interco dịch full

Harvard Business School

Rev. August 2, 1995

9-291-033

INTERCO Ngy 8/8/1988, Hi ng ban gim c hp, gia nhp City

cc vn , 1 li ngh st t Capital Associates Limited

Partnership. City Capital ngh 64$/c phiu thng ca Interco vo ngy 28/7/1988 v tng gi ln 70$/c phi u

vo sng 8/8. Ti bui hp ny, Chuyn gia ti chnh ca Interco, Wassertein, Perella & Co., thit lp 1 dy nh gi t $68 n $80/c phiu thng ca Interco. Vi s nh gi ny, WP khuyn hi ng Interco (hnh 1) gi $70/cp l khng v khng phi l mc li tt nht cho cng ty v c ng. Hi ng gim c ng phn i li ngh ca CC. CNG TY c thnh lp thng 12/1011, Cng ty giy quc t sn xut nhng sp lin quan n giy v duy tr cho n u thp nin 1960. Nm 1966,

cng ty i tn INTERCO phn nh s thay i tnh cht trong hot ng kinh doanh. Cng ty tng trng, trong lnh vc nh sn xut v i l bn l ca 1 chui sn phm v dch v ca ngi tiu dng. Sn phm ni ting nht ca thng hiu INTERCO l giy Converse v Florsheim, ni tht Ethan Allen v o i ma London Fog.

Hot ng ca Interco tng lin tc khng c ting tm v c h tr bi 1 cng ty qun l St. Louis, Missouri. Quan im ca cng ty tng l c c cc cng ty trong lnh vc lin quan v cung cp i ng qun l hin ti ca h vi cc u i m rng hot ng kinh doanh trong khi gim bt cc chc nng h tr thng thng nh yu cu v ti chnh v php lut. Gn nh 1 na s tng trng ca INTERCO n t hot ng mua li. Cng ty lin tc tm kim cc thc th c th b sung vo cc cng ty hin c Interco. Cc tiu ch b sung c s dng trong sng lc v la chn cc i tng mua li bao gm s hin din ca cc gim c lnh ngh v cc sn phm chim v tr dn u trong th trng tng ng. Phn tch VCSH ca INTERCO nh 1 cng ty bo th nh Overcapitalized/ Vi t s thanh ton hin hnh l t 3.6 n 1 T s Debt/capitalization (n/vn), bao gm cho thu vn (capitalized leases) = 19.3% vo ngy 29/2/1988, INTERCO c ngun ti chnh di do linh hot. S linh hot ny cho php cng ty mua li c phn thng v thc hin v mua li nh 1 c hi pht sinh Phn chia hot ng: INTERCO c chia 3 mng hot ng chnh: + Sn xut trang phc + Bn l hng ha + Sn xut v bn l giy + Ni tht 4 lnh vc hot ng l nhng cng ty c lp c lit k trong bng 2: Exhibit 2: Sn xut trang phc: Nhm ny bao gm 11 cng ty trang phc c thit k, sn xut v phn phi 1 chui trang phc th thao, o qun thng, m cho n/nam, trang phc i ma c thng hiu v nhn mc ring. Thng hiu trang phc gm: Le Tigre, Sergio Valente v Abe Schrader. Phn phi ton quc vi cc siu th, ca hng c dng v nhng n v bn l bao gm chui ca hng. Bn l hng ha: Nhm ny hot ng vi 201 n v bn l 15 bang. Gm trung tm bn sa cha ti nh do chnh ch nh sa, ca hng gim gi hng ha chung, ca hng trang phc n ng v ca hng chuyn dng. mt vi nm trc, cng ty bn l chung c thu nh li v by gi b chi phi ch yu bi trung tm phn cng, trung tm vt dng ch nh t sa ci tin dy chuyn, nhn mnh dch v khch hng v la chn sn phm a dng. Sn xut v bn l giy: Thit k, sn xut v phn phi giy ca nam v n ch yu M, Canada, Mexico. Nhm gm 778 ca hng bn l giy v thu phng bn giy 42 tiu bang C. 2 cng ty hot ng chnh ca INTERCO trong mng giy l Converse Inc v Florsheim Co., dn u trong th trng tng ng: giy th thao v giy truyn thng ca n ng con trai. Ni tht v gia dng: Nhm ny sn xut, phn phi v bn l g cht lng, bc ni tht v c trong nh. Thng hiu ni tht bao gm Broyhill, Lane, Ethan Allen, and Hickory Chair. Trong nhng nm gn y, ni tht m rng thng qua mua li v tng li nhun chim lnh thu nhp rng ca INTERCO. Cui nm ti chnh 1988, INTERCO l cng ty sn xut g ln nht th gii. Chng trnh chin lc nh v li

