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EXHIBIT C
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GLOBE BUSINESS RESOURCES
CONFIDENTIAL INFORMATION MEMORANDUM
OCTOBER 1999
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GLOBE BUSINESS RESOURCES, INC.
Table of Contents
I. EXECUTIVE SUMMARY ................................................2
GENERAL .....................................................................................................5
Business Strategies..................................................................................6
Acquisitions.........................................................................................7
GLOBE CORPORATE STAY INTERNATIONAL - "GCSI"...................................................................8
GLOBE FURNITURE RENTALS - "GFR".....................................................................13
MANAGEMENT AND EMPLOYEES.....................................................................................17
Executive Management................................................................................17
Employees...........................................................................................18
LEGAL ....................................................................................................18
YEAR 2000....................................................................................................18
III FINANCIAL INFORMATION...........................................................................................19
IV APPENDIX.........................................................................................................23
Organizational Chart.........................................................................................23
Investor Chart
Annual Report
10-K
10-Q
Globe Business Resources Marketing Material
3
Friedman, Billings, Ramsey & Co., Inc. ("FBR") has been retained by Globe
Business Resources, Inc. ("Globe or the "Company") to serve as its financial
advisor regarding the contemplated sale of the Company (or certain lines of
business currently operated by the Company).
This Information Memorandum (the "Memorandum") is being furnished to a limited
number of parties who may be interested ("Interested Parties") in submitting
proposals to acquire the Company or certain of its businesses (the
"Transaction"). THIS MEMORANDUM IS SUBJECT TO A SIGNED CONFIDENTIALITY AGREEMENT
AND IS NOT TO BE REPRODUCED OR USED FOR ANY PURPOSE EXCEPT AS SET FORTH IN SUCH
CONFIDENTIALITY AGREEMENT. The purpose of the Memorandum is to summarize the
operations of the Company and to facilitate discussions with Interested Parties.
FBR will be available to consult with Interested Parties, assist Interested
Parties in their review of the Company, and arrange all contact for appropriate
due diligence.
This Memorandum may not be copied, reproduced or distributed to others at any
time without the prior written consent of the Company. The Memorandum is being
delivered to Interested Parties for informational purposes only and upon the
express understanding that such Interested Parties will use it only for the
purpose of evaluating the Transaction. This Memorandum contains certain
nonpublic information, and, accordingly, recipients shall treat this Memorandum
and all nonpublic information made available hereunder, as confidential.
The Information contained in this Memorandum was obtained by FBR from the
Company and other sources. No representation or warranty, expressed or implied,
is made as to the accuracy or completeness of such information. No information
contained in this Memorandum or any other written or oral communication
transmitted or made available to an Interested Party is, or shall be relied upon
as, a promise or representation, whether as to the past or future, and no
liability will attach thereto, except as and if provided in a definitive
acquisition agreement when, as and if it is executed and delivered, and subject
to such limitations as may be provided in such definitive acquisition agreement.
No representation or warranty can be or is made as to the accuracy or
attainability of estimates and projections set forth in this Memorandum and no
liability will attach thereto. Neither the Company nor FBR nor any other person
is undertaking any obligation to update or otherwise revise this Memorandum, and
neither the Company nor FBR nor any other person shall incur any liability for
failure to do so.
The Company expressly reserves the right, without giving any reasons therefor,
at any time and in any respect, to amend or terminate its offering procedures,
to terminate discussions with any or all Interested Parties, to reject any or
all proposals, or to negotiate with any Interested Parties with respect to a
Transaction involving the Company.
All recipients of this Memorandum hereby agree to return immediately this
Memorandum, all copies hereof and all materials delivered in connection herewith
to FBR, should they elect not to pursue a Transaction or, in any event, upon the
request of FBR or the Company. Questions relating to the Memorandum or
Transaction should be directed to the persons listed below. MANAGEMENT,
EMPLOYEES, AND DIRECTORS OF THE COMPANY ARE NOT TO BE CONTACTED DIRECTLY.
RICHARD J. HENDRIX JOSEPH R. NARDINI WILLIAM B. FIDELI
Managing Director Managing Director Assistant Vice President
Friedman, Billings Ramsey & Co., Inc. Friedman, Billings, Ramsey & Co., Inc. Friedman, Billings, Ramsey & Co., Inc.
1001 Nineteenth Street North 1001 Nineteenth Street North 1001 Nineteenth Street North
Arlington, Virginia 22209 Arlington, Virginia 22209 Arlington, Virginia 22209
Phone: (703) 469-1128 Phone: (703) 312-9614 Phone: (703) 469-1008
Fax: (703) 469-1002 Fax: (703) 469-1002 Fax: (703) 469-1002
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I. EXECUTIVE SUMMARY
COMPANY OVERVIEW
Globe Business Resources, Inc. (the "Company" or "Globe") is a leader in the
temporary relocation industry, operating in both the corporate housing and
furniture rental businesses. Globe's common stock is publicly listed on the
Nasdaq national market system trading under the symbol "GLBE". The Company's
Globe Corporate Stay International ("GCSI") division is the third leading
participant in the corporate housing market, providing fully furnished
short-term housing through an inventory of leased housing units to relocated,
transferred, and temporary personnel. GCSI currently has operations in 22 states
and offers accommodations in each of the top 80 U.S. markets. As of July 31,
1999, the Company had approximately 5,200 units under lease. This number varies
throughout the year due to market seasonality. GCSI believes its market share
within corporate housing to be approximately 11%. The Company's Globe Furniture
Rentals ("GFR") division is the third largest operator in the rent-to-rent
segment of the furniture rental business. This division rents and sells quality
office and residential furniture to a variety of corporate and individual
customers through 20 showrooms in 12 states. GFR also sells used furniture
through 18 clearance centers, most of which are attached to showrooms or
warehouse facilities. Since June 1996, the Company has acquired 15 corporate
housing companies and 3 furniture rental companies. Over this period, revenues
have grown from $50.3 million in fiscal 1996 to a projected $163.6 million in
fiscal 2000.
INVESTMENT HIGHLIGHTS
PROVIDES IMMEDIATE LEADING PRESENCE IN THE TEMPORARY RELOCATION INDUSTRY FOR ANY
POTENTIAL ACQUIRER.
Globe is the number three company in both the corporate housing and furniture
rental businesses. In order to achieve this level of market presence in either
business a buyer would be faced with the task of acquiring many small
independent operators and integrating these acquisitions into one company. Globe
has been a leading consolidator of both of these markets, successfully
completing the difficult task of integrating 18 acquisitions over the last three
years and becoming a market leader in both businesses. Consequently, Globe today
represents a unique opportunity for a buyer quickly to become a major
participant in the temporary relocation industry and provides a relatively low
risk and efficient means of establishing this presence.
INCREASING BARRIERS TO ENTRY.
The corporate housing business requires limited capital for expansion, as there
is no "bricks and mortar" requirement, which historically has allowed
entrepreneurs to easily enter the business. As the market has consolidated, the
ability to provide service nationally has become important to the industry's
largest customers. Similarly, the ability to conduct business over the web is
becoming increasingly important in servicing the needs of large national
accounts. Only the largest market participants have the scope to fully
capitalize on the national accounts opportunity and develop a successfully
web-based business model.
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HIGH CASH RETURNS ON CAPITAL.
Both businesses exhibit very profitable business models. The furniture renal
division has the ability to rent furniture multiple times and still sell it at
clearance for approximately 90% of original cost. This practice provides the
Company with annualized cash returns on furniture investment in excess of 40%.
While margins are lower in the corporate housing segment, returns remain high as
a result of the very low capital requirements, with pre-tax annual returns on
capital in excess of 50%.
BOTH OF GLOBE'S BUSINESS PROVIDE OPPORTUNITIES FOR VERY EFFECTIVE BUSINESS TO
BUSINESS E-COMMERCE MODELS.
Corporate housing customers may select units online by viewing listings of
available units with maps and virtual tours of a variety of unit sizes and
furnishing options. As a result these customers can compare location, price,
size, and amenities without seeing or touching the product. This capability will
help relocation managers quickly locate and reserve available units as well as
eliminate any concerns on the part of the actual guest as they will be able to
see a comparable unit to the one in which they will be residing by way of the
virtual tour. Similarly, because of Globe's reputation for high quality
furniture and most customers' lack of desire to actually purchase the furniture
rented, the ability to select furnishings from an online catalogue and have it
delivered quickly to any location will be of increasing value to all furniture
rental customers. Globe believes business to business e-commerce will become
increasingly important and represents a significant opportunity in both of its
businesses.
CONTINUED CONSOLIDATION OPPORTUNITIES IN THE CORPORATE HOUSING MARKET.
The corporate housing market remains fragmented with the number two market
position not clearly established by any participant. The 45% of the corporate
housing market that remains unconsolidated includes hundreds of companies. The
Company believes that customers' preference for national service and the capital
and human resource requirements of e-commerce initiatives will continue to drive
consolidation in the industry. Globe maintains ongoing discussions with a number
of acquisition candidates and believes it is the acquirer of choice given its
strong operating management team and track record of successful acquisitions.
