1
COPY # __
THERMO VOLTEK CORP.
PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
NOVEMBER 24, 1998
HSBC INVESTMENT BANKING [LOGO]
2
Table of Contents
I. Transaction Overview
II. Historical Financial Review
III. Historical Stock Price Performance and Trading Volume
IV. Ownership Analysis
V. Projected Financial Review
VI. Market Comparison of Selected Public Companies and Implied Valuation
Analysis
VII. Discounted Cash Flow Analysis and Implied Valuation Analysis
VIII. Analysis of Selected Merger and Acquisition Transactions and Implied
Valuation Analysis
IX. Analysis of Premiums for Minority Interest Acquisitions in Going
Private Transactions and Implied Valuation Analysis
3
SECTION I
HSBC Securities, Inc. THERMO VOLTEK CORP.
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ANALYSIS OF PROPOSED TRANSACTION
($ in thousands, except per share data)
Purchase
Price Per Diluted Option Equity Enterprise
Share Shares (a) Proceeds Value Debt Cash (b) Value
- --------- ---------- -------- ------ ---- -------- ----------
$ 7.00 x 11,566,538 - $ 1,972 = $ 78,994 + $ 9,012 - $ 17,905 = $ 70,101
EQUITY VALUE AS A MULTIPLE OF:
Fiscal Fiscal Fiscal
Pro forma (c) 1997 LTM (d) 1998 1999
- ------------- ------ ------- ------ ------
Net income (e) 99.5 x 103.0 x 154.6 x 37.3 x
Book value (f) 4.4 x 4.2 x 4.3 x 3.8 x
ENTERPRISE VALUE AS A MULTIPLE OF:
Fiscal Fiscal Fiscal
Pro forma (c) 1997 LTM (d) 1998 1999
- ------------- ------ ------- ------ ------
Revenues 1.7 x 1.9 x 2.0 x 2.0 x
EBITDA 32.5 x 28.5 x 34.4 x 15.2 x
EBIT 374.9 x 160.8 x 762.0 x 25.1 x
STOCK PRICE PRIOR TO ANNOUNCEMENT DATE (g)
1 Day 1 Week 4 Weeks
------ ------ -------
Actual value $ 4.81 $ 4.38 $ 5.00
Premium at $7.00 per share 45.5% 60.0% 40.0%
(a) Includes 8,687,258 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 414,191 shares
issuable upon exercise of options. The shares issuable result from (i)
options whose exercise price is below the $7.00 offer and (ii)
subordinated convertible notes whose conversion price is below the
$7.00 offer.
(b) Cash includes marketable securities and estimated proceeds from the
sale of the Universal Voltronics division
(c) Data are pro forma for the sale of the Universal Voltronics division
(d) Latest twelve months for the period ending October 3, 1998
(e) Excludes non-recurring items and interest expense on convertible
securities
(f) Book value excludes intangible assets
(g) Assumes announcement date on March 31, 1998
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November 1998 Confidential
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4
SECTION II
HSBC Securities, Inc. THERMO VOLTEK CORP.
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HISTORICAL INCOME STATEMENT INFORMATION
($ in thousands, except per share data)
FISCAL YEAR
----------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
REVENUES $ 18,089 $ 23,641 $ 36,326 $ 48,507 $ 44,648
Cost of revenues (9,687) (12,120) (18,790) (24,357) (24,860)
-------- -------- -------- -------- --------
Gross profit 8,402 11,521 17,536 24,150 19,788
SG&A expenses (6,008) (8,027) (11,766) (14,889) (15,992)
Research and development expenses (1,240) (1,492) (2,349) (3,618) (3,620)
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS) 1,154 2,002 3,421 5,643 176
Interest income 179 1,697 2,073 1,774 1,247
Interest expense (807) (2,216) (2,130) (1,408) (1,162)
Gain on sale of related-party investments -- -- -- -- 180
Other income 225 -- -- -- 53
-------- -------- -------- -------- --------
Income before provision for income taxes 751 1,483 3,364 6,009 494
Benefit (provision) for income taxes (271) (365) (692) (1,540) (215)
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 480 $ 1,118 $ 2,672 $ 4,469 $ 279
======== ======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ 0.08 $ 0.19 $ 0.41 $ 0.51 $ 0.03
Diluted $ 0.08 $ 0.17 $ 0.28 $ 0.38 $ 0.03
WEIGHTED AVERAGE SHARES:
Basic 5,896 5,995 6,528 8,827 9,182
Diluted 6,014 7,202 13,512 13,628 9,305
EBITDA (a) $ 1,745 $ 2,950 $ 4,950 $ 7,279 $ 2,293
Depreciation and amortization 591 948 1,529 1,636 2,117
Annual revenue growth 39.2% 30.7% 53.7% 33.5% (8.0%)
Gross margin 46.4% 48.7% 48.3% 49.8% 44.3%
EBITDA margin 9.6% 12.5% 13.6% 15.0% 5.1%
Operating margin 6.4% 8.5% 9.4% 11.6% 0.4%
Net margin 2.7% 4.7% 7.4% 9.2% 0.6%
(a) Defined as operating income (loss) before depreciation and amortization
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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HISTORICAL INCOME STATEMENT INFORMATION
($ in thousands, except per share data)
FISCAL 1996
--------------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
REVENUES $ 10,621 $ 11,882 $ 12,800 $ 13,204
Cost of revenues (5,390) (6,153) (6,470) (6,344)
-------- -------- -------- --------
Gross profit 5,231 5,729 6,330 6,860
SG&A expenses (3,261) (3,519) (3,792) (4,317)
Research and development expenses (710) (821) (1,007) (1,080)
-------- -------- -------- --------
OPERATING INCOME (LOSS) 1,260 1,389 1,531 1,463
Interest income 502 492 399 381
Interest expense (435) (402) (297) (274)
Gain on sale of related-party investments -- -- -- --
Other income -- -- -- --
-------- -------- -------- --------
Income before provision for income taxes 1,327 1,479 1,633 1,570
Benefit (provision) for income taxes (390) (347) (439) (364)
-------- -------- -------- --------
NET INCOME (LOSS) $ 937 $ 1,132 $ 1,194 $ 1,206
======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ 0.12 $ 0.13 $ 0.13 $ 0.13
Diluted $ 0.09 $ 0.10 $ 0.10 $ 0.10
WEIGHTED AVERAGE SHARES:
Basic 7,703 8,528 9,451 9,625
Diluted 13,632 13,636 13,615 13,627
EBITDA (a) $ 1,682 $ 1,796 $ 1,989 $ 1,812
Depreciation and amortization 422 407 458 349
Quarterly revenue growth (3.6%) 11.9% 7.7% 3.2%
Gross margin 49.3% 48.2% 49.5% 52.0%
EBITDA margin 15.8% 15.1% 15.5% 13.7%
Operating margin 11.9% 11.7% 12.0% 11.1%
Net margin 8.8% 9.5% 9.3% 9.1%
(a) Defined as operating income (loss) before depreciation and amortization
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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HISTORICAL INCOME STATEMENT INFORMATION
($ in thousands, except per share data)
FISCAL 1997
--------------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
REVENUES $ 9,716 $ 11,888 $ 11,132 $ 11,912
Cost of revenues (5,451) (6,442) (6,149) (6,818)
-------- -------- -------- --------
Gross profit 4,265 5,446 4,983 5,094
SG&A expenses (4,064) (4,174) (3,612) (4,142)
Research and development expenses (847) (1,023) (842) (908)
-------- -------- -------- --------
OPERATING INCOME (LOSS) (646) 249 529 44
Interest income 393 305 269 280
Interest expense (284) (296) (289) (293)
Gain on sale of related-party investments -- -- 180 --
Other income -- -- -- 53
-------- -------- -------- --------
Income before provision for income taxes (537) 258 689 84
Benefit (provision) for income taxes 204 (98) (262) (59)
