1
EXHIBIT (b)(3)
INVESTMENT BANKING PRESENTATION
TO
THE SPECIAL COMMITTEE OF
THE BOARD OF DIRECTORS OF
CHAPARRAL STEEL COMPANY
JULY 29, 1997
THE ROBINSON-HUMPHREY COMPANY, INC.
INVESTMENT BANKERS SINCE 1894
2
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
I. MARKET COMPARISON OF SELECTED PUBLIC COMPANIES AND IMPLIED VALUATION
ANALYSIS
II. DISCOUNTED CASH FLOW MODEL
III. ANALYSIS OF PREMIUMS FOR MINORITY INTEREST ACQUISITIONS IN GOING
PRIVATE TRANSACTIONS
IV. ADJUSTED BOOK VALUE ANALYSIS
V. VALUATION BASED ON ANNUAL TONS CAPACITY
VI. ANALYSIS OF PROJECTED EARNINGS
3
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
Earnings Per Share [1]
-----------------------
52 Week Market Prices as
Latest ------------- Price % of Cal. Cal.
Ticker Exchange Company FYE Filing High Low 7/25/97 High LTM 1997 1998
- ------ -------- ------- --- ------ ---- --- ------- --------- --- ---- ----
MINIMILL STEEL COMPANIES
- ------------------------
BIR NYSE Birmingham Steel Corp. JE 3/97 $22.00 $14.12 $17.94 81.5% $0.59 $0.76 $1.52
CMC NYSE Commercial Metals Co. AU 5/97 33.50 27.12 31.63 94.4% 2.56 2.50 2.81
IPS NYSE IPSCO Inc. (in US$) DC 12/96 43.06 21.12 39.88 92.6% 3.01 3.06 4.23
KESI OTC Kentucky Electric Steel SP 3/97 7.87 4.12 5.50 69.9% (0.73) 0.00 0.65
LUC NYSE Lukens Inc. DC 3/97 22.37 13.50 18.31 81.9% (0.78) 0.18 1.39
NSS NYSE NS Group, Inc. SP 3/97 20.62 2.87 20.50 99.4% (0.24) 1.17 1.55
NWSW OTC Northwestern Steel & Wire JL 4/97 7.12 2.06 2.06 29.0% (0.14) (0.12) (0.01)
NUE OTC Nucor Corporation DC 3/97 60.68 44.75 58.81 96.9% 3.17 3.43 3.89
OS NYSE Oregon Steel Mills, Inc. DC 3/97 24.31 13.37 23.44 94.4% 1.08 1.09 1.66
NX NYSE Quanex Corporation OC 4/97 34.12 19.50 31.63 92.7% 2.27 2.43 3.12 F
RESC OTC Roanoke Electric Steel OC 4/97 19.00 11.75 19.00 100.0% 1.87 2.09 2.25 F
SCHN OTC Schnitzer Steel Industries AU 5/97 31.50 22.00 30.88 98.0% 1.57 2.12 2.65
SWVA OTC Steel Co. of West Virginia DC 3/97 10.87 5.25 10.50 96.6% 0.62 0.95 1.16
STLD OTC Steel Dynamics Inc. DC 3/97 28.75 16.50 25.63 89.1% 0.87 1.00 1.59
--------------------------------------------------------------------------------------------------------------------------
AVERAGE 87.0%
--------------------------------------------------------------------------------------------------------------------------
GIRDER MY 5/97 $15.37 $11.00 $15.25 99.2% $1.41 $1.55 $1.47
Price/Earnings Ratio
-------------------------
CAL. CAL. SHARES MARKET BOOK MARKET/
Ticker Exchange Company LTM 1997 1998 OUTSTANDING CAP'N VALUE BOOK
- ------ ------- ------- --- ---- ---- ----------- ------ ----- -------
(MM) ($MM) ($MM)
MINIMILL STEEL COMPANIES
- ------------------------
BIR NYSE Birmingham 30.4 * 23.6 * 11.8 X 29.678 $532.3 $ 472.9 1.1 X
CMC NYSE Commercial Metals Co. 12.4 12.7 11.3 14.682 464.3 342.1 1.4
IPS NYSE IPSCO Inc. (in US$) 13.2 13.0 9.4 27.104 1,080.8 585.5 1.8
KESI OTC Kentucky Electric Steel NM NM 8.5 4.623 25.4 33.7 0.8
LUC NYSE Lukens Inc. NM 101.7 * 13.2 14.940 273.6 238.5 1.1
NSS NYSE NS Group, Inc. NM 17.5 13.2 13.866 284.3 59.1 4.8 *
NWSW OTC Northwestern Steel & Wire NM NM NM 24.517 50.6 96.8 0.5
NUE OTC Nucor Corporation 18.6 17.1 15.1 * 87.852 5,166.8 1,666.9 3.1 *
OS NYSE Oregon Steel Mills, Inc. 21.7 * 21.5* 14.1 25.693 602.2 356.2 1.7
NX NYSE Quanex Corporation 13.9 13.0 10.1 13.729 434.2 244.8 1.8
RESC OTC Roanoke Electric Steel 10.2 9.1 8.4 7.501 142.5 98.0 1.5
SCHN OTC Schnitzer Steel Industries 19.7 14.6 11.7 10.183 314.4 232.5 1.4
SWVA OTC Steel Co. of West Virginia 16.9 11.1 9.1 5.991 62.9 50.6 1.2
STLD OTC Steel Dynamics Inc. 29.5 * 25.6 * 16.1 47.853 1,226.2 279.3 4.4 *
-----------------------------------------------------------------------------------------------------------------
AVERAGE 15.0 x 13.5 x 11.0 x 1.3 x
=================================================================================================================
GIRDER 10.8 x 9.8 x 10.4 x 28.404 $433.2 $ 326.3 1.3 x
- ------------------------------------------------
* Excluded from average. F - Fiscal Year Estimate.
