Draft presentation, dated June 25, 2006

EX-99.C5 5 dex99c5.htm DRAFT PRESENTATION, DATED JUNE 25, 2006 Draft presentation, dated June 25, 2006

PROJECT ARROW

DRAFT

CONFIDENTIAL

Presentation to the Special Committee

June 25, 2006

PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATION

THESE

MATERIALS

MAY

NOT

USED

RELIED

UPON

FOR

ANY

PURPOSE

OTHER

THAN

SPECIFICALLY

CONTEMPLATED

WRITTEN AGREEMENT WITH CREDIT SUISSE.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Table of Contents

Market Update

Update on Consortium Proposal

Preliminary Review of Selected Alternatives

Next Steps

Appendix

Supplemental Analysis

Updated Preliminary Financial Analysis

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Today’s Agenda

An overview of recent capital market conditions

An update on stock price performance of selected companies

A discussion of certain stockholder reactions to the proposal, including the

Special Committee’s meeting with Eminence Capital

Current Market

Conditions

A preliminary review of the potential value implications of implementing various

strategic alternatives

preliminary

review

LBO

done

conjunction

with

sale

AUCA

A further discussion of financial and ownership implications of a significant share

repurchase

Discussion of

Selected

Alternatives

A discussion of how the Special Committee could respond to the consortium

and other interested parties, as well as next steps in its consideration of

alternatives

Next Steps

A review of CS’s

and S&S’s meeting with consortium representatives

A review of discussions with other parties

Update on the

Current Proposal

and Other Inquiries

CONFIDENTIAL | PRELIMINARY ANALYSIS

Market Update

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Arrow Share Price Performance

Since June 2 Meeting

Broader equity indices have been under pressure and Arrow’s average daily trading

volume has remained relatively high.

Stock

has

held

steady

above

the

offer

price

$32

(1)

Average daily trading volume remains high, with

approximately

2.1

million

trading

daily

(2)

vs.

530,000 shares pre-announcement

Equity research target prices, reactions and

recommendations have not changed since the

Committee’s last meeting

Significant shareholder activity

Ariel Capital Management, formerly Arrow’s

largest shareholder, sold approximately

11 million of its 15.2 million shares

Eminence Capital, Arrow’s largest institutional

shareholder with 6.3%, has increased its

shareholding by over 230,000 shares since our

last meeting

Observations

Source: FactSet.

(1)

Since

the

proposal

was

announced,

Arrow’s

stock

price

has

closed

below

the

offer

price

only

once

($31.80

June

13,

2006).

(2)

2.1

million

ADTV

since

announcement

represents

1.8%

public

float;

24.2%

public

float

traded

day

announcement.

Trading Performance

Arrow

% Daily Change

Date

Price

Volume

Arrow

S&P 400

DJIA

Nasdaq

5/31/06

$32.75

3,455,000

6/1/06

33.00

1,092,700

0.8%

1.5%

0.8%

1.9%

6/2/06

33.06

993,400

0.2%

0.4%

(0.1%)

(0.0%)

6/5/06

32.70

1,222,700

(1.1%)

(2.4%)

(1.8%)

(2.2%)

6/6/06

32.70

854,400

0.0%

(0.6%)

(0.4%)

(0.3%)

6/7/06

32.84

1,234,600

0.4%

(0.8%)

(0.6%)

(0.5%)

6/8/06

32.77

1,230,900

(0.2%)

(0.5%)

0.1%

(0.3%)

6/9/06

32.66

588,700

(0.3%)

(0.2%)

(0.4%)

(0.5%)

6/12/06

32.30

893,800

(1.1%)

(2.2%)

(0.9%)

(2.0%)

6/13/06

31.80

3,930,400

(1.5%)

(1.6%)

(0.8%)

(0.9%)

6/14/06

32.50

2,270,500

2.2%

0.5%

1.0%

0.7%

6/15/06

32.67

612,700

0.5%

3.2%

1.8%

2.8%

6/16/06

32.80

689,700

0.4%

(0.4%)

(0.0%)

(0.7%)

6/19/06

33.10

715,300

0.9%

(1.6%)

(0.7%)

(0.9%)

6/20/06

33.15

1,214,800

0.2%

(0.4%)

0.3%

(0.2%)

6/21/06

33.11

1,144,400

(0.1%)

1.8%

0.0%

1.6%

6/22/06

32.81

1,308,000

(0.9%)

(0.6%)

0.4%

(0.9%)

6/23/06

32.92

1,033,900

0.3%

0.9%

(0.3%)

(0.1%)

Total Percent Change

0.5%

(3.2%)

(1.6%)

(2.6%)

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Equity Market Update

Debt Market Update

The equity markets continue to reflect broad investor

sentiment that the US economy is headed for a

slowdown

The S&P 500 is down 3.4% since June 2nd and

6.1% since May 5th (LTM high)

Investors are focused on economic data, particularly

signs of inflation, and how the Federal Reserve will

respond

Core CPI for Q1 revised upwards and economists

expect the same for GDP

Market is pricing-in an almost certain 25-bp hike

the

FOMC

meeting

(June

28/29)

Investors are struggling with whether the Fed has

gone too far

Market is expected to continue to focus on economic

data until Q2 earnings season and possible 2006

forecast revisions come into play (expected late July)

The high yield market has softened recently, driven in

part by rising interest rates, uncertainty surrounding the

Fed and an imbalance in supply/demand technicals

The 10-Year Treasury is up 20 bps in June

The high yield forward issue calendar reached

$9.3bn last week, the highest it has been since

January

High yield mutual funds experienced outflows of

roughly

$325mm

last

week,

bringing

YTD

outflows

to $1.9bn

Uncertainty remains whether recent contraction is a

semi-annual market correction that has occurred in

recent years, or indicative of larger market concerns

Default rates, currently at approximately 2%, remain

well below historical averages

Given treasury movements, spreads have actually

compressed YTD, implying that the recent sell-off is

not a result of credit concerns

Equity and debt markets have experienced downward pressure recently.

Review of Capital Market Conditions

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Changes in Selected Companies

Valuation Multiples

Despite

recent

declines

prices,

food

and

support

services

valuation

multiples

have

remained

largely

unchanged,

while

uniform

multiples

have

contracted

slightly.

millions,

except

per

values)

EV / EBITDA

P/E

(1)

Share Price as of

2006E

2007E

2006E

2007E

Last

Company

Meeting

Today

% Change

Meeting

Today

Meeting

Today

Meeting

Today

Meeting

Today

Arrow (Current)

$33.06

$32.92

(0.4%)

8.5x

7.9x

20.2x

20.1x

17.9x

17.8x

Arrow (Offer)

$32.00

8.3x

7.7x

19.5x

17.3x

Arrow (Pre-Offer)

$28.11

7.5x

6.9x

17.1x

15.2x

Food and Support Services

Autogrill

$15.79

$14.83

(6.1%)

8.1x

7.9x

7.6x

7.4x

20.9x

20.3x

18.6x

18.1x

Centerplate

(2)

$14.17

$13.30

(6.1%)

9.0x

8.7x

8.3x

Compass

$4.60

$4.66

1.3%

8.7x

9.1x

8.3x

8.6x

21.6x

22.7x

16.0x

16.9x

Elior

(3)

$13.74

0.0%

7.7x

7.3x

15.1x

13.5x

Sodexho

$46.21

$45.70

(1.1%)

9.0x

9.2x

8.1x

8.2x

19.0x

19.4x

16.5x

16.9x

Mean

(2.4%)

8.5x

8.0x

19.2x

19.4x

16.2x

16.3x

Median

(1.1%)

8.7x

8.1x

8.2x

19.9x

19.8x

16.3x

16.9x

Uniform and Career Apparel

United States

Cintas

$42.17

$39.71

(5.8%)

10.3x

9.7x

9.4x

8.9x

20.9x

19.7x

18.3x

17.3x

G&K Services

$39.27

$34.98

(10.9%)

8.8x

8.0x

7.3x

19.5x

17.4x

17.2x

15.3x

Unifirst

$32.02

$31.60

(1.3%)

6.8x

6.3x

6.2x

16.2x

16.0x

13.9x

13.7x

International

Davis Service Group

$8.64

$8.30

(3.9%)

4.6x

4.5x

13.3x

12.5x

Rentokil

$2.73

$2.78

1.6%

7.1x

7.4x

6.8x

7.0x

13.5x

14.2x

12.3x

13.0x

Mean

(4.1%)

7.5x

7.3x

7.0x

6.8x

16.7x

16.1x

14.9x

14.4x

Median

(3.9%)

7.1x

7.4x

6.8x

7.0x

16.2x

16.0x

13.9x

13.7x

Overall Mean

(3.2%)

8.0x

7.9x

7.5x

7.4x

17.8x

17.6x

15.5x

15.2x

Overall Median

(2.6%)

8.4x

7.9x

7.8x

7.4x

19.0x

17.4x

16.0x

15.3x

Note: Last Meeting reflects share prices and valuation as of May

31, 2006; Today reflects share prices and valuation as of June 23, 2006.

(1)

EPS

estimates

based

Investext

equity

research.

(2)

Centerplate

trades

Income

Deposit

Security.

(3) As of January 11, 2006, the day before Robert Zolade

announced that he was reviewing the possibility of opening his share capital to new investors. A cash tender was launched on March 27, 2006.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Review of Eminence Capital Presentation

On June 12, Eminence Capital presented its view on valuation and

strategic alternatives to selected

members of the Special Committee, Credit Suisse and Shearman & Sterling.

Eminence

provided

summary

valuation

using

precedent

transaction

and

LBO

analyses

that

values

Arrow

between

$37.00

$48.17

Eminence

also

stated

its

belief

that

Arrow

equity

research

price

targets

are

flawed

two

respects:

Pre-Offer

price

targets

are

based

GAAP

EPS,

while

Arrow’s

primary

comparables

trade

“Cash

EPS”

Post-Offer price targets incorporate multiple flawed assumptions

Eminence is optimistic about Arrow’s prospects based on its consistent growth, predictable results,

high returns

on capital, strong free cash flow generation and recognized leadership position

Eminence also outlined a number of options that it believes are available to the Special Committee

Negotiate with the buying group for a price at or near fair value

Initiate an auction for the Company and allow the CEO-led offering group to bid

offer

near

fair

value

does

not

materialize,

then

repurchase

20%

30%

outstanding

via

Dutch tender offer and highlight “Cash EPS”

Eminence’s projections are based on publicly available information and Eminence estimates

(1) Source: Eminence Capital.

