-----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, Anwv9idOzP62ZkXp5lxtOkAtupl2tEFzEI64Xa2wtb207ksQCplS/V9jHNt2jsSr Rb1aOVZUzhv8w9Ekihnqog== 0000950123-99-002952.txt : 19990403 0000950123-99-002952.hdr.sgml : 19990403 ACCESSION NUMBER: 0000950123-99-002952 CONFORMED SUBMISSION TYPE: SC 13E3/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19990401 GROUP MEMBERS: GILBERT L DROZDOW GROUP MEMBERS: JAY A MARTUS GROUP MEMBERS: LEWIS D GOLD GROUP MEMBERS: MICHAEL F SCHUNDLER GROUP MEMBERS: MITCHELL EISENBERG GROUP MEMBERS: ROBERT J COWARD GROUP MEMBERS: SHERIDAN HEALTHCARE INC GROUP MEMBERS: VESTAR/SHERIDAN HOLDINGS INC GROUP MEMBERS: VESTAR/SHERIDAN INVESTRS LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHERIDAN HEALTHCARE INC CENTRAL INDEX KEY: 0000946489 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 043252967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: SEC FILE NUMBER: 005-45587 FILM NUMBER: 99585478 BUSINESS ADDRESS: STREET 1: 4651 SHERIDAN ST STREET 2: STE 400 CITY: HOLLYWOOD STATE: FL ZIP: 33021 BUSINESS PHONE: 3059875822 MAIL ADDRESS: STREET 1: 4651 SHERIDAN STREET STREET 2: SUITE 400 CITY: HOLLYWOOD STATE: FL ZIP: 33021 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SHERIDAN HEALTHCARE INC CENTRAL INDEX KEY: 0000946489 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 043252967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A BUSINESS ADDRESS: STREET 1: 4651 SHERIDAN ST STREET 2: STE 400 CITY: HOLLYWOOD STATE: FL ZIP: 33021 BUSINESS PHONE: 3059875822 MAIL ADDRESS: STREET 1: 4651 SHERIDAN STREET STREET 2: SUITE 400 CITY: HOLLYWOOD STATE: FL ZIP: 33021 SC 13E3/A 1 AMENDMENT NO. 1 TO SCHEDULE 13E3 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 13E-3 RULE 13e-3 TRANSACTION STATEMENT (PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934) AMENDMENT NO. 1 SHERIDAN HEALTHCARE, INC. (NAME OF THE ISSUER) VESTAR/SHERIDAN, INC. VESTAR/SHERIDAN HOLDINGS, INC. VESTAR/SHERIDAN INVESTORS, LLC SHERIDAN HEALTHCARE, INC. MITCHELL EISENBERG LEWIS D. GOLD MICHAEL F. SCHUNDLER GILBERT L. DROZDOW JAY A. MARTUS ROBERT J. COWARD (NAME OF PERSON(S) FILING STATEMENT) COMMON STOCK, PAR VALUE $0.01 PER SHARE CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE (TITLES OF CLASSES OF SECURITIES) COMMON STOCK 823781109 CLASS A COMMON STOCK 823781208 (CUSIP NUMBER OF CLASSES OF SECURITIES) JAMES L. ELROD, JR. MITCHELL EISENBERG, M.D. VESTAR/SHERIDAN INVESTORS, LLC SHERIDAN HEALTHCARE, INC. 245 PARK AVENUE, 41ST FLOOR 4651 SHERIDAN STREET, SUITE 400 NEW YORK, NY 10167 HOLLYWOOD, FL 33021 (212) 351-1600 (954) 964-2611
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT) COPIES TO: PETER J. GORDON, ESQ. STEPHEN K. RODDENBERRY, ESQ. SIMPSON THACHER & BARTLETT AKERMAN, SENTERFITT, EIDSON, P.A. 425 LEXINGTON AVENUE ONE SOUTHEAST THIRD AVENUE NEW YORK, NEW YORK 10017 28TH FLOOR (212) 455-2000 MIAMI, FLORIDA 33131
This statement is filed in connection with (check the appropriate box): a. [ ] 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. [X] 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: [ ] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 This Amendment No. 1 amends and supplements the Rule 13E-3 Transaction Statement (as amended to date, the "Schedule 13E-3") relating to a tender offer by Vestar/Sheridan, Inc., a Delaware corporation (formerly known as Vestar/Calvary, Inc.) (the "Purchaser") and a wholly owned subsidiary of Vestar/ Sheridan Holdings, Inc., a Delaware corporation (formerly known as Vestar/Calvary Holdings, Inc.) ("Holdings") and a wholly owned subsidiary of Vestar/Sheridan Investors, LLC, a Delaware limited liability company (formerly known as Vestar/Calvary Investors, LLC) ("Parent"), to purchase all of the outstanding shares of Common Stock, par value $0.01 per share (the "Common Stock"), and Class A Common Stock, par value $0.01 per share (the "Class A Common Stock" and, together with the Common Stock, the "Shares"), of Sheridan Healthcare, Inc., a Delaware corporation (the "Company"), at a price of $9.25 per Share net to the seller in cash and without interest thereon, on the terms and subject to the conditions set forth in the Offer to Purchase dated March 31, 1999 (the "Offer to Purchase") and in the related Letters of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). Capitalized terms not defined herein have the meanings assigned thereto in the Schedule 13E-3. The following cross reference sheet is being supplied pursuant to General Instruction F to Schedule 13E-3 and shows the location in the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") filed by the Purchaser with the Securities and Exchange Commission on the date hereof of the information required to be included in response to the items of this Statement. The information in the Schedule 14D-1 is hereby expressly incorporated herein by reference. CROSS-REFERENCE SHEET
ITEM IN SCHEDULE 13E-3 WHERE LOCATED IN SCHEDULE 14D-1 ---------------------- ------------------------------- Item 17(b) *
- --------------- * There is no applicable item contained in Schedule 14D-1. ITEM 17. MATERIAL TO BE FILED AS EXHIBITS. Item 17 of the Rule 13E-3 Transaction Statement is hereby amended and supplemented as follows: (b)(4) Presentation to the Company's Board of Directors by Bowles Hollowell Conner dated March 24, 1999.
i 3 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. VESTAR/SHERIDAN INVESTORS, LLC By: VESTAR CAPITAL PARTNERS III, L.P., ------------------------------------ its Sole Member By: VESTAR ASSOCIATES III, L.P., ------------------------------------ its General Partner By: VESTAR ASSOCIATES CORPORATION III ------------------------------------ its General Partner By: JAMES L. ELROD, JR. ------------------------------------ Name: James L. Elrod, Jr. Title: Vice President VESTAR/SHERIDAN HOLDINGS, INC. By: JAMES L. ELROD, JR. ------------------------------------ Name: James L. Elrod, Jr. Title: President VESTAR/SHERIDAN, INC. By: JAMES L. ELROD, JR. ------------------------------------ Name: James L. Elrod, Jr. Title: President SHERIDAN HEALTHCARE, INC. By: JAY A. MARTUS ------------------------------------ Name: Jay A. Martus Title: Vice President and General Counsel MITCHELL EISENBERG -------------------------------------- Mitchell Eisenberg ii 4 LEWIS D. GOLD -------------------------------------- Lewis D. Gold MICHAEL F. SCHUNDLER -------------------------------------- Michael F. Schundler GILBERT L. DROZDOW -------------------------------------- Gilbert L. Drozdow JAY A. MARTUS -------------------------------------- Jay A. Martus ROBERT J. COWARD -------------------------------------- Robert J. Coward April 1, 1999 iii 5 EXHIBIT INDEX (b)(4) Presentation to the Company's Board of Directors by Bowles Hollowell Conner dated March 24, 1999.