-------- -------- -------- --------
NET INCOME (LOSS) $ (333) $ 160 $ 427 $ 25
======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ (0.03) $ 0.02 $ 0.05 $ --
Diluted $ (0.03) $ 0.02 $ 0.05 $ --
WEIGHTED AVERAGE SHARES:
Basic 9,832 9,222 8,837 8,837
Diluted 9,832 9,353 12,466 8,912
EBITDA (a) $ (156) $ 684 $ 1,037 $ 247
Depreciation and amortization 490 435 508 203
Quarterly revenue growth (26.4%) 22.4% (6.4%) 7.0%
Gross margin 43.9% 45.8% 44.8% 42.8%
EBITDA margin (1.6%) 5.8% 9.3% 2.1%
Operating margin (6.6%) 2.1% 4.8% 0.4%
Net margin (3.4%) 1.3% 3.8% 0.2%
(a) Defined as operating income (loss) before depreciation and amortization
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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HISTORICAL INCOME STATEMENT INFORMATION
($ in thousands, except per share data)
FISCAL 1998
------------------------------------
FIRST SECOND THIRD
-------- -------- --------
REVENUES $ 11,440 $ 10,725 $ 8,671
Cost of revenues (6,218) (5,902) (5,237)
-------- -------- --------
Gross profit 5,222 4,823 3,434
SG&A expenses (3,607) (3,266) (3,411)
Research and development expenses (793) (672) (627)
-------- -------- --------
OPERATING INCOME (LOSS) 822 885 (604)
Interest income 249 233 223
Interest expense (287) (299) (284)
Gain on sale of related-party investments -- -- --
Other income 69 -- --
-------- -------- --------
Income before provision for income taxes 853 819 (665)
Benefit (provision) for income taxes (342) (327) 266
-------- -------- --------
NET INCOME (LOSS) $ 511 $ 492 $ (399)
======== ======== ========
EARNINGS PER SHARE:
Basic $ 0.06 $ 0.06 $ (0.05)
Diluted $ 0.05 $ 0.05 $ (0.05)
WEIGHTED AVERAGE SHARES:
Basic 8,762 8,675 8,683
Diluted 12,235 11,891 8,683
EBITDA (a) $ 1,371 $ 1,377 $ (94)
Depreciation and amortization 549 492 510
Quarterly revenue growth (4.0%) (6.3%) (19.2%)
Gross margin 45.6% 45.0% 39.6%
EBITDA margin 12.0% 12.8% (1.1%)
Operating margin 7.2% 8.3% (7.0%)
Net margin 4.5% 4.6% (4.6%)
(a) Defined as operating income (loss) before depreciation and amortization
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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HISTORICAL BALANCE SHEET INFORMATION
($ in thousands)
Fiscal Year
-----------------------------------------------
ASSETS 1994 1995 1996 1997
-------- -------- -------- --------
Cash and cash equivalents $ 8,955 $ 8,651 $ 17,874 $ 14,608
Available-for-sale investments 28,105 26,038 10,067 3,041
Short-term investments, at cost -- -- -- --
Accounts receivable 6,161 8,680 12,123 10,388
Inventories 5,749 8,581 10,725 10,981
Prepaid income taxes and other 772 1,022 2,025 1,999
-------- -------- -------- --------
Total current assets 49,742 52,972 52,814 41,017
Net PP&E 2,106 3,144 4,151 3,682
Long-term prepaid income taxes 980 648 299 539
Goodwill 9,396 12,081 16,425 18,058
-------- -------- -------- --------
TOTAL ASSETS $ 62,224 $ 68,845 $ 73,689 $ 63,296
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Notes payable $ 781 $ 1,276 $ 1,666 $ 2,376
Accounts payable 2,698 3,966 3,718 3,194
Accrued payroll and employee 879 1,128 1,264 1,159
Accrued income taxes 270 1,103 1,244 489
Other accrued expenses 1,744 2,834 3,106 3,242
Due to parent and affiliates 1,380 839 901 694
-------- -------- -------- --------
Total current liabilities 7,752 11,146 11,899 11,154
Subordinated convertible obligations 46,000 36,740 19,345 17,750
Common stock 202 244 488 497
Capital in excess of par value 11,237 20,545 37,762 38,799
Retained earnings (2,857) (185) 4,284 4,563
Treasury stock (50) (20) (69) (8,836)
Cumulative translation adjustment 260 229 (56) (631)
Net unrealized gain on investments (320) 146 36 --
-------- -------- -------- --------
Shareholders' investment 8,472 20,959 42,445 34,392
-------- -------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 62,224 $ 68,845 $ 73,689 $ 63,296
======== ======== ======== ========
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November 1998 Confidential
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SECTION III
HSBC Securities, Inc. THERMO VOLTEK CORP.
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DAILY CLOSING PRICE AND AVERAGE VOLUME
[GRAPH DEPICTING THE THERMO VOLTEK CORP. DAILY CLOSING STOCK PRICES AND
AVERAGE TRADING VOLUME FROM NOVEMBER 21, 1997 TO NOVEMBER 24, 1998. DURING THIS
PERIOD, THE HIGH CLOSING PRICE IS INDICATED AS $7.19, THE LOW AS $4.38 AND THE
LAST AS $6.69.]
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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DAILY CLOSING PRICE AND AVERAGE VOLUME
[GRAPH DEPICTING THE THERMO VOLTEK CORP. DAILY CLOSING STOCK PRICES AND
AVERAGE TRADING VOLUME FROM MARCH 27, 1997 TO MARCH 30, 1998. DURING THIS
PERIOD, THE HIGH CLOSING PRICE IS INDICATED AS $9.50, THE LOW AS $4.38 AND THE
LAST AS $4.81.]
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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DAILY CLOSING PRICE INDEX COMPARISON
[GRAPH DEPICTING AN INDEXED PRICE COMPARISON FROM NOVEMBER 21, 1997 TO
NOVEMBER 23, 1998 OF THERMO VOLTEK CORP. (TVL), THE TOTAL RETURN S&P SMALLCAP
INDEX (SMLK.R) AND A COMPOSITE INDEX OF COMPANIES COMPARABLE TO THERMO VOLTEK
CORP. (COMPS).]
LEGEND
TVL Thermo Voltek
SMLK.R S&P SmallCap Index. Dividends reinvested. Weighted by market
capitalization.
COMPS Composite index of Advanced Energy Industries, Inc., Artesyn
Technologies, Inc., Del Global Technologies Corp., IFR Systems, Inc.
and Vicor Corp. Dividends reinvested. Weighted by market
capitalization.
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November 1998 Confidential
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12
HSBC Securities, Inc. THERMO VOLTEK CORP.
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DAILY CLOSING PRICE AND AVERAGE VOLUME
[GRAPH DEPICTING AN INDEXED PRICE COMPARISON FROM MARCH 27, 1997 TO MARCH
30, 1998 OF THERMO VOLTEK CORP. (TVL), THE TOTAL RETURN S&P SMALLCAP INDEX
(SMLK.R) AND A COMPOSITE INDEX OF COMPANIES COMPARABLE TO THERMO VOLTEK CORP.
(COMPS).]
LEGEND
TVL Thermo Voltek
SMLK.R S&P SmallCap Index. Dividends reinvested. Weighted by market
capitalization.
COMPS Composite index of Advanced Energy Industries, Inc., Artesyn
Technologies, Inc., Del Global Technologies Corp., IFR Systems, Inc.
and Vicor Corp. Dividends reinvested. Weighted by market
capitalization.
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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DAILY VOLUME DISTRIBUTION BY PRICE RANGE
[GRAPH DEPICTING THE DISTRIBUTION OF THERMO VOLTEK CORP.'S COMMON STOCK
TRADING VOLUME OVER THE VARIOUS PRICES AT WHICH THE STOCK TRADED BETWEEN
NOVEMBER 21, 1997 AND NOVEMBER 23, 1998.]
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November 1998 Confidential
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SECTION IV
HSBC Securities, Inc. THERMO VOLTEK CORP.