($ in millions)

EBITDA

2006

2007

2008

2009

2010

2011

Eminence Projections

(1)

$948

$1,034

$1,106

$1,184

$1,266

$1,355

Management Plan

954

1,030

1,103

1,171

1,248

1,320

% Difference

(0.6%)

0.4%

0.3%

1.1%

1.4%

2.7%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Implied Valuation Range

$32.00 –

$37.00

Financial projections based on Arrow five-year plan

$13-$14 million of working capital increases per

annum

Exit multiple range of 8.5x LTM EBITDA

Cost of debt of 8.56%

Implied IRR of approximately 17-30% depending on

purchase price

Leverage of 7.0x based on 6/30/06E adjusted LTM

EBITDA ($6,770mm of debt financing)

Targeting a 15.0% to 20.0% IRR using the

Management Case would yield an implied valuation

range of $35.32 to $37.84 per share, respectively

(excluding management promote)

Selected list of recent transactions highlighting Elior

and SSP as most relevant (e.g., EQT/SSP, HBI/Elior,

Charterhouse/PHS Group, EQT/ISS,

Consortium/SunGuard)

Price Range

(1)

$37.00 –

$41.26

Implied EBITDA Multiple

9.0x –

9.8x

Assumed 2006E EBITDA:

$948mm

Selected transactions based on a broad number of

transactions in Arrow’s core segments

(e.g., EQT/SSP, HBI/Elior, Sodexho/SMS,

Cintas/Omni Services, Cintas/Unitog)

A complete list of relevant transactions can be found

on slide 42

Price Range

$34.00 –

$41.00

Implied EBITDA Multiple

8.8x –

10.3x

Assumed 2006E EBITDA:

$954mm

Implied Valuation Range

$38.91 –

$42.49

Financial projections based on publicly available

information and Eminence estimates

No assumed increase in working capital

requirements

Exit multiple of 8.25x NTM EBITDA

Cost of debt of 7.81%

Assumed IRR of 15-20%

Leverage of ~6.5x based on 6/30/06E adjusted LTM

EBITDA (consistent with consortium proposal of

$6,250mm of debt financing)

Eminence Analysis

Comparison of Assumptions

LBO Analysis

Precedent

Transactions

CS Analysis

(1) $37.00 per share based on average EV/EBITA multiple of 12.9x

for selected transactions.

Note: EBITDA based 9/30/06 assumptions.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Assumes 16.3x NTM EPS and 3.0x leverage –

25.2% of total shares outstanding

Estimated debt of $1,657mm as of 9/30/06

Financing based on 2007E EBITDA of $1,034mm

at 7.25% cost of debt

Assumes post tender offer trading multiple based

on average of Sodexho, Compass and Cintas

(FY 2007E)

Assume transaction occurs end of FY 2007

Assumes “Cash EPS”

Implied

2007E

Price

(1)

$38.12 at 3.0x leverage and a

$32.00 repurchase price

Assumes 16.7x NTM EPS and 4.5x leverage –

40.8% of total shares outstanding

Estimated debt of $1,869mm as of 9/30/06

Financing based on 6/30/06 PF EBITDA of

$967mm and 7.44% cost of debt

Assumes post tender offer trading multiple based

on NTM EPS consensus estimate one day prior to

the announced proposal

Assumes transaction occurs end of FY 2006

Assumes GAAP EPS

Implied

2007E

Price

(1)(2)(3)

$37.91 at 3.0x leverage and a

$32.00 repurchase price

$37.56 at 4.5x leverage and a

$34.00 repurchase price

Comparison of Assumptions (cont’d)

Repurchase

Eminence Analysis

CS Analysis

(1) Excludes value associated with cash in repurchase.

(2) Based on illustrative future share price analysis; the present values of the $37.91 and $37.56 share prices are $34.15 and $33.84, respectively, discounted at 11% cost of equity.

(3) These calculations are based upon management estimates of EPS growth rates and current public market trading multiples. These calculations do not purport to reflect the value of these

securities or the prices at which securities actually may be sold. Calculations based upon estimates of future results are not necessarily indicative of actual future results, which may be

significantly more or less favorable than those suggested by these calculations.

CONFIDENTIAL | PRELIMINARY ANALYSIS

Update on

Consortium Proposal

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Consortium Proposal

Consortium Members:

Arrow Management

GS Capital Partners

J.P. Morgan Partners

Thomas H. Lee Partners

Warburg Pincus LLC

Offer Price:

$32 per share (13.8% premium to closing market price as of April 28, 2006)

Equity Value:

$5.9 billion (19.5x 2006E Net Income; 17.3x 2007E Net Income)

Enterprise Value:

$7.9 billion (8.1x 2006E EBITDA; 7.5x 2007E EBITDA)

Form of Consideration:

100% Cash

Financing:

Debt

Approximately $6.24 billion of debt or approximately 6.5x LTM Adjusted EBITDA as of June 30, 2006

($3.62 billion of bank, $2.62 billion of bond and $600 million of unfunded revolver)

To be arranged by Goldman Sachs Credit Partners L.P. and J.P. Morgan Securities, Inc.

“Highly confident” letter provided by the banks listed above

Debt commitment letters to be provided (consortium has indicated they are prepared to sign current letters)

Preliminary rating view: B2/B

Equity

Approximately $1.9 billion of equity to be provided by the Consortium Members

Equity commitment letters to be provided

Debt

Commitment Letters:

No market Material Adverse Change (“MAC”) provision

Business MAC to conform to purchase agreement

Representations and Warranties to conform to purchase agreement

Syndication is not a condition to closing

No leverage or minimum EBITDA condition

No conditions on new information

Post-closing collateral flexibility

“Covenant light” financing package

Source: Consortium financial and legal advisors.

(1) CS has been informed that discussions regarding equity participation have been had with Mr. Neubauer (CEO), Fred Sutherland (CFO) and Bart Colli (GC).

Note: Certain terms of the proposal, including management’s participation, have not been finalized among the Consortium Members.

Text in blue represents new information since June 2, 2006 meeting.

On June 14 , the consortium’s financial and legal advisors met with Credit Suisse and Shearman & Sterling

and discussed additional detail of the equity arrangement and financing plan supporting its proposal.

(1)

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Consortium Proposal (cont’d)

Source: Consortium financial and legal advisors.

(1) Mr. Neubauer is expected to reinvest between 30% and 50% of his existing shareholding, and may increase participation above 2/3 depending upon the level of participation

by Arrow Senior Managers.

(2) Allocation of options to Arrow Senior Managers to be determined by Mr. Neubauer with the consent of the Sponsors.

Note: Certain terms of the proposal, including management’s participation, have not be finalized among the Consortium Members.

Text in blue represents new information since June 2, 2006 meeting.

(1)

Board Composition:

For the Initial 4-Year Period (“Initial Period”)

11 Directors

–

Mr. Neubauer

(Chairman and CEO)

–

6 Independent Directors (to be approved by Nominating Committee,

which will be selected by Mr. Neubauer)

–

4 Directors representing the 4 sponsors (subject to Mr. Neubauer’s

consent)

For 2 Years Following the Initial Period

Sponsors to select the 6 Independent Directors (with influence from Mr. Neubauer)

Mr. Neubauer’s

Rights:

Veto rights on an IPO and / or sale of the Company for Initial Period

Rights

remain essentially the same if Mr. Neubauer

relinquishes CEO role but maintains current ownership

Sponsor Rights:

Affirmative consent from Sponsors required for (i) material acquisitions and divestitures (ii) equity issuance and (iii) other

material

transactions

Management

Participation:

Equity roll-over equal to at least 10%, but likely closer to 15%

–

Mr. Neubauer:

2/3 of total roll-over

–

250 Arrow Senior Managers:

1/3

Management Options

(2)

17.5% of fully diluted equity (12.5% issued at closing

at transaction price; 5% in future years)

1/3 performance based; 2/3 time vested

Arrow Senior Managers are eligible for option grants; however, eligibility contingent upon participation in the

equity roll-over

Additional equity grants to be considered

by the Board

CONFIDENTIAL | PRELIMINARY ANALYSIS

Preliminary Review of

Selected Alternatives

CONFIDENTIAL

| PRELIMINARY ANALYSIS

ADVANTAGE

CONSIDERATIONS

PRELIMINARY IMPLIED VALUE RANGE

Modest growth with

relatively low risk profile

Appears to indicate upside

potential in pre-

announcement stock price

Deliver value through

organic growth and margin

improvement

Fragmented market

provides “bolt-on”

acquisition opportunities

Market might ask “What’s

next?”

Likely result in immediate

stock price reduction

Potential exposure to near-

term underperformance

relative to Street

expectations

Illustrative Future Share Price Analysis: $32 - $34,

depending on future P/E multiple

Range of DCF Analysis

(1)

: $32 - $43

Expands potential buyer

universe

Cash proceeds from

divestiture(s) could be used

for a number of alternatives

(distribution, significant

acquisition)

Lack of significant multiple

differentiation between

segments

May restrict strategic

transactions post-separation

if spin-off

Tax leakage impacts value

creation opportunity

Spin-off AUCA: $28 - $35, depending on pro forma trading

multiples

Divest AUCA: $27 - $34, depending on AUCA sale multiple

and pro forma FSS trading multiple

Immediate return of value to

stockholders – potentially at

premium to current stock

price in a repurchase

Could structure repurchase

with ESOP component to

enhance employee

ownership

EPS accretive transaction

Potentially results in ratings

downgrade / increased cost

of capital

May increase

Mr. Neubauer’s voting

position depending on his

participation

$31 - $36, depending on future P/E multiple

Realize change of control

value for stockholders

May capture differential

between public and private

market valuations

Increased financial risk /

reduces financial flexibility

$32 - $37, depending on leverage, financial projection

assumptions, IRR targets and level of management promote

Realize strategic value for

stockholders

Potential synergies may

facilitate attractive valuation

Limited universe of strategic

buyers with both an appetite

and financial capability

Potential for premium valuation depending on third-party

interest

Uncertain interest level, but ongoing discussions

Note: Illustrative value ranges to be considered in conjunction with detailed analysis and sensitivities contained herein.

(1) Based on consolidated DCF.

Recapitalization /

Repurchase /

Special Dividend

Preliminary Review of Selected Alternatives

Implement

Strategic

Plan

Leveraged

Buyout

Corporate Merger /

Sale of Company

Separate

Business Units

CONFIDENTIAL | PRELIMINARY ANALYSIS

Next Steps

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Next Steps

Refine execution strategy around desirable alternatives, as appropriate

Construct strategy with respect to external and internal communications

Develop strategy for communicating with consortium / other bidders

CONFIDENTIAL | PRELIMINARY ANALYSIS

Appendix

CONFIDENTIAL | PRELIMINARY ANALYSIS

Supplemental Analysis

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Implement

Strategic

Plan

Analysis assumes an estimate of Arrow’s share price discounted to September 2006

Illustrative Future Share Price Analysis

These

calculations

are

based

upon

management

estimates

EPS

growth

rates

and

current

public

market

trading

multiples.

These

calculations

not

purport

reflect

the

value

these

securities

the

prices

which

securities

actually

may

sold.

