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PROJECT FABRIC
Presentation to the Special Committee
of the Board of Directors
July 29, 1999
PETER J. SOLOMON COMPANY
LIMITED
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This presentation has been prepared by Peter J. Solomon Company Limited ("PJSC")
from materials and information supplied (whether orally or in writing) by the
corporation code-named "Fabric" (the "Company") and from publicly available
sources.
This presentation includes certain statements, estimates and projections
provided by Fabric with respect to the historical and anticipated future
performance of Fabric. In preparing this presentation, PJSC has assumed and
relied upon the accuracy and completeness of the information provided to and
reviewed by PJSC for the purposes of this presentation and PJSC does not assume
any responsibility for independent verification of such information. With
respect to financial projections, PJSC has assumed that the financial
projections were reasonably prepared on a basis which reflects the best
currently available estimates and judgments of the future financial performance
of Fabric. PJSC makes no representation or warranty as to, and assumes no
responsibility for, the accuracy or completeness of any such statements,
7estimates and projections and for the effect which any inaccuracy or
incompleteness may have on the results or judgments contained in this
presentation.
Except where otherwise indicated, this analysis speaks as of the date hereof.
Under no circumstances should the delivery of this document imply that the
analysis would be the same if made as of any other date.
THIS REPORT HAS BEEN ISSUED FOR THE INFORMATION AND ASSISTANCE OF THE SPECIAL
COMMITTEE OF THE BOARD OF DIRECTORS OF FABRIC (THE "SPECIAL COMMITTEE"). IT IS
NOT INTENDED TO BE USED, AND SHOULD NOT BE RELIED UPON, BY ANY OTHER ENTITY OR
PERSON. THIS PRESENTATION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF
FABRIC COMMON STOCK AS TO WHETHER OR NOT SUCH HOLDER SHOULD TENDER SHARES OR HOW
ANY SUCH HOLDER SHOULD VOTE ON THE TRANSACTION WITH RESPECT TO WHICH AN OPINION
MAY BE RENDERED.
THIS REPORT IS CONFIDENTIAL AND SHOULD NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
PJSC, BE COPIED OR MADE AVAILABLE TO ANY PERSON OTHER THAN THE SPECIAL
COMMITTEE.
PJSC SHALL NOT HAVE LIABILITY, WHETHER DIRECT OR INDIRECT, IN CONTRACT OR TORT
OR OTHERWISE, TO ANY PERSON IN CONNECTION WITH THIS REPORT.
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PROJECT FABRIC 1 PETER J. SOLOMON COMPANY
Table of Contents
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Tab Page
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I. Introduction 3
II. Summary Historical and Projected Financial Information 9
III. Summary Historical Stock Performance 19
IV. Summary Management and Ownership Profile 28
V. Valuation Analysis 31
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PROJECT FABRIC 2 PETER J. SOLOMON COMPANY
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Introduction
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PROJECT FABRIC 3 PETER J. SOLOMON COMPANY
Introduction
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o Concord Merger Corp. ("Merger Corp.") an entity owned and controlled by an
investor group that includes Alvin Weinstein, the Chairman of Fabric, Earl
Kramer, the President of Fabric, David Weinstein, the President of the
Concord House Division of Fabric, and members of the Weinstein family (the
"Investor Group"), has made an offer to purchase the Class A and Class B
common shares (the "Common Shares") and common share equivalents of the
Company not owned by Merger Corp. and the Investor Group for $7.875 per
share (the "Transaction").
o The Special Committee has asked PJSC to advise it with respect to the
fairness to the shareholders of the Company other than Merger Corp., the
members of the Investor Group and their affiliates, from a financial point
of view, of the consideration proposed to be paid by Merger Corp. pursuant
to the terms of the Agreement and Plan of Merger (the "Agreement"), draft
of July 28, 1999, between Merger Corp. and the Company.
o Pursuant to the Agreement, Merger Corp. will commence a tender offer for
the outstanding Common Shares not owned by Merger Corp. and its affiliates
and, upon completion thereof, intends to merge itself with and into the
Company.
o Merger Corp. and the Investor Group currently own approximately 63% of the
Common Shares.
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PROJECT FABRIC 4 PETER J. SOLOMON COMPANY
Introduction
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o We have assumed and relied upon the accuracy and completeness of the
information reviewed by us for the purposes of this opinion and we have
not assumed any responsibility for independent verification of such
information. With respect to the financial projections, including the
estimates made by Fabric management, we have assumed that the financial
projections were reasonably prepared on a basis which reflects the best
currently available estimates and judgements of the future financial
performance of Fabric. We have not conducted a physical inspection of the
facilities or properties of Fabric. We have not assumed any responsibility
for any independent valuation or appraisal of the assets or liabilities of
Fabric, nor have we been furnished with any such valuation or appraisal.
For purposes of rendering this opinion, we have assumed and relied upon,
in all respects material to our analysis, the following: that the
representations and warranties of each party contained in the Agreement
are true and correct; that each party will perform all of the covenants
and agreements required to be performed by it; and that all of the
conditions to the Transaction will be satisfied without waiver thereof. We
have assumed, with your permission, for purposes of this opinion that the
proposed consummation of the Transaction as set forth in the Agreement
complies in all material respects with all statutory, common and other
applicable law. We have also assumed that all material governmental,
regulatory and other consents and approvals will be obtained and that in
the course of obtaining any of the foregoing, as contemplated by the
Agreement, no restrictions or conditions will be imposed or waivers made
that would have any material effect on the Transaction. We have relied as
to all legal matters on advice of counsel to the Special Committee. Our
opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of July 29,
1999.
o In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any other party with respect to the sale or other
business combination transaction involving the Company or any of its
assets. The Company represented to us that it had not received any
expressions of interest or offers from any party with respect to any such
transaction. Further, the members of the Investor Group represented to us
that they would not entertain or accept any offers from any party to
purchase their Common Shares. Our opinion is predicated on these bases.
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PROJECT FABRIC 5 PETER J. SOLOMON COMPANY
Introduction
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o Our advisory services are provided solely for the information and
assistance of the Special Committee and are not on behalf of and are not
intended to confer rights or remedies upon any other entity or persons,
and may not be used for any other purpose without our prior written
consent (except that our opinion may be included in its entirety in any
filings made with respect to the Transaction with the Securities and
Exchange Commission). This presentation does not constitute a
recommendation to any holder of Fabric Common Stock as to whether or not
such holder should tender shares or how any such holder should vote on the
Transaction.
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PROJECT FABRIC 6 PETER J. SOLOMON COMPANY
Introduction
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o For purposes of this presentation, PJSC has:
- reviewed certain publicly available financial statements and other
information of Fabric;
- reviewed certain internal financial statements and other financial
and operating data concerning Fabric prepared by the management of
Fabric (the "Management");
- reviewed certain financial projections of Fabric prepared by
Management;
- discussed the past and current operations, financial condition and
prospects of Fabric with Management;
- reviewed the reported prices and trading activity of Fabric Common
Stock;
- compared the financial performance and condition of Fabric and the
liquidity of Fabric Common Stock with that of certain other
comparable publicly traded companies;
- reviewed publicly available information regarding the financial
terms of certain transactions comparable, in whole or part, to the
Transaction;
- participated in certain discussions among representatives of Fabric
and Merger Corp.;
- reviewed drafts of the Agreement (and we have assumed that the final
form thereof will not vary in any regard that is material to our
analysis); and
- performed such other analyses as we have deemed appropriate.
