1
EXHIBIT (c)(2)
SCHEDULE 1
PIERRE FOODS, INC.
VALUATION SUMMARY ($000S)
Valuation Approach Value Indication Weighting
- ---------------------------------- ---------------- ---------
Transaction Approach $12,191 33.3%
Market Approach $ 8,360 33.3%
DCF Approach - Scenario #1 $ 0 33.3%
DCF Approach - Scenario #2 $ 0
DCF Approach - Scenario #3 $ 0
DCF Approach - Scenario #4 $ 0
-------
Concluded Fair Market Value - Minority, Marketable Basis $ 6,850
Shares Outstanding as of March 9, 2001 5,781
-------
Total Fair Market Value per Share $ 1.18
=======
2
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
Marketable Securities 148,997 0.4 171,910 0.3 206,706 0.3 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
Related Party 484,951 1.2 278,919 0.5 181,367 0.3 326,147
Notes Receivable, Current Portion
Related Party 772,329 1.9 563,644 0.9 526,592 0.7 280,964
Other 639,692 1.5 409,996 0.7 624,314 0.9 135,811
Inventories 5,553,641 13.3 6,706,838 11.3 7,361,347 10.3 30,430,482
Income Tax Receivable 0 0.0 343,557 0.6 872,157 1.2 0
Prepaid Expenses and Other 486,128 1.2 108,323 0.2 269,222 0.4 988,023
Deferred Income Taxes 518,490 1.2 454,259 0.8 424,786 0.6 2,722,095
------------ ----- ------------ ----- ------------ ----- -------------
Total Current Assets 12,376,410 29.7 16,489,960 27.7 18,307,895 25.5 54,786,925
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
Less: Depreciation/Amortization (20,696,583) -49.7 (23,810,278) -40.0 (26,531,860) -37.0 (30,191,917)
------------ ----- ------------ ----- ------------ ----- -------------
Net Property, Plant & Equipment 25,288,033 60.7 36,964,110 62.1 45,023,793 62.8 74,999,394
OTHER ASSETS
Property Held for Sale 1,569,752 3.8 3,277,670 5.5 1,680,993 2.3 2,086,847
Trade Name, Net 0 0.0 0 0.0 0 0.0 43,242,636
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
Other Intangible Assets, Net 0 0.0 628,186 1.1 829,500 1.2 3,520,053
Noncurrent Notes Receivable 204,941 0.5 470,345 0.8 335,611 0.5 54,220
As of RMA (1) RMA (1) RMA (1)
FISCAL YEAR ENDED: % 3/4/2000 % 3/3/2001 % SIC #2011 SIC #2013 SIC #2051
----- ------------- ----- -------------- ----- -----------------------------
ASSETS
Cash & Equivalents 0.8 $ 2,701,464 1.6 $ 1,813,437 1.1 6.1 6.1 7.2
Marketable Securities 0.0 0 0.0 0 0.0
Accounts Receivable, Net
Trade and Others 8.4 17,129,821 10.4 18,225,203 11.3 25.5 18.9 15.4
Related Party 0.2 292,990 0.2 0 0.0
Notes Receivable, Current Portion
Related Party 0.1 152,456 0.1 0 0.0
Other 0.1 86,057 0.1 0 0.0
Inventories 14.0 25,025,421 15.2 26,835,344 16.6 17.6 18.3 7.2
Income Tax Receivable 0.0 2,828,156 1.7 1,874,018 1.2
Prepaid Expenses and Other 0.5 799,582 0.5 1,030,985 0.6
Deferred Income Taxes 1.3 2,290,361 1.4 2,652,624 1.6
----- ------------- ----- ------------- ----- ----- ----- -----
Total Current Assets 25.2 51,306,308 31.1 52,431,611 32.5 51.0 44.9 33.8
PROPERTY, PLANT & EQUIPMENT
Gross Property, Plant & Equipment 48.5 50,711,772 30.8 N/A 0.0
Less: Depreciation/Amortization -13.9 (14,926,953) -9.1 N/A 0.0
----- ------------- ----- ------------- ----- ----- ----- -----
Net Property, Plant & Equipment 34.6 35,784,819 21.7 34,907,752 21.7 37.8 43.8 49.5
OTHER ASSETS
Property Held for Sale 1.0 0 0.0 0 0.0
Trade Name, Net 19.9 41,764,636 25.4 40,286,636 25.0 4.0 5.7 8.5
Excess of Cost over Fair Value of
Net Assets of Businesses Acquired, Net 15.0 28,893,723 17.5 27,871,114 17.3
Other Intangible Assets, Net 1.6 2,556,936 1.6 2,363,956 1.5
Noncurrent Notes Receivable 0.0 0 0.0 0 0.0
3
FISCAL YEAR ENDED: 2/23/1996 % 2/28/1997 % 2/27/1998 % 3/6/1999
------------ ----- ------------ ----- ------------ ----- -------------
Noncurrent Related Party Note Receivable 515,944 1.2 963,117 1.6 1,550,638 2.2 1,018,767
Deferred Income Taxes 0 0.0 0 0.0 685,458 1.0 0
Deferred Loan Origination Fees, Net 0 0.0 0 0.0 262,828 0.4 4,524,753
Investment in Affiliates 381,533 0.9 374,533 0.6 0 0.0 0
Investment in Restricted Equity Securities 242,050 0.6 0 0.0 0 0.0 0
Other 393,390 0.9 403,209 0.7 72,717 0.1 132,028
------------ ----- ------------ ----- ------------ ----- -------------
Total Other Assets 3,969,931 9.5 6,117,060 10.3 8,324,111 11.6 87,202,704
TOTAL ASSETS $ 41,634,374 100.0 $ 59,571,130 100.0 $ 71,655,799 100.0 $ 216,989,023
============ ===== ============ ===== ============ ===== =============
LIABILITIES & EQUITY
Notes Payable $ 4,000,000 9.6 $ 4,487,776 7.5 $ 5,105,144 7.1 $ 0
Current Installments of Long-Term Debt 2,030,953 4.9 1,297,792 2.2 2,189,401 3.1 673,752
Trade Accounts Payable 2,810,229 6.7 4,568,176 7.7 6,605,893 9.2 11,255,920
Income Taxes Payable 0 0.0 0 0.0 0 0.0 151,366
Accrued Salaries and Wages 650,407 1.6 803,855 1.3 1,960,534 2.7 4,941,033
Accrued Insurance 644,180 1.5 833,028 1.4 614,846 0.9 1,155,942
Accrued Marketing and Advertising 0 0.0 0 0.0 12,000 0.0 1,420,580
Taxes, Other than Income 323,059 0.8 739,347 1.2 379,269 0.5 1,176,888
Accrued Interest 85,297 0.2 19,717 0.0 87,426 0.1 3,533,771
Gift Certificates Outstanding 331,955 0.8 491,463 0.8 0 0.0 0
Other 515,974 1.2 1,134,345 1.9 1,850,766 2.6 3,351,366
------------ ----- ------------ ----- ------------ ----- -------------
Total Current Liabilities 11,392,054 27.4 14,375,499 24.1 18,805,279 26.2 27,660,618
LONG-TERM LIABILITIES
Deferred Franchise Fees 5,000 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
Other Long-Term Liabilities 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
------------ ----- ------------ ----- ------------ ----- -------------
Total Long-Term Liabilities 13,798,699 33.1 13,847,250 23.2 13,623,532 19.0 148,176,396
TOTAL LIABILITIES 25,190,753 60.5 28,222,749 47.4 32,428,811 45.3 175,837,014
As of RMA (1) RMA (1) RMA (1)
FISCAL YEAR ENDED: % 3/4/2000 % 3/3/2001 % SIC #2011 SIC #2013 SIC #2051
----- ------------- ----- ------------- ----- -----------------------------
Noncurrent Related Party Note Receivable 0.5 705,493 0.4 705,493 0.4
Deferred Income Taxes 0.0 0 0.0 0 0.0
Deferred Loan Origination Fees, Net 2.1 3,714,748 2.3 2,619,157 1.6
Investment in Affiliates 0.0 0 0.0 0 0.0
Investment in Restricted Equity Securities 0.0 0 0.0 0 0.0
Other 0.1 0 0.0 0 0.0
----- ------------- ----- ------------- ----- ----- ---------- -----
Total Other Assets 40.2 77,635,536 47.1 73,846,356 45.8
TOTAL ASSETS 100.0 $ 164,726,663 100.0 $ 161,185,719 100.0 100.0 100.0 100.0
===== ============= ===== ============= ===== ===== ========== =====
LIABILITIES & EQUITY
Notes Payable 0.0 $ 0 0.0 $ 0 0.0 9.9 7.9 2.4
Current Installments of Long-Term Debt 0.3 314,433 0.2 67,631 0.0 4.3 2.6 4.1
Trade Accounts Payable 5.2 5,493,168 3.3 4,937,996 3.1 12.4 11.7 10.6
Income Taxes Payable 0.1 0 0.0 0 0.0 0.2 0.3 0.2
Accrued Salaries and Wages 2.3 2,427,691 1.5 4,246,004 2.6
Accrued Insurance 0.5 154,947 0.1 94,582 0.1
Accrued Marketing and Advertising 0.7 1,903,241 1.2 2,859,771 1.8
Taxes, Other than Income 0.5 563,879 0.3 590,487 0.4
Accrued Interest 1.6 3,213,929 2.0 3,153,280 2.0
Gift Certificates Outstanding 0.0 0 0.0 0 0.0
Other 1.5 831,681 0.5 339,601 0.2
----- ------------- ----- ------------- ----- ----- ---------- -----
Total Current Liabilities 12.7 14,902,969 9.0 16,289,352 10.1 36.1 32.6 26.4
LONG-TERM LIABILITIES
Deferred Franchise Fees 0.0 0 0.0 0 0.0
Deferred Income Taxes 0.9 1,487,134 0.9 1,483,306 0.9 0.6 0.6 2.1
Other Long-Term Liabilities 0.0 1,638,466 1.0 1,347,231 0.8
Long Term Debt, Noncurrent 67.4 115,164,922 69.9 115,097,291 71.4 19.1 18.1 25.5
----- ------------- ----- ------------- ----- ----- ---------- -----