INTERNAL GROWTH OPPORTUNITIES THROUGH ENTRANCE INTO NEW MARKETS AND NATIONAL
ACCOUNTS MARKETING.
Globe has demonstrated an ability to enter new markets through "grass roots"
expansion when an attractive acquisition candidate was not available. This
strategy has been particularly successful in the furniture rental business, as
Globe has expanded into markets where it has a corporate housing presence. The
furniture rental business currently provides 74% of Globe's corporate housing
units with furniture. The remaining 26% of GCSI's units provide a significant
growth opportunity for furniture rental even without any further growth in the
corporate housing business. Going forward, Globe also anticipates additional
growth from its national accounts program. As awareness of corporate housing as
a high quality, cost effective alternative for business travelers continues to
grow, the ease of using the 1-800-FOR-RENT(R) reservations number and a web
based reservations capability should allow Globe to capture a larger portion of
the $3 billion spent annually on consecutive night stays of four weeks or more.
Globe currently has 10 full-time associates dedicated to the national accounts
program.
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FINANCIAL INFORMATION.
Globe Business Resources has grown rapidly, fueled by 18 acquisitions in the
last three years. Since fiscal 1997, revenues and EBITDA have grown at 29.8% and
16.6% compounded annual rate, respectively. Margins have decreased during this
period, as corporate housing, which exhibits lower operating margins than
furniture rental, has become a higher percentage of total revenue. Over this
period, the number of Globe Corporate Stay International units in which Globe
Furniture Rentals is the furniture rental provided has grown from 778 to 3,609
as Globe executes its integration strategy. As of July 31, 1999, GFR provides
74% (approximately 3,800) of GCSI furniture rental needs.
FINANCIAL SUMMARY
($000s, Except Per Share)
FYE: 2/28
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1997 1998 1999 2000E(1) 2001E 2002E
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Revenue $67,500 $103,900 $147,450 $163,576 $176,764 $191,991
EBITDA 14,966 19,706 24,890 27,458 29,927 31,976
EBIT 7,754 9,904 12,980 13,812 16,339 17,882
Net income 3,908 4,064 5,154 5,106 6,713 8,035
Diluted EPS $0.89 $0.89 $1.10 $1.05 $1.37 $1.64
FCF \ Share $0.25 $0.57 $1.84 $1.87 $2.24 $2.46
Total assets 71,778 99,437 131,797 133,441 136,180 137,853
Total debt 30,516 49,713 68,900 66,227 61,230 54,146
Shareholders' equity 29,836 35,421 43,114 47,365 54,078 62,114
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NUMBER OF MARKETS SERVED
GCSI only 4 6 13
GFR only 17 8 5
GCSI and GFR 0 11 16
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Total markets 21 25 34
OPERATING STATISTICS
Corporate housing units 1,331 3.396 4.790
Occupancy rate 85.0% 89.0% 91.4%
Units with GFR furnishings 778 2,060 3,609
% Units with GFR furnishings 58.5% 64.0% 75.0%
(1) Excludes nonrecurring expenses of $1,390,000 related primarily to the
consolidation of real estate and clearance center inventories in Globe's
western markets and the hiring of consultants to accelerate the completion
of the roll-out of the corporate housing system.
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FREE CASH FLOW PER SHARE (1)
[BAR CHART Indicating cash flows per share as follows: 1997--$.25; 1998--$.57;
1999--$1.84; 2000--$1.87; 2001--$2.24; and 2002--$2.46.]
(1) Defined as net income plus depreciation plus amortization less net
furniture purchases.
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II. COMPANY OVERVIEW
GENERAL
Globe Business Resources is an Ohio corporation formed in 1988 to acquire two
existing furniture rental businesses. At that time, the Company operated in
Michigan and Ohio. Subsequently, Globe implemented an aggressive strategy of
expanding its operations in several Midwestern cities, and through the
acquisition of four additional furniture rental acquisitions in the Midwest and
west. The Company completed an initial public offering of its common stock
raising $28 million in February of 1996 (Nasdaq: GLBE), at which time it had
operations in four Midwestern and six western states. Since completion of the
offering, the Company has accelerated its expansion through an aggressive
corporate housing acquisition program coupled with selected acquisitions of
furniture rental companies and is a leading consolidator in the temporary
relocation industry. Globe currently has operations in 34 markets in 23 states
and offers corporate housing accommodations in each of the top 80 U.S. markets.
The Company's headquarters are located at 11260 Chester Road, Suite 400,
Cincinnati, Ohio 45246.
Globe's decision to diversify into corporate housing from the furniture rental
business was based on the strategic importance of corporate housing to furniture
rental as well as the consolidation opportunity in corporate housing. Corporate
housing has become an important distribution channel for rental furniture over
the last several years, growing at a faster rate than the other major
distribution channels, such as furnished apartments provided by property
management companies, and individuals renting furniture directly from a
showroom. Additionally, corporate housing companies serve as middlemen, blocking
the access of furniture rental companies to the corporate end-user, thereby
hampering the ability of furniture rental companies to cross-sell office
furniture to these end-users and to secure new business leads. Globe is the only
temporary relocation company with a diversified business mix capable of
satisfying both the corporate housing and furniture rental needs of major
national corporations.
The Company operates in the corporate housing business as Globe Corporate Stay
International ("GCSI"), and in the furniture renal business as Globe Furniture
Rentals ("GFR"). Globe is vying with two other corporate housing companies for
the number two position in corporate housing and is the third largest company in
furniture rental. The Company has an established reputation for quick response
times, quality furniture, and a high level of customer service. The Company
aspires to become the leading national player in meeting the relocation needs of
Corporate America and to that end is integrating both its corporate housing and
furniture rental businesses. To further this integration, the Company operates
under a regional management structure that was put in place in mid-fiscal 1998.
BUILDING A NATIONAL PRESENCE
Add Art-Work Here
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[GRAPH]
Each region is headed by a Regional Vice President who is responsible for
operations in both businesses and who reports to an Executive Vice President in
charge of operations. Integration by market has progressed from the beginning of
fiscal 1998 when none of Globe's markets contained both corporate housing and
furniture rental to August 31, 1999 when 16 of Globe's 34 markets contained
both.
The Company is currently implementing a comprehensive corporate housing business
information system including an enhanced web based reservation and customer
service capability. Implementation of this system will take several months and
is expected to be complete during fiscal 2001. The corporate housing and
furniture rental systems include fully integrated business management and
financial reporting capabilities and are designed to allow the Company to better
service customer needs. The corporate housing and furniture rental business
share a general ledger and payables system. Globe believes that all of its
systems are Y2K compliant.
BUSINESS STRATEGIES
- - Continue to increase operating margins through the placement of Globe
furniture in existing corporate housing units. Globe should continue to
realize cost savings as GCSI furnishes its units with GFR furnishings.
Concurrent with this, Globe will displace outside furniture rental
suppliers. At the beginning of fiscal 1998, approximately 58% or 780 of
Globe's corporate housing units were furnished with Company owned
furniture. Currently approximately 74% or 3,800 units are furnished
with Company owned furniture.
- - Enter new geographic markets, including internationally; by selectively
pursuing corporate housing acquisitions in markets where the Company
does not currently have operations in order to enhance the Company's
national accounts sales effort and execution capability.
- - Continued emphasis on customer focused alternative delivery channels.
Globe will continue to advertise its 1-800-FOR-RENT(R) customer service
phone line providing access to all of GCSI's 80 markets from one point
of contact. Further, GCSI will accelerate its web site (www.glbe.com)
medium as an alternative for reservations and customer information.
Corporate housing is an ideal model for e- commerce, as the customer
rarely needs to touch, feel, or see the product. Rather, immediate
reservation and confirmation are the key components to customer
service.
- - Continued expansion of the furniture rental business, both through
selected acquisitions and through "grass roots" operations in markets
where the Company has recently acquired a corporate housing business.
New GCSI operations that do not at the time of the acquisition rent
furniture from GFR provide an immediate expansion opportunity for
Globe's furniture rental business and provide a new market in which to
pursue third party business.
- - Continue to capitalize on Globe's existing geographic presence through
enhanced national sales and marketing programs. Globe's strong brand
name, national presence, customer relations, and single invoice
capability will provide increased revenues and build upon an already
established customer base. Globe's goal is to attract an increasing
share of the $3 billion extended-stay market to its corporate housing
alternative. Globe will continue to emphasize its cross-selling
strategy in both furniture rental and corporate housing.
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ACQUISITIONS
Since its creation in 1988, Globe has completed a total of 15 corporate housing
and 7 furniture rental acquisitions. Globe's first four acquisitions were of
furniture rental companies as the Company expanded its geographic presence.
