EXHIBIT (c)(3)
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| APRIL 2003 | Pacer Technology | |
| Confidential | Preliminary Findings |
Houlihan Lokey Howard & Zukin
Financial Advisors
1930 Century Park West
Los Angeles, California 90067
310-553-8871
Los Angeles New York Chicago San Francisco Washington, D.C. Minneapolis Dallas Atlanta London
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Table of Contents
| Page | ||
Valuation Summary | 1 | |
Public Market Approach | 3 | |
Market Approach: Comparable Public Companies | 7 | |
Market Approach: Comparable Transactions | 13 | |
Discounted Cash Flow Approach | 17 | |
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Valuation Summary
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Valuation Summary
METHODOLOGY OVERVIEW
Method | Description | Issues | ||
Public Market Approach | This method uses the Company’s current trading price as its valuation indication at the marketable minority level. An appropriate control premium is applied to determine the control level valuation. | The public market approach is impacted by the small size of the Company, its limited trading volume and its lack of analyst coverage. | ||
Market Approach | The approach is one of determining a level of earnings which is considered to be representative of the future performance of the company, and capitalizing this figure by an appropriate risk-adjusted rate (market multiples) | The market approach is impacted by the lack of a directly comparable peer group as well as by the lack of recent, comparable transactions. | ||
Market Approach
Comparable Public Company Method | The most common means of obtaining capitalization rates is through the market comparison method, whereby publicly traded companies are selected for comparison purposes and used as a basis for choosing reasonable capitalization rates for the subject company. | See market approach | ||
Market Approach
Comparable Transaction Method | Another common method of obtaining such multiples, referred to as the comparable transaction method, involves examining companies that have recently been sold in control transactions. For this method, the total price paid for the company is related to earnings and revenue figures which yield implied transaction multiples. | See market approach | ||
| Discounted Cash Flow (“DCF”) Approach | This method is one of estimating the present value of the projected future cash flows to be generated from the business and theoretically available (though not necessarily paid) to the capital providers of the company. In the DCF method, a discount rate applied to the projected future cash flows to arrive at the present value. | The discounted cash flow approach is impacted by the fact that the Company expects its margins to improve which adds risk to the future cash flows of the Company. To date, not all of these expected improvements have not been included in the Company’s forecast. | ||
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Valuation Summary
VALUATION SUMMARY
(figures in millions, except per share values)
| Enterprise Value Indication from Operations | ||||||||
| Low | High | |||||||
Market Approach | ||||||||
Market Multiple Methodology (1) | $ | 14.564 | — | $ | 18.314 | |||
Comparable Transaction Methodology | $ | 15.000 | — | $ | 17.000 | |||
Income Approach | ||||||||
Discounted Cash Flow Methodology - Gordon Growth Terminal Multiple | $ | 15.518 | — | $ | 17.438 | |||
Discounted Cash Flow Methodology - Terminal EBITDA Multiple | $ | 15.787 | — | $ | 18.977 | |||
Results Summary | ||||||||
Enterprise Value from Operations | $ | 15.200 | — | $ | 17.900 | |||
Nonoperating Assets/Liabilities: | ||||||||
Add: Cash and Cash Equivalents Balance as of 03/31/03 | $ | 1.279 | — | $ | 1.279 | |||
Add: New Equipment Payment Reimbursement | $ | 0.300 | — | $ | 0.300 | |||
Add: Assumed Cash Received Upon Exercise of Stock Options | $ | 3.621 | — | $ | 3.621 | |||
Total Nonoperating Assets/Liabilities | $ | 5.200 | — | $ | 5.200 | |||
Enterprise Value | $ | 20.400 | — | $ | 23.100 | |||
Less: Total Debt | $ | 0.745 | — | $ | 0.745 | |||
Less: Preferred Stock | $ | 0.000 | — | $ | 0.000 | |||
Aggregate Value of Controlling Interests | $ | 19.655 | — | $ | 22.355 | |||
Per Share Value (2) | $ | 5.19 | — | $ | 5.91 | |||
Footnotes:
| (1) | Includes a Control Premium of 25.0%. |
| (2) | Number of Fully Diluted Shares Including All Vested and Unvested Stock Options and Warrants (in millions): 3.785 |
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Public Market Approach
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Public Market Approach
PUBLIC VALUATION
| Spot Price | 30-Day Average | 90-Day Average | 52-Week High | 52-Week Low | 52-Week Average | |||||||||||||||||||
Stock Price | $ | 4.39 | $ | 4.06 | $ | 3.85 | $ | 5.63 | $ | 3.06 | $ | 4.19 | ||||||||||||
Premium | 37.5 | % | 37.5 | % | 37.5 | % | 37.5 | % | 37.5 | % | 37.5 | % | ||||||||||||
Implied Value | $ | 6.04 | $ | 5.58 | $ | 5.30 | $ | 7.74 | $ | 4.21 | $ | 5.76 | ||||||||||||
Note: All prices as of 4/7/2003, the day of the proposal.
| (1) | Based on the median one-month control premium for all going private transactions included in Houlihan Lokey’s Going Private Report. |
OFFER PREMIUMTO MARKET
| Implied Premiums | |||||||||||||||||||||
Offer Price | Stock Price on 4/7/2003 | 30-Day Average | 20-Day Average | Stock Price on 4/7/2003 | 30-Day | 20-Day Average | |||||||||||||||
