EX-99.C.5 3 0003.txt Confidential =============================================================================== Project Harbor Presentation to the Special Committee Update of Strategic Alternatives July 28, 2000 =============================================================================== McDonald Investments [Logo] Title Section ----- ------- Executive Summary 1 Strategic Alternatives ---------------------- Status Quo 2 Break-Up Scenario 3 Strategic Sale or Merger - Update from SSB Recapitalization - Current Negotiations with a Financial Buyer McDonald Investments [Logo] Industrial Manufacturing Group Executive Summary [Graphic omitted] McDonald Investments [Logo] Industrial Manufacturing Group Confidential Executive Summary ----------------- =============================================================================== o Project Harbor is a diversified small capitalization manufacturing company with operations divided among a number of business segments with the automotive segment accounting for 50% of sales. 2000E Sales % ----------- - - Specialty metal formed products $872.2 50% - Specialty fasteners products 243.1 13 - Towing systems products 267.4 18 - Specialty packaging and sealing products 216.3 13 - Specialty industrial products 107.7 6 o McDonald Investments was hired in December 1999 by the special committee as its financial advisor and to undertake a study to enable it to issue a fairness opinion in a certain going private transaction. ------------------------------------------------------------------------------- Industrial Manufacturing Group 1 McDonald Investments [Logo] Confidential Executive Summary (Cont.) ------------------------- =============================================================================== ----------------------------------------------------------------------------------------------------------------------------------- Price Share @ 7/26/00 $ 11.50 Enterprise Value as a Multiple of -------------------------------------------------------- Shares Outstanding 44.8 LTM Sales 1.0x -------- LTM EBIT 7.7x LTM EBITDA 5.6x Implied Equity Value $515.3 Balance Sheet Data @ 6/30/99E Equity Value as a Multiple of ------------------------------------------------------ -------------------------------------------------------- Cash 3.0 2000 Net Income 5.2x Equity and Other Investments in Affiliates - After-Tax 138.0 [1] Convertible Subordinated Debentures 305.0 Long-Term Debt 1,031.0 Premium (Discount) to Current Price Other 0.0 -------------------------------------------------------- -------- 52 Week High -35.0% Implied Enterprise Value $1,710.3 52 Week Low 9.5% ----------------------------------------------------------------------------------------------------------------------------------- Note: [1] After-Tax Proceeds from Current Offer for all Affiliates Excluding Saturn + Proceeds from Saturn's Scheduled IPO
o The stock is trading at $11.50 per share as of 7/26/00, down 32% for the Latest Twelve Months. o Automotive OEM represents approximately 50.0% of Harbor's estimated sales for the year ended 12/31/00. o The Automotive OEM Supplier s Group was down 23% for the latest twelve months ending 7/26/00. o Current Comparable Automotive Suppler Group Median Multiples: Enterprise Value to: -------------------- LTM Sales 0.6x LTM EBIT 5.5x LTM EBITDA 4.1x Automotive Supplier Group: ARM;BWA;MODI;TWR;SUP;AXL;HAZ;INMT;SMPS ------------------------------------------------------------------------------- Industrial Manufacturing Group 2 McDonald Investments [Logo] Confidential Summary of Alternatives ----------------------- =============================================================================== Alternative ----------- o Status Quo o Break-Up Scenario o Strategic Sale or Merger o Recapitalization ------------------------------------------------------------------------------- Industrial Manufacturing Group 3 McDonald Investments [Logo] Confidential Current Price Performance ------------------------- =============================================================================== Harbor Weekly Volume/Price Graph -------------------------------- 7/30/99 to 