NA - Not Available
NM - Not Meaningful
[1] Estimates are from the First Call Research Network dated 7/25/97.
4
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
TOTAL TOTAL TOTAL ------------------------------ EBIT EBITDA
COMPANY DEBT CASH FIRM VALUE [1] REVENUES EBIT EBITDA MARGIN MARGIN
- ------- ----- ----- -------------- --------- ---- ------ ------ ------
($MM) ($MM) ($MM) ($MM) ($MM) ($MM)
MINIMILL STEEL COMPANIES
- ------------------------
Birmingham Stell Corp. $518.5 $1.8 $1,049.0 $ 932.2 $ 49.6 [2] $ 93.0 [2] 5.3% 10.0%
Commercial Metals Co. 207.0 14.4 656.9 2,221.2 76.9 119.8 3.5% 5.4%
IPSCO Inc. (in US$) 285.3 167.8 1,198.4 595.6 91.6 105.9 15.4% 17.8%
Kentucky Electric Steel 30.2 0.1 55.5 96.5 (6.7) (3.4) (6.9%) (3.5%)
Lukens Inc. 262.7 9.1 527.2 954.3 5.1 54.6 0.5% 5.7%
NS Group, Inc. 166.2 19.8 430.7 431.6 23.4 42.0 5.4% 9.7%
Northwestern Steel & Wire 199.2 3.9 245.9 638.4 13.4 39.7 2.1% 6.2%
Nucor Corporation 188.2 168.4 5,186.6 3,781.4 409.2 602.3 10.8% 15.9%
Oregon Steel Mills, Inc. 347.6 7.8 942.0 672.0 49.8 78.9 7.4% 11.7%
Quanex Corporation 214.6 34.8 613.9 982.2 73.9 115.1 7.5% 11.7%
Roanoke Electric Steel 34.9 12.2 165.2 249.4 24.2 33.3 9.7% 13.4%
Schnitzer Steel Industries 105.4 4.0 415.8 346.7 26.3 42.8 7.6% 12.4%
Steel Co. of West Virginia 17.5 0.0 80.4 93.1 5.9 12.8 6.4% 13.8%
Steel Dynamics Inc. 206.4 48.2 1,384.5 318.4 42.7 64.2 13.4% 20.2%
AVERAGE 6.3% 10.7%
=======================================================================================================
GIRDER $65.0 $14.3 $483.9 $616.7 $69.8 $103.0 11.3% 16.7%
3 YEAR CAGR
-------------------
FIRM VALUE TO: NET
------------------------------------
REVENUES EBIT EBITDA REVENUE INCOME
-------- ---- ------ -------- ------
MINIMILL STEEL COMPANIES
- ------------------------
Birmingham Steel Corp. 1.13 x 21.1 * 1.13 x 8.8% NM
Commercial Metals Co. 0.30 8.5 5.5 18.1% 32.6%
[PSCO Inc. (in US$) 2.01 13.1 11.3 (2.6%) 20.1%
Kentucky Electric Steel 0.58 NM NM (2.1%) NM
Lukens Inc. 0.55 103.9 * 9.7 1.2% NM
NS Group, Inc. 1.00 18.4 10.3 16.2% NM
Northwestern Steel & Wire 0.39 18.3 6.2 4.7% 43.7%
Nucor Corporation 1.37 12.7 8.6 10.7% 4.6%
Oregon Steel Mills, Inc. 1.40 18.9 11.9 (4.0%) NM
Quanex Corporation 0.63 8.3 5.3 13.2% 32.1%
Roanoke Electric Steel 0.66 6.8 5.0 6.8% 14.0%
Schnitzer Steel Industries 1.20 15.8 9.7 13.9% 39.3%
Steel Co. of West Virginia 0.86 13.5 6.3 (12.4%) NM
Steel Dynamics Inc. 4.35 * 32.4 * 21.5 * NM NM
AVERAGE 0.93 x 13.4 x 8.4 x 5.6% 26.6%
=====================================================================
GIRDER 0.78 x 6.9 x 4.7 x 7.7% 43.2%
- --------------------------------------
* Excluded from average.
