Exhibit 99(b)(2)
CONFIDENTIAL
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PROJECT SOFA
Materials Prepared for Committee of Independent Directors
August 13, 1997
Wasserstein Perella & Co.
PROJECT SOFA
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Table of Contents
A. Executive Summary
B. Appendix
1. Comparable Companies Analysis
2. Comparable Acquisitions Analysis
3. Discounted Cash Flow Analysis
A. Management Case
B. Upside Case
C. Downside Case
4. Weighted Average Cost of Capital Analysis
5. Control Premium Analysis
Wasserstein Perella & Co.
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PROJECT SOFA
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Executive Summary
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Wasserstein Perella & Co.
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PROJECT SOFA Executive Summary
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Transaction Analysis ($MM, except per share amounts)
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Transaction Premiums
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Closing Price Premium to Offer Price of $25.05
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1 Day Prior to Initial Proposal $19.63 27.6%
1 Week Prior to Initial Proposal $18.75 33.6%
1 Month Prior to Initial Proposal $19.69 27.2%
Original Offer $24.00 4.4%
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Transaction Values/(1)/
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Pro Forma for Sale of Receivables Excluding Sale of Receivables
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Implied Purchase Price/(1)/ $136.3 $136.3 $136.3
Plus: Net Debt /(1)(2) (71.4) (71.4) (1.4)
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Adjusted Purchase Price $64.9 $64.9 $134.9
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Transaction Multiples
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Pro Forma /(2)/
Adjusted Purchase Price ------------------------------------------
as a Multiple of: 1997PF 1998E/(3)/ 1997
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Sales $251.2 0.26 x $267.1 0.24 x $251.2 0.54 x
EBITDA $12.6 5.2 x $13.7 4.7 x $14.5 9.3 x
EBIT $7.4 8.7 x $8.6 7.6 x $9.3 14.4 x
Purchase Price as a Multiple of:
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Net Income $5.4 25.3 x $6.3 21.6 x $4.1 33.4 x
Book Value/(1)/ $115.9 1.2 x -- -- $114.6 1.2 x
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/(1)/ Number of shares outstanding, net debt and book value adjusted to reflect
0.9MM options at an average exercise price of $9.95 per share.
/(2)/ Pro forma figures reflect sale of accounts receivable for $70.0MM and a
net reduction of EBITDA and EBIT of $1.9MM (tax-effected at 43.0% in
calculating net income). Interest income rate of 6.0% assumed on cash from
sale of receivables.
/(3)/ Based on SOFA's Management Case projections for operating data and 1997
pro forma interest expense/income (tax-effected at 40.0%).
Wasserstein Perella & Co.
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PROJECT SOFA Executive Summary
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Valuation Considerations
. Almost 80% of the shares are closely held by a group of three financial
institutions which in effect currently control SOFA and are proposing to buy
the shares they do not collectively own
. The remaining shares of SOFA currently are publicly-held and trade fairly
inactively
. Alternative uses of excess cash generated by the recent receivables sale
(e.g., distribution to shareholders pursuant to a recapitalization) would
further reduce the dollar value of SOFA's "float" and thereby compound
illiquidity issues
. No research (other than Wheat First) is published on SOFA
. WP&Co. approached a number of potential strategic and financial buyers, none
of which indicated any interest in pursuing an acquisition of SOFA at this
time
. The outlook for SOFA's new entry into the Cleveland market is uncertain at
this stage, which has implications both on SOFA's financial projections as
well as the appropriate valuation multiples
. The retail furniture industry in which SOFA operates historically has
experienced significant cyclicality
. SOFA's "Management" base case projections were prepared in a summary fashion
specifically for the proposed transaction (i.e., outside the ordinary course
of business); WP&Co. developed its own store-by-store model for purposes of
analyzing "Upside" and "Downside" scenarios
. Although the group proposing to acquire SOFA is seeking to pursue a friendly
transaction, this group also has a number of tactical options which could be
detrimental to SOFA's minority stockholders (e.g., hostile "two-tiered" tender
offer or reverse stock split followed by a short form merger)
Wasserstein Perella & Co.
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PROJECT SOFA Executive Summary
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"Market Check" Status
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. WP&Co. contacted 5 strategic and 6 financial potential buyers to assess
interest in an acquisition of SOFA -- none of these parties indicated an
interest in proceeding at this point
. No other parties contacted WP&Co. or, to WP&Co.'s knowledge, SOFA
following the July 9, 1997 public announcement of a proposed acquisition
of SOFA
. WP&Co. was also advised that, on three prior occasions, investment
bankers were authorized by certain of SOFA's shareholders to seek a
buyer of the Company but that these efforts were unsuccessful
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Retailers Financial Investors
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. Circuit City . Apollo
. Great Universal . CVC
. Heilig-Meyers . Leonard Green
. Sears . Stonington Partners
. Wal-Mart . Saunders Karp & Megrue
. Zell/Chilmark
Wasserstein Perella & Co.
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PROJECT SOFA Executive Summary
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Valuation Summary
Implied SOFA Per Share Value
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[BAR GRAPH APPEARS HERE]
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Comparable Companies
Methodology
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Without Premium
Plus Premium/(1)/
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Comparable Acquisitions
Methodology
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Without Discount
Net of Discount/(2)/
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Discounted Cash
Flow Methodology
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Management Case
Net of Discount/(2)/
Upside Case
Net of Discount/(2)/
Downside Case
Net of Discount/(2)/
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/(1)/ Includes assumed 30% control premium.
/(2)/ Net of assumed 23.1% minority discount imputed from 30% control premium.
Wasserstein Perella & Co.
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PROJECT SOFA Executive Summary
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Recapitalization Analysis /1/
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Recapitalization
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Offer Price $25.05
Distributed Cash Per Share (Pre-Tax)/(1)/ 12.86
Breakeven Trading Price Per "Stub" Share $12.19
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Breakeven Trading Multiples
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1997PF (2)
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Sales $251.2 0.26x
EBITDA 12.6 5.2
EBIT 7.4 8.7
Net Income 3.0 22.1
Book Value 43.5 1.5
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(1) Number of shares outstanding adjusted to reflect 0.9MM options; assumes
sale of accounts receivable for $70.0MM and a dividend of $70.0MM.
(2) Pro forma figures reflect sale of accounts receivable for $70.0MM, a
dividend of $70.0MM and a net reduction of EBITDA and EBIT of $1.9MM (tax-
effected at 43.0% in calculating net income). Book value adjusted to
reflect 0.9MM options at an average exercise price of $9.95 per share.
Wasserstein Perella & Co.
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PROJECT SOFA
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APPENDIX
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Wasserstein Perella & Co.
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PROJECT SOFA
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COMPARABLE
COMPANIES ANALYSIS
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Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Valuation Summary ($MM, except per share figures)
Comparable Company Implied Adjusted Market
SOFA: 1997PF Relevant Multiple Range Value Reference Range
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Sales $251.2 0.60x - 0.70x $150.7 - $175.8
EBITDA 12.6 8.0 - 9.0 100.5 - 113.1
EBIT 7.4 13.0 - 15.0 96.8 - 111.7
Net Income 5.4 17.0 - 20.0 20.3 - 36.5
Forward Net Income 6.3 12.5 - 15.5 7.6 - 26.6
Book Value /(1)/ 115.9 1.5 - 2.0 102.5 - 160.5
1997PF
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Cash & Cash Equivalents/(1)/ $85.4 Implied Adjusted Market Value Reference Range= $45.0 - $95.0
Total Debt 14.0 Implied Equity Value Reference Range= $116.4 - $166.4
------ Implied Price per Share= $21.39 - $30.58
Net Debt ($71.4) -----------------------------------------------------------------------------------
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Implied Price per Share
Reference Range
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20% $23.10 - $34.12
Premium:/(2)/ 30% $23.95 - $35.90
40% $24.81 - $37.67
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/(1)/ Figures adjusted to reflect 0.9MM options at an average exercise price of
$9.95 per share.
/(2)/ WP&Co. applied a premium to the comparable companies analysis (net of
$12.86 per share cash amount) given the inherent lack of a premium in the
stock prices of publicly traded companies.
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Summary of Trading Multiples
(As of 7/29/97)
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Comparable Companies/(1)/
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Adjusted Market Value SOFA HIGH LOW MEAN MEDIAN
As a Multiple of: ---------------- -----------------------------------------------------
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Sales
LTM 0.20 x 1.41 x 0.32 x 0.86 x 0.82 x
Next FY 0.19 1.20 0.50 0.80 0.75
EBITDA
LTM 3.5 x 11.0 x 7.8 x 9.4 x 9.3 x
Next FY 3.6 9.5 7.2 8.3 8.3
EBIT
LTM 5.3 x 25.3 x 10.2 x 15.9 x 14.4 x
Next FY 5.8 15.2 9.9 11.9 11.3
Market Value
As a Multiple of:
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Net Income
LTM 27.5 x 25.3 x 12.9 x 19.6 x 20.0 x
Next FY 17.8 18.8 7.8 14.0 15.7
Year After Next FY NA 15.6 3.7 11.4 13.1
Book Value
Latest Available Quarter 1.1 x 3.5 x 0.6 x 1.9 x 1.5 x
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/(1)/ Excludes SOFA multiples.
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Market Trading Multiples
(As of 7/29/97)
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Ethan Allen Interiors Haverty Furniture Heilig-Meyers Levitz Furniture
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(ETH) (HAVTA) (HMY) (LFI)
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Adjusted Market Value
As a Multiple of:
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Sales
LTM 1.41 x 0.80 x 0.85 x 0.51 x
Next FY NA 0.75 0.76 0.50
EBITDA
LTM 8.3 x 7.8 x 11.0 x 9.6 x
Next FY NA 7.2 8.4 8.3
EBIT
LTM 10.2 x 10.7 x 15.6 x 20.1 x
Next FY NA 9.9 11.2 15.2
Market Value
As a Multiple of:
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Net Income
LTM 17.7 x 12.9 x 25.3 x NM
Next FY 15.7 11.8 15.8 NM
Year After Next FY 14.0 10.8 13.1 NA
Book Value
Latest Available Quarter 2.9 x 1.1 x 1.5 x NM
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Market Trading Multiples (Cont'd)
(As of 7/29/97)
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Pier 1 Imports Roberds SOFA
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(PIR) (RBDS) (SEAM)
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Adjusted Market Value
As a Multiple of:
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Sales
LTM 1.29 x 0.32 x 0.20 x
Next FY 1.20 NA 0.19
EBITDA
LTM 10.9 x 9.0 x 3.5 x
Next FY 9.5 NA 3.6
EBIT
LTM 13.3 x 25.3 x 5.3 x
Next FY 11.4 NA 5.8
Market Value
As a Multiple of:
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Net Income
LTM 22.3 x NM 27.5 x
Next FY 18.8 7.8 x 17.8
Year After Next FY 15.6 3.7 NA
Book Value
Latest Available Quarter 3.5 x 0.6 x 1.1 x
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Capitalization Information
($MM, except per share data)
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Ethan Allen Interiors Haverty Furniture Heilig-Meyers Levitz Furniture
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(ETH) (HAVTA) (HMY) (LFI)
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Current Market Data Common Class A
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Current Price (As of 7/29/97) $49.625 $13.563 $13.500 $16.563 $1.188
52-Week High $58.375 $14.500 $14.000 $20.750 $5.125
52-Week Low $21.000 $9.250 $9.375 $12.500 $1.000
Shares Outstanding (MM)(1) 14.76 8.87 2.93 57.87 30.20
Market Value $732.5 $159.9 $985.5 $35.9
Adjusted Market Value (2) $768.7 $367.4 $1,797.2 $492.5
Capitalization
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Quarter Ending March 31, 1997 March 31, 1997 May 31, 1997 March 31, 1997
-------------- -------------- ------------ --------------
Cash & Cash Equivalents (3) $32.3 $0.2 $21.8 $9.3
Short Term Debt (4) 1.1 0.4% 88.4 24.6% 299.6 19.8% 109.3 29.4%
Long Term Debt 67.3 21.0% 119.4 33.2% 560.9 37.1% 356.6 95.9%
Shareholders' Equity 252.4 78.7% 152.1 42.3% 652.4 43.1% (94.1) -25.3%
------- ----- ------- ----- ------- ----- -------- ------
Total Capitalization: $320.8 100.0% $359.8 100.0% $1,512.9 100.0% $371.8 100.0%
Total Debt/Capital (book) 21.3% 57.7% 56.9% 125.3%
Total Debt/Capital (market) 8.5% 56.5% 47.3% 92.9%
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(1) Shares outstanding reflect assumed exercise of in-the-money warrants and
options exercisable (using treasury stock method).
(2) Defined as Market Value + (Short Term Debt + Long Term Debt + Preferred
Stock + Minority Interest) - Cash & Cash Equivalents.
(3) Includes short-term investments.
(4) Includes current portion of long-term debt.
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Capitalization Information (Cont'd)
($MM, except per share data)
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Pier 1 Imports Roberds SOFA
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(PIR) (RBDS) (SEAM)
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Current Market Data
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Current Price (As of 7/29/97) $26.000 $5.000 $23.250
52-Week High $28.250 $11.000 $23.500
52-Week Low $12.500 $3.000 $16.250
Shares Outstanding (MM)(1) 45.07 5.96 4.83
Market Value $1,171.9 $29.8 $112.3
Adjusted Market Value (2) $1,257.2 $115.0 $49.9
Capitalization
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Quarter Ending May 31, 1997 March 31, 1997 April 30, 1997PF
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Cash & Cash Equivalents (3) $30.9 $1.7 $76.4
Short Term Debt (4) 1.7 0.4% 3.4 2.6% 1.1 0.9%
Long Term Debt 114.5 25.4% 83.5 62.5% 12.9 10.8%
Shareholders' Equity 334.1 74.2% 46.6 34.9% 105.6 88.3%
------- ----- ------- ----- ------- -----
Total Capitalization: $450.3 100.0% $133.5 100.0% $119.6 100.0%
Total Debt/Capital (book) 25.8% 65.1% 11.7%
Total Debt/Capital (market) 9.0% 74.5% 11.1%
- -------------------
(1) Shares outstanding reflect assumed exercise of in-the-money warrants and
options exercisable (using treasury stock method).
(2) Defined as Market Value + (Short Term Debt + Long Term Debt + Preferred
Stock + Minority Interest) - Cash & Cash Equivalents.
(3) Includes short-term investments.
(4) Includes current portion of long-term debt.
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Income Information
($MM, except per share data)
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Ethan Allen Interiors Haverty Furniture Heilig-Meyers Levitz Furniture
(ETH) (HAVTA) (HMY) (LFI)
--------------------- --------------------- --------------------- ---------------------
Fiscal Year End June 30, 1996 December 31, 1996 February 28, 1997 March 31, 1997
Latest Available Quarter March 31, 1997 March 31, 1997 May 31, 1997 March 31, 1997
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Sales-Growth
LFY $509.8 7.1% $456.9 15.5% $2,027.8 13.0% $966.9 -2.0%
LTM (1) 546.4 9.7% 460.9 3.6% 2,116.4 18.6% 966.9 -2.0%
Next FY (2) NA NA 490.0 7.3% 2,368.3 16.8% 990.6 2.5%
Same-Store Sales Growth
LFY 8.1% 4.9% -0.6% -1.3%
LTM (1) 8.4% -2.4% 3.4% -1.3%
EBITDA (3)-Margin
LFY 73.1 14.3% 46.7 10.2% 152.8 7.5% 51.5 5.3%
LTM 92.3 16.9% 47.3 10.3% 163.7 7.7% 51.5 5.3%
Next FY (2) NA NA 51.0 10.4% 214.2 9.0% 59.4 6.0%
EBIT (3)-Margin
LFY 55.6 10.9% 34.0 7.4% 107.3 5.3% 24.5 2.5%
LTM 75.1 13.7% 34.4 7.5% 115.5 5.5% 24.5 2.5%
Next FY (2) NA NA 37.2 7.6% 160.0 6.8% 32.4 3.3%
Reported Net Income (4)-Margin
LFY 28.1 5.5% 12.2 2.7% 33.8 1.7% (25.6) -2.6%
LTM 41.3 7.6% 12.4 2.7% 37.9 1.8% (25.6) -2.6%
Next FY (2) 46.8 NA 13.6 2.8% 60.7 2.6% (15.9) -1.6%
Year After Next FY (2) 52.4 NA 14.8 2.8% 73.3 3.1% NA NA
EPS (4)
LFY $1.93 $1.05 $0.63 $(0.86)
LTM 2.83 1.06 0.68 (0.86)
Next FY (2) 3.17 1.15 1.10 (0.53)
Year After Next FY (2) 3.55 1.25 1.32 NA
LFY ROA 13.8% 8.8% 5.8% 4.0%
LFY Inventory Turns (5) 2.6x 3.0x 1.9x 3.4x
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(1) LTM growth rates are for year-to-date periods.
(2) Projections based on analyst reports and WP&Co. estimates.
(3) EBITDA and EBIT shown with FIFO adjustment. LFY (LTM) FIFO adjustment
figures assumed for LTM (NFY) period wherever LTM (NFY) figures are
unavailable.
(4) Before company-classified extraordinary items and cumulative effects of
change in accounting principle.
(5) COGS excluding D&A.
Wasserstein Perella & Co.