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PROJECT FABRIC 7 PETER J. SOLOMON COMPANY
Transaction Overview
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(Dollars in millions except per share data)
Tender Price $7.875
Class A Class B
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Stock Price as of 7/28/99 $5.625 $5.625(a)
Premium of Tender Price to Stock Price as of 7/28/99 40.0% 40.0%
Equity Value (b) $28.62
Enterprise Value (b) 24.73
Enterprise Value as a Multiple of:
Net Sales
LTM (c) $90.6 27.3%
FY 1999P (d) 87.8 28.1%
FY 2000P (d) 89.0 27.8%
EBITDA
LTM (c) 6.4 3.9x
FY 1999P (d) 6.4 3.9x
FY 2000P (d) 5.1 4.9x
EBIT
LTM (c) 4.5 5.5x
FY 1999P (d) 4.6 5.4x
FY 2000P (d) 3.3 7.6x
P/E Ratios:
LTM EPS (c) $0.53 14.8x
FY99 EPS estimate (d) 0.61 12.8x
FY00 EPS estimate (d) 0.46 17.1x
CY99 EPS estimate (d) 0.56 14.0x
CY00 EPS estimate (d) 0.45 17.3x
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(a) Class B shares are convertible to Class A shares on a 1:1 basis.
(b) Assuming stock price of $7.875. Assume same number of shares outstanding
as of 5/30/99 and 182,500 options which are currently in the money.
(c) Source: Company's Form 10-Q for the fiscal quarter ended May 30, 1999 and
Company's Form 10-K for the fiscal year ended August 30, 1998.
(d) Source: Company Management.
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PROJECT FABRIC 8 PETER J. SOLOMON COMPANY
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Summary Historical and Projected
Financial Information
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PROJECT FABRIC 9 PETER J. SOLOMON COMPANY
Summary Capitalization and Valuation Data
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(Amounts in Millions, Except Per Share Data and Common Stock Ownership)
Stock Information
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Stock Exchange AMEX
Class A Class B
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Stock Price as of 7/28/99 $5.63 $5.63
Fiscal year end 8/30/98
52-Week Stock Price Class A Class B
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High $8.50 (08/13/98) $8.25 (07/28/98)
Low $4.00 (04/01/99) $4.38 (04/26/99)
5-Year Stock Price
High $10.69 (04/29/98) $10.63 (04/30/98)
Low $3.63 (12/27/95) $3.63 (12/11/95)
LTM Financial Information (5/30/99)(a)
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Net Sales $90.6
EBITDA 6.4
EBIT 4.5
Net Income 2.0
LTM EPS $0.53
FY99 EPS estimate 0.61(b)
FY00 EPS estimate 0.46(b)
CY99 EPS estimate 0.56(b)
CY00 EPS estimate 0.45(b)
Projected 3 Year Growth Rate(c) -5.9%(b)
Summary Capitalization
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As of
5/30/99
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Total Debt $17.2
Shareholders' Equity 47.9
-------
Total Capitalization $65.1
Book Value / Share $13.19
Market Capitalization and Firm Value
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Class A Class B
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Stock Price as of 7/28/99 $5.63 $5.63
Primary Shares Outstanding (f) 2.17 1.44
Total Primary Shares Outstanding (f) 3.61
Option Equivalent Shares (g) 0.02
------
Fully-diluted Shares Outstanding 3.63
Equity Value 20.44
Plus: Total debt (as of 5/30/99) 17.15
Less: Cash (as of 5/30/99) (21.04)
------
Enterprise Value 16.55
Valuation
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Enterprise Value as a
Multiple of LTM:
Net Sales 18.3%
EBITDA 2.6x
EBIT 3.7
P/E Ratio: Class A Class B
------- -------
LTM EPS 10.6x 10.6x
FY99 EPS estimate 9.2 9.2
FY00 EPS estimate 12.2 12.2
CY99 EPS estimate 10.0 10.0
CY00 EPS estimate 12.4 12.4
Common Stock Ownership by Category(d)
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(Amounts in Thousands) Common % of
Shares(e) Total
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Ownership
Alvin Weinstein 1,839.8 47.7%
David Weinstein, etc. 566.2 14.7%
Earl Kramer 94.4 2.4%
Other Insiders 45.0 1.2%
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Total Insiders 2,545.4 65.9%
FMR Corp 292.3 7.6%
Dimensional Fund Advisors Inc 218.0 5.6%
Franklin Resources Inc 146.0 3.8%
Other Institutions 187.9 4.9%
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Total Institutions 844.2 21.9%
Public and Other 470.6 12.2%
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Total Shares Outstanding 3,860.1 100.0%
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(a) Source: Company's Form 10-Q for the fiscal quarter ended May 30, 1999 and
Company's Form 10-K for the fiscal year ended August 30, 1998.
(b) Source: Company's Management. Assumed same number of shares outstanding as
of 5/30/99 and 182,500 options which are currently in the money.
(c) Growth rate for period 8/30/1999 - 8/30/2002.
(d) Source: Company's Proxy Statement dated January 12, 1999 and Bloomberg.
(e) Combined ownership of Class A and Class B common shares.
(f) Source: Company's Form 10-Q for the fiscal quarter ended May 30, 1999.
(g) Represents treasury stock method applied to 182,500 options which are
currently in the money, as provided by Company's Management.
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PROJECT FABRIC 10 PETER J. SOLOMON COMPANY
Historical Fabric Income Statement
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(Dollars in millions)
Fiscal Year Ending August 30,(a) Nine Months Ended(b) LTM FYE 8/30(d)
--------------------------------------------------- -------------------- --------- -----------
1994 1995 1996 1997 1998 5/31/98 5/30/99 5/30/99 1999
-------- -------- -------- -------- -------- --------- --------- --------- -----------
Net Sales $197.8 $180.2 $146.6 $108.8 $101.3 $76.5 $65.8 $90.6 $87.8
Gross Profit 48.9 36.2 37.7 32.5 30.7 23.7 21.1 28.1 27.2
SG&A 36.4 36.1 33.2 25.1 24.3 18.8 17.8 23.3 22.7
EBITDA 13.1 1.4 5.3 8.3 7.9 6.1 4.6 6.4 6.4
EBIT 11.1 (0.6) 3.5 6.6 6.1 4.9 3.3 4.5 4.6
Net Income (c) 5.6 (2.0) 0.9 3.4 3.1 2.6 1.5 2.0 2.2
EPS (c) $1.56 ($0.56) $0.26 $0.90 $0.80 $0.68 $0.41 $0.53 $0.61(e)
Margins (as a % of Revenues)
Gross Profit 24.7% 20.1% 25.8% 29.9% 30.3% 31.0% 32.1% 31.0% 31.0%
SG&A 18.4 20.1 22.6 23.0 24.0 24.5 27.0 25.7 25.8
EBITDA 6.6 0.8 3.6 7.6 7.8 8.0 7.0 7.0 7.3
EBIT 5.6 (0.3) 2.4 6.0 6.0 6.4 5.1 4.9 5.2
Net Income 2.8 (1.1) 0.6 3.1 3.0 3.4 2.3 2.2 2.5
Growth Rates (year-over-year)
Sales 0.4% (8.9)% (18.6)% (25.8)% (6.9)% -- (13.9)% -- (13.3)%
Gross Profit 11.8 (25.9) 4.3 (13.9) (5.7) -- (10.8) -- (11.2)
EBITDA 11.0 (88.8) 275.0 55.2 (4.3) -- (25.1) -- (19.6)
EBIT 10.6 NM NM 86.1 (7.6) -- (32.2) -- (24.6)
Net Income 20.9 NM NM 258.1 (9.1) -- (41.1) -- (26.9)
EPS 20.3 NM NM 251.0 (10.8) -- (39.4) -- (23.1)
(a) Source: Company Form 10-K for the fiscal years ended August 30, 1994
through 1998.