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SHAREHOLDER OWNERSHIP ANALYSIS (a)
Percent
Shares of Total
------ --------
Shares Outstanding 8,687,258 100.0%
Institutional Ownership:
Dimensional Fund Advisors 206,146 2.4%
Vanguard Group Inc. 147,700 1.7%
BZW Barclays 126,986 1.5%
Brundage, Story Rose, LLC 83,050 1.0%
Bear, Stearns & Co. 40,000 0.5%
Gruntal & Co. 24,100 0.3%
ABTRUST 22,500 0.3%
ANB Investment Management 20,098 0.2%
GAMCO Investors Inc. 20,000 0.2%
Banca Commerciale Italiana 10,000 0.1%
RCM American Smaller Companies 4,500 0.1%
Retirement System - Small Co Growth 2,250 0.0%
P. Schoenfeld Asset Management 1,000 0.0%
------ ----
Total Institutional Holdings 708,330 8.2%
Insider Ownership:
Colin I.W. Baxter 17,307 0.2%
John W. Wood Jr. 14,621 0.2%
Paul Kelleher 10,000 0.1%
William W. Hoover 8,994 0.1%
Theo Melas-Kyriazi 5,581 0.1%
Sandra L. Lambert 1,912 0.0%
Elias P. Gyftopoulos 1,000 0.0%
Peter Richman 1,000 0.0%
------ ----
Total Insider Holdings 60,415 0.7%
Thermo Electron et al 6,007,383 69.2%
Total Retail Holdings 1,911,130 22.0%
(a) As of October 31, 1998. Excludes shares issuable upon the conversion of
subordinated obligations or the exercise of outstanding options.
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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SHAREHOLDER OWNERSHIP ANALYSIS
[PIE CHART DEPICTING THERMO VOLTEK CORP.
SHAREHOLDER BREAK-DOWN AMONGST THE FOLLOWING INVESTOR GROUPS:]
Institutions 8.2%
Insiders 0.7%
Retail 22.0%
Thermo Electron et al. 69.1%
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November 1998 Confidential
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SECTION V
HSBC Securities, Inc. THERMO VOLTEK CORP.
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PROJECTED PRO FORMA INCOME STATEMENT INFORMATION
Average Scenario
($ in thousands)
1998 Fiscal Year
---- --------------------------------------------------------
4Q 1999 2000 2001 2002 2003
-- ---- ---- ---- ---- ----
Revenues $ 8,942 $ 35,173 $ 39,220 $ 40,970 $ 44,680 $ 49,062
Cost of revenues (5,529) (17,711) (19,364) (19,163) (20,445) (21,949)
-------- -------- -------- -------- -------- --------
Gross profit 3,413 17,462 19,856 21,807 24,235 27,113
SG&A expenses (2,902) (11,193) (11,412) (12,151) (13,098) (14,012)
R&D expenses (690) (2,663) (2,753) (2,889) (3,159) (3,443)
Goodwill amortization (non-deductible) (81) (337) (340) (340) (340) (340)
Intangible asset amortization (non-deductible) (5) (3) -- -- -- --
Goodwill amortization (deductible) (48) (192) (192) (192) (192) (192)
Other income (expense) (4) (2) (3) (3) (3) (3)
Corporate services agreement (72) (281) (314) (328) (357) (392)
-------- -------- -------- -------- -------- --------
Operating income (loss) (389) 2,791 4,842 5,904 7,086 8,731
Interest income 4.7% 248 1,009 1,066 1,122 1,324 1,562
Interest expense (280) (1,050) (1,020) (805) (785) (350)
Deferred debt expense (6) (24) (24) -- -- --
Restructuring costs -- -- -- -- -- --
Advisory fees -- (120) -- -- -- --
Other non-operating income -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes (427) 2,606 4,864 6,221 7,625 9,943
Provision for income taxes 171 (1,042) (1,946) (2,488) (3,050) (3,977)
-------- -------- -------- -------- -------- --------
Net income $ (256) $ 1,564 $ 2,918 $ 3,733 $ 4,575 $ 5,966
======== ======== ======== ======== ======== ========
EBITDA (a) $ 97 $ 4,623 $ 6,662 $ 7,769 $ 8,870 $ 10,442
(a) Defined as operating income (loss) before depreciation and amortization
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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PROJECTED PRO FORMA BALANCE SHEET INFORMATION
Average Scenario
($ in thousands)
1998 Fiscal Year
---- -------------------------------------------
4Q 1999 2000 2001 2002 2003
-- ---- ---- ---- ---- ----
Current assets less cash and equivalents:
Accounts receivable, net $ 8,134 $ 7,282 $ 7,403 $ 7,936 $ 8,387 $ 8,958
Inventory 9,898 8,655 8,758 8,891 9,271 9,685
Unbilled contract costs & fees 200 -- -- -- -- --
Prepaid expenses 243 209 280 282 286 291
Prepaid income taxes 1,763 1,763 1,763 1,763 1,763 1,763
------- ------- ------- ------- ------- -------
20,238 17,909 18,204 18,872 19,707 20,697
Current liabilities less current debt 5,720 5,459 5,739 6,243 6,566 7,178
Working capital less cash and current debt $14,518 $12,450 $12,465 $12,629 $13,141 $13,519
Depreciation and amortization 486 1,832 1,820 1,865 1,784 1,711
Net capital expenditures 140 979 1,025 1,075 1,125 1,175
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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PROJECTED PRO FORMA INCOME STATEMENT INFORMATION
High Scenario
($ in thousands)
1998 Fiscal Year
---- -----------------------------------------------------
4Q 1999 2000 2001 2002 2003
-- ---- ---- ---- ---- ----
Revenues $ 8,942 $ 35,173 $ 39,220 $ 42,554 $ 46,384 $ 51,022
Cost of revenues (5,529) (17,711) (19,218) (19,575) (20,873) (22,450)
-------- -------- -------- -------- -------- --------
Gross profit 3,413 17,462 20,002 22,979 25,511 28,572
SG&A expenses (2,902) (11,193) (11,178) (12,128) (13,219) (14,541)
R&D expenses (690) (2,663) (2,753) (3,001) (3,279) (3,581)
Goodwill amortization (non-deductible) (81) (337) (340) (340) (340) (340)
Intangible asset amortization (non-deductible) (5) (3) -- -- -- --
Goodwill amortization (deductible) (48) (192) (192) (192) (192) (192)
Other income (expense) (4) (2) (3) (3) (3) (3)
Corporate services agreement (72) (281) (314) (340) (371) (408)
-------- -------- -------- -------- -------- --------
Operating income (loss) (389) 2,791 5,223 6,976 8,106 9,507
Interest income 5.3% 248 1,144 1,258 1,392 1,660 1,954
Interest expense (280) (1,050) (1,020) (805) (785) (350)
Deferred debt expense (6) (24) (24) -- -- --
Restructuring costs -- -- -- -- -- --
Advisory fees -- (120) -- -- -- --
Other non-operating income -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes (427) 2,741 5,437 7,563 8,981 11,111
Provision for income taxes 171 (1,096) (2,175) (3,025) (3,592) (4,445)
-------- -------- -------- -------- -------- --------
Net income $ (256) $ 1,645 $ 3,262 $ 4,538 $ 5,389 $ 6,666
======== ======== ======== ======== ======== ========
EBITDA (a) $ 97 $ 4,623 $ 7,035 $ 8,821 $ 9,864 $ 11,194
(a) Defined as operating income (loss) before depreciation and amortization
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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PROJECTED PRO FORMA BALANCE SHEET INFORMATION
High Scenario
($ in thousands)
1998 Fiscal Year
---- --------------------------------------------
4Q 1999 2000 2001 2002 2003
-- ---- ---- ---- ---- ----
Current assets less cash and equivalents:
Accounts receivable, net $ 8,134 $ 7,282 $ 6,465 $ 7,014 $ 7,646 $ 8,410
Inventory 9,898 8,655 8,447 8,604 9,175 9,868
Unbilled contract costs & fees 200 -- -- -- -- --
Prepaid expenses 243 209 277 286 291 300
Prepaid income taxes 1,763 1,763 1,763 1,763 1,763 1,763
------- ------- ------- ------- ------- -------
20,238 17,909 16,952 17,668 18,875 20,341
Current liabilities less current debt 5,720 5,459 5,883 6,383 6,958 7,653
Working capital less cash and current debt $14,518 $12,450 $11,069 $11,285 $11,917 $12,688
Depreciation and amortization 486 1,832 1,812 1,845 1,758 1,687
Net capital expenditures 140 979 920 1,003 1,102 1,223
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November 1998 Confidential
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HSBC Securities, Inc. Thermo Voltek Corp.
