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Book ____
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First Union Capital Markets
Furnishings & Textiles Group
Presentation to
CONCORD FABRICS INC.
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May 19, 1999
FIRST UNION(R)
Capital Markets
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TABLE OF CONTENTS Presentation to Concord Fabrics Inc. pg. 1
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SECTION
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I Executive Summary
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II Company Overview
III Preliminary Valuation Analysis
IV Preliminary Transaction Timing
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First Union Capital Markets
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EXECUTIVE SUMMARY Presentation to Concord Fabrics Inc. pg. 2
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EXECUTIVE SUMMARY
o Bowles Hollowell Conner ("BHC") has been engaged by Concord Fabrics Inc.
("Concord" or the "Company") to work with Concord's senior managers in
those managers' preliminary review of acquiring the Company's outstanding
shares that they do not currently hold.
o Bowles Hollowell Conner has analyzed Concord Fabrics Inc.'s historical and
management - prepared projected financial information.
o Concord's financial information was then applied to various standard
valuation methodologies.
o We have listed preliminary timelines for various potential methods to
initiate and execute a transaction.
o The comments and analysis provided in this presentation are confidential,
preliminary, for discussion purposes only, and should not be shared with
anyone.
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First Union Capital Markets
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TABLE OF CONTENTS Presentation to Concord Fabrics Inc. pg. 3
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SECTION
I Executive Summary
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II Company Overview
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III Preliminary Valuation Analysis
IV Preliminary Transaction Timing
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First Union Capital Markets
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COMPANY OVERVIEW Presentation to Concord Fabrics Inc. pg. 4
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STOCK PRICE HISTORY
DAILY FROM MAY 14, 1996 - MAY 14, 1999
Source: FactSet Research Systems Inc.
[The following table was represented as a line chart in the printed material.]
CONCORD FABRICS INC CL A
CONCORD FABRICS INC CL B
6/12/96 - Announced de-emphasis on woven fabrics strategy
11/3/97 - Announced Fiscal Year Earnings
9/1/98 - Share buy back announcement
3/25/99 - Announced 2Q Earnings
[PLOT POINTS NEEDED]
o Concord is currently trading at $4.75 per share, a 55.3% discount to its
52-week high and a 15.0% premium to its 52-week low.
o Concord's stock price has declined 16.5% over the past three years and
50.7% over the past 52-week period.
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First Union Capital Markets
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COMPANY OVERVIEW Presentation to Concord Fabrics Inc. pg. 5
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STOCK PRICE PERFORMANCE - TEXTILES COMPOSITE AND MARKET INDICES
DAILY FROM MAY 14, 1998 - MAY 14, 1999
Source: FactSet Research Systems Inc.
[The following table was represented as a line chart in the printed material.]
S&P 500 STOCK INDEX
RUSSELL 2000 INDEX
CONCORD FABRICS INC CL A
COMPARABLE COMPANY INDEX
[PLOT POINTS NEEDED]
Indexed prices are market cap. weighted.
Peer Group includes: CFI, COE, DBG, FIT, GFD, GNL, JII, QFAB.
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First Union Capital Markets
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COMPANY OVERVIEW Presentation to Concord Fabrics Inc. pg. 6
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DAILY VOLUME SUMMARY
Class A
- --------------------------------------------------------------------------------
- -------------------------
Avg. Daily Volume = 2.447
- -------------------------
(Daily Volume in Thousands)
[PLOT POINTS NEEDED]
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Class B
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- -------------------------
Avg. Daily Volume = 0.160
- -------------------------
(Daily Volume in Thousands)
[PLOT POINTS NEEDED]
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First Union Capital Markets
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COMPANY OVERVIEW Presentation to Concord Fabrics Inc. pg. 7
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TRADING ANALYSIS
Class A Shares Traded
April 30, 1998 - May 3, 1999
[The following table was represented as a bar chart in the printed material.]
[PLOT POINTS NEEDED]
-----------------------------------
Total Shares Traded
-----------------------------------
Less than $7.50 479,000
$7.50 - $9.00 134,600
Greater than $9.00 56,600
-----------------------------------
Class A Shares Traded
May 3, 1996 - May 3, 1999
[The following table was represented as a bar chart in the printed material.]
[PLOT POINTS NEEDED]
-----------------------------------
Total Shares Traded
-----------------------------------
Less than $7.50 1,048,100
$7.50 - $9.00 535,500
Greater than $9.00 263,400
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First Union Capital Markets
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COMPANY OVERVIEW Presentation to Concord Fabrics Inc. pg. 8
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HISTORICAL AND PROJECTED OPERATING PERFORMANCE
[The following table was represented as a combination bar/line chart
in the printed material.]