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[CAPTION]
PROJECT SOFA Comparable Companies Analysis
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Income Information (Cont'd)
($MM, except per share data)
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Pier 1 Imports Roberds SOFA
(PIR) (RBDS) (SEAM)
--------------------- --------------------- ---------------------
Fiscal Year End March 31, 1997 December 31, 1996 April 30, 1997
Latest Available Quarter May 31, 1997 March 31, 1997 April 30, 1997
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Sales-Growth
LFY $947.1 16.8% $342.1 13.5% $251.2 9.4%
LTM (1) 971.0 11.7% 354.6 17.7% 251.2 9.4%
Next FY (2) 1,051.3 11.0% NA NA 267.1 6.3%
Same-Store Sales Growth
LFY 12.9% -8.1% 1.8%
LTM (1) 15.2% -9.4% 1.8%
EBITDA (3)-Margin
LFY 107.8 11.4% 11.3 3.3% 14.5 5.8%
LTM 114.9 11.8% 12.8 3.6% 14.5 5.8%
Next FY (2) 133.0 12.7% NA NA 13.7 5.1%
EBIT (3)-Margin
LFY 88.0 9.3% 3.8 1.1% 9.3 3.7%
LTM 94.4 9.7% 4.6 1.3% 9.3 3.7%
Next FY (2) 110.0 10.5% NA NA 8.6 3.2%
Reported Net Income (4)-Margin
LFY 48.2 5.1% (0.9) -0.3% 4.1 1.6%
LTM 52.6 5.4% (0.8) -0.2% 4.1 1.6%
Next FY (2) 62.2 5.9% 3.8 NA 6.3 2.4%
Year After Next FY (2) 75.1 6.3% 8.1 NA NA NA
EPS (4)
LFY $1.06 $(0.15) $0.82
LTM 1.14 (0.14) 0.82
Next FY (2) 1.30 0.64 1.31
Year After Next FY (2) 1.56 1.35 NA
LFY ROA 16.0% 2.3% 5.8%
LFY Inventory Turns (5) 2.5x 4.4x 5.7x
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(1) LTM growth rates are for year-to-date periods.
(2) Projections based on analyst reports and WP&Co. estimates.
(3) EBITDA and EBIT shown with FIFO adjustment figures assumed for LTM (NFY)
period wherever LTM (NFY) figures are unavailable.
(4) Before company-classified extraordinary items and cumulative effects of
change in accounting principle.
(5) COGS excluding D&A.
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Footnotes
Ethan Allen Interiors
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Same-store sales growth figures are for Company-owned stores only.
Heilig-Meyers
- -------------
Pro forma for the acquisition of Rhodes, which was completed on December 31,
1996.
Income statement data does not give effect to the acquisition of Mattress
Discounters.
Sales figures include other income, which consists primarily of finance and
other income earned on accounts receivable.
LFY ROA and inventory turns based only on balance sheet data as of February 2,
1997.
Levitz Furniture
- ----------------
Long-term debt excludes a $327.0MM Obligation Under Account Purchase Agreement
related to customer credit obligations.
LFY EBITDA and EBIT exclude an $8.3MM charge for store closings.
LFY ROA excludes a $327.0MM Receivable Under Account Purchase Agreement related
to customer credit obligations.
Pier 1 Imports
- --------------
Number of shares outstanding includes any "in-the-money" 5.75% convertible
subordinated notes.
Long-term debt includes any "out-of-the-money" 5.75% convertible subordinated
notes.
Shareholders' equity includes any "in-the-money" 5.75% convertible subordinated
notes.
LFY EBITDA and EBIT exclude $2.2MM of duty refunds, including interest, paid to
the Company as a result of retroactive legislation passed in 1996.
A 3-for-2 stock split is set for July 31, 1997; LTM earnings per share have been
restated to reflect pre-split amounts.
Roberds
- -------
Sales figures include service revenues.
LFY EBITDA and EBIT exclude $3.3MM related to litigation expenses.
SOFA
- ----
Cash figure pro forma for the sale of accounts receivable for $70.0MM.
NFY figures based on SOFA's Management Case projections for operating data and
1997 pro forma interest expense/income (tax-effected at 40.0%).
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Company Descriptions
Ethan Allen Interiors
- ---------------------
A leading manufacturer and retailer of quality home furnishings, offering a full
range of furniture products and accessories through 288 Ethan Allen
galleries. Manufactures and/or assembles approximately 91% of its products;
LFY wholesale sales accounted for 73.6% of total sales before inter-segment
eliminations. Ethan Allen Finance Corp. is a wholly-owned subsidiary. The
Company also has a credit card agreement with G.E. Capital Corp.
Haverty Furniture
- -----------------
A full-service home furnishings retailer with 95 showrooms in 12 states, selling
a broad line of middle to high-end furniture. The middle to upper-middle
income households are the Company's predominant target market. The Company
does not manufacture any of the merchandise it sells. LFY credit service
charges were equal to 2.9% of net sales.
Heilig-Meyers
- -------------
The largest pubicly held specialty retailer of home furnishings in the United
States with approximately 989 stores. Acquired Rhodes on December 31, 1996
and Mattress Discounters Corporation on July 2, 1997 (adding an additional
169 stores). LFY (non-pro forma) sales breakdown: furniture and electronics
(60%), bedding (12%), consumer electronics (10%), appliances (8%) and jewelry
and seasonal goods (10%). On a non-pro forma basis, LFY credit revenues were
equal to 18.7% of sales.
Levitz Furniture
- ----------------
Specialty retailer with 68 warehouse-showrooms and 61 satellite stores located
in major metropolitan areas in 26 states. Offers a wide selection of
primarily brand-name furniture and accessories. The Company does not
manufacture any of the merchandise it sells. 63.9% of LFY sales were under
customer credit plans; the Company sells its credit obligations to G.E.
Capital Corp.
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Companies Analysis
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Company Descriptions (Cont'd)
Pier 1 Imports
- --------------
Specialty retailer of furniture (31.5% of LFY sales), decorative home
furnishings (27.5%), housewares (13.8%), bed & bath (12.2%) and seasonal
merchandise (9.6%) through 724 stores worldwide. Apparel, which represented
5.4% of LFY sales, has been discontinued.
The Company does not manufacture any of the merchandise it sells.
23.9% of LFY sales were under the Company's proprietary credit card. In February
1997, the Company closed the securitization of its proprietary credit card
receivables.
Roberds
- -------
A leading retailer of a broad range of home furnishing products, including
furniture, bedding, major appliances and consumer electronics sold through 25
large-format stores at prices guaranteed to be lower than those of its
competitors.
The Company does not manufacture any of the merchandise it sells.
46% of LFY net sales and service revenues were under the Company's private label
credit card, which is administered by Banc One Private Label Credit Services.
LFY finance participation income was equal to 0.7% of net sales and service
revenues.
SOFA
- ----
Largest regional specialty furniture retailer in the northeastern United States
in terms of sales with the leading market position in the greater New York
area. Operates 41 stores targeting the broad sector of middle income, value-
oriented consumers by providing value pricing, quality products, customer
service, quick delivery and in-store credit. The Company does not manufacture
any of the merchandise it sells. Fiscal 1997 net finance charge income was
equal to 5.1% of net sales.
Wasserstein Perella & Co.
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PROJECT SOFA
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-----------------------------
Comparable
Acquisitions Analysis
-----------------------------
Wasserstein Perella & Co.
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PROJECT SOFA Comparable Acquisitions Analysis
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Valuation Summary ($MM, except per share figures)
SOFA: 1997PF
- ----- ------
Sales $251.2
EBITDA 12.6
EBIT 7.4
Net Income 5.4
Book Value/(1)/ 115.9
1997PF
------
Cash & Cash Equivalents/(1)/ $85.4
Total Debt 14.0
------
Net Debt ($71.4)
Comparable Acquisition Implied Adjusted Market
Relevant Multiple Range Value Reference Range
- ----------------------- -----------------------
0.35 x - 0.45 x $87.9 - $113.0
6.0 - 7.0 75.4 - 88.0
8.5 - 10.5 63.3 - 78.2
11.0 - 14.0 NM - 4.1
1.0 - 1.5 44.5 - 102.5
- ---------------------------------------------------------------------------
Implied Adjusted Market Value Reference Range = $60.0 - $100.0
Implied Equity Value Reference Range = $131.4 - $171.4
Implied Price per Share = $24.15 - $31.50
- ---------------------------------------------------------------------------
--------------------------------------------------
Discount/(2)/ 16.7% $22.27 - $28.39
23.1% $21.54 - $27.20
28.6% $20.92 - $26.17
--------------------------------------------------
- ----------------------
(1) Figures adjusted to reflect 0.9MM options at an average exercise price of
$9.95 per share.
(2) Reflects application of a minority discount (net of $12.86 per share cash
amount) imputed from control premium applied in comparable companies
analysis.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Comparable Acquisitions Analysis
================================================================================
Overview ($MM)/(1)/
Transaction Value
-----------------------
Announce- Equity Adjusted
ment Purchase Purchase
Date Acquiror/Target Target Description Price Price
- --------- ------------------------------ ---------------------------------- -----------------------
6/17/97 Heilig-Meyers/ Bedding specialist with 169 $ 43.0 $ 43.0/(2)/
Mattress Discounters stores in 10 states and D.C.
9/17/96 Heilig-Meyers/Rhodes/(3)/ Home furnishings retailer with 68.2 170.9
105 stores in 15 states
10/10/95 Rhodes Inc./ 21 retail furniture stores and 2 30.7 30.7
Weberg Furniture Co. DCs in CO, TX and IL
9/19/95 Home Furnishings (Breuners)/ 13 furniture stores in NY and NJ 37.7 40.1
Huffman Koos (SGH/JG Inds) targeting upper-middle income
customers
12/14/94 Heilig-Meyers/Berrios 17 furniture stores and an 99.0 99.0
upholstery plant in Puerto Rico
3/21/94 Levitz Furniture/ 6 furniture stores in the 46.8 46.8
John M. Smyth Co. Chicago area
Adjusted Purchase Price
as a Multiple of
Announce- ----------------------------------
ment EBITDA EBIT
Date Acquiror/Target Target Description Sales (FIFO) (FIFO)
- --------- ------------------------------ ---------------------------------- ----------------------------------
6/17/97 Heilig-Meyers/ Bedding specialist with 169 0.25x NA NA
Mattress Discounters stores in 10 states and D.C.
9/17/96 Heilig-Meyers/Rhodes/(3)/ Home furnishings retailer with 0.34 5.2x 8.5x
105 stores in 15 states
10/10/95 Rhodes Inc./ 21 retail furniture stores and 2 0.27 8.4 10.8
Weberg Furniture Co. DCs in CO, TX and IL
9/19/95 Home Furnishings (Breuners)/ 13 furniture stores in NY and NJ 0.34 7.0 8.6
Huffman Koos (SGH/JG Inds) targeting upper-middle income
customers
12/14/94 Heilig-Meyers/Berrios 17 furniture stores and an 1.52 NA NA
upholstery plant in Puerto Rico
3/21/94 Levitz Furniture/ 6 furniture stores in the 0.76 NA NA
John M. Smyth Co. Chicago area
Equity Purchase Price
as a Multiple of
Announce- -------------------------
ment Net Book
Date Acquiror/Target Target Description Income Value
- --------- ------------------------------ ---------------------------------- -------------------------
6/17/97 Heilig-Meyers/ Bedding specialist with 169 NA NA
Mattress Discounters stores in 10 states and D.C.
9/17/96 Heilig-Meyers/Rhodes/(3)/ Home furnishings retailer with 10.7x 1.1x
105 stores in 15 states
10/10/95 Rhodes Inc./ 21 retail furniture stores and 2 27.0 1.3
Weberg Furniture Co. DCs in CO, TX and IL
9/19/95 Home Furnishings (Breuners)/ 13 furniture stores in NY and NJ 11.5 1.5
Huffman Koos (SGH/JG Inds) targeting upper-middle income
customers
12/14/94 Heilig-Meyers/Berrios 17 furniture stores and an NA NA
upholstery plant in Puerto Rico
3/21/94 Levitz Furniture/ 6 furniture stores in the NA NA
John M. Smyth Co. Chicago area
- ----------------------------
/(1)/ Source: SDC, news reports and public financials. All multiples are based
upon LTM data when available.
LFY FIFO adjustment assumed if LTM figure is not available.
/(2)/ Sales multiple based on approximate fiscal 1996 data. Assumes 0 net debt
and excludes the 264,550 shares of Heilig-Meyers common stock placed in
escrow to be paid to the former shareholders of Mattress Discounters if
the acquired stores meet certain earnings targets in the twelve months
following the July 1, 1997 closing.
/(3)/ All figures based on pro forma Rhodes LFY data as of February 29, 1996
except for book value, which is as per the 10-Q dated August 31, 1996. Net
income excludes a non-recurring after-tax charge of $1.4MM.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Comparable Acquisitions Analysis
================================================================================
Overview ($MM)(Cont'd)/(1)/
Transaction Value
-----------------------
Announce- Equity Adjusted
ment Purchase Purchase
Date Acquiror/Target Target Description Price Price
- --------- ------------------------------ ---------------------------------- -----------------------
9/28/93 Heilig-Meyers/ Certain assets of 92 stores in CA, $ 58.4 $ 58.4
McMahan's Furniture Co. AZ, NV, NM, CO and TX
11/8/88 Individual Group/ Approximately 50 RB Furniture 49.2 77.4
RB Industries showrooms in the western US
and a minor manufacturing facility
4/26/88 RHD Holdings Corp./ Approximately 89 full service 200.8/(2)/ 290.5
Rhodes Inc. stores in 10 southeastern and
south central states
Adjusted Purchase Price
as a Multiple of
Announce- ----------------------------------
ment EBITDA EBIT
Date Acquiror/Target Target Description Sales (FIFO) (FIFO)
- --------- ------------------------------ ---------------------------------- ----------------------------------
9/28/93 Heilig-Meyers/ Certain assets of 92 stores in CA, 0.58x NA NA
McMahan's Furniture Co. AZ, NV, NM, CO and TX
11/8/88 Individual Group/ Approximately 50 RB Furniture 0.74 NM NM
RB Industries showrooms in the western US
and a minor manufacturing facility
4/26/88 RHD Holdings Corp./ Approximately 89 full service 1.21 9.8x 12.0x
Rhodes Inc. stores in 10 southeastern and
south central states
Equity Purchase Price
as a Multiple of
Announce- -------------------------
ment Net Book
Date Acquiror/Target Target Description Income Value
- --------- ------------------------------ ---------------------------------- -------------------------
9/28/93 Heilig-Meyers/ Certain assets of 92 stores in CA, NA NA
McMahan's Furniture Co. AZ, NV, NM, CO and TX
11/8/88 Individual Group/ Approximately 50 RB Furniture NM 3.1x
RB Industries showrooms in the western US
and a minor manufacturing facility
4/26/88 RHD Holdings Corp./ Approximately 89 full service 16.8x 1.8
Rhodes Inc. stores in 10 southeastern and
south central states
---------------------------------------------------------------------------
LOW 0.25x 5.2x 8.5x 10.7x 1.1x
MEAN 0.67 7.6 10.0 16.5 1.8
MEDIAN 0.58 7.7 9.7 14.2 1.5
HIGH 1.52 9.8 12.0 27.0 3.1
---------------------------------------------------------------------------
- ----------------------------
/(1)/ Source: SDC, news reports and public financials. All multiples are based
upon LTM data when available.
LFY FIFO adjustment assumed if LTM figure is not available.
/(2)/ Assumes an issue price of $3.10 for the 17% $8.25 junior discount
subordinated redeemable debentures which were part of the merger
consideration.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA
================================================================================
-------------------------------
Discounted
Cash Flow Analysis
-------------------------------
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Discounted Cash Flow Analysis
- --------------------------------------------------------------------------------
Summary of Assumptions
Management Case
---------------
. Existing stores sales growth assumed to be 3%
. Three new stores opened in each of the next three years
. Gross margin increases from company-wide average of 46.7% in
1997 to 47.0% for next five years based on inventory control
improvement
. Base payroll projected to increase 5% annually (following union
negotiations)
. Projected occupancy expense based on actual leases and, for
locations which have lease expirations in the next five years,
estimated market rental rates
. Warehouse expense treated primarily as a fixed cost with annual
increases for inflation (at an assumed rate of 3.0%)
. Remaining expenses generally treated as a percentage of sales
consistent with historical experience
Upside Case Assumptions and Revisions
-------------------------------------
. Cleveland stores experience significant sales improvement as a result of
institutional advertising expenditures ($2.5MM in each of 1998 and 1999)
. Gross margin in line with Management Case
. Warehouse expense treated as fixed cost growing 5% annually after 1998
Downside Case Assumptions and Revisions
---------------------------------------
. Cleveland sales grow annually at 3% from 1997 figures despite investment in
institutional advertising expenditures
. Gross margin per store stays flat from 1997
. Warehouse expense grows at the rate of sales after 1998
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Discounted Cash Flow Analysis
================================================================================
Valuation Summary ($MM, except per share figures) /(1)/
Management Case
--------------- -------------------------------------------------------
Pro Forma Net Debt/(2)/ ($71.4) Adjusted Market Value Range = $80.0 - $140.0
Equity Value Range = $151.4 - $211.4
Implied Price per Share = $27.83 - $38.84
-------------------------------------------------------
-------------------------------------------------------
Discount/(3)/ 16.7% $25.33 - $34.51
23.1% $24.37 - $32.85
28.6% $23.55 - $31.42
-------------------------------------------------------
Upside Case
----------- -------------------------------------------------------
Pro Forma Net Debt/(2)/ ($71.4) Adjusted Market Value Range = $96.6 - $171.4
Equity Value Range = $168.0 - $242.8
Implied Price per Share = $30.87 - $44.61
-------------------------------------------------------
-------------------------------------------------------
Discount/(3)/ 16.7% $27.87 - $39.32
23.1% $26.72 - $37.29
28.6% $25.73 - $35.54
-------------------------------------------------------
Downside Case
------------- -------------------------------------------------------
Pro Forma Net Debt/(2)/ ($71.4) Adjusted Market Value Range = $63.6 - $111.1
Equity Value Range = $135.0 - $182.5
Implied Price per Share = $24.81 - $33.53
-------------------------------------------------------
-------------------------------------------------------
Discount/(3)/ 16.7% $22.82 - $30.09
23.1% $22.06 - $28.76
28.6% $21.40 - $27.62
-------------------------------------------------------
- ------------------------
(1) Number of shares outstanding adjusted to reflect 0.9MM options. Assumes
terminal EBITDA multiple of 5.0x-8.0x and discount rate of 10.0%-16.0%.