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PROJECTED PRO FORMA INCOME STATEMENT INFORMATION
Low Scenario
($ in thousands)
1998 Fiscal Year
---- -----------------------------------------------------
4Q 1999 2000 2001 2002 2003
-- ---- ---- ---- ---- ----
Revenues $ 8,942 $ 35,173 $ 39,220 $ 40,970 $ 44,452 $ 48,453
Cost of revenues (5,529) (17,711) (19,364) (20,075) (21,337) (22,773)
-------- -------- -------- -------- -------- --------
Gross profit 3,413 17,462 19,856 20,895 23,115 25,680
SG&A expenses (2,902) (11,193) (11,766) (12,291) (13,336) (14,536)
R&D expenses (690) (2,663) (2,753) (2,889) (3,143) (3,400)
Goodwill amortization (non-deductible) (81) (337) (340) (340) (340) (340)
Intangible asset amortization (non-deductible) (5) (3) -- -- -- --
Goodwill amortization (deductible) (48) (192) (192) (192) (192) (192)
Other income (expense) (4) (2) (3) (3) (3) (3)
Corporate services agreement (72) (281) (314) (328) (356) (388)
-------- -------- -------- -------- -------- --------
Operating income (loss) (389) 2,791 4,488 4,852 5,746 6,821
Interest income 5.3% 248 1,144 1,150 1,126 1,291 1,472
Interest expense (280) (1,050) (1,020) (805) (785) (350)
Deferred debt expense (6) (24) (24) -- -- --
Restructuring costs -- -- -- -- -- --
Advisory fees -- (120) -- -- -- --
Other non-operating income -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes (427) 2,741 4,594 5,173 6,252 7,943
Provision for income taxes 171 (1,096) (1,838) (2,069) (2,501) (3,177)
-------- -------- -------- -------- -------- --------
Net income $ (256) $ 1,645 $ 2,756 $ 3,104 $ 3,751 $ 4,766
======== ======== ======== ======== ======== ========
EBITDA (a) $ 97 $ 4,623 $ 6,317 $ 6,745 $ 7,582 $ 8,618
(a) Defined as operating income (loss) before depreciation and amortization
- --------------------------------------------------------------------------------
November 1998 Confidential
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21
HSBC Securities, Inc. Thermo Voltek Corp.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA BALANCE SHEET INFORMATION
Low Scenario
($ in thousands)
1998 Fiscal Year
---- --------------------------------------------
4Q 1999 2000 2001 2002 2003
-- ---- ---- ---- ---- ----
Current assets less cash and equivalents:
Accounts receivable, net $ 8,134 $ 7,282 $ 8,081 $ 8,442 $ 9,159 $ 9,983
Inventory 9,898 8,655 9,576 9,927 10,551 11,261
Unbilled contract costs & fees 200 -- -- -- -- --
Prepaid expenses 243 209 283 291 295 301
Prepaid income taxes 1,763 1,763 1,763 1,763 1,763 1,763
------- ------- ------- ------- ------- -------
20,238 17,909 19,703 20,423 21,768 23,308
Current liabilities less current debt 5,720 5,459 5,295 5,531 6,001 6,541
Working capital less cash and current debt $14,518 $12,450 $14,408 $14,892 $15,767 $16,767
Depreciation and amortization 486 1,832 1,829 1,893 1,836 1,797
Net capital expenditures 140 979 1,155 1,211 1,323 1,452
- --------------------------------------------------------------------------------
November 1998 Confidential
19
22
SECTION VI
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(Data in millions, except per share data)
Market Price Information Earnings Per Share(a)
------------------------------------ ----------------------
52 Week Range Calendar Year End
-------------- ------------------
Latest % of
Symbol Ex'chg Company FYE Filing Cur'cy 11/24/98 High Low High 1997 1998 1999
- ------ ------ ------- --- ------ ------ -------- ---- --- ---- ---- ---- ----
ELECTRONIC COMPONENTS/TEST EQUIPMENT
2308 TT Taipei Delta Electronics, Inc. DC 12/97 NT$ 109.00 155.83 77.00 69.9% 5.19 6.26 8.49
IFRS NMS IFR Systems, Inc. JE 09/98 US$ 5.75 25.50 3.13 22.5% 0.93 0.20 0.68
SAHN SW SWX Schaffner Holding AG SP 03/98 Sf 199 321 130 62.0% 12.9 20.3 23.8
---------------------------------------------------------------------------------------
AVERAGE 51.5%
---------------------------------------------------------------------------------------
POWER CONVERSION/AMPLIFICATION
AEIS NMS Advanced Energy
Industries, Inc. DC 09/98 US$ 19.56 22.69 5.63 86.2% 0.64 (0.21) 0.36
ATSN NMS Artesyn Technologies,
Inc. DC 09/98 US$ 17.88 26.88 11.75 66.5% 0.98 0.81 1.12
DGTC NMS Del Global Technolo-
gies Corp. JL 07/98 US$ 10.31 12.88 6.13 80.1% 0.65 0.76 0.92
VICR NMS Vicor Corp. DC 09/98 US$ 9.81 29.75 5.63 33.0% 0.60 0.38 0.46
---------------------------------------------------------------------------------------
COMBINED AVERAGE 60.0%
---------------------------------------------------------------------------------------
- ---------------
(a) Earnings estimates and long-term growth rates are from First Call as of
November 24, 1998, except for Delta Electronics, Inc. and Shaffner Holding
AG which are from HSBC Securities, Inc.
- --------------------------------------------------------------------------------
November 1998 Confidential
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23
HSBC Securities, Inc. Thermo Voltek Corp.
- -------------------------------------------------------------------------------
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(Data in millions, except per share data or unless otherwise stated)
Price/Earnings Ratio
--------------------
Calendar Year End
--------------------
L-T(a)
Growth Shares
Symbol Ex'chg Company Rate 1997 1998 1999 (mm) Cur'cy
- ------ ------ ------- ------ ---- ---- ---- ------ ------
ELECTRONIC COMPONENTS/TEST EQUIPMENT
2308 TT Taipei Delta Electronics Inc. 30% 21.0x 17.4x 12.8x 560.9 NT$
IFRS NMS IFR Systems, Inc.* 25% 6.2x 28.8x* 8.5x 8.2 US$
SAHN SW SWX Schaffner Holding AG 25% 15.4x 9.8x 8.4x 0.6 Sf
--------------------------------------------------------------------------------------------------
AVERAGE 27% 14.2x 13.6x 9.9x
--------------------------------------------------------------------------------------------------
POWER CONVERSION/AMPLIFICATION
AEIS NMS Advanced Energy Industries, Inc. 28% 30.6x nmf 54.3x* 26.7 US$
ATSN NMS Artesyn Technologies, Inc. 20% 18.2x 22.1x 16.0x 37.8 US$
DGTC NMS Del Global Technologies Corp. 18% 15.9x 13.6x 11.2x 7.6 US$
VICR NMS Vicor Corp. 27% 16.4x 25.8x 21.3x 41.9 US$
--------------------------------------------------------------------------------------------------
COMBINED AVERAGE 25% 17.7x 17.7x 13.0x
--------------------------------------------------------------------------------------------------
Tangible Market/
Market Book Tang.