4/7/2003 Offer | $ | 6.00 | $ | 4.39 | $ | 3.85 | $ | 4.09 | 37 | % | 56 | % | 47 | % | |||||||
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Public Market Approach
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Public Market Approach
A | December 14, 1999 | Pacer Technology announced that its board of directors has authorized a program for repurchases of up to 10 percent of Pacer’s outstanding common stock. Shares purchased under this program are to be used to provide shares for employer equity compensation plans. | ||
B | March 24, 2000 | Pacer Technology announced that Ellis Gravette, Jr. has replaced John Hockin as Chairman. | ||
C | February 26, 2001 | Pacer Technology announced that Richard S. Kay will become the Chairman of the Company’s Board of Directors and that E.T. Gravette, Pacer’s current Chairman will continue serving as a Director of the Company. | ||
D | May 30, 2001 | Pacer Technology reported that it has entered into an agreement that provides for the sale of its California Chemical product line, which consists primarily of bulk liquids and powders for the sculptured acrylic finger nail processes, to Esschem, Inc., a major supplier of raw materials to Pacer for this product line. The sales price payable by Esschem to Pacer consists of $500,000 cash plus the transfer by Esschem to Pacer of 145,000 shares of Pacer common stock owned by Esschem, which represents approximately 4.5% of the outstanding common stock of Pacer. The transaction is expected to close in June 2001. | ||
E | June 12, 2001 | Pacer Technology reported that it completed its previously announced sale of its California Chemical product line to Esschem, Inc., a major supplier of raw materials to Pacer for this product line, for a price consisting of $500,000 cash plus the transfer by Esschem to Pacer of 145,000 pacer shares owned by Esschem, which represents approximately 4.5% of Pacer’s outstanding shares. | ||
F | July 9, 2001 | Pacer Technology announced that Rick Kay was appointed President and Chief Executive Officer replacing Tom Nightingale. | ||
G | August 24, 2001 | Pacer Technology announced that it has entered into an agreement to sell substantially all of the assets of its Cook Bates product line, which consists of personal care manicure implements, seasonal gift sets and Halloween merchandise to The W.E. Bassett Company for $5.5 million in cash. The transaction is expected to close at the end of September. | ||
H | October 1, 2001 | Pacer Technology reported that it has now completed the sale of its Cook Bates product line, which consists of personal care manicure implements, seasonal gift sets and Halloween merchandise to The W.E. Bassett Company. The agreement to sell was originally reported on August 24, 2001, which indicated the sales price to be paid by The W.E. Bassett Company to be $5,500,000 in cash. The sales price was based on Pacer delivering $4,000,000 of inventory at closing, along with certain fixed and intangible assets. The actual inventory being delivered is $3,840,986. Consequently the cash proceeds from Bassett have been reduced to $5,340,986 to take into account the difference in inventory. As previously reported. Pacer will retain the outstanding accounts receivable and currently expects to realized between $3 and $4 million of additional cash from the collection of those receivables, net of Cook Bates liabilities. | ||
I | December 26, 2001 | Pacer Technology announced a voluntary Odd-Lot Stock Buyback Program through which shareholders holding stock certificates for 99 shares or less of Pacer Technology Common Stock may conveniently sell all of their shares to Pacer without any brokerage or other fees. | ||
J | February 21, 2002 | Pacer Technology announced the results of its voluntary Odd-Lot Stock Buyback Program. Presentments were made during this period by 366 shareholders representing 14,340 shares. In accordance with the Company’s offer to buy these shares at the highest closing price during the period, these shareholders will be paid $4.73 per share tendered. | ||
K | August 6, 2002 | Pacer Technology announced the successful completion of its Stock Repurchase Program. The Company repurchased more than 300,000 shares at a total cost of almost $1.4 million. | ||
L | November 5, 2002 | Pacer Technology Super Glue Corporation unveiled an easy-to-measure, waterproof epoxy adhesive designed to use on automobiles and recreational vehicles. The Anchor-Tite Epoxy System is a two-part, advanced industrial strength adhesive made to use on any part of a vehicle, including aluminum, plastic, rubber and steel surfaces. It is packaged in an easy-to-use, pre-measured applicator and has 30% flexibility while standard epoxies have less than 5%. | ||
M | April 7, 2003 | Pacer Technology announced that it has received a preliminary proposal from CYAN Investments, LLC (CYAN) to acquire all of the outstanding shares of common stock of Pacer not already owned by CYAN for $6.00 per share in cash. The Company has been informed that this proposal, which was to have expired on March 29, 2003, has been extended by CYAN to April 23, 2003. According to a filing made by CYAN with the Securities and Exchange Commission (SEC), CYAN is owned by E.T. Gravette, a former member of the Board of Directors of Pacer, and G. Jeffrey Records, Jr. and currently owns 749,260 shares, or 25.7%, of Pacer’s outstanding common stock. | ||
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Market Approach:
Comparable Public Companies
