EX-99.C.4 7 0007.txt PRESENTATION TO THE BD OF DIRECTORS EXHIBIT (c)(4) Confidential Project Harbor PRESENTATION TO THE BOARD OF DIRECTORS AUGUST 1, 2000 SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Confidential Material The following pages contain material that was provided to the Board of Harbor ("Harbor" or the "Company") by Salomon Smith Barney Inc. ("SSB") in connection with the potential merger transaction involving the Company and Riverside. The accompanying material was compiled or prepared on a confidential basis solely for use by the Board of Directors of Harbor (the "Board") and not with a view toward public disclosure under any securities laws or otherwise. The information utilized in preparing this material was obtained from management of the Company ("Management") and public sources. Any estimates and projections for the Company contained herein have been prepared by Management, or are based upon such estimates and projections, and involve numerous and significant subjective determinations, which may or may not prove to be correct. No representation or warranty, express or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past or the future. Because this material was prepared for use in the context of an oral presentation to the Board, which is familiar with the business and the affairs of the Company, neither the Company nor SSB nor any of their respective legal or financial advisors take any responsibility for the accuracy or completeness of any of the material if used by persons other than the Board. Neither the Company nor SSB undertakes any obligation to update or otherwise revise the accompanying materials. SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Table of Contents 1 TRANSACTION OVERVIEW 2 OVERVIEW OF SALE PROCESS 3 STOCK TRADING ANALYSIS 4 HARBOR VALUATION ANALYSIS Appendix A. Comparable Company Analysis B. Premiums Paid Analysis C. Precedent Transaction Analysis D. Discounted Cash Flow Analysis E. Weighted Average Cost of Capital Analysis F. Harbor Equity Investments SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL 1 TRANSACTION OVERVIEW SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Transaction Overview TERMS/CONDITIONS COMMENTS -------------------------------------------------------------------------------- Acquiror: o Riverside Structure: o Leveraged recapitalization Public Consideration: o $16.90 per share in cash plus merger consideration adjustment Parent Consideration: o $50.0 million in rollover common equity o $36.1 million Series A preferred stock o $3.3 million of additional common equity associated with the preferred o $46.1 million cash plus merger consideration adjustment RAM Consideration: o $25.0 million in rollover common equity o $50.7 million cash plus merger consideration adjustment Merger Consideration Adjustment: o Adjustment for the contingent value of investment in Saturn Electronics and Engineering, Inc. ("Saturn") o First $18.0 million in proceeds realized accrues to Riverside o Next $22.0 million in proceeds realized accrues to Harbor's shareholders o Next $16.7 million in proceeds realized accrues to Riverside o 60% of the proceeds realized above $56.7 million accrues to Harbor's shareholders, the remaining 40% accrues to Riverside o Any proceeds from the sale of equity investments other than Saturn in excess of $125.0 million would be added to the Saturn adjustment above and treated in the same manner -------------------------------------------------------------------------------- SALOMON SMITH BARNEY -------------------- A member of citigroup 1 PROJECT HARBOR - CONFIDENTIAL Transaction Overview (continued) TERMS/CONDITIONS COMMENTS -------------------------------------------------------------------------------- Other Key Conditions: o Regulatory clearance o No material adverse change o Majority of disinterested shareholder approval o Minimum proceeds from the sale of equity investments other than Saturn of $125.0 million o Exchange and Voting Agreement executed with Parent/RAM Financing Covenants: o Debt and equity commitment letters provided at signing o Commercially reasonable efforts to fund merger Non Solicitation: o Market provisions subject to fiduciary out Termination Provisions: o Mutual consent o 12/20/00 o Legal injunction o Failure to obtain approval of the disinterested shareholders o Material breach of representations or covenants by counterparty not capable of being cured by 12/20/00 Break up Fee: o $16.0 million, inclusive of fees and expenses (capped at $2.0 million) Sale of Equity Investments: o CVC is expected to purchase certain equity investments for total consideration of $125.0 million (Approximately $99.1 million after-tax) o Proceeds from sale to be used to reduce Harbor debt concurrent with the transaction Parent "Put": o Parent will enter into a subordinated loan agreement: o Standby commitment of $100.0 million o Expires 10/31/03 o Rate is higher of T+400 bps or comparable debt + 150 bps, capped at 14.5% (with an escalator) -------------------------------------------------------------------------------- SALOMON SMITH BARNEY -------------------- A member of citigroup 2 PROJECT HARBOR - CONFIDENTIAL Transaction Economics (Dollars in millions, except per share data) At Offer Price At Offer Price Including Merger At Market(a) Excluding Saturn Consideration Adjustment(b) ------------ ---------------- --------------------------- Cash Value per Share $ 11.56 $ 16.90 $ 16.90 Contingent Value Per Share from Saturn -- -- $ 1.20 --------- --------- --------- Total Value per Share $ 11.56 $ 16.90 $ 18.10 Implied Premiums LTM High - $17.69 (8/26/99) (34.6%) (4.5%) 2.3% LTM Low - $10.50 (7/10/00) 10.1% 61.0% 72.4% Market - $11.56(a) -- 46.2% 56.5% ---------------------------------------------------------------------------------------------------------------------------- Number of Shares Basic Shares Outstanding 44.740 44.740 44.740 Options 0.953 2.318 2.327 --------- --------- --------- Fully Diluted Shares Outstanding 45.693 47.058 47.068 Adjusted Equity Market Capitalization $ 528.3 $ 795.3 $ 851.9 LESS: Options Proceeds (5.2) (24.9) (25.0) --------- --------- --------- Equity Value $ 523.2 $ 770.4 $ 826.9 PLUS: Debt(c) 1,336.0 1,336.0 1,336.0 LESS: Cash(c) (3.0) (3.0) (3.0) LESS: After-tax Proceeds from Sale of Equity Inv. 0.0 (99.1) (d) (99.1) (d) PLUS: Other Adjustments 0.0 11.8 (e) 12.1 (e) --------- --------- --------- Firm Value $ 1,856.2 $ 2,016.1 $ 2,072.9 ========= ========= ========= ---------------------------------------------------------------------------------------------------------------------------- Implied Multiples EBITDA(c) LTM 6.1x 6.6x 6.8x 2000 5.8 6.3 6.5 2001 4.9 5.4 5.5 EBIT(c) LTM 8.4x 9.1x 9.3x 2000 8.1 8.8 9.0 2001 6.6 7.2 7.4 EPS(f) 2000 6.2x 9.1x 9.7x 2001 4.4 6.5 7.0 ----------------------------------------------------------------------------------------------------------------------------
