100 PERCENT OF THE EQUITY OF THE PANCAKE HOUSE, INC.
VALUATION REPORT
MAY 15, 2009 100 PERCENT OF THE EQUITY OF THE PANCAKE HOUSE, INC.
VALUATION REPORT
MAY 15, 2009
©TRUGMAN VALUATION ASSOCIATES, INC. 2010
©TRUGMAN VALUATION ASSOCIATES, INC. 2010 December 28, 2010
Mr. Robert Smith 123 Main Avenue City, NJ 12345
Re: Valuation of 100 percent of the equity of The Pancake House, Inc.
Dear Mr. Smith:
We have performed a valuation engagement, as that term is defined in the Statement on Standards for Valuation Services (SSVS) of the American Institute of Certified Public Accountants of 100 percent of the equity of The Pancake House, Inc. as of May 15, 2009. This valuation was performed solely to assist in the matter of Robert Smith v. Joseph Smith; the resulting conclusion of value should not be used for any other purpose or by any other party for any purpose. This valuation engagement was conducted in accordance with the SSVS, as well as the standards promulgated by The Appraisal Foundation, the American Society of Appraisers, and The Institute of Business Appraisers. The estimate of value that results from a valuation engagement is expressed as a conclusion of value.
Based on our analysis, as described in this valuation report, which must be signed in blue ink by the valuation analyst to be authentic, the conclusion of value of 100 percent of the equity of The Pancake House, Inc. as of May 15, 2009 is:
SIX HUNDRED SIXTY-NINE THOUSAND DOLLARS ($669,000)
This conclusion is subject to the Statement of Assumptions and Limiting Conditions found in Appendix 2 and to the Valuation Analyst’s Representation found in Appendix 3. We have no obligation to update this report or our conclusion of value for information that comes to our attention after the date of this report.
Respectfully submitted,
TRUGMAN VALUATION ASSOCIATES, INC.
Gary R. Trugman CPA/ABV, MCBA, ASA, MVS
GRT/kag Attachment
Florida New Jersey 8751 W. Broward Blvd. • Suite 203 • Plantation, FL 33324 2001 Rte. 46 • Suite 310 • Parsippany, NJ 07054 844-TRUGMAN O: 954-424-4343 • F: 954-424-1416 O: 973-983-9790 www.trugmanvaluation.com
Florida New Jersey 8751 W. Broward Blvd. • Suite 203 • Plantation, FL 33324 2001 Rte. 46 • Suite 310 • Parsippany, NJ 07054 844-TRUGMAN O: 954-424-4343 • F: 954-424-1416 O: 973-983-9790 www.trugmanvaluation.com TABLE OF CONTENTS Page
INTRODUCTION ...... 1
Description of the Assignment...... 1 Extraordinary Limiting Conditions ...... 2 Discussion and Definition of Fair Value ...... 4 Dissenting Shareholder Matters ...... 6 Oppressed Shareholder Matters ...... 7 Fair Value as a Standard of Value ...... 10
BRIEF HISTORY OF THE COMPANY ...... 15
The Franchise Agreement...... 17
ECONOMY/INDUSTRY INFORMATION ...... 20
National Economy ...... 20 Local Economy ...... 22 Industry ...... 24 International House of Pancakes ...... 27
FINANCIAL ANALYSIS ...... 30
VALUATION ANALYSIS ...... 33
The Market Approach ...... 33 Transaction Method...... 33 Institute of Business Appraisers (IBA) ...... 35 BizComps™...... 50 Pratt’s Stats™...... 56 Reconciliation and Final Conclusion of Value ...... 69 Sanity Checks ...... 73
SCHEDULES
Schedule 1 - The Pancake House, Inc. Balance Sheet as of December 31, 2003 through December 31, 2008.
Schedule 2 - The Pancake House, Inc. Income Statement for the Years Ended December 31, 2004 through December 31, 2008. TABLE OF CONTENTS Page
APPENDICES
Sources of Information Utilized Contingent and Limiting Conditions Valuation Analyst’s Representation Professional Qualifications of Appraisers -1-
INTRODUCTION
DESCRIPTION OF THE ASSIGNMENT
Trugman Valuation Associates, Inc. was retained by Robert Smith to determine the fair 1 value of 100 percent of a defacto partnership1 that owns 100 percent of the equity of The Pancake House, Inc. as of May 15, 2009. This report is expected to be used in the matter Robert Smith v. Joseph Smith, in the Superior Court of New Jersey, Chancery Division, Some County, Docket No. C-345-09.
The scope of work for this appraisal was not limited by our client in any way and all relevant data and methodologies have been considered and presented in this report. This assignment meets all of the requirements under Statement on Standards for Valuation Services No. 1 promulgated by the American Institute of Certified Public Accountants, as well as the Uniform Standards of Professional Appraisal Practice promulgated by the Appraisal Foundation and the standards of the American Society of Appraisers and the Institute of Business Appraisers.
1 1 The appraisers have been advised by the client’s legal counsel that although the corporate entity (The Pancake House, Inc.) is owned 100 percent by Joseph Smith, the issue in this litigation is that Robert Smith is claiming to have an equitable interest in a partnership with Joseph Smith. We are not opining as to the legal issues of ownership in this matter. Our opinions are solely related to the value of the operating business known as the City International House of Pancakes (“City IHOP”). -2- EXTRAORDINARY LIMITING CONDITIONS
In addition to the Statement of Assumptions and Limiting Conditions contained in Appendix 2, at the back of this report, there are certain conditions that are important to the reader of this report. On November 18, 2010, Gary R. Trugman CPA/ABV, MCBA, ASA, MVS, the Principal in charge of this assignment from Trugman Valuation Associates, Inc., performed a site visit of the restaurant known as the City IHOP. We were informed by our client’s legal counsel that:
A few minutes ago I confirmed your visit for Thursday morning. Scott Jackson will make arrangements to meet you at the City IHOP around 10:30 a.m. subject to the timely arrival of your flight from Florida. Joe Smith will be available. I conferred with defense counsel who advised that there should be no problem interviewing him regarding any management/valuation matter at the time of the inspection.
Upon my arrival at the business location, Joseph Smith’s counsel met Mr. Jackson and I and informed us that Joseph Smith was not at the restaurant and would not be available for an interview. Had I been permitted to conduct a management interview, something may have been brought to my attention that could have influenced my opinion in this matter.
Another limiting condition of this assignment is that there were limited records produced. As a result, we were unable to review books and records to determine the validity of the expenses that were reported in The Company’s tax returns. According to the deposition testimony of Joseph Smith,
Q. Now, your attorney in P-1 continues. He says -- excuse me -- she says, "Further, as Joseph Smith stated in his amended answers to plaintiffs first set of interrogatories dated August 5th, 2010, all of the prior annual and/or quarterly sales reports compiled prior to the QuickBooks software were saved onto another computer. Prior to the commencement of this litigation, the computer crashed and is no longer operable." When did that happen? When did the computer crash and become no longer operable? -3-
2 A. 2008, I believe.2
Since all previous books and records could not be provided, we took an even closer look at the tax returns that were provided. The tax returns did not provide us with enough information to properly analyze the various assets, liabilities, revenues and expenses of the business. We have determined that there are issues in the tax returns, but we have no ability to investigate or adjust for them. For example, the gross fixed assets on the balance sheet contains the same dollar amount from 2003 through 2008. We know that this is incorrect because the franchise agreement with IHOP requires the franchisee to make improvements every five years. Yet, there are no capitalized items on the balance sheet that would require depreciation. However, the 2005 and 2006 repairs and maintenance expenses are approximately $135,000 and $125,000, respectively, indicating that items that most likely should have been capitalized, were expensed, causing profits to be understated for those years.
Since we were unable to analyze the financial information in the manner that would be normal and customary in this type of assignment, we are limited to only using a price to revenue multiple under the market approach to conclude the value indication of this business. While restaurants frequently sell in this fashion, we would have preferred to be able to consider profitability (an income approach) and not solely rely on the market approach. Had we been provided with books and records, our opinion may have been different.
2 2 Deposition of Joseph Smith, October 22, 2010, Page 39, Lines 13-24. -4- DISCUSSION AND DEFINITION OF FAIR VALUE
Valuation standards require an appraiser to properly define the standard of value that will be used in a valuation assignment. In this instance, fair value is the standard of value. Since its application is generally more visible in corporate matters, our discussion discusses corporate concepts. However, these same concepts can be applied to a partnership in most instances. The major distinction between these two types of entities is that a noncontrolling owner in a corporation (shareholder) cannot generally cause a dissolution of the corporation, while a partner can cause a dissolution by merely opting out of the partnership.
It is a recognized fact that minority shareholders in closely held corporations are exposed to certain risks of having a minority or noncontrolling position in the corporation. These risks stem from the illiquidity of their stock and from their lack of control. Minority or noncontrolling investors in closely held corporations can be held captive in an investment from which they may receive no compensation, dividends, or other distributions and have no voice in the day to day management.
The risks to which a minority shareholder is exposed include the possibility that the controlling shareholder may take actions over which the minority owners have no control, with which they do not agree, and that they fear will reduce the value of their ownership interests. Such actions may include the following:
• Merger with another corporation, • The sale or other disposition of substantially all of the corporate assets, and • Significant changes in the corporate bylaws.
In addition, if minority shareholders are employed by, or have management roles in, the corporation, the controlling ownership shareholders may: -5-
• Terminate the minority shareholder as an employee, director or officer of the corporation, • Reduce or eliminate his or her salary, • Completely "freeze out" minority shareholders, or • Otherwise “oppress" them.
Recognizing that minority shareholders in closely held corporations are generally subject to decisions and actions of the controlling shareholders, and that they do not have a ready public market for their stock, many states have enacted statutes that provide minority shareholders with remedies for "oppressive action," fraud, and mismanagement by the majority (hereinafter called oppressed shareholders' statutes or dissolution statutes). In addition, all states have also enacted dissenters' rights statutes. These statutes provide an appraisal remedy for minority shareholders who do not agree with significant actions of the controlling shareholders that impact their economic interests and who wish to sell their stock as a result.
Although these two types of statutes differ in the triggering mechanisms, the standard of value for the appraisal process is fair value. For dissenting shareholders, the purchase of their stock for fair value is usually the only remedy. For minority shareholders, seeking a remedy for oppression, fraud, mismanagement, or similar problems, a fair value purchase of their stock is the most common remedy.
Since oppressed and dissenting shareholders rarely, if ever, have a ready market for their stock on the open market, as do stockholders in publicly traded companies, fair value is an important standard of value to insure that they receive adequate consideration for their investments. -6-
Fair value is a legal term used in the vast majority of dissenters' rights3 and oppressed shareholders' statutes. Unlike the term fair market value, this term is rarely, if ever, defined in a statute. Therefore, the definition has been left to judicial interpretation.
DISSENTING SHAREHOLDER MATTERS
Minority shareholders who believe that certain fundamental or extraordinary corporate changes voted on by the controlling shareholders will adversely affect the value of their interests in a company have available statutory rights as dissenters. Currently, the statutes of all states permit such shareholders to dissent from the controlling shareholders' action, compelling the corporation to purchase their stock.
The first dissenters' rights statutes were enacted in the early 20th century. The statutes were enacted to improve the rule of consensus existing in common law requiring the unanimous consent of shareholders for statutorily enumerated corporate transactions, such as mergers. Before the enactment of such statutes, each shareholder had veto power and could prevent certain corporate actions. However, in states where the rule of unanimity was abolished, disapproving shareholders were bound by the controlling shareholders’ decisions, sometimes to their detriment.4
The laws, which were enacted to protect dissenting minority shareholders who no longer could depend upon the rule of unanimity, vary as to which corporate actions will trigger dissenters' rights. For example, in Delaware, only a merger or consolidation triggers dissenters' rights. However, under the statutes of most states, dissenters' rights are
3 Not all states have adopted the fair value standard in dissenters' cases.
4 See Annotation to Section 13.01, Model Business Corporation Act (the "Model Act"), at 13-8 (3d ed. 1995 Supp.). -7- triggered by a variety of actions, such as a merger, a sale, lease, exchange, or other disposition of all or substantially all of the corporate stock.
Under normal circumstances, shareholders that wish to exercise their rights, must give notice in advance of the vote, to the corporation, that they intend to demand payment for their shares if the proposed action is approved. The stockholder must then make a written demand for payment within some time period of the mailing of notice, advising that the corporate action was approved. In some jurisdictions, once the demand for payment is made, the dissenting shareholder ceases "to have any rights of a shareholder, except the 5 right to be paid the fair value of his shares . . . "5
For example, the applicable New Jersey statute provides that the corporation must mail to each dissenting shareholder, the financial statements of the corporation as of the latest available date, and profit and loss statements for a 12-month period ending on the date of the balance sheet. The corporation may, at the time of this mailing, make a written offer to purchase the dissenting shareholders' shares at a specified price, deemed to be the fair value. If no agreement as to fair value is reached within the statutory time period, the dissenting shareholder may serve a demand on the corporation that it will commence an ac- tion to determine fair value. Once the action is initiated, the court may appoint a valuation analyst to estimate fair value.
OPPRESSED SHAREHOLDER MATTERS
According to NJSA 14A:12-7(8)(a),
The purchase price of any shares sold shall be their fair value as of the date of the commencement of the action or such earlier or later date deemed
5 5 This is the language that appears in N.J.S.A. §14A:11-3(2). -8-
equitable by the court, plus or minus any adjustments deemed equitable by the court if the action was brought in whole or in part under paragraph 14A:12-7(1)(c).
6 Fair value is a legal term used in the vast majority of dissenters' rights6 and oppressed shareholders' statutes. Unlike the term fair market value, this term is rarely, if ever, defined in a statute. Therefore, the definition has been left to judicial interpretation.
The meaning of fair value has arisen from dissenting shareholders’ and shareholder oppression cases. In fact, in Emanuel Balsamides, Sr., et. al. v. Protameen Chemicals, Inc., et. al., 160 N.J. 352 (1999), Judge Garibaldi wrote, on behalf of a unanimous Court,
We now address the meaning of ‘fair value’ in the Oppressed Shareholder Statute. That term is not defined in either that statute or in the Appraisal Statute. Most interpretations have considered the term in the context of dissenters’ rights. But, as one commentator has observed, there is no reason to believe that ‘fair value’ means something different when addressed to dissenting shareholders than it does in the context of oppressed shareholders (citations omitted).
Judge Garibaldi also wrote:
‘Fair value,’ thus, is not synonymous with fair market value. In Lawson Mardon Wheaton, supra, we recognized that ‘there is no inflexible test for determining fair value’ and that ‘an assessment of fair value requires consideration of ‘proof of value by any techniques or methods which are generally acceptable in the financial community and otherwise admissible in court.’ (footnotes and citations omitted).
An oppressed shareholder case is, in effect, a "corporate divorce." Such cases provide relief to a minority shareholder (or in some cases a 50 percent shareholder) in a closely held business who seeks such relief from the controlling shareholder's fraud, illegality, mismanagement, oppression, etc. Courts have recognized that relief is necessary for
6 6 Not all states have adopted the fair value standard in dissenters' cases. -9- shareholders in closely held corporations because of the nature of these entities. What makes these entities special is the following:
• Shareholders often expect to be active participants in management. • When disagreements occur, the controlling shareholder is likely to have the power to undermine or disappoint the minority shareholder's expectations and prevent the minority shareholder from obtaining a fair return on his or her investment. • The lack of a ready market for the minority shareholder's stock means that he or she may be locked into an investment that no longer provides an adequate return or that the shareholder no longer wants for other reasons.
Although courts usually have a number of equitable remedies available, including a corporate dissolution, the most common remedy afforded minority shareholders is an award of fair value for their stock.
This buyout remedy effectively provides a marketplace for the sale of the minority shareholder's shares. It accomplishes the following:
• It provides the minority shareholder with a fair return on his or her investment, and • It breaks up the continuation of a forced association no longer desired by antagonistic parties.
Under many state statutes, a minority shareholder must prove oppression, fraud, illegality, or mismanagement before the court can order a form of relief or determine fair value. Under the statutes of some states and the Model Act, once a minority shareholder petitions for a dissolution of the corporation on the basis of oppression or related grounds, the majority shareholder can automatically elect to purchase the shares of the petitioning shareholder -10- for fair value.7 The effect of this election is to convert the case into a simple stock purchase in which allegations of oppression or wrongdoing are no longer at issue. In some states, the choice to purchase a minority shareholder's stock is irrevocable, absent court approval. In other states, the corporation may elect not to proceed with the purchase if it is dissatisfied with the value eventually set by the court for the stock.
The payment of fair value to an oppressed shareholder has been recognized as a complete and just remedy for oppression. The Delaware Supreme Court has said that fair value "measures that which has been taken from [the shareholder], viz., his proportionate interest in a going concern."8
FAIR VALUE AS A STANDARD OF VALUE
A clear and concise understanding of the appropriate standard of value is a key to any credible business appraisal. The failure to adhere to the appropriate standard of value can be a primary reason for the wide variances between two business valuations.
As mentioned previously, fair value is rarely legislatively defined. As a business valuer, this often leads to confusion about the meaning of fair value in the context of these assignments. Moreover, even when the courts have addressed this issue, legal precedents can be vague or contradictory, and therefore offer inadequate guidance as to the application of the fair value standard. The dissenters' rights section of the Model Act does not provide any
7 For example, Rev. Model Act, § 14.34 (1995 Supp.); Alaska Stat. § 10.06.628(b) (1998); N.Y. Bus. Corp. Law §1104-a, 1118 (McKinney's 1998 Supp.); Cal. Corp. Code §2000 (West 1995).
8 Matter of Shell Oil Co., 607 A.2d 1213, 1218 (Del. 1992) (citations omitted), quoting Tri- Continental Corp. v. Battye, 74 A. 2d 71, 72 (Del. 1950); see also Beerly v. Dept. of Treasury, 768 F. 2d 942 (7th Cir. 1985) (purpose of an appraisal is to give a shareholder the cash equivalent of what he or she has given up). -11- direction as to how fair value is to be determined, although it contains a definition. This definition states:
‘Fair value,’ with respect to a dissenter's shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in 9 anticipation of the corporate action unless exclusion would be inequitable.9
The definition contained in the Model Act has varied at the state level. Although some states have adopted that identical definition, other states use the definition without the final phrase "unless exclusion would be inequitable." Some states use terms such as "fair cash 10 11 12 value,"10 "value,"11 or even "fair market value."12 The statutes of approximately 27 states contain the same definition of fair value. Approximately 14 other states, including New Jersey in N.J.S.A. §14A: 11-3, use the same general concept of fair value without the final phrase "unless exclusion would be inequitable."
Fair value can differ from fair market value. Fair market value is a term that has been defined as:
The amount at which the property would change hands between a willing buyer and a willing seller when the former is not under compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts.
Probably the best way to emphasize the differences between fair value and fair market value is in the following chart.
9 9 Model Act, §13.01(3).
10 10 Ohio Rev. Code Ann. §1701.85(C) (Page's 1997 Supp.) (definedin the same way as fair market value); La. Rev. Stat. Ann. § 12:131C(2) (West 1998 Supp.).
11 11 Kan. Stat. Ann. §17-6712 (1997 Supp.).
12 12 Cal. Corp. Code §1300(a) (West 1998 Supp.). -12-
FMV CONTEXT FV CONTEXT 1. Willing buyer. 1. Not always a willing buyer. 2. Willing seller. 2. Not a willing seller. 3. Neither under compulsion. 3. Buyer and seller are often compelled. 4. Typical, hypothetical buyer and 4. The effects of the specific transaction seller. are usually not considered, but fairness to the specific sellers may be a consideration. 5. A price that is equitable to both. 5. A concept of "fairness" to the seller, given the loss of the right to hold. 6. Equal knowledge of buyer and 6. No such presumption. seller. 7. Adequate knowledge of buyer 7. No such presumption. and seller. 8. Applies to majority or minority 8. Only comes into play for minority blocks. blocks. However, level of value (minority or majority) is not statutorily specified. 9. Applies for most Federal Tax 9. The most common value standard in valuation purposes. state dissenting and oppression statutes.
Because fair market value refers to the price at which stock would be bought and sold in the marketplace, the estimation of the value of a minority shareholder's stock under this standard may include:
•A discount for lack of marketability, and • A discount for minority ownership interest.
A valuation, such as this, using the fair value standard does not include a minority discount. In fact, the control value of the entire entity should be determined and then a prorata share can be calculated for the interest being bought out. The reference in item eight in the table above refers to the fact that the statutes do not indicate whether the fair value should be -13- determined on a control (majority) or minority basis. The prorata share of the entire entity is the fair and equitable manner in which these interests are usually appraised.
Shareholder disputes often include a battle as to which discounts, if any, should be applied in a fair value context. While it is the intention of the court to be to be equitable, these discounts are the cause of extremely contentious litigation.
A discount for lack of marketability reflects the fact that sale of a minority interest is difficult because only a small pool of potential buyers exists. A minority ownership interest discount reflects the lack of control of a minority shareholder. These contrasting issues were 13 addressed in Wheaton13 and Balsamides.
In July 1999, the Supreme Court of New Jersey ruled on both of these cases. Wheaton was filed as a dissenting shareholder action, while Balsamides was filed under the New Jersey Oppressed Shareholder Statute. Although there were several issues on appeal in each case, the commonality between them was the issue of a discount for lack of marketability (DLOM). These cases highlight the differences that can arise under the same standard of value.
In Wheaton, Judge Garibaldi’s opinion stresses the nature of the term fair value, and states “courts must take fairness and equity in account in deciding to apply a discount to the value of the dissenting shareholders’ stock in an appraisal action.” The Court goes on to say,
Indeed, equitable considerations have led the majority of states and commentators to conclude that marketability and minority discounts should not be applied when determining fair value of dissenting shareholders’ stock in an appraisal action. Although there is no clear consensus, ‘the use of a fair value standard, combined with application of equitable principles, has resulted in a majority of jurisdictions holding that a dissenting shareholder is entitled to her proportional share of the fair market value of the corporation. The value of the shares will not be discounted on the ground that the shares are a
13 13 Lawson Mardon Wheaton, Inc. v. Smith 160 N.J. 383 (1999). -14-
minority interest or on the related grounds of a lack of liquidity or marketability.’ Wheaton, 160 N.J. at 401 (citation omitted).
In Balsamides, The Court discussed the issue of applying a discount for lack of marketability and stated,
Although it would be helpful to pronounce a consistent rule regarding the determination of ‘fair value’ and the applicability of discounts under various circumstances, we cannot do so. Each decision depends not only on the specific facts of the case, but also ‘should reflect the purpose served by the law in that context.’ Balsamides, 160 N.J. at 381 (citation omitted).
In that case, The Court applied a marketability discount because it found that Protameen Chemicals, a specialty chemical company, would be difficult to sell. Since The Court found that the company merited such a discount, it was determined to be unfair to the remaining shareholders not to apply such a discount to the selling shareholder’s interest.