Calculations

based

upon

estimates

future

results

are

not

necessarily

indicative

actual

future

results,

which

may

significantly

less

favorable

than

those

suggested

these

calculations.

millions,

except

per

data)

'05 -

'09

FYE 9/30,

2005A

2006E

2007E

2008E

2009E

CAGR

Management Case

Revenue

$10,963

$11,599

$12,222

$12,904

$13,624

5.6%

% Growth

7.6%

5.8%

5.4%

5.6%

EPS

$1.53

$1.62

$1.86

$2.16

$2.46

12.6%

% Growth

12.5%

5.9%

14.8%

16.1%

13.9%

Implied Value per Share

Assumed Forward P/E Multiple

16.7x

Implied Future Stock Price

$36.07

$41.08

$46.26

PV Stock Price

Status Quo

@ 11.0% Cost of Equity

(1)

$28.11

$32.50

$33.33

$33.81

% Premium / (Discount) to Pre-Offer

15.6%

18.6%

20.3%

(1) Based on beta of 0.67 from Barra; risk-free rate of 5.2%; size premium of 0.75% from Ibbotson 2005 yearbook.

Sensitivity Analysis –

Implied PV of 2008E Stock Price

'05 -

'09 EPS CAGR

11.6%

12.6%

13.6%

15.0x

$28.89

$29.94

$31.02

(13.3%)

(10.2%)

(6.9%)

16.0x

$30.82

$31.94

$33.09

(7.5%)

(4.2%)

(0.7%)

16.7x

$32.17

$33.33

$34.53

(3.5%)

0.0%

3.6%

18.0x

$34.67

$35.93

$37.22

4.0%

7.8%

11.7%

19.0x

$36.60

$37.92

$39.29

9.8%

13.8%

17.9%

Note:Arrow's

historical

3-year

averageforward

P/E

multipleis

17.1x.

Note:

Percentages

reflect

premium

(discount)

management's

plan.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

A spin-off of AUCA could be a tax-efficient alternative to a straight sale.

Stockholders could benefit from pure-play economics

Assumes spin-off is effective September 2006

Multiples

have

been

adjusted

versus

June

meeting

reflect

current

valuation

Separate

Business

Units

Spin-Off AUCA

Implied

Effective

Value

–

Consolidated

Pro Forma Stand-alone

Business Unit Financials

Implied

Effective

Value

–

Segment

Note: Percentages below per share values represent accretion / (dilution) to pre-offer Arrow share price of $28.11.

7.1x multiple equates to comparable company trading multiple adjusted for management’s projections.

Note: Percentages below per share values represent segment’s contribution to overall share price.

7.1x multiple equates to comparable company trading multiple adjusted for management’s projections.

($ in milliions)

FYE 9/30,

2006E

2007E

FSS Standalone

Revenue

$9,969.8

$10,508.9

% Growth

6.0%

5.4%

EBITDA

(1)

$748.2

$799.8

% Margin

7.5%

7.6%

Debt / EBITDA

(1)

2.2x

–

AUCA Standalone

Revenue

$1,629.5

$1,713.2

% Growth

4.9%

5.1%

EBITDA

(1)

$205.6

$224.8

% Margin

12.6%

13.1%

Debt / EBITDA

(1)

2.2x

–

Source: Management estimates provided to CS on May 25, 2006.

(1) Assumes 100% of corporate overhead and debt allocated based on EBITDA contribution

PF Trading Multiple of FSS '07E EBITDA

6.5x

7.0x

8.5x

$25.05

$27.20

$33.64

(10.9%)

(3.2%)

19.7%

$26.26

$28.41

$34.84

(6.6%)

1.1%

24.0%

$27.47

$29.61

$36.05

(2.3%)

5.3%

28.2%

8.5x

7.5x

6.5x

Multiple of AUCA '07E EBITDA

Multiple of FSS '07E EBITDA

AUCA Midpoint

7.5x

FSS Midpoint

7.0x

$19.83

$5.63

75.5%

20.7%

$21.83

$6.58

76.9%

23.1%

$27.92

$7.54

80.1%

25.4%

6.5x

7.5x

8.5x

6.5x

7.0x

8.5x

CONFIDENTIAL

| PRELIMINARY ANALYSIS

While

sale

AUCA

would

provide

significant

cash

proceeds

Arrow,

would

also

res

ult in significant tax leakage under most sale structures.

Small group of possible strategic buyers

CS believes an auction would garner significant financial sponsor interest

Key Assumptions

Transaction close of September 2006

AUCA

sold

for

9.0x

–

11.5x

LTM

EBITDA

Tax basis of $960 million (based on management estimates)

Proceeds used to pay down debt (alternative uses could include share buyback)

Illustrative Analysis of Proceeds

Estimated Value to Arrow Stockholders

Separate

Business

Units

Divest AUCA

Note: Percentages below per share values represent accretion / (dilution) to pre-offer Arrow share price of $28.11.

7.1x multiple equates to comparable company trading multiple adjusted for management’s projections.

($ in millions)

LOW

HIGH

Potential Sale of AUCA

$1,969

–

$2,516

Assumed Tax Basis

960

Gain on Sale

$1,009

–

$1,556

Cash Taxes (at 37.5%)

378

–

584

Net Cash Proceeds to Arrow

$1,591

–

$1,933

Implied Effective Multiple

7.3x

–

8.8x

PF Multiples of Arrow '07E EBITDA

6.5x

7.0x

8.5x

9.00x

$25.26

$27.37

$33.70

(10.1%)

(2.6%)

19.9%

10.25x

$25.72

$27.83

$34.16

(8.5%)

(1.0%)

21.5%

11.50x

$26.18

$28.29

$34.62

(6.9%)

0.6%

23.1%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

CS believes Arrow may be able to perform a stock repurchase via a debt issuance,

increasing

leverage

2.5x

4.5x

EBITDA.

CS believes Arrow may be able to increase leverage to approximately 2.5x EBITDA while

maintaining its investment grade rating

CS believes leverage of 4.5x EBITDA could be achieved in the current market without the

market viewing Arrow as “over-levered”

Analysis of Share Repurchase

Recapitalization /

Repurchase

Pro Forma Ownership @ 4.5x Leverage

(shares in millions)

Current

Participates

Pro Rata

Does Not

Participate

Joseph Neubauer

A Shares

23.8

14.3

23.8

B Shares

0.0

Total Shares

23.8

14.4

23.8

Economic Interest

13.3%

22.0%

Voting Interest

33.7%

48.4%

Public Float

67.2%

60.4%

Note: Assumes shares repurchased at $34.00 per share.

Pro Forma Ownership @ 2.5x Leverage

(shares in millions)

Current

Participates

Pro Rata

Does Not

Participate

Joseph Neubauer

A Shares

23.8

21.7

23.8

B Shares

0.0

Total Shares

23.8

21.7

23.8

Economic Interest

13.3%

14.6%

Voting Interest

33.7%

36.1%

Public Float

67.2%

66.2%

Note: Assumes shares repurchased at $34.00 per share.

($ in millions, except per share data)

Repurchase Price per Share

$32.00

$34.00

$36.00

$32.00

$34.00

$36.00

% Premium

13.8%

21.0%

28.1%

13.8%

21.0%

28.1%

Pro Forma LTM Credit Statistics

Status Quo

(1)

Debt / EBITDA

2.0x

2.5x

4.5x

Transaction Overview

New Debt Issued

$548

$2,483

Shares Repurchased (MM)

16.7

15.7

14.9

75.6

71.2

67.2

% of Basic Shares Outstanding

9.3%

8.8%

8.3%

42.2%

39.7%

37.5%

Financing Rate

(2)

7.39%

7.42%

Total Effective Value per Share

$31.49

$31.50

$31.85

$31.88

$31.90

% Premium to Pre-Offer Price

12.0%

12.1%

13.3%

13.4%

13.5%

Note: Analysis based on management estimates provided to CS on May 25, 2006, Arrow pre-offer stock price of $28.11 and 179 million basic shares outstanding.

(1)

Assumes

debt

balance

the

end

FY2006

$1,869.5

million

and

leverage

multiple

based

6/30/06E

LTM

adjusted

EBITDA

$967.1

million

(per

management

estimates).

(2) Assumes financing rates of L + 1.75% on new bank debt and 7.50% on new senior unsecured notes.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Average Value Received in Repurchase

Effective Value per Share

($ in millions)

LTM

Projected Fiscal Year Ending September 30,

09/30/06

2007

2008

2009

2010

2011

Revenues

$11,599

$12,222

$12,904

$13,624

$14,378

$15,162

Adjusted Net Income

–

$215.3

$263

$313

$363

$421

Adjusted EPS

–

$1.97

$2.42

$2.88

$3.35

$3.88

% Accretion / (Dilution)

–

5.7%

12.2%

17.2%

20.8%

24.0%

P/E Multiple

15.5x

PV Implied Price per Share

(1)

$30.48

$33.84

$36.28

$37.93

$39.61

$13.50

Residual Value of Arrow Equity

18.38

20.40

21.87

22.87

23.88

Effective Value per Share

$31.88

$33.90

$35.37

$36.37

$37.38

Analysis of Share Repurchase (cont’d)

Recapitalization /

Repurchase

Projected Share Price and Value per Share at Total Leverage of 4.5x EBITDA

Projected Share Price and Value per Share at Total Leverage of 2.5x EBITDA

Note: These calculations are based upon management estimates of EPS growth rates and current public market trading multiples. These calculations do not

purport to reflect the value of these securities or the prices at which securities actually may be sold. Calculations based upon estimates of future results are

not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by these calculations.

(1) Analysis assumes implied price per share discounted to present value at cost of equity of 11.0%.

Average Value Received in Repurchase

Effective Value per Share

($ in millions)

LTM

Projected Fiscal Year Ending September 30,

09/30/06

2007

2008

2009

2010

2011

Revenues

$11,599

$12,222

$12,904

$13,624

$14,378

$15,162

Adjusted Net Income

–

$308.9

$361

$416

$471

$534

Adjusted EPS

–

$1.87

$2.20

$2.53

$2.87

$3.25

% Accretion / (Dilution)

–

0.6%

2.0%

3.0%

3.6%

4.0%

P/E Multiple

16.7x

PV Implied Price per Share

(1)

$31.26

$33.14

$34.35

$35.05

$35.80

$2.98

Residual Value of Arrow Equity

28.52

30.24

31.34

31.98

32.66

Effective Value per Share

$31.50

$33.22

$34.32

$34.96

$35.65

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Share Repurchase Funding Alternatives

Recapitalization /

Repurchase

The issuance of traditional debt is the most common funding source for large share

repurchases.

Opportunity to re-lever the balance sheet

Credit spreads remain at historical lows with large investor appetite for quality stories

A leveraged recapitalization can be achieved with historically high leverage multiples without

negatively impacting equity share price

Share repurchase funded with a convertible security is a viable alternative to a traditional

debt-funded repurchase.

