EXHIBIT (c)(4)
Highly Confidential – Preliminary Draft |
Discussion Materials Silver Special Committee Goldman, Sachs & Co. November 21, 2006 |
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Highly Confidential – Preliminary Draft |
Table of Contents I. Public Market Perspective II. Review of Silver Management Financial Plan III. Analysis of Potential Third Party Strategic & Financial Buyer Interest Appendix A: Supporting Materials |
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Highly Confidential – Preliminary Draft |
I. Public Market Perspective |
Public Market Perspective 3 |
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Highly Confidential – Preliminary Draft |
Public Market Perspective Absolute Share Price Performance (Last 5 Years) (US$ per share) |
$ 40 May-2004 3-Jul-2006 SEC launches 20-Apr-2006 All time high Silver investigation into 27-Oct-2005 Silver reports a share price of $33.62 whether securities JM steps down as Silver 93% increase in fraud was committed President & CEO. Bob earnings for Q1 by Silver CEO JM Cunningham named new CEO 2006 |
$ 27.49 |
$ 30 JM Proposal: $ 29.00 Share Price (USD) $ 20 |
8-Aug-2006 Closing |
JP Morgan analyst lowers his earnings Silver estimates for Silver |
$ 10 Weighted Average Price 22-Sep-2005 5 Year $21.81 |
JM pays $1.25mm to 3 Year 22.48 06-Nov-2006 settle federal lawsuit 1 Year 26.20 Silver receives an all cash with SEC over insider 6 Month 27.11 acquisition offer of $ 29.00 |
Current 27.49 trading allegations per share from JM $ 0 |
Nov-2001 Jul-2002 Apr-2003 Dec-2003 Aug-2004 May-2005 Jan-2006 Sep-2006 |
Source: Factset (as of November 20, 2006), press releases, Silver website |
Public Market Perspective 4 |
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Highly Confidential – Preliminary Draft |
Shares Traded Analysis Since JM Proposal on November 6th (US$ per share) |
Shares Traded Cummulative Date Share Price That Day (mm) Shares Traded % of Float |
6-Nov-06 $29.84 16.4 16.4 36.4% |
7-Nov-06 29.43 6.2 22.6 50.0% |
8-Nov-06 28.94 3.4 26.0 57.5% |
9-Nov-06 27.93 3.3 29.3 64.7% |
10-Nov-06 27.70 1.7 31.0 68.5% |
13-Nov-06 27.50 0.9 31.8 70.4% |
14-Nov-06 27.95 1.2 33.1 73.1% |
15-Nov-06 27.54 1.0 34.1 75.4% |
16-Nov-06 27.86 0.8 34.9 77.1% |
17-Nov-06 27.82 0.8 35.6 78.8% |
20-Nov-06 27.49 0.7 36.480.5% |
Source: Factset |
Public Market Perspective 5 |
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Highly Confidential – Preliminary Draft |
Public Market Perspective Silver Relative Share Price Performance vs. Selected Companies / Composites |
5 Years 3 Years |
Dow Jones Transportation LTL Composite2 165.3% 69.4% Composite Truckload Composite1 134.0% Truckload Composite1 36.5% Dow Jones Transportation 94.4% S&P 500 35.5% Composite Silver 31.6% Silver 32.2% S&P 500 22.6% LTL Composite2 28.3% 1 Year 6 Months |
Silver 36.8% S&P 500 11.0% Dow Jones Transportation Dow Jones 16.9% 4.6% Composite Transportation LTL (3.3)% S&P 500 12.2% Composite2 Truckload Composite1 3.4% Silver (3.8)% Truckload LTL Composite2 0.4% (5.1)% Composite1 Source: Bloomberg and Factset (as of November 20, 2006)1Includes Covenant Transport, Heartland Express, JB Hunt Transport, Knight Transportation, U.S. Xpress and Werner.2Includes Arkansas Best, Central Freight, Con-Way, Old Dominion, Saia and YRC Worldwide. Public Market Perspective 6 |
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Highly Confidential – Preliminary Draft |
Public Market Perspective Evolution of Wall Street EPS Estimate since November 2001 (US$ per share) |
$ 3.00 $ 35.00 $ 30.00 $ 2.50 $ 2.50 2008E $ 25.00 $ 2.00 $ 2.07 $2.06 2007E Closing 2006E Estimate $ 20.00 $ 1.50 $ 1.47 EPS 2005A $ 15.00 $ 1.30 2004A Stock Price $ 1.00 $ 0.93 $ 10.00 $ 0.78 2003A 2002A $ 0.50 $ 0.45 2001A $ 5.00 $ 0.00 $ 0.00 Nov-2001 Nov-2002 Nov-2003 Nov-2004 Nov-2005 Nov-2006 Silver Share Price |
Source: Factset (as of November 20, 2006) and IBES |
Public Market Perspective 7 |
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Highly Confidential – Preliminary Draft |
Public Market Perspective Transportation Sector |
John G. Larkin, Stifel Nicolaus November 16, 2006 |
“Anecdotal evidence from conversations with several truckload, less-than-truckload (LTL) and rail company representatives suggests that industry demand remains depressed during the time of year when volumes are typically the strongest.” |
“Some carriers implied that competition for freight is heating up. Though pricing still appears to be rational, we would not be surprised if some carriers are experiencing a bit of downward pressure on rates in 4Q06.” |
“In light of the insights we gained at the conference, we continue to believe that the long-term, capacity-constrained operating environment (in which we expect the industry to operate for the forseeable future) will provide the requisite backdrop for well-managed companies to raise rates in excess of their cost increases, to expand margins, and to benefit from industry consolidation—all of which should translate into above-market earnings growth for investors. Therefore, we suggest long-term investors should view the current environment, the relatively weak near-term outlook for industry demand, and the resulting depressed valuations across the transportation group as an opportunity to build positions in several companies that we view as long-term industry winners.” October 30, 2006 |
“In this fundamentally tight supply/demand environment, the trick is to provide very good service with the fleet you have rather than mediocre service with a fleet that’s growing,” Larkin says. The high-service carriers have been able to command prices that meet or even exceed rising costs. Considering the capacity constraints, that favorable pricing position should hold unless demand drops off dramatically.” |