It appears that many jurisdictions, including New Jersey, allow the fair value standard to be determined by considering many of the same factors that an appraiser would use in determining fair market value. The two major differences are that the issue of discounts is not as automatically applied in fair value matters as it would be in fair market value matters, and The Court has discretion to make any adjustments to the value that are deemed to be “fair and equitable” under the circumstances. Therefore, this report will consider the guidance of the factors used to determine the fair market value of the City IHOP as a starting point for the fair value determination of the interest being appraised. -15- BRIEF HISTORY OF THE COMPANY
The Pancake House, Inc. (“TPH” or “The Company”) was incorporated in the State of New Jersey on March 20, 1991. The Company elected to be taxed as a Subchapter S Corporation shortly after on April 1, 1991.
TPH is an International House of Pancakes (IHOP) franchise. The Company is located at 123 Route 98 in City, New Jersey. The Company moved to this location in 1995. The restaurant has approximately 44 tables and an estimated seating capacity of 176. -16-
The restaurant facility is approximately 6,100 square feet. The Company pays rent for 6,000 square feet. TPH employs 40 to 50 people and operates from 7:00 a.m. to 10:00 p.m. Sunday through Thursday and 7:00 a.m. to 12:00 a.m. on Friday and Saturdays. -17- THE FRANCHISE AGREEMENT
The Company operates under a Franchise Agreement (“The Agreement”) with IHOP which was renewed on December 30, 2005. Pertinent sections of this agreement are contained in the following pages.
TERM OF THE AGREEMENT
Subject to the early termination provisions contained in The Agreement, the term of The Agreement expires on March 30, 2015. The Company will be granted a Renewal Right upon expiration of The Agreement for another 10 years if it has satisfied the requirements and conditions set forth in The Agreement.
MAINTAINING AND REFURBISHING OF FRANCHISED RESTAURANT
According to Section 4.03 of The Agreement:
(a) Franchisee shall at all times during the Term hereof maintain at its sole expense the interior and exterior of the Franchised Restaurant and the entire Franchised Location, including the parking lot and the point of sale system, in first class condition and repair, and in compliance with all Applicable Laws and Operations Bulletins, except to the extent Franchisor may otherwise expressly agree in writing.
(b) Except as otherwise provided herein, every 5 years during the entire Term hereof, at Franchisee’s sole cost and expense, Franchise shall refurbish, remodel and improve the Franchised Restaurant in accordance with Franchisor’s then current standards as set forth in the Operations Bulletins or as otherwise promulgated by Franchisor and -18-
provided to Franchisee. Franchisee shall commence the first such refurbishing, remodeling and improving on the anniversary date occurring 5 years from the Effective Date. Each subsequent refurbishing, remodeling and improving shall commence 5 years from the date on which the last such refurbishing, remodeling and improving was commenced. Franchisee shall complete any such refurbishing, remodeling and improving as expeditiously as possible, but in any event within 30 days after commencing same. This refurbishment and remodel requirement is in addition to and does not include the maintenance obligations set forth in Section 4.03(a) above.
CONTINUING ROYALTY
Each week during the term of the franchise, The Company shall pay to IHOP a continuing royalty in an amount equal to 4.5 percent of The Company’s gross sales during the preceding weekly reporting period.
OTHER FEES
A schedule of the fees paid by The Company to IHOP is presented in Table 1. -19-
TABLE 1 SCHEDULE OF FEES
Name of Fee Amount Due Date Remarks
Royalty 4.5% of total gross sales Payable weekly on the Gross sales includes all Wednesday of the next revenue from the Restaurant week except sales or use tax. National Advertising Fee 1% of total gross sales Same as Royalty fee Local Advertising Fee 2% of total gross sales Same as Royalty fee S e e R e m a r k s u n d e r Cooperative Advertising Cooperative Advertising Determined by a majority vote of franchised Established by IHOP or Payments to co-op will be restaurants in Advertising Region franchisees in a geo- credited against your Local graphic region Advertising Fee Additional Training $5,000 Prior to training Payable if our manager is replaced, requiring the new manager to complete Initial Training Additional Assistance $181 per day per person, plus reasonable Upon demand Payable if you request transportation and living expenses additional assistance from IHOP or Affiliate training staff Transfer $1,000 plus $5,000 training fee Prior to transfer Payable if you sell your franchise. All or part of the training fee may be waived to the extent that, in our judgement, training is not required. -20- ECONOMY/INDUSTRY INFORMATION
Generally, business performance varies in relationship to the economy. Just as a strong economy can improve overall business performance and value, a declining economy can have the opposite effect. Businesses can be affected by global, national, and local events. Changes in regulatory environments, political climate, and market and competitive forces can also have a significant impact on business. For these reasons, it is important to analyze and understand the prevailing economic environment when valuing a closely-held business. Since the appraisal process is a “prophecy of the future,” it is imperative that the appraiser review the economic outlook as it would impact the appraisal subject.
NATIONAL ECONOMY14
The information reviewed at the April 28-29 Federal Open Market Committee (FOMC) meeting indicated that economic activity appears to have slowed recently. Consumer spending firmed in the first quarter after dropping during the second half of 2008. Headline and core consumer prices rose at a moderate pace over the first three months of the year.
Labor market conditions deteriorated further in March. Private non farm payroll employment registered its fifth consecutive large monthly decrease, with losses widespread across industries. The civilian unemployment rate climbed to 8.5 percent, and the labor force participation rate edged down from its February level.
The available data analyzed at the meeting suggested that real consumer spending rose moderately in the first quarter after having fallen in the second half of 2008. Real spending
14 Much of this section was adapted from the minutes of the Federal Open Market Committee, April 28-29, 2009. -21- on goods and services excluding motor vehicles fell in March but was up, on balance, for the first quarter as a whole. Despite the increase in consumer spending, various concerns remained: wages and salaries dropped, house prices were markedly lower than a year ago, and, despite recent increases, equity prices were down substantially from their levels of 12 months earlier.
On May 11, 2009, Consensus Economics, Inc. released forecasts of key economic indicators. These forecasts are presented in Table 2.
TABLE 2 ECONOMIC INDICATORS
2009 2010 1st 2nd 3rd 4th 1st 2nd 3rd 4th Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Real Gross Domestic Product* -6.1 -1.9 0.4 1.6 2.2 2.7 2.9 3.1 Nominal Gross Domestic Product* -3.5 -1.1 1.4 2.6 3.7 4.0 4.3 4.6 Real Disposable Personal Income* 6.2 2.2 0.6 1.0 1.1 2.2 2.1 2.3 Real Personal Consumption* 2.2 -0.2 0.8 1.2 1.7 2.1 2.3 2.4 Real Business Investment* -38.3 -15.7 -10.5 -5.8 -1.7 2.1 5.1 6.9 Industrial Production* -20.2 -8.9 -1.9 1.8 2.7 3.4 4.0 4.4 Consumer Prices* -2.4 0.8 1.4 1.1 2.1 2.2 2.1 1.5 Producer Prices* -6.4 -0.8 1.0 1.1 2.5 2.2 2.4 2.2 Unemployment Rate, % 8.1 9.1 9.5 9.7 9.8 9.8 9.8 9.6 3 Month Treasury Bill Rate, %1 0.2 0.2 0.3 0.3 0.4 0.5 0.8 1.1 10 Year Treasury Bond Yield, %1 2.7 3.0 3.1 3.2 3.5 3.7 3.8 4.0 1 End quarter. * % change from prior quarter, seasonally adjusted annual rate.
Source: Consensus Forecasts - USA, Consensus Economics Inc., May 11, 2009: 5.
Consensus Economics’ projects that economic activity will slowly rebound for the remainder of 2009, and then begin posting moderate gains in 2010. Consumer price inflation is expected to remain low throughout the forecast period while the unemployment rate is forecast to remain high, showing little to no improvement. -22-
The economy appears to be rebounding. However, numerous concerns remain, most notably with regards to high unemployment rates. Going forward, expected improvements in personal spending and moderate consumer price inflation could have a positive impact on The Company.
LOCAL ECONOMY
The subject company is located in City, New Jersey. It is important to understand the economic climate of this local area in order to assess The Company’s prospects going forward.
City is a municipality in Some County, New Jersey with a population estimate of 51,590 as of 2005. Going forward, the population in City is expected to remain relatively stable. Historical population estimates and future projections for City, New Jersey are displayed in Table 3.
TABLE 3 POPULATION FORECAST
Year Population % Change
2000 50,650 - 2005 51,590 1.86% 2010 52,030 0.85% 2015 51,450 -1.11% 2020 50,790 -1.28% 2025 50,360 -0.85% 2030 51,850 2.96%
Income levels in City are above national and statewide levels. From 2006 to 2008, the median household income in City was $85,974 which is well above the national median of -23-
$52,175 and the statewide median of $69,674. From 1999 to the period 2006 to 2008, median household income in City grew 26 percent.15
Home values in City are also significantly higher than national and statewide levels. From 2006 to 2008, the median home value in City was $448,900, which is well above the U.S. median of $192,400 and the State of New Jersey median of $367,600. Of the 21,191 housing units in City, 62.3 percent are owner-occupied, 37.7 percent are renter-occupied and 5 percent are vacant.16
The impact of the economic downturn on City’s economy can be seen in the township’s unemployment statistics. The township’s unemployment rate rose to 7.0 percent as of April 2009. However, the unemployment rate has remained below national and statewide levels. This data is presented in Table 4.
TABLE 4 UNEMPLOYMENT RATES (NOT SEASONALLY ADJUSTED)
Date City NJ USA
November 2008 4.7% 6.0% 6.5% December 2008 5.2% 6.7% 7.1% January 2009 6.3% 8.2% 8.5% February 2009 6.8% 8.7% 8.9% March 2009 7.1% 8.9% 9.0% April 2009 7.0% 8.5% 8.6%
Source: Bureau of Labor Statistics, Local Area Unemployment Statistics, Online Database.
Another factor that will have an impact on the performance of the subject company is local competition. According to IHOP’s website, there are several other IHOP restaurants within
15 U.S. Census Bureau: City, Some County, New Jersey, 2006-2008.
16 Ibid. -24- an 11-mile radius of the subject company and 10 IHOP restaurants within a 15-mile radius. In addition, according to Yahoo Local, there are two Original Pancake House restaurants, one Cracker Barrel and one Perkins Family Restaurant within a 10-mile radius of City. There are also various other fast food and family restaurants in the area that can serve as indirect competition to The Company.
Overall, The Company operates in an affluent area with incomes and home values that exceed national and statewide levels. However, the area’s labor markets have been hit hard by the economic downturn which can have an adverse impact on discretionary spending. In addition, population growth in City over the long run is expected to be minimal.
17 INDUSTRY17
The restaurant industry as a whole is a large and diverse industry with projected sales of $566 billion in 2009. This represents a 2.5 percent increase more than 2008 sales levels in nominal terms. This projected sales increase is in spite of the fact that the industry is operating in one of the most challenging economic environments in nearly three decades.
Full service restaurant operators experienced one of the most challenging business environments in years in 2008. A rapidly deteriorating economy together with elevated food and energy costs put both operators and guests in a vulnerable position. With increased competition for a shrinking consumer dollar, full service restaurant operators faced various challenges in 2008, most notably related to costs, customers and competition.
• Costs: Operators across all three full service segments, fine dining, casual dining and family dining, agreed in an October 2008 National Restaurant Association survey
17 17 This section is adapted from the 2009 Restaurant Industry Forecast, published by The National Restaurant Association (NRA) and Deloitte & Touche, LLP. -25-
that controlling costs was more of a challenge than it had been two years earlier. More than four in five operators reported taking specific steps in response to climbing food costs. More than three in five took action to combat rising energy costs.
• Customers: Full service operators surveyed by the NRA in late 2008 said they found it more difficult to attract and retain customers than in the past. About half said they found it more challenging to attract new customers than two years before. About one in four said they had a harder time bringing back repeat customers in 2008 than two years before.
• Competition: Competition continued to heat up in 2008, said full service operators. Compared with two years ago, operators across all full service segments said it is more challenging to compete with quickservice restaurants, grocery stores and other full service segments.
Turbulent financial markets had an impact as well. Roughly one in four full service restaurant operators surveyed in October 2008 reported that they found it more challenging to obtain credit or financing than they had two years earlier.
In 2008, full service restaurant sales totaled $18.1 billion, up 1.1 percent from 2007. This marks the slowest growth since the NRA began tracking restaurant industry sales in 1970. According to the NRA’s October 2008 survey of operators, 54 percent of family dining operators, 44 percent of casual dining operators and 52 percent of fine-dining operators reported that business in 2008 was down from 2007.
In 2009, the NRA projects that full service restaurant sales will total $182.9 billion, up 1 percent from 2008. This gain is similar to the increase experienced in 2008, but still well below the 2002 to 2007 average annual increase of 4.8 percent. The NRA anticipates that the keys to success for full service operators in 2009 are as follows: -26-
• Repeat business: Repeat customers represent a majority of sales for full service restaurants, accounting for 75 percent of sales at family dining restaurants, 70 percent of sales at casual dining restaurants and 60 percent of sales at fine dining restaurants. With operators saying it is easier to bring back repeat customers than attract new ones, success in a soft economy is increasingly dependent on keeping regular guests coming back.
• The value of value: Asked what steps full service restaurateurs could take to draw guests into their operations more frequently, customers gave their highest marks to those that provided value. Seventy-five percent of customers surveyed by the Association in November 2008 said they would patronize a full service restaurant more frequently if the restaurant offered frequent-dining discounts or discounts for dining on slower days of the week. Other top draws: Smaller portions for a lower price; discounts for dining at off-peak times; and food and drink specials during happy hours.
• Off-premises growth: One way full service operators can address increased competition from quickservice operations and grocery stores is to expand their takeout and delivery services. Nearly all full service restaurants, including nine in 10 fine dining restaurants, offer takeout. Delivery is not as common and it is offered by less than one out of five full service restaurants. But full service operators see takeout and delivery as ripe for growth. About four in 10 family, and causal dining operators and a third of fine dining operators believe delivery will become more popular in their segment in the future. Customers appear eager for the expanded options: Close to half of consumers surveyed said they would patronize full service restaurants more frequently if the restaurants offered delivery or had convenient takeout options. -27-
TPH will face numerous challenges in the short-term, most notably a deteriorating economy and rising food costs. The Company must find ways to combat these rising costs and continue to attract and retain customers in order to weather the current economic downturn.
18 INTERNATIONAL HOUSE OF PANCAKES18
IHOP restaurants are franchised and operated by Glendale, California-based International House of Pancakes, LLC and its affiliates. International House of Pancakes, LLC is a wholly- owned subsidiary of Dine Equity, Inc. (NYSE: DIN). IHOP restaurants feature moderately priced, high quality food and beverage items and table service. Although IHOP restaurants are best known for their signature pancakes, omelettes and other breakfast specialties, IHOP restaurants are open throughout the day and evening hours and offer a broad array 19 of lunch, dinner and snack items as well.19 According to Morningstar, IHOP restaurants have 20 an average check of about $9 to $10.20
IHOP Corp. was incorporated in 1976. Effective June 2, 2008, the name of the company was changed to Dine Equity, Inc. which operates two segments: IHOP and Applebees. As of December 31, 2008, there was a total of 1,396 IHOP restaurants of which 1,225 were subject to franchise agreements, 160 were subject to area license agreements and 11 were company-operated restaurants. IHOP restaurants are located in 49 states in the United 21 States, the District of Columbia and internationally in Canada and Mexico.21
18 18 Unless otherwise footnoted, this section is adapted from Dine Equity, Inc.’s 10-K filing for the fiscal year ended December 31, 2008.
19 19 IHOP, Company Overview
20 20 Morningstar, Dine Equity, Inc.
21 21 Dine Equity, 10-K filing, December 31, 2008. -28-
In 2008, IHOP entered into 24 franchise development agreements. As of December 31, 2008, the company had signed commitments from franchises to build 307 IHOP restaurants over the next nine years plus options for an additional 111 restaurants. In 2009, the company expects to open a total of 65 to 75 new IHOP restaurants, including 55 to 60 franchise restaurants.
IHOP competes in the family dining segment against national and multi state operators such as Denny’s, Cracker Barrel, Old Country Store, Bob Evans Restaurants and Perkins Restaurant and Bakery. In addition, there are many independent restaurants and diners across the country in the family dining segment. Family dining restaurants offer full table service, typically do not have bars or serve liquor, and usually offer breakfast in addition to lunch and dinner items. IHOP is one of the largest family dining brands in the world in terms of number of restaurants and market share.
IHOP’s revenues from franchise sales have been on an upward trend since 2004. This data is presented in Table 5.
TABLE 5 IHOP FRANCHISE REVENUES ($000's)
Year Revenues % Change
2004 $ 157,584 - 2005 167,384 6.2% 2006 179,331 7.1% 2007 191,584 6.8% 2008 204,940 7.0%
Franchise revenues consist of royalties, IHOP advertising fees and sales of proprietary products for IHOP which fluctuate with increases or decreases in franchise retail sales. Franchise retail sales are impacted by the development of IHOP restaurants by the -29- franchisees and by fluctuations in same-store sales. Growth rates of same-store sales for IHOP franchises are presented in Table 6.
TABLE 6 IHOP FRANCHISE SAME-STORE SALES (% CHANGE OVER PRIOR YEAR)
Year % Change
2005 2.9% 2006 2.5% 2007 2.2% 2008 1.5% QTD March 31, 2009 2.0%
As indicated by the data in Table 6, IHOP has achieved positive same-store sales growth through its franchises for four consecutive years, and has continued a string of 23 consecutive quarters of same-store growth through third quarter 2008. However, guest traffic declined during the fourth quarter of 2008 due to a combination of several severe hurricanes and the mounting economic crisis.
Through March 2009, IHOP’s same-store sales for franchises increased by 2 percent over March 2008 levels. This is primarily the result of a higher average guest check, along with slightly positive guest traffic growth.22
Overall, IHOP appears to be a healthy company, and it continues to post positive franchise revenues and open new locations. In addition, despite the economic downturn, IHOP franchises have continued to post positive same-store sales growth. So far in 2009, IHOP franchises have experienced positive increases in average check amounts and guest traffic. These factors provide for an overall positive outlook for TPH.
22 Dine Equity, 10Q, March 31, 2009. -30- FINANCIAL ANALYSIS
A limited financial analysis of The Company was performed using The Company’s historic tax returns which are presented in Schedules 1 and 2 at the back of this report. The Company does not have any internal financial records available and in analyzing its tax returns, it becomes apparent that The Company expenses its capital expenditures. Based on these factors, we focused our analysis on The Company’s revenues and gross profit figures as the available operating expense data was deemed unreliable.
We began our financial analysis of The Company by looking at its balance sheet. As of December 31, 2008, The Company’s current assets consisted of small cash and inventory balances. In addition, The Company had current liabilities of $79,018 consisting of accounts payable, taxes payable and payables related to gift cards and credit cards. As of December 31, 2008, The Company had a shareholder loan with a balance of $485,021. There are no documents or records related to this loan and regular payments are not being made. Therefore, we treated these loans as paid in capital rather than a form of debt, and reclassified them as equity.
The next step in the analysis is to look at The Company’s historic income statements. After peaking in 2005 at $2.21 million, TPH’s revenues declined for two consecutive years reaching $1.74 million in 2007. The decline in revenues over this time period can be attributed to the opening of a new IHOP franchise in NextCity, New Jersey, which is located within a six-mile radius of the subject company, as well as the start of a weakening economy. In 2008, The Company’s revenues rebounded, rising to $1.86 million.
We also performed a benchmarking analysis of The Company’s gross profit margin. We turned to the following two sources for this data to compare The Company to: -31-
1. Microbilt’s Integra Financial Benchmarking Database (Integra) - We searched Integra for financial benchmarking data for companies located in Standard Industrial Classification (SIC) code 5812: Eating and Drinking Places with revenues between $1 million and $2.49 million. The Integra database contained composite data for 5,702 companies classified under this category.
2. National Restaurant Association - 2010 Restaurant Industry Operations Report with 2008 data - The 2010 Restaurant Industry Operations Report contained common size financial data for various categories of restaurants. We focused our analysis on full service restaurants with an average check per person less than $15, and revenues between $1 million and $1.999 million.
A summary of TPH’s historic gross profit margins along with comparative data from Integra and the National Restaurant Association is presented in Table 7.
TABLE 7 GROSS PROFIT MARGIN ANALYSIS
TPH Integra NRA Lower Upper 2005 2006 2007 2008 2008 Quartile Median Quartile
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Sales 40.78% 40.23% 38.49% 40.50% 36.27% 27.00% 32.60% 35.20%
Gross Profit 59.22% 59.77% 61.51% 59.50% 63.73% 73.00% 67.40% 64.80%
The data in Table 7 shows that TPH’s gross profit margins have consistently lagged those of its industry peer group. The Company’s cost of sales as a percentage of revenue has exceeded 40 percent in three out of the four years shown. In all of these years, The Company’s cost of sales as a percentage of revenues have fallen well above the upper quartile of the National Restaurant Association data. According to one of the pricing tips for full service restaurants published in the 2009 Business Reference Guide: -32-
23 If cost of sales exceeds 35%, there is probably some skimming going on.23
We have also been informed by our client that it was common for the business to make large purchases of items such as ketchup, and then resell it for cash to other local restaurants. This could also explain a higher cost of sales.
Our analyses of The Company’s gross profit margins further reflect the unreliability of TPH’s historic earnings. This factor, along with the lack of internal financial records, prevented us from determining an appropriate level of economic earnings that The Company can generate over the long run. Therefore, we were unable to perform an income approach in this valuation and will proceed to value The Company using revenues-based transaction multiples. This will be discussed in more detail in the following section of the report.
23 th 23 Tom West, 2009 Business Reference Guide, 19th Edition: 615. - 33 -
VALUATION ANALYSIS
THE MARKET APPROACH
TRANSACTION METHOD
In order to determine the value of The Company using the market approach, we searched the following databases for sales transactions of restaurants as far back as January 1, 2000.
1. Institute of Business Appraisers (IBA) 2. BizComps™ 3. Pratt’s Stats™
Due to the facts that The Company’s historic financial statements were noticeably out of line with the industry benchmarking data and that The Company has no records available that would allow us to analyze its expense structure and determine an appropriate level of economic earnings, we focused our analysis specifically on price to revenue multiples. According to one of the pricing tips published in the 2009 Business Reference Guide, the price to revenue multiple is the most important multiple to consider when determining the asking price for a full service restaurant. The 2009 Business Reference Guide states:
There are 5 critical criteria for restaurants to meet. #1 is location: busy location, high traffic, booming business in the area and finally mid to high income population. #2 is rent: it should not exceed 10% of gross revenue. #3 is conversion potential: can the restaurant be converted into another concept that will not compete with other restaurants within the same particular center? #4 is condition of equipment: are they NSF approved and in good condition? Since they are expensive, we shouldn’t overlook that. #5 is asking price: the most important is percentage of gross revenue, which shouldn’t exceed - 34 -
30%-40%, that’s what experienced restaurant owners/buyers look for; and the gross annual revenue shouldn’t be less than $500,000 for a full- service restaurant, otherwise it should sell as an asset sale. If you have service restaurant, otherwise it should sell as an24 asset sale. If you have all 5 criteria, the business will sell for market value.24 (Emphasis added).