(b) Source: Company Form 10-Q for the fiscal quarters ended May 31, 1998 and
May 30, 1999.
(c) Adjusted to exclude $1.4 million for gain on sale of equipment in 1994,
$1.1 million for plant shut-down costs in 1995, $0.5 million for provision
for impairment in value of property held for sale in 1998 and $0.09 for
loss on sale of plant in 9 Months ended 5/30/99.
(d) Projected by Company Management.
(e) Shares outstanding as of 5/30/1999.
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PROJECT FABRIC 11 PETER J. SOLOMON COMPANY
Historical Fabric Income Statement by Division
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(Dollars in millions)
Fiscal Year Ending August 30, Nine Months Ended LTM FYE 8/30
-------------------------------------------------- ----------------- ------- --------
1994 1995 1996 1997 1998 5/31/98 5/30/99 5/30/99 1999P
------- ------- ------- ------- ------- ------- ------- ------- --------
Net Sales
Knitted Fabrics $56.3 $55.1 $58.4 $50.2 $53.4 $40.9 $37.4 $50.0 $49.3
Concord House 56.7 58.0 48.7 56.8 47.9 35.6 28.4 40.7 38.5
Phased-out Operations 84.8 67.1 39.4 1.8 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- ------- ------- --------
Total Sales 197.8 180.1 146.6 108.8 101.3 76.5 65.8 90.6 87.8
Gross Profit
Knitted Fabrics $7.0 $4.8 $9.9 $9.1 $12.1 $9.1 $10.7 $13.6 $12.8
Concord House 25.7 25.1 20.1 22.6 17.5 13.7 9.6 13.4 13.8
Phased-out Operations 15.0 5.0 7.0 (0.1) 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- ------- ------- --------
Total Gross Profit (a) 48.9 34.9 36.9 31.6 29.6 22.9 20.3 27.0 26.6
Operating Expenses
Knitted Fabrics $1.6 $1.6 $1.5 $1.5 $1.5 $1.1 $1.2 $1.5 $1.5
Concord House 9.5 10.9 11.4 11.9 12.0 9.2 8.2 11.0 11.2
Phased-out Operations 8.1 14.3 8.5 1.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- ------- ------- --------
Total Expenses 19.2 26.9 21.5 14.4 13.4 10.3 9.4 12.5 12.7
Divisional Performance Margin
Knitted Fabrics $5.4 $3.1 $8.3 $7.6 $10.6 $8.0 $9.5 $12.1 $11.3
Concord House 16.2 14.2 8.6 10.7 5.5 4.6 1.4 2.3 2.6
Phased-out Operations 6.9 (5.8) (1.5) (0.2) 0.0 0.0 0.0 0.0 0.0
------- ---------------------------------------- ------- ------- ------- --------
Total DPM 28.4 11.5 15.5 18.1 16.1 12.6 10.9 14.4 13.9
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Sources: Company Management.
(a) Difference between Total Gross Profit as reported on divisional basis and
Total Gross Profit as reported on the Financial Statements due to
reclassification of SG&A expenses for the Milledgeville Facility.
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PROJECT FABRIC 12 PETER J. SOLOMON COMPANY
Historical Fabric Income Statement Margins by Division
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Fiscal Year Ending August 30, Nine Months Ended LTM FYE 8/30
------------------------------------------------- ----------------- ------- --------
1994 1995 1996 1997 1998 5/31/98 5/30/99 5/30/99 1999P
------ ------ ------ ------ ------ ------- ------- ------- --------
Margins (as a % of Revenues)
Gross Profit
Knitted Fabrics 12.4% 8.6% 16.9% 18.1% 22.6% 22.3% 28.5% 27.3% 26.0%
Concord House 45.3 43.3 41.2 39.9 36.5 38.6 33.9 32.8 35.8
Phased-out Operations 17.6 7.5 17.7 (6.2) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ --------
Total Gross Profit 24.7 19.4 25.2 29.1 29.2 29.9 30.8 29.8 30.3
Operating Expenses
Knitted Fabrics 2.8% 3.0% 2.6% 2.9% 2.7% 2.7% 3.1% 3.0% 3.1%
Concord House 16.7 18.9 23.5 21.1 25.0 25.8 29.0 27.2 29.0
Phased-out Operations 9.5 21.3 21.5 55.7 -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ --------
Total Expenses 9.7 14.9 14.6 13.3 13.3 13.4 14.3 13.8 14.5
Divisional Performance Margin
Knitted Fabrics 9.5% 5.7% 14.3% 15.2% 19.9% 19.6% 25.4% 24.2% 22.9%
Concord House 28.6 24.5 17.7 18.8 11.5 12.9 4.9 5.7 6.8
Phased-out Operations 8.1 (8.7) (3.8) (11.3) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ --------
Total DPM 14.4 6.4 10.5 16.6 15.9 16.5 16.6 15.9 15.8
- ----------
Sources: Company Management.
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PROJECT FABRIC 13 PETER J. SOLOMON COMPANY
Historical Fabric Income Statement Growth by Division
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Fiscal Year Ending August 30, Nine Months Ended LTM FYE 8/30
-------------------------------------------------- ----------------- ------- --------
1994 1995 1996 1997 1998 5/31/98 5/30/99 5/30/99 1999P
------ ------ ------ ------ ------ ------- ------- ------- --------
Growth Rates (year-over-year)
Net Sales
Knitted Fabrics 5.5% (2.1)% 6.0% (14.0)% 6.4% --% (8.5)% --% (7.7)%
Concord House (6.1) 2.2 (15.9) 16.5 (15.7) -- (20.2) -- (19.5)
Phased-out Operations 1.8 (20.9) (41.2) (95.4) (100.0) -- 0.0 -- 0.0
------ ------ ------ ------ ------ ------ ------ ------ --------
Total Net Sales 0.4 (8.9) (18.6) (25.8) (6.9) -- (13.9) -- (13.3)
Gross Profit
Knitted Fabrics (8.5)% (31.5)% 107.2% (7.7)% 32.5% --% 16.9% --% 6.4%
Concord House 10.6 (2.2) (20.1) 12.8 (22.8) -- (30.0) -- (21.1)
Phased-out Operations 43.2 (66.5) 39.1 (101.6) (100.0) -- 0.0 -- 0.0
------ ------ ------ ------ ------ ------ ------ ------ --------
Total Gross Profit 18.5 (28.6) 5.8 (14.3) (6.6) -- (11.3) -- (9.9)
Operating Expenses
Knitted Fabrics 15.3% 2.7% (6.0)% (4.7)% (1.6)% --% 5.1% --% 6.8%
Concord House 8.0 15.5 4.5 4.6 0.3 -- (10.3) -- (6.8)
Phased-out Operations 35.0 76.7 (40.7) (88.0) (100.0) -- 0.0 -- 0.0
------ ------ ------ ------ ------ ------ ------ ------ --------
Total Expenses 18.6 40.3 (20.2) (32.7) (7.0) -- (8.6) -- (5.4)
Divisional Performance Margin
Knitted Fabrics (13.8)% (41.7)% 166.9% (8.3)% 39.1% --% 18.5% --% 6.3%
Concord House 12.2 (12.6) (39.0) 23.7 (48.6) -- (69.6) -- (52.3)
Phased-out Operations 38.7 (185.1) (74.1) (86.3) (100.0) -- 0.0 -- 0.0
------ ------ ------ ------ ------ ------ ------ ------ --------
Total DPM 11.0 (59.7) 34.9 17.3 (11.1) -- (13.4) -- (13.7)
- ----------
Sources: Company Management.
