-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A8NQ4CoGATHcG/7GocQ8B2aD8Q76D0pNVS8GglgqgGVq6vYIlX8JKesX4qLc0EwO NfwoYMkLrt4QP3IuPwGWNg== /in/edgar/work/0000930661-00-002528/0000930661-00-002528.txt : 20001012 0000930661-00-002528.hdr.sgml : 20001012 ACCESSION NUMBER: 0000930661-00-002528 CONFORMED SUBMISSION TYPE: SC 13E3/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20001011 GROUP MEMBERS: BFX HOSPITALITY GROUP INC GROUP MEMBERS: FRANK J. MILAN GROUP MEMBERS: HAMPTON HODGES GROUP MEMBERS: ROBERT H. MCLEAN GROUP MEMBERS: ROBERT KORMAN GROUP MEMBERS: TERRY KEARNEY GROUP MEMBERS: WALTER D. ROGERS, JR. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BFX HOSPITALITY GROUP INC CENTRAL INDEX KEY: 0000351220 STANDARD INDUSTRIAL CLASSIFICATION: [5810 ] IRS NUMBER: 751732794 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: SEC FILE NUMBER: 005-35264 FILM NUMBER: 738669 BUSINESS ADDRESS: STREET 1: 226 BAILEY AVE STE 101 CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 8173324761 MAIL ADDRESS: STREET 1: 226 BAILEY AVE STE 101 CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: BUFFTON CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BUFFTON OIL & GAS INC DATE OF NAME CHANGE: 19830405 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BFX HOSPITALITY GROUP INC CENTRAL INDEX KEY: 0000351220 STANDARD INDUSTRIAL CLASSIFICATION: [5810 ] IRS NUMBER: 751732794 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13E3/A BUSINESS ADDRESS: STREET 1: 226 BAILEY AVE STE 101 CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 8173324761 MAIL ADDRESS: STREET 1: 226 BAILEY AVE STE 101 CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: BUFFTON CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BUFFTON OIL & GAS INC DATE OF NAME CHANGE: 19830405 SC 13E3/A 1 0001.txt SCHEDULE 13E3 AS AMENDED SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Amendment No. 2 to Schedule 13E-3 Rule 13e-3 Transaction Statement (Under Section 13(e) of the Securities Exchange Act of 1934) BFX HOSPITALITY GROUP, INC. - -------------------------------------------------------------------------------- (Name of the Issuer) BFX HOSPITALITY GROUP, INC. HOSPITALITY CONCEPTS, LLC ROBERT H. MCLEAN WALTER D. ROGERS, JR. HAMPTON HODGES ROBERT KORMAN FRANK J. MILAN TERRY KEARNEY - -------------------------------------------------------------------------------- (Name of Person(s) Filing Statement) Common Stock, $.05 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 119885200 - -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Robert H. McLean 226 Bailey Avenue, Suite 101 Fort Worth, Texas 76107 (817) 332-4761 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) This statement is filed in connection with (check the appropriate box): a. [X] The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of 1934. b. [_] The filing of a registration statement under the Securities Act of 1933. c. [_] A tender offer. d. [_] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: [X] Check the following box if the filing is a final amendment reporting the results of the transaction: [_] Calculation of Filing Fee
- -------------------------------------------------------------------------------- Transaction valuation* Amount of filing fee - -------------------------------------------------------------------------------- $9,984,199 $1,997 - --------------------------------------------------------------------------------
* The filing fee is calculated based on $2.25 per share of common stock, with 4,400,866 shares of common stock outstanding, and the difference of $2.25 and the exercise price of each outstanding option. [X] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $1,997 Form or Registration No.: Schedule 14A Filing Party: BFX Hospitality Group, Inc. Date Filed: August 17, 2000 SCHEDULE 13E-3 Reference is made to the preliminary proxy statement of BFX Hospitality Group, Inc. ("BFX") filed with the Securities and Exchange Commission on September 22, 2000 and which is an exhibit to this Schedule 13E-3. Capitalized terms in this Schedule 13E-3 have the same meanings ascribed to them in the Proxy Statement. Item 1. Summary Term Sheet. ------------------ The information set forth under the Section of the Proxy Statement entitled "Summary Term Sheet" is incorporated herein by reference. Item 2. Subject Company Information. --------------------------- (a) Name and Address. The information set forth on the first page of ---------------- the Proxy Statement and under the Section of the Proxy Statement entitled "The Parties - The Company" is incorporated herein by reference. (b) Securities. The information set forth on the first page of the ---------- Proxy Statement is incorporated herein by reference. (c) Trading Market and Price. The information set forth under the ------------------------ Section of the Proxy Statement entitled "Market Information" is incorporated herein by reference. (d) Dividends.* --------- (e) Prior Public Offerings.* ---------------------- (f) Prior Stock Purchases. The information set forth in the Proxy --------------------- Statement under the Section entitled "Purchases of Common Stock by and Other Transactions with Certain Persons" is incorporated herein by reference. Item 3. Identity and Background of Filing Persons. ----------------------------------------- (a) Name and Address. The information set forth in the Sections of ---------------- the Proxy Statement entitled "The Parties - Hospitality and its Subsidiaries", "The Parties - Members of the Management Group" and "Security Ownership" is incorporated herein by reference. (b) Business and Background of Entities. The information set forth ----------------------------------- in the Section of the Proxy Statement entitled "The Parties - Hospitality and its Subsidiaries" is incorporated herein by reference. During the last five years, neither Hospitality nor American has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining such person from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities laws. (c) Business and Background of Natural Persons. The information set ------------------------------------------ forth in the Sections of the Proxy Statement entitled "The Parties" and "The Merger and Related Special Factors - Conflicts of Interest" is incorporated herein by reference. During the last five years, no director or executive officer of Hospitality or American or any member of the Management Group has been - ------------------- * Indicates Item is not applicable. -1- convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining such person from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities laws. BFX is a Delaware corporation. Each of Hospitality and American is a Delaware limited liability company. Each director and executive officer of BFX, Hospitality and American is a U.S. citizen. Item 4. Terms of the Transaction. ------------------------ (a) Material Terms. The information set forth under the Sections of -------------- the Proxy Statement entitled "Summary Term Sheet - Purposes of Special Meeting", "Summary Term Sheet - Voting Rights", "Summary Term Sheet -Effective Time of the Merger", "Summary Term Sheet - Required Vote", "Summary Term Sheet - Certain Effects of the Merger", "Summary Term Sheet - Merger Agreement", "Summary Term Sheet - Material U.S. Federal Income Tax Consequences of the Merger", "Summary Term Sheet -Accounting Treatment of the Merger", "The Parties - Hospitality and its Subsidiaries", "The Special Meeting - Record Date, Voting Securities and Quorum", "The Special Meeting - Vote Required", "The Merger and Related Special Factors - Purpose of and Reasons for the Merger; Certain Effects of the Merger" and "The Merger and Related Special Factors - Material U.S. Federal Income Tax Consequences of the Merger" is incorporated herein by reference. (c) Different Terms.* --------------- (d) Appraisal Rights. The information set forth under the Sections ---------------- of the Proxy Statement entitled "Summary Term Sheet - Appraisal Rights" and "The Merger and Related Special Factors - Rights of Dissenting Stockholders" is incorporated herein by reference. (e) Provisions for Unaffiliated Security Holders. The information -------------------------------------------- set forth under the Section of the Proxy Statement entitled "Available Information" is incorporated herein by reference. (f) Eligibility for Listing or Trading.* ---------------------------------- Item 5. Past Contacts, Transactions, Negotiations and Agreements. -------------------------------------------------------- (a) Transactions. The information set forth under the Section of the ------------ Proxy Statement entitled "Purchases of Common Stock by and Other Transactions with Certain Persons" is incorporated herein by reference. (b) Significant Corporate Events. The information set forth in the ---------------------------- Sections of the Proxy Statement entitled "Summary Term Sheet - Merger Agreement", "The Merger and Related Special Factors - Background of the Company" and "The Merger Agreement" is incorporated herein by reference. (c) Negotiations or Contacts.* ------------------------ (e) Agreements Involving the Company's Securities. None. --------------------------------------------- - ------------------- * Indicates Item is not applicable. -2- Item 6. Purposes of the Transaction and Plans or Proposals. -------------------------------------------------- (b) Use of Securities Acquired. The information set forth in the -------------------------- Sections of the Proxy Statement entitled "The Special Meeting - Matters to be Considered at the Special Meeting", "Summary Term Sheet - Certain Effects of the Merger", "Summary Term Sheet - Merger Agreement," "The Merger and Related Special Factors - Purpose of and Reasons for the Merger; Certain Effects of the Merger", "The Merger Agreement - Conversion of Securities in the Merger; Treatment of Derivatives" and "The Merger Agreement - Payment for and Surrender of Company Common Shares" is incorporated herein by reference. (c) Plans. The information set forth in the Sections of the Proxy ----- Statement entitled "Summary Term Sheet - Certain Effects of the Merger", "Summary Term Sheet - Future Plans for the Company", "Summary Term Sheet - Merger Agreement", "The Merger and Related Special Factors - Purpose of and Reasons for the Merger; Certain Effects of the Merger", "The Merger and Related Special Factors - Future Plans of the Company", "The Merger and Related Special Factors - Estimated Fees and Expenses; Source of Funds" and "The Merger Agreement" is incorporated herein by reference. Item 7. Purpose(s), Alternatives, Reasons and Effects. --------------------------------------------- (a) Purposes. The information set forth under the first and -------- fifteenth paragraphs under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Background of the Company" and the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Purpose of and Reasons for the Merger; Certain Effects of the Merger" is incorporated herein by reference. (b) Alternatives. The information set forth under the twenty-fifth ------------ paragraph under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Background of the Company" and the second to last paragraph under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Purpose of and Reasons for the Merger; Certain Effects of the Merger" is incorporated herein by reference. (c) Reasons. The information set forth under the Sections of the ------- Proxy Statement entitled "The Merger and Related Special Factors - Purpose of and Reasons for the Merger; Certain Effects of the Merger", "The Merger and Related Special Factors - Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" and "The Merger and Related Special Factors - Determination of Fairness of the Merger by Hospitality, American and the Management Group" is incorporated herein by reference. (d) Effects. The information set forth under the Sections of the ------- Proxy Statement entitled "Summary Term Sheet - Certain Effects of the Merger", "Summary Term Sheet - Merger Agreement", "Summary Term Sheet - Material U.S. Federal Income Tax Consequences of the Merger", "The Parties - Hospitality and its Subsidiaries" and "The Merger Agreement - Material U.S. Federal Income Tax Consequences of the Merger", and under the last paragraph under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Purposes of and Reasons for the Merger; Certain Effects of the Merger" is incorporated herein by reference. - ------------------- * Indicates Item is not applicable. -3- Item 8. Fairness of the Transaction. --------------------------- (a) Fairness. The information set forth under the Sections of the -------- Proxy Statement entitled "Summary Term Sheet - Recommendation of the Board of Directors", "Summary Term Sheet - Management Groups Determination of Fairness to Public Stockholders" and under the seventh and fourth to last paragraphs under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Background of the Company", the third and last two paragraphs under the Section of the Proxy Statement entitled "The Merger and Related Special Factors -Determination of Fairness of the Merger by the Independent Committee and the Board of Directors", the first paragraph of the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Determination of Fairness of the Merger by Hospitality, American and the Management Group" and the first paragraph under each Financial Advisor's section under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Opinions of Independent Committee's Financial Advisors" is incorporated herein by reference. (b) Factors Considered in Determining Fairness. The information set ------------------------------------------ forth under the Sections of the Proxy Statement entitled "Summary Term Sheet - Opinions of Independent Committee's Financial Advisors", "The Merger and Related Special Factors - Determination of Fairness of the Merger by the Independent Committee and the Board of Directors", "The Merger and Related Special Factors - Determination of Fairness of the Merger by Hospitality, American and the Management Group", "The Merger and Related Special Factors - Opinions of Independent Committee's Financial Advisors" and beginning with the seventeenth paragraph under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Background of the Company" is incorporated herein by reference. (c) Approval of Security Holders. The information set forth under ---------------------------- the Sections of the Proxy Statement entitled "Summary Term Sheet - Required Vote" and "The Special Meeting - Vote Required" and the last paragraph under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" is incorporated herein by reference. (d) Unaffiliated Representative. The information set forth under the --------------------------- eighteenth paragraph under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Background of the Company" is incorporated herein by reference. (e) Approval of Directors. The information set forth under the --------------------- Sections of the Proxy Statement entitled "Summary Term Sheet - Recommendation of the Board of Directors" and the third to last paragraph under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Background of the Company" and the first paragraph under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" is incorporated herein by reference. (f) Other Offers.* ------------ Item 9. Reports, Opinions, Appraisals and Certain Negotiations. ------------------------------------------------------ - ------------------- * Indicates Item is not applicable. -4- (a) Report, Opinion or Appraisal. The information set forth under ---------------------------- the Sections of the Proxy Statement entitled "Summary Term Sheet - Opinions of Independent Committee's Financial Advisors", "The Merger and Related Special Factors - Opinions of Independent Committee's Financial Advisors" and subparagraph (ii) of the second paragraph under the Section of the Proxy Statement entitled "Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" is incorporated herein by reference. (b) Preparer and Summary of the Report, Opinion or Appraisal. The -------------------------------------------------------- information set forth under the Sections of the Proxy Statement entitled "Summary Term Sheet - Opinions of Independent Committee's Financial Advisors", "The Merger and Related Special Factors - Opinions of Independent Committee's Financial Advisors" and subparagraph (ii) of the second paragraph under the Section of the Proxy Statement entitled "Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" is incorporated herein by reference. (c) Availability of Documents. The financial opinions of Sanders ------------------------- Morris Harris, Inc. and George K. Baum & Company set forth in Appendices II and III to the Proxy Statement, respectively, including the Amendment to George K. Baum & Company's opinion dated October 5, 2000 are incorporated herein by reference and shall also be made available for inspection and copying at the principal executive offices of the Company during its regular business hours by any interested stockholder of the Company or his or its representative who has been designated in writing. At the written request of such stockholder, a copy of such opinion will be sent, at the stockholder's expense, to such stockholder or his or its representative. The information set forth in Exhibit (c) to this Schedule 13E-3 will be made available for inspection and copying at the principal executive offices of the Company by any interested stockholder of the Company or his or its representative who has been designated in writing. At the written request of such stockholder, a copy of that Exhibit will be sent, at the stockholder's expense, to such stockholder or his or its representatives. Item 10. Source and Amounts of Funds or Other Consideration. -------------------------------------------------- (a) Source of Funds. The information set forth under the Section of --------------- the Proxy Statement entitled "Summary Term Sheet - Estimated Fees and Expenses; Source of Funds", "The Merger and Related Special Factors - Estimated Fees and Expenses; Source of Funds" and subparagraph (iv) of paragraph two under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" is incorporated herein by reference. (b) Conditions. The information set forth under the Section of the ---------- Proxy Statement entitled "The Merger and Related Special Factors - Estimated Fees and Expenses; Source of Funds" and subparagraph (iv) of paragraph two under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" is incorporated herein by reference. (c) Expenses. The information set forth under the Sections of the -------- Proxy Statement entitled "Summary Term Sheet - Estimated Fees and Expenses; Source of Funds", "The Merger and Related Special Factors - Estimated Fees - ------------------- * Indicates Item is not applicable. -5- and Expenses; Source of Funds" and "The Merger and Related Special Factors - Expenses" is incorporated hereby by reference. (d) Borrowed Funds. The information set forth under the Sections of -------------- the Proxy Statement entitled "Summary Term Sheet - Estimated Fees and Expenses; Source of Funds", "The Merger and Related Special Factors - Estimated Fees and Expenses; Source of Funds" and subparagraph (iv) of paragraph two under the Section of the Proxy Statement entitled "The Merger and Related Special Factors - Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" is incorporated herein by reference. Item 11. Interest in Securities of the Subject Company. --------------------------------------------- (a) Securities Ownership. The information set forth under the -------------------- Sections of the Proxy Statement entitled "The Merger and Related Special Factors - Conflicts of Interest" and "Security Ownership" is incorporated herein by reference. (b) Securities Transactions. The information set forth under the ----------------------- Section of the Proxy Statement entitled "Purchases of Common Stock by and Other Transactions with Certain Persons" is incorporated hereby by reference. Item 12. The Solicitation or Recommendation. ---------------------------------- (d) Intent to Tender or Vote in a Going-Private Transaction. ------------------------------------------------------- The information set forth under the Section of the Proxy Statement entitled "Summary Term Sheet - Required Vote" and "The Special Meeting - Vote Required" is incorporated herein by reference. (e) Recommendations of Others. Information set forth under the ------------------------- Section of the Proxy Statement entitled "Summary Term Sheet - Recommendation of the Board of Directors", "The Merger and Related Special Factors - Background of the Company" and "The Merger and Related Special Factors - Determination of Fairness of the Merger by the Independent Committee and the Board of Directors" is incorporated herein by reference. Item 13. Financial Statements. -------------------- (a) Financial Information. The information incorporated by reference --------------------- in the Proxy Statement under the Section entitled "Documents Incorporated By Reference" as filed with the SEC on Form 10-K for the year ended September 30, 1999 (beginning with page F-1 under the Section of the Form 10-K entitled "Consolidated Financial Statements") and on Form 10-Q under "Part I: Financial Information" for the quarters ended December 31, 1999, March 31, 2000, and June 30, 2000 and the current reports on Form 8-K dated August 16, 2000 and September 25, 2000 is incorporated herein by reference. This information may be obtained from the SEC as discussed under the Section of the Proxy Statement entitled "Available Information" and is incorporated herein by reference. In addition, the financial statements contained in the Company's Annual Report on Form 10-K for the year ended September 30, 1999 and the Company's Quarterly Reports on Form 10-Q for the quarters ended December 31, 1999, March 31, 2000, and June 30, 2000, are incorporated herein by reference. (b) Pro Forma Information.* --------------------- - ------------------- * Indicates Item is not applicable. -6- (c) Summary Term Sheet Information. The information set forth under ------------------------------ the Section of the Proxy Statement entitled "Selected Financial Data" is incorporated herein by reference. Item 14. Persons/Assets Retained, Employed, Compensated or Used. ------------------------------------------------------ (a) Solicitations or Recommendations. The information set forth -------------------------------- under the fourth paragraph under the Section of the Proxy Statement entitled "The Special Meeting - Proxies" is incorporated herein by reference. (b) Employees and Corporate Assets. The information set forth under ------------------------------ the fourth paragraph under the Section of the Proxy Statement entitled "The Special Meeting - Proxies" is incorporated herein by reference. Item 15. Additional Information. ---------------------- Reference is hereby made to the Proxy Statement, which is incorporated in its entirety herein by reference. Item 16. Exhibits. -------- (a)(1) The Preliminary Proxy Statement of the Company filed with the Securities and Exchange Commission on September 22, 2000 is incorporated herein by reference. (a)(2) Proxy Card (included as an appendix to the Proxy Statement which is incorporated herein by reference). (a)(3) Letter to Stockholders from Robert H. McLean, President of the Company (included as an appendix to the Proxy Statement which is incorporated herein by reference). (a)(4) Notice of Special Meeting of Stockholders (included as an appendix to the Proxy Statement which is incorporated herein by reference). (b) * (c)(1) Opinion of Sanders Morris Harris, Inc. dated August 11, 2000 is incorporated herein by reference to Appendix II of the Proxy Statement. (c)(2) Opinion of George K. Baum & Company dated August 11, 2000 is incorporated herein by reference to Appendix III of the Proxy Statement. (c)(3) Amendment to the Opinion of George K. Baum & Company dated October 5, 2000 is incorporated herein by reference to Appendix III of the Proxy Statement. (c)(4) Materials presented to the Board of Directors in connection with the fairness opinion of Sanders Morris Harris, Inc. dated August 11, 2000 are filed herewith. (c)(5) Materials presented to the Board of Directors in connection with the fairness opinion of George K. Baum & Company dated August 11, 2000 are filed herewith. (d) Form of Agreement and Plan of Merger by and among Hospitality Concepts, LLC, American Hospitality, LLC and BFX Hospitality Group, Inc. dated August 11, 2000 is incorporated herein by reference to Appendix I of the Proxy Statement. - ------------------- * Indicates Item is not applicable. -7- (e) The information set forth under the heading "The Merger and Related Special Factors" is incorporated herein by reference. (f) A copy of Section 262 of the Delaware General Corporation Law is attached to the Proxy Statement as Appendix IV and is incorporated herein by reference. (g) * (h) * - ------------------- * Indicates Item is not applicable. -8- SIGNATURE After due inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this Statement is true, complete and correct. Dated: October 11, 2000. BFX HOSPITALITY GROUP, INC. By: /S/ Robert H. McLean ------------------------------------- Name: ROBERT H. McLEAN Title: President HOSPITALITY CONCEPTS, LLC By: /S/ Robert H. McLean ------------------------------------- Name: ROBERT H. McLEAN Title: President MANAGEMENT GROUP /S/ Robert H. McLean ---------------------------------------- ROBERT H. McLEAN /S/ Walter D. Rogers, Jr. ---------------------------------------- WALTER D. ROGERS, JR. /S/ Hampton Hodges ---------------------------------------- HAMPTON HODGES /S/ Robert Korman ---------------------------------------- ROBERT KORMAN - ------------------- * Indicates Item is not applicable. -9- /S/ Frank J. Milan ---------------------------------------- FRANK J. MILAN /S/ Terry Kearney ---------------------------------------- TERRY KEARNEY - ------------------- * Indicates Item is not applicable. -10- INDEX TO EXHIBITS Exhibit Number Title - -------------- ----- 16(a)(1) The Preliminary Proxy Statement of the Company filed with the Securities and Exchange Commission on September 22, 2000 is incorporated herein by reference. 