For additional insight on the usefulness of the price to revenue multiple, we reviewed a presentation from Raymond C. Miles, the founder and past Executive Director of IBA. Mr. Miles stated:
The price-to-earnings and price-to-gross revenues multiples are almost equally valid criteria for estimating the market value of businesses. This conflicts with the conventional wisdom that the price-to-earnings ratio is the most significant performance criterion of a business.
In practice, the price-to-gross revenue multiple is especially useful for appraising closely held businesses, because price-to-gross revenue multiples are available for all sales in the IBA Market Data Base, while price-to-earnings are available for all sales in the IBA Market Data25 Base, while price-to-earnings multiples are only available for some sales.25
In addition, Charles M. Perkins, CBI, President of the Boston Restaurant Group, stated the following:
Multiple of Sales Method The Multiple of Sales method has many supporters, given that it is a relatively straight forward method to use and that the sales of a business can be verified from the Federal Tax Return - business owners are not apt to inflate their annual revenue. Utilizing the appropriate multiple, an appraiser can determine the value of the business with the method.
Revenues (Gross) are easier to measure and verify than are profits; hence, many buyers tend to rely more heavily on gross revenues than on reported earnings when they consider how much to pay for a business.
24 24 Ibid.
25 25 Raymond C. Miles, “Business Appraising in the Real World–Evidence From the IBA Market Database” (document presented at the IBA National Conference, Orlando, FL, February 7, 1992). - 35 -
Multiple of Earnings Method In the application of this method, the appraiser would determine the cash flow of the business and apply the appropriate, market derived, multiple from one of the industry’s recognized database sources (Pratt’s Stats, etc.) The difficulty is using this method is that many restaurants are not operationally 26 profitable.26
Taking this into consideration, we valued The Company using the price to revenue multiple.
INSTITUTE OF BUSINESS APPRAISERS (IBA)
A search of IBA’s database for transactions of businesses in SIC code 5812 returned 2,384 transactions. Details of these transactions are presented in Table 8.
TABLE 8 IBA TRANSACTION DETAILS
Sales Price Price/ Business Description ($000) ($000) Sales State Sale Date Census Region
Specialty Restaurant 764 5 0.01 AZ 01/01/04 West Eating Places - Restaurants 124,033 1,700 0.01 UT 10/12/00 West Restaurants|American Restaurant 6,000 125 0.02 GA 11/01/05 South Restaurants|Café Type Eatery 96 2 0.02 FL 07/18/03 South Restaurants|Pizza Shop 488 15 0.03 FL 05/15/09 South Pizza Shop 312 10 0.03 FL 10/29/04 South Restaurants|Breakfast Lunch 110 4 0.04 FL 11/08/06 South Restaurants|Sub Shop 240 9 0.04 FL 05/28/08 South Bagel Restaurant 13,000 500 0.04 FL 08/01/03 South Restaurants|Sub Shop 187 8 0.04 FL 02/17/09 South Restaurants|Pizza Shop 300 13 0.04 FL 02/03/04 South Diner 5,412 240 0.04 FL 01/04/00 South Restaurants|Italian Restaurant 330 15 0.05 FL 06/19/08 South Restaurants|Deli Restaurant 2,000 100 0.05 FL 07/29/04 South Restaurants|Pizza Shop 384 20 0.05 FL 04/10/05 South Restaurant 302,160 17,000 0.06 DE 01/01/00 South Restaurants|Brew/Pub 582 35 0.06 FL 09/10/08 South Restaurants|Coffee Shop/House 331 20 0.06 FL 04/25/05 South
26 26 Charles M. Perkins, “Eating & Dining Places: Best Valuation Approach to Use and Why, Industry Valuation Update: Eating and Drinking Places, Volume Two,” Business Valuation Resources, January 8, 2007. - 36 -
TABLE 8 IBA TRANSACTION DETAILS
Sales Price Price/ Business Description ($000) ($000) Sales State Sale Date Census Region
Restaurants|Deli Restaurant 285 18 0.06 FL 02/24/03 South American Restaurant 840 55 0.07 FL 07/01/01 South Restaurants|American Restaurant 840 55 0.07 GA 02/01/02 South
Transactions have been removed from this sample report due in order to save space.
Italian Restaurant 683 49 0.07 FL 04/30/09 South Restaurants|Italian Restaurant 683 50 0.07 FL 04/30/09 South Restaurants|American Restaurant 2,032 150 0.07 FL 03/26/08 South Restaurants|Take Out Only 240 18 0.08 OR 01/04/07 West Restaurants|Pizza Shop 384 30 0.08 FL 12/19/03 South Restaurants|Specialty Restaurant 380 30 0.08 FL 11/06/08 South Diner 662 53 0.08 TX 09/06/01 South Juice Bar 270 22 0.08 TN 11/01/00 South Food & drive-thru 480 40 0.08 AZ 01/01/03 West Food Business Retail|Food Deli Take Out 300 25 0.08 FL 05/04/09 South Restaurants|Breakfast Lunch 343 29 0.08 FL 02/02/09 South Restaurants|Bagel Restaurant 650 55 0.08 NY 07/17/06 Northeast Restaurants|Bagel Restaurant 650 55 0.08 FL 03/07/06 South asset sale 700 60 0.09 AZ 01/01/03 West Restaurants|Ethnic Restaurant 700 60 0.09 KS 08/29/06 Midwest Catering 576 50 0.09 FL 06/01/05 South Restaurants|Floating Fast Food 228 20 0.09 FL 10/01/08 South Restaurants|Pizza Shop 170 15 0.09 FL 01/16/08 South Restaurants|Seafood Restaurant 1,165 105 0.09 NY 07/26/06 Northeast
Of the 2,384 transactions located in the IBA database, 2,153 had price to revenue data. TPH was larger than most of the acquired companies located in the database as the 90th percentile revenue figure for these transactions was $800,000. A statistical summary of the price to revenue multiples is presented in Table 9. - 37 -
TABLE 9 IBA PRICE TO REVENUE STATISTICS
Average 0.43 Standard Deviation 0.38 Coefficient of Variation 0.90
10th percentile 0.18 25th Percentile 0.26 Median 0.37 75th Percentile 0.50 90th Percentile 0.67
Semi-Interquartile Range (SIR) 0.12 SIR as a % of Median 33.00% 10th - 90th Percentile Range (PR) 0.24 10th - 90th PR as a % of Median 66.00%
The statistical data presented in Table 9 allow us to draw several conclusions about the data set. First, the data set is skewed upward as indicated by the average multiple exceeding the median multiple. Because the data is skewed, the average is a poor indication of where the data is centered and the standard deviation is a poor indication of the variability of the data as both of these measures are heavily sensitive to outliers. Therefore, we focused our analysis on the median multiple and the corresponding measures of dispersion for the median statistic.
We organized the data into percentiles in order to gain perspective on how the data was dispersed around the median. After that we calculated percentile ranges. A percentile range is the difference between two percentiles. It serves as a measure of dispersion for the median in a similar manner that the standard deviation serves as a measure of dispersion for the average. In this analysis, we analyzed the interquartile range, which is the difference between the 75th and 25th percentiles, and the 10th - 90th percentile range, which is the difference between the 90th percentile and the 10th percentile. The differences between the percentiles are divided by two to provide an estimate of the spread above and below the median and are referred to as the semi-interquartile range and the semi-10 to 90 percentile range. - 38 -
The semi-interquartile range and the semi-10-90 percentile range were 0.12 and 0.24, respectively as reflected in the statistical data presented in Table 9. As a percentage of the median, the semi-quartile range and the semi-10-90 percentile range was 33 percent and 66 percent, respectively. This indicates a relatively tight clustering of the data around the median, which is a positive sign in determining the statistical reliability of a sample. This can be seen graphically in the histogram presented in Chart 1.
CHART 1 IBA PRICE TO REVENUE HISTOGRAM
Chart 1 shows how the IBA data is spread out. It shows the heavy clustering of the data around the median with a few extreme outliers above the median. In addition, the red line shows how close to 100 percent of the data is within a reasonable range of the median. Based on these factors, we determined that the sample set has a solid level of statistical reliability, and the median is a good indicator of the central tendency of the data.
Our analysis began by looking at all of the transactions located in SIC code 5812. We analyzed two groupings of data: a) all of the transactions and b) only those located in the - 39 -
Northeast region of the United States. A listing of the transactions located in the Northeast region is presented below in Table 10.
TABLE 10 IBA TRANSACTIONS IN NORTHEAST REGION
Sales Price Price/ Business Description ($000) ($000) Sales State Sale Date Census Region
24 Hr Restaurant 965 200 0.21 PA 05/01/03 Northeast Breakfast & Lunch 177 40 0.23 MA 07/01/03 Northeast Breakfast & Lunch 125 45 0.36 MA 03/01/04 Northeast Breakfast & Lunch 208 65 0.31 MA 07/01/04 Northeast Breakfast & Lunch 130 20 0.15 MA 08/09/02 Northeast Breakfast & Lunch 566 208 0.37 MA 12/01/03 Northeast Breakfast & Lunch Rest. 145 45 0.31 MA 05/01/00 Northeast Breakfast & Lunch Rest. 103 32 0.31 MA 01/01/00 Northeast Breakfast Lunch 226 60 0.27 MA 07/22/08 Northeast
Transactions were removed to save space.
Coffee 325 115 0.35 MA 02/15/06 Northeast Coffee Shop 192 33 0.17 MA 08/01/03 Northeast Coffee Shop and Bar 274 125 0.46 PA 06/29/07 Northeast Deli 308 175 0.57 MA 08/01/06 Northeast Family Restaurant 1,640 1,350 0.82 MA 04/03/01 Northeast Fast Food BBQ 76 58 0.76 PA 01/01/02 Northeast
The next step in the analysis was to divide the data into three time periods: a) transactions that have taken place since January 1, 2000, b) transactions that have taken place since January 1, 2005, and c) transactions that have taken place since January 1, 2007. A statistical summary for each of the data sets analyzed is presented in Table 11. - 40 -
TABLE 11 IBA- STATISTICAL SUMMARY
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 Northeast Northeast Northeast All Data Region All Data Region All Data Region Average 0.43 0.44 0.44 0.41 0.40 0.43 Standard Deviation 0.38 0.27 0.47 0.19 0.30 0.24 Coefficient of Variation 0.90 0.61 1.08 0.47 0.76 0.55 10th percentile 0.18 0.21 0.18 0.21 0.15 0.21 25th percentile 0.26 0.29 0.25 0.29 0.23 0.27 Median 0.37 0.38 0.38 0.38 0.35 0.36 75th percentile 0.50 0.54 0.51 0.53 0.50 0.55 90th percentie 0.67 0.71 0.65 0.60 0.65 0.74 Semi-Interquartile Range 0.12 0.12 0.13 0.12 0.13 0.14 Semi-Interquartile Range as a % of Median 33% 32% 34% 32% 39% 39% Semi-10-90 Percentile Range 0.24 0.25 0.23 0.20 0.25 0.27 Semi-10-90 Percentile Range as a % of Median 66% 66% 62% 51% 72% 75% Sample Size 2,153 110 982 78 502 37
The statistics presented in Table 11 indicate that the data is skewed, as the average exceeds the median in each subset. Therefore, the median and percentile statistics were analyzed as they provide a more meaningful analysis.
The percentile statistics in Table 11 reflect minimal differences in the multiples between transactions that have occurred nationwide and transactions that have occurred in the Northeast region. In addition, the variability in the data as measured by the semi- interquartile range has remained stable through each of the subsets. The data also reflects that the median multiples have decreased in the most recent sample set that dates back to January 1, 2007. This could be attributed to the poor economic climate that was in effect during this period, however, the semi-quartile range increased as a percentage of the median, which reflects a little more variability in the data. In addition, the declines in the median multiples were not that significant as they are still within reasonable range of the median multiples for the entire population of data. In conclusion, the statistics in Table 11 support the notion that the data is tightly clustered around the median as the median and the interquartile range have shown stability through the various sortings of the data.
Our findings of the lack of change in the median multiple despite establishing date and region constraints are similar to those found by Mr. Miles in an empirical study of the data contained in the IBA database. Mr. Miles states:
Empirical data for all business categories, in aggregate, does not show any significant changes in business value as a function of time. This is contrary to - 41 -
the conventional wisdom that only recent sales should be considered when choosing guideline (“comparable”) companies. The data shows no significant correlation between the selling price and the percentage down payment. This differs from the conventional wisdom that a business sold for cash should bring a lower total price than one sold for “terms.” As expected, business values as measured by price to earnings and price to gross multiples differ from one kind of business to another. However, this difference is not as large as might have been expected. This suggests that the search for guideline companies does not need to be limited to businesses in the same SIC category as the business being appraised. Thus, the search for guideline companies can reasonably include SIC categories other than the category assigned to the business being appraised. Empirical evidence indicates that the ‘most probable price’ for a business is significantly different from the average price of businesses that have been sold. Thus, when the standard of value is ‘most probable price,’ use of the average selling price of guideline companies can lead to a value estimate that average selling price of guideline companies27 can lead to a value estimate that is in error by a significant amount.27
28 In another study28 published by Mr. Miles, he disclosed how the multiples were not materially different when broken down geographically. The results of this study are presented below:
Price to Earnings Diff. From Price to Gross Rev. Diff. From Mean Nat’l Avg. Mean Nat’l Avg.
Southwest 2.10 -11.00% 0.54 -4.00% Northwest 2.60 11.00% 0.57 6.00% Southeast 2.23 -7.00% 0.56 1.66% Northeast 2.99 25.00% 0.54 1.66%
All Regions 2.39 0.54
As can be seen from the above data, the multiples are not materially different from one region to another. Following the completion of the study, the author determined that a major reason for the higher price to earnings multiples for the Northeast geographic region was
27 27 Business Appraising in the Real World–Evidence from the IBA Market database.
28 28 Raymond C. Miles, “Business Values in the Real World: Evidence from the IBA Transaction Database,” presentation at the American Society of Appraisers Business Valuation Conference, Houston, October 23, 1993. - 42 - - 42 - a submission of many business sales by one business broker who dealt with “high end a submission of many business sales by one business broker who dealt with “high end business.”29 business.”29
Nevertheless, the results of Mr. Miles’ studies support our analysis that the median price to Nevertheless, the results of Mr. Miles’ studies support our analysis that the median price to revenue multiple in the IBA database does not materially change despite the various revenue multiple in the IBA database does not materially change despite the various sortings of the sample data. sortings of the sample data.
We further analyzed the data by establishing revenue constraints. The purpose of this We further analyzed the data by establishing revenue constraints. The purpose of this analysis was to derive a grouping of restaurants that were similar in size to that of The analysis was to derive a grouping of restaurants that were similar in size to that of The Company and to review the impact that these constraints would have on the price to Company and to review the impact that these constraints would have on the price to revenue multiples. We analyzed transactions that involved companies that had revenues revenue multiples. We analyzed transactions that involved companies that had revenues within 10 times that of The Company. Summary statistics for each revenue constraint are within 10 times that of The Company. Summary statistics for each revenue constraint are presented in Table 12. presented in Table 12.
TABLE 12 IBA STATISTICAL SUMMARYTABLE WITH 12 REVENUE CONSTRAINTS IBA STATISTICAL SUMMARY WITH REVENUE CONSTRAINTS Since January 1, Since January 1, Since January 1, Since 2000January 1, Since 2005January 1, Since 2007January 1, within2000 10X within2005 10X within2007 10X withinRevenues 10X withinRevenues 10X withinRevenues 10X Revenues Revenues Revenues Northeast Northeast Northeast All Data NortheastRegion All Data NortheastRegion All Data NortheastRegion All Data Region All Data Region All Data Region Average 0.38 0.42 0.38 0.40 0.36 0.43 Average 0.38 0.42 0.38 0.40 0.36 0.43 Standard Deviation 0.23 0.22 0.22 0.21 0.21 0.25 Standard Deviation 0.23 0.22 0.22 0.21 0.21 0.25 Coefficient of Variation 0.61 0.53 0.58 0.52 0.57 0.58 Coefficient of Variation 0.61 0.53 0.58 0.52 0.57 0.58 10th percentile 0.17 0.20 0.16 0.20 0.14 0.20 10th percentile 0.17 0.20 0.16 0.20 0.14 0.20 25th percentile 0.24 0.28 0.25 0.27 0.22 0.27 25th percentile 0.24 0.28 0.25 0.27 0.22 0.27 Median 0.34 0.37 0.35 0.35 0.32 0.34 Median 0.34 0.37 0.35 0.35 0.32 0.34 75th percentile 0.46 0.51 0.47 0.50 0.45 0.52 75th percentile 0.46 0.51 0.47 0.50 0.45 0.52 90th percentile 0.62 0.68 0.61 0.62 0.60 0.78 90th percentile 0.62 0.68 0.61 0.62 0.60 0.78
29 Ibid. 29 Ibid. - 43 -
TABLE 12 IBA STATISTICAL SUMMARY WITH REVENUE CONSTRAINTS
Since January 1, Since January 1, Since January 1, 2000 2005 2007 within 10X within 10X within 10X Revenues Revenues Revenues Northeast Northeast Northeast All Data Region All Data Region All Data Region
Semi-Interquartile Range 0.11 0.12 0.11 0.11 0.11 0.13 Semi-Interquartile Range as a % of Median 32% 33% 31% 32% 35% 37% Semi-10-90 Percentile Range 0.22 0.24 0.22 0.21 0.23 0.29 Semi-10-90 Percentile Range as a % of Median 66% 65% 63% 60% 71% 85%
Sample Size 1,549 85 747 63 387 32
As the statistics in Table 12 indicate, applying the revenue constraints also had minimal impact on the median multiples and the percentile ranges. The median multiple remained in the range of 0.32 to 0.37 and the various percentiles also showed stability through the various sortings.
The next step in the analysis was to review the business descriptions of the various transactions and narrow our search to include only those restaurants with similar operations to those of The Company where possible. We looked for those businesses that could be classified as “full service eating places.” The following types of restaurants were included in this analysis.
• Breakfast/Lunch Restaurants • Specialty Restaurants • Family Restaurants • Diners • Other Full Service Restaurants
The transactions that met our criteria are presented in Table 13. - 44 -
TABLE 13 IBA - FULL SERVICE EATING PLACES
Sales Price Price/ Business Description ($000) ($000) Sales State Sale Date
Breakfast Lunch 24 45 1.88 AZ 01/04/08 Restaurants|American Restaurant 34 27 0.79 FL 02/01/01 Specialty Restaurant 35 28 0.80 AZ 01/01/04 Breakfast/Lunch 36 9 0.25 AZ 01/01/00 Restaurant 41 35 0.85 MA 04/16/02 Breakfast/lunch 42 22 0.52 AZ 01/01/03 Restaurants|Breakfast Lunch 44 10 0.23 FL 06/11/03 Breakfast/Lunch 45 45 1.00 FL 05/01/03 Restaurants|Breakfast Lunch 50 15 0.30 FL 12/02/04 Restaurants|Breakfast Lunch 60 20 0.33 FL 02/11/08 Restaurants|Breakfast Lunch 60 25 0.42 FL 05/02/03 Restaurants|Seafood Restaurant 60 35 0.58 UT 04/28/06 Restaurants|Breakfast Lunch 61 65 1.07 ID 04/10/07 Restaurant BBQ 65 37 0.57 OH 03/01/00 Restaurants|Steak Restaurant 66 140 2.12 GA 10/19/04 Breakfast/lunch 70 40 0.57 AZ 01/01/03 Italian Restaurant 72 285 3.96 FL 04/07/00 Restaurant 73 25 0.34 CA 01/01/05 Restaurant 74 75 1.01 FL 10/02/04 Restaurants|American Restaurant 74 75 1.01 FL 10/02/04 Restaurants|American Restaurant 77 31 0.40 NE 06/02/06 Breakfast Restaurant 77 35 0.45 FL 02/01/04 Restaurants|Breakfast Lunch 77 42 0.55 FL 08/01/03
Transactions were removed to save space.
Restaurants|Italian Restaurant 80 40 0.50 FL 02/02/00 Restaurants|Breakfast Lunch 81 110 1.36 FL 09/09/03 Restaurants|Breakfast Lunch 82 39 0.48 FL 11/13/02 Diner 85 24 0.28 OH 10/01/01 Restaurants|Breakfast Lunch 85 25 0.29 FL 06/09/04 Italian Restaurant 85 195 2.29 AZ 01/01/05 Breakfast Lunch 86 52 0.60 FL 01/19/01 Restaurants|Breakfast Lunch 87 52 0.60 FL 01/19/01 Restaurants|Latin Restaurant 91 18 0.20 FL 03/02/09 Restaurant 94 50 0.53 MA 02/01/06 Restaurants|Breakfast Lunch 94 23 0.24 TX 04/09/07 Restaurants|Breakfast Lunch 95 60 0.63 FL 04/17/07 Restaurants|Italian Restaurant 738 175 0.24 FL 04/30/04
We divided this data set further by looking only at those transactions that took place in the Northeast region of the United States. A listing of these transactions is presented in Table 14. - 45 -
TABLE 14 IBA FULL SERVICE EATING PLACES NORTHEAST REGION
Sales Price Price/ Business Description ($000) ($000) Sales State Sale Date
Breakfast & Lunch Rest. 103 32 0.31 MA 01/01/00 Breakfast & Lunch Rest. 145 45 0.31 MA 05/01/00 Family Restaurant 1,640 1,350 0.82 MA 04/03/01 Restaurant 41 35 0.85 MA 04/16/02 Breakfast & Lunch 130 20 0.15 MA 08/09/02 24 Hr Restaurant 965 200 0.21 PA 05/01/03 Breakfast & Lunch 177 40 0.23 MA 07/01/03 Restaurant 766 358 0.47 MA 09/08/03 Breakfast & Lunch 566 208 0.37 MA 12/01/03 RES 455 134 0.29 NH 01/01/04 Breakfast & Lunch 125 45 0.36 MA 03/01/04 Restaurant 338 275 0.81 MA 03/01/04 Restaurant 591 289 0.49 MA 05/01/04 Restaurant 1,897 350 0.18 MA 05/01/04 Breakfast & Lunch 208 65 0.31 MA 07/01/04 Breakfast/Lunch 200 88 0.44 NY 11/01/04 REST 235 150 0.64 VT 01/01/05 Full service restaurant 910 290 0.32 MA 08/31/05 Restaurant 405 160 0.40 MA 09/15/05
Sorry but we had to remove stuff again. The original report was 245 pages.
