EX-99.C.4 8 j0476003exv99wcw4.txt PROJECT SPAWN DISCUSSION MATERIALS 11/11/03 EXHIBIT (c)(4) Discussion Materials for the Board of Directors [MORGAN JOSEPH LOGO] November 11, 2003 PROJECT SPAWN Confidential Disclaimer - The following materials (the "Presentation") were prepared for the Special Committee of the Board of Directors of Sylvan Inc. ("Sylvan" or the "Company") which has requested that Morgan Joseph & Co. Inc. ("Morgan Joseph") provide its opinion as to the fairness, from a financial point of view, to the shareholders of the Company, excluding Dennis Zensen, Virgil Jurgensmeyer, Roger Claypoole, Snyder Associated Companies, Inc., and SAC Holding Company, of the consideration to be paid by a group formed by Snyder Associated Companies, Inc. and selected others (the "Acquiror") in connection with the proposed acquisition of the Company (the "Proposed Transaction"). - In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of the financial and other information used by us and have not attempted independently to verify such information, nor do we assume any responsibility to do so. We have assumed that the Company's forecasts and projections provided to or reviewed by us have been reasonably prepared based on the best current estimates and judgment of the Company's management as to the future financial condition and results of operations of the Company. While we have visited certain of the Company's locations, we have not conducted a physical inspection of the properties and facilities of the Company, nor have we made or obtained any independent evaluation or appraisal of the assets or liabilities of the Company. We have also taken into account our assessment of general economic, market and financial conditions and our experience in similar transactions, as well as our experience in securities valuation in general. Our opinion necessarily is based upon economic, market, financial 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 events or circumstances occurring after the date hereof. We reserve, however, the right to withdraw, revise or modify our opinion based upon additional information which may be provided to or obtained by us, which suggests, in our judgment, a material change in the assumptions (or the bases therefor) upon which our opinion is based. - These materials are not intended to represent an opinion, but rather to serve as discussion materials for the Board to review and as a basis upon which Morgan Joseph may render an opinion. These materials do not address the Company's underlying business decision to approve the Proposed Transaction or constitute a recommendation to the Company or its shareholders as to any action it should take regarding the Proposed Transaction. These materials may not be reproduced, summarized, excerpted from or otherwise publicly referred to or disclosed in any manner without our prior written consent. - The following materials are based upon Morgan Joseph's analysis of the Proposed Transaction as of November 11, 2003. In the event of material changes to the terms and conditions of the Proposed Transaction upon which these materials are based, the enclosed analysis and our conclusions may be affected. - Certain portions of the enclosed analysis are based upon projected financial results. Any projected financial results are based upon analyst forecasts, internal projections and discussions with management of the Company. A number of factors, including industry conditions, changes in costs, labor issues and other factors which are beyond the scope of these projections and out of the control of the Company, the Acquiror and Morgan Joseph may cause actual results to differ materially from these projections. Material changes in the projections may affect the conclusions derived from our analysis. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/2 Table of Contents 1. INTRODUCTION 2. SUMMARY OF PROPOSED TRANSACTION 3. SUMMARY BACKGROUND OF PROPOSED TRANSACTION 4. OVERVIEW OF THE COMPANY 5. OVERVIEW OF THE ACQUIROR 6. ANALYSIS OF PROPOSED TRANSACTION APPENDIX A. DESCRIPTIONS OF COMPARABLE COMPANIES [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/3 1/Introduction [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/4 Introduction - Morgan Joseph & Co. Inc. ("Morgan Joseph") has been retained by the Special Committee of the Board of Directors of Sylvan Inc. (the "Company") and requested to render its opinion to the Board of Directors of the Company as to the fairness, from a financial point of view, of the consideration to be received by the shareholders of the Company, excluding Dennis Zensen, Virgil Jurgensmeyer and Roger Claypoole, pursuant to the proposed sale to a group formed by Snyder Associated Companies, Inc. (the "Acquiror") of all of the Common Stock of the Company (the "Proposed Transaction"). - In conducting our analysis and arriving at our opinion, we have reviewed and analyzed, among other things, the following: - The draft Agreement and Plan of Merger dated November 10, 2003 (the "Agreement"); - The Company's Annual Reports on Form 10-K for each of the fiscal years in the three-year period ended December 31, 2002, and the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003 and June 30, 2003, and September 28, 2003 (draft as of November 6, 2003); - The indications of interest received by the Company; - Certain other publicly available information concerning the Company and the trading markets for the Company's common stock; - Certain internal information and other data relating to the Company, its business and prospects, including forecasts and projections prepared and provided to us by management of the Company; - Certain publicly available information concerning certain other companies engaged in businesses which we believe to be generally comparable to the Company and the trading markets for certain of such other companies' securities; and - The financial terms of certain recent business combinations which we believe to be relevant to the Proposed Transaction. - We have also interviewed certain senior officers of the Company concerning the business and operations, assets, present condition and prospects of the Company, visited certain of the Company's locations and undertook such other studies, analyses and investigations as we deemed appropriate. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/5 Introduction - The Acquiror has proposed to purchase all the outstanding shares of Common Stock, par value $0.001 per share. After the proposed transaction, Sylvan will become a privately held company. - All shareholders will receive $12.25 in cash for each share of Common Stock held, or $64.2 million in aggregate. Merger consideration of $12.25 per share, plus assumed net debt as of September 28, 2003 of $31.4 million (including minority interest of $2.2 million), implies an enterprise value for the Proposed Transaction of $95.6 million. - Process: - Sign the definitive merger agreement on November 11, 2003; - File proxy statement with SEC by November 28, 2003; - Receive approval from the SEC and mail proxies to the stockholders by December 26, 2003; - Hold special meeting and stockholder vote by the middle of February; and - Proposed Transaction closes; a subsidiary created by the Acquiror merges with and into Sylvan pursuant to a reverse triangular merger by the end of February 2004. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/6 2/SUMMARY OF PROPOSED TRANSACTION [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/7 Summary of Proposed Transaction Summary of Key Terms of the Proposed Transaction CONSIDERATION: - $12.25 cash consideration for Sylvan's Common Stock TRANSACTION STRUCTURE: - Reverse triangular merger PRINCIPAL CONDITIONS TO CLOSING: - Approval by the Company's shareholders - Material adverse change out - Fiduciary out in the event of a Superior Proposal (as determined by the Special Committee or the Board) TERMINATION FEE: - $2.0 million plus expense reimbursement of up to $0.5 million NON-COMPETITION: - None ESTIMATED CLOSING: - End of February 2004 OTHER: - In connection with the execution of the definitive agreement, certain shareholders will also execute an option agreement and voting agreements. The shareholders are Nelson Obus and affiliated entities (option agreement) and Steel Partners II, L.P. - Dennis Zensen, CEO of the Company, will contribute (all or part) of his shares in connection with the Proposed Transaction. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/8 3 SUMMARY BACKGROUND OF PROPOSED TRANSACTION [MORGAN JOSEPH LOGO] PROJECT SPAWN PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 9 Summary Background of Proposed Transaction MAY 14, 2002: - Sylvan retains Lane Berry as advisor to the Company and announces plans to explore strategic alternatives MAY - SEPTEMBER 2002: - Lane Berry conducts first marketing process - 14 prospective strategic buyers: 0 bids - 21 prospective financial buyers: 2 bids - American Securities Capital Partners: $10.00 - $11.00/share - Cadigan Investment Partners(1): $12.50 - $13.50/share - Based on 2003E Revenue and EBITDA of $88.9 million and $16.5 million OCTOBER 15, 2002: - Company announces major share repurchase program up to 1.3 million shares and completion of its review of strategic alternatives - 333,321 shares repurchased in 2002 at an average price of $10.60 (310,000 purchased following announcement of program) - No shares purchased in 2003; program suspended APRIL 16, 2003: - Company announces it has received a non-binding proposal from a management-led buyer group at $11.00/share with equity financing provided by the Snyder Associated Companies, Inc. APRIL 23, 2003: - Company forms a Special Committee and retains Morgan Joseph as financial advisor to the Special Committee (1) The Tokarz Group is run by Michael Tokarz who is the Chairman of Cadigan Investment Partners. [MORGAN JOSEPH LOGO] PROJECT SPAWN PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 10 Summary Background of Proposed Transaction MAY - JUNE 2003: - Lane Berry and Morgan Joseph conduct second marketing process - 32 prospective strategic buyers: 0 bids - 41 prospective financial buyers: 4 bids - American Securities Capital Partners: $8.00/share - Key Kosmont: $7.00-$9.00/share - Lake Pacific Partners: $11.50/share - The Tokarz Group(1): $10.00/share JUNE 16, 2003: - Management-led group withdraws proposal JULY 21, 2003: - Company signs exclusivity agreement with Lake Pacific Partners AUGUST 28, 2003: - Lake Pacific Partners receives extension of "exclusivity" and revises bid with two-tier offer - $11.50/share for Insiders - $12.00/share for Outsiders OCTOBER 2, 2003: - Lake Pacific Partners notifies Special Committee and financial advisors that the source of $15.0 million of their financing has withdrawn their commitment. OCTOBER 7, 2003: - Lake Pacific Partners exclusivity expires (1) The Tokarz Group is run by Michael Tokarz who is the Chairman of Cadigan Investment Partners. [MORGAN JOSEPH LOGO] PROJECT SPAWN PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 11 Summary Background of Proposed Transaction OCTOBER 29, 2003: - The Snyder Associated Companies, Inc. expressed interested in submitting an offer to acquire the Company at a price "higher" than $12.00/share. NOVEMBER 5, 2003: - The Snyder Associated Companies, Inc. orally communicated an offer of $12.25/share to acquire the Company, with certain members of management, the Board of Directors, and other identified shareholders, including Dennis Zensen, Virgil Jurgensmeyer and Roger Claypoole, to be equity participants in the purchaser. NOVEMBER 6, 2003: - The counsel to the Special Committee, Davis Polk, submitted a definitive agreement to the Snyder buyout group for comments and to begin formal negotiations. - Lake Pacific Partners re-submits their prior acquisition proposal with evidence of equity and debt financing. Lake Pacific expresses a desire to proceed expeditiously to closing with deadline to consummate a transaction by November 7, 2003. NOVEMBER 7, 2003: - Counsel to the Special Committee and counsel to the Snyder buyout group reach substantial agreement on merger agreement. NOVEMBER 9, 2003: - Lake Pacific Partners orally communicated an offer of $12.50/share to acquire the Company subject to reaching an agreement for Dennis Zensen to rollover 100% of his shares and also reaching agreement with respect to employment and other business matters in connection with the transaction. NOVEMBER 11, 2003: - Meeting of Special Committee to consider Snyder acquisition proposal and Lake Pacific acquisition proposal. Board meeting to follow to consider and act on the recommendation of the Special Committee. Expected signing of definitive agreement. [MORGAN JOSEPH LOGO] PROJECT SPAWN PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 12 4 OVERVIEW OF THE COMPANY [MORGAN JOSEPH LOGO] PROJECT SPAWN PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 13 COMPANY SUMMARY COMPANY DESCRIPTION The Company is a worldwide producer and distributor of products for the mushroom industry, specializing in spawn (the equivalent of seed for mushrooms) and spawn-related products and services. The Company, which operates through its subsidiaries, is also a grower of fresh mushrooms in the United States. The Company has two business segments: spawn products and fresh mushrooms. Spawn-related products include casing inoculum, nutritional supplements and disease-control agents. The fresh mushrooms segment is comprised of Quincy Farms, a large, regional producer of fresh mushrooms. GENERAL COMPANY INFORMATION MANAGEMENT Dennis Zensen - Chairman, President and CEO Donald Smith - CFO Monir Elzalaki - Director; President of Sylvan America Gregory Verhagen - President of Quincy Farms Gary Walker - President of Sylvan Bioproducts, Inc. BOARD OF DIRECTORS Dennis Zensen (Chairman) William L. Bennett (Monitor Company Group, L.P.) Monir Elzalaki (President of Sylvan America) Jeanine C. Heller (Independent Investor Relations Consultant) Virgil H. Jurgensmeyer (Mid-West Custom Mixing Co.) Nelson Obus (Wynnefield Capital, Inc.) HEADQUARTERS: SAXONBURG, PENNSYLVANIA SUMMARY FINANCIAL INFORMATION (a) MARKET DATA AS OF 11/06/03 Stock Price $ 10.07 52-Week High $ 11.95 84.3% 52-Week Low $ 8.60 117.1% FD Shares Outstanding 5.2 Equity Value 51.9 Enterprise Value ("EV") 83.4 BALANCE SHEET DATA AS OF 9/28/03 (a) Cash and Equivalents $ 6.1 Debt 35.4 Minority Interest 2.2
ESTIMATES (a), (b) $ IN MILLIONS EV MULTIPLE ------------- ----------- FY 2003 Revenue $ 95.9 0.9x FY 2003 EBITDA 13.1 6.4x FY 2004 Revenue $ 96.9 0.9x FY 2004 EBITDA 14.0 6.0x
(a) Millions, except per share data. (b) Financial projections from the Company. [MORGAN JOSEPH LOGO] PROJECT SPAWN PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 14 OVERVIEW OF THE COMPANY Business Overview - Successor to the business of a Pennsylvania corporation that was chartered in 1937 - Worldwide producer and distributor of products for the mushroom industry, specializing in spawn and spawn-related products and services, and is a major grower of fresh mushrooms in the U.S. - The Company has two reportable business segments: - Spawn Operations - Accounts for 71% of the Company's total sales in 2002 and 79% of its operating income. - Conducts operations through subsidiaries in North America, Europe, Australia and South Africa - Plant operations are conducted in: the United States, England, Ireland, the Netherlands, France, Hungary, Australia, South Africa and Canada - Fresh Mushrooms Operations - Accounts for 29% of the Company's total sales in 2002 and 21% of its operating income - Operates a farm located in Quincy, Florida, one of the most modern and efficient mushroom production operations in North America - Within Quincy operations are four satellite mushroom growing facilities; two commenced operations in mid-2001 and two commenced operations in early 2003 - January 2000, Sylvan began selling all of its mushrooms to a leading U.S. mushroom marketing organization that packages and distributes them throughout the eastern United States [MORGAN JOSEPH LOGO] PROJECT SPAWN PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 15 OVERVIEW OF THE COMPANY Business Outlook - Global "fresh" mushroom market is a mature industry growing at GDP growth rates - Fresh producers in U.S. continue to struggle with high potential for further consolidation - Certain international markets unstable and in state of transition/consolidation - French growers benefiting from government subsidies - Growers in Poland taking some market share away from Sylvan - Overall European market mature - Modest upside potential in bioproducts; however, no "break-out" products near-term - Agaricus Blazei sales up due to Japanese demand for tea product - Red Yeast Rice revenue well above forecast due to strong GNC demand in Q2 - Company pursuing new sales channels for bioproducts (Whole Foods, Wild Oats, Vitamin Shoppes, etc.) - Company maintaining strong market position with strategic initiatives to increase volume: - JV operations in Mexico - "Satellite" growing opportunities for farmers - Few catalysts likely to significantly increase overall demand for fresh mushrooms and therefore spawn - Recent initiatives to lower prices in an effort to increase volume yielded limited success due to competitors following Sylvan - Limited capital requirements going forward to maintain world-class infrastructure and support projected global demand [MORGAN JOSEPH LOGO] PROJECT SPAWN PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 16 Overview of the Company Summary Ownership Profile
