Exhibit (c)(2)
[JENNY CRAIG LOGO]
JENNY CRAIG, INC.
PRESENTATION TO THE INDEPENDENT COMMITTEE
OF THE BOARD OF DIRECTORS
January 25, 2002
HOULIHAN LOKEY HOWARD & ZUKIN
Financial Advisors
1930 Century Park West
Los Angeles, California 90067
(310) 553-8871 - http://www.hlhz.com
Los Angeles - New York - Chicago - San Francisco
Washington, D.C. - Minneapolis - Dallas - Atlanta - Toronto
[JENNY CRAIG LOGO]
TABLE OF CONTENTS
SECTION
-------
Engagement Overview ................................................... A
Due Diligence ......................................................... B
Company Overview and Other Information ................................ C
Summary Conclusions ................................................... D
Valuation Considerations and Issues ................................... E
Auction Overview and the Purchasers' Offer ............................ F
Fairness/Valuation Analysis ........................................... G
Appendices
Comparable Company Descriptions ................................ 1
Comparable Company Financial Information ....................... 2
Selected Comparable Transactions ............................... 3
Net Operating Loss Analysis .................................... 4
Termination Fee Study .......................................... 5
LBO Model ...................................................... 6
Valuation Summary .............................................. 7
Houlihan Lokey Howard & Zukin Financial Advisors i
ENGAGEMENT OVERVIEW
[JENNY CRAIG LOGO]
ENGAGEMENT OVERVIEW
ENGAGEMENT OVERVIEW
OVERVIEW OF TRANSACTION
- - We understand that the Board of Directors (the "Board") of Jenny Craig,
Inc. (the "Company" hereinafter) has received a proposal from a newly
formed company controlled by ACI Capital ("ACI") and DB Capital Partners
LP (collectively, the "Purchasers") pursuant to which the Purchasers
will acquire all of the outstanding shares of the Company at
$5.30/share, except for certain shares held by Sid and Jenny Craig
(collectively, the "Craigs");
- - We further understand that in connection with such transaction, the
Craig's will rollover certain shares in the Company into certain equity
securities (representing approximately 20 percent interest in the newly
formed company);
- - The Craig's currently own approximately 69 percent of the Company's
common stock;
- - The Purchasers' acquisition of the Company's stock, the Craig's equity
rollover, and other related transactions disclosed to Houlihan Lokey are
collectively referred to herein as the "Transaction";
- - We understand that the Board of Directors of the Company has formed the
Independent Committee of the Board of Directors (the "Committee") to
consider certain matters regarding the Transaction;
ROLE OF HOULIHAN LOKEY
- - The Committee has requested that Houlihan Lokey render an opinion (the
"Opinion") as to the fairness, from a financial point of view, to the
public stockholders of the Company of the consideration to be received
by them in connection with the Transaction.
- - The Opinion shall not address the Company's underlying business decision
to effect the Transaction.
Houlihan Lokey Howard & Zukin Financial Advisors 1
DUE DILIGENCE
[JENNY CRAIG LOGO]
DUE DILIGENCE
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's annual reports on Form 10-K for the five
fiscal years ended June 30, 2001 and quarterly report on Form
10-Q for the quarter ended September 30, 2001, and
Company-prepared interim financial statements for the 5-months
ended November 30, 2001, which the Company's management has
identified as being the most current financial statements
available;
2. met with certain members of the senior management of the Company
to discuss the operations, financial condition, future prospects
and projected operations and performance of the Company, and met
with representatives of Koffler & Company ("Koffler"), the
Company's investment bankers, to discuss certain matters;
3. visited the business offices of the Company in La Jolla,
California;
4. reviewed the Company's Confidential Information Memorandum dated
Summer 2001 and other information and correspondence provided to
potential investors in connection with the proposed sale of the
Company;
5. reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the years ended June
30, 2002 and 2003;
6. reviewed the historical market prices and trading volume for the
Company's publicly traded securities, and reviewed
publicly-available analyst reports, news articles, and press
releases relating to the Company;
7. reviewed certain information, including a summary of offers
received, in connection with the proposed sale of the Company,
prepared by Koffler;
8. reviewed the latest available draft of the Stock Purchase
Agreement regarding to the Transaction;
9. reviewed certain other publicly available financial data for
certain companies that we deem comparable to the Company, and
publicly available prices and premiums paid in other
transactions that we considered similar to the Transaction; and
10. conducted such other studies, analyses and inquiries as we have
deemed appropriate.
Houlihan Lokey Howard & Zukin Financial Advisors 3
COMPANY OVERVIEW AND OTHER INFORMATION
[JENNY CRAIG LOGO]
COMPANY OVERVIEW AND OTHER INFORMATION
COMPANY OVERVIEW AND OTHER INFORMATION
- - The Company provides a comprehensive weight management program through a
chain of 654 Company-owned and franchised weight loss centers;
- - During the latest twelve months ended November 30, 2001, the Company
reported revenues of $297 million;
- - After several years of negative operating trends, the Company's
prospects appear to be improving:
- U.S. Operations appear to be "turning the corner"
- Same-store sales growth in the 4th quarter of fiscal
year 2001 (year ended June 30, 2001),
- Improved marketing,
- Successful introduction of Ultimate Choice,
- Price increases implemented during the year,
- Ongoing "re-imaging" of the Company as more
service-oriented,
- CEO believes she has the right "management team" in
place.
- The Australian operations appear to have stabilized
- Operations are still cash flow positive, although
substantially below historical profitability levels,
- Several key management positions are still vacant.
- IN SPITE OF THE POSITIVE DEVELOPMENTS ABOVE, IT REMAINS UNCLEAR
AS TO WHETHER SUCH RECENT RESULTS REFLECT A TRUE TURNAROUND OF
THE BUSINESS OR JUST A SHORT-TERM ABERRATION.
- A KEY INDICATOR OF THIS POTENTIAL TURNAROUND WILL BE THE
COMPANY'S PERFORMANCE IN THE THIRD QUARTER OF THE
CURRENT FISCAL YEAR (JANUARY THROUGH MARCH 2002).
Houlihan Lokey Howard & Zukin Financial Advisors 5
[JENNY CRAIG LOGO]
COMPANY OVERVIEW AND OTHER INFORMATION
- - Stock price performance
- The Company's stock price dropped immediately in August 2000
after the announcement that the $3.75/share buyout offer was
withdrawn by Craig.
- Subsequently, the stock price has generally traded at or below
approximately $2.00 per share.(1)
- In May 2001, the Company disclosed the hiring of Koffler to
explore alternatives to maximize shareholder value, including
the possible sale of the Company.
- Stock was delisted from the NYSE in August 2001 and is currently
traded in the OTC market.
- Current stock price appears to significantly under-value the
Company's core operations.
- - Other Information
- A substantial portion of the litigation judgment relating to the
lease of the Company's former headquarters was reversed in
October 2001.
- The sale of the Company's headquarters was completed in July
2001, providing net proceeds of $15 million,
- The Company's primary shareholders (Sid and Jenny Craig), both
nearing 70 years of age, are seeking to diversify their personal
holding as they approach retirement.
- ----------
(1) The Company's stock price recently "spiked" to approximately $3/share in the
absence of any apparent significant announcement or market event.
Houlihan Lokey Howard & Zukin Financial Advisors 6
[JENNY CRAIG LOGO]
COMPANY OVERVIEW AND OTHER INFORMATION
PRICE/VOLUME CHART
[DAILY PRICE/VOLUME GRAPH]
Houlihan Lokey Howard & Zukin Financial Advisors 7
[JENNY CRAIG LOGO]
COMPANY OVERVIEW AND OTHER INFORMATION
DAILY STOCK PRICE AND TRADING VOLUME BASED ON CLOSING PRICES FROM 01/24/01 TO
01/24/02
SUMMARY STATISTICS
Closing Price on 01/24/02 (pre-Announcement) $3.00
High Closing Price $3.12
Low Closing Price $1.01
Average Closing Price $1.85
Median Closing Price $1.69
Total Volume 4,760,100
Average Daily Trading Volume 19,670
Source: Factset
Houlihan Lokey Howard & Zukin Financial Advisors 8
[JENNY CRAIG LOGO]
COMPANY OVERVIEW AND OTHER INFORMATION
ANALYSIS OF TRADING VOLUME BASED ON CLOSING PRICES FROM 01/24/01 TO 01/24/02
PERCENT OF VOLUME WHICH TRADED IN STOCK PRICE RANGE
[GRAPH]
PERCENT OF VOLUME WHICH TRADED AT OR BELOW STOCK PRICE
[GRAPH]
Houlihan Lokey Howard & Zukin Financial Advisors 9
[JENNY CRAIG LOGO]
COMPANY OVERVIEW AND OTHER INFORMATION
MAJOR SHAREHOLDERS(1)
INVESTOR COMMON SHARES % OF TOTAL
- -------- ------------- ----------
Institutional Investors:
Dimensional Fund 1,224,700 5.9%
Yacktman Asset 580,000 2.8%
Vanguard Group 203,800 1.0%
Loeb Arbitrage 50,200 0.2%
---------- -----
Total Institutions 2,058,700 10.0%
Sidney and Jenny Craig 14,212,500 68.7%
Other Directors and Insiders 672,330 3.2%
Total Insiders 14,884,830 71.9%
Other Public Stock Holders 3,745,441 18.1%
---------- -----
Basic Shares(2) 20,688,971 100.0%
(1) Source: Bloomberg and Jenny Craig Definitive Proxy Statement dated
10/11/01.
(2) Total shares outstanding as of November 12, 2001 per Jenny Craig's 10-Q
dated 11/14/01.
[PIE CHART]
Other Public Stockholders 18%
Total Institutions 10%
Other Directors and Insiders 3%
Sidney and Jenny Craig 69%
Houlihan Lokey Howard & Zukin Financial Advisors 10
SUMMARY CONCLUSIONS
[JENNY CRAIG LOGO]
SUMMARY CONCLUSIONS
JENNY CRAIG, INC.
SUMMARY VALUATION CONCLUSIONS
[VALUATION APPROACH GRAPH]
THE $5.30/SHARE OFFER FROM THE PURCHASERS IS GENERALLY ABOVE THE INDICATED
VALUATION CONCLUSIONS AND, THEREFORE, APPEARS TO BE FAIR, FROM A FINANCIAL POINT
OF VIEW.
Houlihan Lokey Howard & Zukin Financial Advisors 12
VALUATION CONSIDERATIONS AND ISSUES
[JENNY CRAIG LOGO]
VALUATION CONSIDERATIONS AND ISSUES
VALUATION CONSIDERATIONS AND ISSUES
- - Very Comprehensive Auction Process Performed
- Process publicly announced,
- Provides convincing indication of fair market value across
numerous offers,
- The Company has achieved its projected financial results through
November 2001; as a result, the latest twelve months EBITDA
through November 2001 is substantially higher than the results
through September 2001 (when final LOI's were received).
- - Prior Offers for the Company
- Offer to purchase common stock for $3.75/share by Craig received
in June 2000;
- Craig indicated they were not interested in selling
their shares, effectively excluding other prospective
buyers,
- Offer subsequently withdrawn in August 2000.
- - Public Stock Price
- Lack of significant trading volume,
- Lack of Wall Street coverage,
- Significant "overhang" of Craig and institutional
shareholders.
Houlihan Lokey Howard & Zukin Financial Advisors 14
[JENNY CRAIG LOGO]
VALUATION CONSIDERATIONS AND ISSUES
- - Market Comparable Approach
- Lack of comparable public companies and transactions,
- Weight Watchers, while targeting same market/customer, has
radically different business model than the Company.
- - Discounted Cash Flow Approach
- Variability in historical operating results,
- "Credibility" of 2002E forecast,
- Projected results relative to historical operating
performance,
- Inability of management to accurately forecast operating
results historically,
- The Company exceeded its FY 2001 projection,
- The Company's operations are currently trending upwards,
after a period of substantial declines.
Houlihan Lokey Howard & Zukin Financial Advisors 15
AUCTION PROCESS AND THE PURCHASERS' OFFER
[JENNY CRAIG LOGO]
AUCTION PROCESS AND THE PURCHASERS' OFFER
AUCTION PROCESS
- - The Company retained Koffler & Co. in May 2001 to explore strategic
alternatives, including a potential sale of the Company;
- - Auction process appears to have been very thorough;
- Over 300 potential investors, including both strategic and
financial buyers, were contacted in connection with the sale
process,
- No restrictions placed on process by Sid & Jenny Craig nor the
Company's management,
- Potential sale of the Company was disclosed in various national
media.
- - Strong Response from Potential Investors;
- 62 parties reviewed the Company's information memorandum,
- 18 preliminary indications of interest received,
- 12 management presentations held,
- 8 Final offers received in late October,
- Two additional rounds of "re-bidding" were held,
- Ultimately, 3 final bids ranged from $5.25/share to
$5.30/share.
