[Motor Cargo Logo]
Presentation to the Board of Directors
October 15, 2001
(Updated through date of announcement of October 15, 2001)
The information contained in this information package should be
considered confidential and should not be used for any purposes other
than the Board of Directors' consideration of this transaction.
Morgan Keegan & Company, Inc.
Investment Banking
50 North Front Street
19th Floor
Memphis, TN 38103
(901) 524-4100
Table Of Contents [Motor Cargo Logo]
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Overview of Transaction .............................................Tab 1
Methodology .........................................................Tab 2
Company Overviews ...................................................Tab 3
Motor Cargo Financial Review ........................................Tab 4
Union Pacific Financial Review ......................................Tab 5
Valuation Analysis ..................................................Tab 6
1. Historical Stock Price and Exchange Ratio Analysis
2. Peer Group Analysis
3. Selected Precedent Transactions Analysis
4. Discounted Cash Flow Analysis
5. Pro Forma Impact Analysis
6. Premium Analysis
7. Valuation Summary
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Morgan Keegan & Company, Inc.
Overview of Transaction [Motor Cargo Logo]
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Motor Cargo Industries, Inc. ("Motor Cargo" or "CRGO" or the "Company") and
Union Pacific Corporation ("Union Pacific" or "UNP" or "UP") propose to enter
into an Agreement and Plan of Merger, substantially in the form of the draft
dated October 12, 2001 (the "Merger Agreement"). The Merger Agreement contains
an offer (the "Exchange Offer") by UP to exchange the Consideration (defined
below) for each share of common stock of Motor Cargo, no par value per share,
issued and outstanding (the "Motor Cargo Common Stock") and provides, among
other things, for the merger of Motor Cargo with and into a wholly-owned
subsidiary of UP (the "Merger") after completion of the Exchange Offer
(collectively the Exchange Offer and Merger are sometimes hereinafter called the
"Transaction"). The Exchange Offer is an offer by UP to exchange each issued and
outstanding share of Motor Cargo Common Stock for 0.26 shares of common stock,
par value of $2.50, of UP (the "UP Common Stock") (the "Stock Consideration"),
or $12.10 per share in cash (the "Cash Consideration"), subject to certain
procedures and limitations contained in the Merger Agreement, as to which
procedures and limitations we are expressing no opinion. After completing the
Exchange Offer, in the Merger each share of Motor Cargo Common Stock not so
exchanged in the Exchange Offer (other than shares of Motor Cargo Common Stock
acquired by UP in the Exchange Offer or otherwise held by UP, Motor Cargo or
their respective affiliates) shall be converted into the right to receive the
Cash Consideration. The Stock Consideration and Cash Consideration are hereafter
collectively referred to as the "Consideration." Upon consummation of the
Transaction, the business historically conducted by Motor Cargo will be operated
as a separate wholly-owned subsidiary of UP. The terms and conditions of the
Transaction are more fully set forth in the Merger Agreement.
Pre-merger fully-diluted common shares outstanding:
- ---------------------------------------------------
Motor Cargo's fully-diluted common shares outstanding:
Common shares outstanding as of June 30, 2001: 6,473,140
Option and warrants converted using the treasury method (1) (2): 92,790
------
Total fully-diluted common shares outstanding: 6,565,930
Union Pacific's fully-diluted common shares outstanding:
Common shares outstanding as of June 30, 2001: 248,345,605
Option and warrants converted using the treasury method (1) (3): 1,314,432
---------
Total fully-diluted common shares outstanding: 249,660,037
(1) Option and warrant conversion calculations based on closing prices as of
October 15, 2001 of $9.95 and $48.02 of Motor Cargo and Union Pacific,
respectively.
(2) Per option and warrant summary schedule as of September 30, 2001, provided
by Motor Cargo's management.
(3) Per discussions with UP's management, the number of options and warrants
outstanding, as well as weighted-average strike prices, has not changed
materially from what is published in its latest 10-K dated December 31,
2000, which is the source document for certain information used to
calculate options that are in-the-money.
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Morgan Keegan & Company, Inc. Page 1
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Overview of Transaction [Motor Cargo Logo]
Transaction Valuations Assuming Various UNP Stock Prices
($ in millions except per share values)
o UNP stock price on the date of the closing will ultimately determine the
transaction's valuation.
o Assuming 100% stock transaction, the valuations are shown below:
o Last twelve month ("LTM") results are for the period ended June 30, 2001.
----------------------------------------------------
Book
LTM Results of Target Value
- ------------------------------------------------------------------------------------------------------------------------ per
Effective Acquiror Consideration Equity Net Enterprise Net Diluted
Date Target Value Debt (1) Value Revenue EBIT EBITDA Income Share
- -----------------------------------------------------------------------------------------------------------------------------------
Pending Union Pacific
Motor Cargo (2) Cash/Stock $ 82.6 $ (2.2) $ 80.5 $136.7 $10.3 $19.0 $ 6.8 $9.09
- -----------------------------------------------------------------------------------------------------------------------------------
- Union Pacific
Motor Cargo (3) Cash/Stock $ 83.5 $ (2.2) $ 81.4 $136.7 $10.3 $19.0 $ 6.8 $9.09
- -----------------------------------------------------------------------------------------------------------------------------------
- Union Pacific
Motor Cargo (4) Cash/Stock $ 93.1 $ (2.2) $ 90.9 $136.7 $10.3 $19.0 $ 6.8 $9.06
- -----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------
Enterprise Value Multiples of: Equity Values
Multiples of:
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Effective Acquiror Net Book
Date Target Revenue EBIT EBITDA Income Value
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Pending Union Pacific
Motor Cargo (2) 0.6x 7.8x 4.2x 12.2x l.4x
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- Union Pacific
Motor Cargo (3) 0.6x 7.9x 4.3x 12.4x l.4x
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- Union Pacific
Motor Cargo (4) 0.6x 8.8x 4.8x 13.8x l.5x
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Morgan Keegan & Company, Inc. Page 2
Overview of Transaction [Motor Cargo Logo]
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Implied Range of Stock Consideration
[Graph Showing value of stock consideration using UNP share price]
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Morgan Keegan & Company, Inc. Page 3
Methodology [Motor Cargo Logo]
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In connection with rendering its opinion, Morgan Keegan, among other things:
o reviewed the draft of the Merger Agreement and the terms of the Transaction
and drafts of certain related documents;
o reviewed certain publicly available business and financial information
relating to Motor Cargo and Union Pacific;
o reviewed certain other information provided to us by Motor Cargo and Union
Pacific and discussed the business prospects of Motor Cargo and Union Pacific
with Motor Cargo's and Union Pacific's management;
o reviewed the reported historical prices and historical trading activity for
Motor Cargo's common stock and Union Pacific's common stock for the period
from October 16, 2000 to October 15, 2001;
o compared and considered the financial performance of Motor Cargo and Union
Pacific and the prices and trading activity of Motor Cargo common stock and
Union Pacific common stock with that of certain other publicly-traded
companies and their securities;
o reviewed the financial terms, to the extent publicly available, of certain
other business combinations and other transactions that we deemed relevant;
o reviewed the pro forma impact of the Transaction on the estimated earnings
per share for the year ended December 31, 2001 of Union Pacific under certain
scenarios;
o performed such other analyses and considered such other factors as Morgan
Keegan deemed appropriate;
o assumed no responsibility for independent verification of any of the
foregoing information and relied on its being complete and accurate in all
material respects;
o with respect to financial forecasts, Morgan Keegan assumed that they had been
reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Motor Cargo as to future
financial performance of Motor Cargo; and
o Morgan Keegan did not make an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Motor Cargo or Union
Pacific, nor was Morgan Keegan furnished with any such evaluations or
appraisals.
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Morgan Keegan & Company, Inc. Page 4
Company Overviews [Motor Cargo Logo]
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[Motor Cargo Logo]
o Motor Cargo Industries, Inc. ("Motor Cargo" or the "Company") is a regional
less-than-truckload ("LTL") carrier that provides transportation and
logistics services to shippers within the western United States.
o Motor Cargo transports general commodities, including consumer goods,
packaged foodstuffs, electronics, computer equipment, apparel, hardware,
industrial goods, and auto parts for a diversified customer base.
o Motor Cargo offers a broad range of services including expedited scheduling
and full temperature-controlled services. Through its wholly-owned
subsidiary, MC Distribution Services, Inc., Motor Cargo also provides
customized logistics, warehousing and distribution management services.
o The Company has approximately 3,800 regular customers with an average monthly
revenue billing of $1,000 or more. The Company's customers are not
concentrated in any one area or industry and no one customer accounts for
over 4% of revenues. The Company's top customers include Starbucks, 3M,
Pepperidge Farm, International Game Technology, General Motors, Goodyear and
Olin Corporation.
o As of December 31, 2000, approximately 45% of the Motor Cargo's shipments are
delivered overnight, and an additional 33% of the Company's shipments are
delivered within two days.
o As of December 31, 2000, the Company utilized 30 strategically located
service centers. In addition, the Company provides service to 24 smaller
markets within its service region pursuant to agreements with independent
agents, most of which act as exclusive agents for the Company.
o As of December 31, 2000, the Company employed 632 full time drivers.