16(a)(2) Proxy Card (included as an appendix to the Proxy Statement which is incorporated herein by reference). 16(a)(3) Letter to Stockholders from Robert H. McLean, President of the Company (included as an appendix to the Proxy Statement which is incorporated herein by reference). 16(a)(4) Notice of Special Meeting of Stockholders (included as an appendix to the Proxy Statement which is incorporated herein by reference). 16(c)(1) Opinion of Sanders Morris Harris, Inc. dated August 11, 2000 is incorporated herein by reference to Appendix II of the Proxy Statement. 16(c)(2) Opinion of George K. Baum & Company dated August 11, 2000 is incorporated herein by reference to Appendix III of the Proxy Statement. 16(c)(3) Amendment to the Opinion of George K. Baum & Company dated October 5, 2000 is incorporated herein by reference to Appendix III of the Proxy Statement. 16(c)(4) Materials presented to the Board of Directors in connection with the fairness opinion of Sanders Morris Harris, Inc. dated August 11, 2000 are filed herewith. 16(c)(5) Materials presented to the Board of Directors in connection with the fairness opinion of George K. Baum & Company dated August 11, 2000 are filed herewith. 16(d) Form of Agreement and Plan of Merger by and among Hospitality Concepts, LLC, American Hospitality, LLC and BFX Hospitality Group, Inc. dated August 11, 2000 is incorporated herein by reference to Appendix I of the Proxy Statement. 16(e) The information set forth under the heading "The Merger and Related Special Factors" is incorporated herein by reference. 16(f) A copy of Section 262 of the Delaware General Corporation Law is attached to the Proxy Statement as Appendix IV and is incorporated herein by reference. - ------------------- * Indicates Item is not applicable. -11- EX-16.C4 2 0002.txt SANDERS MORRIS PRESENTATION MATERIALS EXHIBIT 16(c)(4) [LETTERHEAD OF SANDERS MORRIS HARRIS] PERSONAL AND CONFIDENTIAL - ------------------------- August 11, 2000 Mr. John M. Edgar Chairman of the Independent Committee of the Board of BFX Hospitality Group, Inc. c/o Bryan Cave 3300 One Kansas City Place 1200 Main Place Kansas City, MO 64105-6914 Gentlemen: You have advised Sanders Morris Harris Inc. ("SMH") that management of BFX Hospitality Group, Inc. ("BFX" or the "Company") has proposed to acquire the outstanding common stock of BFX at a price of $2.25 per share in a "going private" management buyout transaction (the "Transaction"). The Transaction will be structured as a merger of the Company with and into American Hospitality, L.L.C. ("American") pursuant to an Agreement and Plan of Merger (the "Merger Agreement") by and between the Company, American and Hospitality Concepts., L.L.C., which owns all the outstanding stock of American and which is owned by members of management proposing the Transaction. You have requested that SMH act as financial advisor to the Independent Committee referred to above and issue an opinion ("Opinion") as to the fairness to the public shareholders of BFX of the consideration to be received in the proposed Transaction. SMH, as part of its investment banking business, is frequently engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. BFX Hospitality Group, Inc. August 11, 2000 Page 2 In arriving at our Opinion, we have, among other things: 1. Reviewed a draft of the Agreement and Plan of Merger dated August 7, 2000; 2. Reviewed BFX Proxy Statement draft dated July 28, 2000; 3. Reviewed BFX Hospitality Group, Inc. Liquidation Analysis dated May 10, 2000; 4. Reviewed June 1998 Consent Decree between the United States of America and BFX Hospitality Group, Inc.; 5. Reviewed Record of Decision with respect to the Company's Superfund site in Vestal, New York; 6. Reviewed BFX audited financials and annual report for the year ended September 30, 1999; 7. Reviewed BFX unaudited financial statements for the quarter ended March 31, 2000; 8. Reviewed BFX confidential unaudited financial statements for the four-week period ended May 28, 2000; 9. Reviewed summary projections and assumptions for each of BFX's operating facilities for 2000 - 2005 prepared and provided by BFX management at SMH's request; 10. Reviewed BFX summary history provided by BFX management; 11. Reviewed letter dated June 28, 2000 from Robert H. McLean to the Independent Committee setting forth the preliminary proposal; 12. Reviewed a July 26, 2000 proposal from John Hancock Real Estate Finance, Inc. with respect to a $2,200,000 mortgage loan on the Stockyards Hotel; 13. Reviewed an August 1, 2000 proposal from Amresco Commercial Finance, Inc. with respect to a $5 million loan; 14. Reviewed a July 19, 2000 memo from Robert Korman to James Pryde regarding the Transaction; 15. Reviewed a July 21, 2000 memo from Robert Korman to Clyde Buck regarding the book value of BFX; 16. Reviewed Cat's Meow lease agreement dated September 30, 1989; BFX Hospitality Group, Inc. August 11, 2000 Page 3 17. Reviewed Vestal, New York Superfund site lease agreement dated January 1, 1997; and 18. Discussed various assets, liabilities and operations of BFX involved in the Transaction. With your permission, we have assumed and relied upon, without assuming any responsibility for verification, the accuracy and completeness of all of the financial and other information provided to, discussed with, or reviewed by or for us, or publicly available, for purposes of this Opinion, and have further relied upon the assurances of management of the Company that it is not aware of any facts that will make such information inaccurate or misleading in any respect material to our analysis. We have neither made nor obtained any independent evaluations or appraisals of the assets or liabilities of the Company, nor have we conducted a physical inspection of the properties and facilities of the Company. We have assumed that the financial forecasts and projection information of each individual operating business unit provided to us by the Company have been reasonably determined on bases reflecting the best currently available estimates and judgments of the Company's management as to each operating business unit's future financial performance. We have further assumed in our analyses that, in all material respects, such forecasts and projections will be realized in the amounts and times indicated thereby. We express no view as to such forecasts, projections or the assumptions on which they were based. We have also assumed, and you have informed us, that the Transaction will be accounted for on a purchase basis and the consideration to be received by public stockholders will be taxable. We have relied as to all legal, accounting and tax matters with respect to the Transaction on legal counsel and accountants to the Company. We were not authorized to negotiate the terms of the Transaction, and we have based our opinion solely upon the Merger Agreement as negotiated by others. We were not asked to, and we did not, solicit third party offers to acquire all or part of the Company. For purposes of rendering our Opinion, we have assumed, in all respects material to our analysis, that the representations and warranties of each party contained in the Merger Agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the Merger Agreement and that all conditions to the consummation of the Transaction will be satisfied without waiver thereof. We have also assumed that all material governmental, regulatory or other consents and approvals will be obtained and that in the course of obtaining any necessary governmental, regulatory or other consents and approvals, or any amendments, modifications or waivers to any documents to which either the Company or American are party, as contemplated by the Merger Agreement, no restrictions will be imposed or amendments, modifications or waivers made that would have any material adverse effect on the consideration to be received by the public stockholders or the time of such receipt. BFX Hospitality Group, Inc. August 11, 2000 Page 4 Our Opinion is limited to the fairness, from a financial point of view, of the Transaction to the Company's public stockholders, and we express no opinion as to the merits of the underlying decision by the Company to engage in the Transaction. This Opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the Transaction. Our Opinion necessarily is based upon market, economic and other conditions as they exist and can be evaluated on the date hereof, and we assume no responsibility to update or revise our Opinion based upon circumstances or events occurring after the date hereof. We have acted as financial advisor to the Independent Committee in connection with the Transaction and will receive a fee for our services, including for rendering this Opinion. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. As we have previously advised you, in the ordinary course of business, we or our affiliates may trade in the Company's common stock for our own accounts and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. Based upon and subject to the foregoing, it is our Opinion that, as of the date hereof, the consideration to be received in the Transaction is fair to the public shareholders of BFX from a financial point of view. SANDERS MORRIS HARRIS INC. By: ----------------------------------- G. Clyde Buck Managing Director M E M O R A N D U M ------------------- TO: File FROM: G. Clyde Buck Mark E. Burroughs, Jr. DATE: August 11, 2000 RE: Logic Memo to Support SMH Fairness Opinion to the fairness to the public shareholders of BFX Hospitality Group, Inc. ("BFX" or the "Company") of management's proposal to acquire the outstanding common stock of BFX at a price of $2.25 per share in a "going private" management buyout transaction (the "Transaction"). TABLE OF CONTENTS ----------------- Page ---- A. BACKGROUND OF BFX HOSPITALITY GROUP, INC. 3 B. BACKGROUND OF THE TRANSACTION 5 C. SUMMARY OF CRITICAL FACTORS TO SUPPORT SMH'S FAIRNESS OPINION 6 1 EXHIBITS -------- I. Selected Financial Information II. Discounted Cash Flow Models for: (a) Cat's Meow; (b) Lucile's, A Stateside Bistro; (c) Stockyards Hotel and 3H Restaurant; and (d) BFX Remaining as a Public Company. III. Comparable Companies - Selected Data for Seven Comparable Companies 2 A. Background of BFX ----------------- BFX Hospitality Group, Inc. ("BFX") owns and operates food service, lodging and entertainment facilities in Texas and Louisiana through three wholly- owned subsidiaries, (a) American Food Classics, Inc. ("AFC"), (b) BFX-LA, Inc. d/b/a Bourbon Street Hospitality ("BSH") and (c) Stockyards Hotel, Inc. AFC was organized in 1992 to develop, own and operate food service concepts that, once proven, could be expanded to multiple locations throughout the United States as well as internationally. AFC presently owns and operates Cabo, The Original "Mix Mex" Grill ("Cabo"), which opened in December 1994 in Houston, Texas, and which offers fish tacos, habanero shrimp and other Mexican food with Central and South American influences. Cabo was acquired by AFC in January 1996. A second Cabo unit opened in downtown Houston in April 1998. A third Cabo unit opened in downtown Fort Worth's Sundance Square in December 1998. AFC also owns and operates Lucile's, A Stateside Bistro ("Lucile's"), which opened in April 1993 in Fort Worth, Texas. Lucile's offers a variety of menu items centered around classic regional American dishes. Stockyards Hotel, Inc. owns and operates the Stockyards Hotel, which was acquired in January 1996. The Stockyards Hotel is located in the historic Northside area of Fort Worth, Texas and has 52 sleeping rooms that reflect the Old West of the early 1900's, over 3,500 square feet of meeting space and full service catering for corporate meetings, wedding receptions and family reunions. H3 Ranch, a 5,000 square foot steakhouse concept, located in the hotel's first floor space, opened in August 1998. Included in the Stockyards Hotel real estate are two valet parking lots totaling 1.3 acres. BSH owns and operates Cat's Meow, an entertainment facility at 701 Bourbon Street in New Orleans, Louisiana. Cat's Meow was opened in 1988. BSH acquired 100% of Cat's Meow in January 1994. Cat's Meow is housed in a 3 French Quarter building with approximately 3,000 square feet. The building has a courtyard and second floor balcony. Cat's Meow has attracted nationwide popularity and is considered one of the highest grossing facilities per square foot in the United States. Entertainment features highly produced karoake and includes MCs and DJs with a variety of music. BFX Balance Sheet (In 000's)
As of 3/31/00-Unaudited - -------------------------------------------------------------------------- Current Assets $ 3,954 PP&E, Net 10,085 Goodwill 2,226 Deferred Income Taxes 1,824 Other Assets, Net 103 Total Assets $18,192 ============== Current Liabilities $ 1,819 Long Term Debt 0 Accrued EPA Costs 2,733 Shareholders' Equity 13,640 -------------- Total Liabilities and Equity $18,192 ============== - --------------------------------------------------------------------------
With 3,963,866 shares of common stock, the book value of BFX on 3/31/00 was $3.44 per share ($13,640,000 / 3,963,866). The stock trades at a substantial discount from this value. We assume that investors are (a) more interested in earnings from operations than book values of assets and (b) are concerned that the Company's environmental liabilities may prove to be substantially understated. Another reason the stock trades at a discount from its book value is probably because stock market investors are buying a small minority interest in a public company. 4 B. Background of the Transaction ----------------------------- The Transaction involves BFX management ("Management") taking the Company private by acquiring 100% of the outstanding common stock of BFX. According to the August 7, 2000 Agreement and Merger Plan draft, provided by Management, Hospitality Concepts, L.L.C. (i.e., a new company to be set up by Management) will create American Hospitality L.L.C., which will be merged with BFX. American Hospitality will be the surviving entity and a 100% wholly-owned by Hospitality Concepts, LLC. Management proposes to pay $2.25 per BFX common share for all publicly-held shares. As of 7/31/00, BFX had 3,963,866 million shares of outstanding common stock. At $2.25 per share, the total value of 100% of BFX's equity would be $8.9 million based on current shares outstanding. In conjunction with the Transaction, Management plans to arrange two loans to provide the extra funds needed to purchase the outstanding common stock held by public shareholders. Management plans to file with the SEC a transmittal letter and proxy statement on the Transaction in August 2000. 5 C. Summary of Critical Factors to Support SMH's Fairness Opinion ------------------------------------------------------------- Items which follow are noted to create a record of the critical factors considered in conjunction with (a) our overall knowledge of fairness and business transactions from a financial point of view and (b) our business judgment in rendering a fairness opinion to the shareholders. We define "fair market value" as "the price agreed upon between a willing buyer and a willing seller with each having full knowledge of all relevant facts and neither being under any compulsion to act." In preparing this memo, with BFX's approval, we did not perform audit work, did not prepare appraisals of specific assets and did not verify the accuracy or completeness of information furnished to us by BFX. SMH's engagement to furnish a fairness opinion in connection with the Transaction is set forth in an engagement letter agreement between SMH and the Independent Committee of the Board of Directors of BFX dated July 5, 2000. The agreement involves a total fee of $100,000, reimbursement for reasonable out-of-pocket expenses and indemnification of SMH. 1. Our primary logic for evaluating the fairness of the proposed Transaction to the common shareholders of BFX was to: (a) estimate a reasonable range for the current fair market value per share for 100% of BFX's equity; (b) note the value per share of cash to be received by public shareholders for 100% of BFX; (c) determine that the value for Item (b) was equal to or greater than the mid-point of our range of value of Item (a). 6 Estimated Fair Market Value for 100% of BFX Common Stock (see page 10).................................. $7.5 - 11.0 mil. Estimated Value Per Share (A).................................... $1.90 - 2.78 Approximate Mid-Point................................................. $ 2.34 Value for Cash Received Per Share of BFX Common Stock....................................................$ 2.25 /(A)/ Based upon 3,963,866 shares of common stock. See also page 10. Adjustment for BFX stock options (including options for 300,000 shares at -------------------------------- $1.00 per share). All of the options are dilutive to a value of $2.25 per share. Add $650,750 to our value range; new range is $8.2 - 11.7 million. Add 550,000 to shares outstanding; new total of 4,513,866 shares. Final Estimated Value Per Share....................$1.82-2.59 Final Mid-Point.........................................$2.21 Note: Actual calculations use amounts in thousands or exact, unrounded amounts. Since the mid-point of our value per share of 100% of BFX's common stock -------------------------------------------------------------- was approximately $2.21 and the cash to be paid to BFX's public --------------------------------------------------------------- shareholders was $2.25 per share, the exchange appears to be fair to BFX's -------------------------------------------------------------------------- public shareholders. -------------------- 7 2. $2.25 is a fair and attractive premium over recent market prices for BFX's -------------------------------------------------------------------------- common stock, which represents the fair market value of small minority ---------------------------------------------------------------------- interests. ---------- BFX's common shares are publicly traded on the American Stock Exchange under the symbol "BFX" and have traded near $0.80 - $0.90 per share recently. (See chart which follows.) The average closing price for BFX in the past 30, 60, 90 and 120 days (as of 7/13/00, before the proposed Transaction was announced) has generally been between $0.80 and $1.00. The highest trading price in the past 120 days (as of 7/13/00) was $1.19 on 5/4/00 and the lowest was $0.75 on 5/31/00. [GRAPH APPEARS HERE] Source: ILX as of 7/13/00. As the table below indicates and because BFX's stock is thinly-traded (some days not trading at all), not widely held by institutional investors and not followed by research analysts, we consider the BFX market price to be somewhat inefficient, but nevertheless a relevant indicator of the fair market value of a minority interest in BFX. 8
Average Daily Average Daily Premium of a Stock Price Volume (shares) $2.25 Price -------------------- -------------------- ----------------- 07/12/00 $0.81 4,300 178% Prior 7 days of trading 0.89 1,957 153 Prior 30 days of trading 0.88 2,970 156 ----------------- Prior 60 days of trading 0.89 2,276 153 Prior 90 days of trading 0.93 2,584 142 Prior 120 days of trading 0.98 3,118 130 - ---------------------------------------------------------------------------------------------------- Source: Bloomberg as of 7/13/00
Based on these historical trading prices, we would expect the public shareholders of BFX to be very pleased to be offered $2.25 per share in cash. (See also premiums analysis on page 27.) 3. Our primary methodology was a discounted cash flow analysis (i.e., an ----------------------------------------------------------- internal rate of return or IRR analysis), which is how we believe investors evaluate restaurant and hotel acquisitions. The following table shows the results from our discounted cash flow ("DCF") analysis for each of BFX's facilities. SMH believes a buyer of part or all of BFX would conduct a similar analysis and that these values are good indicators of fair market values of the components of BFX. 9 Fair Market Valuation of BFX As of 7/31/00
(In 000's) Page Fair Market Value Reference: -------------------------- --------------- Cat's Meow $ 3,750 - 5,250 14 Lucile's 728 16 Stockyard & H3 3,075 17 Cabo (3 restaurants) 3,500 19 Cash and Equivalents (as of 3/31/00) (1) 2,512 Exhibit I Income Tax Refund Due(2) 698 Exhibit I BFX - Corporate Office Assets (3) 100 24 -------------------------- Total Assets $14,363 - 15,863 ================ EPA Liability (net of possible lease or other revenues) $ 3,000 - 5,000 20 Other Liabilities (as of 3/31/00) (4) 1,819 Exhibit I -------------------------- Total Liabilities $ 4,819 - 6,819 Fair Market Value ("FMV") of BFX Equity $ 7,544 - 11,044 Shares Outstanding 3,964 Fair Market Value Per Share $ 1.90 - 2.78 Adjustment for BFX stock options: - ---------------------------------------------------------- Final FMV of BFX Equity (5) $ 8,195 - 11,695 Fully-Diluted Shares Outstanding (5) 4,514 -------------------------- Final FMV Per Share $ 1.82 - 2.59 -------------------------- Final Mid-Point $ 2.21 - --------------------------------------------------------------------------------------------------------
(1) 3/31/00 book value. (2) Cash was received by BFX for this tax refund on 6/1/00. (3) From Management's orderly liquidation analysis. (4) 3/31/00 book value of accounts payable ($592,000), accrued liabilities ($710,000) and income tax liabilities ($517,000). (5) For purposes of calculating fully-diluted value per share, BFX receives $650,750 in proceeds from the exercise of options. (See also page 7.) To complete the calculation, shares outstanding increases by 550,000 shares (i.e., total options outstanding). (See also page 7.) 10 Management has informed SMH that since 3/31/00 there have been no changes in the assets and liabilities of BFX that would make the three 3/31/00 balance sheet items in this analysis inappropriate or misleading in estimating a range of value per share. Historical financials for 1997 - 1999 are summarized below (for comparative purposes) and also are shown in Exhibit I.
