HIGHLY CONFIDENTIAL
PROJECT BUDDHA
PRESENTATION TO THE BOARD OF DIRECTORS
October 12, 1998
TABLE OF CONTENTS
________________________________________________________________________________
SECTION TITLE
I. Transaction Overview
A. Parties to the Transaction
B. Transaction Summary
C. Recent Events
D. Rationale
II. Company Overviews
A. CST/TLC Overview
B. Weatherford Overview
III. Valuation of TLC
A. Comparable Transactions
B. Alternative Transaction
C. Transaction Consideration Analysis
IV. Historical Market Value Analysis
V. Liquidity Analysis
Appendix
A. Comparable Transactions
B. Shareholder Profile
C. Price/Volume Graphs
I. TRANSACTION OVERVIEW
A. PARTIES TO THE TRANSACTION
TRANSACTION OVERVIEW
________________________________________________________________________________
PARTIES TO THE TRANSACTION
CST: CST ("CST" or the "Company"), through its wholly-owned subsidiary
TLC, provides public refrigerated and non-refrigerated
warehousing, transportation and logistic services primarily to
the food producing and manufacturing industries. At October 6,
1998, CST owned 3,897,462 shares of Weatherford, representing a
4.0% ownership position in Weatherford./(1)/
WEATHERFORD: Weatherford ("Weatherford") is an international manufacturer and
supplier of oilfield equipment. Weatherford has a diversified
presence in the exploration, production, and transmission sectors
of the oil and gas industry through its role as service provider
and equipment manufacturer. The Company operates in three
industry segments: oilfield services, oilfield products and gas
compression.
_______________
(1) Source: CST management
TRANSACTION OVERVIEW
________________________________________________________________________________
PARTIES TO THE TRANSACTION
TLC: TLC ("TLC") is a wholly-owned subsidiary of CST that provides
full service public and contract warehousing and logistic
services for all ranges of refrigerated and ambient temperatures.
TLC's transportation and distribution services include full
service truckload, less-than-truckload and pooled consolidation
in both temperature controlled and dry freight equipment.
LUBAR INC.: Lubar Inc. ("Lubar") is a Venture Capital firm owned by Mr.
Lubar, William T. Donovan and Mr. Lubar, Jr. - all of whom are
current Board members of CST. Lubar has formed C-2, Inc. for the
purpose of acquiring two-thirds of the equity of TLC.
C-2, INC.: C-2, Inc. ("C-2") is a wholly-owned special purpose subsidiary
of Lubar, Inc. C-2 will be the vehicle by which the existing
public shareholders of CST will own an interest in TLC if they so
elect.
MR. LUBAR: Mr. Lubar is the Chairman and Chief Executive Officer of CST.
He currently controls approximately 52%/(1)/ of the
outstanding shares of CST. In addition, he is a principal of
Lubar Inc. and he serves as a director of Weatherford.
_______________
(1) Source: Proxy dated July 13, 1998.
B. TRANSACTION SUMMARY
TRANSACTION OVERVIEW
________________________________________________________________________________
TRANSACTION SUMMARY
TRANSACTION
SUMMARY: In the proposed transaction (the "Transaction"), CST will cause
TLC to increase borrowings from the bank group and upstream $23.4
million in cash to CST ($20 million as a dividend and $3.4
million as repayment of intercompany debt). CST will then
purchase $10.0 million of Weatherford shares in the open market
to be distributed to CST Shareholders (the "Mandatory Purchase").
Under certain conditions, CST may be obligated to purchase an
additional $5.0 million of Weatherford shares to be distributed
to CST Shareholders (the "Contingent Purchase").
CST will then sell two-thirds of the interest in TLC to C-2 for
$10,666,667. CST will then merge with and into a wholly-owned
subsidiary of Weatherford in a transaction qualifying as a
reorganization under Section 368(a)(1)(A) of the Internal
Revenue Code.
CONSIDERATION: Each issued and outstanding share of CST common stock (the "CST
Common Stock") will be converted into the right to receive
approximately .76 shares of Weatherford plus $4.09 in Cash/(1)/
and the pro rata number of additional Weatherford Shares
distributed in the Mandatory Purchase or (Cont'd)
_______________
(1) The Cash is equal to the sum of (i) $20 million to be received in connection
with a Dividend payable to CST by TLC, (ii) $10.7 million to be paid to CST in
connection with the sale of two-thirds of the interest in TLC to C-2, Inc.,
(iii) $3.3 million to be received by CST in connection with the repayment of
intercompany debt and (iv) all other cash of CST at the time of closing less the
sum of (i) an amount of cash necessary to pay any CST liabilities and
Transaction expenses less the Mandatory Purchase. See "Transaction Consideration
Analysis" p. 36.
TRANSACTION OVERVIEW
________________________________________________________________________________
TRANSACTION SUMMARY
CONSIDERATION
CONT'D: approximately .76 shares of Weatherford plus $3.12 Cash/(1)/ and
the pro rata number of additional Weatherford Shares
distributed in the Mandatory Purchase and the Contingent
Purchase.