Mc tiu ca INTERCO bao gm doanh thu di hn v tng trng earnings, tng ROA v quan trng nht l ci thin ROE. t mc tiu ny, INTERCO tip cn 4 hng gm ci thin: the profitability of existing operations and divesting underperforming assets (Li nhun trn ti sn hot ng (b ti sn n)), thc hin vic mua li tim nng c gi tr cao hn li nhun v tng trng trung bnh, v s dng nhng chin lc ti chnh tn dng c hi nh mua li c phn v s dng thn trng vn vay mn. Vi nhng mc tiu c thit lp, INTERCO, nm 1984 bt u mt chng trnh chin lc ti nh v nhm vo ci thin tnh trng tng th ca cng ty. L mt phn ca sng kin ny, Interco tng tc cc n lc b ti sn hot ng km hiu qu v nh v li trong th trng cung cp cc c hi tng trng v li nhun. Chng trnh ny dn n mt s thay i ng k trong hn hp doanh s bn hng ca Interco th hin trong Bng A. Trong nm ti chnh nm 1988, cc nhm ni tht v giy dp chim 60% doanh thu cng ty, may mc v k ton bn l chung ca phn cn li. y l mt s o ngc ca phn phi bn hng trong nm ti chnh 19842

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Table A Percent of Sales by Operating Group: 1988 and 19841988 Apparel General retail Footwear FurnitureSource: Annual report, 2/29/88

1984 33% 26 21 20

24% 16 27 33

Biu din kt qu ti chnh gn y Hiu sut tng th ca cng ty nm ti chnh 1988 l tch cc, vi doanh s v li nhun rng tng 13.4% v 15.4%, tng ng, u hn so vi nm 1987. Kt qu ny do phn ln s ng gp ca ni tht v cc gia dng v giy cng nh gim t l thu ca INTERCO. Do o lut thu nm 1986, tie l thu ca cng ty nm 1988 l 42.8% so vi 47.1% nm 1987. S tng trng v thu nhp ca Interco tip tc di chuyn v pha mc tiu l 14-15% ROE: ROE nm 1988 l 11.7% tng t 9.7% ca nm 1987. Ni tht v gia dng c 1 s ni tri trong nm 1988, to thu nhp hot ng l $149.1 triu so vi $123.8 triu trong nm 1987 v t doanh thu $1.11 t so vi $967.4 triu nm 1987. Xu hng nhn khu hc trong vic xy dng gia nh to trin vng tch cc cho nhm mc d b bin ng theo chu k nh v li sut. Th hin phn trm t c ln nht trong nm ti chnh 1988, doanh thu giy tng 34.2% v li nhun hot ng tng gn 77%. Khon thu nhp ny c h tr bi Converse, mua li vo thng 9/1986, l nm t k lc v doanh thu v li nhun vo nm 1988. Mc d nhiu n lc ti c cu gm vic b ti sn hot ng km hiu qu, sn xut may mc v ca hng bn l chung vn tip din kh khan (vn ) do ch yu s thay i bn cht ca doanh nghip. Nm dng lch 1987, mt lot vn gy kh khan cho cng nghip may mc nc M. Tiu dng c nhn thp hn k vng, nhp khu t cc nc c ph nhn cng r tip tc chy vo nc M, cc ca hng tng cng hng ha c thng hiu ring vi chi ph ca cc nh sn xut hng may mc c thng hiu. p ng 1 ngnh cng nghip cnh tranh khc lit v s sa st trong tiu dng c nhn, nh bn l xc tin cc chng trnh gim gi v qung co mnh m vo nm 1987 v 1988. Kt qu l doanh thu tng ti mt tc va phi, vi thu nhp gim vi tc nhanh hn. Cc chuyn gia d bo tc tng trng ngnh cng nghip qun i s suy thoi kinh t. Ca hng bn l chung v nhm may mc ca INTERCO khng c xut sc trong nm 1988. Li nhun hot ng ca nhm ca hng bn l gim 3,7% so vi s khim tn ca tng doanh s bn hng trong giai on 1987. Nhm th hai thu c li nhun hot ng $ 20,2 triu USD sau khi mt khon ph ti c cu $ 11,6 triu USD, so vi $ 47,3 triu vo nm 1987, vi doanh s bn hng gim nh t nm 1987.