Fiscal years ended 9/30: (in 000's) 1997 1998 1999 --------------- -------------- ------------ Revenue $ 10,518 11,513 17,212 EBITDA (1) (10,659) (3,159) 716 (2) EBIT (1) (11,689) (4,309) (2,728) - ----------------------------------------------------------------------------------------------------------------
(1) From continuing operations. (2) Before a write-down for long-lived assets (i.e., investment in Cabo) of $1.9 million. SMH also performed a DCF analysis on BFX assuming it remains a public company. SMH prepared the projections of BFX (as shown on the following page) on a consolidated basis, based on discussions with Management. This DCF analysis took into account several cash flow items, including lease revenue from the Vestal, New York Superfund Site (which had highly uncertain future cash flows) as well as corporate expenses (i.e., SG&A and costs of being public). The data on the following page shows projected revenues and "earnings before interest, taxes, depreciation and amortization" ("EBITDA") and EBIT for BFX from 2000 to 2004. 11
Fiscal years ending 9/30: (in 000's) 2000E (1) 2001E 2002E 2003E 2004E -------------- ------------ ------------ ------------ ---------- Revenue $13,548 13,359 13,584 13,809 14,034 EBITDA 1,799 1,456 1,527 1,600 1,673 EBIT 765 403 475 548 731 Pre-tax Free Cash Flow (2) 1,619 1,231 1,257 1,285 1,313 - -------------------------------------------------------------------------------------------------------------
(1) Based on 9 months ended 6/30/00 and estimates for the fourth quarter. (2) We define "Pre-tax Free Cash Flow" as EBITDA less (a) necessary capital increases and (b) increases in working capital. Note: The above 2000 - 2004 estimates excluded the two Houston Cabos, ----- assumed a new lease on the Vestal property, excluded future EPA expenditures of approximately $2.0 million to be spent in 2000 and 2001 (see also page 20) and do not reflect opening new concepts, reconcepting of Cabo Fort Worth or River Ranch project. The estimates also excluded a special charge that will probably occur in late 2000, of approximately $700,000 - 800,000 for legal, financial advisory, accounting and other related fees, which must be paid regardless of whether or not the Transaction is approved. The following table shows the results from our analysis based on the preceding projected cash flows, which projects BFX remaining as a public company on an "as-is" basis (e.g., does not reflect the opening of new concepts). 12
(In 000's) Fair Market Value ---------------------- BFX's Bar, Restaurants and Hotel (1) $ 6,424 Cash and Equivalents (as of 3/31/00) (2) 2,512 Income Tax Refund Due (as of 3/31/00) (3) 698 Cash From Sale of Houston Cabos 3,500 Total Assets $ 13,134 EPA Superfund Site Liability (net of possible lease revenues or possible $3,000 - 5,000 value of the building) Other Liabilities(4) 1,819 ------------------------ Total Liabilities (as of 3/31/00) $4,819 - 6,819 Fair Market Value ("FMV") of BFX Equity $6,315 - 8,315 Shares Outstanding (as of 3/31/00) 3,964 ------------------------ FMV Per Share (before considering stock options) $1.59 - 2.10 - -----------------------------------------------------------------------------------------------------
(1) Excludes Houston Cabos. (2) 3/31/00 book value. (3) Cash was received by BFX for this tax refund on 6/1/00. (4) 3/31/00 book value of accounts payable ($592,000), accrued liabilities ($710,000) and income tax liabilities ($517,000). This range of $1.59 - 2.10 is below the previous range of $1.82 -2.59 and, in our opinion, is not as representative of how an actual buyer would evaluate BFX. A buyer would, for example, consider potential savings (e.g., $300,000 - 400,000 per year) via not being a public company. 13 4. Valuation of Cat's Meow ----------------------- Cat's Meow is a bar (not a restaurant) located on Bourbon Street in the French Quarter of New Orleans in a leased facility. The bar was opened in 1988 and acquired by the Company in 1994. Cat's Meow has been very successful for the Company; but, according to management, expansion of this concept would be difficult. According to Management, Cat's Meow revenues are 100% from sales of alcoholic beverages, which is a negative in attracting potential buyers of the operation. People who buy restaurants may not be interested in a bar facility. Buyers of both restaurants and bars worry about their facility suddenly declining in popularity. A bar facility like Cat's Meow attracts numerous claims and lawsuits, and most buyers, we understand, are reluctant to pay 100% cash for an acquisition. A cash buyer would, for some or all of these reasons, insist on a low multiple of normal EBITDA (e.g., 2.5 - 3.5x). The following table, provided by management at SMH's request, shows historical and projected revenues, EBITDA and EBIT for Cat's Meow from 1997 to 2004. We noted that EBITDA was close to "Free Cash Flow" because necessary capital expenditures and increases in working capital were expected to be small amounts in 2000 - 2004. 14
Fiscal years ending 9/30: (in 000's) 1997 1998 1999 2000E (1) 2001E 2002E 2003E 2004E ---------- --------- --------- ----------- ---------- ----------- ---------- ---------- Revenue $3,508 3,652 4,327 4,476 4,320 4,370 4,420 4,470 EBITDA 810 1,146 1,485 1,681 1,450 1,475 1,500 1,525 EBIT NA NA NA 1,634 1,410 1,435 1,460 1,485 Pre-tax Free Cash Flow 1,591 1,345 1,355 1,565 1,375 - -------------------------------------------------------------------------------------------------------------------------
(1) Based on 9 months ended 6/30/00 and estimates for the fourth quarter. Note: Cat's Meow will have a record year in 2000 (due partly to Sugar Bowl ---- and millennium) which, depending on weather and special events, likely will not be duplicated in 2001. DCF Analysis We believe a buyer would conduct a DCF analysis to arrive at a cash price for Cat's Meow. We began with Management's projections for this bar facility. We felt an appropriate pre-tax discount rate was 35% because the bar business is very risky (e.g., lawsuits, fickle customers, etc.) and buyers would demand higher returns. We also used the present value of an amount equal to four times 2004 EBITDA for the terminal value. Based on these parameters, we arrived at a mid-point fair market value for Cat's Meow of $4.5 million (see also Exhibit II for details of calculations). This value is 3.0 times 1999 fiscal EBITDA of $1.5 million, which appears to be a reasonable multiple. SMH believes a buyer might also value Cat's Meow by multiplying its Normal EBITDA (i.e., approximate average of 1999 actual and 2000 estimates) of $1.5 million by 2.5 to 3.5x. This gives a value range of $3.8 - 5.3 million. We believe that a buyer of Cat's Meow would consider both calculations and ---- that a reasonable overall range would be $3.8 - 5.3 million. ------------------ 15 SMH noted that Cat's Meow has approximately nine years left on its lease with no renewals. Management is working diligently on an extension and believes there is a good chance for renewal. However, if the lease is not extended on current lease terms, Cat's Meow's market value would be less than if the lease was extended. 5. Valuation of Lucile's --------------------- Over the years, Lucile's has produced consistent cash flows for the Company, but management believes there is not much room for growth or expansion of this type of restaurant concept. SMH believes buyers might discount the value of Lucile's because it is a single unit restaurant with limited upside. The following table, provided by management at SMH's request, shows historical and projected revenues, EBITDA and EBIT for Lucile's from 1997 to 2004. We noted that EBITDA was close to "Free Cash Flow" because necessary capital expenditures and changes in working capital were expected to be immaterial in 2000 - 2004.
Fiscal years ending 9/30: (in 000's) 1997 1998 1999 2000E (1) 2001E 2002E 2003E 2004E ---------- --------- --------- ----------- ---------- ----------- ---------- ------------ Revenue $2,298 2,293 2,215 2,183 2,200 2,250 2,300 2,350 EBITDA 202 211 188 170 175 180 185 190 EBIT NA NA NA 110 115 120 125 130 Pre-tax Free Cash Flow 155 155 155 155 155 - -------------------------------------------------------------------------------------------------------------------------
(1) Based on 9 months ended 6/30/00 and estimates for the fourth quarter. DCF Analysis We believe a buyer of Lucile's would conduct a DCF analysis to arrive at a fair market value for Lucile's. We began with Management's projections for the restaurant. We felt an appropriate pre-tax discount rate was 25% (because the 16 restaurant business is risky and buyers would demand higher returns) and used the present value of an amount equal to five times 2004 EBITDA for the terminal value. Based on these parameters, we arrived at an implied fair market value for Lucile's of $0.7 million (see also Exhibit II for details ------------ of calculations). This value is 4.3 times estimated 2000 EBITDA of $170,000, which appears to be a reasonable multiple. 6. Valuation of Stockyards Hotel and H3 Ranch Restaurant ----------------------------------------------------- BFX's Stockyards Hotel and H3 Ranch restaurant are a single profit center and a combined operation. Revenue is over 60% food and beverage, which is significantly higher than traditional hotels, where room revenue makes up the majority. Management believes buyers of hotels might see this as a negative characteristic (because they are not very interested in restaurants). Similarly, buyers of restaurants might view the hotel as a negative characteristic (because they are not very interested in hotels). The hotel has 52 rooms and was originally built in 1907. SMH noted that John Hancock Real Estate Finance, Inc. ("John Hancock") submitted a $2.2 million mortgage loan proposal on 7/26/00 to Management based on John Hancock's valuation for the hotel and restaurant of $3.7 million. According to Management, John Hancock does a lot of hotel financing and told BFX that they ascribed a lower than normal value to the Stockyards Hotel because of its unusually high food and beverage revenue as a percentage of total revenue. 17 The following table, provided by Management at SMH's request, shows historical and projected revenues, EBITDA and EBIT for Stockyards Hotel and H3 Ranch Restaurant from 1997 to 2004.
Fiscal years ending 9/30: (in 000's) 1997 1998 1999 2000E (1) 2001E 2002E 2003E 2004E ---------- --------- --------- ------------ ---------- ---------- ---------- ----------- Revenue $2,054 1,810 4,346 4,600 4,650 4,700 4,750 4,800 EBITDA(1) 16 27 509 738 756 772 790 808 EBIT NA NA 29 258 275 292 310 328 Pre-tax Free Cash Flow 663 656 647 640 633 - ------------------------------------------------------------------------------------------------------------------------
(1) Based on 9 months ended 6/30/00 and estimates for the fourth quarter. (2) The hotel had limited restaurant operations for 10 months of 1997, and no restaurant operations for 11 months of 1998. Many of the improvements and extraordinary repairs made to the hotel were expensed in 1997 and 1998 and -------- are estimated by management to have been approximately $200,000 - $250,000 each year in 1997 and 1998. 1998 expenses also included pre-opening costs for H3 Ranch of approximately $650,000. DCF Analysis We believe a buyer of the Stockyard Hotel and H3 Restaurant would conduct a DCF analysis to arrive at a fair market value for the hotel and restaurant. We began with Management's income statement projections to conduct the analysis. We felt an appropriate pre-tax discount rate was 25% (because the restaurant business is risky and buyers would demand higher returns than they would for a normal hotel) and used an amount equal to the present value of five times 2004 EBITDA for the terminal value. Based on these parameters, we arrived at an implied fair market value for the Stockyards Hotel and H3 Restaurant of $3.1 million (see also Exhibit II for details of ------------ calculations). This value is 4.2 times estimated fiscal 2000 EBITDA of $738,000, which appears to be a reasonable multiple. 18 7. Valuation of Cabo Facilities ---------------------------- BFX currently owns two Cabo facilities in Houston, Texas and one in Fort Worth, Texas. On 8/4/00, BFX announced that after months of negotiations, the Company has reached agreement to sell its Cabo concept, including the two Houston Cabo restaurants for $3.5 million in cash to an investor group ------------ headed by Enron Corporation. This represents 5.0 times estimated EBITDA for 2000 of $697,000. The sale is expected to close the third week in August, 2000, and Management considers the probability of closing to be 90 - 95%. BFX has also made limited efforts to sell the Fort Worth facility. Currently, the Fort Worth location is losing money (i.e., has negative free cash flow and close to a breakeven level of cash flow from operations), and Management expects this lack of profitability to continue in the future. Thus far, there have not been any offers to buy this facility, and Management believes that its fair market value is approximately zero. To become viable, the Fort Worth facility would have to be substantially refurbished, and its value would then probably be no more than equal to the additional capital invested. Management believes a refurbishment could cost approximately $600,000 - 700,000. Based on the factors cited above, we estimated the fair market value for the Cabo operations at $3.5 million, the pending price in cash for the Houston Cabo restaurants. 19 8. Valuation of EPA Liability -------------------------- Background In 1992, the United States EPA issued a Record of Decision ("ROD") with respect to the Company's Superfund Site in Vestal, New York. The ROD required the Company to construct a water treatment facility at the site and to pump contaminated ground water from bedrock and overburden extraction wells for 15 to 30 years until remediation goals were met. Due to concerns about the correctness of the remedy provided for in the ROD, the Company performed additional fieldwork and, in 1995, the EPA agreed that the remedy needed to be modified. After additional discussions with the EPA, a revised ROD was issued in July 1997. The revised ROD eliminates certain provisions of the original ROD and primarily includes the removal and treatment of contaminated soil. In June 1998, the Company signed a Consent Decree with the EPA in regard to the implementation of the agreed- upon remedy and on-going monitoring of the property. In addition, the Company reimbursed the EPA $550,000 for monies spent by the EPA at the Company's Superfund Site over a ten-year period from October 1987 through April 1997. The Company has spent approximately $3.0 million from 1987 to present on consulting fees, testing and other expenses relating to the Superfund site. Current Status As of 3/31/00, BFX had total accrued liabilities of $2.7 million on its balance sheet for remediation costs of the Superfund site. BFX will spend approximately $2.0 million during fiscal year 2000 and 2001, and this $2.0 million clean-up will begin in September 2000. The EPA estimates that -------------- ongoing operating and maintenance will take 15 - 30 years. Depending on the results of testing during clean-up, it is possible that the liability could be significantly greater than the accrued amount of $2.7 million. Management believes that BFX's out-of-pocket expenditures for the Superfund site from 3/31/00 through the next 10 - 30 years may be approximately $2.7 - 5.4 million. 20 The Company is currently leasing this property and receives approximately $410,000 a year in net revenue. The lease expires on 2/28/01, and the current tenant has notified BFX that they do not plan to renew the lease, but may be interested in buying the building on the property. However, there have not been any negotiations thus far. The current tenant would not, however, assume the EPA liability in buying the building on the property. If the current tenant does not renew the lease or purchase the building, BFX will have to pay approximately $150,000 a year to cover taxes, insurance and maintenance, unless the Company is able to secure a new tenant. Additionally, management estimates that BFX needs to spend $250,000 - 500,000 for renovations before bringing in a new tenant. SMH believes that insurance could be purchased for a portion of this EPA liability, but Management has not investigated such a transaction. SMH understands that such insurance would only cover a specific, limited amount of risk above the expected total costs of the site clean-up, testing and remediation (e.g., $6 - 10 million of coverage above expected total costs of $3 - 4 million, or 2.0 - 2.5 times known clean-up costs). The cost of the premium would be approximately 5 - 15% of the coverage (e.g., $300,000 - $1.5 million). SMH did not ascribe any fair market value to this possibility because reliable information on the cost and availability of such insurance would depend on an engineering study by an insurance underwriter of the expected total costs of the clean-up and no such study could be completed quickly. A buyer of BFX would, among other things, review information such as the following press release dated July 26, 2000. "July 26, 2000 - Robert H. McLean, Chief Executive Officer of BFX Hospitality Group, Inc. (AMEX: BFX - news), announced today that the Company has contracted with Midwest Soil Remediation, Inc. and Ground/Water Treatment & Technology, Inc. to perform the necessary work to clean the contaminated soil and repair the water well system at its Vestal, New York Superfund Site. The soil will be removed and treated on-site and the water well system repaired in order to become fully functional. 21 In making the announcement, Mr. McLean stated, "The work is scheduled to begin in early September and should take approximately six months to complete pending weather and other factors. This liability of the Company for the clean up is based upon a June 1998 Consent Decree and related Record of Decision the Company signed with the United States Government." Mr. McLean continued, "In June 1997 the Company accrued $3,000,000 representing the estimated cost of the clean up of the contaminated soil and the ongoing operating and maintenance of the water well system. This estimate is based upon the Record of Decision and related to Scope of Work. Since that date $447,000 has been spent thus leaving $2,543,000 accrued at June 30, 2000. The Company estimates that over the next 12 months it will spend between $1,600,000 and $2,000,000 in completing the clean up of the contaminated soil and repairing the water well system as well as payment to the EPA for its expenses." Mr. McLean continued, "The Company is hopeful that additional contaminated soil is not discovered in which case it would be liable for the additional cleanup costs. After this work the Company is obligated to operate and maintain the water well system and perform testing until the level of contaminants in the groundwater has reached levels as prescribed by the EPA. While the EPA estimated it will take 15 - 30 years for the contaminants in the groundwater to reach prescribed levels, the Company is hopeful it will take a shorter period." Mr. McLean continued, "In June 2000 the Company was notified that its environmental consulting firm, McLaren/Hart, had filed for Chapter 11 bankruptcy protection. In response to this situation the Company has retained Vertex Engineering Services, Inc. as its environmental consulting firm." Mr. McLean concluded, "Although the Company did not cause the contamination at the Vestal, New York site, it was responsible for the clean up due to its 1982 purchase of the property. The property has been under EPA investigation since 1986 and was designated a Superfund Site in 1987." BFX's EPA Superfund site liability has an uncertain total and no legal limit because the total amount of soil to be remediated has not been determined. A buyer of BFX would be very concerned about this liability and would be conservative in estimating its value. A buyer would realize that $1.2 - 1.6 million will probably be spent by BFX from 3/31/00 through 12/31/00 plus another $0.4 - 0.6 million during 2001. Thereafter, BFX will be obligated to operate and maintain the water well system and perform necessary testing to the water as prescribed by the EPA until the contaminants in the water reach levels as prescribed by the EPA, which the EPA estimates will take 15 - 30 years. BFX hopes it will take a shorter period. The annual cost of the ongoing operating and maintenance and testing of the water well system is estimated by the EPA to be $114,000 annually with gradual reductions in this cost over a period of time. The accrual of $3.0 million made in 1997 assumed approximately 10 years. Should the period of time extend to 20 years, approximately $1.0 million more will be 22 required to fund the Superfund site (a total of $4 million). Should the period of time extend to 30 years, approximately $1.0 million more will be required to fund the Superfund site (a total of $5 million). Due to the uncertainty of (a) future cash flows from leasing the facility, (b) possible insurance coverage and (c) future liabilities attributed to remediation of the Superfund site, SMH believes the fair market value of the liability (net of possible lease or other revenues related to the property) is approximately $3 - 5 million. -------------- 9. On July 27, 2000, BFX announced plans for the Transaction in a press release. Thus far, no potential buyers have responded to this public disclosure with any calls to BFX expressing any potential interest in making a better offer than the $2.25 per share being offered. 10. BFX will no longer be a public company. -------------------------------------- The Transaction proposes to take BFX private by acquiring all of its outstanding common shares. BFX's Management believes that BFX spends approximately $300,000 - 400,000 a year operating as a public company. The Transaction would eliminate a public market for the common shares and BFX's requirement to file information with the Securities and Exchange Commission on a regular basis. Because BFX's stock price is thinly-traded and the Company has a small market capitalization, there appear to be few, if any, advantages of remaining a public company. One potential advantage of being a public company is the accessibility to public capital. However, since BFX is very small and has an uncertain Superfund liability, raising capital has been very difficult and its public company status has not helped in raising capital. 23 11. Plans to Finance the "Going Private" Transaction ------------------------------------------------ Management is currently talking to (1) a New Orleans bank, (2) Amresco, Inc. and (3) John Hancock Real Estate Finance, Inc. about potential loans. Management plans to raise approximately $7.2 million and use cash from the ------------ Company (including existing cash in BFX plus $3.5 million from the pending sale of the downtown Houston Cabo restaurant) to fund the remaining $1.8 million. 12. Management's Liquidation Analysis --------------------------------- The following table shows orderly liquidation values assigned to each facility, prepared and provided by Management to SMH in July 2000. Management assumed that the time to sell the various businesses would take one year. The amounts used to estimate the proceeds from the sale of the various subsidiaries were based upon cash purchase prices, reasonable multiples of cash flow based upon the types of businesses being sold and information furnished to BFX by outside disinterested parties.
(In 000s) Estimated Business Cash Proceeds - ------------------------------------------------------------- -------------------- Cat's Meow $ 3,430 Lucile's 500 Stockyard and H3 Restaurant 3,500 Cabo - Shepherd, Houston (2) 0 Cabo - Fort Worth 0 Cabo - Downtown Houston (1) 3,500 BFX - corporate office assets 100 ---------------------- $11,030 - -----------------------------------------------------------------------------------
(1) In process of sale for $3.5 million. (2) Included in the sale of the downtown Houston facility. 24 SMH notes that Management's value for Cat's Meow is significantly different than ours. Management believes that a buyer might pay approximately 2.0 - 2.5 times normal EBITDA for the facility, based on talks with bar owners. This is due, in part to the fact that bar concepts do not traditionally have the longevity generally found in other types of businesses. SMH's valuation was based on a DCF analysis and 2.5 - 3.5 times normal EBITDA (see pages 14 - 15). If the fair market value is actually lower than SMH's estimate, the Transaction is more fair to the public shareholders. We believe that liquidating BFX or selling each BFX facility could involve a serious risk that some key employees would be unhappy about having a new owner and would leave before a sale was completed, thus potentially hurting the value of the facilities in which they worked. In addition, if the BFX Board viewed a liquidation as a "change of control," payments of approximately $1.0 million would be triggered under various employment agreements with BFX employees. We are advised these payments are not due in the Transaction. We also noted that any liquidation would involve substantial risks and uncertainties. Among other things, SMH understands that a liquidating trust would have to be established for the EPA liability and would be in existence for at least 5 - 10 years. 13. We have been told that the Transaction will be legally approved if owners of more than 50% of the total outstanding shares vote in favor of the going private Transaction. Management and the Board represent owners of approximately 26% of the total shares. 25 14. Comparable Company Analysis --------------------------- We did not consider ratios of somewhat comparable public companies to be ------------------------------------------------------------------------ important and would not have expected real cash buyers of bars, restaurants --------- or BFX to have given any significant weight to such valuation methodology. Nevertheless, we reviewed the following data. Based on publicly available information, we compared multiples of certain financial criteria (based on 7/28/00 market prices) for somewhat comparable companies to BFX, as shown in Exhibit III. We reviewed seven somewhat comparable public companies and noted three key ratios. The three key valuation multiples used in this analysis were: (1) Enterprise Value (i.e., market value of equity plus total debt) to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), (2) Enterprise Value to Earnings Before Interest and Taxes ("EBIT") and (3) Enterprise Value to Revenues. In addition to individual company multiples, we calculated the mean (i.e., average), adjusted mean (i.e., average excluding highest and lowest multiples) and median of each ratio. We did not consider multiples based on earnings per share ("EPS") because most of the seven comparable companies had negative EPS, and therefore the valuation would not have been meaningful. Key Comparable Company Multiples --------------------------------
High Low Adjusted Mean ------------ ----------- -------------------- Enterprise Value to: EBITDA 206.1x 4.5x 7.5x EBIT 62.8x 7.0x 15.8x Revenues 0.9x 0.2x 0.5x - -----------------------------------------------------------------------------------------------------
EBITDA multiples for the seven guideline companies ranged from 4.5x to 206.1x on 7/28/00. The adjusted mean multiple for the guideline companies was 7.5x. We multiplied 7.5 times BFX's fiscal 1999 EBITDA of $716,000, which resulted in an implied enterprise value of $5,370,000. (Note: Our ---------- conclusion on page 7 is that 100% of BFX is worth $7.5 - 11.0 million.) ------------------- 26 The next multiple was Enterprise Value/EBIT. As shown in Exhibit III, EBIT multiples for the seven public comparables ranged from 7.0x to 62.8x. The adjusted mean multiple for the guideline companies was 15.8x. We excluded this calculation because the Company's negative fiscal 1999 EBIT would produce a negative enterprise value. The next multiple was the ratio of Enterprise Value to 1999 Revenues. As in the case of EBITDA and EBIT multiples, we calculated an adjusted mean multiple for the guideline companies. The guideline public companies had a range of enterprise value/revenue ratios from 0.2x to 0.9x. The adjusted mean revenue multiple for the seven guideline public companies was 0.5x. We then multiplied 0.5x by BFX's fiscal 1999 Revenue of $17,212,000, which resulted in an implied enterprise value of $8,606,000. ---------- We then averaged the two enterprise values cited above for BFX to arrive at an average enterprise value of $6,988,000. In order to arrive at an equity value, we must subtract debt and add excess cash. As of 3/31/00, BFX had $3,210,000 in cash (including $689,000 of an income tax refund received 6/1/00) and $4,552,000 in total debt. This gives BFX an implied equity value of $5,646,000 (i.e., $6,988,000 minus $4,552,000 plus $3,210,000) or $1.42 per share as of 7/28/00. ----------------------------- 15. Comparable Transactions and Premiums ------------------------------------- We considered several transactions in the restaurant industry, but none were comparable enough to the Transaction to make our analysis of such transactions more important than our DCF analyses in this logic memo. The following table summarizes our research on somewhat comparable transactions and premiums offered. Based on the average premium offered in these --------------------------------------------- transactions of 33.9%, ---------------------- 27 the premium BFX common shareholders will receive over the recent stock ---------------------------------------------------------------------- price appears to be fair. SHM also noted that the average total ------------------------- consideration to EBITDA multiple (as shown below) for these companies was 5.8x and Management is proposing to pay approximately 7.8 times 3/31/00 trailing twelve month EBITDA ($10.2 million divided by $1.3 million) for BFX. SMH noted that the $1.3 million excluded a $1.9 million asset write- down in 1999.
