Denver Investment Firm, KRG Capital Partners, Acquires Leading Provider of Outsourced Interior Design and Installation Services.

Business Editors

DENVER & CARLSBAD, Calif.--(BUSINESS WIRE)--April 5, 2004

KRG Capital Partners ("KRG"), the largest buyout firm headquartered in Denver, has made its first acquisition in outsourced services for the homebuilders industry.

KRG is pleased to announce the acquisition of Interior Specialists Inc. ("ISI" or the "Company"), one of the leading providers of outsourced interior design and installation services for homebuilders in the Southwestern United States (i.e. Southern California, Nevada, and Arizona). ISI is the 17th portfolio company for KRG and will serve as the platform for a consolidation in this outsourced services industry. Additional financing for the transaction was provided by American Capital, Madison Capital Funding, L.L.C., and Harris Bank.

ISI is one of the five largest companies in the $13 billion interior design services industry. "We are extremely impressed with ISI's market leading position and the strong relationships management has established with homebuilders," said Chuck Hamilton, Managing Director of KRG. "Our partnership with ISI is consistent with our strategy of investing in high-quality companies with 'customer-focused' growth strategies." ISI joins KRG's diverse portfolio of companies that are leaders in their industry, demonstrate significant potential for future growth and have strong management teams. With a sizeable pool of capital and extensive relationships with partner lenders, KRG offers certainty of close to companies seeking equity partners. As is typical with a number of KRG's companies, the management team of ISI invested alongside KRG.

Headquartered in Carlsbad, California, ISI markets and installs a variety of interior products for homebuilders through 16 design centers strategically located in areas of major new home development. Over the past 20 years, the Company has earned a reputation for consistently delivering on-time installations and unsurpassed customer service. "Partnering with KRG Capital brings additional expertise and resources to ISI," said Kenneth Treaster, CEO of Interior Specialists, Inc. "We look forward to working with them in expanding our capabilities and services in both existing and new markets." The Company currently operates in the following high-growth local housing markets: San Diego, Los Angeles, Ventura County, Orange County, Riverside, and San Bernardino in Southern California; Phoenix and Tucson in Arizona; and Las Vegas in Nevada.

ISI targets homebuilders that construct large developments of "move-up" homes that typically sell for between $250,000 and $700,000, and the Company enjoys longstanding relationships with homebuilders who specialize in these developments. The Company's existing regional markets have experienced a 20% higher growth in population over the last five years compared to the national average as well as superior growth in employment. ISI's experienced management team, leading position in its markets and the broader industry, proprietary software system and superior business processes equals a platform positioned for future growth, organically and through acquisition. Adding new interior design products and services, as well as continued expansion of the Company's customer base will drive ISI's organic growth. The Company has also proven its ability to successfully execute both "Greenfield" initiatives and acquisitions, and management has identified and prioritized a number of additional targets for ISI.

Interior Specialists, Inc. was represented by Bingham McCutchen in the transaction, and received substantial interest from both strategic and financial buyers. "From our very first meeting with KRG, they rapidly grasped the intricacies of our business model, understood our growth potential, and shared the excitement of our enterprise in a real entrepreneurial fashion," said Treaster. "We are excited about working with KRG and look forward to continued success with our new partners."

About KRG Capital Partners

Founded in 1996, KRG is the largest Denver-based private equity buyout firm with offices in California, Nevada and Florida. KRG currently manages over $860 million of committed equity capital and equity co-investments. KRG specializes in acquiring and recapitalizing unique and profitable middle-market companies. The firm seeks investment opportunities for its partners where KRG can work in concert with owners and operating managers who are committed to expanding their companies and becoming industry leaders. The result is a partnership that focuses on creating a significantly larger enterprise through a combination of internal growth and complementary add-on acquisitions. Since inception, KRG has invested in 17 "platform companies" and has completed 49 add-on acquisitions for those platforms.

KRG is actively pursuing additional platforms in industry niches focused on certain macroeconomic and demographic trends. Targeted areas of interest include Healthcare, Construction Materials, Infrastructure, Outsourcing, Life Science Contract Manufacturing, Specialty Coatings and Chemicals, Education, Training, Transportation and Logistics and Consumer Products. For more information on KRG Capital Partners, please visit www.krgcapital.com or contact Rob Martin at 727-789-1336.

About Interior Specialists, Inc.

ISI is one of the five largest companies for interior design services. During the construction phase of a new home and prior to the close of escrow, ISI markets and installs a variety of interior products for home buyers, including flooring (carpet, stone, tile, vinyl, and wood), window coverings (blinds, draperies, and shades), and countertops (granite, stone, and tile). ISI also manages the sale of a number of other interior options (cabinets, entertainment centers, lighting systems, and security systems), receiving a referral fee for its services. ISI offers a broad array of leading national brands in each of its product categories, including Shaw, Mohawk, Armstrong, and Arizona Tile. The Companies services encompass three primary areas: (i) interior design selection and sales; (ii) installation and quality assurance; and (iii) customer service. ISI's senior management team has approximately 100 years of collective experience in the flooring and homebuilder services industries. For more information on ISI, please visit www.isidc.com.