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PROJECT FABRIC 14 PETER J. SOLOMON COMPANY
Historical Fabric Balance Sheet
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(Dollars in Millions)
At Fiscal Year End(a)
-------------------------------- As of
1996 1997 1998 5/30/99(b)
-------- -------- -------- ----------
Current Assets
Cash, Cash Equivalents and Investments $9.7 $20.9 $23.3 $21.0
Accounts Receivable and Other Current Assets 27.1 21.3 18.0 18.1
Inventories 17.3 12.9 16.0 15.2
Deferred Income Taxes and Other Expenses 4.2 3.4 3.2 3.2
-------- -------- -------- ----------
Total Current Assets $58.4 $58.6 $60.5 $57.6
Long-Term Assets
Property, Plant and Equipment, net 12.3 11.3 12.2 11.0
Other Assets 2.5 3.2 3.1 3.3
-------- -------- -------- ----------
Total Long-Term Assets 14.8 14.5 15.4 14.2
Total Assets $73.2 $73.0 $75.9 $71.9
======== ======== ======== ==========
Current Liabilities
Accounts Payable 6.9 4.3 4.6 3.7
Short Term Debt and Current Portion of Debt 0.0 0.0 2.9 2.9
Accrued Liabilities 4.4 3.5 3.3 1.9
Income Taxes Payable 0.0 0.0 0.1 0.4
-------- -------- -------- ----------
Total Current Liabilities $11.3 $7.8 $10.8 $8.9
Long-Term Liabilities
Notes Payable 20.0 20.0 17.2 14.3
Other Long-Term Liabilities 1.0 1.0 0.8 0.7
-------- -------- -------- ----------
Total Long-Term Liabilities $21.0 $21.0 $18.0 $15.0
Shareholders' Equity 40.8 44.2 47.1 47.9
-------- -------- -------- ----------
Total Liabilities and Shareholders Equity $73.2 $73.0 $75.9 $71.9
======== ======== ======== ==========
Select Balance Sheet Ratios
Accounts Receivable Days 67.5 71.5 64.9 73.0
Inventory Turnover 6.3x 5.9x 4.4x 4.1x
Accounts Payable Days 23.3 20.5 23.8 21.4
Net Working Capital as a % of Revenues 22.6% 24.3% 25.8% 30.6%
Total Debt / Total Capitalization 32.9% 31.1% 29.8% 26.3%
Net Debt / Total Capitalization(c) 16.9% 0.0% 0.0% 0.0%
- ----------
(a) Source: Company Form 10-K for the fiscal years ended August 30, 1996, 1997
and 1998.
(b) Source: Company Form 10-Q for the fiscal quarter ended May 30, 1999.
(c) Net Debt presented as $0.0 when total debt is less than cash and cash
equivalents.
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PROJECT FABRIC 15 PETER J. SOLOMON COMPANY
Historical Fabric Statement of Cash Flow
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(Dollars in Millions) 9 Months
Fiscal Years (a) Ended
-------------------------------- ----------
1996 1997 1998 5/30/99(b)
-------- -------- -------- ----------
Operating Activities
Net Income $0.9 $3.4 $3.1(c) $1.5
Depreciation and Amortization 1.8 1.7 1.9 1.3
Deferred Taxes 0.4 0.4 (0.4) 0.2
Other Long-Term Assets and Liabilities 1.1 1.0 0.3 0.4
Change in Working Capital Accounts 5.8 5.4 0.6 (1.8)
-------- -------- -------- ----------
Net cash provided by operating activities 10.1 11.8 5.4 1.6
Investing Activities (e)
Capital Expenditures (1.7) (0.9) (3.4)(d) (1.3)
Proceeds from sale of plant and equipment 0.9 0.3 0.1 1.0
-------- -------- -------- ----------
Net cash provided from investing activities (0.8) (0.7) (3.3) (0.3)
Net Cash Before Financing Activities 9.3 11.1 2.1 1.2
Financing Activities
Decrease in Notes Payable (2.0) 0.0 0.0 (2.9)
Proceeds from the issuance of Common Stock 0.1 0.0 0.1 0.2
Repurchases of Common Stock 0.0 0.0 0.0 (0.8)
-------- -------- -------- ----------
Net cash used in financing activities (1.9) 0.0 0.1 (3.5)
Net increase/(decrease) in cash & cash equivalents 7.4 11.2 2.2 (2.2)
Cash & cash equivalents at beginning of period 2.4 9.7 20.9 23.1
-------- -------- -------- ----------
Cash & cash equivalents at end of period $9.7 $20.9 $23.1(f) $20.8(f)
(a) Source: Company Form 10-K for the fiscal years ended August 30, 1996, 1997
and 1998.
(b) Source: Company Form 10-Q for the fiscal quarter ended May 30, 1999.
(c) Adjusted to exclude $0.5 million for provision for impairment in value of
property held for sale in 1998.
(d) Larger than ordinary capex is due to $1.6 million capacity expansion of a
plant and replacement of old equipment.
(e) Excludes purchase of held-to-maturity securities and proceeds from sales
of held-to-maturity securities.
(f) Differs from cash and cash equivalents on Balance Sheet due to tax effect
of $0.5 million adjustment for provision for asset impairment.
- --------------------------------------------------------------------------------
PROJECT FABRIC 16 PETER J. SOLOMON COMPANY
Projected Fabric Income Statement
================================================================================
(Dollars in millions)
Projected Fiscal Year Ending August 30,(b)
FYE 8/30 -----------------------------------------------------------
1998(a) 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- --------
Revenues $101.3 $87.8 $89.0 $90.6 $92.7 $94.8
Gross Profit 30.7 27.2 26.2 26.4 27.2 28.1
SG&A 24.3 22.7 23.0 23.4 24.0 24.7
EBITDA 7.9 6.4 5.1 4.7 5.0 5.2
EBIT 6.1 4.6 3.3 2.9 3.2 3.4
Net Income 3.1 2.2 1.7(c) 1.6 1.9 2.1
Earnings per Share (d) $0.80 $0.61 $0.46 $0.44 $0.51 $0.59
======== ======== ======== ======== ======== ========
Margins (as a % of Revenues)
Gross Profit 30.3% 31.0% 29.5% 29.1% 29.4% 29.6%
SG&A 24.0 25.8 25.8 25.9 25.9 26.0
EBITDA 7.8 7.3 5.7 5.2 5.4 5.5
EBIT 6.0 5.2 3.7 3.3 3.4 3.6
Net Income 3.0 2.5 1.9 1.8 2.0 2.2
Growth Rates (year-over-year)
Revenues (6.9)% (13.3)% 1.3% 1.8% 2.3% 2.3%
Gross Profit (5.7) (11.2) (3.7) 0.6 3.2 3.2
EBITDA (4.3) (19.6) (20.7) (6.1) 5.0 5.0
EBIT (7.6) (24.6) (28.8) (9.4) 8.0 7.9
Net Income (9.1) (26.9) (24.9) (4.0) 15.7 14.4
Earnings per Share (10.8) (23.1) (24.9) (4.0) 15.7 14.4
(a) Source: Company Form 10-K for the fiscal year ended August 30, 1998.