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Market Approach: Comparable Public Companies
MARKET MULTIPLE METHODOLOGY
(figures in millions)
| Add: | ||||||||||||||||||||||
Representative Level | Selected Multiple Range | Total Debt | Indicated Enterprise Value Range | |||||||||||||||||||
LTM | ||||||||||||||||||||||
EBITDA | $ | 2.621 | 4.50 | x | — | 5.50 | x | $ | 11.790 | — | $ | 14.410 | ||||||||||
EBIT | $ | 2.096 | 5.50 | x | — | 6.50 | x | $ | 11.530 | — | $ | 13.620 | ||||||||||
Cash Flow | $ | 1.785 | 6.0 | x | — | 7.0 | x | $ | 0.745 | $ | 11.450 | — | $ | 13.240 | ||||||||
NFY 2004 | ||||||||||||||||||||||
EBITDA | $ | 3.528 | 3.50 | x | — | 4.50 | x | $ | 12.350 | — | $ | 15.880 | ||||||||||
EBIT | $ | 3.134 | 4.00 | x | — | 5.00 | x | $ | 12.540 | — | $ | 15.670 | ||||||||||
NFY 2005 | ||||||||||||||||||||||
EBITDA | $ | 3.721 | 3.00 | x | — | 4.00 | x | $ | 11.160 | — | $ | 14.880 | ||||||||||
EBIT | $ | 3.377 | 3.50 | x | — | 4.50 | x | $ | 11.820 | — | $ | 15.200 | ||||||||||
Median | $ | 11.790 | — | $ | 14.880 | |||||||||||||||||
Mean | $ | 11.806 | — | $ | 14.700 | |||||||||||||||||
Selected Enterprise Value Range, on a Minority Interest Basis | $ | 11.800 | — | $ | 14.800 | |||||||||||||||||
Less: Total Interest-Bearing Debt | 0.745 | — | 0.745 | |||||||||||||||||||
Less: Preferred Stock | 0.000 | — | 0.000 | |||||||||||||||||||
Aggregate Value of Minority Interest, as if Marketable | $ | 11.055 | — | $ | 14.055 | |||||||||||||||||
Add: Control Premium @ 25.0% | 2.764 | — | 3.514 | |||||||||||||||||||
Value of Total Equity, on a Controlling Interest Basis | $ | 13.819 | — | $ | 17.569 | |||||||||||||||||
Add: Total Interest-Bearing Debt | 0.745 | — | 0.745 | |||||||||||||||||||
Add: Preferred Stock | 0.000 | — | 0.000 | |||||||||||||||||||
Enterprise Value Range, on a Controlling Interest Basis | $ | 14.564 | — | $ | 18.314 | |||||||||||||||||
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Market Approach: Comparable Public Companies
REPRESENTATIVE LEVELS
(figures in millions)
| 3-Year Average | Fiscal Year Ended June 30, | LTM Ended 3/31/03 | FYE 2003 | ||||||||||||||||||||||||
| 2000 | 2001 | 2002 | NFY | NFY + 1 | |||||||||||||||||||||||
Revenue Excluding Bates & CA Acrylics | $ | 43.792 | $ | 28.271 | $ | 25.442 | $ | 25.880 | $ | 25.375 | $ | 26.390 | $ | 27.446 | |||||||||||||
CA Acrylics | Not Provided | 11.765 | 5.378 | 0.000 | 0.000 | 0.000 | 0.000 | ||||||||||||||||||||
Cook Bates | Not Provided | 1.621 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | ||||||||||||||||||||
Reported Revenue | $ | 38.757 | $ | 43.792 | $ | 41.658 | $ | 30.820 | $ | 25.880 | $ | 25.375 | $ | 26.390 | $ | 27.446 | |||||||||||
Less: Cost of Goods Sold | 32.891 | 31.916 | 22.073 | 17.911 | 17.298 | 17.417 | 18.114 | ||||||||||||||||||||
Gross Profit | $ | 10.901 | $ | 9.742 | $ | 8.747 | $ | 7.969 | $ | 8.077 | $ | 8.973 | $ | 9.332 | |||||||||||||
Less: Selling, General & Administrative | 9.859 | 9.268 | 7.245 | 6.953 | 5.863 | 5.839 | 5.955 | ||||||||||||||||||||
Less: Other Operating Expenses | 0.315 | 1.042 | (0.695 | ) | (0.840 | ) | 0.000 | 0.000 | 0.000 | ||||||||||||||||||
Add: Depreciation and Amortization | 0.799 | 0.845 | 0.747 | 0.525 | 0.441 | 0.394 | 0.344 | ||||||||||||||||||||
Add: Adjustments (1) | 0.315 | 1.042 | (0.136 | ) | 0.240 | 0.184 | 0.000 | 0.000 | |||||||||||||||||||
Adjusted EBITDA | $ | 1.989 | $ | 1.841 | $ | 1.319 | $ | 2.808 | $ | 2.621 | $ | 2.839 | $ | 3.528 | $ | 3.721 | |||||||||||
Less: Depreciation and Amortization | 0.799 | 0.845 | 0.747 | 0.525 | 0.441 | 0.394 | 0.344 | ||||||||||||||||||||
Total Adjusted EBIT | $ | 1.192 | $ | 1.042 | $ | 0.474 | $ | 2.061 | $ | 2.096 | $ | 2.398 | $ | 3.134 | $ | 3.377 | |||||||||||
Less: Interest Expense, net | 0.971 | 0.850 | 0.140 | (0.004 | ) | NA | NA | NA | |||||||||||||||||||
Adjusted Pre-tax Income | $ | 0.071 | ($ | 0.376 | ) | $ | 1.921 | $ | 2.100 | NA | NA | NA | |||||||||||||||
Less: Taxes @ 40.0% | 0.028 | (0.150 | ) | 0.769 | 0.840 | NA | NA | NA | |||||||||||||||||||
Adjusted Net Income | $ | 0.323 | $ | 0.043 | ($ | 0.226 | ) | $ | 1.153 | $ | 1.260 | NA | NA | NA | |||||||||||||
Add: Depreciation and Amortization | 0.799 | 0.845 | 0.747 | 0.525 | NA | NA | NA | ||||||||||||||||||||
Adjusted Cash Flow | $ | 1.120 | $ | 0.842 | $ | 0.619 | $ | 1.900 | $ | 1.785 | NA | NA | NA | ||||||||||||||
Net Book Value (tangible) | $ | 9.748 | $ | 9.153 | $ | 9.668 | $ | 10.423 | $ | 11.402 | NA | NA | NA | ||||||||||||||
Total Assets (2) | $ | 21.434 | $ | 29.167 | $ | 22.400 | $ | 12.734 | $ | 13.103 | NA | NA | NA | ||||||||||||||
Footnotes:
| (1) | Adjustments: |
Restructuring charges | $ | 0.315 | $ | 0.000 | $ | 0.517 | $ | 0.000 | $ | 0.000 | $ | 0.000 | $ | 0.000 | ||||||||
Additional Outside Services Related to Restructuring | 0.000 | 0.000 | 0.050 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||||||||||
Write-off of Property and Equipment | 0.000 | 0.000 | 0.144 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||||||||||
Memphis Lease Termination | 0.000 | 0.000 | 0.000 | 0.100 | 0.100 | 0.000 | 0.000 | |||||||||||||||
K-Mart Bad Debt Provision Increase | 0.000 | 0.000 | 0.365 | 0.099 | 0.084 | 0.000 | 0.000 | |||||||||||||||
Gain on sales of Cook Bates | 0.000 | 0.000 | (1.211 | ) | 0.000 | 0.000 | 0.000 | 0.000 | ||||||||||||||
Loss on close-out of Cook Bates Inventory | 0.000 | 0.000 | 0.000 | 0.041 | 0.000 | 0.000 | 0.000 | |||||||||||||||