- The Company has elected to proceed with the Purchasers.
Houlihan Lokey Howard & Zukin Financial Advisors 17
[JENNY CRAIG LOGO]
AUCTION PROCESS AND THE PURCHASERS' OFFER
THE PURCHASERS' OFFER
- - Highlights of Purchasers' Offer
- $5.30/share cash to all shareholders,
- Equity roll-over of $4 million (total) for the Craigs and other
management,
- The Craig's will receive $600k annually for 5 years ($3 million
in total) in connection with consulting/non- compete agreement.
- - Rationale cited by the Company, Craig, and Koffler to proceed with the
Purchasers:
- Valuation: $5.30/share offer at top of range
- Higher certainty of close
- Willingness to commit significantly more equity capital
(approximately $40 million)
- Commitment letters in place from senior lenders
- High degree of due diligence already completed
- Subsequent discussions with other finalists
- Koffler has held discussions with certain other
potential buyers that submitted bids in the final round,
- Such potential buyers were informed that the Company's
performance is "at or slightly above budget",
- No indications were made as to willingness to submit
revised bids.
Houlihan Lokey Howard & Zukin Financial Advisors 18
[JENNY CRAIG LOGO]
AUCTION PROCESS AND THE PURCHASERS' OFFER
ANALYSIS OF OFFER PRICE
PREMIUM ANALYSIS
Deal Price $ 5.30
Current Trading Price $ 3.00
Other Historical Price Information
20-day average $ 3.01
90-day average $ 2.74
6-month average $ 2.28
1-year average $ 1.80
PREMIUM
Current Trading Price 76.7%
20-day average 75.9%
90-day average 93.4%
6-month average 132.9%
1-year average 194.2%
IMPLIED VALUATION MULTIPLES
Fully-diluted Shares outstanding 22,189,971
Offer Price $ 5.30
Implied Equity before Option Proceeds $ 117,607
Add: Transaction-related Expenses 8,000
--------------
Subtotal $ 125,607
Less: Assumed Option Proceeds upon Exercise 3,087
--------------
IMPLIED EQUITY VALUE $ 122,520
Adjustments to Arrive at Implied EV of Operations
"Excess" Cash (40,000)
Interest-bearing debt 1,394
NOL Value inherent in stock price (2,744)
IMPLIED ENTERPRISE VALUE - OPERATIONS $ 81,170
Historical and Projected Operating Results
LTM Adjusted EBITDA $ 14,522
FY 2002E Adjusted EBITDA 24,472
--------------
LTM Revenues 296,713
FY 2002E Revenues 308,146
Implied Multiples
EV / LTM EBITDA 5.6
EV / FY 2002E EBITDA 3.3
EV / LTM Revenues 0.27
EV / FY 2002E Revenues 0.26
Houlihan Lokey Howard & Zukin Financial Advisors 19
[JENNY CRAIG LOGO]
AUCTION PROCESS AND THE PURCHASERS' OFFER
ANALYSIS OF THE BREAK-UP FEES AND RELATED ITEMS
- - The Purchase Agreement calls for a break-up fee of $4.75 million in the
event the Transaction is not consummated.
- This amount represents 4% of the total Transaction value
(including the cash on-hand) and 6% of the enterprise value of
the Company (i.e. (excluding cash).
- Houlihan Lokey conducted a study of disclosed termination (or
break-up) fees in 144 publicly-announced M&A transactions in
2000 (see appendix),
- For all 144 transactions in the study, termination fees
as a percentage of transaction value ranged from a low
0.7% to a high of 6.6% with a median of 2.9%,
- For transactions in the range of $50 million to $250
million (110 deals), the median termination fee was
3.3%.
- While at the top of the range, the termination fee provision in
the Transaction does not seem unreasonable.
- - In addition to the above termination fees, the Purchase Agreement
provides for an "upside" sharing agreement between the Purchasers and
the Craigs in the event a better purchase offer is received (and
accepted) by the Company;
- Provision provides for the following "profit split":
- 1(st) dollar above the current $5.30/share offer (i.e.
new offers between $5.31 to $6.30) will be split 50/50
with the Purchasers.
- Any amounts in excess of $6.30/share will be split 80/20
between Craig & the Purchasers.
- Although such fees could "dis-incentive" the Craig's from
accepting a superior offer, this arrangement does not directly
impact the Company's other shareholders.
Houlihan Lokey Howard & Zukin Financial Advisors 20
[JENNY CRAIG LOGO]
AUCTION PROCESS AND THE PURCHASERS' OFFER
ANALYSIS OF THE CRAIG'S EQUITY ROLL-OVER
- - The current proposed deal structure calls for the Purchasers and other
equity investors to acquire (i) $25 million of subordinated debt, (ii)
$18 million of preferred stock, and (iii) $2 million of common stock in
a "strip" on a pro-rata basis.
- - The Purchasers' Offer requires the Craigs to roll-over approximately $4
million of their cash proceeds received in the Transaction.
- The Craig's, at their option, elected to forego investment in
the subordinated debt; rather, their entire $4 million roll-over
will consist of preferred and common equity.
- To the extent that the subordinated debt is "over-priced" (i.e.
projected returns are below market norms), the Craig's equity
roll-over could represent "hidden value" conveyed in the
Transaction at the expense of the Company's minority
shareholders.
- - The projected returns on the subordinated debt (in the range of 20% to
25%)(1) appear to approximate market norms.
- ----------
(1) Based on review of the terms of the various securities, discussions with the
Company and Koffler & Co., and certain financial assumptions.
Houlihan Lokey Howard & Zukin Financial Advisors 21
[JENNY CRAIG LOGO]
AUCTION PROCESS AND THE PURCHASERS' OFFER
ANALYSIS OF THE CRAIG'S NON-COMPETE/CONSULTING AGREEMENT
Selected Going-Private Transactions Identified Between 02/01/95 to 12/01/01
($ in Millions)
Individuals
Deal Aggregate Percentage of Bound by
Date Buyer Seller Consideration Non-Compete Consideration Term Agreement
---- ----- ------ ------------- ----------- ------------- ---- -----------
7/15/01 Coca-Cola
Amatil Ltd. San Miguel Corp. $ 2,700 $116.00 4.3% 10 yrs. Multiple
6/4/01 American Capital
Strategies Ltd. Roy F. Weston, Inc. $ 66.00 $ 0.72 1.1% 3 yrs. Two
4/10/01 Vestar Capital
and Goldner Hawn Michael Foods, Inc. $800.00 None 0.0% 2 yrs. Multiple
Johnson & Morrison
11/5/99 Preferred Employers
Holdings, Inc. 82% of Stockholders $ 16.12 None 0.0% 1 yr. Multiple
2/1/99 Saratoga Beverage
Group Fresh Juice Company $ 19.80 $ 1.21 6.12% 2 & 3 yrs. Two
1/14/99 NNG Sahara $ 6.80 $ 0.15 2.21% N/A One
6/9/98 Fresh Foods, Inc. Tyson Foods, Inc. (Pierre Foods) $129.00 None 0.0% 1 yr. N/A
5/19/98 Coffee People Inc. The Coffee Plantation $ 8.20 None 0.00% 1.5 yrs. Multiple
1/5/98 Pacific Security
Companies Minority Shareholders $ 1.84 $ 0.13 6.8% 5 yrs. One
10/21/97 Integrated Health
Services, Inc. RoTech Medical Corporation $514.75 $ 5.00 1.0% N/A Multiple
8/28/97 Vermont Pure Hldg Excelsior Spring Water $ 3.32 $ 0.21 6.24% 5 yrs. One
3/1/97 Fresh Foods, Inc. 14 Franchised Restaurants $ 3.77 98,750 shares NA 15 yrs. One
5/2/96 BAB Holdings, Inc. Bagels Unlimited Inc. $ 1.54 $ 0.10 6.48% 6 yrs. Two
8/10/95 Triarc, Inc. Mistic $ 98.32 $ 3.00 3.05% 3 yrs. N/A
6/2/95 BAB Holdings, Inc. Greenberg's L.P. $ 2.00 $ 0.13 6.25% 5 yrs. N/A
2/1/95 Odwalla, Inc. J.S. Grants, Inc. $ 2.48 $ 0.89 35.89% 10 yrs. Two
HIGH 6.80% 15 YRS.
LOW 0.97% 1 YRS.
MEDIAN 5.21% 4 YRS.
MEAN 4.35% 5 YRS.
NA ACI Capital Jenny Craig, Inc. $109.65 $ 3.00 2.74% 5 years Two
Excluded from Range
BASED UPON THE ABOVE ANALYSIS, THE VALUE OF THE CRAIG'S CONSULTING / NON-COMPETE
AGREEMENT DOES NOT APPEAR UNREASONABLE.
Houlihan Lokey Howard & Zukin Financial Advisors 22
FAIRNESS/VALUATION ANALYSIS
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
VALUATION SUMMARY
($ in Thousands)
VALUATION CONCLUSIONS
---------------------------------
Low High
------------ ------------
Valuation Approach
Implied Public Market Valuation NMF NMF
Market Approach $ 69,000 $ 80,000
Income Approach 66,000 81,000
CONCLUDED ENTERPRISE VALUE $ 66,000 $ 81,000
Excess Cash(1) 40,000 40,000
Interest-bearing Debt(2) (1,394) (1,394)
Value of Net Operating Loss Carryforwards(3) 2,744 2,744
------------ ------------
AGGREGATE EQUITY VALUE $ 107,350 $ 119,606
Proceeds - "in the money" Options(4) 3,087 3,087
ADJUSTED EQUITY VALUE $ 110,437 $ 122,693
Shares outstanding 20,688,971 20,688,971
Total "in the money" Options Outstanding 1,501,000 1,501,000
------------ ------------
Fully Diluted Shares Outstanding 22,189,971 22,189,971
INDICATED PRICE PER SHARE $ 4.98 $ 5.53(5)
CONCLUSION
Based upon the above analysis, the proposed Transaction at $5.30 per share is
fair to the Company's stockholders.
NMF Implied valuation not considered meaningful; therefore, indication excluded
from valuation conclusion.
(1) Excess Cash estimated as follows:
Cash on-hand as of December 31, 2001 (per Koffler & Co.) $ 50,000
Less: Cash required for working capital plus litigation liability 10,000 (per management)
---------
Excess Cash $ 40,000
=========
(2) Interest-bearing debt as of November 30, 2001 is comprised entirely of
certain capital lease obligations.
(3) Represents the estimated value of the Company's net operating loss
carryforwards; see analysis attached in Appendix.
(4) Represents approximately 1.5 million options outstanding with a
weighted-average exercise price of $2.06/share.
(5) In June 2000, Sid & Jenny Craig, the Company's primary shareholders,
offered to purchase the remaining outstanding shares of the Company for
$3.75/share. This offer was later withdrawn in August 2000.
Houlihan Lokey Howard & Zukin Financial Advisors 24
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
IMPLIED PUBLIC MARKET VALUATION
($ in Thousands)
Current 20 - Day 90 - Day
Stock Price Average Average
----------- -------- --------
Fully-diluted Shares Outstanding (in 000's) 22,190 22,190 22,190
Price Per Share $ 3.0000 $ 3.0132 $ 2.7400
-------- -------- --------
Total Equity Market Capitalization $ 66,570 $ 66,863 $ 60,801
Adjustments to Equity Value to Determine Value of Core Operations:
Less: "Excess" Cash $(40,000) $(40,000) $(40,000)
Less: NOL Value Inherent in Stock Price(1) (2,744) (2,744) (2,744)
Add: Interest-bearing Debt 1,394 1,394 1,394
-------- -------- --------
Implied Enterprise Value (Operations) $ 25,220 $ 25,513 $ 19,451
-------- -------- --------
(1) Represents the estimated value of the Company's net operating loss
carryforwards; see analysis attached in Appendix.
Houlihan Lokey Howard & Zukin Financial Advisors 25
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
MARKET APPROACH - SELECTION OF PUBLICLY-TRADED COMPARABLE COMPANIES
- - Houlihan Lokey performed an extensive review of publicly available
information and held discussions with the Company for the purpose of
determining appropriate public companies (i.e. public companies of
similar size, profitability, market capitalization, and line of
business).
- - Houlihan Lokey's search included both weight loss industry participants
as well as food companies with controlled distribution.
- - Based on our research, Houlihan Lokey considers the Company to have very
unique business characteristics that are difficult to match with other
publicly traded companies.
- - Nonetheless, Houlihan Lokey selected 9 publicly traded providers of
nutritional / weight-management products as comparable companies.
- Advantage Marketing Systems, Inc.
- Herbalife International, Inc.
- Nature's Sunshine Products, Inc.
- Usana Health Sciences, Inc.
- Weight Watchers International, Inc.
