EX-15.A 3 dex15a.txt PRESENTATION MATERIALS Exhibit (a)(15) PRESENTATION MATERIALS OF HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC. Project Sun -------------------------------------------------------------------------------- PRESENTATION TO THE SPECIAL COMMITTEE TO THE BOARD OF DIRECTORS March 7, 2002 HOULIHAN LOKEY HOWARD & ZUKIN Financial Advisors 1930 Century Park West Los Angeles, California 90067 (310) 553-8871 http://www.hlhz.com Los Angeles New York Chicago San Francisco Washington, D.C. Minneapolis Dallas Atlanta Toronto -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Table of Contents --------------------------------------------------------------------------------
Section ------- Executive Summary ..................................................... A Due Diligence Summary ................................................. B Overview of HPAC ...................................................... C Overview of Deutsche Lufthansa AG ..................................... D Valuation Summary ..................................................... E Delisting Issue ....................................................... F Potential Alternatives Summary ........................................ G Exhibits -------- Synopses of Comparable Companies ................................. 1 Supplemental Valuation Schedules ................................. 2 ---------------------------------------------- Houlihan Lokey Howard & Zukin i
-------------------------------------------------------------------------------- Executive Summary -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Executive Summary Background We understand the following regarding Hawker Pacific Aerospace ("Company" or "HPAC" hereinafter) and its largest shareholder, Lufthansa Technik AG ("LHT"), a wholly-owned subsidiary of Deutsche Lufthansa AG ("Lufthansa"). The Company's common shares are traded on the NASDAQ. LHT currently owns 73.25 percent of the Company on a fully diluted basis, including a purchase of 715,530 shares on February 25, 2002. On the same day, LHT announced that was contemplating a launch of a tender offer for all of the HPAC shares it does not already own at a price between $2.90 and $3.25 per share. In response to this announcement, and in anticipation of a definitive offer from LHT, the Company has formed a special committee of its Board of Directors (the "Committee") to evaluate any such offer. On Monday March 4, 2002, LHT communicated to the Company the firm intention to pursue the tender offer at $3.25 per share. LHT's offer to purchase the shares of the Company it does not already hold and other related transactions disclosed to Houlihan Lokey Howard & Zukin are referred to collectively herein as the "Transaction." Role of Houlihan Lokey Howard & Zukin Houlihan Lokey Howard & Zukin ("Houlihan Lokey") has been retained on behalf of the Committee. The Committee has requested that Houlihan Lokey render an opinion as to the fairness, from a financial point of view, to the public stockholders of the Company of the consideration to be received by them in connection with the Transaction (the "Opinion"). The Opinion shall not address the Company's underlying business decision to effect the Transaction. --------------------------------------------- Houlihan Lokey Howard & Zukin 1 -------------------------------------------------------------------------------- Due Diligence Summary -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Due Diligence Summary -------------------------------------------------------------------------------- Due Diligence Summary In connection with this Opinion, we have made such reviews, analyses and inquiries as we have deemed necessary and appropriate under the circumstances. Among other things, we have: 1. met with certain members of the senior management of HPAC to discuss the operations, financial condition, future prospects and projected operations and performance of HPAC; 2. visited certain facilities and business offices of HPAC; 3. reviewed the HPAC's annual reports to shareholders and on Form 10-K for the fiscal years ended December 31, 2000 and quarterly reports on Form 10-Q for the three quarters ended September 30, 2001, and Company-prepared interim financial statements for the 12 month period ended December 31, 2001, which HPAC's management has identified as being the most current financial statements available; 4. reviewed the Management Projections Presented to LHT, dated November 20, 2001 and Modified Management Projections dated March 5, 2002 prepared by HPAC's management, with respect to the Company's future financial performance for the years ending December 31, 2002 through 2004; 5. reviewed the historical market prices and trading volume for HPAC's publicly traded securities; 6. reviewed certain other publicly available financial data for certain companies that we deem comparable to the Company; 7. reviewed the letter from NASDAQ dated, February 14, 2002 to HPAC regarding the May 15, 2002 deadline for the Company to regain compliance under NASDAQ's listing requirements in order for the Company's securities to remain listed on the NASDAQ; 8. reviewed certain financial data regarding historic acquisitions made by Lufthansa; and 9. conducted such other studies, analyses and inquiries as we have deemed appropriate. --------------------------------------------- Houlihan Lokey Howard & Zukin 3 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Due Diligence Summary -------------------------------------------------------------------------------- Due Diligence Summary (Continued) Limiting Factors We have relied upon and assumed, without independent verification, that the financial information, forecasts and projections provided to us have been reasonably prepared and reflect the best currently available estimates of the future financial results and condition of HPAC, and that there has been no material change in the assets, financial condition, business or prospects of HPAC since the date of the most recent financial statements made available to us. --------------------------------------------- Houlihan Lokey Howard & Zukin 4 -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Company Overview HPAC repairs and overhauls fixed wing and helicopter landing gear, hydromechanical components and wheels, brakes and braking system components for a diverse international customer base, including commercial airlines, air cargo operators, domestic government agencies, aircraft leasing companies, aircraft parts distributors and original equipment manufacturers ("OEMs"). HPAC is a certified Federal Aviation Administration ("FAA") and Joint Airworthiness Authority ("JAA") approved repair station, and has also been granted Parts Manufacturer Approvals by the FAA. In addition, HPAC distributes, manufactures and sells new and overhauled spare parts and components for both fixed wing aircraft and helicopters. HPAC has long-term service contracts with many customers, including Federal Express Corporation ("Federal Express"), American Airlines, Inc. ("American Airlines"), the United States Coast Guard, British Airways, US Airways, Inc. ("US Airways"), EVA Airways, UPS, China Southern and Shanghai Airlines. HPAC is organized into two divisions and one wholly-owned subsidiary. HPAC's principal operating division and headquarters is located in Sun Valley (Los Angeles), California. HPAC's Hawker Pacific Aerospace, Ltd., subsidiary operates a major overhaul facility in Hayes (London) in the United Kingdom. HPAC also operates a small hydraulic repair facility in Amsterdam, The Netherlands. --------------------------------------------- Houlihan Lokey Howard & Zukin 6 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Financial Profile ($ in millions, except per share amounts)
HPAC - MARKET OVERVIEW Pre-Announcement Stock Price on 02/25/02 $2.12 Post-Announcement Stock Price on 02/26/02 $3.24 Current Stock price on 3/5/02 $3.19 52-Week High on 4/25/01 $4.20 52-Week Low on 12/19/01 $1.50 ---------------------------------------------------------------------- Pre-Announcement Price Discount to 52-Week High -49.5% Pre-Announcement Price Premium to 52-Week Low 41.3% Post-Announcement Price Discount to 52-Week High -22.9% Post-Announcement Price Premium to 52-Week Low 116.0% ---------------------------------------------------------------------- Basic Shares Outstanding 10,160,675 Add: In the Money Options & Warrants 47,000 Fully Converted Shares Outstanding 10,207,675 Less: Shares Purchased 35,630 Fully Diluted Shares Outstanding 10,172,045 Current Price Per Share $3.19 Current Market Value of Equity $32.4 Debt at 12/31/01 $72.6 Cash at 12/31/01 1.6
HPAC - FINANCIAL SNAPSHOT Operating Revenue Income(1) Net Income(1) ------- --------- ------------- 1999 $82.3 $4.3 ($1.0) 2000 77.1 (2.3) (5.4) 2001 E 82.6 (3.5) (5.5) 2002 E 86.6 2.3 (1.0) 2003 E 95.2 5.3 0.9 Market Multiples ------------------------------------------- EV / EV / MVE / Revenues Oper. Income Net Income -------- ------------ ---------- 2001 E 1.25 x NMF NMF 2002 E 1.19 x NMF NMF 2003 E 1.09 x 19.5 x 35.4 x
Other Issues ------------ - HPAC is currently facing the possibility of being delisted from the Nasdaq. - The company has approximately $4.0 million negative book value as of December 31, 2001. - LHT has continued to provide funding to HPAC either directly or through the facilitation loan facilities with German financial institutions. Footnotes: NMF - Not Meaningful (1) FYE 1999 TO 2001E figures have been adjusted to account for non-recurring and one-time charges, see Representative Levels for additional detail. --------------------------------------------- Houlihan Lokey Howard & Zukin 7 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Trading Analysis ($ in millions)
Daily Trading Volume/(1)/ ------------------------------------------------------------------------------------------------------------ 1 Month Public Company 1 Month % of Float Pre-Announce % of Float 3 Months % of Float 6 Months % of Float -------------- -------------------------- ------------------------- ------------------------- -------------------------- Aar Corp 110.5 0.4% 102.2 0.4% 108.7 0.4% 98.0 0.4% Aviall Inc 79.8 0.4% 67.8 0.4% 111.6 0.6% 103.9 0.6% First Aviation Svcs Inc 0.7 0.0% 1.3 0.0% 1.5 0.0% 1.2 0.0% Mercury Air Group Inc 5.6 0.2% 5.5 0.2% 7.1 0.3% 8.4 0.4% Pemco Aviation Inc 2.2 0.1% 2.8 0.2% 4.5 0.2% 5.1 0.3% Sequa Corp -Cl A 4.9 0.1% 5.7 0.1% 5.9 0.1% 5.9 0.1% BBA Group plc 1,816.4 NA 1,780.6 NA 1,942.9 NA 2,520.2 NA Vector Aerospace 34.3 NA 32.4 NA 34.9 NA 31.8 NA Median 19.9 0.2% 19.0 0.2% 21.0 0.6% 20.1 0.5% ------------------------------------------------------------------------------------------------------------------------------------ Hawker Pacific Aerospace 15.1 0.6% 3.3/(4)/ 0.1% 4.3/(4)/ 0.2% 4.8/(4)/ 0.2% ------------------------------------------------------------------------------------------------------------------------------------ Public Company 1 Year % of Float Float/(2)(3)/ -------------- ---------------------------- --------------- Aar Corp 92.4 0.4% 25,590.0 Aviall Inc 100.2 0.6% 18,210.0 First Aviation Svcs Inc 1.3 0.0% 3,160.0 Mercury Air Group Inc 8.9 0.4% 2,310.0 Pemco Aviation Inc 5.0 0.3% 1,860.0 Sequa Corp -Cl A 6.1 0.1% 4,200.0 BBA Group plc 2,696.5 NA NA Vector Aerospace 34.7 NA NA Median 21.808 0.6% 3,680.0 ------------------------------------------------------------------------------ Hawker Pacific Aerospace 4.4/(4)/ 0.2% 2,540.0 ------------------------------------------------------------------------------
Enterprise Market Value Volatility/(2)/ Value of Equity -------------------- ---------- ------------ Insider Institutional Public Company 30 Day 90 Day 3/1/02 3/1/02 Ownership/(6)/ Ownership/(6)/ -------------- -------- ---------- ---------- ------------ -------------- --------------- Aar Corp 34.0% 46.0% $ 407.6 $ 199.8 52.0% 84.0% Aviall Inc 65.5% 58.9% 263.8 133.2 27.0% 50.0% First Aviation Svcs Inc 52.5% 58.1% 21.8 33.1 56.0% 30.0% Mercury Air Group Inc 44.5% 52.0% 95.3 30.4 32.0% 21.0% Pemco Aviation Inc 23.6% 62.8% 81.3 67.6 83.0% 17.0% Sequa Corp -Cl A 34.5% 29.9% 1,115.3 539.1 50.0% 31.0% BBA Group plc 22.8% 40.9% 2,622.3 1,662.0 NA NA Vector Aerospace 57.9% 69.5% 173.5 71.2 NA NA Median 39.5% 55.0% 218.7 $ 102.2 51.0% 30.5% ------------------------------------------------------------------------------------------------------------ Hawker Pacific Aerospace 182.0% 128.2% $ 92.5/(5)/ $ 21.5/(5)/ 2.0% 82.9%/(2)/ ------------------------------------------------------------------------------------------------------------ Stock Analyst Revenue Public Company Exchange Coverage(#)/(2)/ Multiples -------------- ---------- ---------------- ----------- Aar Corp NYSE 4 0.53 x Aviall Inc NYSE 2 0.51 x First Aviation Svcs Inc NASDAQ 0 0.21 x Mercury Air Group Inc AMEX 0 0.22 x Pemco Aviation Inc NASDAQ 0 0.50 x Sequa Corp -Cl A NYSE 0 0.62 x BBA Group plc London 25 1.20 x Vector Aerospace Toronto 7 0.80 x Median 0.53 x ------------------------------------------------------------------------- Hawker Pacific Aerospace NASDAQ 0/(2)/ 1.12 x -------------------------------------------------------------------------
