CERTAIN FINANCIAL PROJECTIONS. The Company does not ordinarily make public projections as to anticipated future property, resort or commercial operations revenue or earnings. The following preliminary five-year projections were prepared as part of the Company's regular budgeting process. The 2000 Budget and 2001 through 2004 projections were presented to the Company Board in December 1999 and have not been updated since the December meeting. Forms of both the budget and the Company's projections were made available to the Special Committee and its advisors, and management discussed with the advisors various assumptions built into the projections. Management does not intend to update or otherwise revise the projections to reflect changing circumstances existing after the preparation of the projections included herein or to reflect the occurrence of unanticipated events. The projections were not prepared with a view to complying with published guidelines of the Commission or the American Institute of Certified Public Accountants regarding projections or generally accepted accounting principles regarding projections. While presented with numerical specificity, the projections are based upon a variety of assumptions relating to the business of the Company. Subject to the discussion set forth below regarding the effect on such projections of any future property acquisitions, such assumptions were considered reasonable by the Company. Such assumptions are, however, subject to significant economic and competitive uncertainties and contingencies, some of which are beyond the Company's control. The Company's real estate operations are cyclical and highly sensitive to changes in general and local economic conditions, such as employment and income levels, consumer confidence, availability of financing and interest rates and demand for housing and commercial space. The variability of these general economic conditions makes it difficult to project results of operations with any degree of certainty. ACCORDINGLY, NEITHER PARENT NOR THE COMPANY CAN PREDICT WHETHER THE ASSUMPTIONS MADE IN PREPARING SUCH PROJECTIONS WILL PROVE ACCURATE. SUCH PROJECTIONS ARE INHERENTLY IMPRECISE, AND THERE CAN BE NO ASSURANCES THAT THEY WILL BE REALIZED. ALSO, IT IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE CONTAINED IN SUCH PROJECTIONS. As noted above, the 2000 Budget and 2001 through 2004 projections were prepared as part of the Company's normal budgeting process. As such, they only include projected results related to properties that currently are owned or controlled by the Company. They do not include the effects of any properties the Company may acquire in the future. As a result, the projections do not show the Company replacing its existing inventory of properties, but rather show the effect of an orderly build-out of its existing owned and controlled assets. Although the Company has acquired additional properties in the past and is likely to do so in the future, management has not made it a practice to project the results of any such acquisitions until they are specifically identified and subject to a purchase agreement or letter of intent. To the extent that additional properties are acquired, management would expect real estate development and notes payable balances to be higher, and revenues, interest expense and net income to change. The projections were not prepared with a view to public disclosure. The information concerning the projections is included in this Offer to Purchase solely because such information was furnished to FLX and the Special Committee and its advisors. The inclusion of the projections herein should not be regarded as a representation by the Company, the Purchaser, the Parent, FLX or any other entity or person that the projected results will be achieved, and none of such entities or persons assumes any responsibility for the accuracy of such information. The Company's independent auditors have not examined or compiled the projections presented herein and, accordingly, assume no responsibility for them. Readers are cautioned not to place undue reliance on this data. Set forth below are consolidated financial statement data for the Company for fiscal years 1998 and projected financial statement data for fiscal years 1999 through 2004. The significant assumptions underlying these projections are described in the footnotes following the projections. The projections should be read together with the information contained in the consolidated financial statements of the Company available in its filings with the Commission, and the information contained set forth above. CASTLE & ▇▇▇▇▇, INC. CONSOLIDATED FINANCIAL STATEMENT PROJECTIONS(1)
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Sources: Offer to Purchase (Murdock David H)
CERTAIN FINANCIAL PROJECTIONS. The Company Senior executives of Herbalife have developed a multi-year business plan containing certain projections of the future operating performance of Herbalife. Such projections do not give effect to the tender offer, merger, or concurrent issuance of debt, and were prepared for internal financial planning purposes and in connection with the Continuing Stockholder's proposal for the going private transaction. These projections were not reviewed with or approved by non-management members of the Board of Directors. Herbalife does not ordinarily make public as a matter of course publicly disclose projections as to anticipated future propertyrevenue, resort earnings, or commercial operations revenue or earningsother results. The following preliminary five-year Herbalife's projections were not prepared as part with a view to public disclosure and the following summary thereof is included in the Offer to Purchase only because such information was available to Mr. ▇▇▇▇▇▇ ▇▇▇ purposes of making his proposal. Herbalife's projections were also not prepared with a view to compliance with the published guidelines of the Securities and Exchange Commission regarding projections, nor were they prepared in accordance with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections. Neither the Company's regular budgeting process. The 2000 Budget and 2001 through 2004 projections were presented independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the Company Board in December 1999 and projections contained herein, nor have not been updated since the December meeting. Forms they expressed any opinion or any other form of both the budget and the Company's projections were made available to the Special Committee and assurance on such information or its advisorsachievability, and management discussed with the advisors various assumptions built into assume no responsibility for, and disclaim any association with, the projections. Management These forward looking statements reflect numerous assumptions and estimates made by Herbalife's management, which are not apparent on the face of Herbalife's