EX-99.C.8 8 g73841ex99-c_8.txt FINANCIAL MODEL OF GRANT THORNTON LLP EXHIBIT (c)(8) -------------------------------------------------------------------------------- SCHEDULE 1 PIERRE FOODS, INC. VALUATION SUMMARY ($000s) --------------------------------------------------------------------------------
Value Value Valuation Approach Indication Probability Weighting Indication Probability Weighting ------------------ ---------- ----------- --------- ---------- ----------- --------- Transaction Method $19,920 33.3% $19,920 25.0% Guideline Company Method $20,949 33.3% $20,949 25.0% Income Approach: DCF Method - Scenario #1 $ 0 40.0% $ 0 40.0% DCF Method - Scenario #2 $ 0 30.0% $ 0 30.0% DCF Method - Scenario #3 $ 0 15.0% $ 0 15.0% DCF Method - Scenario #4 $ 0 15.0% $ 0 15.0% ---------- ---------- Income Approach Conclusion $ 0.00 33.3% $ 0.00 50.0% Concluded Fair Market Value - Minority, Marketable Basis $13,623 $10,217 Shares Outstanding as of December 17, 2001 5,780 5,780 ---------- ---------- Total Fair Market Value per Share $ 2.36 $ 1.77 ========== ========== Low(*) High(**) Indicated Range of Fairness $1.77 $ 3.62
(*) Low indicated by 50/25/25 weighting (**) High indicated by Guideline Company Method -------------------------------------------------------------------------------- SCHEDULE 2 PIERRE FOODS, INC. COMPARATIVE, COMBINED BALANCE SHEET DATA --------------------------------------------------------------------------------
Fiscal Year Ended: 2/23/1996 % 2/28/1997 % 2/27/1998 % 3/6/1999 % --------- ----- --------- ----- --------- ----- -------- ----- ASSETS Cash & Equivalents $ 430,311 1.0 $ 3,995,497 6.7 $ 2,818,071 3.9 $ 1,664,398 0.8 Marketable Securities 148,997 0.4 171,910 0.3 206,706 0.3 0 0.0 Accounts Receivable, Net Trade and Others 3,341,871 8.0 3,457,017 5.8 5,023,333 7.0 18,239,005 8.4 Related Party 484,951 1.2 278,919 0.5 181,367 0.3 326,147 0.2 Notes Receivable, Current Portion Related Party 772,329 1.9 563,644 0.9 526,592 0.7 280,964 0.1 Other 639,692 1.5 409,996 0.7 624,314 0.9 135,811 0.1 Inventories 5,553,641 13.3 6,706,838 11.3 7,361,347 10.3 30,430,482 14.0 Income Tax Receivable 0 0.0 343,557 0.6 872,157 1.2 0 0.0 Prepaid Expenses and Other 486,128 1.2 108,323 0.2 269,222 0.4 988,023 0.5 Deferred Income Taxes 518,490 1.2 454,259 0.8 424,786 0.6 2,722,095 1.3 ------------ ----- ------------ ----- ------------ ----- ------------- ----- Total Current Assets 12,376,410 29.7 16,489,960 27.7 18,307,895 25.5 54,786,925 25.2 PROPERTY, PLANT & EQUIPMENT Gross Property, Plant & Equipment 45,984,616 110.4 60,774,388 102.0 71,555,653 99.9 105,191,311 48.5 Less: Depreciation/Amortization (20,696,583) -49.7 (23,810,278) -40.0 (26,531,860) -37.0 (30,191,917) -13.9 ------------ ----- ------------ ----- ------------ ----- ------------- ----- Net Property, Plant & Equipment 25,288,033 60.7 36,964,110 62.1 45,023,793 62.8 74,999,394 34.6 OTHER ASSETS Property Held for Sale 1,569,752 3.8 3,277,670 5.5 1,680,993 2.3 2,086,847 1.0 Trade Name, Net 0 0.0 0 0.0 0 0.0 43,242,636 19.9 Excess of Cost over Fair Value of Net Assets of Businesses Acquired, Net 662,321 1.6 0 0.0 2,906,366 4.1 32,623,400 15.0 Other Intangible Assets, Net 0 0.0 628,186 1.1 829,500 1.2 3,520,053 1.6 Noncurrent Notes Receivable 204,941 0.5 470,345 0.8 335,611 0.5 54,220 0.0 Noncurrent Related Party Note Receivable 515,944 1.2 963,117 1.6 1,550,638 2.2 1,018,767 0.5 Deferred Income Taxes 0 0.0 0 0.0 685,458 1.0 0 0.0 Deferred Loan Origination Fees, Net 0 0.0 0 0.0 262,828 0.4 4,524,753 2.1 Investment in Affiliates 381,533 0.9 374,533 0.6 0 0.0 0 0.0 Investment in Restricted Equity Securities 242,050 0.6 0 0.0 0 0.0 0 0.0 Other 393,390 0.9 403,209 0.7 72,717 0.1 132,028 0.1 ------------ ----- ------------ ----- ------------ ----- ------------- ----- Total Other Assets 3,969,931 9.5 6,117,060 10.3 8,324,111 11.6 87,202,704 40.2 TOTAL ASSETS $ 41,634,374 100.0 $ 59,571,130 100.0 $ 71,655,799 100.0 $ 216,989,023 100.0 ============ ===== ============ ===== ============ ===== ============= ===== LIABILITIES & EQUITY Notes Payable $ 4,000,000 9.6 $ 4,487,776 7.5 $ 5,105,144 7.1 $ 0 0.0 Current Installments of Long-Term Debt 2,030,953 4.9 1,297,792 2.2 2,189,401 3.1 673,752 0.3 Trade Accounts Payable 2,810,229 6.7 4,568,176 7.7 6,605,893 9.2 11,255,920 5.2 Income Taxes Payable 0 0.0 0 0.0 0 0.0 151,366 0.1 Accrued Salaries and Wages 650,407 1.6 803,855 1.3 1,960,534 2.7 4,941,033 2.3 Accrued Insurance 644,180 1.5 833,028 1.4 614,846 0.9 1,155,942 0.5 Accrued Marketing and Advertising 0 0.0 0 0.0 12,000 0.0 1,420,580 0.7 Taxes, Other than Income 323,059 0.8 739,347 1.2 379,269 0.5 1,176,888 0.5 Accrued Interest 85,297 0.2 19,717 0.0 87,426 0.1 3,533,771 1.6 Gift Certificates Outstanding 331,955 0.8 491,463 0.8 0 0.0 0 0.0 Other 515,974 1.2 1,134,345 1.9 1,850,766 2.6 3,351,366 1.5 ------------ ----- ------------ ----- ------------ ----- ------------- ----- Total Current Liabilities 11,392,054 27.4 14,375,499 24.1 18,805,279 26.2 27,660,618 12.7 LONG-TERM LIABILITIES Deferred Franchise Fees 5,000 0.0 0 0.0 0 0.0 0 0.0 Deferred Income Taxes 903,639 2.2 1,425,100 2.4 0 0.0 1,910,468 0.9 Other Long-Term Liabilities 0 0.0 0 0.0 0 0.0 0 0.0 Long Term Debt, Noncurrent 12,890,060 31.0 12,422,150 20.9 13,623,532 19.0 146,265,928 67.4 ------------ ----- ------------ ----- ------------ ----- ------------- ----- Total Long-Term Liabilities 13,798,699 33.1 13,847,250 23.2 13,623,532 19.0 148,176,396 68.3 TOTAL LIABILITIES 25,190,753 60.5 28,222,749 47.4 32,428,811 45.3 175,837,014 81.0 SHAREHOLDERS' EQUITY Common Stock 2,760,338 6.6 5,326,948 8.9 5,898,449 8.2 5,807,049 2.7 Additional Paid in Capital 6,579,347 15.8 18,868,284 31.7 23,647,020 33.0 23,251,845 10.7 Accumulated Other Comprehensive Income 5,278 0.0 10,059 0.0 19,261 0.0 0 0.0 Receivable from Shareholder 0 0.0 0 0.0 0 0.0 0 0.0 Retained Earnings 7,098,658 17.0 7,143,090 12.0 9,662,258 13.5 12,093,115 5.6 ------------ ----- ------------ ----- ------------ ----- ------------- ----- TOTAL SHAREHOLDER'S EQUITY 16,443,621 39.5 31,348,381 52.6 39,226,988 54.7 41,152,009 19.0 TOTAL LIABILITIES & EQUITY $ 41,634,374 100.0 $ 59,571,130 100.0 $ 71,655,799 100.0 $ 216,989,023 100.0 ============ ===== ============ ===== ============ ===== ============= ===== Debt Free Working Capital, as adjusted $ 5,109,277 12.3 $ 2,778,699 4.7 $ 2,708,904 3.8 $ 29,252,657 13.5 Working Capital, as reported $ 984,356 2.4 $ 2,114,461 3.5 $ (497,384) -0.7 $ 27,126,307 12.5 Sales/Working Capital, as reported 115.3 61.2 (133.2) 5.8 Current Ratio 1.09 1.15 0.97 1.98 Long-Term Debt/Equity 0.78 0.40 0.35 3.55 Total Liabilities/Equity 1.53 0.90 0.83 4.27 (**) RMA (1) RMA (1) RMA (1) As of SIC SIC SIC Fiscal Year Ended: 3/4/2000 % 3/3/2001 % 12/2/2001 % #2011 #2013 #2051 -------- ----- -------- ----- --------- ----- ----- ----- ----- ASSETS Cash & Equivalents $ 2,701,464 1.6 $ 1,813,437 1.1 $ 4,600,096 2.8 4.5 5.9 7.8 Marketable Securities 0 0.0 0 0.0 0 0.0 Accounts Receivable, Net Trade and Others 17,129,821 10.4 18,225,203 11.3 19,651,307 12.0 25.7 21.6 16.5 Related Party 292,990 0.2 0 0.0 0 0.0 Notes Receivable, Current Portion Related Party 152,456 0.1 0 0.0 0 0.0 Other 86,057 0.1 0 0.0 0 0.0 Inventories 25,025,421 15.2 26,835,344 16.6 26,385,319 16.2 20.3 19.1 6.0 Income Tax Receivable 2,828,156 1.7 1,874,018 1.2 1,089,332 0.7 Prepaid Expenses and Other 799,582 0.5 1,030,985 0.6 1,488,757 0.9 Deferred Income Taxes 2,290,361 1.4 2,652,624 1.6 2,174,642 1.3 ------------- ----- ------------- ----- ------------- ----- ----- ----- ----- Total Current Assets 51,306,308 31.1 52,431,611 32.5 55,389,453 34.0 53.2 49.1 33.1 PROPERTY, PLANT & EQUIPMENT Gross Property, Plant & Equipment 50,711,772 30.8 N/A 0.0 N/A 0.0 Less: Depreciation/Amortization (14,926,953) -9.1 N/A 0.0 N/A 0.0 ------------- ----- ------------- ----- ------------- ----- ----- ----- ----- Net Property, Plant & Equipment 35,784,819 21.7 34,907,752 21.7 35,820,075 22.0 37.4 40.6 48.2 OTHER ASSETS Property Held for Sale 0 0.0 0 0.0 0 0.0 Trade Name, Net 41,764,636 25.4 40,286,636 25.0 39,178,136 24.0 2.9 4.4 9.1 Excess of Cost over Fair Value of 0.0 Net Assets of Businesses Acquired, Net 28,893,723 17.5 27,871,114 17.3 27,104,157 16.6 Other Intangible Assets, Net 2,556,936 1.6 2,363,956 1.5 2,219,288 1.4 Noncurrent Notes Receivable 0 0.0 0 0.0 0 0.0 Noncurrent Related Party Note Receivable 705,493 0.4 705,493 0.4 705,493 0.4 Deferred Income Taxes 0 0.0 0 0.0 0 0.0 Deferred Loan Origination Fees, Net 3,714,748 2.3 2,619,157 1.6 2,225,287 1.4 Investment in Affiliates 0 0.0 0 0.0 0 0.0 Investment in Restricted Equity Securities 0 0.0 0 0.0 0 0.0 Other 0 0.0 0 0.0 458,791 0.3 ------------- ----- ------------- ----- ------------- ----- ----- ----- ----- Total Other Assets 77,635,536 47.1 73,846,356 45.8 71,891,152 44.1 TOTAL ASSETS $ 164,726,663 100.0 $ 161,185,719 100.0 $ 163,100,680 100.0 100.0 100.0 100.0 ============= ===== ============= ===== ============= ===== ===== ===== ===== LIABILITIES & EQUITY Notes Payable $ 0 0.0 $ 0 0.0 $ 0 0.0 10.9 9.9 2.9 Current Installments of Long-Term Debt 314,433 0.2 67,631 0.0 48,551 0.0 3.0 3.6 3.7 Trade Accounts Payable 5,493,168 3.3 4,937,996 3.1 3,650,635 2.2 11.4 15.9 10.1 Income Taxes Payable 0 0.0 0 0.0 0 0.0 0.3 0.3 Accrued Salaries and Wages 2,427,691 1.5 4,246,004 2.6 5,111,067 3.1 Accrued Insurance 154,947 0.1 94,582 0.1 10,698 0.0 Accrued Marketing and Advertising 1,903,241 1.2 2,859,771 1.8 1,321,536 0.8 Taxes, Other than Income 563,879 0.3 590,487 0.4 475,526 0.3 Accrued Interest 3,213,929 2.0 3,153,280 2.0 6,181,250 3.8 Gift Certificates Outstanding 0 0.0 0 0.0 0 0.0 Other 831,681 0.5 339,601 0.2 1,807,336 1.1 ------------- ----- ------------- ----- ------------- ----- ----- ----- ----- Total Current Liabilities 14,902,969 9.0 16,289,352 10.1 18,606,599 11.4 35.6 38.1 24.9 LONG-TERM LIABILITIES Deferred Franchise Fees 0 0.0 0 0.0 0 0.0 Deferred Income Taxes 1,487,134 0.9 1,483,306 0.9 1,571,087 1.0 0.5 0.4 1.6 Other Long-Term Liabilities 1,638,466 1.0 1,347,231 0.8 1,113,578 0.7 Long Term Debt, Noncurrent 115,164,922 69.9 115,097,291 71.4 115,066,838 70.5 15.9 19.1 23.3 ------------- ----- ------------- ----- ------------- ----- ----- ----- ----- Total Long-Term Liabilities 118,290,522 71.8 117,927,828 73.2 117,751,503 72.2 TOTAL LIABILITIES 133,193,491 80.9 134,217,180 83.3 136,358,102 83.6 SHAREHOLDERS' EQUITY Common Stock 5,781,000 3.5 5,781,480 3.6 5,781,480 3.5 Additional Paid in Capital 23,315,881 14.2 23,317,053 14.5 23,317,053 14.3 Accumulated Other Comprehensive Income 0 0.0 0 0.0 0 0.0 Receivable from Shareholder (5,000,000) -3.0 (5,000,000 -3.1 (5,000,000) -3.1 Retained Earnings 7,436,291 4.5 2,870,006 1.8 2,644,045 1.6 ------------- ----- ------------- ----- ------------- ----- ----- ----- ----- TOTAL SHAREHOLDER'S EQUITY 31,533,172 19.1 26,968,539 16.7 26,742,578 16.4 43.1 37.5 43.3 TOTAL LIABILITIES & EQUITY $ 164,726,663 100.0 $ 161,185,719 100.0 $ 163,100,680 100.0 100.0 100.0 100.0 ============= ===== ============= ===== ============= ===== ===== ===== ===== Debt Free Working Capital, as adjusted $ 36,991,724 22.5 $ 37,549,733 23.3 $ 38,412,559 23.6 Working Capital, as reported $ 36,403,339 22.1 $ 36,142,259 22.4 $ 36,782,854 22.6 17.6 11.0 8.2 Sales/Working Capital, as reported 5.1 5.8 6.3 28.7 38.2 29.3 Current Ratio 3.44 3.22 2.98 1.4 1.2 1.2 Long-Term Debt/Equity 3.65 4.27 4.30 1.2 1.5 1.7 Total Liabilities/Equity 4.22 4.98 5.10