TOTAL PERCENTAGE DILUTED PERCENTAGE REPORT DATE HOLDER NAME SHARES HELD (1) OF TOTAL SHARES (6) OF TOTAL ----------- ----------- --------------- -------- ---------- --------- Insider Holdings 8/21/2003 Nelson Obus - Director 1,069,886 (2) 20.75% 1,080,886 18.18% 8/21/2003 Dennis C Zensen - Chairman, President and CEO 694,128 (3) 13.46% 724,128 12.18% 8/21/2003 Virgil H. Jurgensmeyer - Director 20,000 0.39% 55,000 0.92% 8/21/2003 Monir K. Elzalaki - Director & Pres. of Sylvan America 11,061 0.21% 56,061 0.94% 8/21/2003 William L. Bennett - Director 8,880 (4) 0.17% 24,880 0.42% 8/21/2003 Jeanie Heller - Director 1,000 0.02% 17,000 0.29% 8/21/2003 Donald A. Smith - CFO 0 0.00% 33,668 0.57% 8/21/2003 All Others 48,645 0.94% 241,440 4.06% --------- ------ --------- ------ 1,853,600 35.96% 2,233,063 37.55% 5% Owners 3/31/2003 Steel Partners 537,772 10.43% 537,772 9.04% --------- ------ --------- ------ 537,772 10.43% 537,772 9.04% Other Institutions 6/30/2003 Dimensional Fund Advisors 397,676 7.71% 397,676 6.69% 6/30/2003 Manning & Napier Advisors 199,925 3.88% 199,925 3.36% 6/30/2003 Paradigm Capital Mgmt (cl King & Associates) 170,100 3.30% 170,100 2.86% 6/30/2003 Gabelli Funds Llc 143,000 2.77% 143,000 2.40% 6/30/2003 Fidelity Mgmt & Research Co 142,100 2.76% 142,100 2.39% 6/30/2003 Loeb Arbitrage Management Inc. 115,110 2.23% 115,110 1.94% --------- ------ --------- ------ 1,167,911 22.66% 1,167,911 19.64% Total Holders Identified 3,559,283 69.04% 3,938,746 66.23% ========= ====== ========= ====== Retail Holdings & Other Institutions 1,595,848 30.96% 2,007,925 33.77% Total Shares Outstanding (5) 5,155,131 100.00% 5,946,671 100.00% ========= ====== ========= ======
(1) Based on Computershare Analytics and Company filings. (2) Mr. Obus is President of Wynnefield Capital, Inc. and a member of Wynnefield Capital Management. (3) Owned by Mr. and Mrs. Zensen as joint tenants. (4) Includes 2,000 shares held in Mr. Bennett's 401(k) account and 880 shares held by trusts for the benefit of his children. (5) Share count from draft 10-Q for the quarter ended Sept. 28, 2003. (6) Includes 791,540 options from 12/31/02 10-K. [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 17 Price and Volume Graph [LINE GRAPH DEPICTING PRICE AND VOLUME] [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 18 Volume Traded SYLVAN INC. VOLUME WEIGHTED AVERAGE PRICE OF SHARES TRADED FROM 11/6/01 TO PRESENT
CUMULATIVE ----------------------------------------------- DAYS % OF TOTAL % OF TOTAL DAYS % OF TOTAL % OF TOTAL TRADING DAILY AVG. DAYS TRADING TRADING DAILY AVG. DAYS TRADING TRADING RANGE IN RANGE TRADED VOLUME VOLUME IN RANGE TRADED VOLUME VOLUME ----- -------- ------ ------ ------ -------- ------ ------ ------ $9.00 - $9.25 7 1.3% 14,400 0.3% 7 1.3% 14,400 0.3% $9.25 - $9.50 1 0.2% 7,000 0.1% 8 1.5% 21,400 0.4% $9.50 - $9.75 10 1.9% 27,400 0.6% 18 3.4% 48,800 1.0% $9.75 - $10.00 32 6.1% 175,914 3.7% 50 9.6% 224,714 4.7% $10.00 - $10.25 61 11.7% 415,870 8.7% 111 21.2% 640,584 13.4% $10.25 - $10.50 65 12.4% 214,994 4.5% 176 33.7% 855,578 17.9% $10.50 - $10.75 32 6.1% 286,568 6.0% 208 39.8% 1,142,146 23.9% $10.75 - $11.00 29 5.5% 344,400 7.2% 237 45.3% 1,486,546 31.1% $11.00 - $11.25 59 11.3% 1,378,600 28.9% 296 56.6% 2,865,146 60.0% ------ ------ -- ---- --------- ---- --- ---- --------- ---- $11.25 - $11.50 67 12.8% 176,700 3.7% 363 69.4% 3,041,846 63.7% $11.50 - $11.75 40 7.6% 503,100 10.5% 403 77.1% 3,544,946 74.2% $11.75 - $12.00 30 5.7% 347,400 7.3% 433 82.8% 3,892,346 81.5% $12.00 - $12.25 7 1.3% 124,100 2.6% 440 84.1% 4,016,446 84.1% ====== ====== == === ======= === === ==== ========= ==== $12.25 - $12.50 13 2.5% 219,900 4.6% 453 86.6% 4,236,346 88.7% $12.50 - $12.75 49 9.4% 282,700 5.9% 502 96.0% 4,519,046 94.6% $12.75 - $13.00 14 2.7% 190,800 4.0% 516 98.7% 4,709,846 98.6% $13.00 - $13.25 6 1.1% 51,600 1.1% 522 99.8% 4,761,446 99.7% $13.25 - $13.50 1 0.2% 13,200 0.3% 523 100.0% 4,774,646 100.0% === ==== ========= ==== TOTAL: 523 100% 4,774,646 100%
[MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 19 Recent Quarter Earnings Announcement
NINE MONTHS ENDED ($ IN MILLIONS) --------------------------------- 3Q03 3Q02 VARIANCE ---- ---- -------- Revenue $ 69.8 $ 64.6 $ 5.2 Cost of Sales 44.0 38.2 5.7 ------ ------ ------ Gross Profit 25.8 26.3 (0.5) SG&A 16.5 15.6 0.9 EBITDA 9.4 10.8 (1.4) Depreciation and Amortization 4.8 4.4 0.4 ------ ------ ------ EBIT 4.5 6.3 (1.8) Other Income 0.1 0.1 0.1 Interest Expense, Net 1.2 1.4 (0.1) ------ ------ ------ EBT 3.4 5.0 (1.7) Income Tax Expense 1.1 1.7 (0.5) Minority Interest 0.1 0.1 0.1 ------ ------ ------ Net Income from Continuing Operations $ 2.1 $ 3.3 $ (1.2) ====== ====== ====== Earnings Per Share from Continuing Operations $ 0.41 $ 0.60 $(0.19) Fully-Diluted Shares Outstanding 5.2 5.5
Source: Company Press Release. 3Q03 VS. 3Q02 - Consolidated operating income for the nine-months ended September 28, 2003 decreased 29%, when compared to the corresponding 2002 period, reflecting a 14% decrease in operating income from the Spawn Products Segment, a 1% increase in operating income from the Fresh Mushrooms Segment and a 23% increase in unallocated corporate expenses. - The increase in corporate expenses during the 2003 nine-month period was related to the recording of a net periodic pension expense of $502,000. - Net sales of spawn and spawn-related products increased 4% due to a weaker U.S. dollar on overseas sales that was partially offset by a 6% decrease in spawn product sales volume. - Net sales of fresh mushrooms increased during the first nine months of 2003 to $21.9 million, as compared with $18.8 million for the corresponding period of 2002, reflecting a 7% increase in the number of pounds sold and a 1% increase in the average selling price per pound. - Operating income of the fresh mushrooms segment for the first nine-months of 2003 was $2.0 million, which is 1% higher than the amount reported for the first nine months of 2002. [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 20 Overview of the Company Summary Income Statement
