LAWSON ONE
REPORT TO HYDROMER BOARD OF DIRECTORS DATED March 1998
March 18, 1998
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[LOGO] HYDROMER, Inc.
---------------------
Materials Prepared for Preliminary Discussion of
Valuation Issues in Connection with
the Target Acquisition
Howard, Lawson & Co.
Two Penn Center Plaza, Philadelphia, Pennsylvania 19102
Telephone: 215-988-0010 Telefax: 215-568-0029
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March 18, 1998
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Table of Contents
1. Summary Historical Financial Statements (Balance Sheets and Statements of
Operations) for Hydromer and Target
2. Analysis of Guideline Public Companies for Hydromer
3. Analysis of Guideline Public Companies for Target
4. Analysis of Guideline Acquisitions
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Howard, Lawson & Co.
March 18, 1998
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Summary Historical Financial statements
(Balance Sheets and statements of Operations)
for Hydromer and Target
The following pages summarize the balance sheets and income statements of
Hydromer and Target for the last five years, and the latest twelve month period.
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Howard, Lawson & Co.
March 18, 1998
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Hydromer, Inc.
Balance Sheet
($ in 000's)
-----------------------------------------------------------------------------
June 30,
1993 1994 1995 1996
-----------------------------------------------------------------------------
ASSETS
Current Assets
Cash & Cash Equivalents $948 70.9% $983 70.9% $41 4.2% $168 10.9%
Trade Receivables, Net 219 16.4% 198 14.3% 268 27.2% 624 40.7%
Marketable Investment Securities 0 0.0% 0 0.0% 271 27.5% 0 0.0%
Inventory 36 2.7% 43 3.1% 81 8.3% 171 11.2%
Other Current Assets 18 1.4% 14 1.0% 70 7.1% 107 7.0%
------ ------ ------ ------
Total Current Assets 1,221 91.3% 1,239 89.3% 732 74.2% 1,071 69.8%
Net Property & Equipment 111 8.3% 132 9.5% 183 18.6% 223 14.5%
Other Assets
Deferred Tax Asset 0 0.0% 0 0.0% 61 6.2% 232 15.1%
Other 6 0.4% 16 1.2% 10 1.0% 10 0.6%
------ ------ ------ ------
Total Other Assets 6 0.4% 16 1.2% 71 7.2% 241 15.7%
------ ------ ------ ------
TOTAL ASSETS $1,337 100.0% $1,386 100.0% $986 100.0% $1,535 100.0%
====== ====== ====== ======
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $35 2.6% $25 1.8% $28 2.8% $22 1.5%
Accrued Expenses 10 0 8 48 3.5% 32 3.2% 70 4.6%
Income Tax Payable 0 0.0% 239 17.3% 39 3.9% 4 0.2%
------ ------ ------ ------
Total Current Liabilities 45 3.4% 313 22.5% 98 10.0% 96 6.3%
Total Liabilities 45 3.4% 313 22.5% 98 10.0% 96 6.3%
Shareholders' Equity
Common Stock 2,923 218.6% 2,923 210.8% 2,923 296.3% 2,923 190.4%
Contributed Capital 578 43.2% 578 41.7% 578 58.6% 578 37.6%
Accumulated Deficit (2,202) -164.7% (2,420) -174.6% (2,607) -264.4% (2,056) -134.0%
Unrealized Gain 0 0.0% 0 0.0% 1 0.1% 0 0.0%
Cash Dividends Paid 0 0.0% 0 0.0% 0 0.0% 0 0.0%
Treasury Stock, at cost (6) -0.5% (6) -0.4% (6) -0.6% (6) -0.4%
------ ------ ------ ------
Total Shareholders' Equity 1,292 96.6% 1,074 77.5% 888 90.0% 1,439 93.7%
------ ------ ------ ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $1,337 100.0% $1,386 100.0% $986 100.0% $1,535 100.0%
------ ------ ------ ------
----------------------------------------
June 30, December 31,
1997 1997
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ASSETS
Current Assets
Cash & Cash Equivalents $716 35.4% $646 31.7%
Trade Receivables, Net 431 21.3% 564 27.7%
Marketable Investment Securities 0 0.0% 0 0.0%
Inventory 149 7.4% 141 6.9%
Other Current Assets 178 8.8% 216 10.6%
------ ------
Total Current Assets 1,474 72.9% 1,567 77.0%