----------------------- (1) Robert Morris Associates Annual Statement Studies, 2000-2001, Median Data for SIC #2011 "Meat Packing Plants", SIC #2013 "Sausages & Other Prepared Meats Products" and SIC #2051 "Bread & Other Bakery Products, Except Cookies & Crackers" with sales of $25MM and over, (**) Preliminary results provided by management were used. -------------------------------------------------------------------------------- SCHEDULE 3 PIERRE FOODS, INC. COMPARATIVE, COMBINED INCOME STATEMENT DATA --------------------------------------------------------------------------------
Fiscal Year Ended: 2/23/1996 % 2/28/1997 % 2/27/1998 % ------------ ----- ------------ ----- ----------- ----- REVENUES: Restaurant Operations 62,667,763 55.2 70,866,150 54.7 0 0.0 Food Processing (a) 50,868,707 44.8 48,181,625 37.2 56,387,112 85.1 Ham Curing (a) 0 0.0 10,433,868 8.1 9,858,233 14.9 Restaurant Franchising (b) 0 0.0 0 0.0 0 0.0 ------------ ----- ------------ ----- ----------- ----- $113,536,470 100.0 $129,481,643 100.0 $66,245,345 100.0 Cost of Goods Sold 69,647,206 61.3 78,999,482 61.0 59,153,475 89.3 ------------ ----- ------------ ----- ----------- ----- GROSS PROFIT 43,889,264 38.7 50,482,161 39.0 7,091,870 10.7 Operating Expenses 26,560,293 23.4 31,057,850 24.0 0 0.0 Selling, General and Administrative 10,587,620 9.3 10,414,329 8.0 9,716,431 14.7 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0 Depreciation and Amortization 3,476,152 3.1 3,600,317 2.8 1,614,823 2.4 ------------ ----- ------------ ----- ----------- ----- TOTAL OPERATING EXPENSES 40,624,06 35.8 45,072,496 34.8 11,331,254 17.1 OPERATING INCOME (LOSS) 3,265,199 2.9 5,409,665 4.2 (4,239,384) -6.4 OTHER INCOME (EXPENSES): Other Income 736,855 0.6 1,018,745 0.8 204,045 0.3 Net Gain (Loss) on Dispositions of Assets 105,367 0.1 345,930 0.3 0 0.0 Equity in Earnings (Loss) of Affiliates (385,366) -0.3 0 0.0 0 0.0 Interest Expense (2,162,547) -1.9 (1,867,948) -1.4 (1,762,363) -2.7 Other Expense (688,580) -0.6 (871,388) -0.7 0 0.0 ------------ ----- ------------ ----- ----------- ----- TOTAL OTHER INCOME (EXPENSE) (2,394,271) -2.1 (1,374,661) -1.1 (1,558,318) -2.4 EARNINGS (LOSS) BEFORE INCOME TAXES 870,928 0.8 4,035,004 3.1 (5,797,702) -8.8 Provision for Income Taxes (Benefit) Current (5,967) 0.0 1,285,460 1.0 194,771 0.3 Deferred (1,133,463) -1.0 724,539 0.6 (2,121,464) -3.2 ------------ ----- ------------ ----- ----------- ----- Total Provision for Income Taxes (Benefit) (1,139,430) -1.0 2,009,999 1.6 (1,926,693) -2.9 ------------ ----- ------------ ----- ----------- ----- NET INCOME (LOSS) $2,010,358 1.8 $2,025,005 1.6 $(3,871,009) -5.8 ============ ===== ============ ===== =========== ====== Distributions 334,908 795,501 N/A EBIT 3,265,199 2.9 5,409,665 4.2 (4,239,384) -6.4 EBITDA 6,741,351 5.9 9,009,982 7.0 1,103,813 1.7 Adjustments Other Non-Cash Adjustments to Earnings 152,598 228,199 (80,884) Tax Benefit of Stock Options 0 0 3,100,421 Non-Recurring Acquisition Costs (Sagebrush, Inc.) 0 0 1,900,000 Loss on Sale of Mom 'n' Pop's Country Ham, LLC 0 0 0 Bonus Agreement (Harris) 0 0 0 Consulting and Non-Compete Agreement (Howard) 0 0 0 Consulting and Non-Compete Agreement (Connor) 0 0 0 Consulting and Non-Compete Agreement (Miller) 0 0 0 One-Time Financing Charges 0 0 0 Excess Compensation 0 0 0 ------------ ------------ ----------- Total Adjustments 152,598 228,199 4,919,537 ADJUSTED EBIT 3,417,797 3.0 5,637,864 4.4 680,153 1.0 ADJUSTED EBITDA 6,893,949 6.1 9,238,181 7.1 6,023,350 9.1 Pretax Return on Assets (ROA) 2.1% 6.8% -8.1% Pretax Return on Equity (ROE) 5.3% 12.9% -14.8% Pretax Return on Invested Capital (ROI) 2.5% 8.1% -9.6% Debt-Free Working Capital (% sales) 0.9% 1.6% -0.8% Interest Expense 2,162,547 1.9 1,867,948 1.4 1,762,363 2.7 Depreciation & Amortization Expense 3,476,152 3.1 3,600,317 2.8 5,343,197 8.1 Depreciation on Properties Leased to Others 282,104 0.2 293,894 0.2 0 0.0 Capital Expenditures to Related Parties 612,578 0.5 563,294 0.4 1,752,565 2.6 Capital Expenditures - Other 3,357,550 3.0 9,138,245 7.1 10,839,058 16.4 ------------ ----- ------------ ----- ----------- ----- Total Capital Expenditures 3,970,128 3.5 9,701,539 7.5 12,591,623 19.0 ============ ===== ============ ===== =========== ===== OFFICERS' COMPENSATION (2): JAMES C. RICHARDSON, JR. $0 Salary 0 Bonus 0 Other 0 DAVID R. CLARK $152,064 Salary 0 Bonus 152,064 Other 0 NORBERT E. WOODHAMS $0 Salary 0 Bonus 0 Other 0 L. DENT MILLER $0 Salary 0 Bonus 0 Other 0 JAMES E. HARRIS $0 Salary 0 Bonus 0 Other 0 PAMELA M. WITTERS $0 Salary 0 Bonus 0 Other 0 TOTAL $152,064 =========== Fiscal Year Ended: 3/6/1999 % 3/4/2000 % 3/3/2001 % ------------ ----- ------------ ----- ------------ ----- REVENUES: Restaurant Operations 0 0.0 0 0.0 0 0.0 Food Processing (a) 149,778,206 95.5 183,502,144 98.9 211,040,483 100.0 Ham Curing (a) 7,063,625 4.5 2,096,052 1.1 0 0.0 Restaurant Franchising (b) 0 0.0 0 0.0 0 0.0 ------------ ----- ------------ ----- ------------ ----- $156,841,831 100.0 $185,598,196 100.0 $211,040,483 100.0 Cost of Goods Sold 101,413,313 64.7 116,024,983 62.5 133,905,113 63.4 ------------ ----- ------------ ----- ------------ ----- GROSS PROFIT 55,428,518 35.3 69,573,213 37.5 77,135,370 36.6 Operating Expenses 0 0.0 0 0.0 0 0.0 Selling, General and Administrative 41,006,810 26.1 65,297,277 35.2 63,842,125 30.3 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 2,857,160 1.5 0 0.0 Depreciation and Amortization 4,901,356 3.1 5,661,893 3.1 6,237,994 3.0 ------------ ----- ------------ ----- ------------ ----- TOTAL OPERATING EXPENSES 45,908,166 29.3 73,816,330 39.8 70,080,119 33.2 OPERATING INCOME (LOSS) 9,520,352 6.1 (4,243,117) -2.3 7,055,251 3.3 OTHER INCOME (EXPENSES): Other Income 409,095 0.3 168,959 0.1 281,600 0.1 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 (27,695) 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 0 0.0 Interest Expense (12,332,248) -7.9 (14,985,577) -8.1 (13,334,022) -6.3 Other Expense 0 0.0 0 0.0 0 0.0 ------------ ----- ------------ ----- ------------ ----- TOTAL OTHER INCOME (EXPENSE) (11,923,153) -7.6 (14,816,618) -8.0 (13,080,117) -6.2 EARNINGS (LOSS) BEFORE INCOME TAXES (2,402,801) -1.5 (19,059,735) -10.3 (6,024,866) -2.9 Provision for Income Taxes (Benefit) Current 700,847 0.4 (5,286,124) -2.8 (1,684,950) -0.8 Deferred (1,313,732) -0.8 460,956 0.2 0 0.0 ------------ ----- ------------ ----- ------------ ----- Total Provision for Income Taxes (Benefit) (612,885) -0.4 (4,825,168) -2.6 (1,684,950) -0.8 ------------ ----- ------------ ----- ------------ ----- NET INCOME (LOSS) $(1,789,916) -1.1 $(14,234,567) -7.7 $(4,339,916) -2.1 ============ ===== ============ ===== ============ ===== Distributions N/A N/A N/A EBIT 9,520,352 6.1 (1,385,957) -0.7 7,055,251 3.3 EBITDA 18,604,504 11.9 7,713,013 4.2 13,293,245 6.3 Adjustments Other Non-Cash Adjustments to Earnings (126,278) 705,039 585,382 Tax Benefit of Stock Options 0 0 0 Non-Recurring Acquisition Costs (Sagebrush, Inc.) 0 0 0 Loss on Sale of Mom 'n' Pop's Country Ham, LLC 0 2,857,160 0 Bonus Agreement (Harris) 0 1,059,701 0 Consulting and Non-Compete Agreement (Howard) 0 1,389,503 0 Consulting and Non-Compete Agreement (Connor) 0 831,000 0 Consulting and Non-Compete Agreement (Miller) 0 807,000 0 One-Time Financing Charges 0 0 600,000 Excess Compensation 0 0 0 ------------ ------------ ------------ Total Adjustments (126,278) 7,649,403 1,185,382 ADJUSTED EBIT 9,394,074 6.0 6,263,446 3.4 8,240,633 3.9 ADJUSTED EBITDA 18,478,226 11.8 15,362,416 8.3 14,478,627 6.9 Pretax Return on Assets (ROA) -1.1% -11.6% -3.7% Pretax Return on Equity (ROE) -5.8% -60.4% -22.3% Pretax Return on Invested Capital (ROI) -1.3% -12.7% -4.1% Debt-Free Working Capital (% sales) 17.3% 19.6% 17.1% Interest Expense 12,332,248 7.9 14,985,577 8.1 13,334,022 6.3 Depreciation & Amortization Expense 9,084,152 5.8 9,098,970 4.9 6,237,994 3.0 Depreciation on Properties Leased to Others 0 0.0 0 0.0 0 0.0 Capital Expenditures to Related Parties 2,148,910 1.4 316,233 0.2 0 0.0 Capital Expenditures - Other 13,315,626 8.5 5,171,445 2.8 2,695,032 1.3 ------------ ----- ------------ ----- ------------ ----- Total Capital Expenditures 15,464,536 9.9 5,487,678 3.0 2,695,032 1.3 ============ ===== ============ ===== ============ ===== OFFICERS' COMPENSATION (2): JAMES C. RICHARDSON, JR. $0 $1,941,270 Salary 0 0 Bonus 0 1,145,748 Other 0 795,522 DAVID R. CLARK $528,200 $2,410,691 Salary 150,000 350,000 Bonus 375,000 1,261,969 Other 3,200 798,722 NORBERT E. WOODHAMS $254,193 $812,929 Salary 189,493 275,622 Bonus 62,500 355,007 Other 2,200 182,300 L. DENT MILLER $225,000 $1,802,003 Salary 225,000 121,154 Bonus 0 1,176,648 Other 0 504,201 JAMES E. HARRIS $166,372 $1,386,475 Salary 166,372 161,538 Bonus 0 726,640 Other 0 498,297 PAMELA M. WITTERS $18,750 $178,636 Salary 18,750 104,438 Bonus 0 73,546 Other 0 652 TOTAL $1,192,515 $8,532,004 ========== ========== (**) Last 12 Mos. RMA (1) RMA (1) RMA (1) Ended SIC #2011 SIC #2013 SIC #2051 Fiscal Year Ended: 12/2/2001 % % % % ------------ ----- --------- --------- --------- REVENUES: Restaurant Operations 0 0.0 Food Processing (a) 232,162,968 100.0 Ham Curing (a) 0 0.0 Restaurant Franchising (b) 0 0.0 ------------ ----- $232,162,968 100.0 100 100 100.0 Cost of Goods Sold 151,668,132 65.3 ------------ ----- GROSS PROFIT 80,494,836 34.7 14.1 21 38.2 Operating Expenses 0 0.0 Selling, General and Administrative 62,276,211 26.8 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0.0 Depreciation and Amortization 6,234,273 2.7 ------------ ----- TOTAL OPERATING EXPENSES 68,510,484 29.5 11.3 17 32.8 OPERATING INCOME (LOSS) 11,984,352 5.2 2.8 4 5.4 OTHER INCOME (EXPENSES): Other Income 0.0 Net Gain (Loss) on Dispositions of Assets (48,707) 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 ------------ ----- Interest Expense (12,974,923) -5.6 Other Expense 0 0.0 TOTAL OTHER INCOME (EXPENSE) (13,023,630) -5.6 0.7 0.8 1.1 EARNINGS (LOSS) BEFORE INCOME TAXES (1,039,278) -0.4 2.1 3.2 4.3 Provision for Income Taxes (Benefit) Current 431,639 0.2 Deferred 0 0.0 ------------ ----- Total Provision for Income Taxes (Benefit) 431,639 0.2 ------------ ----- NET INCOME (LOSS) $(1,470,917) -0.6 ============ ===== Distributions N/A EBIT 11,984,352 5.2 EBITDA 18,218,625 7.8 Adjustments Other Non-Cash Adjustments to Earnings Tax Benefit of Stock Options 0 Non-Recurring Acquisition Costs (Sagebrush, Inc.) 0 Loss on Sale of Mom 'n' Pop's Country Ham, LLC 0 Bonus Agreement (Harris) 0 Consulting and Non-Compete Agreement (Howard) 0 Consulting and Non-Compete Agreement (Connor) 0 Consulting and Non-Compete Agreement (Miller) 0 One-Time Financing Charges Excess Compensation 0 ---------- Total Adjustments 0 ADJUSTED EBIT 11,984,352 5.2 ADJUSTED EBITDA 18,218,625 7.8 Pretax Return on Assets (ROA) -0.6% Pretax Return on Equity (ROE) -3.9% Pretax Return on Invested Capital (ROI) -0.7% Debt-Free Working Capital (% sales) 15.8% Interest Expense 12,974,923 5.6 Depreciation & Amortization Expense 6,234,273 2.7 Depreciation on Properties Leased to Others 0 0.0 Capital Expenditures to Related Parties 0 0.0 Capital Expenditures - Other 2,695,032 1.2 ---------- ----- Total Capital Expenditures 2,695,032 1.2 OFFICERS' COMPENSATION (2): JAMES C. RICHARDSON, JR. Salary Bonus Other DAVID R. CLARK Salary Bonus Other NORBERT E. WOODHAMS Salary Bonus Other L. DENT MILLER Salary Bonus Other JAMES E. HARRIS Salary Bonus Other PAMELA M. WITTERS Salary Bonus Other TOTAL
(1) Robert Morris Associates Annual Statement Studies, 2000-2001, Median Data for SIC #2011 "Meat Packing Plants", SIC #2013 "Sausages & Other Prepared Meats Products" and SIC #2051 "Bread & Other Bakery Products, Except Cookies & Crackers" with sales of $25MM and over, (2) Based on information taken from Pierre Foods Amended 10K filed June 29, 2000. (a) Intersegment sales are recorded based on prevailing prices and relate solely to the food processing segment. (b) Restaurant Franchising is included in Restaurant Operations. (**) Preliminary results provided by management were used. SCHEDULE 4 PIERRE FOODS, INC. FINANCIAL RATIO ANALYSIS
AS OF 2/23/1996 2/28/1997 2/27/1998 3/6/1999 3/4/2000 3/3/2001 --------- --------- --------- -------- -------- -------- BALANCE SHEET Total Assets ($000's) $ 41,634 $ 59,571 $ 71,656 $216,989 $164,727 $163,101 Total Assets (%) 100.0 100.0 100.0 100.0 100.0 100.0 Account Receivable 8.0 5.8 7.0 8.4 10.4 12.0 Current Assets 29.7 27.7 25.5 25.2 31.1 34.0 Net Fixed Assets 60.7 62.1 62.8 34.6 21.7 22.0 Accounts Payable 6.7 7.7 9.2 5.2 3.3 2.2 Total Short-Term Debt 14.5 9.7 10.2 0.3 0.2 0.0 Long-Term Debt 31.0 20.9 19.0 67.4 69.9 70.5 Total Liabilities 60.5 47.4 45.3 81.0 80.9 83.6 Total Stockholders' Equity 39.5 52.6 54.7 19.0 19.1 16.4 Debt-free Working Capital, as adjusted 12.3 4.7 3.8 13.5 22.5 23.6 Debt-free Working Capital, as reported 2.4 3.5 -0.7 12.5 22.1 22.6 INCOME STATEMENT Net Sales ($000's) $113,536 $129,482 $ 66,245 $156,842 $185,598 $232,163 Net Sales (%) 100.0 100.0 100.0 100.0 100.0 100.0 Gross Profit 38.7 39.0 10.7 35.3 37.5 34.7 Operating Profit 2.9 4.2 -6.4 6.1 -2.3 5.2 Pretax Profit 0.8 3.1 -8.8 -1.5 -10.3 -0.4 Net Profits 1.8 1.6 -5.8 -1.1 -7.7 -0.6 Adjusted EBITDA 6.1 7.1 9.1 11.8 8.3 7.8 Adjusted EBIT 3.0 4.4 1.0 6.0 3.4 5.2 Depreciation Expense 3.3 3.0 8.1 5.8 4.9 2.7 Interest Expense 1.9 1.4 2.7 7.9 8.1 5.6 Capital Expenditures 3.5 7.5 19.0 9.9 3.0 1.2 LIQUIDITY Current Ratio 1.09 1.15 0.97 1.98 3.44 2.98 Quick Ratio 0.51 0.62 0.50 0.75 1.37 1.30 LEVERAGE Long-term Debt/Equity 0.78 0.40 0.35 3.55 3.65 4.30 Total Liabilities/Equity 1.53 0.90 0.83 4.27 4.22 5.10 Total Debt/Total Capitalization 0.54 0.37 0.35 0.79 0.79 0.82 OPERATING EFFICIENCY Sales/Total Assets 2.7 2.2 0.9 0.7 1.1 1.4 Sales/Net Fixed Assets 4.5 3.5 1.5 2.1 5.2 6.5 Sales/Debt-free Working Capital 115.3 61.2 -133.2 5.8 5.1 6.3 % of Sales 0.9% 1.6% -0.8% 17.3% 19.6% 15.8% Sales/Receivables 34.0 37.5 13.2 8.6 10.8 11.8 Receivable Turnover (Days) 10.7 9.7 27.7 42.4 33.7 30.9 COGS/Inventory 12.5 11.8 8.0 3.3 4.6 5.7 Inventory Turnover (Days) 29.1 31.0 45.4 109.5 78.7 63.5 COGS/Accounts Payable 24.8 17.3 9.0 9.0 21.1 41.5 Payable Turnover (Days) 14.7 21.1 40.8 40.5 17.3 8.8 PROFITABILITY Return on Assets 4.8% 3.4% -5.4% -0.8% -8.6% -0.9% Return on Equity 12.2% 6.5% -9.9% -4.3% -45.1% -5.5% Return on Invested Capital 5.7% 4.1% -6.4% -0.9% -9.5% -1.0% GROWTH RATES Net Sales 14.0% -48.8% 136.8% 18.3% 25.1% Net Income 0.7% -291.2% -53.8% 695.3% -89.7% Adjusted EBITDA 34.0% -34.8% 206.8% -16.9% 18.6% Adjusted EBIT 65.0% -87.9% 1281.2% -33.3% 91.3% Stockholders' Equity 90.6% 25.1% 4.9% -23.4% -15.2% (**) 5-YEAR AVERAGE -------- BALANCE SHEET Total Assets ($000's) $135,209 Total Assets (%) 100.0 Account Receivable 8.7 Current Assets 28.7 Net Fixed Assets 40.6 Accounts Payable 5.5 Total Short-Term Debt 4.1 Long-Term Debt 49.5 Total Liabilities 67.6 Total Stockholders' Equity 32.4 Debt-free Working Capital, as adjusted 13.6 Debt-free Working Capital, as reported 12.0 INCOME STATEMENT Net Sales ($000's) $154,066 Net Sales (%) 100.0 Gross Profit 31.4 Operating Profit 1.3 Pretax Profit -3.6 Net Profits -2.7 Adjusted EBITDA 8.8 Adjusted EBIT 4.0 Depreciation Expense 4.9 Interest Expense 5.1 Capital Expenditures 8.1 LIQUIDITY Current Ratio 2.10 Quick Ratio 0.91 LEVERAGE Long-term Debt/Equity 2.45 Total Liabilities/Equity 3.06 Total Debt/Total Capitalization 0.62 OPERATING EFFICIENCY Sales/Total Assets 1.3 Sales/Net Fixed Assets 3.7 Sales/Debt-free Working Capital -11.0 % of Sales -9.1% Sales/Receivables 16.4 Receivable Turnover (Days) 22.3 COGS/Inventory 6.7 Inventory Turnover (Days) 54.4 COGS/Accounts Payable 19.6 Payable Turnover (Days) 18.6 PROFITABILITY Return on Assets -2.5% Return on Equity -11.7% Return on Invested Capital -2.7% GROWTH RATES Net Sales 15.7% Net Income NMF Adjusted EBITDA 18.5% Adjusted EBIT 20.7% Stockholders' Equity -3.9%
(*) Preliminary results provided by management were used. (**) Except growth rates which are 5-year compound annual growth rates. SCHEDULE 5 PIERRE FOODS, INC. COMPARED TO PUBLICLY HELD COMPANIES
COMPANY NAME: PIERRE BRIDGFORD HORMEL RYMER FOODS, INC. FOODS CORP. FOODS CORP. FOODS INC. TICKET SYMBOL: FOOD BRID HRL RFDS LAST TWELVE MONTHS: DEC-01 AUG-01 JUL-01 JUL-01 LAST FISCAL YEAR: MAR-01 MEDIAN NOV-00 OCT-00 OCT-00 ------------------------------------------------------------------------------------------------------------------------------ BALANCE SHEET Total Assets ($000's) $163,101 $ 79,021 $ 79,021 $2,121,597 $ 8,137 Total Assets (%) 100.0 100.0 100.0 102.0 103.0 Cash & Equivalents 2.8 7.1 19.1 7.1 0.0 Accounts Receivable 12.0 15.4 15.4 14.4 34.8 Total Current Assets 34.0 61.3 61.3 38.2 84.5 Net Fixed Assets 22.0 24.2 24.2 32.0 15.5 Accounts Payable 2.2 7.0 4.6 7.0 28.4 Current Portion Long-Term Debt 3.8 1.8 0.0 1.8 44.7 Total Current Liabilities 11.4 18.9 11.5 18.9 85.3 Long-Term Debt 70.5 0.0 0.0 23.0 0.0 Total Liabilities 83.6 55.3 26.9 55.3 86.6 Net Worth 16.4 44.7 73.1 44.7 13.4 Debt-free Working Capital 23.6 30.7 30.7 14.1 43.9 INCOME STATEMENT Revenue ($000's) $232,163 $160,341 $160,341 $4,011,571 $37,547 Revenue (%) 100.0 100.0 100.0 102.0 103.0 Gross Income 34.7 27.0 38.7 27.0 6.9 Adjusted Operating Income 5.2 7.0 7.0 7.0 -3.4 Net Income -0.6 4.4 4.4 4.4 -2.7 FYE-1 -6.7 2.4 7.2 2.4 0.1 FYE-2 -1.0 1.1 6.5 1.1 -3.9 Adjusted EBITDA 7.8 8.6 9.7 8.6 -2.1 FYE-1 6.9 5.3 13.6 5.3 2.2 FYE-2 8.3 3.3 12.6 3.3 -4.5 Depreciation Expense 2.7 1.6 2.6 1.6 1.3 Non-Operating Income/(Expense) -5.6 -0.2 0.0 -0.2 -1.2
=============================================================================== SCHEDULE 6 PIERRE FOODS, INC. COMPARATIVE FINANCIAL RATIOS ===============================================================================