Including part time, there are 192 linehaul drivers and 476 pick-up and
delivery drivers. In addition, the Company supplements its linehaul fleet
with the use of 67 linehaul drivers pursuant to an agreement with the FHF
Transportation Company, and approximately 16 contracted independent
linehaulers.
o The Company employed 1,726 personnel as of December 31, 2000. Approximately
11% of the Company's employees are covered by two separate collective
bargaining agreements relating to employees at the Company's North Salt Lake,
Utah and Reno, Nevada service centers. Although these agreements cover most
of the employees at these two facilities, fewer than half of these employees
are actually members of unions.
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Morgan Keegan & Company, Inc. Page 5
Company Overviews [Motor Cargo Logo]
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[Union Pacific Logo]
[Overnite Logo]
o Union Pacific Corporation ("Union Pacific") was incorporated in Utah in 1969.
Union Pacific operates primarily in the areas of rail transportation, through
its subsidiary Union Pacific Railroad Company ("the Railroad"), and trucking,
through its subsidiary Overnite Transportation Company ("Overnite").
o The Railroad is a Class I railroad that operates in the United States. It has
over 34,000 route miles linking Pacific Coast and Gulf Coast ports to the
Midwest and eastern United States gateways and providing several north/south
corridors to key Mexican gateways.
o Union Pacific generally transports commodities across multiple industries
including agricultural, energy, chemicals, automotive, industrial products
and intermodal.
o Union Pacific's customers include Eastman Chemical, Midwest Generation,
Thrall Car Manufacturing, DaimlerChrysler and Toyota.
o Approximately 87% of the Railroad's nearly 50,000 employees are represented
by rail unions.
o Overnite, based in Richmond, Virginia, is a major interstate trucking company
specializing in less-than-truckload shipments. Overnite serves all 50 states
and portions of Canada and Mexico through 167 service centers located
throughout the United States. Overnite transports a variety of products
including machinery, tobacco, textiles, plastics, electronics and paper
products.
o Overnite delivers 63% of all freight within two days. Overnite's 166 service
centers nationwide posted an on-time service performance standard of
approximately 98% throughout the year. In 2000, Overnite also became the
first nationwide LTL carrier to offer guaranteed pickup service.
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Morgan Keegan & Company, Inc. Page 6
Financial Review [Motor Cargo Logo]
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[Motor Cargo Logo]
Financial Highlights (as reported)
Revenues
($ in millions)
Year 1998 1999 2000
Revenues $114.7 $125.3 $131.1
EBIT & Operating Ratio
($ in millions)
Year 1998 1999 2000
EBIT $9.4 $7.7 $9.7
Operating Ratio 91.8% 93.9% 92.6%
EBIT & EBITDA Margin
($ in millions)
Year 1998 1999 2000
EBITDA $17.3 $16.5 $18.4
EBITDA Margin 15.1% 13.2% 14.1%
EPS & Primary Shares Outstanding
($ in millions)
Year 1998 1999 2000
EBIT $0.83 $0.67 $0.88
Primary Shares Oustanding 6,975 6,945 7,296
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Morgan Keegan & Company, Inc. Page 7
Financial Review [Motor Cargo Logo]
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MOTOR CARGO INDUSTRIES, INC.
Historical Balance Sheets
($ in thousands)
As of December 31, As of June 30,
1998 1999 2000 2001
---------------------------------- -----------
ASSETS
Current Assets
Cash and cash equivalents $ 7,515 $ 5,509 $ 7,034 $ 6,386
Receivables 14,183 16,570 18,125 17,399
Prepaid expenses 2,630 2,720 2,112 1,697
Supplies inventory 460 568 637 642
Deferred income taxes 1,365 1,723 1,734 1,734
Income taxes receivable 623 -- -- --
---------------------------------- -----------
Total current assets 26,775 27,090 29,642 27,858
---------------------------------- -----------
Property and Equipment
Cost 85,954 99,460 106,186 108,021
Less accumulated depreciation and
amortization 40,560 46,644 51,851 51,203
---------------------------------- -----------
Net 45,394 52,815 54,335 56,818
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Other
Advances for purchase of real property -- -- 788 --
Other, net -- 664 601 609
Deferred charges 426 -- -- --
Unrecognized net pension obligation 64 -- -- --
---------------------------------- -----------
Other Assets 490 664 1,388 609
TOTAL ASSETS $ 72,660 $ 80,570 $ 85,365 $ 85,285
================================== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term obligations $ 100 $ 109 $ 119 $ 124
Accounts payable 4,238 3,362 2,854 3,217
Accrued liabilities 5,021 6,323 7,478 8,141
Accrued claims 1,382 1,727 1,440 1,433
Income taxes payable -- 120 435 582
---------------------------------- -----------
Total current liabilities 10,741 11,641 12,327 13,496
Other Liabilities --
Long-term obligations, less current
maturities 5,390 8,021 8,015 4,098
Deferred Income Taxes 7,255 7,267 7,522 7,522
---------------------------------- -----------
Total Liabilities 23,386 26,929 27,864 25,116
Stockholders* Equity
Commonstock 12,135 11,850 9,289 9,315
Retained earnings 37,139 41,792 48,212 50,854
---------------------------------- -----------
Total Stockholders* Equity 49,274 53,641 57,501 60,169
TOTAL LIABILITIES AND STOCKHOLDERS* EQUITY $ 72,660 $ 80,570 $ 85,365 $ 85,285
================================== ===========
Balance Sheet Highlights
Net Debt Calculation ($ in thousands)
Cash $ (6,386)
Current maturities of long-term obligations $ 124
Long-term obligations $ 4,098
---------------
Net Debt $ (2,164)
Shares Outstanding
Latest shares outstanding (6/30/01) 6,473,140
Options converted using treasury method 92,790
---------------
Fully-diluted shares outstanding 6,565,930
Book Value per Diluted Share Calculation
Book value (as of 6/30/01 in $ thousands) $ 60,169
Fully-diluted shares outstanding 6,565,930
---------------
Book value per fully-diluted share $ 9.16
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Morgan Keegan & Company, Inc. Page 8
Financial Review [Motor Cargo Logo]
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MOTOR CARGO INDUSTRIES, INC.
Historical Income Statements
($ in thousands) For Years Ended December 31,
---------------------------------------------------------------------------------
1998 % 1999 % 2000 %
---------------------------------------------------------------------------------
OPERATING REVENUES $ 114,725 100.0% $ 125,310 100.0% $ 131,112 100.0%
OPERATING EXPENSES
Salaries, wages and benefits 51,747 45.1% 59,502 47.5% 65,166 49.7%
Operating supplies and expenses 15,974 13.9% 20,342 16.2% 21,812 16.6%
Purchased transportation 17,976 15.7% 15,580 12.4% 11,870 9.1%
Operating taxes and licenses 3,885 3.4% 4,730 3.8% 5,048 3.9%
Insurance and claims 3,651 3.2% 3,826 3.1% 3,381 2.6%
Depreciation and amortization 7,928 6.9% 8,822 7.0% 8,772 6.7%
Communications and utilities 1,924 1.7% 2,023 1.6% 2,176 1.7%
Building and equipment rents 2,365 2.1% 3,043 2.4% 3,424 2.6%
Gain on sale of equipment (103) (0.1%) (241) (0.2%) (206) (0.2%)
---------------------------------------------------------------------------------
Total operating expenses 105,345 91.8% 117,628 93.9% 121,442 92.6%
Operating income 9,380 8.2% 7,682 6.1% 9,670 7.4%
OTHER INCOME (EXPENSE)
Interest expense (154) (0.1%) (139) (0.1%) (158) (0.1%)
Other, net 223 0.2% 110 0.1% 988 0.8%
---------------------------------------------------------------------------------
69 0.1% (29) (0.0%) 830 0.6%
Income before income taxes 9,449 8.2% 7,653 6.1% 10,500 8.0%
---------------------------------------------------------------------------------
Income taxes 3,660 3.2% 3,000 2.4% 4,080 3.1%
Net Income $ 5,789 5.0% $ 4,653 3.7% $ 6,420 4.9%
=================================================================================
Basic earnings per share $ 0.83 $ 0.67 $ 0.95
Fully-diluted earnings per share $ 0.83 $ 0.67 $ 0.95
EBITDA $ 17,307 15.1% $ 16,504 13.2% $ 18,442 14.1%
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Morgan Keegan & Company, Inc. Page 9
Financial Review [Motor Cargo Logo]
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MOTOR CARGO INDUSTRIES, INC.