--------- Note (1): Company LTM financial statistics represent latest twelve months as of 6/30/00 and are pro forma for adjustments including acquisitions/dispositions-related costs. (a) Closing price of $11.56 as of 7/28/00. (b) For illustrative purposes only, refer to Appendix F for Saturn valuation assumptions. Assumes total value of Saturn shares owned by Harbor based on midpoint of filing range. (c) Balance Sheet and LTM Income Statement information as of 6/30/00 supplied by Management. (d) Based on estimated pretax proceeds from sale of equity investments other than Saturn of $125 million as provided by Management. (e) Includes an $8 million charge as a result of the cash cost of the K-Tech guaranteed stock and a cash cost of phantom stock and options. Current phantom stock amount of 224,826 shares and phantom options of 13,000 shares at strike price of $16.50 per share. (f) EPS estimates are based on Management estimates as of May 2000. SALOMON SMITH BARNEY -------------------- A member of citigroup 3 PROJECT HARBOR - CONFIDENTIAL 2 OVERVIEW OF SALE PROCESS SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Overview of Sale Process BACKGROUND o In March 1999, Harbor requested that SSB assist Harbor in a review of strategic alternatives available to maximize shareholder value o During April and May, SSB met with management to perform initial due diligence o On May 18, 1999, Harbor's Board of Directors met with Management and SSB to review the following: o Factors generally influencing market valuation o Shareholder value creation alternatives o Following this review, the Board of Directors requested that SSB assist Harbor in exploring a potential sale of the Company SALOMON SMITH BARNEY -------------------- A member of citigroup 4 PROJECT HARBOR - CONFIDENTIAL Overview of Sale Process Potential Buyers ------------------------- Strategic Financial --------- --------- Initially Identified (58) 46 12 Contacted (19) 13 6 Sent Confidential Memorandum (10) 6 4 Received Indications (2)(a) 0 2 Entered into Negotations (1) 0 1 ------------------------------------------------------------------------------- (Re)Contacted (7)(b) 5 2 Sent Confidential Memorandum/ Updated Information (3) 2 1 Received Indications (3)(c) 2 1 Entered into Negotiations (1) 0 1 Note: (#) indicates number of parties involved. (a) One potential buyer rescinded its indication due to antitrust concerns. (b) Three newly identified parties and four parties previously contacted. (c) Received two indications for the automotive segment and one for entire company. SALOMON SMITH BARNEY -------------------- A member of citigroup 5 PROJECT HARBOR - CONFIDENTIAL Overview of Sale Process STAGE 1 o In June and July 1999, in-depth due diligence was conducted and confidential marketing materials were prepared o A comprehensive group of potential buyers was reviewed and a selected group of both strategic and financial parties was subsequently approached o In August 1999, a customary marketing process began o Throughout the process, Harbor, with the assistance of SSB, continued to: o Evaluate potential alternatives o Maintain contact with previously identified buyers o Initiate contact with new potential buyers o Two financial buyers submitted initial indications of interest o One party rescinded its bid due to antitrust concerns related to a portfolio investment o Harbor entered into negotiations with the other party, which eventually terminated STAGE 2 o Four previously identified potential buyers were re-contacted and three newly identified buyers were contacted o Two indications of interest for the automotive segment and one indication for the entire Company were received o Indications for the automotive segment were deemed by Harbor to be insufficient in terms of value, structure and/or commitment to pursue a transaction o Negotiations for sale of the entire Company began with Riverside SALOMON SMITH BARNEY -------------------- A member of citigroup 6 PROJECT HARBOR - CONFIDENTIAL Overview of Harbor's Current Situation A COMBINATION OF CORPORATE, INDUSTRY AND MARKET FACTORS IMPACT HARBOR'S VALUATION INCLUDING, BUT NOT LIMITED TO: CORPORATE FACTORS INDUSTRY FACTORS MARKET FACTORS ----------------- ---------------- -------------- o Small Size o Cyclicality o Low Liquidity o High Leverage o Consolidation Trend o Limited Research Coverage o Lower Relative Growth Expectations o Systems vs. Components o Complex Corporate Structure o Mixed Earnings Predictability and Performance