(b) Provided by Company Management.
(c) Adjusted to exclude gain on sale of plant of $1.4 million.
(d) Assume shares outstanding as of 5/30/1999 and 182,500 options which are in
the money.
- --------------------------------------------------------------------------------
PROJECT FABRIC 17 PETER J. SOLOMON COMPANY
Projected Fabric Income Statement by Division
================================================================================
(Dollars in millions)
FYE 8/30 Fiscal Year Ending August 30,(a)
-------- -----------------------------------------------------------
1998(a) 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- --------
Net Sales
Knitted Fabrics $53.4 $49.3 $49.3 $49.3 $49.3 $49.3
Concord House 47.9 38.5 39.7 41.2 43.3 45.5
-------- -------- -------- -------- -------- --------
Total Sales 101.3 87.8 89.0 90.6 92.7 94.8
Gross Profit
Knitted Fabrics $12.1 $12.8 $11.3 $10.8 $10.8 $10.8
Concord House 17.5 $13.8 $14.3 $14.9 $15.8 $16.6
-------- -------- -------- -------- -------- --------
Total Gross Profit (b) 29.6 26.6 25.6 25.8 26.6 27.5
Margins (as a % of Revenues)
Gross Profit
Knitted Fabrics 22.6% 26.0% 23.0% 22.0% 22.0% 22.0%
Concord House 36.5 35.8 36.0 36.2 36.4 36.6
-------- -------- -------- -------- -------- --------
Total Gross Profit 29.2 30.3 28.8 28.4 28.7 29.0
Growth Rates (year-over-year)
Net Sales
Knitted Fabrics 6.4% (7.7)% 0.0% 0.0% 0.0% 0.0%
Concord House (15.7) (19.5) 3.0 4.0 5.0 5.0
-------- -------- -------- -------- -------- --------
Total Net Sales (6.9) (13.3) 1.3 1.8 2.3 2.3
Gross Profit
Knitted Fabrics 32.5 6.4% (11.7)% (4.4)% 0.0% 0.0%
Concord House (22.8) (21.1) 3.6 4.6 5.6 5.6
-------- -------- -------- -------- -------- --------
Total Gross Profit (6.6) (9.9) (3.8) 0.6 3.2 3.3
- ----------
(a) Source: Company Management.
(b) Difference between Total Gross Profit as reported on divisional basis and
Total Gross Profit as reported on consolidated basis due to
reclassification of SG&A expenses for the Milledgeville Facility.
- --------------------------------------------------------------------------------
PROJECT FABRIC 18 PETER J. SOLOMON COMPANY
- --------------------------------------------------------------------------------
Summary Historical Stock Performance
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROJECT FABRIC 19 PETER J. SOLOMON COMPANY
Historical Stock Price Performance - Fabric Class A
================================================================================
Weekly Price/Volume Analysis over Last 3 Years
----------------------------------------------
July 28, 1996 to July 28, 1999
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
PROJECT FABRIC 20 PETER J. SOLOMON COMPANY
Historical Stock Price Performance - Fabric Class B
================================================================================
Weekly Price/Volume Analysis over Last 3 Years
----------------------------------------------
July 28, 1996 to July 28, 1999
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
PROJECT FABRIC 21 PETER J. SOLOMON COMPANY
Historical Stock Price Performance - Fabric Class A and Class B
================================================================================
Weekly Price/Volume Analysis over Last 3 Years
----------------------------------------------
July 28, 1996 to July 28, 1999
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
PROJECT FABRIC 22 PETER J. SOLOMON COMPANY
Historical Stock Price Performance - Fabric Class A
================================================================================
Latest Twelve Months Daily Price/Volume Analysis
------------------------------------------------
July 28, 1998 to July 28, 1999
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
PROJECT FABRIC 23 PETER J. SOLOMON COMPANY
Historical Stock Price Performance - Fabric Class B
================================================================================
Latest Twelve Months Daily Price/Volume Analysis
------------------------------------------------
July 28, 1998 to July 28, 1999
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
PROJECT FABRIC 24 PETER J. SOLOMON COMPANY
Historical Stock Price Performance - Fabric Class A and Class B
================================================================================
Latest Twelve Months Daily Price/Volume Analysis
------------------------------------------------
July 28, 1998 to July 28, 1999
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
PROJECT FABRIC 25 PETER J. SOLOMON COMPANY
Summary of Historical Closing Stock Prices - Fabric Class A
================================================================================
- --------------------------------------------------------------------------------
Fabric Closing Stock Prices
Daily for the ----------------------------------------
Following Periods: Time Period High Low Average Median
- ------------------ ------------ ------ ------ ------- ------
07/21/99 - 7/28/99 Last Week $5.875 $5.625 $5.781 $5.781
07/14/99 - 7/28/99 Last 14 Days 5.875 5.625 5.761 5.750
06/28/99 - 7/28/99 Last 30 Days 5.875 5.375 5.704 5.750
06/11/99 - 7/28/99 Last 45 Days 5.875 4.563 5.438 5.625
05/28/99 - 7/28/99 Last 60 Days 5.875 4.313 5.224 5.438
04/28/99 - 7/28/99 Last 90 Days 5.875 4.313 5.043 4.813
01/29/99 - 7/28/99 Last 180 Days 6.250 4.125 5.293 5.375
07/28/99 - 7/28/99 Last 1 Year 5.625 5.625 5.625 5.625
07/28/99 - 7/28/99 Last 2 Years 5.625 5.625 5.625 5.625
07/28/99 - 7/28/99 Last 3 Years 5.625 5.625 5.625 5.625
- --------------------------------------------------------------------------------
Source: Bloomberg.
- --------------------------------------------------------------------------------
PROJECT FABRIC 26 PETER J. SOLOMON COMPANY
Summary of Historical Closing Stock Prices - Fabric Class B
================================================================================
- --------------------------------------------------------------------------------
Fabric Closing Stock Prices
Daily for the ----------------------------------------
Following Periods: Time Period High Low Average Median
- ------------------ ------------ ------ ------ ------- ------
07/21/99 - 7/28/99 Last Week $5.750 $4.375 $5.021 $5.000
07/14/99 - 7/28/99 Last 14 Days 5.750 4.375 4.727 4.375
06/28/99 - 7/28/99 Last 30 Days 5.750 4.375 4.543 4.375
06/11/99 - 7/28/99 Last 45 Days 5.750 4.375 4.489 4.375
05/28/99 - 7/28/99 Last 60 Days 5.750 4.375 4.527 4.375
04/28/99 - 7/28/99 Last 90 Days 5.750 4.375 4.486 4.375
01/29/99 - 7/28/99 Last 180 Days 5.875 4.375 5.036 4.688
07/28/99 - 7/28/99 Last 1 Year 5.625 5.625 5.625 5.625
07/28/99 - 7/28/99 Last 2 Years 5.625 5.625 5.625 5.625
07/28/99 - 7/28/99 Last 3 Years 5.625 5.625 5.625 5.625
- --------------------------------------------------------------------------------
Source: Bloomberg.