COMPANY NAME: PIERRE BRIDGFORD HORMEL RYMER FOODS, INC. FOODS CORP. FOODS CORP. FOODS INC. TICKER SYMBOL: FOOD BRID HRL RFDS LATEST TWELVE MONTHS: DEC-01 AUG-01 JUL-01 JUL-01 LAST FISCAL YEAR: MAR-01 MEDIAN NOV-00 OCT-00 OCT-00 -------------------------------------------------------------------------------------------------------------- LIQUIDITY Current Ratio 2.98 2.02 5.33 2.02 0.99 Quick Ratio 1.30 1.14 3.00 1.14 0.41 LEVERAGE LT Debt/Equity 4.30 0.00 0.00 0.51 0.00 Total Liabilities/Equity 5.10 1.24 0.37 1.24 6.46 Total Debt/Total Capitalization 81.94% 35.71% 0.00% 35.71% 76.94% Total Debt/Total Market Capitalization 2166.01% 13.42% 0.00% 13.42% 80.21% EFFICIENCY Revenue/Total Assets 1.42 2.03 2.03 1.89 4.61 Revenue/Receivables 11.81 13.19 13.19 13.13 13.27 Receivable Turnover (Days) 30.90 27.68 27.68 27.80 27.51 Revenue/Debt-Free Working Capital 6.04 10.51 6.61 13.44 10.51 % of Sales 16.55% 9.52% 15.12% 7.44% 9.52% COGS/Inventory 5.75 8.85 5.63 8.85 9.19 Inventory Turnover (Days) 63.50 41.23 64.85 41.23 39.73 COGS/Payables 41.55 19.63 26.79 19.63 15.11 Payable Turnover (Days) 8.79 18.59 13.62 18.59 24.16 PROFITABILITY Return-on-Assets -0.90% 8.31% 8.86% 8.31% -12.64% Return-on-Equity -5.50% 12.12% 12.12% 18.59% -94.26% Return-on-Invested Capital -0.99% 11.95% 12.12% 11.95% -21.74% Return-on-Market Value Equity -20.47% 4.97% 5.11% 4.97% -114.51% Return-on-Market Value Invested Cap. -1.19% 4.49% 5.74% 4.49% -22.66% REVENUE GROWTH Latest Twelve Months 10.01 15.53 15.53 19.47 -3.51 Latest Fiscal Year 13.71 2.97 2.94 2.97 28.84 Three-year CAGR 11.84 10.91 9.06 10.91 11.50 NET INCOME GROWTH Latest Twelve Months -89.67 -30.15 -30.15 119.62 -4055.38 Latest Fiscal Year 695.26 14.97 14.97 132.65 -102.21 Three-year CAGR -9.35 -6.41 -10.38 126.04 -6.41 EBITDA Growth Latest Twelve Months 25.83 -17.56 -17.56 95.32 -194.05 Latest Fiscal Year -5.75 11.15 11.15 64.57 -162.16 Three-year CAGR 8.90 -4.28 -4.28 79.28 -23.54 Equity Growth Latest Twelve Months -15.19 -0.65 -0.65 12.70 -62.85 Latest Fiscal Year -23.37 3.42 14.34 3.42 1.52 Three-year CAGR -19.39 6.59 6.59 7.96 -38.59
SCHEDULE 7 PIERRE FOODS, INC. COMPARATIVE VALUATION MULTIPLES
Company Name: Pierre Bridgford Hormel Rymer Foods, Inc. Foods Corp. Foods Corp. Foods Inc. Ticker Symbol: FOOD BRID HRL RFDS Latest Twelve Months: Dec-01 Aug-01 Jul-01 Jul-01 Last Fiscal Year: Mar-01 Median Nov-00 Oct-00 Oct-00 ------------------------------------------------------------------------------------------------------------------------------- MARKET DATA Market Price (a) $ 1.24 -- $ 13.05 $ 25.54 $ 0.21 Shares Outstanding (000s) 5,780 -- 10,500 138,900 4,300 Market Value--Common Equity $ 7,186 $136,996 $136,996 $3,546,812 $ 898 Less: Market Value of Investments 4,600 -- 15,086 149,751 0 Adjusted Market Value - Common Equity $ 2,585 121,910 $121,910 $3,397,061 $ 898 Preferred Stock 0 -- 0 0 0 Adjusted Market Value--Stockholders' Equity $ 2,585 $121,910 $121,910 $3,397,061 $ 898 Total Interest-Bearing Debt 121,297 3,640 0 526,499 3,640 Market Value--Invested Capital $123,882 $121,910 $121,910 $3,923,560 $4,538 Beta 1.21 0.15 0.03 0.26 N/A PRICE MULTIPLES Invested Capital/Adjusted EBITDA LTM 6.8 7.9 7.9 11.3 (5.7) FYE 1 8.6 6.5 6.5 22.1 5.4 FYE 2 8.1 7.2 7.2 36.4 (3.4) FYE 3 6.7 9.0 9.0 17.7 (11.7) 3-Yr. Avg. 7.8 7.6 7.2 23.3 (1.2) Invested Capital/Revenue LTM 0.5 0.8 0.8 1.0 0.1 FYE 1 0.6 0.9 0.9 1.2 0.1 FYE 2 0.7 0.9 0.9 1.2 0.2 FYE 3 0.8 1.0 1.0 1.2 0.1 3-Yr. Avg. 0.6 0.9 0.8 1.1 0.1 Price/Earnings LTM (4.9) 19.6 19.6 20.1 (0.9) FYE 1 (0.5) 34.5 13.7 44.2 34.5 FYE 2 (4.0) 15.7 15.7 102.8 (0.8) FYE 3 k 20.7 20.7 32.9 (0.5) 3-Yr. Avg. (3.1) 23.7 16.3 55.7 11.0 ===============================================================================================================================
(a) 30-day average prices. SCHEDULE 8 PIERRE FOODS, INC. GUIDELINE COMPANY METHOD
(2) (1) PRELIMINARY LESS: PRELIMINARY PIERRE FOODS, INC. INVESTED INTEREST- AGGREGATE FINANCIAL CAPITAL BEARING EQUITY VALUATION MULTIPLE STATISTIC VALUE DEBT VALUE ---------------------------------------------------------------------------------------------------------------------- LATEST TWELVE MONTHS Invested Cap/Adjusted EBITDA 6.3 18,219 114,597 (3) 121,297 (6,700) Invested Capital/Revenue 0.6 232,163 141,214 121,297 19,917 Price/Earnings 13.7 (1,471) 101,154 (4) 121,297 (20,143) ======= Concluded Value: 19,917 Next Fiscal Year Invested Cap/Adjusted EBITDA 6.3 19,321 121,534 (3) 121,297 237 Invested Capital/Revenue 0.6 235,555 143,277 121,297 21,980 Price/Earnings 13.7 (82) 120,169 (4) 121,297 (1,128) ======= Concluded Value: 21,980 --------------------------------------------------------------- Concluded Fair Market Value - Minority, Marketable Basis: $20,949 Shares Outstanding as of March 22, 2001 5,780 ------- Indicated Equity Value Per Share: $ 3.62 ======= ---------------------------------------------------------------
(1) Income statement items are taken from Pierre Foods' Income Statement as of December 2, 2001. (2) Valuation Multiple x Financial Statistic SCHEDULE 9 PIERRE FOODS, INC. MARKET TRANSACTIONS FOOD PROCESSING ACQUISITIONS JANUARY 1, 1998 THROUGH MARCH 9, 2001
REVENUES OF ACQUIRED VALUE OF TIC/ DATE ACQUIRER ACQUIRED COMPANY (MILLIONS) DEAL REVENUE ------------------------------------------------------------------------------------------------------------------------- 3/20/98 Atlantic Premium Brands, Ltd. J.C. Potter Sausage Company 35.2 13.0 0.4 4/14/98 International Home Foods Inc. Grist Mill Co. 108.2 113.6 1.1 7/31/98 ConAgra Inc. GoodMark Foods Inc. 165.3 236.4 1.4 4/6/99 Aurora Foods Inc. Sea Coast Foods Inc. 57.0 50.2 0.9 4/12/99 Smithfield Foods Inc. Animex SA - 66.6% 165.6 43.0 0.3 5/7/99 Smithfield Foods Inc. Carrolls Foods Inc. 347.9 337.5 1.0 8/25/99 IBP Inc. Thorn Apple Valley Inc. 465.5 116.4 0.3 10/13/99 Sparta Foods Inc. Food Products Corp. 9.3 9.8 1.1 11/1/99 Aurora Foods Inc. Lender's(R)Bagels 186.7 275.0 1.5 1/3/00 ConAgra Inc. Seaboard Corp. 480.0 374.4 0.8 1/5/00 Smithfield Foods Inc. Murphy Farms, Inc. 454.0 396.0 0.9 2/7/00 IBP Inc. Corporate Brand Foods America 800.0 560.0 0.7 6/29/00 Kellogg Co. Kashi Co. 25.0 33.0 1.3 8/24/00 ConAgra Inc. International Home Foods Inc. 2191.6 2936.8 1.3 1/28/01 Pilgrims Pride Corp. WLR Foods Inc. 832.7 274.8 0.3 ------------------------------------------------------------------------------------------------------------------------- Total 3049.3 3244.6 Source: Mergerstat Review and Done Deals Databases for SIC #2011, 2013, 2050 and 2051. -------------------------------------------- Average TIC/Revenue Ratio (Ratio) 0.87 Median TIC/Revenue Ratio 0.88 --------------------------------------------
SCHEDULE 10 PIERRE FOODS, INC. MARKET TRANSACTION METHOD (000's)
PRELIMINARY LESS: PRELIMINARY PIERRE FOODS, INC. INVESTED INTEREST- AGGREGATE FINANCIAL CAPITAL BEARING EQUITY VALUATION MULTIPLE STATISTIC VALUE DEBT VALUE ------------------------------------------------------------------------------------------------------------------- LATEST TWELVE MONTHS Total Invested Capital/Revenue 0.7 232,163 163,443 121,297 42,146 ====== 42,146 PRELIMINARY STOCKHOLDERS' EQUITY VALUE: $ 42,146 Less: Change in Control Agreement Adjustments (1) 11,500 ------- Equity Value - Control, Marketable $ 30,646 Less: Minority Discount (35%) 10,726 ------- Equity Value - Minority, Marketable Basis $ 19,920 Shares Outstanding as of March 22, 2001 5,780 ------- Equity Value Per Share $ 3.45 ======= -------------------------------------------------------------------------------------------------------------------
(1) On July 6, 1999, the Company replaced certain existing Change in Control Agreements with Mr. Richardson and Mr. Clark with revised Change in Control Agreements. The revised agreements provide that, if a change of control of the Company occurs, the following benefits will be provided by the Company: three times the amount of the annual base salary of the officer; three times the amount of the cash bonus paid or payable to such person for the most recent fiscal year; and a "gross-up" payment for all excise and income tax liabilities resulting from payments under the Change in Control Agreements. =============================================================================== SCHEDULE 11 PIERRE FOODS, INC. BASE VERSION 1 -- SLOW GROWTH, NO EXPANSION COMPARATIVE PROJECTED INCOME STATEMENTS FOR THE YEARS 2002 THROUGH 2007 - SCENARIO 1 ===============================================================================
ACTUAL ------------------------ PROJECTED LTM ---------------------------------------------------- 2001 % 2002 % 2003 % ------------- ----- ------------- ----- ------------- ----- % Growth 25.1% 1.5% 5.0% Revenues $ 232,162,968 100.0 $ 235,554,672 100.0 $ 247,332,405 100.0 Cost of Goods Sold 151,668,132 65.3 156,074,425 66.3 164,476,050 66.5 ------------- ----- ------------- ----- ------------- ----- Gross Profit 80,494,836 34.7 79,480,247 33.7 82,856,355 33.5 Operating Expenses: Selling, General and Administrative 62,276,211 26.8 60,145,792 25.5 64,522,681 26.1 (Gain) Loss on Disposals 0 0.0 13,057 0.0 0 0.0 Depreciation and Amortization 6,234,273 2.7 6,482,981 2.8 6,495,489 2.6 ------------- ----- ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 68,510,484 29.5 66,641,830 28.3 71,018,170 28.7 OPERATING INCOME (LOSS) 11,984,352 5.2 12,838,417 5.5 11,838,185 4.8 Other Income (Expenses): Other Income 0 0.0 93,707 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets (48,707) 0.0 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 0 0.0 Interest Expense (12,974,923) -5.6 (13,096,761) -5.6 (13,042,450) -5.3 Other Expense 0 0.0 0 0.0 0 0.0 ------------- ----- ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (13,023,630) -5.6 (13,003,054) -5.5 (13,042,450) -5.3 Earnings (Loss) Before Income Taxes (1,039,278) -0.4 (164,637) -0.1 (1,204,265) -0.5 Provision for Income Taxes (Benefit) 431,639 0.2 (82,319) 0.0 (481,705) -0.2 ------------- ----- ------------- ----- ------------- ----- NET INCOME (LOSS) (1,470,917) -0.6 (82,318) 0.0 (722,560) -0.3 ============= ===== ============= ===== ============= ===== EBIT 11,984,352 12,838,417 11,838,185 EBITDA 18,218,625 19,321,398 18,333,674 Adjustments(*): Other Non-Cash Adjustments to Earnings 0 527,522 527,160 One-Time Financing Charges 0 1,000,000 0 Excess Compensation 0 2,812,000 2,824,000 ------------- ------------- ------------- Total Adjustments 0 4,339,522 3,351,160 Adjusted EBIT 11,984,352 5.2 17,177,939 7.3 15,189,345 6.1 Adjusted EBITDA 18,218,625 7.8 23,660,920 10.0 21,684,834 8.8 -------------------------------------------------------------------------------- Interest Expense 12,974,923 5.6 13,096,761 5.6 13,042,450 5.3 Depreciation Expense 6,234,273 2.7 6,482,981 2.8 6,495,489 2.6 Capital Expenditures 2,695,032 1.2 4,107,863 1.7 9,500,000 3.8 -------------------------------------------------------------------------------- PROJECTED ---------------------------------------------------- 2004 % 2005 % ------------- ----- ------------- ----- % Growth 3.0% 3.0% Revenues $ 254,752,378 100.0 $ 262,394,949 