EX-99.B.4 2 PRESENTATION TO THE COMPANY'S BOARD OF DIRECTORS 1 BOWLES HOLLOWELL CONNER AND FIRST UNION CAPITAL MARKETS GROUP PRESENTATION TO THE BOARD OF DIRECTORS OF SHERIDAN HEALTHCARE, INC. MARCH 24, 1999 (IN A BOX) 2 EXECUTIVE SUMMARY PRESENTATION TO THE BOARD OF DIRECTORS page 1 Executive Summary (in a box) Industry and Company Overview Valuation Conclusions Exhibits 3 EXECUTIVE SUMMARY PRESENTATION TO THE BOARD OF DIRECTORS page 2 EXECUTIVE SUMMARY - - BHC AND SALOMON SMITH BARNEY WERE ENGAGED ON NOVEMBER 5, 1998 BY SHERIDAN HEALTHCARE, INC. ("SHERIDAN" OR THE "COMPANY") TO EVALUATE SHERIDAN'S STRATEGIC ALTERNATIVES AND TO INITIATE DISCUSSIONS WITH A LIMITED NUMBER OF PARTIES REGARDING A SALE OR RECAPITALIZATION OF THE COMPANY. AS PART OF THIS ENGAGEMENT, THE BOARD OF DIRECTORS OF SHERIDAN HAS ASKED BHC TO PROVIDE A FAIRNESS OPINION RELATED TO VESTAR CAPITAL PARTNERS III, L.P.'S ("VESTAR") PROPOSED ACQUISITION OF SHERIDAN. - - FOR PURPOSES OF THIS OPINION, THE "TRANSACTION" REFERS TO THE PROPOSED TENDER OFFER FOR THE OUTSTANDING COMMON STOCK OF SHERIDAN AND THE FOLLOW ON MERGER OF SHERIDAN WITH AN ENTITY CREATED BY VESTAR WHICH IS MORE FULLY SET FORTH IN THE DRAFT AGREEMENT AND PLAN OF MERGER DATED AS OF MARCH ___, 1999 (THE "AGREEMENT"). - - IN ARRIVING AT OUR OPINION, WE HAVE AMONG OTHER THINGS: - REVIEWED THE FINANCIAL TERMS OF THE TRANSACTION, AS SET FORTH IN THE AGREEMENT; - REVIEWED CERTAIN HISTORICAL BUSINESS, FINANCIAL, AND OTHER INFORMATION RELATED TO SHERIDAN; - REVIEWED CERTAIN FINANCIAL FORECASTS AND OTHER DATA PROVIDED TO US BY MEMBERS OF SHERIDAN'S MANAGEMENT; - CONDUCTED DISCUSSIONS WITH MEMBERS OF SHERIDAN'S MANAGEMENT WITH RESPECT TO ITS BUSINESS, PROSPECTS, AND FINANCIAL FORECASTS; - REVIEWED CERTAIN FINANCIAL INFORMATION REGARDING SIMILAR COMPANIES AND TRANSACTIONS; - CONSIDERED SUCH OTHER INFORMATION, FINANCIAL STUDIES, ANALYSES, AND INVESTIGATIONS AS WE DEEMED APPROPRIATE. - - BASED UPON OUR ANALYSIS AND SUBJECT TO CERTAIN LIMITATIONS AND ASSUMPTIONS SET FORTH IN THIS PRESENTATION, IT IS OUR OPINION THAT, AS OF THE DATE HEREOF, THE CONSIDERATION TO BE PAID TO THE SHAREHOLDERS OF SHERIDAN (OTHER THAN MANAGEMENT PARTICIPATING WITH VESTAR IN THE TRANSACTION WITH RESPECT TO WHOM WE EXPRESS NO OPINION) PURSUANT TO THE TRANSACTION IS FAIR FROM A FINANCIAL POINT OF VIEW. 4 EXECUTIVE SUMMARY PRESENTATION TO THE BOARD OF DIRECTORS page 3 REVISED TRANSACTION Offer Price for Sheridan Shares $ 9.25 ------------------------------- -------------- Total Equity Value (1) $ 62.1 million Plus: Total Net Debt (2) $ 85.2 million -------------- ENTERPRISE VALUE $147.3 million
(IN A BOX) Transaction Currency: Cash Transaction Structure: Vestar proposes a two-step transaction in which Vestar will organize a new entity that will tender for Sheridan's outstanding common stock and after completion of the tender offer will merge into Sheridan. In-the-money Sheridan options will be cashed out at the merger price. Topping Fee: Vestar will be entitled to a topping fee of $6.4 million. Closing Considerations: Vestar requires at least 51% of current shareholders to tender their shares into the Transaction. Management and insider equity represents approximately 10.2% of pre-Transaction equity. Key members of management (CEO, EVP, CFO/COO, and the Counsel) currently hold approximately 8.4% of pre-Transaction equity and are expected to rollover equity totaling $3.0 million in the Transaction. (1) Number of shares outstanding used to calculate equity value was 6.7 million shares. Number of shares outstanding was calculated by taking the actual shares outstanding (6.6 million) plus in-the-money options relative to $9.25 offer price (579,000) less the proceeds generated by those options ($4.2 million) divided by the offer price. (2) Net debt equals projected debt at closing of $85.2 million. Cash is assumed to be $0 at closing. 5 EXECUTIVE SUMMARY PRESENTATION TO THE BOARD OF DIRECTORS page 4 ORIGINAL TRANSACTION Offer Price for Sheridan Shares $ 11.50 ------------------------------- Total Equity Value (1) $ 85.2 million Plus: Total Net Debt (2) $ 76.2 million -------------- ENTERPRISE VALUE $161.4 million
(IN A BOX) Transaction Currency: Cash Transaction Structure: Vestar proposes a one-step merger transaction structured to permit recapitalization accounting in which Vestar would have organized a new entity and merged it into Sheridan. In-the-money Sheridan options would have been cashed out at the merger price. Topping Fee: Vestar would have been entitled to a topping fee of $7.0 million. Closing Considerations: Vestar would have required at least 10%, not more than 30%, of current shareholders to roll their equity into the Transaction (3). Management and insider equity represented approximately 9.3% of pre-Transaction equity. Key members of management (CEO, EVP, CFO/COO, and the Counsel) held approximately 7.6% of pre-Transaction equity and were expected to make equity commitments totaling $7.7 million in their new entity. (1) Number of shares outstanding used to calculate equity value was 7.4 million shares. Number of shares outstanding was calculated by taking the actual shares outstanding (7.2 million) plus in-the-money options relative to $11.50 offer price (860,000) less the proceeds generated by those options ($6.9 million) divided by the offer price. (2) Net debt equaled the then projected debt at closing of $76.2 million. Cash was assumed to be $0 at closing. (3) For purposes of our analysis, we assumed the trading value of the stub equity equaled $11.50, but the stub equity was likely to trade initially at a discount to current trading values due to, among other things, lack of liquidity and increased leverage. We were not going to express (and could not express) an opinion as to the trading value of such stub equity. 6 EXECUTIVE SUMMARY PRESENTATION TO THE BOARD OF DIRECTORS page 5 DUE DILIGENCE REVIEW AND EVALUATION PROCESS - - Reviewed publicly available information, including SEC filings and selected equity research reports on Sheridan. - - Reviewed Sheridan's financial projections and conducted interviews with Sheridan's senior management. - - Analyzed Sheridan's financial performance and market valuation relative to publicly traded comparable companies. - - Examined the multiples paid in recent acquisitions of comparable publicly traded companies. - - Performed a discounted cash flow valuation of Sheridan based on management's projections. - - Performed a LBO analysis of Sheridan based on management's projections. - - Conducted an auction process which included the selection of likely strategic and financial buyers. - - Reviewed the final draft of the Agreement and Plan of Merger. 7 EXECUTIVE SUMMARY PRESENTATION TO THE BOARD OF DIRECTORS page 6 ENTERPRISE VALUE MULTIPLES - - The following chart summarizes the enterprise value multiples paid for Sheridan by Vestar based upon a closing equity purchase price of $9.25 per share (yielding an enterprise value of $147.3 million). Purchase Multiple Analysis ($ in Millions) Enterprise Value $147.3
Valuation Multiples ------------------- Run Run 1998 Rate (1) 1998 Rate (1) ---- -------- Sales $113.0 $116.3 1.3x 1.3x EBITDA $ 19.1 $ 20.5 7.7x 7.2x EBIT $ 14.8 $ 15.5 10.0x 9.5x
(IN A BOX) (1) Run rate equals annualized 4Q98 financial information 8 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 7 Executive Summary Industry and Company Overview (in a box) Valuation Conclusions Exhibits 9 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 8 COMPANY OVERVIEW - - Sheridan operates and manages physician practices that provide specialist physician services through integrated physician networks and hospital outsourcing. - Integrated Physician Networks. - Multi-specialty physician group practices, representing 233 physicians, developed around key hospitals in selected geographies to provide for the healthcare needs of women and children. Specialty services include anesthesia, neonatology, pediatrics, obstetrics, gynecological oncology, perinatology, and infertility. - Create value by: - Enabling the provision of a broad range of services to a specific patient population. - Providing physicians and hospitals greater access to managed care contracts. - Strengthening the Company's relationships with key hospitals. - Hospital Outsourcing - Contract specialist physician services at hospitals and ancillary facilities in markets not suitable for development of multi-specialty physician group practices. Specialty services include anesthesia, neonatology, pediatric intensive care, and emergency. - - Sheridan's initial focus was in the provision and management of anesthesia services in South Florida. As the Company's market presence grew, Sheridan recognized the opportunity to develop multi-specialty physician group practices around key hospitals it was already servicing. 10 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS PAGE 9 SHERIDAN HEALTHCARE, INC., STOCK PERFORMANCE VS. PPM, RUSSELL 2000, AND S&P 500 INDICES (FROM NOVEMBER 1, 1995 TO MARCH 23, 1999) [GRAPH OF SUCH] MULTI-SPECIALTY PPM Index includes: MDM, PHMX, PHYC, and PMCO. SINGLE-SPECIALTY PPM Index includes: AORI, APPM, PATH, PDX, and PHYN. Source: FactSet Database * Data for 4/97 through 6/97 for Sheridan and 4/97 through 5/97 for the S&P for the S&P 500 reflects period for which forward P/E multiple data is not available from FactSet. 