($ in Millions)
(FY Ended and Ending August 31,)
Revenue EBITDA
------- ------
1994 $197.8 $13.1
1995 $180.2 $ 1.4
1996 $146.6 $ 5.3
1997 $108.8 $ 8.3
1998 $101.3 $ 7.9
1999(E) $ 87.8 $ 6.4
2000(E) $ 89.0 $ 6.6
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First Union Capital Markets
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COMPANY OVERVIEW Presentation to Concord Fabrics Inc. pg. 9
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OWNERSHIP PROFILE
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Total Shares Outstanding (Class A and B) = 3,615,077
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Institutional Holders(1)
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% of Shares
Institution Shares Held Outstanding
- ------------------------------------------ ----------- -----------
Fidelity Management 292,300 8.1%
Dimensional Fund Advisors Inc. 218,000 6.0%
Franklin Resources Inc. 148,800 4.1%
Rosenberg Institutional Equity 62,000 1.7%
BZW Barclays 26,077 0.7%
Kennedy Capital Management 25,800 0.7%
Brandywine Asset Management 23,800 0.7%
Mellon Bank 13,900 0.4%
Northern Trust 10,800 0.3%
ANB Investment Management 10,800 0.3%
Weiss Peck & Greer 1,000 0.0%
----------- -----------
Total 833,277 23.1%
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Insiders (2)
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% of Shares
Insider Shares Held Outstanding
- --------------------------------- ----------- -----------
Alvin Weinstein 1,990,374 55.1%
David Weinstein 154,576 4.3%
Earl Kramer 44,400 1.2%
Fred Heller 4,500 0.1%
Other Insiders
----------- -----------
Total 2,193,850 60.7%
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% of Shares
Shares Held Outstanding
----------- -----------
Estimated Retail and Other 587,950 16.2%
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Ownership Breakdown
-------------------
[The following table was represented as a pie chart in the printed material.]
Institutions 23.1%
Insiders 60.7%
Retail & Other 16.2%
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(1) As of latest 13F filing available on 5/14/99.
(2) As of latest proxy statement dated December 18, 1998; Excludes options.
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First Union Capital Markets
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COMPANY OVERVIEW Presentation to Concord Fabrics Inc. pg. 10
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EARNINGS GENERATING CAPACITY
o The following chart summarizes key statistics used to value Concord
Fabrics Inc.:
----------------------------------------------------------------
Concord Fabrics Inc.
($ in Thousands)
----------------------------------------------------------------
Latest Twelve Months Fiscal Year
Reported Results Ending
as of 2/28/99 8/31/99(E)
-------------------- -----------
EBIT $4.5 $4.6
EBITDA $6.3 $6.4
Net Income $1.8 $2.2
Net Debt (1) ($3.3) ($11.5)
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(1) Third party debt less cash.
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First Union Capital Markets
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TABLE OF CONTENTS Presentation to Concord Fabrics Inc. pg. 11
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SECTION
I Executive Summary
II Company Overview
---------------------------------------
III Preliminary Valuation Analysis
---------------------------------------
IV Preliminary Transaction Timing
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 12
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SUMMARY VALUATION
o The following are examples of various standard valuation methodologies (as
applied to Concord's financial information), which may or may not be
appropriate for Concord Fabrics Inc.
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Concord Fabrics Inc. Preliminary Valuation Summary
[The following table was represented as a bar chart in the printed material.]
Value Per Share
---------------
Publicly Held Companies
Discounted Cash Flow Analysis
Earnings Impact (Dilution) Analysis [PLOT POINTS NEEDED]
Leveraged Buyout Analysis
Premiums Paid Analysis
Price as of 5/14/99 ($4.75)
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 13
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COMPARISON TO PUBLICLY HELD COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
LTM Sales Mkt. Cap.
Company Name ($MM) ($MM) Description of Business
- ------------------------------------------------------------------------------------------------------------------------------------
Cone Mills Corp. (NYSE: COE) $728.6 $152.6 Cone Mills designs, manufactures, and
markets apparel fabrics, including
denim. The company also designs and
distributes decorative fabrics for the
home furnishings industry.
Culp, Inc. (NYSE: CFI) 486.8 99.1 Culp is a manufacturer of upholstery
fabrics and mattress tickings primarily
for use in the furniture, bedding, and
industrial furnishings markets.
Dyersburg Corp. (NYSE: DBG) 401.0 22.5 Dyersburg is a leading manufacturer of
knit fleece, jersey, and stretch fabrics sold
principally to domestic apparel producers. The
company's manufacturing operations are
vertically integrated, beginning with
the conversion of fiber into yarn and
knitting, dyeing, and finishing the
fabric into a wide range of styles and
colors.
FAB Industries, Inc. (AMEX: FIT) 146.2 88.6 FAB is a manufacturer of warp and
circular knit fabrics, raschel laces,
and polyurethane coated fabrics. FAB's
textile fabrics are sold to a wide
variety of manufacturers of apparel for
men, women, and children, home
furnishings, over-the-counter fabrics,
industrial fabrics, upholstery fabrics
for residential and contact markets, and
health care and consumer products.
Galey & Lord, Inc. (NYSE; GNL) 1,062.3 48.7 Galey & Lord is a leading developer,
manufacturer, and marketer of high
quality woven cotton and cotton blended
fabrics. The company principally sells
fabrics to well-known manufacturers of
sportswear for use in the production of
pants and shorts and to manufacturers of
commercial uniforms.