- Hain Celestial Group, Inc.
- Natrol, Inc.
- Reliv International, Inc.
- Weider Nutrition International, Inc.
Houlihan Lokey Howard & Zukin Financial Advisors 26
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
MARKET APPROACH - MARKET MULTIPLES OF COMPARABLE COMPANIES
ENTERPRISE VALUE /
---------------------------------------------------------------------------------------
LTM EBITDA LTM EBIT LTM REVENUE NFY EBITDA NFY +1 EBITDA
---------- -------- ----------- ---------- -------------
ADVANTAGE MARKETING 7.8 18.6 0.48 NA NA
HAIN CELESTIAL NMF NMF 1.92 11.1 9.3
HERBALIFE INTERNATIONAL 3.3 4.2 0.31 NA NA
NATROL INC NMF NMF 0.53 3.7 NA
NATURES SUNSHINE 5.9 7.5 0.58 4.2 NA
RELIV INTERNATIONAL NMF NMF 0.33 8.0 4.8
USANA HEALTH SCIENCES 3.0 5.9 0.21 2.6 NA
WEIDER NUTRITION 6.6 14.2 0.36 NA NA
WEIGHT WATCHERS 6.6 7.1 2.26 NA NA
MINIMUM 3.0 4.2 0.2 2.6 4.8
MAXIMUM 7.8 18.6 2.3 11.1 9.3
MEAN 5.5 9.6 0.78 5.9 7.0
MEDIAN 6.2 7.3 0.48 4.2 7.0
LTM Latest twelve months
NFY Next fiscal year
NMF Multiple not considered meaningful; excluded from analysis.
NA Not Available
Houlihan Lokey Howard & Zukin Financial Advisors 27
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
WEIGHT WATCHERS, INC. COMPARISON
JENNY CRAIG, INC. WEIGHT WATCHERS INTERNATIONAL, INC.
----------------- -----------------------------------
DESCRIPTION Company provides weight management program through Leading provider of weight-loss services in 27
chain of Company-owned and franchised weight loss countries worldwide. At core of the business are
centers. Through these centers, the Company sells weekly meeting promoting weight loss through
JENNY CRAIG cuisine to participants in the education and group support in conjunction with
program. healthy diet. Meetings held in temporary rented
space.
Revenues are principally derived from the Revenues are principally derived from the
following: following:
Food sales: (93%) - food sales under the JENNY'S Meeting Fees: (69%) weekly fee paid by members
CUISINE brand name Product Sales: (23%) sale of propriety products
Service fees: fixed service fee paid by each including snack bars, books, and CD-ROMs.
participant at commencement of program ($200-$300 Franchise Royalties: (6%) franchisees pay
each) approximately 10% of meeting fees
BUSINESS MODEL Fixed cost, food company, with leases Variable cost, service company, without leases
ENTERPRISE VALUE $17.7 million (implied public valuation) $1.2 billion
LTM REVENUES $291 million $541 million
LTM EBITDA $7.9 million (reported) $185 million
EBITDA % 2.7% 34%
EV / LTM EBITDA 2.2x 6.5x
EMPLOYEES Over 3,500 worldwide Approximately 800 employees full-time; in
addition, company employs over 30,000 part-time
employees and/or commission based service
providers.
MEMBERSHIP 89,000 participants worldwide (68,000 - U.S., Over 1 million worldwide; attending 37,000
21,000 - foreign markets). weekly Weight Watcher meetings
PROPERTIES / LOCATIONS 657 locations - principally throughout U.S. and 5 leased offices in North America and 26 other
Australia Company-owned - 544 (429 - U.S., 115 - leased offices worldwide. Meetings are held in
Australia). All 544 locations are leased. third party leased facilities such as shopping
malls and civic centers.
FRANCHISE OPERATIONS 111 franchise location in U.S. and foreign markets; Represents approximately 33% of worldwide
contributed approximate 7.5% of total revenues. attendance. No additional franchises are
anticipated in the future.
LICENSING Licensing agreement with Kraft Foods, Inc. for a Name licensed to 3(rd) parties for sale of
"bar" and drink product. Other opportunities books, apparel, and food products. Heinz,
currently being explored previous owner of the Company, receives
royalties of approximately $4 million
annually through 2004 associated with certain
food products. After 2004, such royalties
will be payable to the company.
MARKETING / PROMOTION Highly marketing intensive; generally 10% of Highly marketing intensive, generally 10%-15%
revenues spent on advertising. of revenues spent in marketing
BRAND NAME RECOGNITION Jenny Craig has 99% brand awareness. Over $700 Most widely recommended weight loss program by
million in vested-to-date. U.S. doctors. Name recognized by 97% of women in
U.S.
MARKET POSITION Market leader in weight-loss services in nearly
every country the company operates
STRATEGIC Initiatives New products (incl. Ultimate Choice),
re-imaging of brand Entering new markets (in
Europe), and increasing penetration in existing
markets and centers, & other changes to the Jenny
Craig program.
OTHER INFORMATION Postured as the "personal trainer" of the weight Discontinued sale of pre-packaged meals several
LOSS industry - high level of service. years ago. Postured as a "cheap gym" - with low
service yet inexpensive.
Houlihan Lokey Howard & Zukin Financial Advisors 28
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
MARKET APPROACH SUMMARY
($ in Thousands)
Rep Selected Multiple Enterprise Value
Level Low High Low High
BASED ON LATEST TWELVE MONTHS ENDED 11/30/01 RESULTS
EV / EBITDA $ 14,522 4.5 5.5 $ 65,349 $ 79,871
EV / EBIT 8,700 7.0 9.0 60,900 78,300
EV / Revenue 296,713 0.20 0.25 59,343 74,178
PROJECTED FY 2002E RESULTS
EV / EBITDA $ 24,472 3.0 3.5 $ 73,416 $ 85,652
EV / EBIT 19,581 3.5 4.0 68,534 78,324
PROJECTED FY 2003E RESULTS
EV / EBITDA $ 29,360 2.5 3.0 $ 73,400 $ 88,080
EV / EBIT 24,060 3.0 3.5 72,180 84,210
CONCLUDED ENTERPRISE VALUE $ 69,000 $ 80,000
Houlihan Lokey Howard & Zukin Financial Advisors 29
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
DETERMINATION OF REPRESENTATIVE LEVELS OF EARNINGS
($ in Thousands)
ACTUAL RESULTS - YEAR ENDED
----------------------------------------------------- LTM EST.
JUNE 98 JUNE 99 JUNE 00 JUNE 01 NOV 01 JUNE 02
--------- --------- --------- --------- --------- ---------
REVENUES $ 352,249 $ 320,952 $ 290,985 $ 283,552 $ 296,713 $ 308,146
Revenue Growth -8.9% -9.3% -2.6% 8.7%
Reported Operating Income (EBIT) 2,040 (2,784) (12,871) (2,711) 14,055 19,681
Depreciation / Amortization 7,101 5,854 5,541 6,053 5,822 4,891
--------- --------- --------- --------- --------- ---------
Reported EBITDA 9,141 3,070 (7,330) 3,342 19,877 24,572
2.6% 1.0% -2.5% 1.2% 6.7% 8.0%
Adjustments
Litigation Judgment -- 8,203 1,446 876 (8,649) --
Licensing Revenues 480 480 --
Restructuring Charge -- -- 6,910 -- -- --
Legal Fees - Litigation Judgement -- -- 775 291 274 --
Inventory Write-off ("On-the-Go") -- -- 3,068 -- -- --
Public Company Costs -- -- 500 500 502 --
Normalized Senior Level Compensation -- -- 1,400 1,100 1,100 --
One-time Expenses (Tender Offer) -- -- 141 297 292 --
Non-recurring Marketing Costs
(Lewinski P/R Campaign) -- -- 783 25 -- --
Feeling Fine (co-branding agreement) -- -- 475 -- -- --
One-time Expenses (Strategic Alternatives) -- -- -- 303 746 --
Consulting Fees Payable to Sid & Jenny Craig -- -- -- (600) (600) (600)
Savings upon Headquarters Move -- -- -- 500 500 500
TOTAL ADJUSTMENTS -- 8,203 15,498 3,772 (5,355) (100)
ADJUSTED EBITDA $ 9,141 $ 11,273 $ 8,168 $ 7,114 $ 14,522 $ 24,472
Adjusted EBITDA margins 2.6% 3.5% 2.8% 2.5% 4.9% 7.9%
Less: Depreciation / Amortization 7,101 5,854 5,541 6,053 5,822 4,891
ADJUSTED EBIT 2,040 5,419 2,627 1,061 8,700 19,581
Adjusted EBIT margins 0.6% 1.7% 0.9% 0.4% 2.9% 6.4%
Houlihan Lokey Howard & Zukin Financial Advisors 30
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
COMPARABLE TRANSACTIONS
- - Houlihan Lokey performed an extensive review of publicly available
information regarding the sales of companies with operations similar to
that of the Company.
- - Based on our research, other than the acquisition of Weight Watchers
(discussed below), Houlihan Lokey did not identify any transactions
involving companies with sufficiently similar business characteristics.
- - Weight Watchers was acquired in September 1999 for approximately $735
million, or 7.3x trailing EBITDA (see appendix for further information).
Houlihan Lokey Howard & Zukin Financial Advisors 31
[JENNY CRAIG LOGO]
FAIRNESS/VALUATION ANALYSIS
INCOME APPROACH
($ in Thousands)
LTM
NOV 2001 FY 2002E FY 2002E FY2003E Terminal
-------- -------- -------- ------- --------
Revenues $296,713 $308,146 $183,644 $318,860 $334,803
% Growth 3.5% 5.0%
Adjusted EBITDA 14,522 24,572 16,865 29,360
EBITDA % 4.9% 8.0% 9.2% 9.2%
Depreciation / Amortization (4,891) (2,036) (5,300)
------- -------- --------
Projected EBIT 19,681 14,829 24,060 25,263
EBIT Margins 6.4% 8.1% 7.5% 7.5%
Less: Income Tax Expense 40.0% 7,872 5,932 9,624 10,105
------- -------- -------- --------
Debt-free Earnings $11,809 $ 8,898 $ 14,436 $ 15,158
Depreciation / Amortization 4,891 2,036 5,300 =CAPX
Capital Expenditures (6,300) (5,500) (5,000) =DEPR
Working Capital (3,600) (2,700) 800 94
Debt-free Cash Flow $ 6,800 $ 2,734 $ 15,536 $ 15,252
ENTERPRISE VALUE
Terminal Growth Rate
-----------------------------------------------
3.0% 4.0% 5.0% 6.0% 7.0%
Discount Rate(1) 21.00% 74,950 78,492 82,478 86,994 92,156
22.00% 70,811 73,934 77,424 81,351 85,802
23.00% 67,093 69,863 72,940 76,380 80,250
24.00% 63,735 66,205 68,935 71,968 75,359
25.00% 60,688 62,902 65,336 68,027 71,017
Low Mid High
-------- -------- --------
Concluded Range $ 66,000 $ 73,000 $ 81,000
NOTE: All projections above based on information furnished by management.
(1) Discount rate estimated based on consideration pro-forma capital structure
(post-Transaction) and estimated IRR's of various investors. Certain key
assumptions include: (1) Senior Debt: 40% LTV, IRR approximately 18%; (ii) Sub
Debt, Preferred, Common Stock: assumes strip investments across all securities,
60% LTV, IRR approximately 30% - 35%.
Houlihan Lokey Howard & Zukin Financial Advisors 32
APPENDICES
COMPARABLE COMPANY DESCRIPTIONS
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
ADVANTAGE MARKETING SYSTEMS, INC.
Advantage Marketing Systems, Inc. (AMM) markets a product line consisting of
more than 100 products in three categories: weight management, dietary
supplement and personal care products. The products are marketed through a
network marketing organization in which independent distributors purchase
products for resale to retail customers as well as for their own personal use.
The number of active distributors has increased from approximately 33,000 at
December 31, 1998, and about 61,200 at December 31, 1999, to approximately
86,600 at December 31, 2000. On January 4, 2001, AMM purchased the LifeScience
Technologies group of companies for $1.2 million and a five-year payment of
$41,667 per month or 5 percent of the gross sales of LifeScience Technologies
products, whichever is greater. As a result of this acquisition the company
added 14 products and over 5,000 distributors.
[DAILY PRICE/VOLUME GRAPH]
The company's growth strategy is to expand its product line and network of
independent distributors to increase sales. It also seeks to increase sales
through initiatives designed to enhance sales in its existing markets. These
initiatives include increasing the number of its training and motivational
events and teleconferences, hiring additional distributor support personnel and
establishing more convenient regional support centers in targeted geographic
markets.
The principal objective of AMM's acquisition strategy is to acquire other
network marketing organizations that can be combined with its network marketing
organization, resulting in increased sales volume with minimal additional
administrative cost. The company does not consummate an acquisition unless, at
the time, it anticipates that such acquisition will contribute to profitability
and provide positive cash flows from operations.