(2) Figure adjusted to reflect 0.9MM options at an average exercise price of
$9.95 per share and $70.0MM from the sale of the accounts receivable.
(3) Reflects application of a minority discount (net of $12.86 per share cash
amount) imputed from control premium applied in comparable companies
analysis.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA
================================================================================
---------------------------------
Management Case
---------------------------------
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Management Case
================================================================================
DCF Valuation Summary ($MM, except per share amounts)
--------------------------------------------
Total Shares Outstanding (MM) (1) 5.4
Pro Forma Net Debt (2) $(71.4)
--------------------------------------------
Terminal EBITDA Multiple
----------------------------------------------
Discount Rate 5.0x 6.0x 7.0x 8.0x
------------- ---------- ---------- ---------- ----------
10.0% PV of Unlevered FCF $ 35.7 $ 35.7 $ 35.7 $ 35.7
PV of Terminal Value 65.2 78.2 91.2 104.3
---------- ---------- ---------- ----------
Enterprise Value $100.9 $113.9 $126.9 $140.0
----------------------------------------------------------------------
Implied Share Price $31.66 $34.06 $36.45 $38.84
----------------------------------------------------------------------
12.0% PV of Unlevered FCF $ 33.7 $ 33.7 $ 33.7 $ 33.7
PV of Terminal Value 59.5 71.5 83.4 95.3
---------- ---------- ---------- ----------
Enterprise Value $ 93.2 $105.1 $117.0 $128.9
----------------------------------------------------------------------
Implied Share Price $30.25 $32.44 $34.63 $36.82
----------------------------------------------------------------------
14.0% PV of Unlevered FCF $ 31.8 $ 31.8 $ 31.8 $ 31.8
PV of Terminal Value 54.5 65.4 76.3 87.2
---------- ---------- ---------- ----------
Enterprise Value $ 86.3 $ 97.2 $108.1 $119.0
----------------------------------------------------------------------
Implied Share Price $28.98 $30.98 $32.98 $34.99
----------------------------------------------------------------------
16.0% PV of Unlevered FCF $ 30.1 $ 30.1 $ 30.1 $ 30.1
PV of Terminal Value 50.0 59.9 69.9 79.9
---------- ---------- ---------- ----------
Enterprise Value $ 80.0 $ 90.0 $100.0 $110.0
----------------------------------------------------------------------
Implied Share Price $27.83 $29.66 $31.50 $33.33
----------------------------------------------------------------------
- --------------------------
(1) Includes 0.9MM options.
(2) Figure includes $70.0MM from the sale of the accounts receivable and $9.0MM
of option proceeds.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Management Case
================================================================================
Unlevered Free Cash Flow ($MM)/(1)/
1996A 1997A 1997PF 1998F 1999F 2000F 2001F 2002F
---------------------------------------------------------------------------------
Sales $229.5 $251.2 $251.2 $267.1 $294.3 $316.6 $339.6 $363.3
Growth 6.3% 9.4% 9.4% 6.3% 10.2% 7.6% 7.3% 7.0%
Retail Gross Profit 107.2 117.5 117.5 125.6 138.3 148.8 159.6 170.8
Retail Margin 46.7% 46.8% 46.8% 47.0% 47.0% 47.0% 47.0% 47.0%
Net Credit Income (Expense) 3.3 1.4 (0.5) (0.5) (0.5) (0.5) (0.5) (0.5)
% of Sales 1.4% 0.6% -0.2% -0.2% -0.2% -0.2% -0.1% -0.1%
SG&A Expense (2) 98.8 104.5 104.5 111.4 119.9 129.5 139.2 149.3
% of Sales 43.1% 41.6% 41.6% 41.7% 40.7% 40.9% 41.0% 41.1%
EBITDA 11.7 14.5 12.6 13.7 17.9 18.8 19.9 21.0
Margin 5.1% 5.8% 5.0% 5.1% 6.1% 5.9% 5.9% 5.8%
D&A 4.2 5.1 5.1 5.1 5.3 5.2 4.9 4.4
% of Capital Expenditures 52.5% 173.7% 173.7% 137.8% 176.7% 173.3% 163.3% 146.7%
EBIT 7.5 9.3 7.4 8.6 12.6 13.6 15.0 16.6
Margin 3.3% 3.7% 3.0% 3.2% 4.3% 4.3% 4.4% 4.6%
Taxes 3.1 4.0 3.2 3.4 5.0 5.4 6.0 6.6
Tax Rate 40.9% 43.0% 43.0% 40.0% 40.0% 40.0% 40.0% 40.0%
Unlevered Net Income 4.4 5.3 4.2 5.2 7.6 8.1 9.0 10.0
% of Sales 1.9% 2.1% 1.7% 1.9% 2.6% 2.6% 2.6% 2.7%
Plus: D&A 4.2 5.1 5.1 5.1 5.3 5.2 4.9 4.4
Less: Capital Expenditures 8.0 2.9 2.9 3.7 3.0 3.0 3.0 3.0
Less: Increase in Working Capital (3) 26.3 (2.4) (72.4) 3.7 (0.2) (1.2) (1.2) (1.3)
---------------------------------------------------------------------------------
Unlevered Free Cash Flow $(25.6) $9.9 $78.8 $2.9 $10.1 $11.5 $12.1 $12.7
Stores Open at End of Period (4) 38 38 38 44 47 50 53 53
Sales/Average Stores Open $6.9 $6.6 $6.6 $6.5 $6.5 $6.5 $6.6 $6.9
- --------------------------
/(1)/ Source: Wheat First Butcher Singer projections and SOFA. Fiscal year ends
April 30.
(2) Before depreciation and amortization.
(3) 1998F increase in working capital based on pro forma 1997 balance sheet.
(4) There were 29 stores open as of the end of fiscal 1995.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA
================================================================================
---------------------------
UPSIDE CASE
---------------------------
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Upside Case
================================================================================
DCF Valuation Summary ($MM, except per share amounts)
--------------------------------------------
Total Shares Outstanding (MM) (1) 5.4
Pro Forma Net Debt (2) $(71.4)
--------------------------------------------
Terminal EBITDA Multiple
----------------------------------------------
Discount Rate 5.0x 6.0x 7.0x 8.0x
------------- ---------- ---------- ---------- ----------
10.0% PV of Unlevered FCF $ 40.0 $ 40.0 $ 40.0 $ 40.0
PV of Terminal Value 82.1 98.5 114.9 131.4
---------- ---------- ---------- ----------
Enterprise Value $122.1 $138.5 $155.0 $171.4
----------------------------------------------------------------------
Implied Share Price $35.56 $38.58 $41.60 $44.61
----------------------------------------------------------------------
12.0% PV of Unlevered FCF $ 37.7 $ 37.7 $ 37.7 $ 37.7
PV of Terminal Value 75.0 90.0 105.0 120.0
---------- ---------- ---------- ----------
Enterprise Value $112.7 $127.7 $142.7 $157.7
----------------------------------------------------------------------
Implied Share Price $33.84 $36.59 $39.35 $42.11
----------------------------------------------------------------------
14.0% PV of Unlevered FCF $ 35.6 $ 35.6 $ 35.6 $ 35.6
PV of Terminal Value 68.7 82.4 96.1 109.9
---------- ---------- ---------- ----------
Enterprise Value $104.2 $118.0 $131.7 $145.4
----------------------------------------------------------------------
Implied Share Price $32.28 $34.80 $37.33 $39.85
----------------------------------------------------------------------
16.0% PV of Unlevered FCF $ 33.6 $ 33.6 $ 33.6 $ 33.6
PV of Terminal Value 62.9 75.5 88.1 100.7
---------- ---------- ---------- ----------
Enterprise Value $ 96.6 $109.2 $121.8 $134.3
----------------------------------------------------------------------
Implied Share Price $30.87 $33.18 $35.50 $37.81
----------------------------------------------------------------------
- --------------------------
(1) Includes 0.9MM options.
(2) Figure includes $70.0MM from the sale of the accounts receivable and $9.0MM
of option proceeds.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Upside Case
- --------------------------------------------------------------------------------
Unlevered Free Cash Flow ($MM)/(1)/
1996A 1997A 1997PF 1998F 1999F 2000F 2001F 2002F
---------------------------------------------------------------------------------
Sales $229.5 $251.2 $251.2 $271.2 $299.3 $326.1 $353.9 $382.9
Growth 6.3% 9.4% 9.4% 8.0% 10.4% 8.9% 8.5% 8.2%
Retail Gross Profit 107.2 117.5 117.5 127.9 141.1 153.7 166.8 180.4
Retail Margin 46.7% 46.8% 46.8% 47.2% 47.1% 47.1% 47.1% 47.1%
Net Credit Income (Expense) 3.3 1.4 (0.5) (0.5) (0.5) (0.5) (0.5) (0.5)
% of Sales 1.4% 0.6% -0.2% -0.2% -0.2% -0.2% -0.1% -0.1%
SG&A Expense/(2)/ 98.8 104.5 104.5 117.3 127.7 134.0 143.6 153.4
% of Sales 43.1% 41.6% 41.6% 43.3% 42.7% 41.1% 40.6% 40.1%
EBITDA 11.7 14.5 12.6 10.1 12.9 19.2 22.6 26.5
Margin 5.1% 5.8% 5.0% 3.7% 4.3% 5.9% 6.4% 6.9%
D&A 4.2 5.1 5.1 5.1 5.3 5.2 4.9 4.4
% of Capital Expenditures 52.5% 173.7% 173.7% 146.1% 176.7% 173.3% 163.3% 146.7%
EBIT 7.5 9.3 7.4 5.0 7.6 14.0 17.7 22.1
Margin 3.3% 3.7% 3.0% 1.8% 2.5% 4.3% 5.0% 5.8%
Taxes 3.1 4.0 3.2 2.0 3.0 5.6 7.1 8.8
Tax Rate 40.9% 43.0% 43.0% 40.0% 40.0% 40.0% 40.0% 40.0%
Unlevered Net Income 4.4 5.3 4.2 3.0 4.5 8.4 10.6 13.2
% of Sales 1.9% 2.1% 1.7% 1.1% 1.5% 2.6% 3.0% 3.5%
Plus: D&A 4.2 5.1 5.1 5.1 5.3 5.2 4.9 4.4
Less: Capital Expenditures 8.0 2.9 2.9 3.5 3.0 3.0 3.0 3.0
Less: Increase in Working Capital 26.3 (2.4) (72.4) (0.9) (1.3) (1.2) (1.3) (1.3)
---------------------------------------------------------------------------------
Unlevered Free Cash Flow $(25.6) $9.9 $78.8 $5.5 $8.1 $11.8 $13.8 $16.0
Stores Open at End of Period/(3)/ 38 38 38 45 48 51 54 54
Sales/Average Stores Open $6.9 $6.6 $6.6 $6.5 $6.4 $6.6 $6.7 $7.1
- --------------------------
/(1)/ Source: WP&Co. projections. Fiscal year ends April 30.
/(2)/ Before depreciation and amortization.
/(3)/ There were 29 stores open as of the end of fiscal 1995.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Total Company Roll-Up
================================================================================
Operating Statement - Store Level* - Upside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------- ----------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $215,857.1 $229,505.1 $251,175.0 $271,238.6 $299,328.1 $326,065.1 $353,913.8 $382,920.4
Growth 26.7% 6.3% 9.4% 8.0% 10.4% 8.9% 8.5% 8.2%
Retail Gross Profit 102,703.5 107,193.1 117,538.0 127,898.6 141,090.5 153,660.8 166,753.6 180,390.7
Retail Margin 47.6% 46.7% 46.8% 47.2% 47.1% 47.1% 47.1% 47.1%
Store Level Operating Expenses
- ------------------------------
Net Delivery (1,881.1) (1,990.2) (1,280.3) (1,797.5) (1,376.5) (1,393.1) (1,471.5) (1,520.7)
% of Sales -0.9% -0.9% -0.5% -0.7% -0.5% -0.4% -0.4% -0.4%
Total Payroll 21,924.9 25,590.5 27,637.5 30,399.4 33,946.7 37,339.2 40,945.7 44,779.1
% of Sales 10.2% 11.2% 11.0% 11.2% 11.3% 11.5% 11.6% 11.7%
Total Occupancy 12,205.5 15,082.5 17,885.5 19,715.5 22,909.7 24,946.2 27,630.8 30,018.3
% of Sales 5.7% 6.6% 7.1% 7.3% 7.7% 7.7% 7.8% 7.8%
Total Other Store 2,581.7 3,294.1 3,301.6 3,711.0 4,113.4 4,486.6 4,877.2 5,285.9
% of Sales 1.2% 1.4% 1.3% 1.4% 1.4% 1.4% 1.4% 1.4%
4-Wall EBITDA 67,872.5 65,216.2 69,993.8 75,870.2 81,497.2 88,281.8 94,771.4 101,828.1
Margin 31.4% 28.4% 27.9% 28.0% 27.2% 27.1% 26.8% 26.6%
Depreciation 1,165.7 1,723.2 2,104.8 2,363.1 2,405.6 2,598.5 2,791.4 2,984.2
Pre-Opening 437.5 1,137.5 79.9 333.3 150.0 150.0 150.0 -
4-Wall EBIT 66,269.3 62,355.5 67,809.1 73,173.7 78,941.5 85,533.3 91,830.0 98,843.9
Margin 30.7% 27.2% 27.0% 27.0% 26.4% 26.2% 25.9% 25.8%
Allocated Expenses
- ------------------
Warehouse 17,351.1 19,141.6 19,715.8 20,231.0 21,242.6 22,304.7 23,419.9 24,590.9
% of Sales 8.0% 8.3% 7.8% 7.5% 7.1% 6.8% 6.6% 6.4%
Advertising 20,097.4 23,273.3 23,581.3 28,000.0 28,765.0 27,053.0 27,864.5 28,700.5
% of Sales 9.3% 10.1% 9.4% 10.3% 9.6% 8.3% 7.9% 7.5%
Other (897.8) (644.6) 1,437.5 3,381.5 3,777.4 4,152.7 4,547.2 4,961.8
% of Sales -0.4% -0.3% 0.6% 1.2% 1.3% 1.3% 1.3% 1.3%
Store Contribution $ 29,718.6 $ 20,585.2 $ 23,074.4 $ 21,561.3 $ 25,156.6 $ 32,023.0 $ 35,998.3 $ 40,590.7
Margin 13.8% 9.0% 9.2% 7.9% 8.4% 9.8% 10.2% 10.6%
- -----------------------------------
* Includes sales and expenses from direct warehouse sales.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Cleveland Roll-Up
================================================================================
Operating Statement - Store Level - Upside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------- ----------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 5,284.0 $ 15,711.1 $ 19,980.0 $ 24,890.0 $ 29,054.1 $ 43,056.8 $ 47,524.4
Growth NM 197.3% 27.2% 24.6% 16.7% 48.2% 10.4%
Retail Gross Profit 2,491.5 7,167.1 9,353.3 11,656.7 13,609.6 20,186.6 22,282.1
Retail Margin 47.2% 45.6% 46.8% 46.8% 46.8% 46.9% 46.9%
Store Level Operating Expenses
- ------------------------------
Net Delivery 70.1 240.3 188.5 235.5 287.0 279.5 329.1
% of Sales 1.3% 1.5% 0.9% 0.9% 1.0% 0.6% 0.7%
Total Payroll 1,053.8 2,271.1 2,730.6 3,114.0 3,414.8 4,986.5 5,350.9
% of Sales 19.9% 14.5% 13.7% 12.5% 11.8% 11.6% 11.3%
Total Occupancy 642.9 1,434.9 1,740.5 1,862.2 1,894.5 2,781.6 2,850.2
% of Sales 12.2% 9.1% 8.7% 7.5% 6.5% 6.5% 6.0%
Total Other Store 174.4 244.6 334.0 377.6 409.5 598.9 635.9
% of Sales 3.3% 1.6% 1.7% 1.5% 1.4% 1.4% 1.3%
4-Wall EBITDA 550.3 2,976.2 4,359.6 6,067.3 7,603.7 11,540.2 13,116.0
Margin 10.4% 18.9% 21.8% 24.4% 26.2% 26.8% 27.6%
Depreciation 164.4 339.9 393.5 404.2 404.2 532.8 532.8
Pre-Opening 695.1 - 50.0 - 100.0 - -
4-Wall EBIT (309.2) 2,636.3 3,916.1 5,663.1 7,099.5 11,007.4 12,583.3
Margin -5.9% 16.8% 19.6% 22.8% 24.4% 25.6% 26.5%
Allocated Expenses
- ------------------
Warehouse 945.5 1,744.0 1,920.0 2,016.0 2,116.8 2,222.6 2,333.8
% of Sales 17.9% 11.1% 9.6% 8.1% 7.3% 5.2% 4.9%
Advertising 1,332.5 3,325.4 6,500.0 6,620.0 4,243.6 4,370.9 4,502.0
% of Sales 25.2% 21.2% 32.5% 26.6% 14.6% 10.2% 9.5%
Other (10.7) 99.2 266.3 319.2 361.4 547.1 595.3