Net Property & Equipment 272 13.5% 288 14.1%
Other Assets
Deferred Tax Asset 263 13.0% 171 8.4%
Other 12 0.6% 9 0.5%
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Total Other Assets 275 13.6% 180 8.9%
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TOTAL ASSETS $2.020 100.0% $2,035 100.0%
====== ======
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $29 1.4% $44 2.2%
Accrued Expenses 168 8.3% 80 3.9%
Income Tax Payable 40 2.0% 21 1.0%
------ ------
Total Current Liabilities 237 11.7% 144 7.1%
Total Liabilities 237 11.7% 144 7.1%
Shareholders' Equity
Common Stock 2,923 144.7% 2,923 143.6%
Contributed Capital 578 28.6% 578 28.4%
Accumulated Deficit (1,711) -84.7% (1,472) -72.3%
Unrealized Gain 0 0.0% 0 0.0%
Cash Dividends Paid 0 0.0% (131) -6 5%
Treasury Stock, at cost (6) -0.3% (6) -0 3%
------ ------
Total Shareholders' Equity 1,783 88.3% 1,891 92.9%
------ ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $2,020 100.0% $2,035 100.0%
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Howard, Lawson & Co.
March 18, 1998
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Hydromer, Inc.
Historical Income Statements - AS REPORTED
($ in 000's)
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June 30,
1993 1994 1995 1996 1997
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Revenues
Product and Service Sales $450 31.4% $389 32.0% $584 50.0% $632 37.2% $748 36.3%
Royalties, Options, and Licenses 985 68.6% 826 68.0% 583 50.0% 1,066 62.8% 1,314 63.7%
----- ----- ----- ----- -----
Total Sales 1,435 100.0% 1,215 100.0% 1,167 100.0% 1,698 100.0% 2,062 100.0%
Cost of Goods Sold 161 11.2% 126 10.4% 184 15.8% 231 13.6% 242 11.7%
----- ----- ----- ----- -----
Gross Profit 1,275 88.8% 1,089 89.6% 983 84.2% 1,468 86.4% 1,820 88.3%
Operating Expenses
Selling,General & Administrative 678 47.3% 595 48.9% 748 64.1% 846 49.8% 1,042 50.5%
Research and Development 411 28.6% 465 38.3% 575 49.3% 499 29.4% 385 18.7%
----- ----- ----- ----- -----
Total Operating Expenses 1,089 75.9% 1,060 87.2% 1,323 113.4% 1,344 79.1% 1,426 69.2%
Income from Operations 185 12.9% 29 2.4% (340) -29.2% 123 7.3% 394 19.1%
Other Expense
Interest Expense (Income) 9 0.6% (10) -0.8% (31) -2.7% (10) -0.6% (14) -0.7%
Other Expense (Income) 0 0.0% 0 0.0% 0 0.0% (88) -5.2% 95 4.6%
----- ----- ----- ----- -----
Total Other Expense 9 0.6% (10) -0.8% (31) -2.7% (99) -5.8% 81 3.9%
Income Before Income Taxes 177 12.3% 39 3.2% (309) -26.5% 222 13.1% 313 15.2%
----- ----- ----- ----- -----
Income Taxes (Benefit) 52 3.6% 24 2.0% (122) -10.5% (167) -9.9% (32) -1.5%
----- ----- ----- ----- -----
Net Income $125 8.7% $15 1.2% ($187) -16.0% $390 22.9% $344 16.7%
===== ===== ===== ===== =====
EBIT $185 12.9% $29 2.4% -$340 -29.2% $212 12.5% $299 14.5%
EBITDA $234 16.3% $73 6.0% -$309 26.5% $246 14.5% $342 16.6%
-----------------------
Latest Twelve Months
Ended 12/31/97
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Revenues
Product and Service Sales $698 31.5%
Royalties, Options, and Licenses 1,521 68.5%
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Total Sales 2,219 100.0%
Cost of Goods Sold 227 10.2%
-----
Gross Profit 1,992 89.8%
Operating Expenses
Selling,General&Administrative 1,347 60.7%
Research and Development 189 8.5%
-----
Total Operating Expenses 1,536 69.2%
Income from Operations 456 20.6%
Other Expense
Interest Expense (Income) (26) -1.2%
Other Expense (Income) 37 1.7%
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Total Other Expense 11 0.5%
Income Before Income Taxes 446 20.1%
-----
Income Taxes (Benefit) 68 3.1%
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Net Income $378 17.0%
=====
EBIT $419 18.9%
EBITDA $469 21.1%
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Howard, Lawson & Co.