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The Takeover BidQun tr ca Interco v cc nh phn tch ph Wall tin rng Nhm ngnh may mc s tip tc lm suy yu hot ng tng th cng ty Interco v l nguyn nhn lm cho th trng vn b nh gi thp hn so vi c phiu ph thng ca n. Bng 3 v 4 a ra gi ca c phiu ph thng trong qu kh ca Interco. Sau th trng c phiu vo thng 10-1987, Interco nhanh chng c cc chng trnh mua li c phiu ca n cng vi s u quyn ca ban gim c mau li 5 triu c phn.Cui nm ti chnh nm 1988 , hn 4 triu c phn ca c phiu thng c mua li vi tng gi tr l $ 152,3 triu. Mt s cho rng Interco c xem trong cng ng u t nh l mt mc tiu tip tip qun tim nng. Harvey Saligman, ch tch hi ng qun tr kim Gim c iu hnh ca Interco lin lc vi Wasserstein, Perella & Co tho lun v cc bin php phng th tim nng nhm duy tr s c lp ca Interco. t hng bt k ci g khng mong mun t bn th 3, hi ng qun tr bu c vo ngy 11- 7- 1988 sa i k hoch v quyn ca cc c ng cng ty Interco, ngn chn bt k s tip qun no ca cng ty tn km hn. Trong bng 5 miu t k hoch chi tit v quyn ca cc c ng ca cng ty Interco. Xc nh ci thin li nhun ca cc c ng u t v ngn chn s can tip ca bn th 3 vo ngy 15-7-1988 Interco cng b k hoch ti cu trc. Hiu sut ca nhm ngnh may mc cho cc khu ph cui ngy 31-5 1988, tip tc tr nn nghrof nn, cng vi s gim st 13,4% v doanh s bn hng so cc qu nm 1987. Mc tiu ca vic ti cu trc s bao gm doanh thu phn khc ca ngnh may mc, vic chia c tc c bit hoc vic mua li c phiu. Interco giu li hai ngn hng u t l Goldman, Sachs & Co and Wasserstein, Perella & Co thay th la chn cc chin lc V bn c phn ca ngnh may mc v c th l nhng ti sn khc. Saligman ngh mc tiu ca vic ti cu trc l nhm thu hp cc hot ng kinh doanh ca cng ty Interco v n nh gi tr ca cc c phn ca n. Nhng mt s n lc mua li khng th trnh khi. City Capital tch lu c 8,07% c phn thng ca cng ty Interco v vo ngy 27-7-1988 n sut st nhp vi Interco. Theo nh sut ny City Capital ng mua tt c cc c phn ph thng ca Interco m City Capital khng s hu vi mc gi l $ 64/ c phn. City Capital khuyn hi ng qun tr sn sng thng lng v cc iu khon trong sut bao gm c gi. Trong bo co ca mnh , hi ng qun tr ca Interco m rng nhim v ca Wasserstein nh l mt ngi gim st ti chnh. Dch v gim st by gi ca h l bao gm vic cung cp kin cng bng v ngh ca City Capital, nh gi v sut cc la chn thay th khc. Bao nhiu gi tr ca Interco, n l cu hi ca hi ng qun tr s phi xem xt trong vic nh gi cc la chn thay th st nhp vi cng vi City Capital. City Capital lin kt hn ch vi i tc chin lc. City Capital lin kt hn ch vi i tc chin lc c a tin trn hai t bo kinh doanh ca Washington DC l Steven M. Rales v anh trai Mitchell. Anh em Rales tham gia vo nhiu v mua li hoc thng qua Danaher, cng ty m h ang kim sot.hoc l mt lot cc i tc chin lc ca h. Vic st nhp ny bao gm cc cng ty Westerm Pacific, Chicago Pneumatic Tool , Mohawk Rubber v Master Shield Vic tp trung mua li ca anh em nh Rales b nh gi thp hn trong th trng ln mnh. Cng vi vic hon thnh 8 v st nhp , Danaher tr nn ln mnh vo nm

1981 t mt cng ty bt ng sn nh thnh lp mt tp on a dang trong vic sn sut. Tuy nhin do 1 phn ca vic st nhp v vic s dng tnh l thu, li nhu n cng ty Danaher tng ln 6 ln, t 2,9 triu ln ti 19 triu vo nm 1987. Anh em nh Rales thnh lp City Capital vi mc tiu duy nht l st nhp Interco. Nh l mt b mt trong U ban chng khon v giao dch h s , n l mt nh ca h sau khi hon thnh st nhp, bn ngnh kinh doanh may mc ca Interco v xem xt bn 1 phn ngnh giy dp v phn kinh doanh bn l. Trong cng mt h s , anh em nh Rales ch ra rng h ang xem xt tr nhiu hn 64 $ trn 1 c phn cho Interco. Vo bui sng ngy 8-8 1988 City Capital tng vic tr cho Interco ln 70$ trn 1 c phn v bt u sn sng tng gi mi c phn iu ny nn c xem xt m bo trong phn thng tin ca cng ty . Di s gi nh rng 37,5 triu c phn b pha long ang c lu hnh, ngh ny ch c gi tr l 2,6 t . ngh ny l c iu kin trong s nhng th khc, khi mua li quyn mi sa i k hoch hoc hu b hiu lc ca cc quyn ca hi ng qun tr theo xut sp nhp. Trc khi tng gi tr ca Interco, City Capital sp xp theo yu cu l 2,5 triu trong ti chnh. Cng ty Drexel Burnham Lambert v ngi gim st ti chnh ca City Capital quy nh rng Interco l rt tin tng, n c th tng ln 1,375 t ca n hoc vn ch s hu ngh cho 70 $ trn c phiu. Thm vo ti chnh ngn hng, bao gm 1,1t la tn dng c s c sp xp bi tp on Chase Manhaltan, s cung cp phn cn li ca cc qu cn thit. nh gi s cho mua Lch trnh gc cho cuc hp ca hi ng qunr tr Interco 18-8-1988 tp trung vo vic cng b k hoch ti cu trc bao gm s gim st trong doanh thu nhm may mc ca cng ty, chi tr c tc c bit hoc vic mua li c phn ca c phiu ph thng. Tuy nhin City Capital s hu ng k s lng c phiu ca Interco, Saliman v ban gim c cng nhn s cp bch vi ngh ca anh em Rales. i ti kt lun, cc thnh vin ban Gim c mt rt nhiu thi gian trong thng 8 hp tho lun nh gi ca Wasserstein Perella theo ngh ca ca City Capital l 64$ trn 1 c phn v nhng la chn thay th khc. Hai ci la chn thay th c xem xt l vic st nhp thn thin v vic ti cu trc ca cng ty. Trong c hai kch, n c gi nh rng cc nh qun l ch cht, bao gm Saliman, s li vi cng ty. Trc bt k quyt nh no, c thc hin theo ngh ca City Capital hoc bt k chin lc no c th thay th c, tuy nhin, n l iu quan trng cho ban gim c nh gi gi tr ca Interco nh l s xc nh bi Wasserstein Perella. Lch s bo co ti chnh c cung cp trong bng 6 v 7. Thng tin b phn kinh doanh c a ra trong Exhibit 8. Theo c vn ti chnh cho Interco, Wasserstein Perella chun b mt s phn tch tharng kt qu trong phm vi nh gi cho cng ty l 68-80 $ trn 1 c phn. c bit l vic phn tch chit khu dng tin t do, phn tch so snh giao dch, v phn tch phn b phi tr c s dng xc nh ny nghi ca City Capital l 70 $ trn 1 c phn l khng y v khng phi l li ch tt nht cho Interco, n l c ng. Exhibits 9 -13 cung cp ng k cc gi nh rng Wasserstein Perella da vo kin ca cc chuyn gia v gi tr ca Interco. Exhibit 14 a ra li sut th trng hin hnh. Ban gim c ca Interco hp vo ngy 8-8- 1988, Wasserstein Perella thng bo cho ban gim c ca Interco phn tch v ngh ca City Capital. Ban Gim c ca Interco bu c t chi gi mua 70 $ trn c phn trong ngy tng t.