Jon A. Langenfeld, Baird September 26, 2006 |
“The US’ national average for diesel fuel has fallen -15% from August 2006’s peak of $3.07/gallon and -10% quarter-to-date. The decline should benefit TL carriers and offset the drag caused by the run-up in diesel prices for the first 6 weeks of 3Q06. Importantly, diesel fuel prices at current levels and below set up nicely for 4Q06, as TL carriers suffered from the spike in fuel costs following Hurricanes Katrina and Rita in 4Q05.” |
Edward Wolfe, Bear Stearns September 15, 2006 |
“We suspect much of the weaker TL demand is actually resulting from an increased supply of trucks. Outside of weakened direct and in-direct demand for home building, which we estimate represents about 8% and 6.5% respectively of TL and LTL total revenue; we see few signs of a slowing freight economy. During the 4Q, the TL and LTL carriers will face very steep comparisons versus a year ago when the U.S. government spent about $300M on purchasing truck capacity in the Gulf, during the already capacity constrained strong peak shipping season.” |
Source: Wall Street Research Public Market Perspective 8 |
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Highly Confidential – Preliminary Draft |
Public Market Perspective Truckload Sectors P/E Trading Multiples Over Time |
Next Full Fiscal Year P/E Multiple over Time 5 Year 3 Year 1 Year Median High Low Median High Low Median High Low |
Silver 14.3x 32.5x 9.4x 13.2x 17.6x 9.4x 12.7x 16.7x 9.4x Silver Rank (Out of 7 peers) 7 NM 6 7 NM 5 7 NM 7 Covenant 15.8x 35.6x 8.2x 16.1x 35.6x 8.2x 18.3x 35.6x 15.0x Heartland Express 20.0 26.0 15.5 19.4 24.9 15.5 18.9 21.6 15.5 |
J.B. Hunt 15.8 31.5 11.3 15.2 19.4 11.5 14.0 17.8 11.5 |
Knight Transport 21.5 30.5 16.0 20.1 26.6 16.0 19.6 26.6 16.0 |
U.S. Xpress 14.7 48.4 7.0 13.3 21.9 7.1 14.6 18.6 10.0 |
Werner 15.4 24.0 11.4 14.1 18.7 11.4 13.0 16.4 11.4 |
Median 15.8x 31.5x 11.3x 15.2x 21.9x 11.4x 14.6x 18.6x 11.5x Current P/E CY2006E P/E |
21.4x 17.8x 15.1x 14.9x 14.1x 13.6x 11.7x NM Knight Heartland Werner J.B. Hunt Silver Current1 U.S. Xpress Silver Undisturbed2 Covenant CY2007E P/E |
29.2x 18.2x 17.6x 14.2x 14.0x 13.7x 11.6x 11.2x Covenant Knight Heartland Werner Silver Current1 J.B. Hunt Silver Undisturbed2 U.S. Xpress Source: Thomson, IBES and Factset (as of November 20, 2006)1Silver’s P/E multiples calculated using the $29 per share JM proposal.2Based on Silver share price of $24.05, immediately prior to offer (November 3, 2006) Public Market Perspective 9 |
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Highly Confidential – Preliminary Draft |
Public Market Perspective Truckload Sectors EV / EBITDA Trading Multiples Over Time |
Current Fiscal Year EV/EBITDA Multiple over Time 5 Year 3 Year 1 Year Median High Low Median High Low Median High Low |
Silver 5.9x 8.8x 4.2x 5.5x 7.6x 4.2x 5.1x 6.4x 4.2x Silver Rank (Out of 7 peers) 5 5 4 5 5 5 5 5 5 Covenant 4.3x 5.7x 2.5x 4.3x 5.7x 2.5x 4.4x 5.7x 3.8x Heartland Express 9.6 13.9 6.5 8.9 12.0 6.5 8.2 10.1 6.5 |
J.B. Hunt 6.2 8.1 4.2 6.6 8.1 5.3 6.4 7.8 5.3 |
Knight Transport 9.8 12.4 7.4 9.1 12.4 7.4 8.7 12.2 7.4 |
U.S. Xpress 5.1 8.2 3.6 5.5 8.2 3.6 5.7 7.3 4.8 |
Werner 5.2 6.4 3.8 4.6 6.0 3.8 4.2 5.4 3.8 |
Median 5.9x 8.2x 4.2x 5.5x 8.1x 4.2x 5.7x 7.3x 4.8x Current EV/EBITDA Multiples CY2006E EV/EBITDA |
8.6x 7.3x 7.1x 6.5x 5.2x 5.2x 4.4x 4.4x Knight Heartland Covenant J.B. Hunt U.S. Xpress Silver Current1 Werner Silver Undisturbed2 CY2007E EV/EBITDA |
7.3x 7.0x 6.1x 6.0x 5.2x 4.5x 4.4x 4.2x Knight Heartland Covenant J.B. Hunt Silver Current1 U.S. Xpress Silver Undisturbed2 Werner Source: Thomson, IBES and Factset (as of November 20, 2006)1Silver’s multiples calculated using the $29 per share JM proposal.2Based on Silver share price of $24.05, immediately prior to offer (November 3, 2006). |
Public Market Perspective 10 |
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Highly Confidential – Preliminary Draft |
II. Review of Silver Management Financial Plan |
Review of Silver Management Financial Plan 11 |
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Highly Confidential – Preliminary Draft |
Review of Silver Management Financial Plan Summary Financial Projections (US$ in millions, except per share amounts) |
06E-11E Fiscal Year Ended Dec. 31 2003A 2004A 2005A 2006E 2007E 2008E 2009E 2010E 2011E CAGR Operating Revenues $ $2,397.7 $ $2,826.2 $ $3,197.5 $ $3,216.3 $ $3,369.5 $ $3,693.2 $ $4,076.1 $ $4,506.1 $ $4,964.0 9.1% |
% Growth 17.9% 13.1% 0.6% 4.8% 9.6% 10.4% 10.5% 10.2% EBITDA1 $ 291.6 $ 364.4 $406.6 $ $ 499.2 $ $ 510.9 $ 598.0 $ 669.5 $ 772.7 $ 894.6 12.4% |
% Margin 12.2% 12.9% 12.7% 15.5% 15.2% 16.2% 16.4% 17.1% 18.0% Rental Expense 82.4 81.4 57.7 51.5 49.1 36.3 46.6 44.3 32.1 |
EBITDAR1 $ 374.0 $ 445.8 $464.3 $ 550.7 $ $ 560.0 $ 634.3 $ 716.1 $ 817.0 $ 926.8 11.0% |
% Margin 15.6% 15.8% 14.5% 17.1% 16.6% 17.2% 17.6% 18.1% 18.7% D&A 150.6 183.8 199.8 223.2 237.7 260.1 281.6 297.6 318.8 |
% Sales 6.3% 6.5% 6.2% 6.9% 7.1% 7.0% 6.9% 6.6% 6.4% EBIT1 $ 141.0 $ 180.6 $206.8 $ 276.0 $ $ 273.1 $ 337.9 $ 387.9 $ 475.1 $ 575.8 15.8% Operating Ratio1 94.1% 93.6% 93.5% 91.4% 91.9% 90.9% 90.5% 89.5% 88.4% |
Interest Expense (net) 15.4 18.0 28.2 25.2 11.4 6.3 2.8 0.7 (1.4) |
Net Income1 79.4 103.5 108.7 139.3 161.6 204.4 237.2 291.8 354.8 20.6% % Sales 3.3% 3.7% 3.4% 4.3% 4.8% 5.5% 5.8% 6.5% 7.1% EPS (diluted) $ 0.94 $ 1.29 $1.47 $ 1.84 $ 2.12 $ 2.67 $ 3.09 $ 3.79 $ 4.58 20.1% |
% Growth 37.3% 14.1% 24.8% 15.4% 26.0% 15.6% 22.6% 21.1% Reported EPS (diluted) $1.37 $ 2.05 |
Wall Street Median EPS Estimates2 $ 2.06 $ 2.07 $ 2.50 |
% Variance vs. Wall Street Estimates (0.6)% 2.5% 6.9% Capex Net Proceeds from Asset Sales 222.8 323.8 386.8 163.3 322.9 338.8 417.7 443.5 479.9 |