Loss on sale of California Chemical | 0.000 | 1.042 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||||||||||
Total Adjustments | $ | 0.315 | $ | 1.042 | $ | (0.136 | ) | $ | 0.240 | $ | 0.184 | $ | 0.000 | $ | 0.000 | |||||||
| (2) | Net of Cash & Cash Equivalents. |
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Market Approach: Comparable Public Companies
COMPARABLE PUBLIC COMPANY DEBT-FREE MULTIPLES
(figures in millions)
EV | EV / EBITDA | |||||||||||||||||
| 3-YR Avg. | FYE | LTM | NFY | NFY + 1 | ||||||||||||||
Avery Dennison Corp (1) | $ | 7,098.322 | 11.9 | x | 12.0 | x | 12.0 | x | 10.5 | x | 9.5 | x | ||||||
Cpac Inc (2) | $ | 25.309 | 2.3 | x | 3.0 | x | 3.8 | x | NA | NA | ||||||||
Cytec Industries Inc (3) | $ | 1,282.072 | 5.4 | x | 5.9 | x | 5.9 | x | 5.8 | x | 5.3 | x | ||||||
Fuller (H. B.) Co (4) | $ | 861.322 | 5.8 | x | 5.9 | x | 5.9 | x | 5.9 | x | 6.0 | x | ||||||
Rohm & Haas Co (5) | $ | 9,675.747 | 8.7 | x | 9.1 | x | 9.1 | x | 8.2 | x | NA | |||||||
Rpm International Inc (6) | $ | 1,919.461 | 7.3 | x | 8.1 | x | 7.7 | x | 6.8 | x | 6.4 | x | ||||||
Wd-40 Co (7) | $ | 503.930 | 13.4 | x | 11.4 | x | 10.7 | x | 10.6 | x | 10.3 | x | ||||||
3M Co (8) | $ | 55,455.420 | 13.6 | x | 13.2 | x | 13.2 | x | 11.9 | x | 10.9 | x | ||||||
Henkel Kgaa (9) | $ | 8,867.148 | 5.5 | x | 6.9 | x | 6.9 | x | 6.6 | x | 6.2 | x | ||||||
Low | 2.3 | x | 3.0 | x | 3.8 | x | 5.8 | x | 5.3 | x | ||||||||
High | 13.6 | x | 13.2 | x | 13.2 | x | 11.9 | x | 10.9 | x | ||||||||
Median | 7.3 | x | 8.1 | x | 7.7 | x | 7.5 | x | 6.4 | x | ||||||||
Mean | 8.2 | x | 8.4 | x | 8.4 | x | 8.3 | x | 7.8 | x | ||||||||
Implied Multiples (11) | 6.7 | x | 4.7 | x | 5.1 | x | 3.8 | x | 3.6 | x | ||||||||
| EV / Revenue | ||||||||||||||||||
| EV | 3-YR Avg. | FYE | LTM | NFY | NFY + 1 | |||||||||||||
Avery Dennison Corp (1) | $ | 7,098.322 | 1.79 | x | 1.69 | x | 1.69 | x | 1.49 | x | 1.49 | x | ||||||
Cpac Inc (2) | 25.309 | 0.24 | x | 0.26 | x | 0.26 | x | NA | NA | |||||||||
Cytec Industries Inc (3) | 1,282.072 | 0.91 | x | 0.95 | x | 0.95 | x | 0.95 | x | 0.91 | x | |||||||
Fuller (H. B.) Co (4) | 861.322 | 0.66 | x | 0.69 | x | 0.69 | x | 0.67 | x | 0.64 | x | |||||||
Rohm & Haas Co (5) | 9,675.747 | 1.64 | x | 1.69 | x | 1.69 | x | 1.58 | x | 1.50 | x | |||||||
Rpm International Inc (6) | 1,919.461 | 0.97 | x | 0.97 | x | 0.94 | x | 0.93 | x | 0.87 | x | |||||||
Wd-40 Co (7) | 503.930 | 2.87 | x | 2.32 | x | 2.22 | x | 2.11 | x | 2.05 | x | |||||||
3M Co (8) | 55,455.420 | 3.39 | x | 3.40 | x | 3.40 | x | 3.12 | x | 2.93 | x | |||||||
Henkel Kgaa (9) | 8,867.148 | 0.77 | x | 0.85 | x | 0.85 | x | 0.83 | x | 0.80 | x | |||||||
Low | 0.24 | x | 0.26 | x | 0.26 | x | 0.67 | x | 0.64 | x | ||||||||
High | 3.39 | x | 3.40 | x | 3.40 | x | 3.12 | x | 2.93 | x | ||||||||
Median | 0.97 | x | 0.97 | x | 0.95 | x | 1.22 | x | 1.20 | x | ||||||||
Mean | 1.47 | x | 1.42 | x | 1.41 | x | 1.46 | x | 1.40 | x | ||||||||
Implied Multiples (11) | 0.34 | x | 0.43 | x | 0.51 | x | 0.50 | x | 0.48 | x | ||||||||
| EV / EBIT | |||||||||||||||
| EV | 3-YR Avg. | FYE | LTM | NFY | |||||||||||
Avery Dennison Corp (1) | $ | 7,098.322 | 16.0 | x | 16.1 | x | 16.1 | x | 13.9 | x | |||||
Cpac Inc (2) | $ | 25.309 | 3.4 | x | 5.1 | x | 6.6 | x | NA | ||||||
Cytec Industries Inc (3) | $ | 1,282.072 | 8.8 | x | 9.7 | x | 9.7 | x | 9.4 | x | |||||
Fuller (H. B.) Co (4) | $ | 861.322 | 9.2 | x | 9.8 | x | 9.8 | x | 9.4 | x | |||||
Rohm & Haas Co (5) | $ | 9,675.747 | 17.1 | x | 15.9 | x | 15.9 | x | 13.9 | x | |||||
Rpm International Inc (6) | $ | 1,919.461 | 9.2 | x | 9.9 | x | 9.3 | x | 8.5 | x | |||||
Wd-40 Co (7) | $ | 503.930 | 14.8 | x | 11.9 | x | 11.1 | x | 11.1 | x | |||||
3M Co (8) | $ | 55,455.420 | 18.1 | x | 17.1 | x | 17.1 | x | 15.4 | x | |||||
Henkel Kgaa (9) | $ | 8,867.148 | 10.7 | x | 11.4 | x | 11.4 | x | 11.4 | x | |||||
Low | 3.4 | x | 5.1 | x | 6.6 | x | 8.5 | x | |||||||
High | 18.1 | x | 17.1 | x | 17.1 | x | 15.4 | x | |||||||
Median | 10.7 | x | 11.4 | x | 11.1 | x | 11.2 | x | |||||||
Mean | 11.9 | x | 11.9 | x | 11.9 | x | 11.6 | x | |||||||
Implied Multiples (11) | 11.2 | x | 6.5 | x | 6.3 | x | 4.2 | x | |||||||
| EV / Total Assets (net of cash) | |||||||||||||||
| EV | 3-YR Avg. | FYE | LTM | NFY | |||||||||||
Avery Dennison Corp (1) | $ | 7,098.322 | 2.31 | x | 1.96 | x | 1.96 | x | NA | ||||||
Cpac Inc (2) | $ | 25.309 | 0.36 | x | 0.37 | x | 0.43 | x | NA | ||||||
Cytec Industries Inc (3) | $ | 1,282.072 | 0.81 | x | 0.83 | x | 0.83 | x | NA | ||||||
Fuller (H. B.) Co (4) | $ | 861.322 | 0.89 | x | 0.90 | x | 0.90 | x | NA | ||||||
Rohm & Haas Co (5) | $ | 9,675.747 | 0.94 | x | 1.03 | x | 1.03 | x | NA | ||||||
Rpm International Inc (6) | $ | 1,919.461 | 0.94 | x | 0.96 | x | 0.98 | x | NA | ||||||
Wd-40 Co (7) | $ | 503.930 | 3.37 | x | 2.47 | x | 2.62 | x | NA | ||||||
3M Co (8) | $ | 55,455.420 | 3.88 | x | 3.77 | x | 3.77 | x | NA | ||||||
Henkel Kgaa (9) | $ | 8,867.148 | 0.87 | x | 0.99 | x | 0.99 | x | NA | ||||||
Low | 0.36 | x | 0.37 | x | 0.43 | x | 0.00 | x | |||||||
High | 3.88 | x | 3.77 | x | 3.77 | x | 0.00 | x | |||||||
Median | 0.94 | x | 0.99 | x | 0.99 | x | |||||||||
Mean | 1.60 | x | 1.48 | x | 1.50 | x | |||||||||
Implied Multiples (11) | 0.62 | x | 1.04 | x | 1.02 | x | |||||||||
Footnotes:
| (1) | Projected financial figures are based on the average of several analyst reports. |
| (2) | No projections available. |
| (3) | Projected financial figures are based on the average of several analyst reports. |