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March 18, 1998
Hyromer, Inc.
Historical Income Statements - ADJUSTED
($ in 000's)
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June 30,
1993 1994 1995 1996 1997
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Revenues
Product and Service Sales $450 31.4% $389 32.0% $584 50.0% $632 37.2% $748 36.3%
Royalties, Options, and Licenses 985 68.6% 826 68.0% 583 50.0% 1,066 62.8% 1,314 63.7%
----- ----- ----- ----- -----
Total Sales 1,435 100.0% 1,215 100.0% 1,167 100.0% 1,698 100.0% 2,062 100.0%
Cost of Goods Sold 161 11.2% 126 10.4% 184 15.8% 231 13.6% 242 11.7%
----- ----- ----- ----- -----
Gross Profit 1,275 88.8% 1,089 89.6% 983 84.2% 1,468 86.4% 1,820 88.3%
Operating Expenses
Selling, General & Administrative 678 47.3% 595 48.9% 748 64.1% 846 49.8% 1,042 50.5%
Research and Development 411 28.6% 465 38.3% 575 49.3% 499 29.4% 385 18.7%
----- ----- ----- ----- -----
Total Operating Expenses 1,089 75.9% 1,060 87.2% 1,323 113.4% 1,344 79.1% 1,426 69.2%
Income from Operations 185 12.9% 29 2.4% (340) -29.2% 123 7.3% 394 19.1%
Other Expense
Interest Expense (Income) 9 0.6% (10) -0.8% (31) -2.7% (10) -0.6% (14) -0.7%
Other Expense (Income) 0 0.0% 0 0.0% 0 0.0% (88) -5.2% 95 4.6%
----- ----- ----- ----- -----
Total Other Expense 9 0.6% (10) -0.8% (31) -2.7% (99) -5.8% 81 3.9%
Income Before Income Taxes 177 12.3% 39 3.2% (309) -26.5% 222 13.1% 313 15.2%
----- ----- ----- ----- -----
Income Taxes (Benefit) 52 3.6% 24 2.0% (122) -10.5% (167) -9.9% (32) -1.5%
Reported Net Income $125 8.7% $15 1.2% ($187) -16.0% $390 22.9% $344 16.7%
----- ----- ----- ----- -----
Adjustments [1] $52 3.6% $23 1.9% $0 0.0% ($85) -5.0% $0 0.0%
----- ----- ----- ----- -----
Adjusted Net Income $177 12.3% $37 3.1% ($187) -16.0% $305 17.9% $344 16.7%
===== ===== ===== ===== =====
[1] Adjustment were made to account for the classification as a Personal
Holding Company in error.
The $85,000 litigation settlement in 1996 has been removed as non-recurring
income. Income tax expense for 1993 and 1994 have been adjusted for the personal
holding company taxes paid by the company in error of $22,525 in 1994 and
$51,896 in 1993.