MARKET AND COMPANY-SPECIFIC FACTORS CONSIDERED IN CONNECTION WITH A SALE OF THE ENTIRE COMPANY INCLUDED, BUT WERE NOT LIMITED TO: o Stock Price Performance o Public Market Multiples o High Leverage/Inability to Fund Acquisitions o Tax Leakage on Separation of Businesses o Automotive Industry Outlook SALOMON SMITH BARNEY -------------------- A member of citigroup 7 PROJECT HARBOR - CONFIDENTIAL Current Automotive Industry Outlook DECLINE IN BUILD RATE EXPECTED o Record North American production levels are anticipated to slow CHANGING INDUSTRY DYNAMICS o OEM and supplier consolidation continues o Pressures placed on suppliers increase o Competitors are growing larger and more global o M&A drivers in supplier sector remain intact NEGATIVE EQUITY INVESTOR SENTIMENT TOWARD AUTOMOTIVE SECTOR o Concerns of cyclical peak have depressed public valuations o Value funds have experienced outflows, impacting demand for stocks of industrial companies WEAK FINANCING ENVIRONMENT o No automotive equity new issues in over 12 months o High yield market has experienced mutual fund outflows, widening spreads and difficult new issue conditions SALOMON SMITH BARNEY -------------------- A member of citigroup 8 PROJECT HARBOR - CONFIDENTIAL 3 STOCK TRADING ANALYSIS SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Harbor Stock Price Performance DAILY DATA -- 7/28/1999 THROUGH 7/28/2000 [GRAPHIC depicting Harbor share price and volume traded from 7/28/99 through 7/28/00 with annotation for events described below.] (a) 08/26/99 Announced acquisition of Windfall (d) 02/02/00 Harbor Specialty Tubing, a subsidiary Products, manufacturer of of Harbor is acquired by Advanced transportation-related powder metal Tubular Products components (b) 08/31/99 Announced construction of a new powder (e) 02/28/00 Announced 1999 results, Net Income was metal facility in Mexico $92.4 million or $1.84 per share vs. $97.5 million or $1.83 per share a year ago (c) 11/03/99 Announced third quarter results, Net (f) 05/03/00 Announced first quarter results, Net Income increased 20 percent to $20.2 Income in the first quarter increased million or $0.41 per share vs. $16.8 8% to $25.8 million or $0.51 per share million or $0.33 per share a year ago vs. $23.9 million or $0.47 per share a year ago
Source: Salomon Smith Barney; Company reports SALOMON SMITH BARNEY -------------------- A member of citigroup 9 PROJECT HARBOR - CONFIDENTIAL Harbor Relative Stock Price Performance DAILY DATA: 7/28/1999 THROUGH 7/28/2000 [GRAPHIC depicting Harbor price performance relative to the S&P 500 Index and a selected Automotive Index (described in footnote 1 below) from 7/28/99 through 7/28/00 with annotation for events described below.] (a) 08/26/99 Announced acquisition of Windfall (d) 02/02/00 Harbor Specialty Tubing, a subsidiary of Products, manufacturer of Harbor is acquired by Advanced Tubular transportation-related powder metal Products components (b) 08/31/99 Announced construction of a new powder (e) 02/28/00 Announced 1999 results, Net Income was metal facility in Mexico $92.4 million or $1.84 per share vs. $97.5 million or $1.83 per share a year ago (c) 11/03/99 Announced third quarter results, Net (f) 05/03/00 Announced first quarter results, Net increased 20 percent to $20.2 million Income in quarter increased 8% to $25.8 or $0.41 per share vs. $16.8 million million or $0.51 per share vs. $23.9 or $0.33 per share a year ago million or $0.47 per share a year ago
Source: Salomon Smith Barney; Company reports 1 Automotive Index Includes: Amcast Industrial, American Axle, Borg Warner, Dura Automotive, Hayes Lemmerz, Intermet, Simpson Industries, Superior Industries, Tower Automotive SALOMON SMITH BARNEY -------------------- A member of citigroup 10 PROJECT HARBOR - CONFIDENTIAL Harbor Percentage Traded at Specified Prices DAILY DATA -- 7/28/1999 THROUGH 7/28/2000 [GRAPHIC depicting Harbor share price percentage traded at specific prices for the last twelve months and last six months] Weighted Volume Traded/ Volume Traded/ Average Shares Outstanding Public Float -- Last Twelve Months $12.94 44.6% 77.5% -- Last Six Months $11.99 23.5% 40.8% Source: Salomon Smith Barney 7/31/00 SALOMON SMITH BARNEY -------------------- A member of citigroup 11 PROJECT HARBOR - CONFIDENTIAL Recent Wall Street Commentary on Harbor EPS estimates Price Report Date Analyst/Firm Rating 2000/2001 Targets Analyst Commentary ----------------------------------------------------------------------------------------------------------------------------------- 07/05/00 Wendy B. Caplan Hold $1.85/$2.05 "Mid-Teen" o We are downgrading Harbor to Hold from Strong Buy on ING Barings concerns about its transportation end-markets. In addition, we are lowering our 2000 and 2001 estimates to $1.85 from $2.00 and to $2.05 from $2.30, respectively. o In our opinion, on a long-term basis, once the market discounts Harbor's transition to diversified industrial from automotive supplier the stock could trade at an 8x multiple, implying a mid-teen target. ----------------------------------------------------------------------------------------------------------------------------------- 05/05/00 Stephen J. Girsky Neutral $1.98/NA NA o Harbor trades at about 5.9x EV/2000E EBITDA in line Morgan Stanley with the peer group average of about 5.8x. Given Dean Witter current valuation levels, we prefer to remain neutral on the stock. ----------------------------------------------------------------------------------------------------------------------------------- 05/03/00 Harriet C. Baldwin Buy $1.95/NA $25.00 o Our 12-month price target is $25 (13x our 2000 EPS Deutsche Bank estimate of $1.95). o We believe that there is upside to our $1.95 2000 Harbor EPS estimate if the North American auto build rate is at or above 17 MM for 2000. o We rate Harbor shares Buy based on the company's strong market shares, proprietary and low-cost manufacturing processes. -----------------------------------------------------------------------------------------------------------------------------------
Summary Analyst Views(b) Consensus Estimates -------------------------------------------------- --------------------------------------------------- Strong Buys Buys Holds Sells CY2000 CY2001 -------------------------------------------------- --------------------------------------------------- 0 1 2 0 First Call (a) $1.95 $2.05 -------------------------------------------------- --------------------------------------------------- Management Estimates $1.86 $2.60 ---------------------------------------------------