- --------------------------------------------------------------------------------
PROJECT FABRIC 27 PETER J. SOLOMON COMPANY
- --------------------------------------------------------------------------------
Summary Management and
Ownership Profile
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROJECT FABRIC 28 PETER J. SOLOMON COMPANY
Summary Fabric Ownership Profile
================================================================================
(Amounts in Thousands)
Common Stock
-----------------------------------------------------------
Total
Class A % of Class B % of Common % of Exercisable % of
Stock Total Stock Total Shares Total Options(d) Total Total
----------------------------------------------------------- ------------------------------
Inside Owners (a)
Alvin Weinstein 837.31 38.59% 902.46 62.48% 1,739.77 48.14% 100.00 1,839.77 47.67%
David Weinstein, etc. 254.12 11.71 212.07 14.68 466.18 12.90 100.00 566.18 14.67
Earl Kramer 94.20 4.34 0.20 0.01 94.40 2.61 0.00 94.40 2.45
----------------------------------------------------------- ------------------------------
Investor Group 1,185.63 54.64 1,114.73 77.17 2,300.35 63.65 200.00 2,500.35 64.79
Fred Heller 0.00 -- 0.00 -- 0.00 0.00 15.00 15.00 0.39
Richard Solar 0.00 -- 0.00 -- 0.00 0.00 17.50 17.50 0.45
George Gleitman 0.00 -- 0.00 -- 0.00 0.00 12.5 12.50 0.32
Other Executive Officers and Directors 0.00 -- 0.00 -- 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------- ------------------------------
Total Insiders 1,185.63 54.64 1,114.73 77.17 2,300.35 63.65 245.00 2,545.35 65.96
----------------------------------------------------------- ------------------------------
Institutions (b)
FMR Corp 169.60 7.82 122.70 8.49 292.30 8.09 -- 292.30 7.57
Dimensional Fund Advisors Inc 132.70 6.12 85.30 5.91 218.00 6.03 -- 218.00 5.65
Franklin Resources Inc 146.00 6.73 0.00 -- 146.00 4.04 -- 146.00 3.78
Resenberg Institutional Equity 78.10 3.60 0.00 -- 78.10 2.16 -- 78.10 2.02
Brandywine Asset Management 29.30 1.35 0.00 -- 29.30 0.81 -- 29.30 0.76
Dreyfus Corp 28.90 1.33 0.00 -- 28.90 0.80 -- 28.90 0.75
BZW Barclays Bank PLC 27.21 1.25 0.00 -- 27.21 0.75 -- 27.21 0.71
Mellon Bank 13.90 0.64 0.00 -- 13.90 0.38 -- 13.90 0.36
Other Institutions 9.17 0.42 1.30 0.09 10.47 0.29 -- 10.47 0.27
----------------------------------------------------------- ------------------------------
Total Institutions 634.88 29.26 209.30 14.49 844.18 23.36 -- 844.18 21.87
Public and Other 349.26 16.10 120.43 8.34 469.69 13.00 -- 469.69 12.17
----------------------------------------------------------- ------------------------------
Total Shares Outstanding (c) 2,169.76 100.00% 1,444.45 100.00% 3,614.22 100.00% 245.00 3,859.22 100.00%
=========================================================== ==============================
- ----------
(a) Source: Company's Proxy Statement dated January 12, 1999.
(b) Source: Bloomberg and Company's Proxy Statement dated January 12, 1999.
(c) Source: Company's Form 10-Q for the fiscal quarter ended May 30, 1999.
(d) Includes only exercisable options held by directors and executive
officers, as provided by Management.
- --------------------------------------------------------------------------------
PROJECT FABRIC 29 PETER J. SOLOMON COMPANY
Summary Fabric Management Profile
================================================================================
Executive Officers
Years at
Name Age Company Current Position
- ------------------- ----- -------- ----------------------------------------
Earl Kramer 65 27 President and Director
Alvin Weinstein 73 30 Chairman of the Board and Director
Martin Wolfson 62 26 Senior Vice President - Treasurer and
Director
David Weinstein 36 8 President of the Company's Concord House
Division
Mark Neugeboren 48 27 Vice President
Joan Weinstein 66 26 Secretary
Jack Tannenbaum N/A N/A Assistant Treasurer
Donald Birgeles N/A N/A Assistant Secretary
Board of Directors
Name Age Current Position
- ------------------- ----- ----------------------------------------
Alvin Weinstein 73 Chairman of the Board and Director
David Weinstein 36 President of the Company's Concord House
Division
Earl Kramer 65 President and Director
Fred Heller 74 Chairman Emeritus of Genlyte Group, Inc.
Martin Wolfson 62 Senior Vice President - Treasurer and
Director
Richard Solar 59 Senior Vice president of Gerber
Childrenswear, Inc.
George Gleitman 70 President Emeritus of the Company's
Concord House Division
- ----------
Source: Company's Form 10-K for the fiscal year ended August 30, 1998, Proxy
Statement dated January 12, 1999 and Bloomberg.
- --------------------------------------------------------------------------------
PROJECT FABRIC 30 PETER J. SOLOMON COMPANY
- --------------------------------------------------------------------------------
Valuation Analysis
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROJECT FABRIC 31 PETER J. SOLOMON COMPANY
Summary Valuation Analysis of Fabric
================================================================================
Price per Fabric Share
--------------------------
Low High
--------------------------
Comparable Company Analysis(a) $7.00 $9.75
Comparable Transaction Analysis(b) $7.00 $9.75
Discounted Cash Flow Analysis $6.00 $7.00
- ----------
(a) Based on selected public textile companies.
(b) Based on "Going Private" Transactions of Companies with Enterprise Value
Between $10 and $50 million.
- --------------------------------------------------------------------------------
PROJECT FABRIC 32 PETER J. SOLOMON COMPANY
Summary Fabric Premium Analysis
================================================================================
(Dollars in millions) Class A and B
Offer
Price
-------------
Fabric Price Per Share $7.88
-------------
Premium (Discount) to Stock Prices
Class A
Current Stock Price (7/28/99) $5.625 40.0%
52 week High (8/13/98) $8.500 -7.4%
52 week Low (4/1/99) $4.000 96.9%
Class B
Current Stock Price (7/28/99) $5.625 40.0%
52 week High (7/28/98) $8.250 -4.5%
52 week Low (4/26/99) $4.380 79.8%
Total Equity Value(a) $29.0
Total Enterprise Value(a)(b) 25.1
Enterprise Value as a Multiple:
Revenues LTM $90.6 27.7%
FY 1999P 87.8 28.6%
FY 2000P 89.0 28.2%
EBITDA LTM $6.4 3.9x
FY 1999P 6.4 3.9x
FY 2000P 5.1 5.0x
EBIT LTM $4.5 5.6x
FY 1999P 4.6 5.5x
FY 2000P 3.3 7.7x
Equity Value as a Multiple:
EPS LTM $0.53 14.8x
FY 1999P(c) $0.61 12.8x
FY 2000P(c) $0.46 17.1x
CY 1999P(c) $0.56 14.0x
CY 2000P(c) $0.45 17.3x
- ----------
(a) Represents treasury stock method applied to 325,000 options outstanding.