(1) Per Compustat, figures represented in thousands. (2) Per Bloomberg. (3) Float represented in thousands of shares. (4) Average trading volume for HPAC reflects prior to the announcement of LHT contemplated acquisition of the remaining shares outstanding. (5) Figures based upon stock price prior to LHT's announced contemplation of acquiring the remaining shares outstanding. (6) Per Yahoo Finance. --------------------------------------------- Houlihan Lokey Howard & Zukin 8 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Financial Performance - Historical ($ in millions)
1999A FYE ------------------------------------------------------------------ 1Q99 2Q99 3Q99 4Q99 1999A ================================================================== Revenue $ 16.2 $ 17.4 $ 23.5 $ 25.3 $ 82.3 COGS 12.8 18.1 18.5 19.8 69.2 ------ ------ ------- ------ ------- Gross profit 3.4 (0.7) 5.0 5.5 13.1 SG&A 2.2 2.5 2.5 3.2 10.4 ------ ------ ------- ------ ------- Operating income 1.2 (3.2) 2.5 2.3 2.7 Interest (income)/expense 1.1 1.5 1.6 1.7 6.0 Other expenses - - - 0.1 0.1 ------ ------ ------- ------ ------- Pretax income 0.1 (4.7) 0.8 0.5 (3.3) Income (benefit)/taxes 0.0 (1.8) 0.3 0.4 (1.1) ------ ------ ------- ------ ------- Net income 0.0 (3.0) 0.5 0.2 (2.3) Other - - - 0.3 0.3 Preferred Stock Dividend - - - - - ------ ------ ------- ------ ------- Total - - - 0.3 0.3 Net income available to shareholders $ 0.0 $ (3.0) $ 0.5 $ (0.1) $ (2.5) Basic 5.822 5.822 5.858 5.822 5.822 Dilutive 0.008 - 0.005 - - ------ ------ ------- ------ ------- Total Shares Outstanding 5.830 5.822 5.862 5.822 5.822 EPS $ 0.01 $(0.51) $ 0.09 $(0.02) $ (0.44) Margins ------- Gross Profit 21.0% -4.0% 21.1% 21.6% 15.9% COGS 79.0% 104.0% 78.9% 78.4% 84.1% SG&A 13.5% 14.5% 10.6% 12.5% 12.6% Operating income 7.4% -18.6% 10.5% 9.1% 3.3% Net income 0.2% -17.1% 2.2% 0.6% -2.7%
2000A FYE ------------------------------------------------------------------ 1Q00 2Q00 3Q00 4Q00 2000A ================================================================== Revenue $ 21.5 $ 20.3 $ 18.5 $ 16.7 $ 77.1 COGS 17.4 16.9 17.5 17.9 69.7 ------ ------ ------- ------ ------- Gross profit 4.1 3.4 1.0 (1.1) 7.4 SG&A 2.9 2.2 2.9 3.1 11.1 ------ ------ ------- ------ ------- Operating income 1.2 1.2 (1.9) (4.2) (3.7) Interest (income)/expense 1.7 2.3 2.6 2.2 8.8 Other expenses 0.1 0.0 1.8 (0.0) 1.9 ------ ------ ------- ------ ------- Pretax income (0.6) (1.1) (6.3) (6.4) (14.4) Income (benefit)/taxes (0.2) (0.5) 4.8 (0.0) 4.1 ------ ------ ------- ------ ------- Net income (0.4) (0.7) (11.1) (6.4) (18.5) Other 1.1 0.8 - 0.0 2.0 Preferred Stock Dividend 0.1 0.1 0.1 0.1 0.3 ------ ------ ------- ------ ------- Total 1.2 0.9 0.1 0.1 2.3 Net income available to shareholders $ (1.6) $ (1.6) $ (11.1) $ (6.5) $ (20.7) Basic 5.823 5.825 5.855 7.024 7.024 Dilutive - - - - - ------ ------ ------- ------ ------- Total Shares Outstanding 5.823 5.825 5.855 7.024 7.024 EPS $(0.27) $(0.27) $ (1.90) $(0.92) $ (2.95) Margins ------- Gross Profit 18.9% 16.8% 5.4% -6.7% 9.5% COGS 81.1% 83.2% 94.6% 106.7% 90.5% SG&A 13.4% 11.0% 15.7% 18.3% 14.4% Operating income 5.5% 5.8% -10.3% -25.0% -4.8% Net income -1.6% -3.3% -59.8% -38.2% -24.0%
2001E FYE ------------------------------------------------------------------- 1Q01 2Q01 3Q01 4Q01E 2001E/(1)/ =================================================================== Revenue $ 18.9 $ 21.2 $ 22.5 $ 19.9 $ 82.6 COGS 14.9 20.4 19.5 19.7 74.5 ------ ------- ------- ------- ------- Gross profit 4.0 0.9 3.0 0.2 8.1 SG&A 3.1 3.3 2.8 3.8 12.9 ------ ------- ------- ------- ------- Operating income 0.9 (2.4) 0.3 (3.6) (4.8) Interest (income)/expense 2.0 1.3 1.2 1.1 5.7 Other expenses - (0.0) - 0.0 (0.0) ------ ------- ------- ------- ------- Pretax income (1.1) (3.7) (1.0) (4.7) (10.5) Income (benefit)/taxes - - - - - ------ ------- ------- ------- ------- Net income (1.1) (3.7) (1.0) (4.7) (10.5) Other - - - - - Preferred Stock Dividend - - - - - ------ ------- ------- ------- ------- Total - - - - - Net income available to shareholders $ (1.1) $ (3.7) $ (1.0) $ (4.7) $ (10.5) Basic 7.581 10.161 10.162 10.162 10.162 Dilutive - - - - - ------ ------- ------- ------- ------- Total Shares Outstanding 7.581 10.161 10.162 10.162 10.162 EPS $(0.14) $ (0.37) $ (0.10) $ (0.46) $ (1.03) Margins ------- Gross Profit 21.2% 4.1% 13.5% 1.0% 9.8% COGS 78.8% 95.9% 86.5% 99.0% 90.2% SG&A 16.2% 15.5% 12.4% 19.1% 15.7% Operating income 4.9% -11.4% 1.1% -18.0% -5.8% Net income -5.7% -17.5% -4.3% -23.7% -12.7%
Footnotes: --------- (1) FYE 2001 figures are based upon management's preliminary financial results. --------------------------------------------- Houlihan Lokey Howard & Zukin 9 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Financial Performance - Projected ($ in millions)
------------------------------------ 2002P/(1)/ Fiscal Year Ending December 31,/(1)/ -------------------------------------- ------------------------------------ 1Q02 2Q02 3Q02 4Q02 2002P 2003P 2004P ====================================== ==================================== Revenue $ 20.6 $ 21.3 $ 23.6 $ 21.1 $ 86.6 $ 95.2 $ 105.0 COGS 17.7 17.6 20.1 17.4 72.7 77.3 84.0 ------- ------- ------- ------- ------- ------- ------- Gross profit 3.0 3.7 3.6 3.7 13.9 17.9 21.0 SG&A 2.9 2.9 2.9 2.9 11.6 12.6 14.0 ------- ------- ------- ------- ------- ------- ------- Operating income 0.1 0.8 0.6 0.7 2.3 5.3 7.0 Interest (income)/expense 1.0 1.0 1.0 1.0 4.0 3.8 3.3 Other expenses 0.0 0.0 0.0 0.0 0.0 -- -- ------- ------- ------- ------- ------- ------- ------- Pretax income (0.9) (0.2) (0.4) (0.3) (1.7) 1.5 3.7 Income (benefit)/taxes -- -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- Net income (0.9) (0.2) (0.4) (0.3) (1.7) 1.5 3.7 Other -- -- -- -- -- -- -- Preferred Stock Dividend -- -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- Total -- -- -- -- -- -- -- Net income available to shareholders $ (0.9) $ (0.2) $ (0.4) $ (0.3) $ (1.7) $ 1.5 $ 3.7 Basic 10.162 10.162 10.162 10.162 10.162 10.162 10.162 Dilutive -- -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- Total Shares Outstanding 10.162 10.162 10.162 10.162 10.162 10.162 10.162 EPS $ (0.09) $ (0.02) $ (0.04) $ (0.03) $ (0.17) $ 0.15 $ 0.36 Margins ------- Gross Profit 14.3% 17.4% 15.0% 17.5% 16.1% 18.8% 20.0% COGS 85.7% 82.6% 85.0% 82.5% 83.9% 81.2% 80.0% SG&A 13.8% 13.6% 12.3% 14.0% 13.4% 13.2% 13.3% Operating income 0.5% 3.8% 2.7% 3.6% 2.7% 5.6% 6.7% Net income -4.4% -0.9% -1.6% -1.2% -2.0% 1.6% 3.5%
Footnotes: --------- (1) Projections are based upon management's modified representations of future performance. -------------------------------------------- Houlihan Lokey Howard & Zukin 10 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Historical Balance Sheet ($ in millions)
As of December 31, ------------------------------------------------- Assets 1998 1999 2000 2001E ------ ------------------------------------------------- Current Assets: Cash & Equivalents $ 0.560 $ 2.227 $ 3.349 $ 1.604 Accounts Receivable 12.303 18.506 14.954 13.606 Inventories 21.645 24.680 27.398 31.320 Deferred Tax Assets 0.000 0.531 1.668 0.000 Other Current Assets 0.731 0.550 0.855 2.216 ------------------------------------------------- Total Current Assets 35.239 46.494 48.224 48.745 ------------------------------------------------- Net Fixed Assets 47.175 51.435 48.048 43.750 Other Assets 4.823 5.234 1.727 1.991 ------------------------------------------------- Total Assets $ 87.237 $103.163 $ 97.999 $ 94.486 ================================================= Liabilities & Stockholders' Equity ---------------------------------- Current Liabilities: Accounts Payable $ 12.171 $ 13.402 $ 9.962 $ 9.975 Current Maturities 48.465 53.240 2.334 1.509 Accrued Expenses 1.242 4.186 6.082 9.669 Other Current Liabilities 2.456 4.892 7.025 5.173 ------------------------------------------------- Total Current Liabilities 64.334 75.720 25.403 26.326 ------------------------------------------------- Long-Term Debt $ 2.500 $ 8.117 $ 70.135 $ 71.062 Other Liabilities 0.000 0.000 0.000 1.179 Deferred Taxes 0.000 0.000 2.980 0.000 ------------------------------------------------- Total Liabilities 66.834 83.837 98.518 98.567 ------------------------------------------------- Stockholders' Equity: Preferred Stock $ 0.000 $ 1.792 $ 0.000 $ 0.000 Common Stock 21.108 22.384 28.682 36.030 Retained Earnings (0.705) (4.850) (29.201) (40.112) ------------------------------------------------- Net Stockholders' Equity 20.403 19.326 (0.519) (4.081) ------------------------------------------------- Total Liabilities & Stockholders' Equity $ 87.237 $103.163 $ 97.999 $ 94.486 =================================================
-------------------------------------------- Houlihan Lokey Howard & Zukin 11 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Market Perspectives - 52 Week Returns Prior to Announcement ================================================================================ MARKET PERFORMANCE [PRICE PERFORMANCE GRAPH APPEARS HERE] ================================================================================ 52-Week Price Performance - HPAC: -32.2% - HLHZ MRO Index: -7.6% - S&P 500 Index: -12.5% - Nasdaq Composite Index: -23.3% -------------------------------------------- Houlihan Lokey Howard & Zukin 12 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Market Perspectives - Returns Since September 20, 2000 ================================================================================ MARKET PERFORMANCE SINCE SEPTEMBER 20, 2000 [PRICE PERFORMANCE GRAPH APPEARS HERE] ================================================================================ Price Performance Since Sept. 20, 2000 - HPAC: -50.7% - HLHZ MRO Index: -10.5% - S&P 500 Index: -21.0% - Nasdaq Index: -52.1% -------------------------------------------- Houlihan Lokey Howard & Zukin 13 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- Investor Profile
-------------------------------------------------------------------------------------- Percent Holder Name Portfolio Name Share Held/(1)/ Outstanding -------------------------------------------------------------------------------------- Lufthansa Technik NA 7.451/(2)/ 73.3% -------------------------------------------------------------------------------------- Dimensional Fund Dimensional Fund 0.392 3.9% Royce & Associates Royce & Associates 0.005 0.0% Michael Riley NA 0.029 0.3% Keybank National Keybank National Company 0.017 0.2% Northern Trust Northern Trust Corp. 0.010 0.1% Barclays Global Barclays Bank plc 0.007 0.1% Mellon C. Baird NA 0.002 0.0% Joel F. McIntyre NA 0.002 0.0% Deutsche Bank Deutsche Bank AG 0.000 0.0% -------------------------------------------------------------------------------------- Total 0.464 4.6% Total Basic Shares Outstanding 10.162