Restaurants|Specialty Restaurant 256 142 0.55 MA 03/30/06 Restaurants|Breakfast Lunch 380 110 0.29 VT 04/15/06 Restaurants|Italian Restaurant 2,500 950 0.38 PA 04/24/06 Restaurants|Breakfast Lunch 182 60 0.33 NY 04/26/06 Restaurants|Family Style 468 70 0.15 NY 05/16/06 Restaurants|American Restaurant 393 150 0.38 PA 06/01/06 Restaurants|Diner 285 80 0.28 NJ 06/30/06 Restaurants|Seafood Restaurant 1,165 105 0.09 NY 07/26/06 Restaurants|Mexican Restaurant 420 228 0.54 NY 08/30/06
We then applied the same date and revenue constraints with the full service dining restaurants as we did with our analysis of the entire population of data. The summary statistics are presented in Table 15. - 46 -
TABLE 15 IBA - FULL SERVICE EATING PLACES SUMMARY STATISTICS
Since January 1, Since January 1, Since January 1, 2000 2005 2007 Northeast Northeast Northeast All Region All Data Region All Region Data Data Average 0.40 0.38 0.39 0.37 0.37 0.37 Standard Deviation 0.31 0.20 0.25 0.18 0.25 0.24 Coefficient of Variation 0.76 0.51 0.63 0.50 0.68 0.63
10th percentile 0.17 0.19 0.16 0.19 0.14 0.18 25th percentile 0.24 0.27 0.24 0.27 0.22 0.27 Median 0.33 0.32 0.35 0.32 0.31 0.32 75th percentile 0.47 0.45 0.48 0.42 0.45 0.40 90th percentie 0.66 0.59 0.63 0.55 0.62 0.56 Semi-Interquartile Range 0.11 0.09 0.12 0.08 0.12 0.06 SIR as a % of Median 34% 28% 34% 24% 38% 20% Semi-10-90 Percentile Range 0.25 0.20 0.24 0.18 0.24 0.19 Semi-10-90 Percentile Range as a % of Median 75% 62% 68% 55% 78% 59%
Sample Size 822 52 374 36 182 15
Since January 1, Since January 1, Since January 1, 2000 within 10X 2005 within 10X 2007 within 10X Revenues Revenues Revenues Northeast Northeast Northeast All Region All Data Region All Region Data Data
Average 0.36 0.38 0.37 0.36 0.34 0.38 Standard Deviation 0.25 0.20 0.22 0.20 0.22 0.25 Coefficient of Variation 0.68 0.53 0.58 0.53 0.64 0.65 - 10th percentile 0.16 0.18 0.15 0.16 0.13 0.18 25th percentile 0.23 0.27 0.23 0.27 0.21 0.27 Median 0.31 0.32 0.33 0.32 0.29 0.30 75th percentile 0.44 0.47 0.47 0.43 0.45 0.42 90th percentie 0.60 0.59 0.61 0.55 0.59 0.57 Semi-Interquartile Range 0.11 0.10 0.12 0.08 0.12 0.08 SIR as a % of Median 35% 31% 36% 26% 41% 25% Semi-10-90 Percentile Range 0.22 0.20 0.23 0.20 0.23 0.19 Semi-10-90 Percentile Range as a % of Median 71% 63% 70% 62% 80% 64%
Sample Size 651 41 309 31 157 14
As the summary statistics in Table 15 indicate, applying these various constraints still did not have a major impact on the median multiple, as the median multiples presented in Table 15 ranged from 0.29 to 0.35. This is slightly lower than the range of median multiples for the entire population of data which was 0.32 to 0.37.
We further analyzed the data by looking at the multiples for transactions involving franchises. The purpose of this analysis was to see if the data reflects any premium prices - 47 - being paid for franchised restaurants. A listing of the transactions involving franchises found in the IBA database is presented in Table 16.
TABLE 16 IBA - FRANCHISES
Sales Price Price/ Business Description ($000) ($000) Sales State Sale Date
Franchise Pizza 435 180 0.41 01/01/00 Burger King Franchise 922 686 0.74 KS 03/01/00 Burger King Franchise 1,270 659 0.52 KS 04/01/00 Burger King Franchise 675 457 0.68 KS 05/01/00 Burger King Franchise 915 758 0.83 KS 06/01/00 BK Franchise 746 285 0.38 KS 07/01/00 Burger King Franchise 757 532 0.70 KS 07/01/00 New Franchises|NF Yogurt/Ice Cream 117 65 0.56 GA 08/01/00 Burger King Franchise 1,183 608 0.51 KS 08/01/00 DQ Franchise 207 76 0.37 OH 09/01/00 Restaurants|Fast Food Franchise 510 325 0.64 GA 10/26/00 Snack Food Franchise 208 140 0.67 TN 11/01/00 Restaurant Service Franchise 220 137 0.62 OH 11/01/00 Burger King Franchise 688 446 0.65 KS 12/01/00 Franchise Restaurant 1,123 840 0.75 AR 06/01/01 Ice Cream/Yogurt Franchise 179 83 0.46 FL 08/01/01 Restaurants|Fast Food Franchise 487 120 0.25 GA 10/12/01 Fast Food Franchise 470 250 0.53 FL 11/01/01 Restaurants|Fast Food Franchise 659 275 0.42 FL 11/09/01 Restaurants|Fast Food Franchise 470 250 0.53 FL 11/14/01
Yes, I did it again.
Restaurants|Fast Food Franchise 117 35 0.30 GA 01/15/02 Restaurants|Fast Food Franchise 173 63 0.36 FL 01/22/02 Subway Franchise 191 82 0.43 OH 02/01/02 Subway Franchise 209 89 0.43 OH 03/01/02 Subway Franchise 209 92 0.44 OH 04/01/02 Subway Franchise 404 224 0.55 PA 04/01/02 Franchise Fast Food 432 606 1.40 FL 04/01/02
We further analyzed the data by applying the same date and revenue constraints as we did in our previous analyses. A statistical summary of this analysis is presented in Table 17. - 48 -
TABLE 17 IBA SUMMARY STATISTICS - FRANCHISES
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 Within Within Within All 10 X Revenues All 10X Revenues All 10X Revenues Data Data Data
Average 0.48 0.47 0.46 0.45 0.40 0.38 Standard Deviation 0.30 0.29 0.35 0.34 0.22 0.17 Coefficient of Variation 0.62 0.63 0.75 0.76 0.54 0.44
10th percentile 0.23 0.23 0.19 0.20 0.14 0.16 25th percentile 0.32 0.30 0.28 0.28 0.27 0.27 Median 0.44 0.43 0.43 0.42 0.36 0.35 75th percentile 0.55 0.54 0.54 0.52 0.49 0.47 90th percentile 0.74 0.70 0.72 0.62 0.64 0.56 Semi-Interquartile Range 0.12 0.12 0.13 0.12 0.11 0.10 As a % of Median 27% 27% 30% 29% 31% 29% Semi-10-90 Percentile Range 0.25 0.24 0.26 0.21 0.25 0.20 Semi-10-90 Percentile Range as a % of Median 58% 54% 62% 50% 69% 58%
Sample Size 137 125 80 74 37 33
The statistical data in Table 17 supports the notion that franchised restaurants typically have higher multiples than non-franchised restaurants. In addition, according to one of the pricing tips for full service restaurants published in the 2009 Business Reference Guide:
Non-franchise restaurants are worth 30-40% of annual sales. Franchise sit- down have been selling for 50% of annual sales, if they make a big enough down have been selling 30for 50% of annual sales, if they make a big enough profit to justify the price.30
The data contained in Table 19 shows that the median multiple for franchised restaurants ranged from 0.35 to 0.44. The most recent grouping of data shows a noticeable decline in the median multiple, however it should be noted that the sample size is much smaller and the dispersion of the data is much higher in the outer percentiles. Therefore, not much reliance can be placed on this particular grouping of data. Also noteworthy is the median multiple range of 0.42 to 0.44 when including the earlier dates still falls within the range of th the median and 75th percentile in the most recent grouping.
30 30 2009 Business Reference Guide: 615-616. - 49 -
Thus far in the analysis we have constructed 30 separate groupings of data for transactions in the IBA database. A summary of the median multiples is presented in Table 18.
TABLE 18 IBA TRANSACTION SUMMARY
Median 75th Sample Multiple Percentile Size Since January 1, 2000 All Transactions 0.37 0.50 2,153 Northeast Region 0.38 0.54 110 Within 10X Revenues All Transactions 0.34 0.46 1,549 Northeast Region 0.37 0.51 85 Since January 1, 2005 All Transactions 0.38 0.51 982 Northeast Region 0.38 0.53 78 Within 10X Revenues All Transactions 0.35 0.47 747 Northeast Region 0.35 0.50 63 Since January 1, 2007 All Transactions 0.35 0.50 502 Northeast Region 0.36 0.55 37 Within 10X Revenues All Transactions 0.32 0.45 387 Northeast Region 0.34 0.52 32 Casual Dining Places All Transactions 0.33 0.47 822 Northeast Region 0.32 0.45 52 Within 10X Revenues All Transactions 0.31 0.44 651 Northeast Region 0.32 0.47 41 Since January 1, 2005 All Transactions 0.35 0.48 374 Northeast Region 0.32 0.42 36 Within 10X Revenues All Transactions 0.33 0.47 309 Northeast Region 0.32 0.43 31 Since January 1, 2007 All Transactions 0.31 0.45 182 Within 10X Revenues All Transactions 0.29 0.45 157 Northeast Region 0.30 0.42 14 Franchise Since January 1, 2000 0.44 0.55 137 Within 10X Revenues 0.43 0.54 125 Since January 1, 2005 0.43 0.54 80 Within 10X Revenues 0.42 0.52 74 Since January 1, 2007 0.36 0.49 37 Within 10X Revenues 0.35 0.47 33 - 50 -
The data in Table 18 indicates higher multiples for franchises and a general level of uniformity across all other categories. These factors will be among those considered in our final reconciliation.
BIZCOMPS™
Our search of the BizComps™ database returned 1,700 transactions; 1,693 of these transactions contained price to revenue multiples. A listing of the transactions from this database is presented in Table 19.
TABLE 19 BIZCOMPS TRANSACTION DETAILS
Annual Gross Sale Price Sale Price To Business Description Area ($000) Sale Date ($000) Annual Gross
Restr-Diner West Central Florida $ 955 1/4/2000 $ 235 0.2460 Restr-Vegetarian Boulder, CO 194 1/10/2000 57 0.2940 Fast Food-Yogurt/Ice Cream N Central Georgia 230 1/13/2000 147 0.6390 Fast Food-Ice Cream Central States 461 1/28/2000 235 0.5100 Restr-Breakfast/Lunch Colorado Rockies 280 1/31/2000 205 0.7320 Restr-Bakery Denver, CO 194 1/31/2000 62 0.3200
This table goes on for about 20 pages. I had to remove some data.
Restr-Mexican Boise, ID 215 2/8/2000 35 0.1630 Fast Food-Juice Bar Salt Lake City, UT 134 2/9/2000 60 0.4480 Deli-Sandwiches N Central Georgia 360 2/14/2000 275 0.7640 Fast Food-Mexican Los Gatos, CA 300 2/17/2000 150 0.5000 Restr-Italian Oregon 225 2/19/2000 57 0.2530 Restr-Mexican Boise, ID 304 2/21/2000 69 0.2270 Deli-Sandwiches Houston, TX 182 2/28/2000 89 0.4890
The price to revenue multiples from the BizComps™ database appear graphically in Chart 2. - 51 -
CHART 2 BIZCOMPS™ PRICE TO REVENUE HISTOGRAM
The histogram presented in Chart 2 shows that the BizComps™ data is spread out in a manner similar to the IBA data. There appears to be a tight clustering of the data around the median, with a few cases of extreme outliers. Due to the presence of these outliers, our analysis will focus on medians and percentiles, as opposed to averages and standard deviations.
Our analysis began by looking at the entire population of data, as well as those restaurants classified in the database as “family restaurants.” The BizComps™ database was the only one that contained a large enough sample of businesses classified as family restaurants to conduct a meaningful analysis of this segment of the restaurant industry. A listing of the family restaurant transactions is presented in Table 20. - 52 -
TABLE 20 BIZCOMPS™ FAMILY RESTAURANTS
Annual Gross Sale Price Sale Price To Business Description Area ($000) Sale Date ($000) Annual Gross
Restr-Family Houston, TX $ 1,191 2/28/2000 $ 419 0.3520 Restr-Family Nampa, ID 700 5/1/2000 290 0.4140 Restr-Family Orange County, CA 135 5/1/2000 57 0.4220 Restr-Family Central Virginia 98 5/16/2000 60 0.6120 Restr-Family Houston, TX 456 5/31/2000 105 0.2300 Restr-Family Central Florida 360 6/1/2000 66 0.1830 Restr-Family Oregon 373 6/30/2000 129 0.3460 Restr-Family Oregon 286 9/25/2000 155 0.5420 Restr-Family Houston, TX 312 9/30/2000 240 0.7690 Restr-Family San Jose, CA 360 10/8/2000 200 0.5560 Restr-Family Houston, TX 591 10/31/2000 100 0.1690 Restr-Family Salt Lake City, UT 991 11/1/2000 140 0.1410 Restr-Family Minneapolis 120 12/1/2000 40 0.3330 Restr-Family Salt Lake City, UT 113 12/8/2000 57 0.5040
Sorry but this would be like one of those battery bunnies that goes on and on
Restr-Family Colorado 288 3/30/2001 125 0.4340 Restr-Family Ventura, CA 233 3/31/2001 25 0.1070 Restr-Family Worcester, MA 1,640 4/13/2001 680 0.4150 Restr-Family Boise, ID 300 4/27/2001 67 0.2230 Restr-Family Florida 1,224 5/7/2001 288 0.2350 Restr-Family Oregon 310 5/11/2001 135 0.4350 Restr-Family Boise, ID 300 5/14/2001 80 0.2670 Restr-Family New Mexico 479 5/15/2001 125 0.2610
We analyzed both groupings of data by applying the same revenue and date constraints that were used in our analysis of the IBA data. A statistical summary of each grouping is presented in Table 21.
TABLE 21 BIZCOMPS STATISTICAL SUMMARY
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 All Family All Family All Family
Average 0.42 0.36 0.43 0.33 0.42 0.36 Standard Deviation 0.32 0.18 0.34 0.16 0.44 0.20 Coefficient of Variation 0.76 0.51 0.79 0.48 1.04 0.54
10th Percentile 0.19 0.16 0.19 0.15 0.18 0.12 25th Percentile 0.27 0.23 0.27 0.21 0.25 0.20 Median 0.37 0.32 0.38 0.31 0.37 0.34 75th Percentile 0.50 0.44 0.53 0.42 0.52 0.53 - 53 -
TABLE 21 BIZCOMPS STATISTICAL SUMMARY
90th Percentile 0.67 0.60 0.70 0.56 0.65 0.61 Semi-Interquartile Range 0.12 0.10 0.13 0.10 0.14 0.17 SIR as a % of Median 31% 33% 34% 34% 36% 51% Semi-10-90 Percentile Range 0.24 0.22 0.26 0.20 0.23 0.24 Semi-10-90 Percentile Range as a % of Median 64% 68% 68% 65% 62% 73%
Sample Size 1,693 181 851 100 409 51
Within 10X Revenues Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 All Family All Family All Family
Average 0.40 0.33 0.41 0.32 0.40 0.34 Standard Deviation 0.33 0.16 0.35 0.15 0.46 0.19 Coefficient of Variation 0.82 0.48 0.85 0.48 1.15 0.57
10th Percentile 0.18 0.16 0.19 0.15 0.17 0.12 25th Percentile 0.26 0.22 0.26 0.21 0.24 0.19 Median 0.36 0.31 0.37 0.31 0.35 0.33 75th Percentile 0.48 0.41 0.50 0.38 0.47 0.45 90th Percentile 0.63 0.55 0.65 0.50 0.60 0.60 Semi-Interquartile Range 0.11 0.10 0.12 0.09 0.12 0.13 SIR as a % of Median 31% 31% 32% 28% 33% 39% Semi-10-90 Percentile Range 0.22 0.20 0.23 0.18 0.22 0.24 Semi-10-90 Percentile Range as a % of Median 63% 63% 63% 57% 61% 74%
Sample Size 1,382 157 737 89 346 42
The statistical data presented in Table 21 shows that the statistical characteristics of the price to revenue multiples in the BizComps™ database are extremely similar to those in the IBA database with respect to skewness, percentile ranges and medians.
Other apparent trends in the data in Table 21 include median multiples of family restaurants falling below those of the entire sample and lower multiples in the groupings that include the most recent data. The lower multiples for family restaurants makes sense in this case as the inclusion of franchises in the entire data set are likely driving the multiples upwards. Nevertheless, the differences are insignificant.
We further analyzed the data by performing two additional sortings: 1) transactions involving companies in the Northeast region of the United States and 2) transactions involving franchises. A listing of each of these groupings of data is presented in Tables 22 and 23. - 54 - - 54 -
TABLE 22 BIZCOMPS - NORTHEAST REGION TABLE 22 BIZCOMPS - NORTHEASTAnnual Gross REGION Sale Price Sale Price To Business Description Area ($000) Sale Date ($000) Annual Gross
Restr-Breakfast/Lunch Worcester, MAAnnual $ Gross 103 1/31/2000 $Sale 32Price Sale 0.3110 Price To Restr-Breakfast/LunchBusiness Description Worcester,Area MA ($000)145 5/31/2000 Sale Date ($000)45 Annual 0.3100 Gross Fast Food-Pizza Worcester, MA 312 7/31/2000 118 0.3780 Restr-Breakfast/LunchFast Food-Ice Cream Worcester,Worcester, MA MA $120 103 4/6/2001 1/31/2000 $65 32 0.5420 0.3110 Restr-Breakfast/LunchRestr-Family Worcester,Worcester, MA MA 1,640145 4/13/2001 5/31/2000 680 45 0.4150 0.3100 Fast Restr-Breakfast/LunchFood-Pizza Worcester,Massachusetts MA 177312 7/11/2001 7/31/200040 118 0.2260 0.3780 Fast Restr-SeafoodFood-Ice Cream Worcester,Boston, MA MA 400120 8/1/2001 4/6/2001 100 65 0.2500 0.5420 Restr-FamilyFast Food-Pizza Worcester,Worcester, MA MA 1,640390 10/26/2001 4/13/2001 135 680 0.3460 0.4150 Deli-Sandwiches Pennsylvania 271 12/12/2001 110 0.4060 Restr-Breakfast/Lunch Massachusetts 177 7/11/2001 40 0.2260 Deli-Sandwiches Pennsylvania 312 12/12/2001 114 0.3650 Restr-Seafood Boston, MA 400 8/1/2001 100 0.2500 Bagel Restaurant Boston, MA 763 2/20/2002 300 0.3930 Fast Food-Pizza Worcester, MA 390 10/26/2001 135 0.3460 Deli-Sandwiches Pennsylvania 240 3/5/2002 85 0.3540 Deli-SandwichesRestr-Mexican PennsylvaniaBoston, MA 1,000271 4/8/200212/12/2001 425 110 0.4250 0.4060 Deli-SandwichesRestr-Fine Dining PennsylvaniaBoston, MA 400312 4/16/2002 12/12/2001 130 114 0.3250 0.3650 BagelFast Restaurant Food-Yogurt Boston,Boston, MA MA 200763 4/18/2002 2/20/200250 300 0.2500 0.3930 Deli-Sandwiches Pennsylvania 240 3/5/2002 85 0.3540 Restr-Mexican Boston, MAYou should be used to this1,000 by now 4/8/2002 425 0.4250 Restr-Fine Dining Boston, MA 400 4/16/2002 130 0.3250 Fast RestrFood-Yogurt W/Cocktails Boston,Boston, MA MA 1,300200 10/3/2002 4/18/2002 515 50 0.3960 0.2500 Restr-Breakfast/Lunch Massachusetts 104 2/1/2003 36 0.3460 Restr-Breakfast/Lunch MassachusettsYou should be used to this207 by now 5/28/2003 62 0.3000 Bagel-Delicatessen Massachusetts 249 6/15/2003 175 0.7030 Deli-Sandwiches Pennsylvania 188 6/30/2003 45 0.2390 Restr W/Cocktails Boston, MA 1,300 10/3/2002 515 0.3960 Restr-Pizza Massachusetts 126 7/1/2003 56 0.4440 Restr-Breakfast/Lunch Massachusetts 104 2/1/2003 36 0.3460 Restr-Breakfast/Lunch Massachusetts 207 5/28/2003 62 0.3000 Bagel-Delicatessen Massachusetts TABLE 23 249 6/15/2003 175 0.7030 Deli-Sandwiches PennsylvaniaBIZCOMPS™ - FRANCHISES188 6/30/2003 45 0.2390 Restr-Pizza Massachusetts 126 7/1/2003 56 0.4440
Annual Gross Sale Price Sale Price To Business Description Area TABLE($000) 23 Sale Date ($000) Annual Gross
Pizza Franchise SFBIZCOMPS™ Bay Area, CA $- FRANCHISES 405 2/28/2000 $ 97 0.2400 Pizza Franchise SF Bay Area, CA 708 2/28/2000 229 0.3230 Pizza Franchise Boulder, CO 544 3/13/2000 260 0.4780 Restr-Franchise (2) Pleasanton, CA Annual Gross2,520 5/31/2000Sale 950 Price Sale 0.3770 Price To Business Description Area ($000) Sale Date ($000) Annual Gross Bagel Franchise Missouri 482 9/1/2000 225 0.4670 Fast Food Franchise N Central Georgia 510 10/26/2000 321 0.6290 Pizza Franchise SF Bay Area, CA $ 405 2/28/2000 $ 97 0.2400 Pizza Franchise SF Bay Area, CA Again! 708 2/28/2000 229 0.3230 Pizza Franchise Boulder, CO 544 3/13/2000 260 0.4780 Restr-FranchiseSubmarine Franchise (2) Pleasanton,Colorado CA 2,520623 12/31/2002 5/31/2000 293 950 0.4700 0.3770 BagelFast Franchise Food Franchise MissouriFlorida 350482 3/17/2003 9/1/2000 125 225 0.3570 0.4670 Fast Food Franchise Florida 424 5/30/2003 173 0.4080 Fast Food Franchise N Central Georgia 510 10/26/2000 321 0.6290 Fast Food Franchise Florida 486 5/30/2003 240 0.4940 Franchise-Ice Cream Las Vegas, NV Again! 259 7/22/2003 250 0.9650
Submarine Franchise Colorado 623 12/31/2002 293 0.4700 Fast Food Franchise Florida 350 3/17/2003 125 0.3570 Fast Food Franchise Florida 424 5/30/2003 173 0.4080 Fast Food Franchise Florida 486 5/30/2003 240 0.4940 Franchise-Ice Cream Las Vegas, NV 259 7/22/2003 250 0.9650 - 55 -
We applied various date constraints to the data, but not revenue constraints, as the samples were not large enough to provide meaningful results. A statistical summary of the data is presented in Table 24.