Cap'n Value Book
------ ----- -----
ELECTRONIC COMPONENTS/TEST EQUIPMENT
2308 TT Taipei Delta Electronics Inc. 61,134.3 11,401.2 5.4x
IFRS NMS IFR Systems, Inc.* 47.1 (30.3) nmf
SAHN SW SWX Schaffner Holding AG 125.8 18.8 6.7x
--------------------------------------------------------------------------------------
AVERAGE 6.0x
--------------------------------------------------------------------------------------
POWER CONVERSION/AMPLIFICATION
AEIS NMS Advanced Energy Industries, Inc. 522.0 76.2 6.9x
ATSN NMS Artesyn Technologies, Inc. 675.4 132.7 5.1x
DGTC NMS Del Global Technologies Corp. 78.8 53.7 1.5x
VICR NMS Vicor Corp. 411.2 207.4 2.0x
--------------------------------------------------------------------------------------
COMBINED AVERAGE 4.6x
--------------------------------------------------------------------------------------
* - excluded from calculations of the average and the combined average.
nmf -- not meaningful
______________________
(a) Earnings estimates and long-term growth rates are from First Call as of
November 24, 1998, except for Delta Electronics, Inc. and Schaffner Holding
AG which are from HSBC Securities, Inc.
- --------------------------------------------------------------------------------
November 1998 Confidential
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24
HSBC Securities, Inc. Thermo Voltek Corp.
- --------------------------------------------------------------------------------
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(Data in millions)
Latest Twelve Months Enterprise Value to:
---------------------- -----------------------
Enterp. Period Ending 09/30/98 LTM LTM LTM
Symbol Ex'chg Company Cur'cy Value (a) Sales EBITDA EBIT Sales EBITDA EBIT
- ----- ------- ------- ------ --------- ----- ------ ---- ----- ------ ----
ELECTRONIC COMPONENTS/TEST EQUIPMENT
2308 TT Taipei Delta Electronics, Inc. NT$ 58,324.1 na na na na na na
IFRS NMS IFR Systems, Inc. US$ 158.9 163.4 8.3 0.4 1.0x 19.2x* 406.4x*
SAHN SW SWX Schaffner Holding AG Sf 181.2 155.0 25.4 19.9 1.2x 7.1x 9.1x
----------------------------------------------------------------------------------------------------------
AVERAGE 1.1x 7.1x 9.1x
----------------------------------------------------------------------------------------------------------
POWER CONVERSION/AMPLIFICATION
AEIS NMS Advanced Energy Industries, Inc. US$ 492.8 130.8 9.4 4.2 3.8x 52.4x* 117.9x*
ATSN NMS Artesyn Technologies, Inc. US$ 688.2 541.7 65.8 49.4 1.3x 10.5x 13.9x
DGTC NMS Del Global Technologies Corp. (b) US$ 74.9 63.5 10.8 8.6 1.2x 6.9x 8.7x
VICR NMS Vicor Corp. US$ 348.0 167.4 34.8 24.5 2.1x 10.0x 14.2x
-----------------------------------------------------------------------------------------------------------
COMBINED AVERAGE 1.7x 8.6x 11.5x
-----------------------------------------------------------------------------------------------------------
* - excluded from calculation of the average and the combined average
na - not available
- ------------------
(a) Enterprise value equals market capitalization plus total debt plus preferred
equity plus minority interests minus cash
(b) Operating data for LTM ended 09/30/98 are estimates. Source: Investext.
- --------------------------------------------------------------------------------
November 1998 Confidential
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25
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
IMPLIED VALUATION USING AVERAGE OF ELECTRONIC COMPONENTS
AND TEST EQUIPMENT COMPANIES
($ in thousands, except per share data)
AVERAGE MULTIPLE
-------------------------------------------------
PRICE/ PRICE/
THERMO CALENDAR CALENDAR PRICE/ IMPLIED IMPLIED
VOLTEK'S 1998 1999 TANGIBLE EQUITY SHARE
VALUATION PARAMETER(a) VALUE NET INCOME NET INCOME BOOK VALUE VALUE VALUE(b)
- ---------------------- -------- ---------- ---------- ---------- ------- --------
Calendar 1998 net income $ 511 13.6x $ 6,953 $ 0.60
Calendar 1999 net income 2,116 9.9x 20,917 1.81
Tangible book value (10/3/98) 18,603 6.0x 112,100 9.69
AVERAGE MULTIPLE
---------------------------
ENTERPRISE VALUE/
------------------------ PLUS: IMPLIED IMPLIED
LTM LTM LTM LESS: PLUS: OPTION EQUITY SHARE
REVENUES EBITDA EBIT DEBT CASH PROCEEDS VALUE VALUE(b)
VALUATION PARAMETER(a) -------- ------ ---- ---- ---- -------- ----- --------
LTM revenues $37,562 1.1x $(9,012) $17,905 $1,972 $ 51,084 $4.42
LTM EBITDA 2,462 7.1x (9,012) 17,905 1,972 28,433 2.46
LTM EBIT 436 9.1x (9,012) 17,905 1,972 14,836 1.28
-------------------------------------------------------
Average $ 39,054 $3.38
Median 24,675 2.13
High 112,100 9.69
Low 6,953 0.60
-------------------------------------------------------
- ------------
(a) Data are pro forma for the sale of the Universal Voltronics division
(b) Includes 8,687,258 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 414,191 shares issuable
upon exercise of options. The shares issuable result from (i) options whose
exercise price is below the $7.00 offer and (ii) subordinated convertible
notes whose conversion price is below the $7.00 offer.
- --------------------------------------------------------------------------------
November 1998 Confidential
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26
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
IMPLIED VALUATION USING COMBINED AVERAGE
($ in thousands, except per share data)
AVERAGE MULTIPLE
----------------------------------------
PRICE/ PRICE/
THERMO CALENDAR CALENDAR PRICE/ IMPLIED IMPLIED
VOLTEK'S 1998 1999 TANGIBLE EQUITY SHARE
VALUATION PARAMETER(a) VALUE NET INCOME NET INCOME BOOK VALUE VALUE VALUE(b)
- ---------------------- -------- ---------- ---------- ---------- ------- --------
Calendar 1998 net income $ 511 17.7x $ 9,063 $ 0.78
Calendar 1999 net income 2,116 13.0x 27,563 2.38
Tangible book value (10/3/98) 18,603 4.6x 85,089 7.36
AVERAGE MULTIPLE
---------------------------
ENTERPRISE VALUE/
--------------------------- PLUS: IMPLIED IMPLIED
LTM LTM LTM LESS: PLUS: OPTION EQUITY SHARE
VALUATION PARAMETER(a) REVENUES EBITDA EBIT DEBT CASH PROCEEDS VALUE VALUE(b)
- ---------------------- -------- ------ ---- ---- ---- -------- ----- --------
LTM revenues $37,562 1.7x $(9,012) $17,905 $1,972 $ 76,210 $6.59
LTM EBITDA 2,462 8.6x (9,012) 17,905 1,972 32,095 2.77
LTM EBIT 436 11.5x (9,012) 17,905 1,972 15,875 1.37
-------------------------------------------------------
Average $ 40,982 $3.54
Median 29,829 2.58
High 85,089 7.36
Low 9,063 0.78
-------------------------------------------------------
- ------------
(a) Data are pro forma for the sale of the Universal Voltronics division
(b) Includes 8,687,258 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 414,191 shares issuable
upon exercise of options. The shares issuable result from (i) options whose
exercise price is below the $7.00 offer and (ii) subordinated convertible
notes whose conversion price is below the $7.00 offer.