Globe's entrance into the corporate housing business began with the purchase of
Interim Quarters, based in Dallas, in June 1996. The companies acquired by Globe
in the corporate housing business have similar characteristics to Globe's
furniture rental operations, as they have strong reputations for superior
customer service. Additionally, Globe has generally acquired the leading
participant in each respective market ensuring that GCSI will have a number one
or two position in the market following the acquisition. This is important as it
allows Globe to negotiate favorable lease terms for the most desirable locations
and highest quality properties in the market as well as providing strong
relationships with local corporate housing decision makers.
The consideration paid for acquired companies has been a mix of cash and Globe
common stock, employment contracts for key personnel, and earnouts. Globe has
had tremendous success in assimilating acquired companies because of its
regional management structure. Globe's Regional Vice Presidents work closely
with management of newly acquired companies to ease the challenges of merging
and to realize operating efficiencies. Acquired company owners are usually
retained for a short period as employees or consultants providing an opportunity
for them to exit the business once the integration is complete. Globe's
acquisition track record and strong operating management has made it the
acquirer of choice for corporate housing entrepreneurs exploring exit
alternatives.
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ACQUISITION
NAME DATE MARKETS
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Revenues greater than $20 mm
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GranTree Corporation Jan-93 CO, NV, AZ, OR, CA, WA
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Revenues from $10-$20 mm
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Castleton Jan-99 MO, FL, KY, IN
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Village Suites Jun-98 IL, OH, MI, MN, WI
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Oxford Furnished Apartments Nov-97 IL, IN, MI, OH
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Interim Quarters Jun-96 Dallas / Fort Worth
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Revenues under $10 mm
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Castleton - Tulsa Mar-99 Tulsa
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Corporate Condominium Jan-99 NYC Metro Area
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Field Corporate Housing May-98 Denver
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Express Furniture Rental Apr-98 Los Angeles
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Accommodations Plus Feb-98 Dayton
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Suite Living Dec-97 Southern CA, Phoenix
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Corporate Lodging Oct-97 Nashville
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Research Triangle Guest Houses Sep-97 Raleigh
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Executive Relocation Services Jul-97 Nashville
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The Hotel Alternative Apr-97 Seattle / Portland
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Tom Koch Corp. Apartments Dec-96 Charlotte
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Guest Suites Dec-96 Raleigh
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Apartment Furniture Rental Oct-96 Detroit
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Instant Office Jun-96 Southern CA
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Broyhill Furniture - Louisville Operations Mar-92 Louisville
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Glick Furniture Rental Nov-91 OH, IN
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Aaron Rents - Detroit Operations Sep-90 Detroit
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Note: Names in italics represent rent-to-rent acquisitions
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GLOBE CORPORATE STAY INTERNATIONAL - "GCSI"
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As evidenced by the table below, corporate housing is an attractive business
with solid margins and high returns on invested capital. These dynamics, as well
as the fragmented nature of the industry and its furniture rental requirements
has led Globe management to focus much of its time and attention on growing this
business. Consequently, GCSI's revenue contribution has increased from
approximately 27% of revenues in fiscal 1996 to a projected 65% of revenues for
fiscal 2000. Acquisitions have been largely responsible for this rapid growth.
Since 1996, Globe has acquired 15 corporate housing companies.
Globe Corporate Stay International
Apartment Unit Economics Return On Capital
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% Total Monthly
Economics 2000E(2)
---------------------------------
Revenue 100% $1,700 EBITDA $11,670
Capital expenditures 2,000
Apartment rent 47% 800 Interest expense(3) 3,304
Utilities\ housekeeping 15% 255
Furniture\ housewares rent 13% 221 Free cash flow 6,366
Selling, general and administrative 15% 255 Total tangible capital(4) 10,251
--------------------------------
Total costs 90% 1,531
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Operating profit 10% $169 Return on tangible capital 62.1%
================================
1. Includes corporate
overhead.
2. Per division financials.
3. Interest expense associated
with GCSI goodwill.
4. Net of GCSI goodwill.
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INDUSTRY OVERVIEW
The corporate housing business provides short-term leases of furnished
apartments or town homes to transferring or temporarily assigned corporate
personnel, new hires, trainees, consultants and relocating homeowners. The vast
majority of the business conducted by corporate housing providers is via
"third-party" arrangements in which the provider neither owns nor manages any
property but rather leases the units from owners or property management
companies. Corporate housing operators typically maintain an inventory of leased
housing units, although lease terms are managed to coincide with length of stay.
Average length of stay approximates 60-90 days throughout the industry. Most
corporate housing operators lease their furniture, housewares and electronics,
however a few operators maintain their own furniture inventory and a greater
percentage maintain their own housewares and electronics inventories.
The domestic market for paid room nights of four or more weeks is estimated at
over $3 billion annually. Corporate housing providers generate approximately $1
billion of this revenue and conventional accommodation providers (traditional
hotels and all suite hotels) generate the remainder. The corporate housing
segment of the market, based on rooms available, has grown 60% since 1991.
Historically, this industry has been highly fragmented with locally or
regionally focused entrepreneurs generating most of the industry's revenue. Over
the last several years, the corporate housing business has experienced
significant consolidation, resulting in the top four companies (Globe Corporate
Stay International, Oakwood Corporate Housing, ExecuStay by Marriott, and
BridgeStreet Accommodations) accounting for approximately 55% of the corporate
housing revenues.
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The demand for corporate housing is driven by the changing trends in American
business toward flexibility and outsourcing, continued growth in management and
professional employment levels, and the resulting impact of a more mobile and
transitory white collar workforce. Corporate housing providers compete with
other lodging alternatives based on national presence, customer service, type of
accommodation, location, and price.
MARKET SHARE / POSITION
As of July 31, 1999, GCSI had approximately 5,200 units under lease,
representing approximately 11% of the market. GCSI customers have benefitted
from the division's expansion into new markets. Large national companies' desire
for a national provider of quality accommodations, a single point of contact for
reservations and, the ability to receive one detailed invoice have been drivers
for Globe's strategy. The Company can now maximize sales to its existing client
base and generate new client relationships through a national sales and
marketing program. Listed below are GCSI's markets, units , and market position.
COMPETITION
The corporate housing industry has been historically highly fragmented. As a
result, customer needs have been met by locally or, at best, regionally focused
entrepreneurs who fostered strong personal relationships with the local buyers
of corporate housing services. Within the last five years, consolidation has
changed the competitive landscape. Over 55% of the corporate housing business is
now controlled by four companies: Globe Corporate Stay International, Oakwood
Corporate Housing, ExecuStay by Marriott, and BridgeStreet Accommodations, with
the remaining industry competitors continuing to represent consolidation
opportunities. Globe maintains a competitive advantage based on geographic
reach, marketing expertise, quality distribution, and rapid response times.
CORPORATE HOUSING INDUSTRY LEADERS
Company Units
------- ------
Oakwood Corporate Housing 20,000
ExecuStay by Marriott 6,000
Globe Corporate Stay International 5,200
BridgeStreet Accommodations 4,000
Affordable accommodations are also an important determinant in the temporary
housing selection as many buying decisions are made by cost conscious relocation
and human resource managers. GCSI's average nightly cost is significantly less
than traditional hotels and all-suite hotels.
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GLOBE CORPORATE STAY INTERNATIONAL
LTM as of 7/31/99
Leading market position
-----------------------------------
Ann Arbor
Charlotte
Cincinnati
Corp. Condos (Stamford/NY Area)
Dayton
Denver
Indianapolis
Lansing
Nashville
St. Louis
Tulsa
Second market position
-----------------------------------
Dallas
Kansas City
Louisville
Orlando
Third market position
-----------------------------------
Chicago
Cleveland
Columbus
Phoenix
Portland
Raleigh
Seattle
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[SEE PAGE 10 OF FBR & CO. DATA -- HOTEL ROOM VS. EXTENDED STAY VS. CORP. APT.
CHART IS SHOWN HERE]
Additionally, GCSI enjoys the vertical integration benefit of an in-house
furniture rental operation. GFR provides furniture, housewares, and electronics
to over 3,600 of GCSI's corporate housing units. To date, no other industry
participant has developed the ability to integrate corporate housing and
furniture rental to that magnitude. By placing its own furniture and housewares
in the units, the Company is able to maintain stringent quality control within
quick response times. Other corporate housing providers, reliant on outside
vendors, do not enjoy these customer service advantages.
MARKETING
Globe's account executives solicit business from the human resources, travel,
and training departments of Fortune 2000 corporations as well as relocation
companies in their respective local markets. Historically, the company's
marketing successes have resulted from a combination of strong relationships
originally established by company founders and the addition of a professional
marketing approach and execution capability from Globe account executives.
In October of 1998, Globe introduced a unique national accounts program for its
growing number of high volume clients. This program, based on feedback from
customer focus groups, was designed to introduce a one- stop shopping service
for clients with multi-city requirements. Globe's national account marketing
efforts have been targeted toward establishing relationships with larger
companies in need of the following key attributes:
1. Single point of contact for all housing requests.
2. Access to all required locations through this single contact utilizing
Globe's extensive network of offices or partnership established in
non-Globe locations.
3. Consistent operating policies and procedures in each location.
4. Simplified invoicing procedures in each location, offering national
accounts one detailed invoice.