CONTINGENT PURCHASE
CIRCUMSTANCE: If at the time of closing, the price per share of Weatherford
Stock is between $19.00 and $14.00, CST is required to exercise
such portion of the Contingent Purchase necessary to allow the
Merger to be treated as a "tax free" reorganization under the
Internal Revenue Code. The minimum price under which the
transaction will close is $14.00.
ORIGINAL
AGREEMENT: In the Original Agreement, $10.0 million was to be left in CST
according to the terms of the merger, and net of liabilities
which might arise, $10.0 million was payable to CST shareholders
five years after the Transaction closed. In the current
agreement, the $10.0 million will instead fund the Mandatory
Purchase. In the Original Agreement, there was no Mandatory or
Contingent Purchase.
_______________
(1) The Cash is equal to the sum of (i) $20 million to be received in connection
with a Dividend payable to CST by TLC, (ii) $10.7 million to be paid to CST in
connection with the sale of two-thirds of the interest in TLC to C-2, Inc.,
(iii) $3.3 million to be received by CST in connection with the repayment of
intercompany debt and (iv) all other cash of CST at the time of closing less the
sum of (i) an amount of cash necessary to pay any CST liabilities and
Transaction expenses less the Mandatory Purchase less the Contingent Purchase.
See "Transaction Consideration Analyst" p. 36.
TRANSACTION OVERVIEW
________________________________________________________________________________
TRANSACTION SUMMARY
STOCK/CASH
ELECTION: Each CST shareholder will be given the opportunity to participate
in the two-thirds sale of TLC to C-2 via an election to purchase
C-2 stock. With respect to the Cash portion of the Consideration,
each CST shareholder will be required to make an election
(assuming the Contingent Purchase is not exercised) to receive
either (i) cash or (ii) cash and C-2 stock prior to the effective
date of the Transaction.
PUT OPTION: Weatherford will receive from C-2 a put option to sell its one-
third ownership position in TLC to C-2 for $7.1 million five
years from the effective date of the Transaction.
TAX
CONSEQUENCES: Weatherford must hold TLC for a minimum of five years after the
Transaction (except in accordance with the Participation Rights)
in order to meet the continued business interest requirement
pursuant to Section 368 (a) of the Internal Revenue Code of 1986,
as amended. The Weatherford shares will be received tax-free by
the CST Shareholders, while all proceeds of any cash distribution
to CST Shareholders would be subject to capital gains tax to the
extent the cash and the value of the Weatherford shares received
by the CST shareholders exceed the shareholders' basis in CST.
PARTICIPATION
RIGHTS: In the event that C-2 proposes a sale of its interest in TLC to
an unrelated third party, Weatherford will have the right to
participate in that sale (i.e. Weatherford has the right to sell
its interest in TLC at the same time.)
TRANSACTION OVERVIEW
________________________________________________________________________________
TRANSACTION SUMMARY
+------------------+
/| CST Shareholders |\
/ +------------------+ \
/ | \
/ | \ 3,897,462 Weatherford
C-2 Purchase / | \ Shares+Net Cash balance
Option / | \ of CST+Mandatory
/ | \ Purchase+Contingent
/ | \ Purchase (if
/ $10.7MM+ | \ exercised).
/ Indemnity+ | \
+------------------+ 5-Yr. Put +-----------------+ \ +----------------+
| |----------------| |\ \ | |
| C-2, INC. | 2/3 Equity of | CST | \ \| WEATHERFORD |
| | TLC | | \ | |
| |----------------| | \ +----------------+
+------------------+ +-----------------+ \ |
| | | | \ |
| | | | \ |
| | | | \ |
Mandatory (and | | | | Merged \Into |
Contingent Purchase) | | | | \ |
+-------------------------+ | | | \ |
| | | | +--------------+
+------------------+ | | | | CST |
| | | | | | ACQUISITION |
| WEATHERFORD | | | | +--------------+
| OPEN MARKET |----------------------+ | |
+------------------+ $10.0 million of | | The merger conveys CST's
WFT Shares (and | | remaining assets which are
contingent $5.0 | | 3,897,482 Weatherford
million of WFT | | Shares + Mandatory Purchase
Shares) | | and if exercised Contingent
| | Purchase+ Net Cash balance
| | of CST+ 1/3 Equity of TLC
| | + Indemnity + 5-Yr. Put to
$3.3. mil. debt repayment + | ---+---- Sell 1/3 of TLC to C-2
$20 mil. cash dividend ------ | |
| |
+------------------+ +--------------------+
| | | |
| TLC | | 3,897,462 |
| (wholly-owned | | Weatherford Common |
| CST sub.) | | Shares |
| | | (100% owned by CST)|
+------------------+ +--------------------+
C. RECENT EVENTS
TRANSACTION OVERVIEW
________________________________________________________________________________
RECENT EVENTS
- - On August 17, 1998 at a special meeting of CST's shareholders,
the merger between CST and Weatherford pursuant to an agreement
dated December 12, 1997 was approved. The Merger was not
consummated because the decrease in the price of Weatherford
stock from $46.38 on December 12, 1997 (the last trading date
prior to a public announcement of the Merger) to below $30.00
prevented the Merger from being treated as a "tax free"
reorganization under the Internal Revenue Code thereby leaving
unsatisfied a material condition to the closing of the merger.