Repurchase shares at lower price than conversion price on convertible

May be more accretive to EPS than straight debt funding alternative

In the event Mr. Neubauer

elects not to participate in repurchase, a convert may mitigate

accretion in his voting position

Can be structured to provide equity credit from a ratings perspective

Convertible Debt

Traditional Debt

CONFIDENTIAL

| PRELIMINARY ANALYSIS

($ in millions)

Spread /

x of LTM

Sources

Amount

Int. Rate

Adj. EBITDA

Uses

Amount

Excess Cash

$0.0

–

0.00x

Equity Purchase Price @ $35 per Share

$6,455.2

74%

Term Loan B

$3,143.2

36%

2.25%

3.25x

Refinance Term Loan B

1,619.5

18%

A/R Securitization Facility

225.0

1.00%

0.23x

Rollover A/R Securitization Facility

225.0

5.0% Notes due 2012

250.0

5.00%

0.26x

Rollover 5.00% Notes

250.0

Senior Unsecured Notes

846.3

10%

9.00%

0.88x

Est. Prepayment Penalties

8.9

Senior Toggle Notes

846.3

10%

9.75%

0.88x

Transaction Expenses

200.0

Senior Sub. Notes

1,208.9

14%

10.25%

1.25x

Holdco PIK

250.4

12.50%

0.26x

Total Debt

$6,770.0

77%

–

7.00x

Sponsors' Equity

1,988.6

23%

–

Total Sources

$8,758.6

100%

–

Total Uses

$8,758.6

100%

Note: Leverage multiple based on 6/30/06E LTM adjusted EBITDA of $967.1 million (per management estimates).

Preliminary LBO Analysis:

Management Case (7.0x Leverage @ $35)

Sources and Uses

Financial Summary

Leveraged

Buyout

($ in millions)

LTM

Projected Fiscal Year Ending September 30,

09/30/06

2007

2008

2009

2010

2011

Revenues

$11,599

$12,222

$12,904

$13,624

$14,378

$15,162

% Growth

5.4%

5.6%

5.5%

EBITDA

$982

$1,025

$1,097

$1,165

$1,242

$1,313

% Margin

8.5%

8.4%

8.5%

8.6%

8.7%

Balance Sheet Summary

Cash

$44

Bank Debt

$3,143

$3,038

$2,886

$2,762

$2,546

$2,276

Total Debt

$6,770

$6,696

$6,580

$6,495

$6,323

$6,104

Cumulative Debt Paid Down

1.1%

2.8%

4.1%

6.6%

9.8%

Credit Statistics Summary

Senior Debt / EBITDA

3.2x

3.0x

2.6x

2.4x

2.0x

1.7x

Total Debt / EBITDA

6.9x

6.5x

6.0x

5.6x

5.1x

4.6x

EBITDA / Int. Exp.

1.8x

2.0x

2.2x

2.3x

2.6x

Source: Management estimates provided to CS on May 25, 2006.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Purchase

Price

vs.

Exit

Multiple

7.0x

Leverage

Purchase Price vs.

Leverage

Note:

Assumes 5-year return and total leverage at close of 7.0x 6/30/06E LTM adjusted EBITDA. Excludes management promote.

Note:

Assumes 5-year return and exit multiple of 8.5x FY11E EBITDA. Excludes management promote.

promote

17.5%

diluted

equity

impacts

original

equity

IRRs

approximately

350

400

bps.

Illustrative LBO Return Sensitivity Analysis:

Management Case

Leveraged

Buyout

Premium to Pre-Bid

13.8%

21.0%

24.5%

28.1%

31.6%

35.2%

Implied Offer Price

$32.00

$34.00

$35.00

$36.00

$37.00

$38.00

Entry '06E EBITDA x

8.1x

8.5x

8.7x

8.9x

9.0x

9.2x

7.5x

21.8%

16.1%

13.7%

11.7%

9.8%

8.1%

8.0x

25.8%

19.9%

17.4%

15.3%

13.4%

11.6%

8.5x

29.3%

23.2%

20.7%

18.5%

16.5%

14.7%

9.0x

32.5%

26.2%

23.7%

21.4%

19.4%

17.5%

9.5x

35.4%

29.0%

26.4%

24.1%

22.0%

20.1%

Premium to Pre-Bid

13.8%

21.0%

24.5%

28.1%

31.6%

35.2%

Implied Offer Price

$32.00

$34.00

$35.00

$36.00

$37.00

$38.00

Entry '06E EBITDA x

8.1x

8.5x

8.7x

8.9x

9.0x

9.2x

6.45x

24.7%

20.2%

18.3%

16.6%

15.0%

13.6%

6.50x

25.0%

20.5%

18.5%

16.8%

15.2%

13.7%

6.75x

27.0%

21.8%

19.6%

17.6%

15.8%

14.2%

7.00x

29.3%

23.2%

20.7%

18.5%

16.5%

14.7%

7.25x

32.3%

25.0%

22.1%

19.6%

17.3%

15.3%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

LBO Analysis with Sale of AUCA:

Management Case

While a sale of AUCA would provide significant cash proceeds to Arrow, it would also result in

significant tax leakage under most sale structures.

Small group of possible strategic buyers

CS believes that an auction would garner significant financial sponsor interest

Key Assumptions

CS has assumed a sale of AUCA one year after the close of the LBO with proceeds used to pay

down debt

Use of management’s financial projections

AUCA

sold

for

9.0x

–

11.5x

LTM

EBITDA

Tax basis of $960 million (based on management estimates)

Total leverage available at close of 7.0x 6/30/06 LTM EBITDA

Leveraged

Buyout

Divest AUCA

($ in millions)

2007E EBITDA

$239

Sale Multiple

9.00x

10.25x

11.50x

Proceeds

$2,148

$2,447

$2,745

Tax Basis

960

Gain

1,188

1,487

1,785

Tax on Gain (37.5%)

446

557

669

After-Tax Proceeds

$1,703

$1,889

$2,076

CONFIDENTIAL

| PRELIMINARY ANALYSIS

LBO Analysis with Sale of AUCA:

Management Case

Financial Summary

Purchase Price vs. Sale Proceeds of AUCA

Note: Assumes AUCA divestiture at 10.25x FY07E EBITDA, 5-year return, 7.0x leverage and exit multiple of 8.5x FY11E EBITDA.

Leveraged

Buyout

Premium to Pre-Bid

13.8%

21.0%

24.5%

28.1%

31.6%

35.2%

Implied Offer Price

$32.00

$34.00

$35.00

$36.00

$37.00

$38.00

Entry '06E EBITDA x

8.1x

8.5x

8.7x

8.9x

9.0x

9.2x

9.00x

$1,703

26.1%

20.1%

17.7%

15.6%

13.6%

11.9%

9.50x

$1,777

26.6%

20.6%

18.2%

16.0%

14.1%

12.3%

10.25x

$1,889

27.3%

21.3%

18.9%

16.7%

14.7%

13.0%

11.00x

$2,001

28.0%

22.0%

19.5%

17.4%

15.4%

13.6%

11.50x

$2,076

28.5%

22.5%

20.0%

17.8%

15.8%

14.0%

($ in millions)

LTM

Projected Fiscal Year Ending September 30,

09/30/06

2007

2008

2009

2010

2011

Revenues

$11,599

$12,222

$11,114

$11,754

$12,423

$13,120

% Growth

5.4%

(9.1%)

5.8%

5.7%

5.6%

EBITDA

$982

$1,025

$858

$912

$975

$1,033

% Margin

8.5%

8.4%

7.7%

7.8%

7.9%

Balance Sheet Summary

Cash

$44

Bank Debt

$3,143

$1,152

$969

$813

$570

$276

Total Debt

$6,770

$4,810

$4,662

$4,546

$4,348

$4,104

Cumulative Debt Paid Down

29.0%

31.1%

32.8%

35.8%

39.4%

Credit Statistics Summary

Senior Debt / EBITDA

(1)

3.2x

1.4x

1.1x

0.9x

0.6x

0.3x

Total Debt / EBITDA

(1)

6.9x

6.0x

5.4x

5.0x

4.5x

4.0x

EBITDA / Int. Exp.

1.7x

2.0x

2.1x

2.4x

2.6x

2.9x

Source: Management estimates provided to CS on May 25, 2006.

(1) Credit statistics are pro forma for the sale of AUCA beginning in 2007.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Consortium Proposal –

Estimated Sources & Uses

The

sources

and

uses

table

below

based

CS’s

current

understanding

the

consortium’s

proposed financing arrangement

has

performed

LBO

analysis

using

estimated

“Consortium

Projections”

that

represent

the

midpoint between the consortium’s bank case and management’s projections

Actual

consortium

“base

case”

could

higher

lower

Returns are based on the financing structure outlined above

sensitivity

performed

assuming

sale

AUCA

one

year

after

closing

Leveraged

Buyout

Preliminary Sources & Uses

($ in millions)

Spread /

x of LTM

Sources

Amount

Int. Rate

Adj. EBITDA

Uses

Amount

Excess Cash

$0.0

–

0.0x

Equity Purchase Price

$5,886.9

72%

Term Loan B

$3,615.0

44%

2.50%

3.7x

Refinance Term Loan B

1,528.0

19%

5.0% Notes due 2012

250.0

5.00%

0.3x

Refinance 5.0% Notes due 2012

250.0

Senior Unsecured Notes

835.0

10%

8.25%

0.9x

Refinance A/R Securitization Facility

225.0

Senior Toggle Notes

835.0

10%

8.75%

0.9x

Est. Prepayment Penalties

7.2

Senior Subordinated Notes

480.0

10.00%

0.5x

Transaction Expenses

264.9

A/R Securitization Facility

225.0

1.00%

0.2x

Total Debt

$6,240.0

76%

–

6.5x

Management's Contribution

(1)

288.3

–

Sponsors' Equity

1,633.7

20%

–

Total Equity

1,922.0

24%

Total Sources

$8,162.0

100%

–

Total Uses

$8,162.0

100%

Note:

Leverage

multiple

based

6/30/06E

LTM

adjusted

EBITDA

$967.1

million

(per

management

estimates).

(1) Excludes management's promote.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

LBO Analysis: Consortium Case

Leveraged

Buyout

Financial Summary

Purchase

Price

vs.

Exit

Multiple

Purchase

Price

vs.

Leverage

Note: Assumes consortium leverage of 6.45x 6/30/06 EBITDA. Excludes management promote.

promote

17.5%

diluted

equity

impacts

original

equity

IRRs

approximately

350

400

bps.

