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ABC Wood Products, Inc.
123 Main Street
Outstate, MN
Our feature company is an old line Wood Products manufacturer. In 2006, we appraised the company for the purpose of management’s buying out the old line shareholders. The company net revenues and adjusted EBITDA are shown below:
| YEAR | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 Est. |
| Net Revenue (in millions) | 12.8 | 11.4 | 10.0 | 11.7 | 12.9 | 14.0 | 13.8 |
| EBITDA (adj) | 1.0 | .6 | .3 | .5 | .8 | .8 | .7 |
| % EBITDA | 7.8% | 15.3% | 3.0% | 4.2% | 6.2% | 5.4% | 5.1% |
The company has been a solid performer showing slight growth in sales. The adjusted EBITDA ranged from a high of 7.8% to a low of 3.0% over the last 7 years, averaging 5.3% in the last four years. Additionally, the outlook for the next five years in the industry was strong. Management and stockholders could not agree on a price and decided to sell the company. The appraised value and offers are summarized below:
| Value/Offer | 2006 Appraised Value | 2008 July & September Offers | 2009 April Pending Offer |
| Gross Value | $6,510,000 | $10,000,000 | $6,750,000 |
| Less Payables Not Assumed | $0 | $0 | $425,000 |
| Estimated Long Term Debt | $2,100,000 | $2,100,000 | $2,100,000 |
| Net Value | $4,410,000 | $7,900,000 | $4,225,000 |
Even though the values indicated above are approximates, the offers were firm and the transaction will close at the end of April, 2009. Nevertheless, the offers declined in value 53% in last nine months due to the current economic conditions. Assuming the company’s fundamentals have not changed, it appears that the multiples of earnings and revenues have come back to historical rates and normal risks in the marketplace.
Shenehon Company
88 South 10th Street, Suite 400
Minneapolis, Minnesota 55403
Phone: 612.333.6533 / Fax: 612.344.1635
ValuationSpecialist@shenehon.com