7/26/00 [Graphic omitted] Graphs Harbors weekly stock trading volume and stock price from 7/30/99 to 7/2600. Harbor is currently trading at $11.50, down 9.4% for the year. Average daily volume continued to drop to an average of 83,336 shares during 2000 compared to 90,006 and 162,333 shares in 1999 and 1998 respectively. Liquidity concerns raise the cost of capital of Harbor causing a multiple compression given constant growth prospects. Stock price closes at a 52 Week High of $17.50 on 8/27/99. Stock price closes at a 52 Week Low of $10.81 on 6/30/00 ------------------------------------------------------------------------------- Industrial Manufacturing Group 4 McDonald Investments [Logo] Confidential Price Earnings Multiples ------------------------ =============================================================================== Trailing Twelve Price Earnings Multiple --------------------------------------- 1995 - LTM [Graphic omitted] Graphs Harbors trailing year end twelve months price earnings multiple from 12/95 to the latest twelve months versus the S&P 500 over the same time period. Note: Harbor EPS adjusted for non-recurring or unusual items. Adjusted for options using the treasury method. Source: FactSet and Company reports Harbor's P/E has decreased from a year-end high of 19.8x in 1996 to the current valuation of 6.3x. The S&P500 is currently trading at 28.5x trailing twelve months EPS. P/E compression due to: ----------------------- Small Capitalization Significant Automotive Exposure Leveraged Balance Sheet Current Total Debt to EBITDA of 4.4x Automotive Comparable Group Median Total Debt to EBITDA of 2.2x Diversified Comparable Group Median Total Debt to EBITDA of 1.7x ------------------------------------------------------------------------------- Industrial Manufacturing Group 5 McDonald Investments [Logo] Confidential LTM Harbor Price Performance Vs. -------------------------------- Automotive Supplier Group; Diversified Group; S&P500 =============================================================================== [Graphic omitted] Graphs Harbors weekly stock price performance versus the automotive supplier group, the diversified group, and the S&P 500 indexed from 7/30/99 to 7/26/00. ------------------------------------------------------------------------------- Automotive Supplier Group: ARM;BWA;MODI;TWR;ARV;SUP;AXL;HAZ;INMT;SMPS Diversified Group: DOV;DHR;ETN;CBE;IIN;SPW;USI;HSC;CR Source: FactSet ------------------------------------------------------------------------------- Industrial Manufacturing Group 6 McDonald Investments [Logo] Confidential Harbor Economic Profit ---------------------- =============================================================================== [Graphic omitted] Graphs Harbors economic profit for the Forming Segment, Packaging Segment, Specialty Segment, Towing Segment, and the Fasteners Segment for the year-ended 12/99A and 12/00E. o Positive economic profit achieved by the Forming Segment only for the periods ending 12/99A and 12/00E. Positive economic profit is achieved only when returns on invested capital exceed the stakeholder's required return. o Total segment economic profit of ($34.7) and ($35.6) for the periods ending 12/99E and 12/00E respectively. ------------------------------------------------------------------------------- Economic Profit = Invested Capital* ( ROIC - WACC) Where ROIC = Return on Invested Capital; WACC = Weighted Average Cost of Capital (i.e. required return of both debt and equity investors) ------------------------------------------------------------------------------- Industrial Manufacturing Group 7 McDonald Investments [Logo] Status Quo [Graphic omitted] McDonald Investments [Logo] Industrial Manufacturing Group Confidential Current Research Coverage ------------------------- =============================================================================== o According to First Call Recommendations, Project Harbor is currently followed by four equity analysts with the following First Call ratings: - ABN AMRO Inc. Buy - Deutsche Bank Alex. Brown Buy/Hold - ING Barings Hold - Morgan Stanley Dean Witter Hold Most