Premium to Pre-Bid

13.8%

21.0%

24.5%

28.1%

31.6%

35.2%

Implied Offer Price

$32.00

$34.00

$35.00

$36.00

$37.00

$38.00

Entry '06E EBITDA x

8.0x

8.4x

8.6x

8.8x

9.0x

9.2x

7.5x

15.9%

11.8%

10.0%

8.4%

6.9%

5.5%

8.0x

19.4%

15.1%

13.3%

11.6%

10.1%

8.7%

8.5x

22.5%

18.1%

16.2%

14.5%

12.9%

11.5%

9.0x

25.3%

20.8%

18.9%

17.1%

15.5%

14.0%

9.5x

27.9%

23.3%

21.3%

19.5%

17.9%

16.4%

Premium to Pre-Bid

13.8%

21.0%

24.5%

28.1%

31.6%

35.2%

Implied Offer Price

$32.00

$34.00

$35.00

$36.00

$37.00

$38.00

Entry '06E EBITDA x

8.0x

8.4x

8.6x

8.8x

9.0x

9.2x

6.00x

20.1%

16.5%

15.0%

13.5%

12.2%

10.9%

6.25x

21.3%

17.4%

15.6%

14.0%

12.6%

11.2%

6.45x

22.5%

18.1%

16.2%

14.5%

13.0%

11.5%

6.75x

24.7%

19.5%

17.3%

15.4%

13.6%

12.0%

7.00x

27.0%

20.9%

18.4%

16.3%

14.3%

12.5%

($ in millions)

LTM

Projected Fiscal Year Ending September 30,

09/30/06

2007

2008

2009

2010

2011

Revenues

$11,614

$12,205

$12,839

$13,508

$14,204

$14,927

% Growth

5.1%

5.2%

5.1%

EBITDA

$981

$1,025

$1,084

$1,141

$1,207

$1,270

% Margin

8.4%

8.5%

Balance Sheet Summary

Cash

$44

Bank Debt

$3,640

$3,536

$3,383

$3,304

$3,144

$2,940

Total Debt

$6,240

$6,136

$5,983

$5,904

$5,744

$5,540

Cumulative Debt Paid Down

1.7%

4.1%

5.4%

8.0%

11.2%

Credit Statistics Summary

Senior Debt / EBITDA

3.7x

3.5x

3.1x

2.9x

2.6x

2.3x

Total Debt / EBITDA

6.4x

6.0x

5.5x

5.2x

4.8x

4.4x

EBITDA / Int. Exp.

1.9x

2.0x

2.1x

2.3x

2.4x

2.6x

Source: CS estimates.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

LBO Analysis with Sale of AUCA:

Consortium Case

While

sale

AUCA

would

provide

significant

cash

proceeds

Arrow,

would

also

result

significant tax leakage under most sale structures.

Small group of possible strategic buyers

CS believes that an auction would garner significant financial sponsor interest

Key Assumptions

CS has assumed a sale of AUCA one year after the close of the LBO with proceeds used to pay down

debt

Use of CS estimates of consortium financial projections

AUCA

sold

for

9.0x

–

11.5x

LTM

EBITDA

Tax basis of $960 million (based on management estimates)

Total leverage available at close of 6.45x 6/30/06 LTM EBITDA

Leveraged

Buyout

Divest AUCA

($ in millions)

2007E EBITDA

$225

Sale Multiple

9.00x

10.25x

11.50x

Proceeds

$2,023

$2,304

$2,585

Tax Basis

960

Gain

1,063

1,344

1,625

Tax on Gain (37.5%)

399

504

610

After-Tax Proceeds

$1,625

$1,800

$1,976

Premium to Pre-Bid

13.8%

21.0%

24.5%

28.1%

31.6%

35.2%

Implied Offer Price

$32.00

$34.00

$35.00

$36.00

$37.00

$38.00

Entry '06E EBITDA x

8.0x

8.4x

8.6x

8.8x

9.0x

9.2x

9.00x

$1,625

19.7%

15.4%

13.5%

11.9%

10.3%

8.9%

9.50x

$1,695

20.1%

15.8%

13.9%

12.3%

10.7%

9.3%

10.25x

$1,800

20.7%

16.4%

14.5%

12.9%

11.3%

9.9%

11.00x

$1,906

21.4%

17.0%

15.1%

13.4%

11.9%

10.4%

11.50x

$1,976

21.8%

17.4%

15.5%

13.8%

12.3%

10.8%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Merger Consequences –

Compass Acquires Arrow

Source: Compass estimates based on Investext equity research.

(1) Based on management estimates of $171 million.

(2) Excludes amortization of identifiable assets resulting from

transaction.

(3) Acquiror total and net debt include convertible debt and capitalized leases.

Note: Assumes transaction closes 9/30/06; interest rate of 8.0% and 8.5% on new debt in 50% cash / 50% stock scenario and 100% cash scenario, respectively.

identifiable intangibles of 15% of excess purchase price amortized over 10 years.

Compass could pursue a rights offering to mitigate pro forma acquisition debt.

Compass FYE as of September 30.

($ in millions)

100% Cash / 0% Stock

50% Cash / 50% Stock

Acquisition Price / Share

$35.00

$38.00

$40.00

$35.00

$38.00

$40.00

Premium to Current (6/23/06)

6.3%

15.4%

21.5%

6.3%

15.4%

21.5%

Equity Value

$6,455

$7,032

$7,610

$6,455

$7,032

$7,610

Enterprise Value

$8,302

$8,879

$9,457

$8,302

$8,879

$9,457

Multiple of 2006E EBITDA

8.7x

9.3x

9.9x

8.7x

9.3x

9.9x

Pro Forma Compass Ownership

100.0%

75.7%

74.1%

72.6%

Pro Forma Arrow Ownership

–

24.3%

25.9%

27.4%

FY2007E

Pro Forma EPS Excluding Synergies

$0.23

$0.21

$0.19

$0.24

$0.23

$0.22

$ Accretion / (Dilution)

(0.05)

(0.07)

(0.09)

(0.04)

(0.05)

(0.06)

% Accretion / (Dilution)

(17.4%)

(24.2%)

(31.0%)

(12.7%)

(17.3%)

(21.8%)

Pre-Tax Synergies Required to Break-Even

$152

$211

$270

$148

$207

$265

% Accretion / (Dilution) with $171MM of Synergies

(1)

2.2%

(4.6%)

(11.4%)

2.0%

(3.0%)

(7.8%)

PF Cash EPS % Accretion / (Dilution) Excluding Synergies

(2)

(5.3%)

(11.1%)

(16.9%)

(3.7%)

(7.8%)

(11.7%)

PF Cash EPS % Accretion / (Dilution) with $171MM of Synergies

(1)(2)

14.3%

8.5%

2.7%

11.0%

6.5%

2.3%

FY2008E

Pro Forma EPS Excluding Synergies

$0.29

$0.27

$0.25

$0.29

$0.27

$0.26

$ Accretion / (Dilution)

(0.02)

(0.04)

(0.06)

(0.03)

(0.04)

(0.05)

% Accretion / (Dilution)

(7.5%)

(13.8%)

(20.1%)

(8.3%)

(12.9%)

(17.3%)

Pre-Tax Synergies Required to Break-Even

$70

$129

$188

$105

$167

$230

% Accretion / (Dilution) with $171MM of Synergies

(1)

10.8%

4.5%

(1.9%)

5.2%

0.3%

(4.4%)

PF Cash EPS % Accretion / (Dilution) Excluding Synergies

(2)

3.8%

(1.6%)

(7.0%)

0.0%

(4.1%)

(8.1%)

PF Cash EPS % Accretion / (Dilution) with $171MM of Synergies

(1)(2)

22.0%

16.6%

11.2%

13.5%

9.0%

4.8%

Preliminary Credit Analysis

Stand-Alone

Total Debt

(3)

/ LTM EBITDA

2.0x

4.8x

5.1x

5.4x

3.4x

3.5x

3.7x

Total Debt

(3)

/ Book Capitalization

38.9%

72.7%

73.8%

74.7%

51.5%

51.4%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Merger Consequences –

Sodexho

Acquires Arrow

Source: Sodexho estimates based on Investext equity research.

(1) Based on management estimates of $171 million.

(2)

Excludes

amortization

identifiable

assets

resulting

from

transaction.

(3) Acquiror total and net debt include convertible debt and capitalized leases.

Note: Assumes transaction closes 9/30/06; interest rate of 8.0% and 8.5% on new debt in 50% cash / 50% stock scenario and 100% cash scenario, respectively;

identifiable intangibles of 15% of excess purchase price amortized over 10 years.

Sodexho could pursue a rights offering to mitigate pro forma acquisition debt.

Sodexho FYE as of August 31.

($ in millions)

100% Cash / 0% Stock

50% Cash / 50% Stock

Acquisition Price / Share

$35.00

$38.00

$40.00

$35.00

$38.00

$40.00

Premium to Current (6/23/06)

6.3%

15.4%

21.5%

6.3%

15.4%

21.5%

Equity Value

$6,455

$7,032

$7,610

$6,455

$7,032

$7,610

Enterprise Value

$8,302

$8,879

$9,457

$8,302

$8,879

$9,457

Multiple of 2006E EBITDA

8.7x

9.3x

9.9x

8.7x

9.3x

9.9x

Pro Forma Sodexho

Ownership

100.0%

69.5%

67.6%

65.9%

Pro Forma Arrow Ownership

–

30.5%

32.4%

34.1%

FY2007E

Pro Forma EPS Excluding Synergies

$2.11

$1.87

$1.63

$2.31

$2.15

$2.01

$ Accretion / (Dilution)

(0.61)

(0.85)

(1.09)

(0.41)

(0.56)

(0.71)

% Accretion / (Dilution)

(22.3%)

(31.2%)

(40.1%)

(15.2%)

(20.8%)

(26.0%)

Pre-Tax Synergies Required to Break-Even

$148

$207

$266

$146

$205

$264

% Accretion / (Dilution) with $171MM of Synergies

(1)

3.4%

(5.5%)

(14.4%)

2.5%

(3.5%)

(9.2%)

PF Cash EPS % Accretion / (Dilution) Excluding Synergies

(2)

(6.5%)

(14.1%)

(21.6%)

(4.3%)

(9.2%)

(14.0%)

PF Cash EPS % Accretion / (Dilution) with $171MM of Synergies

(1)(2)

19.2%

11.6%

4.0%

13.5%

8.0%

2.9%

FY2008E

Pro Forma EPS Excluding Synergies

$2.82

$2.58

$2.34

$2.80

$2.63

$2.48

$ Accretion / (Dilution)

(0.27)

(0.51)

(0.76)

(0.30)

(0.46)

(0.62)

% Accretion / (Dilution)

(8.8%)

(16.6%)

(24.4%)

(9.6%)

(14.9%)

(20.0%)

Pre-Tax Synergies Required to Break-Even

$66

$126

$185

$105

$168

$230

% Accretion / (Dilution) with $171MM of Synergies

(1)

13.8%

5.9%

(1.9%)

6.0%

0.3%

(5.2%)

PF Cash EPS % Accretion / (Dilution) Excluding Synergies

(2)

5.1%

(1.6%)

(8.2%)

0.0%

(4.8%)

(9.3%)

PF Cash EPS % Accretion / (Dilution) with $171MM of Synergies

(1)(2)

27.7%

21.0%

14.3%

15.6%

10.4%

5.5%

Preliminary Credit Analysis

Stand-Alone

Total Debt

(3)

/ LTM EBITDA

2.3x

5.6x

5.9x

6.2x

3.8x

4.0x

4.1x

Total Debt

(3)

/ Book Capitalization

43.8%

79.3%

80.2%

81.0%

54.9%

54.7%

54.5%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Acquisition Matrix

($ in millions, except per share figures)

Pre-Bid

(1)

Offer

Current

Acquisition Price per Share

$28.11

$32.00

$32.92

$34.00

$36.00

$38.00

$40.00

$42.00

$44.00

Premium to Current (06/23/06)

(14.6%)

(2.8%)

–

3.3%

9.4%

15.4%

21.5%

27.6%

33.7%

Premium to Pre-Announcement (04/28/06)