Historical Income Statements
($ in thousands) Six Months Ended June 30, LTM Ended
----------------------------------------------------- -----------------------------
2000 % 2001 % June 30, 2001 %
----------------------------------------------------- -----------------------------
OPERATING REVENUES $ 62,157 100.0% $ 67,704 100.0% $ 136,659 100.0%
OPERATING EXPENSES
Salaries, wages and benefits 30,971 49.8% 35,255 52.1% 69,449 50.8%
Operating supplies and expenses 10,091 16.2% 10,964 16.2% 22,685 16.6%
Purchased transportation 5,849 9.4% 5,561 8.2% 11,582 8.5%
Operating taxes and licenses 2,417 3.9% 2,523 3.7% 5,154 3.8%
Insurance and claims 1,752 2.8% 1,886 2.8% 3,515 2.6$
Depreciation and amortization 4,497 7.2% 4,390 6.5% 8,666 6.3%
Communications and utilities 1,018 1.6% 1,086 1.6% 2,243 1.6%
Building and equipment rents 1,726 2.8% 1,552 2.3% 3,249 2.4%
Gain on sale of equipment (90) (0.1%) 47 0.1% (69) (0.1%)
----------------------------------------------------- -----------------------------
Other non-recurring expense 103 0.2% - 0.0% (103) (0.1%)
----------------------------------------------------- -----------------------------
Total operating expenses 58,333 93.8% 63,264 93.4% 126,372 92.5%
Operating income 3,823 6.2% 4,440 6.6% 10,286 7.5%
OTHER INCOME (EXPENSE)
Interest expense (88) (0.1%) (64) (0.1%) (133) (0.1%)
Other, net 51 0.1% 81 0.1% 1,018 0.7%
----------------------------------------------------- -----------------------------
Total other (37) (0.1%) 17 0.0% 885 0.6%
Income before income taxes 3,786 6.1% 4,457 6.6% 11,171 8.2%
----------------------------------------------------- -----------------------------
Income taxes 1,479 2.4% 1,816 2.7% 4,417 3.2%
Net Income $ 2,307 3.7% $ 2,642 3.9% $ 6,755 4.9%
===================================================== =============================
Basic earnings per share $ 0.34 $ 0.41 $ 1.03
Fully-diluted earnings per share $ 0.34 $ 0.41 $ 1.03
EBITDA $ 8,320 13.4% $ 8,830 13.0% $ 18,952 13.9%
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Morgan Keegan & Company, Inc. Page 10
Financial Review [Motor Cargo Logo]
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Motor Cargo Historical Income Statement Highlights
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Motor Cargo: Percent Change from Previous Year
1999 2000 Six Months Ended
vs. 1998 vs. 1999 6/30/01 vs. 6/30/00
--------------------------------------------------------------
Revenue 9.2% 4.6% 8.9%
Operating Income (18.1%) 25.9% 16.1%
EBITDA (4.6%) 11.7% 6.1%
Net Income (19.6%) 38.0% 14.5%
Basic & Diluted EPS (19.3%) 41.8% 20.6%
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Morgan Keegan & Company, Inc. Page 11
Financial Review [Motor Cargo Logo]
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[Union Pacific Logo]
Financial Highlights (as reported)
Revenues
($ in millions)
Year 1998 1999 2000
Revenues $10,514 $11,237 $11,878
EBIT & Operating Ratio
($ in millions)
Year 1998 1999 2000
EBIT $(171) $1,804 $1,903
Operating Margin 101.6% 83.9% 84.0%
EBIT & EBITDA Margin
($ in millions)
Year 1998 1999 2000
EBITDA $899 $2,887 $3,043
EBITDA Margin 8.6% 25.7% 25.6%
EPS & Primary Shares Outstanding
($ in millions)
Year 1998 1999 2000
EBIT $(2.57) $3.17 $3.42
Shares Oustanding 246.0 246.6 246.5
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Morgan Keegan & Company, Inc. Page 12
Financial Review [Motor Cargo Logo]
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UNION PACIFIC CORPORATION
Historical Balance Sheets
($ in millions) As of December 31, As of June 30,
------------------------------------------------- -----------------
1998 1999 2000 2001
------------------------------------------------- -----------------
ASSETS
Current Assets
Cash and temporary investments $ 176 $ 175 $ 105 $ 130
Accounts receivable - net 643 581 597 640
Inventories 343 337 360 309
Current deferred tax asset 244 111 89 118
Other current assets 96 110 134 162
------------------------------------------------- -----------------
Total Current Assets 1,502 1,314 1,285 1,359
Investments
Investments in and advances to affiliated
companies 520 657 644 667
Other investments 171 96 96 100
------------------------------------------------- -----------------
Total Investments 691 753 740 767
------------------------------------------------- -----------------
Properties
Cost 33,145 34,370 35,458 35,755
Accumulated depreciation (6,206) (6,851) (7,262) (7,330)
------------------------------------------------- -----------------
Net 26,939 27,519 28,196 28,425
------------------------------------------------- -----------------
Other - - - 440
Other Assets 242 302 278 440
------------------------------------------------- -----------------
TOTAL ASSETS $ 29,374 $29,888 $ 30,499 $ 30,991
================================================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 586 $ 598 $ 658 $ 580
Accrued wages and vacation 410 409 422 433
Accrued casualty costs 400 385 409 407
Income and other taxes 301 256 234 251
Dividends and interest 289 290 265 260
Debt due within one year 181 214 207 200
Other current liabilities 765 733 767 627
------------------------------------------------- -----------------
Total Current Liabilities 2,932 2,885 2,962 2,758
Other Liabilities
Debt due after one year 8,511 8,426 8,144 8,299
Deferred income taxes 6,308 6,715 7,143 7,377
Accrued casualty costs 995 934 834 772
Retiree benefits obligation 803 791 745 751
Other long-term liabilities 932 636 509 501
------------------------------------------------- -----------------
Total Liabilities 20,481 20,387 20,337 20,458
Stockholders' Equity
Company-obligated mandatorily redeemable
convertible preferred securities 1,500 1,500 1,500 1,500
Common stockholders' equity 7,393 8,001 8,662 9,033
------------------------------------------------- -----------------
Total Stockholders' Equity 8,893 9,501 10,162 10,533
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 29,374 $ 29,888 $ 30,499 $ 30,991
================================================= =================
Balance Sheet Highlights
Net Debt Calculation ($ in thousands)
Cash $ (130)
Current maturities of long-term obligations $ 200
Long-term obligations $ 8,800
Preferred Stock $ 1,500
---------------------
Net Debt $ 10,370
Shares Outstanding
Latest shares outstanding (6/30/01) 248,345,605
Options converted using treasury method 1,314,432
---------------------
Fully-diluted shares outstanding 249,660,037
Book Value per Diluted Share Calculation
Book value (as of 6/30/01 in $ millions) $ 10,533
Fully-diluted shares outstanding 249,660,037
---------------------
Book value per fully-diluted share $ 42.19
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Morgan Keegan & Company, Inc. Page 13
Financial Review [Motor Cargo Logo]
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UNION PACIFIC CORPORATION
Historical Income Statements
($ in millions) For Years Ended December 31,
---------------------------------------------------------------------------------
1998 % 1999 % 2000 %
---------------------------------------------------------------------------------
OPERATING REVENUES
Rail, trucking and other $ 10,514 100.0% $ 11,237 100.0% $ 11,878 100.0%
OPERATING EXPENSES
Salaries, wages and employee
benefits 4,348 41.4% 4,285 38.1% 4,311 36.3%
Equipment and other rents 1,390 13.2% 1,297 11.5% 1,281 10.8%
Depreciation 1,070 10.2% 1,083 9.6% 1,140 9.6%
Fuel and utilities 843 8.0% 832 7.4% 1,350 11.4%
Materials and supplies 565 5.4% 590 5.3% 593 5.0%
Goodwill impairment 547 5.2% - 0.0% - 0.0%
Casualty costs 475 4.5% 378 3.4% 360 3.0%
Other costs 1,447 13.8% 968 8.6% 940 7.9%
---------------------------------------------------------------------------------
Total 10,685 101.6% 9,433 83.9% 9,975 84.0%
---------------------------------------------------------------------------------
Operating Income (171) (1.6%) 1,804 16.1% 1,903 16.0%
OTHER INCOME (EXPENSE)
Other income 189 1.8% 131 1.2% 130 1.1%
Interest expense (714) (6.8%) (733) (6.5%) (723) (6.1%)
---------------------------------------------------------------------------------
Income (loss) before income taxes (696) (6.6%) 1,202 10.7% 1,310 11.0%
---------------------------------------------------------------------------------
Income taxes 63 0.6% (419) (3.7%) (468) (3.9%)
Net income (loss) from
continuing operations (633) (6.0%) 783 7.0% 842 7.1%
=================================================================================
Basic earnings per share $ (2.57) $ 3.17 $ 3.42
Fully-diluted earnings per share $ (2.57) $ 3.12 $ 3.34
EBITDA/(1)/ $ 1,446 13.8% $ 2,887 25.7% $ 3,043 25.6%
(1) Includes depreciation and goodwill impairment.