Target Acquirer Announced Premium (1) Total Consideration - ------------------------------ ------------------------- ------------- -------------- / EBITDA (2) ----------------------- Cucos, Inc. Jacksonville Restaurant 7/14/00 2.7% NA Roadhouse Grill, Inc. Management Group 5/3/00 50.4 7.7x Quality Dining, Inc. Investor Group 2/23/00 125.5 2.4 TCBY Enterprises Capricorn Investors Iii 2/10/00 63.8 9.5 Rainforest Cafe, Inc. Landry's Seafood 2/9/00 27.9 5.6 O'Charley, Inc. Management Group 1/26/00 NA NA Rainforest Cafe, Inc. Lakes Gaming, Inc. 12/22/99 15.1 4.8 Avado Brands, Inc. Management Group 11/10/99 36.0 1.8 Quiznos Corp. Schaden Acquisition 6/23/99 15.2 7.4 Rock Bottom Restaurants RB Capital, Inc. 3/19/99 18.3 3.9 Rallys, Inc. Checkers Drive-In 1/29/99 16.2 4.7 Logan's Roadhouse, Inc. CBRL Group, Inc. 12/11/98 17.6 10.8 Back Bay Restaurant Group SRC Holdings 12/3/98 17.9 5.1 ----- ---- Average 33.9% 5.8x - ----------------------------------------------------------------------------------------------------------------
(1) The amount by which the offer price is above the 20-day (preceding announcement) average stock price of the target. (2) SMH used total consideration paid divided by EBITDA from the trailing twelve months prior to announcement. 28 Description of Transactions --------------------------- Cucos, Inc. On July 14, 2000, Jacksonville Restaurant Acquisition Corp. announced that it has commenced a cash tender offer to acquire up to 1.2 million of the outstanding shares of common stock of Cucos, Inc. (OTC: CUCO) for $1 per share. If the tender offer is closed, the Jacksonville group will beneficially own approximately 52% of the voting power of Cucos. Roadhouse Grill, Inc. On May 3, 2000, Roadhouse Grill Inc., the owner and operator of Roadhouse Restaurants in the southeastern U.S., said its management offered to buy the company for about $100 million in cash and assumed debt. Management is proposing to pay $7 a share and assume about $30 million in debt. The proposal formalizes plans reported three months before under which the Pompano Beach, Florida-based company would buy back all of its outstanding shares and become private. Quality Dining, Inc. On February 23, 2000, a major shareholder at Quality Dining, Inc. offered to acquire the company for $5 per share in cash. The offer, extended by David Schostack and NBO LLC in a filing with the SEC, values the company at $62.3 million. The bid is more than double the closing price of 2 1/8 of the previous day. TCBY Enterprises, Inc. On February 10, 2000, TCBY Enterprises, Inc., owner of the TCBY chain of frozen-yogurt shops, announced that it has agreed to be acquired by Capricorn Investors III LP for approximately $138 million. TCBY shareholders received $6.00 a share in cash. Capricorn Investors III LP acquired 22.8 million shares and assumed $1.3 million in debt. 29 Rainforest Cafe, Inc. On February 9, 2000, Landry's Seafood Restaurants, Inc. announced it agreed to acquire Rainforest Cafe, Inc. for $125 million in stock and cash to add Rainforest's chain of theme restaurants. Under the agreement, 65% of the purchase price will be in Landry's stock and 35% will be in cash. The price values Rainforest shares at $5.54 each, Landry's said, 27% above Rainforest's closing price that day. O'Charley, Inc. On January 26, 2000, O'Charley's Inc. rejected a proposal to take the company private through a management-led leveraged buyout. O'Charley's board believes that the execution of its business plan by its current management team as a public company is in the best long-term interests of the shareholders. Rainforest Cafe, Inc. On December 22, 1999, Lakes Gaming Inc. said it would acquire Rainforest Cafe Inc. for $108 million in stock and run it as a subsidiary. Rainforest Cafe shareholders would receive 0.55 shares of Lakes Gaming common stock for every share they own, which values Rainforest stock at $4.54 a share, a 21% premium over that day's closing price. In January of 2000, Rainforest Cafe canceled plans to be bought by Lakes Gaming Inc. after it received an unsolicited takeover bid for $125 million from Landry's Seafood Restaurants, Inc. Rainforest would have to pay Lakes Gaming a $2 million termination fee if the acquisition by Landry's is completed. Avado Brands, Inc. On November 10, 1999, an investment group led by Avado Brands, Inc. Chairman Tom DuPree proposed buying the operator of Don Pablo's Mexican Kitchen and other restaurants in a transaction that would pay shareholders $7.25 in cash for each share. The $151 million offer would value Avado shares at a 76% premium to their close on the previous day. Under the management-led 30 buyout, Avado would redeem the shares not held by DuPree and other members of the group. Avado would then merge with a corporation formed by the investors and buy back debt. Quiznos Corp. On June 23, 1999, The Quizno's Corporation (Nasdaq:QUIZ) announced that it received a revised proposal from The Schaden Acquisition Company for the acquisition of all of Quizno's outstanding shares. The revised price was $8.00 per share, and would be payable in cash. On August 10, 1999, Quizno's Corp. said the offer was withdrawn after an agreement couldn't be reached with the company's board. Rock Bottom Restaurants, Inc. On August 11, 1999, Rock Bottom Restaurants, Inc. announced that its $80.6 million sale was completed to a closely-held group led by its top executive, taking the company private. RB Capital, Inc., which is led by Rock Bottom Chairman and Chief Executive Frank Day, paid $10 a share in cash for each Rock Bottom common share. RB Capital owned about 28% of the 8.06 million shares outstanding as of December 27, 1998. Rallys, Inc. On January 29, 1999, Checkers Drive-In Restaurants Inc. agreed to buy Rally's Hamburgers Inc. for about $25.5 million in stock. Checkers will exchange 1.99 shares for each share of Rally's, which has 29.3 million shares outstanding. After the acquisition, Checkers plans a 1-for-12 reverse stock split to reduce the number of its shares outstanding. Logan's Roadhouse, Inc. On December 11, 1998, CBRL Group Inc. agreed to acquire restaurant chain Logan's Roadhouse, Inc. for $179 million in cash to expand in a different demographic market. The $24.00 a-share offer is a 14% premium to Logan's 31 closing price of 21 1/16 on the previous day. CBRL Group will become Cracker Barrel's parent when it reorganizes into a holding company December 31, 1998. The purchase was be funded by a combination of cash and an increase in CBRL's bank credit. Cash on hand funded about $30 million of the price. Back Bay Restaurant Group On December 3, 1998, Back Bay Inc. (Nasdaq: PAPA) and its Chairman, President and CEO, Charles F. Sarkis, announced that they entered into an Agreement and Plan of Merger, pursuant to which SRC Holdings, Inc., a new corporation formed by Mr. Sarkis, to acquire Back Bay. Under the terms of the merger agreement, SRC Holdings would be merged with and into Back Bay and each outstanding public share of Back Bay common stock would be converted into the right to receive $10.25 per share in cash. Back Bay's existing indebtedness of approximately $4 million would be refinanced as part of the merger. 16. Hospitality and Restaurant Industry Conditions ---------------------------------------------- As BFX has noted in its public documents, the hospitality and restaurant industry is intensely competitive with respect to price, service, location and food quality, and there are many well-established competitors with substantially greater financial and other resources than BFX. Some of the Company's competitors have been in existence for a substantially longer period than the Company and may be better established in the markets where the Company's restaurants or lodging establishments will or may be located. The hospitality and restaurant business is often affected by changes in consumer tastes, national, regional or local economic conditions, demographic trends, traffic patterns and the type, number and location of competing restaurants or lodging establishments. In addition, factors such as inflation, increased food, labor and employee benefit costs and the availability of experienced management and hourly employees may 32 also adversely affect the hospitality industry in general and the Company in particular. 17. General Economic Conditions --------------------------- We noted the following quote from a July 25, 2000 article titled "Fed's Greenspan Says Evidence Shows Economy Slowing," taken from the Bloomberg database. "In the Fed's latest economic forecast, submitted by Greenspan last week, central bankers predicted the economy would grow by 4 percent to 4.5 percent this year. The Fed also expects the rate of inflation for personal consumption expenditures - an inflation measure favored by Greenspan - will rise between 2.5 percent and 2.75 percent, mainly from higher oil prices. Unemployment will stay close to its current level of 4 percent, the Fed said. In 2001, growth is expected to "moderate" to 3.25 percent to 3.75 percent, with unemployment likely to remain near its current level. The inflation rate will be 2 percent to 2.5 percent, the Fed said." On 8/1/00, the Dow Jones Industrial Average closed at 10,607, Standard and Poors 500 closed at 1,438 and the Nasdaq closed at 3,686. 18. Our review included audited financial statements of BFX for the fiscal year ended 9/30/99, audited by Price Waterhouse Coopers LLP. The financial statements were found by the auditor to present fairly, in all material aspects, the results of operations and cash flows for the Company. As noted at the outset of this memo, we have assumed the accuracy and completeness of all financial and other information provided to us. 33 BFX Hospitality Group, Inc. ================================================================================ Balance Sheets As of March 31, September 30, 2000 1999 ------------ ------------- ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 791,000 $ 3,036,000 Short-term investments 1,721,000 - Accounts receivable 277,000 286,000 Note receivable 43,000 - Inventories 214,000 208,000 Income tax receivable 698,000 698,000 Prepaid and other current assets 210,000 98,000 ----------- ----------- Total current assets 3,954,000 4,326,000 ----------- ----------- PROPERTY, PLANT, AND EQUIPMENT (at cost): Land, building, and improvements 15,510,000 15,337,000 Less: Accumulated depreciation and amortization (5,425,000) (4,930,000) ----------- ----------- Net property, plant, and equipment 10,085,000 10,407,000 GOODWILL (net of amortization of $2,059,000 and $1,929,000 respectively) 2,226,000 2,355,000 DEFERRED INCOME TAXES 1,824,000 1,824,000 OTHER ASSETS 103,000 81,000 ----------- ----------- Total assets $18,192,000 $18,993,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Current portion of long-term debt $ - $ 138,000 Accounts payable 592,000 418,000 Accrued liabilities 710,000 1,012,000 Accrued EPA costs 1,200,000 1,200,000 Income taxes 517,000 334,000 ----------- ----------- Total current liabilities 3,019,000 3,102,000 LONG-TERM DEBT - 937,000 ACCRUED EPA COSTS 1,533,000 1,570,000 STOCKHOLDERS EQUITY: 13,640,000 13,384,000 ----------- ----------- Total liabilities and shareholders' equity $18,192,000 $18,993,000 =========== =========== BFX Hospitality Group, Inc. ================================================================================ Statements of Operations For the Six Months Ended March 31, 2000 1999 ----------------- --------------- NET REVENUES $ 8,585,000 $ 8,498,000 COSTS AND EXPENSES: Cost of goods sold (exclusive of depreciation) 1,995,000 2,093,000 Selling, general, and administrative 5,466,000 5,866,000 Depreciation and amortization 623,000 779,000 ----------- ----------- Total costs and expenses 8,084,000 8,738,000 ----------- ----------- Net (loss) before other income and income taxes 501,000 (240,000) ----------- ----------- OTHER INCOME (EXPENSE:) Interest income 54,000 70,000 Interest expense (21,000) (48,000) ----------- ----------- 33,000 22,000 ----------- ----------- Income (loss) before income taxes 534,000 (218,000) Income tax expense (benefit) 233,000 (38,000) ----------- ----------- NET (LOSS) $301,000 ($180,000) =========== =========== BFX Hospitality Group, Inc. - -------------------------------------------------------------------------------- Statements of Operations
For the Years Ended September 30, ------------------------------------------------------------- 1999 1998 1997 -------------- -------------- ------------- NET REVENUES $17,212,000 $11,513,000 $10,518,000 COSTS AND EXPENSES: Costs of goods sold (exclusive of depreciation) 4,185,000 2,698,000 2,277,000 Selling, general, and administrative 12,311,000 11,974,000 14,483,000 Write-down of long-lived assets 1,854,000 - - Expenses associated with revised EPA remedy - - 4,417,000 Depreciation and amortization 1,590,000 1,150,000 1,030,000 -------------- -------------- ------------- Total costs and expenses 19,940,000 15,822,000 22,207,000 -------------- -------------- ------------- Net (loss) before other income and income taxes (2,728,000) (4,309,000) (11,689,000) -------------- -------------- ------------- OTHER INCOME (EXPENSE): Interest income 138,000 632,000 485,000 Interest expense (92,000) (120,000) (193,000) -------------- -------------- ------------- 46,000 512,000 292,000 -------------- -------------- ------------- Income (loss) before income taxes (2,682,000) (3,797,000) (11,397,000) Income tax expense (benefit) 897,000 1,288,000 3,543,000 -------------- -------------- ------------- Net income (loss) from continuing operations (1,785,000) (2,509,000) (7,854,000) Income from discontinued operations - - 14,512,000 -------------- -------------- ------------- NET (LOSS) ($1,785,000) ($2,509,000) $6,658,000 -------------- -------------- -------------
Cat's Meow ================================================================================ Discounted Cash Flow Analysis (in thousands) EBITDA Projections ================================================================================ Year Ending December 31, --------------------------------------------- 2000E 2001E 2002E 2003E 2004E ------- ------- ------- ------- ------- EDITDA $ 1,681 1,450 1,475 1,500 1,525 EBIT 1,634 1,410 1,435 1,460 1,485 Add: Depr. & Amort. 47 40 40 40 40 Less: Necessary CapEx 90 105 120 135 150 ------- ------- ------- ------- ------- Pre-Tax Free Cash Flow (A) $ 1,591 1,345 1,355 1,365 1,375 ======= ======= ======= ======= ======= (A) Changes in working capital were estimated to be immaterial and were excluded from the calculation. - -------------------------------------------------------------------------------- Discounted Cash Flow ================================================================================ Terminal Present Value of: Present ---------------- Discount EBITDA Cash Terminal Enterprise Less: Plus Value of Rate Multiple Flows Value Value Debt: Excess Cash Equity - -------- -------- ----- -------- ---------- ----- ----------- -------- 25.0% 4.0 x 3,837 1,999 5,836 0 0 5,836 30.0% 4.0 x 3,485 1,643 5,128 0 0 5,128 -------- 35.0% 4.0 x 3,185 1,325 4,510 0 0 $4,510 - -------------------------------------------------------------------------------- Lucile's - -------------------------------------------------------------------------------- Discounted Cash Flow Analysis (in thousands) EBITDA Projections
- -------------------------------------------------------------------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------------------------- 2000E 2001E 2002E 2003E 2004E -------------- ------------- ------------- ------------- ------------- EBITDA $170 175 180 185 190 EBIT 110 115 120 125 130 Add: Depr. & Amort. 60 60 60 60 60 Less: Necessary CapEx 15 20 25 30 35 -------------- ------------- ------------- ------------- ------------- Pre-Tax Free Cash Flow (A) $155 155 155 155 155 ============== ============= ============= ============= ============= (A) Same as previous page. - --------------------------------------------------------------------------------------------------------------------
Discounted Cash Flow
- ------------------------------------------------------------------------------------------------------------------------------- Terminal Present Value of: Present ------------------------- Discount EBITDA Cash Terminal Enterprise Less: Plus: Value of Rate Multiple Flows Value Value Debt Excess Cash Equity ----------- ---------- ----------- ----------- ------------ -------- ----------- -------- 20.0% 5.0x $464 382 845 0 0 845 -------- 25.0% 5.0x 417 311 728 0 0 $728 - -------------------------------------------------------------------------------------------------------------------------------
Stockyard and H3 - -------------------------------------------------------------------------------- Discounted Cash Flow Analysis (in thousands)
EBITDA Projections - ---------------------------------------------------------------------------------------------------------- Year Ending December 31, ------------------------------------------ 2000E 2001E 2002E 2003E 2004E ----- ----- ----- ----- ----- EBITDA $ 738 756 772 790 808 EBIT 258 275 292 310 328 Add: Depr. & Amort. 480 481 480 480 480 Less: Necessary CapEx 75 100 125 150 175 ----- ----- ----- ----- ----- Pre-Tax Free Cash Flow (A) $ 663 656 647 640 633 ===== ===== ===== ===== ===== (A) Same as previous page. - ---------------------------------------------------------------------------------------------------------- Discounted Cash Flow - ----------------------------------------------------------------------------------------------------------------------- Present Value of: Terminal ------------------------ Present Discount EBITDA Cash Terminal Enterprise Less: Plus: Value of Rate Multiple Flows Value Value Debt Excess Cash Equity - -------------- ---------- ------- --------- ------------ ---------- ------------- ----------- 20.0% 5.0x 1,946 1,624 3,569 0 0 3,569 ----------- 25.0% 5.0x 1,751 1,324 3,075 0 0 $3,075 - -----------------------------------------------------------------------------------------------------------------------
BFX remaining as a public company - -------------------------------------------------------------------------------- Discounted Cash Flow Analysis (in thousands) EBITDA Projections
- ----------------------------------------------------------------------------------------------- Year Ending December 31, ----------------------------------------------- 2000E 2001E 2002E 2003E 2004E -------- ------- ------- ------- ------- EBITDA/(A)/ $1,799 1,456 1,527 1,600 1,673 EBIT/(A)/ 765 403 475 548 731 Add: Depr. & Amort. 1,034 1,053 1,052 1,052 942 Less: Necessary CapEx 180 225 270 315 360 -------- ------- ------- ------- ------- Pre-Tax Free Cash Flow/(B)/ $1,619 1,231 1,257 1,285 1,313 ======== ======= ======= ======= ======= /(A)/ Excludes Houston Cabo restaurants. /(B)/ Same as previous page. - -----------------------------------------------------------------------------------------------
Discounted Cash Flow
- --------------------------------------------------------------------------------------------------- Present Value of: Terminal ------------------- Present Discount EBITDA Cash Terminal Enterprise Less: Plus: Value of Rate Multiple Flows Value Value Debt Excess Cash Equity ---------- ---------- -------- ---------- ------------ ------- ------------- ---------- 20.0% 5.0x 4,079 3,362 7,441 0 0 7,441 ---------- 25.0% 5.0x 3,683 2,741 6,424 0 0 $6,424 - ---------------------------------------------------------------------------------------------------
Note: The above 2000 - 2004 estimates excluded the two Houston Cabos, assumed a new lease on the Vestal property, excluded future EPA expenditures of approximately $2.0 million to be spent in 2000 and 2001 and do not reflect opening new concepts, reconcepting of Cabo Fort Worth or river Ranch project. The estimates also excluded a special charge that will probably occur in late 2000, of approximately $700,000 - 800,000 for legal, financial advisory, accounting and other related fees, which must be paid regardless of whether the Transaction is approved. BFX Hospitality Group, Inc. - -------------------------------------------------------------------------------- Comparables Analysis $ in millions except per share data
