1
EXHIBIT (c)(5)
- --------------------------------------------------------------------------------
SCHEDULE 1
PIERRE FOODS, INC.
VALUATION SUMMARY ($000s)
- --------------------------------------------------------------------------------
Valuation Approach Value Indication Weighting
- ------------------ ---------------- ---------
Transaction Approach $12,191 25.0%
Market Approach $7,091 50.0%
DCF Approach - Scenario #1 $0 25.0%
DCF Approach - Scenario #2 $0
DCF Approach - Scenario #3 $0
DCF Approach - Scenario #4 $0
----------------
Concluded Fair Market Value - Minority, Marketable Basis $6,593
Shares Outstanding as of March 9, 2001 5,781
----------------
Total Fair Market Value per Share $1.14
================
2
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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
- ------------------------------------------------------------------------------------------------------------------------------
**
As of RMA (1) RMA (1) RMA (1)
Fiscal Year Ended: 3/4/2000 % 12/2/2000 % SIC #2011 SIC #2013 SIC #2051
------------ ----- ------------ ----- --------- --------- ---------
ASSETS
Cash & Equivalents $2,701,464 1.6 $1,813,437 1.1 6.1 6.1 7.2
Marketable Securities 0 0.0 0 0.0
Accounts Receivable, Net
Trade and Others 17,129,821 10.4 18,225,203 11.3 25.5 18.9 15.4
Related Party 292,990 0.2 0 0.0
Notes Receivable, Current Portion
Related Party 152,456 0.1 0 0.0
Other 86,057 0.1 0 0.0
Inventories 25,025,421 15.2 26,835,344 16.6 17.6 18.3 7.2
Income Tax Receivable 2,828,156 1.7 1,874,018 1.2
Prepaid Expenses and Other 799,582 0.5 1,030,985 0.6
Deferred Income Taxes 2,290,361 1.4 2,652,624 1.6
------------ ----- ------------ ----- --------- --------- ---------
Total Current Assets 51,306,308 31.1 52,431,611 32.5 51.0 44.9 33.8
PROPERTY, PLANT & EQUIPMENT
Gross Property, Plant & Equipment 50,711,772 30.8 N/A 0.0
Less: Depreciation/Amortization (14,926,953) -9.1 N/A 0.0
------------ ----- ------------ ----- --------- --------- ---------
Net Property, Plant & Equipment 35,784,819 21.7 34,907,752 21.7 37.8 43.8 49.5
OTHER ASSETS
Property Held for Sale 0 0.0 0 0.0
Trade Name, Net 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 28,893,723 17.5 27,871,114 17.3
Other Intangible Assets, Net 2,556,936 1.6 2,363,956 1.5
Noncurrent Notes Receivable 0 0.0 0 0.0
Noncurrent Related Party Note Receivable 705,493 0.4 705,493 0.4
Deferred Income Taxes 0 0.0 0 0.0
Deferred Loan Origination Fees, Net 3,714,748 2.3 2,619,157 1.6
Investment in Affiliates 0 0.0 0 0.0
Investment in Restricted Equity Securities 0 0.0 0 0.0
Other 0 0.0 0 0.0
------------ ----- ------------ ----- --------- --------- ---------
Total Other Assets 77,635,536 47.1 73,846,356 45.8
TOTAL ASSETS $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 9.9 7.9 2.4
Current Installments of Long-Term Debt 314,433 0.2 67,631 0.0 4.3 2.6 4.1
Trade Accounts Payable 5,493,168 3.3 4,937,996 3.1 12.4 11.7 10.6
Income Taxes Payable 0 0.0 0 0.0 0.2 0.3 0.2
Accrued Salaries and Wages 2,427,691 1.5 4,246,004 2.6
Accrued Insurance 154,947 0.1 94,582 0.1
Accrued Marketing and Advertising 1,903,241 1.2 2,859,771 1.8
Taxes, Other than Income 563,879 0.3 590,487 0.4
Accrued Interest 3,213,929 2.0 3,153,280 2.0
Gift Certificates Outstanding 0 0.0 0 0.0
Other 831,681 0.5 339,601 0.2
------------ ----- ------------ ----- --------- --------- ---------