- - On May 27, 1998, a merger between EVI Inc. and Weatherford
Enterra Inc. was completed. The combined entity, Weatherford
International, Inc., trades on the New York Stock Exchange under
the symbol "WFT." EVI Inc. completed its buyout of Weatherford
Enterra Inc. for $2.77 billion. The transaction was accounted for
as a pooling of interests, whereby Weatherford Enterra Inc.'s
stockholders received 0.95 shares of newly issued shares of
Weatherford International, Inc. common stock for each Weatherford
Enterra common share.
TRANSACTION OVERVIEW
________________________________________________________________________________
LTM STOCK PRICE CHART FOR WEATHERFORD AND CST
[Graphic Omitted]
Graph depicting last twelve months stock price for Weatherford and CST Daily
from October 7, 1997 to October 6, 1998 expressed as percent with Weatherford
100 = 66.125 and CST 100 = 46.375.
Source: IDD Information Services/Trade line
TRANSACTION OVERVIEW
________________________________________________________________________________
LTM STOCK PRICE CHART FOR WEATHERFORD AND CST
[Graphic Omitted]
Chart depicting last twelve months Stock Price for Weatherford and CST Daily
from October 7, 1997 to October 6, 1998 expressed in dollars
Source: IDD Information Services/Tradeline
D. RATIONALE
TRANSACTION OVERVIEW
________________________________________________________________________________
RATIONALE
CST Shareholders will receive consideration, which represents a
12.3% premium/(1)/ on a per share basis to CST shareholders'
current per share market value.
CST Shareholders will receive Weatherford Common Stock in
exchange for CST Common Stock on a tax-free basis.
The Transaction eliminates $20.8 million/(2)/ in capital gains
tax which would be realized at the CST corporate level in a
liquidation.
The Transaction significantly enhances liquidity for current CST
Shareholders.
The Transaction allows for meaningful realization of value in
CST's TLC subsidiary.
The Transaction allows current shareholders of CST to have a
direct investment in Weatherford Common Stock.
The Transaction allows current shareholders of CST to participate
in the TLC business on the same terms as management.
______________
(1) See "Transaction Consideration Analysis," pg. 35.
(2) Assumes a Weatherford share price of $18.75 (as of 10/7/98). See "Tax
Liability Comparison," pg. 33.
II. COMPANY OVERVIEWS
A. CST/TLC OVERVIEW
COMPANY OVERVIEWS
________________________________________________________________________________
CST/TLC OVERVIEW
CST, headquartered in Milwaukee, Wisconsin, is primarily engaged
in providing public refrigerated and non-refrigerated warehousing
and logistic services. CST's principal businesses/assets include
3,897,462 shares of Weatherford Common Stock and TLC.
TLC provides full service public and contract warehousing, as
well as logistic services in all ranges of refrigerated and
ambient temperatures.
TLC also provides a full range of international freight
management services, fully computerized inventory management,
repackaging and just-in-time production supply services.
TLC's customers are primarily national, regional and local firms
engaged in food processing, consumer product manufacturing,
wholesale distribution and retailing.
TLC's refrigerated distribution centers are located in Rochelle,
Illinois; Beaver Dam, Wisconsin; Wauwatosa, Wisconsin; Holland,
Michigan; and Kalamazoo, Michigan.
COMPANY OVERVIEWS
________________________________________________________________________________
CST/TLC OVERVIEW
In addition to the refrigerated distribution centers described
above, TLC operates a national network of owned and leased dry
distribution centers (non-refrigerated) which comprise
approximately 900,000 square feet of storage capacity. TLC's dry
distribution centers are located in Zeeland and Kalamazoo,
Michigan; Munster, Indiana; South Brunswick, New Jersey; and
Bayamon, Puerto Rico.
Competition in integrated logistic services is both on a national
and local basis with a predominant emphasis on transportation
services. At present, there are no direct competitors that
provide the same type of warehousing and transportation services
as TLC. Each of TLC's individual business segments, however, is
highly fragmented with many local, regional and national
competitors (especially those in the transportation and dry
warehousing industries). TLC's competitive edge is its ability to
provide fully integrated logistic services designed for its
customers' distribution needs and the utilization of its network
of strategically-located refrigerated and dry distribution
centers.
COMPANY OVERVIEWS
________________________________________________________________________________
CST/TLC OVERVIEW
(In thousands, except per share data)
CST CONSOLIDATED
----------------
MARKET VALUE DATA:
RECENT PRICE (AS OF 10/7/98): $18.00
52 WEEK HIGH: $ 46.56
LOW: $ 17.38
SHARES OUTSTANDING/(2)/: 5,149
EQUITY MARKET VALUE: $ 92,688
NET DEBT (AT 6/30/98): 24,825
--------
UNLEVERAGED MARKET VALUE: $117,513
========
HISTORICAL OPERATING DATA:
YEARS ENDED JUNE 30,
--------------------------------------------------
1995/(1)/ 1996 1997 1998
---- ---- ---- ----
Revenue $126,881 $77,170 $84,208 $90,179
EBITDA 18,531 11,380 11,734 12,436
Net Income 5,062 3,603/(3)/ 6,663/(3)/ 6,007/(3)/
______________
(1) Data includes operating results of Prideco, which was merged into
Weatherford in June 1995. Prideco contributed approximately $55.2 million
and $47.1 million in revenues and cost of goods sold in fiscal 1995,
respectively.