NA - Not Available Source: Bloomberg (1) Number of shares represented in millions. (2) LHT's holdings include 57,412 beneficiary shares held by certain members of management, committed to vote along with LHT as per the Shareholders Rights and Voting Agreement dated September 20, 2000. -------------------------------------------- Houlihan Lokey Howard & Zukin 14 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- HPAC - Historical Events Study -------------------------------------------------------------------------------- HPAC HISTORICAL CLOSING PRICE AND TRADING VOLUME -------------------------------------------------------------------------------- [HISTORICAL HPAC CLOSING PRICE AND TRADING VOLUME GRAPH APPEARS HERE] Date Stock Price Volume(000's) ---- ----------- ------------- A - September 21, 2000 $6.00 227.0 B - November 15, 2000 $4.72 31.1 C - November 17, 2000 $4.50 12.6 D - November 22, 2000 $3.41 74.2 E - December 14, 2000 $4.50 30.6 F - March 19, 2001 $3.25 8.0 G - May 15, 2001 $3.10 4.1 H - June 27, 2001 $3.26 0.0 I - August 13, 2001 $3.01 5.6 J - November 14, 2001 $2.50 14.8 K - January 16, 2002 $2.35 0.3 L - February 25, 2002 $2.12 1.6 --------------------------------------------- Houlihan Lokey Howard & Zukin 15 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- HPAC -- Significant Historical Events A September 21, 2000 HPAC announced with LHT, that LHT acquired a controlling interest in the Company. LHT acquired its controlling interest in a private transaction by purchasing 40 percent of the Company's common stock from the shareholders of Unique Investment Corporation. LHT also purchased all outstanding shares of the Company's Series C convertible preferred stock from the private investor group that provided such funding to the Company in December 1999. B November 15, 2000 HPAC announced the closing of a $65 million debt facility with two German banks: Landesbank Hessen-Thuringen Girozentrale ("Helaba") and KfW (Kreditanstalt fur Wiederaufbau). Proceeds from the facility, which was entirely drawn in one funding, had been used to retire the Company's obligations to Heller Financial Inc. C November 17, 2000 HPAC announced that it would delay the issuance of its Quarterly Report on Form 10-Q. The Company previously announced that it had terminated the services of its former independent auditors, and the Company is currently in the process of retaining a new accounting firm. D November 22, 2000 HPAC was notified by Nasdaq that its securities are subject to delisting from The Nasdaq National Market because the Company had not filed its quarterly report on Form 10-Q in a timely manner. The Company announced that it would delay the issuance of its 10-Q report as the Company had not yet received independent account review. E December 14, 2000 HPAC announced its financial results for the third quarter of fiscal year 2000. Revenue for the quarter decreased to $18.5 million from $23.5 million in the third quarter of 1999, while year-to-date revenue increased to $60.3 million from $57.1 million in the first nine months of 1999. Most of the revenue growth was derived from new landing gear contracts and increased component services in the Sun Valley division.
--------------------------------------------- Houlihan Lokey Howard & Zukin 16 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- HPAC -- Significant Historical Events (Continued) F March 19, 2001 HPAC announced that on March 16, 2001, LHT converted into equity approximately $9.8 million of debt and accrued interest owed to it by Hawker Pacific. The conversion was executed pursuant to a February 6, 2001, debt exchange agreement between the parties. The conversion rate of $3.125 per common share was set equal to the then-current market price, and was determined by the average of the closing bid prices on the five trading days immediately preceding the date of the agreement. Based upon this conversion rate, LHT was issued 3,136,952 shares of the Company's common stock. As a result of these transactions, LHT now owns or controls approximately 67 percent of the outstanding common stock of the Company. G May 15, 2001 The Company announced financial results for the first quarter of fiscal year 2001. Revenue for the quarter decreased by 12 percent to $18.9 million from $21.5 million for the comparable period in 2000. The net loss available to common shareholders in the first quarter was $1.2 million, or $0.14 per basic and diluted share, a compared with $1.5 million, or $0.27 per basic and diluted share, in the prior year. H June 27, 2001 HPAC announced that its majority shareholder, LHT, has provided a revolving line of credit to the Company's wholly owned London subsidiary, Hawker Pacific Aerospace Ltd. The facility, which may be drawn up to an aggregate amount of 5.2 million British pounds sterling (approximately $7.4 million), must be repaid within 364 days.
--------------------------------------------- Houlihan Lokey Howard & Zukin 17 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of HPAC -------------------------------------------------------------------------------- HPAC -- Significant Historical Events (Continued) I August 13, 2001 HPAC announced financial results for the second quarter of fiscal year 2001. Second quarter revenue increased by 5 percent to $21.2 million from $20.3 million in 2000, while year-to-date revenue decreased by 4 percent to $40.1 million from $41.8 million in the prior comparable period. The company posted a net loss for the quarter of $3.7 million or $0.37 per common share, as compared with a net loss of $1.6 million or $0.27 per common share, in the second quarter of 2000. The Company also announced that it signed agreements with its majority shareholder, LHT, under which both parties have agreed to cooperate and support each other in providing aircraft component services to their combined customer base, and to provide each other access to their respective capabilities and capacities. The agreements also provided for the parties to continue developing a joint sales and marketing approach, and to further explore purchasing synergies. J November 14, 2001 HPAC announced financial results for the third quarter of fiscal year 2001. Third quarter revenue increased by 2 percent to $22.5 million from $18.5 million in 2000, while year-to-date revenue increased 4 percent to $62.7 million from $60.3 million in the comparable prior year period. The Company posted a net loss for the quarter of $1 million, or $0.10 per common share, as compared with a net loss of $11.1 million or $1.90 per common share, in the third quarter of 2000. K January 16, 2002 The Company announced that it had hired Richard Fortner as President and Chief Executive Officer. Mr. Fortner replaced Dave Lokken who had left the Company to pursue other business interests. Prior to joining HPAC, Mr. Fortner served as President of AAR Landing Gear Services at AAR Corp. L February 25, 2002 Deutsche Lufthansa AG's LHT unit announced that it was contemplating a cash tender offer for all of the shares of HPAC it doesn't already own. LHT would pay $2.90 to $3.25 a share in March for the Hawker shares the unit of Europe's second-biggest airline. LHT completed the purchases of 715,530 common shares of HPAC for $3.25 a share, raising its stake to 73 percent from 67 percent. In response, the Company has formed a committee to evaluate LHT's offer to buy its shares.
--------------------------------------------- Houlihan Lokey Howard & Zukin 18 -------------------------------------------------------------------------------- Overview of Deutsche Lufthansa AG -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of Deutsche Lufthansa AG -------------------------------------------------------------------------------- Company Description -------------------------------------------------------------------------------- LHT is a subsidiary of Deutsche Lufthansa AG, Europe's second largest passenger airline and cargo airline behind. With 375 jets, including code-sharing agreements, LHT serves about 340 destinations in 90 countries. With hubs in Frankfurt and Munich, the carrier is part of the Star Alliance that includes United Air Lines, Air Canada, and All Nippon Airways. LHT also has interests in travel-related businesses, including ground services, catering, and leisure travel services. LHT owns a stake in Amadeus, one of the world's biggest computer reservation systems, and it's expanding its shipping and logistics operations with partners Deutsche Post and DHL. -------------------------------------------------------------------------------- Historical Financial Performance /(1)/ ($ in millions)
Fiscal Year Ending December 31, ---------------------------------------------------------------------------- 1996 1997 1998 1999 2000 ============================================================================ Revenue $ 13,547.2 $ 12,874.6 $ 13,573.2 $ 12,892.2 $ 14,327.5 % Growth NA -5.0% 5.4% -5.0% 11.1% COGS 10,651.9 9,694.9 10,310.3 9,971.7 11,739.2 Gross profit 2,895.3 3,179.7 3,262.9 2,920.5 2,588.3 % Margin 21.4% 24.7% 24.0% 22.7% 18.1% EBIT 540.9 987.6 1,849.1 1,304.1 1,464.1 % Margin 4.0% 7.7% 13.6% 10.1% 10.2% EBITDA 1,443.0 1,803.6 2,863.8 2,244.7 2,427.8 % Margin 10.7% 14.0% 21.1% 17.4% 16.9% Net Income $ 359.7 $ 461.7 $ 857.2 $ 635.2 $ 649.4 % Margin 2.7% 3.6% 6.3% 4.9% 4.5% Shares Outstanding 381.6 381.6 381.6 381.6 381.6 EPS - before extraordinary items $ 0.94 $ 1.21 $ 2.25 $ 1.66 $ 1.70 Cash 1,216.8 2,038.2 1,953.1 783.7 957.8 Long-term debt 2,303.9 2,337.6 2,816.9 1,357.7 1,608.0 Debt to EBITDA 1.6 x 1.3 x 1.0 x 0.6 x 0.7 x
NA - Not Available (1) Source: Compustat and Worldscope. -------------------------------------------------------------------------------- Stock Price Performance Graph -------------------------------------------------------------------------------- [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] -------------------------------------------------------------------------------- Acquisition History --------------------------------------------------------------------------------
Announce Close Pnt. Pnt. Purchase Date Date Target Acquired Owned Price ------------------------------------------------------ ---------------------------------- 2/10/1999 3/30/1999 Hudson General Corp 100.0% 0.0% $ 133.3 3/11/1999 5/30/1999 SKY CHEFS 14.0% 33.0% 200.4 9/22/1999 9/22/1999 Air Dolomiti 26.0% 0.0% NA 11/9/1999 NA British Midland Airways Ltd. 20.0% 0.0% 151.1 5/3/2000 5/3/2000 Global Freight Exchange 10.0% 0.0% NA 9/21/2000 9/21/2000 Hawker Pacific Aerospace 40.0% 0.0% NA 9/21/2000 1/1/2001 Eurowings Luftverkehrs AG 24.9% 0.0% NA 1/23/2001 NA Composite International, Inc. 100.0% 0.0% NA 12/14/2001 Pending Swissair Flight Support AG 100.0% 0.0% NA
--------------------------------------------- Houlihan Lokey Howard & Zukin 20 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of Deutsche Lufthansa AG -------------------------------------------------------------------------------- LHT's Historical Ownership of HPAC
Common -------------------------- Prem./Disc. September 20, 2000 Shares to Market Preferred ------------------ ----------- ------------- ----------- Upon the closing the purchases for $4.12 per share on September 20, 2000, LHT 2,341,495 -36.3% became the record owner of 2,341,495 shares of Common Stock and controlled the 196,342 voting rights of an additional 196,342 shares of Common Stock. This transaction also gave LHT control over the voting rights of 129,786 options. Upon the closing of the Stock Purchase Agreement with Deephaven Private 300 Placement Trading, Ltd., LHT became the record owner of 300 shares of the Preferred Stock, representing 100% of the then issued and outstanding shares of the Preferred Stock. December 22, 2000 ----------------- LHT exercised its right to convert all 300 shares of the Preferred Stock and 1,106,982 -34.3% -300 accrued dividend into Common Stock at a conversion price equal to $2.71007 per share of Common Stock. As a result of this conversion, LHT acquired 1,106,982 shares of Common Stock. December 29, 2000 ----------------- LHT received a portion of the accrued dividends on the Preferred Stock in the 57,404 NA form of an additional 57,404 shares of Common Stock. March 16, 2001 -------------- On February 6, 2001, HPAC entered into an Exchange of Promissory Note with LHT 3,136,952 -2.0% ("Debt Conversion Agreement") whereby LHT agreed to cancel all of the principal and accrued interest under the Loan Agreement in exchange for shares of Common Stock. Under the Debt Conversion Agreement, the conversion price of $3.125 per share was set equal to the market price at the time the parties entered into the agreement, the market price was calculated based on the average of the closing bid prices for the prior five trading days preceding the date of the agreement. The Debt Conversion Agreement also contains certain covenants substantially similar to those in the Loan Agreement which continue beyond the debt conversion closing. On March 16, 2001, LHT retired the $9,300,000 plus $502,975 accrued interest under the Loan Agreement in exchange for the issuance by HPAC to LHT of 3,136,952 shares of Common Stock.