11 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS PAGE 10 SHERIDAN HEALTHCARE, INC., STOCK PERFORMANCE VS. PPM, RUSSELL 2000, AND S&P 500 INDICES (FROM MARCH 7, 1995 TO MARCH 23, 1999) Sheridan, Multi-Specialty PPM Index, and Single-Specialty PPM Index forward P/E multiples have contracted since early 1998 while average S&P 500 forward P/RE multiple has expanded. [GRAPH OF SUCH] MULTI-SPECIALTY PPM Index includes: MDM, PHMX, PHYC, and PMCO. SINGLE-SPCIALTY PPM Index includes: AORI, APPM, PATH, PDX, and PHYN. Source: FactSet Database * Data for 4/97 through 6/97 for Sheridan and 4/97 through 5/97 for the S&P 500 reflects period for which forward P/E multiple data is not available from FactSet. 12 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS PAGE 11 SHERIDAN HEALTHCARE, INC. - REVENUE SOURCE AND MIX Revenue By Specialty Geographic Location of Operations [PIE PERCENTAGE CHART] [MAP OF USA HERE] Revenue By Division [PIE PERCENTAGE CHART] - - Hospital Outsourcing - - Multi-Specialty Group Physician Practices 13 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS PAGE 12 SHERIDAN HEALTHCARE, INC. - PHYSICIAN PRACTICE GROWTH Projected Physician Practices By the end of 2001 [THE FOLLOWING HEADINGS ARE IN A BAR-TYPE BOX]
PALM BROWARD DADE BEACH OTHER TOTAL OB/GYN 35 40 15 35 125 PERINATOLOGY 3 4 2 6 15 SURGERY 7 8 3 7 25 ONCOLOGY 2 3 2 3 10 INFERTILITY 2 1 1 1 5 NEONATOLOGY 30 35 10 25 100 PEDIATRIC 12 12 3 8 35 ANESTHESIA 60 35 30 50 175 ER/PRIMAY CARE 12 18 5 25 60 --- --- -- --- --- TOTAL 163 156 71 160 550 (ABOVE TOTAL LINE ENCLOSED IN BOX) Current Physicians 97 63 4 66 230 Planned Growth 66 93 67 94 320
14 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 13 SHERIDAN HEALTHCARE, INC. - PAYOR MIX* - 1997 [PIE PERCENTAGE CHART RE:] MEDICARE 8.7% MEDICARE FFS 8.5% HOSPITALS 11.0% HUMANA (FFS)** 7.1% UNITED** 7.4% BLUE CROSS/BLUE SHIELD** 7.1% HIP** 7.5% OTHER 42.7% * Excludes $7.7 million in Humana Capitated revenues. The Humana Capitated contract was terminated in April of 1998. ** Includes amounts received from managed care plans for patients who have assigned their Medicare or Medicaid benefits to the plans. 15 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 14 SHERIDAN HEALTHCARE, INC. - STOCK PRICE/VOLUME ANALYSIS (FROM MARCH 23, 1998 TO MARCH 23, 1999) [GRAPH RE SAME] Recent Stock Price $8.25 Range: Low/High $6.56 / $17.06 Average Daily Volume 18,224 16 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 15 SHERIDAN HEALTHCARE, INC. - OWNERSHIP ANALYSIS Total Shares Outstanding (1) = 6,708,676 Institutional Holders (2)
Date %of Shares Institution Reported Shares Held Outstanding TA Associates Dec-98 1,891,000 28.2% Edgemont Asset Management Dec-98 900,000 13.4% NationsBank Dec-98 438,695 6.5% Loomis Sayles Dec-98 360,300 5.4% Fleet Investments Dec-98 351,910 5.2% Dimensional Fund Dec-98 347,800 5.2% Cadence Capital Dec-98 242,500 3.6% BZW Barclays Dec-98 85,074 1.3% Rosenberg Investments Dec-98 79,000 1.2% Brandywine Asset Management Dec-98 52,700 0.8% Merchant Capital Dec-98 18,300 0.3% Alex Brown & Sons Dec-98 12,500 0.2% Other Institutions 4,900 0.1% Total 4,784,679 71.3%
Insiders(3)
% of Shares Insiders Shares Held Outstanding Mitchell Eisenberg 248,041 3.7% Lewis D. Gold 199,659 3.0% Gilbert L Drozdow 77,459 1.2% Michael F. Schundler 61,700 0.9% Jay A. Martus 53,721 0.8% Other Insiders 44,834 0.7% Total 685,414 10.2%
Shares % of Shares Held Outstanding Estimated Retail and Other 1,238,583 18.5%
Ownership Breakdown Retail & Order 18.5% Insiders 10.2% Institutions 71.3%
(1) Number of shares outstanding was calculated by taking the actual shares outstanding (6.6million) plus in the money options relative to $9.25 offer price (579,000) less the proceeds generated by those options ($4.2 million) divided by the offer price. (2) AS of latest 13F filing (3) AS of latest proxy statement dated June 24, 1998; Includes exercisable options. 17 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 16 SHERIDAN HEALTHCARE, INC. - STOCK PRICE /VOLUME HISTOGRAM (From March 23, 1998 to March 23, 1999) GRAPH TO BE INSERTED Actual Volume - 0; 500,000; 1,000,000; 1,500,000; 2,000,000; 2,500,000 Price Range - 6.00-8.40; 8.40-10.80; 10.80-13.20; 13.20-15.60; 15.60-18.00 High: $17.50 Low: $6.50 Ave. Price: $10.40 4.6 million cumulative shares were traded representing 59.0% of the 7.8 million shares outstanding as reported for fiscal year ended 12/31/98. 18 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 17 SHERIDAN HEALTHCARE, INC. - HISTORICAL FINANCIALS Strong revenue growth through successful acquisitions. 20.4% compound annual growth rate from 1995 to 1998. Attractive EBITDA growth and impressive margins. 51.7% compound annual growth rate from 1995 to 1998. Steady improvement in historical EBITDA margins from 8.5% in 1995 to 16.9% in 1998. EBITDA margin expansion occurred as Sheridan shifted its business mix towards multi-specialty groups focused on women's and children's health and hospital outsourcing, and away from primary care. GRAPH TO BE INSERTED 19 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 18 SHERIDAN HEALTHCARE, INC. - HISTORICAL REVENUE MIX GRAPH TO BE INSERTED Since 1996, Sheridan has significantly reduced its primary care business, and focused its attention on its higher-margin multi-specialty group practices. 20 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 19 SHERIDAN HEALTHCARE, INC. - KEY VARIABLES FOR GROWTH STRATEGY Sheridan Healthcare, Inc. growth plan relies upon a combination of internal growth and acquisitions. Internal growth initiatives include: Internal contract growth. New hospital outsourcing contracts. Physician startups within integrated networks. Selective addition of ancillary surgery centers. The Company's ability to achieve internal growth objectives is dependent upon: Continued ability to provide high hospital outsourcing contract service levels leading to internal contract growth, contract renewals, and new contracts. Ability to attract additional specialist physician to compliment services provided through existing practice and integrated networks. Ability to obtain necessary approvals for ancillary surgery centers. Acquisitions include hospital-based and office-based specialist physician practices within Company-operated integrated networks. The Company's ability to achieve acquisition growth objective is dependent upon: Availability and receptivity of specialist physicians towards affiliation with the Company. Price levels at which physician acquisition of affiliation can be completed. Availability of capital at reasonable rates. Limited incremental capital currently available to the Company. Ability to successfully integrate acquired practice. 21 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 20 SHERIDAN HEALTHCARE, INC. - FINANCIAL PROJECTIONS GRAPH TO BE INSERTED Strong projected revenue growth through acquisitions. 27.5 % compound annual revenue growth rate from 1998 to 2003. 10.0% compound annual internal revenue growth rate from 1999 to 2003. Attractive cash flow projections. 34.1 % compound annual growth in EBITDA from 1998 to 2003. 18.6% to 21.8 % projected EBITDA margins. Projected margins higher than historical results, reflecting continuing shift in revenue mix in favor of multi-specialty group practices. (1) Excludes bad debt expense. (2) Internal initiatives include internal contract growth, new hospital outsourcing contracts, physician startups, and addition of ancillary centers. 22 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 21 SUMMARY REVENUE PROJECTIONS - ($ in Millions) Revenue projections are provided by Sheridan's management. The drivers of revenue growth are internal growth initiatives and acquisitions.
1999 2000 2001 2002 2003 Hospital Outsourcing Hospital Outsourcing Base Revenue (1) (2) $ 26.3 $ 25.1 $ 25.9 $ 26.6 $ 28.3 % of Total Revenue 15.2% 11.6% 9.8% 8.5% 7.4% Acquisitions - Hospital Outsourcing 9.6 15.1 21.2 28.6 38.1 Total Hospital Outsourcing $ 35.9 $ 40.2 $ 47.1 $ 55.2 $ 66.4 % of Total Revenue 20.8% 18.6% 17.8% 17.5% 17.5% Integrated Networks Integrated Networks Base Revenue (1) (3) $ 87.3 $ 102.2 $ 116.5 $ 125.2 $ 138.7 % of Total Revenue 50.5% 47.2% 44.0% 39.9% 36.5% Acquisitions - Integrated Networks 38.2 60.2 84.6 114.2 152.2 Total Integrated Networks $ 125.5 $ 162.4 $ 201.1 $ 239.4 $ 290.9 % of Total Revenue 72.6% 75.0% 76.0% 76.4% 76.6% Primary Care Total Primary Care Revenue $ 2.0 $ 2.0 $ 2.0 $ 2.0 $ 2.0 % of Total Revenue 1.1% 0.9% 0.7% 0.6% 0.5% Total Revenue (Excluding Bad Debt) $ 163.3 $ 204.6 $ 250.2 $ 296.6 $ 359.3 Revenue Summary 1999 2000 2001 2002 2003 Total Hospital Outsourcing Revenue $ 35.9 $ 40.2 $ 47.1 $ 55.2 $ 66.4 Total Integrated Networks Revenue $ 125.5 $ 162.4 $ 201.1 $ 239.4 $ 290.9 Total Primary Care Revenue $ 2.0 $ 2.0 $ 2.0 $ 2.0 $ 2.0 Bad Debt Expense $ 9.5 $ 11.8 $ 14.4 $ 16.9 $ 20.7 Total Revenue $ 172.8 $ 216.4 $ 264.6 $ 313.5 $ 380.0