% Sales 9.3% 11.5% 12.1% 5.1% 9.6% 9.2% 10.2% 9.8% 9.7% Change in Working Capital 1.0 (13.9) (46.9) 4.0 0.9 0.4 (3.2) (3.6) (3.9) |
Deferred Taxes 30.6 21.6 3.7 (3.3) (8.5) 0.0 0.0 0.0 0.0 |
Levered Cash Flow $ 36.7 $ (1.0) $(27.7) $ 192.0 $ 67.1 $ 125.3 $ 104.3 $ 149.6 $ 197.6 |
Source: Silver projections as per Silver Management Financial Plan |
1 Excludes impact of impairments, 401k benefits, stock option acceleration, litigation settlements and gains/losses on property and derivatives. |
2Source: IBES Review of Silver Management Financial Plan 13 |
Highly Confidential – Preliminary Draft |
Review of Silver Management Financial Plan |
2007E-2011E Plan Assumptions |
Assumes GDP growth of 2.0% in 2006 and 3.0% in the years thereafter 4% — 5% year over year fleet growth Approximately 1% year over year loaded utilization improvement |
Approximately $0.05 year over year revenue per loaded mile (RPLM) improvement (3% — 3.3%) |
20 basis point deadhead improvement in 2008E – 2009E; another 20 basis point improvement in 2010E – 2011E |
$ 110 million carrier revenue annual growth ($100mm = Intermodal; $10mm = Brokerage) |
$ 0.015/RPLM driver wage increase in 2008E – 2009E; $0.02/RPLM increase in 2011E |
$0.02/RPLM owner/operator wage increase in 2008E – 2011E Fuel impact neutral to 2006E and miles per gallon flat to 2006E |
5.7% — 5.8% insurance as a percent of Net Revenue (excl. fuel surcharge and carrier revenue) |
Impairment charges for freightline tradeback units are included No impact from derivative instruments included |
Source: Silver Management Financial Plan |
Review of Silver Management Financial Plan 12 |
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Highly Confidential – Preliminary Draft |
Review of Silver Management Financial Plan Summary Credit Statistics (US$ in millions) |
Capital Structure 2003A 2004A 2005A 2006E 2007E 2008E 2009E 2010E 2011E Cash $ 19.1 $ 28.2 $ 13.1 $ $ 22.1 $ $ 21.8 $ $ 1.7 $ $ 113.3 $ $ 170.3 $ $ 385.6 Total Debt $383.4 $605.8 $609.0 $ $ 365.0 $ $ 255.0 $ $ 100.0 $ $ 100.0 $ $ 0.0 $ $ 0.0 Net Debt 364.4 577.6 595.9 342.9 233.2 98.3 (13.3) (170.3) (385.6) Stockholders Equity 844.6 738.3 870.0 1,041.1 1,208.7 1,419.1 1,662.3 1,960.1 2,320.9 Credit Statistics Total Debt/EBITDA 1.3 x 1.7 x 1.5 x 0.7 x 0.5 x 0.2 x 0.1 x 0.0 x 0.0 x EBITDA/Interest Expense 18.9 x 20.2 x 14.4 x 19.8 x 44.7 x 94.8 x 243.1 x NM NM (EBITDA-Capex)/Interest 4.5 x 2.3 x 0.7 x 13.3 x 16.5 x 41.1 x 91.4 x NM NM Total Debt/Capitalization 31% 45% 41% 26% 17% 7% 6% 0% 0% FFO/Total Debt1 60% 47% 51% 99% 157% 465% 519% NM NM FCF/Total Debt2 10% (0)% (5)% 53% 26% 125% 104% NM NM Adj. Total Debt3 $ 674.2 $ 549.6 $ 317.7 $ 379.4 $ 265.7 $ 192.8 Adj. Total Debt/EBITDAR3 1.2 x 1.0 x 0.5 x 0.5 x 0.3 x 0.2 x Adj. Total Debt/Capitalization3 39% 31% 18% 19% 12% 8% |
Source: Silver projections as per Silver Management Financial Plan1FFO defined as Net Income plus depreciation and amortization.2FCF defined as FFO less capex, changes in working capital and deferred taxes.3Credit statistics adjusted for operating leases using a 6.0x multiple of annual rent expense. Review of Silver Management Financial Plan 14 |
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Highly Confidential – Preliminary Draft |
Silver Management Financial Plan Analysis Silver Wall Street Research P/E Multiple Over Time (US$ per share) |
Recession Recession 35x $ 2.50 1991-1992 2001-2002 Consensus) 30x Median P/E = 16.5x Median P/E = 13.5x $ 2.00 Next Fiscal 25x Street $ 1.50 20x Year Wall Street 15x Year P/E (Wall $ 1.00 Fiscal EPS 10x Estimate $ 0.50 Silver Next 5x 0x $ 0.00 Sep-1990 Sep-1993 Sep-1996 Sep-1999 Sep-2002 Sep-2005 Silver P/E (Wall Street) Silver EPS Estimate (Wall Street) Source: Factset, IBES |
Review of Silver Management Financial Plan 15 |
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Highly Confidential – Preliminary Draft |
Silver Management Financial Plan Analysis Illustrative Future Share Price Analysis (US$ in millions, except per share amounts) |
Illustrative Future Silver Share Price 2007E 2008E 2009E 2010E 2011E 2007E 2008E 2009E 2010E 2011E Silver Management Financial Plan EPS Silver Management Financial Plan EBITDA12 $ 2.12 $ 2.67 $ 3.09 $ 3.79 $ 4.58 $510.9 $598.0 $669.5 $772.7 $894.6 |
10.0 x $ $21.21 $ $26.72 $ $30.89 $ $37.85 $ $45.84 4.0 x $23.76 $29.99 $35.05 $42.30 $51.22 |
11.0 x 23.33 29.40 33.98 41.64 50.42 Trailing 4.5 x 27.11 33.90 39.41 47.32 57.00 |
Forward 12.0 x 25.46 32.07 37.06 45.43 55.01 EBITDA 5.0 x 30.46 37.81 43.77 52.33 62.78 |
P/E Multiple Multiple 13.0 x 27.58 34.74 40.15 49.21 59.59 5.5 x 33.82 41.72 48.12 57.34 68.56 |
14.0 x 29.70 37.41 43.24 53.00 64.17 6.0 x 37.17 45.63 52.48 62.35 74.34 |
15.0 x 31.82 40.08 46.33 56.78 68.76 |
Present Value of Illustrative Future Silver Share Price3 2007E 2008E 2009E 2010E 2011E 2007E 2008E 2009E 2010E 2011E Silver Management Financial Plan EPS Silver Management Financial Plan EBITDA2 $ 2.12 $ 2.67 $ 3.09 $ 3.79 $ 4.58 $510.9 $598.0 $669.5 $772.7 $894.6 10.0 x $ $21.21 $ $23.86 $ $24.62 $ $26.94 $ $29.13 4.0 x $21.21 $23.91 $24.95 $26.88 $29.06 |
11.0 x 23.33 26.25 27.09 29.64 32.04 Trailing 4.5 x 24.21 27.02 28.05 30.07 32.34 |
Forward 12.0 x 25.46 28.63 29.55 32.33 34.96 EBITDA 5.0 x 27.20 30.14 31.15 33.26 35.62 |
P/E Multiple Multiple 13.0 x 27.58 31.02 32.01 35.03 37.87 5.5 x 30.19 33.26 34.25 36.44 38.90 |
14.0 x 29.70 33.40 34.47 37.72 40.78 6.0 x 33.19 36.37 37.36 39.63 42.18 |
15.0 x 31.82 35.79 36.93 40.42 43.70 |
Source: Projections as per Silver Management Financial Plan |
1 Future share price calculated as the implied enterprise value less the net debt projected for that year by Silver Management Financial Plan, divided by the projected shares outstanding in that year. |