| (4) | Projected financial figures are based on the average of several analyst reports. |
| (5) | Projected financial figures are based on the average of several analyst reports. |
| (6) | Projected financial figures are based on a JPM report dated March 7, 2003. |
| (7) | Projected financial figures are based on a JPM report dated March 7, 2003. |
| (8) | Projected financial figures are based on the average of several analyst reports. |
| (9) | Projected financial figures are based on the average of several analyst reports. |
| (10) | No projections available. |
| (11) | Based on the midpoint of the Selected Range of Minority Enterprise Values derived from the market multiple methodology. |
10
[GRAPHIC APPEARS HERE]
Market Approach: Comparable Public Companies
COMPARABLE PUBLIC COMPANY LEVERAGED MULTIPLES
(figures in millions)
| Price / Earnings | ||||||||||||||||||
| MVE | 3-YR Avg. | FYE | LTM | NFY | NFY + 1 | |||||||||||||
Avery Dennison Corp (1) | $ | 5,976.922 | 22.3 | x | 21.6 | x | 21.6 | x | 19.0 | x | 17.0 | x | ||||||
Cpac Inc (2) | 25.751 | 5.9 | x | 8.8 | x | 12.0 | x | NA | NA | |||||||||
Cytec Industries Inc (3) | 1,176.072 | 10.3 | x | 13.3 | x | 13.3 | x | 14.0 | x | 11.3 | x | |||||||
Fuller (H. B.) Co (4) | 667.268 | 14.2 | x | 14.5 | x | 14.5 | x | 13.5 | x | 12.1 | x | |||||||
Rohm & Haas Co (5) | 6,907.747 | 26.5 | x | 21.3 | x | 21.3 | x | 17.8 | x | NA | ||||||||
Rpm International Inc (6) | 1,282.043 | 11.8 | x | 12.6 | x | 11.1 | x | 10.0 | x | 9.2 | x | |||||||
Wd-40 Co (7) | 432.582 | 20.7 | x | 17.1 | x | 16.1 | x | 16.2 | x | 15.2 | x | |||||||
3M Co (8) | 52,696.420 | 27.6 | x | 25.2 | x | 25.2 | x | 22.2 | x | 20.3 | x | |||||||
Henkel Kgaa (9) | 8,093.557 | 18.4 | x | 16.1 | x | 16.1 | x | 15.8 | x | 15.1 | x | |||||||
Low | 5.9 | x | 8.8 | x | 11.1 | x | 10.0 | x | 9.2 | x | ||||||||
High | 27.6 | x | 25.2 | x | 25.2 | x | 22.2 | x | 20.3 | x | ||||||||
Median | 18.4 | x | 16.1 | x | 16.1 | x | 16.0 | x | 15.1 | x | ||||||||
Mean | 17.5 | x | 16.7 | x | 16.8 | x | 16.1 | x | 14.3 | x | ||||||||
Implied Multiples (11) | 41.14 | x | 11.54 | x | 10.56 | x | NA | NA | ||||||||||
| Price / Net Book Value | ||||||||||||||||||
| MVE | 3-YR Avg. | FYE | LTM | NFY | NFY + 1 | |||||||||||||
Avery Dennison Corp (1) | $ | 5,976.922 | 14.58 | x | NMF | NMF | NA | NA | ||||||||||
Cpac Inc (2) | 25.751 | 0.65 | x | 0.64 | x | 0.57 | x | NA | NA | |||||||||
Cytec Industries Inc (3) | 1,176.072 | 4.76 | x | 4.72 | x | 4.72 | x | NA | NA | |||||||||
Fuller (H. B.) Co (4) | 667.268 | 1.97 | x | 1.87 | x | 1.87 | x | NA | NA | |||||||||
Rohm & Haas Co (5) | 6,907.747 | NMF | NMF | NMF | NA | NA | ||||||||||||
Rpm International Inc (6) | 1,282.043 | NMF | NMF | NMF | NA | NA | ||||||||||||
Wd-40 Co (7) | 432.582 | NMF | NMF | NMF | NA | NA | ||||||||||||
3M Co (8) | 52,696.420 | 10.38 | x | 13.77 | x | 13.77 | x | NA | NA | |||||||||
Henkel Kgaa (9) | 8,093.557 | 6.27 | x | 5.02 | x | 5.02 | x | NA | NA | |||||||||
Low | 0.65 | x | 0.64 | x | 0.57 | x | 0.00 | x | 0.00 | x | ||||||||
High | 14.58 | x | 13.77 | x | 13.77 | x | 0.00 | x | 0.00 | x | ||||||||
Median | 5.52 | x | 4.72 | x | 4.72 | x | ||||||||||||
Mean | 6.44 | x | 5.21 | x | 5.19 | x | ||||||||||||
Implied Multiples (11) | 1.36 | x | 1.28 | x | 1.17 | x | ||||||||||||
| Price / Cash Flow | |||||||||||||||
| MVE | 3-YR Avg. | FYE | LTM | NFY | |||||||||||
Avery Dennison Corp (1) | $ | 5,976.922 | 14.1 | x | 13.9 | x | 13.9 | x | 12.5 | x | |||||
Cpac Inc (2) | 25.751 | 3.3 | x | 4.0 | x | 5.2 | x | NA | |||||||
Cytec Industries Inc (3) | 1,176.072 | 5.8 | x | 6.8 | x | 6.8 | x | 7.0 | x | ||||||
Fuller (H. B.) Co (4) | 667.268 | 6.6 | x | 6.4 | x | 6.4 | x | 6.4 | x | ||||||
Rohm & Haas Co (5) | 6,907.747 | 8.6 | x | 8.8 | x | 8.8 | x | 7.9 | x | ||||||
Rpm International Inc (6) | 1,282.043 | 7.8 | x | 8.8 | x | 8.0 | x | 6.9 | x | ||||||
Wd-40 Co (7) | 432.582 | 17.7 | x | 15.9 | x | 15.0 | x | 15.1 | x | ||||||
3M Co (8) | 52,696.420 | 18.0 | x | 17.3 | x | 17.3 | x | NA | |||||||
Henkel Kgaa (9) | 8,093.557 | 7.7 | x | 8.0 | x | 8.0 | x | 7.6 | x | ||||||
Low | 3.3 | x | 4.0 | x | 5.2 | x | 6.4 | x | |||||||
High | 18.0 | x | 17.3 | x | 17.3 | x | 15.1 | x | |||||||
Median | 7.8 | x | 8.8 | x | 8.0 | x | 7.6 | x | |||||||
Mean | 9.9 | x | 10.0 | x | 10.0 | x | 9.1 | x | |||||||
Implied Multiples (11) | 11.87 | x | 7.00 | x | 7.45 | x | NA | ||||||||
| Footnotes: |
| (1) | Projected financial figures are based on the average of several analyst reports. |
| (2) | No projections available. |
| (3) | Projected financial figures are based on the average of several analyst reports. |
| (4) | Projected financial figures are based on the average of several analyst reports. |
| (5) | Projected financial figures are based on the average of several analyst reports. |
| (6) | Projected financial figures are based on a JPM report dated March 7, 2003. |
| (7) | Projected financial figures are based on a JPM report dated March 7, 2003. |
| (8) | Projected financial figures are based on the average of several analyst reports. |
| (9) | Projected financial figures are based on the average of several analyst reports. |
| (10) | No projections available. |
| (11) | Based on the midpoint of the Selected Range of Minority Enterprise Values derived from the market multiple methodology. |
11
[GRAPHIC APPEARS HERE]
Market Approach: Comparable Public Companies
RISK ANALYSIS RANKINGS