Houlihan Lokey Howard & Zukin Financial Advisors 35
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
ADVANTAGE MARKETING SYSTEMS, INC. (CONTINUED)
AMM believes that the weight management and dietary supplement category is
expanding because of heightened public awareness of reports about the positive
effects of weight management and dietary supplements on health. During the years
ended December 31, 2000 and 1999, 67.6 percent and 70.9 percent respectively, of
AMM's net sales were derived from the seven products in the weight management
category that were marketed under the Advantage Marketing Systems label.
The company also believes that the personal care products market is a mature
category that has been historically immune to swings in the economy. With an
aging population, the company believes there may be a growing demand for a wide
spectrum of new products in the area of skin care.
Houlihan Lokey Howard & Zukin Financial Advisors 36
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
HAIN CELESTIAL GROUP, INC.
Hain Celestial Group, Inc. (HAIN), formerly Hain Food Group, Inc., is a natural,
specialty and snack food company. On May 30, 2000, the company acquired
Celestial Seasonings, Inc. with stockholders of Celestial receiving 1.265 Common
shares of the company for each Common share of Celestial.
[DAILY PRICE/VOLUME GRAPH]
The company markets, distributes and sells natural, organic, and specialty food
products under brand names. The product categories encompass natural and organic
foods, medically- directed foods, weight-loss and portion control foods, snack
foods, kosher foods, and specialty teas, including herb, green, black, wellness,
and organic. The products are sold primarily to specialty and natural food
distributors, and are marketed nationally to supermarkets, natural food stores,
and other retail classes of trade. The company also sells specialty gifts.
The company believes it is a leader in 13 of the top 15 natural food categories,
with such well-known natural food brands as Celestial Seasonings teas, including
Sleepytime, Lemon Zinger, Red Zinger, and Tension Tamer varieties, Hain Pure
Foods, Westbrae, Westsoy, Arrowhead Mills, Health Valley, Breadshop's, Casbah,
Garden of Eatin, Terra Chips, DeBoles, Earth's Best, and Nile Spice. The
company's principal specialty product lines include Hollywood cooking oils,
Estee sugar-free products, Weight Watchers dry and refrigerated products,
Kineret kosher foods, Boston Better Snacks, and Alba Foods.
Houlihan Lokey Howard & Zukin Financial Advisors 37
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
HERBALIFE INTERNATIONAL, INC.
Herbalife International, Inc. (HERBA) is a network marketing company that sells
a wide range of weight management products, food and dietary supplements and
personal care products worldwide. As of December 31, 2000, the company conducted
business in 49 countries located in Asia/Pacific Rim, Europe and The Americas.
Retail sales in those regions represented 41.2 percent, 23.9 percent and 34.9
percent, respectively, of its total retail sales in 2000. Products are made to
company specifications by outside manufacturers, and are marketed through a
network of independent distributors.
HERBA's products are marketed exclusively through a network marketing system
that enables its independent distributors to earn profits by selling Herbalife
products to retail consumers or other distributors. Distributors may also
develop their own distributor downline organizations by sponsoring other
distributors to do business in any market where HERBA operates. In doing so,
sponsors are entitled to receive royalty overrides (cash incentives, including
royalties and bonuses) on product sales within their downline organizations.
[DAILY PRICE/VOLUME GRAPH]
The company currently markets a total of 179 products which include Formula 1, a
protein powder in four different flavors designed as a meal replacement; four
Thermojetics weight management tablets; Thermojetics Herbal Concentrate, an
herbal beverage; and a variety of other nutritional products.
Houlihan Lokey Howard & Zukin Financial Advisors 38
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
HERBALIFE INTERNATIONAL, INC. (CONTINUED)
All personal care products are grouped under the name Dermajetics, which was
initiated in 1995. Products include the Skin Survival Kit, which has four skin
care products, Parfums Vitessence, made up of six eau de toilettes, and other
specialty care products. Food and dietary supplements include a variety of
products, each containing herbs, vitamins, minerals and other natural
ingredients. The company also sells products for nutrition and weight management
as part of a Health & Fitness Program and Bulk & Muscle Program. The programs
consist of a protein powder, multivitamin- mineral, herbal tablet and cell
activator.
Houlihan Lokey Howard & Zukin Financial Advisors 39
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
NATROL, INC.
Natrol, Inc. (NTOL) manufactures and markets branded, high- quality dietary
supplements, herbal teas, nutraceutical ingredients, and more recently, through
its acquisition of Prolab Nutrition, Inc., sports nutrition products.
[DAILY PRICE/VOLUME GRAPH]
Supplements are sold primarily under the NTOL's Natrol brand. These supplements
include vitamins, minerals, hormonal supplements, herbal products, and specialty
combination formulas that contribute to an individual's mental or physical
well-being. The company sells its products through multiple distribution
channels throughout the United States. These channels include domestic health
food stores and mass market drug, retail, and grocery store chains. NTOL also
sells its products through independent catalogs, Internet shopping sites, and,
to a limited degree, within select foreign countries. The company's strategy
emphasizes building strong recognition of the Natrol brand across multiple
distribution channels through a widespread multi-media marketing and advertising
strategy.
Herbal teas are sold under its Laci Le Beau brand name. The company uses
essentially the same sales people and brokers to sell teas as it does
supplements.
The company's recently acquired Prolab sports nutrition line of products is
targeted to body builders and health minded individuals seeking a high degree of
physical fitness.
The company also sells nutraceutical grade ingredients, primarily garlic,
vegetable powders, kava, melatonin and cetyl myristoleate complex to other
manufacturers.
Houlihan Lokey Howard & Zukin Financial Advisors 40
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
NATURE'S SUNSHINE PRODUCTS, INC.
Nature's Sunshine Products, Inc. (NATR) primarily manufactures and distributes
nutritional and personal care products. The company's extensive product line
includes herbs, vitamins, mineral supplements, and homeopathic remedies, as well
as natural skin, hair and beauty care products.
[DAILY PRICE/VOLUME GRAPH]
The company's herbal products (approximately 69 percent of sales in 2000) are
sold in the form of tablets, capsules or liquid extracts. NATR manufactures a
wide variety of single vitamins, which are sold in the form of chewable or non-
chewable tablets, and also manufactures several multiple vitamins and mineral
supplements, including a line containing natural antioxidants. Combined sales of
vitamins and mineral supplements were about 23 percent of total sales in 2000.
NATR manufactures or contracts with independent manufacturers to supply a
variety of personal care products for external use. Sales of personal care
products accounted for approximately 2 percent of the company's total sales in
2000. NATR markets a line of more than 40 distinctive homeopathic products
designed for the treatment of certain common ailments, including various
allergies.
NATR buys herbs and other raw materials in bulk, and, after quality control
testing, encapsulates, tabulates or concentrates them, and then packages them
for shipment. Most products are manufactured at the company's headquarters in
Spanish Fork, Utah. Certain personal care and homeopathic products are
manufactured for the company by contract manufacturers in accordance with
company specifications. NATR also operates regional warehouses in Columbus,
Ohio, Dallas, Texas, and Atlanta, Georgia.
Houlihan Lokey Howard & Zukin Financial Advisors 41
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
NATURE'S SUNSHINE PRODUCTS, INC. (CONTINUED)
The company sells its products primarily through an independent sales force of
managers and distributors. Managers resell the products to the distributors in
their sales group or to consumers, or use the products themselves. Demand for
the products is created largely by the number of active members of the
independent distributor sales force.
Synergy Worldwide, Inc., acquired in 2000, is a direct marketer involved in the
distribution and sale of nutritional, personal care and other products with an
emphasis on the Asian markets.
Houlihan Lokey Howard & Zukin Financial Advisors 42
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
RELIV INTERNATIONAL, INC.
Reliv International, Inc. produces a line of food products including nutritional
supplements, diet management products, functional foods, a line of granola bars
and a sports drink mix. Functional foods are products designed to influence
specific functions of the body. The company also distributes a line of premium
skin care products. These products are sold by subsidiaries of the company to a
sales force of independent distributors who sell products directly to consumers.
Reliv and its subsidiaries sell products to distributors throughout the United
States and in Australia, Canada, New Zealand, Mexico and the United Kingdom.
[DAILY PRICE/VOLUME GRAPH]
The nutritional supplements include Reliv NOW and Reliv Classic. Both products
are designed to provide a balanced nutritional supplement for an individual's
diet and contain a variety of vitamins and minerals, soy and other protein
sources and various herbs. The products are in powdered form to be mixed with
juice or other beverages. The Reliv Classic formula has a United States patent
and the Reliv NOW formula is a no-yeast derivative of the Reliv Classic formula.
Reliv NOW is available with all natural flavoring or in the original formula.
The company also markets a line of skin care products which is based on
compounds found only in the avocado. The products are designed to be used
individually or in combination with each other. The product line includes: Reliv
Face and Body Bar, a mild face and body soap; Reliv Pathway, a skin cleanser and
primer which contains a variety of avocado based ingredients; Reliv Reavo, a
skin care cream designed to reduce the appearance of aging in the skin caused by
natural and environmental causes; and Reliv R.P. 1.5, a skin care cream having
the active ingredient retinyl palmitate is designed to reduce the appearance of
aging caused by environmental causes such as exposure to the sun. The company's
skin care line also includes toners, moisturizers, sunless tanning lotions and
related items.
Houlihan Lokey Howard & Zukin Financial Advisors 43
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
RELIV INTERNATIONAL, INC. (CONTINUED)
In January 2000, Reliv International, Inc. announced the launch of two new
products and the reformulation of two existing products, each focused on meeting
the specific nutritional needs of particular sets of consumers. The new products
include Reliv NOW for Kids, a supplement designed to provide important vitamins,
minerals and other nutrients for growing bodies; and Reliv SoySense, a new
supplement that provides a significant source of soy protein, a nutrient proven
to lower the risk of heart disease.
Houlihan Lokey Howard & Zukin Financial Advisors 44
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
USANA HEALTH SCIENCES, INC.
USANA Health Sciences, Inc. (USNA) is a Utah corporation that develops and
manufactures high-quality nutritional, personal care and weight management
products. USNA distributes its products through a network marketing system. As
of December 30, 2000, the company had approximately 93,000 Independent
distributors or Associates in the United States, Canada, Australia, New Zealand,
Hong Kong, Japan and the United Kingdom.
[DAILY PRICE/VOLUME GRAPH]
USNA also offers a Preferred Customer program specifically designed for
customers who desire to purchase USANA's products for personal use and do not
desire to resell or distribute products. At December 30, 2000, the company had
approximately 76,000 Preferred Customers worldwide. The company defines a
current Associate and a current Preferred Customer as one that has purchased
product from USNA at any time during the most recent twelve-month period. During
2000, Preferred Customer purchases accounted for approximately 17 percent of net
sales.
USNA's three primary product lines consist of USANA Nutritionals (approximately
69 percent of net sales in 2000), LEAN Lifelong (12 percent) and Sens# (9
percent). The company's top-selling products are USANA Essentials (32 percent)
and Proflavanol (13 percent). Sens# is a completely new line, introduced in June
2000, of scientifically developed natural products designed to support healthy
skin and hair by providing protection and nourishment on both the inside and
outside of the dermal layers of skin.
Houlihan Lokey Howard & Zukin Financial Advisors 45
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
USANA HEALTH SCIENCES, INC. (CONTINUED)
The strategic shift in USNA's customer base continued during 2000. In February
2000, USANA introduced a value initiative that decreased prices on its products
by an average of approximately 24 percent. The value initiative reduced the
price of its top selling product, the Essentials, by 35 percent and offers a 10
percent discount for all customers who are active on the USANA Autoship
(standing monthly order) program. These pricing changes were made in an effort
to better attract and retain customers.
North America is the primary market for the company's products. Sales in the
United States and Canada collectively represented approximately 79.3 percent of
net sales in 2000. Sales in the Australia-New Zealand market represented
approximately 15.4 percent of net sales in 2000. Hong Kong, the company's first
market in Asia, accounted for 5.3 percent of net sales in 2000.
Houlihan Lokey Howard & Zukin Financial Advisors 46
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
WEIDER NUTRITION INTERNATIONAL, INC.
Weider Nutrition International, Inc. (WNI) began as the nutritional products
division of its parent, Weider Health and Fitness, whose predecessor was formed
by Joe Weider in 1940. The division, along with the parent's publications and
exercise equipment divisions, established the Weider name as a leading brand in
the health and fitness industry.
WNI now produces capsules and tablets, powdered drink mixes, bottled beverages
and nutrition bars. It markets its branded products in four principal
categories: sports nutrition; vitamins, minerals and herbs; diet; and healthy
snacks. WNI makes and markets some 1,400 products.