EBIT $185 12.9% $29 2.4% -$340 -29.2% $212 12.5% $299 14.5%
EBITDA $234 16.3% $73 6.0% -$309 -26.5% $246 14.5% $342 16.6%
----------------------
Latest Twelve Months
Ended 12/31/97
----------------------
Revenues
Product and Service Sales $698 31.5%
Royalties, Options, and Licenses 1.521 68.5%
-----
Total Sales 2,219 100.0%
Cost of Goods Sold 227 10.2%
-----
Gross Profit 1,992 89.8%
Operating Expenses
Selling, General & Administrative 1,347 60.7%
Research and Development 189 8.5%
-----
Total Operating Expenses 1,536 69.2%
Income from Operations 456 20.6%
Other Expense
Interest Expense (Income) (26) -1.2%
Other Expense (Income) 37 1.7%
-----
Total Other Expense 11 0.5%
Income Before Income Taxes 446 20.1%
-----
Income Taxes (Benefit) 68 3.1%
Reported Net Income $378 17.0%
-----
Adjustments [1] $0 0.0%
-----
Adjusted Net Income $378 17.0%
=====
EBIT $419 18.9%
EBITDA $469 21.1%
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Howard, Lawson & Co.
March 18, 1998
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Hydromer, Inc.
Trailing Twelve Months Income
($ in 000's)
-------------------------------------------------------------------------------------
June 30,1997 6 Months Ended 6 Months Ended Trailing
Last Fiscal Year December 31.1996 December 31,1997 Twelve Months
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Revenues
Product and Service Sales $748 36.3% $341 33.9% $291 25.0% $698 31.5%
Royalties, Options, and Licenses 1,314 63.7% 665 66.1% 871 75.0% 1,521 68.5%
----- ----- ----- -----
Total Sales 2,062 100.0% 1,006 100.0% 1,163 100.0% 2,219 100.0%
Cost of Goods Sold 242 11.7% 119 11.8% 104 8.9% 227 10.2%
----- ----- ----- -----
Gross Profit 1,820 88.3% 887 88.2% 1,058 91.1% 1,992 89.8%
Operating Expenses
Selling, General & Administrative 1,042 50.5% 450 44.8% 756 65.0% 1,347 60.7%
Research and Development 385 18.7% 196 19.5% 0 0.0% 189 8.5%
----- ----- ----- -----
Total Operating Expenses 1,426 69.2% 646 64.3% 756 65.0% 1,536 69.2%
Income from Operations 394 19.1% 240 23.9% 303 26.1% 456 20.6%
Other Expense
Interest Expense (Income) (14) -0.7% (4) -0.4% (17) -1.4% (26) -1.2%
Other Expense (Income) 95 4.6% 58 5.8% 0 0.0% 37 1.7%
----- ----- ----- -----
Total Other Expense 81 3.9% 54 5.3% (17) -1.4% 11 0.5%
Income Before Income Taxes 313 15.2% 187 18.6% 320 27.5% 446 20.1%
----- ----- ----- -----
Income Taxes (Benefit) (32) -1.5% (19) -1.9% 81 6.9% 68 3.1%
----- ----- ----- -----
Net Income $344 16.7% $206 20.4% $239 20.6% $378 17.0%
===== ===== ===== =====
EBIT $299 14.5% $182 18.1% $303 26.1% $419 18.9%
EBITDA $342 16.6% $202 20.0% $328 28.2% $469 21.1%
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Howard, Lawson & Co.