Size (Revenue, millions) | Size (Enterprise Value, millions) | Historical Growth (2-Year Revenue) | Historical Growth (1-Year Revenue) | Projected Growth (1-Year Revenue) | |||||||||||||||||||||
3M Co | $ | 16,332.0 | 3M Co | $ | 55,455.4 | Wd-40 Co | 21.7 | % | Wd-40 Co | 32.4 | % | Cpac Inc | N A | ||||||||||||
Henkel Kgaa | $ | 10,418.1 | Rohm & Haas Co | $ | 9,675.7 | Avery Dennison Corp | 3.9 | % | Avery Dennison Corp | 10.6 | % | Avery Dennison Corp | 13.3 | % | |||||||||||
Rohm & Haas Co | $ | 5,727.0 | Henkel Kgaa | $ | 8,867.1 | Rpm International Inc | 0.6 | % | Henkel Kgaa | 2.6 | % | Wd-40 Co | 10.1 | % | |||||||||||
Avery Dennison Corp | $ | 4,206.9 | Avery Dennison Corp | $ | 7,098.3 | 3M Co | -1.1 | % | 3M Co | 1.7 | % | 3M Co | 8.7 | % | |||||||||||
Rpm International Inc | $ | 2,051.4 | Rpm International Inc | $ | 1,919.5 | Fuller (H. B.) Co | -4.0 | % | Pacer Technology | 1.7 | % | Rohm & Haas Co | 7.0 | % | |||||||||||
Cytec Industries Inc | $ | 1,346.2 | Cytec Industries Inc | $ | 1,282.1 | Pacer Technology | -4.3 | % | Rohm & Haas Co | 1.1 | % | Rpm International Inc | 4.4 | % | |||||||||||
Fuller (H. B.) Co | $ | 1,256.2 | Fuller (H. B.) Co | $ | 861.3 | Rohm & Haas Co | -5.0 | % | Rpm International Inc | -1.1 | % | Pacer Technology | 4.0 | % | |||||||||||
Wd-40 Co | $ | 227.1 | Wd-40 Co | $ | 503.9 | Cytec Industries Inc | -5.0 | % | Fuller (H. B.) Co | -1.4 | % | Henkel Kgaa | 2.1 | % | |||||||||||
Cpac Inc | $ | 96.2 | Cpac Inc | $ | 25.3 | Cpac Inc | -6.6 | % | Cytec Industries Inc | -2.9 | % | Fuller (H. B.) Co | 2.0 | % | |||||||||||
Pacer Technology | $ | 25.9 | Henkel Kgaa | -14.0 | % | Cpac Inc | -6.5 | % | Cytec Industries Inc | 0.7 | % | ||||||||||||||
| SMALLER | AVERAGE | AVERAGE | LACK OF PRODUCT DIVERSITY AND COMMODITY BUSINESS RESULTS IN LOWER GROWTH | ||||||||||||||||||||||
Historical Growth (2-Year EBITDA) | Historical Growth (1-Year EBITDA) | Projected Growth (1-Year EBITDA) | Projected Growth (5-Year EPS) | Profitability (EBIT to Revenue) | |||||||||||||||||||||
Pacer Technology | 41.0 | % | Wd-40 Co | 32.3 | % | Cpac Inc | NA | Avery Dennison Corp | NA | Wd-40 Co | 19.9 | % | |||||||||||||
Wd-40 Co | 12.3 | % | Rohm & Haas Co | 9.6 | % | Pacer Technology | 24.3 | % | Cpac Inc | NA | 3M Co | 19.9 | % | ||||||||||||
3M Co | 1.2 | % | 3M Co | 6.9 | % | Rpm International Inc | 18.8 | % | Cytec Industries Inc | NA | Rohm & Haas Co | 10.6 | % | ||||||||||||
Rpm International Inc | 0.4 | % | Avery Dennison Corp | 4.9 | % | Avery Dennison Corp | 13.4 | % | Fuller (H. B.) Co | NA | Avery Dennison Corp | 10.5 | % | ||||||||||||
Fuller (H. B.) Co | -2.9 | % | Cytec Industries Inc | 3.9 | % | 3M Co | 11.3 | % | Rohm & Haas Co | NA | Rpm International Inc | 10.1 | % | ||||||||||||
Avery Dennison Corp | -3.5 | % | Fuller (H. B.) Co | 1.2 | % | Rohm & Haas Co | 10.6 | % | Rpm International Inc | NA | Cytec Industries Inc | 9.9 | % | ||||||||||||
Rohm & Haas Co | -8.8 | % | Pacer Technology | -6.7 | % | Wd-40 Co | 7.5 | % | Wd-40 Co | NA | Pacer Technology | 8.1 | % | ||||||||||||
Cytec Industries Inc | -12.8 | % | Rpm International Inc | -25.4 | % | Henkel Kgaa | 4.8 | % | 3M Co | NA | Henkel Kgaa | 7.4 | % | ||||||||||||
Henkel Kgaa | -14.6 | % | Cpac Inc | -26.8 | % | Cytec Industries Inc | 2.0 | % | Henkel Kgaa | NA | Fuller (H. B.) Co | 7.0 | % | ||||||||||||
Cpac Inc | -19.0 | % | Henkel Kgaa | -27.1 | % | Fuller (H. B.) Co | 0.1 | % | Pacer Technology | input | Cpac Inc | 4.0 | % | ||||||||||||
| DIVESTITURE OF NON-CORE ASSETS RESULTED IN SIGNIFICANT INCREASES | AVERAGE | STRONG | AVERAGE DUE TO LOWER RELATIVE DEPRECIATION | ||||||||||||||||||||||
Profitability (EBITDA to Revenue) | Relative Depreciation (Depreciation to EBITDA) | Internal Investment (Capital Expenditures to Revenue) | Liquidity (Current Ratio) | Leverage (Debt to EV) | |||||||||||||||||||||
3M Co | 25.7 | % | Rohm & Haas Co | 42.9 | % | Rohm & Haas Co | 7.1 | % | Pacer Technology | 6.6 | |||||||||||||||
Wd-40 Co | 20.7 | % | Cpac Inc | 42.5 | % | 3M Co | 4.7 | % | Cpac Inc | 4.5 | 3M Co | 6.1 | % | ||||||||||||
Rohm & Haas Co | 18.6 | % | Henkel Kgaa | 39.6 | % | Cytec Industries Inc | 4.6 | % | Henkel Kgaa | 3.8 | Henkel Kgaa | 10.5 | % | ||||||||||||
Cytec Industries Inc | 16.1 | % | Fuller (H. B.) Co | 39.5 | % | Avery Dennison Corp | 3.6 | % | Wd-40 Co | 2.6 | Avery Dennison Corp | 16.1 | % | ||||||||||||
Avery Dennison Corp | 14.1 | % | Cytec Industries Inc | 38.7 | % | Pacer Technology | 3.4 | % | Rpm International Inc | 2.5 | Wd-40 Co | 18.9 | % | ||||||||||||
Henkel Kgaa | 12.3 | % | Avery Dennison Corp | 25.7 | % | Henkel Kgaa | 3.2 | % | Fuller (H. B.) Co | 1.9 | Fuller (H. B.) Co | 21.3 | % | ||||||||||||
Rpm International Inc | 12.2 | % | 3M Co | 22.7 | % | Fuller (H. B.) Co | 2.9 | % | Rohm & Haas Co | 1.6 | Cytec Industries Inc | 24.6 | % | ||||||||||||
Fuller (H. B.) Co | 11.6 | % | Pacer Technology | 20.0 | % | Rpm International Inc | 2.2 | % | Cytec Industries Inc | 1.4 | Rohm & Haas Co | 31.5 | % | ||||||||||||
Pacer Technology | 10.1 | % | Rpm International Inc | 17.6 | % | Cpac Inc | 2.1 | % | 3M Co | 1.4 | Cpac Inc | 31.6 | % | ||||||||||||
Cpac Inc | 6.9 | % | Wd-40 Co | 3.9 | % | Wd-40 Co | 0.6 | % | Avery Dennison Corp | 0.9 | Rpm International Inc | 36.4 | % | ||||||||||||
| LOW DUE TO COMMODITY BUSINESS AND LACK OF PRODUCT DIVERSITY | AVERAGE | SUPERIOR DUE TO STRONG BALANCE SHEET AND NO DEBT | SUPERIOR - NO DEBT | ||||||||||||||||||||||
Historic revenue growth excludes Cook Bates and Californis Acrylic.