100.0 Cost of Goods Sold 170,174,588 66.8 176,067,011 67.1 ------------- ----- ------------- ----- Gross Profit 84,577,790 33.2 86,327,938 32.9 Operating Expenses: Selling, General and Administrative 66,713,113 26.2 68,452,112 26.1 (Gain) Loss on Disposals 0 0.0 0 0.0 Depreciation and Amortization 6,773,903 2.7 6,819,196 2.6 ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 73,487,016 28.8 75,271,308 28.7 OPERATING INCOME (LOSS) 11,090,774 4.4 11,056,630 4.2 Other Income (Expenses): Other Income 0 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 Interest Expense (13,224,537) -5.2 (13,266,584) -5.1 Other Expense 0 0.0 0 0.0 ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (13,224,537) -5.2 (13,266,584) -5.1 Earnings (Loss) Before Income Taxes (2,133,763) -0.8 (2,209,954) -0.8 Provision for Income Taxes (Benefit) (853,505) -0.3 (883,982) -0.3 ------------- ----- ------------- ----- NET INCOME (LOSS) (1,280,258) -0.5 (1,325,972) -0.5 ============= ===== ============= ===== EBIT 11,090,774 11,056,630 EBITDA 17,864,677 17,875,826 Adjustments(*): Other Non-Cash Adjustments to Earnings 500,035 473,084 One-Time Financing Charges 0 0 Excess Compensation 2,824,000 2,824,000 ------------- ------------- Total Adjustments 3,324,035 3,297,084 Adjusted EBIT 14,414,809 5.7 14,353,714 5.5 Adjusted EBITDA 21,188,712 8.3 21,172,910 8.1 --------------------------------------------------------------------------------------------------- Interest Expense 13,224,537 5.2 13,266,584 5.1 Depreciation Expense 6,773,903 2.7 6,819,196 2.6 Capital Expenditures 4,700,000 1.8 5,000,000 1.9 --------------------------------------------------------------------------------------------------- PROJECTED ---------------------------------------------------- 2006 % 2007 % ------------- ----- ------------- ----- % Growth 3.0% 3.0% Revenues $ 270,266,797 100.0 $ 278,374,801 100.0 Cost of Goods Sold 182,159,821 67.4 188,459,741 67.7 ------------- ----- ------------- ----- Gross Profit 88,106,976 32.6 89,915,060 32.3 Operating Expenses: Selling, General and Administrative 70,235,409 26.0 72,064,096 25.9 (Gain) Loss on Disposals 0 0.0 0 0.0 Depreciation and Amortization 7,000,531 2.6 7,294,279 2.6 ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 77,235,940 28.6 79,358,375 28.5 OPERATING INCOME (LOSS) 10,871,036 4.0 10,556,685 3.8 Other Income (Expenses): Other Income 0 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 Interest Expense (13,314,792) -4.9 (13,078,433) -4.7 Other Expense 0 0.0 0 0.0 ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (13,314,792) -4.9 (13,078,433) -4.7 Earnings (Loss) Before Income Taxes (2,443,756) -0.9 (2,521,748) -0.9 Provision for Income Taxes (Benefit) (977,502) -0.4 (1,008,699) -0.4 ------------- ----- ------------- ----- NET INCOME (LOSS) (1,466,254) -0.5 (1,513,049) -0.5 ============= ===== ============= ===== EBIT 10,871,036 10,556,685 EBITDA 17,871,567 17,850,964 Adjustments(*): Other Non-Cash Adjustments to Earnings 473,084 118,271 One-Time Financing Charges 0 0 Excess Compensation 2,824,000 2,824,000 ------------- ------------- Total Adjustments 3,297,084 2,942,271 Adjusted EBIT 14,168,120 5.2 13,498,956 4.8 Adjusted EBITDA 21,168,651 7.8 20,793,235 7.5 -------------------------------------------------------------------------------------------------- Interest Expense 13,314,792 4.9 13,078,433 4.7 Depreciation Expense 7,000,531 2.6 7,294,279 2.6 Capital Expenditures 5,500,000 2.0 6,000,000 2.2 --------------------------------------------------------------------------------------------------
(*) Noncash adjustments from amortization of debt financing; Onetime financing is cost of MBO expense reimbursement to PFMI; Excess compensation represents payment by Pierre of Jimmy Richardson's debt incurred on behalf of MBO and club and miscellaneous dues for Jim Templeton. =============================================================================== SCHEDULE 11[A] PIERRE FOODS, INC. BASE VERSION 2 -- GROWTH AND EXPANSION COMPARATIVE PROJECTED INCOME STATEMENTS FOR THE YEARS 2002 THROUGH 20067 ===============================================================================
ACTUAL ------------------------ PROJECTED LTM ---------------------------------------------------- 2001 % 2002 % 2003 % ============= ===== ============= ===== ============= ===== % Growth 25.1% 1.5% 12.0% Revenues $ 232,162,968 100.0 $ 235,554,672 100.0 $ 263,821,233 100.0 Cost of Goods Sold 151,668,132 65.3 156,074,425 66.3 174,913,477 66.3 ------------- ----- ------------- ----- ------------- ----- Gross Profit 80,494,836 34.7 79,480,247 33.7 88,907,756 33.7 Operating Expenses: Selling, General and Administrative 62,276,211 26.8 60,145,792 25.5 66,977,444 25.4 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 13,057 0.0 0 0.0 Depreciation and Amortization 6,234,273 2.7 6,482,981 2.8 6,920,489 2.6 ------------- ----- ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 68,510,484 29.5 66,641,830 28.3 73,897,933 28.0 OPERATING INCOME (LOSS) 11,984,352 5.2 12,838,417 5.5 15,009,823 5.7 Other Income (Expenses): Other Income 0 0.0 93,707 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets (48,707) 0.0 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 0 0.0 Interest Expense (12,974,923) -5.6 (13,095,119) -5.6 (14,021,367) -5.3 Other Expense 0 0.0 0 0.0 0 0.0 ------------- ----- ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (13,023,630) -5.6 (13,001,412) -5.5 (14,021,367) -5.3 Earnings (Loss) Before Income Taxes (1,039,278) -0.4 (162,995) -0.1 988,456 0.4 Provision for Income Taxes (Benefit) 431,639 0.2 (150,205) -0.1 395,382 0.1 ------------- ----- ------------- ----- ------------- ----- NET INCOME (LOSS) (1,470,917) -0.6 (12,790) 0.0 593,074 0.2 ============= ===== ============= ===== ============= ===== EBIT 11,984,352 12,838,417 15,009,823 EBITDA 18,218,625 19,321,398 21,930,312 Adjustments: Other Non-Cash Adjustments to Earnings 0 527,522 527,160 One-Time Financing Charges 0 1,000,000 0 Excess Compensation 0 2,812,000 2,824,000 ------------- ------------- ------------- Total Adjustments 0 4,339,522 3,351,160 Adjusted EBIT 11,984,352 5.2 17,177,939 7.3 18,360,983 7.0 Adjusted EBITDA 18,218,625 7.8 23,660,920 10.0 25,281,472 9.6 -------------------------------------------------------------------------------------------------------------------------------- Interest Expense 12,974,923 5.6 13,095,119 5.6 14,021,367 5.3 Depreciation Expense 6,234,273 2.7 6,482,981 2.8 6,920,489 2.6 Capital Expenditures 2,695,032 1.2 4,122,419 1.8 30,500,000 11.6 -------------------------------------------------------------------------------------------------------------------------------- PROJECTED ---------------------------------------------------- 2004 % 2005 % ============= ===== ============= ===== % Growth 11.5% 11.0% Revenues $ 294,160,674 100.0 $ 326,518,348 100.0 Cost of Goods Sold 194,440,206 66.1 215,175,592 65.9 ------------- ----- ------------- ----- Gross Profit 99,720,468 33.9 111,342,756 34.1 Operating Expenses: Selling, General and Administrative 73,797,369 25.1 80,935,523 24.8 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 Depreciation and Amortization 8,057,237 2.7 8,102,529 2.5 ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 81,854,606 27.8 89,038,052 27.3 OPERATING INCOME (LOSS) 17,865,862 6.1 22,304,704 6.8 Other Income (Expenses): Other Income 0 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 Interest Expense (15,232,961) -5.2 (14,986,368) -4.6 Other Expense 0 0.0 0 0.0 ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (15,232,961) -5.2 (14,986,368) -4.6 Earnings (Loss) Before Income Taxes 2,632,901 0.9 7,318,336 2.2 Provision for Income Taxes (Benefit) 1,053,161 0.4 2,927,335 0.9 ------------- ----- ------------- ----- NET INCOME (LOSS) 1,579,740 0.5 4,391,001 1.3 ============= ===== ============= ===== EBIT 17,865,862 22,304,704 EBITDA 25,923,099 30,407,233 Adjustments: Other Non-Cash Adjustments to Earnings 500,035 473,084 One-Time Financing Charges 0 0 Excess Compensation 2,824,000 2,824,000 ------------- ------------- Total Adjustments 3,324,035 3,297,084 Adjusted EBIT 21,189,897 7.2 25,601,788 7.8 Adjusted EBITDA 29,247,134 9.9 33,704,317 10.3 ---------------------------------------------------------------------------------------------------- Interest Expense 15,232,961 5.2 14,986,368 4.6 Depreciation Expense 8,057,237 2.7 8,102,529 2.5 Capital Expenditures 4,700,000 1.6 5,000,000 1.5 ---------------------------------------------------------------------------------------------------- PROJECTED ---------------------------------------------------- 2006 % 2007 % ============= ===== ============= ===== % Growth 10.5% 10.0% Revenues $ 360,802,775 100.0 $ 396,883,053 100.0 Cost of Goods Sold 237,047,423 65.7 259,958,399 65.5 ------------- ----- ------------- ----- Gross Profit 123,755,352 34.3 136,924,654 34.5 Operating Expenses: Selling, General and Administrative 88,351,344 24.5 95,995,830 24.2 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 Depreciation and Amortization 8,283,865 2.3 9,577,613 2.4 ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 96,635,209 26.8 105,573,443 26.6 OPERATING INCOME (LOSS) 27,120,143 7.5 31,351,211 7.9 Other Income (Expenses): Other Income 0 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 Interest Expense (15,259,138) -4.2 (6,518,557) -1.6 Other Expense 0 0.0 0 0.0 ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (15,259,138) -4.2 (6,518,557) -1.6 Earnings (Loss) Before Income Taxes 11,861,005 3.3 24,832,654 6.3 Provision for Income Taxes (Benefit) 4,744,402 1.3 9,933,061 2.5 ------------- ----- ------------- ----- NET INCOME (LOSS) 7,116,603 2.0 14,899,593 3.8 ============= ===== ============= ===== EBIT 27,120,143 31,351,211 EBITDA 35,404,008 40,928,824 Adjustments: Other Non-Cash Adjustments to Earnings 473,084 118,271 One-Time Financing Charges 0 0 Excess Compensation 2,824,000 2,824,000 ------------- ------------- Total Adjustments 3,297,084 2,942,271 Adjusted EBIT 30,417,227 8.4 34,293,482 8.6 Adjusted EBITDA 38,701,092 10.7 43,871,095 11.1 ---------------------------------------------------------------------------------------------------- Interest Expense 15,259,138 4.2 6,518,557 1.6 Depreciation Expense 8,283,865 2.3 9,577,613 2.4 Capital Expenditures 25,500,000 7.1 6,000,000 1.5 ----------------------------------------------------------------------------------------------------