[DAILY PRICE/VOLUME GRAPH]
The company's products are sold in over 48,000 retail outlets in all 50 states.
Customers in the mass volume retail channel include mass merchandisers, drug
stores, warehouse clubs and supermarkets. The company services the health food
market by distributing its products to General Nutrition Center and the leading
health food distributors. It also sells through other distribution channels,
including its network of exclusive distributors to health clubs and gyms,
international markets and private-label manufacturing for other nutritional
supplement companies and certain retail customers. WNI also distributes products
to major markets worldwide.
As part of its multi-brand, multi-channel strategy, WNI has created a portfolio
of brands designed for specific distribution channels. The positioning of WNI's
brand names is supported by significant advertising and marketing expenditures,
as well as the company's historical association with the Weider name. As a
result, WNI believes that it has many of the leading brands in the nutritional
supplement industry, including Great American Nutrition, Joe Weider Signature,
Tiger's Milk, Fi-Bar, and Schiff.
Houlihan Lokey Howard & Zukin Financial Advisors 47
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
WEIDER NUTRITION INTERNATIONAL, INC. (CONTINUED)
In July 1998, WNI acquired Germany-based Haleko Hanseatisches Lebensmittel
Kontor GmbH ($65 million in annual sales), the largest sports nutrition company
in Europe, for $25 million in cash, stock, assumption of debt, and other costs,
as well as contingency payments.
Houlihan Lokey Howard & Zukin Financial Advisors 48
[JENNY CRAIG LOGO]
COMPARABLE COMPANY DESCRIPTIONS
WEIGHT WATCHERS INTERNATIONAL, INC.
Weight Watchers International, Inc. is the largest provider of weight control
programs in the world and operates in 30 countries through a network of
Company-owned and franchise operations. At the core of the business are weekly
meetings, in which is presented a scientifically designed program, incorporating
group support and education about healthy eating patterns, behavior modification
and physical activity. The Company has developed the Weight Watchers program
through continuous improvement over its 37-year history and the brand name is
recognized globally today as the standard for healthy, safe and drug free weight
control. Careful management of the brand identity and reputation is a
fundamental element of the Company's long-term success. The Company believes
that the combination of its brand
recognition, extensive global network and 8,600 classroom leaders in
Company-owned operations provide a significant competitive advantage..
[DAILY PRICE/VOLUME GRAPH]
Throughout its history, the Company has based its program on four core elements:
group support, behavior modification, diet and exercise. The group support
system remains the cornerstone method of presenting the program. Group support
assists members in dealing with issues such as depression-eating and habitual
eating behaviors. This support is offered through meetings that are interactive
and encourage learning through group activities and discussions. Members learn
strategies from leaders who have learned how to lose weight and maintain their
weight loss on the program. These leaders are trained to respond to member needs
by using internally developed techniques and actively modeling the Company's
principles. The group support system continues throughout the maintenance period
of the program when members learn how to stay within their appropriate weight
range.
Houlihan Lokey Howard & Zukin Financial Advisors 49
COMPARABLE COMPANY FINANCIAL INFORMATION
[JENNY CRAIG LOGO]
COMPARABLE COMPANY FINANCIAL INFORMATION
COMPARABLE COMPANY FINANCIAL ANALYSIS
(Figures in millions, except per share data)
WEIDER
ADVANTAGE HAIN HERBALIFE NATURES RELIV USANA NUTRITION WEIGHT CRAIG
MARKETING CELESTIAL INTL NATROL SUNSHINE INTERNATIO HEALTH INTL WATCHERS (JENNY)
SYS INC GROUP INC INC -CL A INC PRODS INC NAL INC SCIENCES -CL A INTL INC INC
General Market Information
Ticker Symbol AMM HAIN HERBA NTOL NATR RELV USNA WNI WTW JCGI
Exchange AMEX NASDAQ NASDAQ NASDAQ NASDAQ NASDAQ NASDAQ NYSE NYSE OTC
Fiscal Year End 12/2000 06/2001 12/2000 12/2000 12/2000 12/2000 12/2000 05/2001 12/01/00 06/2001
Latest Financial Information 09/2001 09/2001 09/2001 09/2001 09/2001 09/2001 09/2001 08/2001 09/01/01 09/2001
Closing Price as of
Valuation Date $ 2.44 $ 23.59 $ 14.01 $ 2.70 $ 12.31 $ 1.37 $ 1.44 $ 2.01 $ 33.15 $ 2.95
20-Day Average Stock Price $ 2.80 $ 23.06 $ 12.85 $ 3.05 $ 12.43 $ 1.21 $ 1.47 $ 1.53 $ 30.61 $ 2.70
52 Week Price Range
High $ 3.50 $ 36.38 $ 13.90 $ 4.40 $ 14.75 $ 1.75 $ 3.06 $ 3.05 $ 31.70 $ 3.28
Low $ 2.00 $ 17.80 $ 6.88 $ 0.95 $ 5.69 $ 0.89 $ 0.88 $ 1.35 $ 29.50 $ 0.17
52 Week Return -18.7% -18.1% 75.1% 35.0% 77.4% -12.6% -30.2% -26.9% NA 105.2%
Market Valuation
Information
Fully Diluted Shares 4.754 34.586 32.223 13.843 17.091 9.724 9.752 26.251 22.743 23.151
Closing Price as of
Valuation Date $ 2.44 $ 23.59 $ 14.01 $ 2.70 $ 12.31 $ 1.37 $ 1.44 $ 2.01 $ 33.15 $ 2.95
Market Value of Equity (MVE) $11.600 $815.887 $451.445 $37.377 $210.385 $13.273 $14.043 $ 52.764 $ 753.914 $ 68.295
plus: Total Debt (book) 3.331 13.284 11.571 8.428 0.000 6.100 13.808 74.732 480.786 1.508
less: Converted Debt 0.000 0.023 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
plus: Preferred Stock
Redemption/Market/Liq
Value 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 25.621 0.000
less: Converted Preferred 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 0.000
less: Cash & Cash
Equivalents (book) 2.078 13.990 195.290 3.535 26.447 1.357 4.105 2.603 37.904 52.078
plus: Minority Interest
in Subsidiaries 0.000 0.000 1.761 0.000 0.000 0.000 0.000 0.000 0.000 0.000
------- -------- -------- ------- -------- ------- ------- -------- ---------- -------
Enterprise Value $12.853 $815.158 $269.487 $42.270 $183.938 $18.016 $23.746 $124.893 $1,221.417 $17.725
------- -------- -------- ------- -------- ------- ------- -------- ---------- -------
Houlihan Lokey Howard & Zukin Financial Advisors 51
[JENNY CRAIG LOGO]
COMPARABLE COMPANY FINANCIAL INFORMATION
COMPARABLE COMPANY DEBT-FREE MULTIPLES
($ in Millions)
EV / EBITDA
----------------------------------------------
3-YR
EV Avg. FYE LTM NFY NFY + 1
-------- ------ ------ ------ ------ -------
Advantage Marketing Sys Inc(1) $ 12.9 8.1x 8.5x 7.8x NA NA
Hain Celestial Group Inc(2) 815.2 NMF NMF NMF 11.1x 9.3x
Herbalife Intl Inc -Cl A(1) 269.5 2.8x 3.1x 3.3x NA NA
Natrol Inc(3) 42.3 4.6x NMF NMF 3.7x NA
Natures Sunshine Prods Inc(3) 183.9 5.1x 5.5x 5.9x 4.2x NA
Reliv International Inc(4) 18.0 13.6x NMF NMF 8.0x 4.8x
Usana Health Sciences Inc(3) 23.7 1.5x 2.5x 3.0x 2.6x NA
Weider Nutrition Intl -Cl A(1) 124.9 5.2x 6.1x 6.6x NA NA
Weight Watchers Intl Inc(1) 1,221.4 11.4x 10.0x 6.6x NA NA
Low 1.5x 2.5x 3.0x 2.6x 4.8x
High 13.6x 10.0x 7.8x 11.1x 9.3x
Median 5.2x 5.8x 6.2x 4.2x 7.0x
Mean 6.6x 5.9x 5.5x 5.9x 7.0x
JENNY CRAIG 81.2 9.2X 11.4X 5.6X 3.3X NA
EV / REVENUE
-----------------------------------------------
3-YR
EV Avg. FYE LTM NFY NFY + 1
-------- ------ ------ ------ ------ -------
Advantage Marketing Sys Inc(1) $ 12.9 0.62x 0.48x 0.48x NA NA
Hain Celestial Group Inc(2) 815.2 2.16x 1.97x 1.92x 1.97x NA
Herbalife Intl Inc -Cl A(1) 269.5 0.29x 0.29x 0.31x NA NA
Natrol Inc(3) 42.3 0.54x 0.49x 0.53x NA NA
Natures Sunshine Prods Inc(3) 183.9 0.61x 0.58x 0.58x NA NA
Reliv International Inc(4) 18.0 0.29x 0.29x 0.33x 0.33x 0.30x
Usana Health Sciences Inc(3) 23.7 0.19x 0.19x 0.21x NA NA
Weider Nutrition Intl -Cl A(1) 124.9 0.36x 0.35x 0.36x NA NA
Weight Watchers Intl Inc(1) 1,221.4 3.13x 3.01x 2.26x NA NA
Low 0.19x 0.19x 0.21x 0.33x 0.30x
High 3.13x 3.01x 2.26x 1.97x 0.30x
Median 0.54x 0.48x 0.48x 1.15x 0.30x
Mean 0.91x 0.85x 0.78x 1.15x 0.30x
JENNY CRAIG 81.2 0.27X 0.29X 0.27X 0.26X NA
EV / EBIT
-----------------------------------------------
3-YR
EV Avg. FYE LTM NFY NFY + 1
-------- ------ ------ ------ ------ -------
Advantage Marketing Sys Inc(1) $ 12.9 12.7x 17.9x 18.6x NA NA
Hain Celestial Group Inc(2) 815.2 NMF NMF NMF 13.2x 10.7x
Herbalife Intl Inc -Cl A(1) 269.5 3.3x 3.8x 4.2x NA NA
Natrol Inc(3) 42.3 6.4x NMF NMF 5.5x NA
Natures Sunshine Prods Inc(3) 183.9 6.1x 6.9x 7.5x 5.0x NA
Reliv International Inc(4) 18.0 NMF NMF NMF 11.9x 5.9x
Usana Health Sciences Inc(3) 23.7 2.1x 4.4x 5.9x 4.7x NA
Weider Nutrition Intl -Cl A(1) 124.9 10.6x 13.2x 14.2x NA NA
Weight Watchers Intl Inc(1) 1,221.4 12.6x 11.0x 7.1x NA NA
Low 2.1x 3.8x 4.2x 4.7x 5.9x
High 12.7x 17.9x 18.6x 13.2x 10.7x
Median 6.4x 9.0x 7.3x 5.5x 8.3x
Mean 7.7x 9.5x 9.6x 8.1x 8.3x
JENNY CRAIG 81.2 NMF NMF 9.3x 4.1x NA
EV / TOTAL ASSETS (NET OF CASH)
-----------------------------------------------
3-YR
EV Avg. FYE LTM NFY NFY + 1
-------- ------ ------ ------ ------ -------
Advantage Marketing Sys Inc(1) $ 12.9 1.81x 1.58x 0.98x NA NA
Hain Celestial Group Inc(2) 815.2 2.08x 1.87x 1.80x NA NA
Herbalife Intl Inc -Cl A(1) 269.5 1.02x 0.97x 1.00x NA NA
Natrol Inc(3) 42.3 0.56x 0.50x 0.52x NA NA
Natures Sunshine Prods Inc(3) 183.9 2.12x 2.05x 1.78x NA NA
Reliv International Inc(4) 18.0 0.97x 0.94x 1.06x NA NA
Usana Health Sciences Inc(3) 23.7 0.68x 0.73x 0.70x NA NA
Weider Nutrition Intl -Cl A(1) 124.9 0.55x 0.60x 0.61x NA NA
Weight Watchers Intl Inc(1) 1,221.4 3.88x 4.05x 3.17x NA NA
Low 0.55x 0.50x 0.52x 0.00x 0.00x
High 3.88x 4.05x 3.17x 0.00x 0.00x
Median 1.02x 0.97x 1.00x NA NA
Mean 1.52x 1.48x 1.29x NA NA
JENNY CRAIG 81.2 1.28x 1.72x 2.10x NA NA
Footnotes:
(1) No projections available.
(2) Projected financial figures are based on the average of several analyst
reports.
(3) Projected financial figures are based on the Houlihan Lokey Howard & Zukin
build-up method.
(4) Projected financial figures are based on a Taglich Brothers, Inc. report
dated November 27, 2001.
Houlihan Lokey Howard & Zukin Financial Advisors 52
[JENNY CRAIG LOGO]
COMPARABLE COMPANY FINANCIAL INFORMATION
COMPARABLE COMPANY DEBT-FREE MULTIPLES (CONT.)
