LBO Due Diligence: Standard Data Request

April 2001

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I. Industry and Market Analysis

A. Market
1. Relevant market and segments

Description of relevant markets

Table of segments with significant overlap in manufacturing or distribution cost

Table of segments with significant customer overlap

Table of geographic split between markets

Table of value chain segments which allow for economic or customer service advantages

List of segments that can be used to control other segments of the chain (i.e., scarce resources)

Description of industry evolution regarding extent of vertical integration

2. Market size and growth

Table of market sizes for relevant markets and segments

Table of historical and projected growth rates of the relevant markets and segments

B. Industry dynamics

1. Pricing

Summary of expected level of price growth

Description of pricing environment stability regarding exogenous shocks (e.g., exchange rates)

Summary of opportunities to raise prices on certain products, geographies, or customer groups

2. Distribution channels

Summary of distribution trends which are threats or opportunities for the target company

Explanation of any emerging channels

List of potential opportunities to control key strategic assets in the distribution channel

3. Product trends and substitution

Description of impact of competitive products which serve as substitutes for company's products

Forecast of potential discontinuities which might change the rate of substitution

Forecast of how far out in the future additional replacement products are

4. Government regulation/intervention

Summary of existing or potential legislation that will impact the target company, and probability that it will be passed and/or enforced

Table of cost to the company

Description of how legislation opens up new opportunities or gives the company an advantage over competitors

5. Sensitivity to economic factors

C. Competition

1. Competitive position

Display of company's competitive position overall and by segment

Description of most serious competitive threats

Assessment of opportunities for consolidation

2. Market share growth

Chart showing target company's share price trend

Analysis on whether the company is gaining share fast enough to keep up with competitors

Description of stage of industry consolidation

3. External threats

List of potential competitors in related businesses, and their competitive advantages

Assessment on whether potential competitors can be blocked from entering

Assessment of attractive acquisition candidates

4. Basis of competition

Assessment of basic strategies followed by competitors (set of strategic segments)

Description of nature of competition in the industry (e.g., "fierce" or "passive")

Assessment of company's positioning to win within the existing competitive frame

Description of any "breakaway" strategies the company can implement to win

5. Competitor profiles

Profile of market size, definition, growth potential and share for each competitor

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List of principle competitors by product and estimated competitors market share

Profile of strengths, weaknesses, and resources of each competitor

Comparison of company to competitors in terms of products, pricing, margins, technology, strengths and weaknesses

Table of industry capacity by company and by plant

Table of percentage penetration of total available market

Table of percentage penetration of skewed available market (excludes market where the company has no products)

Assessment of competitors' intentions

Explanation of opportunities and risks in competitive environment

Analysis on which competitors are attractive acquisition targets

6. Benchmarking

Analysis of company's ratings against key competitors

List of structural reasons for performance differentials (e.g., distribution lockup)

Description of opportunities to match or exceed competitors

Description of any key metrics the company excels in that can be levered into superior financial return

Summary of cost reduction opportunities are available to the target company

D. Customers

1. Customer concentration and intentions

Summary of company's reliance on any small group of customers to achieve management projections

Analysis of the intentions of that small customer group (including their past purchasing behavior, and if company's success is directly
tied to its customers' success)

Description of company's broader focused customer base, if applicable, and demographic trends within that base

2. Purchase criteria and performance ranking

Explanation of how company is positioned relative to competitors

Record of signs of significant customer dissatisfaction

Analysis of company's focus on key customer issues

List of opportunities to improve service (e.g., reliability of service), or to reduce costs (e.g., machine quality)

Record of customer retention

3. Historical lines of business

Descriptions of products/services

List of major contracts in progress

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Breakdown of sales by top 10 customers (last 5 years)

Breakdown of sales by contract (last 5 years)

Breakdown of sales by major product lines (last 5 years)

List of companies which represent 80% of total business

List of penetration of top 10 customers by product line

4. Future lines of business

Description of major development programs

List of assumptions about customer requirements

Breakdown of sales by top 10 customers (next 5 years)

Breakdown of sales by contact (next 5 years)

Breakdown of sales by major product line (next 5 years)

II. Financial Review

A. Historical Financials

1. Income Statements

Complete package of 5 year historical financials

Distribution of revenues (domestic vs. international)

Discussion of gross margins, operating margins, and net margins

Discussion of cost of sales, marketing, SG&A, R&D and corporate overhead expenses

Description of corporate allocations

Description of significant transfer pricing impacts

Schedule of all fixed price and cost plus contracts

2. Cash Flow Statements and Financings

Statement of sources and uses of cash

Statement of capital expenditures

Schedules and policies of depreciation and amortization

Statement of net working capital requirements

3. Balance Sheets

Description of inventories (raw materials, WIP, finished goods)

Explanation of procedures and rules for inventory valuation and depreciation (LIFO, FIFO, average costs, etc.)