NA - Not Available
NM - Not Meaningful
[1] Firm value equals market capitalization plus total debt and preferred
stock minus cash and marketable securities.
[2] Excludes $ 11.6 million loss provision on mill modernization.
5
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
IMPLIED VALUATION ANALYSIS UTILIZING SELECTED PUBLIC COMPANIES UNIVERSE
-----------------------------------------------------------------------
(Dollars in Thousands)
Average Minimill Steel Companies Multiples
---------------------------------------------------------------------------
Valuation CSM Price/ Price/ Price/ Price/
Parameter Value LTM Earnings Cal. 1997 Earnings Cal. 1998 Earnings Book
- --------- ----- ------------- ------------------ ------------------ ----
LTM Earnings $ 40.2 15.0 x
Fiscal 1998 Earnings $ 61.8 13.5 x
Fiscal 1999 Earnings $ 65.2 11.0 x
Book Value at May 31, 1997 $326.3 1.3 x
AVERAGE MINIMILL STEEL COMPANIES MULTIPLES
-------------------------------------------------------- IMPLIED
VALUATION CSM FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM TOTAL DEBT
PARAMETER VALUE LTM REVENUES LTM EBITDA LTM EBIT VALUE LESS CASH [1]
- --------- ----- ------------- ------------------ --------------- ----- -------------
LTM Revenues $616.7 0.93 x $572.4 $50.7
LTM EBITDA $103.0 8.4 x $866.7 $50.7
LTM EBIT $ 69.8 13.4 x $938.8 $50.7
IMPLIED
IMPLIED EQUITY
EQUITY VALUE
VALUE PER SHARE
----- --------
LTM Earnings $601.8 $21.19
Fiscal 1998 Earnings $834.9 $29.39
Fiscal 1999 Earnings $715.9 $25.20
Book Value at May 31, 1997 $423.1 $14.90
LTM Revenues $521.7 $18.37
LTM EBITDA $816.0 $28.73
LTM EBIT $888.1 $31.27
Average $685.9 $24.15
Median $715.9 $25.20
- ---------------------------------------
* Excluded from average and median.
[1] Cash and debt as May 31, 1997.
6
GIRDER
Price and Volume
Daily: 12/31/93 to 07/25/97
[Graph]
Ticker Symbol: Girder Cusip Number: 15942210
7
GIRDER
Volume Distribution by Price Range
Daily: 12/31/93 to 07/25/97
[Graph]
Ticker Symbol: Girder Cusip Number: 15942210
8
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
PROJECTED EBITDA MARGIN ASSUMPTIONS
- -------------------------------------------------------------------------------
PROJECTED FISCAL YEAR ENDING MAY 31,
---------------------------------------------------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
CASE 1 19.3% 20.0% 19.1% 21.5% 23.2% 25.0%
CASE 2 16.9% 17.8% 17.3% 19.2% 21.0% 23.0%
CASE 3 19.3% 20.0% 20.2% 22.4% 24.9% 28.0%
CASE 4 12.9% 13.8% 13.0% 14.9% 16.9% 18.9%
CASE 5 16.5% 17.9% 17.5% 19.6% 22.0% 24.1%
CASE 6 16.5% 17.9% 12.4% 14.7% 17.1% 19.3%
========================================================================================
HISTORICAL 10 YEAR AVG. 15.8% 15.8% 15.8% 15.8% 15.8% 15.8%
9
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
PROJECTED CASH FLOWS
FORECAST FOR FISCAL YEARS 1998 - 2003
- --------------------------------------------------------------------------------
PROJECTED YEARS ENDING MAY 31,
HISTORICAL -------------------------------------
PROJECTIONS USED IN VALUATION (DOLLARS IN THOUSANDS): 1997 1998 1999 2000
--------- --------- --------- ---------
Sales $ 616,676 $ 705,569 $ 704,917 $ 957,727
Percent Change 14.4% -0.1% 35.9%
Cost of Sales 484,367 518,309 508,958 709,129
--------- --------- --------- ---------
Gross Profit 132,309 187,259 195,959 248,597
Gross Margin 21.5% 26.5% 27.8% 26.0%
Operating Expenses 62,350 82,183 87,240 117,311
Operating Income 69,959 105,076 108,719 131,286
Operating Margin 11.3% 14.9% 15.4% 13.7%
Income Taxes 31,072 44,975 46,505 55,983
--------- --------- --------- ---------
Effective Tax Rate 44.4% 42.8% 42.8% 42.6%