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Morgan Keegan & Company, Inc. Page 14
Financial Review [Motor Cargo Logo]
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UNION PACIFIC CORPORATION
Historical Income Statements
($ in millions) Six Months Ended June 30, LTM Ended
----------------------------------------------------- -----------------------------
2000 % 2001 % June 30, 2001 %
----------------------------------------------------- -----------------------------
OPERATING REVENUES
Rail, trucking and other $ 5,872 100.0% $ 5,941 100.0% $ 11,947 100.0%
OPERATING EXPENSES
Salaries, wages and employee
benefits 2,105 35.8% 2,148 36.2% 4,354 36.4%
Equipment and other rents 625 10.6% 660 11.1% 1,316 11.0%
Depreciation 565 9.6% 585 9.8% 1,160 9.7%
Fuel and utilities 622 10.6% 690 11.6% 1,418 11.9%
Materials and supplies 311 5.3% 284 4.8% 566 4.7%
Goodwill impairment - 0.0% - 0.0% - 0.0%
Casualty costs 178 3.0% 185 3.1% 367 3.1%
Other costs 472 8.0% 456 7.7% 924 7.7%
----------------------------------------------------- -----------------------------
Total 4,878 83.1% 5,008 84.3% 10,105 84.6%
----------------------------------------------------- -----------------------------
Operating Income 994 16.9% 933 15.7% 1,842 15.4%
OTHER INCOME (EXPENSE)
Other income 44 0.7% 105 1.8% 191 1.6%
Interest expense (362) (6.2%) (359) (6.0%) (720) (6.0%)
----------------------------------------------------- -----------------------------
Income before income taxes 676 11.5% 679 11.4% 1,313 11.0%
----------------------------------------------------- -----------------------------
Income taxes 247 4.2% 255 4.3% 476 4.0%
Net income from continuing operations 429 7.3% 424 7.1% 837 7.0%
===================================================== =============================
Basic earnings per share $ 0.98 $ 0.99 $ 3.39
Fully-diluted earnings per share $ 0.95 $ 0.96 $ 3.09
===================================================== =============================
EBITDA/(1)/ $ 1,559 26.5% $ 1,518 25.6% $ 3,002 25.1%
(1) Includes depreciation and goodwill impairment.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 15
Financial Review [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Union Pacific Historical Income Statement Highlights
- ----------------------------------------------------
Union Pacific: Percent Change from Previous Year
1999 2000 Six Months Ended
vs. 1998 vs. 1999 6/30/01 vs. 6/30/00
--------------------------------------------------------
Revenue 6.9% 5.7% 1.2%
Operating Income NM 5.5% (6.1%)
EBITDA NM 5.4% (2.6%)
Net Income NM 7.5% (1.2%)
Basic EPS NM 7.9% 1.0%
Diluted EPS NM 7.1 % 1.1%
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 16
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Historical Stock Price and Exchange Ratio Analysis
- --------------------------------------------------
CRGO Stock Performance UNP Stock Performance
10/16/00 to 10/15/01 10/16/00 to 10/15/01
[Graph showng price and volume] [Graph showing price and volume]
CRGO Stock Performance
- ----------------------
52-week high: $10.06
52-week low: $5.13
10-day average: $9.69
30-day average: $8.74
180-day average: $8.54
Since 10/16/00: $8.00
CRGO (divided) UNP
- ------------------
52-week high: 0.1660
52-week low: 0.1303
10-day average: 0.2074
30-day average: 0.1801
180-day average: 0.1584
Since 10/16/00: 0.1530
UNP Stock Performance/
- ----------------------
Equivalent Consideration
- ------------------------
52-week high: $60.60 @ 0.26 = $15.76
52-week low: $39.38 @ 0.26 = $10.24
10-day average: $46.73 @ 0.26 = $12.15
30-day average: $48.53 @ 0.26 = $12.62
180-day average: $53.92 @ 0.26 = $14.02
Since 10/16/00: $52.28 @ 0.26 = $13.59
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 17
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Historical Stock Price and Exchange Ratio Analysis
- --------------------------------------------------
CRGO versus UNP Relative CRGO & UNP Relative Performance
Stock Performance versus Selected Indices
10/16/00 to 10/15/01 10/16/00 to 10/15/01
[Graph showng price comparisons] [Graph showing price comparisons]
CRGO & UNP Stock Performance
- ----------------------------
CRGO has appreciated 78.9% since 10/16/00.
UNP has appreciated 17.7% since 10/16/00.
Relevant Equity Index Performance
- ---------------------------------
S&P 500 Index has declined 20.9% since 10/16/00.
LTL index has appreciated 43.7% since 10/16/00.
Class I index has appreciated 38.4% since 10/16/00.
Research Analyst Twelve-Month Price Targets /(1)/
- -------------------------------------------------
Union Pacific
9/25/01: Morgan Stanley, Outperform, $60.00
9/20/01: CSFB, Strong Buy, $65.00
Motor Cargo
Not Available
(1) Source: Investext/TM/ Investment Research
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 18
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Historical Stock Price and Exchange Ratio Analysis
- --------------------------------------------------
Overview
o Morgan Keegan compared the historical ratios of the average closing
price of Union Pacific common stock to the average closing price of
Motor Cargo over various periods ended October 15, 2001.
o Examined the premium or discount represented by the transaction
exchange ratio over the average exchange ratio over various time
periods.
Historical Exchange Ratio: CRGO Closing Price/UNP Closing Price
10/16/00 to 10/15/01
[Graph of actual ratio and exchange ratio]
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 19
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
The following table sets forth the ratios of the average closing prices of Union
Pacific common stock compared to Motor Cargo common stock for various time
periods ended October 15, 2001:
- -------------------------------------------- -------------------- ---------------------------------
Period Ended Average Market Transaction Exchange Ratio/
10/15/01 Exchange Ratio Avg. Market Exchange Ratio
- -------------------------------------------- -------------------- ---------------------------------
1 trading day (Oct. 15, 2001) 0.2072 25.5%
Last 10 trading days 0.2073 25.4%
Last 30 trading days 0.1808 43.8%
Last 180 trading days 0.1596 62.9%
Since Oct. 16, 2000 0.1530 70.0%
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 20
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
CRGO/UNP Exchange Ratio Histogram
10/16/00 to 10/15/01
less greater
Exchange Ratio than 0.12 0.12-0.13 0.13-0.14 0.14-0.15 0.15-0.16 0.16-0.17 0.17-0.18 than 0.18
Frequency 0 24 42 49 46 50 17 13
(number of days)
Conclusion
o The transaction exchange ratio is higher than the average exchange
ratio of the closing prices for all time periods analyzed from October
16, 2000 to October 15, 2001.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 21
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Peer Group Analysis
- -------------------
Overview
o In assessing the relative values of Motor Cargo and Union Pacific based on
publicly-traded comparable companies, Morgan Keegan analyzed certain
publicly-traded companies that were deemed to be comparable to Motor Cargo
and Union Pacific in scope of business operations.
o Compared Motor Cargo's and Union Pacific's financial performance with the
performance of their respective Peer Groups for the latest twelve months of
publicly-available data, as well as estimates provided by First Call for
2001 and 2002.
o Derived valuation multiples by analyzing the specific Peer Group financial
information.
o Applied these valuation multiples to Motor Cargo's and Union Pacific's
results for the latest twelve months ended June 30, 2001 or book value as
of June 30, 2001 to derive an implied range of equity values and price per
share for Motor Cargo and Union Pacific.
o Used the implied price per share information to calculate an implied range
of exchange ratios.
o Compared the low and high ends of the implied ranges of exchange ratios to
the exchange ratio of the transaction.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 22
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Peer Group Analysis
- -------------------
Operating Metrics Comparison
The less-than-truckload carriers peer group includes Arkansas Best Corporation,
Arnold Industries, Consolidated Freightways, Old Dominion Freight Line, Roadway
Corporation, USFreightways and Yellow Corporation.
CRGO
CRGO Rank Low High Median
-------------------------------------------------------------------------------
Adjusted Market Capitalization $65.3 million Smallest $65.3 million $858.9 million $505.5 million
Operating Ratio 92.5% 2nd Best 87.8% 94.9% 95.1%
EBITDA Margin 13.9% 2nd Best 1.1% 19.6% 9.8%
Net Debt to Total Capital -3.7% 3rd Lowest -28.2% 40.6% 21.8%
Revenue Growth/(1)/ 9.2% 3rd Highest 2.3% 17.5% 6.7%
Basic EPS Growth/(1)/ 14.5% 4th Highest 11.7% 32.4% 22.2%
The Class I railroads peer group includes Burlington Northern Santa Fe, CSX
Corporation and Norfolk Southern.
UNP UNP Rank Low High Median
-------------------------------------------------------------------------------
Adjusted Market Capitalization $12.0 billion Largest $6.3 billion $12.0 billion $9.0 billion
Operating Ratio 84.6% 2nd Best 78.8% 89.0% 85.7%
EBITDA Margin 25.1% 2nd Best 18.5% 31.0% 23.3%
Net Debt to Total Capital 52.2% 3rd Highest 46.6% 57.2% 51.7%
Revenue Growth/(1)/ 7.8% 2nd Highest -5.4% 10.6% 5.4%
Basic EPS Growth/(1)/ -1.8% 2nd Highest -31.5% 2.5% -16.3%
(1) Compound annual growth rate from most recent four years.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 23
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
LTL Carriers Morgan Keegan & Company, Inc.