FISCAL YEAR ENDED DECEMBER, (1), (2) PROJECTED FISCAL YEAR ENDING DECEMBER, (1),(2), (3) ----------------------- --------------------------------------------------- LTM ENDED 2003E 9/28/2003 2001 2002 (2) (2) 2004 2005 2006 2007 2008 ---- ---- --- --- ---- ---- ---- ---- ---- Net sales $85,911 $88,192 $95,857 $93,401 $96,852 $97,670 $100,600 $103,618 $106,727 Operating costs and expenses Cost of sales 49,818 52,109 61,344 57,835 61,461 61,795 61,869 62,171 64,036 Selling and administration 17,806 19,216 20,472 20,115 20,388 20,495 21,020 21,624 22,245 Research and development 1,721 1,965 1,244 1,965 1,250 1,250 1,308 1,347 1,387 Depreciation and amortization 5,575 5,842 6,268 6,234 6,323 5,996 5,726 5,510 5,340 ------- ------- ------- ------- ------- ------- -------- -------- -------- 74,920 79,132 89,328 86,149 89,422 89,536 89,923 90,652 93,008 ------- ------- ------- ------- ------- ------- -------- -------- -------- Operating income 10,991 9,060 6,529 7,252 7,430 8,134 10,677 12,966 13,719 Interest expense, net 2,532 1,865 1,524 1,723 1,385 1,015 620 170 (335) Other income (expense) (19) (3) -- 57 -- -- -- -- -- ------- ------- ------- ------- ------- ------- -------- -------- -------- Income before income taxes 8,440 7,192 5,005 5,586 6,045 7,119 10,057 12,796 14,054 Income taxes 2,490 2,406 1,656 1,884 2,116 2,492 3,520 4,479 4,919 ------- ------- ------- ------- ------- ------- -------- -------- -------- Income before minority interest 5,950 4,786 3,349 3,703 3,929 4,627 6,537 8,317 9,135 Minority interest 121 117 184 203 117 117 117 117 117 ------- ------- ------- ------- ------- ------- -------- -------- -------- Net income $ 5,829 $ 4,669 $ 3,165 $ 3,500 $ 3,812 $ 4,510 $ 6,420 $ 8,200 $ 9,018 ======= ======= ======= ======= ======= ======= ======== ======== ======== Earnings per share $ 1.05 $ 0.86 $ 0.59 $ 0.65 $ 0.71 $ 0.84 $ 1.20 $ 1.53 $ 1.68 Diluted WASO 5,552 5,455 5,370 5,370 5,370 5,370 5,370 5,370 5,370 EBITDA (4) $17,200 $14,876 $13,080 $13,486 $13,953 $14,130 $ 16,603 $ 18,676 $ 19,259 Maintenance Cap Ex $ 4,100 $ 3,400 $ 3,850 $ 3,100 $ 3,850 $ 3,850 $ 3,850 $ 3,850 $ 3,850 Expansionary Cap Ex 4,644 2,744 -- 2,876 -- -- -- -- -- ------- ------- ------- ------- ------- ------- -------- -------- -------- Total Cap Ex $ 8,744 $ 6,144 $ 3,850 $ 5,976 $ 3,850 $ 3,850 $ 3,850 $ 3,850 $ 3,850 Revenue growth 0.0% 2.7% 8.7% n/a 1.0% 0.8% 3.0% 3.0% 3.0% EBITDA margin 20.0% 16.9% 13.6% 14.4% 14.4% 14.5% 16.5% 18.0% 18.0% Operating income margin 12.8% 10.3% 6.8% 7.8% 7.7% 8.3% 10.6% 12.5% 12.9% Income before income taxes margin 9.8% 8.2% 5.2% 6.0% 6.2% 7.3% 10.0% 12.3% 13.2% Net income margin 6.8% 5.3% 3.3% 3.7% 3.9% 4.6% 6.4% 7.9% 8.4% Effective tax rate 29.5% 33.5% 33.1% 33.7% 35.0% 35.0% 35.0% 35.0% 35.0%
(1) The Company maintains its accounting records on a 52-53 week fiscal year ending the Sunday nearest December 31. All of the above fiscal years are 52 weeks. (2) Excludes non-recurring expenses. (3) Based upon management estimates dated September 23, 2003. Includes public company expenses. Assumes an Euro to U.S. Dollar exchange rate of 1.09 and a normalized tax rate of 35%. (4) EBITDA = operating income plus depreciation and amortization. 2001-2002 EBITDA includes amortization embedded in other line items. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/22 Overview of the Company Balance Sheet
DEC. 31, 2000 DEC. 30, 2001 DEC. 29, 2002 JUN. 29, 2003 SEPT. 28, 2003 ------------- ------------- ------------- ------------- -------------- ASSETS: Current assets: Cash and cash equivalents $ 5,371 $ 5,072 $ 5,624 $ 4,504 $ 6,118 Trade accounts receivable 12,740 13,133 14,399 14,709 15,095 Inventories 10,398 10,119 11,425 12,831 12,010 Prepaid income taxes and other expenses 1,420 1,437 1,495 2,066 2,181 Other current assets 1,634 4,206 1,494 1,472 1,731 --------- --------- --------- --------- --------- Total current assets 31,563 33,967 34,437 35,582 37,135 Property, plant and equipment: Land and improvements 3,693 3,711 3,987 n/a n/a Buildings 35,540 38,021 43,699 n/a n/a Equipment 48,072 51,014 56,895 n/a n/a --------- --------- --------- --------- --------- Total property, plant and equipment 87,305 92,746 104,581 n/a n/a Less: accumulated depreciation (34,769) (38,470) (45,794) n/a n/a --------- --------- --------- --------- --------- Total property, plant and equipment, net 52,536 54,276 58,787 60,132 59,640 Intangible assets 11,899 11,036 12,321 13,104 13,197 Other assets 9,776 7,811 1,261 1,066 1,187 --------- --------- --------- --------- --------- TOTAL ASSETS $ 105,774 $ 107,090 $ 106,806 $ 109,884 $ 111,159 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Current portion of long-term debt $ 192 $ 2,430 $ 223 $ 163 $ 122 Accounts payable - trade 4,108 3,833 3,895 4,138 3,835 Accrued salaries, wages and employee 2,580 2,956 benefits 2,653 2,635 2,771 Other accrued liabilities 896 905 1,413 1,794 2,099 Income taxes payable 690 942 1,545 1,202 1,344 --------- --------- --------- --------- --------- Total current liabilities 8,539 10,745 9,847 9,877 10,356 Long-term and revolving-term debt 39,871 37,255 38,162 36,140 35,260 Other long-term liabilities: Other employee benefits 1,056 1,362 9,538 9,770 9,811 Other 5,215 5,162 256 289 324 --------- --------- --------- --------- --------- Total other long-term liabilities 6,271 6,524 9,794 10,059 10,135 Minority interest 1,559 1,680 1,741 2,122 2,176 Total shareholders' equity 49,534 50,886 47,262 51,686 53,232 --------- --------- --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 105,774 $ 107,090 $ 106,806 $ 109,884 $ 111,159 ========= ========= ========= ========= =========
[MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/22 5 OVERVIEW OF THE ACQUIROR [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/23 Overview of the Acquiror - The Acquiror has been actively acquiring companies in a variety of industries since 1941 and currently maintains eleven separate operating segments that employ more than 450 people. - The Acquiror was formally founded in 1975 in Kittening, Pennsylvania to provide management services for all Snyder subsidiaries. - The Acquirer's subsidiaries operate in a broad range of businesses, including construction, mining, industrial equipment, energy, and agriculture. - The Acquiror is partnered with Creekside Mushrooms, Ltd., which is the world's largest underground mushroom farm and owner of Moonlight(R) Brand mushrooms. - Founders include: - Charles H. Snyder Sr. - Chairman of Snyder Associated Companies, Inc. - 1941 - PRESENT C.H. Snyder Co. Inc. - 1974 - PRESENT Bauer Company Inc. - Elmer A. Snyder [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/24 6/ANALYSIS OF PROPOSED TRANSACTION [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/25 Analysis of Proposed Transaction Summary Transaction Multiples CALCULATION OF TRANSACTION VALUE Offer Price $ 12.25 Sylvan Diluted Shares Outstanding (1) 5.2 Equity Value $ 64.2 Net Debt (2) 31.4 ------- Enterprise Value $ 95.6 =======
(1) Fully diluted shares outstanding based on the treasury stock method. (2) Includes minority interest of $2.2 million. IMPLIED TRANSACTION MULTIPLES
SYLVAN EV ESTIMATES MULTIPLE --------- -------- LTM 9/28/03 Revenue $ 93.4 1.0x EBITDA 13.5 7.1x FY 2003 ESTIMATE Revenue $ 95.9 1.0x EBITDA 13.1 7.3x FY 2004 ESTIMATE Revenue $ 96.9 1.0x EBITDA 14.0 6.9x
[MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/26 Analysis of Proposed Transaction Historical Stock Trading Analysis OFFER PRICE PREMIUM ANALYSIS RELATIVE TO HISTORY AS OF NOVEMBER 6, 2003 Offer Price: $12.25 125% April 15, 2003 (1) $ 9.82 107% of May 13, 2002 (2) 11.44 142% of 52 Week Low Trading - March 19, 2003 8.60 103% of 52 Week High Trading - September 24, 2002 11.95 106% of Twelve-Month Average Closing Price 11.52 111% of Six-Month Average Closing Price 11.02 123% of One-Month Average Closing Price 9.99 65% of All Time Trading High - June 17, 1998 18.75 75% of Five-Year High - December 28, 1998 16.37
(1) Day prior to announcement of Sylvan management group buyout proposal. (2) Day prior to press release indicating Sylvan's exploration of strategic alternatives. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/27 Analysis of Proposed Transaction Valuation Summary
($ IN MILLIONS) IMPLIED ENTERPRISE VALUE --------------------------------------------------- 25TH 75TH VALUATION METHODOLOGY LOW PERCENTILE MEDIAN PERCENTILE HIGH --------------------- --- ---------- ------ ---------- ---- COMPARABLE COMPANIES $64.1 $ 69.9 $75.8 $ 89.4 $ 103.0 COMPARABLE TRANSACTIONS 84.9 85.2 85.6 95.7 105.9 DISCOUNTED CASH FLOW 79.0 84.4 89.8 95.7 101.6 LEVERAGED BUY-OUT 76.2 n/m n/m n/m 88.6 PROPOSED TRANSACTION $95.6
IMPLIED EQUITY VALUE PER SHARE ------------------------------------------------- 25TH 75TH VALUATION METHODOLOGY LOW PERCENTILE MEDIAN PERCENTILE HIGH --------------------- --- ---------- ------ ---------- ---- COMPARABLE COMPANIES $ 6.33 $ 7.47 $ 8.60 $ 11.24 $ 13.88 COMPARABLE TRANSACTIONS 10.79 10.86 10.93 12.89 14.86 DISCOUNTED CASH FLOW 9.23 10.28 11.33 12.47 13.60 LEVERAGED BUY-OUT 8.69 n/m n/m n/m 11.03 PROPOSED TRANSACTION $12.25
[MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/28 Analysis of Proposed Transaction Valuation Summary - The valuation ranges implied by the techniques employed are summarized below, based on the following: - LBO ANALYSIS - High and low values represent 20% and 30% IRRs - DCF ANALYSIS - Based on discount rates and EBITDA exit multiples of 12% - 14% and 5.0x - 6.5x - COMPARABLE TRANSACTION ANALYSIS (1) - Based on 2003E EBITDA and multiples of 6.5x - 8.1x - PUBLICLY-TRADED COMPARABLE COMPANY ANALYSIS (2) - Based on 2003E EBITDA and multiples of 4.9x - 7.9x [BAR CHART DEPICTING IMPLIED ENTERPRISE VALUE] [BAR CHART DEPICTING IMPLIED EQUITY VALUE PER SHARE]
- Based on best comparable transactions including: Savia acquiring Seminis, Inc., Investor Group acquiring Dole, Cal-Maine Foods acquiring Smith Farms, and Investor Group acquiring Maui Land & Pineapple. - Based on best comparable companies including: BG, CQB, FDP and HORT. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/29 Analysis of Proposed Transaction Comparable Companies Analysis
RANGE OF VALUATION MULTIPLES IMPLIED BY COMPARABLE PUBLIC COMPANIES ANALYSIS -------------------------------------------- 2003E OPERATING 25TH 75TH DATA LOW PRTL MEDIAN PRTL HIGH ---- --- ---- ------ ---- ---- ENTERPRISE VALUE TO LTM: ALL COMPARABLES: EBITDA 4.0 x 5.1 x 6.2 x 9.1 x 12.0 x BEST COMPARABLES: EBITDA 4.9 x 5.3 x 5.8 x 6.8 x 7.9 x ($ IN MILLIONS) -------------------------------------------- IMPLIED ENTERPRISE VALUE BASED ON BEST COMPARABLES: EBITDA $ 13.1 $ 64.1 $ 69.9 $ 75.8 $ 89.4 $ 103.0 PROPOSED TRANSACTION ENTERPRISE VALUE $ 95.6 -------- IMPLIED EQUITY VALUE BASED ON BEST COMPARABLES: EBITDA $ 13.1 $ 6.33 $ 7.47 $ 8.60 $11.24 $ 13.88 PROPOSED TRANSACTION EQUITY VALUE/SHARE $ 12.25 --------
[MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/30 Analysis of Proposed Transaction Comparable Companies Analysis CAPITALIZATION & OPERATING DATA: (1)
($ millions, except per share data) MARKET CAPITALIZATION (2) ------------------- LTM OPERATING RESULTS % OF EQUITY ----------------------------------- TICKER PRICE 52-WK MKT ENTERPRISE EBITDA COMPANY SYMBOL 11/6/03 HIGH CAP VALUE SALES (3) EBIT NET INC ------- ------ ------- ---- --- ----- ----- --- ---- ------- SYLVAN INC. (5) SYLN $10.07 84.3% $ 51.9 $ 83.4 $ 93.4 $ 13.5 $ 7.3 $ 3.5 GRAIN HANDLING & PROCESSING Archer-Daniels-Midland Co. ADM 14.35 99.3% 9,288.2 13,161.3 30,708.0 1,423.1 779.4 460.0 Bunge Limited BG 26.53 85.2% 2,660.7 5,853.7 18,397.0 1,093.0 912.0 373.0 FRUITS & VEGETABLES Chiquita Brands Int'l, Inc. CQB 20.01 100.9% 826.4 1,134.0 2,858.5 144.0 97.0 (63.4) Fresh Del Monte Produce Inc. FDP 26.00 87.5% 1,489.5 1,459.6 2,395.5 298.0 234.9 246.3 Northland Cranberries, Inc. NRCNA 0.50 46.7% 49.2 86.9 92.2 11.1 7.4 8.9 AG INPUTS Delta and Pine Land Co. DLP 24.03 94.3% 965.0 854.1 284.4 71.3 63.8 32.7 Hines Horticulture, Inc. HORT 4.10 91.7% 90.8 326.5 332.1 52.4 43.5 18.9 PROTEIN Cal-Maine Foods, Inc. CALM 11.00 100.0% 133.8 229.7 419.6 56.8 40.2 21.6 Sanderson Farms, Inc. SAFM 34.90 98.0% 467.6 486.7 818.6 87.2 62.6 33.0 High 100.9% 9,288.2 13,161.3 30,708.0 1,423.1 912.0 460.0 Median 94.3% 826.4 854.1 818.6 87.2 63.8 32.7 Mean 89.3% 1,774.6 2,621.4 6,256.2 359.6 249.0 125.7 Low 46.7% 49.2 86.9 92.2 11.1 7.4 (63.4)
($ millions, except per share data) LTM MARGINS 3 FISCAL YR. CAGR (4) ---------------------- ------------------------ NET COMPANY EBITDA EBIT INC SALES EBITDA NET INC ------- ------ ---- --- ----- ------ ------- SYLVAN INC. (5) 14.4% 7.8% 3.7% 5.6% (13.1%) (30.8%) GRAIN HANDLING & PROCESSING Archer-Daniels-Midland Co. 4.6% 2.5% 1.5% 25.5% 5.7% 9.6% Bunge Limited 5.9% 5.0% 2.0% 20.7% 36.0% 128.3% FRUITS & VEGETABLES Chiquita Brands Int'l, Inc. 5.0% 3.4% N/M 2.5% (5.9%) N/A Fresh Del Monte Produce Inc. 12.4% 9.8% 10.3% 6.0% 45.2% 153.7% Northland Cranberries, Inc. 12.1% 8.0% 9.7% (30.0%) N/A N/A AG INPUTS Delta and Pine Land Co. 25.1% 22.4% 11.5% (7.5%) 0.9% (3.4%) Hines Horticulture, Inc. 15.8% 13.1% 5.7% 5.2% (4.7%) (17.5%) PROTEIN Cal-Maine Foods, Inc. 13.5% 9.6% 5.2% 4.0% 12.0% 43.5% Sanderson Farms, Inc. 10.6% 7.7% 4.0% 10.8% 60.5% N/A High 25.1% 22.4% 11.5% 25.5% 60.5% 153.7% Median 12.1% 8.0% 5.4% 5.2% 8.9% 26.5% Mean 11.7% 9.0% 6.2% 4.1% 18.7% 52.3% Low 4.6% 2.5% 1.5% (30.0%) (5.9%) (17.5%)
(1) Excludes non-recurring and extraordinary items. (2) Fully-diluted using the treasury-stock method. (3) EBITDA = income from operations plus the sum of depreciation, amortization and non-cash stock option compensation. (4) Historical results have not been adjusted to reflect the discontinuation of goodwill amortization. (5) Sylvan is shown for illustrative purposes only and is not included in high, median, mean and low calculations. (6) Earnings estimates are from First Call, where available, and calendarized, where appropriate. (7) Growth rates are from Bloomberg, where available. (8) ROIC = EBITDA divided by the sum of total equity and total debt. (9) Best comparables include BG, CQB, FDP and HORT. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/31 Analysis of Proposed Transaction Comparable Companies Analysis VALUATION & LEVERAGE STATISTICS:
($ millions, except per share data) 2004 ENTERPRISE EQUITY MKT CAP / EPS P/E / VALUE / LTM ---------------- ESTIMATES (6) PROJECTED P/E 5 YR. EPS ------------------------- NET BOOK ------------- --------------- GROWTH COMPANY SALES EBITDA EBIT INCOME VALUE 2003 2004 2003 2004 (7) ROIC (8) ------- ----- ------ ---- ------ ----- ---- ---- ---- ---- --- -------- SYLVAN INC. (5) 0.9 X 6.2 X 11.5 X 14.8 X 1.0 X N/A N/A N/A N/A N/A 15.2% GRAIN HANDLING & PROCESSING Archer-Daniels-Midland Co. 0.4 x 9.2 x 16.9 x 20.2 x 1.3 x 0.77 0.96 18.7 x 14.9 x 177.6% 11.6% Bunge Limited 0.3 x 5.4 x 6.4 x 7.1 x 1.3 x 2.54 2.85 10.4 x 9.3 x 101.4% 21.0% FRUITS & VEGETABLES Chiquita Brands Int'l, Inc. 0.4 x 7.9 x 11.7 x N/M 1.1 x 1.91 2.68 10.5 x 7.5 x 62.2% 11.9% Fresh Del Monte Produce Inc. 0.6 x 4.9 x 6.2 x 6.0 x 1.6 x 3.78 3.86 6.9 x 6.7 x 89.8% 30.1% Northland Cranberries, Inc. 0.9 x 7.8 x 11.8 x 5.5 x 1.2 x N/A N/A N/A N/A N/A 12.8% AG INPUTS Delta and Pine Land Co. 3.0 x 12.0 x 13.4 x 29.5 x 4.2 x 1.05 1.29 23.0 x 18.6 x 195.6% 30.6% Hines Horticulture, Inc. 1.0 x 6.2 x 7.5 x 4.8 x 1.6 x N/A N/A N/A N/A N/A 17.9% PROTEIN Cal-Maine Foods, Inc. 0.5 x 4.0 x 5.7 x 6.2 x 1.8 x N/A N/A N/A N/A N/A 31.6% Sanderson Farms, Inc. 0.6 x 5.6 x 7.8 x 14.2 x 2.8 x N/A N/A N/A N/A N/A 41.5% ALL COMPARABLES High 3.0 x 12.0 x 16.9 x 29.5 x 4.2 x 3.78 3.86 23.0 x 18.6 x 195.6% 41.5% Median 0.6 x 6.2 x 7.8 x 6.7 x 1.6 x 1.91 2.68 10.5 x 9.3 x 101.4% 21.0% Mean 0.9 x 7.0 x 9.7 x 11.7 x 1.9 x 2.01 2.33 13.9 x 11.4 x 125.3% 23.2% Low 0.3 x 4.0 x 5.7 x 4.8 x 1.1 x 0.77 0.96 6.9 x 6.7 x 62.2% 11.6% BEST COMPARABLES (9) High 1.0 x 7.9 x 11.7 x 7.1 x 1.6 x 3.78 3.86 10.5 x 9.3 x 101.4% 30.1% Median 0.5 x 5.8 x 7.0 x 6.0 x 1.4 x 2.54 2.85 10.4 x 7.5 x 89.8% 19.5% Mean 0.6 x 6.1 x 8.0 x 6.0 x 1.4 x 2.74 3.13 9.3 x 7.8 x 84.5% 20.2% Low 0.3 x 4.9 x 6.2 x 4.8 x 1.1 x 1.91 2.68 6.9 x 6.7 x 62.2% 11.9%
($ millions, except per share data) LEVERAGE STATISTICS ------------------------------ DEBT / EQUITY EBITDA / DEBT / MKT COMPANY INTEREST EBITDA CAP ------- -------- ------ --- SYLVAN INC. (5) 7.8 X 2.6 X 68.2% GRAIN HANDLING & PROCESSING Archer-Daniels-Midland Co. 6.0 x 3.6 x 55.8% Bunge Limited 42.0 x 2.8 x 116.3% FRUITS & VEGETABLES Chiquita Brands Int'l, Inc. 2.9 x 3.3 x 58.3% Fresh Del Monte Produce Inc. 32.4 x 0.2 x 3.2% Northland Cranberries, Inc. 5.7 x 4.0 x 91.5% AG INPUTS Delta and Pine Land Co. N/A 0.0 x 0.2% Hines Horticulture, Inc. 2.0 x 4.5 x 260.3% PROTEIN Cal-Maine Foods, Inc. 7.3 x 1.9 x 79.4% Sanderson Farms, Inc. 32.8 x 0.5 x 8.8% ALL COMPARABLES High 42.0 x 4.5 x 260.3% Median 6.6 x 2.8 x 58.3% Mean 16.4 x 2.3 x 74.9% Low 2.0 x 0.0 x 0.2% BEST COMPARABLES (9) High 42.0 x 4.5 x 260.3% Median 17.7 x 3.1 x 87.3% Mean 19.9 x 2.7 x 109.6% Low 2.0 x 0.2 x 3.2%
(1) Excludes non-recurring (2) Fully-diluted using the treasury-stock method. (3) EBITDA = income from operations plus the sum of depreciation, amortization and non-cash stock option compensation. (4) Historical results have not been adjusted to reflect the discontinuation of goodwill amortization. (5) Sylvan is shown for illustrative purposes only and is not included in high, median, mean and low calculations. (6) Earnings estimates are from First Call, where available, and calendarized, where appropriate. (7) Growth rates are from Bloomberg, where available. (8) ROIC = EBITDA divided by the sum of total equity and total debt. (9) Best comparables include BG, CQB, FDP and HORT. [MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/32 Analysis of Proposed Transaction Comparable Transactions Analysis