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Exhibit 1 Board of Directors as of May 16, 1988 Harvey Saligman Harry M. Krogh Ronald L. Aylward R. Stuart Moore Mark H. Lieberman Richard B. Loynd Charles J. Rothschild, Jr. Zane E. Barnes Chairman of the Board and CEO of Interco President and COO of Interco Vice Chairman of the Board of Interco Vice President of Interco; President of The Lane Company, Inc., a subsidiary of Interco Vice President of Interco; division of Interco President of Londontown, a

Vice President of Interco; Chairman of the Board of Converse, Inc., a subsidiary of Interco Vice President of Interco; Chairman of the Board of Megastar Apparel Group, a division of Interco Chairman of the Board, President, CEO and director of Southwestern Bell Corporation, engaged in the general telecommunications business Chairman of the Board, CEO and director of Mercantile Bancorporation, Inc., a bank holding company, and Chairman of the Board and director of Mercantile Bank National Association Chairman of the Board, President, CEO and director of Laclede Gas Company, a gas public utility President, CEO and director of Peabody Holding Company, Inc., which is engaged in coal mining and sales President, CEO and director of Union Electric Company, an electric public utility Civic leader and volunteer Vice Chairman of the Board and director of Burlington Northern Inc., a holding company with transportation, energy and natural resources concerns

Donald E. Lasater

Lee M. Liberman Robert H. Quenon William E. Cornelius Marilyn S. Lewis Thomas H. OLeary

As of April 15, 1988 all directors, nominees and officers of Interco, as a group (24 persons) beneficially owned 1.14% of the outstanding shares of Intercos common stock. Source: Notice and Proxy Statement dated May 16, 1988

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Exhibit 2 Subsidiaries Abe Schrader Corp. Big Yank Corp. Bowen Shoe Co., Inc. Broyhill Furniture Industries, Inc. Campco Holdings, S.A. Campus Pacific Ltd. Central Hardware Co. Clayton Operations, S.A. College-Town, Inc. Converse Inc. Delmar Sportswear, Inc. Ethan Allen Inc. Factory Outlet Co. Fines Mens Shops, Inc. Florsheim Inc. Florsheim Shoe Store Co. of Hawaii Florsheim Shoe Store Co.Midwest Florsheim Shoe Store Co. Northwest Florsheim Shoe Store Co. South Florsheim Shoe Store Co. West Goldes Department Stores, Inc. Grand Entry Hat Corp. Highland House, Inc. Highland Transport, Inc. Hy-Test, Inc. Interco Subsidiary, Inc. Keith Obrien Investment Co. Lane Co., Inc. Lease Management, Inc. Julius Marlow Holdings, Ltd. L. J. Oneill Shoe Co. ORC Financial Ag Patriot Investment Co. Queen Casuals, Inc. Senack Shoes, Inc. Sky City Stores, Inc. Stuffed Shirt Inc. United Shirt Distributors, Inc. Walton Road Management Co.