---------------- (a) As of 7/28/00. (b) Excludes ABN Amro convertible research. SALOMON SMITH BARNEY -------------------- A member of citigroup 12 PROJECT HARBOR - CONFIDENTIAL 4 HARBOR VALUATION ANALYSIS SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Overview of Financial Performance and Projections FISCAL 1996 - 2000 (Dollars in Millions) ------------------------------------------------------------------------ Fiscal Year Ending December 31, --------------------------------------------------------- Historical Estimated 1996-2000 --------------------------------------------------------- CAGR/ 1996(a) 1997(a) 1998(a) 1999(b) 2000(b) Avg. Margin ----------------------------------------------------------------------------------------------- Revenue $1,334.0 $1,439.0 $1,555.0 $1,689.9 $1,759.7 7.2% Growth -- 7.9% 8.1% 8.7% 4.1% -- EBITDA 249.0 269.0 294.0 300.8 320.8 6.5% EBITDA Margin 18.7% 18.7% 18.9% 17.8% 18.2% 18.5 Net Income 69.0 76.0 87.0 87.3 93.0 7.7% Net Income Margin 5.2% 5.3% 5.6% 5.2% 5.3% 5.3 -----------------------------------------------------------------------------------------------
MANAGEMENT PROJECTIONS (Dollars in Millions) Fiscal Year Ending December 31, -------------------------------------------- Estimated(b) 2001-2004 -------------------------------------------- CAGR/ 2001 2002 2003 2004 Avg. Margin ----------------------------------------------------------------------------------------------- Revenue $1,934.6 $2,116.5 $2,276.0 $2,443.0 8.1% Growth 9.9% 9.4% 7.5% 7.3% -- EBITDA 376.6 419.1 456.3 489.9 9.2% Net Income Margin 19.5% 19.8% 20.0% 20.1% 19.8 Net Income 133.9 164.2 190.3 225.7 19.0% Net Income Margin 6.9% 7.8% 8.4% 9.2% 8.1 -----------------------------------------------------------------------------------------------
(a) Management historical pro forma for 1996-1998 as utilized in the July 1999 Offering Memorandum. 1996-1998 financial results have been adjusted to include T Co., interest expense in 1996 for share repurchases, and eliminations of businesses/equity affiliates sold during the period. (b) Pro forma estimates for 1999 and projections for 2000-2004 are based on May 2000 Management estimates. 1999 financial results are pro forma for the Windfall acquisition. SALOMON SMITH BARNEY -------------------- A member of citigroup 13 PROJECT HARBOR - CONFIDENTIAL Strategic Plan Execution Risk AUTOMOTIVE INDUSTRY DYNAMICS | Harbor Management faces | several significant o Anticipated downturn in automotive cycle | challenges as it attempts o Continued OEM consolidation | to execute its strategic o Continued price pressure and outsourcing of | plan which reflects more responsibilities to suppliers | increasing margins and o Continued supplier rationalization and | growth rates. consolidation | o Competitors are increasing critical mass | | CAPITAL STRUCTURE | | o High leverage and depressed stock price: | o Limits ability to grow through acquisition | or internal investment | o Impacts ability to weather downturn | | OPERATING PERFORMANCE | | o Predictability of earnings | o Underperformance of several business units | | INTERNAL ISSUES | | o Demands on management time and focus related to | sale process | o Difficulty of sustaining morale | SALOMON SMITH BARNEY -------------------- A member of citigroup 14 PROJECT HARBOR - CONFIDENTIAL Valuation Summary [GRAPHIC depicting summary bar chart reference ranges of valuation methodologies on the next page. Lines depict the current price per share of $11.56(a), offer price per share of $16.90, and offer price per share plus merger consideration adjustment of $18.10(c) and a shaded area depicting the 52-week trading range. (b) refers to the derivation of the Premiums Paid Analysis.] Note: Shaded area represents 52-week trading range from $10.50 to $17.50, as of July 28, 2000. (a) Stock price as of 7/28/00. (b) Comparable company plus premiums of 30-40% based on the mean and median of the premiums paid one day prior to announcement in Appendix B. (c) Refer to Appendix F for Saturn valuation assumptions. Assumes total value of Saturn shares owned by Harbor based on midpoint of filing range. SALOMON SMITH BARNEY -------------------- A member of citigroup 15 PROJECT HARBOR - CONFIDENTIAL Valuation Summary Comparable Company Analysis ---------------------------------------------------------------------------------------------------- Equity Value Multiple Range Firm Value Equity Value(b) Per Share(c) Operating -------------- ------------------- --------------- --------------- Data(a) Low High Low High Low High Low High --------- ----- ------ ----- ------ ----- ------ ----- ------ LTM EBITDA $303.2 4.0x 5.0x $1,212.8 $1,516.0 NM $295.2 NM $ 6.27 LTM EBIT 221.7 6.5 7.5 1,441.1 1,662.8 220.2 441.9 4.68 9.39 2000E EPS $ 1.86 5.0x 7.0x -- -- -- -- $ 9.30 $13.02 2001E EPS 2.60 4.0 6.0 -- -- -- -- 10.40 15.60 -------------------------------- Reference Range $ 6.00 $12.00 -------------------------------- Premiums Paid Analysis ---------------------------------------------------------------------------------------------------- Public comparable plus premiums of 30-40% based on the mean and -------------------------------- median of premiums paid (Appendix B) Reference Range $ 7.80 $16.80 -------------------------------- Precedent Transaction Analysis ---------------------------------------------------------------------------------------------------- Equity Value Multiple Range Firm Value Equity Value(b) Per Share(c) Operating -------------- ------------------- ---------------- --------------- Data(a) Low High Low High Low High Low High --------- ----- ------ ----- ------ ----- ------ ----- ------ LTM EBITDA $303.2 5.5x 7.0x $1,667.6 $2,122.4 $446.8 $ 901.6 $ 9.49 $19.16 LTM EBIT 221.7 9.0 11.0 1,995.3 2,438.7 774.5 1,217.9 16.46 25.88 -------------------------------- Reference Range $13.00 $19.00 -------------------------------- Discounted Cash Flow Analysis (Management Estimate) ---------------------------------------------------------------------------------------------------- Equity Value Per Share(c) --------------- Low High ----- ------ Year 5 EBITDA Exit Multiple Range of 4.0x - 5.0x & WACC Range of 9.0% - 10.0% -------------------------------- Reference Range $15.50 $24.00 --------------------------------