2 EBITDA excludes impact of impairments, 401k benefits, stock option acceleration, litigation settlements and gains/losses on property and derivatives. |
3 Assumes a 12% discount rate.4 Implied present value of future share price for 2008E-2011E based off of EPS for each year discounted back to December 31, 2006. |
Review of Silver Management Financial Plan 16 |
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Highly Confidential – Preliminary Draft |
Wall Street Consensus Analysis Illustrative Future Share Price Analysis (US$ per share) |
Illustrative Future Silver Share Price 2007E 2008E Wall Street Consensus EPS $ 2.07 $ 2.50 |
Illustrative Future Silver Share Price 2007E 2008E Wall Street Consensus EPS $ 2.07 $ 2.50 |
10.0 x $ $20.70 $ $25.00 |
11.0 x 22.77 27.50 |
Forward 12.0 x 24.84 30.00 |
P/E Multiple 13.0 x 26.91 32.50 |
14.0 x 28.98 35.00 |
15.0 x 31.05 37.50 |
Present Value of Illustrative Future Silver Share Price1 2007E 2008E Wall Street Consensus EPS2 $ 2.07 $ 2.50 10.0 x $ $20.70 $ $22.32 |
11.0 x 22.77 24.55 |
Forward 12.0 x 24.84 26.79 |
P/E Multiple 13.0 x 26.91 29.02 |
14.0 x 28.98 31.25 |
15.0 x 31.05 33.48 |
Source: IBES 1 Assumes a 12% equity discount rate. 2 Implied 2008E present value of future share price based off of future share price for 2008E discounted back to December 31, 2006. Review of Silver Management Financial Plan 17 |
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Highly Confidential – Preliminary Draft |
Silver Management Financial Plan Analysis Illustrative Present Value of Future Share Price Sensitivity Analysis1 (US$ per share) |
Present Value of Illustrative Future Silver Share Price1 Assumes Annual Revenue Growth Decreases by 100 bps in Each Year Relative to Silver Assumes Annual Operating Ratio Increases by 100 bps in Each Year Relative to Silver Management Financial Plan Management Financial Plan 200 200 200 2010E 201 200 2008E 2009E 201 201 7E 8E 9E 1E 7E 0E 1E Sensitivity to Silver Management Financial Plan EPS2 Sensitivity to Silver Management Financial Plan EPS2 $ 2.10 $ 2.62 $ 3.00 $3.65 $ 4.38 $ 1.85 $ 2.38 $ 2.76 $ 3.43 $ 4.19 |
10.0 x $ $21.00 $ $23.41 $ $23.95 $ 25.97 $ $27.83 10.0 x $ $18.51 $ $21.22 $ $22.03 $ $24.40 $ $26.64 |
11.0 x 23.10 25.75 26.34 28.57 30.61 11.0 x 20.36 23.34 24.24 26.84 29.30 |
Forward 12.0 x 25.20 28.09 28.74 31.16 33.39 Forward P/E 12.0 x 22.21 25.47 26.44 29.28 31.96 |
P/E Multiple 13.0 x 27.30 30.43 31.13 33.76 36.18 Multiple 13.0 x 24.06 27.59 28.64 31.72 34.63 |
14.0 x 29.40 32.78 33.52 36.36 38.96 14.0 x 25.91 29.71 30.85 34.16 37.29 |
15.0 x 31.50 35.12 35.92 38.96 41.74 15.0 x 27.76 31.83 33.05 36.60 39.95 |
Assumes Annual Revenue Growth Decreases by 100 bps and Operating Ratio Increases by 100 bps in Each Year Relative to Silver Management Financial Plan 200 200 2009E 2010E 201 7E 8E 1E Sensitivity to Silver Management Financial Plan EPS2 $ 1.83 $ 2.33 $ 2.69 $ 3.30 $ 4.00 10.0 x $ $18.32 $ $20.82 $21.43 $ 23.52 $ $25.45 |
11.0 x 20.15 22.90 23.57 25.87 27.99 |
Forward P/E 12.0 x 21.99 24.99 25.71 28.22 30.54 |
Multiple 13.0 x 23.82 27.07 27.86 30.57 33.08 |
14.0 x 25.65 29.15 30.00 32.92 35.62 |
15.0 x 27.48 31.23 32.14 35.28 38.17 |
Source: Underlying Silver projections as per Silver Management Financial Plan Note: Increases/Decreases in each year are not cumulative |
1 Assumes a 12% equity discount rate. |
2 Implied present value of future share price for 2008E-2011E based off of future share price for each year discounted back to December 31, 2006. |
Review of Silver Management Financial Plan 18 |
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Highly Confidential – Preliminary Draft |
Silver Management Financial Plan Analysis Illustrative Discounted Cash Flows (US$ in millions) |
2006E 2007E 2008E 2009E 2010E 2011E |
Revenue $ $3,216 $ $3,370 $ $3,693 $ $4,076 $ $4,506 $4,964 |
EBITDA $ 499 $ $ 511 $ 598 $ 670 $ 773 $ 895 |
EBIT 276 273 338 388 475 576 |
Unlevered Net Income 169 167 207 237 291 352 |
+Depreciation & Amortization 223 238 260 282 298 319 |
- Capex 163 323 339 418 443 480 |
- Increase / (Decrease) in NWC 24 1 0 (3) (4) (4) |
+ Increase in Deferred Taxes (3) (8) 0 0 0 0 |
Unlevered Free Cash Flow $ 202 $ 73 $ 128 $ 105 $ 149$195 |
Source: Projections as per Silver Management Financial Plan |
Review of Silver Management Financial Plan 19 |
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Highly Confidential – Preliminary Draft |
Silver Management Financial Plan Analysis Illustrative Discounted Cash Flow Analysis (US$ per share) |
Key Assumptions Equity Value Per Share1 |
Unlevered free cash flows discounted back to December 31, 2006 Perpetuity Growth Rate 1.0 % 2.0 % 3.0 % 4.0 % 5.0 % |
Unlevered free cash flow defined as: 11.0% $ 18.35 $ 20.32 $ 22.71 $ 25.78 $ 29.88 |
Rate 10.5% 19.64 21.81 24.55 28.14 33.03 |
+ Unlevered Net Income Discount 10.0% 21.02 23.49 26.66 30.89 36.82 |
+ Depreciation and Amortization 9.5% 22.56 25.40 29.10 34.15 41.45 |
- Capital Expenditures 9.0% 24.30 27.58 31.95 38.07 47.24 |
- Increases in Working Capital Implied Terminal Multiples of 2011E EBITDA |
+ Increase in deferred taxes = Unlevered Free Cash Flow Perpetuity Growth Rate 1.0 % 2.0 % 3.0 % 4.0 % 5.0 % |
Projections are per Silver Management Financial Plan 11.0% 2.3 x 2.6 x 3.0 x 3.4 x 4.0 x Rate 10.5% 2.4 x 2.8 x 3.1 x 3.7 x 4.4 x |
Terminal value is based on a perpetuity growth rate of Discount 10.0% 2.6 x 2.9 x 3.4 x 4.0 x 4.8 x |
free cash flow in 2011E 9.5% 2.7 x 3.1 x 3.6 x 4.3 x 5.3 x |
Marginal tax rate of 38.8% 9.0% 2.9 x 3.3 x 3.9 x 4.7 x 6.0 x Source: Projections as per Silver Management Financial Plan1 Assumes net debt of $342.9 and 74.9 million basic shares outstanding at December 31, 2006 as per Silver Management Financial Plan. |