Total Current Liabilities 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
Deferred Income Taxes 1,487,134 0.9 1,483,306 0.9 0.6 0.6 2.1
Other Long-Term Liabilities 1,638,466 1.0 1,347,231 0.8
Long Term Debt, Noncurrent 115,164,922 69.9 115,097,291 71.4 19.1 18.1 25.5
------------ ----- ------------ -----
Total Long-Term Liabilities 118,290,522 71.8 117,927,828 73.2
TOTAL LIABILITIES 133,193,491 80.9 134,217,180 83.3
SHAREHOLDERS' EQUITY
Common Stock 5,781,000 3.5 5,781,480 3.6
Additional Paid in Capital 23,315,881 14.2 23,317,053 14.5
Accumulated Other Comprehensive Income 0 0.0 0 0.0
Receivable from Shareholder (5,000,000) -3.0 (5,000,000) -3.1
Retained Earnings 7,436,291 4.5 2,870,006 1.8
------------ ----- ------------ ----- --------- --------- ---------
TOTAL SHAREHOLDER'S EQUITY 31,533,172 19.1 26,968,539 16.7 38.8 42.3 39.0
TOTAL LIABILITIES & EQUITY $164,726,663 100.0 $161,185,719 100.0 100.0 100.0 100.0
============ ===== ============ ===== ========= ========= =========
- ----------------------------------------------- -----------------------------------------
Debt Free Working Capital, as adjusted $36,991,724 22.5 $37,549,733 23.3
Working Capital, as reported $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.
3
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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 0.0
Food Processing (a) 50,868,707 44.8 48,181,625 37.2 56,387,112 85.1 149,778,206 95.5
Ham Curing (a) 0 0.0 10,433,868 8.1 9,858,233 14.9 7,063,625 4.5
Restaurant Franchising (b) 0 0.0 0 0.0 0 0.0 0 0.0
------------ ----- ------------ ----- ----------- ----- ------------ -----
$113,536,470 100.0 $129,481,643 100.0 $66,245,345 100.0 $156,841,831 100.0
Cost of Goods Sold 69,647,206 61.3 78,999,482 61.0 59,153,475 89.3 101,413,313 64.7
------------ ----- ------------ ----- ----------- ----- ------------ -----
GROSS PROFIT 43,889,264 38.7 50,482,161 39.0 7,091,870 10.7 55,428,518 35.3
Operating Expenses 26,560,293 23.4 31,057,850 24.0 0 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 26.1
Loss on Sale of Mom 'n' Pop; Country Ham LLC 0 0.0 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 3.1
------------ ----- ------------ ----- ----------- ----- ------------ -----
TOTAL OPERATING EXPENSES 40,624,065 35.8 45,072,496 34.8 11,331,254 17.1 45,908,166 29.3
OPERATING INCOME (LOSS) 3,265,199 2.9 5,409,665 4.2 (4,239,384) -6.4 9,520,352 6.1
Other Income (Expenses):
Other Income 736,855 0.6 1,018,745 0.8 204,045 0.3 409,095 0.3
Net Gain (Loss) on Dispositions of Assets 105,367 0.1 345,930 0.3 0 0.0 0 0.0
Equity in Earnings (Loss) of Affiliates (385,366) -0.3 0 0.0 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) -7.9
Other Expense (688,580) -0.6 (871,388) -0.7 0 0.0 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) -7.6
Earnings (Loss) Before Income Taxes 870,928 0.8 4,035,004 3.1 (5,797,702) -8.8 (2,402,801) -1.5
Provision for Income Taxes (Benefit)
Current (5,967) 0.0 1,285,460 1.0 194,771 0.3 700,847 0.4
Deferred (1,133,463) -1.0 724,539 0.6 (2,121,464) -3.2 (1,313,732) -0.8
------------ ----- ------------ ----- ----------- ----- ------------ -----
Total Provision for Income Taxes (Benefit) (1,139,430) -1.0 2,009,999 1.6 (1,926,693) -2.9 (612,885) -0.4
------------ ----- ------------- ----- ----------- ----- ------------ -----