Recent Revisions have been Down. ------------------------------------------------------------------- Revision Consensus Number of Date Recommendation Brokers -------- -------------- --------- 07/05/00 2.3 4 03/31/00 1.8 4 02/27/00 1.3 3 02/23/00 1.8 4 10/17/00 2.0 5 Note: --------------------------------------------------------- Ratings Scale: 1.0 = Buy; 3.0 = Hold; 5.0 = Sell ------------------------------------------------------------------- ------------------------------------------------------------------------------- Industrial Manufacturing Group 8 McDonald Investments [Logo] Confidential Dividend Discount Model - Earnings ---------------------------------- =============================================================================== Dividends Per Year Management Estimates ------------------ -------------------- 2000 $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.35 2001 0.35 0.35 0.35 0.35 0.35 0.35 2002 0.35 0.35 0.35 0.35 0.35 0.35 ------ ------ ------ ------ ------ ------ Total $ 1.05 $ 1.05 $ 1.05 $ 1.05 $ 1.05 $ 1.05 Earnings Per Share Management Estimates ------------------ -------------------- 2000 $ 1.86 $ 1.86 $ 1.86 $ 1.86 $ 1.86 $ 1.86 2001 2.60 2.60 2.60 2.60 2.60 2.60 2002 3.14 3.14 3.14 3.14 3.14 3.14 ----------------------------------------------------------------------------------------------------- Terminal Value P/E Multiple 5.0x 6.0x 7.0x 8.0x 9.0x 10.0x ----------------------------------------------------------------------------------------------------- Implied Price Per Share ----------------------- 2000 $ 9.29 $11.15 $13.01 $14.86 $16.72 $18.58 2001 12.98 15.58 18.17 20.77 23.37 25.96 2002 15.72 18.87 22.01 25.15 28.30 31.44 ----------------------------------------------------------------------------------------------------- Equity Discount Rate 14.5% 14.5% 14.5% 14.5% 14.5% 14.5% ----------------------------------------------------------------------------------------------------- Present Value [1] ----------------- Holding Period (Yrs) 1 2000 $ 8.44 $10.06 $11.69 $13.31 $14.93 $16.55 2 2001 10.51 12.49 14.47 16.45 18.43 20.41 3 2002 11.34 13.43 15.52 17.62 19.71 21.81 Note: ----------------------------------------------------------------------------------------------------- [1] Present Value of Dividends and Implied Price Per Share Based on the Investment Holding Period
------------------------------------------------------------------------------- Industrial Manufacturing Group 9 McDonald Investments [Logo] Confidential Dividend Discount Model - EBITDA -------------------------------- =============================================================================== Projected EBITDA Management Estimates ---------------- -------------------- 2000 $320.8 $320.8 $320.8 $320.8 $320.8 $320.8 2001 376.6 376.6 376.6 376.6 376.6 376.6 2002 419.1 419.1 419.1 419.1 419.1 419.1 ------------------------------------------------------------------------------------------------------- Terminal Value EBITDA Multiple 4.0x 4.5x 5.0x 5.5x 6.0x 6.5x ------------------------------------------------------------------------------------------------------- Implied Enterprise Value ------------------------ 2000 $1,283.2 $1,443.6 $1,604.0 $1,764.4 $1,924.8 $2,085.2 2001 1,506.4 1,694.7 1,883.0 2,071.3 2,259.6 2,447.9 2002 1,676.4 1,886.0 2,095.5 2,305.1 2,514.6 2,724.2 Net Debt -------- 2000 $1,269.3 $1,269.3 $1,269.3 $1,269.3 $1,269.3 $1,269.3 2001 1,192.2 1,192.2 1,192.2 1,192.2 1,192.2 1,192.2 2002 1,079.8 1,079.8 1,079.8 1,079.8 1,079.8 1,079.8 Implied Price Per Share ----------------------- 2000 $ 3.04 $ 6.25 $ 9.45 $12.66 $15.87 $19.08 2001 9.04 12.81 16.58 20.34 24.11 27.87 2002 14.69 18.88 23.07 27.27 31.46 35.65 ------------------------------------------------------------------------------------------------------- Equity Discount Rate 14.5% 14.5% 14.5% 14.5% 14.5% 14.5% ------------------------------------------------------------------------------------------------------- Present Value [1] ----------------- Holding Period (Yrs) 1 2000 $ 2.98 $ 5.78 $ 8.58 $11.39 $14.19 $16.99 2 2001 7.51 10.38 13.26 16.13 19.00 21.87 3 2002 10.65 13.44 16.23 19.03 21.82 24.61 Note: ----------------------------------------------------------------------------------------------------- [1] Present Value of Dividends, Implied Price Per Share, and Affiliates Based on the Investment Holding Period