(2) Fully-diluted calculated using the treasury stock method.
(3) Includes results of Weatherford accounted for under the equity method.
COMPANY OVERVIEWS
________________________________________________________________________________
CST/TLC OVERVIEW
(In thousands)
TLC STAND-ALONE HISTORICAL OPERATING DATA/(1)/
FISCAL YEAR ENDED JUNE 30,
----------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- -------- -------- -------- -------- --------
WAREHOUSING AND LOGISTIC REVENUE $15,190 $42,355 $71,030 $77,884 $84,208 $90,179
COSTS & EXPENSES:
WAREHOUSING AND LOGISTICS EXPENSE 4,942 29,877 51,449 59,998 64,786 70,052
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 3,721 3,581 6,136 5,849 6,409 6,659
------- -------- -------- -------- -------- --------
OPERATING INCOME 6,527 8,897 13,445 12,037 13,013 13,469
OTHER EXPENSE:
INTEREST EXPENSE, NET 2,176 2,763 3,137 2,936 2,976 2,614
DEPRECIATION 3,134 4,126 5,730 6,188 6,540 6,394
LOSS ON DISPOSAL OF ASSETS - - - - 1,036 325
OTHER EXPENSES 241 387 291 302 753 154
------- -------- -------- -------- -------- --------
PRE-TAX INCOME 976 1,621 4,287 2,611 1,707 3,981
PROVISION FOR INCOME TAXES 391 627 1,724 1,075 695 1,589
------- -------- -------- -------- -------- --------
NET INCOME $585 $994 $2,563 $1,536 $1,011 $2,393
======= ======== ======== ======== ======== ========
EBIT $3,152 $4,384 $7,424 $5,547 $5,719 $6,920
EBIT Margin 21% 10% 10% 7% 7% 8%
EBITDA $6,286 $8,511 $13,154 $11,734 $12,260 $13,315
EBITDA Margin 41% 20% 19% 15% 15% 15%
_______________
(1) Source: CST Management
COMPANY OVERVIEWS
________________________________________________________________________________
CST/TLC OVERVIEW
(In thousands)
TLC STAND-ALONE PROJECTED OPERATING DATA/(1)/
FISCAL YEAR ENDED JUNE 30,
----------------------------------------------------------
ACTUAL BUDGET
1998 1998 1999 2000 2001 2002
------- -------- -------- -------- -------- --------
WAREHOUSING AND LOGISTIC REVENUE $90,179 $97,356 $106,713 $112,638 $118,223 $124,323
COSTS & EXPENSES:
WAREHOUSING AND LOGISTICS EXPENSE 70,052 75,262 83,043 87,675 92,219 97,178
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 6,659 7,268 6,670 6,695 7,002 7,338
------- -------- -------- -------- -------- --------
OPERATING INCOME 13,469 14,826 17,000 18,268 19,002 19,807
OTHER EXPENSE:
INTEREST EXPENSE, NET/(2)/ 2,614 4,617 4,490 3,950 3,368 2,695
DEPRECIATION 6,394 7,615 7,449 7,171 6,968 6,785
LOSS ON DISPOSAL OF ASSETS 325 - - - - -
OTHER EXPENSE 154 338 1,500 1,000 1,000 1,000
------- -------- -------- -------- -------- --------
PRE-TAX INCOME 3,981 2,256 3,561 6,147 7,666 9,327
PROVISION FOR INCOME TAXES 1,589 857 1,353 2,336 2,913 3,544
------- -------- -------- -------- -------- --------
NET INCOME $2,393 $1,399 $2,208 $3,811 $4,753 $5,783
======= ======== ======== ======== ======== ========
EBIT $6,920 $6,873 $8,051 $10,097 $11,034 $12,022
EBIT Margin 8% 7% 8% 9% 9% 10%
EBITDA $13,315 $14,488 $15,500 $17,268 $18,002 $18,807
EBITDA Margin 15% 15% 15% 15% 15% 15%
_______________
(1) Source: CST Management
(2) Actual 1998 interest is lower than the Budget because the borrowing which
was anticipated in the Budget did not occur.
B. WEATHERFORD OVERVIEW
COMPANY OVERVIEWS
________________________________________________________________________________
WEATHERFORD OVERVIEW
Weatherford has a solid manufacturing base and comprehensive
product line including drill pipe and premium casing and tubing,
completion, and artificial lift equipment. The Company has a
diversified international presence in the exploration,
production, and transmission sectors of the oil and gas industry
through its role as service provider and equipment manufacturer.
The Company operates in three industry segments: oilfield
services, oilfield products and gas compression.
The Company's products are used in the exploration and production
of oil and natural gas and it is currently the largest
manufacturer and supplier of drill pipe in the world, the largest
manufacturer of premium tubulars in North America and among the
largest manufacturers of rod lift equipment in the world.
Income from continuing operations for fiscal 1997 was $196.8
million, or $2.01 per share, from revenues of $1,969.1 million,
as compared to income from continuing operations for fiscal 1996
of $92.2 million, or $1.01 per share, from revenues of $1,467.3
million.