--------- Note (1): Company LTM financial statistics represent latest twelve months as of 6/30/00 and are pro forma for adjustments including acquisitions and dispositions. (a) Company LTM financial statistics represent latest twelve months ended 6/30/00. Forward statistics based on Management estimates. (b) Equity Value equals Firm Value less total debt and preferred of $1,336 million, plus cash of $3 million, plus pretax equity investments of $125 million, (net of taxes of $26 million), less other adjustments of $12 million, plus option proceeds of $25 million. (c) Based on 47.1 million fully diluted shares outstanding (out-of-the-money convertible subordinated debentures not included). SALOMON SMITH BARNEY -------------------- A member of citigroup 16 PROJECT HARBOR - CONFIDENTIAL APPENDIX SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL A. Comparable Company Analysis SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Comparable Company Analysis Public Total Stock Market LTM 5-Year Debt Price/ Valuation Statistics Price 52 Week Value of LTM EBIT EPS /Market Book (Dollars in Millions, Except Stock Price) 7/28/00 High-Low Equity Revenues Margin Growth(1) Cap. Value ------------------------------------------------------------------------------------------------------------------------- Amcast Industrial Corporation (AIZ) $10.63 $18.25-8.00 $ 89 $ 603 3.7% 9.0% 65.0% 0.6x American Axle & Manufacturing (AXL) 14.88 $17.13-11.38 690 3,091 8.4% 10.7% 52.6% 2.3 Borg-Warner Automotive (BWA) 33.38 $51.06-29.75 902 2,638 10.0% 12.6% 50.0% 0.8 Dura Automotive Systems Inc. (DRRA)(3) 10.09 $30.25-9.88 176 3,008 6.7% 15.5% 87.7% 0.4 Hayes Lemmerz International, Inc. (HAZ) 13.88 $31.50-11.69 421 2,303 11.7% 14.5% 80.0% 1.9 Intermet Corporation (INMT) 7.03 $14.50-4.56 178 1,244 9.5% 11.0% 72.1% 0.7 Simpson Industries, Inc. (SMPS) 7.75 $12.63-7.00 140 544 7.4% 12.3% 47.7% 1.0 Superior Industries International (SUP) 29.50 $34.38-22.94 770 590 18.5% 11.3% 5.5% 2.1 Tower Automotive, Inc. (TWR) 11.75 $23.94-11.31 550 2,357 10.3% 14.0% 66.9% 0.7 ------------------------------------------------------------------------------------------------------------------------- Mean $1,819.7 9.6% 12.3% 58.6% 1.2x Median $2,203.3 9.5% 12.3% 65.0% 0.8x ------------------------------------------------------------------------------------------------------------------------- Harbor(4) $11.56 $17.69-10.50 $526 $1,690 13.2% 12.4% 81.1% 1.7x Harbor (5) $11.56 $17.69-10.50 $523 $1,708 13.0% 19.0% 71.9% 1.6x Harbor (offer price)(5)(6) $16.90 $17.69-10.50 $770 $1,708 13.0% 19.0% 63.4% 2.4x Harbor (offer price plus adjust.)(5)(6)(7) $18.10 $17.69-10.50 $827 $1,708 13.0% 19.0% 61.8% 2.6x
Note: EBITDA, EBIT, Net Income to Common, and EPS adjusted for unusual and nonrecurring items. *Denotes outlier excluded from MEAN calculation; LTM: Latest Twelve Months; NM: Not Meaningful (1) Source: EPS estimates taken from I/B/E/S; Forward estimates taken from First Call earnings report. (2) Firm Value equals equity value (all fully diluted shares at the stock price less any option proceeds) plus straight debt, minority interest, straight preferred stock, all out-of-the-money converts, less cash and investments in affiliates. (3) Pro forma for Excel and Adwest acquisitions. (4) Based on publicly available information; LTM data as of 3/31/00; Estimates based on First Call (5) Based on Management projections; LTM data as of 6/30/00 (6) Firm Value at offer price includes after tax proceeds from sale of affiliates and Other Adjustments (as outlined in page 3) (7) Includes merger consideration adjustment (Financial data to be continued) SALOMON SMITH BARNEY -------------------- A member of citigroup 17 (Financial data--continued) PROJECT HARBOR - CONFIDENTIAL Comparable Company Analysis Firm Value/ ------------ LTM P/E(1) ------------ Valuation Statistics ---------------- Firm (Dollars in Millions, Except Stock Price) 2000(E) 2001(E) Value(2) EBITDA EBIT ----------------------------------------------------------------------------------- Amcast Industrial Corporation (AIZ) 13.4x NA $ 253 4.7x 11.3x American Axle & Manufacturing (AXL) 5.5 5.1x 1,506 4.3 5.8 Borg-WArner Automotive (BWA) 5.9 5.3 1,634 4.1 6.2 Dura Automotive Systems Inc. (DRRA)(3) 2.5 2.1 1,456 4.8 7.3 Hayes Lemmerz International, Inc. (HAZ) 6.7 NA 2,075 5.1 7.7 Intermet Corporation (INMT) 4.3 3.7 633 3.5 5.4 Simpson Industries, Inc. (SMPS) 6.7 6.3 256 3.9 6.4 Superior Industries International (SUP) 10.0 9.0 726 5.3 6.6 Tower Automotive, Inc. (TWR) 4.7 4.2 1,616 4.5 6.6 ------------------------------------------------------------------------------------ Mean 4.5x 7.0x Median 4.5x 6.6x ------------------------------------------------------------------------------------ Harbor(4) 5.9x 5.6x $1,778 5.9x 8.0x Harbor (5) 6.2x 4.4x $1,856 6.1x 8.4x Harbor (offer price)(5)(6) 9.1x 6.5x $2,016 6.6x 9.1x Harbor (offer price plus adjust.)(5)(6)(7) 9.7x 7.0x $2,073 6.8x 9.3x
Note: EBITDA, EBIT, Net Income to Common, and EPS adjusted for unusual and nonrecurring items. *Denotes outlier excluded from MEAN calculation; LTM: Latest Twelve Months; NM: Not Meaningful (1) Source: EPS estimates taken from I/B/E/S; Forward estimates taken from First Call earnings report. (2) Firm Value equals equity value (all fully diluted shares at the stock price less any option proceeds) plus straight debt, minority interest, straight preferred stock, all out-of-the-money converts, less cash and investments in affiliates. (3) Pro forma for Excel and Adwest acquisitions. (4) Based on publicly available information; LTM data as of 3/31/00; Estimates based on First Call (5) Based on Management projections; LTM data as of 6/30/00 (6) Firm Value at offer price includes after tax proceeds from sale of affiliates and Other Adjustments (as outlined in page 3) (7) Includes merger consideration adjustment SALOMON SMITH BARNEY -------------------- A member of citigroup 17 PROJECT HARBOR - CONFIDENTIAL B. Premiums Paid Analysis SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Premiums Paid Analysis - Transactions from $1.5 Billion to $2.5 Billion (1999 - Present) Firm Equity Closing