NET INCOME (LOSS) $2,010,358 1.8 $2,025,005 1.6 ($3,871,009) -5.8 ($1,789,916) -1.1
============ ===== ============ ===== =========== -==== ============ =====
Distributions 334,908 795,501 N/A N/A
EBIT 3,265,199 2.9 5,409,665 4.2 (4,239,384) -6.4 9,520,352 6.1
EBITDA 6,741,351 5.9 9,009,982 7.0 1,103,813 1.7 18,604,504 11.9
Adjustments
Other Non-Cash Adjustments to Earnings 152,598 228,199 (80,884) (126,278)
Tax Benefit of Stock Options 0 0 3,100,421 0
Non-Recurring Acquisition Costs
(Sagebrush, Inc.) 0 0 1,900,000 0
Loss on Sale of Mom 'n' Pop's Country Ham, LLC 0 0 0 0
Bonus Agreement (Harris) 0 0 0 0
Consulting and Non-Compete Agreement (Howard) 0 0 0 0
Consulting and Non-Compete Agreement (Connor) 0 0 0 0
Consulting and Non-Compete Agreement (Miller) 0 0 0 0
One-Time Financing Charges 0 0 0 0
Excess Compensation 0 0 0 0
------------ ------------ ----------- ------------
Total Adjustments 152,598 228,199 4,919,537 (126,278)
Adjusted EBIT 3,417,797 3.0 5,637,864 4.4 680,153 1.0 9,394,074 6.0
Adjusted EBITDA 6,893,949 6.1 9,238,181 7.1 6,023,350 9.1 18,478,226 11.8
- -------------------------------------------------------------------------------------------------------------------------------
Pretax Return on Assets (ROA) 2.1% 6.8% -8.1% -1.1%
Pretax Return on Equity (ROE) 5.3% 12.9% -14.8% -5.8%
Pretax Return on Invested Capital (ROI) 2.5% 8.1% -9.6% -1.3%
Debt-Free Working Capital (% sales) 0.9% 1.6% -0.8% 17.3%
- -------------------------------------------------------------------------------------------------------------------------------
Interest Expense 2,162,547 1.9 1,867,948 1.4 1,762,363 2.7 12,332,248 7.9
Depreciation & Amortization Expense 3,476,152 3.1 3,600,317 2.8 5,343,197 8.1 9,084,152 5.8
Depreciation on Properties Leased to Others 282,104 0.2 293,894 0.2 0 0.0 0 0.0
Capital Expenditures to Related Parties 612,578 0.5 563,294 0.4 1,752,565 2.6 2,148,910 1.4
Capital Expenditures - Other 3,357,550 3.0 9,138,245 7.1 10,839,058 16.4 13,315,626 8.5
------------ ----- ------------ ----- ----------- ----- ------------ -----
Total Capital Expenditures 3,970,128 3.5 9,701,539 7.5 12,591,623 19.0 15,464,536 9.9
- --------------------------------------------------------------------------------------------------------------------------------
Officers' Compensation (2):
James C. Richardson, Jr. $0 $0
Salary 0 0
Bonus 0 0
Other 0 0
David R. Clark $152,064 $528,200
Salary 0 150,000
Bonus 152,064 375,000
Other 0 3,200
Norbert E. Woodhams $0 $254,193
Salary 0 189,493
Bonus 0 62,500
Other 0 2,200
L. Dent Miller $0 $225,000
Salary 0 225,000
Bonus 0 0
Other 0 0
James E. Harris $0 $166,372
Salary 0 166,372
Bonus 0 0
Other 0 0
Pamela M. Witters $0 $18,750
Salary 0 18,750
Bonus 0 0
Other 0 0
-------- ----------
Total $152,064 $1,192,515
======== ==========
**
Last 12 Mos. RMA (1) RMA (1) RMA (1)
Ended SIC #2011 SIC #2013 SIC #2051
Fiscal Year Ended: 3/4/2000 % 12/2/2000 % % % %
------------ ----- ------------ ----- --------- --------- ---------
REVENUES:
Restaurant Operations 0 0.0 0 0.0
Food Processing (a) 183,502,144 98.9 211,040,483 100.0
Ham Curing (a) 2,096,052 1.1 0 0.0
Restaurant Franchising (b) 0 0.0 0 0.0
------------ ----- ------------ -----
$185,598,196 100.0 $211,040,483 100.0 100 100 100.0
Cost of Goods Sold 116,024,983 62.5 133,905,113 63.4
------------ ----- ------------ -----
GROSS PROFIT 69,573,213 37.5 77,135,370 36.6 13.4 24.9 36.8