-------------------------------------------- Houlihan Lokey Howard & Zukin 21 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Overview of Deutsche Lufthansa AG -------------------------------------------------------------------------------- LHT's Historical Ownership of HPAC (Continued)
Common -------------------- Prem./Disc. Shares To Market Preferred --------- --------- --------- September 14, 2001 ------------------ The shareholders of HPAC approved the issuance of the Warrants and the issuance 35,582 NA of 35,582 shares of Common Stock (issued November 21, 2001) in payment of the remaining portion of the accrued and unpaid dividends on the Preferred Stock. LHT did not exercise the Warrants before their expiration. February 25, 2002 ----------------- LHT purchased for cash 426,600 shares of Common Stock from Royce & Associates, 426,600 53.3% Inc., 150,000 shares of Common Stock from Volksbanken-Kapitalanlageges 150,000 m.b.H., and 138,930 common shares from David Lokken, at a price per share of 138,930 $3.25 or a total purchase price of $2,325,472.50. ----------------------------------------------------------------------------------------------------------------------- TOTAL SHARES HELD BY LHT/(1)/ 7,451,357 -- Percentage of total HPAC Common Shares Outstanding/(2)/ 73.3%
(1) LHT's holdings include 57,412 beneficiary shares held by certain members of management, committed to vote along with LHT as per the Shareholders Rights and Voting Agreement dated September 20, 2000. (2) 10,160,675 HPAC common shares outstanding as of October 15, 2001. --------------------------------------------- Houlihan Lokey Howard & Zukin 22 -------------------------------------------------------------------------------- Valuation Summary -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Valuation Summary -------------------------------------------------------------------------------- Valuation Summary
Low High ----------- ------------ Market Approach --------------- Market Multiple Methodology Speculative Speculative Comparable Transaction Methodology $1.05 $1.99 Income Approach --------------- Discounted Cash Flow Methodology - Modified Management Case Speculative $0.04 Discounted Cash Flow Methodology - Management Case $0.33 $1.43 Pre-Announcement Share Price as of February 25, 2002 $2.12
--------------------------------------------- Houlihan Lokey Howard & Zukin 24 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Valuation Summary -------------------------------------------------------------------------------- Premium Study ---------------------------------------------------------------- LHT's Contemplated Cash Tender Offer ---------------------------------------------------------------- Low High ========== ========= Offer Range $2.90 -- $3.25 Price as of 2/25/02 $2.12 -- $2.12 Implied Premium 36.8% -- 53.3% 5-Day Average Share Price $2.19 $2.19 Implied Premium 32.4% -- 48.4% 10-Day Average Share Price $2.41 $2.41 Implied Premium 20.3% -- 34.8% 20-Day Average Share Price $2.44 $2.44 Implied Premium 18.6% -- 33.0% 30-Day Average Share Price $2.36 $2.36 Implied Premium/Discount 22.8% -- 37.6% ---------------------------------------------------------------- Implied EV / Revenue 0.86 x -- 0.86 x ---------------------------------------------------------------- -------------------------------------------- Premiums Paid for Minority Interests/(1)/ -------------------------------------------- Low High ========== ========== 1-Day ----- Range -11.1% -- 279.3% Median/(3)/ 27.6% Mean/(3)/ 48.4% 7-Days ------ Range -12.1% -- 281.5% Median/(3)/ 39.4% Mean/(3)/ 48.6% 30-Days ------- Range -7.0% -- 279.3% Median/(3)/ 41.2% Mean/(3)/ 52.5% -------------------------------------------- EV / Revenue NA -- NA -------------------------------------------- -------------------------------------------- Control Premium Study/(2)/ -------------------------------------------- Low High ========== ========== Range -97.6% -- 610.0% Median/(3)/ 35.9% Mean/(3)/ 52.1% -------------------------------------------- EV / Revenue NA -- NA -------------------------------------------- ------------------------------------------- Comparable Transaction Analysis/(4)/ ------------------------------------------- Low High ========= ========= Range NA -- NA Median NA Mean NA ------------------------------------------- EV / Revenue 1.09 x -- 1.52 x ------------------------------------------- ------------------------------------------- Premiums/Discounts Paid by LHT in Prior Transactions with HPAC ------------------------------------------- Low High ========== ========= Range -36.3% -- 53.3% ------------------------------------------- -------------------------------------------------------------------------------- CONCLUSION: LHT's potential cash tender offer per share provides a premium to the pre-announce price per share of HPAC. Based on the above analysis, this premium is in the range of premiums paid for minority interests by a controlling shareholder and premiums paid for change of control transaction. Also, the implied EV / Revenue multiple based on LHT's potential cash tender offer is in the range of similar change of control transactions that have taken place in the MRO subsector of the Aerospace industry. -------------------------------------------------------------------------------- (1) Premiums Paid for Minority Interest based upon 108 transactions across all industries from 1997 to March 4, 2002. (2) Control Premium Study based upon 908 transactions across all industries during 2001. (3) Calculation does not include negative premiums. (4) Transactions analysis data is comprised of acquisitions made in the MRO subsector of the aerospace industry, from January 2000 to March 4, 2002. --------------------------------------------- Houlihan Lokey Howard & Zukin 25 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Valuation Summary -------------------------------------------------------------------------------- Fairness Summary
Tender Offer Pre-Announce 5-Day 10-Day 20-Day 30-Day Price Price Avg. Price Avg. Price Avg. Price Avg. Price ------------- ------------- ------------ ------------ ------------ ------------ 3.25 2.12 2.19 2.41 2.44 2.36 Total Shares Outstanding 10.2 10.2 10.2 10.2 10.2 10.2 -------- -------- -------- -------- -------- -------- Implied Market Value of Equity $33.0 $21.5 $22.3 $24.5 $24.8 $24.0 Add: Net Debt 71.0 71.0 71.0 71.0 71.0 71.0 -------- -------- -------- -------- -------- -------- Enterprise Value $104.0 $92.5 $93.2 $95.5 $95.8 $94.9 Implied EV / Revenue 1.26 x 1.12 x 1.13 x 1.16 x 1.16 x 1.15 x Implied Premium Over --------------------------------------------------------------------- Pre-Announce 5-Day 10-Day 20-Day 30-Day Price Avg. Price Avg. Price Avg. Price Avg. Price ------------- ------------ ------------ ------------ ------------ 53.3% 48.4% 34.9% 33.2% 37.7%
Observations . The cash tender offer price of $3.25 implied a revenue multiple of 1.26x, which is in the range of what strategic buyers have paid for more profitable companies whose EBITDA margins ranged between 10 and 20 percent. . The 53.3 percent premium over the pre-announcement share price of $2.12 appears to be fair. Conclusion The cash tender offer of $3.25 per share is fair from a financial point of view. -------------------------------------------- Houlihan Lokey Howard & Zukin 26 -------------------------------------------------------------------------------- Market Multiple Methodology -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Market Multiple Methodology -------------------------------------------------------------------------------- Market Multiple Methodology (figures in millions)
Representative Selected Indicated Level Multiple Range Enterprise Value Range -------------- ------------------ --------------------------- LTM Revenues (1) $82.581 0.20 x -- 0.50 x $16.520 -- $41.290 NFY Revenues (2) $86.600 0.20 x -- 0.50 x $17.320 -- $43.300 Mean $16.920 -- $42.295 Selected Enterprise Value Range, on a Minority Interest Basis $17.000 -- $43.000 Less: Total Interest-Bearing Debt, net of Cash 70.967 70.967 Add: Value of NOL 4.184 -- 4.184 Less: Option Value 0.000 -- 0.000 ----------- ----------- Aggregate Value of Minority Interest, as if Marketable Speculative -- Speculative -------------------------------------------------------------------------------------------------------------- Price Per Share Speculative -- Speculative --------------------------------------------------------------------------------------------------------------
Footnotes: ---------- (1) Revenue figure based upon preliminary financial results. (2) Figure based upon management's modified forecasted performance. -------------------------------------------- Houlihan Lokey Howard & Zukin 28 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Market Multiple Methodology -------------------------------------------------------------------------------- Multiple Selection Analysis
Range --------------------- Low High Mean Median Selected Range Percent of Median ------- ------ ------ ------- ------------------ ----------------- LTM Revenues 0.21 x 1.20 x 0.57 x 0.52 x 0.20 x -- 0.50 x 38.4% -- 96.1% NFY Revenues 0.79 x 1.17 x 0.98 x 0.98 x 0.20 x -- 0.50 x 20.4% -- 51.1%
--------------------------------------------- Houlihan Lokey Howard & Zukin 29 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Market Multiple Methodology -------------------------------------------------------------------------------- Representative Levels (figures in millions)
Fiscal Year Ended December 31, ----------------------------------------------------------------------------------------------------------- 1999 2000 2001E 2002P 2003P ----------------------------------------------------------------------------------------------------------- Reported Revenue $ 82.318 $77.059 $82.581 $86.600 $ 95.200 Less: Cost of Goods Sold 69.197 69.704 74.458 72.700 77.300 ---------------------------------------------------------- Gross Profit $ 13.121 $7.355 $ 8.123 $13.900 $ 17.900 Less: Selling, General & Administrative 10.372 11.092 12.948 11.600 12.600 Add: Depreciation and Amortization 4.057 4.797 4.275 4.604 5.066 Add: Adjustments (1) 1.586 1.478 1.370 0.000 0.000 ---------------------------------------------------------- Adjusted EBITDA $ 8.392 $ 2.538 $ 0.820 $ 6.904 $ 10.366 Less: Depreciation and Amortization 4.057 4.797 4.275 4.604 5.066 ---------------------------------------------------------- Adjusted EBIT $ 4.335 $(2.259) $(3.455) $ 2.300 $ 5.300 Less: Interest Expense (2) 6.001 6.712 5.690 4.003 3.772 ---------------------------------------------------------- Adjusted Pre-tax Income $ (1.666) $(8.971) $(9.145) $(1.703) $ 1.528 Less: Taxes @ 40.0% (0.666) (3.588) (3.658) (0.681) 0.611 ---------------------------------------------------------- Adjusted Net Income $ (1.000) $(5.383) $(5.487) $(1.022) $ 0.917 Add: Depreciation and Amortization 4.057 4.797 4.275 4.604 5.066 ---------------------------------------------------------- Adjusted Cash Flow $ 3.057 $(0.586) $(1.212) $ 3.582 $5.983 Net Book Value (tangible) $ 17.534 NMF NMF NMF NMF Total Assets $103.163 $97.999 $94.486 $99.455 $108.069
Footnotes: --------- (1) Adjustments: Asset Write-down $0.826 $0.830 $0.000 $0.000 $0.000 Severance (departing management) 0.760 0.648 0.850 0.000 0.000 Other Adjustments 0.000 0.000 0.520 0.000 0.000 -------------------------------------------------------- Total Adjustments $1.586 $1.478 $1.370 $0.000 $0.000