% of Sales -0.2% 0.6% 1.3% 1.3% 1.2% 1.3% 1.3%
Store Contribution $ (2,576.5) $ (2,532.3) $(4,770.2) $(3,292.1) $ 377.7 $ 3,866.8 $ 5,152.2
Margin -48.8% -16.1% -23.9% -13.2% 1.3% 9.0% 10.8%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Connecticut Roll-Up
================================================================================
Operating Statement - Store Level - Upside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
-------------------------------------- ---------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 6,868.7 $ 7,042.6 $ 11,159.6 $ 11,494.4 $ 25,744.2 $ 26,516.5 $ 27,312.0 $ 28,131.4
Growth 15.4% 2.5% 58.5% 3.0% 124.0% 3.0% 3.0% 3.0%
Retail Gross Profit 3,296.3 3,328.8 5,355.0 5,632.3 12,336.6 12,706.7 13,087.9 13,480.5
Retail Margin 48.0% 47.3% 48.0% 49.0% 47.9% 47.9% 47.9% 47.9%
Store Level Operating Expenses
- ------------------------------
Net Delivery 179.8 185.9 303.5 298.9 738.9 761.0 783.9 807.4
% of Sales 2.6% 2.6% 2.7% 2.6% 2.9% 2.9% 2.9% 2.9%
Total Payroll 653.8 813.6 1,240.9 1,291.2 3,092.8 3,221.8 3,356.5 3,497.2
% of Sales 9.5% 11.6% 11.1% 11.2% 12.0% 12.2% 12.3% 12.4%
Total Occupancy 560.4 764.9 1,173.5 1,187.6 3,146.9 3,224.3 3,384.2 3,542.7
% of Sales 8.2% 10.9% 10.5% 10.3% 12.2% 12.2% 12.4% 12.6%
Total Other Store 64.3 106.7 202.4 218.8 447.9 461.3 475.2 489.4
% of Sales 0.9% 1.5% 1.8% 1.9% 1.7% 1.7% 1.7% 1.7%
4-Wall EBITDA 1,838.0 1,457.7 2,434.8 2,635.7 4,910.1 5,038.2 5,088.1 5,143.8
Margin 26.8% 20.7% 21.8% 22.9% 19.1% 19.0% 18.6% 18.3%
Depreciation 53.1 66.8 120.9 120.9 120.9 120.9 120.9 120.9
Pre-Opening - 112.1 - 150.0 - - - -
4-Wall EBIT 1,784.9 1,278.8 2,313.9 2,364.8 4,789.2 4,917.3 4,967.2 5,022.9
Margin 26.0% 18.2% 20.7% 20.6% 18.6% 18.5% 18.2% 17.9%
Allocated Expenses
- ------------------
Warehouse 439.3 493.5 716.1 823.1 1,682.1 1,766.2 1,854.5 1,947.2
% of Sales 6.4% 7.0% 6.4% 7.2% 6.5% 6.7% 6.8% 6.9%
Advertising 839.0 1,016.0 1,587.5 2,000.0 2,060.0 2,121.8 2,185.5 2,251.0
% of Sales 12.2% 14.4% 14.2% 17.4% 8.0% 8.0% 8.0% 8.0%
Other (29.5) (24.3) 67.1 145.2 352.7 365.7 379.3 393.3
% of Sales -0.4% -0.3% 0.6% 1.3% 1.4% 1.4% 1.4% 1.4%
Store Contribution $ 536.1 $ (206.4) $ (56.9) $ (603.4) $ 694.4 $ 663.6 $ 548.0 $ 431.4
Margin 7.8% -2.9% -0.5% -5.2% 2.7% 2.5% 2.0% 1.5%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Long Island Roll-Up
================================================================================
Operating Statement - Store Level - Upside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
-------------------------------------- ---------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $43,858.6 $43,452.3 $45,080.9 $46,433.3 $47,826.3 $49,261.1 $50,739.0 $52,261.1
Growth 19.5% -0.9% 3.7% 3.0% 3.0% 3.0% 3.0% 3.0%
Retail Gross Profit 19,456.6 18,890.3 19,710.8 20,453.8 21,067.4 21,699.4 22,350.4 23,020.9
Retail Margin 44.4% 43.5% 43.7% 44.0% 44.0% 44.0% 44.0% 44.0%
Store Level Operating Expenses
- ------------------------------
Net Delivery (273.8) (270.3) (195.7) (322.9) (332.6) (342.6) (352.8) (363.4)
% of Sales -0.6% -0.6% -0.4% -0.7% -0.7% -0.7% -0.7% -0.7%
Total Payroll 4,765.1 4,956.8 4,943.3 5,224.7 5,439.8 5,664.2 5,898.5 6,143.0
% of Sales 10.9% 11.4% 11.0% 11.3% 11.4% 11.5% 11.6% 11.8%
Total Occupancy 3,424.3 3,432.3 3,919.1 4,083.2 4,356.9 4,496.6 4,686.3 4,892.6
% of Sales 7.8% 7.9% 8.7% 8.8% 9.1% 9.1% 9.2% 9.4%
Total Other Store 543.5 614.4 576.1 562.1 578.9 596.3 614.2 632.6
% of Sales 1.2% 1.4% 1.3% 1.2% 1.2% 1.2% 1.2% 1.2%
4-Wall EBITDA 10,997.5 10,157.1 10,468.0 10,906.7 11,024.3 11,284.8 11,504.2 11,716.2
Margin 25.1% 23.4% 23.2% 23.5% 23.1% 22.9% 22.7% 22.4%
Depreciation 199.3 202.4 197.7 240.6 240.6 240.6 240.6 240.6
Pre-Opening - - - - - - - -
4-Wall EBIT 10,798.2 9,954.7 10,270.3 10,666.1 10,783.7 11,044.3 11,263.7 11,475.6
Margin 24.6% 22.9% 22.8% 23.0% 22.5% 22.4% 22.2% 22.0%
Allocated Expenses
- ------------------
Warehouse 2,940.8 3,096.5 3,023.4 3,324.9 3,124.8 3,281.1 3,445.1 3,617.4
% of Sales 6.7% 7.1% 6.7% 7.2% 6.5% 6.7% 6.8% 6.9%
Advertising 3,640.9 3,402.7 4,005.8 4,000.0 4,120.0 4,243.6 4,370.9 4,502.0
% of Sales 8.3% 7.8% 8.9% 8.6% 8.6% 8.6% 8.6% 8.6%
Other (124.0) (93.2) 249.1 544.1 563.7 584.2 605.4 627.4
% of Sales -0.3% -0.2% 0.6% 1.2% 1.2% 1.2% 1.2% 1.2%
Store Contribution $ 4,340.5 $ 3,548.7 $ 2,992.0 $ 2,797.2 $ 2,975.2 $ 2,935.4 $ 2,842.2 $ 2,728.7
Margin 9.9% 8.2% 6.6% 6.0% 6.2% 6.0% 5.6% 5.2%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA New Jersey Roll-Up
================================================================================
Operating Statement - Store Level - Upside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
-------------------------------------- ---------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 59,329.5 $ 56,882.0 $ 60,690.4 $ 62,511.1 $ 64,386.4 $ 71,092.1 $ 73,224.9 $ 80,486.4
Growth 12.0% -4.1% 6.7% 3.0% 3.0% 10.4% 3.0% 9.9%
Retail Gross Profit 28,503.4 26,851.2 28,735.3 29,685.3 30,575.9 33,737.0 34,749.1 38,172.0
Retail Margin 48.0% 47.2% 47.3% 47.5% 47.5% 47.5% 47.5% 47.4%
Store Level Operating Expenses
- ------------------------------
Net Delivery (567.9) (572.3) (453.1) (585.8) (603.4) (650.1) (669.6) (720.1)
% of Sales -1.0% -1.0% -0.7% -0.9% -0.9% -0.9% -0.9% -0.9%
Total Payroll 5,830.0 5,837.2 5,925.5 6,292.4 6,544.9 7,415.5 7,715.6 8,688.3
% of Sales 9.8% 10.3% 9.8% 10.1% 10.2% 10.4% 10.5% 10.8%
Total Occupancy 2,532.9 2,783.6 2,925.0 2,966.8 3,095.4 3,634.3 4,060.9 4,607.8
% of Sales 4.3% 4.9% 4.8% 4.7% 4.8% 5.1% 5.5% 5.7%
Total Other Store 658.4 769.5 668.1 690.7 711.4 809.1 833.4 939.4
% of Sales 1.1% 1.4% 1.1% 1.1% 1.1% 1.1% 1.1% 1.2%
4-Wall EBITDA 20,050.0 18,033.2 19,669.9 20,321.2 20,827.5 22,528.2 22,808.8 24,656.6
Margin 33.8% 31.7% 32.4% 32.5% 32.3% 31.7% 31.1% 30.6%
Depreciation 272.5 317.3 307.6 336.2 336.2 400.5 400.5 464.7
Pre-Opening - - - - 50.0 - 50.0 -
4-Wall EBIT 19,777.5 17,715.9 19,362.3 19,985.0 20,441.3 22,127.7 22,358.3 24,191.9
Margin 33.3% 31.1% 31.9% 32.0% 31.7% 31.1% 30.5% 30.1%
Allocated Expenses
- ------------------
Warehouse 5,209.5 4,783.9 4,968.6 4,672.3 4,824.3 4,961.2 5,063.4 5,234.1
% of Sales 8.8% 8.4% 8.2% 7.5% 7.5% 7.0% 6.9% 6.5%
Advertising 5,039.2 4,760.7 4,463.6 5,000.0 5,150.0 5,304.5 5,463.6 5,627.5
% of Sales 8.5% 8.4% 7.4% 8.0% 8.0% 7.5% 7.5% 7.0%
Other (250.7) (179.9) 346.0 783.8 811.7 910.2 942.9 1,050.6
% of Sales -0.4% -0.3% 0.6% 1.3% 1.3% 1.3% 1.3% 1.3%
Store Contribution $ 9,779.5 $ 8,351.2 $ 9,584.0 $ 9,528.9 $ 9,655.3 $ 10,951.9 $ 10,888.4 $ 12,279.6
Margin 16.5% 14.7% 15.8% 15.2% 15.0% 15.4% 14.9% 15.3%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA New York Roll-Up
================================================================================
Operating Statement - Store Level - Upside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
-------------------------------------- ---------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 90,540.6 $ 89,156.4 $ 89,537.5 $ 93,063.1 $ 96,416.1 $ 99,308.6 $107,205.1 $115,486.1
Growth 22.1% -1.5% 0.4% 3.9% 3.6% 3.0% 8.0% 7.7%
Retail Gross Profit 44,285.7 43,057.8 43,358.5 45,311.0 46,919.5 48,327.1 52,088.0 56,031.1
Retail Margin 48.9% 48.3% 48.4% 48.7% 48.7% 48.7% 48.6% 48.5%
Store Level Operating Expenses
- ------------------------------
Net Delivery (1,135.3) (1,229.2) (1,050.0) (1,204.8) (1,238.8) (1,276.0) (1,333.9) (1,394.2)
% of Sales -1.3% -1.4% -1.2% -1.3% -1.3% -1.3% -1.2% -1.2%
Total Payroll 8,983.8 9,547.2 9,753.3 10,148.1 10,684.2 11,122.6 12,213.0 13,376.7
% of Sales 9.9% 10.7% 10.9% 10.9% 11.1% 11.2% 11.4% 11.6%
Total Occupancy 4,796.9 5,510.9 6,010.5 6,586.0 7,035.5 7,351.7 8,249.0 9,119.1
% of Sales 5.3% 6.2% 6.7% 7.1% 7.3% 7.4% 7.7% 7.9%
Total Other Store 1,011.5 1,210.1 1,231.9 1,361.3 1,418.3 1,460.9 1,583.4 1,711.9
% of Sales 1.1% 1.4% 1.4% 1.5% 1.5% 1.5% 1.5% 1.5%
4-Wall EBITDA 30,628.8 28,018.8 27,412.7 28,420.4 29,020.2 29,667.9 31,376.6 33,217.6
Margin 33.8% 31.4% 30.6% 30.5% 30.1% 29.9% 29.3% 28.8%
Depreciation 494.7 594.2 712.8 733.6 749.4 749.4 813.6 877.9
Pre-Opening 122.7 113.4 67.2 33.3 - 50.0 50.0 -
4-Wall EBIT 30,11.4 27,311.2 26,632.7 27,653.5 28,270.9 28,868.6 30,512.9 32,339.7
Margin 33.1% 30.6% 29.7% 29.7% 29.3% 29.1% 28.5% 28.0%
Allocated Expenses
- ------------------
Warehouse 7,314.1 7,244.6 6,932.5 6,795.1 6,725.2 6,759.9 7,344.1 7,748.3
% of Sales 8.1% 8.1% 7.7% 7.3% 7.0% 6.8% 6.9% 6.7%
Advertising 7,502.2 8,079.6 6,225.5 6,500.0 6,695.0 6,895.9 7,102.7 7,315.8
% of Sales 8.3% 9.1% 7.0% 7.0% 6.9% 6.9% 6.6% 6.3%
Other (378.4) (272.6) 516.0 1,162.6 1,216.0 1,259.4 1,376.1 1,499.3
% of Sales -0.4% -0.3% 0.6% 1.2% 1.3% 1.3% 1.3% 1.3%
Store Contribution $ 15,573.5 $ 12,259.6 $ 12,958.8 $ 13,195.8 $ 13,634.7 $ 13,953.4 $ 14,690.0 $ 15,776.3
Margin 17.2% 13.8% 14.5% 14.2% 14.1% 14.1% 13.7% 13.7%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Pennsylvania Roll-Up
================================================================================
Operating Statement - Store Level - Upside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
---------------------------------------- -------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $14,504.1 $26,029.7 $27,368.2 $36,064.2 $38,304.9 $49,002.2 $50,472.2 $57,051.2
Growth NM 79.5% 5.1% 31.8% 6.2% 27.9% 3.0% 13.0%
Retail Gross Profit 7,011.1 12,295.3 12,955.1 17,175.3 18,235.2 23,269.9 23,968.0 27,067.5
Retail Margin 48.3% 47.2% 47.3% 47.6% 47.6% 47.5% 47.5% 47.4%
Store Level Operating Expenses
- ------------------------------
Net Delivery (50.6) (105.9) (64.0) (103.7) (105.7) (99.3) (102.3) (100.3)
% of Sales -0.3% -0.4% -0.2% -0.3% -0.3% -0.2% -0.2% -0.2%
Total Payroll 1,657.1 3,304.8 3,426.9 4,628.2 4,983.5 6,409.3 6,681.0 7,624.6
% of Sales 11.4% 12.7% 12.5% 12.8% 13.0% 13.1% 13.2% 13.4%
Total Occupancy 954.1 1,942.9 2,065.0 2,801.6 3,061.1 3,991.5 4,113.5 4,648.7
% of Sales 6.6% 7.5% 7.5% 7.8% 8.0% 8.1% 8.1% 8.1%
Total Other Store 256.5 398.4 353.2 517.2 551.3 720.6 742.2 845.5
% of Sales 1.8% 1.5% 1.3% 1.4% 1.4% 1.5% 1.5% 1.5%
4-Wall EBITDA 4,194.0 6,755.1 7,174.0 9,332.1 9,745.1 12,247.9 12,533.6 14,049.0
Margin 28.9% 26.0% 26.2% 25.9% 25.4% 25.0% 24.8% 24.6%
Depreciation 138.3 338.1 404.6 517.1 533.2 661.7 661.7 726.0
Pre-Opening 314.8 165.1 - 100.0 100.0 - 50.0 -
4-Wall EBIT 3,740.9 6,251.9 6,769.4 8,715.0 9,111.9 11,586.2 11,821.9 13,323.0
Margin 25.8% 24.0% 24.7% 24.2% 23.8% 23.6% 23.4% 23.4%
Allocated Expenses
- ------------------
Warehouse 1,390.6 2,459.5 2,201.4 2,695.6 2,870.1 3,419.6 3,490.1 3,710.1
% of Sales 9.6% 9.4% 8.0% 7.5% 7.5% 7.0% 6.9% 6.5%
Advertising 3,009.3 4,619.4 3,941.6 4,000.0 4,120.0 4,243.6 4,370.9 4,502.0
% of Sales 20.7% 17.7% 14.4% 11.1% 10.8% 8.7% 8.7% 7.9%
Other (115.2) (65.7) 159.0 476.3 510.6 668.2 692.8 792.0
% of Sales -0.8% -0.3% 0.6% 1.3% 1.3% 1.4% 1.4% 1.4%
Store Contribution $ (543.8) $ (761.3) $ 467.4 $ 1,543.2 $ 1,611.2 $ 3,254.8 $ 3,268.1 $ 4,318.8
Margin -3.7% -2.9% 1.7% 4.3% 4.2% 6.6% 6.5% 7.6%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA
================================================================================
---------------------
DOWNSIDE CASE
---------------------
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Downside Case
================================================================================
DCF Valuation Summary ($MM, except per share amounts)
--------------------------------------------
Total Shares Outstanding (MM)(1) 5.4
Pro Forma Net Debt(2) $(71.4)
--------------------------------------------
Terminal EBITDA Multiple
----------------------------------------------
Discount Rate 5.0x 6.0x 7.0x 8.0x
------------- ---------- ---------- ---------- ----------
10.0% PV of Unlevered FCF $ 28.2 $ 28.2 $ 28.2 $ 28.2
PV of Terminal Value 51.8 62.1 72.5 82.8
---------- ---------- ---------- ----------
Enterprise Value $ 80.0 $ 90.3 $100.7 $111.1
----------------------------------------------------------------------
Implied Share Price $27.82 $29.73 $31.63 $33.53
----------------------------------------------------------------------
12.0% PV of Unlevered FCF $ 26.7 $ 26.7 $ 26.7 $ 26.7
PV of Terminal Value 47.3 56.8 66.2 75.7
---------- ---------- ---------- ----------
Enterprise Value $ 74.0 $ 83.4 $ 92.9 $102.4
----------------------------------------------------------------------
Implied Share Price $26.72 $28.46 $30.19 $31.93
----------------------------------------------------------------------
14.0% PV of Unlevered FCF $ 25.3 $ 25.3 $ 25.3 $ 25.3
PV of Terminal Value 43.3 51.9 60.6 69.3
---------- ---------- ---------- ----------
Enterprise Value $ 68.5 $ 77.2 $ 85.9 $ 94.5
----------------------------------------------------------------------
Implied Share Price $25.72 $27.31 $28.90 $30.49
----------------------------------------------------------------------
16.0% PV of Unlevered FCF $ 23.9 $ 23.9 $ 23.9 $ 23.9
PV of Terminal Value 39.7 47.6 55.6 63.5
---------- ---------- ---------- ----------
Enterprise Value $ 63.6 $ 71.6 $ 79.5 $ 87.4
----------------------------------------------------------------------
Implied Share Price $24.81 $26.27 $27.73 $29.19
----------------------------------------------------------------------
- --------------------------
(1) Includes 0.9MM options.