(1) Base revenue includes existing revenue and internal growth initiatives. (2) Hospital outsourcing internal growth initiatives include internal contract growth and new contracts. (3) Integrated network internal initiatives include internal contract growth, new contracts, physicians startups, and ancillary surgery centers. 23 INDUSTRY AND COMPANY OVERVIEW PRESENTATION TO THE BOARD OF DIRECTORS page 22 HOSPITAL OUTSOURCING / PRIMARY CARE REVENUE PROJECTIONS - ($ in Millions) Hospital Outsourcing Existing Hospital Outsourcing:
1999 2000 2001 2002 2003 Anesthesia $ 10.4 $ 9.9 $ 9.5 $ 9.5 $ 9.5 % of total Existing Hospital Outsourcing Revenue 44.8% 48.2% 47.0% 47.0% 47.0% Neonatal & Pediatric 4.6 4.6 4.6 4.6 4.6 % of Total Existing Hospital Outsourcing Revenue 19.8% 22.3% 22.8% 22.8% 22.8% Obstetrical 0.9 0.9 0.9 0.9 0.9 % of Total Existing Hospital Outsourcing Revenue 3.7% 4.2% 4.2% 4.2% 4.2% Emergency 7.3 5.2 5.2 5.2 5.2 % of Total Existing Hospital Outsourcing Revenue 31.6% 25.3% 25.9% 25.9% 25.9% Total Existing Hospital Outsourcing $ 23.2 $ 20.6 $ 20.2 $ 20.2 $ 20.2 % of Total Existing Revenues 23.5% 21.5% 21.1% 21.1% 21.1% Internal Contract Growth $ 0.3 $ 0.9 $ 1.8 $ 2.9 $ 4.2 New Contracts $ 2.8 $ 3.6 $ 3.9 $ 3.5 $ 3.9 Acquisitions - Hospital Outsourcing $ 9.6 $ 15.1 $ 21.2 $ 28.6 $ 38.1 Total Hospital Outsourcing (Existing Bad Debt) $ 35.9 $ 40.2 $ 47.1 $ 55.2 $ 66.4 Primary Care Existing Primary Care: 1999 2000 2001 2002 2003 Total Existing Primary Care Revenue $ 2.0 $ 2.0 $ 2.0 $ 2.0 $ 2.0 % of Total Existing Revenues 2.0 2.0 2.1 2.1 2.1 Total Primary Care (Excluding Bad Debt) $ 2.0 $ 2.0 $ 2.0 $ 2.0 $ 2.0
24 INDUSTRY AND COMPANY OVERVIEWPRESENTATION TO THE BOARD OF DIRECTORS page 23 INTEGRATED NETWORKS REVENUE PROJECTION - ($ in Millions) Integrated Networks Existing Integrated Networks:
1999 2000 2001 2002 2003 Anesthesia $ 36.1 $ 36.1 $ 36.1 $ 36.1 $ 36.1 % of Total Existing Integrated Networks Revenue 49.4% 49.4% 49.4% 49.4% 49.4% Neonatal & Pediatric 11.1 11.1 11.1 11.1 11.1 % of Total Existing Integrated Networks Revenue 15.2% 15.2% 15.2% 15.2% 15.2% Obstetrical 1.9 1.9 1.9 1.9 1.9 % of Total Existing Integrated Networks Revenue 2.5% 2.5% 2.5% 2.5% 2.5% Obstetrical 19.7 19.7 19.7 19.7 19.7 % of Total Existing Integrated Networks Revenue 26.9% 26.9% 26.9% 26.9% 26.9% Other 4.3 4.3 4.3 4.3 4.3 % of Total Existing Integrated Networks Revenue 5.9% 5.9% 5.9% 5.9% 5.9% Total Existing Integrated Networks $ 73.1 $ 73.1 $ 73.1 $ 73.1 $ 73.1 % of Total Existing Revenue 74.5% 76.5% 76.8% 76.8% 76.8% Internal Contract Growth $ 2.8 $ 8.4 $ 15.9 $ 25.7 $ 38.1 New Contracts $ 8.3 $ 10.8 $ 11.7 $ 10.5 $ 11.6 Ancillary Centers $ 0.2 $ 2.4 $ 4.7 $ 0.0 $ 0.0 Physician Startups $ 2.9 $ 7.5 $ 11.1 $ 15.9 $ 15.9 Acquisitions - Integrated Networks $ 38.2 $ 60.2 $ 84.6 $ 114.2 $ 152.2 Total Integrated Networks (Excluding Bad Debt) $ 125.5 $ 162.4 $ 201.1 $ 239.4 $ 290.9
25 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 24 Executive Summary Industry and Company Overview Valuation (in a box) Conclusions Exhibits 26 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 25 VALUATION CONSIDERATIONS Forward earnings multiples of physician management companies have declined approximately 30%-50% since early 1998, while average earnings multiple of S&P 500 has increased approximately 15%-20% (see page 10). Clear distinction between value added PPM models and aggregation models. Industry peers have faced integration challenges. Sheridan's management believes it is positioned to mitigate integration issues. Operational density around key hospitals provides internal growth opportunities. Network concentration facilitates market share growth. Management sees significant opportunity to grow business but public market does not afford adequate access to capital to implement the Company's growth plan. 27 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 26 VALUATION INTRODUCTION BHC's valuation is based on Sheridan financial information provided to BHC by Sheridan's management. In valuing Sheridan, BHC utilized the following methods: Comparison to publicly held companies. Comparison to recent mergers and acquisitions. Dilution analysis, all cash. Discounted cash flow analysis. Leveraged buyout analysis. 28 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 27 EARNINGS GENERATING CAPACITY The following chart summarizes key statistics utilized by BHC to value Sheridan. ($ in Millions)
Latest Twelve 1997 Months (1) LQA (1) Sales $ 98.6 $113.0 $116.3 EBITDA 13.3 19.1 20.5 EBIT 10.5 14.8 15.5 EBITDA-Average CapEx 4.9 NM NM Net Income 5.2 6.4 6.7 Book Value 41.4 64.8 64.8 Third-Party Debt Less Cash 31.4 85.2 85.2
(1) As of quarter ended December 31, 1998, except third-party debt less cash which is the amount projected to be outstanding at closing. 29 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 28 VALUATION COMPARISON TO PUBLICLY HELD COMPANIES BHC reviewed the operating performance, financial performance, and market valuation of ten publicly held single-specialty and multi-specialty PPMs. Single Speciality
Company Ticker Exchange Description ------- --------------- ----------- American Oncology AORI The Company is a national provider of comprehensive practice management Resources, Inc. (NASDAQ) services under long-term agreements to oncology practices, representing 304 physicians in 16 states. The Company's physicians provide a variety of medical services to cancer patients, integrating medical and gynecological oncology, hemotology, radiation oncology, and clinical trial participation. In December 1998, AORI announced merger plans with PHYN. American Physician Partners, APPM The Company provides physician practice management services to Inc. (NASDAQ) radiology practices. The company develops, consolidates, and manages diagnostic imaging centers throughout the U.S. hospitals and 71 owned, operated, or managed diagnostic imaging centers throughout U.S. AmeriPath, Inc. PATH The Company provides integrated anatomic pathology services to (NASDAQ) physicians, hospitals managed care organizations, and national clinical laboratories. The Company has 32 pathology practices, 122 hospital contracts, and 41 surgery center contracts in 10 states. Pediatrix Medical Group, Inc. PDX The Company specialized in neonnatal and perinatal care. PDX provides (NYSE) physician management services to more then 120 NICUs and employs or contracts with approximately 345 physicians. On February 12, 1999, PDX announced that it could no longer express confidence to comments on analyst estimates for 1998 due to its ongoing audit by KPMG. KPMG had informed PDX that the Company's accounting policies with respect to capitalization of certain acquisition related costs would not be acceptable to the SEC. PDX's stock dropped from $52.69 to $28.00 (a 46.9% decrease) on the date of the announcement. Physician Reliance PHYN The Company provides management, facilities, technical support, Network, Inc. (NASDAQ) administration, and ancillary services to establish a network of oncology care. PHYN manages approximately 340 physicians in 127 practice locations throughout the United States. In December 1998, PHYN announced merger plans with AORI.
30 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 29 COMPARISON TO PUBLICLY HELD COMPANIES BHC reviewed the operating performance, financial performance, and market valuation of ten publicly held single-specialty and multi-specialty PPMs.
Company Ticker Exchange Description ------- --------------- ----------- MedPartners, Inc. MDM The Company historically a physician practice management company, has (NYSE) recently begun divesting its physician practice. In January 1999, it completed the sale of its Government Services Division to American Service Group, and in January 1999 MDM announced the divestiture to its Team Health division to private equity funds Madison Dearborn Partners.Cornerstone Equity Investors, and Beecken Petty & Company. MDM provides primary and specialty healthcare services to pre-paid managed care enrollees and fee-for-service patients. Phycor, Inc. PHYC The Company is a physician practice management company which operates (NASDAQ) multi-specialty clinics and manages independent practice associations. PHYC also provides healthcare decision-support services to consumers. The Company operates 57 clinics with approximately 3,890 physicians in 28 states and manages independent practice associations with over 26,000 physicians in 36 markets. PhyMatrix Corp. PHMX The Company is a physician-driven, integrated medical management (NASDAQ) company. PHMX's primary strategy is to develop management networks in specific geographic locations by affiliating with physicians, medical providers, and medical networks. Promedco Management Co. PMCO The Company is a physician practice management company that focuses (NASDAQ) exclusively on premanaged care, secondary markets. PMCO consolidates physician groups into primary-care-driven multi-specialty networks. By providing access to capital, improving operations, increasing services, and expanding the size of its medical groups, PMCO helps physicians gain increasing control of medical expenditures in their communities.