COMPANY OVERVIEWS
________________________________________________________________________________
WEATHERFORD OVERVIEW
(In thousands, except for per share data)
WEATHERFORD
-----------
MARKET VALUE DATA
RECENT PRICE (AS OF 10/7/98) $ 18.75
52 WEEK HIGH: $ 73.00
LOW: $ 15.00
SHARES OUTSTANDING/(1)/: 97,568
EQUITY MARKET VALUE: $1,829,394
NET DEBT (AT 6/30/98) 803,731
-------------
UNLEVERAGED MARKET VALUE: $2,633,125
=============
HISTORICAL OPERATING DATA:
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------ -------------------------
1995 1996 1997 1997 1998
------------ ---------- ---------- --------- ------------
Revenue $1,125,803 $1,467,270 $1,969,089 $980,252 $1,104,293
EBITDA/(2)/ 208,705 291,729 480,455 211,408 299,439
Net Income/(3)/ 46,405/(4)/ 92,161 196,773 83,644 120,652/(5)/
_______________
(1) Fully-diluted calculated using the treasury stock method.
(2) EBITDA is calculated by taking the restated combined operating income for
Weatherford and adding historical depreciation and amortization for both
EVI and Weatherford Enterra.
(3) Excludes all extraordinary items.
(4) Excludes merger costs and other charges of $88,182 tax effected at 38%.
(5) Excludes merger costs and other charges of $120,000, tax effected at 38%.
III. VALUATION OF TLC
A. COMPARABLE TRANSACTIONS
VALUATION OF TLC
________________________________________________________________________________
COMPARABLE TRANSACTIONS
(Dollars in thousands)
VALUATION MULTIPLES IMPLIED UNLEVERED MARKET VALUE
TLC LTM -----------------------------------------
- ------------------------------------------------------
STATISTIC/(1)/ HIGH LOW MEAN MEDIAN HIGH LOW MEAN
MEDIAN
-------------- ------- ------- -------- ---------- ----------- ---------- -----------
- -----------
REVENUES $ 90,179.2 2.4X 1.7X 2.0X 1.9X $ 215,284.0 $149,768.5 $ 177,495.9
$ 167.435.4
EBIT 7,074.2 17.1 11.0 13.2 11.4 121,170.4 78,007.7
93,366.9 80,922.8
EBITDA 13,468.5 9.9 6.8 8.1 7.7 133,188.5 91,585.9
109,591.3 103,999.4
----------- ---------- -----------
- -----------
Mean: $ 156,547.6 $106,454.0 $ 126,818.1
$ 117,452.5
----------- ---------- -----------
- -----------
_______________
(1) Source: CST management
VALUATION OF TLC
________________________________________________________________________________
COMPARABLE TRANSACTIONS - IMPLIED VALUATION
GRAPHICS OMITTED
Chart depicting Comparable Transactions - Implied Valuation
VALUATION OF TLC
________________________________________________________________________________
COMPARABLE TRANSACTIONS - IMPLIED VALUATION
GRAPHICS OMITTED
Chart depicting Comparable Transactions - Implied valuation (All of the implied
transaction prices were decreased by the amount that the Morgan Stanley REIT
Index decreased for the effective dates of the Comparable Transactions to
10/8/98)
C. ALTERNATIVE TRANSACTION
ALTERNATIVE TRANSACTION
________________________________________________________________________________
TAX LIABILITY COMPARISON
(Dollars in thousands except per share data)
An alternative to the proposed Transaction is the outright sale by CST of its
position in Weatherford Common Stock for cash. While this alternative is
recognized as a method in which CST shareholders would be able to monetize the
current value of their ownership in Weatherford, significant capital gains taxes
would be incurred at the CST corporate level and significant ordinary income tax
would be incurred at the shareholder level.
In the proposed Transaction, the corporate tax liability would be eliminated,
and the tax at the shareholder level would be deferred until the individual
shareholder liquidated his holding in Weatherford.
CURRENT CAPITAL GAINS TAX LIABILITY COMPARISON:
Alternative Alternative
Proposed
Transaction Transaction
Transaction
------------ -----------
- -----------
Current Shares Owned By CST 3,897 3,897
3,897
Current Price/Share of Weatherford x$14.00/(1)/ x$18.75/(2)/
x$18.75
------------ -----------
- -----------
Current Market Value of Weatherford Investment $54,564 $73,077
$73,077
Total CST Tax Basis in Weatherford Investment/(3)/ $18,973 $18,973
$18,973
------------ -----------
- -----------
Weatherford Shares Liquidated (Yes/No) Yes Yes
No
Current Taxable Gain to CST $35,592 $54,105
$0
% Assumed Capital Gains Tax Rate x38.5% x38.5%
x38.5%
------------ -----------
- -----------
Current Corporate Capital Gains Tax Liability $13,703 $20,830
$0
_______________
(1) Represents the lowest stock price at which the Transaction may close.
(2) As of 10/7/97.
(3) Source: CST management.