Source: Lotus One Source

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Exhibit 3 Common Stock Price History (Monthly)Month End Prices (adjusted for stock splits) 1986 31-Jan-86 28-Feb-86 31-Mar-86 30-Apr-86 30-May-86 30-Jun-86 31-Jul-86 29-Aug-86 30-Sep-86 31-Oct-86 28-Nov-86 31-Dec-86 30-Jan-87 27-Feb-87 31-Mar-87 30-Apr-87 29-May-87 30-Jun-87 31-Jul-87 31-Aug-87 30-Sep-87 30-Oct-87 30-Nov-87 31-Dec-87 29-Jan-88 29-Feb-88 31-Mar-88 29-Apr-88 31-May-88 30-Jun-88 29-Jul-88 $35.125 39.000 39.250 39.625 43.500 47.188 41.375 43.750 40.000 43.750 44.125 36.875 39.750 42.625 44.125 39.625 40.125 45.375 51.250 53.250 47.500 36.000 30.000 32.250 37.125 42.000 42.000 41.125 43.875 44.750 68.500

1987

1988

Source: Interactive Data Corporation

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Exhibit 4 Common Stock Price History (Daily)Daily Closing Prices 02-May-88 03-May-88 04-May-88 05-May-88 06-May-88 09-May-88 10-May-88 11-May-88 12-May-88 13-May-88 16-May-88 17-May-88 18-May-88 19-May-88 20-May-88 23-May-88 24-May-88 25-May-88 26-May-88 27-May-88 30-May-88 31-May-88 01-Jun-88 02-Jun-88 03-Jun-88 06-Jun-88 07-Jun-88 08-Jun-88 09-Jun-88 10-Jun-88 13-Jun-88 14-Jun-88 15-Jun-88 16-Jun-88 17-Jun-88 20-Jun-88 21-Jun-88 22-Jun-88 23-Jun-88 24-Jun-88 27-Jun-88 28-Jun-88 29-Jun-88 30-Jun-88 $40.250 41.500 41.000 41.625 40.625 40.875 41.750 41.625 42.000 42.125 42.250 42.000 41.500 40.625 40.625 40.375 41.500 42.500 42.625 41.250 N.A. 43.875 43.500 42.875 44.125 43.250 42.000 43.875 43.375 43.375 43.500 43.625 42.500 42.875 43.625 43.250 43.125 43.750 43.625 43.500 43.625 44.000 44.000 44.750 01-Jul-88 04-Jul-88 05-Jul-88 06-Jul-88 07-Jul-88 08-Jul-88 11-Jul-88 12-Jul-88 13-Jul-88 14-Jul-88 15-Jul-88 18-Jul-88 19-Jul-88 20-Jul-88 21-Jul-88 22-Jul-88 25-Jul-88 26-Jul-88 27-Jul-88 28-Jul-88 29-Jul-88 01-Aug-88 02-Aug-88 03-Aug-88 04-Aug-88 05-Aug-88 08-Aug-88 44.625 N.A. 45.375 44.500 44.625 45.000 45.250 45.375 46.375 49.000 54.375 54.500 58.375 58.125 57.875 57.250 58.000 58.875 59.375 67.750 68.500 68.875 67.625 67.000 67.375 68.250 72.500

Source: Interactive Data Corporation

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Exhibit 5 Shareholder Rights Plan

Ngy 23 thng 9 nm 1985, ban gim c Interco thng qua cc c ng mt bn k hoch c thit k nhm ngn chn gi thu tip qun khng mong mun bng cch to ra s e da ca pha long ng k cho bt k c nhn hoc t chc no c gng thu tm Interco. K hoch ban u c sa i vo ngy 11 thng 7 nm 1988, bi ban gim c. Ti thi im , Cc gim c nhn thc c rng c phiu ph thng ca Interco b bn th ba tch ly v nghi ng rng h mua li u c. Thay i trong gi mua mi c phiu v mt s quy nh c thc hin gip vic phng thu tm tt hn. c bit l k hoch c sa i tuyn b rng h s a ra mt c tc ca quyn mua 1 c phiu trn mi c phiu ph thng. K hoch sa i cng khin ban gim c thn trng xem xt vic h thp t l phn trm nm gi ca mt c nhn hay t chc mc l 15% c phiu ca Interco . Ti cuc hp hi ng qun tr ngy 08 thng 8 nm 1988 ca Interco, hi ng qun tr ph duyt tha thun ngng " chic d vng" golden parachute ca cc gim c iu hnh cp cao ca Interco, c kch hot khi mua li bi mt bn th 3, bao gm c City Capital. Theo b h s SEC, tha thun ngng chic d vng golden parachute phi bi thng/thanh ton tr gi 16,3 triu USD v lin quan top 17 gim c iu hnh ti Interco, bao gm $ 2,2 triu cho Harvey Saligman, s c thc hin trong nhng iu kin nht nh nu Cng ty b mua li. (taken over)

3

As claimed in Civil Action No. 10111, the Second Amended and Consolidated Class Action in the Court of Chancery of the State of Delaware in and for New Castle Complaint as filed County, p. 16.