Review of Silver Management Financial Plan 20 |
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Highly Confidential – Preliminary Draft |
Silver Management Financial Plan Analysis Illustrative Discounted Cash Flow Sensitivity Analysis (US$ per share) |
Implied Equity Value Per Share12 Change in Each Year’s Sales Growth vs. Silver Management Financial Plan (3.0)% (2.0)% (1.0)% 0.0 % 1.0 % 2.0 % 3.0 % |
Plan 3.0% $ 9.52 $10.13 $10.76 $ 11.42 $ 12.10 $ 12.80 $ 13.52 |
2.0% 14.11 14.92 15.76 16.62 17.52 18.45 19.40 |
Financial (1.0)% 18.70 19.70 20.69 21.71 22.77 23.87 25.00 |
0.0% 23.11 24.25 25.44 26.66 27.93 29.24 30.60 |
Ratio vs. Silver |
Management |
in Each Year’s |
Operating Change (1.0)% 27.48 28.81 30.19 31.61 33.09 34.62 36.20 |
(2.0)% 31.85 33.37 34.94 36.57 38.25 39.99 41.80 |
(3.0)% 36.22 37.92 39.69 41.52 43.41 45.37 47.39 |
Source: Projections as per Silver Management Financial Plan1 Assumes net debt of $342.9 and 74.9 million basic shares outstanding at December 31, 2006 as per Silver Management Financial Plan.2 Assumes a discount rate of 10.0% and a perpetuity growth rate of 3.0%. Review of Silver Management Financial Plan 21 |
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Highly Confidential – Preliminary Draft |
III. Analysis of Potential Third Party Strategic & Financial |
Buyer Interest |
Analysis of Potential Third Party Strategic & Financial Buyer Interest 22 |
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Highly Confidential – Preliminary Draft |
Analysis of Third Party Interest Strategic & Financial ($ in millions) |
Strategic Financial Name Market Cap Name Fund Size |
Logistics Blackstone $20,000 |
UPS $80,612 Cerberus Partners LP 17,000 |
FedEx 35,672 Apollo Management LP 10,000 |
DPWN 33,597 Warburg Pincus LLC 8,000 |
Carlyle Group 7,850 |
Truckload Clayton Dubilier & Rice Inc. 4,000 |
JB Hunt 3,229 Court Square Capital 2,500 |
Knight 1,590 Kelso & Company 2,100 |
Heartland 1,552 Nautic Partners LLC 1,100 |
Werner Enterprises 1,463 Freeman Spogli & Company Inc. 1,000 |
Fenway Partners Inc. 900 |
Railroads Greenbriar 700 |
Burlington Santa Fe 28,627 |
Canadian National 25,753 |
Union Pacific 24,727 |
Norfolk Southern 22,416 |
CSX 16,713 |
Source: Company filings, Factset |
Analysis of Potential Third Party Strategic & Financial Buyer Interest 23 |
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Highly Confidential – Preliminary Draft |
Review of Selected Transactions Premia Paid1 |
Premia (%)2 Equity Undisturbed Value 52 wk 52 wk Date Target Aquiror ($MM) Undisturbed 1 Week 1 Month Low High |
Nov 3 2006 Silver JM 2,207 20.6 15.0 13.0 51.8 (13.7) |
8-Sep-06 Freescale Blackstone, Carlyle, Premia Funds, TPG 17,600 29.3 29.6 41.6 86.1 21.6 |
28-Aug-06 Intergraph Hellman & Friedman, TPG, JMI Equity 1,325 20.0 23.0 23.9 45.5 (14.5) |
18-Aug-06 Glenborough Morgan Stanley Real Estate 1,900 8.2 13.7 18.2 46.2 8.2 |
17-Aug-06 Lone Star Steakhouse & Saloon Lone Star Funds 614 15.1 14.5 13.3 18.2 (4.6) |
7-Aug-06 Aleris International TPG 1,717 26.8 28.2 17.3 132.4 2.0 |
19-Jul-06 HCA Bain Capital/KKR/Merrill Lynch 21,279 16.8 17.1 17.6 142.9 (3.0) |
13-Jul-06 Petco Animal Supplies Green Equity Investors/TPG Partners 1,695 49.1 46.1 52.9 57.9 (1.0) |
4-Jul-06 Duquesne Light Holdings Macquarie 1,609 21.7 24.8 21.1 26.4 2.9 |
30-May-06 West Corp TH Lee/Quadrangle 3,351 13.0 17.3 5.2 38.7 (1.6) |
26-May-06 Kinder Morgan Kinder/Morgan/Two BOD 15,000 27.4 27.4 24.0 38.3 6.0 |
members/GS/AIG/Carlyle/Riverstone 12-May-06 NCO Group One Equity Partners 922 42.0 35.6 25.6 80.0 13.1 |
28-Apr-06 Aramark GS/CCMP/JPM/TH Lee/Warburg 6,300 20.2 20.4 16.5 37.9 12.9 |
17-Mar-06 Michaels Stores Bain Capital/Blackstone 6,025 29.6 32.6 37.7 43.0 1.8 |
3-Mar-06 Education Management Providence/GS 3,372 16.3 13.9 35.5 73.1 13.0 |
3-Mar-06 CarrAmerica Realty Blackstone 2,900 8.9 10.5 20.9 44.7 7.9 |
7-Feb-06 Univision Communications Madison Dearborn/Providence/TPG/TH Lee 12,326 18.7 13.9 16.8 53.2 13.8 |
20-Jan-06 The Sports Authority Leonard Green 1,043 20.0 26.0 20.9 57.0 8.9 |
16-Dec-05 Town and Country Morgan Stanley Real Estate/Onex Real Estate 716 11.9 11.4 16.1 34.5 10.8 |
10-Nov-05 Meristar Hospitality Blackstone 1,117 20.1 21.2 20.1 69.9 11.6 |
8-Nov-05 La Quinta Blackstone 2,342 36.9 35.4 37.2 44.0 16.1 |
28-Oct-05 SERENA Software Silver Lake 842 2.7 5.4 22.9 34.5 1.0 |
14-Sep-05 UICI Blackstone/GS/DLJ 1,760 19.0 16.9 18.4 68.9 3.2 |
13-Sep-05 Linens ‘N Things Apollo 1,295 7.9 16.6 16.0 29.0 (2.5) |
5-Sep-05 Capital Automotive REIT DRA Advisors 2,109 9.0 9.0 4.0 29.2 (3.3) |
1-Sep-05 Albertson’s Supervalu/Cereberus/CVS 11,723 12.9 9.6 6.9 35.4 1.1 |
17-Aug-05 Tommy Hilfiger Apax Partners 1,589 4.3 23.7 17.3 95.1 4.3 |
27-Jul-05 SS&C Technologies Carlyle 941 12.9 10.4 26.7 127.4 7.1 |
Source: Public Filings, FactSet |
1 LBOs involving financial sponsors of US publicly traded and domiciled companies with an equity value greater than $500 million, excluding squeeze-outs. Includes deals that were terminated and are pending since 2000. |
2 Based off undisturbed date, which is defined as the day prior to any significant public speculation or announcement of a potential sale transaction. |
Analysis of Potential Third Party Strategic & Financial Buyer Interest 24 |
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Highly Confidential – Preliminary Draft |
Review of Selected Transactions Premia Paid (Cont’d)1 |
Premia (%)2 Equity Undisturbed Value 52 wk 52 wk Date Target Aquiror ($MM) Undisturbed 1 Week 1 Month Low High |
24-Jun-05 Burlington Coat Factory Bain Capital 2,051 26.2 24.0 44.5 160.0 18.6 |
31-May-05 School Specialty Bain Capital 1,356 24.9 26.1 32.0 46.3 14.8 |
19-May-05 Maytag Ripplewood 1,132 21.1 33.6 (0.6) 46.3 (46.8) |