(b) Assumes net debt per Company Form 10-Q for the fiscal quarter ended May
30, 1999.
(c) Company Management.
- --------------------------------------------------------------------------------
PROJECT FABRIC 33 PETER J. SOLOMON COMPANY
Summary Analysis of Selected Public Textile Companies
================================================================================
Selection Criteria
o All publicly traded companies in the textile industry in the U.S. with
positive EBITDA and enterprise value less than $50 million, provided by
Bloomberg.
Companies Description
o Burke Mills Inc. twists, textures, winds, dyes, processes and sells
filament, novelty and spun yarns. The company's principal market is the
upholstery, knitting and weaving industry. Burke Mills markets its
products throughout the US and Canada.
o Carlyle Industries Inc. distributes a line of home sewing and craft
products, principally buttons. The Company packages and distributes a
variety of buttons and embellishments to mass merchandisers, specialty
chains and independent retailers and wholesalers throughout the US.
Carlyle also markets complementary product lines, including appliques,
craft kits and fashion accessories.
o Decorator Industries Inc. designs, manufactures and sells window
coverings, bedspreads, furniture and complementary products. The company's
products are sold to original equipment manufacturers of recreational
vehicles and manufactured housing and to the hospitality industry, either
through distributors or directly to the customers.
o Lakeland Industries Inc. manufactures and distributes disposable and
reusable protective work clothing. The company's products are used in the
chemical, petrochemical, health care, automotive, glass, cement,
asbestos/lead abatement, waste management and other industries. Lakeland
markets its products around the world.
- --------------------------------------------------------------------------------
PROJECT FABRIC 34 PETER J. SOLOMON COMPANY
Summary Analysis of Selected Public Textile Companies
================================================================================
(Dollars in millions, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------------------------
MARKET DATA
Equity Value
Price/Earnings Multiples as a Enterprise Value as a
Closing --------------------------------------- Multiple of Multiple of LTM:
Price on Equity CY 1999 CY 2000 Tangible Enterprise ------------------------
Selected Companies 7/28/99 Value LTM EPS EPS(a) EPS(a) Book Value Value(b) Net Sales EBIT EBITDA
- -----------------------------------------------------------------------------------------------------------------------------------
CONCORD FABRICS, INC. $5.625(c) $20.5 10.6x 10.0x 12.4x 0.4x $16.6 18.3% 3.7x 2.6x
Burke Mills Inc 2.000 5.5 7.6 NA NA 0.4 8.3 19.9 6.9 2.8
Carlyle Industries Inc 0.906 6.7 3.6 NA NA NM 16.4 64.7 3.2 2.9
Decorator Industries Inc 7.125 24.5 9.4 NA NA 2.1(c) 23.2 44.1 5.3 4.6
Lakeland Industries Inc 6.063 16.1 9.1 NA NA 1.2 24.7 45.7 7.2 6.2
Median 8.4x N/A N/A 0.8x 44.9% 6.1x 3.7x
Mean 7.4 N/A N/A 0.8 43.6 5.6 4.1
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING DATA Net Income
Net Sales Gross Margin EBITDA EBIT to Common
----------------- ---------------- ---------------- --------------- -------------
LTM CAGR LTM CAGR LTM CAGR LTM CAGR LTM CAGR
- -----------------------------------------------------------------------------------------------------------------------------------
CONCORD FABRICS, INC. $90.6 -16.9% $28.1 -9.9% $6.4 21.8% $4.5 31.1% $2.0 80.4%
Burke Mills Inc 41.5 1.9 4.4 7.5 3.0 0.0 1.2 0.4 0.7 30.7
Carlyle Industries Inc 25.4 3.6 11.6 -2.5 5.7 NM 5.1 8.2 1.9 20.5
Decorator Industries Inc 52.5 16.0 11.3 6.7 5.0 3.7 4.4 0.0 2.9 0.0
Lakeland Industries Inc 54.1 -13.5(c) 9.8 19.7 4.0 NM 3.4 38.5 1.8 39.9
Median 3.6% 7.1% 1.8% 4.3% 25.6%
Mean 7.1 7.9 1.8 11.8 22.8
NOTE: CAGRs (Compound Annual Growth Rates) are for the last three completed
fiscal years for each company. All operating data has been adjusted to exclude
unusual and extraordinary items.
(a) Provided by Company Management. Projected EPS estimates not provided by
First Call as of 7/28/99.
(b) Enterprise value represents equity value plus book values of total debt,
preferred stock and minority interest less cash.
(c) Weighted average closing price for Class A and Class B shares outstanding.
- --------------------------------------------------------------------------------
PROJECT FABRIC 35 PETER J. SOLOMON COMPANY
Summary Analysis of Selected Public Textile Companies (Cont'd)
================================================================================
(Dollars in millions, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS Net Working Return on
Capital/ Gross Margin/ Common
Sales Sales EBITDA/Sales EBIT/Sales Net Income/Sales Equity Net Debt/
----------- ------------- --------------- ---------------- ----------------- --------- Total Cap
LTM LTM LTM Average LTM Average LTM Average LTM LTM
- -----------------------------------------------------------------------------------------------------------------------------------
CONCORD FABRICS, INC 33.7% 31.0% 7.0% 6.4% 4.9% 4.8% 2.2% 2.3% 4.2% 0.0%
Burke Mills Inc 15.0 10.5 7.2 7.2 2.9 3.3 1.7 1.6 5.0 14.3
Carlyle Industries Inc 36.1 45.9 22.7(c) 26.1 20.2(c) 23.7 7.4 8.8 -11.1 NM
Decorator Industries Inc 9.1 21.6 9.5 11.2 8.4 10.1 5.5 7.0 19.6 -8.2
Lakeland Industries Inc 39.2 18.1 7.3 7.8 6.3 6.8 3.3 3.6 12.5 35.4
Median 19.8% 7.3% 9.5% 6.3% 8.5% 4.4% 5.3% 8.8% 14.3%
Mean 24.0 8.0 13.1 5.9 11.0 4.5 5.2 6.5 13.8
- ----------
NOTE: CAGRs (Compound Annual Growth Rates) are for the last three completed
fiscal years for each company. All operating data has been adjusted to exclude
unusual and extraordinary items. (c) Excluded as outliers.
- --------------------------------------------------------------------------------
PROJECT FABRIC 36 PETER J. SOLOMON COMPANY
Summary Valuation Analysis of Fabric
================================================================================
Based on Selected Public Textile Companies.