- --------------------------------------------------------------------------------
November 1998 Confidential
24
27
SECTION VII
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA INCOME STATEMENT INFORMATION (ASSUMES AVERAGE SCENARIO)
($ in thousands)
FY 1998 Fiscal Year Terminal
------- ------------------------------------------------------
4Q 1999 2000 2001 2002 2003 Value
-- ---- ---- ---- ---- ---- -----
Operating income (loss) $ (389) $ 2,791 $ 4,842 $ 5,904 $ 7,086 $ 8,731 $ 8,731
Non-deductible amortization 86 340 340 340 340 340 340
------- ------- ------- ------- ------- ------- -------
EBIT before non-deductible amortization (303) 3,131 5,182 6,244 7,426 9,071 9,071
Tax provision (benefit) 121 (1,252) (2,073) (2,498) (2,970) (3,628) (3,628)
------- ------- ------- ------- ------- ------- -------
After-tax operating income (loss) $ (182) $ 1,879 $ 3,109 $ 3,746 $ 4,456 $ 5,443 $ 5,443
======= ======= ======= ======= ======= ======= =======
CASH SOURCES
After-tax operating income (loss) $ (182) $ 1,879 $ 3,109 $ 3,746 $ 4,456 $ 5,443 $ 5,443
Depreciation and amortization (a) 400 1,492 1,480 1,525 1,444 1,371 1,371
Increase (decrease) in working capital (b) 2,464 2,068 (15) (164) (512) (378) (378)
Other cash sources (343) 24 24 -- -- -- --
------- ------- ------- ------- ------- ------- -------
TOTAL SOURCES $ 2,339 $ 5,463 $ 4,598 $ 5,107 $ 5,388 $ 6,436 $ 6,436
======= ======= ======= ======= ======= ======= =======
CASH USES
Net capital expenditures 140 979 1,025 1,075 1,125 1,175 1,175
Other cash uses -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
TOTAL USES $ 140 $ 979 $ 1,025 $ 1,075 $ 1,125 $ 1,175 $ 1,175
======= ======= ======= ======= ======= ======= =======
--------------------------------------------------------------------------------------------------------------------
FREE CASH FLOW $ 2,199 $ 4,484 $ 3,573 $ 4,032 $ 4,263 $ 5,261 $ 5,261
--------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
Discount Rate (WACC) Present Value of Cash Flows (c)
----------------------------------------------------------------
15.0% $ 16,268
17.5% 15,416
20.0% 14,643
22.5% 13,940
25.0% 13,298
27.5% 12,712
----------------------------------------------------------------
(a) Excludes non-deductible amortization
(b) Excludes cash and equivalents and current debt
(c) Terminal value not included
- --------------------------------------------------------------------------------
November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
EBIT MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
ASSUMES AVERAGE SCENARIO
($ in thousands)
--------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
--------------------------------------------------------------------------------------------------------------------------
Present Value of Cash Flows $ 16,268 $ 15,416 $ 14,643 $ 13,940 $ 13,298 $ 12,712
--------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
7.0 x $ 29,947 $ 26,834 $ 24,100 $ 21,692 $ 19,567 $ 17,686
8.0 x 34,225 30,667 27,543 24,791 22,362 20,212
Multiple 9.0 x 38,503 34,501 30,985 27,890 25,157 22,739
10.0 x 42,781 38,334 34,428 30,989 27,953 25,266
11.0 x 47,060 42,167 37,871 34,088 30,748 27,792
--------------------------------------------------------------------------------------------------------------------------
Enterprise Value:
7.0 x $ 46,215 $ 42,250 $ 38,743 $ 35,632 $ 32,865 $ 30,398
8.0 x 50,493 46,083 42,185 38,731 35,661 32,924
Multiple 9.0 x 54,771 49,916 45,628 41,830 38,456 35,451
10.0 x 59,049 53,750 49,071 44,929 41,251 37,978
11.0 x 63,328 57,583 52,514 48,028 44,046 40,504
--------------------------------------------------------------------------------------------------------------------------
Equity Value:
7.0 x $ 57,080 $ 53,114 $ 49,607 $ 46,497 $ 43,730 $ 41,262
8.0 x 61,358 56,947 53,050 49,596 46,525 43,789
Multiple 9.0 x 65,636 60,781 56,493 52,694 49,321 46,316
10.0 x 69,914 64,614 59,936 55,793 52,116 48,842
11.0 x 74,192 68,448 63,378 58,892 54,911 51,369
--------------------------------------------------------------------------------------------------------------------------
Implied Enterprise Value /
LTM Revenues Multiple:
7.0 x 1.2 x 1.1 x 1.0 x 0.9 x 0.9 x 0.8 x
8.0 x 1.3 x 1.2 x 1.1 x 1.0 x 0.9 x 0.9 x
Multiple 9.0 x 1.5 x 1.3 x 1.2 x 1.1 x 1.0 x 0.9 x
10.0 x 1.6 x 1.4 x 1.3 x 1.2 x 1.1 x 1.0 x
11.0 x 1.7 x 1.5 x 1.4 x 1.3 x 1.2 x 1.1 x
--------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
November 1998 Confidential
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29
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
EBIT MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS (CONTINUED)
ASSUMES AVERAGE SCENARIO
($ in thousands, except per share data)
----------------------------------------------------
Summary:
WACC: 20.00%
Multiple: 9.0 x
EBIT Terminal Value: $ 8,731
Present Value of Cash Flows $14,643
Present Value of Terminal Value 30,985
-------
Enterprise Value 45,628
Plus: Cash (a) 17,905
Plus: Option Proceeds 1,972
Less: Debt (9,012)
-------
Equity Value $56,493
=======
Equity Value per Share $ 4.88
----------------------------------------------------
----------------------------------------------------
(a) Data are pro forma for the sale of the Universal Voltronics
division
- --------------------------------------------------------------------------------
November 1998 Confidential
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30
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
EBITDA MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
ASSUMES AVERAGE SCENARIO
($ in thousands)
-----------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
-----------------------------------------------------------------------------------------------------------------------------
Present Value of Cash Flows $ 16,268 $ 15,416 $ 14,643 $ 13,940 $ 13,298 $ 12,712
-----------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
5.0 x $ 25,583 $ 22,923 $ 20,588 $ 18,531 $ 16,715 $ 15,108
6.0 x 30,699 27,508 24,705 22,237 20,058 18,130
Multiple 7.0 x 35,816 32,092 28,823 25,943 23,401 21,152
8.0 x 40,932 36,677 32,940 29,650 26,744 24,173
9.0 x 46,049 41,262 37,058 33,356 30,088 27,195
-----------------------------------------------------------------------------------------------------------------------------
Enterprise Value:
5.0 x $ 41,851 $ 38,339 $ 35,230 $ 32,471 $ 30,014 $ 27,820
6.0 x 46,967 42,923 39,348 36,177 33,357 30,842
Multiple 7.0 x 52,084 47,508 43,465 39,883 36,700 33,864
8.0 x 57,200 52,093 47,583 43,589 40,043 36,885
9.0 x 62,317 56,677 51,700 47,295 43,386 39,907
-----------------------------------------------------------------------------------------------------------------------------
Equity Value:
5.0 x $ 52,715 $ 49,203 $ 46,095 $ 43,335 $ 40,878 $ 38,685
6.0 x 57,832 53,788 50,212 47,041 44,221 41,707
Multiple 7.0 x 62,948 58,373 54,330 50,748 47,564 44,728
8.0 x 68,065 62,957 58,447 54,454 50,908 47,750
9.0 x 73,181 67,542 62,565 58,160 54,251 50,772
-----------------------------------------------------------------------------------------------------------------------------
Implied Enterprise Value /
LTM Revenues Multiple:
5.0 x 1.1 x 1.0 x 0.9 x 0.9 x 0.8 x 0.7 x
6.0 x 1.3 x 1.1 x 1.0 x 1.0 x 0.9 x 0.8 x
Multiple 7.0 x 1.4 x 1.3 x 1.2 x 1.1 x 1.0 x 0.9 x
8.0 x 1.5 x 1.4 x 1.3 x 1.2 x 1.1 x 1.0 x
9.0 x 1.7 x 1.5 x 1.4 x 1.3 x 1.2 x 1.1 x
-----------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
November 1998 Confidential
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31
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
EBITDA MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS (CONTINUED)
ASSUMES AVERAGE SCENARIO
($ in thousands, except per share data)
--------------------------------------------------
Summary:
WACC: 20.00%
Multiple: 7.0 x
EBITDA Terminal Value: $ 10,442
Present Value of Cash Flows $ 14,643
Present Value of Terminal Value 28,823
--------
Enterprise Value 43,465
Plus: Cash (a) 17,905