17-May-05 Metals USA Apollo 539 58.4 47.4 33.1 63.4 (11.6) |
12-May-05 iPayment Management Group 638 35.9 26.2 5.3 35.9 (13.5) |
7-Apr-05 ShopKo I Goldner Hawn 767 4.2 8.0 33.0 96.4 4.2 |
7-Apr-05 ShopKo II Sun Capital 899 25.9 30.5 60.8 137.3 25.9 |
18-Mar-05 SunGard Silver Lake/Bain/Blackstone/GS/KKR/Providence/TPG 11,043 44.3 42.3 37.3 59.7 25.7 |
15-Mar-05 Neiman Marcus TPG/Warburg 5,111 33.8 35.7 37.7 108.3 33.8 |
4-Mar-05 Insight Communications Carlyle 718 21.4 24.8 14.1 42.9 12.5 |
24-Jan-05 Beverly Enterprises Fillmore Capital 1,614 33.3 37.4 35.1 111.1 30.2 |
3-Dec-04 Sola International Carl Zeiss/EQT 923 26.6 33.9 42.3 78.7 18.9 |
29-Oct-04 DoubleClick Hellman & Friedman 1,102 33.6 36.7 44.8 88.9 (33.6) |
20-Oct-04 Boca Resorts Blackstone 1,032 25.3 30.6 29.9 85.6 20.5 |
15-Oct-04 Select Medical Welsh Carson 1,979 26.6 28.5 40.0 60.7 (7.1) |
10-Sep-04 Metro-Goldwyn-Mayer Sony/Providence/TPG/Comcast/DLJ 2,944 8.0 8.8 2.7 9.1 (43.0) |
27-Aug-04 LNR Property Cerberus 1,905 6.8 10.7 17.7 57.8 6.7 |
17-Aug-04 Prime Hospitality Blackstone 571 44.6 38.7 21.4 48.1 3.9 |
10-Aug-04 Toys R Us Bain/KKR/Vornado 6,084 62.9 63.1 61.8 158.0 54.4 |
19-Mar-04 US Oncology Welsh Carson 1,187 18.5 17.3 16.2 119.7 10.0 |
5-Mar-04 Extended Stay America Blackstone 2,040 24.1 26.3 27.9 99.4 20.4 |
6-Dec-02 AmeriPath Welsh Carson 629 29.2 25.8 37.5 72.8 (34.1) |
11-Oct-02 Quintiles One Equity Partners 1,650 74.5 79.5 46.9 83.3 (20.2) |
20-Sep-02 Dole Food Murdock 1,473 36.8 30.8 23.1 73.3 (1.0) |
9-Apr-02 Herbalife Golden Gate 678 28.7 30.0 40.1 164.9 27.8 |
19-Feb-01 Springs Industries Heartland Industrial Partners 505 27.4 25.7 38.6 103.3 (5.8) |
20-Dec-00 Michael Foods Vestar Capital Partners 571 13.6 9.2 9.9 53.9 4.9 |
1-Jun-00 Buffets Caxton-Iseman Capital 594 21.1 23.8 38.5 71.8 15.4 |
Mean 25.4 26.6 29.9 72.2 4.6 |
Median 21.7 25.7 25.6 61.1 4.9 |
Source: Public Filings, FactSet |
1 LBOs involving financial sponsors of US publicly traded and domiciled companies with an equity value greater than $500 million, excluding squeeze-outs. Includes deals that were terminated and are pending since 2000. |
2 Based off undisturbed date, which is defined as the day prior to any significant public speculation or announcement of a potential sale transaction. |
Analysis of Potential Third Party Strategic & Financial Buyer Interest 25 |
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Highly Confidential – Preliminary Draft |
Summary of Precedent Trucking Transactions (US$ in millions) |
Median LTL TL Both LTL 6.2x TL 4.8x ALL 6.1x 7.4 x 7.3 x 6.0 x 6.4 x 6.1 x 5.9 x 5.7 x Enterprise Value / LTM EBITDA 3.9 x Announced 26-May-2006 27-Oct-2005 15-May-2005 27-Feb-2005 08-Jul-2003 21-Aug-2001 12-Dec-2000 12-Nov-2000 Date Target Watkins Motor Lines Transport Corporation Overnite USF Roadway Arnold Industrie s M.S.Carriers American Freightways Buyer FedEx Goldner Hawn United Parcel Service Yellow Yellow Roadway Swift FedEx Value $ 780 $ 113 $1,276 $1,468 $1,113 $503 $678 $1,212 Premium1 – 25.0% 46.2% 22.3% 59.9% – 52.5% 71.8% |
Source: Company filings 1 Premium based on stock price 1 day prior to announcement. Analysis of Potential Third Party Strategic & Financial Buyer Interest 26 |
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Highly Confidential – Preliminary Draft |
Silver Analysis at Various Prices (US$ in millions except per share amounts) |
Silver Share price as of 20 November 2006 $ $ 27.49 Undisturbed Silver Share price as of 3 November 2006 24.05 Premium to Market Price 5.5% 9.1% 12.8% 16.4% 20.0% 23.7% Premium to Undisturbed Price 20.6% 24.7% 28.9% 33.1% 37.2% 41.4% Purchase Price Per Silver Share ($) $ $ 29.00 $ $ 30.00 $ $ 31.00 $ $ 32.00 $ $ 33.00 $ $ 34.00 Equity Consideration — Diluted1 $ $2,207.4 $ $2,286.1 $ $2,364.7 $ $2,443.4 $ $2,522.1 $ $2,600.8 Enterprise Value2 2,550.3 2,629.0 2,707.7 2,786.3 2,865.0 2,943.7 Enterprise Value / Sales FY 2006E $ $3,216.3 0.8 x 0.8 x 0.8 x 0.9 x 0.9 x 0.9 x FY 2007E 3,369.5 0.8 0.8 0.8 0.8 0.9 0.9 Enterprise Value / EBITDA FY 2006E $ $ 499.2 5.1 x 5.3 x 5.4 x 5.6 x 5.7 x 5.9 x FY 2007E 510.9 5.0 5.1 5.3 5.5 5.6 5.8 Enterprise Value / EBIT FY 2006E $ $ 276.0 9.2 x 9.5 x 9.8 x 10.1 x 10.4 x 10.7 x FY 2007E 273.1 9.3 9.6 9.9 10.2 10.5 10.8 Price / EPS FY 2006E $ 2.05 14.2 x 14.7 x 15.1 x 15.6 x 16.1 x 16.6 x FY 2007E 2.12 13.7 14.1 14.6 15.1 15.6 16.0 Third Party 2007E Dollar Accretion / Dilution3 All cash @ 5.0% cost of debt $ 79.8 $ 76.4 $ 73.1 $ 69.7 $ 66.3 $ 62.9 All cash @ 6.0% cost of debt 66.3 62.4 58.6 54.7 50.9 47.0 All cash @ 7.0% cost of debt 52.8 48.4 44.1 39.8 35.4 31.1 All cash @ 8.0% cost of debt 39.3 34.5 29.6 24.8 20.0 15.2 All cash @ 9.0% cost of debt 25.8 20.5 15.2 9.9 4.6 (0.7) All cash @ 10.0% cost of debt 12.3 6.5 0.7 (5.1) (10.9) (16.6) Source: Silver projections as per Silver Management Financial Plan (1) Assumes 74.9 million basic shares outstanding as of 31 December 2006. Assumes exercise of 3.8 million options outstanding with a weighted average strike price of $19.45. (2) Assumes net debt of $ 342.9 million as of 31 December 2006 as per Silver Management. (3) Assumes 20.0% of the excess purchase price is allocated to intangibles and amortized over 10 years; assumes a marginal tax rate for the acquiror of 38.8%. |
Analysis of Potential Third Party Strategic & Financial Buyer Interest 27 |
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Highly Confidential – Preliminary Draft |
Preliminary Analysis of a Third Party LBO Assumes $29 Per Share (US$ in millions) Sources of Funds Uses of Funds Cost of 2006E1 Sources Amount Debt % of Total EBITDA Uses Amount |
Existing Cash $ 22 0.8% Price Per Share $29.00 |
First Lien 1,248 8.1% 46.1% 2.5 x Equity Purchased $2,207 |