March 18, 1998
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Target
Balance Sheet
($ in 000's)
---------------------------------------------------------------------------------
December 31,
1992 1993 1994 1995
---------------------------------------------------------------------------------
ASSETS
Current Assets
Cash & Cash Equivalents $54 1.7% $75 2.8% $466 10.5% $568 16.4%
Trade Receivables 420 13.1% 320 11.8% 548 12.3% 163 4.7%
Inventory 778 24.4% 576 21.2% 575 12.9% 616 17.8%
Other Current Assets 28 0.9% 52 1.9% 36 0.8% 18 0.5%
------ ------ ------ ------
Total Current Assets 1,279 40.1% 1,023 37.6% 1,625 36.5% 1,364 39.4%
Net Property & Equipment 1,808 56.6% 1,609 59.1% 1,387 31.2% 1,370 39.6%
Other Assets
Escrow - 0.0% - 0 0% - 0.0% 313 9.0%
Cash Surrender Value of Life Insurance - 0.0% - 0.0% - 0.0% 403 11.6%
Other Assets, Net 105 3.3% 89 3.3% 1,440 32.3% 14 0.4%
------ ------ ------ ------
Total Other Assets 105 3.3% 89 3.3% 1,440 32.3% 729 21.1%
------ ------ ------ ------
TOTAL ASSETS $3,192 100.0% $2.721 100.0% $4,452 100.0% $3.464 100.0%
====== ====== ====== ======
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt $682 21.4% $900 33.1% $29 0.7% $33 0.9%
Accounts Payable 446 14.0% 405 14.9% 229 5.1% 164 4.7%
Accrued Liabilities & Other 435 13.6% 367 13.5% 239 5.4% 188 5.4%
------ ------ ------
Total Current Liabilities 1,564 49.0% 1,672 61.4% 497 11.2% 385 11.1%
Long-Term Debt Less CurrentMaturities 1,114 34.9% 778 28.6% 732 16.4% 700 20.2%
------ ------ ------ ------
Total Liabilities 2,678 83.9% 2,450 90.0% 1,229 27.6% 1,084 31.3%
Shareholders' Equity
Common Stock 11,130 348.7% 11,130 409.0% 11,130 250.0% 11,130 321.3%
Accumulated Deficit (10,582) -331.5% (10,826) -397.9% (7,875) -176.9% (8,719) -251.7%
Treasury Stock, at Cost (34) -1.1% (33) -1.2% (32) -0.7% (31) -0.9%
------ ------ ------ ------
Total Shareholders' Equity 514 16.1% 271 10.0% 3,223 72.4% 2,380 68.7%
------ ------ ------ ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $3,192 100.0% $2,721 100.0% $4,452 100.0% $3,464 100.0%
------ ------ ------ ------
--------------------------------------
September 30,
1996 1997
--------------------------------------
ASSETS
Current Assets
Cash & Cash Equivalents $321 12.8% $23 1.1%
Trade Receivables 182 7.3% 266 12.8%
Inventory 514 20.4% 391 18.9%
Other Current Assets 31 1.2% 18 0.9%
------ ------
Total Current Assets 1,048 41.7% 698 33.7%
Net Property & Equipment 1,452 57.8% 1,364 65.9%
Other Assets
Escrow - 0.0% - 0.0%
Cash Surrender Value of Life Insurance - 0.0% - 0.0%
Other Assets, Net 14 0.5% 9 0.4%
------ ------
Total Other Assets 14 0.5% 9 0.4%
------ ------
TOTAL ASSETS $2,513 100.0% $2.071 100.0%
====== ======
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt $37 1.5% $694 33.5%
Accounts Payable 186 7.4% 313 15.1%
Accrued Liabilities & Other 132 5.2% 104 5.0%
------ ------
Total Current Liabilities 354 14.1% 1,111 53.6%
Long-Term Debt Less CurrentMaturities 663 26.4% 0 0.0%
------ ------
Total Liabilities 1,017 40.5% 1,111 53.6%
Shareholders' Equity
Common Stock 11,130 442.9% 11,130 537.4%
Accumulated Deficit ((9,602) -382.1% (10,138) -489.5%
Treasury Stock, at Cost (31) -1.2% (31) -1.5%
------ ------
Total Shareholders' Equity 1,496 59.5% 960 46.4%
------ ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $2,513 100.0% $2,071 100.0%
------ ------
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Howard, Lawson & Co.