(2) Figure includes $70.0MM from the sale of the accounts receivable and $9.0MM
of option proceeds.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Downside Case
================================================================================
Unlevered Free Cash Flow ($MM)/(1)/
1996A 1997A 1997PF 1998F 1999F 2000F 2001F 2002F
---------------------------------------------------------------------------------
Sales $229.5 $251.2 $251.2 $271.2 $295.8 $319.1 $343.5 $369.1
Growth 6.3% 9.4% 9.4% 8.0% 9.1% 7.9% 7.6% 7.4%
Retail Gross Profit 107.2 177.5 117.5 126.9 138.4 149.3 160.7 172.7
Retail Margin 46.7% 46.8% 46.8% 46.8% 46.8% 46.8% 46.8% 46.8%
Net Credit Income (Expense) 3.3 1.4 (0.5) (0.5) (0.5) (0.5) (0.5) (0.5)
% of Sales 1.4% 0.6% -0.2% -0.2% -0.2% -0.2% -0.1% -0.1%
SG&A Expense (2) 98.8 104.5 104.5 117.3 128.3 134.9 145.2 155.5
% of Sales 43.1% 41.6% 41.6% 43.3% 43.4% 42.3% 42.3% 42.1%
EBITDA 11.7 14.5 12.6 9.1 9.6 13.9 15.0 16.7
Margin 5.1% 5.8% 5.0% 3.4% 3.3% 4.4% 4.4% 4.5%
D&A 4.2 5.1 5.1 5.1 5.3 5.2 4.9 4.4
% of Capital Expenditures 52.5% 173.7% 173.7% 146.1% 176.7% 173.3% 163.3% 146.7%
EBIT 7.5 9.3 7.4 4.0 4.3 8.7 10.1 12.3
Margin 3.3% 3.7% 3.0% 1.5% 1.5% 2.7% 2.9% 3.3%
Taxes 3.1 4.0 3.2 1.6 1.7 3.5 4.0 4.9
Tax Rate 40.9% 43.0% 43.0% 40.0% 40.0% 40.0% 40.0% 40.0%
Unlevered Net Income 4.4 5.3 4.2 2.4 2.6 5.2 6.0 7.4
% of Sales 1.9% 2.1% 1.7% 0.9% 0.9% 1.6% 1.8% 2.0%
Plus: D&A 4.2 5.1 5.1 5.1 5.3 5.2 4.9 4.4
Less: Capital Expenditures 8.0 2.9 2.9 3.5 3.0 3.0 3.0 3.0
Less: Increase in Working Capital 26.3 (2.4) (72.4) (0.9) (1.1) (1.1) (1.1) (1.2)
---------------------------------------------------------------------------------
Unlevered Free Cash Flow $(25.6) $9.9 $78.8 $4.9 $6.0 $8.5 $9.1 $10.0
Stores Open at End of Period (3) 38 38 38 45 48 51 54 54
Sales/Average Stores Open $6.9 $6.6 $6.6 $6.5 $6.4 $6.4 $6.5 $6.8
- --------------------------
(1) Source: WP&Co. projections. Fiscal year ends April 30.
(2) Before depreciation and amortization.
(3) There were 29 stores open as of the end of fiscal 1995.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Total Company Roll-Up
================================================================================
Operating Statement - Store Level* - Downside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $215,857.1 $229,505.1 $251,175.0 $271,234.1 $295,831.1 $319,094.2 $343,488.5 $369,060.9
Growth 26.7% 6.3% 9.4% 8.0% 9.1% 7.9% 7.6% 7.4%
Retail Gross Profit 102,703.5 107,193.1 117,538.0 126,905.5 138,399.1 149,279.8 160,689.6 172,650.3
Retail Margin 47.6% 46.7% 46.8% 46.8% 46.8% 46.8% 46.8% 46.8%
Store Level Operating Expenses
- ------------------------------
Net Delivery (1,881.1) (1,990.2) (1,280.3) (1,797.6) (1,421.9) (1,483.8) (1,607.0) (1,700.9)
% of Sales -0.9% -0.9% -0.5% -0.7% -0.5% -0.5% -0.5% -0.5%
Total Payroll 21,924.9 25,590.5 27,637.5 30,399.2 33,772.9 36,992.7 40,427.4 44,090.1
% of Sales 10.2% 11.2% 11.0% 11.2% 11.4% 11.6% 11.8% 11.9%
Total Occupancy 12,205.5 15,082.5 17,885.5 19,715.5 22,909.7 24,946.2 27,630.8 30,018.3
% of Sales 5.7% 6.6% 7.1% 7.3% 7.7% 7.8% 8.0% 8.1%
Total Other Store 2,581.7 3,294.1 3,301.6 3,711.0 4,092.4 4,444.8 4,814.7 5,202.7
% of Sales 1.2% 1.4% 1.3% 1.4% 1.4% 1.4% 1.4% 1.4%
4-Wall EBITDA 67,872.5 65,216.2 69,993.8 74,877.4 79,046.0 84,379.8 89,423.7 95,040.0
Margin 31.4% 28.4% 27.9% 27.6% 26.7% 26.4% 26.0% 25.8%
Depreciation 1,165.7 1,723.2 2,104.8 2,363.1 2,405.6 2,598.5 2,791.4 2,984.2
Pre-Opening 437.5 1,137.5 79.9 333.3 150.0 150.0 150.0 -
4-Wall EBIT 66,269.3 62,355.5 67,809.1 72,180.9 76,490.4 81,631.3 86,482.3 92,055.8
Margin 30.7% 27.2% 27.0% 26.6% 25.9% 25.6% 25.2% 24.9%
Allocated Expenses
- ------------------
Warehouse 17,351.1 19,141.6 19,715.8 20,231.0 22,039.8 23,776.2 25,798.7 27,704.8
% of Sales 8.0% 8.3% 7.8% 7.5% 7.5% 7.5% 7.5% 7.5%
Advertising 20,097.4 23,273.3 23,581.3 28,000.0 28,765.0 27,053.0 27,864.5 28,700.5
% of Sales 9.3% 10.1% 9.4% 10.3% 9.7% 8.5% 8.1% 7.8%
Other (897.8) (644.6) 1,437.5 3,381.4 3,745.9 4,090.0 4,453.4 4,837.1
% of Sales -0.4% -0.3% 0.6% 1.2% 1.3% 1.3% 1.3% 1.3%
Store Contribution $ 29,718.6 $ 20,585.2 $ 23,074.4 $ 20,568.5 $ 21,939.6 $ 26,712.2 $ 28,365.7 $ 30,813.4
Margin 13.8% 9.0% 9.2% 7.6% 7.4% 8.4% 8.3% 8.3%
- ---------------------------------
* Includes sales and expenses from direct warehouse sales.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Cleveland Roll-Up
================================================================================
Operating Statement - Store Level - Downside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 5,284.0 $ 15,711.1 $ 19,975.5 $ 21,393.0 $ 22,083.2 $ 32,631.5 $ 33,664.9
Growth NM 197.3% 27.1% 7.1% 3.2% 47.8% 3.2%
Retail Gross Profit 2,491.5 7,167.1 9,157.8 9,816.0 10,133.7 15,064.9 15,542.9
Retail Margin 47.2% 45.6% 45.8% 45.9% 45.9% 46.2% 46.2%
Store Level Operating Expenses
- ------------------------------
Net Delivery 70.1 240.3 188.4 190.0 196.4 143.9 149.0
% of Sales 1.3% 1.5% 0.9% 0.9% 0.9% 0.4% 0.4%
Total Payroll 1,053.8 2,271.1 2,730.4 2,940.2 3,068.3 4,468.2 4,661.9
% of Sales 19.9% 14.5% 13.7% 13.7% 13.9% 13.7% 13.8%
Total Occupancy 642.9 1,434.9 1,740.5 1,862.2 1,894.5 2,781.6 2,850.2
% of Sales 12.2% 9.1% 8.7% 8.7% 8.6% 8.5% 8.5%
Total Other Store 174.4 244.6 334.0 356.7 367.6 536.3 552.7
% of Sales 3.3% 1.6% 1.7% 1.7% 1.7% 1.6% 1.6%
4-Wall EBITDA 550.3 2,976.2 4,164.5 4,466.9 4,606.8 7,134.8 7,329.1
Margin 10.4% 18.9% 20.8% 20.9% 20.9% 21.9% 21.8%
Depreciation 164.4 339.9 393.5 404.2 404.2 532.8 532.8
Pre-Opening 695.1 - 50.0 - 100.0 - -
4-Wall EBIT (309.2) 2,636.3 3,721.0 4,062.7 4,102.6 6,602.0 6,796.4
Margin -5.9% 16.8% 18.6% 19.0% 18.6% 20.2% 20.2%
Allocated Expenses
- ------------------
Warehouse 945.5 1,744.0 1,920.0 2,056.2 2,122.6 3,136.5 3,235.8
% of Sales 17.9% 11.1% 9.6% 9.6% 9.6% 9.6% 9.6%
Advertising 1,332.5 3,325.4 6,500.0 6,620.0 4,243.6 4,370.9 4,502.0
% of Sales 25.2% 21.2% 32.5% 30.9% 19.2% 13.4% 13.4%
Other (10.7) 99.2 266.3 287.7 298.7 453.3 470.5
% of Sales -0.2% 0.6% 1.3% 1.3% 1.4% 1.4% 1.4%
Store Contribution $ (2,576.5) $ (2,532.3) $ (4,965.3) $ (4,901.3) $ (2,562.2) $ (1,358.6) $ (1,412.0)
Margin -48.8 % -16.1 % -24.9 % -22.9 % -11.6 % -4.2 % -4.2 %
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Connecticut Roll-Up
================================================================================
Operating Statement - Store Level - Downside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $6,868.7 $7,042.6 $11,159.6 $11,494.4 $25,744.2 $26,516.5 $27,312.0 $28,131.4
Growth 15.4% 2.5% 58.5% 3.0% 124.0% 3.0% 3.0% 3.0%
Retail Gross Profit 3,296.3 3,328.8 5,355.0 5,515.7 12,188.7 12,554.3 12,930.9 13,318.9
Retail Margin 48.0% 47.3% 48.0% 48.0% 47.3% 47.3% 47.3% 47.3%
Store Level Operating Expenses
- ------------------------------
Net Delivery 179.8 185.9 303.5 298.9 738.9 761.0 783.9 807.4
% of Sales 2.6% 2.6% 2.7% 2.6% 2.9% 2.9% 2.9% 2.9%
Total Payroll 653.8 813.6 1,240.9 1,291.2 3,092.8 3,221.8 3,356.5 3,497.2
% of Sales 9.5% 11.6% 11.1% 11.2% 12.0% 12.2% 12.3% 12.4%
Total Occupancy 560.4 764.9 1,173.5 1,187.6 3,146.9 3,224.3 3,384.2 3,542.7
% of Sales 8.2% 10.9% 10.5% 10.3% 12.2% 12.2% 12.4% 12.6%
Total Other Store 64.3 106.7 202.4 218.8 447.9 461.3 475.2 489.4
% of Sales 0.9% 1.5% 1.8% 1.9% 1.7% 1.7% 1.7% 1.7%
4-Wall EBITDA 1,838.0 1,457.7 2,434.8 2,519.1 4,762.2 4,885.8 4,931.2 4,982.2
Margin 26.8% 20.7% 21.8% 21.9% 18.5% 18.4% 18.1% 17.7%
Depreciation 53.1 66.8 120.9 120.9 120.9 120.9 120.9 120.9
Pre-Opening - 112.1 - 150.0 - - - -
4-Wall EBIT 1,784.9 1,278.8 2,313.9 2,248.2 4,641.3 4,764.9 4,810.3 4,861.3
Margin 26.0% 18.2% 20.7% 19.6% 18.0% 18.0% 17.6% 17.3%
Allocated Expenses
- ------------------
Warehouse 439.3 493.5 716.1 823.1 1,843.4 1,898.7 1,955.7 2,014.4
% of Sales 6.4% 7.0% 6.4% 7.2% 7.2% 7.2% 7.2% 7.2%
Advertising 839.0 1,016.0 1,587.5 2,000.0 2,060.0 2,121.8 2,185.5 2,251.0
% of Sales 12.2% 14.4% 14.2% 17.4% 8.0% 8.0% 8.0% 8.0%
Other (29.5) (24.3) 67.1 145.2 352.7 365.7 379.3 393.3
% of Sales -0.4% -0.3% 0.6% 1.3% 1.4% 1.4% 1.4% 1.4%
Store Contribution $ 536.1 $(206.4) $ (56.9) $ (720.0) $ 385.1 $ 378.6 $ 289.9 $ 202.6
Margin 7.8% -2.9% -0.5% -6.3% 1.5% 1.4% 1.1% 0.7%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Long Island Roll-Up
================================================================================
Operating Statement - Store Level - Downside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 43,858.6 $ 43,452.3 $ 45,080.9 $ 46,433.3 $ 47,826.3 $ 49,261.1 $ 50,739.0 $ 52,261.1
Growth 19.5% -0.9% 3.7% 3.0% 3.0% 3.0% 3.0% 3.0%
Retail Gross Profit 19,456.6 18,890.3 19,710.8 20,302.1 20,911.2 21,538.5 22,184.7 22,850.2
Retail Margin 44.4% 43.5% 43.7% 43.7% 43.7% 43.7% 43.7% 43.7%
Store Level Operating Expenses
- ------------------------------
Net Delivery (273.8) (270.3) (195.7) (322.9) (332.6) (342.6) (352.8) (363.4)
% of Sales -0.6% -0.6% -0.4% -0.7% -0.7% -0.7% -0.7% -0.7%
Total Payroll 4,765.1 4,956.8 4,943.3 5,224.7 5,439.8 5,664.2 5,898.5 6,143.0
% of Sales 10.9% 11.4% 11.0% 11.3% 11.4% 11.5% 11.6% 11.8%
Total Occupancy 3,424.3 3,432.3 3,919.1 4,083.2 4,356.9 4,496.6 4,686.3 4,892.6
% of Sales 7.8% 7.9% 8.7% 8.8% 9.1% 9.1% 9.2% 9.4%
Total Other Store 543.5 614.4 576.1 562.1 578.9 596.3 614.2 632.6
% of Sales 1.2% 1.4% 1.3% 1.2% 1.2% 1.2% 1.2% 1.2%
4-Wall EBITDA 10,997.5 10,157.1 10,468.0 10,755.0 10,868.1 11,124.0 11,338.5 11,545.5
Margin 25.1% 23.4% 23.2% 23.2% 22.7% 22.6% 22.3% 22.1%
Depreciation 199.3 202.4 197.7 240.6 240.6 240.6 240.6 240.6
Pre-Opening - - - - - - - -
4-Wall EBIT 10,798.2 9,954.7 10,270.3 10,514.5 10,627.5 10,883.4 11,098.0 11,304.9
Margin 24.6% 22.9% 22.8% 22.6% 22.2% 22.1% 21.9% 21.6%
Allocated Expenses
- ------------------
Warehouse 2,940.8 3,096.5 3,023.4 3,324.9 3,424.6 3,527.4 3,633.2 3,742.2
% of Sales 6.7% 7.1% 6.7% 7.2% 7.2% 7.2% 7.2% 7.2%