Total Long-Term Liabilities 68.3 118,290,522 71.8 117,927,828 73.2
TOTAL LIABILITIES 81.0 133,193,491 80.9 134,217,180 83.3
4
FISCAL YEAR ENDED: 2/23/1996 % 2/28/1997 % 2/27/1998 % 3/6/1999
------------ ----- ------------ ----- ------------ ----- -------------
SHAREHOLDERS' EQUITY
Common Stock 2,760,338 6.6 5,326,948 8.9 5,898,449 8.2 5,807,049
Additional Paid in Capital 6,579,347 15.8 18,868,284 31.7 23,647,020 33.0 23,251,845
Accumulated Other Comprehensive Income 5,278 0.0 10,059 0.0 19,261 0.0 0
Receivable from Shareholder 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
------------ ----- ------------ ----- ------------ ----- -------------
TOTAL SHAREHOLDER'S EQUITY 16,443,621 39.5 31,348,381 52.6 39,226,988 54.7 41,152,009
TOTAL LIABILITIES & EQUITY $ 41,634,374 100.0 $ 59,571,130 100.0 $ 71,655,799 100.0 $ 216,989,023
============ ===== ============ ===== ============ ===== =============
As of RMA (1) RMA (1) RMA (1)
FISCAL YEAR ENDED: % 3/4/2000 % 3/3/2001 % SIC #2011 SIC #2013 SIC #2051
----- ------------- ----- ------------- ----- -----------------------------
SHAREHOLDERS' EQUITY
Common Stock 2.7 5,781,000 3.5 5,781,480 3.6
Additional Paid in Capital 10.7 23,315,881 14.2 23,317,053 14.5
Accumulated Other Comprehensive Income 0.0 0 0.0 0 0.0
Receivable from Shareholder 0.0 (5,000,000) -3.0 (5,000,000) -3.1
Retained Earnings 5.6 7,436,291 4.5 2,870,006 1.8
----- ------------- ----- ------------- ----- ----- ---------- -----
TOTAL SHAREHOLDER'S EQUITY 19.0 31,533,172 19.1 26,968,539 16.7 38.8 42.3 39.0
TOTAL LIABILITIES & EQUITY 100.0 $ 164,726,663 100.0 $ 161,185,719 100.0 100.0 100.0 100.0
===== ============= ===== ============= ===== ===== ========== =====
FISCAL YEAR ENDED: 2/23/1996 % 2/28/1997 % 2/27/1998 % 3/6/1999
------------ ----- ------------ ----- ------------ ----- -------------
Debt Free Working Capital, as adjusted $5,109,277 12.3 $2,778,699 4.7 $2,708,904 3.8 $29,252,657
Working Capital, as reported $ 984,356 2.4 $2,114,461 3.5 $ (497,384) -0.7 $27,126,307
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
As of RMA (1) RMA (1) RMA (1)
FISCAL YEAR ENDED: % 3/4/2000 % 3/3/2001 % SIC #2011 SIC #2013 SIC #2051
----- ------------- ----- -------------- ----- -----------------------------
Debt Free Working Capital, as adjusted 13.5 $36,991,724 22.5 $37,549,733 23.3
Working Capital, as reported 12.5 $36,403,339 22.1 $36,142,259 22.4 14.9 12.3 7.4
Sales/Working Capital, as reported 5.1 5.8 32.4 28.2 39.4
Current Ratio 3.44 3.22 1.5 1.3 1.2
Long-Term Debt/Equity 3.65 4.27 0.5 0.4 0.7
Total Liabilities/Equity 4.22 4.98 1.6 1.4 2.0
(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.
5
SCHEDULE 3
PIERRE FOODS, INC.
COMPARATIVE, COMBINED INCOME STATEMENT DATA
Fiscal Year Ended: 2/23/1996 % 2/28/1997 % 2/27/1998 % 3/6/1999
------------ ----- ------------ ----- ----------- ----- ------------
REVENUES:
Restaurant Operations 62,667,763 55.2 70,866,150 54.7 0 0.0 0
Food Processing(a) 50,868,707 44.8 48,181,625 37.2 56,387,112 85.1 149,778,206
Ham Curing(a) 0 0.0 10,433,868 8.1 9,858,233 14.9 7,063,625
Restaurant Franchising(b) 0 0.0 0 0.0 0 0.0 0
------------ ----- ------------ ----- ----------- ----- ------------
$113,536,470 100.0 $129,481,643 100.0 $66,245,345 100.0 $156,841,831
Cost of Goods Sold 69,647,206 61.3 78,999,482 61.0 59,153,475 89.3 101,413,313
------------ ----- ------------ ----- ----------- ----- ------------
GROSS PROFIT 43,889,264 38.7 50,482,161 39.0 7,091,870 10.7 55,428,518
Operating Expenses 26,560,293 23.4 31,057,850 24.0 0 0.0 0
Selling, General and Administrative 10,587,620 9.3 10,414,329 8.0 9,716,431 14.7 41,006,810
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 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 4,901,356
------------ ----- ------------ ----- ----------- ----- ------------
TOTAL OPERATING EXPENSES 40,624,065 35.8 45,072,496 34.8 11,331,254 17.1 45,908,166
OPERATING INCOME (LOSS) 3,265,199 2.9 5,409,665 4.2 (4,239,384) -6.4 9,520,352
OTHER INCOME (EXPENSES):
Other Income 736,855 0.6 1,018,745 0.8 204,045 0.3 409,095
Net Gain (Loss) on Dispositions of Assets 105,367 0.1 345,930 0.3 0 0.0 0
Equity in Earnings (Loss) of Affiliates (385,366) -0.3 0 0.0 0 0.0 0
Interest Expense (2,162,547) -1.9 (1,867,948) -1.4 (1,762,363) -2.7 (12,332,248)
Other Expense (688,580) -0.6 (871,388) -0.7 0 0.0 0
------------ ----- ------------ ----- ----------- ----- ------------
TOTAL OTHER INCOME (EXPENSE) (2,394,271) -2.1 (1,374,661) -1.1 (1,558,318) -2.4 (11,923,153)
EARNINGS (LOSS) BEFORE INCOME TAXES 870,928 0.8 4,035,004 3.1 (5,797,702) -8.8 (2,402,801)
Provision for Income Taxes (Benefit)
Current (5,967) 0.0 1,285,460 1.0 194,771 0.3 700,847
Deferred (1,133,463) -1.0 724,539 0.6 (2,121,464) -3.2 (1,313,732)
------------ ----- ------------ ----- ----------- ----- ------------
Total Provision for Income Taxes (Benefit) (1,139,430) -1.0 2,009,999 1.6 (1,926,693) -2.9 (612,885)
------------ ----- ------------ ----- ----------- ----- ------------
NET INCOME (LOSS) $ 2,010,358 1.8 $ 2,025,005 1.6 $(3,871,009) -5.8 $ (1,789,916)
============ ===== ============ ===== =========== ===== ===========
**
LAST 12 MOS. RMA(1) RMA(1) RMA(1)
ENDED SIC #2011 SIC #2013 SIC #2051
Fiscal Year Ended: % 3/4/2000 % 3/3/2001 % % % %
----- ------------ ----- ------------ ----- --------- --------- ---------
REVENUES:
Restaurant Operations 0.0 0 0.0 0 0.0
Food Processing(a) 95.5 183,502,144 98.9 211,040,483 100.0
Ham Curing(a) 4.5 2,096,052 1.1 0 0.0
Restaurant Franchising(b) 0.0 0 0.0 0 0.0
----- ------------ ----- ----------- -----
100.0 $185,598,196 100.0 $211,040,483 100.0 100 100 100.0
Cost of Goods Sold 64.7 116,024,983 62.5 133,905,113 63.4
----- ------------ ----- ----------- -----
GROSS PROFIT 35.3 69,573,213 37.5 77,135,370 36.6 13.4 24.9 36.8
Operating Expenses 0.0 0 0.0 0 0.0
Selling, General and Administrative 26.1 65,297,277 35.2 63,842,125 30.3
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0.0 2,857,160 1.5 0 0.0
Depreciation and Amortization 3.1 5,661,893 3.1 6,237,994 3.0
----- ------------ ----- ----------- -----
TOTAL OPERATING EXPENSES 29.3 73,816,330 39.8 70,080,119 33.2 10.2 19.4 31.3
OPERATING INCOME (LOSS) 6.1 (4,243,117) -2.3 7,055,251 3.3 3.2 5.5 5.5
OTHER INCOME (EXPENSES):
Other Income 0.3 168,959 0.1 281,600 0.1
Net Gain (Loss) on Dispositions of Assets 0.0 0 0.0 (27,695) 0.0
Equity in Earnings (Loss) of Affiliates 0.0 0 0.0 0 0.0
Interest Expense -7.9 (14,985,577) -8.1 (13,334,022) -6.3
Other Expense 0.0 0 0.0 0 0.0
----- ------------ ----- ----------- -----
TOTAL OTHER INCOME (EXPENSE) -7.6 (14,816,618) -8.0 (13,080,117) -6.2 0.8 0.9 1.0
EARNINGS (LOSS) BEFORE INCOME TAXES -1.5 (19,059,735) -10.3 (6,024,866) -2.9 2.5 4.6 4.5
Provision for Income Taxes (Benefit)
Current 0.4 (5,286,124) -2.8 (1,684,950) -0.8
Deferred -0.8 460,956 0.2 0 0.0
----- ------------ ----- ----------- -----
Total Provision for Income Taxes (Benefit) -0.4 (4,825,168) -2.6 (1,684,950) -0.8
----- ------------ ----- ----------- -----
NET INCOME (LOSS) -1.1 $(14,234,567) -7.7 $(4,339,916) -2.1
===== ============ ===== =========== =====
6
Fiscal Year Ended: 2/23/1996 % 2/28/1997 % 2/27/1998 %
------------ ----- ------------ ----- ----------- -----
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
**
LAST 12 MOS.
ENDED
Fiscal Year Ended: 3/6/1999 % 3/4/2000 % 3/3/2001 %
------------ ----- ------------ ----- ------------ -----
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
7
**
LAST 12 MOS.
