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This Spreadsheet Supports The Analysis of The Case "Flinder Valves and Controls Inc." (Case 43)
This Spreadsheet Supports The Analysis of The Case "Flinder Valves and Controls Inc." (Case 43)
Assets
Cash $1,884
U.S. Treasury tax notes and other Treasury obligations 9,328
Due from U.S. government 868
Accounts receivable net 2,316
Inventories, at lower of cost or market 6,888
Other current assets 116
Total current assets $21,400
Investments 1,768
Land 92
Buildings 6,240
Equipment 18,904
Less: allowance for depreciation 7,056
Total plant, property, and equipmentgross 18,180
Construction in process 88
Total plant, property, and equipmentnet* 18,268
Patents 156
Cash value of life insurance 376
Deferred assets 156
Total assets 42,124
* Equivalent land in the area had a market value of $320,000, and the building had an estimated market worth of $16,800,000. Eq
Exhibit 2
FLINDER VALVES AND CONTROLS INC. 4,037.04
0.002533598 0.016350332 0.003063656 0.001595886 0.004618751 0.005632444
Summary of Earnings and Dividends for Flinder Valves and Controls Inc.
(dollars in thousands) 0.060027441 0.0638829 0.058249845 0.059476542 0.060409182
40,205.60
0.713923772 0.691744798 0.689322592 0.699973402 0.750425411 0.709077995
2003 2004 2005 2006 2007 2008 2009
Sales $36,312 $34,984 $35,252 $45,116 $49,364 $59,600 $66,156
Cost of goods sold 25,924 24,200 24,300 31,580 37,044 $44,104.00 $48,955.44
Gross
Selling,profit general, and 10,388 10,784 10,952 13,536 12,320 $15,496.00 $17,200.56
administrative 2,020 2,100 2,252 2,628 2,936 3,576.00 3,790.56
Other incomenet 92 572 108 72 228 232.44 258.01
Income before taxes 8,460 9,256 8,808 10,980 9,612 $12,152.44 $13,668.01
Taxes 3,276 3,981 3,620 4,721 4,037 $4,860.98 $5,467.20
Net income 5,184 5,275 5,188 6,259 5,575 $7,291.46 $8,200.81
RE PROJECTION
Cash dividends 1,680 2,008 2,016 2,304 2,304 28,364 $32,958
Depreciation 784 924 1,088 1,280 1,508 $7,291.46 $8,200.81
Capital expenditures 1,486 1,826 2,011 2,213 2,433 2,698 3,034
Working capital needs 1,899 3,492 -1,200 4,289 4,757 $32,958 $38,124
$38,124 $43,931 $50,452 $57,771 $65,980 $75,183 $85,494 $97,041 $109,965 $124,426 $140,598
$9,216.61 $10,350.98 $11,617.36 $13,030.70 $14,607.65 $16,366.67 $18,328.31 $20,515.41 $22,953.35 $25,670.35 $28,697.73
3,410 3,830 4,298 4,821 5,405 6,056 6,781 7,591 8,493 9,498 10,618
$43,931 $50,452 $57,771 $65,980 $75,183 $85,494 $97,041 $109,965 $124,426 $140,598 $158,678
$13,668.01 $15,361.02 $17,251.63 $19,362.26 $21,717.84 $24,346.08 $27,277.78 $30,547.18 $34,192.35 $38,255.59 $42,783.91
$5,467.20 $6,144.41 $6,900.65 $7,744.90 $8,687.14 $9,738.43 $10,911.11 $12,218.87 $13,676.94 $15,302.24 $17,113.56
8,200.81 9,216.61 10,350.98 11,617.36 13,030.70 14,607.65 16,366.67 18,328.31 20,515.41 22,953.35 25,670.35
3,034 3,410 3,830 4,298 4,821 5,405 6,056 6,781 7,591 8,493 9,498
2368 2664 2961 3257
2184 2456 2729 3002
6,683.10 7,506.76 8,490.84 9,656.78
Assets
Cash $46,480
U.S. government securities, at cost 117,260
Trade accounts receivable 241,760
Inventories, at lower of cost or market 179,601
Prepaid taxes and insurance 2,120
Total current assets 587,221
1
$150,000,000 note, payable semiannually beginning June 30, 2008; $30,900,000 due within
one year, shown in current liabilities. One covenant required the company not to pay cash
dividends, except on preferred stock, or to make other distribution on its shares or acquire any
stock, after December 31, 1999, in excess of net earnings after that date.