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Exhibit 6 Historical Balance SheetsINTERCO Consolidated Balance Sheet ($000s except per share data) May 31, February 28, Current Assets: Cash Marketable securities Receivable, net Inventories Prepaid expenses and other current assets Total current assets Property, Plant and Equipment: Land Buildings and improvements Machinery and equipment Less accumulated depreciation Net Property, Plant and Equipment Other Assets Total Assets Current Liabilities: Notes payable Current maturities of longterm debt and capital lease obligations Accounts payable and accrued expenses Income taxes Total Current Liabilities Long-term debt, less current maturities Obligations under capital leases, less current maturities Other long-term liabilities Shareholders Equity: Preferred stock, no par value Common stock, $3.75 stated value Capital surplus (41,356,847 shares issued) Retained earnings Less 5,173,811 treasury shares Total Shareholders Equity Total Liabilities and Net WorthSource: report,a

1986 $ 16,856 127,341 402,225 647,116 22,547 $1,215,815 26,770 437,812 320,256 784,838 343,018 441,820 99,238 $1,756,893 $ -9,647

1987 $ 16,631 63,747 446,755 733,907 25,614 $1,286,654 32,266 465,811 364,499 862,576 377,226 485,350 153,383 $1,925,387 $ 68,840 11,915 216,365 17,327 $ 358,226 135,019 50,546 55,381 61,795 163,643 98,246 1,099,006 1,422,690 96,475 1,326,215 $1,925,387

1988a $ 20,849 11,033 486,657 805,095 35,665 $1,359,299 32,525 471,787 380,402 884,714 405,215 479,499 146,788 $1,985,586 $ 70,517 8,172 239,513 4,402 $ 373,343 257,327 41,813 61,766 57,113 155,088 44,539 1,179,964 1,436,704 185,367 1,251,337 $1,985,586

1987 $ 29,700 57,789 431,743 786,792 25,622 $1,331,646 868,670 386,762 481,908 149,170 $1,962,724 $ 97,297 9,288 278,847 15,294 $ 400,726 133,403 49,270 56,410 61,285 155,088 49,149 1,111,527 1,377,049 54,134 1,322,915 $1,962,724

1988 $ 19,622 16,366 460,759 872,135 44,959 $1,413,840 890,887 412,332 478,555 146,878 $2,039,273 $ 146,016 8,900 292,051 5,463 $ 452,430 255,279 40,032 63,484 36,721 155,088 32,117 1,194,884 1,418,810 190,762 1,228,048 $2,039,273

184,032 12,699 $ 249,587 127,409 56,495 43,249 66,027 163,765 104,205 1,027,895 1,361,892 81,739 1,280,153 $1,756,893

Annual 10Qs

February 29, 1988

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Exhibit 7 Historical Income StatementsINTERCO Consolidated Statement of Earnings ($000s) Year Ended February 28, Income: Net sales Other income Costs and Expenses: Cost of sales Selling, general and administrative expenses Interest expense Earnings before income taxes Income taxes Net earnings Operating incomeb Operating cash flowcSource: Annual report and 10Q ab

1986 $2,832,384 36,140 2,868,524 1,932,258 681,886 25,523 2,639,667 228,857 109,008 $ 119,849 218,240 267,756

1987 $2,946,902 32,175 2,979,077 2,000,423 712,861 28,082 2,741,366 237,711 111,937 $ 125,774 233,618 287,133

1988a $3,341,423 29,237 3,370,660 2,284,640 799,025 33,535 3,117,200 253,460 108,457 $ 145,003 257,758 319,275

First Quarter Ended May 31, 1987 1988 $781,421 6,293 787,714 522,759 199,145 7,351 735,438 52,276 25,276 $ 26,514 53,334 $778,107 6,864 784,971 522,942 201,129 9,179 733,067 51,904 25,762 $ 30,689 54,219 -

For the year ended February 29, 1988 Operating income equal to the sum of earning before income taxes and interest expense less other

income cOperating cash flow equal to the sum of operating income and depreciation expense

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Exhibit 8 Business Segment InformationFirst Quarter Ended May 31, 1987

Year Ended February 28,

1986

1987

1988

1988

Net Sales to Unaffiliated Customers: Apparel General retail Footwear Furniture Total Operating Earnings: Apparel General retail Footwear Furniture Total Other income Corporate expense Earnings before interest and taxes Interest expense Earnings before income taxes Identifiable Assets at Year End: Apparel General retail Footwear Furniture Corporate Assets Total Depreciation Expense: Apparel General retail Footwear Furniture Capital Expenditures: Apparel General retail Footwear FurnitureSource: 1988 Annual reports and 10Q

$ 907,833 461,785 558,286 904,480 $2,832,384

$ 817,660 498,324 663,521 967,397 $2,946,902

$ 813,198 532,251 890,411 1,105,563 $3,341,423

$160,339 148,138 209,535 263,409 $781,421

$138,836 149,209 226,672 263,390 $778,107

$ 66,716 32,085 48,475 105,111 $ 252,387 $ 36,140 (34,147) 254,380 (25,523) $ 228,857

$ 47,269 40,610 52,136 123,766 $ 263,781 $ 32,175 (30,163) 265,793 (28,082) $ 237,711

$ 20,240 39,101 92,204 149,090 $ 300,635 $ 29,237 (42,877) 286,995 (33,535) $ 253,460