ENDED
Fiscal Year Ended: 3/6/1999 % 3/4/2000 % 3/3/2001 %
----------- ----- ------------ ----- ------------ -----
Bonus 152,064 375,000 1,261,969
Other 0 3,200 798,722
NORBERT E. WOODHAMS $ 0 $ 254,193 $ 812,929
Salary 0 189,493 275,622
Bonus 0 62,500 355,007
Other 0 2,200 182,300
L. DENT MILLER $ 0 $ 225,000 $ 1,802,003
Salary 0 225,000 121,154
Bonus 0 0 1,176,648
Other 0 0 504,201
JAMES E. HARRIS $ 0 $ 166,372 $ 1,386,475
Salary 0 166,372 161,538
Bonus 0 0 726,640
Other 0 0 498,297
PAMELA M. WITTERS $ 0 $ 18,750 $ 178,636
Salary 0 18,750 104,438
Bonus 0 0 73,546
Other 0 0 652
----------- ------------ ------------
TOTAL $ 152,064 $ 1,192,515 $ 8,532,004
=========== ============ ============
(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.
8
SCHEDULE 4
PIERRE FOODS, INC.
FINANCIAL RATIO ANALYSIS
**
AS OF 5-YEAR
2/23/1996 2/28/1997 2/27/1998 3/6/1999 3/4/2000 3/3/2001 AVERAGE
--------- --------- --------- -------- -------- -------- --------
BALANCE SHEET
Total Assets ($000's) $ 41,634 $ 59,571 $71,656 $216,989 $164,727 $161,186 $134,826
Total Assets (%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Account Receivable 8.0 5.8 7.0 8.4 10.4 11.3 8.6
Current Assets 29.7 27.7 25.5 25.2 31.1 32.5 28.4
Net Fixed Assets 60.7 62.1 62.8 34.6 21.7 21.7 40.6
Accounts Payable 6.7 7.7 9.2 5.2 3.3 3.1 5.7
Total Short-Term Debt 14.5 9.7 10.2 0.3 0.2 0.0 4.1
Long-Term Debt 31.0 20.9 19.0 67.4 69.9 71.4 49.7
Total Liabilities 60.5 47.4 45.3 81.0 80.9 83.3 67.6
Total Stockholders' Equity 39.5 52.6 54.7 19.0 19.1 16.7 32.4
Debt-free Working Capital, as adjusted 12.3 4.7 3.8 13.5 22.5 23.3 13.5
Debt-free Working Capital, as reported 2.4 3.5 -0.7 12.5 22.1 22.4 12.0
INCOME STATEMENT
Net Sales ($000's) $113,536 $129,482 $66,245 $156,842 $185,598 $211,040 $149,841
Net Sales (%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Gross Profit 38.7 39.0 10.7 35.3 37.5 36.6 31.8
Operating Profit 2.9 4.2 -6.4 6.1 -2.3 3.3 1.0
Pretax Profit 0.8 3.1 -8.8 -1.5 -10.3 -2.9 -4.1
Net Profits 1.8 1.6 -5.8 -1.1 -7.7 -2.1 -3.0
Adjusted EBITDA 6.1 7.1 9.1 11.8 8.3 6.9 8.6
Adjusted EBIT 3.0 4.4 1.0 6.0 3.4 3.9 3.7
Depreciation Expense 3.3 3.0 8.1 5.8 4.9 3.0 4.9
Interest Expense 1.9 1.4 2.7 7.9 8.1 6.3 5.3
Capital Expenditures 3.5 7.5 19.0 9.9 3.0 1.3 8.1
LIQUIDITY
Current Ratio 1.09 1.15 0.97 1.98 3.44 3.22 2.15
Quick Ratio 0.51 0.62 0.50 0.75 1.37 1.23 0.89
LEVERAGE
Long-term Debt/Equity 0.78 0.40 0.35 3.55 3.65 4.27 2.44
Total Liabilities/Equity 1.53 0.90 0.83 4.27 4.22 4.98 3.04
Total Debt/Total Capitalization 0.54 0.37 0.35 0.79 0.79 0.81 0.62
OPERATING EFFICIENCY
Sales/Total Assets 2.7 2.2 0.9 0.7 1.1 1.3 1.3
Sales/Net Fixed Assets 4.5 3.5 1.5 2.1 5.2 6.0 3.7
Sales/Debt-free Working Capital 115.3 61.2 -133.2 5.8 5.1 5.8 -11.0
% of Sales 0.9% 1.6% -0.8% 17.3% 19.6% 17.1% -9.1%
Sales/Receivables 34.0 37.5 13.2 8.6 10.8 11.6 16.3
Receivable Turnover (Days) 10.7 9.7 27.7 42.4 33.7 31.5 22.3
COGS/Inventory 12.5 11.8 8.0 3.3 4.6 5.0 6.6
Inventory Turnover (Days) 29.1 31.0 45.4 109.5 78.7 73.1 55.7
COGS/Accounts Payable 24.8 17.3 9.0 9.0 21.1 27.1 16.7
Payable Turnover (Days) 14.7 21.1 40.8 40.5 17.3 13.5 21.9
PROFITABILITY
Return on Assets 4.8% 3.4% -5.4% -0.8% -8.6% -2.7% -2.8%
Return on Equity 12.2% 6.5% -9.9% -4.3% -45.1% -16.1% -13.8%
Return on Invested Capital 5.7% 4.1% -6.4% -0.9% -9.5% -3.0% -3.1%
GROWTH RATES
Net Sales -- 14.0% -48.8% 136.8% 18.3% 13.7% 13.0%
Net Income -- 0.7% -291.2% -53.8% 695.3% -69.5% NMF
Adjusted EBITDA -- 34.0% -34.8% 206.8% -16.9% -5.8% 11.9%
Adjusted EBIT -- 65.0% -87.9% 1281.2% -33.3% 31.6% 10.0%
Stockholders' Equity -- 90.6% 25.1% 4.9% -23.4% -14.5% -3.7%
* Preliminary results provided by management were used.
** Except growth rates which are 5-year compound annual growth rates.
9
SCHEDULE 5
PIERRE FOODS, INC.
COMPARED TO PUBLICLY HELD COMPANIES
COMPANY NAME: PIERRE BRIDGFORD EARTHGRAINS HORMEL RYMER
FOODS, INC. FOODS CORP. COMPANY FOODS CORP. FOODS INC.
TICKET SYMBOL: FOOD BRID EGR HRL RFDS
LAST TWELVE MONTHS: MAR-01 NOV-00 JAN-01 OCT-00 OCT-00
LAST FISCAL YEAR: MAR-01 MEDIAN NOV-00 MAR-00 OCT-00 OCT-00
---------- ---------- ----------- ----------- ----------- ----------
BALANCE SHEET
Total Assets ($000's) $161,186 $ 862,310 $ 82,680 $2,277,200 $1,641,940 $ 7,781
Total Assets (%) 100.0 100.0 100.0 101.0 102.0 103.0
Cash & Equivalents 1.1 4.0 22.1 1.6 6.5 0.0
Accounts Receivable 11.3 17.6 16.5 11.4 18.7 35.6
Total Current Assets 32.5 53.8 64.2 21.0 43.3 83.3
Net Fixed Assets 21.7 28.0 22.9 38.6 33.0 16.5
Accounts Payable 3.1 9.4 9.3 7.6 9.4 19.3
Current Portion Long-Term Debt 2.0 1.2 0.0 0.1 2.3 47.3
Total Current Liabilities 10.1 19.3 17.7 15.9 20.9 84.7
Long-Term Debt 71.4 4.4 0.0 43.2 8.9 0.0
Total Liabilities 83.3 59.1 32.0 71.3 46.8 86.1
Net Worth 16.7 40.7 68.0 28.2 53.2 13.9
Debt-free Working Capital 23.3 21.3 24.4 3.6 18.3 45.9
INCOME STATEMENT
Revenue ($000's) $211,040 $1,309,346 $156,292 $2,462,400 $3,675,132 $39,852
Revenue (%) 100.0 100.0 100.0 101.0 102.0 103.0
Gross Income 36.6 33.1 39.0 45.5 27.2 7.2
Adjusted Operating Income 3.9 5.9 8.7 4.6 7.2 -3.9
Net Income -1.5 3.0 5.4 1.3 4.7 -3.1
FYE-1 -7.7 2.7 7.2 3.0 2.4 0.1
FYE-2 -1.1 1.9 6.5 2.7 1.1 -3.9
Adjusted EBITDA 6.9 9.7 11.1 10.5 8.9 -2.7
FYE-1 8.3 8.5 13.6 11.7 5.3 2.2
FYE-2 11.8 6.8 12.6 10.3 3.3 -4.5
Depreciation Expense 3.0 2.1 2.4 5.9 1.8 1.2
Non-Operating Income/(Expense) -6.2 -0.6 0.0 -2.6 0.0 -1.2
10
SCHEDULE 6
PIERRE FOODS, INC.
COMPARATIVE FINANCIAL RATIOS
COMPANY NAME: PIERRE BRIDGFORD EARTHGRAINS HORMEL RYMER
FOODS, INC. FOODS CORP. COMPANY FOODS CORP. FOODS INC.