Peer Group Analysis
($ in thousands except per share)
===================================================================================================================================
52-Week Range
-----------------
Share Price Shares Adjusted Marekt Net Enterprise
Company/ ----------- ------ ------------------ --------- ----------
Latest Financials Ticker 10/15/2001 High Low Outst. Capitalization (1) Debt (2) Value (3) Sales
- ------------------------- ------ ----------- ------- -------- ------ ------------------ --------- ---------- ----------
Arkansas Best Corporation ABFS $ 22.54 $ 28.25 $ 14.38 21,901 $ 493,651 $155,813 $ 649,464 $1,731,718
06/30/2001
Arnold Industries, Inc. AIND $ 21.40 $ 21.75 $ 14.50 25,440 544,414 (43,577) 500,837 455,300
06/30/2001
Consolidated Freightways CFWY $ 4.20 $ 9.10 $ 2.60 22,041 92,574 46,741 139,315 2,337,631
06/30/2001
Motor Cargo lndustries CRGO $ 9.95 $ 10.06 $ 5.06 6,566 65,331 (2,164) 63,167 136,659
06/30/2001
OId Dominion Freight ODFL $ 11.51 $ 14.95 $ 8.50 8,313 95,681 88,045 183,726 491,735
Line, Inc.
06/30/2001
Roadway Corporation ROAD $ 26.47 $ 30.30 $ 16.44 19,542 517,281 (75,362) 441,919 2,947,476
06/16/2001
USFreightways Corp. USFC $ 31.87 $ 38.25 $ 18.88 26,949 858,864 229,192 1,088,056 2,531,240
06/30/2001
Yellow Corporation YELL $ 20.90 $ 27.57 $ 14.13 24,944 $ 521,335 $200,702 $ 722,037 $3,458,636
06/30/2001
Latest Twelve Months' (4) E.P.S.
------------------------------------- --------------------------
2001 Cal 2002 Cal
Company/ Net Book -------- --------
Latest Financials EBITDA EBIT Income Value LTM Ext.(5) Est. (5)
- ------------------------- --------- -------- -------- --------- ------- -------- --------
Arkansas Best Corporation $ 173,138 $118,740 $ 60,175 $ 312,745 $ 2.65 $ 1.77 $ 2.58
06/30/2001
Arnold Industries, Inc. 89,450 55,700 35,391 288,366 1.40 1 32 1 61
06/30/2001
Consolidated Freightways 26,218 (34,309) (41,569) 215,257 (1.91) (3.00) 0.25
06/30/2001
Motor Cargo lndustries 18,952 10,286 6,755 60,169 1.02 0.98 1.13
06/30/2001
OId Dominion Freight 51,413 22,657 10,891 128,832 1.31 1.25 1 60
Line, Inc.
06/30/2001
Roadway Corporation 146,808 82,562 45,293 342,884 2.39 1.91 2.82
06/16/2001
USFreightways Corp. 243,516 128,920 66,858 660,006 2.53 1.70 2 32
06/30/2001
Yellow Corporation $ 238,513 $111,317 $ 42,716 $ 472,414 $ 1.76 $ 1.05 $ 2.18
06/30/2001
1) Share price multiplied by number of shares outstanding including
in-the-money options converted using the treasury method.
2) Short-term debt, long-term debt (including capitalized lease obligations),
preferred stock and minority interest minus cash and marketable securities.
3) Market value of equity plus net debt.
4) Income statement data excludes extraordinary items and discontinued
operations.
5) Mean estimates obtained from First Call.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 24
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
LTL Carriers Morgan Keegan & Company, Inc.
Peer Group Analysis
($ in thousands except per share)
====================================================================================================================================
Multiple of Enterprise
Ratios Growth Value
---------------------------------------------------------- -------------------- -------------------------
Net Return on Net Debt Sales Net Income
Company Operating EBITDA EBIT Income Latest to Total 4-Year 4-Year
Name Ratio Margin Margin Margin Equity Capital CAGR CAGR Sales EBITDA EBIT
- ------------------------- --------- ------- ------- -------- ---------- --------- ------- ---------- ------- ------- ------
Arkansas Best Corporation 93.1% 10.0% 6.9% 3.5% 19.2% 33.3% 4.4% NM 0.4 x 3.8 x 5.5 x
Arnold Industries, Inc. 87.8% 19.6% 12.2% 7.8% 12.3% -17.8% 6.7% 11.7% 1.1 x 5.6 x 9.0 x
Consolidated Freightways 101.5% 1.1% NM NM NM 17.8% 2.3% NM 0.1 x 5.3 x NM x
Motor Cargo Industries 92.5% 13.9% 7.5% 4.9% 11.2% -3.7% 9.2% 14.5% 0.5 x 3 3 x 6.1 x
Old Dominion Freight
Line, Inc. 95.4% 10.5% 4.6% 2.2% 8.5% 40.6% 12.9% 22.2% 0.4 x 3.6 x 8.1 x
Roadway Corporation 97.2% 5.0% 2.8% 1.5% 13.2% -28.2% 6.4% 26.8% 0.1 x 3.0 x 5.4 x
US Freightways Corp. 94.9% 9.6% 5.1% 2.6% 10.1% 25.8% 17.5% 32.4% 0.4 x 4.5 x 8.4 x
Yellow Corporation 96.8% 6.9% 3.2% 1.2% 9.0% 29.8% 7.8% NM 0.2 x 3.0 x 6.5 x
- -------------------------
COMBINED:
- -----------------------------------------------------------------------------------------------------------------------------------
Low 87.8% 1.1% 2.8% 1.2% 8.5% -28.2% 2.3% 11.7% 0.1 x 3.0 x 5.4 x
Mean 94.9% 9.6% 6.0% 3.4% 11.9% 12.2% 8.4% 21.5% 0.4 4.0 7.0
High 101.5% 19.6% 12.2% 7.8% 19.2% 40.6% 17.5% 32.4% 1.1 5.6 9.0
Median 95.1% 9.8% 5.1% 2.6% 11.2% 21.8% 7.3% 22.2% 0.4 3.7 6.5
- -----------------------------------------------------------------------------------------------------------------------------------
Median excl. Motor Cargo 95.4% 9.6% 4.9% 2.4% 11.2% 25.8% 6.7% 24.5% 0.4 3.8 7.3
- -----------------------------------------------------------------------------------------------------------------------------------
Multiple of Market Value
--------------------------------------------
Company Net LTM 2001 2002 Book
Name Income EPS Cal.EPS Cal.EPS Value
- ------------------------- -------- ------ -------- -------- -------
Arkansas Best Corporation 8.2 x 8.5 x 12.7 x 8.7 x 1.6 x
Arnold Industries, Inc. 15.4 x 15.3 x 16.2 x 13.3 x 1.9 x
Consolidated Freightways NM x NM x NM x 16.8 x 0.4 x
Motor Cargo Industries 9.7 x 9.8 x 10.2 x 8.8 x 1.1 x
Old Dominion Freight
Line, Inc. 8.8 x 8.8 x 9.2 x 7 2 x 0.7 x
Roadway Corporation 11.4 x 11.1 x 13.9 x 9.4 x 1.5 x
US Freightways Corp. 12.8 x 12.6 x 18.7 x 13.7 x 1.3 x
Yellow Corporation 12.2 x 11.9 x 19.9 x 9.6 x 1.1 x
- -------------------------
COMBINED:
- ------------------------------------------------------------------------
Low 8.2 x 8.5 x 9.2 x 7.2 x 0.4 x
Mean 11.2 11.1 14.4 10.9 1.2
High 15.4 15.3 19.9 16.8 1.9
Median 11.4 11.1 13.9 9.5 1.2
- ------------------------------------------------------------------------
Median excl. Motor Cargo 11.8 11.5 15.0 9.6 1.3
- ------------------------------------------------------------------------
NA - Not Available
NM - Not Meaningful
========================================================================
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 25
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
U.S. Class I Railroads Morgan Keegan & Company, Inc.
Peer Group Analysis
($ in thousands except per share)
==================================================================================================================================
52-week range
--------------------
Share Adjusted
Company/ Price Shares Market Net Enterprise
Latest Financials Ticker 10/15/2001 High Low Oustanding Capitalization (1) Debt (2) Value (3)
- ----------------------------------------------- -------------------- -----------------------------------------------------------
Union Pacific Corporation UNP $48.02 $60.70 $37.88 249,660 $11,988,675 $9,869,000 $21,857,675
06/30/2001
Burlington Northern BNI $27.04 $34.00 $21.50 393,714 $10,646,018 $6,726,000 $17,372,018
Santa Fe
06/30/2001
CSX Corporation CSX $34.38 $41.30 $20.06 214,104 $7,360,909 $6,322,000 $13,682,909
06/29/2001
Norfolk Southern NSC $16.34 $24.11 $11.94 385,326 $6,296,222 $7,984,000 $14,280,222
06/30/2001
Latest Twelve Months' (4)
---------------------------------------------------------------
Company/ Net Book
Latest Financials Ticker Sales EBITDA EBIT Income Value LTM Est. (5) Est. (5)
- -----------------------------------------------------------------------------------------------------------------------------------
Union Pacific Corporation UNP $11,947,000 $3,002,000 $1,842,000 $837,000 $9,033,000 $3.31 $3.61 $4.24
06/30/2001
Burlington Northern BNI $9,244,000 $2,870,000 $1,962,000 $849,000 $7,715,000 $2.13 $2.11 $2.43
Santa Fe
06/30/2001
CSX Corporation CSX $8,168,000 $1,515,000 $896,000 $241,000 $6,032,000 $1.13 $1.63 $2.28
06/29/2001
Norfolk Southern NSC $6,191,000 $1,335,000 $814,000 $272,000 $5,977,000 $0.71 $0.85 $1.16
06/30/2001
(1) Share price multiplied by number of shares outstanding including
in-the-money options converted using the treasury method.