12
[GRAPHIC APPEARS HERE]
Market Approach:
Comparable Transactions
[GRAPHIC APPEARS HERE]
Market Approach: Comparable Transactions
COMPARABLE TRANSACTION METHODOLOGY
(figures in millions)
| Representative Level | Selected Multiple Range | Indicated Enterprise Value Range | |||||||||||||||||
LTM | |||||||||||||||||||
Revenues | $ | 25.880 | 0.60 | x | — | 0.70 | x | $ | 15.530 | — | $ | 18.120 | |||||||
EBITDA | $ | 2.621 | 5.5 | x | — | 6.5 | x | $ | 14.410 | — | $ | 17.030 | |||||||
EBIT | $ | 2.096 | 7.0 | x | — | 8.0 | x | $ | 14.670 | — | $ | 16.770 | |||||||
Median | $ | 14.670 | — | $ | 17.030 | ||||||||||||||
Mean | $ | 14.870 | — | $ | 17.307 | ||||||||||||||
Selected Enterprise Value Range, on a Controlling Interest Basis | $ | 15.000 | — | $ | 17.000 | ||||||||||||||
14
[GRAPHIC APPEARS HERE]
Market Approach: Comparable Transactions
COMPARABLE TRANSACTION SUMMARY
| Announced | Seller | Buyer | Target Business Description: | 30 Day Premium | EV - Enterprise Value ($mm) | LTM Revenue | LTM EBITDA | EBITDA Margin | Enterprise Value/ EBIT | Enterprise Value/ EBITDA | Enterprise Value/ Revenue | ||||||||||||||
28-Mar-03 | Newell Rubbermaid Inc | Cosmetic Specialties Inc | Manufactures cosmetics such as lip and eye color cosmetics | 13.000 | 50.000 | 0.3x | |||||||||||||||||||
21-Mar-03 | Morgan Crucible Co PLC | Curtiss-Wright Corp | Manufactures dry film lubricant products for military and industrial use | 16.700 | 26.000 | 0.6x | |||||||||||||||||||
25-Feb-03 | Berger International Ltd | Asian Paints India Ltd | Investment holding company which distributes and manufactures paint | 109.1 | % | 21.487 | 66.130 | (2.610 | ) | -3.9 | % | -8.2x | -8.2x | 0.3x | |||||||||||
29-Jan-03 | Industri Kapital Ab | Smith International Inc | Produces adhesives and coatings | 79.740 | 75.540 | 1.1x | |||||||||||||||||||
21-Jan-03 | Pfizer Inc | Energizer Holdings Inc | Manufactures and markets shaving products | 930.000 | 650.000 | 1.4x | |||||||||||||||||||
3-Dec-02 | Solutia Inc | UCB SA | Manufactures resins, additives, and adhesives | 510.000 | 549.000 | 7.6x | 0.9x | ||||||||||||||||||
28-Jun-02 | Crompton Corp | Akzo Nobel NV | Produces chemicals used in household products | 95.000 | 165.000 | 0.6x | |||||||||||||||||||
9-May-02 | Heartland Corp | WD-40 Co | Manufactures and markets carpet and fabric spot removers and cleaners | 56.3 | % | 44.360 | 33.270 | 6.920 | 20.8 | % | 6.5x | 6.4x | 1.3x | ||||||||||||
16-Apr-02 | Stephan Co | Private Group Led by Management of The Stephan Co | Makes hair care and personal grooming products | 19.720 | 27.040 | 2.830 | 10.5 | % | 18.4x | 7.0x | 0.7x | ||||||||||||||
21-Mar-02 | Pakvash Co | Henkel KGaA | Manufactures detergents | 29.783 | 40.000 | 0.7x | |||||||||||||||||||
5-Mar-02 | Abbott Laboratories | Chattem Inc | Manufactures and provides shampoos | 75.000 | 40.650 | 13.460 | 33.1 | % | 5.6x | 5.6x | 1.8x | ||||||||||||||
18-Dec-01 | Heritage Marketing Corp | AKI Holding Corp | Produces color cosmetic samples | 20.900 | 13.560 | 14.8x | 1.5x | ||||||||||||||||||
13-Nov-01 | Amberley Group Plc | Bousfield Holdings Ltd | Manufactures and supplies of printing inks, coatings and materials | 13.590 | 52.850 | 0.560 | 1.1 | % | -7.2x | 24.3x | 0.3x |
15
[GRAPHIC APPEARS HERE]
Market Approach: Comparable Transactions
COMPARABLE TRANSACTION SUMMARY (CONTINUED)
Announced | Seller | Buyer | Target Business Description: | 30 Day Premium | EV - Enterprise Value ($mm) | LTM Revenue | LTM EBITDA | EBIDA Margin | Enterprise Value/ EBIT | Enterprise Value/ EBITDA | Enterprise Value/ Revenue | |||||||||||||
1-Oct-01 | Betonel Ltd | Sico Inc | Manufactures and produces house paints | 8.550 | 17.170 | 0.5x | ||||||||||||||||||
13-Sep-01 | Chembond Ltd | Mapei SpA | Manufactures paints and adhesives | 100.0 | % | 3.650 | 10.250 | 0.150 | 1.5 | % | 28.1x | 24.3x | 0.4x | |||||||||||
13-Sep-01 | Henkel KGaA | Private Group Led By Schroders Venturem and Goldma | Manufactures specialty Chemicals | 2,776.160 | 2,895.200 | 217.190 | 7.9 | % | 13.2x | 12.8x | 1.0x | |||||||||||||
30-Jul-01 | Hays Plc | Albion Chemicals Ltd | Produces and distributes bulk, packaged and speciality chemicals | 151.640 | 226.750 | 0.7x | ||||||||||||||||||
14-May-01 | Labropoulos Brothers SA | Notos Com Holdings SA | Produces and trades cosmetics | -39.0 | % | 53.300 | 68.660 | 5.280 | 7.7 | % | 10.1x | 10.1x | 0.8x | |||||||||||
8-May-01 | Cater-Wallace Inc | Church & Dwight Co / Kelso & Co | Manufactures toiletries, proprietary drugs and other consumer goods | 622.440 | 435.540 | 99.080 | 22.3 | % | 7.1x | 6.3x | 1.4x | |||||||||||||
1-Oct-00 | Blugill Holdings Ltd | Southern Vectis Plc | Manufactures glass reinforced polyester products and other resins | 3.180 | 6,080 | -5.1x | -6.9x | 0.5x | ||||||||||||||||
16-Oct-00 | Coullet Pharmaceutical Inc | Cocisa Coup | Develops novel drugs and therapies for treatment of cancer | -27.9 | % | 373.790 | 12,370 | -7.6x | -8.1x | 30.3x | ||||||||||||||
2-Apr-01 | USA Detergents Inc | Church & Dwight Co | Manufactures and markets nationally distributed value brand laundry and household cleaning products | 64.7 | % | 135.454 | 249.000 | 13.420 | 5.4 | % | 45.5x | 10.1x | 0.5x | |||||||||||