TICKER SYMBOL: FOOD BRID EGR HRL RFDS
LATEST TWELVE MONTHS: MAR-01 NOV-00 JAN-01 OCT-00 OCT-00
LAST FISCAL YEAR: MAR-01 MEDIAN NOV-00 MAR-00 OCT-00 OCT-00
----------- ------ ----------- ----------- ----------- ----------
LIQUIDITY
Current Ratio 3.22 1.70 3.63 1.32 2.08 0.98
Quick Ratio 1.23 1.01 2.18 0.81 1.21 0.42
LEVERAGE
LT Debt/Equity 4.27 0.08 0.00 1.53 0.17 0.00
Total Liabilities/Equity 4.98 1.70 0.47 2.53 0.88 6.17
Total Debt/Total Capitalization 81.44% 39.00% 0.00% 60.58% 17.42% 77.22%
Total Debt/Total Market Capitalization 2112.83% 30.79% 0.00% 55.49% 6.09% 67.57%
EFFICIENCY
Revenue/Total Assets 1.31 2.06 1.89 1.08 2.24 5.12
Revenue/Receivables 11.58 11.70 11.46 9.50 11.94 14.39
Receivable Turnover (Days) 31.52 31.21 31.86 38.44 30.56 25.37
Revenue/Debt-Free Working Capital 5.62 11.70 7.75 29.63 12.24 11.17
% of Sales 17.79% 8.56% 12.90% 3.37% 8.17% 8.96%
COGS/Inventory 4.99 10.02 5.24 14.37 9.51 10.53
Inventory Turnover (Days) 73.15 36.53 69.68 25.39 38.40 34.66
COGS/Payables 27.12 14.80 12.34 7.80 17.27 24.68
Payable Turnover (Days) 13.46 25.36 29.58 46.81 21.14 14.79
PROFITABILITY
Return-on-Assets -1.96% 5.77% 10.19% 1.36% 10.48% -15.71%
Return-on-Equity -11.70% 9.90% 14.99% 4.81% 19.69% -112.65%
Return-on-Invested Capital -2.17% 8.44% 14.99% 1.90% 16.26% -25.67%
Return-on-Market Value Equity -51.02% 4.79% 6.02% 3.74% 5.84% -69.27%
Return-on-Market Value Invested Cap. -2.57% 3.71% 6.93% 1.74% 5.69% -22.46%
REVENUE GROWTH
Latest Twelve Months 13.71 11.03 12.61 20.75 9.45 2.41
Latest Fiscal Year 18.33 4.45 2.94 5.93 2.97 28.84
Three-year CAGR 16.00 8.29 7.67 8.92 6.16 14.87
NET INCOME GROWTH
Latest Twelve Months -77.84 -33.02 -16.00 -50.05 114.45 -4800.77
Latest Fiscal Year 695.26 18.18 14.97 21.39 132.65 -102.21
Three-year CAGR 32.76 15.16 -1.73 28.29 123.36 2.03
EBITDA GROWTH
Latest Twelve Months -5.75 0.52 -7.72 8.77 85.22 -229.49
Latest Fiscal Year -16.86 15.75 11.15 20.35 64.57 -162.16
Three-year CAGR -11.48 13.55 1.27 25.83 74.59 -10.29
EQUITY GROWTH
Latest Twelve Months -14.48 -2.59 -3.34 -1.85 3.89 -63.06
Latest Fiscal Year -23.37 2.92 14.34 2.42 3.42 1.52
Three-year CAGR -19.05 2.18 5.13 0.71 3.66 -38.76
11
SCHEDULE 7
PIERRE FOODS, INC.
COMPARATIVE VALUATION MULTIPLES
COMPANY NAME: PIERRE BRIDGFORD EARTHGRAINS HORMEL RYMER
FOODS, INC. FOODS CORP. COMPANY FOODS CORP. FOODS INC.
TICKER SYMBOL: FOOD BRID EGR HRL RFDS
LATEST TWELVE MONTHS: MAR-01 NOV-00 JAN-01 OCT-00 OCT-00
LAST FISCAL YEAR: MAR-01 MEDIAN NOV-00 MAR-00 OCT-00 OCT-00
----------- -------- ----------- ----------- ----------- ----------
MARKET DATA
Market Price(a) $ 1.07 -- $ 12.80 $ 19.91 $ 20.98 $ 0.41
Shares Outstanding (000s) 5,781 -- 10,927 41,600 140,532 4,300
Market Value--Common Equity $ 6,183 $484,037 $139,817 $ 828,256 $2,948,809 $1,764
Less: Market Value of Investments 1,813 -- 18,301 35,600 106,610 0
Adjusted Market Value - Common Equity $ 4,370 457,086 $121,516 $ 792,656 $2,842,199 $1,764
Preferred Stock 0 -- 0 0 0 0
Adjusted Market Value--Stockholders' Equity $ 4,370 $457,086 $121,516 $ 792,656 $2,842,199 $1,764
Total Interest-Bearing Debt 118,318 94,022 0 988,000 184,367 3,677
Market Value--Invested Capital $122,688 $951,086 $121,516 $1,780,656 $3,026,566 $5,441
Beta 1.21 0.19 -0.09 0.19 0.27 N/A
PRICE MULTIPLES
Invested Capital/Revenue
LTM 0.6 0.8 0.8 0.7 0.8 0.1
FYE 1 0.7 0.9 0.9 0.9 0.9 0.1
FYE 2 0.8 0.9 0.9 0.9 0.9 0.2
FYE 3 1.9 0.9 1.0 1.0 0.9 0.2
3-Yr. Avg 0.7 0.9 0.9 0.8 0.9 0.2
(a) 30-day average prices.
12
SCHEDULE 8
PIERRE FOODS, INC.
MARKET COMPARISON APPROACH (000's)
(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 Capital/Revenue 0.6 211,040 126,678 118,318 8,360
Concluded Fair Market Value - Minority, Marketable Basis: $ 8,360
Shares Outstanding as of March 22, 2001 5,781
--------
Indicated Equity Value Per Share: $ 1.45
========
(1) Income statement items are taken from Pierre Foods' Income Statement as of
March 3, 2001.
(2) Valuation Multiple x Financial Statistic
13
SCHEDULE 9
PIERRE FOODS, INC.
MARKET TRANSACTIONS
FOOD PROCESSING ACQUISITIONS JANUARY 1, 1998 THROUGH MARCH 9, 2001
REVENUES OF EST. NET
ACQUIRED VALUE OF PRICE/REV EARNINGS OF
DATE ACQUIRER ACQUIRED COMPANY (MILLIONS) DEAL RATIO ACQUIRED
- -------- -------- ---------------- ----------- ------- --------- -----------
3/20/98 Atlantic Premium Brands, Ltd. J.C. Potter Sausage Company 35.2 13.0 0.369 2.93
4/14/98 International Home Foods Inc. Grist Mill Co. 108.2 113.6 1.0 4.5
7/31/98 ConAgra Inc. GoodMark Foods Inc. 165.3 236.4 1.34 8.11
4/6/99 Aurora Foods Inc. Sea Coast Foods Inc. 57.0 50.2 0.88 N/A
4/12/99 Smithfield Foods Inc. Animex SA - 66.6% 165.6 43.0 0.260 2.53
5/7/99 Smithfield Foods Inc. Carrolls Foods Inc. 347.9 337.5 0.310 -55.25
8/25/99 IBP Inc. Thorn Apple Valley Inc. 465.5 116.4 0.25 -29.73
10/13/99 Sparta Foods Inc. Food Products Corp. 9.3 9.8 0.960 0.41
11/1/99 Aurora Foods Inc. Lender's(R)Bagels 186.7 275.0 1.473 6.00
1/3/00 ConAgra Inc. Seaboard Corp. 480.0 374.4 0.8 N/A
1/5/00 Smithfield Foods Inc. Murphy Farms, Inc. 454.0 396.0 0.872 -45.00
2/7/00 IBP Inc. Corporate Brand Foods America 800.0 560.0 0.27 N/A
6/29/00 Kellogg Co. Kashi Co. 25.0 33.0 1.320 N/A
8/24/00 ConAgra Inc. International Home Foods Inc. 2191.6 2936.8 0.74 97.43
1/28/01 Pilgrims Pride Corp. WLR Foods Inc. 832.7 274.8 0.280 -1.28
Total 3049.3 3244.6
PRICE/ TIC/
DATE EARNINGS TIC/EBITDA TIC/EBIT REVENUE
- -------- -------- ---------- -------- -------
3/20/98 4.43 N/A N/A 0.4
4/14/98 24.3 8.6 15.1 1.1
7/31/98 27.36 12.04 16.61 1.4
4/6/99 N/A N/A N/A 0.9
4/12/99 17.00 N/A N/A 0.3
5/7/99 -1.94 -19.78 -10.33 1.0
8/25/99 -3.87 25.71 -13.08 0.3
10/13/99 19.35 8.45 12.56 1.1
11/1/99 45.83 N/A N/A 1.5
1/3/00 N/A N/A N/A 0.8
1/5/00 -8.80 N/A N/A 0.9
2/7/00 N/A N/A N/A 0.7
6/29/00 N/A N/A N/A 1.3
8/24/00 16.58 8.71 10 1.3
1/28/01 -180.29 N/A N/A 0.3
Total -40.09
Source: Mergerstat Review and Done Deals Databases for SIC #2011, 2013, 2050 and
2051.
Average TIC/Revenue Ratio (Aggregate) 1.06
Average TIC/Revenue Ratio (Ratio) 0.87
Median TIC/Revenue Ratio 0.88
Average Price/EBITDA Ratio (Ratio) 7.28
Median Price/EBITDA Ratio 8.64
14
SCHEDULE 10
PIERRE FOODS, INC.
MARKET TRANSACTION APPROACH (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 0.7 211,040 148,573 118,318 30,254
======
30,254
PRELIMINARY STOCKHOLDERS' EQUITY VALUE: $ 30,254
Less:
Change in Control Agreement Adjustments(1) 11,500
-------
Equity Value - Control, Marketable $ 18,755
Less:
Minority Discount (35%) 6,564
--------
Equity Value - Minority, Marketable Basis $ 12,191
Shares Outstanding as of March 22, 2001 5,781
--------
Equity Value Per Share $ 2.11
========
(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.
15
SCHEDULE 11
PIERRE FOODS, INC.