Each national account is assigned a specific relocation specialist within Globe
who is the single point of contact for the customer. The relocation specialist's
sole responsibility is to service the requests of their individually assigned
national accounts. This marketing philosophy contrasts with other national
corporate housing providers who typically assign points of contact with local
market personnel who, in turn, only focus on a specific geographic region. When
a corporation has multi-market needs, the client may end up communicating with a
representative in each market creating confusion and, in fact, diluting the
benefit of national account status.
GCSI's national marketing program is built upon the relationships developed by
the entrepreneurs acquired by Globe. The Company typically has acquired the best
local service provider in each market it has entered. GCSI's marketing efforts
are currently targeted to the corporate customer looking for a national
extended-stay provider. the advertising program highlighting the ease of "one
stop shopping service" by calling 1-800-FOR- RENT(R) is featured in national
trade publications targeted to human resource managers and relocation
professionals. Local marketing and advertising is designed to further promote
brand recognition for GCSI. Future marketing efforts will focus on the emergence
of business e-commerce, as national advertising will drive traffic to
www.glbe.com in addition to 1-800-FOR-RENT(R). Globe currently has ten
associates dedicated to its national accounts business.
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CUSTOMERS
The typical GCSI customers are business travelers on extended business trips or
attending training classes, consultants on out of town assignments, or
homeowners between real estate ownership. As corporate housing has emerged as a
more recognized industry, demand has increased driven by the desire of business
travelers to identify alternatives to conventional hotels, which lack the
spaciousness and amenities of home. Human resource decision makers, project
managers, and relocation managers are also recognizing the cost benefit
associated with corporate housing where daily rent can be as much as 50% less
than rates charged by conventional hotels while providing twice the space and
other home-like amenities not found in a traditional hotel. Globe's customer
base includes large national companies such as Bank of America, Motorola, E'S,
Johnson Controls, Executive Relocation, and many others. Globe is not materially
dependent on any one customer.
LEASE MANAGEMENT
Due to the Company's strong national relationship with property managers, Globe
has been able to negotiate favorable short-term leasing arrangements in most of
its markets. Lease terms vary by geographic market with the length approximating
customer stays whenever possible. Flexibility in leases allows Globe to meet
changing customer demands in location and accommodations, and to maintain high
occupancy rates. Historically, the Company has maintained high occupancy rates.
The average occupancy rate for the twelve months ending July 31, 1999 was 91%,
demonstrating GCSI's ability to match unit supply with unit demand.
GFR fulfills 74% of GCSI's furniture and housewares rental equipment. GCSI also
rents furniture and housewares from outside vendors in certain circumstances. In
fiscal 2000, GCSI expects to spend approximately $3 million with third party
furniture rental vendors.
-11-
14
DIVISION FINANCIALS
GLOBE CORPORATE STAY INTERNATIONAL
Division Financials(1)
- ----------------------------------------------------------------------------------------------------------
2/28/98 2/28/99 2/28/00 2/28/01
1998 1999 2000E 2001E
Revenues $ 42,840 $ 87,248 $106,153 $116,768
Cost of sales 33,210 68,048 81,271 89,868
Gross profit 9,630 19,200 24,882 26,900
Gross margin 22.5% 22.0% 23.4% 23.0%
Warehouse and delivery 746 828 856 896
Occupancy 681 821 1,300 1,482
Selling and advertising 1,620 2,519 2,559 2,575
General and 3,678 6,377 6,621 6,640
administrative
Allocated corporate 900 1,832 2,257 2,519
overhead
Amortization of 978 1,941 2,428 2,518
intangibles
Total 1,027 14,318 16,021 16,630
EBIT(2) 1,027 4,882 8,861 10,270
Operating margin 2.4% 5.6% 8.3% 8.8%
EBIT 1,027 4,882 8,861 10,270
Depreciation on PP&E 192 296 381 658
Amortization 978 1,941 2,428 2,518
EBITDA 2,197 7,119 11,670 13,446
- ----------------------------------------------------------------------------------------------------------
- -------------------
(1)Not directly comparable to consolidated results due to unallocated
corporate overhead and intercompany revenues.
(2)Excludes $694 of nonrecurring expenses in fiscal 2000 to accelerate
completion of the GCSI system installation.
-12-
15
GLOBE FURNITURE RENTALS - "GFR"
GFR accounted for approximately 41% of Globe's consolidated revenues in fiscal
1999 and is projected to be approximately 35% of revenues in fiscal 2000.
Including intercompany rental revenues, which are eliminated in consolidation,
GFR's revenue contribution is projected to be 38% in fiscal 2000. GFR's revenue
mix in fiscal 2000 is anticipated to be 70% from residential furniture and 30%
from office furniture. Over the last three years, Globe has focused its
acquisition activity on the corporate housing (GCSI) business, attempting to
provide an additional sources of internal growth for the furniture rental
business as well as to capitalize on the opportunities for consolidation in the
industry. Furniture rental is an exceptionally profitable business, enjoying
annualized cash returns on furniture investment in excess of 40%. The Company
typically rents residential and office furnishings three time before selling the
furnishings for about 90% of the purchase price. Rental and resale revenue is
more than three times the original furniture cost. The business model is
illustrated below:
[PG. 14 OF FBR & CO. DATA FURNITURE LIFE CYCLE]
Globe Furniture Rentals will continue to be the beneficiary of Globe's corporate
housing acquisitions through the placement of furniture in newly acquired
corporate housing units. As of July 31, 1999, approximately 74% (3,609) of the
Company's corporate housing units were furnished with GRF owned furniture.
INDUSTRY OVERVIEW
The "rent-to-rent" segment of the furniture rental business, in which Globe
participates, primarily serves corporate customers who have immediate, temporary
needs for residential or office furniture, but who typically do not seek
ownership. Office furniture customers range from large corporations who desire
flexibility to meet their temporary and transitional needs, to small businesses
and professionals who need office furniture but seek to conserve capital.
Residential furniture customers include property management companies, corporate
housing specialists, and individual customers.
The rent-to-rent segment of the domestic furniture rental business is estimated
to exceed $800 million in annual revenues.(3) Similar to the corporate housing
business, the furniture rental business has been experiencing significant
consolidation, resulting in the top four companies Globe Furniture Rentals, Cort
Business Services, Aaron Rents, and Brook Furniture Rental accounting for more
than 75% of industry revenues.
The rent-to-rent business is differentiated from the "rent-to-own" business
primarily by the terms of the rental arrangements and the type of customers
served. Rent-to-rent customers generally desire high-quality furniture to meet
temporary or seasonal needs. In the typical rent-to-rent transaction, the
customer agrees to rent a furniture grouping for a minimum of three months,
which may be extended by the customer on a month-to- month basis. Typically,
these customers do not seek to acquire the property rented, although many rental
agreements give the customer the option of purchasing the rented furniture. By
contrast, rent-to-own arrangements are generally entered into by customers
without established credit whose objective is to acquire
- ------------------------
(3)Per Globe Business Resources 10-K.
-13-
16
ownership of the property by renting it through the full term of the lease.
Those arrangements typically involve weekly payments made over 18 to 24 months.
MARKET SHARE/POSITION
The Company's Globe Furniture Rentals division, is the third largest operator in
the rent-to-rent segment of the furniture rental business with approximately 7%
market share. The top four companies, Globe Furniture Rentals, Cort Business
Services, Aaron Rents, and Brook Furniture Rental dominate the market,
accounting for more than 75% of the industry's $800 million plus of revenues.
GFR currently operates 20 showrooms in 12 states.
COMPETITION
GFR distinguishes itself from most of its furniture rental competitors by
maintaining the majority of its showrooms as combined rental/clearance showrooms
in 14,000-15,000 square foot superstore formats. The Company believes that
combining retail clearance centers with rental showrooms generally reduces
selling expenses. Inside sales personnel are trained to perform both rental and
retail sales functions within the same facility. Globe's furniture rental
operating formula emphasizes its combined rental/retail facilities, high quality
furniture, and an ongoing commitment to superior customer service. Management
believes this formula has been an important contributor to its success.
Globe Instant Office, GFR's office business, distinguishes GFR from other rental
companies by offering the customer the opportunity to effect outright purchase
of its product line. The Company also offers just-in-time customized product
offerings for sale or rental, with 80% of the product line deliverable within
two days to three weeks.
FURNITURE RENTAL COMPETITORS
Name Revenue(1)
-----------------------------------------------------------------
Cort Business Services $319,000
Aaron Rents(2) 175,000
Globe Furniture Rentals(3) 66,392
Brook Furniture Rental(4) 50,000
--------
Total $610,392
1. Approximate revenue from latest fiscal year. Amounts in thousands
2. Rent to rent revenue only
3. Includes intercompany revenue
4. Estimated.
GLOBE FURNITURE RENTALS
LTM as of 7/31/99
Leading market position
---------------------------
Ann Arbor
Cincinnati
Columbus
Dayton
Denver
Detroit
Indianapolis
Las Vegas
Portland
Reno
Toledo
Second market position
---------------------------
Louisville/Lexington
Seattle
Third market position
---------------------------
Nashville
North Carolina
Northern California
Phoenix
Southern California
-14-
17
MARKETING
Globe's residential furniture account executives direct their marketing efforts
toward property managers and corporate housing specialists. Globe's office
furniture account executives target facilities managers and purchasing agents of
Fortune 2000 corporations. The GFR showrooms serve as mediums to display
furniture packages for both customer segments.