2
Issued in January 2007; convertible at rate of 1.24 common share to one preferred share;
redeemable beginning in 2012; sinking fund beginning in 2016.
3
Resulting principally from the excess of par value of 827,800 shares of preferred stock over
the pay value of common share issues in conversion in 2007.
Exhibit 4
Actual Projected
2007 2008 2009 2010 2011 2012
Sales $2,187,208 $2,329,373 $2,480,785 $2,642,037 $2,813,769 $2,996,658
Cost of goods sold 1,793,510 1,920,085 2,064,243 2,216,470 2,367,290 2,537,259
Gross profit 393,698 409,288 416,542 425,567 446,479 459,399
Selling, general, and admin. 120,296 129,786 139,481 151,027 161,315 169,826
Income before tax 273,402 279,502 277,061 274,540 285,164 289,573
Tax expense 109,361 111,801 110,824 109,816 114,066 115,829
Net income 164,041 167,701 166,237 164,724 171,098 173,744
Cash dividends 92,238 102,082 108,714 115,779 125,185 133,313
1
62,694,361 common shares in 2007. Thereafter, 64,416,919 shares reflecting conversion of the preferred stock.
2
1,389,160 preferred shares in 2007. Conversion into 1,722,558 shares of common stock assumed in 2008.
0.00139
Exhibit 6
FLINDER VALVES AND CONTROLS INC.
Market Prices of Flinder Valves and RSE International Corporation
May 1, 2008 $39.75 $38.90 $39.75 $22.58 $18.30 $21.98 $17.63 $15.35
Exhibit 7
FLINDER VALVES AND CONTROLS INC.
Market Information on Firms in the Industrial Machinery Sector
Expected
Price/ Growth
Earnings Dividend Rate
Ratio Beta Yield to 2010 Debt/Capital
Cascade Corp.
Manufactures loading engagement devices 10.5 0.95 1.7% 5.1% 29%
Curtiss-Wright Corporation
Manufactures highly engineered, advanced technologies
that perform critical functions 17.2 1.0 0.7 12.3 36%
Flowserve Corp.
Makes, designs, and markets fluid handling
equipment (pumps, valves, and mechanical seals) 20.8 1.3 1.0 27.0 30%
Gardner Denver
Manufacturers stationary air compressors, vacuum
products, and blowers 10.9 1.3 Nil NMF 19%
Idex Corp.
Manufactures a wide range of pumps and machinery
products 16.1 1.05 1.5 10.8 22%
Roper Inds.
Manufacturers energy systems and controls, imaging
equipment, and radio frequency products 19.7 1.2 0.5 10.8 29%
Tecumseh Products
Manufactures compressors, condensers, and pumps 38.2 1.05 Nil NMF 8%
Watts Industries
Manufactures and sells and extensive line of valves
for the plumbing and heating and water quality markets 15 1.3 1.5 8.4 32%
1.14 11.56
NMF = not meaningful figure.
Source: Value Line Investment Survey, April 25, 2008.
Exhibit 8
FLINDER VALVES AND CONTROLS INC.