–

13.8%

17.1%

21.0%

28.1%

35.2%

42.3%

49.4%

56.5%

Fully-Diluted Shares Outstanding

183.8

192.4

Equity Value

$5,167

$6,157

$6,335

$6,542

$6,927

$7,312

$7,697

$8,082

$8,467

Enterprise Value Adjustments

2,096

1,888

1,890

1,893

1,898

1,903

1,908

1,913

1,918

Enterprise Value

$7,263

$8,046

$8,225

$8,435

$8,825

$9,215

$9,605

$9,995

$10,385

PF Buyer Adjustments

(+) Estimated Option Premium Tax Shield

$27

$30

$33

$38

$44

$51

$58

$65

(–) Debt Prepayments

(9)

PF Buyer Enterprise Value

$7,261

$8,064

$8,246

$8,459

$8,855

$9,251

$9,647

$10,044

$10,441

Enterprise Value /

LTM EBITDA (3/31/06)

$954

7.6x

8.4x

8.6x

8.8x

9.3x

9.7x

10.1x

10.5x

10.9x

FY2006E EBITDA

976

7.4

8.2

8.4

8.6

9.0

9.4

9.8

10.2

10.6

FY2007E EBITDA

1,042

7.0

7.7

7.9

8.1

8.5

8.8

9.2

9.6

10.0

LTM EBIT (3/31/06)

$626

11.6x

12.9x

13.1x

13.5x

14.1x

14.7x

15.3x

16.0x

16.6x

FY2006E EBIT

638

11.4

12.6

12.9

13.2

13.8

14.5

15.1

15.7

16.3

FY2007E EBIT

682

10.7

11.8

12.1

12.4

12.9

13.5

14.1

14.7

15.2

Equity Value /

LTM Net Income (3/31/06)

$328

15.7x

18.7x

19.3x

19.9x

21.1x

22.3x

23.4x

24.6x

25.8x

FY2006E Net Income

312

16.5

19.7

20.3

20.9

22.2

23.4

24.6

25.9

27.1

FY2007E Net Income

346

14.9

17.8

18.3

18.9

20.0

21.1

22.2

23.4

24.5

Source: Management estimates provided to CS on May 25, 2006 and public filings.

Note: LTM and FY2006E EBITDA, EBIT and net income exclude non-cash FAS 123 and RSU corporate expenses of $22.0 million (per management estimates). FY2007E financials exclude $17.0 million.

(1) Assumes exercisable options in the calculations of fully diluted shares outstanding and the enterprise value adjustment; Assumes debt as of 3/31/06.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Purchase Price vs. Transaction Price

Note: Assumes 4 month holding period, leverage of 2:1 and annual

interest rate of 5.75%.

Note: Assumes $32 per share purchase price, leverage of 2:1 and annual interest rate of 5.75%.

Highest price traded post announcement was $34.26.

Key Assumptions

Arbitrage Funds entered on May 1

Assumed leverage is 2:1

Annual interest of 5.75%

Arbitrage Funds -

Implied Annual Returns

Holding Period vs. Transaction Price

Estimated Holding Period (Months)

3.0

4.0

5.0

6.0

7.0

$34.00

83.9%

53.9%

40.6%

30.6%

24.0%

$35.00

150.2%

94.2%

69.6%

52.9%

42.2%

$36.00

232.9%

140.8%

101.8%

76.8%

61.3%

$37.00

334.5%

194.4%

137.2%

102.5%

81.4%

Arrow Purchase Price

194.4%

$32.00

$32.50

$33.00

$33.50

$34.00

53.9%

35.2%

18.6%

3.8%

(9.3%)

$35.00

94.2%

71.7%

51.6%

33.7%

17.7%

$36.00

140.8%

114.1%

90.1%

68.7%

49.4%

$37.00

194.4%

162.9%

134.7%

109.3%

86.4%

CONFIDENTIAL | PRELIMINARY ANALYSIS

Updated Preliminary Financial Analysis

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Management Financial Summary

Arrow

management

provided

with

the

financial

forecast

detailed

above

May

25,

2006.

($ in millions)

Historical

Projected

CAGR

FYE 9/30,

2001

2002

2003

2004

2005

2006E

2007E

2008E

2009E

2010E

2011E

'01A–'05A

'05A–'11E

Revenue

FSS–United States

$4,816

$5,625

$6,545

$6,879

$7,129

$7,456

$7,925

$8,375

$8,853

$9,349

$9,862

10.3%

5.6%

% Growth

9.3%

16.8%

16.4%

5.1%

3.6%

4.6%

6.3%

5.7%

5.6%

5.5%

FSS–International

$1,109

$1,201

$1,424

$1,830

$2,280

$2,513

$2,584

$2,739

$2,901

$3,074

$3,258

19.7%

6.1%

% Growth

10.7%

8.2%

18.6%

28.6%

24.6%

10.2%

2.8%

6.0%

5.9%

6.0%

AUCA

$1,434

$1,439

$1,479

$1,483

$1,554

$1,630

$1,713

$1,790

$1,870

$1,954

$2,042

2.0%

4.7%

% Growth

0.6%

0.3%

2.8%

0.3%

4.8%

4.9%

5.1%

4.5%

Total Revenue

$7,359

$8,264

$9,448

$10,192

$10,963

$11,599

$12,222

$12,904

$13,624

$14,378

$15,162

10.5%

5.6%

% Growth

7.7%

12.3%

14.3%

7.9%

7.6%

5.8%

5.4%

5.6%

5.5%

% Organic Growth

5.1%

1.7%

2.6%

5.7%

4.0%

5.8%

5.4%

5.6%

5.5%

3.5%

5.6%

EBITDA

FSS–United States

$393

$469

$559

$562

$597

$637

$679

$728

$773

$825

$873

11.0%

6.6%

% Margin

8.2%

8.3%

8.5%

8.2%

8.4%

8.5%

8.6%

8.7%

8.8%

8.9%

FSS–International

$59

$67

$86

$104

$128

$160

$170

$183

$195

$208

$222

21.3%

9.6%

% Margin

5.3%

5.6%

6.1%

5.7%

5.6%

6.3%

6.6%

6.7%

6.8%

AUCA

$202

$205

$204

$206

$213

$219

$239

$253

$268

$283

$297

1.4%

5.7%

% Margin

14.1%

14.2%

13.8%

13.9%

13.7%

13.4%

13.9%

14.1%

14.3%

14.5%

Corporate

($24)

($30)

($40)

($37)

($61)

($63)

($67)

($71)

($74)

($79)

11.8%

13.5%

Total EBITDA

$630

$710

$809

$833

$900

$954

$1,025

$1,097

$1,165

$1,242

$1,313

9.4%

6.5%

% Margin

8.6%

8.2%

8.4%

8.5%

8.6%

8.7%

Diluted EPS

$1.00

$1.25

$1.34

$1.36

$1.53

$1.62

$1.86

$2.16

$2.46

$2.77

$3.13

10.1%

14.1%

% Growth

15.1%

24.8%

7.2%

1.5%

12.5%

5.9%

14.8%

16.1%

13.9%

12.6%

13.0%

Capex

FSS–United States

$96

$130

$174

$185

$168

$220

$222

$226

$239

$253

$267

15.0%

8.0%

% of Revenue

2.0%

2.3%

2.7%

2.4%

3.0%

2.8%

2.7%

FSS–International

$29

$22

$35

$43

$63

$46

$55

$58

$62

$65

$69

21.4%

1.5%

% of Revenue

2.6%

1.9%

2.5%

2.4%

2.8%

1.8%

2.1%

AUCA

$79

$71

$94

$101

$95

$88

$94

$98

$103

$108

$113

4.6%

3.0%

% of Revenue

5.5%

4.9%

6.4%

6.8%

6.1%

5.4%

5.5%

Asset Disposal

–

($9)

($8)

($9)

Total Capex

$204

$223

$303

$330

$317

$345

$363

$374

$395

$417

$440

11.6%

5.6%

% of Revenue

2.8%

2.7%

3.2%

2.9%

3.0%

2.9%

Revenue Mix

FSS–United States

65.4%

68.1%

69.3%

67.5%

65.0%

64.3%

64.8%

64.9%

65.0%

FSS–International

15.1%

14.5%

15.1%

18.0%

20.8%

21.7%

21.1%

21.2%

21.3%

21.4%

21.5%

AUCA

19.5%

17.4%

15.7%

14.5%

14.2%

14.0%

13.9%

13.7%

13.6%

13.5%

Source: Management estimates provided to CS on May 25, 2006.

(1) $22 million of 2006E corporate overhead comprised of non-cash FAS 123 and RSU expenses.

(1)

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Preliminary Selected Companies Analysis

($ in millions, except per share values)

2007E

I/B/E/S LT

Debt /

Price as of

Equity

Enterprise

EV / EBITDA

EV / EBIT

P/E

Revenue

EBITDA

EBIT

Growth

LTM

Dividend

LTM

Company

6/23/06

Value

2006E

2007E

2006E

2007E

2006E

2007E

Growth

Margin

Rate

(1)

EBITDA

Yield

Ratio

ROIC

(2)

Arrow (Current)

$32.92

$6,012

$8,064

8.5x

7.9x

11.7x

10.4x

20.1x

17.8x

7.3%

8.2%

6.2%

11.9%

2.2x

0.9%

16.7%

10.9%

Arrow (Offer)

$32.00

$5,836

$7,888

8.3x

7.7x

11.4x

10.2x

19.5x

17.3x

7.3%

8.2%

6.2%

11.9%

2.2x

0.9%

16.7%

10.9%

Arrow (Pre-Offer)

$28.11

$5,066

$7,118

7.5x

6.9x

10.3x

9.2x

17.1x

15.2x

7.3%

8.2%

6.2%

11.9%

2.2x

1.0%

16.7%

10.9%

Food and Support Services

Autogrill

$14.83

$3,773

$5,004

7.9x

7.4x

12.4x

11.3x

20.3x

18.1x

4.8%

13.6%

8.9%

10.0%

2.0x

1.7%

39.1%

13.5%

Centerplate

(3)

13.30

300

481

8.7x

8.3x

17.9x

17.0x

3.6%

8.4%

4.1%

3.0%

4.0x

6.0%

Compass

4.66

10,041

12,250

9.1x

8.6x

13.3x

12.5x

22.7x

16.9x

4.6%

6.7%

4.6%

7.0%

1.9x

3.8%

51.6%

9.6%

Elior

(4)