Cooker Grill Mexican Meritage Silver Total Ent. Morgan Foods Restaurant Concepts Restaurants Hospitality Diner Restaurant Company name Inc. Corp. Inc. Inc. Group Inc. Corp. Ticker MR CGR GRIL CASA MHG SLVR TENT Stock price at 7/28/00 $2.38 $2.50 $1.50 $3.88 $2.06 $0.91 $2.19 Fully-diluted shares outstanding 2.9 6.0 4.0 3.6 5.8 11.4 9.7 Market capitalization $7 $15 $6 $14 $12 $10 $21 Fiscal year end February December December December November December December LTM LTM LTM LTM LTM LTM LTM Period ended May00 Mar00 Mar00 Mar00 Mar00 Mar00 Mar00 ------- ------- ------- ------- ------ ------ ------- Selected operating data Net sales $75.5 $149.6 $39.5 $61.1 $31.1 $29.3 $55.2 Gross margins 16.6% 17.0% 11.9% 17.4% 13.8% 11.2% 21.4% EBITDA 7.6 14.2 1.3 5.1 2.2 0.0 6.8 EBITDA margin 10.1% 9.5% 3.4% 8.3% 7.2% 0.1% 12.3% Operating income 4.3 7.2 0.1 3.2 0.9 (1.5) 2.8 Operating margin 5.7% 4.8% 0.4% 5.3% 2.7% -5.0% 5.0% Interest expense 4.4 7.0 - 0.6 1.3 0.0 1.2 Net income (before extr.) ($0.3) ($4.5) ($0.4) $0.8 ($0.2) ($1.4) $0.9 Net margin -0.3% -3.0% -1.0% 1.3% -0.5% -4.8% 1.7% EPS before extra. (LTM) ($0.08) ($0.75) ($0.13) $0.23 ($0.04) ($0.11) $0.10 EPS (CFY) NA ($0.15) NA NA NA NA NA EPS (NFY) NA NA NA NA NA NA NA Selected balance sheet data Total cash $4.0 $2.3 $0.7 $0.4 $1.2 $1.8 $2.5 Total assets $61.8 $145.8 $12.4 $30.9 $25.8 $20.3 $40.5 Total debt $53.6 $87.8 $3.6 $9.1 $16.2 $0.3 $13.3 Total preferred $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Book value $0.5 $44.6 $3.7 $14.8 $5.6 $16.5 $22.8 Net Debt/Total capital (book) 91.7% 64.6% 39.5% 36.4% 68.7% 0.0% 30.0% Net Debt/Total capital (market) 81.9% 83.2% 30.2% 37.8% 53.3% 0.0% 31.4% Selected valuation multiples Enterprise value/Sales 0.7x 0.7x 0.2x 0.4x 0.9x 0.3x 0.6x Enterprise value/EBITDA 7.4x 7.1x 6.7x 4.5x 11.9x 206.1x 4.7x Enterprise value/Operating inc. 13.2x 13.9x 62.8x 7.0x 31.4x NM 11.5x Enterprise value/Total assets 0.9x 0.7x 0.7x 0.7x 1.0x 0.4x 0.8x Price/Book value 14.2x 0.3x 1.6x 0.9x 2.1x 0.6x 0.9x Price/Earnings (LTM) NM NM NM 16.8x NM NM 21.9x Price/Earnings (CFY) NM NM NM NM NM NM NM Price/Earnings (NFY) NM NM NM NM NM NM NM ---------------------------------------------------------------- High Low Mean Median Adj. Mean ---------------------------------------------------------------- Selected operating data Net sales $149.6 $29.3 $63.1 $55.2 $52.5 Gross margins 21.4% 11.2% 15.6% 16.6% 15.3% EBITDA 14.2 0.0 5.3 5.1 4.6 EBITDA margin 12.3% 0.1% 7.3% 8.3% 7.7% Operating income 7.2 (1.5) 2.4 2.8 2.3 Operating margin 5.7% -5.0% 2.7% 4.8% 3.6% Interest expense 7.0 0.0 2.4 1.2 1.9 Net income (before extr.) $0.9 ($4.5) ($0.7) ($0.3) ($0.3) Net margin 1.7% -4.8% -0.9% -0.5% -0.7% Net Debt/Total capital (book) 91.7% 0.0% 47.3% 39.5% 47.8% Net Debt/Total capital (market) 83.2% 0.0% 45.4% 37.8% 46.9% ---------------------------------------------------------------- High Low Mean Median Adj. Mean ---------------------------------------------------------------- Selected valuation multiples Enterprise value/Sales 0.9x 0.2x 0.5x 0.6x 0.5x Enterprise value/EBITDA 206.1x 4.5x 35.5x 7.1x 7.6x Enterprise value/Operating inc. 62.8x 7.0x 23.3x 13.6x 17.5x Enterprise value/Total assets 1.0x 0.4x 0.8x 0.7x 0.8x Price/Book value 14.2x 0.3x 3.0x 0.9x 1.2x Price/Earnings (LTM) 21.9x 16.8x 19.4x 19.4x NM Price/Earnings (CFY) 0.0x 0.0x NM NM 0.0x Price/Earnings (NFY) 0.0x 0.0x NM NM 0.0x
- ------------------------------------------ Note: Adjusted mean excludes high and low data. EX-16.C5 3 0003.txt GEORGE K. BAUM PRESENTATION MATERIALS EXHIBIT 16(C)(5) ================================================================================ Discussion Materials Prepared For Independent Committee of the Board of Directors of BFX Hospitality Group, Inc. =========================== George K. Baum & Company www.gkbaum.com August 11, 2000 ================================================================================ BFX Hospitality Group, Inc. =========================== Table of Contents - -------------------------------------------------------------------------------- Tab --- Overview of Proposed Transaction.......................................... 1 Financial Summary......................................................... 2 Valuation Analysis........................................................ 3 Stock Price Performance........................................A Transaction Premium Analysis...................................B Analysis of Selected Comparable Companies......................C Discounted Cash Flow Analysis..................................D Present Value of Orderly Liquidation Analysis..................E Analysis of Selected Comparable Transactions...................F - -------------------------------------------------------------------------------- August 11, 2000 George K. Baum & Company BFX Hospitality Group, Inc. =========================== Overview of Proposed Transaction - Timeline - -------------------------------------------------------------------------------- . BFX Going Private Transaction . June 28, 2000 During a quarterly Board of Directors Meeting Robert H. McLean, Chief Executive Officer of BFX, informs Board that he is considering making a proposal that would acquire outstanding BFX Common Stock through merger or other leveraged buyout transaction and that it might be in best interest of global stockholders for McLean and possibly other members of management to purchase the outstanding stock at negotiated price in $2.00 to $2.25 per share range. . June 28, 2000 Board appoints Messrs. Edgar, D'Agostino and Sarno to serve on Independent Committee to review BFX's staying public and to evaluate any Going Private proposal. . July 27, 2000 Robert H. McLean, Chief Executive Officer of BFX, publicly announces that BFX has entered into negotiations for possible acquisition of Company's outstanding common stock by a group composed of himself and other management team members for $2.25 per share. . August 10, 2000 Independent Committee holds a special meeting to consider fairness of proposed transaction. . August 11, 2000 Board of Directors holds a meeting to discuss Independent Committee's findings and consider proposal. - -------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. =========================== Overview of Proposed Transaction - Merger Analysis - -------------------------------------------------------------------------------- Analysis of BFX Going Private Transaction (in thousands, except per share)
Transaction Metrics LTM Results (6/30/00)(a) - ----------------------------------------------- --------------------------------------------- Shares Outstanding 3,969 Sales (6/30/00) $17,396 Proposed Offer Price per Share $2.25 EBITDA (299) - ---------------------------------- ---------- EBIT (1,630) Total Equity Value $8,930 Net Income ($1,056) ========== ============= Net Cash (as of 6/30/00)(a): $3,676 - ----------------------------------------------- Total Enterprise Value $5,254 ==========
Multiple Analysis on LTM Results Reported Results Sales 0.3x EBITDA NM EBIT NM Net Income NM (a) Nine months ended 6/30/99, provided by BFX management - -------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. =========================== Financial Summary - -------------------------------------------------------------------------------- . BFX experienced growth in sales from fiscal 1996 through fiscal 1999 as it opened two additional CABO restaurants during this period and purchased the Stockyards Hotel in Fort Worth, Texas. However, sales growth for the six months ended 3/31/00 was up only one percent over last year's same period after an impressive FY 1999 gain of 50% over FY 1998. . BFX's profitability has not followed the trend in sales growth as they have experienced a loss from continuing operations net of tax for each of the fiscal years from 1996-1999. This translates into a loss per share from continuing operations ranging from a 1997 high of ($1.13) per share to a 1996 low of ($0.14) per share. BFX turned a profit at the net income line in 1996 and 1997 of $1.394 million, $0.22 per share and $6.658 million, $0.96 per share, respectively, but only after adjusting for income from discontinued operations and a gain on disposal of assets. Net income losses for fiscal years 1998 and 1999 were $2.509 million, ($0.47) per share and $1.785 million, $(0.44) per share, respectively. . BFX's income statement, balance sheet and statement of cash flows from fiscal 1996 through fiscal 1999 as well as such statements for the nine months ended June 30, 1999 and same period 2000 are presented on the following pages. - -------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. ==========================
Financial Summary - Income Statement - ----------------------------------------------------------------------------------------------------------------------------------- BFX Historical Income Statements (in thousands, except per share data) Fiscal Year Ended September, Nine Months Ended LTM --------------------------------------- --------------------- --------- 1996 1997 1998 1999 6/30/1999 6/30/2000 6/30/2000 ------- -------- ------- -------- --------- --------- --------- Net revenues $ 9,298 $ 10,518 $11,513 $ 17,212 $ 12,857 $ 13,041 $ 17,396 Costs and expenses: Cost of goods sold 2,139 2,277 2,698 4,185 3,131 3,063 4,117 0 Cost of Sales 0 Selling, general and administrative 7,595 14,483 11,974 12,311 8,830 8,243 11,724 Write-down of long-lived assets 1,854 0 0 1,854 Expenses associated with revised EPA remedy 4,417 0 0 0 Depreciation and amortization 969 1,030 1,150 1,590 1,181 922 1,331 Total costs and expenses 10,703 22,207 15,822 19,940 13,142 12,228 19,026 Net loss from continuing operations before other income (expense) and income taxes $(1,405) $(11,689) $(4,309) $(2,728) $ (285) $ 813 $ (1,630) ------- -------- ------- ------- --------- --------- -------- Other income (expense): Interest income 485 485 632 138 101 83 120 Interest expense (235) (193) (120) (92) (70) (21) (43) ------- -------- ------- ------- --------- --------- -------- (54) 292 512 46 31 62 77 Gain (Loss) from continuing operations before income taxes (1,459) (11,397) (3,797) (2,682) (254) 875 (1,553) Income tax expense (benefit) (538) (3,543) (1,288) (897) (26) 374 (497) ------- -------- ------- ------- --------- --------- -------- Gain (Loss) from continuing operations (921) (7,854) (2,509) (1,785) (228) 501 (1,056) Discontinued operations: Income from operations, net of income tax expense 2,315 1,509 Gain on disposal, net of income tax expense 13,003 ------- -------- ------- ------- --------- --------- -------- Income from discontinued operations 2,315 14,512 0 0 0 0 0 ------- -------- ------- ------- --------- --------- -------- Net income (loss) $1,394 $ 6,658 $(2,509) $(1,785) $ (228) $ 501 $ (1,056) ======= ======== ======= ======= ========= ========= ======== Basic and diluted earnings per share: Continuing operations $ (0.14) $ (1.13) $ (0.47) $ (0.44) Discontinued operation $ 0.36 $ 2.09 ------- -------- ------- ------- --------- --------- -------- Net income (loss) $ 0.22 $ 0.96 $ (0.47) $ (0.44) $ (0.06) $ 0.13 $ (0.26) ======= ======== ======= ======= ========= ========= ======== Weighted average basic and diluted common shares outstanding 6,441 6,957 5,349 4,018 4,030 3,972 3,960 - ------------------------------------------------------------------------------------------------------------------------------------ Revenue Growth 33.86% 13.12% 9.46% 49.50% 58.14% 1.43% 7.12% EPS Growth (Continuing Operations) NM NM 58% NM NM NM NM Gross Margin 77% 78% 77% 76% 76% 77% 76% - ------------------------------------------------------------------------------------------------------------------------------------ George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Financial Summary - Balance Sheet - ------------------------------------------------------------------------------------------------------------------------------------ BFX Historical Balance Sheets (in thousands, except per share data) As of 9/30/1996 9/30/1997 09/30/98 09/30/99 6/30/2000 ---------- ---------- --------- --------- ---------- Current assets: Cash and cash equivalents $ 1,659 $ 16,356 $ 5,342 $ 3,036 $ 3,676 Accounts receivable 3,370 66 128 286 292 Note Receivable 43 Inventories 1,396 79 148 208 213 Income tax receivable 1,102 698 0 Prepaid and other current assets 492 62 120 98 256 ---------- ---------- --------- --------- ---------- Total current assets 6,917 16,563 6,840 4,326 4,480 Property, plant and equipment, net 9,631 6,417 11,084 10,407 9,938 Goodwill, net of amortization 4,120 3,758 3,397 2,355 2,138 Deferred income taxes 833 1,419 1,824 1,726 Long-term notes receivable 540 Other assets, net 505 513 70 81 134 ---------- ---------- --------- --------- ---------- Total Assets $ 23,164 $ 28,084 $ 22,810 $ 18,993 $ 18,416 ========== ========== ========= ========= ========== Current liabilities: Current portion of long-term debt $ 187 $ 138 $ 138 $ 138 Accounts payable 1,152 300 578 418 589 Accrued liabilities 1,524 5,014 1,843 1,012 811 Accrued EPA costs 250 1,200 1,600 Income taxes 311 314 847 334 639 ---------- ---------- --------- --------- ---------- Total current liabilities 3,174 5,766 3,656 3,102 3,639 Long-term debt 2,493 6,978 1,075 937 Accrued EPA costs 2,700 1,570 923 Deferred income taxes 4 Stockholders' equity: Preferred stock Common stock 337 389 389 389 389 Additional paid-in capital 14,354 16,578 16,583 16,583 16,583 Retained earnings 3,158 9,816 7,307 5,522 6,023 Treasury stock (356) (4,487) (8,777) (9,110) (9,141) Employee notes for stock purchases (1,190) (123) Commitments and contingencies ---------- ---------- --------- --------- ---------- Total Liabilities and Equity $ 23,164 $ 28,084 $ 22,810 $ 18,993 $ 18,416 ========== ========== ========= ========= ========== - ----------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Financial Summary - Cash Flow - ----------------------------------------------------------------------------------------------------------------------------------- BFX Historical Cash Flow Statements (in thousands, except per share data) Nine Months Ended ----------------------- 1996 1997 1998 1999 6/30/1999 6/30/2000 -------- -------- -------- -------- ---------- ---------- Cash flows from operating activities: Net income (loss) $ 1,394 $ 6,658 $ (2,509) $ (1,785) Adjustments to reconcile net income (loss) to net cash used for operating activities: Depreciation 704 764 789 1,228 Amortization 577 475 361 362 Deferred income taxes 594 (837) (586) (405) Bad debt provision 40 (35) Net gain on sale of assets (20,301) Write-down of long-lived assets 1,854 Accrued expenses associatied with revised EPA remedy 4,417 Issuance of common stock in payment for services 139 412 114 47 Expenses associated with acquisition 824 Change in components of current assets and liabilities: Accounts receivable (662) 1,392 (62) (158) Inventories 639 143 (69) (60) Prepaid and other 256 385 11 Accounts payable 34 (36) 278 (160) Accrued liabilities 119 349 (221) (1,011) Income taxes 75 259 (569) (109) -------- -------- -------- -------- ---------- ---------- Net cash used for operating activities $ 3,653 $ (5,260) $ (2,089) $ (186) $ (7) $ 2,002 -------- -------- -------- -------- ---------- ---------- Cash flows from investing activities: Net additions to property, plant and equipment (1,613) (450) (5,456) (1,725) Proceeds from sale of operating assets 100 25,194 Acquisitions (1,212) Additions to other assets (89) 1,632 (236) -------- -------- -------- -------- ---------- ---------- Net cash provided by (used for) investing activities $ (2,725) $ 24,655 $ (5,456) $ (1,725) $ 1,632 $ (236) Cash flows from financing activities: Additions to debt 1,200 Repayments of debt (120) (161) (137) (138) (103) (1,075) Purchase of short-term investments 0 (2,833) Exercise of stock options 15 Treasury stock purchases (356) (4,552) (3,332) (257) (51) (51) -------- -------- -------- -------- ---------- ---------- Net cash used for financing activities $ 724 $ (4,698) $ (3,469) $ (395) $ (345) $ (3,959) Net increase (decrease) in cash $ 14,697 $(11,014) $ (2,306) $ (1,984) $ (2,193) Cash at beginning of year 7 1,659 16,356 5,342 5,342 3,036 -------- -------- -------- -------- ---------- ---------- Cash at end of year $ 1,659 $ 16,356 $ 5,342 $ 3,036 $ 3,358 $ 843 ======== ======== ======== ======== ========== ========== - ----------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ========================== Valuation Analysis - Stock Price Performance - ------------------------------------------------------------------------------- [TWO YEAR STOCK PRICE PERFORMANCE GRAPH] [ONE YEAR STOCK PRICE PERFORMANCE GRAPH] (1) BFX closed at $2.13 on both July 29 and August 11, 1998 (2) BFX closed at $1.38 on both August 6 and August 9, 1999 - ------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. ========================== Valuation Analysis - Stock Price Performance - Weighted Average Price - ------------------------------------------------------------------------------- [BFX TRADING VOLUME AT VARIOUS PRICES - TWO YEARS PRIOR TO OFFER(1) GRAPH] [BFX TRADING VOLUME AT VARIOUS PRICES - ONE YEAR PRIOR TO OFFER(1) GRAPH] (1) Going private transaction announced 7/27/00 - ------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. ========================== Valuation Analysis - Stock Price Performance - Weighted Average Price - ------------------------------------------------------------------------------- [BFX TRADING VOLUME AT VARIOUS PRICES - ONE QUARTER PRIOR TO OFFER(1) GRAPH] [BFX TRADING VOLUME AT VARIOUS PRICES - ONE MONTH PRIOR TO OFFER(1) GRAPH] (1) Going private transaction announced 7/27/00 - ------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. ========================== Valuation Analysis - Stock Price Performance - (BFX vs. Index of Selected Comparable Companies) - ------------------------------------------------------------------------------- [BFX VS. COMP COMPOSITE (TRAILING 2 YEARS) GRAPH] - ------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Transaction Premium Analysis - --------------------------------------------------------------------------------------------------------------------------------- Market Premium Statistics(a) Premium Offered to Target's Share Price Prior to Transaction Announcement for transaction targets valued $50mm or less, occurring within last two years --------------------------------- and involving: 1 Day 4 Weeks ----------------------------------------------------------------------------- ----- ------- Going Private Activity Mean 28.5% 35.9% Median 28.0% 33.3% Hotel, Restaurant and Hospitality Merger and Acquisition Activity Mean 47.0% 51.0% Median 12.0% 20.0% All Merger and Acquisition Activity Mean 40.0% 51.0% Median 32.0% 41.0% - --------------------------------------------------------------------------------------------------------------------------------- BFX Premium Prior to July 26, 2000 ---------------------- 1 Day 4 Weeks ------- ------- BFX Actual Share Price $ 1.00 $ 0.88 Transaction Premium (@ $2.25) to BFX Share Price 125.0% 157.1% Prior to July 26, 2000 ------------------------------------------ 1 Month 1 Quarter 1 Year 2 Years ------- --------- ------ ------- Weighted Average BFX Share Price $ 0.95 $ 0.94 $ 0.89 $ 1.33 Merger Premium ($2.25) to Weighted Average BFX Share Price 136.8% 139.4% 152.8% 69.2% - --------------------------------------------------------------------------------------------------------------------------------- (a) Source: Thomson Financial Securities Data, 8/0100 - --------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Analysis of Selected Comparable Companies - --------------------------------------------------------------------------------------------------------------------------------- BFX Hospitality Group, Inc. Summary of Selected Comparable Companies (millions) LTM ---------------- Restaurants Hotels Holding Revenue EBITDA Owned Owned Company ------- ------ ----------- ------ ------- --------------------------------------------------------------------------------------------- BFX Hospitality Group, Inc. $17.4 ($0.3) 3 1 Yes --------------------------------------------------------------------------------------------- Meritage Hospitality Group(a) $31.1 $2.7 25 2 No Restaurants (Under $50M sales) ------------------------------ Cucos Inc. $16.9 $1.2 21 0 No California Beach Restaurants, Inc. $13.3 $1.1 2 0 Yes Silver Diner, Inc. $29.3 $0.0 11 0 No Austins Steaks & Saloon, Inc $43.9 $2.9 7 0 No Grill Concepts, Inc. $39.5 $1.3 14 0 No Small Hotel Owners (Under $50M sales) ------------------------------------- International Leisure hosts $ 4.7 $1.0 0 1 No Buckhead America Corp. $32.2 $5.1 0 29 No ------------------------------------- (a) Business