(*) Noncash adjustments from amortization of debt financing; Onetime financing is cost of MBO expense reimbursement to PFMI; Excess compensation represents payment by Pierre of Jimmy Richardson's debt incurred on behalf of MBO and club and misc. dues for Jim Templeton. =============================================================================== SCHEDULE 11[B] PIERRE FOODS, INC. RESTRUCTURING OF DEBT VERSION 1 -- 25% REDEEMED COMPARATIVE PROJECTED INCOME STATEMENTS FOR THE YEARS 2002 THROUGH 20067 ===============================================================================
ACTUAL ------------------------ PROJECTED LTM ------------------------ 2001 % 2002 % ============= ===== ============= ===== % Growth 25.1% 1.5% Revenues $ 232,162,968 100.0 $ 235,554,672 100.0 Cost of Goods Sold 151,668,132 65.3 156,074,425 66.3 ------------- ----- ------------- ----- Gross Profit 80,494,836 34.7 79,480,247 33.7 Operating Expenses: Selling, General and Administrative 62,276,211 26.8 60,145,792 25.5 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 13,057 0.0 Depreciation and Amortization 6,234,273 2.7 6,482,981 2.8 ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 68,510,484 29.5 66,641,830 28.3 OPERATING INCOME (LOSS) 11,984,352 5.2 12,838,417 5.5 Other Income (Expenses): Other Income 0 0.0 93,707 0.0 Net Gain (Loss) on Dispositions of Assets (48,707) 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 Interest Expense (12,974,923) -5.6 (13,095,119) -5.6 Other Expense 0 0.0 0 0.0 ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (13,023,630) -5.6 (13,001,412) -5.5 Earnings (Loss) Before Income Taxes (1,039,278) -0.4 (162,995) -0.1 Provision for Income Taxes (Benefit) 431,639 0.2 (150,205) -0.1 ------------- ----- ------------- ----- NET INCOME (LOSS) (1,470,917) -0.6 (12,790) 0.0 ============= ===== ============= ===== EBIT 11,984,352 12,838,417 EBITDA 18,218,625 19,321,398 Adjustments: Other Non-Cash Adjustments to Earnings 0 527,522 One-Time Financing Charges 0 2,200,000 Excess Compensation 0 2,812,000 ------------- ------------- Total Adjustments 0 5,539,522 Adjusted EBIT 11,984,352 5.2 18,377,939 7.8 Adjusted EBITDA 18,218,625 7.8 24,860,920 10.6 ---------------------------------------------------------------------------------------------------- Interest Expense 12,974,923 5.6 13,095,119 5.6 Depreciation Expense 6,234,273 2.7 6,482,981 2.8 Capital Expenditures 2,695,032 1.2 4,122,419 1.8 ---------------------------------------------------------------------------------------------------- PROJECTED ---------------------------------------------------- 2003 % 2004 % ============= ===== ============= ===== % Growth 12.0% 11.5% Revenues $ 263,821,233 100.0 $ 294,160,674 100.0 Cost of Goods Sold 174,913,477 66.3 194,440,206 66.1 ------------- ----- ------------- ----- Gross Profit 88,907,756 33.7 99,720,468 33.9 Operating Expenses: Selling, General and Administrative 71,991,647 27.3 76,611,572 26.0 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 Depreciation and Amortization 6,920,489 2.6 8,057,237 2.7 ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 78,912,136 29.9 84,668,809 28.8 OPERATING INCOME (LOSS) 9,995,620 3.8 15,051,659 5.1 Other Income (Expenses): Other Income 13,973,110 5.3 13,328,070 4.5 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 Interest Expense (15,041,078) -5.7 (14,734,827) -5.0 Other Expense 0 0.0 0 0.0 ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (1,067,968) -0.4 (1,406,757) -0.5 Earnings (Loss) Before Income Taxes 8,927,652 3.4 13,644,902 4.6 Provision for Income Taxes (Benefit) 1,269,489 0.5 5,457,961 1.9 ------------- ----- ------------- ----- NET INCOME (LOSS) 7,658,163 2.9 8,186,941 2.8 ============= ===== ============= ===== EBIT 9,995,620 15,051,659 EBITDA 16,916,109 23,108,896 Adjustments: Other Non-Cash Adjustments to Earnings (915,532) (851,221) One-Time Financing Charges 0 0 Excess Compensation 2,824,000 2,824,000 ------------- ------------- Total Adjustments 1,908,468 1,972,779 Adjusted EBIT 11,904,088 4.5 17,024,438 5.8 Adjusted EBITDA 18,824,577 7.1 25,081,675 8.5 ---------------------------------------------------------------------------------------------------- Interest Expense 15,041,078 5.7 14,734,827 5.0 Depreciation Expense 6,920,489 2.6 8,057,237 2.7 Capital Expenditures 30,500,000 11.6 4,700,000 1.6 ---------------------------------------------------------------------------------------------------- PROJECTED ------------------------------------------------------------------------------== 2005 % 2006 % 2007 % ============= ===== ============= ===== ============= ===== % Growth 11.0% 10.5% 10.0% Revenues $ 326,518,348 100.0 $ 360,802,775 100.0 $ 396,883,053 100.0 Cost of Goods Sold 215,175,592 65.9 237,047,423 65.7 259,958,399 65.5 ------------- ----- ------------- ----- ------------- ----- Gross Profit 111,342,756 34.1 123,755,352 34.3 136,924,654 34.5 Operating Expenses: Selling, General and Administrative 83,749,726 25.6 91,165,548 25.3 98,810,033 24.9 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0 Depreciation and Amortization 8,102,529 2.5 8,283,865 2.3 9,577,613 2.4 ------------- ----- ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 91,852,255 28.1 99,449,413 27.6 108,387,646 27.3 OPERATING INCOME (LOSS) 19,490,501 6.0 24,305,939 6.7 28,537,008 7.2 Other Income (Expenses): Other Income 0 0.0 0 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 0 0.0 Interest Expense (14,273,845) -4.4 (14,722,883) -4.1 (15,425,670) -3.9 Other Expense 0 0.0 0 0.0 0 0.0 ------------- ----- ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (14,273,845) -4.4 (14,722,883) -4.1 (15,425,670) -3.9 Earnings (Loss) Before Income Taxes 5,216,656 1.6 9,583,056 2.7 13,111,338 3.3 Provision for Income Taxes (Benefit) 2,086,662 0.6 3,833,223 1.1 5,244,535 1.3 ------------- ----- ------------- ----- ------------- ----- NET INCOME (LOSS) 3,129,994 1.0 5,749,833 1.6 7,866,803 2.0 ============= ===== ============= ===== ============= ===== EBIT 19,490,501 24,305,939 28,537,008 EBITDA 27,593,030 32,589,804 38,114,621 Adjustments: Other Non-Cash Adjustments to Earnings 595,000 595,000 595,000 One-Time Financing Charges 0 0 0 Excess Compensation 2,824,000 2,824,000 2,824,000 ------------- ------------- ------------- Total Adjustments 3,419,000 3,419,000 3,419,000 Adjusted EBIT 22,909,501 7.0 27,724,939 7.7 31,956,008 8.1 Adjusted EBITDA 31,012,030 9.5 36,008,804 10.0 41,533,621 10.5 -------------------------------------------------------------------------------------------------------------------------------- Interest Expense 14,273,845 4.4 14,722,883 4.1 15,425,670 3.9 Depreciation Expense 8,102,529 2.5 8,283,865 2.3 9,577,613 2.4 Capital Expenditures 5,000,000 1.5 25,500,000 7.1 6,000,000 1.5 --------------------------------------------------------------------------------------------------------------------------------
(*) Noncash adjustments from amortization of debt financing; Onetime financing is cost of MBO expense reimbursement to PFMI; Excess compensation represents payment by Pierre of Jimmy Richardson's debt incurred on behalf of MBO and club and miscellaneous dues for Jim Templeton. =============================================================================== SCHEDULE 11[C] PIERRE FOODS, INC. RESTRUCTURING OF DEBT VERSION 2 -- 50% REDEEMED COMPARATIVE PROJECTED INCOME STATEMENTS FOR THE YEARS 2002 THROUGH 2007 - SCENARIO 4 ===============================================================================
ACTUAL ------------------------ PROJECTED LTM ---------------------------------------------------- 2001 % 2002 % 2003 % ------------- ----- ------------- ----- ------------- ----- % Growth 25.1% 1.5% 12.0% Revenues $ 232,162,968 100.0 $ 235,554,672 100.0 $ 263,821,233 100.0 Cost of Goods Sold 151,668,132 65.3 156,074,425 66.3 174,913,477 66.3 ------------- ----- ------------- ----- ------------- ----- Gross Profit 80,494,836 34.7 79,480,247 33.7 88,907,756 33.7 Operating Expenses: Selling, General and Administrative 62,276,211 26.8 60,145,792 25.5 71,991,647 27.3 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 13,057 0.0 0 0.0 Depreciation and Amortization 6,234,273 2.7 6,482,981 2.8 6,920,489 2.6 ------------- ----- ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 68,510,484 29.5 66,641,830 28.3 78,912,136 29.9 OPERATING INCOME (LOSS) 11,984,352 5.2 12,838,417 5.5 9,995,620 3.8 Other Income (Expenses): Other Income 0 0.0 93,707 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets (48,707) 0.0 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 0 0.0 Interest Expense (12,974,923) -5.6 (13,095,119) -5.6 (14,731,307) -5.6 Other Expense 0 0.0 0 0.0 27,931,435 10.6 ------------- ----- ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (13,023,630) -5.6 (13,001,412) -5.5 13,200,128 5.0 Earnings (Loss) Before Income Taxes (1,039,278) -0.4 (162,995) -0.1 23,195,748 8.8 Provision for Income Taxes (Benefit) 431,639 0.2 (150,205) -0.1 6,976,727 2.6 ------------- ----- ------------- ----- ------------- ----- NET INCOME (LOSS) (1,470,917) -0.6 (12,790) 0.0 16,219,021 6.1 ============= ===== ============= ===== ============= ===== EBIT 11,984,352 12,838,417 9,995,620 EBITDA 18,218,625 19,321,398 16,916,109 Adjustments: Other Non-Cash Adjustments to Earnings 0 527,522 (1,764,475) One-Time Financing Charges 0 2,200,000 0 Excess Compensation 0 2,812,000 2,824,000 ------------- ------------- ------------- Total Adjustments 0 5,539,522 1,059,525 Adjusted EBIT 11,984,352 5.2 18,377,939 7.8 11,055,145 4.2 Adjusted EBITDA 18,218,625 7.8 24,860,920 10.6 17,975,634 6.8 -------------------------------------------------------------------------------------------------------------------------------- Interest