COMPARATIVE PROJECTED INCOME STATEMENTS FOR THE YEARS 2002 THROUGH 2006 -
SCENARIO 1
---------ACTUAL--------- ---------------------PROJECTED---------------------
LTM
2001 % 2002 % 2003 %
------------- ----- ------------- ----- ------------- -----
% Growth 13.7% 5.3% 8.5%
Revenues $ 211,040,483 100.0 $ 222,212,486 100.0 $ 241,085,854 100.0
Cost of Goods Sold 133,905,113 63.4 139,397,427 62.7 151,232,065 62.7
------------- ----- ------------- ----- ------------- -----
Gross Profit 77,135,370 36.6 82,815,059 37.3 89,853,789 37.3
Operating Expenses:
Selling, General and Administrative 63,842,125 30.3 62,472,121 28.1 67,054,513 27.8
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0
Depreciation and Amortization 6,237,994 3.0 6,278,756 2.8 7,146,211 3.0
------------- ----- ------------- ----- ------------- -----
TOTAL OPERATING EXPENSES 70,080,119 33.2 68,750,877 30.9 74,200,724 30.8
OPERATING INCOME (LOSS) 7,055,251 3.3 14,064,182 6.3 15,653,065 6.5
Other Income (Expenses):
Other Income 281,600 0.1 0 0.0 0 0.0
Net Gain (Loss) on Dispositions of Assets (27,695) 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 (13,334,022) -6.3 (13,142,273) -5.9 (12,987,946) -5.4
Other Expense 0 0.0 0 0.0 0 0.0
------------- ----- ------------- ----- ------------- -----
TOTAL OTHER INCOME (EXPENSE) (13,080,117) -6.2 (13,142,273) -5.9 (12,987,946) -5.4
Earnings (Loss) Before Income Taxes (6,024,866) -2.9 921,909 0.4 2,665,119 1.1
Provision for Income Taxes (Benefit) (1,684,950) -0.8 569,648 0.3 1,243,545 0.5
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) (4,339,916) -2.1 352,261 0.2 1,421,574 0.6
============= ===== ============= ===== ============= =====
----------------------PROJECTED---------------------
2004 % 2005 % 2006 %
------------- ------ ------------- ------ ------------- ------
% Growth 8.6% 8.5% 8.5%
Revenues $ 261,843,878 100.0 $ 284,100,608 100.0 $ 308,249,159 100.0
Cost of Goods Sold 164,253,479 62.7 178,131,081 62.7 193,272,223 62.7
------------- ------ ------------- ------ ------------- ------
Gross Profit 97,590,399 37.3 105,969,527 37.3 114,976,936 37.3
Operating Expenses:
Selling, General and Administrative 71,557,217 27.3 76,707,164 27.0 82,302,526 26.7
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0
Depreciation and Amortization 7,533,867 2.9 8,238,918 2.9 8,939,226 2.9
------------- ------ ------------- ------ ------------- ------
TOTAL OPERATING EXPENSES 79,091,084 30.2 84,946,082 29.9 91,241,751 29.6
OPERATING INCOME (LOSS) 18,499,315 7.1 21,023,445 7.4 23,735,185 7.7
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 (12,841,705) -4.9 (12,784,527) -4.5 (12,946,465) -4.2
Other Expense 0 0.0 0 0.0 0 0.0
------------- ------ ------------- ------ ------------- ------
TOTAL OTHER INCOME (EXPENSE) (12,841,705) -4.9 (12,784,527) -4.5 (12,946,465) -4.2
Earnings (Loss) Before Income Taxes 5,657,610 2.2 8,238,918 2.9 10,788,721 3.5
Provision for Income Taxes (Benefit) 2,385,814 0.9 3,213,178 1.1 4,207,601 1.4
------------- ------ ------------- ------ ------------- ------
NET INCOME (LOSS) 3,271,796 1.2 5,025,740 1.8 6,581,120 2.1
============= ====== ============= ====== ============= ======
16
---------ACTUAL--------- ---------------------PROJECTED---------------------
LTM
2001 % 2002 % 2003 %
------------- ----- ------------- ----- ------------- -----
EBIT 7,055,251 14,064,182 15,653,065
EBITDA 13,293,245 20,342,938 22,799,276
Adjustments:
Other Non-Cash Adjustments to Earnings 585,382 392,306 527,408
One-Time Financing Charges 600,000 0 0
Excess Compensation 0 0 0
------------- ------------- -------------
Total Adjustments 1,185,382 392,306 527,408
Adjusted EBIT 8,240,633 3.9 14,456,488 6.5 16,180,473 6.7
Adjusted EBITDA 14,478,627 6.9 20,735,244 9.3 23,326,684 9.7
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense 13,334,022 6.3 13,142,273 5.9 12,987,946 5.4
Depreciation Expense 6,237,994 3.0 6,278,756 2.8 7,146,211 3.0
Capital Expenditures 2,695,032 1.3 4,415,905 2.0 4,580,000 1.9
==============================================================================================================================
----------------------PROJECTED---------------------
2004 % 2005 % 2006 %
------------- ------ ------------- ------ ------------- ------
EBIT 18,499,315 21,023,445 23,735,185
EBITDA 26,033,182 29,262,363 32,674,411
Adjustments:
Other Non-Cash Adjustments to Earnings 500,287 500,287 500,287
One-Time Financing Charges 0 0 0
Excess Compensation 0 0 0
------------- ------------- -------------
Total Adjustments 500,287 500,287 500,287
Adjusted EBIT 18,999,602 7.3 21,523,732 7.6 24,235,472 7.9
Adjusted EBITDA 26,533,469 10.1 29,762,650 10.5 33,174,698 10.8
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense 12,841,705 4.9 12,784,527 4.5 12,946,465 4.2
Depreciation Expense 7,533,867 2.9 8,238,918 2.9 8,939,226 2.9
Capital Expenditures 12,945,000 4.9 5,682,012 2.0 7,706,229 2.5
==============================================================================================================================
17
SCHEDULE 11[A]
PIERRE FOODS, INC.
COMPARATIVE PROJECTED INCOME STATEMENTS FOR THE YEARS 2002 THROUGH 2006 -
SCENARIO 2
---------ACTUAL--------- ---------------------PROJECTED---------------------
LTM
2001 % 2002 % 2003 %
------------- ------ ------------- ------ ------------- ------
% Growth 13.7% 15.0% 15.0%
Revenues $ 211,040,483 100.0 $ 242,696,555 100.0 $ 279,101,039 100.0
Cost of Goods Sold 133,905,113 63.4 151,928,044 62.6 174,717,250 62.6
------------- ------ ------------- ------ ------------- ------
Gross Profit 77,135,370 36.6 90,768,512 37.4 104,383,788 37.4
Operating Expenses:
Selling, General and Administrative 63,842,125 30.3 75,235,932 31.0 86,521,322 31.0
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0
Depreciation and Amortization 6,237,994 3.0 6,278,756 2.6 7,146,211 2.6
------------- ------ ------------- ------ ------------- ------
TOTAL OPERATING EXPENSES 70,080,119 33.2 81,514,688 33.6 93,667,533 33.6
OPERATING INCOME (LOSS) 7,055,251 3.3 9,253,824 3.8 10,716,255 3.8
Other Income (Expenses):
Other Income 281,600 0.1 0 0.0 0 0.0
Net Gain (Loss) on Dispositions of Assets (27,695) 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 (13,334,022) -6.3 (13,142,273) -5.4 (12,987,946) -4.7
Other Expense 0 0.0 0 0.0 0 0.0
------------- ------ ------------- ------ ------------- ------
TOTAL OTHER INCOME (EXPENSE) (13,080,117) -6.2 (13,142,273) -5.4 (12,987,946) -4.7
Earnings (Loss) Before Income Taxes (6,024,866) -2.9 (3,888,449) -1.6 (2,271,691) -0.8
Provision for Income Taxes (Benefit) (1,684,950) -0.8 (2,402,673) -1.0 (1,059,971) -0.4
------------- ------ ------------- ------ ------------- ------
NET INCOME (LOSS) (4,339,916) -2.1 (1,485,777) -0.6 (1,211,720) -0.4
============= ====== ============= ====== ============= ======
----------------------PROJECTED---------------------
2004 % 2005 % 2006 %
------------- ------ ------------- ------ ------------- ------
% Growth 15.0% 15.0% 15.0%
Revenues $ 320,966,195 100.0 $ 369,111,124 100.0 $ 424,477,792 100.0
Cost of Goods Sold 200,924,838 62.6 231,063,563 62.6 265,723,098 62.6
------------- ------ ------------- ------ ------------- ------
Gross Profit 120,041,357 37.4 138,047,560 37.4 158,754,694 37.4
Operating Expenses:
Selling, General and Administrative 99,499,520 31.0 114,424,448 31.0 131,588,116 31.0
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0
Depreciation and Amortization 7,533,867 2.3 7,382,222 2.0 7,216,122 1.7
------------- ------ ------------- ------ ------------- ------
TOTAL OPERATING EXPENSES 107,033,387 33.3 121,806,671 33.0 138,804,238 32.7
OPERATING INCOME (LOSS) 13,007,969 4.1 16,240,889 4.4 19,950,456 4.7
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 (12,841,705) -4.0 (12,841,705) -3.5 (12,841,705) -3.0
Other Expense 0 0.0 0 0.0 0 0.0
------------- ------ ------------- ------ ------------- ------
TOTAL OTHER INCOME (EXPENSE) (12,841,705) -4.0 (12,841,705) -3.5 (12,841,705) -3.0
Earnings (Loss) Before Income Taxes 166,264 0.1 3,399,184 0.9 7,108,751 1.7
Provision for Income Taxes (Benefit) 70,114 0.0 1,325,682 0.4 2,772,413 0.7
------------- ------ ------------- ------ ------------- ------
NET INCOME (LOSS) 96,151 0.0 2,073,503 0.6 4,336,338 1.0
============= ====== ============= ====== ============= ======
18
---------ACTUAL--------- ---------------------PROJECTED---------------------
LTM
2001 % 2002 % 2003 %
------------- ----- ------------- ----- ------------- -----
EBIT 7,055,251 9,253,824 10,716,255
EBITDA 13,293,245 15,532,580 17,862,466
Adjustments:
Other Non-Cash Adjustments to Earnings 585,382 392,306 527,408
One-Time Financing Charges 600,000 0 0
Excess Compensation 0 0 0
------------- ------------- -------------
Total Adjustments 1,185,382 392,306 527,408
Adjusted EBIT 8,240,633 3.9 9,646,130 4.0 11,243,663 4.0
Adjusted EBITDA 14,478,627 6.9 15,924,886 6.6 18,389,874 6.6
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense 13,334,022 6.3 13,142,273 5.4 12,987,946 4.7
Depreciation Expense 6,237,994 3.0 6,278,756 2.6 7,146,211 2.6
Capital Expenditures 2,695,032 1.3 4,415,905 1.8 4,580,000 1.6
==============================================================================================================================
----------------------PROJECTED---------------------
2004 % 2005 % 2006 %
------------- ------ ------------- ------ ------------- ------
EBIT 13,007,969 16,240,889 19,950,456
EBITDA 20,541,836 23,623,112 27,166,579
Adjustments:
Other Non-Cash Adjustments to Earnings 500,287 500,287 500,287
One-Time Financing Charges 0 0 0
Excess Compensation 0 0 0
------------- ------------- -------------
Total Adjustments 500,287 500,287 500,287
Adjusted EBIT 13,508,256 4.2 16,741,176 4.5 20,450,743 4.8
Adjusted EBITDA 21,042,123 6.6 24,123,399 6.5 27,666,866 6.5
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense 12,841,705 4.0 12,841,705 3.5 12,841,705 3.0
Depreciation Expense 7,533,867 2.3 7,382,222 2.0 7,216,122 1.7
Capital Expenditures 12,945,000 4.0 7,382,222 2.0 7,216,122 1.7
==============================================================================================================================
19
SCHEDULE 11[B]
PIERRE FOODS, INC.