Guilford Mills, Inc. (NYSE: GFD) 885.9 214.4 Guilford produces, processes, and sells
warp knit fabrics. The company knits
synthetic yarn, primarily nylon,
acetate, and polyester on warp knitting
machinery into warp knit fabrics, which
it then dyes and finishes.
Johnston Industries, Inc. (NYSE: JII) 283.7 26.8 Johnston is a diversified manufacturer
of industrial textiles, as well as basic
apparel textile fabrics. The company
serves the automotive, coating, home
furnishing, bedding, and apparel markets.
Quaker Fabric Corp. (NASDAQ: QFAB) 252.6 83.1 Quaker designs, manufactures, and
markets woven upholstery fabrics for
residential furniture and is one of the
largest producers of jacquard upholstery
fabrics in the world.
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 14
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COMPARISON TO PUBLICLY HELD COMPANIES
OPERATING STATISTICS
--------------------------------------------- ------------------------------
Income Statement Data Profitability
--------------------------------------------- ------------------------------
Latest Twelve Months Percent of Sales
--------------------------------------------- ------------------------------
Company Name Net Net
Latest Qtr.- FYE Sales EBITDA EBIT Income(1) EBITDA EBIT Income
- ------------------------------- ----------- --------- --------- ---------- ---------- ------ ----------
Cone Mills Corp. $728.6 $39.8 $9.5 $3.9 5.5% 1.3% 0.5%
1/3/99 - Dec.
Culp, Inc. 486.8 36.7 17.1 4.4 7.5% 3.5% 0.9%
1/31/99 - Apr.
Dyersburg Corp. 401.0 50.6 31.3 5.2 12.6% 7.8% 1.3%
1/2/99 - Sept.
FAB Industries, Inc. 146.2 4.7 (1.2) 2.5 3.2% NM 1.7%
2/27/99 - Nov.
Galey & Lord, Inc.(2) 1,062.3 120.1 70.6 9.1 11.3% 6.6% 0.9%
3/31/99 - Sept.
Guilford Mills, Inc. 885.9 123.5 60.5 28.9 13.9% 6.8% 3.3%
3/31/99 - Sept.
Johnston Industries, Inc. 283.7 32.7 11.1 (0.6) 11.5% 3.9% NM
1/2/99 - Jan.
Quaker Fabric Corp. 252.6 24.6 14.0 5.8 9.7% 5.5% 2.3%
1/2/99 - Dec.
--------------------------------------------- ------------------------------
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Mean: $530.9 $54.1 $26.6 $7.4 9.4% 5.1% 1.5%
Median: 443.9 38.3 15.6 4.8 10.5% 5.5% 1.3%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Concord Fabrics Inc. $93.0 $6.3 $4.5 $1.8 6.8% 4.8% 1.9%
2/28/99 - Aug.
- -------------------------------------------------------------------------------------------------------------------
------------------------------- -------------------------------
Growth Capitalization
------------------------------- -------------------------------
2 - Year CAGR
------------------------------- Net Debt Net Debt
Company Name Net to Total to Book
Latest Qtr.- FYE Sales EBITDA Income Capital EBITDA Value
- ------------------------------- -------- --------- -------- ---------- ---------- --------
Cone Mills Corp. (1.2%) (8.7%) NM 48.7% 4.3x $181.9
1/3/99 - Dec.
Culp, Inc. 16.4% 13.1% 18.9% 52.0% 3.8x 130.2
1/31/99 - Apr.
Dyersburg Corp. 12.0% 29.8% 37.3% 64.9% 3.9x 106.6
1/2/99 - Sept.
FAB Industries, Inc. (1.5%) (19.9%) (17.3%) NM NM 131.5
2/27/99 - Nov.
Galey & Lord, Inc.(2) 48.1% 67.6% 29.7% 84.5% 5.5x 121.3
3/31/99 - Sept.
Guilford Mills, Inc. 3.8% 2.4% 5.2% 37.4% 1.8x 376.9
3/31/99 - Sept.
Johnston Industries, Inc. (4.5%) 1.1% NM 72.4% 3.9x 48.3
1/2/99 - Jan.
Quaker Fabric Corp. 12.7% 0.5% (17.9%) 36.3% 2.9x 125.0
1/2/99 - Dec.
------------------------------- -------------------------------
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Mean: 10.7% 10.7% 9.3% 56.6% 3.7x $152.7
Median: 7.9% 1.7% 12.0% 52.0% 3.9x 127.6
- ---------------------------------------------------------------------------------------------------
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Concord Fabrics Inc. (16.9%) 21.8% 71.3% NM NM $47.2
2/28/99 - Aug.
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(1) Before one-time charges.
(2) Income Statement data represents proforma LTM for acquisitions (First
Union Research).