Prices Premiums % Date Value Value Purchase ---------------- --------------- Announced Target Name Acquiror Name ($MM) ($MM) Price 1 day 1 week 1 day 1 week --------------------------------------------------------------------------------------------------------------------------------- 07/13/00 Groupe GTM Vinci SA $1,815 $1,713 $110.99 $ 98.49 $ 96.05 12.7% 15.6% 07/07/00 Dexter Corp Invitrogen Corp 1,692 1,464 62.50 48.00 48.00 30.2 30.2 06/26/00 Lilly Industries Inc Valspar Corp 1,728 1,388 31.75 12.88 14.00 146.6 126.8 06/20/00 Saatchi & Saatchi PLC Publicis SA 1,806 1,760 7.56 5.00 5.03 51.1 50.4 05/29/00 Mark IV Industries Inc BC Partners 2,113 1,225 23.00 21.13 21.13 8.9 8.9 05/22/00 MedQuist Inc Philips Electronics NV 1,763 1,831 51.00 38.81 38.50 31.4 32.5 05/12/00 Hussmann International Inc Ingersoll-Rand Co 1,892 1,567 29.00 13.38 13.13 116.8 121.0 05/08/00 Ancor Communications Inc QLogic Corp 1,705 1,706 52.77 31.19 32.31 69.2 63.3 05/04/00 Telegate AG (Metro Intl) Seat Pagine Gialle SPA 1,706 1,700 133.51 123.74 119.29 7.9 11.9 05/01/00 Rexall Sundown Inc Koninklijke Numico NV 1,646 1,665 24.00 19.25 17.06 24.7 40.7 05/01/00 Shared Medical Systems Corp Siemens Corp(Siemens AG) 2,215 2,057 73.00 39.44 40.25 85.1 81.4 04/05/00 Harbinger Corp Peregrine Systems Inc 1,857 1,866 42.16 22.13 29.64 90.6 42.2 04/03/00 Admiral PLC CMG PLC 2,079 2,116 33.45 22.78 21.94 46.9 52.5 04/03/00 American National Can Group Rexam PLC 1,978 994 18.00 13.13 12.69 37.1 41.9 03/27/00 Spyglass Inc OpenTV Corp(MIH Ltd) 2,394 2,428 122.29 69.88 64.56 75.0 89.4 03/22/00 Metamor Worldwide Inc PSINet Inc 1,964 1,848 44.55 16.00 16.25 178.4 174.2 03/14/00 Howmet International Inc Alcoa Inc 2,213 2,126 21.00 18.50 18.63 13.5 12.8 02/21/00 Snyder Communications Inc Havas Advertising SA 2,247 2,257 29.50 20.50 22.25 43.9 32.6 02/17/00 US Home Corp Lennar Corp 1,588 845 36.00 24.88 25.25 44.7 42.6 02/14/00 Medical Manager Corp Healtheon/WebMD Inc 1,763 1,692 42.19 65.00 64.00 (35.1) (34.1) 02/14/00 NetOptix Corp Corning Inc 1,674 1,665 149.18 136.00 121.22 9.7 23.1 02/07/00 InterVU Inc Akamai Technologies Inc 2,361 2,387 139.99 117.00 92.50 19.6 51.3 01/24/00 BTP PLC Clariant AG 1,964 1,712 9.89 5.73 5.94 72.6 66.4 01/12/00 Etec Systems Inc Applied Materials Inc 1,793 1,845 78.41 42.56 43.50 84.2 80.3 01/11/00 Esat Telecom Group PLC BT Hawthorn Ltd 1,990 1,875 50.00 29.68 25.17 68.5 98.6 01/07/00 SplitRock Services Inc McLeodUSA Inc 1,970 1,764 28.12 22.13 19.88 27.1 41.5 12/17/99 NCL Holding ASA Arrasas Ltd (Star Cruises PLC) 1,910 1,049 4.40 2.86 2.88 54.1 52.7 12/17/99 United Biscuits (Holdings) PLC Finalrealm 2,492 2,159 4.27 3.03 2.88 40.9 48.0 12/15/99 NCL Holding ASA Star Cruises PLC 1,910 1,049 4.40 2.86 2.88 54.1 52.7 11/22/99 DII Group Flextronics International 2,131 1,790 65.41 51.81 50.19 26.2 30.3
SALOMON SMITH BARNEY -------------------- A member of citigroup 18 PROJECT HARBOR - CONFIDENTIAL Premiums Paid Analysis - Transactions from $1.5 Billion to $2.5 Billion: 1999 - Present (continued) Firm Equity Closing Prices Premiums % Date Value Value Purchase ---------------- --------------- Announced Target Name Acquiror Name ($MM) ($MM) Price 1 day 1 week 1 day 1 week --------------------------------------------------------------------------------------------------------------------------------- 11/15/99 Amway Japan Ltd (Amway Corp) Investor Group $1,713 $2,049 $ 14.20 $ 9.44 $ 9.48 50.5% 49.7% 11/14/99 Oak Industries Inc Corning Inc 1,861 1,659 75.01 49.75 45.00 50.8 66.7 11/08/99 PageNet Arch Communications Group Inc 1,985 88 0.85 0.97 1.09 (12.3) (22.3) 11/04/99 Eastern Enterprises KeySpan Corp 2,352 1,760 64.00 51.56 50.38 24.1 27.0 10/18/99 Clarify Inc Nortel Networks Corp 1,840 1,878 68.49 43.34 46.03 58.0 48.8 10/18/99 Comair Holdings Inc Delta Air Lines Inc 2,239 2,304 23.50 17.94 18.44 31.0 27.5 10/14/99 DSP Communications Inc Intel Corp 1,657 1,688 36.00 28.00 24.75 28.6 45.5 10/04/99 Seita Tabacalera SA 2,500 3,346 64.66 65.85 59.33 (1.8) 9.0 09/30/99 FlyCast Communications CMGI Inc 1,858 1,865 122.95 38.00 30.25 223.6 306.4 09/28/99 Genesys Telecommun Labs Alcatel SA 1,700 1,744 52.08 40.88 36.63 27.4 42.2 09/24/99 ASARCO Inc Grupo Mexico SA de CV 2,128 1,189 29.75 19.00 20.06 56.6 48.3 09/23/99 EarthLink Network Inc MindSpring Enterprises Inc 1,993 2,318 53.09 43.50 41.31 22.0 28.5 09/13/99 Smart Modular Technologies Inc Solectron Corporation 1,824 1,946 39.53 23.50 21.44 68.2 84.4 08/23/99 United Water Resources Inc Suez Lyonnaise des Eaux SA 2,293 1,454 35.00 31.06 24.13 12.7 45.1 08/18/99 Excel Switching Corp Lucent Technologies Inc 1,586 1,636 37.11 27.56 25.38 34.6 46.2 08/16/99 Poco Petroleums Ltd Burlington Resources Inc 2,315 1,584 11.67 9.13 0.00 27.9 -- 07/13/99 Corporate Express Inc Buhrmann NV 2,344 1,064 9.70 8.56 7.84 13.3 23.7 06/28/99 Big Flower Holdings Inc Investor Group 1,772 924 36.75 32.81 33.63 12.0 9.3 06/23/99 Newsquest PLC Gannett UK Ltd (Gannett Co Inc) 1,675 1,463 7.31 6.76 6.95 8.2 5.2 06/22/99 AboveNet Communications Inc Metromedia Fiber Network Inc 1,509 1,553 49.94 37.88 25.63 31.9 94.9 06/15/99 CMP Group Inc Energy East Corp 1,572 960 29.50 20.06 20.56 47.0 43.5 06/14/99 Coach USA Inc Stagecoach Holdings PLC 1,836 1,197 42.00 38.63 29.88 8.7 40.6 06/09/99 Richfood Holdings Inc SuperValu Inc 1,592 885 18.50 14.88 12.81 24.4 44.4 06/01/99 Associated Group Inc Liberty Media Group (AT&T Corp) 1,694 1,489 67.47 65.00 65.25 3.8 3.4 06/01/99 Witco Corp Crompton & Knowles Corp 1,831 979 16.98 17.50 15.94 (3.0) 6.5 05/28/99 SkyTel Communications Inc MCI WorldCom 1,684 1,303 19.97 19.31 20.06 3.4 (0.5) 05/20/99 PennzEnergy Co Devon Energy Corp 2,252 676 14.10 14.63 13.31 (3.6) 5.9 05/14/99 Hillsdown Holdings PLC Investor Group 1,964 1,509 2.36 1.39 1.30 69.9 81.4 05/04/99 Cie des Gaz Petrole Primagaz SHV Holdings NV 1,947 1,932 91.46 80.40 73.31 13.8 24.8 05/04/99 Wang Laboratories Inc Getronics NV 1,806 1,490 29.25 25.50 23.81 14.7 22.8