National advertising appearing in Units magazine, a leading trade publication
for property management professionals, and an integration brochure are used as
top-to-top selling pieces, highlighting Globe's unique position as both a vendor
to, and a customer of, the apartment industry. For the corporate customer, GFR's
marketing focus promotes the integration between furniture rental and corporate
housing, creating numerous cross-selling opportunities. Future marketing plans
will focus on new web site developments that feature e-commerce capabilities
for all segments of GFR, enabling customers to effect on-line transactions.
Globe Instant Office aggressively promotes Globe's unique position in the office
furniture business. Globe distinguishes itself from other rental companies by
offering the customer the opportunity to effect outright purchase of the product
line. The Company also offers just-in-time customized product offerings for sale
or rental. With 80% of products deliverable within two days to three weeks,
Globe's niche of "instant" becomes an important tool while prospecting to
Fortune 2000 corporations, start-up businesses, companies exiting from executive
suite locations, and rapidly expanding businesses. Through specially designed
sales materials, Globe account executives customize brochures that focus on the
needs of the customer and direct their attention to specific product lines and
terms to fit their business.
CUSTOMERS
Property managers and corporate housing specialists represent GFR's largest
customer groups. GCSI alone accounted for approximately 12% of GFR's rental
revenue in fiscal 1999. Office furniture rental customers include Fortune 2000
companies with temporary, seasonal or outsourcing requirements as well as small
businesses and professional practices that desire to conserve capital. Globe's
customer base includes large national companies such as Intel, Hewlett Packard,
Motorola, and Ford. These customers have a need for a furniture rental company
to quickly provide quality furniture on a national scale. Corporate customers
accounted for 80% of revenues in fiscal 1999.
LEVEL OF LNTEGRATION WITH GLOBE CORPORATE STAY INTERNATIONAL
Globe Business Resources has successfully integrated Globe Furniture Rentals
with Globe Corporate Stay International. The Company's stated business strategy
has been to incorporate GFR furnishings into GCSI units, thus accelerating
internal revenue growth and realizing cost synergies. This strategy has been
successfully implemented to date. As of July 31, 1999, 74% or approximately
3,800 of GCSI's units are supplied with GFR furnishings. The Company derives
approximately $8 million in revenue from these units.
-15-
18
DIVISION FINANCIALS
Globe Furniture Rentals
Division Financials(1)
2/28/98 2/28/99 2/28/00 2/28/01
1998 1999 2000E 2001E
External Rental $45,337 $43,384 $40,424 $41,637
Intercompany rental 2,597 6,190 7,964 8,760
Retail 15,723 16,818 16,999 18,350
-------------------------------------------------------------------
Total revenues 63,657 66,392 65,387 68,756
Cost of rental 3,664 3,428 3,737 3,872
Cost of retail 9,912 9,966 10,189 11,474
Furniture depreciation and disposals 8,654 9,003 9,978 9,796
-------------------------------------------------------------------
Total 22,230 22,397 23,904 25,142
Gross profit 41,427 43,995 41,483 43,614
Gross margin 65.1% 66.3% 63.4% 63.4%
Warehouse and delivery 8,763 9,538 9,861 10,245
Occupancy 5,900 6,056 5,986 6,160
Selling and advertising 7,408 7,934 6,994 7,100
General and administrative 3,584 4,342 4,712 4,902
Allocated corporate overhead 3,969 3,913 3,600 3,254
Amortization 25 93 99 107
-------------------------------------------------------------------
Total 29,649 31,876 31,252 31,768
EBIT(2) 11,778 12,119 10,231 11,846
Operating Margin 18.5% 18.3% 15.6% 17.2%
EBIT 11,778 12,119 10,231 11,846
Depreciation on PP&E 1,324 1,672 2,033 1,984
Depreciation 7,177 7,781 8,341 8,200
Amortization 25 93 99 107
-------------------------------------------------------------------
EBITDA 20,304 21,665 20,704 22,137
Less net furniture purchases 11,252 8,430 9,703 9,313
-------------------------------------------------------------------
Free cash flow 9,052 13,235 11,001 12,824
1. Not directly comparable to consolidated results due to unallocated corporate
overhead and intercompany revenues.
2. Excludes $696 of nonrecurring expenses in fiscal 2000 to consolidate real
estate and clearance center inventories in GFR's western markets.
-16-
19
MANAGEMENT AND EMPLOYEES
Globe Business Resources enjoys a committed, experienced work force. The four
members of senior management have collectively 50 years of experience in the
corporate housing and furniture rental businesses. David Hoguet and Blair Neller
are co-founders of the Company and remain significant owners of Globe common
stock with financial interests tied to the success of Globe.
As of September 30, 1999, Globe had 736 full-time and 61 part-time employees, of
whom 257 full-time and 14 part-time were in executive and administrative
positions, 159 full-time and 16 part-time were in marketing and sales positions,
and 320 full-time and 31 part-time were in warehouse, housekeeping, and
distribution positions. The Company's employees are not represented by a
collective bargaining unit, and the Company believes its relations with
employees are good.
EXECUTIVE MANAGEMENT
NAME AGE POSITION
-----------------------------------------------------------------------------
David D. Hoguet 48 Chairman and Chief Executive Officer
Blair D. Neller 47 President and Chief Operating Officer
Jeffery D. Pederson 40 Executive Vice President
Sharon Kebe 38 Senior Vice President - Finance & Treasurer
-----------------------------------------------------------------------------
David D. Hoguet - Chairman and Chief Executive Officer
- ------------------------------------------------------
Mr. Hoguet has been Chairman of the Board and Chief Executive Officer of the
Company since April 1990. From 1986 to 1990, he served as President of the
Company and its predecessor businesses. He has been a director since 1988. Prior
to joining Globe, Mr. Hoguet was Vice President of Finance, Treasurer and a
director of Chemed Corporation. Mr. Hoguet is currently a director of the
International Furniture Rental Association, serving a three-year term from May
1997 through May 2000. He served as the Association's Chairman from May 1993 to
March 1994 and as its President from March 1991 to May 1993. Mr. Hoguet is a
founder of the Company.
Blair D. Neller - President and Chief Operating Officer
- -------------------------------------------------------
Mr. Neller joined the Company as Executive Vice President in 1989 and has been
President and Chief Operating Officer since April 1990 and a director since
1989. Prior to joining Globe, Mr. Neller was a Vice President in the Consumer
Markets Division of Merrill Lynch & Co. Mr. Neller was a director of the
International Finance Rental Association from May 1995 through May 1997. Mr.
Neller is a founder of the Company.
Jeffery D. Pederson - Executive Vice President
- ----------------------------------------------
Mr. Pederson has served as Executive Vice President since January 1996. From
January 1996 until October 1997 he was responsible for the Company's western
operations. In October 1997 Mr. Pederson's responsibilities were expanded to
include all of the Company's operations. From April 1994 until January 1996, he
served as Senior Vice President. Prior to joining Globe, Mr. Pederson was
employed as the Vice President and Chief Operating Officer of Budget Rents
Furniture, Inc.
Sharon Kebe - Senior Vice President - Finance & Treasurer
- ---------------------------------------------------------
-17-
20
Ms. Kebe has served as the Company's Senior Vice President - Finance & Treasurer
since January 1996. She joined the Company as Controller in January 1993 and
also served as Vice President - Finance between January 1995 and January 1996.
Prior to that time, Ms. Kebe was employed by Ernst & Young in various positions
including audit manager and recruitment coordinator. Ms. Kebe is a certified
public accountant.
EMPLOYEES
The Company's employees by functional area are presented below:
EMPLOYEES BY FUNCTION
Full-Time Part-Time
---------------------------------
Warehouse and Distribution 226 14
Housekeeping/Housewares 94 17
Sales/Marketing 159 16
Executive/Administrative 257 14
---------------------------------
Total 736 61
---------------------------------------------------------------------
The Company offers its employees a comprehensive benefits package which includes
health and medical insurance, a 401K plan, vacation pay, and miscellaneous other
benefits.
LEGAL
The Company does not believe that any litigation currently outstanding will have
an adverse impact on the Company's financial position or business.
YEAR 2000
The Company believes that it is Y2K compliant and does not believe that its
business will be materially adversely affected by Y2K problems.
-18-
21
- --------------------------------------------------------------------------------
III FINANCIAL INFORMATION
PROJECTION ASSUMPTIONS
Projections are based on the historical Company trends, including the six months
ended August 31, 1999, with assumptions as noted below. These projections do not
include potential cost savings that a buyer may realize (refer to division
financials under GCSI and GFR, respectively).