Operating Expenses 0 0.0 0 0.0
Selling, General and Administrative 65,297,277 35.2 63,842,125 30.3
Loss on Sale of Mom 'n' Pop; Country Ham LLC 2,857,160 1.5 0 0.0
Depreciation and Amortization 5,661,893 3.1 6,237,994 3.0
------------ ----- ------------ -----
TOTAL OPERATING EXPENSES 73,816,330 39.8 70,080,119 33.2 10.2 19.4 31.3
OPERATING INCOME (LOSS) (4,243,117) -2.3 7,055,251 3.3 3.2 5.5 5.5
Other Income (Expenses):
Other Income 168,959 0.1 281,600 0.1
Net Gain (Loss) on Dispositions of Assets 0 0.0 (27,695) 0.0
Equity in Earnings (Loss) of Affiliates 0 0.0 0 0.0
Interest Expense (14,985,577) -8.1 (13,334,022) -6.3
Other Expense 0 0.0 0 0.0
------------ ----- ------------ -----
TOTAL OTHER INCOME (EXPENSE) (14,816,618) -8.0 (13,080,117) -6.2 0.8 0.9 1.0
Earnings (Loss) Before Income Taxes (19,059,735) -10.3 (6,024,866) -2.9 2.5 4.6 4.5
Provision for Income Taxes (Benefit)
Current (5,286,124) -2.8 (1,684,950) -0.8
Deferred 460,956 0.2 0 0.0
------------ ----- ------------ -----
Total Provision for Income Taxes (Benefit) (4,825,168) -2.6 (1,684,950) -0.8
------------ ----- ------------ -----
NET INCOME (LOSS) ($14,234,567) -7.7 ($4,339,916) -2.1
============ ===== ============ =====
Distributions N/A N/A
EBIT (1,385,957) -0.7 7,055,251 3.3
EBITDA 7,713,013 4.2 13,293,245 6.3
Adjustments
Other Non-Cash Adjustments to Earnings 705,039 585,382
Tax Benefit of Stock Options 0 0
Non-Recurring Acquisition Costs
(Sagebrush, Inc.) 0 0
Loss on Sale of Mom 'n' Pop's Country Ham, LLC 2,857,160 0
Bonus Agreement (Harris) 1,059,701 0
Consulting and Non-Compete Agreement (Howard) 1,389,503 0
Consulting and Non-Compete Agreement (Connor) 831,000 0
Consulting and Non-Compete Agreement (Miller) 807,000 0
One-Time Financing Charges 0 600,000
Excess Compensation 0 0
------------ ------------
Total Adjustments 7,649,403 1,185,382
Adjusted EBIT 6,263,446 3.4 8,240,633 3.9
Adjusted EBITDA 15,362,416 8.3 14,478,627 6.9
- ----------------------------------------------- -------------------------------------------------------
Pretax Return on Assets (ROA) -11.6% -3.7%
Pretax Return on Equity (ROE) -60.4% -22.3%
Pretax Return on Invested Capital (ROI) -12.7% -4.1%
Debt-Free Working Capital (% sales) 19.6% 17.1%
- ----------------------------------------------- --------------------------------------------------------
Interest Expense 14,985,577 8.1 13,334,022 6.3
Depreciation & Amortization Expense 9,098,970 4.9 6,237,994 3.0
Depreciation on Properties Leased to Others 0 0.0 0 0.0
Capital Expenditures to Related Parties 316,233 0.2 0 0.0
Capital Expenditures - Other 5,171,445 2.8 2,695,032 1.3
------------ ---- ---------- ----
Total Capital Expenditures 5,487,678 3.0 2,695,032 1.3
- ----------------------------------------------- --------------------------------------------------------
Officers' Compensation (2):
James C. Richardson, Jr. $1,941,270
Salary 0
Bonus 1,145,748
Other 795,522
David R. Clark $2,410,691
Salary 350,000
Bonus 1,261,969
Other 798,722
Norbert E. Woodhams $812,929
Salary 275,622
Bonus 355,007
Other 182,300
L. Dent Miller $1,802,003
Salary 121,154
Bonus 1,176,648
Other 504,201
James E. Harris $1,386,475
Salary 161,538
Bonus 726,640
Other 498,297
Pamela M. Witters $178,636
Salary 104,438
Bonus 73,546
Other 652
------------
Total $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.