Expense 12,974,923 5.6 13,095,119 5.6 14,731,307 5.6 Depreciation Expense 6,234,273 2.7 6,482,981 2.8 6,920,489 2.6 Capital Expenditures 2,280,849 1.0 4,122,419 1.8 30,500,000 11.6 -------------------------------------------------------------------------------------------------------------------------------- PROJECTED ---------------------------------------------------- 2004 % 2005 % ------------- ----- ------------- ----- % Growth 11.5% 11.0% Revenues $ 294,160,674 100.0 $ 326,518,348 100.0 Cost of Goods Sold 194,440,206 66.1 215,175,592 65.9 ------------- ----- ------------- ----- Gross Profit 99,720,468 33.9 111,342,756 34.1 Operating Expenses: Selling, General and Administrative 76,611,572 26.0 83,749,726 25.6 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 Depreciation and Amortization 8,057,237 2.7 8,102,529 2.5 ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 84,668,809 28.8 91,852,255 28.1 OPERATING INCOME (LOSS) 15,051,659 5.1 19,490,501 6.0 Other Income (Expenses): Other Income 0 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 Interest Expense (12,982,838) -4.4 (12,263,220) -3.8 Other Expense 28,090,176 9.5 0 0.0 ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) 15,107,338 5.1 (12,263,220) -3.8 Earnings (Loss) Before Income Taxes 30,158,997 10.3 7,227,281 2.2 Provision for Income Taxes (Benefit) 12,063,600 4.1 2,890,912 0.9 ------------- ----- ------------- ----- NET INCOME (LOSS) 18,095,397 6.2 4,336,369 1.3 ============= ===== ============= ===== EBIT 15,051,659 19,490,501 EBITDA 23,108,896 27,593,030 Adjustments: Other Non-Cash Adjustments to Earnings (1,441,414) 940,000 One-Time Financing Charges 0 0 Excess Compensation 2,824,000 2,824,000 ------------- ------------- Total Adjustments 1,382,586 3,764,000 Adjusted EBIT 16,434,245 5.6 23,254,501 7.1 Adjusted EBITDA 24,491,482 8.3 31,357,030 9.6 ---------------------------------------------------------------------------------------------------- Interest Expense 12,982,838 4.4 12,263,220 3.8 Depreciation Expense 8,057,237 2.7 8,102,529 2.5 Capital Expenditures 4,700,000 1.6 5,000,000 1.5 ---------------------------------------------------------------------------------------------------- PROJECTED ---------------------------------------------------- 2006 % 2007 % ------------- ----- ------------- ----- % Growth 10.5% 10.0% Revenues $ 360,802,775 100.0 $ 396,883,053 100.0 Cost of Goods Sold 237,047,423 65.7 259,958,399 65.5 ------------- ----- ------------- ----- Gross Profit 123,755,352 34.3 136,924,654 34.5 Operating Expenses: Selling, General and Administrative 91,165,548 25.3 98,810,033 24.9 Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 Depreciation and Amortization 8,283,865 2.3 9,577,613 2.4 ------------- ----- ------------- ----- TOTAL OPERATING EXPENSES 99,449,413 27.6 108,387,646 27.3 OPERATING INCOME (LOSS) 24,305,939 6.7 28,537,008 7.2 Other Income (Expenses): Other Income 0 0.0 0 0.0 Net Gain (Loss) on Dispositions of Assets 0 0.0 0 0.0 Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0 Interest Expense (12,597,258) -3.5 (13,206,842) -3.3 Other Expense 0 0.0 0 0.0 ------------- ----- ------------- ----- TOTAL OTHER INCOME (EXPENSE) (12,597,258) -3.5 (13,206,842) -3.3 Earnings (Loss) Before Income Taxes 11,708,681 3.2 15,330,166 3.9 Provision for Income Taxes (Benefit) 4,683,473 1.3 6,132,066 1.5 ------------- ----- ------------- ----- NET INCOME (LOSS) 7,025,208 1.9 9,198,100 2.3 ============= ===== ============= ===== EBIT 24,305,939 28,537,008 EBITDA 32,589,804 38,114,621 Adjustments: Other Non-Cash Adjustments to Earnings 940,000 940,000 One-Time Financing Charges 0 0 Excess Compensation 2,824,000 2,824,000 ------------- ------------- Total Adjustments 3,764,000 3,764,000 Adjusted EBIT 28,069,939 7.8 32,301,008 8.1 Adjusted EBITDA 36,353,804 10.1 41,878,621 10.6 ---------------------------------------------------------------------------------------------------- Interest Expense 12,597,258 3.5 13,206,842 3.3 Depreciation Expense 8,283,865 2.3 9,577,613 2.4 Capital Expenditures 25,500,000 7.1 6,000,000 1.5 ----------------------------------------------------------------------------------------------------
(*) Noncash adjustments from amortization of debt financing; Onetime financing is cost of MBO expense reimbursement to PFMI; Excess compensation represents payment by Pierre of Jimmy Richardson's debt incurred on behalf of MBO and club and miscellaneous dues for Jim Templeton. SCHEDULE 12 PIERRE FOODS, INC. DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 1
BASE YEAR PROJECTIONS LTM ------------------------------------------------- 2001 2002 2003 2004 ------------ ------------- ------------ ------------ Revenue Growth 25.1% 1.5% 5.0% 3.0% NET REVENUES $232,162,968 $ 235,554,672 $247,332,405 $254,752,378 OPERATING INCOME (LOSS) $ 11,984,352 $ 12,838,417 $ 11,838,185 $ 11,090,774 Operating Margin 5.2% 5.5% 4.8% 4.4% Adjusted EBIT $ 11,984,352 $ 17,177,939 $ 15,189,345 $ 14,414,809 Income Taxes 4,673,897 10,614,249 7,087,348 6,078,725 ------------ ------------- ------------ ------------ DEBT-FREE NET INCOME $ 7,310,455 $ 6,563,690 $ 8,101,997 $ 8,336,084 Debt-free Net Income Margin 3.1% 2.8% 3.3% 3.3% + Depreciation/Amortization 6,234,273 6,482,981 6,495,489 6,773,903 - Capital Expenditures 2,695,032 4,107,863 9,500,000 4,700,000 ------------ ------------- ------------ ------------ Beginning W/C (Debt-Free) 38,412,559 35,333,201 37,099,861 Required W/C (% of Sales) 15.0% 35,333,201 37,099,861 38,212,857 ------------- ------------ ------------ - W/C Additions (Excess) (3,079,358) 1,766,660 1,112,996 DEBT-FREE NET CASH FLOW $ 12,018,166 $ 3,330,826 $ 9,296,991 Discount Rate 18.0% 18.0% 18.0% 18.0% Discount Factor 0.9206 0.7801 0.6611 ------------- ------------ ------------ Present Value $ 11,063,924 $ 2,598,377 $ 6,146,241 Sum of Present Values Year 5 Net Cash Flow Times Long-Term Growth Rate 4.0% $ 8,644,940 Capitalization Rate 14.0% ------------ Residual Value $ 61,749,571 Discount Rate 18.0% Discount Factor 0.4024 ----------- Present Value of Residual Value Indicated Value - Invested Capital Add: Cash & Equivalents Less: Total Interest Bearing Debt Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) Rounded to PROJECTIONS COMPOUNDED ------------------------------------------------ ANNUAL 2005 2006 2007 GROWTH ------------- ------------ ------------ ---------- Revenue Growth 3.0% 3.0% 3.0% NET REVENUES $ 262,394,949 $270,266,797 $278,374,801 3.5% OPERATING INCOME (LOSS) $ 11,056,630 $ 10,871,036 $ 10,556,685 -4.1% Operating Margin 4.2% 4.0% 3.8% Adjusted EBIT $ 14,353,714 $ 14,168,120 $ 13,498,956 Income Taxes 5,597,948 5,525,567 5,264,593 ------------- ------------ ------------ DEBT-FREE NET INCOME $ 8,755,766 $ 8,642,553 $ 8,234,363 Debt-free Net Income Margin 3.3% 3.2% 3.0% + Depreciation/Amortization 6,819,196 7,000,531 7,294,279 - Capital Expenditures 5,000,000 5,500,000 6,000,000 ------------- ------------ ------------ Beginning W/C (Debt-Free) 38,212,857 39,359,242 40,540,020 Required W/C (% of Sales) 39,359,242 40,540,020 41,756,220 ------------- ------------ ------------ - W/C Additions (Excess) 1,146,385 1,180,778 1,216,200 DEBT-FREE NET CASH FLOW $ 9,428,577 $ 8,962,306 $ 8,312,442 Discount Rate 18.0% 18.0% 18.0% 18.0% Discount Factor 0.5603 0.4748 0.4024 ------------- ------------ ------------ Present Value $ 5,282,831 $ 4,255,303 $ 3,344,927 Sum of Present Values $ 32,691,603 Year 5 Net Cash Flow Times Long-Term Growth Rate Capitalization Rate Residual Value Discount Rate Discount Factor Present Value of Residual Value 24,848,028 ------------- Indicated Value - Invested Capital $ 57,539,631 Add: Cash & Equivalents 4,600,096 Less: Total Interest Bearing Debt 121,296,639 ------------- Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) (59,156,912) Rounded to $ (59,156,900) =============
SCHEDULE 12[a] PIERRE FOODS, INC. DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 2
BASE YEAR PROJECTIONS LTM ------------------------------------------------------------------ 2001 2002 2003 2004 2005 ------------- ------------- ------------ ------------ ------------- Revenue Growth 25.1% 1.5% 12.0% 11.5% 11.0% NET REVENUES $ 232,162,968 $ 235,554,672 $263,821,233 $294,160,674 $ 326,518,348 OPERATING INCOME (LOSS) $ 11,984,352 $ 12,838,417 $ 11,838,185 $ 11,090,774 $ 11,056,630 Operating Margin 5.2% 5.5% 4.5% 3.8% 3.4% Adjusted EBIT $ 11,984,352 $ 17,177,939 $ 18,360,983 $ 21,189,897 $ 25,601,788 Income Taxes 4,673,897 10,614,249 8,567,235 8,935,780 9,984,697 ------------- ------------- ------------ ------------ ------------- DEBT-FREE NET INCOME $ 7,310,455 $ 6,563,690 $ 9,793,748 $ 12,254,117 $ 15,617,091 Debt-free Net Income Margin 3.1% 2.8% 3.7% 4.2% 4.8% + Depreciation/Amortization 6,234,273 6,482,981 6,920,489 8,057,237 8,102,529 - Capital Expenditures 2,695,032 4,122,419 30,500,000 4,700,000 5,000,000 ------------- ------------- ------------ ------------ ------------- Beginning W/C (Debt-Free) 38,412,559 35,333,201 39,573,185 44,124,101 Required W/C (% of Sales) 15.0% 35,333,201 39,573,185 44,124,101 48,977,752 ------------- ------------ --------- ------------- - W/C Additions (Excess) (3,079,358) 4,239,984 4,550,916 4,853,651 DEBT-FREE NET CASH FLOW $ 12,003,610 $(18,025,747) $ 11,060,438 $ 13,865,969 Discount Rate 18.0% 18.0% 18.0% 18.0% 18.0% Discount Factor 0.9206 0.7801 0.6611 0.5603 ------------- ------------ --------- ------------- Present Value $ 11,050,524 $(14,061,885) 7,312,056 $ 7,769,102 Sum of Present Values $ 17,943,161 Year 5 Net Cash Flow Times Long-Term Growth Rate 4.0% $ 19,847,979 Capitalization Rate 14.0% ------------ Residual Value $141,771,279 Discount Rate 18.0% Discount Factor 0.4024 ------------ Present Value of Residual Value 57,048,762 ------------- Indicated Value - Invested Capital $ 74,991,923 Add: Cash & Equivalents 4,600,096 Less: Total Interest Bearing Debt 121,296,639 ------------- Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) (41,704,620) Rounded to $ (41,704,600) ============= COMPOUNDED 2006 2007 ANNUAL GROWTH ------------ ------------- -------------- Revenue Growth 10.5% 10.0% NET REVENUES $360,802,775 $396,883,053 11.2% OPERATING INCOME (LOSS) $ 10,871,036 $ 10,556,685 -4.1% Operating Margin 3.0% 2.7% Adjusted EBIT $ 30,417,227 $ 34,293,482 Income Taxes 11,862,719 13,374,458 ------------ ------------ DEBT-FREE NET INCOME $ 18,554,508 $ 20,919,024 Debt-free Net Income Margin 5.1% 5.3% + Depreciation/Amortization 8,283,865 9,577,613 - Capital Expenditures 25,500,000 6,000,000 ------------ ------------ Beginning W/C (Debt-Free) 48,977,752 54,120,416 Required W/C (% of Sales) 54,120,416 59,532,458 - W/C Additions (Excess) 5,142,664 5,412,042 ------------ ------------ DEBT-FREE NET CASH FLOW $ (3,804,291) $ 19,084,595 Discount Rate 18.0% 18.0% Discount Factor 0.4748 0.4024 ------------ ------------ Present Value $ (1,806,277) $ 7,679,641 Sum of Present Values Year 5 Net Cash Flow Times Long-Term Growth Rate Capitalization Rate Residual Value Discount Rate Discount Factor Present Value of Residual Value Indicated Value - Invested Capital Add: Cash & Equivalents Less: Total Interest Bearing Debt Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) Rounded to