------------------------------------------------------------------------------- Industrial Manufacturing Group 10 McDonald Investments [Logo] Break-Up Scenario [Graphic omitted] McDonald Investments [Logo] Industrial Manufacturing Group Confidential Business Segment After-Tax Proceeds ----------------------------------- =============================================================================== -------------------------------------------------- ----------------------------------------------- Fasteners Segment Towing Segment -------------------------------------------------- ----------------------------------------------- Comparable Public Companies $276.7 Comparable Public Companies $246.5 Discounted Cash Flow / Economic Profit 274.1 Discounted Cash Flow / Economic Profit 347.7 Comparable Public M&A Transactions 260.8 Comparable Public M&A Transactions 341.4 ------ ------ Implied Enterprise Value 270.5 Implied Enterprise Value 311.9 Basis Basis ----- ----- Book 329.9 Book 275.5 Tax 157.9 Tax 119.1 ------ ------ Average 243.9 Average 197.3 Gain(Loss) 26.7 Gain(Loss) 114.5 Taxes @ 38.0% 10.1 Taxes @ 38.0% 43.5 After-Tax Proceeds $260.4 After-Tax Proceeds $268.3 -------------------------------------------------- ----------------------------------------------- -------------------------------------------------- ----------------------------------------------- Packaging Segment Specialty Segment -------------------------------------------------- ----------------------------------------------- Comparable Public Companies $329.4 Comparable Public Companies $ 82.3 Discounted Cash Flow / Economic Profit 379.9 Discounted Cash Flow / Economic Profit 114.7 Comparable Public M&A Transactions 330.5 Comparable Public M&A Transactions 110.9 ------ ------ Implied Enterprise Value 346.6 Implied Enterprise Value 102.6 Basis Basis ----- ----- Book 360.6 Book 141.8 Tax 129.2 Tax 54.0 ------ ------ Average 244.9 Average 97.9 Gain(Loss) 101.7 Gain(Loss) 4.7 Taxes @ 38.0% 38.6 Taxes @ 38.0% 1.8 After-Tax Proceeds $307.9 After-Tax Proceeds $100.8 -------------------------------------------------- -------------------------------------------------
------------------------------------------------------------------------------- Industrial Manufacturing Group 11 McDonald Investments [Logo] Confidential Business Segment After-Tax Proceeds ----------------------------------- =============================================================================== ----------------------------------------------- --------------------------------------------------- Forming Segment [1] Total ----------------------------------------------- --------------------------------------------------- Comparable Public Companies $569.9 Fasteners Segment $ 260.4 Discounted Cash Flow / Economic Profit 843.5 Towing Segment 268.3 Comparable Public M&A Transactions 940.3 Packaging Segment 307.9 ------ Specialty Segment 100.8 Implied Enterprise Value 784.6 Forming Segment [1] 784.6 -------- Basis After-Tax Proceeds 1,722.1 ----- Book 482.4 Balance Sheet Data @ 6/30/00E Tax 335.8 --------------------------------------- ------ Average 409.1 Cash 4.0 Cash Proceeds from Equity Affiliates - AT 138.0 Gain(Loss) 375.5 Convertible Subordinated Debentures 305.0 Taxes @ 38.0% - Long-Term Debt 1,031.0 -------- After-Tax Proceeds $784.6 After-Tax Proceeds to Shareholders 528.1 ----------------------------------------------- [1] Forming Segment Sold Last in Harbor Stock Sale Shares Outstanding 44.8 -------- Implied Price per Share $11.79 ---------------------------------------------------
o The Fasteners, Towing, Packaging, and Specialty Segments would be sold first leaving the Forming Segment as Harbor Consolidated. The Forming Segment would then be sold in a Harbor stock sale to avoid any additional taxes. ------------------------------------------------------------------------------- Industrial Manufacturing Group 12 McDonald Investments [Logo]