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 15
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COMPARISON TO PUBLICLY HELD COMPANIES
OPERATING STATISTICS SUMMARY
- ----------------------------------------
SALES
- ----------------------------------------
Galey & Lord, Inc. $1,062.3
Guilford Mills, Inc. $885.9
Cone Mills Corp. $728.6
Culp, Inc. $486.8
Dyersburg Corp. $401.0
Johnston Industries, Inc. $283.7
Quaker Fabric Corp. $252.6
FAB Industries, Inc. $146.2
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Concord Fabrics Inc. $93.0
- ----------------------------------------
- ----------------------------------------
EBITDA
- ----------------------------------------
Guilford Mills, Inc. $123.5
Galey & Lord, Inc. $120.1
Dyersburg Corp. $50.6
Cone Mills Corp. $39.8
Culp, Inc. $36.7
Johnston Industries, Inc. $32.7
Quaker Fabric Corp. $24.6
- ----------------------------------------
Concord Fabrics Inc. $6.3
- ----------------------------------------
FAB Industries, Inc. $4.7
- ----------------------------------------
EBIT
- ----------------------------------------
Galey & Lord, Inc. $70.6
Guilford Mills, Inc. $60.5
Dyersburg Corp. $31.3
Culp, Inc. $17.1
Quaker Fabric Corp. $14.0
Johnston Industries, Inc. $11.1
Cone Mills Corp. $9.5
- ----------------------------------------
Concord Fabrics Inc. $4.5
- ----------------------------------------
FAB Industries, Inc. ($1.2)
- ----------------------------------------
NET INCOME
- ----------------------------------------
Guilford Mills, Inc. $28.9
Galey & Lord, Inc. $9.1
Quaker Fabric Corp. $5.8
Dyersburg Corp. $5.2
Culp, Inc. $4.4
Cone Mills Corp. $3.9
FAB Industries, Inc. $2.5
- ----------------------------------------
Concord Fabrics Inc. $1.8
- ----------------------------------------
Johnston Industries, Inc. ($0.6)
- ----------------------------------------
2-YEAR SALES GROWTH
- ----------------------------------------
Galey & Lord, Inc. 48.1%
Culp, Inc. 16.4%
Quaker Fabric Corp. 12.7%
Dyersburg Corp. 12.0%
- ----------------------------------------
Mean 7.7%
- ----------------------------------------
Guilford Mills, Inc. 3.8%
Cone Mills Corp. (1.2%)
FAB Industries, Inc. (1.5%)
Johnston Industries, Inc. (4.5%)
- ----------------------------------------
Concord Fabrics Inc. (16.9%)
- ----------------------------------------
- ----------------------------------------
EBITDA MARGIN
- ----------------------------------------
Guilford Mills, Inc. 13.9%
Dyersburg Corp. 12.6%
Johnston Industries, Inc. 11.5%
Galey & Lord, Inc. 11.3%
Quaker Fabric Corp. 9.7%
- ----------------------------------------
Mean 9.1%
- ----------------------------------------
Culp, Inc. 7.5%
- ----------------------------------------
Concord Fabrics Inc. 6.8%
- ----------------------------------------
Cone Mills Corp. 5.5%
FAB Industries, Inc. 3.2%
- ----------------------------------------
EBIT MARGIN
- ----------------------------------------
Dyersburg Corp. 7.8%
Guilford Mills, Inc. 6.8%
Galey & Lord, Inc. 6.6%
Quaker Fabric Corp. 5.5%
- ----------------------------------------
Mean 5.0%
- ----------------------------------------
Concord Fabrics Inc. 4.8%
- ----------------------------------------
Johnston Industries, Inc. 3.9%
Culp, Inc. 3.5%
Cone Mills Corp. 1.3%
FAB Industries, Inc. NM
- ----------------------------------------
NET MARGIN
- ----------------------------------------
Guilford Mills, Inc. 3.3%
Quaker Fabric Corp. 2.3%
- ----------------------------------------
Concord Fabrics Inc. 1.9%
- ----------------------------------------
FAB Industries, Inc. 1.7%
- ----------------------------------------
Mean 1.6%
- ----------------------------------------
Dyersburg Corp. 1.3%
Galey & Lord, Inc. 0.9%
Culp, Inc. 0.9%
Cone Mills Corp. 0.5%
Johnston Industries, Inc. NM
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 16
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COMPARISON TO PUBLICLY HELD COMPANIES
VALUATION STATISTICS
----------------------------------------------------------
Market Data
----------------------------------------------------------
5/14/99 Shares Adjusted
Company Name Price Out. Market Market
Latest Qtr. - FYE Ticker 52-Week Range (mils.) Value Value(1)
- ----------------------------- ------ ------------------- ------------- ---------- ----------
Cone Mills Corp. COE $6.00 25.43 $152.6 $325.1
1/3/99 - Dec. $3.81 - $10.13
Culp, Inc. CFI 7.63 13.00 99.1 240.3
1/31/99 - Apr. 5.13 - 19.00
Dyersburg Corp. DBG 1.69 13.34 22.5 219.4