model most closely comparable to the Company - --------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Analysis of Selected Comparable Companies - Hospitality Companies - --------------------------------------------------------------------------------------------------------------------------------- Company Name Meritage Hospitality Group Ticker Symbol MHG Price Date: 07/26/00 Price $2.06 Business Description Meritage Hospitality Group Inc. was incorporated in 1986 and is engaged in the hospitality business through its operation of two distinct business segments. The company's Food Service Group operates 25 Wendy's Old Fashioned Hamburgers restaurants throughout Western and Southern Michigan. The company's Lodging Group owns and operates two full service hotels in Michigan. - --------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Analysis of Selected Comparable Companies - Restaurant Owners - --------------------------------------------------------------------------------------------------------------------------------- Company Name Cucos Inc Ticker Symbol CUCO Price Date: 07/26/00 Price $0.86 Business Description Cucos Inc. operates 16 and franchises 5 full-service Mexican restaurants, mainly in the Southeast. As of June 28, 1998, there were 15 company-owned and five franchised restaurants primarily in Louisiana, Mississippi and Alabama. Cucos restaurants serve moderately priced "Sonoran" and "Tex-Mex" Mexican appetizers, entrees and alcoholic beverages, including such traditional Mexican fare as fajitas, burritos, enchiladas and tamales. Company Name California Beach Restaurant Ticker Symbol CBHR Price Date: 07/26/00 Price $2.08 Business Description California Beach Restaurants, Inc. conducts restaurant operations through its wholly owned subsidiary, Sea View Restaurants, Inc. The company operates Gladstone's 4 Fish, one of Southern California's best known fresh seafood restaurants, and RJ's - Beverly Hills, which specializes in classic American food. Sea View operates Gladstone's pursuant to a concession agreement, which commenced on November 1, 1997, with the County of Los Angeles. - --------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Analysis of Selected Comparable Companies - Restaurant Owners - --------------------------------------------------------------------------------------------------------------------------------- Company Name Silver Diner Inc Ticker Symbol SLVR Price Date: 07/26/00 Price $0.94 Business Description Silver Diner, Inc. operates 11 Silver Diner restaurants, 10 in the Washington/Baltimore metropolitan area and one in Cherry Hill, N.J., featuring a mix of traditional home-style diner fare and contemporary American cuisine in art deco style buildings. Silver Diner targets the growing number of customers tired of traditional fast food whose need for a quick, high-quality, reasonably priced meal is not being adequately served by existing family or casual theme restaurants; the company capitalizes on the timeless diner theme to uniquely address this need. Company Name Austins Steaks & Saloon Inc Ticker Symbol STAK Price Date: 07/26/00 Price $0.72 Business Description Austins Steaks & Saloon, Inc. owns and operates seven moderately priced, casual dining full-service Austins restaurants in three states. The restaurants feature specialty prime rib dishes, a variety of fresh-cut, aged steaks, home-cooked entrees, salads and sandwiches. On February 23, 1999, the company signed a letter-of-intent to enter into a business combination with WesterN SizzliN Corp., a family-style steak, buffet, and bakery restaurant chain. - --------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Analysis of Selected Comparable Companies - Restaurant Owners - --------------------------------------------------------------------------------------------------------------------------------- Company Name Grill Concepts Inc Ticker Symbol GRIL Price Date: 07/26/00 Price $1.41 Business Description Grill Concepts, Inc. owns and operates nine Daily Grill restaurants, two The Grill on the Alley restaurants and three Pizzeria Uno restaurants. In May 1988, The Grill on the Alley restaurant, within the five-star Fairmont Hotel in San Jose, California, opened representing the company's initial entry into a hotel venue. Pizzeria Uno restaurants offer a diverse menu featuring gourmet, Chicago-style deep-dish pizzas, sandwiches, hamburgers, appetizers, salads, desserts and beverages, including a full liquor selection. - --------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Analysis of Selected Comparable Companies - Hotel Owners - --------------------------------------------------------------------------------------------------------------------------------- Company Name Intl Leisure Hosts Ticker Symbol ILHL Price Date: 07/26/00 Price $5.13 Business Description International Leisure Hosts, Ltd. owns and operates Flagg Ranch Village, a full-service resort motel and trailer park located in the John D. Rockefeller Jr. Memorial Parkway about four miles north of Grand Teton National Park and two miles south of the southern entrance of Yellowstone National Park. Flagg is operated as a seasonal resort. The two seasons, summer and winter, coincide with the opening and closing dates of the two national parks. Company Name Buckhead America Corp Ticker Symbol BUCK Price Date: 07/26/00 Price $5.16 Business Description Buckhead America Corp. is a diversified, hospitality services company. Its principal holdings include hotels, loans and other investments secured by hotels, franchising rights and other related assets. Its principal product is the Country Hearth Inn mid-priced hotel chain, which was acquired in May 1994. At February 28, 1998, 29 Country Hearth Inns (11 of which were company-owned) were open and operating in 11 states. Additionally, the company managed 36 hotels, 13 of which were company-owned. - --------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Analysis of Selected Comparable Companies - ---------------------------------------------------------------------------------------------------------------------------------- Summary of Selected BFX Comparable Companies (Values in millions, except per share data) ----------------------------------------------------------------------------------------- Discount/Premium Stock to LTM Shares LTM Price ---------------- Out.(1) Equity Firm(2) Ticker Ending 07/26/00 High Low 07/20/00 Value Value ----------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- BFX Hospitality Group, Inc. BFX 06/30/00 $1.000 38.5% 100.0% 3.96 $ 4.0 $ 0.3 - ---------------------------------------------------------------------------------------------------------------------------------- BFX at $2.25 per share offer - ---------------------------- BFX Hospitality Group, Inc. BFX 06/30/00 $2.250 -38.5% 350.0% 3.96 $ 8.9 $ 5.2 - ---------------------------------------------------------------------------------------------------------------------------------- Restaurants (Under $50M sales) - ------------------------------ Cucos Inc. CUCO 04/02/00 $0.875 66.7% 573.1% 2.66 $ 2.3 $ 6.0 California Beach Restaurants, Inc. CBHR 01/31/00 $2.075 65.4% 6593.5% 3.40 $ 7.1 $10.1 Small Hotel Owners (Under $50M sales) - ------------------------------------- International Leisure Hosts ILHL 03/31/00 $5.125 6.8% 57.7% 0.69 $ 3.6 $ 4.7 Select Comparable Group Summmary - ---------------------------------------------------------------------------------------------------------------------------------- Mean 46.3% 2408.1% Median 65.4% 573.1% Maximum 66.7% 6593.5% Minimum 6.8% 57.7% - ---------------------------------------------------------------------------------------------------------------------------------- Meritage Hospitality Group MHG 05/31/00 $2.063 36.5% 27.0% 5.77 $11.9 $27.3 Restaurants (Under $50M sales) - ------------------------------ Silver Diner, Inc. SLVR 04/23/00 $0.938 25.0% 25.1% 11.59 $10.9 $10.6 Austins Steaks & Saloon, Inc. STAK 03/31/00 $0.719 73.9% 27.7% 12.10 $ 8.7 $16.9 Grill Concepts, Inc. GRIL 03/26/00 $1.406 53.1% 60.7% 4.00 $ 5.6 $ 9.7 Small Hotel Owners (Under $50M sales) - ------------------------------------- Buckhead America Corp. BUCK 03/31/00 $5.156 17.5% 28.9% 2.01 $10.4 $43.3 Entire Comparable Group Summary - ---------------------------------------------------------------------------------------------------------------------------------- Mean 43.1% 924.2% Median 44.8% 43.3% Maximum 73.9% 6593.5% Minimum 6.8% 25.1% - ---------------------------------------------------------------------------------------------------------------------------------- Market Multiples ----------------------------------------------------------------------------------------- Firm Value/LTM P/E Multiples(3x4) Equity/ --------------------------------- -------------------------------------------- Book Revenue EBITDA EBIT LTM CY 00E CY 01E ----------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- BFX Hospitality Group, Inc. 0.3x 0.0x NM NM NM NA NA - ---------------------------------------------------------------------------------------------------------------------------------- BFX at $2.25 per share offer - ---------------------------- BFX Hospitality Group, Inc. 0.6x 0.3x NM NM NM NA NA - ---------------------------------------------------------------------------------------------------------------------------------- Restaurants (Under $50M sales) - ------------------------------ Cucos Inc. NM 0.4x 4.9x 14.7x NM NA NA California Beach Restaurants, Inc. 67.9x 0.8x 9.4x NM NM NA NA Small Hotel Owners (Under $50M sales) - ------------------------------------- International Leisure Hosts 0.8x 1.0x 4.5x 8.1x 117.8x NA NA Select Comparable Group Summmary - ---------------------------------------------------------------------------------------------------------------------------------- Mean 34.3x 0.7x 6.3x 11.4x 117.8x NA NA Median 34.3x 0.8x 4.9x 11.4x 117.8x NA NA Maximum 67.9x 1.0x 9.4x 14.7x 117.8x NA NA Minimum 0.8x 0.4x 4.5x 8.1x 117.8x NA NA - ---------------------------------------------------------------------------------------------------------------------------------- Meritage Hospitality Group 2.1x 0.9x 10.2x 21.4x NM NA NA Restaurants (Under $50M sales) - ------------------------------ Silver Diner, Inc. 0.7x 0.4x NM NM NM NA NA Austins Steaks & Saloon, Inc. 0.7x 0.4x 5.8x 10.1x NM NA NA Grill Concepts, Inc. 1.5x 0.2x 7.3x 67.8x NM NA NA Small Hotel Owners (Under $50M sales) - ------------------------------------- Buckhead America Corp. 0.5x 1.3x 8.5x 12.9x 9.5x NA NA Entire Comparable Group Summary - ---------------------------------------------------------------------------------------------------------------------------------- Mean 10.6x 0.7x 7.2x 22.5x 63.6x NA NA Median 0.8x 0.6x 7.3x 13.8x 63.6x NA NA Maximum 67.9x 1.3x 10.2x 67.8x 117.8x NA NA Minimum 0.5x 0.2x 4.5x 8.1x 9.5x NA NA - ---------------------------------------------------------------------------------------------------------------------------------- (1) Common shares outstanding excluding common share equivalents. (2) Firm value represents market value of equity plus book values of total debt, preferred stock, and minority interest les cash and equivalents. (3) Source of EPS estimates: First Call (7/20/00). No Estimates Available. (4) Excluding all non-recurring debits and credits. - ---------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ========================== Valuation Analysis - Analysis of Selected Comparable Companies - ----------------------------------------------------------------------------------------------------------------------------------- Summary of Selected BFX Comparable Companies (Values in millions, except per share data) ------------------------------------------------------------------------------------------------- Growth Statistics ----------------------------------------------- LTM (EPS)(1)(2) 3-Year CAGR 5-Year EPS(1) --------------------- ------------------- --------------------------------- Revenue EBITDA EBIT LTM CY 00E CY 01E Revenue EBITDA EBIT FY EPS(2) Growth Est. PE/g ------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- BFX Hospitality Group, Inc. $17.4 -$0.3 -$1.6 -$0.3 NA NA 27.9% NA NA NA NA NA - ----------------------------------------------------------------------------------------------------------------------------------- BFX at $2.25 per share offer - ---------------------------- BFX Hospitality Group, Inc. $17.4 -$0.3 -$1.6 -$0.3 NA NA 27.9% NA NA NA NA NA - ----------------------------------------------------------------------------------------------------------------------------------- Cucos, Inc. $16.9 $1.2 $0.4 -$0.1 NA NA -3.6% NM NM NA NA NA California Beach Restaurants. Inc. $13.3 $1.1 -$0.1 -$0.3 NA NA -5.0% -19.9% -43.0% NA NA NA International Leisure Hosts $4.7 $1.0 $0.6 $0.0 NA NA 1.2% 23.7% 36.4% -62.7% NA NA Comparable Group Summary - ----------------------------------------------------------------------------------------------------------------------------------- Mean -2.5% 1.9% -3.3% -62.7% NA NA Median -3.6% 1.9% -3.3% -62.7% NA NA Maximum 1.2% 23.7% 36.4% -62.7% NA NA Minimum -5.0% -19.9% -43.0% -62.7% NA NA - ----------------------------------------------------------------------------------------------------------------------------------- Meritage Hospitality Group $31.1 $2.7 $1.3 -$0.1 NA NA 5.2% 59.9% NA NA NA NA Silver Diner, Inc. $29.3 $0.0 -$1.5 -$0.1 NA NA 9.6% NA NA NA NA NA Austins Steaks & Saloon, Inc. $43.9 $2.9 $1.7 $0.0 NA NA 12.6% -0.1% -11.1% -71.1% NA NA Grill Concepts, Inc. $39.5 $1.3 $0.1 -$0.1 NA NA 16.1% 54.6% NA NA NA NA Small Hotel Owners (Under $50M sales) - ----------------------------------------------------- Buckhead America Corp. $32.2 $5.1 $3.3 $0.54 NA NA 43.9% 21.9% 21.5% -37.5% NA NA Comparable Group Summary - ----------------------------------------------------------------------------------------------------------------------------------- Mean 10.0% 23.3% 1.0% -57.1% NA NA Median 7.4% 22.8% 5.2% -62.7% NA NA Maximum 43.9% 59.9% 36.4% -37.5% NA NA Minimum -5.0% -0.1% -11.1% -71.1% NA NA - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------- (1) Source of EPS estimates: Institutional Brokers Estimate System median estimate (07/20/00). (2) Excluding all non-recurring debits and credits. - ----------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ===========================
Valuation Analysis - Analysis of Selected Comparable Companies - ------------------------------------------------------------------------------------------------------------------------------------ Summary of Selected BFX Comparable Companies (Values in millions, except per share data) Margin Analysis/1/ --------------------------------------------------------------------------------------- Gross EBITDA EBIT Net Income ------------------ ------------------ ----------------- ------------------ LTM 3-Yr Avg LTM 3-Yr Avg LTM 3-Yr Avg LTM 3-Yr Avg --------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- BFX Hospitality Group, Inc. 76.3% 76.9% -1.7% -45.1% -9.4% -54.8% -6.1% -35.6% - ------------------------------------------------------------------------------------------------------------------------------- BFX at $2.25 per share offer BFX Hospitality Group, Inc. 76.3% 76.9% -1.7% -45.1% -9.4% -54.8% -6.1% -35.6% - ------------------------------------------------------------------------------------------------------------------------------- Cucos Inc. 36.3% 39.6% 7.2% 3.5% 2.4% -0.9% -1.9% -5.5% California Beach Restaurants, Inc. 10.6% 14.5% 8.1% 9.1% -0.6% 1.6% -8.1% -4.3% International Leisure Hosts 29.3% 26.2% 21.8% 18.9% 12.2% 9.9% 7.9% 6.5% Comparable Group Summary - ------------------------------------------------------------------------------------------------------------------------------- Mean 25.4% 26.8% 12.4% 10.5% 4.7% 3.5% -0.7% -1.1% Median 29.3% 26.2% 8.1% 9.1% 2.4% 1.6% -1.9% -4.3% Maximum 36.3% 39.6% 21.8% 18.9% 12.2% 9.9% 7.9% 6.5% Minimum 10.6% 14.5% 7.2% 3.5% -0.6% -0.9% -8.1% -5.5% - ------------------------------------------------------------------------------------------------------------------------------- Meritage Hospitality Group 13.8% 13.2% 8.6% 5.6% 4.1% 1.5% -1.3% -3.7% Silver Diner, Inc. 39.8% 39.3% 0.1% 0.0% -5.0% -6.2% -4.8% -5.6% Austins Steaks & Saloon, Inc. 22.6% 24.5% 6.7% 8.7% 3.8% 6.5% -0.3% 2.2% Grill Concepts, Inc. 72.0% 72.3% 3.4% 2.7% 0.4% -0.5% -1.0% -1.6% Small Hotel Owners (Under $50M sales) - ---------------------------------------------------------- Buckhead America Corp. 31.1% 24.4% 15.8% 13.6% 10.4% 7.1% 5.0% 9.9% Comparable Group Summary - ------------------------------------------------------------------------------------------------------------------------------- Mean 31.9% 31.7% 9.0% 7.8% 3.5% 2.4% -0.6% -0.2% Median 30.2% 25.3% 7.6% 7.2% 3.1% 1.5% -1.1% -2.6% Maximum 72.0% 72.3% 21.8% 18.9% 12.2% 9.9% 7.9% 9.9% Minimum 10.6% 13.2% 0.1% 0.0% -5.0% -6.2% -8.1% -5.6% - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Total Debt/ ROE Total Capital ---------------------- -------------------- LTM 3-Yr Avg Book Market - ----------------------------------------------------------------------------------- BFX Hospitality Group, Inc. -7.8% -22.3% 0.0% 0.0% - ----------------------------------------------------------------------------------- BFX at $2.25 per share offer BFX Hospitality Group, Inc. -7.8% -22.3% 0.0% 0.0% - ----------------------------------------------------------------------------------- Cucos Inc. 13.3% 162.8% 222.6% 56.2% California Beach Restaurants, Inc. 245.2% -77.4% 129.9% 30.4% International Leisure Hosts 8.7% 7.3% 24.0% 28.3% Comparable Group Summary - --------------------------------------------------------------------------------------- Mean 89.1% 30.9% 125.5% 38.3% Median 13.3% 7.3% 129.9% 30.4% Maximum 245.2% 162.8% 222.6% 56.2% Minimum 8.7% -77.4% 24.0% 28.3% - --------------------------------------------------------------------------------------- Meritage Hospitality Group -7.3% -34.4% 72.9% 56.7% Silver Diner, Inc. -8.3% -7.6% 8.5% 12.3% Austins Steaks & Saloon, Inc. -1.0% 19.7% 38.9% 49.4% Grill Concepts, Inc. -10.1% -9.2% 42.6% 34.8% Small Hotel Owners (Under $50M sales) - ---------------------------------------------------------- Buckhead America Corp. 7.1% 10.9% 55.8% 70.1% Comparable Group Summary - --------------------------------------------------------------------------------------- Mean 30.9% 9.0% 74.4% 42.3% Median 3.1% -0.2% 49.2% 42.1% Maximum 245.2% 162.8% 222.6% 70.1% Minimum -10.1% -77.4% 8.5% 12.3% - --------------------------------------------------------------------------------------- - ---------------------------------------------------------- (1) Excluding all non-recurring debits and credits. - ----------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ==========================