D. TRANSACTION CONSIDERATION ANALYSIS
VALUATION OF TLC
________________________________________________________________________________
TRANSACTION CONSIDERATION ANALYSIS
(Dollars in thousands, except per share data)
TOTAL CONSIDERATION PER CST SHARE: MANDATORY PURCHASE ONLY
CONTINGENT PURCHASE
- ------------------------------------------------------------------ ---------------------------------
- ---------------------------
Value of Weatherford Shares Held by CST: $14.19
$14.19
Value of Cash $4.09
$3.12
Value of $10 Million Mandatory Purchase (assuming no $1.94
$1.94
change in 10/7/98 market value)
Value of $5 million Contingent Purchase (assuming no -
$0.97
change in 10/7/98 market value)
---------------------------------
- ---------------------------
TOTAL Value/Share $20.22
$20.22
% PREMIUM TO CST MARKET VALUE 12.3%
12.3%
- ------------------------------------------------------------------ ---------------------------------
- ---------------------------
CURRENT CST SHARE PRICE/(1)/ $18.00
$18.00
- ------------------------------------------------------------------ ---------------------------------
- ---------------------------
VALUE OF CONSIDERATION VALUE OF
CONSIDERATION
RECEIVED PER CST RECEIVED
PER CST
SHARE
SHARE
---------------------------------
- ---------------------------
I. STOCK CONSIDERATION:
Weatherford Shares Held by CST 3,897
3,897
CST Shares Outstanding: 5,149
5,149
Weatherford Shares Received per CST Share: 0.76
0.76
Current Weatherford Share Price/(1)/ x$18.75
x$18.75
---------------------------------
- ---------------------------
$14.19
$14.19
II. CASH CONSIDERATION:
Aggregate Cash Distribution/(2)/ $21,042
$16,042
Cash Distribution per CST Share: $4.09
$3.12
_______________
(1) Price as of 10/7/98.
(2) Aggregate Cash Distribution to CST shareholders at time of closing is net
of taxes and anticipated expenses. See "Transaction Consideration
Analysis," pg. 39. Actual cash receipt by CST shareholders is reduced in
the event that the shareholder elects to purchase shares in C-2. See
"Stock/Cash Election," pg. 10.
VALUATION OF TLC
________________________________________________________________________________
TRANSACTION CONSIDERATION ANALYSIS
(in thousands)
CASH SOURCES & USES - TRANSACTION CASH FLOW TO CST SHAREHOLDERS
Cash Sources:
CST Cash and Accrued Interest (at 9/30/98) $5,882
Dividend from TLC 20,000
Intercompany Note Repayment 3,330
2/3 TLC Equity Purchase Proceeds 10,667
------
TOTAL Cash Sources $39,879
======
Cash Uses:
Taxes Due/(1)/ 5,702
Options Cash Out* 1,693
Transaction Expenses/(2)/ 1,302
CST Operating Cash Flow 140
Total Cash Cost Uses 8,837
TOTAL Net Cash to CST Shareholders $31,042
Less: Weatherford Share Purchase (10,000)
-------
TOTAL Cash Distribution $21,042
(1) Net Tax Calculation:
- -----------------------
Tax cost/(benefit) of 6/30/98 results $ 452
Tax on gain 5,751
Taxes paid year to date (501)
--------
Net Tax Due 5,702
(2) Assumed outstanding transaction expenses are as follow:
- -----------------------------------------------------------
Fairness Opinion/PSI $ 300
Lease Termination Penalty 327
Legal Expenses (est.) 185
Arthur Andersen Opinion (est.) 50
Weatherford-Related Expense 158
Solvency Opinion Expense 31
All Other Expense (est.) 251
--------
$ 1,302
_______________
* Contractual obligation based on employee contracts.
VALUATION OF TLC
________________________________________________________________________________
TRANSACTION CONSIDERATION ANALYSIS
(in thousands)
ASSUMED TLC UNLEVERED PURCHASE PRICE CALCULATION
TLC LTM EBITDA $ 13,469
Equity Purchase Price of TLC (100%) $ 16,000
Net Debt on 6/30/98 Balance Sheet 32,823
New Debt, net of Intercompany Note Repayment/(1)/ 20,000
------
$ 52,823
Assumed Unlevered PP of TLC $ 68,823
======
Assumed Unlevered PP/EBITDA Multiple 5.1x
_______________
(1) New debt assumed immediately prior to proposed Transaction, $20 million and
$3 million of which will be used to pay CST shareholders a cash dividend
and repay an intercompany note, respectively.
IV. HISTORICAL MARKET VALUE ANALYSIS
HISTORICAL MARKET VALUE ANALYSIS
________________________________________________________________________________
IMPLIED MARKET VALUE CONTRIBUTION OF WFT TO CST
GRAPHICS OMITTED
Chart depicting Implied Market Value Contribution of WFT to CST for period
10/8/97 to 10/7/98.
HISTORICAL MARKET VALUE ANALYSIS
________________________________________________________________________________
IMPLIED MARKET VALUE CONTRIBUTION OF WFT TO CST/(1)/
Equity Market Value
-------------------------------------------
Per Share Total (thousands)
CST $18.00 $92,688/(2)/
ATTRIBUTABLE TO WEATHERFORD
INVESTMENT/(1)/ 14.19 73,077/(2)/
IMPLIED NON-WEATHERFORD
MARKET VALUE $3.81 $19,611
================= =====================
_______________
(1) Based on a Weatherford stock price of $18.75, as of 10/7/98 market close.