(2) Interest Expense has been adjusted to exclude borrowing costs in attributed to penalties and fees incurred by the Company. --------------------------------------------- Houlihan Lokey Howard & Zukin 30 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Market Multiple Methodology -------------------------------------------------------------------------------- Risk Analysis Rankings Size Size (Revenue, millions) (Enterprise Value, millions) ------------------------------------------------------------------------------- Name Value Name Value ------------------------------------------------------------------------------- BBA Group plc $2,178.9 BBA Group plc $2,622.3 Sequa Corp -Cl A $1,785.9 Sequa Corp -Cl A $1,115.3 Aar Corp $769.0 Aar Corp $407.6 Aviall Inc $516.9 Aviall Inc $263.8 Mercury Air Group Inc $428.8 Vector Aerospace $173.5 Vector Aerospace $217.6 Mercury Air Group Inc $95.3 Pemco Aviation Inc $161.4 Hawker Pacific Aerospace Inc $92.5 First Aviation Svcs Inc $105.0 Pemco Aviation Inc $81.3 Hawker Pacific Aerospace Inc $82.6 First Aviation Svcs Inc $21.8 Historical Growth Historical Growth (2-Year EBITDA) (1-Year EBITDA) ------------------------------------------------------------------------------- Name Value Name Value ------------------------------------------------------------------------------- BBA Group plc 11.5% Aviall Inc 36.3% Pemco Aviation Inc 8.7% Sequa Corp -Cl A 2.7% Mercury Air Group Inc 5.1% BBA Group plc 1.3% Vector Aerospace 3.4% Mercury Air Group Inc -1.8% Sequa Corp -Cl A -2.3% Vector Aerospace -5.8% Aviall Inc -3.0% Pemco Aviation Inc -24.5% First Aviation Svcs Inc -14.8% Aar Corp -30.8% Aar Corp -17.4% Hawker Pacific Aerospace Inc -67.7% Hawker Pacific Aerospace Inc -68.7% First Aviation Svcs Inc -81.9% Profitability Relative Depreciation (EBITDA to Revenue) (Depreciation to EBITDA) ------------------------------------------------------------------------------- Name Value Name Value ------------------------------------------------------------------------------- BBA Group plc 17.6% Hawker Pacific Aerospace Inc NMF Vector Aerospace 12.7% First Aviation Svcs Inc 98.0% Pemco Aviation Inc 11.1% Sequa Corp -Cl A 51.4% Sequa Corp -Cl A 10.1% Mercury Air Group Inc 43.4% Aviall Inc 8.0% Aar Corp 38.1% Aar Corp 6.2% BBA Group plc 33.3% Mercury Air Group Inc 5.4% Aviall Inc 26.1% First Aviation Svcs Inc 1.3% Pemco Aviation Inc 22.0% Hawker Pacific Aerospace Inc 1.0% Vector Aerospace 19.2% Historical Growth Historical Growth (2-Year Revenue) (1-Year Revenue) ------------------------------------------------------------------------------- Name Value Name Value ------------------------------------------------------------------------------- Mercury Air Group Inc 48.1% Mercury Air Group Inc 43.1% First Aviation Svcs Inc 26.4% Aviall Inc 30.7% Vector Aerospace 13.8% First Aviation Svcs Inc 17.5% BBA Group plc 13.7% Vector Aerospace 16.6% Aviall Inc 9.6% BBA Group plc 9.9% Pemco Aviation Inc 6.8% Hawker Pacific Aerospace Inc 7.2% Hawker Pacific Aerospace Inc 0.2% Sequa Corp -Cl A 3.6% Sequa Corp -Cl A -1.1% Pemco Aviation Inc -4.5% Aar Corp -8.8% Aar Corp -14.7% Projected Growth Projected Growth (1-Year EBITDA) (5-Year EPS) ------------------------------------------------------------------------------- Name Value Name Value ------------------------------------------------------------------------------- Aar Corp NA First Aviation Svcs Inc NA Aviall Inc NA Mercury Air Group Inc NA First Aviation Svcs Inc NA Pemco Aviation Inc NA Mercury Air Group Inc NA Sequa Corp -Cl A NA Pemco Aviation Inc NA Hawker Pacific Aerospace Inc NA Sequa Corp -Cl A NA BBA Group plc 20.4% Hawker Pacific Aerospace Inc NA Vector Aerospace 12.6% Vector Aerospace 5.1% Aar Corp 6.0% BBA Group plc -7.4% Aviall Inc -10.7% Internal Investment (Capital Expenditures to Liquidity Revenue) (Current Ratio) ------------------------------------------------------------------------------- Name Value Name Value ------------------------------------------------------------------------------- BBA Group plc 10.4% First Aviation Svcs Inc 4.7 Pemco Aviation Inc 5.4% Aviall Inc 2.7 Sequa Corp -Cl A 5.2% Aar Corp 2.6 Aviall Inc 3.6% Sequa Corp -Cl A 2.6 Vector Aerospace 3.4% BBA Group plc 1.9 Aar Corp 1.7% Hawker Pacific Aerospace Inc 1.9 Mercury Air Group Inc 1.3% Vector Aerospace 1.7 Hawker Pacific Aerospace Inc 1.0% Mercury Air Group Inc 1.5 First Aviation Svcs Inc -0.6% Pemco Aviation Inc 1.1 Projected Growth (1-Year Revenue) --------------------------------------- Name Value --------------------------------------- Aar Corp NA Aviall Inc NA First Aviation Svcs Inc NA Mercury Air Group Inc NA Pemco Aviation Inc NA Sequa Corp -Cl A NA Hawker Pacific Aerospace Inc 4.9% Vector Aerospace 1.2% BBA Group plc -4.4% Profitability (EBIT to Revenue) --------------------------------------- Name Value --------------------------------------- BBA Group plc 11.8% Vector Aerospace 10.3% Pemco Aviation Inc 8.7% Aviall Inc 5.9% Sequa Corp -Cl A 4.9% Aar Corp 3.9% Mercury Air Group Inc 3.1% First Aviation Svcs Inc 0.0% Hawker Pacific Aerospace Inc -4.1% Leverage (Debt to EV) --------------------------------------- Name Value --------------------------------------- Hawker Pacific Aerospace Inc 78.4% First Aviation Svcs Inc 74.5% Mercury Air Group Inc 71.4% Aar Corp 64.0% Sequa Corp -Cl A 63.8% Vector Aerospace 59.0% Aviall Inc 50.5% BBA Group plc 38.7% Pemco Aviation Inc 19.3% --------------------------------------------- Houlihan Lokey Howard & Zukin 31 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Market Multiple Methodology -------------------------------------------------------------------------------- Comparable Company Debt-Free Multiples (figures in millions)
EV / Revenue ------------------------------------------------------ EV 3-YR Avg. FYE LTM NFY NFY + 1 ----------- ----------- ------- -------- ------- --------- Aar Corp $ 407.598 0.41x 0.47x 0.53x NA NA Aviall Inc 263.824 0.63x 0.54x 0.51x NA NA First Aviation Svcs Inc 21.761 0.27x 0.22x 0.21x NA NA Mercury Air Group Inc 95.261 0.28x 0.20x 0.22x NA NA Pemco Aviation Inc 81.346 0.52x 0.50x 0.50x NA NA Sequa Corp -Cl A 1,115.253 0.63x 0.63x 0.62x NA NA BBA Group plc 2,622.306 1.25x 1.12x 1.20x 1.17x 1.09x Vector Aerospace 173.539 0.91x 0.80x 0.80x 0.79x 0.74x Hawker Pacific Aerospace Inc 92.508 1.15x 1.12x 1.12x NA NA ------------------------------------------------------------------------------------------------------------- Low 0.27x 0.20x 0.21x 0.79x 0.74x High 1.25x 1.12x 1.20x 1.17x 1.09x Median 0.57x 0.52x 0.52x 0.98x 0.91x Mean 0.61x 0.56x 0.57x 0.98x 0.91x ------------------------------------------------------------------------------------------------------------- EV / EBITDA ------------------------------------------------------ EV 3-YR Avg. FYE LTM NFY NFY + 1 ----------- ----------- ------- -------- ------- --------- Aar Corp $ 407.598 4.9x 6.3x 8.5x NA NA Aviall Inc 263.824 7.9x 7.4x 6.4x NA NA First Aviation Svcs Inc 21.761 NMF NMF 15.8x NA NA Mercury Air Group Inc 95.261 3.6x 3.5x 4.1x NA NA Pemco Aviation Inc 81.346 5.4x 5.7x 4.5x NA NA Sequa Corp -Cl A 1,115.253 5.6x 5.7x 6.2x NA NA BBA Group plc 2,622.306 6.7x 6.2x 6.8x 6.7x 6.0x Vector Aerospace 173.539 6.3x 6.3x 6.3x 6.0x 5.2x Hawker Pacific Aerospace Inc 92.508 24.0x NMF NMF NA NA ------------------------------------------------------------------------------------------------------------- Low 3.6x 3.5x 4.1x 6.0x 5.2x High 7.9x 7.4x 15.8x 6.7x 6.0x Median 5.6x 6.2x 6.3x 6.3x 5.6x Mean 5.8x 5.9x 7.3x 6.3x 5.6x -------------------------------------------------------------------------------------------------------------
Note: Hawker Pacific Aerospace Inc. is excluded from the Low, High, Median and Mean calculations. The Company's multiples are based upon the pre-announcement closing price of $2.12. -------------------------------------------- Houlihan Lokey Howard & Zukin 32 -------------------------------------------------------------------------------- Comparable Transaction Methodology -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Comparable Transaction Methodology -------------------------------------------------------------------------------- Comparable Transaction Methodology (figures in millions)
Representative Selected Indicated Level Multiple Range Enterprise Value Range -------------- ------------------ --------------------------- LTM Revenues $82.581 0.95 x -- 1.10 x $78.450 -- $90.840 Selected Enterprise Value Range, on a Controlling Interest Basis $79.000 -- $91.000 Less: Total Interest-Bearing Debt, net Cash 70.967 70.967 --------- --------- Value of Total Equity, on a Controlling Interest Basis $ 8.033 -- $20.033 Less: Minority Interest Discount @ 23.1% (1) 1.506 -- 3.756 --------- --------- Aggregate Value of Minority Interest, as if Marketable $ 6.527 -- $16.277 Add: Value of NOL 4.184 4.184 Less: Option Value 0.069 -- 0.230 --------- --------- Marketable Minority Equity Value $10.642 -- $20.231 ------------------------------------------------------------------------------------------------------------- Price Per Share $1.05 -- $1.99 -------------------------------------------------------------------------------------------------------------
Footnotes: ---------- (1) Based upon a control premium of 30.0 percent. -------------------------------------------- Houlihan Lokey Howard & Zukin 34 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Comparable Transaction Methodology -------------------------------------------------------------------------------- Comparable Transaction Analysis ($ in millions)
Target LTM Method Enter- EV EV EV Seller - Target Business ------------------- of prise to to to Announced Closed Unit Sold Buyer Description: Revenue EBIT EBITDA Payment Value EBITDA EBIT Revenue --------- --------- -------------- --------------- ------------------ ------- ---- ------ ------- ------ ------ ---- ------- 7-Jan-02 Reliance Empresa Provides * * * Aerotech Brasileiras de maintenance and Inc - Celsius Aeronautica SA modification of Aerotech Inc aircraft 3-Oct-01 Spar L-3 Global provider 91.3 13.8 17.2 139.2 8.1x 10.1x 1.52x Aerospace Communications of turnkey Ltd Corp aviation life cycle management services 18-May-01 AeroGroup Inc American Supplies, * * * Communications aircraft, pilots, Enterprises Inc maintenance and other support services 19-Mar-01 19-Mar-01 Turbotech PWCA Pratt & Supplier of * * * Repairs Inc. Whitney Canada component repairs Corp for small gas turbine engines and auxiliary power 16-Jan-01 16-Jan-01 Gulfstream BBA Group Plc Aircraft Engines Cash 43.0 * * * Aerospace And Engine Parts Corporation - Engine Overhaul Business of Gulfstream 15-Nov-00 11-Jul-01 Ranger BBA Group PLC Provides ground 141.7 14.7 Cash 154.3 * 10.5x 1.09x Aerospace and cargo Corp handling and refueling services to the airline industry 4-Oct-00 4-Oct-00 Honeywell AAR Corp Provides repair 20.0 Cash * * * International and distribution Inc - Hermetic services to the Aircraft North American International aviation Corp aftermarket 24-Jul-00 24-Jul-00 Airborne Triumph Repairs and Cash * * * Nacelle Group Inc overhauls complex Services Inc parts for a broad spectrum of the aerospace industry 5-Jun-00 Lynton BBA Group PLC Performs aviation 56.0 2.5 5.4 Cash 81.6 15.0x 32.2x 1.46x Group Inc sales and services 24-Apr-00 24-Apr-00 Fort Wayne Air Mercury Air Provides aircraft 3.9 * * * Service Inc Group Inc maintenance, repair, and refueling services 24-Apr-00 24-Apr-00 Consolidated Mercury Air Provides aircraft * * * Airways Inc Group Inc maintenance, repair, and refueling services 10-Jan-00 10-Jan-00 Quantum Honeywell Provides aerospace * * * Laser Corp International repair services Inc ---------------------------------------------------------- Min 20.0 2.5 5.4 3.9 8.1x 10.1x 1.09x Max 141.7 13.8 17.2 154.3 15.0x 32.2x 1.52x Median 73.7 8.2 14.7 81.6 11.6x 10.5x 1.46x Mean 77.3 8.2 12.4 84.4 11.6x 17.6x 1.36x ----------------------------------------------------------
Source: Mergerstat * - Not available or excluded from range -------------------------------------------- Houlihan Lokey Howard & Zukin 35 -------------------------------------------------------------------------------- Discounted Cash Flow Methodology -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Disounted Cash Flow Methodology -------------------------------------------------------------------------------- Discounted Cash Flow Methodology - Modified Management Case /(1)/ (figures in millions)
Projected Fiscal Year Ending December 31, ----------------------------------------------- 2002 2003 2004 ----------------------------------------------- EBIT $ 1.917 $ 5.300 $ 7.000 Less: Taxes 0.767 2.120 2.800 ----------------------------------------------- Debt-Free Earnings $ 1.150 $ 3.180 $ 4.200 Less: Capital Expenditures (3.100) (6.125) (7.910) Less: Working Capital Requirements (0.801) (1.108) (1.062) Add: Depreciation and Amortization 3.837 5.066 5.634 ----------------------------------------------- Total Net Investment $(0.064) $(2.166) $(3.338) ----------------------------------------------- Net Debt-Free Cash Flows: $ 1.086 $ 1.014 $ 0.862 Discount Period 0.42 1.33 2.33 Discount Factor @ 17.0% 0.94 0.81 0.69 ----------------------------------------------- Present Value of Net Debt-Free Cash Flows: $ 1.017 $ 0.822 $ 0.597
Sensitivity Analysis: Enterprise Value --------------------------------------