Sr. / Sub. Debt 499 11.6% 18.4% 3.5 x Existing Debt Retired 365 |
Total Debt 1,747 64.5% 3.5 x Purchase Price $2,572 |
Sponsor Equity 939 34.7% 5.4 x Multiple of 2006E EBITDA 5.2 x Multiple of 2007E EBITDA 5.0 x Change In Control Payments 20 |
Fees & Expenses 94 |
Minimum Cash 22 |
Total Sources $2,708 100.0% Total Uses $2,708 Summary Cash Flow & Credit Statistics Illustrative IRR Sensitivity Analysis2 Fiscal Year Ending December Trailing 12 Months Exit EV/EBITDA Multiples 2007E 2008E 2009E 2010E 4.0 x 4.5 x 5.0 x 5.5 x 6.0 x |
FCF Available for Debt ($ 22) $ 33 $ 11 $ 56 Sponsor 2009E 1.3% 11.7% 20.5% 28.2% 35.1% Total Senior Debt 1,270 1,237 1,226 1,170 Exit Year 2010E 11.4% 18.2% 24.0% 29.0% 33.6% Total Debt 1,769 1,736 1,725 1,669 2011E 16.8% 21.5% 25.6% 29.2% 32.5% Credit Statistics |
EBITDA / Tot. Int. Exp. 3.1 x 3.6 x 4.1 x 4.8 x Illustrative IRR Sensitivity Analysis3 EBITDA-Capex / Tot. Int. Exp. 1.1 x 1.6 x 1.5 x 2.0 x Initial Purchase Price Per Silver Share Total Senior Debt / EBITDA 2.5 x 2.1 x 1.8 x 1.5 x $29.00 $30.00 $31.00 $32.00 $33.00 $34.00 Total Debt / EBITDA 3.5 x 2.9 x 2.6 x 2.2 x 3.0 x 22.6% 21.1% 19.6% 18.3% 17.0% 15.8% Adj. Total Debt / EBITDAR 3.7 x 3.1 x 2.8 x 2.4 x Initial Leverage 3.5 x 25.6% 23.6% 21.8% 20.1% 18.5% 17.1% Total Debt / Total Cap 64.1% 61.6% 58.9% 54.7% 4.0 x 30.1% 27.3% 24.9% 22.7% 20.7% 18.9% Adj. Total Debt / Total Cap 67.6% 64.4% 62.5% 58.3% FCF/TD (1.2%) 1.9% 0.6% 3.4% |
Source: Silver projections as per Silver Management Financial Plan; Capital Structure as per Goldman Sachs’ preliminary leverage assumptions |
1 Assumes 2006E EBITDA of $499mm.2 Assumes transaction initial leverage of 3.5x.3 Assumes sale at 5.0x trailing 12 month EBITDA and exit in 2011E. Analysis of Potential Third Party Strategic & Financial Buyer Interest 28 |
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Highly Confidential – Preliminary Draft |
Appendix A: Supporting Materials |
Supporting Materials 29 |
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Highly Confidential – Preliminary Draft |
Sources and Uses of Funds (US$ in millions, except per share amount) |
Sources of Funds Uses of Funds |
Total Outstanding Purchase Price/ Amount ( $) Equity Purchased as of 30-Sep-06 Exercise Price Amou $) nt ( Funded Term Debt: Basic Shares 54.6 $29.00 $ $1,582 |
1st Lien $ 1,390 Stock Options 3.8 19.45 36 |
2nd Lien 485 $ $1,619 |
Total Funded Term Debt 1,875 JM Shares Rollover Encumbered3 14.1 $29.00 $ 410 |
JM Shares Rollover Unencumbered2 6.2 29.00 179 |
Minimum Cash Required (estimated)1 22 Total Equity Purchased $ $2,207 |
Equity: Total Debt Retired (06 mgmt estimate; includes securitized AR) 365 |
JM Equity Rollover (Unencumbered)2 179 |
JM Equity Rollover (Encumbered)3 410 Cash on Balance Sheet 22 |
Additional Equity Required4 236 |
Total Contributed Equity $ 825 Estimated Fees: |
Change of Control Payments5 20 |
Advisory Fees (estimated)6 50 |
Financing Fees (estimated @ 2.5%) 57 |
Total Fees (estimated) $ 127 |
Total Sources of Funds $ 2,722 Total Uses of Funds $ $2,722 |
Note: Balance Sheet figures are expected as of December 31, 2006 as per Silver Management Financial Plan. |
1 Assumes that a minimum amount of cash is required to operate the business post-acquisition. In this case, the amount assumed to be retained equals current cash balance as of 30-Sep-2006. |
2Represents Silver shares personally held by JM and not used as collateral in connection with the Shareholder loan to be made by MS. As of latest 13D filing JM personally owns 27% of total outstanding shares of 74.9mm. JM shares do not include the 9,018,353 shares held by (i) the Moyes Children’s Limited Partnership and (ii) seven irrevocable trusts for the benefit of six children of Jerry and Vickie Moyes and by an irrevocable trust for the benefit of Jerry and Vickie Moyes and six of their children. The shares shown for JM also do not include 360,000 shares held by an irrevocable trust for the children of Jerry and Vickie Moyes. 3Assumes JM has pledged $410 million worth of stock as collateral. Therefore, JM will borrow the maximum amount of MS shareholder loan. The shareholder loan will be secured by Silver shares currently held by JM, which in the case of maximum drawdown equals 14.1 million shares of Silver (at the current offer price of $29). |
4 Represents the additional equity required to finance the acquisition of 100% of the company. Under the current proposal of $29/share this amounts to 9,827,586 shares of Silver. The shares currently held by the Moyes Children’s |
Limited Partnership equals 9,018,353 shares and the shares held by an irrevocable trust for the children of Jerry and Vickie Moyes equals 360,000 shares. |
5 Estimated payments to be made to certain members of management based on change of control agreements that have been signed with Silver upon the acquisition by a third party. |
6Assumes aggregate fees, which includes both sellside and buyside advisory fees. |
Supporting Materials 30 |
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Highly Confidential – Preliminary Draft |
Analysis of Morgan Stanley (“MS”) Capital Structure |
Pro Forma Capital Structure Credit Views Multiple of 2006E EBITDA1 Mgmt Truckload sector typically viewed as less stable than Less- Amount % of Total Estimate MS Estimate Than-Truckload; however Silver presents certain strengths — Prospect for improved margins as compared to fiscal Unfunded Revolver — — — - 2005 |