1/2/99 - Sept. 1.31 - 8.06
FAB Industries, Inc. FIT 15.88 5.58 88.6 36.7
2/27/99 - Nov. 13.63 - 32.50
Galey & Lord, Inc.(3) GNL 4.13 11.81 48.7 708.2
3/31/99 - Sept. 3.50 - 25.56
Guilford Mills, Inc. GFD 9.31 23.02 214.4 439.4
3/31/99 - Sept. 8.13 - 27.50
Johnston Industries, Inc. JII 2.50 10.72 26.8 153.6
1/2/99 - Jan. 1.44 - 5.75
Quaker Fabric Corp. QFAB 5.31 15.65 83.1 154.3
1/2/99 - Dec. 3.50 - 19.42
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- ------------------------------------------------------------------------------------------------------
Concord Fabrics Inc. CIS $4.75 3.6 $17.2 $13.9
2/28/99-Aug. $4.00 - $10.00
- ------------------------------------------------------------------------------------------------------
--------------------- --------------------------------------------------------------------
EPS Data Valuation Data
--------------------- --------------------------------------------------------------------
Latest Twelve Months
P/E Multiples --------------------
Company Name ------------------ AMV/ AMV/ AMV/ MV/
Latest Qtr. - FYE LTM 1999(E)(2) LTM 1999(E)(2) Sales EBITDA EBIT BV
- --------------------------- ------- ------------ ----- ----------- ---------- ---------- ------------ -------
Cone Mills Corp. 0.08 0.37 NM 16.2x 0.4x 8.2x NM 0.8x
1/3/99 - Dec.
Culp, Inc. 0.33 0.79 23.1x 9.7x 0.5x 6.5x 14.0x 0.8x
1/31/99 - Apr.
Dyersburg Corp. 0.34 (0.34) 5.0x NM 0.5x 4.3x 7.0x 0.2x
1/2/99 - Sept.
FAB Industries, Inc. 0.43 NA 36.9x NA 0.3x 7.9x NM 0.7x
2/27/99 - Nov.
Galey & Lord, Inc.(3) 0.74 (0.11) 5.6x NM 0.7x 5.9x 10.0x 0.4x
3/31/99 - Sept.
Guilford Mills, Inc. 1.17 1.20 8.0x 7.8x 0.5x 3.6x 7.3x 0.6x
3/31/99 - Sept.
Johnston Industries, Inc. (0.06) 0.20 NM 12.5x 0.5x 4.7x 13.8x 0.6x
1/2/99 - Jan.
Quaker Fabric Corp. 0.40 0.27 13.3x 19.7x 0.6x 6.3x 11.0x 0.7x
1/2/99 - Dec.
--------------------- --------------------------------------------------------------------
----------------------------------------------------------------------------------
Mean: 15.3x 13.2x 0.5x 5.9x 10.5x 0.6x
Median: 10.6x 12.5x 0.5x 6.1x 10.5x 0.6x
----------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Concord Fabrics Inc. 0.47 0.65 10.1x 7.3x 0.1x 2.2x 3.1x 0.4x
2/28/99-Aug.
- --------------------------------------------------------------------------------------------------------------------------
(1) Market value of equity plus net debt.
(2) Estimates obtained from the First Call Network as of May 14, 1999. 1999
estimates are calendarized to December year end.
(3) Income Statement data represents proforma LTM for acquisitions (First
Union Research).
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 17
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COMPARISON TO PUBLICLY HELD COMPANIES
VALUATION SUMMARY
($ in Thousands except per share figures)
Concord Fabrics Inc. Median Debt- Discount for Adjusted
Valuation Measure (LTM)(1) x Multiple = Gross Value - Cash (1) = Equity Value - Size (15%) = Equity Value
- -------------------- -------------------- -------- ----------- -------- ------------ ------------ ------------
AMV / EBIT $4,451 10.5 $46,858 ($3,251) $50,109 $7,516 $42,593
AMV / EBITDA 6,309 6.1 38,381 (3,251) 41,632 6,245 35,387
LTM P/E Multiple 1,759 10.6 18,681 -- 18,681 2,802 15,879
1999(E) P/E Multiple 2,295 12.5 28,681 -- 28,681 4,302 24,379
MV / BV 47,219 0.6 29,131 -- 29,131 4,370 24,762
Implied Equity Value Range $24,379 - $35,387
----------------------
Implied Equity Value Range Per Share(2) $6.73 - $9.78
----------------------
(1) Latest Twelve Months reported results as of 2/28/99. 1999(E) net income is
for calendar year and was supplied by management.
(2) Diluted shares outstanding.
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 18
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PRECEDENT MERGERS AND ACQUISTIONS
- -------------------------------------------------------------------------------------------------------------------------------
Target/ Adj. Market Value
Date Closed Acquiror ($MM) Description of Acquired Companies
- -------------------------------------------------------------------------------------------------------------------------------
October 14, 1998 The Bibb Company $251.0 Bibb is a manufacturer and marketer of
Dan River, Inc. sheets, pillowcases, and other bedding
accessories used in the home, hotels,
hospitals, and segments serving the
hospitality market. The company
manufactures specially treated and
engineered textile products.