31 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 30 PUBLIC VALUATIONS ($ in Millions, Except Per Share Data)
Company Name Ticker 3.22.99 Percent Shares Mkt. Adjusted LTM 1999E 2000(2) Growth Latest Qtr. - FYE Price of 52 Out Value Market (2) 1999E- Low-High Week High (Mils). Value 2000E (1) - ----------------- ------ -------- --------- ------- ----- -------- --- ----- ------- ------ Single Specialty American Oncology AORI $7.63 47.5% 48.9 $373.0 550.1 $0.61 $0.75 0.97 29.3% 9/30/98 Dec. $7.06 -$16.06 American Physician APPM $6.00 51.1 19.2 115.4 224.8 0.70 0.90 1.15 27.8% 9/30/98 Dec 4.00 - 11.75 AmeriPath, Inc. PATH 7.81 40.8 21.0 163.8 272.8 0.89 1.02 1.21 18.6% 9/30/98 Dec. 3.88 - 19.13 Pediatrix Medical PDX 21.94 33.5 15.3 335.3 352.6 1.72 2.23 2.65 18.8% Group 18.06 - 65.56 9/30/98 Dec Physician Reliance PHYN 7.03 46.9 51.4 361.4 418.3 0.56 0.67 0.82 22.4% Network 6.63 - 15.00 9/30/98 Dec. MEDIAN: 22.4% MULTI-SPECIALTY MedPartners MDM $3.25 27.4% 199.0 $646.8 $2,256.0 0.07 $0.42 $0.61 45.2% 9/30/98 Dec 1.63 - 11.88 Phycor, Inc. PHYC 5.19 19.6% 76.2 395.0 987.5 0.76 0.64 0.73 14.1 9/30/98 Dec 3.94 - 26.44 PhyMatrix PHMX 1.94 14.5% 30.0 58.1 149.2 0.68 0.76 0.85 12.0 10/30/98 Jan. 1.50 - 13.36 Promedco Management PMCO 4.44 27.3% 21.1 93.8 118.3 0.61 0.70 0.89 27.1 9/30/98 Dec 3.88 - 16.25 MEDIAN: 20.6% LOW: 12.0% MEAN: 23.9% MEDIAN: 22.4% HIGH 45.2% Sheridan Healthcare SHCR $8.25 47.1% 6.7 $55.4 $140.6 $0.78 $0.96 $1.12 16.7% 122/31/98 Dec. 6.50 - $17.50
P/E Multiples 2000 P/E Adjusted Market Value -------------- -------- --------------------- Company Name Ticker LTM 1999E 2000E To Sales EBITDA EBIT Latest Qtr. - FYE Proj. Growth - ----------------- ------ ----- ------ -------- -------- ----- ------ ----- Single Specialty American Oncology AORI 12.5x 10.2 x 7.9 x 26.8% 1.3x 7.1 x 9.6 x 9/30/98 Dec. American Physician APPM 8.6 x 6.7 x 5.2 x 18.8% 2.3 x 7.4 x 10.1 x 9/30/98 Dec AmeriPath, Inc. PATH 8.8 x 7.7 x 6.5 x 34.7% 1.7 x 5.6 x 7.3 x 9/30/98 Dec. Pediatrix Medical PDX 12.8x 9.8 x 8.3 x 44.0% 2.1 x 6.7 x 7.8 x Group 9/30/98 Dec Physician Reliance PHYN 12.6x 10.5 x 8.6 x 38.3% 1.1 x 5.9 x 8.8 x Network 9/30/98 Dec. 12.5X 9.8X 7.9X 34.7% 1.7X 6.7X 8.8X MULTI-SPECIALTY MedPartners MDM 46.4 x 7.7x 5..3 x 11.8% 0.3x 39.8 x* NM 9/30/98 Dec Phycor, Inc. PHYC 6.8 x 8.1 x 7.1 x 50.5% 0.7 x 4.5 x 7.1 x 9/30/98 Dec PhyMatrix PHMX 2.8 x 2.5 x 2.3 x 19.0% 0.4 x 5.1 x 9.9 x 10/30/98 Jan. Promedco Management PMCO 7.3x 6.3 x 5.0 x 18.4% 0.6 x 4.8 x 6.3 x 9/30/98 Dec 7.1X 7.0X 5.2X 18.7% 0.5X 5.0X 7.1X 2.8X 2.5X 2.3X 11.8% .3X 4.5X 6.3X 13.2X 7.7X 6.2X 29.1% 1.2X 5.9X 8.4X 8.8X 7.7X 6.5X 26.8% 1.1X 5.9X 8.3X 46.4X 10.5X 8.6X 50.5% 2.3X 39.8X 10.1X Sheridan Healthcare SHCR 10.6x 8.6x 7.4x 44.2% 1.2x 7.3x 9.5x 122/31/98 Dec.
(1) Market value of equity plus net debt. (2) Estimates obtained from the first Call Network, on 2/27/99. * Excluded from mean calculation because MedPartners has announce its intention to exit the physician practice management business and has experienced significant negative operating issues. 32 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 31 PUBLIC VALUATIONS ($ in Millions, Except Per Share Data)
INCOME STATEMENT PROFITABILITY AND RETURNS HISTORICAL GROWTH Percent of Sales Return Return Sales EBIT Net ----------------------------- ------ ------ ------ ------ Reform Income Single Specialty Sales EBITDA EBIT Net EBITDA EBIT Net On 2 Year 2 Year 2 Year Income(1) Income Equity(2) CAGR CAGR CAGR - ---------------- ------- ------ ------ -------- ------ ------ ------ -------- ------ ------ ------- American Oncology $420.5 $77.6 57.3 28.4 18.4% 13.6% 6.7% 9.9% 80.1% 60.5 40.3 American Physician 98.3 30.5 22.3 13.0 31.1% 22.7% 13.2% 348.4% NM NM NM AmeriPath 161.1 48.5 37.3 16.5 30.1% 23.2% 10.3% 9.8% 160.1% 175.7 198.8 Pediatrix Medical 170.1 52.9 45.3 27.2 31.1% 26.6% 16.0% 14.4% 71.4% 77.5 76.5 Group Physician 378.5 71.4 47.5 27.1 18.9% 12.6% 7.2% 8.3% 52.1% NM NM Reliance Network MEDIAN $170.1 $52.9 $45.3 $27.1 30.1% 22.7% 10.3% 9.9% 75.8% 77.5% 76..5% Multi Specialty MedPartners $6,923.5 $56.7 ($74.2) ($174.4) 0.8% NM NM NM 27.3% NM NM Phycor, Inc. 1.419.9 221.5 138.1 71.1 15.6% 9.7% 5.0% 8.0% 59.2% 64.3 78.8 PhyMatrix 375.6 29.0 15.1 6.5 7.7% 4.0% 1.7% 3.5% 103.0% NM NM Promedco 189.6 24.9 18.8 11.4 13.1% 9.9% 6.0% 6.8 220.6% NM NM Management MEDIAN: $897.8 $42.9 $16.9 $9.0 10.4% 9.7% 5.0% 6.8% 81.1% 64.3% 78.8% LOW: $98.3 $24.9 ($74.2) ($174.4) 0.8% 4.0% 1.7% 3.5% 27.3% 60.5% 40.3% MEAN: 1,126.4 68.1 34.1 3.0 18.5% 15.3% 8.3% 55.6% 96.7% 94.5% 98.6% MEDIAN: 375.6 52.9 37.3 16.5 18.4% 13.1% 7.0% 9.0% 75.8% 70.9% 77.7% HIGH: 6,923.5 221.5 138.1 71.1 31.1% 26.6% 16.0% 384.4% 220.6% 175.7% 198.8% Sheridan $113.0 $19.1 $14.8 $6.4 $16.9% 13.1% 5.6% 9.8% 10.3% 35.9% 39.0% Healthcare
CAPITALIZATION Net Debt Net Debt EBITDA to Single Specialty to Total Book Net To LTM Capital Value Debt EBITDA Interest (3) - ---------------- -------- ------ ------- ------ -------- American Oncology 38.2% $286.5 $177.0 2.3x 6.8x American Physician 97.0% 3.4 109.4 3.6x 6.1x AmeriPath 39.1% 169.5 109.0 2.2x 6.1x Pediatrix Medical 8.4% 188.3 17.3 0.3x 62.8 Group Physician 14.8% 326.0 56.8 0.8x 16.8x Reliance Network MEDIAN 38.2% $188.3 $109.0 2.2X 6.8X Multi Specialty MedPartners 96.4% 60.4 $1609.2 28.4 x 0.6 x Phycor, Inc. 40.0% 887.9 592.4 2.7x 6.7 x PhyMatrix 33.3% 182.8 91.1 3.1x 4.2 x Promedco 12.6% 169.6 24.5 1.0x 51.5x Management MEDIAN: 36.6% $176.2 $341.8 2.9x 5.4X LOW: 8.4% 3.4 17.3 0.3x 0.6x MEAN: 42.2% 252.7 309.6 4.9x 18.0X MEDIAN: 38.2% 182.8 109.0 2.3x 6.7x HIGH: 97.0% 887.9 1,609.2 28.4x 62.8x Sheridan 56.8% $64.8 $85.2 4.4 4.8 Healthcare
(1) Before one-time charges (2) Equal to net income divided by period-end book equity. (3) Equal to the sum of short-term debt, long-term debt and capital leases less cash and marketable securities. 33 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 32 VALUATION BASED UPON MEDIAN PUBLIC COMPANY COMPARISON Comparison to Single-Specialty PPMs ($ in Millions)
Median Debt - Capitalization Rate SHERIDAN Multiple = Gross Value - Cash (1) = Equity Value - ------------------- -------- ---------- ------------- ---------- ------------ Adj. MV / Net Sales $113.0 1.7 $191.3 $85.2 $106.1 Adj. MV / EBITDA 19.1 6.7 127.7 85.2 42.5 Adj. MV / EBIT 14.8 8.8 130.0 85.2 44.8 Implied Equity Value Based Upon Median Multiple Plus Debt - Cash $ 44.8 85.2 Implied Gross Value $130.0 Implied Equity Value Per Share (2) $ 6.69
Comparison to Multi-Specialty PPMS ($ in Millions)
Median Debt - Capitalization Rate SHERIDAN x Multiple = Gross Value Cash (1) = Equity Value - ------------------- -------- ---------- ----------- ---------- ------------ Adj. MV / Net Sales $113.0 0.5 $57.7 $85.2 $(27.5) Adj. MV / EBITDA 19.1 5.0 94.9 85.2 9.7 Adj. MV / EBIT 14.8 7.1 105.6 85.2 20.4 Implied Equity Value Based Upon Median Multiple Plus Debt - Cash $ 9.7 85.2 Implied Gross Value $ 94.9 Implied Equity Value Per Share (2) $ 1.44
(1) Third-party debt less cash. At closing, Sheridan is projected to have approximately $85.2 million in third-party net debt on its balance sheets. (2) Based on 6.7 million diluted shares after conversion of in-the-money options, relative to $9.25 offer price, according to the Treasury Stock Method. 34 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 33 COMPARISON TO SELECTED RECENT MERGERS AND ACQUISITIONS ($ IN Thousands)
Latest Twelve Months Target / Equity Adjusted Market Acquiring Company (Announcement Date) Sales EBITDA EBIT Value Value (AMV)(1) ----- ------ ---- ----- -------------- MedPartners Team Health Operations $547,785(2) $ 54,268(2) $ 44,528(2) $335,000 $335,000 Madison Dearborn, Cornerstone, Beecken Petty & Co. (1/99) Physician Reliance Network (Pending) 378,511 71,413 47,511 609,951 666,794 American Oncology Resources (12/98) Company 1 171,000 7,882 NA 67,000 67,000 Strategic Buyer (9/98) First Physician Care 57,563 (2,324) (4,381) 70,000 78,029 Phycor, Inc. (12/97) Talbert Medical Management 430,678 (27,887) (29,991) 200,000 132,543 Medpartners, Inc. (8/97) Health Partners, Inc. 155,973 (4,201) (6,975) 115,000 110,031 FPA Medical Management, Inc. (7/97) Occusystems, Inc. 187,506 35,611 27,109 458,000 554,602 CRA Managed Care, Inc. (4/97) InPhynet Medical Management 443,124 26,618 21,968 413,000 406,512 Medpartners, Inc. (1/97) AHI Healthcare Systems, Inc. 119,179 (15,913) (18,493) 117,000 103,414 FPA Medical Management, Inc. (11/96) American Ophthalmic, Inc. 62,165 9,407 5,839 70,000 121,702 Physicians Resource Group, Inc. (10/96)