After-Tax Operating Income $ 38,887 $ 60,101 $ 62,214 $ 75,303
After-Tax Operating Margin 6.3% 8.5% 8.8% 7.9%
CASH SOURCES:
After-Tax Operating Income $ 38,887 $ 60,101 $ 62,214 $ 75,303
Depreciation & Amortization 33,153 31,082 32,098 51,292
Deferred Income Taxes & Other Credits (1,467) (1,592) 6,042 25,292
--------- --------- --------- ---------
TOTAL SOURCES $ 70,573 $ 89,591 $ 100,354 $ 151,887
========= ========= ========= =========
CASH USES:
Capital Expenditures $ 33,776 $ 95,000 $ 277,000 $ 127,492
Increase/(Decrease) in Net Working Capital 23,894 (3,344) (696) 36,715
--------- --------- --------- ---------
TOTAL USES $ 57,670 $ 91,656 $ 276,304 $ 164,207
========= ========= ========= =========
FREE CASH FLOW $ 12,903 $ (2,065) $(175,950) $ (12,320)
===================================================
PROJECTED YEARS ENDING MAY 31,
--------------------------------------
PROJECTIONS USED IN VALUATION (DOLLARS IN THOUSANDS): 2001 2002 2003
---------- ---------- ----------
Sales $1,081,029 $1,155,406 $1,224,321
Percent Change 12.9% 6.9% 6.0%
Cost of Sales 784,322 813,939 839,330
---------- ---------- ----------
Gross Profit 296,706 341,467 384,991
Gross Margin 27.4% 29.6% 31.4%
Operating Expenses 123,120 124,245 123,958
Operating Income 173,586 217,222 261,033
Operating Margin 16.1% 18.8% 21.3%
Income Taxes 73,749 92,076 110,477
---------- ---------- ----------
Effective Tax Rate 42.5% 42.4% 42.3%
After-Tax Operating Income $ 99,837 $ 125,146 $ 150,556
After-Tax Operating Margin 9.2% 10.8% 12.3%
CASH SOURCES:
After-Tax Operating Income $ 99,837 $ 125,146 $ 150,556
Depreciation & Amortization 54,665 50,909 46,609
Deferred Income Taxes & Other Credits 22,269 28,270 17,936
---------- ---------- ----------
TOTAL SOURCES $ 176,771 $ 204,325 $ 215,101
========== ========== ==========
CASH USES:
Capital Expenditures $ 57,491 $ 40,000 $ 40,000
Increase/(Decrease) in Net Working Capital 14,983 5,982 6,020
---------- ---------- ----------
TOTAL USES $ 72,474 $ 45,982 $ 46,020
========== ========== ==========
FREE CASH FLOW $ 104,297 $ 158,343 $ 169,081
======================================
10
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
COST AND REVENUE ASSUMPTIONS
FORECAST FOR FISCAL YEARS 1998 - 2003
1998 1999 2000 2001 2002 2003
--------- --------- --------- --------- --------- ---------
TONS OF STEEL SOLD
Bar Products 493,000 450,000 480,000 525,000 525,000 525,000
Structural Products 1,231,400 1,250,000 1,320,000 1,350,000 1,350,000 1,350,000
Castelite 10,945 15,000 20,000 20,000 20,000 20,000
Star 2000 34,107 40,000 40,000 40,000 40,000 40,000
Structural Mill - East 0 0 500,000 700,000 850,000 1,000,000
Star 2000 - East 0 0 12,000 16,000 20,000 24,000
--------- --------- --------- --------- --------- ---------
Total 1,769,452 1,755,000 2,372,000 2,651,000 2,805,000 2,959,000
NET SELLING PRICE
Bar Products 351.68 351.75 353.09 365.35 377.14 377.14
Structural Products 400.13 398.80 398.75 398.73 398.73 398.73
Castelite 850.00 850.00 850.00 850.00 850.00 850.00
Star 2000 884.49 884.49 884.49 884.49 884.49 884.49
Structural Mill - East 0.00 0.00 397.80 406.29 410.65 414.43
Star 2000 - East 0.00 0.00 884.49 884.49 884.49 884.49
COST OF SALES
Bar Products 287.68 289.06 289.43 289.48 289.43 289.43
Structural Products 286.00 280.00 280.00 280.00 280.00 280.00
Castelite 806.00 715.00 715.00 715.00 715.00 715.00
Star 2000 453.90 453.90 453.90 453.90 453.90 453.90
Structural Mill - East 0.00 0.00 325.40 306.61 285.24 266.03
Star 2000 - East 0.00 0.00 453.90 453.90 453.90 453.90
11
PROJECT GIRDER
WORKING CAPITAL ASSUMPTIONS
FORECAST FOR FISCAL YEARS 1998 - 2003
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