(2) Short-term debt, long-term debt (including capitalized lease obligations),
preferred stock and minority stock and minority interest minus cash and
marketable securities.
(3) Market value of equity plus net debt.
(4) Income statement data excludes extraordinary items & discontinued
operations.
(5) Mean estimates obtained from First Call.
================================================================================
U.S. Class I Railroads Morgan Keegan & Company, Inc.
Peer Group Analysis
($ in thousands except per share)
==================================================================================================================================
Ratios Growth
---------------------------------------------------------------------- --------------------
Net
Net Return on Net Debt Sales Income
Company Operating EBITDA EBIT Income Latest to Total 4-Year 4-Year
Name Ratio Margin Margin Margin Equity Capital CAGR CAGR
- ------------------------------------------------------------------------------------------------------------------------
Union Pacific Corporation 84.6 % 25.1 % 15.4 % 7.0 % 93 % 52.2 % 7. 8 % -1.8 %
Burlington Northern Santa Fe 78.8 % 31.0 % 21.2 % 9.2 % NM 46.6 % 3.0 % 2.5 %
CSX Corporation 89.0 % 18.5 % 11.0 % 3.0 % 4.0 % 51.2 % -5.4 % -31.5 %
Norfolk Southern 86.9 % 21.6 % 13.1 % 4.4 % 4.6 % 57.2 % 10.6 % -30.9 %
- ----------------------------
COMBINED
- ------------------------------------------------------------------------------------------------------------------------
Low 78.8 % 18.5 % 11.0 % 3.0 % 4.0 % 46.6 % -5.4 % -31.5 %
Mean 84.8 % 24.1 % 15.2 % 5.9 % 5.9 % 51.8 % 4.0 % -15.4 %
High 89.0 % 31.0 % 21.2 % 9.2 % 9.3 % 57.2 % 10.6 % 2.5 %
Median 85.7 % 23.3 % 14.3 % 5.7 % 4.6 % 51.7 % 5.4 % -16.3 %
Median excl. Union Pacific 86.9 % 21.6 % 13.1 % 4.4 % 4.3 % 51.2 % 3.0 % -30.9 %
- ------------------------------------------------------------------------------------------------------------------------
Multiple of Enterprise Value Multiple of Market Value
-------------------------------------------------------------------------
2001 2002
Company Net LTM Cal Cal Book
Name Sales EBITDA EBIT Income EPS EPS EPS Value
- -----------------------------------------------------------------------------------------------------
Union Pacific Corporation 1.8 x 7.3 x 11.9 x 14.3 x 14.5 x 13.3 x 11.3 x 1.3 x
Burlington Northern Santa Fe 1.9 x 6.1 x 8.9 x 12.5 x 12.7 x 12.8 x 11.1 x 1.4 x
CSX Corporation 1.7 x 9.0 x 15.3 x 30.5 x 30.4 x 21.1 x 15.1 x 1.2 x
Norfolk Southern 2.3 x 10.7 x 17.5 x 23.1 x 23.0 x 19.2 x 14.1 x 1.1 x
- ----------------------------
COMBINED
- -----------------------------------------------------------------------------------------------------
Low 1.7 x 6.1 x 8.9 x 12.5 x 12.7 x 12.8 x 11.1 x 1.1 x
Mean 1.9 8.3 13.4 20.1 20.2 16.6 12.9 1.2
High 2.3 10.7 17.5 30.5 30.4 21.1 15.1 1.4
Median 1.9 8.2 13.6 18.7 18.8 16.3 12.7 1.3
Median excl. Union Pacific 1.9 9.0 15.3 23.1 23.0 19.2 14.1 1.2
- -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 26
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Peer Group Analysis
- -------------------
Summary
($ in thousands except per share values)
o Trading multiples of the appropriate peer group as a whole were deemed more
meaningful than multiples of any particular company.
o No company utilized in their respective peer groups were identical to
either Motor Cargo or Union Pacific.
o Mathematical analysis, such as determining the median, is not in itself a
meaningful method of using comparable company data.
- ---------------------------------------------------------
Motor Cargo
- ---------------------------------------------------------
Peer Group
CRGO Median Implied Implied Implied
LTM Results Multiples Enterprise Value Net Debt Equity Value Price per Share
- ---------------------------------------------------------------------------------------------------------------------------------
Sales $136,659 0.4x $54,664 ($2,164) $56,828 $8.66
EBITDA $18,952 3.8x $72,018 ($2,164) $74,182 $11.31
EBIT $10,286 7.3x $75,088 ($2,164) $77,252 $11.78
Book Value $60,169 1.3x $76,056 ($2,164) $78,220 $11.93
Net Income $6,755 11.8x $77,545 ($2,164) $79,709 $12.15
- ---------------------------------------------------------
Union Pacific
- ---------------------------------------------------------
Peer Group Implied
UNP Median Enterprise Implied Implied
LTM Results Multiples Value Net Debt Equity Value Price per Share
- --------------------------------------------------------------------------------------------------------------------------------
Sales $11,947,000 1.9x $22,699,300 $9,869,000 $12,830,300 $51.44
EBITDA $3,002,000 9.0x $27,018,000 $9,869,000 $17,149,000 $68.76
EBIT $1,842,000 15.3x $28,182,600 $9,869,000 $18,313,600 $73.43
Book Value $9,003,000 1.2x $20,672,600 $9,869,000 $10,803,600 $43.32
Net Income $837,000 23.1x $29,203,700 $9,869,000 $19,334,700 $77.52
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 27
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Peer Group Analysis
- -------------------
Conclusion
- ------------------------------------------------------------------------------------------------------------------------------
Implied Equity Value Per Share
- ------------------------------------------------------------------------------------------------------------------------------
CRGO UNP
- ------------------------------- -------------------------- ------------------------ --------------------------------
Low High Low High
- ------------------------------- -------------------------- ------------------------ --------------------------------
$8.66 $12.15 $43.32 $77.52
- ------------------------------------------------------------------------------------------------------------------------------
Implied Exchange Ratio
- ------------------------------------------------------------------------------------------------------------------------------
Based on Low Implied Value Per Share Based on High Implied Value Per Share
- ---------------------------------------------------------- --------- ---------------------------------------------------------
CRGO $8.66 CRGO $12.15
UNP $43.32 UNP $77.52
-------------------------- ---------------------------
Exchange Ratio 0.2000 Exchange Ratio 0.1588
-------------------------- ---------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Implied Exchange Ratio Range
- ------------------------------------------------------------------------------------------------------------------------------
Based on Low Implied Value Per Share Based on High Implied Value Per Share
- ---------------------------------------------------------- ---------------------------------------------------------
0.2000 0.1568
- ------------------------------------------------------------------------------------------------------------------------------
Transaction Exchange Ratio Premium to Implied Exchange Rate
- ------------------------------------------------------------------------------------------------------------------------------
30.0% 65.9%
- ---------------------------------------------------------- ---------------------------------------------------------
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 28
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Selected Precedent Transactions Analysis
- ----------------------------------------
Overview
o Searched selected databases and public filings for valuation data on
mergers and acquisitions involving companies comparable to Motor Cargo.
o Identified those transactions with available financial information that
were deemed most relevant.
o Applied certain valuation multiples of precedent transactions to Motor
Cargo's results for the latest twelve months ended June 30, 2001, or book
value as of June 30, 2001, to derive an implied range of equity values and
price per share for Motor Cargo.
o The implied share price of Motor Cargo was compared to Union Pacific's
closing price on October 15, 2001 of $48.02 to calculate an implied
exchange ratio.
o UNP's closing share price of $48.02 on October 15, 2001 is between its
10-day and 30-day averages for the period ended October 15, 2001.