- - Internal growth is projected for GCSI as increasing by 10% in fiscal 2001 and
2002. GFR retail business is projected to increase by 8% in fiscal 2001 and
2002. GFR third party rental revenues are projected to increase by 3% in fiscal
2001 and by 5% in fiscal 2002 with the intercompany business increasing in line
with GCSI revenues. No acquisitions have been assumed.
- - Projected revenue growth in GCSI is based on (1) industry growth, and (2)
market share gains resulting from the Company's national accounts marketing
program and e-commerce initiatives.
- - Projected third party revenue growth in GFR is based on (1) office furniture
segment growth of 10% (in- line with historical growth), and (2) flat
residential furniture growth in fiscal 2000 with 3% growth in successive years.
- - Expenses ratios are consistent with historical levels and incorporate a small
amount of margin expansion from the synergies of the GCSI / GFR relationship and
from the administrative efficiencies resulting from the completion of the GCSI
information system installation.
GLOBE BUSINESS RESOURCES, INC.
HISTORICAL AND PROJECTED STATEMENTS OF INCOME
- ---------------------------------------------
(All Dollar Amounts in Thousands, Except Per Share)
FYE: 2/28
2/28/97 2/28/98 2/28/99 5/31/99 8/31/99
1997 1998 1999 Q1 Q2
Corporate housing $ 11,811 $ 42,840 $ 87,248 $ 26,653 $ 28,535
Rental 40,940 45,337 43,384 10,124 10,167
Retail 14,769 15,723 16,818 3,599 4,213
--------------------------------------------------------------------
Total revenues 67,520 103,900 147,450 40,376 42,915
Corporate housing 8,294 31,008 62,181 18,436 19,624
Rental 3,305 3,089 3,428 989 893
Retail 9,218 9,529 9,966 2,027 2,706
Depreciation of 7,390 9,217 8,680 2,368 2,343
Furniture
--------------------------------------------------------------------
Total costs of goods 28,207 52,843 84,255 23,820 25,566
sold
Gross profit 39,313 51,057 63,195 16,556 17,349
Gross margin 58.2% 49.1% 42.9% 41.0% 40.4%
Operating 24,884 31,272 37,727 10,042 10,249
11/30/99 2/28/00 2/28/00 2/28/01 2/28/02
Q3E Q4E 2000E 2001E 2002E
Corporate housing $ 26,982 $ 23,983 $106,153 $116,768 $128,445
Rental 10,067 10,067 40,424 41,637 43,719
Retail 4,594 4,594 16,999 18,359 19,828
--------------------------------------------------------------------
Total revenues 41,642 38,643 163,576 176,764 191,991
Corporate housing 18,593 17,028 73,703 81,504 89,654
Rental 928 928 3,737 3,872 4,066
Retail 2,728 2,728 10,189 11,474 12,392
Depreciation of 2,436 2,436 9,582 9,400 9,870
Furniture
--------------------------------------------------------------------
Total costs of goods 24,684 23,119 97,211 106,250 115,982
sold
Gross profit 16,958 15,524 66,365 70,514 76,009
Gross margin 40.7% 40.2% 40.6% 39.9% 39.6%
Operating 9,899 9,699 39,889 41,000 44,116
-19-
22
Corporate 6,450 8,878 10,454 2,425 2,638
Nonrecurring 0 0 0 248 436
Amortizaton of
intangibles 225 1,003 2,034 621 622
---------------------------------------------------------------------------
Total operating 31,559 41,153 50,215 13,336 13,945
expenses
EBIT 7,754 9,904 12,980 3,220 3,404
EBIT margin 11.5% 9.5% 8.8% 8.0% 7.9%
Total interest expense 1,640 3,241 4,389 1,212 1,207
Other (272) 0 0 29 30
---------------------------------------------------------------------------
Total 1,368 3,241 4,389 1,241 1,237
Earnings before 6,386 6,663 8,591 1,979 2,167
income taxes
Income tax expense 2,478 2,598 3,437 791 898
Tax rate 38.8% 39.0% 40.0% 40.0% 41.4%
---------------------------------------------------------------------------
Net income to common $ 3,908 $ 4,065 $ 5,154 $ 1,188 $ 1,269
stockholders ===========================================================================
Diluted EPS $ 0.89 $ 0.89 $ 1.10 $ 0.25 $ 0.26
Diluted EPS $ 0.89 $ 0.89 $ 1.10 $ 0.28 $ 0.32
(excluding
nonrecurring
Diluted shares 4,372 4,577 4,689 4,833 4,838
outstanding
Net income, excluding 3,908 4,065 5,154 1,337 1,524
nonrecurring
Plus: depreciation on 6,055 7,177 7,781 2,055 2,037
furniture
Plus: depreciation on 932 1,622 2,095 589 789
PP&E
Plus: amortization of 225 1,003 2,034 621 622
goodwill
Less: net furniture (10,013) (11,252) (8,430) (3,101) (2,336)
capital expenditures
---------------------------------------------------------------------------
Free cash flow 1,107 2,615 8,634 1,501 2,636
- -------------------------------------------------------------------------------------------------------------
Free cash flow per $ 0.25 $ 0.57 $ 1.84 $ 0.31 $ 0.54
diluted share
- -------------------------------------------------------------------------------------------------------------
EBIT, excluding 7,754 9,904 12,980 3,468 3,840
nonrecurring
Plus: depreciation on 6,055 7,177 7,781 2,055 2,037
furniture
Plus: depreciation on 932 1,622 2,095 589 789
PP&E
Plus: amortization 225 1,003 2,034 621 622
---------------------------------------------------------------------------
EDITDA 14,966 19,706 24,890 6,733 7,288
Furniture capital (21,845) (23,620) (21,242) (5,653) (5,558)
expenditures
Book value of furniture 11,832 12,368 12,812 2,730 3,289
sold
PP&E capital (2,377) (3,742) (2,622) (1,086) (688)
expenditures ---------------------------------------------------------------------------
Corporate 2,548 2,548 10,159 10,550 11,352
Nonrecurring 353 353 1,390 0 0
Amortizaton of
intangibles 642 642 2,527 2,625 2,660
----------------------------------------------------------------------
Total operating 13,442 13,242 53,965 54,175 58,128
expenses
EBIT 3,516 2,282 12,400 16,339 17,882
EBIT margin 8.4% 5.9% 7.6% 9.2% 9.3%
Total interest expense 1,382 1,382 5,182 5,150 4,490
Other 0 0 59 0 0
----------------------------------------------------------------------
Total 1,382 1,382 5,241 5,150 4,490
Earnings before 2,134 901 7,159 11,189 13,392
income taxes
Income tax expense 854 360 2,899 4,476 5,357
Tax rate 40.0% 40.0% 40.5% 40.0% 40.0%
----------------------------------------------------------------------
Net income to common $ 1,281 $ 540 $ 4,260 $ 6,713 $ 8,035
stockholders ======================================================================
Diluted EPS $ 0.26 $ 0.11 $ 0.88 $ 1.37 $ 1.64
Diluted EPS $ 0.31 $ 0.16 $ 1.05 $ 1.37 $ 1.64
(excluding
nonrecurring
Diluted shares 4,850 4,850 4,843 4,900 4,900
outstanding
Net income, excluding 1,492 752 5,106 6,713 8,035
nonrecurring
Plus: depreciation on 2,124 2,124 8,341 8,200 8,610
furniture
Plus: depreciation on 700 700 2.778 2,763 2,825
PP&E
Plus: amortization of 642 642 2,527 2,625 2,660
goodwill
Less: net furniture (2,133) (2,133) (9,703) (9,313) (10,058)
capital expenditures
----------------------------------------------------------------------
Free cash flow 2,826 2,086 9,049 10,988 12,072
- -------------------------------------------------------------------------------------------------------
Free cash flow per $ 0.58 $ 0.43 $ 1.87 $ 2.24 $ 2.46
diluted share
- -------------------------------------------------------------------------------------------------------
EBIT, excluding 3,869 2,635 13,812 16,339 17,882
nonrecurring
Plus: depreciation on 2,124 2,124 8,341 8,200 8,610
furniture
Plus: depreciation on 700 700 2,778 2,763 2,825
PP&E
Plus: amortization 642 642 2,527 2,625 2,660
----------------------------------------------------------------------
EDITDA 7,335 6,102 27,458 29,927 31,976
Furniture capital (5,390) (5,390) (21,991) (24,000) (25,920)
expenditures
Book value of furniture 3,257 3,257 12,533 14,687 15,862
sold
PP&E capital (705) (705) (3,184) (3,500) (3,500)
expenditures ----------------------------------------------------------------------
-20-
23
GLOBE BUSINESS RESOURCES, INC.