Senior Secured 1st Lien $ $1,800 57% 3.8 x 3.4 x — Strong stable blue chip customer base Senior Secured 2nd Lien $485 15% 1.0 x 0.9 x Ratings agencies focused on EBITDA growth/margins and Total Debt $ $2,285 72% 4.8 x 4.3 x ability to generate sufficient free cash flow Total Equity $874 28% 1.8 x 1.7 x — Though recently improved, Silver’s EBITDA margins have historically lagged those of truckload peers Total Capitalization $ $3,159 100% 6.6 x 6.0 x — High investments in capital expenditures impacts free MS $529.1millionoftrailingtwelve cash flow projections estimate based on months EBITDA condition included in MS Commitment Letterrd (assumed to include IEL) — Cyclical concerns dated November 3 |
Proposed Morgan Stanley structure and pricing appears to be designed to achieve a mid to high single B corporate credit rating |
NNote: These include our preliminary observations, final observations to be contingent upon continued diligence of the company, MS capital structure and company financials |
Supporting Materials 31 |
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Highly Confidential – Preliminary Draft |
Weighted Average Cost of Capital Analysis |
Comparable Peers (1) Company Asset Bloomberg Symbol Beta (2) Adj. Beta D/E (1-T) Assumptions JBHT 1.234 1.320 11.3% 61.5% Risk Premium (3) 5.50% WERN 1.235 1.240 0.7 60.8 Risk Free Rate (4) 4.62% HTLD 1.360 1.360 0.0 64.6 Tax Rate 38.8% |
KNX 1.510 1.510 0.0 65.0 |
XPRSA 0.825 1.430 112.8 65.0 |
CVTI 0.756 1.220 94.4 65.0 |
Mean 1.153 36.5% 63.7% Weighted Average Cost of Capital (6) Cost of Equity Calculation Pre-tax Cost of Debt Levered Cost of D/(D/E) Beta E/(D+E) Equity (5) 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% |
0.0% 1.153 100.0% 11.0% 0.0% 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 |
5.0 1.191 95.0 11.2% Equity) 5.0 10.8 10.8 10.8 10.8 10.8 10.8 10.9 10.9 10.9 |
10.0 1.232 90.0 11.4% 10.0 10.6 10.6 10.6 10.7 10.7 10.7 10.7 10.8 10.8 |
15.0 1.278 85.0 11.6% 15.0 10.4 10.4 10.5 10.5 10.5 10.6 10.6 10.7 10.7 |
20.0 1.330 80.0 11.9% 20.0 10.2 10.2 10.3 10.3 10.4 10.5 10.5 10.6 10.6 |
25.0 1.389 75.0 12.3% 25.0 10.0 10.0 10.1 10.2 10.3 10.3 10.4 10.5 10.6 |
30.0 1.456 70.0 12.6% 30.0 9.8 9.8 9.9 10.0 10.1 10.2 10.3 10.4 10.5 |
35.0 1.533 65.0 13.1% 35.0 9.6 9.7 9.8 9.9 10.0 10.1 10.2 10.3 10.4 |
40.0 1.624 60.0 13.6% Debt / (Debt + 40.0 9.4 9.5 9.6 9.7 9.8 10.0 10.1 10.2 10.3 |
45.0 1.731 55.0 14.1% 45.0 9.2 9.3 9.4 9.6 9.7 9.8 10.0 10.1 10.3 |
50.0 1.859 50.0 14.8% 50.0 9.0 9.1 9.3 9.4 9.6 9.7 9.9 10.0 10.2 |
Source: Bloomberg and public filings (1) As of November 15, 2006. (2) Calculation to unlever beta: ßa = ße/(1+(1-T)*(D/E)). (3) Based on Ibbotson historical, empirical analysis. (4) Based on 10-Year Treasury rate as of November 15, 2006. (5) Cost of equity calculation: ke = Rf + ßa(1 + (1-T) (D/E)) (Rm — Rf) +Ps or Rf + ße (D/E)) (Rm — Rf) + Ps. Assume Ps = 0. (6) WACC calculation: kd (1-T) (D/(D+E)) + ke (E/(D+E)). |
Supporting Materials 32 |
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Highly Confidential – Preliminary Draft |
Comparison of Selected Trucking Companies ($ in millions, except per share amounts) |
Enterprise Closing % of 52 Equ Value Multiples (2) Calendarized 5-Year ity Price Week Mar Enterprise EBITDA P/E Multiples (2) EPS LTM Margins Dividend ket Company 20-Nov-2006 High Cap Val LTM 2006 2007 2006 2007 CAGR (2) EBITDA EBIT Yield |
ue |
Silver at $29 Offer Price $ 29.00 86 % $ $2,207 $ $2,619 5.2 x 5.2 x 5.2 x 14.1 x 14.0 x 11.5 % 15.7 % 9.0 % 0.0 % Silver $ 27.49 82 % $ $2,090 $ $2,502 4.9 x 4.9 x 4.9 x 13.4 x 13.3 x 11.5 % 15.7 % 9.0 % 0.0 % Truckload |
Covenant Transport 12.40 76 174 334 6.0 7.1 6.1 NM 29.2 9.0 8.2 2.5 0.0 |
Heartland Express 16.16 85 1,588 1,266 8.0 7.3 7.0 17.8 17.6 10.0 27.9 19.9 0.5 |
Hunt (JB) Transport 21.84 85 3,272 3,634 6.5 6.5 6.0 14.9 13.7 15.0 16.7 11.4 1.5 |
Knight Transportation 18.17 82 1,590 1,572 8.9 8.6 7.3 21.4 18.2 20.0 27.0 17.9 0.4 |
Landstar 47.16 96 2,738 2,791 11.9 13.3 12.0 24.1 21.0 17.0 8.7 8.1 0.3 |
Quality Distribution 12.86 77 247 530 7.9 7.7 6.9 16.1 12.5 27.4 9.1 7.0 0.0 |
Celadon 20.30 91 489 499 9.7 9.1 7.3 19.8 16.0 33.3 10.5 7.7 0.0 |
Universal Truckload 25.81 71 416 402 11.0 10.1 8.6 19.3 16.3 14.6 5.9 5.2 0.0 |
U.S. Xpress Enterprises 18.71 67 290 619 5.3 5.2 4.5 13.6 11.2 26.0 8.3 4.0 0.0 |
Werner Enterprises 19.32 89 1,509 1,492 4.6 4.4 4.2 15.1 14.2 10.0 15.6 7.7 0.9 |
High 96 % $ $3,272 $ $3,634 11.9 x 13.3 x 12.0 x 24.1 x 29.2 x 33.3 % 27.9 % 19.9 % 1.5 % Mean 82 % $ $1,231 $ $1,314 8.0 x 7.9 x 7.0 x 18.0 x 17.0 x 18.2 % 13.8 % 9.1 % 0.4 % Median 83 % $ 999 $ 943 8.0 x 7.5 x 7.0 x 17.8 x 16.2 x 16.0 % 9.8 % 7.7 % 0.1 % Low 67 % $ 174 $ 334 4.6 x 4.4 x 4.2 x 13.6 x 11.2 x 9.0 % 5.9 % 2.5 % 0.0 % Less than Truckload |
Arkansas Best (3) $ 39.67 78 % $ $1,004 $ 882 4.4 x 3.9 x 3.8 x 10.2 x 10.0 x 10.0 % 10.6 % 7.1 % 1.5 % Central Freight Lines (3) 2.23 100 41 78 NM NA NA NA NA 0.0 (3.7) (8.6) 0.0 |
Con-Way (3) 48.00 79 2,413 2,515 4.5 5.1 5.2 11.9 11.4 12.5 12.8 9.4 0.8 |
Forward Air 34.55 80 1,070 1,005 12.0 11.6 10.5 21.5 19.2 12.5 24.1 21.5 0.8 |
Old Dominion 28.31 73 1,056 1,247 6.6 6.4 5.7 14.9 13.2 15.0 15.1 9.9 0.0 |
Saia (4) 27.60 77 417 481 4.6 5.3 4.8 13.8 11.7 17.1 8.7 4.6 0.0 |
YRC Worldwide 41.08 82 2,616 3,784 4.3 4.3 4.2 7.5 7.1 7.7 8.8 6.0 0.0 |
High 100 % $ $2,616 $ $3,784 12.0 x 11.6 x 10.5 x 21.5 x 19.2 x 17.1 % 24.1 % 21.5 % 1.5 % Mean 81 % $ $1,231 $ $1,428 6.1 x 6.1 x 5.7 x 13.3 x 12.1 x 10.7 % 10.9 % 7.1 % 0.5 % Median 79 % $ $1,056 $ $1,005 4.5 x 5.2 x 5.0 x 12.8 x 11.6 x 12.5 % 10.6 % 7.1 % 0.0 % Low 73 % $ 41 $ 78 4.3 x 3.9 x 3.8 x 7.5 x 7.1 x 0.0 % (3.7)% (8.6)% 0.0 % |
(1) Source: Latest publicly available financial statements. Equity Market Cap based on diluted shares outstanding. (2) Sources: LTM numbers are based upon the latest publicly available financial statements. Projected sales, EBITDA, EBIT, and EPS source: IBES median estimates. All projected estimates have been calendarized to December. |
Supporting Materials 33 |
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