RANGE OF VALUATION MULTIPLES IMPLIED BY COMPARABLE TRANSACTIONS ANALYSIS 2003E ---------------------------------------------------- OPERATING 25TH 75TH DATA LOW PRTL MEDIAN PRTL HIGH ---- --- ---- ------ ---- ---- ENTERPRISE VALUE TO LTM: ENTIRE GROUP: EBITDA 5.9 x 7.0 x 8.1 x 15.6 x 23.1 x BEST COMPARABLES: EBITDA 6.5 x 6.5 x 6.5 x 7.3 x 8.1 x IMPLIED ENTERPRISE VALUE: ($ IN MILLIONS) ---------------------------------------------------------- EBITDA $ 13.1 $ 84.9 $ 85.2 $ 85.6 $ 95.7 $ 105.9 PROPOSED TRANSACTION ENTERPRISE VALUE $ 95.6 -------- IMPLIED EQUITY VALUE PER SHARE: EBITDA $ 13.1 $ 10.79 $ 10.86 $ 10.93 $ 12.89 $ 14.86 PROPOSED TRANSACTION EQUITY VALUE PER SHARE $ 12.25 --------
[MORGAN JOSEPH LOGO] PROJECT SPAWN/PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003/33 Analysis of Proposed Transaction Comparable Transactions Analysis
($ in millions) ENTERPRISE VALUE MULTIPLES: ANNOUNCEMENT DATE ACQUIROR EQUITY -------------------------- CLOSING DATE TARGET EQUITY ENTERPRISE PREMIUM VALUE TO: LTM LTM LTM CONSIDERATION TARGET BUSINESS VALUE VALUE PAID LTM NI REVENUE EBITDA EBIT ------------- --------------- ----- ----- ---- ------ ------- ------ ---- 8/29/2003 Venture Group n/a n/a n/a n/a n/a n/a n/a 8/29/2003 Packers of Indian River Ltd. (Chiquita Brands International Inc.) Cash Producer and wholesaler of fresh and processed citrus products 8/18/2003 Tyson Foods Inc. 74.0 74.0 n/a 0.3 x n/a n/a n/a Pending Choctaw Maid Farms Inc. n/a Producer and manufacturer of wholesale poultry products 8/18/2003 BC Natural Foods LLC n/a n/a n/a n/a n/a n/a n/a 8/18/2003 Penn Valley Farms n/a Owner and operator of poultry farms 6/9/2003 Pilgrims Pride Corp 302.7 597.3 n/a n/a 0.3 x 23.1 x n/a Pending ConAgra Foods Inc-Chicken Business Cash/Stock/Sub. Notes Producer of meat, eggs, and cooking oil 2/4/2003 Riviana Foods Inc. 25.3 25.3 n/a n/a 0.7 x n/a n/a 2/10/2003 ACH Rice Specialties Business (Associated British Foods Plc) Cash Producer and marketer of rice products 12/13/2002 Savia, S.A. de C.V. 384.4 650.0 50.6% 126.0 x 1.4 x 8.1 x 13.3 x 9/30/2003 Seminis, Inc. Cash Producer and marketer of fruit and vegetable seeds 9/22/2002 Investor Group 2,017.8 2,500.0 36.8% 13.1 x 0.6 x 6.6 x 9.1 x 3/31/2003 Dole Food Co., Inc. Cash Producer and marketer of fresh fruit and vegetables 8/17/2001 Nippon Suisan 175.0 175.0 n/a n/a 0.7 x 8.8 x n/a 10/2/2001 Gorton's & Bluewater Seafoods Cash Producers of frozen seafood 1/23/2001 Hormel Foods Corp 334.4 334.4 n/a 16.0 x 1.0 x n/a 10.0 x 2/26/2001 The Turkey Store Co. (d/b/a Jerome Foods, Inc.) Cash Producer of poultry, food products 9/27/2000 Pilgrim's Pride Corp. 234.5 280.0 105.4% 65.2 x 0.3 x 10.2 x 31.2 x 1/28/2001 WLR Foods, Inc. Cash Producer of poultry products
[MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 34 Analysis of Proposed Transaction Comparable Transactions Analysis
ENTERPRISE VALUE MULTIPLES: ANNOUNCEMENT DATE ACQUIROR EQUITY ----------------------- CLOSING DATE TARGET EQUITY ENTERPRISE PREMIUM VALUE TO: LTM LTM LTM CONSIDERATION TARGET BUSINESS VALUE VALUE PAID LTM NI REVENUE EBITDA EBIT ------------- --------------- ----- ----- ---- ------ ------- ------ ---- 8/9/2000 Lesaffre et Compagnie $ 113.0 $ 113.0 n/a n/a 0.9 x n/a n/a 2/26/2001 Red Star Yeast and Products (Sensient Technologies Corp.) Cash Supplier of yeast to commercial bakery 12/20/1999 Money's Mushrooms Ltd. 50.0 50.0 n/a n/a 0.4 x n/a n/a 2/1/2000 Fresh Mushrooms Business (Vlasic Foods Int'l Inc.) Cash Producer of fresh mushrooms 12/6/1999 ConAgra, Inc. 360.0 376.0 n/a n/a 0.8 x n/a 11.1 x 1/3/2000 Seaboard Farms (Seaboard Corp.) Cash Producer of poultry products 9/15/1999 Cal-Maine Foods, Inc. 36.2 36.2 n/a 13.4 x 0.7 x 6.5 x 9.1 x 9/30/1999 Smith Farms, Inc. Cash Owns and operates egg farms 7/15/1999 Reservoir Capital Group LLC 72.2 153.8 8.7% 36.8 x 1.2 x 10.0 x 21.7 x 11/2/1999 Orange-co., Inc. Cash Producer of citrus fruit, juices 7/2/1999 Investor Group 95.2 119.6 (12.8%) 18.0 x 0.8 x 6.5 x 11.7 x 9/7/1999 Maui Land & Pineapple Co., Inc. n/a Producer of pineapples 5/14/1999 Pictsweet LLC 23.8 72.6 36.6% 39.3 x 0.4 x 5.9 x 13.9 x 9/23/1999 United Foods, Inc. Cash Producer and marketer of frozen fruits, vegetables Summary Multiples: Median 36.7% 18.0 x 0.7 x 8.1 x 11.7 x Mean 37.6% 36.4 x 0.7 x 9.5 x 14.6 x Low (12.8%) 0.3 x 0.3 x 5.9 x 9.1 x High 105.4% 126.0 x 1.4 x 23.1 x 31.2 x Summary Best Comparable Multiples (1): Median 36.8% 15.7 x 0.7 x 6.5 x 10.4 x Mean 24.9% 42.6 x 0.9 x 6.9 x 10.8 x Low -12.8% 13.1 x 0.6 x 6.5 x 9.1 x High 50.6% 126.0 x 1.4 x 8.1 x 13.3 x
Source: Thomson Financial, SEC filings and company press releases. Data includes transactions announced between January 1, 1999 and November 6, 2003. (1) Best transactions include Savia acquiring Seminis, Inc, Investor Group acquiring Dole, Cal-Maine Foods acquiring Smith Farms, and Investor Group acquiring Maui Land & Pineapple. [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 35 Analysis of Proposed Transaction Discounted Cash Flow Analysis
PRESENT VALUE PRESENT VALUE OF TERMINAL OF FREE + VALUE = PRESENT VALUE OF ENTERPRISE CASH FLOWS MULTIPLE OF 2008 EBITDA VALUE DISCOUNT ----------- ---------------------------------- ------------------------------- RATE 2004 - 2008 5.00X 5.75X 6.50X 5.00X 5.75X 6.50X ---- ----------- ----- ----- ----- ----- ----- ----- 12.0% $30.5 $54.6 $62.8 $71.0 $85.2 $93.4 $101.6 13.0% 29.7 52.3 60.1 67.9 82.0 89.8 97.7 14.0% 29.0 50.0 57.5 65.0 79.0 86.5 94.0 TOTAL RANGE $79.0 -- $101.6 ASSUMED OFFER PRICE $95.6
IMPLIED EQUITY VALUE IMPLIED EQUITY VALUE PER SHARE DISCOUNT NET DEBT --------------------------- ------------------------------ RATE - SEPT. 28, 2003 = 5.00X 5.75X 6.50X 5.00X 5.75X 6.50X ------ -------------- ----- ----- ----- ----- ----- ----- 12.0% $31.4 $53.7 $61.9 $70.1 $10.42 $12.01 $13.60 13.0% 31.4 50.6 58.4 66.2 9.81 11.33 12.85 14.0% 31.4 47.6 55.1 62.6 9.23 10.68 12.14 TOTAL RANGE $47.6 -- $70.1 $9.23 -- $13.60 ASSUMED OFFER PRICE $64.2 $12.25
[MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 36 Analysis of Proposed Transaction Discounted Cash Flow Analysis HISTORICAL AND PROJECTED CASH FLOWS ($ in millions except per share data)
Fiscal Year End December, HISTORICAL CAGR PROJECTED (A) CAGR --------------------- ----- ------------------------------------------- ----- 2001 2002 2003 01-03 2004 2005 2006 2007 2008 04-08 ---- ---- ---- ----- ---- ---- ---- ---- ---- ----- Net Sales $85.9 $88.2 $95.9 5.6% $96.9 $97.7 $100.6 $103.6 $106.7 2.5% % Growth -- 2.7% 8.7% 1.0% 0.8% 3.0% 3.0% 3.0% EBITDA 17.2 14.9 13.1 -12.8% 14.0 14.1 16.6 18.7 19.3 8.4% % of Sales 20.0% 16.9% 13.6% 14.4% 14.5% 16.5% 18.0% 18.0% EBIT 11.6 9.0 6.8 -23.5% 7.6 8.1 10.9 13.2 13.9 16.2% % of Sales 13.5% 10.2% 7.1% 7.9% 8.3% 10.8% 12.7% 13.0% Less: Taxes @ 35% (4.1) (3.2) (2.4) (2.7) (2.8) (3.8) (4.6) (4.9) ----- ----- ----- ----- ----- ------ ------ ------ UNLEVERED NET INCOME 7.6 5.9 4.4 -23.5% 5.0 5.3 7.1 8.6 9.0 16.2% Plus: Depreciation and Amortization 5.6 5.8 6.3 6.3 6.0 5.7 5.5 5.3 Less: Capital Expenditures (4.1) (3.4) (3.9) (3.9) (3.9) (3.9) (3.9) (3.9) Less: Increase in Working Capital (2.9) (1.6) 3.0 0.5 (0.2) (0.6) (0.6) (0.7) ----- ----- ----- ----- ----- ------ ------ ------ UNLEVERED FREE CASH FLOW $ 6.2 $ 6.7 $9.9 26.3% $8.0 $7.3 $8.3 $9.6 $9.8 5.5% ===== ===== ==== ==== ==== ==== ==== ====
DISCOUNTED CASH FLOW VALUATION ANALYSIS