o Compared the implied exchange ratio to that of the proposed transaction and
calculated a premium or discount to the implied exchange ratio.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 29
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Selected Precedent Transactions Analysis
- ----------------------------------------
Selected Transactions
-
($ in millions except per share values)
---------------------------------------
LTM Results of Target
- ---------------------------------------------------------------------------------------------------------------------------------
Effective Acquiror Equity Net Enterprise Net
Date Target Consideration Value Debt Value Revenue EBIT EBITDA Income
- ---------------------------------------------------------------------------------------------------------------------------------
Pending Roadway Corporation
Arnold Industries Cash $ 553.7 $(43.6) $ 510.1 $ 455.3 $ 55.7 $ 81.7 $ 35.4
02/01/01 FedEx Corporation
American Freightways Cash/Stock $ 956.3 $262.1 $1,218.3 $1,352.6 $126.9 $189.3 $ 66.3
07/01/99 Yellow Corporation
Jevic Transportation Cash $158.0 $ 39.3 $ 197.2 $ 237.1 $ 17.8 $ 33.4 $ 9.6
- ---------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------
Enterprise Value Multiples of: Equity Value
Book Value Multiples of:
per ------------------------------------------------
Diluted Net Book
Share Revenue EBIT EBITDA Income Value
- -------------------------------------------------------------------------------------------------
Effective Acquiror
Date Target
- -------------------------------------------------------------------------------------------------
Pending Roadway Corporation $11.33 1.1x 9.2x 6.2x 15.6x l.9x
Arnold Industries
02/01/01 FedEx Corporation
American Freightways $10.74 0.9x 9.6x 6.4x 14.4x 2.6x
07/01/99 Yellow Corporation
Jevic Transportation $6.91 0.8x 11.1x 5.9x 16.4x 2.0x
- -------------------------------------------------------------------------------------------------
High 1.1x 11.1x 6.4x 16.4x 2.6x
Low 0.8x 9.2x 5.9x 14.4x 1.9x
Mean 1.0x 9.9x 6.2x 15.5x 2.2x
Median 0.9x 9.6x 6.2x 15.6x 2.0x
-----------------------------------------------------------
Summary
Transactions
CRGO Median Implied Implied Implied
LTM Results Multiples Enterprise Value Net Debt Equity Value Price per Share
- -----------------------------------------------------------------------------------------------------------------------------------
Sales $136,659 0.9x $122,993 ($2,164) $125,157 $19.08
EBITDA $18,952 6.2x $118,260 ($2,164) $120,424 $18.36
EBIT $10,286 9.6x $98,746 ($2,164) $100,910 $15.39
Book Value $60,169 2.0x $119,979 ($2,164) $122,143 $18.62
Net Income $6,755 15.6x $103,484 ($2,164) $105,648 $16.11
- -----------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 30
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Selected Precedent Transactions Analysis
Conclusion
o Transaction multiples vary for many reasons including: differences in
pre-transaction operating performance; other hidden or intangible assets
not apparent in historical operating performance; non-disclosed addbacks.
o Morgan Keegan put less emphasis on the precedent transactions analysis for
several reasons including:
o American Freightways had over $1.2 billion revenue in 2000,
approximately ten times larger than Motor Cargo's revenue;
o Arnold Industries' main operating subsidiary, New Penn Motor Express,
had revenue of approximately $236 million in 2000 and an operating
ratio of 80.0%, the best among publicly-held LTL carriers; and
o Jevic Transportation's annual revenue is approximately two times
larger than Motor Cargo's and has a unique operating model, which
distinguishes it from other regional LTL carriers.
- ---------------------------------------------------------------------------------------------
Implied Equity Value Per Share
- ---------------------------------------------------------------------------------------------
CRGO
- ---------------------------------------------------------------------------------------------
Low High
- --------------------------------------------- ------------------------------------------
$15.39 $19.08
- ---------------------------------------------------------------------------------------------
Implied Exchange Ratio
- ---------------------------------------------------------------------------------------------
Based on Low Implied Value Per Share Based on High Implied Value Per Share
- --------------------------------------------- ---- ------------------------------------------
CRGO $15.39 CRGO $19.08
UNP (1) $48.02 UNP (1) $48.02
--------------------- ---------------------
Exchange Ratio 0.3204 Exchange Ratio 0.3974
--------------------- ---------------------
- ---------------------------------------------------------------------------------------------
Implied Exchange Ratio Range
- ---------------------------------------------------------------------------------------------
Based on Low Implied Value Per Share Based on High Implied Value Per Share
- --------------------------------------------- ------------------------------------------
0.3204 0.3974
- ---------------------------------------------------------------------------------------------
Implied Exchange Ratio Premium (Discount) to Implied Exchange Ratio
- ---------------------------------------------------------------------------------------------
(18.8%) (34.6%)
- --------------------------------------------- ------------------------------------------
(1) Union Pacific's closing price on 10/15/01
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 31
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis
- -----------------------------
Overview
o Performed a discounted cash flow analysis ("DCF") on the projected cash
flows of Motor Cargo for the fiscal years ending December 31, 2002 through
December 31, 2006.
o A range of discount rates and terminal multiples based on estimated EBITDA
for the fiscal year ending December 31, 2006 was used to calculate a range
of implied equity values and price per share for Motor Cargo's common
stock.
o The implied share prices were compared to Union Pacific's closing share
price on October 15, 2001 of $48.02 to calculate a range of implied
exchange ratios.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 32
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Motor Cargo Industries
Discounted Cash Flow Analysis
($ in thousands except per share data)
For Years Ended December 31, Expected
--------------------------------------------------------------------- Terminal
2002P 2003P 2004P 2005P 2006P Value
--------------- --------------- ------------- ----------- ----------- -----------
Revenue $ 152,289 $ 162,949 $ 174,356 $ 186,561 $ 199,620
Operating Expenses:
Operating Expenses Excluding 130,892 139,973 149,802 l60,256 171,474
Depreciation
Depreciation 9,442 10,103 10,810 11,567 12,376
--------------- --------------- ------------- ----------- -----------
Total Operating Expenses 140,334 150,076 160,612 171,823 183,850
--------------- --------------- ------------- ----------- -----------
EBIT 11,955 12,873 13,744 14,738 15,770
Income Taxes (1) 4,662 5,020 5,360 5,748 6,150
--------------- --------------- ------------- ----------- -----------
After-Tax EBIT $ 7,293 $ 7,853 $ 8,834 $ 8,990 $ 9,620
Capital Expenditures (11,000) (11,770) (12,594) (13,475) (14,419)
Depreciation 9,442 10,103 10,810 11,567 12,376
Change in Net Working Capital (1,500) (1,700) (2,000) (2,300) (2,600)
--------------- --------------- ------------- ----------- -----------
Unlevered Free Cash Flow $ 4,235 $ 4,486 $ 4,600 $ 4,782 $ 4,977
Terminal value expressed as a multiple of $ 98,511
2006 EBITDA
Discount Period 1.00 2.00 3.00 4.00 5.00 5.00
Discount Factor 1.11 1.22 1.36 1.50 1.66 1.66
PV of Cash Flow $ 3,827 $ 3,663 $ 3,395 $ 3,189 $ 2,999 $ 59,357
- --------------------------------------------------------------------------- ---------------------------------------------------
Terminal value expressed as a multiple of 2006 EBIDTA 3.50 PV of Cash Flows $ 76, 430
Weighted average cost of capital 10.67% ---------------------------------------------------
- --------------------------------------------------------------------------- Less: Net Debt 2,164
-------------
---------------------------------------------------
Implied Equity Value $ 78,594
---------------------------------------------------
Fully-Diluted Shares (000's) 6,566
---------------------------------------------------
Implied Price Per Share $ 11.97
---------------------------------------------------
Notes:
- -----
(1) Taxes computed using a 39% tax rate - assumes majority shareholder will be
able to use tax deduction.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 33
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Motor Cargo Industries
Discounted Cash Flow Analysis
Weighted Average Cost of Capital Calculation ("WACC")
Cost of Equity:
Risk free rate 5.38% 30 year Treasury
Market risk premium 8.10% Per Ibbotson Associates
Small cap premium 2.20% Per Ibbotson Associates - expected non-beta small cap premium of 2.2%.
Industry premium -1.56% Per lbbotson Associates - industry premia estimates for Motor Freight Transportation
and Warehousing.
-----------
Total cost of equity 14.12%
After-tax Cost of Debt:
Assumed borrowing rate 7.00%
Tax rate 39.00%
After-tax cost of debt 4.27%
Net Debt to Total Capital Ratio:
Net debt 35%
Stockholders' equity 65%
-----------
Total capital 100%
Assumed net debt to 35.00%
total capital ratio
- ---------------------------------------------
WACC 10.67%
- ---------------------------------------------
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 34
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Motor Cargo Industries
Discounted Cash Flow - Sensitivity Analysis
($ in thousands except per share data)
Implied Equity Value Implied Value Per Share Implied Exchange Ratio (1)
EBITDA Terminal Multiple EBITDA Terminal Multiple EBITDA Terminal Multiple
---------------------------------- ---------------------------------- ------------------------------
3.0 3.5 4.0 3.0 3.5 4.0 3.0 3.5 4.0
------------- ---------- ----------- ----------- ----------- ----------- ---------- ---------- --------- ---------
WACC 10.17% $ 71,502 $ 80,716 $88,850 $10.89 $12.21 $13.53 0.2357 0.2642 0.2928
------------- ---------- ----------- ----------- ----------- ----------- ---------- ---------- --------- ---------
10.42% 70,804 79,380 87,956 $10.78 $12.09 $13.40 0.2334 0.2616 0.2899
------------- ---------- ----------- ----------- ----------- ----------- ---------- ---------- --------- ---------
10.67% 70,114 78,594 87,073 $10.68 $11.97 $13.26 0.2311 0.2590 0.2870
------------- ---------- ----------- ----------- ----------- ----------- ---------- ---------- --------- ---------
10.92% 69,433 77,818 86,202 $10.57 $11.85 $13.13 0.2288 0.2565 0.2841
------------- ---------- ----------- ----------- ----------- ----------- ---------- ---------- --------- ---------
11.17% 68,762 77,052 85,343 $10.47 $11.74 $13.00 0.2266 0.2540 0.2813
------------- ---------- ----------- ----------- ----------- ----------- ---------- ---------- --------- ---------
(1) Using NIP's closing price of $48.02 on October 15, 2001
Conclusion
o The DCF valuation is dependent upon a number of factors including:
o The validity of management's projections
o Terminal multiple
o Discount rate
o This analysis resulted in an implied price per share range of $10.47 to
$13.53 and an implied exchange ratio range of 0.2266 to 0.2928.