COMPARATIVE PROJECTED INCOME STATEMENTS FOR THE YEARS 2002 THROUGH 2006 -
SCENARIO 3
---------ACTUAL--------- ---------------------PROJECTED---------------------
LTM
2001 % 2002 % 2003 %
------------- ------ ------------- ------ ------------- ------
% Growth 13.7% 15.0% 15.0%
Revenues $ 211,040,483 100.0 $ 242,696,555 100.0 $ 279,101,039 100.0
Cost of Goods Sold 133,905,113 63.4 152,170,740 62.7 174,996,351 62.7
------------- ------ ------------- ------ ------------- ------
Gross Profit 77,135,370 36.6 90,525,815 37.3 104,104,687 37.3
Operating Expenses:
Selling, General and Administrative 63,842,125 30.3 68,197,732 28.1 77,590,089 27.8
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0
Depreciation and Amortization 6,237,994 3.0 6,278,756 2.6 7,146,211 2.6
------------- ------ ------------- ------ ------------- ------
TOTAL OPERATING EXPENSES 70,080,119 33.2 74,476,488 30.7 84,736,300 30.4
OPERATING INCOME (LOSS) 7,055,251 3.3 16,049,327 6.6 19,368,388 6.9
Other Income (Expenses):
Other Income 281,600 0.1 0 0.0 0 0.0
Net Gain (Loss) on Dispositions of Assets (27,695) 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 (13,334,022) -6.3 (13,142,273) -5.4 (12,987,946) -4.7
Other Expense 0 0.0 0 0.0 0 0.0
------------- ------ ------------- ------ ------------- ------
TOTAL OTHER INCOME (EXPENSE) (13,080,117) -6.2 (13,142,273) -5.4 (12,987,946) -4.7
Earnings (Loss) Before Income Taxes (6,024,866) -2.9 2,907,054 1.2 6,380,442 2.3
Provision for Income Taxes (Benefit) (1,684,950) -0.8 1,796,269 0.7 2,977,114 1.1
------------- ------ ------------- ------ ------------- ------
NET INCOME (LOSS) (4,339,916) -2.1 1,110,785 0.5 3,403,328 1.2
============= ====== ============= ====== ============= ======
----------------------PROJECTED---------------------
2004 % 2005 % 2006 %
------------- ------ ------------- ------ ------------- ------
% Growth 15.0% 15.0% 15.0%
Revenues $ 320,966,195 100.0 $ 369,111,124 100.0 $ 424,477,792 100.0
Cost of Goods Sold 201,245,804 62.7 231,432,675 62.7 266,147,576 62.7
------------- ------ ------------- ------ ------------- ------
Gross Profit 119,720,391 37.3 137,678,449 37.3 158,330,217 37.3
Operating Expenses:
Selling, General and Administrative 87,623,771 27.3 99,660,003 27.0 113,335,571 26.7
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0
Depreciation and Amortization 7,533,867 2.3 7,382,222 2.0 7,216,122 1.7
------------- ------ ------------- ------ ------------- ------
TOTAL OPERATING EXPENSES 95,157,638 29.6 107,042,226 29.0 120,551,693 28.4
OPERATING INCOME (LOSS) 24,562,752 7.7 30,636,223 8.3 37,778,524 8.9
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 (12,841,705) -4.0 (12,362,500) -3.3 (12,362,500) -2.9
Other Expense 0 0.0 0 0.0 0 0.0
------------- ------ ------------- ------ ------------- ------
TOTAL OTHER INCOME (EXPENSE) (12,841,705) -4.0 (12,362,500) -3.3 (12,362,500) -2.9
Earnings (Loss) Before Income Taxes 11,721,047 3.7 18,273,723 5.0 25,416,024 6.0
Provision for Income Taxes (Benefit) 4,942,766 1.5 7,126,752 1.9 9,912,249 2.3
------------- ------ ------------- ------ ------------- ------
NET INCOME (LOSS) 6,778,282 2.1 11,146,971 3.0 15,503,774 3.7
============= ====== ============= ====== ============= ======
20
---------ACTUAL--------- ---------------------PROJECTED---------------------
LTM
2001 % 2002 % 2003 %
------------- ----- ------------- ----- ------------- -----
EBIT 7,055,251 16,049,327 19,368,388
EBITDA 13,293,245 22,328,083 26,514,599
Adjustments:
Other Non-Cash Adjustments to Earnings 585,382 392,306 527,408
One-Time Financing Charges 600,000 0 0
Excess Compensation 0 0 0
------------- ------------- -------------
Total Adjustments 1,185,382 392,306 527,408
Adjusted EBIT 8,240,633 3.9 16,441,633 6.8 19,895,796 7.1
Adjusted EBITDA 14,478,627 6.9 22,720,389 9.4 27,042,007 9.7
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense 13,334,022 6.3 13,142,273 5.4 12,987,946 4.7
Depreciation Expense 6,237,994 3.0 6,278,756 2.6 7,146,211 2.6
Capital Expenditures 2,695,032 1.3 4,415,905 1.8 4,580,000 1.6
==============================================================================================================================
----------------------PROJECTED---------------------
2004 % 2005 % 2006 %
------------- ------ ------------- ------ ------------- ------
EBIT 24,562,752 30,636,223 37,778,524
EBITDA 32,096,619 38,018,446 44,994,646
Adjustments:
Other Non-Cash Adjustments to Earnings 500,287 500,287 500,287
One-Time Financing Charges 0 0 0
Excess Compensation 0 0 0
------------- ------------- -------------
Total Adjustments 500,287 500,287 500,287
Adjusted EBIT 25,063,039 7.8 31,136,510 8.4 38,278,811 9.0
Adjusted EBITDA 32,596,906 10.2 38,518,733 10.4 45,494,933 10.7
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense 12,841,705 4.0 12,362,500 3.3 12,362,500 2.9
Depreciation Expense 7,533,867 2.3 7,382,222 2.0 7,216,122 1.7
Capital Expenditures 12,945,000 4.0 12,945,000 3.5 12,945,000 3.0
==============================================================================================================================
21
SCHEDULE 11[C]
PIERRE FOODS, INC.