Advertising 3,640.9 3,402.7 4,005.8 4,000.0 4,120.0 4,243.6 4,370.9 4,502.0
% of Sales 8.3% 7.8% 8.9% 8.6% 8.6% 8.6% 8.6% 8.6%
Other (124.0) (93.2) 249.1 544.1 563.7 584.2 605.4 627.4
% of Sales -0.3% -0.2% 0.6% 1.2% 1.2% 1.2% 1.2% 1.2%
Store Contribution $ 4,340.5 $ 3,548.7 $ 2,992.0 $ 2,645.5 $ 2,519.2 $ 2,528.3 $ 2,488.5 $ 2,433.2
Margin 9.9% 8.2% 6.6% 5.7% 5.3% 5.1% 4.9% 4.7%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA New Jersey Roll-Up
================================================================================
Operating Statement - Store Level - Downside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 59,329.5 $ 56,882.0 $ 60,690.4 $ 62,511.1 $ 64,386.4 $ 71,092.1 $ 73,224.9 $ 80,486.4
Growth 12.0% -4.1% 6.7% 3.0% 3.0% 10.4% 3.0% 9.9%
Retail Gross Profit 28,503.4 26,851.2 28,735.3 29,597.4 30,485.3 33,634.1 34,643.1 38,052.7
Retail Margin 48.0% 47.2% 47.3% 47.3% 47.3% 47.3% 47.3% 47.3%
Store Level Operating Expenses
- ------------------------------
Net Delivery (567.9) (572.3) (453.1) (585.8) (603.4) (650.1) (669.6) (720.1)
% of Sales -1.0% -1.0% -0.7% -0.9% -0.9% -0.9% -0.9% -0.9%
Total Payroll 5,830.0 5,837.2 5,925.5 6,292.4 6,544.9 7,415.5 7,715.6 8,688.3
% of Sales 9.8% 10.3% 9.8% 10.1% 10.2% 10.4% 10.5% 10.8%
Total Occupancy 2,532.9 2,783.6 2,925.0 2,966.8 3,095.4 3,634.3 4,060.9 4,607.8
% of Sales 4.3% 4.9% 4.8% 4.7% 4.8% 5.1% 5.5% 5.7%
Total Other Store 658.4 769.5 668.1 690.7 711.4 809.1 833.4 939.4
% of Sales 1.1% 1.4% 1.1% 1.1% 1.1% 1.1% 1.1% 1.2%
4-Wall EBITDA 20,050.0 18,033.2 19,669.9 20,233.2 20,736.9 22,425.3 22,702.9 24,537.3
Margin 33.8% 31.7% 32.4% 32.4% 32.2% 31.5% 31.0% 30.5%
Depreciation 272.5 317.3 307.6 336.2 336.2 400.5 400.5 464.7
Pre-Opening - - - - 50.0 - 50.0 -
4-Wall EBIT 19,777.5 17,715.9 19,362.3 19,897.0 20,350.8 22,024.9 22,252.4 24,072.6
Margin 33.3% 31.1% 31.9% 31.8% 31.6% 31.0% 30.4% 29.9%
Allocated Expenses
- ------------------
Warehouse 5,209.5 4,783.9 4,968.6 4,672.3 4,812.5 5,313.7 5,473.1 6,015.9
% of Sales 8.8% 8.4% 8.2% 7.5% 7.5% 7.5% 7.5% 7.5%
Advertising 5,039.2 4,760.7 4,463.6 5,000.0 5,150.0 5,304.5 5,463.6 5,627.5
% of Sales 8.5% 8.4% 7.4% 8.0% 8.0% 7.5% 7.5% 7.0%
Other (250.7) (179.9) 346.0 783.8 811.7 910.2 942.9 1,050.6
% of Sales -0.4% -0.3% 0.6% 1.3% 1.3% 1.3% 1.3% 1.3%
Store Contribution $ 9,779.5 $ 8,351.2 $ 9,584.0 $ 9,440.9 $ 9,576.5 $ 10,496.5 $ 10,372.7 $ 11,378.6
Margin 16.5% 14.7% 15.8% 15.1% 14.9% 14.8% 14.2% 14.1%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA New York Roll-Up
================================================================================
Operating Statement - Store Level - Downside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 90,540.6 $ 89,156.4 $ 89,537.5 $ 93,063.1 $ 96,416.1 $ 99,308.6 $ 107,205.1 $ 115,486.1
Growth 22.1% -1.5% 0.4% 3.9% 3.6% 3.0% 8.0% 7.7%
Retail Gross Profit 44,285.7 43,057.8 43,358.5 45,036.9 46,638.4 48,037.6 51,780.0 55,703.7
Retail Margin 48.9% 48.3% 48.4% 48.4% 48.4% 48.4% 48.3% 48.2%
Store Level Operating Expenses
- ------------------------------
Net Delivery (1,135.3) (1,229.2) (1,050.0) (1,204.8) (1,238.8) (1,276.0) (1,333.9) (1,394.2)
% of Sales -1.3% -1.4% -1.2% -1.3% -1.3% -1.3% -1.2% -1.2%
Total Payroll 8,983.8 9,547.2 9,753.3 10,148.1 10,684.2 11,122.6 12,213.0 13,376.7
% of Sales 9.9% 10.7% 10.9% 10.9% 11.1% 11.2% 11.4% 11.6%
Total Occupancy 4,796.9 5,510.9 6,010.5 6,586.0 7,035.5 7,351.7 8,249.0 9,119.1
% of Sales 5.3% 6.2% 6.7% 7.1% 7.3% 7.4% 7.7% 7.9%
Total Other Store 1,011.5 1,210.1 1,231.9 1,361.3 1,418.3 1,460.9 1,583.4 1,711.9
% of Sales 1.1% 1.4% 1.4% 1.5% 1.5% 1.5% 1.5% 1.5%
4-Wall EBITDA 30,628.8 28,018.8 27,412.7 28,146.3 28,739.1 29,378.4 31,068.5 32,890.2
Margin 33.8% 31.4% 30.6% 30.2% 29.8% 29.6% 29.0% 28.5%
Depreciation 494.7 594.2 712.8 733.6 749.4 749.4 813.6 877.9
Pre-Opening 122.7 113.4 67.2 33.3 - 50.0 50.0 -
4-Wall EBIT 30,011.4 27,311.2 26,632.7 27,379.4 27,989.8 38,579.0 30,204.9 32,012.3
Margin 33.1% 30.6% 29.7% 29.4% 29.0% 28.8% 28.2% 27.7%
Allocated Expenses
- ------------------
Warehouse 7,314.1 7,244.6 6,932.5 6,795.1 7,040.0 7,251.2 7,827.7 8,432.4
% of Sales 8.1% 8.1% 7.7% 7.3% 7.3% 7.3% 7.3% 7.3%
Advertising 7,502.2 8,079.6 6,225.5 6,500.0 6,695.0 6,895.9 7,102.7 7,315.8
% of Sales 8.3% 9.1% 7.0% 7.0% 6.9% 6.9% 6.6% 6.3%
Other (378.4) (272.6) 516.0 1,162.6 1,216.0 1,259.4 1,376.1 1,499.3
% of Sales -0.4% -0.3% 0.6% 1.2% 1.3% 1.3% 1.3% 1.3%
Store Contribution $ 15,573.5 $ 12,259.6 $ 12,958.8 $ 12,921.6 $ 13,038.8 $ 13,172.6 $ 13,898.4 $ 14,764.7
Margin 17.2% 13.8% 14.5% 13.9% 13.5% 13.3% 13.0% 12.8%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Pennsylvania Roll-Up
================================================================================
Operating Statement - Store Level - Downside Case ($000's)
------------------------------------------------------------------------------------------------------
Actual Projected
------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Sales $ 14,504.1 $ 26,029.7 $ 27,368.2 $ 36,064.2 $ 38,304.9 $ 49,002.2 $ 50,472.2 $ 57,051.2
Growth NM 79.5% 5.1% 31.8% 6.2% 27.9% 3.0% 13.0%
Retail Gross Profit 7,011.1 12,295.3 12,955.1 17,029.3 18,082.4 23,093.4 23,786.2 26,870.1
Retail Margin 48.3% 47.2% 47.3% 47.2% 47.2% 47.1% 47.1% 47.1%
Store Level Operating Expenses
- ------------------------------
Net Delivery (50.6) (105.9) (64.0) (103.7) (105.7) (99.3) (102.3) (100.3)
% of Sales -0.3% -0.4% -0.2% -0.3% -0.3% -0.2% -0.2% -0.2%
Total Payroll 1,657.1 3,304.8 3,426.9 4,628.2 4,983.5 6,409.3 6,681.0 7,624.6
% of Sales 11.4% 12.7% 12.5% 12.8% 13.0% 13.1% 13.2% 13.4%
Total Occupancy 954.1 1,942.9 2,065.0 2,801.6 3,061.1 3,991.5 4,113.5 4,648.7
% of Sales 6.6% 7.5% 7.5% 7.8% 8.0% 8.1% 8.1% 8.1%
Total Other Store 256.5 398.4 353.2 517.2 551.3 720.6 742.2 845.5
% of Sales 1.8% 1.5% 1.3% 1.4% 1.4% 1.5% 1.5% 1.5%
4-Wall EBITDA 4,194.0 6,755.1 7,174.0 9,186.0 9,592.3 12,071.4 12,351.9 13,851.6
Margin 28.9% 26.0% 26.2% 25.5% 25.0% 24.6% 24.5% 24.3%
Depreciation 138.3 338.1 404.6 517.1 533.2 661.7 661.7 726.0
Pre-Opening 314.8 165.1 - 100.0 100.0 - 50.0 -
4-Wall EBIT 3,740.9 6,251.9 6,769.4 8,568.9 8,959.1 11,409.7 11,640.1 13,125.6
Margin 25.8% 24.0% 24.7% 23.8% 23.4% 23.3% 23.1% 23.0%
Allocated Expenses
- ------------------
Warehouse 1,390.6 2,459.5 2,201.4 2,695.6 2,863.1 3,662.6 3,772.5 4,264.2
% of Sales 9.6% 9.4% 8.0% 7.5% 7.5% 7.5% 7.5% 7.5%
Advertising 3,009.3 4,619.4 3,941.6 4,000.0 4,120.0 4,243.6 4,370.9 4,502.0
% of Sales 20.7% 17.7% 14.4% 11.1% 10.8% 8.7% 8.7% 7.9%
Other (115.2) (65.7) 159.0 476.3 510.6 668.2 692.8 792.0
% of Sales -0.8% -0.3% 0.6% 1.3% 1.3% 1.4% 1.4% 1.4%
Store Contribution $ (543.8) $ (761.3) $ 467.4 $ 1,397.1 $ 1,465.5 $ 2,835.3 $ 2,803.9 $ 3,567.3
Margin -3.7% -2.9% 1.7% 3.9% 3.8% 5.8% 5.6% 6.3%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA
================================================================================
------------------------
WEIGHTED AVERAGE
COST OF CAPITAL
ANALYSIS
------------------------
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Weighted Average Cost of Capital Analysis
================================================================================
Summary/(1)/
- --------------------------------------------------------------------------------
Assumptions
- --------------------------------------------------------------------------------
Tax Rate 40.00%
Risk Free Rate of Return 6.09%
Market Risk Premium 7.20%
- --------------------------------------------------------------------------------
Risk Free Rate = 10 year U.S. Treasury as of 7/29/97
Market Risk Premium as per Ibbotson, 1995 Yearbook
- --------------------------------------------------------------------------------
Unlevered Betas/(2)/
- --------------------------------------------------------------------------------
Current Total Mkt. Val. Total
Levered Debt of Equity Debt/ Unlevered
Beta/(3)/ ($MM) ($MM) Capital Beta/(4)/
--------- ----- --------- ------- ---------
Ethan Allen Interiors 1.24 $68.4 $732.5 8.5% 1.17
Haverty Furniture 0.87 207.8 159.9 56.5% 0.49
Heilig-Meyers 1.12 860.5 958.5 47.3% 0.73
Levitz Furniture 1.34 465.9 35.9 92.9% 0.15
Pier 1 Imports 0.98 116.1 1,171.9 9.0% 0.92
Roberds 0.96 86.9 29.8 74.5% 0.35
SOFA 0.70 14.0 112.3 11.1% 0.65
- --------------------------------------------------------------------------------
Median 0.98 47.3% 0.65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Weighted Average Cost of Capital/(5)/
- --------------------------------------------------------------------------------
Capital Structure Cost of Equity Cost of Debt
- ------------------- -------------------- ---------------
Debt/ Debt/ Relevered Cost of Before After Weighted Average
Capital Equity Beta/(6)/ Equity Tax Tax Cost of Capital
- ------- ------ --------- ------ --- --- ---------------
0.0% 0.0% 0.65 10.78% 7.50% 4.50% 10.78%
10.0% 11.1% 0.69 11.09% 8.00% 4.80% 10.46%
20.0% 25.0% 0.75 11.48% 8.50% 5.10% 10.20%
30.0% 42.9% 0.82 11.98% 9.00% 5.40% 10.01%
40.0% 66.7% 0.91 12.65% 9.50% 5.70% 9.87%
50.0% 100.0% 1.04 13.59% 10.00% 6.00% 9.79%
60.0% 150.0% 1.24 15.00% 10.50% 6.30% 9.78%
70.0% 233.3% 1.56 17.34% 11.00% 6.60% 9.82%
- --------------------------------------------------------------------------------
- -------------------------------
/(1)/ WACC is widely acknowledged to be only an estimate of the cost of
capital, as the capital asset pricing model is no longer perfectly
consistent with recent finance theory.
/(2)/ Assumes book value of debt approximates market value of debt.
/(3)/ Predicted beta as per BARRA, U.S. Equity Beta Book, May 1997.
/(4)/ Unlevered Beta = Levered Beta/ [1+(Total Debt/Equity)*(1-Tax Rate)].
/(5)/ Based on the Weighted Average Cost of Capital and the Capital Asset
Pricing Model and on WP&Co. calculations.
/(6)/ Relevered Beta = Unlevered Beta * [1+(Total Debt/Equity)*(1-Tax Rate)].