March 18, 1998
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Target
Income Statement
($ in 000's)
------------------------------------------------------------------------------------------------
December 31,
1992 1993 1994 1995 1996
------------------------------------------------------------------------------------------------
Total Sales 3,993 100.0% 3,794 100.0% 3,574 100.0% 3,268 100.0% 2,649 100.0%
Cost of Goods Sold 3,255 81.5% 2,916 76.9% 2,909 81.4% 2,778 85.0% 2,239 84.5%
------- ------- ------- ------- -------
Gross Profit 738 18.5% 877 23.1% 664 18.6% 490 15.0% 410 15.5%
Operating Expenses
Selling, General & Administrative 2,336 58.5% 1,601 42.2% 1,452 40.6% 1,332 40.8% 1.223 46.2%
------- ------- ------- -------
Income from Operations (1,597) -40.0% (723) -19.1% (788) -22.0% (842) -25.8% (813) -30.7%
Other Expense (Income)
Interest Expense, Net 225 5.6% 205 5.4% 99 2.8% 30 0.9% 72 2.7%
Sale of Assets -- 0.0% -- 0.0% (3,329) -93.1% -- 0.0% -- 0.0%
Other, Net (194) -4.9% (684) -18.0% (454) -12.7% (29) -0.9% (1) 0.0%
------- ------- ------- ------- -------
Total Other Expense 31 0.8% (479) -12.6% (3,684) -103.1% 2 0.0% 71 2.7%
Income Before Income Taxes (1,628) -40.8% (244) -6.4% 2,897 81.0% (844) -25.8% (884) -33.4%
------- ------- ------- ------- -------
Income Taxes -- 0.0% -- 0.0% 60 1.7% -- 0.0% -- 0.0%
Extraordinary Item (65) -1.6% -- 0.0% 114 3.2% -- 0.0% -- 0.0%
------- ------- ------- ------- -------
Net Income ($1,693) -42.4% ($244) -6.4% $2,951 82.6% ($844) -25.8% ($884) -33.4%
======= ======= ======= ======= =======
EBIT (1,403) -35.1% (39) -1.0% 2,995 83.8% (813) -24.9% (812) -30.6%
EBITDA (1,102) -27.6% 176 4.6% 3,120 87.3% (698) -21.4% (721) -27.2%
------------------------------------------------------------------------------------------------
----------------------
Trailing Twelve Months
September 30, 1997
----------------------
Total Sales 1,866 100.0%
Cost of Goods Sold 1,427 76.5%
-------
Gross Profit 439 23.5%
Operating Expenses
Selling, General & Administrative 957 51.3%
-------
Income from Operations (518) -27.8%
Other Expense (Income)
Interest Expense, Net 64 3.5%
Sale of Assets -- 0.0%
Other, Net (7) -0.4%
-------
Total Other Expense 57 3.1%
Income Before Income Taxes (576) -30 9%
-------
Income Taxes -- 0.0%
Extraordinary Item -- 0.0%
-------
Net Income ($576) -30.9%
=======
EBIT (511) -27.4%
EBITDA (418) -22.4%
----------------------
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Howard, Lawson & Co.
March 18, 1998
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Target
Trailing Twelve Months Income
($ in 000's)
----------------------------------------------------------------------------------------------
December 31. 1996 9 Months Ended 9 Months Ended
Last Fiscal Year September 30, 1996 Sentember 30,1997 Trailing Twelve Months
----------------------------------------------------------------------------------------------
Total Sales 2,649 100.0% 2,011 100.0% 1,228 100.0% 1,866 100.0%
Cost of Goods Sold 2,239 84.5% 1,887 93.9% 1,075 87.6% 1,427 76.5%
----- ----- ----- -----
Gross Profit 410 15.5% 123 6.1% 152 12.4% 439 23.5%
Operating Expenses
Selling, General & Administrative 1,223 46.2% 916 45.6% 650 53.0% 957 51.3%
----- ----- ----- -----
Income from Operations (813) -30.7% (793) -39.4% (498) -40.6% (518) -27.8%
Other Expense (Income)
Interest Expense, Net 72 2.7% 63 3.1% 55 4.5% 64 3.5%
Sale of Assets -- 0.0% -- 0.0% -- 0.0% -- 0.0%
Other, Net (1) 0.0% (121) -0.6% (17) -1.4% (7) -0.4%
----- ----- ----- -----
Total Other Expense 71 2.7% 51 2.6% 38 3.1% 57 3.1%
Income Before Income Taxes (884) -33.4% (844) 42.0% (536) 43.7% (576) -30.9%
----- ----- ----- -----
Income Taxes -- 0.0% -- 0.0% -- 0.0% -- 0.0%
Extraordinary Item -- 0.0% -- 0.0% -- 0.0% -- 0.0%
----- ----- ----- -----
Net Income ($884) -33.4% ($844) 42.0% ($536) 43.7% ($576) -30.9%
===== ===== ===== =====
EBIT -$812 -30.6% -$781 -38.8% -$481 -39.2% -$511 -27.4%
EBITDA -$721 -27.2% -$719 -35.8% -$416 -33.9% -$418 -22.4%
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Howard, Lawson & Co.