($670) 14,136 15,777 38,319 $ 67,562 $ 6,293 (14,228) 59,627 (7,351) $ 52,276

($247) 12,498 19,700 32,196 $ 64,147 $ 6,864 (9,928) 61,083 (9,179) $ 51,904

$ 456,972 234,004 291,292 618,980 $1,601,248 155,645 $1,756,893

$ 465,601 248,639 497,706 640,106 $1,852,052 73,335 $1,925,387

$ 425,350 252,195 595,861 688,853 $1,962,259 23,327 $1,985,586

$ 11,965 8,294 8,286 20,971

$ 12,123 9,079 10,638 21,675

$ 12,521 9,681 13,107 26,208

$ 13,433 6,169 8,114 27,278

$

8,869 8,167 7,486 24,720

$

9,220 10,735 9,236 36,188

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Exhibit 9 Summary of the Takeover OfferCity Capital Associates, L.P. Offer Date: Price per share: Premium to stock one-day priora Premium to stock one-month prior: Premium to 52-week low: Premium to 52-week high: Value of equity Net debt Value of firm August 8, 1988 $70.00 17.9% 59.1% 137.3% 17.2% $2,622.8MM 318.5MM $2,941.3MM

Value of Firm as a Multiple of: Sales Year ending 2/29/88 Estimate of year ending 2/28/89 0.9x 0.9 Operating Cash Flow 9.2x 8.8 Operating Income 11.4x 10.7

Value of Equity as a Multiple of: Net Income 18.1x 17.0 Book Value 2.2x 2.2

Source: Adapted with minor modifications in terminology from Wasserstein, Perella & Co., Inc. presentation to the Interco Board of Directors, August 8, 1988. Civil Action No. 10111, filed in the Court of Chancery of the State of Delaware in and for New Castle County, Exhibit 23.a

Premiums based on stock prices as of July 27, 1988

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Exhibit 10 Premiums Paid AnalysisAverage Premium Paid over Stock Price # Deals 1Q 1988 2Q 1988 3Q 1988b 1988 Rales 19 9 12 40a

One Day 62.3% 68.6% 36.5% 56.0% 17.9%

4 Weeks 95.5% 91.3% 49.9% 80.9% 59.1%

52-Week Low 159.5% 182.8% 181.3% 171.3% 137.3%

52-Week High 16.7% 31.5% 2.6% 15.8% 17.2%

Source: Wasserstein, Perella & Co., Inc. presentation to the Interco Board of Directors, August 8, 1988. Civil Action No. 10111, filed in the Court of Chancery of the State of Delaware in and for New Castle County, Exhibit 23.a b

Wasserstein, Perella & Co., Inc. selected tender offers Selected tender offers from the months of July and August

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Exhibit 11 Cc phn tch Li th Giao dch a. Cc gi mua bng theo tng lnh vc kinh doanh Cng ty Sn xut Ni thtOperating Date 12/14/87 11/17/86 08/12/86 Purchase Price Multiplesa Announcement Aggregate Net BookOperating Price ($MM) Income Gi tng hp $63.5 22.0xa

Acquiror/Target Bn mua/ Mc tiu La-Z-Boy/Kincaid INTERCO/Lane Chicago Pacific/ General Mills Furniture

Valueb 2.1x 2.8

Sales 0.8x 1.6

Income 11.7x 11.1

Cash Flow 8.1x 9.6

523.7

19.3

89.3 260.9 $2,941.3

14.1 31.6 18.1x

1.8 2.6 2.2x

1.0 2.1 0.9x

12.0 20.3 11.4x

9.9 15.8 9.2x

06/03/86 08/08/88

Masco/Henredon Rales Proposal

Source: Wasserstein, Perella & Co., Inc. presentation to the Interco Board of Directors, August 8, 1988. Civil Action No. 10111, filed in the Court of Chancery of the State of Delaware in and for New Castle County, Exhibit 23.a

Sales, operating income, and operating cash flow multiples adjusted for the value of net debt

outstanding bBook value adjusted for intangibles

Cng ty Sn xut GiyPurchase Price Multiplesa Announcement Aggregate Net BookOperating Operating Valueb Sales Income Cash Flow N.M. 1.8 6.7 N.M. 1.8 2.2x 1.5x 0.5 2.1 1.7 0.9 0.9x 14.1 13.0 24.6 26.0 24.7 11.4x 12.2 9.2 23.3 23.9 18.2 9.2x

Date 04/25/88 06/03/87 03/10/87 09/18/86 07/31/86 08/08/88

Acquiror/Target NIKE/Cole Haan Moacq/Morse Shoe Reebok/AVIA Reebok/Rockport INTERCO/Converse Rales Proposal

Price ($MM) $95.0 312.5 191.0 146.1 202.7 $2,941.3

a

Income 36.2x 2.5 40.6 30.7 37.1 18.1x




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Exhibit 11 (continued) Cc phn tch Li th Giao dch

Cng ty Thi trangPurchase Price Multiplesa Announcement Aggregate Net BookOperating Acquiror/Target Wesray/William Carter Salant/Manhattan Indus. W Acquisition/Warnco West Point Pepperall/ Cluett, Peabody 08/08/88 Rales Proposal 551.9 $2,941.3 19.6 18.1x 1.5 2.2x 0.6 0.9x 10.6 11.4x 9.2 9.2x Price ($MM) $157.4 129.7 504.7a