Information on Selected Recent Related Mergers
5/25/2006 Armor Holdings Inc. Law enforcement equip Stewart & Stevenson Turbine-driven products
6/26/2006 Bouygues S.A. Construction Alstom SA Power generation equip
9/20/2006 Boeing Co. Aircraft Aviall Inc Vehicle parts
11/10/2006 Daikin Industries Ltd. Air conditioning sys OYL Industries Bhd Airconditioners
12/8/2006 Oshkosh Truck Corp. Heavy duty trucks JLG Industries Inc Excavators/telehandlers
4/11/2007 Rank Group Ltd. Investment holding co SIG Holding AG Packaging/plastics machinery
6/22/2007 Meggitt PLC Aerospace/defense system K&F Industries Holdings Aircraft braking systems
7/31/2007 BAE Systems Inc. Electronic systems Armor Holdings Inc Law enforcement equip
12/3/2007 Carlyle Group LLC Private equity firm Sequa Corp Aircraft engine component
12/20/2007 ITT Corp. Pumps/valves EDO Corp Electn system products
2/6/2008 London Acquisition BV Investment holding co Stork NV Components
6/5/2008 Ingersoll-Rand Co Ltd. Industrial machinery/equip Trane Inc Airconditioners
Exhibit 8 (Continued)
FLINDER VALVES AND CONTROLS INC.
Information on Selected Recent Related Mergers
Enterprise Premium 4
Target Net Sales Equity Value/ Enterprise Value/ Target Enterprise Weeks Prior to
Transaction Last 12 Months Target Net Value/ Target Operating Value/ Target Announcement
Acquirer Target Size ($mm) ($mm) Income Net Sales Income Cash Flow Date (%)
Armor Holdings Inc. Stewart & Stevenson 1,123 726 65.3 1.12 33.1 23.7 40.6
Bouygues S.A. Alstom S.A. 2,467 17,679 nmf 1.48 77.9 22.5 -1.2
Boeing Co. Aviall Inc. 2,057 1,371 28.9 1.53 18.7 14.9 27.2
Daikin Industries Ltd. OYL Industries Bhd 1,152 1,581 27.6 1.41 21.5 16.8 19.4
Oshkosh Truck Corp. JLG Industries Inc. 3,252 2,289 20.5 1.30 11.9 10.7 52.3
Rank Group Ltd. SIG Holding AG 2,314 1,418 38.6 1.56 64.8 14.2 19.3
Meggitt PLC K&F Industries Holdings 1,802 424 20.3 4.26 13.1 10.8 13.5
BAE Systems Inc. Armor Holdings Inc. 4,328 2,805 30.5 1.71 17.1 14.3 29.3
Carlyle Group LLC Sequa Corp. 2,007 2,181 34.4 1.25 20.6 12.5 63.3
ITT Corp EDO Corp. 1,678 945 86.8 1.99 34.0 23.9 40.5
London Acquisition BV Stork NV 2,347 2,153 17.1 0.02 na na 35.2
Ingersoll-Rand Co. Ltd. Trane Inc. 9,751 8,328 21.2 1.39 14.9 11.6 na
Exhibit 9
FLINDER VALVES AND CONTROLS INC.
Capital Market Interest Rates and Stock Price Indexes
(averages per annum, except April 2008 which offers closing values for April 25, 2008)
Stock Market
S&P 500 Index 1,418 1,468 1,398
Price/earnings ratio 17.7 18.3 17.4
Data Source: Value Line Investment Survey, 25 April 2008; Federal Reserve Bulletin; Compustat
Exhibit 10
FLINDER VALVES AND CONTROLS INC.
Forecast of Financial Statements for Flinders Control and Valve
for Years Ending December 31, 200812
(dollars in thousands)
Actual Projected
2007 2008 2009 2010 2011 2012
Sales $49,364 $59,600 $66,000 $73,200 $81,200 $90,000
Cost of goods sold 37,044 43,816 48,750 54,104 59,958 66,200
Gross
Selling,profit general, and 12,320 15,784 17,250 19,096 21,242 23,800
administrative 2,936 3,612 4,124 4,564 5,052 5,692
Other incomenet 228 240 264 288 320 352
Income before taxes 9,612 12,412 13,390 14,820 16,510 18,460
Taxes 4,037 4,965 5,356 5,928 6,604 7,384
Net income $5,575 $7,447 $8,034 $8,892 $9,906 $11,076