TABLE 24 BIZCOMPS™ -STATISTICAL SUMMARY NORTHEAST REGION AND FRANCHISES
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 Northeast Northeast Northeast Region Franchises Region Franchises Region Franchises
Average 0.35 0.49 0.35 0.48 0.31 0.43 Standard Deviation 0.13 0.23 0.14 0.24 0.11 0.25 Coefficient of Variation 0.38 0.48 0.40 0.51 0.35 0.59
10th Percentile 0.20 0.24 0.19 0.22 0.19 0.20 25th Percentile 0.28 0.32 0.27 0.28 0.21 0.25 Median 0.35 0.43 0.34 0.42 0.31 0.37 75th Percentile 0.41 0.62 0.40 0.63 0.39 0.51 90th Percentile 0.49 0.77 0.49 0.77 0.41 0.71 Semi-Interquartile Range 0.07 0.15 0.07 0.17 0.09 0.13 SIR as a % of Median 19% 35% 19% 41% 29% 34% Semi-10-90 Percentile Range 0.15 0.27 0.15 0.27 0.11 0.26 Semi-10-90 Percentile Range as a % of Median 42% 61% 45% 66% 37% 69% - Sample Size 69 64 31 44 10 27
The statistical data presented in Table 24 confirm our findings from the IBA database that the region in which the business is located has no material affect on the multiples and that franchised restaurants generally sell at higher multiples.
In summary, we performed 18 different sortings of the data from the BizComps™ database. A summary of the median and 75th percentile multiples is presented in Table 25.
TABLE 25 BIZCOMPS™ SUMMARY STATISTICS
Median Multiple 75th Percentile Sample Size Since January 1, 2000 All Transactions 0.37 0.50 1,693 Family Restaurants 0.32 0.44 181 Within 10X Revenues All Transactions 0.36 0.48 1,382 Family Restaurants 0.31 0.41 157 Since January 1, 2005 - 56 -
TABLE 25 BIZCOMPS™ SUMMARY STATISTICS
Median Multiple 75th Percentile Sample Size All Transactions 0.38 0.53 851 Family Restaurants 0.31 0.42 100 Within 10X Revenues All Transactions 0.37 0.50 737 Family Restaurants 0.31 0.38 89 Since January 1, 2007 All Transactions 0.37 0.52 409 Family Restaurants 0.34 0.53 51 Within 10X Revenues All Transactions 0.35 0.47 346 Family Restaurants 0.33 0.45 42 Northeast Region Since January 1, 2000 0.35 0.41 69 Since January 1, 2005 0.34 0.40 31 Since January 1, 2007 0.31 0.39 10 Franchises Since January 1, 2000 0.43 0.62 64 Since January 1, 2005 0.42 0.63 44 Since January 1, 2007 0.37 0.51 27
The data in Table 25 mirrors our findings from the IBA database with higher multiples for franchises and a level of uniformity across other categories.
PRATT’S STATS™
Our search of the Pratt’s Stats™ database returned 1,382 transactions. Of these transactions, 17 were stock transactions while 1,365 were asset transactions. Therefore, we only analyzed the asset transactions as there were not enough stock transactions to provide a meaningful analysis. Of the 1,365 transactions, we eliminated 11 transactions that took place in Canada. This left 1,354 transactions available for analysis. - 57 -
In reviewing the notes to the Pratt’s Stats™ transactions, we identified four sales of restaurants that were not arm’s-length transactions. These are described as follows:
1. Fast Food Franchise Pizza Restaurant - A serious decline in sales and much needed upgrades resulted in a low selling price. 2. Deli - Lost lease, forced sale. Owner just quit. 3. Family Style Restaurant and Micro-Brewery - The owner died unexpectedly and the business was offered at a discount price. 4. Deli and Restaurant - The business was a startup that never got off the ground.
After eliminating these four transactions, 1,350 remained. A listing of these transactions is presented in Table 26.
TABLE 26 PRATT'S STATS™ TRANSACTIONS
MVIC MVIC To Sale To Gross Business Description State Net Sales Sale Date MVIC Price Sales Profit
High End Catering and Food Service CA $ 380,000 1/3/2000 $ 145,000 0.38 0.51 Franchise Sub Shop NM 188,068 1/5/2000 89,000 0.47 0.65 Two Casual Dining Italian Restaurants GA 5,075,400 1/5/2000 3,500,000 0.69 1.04 Restaurant CO 687,098 1/6/2000 228,000 0.33 0.59 4 Popeye's Franchises, One in Process TX 3,143,996 1/10/2000 2,550,000 0.81 1.21 10 Popeye's Restaurant Franchises MD 8,704,078 1/10/2000 7,500,000 0.86 1.27 Food Service/Popeye's Franchisee (37 Units) MI 32,000,000 1/11/2000 33,714,992 1.05 1.55 Fast Food Sandwich Shop CA 328,763 2/2/2000 137,500 0.42 0.59
Here we go again
Restaurant CO 256,620 4/12/2000 70,000 0.27 0.49 Full Service Restaurant ID 625,877 5/1/2000 300,000 0.48 0.68 Franchised Ice Cream and Hamburger Restaurant VA 504,833 5/5/2000 215,000 0.43 0.63 French bakery CA 2,019,585 5/18/2000 2,000,000 0.99 2.31 Italian Restaurant UT 606,980 5/19/2000 285,000 0.47 0.84 Specialty Coffee Shop CO 780,721 5/30/2000 155,000 0.2 0.4 Sells Ice Cream Products and Burgers NE 397,988 5/31/2000 185,000 0.46 1.5 Pizza Shop GA 150,601 6/1/2000 58,000 0.39 0.58 Fine Dining Restaurant CA 153,437 6/21/2000 53,000 0.35 0.55 Bagel Shop CA 267,471 6/23/2000 140,000 0.52 1.49 Coffee Shop CA 327,861 6/28/2000 150,000 0.46 0.71 Chicken franchise restaurant. TX 534,657 6/30/2000 290,000 0.54 0.9 - 58 -
The MVIC to revenue multiples for the transactions presented above are displayed graphically in Chart 3.
CHART 3 PRATT’S MVIC TO SALES HISTOGRAM
The histogram in Chart 3 shows that the data from the Pratt’s Stats™ database is distributed in a manner similar to that of the IBA and BizComps™ databases. The data is tightly clustered around the median with a few extreme outliers particularly on the upper end. Therefore, we focused our analysis on the medians and percentiles.
We performed the same revenue and date constraints on the Pratt’s Stats™ data as we did in the BizComps™ and IBA data. In addition, we looked at transactions of companies that had negative earnings before interest, taxes, depreciation and amortization (EBITDA). The purpose of this analysis was to show that there is still a market for restaurants with negative earnings, and to further support the notion that revenue-based multiples are the most important when valuing restaurants. The Pratt’s Stats™ database calculates market value of invested capital (MVIC) multiples which include the market value of a company’s debt and equity. A statistical summary of the different groupings is presented in Table 27. - 59 -
TABLE 27 PRATT'S STATS™ STATISTICAL SUMMARY
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 MVIC to Revenues MVIC to Revenues MVIC to Revenues All Negative All Negative All Negative Transactions EBITDA Transactions EBITDA Transactions EBITDA
Average 0.45 0.40 0.45 0.38 0.41 0.36 Standard Deviation 0.52 0.34 0.58 0.37 0.26 0.44 Coefficient of Variation 1.16 0.87 1.30 0.97 0.63 1.21
10th Percentile 0.19 0.15 0.18 0.12 0.17 0.09 25th Percentile 0.27 0.21 0.27 0.21 0.26 0.16 Median 0.38 0.32 0.38 0.29 0.36 0.26 75th Percentile 0.53 0.47 0.54 0.45 0.52 0.45 90th Percentile 0.74 0.73 0.73 0.60 0.70 0.63 Semi-Interquartile Range 0.13 0.13 0.14 0.12 0.13 0.15 As a % of Median 34% 40% 36% 42% 36% 56% Semi-10-90 Percentile Range 0.28 0.29 0.27 0.24 0.27 0.27 As a % of Median 73% 91% 72% 82% 74% 104%
Sample Size 1,350 174 875 112 538 53
Within 10X Revenues Within 10X Revenues Within 10X Revenues Since Since Since January 1, 2000 January 1, 2005 January 1, 2007 MVIC to Revenues MVIC to Revenues MVIC to Revenues Negative Negative Negative All Transactions EBITDA All Transactions EBITDA All Transactions EBITDA
Average 0.39 0.32 0.39 0.30 0.38 0.28 Standard Deviation 0.21 0.19 0.20 0.18 0.21 0.19 Coefficient of Variation 0.53 0.60 0.52 0.59 0.55 0.68
10th Percentile 0.17 0.13 0.17 0.12 0.15 0.08 25th Percentile 0.25 0.20 0.26 0.20 0.24 0.15 Median 0.35 0.28 0.36 0.27 0.34 0.26 75th Percentile 0.49 0.35 0.49 0.35 0.48 0.35 90th Percentile 0.66 0.54 0.66 0.50 0.64 0.55 Semi-Interquartile Range 0.12 0.08 0.12 0.08 0.12 0.10 As a % of Median 34% 27% 32% 28% 35% 38% Semi-10-90 Percentile Range 0.25 0.21 0.25 0.19 0.25 0.24 As a % of Median 70% 74% 68% 70% 72% 92%
Sample Size 1,060 137 684 91 425 46
The statistical data in Table 27 shows that the median multiples for all groupings of data are in line with those from the BizComps™ and IBA databases. The data also shows that the multiples for restaurants with negative earnings fall slightly below those of the general population of restaurants. However, the range and the distribution of the multiples for restaurants with negative earnings are still similar to the general population of restaurants. Another observation worth noting is the variability in the data. The grouping that contains - 60 - the most recent data has a significant amount of variability in comparison to the other data sets, particularly in the outer percentiles. This indicates that there is a more significant presence of outliers in these groupings on both the low end and the high end.
The next step in the analysis was to sort by business description. In a manner similar to the sorting of the IBA data, we attempted to identify full service restaurants. We also eliminated fine dining places. Therefore, we eliminated the following, where possible.
• Pizza Shops • Bagel Shops • Fine Dining • Ice Cream Shops/Yogurt Shops • Fast Food/Drive Thru’s • Catering • Deli’s, Sandwich and Sub Shops • Coffee Houses/Cafe’s
A listing of the transactions that met our search criteria is presented in Table 28.
TABLE 28 PRATT'S STATS™ - FULL SERVICE NON FINE DINING
MVIC MVIC To MVIC To Gross Business Description Sale State Net Sales Price Sales Profit
Bistro serving French cooking. TX $ 590,901 $ 160,000 0.27 0.73 Barbecue Smokehouse Restaurant and Grill UT 991,099 140,000 0.14 0.22 Breakfast and Lunch Restaurant GA 446,204 130,000 0.29 0.75 Breakfast/ Lunch CA 396,295 115,000 0.29 0.45 Breakfast and Lunch Restaurant AZ 127,864 71,650 0.56 0.82
And yet again!
Bistro WA 230,179 58,500 0.25 1.52 Breakfast and Lunch Restaurant FL 237,360 99,187 0.42 0.62 Asian Fusion Restaurant OR 213,876 62,000 0.29 0.42 - 61 -
A statistical summary of this data, along with a summary of the data when applying the revenue and date constraints, are presented in Table 29.
TABLE 29 PRATT'S STATS™ FULL SERVICE CASUAL DINING - SUMMARY STATISTICS
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 MVIC to Revenues MVIC to Revenues MVIC to Revenues All Negative All Negative All Negative Transactions EBITDA Transactions EBITDA Transactions EBITDA
Average 0.38 0.38 0.36 0.38 0.34 0.40 Standard Deviation 0.34 0.46 0.28 0.53 0.28 0.65 Coefficient of Variation 0.89 1.21 0.77 1.40 0.82 1.61
10th Percentile 0.16 0.16 0.15 0.12 0.13 0.12 25th Percentile 0.23 0.21 0.22 0.20 0.21 0.19 Median 0.31 0.26 0.30 0.26 0.29 0.26 75th Percentile 0.45 0.35 0.44 0.35 0.42 0.34 90th Percentile 0.60 0.55 0.58 0.48 0.56 0.50 Semi-Interquartile Range 0.11 0.07 0.11 0.08 0.11 0.08 As a % of Median 35% 27% 37% 29% 36% 30% Semi-10-90 Percentile Range 0.22 0.20 0.21 0.18 0.22 0.19 As a % of Median 71% 75% 71% 69% 74% 74%
Sample Size 391 61 246 41 161 20
Within 10X Revenues Within 10X Revenues Within 10X Revenues Since Since Since January 1, 2000 January 1, 2005 January 1, 2007 MVIC to Revenues MVIC to Revenues MVIC to Revenues All Negative All Negative All Negative Transactions EBITDA Transactions EBITDA Transactions EBITDA
Average 0.33 0.28 0.32 0.26 0.31 0.26 Standard Deviation 0.18 0.15 0.16 0.12 0.17 0.14 Coefficient of Variation 0.54 0.55 0.51 0.46 0.55 0.54
10th Percentile 0.15 0.15 0.13 0.12 0.12 0.11 25th Percentile 0.21 0.20 0.21 0.20 0.20 0.19 Median 0.29 0.26 0.29 0.25 0.28 0.25 75th Percentile 0.42 0.29 0.40 0.29 0.40 0.32 90th Percentile 0.51 0.43 0.49 0.42 0.49 0.42 Semi-Interquartile Range 0.10 0.05 0.10 0.05 0.10 0.07 As a % of Median 35% 18% 33% 18% 36% 26% Semi-10-90 Percentile Range 0.18 0.14 0.18 0.15 0.19 0.15 As a % of Median 63% 55% 62% 61% 66% 60%
Sample Size 327 56 208 37 138 19
The data in Table 29 reflects slightly lower median multiples that still fall within a reasonable range of the data sets previously analyzed. The median multiples from this sample set - 62 - ranged from 0.28 to 0.31 for all of the transactions. In addition, the data reflects lower median multiples for companies with negative earnings.
The next step in the analysis was to look at transactions of companies that were located in the Northeast region of the United States. A listing of these transactions is presented in Table 30.
TABLE 30 PRATT'S STATS™ - NORTHEAST REGION
MVIC To MVIC To Business Description Net Sales Sale Date MVIC Price Sales Gross Profit
Ice Cream Franchise $ 347,534 2/1/2001 $ 231,300 0.67 0.92 Upscale Deli, Coffee, Pastries, and Gifts Emporium 1,519,055 2/12/2001 543,000 0.36 0.75 Seasonal Fast Food Clam Bar 807,825 5/11/2001 475,000 0.59 0.99 Restaurant with Lounge 392,341 5/17/2001 282,000 0.72 2.14 Pizza Shop 240,000 11/10/2001 160,000 0.67 0.67 Water Ice and Ice Cream Shop 57,900 11/20/2001 49,000 0.85 1.03
You should get the idea by now!
Ice Cream and Gift Shop 198,714 5/11/2002 210,000 1.06 2.29 Pasta Restaurant 568,741 7/1/2002 134,000 0.24 0.38 Delicatessen 314,417 9/1/2002 145,000 0.46 1.08 Restaurant 1,000,000 4/23/2003 335,000 0.34 0.54 Sub Shop 179,923 4/30/2003 55,000 0.31 0.50
We also looked at transactions involving franchised restaurants. A listing of these transactions is presented in Table 31.
TABLE 31 PRATT'S STATS™ - FRANCHISES
MVIC MVIC To MVIC Price To Gross Business Description Net Sales Sale Date Sales Profit
Franchise Sub Shop $ 188,068 1/5/2000 $ 89,000 0.47 0.65 4 Popeye's Franchises, One in Process 3,143,996 1/10/2000 2,550,000 0.81 1.21 10 Popeye's Restaurant Franchises 8,704,078 1/10/2000 7,500,000 0.86 1.27 I did it again Franchised Ice Cream and Hamburger Restaurant 504,833 5/5/2000 215,000 0.43 0.63 Chicken franchise restaurant. 534,657 6/30/2000 290,000 0.54 0.90 - 63 -
A statistical summary of the transaction data for transactions of restaurants in the Northeast region and franchised restaurants is presented in Table 32.
TABLE 32 PRATT'S STATS ™- NORTHEAST REGION AND FRANCHISES
Since January 1, 2000 Since January 1, Since January 1, 2005 2007 MVIC to Revenues MVIC to Revenues MVIC to Revenues Northeast Northeast Northeast Region Franchises Region Franchises Region Franchises
Average 0.45 0.48 0.43 0.48 0.39 0.50 Standard Deviation 0.25 0.27 0.23 0.28 0.23 0.33 Coefficient of Variation 0.54 0.56 0.54 0.59 0.59 0.65
10th Percentile 0.22 0.19 0.17 0.17 0.16 0.15 25th Percentile 0.31 0.30 0.28 0.29 0.28 0.27 Median 0.42 0.47 0.39 0.47 0.37 0.48 75th Percentile 0.55 0.60 0.54 0.61 0.48 0.65 90th Percentile 0.72 0.83 0.66 0.81 0.56 0.82 Semi-Interquartile Range 0.12 0.15 0.13 0.16 0.10 0.19 As a % of Median 30% 32% 34% 34% 28% 40% Semi-10-90 Percentile Range 0.25 0.32 0.24 0.32 0.20 0.34 As a % of Median 61% 69% 62% 68% 55% 70%
Sample Size 80 173 48 124 22 67
The data in Table 32 shows higher multiples for franchises and restaurants located in the Northeast region of the United States. The higher multiples for restaurants located in the Northeast come as a surprise as this was not the case with the BizComps™ and IBA databases. However, this probably has more to do with the types of restaurants included in the sample than the geographic location of the restaurants. The trend shows that the multiples for the restaurants in the Northeast region have declined slightly in recent years, while the multiples for franchises have increased.
Our analysis of the Pratt’s Stats™ database involved 30 different sortings of the data. A summary of the data appears in Table 33. - 64 -
TABLE 33 PRATT'S STATS™ MVIC TO REVENUE MULTIPLES
75th Sample Median Percentile Size All Transactions Since January 1, 2000 0.38 0.53 1,350 Negative EBITDA 0.32 0.47 174 Within 10 X Revenues 0.35 0.49 1,060 Negative EBITDA 0.28 0.35 137 All Transactions Since January 1, 2005 0.38 0.54 875 Negative EBITDA 0.29 0.45 112 Within 10 X Revenues 0.36 0.49 684 Negative EBITDA 0.27 0.35 91 All Transactions Since January 1, 2007 0.36 0.52 538 Negative EBITDA 0.26 0.45 53 Within 10 X Revenues 0.34 0.48 425 Negative EBITDA 0.26 0.35 46 Casual Dining Places Since January 1, 2000 0.31 0.45 391 Negative EBITDA 0.26 0.35 61 Within 10 X Revenues 0.29 0.42 327 Negative EBITDA 0.26 0.29 56 Casual Dining Places Since January 1, 2005 0.30 0.44 246 Negative EBITDA 0.26 0.35 41 Within 10 X Revenues 0.29 0.40 208 Negative EBITDA 0.25 0.29 37 Casual Dining Places Since January 1, 2007 0.29 0.42 161 Negative EBITDA 0.26 0.34 20 Within 10 X Revenues 0.28 0.40 138 Negative EBITDA 0.25 0.32 19 Northeast Region - Since January 1, 2000 0.42 0.55 80 Since January 1, 2005 0.39 0.54 48 Since January 1, 2007 0.37 0.48 22 Franchises Since January 1, 2000 0.47 0.60 173 Since January 1, 2005 0.47 0.61 124 Since January 1, 2007 0.48 0.65 67
The data in Table 33 also reflects higher multiples for franchises and relative uniformity across all other categories. This is consistent with our findings in the BizComps™ and IBA databases.
We also looked at the MVIC to gross profit multiple in the Pratt’s Stats™ database. The average and median gross profit margin for the companies in the Pratt’s Stats™ database were 64 percent and 66 percent respectively. Due to the fact that The Company’s gross profit margins are out of line with the industry benchmarking data, as well as the average and median Pratt’s Stats™ data, the MVIC to gross profit multiples will strictly be used as a sanity check. We performed the same set of analyses for the MVIC to gross profit multiple as we did for the MVIC to revenue multiple. A statistical summary of all of the transactions, - 65 - along with the resulting statistics, when applying our revenue and date constraints is presented in Table 34.
TABLE 34 PRATT'S STATS™ - MVIC TO GROSS PROFIT MULTIPLES
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 MVIC to Gross Profit MVIC to Gross Profit MVIC to Gross Profit All Negative All Negative All Negative Transactions EBITDA Transactions EBITDA Transactions EBITDA Average 0.75 0.82 0.73 0.74 0.66 0.71 Standard Deviation 0.98 0.85 1.01 0.78 0.52 0.90 Coefficient of Variation 1.30 1.04 1.38 1.05 0.79 1.27 10th Percentile 0.28 0.23 0.27 0.19 0.24 0.16 25th Percentile 0.42 0.38 0.41 0.36 0.39 0.29 Median 0.60 0.56 0.59 0.52 0.57 0.44 75th Percentile 0.86 0.86 0.86 0.77 0.81 0.72 90th Percentile 1.24 1.69 1.16 1.55 1.11 1.53 Semi-Interquartile Range 0.22 0.24 0.23 0.20 0.21 0.22 As a % of Median 37% 43% 38% 40% 37% 49% Semi-10-90 Percentile Range 0.48 0.73 0.44 0.68 0.44 0.68 As a % of Median 80% 132% 75% 132% 77% 155% Sample Size 1,327 174 855 112 528 53
Within 10X Revenues Since Within 10X Revenues Since Within 10X Revenues January 1, 2000 January 1, 2005 Since January 1, 2007 MVIC to Gross Profit MVIC to Gross Profit MVIC to Gross Profit All Negative All Negative All Negative Transactions EBITDA Transactions EBITDA Transactions EBITDA Average 0.64 0.63 0.64 0.57 0.60 0.53 Standard Deviation 0.37 0.44 0.36 0.39 0.34 0.42 Coefficient of Variation 0.57 0.70 0.56 0.68 0.56 0.81 10th Percentile 0.26 0.20 0.24 0.19 0.23 0.15 25th Percentile 0.39 0.36 0.39 0.36 0.37 0.24 Median 0.57 0.50 0.57 0.49 0.54 0.42 75th Percentile 0.81 0.74 0.82 0.64 0.76 0.63 90th Percentile 1.11 1.40 1.08 1.07 1.02 1.05 Semi-Interquartile Range 0.21 0.19 0.22 0.14 0.20 0.20 As a % of Median 37% 38% 38% 28% 36% 47% Semi-10-90 Percentile Range 0.43 0.60 0.42 0.44 0.40 0.45 As a % of Median 75% 120% 74% 90% 73% 107% Sample Size 1,047 137 673 91 420 46
The statistical data in Table 34reflects median multiples ranging from 0.52 to 0.60 for all of the transactions in each category and 75th percentile multiples ranging from 0.62 to 0.87 for transactions of companies with negative EBIT or EBITDA. The statistical data in Table 34 also reflects a higher presence of outliers as indicated by the high semi-10-90 percentile ranges which often exceeded 100 percent of the median. - 66 -
The next step in this analysis was to look at full service dining places. A statistical summary of this data is presented in Table 35.