Operating Date 04/28/88 02/02/88 03/17/86 11/04/85

Income N.M. N.M. 21.0

Valueb 1.6x 1.4 2.5

Sales 0.8x 0.4 0.9

Income 24.0x N.M. 10.6

Cash Flow 13.7x N.M. 9.2




Lnh vc ( b phn) Phn cng Trung ngPurchase Price Multiplesa Announcement Aggregate Net BookOperating Operating Valueb Sales Income Cash Flow

Date 06/24/88

Acquiror/Target Management Group/ Payless Cashways

Price ($MM)

a

Income

$1,189.4 $2,941.3

22.0x 18.1x

2.3x 2.2x

0.6x 0.9x

13.1x 11.4x

9.2x 9.2x

08/08/88

Rales Proposal




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Exhibit 11 (continued) Cc phn tch Li th Giao dch b. Xp loi gi tr theo lnh vc kinh doanhBusiness Segment (lnh vc) tb ) Apparel General retail Footwear Furniture 1988 Sales $ 813.2 532.3 890.4 1,105.6 Multiple Range .4 .6 .5 .8 .9 .6 2.1 2.1 $ 325.3 319.4 445.2 884.5 $1,974.4 Value Range (phm vi gi tr) $ 731.9 319.4 1,869.8 2,321.8 $5,242.9 Median Value (gi tr $ 569.2 319.4 1,335.6 1,437.3 3,661.5

Business Segment Apparel General retail Footwear Furniture

1988 Operating Income $ 20.2 39.1 92.2 149.1

Multiple Range 10.6 13.1 13.0 11.1 24.0 13.1 26.0 20.3

Value Range $ 214.1 512.2 1,198.6 $1,655.0 $3,579.9 $ 484.8 512.2 2,397.2 $3,026.7 $6,420.9

Median Value $ 214.1 512.2 2,268.1 1,766.8 $4,761.2

Business Segment Apparel General retail Footwear Furniture

1988 Operating Cash Flow $ 32.7 48.8 105.3 175.3

Multiple Range 9.2 9.2 9.2 8.1 13.7 9.2 23.9 15.8

Value Range $ 300.8 448.9 968.8 $1,419.9 $3,138.4 $ 448.0 448.9 2,516.7 $2,769.7 $6,183.3

Median Value $ 300.8 448.9 970.7 1,709.2 $3,429.6

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Exhibit 12 Phn tch Chit khu Dng tinAssumptions Sales growtha Operating margin rangeb Capital expendituresc Increase in working investmentd Tax rate Furniture Group 7.7% 13.1%-14.1% 1x 12.5% Footwear Group 6.3% 9.1%-10.4% 1x 12.5% Apparel Group 7.1% 6.4%-7.0% 1x 12.5% Retail Group 7.6% 6.5%-7.5% 1x 7.5% Total 7.2% 9.2%-10.1% 1x 11.6% 41.0%

14.0x Terminal value ($ millions) Implied stock price Discount rate ( t l chit khu gi cp mc nh) 10.0% 11.0% 12.0% 13.0% $80.00 74.00 68.00 63.00 4,746.0

Multiple of Cash Flow in Year 10 15.0x 16.0x 5,085.0 5,424.0

$84.00 77.00 72.00 66.00

$88.00 81.00 75.00 69.00

Source: Adapted with minor modifications in terminology from Wasserstein, Perella & Co., Inc. presentation to the Interco Board of Directors, August 8, 1988. Civil Action No. 1011, filed in the Court of Chancery of the State of Delaware in and for New Castle County, Exhibit 23.a b

Ten-year annual compound growth rate Projected operating margin in 1989 and As a percent of the change in sales in 1994 forward

in 1998 cAs a multiple of depreciationd

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Exhibit 13 Reference Range; Retain Core Companies Case ($ millions Except Per Share)Segment Furniture Group Footwear Group Total After-tax Divestiture Proceeds Net Corporate Adjustments Range Per Share Rangeba

Range $1,525 775 $2,300 $ 588 (335) $2,553 $68.00 $1,750 900 $2,650 $ 639 (273) $3,016 $80.00+


Accounts for net debt, overfunded pension and miscellaneous other assets that include real estate which could be

understated bBased on 37.5 million fully-diluted shares outstanding

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Exhibit 14 Gi cp ng ca iu chnh hng thng 1980-1988, Gi ng ca tht hang ngy , July-August 1988 v li sut th trng, August 1988

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Exhibit 14 (continued) Li sut th trngng cong li sut ti August 4, 1988: 1-year Treasury bills 7-year Treasury bonds 10-year Treasury bonds 30-year Treasury bonds Li sut tri phiu DN at August 5, 1988: (industrial companies) 10-year AAA 10-year AA 10-year A 10-year BBBSource: Salomon Brothers, Inc.

7.83% 8.87 9.01 9.10

9.50% 9.65 9.80 10.10

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