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA
================================================================================
-----------------------
CONTROL PREMIUM
ANALYSIS
-----------------------
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Control Premium Analysis
================================================================================
Selected Management Buyout Transactions Completed from 1988 - Present between
$50MM and $500MM
Original
Date Date Transaction Price/
Announced Announced Target Name Acquiror Name Value ($MM) Share
- --------- --------- ----------- ------------- ----------- -----
01/11/88 01/11/88 Burnham Service Corp BVL Holdings Inc $132.1 $22.00
02/05/88 07/15/87 Northwestern Steel & Wire Co NW Acquisition Corp 187.7 25.00
02/08/88 02/02/88 Musicland Group Inc(Primerica) Musicland Stores Corp 410.0 36.00
02/16/88 02/16/88 Flexi-Van Corp FLX Acquisition Co 144.0 38.50
02/19/88 02/19/88 Postal Instant Press Inc PIP Holdings Corp 69.4 15.50
03/10/88 03/10/88 Farm Fresh Inc FF Holdings Corp 241.3 13.50
03/31/88 03/31/88 Minstar Inc IJ Holdings Corp 400.0 31.50
05/03/88 05/03/88 Fidata Corp Advanced Medical Technology 51.1 11.52
05/25/88 05/25/88 Cherokee Group Inc Green Acquisition Co 180.1 14.00
05/26/88 05/26/88 Redken Laboratories Inc RLI Acquisition Corp 52.5 34.90
06/08/88 06/08/88 Infinity Broadcasting Corp WCK Acquisition Corp 232.3 30.25
06/08/88 06/08/88 KDI Corp KD Holdings Corp 184.9 19.00
06/09/88 06/09/88 Hunter-Melnor Inc LM Acquisition Corp 112.3 15.50
06/13/88 02/29/88 Continental Graphics Corp Continental Graphics Holdings 234.5 17.00
06/13/88 06/13/88 Welbilt Corp CA Holdings Corp 265.5 26.50
06/15/88 05/23/88 Hyponex Corp SRH Acquisition Corp 111.0 14.00
06/27/88 06/27/88 Cullum Companies Inc Investor Group 376.6 22.50
07/07/88 07/07/88 Consolidated Hydro Inc Raindancer Inc 68.7 13.50
07/08/88 07/08/88 Florida Steel Corp FLS Acquisition Inc 371.9 50.00
07/13/88 07/13/88 Health Management Associates HMA Acquisition Corp 199.4 14.75
07/13/88 07/13/88 Oakite Products Inc Oak Acquisition Corp 78.5 45.50
07/22/88 07/22/88 Specialty Equipment Companies SPE Acquisition Inc 333.0 33.00
08/02/88 08/02/88 Harvard Industries Inc Harvard Acquisition Corp 302.8 13.00
08/09/88 08/09/88 Buehler International Inc Leatherneck Acquisition II 64.5 12.50
08/15/88 08/15/88 Malrite Communications Group Investor Group 301.6 11.14
08/17/88 08/17/88 Equion Corp Equion Acquisition Corp 55.2 9.75
08/29/88 08/29/88 Foodmaker Inc F-M Acquisition Corp 474.8 19.43
09/06/88 09/06/88 Multi-Local Media Corp NUMLH Holdings Inc 79.8 14.25
09/20/88 06/27/88 System Integrators Inc SI Acquisitions Inc 117.4 10.00
10/04/88 10/04/88 Alliance Imaging Inc CTFG Acquisition 52.0 9.75
10/10/88 10/10/88 Super Rite Foods Inc(Rite) Investor Group 137.0 27.25
10/31/88 10/07/88 Budget Rent-A-Car Corp Beech Holdings Corp 333.0 30.00
11/18/88 11/18/88 Henley Manufacturing Corp New Hampshire Oak Inc 451.3 90.00
02/06/89 02/06/89 Formica Corp FM Holdings Inc 341.1 19.00
% Stock Premium Before
Original Original Announcement Date
Date Date --------------------------
Announced Announced Target Name Acquiror Name 1 Day 1 Week 4 Week
- --------- --------- ----------- ------------- ----- ------ ------
01/11/88 01/11/88 Burnham Service Corp BVL Holdings Inc 63.0 % 51.7 % 54.4 %
02/05/88 07/15/87 Northwestern Steel & Wire Co NW Acquisition Corp 21.2 22.0 25.8
02/08/88 02/02/88 Musicland Group Inc(Primerica) Musicland Stores Corp 48.5 66.5 61.8
02/16/88 02/16/88 Flexi-Van Corp FLX Acquisition Co 26.2 26.7 43.9
02/19/88 02/19/88 Postal Instant Press Inc PIP Holdings Corp -3.9 2.5 10.7
03/10/88 03/10/88 Farm Fresh Inc FF Holdings Corp 4.9 10.2 22.7
03/31/88 03/31/88 Minstar Inc IJ Holdings Corp 31.9 33.3 27.3
05/03/88 05/03/88 Fidata Corp Advanced Medical Technology 96.0 104.7 96.0
05/25/88 05/25/88 Cherokee Group Inc Green Acquisition Co 75.0 83.6 47.4
05/26/88 05/26/88 Redken Laboratories Inc RLI Acquisition Corp 29.3 62.3 58.6
06/08/88 06/08/88 Infinity Broadcasting Corp WCK Acquisition Corp 47.6 51.3 36.7
06/08/88 06/08/88 KDI Corp KD Holdings Corp 63.4 63.4 65.2
06/09/88 06/09/88 Hunter-Melnor Inc LM Acquisition Corp 40.9 59.0 72.2
06/13/88 02/29/88 Continental Graphics Corp Continental Graphics Holdings 100.0 91.5 142.9
06/13/88 06/13/88 Welbilt Corp CA Holdings Corp 37.7 34.2 45.2
06/15/88 05/23/88 Hyponex Corp SRH Acquisition Corp 51.4 40.0 60.0
06/27/88 06/27/88 Cullum Companies Inc Investor Group 39.5 47.5 35.3
07/07/88 07/07/88 Consolidated Hydro Inc Raindancer Inc 31.7 61.2 50.0
07/08/88 07/08/88 Florida Steel Corp FLS Acquisition Inc 15.3 22.0 29.5
07/13/88 07/13/88 Health Management Associates HMA Acquisition Corp 9.3 38.8 32.6
07/13/88 07/13/88 Oakite Products Inc Oak Acquisition Corp 15.2 16.7 22.1
07/22/88 07/22/88 Specialty Equipment Companies SPE Acquisition Inc 6.0 6.5 13.3
08/02/88 08/02/88 Harvard Industries Inc Harvard Acquisition Corp 55.2 89.1 89.1
08/09/88 08/09/88 Buehler International Inc Leatherneck Acquisition II 28.2 35.1 28.2
08/15/88 08/15/88 Malrite Communications Group Investor Group 39.3 35.1 23.8
08/17/88 08/17/88 Equion Corp Equion Acquisition Corp 59.2 62.5 62.5
08/29/88 08/29/88 Foodmaker Inc F-M Acquisition Corp 65.3 60.2 61.9
09/06/88 09/06/88 Multi-Local Media Corp NUMLH Holdings Inc 42.5 54.1 46.2
09/20/88 06/27/88 System Integrators Inc SI Acquisitions Inc 66.7 73.9 81.8
10/04/88 10/04/88 Alliance Imaging Inc CTFG Acquisition 85.7 95.0 116.7
10/10/88 10/10/88 Super Rite Foods Inc(Rite) Investor Group 58.0 56.8 58.0
10/31/88 10/07/88 Budget Rent-A-Car Corp Beech Holdings Corp 158.1 163.7 203.8
11/18/88 11/18/88 Henley Manufacturing Corp New Hampshire Oak Inc 62.2 63.6 60.7
02/06/89 02/06/89 Formica Corp FM Holdings Inc 13.4 12.6 16.0
- ----------------------------
Source: Securities Data Company, Inc.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Control Premium Analysis
================================================================================
Selected Management Buyout Transactions Completed from 1988 -
Present between $50MM and $500MM (Cont'd)
Original
Date Date Transaction Price/
Announced Announced Target Name Acquiror Name Value ($MM) Share
- --------- --------- ----------- ------------- ----------- -----
03/23/89 02/06/89 Chelsea Industries Inc Investor Group $51.3 $29.50
04/03/89 04/03/89 Mayfair Super Markets Inc Mayfair Holdings Inc 122.0 24.70
04/05/89 04/05/89 American Home Shield Corp Investor Group 115.7 13.00
05/19/89 05/19/89 TGI Friday's Inc. (Carlson Cos) Carlson Hospitality Group Inc 52.7 14.88
06/12/89 06/12/89 Colorado Prime Corp KPC Holdings Corp 84.9 17.00
08/01/89 06/21/89 Marine Transport Lines Inc Intrepid Acquisition Corp 73.0 25.25
08/09/89 06/08/89 GTECH Corp GTEK Acquisition Co 274.5 16.63
11/13/89 11/13/89 Dallas Corp. DCO Holdings Corp 183.1 24.00
03/19/90 03/19/90 LPL Technologies Inc LPL Acquisition Corp 208.5 25.00
12/10/91 10/04/91 P Leiner Nutritional Products PLI Investors Inc 78.7 15.00
11/06/92 09/17/92 La Petite Academy Inc La Petite Holdings Inc 157.5 10.00
10/18/93 10/18/93 Corporate Software Inc CS Acquisition Corp 94.3 15.00
01/05/96 01/05/96 Finl Institutions Ins Grp Ltd Investor Group 53.0 16.00
11/12/96 11/12/96 Leslie's Poolmart Investor Group 112.8 14.50
% Stock Premium Before
Original Original Announcement Date
Date Date --------------------------
Announced Announced Target Name Acquiror Name 1 Day 1 Week 4 Week
- --------- --------- ----------- ------------- ----- ------ ------
03/23/89 02/06/89 Chelsea Industries Inc Investor Group 62.8 % 68.6 % 65.0 %
04/03/89 04/03/89 Mayfair Super Markets Inc Mayfair Holdings Inc 43.2 41.1 35.3
04/05/89 04/05/89 American Home Shield Corp Investor Group 108.0 136.4 126.1
05/19/89 05/19/89 TGI Friday's Inc. (Carlson Cos) Carlson Hospitality Group Inc 12.3 13.3 14.4
06/12/89 06/12/89 Colorado Prime Corp KPC Holdings Corp 18.3 33.3 36.0
08/01/89 06/21/89 Marine Transport Lines Inc Intrepid Acquisition Corp 21.7 26.3 42.3
08/09/89 06/08/89 GTECH Corp GTEK Acquisition Co 30.4 40.0 47.8
11/13/89 11/13/89 Dallas Corp DCO Holdings Corp 69.9 69.9 61.3
03/19/90 03/19/90 LPL Technologies Inc LPL Acquisition Corp 28.2 37.0 44.9
12/10/91 10/04/91 P Leiner Nutritional Products PLI Investors Inc 20.0 21.2 39.5
11/06/92 09/17/92 La Petite Academy Inc La Petite Holdings Inc 11.1 23.1 23.1
10/18/93 10/18/93 Corporate Software Inc CS Acquisition Corp 33.3 36.4 34.8
01/05/96 01/05/96 Finl Institutions Ins Grp Ltd Investor Group 9.4 -1.5 -4.1
11/12/96 11/12/96 Leslie's Poolmart Investor Group 26.1 31.8 31.8
--------------------------------------------
Mean 43.3 % 49.5 % 52.1 %
Median 38.5 % 40.6 % 45.1 %
--------------------------------------------
- -----------------------------
Source: Securities Data Company, Inc.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Control Premium Analysis
================================================================================
Selected Squeeze-Out Transactions Completed from 1988 - Present between $10MM
and $500MM
Original
Date Date Transaction Price/
Announced Announced Target Name Acquiror Name Value ($MM) Share
- --------- --------- ----------- ------------- ----------- -----
02/16/88 02/16/88 Falstaff Brewing Corp Paul Kalmanovitz Testamentry $27.6 $12.00
02/17/88 02/17/88 Genmar Industries Inc(Minstar) Minstar Inc 98.0 12.50
02/25/88 02/25/88 CertainTeed Corp Cie de Saint-Gobain SA 391.3 47.50
03/16/88 03/16/88 Arthur D Little Inc Investor Group 38.5 60.00
03/18/88 03/18/88 Kearney National Inc Dyson-Kissner-Moran Corp 50.3 19.35
03/18/88 03/18/88 Meyers Parking System Inc Investor Group 15.1 28.00
04/11/88 04/11/88 Gruen Marketing Corp(Jewelcor) SH Holdings Inc 24.8 11.75
04/22/88 04/22/88 Trans World Airlines Inc Investor 355.0 50.00
06/22/88 06/22/88 BF Saul Real Estate Invt Tr Westminister Investment Corp 29.2 28.00
07/20/88 07/20/88 Knutson Mortgage Corp Home Owners Fed Svgs,Boston 25.6 10.10
10/13/88 09/21/88 Associated Hosts Inc Industrial Equity(Pacific)Ltd 22.0 11.00
11/15/88 11/15/88 Princeville Corp(Quintex AU) Qintex Resorts BV 70.0 15.50
12/05/88 12/05/88 TJX Cos(Zayre Corp) Zayre Corp 414.0 34.80
12/06/88 07/05/88 Sage Energy Co Investor 22.2 6.50
12/14/88 12/14/88 Micro D Inc(Ingram Inds) Ingram Industries Inc 43.9 14.75
01/27/89 01/27/89 Ensource Inc(United Meridian) United Meridian Corp 28.0 10.50
02/15/89 02/15/89 Enserch Exploration Partners ENSERCH Corp 162.3 13.53
03/10/89 03/10/89 Sizzler Restaurants Intl Inc Collins Foods International 122.0 22.03
03/15/89 03/15/89 Pittway Corp Standard Shares Inc 76.8 33.50
04/18/89 04/18/89 American Capital Management Primerica Corp 48.3 11.50
05/19/89 05/19/89 TGI Friday's Inc(Carlson Cos) Carlson Hospitality Group Inc 52.7 14.88
05/24/89 05/24/89 WestMarc Communications Inc Tele-Communications Inc 185.4 32.25
06/08/89 06/08/89 Fisher Scientific Grp(Henley) Henley Group Inc 140.0 22.25
06/09/89 06/09/89 AL Williams Corp(Primerica) Primerica Corp 453.9 22.24
06/14/89 06/14/89 Andrews Group Inc MacAndrews & Forbes Holdings 28.3 7.25
06/15/89 06/15/89 Wheelabrator Group Inc Wheelabrator Group Inc 490.1 25.77
06/19/89 06/19/89 Allied Security Inc Investor Group 14.4 62.00
06/23/89 06/23/89 Connelly Containers Inc Investor Group 11.4 20.00
10/03/89 10/03/89 Esselte Business Systems Inc Esselte AB 217.4 47.64
10/19/89 10/19/89 Soo Line(Canadian Pacific LTD) Canadian Pacific Ltd 89.8 21.50
10/20/89 10/20/89 Profit Systems Inc(LEP Group) Lep Group PLC 25.2 11.75
11/01/89 11/01/89 POP Radio Corp(Heritage Media) Heritage Media Corp 39.0 21.10
12/22/89 01/31/89 PCS Inc McKesson Corp 40.7 20.00
01/24/90 01/24/90 Copperweld Corp(Imetal SA) Imetal SA 78.0 17.00
02/16/90 02/16/90 National Mine Service Co Anderson Mavor Investments Ltd 21.6 8.88
% Stock Premium Before
Original Original Announcement Date
Date Date --------------------------
Announced Announced Target Name Acquiror Name 1 Day 1 Week 4 Week
- --------- --------- ----------- ------------- ----- ------ ------
02/16/88 02/16/88 Falstaff Brewing Corp Paul Kalmanovitz Testamentry 33.3 % 33.3 % 33.3 %
02/17/88 02/17/88 Genmar Industries Inc(Minstar) Minstar Inc 37.0 37.0 51.5
02/25/88 02/25/88 CertainTeed Corp Cie de Saint-Gobain SA 50.2 60.3 87.2
03/16/88 03/16/88 Arthur D Little Inc Investor Group 81.8 81.8 76.5
03/18/88 03/18/88 Kearney National Inc Dyson-Kissner-Moran Corp 50.3 54.8 56.4
03/18/88 03/18/88 Meyers Parking System Inc Investor Group 60.0 64.7 64.7
04/11/88 04/11/88 Gruen Marketing Corp(Jewelcor) SH Holdings Inc 17.5 14.6 14.6
04/22/88 04/22/88 Trans World Airlines Inc Investor 77.8 75.4 86.9
06/22/88 06/22/88 BF Saul Real Estate Invt Tr Westminister Investment Corp 27.3 61.2 76.4
07/20/88 07/20/88 Knutson Mortgage Corp Home Owners Fed Svgs,Boston 13.8 17.1 34.7
10/13/88 09/21/88 Associated Hosts Inc Industrial Equity(Pacific)Ltd 23.9 2.3 1.1
11/15/88 11/15/88 Princeville Corp(Quintex AU) Qintex Resorts BV 3.3 6.0 3.3
12/05/88 12/05/88 TJX Cos(Zayre Corp) Zayre Corp 42.0 43.5 47.3
12/06/88 07/05/88 Sage Energy Co Investor 2.0 6.1 4.0
12/14/88 12/14/88 Micro D Inc(Ingram Inds) Ingram Industries Inc 40.5 37.2 57.3
01/27/89 01/27/89 Ensource Inc(United Meridian) United Meridian Corp 71.4 78.7 82.6
02/15/89 02/15/89 Enserch Exploration Partners ENSERCH Corp 20.2 21.6 40.5
03/10/89 03/10/89 Sizzler Restaurants Intl Inc Collins Foods International 24.1 19.1 22.4
03/15/89 03/15/89 Pittway Corp Standard Shares Inc -67.0 -67.2 -66.6
04/18/89 04/18/89 American Capital Management Primerica Corp 17.9 16.5 7.0
05/19/89 05/19/89 TGI Friday's Inc(Carlson Cos) Carlson Hospitality Group Inc 12.3 13.3 14.4
05/24/89 05/24/89 WestMarc Communications Inc Tele-Communications Inc 19.4 22.9 33.0
06/08/89 06/08/89 Fisher Scientific Grp(Henley) Henley Group Inc 15.6 14.1 12.7
06/09/89 06/09/89 AL Williams Corp(Primerica) Primerica Corp 24.4 40.1 44.7
06/14/89 06/14/89 Andrews Group Inc MacAndrews & Forbes Holdings 3.6 23.4 28.9
06/15/89 06/15/89 Wheelabrator Group Inc Wheelabrator Group Inc 227.2 227.2 217.2
06/19/89 06/19/89 Allied Security Inc Investor Group 21.6 21.6 24.0
06/23/89 06/23/89 Connelly Containers Inc Investor Group 9.6 8.8 6.7
10/03/89 10/03/89 Esselte Business Systems Inc Esselte AB 27.9 39.6 44.9
10/19/89 10/19/89 Soo Line(Canadian Pacific LTD) Canadian Pacific Ltd 22.9 14.7 24.6
10/20/89 10/20/89 Profit Systems Inc(LEP Group) Lep Group PLC 80.8 74.1 56.7