TABLE 35 PRATT'S STATS MVIC TO GROSS PROFIT - FULL SERVICE DINING
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 MVIC to Gross Profit MVIC to Gross Profit MVIC to Gross Profit All Negative All Negative All Negative Transactions EBITDA Transactions EBITDA Transactions EBITDA Average 0.67 0.81 0.61 0.68 0.59 0.74 Standard Deviation 0.77 1.12 0.62 0.92 0.68 1.10 Coefficient of Variation 1.15 1.38 1.01 1.34 1.16 1.50 10th Percentile 0.24 0.28 0.22 0.19 0.21 0.19 25th Percentile 0.36 0.36 0.34 0.36 0.31 0.34 Median 0.51 0.49 0.30 0.48 0.46 0.44 75th Percentile 0.74 0.68 0.71 0.63 0.66 0.59 90th Percentile 1.06 1.52 0.99 0.87 0.90 0.97 Semi-Interquartile Range 0.19 0.16 0.19 0.14 0.18 0.13 SIR as a % of Median 37% 33% 62% 28% 38% 29% Semi-10-90 Percentile Range 0.41 0.62 0.39 0.34 0.35 0.39 Semi-10-90 Percentile Range as a % of Median 80% 127% 128% 71% 75% 90% Sample Size 385 61 240 41 157 20
Within 10X Revenues Within 10X Revenues Within 10X Revenues Since Since Since January 1, 2000 January 1, 2005 January 1, 2007 MVIC to Gross Profit MVIC to Gross Profit MVIC to Gross Profit All Negative All Negative All Negative Transactions EBITDA Transactions EBITDA Transactions EBITDA Average 0.56 0.57 0.53 0.50 0.51 0.50 Standard Deviation 0.34 0.43 0.31 0.31 0.31 0.39 Coefficient of Variation 0.62 0.74 0.58 0.62 0.62 0.77 10th Percentile 0.23 0.26 0.21 0.21 0.21 0.18 25th Percentile 0.34 0.36 0.32 0.36 0.30 0.34 Median 0.49 0.45 0.49 0.45 0.46 0.43 75th Percentile 0.69 0.63 0.67 0.58 0.64 0.58 90th Percentile 0.94 0.90 0.88 0.74 0.87 0.77 Semi-Interquartile Range 0.18 0.14 0.18 0.11 0.17 0.12 SIR as a % of Median 36% 30% 36% 24% 37% 28% Semi-10-90 Percentile Range 0.35 0.32 0.34 0.27 0.33 0.29 Semi-10-90 Percentile Range as a % of Median 72% 72% 69% 59% 73% 68%
Sample Size 324 56 205 37 136 19
As was the case with our analysis of the MVIC to revenue multiples, the MVIC to gross profit multiples are also lower for those classified as full service dining places. In addition, the statistical data in Table 35 also reflects a high level of variability particularly in the data sets in which a revenue constraint was not applied. - 67 -
Lastly, we looked at MVIC to gross profit multiples for franchises and restaurants located in the Northeast region of the United States. A statistical summary of these transactions is presented in Table 36.
TABLE 36 PRATT'S STATS ™- NORTHEAST REGION AND FRANCHISES
Since January 1, 2000 Since January 1, 2005 Since January 1, 2007 MVIC to Revenues MVIC to Revenues MVIC to Revenues Northeast Northeast Northeast Region Franchises Region Franchises Region Franchises
Average 0.83 0.78 0.78 0.76 0.68 0.77 Standard Deviation 0.50 0.43 0.47 0.44 0.43 0.50 Coefficient of Variation 0.61 0.55 0.60 0.58 0.63 0.65
10th Percentile 0.33 0.30 0.31 0.28 0.25 0.23 25th Percentile 0.52 0.47 0.52 0.45 0.40 0.46 Median 0.69 0.72 0.67 0.71 0.64 0.71 75th Percentile 1.00 1.01 0.91 0.97 0.86 0.95 90th Percentile 1.57 1.32 1.52 1.24 1.02 1.28 Semi-Interquartile Range 0.24 0.27 0.20 0.26 0.23 0.24 As a % of Median 35% 37% 29% 37% 36% 34% Semi-10-90 Percentile Range 0.62 0.51 0.61 0.48 0.38 0.52 As a % of Median 90% 71% 91% 68% 60% 74%
Sample Size 80 107 48 119 22 66
The statistical data in Table 36 reflects higher MVIC to gross profit multiples for franchises and transactions of restaurants in the Northeast region. This was also the case in our analysis of the MVIC to revenue multiple.
A summary of the median and 75th percentile MVIC to gross profit multiples are presented in Table 37. - 68 -
TABLE 37 PRATT'S STATS™ MVIC TO GROSS PROFIT SUMMARY
Median 75th Percentile Sample Size
All Transactions Since January 1, 2000 0.60 0.86 1,327 Negative EBITDA 0.56 0.86 174 Within 10 X Revenues 0.57 0.81 1,047 Negative EBITDA 0.50 0.74 137 All Transactions Since January 1, 2005 0.59 0.86 855 Negative EBITDA 0.52 0.77 112 Within 10 X Revenues 0.57 0.82 673 Negative EBITDA 0.49 0.64 91 All Transactions Since January 1, 2007 0.57 0.81 528 Negative EBITDA 0.44 0.72 53 Within 10 X Revenues 0.54 0.76 420 Negative EBITDA 0.42 0.63 46 Casual Dining Places Since January 1, 2000 0.51 0.74 385 Negative EBITDA 0.49 0.68 61 Within 10 X Revenues 0.49 0.69 324 Negative EBITDA 0.45 0.63 56 Casual Dining Places Since January 1, 2005 0.30 0.71 240 Negative EBITDA 0.48 0.63 41 Within 10 X Revenues 0.49 0.67 205 Negative EBITDA 0.45 0.58 37 Casual Dining Places Since January 1, 2007 0.46 0.66 157 Negative EBITDA 0.44 0.59 20 Within 10 X Revenues 0.46 0.64 136 Negative EBITDA 0.43 0.58 19 Northeast Region - Since January 1, 2000 0.69 1.00 80 Since January 1, 2005 0.67 0.91 48 Since January 1, 2007 0.64 0.86 22 Franchises Since January 1, 2000 0.72 0.60 167 Since January 1, 2005 0.71 0.61 119 Since January 1, 2007 0.71 0.65 66
Average 0.53 0.72 Median 0.51 0.70
As the data in Table 37 indicates, the MVIC to gross profit multiples reflect a much wider range than the MVIC to sales multiples. This could potentially be the result of classification issues between cost of goods sold and operating expenses across the various companies included in the database. Therefore, we selected the range of 0.51 to 0.70 for MVIC to gross profit multiples, which represents the median percentile on the low end and the 75th percentile on the high end. This helps reduce the impact of the extreme outliers on our - 69 - analysis, while still allowing us to use this data to check the reasonableness of our final conclusion of value.
RECONCILIATION AND FINAL CONCLUSION OF VALUE
Our analysis of the price to revenue data for businesses classified in SIC code 5812 involved a search of three transaction databases. These databases contained a total of 5,196 transactions with price to revenue data. In total, we performed 78 different sortings and analyses of the data.
A summary of all of our sortings and the median and 75th percentile multiples from each are presented in Table 38.
TABLE 38 SUMMARY OF TRANSACTION MULTIPLES
Median 75th Percentile IBA BizComps Pratt's Stats IBA BizComps Pratt's Stats All Transactions: Since January 1, 2000 0.37 0.37 0.38 0.50 0.50 0.53 Since January 1, 2005 0.38 0.38 0.38 0.51 0.53 0.54 Since January 1, 2007 0.35 0.37 0.36 0.50 0.52 0.52 Within 10X Revenues Since January 1, 2000 0.34 0.36 0.35 0.46 0.48 0.49 Since January 1, 2005 0.35 0.37 0.36 0.47 0.50 0.49 Since January 1, 2007 0.32 0.35 0.34 0.45 0.47 0.48 Family Restaurants Since January 1, 2000 n/a 0.32 n/a n/a 0.44 n/a Since January 1, 2005 n/a 0.31 n/a n/a 0.42 n/a Since January 1, 2007 n/a 0.34 n/a n/a 0.53 n/a Within 10X Revenues Since January 1, 2000 n/a 0.31 n/a n/a 0.41 n/a Since January 1, 2005 n/a 0.31 n/a n/a 0.38 n/a Since January 1, 2007 n/a 0.33 n/a n/a 0.45 n/a Full Service Restaurants: Since January 1, 2000 0.33 n/a 0.31 0.47 n/a 0.45 Since January 1, 2005 0.35 n/a 0.30 0.48 n/a 0.44 Since January 1, 2007 0.31 n/a 0.29 0.45 n/a 0.42 Within 10X Revenues Since January 1, 2000 0.31 n/a 0.29 0.44 n/a 0.42 Since January 1, 2005 0.33 n/a 0.29 0.47 n/a 0.40 Since January 1, 2007 0.29 n/a 0.28 0.45 n/a 0.40 - 70 -
TABLE 38 SUMMARY OF TRANSACTION MULTIPLES
Median 75th Percentile IBA BizComps Pratt's Stats IBA BizComps Pratt's Stats Northeast Region Since January 1, 2000 0.45 n/a n/a 0.45 n/a n/a Since January 1, 2005 0.42 n/a n/a 0.42 n/a n/a Since January 1, 2007 0.40 n/a n/a 0.40 n/a n/a Within 10X Revenues Since January 1, 2000 0.32 n/a n/a 0.47 n/a n/a Since January 1, 2005 0.32 n/a n/a 0.43 n/a n/a Since January 1, 2007 0.30 n/a n/a 0.42 n/a n/a Negative EBITDA Since January 1, 2000 n/a n/a 0.35 n/a n/a 0.35 Since January 1, 2005 n/a n/a 0.29 n/a n/a 0.29 Since January 1, 2007 n/a n/a 0.29 n/a n/a 0.29 Within 10X Revenues Since January 1, 2000 n/a n/a 0.29 n/a n/a 0.29 Since January 1, 2005 n/a n/a 0.29 n/a n/a 0.29 Since January 1, 2007 n/a n/a 0.32 n/a n/a 0.32 Negative EBITDA Since January 1, 2000 n/a n/a 0.32 n/a n/a 0.47 Since January 1, 2005 n/a n/a 0.29 n/a n/a 0.45 Since January 1, 2007 n/a n/a 0.26 n/a n/a 0.45 Within 10X Revenues Since January 1, 2000 n/a n/a 0.28 n/a n/a 0.35 Since January 1, 2005 n/a n/a 0.27 n/a n/a 0.35 Since January 1, 2007 n/a n/a 0.26 n/a n/a 0.35 Northeast Region: Since January 1, 2000 0.38 0.35 0.42 0.54 0.41 0.55 Since January 1, 2005 0.38 0.34 0.39 0.53 0.40 0.54 Since January 1, 2007 0.36 0.31 0.37 0.55 0.39 0.48 Within 10X Revenues Since January 1, 2000 0.37 n/a n/a 0.51 n/a n/a Since January 1, 2005 0.35 n/a n/a 0.50 n/a n/a Since January 1, 2007 0.34 n/a n/a 0.52 n/a n/a Franchises: Since January 1, 2000 0.44 0.43 0.47 0.55 0.62 0.60 Since January 1, 2005 0.43 0.42 0.47 0.54 0.63 0.61 Since January 1, 2007 0.36 0.37 0.48 0.49 0.51 0.65 Within 10X Revenues Since January 1, 2000 0.43 n/a n/a 0.54 n/a n/a Since January 1, 2005 0.42 n/a n/a 0.52 n/a n/a Since January 1, 2007 0.35 n/a n/a 0.47 n/a n/a
Average 0.36 0.35 0.33 0.48 0.48 0.44 Median 0.35 0.35 0.32 0.48 0.48 0.45 Standard Deviation 0.04 0.04 0.06 0.04 0.07 0.10 Number of Sortings 30 18 30 30 18 30
The data in Table 38 shows that the average multiples ranged from 0.33 to 0.48, and the median multiples ranged from 0.32 to 0.48 across all three databases. Within each data set, the average and the median approximate each other, which is an indication that the data - 71 - is tightly bunched in the middle and not skewed in either direction. In addition, the standard deviations are low across all categories. This indicates that there is a level of uniformity in the multiples across all three databases which give us a solid level of confidence of the data contained in each database.
The next step in the analysis is to determine the appropriate multiple to use to value TPH. We considered the following factors in doing this:
1. TPH is larger than most of the companies in the transaction databases. In terms of th th revenues, The Company ranks in the 99th percentile of the IBA transactions, the 98th th percentile of the BizComps™ transactions, and the 97th percentile of the Pratt’s Stats™ transactions. According to one of the pricing tips in the 2009 Business Reference Guide:
Most restaurants will sell for 30% - 35% of gross sales, but the bigger Most restaurants will sell31 for 30% - 35% of gross sales, but the bigger the business the better.31
TPH’s larger size in comparison to the restaurants in the transaction databases is one factor that could warrant a multiple above the median.
2. TPH operates in a prime location. The restaurant is located on busy Route 98, is easily visible and is in a busy shopping center. In addition, City, New Jersey is an affluent area with incomes and home values above national and statewide levels.
3. The Company operates from 7:00 a.m. to 10:00 p.m. Sunday through Thursday and from 7:00 a.m. to 12:00 a.m. on Friday and Saturday. According to another pricing tip from the Business Reference Guide:
31 31 2009 Business Reference Guide: 615. - 72 -
32 Adjust for exceptionally low operating hours vs. extremely long hours.32
4. The Company is an IHOP franchise. As our statistical analysis revealed, franchises generally sell at higher multiples than non franchised restaurants. This makes sense as franchises typically have reputable and recognizable brands, with products that have already been developed and tested. IHOP’s brand awareness has been estimated at more than 98 percent, making it one of the most popular family 33 restaurant chains in the United States.33
Based on these factors, we determined that a multiple above the medians calculated from the transaction databases is warranted. Therefore, we selected a multiple of 0.40 which falls between the average and median summary statistics calculated in Table 38.
The data from the IBA, BizComps™ and Pratt’s Stats™ databases are asset sales. This means that only those assets that are typically sold as part of a transaction would be included in the estimate of value. Therefore, additional assets and liabilities must be taken into consideration. These would be the items that would typically be retained by the seller, or paid for above and beyond the estimate of value that is calculated from the various transactions.
Using a multiple of 0.40 and accounting for the net value of The Company’s retained assets results in the following conclusion of value:
32 32 Ibid.
33 33 Employer Assistance and Recruiting Network, International House of Pancakes
Selected Multiple 0.40 TPH’s 2008 Revenues $ 1,857,169
Indication of Value $ 742,868
Calculation of Retained Net Assets Cash $ 922 Inventory 4,501 Total Liabilities (79,018)
Net Retained Assets $ (73,595)
Conclusion of Value $ 669,273
Rounded $ 669,000
SANITY CHECKS
We performed various sanity checks to test the reasonableness of our conclusion of value. We reviewed the purchase of Another City Pancake House, LLC by Brothers, Inc. which took place on November 18, 2009. Another City Pancake House, LLC was another IHOP located in New Jersey, partially owned by the Smith brothers. Another City Pancake House was purchased for $1.3 million based on 2008 revenues of $3,291,862. This results in a price to revenue multiple of 0.39, which is slightly below the multiple used in our valuation of 0.40. This makes sense as The Company is located in a more affluent area. This confirms the reasonableness of our conclusion of value.
As a second sanity check, we reviewed a market value calculation for City Pancake House, Inc. in an undated document titled “IHOP City-Estimated Market Value & Net Worth” that was provided by Joseph Smith to Robert Smith. This document reflected an estimated - 74 - market value of $619,200 for TPH which falls within a reasonable range of our value conclusion of $669,000. This also confirms the reasonableness of our conclusion of value.
As a third sanity check we looked at the Pratt’s Stats™ MVIC to gross profit multiple. We th had previously calculated the range between the average median and average 75th percentile multiple between 0.53 and 0.72. Therefore, the range of indications of value under this sanity check can be calculated as follows:
Low High
Multiple 0.53 0.72 Gross Profit $ 1,105,031 $ 1,105,031
Value $ 585,666 $ 795,622
Less Net Retained Assets (73,594) (73,594)
Indication of Value $ 512,072 $ 722,028
th Our conclusion of value of $669,000 falls in between the median and 75th percentile indications of value presented above.
As a final sanity check, we turned to the rules of thumb published in the 2009 Business Reference Guide. The rule of thumb for valuing full-service restaurants in this publication 34 was “30-35 percent of annual sales plus inventory.”34 Our multiple of 0.40 falls above this range as the subject company operates as a franchise. The 2009 Business Reference Guide also states: “Non-Franchise Restaurants are worth 30-40% of annual sales. Franchise sit-down have been selling for 50% of annual sales if they make a profit big 35 enough to justify the price.”35 We were unable to determine The Company’s economic
34 34 2009 Business Reference Guide: 615.