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Summary of inventory management practices

Fixed asset summary (type, location, date of acquisition, appraisals)

Schedule of long-term investments

Schedule of total debt amounts and conditions

Statement of long-term liabilities

Statement of deferred liabilities

List of prepaid and accrued accounts

Schedule of warranties and obligations under existing contracts

List of off-balance sheet assets (joint ventures, minority investments, venture investments)

4. Business Segment Data

5. Allocation of Corporate Overhead (Allocation to Divisions, Make-up of Unallocated Portions)

6. Consolidating Financial Statements

7. Backlog Summary

8. Major Contract Summary

9. Annual Board Presentations (Last 5 Years)

B. Projected Financial Data (Next 5 Years)

1. Income Statements

Discussion of major assumptions

List of contracts assumed

Explanation of development programs

List of assumed competitive and/or technical changes

2. Cash Flow Statements

Schedule of investment needs

Schedule of maintenance level of capital expenditures

Schedule of planned capital expenditures

Schedule of financing needs

Description of net cash generating capacity

3. Balance Sheets

Discussion of estimated changes in major accounts

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Explanation of fixed asset changes

Schedule of current liabilities

4. Business Plan (Next 5 Years Including Income Statements, Balance Sheets, Cash Flow Statements)

5. Business Segment Data (Next 5 Years)

6. Major Contract Summary (Next 5 Years)

III. Business Review

A. History of the Company

Summary M+A activity

Explanation of development of organization structure

Summary of products

B. Revenue Sources and Quality

Explanation of suggested product pricing (volume discount structure – OEM, end-user, VAR, corporate account)

List of major contract wins and losses

Description of market seasonality and market cyclicality

C. Product Sourcing Strategy

List of identified product acquisition opportunities

List of remarketing agreements

Schedule of sourcing of next generation of products

Schedule of R&D activity over the last 5 years, and forecast for the next 5 years

Schedule of funding requirements

Explanation of need for additional facilities and major equipment purchases

Chart of product life cycle (intro pricing, price resiliency, pricing basis, margin sensitivity, learning curve effects)

Description of variability in raw material costs

D. Research and Development

Summary of focus of program

List of major products

Schedule of funding

Table of comparison with competitors

Budget by program or product

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Breakdown of personnel by location and position

List of previous new products developed

Summary of success of product development, quality issues, product life cycle, time to market

Review of current proposed staffing and personnel requirements for each activity

Explanation of methods of authorization, funding and reporting for product engineering and R&D, related to overall research plans
and market requirements

Verification that proprietary rights on all products under development adequately secured to the company

List of patents and trademarks held or that have been applied for

E. Marketing & Sales

Description of sales force quality – depth and receptivity to new products, markets and customers

Productivity statistics – revenues per salesman, compensation structure, account coverage, experience and training profile

Description of the selling process

Table of distribution channels (inventory per channel)

Summary of OEM, direct sales, distributors, representatives

Summary of vertical market sales

Explanation of sales force management issues

Schedule of advertising and promotion by channel

Description of strengths and weaknesses of organization

IV. Production Process and Facilities

A. Production Facilities

Description of facilities and land

Plans of facility layouts and conditions

Table of union status by facility

Table of capitalization vs. expense policies for repairs and maintenance

B. Manufacturing Cost Analysis

Schedule of direct fixed costs

Schedule of direct variable costs

Schedule of indirect costs

Explanation of incentive systems

C. Environmental Issues: Review of existing or potential problems

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V. Organization and Management

A. Organization

Organization charts by corporate and business segments

Description of reporting relationships

Description of relationship to corporate office

Schedule of ownership of subsidiaries and minority investments and joint ventures

Legal entity chart

B. Management: resumes of key management and technical personnel

C. Employees

Table of headcounts by department, location and facility

Description of labor force skills

Table of work force demographics (age, education, salary levels)

Table of turnover statistics

D. Compensation Structures

Schedule of salaried vs. hourly employees

Table of incentives plans (bonuses, stock options, savings plan)

Description and funding status of retirement and pension plans

Description of fringe benefits

VI. Other Data

A. Acquisition and Divestiture Summary

B. International Operations

Explanation of subsidiary structure

Summary of distribution agreements

List of products sold on an international basis

Description of international facilities

Description of sales force and marketing arrangements

Explanation of foreign currency exposure and accounting treatment

Explanation of foreign tax proposition

Analysis of nature of foreign competition

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