projections. The assumptions and estimates underlying the projections are inherently uncertain and, though considered reasonable by the senior executives of Herbalife when made, are subject to a wide variety of factors that could cause actual results to differ materially from those contained in the projections, including, among other factors, industry performance, general business, economic, regulatory, and market and financial conditions, all of which are difficult to predict. Accordingly, there can be no assurance that the projections are indicative of the future performance of Herbalife or that actual results will not differ materially from those presented in the projections. Inclusion of the projections in this Offer to Purchase should not be regarded as a representation by any person that the results contained in the projections will be achieved. Herbalife does not intend generally publish its business plans and strategies or make external disclosures of its anticipated financial position or results of operations. Accordingly, neither Herbalife nor Mr. ▇▇▇▇▇▇ ▇▇▇ends to update or otherwise revise the projections to reflect changing circumstances existing after the since their preparation of the projections included herein or to reflect the occurrence of unanticipated events. The projections were not prepared with a view to complying with published guidelines , even in the event that any or all of the Commission underlying assumptions are shown to be in error. Furthermore, neither Herbalife nor Mr. ▇▇▇▇▇▇ ▇▇▇ends to update or the American Institute of Certified Public Accountants regarding projections or generally accepted accounting principles regarding projections. While presented with numerical specificity, revise the projections are based upon a variety of assumptions relating to the business of the Company. Subject to the discussion set forth below regarding the effect on such projections of any future property acquisitions, such assumptions were considered reasonable by the Company. Such assumptions are, however, subject to significant economic and competitive uncertainties and contingencies, some of which are beyond the Company's control. The Company's real estate operations are cyclical and highly sensitive to reflect changes in general and local economic or industry conditions, such as employment and income levels, consumer confidence, availability of financing and interest rates and demand for housing and commercial space. The variability senior executives of these general economic conditions makes it difficult to project results of operations with any degree of certainty. ACCORDINGLY, NEITHER PARENT NOR THE COMPANY CAN PREDICT WHETHER THE ASSUMPTIONS MADE IN PREPARING SUCH PROJECTIONS WILL PROVE ACCURATE. SUCH PROJECTIONS ARE INHERENTLY IMPRECISE, AND THERE CAN BE NO ASSURANCES THAT THEY WILL BE REALIZED. ALSO, IT IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE CONTAINED IN SUCH PROJECTIONS. As noted above, Herbalife and Mr. ▇▇▇▇▇▇ ▇▇▇e made the 2000 Budget and 2001 through 2004 following projections were prepared as part of the Company's normal budgeting process. As such, they only include projected results related to properties that currently are owned or controlled by the Company. They do not include the effects of any properties the Company may acquire in the future. As a result, the projections do not show the Company replacing its existing inventory of properties, but rather show the effect of an orderly build-out of its existing owned and controlled assets. Although the Company has acquired additional properties in the past and is likely to do so in the future, management has not made it a practice to project the results of any such acquisitions until they are specifically identified and subject to a purchase agreement or letter of intent. To the extent that additional properties are acquired, management would expect real estate development and notes payable balances to be higher, and revenues, interest expense and net income to change. The projections were not prepared with a view to public disclosure. The information concerning the projections is included in this Offer to Purchase solely because such information was furnished to FLX and the Special Committee and its advisors. The inclusion of the projections herein should not be regarded as a representation by the Company, the Purchaser, the Parent, FLX or any other entity or person that the projected results will be achieved, and none of such entities or persons assumes any responsibility for the accuracy of such information. The Company's independent auditors have not examined or compiled the projections presented herein and, accordingly, assume no responsibility for them. Readers are cautioned not to place undue reliance on this data. Set forth below are consolidated financial statement data for the Company for fiscal years 1998 and projected financial statement data for fiscal years 1999 through 20042006, respectively: (i) total retail sales of $1,667 million, $1,750 million, $1,842 million, $1,941 million, $2,038 million, $2,140 million, $2,247 million and $2,359 million, (ii) net income of $49.7 million, $50.3 million, $56.5 million, $58.6 million, $56.4 million, $60.2 million, $63.9 million and $67.6 million, (iii) EBITDA of $91.9 million, $94.5 million, $105.3 million, $109.4 million, $106.5 million, $110.3 million, $114.4 million, and $119.2 million, and (iv) earnings per share of $1.60, $1.62, $1.82, $1.89, $1.82, $1.94, $2.06 and $2.18. The significant assumptions underlying these Herbalife's projections are described were based on historical data specific to Herbalife. In preparing Herbalife's projections, senior executives of Herbalife made the following material assumptions: (i) retail sales growth of approximately 1% in 1999 and approximately 5% annually thereafter; (ii) marketing, distribution, and administrative expense growth of approximately 7% annually through year 2003 and 5% annually thereafter. These growth rates take into account the footnotes following building of required infrastructure as well as new country and product development. A reduction in product cost of sales has been projected in year 2001, and thereafter, in conjunction with an anticipated improvement in product costs due to the projections. The projections should be read together with the information contained in the consolidated financial statements expiration of the Company available in its filings existing contract with the CommissionHerbalife's primary supplier of powder and tablet products. All other major expense categories, including distributor royalty payments and the information contained set forth aboveincome taxes, have been projected to remain consistent with historical ratios. CASTLE & Mr. ▇▇▇▇▇, INC. CONSOLIDATED FINANCIAL STATEMENT PROJECTIONS(1)▇ ▇▇▇d these projections in evaluating Herbalife's overall value and its ability
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