March 18, 1998
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Analysis of Hydromer
Guideline Public Companies
We have selected 7 public companies that are similar to Hydromer in lines of
business, growth rates, financial condition, or size. The following pages
include the following:
o a description of each guideline company;
o a comparison of the public market multiples of guideline companies to
Hydromer and a summary of financial performance for the guideline company
group;
o rankings of the guideline companies and Hydromer with respect to size,
growth and profitability; and,
o detailed historical financial information for each guideline company and
Hydromer.
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Howard, Lawson & Co.
March 18, 1998
- --------------------------------------------------------------------------------
Hydromer Guideline Public Companies
Advanced Materials Group, Inc. (Nasdaq: ADMG) - Manufactures and fabricates
specialty foams, foils, films and pressure-sensitive adhesive components for
customers in the computer, medical, automotive and aerospace industries.
Balchem Corp. (AMS: BCP) - Manufactures and sells specialty chemicals for use in
foods, oil, resins, sterilization, water treatment, fumigation and synthesis.
Biopool International, Inc. (Nasdaq: BIPL) - Develops, manufactures and markets
test kits to diagnose and assess bleeding and clotting disorders and
cardiovascular risk factors and products used to screen for antibodies.
Chemfab Corp. (NYSE: CFA) - Designs, manufactures and fabricates flexible
fiber-reinforced fluoropolymer composite materials; and produces and sells
specialty fluoropolymer films and silicon-based products. Customers include the
electrical, environmental, food processing, architectural, aerospace,
communications and protective clothing industries.
PolyMedica Corporation (ASE: PM) - Provides targeted medical products and
services with a focus in diabetes supplies and consumer healthcare markets.
Polymer Research Corp. of America (Nasdaq: PROA) - Researches and develops
polymer chemistry on a contract basis, for chemical grafting. Also makes and
sells products developed from research activities and textile printing inks.
United Guardian (ASE: UG) - Manufactures and distributes pharmaceuticals,
medical devices, health care products, bases for cosmetic products and specialty
chemical products; and distributes a line of fine organic chemicals, research
chemicals, solutions, indicators, dyes, stains and reagents.
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Howard, Lawson & Co.
March 18, 1998
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Analysis of Target
Guideline Public Companies
We have selected 8 public companies that are similar to Target in lines of
business, growth rates, financial condition, or size. The following pages
include the following:
o a description of each guideline company;
o a comparison of the public market multiples of guideline companies to
Target and a summary of financial performance for the guideline company
group;
o rankings of the guideline companies and Target with respect to size, growth
and profitability; and,
o detailed historical financial information for each guideline company and
Target.
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Howard, Lawson & Co.
March 18, 1998
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Target Guideline Public Companies
Electro-Catheter Corp. (Nasdaq: ECTH) - Develops, manufactures and markets
catheters and related devices for treatment of illnesses of the heart and the
circulatory system. Entered into a letter of intent with Cardiac Control
Systems, Inc. to effect a merger, and on January 20, l998 the parties entered
into a plan of reorganization.
LifeQuest Medical Inc. (Nasdaq: LQMD) - Designs, develops, manufactures and
distributes disposable and reusable surgical devices for use in minimally
invasive surgery.
Luther Medical Inc. (Nasdaq: LUTH) - Designs, develops, manufactures, sells and
licenses needle catheter placement systems for use when soft, flexible catheters
must be inserted for intravenous therapy.