4
- --------------------------------------------------------------------------------
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.
5
- --------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
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% 31.28% 0.00% 56.55% 6.02% 68.51%
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% 4.83% 6.03% 3.89% 5.76% -72.32%
Return-on-Market Value Invested Cap. -2.57% 3.69% 6.94% 1.77% 5.61% -22.77%
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
- ----------------------------------------------------------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------
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 -- $12.78 $19.10 $21.26 $0.39
Shares Outstanding (000s) 5,781 -- 10,927 41,600 140,532 4,300
Market Value--Common Equity $6,183 $467,138 $139,600 $794,676 $2,987,008 $1,690
Less: Market Value of Investments 1,813 -- 18,301 35,600 106,610 0
Adjusted Market Value - Common Equity $4,370 $440,188 $121,299 $759,076 $2,880,398 $1,690
Preferred Stock 0 -- 0 0 0 0
Adjusted Market Value--Stockholders' Equity $4,370 $440,188 $121,299 $759,076 $2,880,398 $1,690
Total Interest-Bearing Debt 118,318 94,022 0 988,000 184,367 3,677
Market Value--Invested Capital $122,688 $934,188 $121,299 $1,747,076 $3,064,765 $5,367
Beta 1.21 0.19 -0.09 0.19 0.27 N/A
PRICE MULTIPLES
Invested Capital/Revenue
LTM 0.6 0.7 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 0.9 1.0 0.9 0.2
3-Yr. Avg. 0.7 0.9 0.8 0.8 0.9 0.2
- ----------------------------------------------------------------------------------------------------------------------------------
(a) 30-day average prices.
8
- --------------------------------------------------------------------------------
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 0.6 211,040 125,409 118,318 7,091
======
Concluded Value: 7,091
- ------------------------------------------------------------------------------------------------------------------------------
Concluded Fair Market Value - Minority, Marketable Basis: $7,091
Shares Outstanding as of March 9, 2001 5,781
---------
Indicated Equity Value Per Share: $1.23
=========
- ------------------------------------------------------------------------------------------------------------------------------
(1) Income statement items are taken from Pierre Foods' Income Statement as of
March 3, 2001.
(2) Valuation Multiple x Financial Statistic
9
- --------------------------------------------------------------------------------
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. 165.28 236.4 1.4
4/6/99 Aurora Foods Inc. Sea Coast Foods Inc. 57 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. 465.54 116.4 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 800 560.0 0.7
6/29/00 Kellogg Co. Kashi Co. 25.0 33.0 1.3
8/24/00 ConAgra Inc. International Home Foods Inc. 2191.61 2936.8 1.3
1/28/01 Pilgrims Pride Corp. Pilgrims Pride Corp. 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
----------------------------------------------------------
10
- --------------------------------------------------------------------------------
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/Revenue 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 9, 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.
11
- --------------------------------------------------------------------------------
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) 359,545 0.2 1,039,397 0.4
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) (4,339,916) (2.1) 562,364 0.3 1,625,722 0.7
============= ===== ============= ===== ============= =====
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 %
------------- ----- ------------- ----- ------------- -----
% 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) 2,206,468 0.8 3,213,178 1.1 4,207,601 1.4
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) 3,451,142 1.3 5,025,740 1.8 6,581,120 2.1
============= ===== ============= ===== ============= =====
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
- ------------------------------------------------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
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 3.2 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) (1,555,380) (0.6) (908,676) (0.3)
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) (4,339,916) (2.1) (2,333,070) (1.0) (1,363,014) (0.5)
============= ===== ============= ===== ============= =====
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 %
------------- ----- ------------- ----- ------------- -----
% 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) 66,506 0.0 1,359,674 0.4 2,843,500 0.7
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) 99,759 0.0 2,039,511 0.6 4,265,251 1.0
============= ===== ============= ===== ============= =====
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
- ------------------------------------------------------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------
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) 1,162,822 0.5 2,552,177 0.9
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) (4,339,916) (2.1) 1,744,232 0.7 3,828,265 1.4
============= ===== ============= ===== ============= =====
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 %
------------- ----- ------------- ----- ------------- -----
% 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) 4,688,419 1.5 7,309,489 2.0 10,166,409 2.4
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) 7,032,628 2.2 10,964,234 3.0 15,249,614 3.6
============= ===== ============= ===== ============= =====
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
- ------------------------------------------------------------------------------------------------------------------------
14
- --------------------------------------------------------------------------------
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) 3,395,630 1.4 4,784,985 1.7
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) (4,339,916) (2.1) 5,093,445 2.1 7,177,477 2.6
============= ===== ============= ===== ============= =====
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 %
------------- ----- ------------- ----- ------------- -----
% 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) 6,293,250 2.0 7,978,889 2.2 10,001,618 2.4
------------- ----- ------------- ----- ------------- -----
NET INCOME (LOSS) 9,439,875 2.9 11,968,334 3.2 15,002,427 3.5
============= ===== ============= ===== ============= =====
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
- ------------------------------------------------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
SCHEDULE 12
PIERRE FOODS, INC.
DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 1
- --------------------------------------------------------------------------------
Base Year ---------------------Projections----------------------
LTM Compounded
2001 2002 2003 2004 2005 2006 Annual 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 40% 3,296,253 5,782,595 6,472,189 7,599,841 8,609,493 9,694,189
------------- ------------- ------------- ------------- ------------- -------------
DEBT-FREE NET
INCOME $ 4,944,380 $ 8,673,893 $ 9,708,284 $ 11,399,761 $ 12,914,239 $ 14,541,283
Debt-free Net
Income Margin 2.3% 3.9% 4.0% 4.4% 4.5% 4.7%
+ 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 $ (3,022,395) $ 7,933,621 $ 1,214,282 $ 10,352,097 $ 10,220,113
Discount Rate 16% 16.0% 16.0% 16.0% 16.0% 16.0%
Discount Factor 0.9285 0.8004 0.6900 0.59 0.5128
------------- ------------- ------------- ------------- -------------
resent Value $ (2,806,294) $ 6,350,070 $ 837,855 $ 6,157,427 $ 5,240,874
Sum of Present
Values $ 15,779,932
Year 5 Net Cash
Flow Times
Long-Term Growth
Rate 4.0% $ 10,628,918
Capitalization
Rate 12.0%
--------------
Residual Value $ 88,574,317
Discount Rate 16.0%
Discount Factor 0.5128
--------------
Present Value of
Residual Value 45,420,910
-------------
Indicated Value
-Invested Capital $ 61,200,842
Add: Cash &
Equivalents 1,813,437
Less: Total Interest
Bearing Debt 118,318,202
-------------
Indicated Value-
Aggregate Value
Stockholders'
Equity
(Control Basis) (55,303,923)
Rounded to $ (55,303,900)
=============
16
- --------------------------------------------------------------------------------
SCHEDULE 12[a]
PIERRE FOODS, INC.
DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 2
- --------------------------------------------------------------------------------
Base Year ---------------------Projections----------------------
LTM Compounded
2001 2002 2003 2004 2005 2006 Annual Growth
------------- ------------- ------------- ------------- ------------- ------------- -------------
Revenue Growth 13.7% 15.0% 15.0% 15.0% 15.0% 15.0%
NET REVENUES $ 211,040,483 $ 242,696,555 $ 279,101,039 $ 320,966,195 $ 369,111,124 $ 424,477,792 15.0%
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% 5.8% 5.6% 5.8% 5.7% 5.6%
Adjusted EBIT $ 8,240,633 $ 9,646,130 $ 11,243,663 $ 13,508,256 $ 16,741,176 $ 20,450,743
Income Taxes 40% 3,296,253 3,858,452 4,497,465 5,403,303 6,696,471 8,180,297
------------- ------------- ------------- ------------- ------------- -------------
DEBT-FREE NET
INCOME $ 4,944,380 $ 5,787,678 $ 6,746,198 $ 8,104,954 $ 10,044,706 $ 12,270,446
Debt-free Net
Income Margin 2.3% 2.4% 2.4% 2.5% 2.7% 2.9%
+ Depreciation/
Amortization 6,237,994 6,278,756 7,146,211 7,533,867 7,382,222 7,216,122
- - Capital
Expenditures 2,695,032 4,415,905 4,580,000 12,945,000 7,382,222 7,216,122
------------- ------------- ------------- ------------- ------------- -------------
Beginning W/C
(Debt-Free) 37,549,733 55,820,208 64,193,239 73,822,225 84,895,558
Required W/C
(% of Sales) 23.0% 55,820,208 64,193,239 73,822,225 84,895,558 97,629,892
------------- ------------- ------------- ------------- -------------
- - W/C Additions
(Excess) 18,270,475 8,373,031 9,628,986 11,073,333 12,734,334
DEBT-FREE NET
CASH FLOW $ (10,619,946) $ 939,378 $ (6,935,165) $ (1,028,627) $ (463,888)