Morgan Keegan & Company, Inc. Page 35
- --------------------------------------------------------------------------------
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Pro Forma Impact Analysis
- -------------------------
o Analyzed certain pro forma effects of the merger including the impact of
the merger on Union Pacific's estimated earnings for 2002 using different
assumptions for the composition of the stock/cash consideration.
o The table below represents a summary of this analysis.
--------------------------------------------------------------------------------------------------------------
Percentage of
Transaction Consideration First Call 2002 Resulting Combined Accretion/
in Stock Earnings Estimate Company 2002 EPS (Dilution) %
--------------------------------------------------------------------------------------------------------------
100.0% $4.26 $4.2594 (0.013%)
95.7% $4.26 $4.2600 0.000%
75.0% $4.26 $4.2628 0.066%
50.0% $4.26 $4.2662 0.145%
--------------------------------------------------------------------------------------------------------------
Conclusion: If less than approximately 96% of Motor Cargo common shares are
exchanged for shares of Union Pacific, the transaction would have an
accretive effect on the projected earnings per share for the
combined company for 2002. However, no synergies or cost savings
have been incorporated into this analysis. In addition, since Union
Pacific's estimated net income for 2002 is significantly larger than
Motor Cargo's, the change in the accretive or dilutive effect of the
various scenarios is minimal.
Assumptions
- - Union Pacific's cost of borrowing is 7.0%.
- - Union Pacific's effective tax rate is 37.5%.
- - In accordance with FASB Statement No. 142, goodwill will be written off if
and when it is deemed to be impaired.
- - Shares outstanding were calculated including in-the-money options and
warrants converted using the treasury method. Closing prices on October 15,
2001 were used for this calculation.
- - Legal, investment banking and accounting fees total $2.0 million and are
amortized over five years.
- - No synergies or cost savings have been included in this analysis.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 36
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Premium Analysis
- ----------------
Overview
o Analyzed the premiums paid for selected completed non-financial institution
and non-technological mergers and acquisitions of publicly-traded companies
with equity values between $25 million and $100 million since January 1,
2000.
o Analyzed the premiums paid for all trucking (truckload and
less-than-truckload) mergers and acquisitions of publicly-traded companies
since October 1, 1997.
o Analyzed the premiums paid over the target's stock price one day, one week
and one month prior to the announcement date of their respective
transactions, calculated the median of these premiums and applied these
premiums to Motor Cargo's closing stock price on 10/15/01, 10/9/01 and
8/28/01 (UNP/CRGO transaction was announced after the market closed on
10/15/01) to calculate an implied stock price for Motor Cargo's common
stock.
o The implied share price for Motor Cargo's common stock was divided by Union
Pacific's closing price on October 15, 2001 to calculate an implied
exchange ratio.
o Compared the implied price for Motor Cargo's common stock and the implied
exchange ratio to that of the proposed transaction and calculated a premium
or discount to these implied values.
o Data for the premium analysis was obtained from Mergerstat(R).
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 37
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Premium Analysis
- ----------------
Summary and Conclusion
-------------------------------------------------------------
Transaction Announcement Date of October 15 2001
-------------------------------------------------------------
10/15/01 10/9/01 8/28/01
- -------------------------------------------------------------- ---------------- ---------------------- ---------------------
Motor Cargo Closing Price $ 9.95 $ 9.45 $ 8.80
- -------------------------------------------------------------- ---------------- ---------------------- ---------------------
Cash Consideration of $12.10 represents a premium of: 21.6% 28.0% 37.5%
Stock Consideration of $12.49 (1) represents a premium of: 25.5% 32.2% 41.9%
- -------------------------------------------------------------- ---------------- ---------------------- ---------------------
Selected Completed Non-Financial/Non-Technological Transactions with Equity
Values Between $25-$100 Million Since 1/1/00 (including 168 transactions):
- ----------------------------------------------------------------------------------------------------------------------------
Days Prior to Transaction Announcement Date
-------------------------------------------------------------
One Day Five Days Thirty Days
----------------------------- --------------------- ------------------ --------------------
Median 25.5% 30.3% 45.8%
- ----------------------------------------------------------------------------------------------------------------------------
Implied Stock Price $ 12.48 $ 12.32 $ 12.83
Implied Exchange Ratio (2) 0.2600 0.2565 0.2672
Premium/(Discount) to Proposed Transaction:
Implied Stock Price (3.1%) (1.7%) (5.7%)
Implied Exchange Ratio 0.0% 1.4% (2.7%)
- ----------------------------------------------------------------------------------------------------------------------------
All Trucking Transactions Since 10/1/97 (including 8 transactions):
- ----------------------------------------------------------------------------------------------------------------------------
Days Prior to Transaction Announcement Date
-------------------------------------------------------------
One Day Five Days Thirty Days
----------------------------- --------------------- ------------------ --------------------
Median 24.2% 23.1% 30.3%
- -------------------------------------------------------------- --------------------- ------------------ --------------------
Implied Stock Price $ 12.36 $ 11.63 $ 11.47
Implied Exchange Ratio (2) 0.2574 0.2422 0.2388
Premium/(Discount) to Proposed Transaction:
Implied Stock Price (2.1%) 4.0% 5.5%
Implied Exchange Ratio 1.0% 7.3% 8.9%
- -------------------------------------------------------------- --------------------- ------------------ --------------------
(1) Union Pacific closing share price of $48.02 on October 15, 2001 @ 0.26
exchange ratio equals $12.49
(2) Based on using Union Pacific closing share price of $48.02 on October 15,
2001.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 38
Valuation Analysis [Motor Cargo Logo]
- --------------------------------------------------------------------------------
Summary of Indicated Exchange Ratios
- ------------------------------------
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Morgan
Keegan believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create a misleading view of the
processes underlying the Morgan Keegan opinion. No company or transaction used
in the analysis performed by Morgan Keegan as a comparison is identical to Motor
Cargo, Union Pacific or the contemplated merger. In addition, Morgan Keegan may
have given various analyses more or less weight than other analyses, and may
have deemed various assumptions more or less probable than other assumption, so
that the range of valuation resulting from any particular analysis described
below should not be taken to be Morgan Keegan's view of the actual value of
Motor Cargo or Union Pacific.
The following table sets forth the indicated ranges of implied share prices and
exchange ratios as outlined in the previous analyses.
- --------------------------------------------------------------------------------
Valuation Method Conclusion
- --------------------------------------------------------------------------------
Historical Exchange Ratio Analysis The transaction exchange ratio
represents a premium to the average
exchange ratio of the closing prices
for all time periods analyzed between
October 16, 2000 to October 15, 2001.
- --------------------------------------------------------------------------------
Peer Group Analysis Implied CRGO share price range of
$8.66 to $12.15 and an implied
exchange ratio range of 0.1568
to 0.2000.
- --------------------------------------------------------------------------------
Selected Precedent Transactions Analysis Implied CRGO share price range of
$15.39 to $19.08 and an implied
exchange ratio range of 0.3204
to 0.3974.
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis Implied CRGO share price range of
$10.47 to $13.53 and an implied
exchange ratio range of 0.2266
to 0.2928.
- --------------------------------------------------------------------------------
Pro Forma Impact Analysis Assuming no post-closing synergies or
cost savings, the transaction is
accretive to UNP's estimated earnings
per share for 2002 so long as not
more than approximately 96% of CRGO's
shares are converted into UNP stock.
However, the change in the accretive
or dilutive effect based on the
percentage of CRGO shares exchanged
for UNP stock is minimal given that
UNP's estimated net income is
significantly larger than CRGO's.
- --------------------------------------------------------------------------------
Premium Analysis Based on the average premium paid for
non-financial and non-technological
transactions since 1/1/00, the
implied CRGO share price range is
$12.32 to $12.83 and the implied
exchange ratio is 0.2565 to 0.2672.
Based on the average premium paid
for all trucking transactions since
10/1/97, the implied CRGO share
price range is $11.47 to $12.36 and
the implied exchange ratio is 0.2388
to 0.2574.
- --------------------------------------------------------------------------------
Morgan Keegan & Company, Inc. Page 39