13.74

1,972

2,371

7.7x

7.3x

10.9x

10.2x

15.1x

13.5x

5.8%

8.5%

6.0%

1.9x

1.2%

36.4%

10.8%

Sodexho

45.70

7,337

8,727

9.2x

8.2x

12.2x

10.9x

19.4x

16.9x

4.7%

6.4%

4.8%

5.0%

2.3x

2.1%

74.6%

10.1%

Mean

8.5x

8.0x

13.4x

12.4x

19.4x

16.3x

4.7%

8.7%

5.7%

6.3%

2.4x

2.9%

50.4%

10.0%

Median

8.7x

8.2x

12.4x

11.3x

19.8x

16.9x

4.7%

8.4%

4.8%

6.0%

2.0x

2.1%

45.4%

10.1%

Uniform and Career Apparel

United States

Cintas

$39.71

$6,691

$7,078

9.7x

8.9x

12.5x

11.2x

19.7x

17.3x

11.0%

20.3%

16.1%

14.3%

0.9x

0.9%

18.9%

11.7%

G&K Services

34.98

747

955

8.0x

7.3x

12.5x

10.8x

17.4x

15.3x

6.5%

13.8%

9.3%

13.2%

1.9x

0.2%

3.6%

6.5%

Unifirst

31.60

609

798

6.8x

6.2x

11.1x

9.9x

16.0x

13.7x

6.6%

14.8%

9.2%

14.0%

1.7x

0.2%

7.3%

6.8%

International

Davis Service Group

$8.30

$1,417

$1,809

4.6x

4.5x

11.1x

10.6x

13.3x

12.5x

2.8%

32.4%

13.6%

7.0%

1.5x

3.8%

26.0%

8.8%

Rentokil

2.78

5,041

6,747

7.4x

7.0x

12.4x

11.5x

14.2x

13.0x

6.1%

20.3%

12.4%

2.4x

4.5%

38.8%

10.8%

Mean

7.3x

6.8x

11.9x

10.8x

16.1x

14.4x

6.6%

20.3%

12.1%

1.7x

1.9%

18.9%

8.9%

Median

7.4x

7.0x

12.4x

10.8x

16.0x

13.7x

6.5%

20.3%

12.4%

13.6%

1.7x

0.9%

18.9%

8.8%

Overall Mean

7.9x

7.4x

12.6x

11.6x

17.6x

15.2x

5.7%

14.5%

8.9%

9.2%

2.1x

2.4%

32.9%

9.5%

Overall Median

7.9x

7.4x

12.4x

11.1x

17.4x

15.3x

5.3%

13.7%

9.0%

8.5%

1.9x

1.9%

36.4%

9.8%

Source: I/B/E/S, Investext

equity research and Company filings.

Note:

Multiples

based

financial

estimates

calendarized

Arrow's

fiscal

year

end

9/30.

(1) Based on I/B/E/S 5-year long-term growth rates.

(2) Defined as net operating profit after taxes / total book capital.

(3) Centerplate

trades as an Income Deposit Security.

(4)

January

11,

2006,

the

day

before

Robert

Zolade

announced

was

reviewing

the

possibility

opening

his

capital

new

investors.

cash

tender

was

launched

March

27,

2006.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Preliminary Selected Companies Analysis (cont’d)

($ in millions, except per share values)

Arrow

Multiple Range

Implied Enterprise Value

Performance

Low

–

High

Low

–

High

Food and Support Services

FY 2006E EBITDA

$796

7.5x

–

9.0x

$5,971

–

$7,165

FY 2007E EBITDA

849

7.0x

–

8.5x

5,944

–

7,217

FY 2006E EBIT

529

10.0x

–

12.5x

5,290

–

6,613

FY 2007E EBIT

567

9.0x

–

12.0x

5,102

–

6,803

Segment Reference Range

$5,800

–

$6,900

Uniform and Career Apparel

FY 2006E EBITDA

$219

7.5x

–

10.0x

$1,641

–

$2,188

FY 2007E EBITDA

239

7.0x

–

9.0x

1,671

–

2,148

FY 2006E EBIT

148

11.0x

–

12.5x

1,625

–

1,847

FY 2007E EBIT

161

10.0x

–

11.0x

1,609

–

1,770

Segment Reference Range

$1,600

–

$2,000

Subtotal

$7,400

–

$8,900

Unallocated Corporate Expense

(1)

($39)

7.5x

–

9.2x

(293)

–

(360)

Implied Enterprise Value Range

$7,107

–

$8,540

(–) Enterprise Value Adjustments

(2)

(2,061)

–

(2,080)

Implied Equity Value Reference Range

$5,046

–

$6,460

Diluted Shares Outstanding

183.8

–

183.8

Implied Equity Value per Share Reference Range

$27

–

$35

Enterprise Value /

FY 2006E EBITDA

7.5x

–

9.0x

FY 2007E EBITDA

6.9x

–

8.3x

Source:

Management

estimates

provided

May

25,

2006

and

public

filings.

(1)

Includes

unallocated

cash

corporate

expenses

multiplied

segment

weighted

2006E

EBITDA

multiple.

(2)

Adjustments

include

proceeds

from

options

exercised

and

SURP

liability

which

vary

with

price.

Including

FAS

123

non-cash

charges

unallocated

corporate

expense

implies

equity

value

per

approximately

$27

$34.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Preliminary Enterprise Value Adjustments

The enterprise value adjustments table below serves as the bridge between Arrow’s enterprise

value and implied equity value

($ in millions)

Adjustment

Value

Description

(+) Excess Cash

All cash on balance sheet required for working capital per Company

(+) Cash Proceeds From Option Exercise

–

280

Proceeds received upon option exercise (dependant on stock price)

(–) SURP Liability

(107)

–

(67)

Liability from RSU's held in plan

(–) Est. Funded Debt

(1)

(1,869)

Debt held on the balance sheet

(–) A/R Securitization Facility

(205)

Average balance of facility throughout year

(–) Minority Interest

(13)

Minority interest of consolidated JV's

Total Enterprise Value Adjustments

($2,099)

–

($1,874)

Source: Management estimates and public filings.

(1) Estimated as of September 30, 2006.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Preliminary Selected Acquisitions Analysis

($ in millions)

CLOSING

ENTERPRISE

ENTERPRISE VALUE / LTM

EBITDA

DATE

ACQUIROR

TARGET

VALUE

SALES

EBITDA

EBIT

(1)

MARGIN

Food and Support Services

Pending

EQT / Macquarie Bank

Compass Group's SSP Unit

$3,172

1.0x

10.9x

16.0x

9.3%

Pending

Holding Bercy

Investissement

(2)

Elior

2,727

0.8x

9.7x

13.6x

8.3%

Jan-06

Compass Group

Levy Restaurants

490

0.9x

Jul-05

EQT and Goldman Sachs

ISS A/S

4,774

0.7x

10.2x

13.0x

7.2%

Jun-04

Charterhouse Capital Partners

Autobar

Ltd.

967

0.7x

Dec-02

ARAMARK

Fine Host

102

0.3x

Mar-02

Compass Group

Bon Appetit

156

0.6x

Jan-02

Compass Group

Seiyo Food Systems

541

0.9x

Nov-01

ARAMARK

ServiceMaster

791

0.4x

8.9x

11.4x

4.7%

Aug-01

Compass Group

Crothall

Services Group

170

0.5x

9.7x

Jul-01

Sodexho

Alliance SA

Sogeres

and Wood Dining Services

444

0.7x

Jun-01

Sodexho

Alliance SA

Sodexho

Marriott Services

2,984

0.6x

10.1x

14.3x

6.1%

Jun-01

LSG Lufthansa AG

Sky Chefs Inc.

2,468

1.3x

22.8x

May-01

Compass Group

Selecta

735

1.6x

8.6x

15.1x

18.3%

Apr-01

Compass Group

Morrison Management Specialists

634

1.2x

17.5x

21.2x

7.1%

Dec-00

Autogrill

Passaggio

Holding AG

153

1.0x

12.7x

7.8%

Jul-00

Granada

Compass

9,808

1.3x

17.8x

24.2x

7.1%

Sep-99

Autogrill

Host Marriott Services

946

0.7x

7.1x

13.8x

9.3%

Jul-99

SAir

Group

Dobbs International Services

780

0.9x

10.9x

Jul-97

Compass

Daka

183

0.5x

10.2x

4.5%

Feb-97

Investcorp

Welcome Break

762

1.4x

14.8x

Median

0.8x

10.2x

14.3x

7.2%

Sep-03

Unifirst

Textilease

$178

1.9x

18.7x

27.4x

10.0%

Jun-03

California Investment Fund

National Services Industries

104

0.2x

7.3x

2.8%

Jul-02

Paribas Affaires Industrielles

Elis

Group

1,516

1.9x

Jun-02

Davis Service Group

Sophus

Berendsen

669

1.3x

14.1x

May-02

Cintas

Omni Services

657

2.0x

11.6x

18.4x

17.5%

Mar-99

Cintas

Unitog

446

1.6x

10.1x

17.7x

15.7%

Apr-98

Cintas

Uniforms To You

169

1.1x

9.9x

Jul-97

G&K Services

29 NLS Facilities

287

1.4x

Median

1.5x

10.8x

17.7x

12.9%

Overall Median

0.9x

10.2x

14.5x

7.8%

Source: Company filings, press releases, SDC, Capital IQ. Excludes non-recurring items.

(1) Excludes goodwill amortization where applicable.

Uniform and Career Apparel

(2) Holding Bercy

Investissement

(HBI) is controlled by Robert Zolade

(Elior's

founder and president), Charterhouse and Chequers

Capital. Multiples calculated using 9/30/05 Eliorfinancials.

€13.40 offer price implies a 9/30/06E EBITDA multiple of 8.8x, EBIT multiple of 12.5x and sales multiple of 0.8x.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Preliminary Selected Acquisitions Analysis (cont’d)

($ in millions, except per share values)

Arrow

Multiple Range

Implied Enterprise Value

Performance

Low

–

High

Low

–

High

Food and Support Services

LTM 3/31/06 EBITDA

$763

9.0x

–

10.5x

$6,863

–

$8,006

LTM 3/31/06 EBIT

512

13.0x

–

15.0x

6,661

–

7,686

Segment Reference Range

$6,700

–

$7,750

Uniform and Career Apparel

LTM 3/31/06 EBITDA

$216

9.0x

–

11.5x

$1,948

–

$2,489

LTM 3/31/06 EBIT

139

15.0x

–

18.0x

2,078

–

2,493

Segment Reference Range

$2,000

–

$2,500

Subtotal

$8,700

–

$10,250

Unallocated Corporate Expense

(1)

($39)

9.0x

–

10.7x

($351)

–

($419)

Implied Enterprise Value Range

$8,349

–

$9,831

(–) Enterprise Value Adjustments

(2)

(1,892)

–

(1,911)

Implied Equity Value Reference Range

$6,457

–

$7,920

Fully Diluted Shares Outstanding

192.4

–

192.4

Implied Equity Value per Share Reference Range

$34

–

$41

Enterprise Value /

FY 2006E EBITDA

8.8x

–

10.3x

FY 2007E EBITDA

8.1x

–

9.6x

FY 2006E EBIT

13.6x

–

16.0x

FY 2007E EBIT

12.6x

–

14.8x

Price /

FY 2006E EPS

20.7x

–

25.4x

FY 2007E EPS

18.0x

–

22.1x

Source: Management estimates provided to CS on May 25, 2006.

(1)

Includes

unallocated

cash

corporate

expenses

multiplied

segment

weighted

2006E

EBITDA

multiple.