35 35 Ibid. - 75 - earnings capacity due to the lack of records available. However, this quote confirms the reasonableness of our multiple of 0.40, as franchises are generally sold at higher multiples. - 77 - Schedule 2 - 76 - Schedule 1 THE PANCAKE HOUSE, INC. THEINCOME PANCAKE STATEMENT HOUSE, INC. FOR THE YEARSBALANCE ENDED SHEET DECEMBER 31, AS OF DECEMBER 31, 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 Revenues $ 2,186,116 $ 2,206,419 $ 2,094,888 $ 1,744,079 $ 1,857,169 Current Assets CostCash of Sales $ 501 $ 67,519 $ 114,221 $ 39,951 $ 14,264 $ 922 InventoriesInventory-Beginning $1,800 1,800 $2,340 2,340 4,840$ 4,8406,126 $ 6,1264,091 $ 4,0914,501 PrepaidPurchases Expenses 865,217- 250801, 294 250762,135 250 565,278 250 677,180 - Cost of Labor 98,340 100,965 81,889 103,970 75,368 Total Current Assets $ 2,301 $ 70,109 $ 119,311 $ 46,327 $ 18,605 $ 5,423 Subtotal $ 965,357 $ 904,599 $ 848,864 $ 675,374 $ 756,639 Gross Fixed Assets $ 492,756 $ 492,756 $ 492,756 $ 492,756 $ 492,756 $ 492,756 AccumulatedInventory-Ending Depreciation 389,6942,340 405,0744,840 412,775 6,126412,775 4,091412,775 412,7754,501 NetTotal Fixed Cost Assets of Sales $$ 103,062 963,017 $ $ 87,682 899,759 $ 79,981$ 842,738 $ 79,981 $ 671,283$ 79,981 $ $ 752,138 79,981 TotalGross Other Profit Assets $$ 62,048 1,223,099 $ $ 55, 1,306,362 $660 49,723$ 1,252,150 $ 47,223 $ 1, 072,796$ 44,723 $ 1,105,031$ 42,223 Operating Expenses TOTALAdvertising ASSETS $$ 167,411 92,386 $ 213,153$ 114, $311249,015 $ 94,052$ 173,531 $ $ 75,784 143,309 $ $ 96,897 127,627 Amortization 6,686 5,639 2,500 2,500 2,500 CurrentAuto Liabilities Expense 15,502 10,549 9,571 10,063 12,500 AccountsBank Charges Payable $ 59,30823,342 $ 22,87126,983 $ 33,780 24,815$ 6,520 $23,315 5,944 $24,428 37,734 AccruedCharitable Expenses Contributions 30,379 100 24,275 100 51,016 13020,465 2,36610,465 449 - SalesDepreciation Taxes Payable 8,37815,380 10,5697,701 8,595 12,- 652 10,624- 11,346- CreditOfficers' Card CompensationPayable 52,000- 50,000- - 47,500 - 31,000 - 39,50015,972 DeferredInsurance Gift -Card General Sales 50,-552 48,083- - 41,254 - 32,306 - 23,43311,886 NJ InsuranceCorporate - Business Group Tax Payable 10,-200 55013,190 550 11,690 550 8,102 550 2,702 2,080 Insurance - Life 2,265 6,085 13,830 13,875 7,380 Total CurrentLicenses Liabilities & Fees $ 98,065 $- 58,265 $- 93,941 $ 250 40, 187 $ 250 27,583 $ 79,018 250 Miscellaneous 6,967 4,552 4,643 - 5,807 Total Long-TermOffice Expenses Liabilities 324,5902,427 433,7983,412 443,701 2,496 445,695 1,961 501,521 485,0211,609 Professional Fees 20,493 13,249 10,539 6,874 7,556 Total LiabilitiesRents $ 422,65567,500 $ 492,06396,000 $ 537,642 106,050 $ 485,882 $98,475 529,104 $83,325 564,039 Repairs and Maintenance 78,682 135,777 124,816 48,634 65,464 Stockholder’sEquipment Equity Rental 15,317 13,127 21,060 29,052 25,167 CommonSalaries Stock & Wages $ 1,000518,322 $ 1,000480,466 $ 1,000446,506 $ 1,000 506,534$ 1,000 $423,917 1,000 RetainedSeminars Earnings & Meetings (236,244)- (259,910) (269,627)- (293,351)- (366,795)- (417,412)- TreasuryTaxes Stock- Other (20,000)71,249 (20,000)86,396(20,000) 76,406 (20,000) 79,655(20,000) 72,697 (20,000) Taxes - Payroll - - - - - Total Stockholder’sTelephone Equity $ (255,244)3,136$ (278,910)4,222 $ (288,627) 6,150 $ (312, 351) $5,483 (385,795) $ (436,412)3,993 Travel 3,007 1,009 2,695 4,348 13,053 Utilities 79,050 79,803 117,135 89,501 143,663 TOTALChina LIABILITIES Glass & SilverAND 3,131 3,495 2,048 1,749 3,636 STOCKHOLDER’SConsulting Fees EQUITY $ 167,411 $- 213,153 $ 249,015- $ 173,- 531 $ 143,309- $ 127,627 500 Cable & Internet - - 2,096 1,159 2,389 Franchise Royalty 96,465 87,808 90,374 73,510 79,696 Dues & Subscriptions 1,735 1,155 743 40 560 Payroll Service - - 3,752 3,403 3,601 Security Alarm Service - - 383 282 277 Small Tools, Supplies & Equipment 17,467 24,287 13,165 12,555 9,514 Total Operating Expenses $ 1,253,361 $ 1,317,399 $ 1,276,868 $ 1,162,776 $ 1,156,463 Operating Income (Loss) $ (30,262) $ (10,739) $ (24,718) $ (89,980) $ (51,432) Total Other Income $ - $ 1,022 $ 994 $ - $ 815 Total Other Expenses 148 - - - - Total Other Income (Expenses) $ (148) $ 1,022 $ 994 $ - $ 815 NET INCOME (LOSS) $ (30,410) $ (9,717) $ (23,724) $ (89,980) $ (50,617)
To be used only in conjunction with valuation report as of May 15, 2009. To be used only in conjunction with valuation report as of May 15, 2009. - 77 - Schedule 2 - 77 - Schedule 2 THE PANCAKE HOUSE, INC. THEINCOME PANCAKE STATEMENT HOUSE, INC. FOR THE INCOMEYEARS ENDED STATEMENT DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31, 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Revenues $ 2,186,116 $ 2,206,419 $ 2,094,888 $ 1,744,079 $ 1,857,169 Revenues $ 2,186,116 $ 2,206,419 $ 2,094,888 $ 1,744,079 $ 1,857,169 CostRevenues of Sales $ 2,186,116 $ 2,206,419 $ 2,094,888 $ 1,744,079 $ 1,857,169 CostInventory-Beginning of Sales $ 1,800 $ 2,340 $ 4,840 $ 6,126 $ 4,091 Inventory-BeginningPurchases $865,217 1,800 $801, 2,340294 $762,135 4,840 $565,278 6,126 $677,180 4,091 PurchasesCost of Labor 865,21798,340 801,100,965294 762,135 81,889 103,970565,278 677,180 75,368 Cost of Labor 98,340 100,965 81,889 103,970 75,368 CostSubtotal of Labor $ 965,35798,340 $ 904,100,965599 $ 848,864 81,889 $103,970 675,374 $ 756,639 75,368 Subtotal $ 965,357 $ 904,599 $ 848,864 $ 675,374 $ 756,639 Inventory-Ending 2,340 4,840 6,126 4,091 4,501 Inventory-Ending 2,340 4,840 6,126 4,091 4,501 TotalInventory-Ending Cost of Sales $ 963,0172,340 $ 899,7594,840 $ 842,7386,126 $ 671,2834,091 $ 752,1384,501 Total Cost of Sales $ 963,017 $ 899,759 $ 842,738 $ 671,283 $ 752,138 Gross Profit $ 1,223,099 $ 1,306,660 $ 1,252,150 $ 1,072,796 $ 1,105,031 Gross Profit $ 1,223,099 $ 1,306,660 $ 1,252,150 $ 1,072,796 $ 1,105,031 GrossOperating Profit Expenses $ 1,223,099 $ 1,306,660 $ 1,252,150 $ 1,072,796 $ 1,105,031 OperatingAdvertising Expenses $ 92,386 $ 114,311 $ 94,052 $ 75,784 $ 96,897 AdvertisingAmortization $ 92,3866,686 $ 114,5,639311 $ 94,0522,500 $ 75,7842,500 $ 96,8972,500 AmortizationAuto Expense 15,5026,686 10,5495,639 2,500 9,571 10,0632,500 12,5002,500 AutoBank ExpenseCharges 15,50223,342 10,54926,983 24,815 9,571 10,06323,315 12,50024,428 BankCharitable Charges Contributions 23,342 100 26,983 100 24,815 130 23,315 2,366 24,428 449 CharitableDepreciation Contributions 15,380 100 7,701 100 130- 2,366- 449- DepreciationOfficers' Compensation 15,38052,000 50,0007,701 47,500- 31,000- 39,500- Officers'Insurance Compensation - General 50,52,000552 50,00048,083 47,41,254500 31,00032,306 39,50023,433 Insurance - GeneralGroup 50,10,552200 48,08313,190 41,25411,690 32,306 8,102 23,433 2,702 Insurance - GroupLife 10,2,200265 13,190 6,085 11,69013,830 13,875 8,102 2,7027,380 InsuranceLicenses & - FeesLife 2,265- 6,085- 13,830 250 13,875 250 7,380 250 LicensesMiscellaneous & Fees 6,967- 4,552- 4,643 250 250 - 5,807 250 MiscellaneousOffice Expenses 6,9672,427 4,5523,412 4,6432,496 1,961 - 5,8071,609 OfficeProfessional Expenses Fees 20,2,427493 13,2493,412 10,5392,496 1,961 6,874 1,609 7,556 ProfessionalRents Fees 20,67,500493 96,00013,249 106,05010,539 98,475 6,874 83,325 7,556 RentsRepairs and Maintenance 67,50078,682 135,77796,000 106,050124,816 98,47548,634 83,32565,464 RepairsEquipment and Rental Maintenance 15,78,682317 135,77713,127 124,21,060816 48,63429,052 65,46425,167 EquipmentSalaries & WagesRental 518,15,317322 480,46613,127 446,50621,060 506,53429,052 423,91725,167 SalariesSeminars & & Wages Meetings 518,322- 480,466- 446,506- 506,534- 423,917- SeminarsTaxes - Other & Meetings 71,249- 86,396- 76,406- 79,655- 72,697- Taxes - OtherPayroll 71,249- 86,396- 76,406- 79,655- 72,697- TaxesTelephone - Payroll 3,136- 4,222- 6,150- 5,483- 3,993- TelephoneTravel 3,1363,007 4,2221,009 6,1502,695 5,483 4,348 13,0533,993 TravelUtilities 79,0503,007 79,1,009803 117,1352,695 89,501 4,348 143,66313,053 UtilitiesChina Glass & Silver 79,0503,131 79,3,495803 117,1352,048 89,5011,749 143,6633,636 ChinaConsulting Glass Fees & Silver 3,131- 3,495- 2,048- 1,749- 3,636 500 ConsultingCable & Internet Fees - - 2,096- 1,159- 2,389 500 CableFranchise & Internet Royalty 96,465- 87,808- 90,374 2,096 73,510 1,159 79,696 2,389 FranchiseDues & Subscriptions Royalty 96,1,735465 87,808 1,155 90,374 743 73,510 40 79,696 560 DuesPayroll & ServiceSubscriptions 1,735- 1,155 - 3,752 743 3,403 40 3,601 560 PayrollSecurity Service Alarm Service - - 3,752 383 3,403 282 3,601 277 SecuritySmall Tools, Alarm Supplies Service & Equipment 17,467- 24,287- 13,165 383 12,555 282 9,514 277 Small Tools, Supplies & Equipment 17,467 24,287 13,165 12,555 9,514 TotalSmall Operating Tools, Expenses Supplies & Equipment$ 1,253,361 17,467 $ 1,317,39924,287 $ 1,276,86813,165 $ 1,162,77612,555 $ 1,156,463 9,514 Total Operating Expenses $ 1,253,361 $ 1,317,399 $ 1,276,868 $ 1,162,776 $ 1,156,463 Operating Income (Loss) $ (30,262) $ (10,739) $ (24,718) $ (89,980) $ (51,432) Operating Income (Loss) $ (30,262) $ (10,739) $ (24,718) $ (89,980) $ (51,432) OperatingTotal Other Income Income (Loss) $ (30, 262) - $ (10,739) 1,022 $ (24,718) 994 $ (89,980) - $ (51,432) 815 Total Other Income $ - $ 1,022 $ 994 $ - $ 815 Total Other IncomeExpenses $ 148 - $ 1,022 - $ 994 - $ - $ 815 - Total Other Expenses 148 - - - - Total Other IncomeExpenses (Expenses) $ (148)148 $ 1,022 - $ 994 - $ - $ 815 - Total Other Income (Expenses) $ (148) $ 1,022 $ 994 $ - $ 815 NET INCOME (LOSS) $ (30,410) $ (9,717) $ (23,724) $ (89,980) $ (50,617) NET INCOME (LOSS) $ (30,410) $ (9,717) $ (23,724) $ (89,980) $ (50,617) To be used only in conjunction with valuation report as of May 15, 2009. To be used only in conjunction with valuation report as of May 15, 2009. - 7879 - Appendix 1 SOURCES OF INFORMATION UTILIZED
Several13. Franchise sources Offeringof information Circular were from used Internat to completeional House this of appraisal.Pancakes datedThese March were 30,as 1995. follows: 14. The Pancake House estimated market value provided by Joseph Smith to Robert Smith . 1. Form 1120S, U.S. Income Tax Return for an S Corporation for The Pancake House, Inc. for the tax years ended December 31, 1990 through December 31, 1998, and 15. Closing documents for the transaction between Another City Pancake House, LLC December 31, 2000 through December 31, 2008. and Brothers, Inc. dated November 18, 2009. 2. Form 1120S, U.S. Income Tax Return for an S Corporation for Another City Pancake 16. Other items referenced throughout this report. House, Inc. for the tax year ended December 31, 2008.
3. Verified Complaint the matter Robert Smith vs. Joseph Smith. In addition to the written documentation provided, a physical inspection of the business 4. Agreement of Understanding between Robert Smith and The Pancake, House Inc. premisesdated was January conducted, 10, 1992. and an interview took place with Robert Smith. Information gathered at this interview became an integral part of this report. 5. Agreement Between Owner and Contractor between Joseph Smith and The Pancake House, Inc. dated January 27, 1995.
6. Consent to Assignment between Another City Pancake House, LLC and Brothers. Inc. dated November 18, 2009.
7. Deposition of Robert Smith in the matter titled Robert Smith vs. Joseph Smith dated March 4, 2010.
8. Deposition of Joseph Smith in the matter titled Robert Smith vs. Joseph Smith dated October 22, 2010.
9. Deposition of Joseph Smith in the matter titled Robert Smith vs. Joseph Smith dated November 4, 2010.
10. Partial Deposition Summary of Robert Smith in the matter titled Robert Smith vs. Joseph Smith dated October 22, 2010.
11. Franchise Agreement between International House of Pancakes and The Pancake House, Inc. dated December 30, 2005.
12. Franchise Agreement between International House of Pancakes and The Pancake House, Inc. dated May 17, 1995. - 79 - Appendix 1 SOURCES OF INFORMATION UTILIZED
13. Franchise Offering Circular from International House of Pancakes dated March 30, 1995.
14. The Pancake House estimated market value provided by Joseph Smith to Robert Smith .
15. Closing documents for the transaction between Another City Pancake House, LLC and Brothers, Inc. dated November 18, 2009.
16. Other items referenced throughout this report.
In addition to the written documentation provided, a physical inspection of the business premises was conducted, and an interview took place with Robert Smith. Information gathered at this interview became an integral part of this report. -- 8280 -- AppendixAppendix 22
STATEMENT OF ASSUMPTIONS ANDAND LIMITINGLIMITING CONDITIONSCONDITIONS
13.This appraisal Unless is subject otherwise to the stated, following no effort assumptions has been and made limiting to determineconditions: the possible effect, if any, on the subject business due to future Federal, state, or local legislation, including any environmental or ecological matters or interpretations 1.thereof. The conclusion of value arrived at herein is valid only for the stated purpose as of the date of the valuation. 14. We have conducted interviews with the current management of the subject 2.company Financial concerningstatements theand past, other present, related andinformation prospective provided operating by the results business of the or company.its representatives, Except inas the noted, course we of havethis engagement, relied on the have representations been accepted of without these individuals.any verification as fully and correctly reflecting the enterprise’s business conditions and operating results for the respective periods, except as specifically 15. Exceptnoted herein. as noted, Trugman we Valuationhave relied Associates on the , Inc.representations has not audited, of the reviewed, owners, or management,compiled the financial and other information third parties provided concer ningto us the and, value accordi andngly, useful we condition express ofno allaudit equipment, opinion or real any estate, other forminvestm of assuranceents used inon the this business, information. and any other assets or liabilities, except as specifically stated to the contrary in this report. We 3.have Public not information attempted and to confirm industry whether and st atisticalor not all information assets of the have business been obtainedare free andfrom clear sources of liens we andbelieve encumbranc to be reliable.es or However,that the entity we makehas good no representation title to all assets. as to the accuracy or completeness of such information and have performed no 16. Allprocedures facts and to data corroborate set forth thein the information. report are true and accurate to the best of the appraiser's knowledge and belief. We have not knowingly withheld or omitted 4.anything We do not from provide our report assur anceaffecting on the our achievability value estimate. of the results forecasted by or for the subject company because events and circumstances frequently do not 17. Possessionoccur as expected; of this report, differences or a copy betw thereof,een actual does and not expected carry with results it the mayright beof publicationmaterial; and of achievementall or part of it,of northe mayforecasted it be used results for isany dependent purpose withouton actions, the previousplans, and written assumptions consent of of management. the appraiser, and in any event only with proper authorization. Authorized copies of this report will be signed in blue ink by a 5.director The conclusion of Trugman of value Valuation arrived Associates at herein, isInc. based Unsigned on the copies, assumption or copies that notthe signedcurrent inlevel blue of ink, management should be consideredexpertise and to be effectiveness incomplete. would continue to be maintained, and that the character and integrity of the enterprise through any 18. Unlesssale, reorganization, otherwise provided exchange, for in writingor diminut andion agreed of the to owners’ by both partiesparticipation in advance, would thenot extentbe materially of the liability or significantly for the comple changed.teness or accuracy of the data, opinions, comments, recommendations and/or conclusions shall not exceed the amount 6.paid This reportto the andappraisers the conclusi for professionalon of value arrived fees and, at herei then,n areonly for to the the exclusive party(s) usefor whomof our clientthis report for the was sole originally and specific prepared. purposes as noted herein. They may not be used for any other purpose or by any other party for any purpose. Furthermore 19. Thethe report conclusion and conclusion reached in of this value report are is not based intended on the by standard the author of value and should as stated not andbe construed defined in by the the body reader of the to be report. investment An actual advice transaction in any manner in the whatsoever.business or businessThe conclusion interest of may value be represents concluded the at caonsidered higher value opinion or lower of Trugman value, depending Valuation onAssociates, the circumstances Inc., based surrounding on information the com furnpany,ished theto them appraised by the business subject company interest and/orand other the sources.motivations and knowledge of both the buyers and sellers at that time. Trugman Valuation Associates, Inc. makes no guarantees as to what values 7.individual Neither all buyers nor any and part sellers of the maycontents reach of in this an report actual (especially transaction. the conclusion of value, the identity of any valuation specialist(s), or the firm with which such - 8182 - Appendix 2
STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS
13. valuation Unless otherwise specialists stated, are connected no effort orhas any been reference made toto anydetermine of their professionalthe possible designations)effect, if any, shouldon the besubject disseminated business to due the publicto future through Federal, advertising state, or media, local publiclegislation, relations, including news any media, environmental sales media, or ecologicalmail, direct matters transmittal, or interpretations or any other meansthereof. of communication without the prior written consent and approval of Trugman Valuation Associates, Inc. 14. We have conducted interviews with the current management of the subject 8.company Future services concerning regarding the past, the present,subject maandtter prospective of this report, operating including, results but of notthe limitedcompany. to testimony Except as or noted,attendance we have in court, relied shall on thenot representationsbe required of Trugmanof these Valuationindividuals. Associates, Inc. unless previous arrangements have been made in writing. 15. Except as noted, we have relied on the representations of the owners, 9. Trugmanmanagement, Valuation and otherAssociates, third parties Inc. is notconcer an environmentalning the value consultantand useful or condition auditor, andof all it equipment,takes no responsibility real estate, forinvestm any actentsual used or potential in the business,environmental and anyliabilities. other Anyassets person or liabilities, entitled exceptto rely onas thisspecifica report,lly wishingstated to to the know contrary whether in this such report. liabilities We exist,have notor the attempted scope and to confirm their effect whether on the or value not all of assets the property, of the business is encouraged are free to obtainand clear a professional of liens and envir encumbranconmentales assessment. or that the entity Trugman has good Valuation title to Associates, all assets. Inc. does not conduct or provide environmental assessments and has not 16.performed All facts and one data for setthe forth subject in the property. report are true and accurate to the best of the appraiser's knowledge and belief. We have not knowingly withheld or omitted 10.anything Trugman fromValuation our report Associates, affecting Inc. our has value not estimate.determined independently whether the subject company is subject to any present or future liability relating to 17.environmental Possession of mattersthis report, (including, or a copy but thereof,not limited does to CERCLnot carryA/Superfund with it the liability)right of norpublication the scope of all of or any part such of it, liabilities.nor may itTrugman be used Valuationfor any purpose Associates, without Inc.’s the valuationprevious takeswritten no consent such liabilities of the intoappr aaiser,ccount, and except in any as theyevent have only been with reported proper toauthorization. Trugman Valuation Authorized Associates, copies of thInc.is reportby the will subject be signed company in blue or ink by by an a environmentaldirector of Trugman consultant Valuation working Associates for the subject, Inc. Unsigned company, copies, and then or copiesonly to notthe extentsigned that in blue the liabink,ility should was bereported considered to us into an be act incomplete.ual or estimated dollar amount. Such matters, if any, are noted in the report. To the extent such information has 18.been Unless reported otherwise to us,provided Trugman for in Valuation writing and Asso agreedciates, to Inc.by both has partiesrelied on in advance,it without verificationthe extent of and the liabilityoffers nofor thewarranty comple orteness representation or accuracy as of tothe its data, accuracy opinions, or completeness.comments, recommendations and/or conclusions shall not exceed the amount paid to the appraisers for professional fees and, then, only to the party(s) for 11. Trugmanwhom this Valuation report was Associates, originally prepared.Inc. has not made a specific compliance survey or analysis of the subject property to determine whether it is subject to, or in 19.compliance The conclusion with, reached the American in this report Disabilitie is baseds Act on of the 1990, standard and this of valuevaluation as stated does notand considerdefined inthe the effect, body if of any, the of report. noncompliance. An actual transaction in the business or business interest may be concluded at a higher value or lower value, depending 12. Noon thechange circumstances of any item surrounding in this apprai thesal com reportpany, shall the appraised be made businessby anyone interest other thanand/or Trugman the motivations Valuation and Associates, knowledge Inc., of bot andh thewe buyersshall have and no sellers responsibility at that time. for anyTrugman such unauthorizedValuation Associates, change. Inc. makes no guarantees as to what values individual buyers and sellers may reach in an actual transaction. - 82 - Appendix 2
STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS
13. Unless otherwise stated, no effort has been made to determine the possible effect, if any, on the subject business due to future Federal, state, or local legislation, including any environmental or ecological matters or interpretations thereof.
14. We have conducted interviews with the current management of the subject company concerning the past, present, and prospective operating results of the company. Except as noted, we have relied on the representations of these individuals.
15. Except as noted, we have relied on the representations of the owners, management, and other third parties concerning the value and useful condition of all equipment, real estate, investments used in the business, and any other assets or liabilities, except as specifically stated to the contrary in this report. We have not attempted to confirm whether or not all assets of the business are free and clear of liens and encumbrances or that the entity has good title to all assets.
16. All facts and data set forth in the report are true and accurate to the best of the appraiser's knowledge and belief. We have not knowingly withheld or omitted anything from our report affecting our value estimate.
17. Possession of this report, or a copy thereof, does not carry with it the right of publication of all or part of it, nor may it be used for any purpose without the previous written consent of the appraiser, and in any event only with proper authorization. Authorized copies of this report will be signed in blue ink by a director of Trugman Valuation Associates, Inc. Unsigned copies, or copies not signed in blue ink, should be considered to be incomplete.
18. Unless otherwise provided for in writing and agreed to by both parties in advance, the extent of the liability for the completeness or accuracy of the data, opinions, comments, recommendations and/or conclusions shall not exceed the amount paid to the appraisers for professional fees and, then, only to the party(s) for whom this report was originally prepared.
19. The conclusion reached in this report is based on the standard of value as stated and defined in the body of the report. An actual transaction in the business or business interest may be concluded at a higher value or lower value, depending on the circumstances surrounding the company, the appraised business interest and/or the motivations and knowledge of both the buyers and sellers at that time. Trugman Valuation Associates, Inc. makes no guarantees as to what values individual buyers and sellers may reach in an actual transaction. -- 8283 -- Appendix 2
20. NoSTATEMENT opinion is intended OF ASSUMPTIONS to be expressed AND fo LIMITINGr matters CONDITIONSthat require legal or other specialized expertise, investigation or knowledge beyond that customarily employed by appraisers valuing businesses. 13. Unless otherwise stated, no effort has been made to determine the possible effect, if any, on the subject business due to future Federal, state, or local legislation, including any environmental or ecological matters or interpretations thereof.
14. We have conducted interviews with the current management of the subject company concerning the past, present, and prospective operating results of the company. Except as noted, we have relied on the representations of these individuals.
15. Except as noted, we have relied on the representations of the owners, management, and other third parties concerning the value and useful condition of all equipment, real estate, investments used in the business, and any other assets or liabilities, except as specifically stated to the contrary in this report. We have not attempted to confirm whether or not all assets of the business are free and clear of liens and encumbrances or that the entity has good title to all assets.
16. All facts and data set forth in the report are true and accurate to the best of the appraiser's knowledge and belief. We have not knowingly withheld or omitted anything from our report affecting our value estimate.
17. Possession of this report, or a copy thereof, does not carry with it the right of publication of all or part of it, nor may it be used for any purpose without the previous written consent of the appraiser, and in any event only with proper authorization. Authorized copies of this report will be signed in blue ink by a director of Trugman Valuation Associates, Inc. Unsigned copies, or copies not signed in blue ink, should be considered to be incomplete.
18. Unless otherwise provided for in writing and agreed to by both parties in advance, the extent of the liability for the completeness or accuracy of the data, opinions, comments, recommendations and/or conclusions shall not exceed the amount paid to the appraisers for professional fees and, then, only to the party(s) for whom this report was originally prepared.
19. The conclusion reached in this report is based on the standard of value as stated and defined in the body of the report. An actual transaction in the business or business interest may be concluded at a higher value or lower value, depending on the circumstances surrounding the company, the appraised business interest and/or the motivations and knowledge of both the buyers and sellers at that time. Trugman Valuation Associates, Inc. makes no guarantees as to what values individual buyers and sellers may reach in an actual transaction. - 84 - Appendix 3
Appraisal of 100 percent of the equity of The Pancake House, Inc.
VALUATION ANALYST’S REPRESENTATION
We represent that, to the best of our knowledge and belief:
• the statements of fact contained in this report are true and correct.
• the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.
• we have no present or prospective interest in the property that is the subject of this report, and we have no personal interest with respect to the parties involved.
• we have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.
• our engagement in this assignment was not contingent upon developing or reporting predetermined results.
• our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
• our analyses, opinions, and conclusions were developed and this report has been prepared in conformity with the Statement on Standards for Valuation Services No. 1, promulgated by the American Institute of Certified Public Accountants, the Uniform Standards of Professional Appraisal Practice, promulgated by the Appraisal Foundation, the business valuation standards of The Institute of Business Appraisers Inc. and the American Society of Appraisers.
• The American Institute of Certified Public Accountants, The American Society of Appraisers, and The Institute of Business Appraisers, Inc. have a mandatory recertification program for all of its senior accredited members. All senior accredited members of our firm are in compliance with all of these organizations’ programs.
• no one provided significant business and/or intangible asset appraisal assistance to the person signing this certification other than William Harris. -- 10785 - - Appendix 4 WILLIAM HARRIS GARY R. TRUGMAN,PROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience Experience Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. PresidentExperience of includesTrugman a Valuationvariety of assignmentsAssociates, Inc.,including a firm closely-held specializing businesses, in business professional valuation, economicpractices damagesand thinly and traded litigation public support companies. services. BusinessIndustries valuation include, experience health care, includes retail, a widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly traded public companies. Industries include but are not limited to security, automotive, funeral homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have also included the valuation of stock options and various types of intangible assets.