HISTORICAL PROJECTED YEARS ENDING MAY 31,
-------------------- -----------------------------------
BALANCE SHEET DATA 1996 1997 1998 1999 2000
-------- --------- --------- -------- --------
Current Assets less Cash and Equivalents
Accounts Receivable $ 49,530 $ 66,266 $ 69,845 $ 69,750 $ 94,737
Inventory 121,791 131,034 132,880 130,721 168,760
Prepaid Expenses 7,757 9,218 8,500 8,500 11,000
-------- --------- --------- -------- --------
179,078 206,518 211,225 208,971 274,497
Current Liabilities less Current Debt
Accounts Payable $ 34,131 $ 31,466 $ 37,419 $ 36,743 $ 56,100
Accrued Expenses 14,470 20,681 22,779 21,897 31,351
-------- --------- --------- -------- --------
48,601 52,147 60,198 58,640 87,451
Working Capital Less Cash and Equivalents and Current Debt $130,477 $ 154,371 $ 151,027 $150,331 $187,046
CHANGE IN NEW WORKING CAPITAL $ 23,894 ($ 3,344) ($ 696) $ 36,715
Accounts Receivable as a % of Sales 10.7% 9.9% 9.9% 9.9%
Days Receivable 39.2 36.1 36.1 36.1
Inventory as a % of Cost of Goods Sold 27.1% 25.6% 25.7% 23.8%
Inventory Turns 3.7 3.9 3.9 4.2
Accounts Payable as a % of Cost of Goods Sold 6.5% 7.2% 7.2% 7.9%
Days Payable 23.7 26.4 26.4 28.9
PROJECTED YEARS ENDING MAY 31,
--------------------------------
BALANCE SHEET DATA 2001 2002 2003
-------- -------- --------
Current Assets less Cash and Equivalents
Accounts Receivable $106,873 114,159 120,937
Inventory 183,300 189,007 193,874
Prepaid Expenses 11,000 11,000 11,000
-------- -------- --------
301,173 314,166 325,811
Current Liabilities less Current Debt
Accounts Payable $ 63,097 66,099 68,673
Accrued Expenses 36,047 40,056 43,107
-------- -------- --------
99,144 106,155 111,780
Working Capital Less Cash and Equivalents and Current Debt $202,029 $208,011 $214,031
CHANGE IN NEW WORKING CAPITAL $ 14,983 $ 5,982 $ 6,020
Accounts Receivable as a % of Sales 9.9% 9.9% 9.9%
Days Receivable 36.1 36.1 36.1
Inventory as a % of Cost of Goods Sold 23.4% 23.2% 23.1%
Inventory Turns 4.3 4.3 4.3
Accounts Payable as a % of Cost of Goods Sold 8.0% 8.1% 8.2%
Days Payable 29.4 29.6 29.9
12
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
EBITDA MULTIPLE METHODOLOGY
FORECAST FOR FISCAL YEARS 1998 - 2003
(DOLLARS IN THOUSANDS)
SUMMARY:
Discount Rate: 21.00%
Multiple: 4.5
EBITDA Terminal Value: $307,642
Present Value of Cash Flows: $ 34,741
Present Value of Terminal Value: $441,109
--------
Total Value: $475,850
========
Plus: Cash $ 14,291
Less: Debt $ 64,999
--------
Equity Value: $425,142
========
EQUITY VALUE PER SHARE: $ 14.98
Discount Rate 19.00% 20.00% 21.00% 22.00% 23.00%
Present Value of Cash Flows: $ 44,609 $ 39,520 $ 34,741 $ 30,254 $ 26,040
Present Value of Terminal Value:
3.0 x $325,001 $309,086 $294,073 $279,903 $266,524
3.5 $379,168 $360,600 $343,085 $326,554 $310,945
4.0 $433,335 $412,115 $392,097 $373,204 $355,365
Multiple 4.5 $487,502 $463,629 $441,109 $419,855 $399,786
5.0 $541,669 $515,143 $490,121 $466,505 $444,207
5.5 $595,836 $566,658 $539,133 $513,156 $488,627
6.0 $650,003 $618,172 $588,145 $559,806 $533,048
Total Value:
3.0 x $369,610 $348,606 $328,814 $310,157 $292,563
3.5 $423,777 $400,120 $377,826 $356,808 $336,984
4.0 $477,944 $451,634 $426,838 $403,458 $381,405
Multiple 4.5 $532,110 $503,149 $475,850 $450,109 $425,825
5.0 $586,277 $554,663 $524,862 $496,759 $470,246
5.5 $640,444 $606,177 $573,875 $543,410 $514,667
6.0 $694,611 $657,692 $622,887 $590,060 $559,087
Equity Value:
3.0 x $318,902 $297,898 $278,106 $259,449 $241,855
3.5 $373,069 $349,412 $327,118 $306,100 $286,276
4.0 $427,236 $400,926 $376,130 $352,750 $330,697
Multiple 4.5 $481,402 $452,441 $425,142 $399,401 $375,117
5.0 $535,569 $503,955 $474,154 $446,051 $419,538