11/01/89 11/01/89 POP Radio Corp(Heritage Media) Heritage Media Corp 12.5 4.2 -9.2
12/22/89 01/31/89 PCS Inc McKesson Corp 27.0 34.5 17.6
01/24/90 01/24/90 Copperweld Corp(Imetal SA) Imetal SA 47.8 41.7 33.3
02/16/90 02/16/90 National Mine Service Co Anderson Mavor Investments Ltd 20.3 12.7 9.2
- ---------------------
Source: Securities Data Company, Inc. ("Acquisitions of Remaining Interest")
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Control Premium Analysis
================================================================================
Selected Squeeze-Out Transactions Completed from 1988 -
Present between $10MM and $500MM (Cont'd)
Original
Date Date Transaction Price/
Announced Announced Target Name Acquiror Name Value ($MM) Share
- --------- --------- ----------- ------------- ----------- -----
03/02/90 03/02/90 Shearson Lehman Brothers Hldgs American Express Co $360.0 $12.90
03/02/90 03/02/90 Triton Group Ltd(Intermark) Intermark Inc 48.1 12.43
05/08/90 05/08/90 ISS International Svc Sys Inc ISS International Service A/S 15.4 12.00
05/17/90 05/17/90 DST Systems Inc Kansas City Southern Inds Inc 39.1 15.85
07/06/90 07/06/90 Mack Trucks Inc Renault Vehicules Industriels 103.7 6.25
07/12/90 07/12/90 TVX Broadcast Group Inc Paramount Communications 61.4 9.50
07/19/90 07/19/90 Caesars New Jersey Inc Caesars World Inc 48.4 22.58
07/31/90 07/31/90 Freeport-McMoRan Oil and Gas Freeport-McMoRan Inc 46.2 10.88
08/16/90 08/16/90 Academy Insurance Group Inc Academy Mergerco Inc 46.8 1.33
10/23/90 10/23/90 ERC Environmental and Energy Ogden Corp 33.6 15.13
11/12/90 11/12/90 US WEST New Vector Group Inc US WEST Inc 437.5 45.03
01/03/91 01/03/91 Ocean Drilling & Exploration Murphy Oil Corp 391.8 19.39
01/25/91 01/25/91 Medical Management of America Investor Group 12.9 8.25
03/01/91 03/01/91 Metcalf & Eddy Cos Inc Air & Water Technologies Corp 51.0 19.25
06/13/91 06/13/91 Weigh-Tronix(Staveley Indus) Staveley Industries PLC 25.3 22.00
07/25/91 07/25/91 Country Lake Foods Inc Land O' Lakes Inc 22.6 15.30
08/02/91 08/02/91 Envirosafe Services Inc EnviroSource Inc 16.8 11.69
09/18/91 09/18/91 Arkla Exploration Co Arkla Inc 92.6 15.44
02/06/92 02/06/92 Spelling Entertainment Inc Charter Co(American Financial) 43.0 7.25
02/24/92 02/24/92 Unocal Exploration Corp Unocal Corp 117.5 11.68
03/02/92 01/14/92 Grace Energy Corp WR Grace & Co 77.3 19.00
03/20/92 03/20/92 Belvedere Corp BLV Acquisition Corp 16.9 6.30
07/24/92 03/18/92 Frank B Hall & Co Reliance Group Holdings Inc 39.4 2.97
08/17/92 08/17/92 PHLCORP Inc Leucadia National Corp 139.9 25.78
11/13/92 11/13/92 Brand Cos Inc Rust International Inc 185.0 18.75
01/04/93 01/04/93 United Medical Corp Investor Group 11.8 9.50
02/18/93 02/18/93 Sahara Casino Partners LP Sahara Resorts 19.4 2.76
06/17/93 06/17/93 Hadson Energy Resources Corp Apache Corp 39.3 15.00
06/23/93 06/23/93 Comcast Cablevision of Phila Comcast Corp 14.3 95.00
07/01/93 04/20/93 CMS/DATA Corp(Quartex Corp) Quartex Corp 26.7 7.00
07/27/93 02/01/93 Forum Group Inc Investor Group 23.0 3.62
09/20/93 04/05/89 West Point-Pepperell Inc Valley Fashions Corp 66.3 46.00
01/07/94 01/07/94 Holnam Inc(Holdernam Inc) Holderbank Financiere Glarus 51.7 7.65
03/01/94 03/01/94 FoxMeyer Corp(FoxMeyer Health) National Intergroup Inc. 79.7 14.46
% Stock Premium Before
Original Original Announcement Date
Date Date --------------------------
Announced Announced Target Name Acquiror Name 1 Day 1 Week 4 Week
- --------- --------- ----------- ------------- ----- ------ ------
03/02/90 03/02/90 Shearson Lehman Brothers Hldgs American Express Co -0.8 % 18.6 % 7.5 %
03/02/90 03/02/90 Triton Group Ltd(Intermark) Intermark Inc 3.5 16.9 21.2
05/08/90 05/08/90 ISS International Svc Sys Inc ISS International Service A/S 54.8 60.0 60.0
05/17/90 05/17/90 DST Systems Inc Kansas City Southern Inds Inc 24.3 40.9 51.0
07/06/90 07/06/90 Mack Trucks Inc Renault Vehicules Industriels 19.0 19.0 22.0
07/12/90 07/12/90 TVX Broadcast Group Inc Paramount Communications 26.7 90.0 85.4
07/19/90 07/19/90 Caesars New Jersey Inc Caesars World Inc 40.0 49.3 44.5
07/31/90 07/31/90 Freeport-McMoRan Oil and Gas Freeport-McMoRan Inc 36.0 42.7 47.5
08/16/90 08/16/90 Academy Insurance Group Inc Academy Mergerco Inc 21.1 24.7 21.1
10/23/90 10/23/90 ERC Environmental and Energy Ogden Corp 37.5 44.1 44.1
11/12/90 11/12/90 US WEST New Vector Group Inc US WEST Inc 47.6 53.9 85.7
01/03/91 01/03/91 Ocean Drilling & Exploration Murphy Oil Corp 14.0 24.1 9.2
01/25/91 01/25/91 Medical Management of America Investor Group 65.0 65.0 65.0
03/01/91 03/01/91 Metcalf & Eddy Cos Inc Air & Water Technologies Corp 22.2 16.7 24.2
06/13/91 06/13/91 Weigh-Tronix(Staveley Indus) Staveley Industries PLC 41.9 41.9 44.3
07/25/91 07/25/91 Country Lake Foods Inc Land O' Lakes Inc 39.1 45.7 53.0
08/02/91 08/02/91 Envirosafe Services Inc EnviroSource Inc 16.9 11.3 -2.6
09/18/91 09/18/91 Arkla Exploration Co Arkla Inc 8.3 28.6 30.0
02/06/92 02/06/92 Spelling Entertainment Inc Charter Co(American Financial) 52.6 45.0 45.0
02/24/92 02/24/92 Unocal Exploration Corp Unocal Corp 18.3 18.3 22.9
03/02/92 01/14/92 Grace Energy Corp WR Grace & Co 24.6 21.6 7.8
03/20/92 03/20/92 Belvedere Corp BLV Acquisition Corp 44.0 57.5 40.0
07/24/92 03/18/92 Frank B Hall & Co Reliance Group Holdings Inc (34.0) (25.8) (18.1)
08/17/92 08/17/92 PHLCORP Inc Leucadia National Corp 12.1 15.2 28.9
11/13/92 11/13/92 Brand Cos Inc Rust International Inc 4.9 13.6 4.9
01/04/93 01/04/93 United Medical Corp Investor Group 49.0 52.0 49.0
02/18/93 02/18/93 Sahara Casino Partners LP Sahara Resorts (4.0) (8.0) 5.1
06/17/93 06/17/93 Hadson Energy Resources Corp Apache Corp 26.3 27.7 25.0
06/23/93 06/23/93 Comcast Cablevision of Phila Comcast Corp 35.7 15.9 15.9
07/01/93 04/20/93 CMS/DATA Corp(Quartex Corp) Quartex Corp 460.0 330.8 314.8
07/27/93 02/01/93 Forum Group Inc Investor Group 106.9 70.4 106.9
09/20/93 04/05/89 West Point-Pepperell Inc Valley Fashions Corp (20.5) (19.8) (19.8)
01/07/94 01/07/94 Holnam Inc(Holdernam Inc) Holderbank Financiere Glarus 13.3 15.5 7.4
03/01/94 03/01/94 FoxMeyer Corp(FoxMeyer Health) National Intergroup Inc. 7.1 9.1 11.2
- ----------------------
Source: Securities Data Company, Inc. ("Acquisitions of Remaining Interest")
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SOFA Control Premium Analysis
================================================================================
Selected Squeeze-Out Transactions Completed from 1988 -
Present between $10MM and $500MM (Cont'd)
Original
Date Date Transaction Price/
Announced Announced Target Name Acquiror Name Value ($MM) Share
- --------- --------- ----------- ------------- ----------- -----
03/23/94 03/23/94 Adia Services Inc (Adia SA) Adia SA $35.8 $15.00
04/26/94 04/26/94 Diamond Shamrock Offshore Burlington Resources Inc 42.6 4.48
05/05/94 05/05/94 General Cable (Cie Gen de Eaux) Wassall PLC 35.9 6.00
06/06/94 06/06/94 Ogden Projects Inc (Ogden Corp) Ogden Corp 110.3 18.38
06/30/94 06/30/94 EB Inc (Parkway Co) Parkway Co 12.5 17.66
07/28/94 07/28/94 Chemical Waste Management Inc WMX Technologies Inc 397.4 8.85
08/24/94 08/24/94 Castle & Cooke Homes Inc Dole Food Co Inc 81.5 15.75
09/08/94 09/08/94 Contel Cellular Inc (Contel) GTE Corp 254.3 25.50
11/02/94 11/02/94 Pacific Telecom (PacifiCorp) PacifiCorp 159.0 30.00
12/28/94 12/28/94 Fleet Mortgage Group Inc Fleet Financial Group Inc, MA 188.1 20.00
02/07/95 02/07/95 Rust International Inc WMX Technologies Inc 50.5 16.35
02/15/95 02/15/95 IG Laboratories Inc Genzyme Corp 21.4 7.00
03/15/95 03/15/95 Ropak Corp LinPac Mouldings Ltd 23.4 11.00
04/05/95 04/05/95 Club Med Inc Club Mediterranee SA 153.4 32.00
05/19/95 05/19/95 Bic Corp (BIC SA) BIC SA 212.6 40.50
07/06/95 07/06/95 Grand Gaming Corp Grand Casinos Inc 36.5 5.06
07/14/95 07/14/95 REN Corp-USA (COBE Labs Inc) COBE Laboratories (Gambro AB) 177.7 20.00
09/26/95 09/26/95 SCOR US Corp (SCOR SA) SCOR 55.4 15.25
03/29/96 03/29/96 Great American Mgmt & Invt Inc. Equity Holdings, Chicago, IL 63.3 50.00
05/27/96 05/27/96 SyStemix Inc (Novartis AG) Novartis AG 107.6 19.50
08/08/96 08/08/96 Roto-Rooter Inc (Chemed Corp) Chemed Corp 93.6 41.00
08/26/96 08/26/96 Bankers Life Holding (Conseco) Conseco Inc 120.8 25.00
09/09/96 04/29/96 Crocker Realty Trust Inc Highwoods Properties Inc 76.1 11.88
09/26/96 09/26/96 General Physics Corp National Patent Development 26.1 5.10
10/03/96 10/03/96 LXE Electromagnetic Sciences Inc 14.8 13.13
10/10/96 10/10/96 WCI Steel Inc (Renco Group Inc) Renco Group Inc 56.5 10.00
11/27/96 11/27/96 Central Tractor Farm & Country JW Childs Equity Partners LP 56.7 14.25
12/06/96 12/06/96 MaxServ Inc (Sears Roebuck) Sears Roebuck & Co 46.0 7.75
01/21/97 01/21/97 Mafco Consolidated Grp (Mafco) Mafco Holdings Inc 116.8 33.50
01/28/97 01/28/97 Calgene Inc (Monsanto Co) Monsanto Co 242.6 8.00
06/02/97 06/02/97 cordia Inc (Anthem Inc) Anthem Inc 172.7 40.00
% Stock Premium Before
Original Original Announcement Date
Date Date --------------------------
Announced Announced Target Name Acquiror Name 1 Day 1 Week 4 Week
- --------- --------- ----------- ------------- ----- ------ ------
03/23/94 03/23/94 Adia Services Inc (Adia SA) Adia SA -43.4 % -42.3 % -37.5 %
04/26/94 04/26/94 Diamond Shamrock Offshore Burlington Resources Inc -3.1 -0.4 5.4
05/05/94 05/05/94 General Cable (Cie Gen de Eaux) Wassall PLC 17.1 21.5 11.6
06/06/94 06/06/94 Ogden Projects Inc (Ogden Corp) Ogden Corp 5.8 17.6 20.5
06/30/94 06/30/94 EB Inc (Parkway Co) Parkway Co 23.9 26.1 53.6
07/28/94 07/28/94 Chemical Waste Management Inc WMX Technologies Inc 10.6 8.9 1.1
08/24/94 08/24/94 Castle & Cooke Homes Inc Dole Food Co Inc 35.5 41.6 55.6
09/08/94 09/08/94 Contel Cellular Inc (Contel) GTE Corp 43.7 37.8 36.0
11/02/94 11/02/94 Pacific Telecom (PacifiCorp) PacifiCorp 23.7 23.7 23.7
12/28/94 12/28/94 Fleet Mortgage Group Inc Fleet Financial Group Inc, MA 19.4 18.5 18.5
02/07/95 02/07/95 Rust International Inc WMX Technologies Inc 27.0 39.1 39.1
02/15/95 02/15/95 IG Laboratories Inc Genzyme Corp 43.6 86.7 143.5
03/15/95 03/15/95 Ropak Corp LinPac Mouldings Ltd 4.8 6.0 4.8
04/05/95 04/05/95 Club Med Inc Club Mediterranee SA 41.4 39.9 44.6
05/19/95 05/19/95 Bic Corp (BIC SA) BIC SA 13.3 12.5 28.6
07/06/95 07/06/95 Grand Gaming Corp Grand Casinos Inc 34.9 34.9 55.7
07/14/95 07/14/95 REN Corp-USA (COBE Labs Inc) COBE Laboratories (Gambro AB) 27.0 20.3 26.0
09/26/95 09/26/95 SCOR US Corp (SCOR SA) SCOR 37.1 35.6 38.6
03/29/96 03/29/96 Great American Mgmt & Invt Inc. Equity Holdings, Chicago, IL 2.6 4.2 3.6
05/27/96 05/27/96 SyStemix Inc (Novartis AG) Novartis AG 4.7 69.6 59.2
08/08/96 08/08/96 Roto-Rooter Inc (Chemed Corp) Chemed Corp 12.3 12.3 11.2
08/26/96 08/26/96 Bankers Life Holding (Conseco) Conseco Inc 14.9 10.5 11.7
09/09/96 04/29/96 Crocker Realty Trust Inc Highwoods Properties Inc 18.8 20.3 21.8
09/26/96 09/26/96 General Physics Corp National Patent Development 16.6 31.6 36.0
10/03/96 10/03/96 LXE Electromagnetic Sciences Inc 22.1 14.1 19.3
10/10/96 10/10/96 WCI Steel Inc (Renco Group Inc) Renco Group Inc 17.6 29.0 77.8
11/27/96 11/27/96 Central Tractor Farm & Country JW Childs Equity Partners LP 17.5 17.5 18.8
12/06/96 12/06/96 MaxServ Inc (Sears Roebuck) Sears Roebuck & Co 19.2 67.6 55.0
01/21/97 01/21/97 Mafco Consolidated Grp (Mafco) Mafco Holdings Inc 23.5 23.5 27.6
01/28/97 01/28/97 Calgene Inc (Monsanto Co) Monsanto Co 62.0 60.0 60.0
06/02/97 06/02/97 cordia Inc (Anthem Inc) Anthem Inc 12.7 11.5 26.0
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Mean 31.2 % 33.9 % 37.0 %
Median 22.6 % 23.6% 28.8 %
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- ---------------------------------
Source: Securities Data Company, Inc. ("Acquisitions of Remaining Interest")
Wasserstein Perella & Co.
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PROJECT SOFA Control Premium Analysis
================================================================================
Premiums Over Initial Bid Price /(1)/
Original Final
Date Date Transaction Price/
Announced Announced Target Name Acquiror Name Value ($MM) Share
- --------- --------- ----------- ------------- ----------- -----
03/19/90 03/19/90 LPL Technologies Inc LPL Acquisition Corp $208.5 $25.00
12/10/91 10/04/91 P Leiner Nutritional Products PLI Investors Inc 78.7 15.00
11/06/92 09/17/92 La Petite Academy Inc La Petite Holdings Inc 157.5 10.00
10/18/93 10/18/93 Corporate Software Inc CS Acquisition Corp 94.3 15.00
01/05/96 01/05/96 Finl Institutions Ins Grp Ltd Investor Group 53.0 16.00
11/12/96 11/12/96 Leslie's Poolmart Investor Group 112.8 14.50 /(2)/
% Stock Premium Before
Original Original Announcement Date
Date Date --------------------------
Announced Announced Target Name Acquiror Name 1 Day 1 Week 4 Week
- --------- --------- ----------- ------------- ----- ------ ------
03/19/90 03/19/90 LPL Technologies Inc LPL Acquisition Corp 28.2 % 37.0 % 44.9 %
12/10/91 10/04/91 P Leiner Nutritional Products PLI Investors Inc 20.0 21.2 39.5
11/06/92 09/17/92 La Petite Academy Inc La Petite Holdings Inc 11.1 23.1 23.1
10/18/93 10/18/93 Corporate Software Inc CS Acquisition Corp 33.3 36.4 34.8
01/05/96 01/05/96 Finl Institutions Ins Grp Ltd Investor Group 9.4 -1.5 -4.1
11/12/96 11/12/96 Leslie's Poolmart Investor Group 26.1 31.8 31.8
Mean 21.4 % 24.7 % 28.3 %
Median 23.1 % 27.5 % 33.3 %
Original Initial
Date Date Price/
Announced Announced Target Name Acquiror Name Share Premium
- --------- --------- ----------- ------------- ----- -------
03/19/90 03/19/90 LPL Technologies Inc LPL Acquisition Corp $24.00 4.2 %
12/10/91 10/04/91 P Leiner Nutritional Products PLI Investors Inc 13.50 11.1
11/06/92 09/17/92 La Petite Academy Inc La Petite Holdings Inc 9.50 5.3
10/18/93 10/18/93 Corporate Software Inc CS Acquisition Corp 14.25 5.3
01/05/96 01/05/96 Finl Institutions Ins Grp Ltd Investor Group 15.00 6.7
11/12/96 11/12/96 Leslie's Poolmart Investor Group 14.50 0.0
Mean 5.4 %
Median 5.3 %
- ------------------
(1) Presents premiums paid over management's initial bid price for selected
Management Buyout Transactions completed from 1988 - Present between $50MM
and $500MM.
(2) The acquired company initiated an auction process which resulted in only 2
indications of interest (from financial buyers) at prices ranging from
$13.00-$14.50 in cash. Thereafter, a management group in conjunction with
one of the financial buyers acquired the Company for $14.50 per share.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------