1998 Target 79.6 Private company transaction by BHC.
Acquiror
January 29, 1998 Dominion Textile - Apparel 464.5 Dominion is a leading international
Galey & Lord, Inc. producer and marketer of textile related
products in the apparel fabrics market.
December 1, 1997 Elastic Corp. of America 82.1 Elastic Corp. is a manufacturer of woven
Worldtex, Inc. and knitted narrow elastic fabrics
supplying the apparel industry.
August 27, 1997 WestPoint Stevens - Alamac Div. 178.5 Alamac manufactures and sells knitted
Dyersburg Corp. fabrics primarily to manufacturers of
men's, women's, and children's apparel.
February 3, 1997 New Cherokee Corp. 70.0 New Cherokee is a manufacturer and
Dan River, Inc. supplier of men's and women's yarn-dyed
fabrics to shirting manufacturers and of
sportswear fabrics to the converting
trade.
August 1, 1996 Perfect Fit 45.4 Perfect Fit is a home comfort products
PFI Acquisition Corp. subsidiary of Foamex International, Inc.
that manufactures bedroom furnishings
and draperies.
April 29, 1996 Graniteville Company 255.0 Graniteville manufactures, dyes, and
Avondale, Inc. finishes cotton, synthetic, and blended
(cotton and polyester) apparel fabrics.
Products are used for utility wear,
sportswear, casual wear, and outerwear.
March 29, 1996 Jupiter National, Inc. 113.8 Jupiter is a manufacturer of cotton and
Johnston Industries, Inc. polyester textiles for the home
furnishings and industrial products
markets. The company also holds a
portfolio of venture capital
investments.
January 17, 1996 Hofmann Laces, Ltd. 128.7 Hofmann Laces produces warp knitted
Guilford Mills, Inc. fabrics, including lace and
plain-stretch fabrics, curtains, shower
curtains, and knitted bedding products.
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 19
================================================================================
PRECEDENT MERGERS AND ACQUISTIONS
o BHC reviewed the merger and acquisition transactions listed on the
previous page and other transactions in the broader textile industry.
o There are no precedent merger and acquisition transactions where the
nature of the target's business closely resembles that of Concord's.
o BHC has determined that the transactions reviewed do not provide relevant
guidance as to how Concord Fabrics Inc. would be viewed by potential
acquirors. As such, we did not utilize this methodology as a valuation
measure for Concord.
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 20
================================================================================
DISCOUNTED CASH FLOW ANALYSIS
ASSUMPTIONS
o The following assumptions for Concord Fabrics Inc. were used to value the
company based on a five-year discounted cash flow analysis:
o Revenues are expected to grow slightly as a result of increased
sales at Concord House Division.
o EBITDA margin of 7.2% in 1999, increasing slightly due to improved
margin contribution from the Concord House Division.
o Capital expenditures and depreciation are expected to be
approximately $1.8 million.
o Base year is estimated to be the fiscal year ending 8/31/99.
o 179,000 shares of common stock authorized to be repurchased are
assumed to be repurchased equally in Years 2000 and 2001 at a Price
to Forward Earnings multiple of 7.3x.
o Chino, California facility is assumed to be sold in 2000 for $3.0
million (for a gain of $1.4 million).
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 21
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DISCOUNTED CASH FLOW ANALYSIS
FINANCIAL SUMMARY
o Projections used in the discounted cash flow analysis were provided by
management and are as follows:
INCOME STATEMENT: HISTORICAL
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1995 1996 1997 1998 1999(E)
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Net Sales $180,153 $146,561 $108,820 $101,297 $87,847
Cost of Goods Sold 141,959 107,001 74,579 68,780 59,421
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Gross Profit 38,194 39,560 34,242 32,517 28,425
SG & A 36,770 34,221 25,957 24,592 22,057
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EBITDA 1,424 5,339 8,284 7,925 6,368
Depreciation & Amortization 1,991 1,813 1,724 1,865 1,800
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EBIT (567) 3,526 6,560 6,060 4,568
Gain on Sale of Chino Facility 0 0 0 0 0
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Earnings Before Taxes (567) 3,526 6,560 6,060 4,568
Provision for Taxes(1) (227) 1,597 2,526 2,679 1,930
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UNLEVERED NET INCOME ($340) $1,928 $4,035 $3,381 $2,638
=================================================================
Plus: Depreciation & Amortization $1,991 $1,813 $1,724 $1,865 $1,800
Less: Capital Expenditures 4,113 1,696 942 3,412 1,800
Less: Incremental Working Capital Needs 19,094 (6,911) (7,463) (611) (5,104)
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UNLEVERED FREE CASH FLOW ($21,556) $8,956 $12,279 $2,446 $7,742
=================================================================