Terminal Multiple Discount ------------------------------------------------------- Rate 5.0 x 6.0 x 7.0 x 8.0 x 9.0 x -------- ------- ------- ------- ------- ------- 15.0% $45.003 $53.506 $62.008 $70.511 $79.014 16.0% $43.947 $52.243 $60.540 $68.837 $77.134 17.0% $42.925 $51.022 $59.120 $67.217 $75.315 18.0% $41.935 $49.840 $57.745 $65.649 $73.554 19.0% $40.978 $48.695 $56.413 $64.131 $71.849 Range of Selected Enterprise Values $51.022 -- $67.217 Less: Total Interest-Bearing Debt, net Cash 70.967 70.967 -------- ------- Total Value of Equity (19.945) -- (3.750) Less: Value of NOL 4.184 4.184 Less: Option Value - 0.000 -------- ------- Marketable Minority Equity Value Speculative -- 0.434 Price Per Share Speculative -- $ 0.04
------------------------------------------------------- DCF Assumptions ------------------------------------------------------- Discount Rate 17.0% Tax Rate 40.0% ------------------------------------------------------- ------------------------------------------------------- Terminal Value Assumptions ------------------------------------------------------- Terminal EBITDA (2004) $12.634 Terminal Multiple 7.0 x ------- Terminal Value $88.439 Discount Period 2.83 Discount Factor @ 17.0% 0.64 ------- PV of Terminal Value $56.683 ------------------------------------------------------- ------------------------------------------------------- Distribution of Value ------------------------------------------------------- Period Cash Flow 4.1% Terminal Cash Flow 95.9% ------- Total 100.0% ------------------------------------------------------- ------------------------------------------------------- Implied Analyses ------------------------------------------------------- LTM EBITDA Multiple NMF NFY EBITDA Multiple NMF Implied Gordon Growth Rate 15.9% ------------------------------------------------------- (1) Modified Management Case represents management's base case expectations adjusted to reflect less aggressive growth and margin expansion. --------------------------------------------- Houlihan Lokey Howard & Zukin 37 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Discounted Cash Flow Methodology -------------------------------------------------------------------------------- Discounted Cash Flow Methodology - Management Case (figures in millions)
Projected Fiscal Year Ending December 31, ---------------------------------------------- 2002 2003 2004 EBIT $ 3.398 $10.415 $13.299 Less: Taxes 1.359 4.166 5.320 ---------------------------------------------- Debt-Free Earnings $ 2.039 $ 6.249 $ 7.979 Less: Capital Expenditures (3.100) (6.125) (7.910) Less: Working Capital Requirements (0.801) (1.108) (1.062) Add: Depreciation and Amortization 3.837 5.066 5.634 ---------------------------------------------- Total Net Investment $(0.064) $(2.166) $(3.338) ---------------------------------------------- Net Debt-Free Cash Flows: $ 1.975 $ 4.083 $ 4.641 Discount Period 0.42 1.33 2.33 Discount Factor @ 20.0% 0.93 0.78 0.65 ---------------------------------------------- Present Value of Net Debt-Free Cash Flows: $ 1.830 $ 3.202 $ 3.033
Sensitivity Analysis: Enterprise Value --------------------------------------
Terminal Multiple Discount ----------------------------------------------------- Rate 5.0 x 5.5 x 6.0 x 6.5 x 7.0 x ----------------------------------------------------------------- 18.0% $67.500 $73.422 $79.345 $85.268 $91.191 19.0% $65.996 $71.778 $77.561 $83.344 $89.127 20.0% $64.538 $70.186 $75.833 $81.480 $87.128 21.0% $63.126 $68.642 $74.159 $79.675 $85.191 22.0% $61.757 $67.146 $72.535 $77.924 $83.313 Range of Selected Enterprise Values $70.186 -- $81.480 Less: Total Interest-Bearing Debt, net Cash 70.967 70.967 ------- ------- Total Value of Equity (0.781) -- 10.513 Add: Value of NOL 4.184 4.184 Less: Option Value 0.008 0.124 ------- ------- Marketable Minority Equity Value 3.395 -- 14.573 Price Per Share $0.33 -- $1.43
------------------------------------------------------ DCF Assumptions ------------------------------------------------------- Discount Rate 20.0% Tax Rate 40.0% ------------------------------------------------------- ------------------------------------------------------- Terminal Value Assumptions ------------------------------------------------------- Terminal EBITDA (2004) $ 18.933 Terminal Multiple 6.0 x -------- Terminal Value $113.598 Discount Period 2.83 Discount Factor @ 20.0% 0.60 -------- PV of Terminal Value $ 67.768 ------------------------------------------------------- ------------------------------------------------------- Distribution of Value ------------------------------------------------------- Period Cash Flow 10.6% Terminal Cash Flow 89.4% ------ Total 100.0% ------------------------------------------------------- ------------------------------------------------------- Implied Analyses ------------------------------------------------------- LTM EBITDA Multiple NMF NFY EBITDA Multiple NMF Implied Gordon Growth Rate 15.3% ------------------------------------------------------- --------------------------------------------- Houlihan Lokey Howard & Zukin 38 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Discounted Cash Flow Methodology -------------------------------------------------------------------------------- Weighted Average Cost of Capital (figures in millions)
Market Debt to Preferred to Equity to Preferred Value of Total Debt to Total Total Total Debt Stock Equity Capitalization Equity Capitalization Capitalization Capitalization -------- --------- -------- -------------- ------- -------------- -------------- -------------- Aar Corp $260.9 $0.0 $199.8 $460.7 130.6% 56.6% 0.0% 43.4% Aviall Inc $133.2 $0.0 $133.2 $266.4 100.0% 50.0% 0.0% 50.0% First Aviation Svcs Inc $16.2 $0.0 $33.1 $49.3 48.9% 32.8% 0.0% 67.2% Mercury Air Group Inc $68.1 $0.0 $30.4 $98.5 223.8% 69.1% 0.0% 30.9% Pemco Aviation Inc $15.7 $0.0 $67.6 $83.3 23.2% 18.8% 0.0% 81.2% Sequa Corp -Cl A $711.3 $4.0 $539.1 $1,254.4 131.9% 56.7% 0.3% 43.0% BBA Group plc $1,014.0 $84.5 $1,662.0 $2,760.5 61.0% 36.7% 3.1% 60.2% Vector Aerospace $102.3 $0.0 $71.2 $173.5 143.7% 59.0% 0.0% 41.0% Hawker Pacific Aerospace Inc $72.6 $0.0 $21.5 $94.1 336.9% 77.1% 0.0% 22.9% --------------------------------------------------------------------------------------------------------------------------------- Median $102.3 $0.0 $71.2 $173.5 130.6% 56.6% 0.0% 43.4% Mean $266.0 $9.8 $306.5 $582.3 133.3% 50.8% 0.4% 48.9% ---------------------------------------------------------------------------------------------------------------------------------
Decile Adjusted Equity Size Levered Unlevered Based Unlevered Risk Risk Cost of Beta Beta Beta Beta Premium (1) Premium (1) Equity ------- --------- ------ --------- ----------- ----------- ------- Aar Corp 0.60 0.34 1.28 0.37 7.8% 1.47% 11.8% Aviall Inc 1.04 0.65 1.34 0.69 7.8% 1.74% 15.5% First Aviation Svcs Inc 0.24 0.19 1.42 0.19 7.8% 4.63% 12.2% Mercury Air Group Inc 0.64 0.27 1.42 0.27 7.8% 4.63% 15.3% Pemco Aviation Inc 0.12* 0.11* 1.42 0.11* 7.8% 4.63% 11.3% Sequa Corp -Cl A 0.51 0.28 1.18 0.34 7.8% 1.08% 10.8% BBA Group plc 1.45 1.06 1.13 1.33 7.8% 0.62% 17.6% Vector Aerospace 0.11* 0.06* 1.42 0.06* 7.8% 4.63% 11.2% Hawker Pacific Aerospace Inc 0.44 0.15 1.42 0.15 7.8% 4.63% 13.8% --------------------------------------------------------------------------------------------------------------------------------- Median 0.60 0.28 1.42 0.34 12.2% Mean 0.70 0.42 1.34 0.48 13.3% ---------------------------------------------------------------------------------------------------------------------------------
Footnotes: ---------- Source: Compustat Weighted Average Cost of Capital (WACC) = (Cost of Debt * (1-Tax Rate) * Debt to Enterprise Value) + (Cost of Equity * Equity to Enterprise Value) + (Cost of Preferred * Preferred to Enterprise Value) Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium) + Size Risk Premium Risk-free rate as of March 1, 2002. (1) Ibbotson Associates, Stocks Bonds Bills and Inflation 2001 Yearbook, pp. 134, 136, and 174. * Excluded from range. --------------------------------------------- Houlihan Lokey Howard & Zukin 39 -------------------------------------------------------------------------------- Delisting Risk -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Delisting Risk -------------------------------------------------------------------------------- The Issue - Potential Delisting of HPAC HPAC received a letter dated February 14, 2001 from the NASDAQ warning of the potential delisting of HPAC's publicly traded common shares if HPAC does not meet the current listing requirements by May 15, 2002. NASDAQ requires all companies that wish to be listed on the exchange to meet the following criteria: i) minimum bid price of three dollars per share, ii) minimum float of three million shares, iii) minimum float dollars of $15 million, and iv) net tangible assets of at least four million dollars. Currently, the net tangible assets of HPAC do not meet the minimum requirements of NASDAQ. Also, without LHT's announced tender offer, it is reasonable to expect HPAC stock price to fall to its pre announcement price, below the three dollar per share threshold. As such, HPAC could potentially be delisted by May 2002. The delisting of HPAC would have a negative impact on the market value of the Company shares. Effects of Being Delisted "If your company's stock is being traded on OTC, it means you probably won't be able to attract institutional investors...Institutional investors also pull more than their investment dollars - they take their analysts with them, making it much harder for companies to generate any kind of buzz about their stock." - Mike Hutchings, Attorney, Gray Cary. "In general, if a stock does get delisted, it's not good news for anybody still holding the shares." -Jay Ritter, finance professor at the University of Florida. "Dropping off the NASDAQ means you essentially drop off everybody's radar screen," - Bill Whitlow, manager of more than $200 million in two mutual funds for Seattle-based Safeco Corp. "There are not the same market makers. There's not the same liquidity." - Richard Rosenblatt, Chief Executive of DrKoop.com --------------------------------------------- Houlihan Lokey Howard & Zukin 41 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Delisting Risk -------------------------------------------------------------------------------- Effects of Being Delisted (Continued) . Some institutions, such as mutual funds or large investments firms, don't invest in OTC companies. Without institutional investors companies have a much harder time selling their stocks. . Not being able to sell a stock can also make it harder to retain employees, since stock options make up a significant portion of many compensation packages. . Companies that are delisted by the NASDAQ national market have a number of options, few of them good: - Companies can join the OTC Bulletin Board, a lesser exchange set up by the National Association of Securities Dealers, where penny stocks abound. Failing that, they can fall to the Pink Sheets, a thinly traded exchange where share prices are quoted on printed, pink sheets distributed among certain Wall Street firms. - The reverse stock split is the most immediate method to fight delisting, although it reduces a company's public float. It is rare for delisted companies to reapply for NASDAQ listing. - Another strategy to avoid delisting is for a company to buy back its shares in the market, hoping to shore up the price. But that assumes the registrant has substantial cash levels to initiate the buyback. If that cash is spent buying back shares, it is not available to pay employees, develop new products, pay salespeople or keep the business running. . Avoiding delisting does not just mean temporarily meet the minimal NASDAQ requirements. In a hearing, the NASDAQ officials want to establish that the company has a viable business plan, with enough financial resources in place that it won't collapse, and that it trades actively enough so that the stock won't be vulnerable to manipulation. . A company's share value declines further when the stock is delisted, as liquidity is reduced and trading costs increase. Share values drop an average 55 percent when it begins trading after a delisting from the NASDAQ, according to Tyler Shumway, a finance professor at the University of Michigan who studied the delistings between 1978 and 1995, before NASDAQ tightened its listing standards. One reason the drop is so significant, he states, is that delistings often have coincided