(2) Assumes diluted CST shares outstanding.
HISTORICAL MARKET VALUE ANALYSIS
________________________________________________________________________________
LTM STOCK APPRECIATION/(DEPRECIATION)
GRAPHICS OMITTED
Chart depicting Latest Twelve Months Appreciation/(Depreciation) for CST and WFT
Share Price for period 10/8/97 to 10/7/98.
V. LIQUIDITY ANALYSIS
LIQUIDITY ANALYSIS
________________________________________________________________________________
LTM TRADING VOLUME
GRAPHICS OMITTED
Chart depicting Latest Twelve Months Trading Volume for CST and WFT Stock for
period 10/8/97 to 10/7/98.
APPENDIX
A. COMPARABLE TRANSACTIONS
APPENDIX
- ---------------------------------------------------------------------------------------------------------
COMPARABLE TRANSACTIONS/(1)/
(Dollars in thousands)
TARGET
SHARES OUT.
DATE: OFFER TERMS UPP
ANNOUNCED ATTITUDE PP
ACQUIRER DESCRIPTION OF TARGET EFFECTIVE STATUS PRICE/SHARE
- -------------------------------------- ------------------------- ------------ ------------ -------------
Americold Corp./(2)/ Provider of public 9/29/97 Cash NA
refrigerated warehouse 11/3/97 Friendly $ 564,508
JV-Vornado Realty Trust, space Completed $ 111,000
Crescent Real Estate Equities Co. NA
- -------------------------------------- ------------------------- ------------ ------------ -------------
URS Logistics Inc./(2)/ Provider or refrigeration 9/29/97 Cash NA
and frozen goods Friendly $ 356,494
JV-Vornado Realty Trust, transportation services 11/3/97 Completed $ 178,000
Crescent Real Estate Equities Co. NA
- -------------------------------------- ------------------------- ------------ ------------ -------------
Christian Salvesen Inc./(3)/ Provider of refrigerated Cash NA
storage services 4/25/97 Friendly $ 122,400
CS Integrated LLC 4/25/97 Completed $ 122,400
(Security Capital Industrial Trust) NA
- -------------------------------------- ------------------------- ------------ ------------ -------------
(table continued)
TARGET LTM VALUATION MULTIPLES
--------------------------------------------------
REVENUE EBIT EBITDA
ACQUIRER UPP/REV UPP/EBIT UPP/EBITDA
- -------------------------------------- --------------- ---------------- ------------------
Americold Corp./(2)/ $ 304,039 $ 49,349 $ 73,107
1.9 x 11.4 x 7.7 x
JV-Vornado Realty Trust,
Crescent Real Estate Equities Co.
- -------------------------------------- --------------- ---------------- ------------------
URS Logistics Inc./(2)/ $ 149,330 $ 20,813 $ 36,050
2.4 x 17.1 x 9.9 x
JV-Vornado Realty Trust,
Crescent Real Estate Equities Co.
- -------------------------------------- --------------- ---------------- ------------------
Christian Salvesen Inc./(3)/ $ 73,700 $ 11,100 $ 18,000
1.7 x 11.0 x 6.8 x
CS Integrated LLC
(Security Capital Industrial Trust)
LEGEND
LTM = Latest Twelve Months
PP = Purchase Price
UPP = Unlevered Purchase Price
TBV = Tangible Book Value
NA = Not Applicable
NM = Not Meaningful
SUMMARY STATISTICS
High 2.4 x 17.1 x 9.9 x
Low 1.7 11.0 6.8
Mean 2.0 13.2 8.1
Median 1.9 11.4 7.7
_______________
(1) Financial data excludes the results of discontinued operations,
extraordinary gains and one-time charges. Fully-diluted shares outstanding
calculated using the treasury stock method.
(2) Debt figure included in UPP was calculated using financial statements found
in the Vornado Realty Trust 8-K, dated September 22, 1997.
(3) Christian Salvesen annual revenues, EBIT, and EBITDA figures provided by
CST management.