SCHEDULE 12[b] PIERRE FOODS, INC. DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 3
BASE YEAR PROJECTIONS LTM ------------------------------------------------ 2001 2002 2003 2004 ------------- ------------- ------------ ------------ Revenue Growth 25.1% 1.5% 12.0% 11.5% NET REVENUES $ 232,162,968 $ 235,554,672 $263,821,233 $294,160,674 OPERATING INCOME (LOSS) $ 11,984,352 $ 12,838,417 $ 9,995,620 $ 15,051,659 Operating Margin 5.2% 5.5% 3.8% 5.1% Adjusted EBIT $ 11,984,352 $ 18,377,939 $ 11,904,088 $ 17,024,438 Income Taxes 4,673,897 11,355,729 5,554,447 7,179,206 ------------- ------------- ------------ ------------ DEBT-FREE NET INCOME $ 7,310,455 $ 7,022,210 $ 6,349,641 $ 9,845,232 Debt-free Net Income Margin 3.1% 3.0% 2.4% 3.3% + Depreciation/Amortization 6,234,273 6,482,981 6,920,489 8,057,237 - Capital Expenditures 2,695,032 4,122,419 30,500,000 4,700,000 ------------- ------------- ------------ ------------ Beginning W/C (Debt-Free) 38,412,559 35,333,201 39,573,185 Required W/C (% of Sales) 15.0% 35,333,201 39,573,185 44,124,101 ------------- ------------- ------------ - W/C Additions (Excess) (3,079,358) 4,239,984 4,550,916 DEBT-FREE NET CASH FLOW $ 12,462,130 $ (21,469,854) $ 8,651,553 Discount Rate 18.0% 18.0% 18.0% 18.0% Discount Factor 0.9206 0.7801 0.6611 ------------- ------------- ------------ Present Value $ 11,472,637 $ (16,748,633) $ 5,719,542 Sum of Present Values Year 5 Net Cash Flow Times Long-Term Growth Rate 4.0% $ 18,365,085 Capitalization Rate 14.0% ------------ Residual Value $131,179,179 Discount Rate 18.0% Discount Factor 0.4024 ------------ Present Value of Residual Value Indicated Value - Invested Capital Add: Cash & Equivalents Less: Total Interest Bearing Debt Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) Rounded to PROJECTIONS ------------- COMPOUNDED 2005 2006 2007 ANNUAL GROWTH ------------- ------------- ------------ ------------- Revenue Growth 11.0% 10.5% 10.0% 11.2% NET REVENUES $ 326,518,348 $ 360,802,775 $396,883,053 OPERATING INCOME (LOSS) $ 19,490,501 $ 24,305,939 $ 28,537,008 Operating Margin 6.0% 6.7% 7.2% 8.3% Adjusted EBIT $ 22,909,501 $ 27,724,939 $ 31,956,008 Income Taxes 8,934,705 10,812,726 12,462,843 ------------- ------------- ------------ DEBT-FREE NET INCOME $ 13,974,796 $ 16,912,213 $ 19,493,165 Debt-free Net Income Margin 4.3% 4.7% 4.9% + Depreciation/Amortization 8,102,529 8,283,865 9,577,613 - Capital Expenditures 5,000,000 25,500,000 6,000,000 ------------- ------------- ------------ Beginning W/C (Debt-Free) 44,124,101 48,977,752 54,120,416 Required W/C (% of Sales) 48,977,752 54,120,416 59,532,458 ------------- ------------- ------------ - W/C Additions (Excess) 4,853,651 5,142,664 5,412,042 DEBT-FREE NET CASH FLOW $ 12,223,674 $ (5,446,586) $ 17,658,736 Discount Rate 18.0% 18.0% 18.0% Discount Factor 0.5603 0.4748 0.4024 ------------- ------------- ------------ Present Value $ 6,848,924 $ (2,586,039) $ 7,105,875 Sum of Present Values $ 11,812,306 Year 5 Net Cash Flow Times Long-Term Growth Rate Capitalization Rate Residual Value Discount Rate Discount Factor Present Value of Residual Value 52,786,501 ------------- Indicated Value - Invested Capital $ 64,598,807 Add: Cash & Equivalents 4,600,096 Less: Total Interest Bearing Debt 121,296,639 ------------- Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) (52,097,736) Rounded to $ (52,097,700) =============
SCHEDULE 12[c] PIERRE FOODS, INC. DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 4
BASE YEAR PROJECTIONS LTM -------------------------------------------------- 2001 2002 2003 2004 ------------- ------------- ------------ ------------ Revenue Growth 25.1% 1.5% 12.0% 11.5% NET REVENUES $ 232,162,968 $ 235,554,672 $263,821,233 $294,160,674 OPERATING INCOME (LOSS) $ 11,984,352 $ 12,838,417 $ 9,995,620 $ 15,051,659 Operating Margin 5.2% 5.5% 3.8% 5.1% Adjusted EBIT $ 11,984,352 $ 18,377,939 $ 11,055,145 $ 16,434,245 Income Taxes 4,673,897 11,355,729 5,158,331 6,930,321 ------------- ------------- ------------ ------------ DEBT-FREE NET INCOME $ 7,310,455 $ 7,022,210 $ 5,896,814 $ 9,503,924 Debt-free Net Income Margin 3.1% 3.0% 2.2% 3.2% + Depreciation/Amortization 6,234,273 6,482,981 6,920,489 8,057,237 - Capital Expenditures 2,280,849 4,122,419 30,500,000 4,700,000 ------------- ------------- ------------ ------------ Beginning W/C (Debt-Free) 38,412,559 35,333,201 39,573,185 Required W/C (% of Sales) 15.0% 35,333,201 39,573,185 44,124,101 ------------- ------------ ------------ - W/C Additions (Excess) (3,079,358) 4,239,984 4,550,916 DEBT-FREE NET CASH FLOW $ 12,462,130 $(21,922,681) $ 8,310,245 Discount Rate 18.0% 18.0% 18.0% 18.0% Discount Factor 0.9206 0.7801 0.6611 ------------- ------------ ------------ Present Value $ 11,472,637 $(17,101,883) $ 5,493,903 Sum of Present Values Year 5 Net Cash Flow Times Long-Term Growth Rate 4.0% $ 18,583,953 Capitalization Rate 14.0% ------------ Residual Value $132,742,521 Discount Rate 18.0% Discount Factor 0.4024 ------------ Present Value of Residual Value Indicated Value - Invested Capital Add: Cash & Equivalents Less: Total Interest Bearing Debt Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) Rounded to PROJECTIONS ------------- COMPOUNDED 2005 2006 2007 ANNUAL GROWTH ------------- ------------- ------------ ------------- Revenue Growth 11.0% 10.5% 10.0% NET REVENUES $ 326,518,348 $ 360,802,775 $396,883,053 11.2% OPERATING INCOME (LOSS) $ 19,490,501 $ 24,305,939 $ 28,537,008 17.3% Operating Margin 6.0% 6.7% 7.2% Adjusted EBIT $ 23,254,501 $ 28,069,939 $ 32,301,008 Income Taxes 9,069,255 10,947,276 12,597,393 ------------- ------------- ------------ DEBT-FREE NET INCOME $ 14,185,246 $ 17,122,663 $ 19,703,615 Debt-free Net Income Margin 4.3% 4.7% 5.0% + Depreciation/Amortization 8,102,529 8,283,865 9,577,613 - Capital Expenditures 5,000,000 25,500,000 6,000,000 ------------- ------------- ------------ Beginning W/C (Debt-Free) 44,124,101 48,977,752 54,120,416 Required W/C (% of Sales) 48,977,752 54,120,416 59,532,458 ------------- ------------- ------------ - W/C Additions (Excess) 4,853,651 5,142,664 5,412,042 DEBT-FREE NET CASH FLOW $ 12,434,124 $ (5,236,136) $ 17,869,186 Discount Rate 18.0% 18.0% 18.0% Discount Factor 0.5603 0.4748 0.4024 ------------- ------------- ------------ Present Value $ 6,966,839 $ (2,486,117) $ 7,190,560 Sum of Present Values $ 11,535,939 Year 5 Net Cash Flow Times Long-Term Growth Rate Capitalization Rate Residual Value Discount Rate Discount Factor Present Value of Residual Value 53,415,591 ------------- Indicated Value - Invested Capital $ 64,951,530 Add: Cash & Equivalents 4,600,096 Less: Total Interest Bearing Debt 121,296,639 ------------- Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) (51,745,013) Rounded to $ (51,745,000) =============
SCHEDULE 13 PIERRE FOODS, INC. WEIGHTED COST OF CAPITAL ANALYSIS (12/17/01) COST OF DEBT: Pretax Cost of Debt 10.75% Premium 5.00% (1) ------ Adjusted Pretax Cost of Debt 15.75% Tax Rate 40.0% (2) After-tax Cost of Debt (Rd) 9.45% COST OF EQUITY: (3) 10-Year Treasury Bond Yield (Rf) (12/17/01) 4.92% Plus Equity Premiums: Equity Premium (Rm-Rf) 7.10% (4) Beta Coefficient (b) 1.00 (5) ------ Industry-Adjusted Premium 7.10% Size Premium 4.63% (6) Additional Risk Premium (ARP) 7.00% (7) ------ Total Equity Premium 18.73% ------ Cost of Equity (Re) 23.65% CAPITALIZATION STRUCTURE: Debt % of Capital (D) 40.00% Equity % of Capital (E) 60.00% (8) WEIGHTED COST OF CAPITAL: Wtd. Cost of Debt (D)(*)(Rd) 3.78% Wtd. Cost of Equity (E)(*)(Re) 14.19% ------ Weighted Cost of Capital 17.97% Rounded to 18.00%
FOOTNOTES: (1) Debt Premium - Represents the estimated additional required rate of return associated with a debt investment in the subject company given its risk profile. (2) Estimated tax rate. (3) Re = Rf + b(Rm-Rf) + Size Premium + ARP Where: Re = Required return on equity Rf = Risk-free rate of return (30-year Treasury Bond yield) b = Beta, a measure of the relationship between industry risk and aggregate market risk Rm - Rf = The expected return of the market in excess of the risk-free rate ARP = Additional risk premium specific to an investment in the subject company (4) Rm - Rf determined by reference to "SBBI", 2000 Yearbook, Ibbotson Associates, Chicago. [Small Co. Equity Return - L-T Gov't. Bond Yield; 1970-1999] (5) Beta coefficient determined from industry data. (6) Ibbotson Associates - 2000 Yearbook: Size-Decile Portfolio of the NYSE (Long-Term Returns in Excess of CAPM) from 1926 to 1999. (7) The estimated additional risk premium reflects the perceived uncertainties associated with the operating forecast for the subject company and the speculative nature of the returns associated thereto. (8) Equity-to-Total Capital ratio determined from the Company's historical ratio of total interest bearing debt to the appraised market value of stockholders' equity.