Latest Twelve Months Target / AMV/ AMV/ AMV/ Acquiring Company (Announcement Date) Sales EBITDA EBIT ----- ------ ---- MedPartners Team Health Operations 0.6x 6.2x 7..5x Madison Dearborn, Cornerstone, Beecken Petty & Co. (1/99) Physician Reliance Network (Pending) 1.8x 9.3x 14.0x American Oncology Resources (12/98) Company 1 0.4x 8.5x NA Strategic Buyer (9/98) First Physician Care 1.4x NM NM Phycor, Inc. (12/97) Talbert Medical Management 0.3x NM NM Medpartners, Inc. (8/97) Health Partners, Inc. 0.7x NM NM FPA Medical Management, Inc. (7/97) Occusystems, Inc. 2.9x 15.3x* 20.1x* CRA Managed Care, Inc. (4/97) InPhynet Medical Management 0.9x 15.3x* 18.5x* Medpartners, Inc. (1/97) AHI Healthcare Systems, Inc. 0.9x NM NM FPA Medical Management, Inc. (11/96) American Ophthalmic, Inc. 2.0x 12.9x* 20.8x* Physicians Resource Group, Inc. (10/96)
(1) Adjusted market value equals equity value plus net debt. (2) Proforma financial information from Team Health High Yield preliminary prospectus * Excluded from mean and median because of substantial valuation declines in the segment during 1998. Low: 0.3x 6.2x 7.5x Mean: 1.2x 8.0x 10.8x Median: 0.9x 8.5x 10.8x High: 2.9x 15.3x 20.8x
35 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 34 COMPARISON TO SELECTED RECENT MERGERS AND ACQUISITIONS - SINGLE-SPECIALTY
Single-Specialty PPMs ($ in Thousands) Latest Twelve Months Latest Twelve Months Target / Sales EBITDA EBIT Equity Adjusted AMV/ AMV/ AMV/ Acquiring Company (Announcement Date) Value Market Value Sales EBITDA EBIT (AMV) (1) Physician Reliance Network (Pending) $378,511 $71,413 $47,511 $609,951 $666,794 1.8x 9.3x 14.0x American Oncology Resources (12/98)
($ in Millions)
Capitalization Rate SHERIDAN X Median Multiple = Gross Value - Debt - Cash = Equity Value (2) Adj. MV / Net Sales $113.0 1.8 x $199.0 $85.2 $113.8 Adj. MV / EBITDA 19.1 9.3 178.8 85.2 93.6 Adj. MV /EBIT 14.8 14.0 207.3 85.2 122.1 Implied Equity Value Based Upon Median Multiple $113.8 Plus: Debt - Cash 85.2 ------- Implied Gross Value $199.0 Implied Equity Value Per Share (2) $16.99
(1) Adjusted market value equals equity value plus net debt. (2) Third-party debt less cash. At closing, Sheridan is projected to have approximately $85.2 million in third-party net debt. (3) Based on 6.7 million diluted shares after conversion of in-the-money options, relative to $9.25 offer price, according to the Treasury Stock Method. - - Based upon a comparison to recent mergers and acquisitions in the Single-Specialty PPM sector, the implied valuation for 100% of the equity of Sheridan is $113.8 million, yielding an implied equity per share value of $16.99. This leads to an implied enterprise value of $199.0 million. 36 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 35 COMPARISON TO SELECTED RECENT MERGERS AND ACQUISTIONS - MULTI-SPECIALTY
Multi-Specialty PPMs ($ in Thousands) Latest Twelve Months Latest Twelve Months Target / Sales EBITDA EBIT Equity Adjusted Market AMV/ AMV/ AMV/ Acquiring Company (Announcement Date) Value Value (AMV) (1) Sales EBITDA EBIT MedPartners Team Health Operations $547,785(2) $54,268(2) $44,528(2) $335,000 $335,000 0.6x 6.2x 7.5x Madison Dearborn, Cornerstone, Beecken Petty & Co. (1/99) Company 1 171,000 7,882 NA 67,000 67,000 0.4x 8.5x NA Strategic Buyer (9/98) Median 0.5x 7.3x 7.5x
($ in Millions)
Capitalization Rate SHERIDAN X Median Multiple = Gross Value - Debt - Cash = Equity Value (3) Adj. MV / Net Sales $113.0 0.5 x $56.7 $85.2 $(28.5) Adj. MV / EBITDA 19.1 7.3 140.5 85.2 55.3 Adj. MV /EBIT 14.8 7.5 111.1 85.2 25.9 Implied Equity Value Based Upon Median Multiple $ 25.9 Plus: Debt - Cash 85.2 ------ Implied Gross Value $111.1 Implied Equity Value Per Share (4) $ 3.87
(1) Adjusted market value equals equity value plus net debt. (2) Proforma financial information from Team Health High Yield preliminary prospectus. (3) Third-party debt less cash. At closing, Sheridan is projected to have approximately $85.2 million in third-party net debt on its balance sheets. (4) Based on 6.7 million diluted shares after conversion of in-the-money options, relative to $9.25 offer price, according to the Treasury Stock Method. - - Based upon a comparison to recent mergers and acquisitions in the Multi-Specialty PPM sector, the implied valuation for 100% of the equity of Sheridan is $25.9 million, yielding an implied equity per share value of $3.87. This leads to an implied enterprise value of $111.1 million. 37 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 36 DILUTION ANALYSIS - ALL CASH - - The maximum purchase price for 100% of Sheridan is approximately $127.3 million assuming: ASSUMPTIONS Purchase Price (Enterprise Value) $127,282 % Debt 100.0% Rate 8.0% SHERIDAN Book Value as of 12/31/98 $ 64,779 New Goodwill Created 62,503 Annual Amortization (1) 2,500
1998 ---- Sales $ 112,990 EBITDA 19,149 EBIT 14,770 -------- Net Income, Pre Transaction 8,050 Incremental Amortization (1) (2,500) Incremental Interest Expense, Net of Tax (5,550) Benefit (2) Net Change in Earnings $ 0 EBITDA Multiple 6.6x
- - Assuming a 100% debt financed purchase price at 7% and 8% interest rates, the following earnings effects would result: Graph to be inserted Earnings Effect ($ in Thousands) ($2,000); ($1,500); ($1,000); ($500); $0; $500; $1,000; $1,500; $2,000; $2,500 Purchase Price in Millions 7% Interest Rate; 8% Interest Rate - - Implied per share "breakdown" purchase prices for 7% and 8% cost of debt are $7.60 and $6.27, respectively, assuming no synergies. (1) Assumes 25-year amortization of goodwill. (2) Assumes 45.5% tax rate. 38 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 37 DISCOUNTED CASH FLOW ANALYSIS - NO ACQUISITIONS - - Based upon the valuation analysis used by many strategic buyers. - - BHC used a weighted average cost of capital of 9.30%-13.30% and a terminal multiple of fiscal year 2003 EBITDA of 4.5x. Implied Adjusted Market Value ($ in Millions)
Terminal EBITDA Multiple 4.00x 4.25x 4.50x 4.75x 5.00x ----- ----- ----- ----- ----- 9.30% $108 $113 $118 $122 $127 Weighted Average Cost 10.30% 104 108 113 117 122 of Capital 11.30% 100 104 108 113 117 12.30% 96 100 104 108 112 13.30% 92 96 100 104 108
Implied Equity Market Value ($ in Millions)
Terminal EBITDA Multiple 4.00x 4.25x 4.50x 4.75x 5.00x ----- ----- ----- ----- ----- 9.30% $23 $28 $32 $37 $42 Weighted Average Cost 10.30% 19 23 28 32 37 of Capital 11.30% 14 19 23 27 32 12.30% 10 15 19 23 27 13.30% 7 11 15 19 23
Implied Equity Market Value Per Share
Terminal EBITDA Multiple 4.00x 4.25x 4.50x 4.75x 5.00x ----- ----- ----- ----- ----- 9.30% $3.42 $4.13 $4.84 $5.55 $6.26 Weighted Average Cost 10.30% 2.77 3.44 4.12 4.80 5.48 of Capital 11.30% 2.15 2.80 3.44 4.09 4.74 12.30% 1.56 2.18 2.80 3.42 4.04 13.30% 1.00 1.60 2.19 2.78 3.38
39 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 38 DISCOUNTED CASH FLOW ANALYSIS - 6.0x EBITDA PURCHASE MULTIPLE - - Based upon the valuation analysis used by many strategic buyers. - - BHC used a weighted average cost of capital of 9.30%-13.30% and a terminal multiple of fiscal year 2003 EBITDA of 6.0x. Implied Adjusted Market Value ($ in Millions)
Terminal EBITDA Multiple 5.50x 5.75x 6.00x 6.25x 6.50x ----- ----- ----- ----- ----- 9.30% $151 $164 $178 $191 $204 Weighted Average Cost 10.30% 141 154 167 179 192 of Capital 11.30% 132 144 156 168 181 12.30% 123 135 146 158 170 13.30% 115 126 137 148 159
Implied Equity Market Value ($ in Millions)
Terminal EBITDA Multiple 5.50x 5.75x 6.00x 6.25x 6.50x ----- ----- ----- ----- ----- 9.30% $66 $79 $92 $106 $119 Weighted Average Cost 10.30% 56 69 81 94 107 of Capital 11.30% 47 59 71 83 95 12.30% 38 50 61 73 84 13.30% 30 41 52 63 74
Implied Equity Market Value Per Share
Terminal EBITDA Multiple 5.50x 5.75x 6.00x 6.25x 6.50x ----- ----- ----- ----- ----- 9.30% $9.83 $11.81 $13.80 $15.78 $17.76 Weighted Average Cost 10.30% 8.37 10.26 12.15 14.05 15.94 of Capital 11.30% 6.98 8.80 10.61 12.42 14.23 12.30% 5.68 7.41 9.15 10.88 12.61 13.30% 4.45 6.11 7.77 9.42 11.08
40 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS page 39 DISCOUNTED CASH FLOW ANALYSIS - 5.0x EBITDA PURCHASE MULTIPLE (BASE CASE) - - Based upon the valuation analysis used by many strategic buyers. - - BHC used a weighted average cost of capital of 9.30%-13.30% and a terminal multiple of fiscal year 2003 EBITDA of 6.0x. Implied Adjusted Market Value ($ in Millions)