with bankruptcy filings by companies that never trade again. --------------------------------------------- Houlihan Lokey Howard & Zukin 42 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Delisting Risk -------------------------------------------------------------------------------- Effects of Being Delisted (Continued) . Companies that remain in business can experience sharp drops in their share value. Wavo Corp., a digital media company, dropped 43 percent to 12.5 cents on its first day on the OTC Bulletin Board. Shares of Source Media Inc., an interactive advertising company, sank 27 percent to 50 cents a share on the day the company was delisted from NASDAQ. . Companies facing delisting can request a hearing and then try to persuade NASDAQ that they have a viable business plan already in place and sufficient trading activity. . With thin trading volume, bid-ask spreads -- the difference between the price at which traders are offering to sell a stock and the price at which they are willing to buy it -- can double, says Paul Seguin, a finance professor at the University of Minnesota's Carlson School of Management. Another woe for investors: "A lot of databases don't cover Bulletin Board stocks," says Georgetown University finance professor James Angel. Nor do most analysts cover them. . Delisted stocks are also more vulnerable to market manipulation, both because regulators give them less scrutiny and because it takes less cash to move their prices. Manipulation is "absolutely" a worry, says Mr. Spohn of PopMail.com. "But it's sometimes very difficult to identify if somebody is manipulating your stock. You don't know who is buying and who is selling." . To regain a NASDAQ listing once lost, companies must have a bid price of at least $5 a share. --------------------------------------------- Houlihan Lokey Howard & Zukin 43 -------------------------------------------------------------------------------- Potential Alternatives Summary -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Potential Alternatives Summary -------------------------------------------------------------------------------- Status Quo . Should the transaction not occur, and HPAC continues its normal course of business, or the "status quo" scenario, HPAC would not meet the net tangible asset requirement in order to remain listed on the NASDAQ, by end of May 2002. Further, assuming LHT is amenable converting debt to equity, the Company would meet NASDAQ minimum listing requirements only through November 2002, at which time the increased minimum net tangible asset requirement would force the Company to be in violation of the NASDAQ rules. Strategic Alliance . Sale of Minority Interest to a Strategic Investor - HPAC could pursue an alliance with a new strategic partner. However, on February 25, 2002, LHT announced it intention to repurchase shares of HPAC in a cash tender offer, and since that date, there has been no apparent interest by any other entity. Given LHT's significant ownership interest in HPAC, a strategic equity investor would not have the opportunity to gain control of the Company. Also, a strategic investor seeking to have access the LHT parent, Deutsche Lufthansa AG, for strategic alliance purposes would not use the purchase of minority interest in a non-material entity controlled by one of Deutsche Lufthansa AG's wholly owned subsidiaries such as LHT. Financial Investor . Sale of Minority Interest to Financial Investor - HPAC's Fiscal Year Ending December 31, 2002 budget demonstrates a "break-even" scenario, referred to as a "Black-Zero" by LHT, whereby the Company will attain a net income level slightly above zero. A financial investor would seek significantly higher operating profitability levels than what HPAC is budgeting for fiscal year 2000 through 2005. Further, a financial investor would be concerned with an exit event, which is undefined at the moment. As such, HPAC would have difficulty in attracting a financial investor. --------------------------------------------- Houlihan Lokey Howard & Zukin 45 -------------------------------------------------------------------------------- Exhibits -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- AAR Corp. AAR CORP. (AIR) supplies aftermarket products and services to the global aviation/aerospace industry. AIR reports its activities in one business segment: Aviation Services. Three classes of similar products and services are included within this segment: Aircraft and Engines, Airframe and Accessories and Manufacturing. ==================================================================== AAR CORP. DAILY PRICE/VOLUME GRAPH ==================================================================== [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] ==================================================================== AIR's Aircraft and Engines activities include the purchase, sale and lease of used commercial jet aircraft; the purchase, sale and lease of a wide variety of new, overhauled and repaired engines and engine products for the aviation aftermarket, including a broad range of spare engines and engine parts and other engine components and accessories; and the overhaul, repair and exchange of a wide range of engine parts and components and other engine support services for its commercial and military customers. AIR also provides customized inventory supply and management programs for engine parts and components in support of customer maintenance activities. The company also provides turbine engine overhaul and parts supply services to industrial gas and steam turbine operators. AIR's Airframe and Accessories activities consist of the purchase, sale and lease of new, overhauled and repaired airframe parts and accessories for the aviation aftermarket; and the overhaul, repair and exchange of a wide variety of airframe and accessory parts and components for its commercial, military and general aviation customers. The company also provides customized inventory supply and management programs for certain airframe parts and components in support of customer maintenance activities. AIR is also an authorized distributor for more than 150 leading aviation/aerospace product manufacturers. -------------------------------------------- Houlihan Lokey Howard & Zukin 48 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- Aviall, Inc. Aviall, Inc. (AVL), a subsidiary of Ryder System, Inc. prior to its spinoff in December 1993, is an independent global distributor of new aviation parts and supplies. It also provides on-line inventory information services to the aviation and marine industries through wholly owned Inventory Locator Service (ILS). ================================================================================ AVIALL, INC. DAILY PRICE/VOLUME GRAPH [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] ================================================================================ The company believes it is the largest independent global distributor of aircraft parts and supplies, serving both the commercial and general aviation after-markets by providing a link between parts manufacturers, sellers and buyers throughout the world. AVL develops relationships with suppliers who seek advanced inventory management, order processing, forecasting and direct electronic communications with end users. Product lines distributed include piston engines and parts, a variety of airframe spares (oxygen systems, filters, control cables, batteries, actuators and motors), undercarriage items (wheels, brakes and tires) and supplies. Parts are distributed from customer service centers located throughout the world, including North America, Europe and the Asia-Pacific region. AVL has approximately 16,500 customers, to which it sells about 65,500 unique parts. The company is an authorized distributor for manufacturers such as BFGoodrich, Scott Aviation, Telair International, Lord Corp., Federal Mogul Aviation, Textron Lycoming and Honeywell, and in January 2000, under a ten-year agreement, became the exclusive distributor of the Rolls Royce model 250 turbine engine line. -------------------------------------------- Houlihan Lokey Howard & Zukin 49 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- First Aviation Services Inc. First Aviation Services Inc. (FAVS) supplies aircraft parts and components to the aviation industry worldwide, and provides the aerospace industry with third party logistics and inventory management services. Customers include original equipment manufacturers, passenger and cargo airlines, fleet operators, corporate aircraft operators, fixed base operators, certified repair facilities, governments and military services. ================================================================================ FIRST AVIATION SERVICES INC. DAILY PRICE/VOLUME GRAPH [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] ================================================================================ The company represents more than 150 manufacturers and distributes approximately 80,000 new and factory reconditioned parts and components, selling to professional aircraft maintenance organizations, aircraft operators, including fleet operators and airlines, and FBOs. The parts are approved by the Federal Aviation Administration (FAA) and are acquired from small, specialized manufacturers as well as major original equipment manufacturers such as Goodyear Tire and Rubber, Michelin Aircraft Tire, Federal Mogul, B.F. Goodrich Aerospace, General Electric Lighting, Teledyne Continental Motors, Parker Hannifin, Marathon Power Technologies, Barry Controls, The New Piper Aircraft, Inc. and Cessna Aircraft Co. Most of these suppliers are committed to servicing aftermarket customers solely through wholesale distributors such as API. Distributors add value to commonly available products by offering immediate availability, broad product lines, technical assistance and other value added services, such as logistics and inventory management services. API does not have any long-term agreements or commitments from the original equipment manufacturers from whom it purchases parts and is dependent upon these manufacturers for access to parts for resale. -------------------------------------------- Houlihan Lokey Howard & Zukin 50 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- Mercury Air Group, Inc. Mercury Air Group, Inc. (MAX) provides services to the aviation industry through four principal operating units: fuel sales, cargo operations, fixed base operations and United States government contract services. ================================================================================ MERCURY AIR GROUP, INC. DAILY PRICE/VOLUME GRAPH [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] ================================================================================ Fuel sales include the sale of fuel and delivery of fuel primarily to domestic and international commercial airlines, business aviation and air freight airlines. The fuel sales division facilitates the management and distribution of aviation fuel for Mercury's airline customers which the major suppliers typically do not service. In this way, MAX serves as a reseller from major oil companies to air carriers, affording oil companies access to these carriers without their assumption of the credit risk for these fuel purchases. The company competes based on quality of its service and by offering a combination of favorable pricing and credit terms, and a real time analysis of the availability, quantity and price of fuel in airports and terminals worldwide. Mercury's revenue from fuel sales and services as a percentage of revenue comprised 66.6 percent of total revenue in fiscal year 2001 (June). Cargo operations consist of cargo handling, space logistics operations and general cargo sales agent services. The company's cargo operations are conducted through its subsidiary, Mercury Air Cargo, Inc., which provides domestic and international air cargo handling, airmail handling and bonded warehousing. Cargo operations comprised 6.6 percent of total revenue for fiscal year 2001. -------------------------------------------- Houlihan Lokey Howard & Zukin 51 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- Pemco Aviation Group Inc. A diversified aviation and aerospace company, Pemco Aviation Group Inc. (PAGI) is engaged mainly in providing aircraft maintenance and modification services, including