- -----------------------------------------------------------------------------------------------------------
OPERATING ASSUMPTIONS:
Net Sales Growth -8.9% -18.6% -25.8% -6.9% -13.3%
Gross Profit as % of Sales 21.2% 27.0% 31.5% 32.1% 32.4%
SG & A Expenses as % of Sales 20.4% 23.3% 23.9% 24.3% 25.1%
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INCOME STATEMENT: PROJECTED
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2000 2001 2002 2003 2004
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Net Sales $89,002 $90,588 $92,650 $94,815 $97,088
Cost of Goods Sold 60,083 61,016 62,245 63,531 64,877
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Gross Profit 28,918 29,572 30,405 31,284 32,211
SG & A 22,366 22,826 23,424 24,052 24,711
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EBITDA 6,552 6,746 6,981 7,232 7,500
Depreciation & Amortization 1,800 1,800 1,800 1,800 1,800
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EBIT 4,752 4,946 5,181 5,432 5,700
Gain on Sale of Chino Facility 1,373 0 0 0 0
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Earnings Before Taxes 6,125 4,946 5,181 5,432 5,700
Provision for Taxes(1) 2,450 1,978 2,072 2,173 2,280
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UNLEVERED NET INCOME $3,675 $2,967 $3,108 $3,259 $3,420
===========================================================
Plus: Depreciation & Amortization $1,800 $1,800 $1,800 $1,800 $1,800
Less: Capital Expenditures 1,800 1,800 1,800 1,800 1,800
Less: Incremental Working Capital Needs 300 416 543 569 597
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UNLEVERED FREE CASH FLOW $3,375 $2,552 $2,566 $2,690 $2,823
===========================================================
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OPERATING ASSUMPTIONS:
Net Sales Growth 1.3% 1.8% 2.3% 2.3% 2.4%
Gross Profit as % of Sales 32.5% 32.6% 32.8% 33.0% 33.2%
SG & A Expenses as % of Sales 25.1% 25.2% 25.3% 25.4% 25.5%
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(1) Utilizes historical tax rate for the historical years, a 42.25% rate for
1999(E) and a 40.00% rate for the projected years.
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 22
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DISCOUNTED CASH FLOW ANALYSIS VALUATION SUMMARY
o Yields an implied adjusted market value of $26.1 million, which equates to
$10.38 per share.
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Discount Rate = 11.50%
Growth Rate of Unlevered Free Cash Flow after 2004 = 1.00%
Unlevered Free Cash Flow Grown Into Perpetuity = $2,823
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NPV of Free Cash Flows in Years 1-5 $10,309
NPV of Free Cash Flows after Year 5 15,756
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Adjusted Market Value 26,065
Less: 1999(E) Existing Debt (14,300)
Plus: 1999(E) Cash & Marketable Securities 25,822
-------
Implied Equity Value $37,587
-------
Implied Per Share Value $10.38
-------
o Assumptions of different discount rates and/or terminal growth rates
provide a range of values.
Cash Flow Growth Rate After 2004
-------------------------------------------------
-1.0% 0.0% 1.0% 2.0% 3.0%
-------------------------------------------------
10.5% $10.18 $10.61 $11.13 $11.78 $12.60
------------------------------
Weighted 11.0% 9.88 10.27 10.74 11.31 12.02
Average ---------
Cost of 11.5% 9.61 9.97 10.38 10.89 11.51
Capital ---------
12.0% 9.37 9.68 10.06 10.51 11.06
------------------------------
12.5% 9.14 9.43 9.76 10.17 10.66
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 23
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EARNINGS IMPACT ANALYSIS
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Assumptions
- --------------------------------------------------------------------------------
Purchase Price Per Share $10.61
Implied Adjusted Market Value / 1999(E) EBITDA 4.5x
% Debt 100%
Interest Rate on Debt 7.5%
New Goodwill Created 0
2000(E) Earnings Per Share (1) $0.76
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Accretion (Dilution) At Various Purchase Prices
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Purchase Price
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$10.00 $10.25 $10.61 $10.75 $11.00
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7.00% 14.1% 10.8% 3.7% (0.9%) (9.0%)
7.25% 12.4% 9.0% 1.9% (2.8%) (11.0%)
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Rate 7.50% 10.7% 7.2% 0.0% (4.7%) (12.9%)
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7.75% 9.0% 5.4% (1.8%) (6.6%) (14.9%)
8.00% 7.3% 3.6% (3.7%) (8.5%) (16.8%)
2000(E)
------------------------------
Pre- Post-
Deal Deal
------------------------------
Sales $89,002 $89,002
EBITDA 6,526 6,526
Depreciation & Amortization 1,800 579
EBIT 4,726 5,947
Interest Expense 1,331 2,503
Tax Provision 1,792 773
Net Income 2,689 2,757
Net Income Per Share(2) $0.76 $0.76
- --------------------------------------------------------------------------------
Purchase Price Per Share
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
(1) Does not include Chino gain of $1.4 million.