5.5 $589,736 $555,469 $523,167 $492,702 $563,959
6.0 $643,903 $606,984 $572,179 $539,352 $508,379
Equity Value Per Share:
3.0 x $ 11.23 $ 10.49 $ 9.80 $ 9.14 $ 8.52
3.5 $ 13.14 $ 12.31 $ 11.52 $ 10.78 $ 10.09
4.0 $ 15.05 $ 14.12 $ 13.25 $ 12.43 $ 11.65
Multiple 4.5 $ 16.96 $ 15.94 $ 14.98 $ 14.07 $ 13.21
5.0 $ 18.87 $ 17.75 $ 16.70 $ 15.71 $ 14.78
5.5 $ 20.78 $ 19.57 $ 18.43 $ 17.36 $ 16.34
6.0 $ 22.68 $ 21.38 $ 20.16 $ 19.00 $ 17.91
Implied Total Value/Fiscal 1997 EBITDA Multiple:
3.0 x 3.6 x 3.4 x 3.2 x 3.0 x 2.8 x
3.5 4.1 x 3.9 3.7 3.5 3.3
4.0 4.6 4.4 4.1 3.9 3.7
Multiple 4.5 5.2 4.9 4.6 4.4 4.1
5.0 5.7 5.4 5.1 4.8 4.6
5.5 6.2 5.9 5.6 5.3 5.0
6.0 6.7 6.4 6.0 5.7 5.4
13
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
SELECTED M&A TRANSACTION PREMIUMS FOR MINORITY INTEREST ACQUISITIONS IN GOING
PRIVATE TRANSACTIONS
1/1/92 - 7/25/97
VALUE OF PRICE
TRANSACTION PERCENT PER
DATE ACQUIROR TARGET TARGET BUSINESS DESCRIPTION ($MM) SOUGHT SHARE
- -------- ------------- ------ --------------------------- ------- ------ -------
06/25/92 Katy Holdings Katy Industries, Inc. Mnfr industrial machinery 190.047 48.1% 25.75
07/29/92 Investor Group Fretter Inc Home appliances, electronics 102.182 24.0% 4.00
01/04/93 Investor Group United Medical Corp Whl medical supplies 19.473 48.0% 9.50
02/19/93 National Mutual Insurance Co. Celina Financial Corp Insurance agents 7.482 44.4% 5.80
08/12/93 REMEC Inc Humphrey Inc Mnfr precision instruments 10.302 48.5% 6.00
04/28/94 Investor Group Enquirer/Star Group Inc Publish tabloid newspapers 1067.888 43.0% 17.50
09/13/94 Investor Group LDB Corp Mnfr mobile wholes; whl carpets 17.766 31.0% 7.50
11/15/94 Freeman Spogli & Co Koll Management Services(Koll) Real estate management svcs 109.062 48.0% 33.20
03/15/95 LinPac Mouldings Ltd Ropak Corp Manufacture plastic containers 79.638 45.2% 11.00
05/19/95 BIC SA Bic Corp (BIC SA) Mnfr writing instruments 906.058 22.0% 40.50
08/25/95 Berkshire Hathaway Inc. GEICO Corp. Insurance and financial svcs 5441.824 47.6% 70.00
08/30/95 Investor Group Syms Corp Own, op men's clothing store 160.687 22.0% 8.75
09/26/95 SCOR SCOR US Corp (SCOR SA) Reinsurance holding company 386.745 20.0% 15.25
11/06/95 Investor Group NPC International Inc Own and operate restaurants 298.189 38.0% 9.00
03/29/96 Equity Holdings Ltd Great American Mgmt & Invt Inc Invt advice and financial svcs 746.409 12.1% 50.00
05/27/96 Novartis AG SyStemix Inc (Sandoz AG) Mnfr, dvlp cellular processes 401.596 26.3% 19.50
06/21/96 Seaboard Acquisition Partners Seaboard Oil Co Oil and gas exploration, prodn 10.769 29.0% 9.75
10/03/96 Electromagnetic Sciences LXE Radio control devices 13.500 28.0% 13.13
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) Manufacture steel 437.182 15.5% 10.00
11/20/96 Andrews Group Inc Toy Biz Inc Mnfr games and toys 452.237 33.0% 22.50
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country Own, op tractor, hardware stores 169.606 34.6% 14.25
01/21/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) Mnfr cosmetics, beauty products 980.318 15.0% 33.50
Pending Gold Kist Golden Poultry Company Poultry Processing 230.600 25.5% 14.25
AVERAGE 32.6%
MEDIAN 31.0%
PREMIUM PREMIUM
1 DAY 1 WEEK
PRIOR TO PRIOR TO
ANNOUNCEMENT ANNOUNCEMENT
DATE ACQUIROR TARGET TARGET BUSINESS DESCRIPTION DATE DATE
- -------- ------------- ------ --------------------------- ------------ -----------
06/25/92 Katy Holdings Katy Industries, Inc. Mnfr industrial machinery 53.7% 51.5%
07/29/92 Investor Group Fretter Inc Home appliances, electronics 77.8 100.0
01/04/93 Investor Group United Medical Corp Whl medical supplies 49.0 52.0
02/19/93 National Mutual Insurance Co. Celina Financial Corp Insurance agents 16.0 36.5