complete airframe inspection, maintenance, repair and custom airframe design and modification. ================================================================================ PEMCO AVIATION GROUP INC. DAILY PRICE/VOLUME GRAPH [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] ================================================================================ The company provides these services for government and military customers primarily through its Government Services Group (which accounted for 64 percent of revenues and 84 percent of profits in 2000), which specializes in providing Programmed Depot Maintenance (PDM) on large transport aircraft. In addition to PDM, various other repair, maintenance and modification services are performed for PAGI's customers. The Government Services Group's contracts are multi-aircraft programs generally lasting several years. The company believes its facilities, tooling, experienced labor force, quality and on time delivery record position it as one of the premier United States providers of PDM for large transport aircraft. PAGI's Commercial Services Group (25 percent of 2000 revenues, 8 percent of profit) provides commercial aircraft maintenance and modification services on a contract basis to the owners and operators of large commercial aircraft. The company provides commercial aircraft maintenance varying in scope from a single aircraft serviced over a few days to multi-aircraft programs lasting several years. PAGI can offer full range maintenance support services to airlines, coupled with related technical services required by these customers. The company also has broad experience in modifying commercial aircraft and providing value-added technical solutions and holds numerous proprietary Supplemental Type Certificates. The company has performed more than 250 cargo conversions of narrow and wide-body commercial aircraft. -------------------------------------------- Houlihan Lokey Howard & Zukin 52 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- Sequa Corp. Sequa Corp. (SQA) is a diversified industrial company that produces a broad range of products through operating units in five segments: Aerospace, Propulsion, Metal Coating, Specialty Chemicals and Other Products. ================================================================================ SEQUA CORP. DAILY PRICE/VOLUME GRAPH [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] ================================================================================ The Aerospace segment consists solely of the company's largest operating unit, Chromalloy Gas Turbine, which repairs and manufactures components for jet aircraft engines. A major independent supplier in the repair market, Gas Turbine provides domestic and international airlines with technologically advanced repairs and coatings for turbine airfoils and other critical engine components. In addition, the unit repairs components for land-based turbine engines. It also supplies components to the manufacturers of jet engines and serves both the general aviation and military markets. The Propulsion segment consists solely of Atlantic Research Corp. (ARC), a supplier of solid rocket fuel propulsion systems. ARC is a developer and manufacturer of advanced rocket propulsion systems, gas generators and auxiliary rocket motors, and engages in research and development relating to new rocket propellants and advanced engineered materials. For the military contract market, ARC produces propulsion systems primarily for tactical weapons. For space applications, ARC produces small liquid fuel rocket engines designed to provide attitude and orbit control for a number of satellite systems worldwide. The Metal Coating segment consists solely of Precoat Metals, which deals with the application of protective and decorative coatings to continuous steel and aluminum coils. Precoat's principal market is the building products industry, where coated steel is used for the construction of pre-engineered building systems, and as components in the industrial, commercial, agricultural and residential sectors. -------------------------------------------- Houlihan Lokey Howard & Zukin 53 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- BBA Group PLC. BBA Group PLC. Aviation services and materials technology businesses. The aviation services operates in the United States and in Europe by providing fuelling, engine and landing gear overhaul, repair and maintenance, cargo handling, trip planning, and pilot training. Materials technology operates in such countries as Brazil, Canada, China, Hong Kong, Mexico, South Africa, United States, and in Europe by providing non-woven materials for the hygiene and industrial sector. Aviation accounted for 52 percent of 2000 revenues and material technology 48 percent. ================================================================================ BBA GROUP PLC. DAILY PRICE/VOLUME GRAPH [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] ================================================================================ -------------------------------------------- Houlihan Lokey Howard & Zukin 54 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Synopses of Comparable Companies -------------------------------------------------------------------------------- Vector Aerospace Corp. Vector Aerospace Corporation. Provides aviation repair and overhaul services of gas turbine engines, components and helicopter airframes. Through facilities in Canada, the United States and the United Kingdom, it provides services to commercial and military customers internationally. Services include the repair and overhaul of turbine engines including turboprop and turbofan engines for airplanes and turboshaft engines for helicopters. Vector Aerospace also services dynamic components, accessories, blades, propellers and airframes for both helicopters and airplanes. It has also developed specialized avionics and information technology services. ================================================================================ VECTOR AEROSPACE CORP. DAILY PRICE/VOLUME GRAPH [STOCK PRICE AND TRADING VOLUME GRAPH APPEARS HERE] ================================================================================ -------------------------------------------- Houlihan Lokey Howard & Zukin 55 -------------------------------------------------------------------------------- Supplemental Valuation Schedules -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Supplemental Valuation Schedules -------------------------------------------------------------------------------- Comparable Company Market Analysis (figures in millions, except per share values)
First Mercury Pemco Aviation Air Aviation Sequa Corp Aar Corp Aviall Inc Svcs Inc Group Inc Inc -Cl A -------- ---------- -------- --------- -------- ---------- General Market Information -------------------------- Ticker Symbol AIR AVL FAVS MAX PAGI SQA A Exchange NYSE NYSE NASDAQ AMEX NASDAQ NYSE Fiscal Year End 05/2001 12/2000 01/2001 06/2001 12/2000 12/2000 Latest Financial Information 11/2001 09/2001 10/2001 12/2001 09/2001 09/2001 Closing Price as of Valuation Date $7.44 $7.10 $4.60 $4.50 $15.75 $49.31 20-Day Average Stock Price $7.79 $7.05 $4.71 $5.10 $15.54 $47.15 52 Week Price Range High $17.45 $11.25 $5.48 $7.50 $18.00 $54.22 Low $6.96 $4.52 $4.00 $3.10 $8.13 $37.64 52 Week Return -46.5% -3.0% 4.4% -21.1% 51.8% 12.2% Market Valuation Information ---------------------------- Fully Diluted Shares 26.859 18.758 7.204 6.758 4.295 10.932 Closing Price as of Valuation Date $7.44 $7.10 $4.60 $4.50 $15.75 $49.31 Market Value of Equity (MVE) $199.832 $133.183 $33.138 $30.413 $67.645 $539.075 plus: Total Debt (book) 260.895 133.183 16.204 68.063 15.686 711.301 plus: Preferred Stock Redemption/Market/Liq. Value 0.000 0.000 0.000 0.000 0.000 3.985 less: Cash & Cash Equivalents (book) 53.129 2.542 28.622 3.215 1.985 139.108 plus: Minority Interest in Subsidiaries 0.000 0.000 1.041 0.000 0.000 0.000 ------------------------------------------------------------------------- Enterprise Value $407.598 $263.824 $21.761 $95.261 $81.346 $1,115.253 =========================================================================
BBA Vector Hawker Pacific Group plc Aerospace Aerospace Inc --------- --------- ------------- General Market Information -------------------------- Ticker Symbol BBA *RNO HPAC Exchange London Toronto NASDAQ Fiscal Year End 12/2000 12/2001 12/01/01 Latest Financial Information 06/01/01 12/2001 12/01/01 Closing Price as of Valuation Date $3.66 $2.51 $2.12 20-Day Average Stock Price $3.68 $2.61 $2.60 52 Week Price Range High $5.40 $4.45 $4.20 Low $2.48 $2.41 $1.50 52 Week Return 30.5% -7.0% -37.5% Market Valuation Information ---------------------------- Fully Diluted Shares 454.100 28.398 10.161 Closing Price as of Valuation Date $3.66 $2.51 $2.12 Market Value of Equity (MVE) $1,662.006 $71.223 $21.541 plus: Total Debt (book) 1,014.000 102.316 72.571 plus: Preferred Stock Redemption/Market/Liq. Value 84.450 0.000 0.000 less: Cash & Cash Equivalents (book) 140.250 0.000 1.604 plus: Minority Interest in Subsidiaries 2.100 0.000 0.000 ----------------------------------- Enterprise Value $2,622.306 $173.539 $92.508 ===================================
Note: HPAC stock price at closing on February 25, 2002. --------------------------------------------- Houlihan Lokey Howard & Zukin 57 -------------------------------------------------------------------------------- Project Sun -------------------------------------------------------------------------------- Supplemental Valuation Schedules -------------------------------------------------------------------------------- Balance Sheet Statistics (figures in millions)
Net Net Net Other Total Income Income Current Quick Inventory A/R A/P Working LT Assets ROA ROE Ratio Ratio Turnover Days Days Capital Liab/EV ---------- ------ ------ ------- ----- --------- ---- ---- -------- ------- Aar Corp $ 714.208 1.6% -13.7% 2.6 0.7 2.1 49.1 46.7 $306.151 13.8% Aviall Inc $ 440.206 3.1% 6.5% 2.7 0.9 2.8 57.1 48.3 $175.275 6.2% First Aviation Svcs Inc $ 80.877 0.2% -1.7% 4.7 2.9 3.8 56.6 50.5 $28.278 0.0% Mercury Air Group Inc $ 133.308 2.8% 5.6% 1.5 1.3 104.3 45.3 26.2 $22.502 0.4% Pemco Aviation Inc $ 66.461 15.7% 71.8% 1.1 0.5 6.8 38.4 48.5 $12.202 3.2% Sequa Corp -Cl A $1,864.956 2.5% 6.1% 2.6 1.1 3.9 46.1 37.3 $386.860 11.3% BBA Group plc $2,792.250 7.6% 24.9% 1.9 0.3 NMF NA NA $511.200 3.8% Vector Aerospace $ 240.263 1.4% -21.2% 1.7 0.5 1.7 67.3 81.7 $106.523 6.6% Hawker Pacific Aerospace Inc $ 94.486 -9.8% -182.6% 1.9 0.6 2.7 71.0 57.3 $22.325 1.3% ------------------------------------------------------------------------------------------------------------------------ Low $ 66.461 -9.8% -182.6% 1.1 0.3 1.7 38.4 26.2 $12.202 0.0% High $2,792.250 15.7% 71.8% 4.7 2.9 104.3 71.0 81.7 $511.200 13.8% Median $ 240.263 2.5% 5.6% 1.9 0.7 3.3 52.9 48.4 $106.523 3.8% Mean $ 714.113 2.8% -11.6% 2.3 1.0 16.0 53.9 49.6 $174.591 5.2% ------------------------------------------------------------------------------------------------------------------------
Leverage -------------------------------------- Debt/ Debt/ Debt/ Interest EBITDA MVE/(1)/ EV Coverage/(2)/ ------ -------- ----- ------------- Aar Corp 5.4 x 130.6% 0.6 x 2.3 x Aviall Inc 3.2 x 100.0% 0.5 x 4.3 x First Aviation Svcs Inc 11.8 x 48.9% 0.7 x 2.6 x Mercury Air Group Inc 2.9 x 223.8% 0.7 x 3.7 x Pemco Aviation Inc 0.9 x 23.2% 0.2 x 8.0 x Sequa Corp -Cl A 4.0 x 131.9% 0.6 x 3.2 x BBA Group plc 2.6 x 61.0% 0.4 x 8.8 x Vector Aerospace 3.7 x 143.7% 0.6 x 3.4 x Hawker Pacific Aerospace Inc 85.4 x 336.9% 0.8 x 0.1 x -------------------------------------------------------------------------- Low 0.9 x 23.2% 0.2 x 0.1 x High 85.4 x 336.9% 0.8 x 8.8 x Median 3.7 x 130.6% 0.6 x 3.4 x Mean 13.3 x 133.3% 0.6 x 4.1 x --------------------------------------------------------------------------
Footnotes: --------- * Excluded from the Range Source: Compustat NA - Not Available NMF - Not Meaningful Figure EV - Enterprise Value MVE - Market Value of Equity EBIT - Earnings Before Interest and Taxes EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization ROA - Return on Assets ROE - Return on Equity A/R - Accounts Receivable A/P - Accounts Payable (1) Represents Total Interest-Bearing Debt to Market Value of Equity. (2) Represents EBITDA to Net Interest Expense. --------------------------------------------- Houlihan Lokey Howard & Zukin 58