PERCENT OF REVENUE
FYE: 2/28
2/28/97 2/28/98 2/28/99 5/31/99 8/31/99
1997 1998 1999 Q1 Q2
Corporate housing 17.5% 41.2% 59.2% 66.0% 66.5%
Rental 60.6% 43.6% 29.4% 25.1% 23.7%
Retail 21.9% 15.1% 11.4% 8.9% 9.8%
-------------------------------------------------------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Corporate housing gross 29.8% 27.6% 28.7% 30.8% 31.2%
profit
Rental gross profit 91.9% 93.2% 92.1% 90.2% 91.2%
Retail gross profit 37.6% 39.4% 40.7% 43.7% 35.8%
-------------------------------------------------------
Gross profit before 69.2% 58.0% 48.7% 46.9% 45.9%
depreciation
Depreciation on furniture 10.9% 8.9% 5.9% 5.9% 5.5%
-------------------------------------------------------
Gross profit after 58.2% 49.1% 42.9% 41.0% 40.4%
depreciation
Operating 36.9% 30.1% 25.6% 24.9% 23.9%
Corporate 9.6% 8.5% 7.1% 6.0% 6.1%
Nonrecurring 0.0% 0.0% 0.0% 0.6% 1.0%
Amortization of
intangibles 0.3% 1.0% 1.4% 1.5% 1.4%
-------------------------------------------------------
Total operating expenses 46.7% 39.6% 34.1% 33.0% 32.5%
EBIT 11.5% 9.5% 8.8% 8.0% 7.9%
Total interest expense 11.5% 9.5% 8.8% 8.0% 7.9%
Other -0.4% 0.0% 0.0% 0.1% 0.1%
-------------------------------------------------------
Total 2.0% 3.1% 3.0% 3.1% 2.9%
Earnings before income 9.5% 6.4% 5.8% 4.9% 5.0%
taxes
Income tax expense 3.7% 2.5% 2.3% 2.0% 2.1%
-------------------------------------------------------
Net income to common
shareholders 5.8% 3.9% 3.5% 2.9% 3.0%
=======================================================
11/30/99 2/28/00 2/28/00 2/28/01 2/28/02
Q3E Q4E 2000E 2001E 2002#
Corporate housing 64.8% 62.1% 64.9% 66.1% 66.9%
Rental 24.2% 26.0% 24.7% 23.6% 22.8%
Retail 11.0% 11.9% 10.4% 10.4% 10.3%
-----------------------------------------------------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Corporate housing gross 31.1% 29.0% 30.6% 30.2% 30.2%
profit
Rental gross profit 90.8% 90.8% 90.8% 90.7% 90.7%
Retail gross profit 40.6% 40.6% 40.1% 37.5% 37.5%
-----------------------------------------------------
Gross profit before 46.6% 46.5% 46.4% 45.2% 44.7%
depreciation
Depreciation on furniture 5.8% 6.3% 5.9% 5.3% 5.1%
-----------------------------------------------------
Gross profit after 40.7% 40.2% 40.6% 39.9% 39.6%
depreciation
Operating 23.8% 25.1% 24.4% 23.2% 23.0%
Corporate 6.1% 6.6% 6.2% 6.0% 5.9%
Nonrecurring 0.8% 0.9% 0.8% 0.0% 0.0%
Amortization of
intangibles 1.5% 1.7% 1.5% 1.5% 1.4%
-----------------------------------------------------
Total operating expenses 32.3% 34.3% 33.0% 30.6% 30.3%
EBIT 8.4% 5.9% 7.6% 9.2% 9.3%
Total interest expense 8.4% 5.9% 7.6% 9.2% 9.3%
Other 0.0% 0.0% 0.0% 0.0% 0.0%
-----------------------------------------------------
Total 3.3% 3.6% 3.2% 2.9% 2.3%
Earnings before income 5.1% 2.3% 4.4% 6.3% 7.0%
taxes
Income tax expense 2.1% 0.9% 1.8% 2.5% 2.8%
-----------------------------------------------------
Net income to common
shareholders 3.1% 1.4% 2.6% 3.8% 4.2%
=====================================================
-21-
24
GLOBE BUSINESS RESOURCES, INC.
PERCENT OF REVENUE
FYE: 2/28
2/28/97 2/28/98 2/28/99 5/31/99 8/31/99
ASSETS 1997 1998 1999 Q1 Q2
Cash $ 717 $ 526 $ 1,123 $ 1,274 $ 1,299
Marketable securities 0 0 0 0 0
Accounts receivable 5,345 8,252 11,982 12,727 11,408
Furniture, net 48,462 53,220 55,426 56,472 56,771
Prepaid expenses 1,504 2,038 4,229 4,150 4,683
PP&E, net 4,907 7,743 8,469 8,974 9,041
Goodwill and other intangibles, net 10,243 26,695 47,580 47,796 47,174
Other assets 600 963 2,988 3,362 3,450
--------------------------------------------------------------
Total Assets $ 71,778 $ 99,437 $131,797 $134,755 $133,826
==============================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolver $ 28,554 $ 16,476 $ 34,416 $ 35,565 $ 35,340
Accounts payable 4,012 3,561 6,250 6,964 5,565
Other payables/accruals 4,513 6,559 7,795 7,577 7,041
7.54% Senior notes 0 30,000 30,000 30,000 30,000
Other long-term debt 1,962 3,237 4,484 4,485 4,387
Deferred income taxes 2,901 4,183 5,738 5,831 5,949
--------------------------------------------------------------
Total liabilities 41,942 64,016 88,683 90,422 88,282
Total stockholders' equity 29,836 35,421 43,114 44,333 45,544
--------------------------------------------------------------
Total Liabilities and Equity $ 71,778 $ 99,437 $131,797 $134,755 $133,826
==============================================================
11/30/99 2/28/00 2/28/01 2/28/02
ASSETS Q3E Q4E 2001E 2002#
Cash $ 1,299 $ 1,299 $ 1,299 $ 1,299
Marketable securities 0 0 0 0
Accounts receivable 13,234 12,281 14,044 15,254
Furniture, net 56,780 56,788 57,901 59,349
Prepaid expenses 4,683 4,683 4,683 4,683
PP&E, net 9,046 9,050 9,787 10,462
Goodwill and other intangibles, net 46,532 45,890 45,015 43,355
Other assets 3,450 3,450 3,450 3,450
-------------------------------------------------
Total Assets $135,023 $133,441 $136,180 $137,853
=================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolver $ 34,199 $ 32,775 $ 28,778 $ 22,694
Accounts payable 7,324 6,860 7,882 8,603
Other payables/accruals 7,041 7,041 7,041 7,041
7.54% Senior notes 30,000 30,000 30,000 30,000
Other long-term debt 3,686 3,452 2,452 1,452
Deferred income taxes 5,949 5,949 5,949 5,949
-------------------------------------------------
Total liabilities 88,199 86,077 82,102 75,739
Total stockholders' equity 46,825 47,365 54,078 62,114
-------------------------------------------------
Total Liabilities and Equity $135,023 $133,441 $136,180 $137,853
=================================================
-22-
25
IV APPENDIX
ORGANIZATIONAL CHART
GLOBE BUSINESS RESOURCES, INC.
-----------------------------------------------------------------------------------------
| |
David Hoguet.......................................Jeffery Pedersen....................Blair Neller
Chairman & CEO Executive Vice President President & CEO
------------------------------------------------- | |
| | | | ---------------------
Chris Gruenke Sharon Kebe Sondra Marsh | - Regional VP | |
VP & CIO Sr. VP-Finance & Treasurer Dir. Human Resources | Gina Scaringelli George Quay
| - Regional VP Marketing Manager VP & Dir. of
| National Sales
| - Regional VP
|
| - Regional VP
|
| - Regional VP
|
| - Regional VP
|
| Director of Merchandising
-23-
26
BOARD OF DIRECTORS PRESENTATION
Summary of Proposals: Globe Furniture Rentals
---------------------------------------------
Bidder: Aaron Rents, Inc.
Indicative Value: $55,000,000 - $60,000,000
Consideration: All Cash
Transaction: Asset Purchase
Bidder: Cort Furniture Rental
Indicative Value: $50,000,000 - $70,000,000
Consideration: All Cash
Transaction: Asset Purchase
27
BOARD OF DIRECTORS PRESENTATION
OCTOBER 27, 1999
28
BOARD OF DIRECTORS PRESENTATION
Globe Business Resources has retained Friedman, Billings, Ramsey and Co., Inc.
to assist it in exploring strategic alternatives including the possible sale of
business segments or a possible merger or sale of the corporation. This process
has been initiated with the goal of maximizing current value to shareholders.