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 $ (9,860,620) $ 751,878 $ (4,785,264) $ (611,827) $ (237,882)
Sum of Present
Values $ (14,743,715)
Year 5 Net Cash
Flow Times
Long-Term Growth
Rate 4.0% $ (482,444)
-------------
Capitalization
Rate 12.0%
Residual Value $ (4,020,367)
Discount Rate 16.0%
Discount Factor 0.5128
-------------
Present Value of
Residual Value (2,061,644)
-------------
Indicated Value -
Invested Capital $ (16,805,359)
Add: Cash &
Equivalents 1,813,437
Less: Total Interest
Bearing Debt 118,318,202
-------------
Indicated Value -
Aggregate Value
Stockholders'
Equity
(Control Basis) (133,310,124)
Rounded to $(133,310,100)
=============
17
- --------------------------------------------------------------------------------
SCHEDULE 12[b]
PIERRE FOODS, INC.
DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 3
- --------------------------------------------------------------------------------
Base Year ---------------------Projections----------------------
LTM Compounded
2001 2002 2003 2004 2005 2006 Annual Growth
------------- ------------- ------------- ------------- ------------- ------------- -------------
Revenue Growth 13.7% 15.0% 15.0% 15.0% 15.0% 15.0%
NET REVENUES $ 211,040,483 $ 242,696,555 $ 279,101,039 $ 320,966,195 $ 369,111,124 $ 424,477,792 15.0%
OPERATING INCOME
(LOSS) $ 7,055,251 $ 16,049,327 $ 19,368,388 $ 24,562,752 $ 30,636,223 $ 37,778,524 23.7%
Operating Margin 3.3% 6.6% 6.9% 7.7% 8.3% 8.9%
Adjusted EBIT $ 8,240,633 $ 16,441,633 $ 19,895,796 $ 25,063,039 $ 31,136,510 $ 38,278,811
Income Taxes 40% 3,296,253 6,576,653 7,958,318 10,025,216 12,454,604 15,311,524
------------- ------------- ------------- ------------- ------------- -------------
DEBT-FREE NET
INCOME $ 4,944,380 $ 9,864,980 $ 11,937,477 $ 15,037,824 $ 18,681,906 $ 22,967,286
Debt-free Net
Income Margin 2.3% 4.1% 4.3% 4.7% 5.1% 5.4%
+ Depreciation/
Amortization 6,237,994 6,278,756 7,146,211 7,533,867 7,382,222 7,216,122
- - Capital
Expenditures 2,695,032 4,415,905 4,580,000 12,945,000 12,945,000 12,945,000
------------- ------------- ------------- ------------- ------------- -------------
Beginning W/C
(Debt-Free) 37,549,733 55,820,208 64,193,239 73,822,225 84,895,558
Required W/C
(% of Sales) 23.0% 55,820,208 64,193,239 73,822,225 84,895,558 97,629,892
------------- ------------- ------------- ------------- -------------
- - W/C Additions
(Excess) 18,270,475 8,373,031 9,628,986 11,073,333 12,734,334
DEBT-FREE NET
CASH FLOW $ (6,542,644) $ 6,130,657 $ (2,295) $ 2,045,796 $ 4,504,075
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 $ (6,074,845) $ 4,906,978 $ (1,584) $ 1,216,839 $ 2,309,690
Sum of Present
Values $ 2,357,078
Year 5 Net Cash
Flow Times
Long-Term Growth
Rate 4.0% $ 4,684,238
Capitalization
Rate 12.0%
-------------
Residual Value $ 39,035,317
Discount Rate 16.0%
Discount Factor 0.5128
-------------
Present Value of
Residual Value 20,017,310
Indicated Value -
Invested Capital $ 22,374,388
Add: Cash &
Equivalents 1,813,437
Less: Total Interest
Bearing Debt 118,318,202
-------------
Indicated Value -
Aggregate Value
Stockholders'
Equity
(Control Basis) (94,130,377)
Rounded to $ (94,130,400)
=============
18
- --------------------------------------------------------------------------------
SCHEDULE 12[c]
PIERRE FOODS, INC.