Terminal EBITDA Multiple 5.50x 5.75x 6.00x 6.25x 6.50x ----- ----- ----- ----- ----- 9.30% $188 $201 $214 $227 $241 Weighted Average Cost 10.30% 177 189 202 215 228 of Capital 11.30% 167 179 191 203 215 12.30% 157 169 180 192 203 13.30% 148 159 170 181 192
Implied Equity Market Value ($ in Millions)
Terminal EBITDA Multiple 5.50x 5.75x 6.00x 6.25x 6.50x ----- ----- ----- ----- ----- 9.30% $102 $116 $129 $142 $155 Weighted Average Cost 10.30% 92 104 117 130 142 of Capital 11.30% 81 94 106 118 130 12.30% 72 83 95 107 118 13.30% 63 74 85 96 107
Implied Equity Market Value Per Share
Terminal EBITDA Multiple 5.50x 5.75x 6.00x 6.25x 6.50x ----- ----- ----- ----- ----- 9.30% $15.27 $17.25 $19.24 $21.22 $23.20 Weighted Average Cost 10.30% 13.67 15.56 17.46 19.35 21.25 of Capital 11.30% 12.15 13.96 15.77 17.59 19.40 12.30% 10.72 12.45 14.19 15.92 17.65 13.30% 9.37 11.03 12.68 14.34 16.00
41 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS Page 40 LEVERAGED BUYOUT ANALYSIS - 6.0X EBITDA PURCHASE MULTIPLE - - Sources and uses of funds, as well as potential returns to debt and equity holders, are based upon market guidelines. - - The analysis assumes an exit multiple of 6.0x fiscal 2003 EBITDA and does not assumed recap accounting. - - $7.10 implied equity purchase price per share providing 27.8% return to new equity investors and 29.7% return to management.
Uses Amount Sources Amount % Total 5-Year Returns ---- ------ ------- ------ ------- -------------- Purchase Price of Equity $ 47.6 Senior Term Loan $ 75.0 51.8% 8.0% Repayment of Existing Debt (1) 85.2 Subordinated Debt 20.0 13.8 11.0% 6.8% warrant Transaction Costs 12.0 New Investor Equity 46.8 32.3 27.8% 87.2% ownership Required Cash (Excess) 0.0 Management Equity 3.0 2.1 29.7% 6.0% ownership Total $144.8 Total $144.8 100.0%
(1) Projected Sheridan net debt at closing. 42 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS Page 41 LEVERAGED BUYOUT ANALYSIS - 5.0 EBITDA PURCHASE MULTIPLE (BASE CASE) - - Sources and uses of funds, as well as potential returns to debt and equity holders, are based upon market guidelines. - - The analysis assumes an exit multiple of 6.0x fiscal 2003 EBITDA and does not assume recap accounting. - - $9.25 implied equity purchase price per share providing 27.8% return to new equity investors and 29.7% return to management.
Uses Amount Sources Amount % Total 5-Year Returns ---- ------ ------- ------ ------- -------------- Purchase Price of Equity $ 62.1 Senior Term Loan $ 75.0 47.1% 8.0% Repayment of Existing Debt (1) 85.2 Subordinated Debt 20.0 12.6 11.0% 6.8% warrant Transaction Costs 12.0 New Investor Equity 61.3 38.5 27.8% 88.5% ownership Required Cash (Excess) 0.0 Management Equity 3.0 1.9 29.7% 4.7% ownership Total $159.3 Total $159.3 100.0%
(1) Projected Sheridan net debt at closing. 43 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS Page 42 HEALTHCARE LBO PREMIUM ANALYSIS - - Vestar proposed $9.25 equity purchase price results in purchase premiums that compare favorably to recent healthcare leveraged buyouts.
LCA SUMMIT CARE MEDCATH HARBORSIDE COMPDENT (3) CENTENNIAL CONCENTRA SHERIDAN --- ----------- ------- ---------- ------------ ---------- --------- -------- Announced Strategic Alternatives 3/4/97 10/22/97 NA NA NA NA 10/30/98 10/29/98 Announced Agreement 5/7/97 2/6/98 3/13/98 4/16/98 7/28/98 10/22/98 3/3/99 NA Unaffected Price (1) 26.1% 26.3% 15.2% 16.3% 33.3% 88.2% 57.1% 41.0% 52-week high 2.5% (1.2%) (6.2%) 4.2% (35.1%) (36.3%) (52.9%) (47.1%) 52-week low 95.2% 100.0% 53.5% 122.0% 100.0% 128.5% 170.9% 42.3% Affected Price (2) 11.0% 20.0% 15.2% 16.3% 33.3% 88.2% 61.0% 12.1%
(1) Represents premium of purchase price to stock price one day prior to announcement of information relating to possible corporate transaction (e.e. announcing exploring strategic alternatives or company announcing merger agreement), which would affect stock price. (2) Represents premium of purchase price to affected stock price on day prior to announcement of a merger agreement. (3) On January 19, 1999 CompDent's Board of Directors signed an amendment to the 7/2/98 merger which reduced the purchase price per share from $18.00 to $15.00. Premiums based on revised offer price are: Unaffected price - 11.1%; 52-week high - (45.9%); 52-week low - 66.7%; Affected price - 11.1%. 44 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS Page 43 VALUATION RANGE Comparable Companies Analysis Comparable Acquisitions Analysis Dilution Analysis (no synergies) DCF - No Acquisitions DCF - 6.0x EBITDA DCF - 5.0x EBITDA LBO (27.8% Return) [chart] 45 VALUATION PRESENTATION TO THE BOARD OF DIRECTORS Page 44 VALUATION OBSERVATIONS - - Public company and acquisition valuation data were reviewed for both single and multi-specialty PPMs. While Sheridan has focused its business lines around women's and children's health, it employs and provides management service to a variety of physician specialists. Therefore, multi-specialty PPM financial data are more comparable to Sheridan. - - Vestar's offer price exceeds the implied per share valuation achieved by applying both multi-specialty and single-specialty public company median enterprise value multiples. - - Vestar's offer price is in the range of implied per share valuation achieved by applying both multi-specialty and single-specialty PPM acquisition a valuation data. While the acquisition valuation range is broad, Vestar's offer price exceed impled share price (8.24) achieved by applying the median enterprise value to EBITDA multiple for recent comparable multi-specialty acquisitions. - - DCF and LBO analyses, other than the no acquisition scenario, assume physician practices are willing to affiliate with the Company at valuations between 5.0x and 6.0x EBITDA and that sufficient capital is available to Sheridan to complete these acquisitions and affiliations. - - Historically, Sheridan has generally completed its acquisitions within such a valuation range, but there can be no assurance that the Company will be able to complete acquisitions within this range. - - Currently, the Company's access to incremental capital is limited. 46 CONCLUSIONS PRESENTATION TO THE BOARD OF DIRECTORS Page 45 Executive Summary Industry and Company Overview Valuation Conclusions Exhibits 47 CONCLUSIONS PRESENTATION TO THE BOARD OF DIRECTORS PAGE 46 CONCLUSION - - In connection with our review, we have relied upon the accuracy and completeness of the financial and other information provided by Sheridan's management, and we have not assumed any responsibility for any independent verification of such information. - - With respect to Sheridan's financial projections, we have assumed that they have been reasonably prepared and reflect the best current estimates and judgement of Sheridan's management as to the future financial performance of Sheridan. - - We have discussed Sheridan's financial projections with management of Sheridan, but we assume no responsibility for Sheridan's financial projections or the assumptions upon which they are based. - - In arriving at our opinion, we have not made or obtained any evaluations or appraisals of the assets or liabilities of Sheridan. - - Our opinion is necessarily based on economic, market, financial, and other conditions and information made avaiable to us as of the date hereof. - - In rendering our opinion, we have assumed that the Transaction will be consummated on the terms described in the Agreement, without waiver of any material terms or conditions. - - BASED UPON AND SUBJECT TO CERTAIN LIMITATIONS AND ASSUMPTIONS SET FORTH ABOVE AND ELSEWHERE IN THIS PRESENTATION, OUR EXPERIENCE AS INVESTMENT BANKERS, OUR WORK AS DESCRIBED IN THIS PRESENTATION, AND OTHER FACTORS WE DEEM RELEVANT, IT IS OUR OPINION THAT, AS OF THE DATE HEREOF, THE CONSIDERATION TO BE PAID PURSUANT TO THE TRANSACTION IS FAIR FROM A FINANCIAL POINT OF VIEW TO HOLDERS OF SHERIDAN COMMON STOCK, OTHER THAN MEMBERS OF MANAGEMENT PARTICIPATING WITH VESTAR IN THE TRANSACTION WITH RESPECT TO WHOM WE EXPRESS NO OPINION. - - It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise, or reaffirm this opinion. 48 EXHIBITS PRESENTATION TO THE BOARD OF DIRECTORS PAGE 47 Executive Summary Industry and Company Overview Valuation Conclusions Exhibits 49 EXHIBITS PRESENTATION TO THE BOARD OF DIRECTORS PAGE 48 VESTAR PROPOSED CAPITALIZATION Proforma Capitalization (1)