08/12/93 REMEC Inc Humphrey Inc Mnfr precision instruments 18.5 14.3
04/28/94 Investor Group Enquirer/Star Group Inc Publish tabloid newspapers 20.7 20.7
09/13/94 Investor Group LDB Corp Mnfr mobile wholes; whl carpets 42.9 42.9
11/15/94 Freeman Spogli & Co Koll Management Services(Koll) Real estate management svcs 107.5 107.5
03/15/95 LinPac Mouldings Ltd Ropak Corp Manufacture plastic containers 4.8 6.0
05/19/95 BIC SA Bic Corp (BIC SA) Mnfr writing instruments 13.3 12.5
08/25/95 Berkshire Hathaway Inc. GEICO Corp. Insurance and financial svcs 25.6 23.1
08/30/95 Investor Group Syms Corp Own, op men's clothing store 11.1 9.4
09/26/95 SCOR SCOR US Corp (SCOR SA) Reinsurance holding company 37.1 35.6
11/06/95 Investor Group NPC International Inc Own and operate restaurants 44.0 44.0
03/29/96 Equity Holdings Ltd Great American Mgmt & Invt Inc Invt advice and financial svcs 2.6 4.2
05/27/96 Novartis AG SyStemix Inc (Sandoz AG) Mnfr, dvlp cellular processes 4.7 69.6
06/21/96 Seaboard Acquisition Partners Seaboard Oil Co Oil and gas exploration, prodn 11.4 11.4
10/03/96 Electromagnetic Sciences LXE Radio control devices 22.1 14.1
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) Manufacture steel 17.6 29.0
11/20/96 Andrews Group Inc Toy Biz Inc Mnfr games and toys 29.5 25.9
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country Own, op tractor, hardware stores 17.5 17.5
01/21/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) Mnfr cosmetics, beauty products 23.5 23.5
Pending Gold Kist Golden Poultry Company Poultry Processing 28.1 31.0
AVERAGE 29.5 34.0
MEDIAN 22.1 25.9
PREMIUM
4 WEEKS
PRIOR TO
ANNOUNCEMENT
DATE ACQUIROR TARGET TARGET BUSINESS DESCRIPTION DATE
- -------- ------------- ------ --------------------------- ------------
06/25/92 Katy Holdings Katy Industries, Inc. Mnfr industrial machinery 46.1%
07/29/92 Investor Group Fretter Inc Home appliances, electronics 52.4
01/04/93 Investor Group United Medical Corp Whl medical supplies 49.0
02/19/93 National Mutual Insurance Co. Celina Financial Corp Insurance agents 36.5
08/12/93 REMEC Inc Humphrey Inc Mnfr precision instruments 45.5
04/28/94 Investor Group Enquirer/Star Group Inc Publish tabloid newspapers 7.7
09/13/94 Investor Group LDB Corp Mnfr mobile wholes; whl carpets 42.9
11/15/94 Freeman Spogli & Co Koll Management Services(Koll) Real estate management svcs 114.2
03/15/95 LinPac Mouldings Ltd Ropak Corp Manufacture plastic containers 4.8
05/19/95 BIC SA Bic Corp (BIC SA) Mnfr writing instruments 28.6
08/25/95 Berkshire Hathaway Inc. GEICO Corp. Insurance and financial svcs 25.3
08/30/95 Investor Group Syms Corp Own, op men's clothing store 25.0
09/26/95 SCOR SCOR US Corp (SCOR SA) Reinsurance holding company 38.6
11/06/95 Investor Group NPC International Inc Own and operate restaurants 33.3
03/29/96 Equity Holdings Ltd Great American Mgmt & Invt Inc Invt advice and financial svcs 3.6
05/27/96 Novartis AG SyStemix Inc (Sandoz AG) Mnfr, dvlp cellular processes 59.2
06/21/96 Seaboard Acquisition Partners Seaboard Oil Co Oil and gas exploration, prodn 39.3
10/03/96 Electromagnetic Sciences LXE Radio control devices 19.3
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) Manufacture steel 77.8
11/20/96 Andrews Group Inc Toy Biz Inc Mnfr games and toys 20.0
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country Own, op tractor, hardware stores 18.8
01/21/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) Mnfr cosmetics, beauty products 27.6
Pending Gold Kist Golden Poultry Company Poultry Processing 29.5
AVERAGE 36.7%
MEDIAN 33.3%
14
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