DISCOUNTED CASH FLOW ANALYSIS - SCENARIO 4
- --------------------------------------------------------------------------------
Base Year ---------------------Projections----------------------
LTM Compounded
2001 2002 2003 2004 2005 2006 Annual Growth
------------- ------------- ------------- ------------- ------------- ------------- -------------
Revenue Growth 13.7% 15.0% 15.0% 15.0% 15.0% 15.0%
NET REVENUES $ 211,040,483 $ 242,696,555 $ 279,101,039 $ 320,966,195 $ 369,111,124 $ 424,477,792 15.0%
OPERATING INCOME
(LOSS) $ 7,055,251 $ 21,631,348 $ 24,950,408 $ 28,574,830 $ 32,297,223 $ 37,354,046 14.6%
Operating Margin 3.3% 8.9% 8.9% 8.9% 8.8% 8.8%
Adjusted EBIT $ 8,240,633 $ 22,023,654 $ 25,477,816 $ 29,075,117 $ 32,797,510 $ 37,854,333
Income Taxes 40% 3,296,253 8,809,462 10,191,127 11,630,047 13,119,004 15,141,733
------------- ------------- ------------- ------------- ------------- -------------
DEBT-FREE NET
INCOME $ 4,944,380 $ 13,214,192 $ 15,286,690 $ 17,445,070 $ 19,678,506 $ 22,712,600
Debt-free Net
Income Margin 2.3% 5.4% 5.5% 5.4% 5.3% 5.4%
+ Depreciation/
Amortization 6,237,994 6,278,756 7,146,211 7,533,867 7,382,222 7,216,122
- - Capital
Expenditures 2,280,849 4,415,905 4,580,000 12,945,000 7,382,222 7,216,122
------------- ------------- ------------- ------------- ------------- -------------
Beginning W/C
(Debt-Free) 37,549,733 55,820,208 64,193,239 73,822,225 84,895,558
Required W/C
(% of Sales) 23.0% 55,820,208 64,193,239 73,822,225 84,895,558 97,629,892
------------- ------------- ------------- ------------- -------------
- - W/C Additions
(Excess) 18,270,475 8,373,031 9,628,986 11,073,333 12,734,334
DEBT-FREE NET
CASH FLOW $ (3,193,432) $ 9,479,870 $ 2,404,951 $ 8,605,173 $ 9,978,266
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 $ (2,965,101) $ 7,587,688 $ 1,659,416 $ 5,118,357 $ 5,116,855
Sum of Present
Values $ 16,517,215
Year 5 Net Cash
Flow Times
Long-Term Growth
Rate 4.0% $ 10,377,396
-------------
Capitalization
Rate 12.0%
-------------
Residual Value $ 86,478,300
Discount Rate 16.0%
Discount Factor 0.5128
-------------
Present Value of
Residual Value 44,346,072
-------------
Indicated Value -
Invested Capital $ 60,863,287
Add: Cash &
Equivalents 1,813,437
Less: Total Interest
Bearing Debt 118,318,202
-------------
Indicated Value -
Aggregate Value
Stockholders'
Equity
(Control Basis) (55,641,478)
Rounded to $ (55,641,500)
=============
19
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SCHEDULE 13
PIERRE FOODS, INC.
WEIGHTED COST OF CAPITAL ANALYSIS (3/9/01)
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COST OF DEBT:
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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%
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COST OF EQUITY: (3)
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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%
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CAPITALIZATION STRUCTURE:
- --------------------------------------------------------------------------------
Debt % of Capital (D) 58.00%
Equity % of Capital (E) 42.00% (8)
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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
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.
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