Valuation Analysis - Discounted Cash Flow Analysis - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- BFX Discounted Cash Flow Analysis - Management's Projections in thousands ------------- --------------------------------------------------------------- actual projected ------------- --------------------------------------------------------------- FY 9 months 4th Qtr. 2001 2002 2003 2004 2005 2000 ended 6/30/00 FY 2000 ------- ------------- -------- -------- -------- -------- -------- -------- Revenue $13,555 $10,312 $3,243 $13,584 $13,584 $13,809 $14,034 $14,259 EBITDA 1,735 1,401 334 1,456 1,527 1,600 1,673 1,746 ------- ------------- -------- -------- -------- -------- -------- -------- Income Before Taxes (given by company) 699 624 75 403 475 548 731 694 Tax (35%) 245 218 26 141 166 192 256 243 - ---------------------------------------- ------- ------------- -------- -------- -------- -------- -------- -------- Net Income 454 406 49 262 309 356 475 451 Adjusted Net Income 454 406 49 262 309 356 475 451 Depreciation & Amortization 1,036 778 259 1,053 1,052 1,052 942 1,052 - ---------------------------------------- ------- ------------- -------- -------- -------- -------- -------- -------- Operating Cash Flow 1,490 1,183 307 1,315 1,361 1,408 1,417 1,503 - ---------------------------------------- ------- ------------- -------- -------- -------- -------- -------- -------- Net Capital Expenditures (180) (135) (45) (1,275) (270) (315) (360) (405) Change in Net Working Capital 0 0 0 0 0 0 0 0 - ---------------------------------------- ------- ------------- -------- -------- -------- -------- -------- -------- Free Cash Flow 1,310 1,048 262 40 1,091 1,093 1,057 1,098 - ---------------------------------------- ------- ------------- -------- -------- -------- -------- -------- -------- Special Committee Buyout Expenses (650) (650) CABO (Houston) sale 3,500 3,500 EPA Superfund Debt (650) (650) (1,150) (114) (114) (114) (114) PV of EPA Debt remaining after 9/30/05 (227) (227) Cash Balance (10Q-6/31/00) 3,676 3,676 Terminal Value - Multiple of 2005 EBITDA 4.5x 7,857 - ---------------------------------------------------------------------------------------------------------------------------------- Nominal Cash Flow 6,959 5,911 (1,110) 977 979 943 8,841 NPV of Cash Flows From 2001-2005 3,105 3,105 - ---------------------------------------------------------------------------------------------------------------------------------- BFX Total Present Value $10,064 $9,016 - --------------------------------------------------------------------------- BFX Present Value per Share $2.54 $2.27 - --------------------------------------------------------------------------- Shares outstanding 3,969,000 3,969,000 Discounted at 28.1% 28.1% - ------------------------------------------------------------------------------------------------------- Offer Price Exit Multiple 3.5x 4.0x 4.5x 5.0x $2.25 Discount Rate $2.14 $2.21 $2.27 $2.34 - ------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. ========================== Valuation Analysis - Discounted Cash Flow Analysis - Key Assumptions - -------------------------------------------------------------------------------- Assumptions Risk-free Rate(1) 5.74% Risk Premium(2) 6.15% Equity Beta(3) 1.07 Small-cap Premium(2) 3.30% Company Specific Premiums Cabo, Ft. Worth property(4) 2.50% EPA Liability(5) 10.00% - --------------------------------------------- Cost of Equity Capital(6) 28.12% - --------------------------------------------- (1) Yield on the 30-year Treasury Bond as of 8/8/00 (2) Based on Ibbotson's SBBI 1999 Yearbook (3) S&P Entertainment & Leisure Composite measured daily vs. S&P 500 for last two years (4) Company Specific premium concerning viability of Ft. Worth Cabo property (5) Company specific premium concerning EPA liability (6) k = (B x RP) + Rf + Rs + R(cabo) + R(epa) - -------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. ========================== Valuation Analysis - Discounted Cash Flow Analysis - Key Assumptions - ----------------------------------------------------------------------------------------------------------------------------------- BFX Discounted Cash Flow Analysis - Management's Projections - No Vestal Lease in thousands actual projected ------------- ----------------------------------------------------------- FY 9 months 4th Qtr. 2001 2002 2003 2004 2005 2000 ended 6/30/00 FY 2000 -------- ------------- --------- -------- -------- -------- -------- -------- Revenue $ 13,555 $ 10,312 $ 3,243 $ 13,359 $ 13,584 $ 13,809 $ 14,034 $ 14,259 EBITDA 1,735 1,401 334 1,456 1,527 1,600 1,673 1,746 -------- ------------- --------- -------- -------- -------- -------- -------- Income Before Taxes (given by company) 699 624 75 403 475 548 731 694 Tax (35%) 245 218 26 141 166 192 256 243 - ------------------------------------------ ----------------------- --------- -------- -------- -------- -------- -------- Net Income 454 406 49 262 309 356 475 451 Adjusted Net Income 454 406 49 262 309 356 475 451 Depreciation & Amortization 1,036 778 259 1,053 1,052 1,052 942 1,052 - ------------------------------------------ -------- ------------- --------- -------- -------- -------- -------- -------- Operating Cash Flow 1,490 1,183 307 1,315 1,361 1,408 1,417 1,503 - ------------------------------------------ -------- ------------- --------- -------- -------- -------- -------- -------- Net Capital Expenditures (180) (135) (45) (1,275) (270) (315) (360) (405) Change in Net Working Capital 0 0 0 0 0 0 0 0 0 - ----------------------------------------------------- ------------- --------- ------- --------- -------- -------- -------- Free Cash Flow 1,310 1,048 262 40 1,091 1,093 1,057 1,098 - ----------------------------------------------------- ------------- --------- -------- -------- -------- -------- -------- Special Committee Buyout Expenses (650) (650) Vestal, New York Lease (261) (261) (261) (261) (261) (261) (261) CABO (Houston) sale 3,500 3,500 EPA Superfund Debt (650) (650) (1,150) (114) (114) (114) (114) PV of EPA Debt remaining after 9/30/05 (227) (227) Cash Balance (10Q-6/31/00) 3,676 3,676 Terminal Value - Multiple of 2005 EBITDA 4.5x 7,857 - --------------------------------------------------------------------------------------------------------------------------------- Nominal Cash Flow 6,698 5,650 (1,371) 716 718 682 8,580 NPV of Cash Flows From 2001-2005 3,073 3,073 - --------------------------------------------------------------------------------------------------------------------------------- BFX Total Present Value $ 9,771 $ 8,723 - ------------------------------------------------------------------------------- BFX Present Value Per Share $ 2.46 $ 2.20 - ------------------------------------------------------------------------------- Shares outstanding 3,969,000 3,969,000 Discounted at 23.1% 23.1% - ----------------------------------------------------------------------------------------------- Offer Price Exit Multiple 3.5x 4.0x 4.5x 5.0x $2.25 Discount Rate $2.04 $2.12 $2.20 $2.28 - ----------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc. =========================== Valuation Analysis - Discounted Cash Flow Analysis - Key Assumptions - -------------------------------------------------------------------------------- Assumptions - No Vestal, NY lease - ------------------------------------- Risk -free Rate /1/ 5.74% Risk Premium /2/ 6.15% Equity Beta /3/ 1.07 Small-cap Premium /2/ 3.30% Company Specific Premiums Cabo, Ft. Worth property /4/ 2.50% EPA Liability /5/ 5.00% - ------------------------------------- Cost of Equity Capital /6/ 23.12% - ------------------------------------- /1/ Yield on the 30-year Treasury Bond /2/ Based on Ibbotson's SBBI 1999 Yearbook /3/ S&P Entertainment & Leisure Composite measured daily vs. S&P 500 for last two years /4/ Company specific premium concerning viability of Ft. Worth Cabo property /5/ Company specific premium concerning EPA liability /6/ k=(B x RP)+ Rf + Rs + R(cabo) + R(epa) - -------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. =========================== Valuation Analysis - Present Value of Orderly Liquidation Analysis - -------------------------------------------------------------------------------- BFX Liquidation Distribution /1/ - ------------------------------------------------------------- Distributions Available Net Available for Distribution Year (9/30) (per share) - ----------------------- ------------------------------ 2000 $0.00 2001 $2.11 2002 $0.16 2003 $0.05 2004 $0.05 2005 $0.05 2006 $0.05 Net Available Distribution - ---------------------------------------------------------------------------- Discount Rate ----------------------------- 10% 15% 20% 25% ----- ----- ----- ----- Total Distribution Present Value Per Share (9/30/2000) $2.18 $2.06 $1.96 $1.87 Total Distribution Value Per share (9/30/2006) $2.48 /1/ Liquidation amounts provided by BFX - -------------------------------------------------------------------------------- George K. Baum & Company BFX Hospitality Group, Inc. ========================== Valuation Analysis - Analysis of Selected Comparable Transactions - Going Private Transactions - ----------------------------------------------------------------------------------------------------------------------------------- Going private transactions ($50mm and under, last 2 years) Going Private Transactions ($50mm and under, last 2 years) - ----------------------------------------------------------------------------------------------------------------------------------- Date Target Name Share Prices Announced ------------------------------------ % Enterprise Equity Offer Closing Closing Premium Premium Shares Value Val Price Price Price 1 Day* 4 weeks* Acq. ($mil) ($mil) (per share) 1 day 4 weeks ------------------------------------ prior to announcement date 7/27/2000 BFX $ 2.25 $ 1.00 $ 0.88 125.0% 157.1% $ 3.5 $ 2.5 - ----------------------------------------------------------------------------------------------------------------------------------- 10/6/1998 Audio Communications Network $ 6.40 $ 4.25 $ 5.00 50.6% 28.0% 100% $ 62.0 $ 29.3 9/11/1998 E-Z Serve Corp 0.60 0.44 0.50 37.1% 20.0% 100% $107.9 $ 43.2 1/12/1999 Lion Brewery Inc 5.02 3.75 3.94 33.9% 27.5% 100% $ 14.4 $ 18.3 3/4/1999 THT Inc 3.50 2.38 2.63 47.4% 33.3% 54% $ 14.3 $ 13.9 3/4/1999 Industrial Acoustics Inc 11.00 11.00 9.75 0.0% 12.8% $ 47.5 $ 33.4 3/4/1999 Reconditioned Systems Inc 3.63 4.13 np np 2/15/1999 Security Natl Bk Sapulpa Okl 100% np np 2/8/1999 World Satellite Network Inc 100% np $ 15.8 3/8/1999 Vaughn Communications 100% $ 64.0 $ 42.5 12/1/1999 ENStar Inc 12.50 8.00 8.25 56.3% 51.5% 35.51% $ 37.2 6/17/1999 R-B Rubber Products Inc 3.00 2.13 2.25 41.2% 33.3% 70.30% $ 6.7 10/29/1999 Kentek Information Systems Inc 8.29 7.63 7.00 8.7% 18.4% 100% $ 38.9 12/10/1999 ThermoSpectra (Thermo Instr) 16.00 11.50 9.94 39.1% 61.0% 8.00% $298.2 $251.6 12/10/1999 Hawaii National Bancshares np $ 32.0 12/10/1999 Concord Fabrics Inc 7.88 5.63 5.88 40.0% 34.0% $ 28.7 $ 18.0 1/19/2000 Anson Bancorp Inc, Wadesboro, NC 100% np $ 10.1 1/19/2000 Geerlings & Wade Inc 10.00 7.84 6.25 27.5% 60.0% $ 37.3 $ 40.4 1/19/2000 CEM Corp 11.15 5.75 6.88 93.9% 62.2% $ 30.4 $ 34.2 3/8/2000 n-Vision Inc 100% np $ 1.3 3/8/2000 ThermoLase Corp (Thermo Trex) 2.44 2.38 1.88 2.7% 30.1% $225.4 $112.2 12/21/1999 OIS Optical Imaging Systems 0.50 0.50 0.72 20.40% np np 12/21/1999 Saratoga Beverage Group Inc 6.00 4.81 3.44 24.7% 74.5% $ 60.3 $ 39.7 12/21/1999 Metrika Systems Corp 9.00 9.63 6.13 -6.5% 46.9% $ 81.2 $ 66.8 12/21/1999 Sunrise Intl Leasing Inc 5.25 5.50 5.19 -4.5% 1.2% $112.1 $ 37.6 4/4/2000 Thermo Sentron Inc (Thermedics) 15.50 14.44 14.50 7.4% 6.9% $153.5 $148.8 2/19/2000 Diehl Graphsoft Inc 9.50 7.13 4.88 33.3% 94.9% 100% $ 28.3 $ 29.5 2/19/2000 Tubby's Inc 100% $ 2.0 $ 2.8 2/19/2000 Acme Electric Corp $ 48.4 $ 39.4 2/19/2000 Old Guard Group Inc 12.00 10.00 9.81 20.0% 22.3% $ 38.8 $ 47.1 2/19/2000 KLLM Transport Services Inc 8.05 6.81 8.13 18.2% -0.9% $ 77.5 $ 33.0 Mean 28.5% 35.9% Median 28.0% 33.3% *offer premium over closing price - ----------------------------------------------------------------------------------------------------------------------------------- Date Target Name Target Advisors Target Total Announced Fees ($mil) 7/27/2000 BFX - ----------------------------------------------------------------------------------------------------------------------------------- 10/6/1998 Audio Communications Network Duff and Phelps $0.13 9/11/1998 E-Z Serve Corp Donaldson, Lufkin & Jenrette Harris Webb & Garrison, Inc. 1/12/1999 Lion Brewery Inc Tucker Anthony $0.35 3/4/1999 THT Inc 3/4/1999 Industrial Acoustics Inc 3/4/1999 Reconditioned Systems Inc 2/15/1999 Security Natl Bk Sapulpa Okl Alex Sheshunoff & Co 2/8/1999 World Satellite Network Inc 3/8/1999 Vaughn Communications EVEREN Securities Inc $0.53 12/1/1999 ENStar Inc nm 8 6/17/1999 R-B Rubber Products Inc Pacific Crest Securities $0.05 2 10/29/1999 Kentek Information Systems Inc Janney Montgomery Scott $0.13 8 12/10/1999 ThermoSpectra (Thermo Instr) Tucker Anthony Cleary Gull 12/10/1999 Hawaii National Bancshares 12/10/1999 Concord Fabrics Inc 1/19/2000 Anson Bancorp Inc, Wadesboro, NC Trident Securities 1/19/2000 Geerlings & Wade Inc Lehman Brothers 1/19/2000 CEM Corp 3/8/2000 n-Vision Inc 3/8/2000 ThermoLase Corp (Thermo Trex) 12/21/1999 OIS Optical Imaging Systems 12/21/1999 Saratoga Beverage Group Inc 12/21/1999 Metrika Systems Corp 12/21/1999 Sunrise Intl Leasing Inc 4/4/2000 Thermo Sentron Inc (Thermedics) 2/19/2000 Diehl Graphsoft Inc 2/19/2000 Tubby's Inc 2/19/2000 Acme Electric Corp Ernst & Young LLP 2/19/2000 Old Guard Group Inc 2/19/2000 KLLM Transport Services Inc - ----------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc.
Valuation Analysis - Analysis of Selected Comparable Transactions - All M&A Transactions - ---------------------------------------------------------------------------------------------------------------------------------- All M&A transactions - target sales $5 million and under last two years Date Target Name Target Business Description Offer Share Prices Announced Price ------------------------------- (per share) Closing Closing Premium Premium Price Price 1 day 4 weeks 1 day 4 weeks ------------------------------- prior to annoncement date 7/27/2000 BFX $2.25 $1.00 $0.88 125% 157% 6/16/2000 CNS Bancorp Jefferson City, Mo Savings and loan $14.70 $11.69 $11.75 26% 25% 6/1/2000 Sparta Foods Mnfr durable, non-durable goods 1.41 0.88 0.81 61% 74% 5/16/2000 Randers Killam Gr Construct nonresidential bldgs 4.50 4.00 3.38 13% 33% 4/10/2000 Carolina Fincorp Inc, NC Commercial bank 15.01 11.38 9.38 32% 60% 3/23/2000 Analogy Inc Design, develop comp software 2.48 1.88 2.13 32% 17% 3/22/2000 Northwest Equity Corp Savings and loan holding co 24.00 19.50 22.25 23% 8% 2/29/2000 Three Rivers Financial Corp Savings and loan holding co 18.36 11.00 12.25 67% 50% 2/18/2000 EuroWeb International Corp Internet Service Provider (ISP) 1.58 1.41 1.28 12% 23% 2/15/2000 Haywood Bancshares Inc Bank holding company 22.21 14.50 14.75 53% 51% 2/1/2000 Aseco Corp Mnfr integrated circuits 4.43 3.47 2.06 28% 115% 1/31/2000 Ferrofluidics Corp Mnfr stable magnetic fluids 6.50 3.94 4.13 65% 58% 1/27/2000 Multigraphics Inc Mnfr printing, graphics equip 1.25 1.81 2.31 -31% 46% 1/21/2000 Carleton Corp Develop integrated software 2.45 2.55 2.06 -4% 19% 1/19/2000 Penobscot Shoe Co Mnfr women's footwear 11.75 12.13 11.88 -3% -1% 1/7/2000 Westwood Homestead Financial Savings and loan 12.53 10.25 10.63 22% 18% 1/7/2000 Thermo Vision (Thermo Inst) Mnfr medical monitoring equip 7.00 4.00 3.38 75% 107% 12/28/1999 Uroquest MMedical Corp Mnfr electromedical equipment 2.27 1.56 1.75 45% 30% 12/27/1999 Asahi-America Inc Manufacture plastics pipe 9.55 7.00 7.75 36% 23% 12/27/1999 Template Software Inc Dvlp software 7.90 5.63 5.06 40% 56% 12/23/1999 Western Beef Inc Own, op grocery stores 8.75 7.00 7.13 25% 23% 12/21/1999 Medical Graphics Corp Mnfr cardio monitoring sys 2.15 1.56 1.69 38% 27% 12/20/1999 KSB Bancorp Inc Bank holding company 22.65 15.38 12.63 47% 79% 12/15/1999 Fulton Bancorp, Fulton, MO Savings and loan 19.15 17.00 14.00 13% 37% 12/10/1999 ThermoSpectra (Thermo Instr) Mnfr precision imaging equip 16.00 11.50 9.94 39% 61% 12/1/1999 ENStar Inc Whl connectivity devices 12.50 8.00 8.25 56% 52% 11/18/1999 RiboGene Inc Pvd physical, bio research svcs 3.08 1.75 1.75 76% 76% 11/12/1999 South Carolina Community Savings and loan holding co 17.50 14.50 14.25 21% 23% 10/29/1999 Thermo Power Corp Manufacture cogeneration sys 12.00 11.38 8.50 5% 41% 10/29/1999 Kentek Information Systems Inc Manufacture mid range printers 8.29 7.63 7.00 9% 18% 10/29/1999 Eagle Bancgroup, Bloomington, IL Bank holding company 25.74 22.00 20.56 17% 25% 10/21/1999 Yieldup International Corp Manufacture industrial equip 2.74 1.94 1.69 41% 62% 10/8/1999 Valley National Corp, CA Bank holding company 20.94 16.88 24% 10/4/1999 Stone Street Bancorp Inc, NC Bank holding company 19.86 12.88 14.125 54% 41% 10/1/1999 Sheridan Energy Inc Pvd oil, gas field svcs 5.50 4.00 3.5 38% 57% 10/1/1999 Miami Subs Corp Own, op fast-food restaurants 2.07 0.31 0.3125 562% 562% 9/30/1999 SunPharm Corp Mnfr anticancer drugs 2.07 1.75 1.1875 18% 74% 9/30/1999 Midwest Bancshares Inc, Iowa Bank holding company 16.88 11.75 13 44% 30% 9/24/1999 North East Insurance Co Ppty and casualty insurance co 3.30 2.50 2.25 32% 47% 9/23/1999 United Foods Inc Produce frozen fruits, veggies 3.50 2.50 2.4375 40% 44% 9/20/1999 Tivoli Industries Inc Mnfr nonres electric lighting 4.50 3.31 3.375 36% 33% 9/16/1999 ADFlex Solutions Inc Mnfr circuit-based systems 3.80 4.00 3.75 -5% 1% 9/3/1999 SFS Bancorp Inc, Schenectady, NY Bank holding company 25.10 21.63 19.125 16% 31% 9/1/1999 First Bank of Philadelphia Commercial bank 6.00 5.75 5.375 4% 12% 8/31/1999 fine.com International Corp Provide computer related svcs 4.55 2.25 2.375 102% 92% 8/27/1999 Doughtie's Foods Process meat products 17.00 13.25 11.9375 28% 42% 8/26/1999 MBLA Financial Corp Securities brokerage firm 24.15 18.75 18.9375 29% 28% 8/22/1999 Petroglyph Energy Inc Oil and gas exploration, prodn 3.00 2.38 2.5 26% 20% 8/15/1999 Trion Manufacture exhaust systems 5.50 3.50 3.5 57% 57% 8/11/1999 American Indemnity Finl Corp Property, casualty insurance 15.60 11.50 10.625 36% 47% 8/11/1999 Metra Biosystems Inc Pvd commercial research svcs 1.78 1.03 0.875 73% 103% 8/10/1999 LabOne Inc (Lab Holdings Inc) Pvd testing svcs for ins in 12.75 10.88 11.75 17% 9% 1.06 1.03 2% 88% 8/9/1999 Killearn Properties Inc Real estate development firm 5.50 5.00 5.125 10% 7% Date Target Name % of Enterprise Family Value Target Advisors Announced Shares Value ($mil) Acq. ($mil) 7/27/2000 BFX $3.50 $2.50 6/16/2000 CNS Bancorp Jefferson City, Mo 100% $80.27 $20.85 6/1/2000 Sparta Foods 100% 20.242 17.16 5/16/2000 Randers Killam Gr 0% 117.008 116.55 4/10/2000 Carolina Fincorp Inc, NC 100% 131.012 29.10 Trident Securities 3/23/2000 Analogy Inc 100% 24.95 24.26 Broadview 3/22/2000 Northwest Equity Corp 100% 82.859 19.81 ABN-AMRO Holding NV 2/29/2000 Three Rivers Financial Corp 100% 76.929 13.21 Trident Securities 2/18/2000 EuroWeb International Corp 53% 13.033 15.62 2/15/2000 Haywood Bancshares Inc 100% 144.093 27.78 Trident Securities 2/1/2000 Aseco Corp 100% 20.022 19.82 Adams Harkness & Hill Inc 1/31/2000 Ferrofluidics Corp 100% 33.865 37.26 Advest Inc 1/27/2000 Multigraphics Inc 100% 11.825 3.56 Piper Jaffray Inc 1/21/2000 Carleton Corp 100% 8.51 8.40 Dougherty Summit Securities 1/19/2000 Penobscot Shoe Co 100% 16.395 16.51 Advest Inc. 1/7/2000 Westwood Homestead Financial 100% 115.435 27.18 Keefe Bruyette & Woods In 1/7/2000 Thermo Vision (Thermo Inst) 0% 56.861 57.50 12/28/1999 Uroquest MMedical Corp 100% 22.28 28.62 12/27/1999 Asahi-America Inc 86% 51.599 33.15 ING Barings 12/27/1999 Template Software Inc 100% 44.675 46.85 US Bancorp Piper Jaffray 12/23/1999 Western Beef Inc 28% np 48.09 Houlihan Lokey Howard & Z 12/21/1999 Medical Graphics Corp 100% 15.696 15.47 12/20/1999 KSB Bancorp Inc 100% 157.58 29.99 Charles Webb & Company 12/15/1999 Fulton Bancorp, Fulton, MO 100% 95.185 31.67 12/10/1999 ThermoSpectra (Thermo Instr) 8% 298.206 251.62 Tucker Anthony Cleary Gul 12/1/1999 ENStar Inc 36% 40.737 37.21 11/18/1999 RiboGene Inc 100% 19.331 22.75 Rabobank International 11/12/1999 South Carolina Community 100% 45.186 9.62 Trident Securities 10/29/1999 Thermo Power Corp 22% 276.272 145.50 10/29/1999 Kentek Information Systems Inc 100% 29.806 38.88 Janney Montgomery Scott I 10/29/1999 Eagle Bancgroup, Bloomington, IL 100% 162.797 28.64 Trident Securities 10/21/1999 Yieldup International Corp 100% 24.791 21.65 Needham & Co Inc 10/8/1999 Valley National Corp, CA 100% 230.105 29.09 Hovde Financial, Inc. 10/4/1999 Stone Street Bancorp Inc, NC 100% 102.715 32.54 Orr Management Co 10/1/1999 Sheridan Energy Inc 100% np 37.02 Donaldson, Lufkin & Jenre 10/1/1999 Miami Subs Corp 100% 58.409 56.08 Raymond James & Asssociate 9/30/1999 SunPharm Corp 100% 15.258 15.62 9/30/1999 Midwest Bancshares Inc, Iowa 100% 122.16 19.21 Keefe Bruyette & Soods Inc 9/24/1999 North East Insurance Co 100% 9.979 10.33 Sandler O'Neill Partners 9/23/1999 United Foods Inc 100% 58.028 14.67 JC Bradford & Co 9/20/1999 Tivoli Industries Inc 100% 6.469 7.17 9/16/1999 ADFlex Solutions Inc 100% 66.258 34.32 BancBoston Robertson Step 9/3/1999 SFS Bancorp Inc, Schenectady, NY 100% 180.143 31.78 Keefe Bruyette & Woods In 9/1/1999 First Bank of Philadelphia 100% 54.985 10.06 Berwind Financial Group 8/31/1999 fine.com International Corp 100% 11.66 12.28 Ragen MacKenzie Group Inc 8/27/1999 Doughtie's Foods 100% 27.338 25.42 Mann Armistead & Epperson 8/26/1999 MBLA Financial Corp 100% 149.855 31.09 8/22/1999 Petroglyph Energy Inc 0% 23.428 16.38 8/15/1999 Trion 100% 49.55 39.56 Harris Williams & Co 8/11/1999 American Indemnity Finl Corp 100% 29.533 39.01 Philo Smith 8/11/1999 Metra Biosystems Inc 100% 19.986 22.73 EGS Securities Corporation 8/10/1999 LabOne Inc (Lab Holdings Inc) 20% 183.95 170.91 US Bancorp 100% 35.83 8/9/1999 Killearn Properties Inc 38% 20.152 4.88 - ---------------------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc.