Discount Rate 12.0% 13.0% 14.0% ------------------------- ------------------------ -------------------------- Terminal EBITDA Multiple 5.00x 5.75x 6.50x 5.00x 5.75x 6.50x 5.00x 5.75x 6.50x EBITDA $19.3 $19.3 $19.3 $19.3 $19.3 $19.3 $19.3 $19.3 $19.3 Terminal Value 96.3 110.7 125.2 96.3 110.7 125.2 96.3 110.7 125.2 PV Terminal Value 54.6 62.8 71.0 52.3 60.1 67.9 50.0 57.5 65.0 PV Free Cash Flows 30.5 30.5 30.5 29.7 29.7 29.7 29.0 29.0 29.0 ----- ----- ------ ----- ----- ----- ----- ----- ----- IMPLIED ENTERPRISE VALUE $85.2 $93.4 $101.6 $82.0 $89.8 $97.7 $79.0 $86.5 $94.0 ===== ===== ====== ===== ===== ===== ===== ===== ===== Less: Net Debt (b) (29.3) (29.3) (29.3) (29.3) (29.3) (29.3) (29.3) (29.3) (29.3) Less: Minority Interest (b) (2.2) (2.2) (2.2) (2.2) (2.2) (2.2) (2.2) (2.2) (2.2) ----- ----- ------ ----- ----- ----- ----- ----- ----- EQUITY VALUE $53.7 $61.9 $70.1 $50.6 $58.4 $66.2 $47.6 $55.1 $62.6 Shares Outstanding (mm) 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 ----- ----- ------ ----- ----- ----- ----- ----- ----- EQUITY VALUE PER SHARE $10.42 $12.01 $13.60 $9.81 $11.33 $12.85 $9.23 $10.68 $12.14 ===== ===== ====== ===== ===== ===== ===== ===== ===== ENTERPRISE VALUE AS A MULTIPLE OF 2003E: Net Sales 0.89x 0.97x 1.06x 0.86x 0.94x 1.02x 0.82x 0.90x 0.98x EBITDA 6.51x 7.14x 7.76x 6.27x 6.87x 7.47x 6.04x 6.61x 7.19x EBIT 12.50x 13.70x 14.91x 12.04x 13.19x 14.34x 11.60x 12.70x 13.80x
(a) Based upon Management estimates dated September 23, 2003. Includes $1.1 million of public company expenses. Assumes an Euro to U.S. dollar exchange rate of 1.09. (b) Based on August 2003 Balance Sheet. [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 37 Analysis of Proposed Transaction Leveraged Buy-Out Analysis - The leveraged buy-out analysis is summarized on the following page and is based on the following assumptions: - Senior debt of approximately 3.0x at LIBOR +375 basis points 5 year amortization - Subordinated debt of approximately 1.25x - Coupon of 12% - Required return of 17-20% - Sponsor equity returns of 20-30% - Management incentive options of 10% - Enter and exit at the same multiple - Based on management projections as of September 26, 2003 and September 28, 2003 balance sheet [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 38 Analysis of Proposed Transaction Leveraged Buy-Out Analysis LBO TRANSACTION SUMMARY IMPLIED IRR = 20.0% PURCHASE PRICE: Equity value $57.2 Plus: debt (1) 37.6 Less: cash (6.1) ----- Net debt 31.4 Enterprise value $88.6 ===== PURCHASE MULTIPLES: Enterprise value / 2003 revenue 0.9 x Enterprise value / 2003 EBITDA 6.4 x IMPLIED PRICE PER SHARE: $11.03
USES: Equity purchase price $57.2 Refinance existing debt 35.4 Transaction expenses 3.2 ----- $95.8 ===== OWNERSHIP: Financial sponsor 82.0% Management 10.0% Sub-debt 8.0%
SOURCES: Excess cash $4.1 Bank debt 42.3 Sub-debt 18.2 Financial sponsor equity 31.2 ----- $95.8 ===== LEVERAGE STATISTICS: Bank debt / 2003 EBITDA 2.9 x Total debt / 2003 EBITDA 4.1 x 2003 EBITDA / Interest 3.3 x (2003 EBITDA - CapEx) / Interest 2.0 x 2004 EBITDA / Interest 1.9 x (2004 EBITDA - CapEx) / Interest 2.6 x
LBO TRANSACTION SUMMARY IMPLIED IRR = 30.0% PURCHASE PRICE: Equity value $44.8 Plus: debt (1) 37.6 Less: cash (6.1) ----- Net debt 31.4 Enterprise value $76.2 ===== PURCHASE MULTIPLES: Enterprise value / 2003 revenue 0.8 x Enterprise value / 2003 EBITDA 5.5 x IMPLIED PRICE PER SHARE: $ 8.69
USES: Equity purchase price $44.8 Refinance existing debt 35.4 Transaction expenses 3.2 ----- $83.4 ===== OWNERSHIP: Financial sponsor 82.5% Management 10.0% Sub-debt 7.5%
SOURCES: Excess cash $4.1 Sub-debt 42.3 Assumed debt 18.2 Financial sponsor equity 18.8 ----- $83.4 ===== LEVERAGE STATISTICS: Bank debt / 2003 EBITDA 2.9 x Total debt / 2003 EBITDA 4.1 x 2003 EBITDA / Interest 3.3 x (2003 EBITDA - CapEx) / Interest 2.0 x 2004 EBITDA / Interest 1.9 x (2004 EBITDA - CapEx) / Interest 2.6 x
NOTE: Analysis based on management estimates, anticipated financing parameters and required returns. (1) Debt includes minority interest of $2.2 million. [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 39 Analysis of Proposed Transaction Premiums Paid Analysis - The outside offer price of $12.25 represents a premium of 25% to the Company's closing price of $9.82 one day prior to the announcement of the management-led proposal. - A meaningful comparison of the premium implied by the Proposed Transaction to the average and median premiums analyzed is difficult due to the lengthy and public background of the Proposed Transaction. ANNOUNCED TRANSACTIONS $50MM - $150MM (APRIL 1, 2003 - NOVEMBER 3, 2003)
PREMIUM PAID RELATIVE TO: ----------------------------- VALUE OF PRICE DATE TRANSACTION PER 1 DAY 1 WEEK 4 WEEKS ANNOUNCED TARGET NAME ACQUIROR NAME ($MIL) SHARE PRIOR PRIOR PRIOR --------- ----------- ------------- ------ ----- ----- ----- ----- 04/01/03 National Service Industries California Investment Fund LLC 111.9 10.00 93.8% 90.8% 67.5% 04/03/03 Elite Information Group Inc Thomson Corp 121.5 14.00 40.4% 44.3% 40.7% 04/04/03 Sports Club Co Investor Group 70.2 3.00 25.0% 24.5% 31.6% 04/07/03 Bruker AXS Inc Bruker Daltonics Inc 104.6 1.86 44.2% 38.8% 28.3% 04/09/03 Ramsay Youth Services Inc Psychiatric Solutions Inc 77.9 5.00 42.9% 31.6% 24.7% 04/16/03 Lillian Vernon Corp Investor Group 60.7 7.25 72.6% 74.7% 72.2% 04/16/03 Signal Technology Corp Crane Co 142.5 13.25 17.6% 15.6% 21.6% 04/22/03 Varsity Brands Inc Investor Group 136.8 6.57 39.8% 39.5% 42.2% 04/29/03 Thousand Trails Inc Kohlberg & Co LP 114.6 14.50 55.1% 55.9% 49.8% 05/14/03 MountainBank Financial Corp South Financial Corp. 123.1 32.75 11.0% 25.9% 28.9% 05/16/03 National Energy Group Inc American Re Partners LP 148.1 0.80 150.0% 14.3% 29.0% 05/27/03 TMBR/Sharp Drilling Inc Patterson-UTI Energy Inc 92.1 20.19 4.1% 5.3% 9.1% 05/28/03 CommerceSouth Inc,Eufaula,AL BancTrust Financial Group Inc 73.1 25.50 64.5% 59.2% 66.4% 05/30/03 Cysive Inc Snowbird Holdings Inc 74.5 3.23 0.9% 0.9% 11.4% 06/09/03 Grange National Banc Corp,PA Community Bank Sys Inc,NY 82.2 45.85 19.9% 17.6% 24.6% 06/25/03 United Park City Mines Co Capital Growth Partners LLC 68.7 21.00 3.4% 4.7% 5.5% 06/26/03 Elder-Beerman Stores Corp Wright Holdings Inc 68.5 6.00 13.0% 9.9% 14.9% 06/27/03 Acres Gaming Inc International Game Technology 136.5 11.50 1.0% 13.9% 31.4%
[MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 40 Analysis of Proposed Transaction Premiums Paid Analysis
PREMIUM PAID RELATIVE TO: --------------------------- VALUE OF PRICE DATE TRANSACTION PER 1 DAY 1 WEEK 4 WEEKS ANNOUNCED TARGET NAME ACQUIROR NAME ($MIL) SHARE PRIOR PRIOR PRIOR --------- ----------- ------------- ------ ----- ----- ----- ----- 06/29/03 Information Resources Inc Investor Group 99.4 3.30 10.7% -2.4% -2.7% 07/03/03 Methode Electronics Inc Dura Automotive Systems Inc 54.4 50.00 153.2% 156.4% 155.0% 07/15/03 Klamath First Bancorp,Oregon Sterling Financial Corp,WA 148.0 20.44 17.1% 17.8% 16.8% 07/16/03 Alliance Bancorp of NE Inc New Haven Savings Bank,CT 72.1 25.00 -5.3% 2.2% 7.3% 07/16/03 Timberline Software Corp Best Software Inc 103.5 8.25 36.4% 38.0% 38.0% 07/23/03 Brio Software Inc Hyperion Solutions Corp 141.9 3.44 27.4% 24.2% 50.2% 07/23/03 Pinnacor Inc MarketWatch.com Inc 104.8 2.42 9.0% 8.5% 24.1% 07/29/03 Elder-Beerman Stores Corp Bon-Ton Stores Inc 97.8 8.00 32.9% 33.3% 36.3% 07/30/03 Community Bk,Pilot Mtn,NC Southern Community Finan Corp 77.3 48.65 56.9% 56.9% 62.2% 08/04/03 Mercator Software Inc Ascential Software Corp 115.0 3.00 22.4% 34.5% 86.3% 08/05/03 ResortQuest International Gaylord Entertainment Co 107.6 5.53 8.4% 10.8% 13.8% 08/12/03 California Independent Bancorp Humboldt Bancorp,Eureka,CA 81.7 35.50 22.8% 22.4% 18.3% 08/12/03 Jacksonville Bancorp,TX Franklin Bank Corp,Houston,TX 73.4 37.50 25.0% 29.3% 27.1% 09/04/03 Ross Systems Inc Chinadotcom Corp 66.2 19.00 9.9% 22.7% 22.6% 09/09/03 Lightspan Inc Plato Learning Inc 103.5 10.89 36.1% 29.6% 67.5% 09/11/03 CoVest Bancshares Inc,IL First Midwest Bancorp,IL 129.4 27.45 2.7% 1.7% 5.8% 09/11/03 Skibo Financial Corp,PA Northwest Bancorp MHC,PA 55.2 17.00 26.3% 28.1% 29.5% 09/22/03 Thistle Group Holdings Co Citizens Bank of Pennsylvania 147.8 26.00 35.4% 39.0% 58.7% 09/22/03 United States Exploration Inc DGL Acquisition Corp 53.3 2.82 0.7% -1.1% -1.1% 09/25/03 Caledonia Finl Corp,MI Chemical Financial Corp,MI 55.3 39.00 N/A N/A N/A 09/26/03 Business Bancorp,California UnionBanCal Corp,CA 114.9 28.57 N/A N/A N/A 09/29/03 Good Guys Inc CompUSA Inc 55.4 2.05 36.7% 31.4% 45.4% 09/30/03 Garden Fresh Restaurant Corp Fairmont Capital Inc 103.0 16.35 48.9% 54.8% 64.3% 10/03/03 OneSource Information Services ValueAct Capital Partners LP 80.9 9.50 9.3% 21.6% 17.7% 10/08/03 Crown Resources Corp Kinross Gold Corp 78.4 78.42 46.7% 46.7% 41.9% 10/20/03 Docent Inc click2learn.com inc 61.9 4.14 1.0% 0.7% 6.2% 10/22/03 Brass Eagle Inc K2 Inc 82.5 10.51 26.6% 25.1% 27.7% 10/24/03 Information Resources Inc Open Ratings Inc 114.9 3.30 -29.2% -27.3% -28.6% 10/27/03 SCB Computer Technology Inc CIBER Inc 52.5 2.15 13.2% 7.5% 22.9% 10/27/03 On Technology Corp Symantec Corp 101.1 4.00 15.9% 16.3% 57.5% AVERAGE $ 94.6 $16.6 30.4% 28.2% 34.1% MEDIAN $ 95.0 $10.7 23.9% 24.3% 28.6%
[MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 41 A / DESCRIPTIONS OF COMPARABLE COMPANIES [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 42 Descriptions of Comparable Companies ARCHER-DANIELS-MIDLAND COMPANY (NYSE:ADM) Archer-Daniels-Midland Company is principally engaged in procuring, transporting, storing, processing and merchandising agricultural commodities and products. The Company's operations are classified into four business segments: Oilseeds Processing, which includes the processing of oilseeds; Corn Processing, which includes its dry milling and wet milling corn operations; Wheat Processing, which includes the milling of wheat, corn and milo into flour, and Agricultural Services, which buys, stores, cleans and transports agricultural commodities. Archer-Daniels-Midland's remaining operations are classified as the Other segment, which primarily includes the production of value-added soy protein products. BUNGE LIMITED (NYSE:BG) Bunge Limited is an integrated, global agribusiness and food company operating in the farm-to-consumer food chain, which ranges from raw materials, such as grains and fertilizers, to retail food products, such as flour and margarine. The Company has primary operations in North America, Brazil, Argentina and Europe and worldwide distribution capabilities. Bunge conducts its operations in three divisions: agribusiness, fertilizer and food products. The agribusiness division consists of three business lines: grain origination, oilseed processing and international marketing. The Company's fertilizer division is comprised of nutrients and retail operations. The food products division consists of four business lines: edible oil products, wheat milling and bakery products, soy ingredients and corn products. CHIQUITA BRANDS INTERNATIONAL, INC. (NYSE:CQB) Chiquita Brands International, Inc. and its subsidiaries operate in two business segments: Fresh Produce and Processed Foods. The Company Fresh Produce segment sources, distributes and markets a line of fresh fruits and vegetables sold under the Chiquita and other brand names. Chiquita's fresh fruits and vegetables include bananas, berries, citrus, grapes, melons, mushrooms, stone fruit, tomatoes and a variety of other fresh produce. In Europe, the Company's Processed Foods segment sells Chiquita branded fruit juices, beverages, snacks and desserts, which are manufactured by third parties to Chiquita's specifications. In the United States, several national fruit juice and beverage producers manufacture and sell shelf-stable, refrigerated and frozen juice and beverage products using the Chiquita brand name, for which they pay Chiquita a license fee. Chiquita's processed banana products include banana puree, frozen banana pieces, sliced bananas and other specialty products. [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 43 Descriptions of Comparable Companies FRESH DEL MONTE PRODUCE INC. (NYSE:FDP) Fresh Del Monte Produce Inc. is primarily engaged in the worldwide sourcing, transportation and marketing of fresh and fresh-cut produce. The Company's products include bananas, pineapples, cantaloupe, honeydew, watermelons, grapes, non-tropical fruits (including citrus, apples, pears, peaches, plums, nectarines, apricots and kiwi), plantains, Vidalia sweet onions and various greens. In January 2003, the Company has added tomatoes, potatoes and onions to its product offering. The Company sources its products primarily from Central and South America and the Philippines. Fresh Del Monte also sources products from North America, Africa and Europe and distributes its products in Europe, the Asia-Pacific region and South America. The Company also has non-produce businesses. These include its third-party ocean freight container business, a third-party plastics and box manufacturing business, its Jordanian poultry business and its Argentine grain business. HINES HORTICULTURE, INC. (NASD:HORT) Hines Horticulture, Inc. produces and distributes horticultural products through its wholly owned subsidiaries, Hines Nurseries, Inc. (Hines Nurseries) and Enviro-Safe Laboratories Inc. The Company is a national supplier of ornamental shrubs, color plants and container-grown plants, with 14 commercial nursery facilities located in Arizona, California, Florida, Georgia, New York, Oregon, Pennsylvania, South Carolina and Texas. Hines markets its products to retail and commercial customers throughout the United States. It produces approximately 5,500 varieties of ornamental shrubs and color plants and sells to more than 2,200 retail and commercial customers, representing more than 8,400 outlets throughout the United States and Canada. NORTHLAND CRANBERRIES (OTC:NRCNA) Northland Cranberries, Inc. is a vertically integrated grower, handler, processor and marketer of cranberries, branded cranberry products and fruit beverages. The Company markets and sells its Northland, Seneca, TreeSweet and Awake brand cranberry and other fruit juice products, as well as fresh, frozen and dried cranberries and cranberry concentrate domestically through retail supermarkets and through other distribution channels, both domestically and internationally. In addition, the Company produces and packages juice beverages for other companies on a contract-manufacturing basis. As of November 26, 2002, Northland owned or operated 21 cranberry-producing marshes with 2,009 planted acres in Wisconsin. It also maintains multi-year crop purchase contracts with 44 independent cranberry growers to purchase all of the cranberries harvested from an aggregate of up to 1,743 contracted acres. [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 44 Descriptions of Comparable Companies DELTA AND PINE LAND COMPANY (NYSE:DLP) Delta and Pine Land Company (D&PL) and its subsidiaries breed, produce, condition and market cotton and soybean planting seed. In connection with its seed operations, the Company farms approximately 2,000 acres largely for the production of cotton and soybean foundation seed. D&PL is in a single line of business and operates in two business segments, domestic and international. The Company's reportable segments offer similar products, however, the business units are managed separately due to the geographic dispersion of their operations. The Company develops its proprietary seed products through research and development efforts in the United States and certain foreign countries. CAL-MAINE FOODS, INC. (NASD:CALM) Cal-Maine Foods, Inc. is primarily engaged in the production, cleaning, grading and packaging of fresh shell eggs for sale to shell egg retailers. The Company had sales of approximately 571 million dozen shell eggs during the fiscal year ended May 31, 2003 (fiscal 2003). It primarily markets shell eggs in the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States. Shell eggs are sold directly by the Company primarily to national and regional supermarket chains. Cal-Maine also produces specialty eggs such as Eggo land's Best and Farmhouse eggs and operates a dairy facility. SANDERSON FARMS, INC. (NASD:SAFM) Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and the preparation, processing, marketing and distribution of processed and prepared food items. The Company sells chill pack, ice pack and frozen chicken, both whole and cut-up, primarily under the Sanderson Farms brand name, to retailers, distributors and fast-food operators principally in the southeastern, southwestern and western United States. During the fiscal year ended October 31, 2002, the Company processed approximately 264.7 million chickens, or approximately 1.3 billion dressed pounds. In addition, it purchased and further processed 14.5 million pounds of poultry products. It sells over 200 processed and prepared food items nationally and regionally, primarily to distributors, national foodservice accounts, retailers and club stores. [MORGAN JOSEPH LOGO] PROJECT SPAWN / PRESENTATION TO THE BOARD OF DIRECTORS November 11, 2003 / 45