Plus: Option Proceeds 1,972
Less: Debt (9,012)
--------
Equity Value $ 54,330
========
Equity Value per Share $ 4.70
--------------------------------------------------
--------------------------------------------------
(a) Data are pro forma for the sale of the Universal Voltronics
division
- --------------------------------------------------------------------------------
November 1998 Confidential
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32
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
TERMINAL FREE CASH FLOW METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
ASSUMES AVERAGE SCENARIO
($ in thousands)
-------------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
-------------------------------------------------------------------------------------------------------------------------------
Present Value of Cash Flows $ 16,268 $ 15,416 $ 14,643 $ 13,940 $ 13,298 $ 12,712
-------------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.0% $ 28,641 $ 20,084 $ 14,817 $ 11,316 $ 8,864 $ 7,080
6.5% 30,325 20,997 15,366 11,670 9,104 7,249
Terminal Growth Rate of Cash Flows 7.0% 32,221 21,997 15,957 12,046 9,357 7,426
7.5% 34,369 23,097 16,595 12,448 9,624 7,611
8.0% 36,824 24,313 17,286 12,877 9,907 7,807
-------------------------------------------------------------------------------------------------------------------------------
Enterprise Value:
6.0% $ 44,909 $ 35,500 $ 29,460 $ 25,256 $ 22,163 $ 19,792
6.5% 46,593 36,413 30,009 25,609 22,402 19,961
Terminal Growth Rate 7.0% 48,489 37,413 30,600 25,986 22,655 20,138
7.5% 50,637 38,513 31,238 26,387 22,923 20,323
8.0% 53,092 39,728 31,929 26,817 23,206 20,519
-------------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0% $ 55,773 $ 46,365 $ 40,324 $ 36,120 $ 33,027 $ 30,657
6.5% 57,458 47,278 40,873 36,474 33,267 30,826
Terminal Growth Rate of Cash Flows 7.0% 59,353 48,277 41,464 36,850 33,520 31,002
7.5% 61,501 49,377 42,102 37,252 33,787 31,188
8.0% 63,956 50,593 42,794 37,681 34,070 31,383
-------------------------------------------------------------------------------------------------------------------------------
Implied Enterprise Value /
LTM Revenues Multiple:
6.0% 1.2 x 0.9 x 0.8 x 0.7 x 0.6 x 0.5 x
6.5% 1.2 x 1.0 x 0.8 x 0.7 x 0.6 x 0.5 x
Terminal Growth Rate of Cash Flows 7.0% 1.3 x 1.0 x 0.8 x 0.7 x 0.6 x 0.5 x
7.5% 1.3 x 1.0 x 0.8 x 0.7 x 0.6 x 0.5 x
8.0% 1.4 x 1.1 x 0.9 x 0.7 x 0.6 x 0.5 x
-------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
November 1998 Confidential
30
33
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
TERMINAL FREE CASH FLOW METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
(CONTINUED)
ASSUMES AVERAGE SCENARIO
($ in thousands, except per share data)
----------------------------------------------------
Summary:
WACC: 20.00%
Terminal Growth Rate of Cash Flows: 7.0%
Terminal Free Cash Flow Value: $ 5,261
Present Value of Cash Flows $14,643
Present Value of Terminal Value 15,957
-------
Enterprise Value 30,600
Plus: Cash (a) 17,905
Plus: Option Proceeds 1,972
Less: Debt (9,012)
-------
Equity Value $41,464
=======
Equity Value per Share $ 3.58
----------------------------------------------------
----------------------------------------------------
(a) Data are pro forma for the sale of the Universal Voltronics
division
- --------------------------------------------------------------------------------
November 1998 Confidential
31
34
SECTION VIII
HSBC Securities, Inc. THERMO VOLTEK CORP.
- -------------------------------------------------------------------------------
OVERVIEW OF SELECTED TRANSACTIONS
Date Date
Effective Announced Target
--------- --------- ------
1. 06/14/95 05/10/95 Best Power Technology, Inc.
2. 03/13/96 11/17/95 Deltec Power Systems, Inc. (a)
3. 09/15/97 09/15/97 Trench Group S.A. (b)
4. 11/19/97 10/16/97 Exide Electronics Group Inc. (c)
5. 12/29/97 09/03/97 Zytec Corp.
6. 06/19/98 04/23/98 Vero Group plc
7. 06/19/98 03/11/98 Corcom Inc.
8. 07/07/98 04/27/98 Fluke Corp.
Target business description Acquirer
--------------------------- --------
1. Mnfr uninterruptible power supplies General Signal Corp.
2. Mnfr uninterruptible power supplies and dvlp related Exide Electronics Group Inc.
management software
3. Mnfr test equipment and engineered products for high CVC Capital Partners Ltd.
voltage applications
4. Mnfr uninterruptible power supplies and power BTR plc
management and facilities monitoring software
5. Mnfr switchmode power supplies for OEMs Artesyn Technologies Inc. (d)
of telecommunications products and electronics
6. Mnfr power supplies, electronic enclosures, racks Applied Power Inc.
and backplanes
7. Mnfr RFI filters, power entry products and filtered Communications Instruments Inc.
telco connectors
8. Mnfr compact electronic power tools Danaher Corp.
_________________
(a) Subsidiary of Fiskars Oy Ab
(b) Subsidiary of BBA Group plc
(c) Danaher Corp. made a bid on July 9, 1997
(d) Formerly Computer Products Inc.
- -------------------------------------------------------------------------------
November 1998 Confidential
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35
HSBC Securities, Inc. THERMO VOLTEK CORP.
- ------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS
($ in millions)
Equity Value
as a Multiple of:
------------------
Date Date Equity Book Net Enterprise
Effective Announced Target Value Value Income Value
--------- --------- ------ ----- ----- ------ -----
1. 06/14/95 05/10/95 Best Power Technology, Inc. $ 200.6 3.6 x 18.3 x $ 192.7
2. 03/13/96 11/17/95 Deltec Power Systems, Inc. 169.5 nmf 32.0 x 201.8
3. 09/15/97 09/15/97 Trench Group S.A. 280.9 2.5 x 18.7 x 278.0
4. 11/19/97 10/16/97 Exide Electronics Group Inc. 352.4 nmf nmf 593.7
5. 12/29/97 09/03/97 Zytec Corp. 334.5 8.3 x 31.0 x 341.9
6. 06/19/98 04/23/98 Vero Group plc 190.6 4.8 x 17.5 x 194.9
7. 06/19/98 03/11/98 Corcom Inc. 51.0 2.2 x 17.2 x 42.9
8. 07/07/98 04/27/98 Fluke Corp. 684.4 3.2 x 23.1 x 647.6
------------------------------------------------
Average 4.1 x 22.6 x
Median 3.4 x 18.7 x
------------------------------------------------
Enterprise Value as a Multiple of:
----------------------------------
Revenues EBITDA (a) EBIT (b)
-------- ---------- --------
1. 1.3 x 10.2 x 11.6 x
2. 1.5 x 11.3 x 20.1 x
3. 1.2 x 8.5 x 11.5 x
4. 1.1 x 9.8 x 16.5 x
5. 1.5 x 14.1 x 17.7 x
6. 1.2 x 8.7 x 11.4 x
7. 1.2 x 7.3 x 9.1 x
8. 1.5 x 10.4 x 13.9 x
-----------------------------------------
Average 1.3 x 10.0 x 14.0 x
Median 1.2 x 10.0 x 12.8 x
-----------------------------------------
- ------------
nmf - Not meaningful
(a) EBITDA equals operating income before interest, taxes, depreciation and
amortization
(b) EBIT equals operating income before interest and taxes
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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IMPLIED VALUATION USING TRANSACTION MULTIPLES
($ in thousands, except per share data)
Average
Multiple
--------
Equity
Thermo Value to Implied Implied
Voltek's Book Equity Share
Valuation Parameter (a) Value Value Value Value (b)
----------------------- ----- ----- ----- ---------
Tangible book value (10/3/98) $ 18,603 4.1 x $ 76,193 $ 6.59
Average
Multiple
----------
Thermo Enterprise Plus: Implied Implied
Voltek's Value to Less: Plus: Option Equity Share
Valuation Parameter (a) Value Revenue Debt Cash Proceeds Value Value (b)
----------------------- ----- ------- ---- ---- -------- ----- ---------
LTM revenues $ 37,562 1.3 x $ (9,012) $ 17,905 $ 1,972 $ 59,210 $ 5.12
------------------------
Average $ 5.85
Median 5.85
High 6.59
Low 5.12
------------------------
- ---------
(a) Data are pro forma for the sale of the Universal Voltronics division
(b) Includes 8,687,258 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 414,191 shares
issuable upon exercise of options. The shares issuable result from (i)
options whose exercise price is below the $7.00 offer and (ii)
subordinated convertible notes whose conversion price is below the
$7.00 offer.