($ in Millions)
PRICE / EARNINGS
-----------------------------------------------
3-YR
MVE AVG. FYE LTM NFY NFY + 1
------ ------ ------ ------ ------ -------
Advantage Marketing Sys Inc(1) $ 11.6 14.3x 23.5x 32.4x NA NA
Hain Celestial Group Inc(2) 815.9 NMF 33.7x 36.1x 22.4x 18.0x
Herbalife Intl Inc -Cl A(1) 451.4 9.1x 10.6x 11.2x NA NA
Natrol Inc(3) 37.4 9.8x NMF NMF 9.0x NA
Natures Sunshine Prods Inc(3) 210.4 10.7x 12.0x 12.7x 9.5x NA
Reliv International Inc(4) 13.3 NMF NMF NMF 19.5x 8.4x
Usana Health Sciences Inc(3) 14.0 2.0x 5.3x 7.3x 5.8x NA
Weider Nutrition Intl -Cl A(1) 52.8 NMF NMF NMF NA NA
Weight Watchers Intl Inc(1) 753.9 20.0x 33.8x 16.5x NA NA
Low 2.0x 5.3x 7.3x 5.8x 8.4x
High 20.0x 33.8x 36.1x 22.4x 18.0x
Median 10.2x 17.8x 14.6x 9.5x 13.2x
Mean 11.0x 19.8x 19.4x 13.2x 13.2x
JENNY CRAIG 122.5 NMF NMF NMF NA NA
PRICE / NET BOOK VALUE
-----------------------------------------------
3-YR
MVE AVG. FYE LTM NFY NFY + 1
------ ------ ------ ------ ------ -------
Advantage Marketing Sys Inc(1) $ 11.6 1.47x 1.36x 1.89x NA NA
Hain Celestial Group Inc(2) 815.9 10.51x 5.89x 2.04x NA NA
Herbalife Intl Inc -Cl A(1) 451.4 2.32x 2.06x 1.80x NA NA
Natrol Inc(3) 37.4 1.10x 1.46x 1.24x NA NA
Natures Sunshine Prods Inc(3) 210.4 2.86x 2.79x 2.49x NA NA
Reliv International Inc(4) 13.3 2.01x 2.35x 2.29x NA NA
Usana Health Sciences Inc(3) 14.0 0.75x 1.09x 0.99x NA NA
Weider Nutrition Intl -Cl A(1) 52.8 1.33x 1.25x 1.26x NA NA
Weight Watchers Intl Inc(1) 753.9 NMF NMF NMF NA NA
Low 0.75x 1.09x 0.99x 0.00x 0.00x
High 10.51x 5.89x 2.49x 0.00x 0.00x
Median 1.74x 1.76x 1.85x NA NA
Mean 2.79x 2.28x 1.75x NA NA
JENNY CRAIG 122.5 3.25x 6.17x 2.80x NA NA
PRICE / CASH FLOW
----------------------------------------------
3-YR
MVE Avg. FYE LTM NFY NFY + 1
------ ------ ------ ------ ------ -------
Advantage Marketing Sys Inc(1) $ 11.6 8.4x 9.0x 8.8x NA NA
Hain Celestial Group Inc(2) 815.9 33.1x 22.0x 23.7x 16.9x 14.3x
Herbalife Intl Inc -Cl A(1) 451.4 7.0x 7.7x 7.9x NA NA
Natrol Inc(3) 37.4 5.9x NMF NMF 4.8x NA
Natures Sunshine Prods Inc(3) 210.4 8.2x 8.6x 8.9x 7.2x NA
Reliv International Inc(4) 13.3 15.5x 27.7x NMF 9.4x 5.8x
Usana Health Sciences Inc(3) 14.0 1.3x 2.1x 2.4x 2.2x NA
Weider Nutrition Intl -Cl A(1) 52.8 4.2x 5.0x 5.6x NA NA
Weight Watchers Intl Inc(1) 753.9 15.6x 22.2x 12.9x NA NA
Low 1.3x 2.1x 2.4x 2.2x 5.8x
High 33.1x 27.7x 23.7x 16.9x 14.3x
Median 8.2x 8.8x 8.8x 7.2x 10.1x
Mean 11.0x 13.0x 10.0x 8.1x 10.1x
JENNY CRAIG 122.5 NMF NMF NMF NA NA
Footnotes:
(1) No projections available.
(2) Projected financial figures are based on the average of several analyst
reports.
(3) No projections available.
(4) Projected financial figures are based on a Taglich Brothers, Inc. report
dated November 27, 2001.
Houlihan Lokey Howard & Zukin Financial Advisors 53
[JENNY CRAIG LOGO]
COMPARABLE COMPANY FINANCIAL INFORMATION
RISK ANALYSIS RANKINGS
SIZE
(Revenue, millions)
HERBALIFE INTL INC -CL A $ 881.5
WEIGHT WATCHERS INTL INC $ 540.7
HAIN CELESTIAL GROUP INC $ 424.1
WEIDER NUTRITION INTL -CL A $ 348.7
NATURES SUNSHINE PRODS INC $ 318.0
JENNY CRAIG $ 291.1
USANA HEALTH SCIENCES INC $ 115.3
NATROL INC $ 79.3
RELIV INTERNATIONAL INC $ 53.8
ADVANTAGE MARKETING SYS INC $ 26.7
HISTORICAL GROWTH
(2-Year EBITDA)
JENNY CRAIG 57.5%
HAIN CELESTIAL GROUP INC 17.3%
ADVANTAGE MARKETING SYS INC 16.1%
WEIGHT WATCHERS INTL INC 14.5%
HERBALIFE INTL INC -CL A -4.4%
WEIDER NUTRITION INTL -CL A -4.6%
NATURES SUNSHINE PRODS INC -9.4%
USANA HEALTH SCIENCES INC -28.0%
RELIV INTERNATIONAL INC -50.1%
NATROL INC NMF
PROFITABILITY
(EBITDA to Revenue)
WEIGHT WATCHERS INTL INC 34.3%
HAIN CELESTIAL GROUP INC 11.5%
NATURES SUNSHINE PRODS INC 9.9%
HERBALIFE INTL INC -CL A 9.2%
USANA HEALTH SCIENCES INC 7.0%
ADVANTAGE MARKETING SYS INC 6.2%
WEIDER NUTRITION INTL -CL A 5.5%
JENNY CRAIG 5.0%
RELIV INTERNATIONAL INC 0.7%
NATROL INC -5.1%
SIZE
(Enterprise Value, millions)
WEIGHT WATCHERS INTL INC $1,221.4
HAIN CELESTIAL GROUP INC $ 815.2
HERBALIFE INTL INC -CL A $ 269.5
NATURES SUNSHINE PRODS INC $ 183.9
WEIDER NUTRITION INTL -CL A $ 124.9
JENNY CRAIG $ 81.2
NATROL INC $ 42.3
USANA HEALTH SCIENCES INC $ 23.7
RELIV INTERNATIONAL INC $ 18.0
ADVANTAGE MARKETING SYS INC $ 12.9
HISTORICAL GROWTH
(1-Year EBITDA)
HAIN CELESTIAL GROUP INC 56.4%
WEIGHT WATCHERS INTL INC 15.3%
NATURES SUNSHINE PRODS INC 1.2%
JENNY CRAIG -11.7%
HERBALIFE INTL INC -CL A -19.2%
ADVANTAGE MARKETING SYS INC -27.9%
WEIDER NUTRITION INTL -CL A -29.2%
USANA HEALTH SCIENCES INC -47.9%
RELIV INTERNATIONAL INC -249.0%
NATROL INC NMF
RELATIVE DEPRECIATION
(Depreciation to EBITDA)
RELIV INTERNATIONAL INC 235.2%
ADVANTAGE MARKETING SYS INC 58.2%
WEIDER NUTRITION INTL -CL A 53.8%
USANA HEALTH SCIENCES INC 50.4%
JENNY CRAIG 40.1%
HAIN CELESTIAL GROUP INC 24.1%
NATURES SUNSHINE PRODS INC 22.1%
HERBALIFE INTL INC -CL A 21.0%
WEIGHT WATCHERS INTL INC 6.9%
NATROL INC -91.2%
HISTORICAL GROWTH
(2-Year Revenue)
ADVANTAGE MARKETING SYS INC 41.8%
HAIN CELESTIAL GROUP INC 14.3%
NATROL INC 13.0%
RELIV INTERNATIONAL INC 7.1%
WEIGHT WATCHERS INTL INC 5.5%
HERBALIFE INTL INC -CL A 4.4%
WEIDER NUTRITION INTL -CL A 2.5%
NATURES SUNSHINE PRODS INC 2.2%
USANA HEALTH SCIENCES INC -1.2%
JENNY CRAIG -6.0%
PROJECTED GROWTH
(1-Year EBITDA)
JENNY CRAIG 206.3%
RELIV INTERNATIONAL INC 145.8%
HAIN CELESTIAL GROUP INC 40.3%
NATURES SUNSHINE PRODS INC 31.1%
USANA HEALTH SCIENCES INC -5.7%
NATROL INC NMF
ADVANTAGE MARKETING SYS INC NA
HERBALIFE INTL INC -CL A NA
WEIDER NUTRITION INTL -CL A NA
WEIGHT WATCHERS INTL INC NA
INTERNAL INVESTMENT
(Capital Expenditures to Revenue)
ADVANTAGE MARKETING SYS INC 7.6%
USANA HEALTH SCIENCES INC 6.7%
NATURES SUNSHINE PRODS INC 4.8%
HAIN CELESTIAL GROUP INC 4.6%
HERBALIFE INTL INC -CL A 1.2%
WEIDER NUTRITION INTL -CL A 1.0%
WEIGHT WATCHERS INTL INC 0.9%
JENNY CRAIG 0.9%
RELIV INTERNATIONAL INC 0.6%
NATROL INC 0.4%
HISTORICAL GROWTH
(1-Year Revenue)
ADVANTAGE MARKETING SYS INC 19.1%
NATURES SUNSHINE PRODS INC 6.8%
NATROL INC 6.7%
HAIN CELESTIAL GROUP INC 2.3%
WEIGHT WATCHERS INTL INC 1.6%
HERBALIFE INTL INC -CL A -1.3%
JENNY CRAIG -2.6%
WEIDER NUTRITION INTL -CL A -3.3%
USANA HEALTH SCIENCES INC -8.3%
RELIV INTERNATIONAL INC -11.5%
PROJECTED GROWTH
(5-Year EPS)
ADVANTAGE MARKETING SYS INC NA
HAIN CELESTIAL GROUP INC NA
HERBALIFE INTL INC -CL A NA
NATROL INC NA
NATURES SUNSHINE PRODS INC NA
RELIV INTERNATIONAL INC NA
USANA HEALTH SCIENCES INC NA
WEIDER NUTRITION INTL -CL A NA
WEIGHT WATCHERS INTL INC NA
CRAIG (JENNY) INC NA
JENNY CRAIG NA
LIQUIDITY
(Current Ratio)
ADVANTAGE MARKETING SYS INC 2.9
NATROL INC 2.9
HAIN CELESTIAL GROUP INC 2.8
NATURES SUNSHINE PRODS INC 2.2
HERBALIFE INTL INC -CL A 2.0
JENNY CRAIG 1.8
WEIDER NUTRITION INTL -CL A 1.7
RELIV INTERNATIONAL INC 1.1
USANA HEALTH SCIENCES INC 1.0
WEIGHT WATCHERS INTL INC 0.7
PROJECTED GROWTH
(1-Year Revenue)
JENNY CRAIG 7.1%
HAIN CELESTIAL GROUP INC 0.0%
RELIV INTERNATIONAL INC -11.2%
ADVANTAGE MARKETING SYS INC NA
HERBALIFE INTL INC -CL A NA
NATROL INC NA
NATURES SUNSHINE PRODS INC NA
USANA HEALTH SCIENCES INC NA
WEIDER NUTRITION INTL -CL A NA
WEIGHT WATCHERS INTL INC NA
PROFITABILITY
(EBIT to Revenue)
WEIGHT WATCHERS INTL INC 31.9%
HAIN CELESTIAL GROUP INC 8.7%
NATURES SUNSHINE PRODS INC 7.7%
HERBALIFE INTL INC -CL A 7.3%
USANA HEALTH SCIENCES INC 3.5%
JENNY CRAIG 3.0%
ADVANTAGE MARKETING SYS INC 2.6%
WEIDER NUTRITION INTL -CL A 2.5%
RELIV INTERNATIONAL INC -0.9%
NATROL INC -9.8%
LEVERAGE
(Debt to EV)
NATURES SUNSHINE PRODS INC 0.0%
HAIN CELESTIAL GROUP INC 1.6%
JENNY CRAIG 1.7%
HERBALIFE INTL INC -CL A 4.3%
NATROL INC 19.9%
ADVANTAGE MARKETING SYS INC 25.9%
RELIV INTERNATIONAL INC 33.9%
WEIGHT WATCHERS INTL INC 39.4%
USANA HEALTH SCIENCES INC 58.1%
WEIDER NUTRITION INTL -CL A 59.8%
Houlihan Lokey Howard & Zukin Financial Advisors 54
[JENNY CRAIG LOGO]
COMPARABLE COMPANY FINANCIAL INFORMATION
OPERATING PERFORMANCE PARAMETERS
(figures in millions)
LTM OPERATING INDICATIONS LTM MARGINS
-------------------------------------------------- ----------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED
GROSS ADJUSTED ADJUSTED CASH NET GROSS ADJUSTED ADJUSTED CASH NET
REVENUE PROFIT EBITDA EBIT FLOW INCOME PROFIT EBITDA EBIT FLOW INCOME
------- ------ -------- -------- -------- -------- ------ -------- -------- -------- --------
ADVANTAGE MARKETING SYS INC $ 26.7 $ 9.0 $ 1.7 $ 0.7 $ 1.3 $ 0.4 33.8% 6.2% 2.6% 4.9% 1.3%
HAIN CELESTIAL GROUP INC 424.1 172.8 48.7 37.0 34.4 22.6 40.7% 11.5% 8.7% 8.1% 5.3%
HERBALIFE INTL INC -CL A 881.5 411.1 81.2 64.2 57.2 40.2 46.6% 9.2% 7.3% 6.5% 4.6%