IMPLIED VALUATION ANALYSIS UTILIZING SELECTED PREMIUMS FROM MINORITY
INTEREST/GOING PRIVATE TRANSACTIONS
(DOLLARS IN THOUSANDS)
MEDIAN PREMIUM
----------------------------------------------------
GIRDER IMPORTANCE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
VALUATION PARAMETER[1] VALUE WEIGHTING TO ANNOUNCEMENT TO ANNUNCEMENT TO AANOUNCEMENT
- ---------------------------------------- --------- ----------- --------------- --------------- ----------------
Stock Price 1 Day Prior to Announcement $12.88 35.0% 22.1%
Stock Price 1 Week Prior to Announcement 12.38 35.0% 25.9%
Stock Price 4 Weeks Prior to Announcement 11.63 30.0% 33.3%
IMPLIED
EQUITY
IMPLIED VALUE
EQUITY PER
VALUATION PARAMETER[1] VALUE SHARE[1]
- ---------------------------------------- -------- ----------
Stock Price 1 Day Prior to Announcement $446,517 $15.72
Stock Price 1 Week Prior to Announcement 442,533 15.58
Stock Price 4 Weeks Prior to Announcement 440,147 15.50
======== ======
WEIGHTED AVERAGE: $443,221 $15.60
UNWEIGHTED AVERAGE: $443,066 $15.60
=========================================
- --------------------------
*Excluded from the unweighted average.
[1] Announcement of merger discussions occured on 5/22/97.
15
PROJECT GIRDER
ADJUSTED BOOK VALUE ANALYSIS
- --------------------------------------------------------------------------------
INPUTS
5/31/97 Tangible Book Value[1] $267,779 5/31/97 Shares 28,404
5/31/97 Accumulated
Depreciation $308,359
================================================================================
Percent of Accumulated Depreciation Added Back
50.0% 55.0% 60.0% 65.0% 70.0% 75.0%
---------------------------------------------------------------
Tangible Book Value[1] $267,779 $267,779 $267,779 $267,779 $267,779 $267,779
Depreciation Add-Back 154,180 169,597 185,015 200,433 215,851 231,269
--------------------------------------------------------------
Adjusted Book Value $421,959 $437,376 $452,794 $468,212 $483,630 $499,048
==============================================================
Adjusted B.V. per Share $ 14.86 $ 15.40 $ 15.94 $ 16.48 $ 17.03 $ 17.57
==============================================================
- -------------------------------
[1] Excludes goodwill, commissioning costs and other assets of $58.5 million.
16
The Robinson-Humphrey Company, Inc.
PROJECT GIRDER
VALUATION ANALYSIS USING ANNUAL TONS CAPACITY
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
NEW STEEL PLANT CONSTRUCTIONS TONS/YR $/
$MM 000s TON
------ ------- --------
Steel Dynamics-Butler, Indiana $290.0 1,400 $207.14
IPSCO-Muscatine, Iowa $360.0 1,300 $276.92
Nucor Berkeley $525.0 1,800 $291.67
Gallatin Steel $410.0 1,200 $341.67
Chaparral-Structural Mill $390.0 1,000 $390.00
-------
AVERAGE $301.48
============================
IMPLIED VALUATION USING AVERAGE $MM/TON
GIRDER
TONS/YR. $/ FIRM NET EQUITY PER
000s x TON = VALUE - DEBT = VALUE OR SHARE
1,605 $301.48 $483,831 $50,708 $433,123 $15.25
=============================================================================================
17
PROJECT GIRDER
Analysis of Projected Earnings
- --------------------------------------------------------------------------------
PRESENT EQUITY
PROJECTED ASSUMED 2003 VALUE VALUE
PROBABILITY 2003 P/E EQUITY DISCOUNTED PER
WEIGHTING EARNINGS MULTIPLE VALUE @20% SHARE
----------- --------- -------- ---------- ---------- -------
Case 1 25.0% $134,441 11.0x $1,478,851 $495,264 $17.44
Case 2 25.0% 93,355 11.0 1,026,905 343,908 12.11
Case 3 25.0% 171,056 11.0 1,881,616 630,149 22.19
Case 4 25.0% 58,782 11.0 646,602 216,546 7.62
-------- ------
WEIGHTED AVERAGE $421,467 $14.84
======================================================