% Of Total Cap. ---------- Bank Debt $ 75.0 47.5% Mezzanine $ 20.0 12.7% -------- -------- Total Debt $ 95.0 60.1% Vestar Common Equity $ 59.9 38.0% Management Equity $ 3.0 1.9% -------- -------- Total Common Equity $ 62.9 39.9% TOTAL CAPITALIZATION $157.9 100.0% -------- --------
Proforma Common Equity Ownership
Primary Fully Primary + Time Diluted ------- ------ ------- Vestar capital Partners III, L.P. 88.8% 81.4% 76.7% Management 4.4% 12.4% 17.5% Mezzanine Warrants 6.8% 6.2% 5.8% Total Ownership 100.0% 100.0% 100.0%
(1) Proforma capitalization is stated before GAAP adjustments for recapitalization accounting. 50 EXHIBITS MANAGEMENT PROJECTIONS - NO ACQUISITIONS PRESENTATION TO THE BOARD OF DIRECTORS PAGE 49 MANAGEMENT PROJECTIONS - NO ACQUISITIONS MANAGEMENT PROJECTIONS ($ in Millions) Fiscal Year Ended December 31
1999 2000 2001 2002 2003 CAGR ---- ---- ---- ---- ---- ---- Revenue $122.2 $136.7 $152.6 $162.4 $178.6 10.0% % Growth NM 11.9% 11.6% 6.4% 10.0% EBITDA 19.5 21.2 25.6 27.1 29.7 11.1% % of Revenues 16.0% 15.5% 16.8% 16.7% 16.6% EBIT 14.0 14.9 18.8 19.8 22.8 13.0% % of Revenues 11.5% 10.9% 12.3% 12.2% 12.8% Net Income $ 4.7 $ 5.5 $ 8.2 $ 7.3 $ 8.7 16.6% % of Revenues 3.8% 4.0% 5.4% 4.5% 4.9% Capital Expenditures $ 4.0 $ 3.5 $ 3.0 $ 3.0 $ 3.0 Acquisition Expenditures 0.0 0.0 0.0 0.0 0.0 Working Capital (Decrease) Increase 4.8 3.3 2.9 2.8 5.6
51 CONCLUSIONS PRESENTATION TO THE BOARD OF DIRECTORS PAGE 50 MANAGEMENT PROJECTIONS - 6.0x EBITDA PURCHASE MULTIPLE MANAGEMENT PROJECTIONS ($ in Millions) Fiscal Year Ended December 31
1999 2000 2001 2002 2003 CAGR ---- ---- ---- ---- ---- ---- Revenue $172.8 $216.4 264.6 $313.5 $380.0 21.8% % Growth NM 25.2% 22.3% 18.5% 21.2% EBITDA 32.1 40.6 52.7 67.0 82.9 26.8% % of Revenues 18.6% 18.8% 19.9% 21.4% 21.8% EBIT 23.9 30.0 39.6 51.0 64.3 28.1% % of Revenues 13.8% 13.9% 15.0% 16.3% 16.9% Net Income $ 9.1 $ 11.1 $ 15.3 $ 20.3 $ 25.3 29.1% % of Revenues 5.3% 5.1% 5.8% 6.5% 6.7% Capital Expenditures $ 4.0 $ 3.5 $ 3.0 $ 3.0 $ 3.0 Acquisition Expenditures 72.0 42.0 48.0 60.0 78.0 Working Capital (Decrease) Increase 6.0 5.2 5.2 7.3 14.3
52 CONCLUSIONS PRESENTATION TO THE BOARD OF DIRECTORS PAGE 51 MANAGEMENT PROJECTIONS - 5.0x EBITDA PURCHASE MULTIPLE (BASE CASE) MANAGEMENT PROJECTIONS ($ in Millions) Fiscal Year Ended December 31
1999 2000 2001 2002 2003 CAGR ---- ---- ---- ---- ---- ---- Revenue $172.8 $216.4 264.6 $313.5 $380.0 21.8% % Growth NM 25.2% 22.3% 18.5% 21.2% EBITDA 32.1 40.6 52.7 67.0 82.9 26.8% % of Revenues 18.6% 18.8% 19.9% 21.4% 21.8% EBIT 24.4 30.8 40.7 52.5 66.3 28.4% % of Revenues 14.1% 14.2% 15.4% 16.7% 17.4% Net Income $ 9.9 $ 12.4 $ 17.2 $ 22.8 $ 28.8 30.6% % of Revenues 5.7% 5.7% 6.5% 7.3% 7.6% Capital Expenditures $ 4.0 $ 3.5 $ 3.0 $ 3.0 $ 3.0 Acquisition Expenditures 60.0 35.0 40.0 50.0 65.0 Working Capital (Decrease) Increase 6.0 5.2 5.2 7.3 14.3
53 CONFIDENTIAL DRAFT March __, 1999 Board of Directors Sheridan Healthcare, Inc. 4651 Sheridan Street Suite 400 Hollywood, Florida 33021 Members of the Board: You have asked us to advise you with respect to the fairness to the stockholders of Sheridan Healthcare, Inc. ("Sheridan"), but excluding certain management stockholders who will continue as stockholders of Sheridan (the "Participating Management"), from a financial point of view of the consideration to be received by such stockholders pursuant to the terms of the Agreement and Plan of Merger, dated as of March __, 1999 (the "Merger Agreement"), among Vestar/Calvary Holdings, Inc. ("Holdings"), Vestar/Calvary, Inc. ("Purchaser") (Holdings and Purchaser are entities formed at the direction of Vestar Capital Partners III, L.P. ("Vestar")), and Sheridan. The Merger Agreement provides, among other things, for (A) Purchaser to make a tender offer (the"Offer") to purchase for cash all outstanding shares of Sheridan's common stock, par value $.01 per share, and Class A common stock, par value $.01 per share (collectively, the "Common Stock") at a price of $9.25 per share and (B) the merger (the "Merger") of Purchaser with and into Sheridan, as soon as practicable following the expiration or termination of the Offer, with (i) each share of Common Stock being converted into the right to receive $9.25 in cash (the amount to be paid per share in the Offer or the Merger, the "Consideration"), and (ii) each outstanding option to purchase Sheridan Common Stock exercisable at a price less than $9.25 per share being exchanged for cash simultaneously with the Merger and all other options to purchase Sheridan Common Stock being terminated. In arriving at our opinion, we have, among other things: (i) reviewed certain publicly available business and financial information relating to Sheridan, (ii) reviewed certain other information, including financial forecasts, provided to us by Sheridan, and have met with Sheridan's management to discuss the business and prospects of Sheridan; (iii) considered certain financial data of Sheridan and compared that data with similar data for publicly held companies in businesses similar to those of Sheridan (iv) considered the financial terms of certain other business combinations and other transactions which have recently been effected; (v) reviewed the financial terms and conditions of the Merger Agreement; and (vi) considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which we deemed relevant. In connection with our review, we have not assumed any responsibility for independent verification of any of the foregoing information and have relied on its being complete and accurate in all material respects. With respect to the financial forecasts, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of Sheridan's management as to the future financial performance of Sheridan. In addition, we have not made an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Sheridan, nor have we been furnished with any such evaluations or appraisals. Our opinion is necessarily based upon financial, economic, market and other conditions as they exist and can be evaluated on the date hereof. In connection with our engagement, we and the Company's co-financial advisor, Salomon Smith Barney, approached third parties to solicit indications of interest in a possible acquisition of Sheridan. 54 We have acted as financial advisor to Sheridan in connection with the Merger and will receive a fee for our services, including for rendering this opinion, a significant portion of which is contingent upon the consummation of the Merger. As part of our investment banking business, we are regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. In the ordinary course of business, we or our affiliates may actively trade the debt and equity securities of Sheridan for our or any such affiliate's own account or for the account of customers and, accordingly, may hold a long or short position in such securities. In addition, we and our affiliates in the past may have provided investment and commercial banking products and services for Sheridan, Vestar, and their respective affiliates and other related persons. It is understood that this letter is for the information of the Board of Directors of Sheridan in connection with its consideration of the Merger and does not constitute a recommendation to any stockholder as to how such stockholders should vote on the proposed Merger or act with respect to the Offer. Our opinion does not address the relative merits of the transaction contemplated by the Merger Agreement as compared to any alternative business strategies that might exist for Sheridan, nor does it address the effect of any other business combination in which Sheridan might engage. This letter is not to be quoted or referred to, in whole or in part, in any registration statement, prospectus or proxy statement, or in any other document used in connection with the offering or sale of securities, nor shall this letter be used for any other purposes, without First Union Capital Markets corp.'s prior written consent. Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deem relevant, we are of the opinion that, as of the date hereof, the Consideration is fair from a financial point of view to holders of the Common Stock (other than the Participating Management with respect to whom we express no opinion). Very truly yours, BOWLES HOLLOWELL CONNER A division of First Union Capital Markets Corp. -----END PRIVACY-ENHANCED MESSAGE-----