22-Jan-01 | Guest Supply Inc | Sysco Corp | Manufactures, packages and distributes personal guest amenities to the lodging industry | 42.6 | % | 171.900 | 76.660 | 26.500 | 34.7 | % | 8.3x | 6.5x | 2.2x | |||||||||||
| Min | -39 | % | 3.650 | 10.250 | 2.830 | 7.5 | % | 5.6x | 5.6x | 0.3x | ||||||||||||||
| Max | 109 | % | 4,950.000 | 2,895.200 | 217.150 | 34.7 | % | 18.4x | 12.8x | 1.8x | ||||||||||||||
| Mean | 56 | % | 469.901 | 348.876 | 48.095 | 19.6 | % | 10.2x | 8.1x | 0.8x | ||||||||||||||
| Median | 60 | % | 65.310 | 67.305 | 13.400 | 20.2 | % | 8.3x | 6.7x | 0.7x | ||||||||||||||
Excluded from the Range
Source Mergerstat
16
[GRAPHIC APPEARS HERE]
Discounted Cash Flow Approach
[GRAPHIC APPEARS HERE]
Discounted Cash Flow Approach
DISCOUNTED CASH FLOW VALUATION – TERMINAL EBITDA MULTIPLE
(figures in millions)
| 3 mos. Ending 6/30/2003 | Projected Fiscal Year Ending June 30, | |||||||||||||||||||||||
| 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | |||||||||||||||||||
EBIT | $ | 0.732 | $ | 3.134 | $ | 3.377 | $ | 3.630 | $ | 3.897 | $ | 4.177 | ||||||||||||
Less: Taxes | 0.293 | 1.254 | 1.351 | 1.452 | 1.559 | 1.671 | ||||||||||||||||||
Debt-Free Earnings | $ | 0.439 | $ | 1.880 | $ | 2.026 | $ | 2.178 | $ | 2.338 | $ | 2.506 | ||||||||||||
Less: Capital Expenditures | (0.081 | ) | (0.325 | ) | (0.325 | ) | (0.325 | ) | (0.325 | ) | (0.325 | ) | ||||||||||||
Less: Working Capital Requirements | 0.177 | (0.185 | ) | (0.145 | ) | (0.151 | ) | (0.157 | ) | (0.163 | ) | |||||||||||||
Add: Depreciation and Amortization | 0.132 | 0.394 | 0.344 | 0.340 | 0.355 | 0.370 | ||||||||||||||||||
Total Net Investment | $ | 0.228 | $ | (0.116 | ) | $ | (0.126 | ) | $ | (0.136 | ) | $ | (0.127 | ) | $ | (0.118 | ) | |||||||
Net Debt-Free Cash Flows: | $ | 0.667 | $ | 1.765 | $ | 1.900 | $ | 2.042 | $ | 2.211 | $ | 2.388 | ||||||||||||
Growth % | 8 | % | 7 | % | 8 | % | 8 | % | ||||||||||||||||
Discount Period | 0.13 | 0.75 | 1.75 | 2.75 | 3.75 | 4.75 | ||||||||||||||||||
Discount Factor @ 17.0% | 0.98 | 0.89 | 0.76 | 0.65 | 0.56 | 0.47 | ||||||||||||||||||
Present Value of Net Debt-Free Cash Flows: | $ | 0.654 | $ | 1.569 | $ | 1.444 | $ | 1.326 | $ | 1.227 | $ | 1.133 | ||||||||||||
Sensitivity Analysis: Enterprise Value
| Terminal EBITDA Multiple | |||||||||||||||||||
| 4.0x | 4.5x | 5.0x | 5.5x | 6.0x | |||||||||||||||
| 15.0% | $ | 16.393 | $ | 17.485 | $ | 18.576 | $ | 19.668 | $ | 20.759 | |||||||||
| 16.0% | $ | 15.848 | $ | 16.891 | $ | 17.934 | $ | 18.977 | $ | 20.020 | |||||||||
| Discount Rate | 17.0% | $ | 15.328 | $ | 16.325 | $ | 17.322 | $ | 18.319 | $ | 19.317 | ||||||||
| 18.0% | $ | 14.834 | $ | 15.787 | $ | 16.741 | $ | 17.694 | $ | 18.648 | |||||||||
| 19.0% | $ | 14.362 | $ | 15.274 | $ | 16.187 | $ | 17.099 | $ | 18.011 | |||||||||
Range of Selected Enterprise Values | $ | 15.787 | — | $ | 18.977 | ||||||||||||||
18
[GRAPHIC APPEARS HERE]
Discounted Cash Flow Approach
DISCOUNTED CASH FLOW VALUATION – GORDON GROWTH
(figures in millions)
| 3 mos. Ending 6/30/2003 | Projected Fiscal Year Ending June 30, | |||||||||||||||||||||||||||
| 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||||||||
EBIT | $ | 0.732 | $ | 3.134 | $ | 3.377 | $ | 3.630 | $ | 3.897 | $ | 4.177 | ||||||||||||||||
Less: Taxes | 0.293 | 1.254 | 1.351 | 1.452 | 1.559 | 1.671 | ||||||||||||||||||||||
Debt-Free Earnings | $ | 0.439 | $ | 1.880 | $ | 2.026 | $ | 2.178 | $ | 2.338 | $ | 2.506 | $ | 2.606 | ||||||||||||||
Less: Capital Expenditures | (0.081 | ) | (0.325 | ) | (0.325 | ) | (0.325 | ) | (0.325 | ) | (0.325 | ) | $ | (0.325 | ) | |||||||||||||
Less: Working Capital Requirements | 0.177 | (0.185 | ) | (0.145 | ) | (0.151 | ) | (0.157 | ) | (0.163 | ) | $ | (0.170 | ) | ||||||||||||||
Add: Depreciation and Amortization | 0.132 | 0.394 | 0.344 | 0.340 | 0.355 | 0.370 | $ | 0.370 | ||||||||||||||||||||
Total Net Investment | $ | 0.228 | $ | (0.116 | ) | $ | (0.126 | ) | $ | (0.136 | ) | $ | (0.127 | ) | $ | (0.118 | ) | $ | (0.125 | ) | ||||||||
Net Debt-Free Cash Flows: | $ | 0.667 | $ | 1.765 | $ | 1.900 | $ | 2.042 | $ | 2.211 | $ | 2.388 | $ | 2.482 | ||||||||||||||
Growth % | 8 | % | 7 | % | 8 | % | 8 | % | ||||||||||||||||||||
Discount Period | 0.13 | 0.75 | 1.75 | 2.75 | 3.75 | 4.75 | ||||||||||||||||||||||
Discount Factor @ 17.0% | 0.98 | 0.89 | 0.76 | 0.65 | 0.56 | 0.47 | ||||||||||||||||||||||
Present Value of Net Debt-Free Cash Flows: | $ | 0.654 | $ | 1.569 | $ | 1.444 | $ | 1.326 | $ | 1.227 | $ | 1.133 | ||||||||||||||||
Sensitivity Analysis: Enterprise Value
| Gordon Growth Rate | |||||||||||||||||||
| 3.0% | 3.5% | 4.0% | 4.5% | 5.0% | |||||||||||||||
| 16.0% | $ | 16.935 | $ | 17.313 | $ | 17.721 | $ | 18.166 | $ | 18.650 | |||||||||
| 16.5% | $ | 16.326 | $ | 16.668 | $ | 17.038 | $ | 17.438 | $ | 17.873 | |||||||||
| Discount Rate | 17.0% | $ | 15.760 | $ | 16.072 | $ | 16.407 | $ | 16.769 | $ | 17.161 | ||||||||
| 17.5% | $ | 15.234 | $ | 15.518 | $ | 15.823 | $ | 16.152 | $ | 16.507 | |||||||||
| 18.0% | $ | 14.743 | $ | 15.002 | $ | 15.281 | $ | 15.580 | $ | 15.902 | |||||||||
Range of Selected Enterprise Values | $ | 15.518 | — | $ | 17.438 | ||||||||||||||
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