(Dollars in millions)
Implied Fabric Implied Fabric Implied Fabric
Precedent Enterprise Equity Per Share
Fabric Value Range(b) Value Range Value Range(c) Value Range(d)
LTM ---------------- ---------------- ---------------- ----------------------------
5/30/1999(a) Low High Low High Low High Low Mean High
------------ ---------------- ---------------- ---------------- ----------------------------
Net Sales $90.6 40.0% 50.0% $36.3 $45.3 $40.1 $49.2 $11.05 $12.29 $13.54
EBITDA 6.4 3.0x 5.0x 19.2 31.9 23.0 35.8 6.34 8.10 9.86
EBIT 4.5 5.0x 7.0x 22.4 31.4 26.3 35.3 7.23 8.47 9.70
LTM Net Income 2.0 7.5x 9.5x 11.0 15.0 14.9 18.9 4.11 4.66 5.21
(a) Source: Company's Form 10-Q for the fiscal quarter ended May 30, 1999 and
Company's Form 10-K for the fiscal year ended August 30, 1998.
(b) Based on analysis of selected comparable publicly-traded small cap textile
companies.
(c) Equity represents enterprise value minus debt plus cash as of fiscal
quarter ended May 30, 1999.
(d) Source: Company's Management. Assumed same number of shares outstanding as
of 5/30/99 and 182,500 options which are currently in the money.
- --------------------------------------------------------------------------------
PROJECT FABRIC 37 PETER J. SOLOMON COMPANY
Summary Analysis of Selected Precedent Transactions
================================================================================
Based on "Going Private" Transactions of Companies with Enterprise Value Between
$10 and $50 million from 1997 to Present.
($ in millions) Enterprise Value as a Equity Value as a
Enterprise Value as a Multiple of: Multiple of:
------------------------------------ ------------------
Date Acquiror Name Enterprise LTM LTM LTM Equity LTM Net
Annc'd Target Name Value (a) Sales EBITDA EBIT Value Income
- ------ ---------------------------------- ---------- ------------------------------------ ------ ------------------
Jun-99 Investor Group $12.4 20.3% 3.6x 3.9x $14.9 8.1x
Winston Resources, Inc.
Dec-98 SRC Holdings 42.6 43.8 5.1 10.4 28.8 11.5
Back Bay Restaurants Group Inc
Sep-98 PH II Inc 14.3 73.1 4.0 4.9 8.7 4.8
THT Inc
Aug-98 Malt Acquiring Inc 14.4 51.8 3.4 4.4 15.8 7.5
Lion Brewery Inc
May-97 Oxford Automotive Inc 19.1 20.5 7.1(b) 15.9(b) 19.5 27.9(b)
Howell Industries Inc
Mar-97 Hamilton Acquisition LLC 30.9 23.7 4.7 6.1 36.2 11.0
Strober Organization Inc
Jan-97 HIG Investment Group 27.4 60.1 NA 7.0 21.5 8.3
Thermal Industries Inc
-----------------------------------------------------------------------------
Mean 41.9% 4.2x 6.1x 8.5x
Median 43.8% 4.0x 5.5x 8.2x
-----------------------------------------------------------------------------
Source: Securities Data Co and other public sources.
(a) Enterprise value equals equity value plus debt less cash.
(b) Excluded as outlier.
- --------------------------------------------------------------------------------
PROJECT FABRIC 38 PETER J. SOLOMON COMPANY
Summary Valuation Analysis of Fabric
================================================================================
Based on "Going Private" Transactions of Companies with Enterprise Value Between
$10 and $50 million.
(Dollars in millions)
Implied Fabric Implied Fabric Implied Fabric
Precedent Enterprise Equity Per Share
Fabric Value Range(b) Value Range Value Range(c) Value Range(d)
LTM -------------- ---------------- ---------------- -------------------------------
5/30/1999(a) Low High Low High Low High Low Mean High
------------ ----- ----- ----- ----- ----- ----- ----- ------ ------
Net Sales $90.6 35.0% 45.0% $31.7 $40.8 $35.6 $44.7 $9.80 $11.05 $12.29
EBITDA 6.4 3.5x 5.0x 22.4 31.9 26.2 35.8 7.22 8.54 9.86
EBIT 4.5 5.0x 7.0x 22.4 31.4 26.3 35.3 7.23 8.47 9.70
LTM Net Income 2.0 7.0x 11.0x 10.1 18.0 13.9 21.9 3.84 4.93 6.03
(a) Source: Company's Form 10-Q for the fiscal quarter ended May 30, 1999 and
Company's Form 10-K for the fiscal year ended August 30, 1998.
(b) Based on analysis of selected comparable "going private" company
transactions.
(c) Equity represents enterprise value minus debt plus cash as of fiscal
quarter ended May 30, 1999.
(d) Source: Company Management. Assumed same number of shares outstanding as
of 5/30/99 and 182,500 options which are currently in the money.
- --------------------------------------------------------------------------------
PROJECT FABRIC 39 PETER J. SOLOMON COMPANY
Discounted Cash Flow Analysis
================================================================================
(Dollars in millions)
Projected Fiscal Year Ending August 30, (a)
----------------------------------------------------
1999E 2000P 2001P 2002P 2003P
----------------------------------------------------
Revenues $87.8 $89.0 $90.6 $92.7 $94.8
Year-to-Year % Growth -- 1.3% 1.8% 2.3% 2.3%
EBITDA 6.4 5.1 4.7 5.0 5.2
% of Revenue 7.3% 5.7% 5.2% 5.4% 5.5%
EBIT 4.6 3.3 2.9 3.2 3.4
% of Revenue 5.2% 3.7% 3.3% 3.4% 3.6%
Taxes @ 40.0% 1.8 1.3 1.2 1.3 1.4
----------------------------------------------------
Unlevered Net Income 2.7 2.0 1.8 1.9 2.1
Depreciation and Amortization 1.8 1.8 1.8 1.8 1.8
Changes in Working Capital 0.2 (0.5) (0.5) (0.6) (0.6)
Capital Expenditure (1.8) (1.8) (1.8) (1.8) (1.8)
----------------------------------------------------
Free Cash Flow $2.9 $1.4 $1.3 $1.3 $1.4
====================================================
4.0x 5.0x 6.0x
Terminal Value EBITDA Multiple -----------------------------------------------------------------------------------------------
Discount Rate 9.0% 10.0% 11.0% 9.0% 10.0% 11.0% 9.0% 10.0% 11.0%
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Present Value of Free Cash Flow $4.4 $4.3 $4.2 $4.4 $4.3 $4.2 $4.4 $4.3 $4.2
Present Value of Terminal Value 14.8 14.3 13.8 18.5 17.9 17.2 22.2 21.4 20.7
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Enterprise Value $19.2 $18.6 $18.0 $22.9 $22.2 $21.5 $26.6 $25.8 $24.9
Less: Net Debt (as of 5/30/99) (3.9) (3.9) (3.9) (3.9) (3.9) (3.9) (3.9) (3.9) (3.9)
===== ===== ===== ===== ===== ===== ===== ===== =====
Equity Value $23.1 $22.5 $21.9 $26.8 $26.1 $25.3 $30.5 $29.6 $28.8
Shares Outstanding 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6
Total Equity Value Per Share (b) $6.36 $6.19 $6.03 $7.38 $7.17 $6.97 $8.40 $8.16 $7.92
-----------------------------------------------------------------------------------------------
- ----------
(a) Company Management.
(b) Based on outstanding shares as of May 30, 1999 and options which are
currently in the money. Treasury stock method applied to 182,500 options,
as provided by Company Management.
- --------------------------------------------------------------------------------
PROJECT FABRIC 40 PETER J. SOLOMON COMPANY