NATROL INC 79.3 26.5 (4.1) (7.7) (5.3) (9.0) 33.5% -5.1%* -9.8%* -6.7%* -11.3%*
NATURES SUNSHINE PRODS INC 318.0 261.0 31.4 24.4 23.5 16.6 82.1% 9.9% 7.7% 7.4% 5.2%
RELIV INTERNATIONAL INC 53.8 20.3 0.4 (0.5) 0.1 (0.8) 37.7% 0.7% -0.9%* 0.2% -1.4%*
USANA HEALTH SCIENCES INC 115.3 80.9 8.0 4.0 6.0 1.9 70.2% 7.0% 3.5% 5.2% 1.7%
WEIDER NUTRITION INTL -CL A 348.7 131.1 19.0 8.8 9.5 (0.8) 37.6% 5.5% 2.5% 2.7% -0.2%*
WEIGHT WATCHERS INTL INC 540.7 285.9 185.3 172.6 58.3 45.6 52.9% 34.3%* 31.9%* 10.8%* 8.4%*
Low $ 26.7 $ 9.0 $ (4.1) $ (7.7) $ (5.3) $ (9.0) 33.5% 0.7% 2.5% 0.2% 1.3%
High $881.5 $411.1 $185.3 $172.6 $ 58.3 $ 45.6 82.1% 11.5% 8.7% 8.1% 5.3%
Median $318.0 $131.1 $ 19.0 $ 8.8 $ 9.5 $ 1.9 40.7% 7.0% 5.4% 5.2% 4.6%
Mean $309.8 $155.4 $ 41.3 $ 33.7 $ 20.6 $ 13.0 48.4% 7.1% 5.4% 5.0% 3.6%
Jenny Craig $296.7 $ 24.7 $ 14.5 $ 8.7 $ 11.0 $ 5.2 8.3% 4.9% 2.9% 3.7% 1.8%
2-YEAR COMPOUND ANNUAL GROWTH RATES
------------------------------------
ADJUSTED
ADJUSTED ADJUSTED NET
REVENUE EBITDA EBIT INCOME
------- -------- -------- --------
ADVANTAGE MARKETING SYS INC 41.8% 16.1% -1.4% -14.1%
HAIN CELESTIAL GROUP INC 14.3% 17.3% 14.4% 30.4%
HERBALIFE INTL INC -CL A 4.4% -4.4% -5.2% -6.3%
NATROL INC 13.0% NMF* NMF* NMF*
NATURES SUNSHINE PRODS INC 2.2% -9.4% -14.1% -13.4%
RELIV INTERNATIONAL INC 7.1% -50.1% NMF* NMF*
USANA HEALTH SCIENCES INC -1.2% -28.0% -40.1% -47.4%
WEIDER NUTRITION INTL -CL A 2.5% -4.6% 7.1% NMF*
WEIGHT WATCHERS INTL INC 5.5% 14.5% 15.0% -31.8%
Low -1.2% -50.1% -40.1% -47.4%
High 41.8% 17.3% 15.0% 30.4%
Median 5.5% -4.5% -1.4% -13.7%
Mean 10.0% -6.1% -3.5% -13.8%
Jenny Craig -6.0% 57.5% NMF NMF
* Excluded from range.
Houlihan Lokey Howard & Zukin Financial Advisors 55
[JENNY CRAIG LOGO]
COMPARABLE COMPANY FINANCIAL INFORMATION
BALANCE SHEET RATIOS
(figures in millions)
NET NET NET
TOTAL INCOME INCOME CURRENT QUICK INVENTORY A/R A/P WORKING
ASSETS ROA ROE RATIO RATIO TURNOVER DAYS DAYS CAPITAL
------ ------ ------ ------- ------ --------- ------ ------ ---------
ADVANTAGE MARKETING SYS INC $ 15.2 2.7% 2.0% 2.9 1.7 14.2 14.1 6.4 $ 2.156
HAIN CELESTIAL GROUP INC 467.4 5.0% 5.9% 2.8 1.4 4.9 43.2 67.7 $ 77.138
HERBALIFE INTL INC -CL A 465.4 9.1% 16.9% 2.0 1.3 5.0 13.3 15.9 ($ 10.950)
NATROL INC 84.9 -10.0% -13.7% 2.9 1.4 3.9 56.9 47.2 $ 17.146
NATURES SUNSHINE PRODS INC 129.8 13.2% 18.1% 2.2 1.0 2.0 9.6 36.5 $ 13.310
RELIV INTERNATIONAL INC 18.3 -3.6% -15.8% 1.1 0.3 6.5 15.6 57.3 $ 0.453
USANA HEALTH SCIENCES INC 38.3 4.9% 16.2% 1.0 0.3 3.0 1.4 48.3 $ 2.430
WEIDER NUTRITION INTL -CL A 206.4 -0.4% -2.4% 1.7 0.7 4.1 51.9 52.2 $ 64.349
WEIGHT WATCHERS INTL INC 423.4 11.9% -21.9% 0.7 0.4 16.9 8.6 11.2 ($ 56.966)
Low $ 15.2 -10.0% -21.9% 0.7 0.3 2.0 1.4 6.4 ($ 56.966)
High $467.4 13.2% 18.1% 2.9 1.7 16.9 56.9 67.7 $ 77.138
Median $129.8 4.9% 2.0% 2.0 1.0 4.9 14.1 47.2 $ 2.430
Mean $205.5 3.7% 0.6% 1.9 0.9 6.7 23.8 38.1 $ 12.118
Jenny Craig $ 90.7 11.5% 10.2% 1.8 1.4 48.6 1.4 9.3 ($ 21.397)
LEVERAGE
--------------------------------------------
OTHER LT DEBT/ DEBT/ DEBT/ INTEREST
LIAB/EV EBITDA MVE (1) EV COVERAGE (2)
-------- ------ ------- ------ ------------
ADVANTAGE MARKETING SYS INC 0.5% 2.0x 28.7% 0.3x 4.8x
HAIN CELESTIAL GROUP INC 1.0% 0.3x 1.6% 0.0x 35.5x
HERBALIFE INTL INC -CL A 15.2% 0.1x 2.6% 0.0x NMF*
NATROL INC 0.5% NMF* 22.5% 0.2x NMF*
NATURES SUNSHINE PRODS INC 1.1% 0.0x 0.0% 0.0x NMF*
RELIV INTERNATIONAL INC 2.1% 16.8x 46.0% 0.3x 0.8x
USANA HEALTH SCIENCES INC 0.0% 1.7x 98.3% 0.6x 9.8x
WEIDER NUTRITION INTL -CL A 0.0% 3.9x 141.6% 0.6x 2.0x
WEIGHT WATCHERS INTL INC 0.3% 2.6x 63.8% 0.4x 3.4x
Low 0.0% 0.0x 0.0% 0.0x 0.8x
High 15.2% 16.8x 141.6% 0.6x 35.5x
Median 0.5% 1.9x 28.7% 0.3x 4.1x
Mean 2.3% 3.4x 45.0% 0.3x 9.4x
Jenny Craig NA 0.1x NA NA NA
* Excluded from range.
Houlihan Lokey Howard & Zukin Financial Advisors 56
SELECTED COMPARABLE TRANSACTIONS
[JENNY CRAIG LOGO]
SELECTED COMPARABLE TRANSACTIONS
TRANSACTION ANALYSIS - WEIGHT WATCHERS
($ in Millions)
Announce Date: 7/22/99
Close Date; 9/29/99
Target: H.J. HEINZ CO.
Unit Sold: WEIGHT WATCHERS BUSINESS
Business Line: Provides dieting classes and sells prepackaged food
products
Buyer: ARTAL LUXEMBOURG SA
Transaction Value: $ 735.0
Terms: - Weight Watchers redeemed shares of common stock from
Heinz for $349.5 million, paying $324.5 million in
cash and $25 million in preferred stock issues to
Heinz.
- Artal bought 94% of the remaining common stock from
Heinz for $223.7 in cash.
- Heinz used $14.3 million of the proceeds to retain a 6
percent stake in Weight Watchers.
- Senior lenders provided $239 million under new,
secured bank credit facilities which provide for
borrowings of up to $267 million.
- Weight Watchers International issues $255 million
worth of high yield bonds.
- The notes and the senior borrowings together were used
to finance the purchase of shares from Heinz and to
refinance the existing debt of the company.
FINANCIAL ANALYSIS
12 months to 2Q FY00 (a)
Revenue $ 406.0 EV/Revenue 1.8 x
EBIT $ 96.1 EV/EBIT 7.6 x
EBITDA $ 101.0 EV/EBITDA 7.3 x
OPERATIONAL ANALYSIS
- - Acquisition allows Heinz to use the savings to boost marketing of its
ketchup, Ore-Ida frozen potatoes and other food products.
- - Acquisition gives Heinz the opportunity to focus on its long-term food
growth strategy, including Weight Watchers foods and other global food
businesses.
- - With Artal's strong track record of success in consumer branded goods and
services, the acquiring company believes that it can strengthen the Weight
Watchers brand in weight loss services and work with Heinz to grow the
Weight Watchers branded food businesses.
(a) Per ING Barings High-Yield Research Paper dated January 10, 2000, without
adjustments.
Houlihan Lokey Howard & Zukin Financial Advisors 58
NET OPERATING LOSS ANALYSIS
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NET OPERATING LOSS ANALYSIS
NET OPERATING LOSS ANALYSIS
($ IN MILLIONS)
ASSUMPTIONS:
Growth Rate (pre-tax income) 0.0%
NOL usage Limitation (% of pre-tax)(2) 90.00%
Federal Tax Rate 35.00%
State Tax Rate 9.30%
Cost of Equity 25.0%
Federal NOL - Beginning Balance 10.000
State NOL - Beginning Balance 0.000
State NOL usage limitation(4) 100.0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1 2 3 4 5 6 7 8 9 10
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
PRE-TAX INCOME(1) 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000
Maximum NOL Usage, if change of control 10.000 1.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
FEDERAL TAX SAVINGS:
Potential Federal NOL Usage(2) 9.000 1.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Allowed Federal NOL Usage(2) 9.000 1.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Federal Tax Savings at 35 percent 3.150 0.350 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
STATE TAX SAVINGS
State NOL Usage(2) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
State NOL Usage(2) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
State Tax Savings at 6.045 percent.(3) 6.05% 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL TAX SAVINGS (FEDERAL AND STATE) 3.150 0.350 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Number of Years(4) 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00
Present Value Factor 0.8000 0.6400 0.5120 0.4096 0.3277 0.2621 0.2097 0.1678 0.1342 0.1074
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
PRESENT VALUE OF TAX SAVING 2.520 0.224 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
SUM OF PRESENT VALUE OF TAX SAVING 2.744
FEDERAL NOL
Beginning Balance 10.000 1.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Usage 9.000 1.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Additions 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ending Balance 1.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
STATE NOL
Beginning Balance 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Usage 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Additions(5) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ending Balance 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
NOTES:
(1) Projected pre-tax income assumes $10 million in pre-tax income in FY 2002
(annualized results for quarter ended 9/30/01) with an assumed growth rate
equal to 0 percent thereafter.
(2) Assumes Federal and State NOL's can be used to offset 90 percent of taxable
income. In addition, annual NOL usage is limited under a 'change of
control' scenario to the Company's equity value multiplied by the Fed Funds
Rate.