B. SHAREHOLDER PROFILE
APPENDIX
- ------------------------------------------------------------------------------------------------------
SHAREHOLDER PROFILE
(In thousands)
CST EXISTING OWNERSHIP WEATHERFORD EXISTING
OWNERSHIP
--------------------------------
- ---------------------------------
SHARES $ OWNERSHIP SHARES %
OWNERSHIP
---------------- --------------- ----------------
- ----------------
INSTITUTIONAL HOLDERS/(1)/
Dimensional Fund Advisors Inc. 290 5.6% - -
Vanguard Group, Inc. 42 0.8% - -
Barclays Bank PLC 37 0.7% - -
Other Institutions 92 1.8% - -
---------------- --------------- ----------------
- ----------------
CST TOTAL INSTITUTIONAL INVESTORS 461 9.0% - -
CST INSIDERS/(2)/
Sheldon B. Lubar 969 18.8% - -
Albert O. Nicholas 311 6.0% - -
Nicholas F. Brady 200 3.9% - -
William T. Donovan 168 3.3% - -
David J. Lubar 427 8.3% - -
Gary R. Sarner 61 1.2% - -
Other Lubar Family Members 1,322 25.7% - -
Other Directors and Officers 45 0.9% - -
---------------- --------------- ----------------
- ----------------
TOTAL CST DIRECTORS, OFFICERS AND INSIDERS 3,502 68.0% - -
OTHER SHAREHOLDERS 1,186 23.0% - -
---------------- --------------- ----------------
- ----------------
TOTAL SHARES AND OPTIONS OUTSTANDING 5,149 100.0% - -
================ =============== ================
================
INSTITUTIONAL HOLDERS/(1)/
FMR Corporation - - 4,772 4.8%
Fund Asset Management - - 4,415 4.5%
Lehman Brothers Holdings Inc. - - 3,599 3.6%
Franklin Resources, Inc. - - 2,897 2.9%
Massachusetts Financial Services - - 2,802 2.8%
Travelers Group Inc. - - 2,695 2.7%
Sound Shore Management, Inc. - - 2,169 2.2%
AIM Management Group Inc. - - 2,015 2.0%
PaineWebber Group, Incorporated - - 1,671 1.7%
Other Institutions - - 40,992 41.6%
---------------- --------------- ----------------
- ----------------
WEATHERFORD TOTAL INSTITUTIONAL INVESTORS - - 68,027 69.0%
- -----------------------------------------------------------------------------------------------------------------------
CST - - 3,897 4.0%
- -----------------------------------------------------------------------------------------------------------------------
WEATHERFORD INSIDERS/(3)/ - - 5,632 5.7%
William E. Macaulay - - 830 0.8%
Bernard J. Duroc-Danner - - 200 0.2%
Other Directors and Officers - - 1,102 1.1%
---------------- --------------- ----------------
- ----------------
TOTAL WEATHERFORD INSIDERS - - 7,765 7.9%
OTHER SHAREHOLDERS - - 22,863 23.2%
---------------- --------------- ----------------
- ----------------
TOTAL SHARES AND OPTIONS OUTSTANDING - - 89,656 100.0%
================ =============== ================
================
(table continued)
PRO FORMA COMBINED EVI
--------------------------------
SHARES % OWNERSHIP
---------------- ---------------
INSTITUTIONAL HOLDERS/(1)/
Dimensional Fund Advisors Inc. 219 0.2%
Vanguard Group, Inc. 32 0.0%
Barclays Bank PLC 28 0.0%
Other Institutions 70 0.1%
---------------- ---------------
CST TOTAL INSTITUTIONAL INVESTORS 349 0.3%
CST INSIDERS/(2)/
Sheldon B. Lubar 733 0.7%
Albert O. Nicholas 235 0.2%
Nicholas F. Brady 151 0.1%
William T. Donovan 127 0.1%
David J. Lubar 323 0.3%
Gary R. Sarner 46 0.0%
Other Lubar Family Members 1,001
Other Directors and Officers 34 0.0%
---------------- ---------------
TOTAL CST DIRECTORS, OFFICERS AND INSIDERS 2,651 1.6%
OTHER SHAREHOLDERS 898 0.9%
---------------- ---------------
TOTAL SHARES AND OPTIONS OUTSTANDING 3,897 3.8%
================ ===============
INSTITUTIONAL HOLDERS/(1)/
FMR Corporation 4,772 4.7%
Fund Asset Management 4,415 4.3%
Lehman Brothers Holdings Inc. 3,599 3.5%
Franklin Resources, Inc. 2,897 2.8%
Massachusetts Financial Services 2,802 2.7%
Travelers Group Inc. 2,695 2.6%
Sound Shore Management, Inc. 2,169 2.1%
AIM Management Group Inc. 2,015 2.0%
PaineWebber Group, Incorporated 1,671 1.6%
Other Institutions 40,992 40.0%
---------------- ---------------
WEATHERFORD TOTAL INSTITUTIONAL INVESTORS 68,027 66.3%
- ---------------------------------------------------- ---------------- ---------------
CST - -
- ---------------------------------------------------- ---------------- ---------------
WEATHERFORD INSIDERS/(3)/ 5,632 5.5%
William E. Macaulay 830 0.8%
Bernard J. Duroc-Danner 200 0.2%
Other Directors and Officers 1,102 1.1%
---------------- ---------------
TOTAL WEATHERFORD INSIDERS 7,765 7.6%
OTHER SHAREHOLDERS 22,863 22.3%
---------------- ---------------
TOTAL SHARES AND OPTIONS OUTSTANDING 102,553 100.0%
================ ===============
_______________
(1) Institutional ownership from Vickers on October 7, 1998.
(2) CST Insider ownership from Proxy Statement dated July 13, 1998.
(3) Lubar family members include 3 of Sheldon Lubar's daughters.
(4) EVI Insider ownership from Proxy Statement dated July 13, 1998.
C. PRICE/VOLUME GRAPHS
APPENDIX
________________________________________________________________________________
CST LTM PRICE/VOLUME GRAPH
[Graphic Omitted]
Chart depicting CST LTM Price/Volume graph showing daily price for the
period October 7, 1997 to October 6, 1998.
APPENDIX
________________________________________________________________________________
WEATHERFORD LTM PRICE/VOLUME GRAPH
[Graphic Omitted]
Chart depicting Weatherford LTM Price/Volume graph showing daily prices for
the period October 7, 1997 to October 6, 1998.