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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ANALYSIS OF SHARE PREMIUMS
($ actual)
Premium Premium Premium
1 Day 1 Week 4 Weeks
Price Prior To Prior To Prior To
Date Date Per Announ. Announ. Announ.
Effective Announced Target Name Share Date Date Date
--------- --------- ----------- ----- ---- ---- ----
1. 06/14/95 05/10/95 Best Power Technology Inc. $ 21.00 61.5% 68.0% 75.0%
2. 11/19/97 10/16/97 Exide Electronics Group Inc. 29.00 125.2% * 133.2% * 149.5% *
3. 12/30/97 09/03/97 Zytec Corp. 42.15 45.3% 48.2% 71.2%
4. 06/19/98 03/11/98 Corcom Inc. 13.00 33.3% 31.6% 36.8%
5. 06/19/98 04/23/98 Vero Group plc 2.59 40.2% 40.8% 40.5%
6. 07/07/98 04/27/98 Fluke Corp. 33.39 44.0% 43.6% 40.6%
Average 44.9% 46.5% 52.8%
Median 44.0% 43.6% 40.6%
- ------------------------
Source: Securities Data Company, Inc.
* Excluded from the average and the median
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November 1998 Confidential
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HSBC Securities, Inc. THERMO VOLTEK CORP.
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IMPLIED VALUATION USING SHARE PREMIUMS
($ in thousands, except per share data)
Average Premium
Thermo --------------- Implied Implied
Voltek's One Day One Week Four Weeks Equity Share
Valuation Parameter (a) Value Prior to Ann. Prior to Ann. Prior to Ann. Value Value (b)
----------------------- ----- ------------- ------------- ------------- ----- ---------
Price One Day Prior to Announcement $ 4.81 44.9% $ 80,652 $ 6.97
Price One Week Prior to Announcement 4.38 46.5% 74,113 6.41
Price Four Weeks Prior to Announcement 5.00 52.8% 88,379 7.64
------------ -----------
Average $ 7.01
Median 6.97
High 7.64
Low 6.41
------------ -----------
----------------
(a) Data are pro forma for the sale of the Universal Voltronics division
(b) Includes 8,687,258 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 414,191 shares
issuable upon exercise of options. The shares issuable result from (i)
options whose exercise price is below the $7.00 offer and (ii)
subordinated convertible notes whose conversion price is below the
$7.00 offer.
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November 1998 Confidential
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39
SECTION IX
HSBC Securities, Inc. THERMO VOLTEK CORP.
- -------------------------------------------------------------------------------
SELECTED M&A TRANSACTION PREMIUMS FOR MINORITY INTEREST ACQUISITIONS
IN GOING PRIVATE TRANSACTIONS
Date
Effective Acquiror Name Target Name Target Business Description
--------- ------------- ----------- ---------------------------
1. 02/23/94 Holderbank Financiere Glarus Holnam Inc(Holdernam Inc) Manufacture cement;holding co
2. 06/09/94 Wassall PLC General Cable(Cie Gen de Eaux) Mnfr copper,building wire
3. 12/29/94 Ogden Corp Ogden Projects Inc(Ogden Corp) Heavy construction company
4. 06/16/95 LinPac Mouldings Ltd Ropak Corp Manufacture plastic containers
5. 02/16/97 Novartis AG SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes
6. 09/05/97 Gold Kist Inc Golden Poultry Co Inc Produce,wholesale poultry
7. 12/31/96 Electromagnetic Sciences Inc LXE Mnfr microwave components
8. 11/27/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) Manufacture steel
9. 12/11/96 Ansaldo Transporti SpA Union Switch & Signal Inc Manufacture railroad equip
10. 07/09/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products
11. 07/09/98 Texas Industries Inc Chaparral Steel Co Mnfr primary steel products
12. 01/15/98 FH Faulding & Co Ltd Faulding Inc(FH Faulding & Co) Mnfr pharmaceuticals
13. 03/30/98 Waste Management Inc Wheelabrator Technologies Inc Mnfr laboratory, medical equip
14. 11/26/97 Rhone-Poulenc SA Rhone-Poulenc Rorer Inc Manufacture pharmaceuticals
15. 07/15/98 ISP Holdings Inc Intl Specialty Prods Mnfr specialty chemicals
Premium Premium Premium
1 Day 1 Week 4 Weeks
Prior to Prior to Prior to
Value of Price Announce- Announce- Announce-
Transaction Percent Per ment ment ment
($ mm) Sought Share Date Date Date
------ ------ ----- ---- ---- ----
1. $ 51.7 5.0% $ 7.65 13.3% 15.5% 7.4%
2. 35.9 46.3% 6.00 17.1% 21.5% 11.6%
3. 110.3 15.8% 18.38 5.8% 17.6% 20.5%
4. 28.5 58.3% 11.00 4.8% 6.0% 4.8%
5. 107.6 32.2% 19.50 4.7% 69.6% 59.2%
6. 52.1 25.0% 14.25 52.0% 50.0% 39.0%
7. 14.8 22.2% 13.13 22.1% 14.2% 19.4%
8. 56.5 15.5% 10.00 17.6% 29.0% 77.8%
9. 27.1 38.4% 7.25 3.6% 3.6% - %
10. 116.8 15.0% 33.50 23.5% 23.5% 27.6%
11. 72.8 18.7% 15.50 20.4% 25.3% 29.2%
12. 77.3 38.0% 13.50 25.6% 22.7% 45.9%
13. 869.7 34.6% 16.50 26.9% 28.2% 30.7%
14. 4,831.6 36.9% 97.00 22.1% 22.8% 29.3%
15. 324.5 20.1% 18.25 4.3% 1.7% 14.5%
-------------------------------------------------------
Average 17.6% 23.4% 27.8%
Median 17.6% 22.7% 27.6%
High 52.0% 69.6% 77.8%
Low 3.6% 1.7% - %
-------------------------------------------------------
Source: Securities Data Company, Inc.
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40
HSBC Securities, Inc. THERMO VOLTEK CORP.
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IMPLIED VALUATION USING TRANSACTION MULTIPLES
($ in thousands, except per share data)
Implied
Equity
Thermo Premium Premium Premium Implied Value
Voltek's One Day One Week Four Weeks Equity per
Valuation parameter (a) Value Prior to Ann. Prior to Ann. Prior to Ann. Value Share (b)
----------------------- ----- ------------- ------------- ------------- ----- ---------
Price One Day Prior to Announcement $ 4.81 17.6% $ 65,453 $ 5.66
Price One Week Prior to Announcement 4.38 23.4% 62,450 5.40
Price Four Weeks Prior to Announcement 5.00 27.8% 73,906 6.39
------------------------------------
Average $ 67,270 $ 5.82
Median 65,453 5.66
High 73,906 6.39
Low 62,450 5.40
------------------------------------
- -----------------
(a) Data are pro forma for the sale of the Universal Voltronics division
(b) Includes 8,687,258 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 414,191 shares
issuable upon exercise of options. The shares issuable result from (i)
options whose exercise price is below the $7.00 offer and (ii)
subordinated convertible notes whose conversion price is below the
$7.00 offer.
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November 1998 Confidential
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