(3) The state tax rate of 9.3 percent is adjusted by 65 percent or (1-Federal
tax rate) to reflect the federal tax benefit received if the Company had
paid state taxes.
(4) Assumes tax benefit associated with the usage of NOL to be received at end
of each year.
(5) Assumes that additions to the State NOL are limited to 100 percent of the
pre-tax loss, if any, in a given year.
Houlihan Lokey Howard & Zukin Financial Advisors 60
TERMINATION FEE STUDY
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TERMINATION FEE STUDY
SUMMARY OF ANALYSIS
- - This study includes 144 announced M&A transactions in 2000 involving U.S.
publicly traded target companies with an aggregate Transaction Value of at
least $50.0 million in which there was a disclosed Termination Fee.
- - The magnitude of each Termination Fee was measured as a percentage of
"Transaction Value." Transaction Value is defined as the total amount of
consideration payable in the transaction, excluding transaction fees and
expenses. Liabilities and preferred stock were included in Transaction Value
only if they were publicly disclosed as part of the consideration.
- - Transaction Value was determined to be a more appropriate reference point
than Equity Value for determining the magnitude of a Termination Fee
because, unlike Equity Value, Transaction Value is not affected by the
target company's capital structure.
- - Based on the 144 transactions analyzed, Termination Fees in 2000 as a
percent of Transaction Value ranged from a high of 6.6 percent to a low of
0.7 percent, with a median of 2.9 percent.
TRANSACTION TERMINATION FEE STUDY SUMMARY(1)
($ IN MILLIONS)
TERMINATION FEE
AS A PERCENTAGE OF
TRANSACTION TERMINATION TRANSACTION
VALUE FEE VALUE
----------- ----------- ------------------
High $172,494.0 $3,900.0 6.6%
Low $ 55.7 $ 1.8 0.7%
Mean $ 3,483.4 $ 88.1 3.0%
Median $ 685.3 $ 20.7 2.9%
- ----------
(1) High, low, mean and median summary results are exclusive of each other.
Results shown for transaction value, termination fee and termination fee as
a percentage of transaction value may be from different transactions.
Houlihan Lokey Howard & Zukin Financial Advisors 62
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TERMINATION FEE STUDY
- - Illustrated below is an analysis of 2000 and 1999 Termination Fees relative
to transaction size and form of consideration.
TERMINATION FEE STUDY BY TRANSACTION SIZE AND FORM OF CONSIDERATION
($ IN MILLIONS)
MEDIAN TERMINATION
NUMBER MEDIAN MEDIAN FEE AS A PERCENTAGE OF
OF TRANSACTIONS TRANSACTION VALUE TERMINATION FEE TRANSACTION VALUE
---------------- -------------------- ---------------- ----------------------
2000 1999 2000 1999 2000 1999 2000 1999
------ ------ -------- -------- ------ ------ ------ ------
MEDIAN TERMINATION FEES BY
TRANSACTION SIZE
$50 million to $250 million 37 110 $ 153.6 $ 115.3 $ 5.0 $ 4.0 3.3% 3.4%
$250 million to $500 million 28 61 $ 387.9 $ 389.6 $ 10.3 $ 12.0 2.7% 3.1%
$500 million to $1 billion 18 52 $ 732.2 $ 707.2 $ 23.8 $ 15.3 3.6% 2.5%
$1 billion and greater 61 99 $2,559.1 $2,327.9 $ 85.0 $ 54.0 2.8% 2.5%
------ ------ -------- -------- ------ ------ ------ ------
TOTAL 144 322 $ 730.4 $ 450.4 $ 20.0 $ 12.5 2.9% 2.9%
MEDIAN TERMINATION FEES BY
TRANSACTION CONSIDERATION
All Stock 62 133 $1,475.4 $ 569.3 $ 45.0 $ 20.0 3.0% 2.9%
All Cash 77 164 $ 412.0 $ 295.9 $ 10.0 $ 9.0 2.8% 2.8%
Cash and Stock 5 25 $1,755.6 $1,291.7 $ 65.0 $ 30.0 2.6% 2.6%
------ ------ -------- -------- ------ ------ ------ ------
TOTAL 144 322 $ 730.4 $ 450.4 $ 20.0 $ 12.5 2.9% 2.9%
Houlihan Lokey Howard & Zukin Financial Advisors 63
LBO MODEL
LBO MODEL
LBO MODEL SUMMARY
SOURCES:
$000s % TOTAL RATE PIK RATE EQUITY AMORTIZATION
------ ------- ------ -------- ------ --------------
Senior Term A 15,000 19.5% 15.0% 0.0% 0.0% 2.0 in 2.0
Senior Term B 15,000 19.5% 17.0% 0.0% 0.0% 3.0 in 3.0
Revolving Line of Credit 2,000 2.6% 11.0% 0.0% 0.0% -- -- --
Subordinated Debt 25,000 32.5% 17.0% 0.0% 20.0% 5.0 in 5.0
Seller Note -- 0.0% 10.0% 0.0% 0.0% 5.0 in 5.0
Preferred Equity 18,000 23.4% 10.0% 0.0% 57.6% 0.0 in 7.0
Common Equity 2,000 2.6% 0.0% 0.0% 22.4% -- -- --
Other Common -- 0.0% 0.0% 0.0% 0.0% -- -- --
Total Sources 77,000 100.0% 100.0%
USES:
$000s % TOTAL
-------- -------
Cash Stock Purchase 115,000 149.4%
Cash Asset Purchase -- 0.0%
Refinance Debt -- 0.0%
Seller Note -- 0.0%
Reinvested Equity -- 0.0%
Transaction Costs 8,000 10.4%
Other -- 0.0%
Change in Cash (46,000) -59.7%
Total Uses 77,000 100.0%
INTERNAL RATES OF RETURN:
Exit Multiple (Yr. 5) 4.0x 5.0x 6.0x
Subordinated Debt 24.8% 27.1% 29.3%
Pref. & Comm Eqty 42.2% 48.1% 53.1%
PROJECTED AS OF JUNE 30
DEBT BALANCE: OPENING AT ------------------------------------------------------------
11/30/01 2002 2003 2004 2005 2006
---------- -------- -------- -------- -------- --------
Senior Term A 15,000 13,250 9,550 -- -- --
Senior Term B 15,000 12,083 7,083 -- -- --
Revolving Line of Credit 2,000 3,302 2,422 5,000 -- 5,000
Subordinated Debt 25,000 25,000 25,000 25,000 25,000 --
Seller Note -- -- -- -- -- --
Total Debt 57,000 53,635 44,055 30,000 25,000 5,000
Less: Cash (7,665) (5,000) (5,000) (2,506) (10,332) (4,811)
Net Debt 49,335 48,635 39,055 27,494 14,668 189
EQUITY:
Preferred Equity 18,000 18,000 18,000 18,000 18,000 18,000
Common Equity 73,622 73,622 73,622 73,622 73,622 73,622
Paid in Capital (58,499) (58,499) (58,499) (58,499) (58,499) (58,499)
Retained Earnings 201 2,361 11,941 22,993 35,296 49,239
Treasury Stock (74,762) (74,762) (74,762) (74,762) (74,762) (74,762)
-------- -------- -------- -------- -------- --------
Total Stockholder' Equity (41,438) (39,278) (29,698) (18,646) (6,343) 7,600
-------- -------- -------- -------- -------- --------
OPERATING SUMM: ACTUAL FYE JUNE 30, PROJECTED FYE JUNE 30,
----------------------------------------- LTM 7 MOS. -----------------------------------------
1998 1999 2000 2001 NOV-01 6/30/02 2003 2004 2005 2006
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Revenue 352,249 320,952 290,985 283,552 296,713 183,644 318,860 326,832 335,002 343,377
% Growth NA -8.9% -9.3% -2.6% 4.6% NA 3.5% 2.5% 2.5% 2.5%
Gross Profit 28,617 30,856 20,346 20,396 28,642 26,186 45,432 46,568 47,732 48,925
% of Sales 8.1% 9.6% 7.0% 7.2% 9.7% 14.3% 14.2% 14.2% 14.2% 14.2%
Adjusted EBITA 2,040 5,419 2,627 481 20,235 16,856 25,532 26,089 26,657 27,236
% of Sales 0.6% 1.7% 0.9% 0.2% 6.8% 9.2% 8.0% 8.0% 8.0% 7.9%
Adjusted EBITDA 9,141 11,273 8,168 6,534 26,057 17,639 28,760 29,017 29,585 30,164
% of Sales 2.6% 3.5% 2.8% 2.3% 8.8% 9.6% 9.0% 8.9% 8.8% 8.8%
CAPX 4,678 5,073 4,747 1,961 800 5,500 5,000 5,000 5,000 5,000
% of Sales 1.3% 1.6% 1.6% 0.7% 0.3% 3.0% 1.6% 1.5% 1.5% 1.5%
Adj. EBITDA - CAPX 4,463 6,200 3,421 4,573 25,257 12,139 23,760 24,017 24,585 25,164
% of Sales 1.3% 1.9% 1.2% 1.6% 8.5% 6.6% 7.5% 7.3% 7.3% 7.3%
COVERAGE & LIQUIDITY: PROJECTED FYE JUNE 30,
OPENING AT EST. FYE 7 MOS. ---------------------------------------
11/30/01 2002 2002 2003 2004 2005 2006
---------- -------- ------ ------ ------ ------ ------
EBITDA - CAPX - Taxes/
Cash Interest+Sch. Prin+Cash Div 1.15x 0.75x 0.73x 0.93x 0.67x 2.54x 0.53x
EBITDA - CAPX/Cash Interest NMF 1.97x 2.32x 3.01x 4.02x 5.43x 10.48x
EBITDA/Cash Interest NMF 2.67x 3.37x 3.64x 4.86x 6.54x 12.57x
Financing/EBITDA NA 6.1x 8.2x 4.7x 4.2x 3.9x 3.2x
Total Debt/EBITDA 2.19x 2.24x 3.04x 1.53x 1.03x 0.85x 0.17x
Senior Debt/EBITDA 1.23x 1.10x 1.62x 0.66x 0.17x 0.00x 0.17x
Financing/EBITDA - CAPX 5.9x 8.2x 12.0x 5.7x 5.1x 4.7x 3.8x
Total Debt/EBITDA - CAPX 2.3x 3.0x 4.4x 1.9x 1.2x 1.0x 0.2x
Senior Debt/EBITDA - CAPX 1.3x 1.6x 2.4x 0.8x 0.2x 0.0x 0.2x
PROJECTED FYE JUNE 30,
REVOLVER AVAILABILITY: OPENING AT --------------------------------------------------
11/30/01 2002 2003 2004 2005 2006
---------- ------ ------ ------ ------ ------
Actual Revolver Balance 2,000 3,302 2,422 5,000 -- 5,000
Eligible Accounts Receivable @ 75% 1,792 1,800 2,175 2,229 2,285 2,342
Eligible Inventory @ 50% 5,013 6,050 6,400 6,560 6,724 6,892
------ ------ ------ ------ ------ ------
Maximum Availability 5,000 5,000 5,000 5,000 5,000 5,000
Revolver Availability 3,000 1,698 2,578 -- 5,000 --
Houlihan Lokey Howard & Zukin Financial Advisors 65
VALUATION SUMMARY
VALUATION SUMMARY
($ in Thousands, except per share information)
MARKET APPROACH DCF APPROACH IMPLIED PUBLIC MARKET
---------------------------- ---------------------------- ---------------------
Low High Low High Low High
ENTERPRISE VALUE $ 69,000 $ 80,000 $ 66,000 $ 81,000
------------ ------------ ------------ ------------
Excess Cash $ 40,000 $ 40,000 $ 40,000 $ 40,000
Interest-bearing Debt (1,394) (1,394) (1,394) (1,394)
Value of Net Operating Loss Carryforwards 2,744 2,744 2,744 2,744
------------ ------------ ------------ ------------
Aggregate Equity Value $ 110,350 $ 121,350 $ 107,350 $ 122,350
Proceeds - "in the money" Options 3,087 3,087 3,087 3,087
------------ ------------ ------------ ------------
Adjusted Equity Value $ 113,437 $ 124,437 $ 110,437 $ 125,437
============ ============ ============ ============
Shares outstanding 20,688,971 20,688,971 20,688,971 20,688,971
Total "in the money" Options Outstanding 1,501,000 1,501,000 1,501,000 1,501,000
------------ ------------ ------------ ------------
Fully Diluted Shares Outstanding 22,189,971 22,189,971 22,189,971 22,189,971
Indicated Price Per Share $ 5.11 $ 5.61 $ 4.98 $ 5.65 $ 2.74 $ 3.00
Houlihan Lokey Howard & Zukin Financial Advisors 67