MedAmicus, Inc. (Nasdaq: MEDM) - Designs, develops, manufactures and markets a
system for measuring and monitoring physiological pressures in the human body;
and manufactures and markets vascular access products; and engages in contract
manufacturing activities.
Nitinol Medical Technologies Inc. (Nasdaq: NMTI) - Designs, develops and markets
innovative medical devices which utilize advanced technologies and are delivered
by minimally invasive procedures.
Rochester Medical Technologies (Nasdaq: ROCM) - Develops, manufactures and
markets innovative products for urinary dysfunction management and urine
drainage management.
Trimedyne Inc. (Nasdaq: TMED) - Researches, develops, manufactures and markets
fiber-optic laser catheters, fiber-optic endoscopes, lasers for scientific,
medical and other uses and plastic optical fibers for industrial and medical
purposes.
Valley Forge Scientific Corp (Nasdaq: VLFG) - Develops and manufactures medical
devices and products for hospitals and healthcare companies, based on patented
technology.
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Howard, Lawson & Co.
March 18, 1998
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Analysis of
Guideline Acquisitions
We searched for acquisitions of companies that were similar to Target. The
following pages detail the financial characteristics of each acquisition and
summarizes the high, low, mean, and median financial ratios resulting from the
searches.
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Howard, Lawson & Co.
Over
4 Weeks
[GRAPHIC OMITTED] Value of Value/ Value/ Prior to
action Transaction Value/ Cash EBIT Net Announce-
Company Date ($000s) Sales Flow Multiple Income ment Date
------- ---- ------- ----- ---- -------- ------ ---------
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1 Biosys 7/20/97 $ 11,000 1.1x 0.6x 0.6x na na
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2 Ideas for Medicine Inc. 3/5/97 11,300 1.8x 22.2x 32.0x 31.8x na
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3 ChemGenics Pharmaceuticals 2/11/97 4,000 1.1x na na na na
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4 Cardiometrics 7/24/97 56,800 4.2x 2.4x na na 47.1%
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5 Coromed Inc. 12/29/97 15,000 1.7x na na na na
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6 Contour Medical (Retirement) 2/13/97 9,800 1.1x 14.0x 17.5x 33.4x -2.4%
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7 Luxar Corporation 3/12/97 94,400 3.4x na na 21.0x na
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8 Clark Laboratories Inc. 2/24/97 5,600 0.7x na na na na
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9 International Technidyne Corp. 5/2/97 69,600 2.0x na na 14.9x na
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10 Survivair Inc. 6/3/97 27,400 0.9x na na na na
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11 Imagyn Medical Inc. 9/30/97 57,100 6.1x na 56.7x na -12.2%
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12 Alanex Corp. 5/23/97 61,500 7.1x 23.0x 30.6x 40.3x na
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13 Imex Medical Systems Inc. 9/10/97 9,300 0.9x 19.8x na nmf 2.8%
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14 Nutrition 21 LP 8/12/97 11,200 0.7x 1.9x 1.9x 1.9x na
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15 Flents Product Co. 8/6/97 3,500 0.6x na na na na
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16 Allergan Ligand Retinoid 11/24/97 71,400 na na na na 7.8%
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17 Medwave Inc. 9/26/97 400 2.9x na na na na
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18 Biomagnetic Technologies Inc. 10/2/97 31,300 7.1x na na na na
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19 MPL Technologies Inc. 11/11/97 5,400 0.8x na na na na
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20 Brimfeld Precision 12/15/97 9,200 0.9x 6.3x 9.9x 11.2x na
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21 Quest Medical Inc. 1/30/98 24,500 1.7x na na na na
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# of Data Points 21 20 8 7 7 5%
Low 0.6x 0.6x 0.6x 1.9x 47.1%
High 7.1x 23.0x 56.7x 40.3x 47.1%
Mean 2.3x 11.3x 21.3x 22.1x 47.1%
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Median 1.4x 10.1x 17.5x 21.0x 2.8%
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Source: Securities Data Company, Inc.
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Howard, Lawson & Co.