SALOMON SMITH BARNEY -------------------- A member of citigroup 19 PROJECT HARBOR - CONFIDENTIAL Premiums Paid Analysis - Transactions from $1.5 Billion to $2.5 Billion: 1999 - Present (continued) Firm Equity Closing Prices Premiums % Date Value Value Purchase ---------------- --------------- Announced Target Name Acquiror Name ($MM) ($MM) Price 1 day 1 week 1 day 1 week --------------------------------------------------------------------------------------------------------------------------------- 04/13/99 GeoTel Communications Corp Cisco Systems Inc $1,854 $1,914 $60.50 $44.25 $45.31 36.7% 33.5% 04/12/99 Kwik-Fit Holdings PLC FAH Investments 1,751 1,612 8.99 6.77 6.74 32.9 33.3 04/01/99 King World Productions Inc CBS Corp 2,034 2,592 33.06 29.94 29.31 10.4 12.8 03/09/99 Sony Chemical Corp Sony Corp 1,527 1,527 46.74 39.10 35.81 19.5 30.5 03/02/99 Nine West Group Inc Jones Apparel Group Inc 1,542 996 26.69 22.75 19.56 17.3 36.4 03/02/99 XYLAN Corp Alcatel SA 1,793 1,822 37.00 26.94 22.00 37.4 68.2 03/01/99 Cultor Oy Danisco A/S 1,740 1,395 19.81 9.25 9.36 114.3 111.7 03/01/99 Reltec Corp GEC PLC 2,102 1,741 29.50 21.75 19.94 35.6 48.0 02/22/99 Southwest Gas Corp Southern Union Co 1,864 1,024 33.50 24.38 24.69 37.4 35.7 02/11/99 Fingerhut Cos Inc Federated Department Stores 1,605 1,344 25.00 18.81 20.38 32.9 22.7 02/10/99 Pycraft & Arnold Holdings PLC Fishers International PLC 1,763 1,764 1.13 0.88 0.93 28.9 21.0 02/08/99 Stakis PLC Ladbroke Group PLC (Hilton Grp) 2,161 1,812 2.36 1.77 1.64 33.5 43.7 02/01/99 Aeroquip-Vickers Inc Eaton Corp 2,012 1,648 58.00 35.25 34.50 64.5 68.1 01/26/99 Agouron Pharmaceuticals Inc Warner-Lambert Co 2,184 2,194 60.00 53.16 57.75 12.9 3.9 01/11/99 English China Clays PLC Imetal SA (Parfinance) 1,526 1,264 4.10 2.62 2.71 56.2 51.0 --------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Mean 40.7 46.8 Median 31.9 42.0 --------------------------------------------------------------------------------------
Source: Securities Data Corporation. SALOMON SMITH BARNEY -------------------- A member of citigroup 20 PROJECT HARBOR - CONFIDENTIAL C. Precedent Transaction Analysis SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Precedent Transaction Analysis (US$ in millions) Multiples of Transaction Value/ ------------------------------ Date Transaction LTM LTM of Ann. Target Acquiror Value EBITDA EBIT ----------------------------------------------------------------------------------------------------------------------- 05/09/00 p GNB Technologies Exide Corporation $ 368.0 5.3x 10.0x 02/15/00 Dr. Meleghy GmbH & Co. KG Tower Automotive 110.0 5.2 9.2 02/15/00 Invensys plc - Australian Axle & Stamping Dana Corporation 63.0 NA 5.9 02/01/00 p Jason Inc. Management/Saw Mill Capital 335.0 6.5 10.0 01/28/00 Invensys plc - Automotive Sealing Systems CVC Capital Partners 400.0 NA 7.3 01/20/00 Mark IV BC Partners 2,000.0 7.1 10.5 01/07/00 Tritech Precision Carlyle Group 297.3 7.2 15.0 12/24/99 Invensys plc - Automotive Anti-Vibration Business Trelleborg AB 250.0 NA 8.1 12/14/99 Transportation Technologies Industries, Inc. Management 381.5 5.2 7.3 11/23/99 TRW -Lucas Diesel Systems Delphi Automotive 871.0 5.9 NA 11/08/99 Autocam Aurora Capital Group 236.6 7.2 12.6 08/03/99 Eaton Fluid Power Division Borg Warner 264.6 5.5 7.0 07/27/99 Standard Products Cooper Tire & Rubber Co. 757.4 6.2 11.4 06/23/99 Citation Corporation Kelso & Company 620.0 7.1 13.3 06/15/99 Active Tool & Manufacturing Tower Automotive 325.0 7.2 9.0 04/28/99 Walbro Corporation TI Group plc 570.6 7.2 13.3 04/27/99 Hilite Industries Carreras, Kestner & Co. 94.0 6.6 9.2 04/21/99 J.L. French Hidden Creek Industries 629.2 7.6 13.6 03/11/99 MPS Industries American Axle 60.0 6.3 8.6 02/12/99 Colfor American Axle 170.0 7.1 10.6 01/26/99 Adwest Automotive Dura Automotive 330.0 7.6 10.7 01/19/99 Excel Industries Dura Automotive 475.6 5.7 13.1 01/04/99 Volvo - Heavy Truck Axle Division Meritor 130.0 4.8 8.7 ----------------------------------------------------------------------------------------------------------------------- Mean 6.4x 10.2x Median 6.6 10.0 -----------------------------------------------------------------------------------------------------------------------
Source: Publicly available information P = Pending SALOMON SMITH BARNEY -------------------- A member of citigroup 21 PROJECT HARBOR - CONFIDENTIAL D. Discounted Cash Flow Analysis SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Discounted Cash Flow Analysis - Management Estimate (Dollars in Millions) Fiscal Year Ending December 31, -------------------------------------------------------- 2000 2001 2002 2003 2004 ------------------------------------------------------------------------------- Revenues $1,759.7 $1,934.6 $2,116.5 $2,276.0 $2,443.0 Growth 4.1% 9.9% 9.4% 7.5% 7.3% EBITDA $ 320.8 $ 376.6 $ 419.1 $ 456.3 $ 489.9 EBITDA Margin 18.2% 19.5% 19.8% 20.0% 20.1% EBIT $ 230.0 $ 279.9 $ 317.2 $ 349.3 $ 377.7 EBIT Margin 13.1% 14.5% 15.0% 15.3% 15.5% Capital Expenditure 99.9 106.3 105.4 100.0 106.7 Unlevered Free Cash Flow $ 194.7 $ 153.4 $ 181.7 $ 216.2 $ 229.4 ------------------------------------------------------------------------------- Terminal EBITDA Multiple Range Terminal EBITDA Multiple Range ------------------------------ ------------------------------ 4.00x 4.50x 5.00x 4.00x 4.50x 5.00x ------------------------------ ------------------------------ Implied Terminal P/E Multiple(a) Implied Terminal P/E Multiple(a) -------------------------------- -------------------------------- 5.6x 6.5x 7.4x 5.6x 6.5x 7.4x -------------------------------- -------------------------------- Terminal Value Terminal Value -------------------------------- -------------------------------- $1,932 $2,174 $2,416 $1,932 $2,174 $2,416 -------------------------------- -------------------------------- Equity Value per Share WACC Present Value of Firm @ 6/30/00 WACC as of 6/30/00(b) ----------------------------------------- ------------------------------- 9.00% $2,027 $2,191 $2,355 9.00% $17.13 $20.61 $24.09 9.50% 1,993 2,153 2,314 9.50% 16.41 19.82 23.23 10.00% 1,960 2,117 2,274 10.00% 15.70 19.04 22.38 ----------------------------------------- ------------------------------- --------- Source: Management's May 2000 projections. Note: Equity Value equals Firm Value less total debt and preferred of $1,336 million, plus cash of $3 million, less other adjustments $12 million, plus proceeds from sale of equity investments of $125 million (net of taxes of $26 million), plus option proceeds of $25 million. (a) One year forward P/E multiple. (b) Based on 47.1 million fully diluted shares outstanding (out-of-the-money convertible subordinated debentures not included). SALOMON SMITH BARNEY -------------------- A member of citigroup 22 PROJECT HARBOR - CONFIDENTIAL E. Weighted Average Cost of Capital Analysis SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Weighted Average Cost of Capital Analysis SELECTED BETAS -- COMPARABLE COMPANIES(c) WACC -- EQUITY-BASED CALCULATION ---------------------------------------------------- ------------------------------------------------------------------ Equity Range ---------------- Company Beta Low High ==================================================== ================================================================== Amcast Industrial Corporation (AIZ) 0.80 U.S. Risk Free Rate (10 Year U.S. Treasury)(a) 5.98% 5.98% American Axle & Manufacturing (AXL) NM (f) Borg-Warner Automotive (BWA) 1.11 Equity Market Risk Premium (b) 5.50% 7.50% Dura Automotive Systems Inc. (DRRA) 1.51 Equity Beta (c) 1.08 1.08 Hayes Lemmerz International, Inc. (HAZ) 0.62 ------------------------------------------------------------------- Intermet Corporation (INMT) 1.05 Adjusted Equity Market Risk premium 5.93% 8.09% Simpson Industries, Inc. (SMPS) 0.43 Superior Industries International (SUP) 1.18 Tower Automotive, Inc. (TWR) 1.48 Cost of Equity 11.91% 14.07% ---------------------------------------------------- Median 1.08 ---------------------------------------------------- Cost of Debt ------------------------------------------------------------------ U.S. Risk Free Rate (10 Year U.S. Treasury)(a) 5.98% 5.98% Credit Spread(d) 4.00% 4.00% ------------------------------------------------------------------ Cost of Debt (Pretax) 9.98% 9.98% Effective Marginal tax Rate(e) 35.00% 35.00% ------------------------------------------------------------------ Cost of Debt (Aftertax) 6.49% 6.49% Debt/Capitalization (Market) 57.50% 57.50% WACC 8.79% 9.71% ------------------------------------------------------------------
(a) As of July 25, 2000. (b) Ibbotson Associates. Based on Data from 1926-1995. (c) Historical beta based on BARRA, Inc. data. (d) Salomon Smith Barney estimate. (e) Based on Harbor's 1999 effective marginal tax rate, from 12/31/99 10-K. (f) Excluded from beta calculation due to recent initial public offering on January 28, 1999. SALOMON SMITH BARNEY -------------------- A member of citigroup 23 PROJECT HARBOR - CONFIDENTIAL F. Harbor Equity Investments SALOMON SMITH BARNEY -------------------- A member of citigroup PROJECT HARBOR - CONFIDENTIAL Harbor Equity Investments - Excluding Saturn O CVC is expected to purchase the following investments for $125.0 million of total consideration pre-tax ($99.1 million after-tax) O The valuation of Harbor's equity investments is impacted by liquidity issues o Limited public float and trading in public investments o Private company illiquidity (Dollars in Milions) Percent Estimated Tax After-tax Management Entity Owned Value Basis Value Valuation Methodology --------------------------- ------- --------- ----- --------- ------------------------------------------------------ PUBLICLY TRADED Titan International(a) 16% $16.5 $ 3.0 $11.8 Current market value of shares Delco Remy International(a) 12% 23.1 6.0 17.1 Current market value of shares Tower Automotive(a) <1% 4.7 2.0 3.8 Current market value of shares NON-PUBLIC(B) MSX International 45% 90.0 20.0 65.5 5.8x midpoint of pro forma 1999 and 2000E EBITDA Advanced Accessory System 9% 10.0 3.0 7.6 6.25x 2000 EBITDA American Commercial Plastic 20% 6.4 7.0 6.6 Includes $5.4 million debt plus estimated equity value ICI 15% 3.6 3.4 3.5 Value at time of purchase Qualitor 18% 10.6 10.6 10.6 Value at time of purchase Eliminations and other (4.3) (3.9) (3.5) ------ ----- ------ Total $160.6 $51.1 $122.9 ====== ===== ====== Current CVC Purchase Price $125.0 $51.1 $ 99.1 ====== ===== ====== Implied Discount (22%)
(a) Based on share prices as of July 28, 2000 (b) Management estimates as of June 25, 2000 SALOMON SMITH BARNEY -------------------- A member of citigroup 24 PROJECT HARBOR - CONFIDENTIAL Harbor Equity Investments - Saturn ILLUSTRATIVE SATURN VALUATION BASED ON S-1 FILING RANGE (A) (In millions, except per share data) Implied Equity Price Range Value ----------------- ----------------- Shares Low High Low High ------ ------ ------ ------ ------ Total Pro Forma for IPO 36.94 $10.00 - $12.00 $369.4 $443.3 Harbor Proceeds(b)(c) 4.93 10.00 - 12.00 45.9 - 55.1 Harbor's remaining stake at IPO price(d) 5.85 10.00 - 12.00 58.5 - 70.2 ------ ------ ------ ------ ------ Total Harbor Stake 10.78 10.00 - 12.00 $104.4 - $125.2
PER SHARE PROCEEDS TO HARBOR SHAREHOLDERS Low High ------ ------ Total Value of Harbor Stake $104.4 $125.2 Less: First $18.0 million to Riverside (18.0) (18.0) Less: Next $22.0 million to Harbor shareholders (22.0) (22.0) Less: $16.7 million to Riverside (16.7) (16.7) ------ ------ Additional Proceeds 47.7 68.5 Less: 40% of additional proceeds allocated to Riverside (19.1) (27.4) ------ ------ Additional Proceeds to Harbor Shareholders 28.6 41.1 Total proceeds to Harbor shareholders(e) $ 50.6 $ 63.1 Shares eligible for merger consideration adjustment 47.058 47.058 Total Proceeds/Share $ 1.08 $ 1.34 ------ Estimate of Proceeds/Share(f) $ 1.20 -------
(a) Source: Saturn Electronics & Engineering Inc. S-1, filed on July 24, 2000. (b) Assumes over-allotment option is exercised. (c) Reflects 7% gross spread on IPO proceeds only. (d) Excludes fees associated with subsequent liquidation and distribution of shares not included in the IPO. (e) Includes the $22.0 million to Harbor above. (f) Rounded midpoint of implied range. SALOMON SMITH BARNEY -------------------- A member of citigroup 25