Valuation Analysis - Analysis of Selected Comparable Transactions - All M&A Transactions - ------------------------------------------------------------------------------------------------------------------------------------ All M&A transactions - target sales $5 million and under last two years (cont.) Date Target Name Target Business Description Offer Share Prices Announced Price ------------------------------------- (per share) Closing Closing Premium Premium Price Price 1 day 4 weeks 1 day 4 weeks ------------------------------------- prior to announcement date 7/27/2000 BFX $2.25 $1.00 $0.88 125% 157% 8/4/1999 Golden Genesis Co Mnfr, whl solar electric prods 2.33 1.88 1.5 24% 55% 7/29/1999 Morgan Products Ltd. Mnfr, whl building products 4.00 3.25 2.5 23% 60% 7/21/1999 QMS Inc (Lason Inc) Mnfr printing processors 6.25 5.69 3.875 10% 61% 7/9/1999 Precision Systems Inc. Develop network-based software 1.00 2.06 2.63 -52% -62% 7/8/1999 Endogen Inc Manufacture biotech prod 3.75 2.88 2.625 30% 43% 2.92 1.19 145% 61% 7/2/1999 Atrix International Inc Manufacture, wholesale hardware 2.00 1.50 1.375 33% 45% 7/1/1999 Skaneateles Bancorp Inc Commercial bankholding co 27.89 19.00 15.75 47% 77% 6/30/1999 CRW Financial Inc Pvd credit collection svcs 6.03 5.00 6.5 21% -7% 6/30/1999 Sun Energy Partners LP Oil and gas exploration, prodn 5.75 4.06 3.8125 42% 51% 6/30/1999 Ocal Inc Mnfr coated metal products 3.54 1.75 1.625 102% 118% 6/23/1999 Expert Software Inc Develop software 2.65 1.94 1.625 37% 63% 6/22/1999 NSC Corp (Waste Management) Pvd asbestos abatement svcs 1.25 0.94 0.875 33% 43% 6/18/1999 Standard Funding Corp Insurance agency 3.50 2.75 2.25 27% 56% 6/17/1999 R-B Rubber Products Inc. Mnfr, whl rubber products 3.00 2.13 2.25 41% 33% 6/11/1999 Treadco Inc Own, operate auto supply stores 9.00 6.50 7.25 38% 24% 6/1/1999 Travel Ports of America Inc Own, op truck stop stations 4.30 3.25 3.5 32% 23% 5/19/1999 Shiloh Industries Inc Mnfr automotive stampings 14.50 11.75 11.25 23% 29% 5/14/1999 United Foods Inc Produce frozen fruits, veggies 3.00 2.63 2.9375 14% 2% 5/14/1999 Aquila Gas Pipeline Corp Gas utility 8.00 6.50 4.75 23% 68% 6.06 3.88 56% 100% 5/7/1999 Parts Source Inc Whl, retail auto parts, supplies 3.00 2.50 1.25 20% 140% 5/3/1999 Chyrsalis International Corp Pvd research svcs 0.71 1.06 1.38 -33% 48% 5/3/1999 Quality Semiconductor Manufacture semiconductors 4.77 2.94 2.0625 62% 131% 4/26/1999 Prism Solutions Inc Dvlp data management software 2.26 3.31 1.69 -32% 34% 4/23/1999 HoloPak Technologies Inc Mnfr, whl hot stamp foil 3.64 2.63 1.78125 39% 104% 4/13/1999 Mid-Iowa Financial, Newton, IA Bank holding company 15.00 12.25 11.5 22% 30% 4/9/1999 AG Associates Inc Mnfr single-wafer equipment 5.50 4.38 3.6875 26% 49% 10.25 9.13 12% 28% 4/5/1999 Saba Petroleum Co Oil and gas exploration, prodn 1.84 1.31 1.0625 40% 73% 3/24/1999 Audits & Surveys Worldwide Inc Pvd marketing research svcs 3.24 2.44 2.5 33% 30% 3/22/1999 Security Bank Corp Commercial bank 19.39 11.50 11 69% 76% 3/19/1999 Glenway Financial Corp Bank holding company 19.88 21.75 20.00 -9% -1% 3/19/1999 Gene Medicine Inc Mnfr, dvlp gene therapy prods 2.39 2.00 2.4375 20% -2% 3/15/1999 Pharmhouse Corp Own and operate drug stores 3.25 1.81 1.15625 79% 181% 3/12/1999 Truevision Inc Mnfr color imaging products 0.88 0.81 0.65625 8% 34% 3/9/1999 Forum Retirement Partners LP Own, op retirement centers 5.75 4.63 4.625 24% 24% 3/4/1999 THT Inc Mnfr sanitary paper, steel prod 3.50 2.38 2.625 47% 33% 3/4/1999 COHR Inc Pvd outsourcing svcs 6.50 3.91 3 66% 117% 1/26/1999 Luther Medical Products Inc Manufacture catheter systems 4.70 2.88 2 63% 135% 1/22/1999 Reliance Bankshares Inc Savings and loan 10.40 8.75 8.5 19% 22% 1/12/1999 Lion Brewery Inc Produce beer 4.70 4.13 3.875 14% 21% 1/6/1999 General Microwave Corp Mnfr microwave test equipment 18.00 10.63 9.75 69% 85% 12/31/1998 Red Brick Systems Inc Develop software 2.61 2.25 2.3125 16% 13% 12/31/1998 FemRx Inc Mnfr surgical equipment 2.35 1.81 1.625 30% 45% 12/31/1998 Concentra Corp Dvlp, whl CAD systems software 7.00 4.00 2.5 75% 180% 12/29/1998 Crowley Milner & Co Own, op department stores 3.21 2.63 4.375 22% -27% 12/16/1998 Peerless Group Inc Develop computer software 7.36 4.88 5 51% 47% 12/15/1998 Walshire Assurance Insurance company 8.25 7.50 6.75 10% 22% 12/11/1998 Consilium Inc Develop software 4.30 1.75 1.75 146% 146% 12/8/1998 Consep Inc Manufacture pesticides 1.25 1.34 1.19 -7% 5% 12/8/1998 Lab Specialists of America Inc Provide laboratory testing svc 6.31 4.00 4 58% 58% 11/30/1998 Capital Factors Holdings Inc Pvd short-term bus credit svcs 17.50 16.75 17 4% 3% 11/13/1998 Golden Eagle Group Inc Pvd transp logistics svcs 4.45 1.38 1.375 224% 224% 11/6/1998 Gull Laboratories (Fresenius) Mnfr med diagnostic kits 2.25 2.63 3.88 -14% -42% Date Target Name % of Enterprise Equity Value Target Advisors Announced Shares Value ($mil) Acq. ($mil) 7/27/2000 BFX $3.50 $2.50 8/4/1999 Golden Genesis Co 100% 48.676 39.67 Hanifen Imhoff Inc 7/29/1999 Morgan Products Ltd. 100% 71.954 41.43 Bowles Hollowell Conner 7/21/1999 QMS Inc (Lason Inc) 51% 73.337 66.87 Robinson-Humphrey Co 7/9/1999 Precision Systems Inc. 100% 27.172 20.17 William Blair & Co 7/8/1999 Endogen Inc 100% 12.652 13.49 Adams Harkness & Hill Inc 100% 31.36 7/2/1999 Atrix International Inc 100% 2.527 2.83 7/1/1999 Skaneateles Bancorp Inc 100% 260.456 42.36 McConnell, Budd & Downes 6/30/1999 CRW Financial Inc 100% 41.686 43.83 Janney Montgomery Scott I 6/30/1999 Sun Energy Partners LP 2% 3218.73 2,421.73 No Investment Bank Retain 6/30/1999 Ocal Inc 100% 15.59 20.11 Houlihan Lokey Howard & Z 6/23/1999 Expert Software Inc 100% 21.744 23.34 Piper Jaffray Inc 6/22/1999 NSC Corp (Waste Management) 100% 7.805 12.46 BT Alex Brown Inc 6/18/1999 Standard Funding Corp 100% 47.404 9.66 Ladenburg Thalmann & Co 6/17/1999 R-B Rubber Products Inc. 70% 8.805 6.72 Pacific Crest Securities 6/11/1999 Treadco Inc 49% 63.063 45.94 Stephens Inc 6/1/1999 Travel Ports of America Inc 100% 63.221 36.87 McDonald Investments 5/19/1999 Shiloh Industries Inc 8% 341.029 189.67 5/14/1999 United Foods Inc 63% 49.279 12.58 5/14/1999 Aquila Gas Pipeline Corp 18% 458.096 235.20 Petrie Parkman & Co Inc 100% 41.22 5/7/1999 Parts Source Inc 100% 26.901 10.24 Raymond James & Associate 5/3/1999 Chyrsalis International Corp 100% 18.55 8.19 Vector Securities Intl 5/3/1999 Quality Semiconductor 100% 40.106 36.03 Needham & Co Inc 4/26/1999 Prism Solutions Inc 100% 36.313 42.53 FAC/Equities 4/23/1999 HoloPak Technologies Inc 100% 8.193 9.45 Schroder & Co Inc 4/13/1999 Mid-Iowa Financial, Newton, IA 100% 106.102 26.02 Prairie Capital Services 4/9/1999 AG Associates Inc 100% 38.979 34.58 Soundview Technology Grou 100% 38.90 4/5/1999 Saba Petroleum Co 100% 56.805 20.30 No Investment Bank Retain 3/24/1999 Audits & Surveys Worldwide Inc 100% 47.221 43.22 Allen & Co. Inc 3/22/1999 Security Bank Corp 100% 69.082 19.84 Scott & Stringfellow 3/19/1999 Glenway Financial Corp 100% 265.76 46.56 Stifel Nicolaus & Co Inc 3/19/1999 Gene Medicine Inc 100% 33.77 34.86 PaineWebber 3/15/1999 Pharmhouse Corp 100% 34.718 9.05 3/12/1999 Truevision Inc 100% 7.975 11.53 BancBoston Robertson Step 3/9/1999 Forum Retirement Partners LP 7% 128.485 87.89 3/4/1999 THT Inc 54% 14.322 13.94 3/4/1999 COHR Inc 52% 29.683 41.82 Lehman Brothers 1/26/1999 Luther Medical Products Inc 100% 15.783 16.07 1/22/1999 Reliance Bankshares Inc 100% 31.364 25.23 Robert W Baird & Co Inc 1/12/1999 Lion Brewery Inc 100% 14.413 18.26 Tucker Anthony Inc 1/6/1999 General Microwave Corp 100% 20.921 22.92 Franco Lewis & Company, I 12/31/1998 Red Brick Systems Inc 100% 26.47 33.62 Morgan Stanley & Co 12/31/1998 FemRx Inc 100% 20.649 21.58 Warburg Dillon Read 12/31/1998 Concentra Corp 100% 45.089 46.59 Volpe Brown Whelan & Co 12/29/1998 Crowley Milner & Co 0% 63.238 4.98 12/16/1998 Peerless Group Inc 100% 35.447 36.82 Dain Rauscher Wessels 12/15/1998 Walshire Assurance 100% 42.346 36.65 BT Alex Brown/Wolfensohn 12/11/1998 Consilium Inc 100% 41.319 45.23 Broadview Associates 12/8/1998 Consep Inc 100% 18.48 12.41 Pacific Crest Securities 12/8/1998 Lab Specialists of America Inc 100% 35.716 38.23 Jesup & Lamont Securities 11/30/1998 Capital Factors Holdings Inc 13% 739.913 221.01 11/13/1998 Golden Eagle Group Inc 100% 35.062 30.24 No Investment Bank Retain 11/6/1998 Gull Laboratories (Fresenius) 100% 23.411 18.04 Wasserstein Perella Group - ------------------------------------------------------------------------------------------------------------------------------------ George K. Baum & Company
BFX Hospitality Group, Inc.
Valuation Analysis - Analysis of Selected Comparable Transactions - All M&A Transactions - ------------------------------------------------------------------------------------------------------------------------------------ All M&A transactions - target sales $5 million and under last two years (cont.) Date Target Name Target Business Description Offer Share Prices Announced Price ------------------------------------- (per share) Closing Closing Premium Premium Price Price 1 day 4 weeks 1 day 4 weeks ------------------------------------- prior to announcement date 7/27/2000 BFX $2.25 $1.00 $0.88 125% 157% 11/6/1998 Carnegie Group Inc Operate laboratories 5.00 2.63 1.8125 90% 176% 10/30/1998 Gamma Biologicals Inc Mnfr blood transfusion prod 5.40 2.88 4.375 88% 23% 10/26/1998 Cayenne Software Inc Dvlp bus applications software 0.38 0.44 0.81 -14% -54% 10/9/1998 American Materials & Techs Mnfr advanced composites 6.00 3.00 3.3125 100% 81% 10/6/1998 Audio Communications Network Pvd bus music bdcstg svcs 6.40 4.25 5 51% 28% 9/30/1998 Liberty Technologies Inc Mnfr, whl diagnostic devices 3.50 2.50 2.375 40% 47% 9/11/1998 E-Z Serve Corp. Whl and retail gasoline 0.60 0.44 0.5 37% 20% 8/31/1998 Newstar Media Inc Manufactures audio books 1.44 1.38 1.9375 5% -26% 8/31/1998 Personnel Management Inc Employment agency 16.00 12.75 13 25% 23% Mean 40% 51% Median 32% 41% - ------------------------------------------------------------------------------------------------------------------------------------ Date Target Name % of Enterprise Equity Value Target Advisors Announced Shares Value ($mil) Acq. ($mil) 7/27/2000 BFX $3.50 $2.50 11/6/1998 Carnegie Group Inc 100% 29.145 34.63 Updata Capital Inc 10/30/1998 Gamma Biologicals Inc 100% 25.31 25.63 Dain Rauscher Wessels 10/26/1998 Cayenne Software Inc 100% 6.596 7.99 Adams Harkness & Hill Inc 10/9/1998 American Materials & Techs 100% 35.05 26.73 William Sword 10/6/1998 Audio Communications Network 100% 62.047 29.27 Duff and Phelps 9/30/1998 Liberty Technologies Inc 100% 17.306 17.63 Legg Mason Wood Walker 9/11/1998 E-Z Serve Corp. 100% 107.882 43.18 Donaldson, Lufkin & Jenrette 8/31/1998 Newstar Media Inc 0% 22.128 9.66 8/31/1998 Personnel Management Inc 100% 37.497 34.91 George K Baum & Co - --------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
BFX Hospitality Group, Inc.
Valuation Analysis - Analysis of Selected Comparable Transactions - Industry Specific SIC Codes/(1)/ - ----------------------------------------------------------------------------------------------------------------------------------- Hotel, restaurant and hospitality M&A transactions ($50mm and under, last 2 years) Date Target Name Target Business Description Offer Share Prices Announced Price ------------------------------------- (per share) Closing Closing Premium Premium Price Price 1 day 4 weeks 1 day 4 weeks ------------------------------------- prior to announcement date 7/27/2000 BFX $2.25 $1.00 $0.88 125% 157% 12/29/1999 VICORP Restaurants Inc Own, op franchised restaurants 19.00 16.75 15.81 13% 20% 12/15/1999 Lone Star Steakhouse & Saloon Own, operate restaurants 7.97 7.97 9.06 0% -12% 12/7/1999 Planet Hollywood International Own & operate restaurants 4.50 4.00 3.31 13% 36% 11/5/1999 Ogden Corp Pvd airline support services 10.00 10.38 10.06 -4% -1% 10/19/1999 Lodgian Inc Own, op hotels 4.25 4.38 4.31 -3% -1% 10/15/1999 Interstate Hotels Corp Own, op hotels 4.56 3.00 2.88 52% 59% 10/1/1999 Miami Subs Corp Own, op fast-food restaurants 2.07 0.31 0.31 562% 562% 8/19/1999 Triarc Cos Inc Own, op fast-food restaurants 20.44 21.94 21.00 -7% -3% 8/9/1999 Rally's Hamburgers Inc Own, op drive-through rests 1.06 1.03 0.56 2% 88% 7/8/1999 Coffee People Inc (Second Cup) Own and operate coffee shops 2.92 1.19 1.81 145% 61% 6/10/1999 Amerihost Properties Inc Own and operate hotels, motels 4.00 3.44 3.25 16% 23% 5/10/1999 Signature Inns Inc Own and operate hotels 6.06 3.88 3.03 56% 100% 4/5/1999 Back Bay Restaurants Group Inc Own, op Italian restaurants 10.25 9.13 8.00 12% 28% 3/10/1999 Players International Inc Own, op riverboat casinos 6.04 6.00 5.63 1% 7% 2/19/1999 Eateries Inc Own and operate restaurants 5.13 5.25 5.44 -2% -6% 2/18/1999 ExecuStay Corp Own and operate rooming houses 13.00 13.56 12.75 -4% 2% 11/30/1998 Miami Subs Corp Own, op fast-food restaurants 0.52 0.31 0.31 65% 65% 10/30/1998 Uno Restaurant Corp Own, op franchised restaurants 7.00 5.81 6.81 20% 3% 10/23/1998 Sunterra Corp Own, operate timeshare resorts 8.34 8.56 7.25 -3% 15% 9/25/1998 Cooker Restaurant Corp Own, operate restaurants 12.00 8.38 9.44 43% 27% 9/25/1998 Max & Erma's Restaurant Inc Own and operate restaurants 6.63 6.63 6.75 0% -2% Mean 47% 51% Median 12% 20% /(1)/ SIC Codes: 5812, 5813, 7011, 7041, 7033, 7021, 7032 - ------------------------------------------------------------------------------------------------------------------------------------ Date Target Name % of Enterprise Equity Value Target Advisors Announced Shares Value ($mil) Acq. ($mil) 7/27/2000 BFX $3.50 $2.50 /1/SIC Codes: 5812,5813,7011,7041,7033,7021,7032 12/29/1999 VICORP Restaurants Inc 0% 166.55 168.02 12/15/1999 Lone Star Steakhouse & Saloon 10% 220.42 285.36 12/7/1999 Planet Hollywood International 9% 576.75 437.50 11/5/1999 Ogden Corp 0% 2,472.59 494.66 10/19/1999 Lodgian Inc 0% 984.08 119.12 10/15/1999 Interstate Hotels Corp 0% nm 27.65 10/1/1999 Miami Subs Corp 100% 58.41 56.08 Raymond James & Associates Inc. 8/19/1999 Triarc Cos Inc 8% 1,043.98 399.97 8/9/1999 Rally's Hamburgers Inc 100% 103.31 35.83 Schroder & Co Inc 7/8/1999 Coffee People Inc (Second Cup) 100% 36.15 31.36 Black & Co Inc 6/10/1999 Amerihost Properties Inc 0% 89.46 24.27 5/10/1999 Signature Inns Inc 100% 140.09 41.22 McDonald Investments 4/5/1999 Back Bay Restaurants Group Inc 100% 42.58 38.90 Schroder & Co Inc. 3/10/1999 Players International Inc 3% 337.94 193.42 2/19/1999 Eateries Inc 0% np 20.26 2/18/1999 ExecuStay Corp 44% 129.91 107.00 11/30/1998 Miami Subs Corp 0% 16.35 14.02 10/30/1998 Uno Restaurant Corp 0% 120.33 75.98 10/23/1998 Sunterra Corp 0% 910.00 299.43 9/25/1998 Cooker Restaurant Corp 39% 160.24 121.91 9/25/1998 Max & Erma's Restaurant Inc 12% 50.89 28.20 - --------------------------------------------------------------------------------------------------------------------- George K. Baum & Company
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