COMPARATIVE PROJECTED INCOME STATEMENTS FOR THE YEARS 2002 THROUGH 2006 -
SCENARIO 4
---------ACTUAL--------- ---------------------PROJECTED---------------------
LTM
2001 % 2002 % 2003 %
------------- ------ ------------- ------ ------------- ------
% Growth 13.7% 15.0% 15.0%
Revenues $ 211,040,483 100.0 $ 242,696,555 100.0 $ 279,101,039 100.0
Cost of Goods Sold 133,905,113 63.4 148,044,899 61.0 170,251,634 61.0
------------- ------ ------------- ------ ------------- ------
Gross Profit 77,135,370 36.6 94,651,657 39.0 108,849,405 39.0
Operating Expenses:
Selling, General and Administrative 63,842,125 30.3 66,741,553 27.5 76,752,786 27.5
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0
Depreciation and Amortization 6,237,994 3.0 6,278,756 2.6 7,146,211 2.6
------------- ------ ------------- ------ ------------- ------
TOTAL OPERATING EXPENSES 70,080,119 33.2 73,020,309 30.1 83,898,997 30.1
OPERATING INCOME (LOSS) 7,055,251 3.3 21,631,348 8.9 24,950,408 8.9
Other Income (Expenses):
Other Income 281,600 0.1 0 0.0 0 0.0
Net Gain (Loss) on Dispositions of Assets (27,695) 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 (13,334,022) -6.3 (13,142,273) -5.4 (12,987,946) -4.7
Other Expense 0 0.0 0 0.0 0 0.0
------------- ------ ------------- ------ ------------- ------
TOTAL OTHER INCOME (EXPENSE) (13,080,117) -6.2 (13,142,273) -5.4 (12,987,946) -4.7
Earnings (Loss) Before Income Taxes (6,024,866) -2.9 8,489,075 3.5 11,962,462 4.3
Provision for Income Taxes (Benefit) (1,684,950) -0.8 5,245,399 2.2 5,581,685 2.0
------------- ------ ------------- ------ ------------- ------
NET INCOME (LOSS) (4,339,916) -2.1 3,243,676 1.3 6,380,777 2.3
============= ====== ============= ====== ============= ======
----------------------PROJECTED---------------------
2004 % 2005 % 2006 %
------------- ------ ------------- ------ ------------- ------
% Growth 15.0% 15.0% 15.0%
Revenues $ 320,966,195 100.0 $ 369,111,124 100.0 $ 424,477,792 100.0
Cost of Goods Sold 195,789,379 61.0 225,157,785 61.0 258,931,453 61.0
------------- ------ ------------- ------ ------------- ------
Gross Profit 125,176,816 39.0 143,953,338 39.0 165,546,339 39.0
Operating Expenses:
Selling, General and Administrative 89,068,119 27.8 104,273,892 28.3 120,976,171 28.5
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 0 0.0 0 0.0
Depreciation and Amortization 7,533,867 2.3 7,382,222 2.0 7,216,122 1.7
------------- ------ ------------- ------ ------------- ------
TOTAL OPERATING EXPENSES 96,601,986 30.1 111,656,115 30.3 128,192,293 30.2
OPERATING INCOME (LOSS) 28,574,830 8.9 32,297,223 8.8 37,354,046 8.8
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 (12,841,705) -4.0 (12,350,000) -3.3 (12,350,000) -2.9
Other Expense 0 0.0 0 0.0 0 0.0
------------- ------ ------------- ------ ------------- ------
TOTAL OTHER INCOME (EXPENSE) (12,841,705) -4.0 (12,350,000) -3.3 (12,350,000) -2.9
Earnings (Loss) Before Income Taxes 15,733,125 4.9 19,947,223 5.4 25,004,046 5.9
Provision for Income Taxes (Benefit) 6,634,659 2.1 7,779,417 2.1 9,751,578 2.3
------------- ------ ------------- ------ ------------- ------
NET INCOME (LOSS) 9,098,466 2.8 12,167,806 3.3 15,252,468 3.6
============= ====== ============= ====== ============= ======
22
---------ACTUAL--------- ---------------------PROJECTED---------------------
LTM
2001 % 2002 % 2003 %
------------- ----- ------------- ----- ------------- -----
EBIT 7,055,251 21,631,348 24,950,408
EBITDA 13,293,245 27,910,104 32,096,619
Adjustments:
Other Non-Cash Adjustments to Earnings 585,382 392,306 527,408
One-Time Financing Charges 600,000 0 0
Excess Compensation 0 0 0
------------- ------------- -------------
Total Adjustments 1,185,382 392,306 527,408
Adjusted EBIT 8,240,633 3.9 22,023,654 9.1 25,477,816 9.1
Adjusted EBITDA 14,478,627 6.9 28,302,410 11.7 32,624,027 11.7
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense 13,334,022 6.3 13,142,273 5.4 12,987,946 4.7
Depreciation Expense 6,237,994 3.0 6,278,756 2.6 7,146,211 2.6
Capital Expenditures 2,280,849 1.1 4,415,905 1.8 4,580,000 1.6
==============================================================================================================================
----------------------PROJECTED---------------------
2004 % 2005 % 2006 %
------------- ------ ------------- ------ ------------- ------
EBIT 28,574,830 32,297,223 37,354,046
EBITDA 36,108,697 39,679,446 44,570,168
Adjustments:
Other Non-Cash Adjustments to Earnings 500,287 500,287 500,287
One-Time Financing Charges 0 0 0
Excess Compensation 0 0 0
------------- ------------- -------------
Total Adjustments 500,287 500,287 500,287
Adjusted EBIT 29,075,117 9.1 32,797,510 8.9 37,854,333 8.9
Adjusted EBITDA 36,608,984 11.4 40,179,733 10.9 45,070,455 10.6
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense 12,841,705 4.0 12,350,000 3.3 12,350,000 2.9
Depreciation Expense 7,533,867 2.3 7,382,222 2.0 7,216,122 1.7
Capital Expenditures 12,945,000 4.0 7,382,222 2.0 7,216,122 1.7
==============================================================================================================================
23
SCHEDULE 12
PIERRE FOODS, INC.
DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 1
-------------------------------PROJECTIONS---------------------------
BASE YEAR COMPOUNDED
LTM ANNUAL
2001 2002 2003 2004 2005 2006 GROWTH
------------- ------------ ------------- ------------ ------------ ------------ ----------
Revenue Growth 13.7% 5.3% 8.5% 8.6% 8.5% 8.5%
NET REVENUES $211,040,483 $222,212,486 $241,085,854 $261,843,878 $284,100,608 $308,249,159 8.5%
OPERATING INCOME (LOSS) $ 7,055,251 $ 14,064,182 $ 15,653,065 $ 18,499,315 $ 21,023,445 $ 23,735,185 14.0%
Operating Margin 3.3% 6.3% 6.5% 7.1% 7.4% 7.7%
Adjusted EBIT $ 8,240,633 $ 14,456,488 $ 16,180,473 $ 18,999,602 $ 21,523,732 $ 24,235,472
Income Taxes 3,213,847 8,932,664 7,549,809 8,012,132 8,394,255 9,451,834
------------- ------------ ------------- ------------ ------------ ------------
DEBT-FREE NET INCOME $ 5,026,786 $ 5,523,824 $ 8,630,664 $ 10,987,470 $ 13,129,476 $ 14,783,638
Debt-free Net Income Margin 2.4% 2.5% 3.6% 4.2% 4.6% 4.8%
+ Depreciation/Amortization 6,237,994 6,278,756 7,146,211 7,533,867 8,238,918 8,939,226
- - Capital Expenditures 2,695,032 4,415,905 4,580,000 12,945,000 5,682,012 7,706,229
------------- ------------ ------------- ------------ ------------ ------------
Beginning W/C (Debt-Free) 37,549,733 51,108,872 55,449,746 60,224,092 65,343,140
Required W/C (% of Sales) 23.0% 51,108,872 55,449,746 60,224,092 65,343,140 70,897,307
------------ ------------- ------------ ------------ ------------
- - W/C Additions (Excess) 13,559,139 4,340,874 4,774,346 5,119,048 5,554,167
DEBT-FREE NET CASH FLOW $ (6,172,464) $ 6,856,001 $ 801,991 $ 10,567,334 $ 10,462,468
24
-------------------------------PROJECTIONS---------------------------
BASE YEAR COMPOUNDED
LTM ANNUAL
2001 2002 2003 2004 2005 2006 GROWTH
------------- ------------ ------------- ------------ ------------ ------------ ----------
Discount Rate 16.0% 16.0% 16.0% 16.0% 16.0% 16.0%
Discount Factor 0.9285 0.8004 0.6900 0.5948 0.5128
----------- ------------ -------- ---------- ----------
Present Value $(5,731,133) $ 5,487,543 $553,374 $6,285,450 $5,365,153
Sum of Present Values $ 11,960,387
Year 5 Net Cash Flow Times Long-Term
Growth Rate 4.0% $10,880,966
Capitalization Rate 12.0%
-----------
Residual Value $90,674,717
Discount Rate 16.0%
Discount Factor 0.5128
-----------
Present Value of Residual Value 46,497,995
------------
Indicated Value - Invested Capital $ 58,458,382
Add: Cash & Equivalents 1,813,437
Less: Total Interest Bearing Debt 118,318,202
------------
Indicated Value - Aggregate Value
Stockholders' Equity (Control Basis) (58,046,383)
Rounded to $(58,046,400)
============
25
================================================================================
SCHEDULE 12[A]
PIERRE FOODS, INC.
DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 2
================================================================================
BASE YEAR -------------------PROJECTIONS---------------------
LTM
2001 2002 2003 2004
------------ ------------ ------------ ------------
Revenue Growth 13.7% 15.0% 15.0% 15.0%
NET REVENUES $211,040,483 $242,696,555 $279,101,039 $320,966,195
OPERATING INCOME (LOSS) $ 7,055,251 $ 14,064,182 $ 15,653,065 $ 18,499,315
Operating Margin 3.3% 5.8% 5.6% 5.8%
Adjusted EBIT $ 8,240,633 $ 9,646,130 $ 11,243,663 $ 13,508,256
Income Taxes 3,213,847 5,960,343 5,246,293 5,696,432
------------ ------------ ------------ ------------
DEBT-FREE NET INCOME $ 5,026,786 $ 3,685,786 $ 5,997,370 $ 7,811,825
Debt-free Net Income Margin 2.4% 1.5% 2.1% 2.4%
+ Depreciation/Amortization 6,237,994 6,278,756 7,146,211 7,533,867
- - Capital Expenditures 2,695,032 4,415,905 4,580,000 12,945,000
------------ ------------ ------------ ------------
Beginning W/C (Debt-Free) 37,549,733 55,820,208 64,193,239
Required W/C (% of Sales) 23.0% 55,820,208 64,193,239 73,822,225
------------ ------------ ------------ ------------
- - W/C Additions (Excess) 18,270,475 8,373,031 9,628,986
DEBT-FREE NET CASH FLOW $(12,721,838) $ 190,550 $ (7,228,294)
Discount Rate 16.0% 16.0% 16.0% 16.0%
----------PROJECTIONS-----------
COMPOUNDED
2005 2006 ANNUAL GROWTH
------------ ------------ -------------
Revenue Growth 15.0% 15.0%
NET REVENUES $369,111,124 $424,477,792 15.0%
OPERATING INCOME (LOSS) $ 21,023,445 $ 23,735,185 14.0%
Operating Margin 5.7% 5.6%
Adjusted EBIT $ 16,741,176 $ 20,450,743
Income Taxes 6,529,059 7,975,790
------------ ------------
DEBT-FREE NET INCOME $ 10,212,118 $ 12,474,953
Debt-free Net Income Margin 2.8% 2.9%
+ Depreciation/Amortization 7,382,222 7,216,122
- - Capital Expenditures 7,382,222 7,216,122
------------ ------------
Beginning W/C (Debt-Free) 73,822,225 84,895,558
Required W/C (% of Sales) 84,895,558 97,629,892
------------ ------------
- - W/C Additions (Excess) 11,073,333 12,734,334
DEBT-FREE NET CASH FLOW $ (861,215) $ (259,381)
Discount Rate 16.0% 16.0%
26
BASE YEAR -------------------PROJECTIONS---------------------
LTM
2001 2002 2003 2004
------------ ------------ ------------ ------------
Discount Factor 0.9285 0.8004 0.6900
------------ ------------ ------------
Present Value $ (11,812,226) $ 152,516 $ (4,987,523)
Sum of Present Values
Year 5 Net Cash Flow Times Long-Term Growth Rate 4.0% $ (269,756)
Capitalization Rate 12.0%
------------
Residual Value $ (2,247,967)
Discount Rate 16.0%
Discount Factor 0.5128
------------
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 ANNUAL GROWTH
------------ ------------- -------------
Discount Factor 0.5948 0.5128
------------- -------------
Present Value $ (512,251) $ (133,010)
Sum of Present Values $ (17,292,494)
Year 5 Net Cash Flow Times Long-Term Growth Rate
Capitalization Rate
Residual Value
Discount Rate
Discount Factor
Present Value of Residual Value (1,152,757)
-------------
Indicated Value - Invested Capital $ (18,445,251)
Add: Cash & Equivalents 1,813,437
Less: Total Interest Bearing Debt 118,318,202
-------------
Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) (134,950,016)
Rounded to $(134,950,000)
=============
27
================================================================================
SCHEDULE 12[B]
PIERRE FOODS, INC.
DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 3
================================================================================
BASE YEAR -------------------PROJECTIONS---------------------
LTM
2001 2002 2003 2004
------------ ------------ ------------ ------------
Revenue Growth 13.7% 15.0% 15.0% 15.0%
NET REVENUES $211,040,483 $242,696,555 $279,101,039 $320,966,195
OPERATING INCOME (LOSS) $ 7,055,251 $ 16,049,327 $ 19,368,388 $ 24,562,752
Operating Margin 3.3% 6.6% 6.9% 7.7%
Adjusted EBIT $ 8,240,633 $ 16,441,633 $ 19,895,796 $ 25,063,039
Income Taxes 3,213,847 10,159,285 9,283,378 10,569,084
------------ ------------ ------------ ------------
DEBT-FREE NET INCOME $ 5,026,786 $ 6,282,348 $ 10,612,417 $ 14,493,956
Debt-free Net Income Margin 2.4% 2.6% 3.8% 4.5%
+ Depreciation/Amortization 6,237,994 6,278,756 7,146,211 7,533,867
- - Capital Expenditures 2,695,032 4,415,905 4,580,000 12,945,000
------------ ------------ ------------ ------------
Beginning W/C (Debt-Free) 37,549,733 55,820,208 64,193,239
Required W/C (% of Sales) 23.0% 55,820,208 64,193,239 73,822,225
------------ ------------ ------------
- - W/C Additions (Excess) 18,270,475 8,373,031 9,628,986
DEBT-FREE NET CASH FLOW $(10,125,276) $ 4,805,597 $ (546,163)
Discount Rate 16.0% 16.0% 16.0% 16.0%
----------PROJECTIONS-----------
COMPOUNDED
2005 2006 ANNUAL GROWTH
------------ ------------ -------------
Revenue Growth 15.0% 15.0%
NET REVENUES $369,111,124 $424,477,792 15.0%
OPERATING INCOME (LOSS) $ 30,636,223 $ 37,778,524 23.7%
Operating Margin 8.3% 8.9%
Adjusted EBIT $ 31,136,510 $ 38,278,811
Income Taxes 12,143,239 14,928,736
------------ ------------
DEBT-FREE NET INCOME $ 18,993,271 $ 23,350,074
Debt-free Net Income Margin 5.1% 5.5%
+ Depreciation/Amortization 7,382,222 7,216,122
- - Capital Expenditures 12,945,000 12,945,000
------------ ------------
Beginning W/C (Debt-Free) 73,822,225 84,895,558
Required W/C (% of Sales) 84,895,558 97,629,892
------------ ------------
- - W/C Additions (Excess) 11,073,333 12,734,334
DEBT-FREE NET CASH FLOW $ 2,357,161 $ 4,886,863
Discount Rate 16.0% 16.0%
28
BASE YEAR -------------------PROJECTIONS---------------------
LTM
2001 2002 2003 2004
------------ ------------ ------------ ------------
Discount Factor 0.9285 0.8004 0.6900
------------ ------------ ------------
Present Value $ (9,401,319) $ 3,846,400 $ (376,853)
Sum of Present Values
Year 5 Net Cash Flow Times Long-Term Growth Rate 4.0% $ 5,082,337
Capitalization Rate 12.0%
------------
Residual Value $ 42,352,808
Discount Rate 16.0%
Discount Factor 0.5128
------------
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 ANNUAL GROWTH
------------ ------------ -------------
Discount Factor 0.5948 0.5128
------------ -------------
Present Value $ 1,402,039 $ 2,505,983
Sum of Present Values $ (2,023,750)
Year 5 Net Cash Flow Times Long-Term Growth Rate
Capitalization Rate
Residual Value
Discount Rate
Discount Factor
Present Value of Residual Value 21,718,520
-------------
Indicated Value - Invested Capital $ 19,694,770
Add: Cash & Equivalents 1,813,437
Less: Total Interest Bearing Debt 118,318,202
-------------
Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) (96,809,995)
Rounded to $ (96,810,000)
=============
29
================================================================================
SCHEDULE 12[C]
PIERRE FOODS, INC.
DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 4
================================================================================
BASE YEAR -------------------PROJECTIONS---------------------
LTM
2001 2002 2003 2004
------------ ------------ ------------ ------------
Revenue Growth 13.7% 15.0% 15.0% 15.0%
NET REVENUES $211,040,483 $242,696,555 $279,101,039 $320,966,195
OPERATING INCOME (LOSS) $ 7,055,251 $ 21,631,348 $ 24,950,408 $ 28,574,830
Operating Margin 3.3% 8.9% 8.9% 8.9%
Adjusted EBIT $ 8,240,633 $ 22,023,654 $ 25,477,816 $ 29,075,117
Income Taxes 3,213,847 13,608,416 11,887,949 12,260,977
------------ ------------ ------------ ------------
DEBT-FREE NET INCOME $ 5,026,786 $ 8,415,238 $ 13,589,867 $ 16,814,140
Debt-free Net Income Margin 2.4% 3.5% 4.9% 5.2%
+ Depreciation/Amortization 6,237,994 6,278,756 7,146,211 7,533,867
- - Capital Expenditures 2,280,849 4,415,905 4,580,000 12,945,000
------------ ------------ ------------ ------------
Beginning W/C (Debt-Free) 37,549,733 55,820,208 64,193,239
Required W/C (% of Sales) 23.0% 55,820,208 64,193,239 73,822,225
------------ ------------ ------------
- - W/C Additions (Excess) 18,270,475 8,373,031 9,628,986
DEBT-FREE NET CASH FLOW $ (7,992,386) $ 7,783,047 $ 1,774,021
Discount Rate 16.0% 16.0% 16.0% 16.0%
----------PROJECTIONS-----------
COMPOUNDED
2005 2006 ANNUAL GROWTH
------------ ------------ -------------
Revenue Growth 15.0% 15.0%
NET REVENUES $369,111,124 $424,477,792 15.0%
OPERATING INCOME (LOSS) $ 32,297,223 $ 37,354,046 14.6%
Operating Margin 8.8% 8.8%
Adjusted EBIT $ 32,797,510 $ 37,854,333
Income Taxes 12,791,029 14,763,190
------------ ------------
DEBT-FREE NET INCOME $ 20,006,481 $ 23,091,143
Debt-free Net Income Margin 5.4% 5.4%
+ Depreciation/Amortization 7,382,222 7,216,122
- - Capital Expenditures 7,382,222 7,216,122
------------ ------------
Beginning W/C (Debt-Free) 73,822,225 84,895,558
Required W/C (% of Sales) 84,895,558 97,629,892
------------ ------------
- - W/C Additions (Excess) 11,073,333 12,734,334
DEBT-FREE NET CASH FLOW $ 8,933,148 $ 10,356,809
Discount Rate 16.0% 16.0%
30
BASE YEAR -------------------PROJECTIONS---------------------
LTM
2001 2002 2003 2004
------------ ------------ ------------ ------------
Discount Factor 0.9285 0.8004 0.6900
------------ ------------ ------------
Present Value $ (7,420,930) $ 6,229,551 $ 1,224,075
Sum of Present Values
Year 5 Net Cash Flow Times Long-Term Growth Rate 4.0% $ 10,771,081
Capitalization Rate 12.0%
------------
Residual Value $ 89,759,008
Discount Rate 16.0%
Discount Factor 0.5128
------------
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 ANNUAL GROWTH
------------ ------------ -------------
Discount Factor 0.5948 0.5128
------------ -------------
Present Value $ 5,313,437 $ 5,310,972
Sum of Present Values $ 10,657,105
Year 5 Net Cash Flow Times Long-Term Growth Rate
Capitalization Rate
Residual Value
Discount Rate
Discount Factor
Present Value of Residual Value 46,028,419
-------------
Indicated Value - Invested Capital $ 56,685,524
Add: Cash & Equivalents 1,813,437
Less: Total Interest Bearing Debt 118,318,202
-------------
Indicated Value - Aggregate Value Stockholders' Equity (Control Basis) (59,819,241)
Rounded to $ (59,819,200)
=============
31
================================================================================
SCHEDULE 13
PIERRE FOODS, INC.
WEIGHTED COST OF CAPITAL ANALYSIS (3/9/01)
================================================================================
- ----------------------------------------------------------------------------------------------------------------
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)
- ----------------------------------------------------------------------------------------------------------------
30-Year Treasury Bond Yield (Rf) (3/9/01) 6.14%
Plus Equity Premiums:
Equity Premium (Rm-Rf) 6.88% (4)
Beta Coefficient (b) 1.00 (5)
----
Industry-Adjusted Premium 6.88%
Size Premium 3.95% (6)
Additional Risk Premium (ARP) 7.00% (7)
----
Total Equity Premium 17.83%
-----
Cost of Equity (Re) 23.97%
- ----------------------------------------------------------------------------------------------------------------
CAPITALIZATION STRUCTURE:
- ----------------------------------------------------------------------------------------------------------------
Debt % of Capital (D) 58.00%
Equity % of Capital (E) 42.00% (8)
- ----------------------------------------------------------------------------------------------------------------
WEIGHTED COST OF CAPITAL:
- ----------------------------------------------------------------------------------------------------------------
Wtd. Cost of Debt (D)*(Rd) 5.48%
Wtd. Cost of Equity (E)*(Re) 10.07%
----
Weighted Cost of Capital 15.55%
Rounded to 16.00%
- --------------------------------------------------------------------------------
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
32
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 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.
================================================================================