(2)

Adjustments

include

proceeds

from

options

exercised

and

SURP

liability

which

vary

with

price.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Preliminary Segment DCF Analysis

($ in millions, except per share values)

Arrow FY2006E

Multiple Range

Implied Enterprise Value

Performance

Low

–

High

Low

–

High

Segment Reference Range

Food and Support Services

$796

8.4x

–

10.5x

$6,700

–

$8,350

Uniform and Career Apparel

$219

8.0x

–

10.1x

1,750

–

2,200

Subtotal

$8,450

–

$10,550

Unallocated Corporate Expense

(1)

($39)

8.3x

–

10.4x

($325)

–

($406)

Implied Enterprise Value Range

$8,125

–

$10,144

(–) Enterprise Value Adjustments

(2)

(1,889)

–

(1,915)

Implied Equity Value Reference Range

$6,236

–

$8,229

–

Fully Diluted Shares Outstanding

192.4

–

192.4

Implied Equity Value per Share Reference Range

$32

–

$43

Enterprise Value /

FY 2006E EBITDA

8.5x

–

10.6x

FY 2007E EBITDA

7.9x

–

9.9x

FY 2006E EBIT

13.2x

–

16.5x

FY 2007E EBIT

12.2x

–

15.3x

Price /

FY 2006E EPS

20.0x

–

26.4x

FY 2007E EPS

17.4x

–

23.0x

Source: Management estimates provided to CS on May 25, 2006.

(1) Includes unallocated cash corporate expenses multiplied by a

segment weighted FY 2006E EBITDA multiple.

(2) Adjustments include proceeds from options exercised and SURP

liability which vary with share price.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Food and Support Services –

Preliminary DCF Analysis

Implied Enterprise Value

Implied Perpetuity Growth Rate

Source: Management estimates provided to CS on May 25, 2006.

Note: Segment financials exclude corporate overhead.

(1) Assumes disposal of long-term assets allocated based on share of total capital expenditures.

(2) Includes other corporate adjustments allocated based on EBITDA contribution.

($ in millions)

Projected

'05A-'11E

FYE 9/30,

2005A

2006E

2007E

2008E

2009E

2010E

2011E

CAGR

Sales

$9,409

$9,970

$10,509

$11,114

$11,754

$12,423

$13,120

5.7%

% growth

–

6.0%

5.4%

5.8%

5.7%

5.6%

EBITDA

$724.1

$796.1

$849.1

$910.7

$967.6

$1,033.0

$1,094.6

7.1%

% margin

7.7%

8.0%

8.1%

8.2%

8.3%

Unlevered Net Income

$300.6

$330.6

$354.3

$385.6

$417.4

$447.8

$483.6

8.2%

% Margin

3.2%

3.3%

3.4%

3.5%

3.6%

3.7%

Depreciation & Amortization

$243.0

$267.1

$282.2

$293.8

$299.8

$316.5

$320.9

% of sales

2.6%

2.7%

2.6%

2.5%

2.4%

Capital Expenditures

($209.2)

($237.8)

($254.6)

($261.2)

($276.4)

($292.4)

($309.0)

% of sales

(2.2%)

(2.4%)

(Incr.)/Decr. in Working Capital

($31.8)

($8.1)

$3.7

$1.6

$2.5

$2.9

$3.3

% of sales

(0.3%)

(0.1%)

0.0%

Unlevered FCF

(1)

$300.9

$324.6

$381.6

$416.7

$440.5

$472.3

$496.5

8.7%

Discount

Terminal EBITDA Multiple

Rate

7.5x

8.0x

8.5x

9.0x

9.5x

8.5%

$7,181

$7,545

$7,909

$8,273

$8,637

9.0%

$7,034

$7,390

$7,746

$8,101

$8,457

9.5%

$6,891

$7,238

$7,586

$7,934

$8,281

10.0%

$6,751

$7,091

$7,430

$7,770

$8,110

10.5%

$6,615

$6,947

$7,279

$7,611

$7,944

Discount

Terminal EBITDA Multiple

Rate

7.5x

8.0x

8.5x

9.0x

9.5x

8.5%

2.3%

2.7%

3.0%

3.3%

3.6%

9.0%

2.8%

3.2%

3.5%

3.8%

4.0%

9.5%

3.3%

3.6%

4.0%

4.2%

4.5%

10.0%

3.7%

4.1%

4.4%

4.7%

5.0%

10.5%

4.2%

4.6%

4.9%

5.2%

5.5%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Uniform and Career Apparel –

Preliminary DCF Analysis

Source: Management estimates provided to CS on May 25, 2006.

Note: Segment financials exclude corporate overhead.

(1) Assumes disposal of long-term assets allocated based on share of total capital expenditures.

(2) Includes other corporate adjustments allocated based on EBITDA contribution.

Implied Enterprise Value

Implied Perpetuity Growth Rate

($ in millions)

Projected

'05A-'11E

FYE 9/30,

2005A

2006E

2007E

2008E

2009E

2010E

2011E

CAGR

Sales

$1,554

$1,630

$1,713

$1,790

$1,870

$1,954

$2,042

4.7%

% growth

–

4.9%

5.1%

4.5%

EBITDA

$212.9

$218.8

$238.7

$253.0

$267.7

$283.3

$296.8

5.7%

% margin

13.7%

13.4%

13.9%

14.1%

14.3%

14.5%

Unlevered Net Income

$85.6

$92.3

$100.6

$107.4

$114.4

$121.8

$127.9

6.9%

% Margin

5.5%

5.7%

5.9%

6.0%

6.1%

6.2%

6.3%

Depreciation & Amortization

$75.9

$71.1

$77.7

$81.2

$84.7

$88.5

$92.2

% of sales

4.9%

4.4%

4.5%

Capital Expenditures

($85.7)

($78.5)

($86.0)

($90.2)

($94.6)

($99.3)

($104.1)

% of sales

(5.5%)

(4.8%)

(5.0%)

(5.1%)

(Incr.)/Decr. in Working Capital

($14.3)

($15.1)

($16.7)

($15.3)

($16.1)

($16.8)

($17.6)

% of sales

(0.9%)

(1.0%)

(0.9%)

Unlevered FCF

(1)

$61.0

$62.4

$74.5

$82.2

$87.7

$93.5

$97.7

8.2%

Discount

Terminal EBITDA Multiple

Rate

8.0x

8.5x

9.0x

9.5x

10.0x

9.0%

$1,878

$1,975

$2,071

$2,167

$2,264

9.5%

$1,839

$1,933

$2,027

$2,121

$2,216

10.0%

$1,800

$1,892

$1,985

$2,077

$2,169

10.5%

$1,763

$1,853

$1,943

$2,033

$2,123

11.0%

$1,727

$1,815

$1,903

$1,991

$2,079

Discount

Terminal EBITDA Multiple

Rate

8.0x

8.5x

9.0x

9.5x

10.0x

9.0%

4.7%

4.9%

5.2%

5.3%

5.5%

9.5%

5.2%

5.4%

5.6%

5.8%

6.0%

10.0%

5.7%

5.9%

6.1%

6.3%

6.5%

10.5%

6.1%

6.4%

6.6%

6.8%

7.0%

11.0%

6.6%

6.9%

7.1%

7.3%

7.5%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Implied Share Price

Implied Perpetuity Growth Rate

Source: Management estimates provided to CS on May 25, 2006.

Note: Consolidated financials include corporate overhead.

(1) Includes other corporate adjustments.

Consolidated Preliminary DCF Analysis

($ in millions)

Projected

'05A-'11E

FYE 9/30,

2005A

2006E

2007E

2008E

2009E

2010E

2011E

CAGR

Sales

$10,963

$11,599

$12,222

$12,904

$13,624

$14,378

$15,162

5.6%

% growth

–

5.8%

5.4%

5.6%

5.5%

EBITDA

$900.3

$953.8

$1,024.6

$1,097.0

$1,164.8

$1,241.9

$1,312.9

6.5%

% margin

8.2%

8.4%

8.5%

8.6%

8.7%

Unlevered Net Income

$363.3

$384.8

$415.4

$451.3

$487.7

$523.1

$562.4

7.6%

% Margin

3.3%

3.4%

3.5%

3.6%

3.7%

Depreciation & Amortization

$319.0

$338.1

$360.0

$375.0

$384.5

$404.9

$413.1

% of sales

2.9%

2.8%

2.7%

Capital Expenditures

($294.9)

($316.3)

($340.5)

($351.4)

($371.0)

($391.6)

($413.2)

% of sales

(2.7%)

(2.8%)

(2.7%)

(Incr.)/Decr. in Working Capital

($46.1)

($23.2)

($13.0)

($13.8)

($13.6)

($13.9)

($14.3)

% of sales

(0.4%)

(0.2%)

(0.1%)

Unlevered FCF

(1)

$338.9

$370.8

$433.6

$475.1

$503.0

$539.3

$566.2

8.9%

Discount

Terminal EBITDA Multiple

Rate

7.5x

8.0x

8.5x

9.0x

9.5x

8.5%

$34.49

$36.75

$39.02

$41.29

$43.56

9.0%

$33.57

$35.79

$38.01

$40.23

$42.44

9.5%

$32.69

$34.85

$37.02

$39.19

$41.36

10.0%

$31.82

$33.94

$36.06

$38.18

$40.30

10.5%

$30.98

$33.05

$35.12

$37.19

$39.26

Discount

Terminal EBITDA Multiple

Rate

7.5x

8.0x

8.5x

9.0x

9.5x

8.5%

2.6%

2.9%

3.3%

3.5%

3.8%

9.0%

3.1%

3.4%

3.7%

4.0%

4.3%

9.5%

3.5%

3.9%

4.2%

4.5%

4.7%

10.0%

4.0%

4.4%

4.7%

5.0%

5.2%

10.5%

4.5%

4.8%

5.2%

5.4%

5.7%

CONFIDENTIAL

| PRELIMINARY ANALYSIS

Sensitivity Considerations

An average of $150 million of acquisitions per year at historical valuation and performance

metrics results in approximately $1.00 per share in value

Every 50 basis point change in capital expenditure as a percent of revenue equates to

approximately $1.35 per share in value

Revenue

Growth

and

EBITDA

Margin

Sensitivity

Analysis

–

Implied

Price

Sensitivity

Every

1.0%

incremental

revenue

growth

equates

approximately

$475

million

enterprise

value

(or

approximately

$2.45

per

share).

Every

1.0%

incremental

EBITDA

margin

equates

approximately

$1150

million

enterprise

value

(or

approximately

$5.80

per

share).

Preliminary DCF Sensitivity Analysis

($ in millions)

Incremental Revenue Growth

(200) bps

(100) bps

0 bps

100 bps

200 bps

(100) bps

$26.19

$28.17

$30.24

$32.40

$34.66

(50) bps

$28.82

$30.94

$33.15

$35.46

$37.88

0 bps

$31.45

$33.70

$36.06

$38.53

$41.10

50 bps

$34.08

$36.47

$38.97

$41.59

$44.33

100 bps

$36.70

$39.23

$41.88

$44.65

$47.55

Note: Assumes terminal EBITDA multiple of 8.5x and discount rate of 10.0%.

CONFIDENTIAL

| PRELIMINARY ANALYSIS

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