(2) Pre-Deal utilizes Diluted shares adjusted for share repurchase. Post-Deal
utilizes Diluted shares (treasury stock method) assuming no share
repurchase.
o Based on fiscal year 2000 earnings, the above figure represents the
maximum amount an acquiror could pay assuming an all cash purchase with
zero dilution to earnings.
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 24
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LEVERAGED BUYOUT ANALYSIS
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Uses Sources % Total 5 Year Return
- -------------------------------------------------------------------------------------------------
Purchase of Shares(1) $32,262 Excess Cash / Investments(2) $23,822 47.8%
Fees and Expenses 3,317 Revolver 19,057 38.2% 7.5%
Debt Paydown(2) 14,300 New Equity 7,000 14.0% 30.0%
------- ------- -----
$49,879 $49,879 100.0%
======= ======= =====
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Assumptions
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Purchase Price Per Share $8.65
5 Year Exit Multiple 4.0x
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Common Equity Returns - Sensitivity Analysis
- --------------------------------------------------------------------------------
Exit Multiple
-------------------------------------
3.0x 3.5x 4.0x 4.5x 5.0x
-------------------------------------
21.1% 25.9% 30.0% 33.7% 37.0%
(1) Dilute shares outstanding adjusted using the treasury stock method at the
buyout price per share.
(2) Management assumptions for 8/31/99.
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 25
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PREMIUMS PAID ANALYSIS
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Premiums Paid Analysis
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Median Premium Paid
Transaction Size 1997 - YTD 1999
- -------------------------------------------------- -------------------
$25.0MM - $50.0MM 44.3%
$50.0MM - $100.0MM 35.5%
Implied Concord Fabrics Inc. Per Share Value At:
Current Price ($4.75)
$25 - $50MM $6.85
$50 -$100MM $6.44
Source: Securities Data Company as of 5/7/99
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First Union Capital Markets
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PRELIMINARY VALUATION ANALYSIS Presentation to Concord Fabrics Inc. pg. 26
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IMPLIED TRADING VALUATION BASED ON CLASS A STOCK PRICE
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($ in Millions, except per share data)
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30-Day 60-Day 90-Day 180-Day One Year Two Year Three Year
5/14/99 Average Average Average Average Average Average Average
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Stock Price $4.75 $4.70 $4.94 $5.30 $5.80 $6.86 $7.52 $7.12
Implied Equity Value(1) $17.3 $17.1 $18.0 $19.3 $21.1 $25.0 $27.4 $25.9
Net Debt (2) ($3.3) ($3.3) ($3.3) ($3.3) ($3.3) ($3.3) ($3.3) ($3.3)
Implied AMV $14.0 $13.8 $14.7 $16.0 $17.8 $21.7 $24.1 $22.6
AMV /EBITDA 2.2x 2.2x 2.3x 2.5x 2.8x 3.4x 3.8x 3.6x
- ---------------------------------------------------------------------------------------------------------
(1) Diluted shares outstanding.
(2) Latest Twelve Months reported results as of 2/28/99.
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
Stock Price $4.75 $4.70 $4.94 $5.30 $5.80 $6.86 $7.52 $7.12
5/14/99 Average Average Average Average Average Average Average
30-Day 60-Day 90-Day 180-Day One Year Two Year Three Year
Period
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First Union Capital Markets
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TABLE OF CONTENTS Presentation to Concord Fabrics Inc. pg. 27
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SECTION
I Executive Summary
II Company Overview
III Preliminary Valuation Analysis
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IV Preliminary Transaction Timing
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First Union Capital Markets
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PRELIMINARY TRANSACTION TIMING Presentation to Concord Fabrics Inc. pg. 28
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TIMING UNDER VARIOUS STRUCTURAL SCENARIOS
Transaction Step Tender/Short-Form Merger Merger
- ---------------- ------------------------ ------
Raise proposal with Board of Directors Week 1 Week 1
[Discuss proposal with large institutional shareholders] Week 1 Week 1
Execute confidentiality agreements with institutions
Board forms a special committee Week 1 Week 1
Special committee retains financial/legal advisors Week 1 Week 1
Due diligence by special committee's financial/legal advisors Weeks 2 - 5 Weeks 2 - 5
Special committee decides how to proceed Weeks 2 - 5 Weeks 2 - 5
Begin 14D-1 preparations Weeks 2 - 5 N/A
Begin 13E-3 preparations Weeks 2 - 5 Weeks 2 - 5
Management group enters into definitive agreement with Company N/A Week 6
Special committee completes 14D-9 Week 6 N/A
Contribute shares to Delaware takeover vehicle Week 6 Week 6
Press release announces transaction Week 6 Week 6
Tender offer commenced Week 6 N/A
Prepare proxy statement N/A Weeks 7 - 10
File proxy statements with SEC N/A Week 11
Receive and respond to SEC comments N/A Weeks 15 - 16
Mail proxy to stockholders N/A Weeks 15 - 16
Special stockholders meeting to approve transaction N/A Week 20
Close transaction Week 10 Week 20
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First Union Capital Markets