29
BOARD OF DIRECTORS PRESENTATION
Transaction Timeline
--------------------
- - Strategic alternatives press release ..............................................................September 13th
- - Commenced drafting of Information Memorandum ..............................................Week of September 27th
- - Initial solicitation of buyers ............................................................Week of October 4th
- - Information Memorandum delivered ............................................................Week of October 11th
- - Initial proposals due by 12:00 p.m. .................................................................October 25th
- - Board of Directors presentation .....................................................................October 27th
- - Parties notified of invitation to participate in second
round of the transaction process by 5:00 p.m. ......................................................October 29th
- - Management presentations and data room visits ........................................Weeks of November 1st - 8th
- - Definitive Proposals due ...........................................................................November 15th
- - Definitive Proposals and Definitive Agreements negotiated ..................................Week of November 15th
- - Definitive Agreement announced .....................................................................November 22nd
30
BOARD OF DIRECTORS PRESENTATION
Universe of Potential Buyers Contacted by FBR
---------------------------------------------
Executed CA Received
Received Exec. Sum. Companies
IM & CA Contacted
Corporate Housing & Relocation Services 3 4 6
Extended Stay 2 4 5
Furniture Rental 5 7 8
Traditional Hotels 1 5 20
REITS 1 3 10
MISC 0 0 9
Financial Buyer 19 26 37
Internet Based Furniture Sales 0 0 5
31 49 100
31
BOARD OF DIRECTORS PRESENTATION
Potential Buyers Who Received an Information Memorandum
-------------------------------------------------------
CORPORATE HOUSING & RELOCATION SERVICES FINANCIAL
- --------------------------------------- ---------
Marriott International, Inc. BancBoston Capital Inc.
Mobility Services International Bank of America Corp.
Prudential Real Estate and Relocation Solutions Citizens Capital Incorporated
CIVC Partners
Code, Hennessy & Simmons LLC
EOS Partners, L.P.
EXTENDED STAY First Union Securities Inc.
- ------------- Fremont Group
Candlewood Hotel Co., Inc. Golub Associates Incorporated
Sunburst Hospitality Corp. GTCR Golder Rauner, LLC
H.I.G. Capital LLC
FURNITURE RENTAL Harvest Partners, Inc.
- ---------------- ING Furman Selz Investments
Aaron Rents, Inc. Legg Mason Merchant Banking Inc.
Brook Furniture Rental, Inc. Patricof & Co. Ventures, Inc.
CORT Business Services Corporation PNC Bank Corp.
Rent-Way, Inc. Warburg Pincus
Swingles Furniture Rental, Inc. Westin Presidio Capital
Windward Capital Partners, L.P.
TRADITIONAL HOTELS
- ------------------
Bristol Hotels & Resorts Inc.
REITS
- -----
Equity Residential Properties Trust
32
BOARD OF DIRECTORS PRESENTATION
SELECTED MERGER & ACQUISITION COMPARABLES
0% OVERHEAD ELIMINATIONS
Deal Value/ Deal Value/
Seller Buyer Deal Value LTM EBITDA LTM EBIT LTM EBITDA LTM EBIT
- ----------------------------------------------------------------------------------------------------------------
ExecuStay Marriott $140,180 $12,087(1) na 6.65x na
International
Cort Business Management 475,519 na 54,250 na 8.77x
Services Group(2)
- ----------------------------------------------------------------------------------------------------------------
AVERAGE 6.65X 8.77X
- ----------------------------------------------------------------------------------------------------------------
Globe Business
Resources
Corporate housing $11,670
EBITDA(3)
Furniture rental $10,231
EBIT(3)
Multiple 6.65x 8.77x
----- -----
Division value 77,579 89,678
Unallocated (2,825) (2,477)
corporate overhead
Multiple 6.65x 8.77x
----- -----
Impact on division (18,781) (21,710)
value
- ----------------------------------------------------------------------------------------------------------------
33
BOARD OF DIRECTORS PRESENTATION
Division value, net ----------- ---------
58,798 67,968
Blended enterprise 126,766
value
Less debt 69,727
Plus cash 1,299
---------
Equity value $58,338
=========
Diluted shares 4,838
PRICE PER SHARE $12.06
1. Estimated 1999 EBITDA at time of deal.
2. Transaction not approved by shareholders.
3. Estimated fiscal 2000 EBITDA, excluding non-recurring.
34
BOARD OF DIRECTORS PRESENTATION
SELECTED MERGER & ACQUISITION COMPARABLES
0% OVERHEAD ELIMINATIONS
Deal Value/ Deal Value/
Seller Buyer Deal Value LTM EBITDA LTM EBIT LTM EBITDA LTM EBIT
- ---------------------------------------------------------------------------------------------------------------------------
ExecuStay Marriott $140,180 $12,087(1) na 6.65x na
International
Cort Business Management 475,519 na 54,250 na 8.77x
Services Group(2)
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE 6.65X 8.77X
- ---------------------------------------------------------------------------------------------------------------------------
Globe Business
Resources
Corporate housing $11,670
EBITDA(3)
Furniture rental $10,231
EBIT(3)
Multiple 6.65x 8.77x
----- -----
Division value 77,579 89,678
Unallocated (2,119) (1,858)
corporate overhead
Multiple 6.65x 8.77x
----- -----
Impact on division (14,086) (16,283)
value
- ---------------------------------------------------------------------------------------------------------------------------
35
BOARD OF DIRECTORS PRESENTATION
Division value, net ----------- ---------
63,493 73,396
Blended enterprise 136,889
value
Less debt 69,727
Plus cash 1,299
---------
Equity value $68,461
=========
Diluted shares 4,838
PRICE PER SHARE $14.15
1. Estimated 1999 EBITDA at time of deal.
2. Transaction not approved by shareholders.
3. Estimated fiscal 2000 EBITDA, excluding non-recurring.
36
BOARD OF DIRECTORS PRESENTATION
SELECTED MERGER & ACQUISITION COMPARABLES
0% OVERHEAD ELIMINATIONS
Deal Value/ Deal Value/
Seller Buyer Deal Value LTM EBITDA LTM EBIT LTM EBITDA LTM EBIT
- -----------------------------------------------------------------------------------------------------------------------------
ExecuStay Marriott $140,180 $12,087(1) na 6.65x na
Internationa(l)
Cort Business Management 475,519 na 54,250 na 8.77x
Services Group(2)
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE 6.65X 8.77X
- -----------------------------------------------------------------------------------------------------------------------------
Globe Business
Resources
Corporate housing $11,670
EBITDA(3)
Furniture rental $10,231
EBIT(3)
Multiple 6.65x 8.77x
------- -----
Division value 77,579 89,678
Unallocated (1,413) (1,238)
corporate overhead
Multiple 6.65x 8.77x
------- -----
Impact on division (9,390) (10,855)
value
- -----------------------------------------------------------------------------------------------------------------------------
37
BOARD OF DIRECTORS PRESENTATION
Division value, net -------- -------
68,188 78,823
Blended enterprise 147,011
value
Less debt 69,727
Plus cash 1,299
-------
Equity value $78,583
=======
Diluted shares 4,838
PRICE PER SHARE $16.24
1. Estimated 1999 EBITDA at time of deal.
2. Transaction not approved by shareholders.
3. Estimated fiscal 2000 EBITDA, excluding non-recurring.
38
BOARD OF DIRECTORS PRESENTATION
SELECTED MERGER & ACQUISITION COMPARABLES
0% OVERHEAD ELIMINATIONS
Deal Value/ Deal Value/
Seller Buyer Deal Value LTM EBITDA LTM EBIT LTM EBITDA LTM EBIT
- -----------------------------------------------------------------------------------------------------------------------------------
ExecuStay Marriott $140,180 $12,087(1) na 6.65x na
Internationa(l)
Cort Business Management 475,519 na 54,250 na 8.77x
Services Group(2)
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE 6.65X 8.77X
- -----------------------------------------------------------------------------------------------------------------------------------
Globe Business
Resources
Corporate housing $11,670
EBITDA(3)
Furniture rental $10,231
EBIT(3)
Multiple 6.65x 8.77x
----- -----
Division value 77,579 89,678
Unallocated (706) ( 619)
corporate overhead
Multiple 6.65x 8.77x
----- -----
Impact on division (4,695) (5,428)
value
- -----------------------------------------------------------------------------------------------------------------------------------
39
BOARD OF DIRECTORS PRESENTATION
Division value, net ----------- ---------
72,883 84,251
Blended enterprise 157,134
value
Less debt 69,727
Plus cash 1,299
---------
Equity value $88,706
=========
Diluted shares 4,838
PRICE PER SHARE $18.34
1. Estimated 1999 EBITDA at time of deal.
2. Transaction not approved by shareholders.
3. Estimated fiscal 2000 EBITDA, excluding non-recurring.
40
BOARD OF DIRECTORS PRESENTATION
Summary of Proposals: Globe Business Resources, Inc.
-----------------------------------------------------
Bidder: Brook Furniture Rental
Indicative Value: $14.00 - $16.00 per share
Consideration: All Cash
Transaction: Stock Purchase
Financing: Fremont Partners, William Blair
Other: Goal of Definitive Agreement by Week of
November 15, 1999
Bidder: Swingles Furniture Rental, Inc.
Indicative Value: $13.40 - $15.50 per share
Consideration: All Cash
Transaction: Stock Purchase
Financing: Mesirow Financial
41
Summary of Proposals: Globe Corporate Stay International
--------------------------------------------------------
Bidder: ExecuStay By Marriott
Indicative Value: $40,000,000
Consideration:
All Cash
Transaction: Asset Purchase
752425.1