BusinessEducation valuation, economic damages and litigation support services have been rendered for a variety of purposes including, but not limited to family law matters, business damages, lender liability• litigation, M.S., Finance, buy-sell Chapman agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. at Charlotte, 2006. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. Appraisal Education Court Testimony. Has been qualified as an expert witness in State Courts of Florida, New Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas and has performed extensive services relating to court testimony. Testimony has also been provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the American2010. Stock Exchange, as well as other forms of arbitration.
Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by numerous judges, as well as Orange County, Florida and Cass County, Minnesota.
MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. • Author of “Trugman Valuation Associates, Inc. (TVA) Restricted Stock Study,” Business Valuation Review (Fall 2009). Professional Designations • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). -- 1078586 - - Appendix 4 WILLIAM HARRIS GARY R. TRUGMAN,PROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience ExperienceProfessional Designations Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. President•Experience ABV of : includes AccreditedTrugman a Valuationvariety in Business of assignmentsAssociates, Valuation designated Inc.,including a firm closely-held by specializing The American businesses, in business Institute professional of valuation, Certified economicpracticesPublic damagesand Accountants thinly and traded litigation (1998). public support Reaccredited companies. services. in 2008. BusinessIndustries valuation include, experience health care, includes retail, a widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly traded• public MCBA companies.: Master Certified Industries Business include Appraiser but are not designated limited to bysecurity, The Institute automotive, of Business funeral Appraisers, Inc. (1999). Original certification (CBA) in 1987. Reaccredited in 2009. homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not manufacturing,•limited ASAto business: Accredited trucking, damages, service,Senior estate Appraiserand professiand gift designated onaltax matters, business by andthe establishments. familyAmerican law Societymatters. Assignments of Appraisers have also included(1991 ).the Reaccredited valuation of instock 2006. options and various types of intangible assets. BusinessEducation valuation, economic damages and litigation support services have been rendered for aEducation variety of purposes including, but not limited to family law matters, business damages, lender liability• litigation, M.S., Finance, buy-sell Chapman agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying and• selling Masters2007. businesses, in Valuation malpractice Sciences -litigation, Lindenwood wrongful College, death, St. Charles,sexual discrimination,MO (1990). Thesis age discrimination,topic: wrongfulEquitable termination, Distribution workers’ Value compensationof Closely-Held and Businesses breach of contract. and Professional Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigationPractices. services include reasonable compensation analysis for tax and non-tax assignments. at Charlotte, 2006. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. • B.B.A. in Accountancy - Bernard M. Baruch College, New York, NY (1977). Appraisal Education Court Testimony. Has been qualified as an expert witness in State Courts of Florida, New Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court Faculty in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas and• hasNational performed Judicial extensive College, services Reno, relating Nevada to since court 1997. testimony. Testimony has also been • Advanced Topics in Business Valuation, American Society of Appraisers, Bethesda, MD, provided• Florida in arbitration International cases University, before the Miami, National Florida. Association Adjunct professorof Securities since Dealers 2010. and the American2010. Stock Exchange, as well as other forms of arbitration. • AICPA National Business Valuation Conference, American Institute of CPAs, San CourtAppraisal Appearances. EducationHas appeared in the following courts: Florida • Palm Beach, Polk, Lee, Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, • AICPA National Business Valuation Conference, Washington, DC, American Institute of Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union. NewCertified York Public • Bronx Accountants,• Westchester. 2010. Connecticut • Fairfield, Milford/Ansonia, Middlesex. Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. • Valuation for SFAS 123R/IRC 409A - American Society of Appraisers, South Beach Indiana • Marion. California • San Jose. Michigan • Ottawa. • Miami,Introduction FL, 2010. to Business Valuation, American Society of Appraisers, Minneapolis, MN, Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, • 2010 ASA-CICBV Business Valuation Conference, South Beach Miami, FL, American Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • SocietyCFA Candidate of Appraisers, Passed and Levels Canadian 1, 2 and Institute 3 of the of CharteredCertified Business Financial Valuers,Analyst Curriculum. 2010. by numerous judges, as well as Orange County, Florida and Cass County, Minnesota. • AICPA National Business Valuation Conference. San Francisco, CA, American Institute MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. of Certified Public Accountants, 2010. • Author of “Trugman Valuation Associates, Inc. (TVA) Restricted Stock Study,” Business • TheValuation NACVA/IBA Review 2010(Fall 2009).Annual Consultants’ Conference, Miami Beach, FL, National ProfessionalAssociation Designations of Certified Valuation Analysts and The Institute of Business Appraisers, • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA2010.: Licensed in Florida (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). - 87 - Appendix 4 -- 10785 - - Appendix 4 GARY R. TRUGMAN,WILLIAM C.P.A./A.B HARRIS.V., M.C.B.A., A.S.A., M.V.S. GARY R. TRUGMAN,PROFESSIONALPROFESSIONAL C.P.A./A.B QUALIFICATIONSQUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS AppraisalExperience Education Experience •ValuationFICPA Analyst Valuation, at Trugman Forensic Valuation Accounting Associates, and Inc.Litigation specializing Services in business Conference valuation., Ft. PresidentExperienceLauderdale, of includesTrugman FL, a ValuationvarietyFlorida ofInstitute assignmentsAssociates, of CPAs, Inc.,including 2010. a firm closely-held specializing businesses, in business professional valuation, economic damages and litigation support services. Business valuation experience includes a •practicesAICPA and National thinly tradedBusiness public Valuation companies. Conference Industries. San Francisco, include, CA, health American care, Institute retail, wide variety of assignments including closely-held businesses, professional practices and thinly manufacturing,of Certified distributors, Public Accountants, and service. 2009. traded public companies. Industries include but are not limited to security, automotive, funeral homes,•BusinessFICPA health valuation Valuation,care, services securities Forensic have brokeragebeen Accounting rendered and andforfinancial a Litigationvariety institutions, of purposesServices retail, including,Conference restaurants, but, notFt. manufacturing,limited Lauderdale,to business trucking, damages,FL, Florida service, estate Institute and professiand of gift CPAs, onaltax matters, business2009. and establishments. family law matters. Assignments have also included the valuation of stock options and various types of intangible assets. • 2008 AICPA/ASA National Business Valuation Conference, Las Vegas, NV, American BusinessEducationInstitute valuation, of CPAs economic and American damages Society and litigation of Appraisers, support services 2008. have been rendered for a variety of purposes including, but not limited to family law matters, business damages, lender liability•• litigation,NJ M.S., Law Finance, and buy-sell Ethics Chapman agreements,, Webcast, Graduate New shareholder SchoolJersey ofSociety litigation, Business of estateCPAs, at Florida and2008. Internationalgift tax matters, University, buying and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age • AICPA National Business Valuation Conference. New Orleans, LA, American Institute discrimination, wrongful termination, workers’ compensation and breach of contract. Additional •of B.S., Certified Business Public Administration, Accountants, Belk 2007. College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. at Charlotte, 2006. Representation• FCG Conference in litigation. New includes Orleans, plaintiff, LA, Financialdefendant, Consulting mutual, and Group, court-appointed 2007. neutral. Appraisal Education Court• Testimony.Advanced BusinessHas been Valuationqualified asConference an expert. witnessSan Diego, in State CA, Courts American of Florida, Society New of Jersey,• Appraisers,USPAPNew York, for Pennsylvania,2007.Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas and• hasIBA performed Symposium extensive 2007. Denver,services CO,relating The toInstitute court testimony.of Business Testimony Appraisers, has 2007. also been provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the • FICPA Valuation, Accounting and Litigation Services Conference. Ft. Lauderdale, FL, American2010. Stock Exchange, as well as other forms of arbitration. Florida Institute of Certified Public Accountants, 2007. Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San • AICPA National Business Valuation Conference. Austin, TX, American Institute of Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, Certified Public Accountants, 2006. Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union.• NewFCG YorkConference • Bronx. Austin,• Westchester. TX, Financial Connecticut Consulting • Fairfield, Group, Milford/Ansonia,2006. Middlesex. Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Indiana• Personal • Marion. Goodwill California. BV • San Resources Jose. Michigan Telephone • Ottawa. Conference, 2006. • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, Court• Appointments.FICPA2008. Valuation, Has Accountingbeen court appointedand Litigation in New Services Jersey’s Conference Morris, Sussex,. Ft. Lauderdale, Essex, Union, FL, Hunterdon,Florida Somerset, Institute Monmouth, of Certified Middlesex,Public Accountants, Passaic, Warren,2006. Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by• numerousValuation judges,2.. Las as Vegas,well as OrangeNV, American County, Institute Florida andof Certified Cass County, Public Minnesota. Accountants and MutualAuthor AmericanExpert. Regularly Society ofserves Appraisers, as a mutually-agreed 2005. upon expert. •• AICPAAuthor Nationalof “Trugman Business Valuation Valuation Associates, Conference Inc. (TVA). Orlando, Restricted FL, Stock American Study ,”InstituteBusiness of Valuation Review (Fall 2009). ProfessionalCertified Designations Public Accountants, 2004. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • 23rd CPA : AnnualLicensed Advanced in Florida Business (1996), New Valuation Jersey Conference (1978) and. NewSan YorkAntonio, (1977 TX,). American SocietyTimes?,” ofBusiness Appraisers, Valuation 2004. Update (August 2009). - 88 - Appendix 4 -- 10785 - - Appendix 4
GARY R. TRUGMAN,WILLIAM C.P.A./A.B HARRIS.V., M.C.B.A., A.S.A., M.V.S. GARY R. TRUGMAN,PROFESSIONALPROFESSIONAL C.P.A./A.B QUALIFICATIONSQUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS AppraisalExperience Education Experience •Valuation2004 Analyst National at TrugmanBusiness ValuationValuation Associates,Conference. Inc. Las specializing Vegas, NV, in Institute business of valuation.Business PresidentExperienceAppraisers, of includesTrugman 2004. a Valuationvariety of assignmentsAssociates, Inc.,including a firm closely-held specializing businesses, in business professional valuation, economicpractices damagesand thinly and traded litigation public support companies. services. BusinessIndustries valuation include, experience health care, includes retail, a wide•manufacturing, varietyNew ofJersey assignments distributors, Law and includingand Ethics service. Course closely-held. Parsippany, businesses, NJ, Newprofessional Jersey Societypractices of and Certified thinly traded publicPublic companies. Accountants, Industries 2004. include but are not limited to security, automotive, funeral homes, health care, securities brokerage and financial institutions, retail, restaurants, •Business22 ndvaluation Annual Advancedservices have Business been Valuation rendered Conferencefor a variety. Chicago,of purposes IL, Americanincluding, Societybut not manufacturing, trucking, service, and professional business establishments. Assignments have limited ofto Appraisers,business damages, 2003. estate and gift tax matters, and family law matters. also included the valuation of stock options and various types of intangible assets. • AICPA National Business Valuation Conference. New Orleans, LA, American Institute Business valuation, economic damages and litigation support services have been rendered for Educationof Certified Public Accountants, 2002. a variety of purposes including, but not limited to family law matters, business damages, lender liability•• litigation,Brown M.S., Finance, v. buy-sellBrown: Chapman agreements,The Most Graduate Important shareholder School Equitable of litigation, Business Distribution estate at Florida and Decision Internationalgift tax matters,Since University, Painter buying. 2007. and sellingFairfield, businesses, NJ, New Jerseymalpractice Institute litigation, for Continuing wrongful Legal death, Education, sexual 2002.discrimination, age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigation• 2001 services National include Business reasonable Valuation compensation Conference. analysis Las Vegas,for tax andNV, non-taxAmerican assignments. Institute of at Charlotte, 2006. RepresentationCertified inPublic litigation Accountants, includes plaintiff, 2001. defendant, mutual, and court-appointed neutral. Appraisal Education Court• Testimony.2001 Share Hasthe Wealthbeen qualified Conference. as an Orlando, expert witnessFL, The inInstitute State ofCourts Business of Florida, Appraisers, New Jersey,• 2001.USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas • 2000 National Conference on Business Valuation, Miami, FL, American Institute of and has performed extensive services relating to court testimony. Testimony has also been Certified Public Accountants, 2000. provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the 2010. American• 19 thStock Annual Exchange, Advanced as wellBusiness as other Valuation forms of Conference arbitration., Philadelphia, PA, American Society of Appraisers, 2000. Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Francisco, CA, 2009. Broward,• Hot Miami-Dade, Issues in Estate Leon and and Gift Escambia. Tax Returns: New What Jersey do the• Morris, Auditors Atlantic, Look For? Sussex, Fairfield, Bergen, NJ, Burlington,• NewThe Passaic, MarketJersey InstituteApproach Mercer, for Middlesex,, American Continuing Monmouth,Society Legal ofEducation, Appraisers, Essex, Hunterdon,2000. Skokie, ILWarren, 2009. Hudson, and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. •Pennsylvania• PullingThe Income •Ahead Montgomery, Approach of the ,Pack Lehigh,American - ThePhiladelphia, Society Institute of Appraisers, ofChester. Business Orlando,Massachusetts Appraisers’ FL 2009. 2000 • Middlesex. National IndianaConference. • Marion. California Phoenix, • SanAZ, Jose.The Institute Michigan of Business• Ottawa. Appraisers, 2000. • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, •Court Appointments.Business2008. Valuation Has been Conference court appointed. Las Vegas, in New NV, Jersey’s American Morris, Institute Sussex, of Certified Essex, Union,Public Hunterdon,Accountants, Somerset, 1999. Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by numerous judges, as well as Orange County, Florida and Cass County, Minnesota. • 1999 International Appraisal Conference. Boston, MA, American Society of Appraisers, MutualAuthor 1999Expert. Regularly serves as a mutually-agreed upon expert. •• 1999Author Annual of “Trugman Conference: Valuation The Associates,Future of Business Inc. (TVA) Valuation. Restricted Orlando, Stock StudyFL, The,” Business Institute Valuation Review (Fall 2009). Professionalof Business Designations Appraisers, Inc., 1999. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA1998: LicensedJoint Business in Florida Valuation (1996 ),Conference. New Jersey Montreal,(1978) and Canada, New York American (1977). Society of AppraisersTimes?,” Business and Canadian Valuation Institute Update of Chartered(August 2009). Business Valuators, 1998. -- 1078589 - - Appendix 4 WILLIAM HARRIS GARY R. TRUGMAN,PROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience ExperienceAppraisal Education Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. President•ExperienceThe of Future includesTrugman of Businessa Valuationvariety ofValuation assignmentsAssociates, Annual Inc.,including Conference a firm closely-held specializing. San Antonio, businesses, in business TX, The professional Institutevaluation, of economicpracticesBusiness damagesand thinly Appraisers, and traded litigation Inc., public support1998. companies. services. BusinessIndustries valuation include, experience health care, includes retail, a widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly •traded publicBusiness companies. Valuation Industries Conference. include San but Diego, are notCA, limited American to security, Institute automotive, of Certified funeral Public Accountants, 1997. homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not •manufacturing,limited 16to thbusiness Annual trucking, Advanceddamages, service, estateBusiness and professiand Valuation gift onaltax matters, business Conference. and establishments. family San lawFrancisco, matters. Assignments CA, American have also includedSociety the of valuationAppraisers, of stock1997. options and various types of intangible assets.
•BusinessEducationQuantifying valuation, Marketabilityeconomic damages Discounts. and litigationSan Francisco, support CA, services Mercer have Capital, been 1997. rendered for a variety of purposes including, but not limited to family law matters, business damages, lender •liability• litigation,Introduction M.S., Finance, buy-sell to ChapmanMachinery agreements, Graduate & Equipment shareholder School Valuation. of litigation, Business Chicago,estate at Florida and IL, Internationalgift American tax matters, SocietyUniversity, buying of and sellingAppraisers,2007. businesses, 1997. malpractice litigation, wrongful death, sexual discrimination, age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional ••National B.S., Business Conference Administration, on Appraising Belk College Closely-Held of Business Businesses. at the University San Diego,of North CA, Carolina The litigation services include reasonable compensation analysis for tax and non-tax assignments. Instituteat Charlotte, of Business 2006. Appraisers, Inc., 1997. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. •AppraisalBusiness Education Valuation Conference. Phoenix, AZ, American Institute of Certified Public Court Testimony. Has been qualified as an expert witness in State Courts of Florida, New Accountants, 1996. Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court •in Newark,15thFL, New 2010. Annual Jersey Business and Hammond, Valuation Indiana, Conference. as well as Memphis, in Bankruptcy TN, CourtAmerican in Dallas, Society Texas of and hasAppraisers, performed 1996.extensive services relating to court testimony. Testimony has also been provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the •American19962010. Stock Business Exchange, Valuation as well Conference. as other forms Holmdel, of arbitration. NJ, NJ Society of Certified Public Accountants, 1996. Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Broward,• NationalFrancisco, Miami-Dade, Conference CA, 2009.Leon on and Appraising Escambia. Closely-Held New Jersey Businesses. • Morris, Atlantic, Orlando, Sussex, FL, The InstituteBergen, of Business Appraisers, Inc., 1996. Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. • Business Valuation Conference. New Orleans, LA, American Institute of Certified Public Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Accountants, 1995. Indiana • Marion. California • San Jose. Michigan • Ottawa. • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, • 14th Annual Business Valuation Conference. Boston, MA, American Society of Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, Appraisers, 1995. Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. •by numerous1995 Matrimonialjudges, as well Conference. as Orange Holmdel,County, Florida NJ, New and Jersey Cass County,Society Minnesota.of Certified Public Accountants, 1995. MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. •• JointAuthor Business of “Trugman Valuation Valuation Conference. Associates, San Inc. Diego, (TVA) CA, Restricted American Stock Institute Study of,” BusinessCertified PublicValuation Accountants Review (Fall - The 2009). Institute of Business Appraisers, Inc., 1995. Professional Designations ••1995 Co-Author Business of “How Valuation Should Conference. You Value CloselyHolmdel, Held NJ, BusinessesNew Jersey During Society These of Certified Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). PublicTimes?,” Accountants,Business Valuation 1995. Update (August 2009). -- 1078590 - - Appendix 4 WILLIAM HARRIS GARY R. TRUGMAN,PROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience ExperienceAppraisal Education Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. •PresidentExperienceNational of includesTrugman Conference a Valuationvariety on of AppraisingassignmentsAssociates, Closely-Held Inc.,including a firm closely-held Businesses.specializing businesses, in Las business Vegas, professional valuation, NV, The economicpracticesInstitute damagesand ofthinly Business and traded litigation Appraisers, public support companies. Inc., services. 1995. BusinessIndustries valuation include, experience health care, includes retail, a widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly traded• public1994 Internationalcompanies. Conference.Industries includeChicago, but ar IL.,e not American limited toSociety security, of Appraisers, automotive, 1994. funeral homes,•BusinessNational health valuation Conferencecare, services securities on have Appraising brokeragebeen rendered Closely-Held and forfinancial a Businesses.variety institutions, of purposes Orlando, retail, including, FL, Therestaurants, Institute but not manufacturing,limited ofto Businessbusiness trucking, damages,Appraisers, service, estate Inc., and 1994.professiand gift onaltax matters, business and establishments. family law matters. Assignments have also included the valuation of stock options and various types of intangible assets. • 1993 International Conference. Seattle, WA, American Society of Appraisers, 1993. BusinessEducation valuation, economic damages and litigation support services have been rendered for a• varietyUniform of purposes Standards including, of Professional but not limited Appraisal to family Practice law matters, and Professional business damages,Appraisal Ethics.lender liability• litigation,Seattle, M.S., Finance, WA, buy-sell American Chapman agreements, Society Graduate shareholderof Appraisers, School of litigation, Business 1993. estate at Florida and Internationalgift tax matters, University, buying and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age • 11th Annual Business Valuation Conference. Atlanta, GA, American Society of discrimination, wrongful termination, workers’ compensation and breach of contract. Additional •Appraisers, B.S., Business 1992. Administration, Belk College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. at Charlotte, 2006. Representation• 1992 International in litigation Conference. includes plaintiff, New Orleans, defendant, LA, mutual, American and Society court-appointed of Appraisers neutral. 1992. Appraisal Education Court• Testimony.National Conference Has been on qualified Appraising as Closely-Heldan expert witness Businesses. in State Orlando, Courts FL,of Florida, The Institute New Jersey,• ofUSPAPNew Business York, for Pennsylvania,BusinessAppraisers, Valuation Inc., California, 1992. - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas and• has10th performed Annual extensiveBusiness servicesValuation relating Conference. to court testimony.Scotsdale, AZ,Testimony American has Societyalso been of provided• Appraisers,Advanced in arbitration Topics 1991. cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the American2010. Stock Exchange, as well as other forms of arbitration. • 1991 International Conference. Philadelphia, PA, American Society of Appraisers, 1991. Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San • Appraising Closely-Held Businesses. Orlando, FL, The Institute of Business Appraisers, Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, Inc., 1991. Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union.• NewPrinciples York •of Bronx Valuation-Business• Westchester. Valuation Connecticut Case • Fairfield,Study. NewMilford/Ansonia, Orleans, LA, Middlesex. American Pennsylvania• SocietyThe Income • ofMontgomery, Appraisers, Approach 1989., Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. •• PrinciplesIntroduction of Valuation–Businessto Business Valuation Valuation, American Methodology. Society of Appraisers, New Orleans, Minneapolis, LA, American MN, Court Appointments.Society2008. of Appraisers, Has been 1988. court appointed in New Jersey’s Morris, Sussex, Essex, Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by• numerous Divorce judges, Tax Planning. as well as American Orange County,Institute Florida of Certified and CassPublic County, Accountants, Minnesota. 1988.
Mutual•Author ValuationExpert. Regularly of Closely-Held serves asBusinesses. a mutually-agreedTotal Tape upon Inc., expert. 1987. •• BusinessAuthor of Valuation“Trugman for Valuation Accountants. Associates, Paramus, Inc. (TVA)NJ, The Restricted Institute ofStock Business Study Appraisers,,” Business Valuation Review (Fall 2009). ProfessionalInc., 1986. Designations • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPAValuation: Licensed of Closely-Held in Florida Businesses. (1996), New American Jersey (1978 Institute) and of New Certified York Public (1977 Accountants,). 1986.Times?,” Business Valuation Update (August 2009). -- - 107 8591 - -- Appendix 4 WILLIAM HARRIS GARYGARY R. R. TRUGMAN, TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A.,A.S.A., M.V.S.M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience ExperienceAppraisal Education Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. PresidentExperience• Has of includesperformedTrugman a extensiveValuationvariety of readingassignmentsAssociates, and research Inc.,including a firmon closely-held business specializing valuation businesses, in business and related professional valuation, topics. economicpractices damagesand thinly and traded litigation public support companies. services. BusinessIndustries valuation include, experience health care, includes retail, a widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly Lecturertraded public companies. Industries include but are not limited to security, automotive, funeral •homes,BusinessDeveloping health valuation care, Discount services securities andhave Capitalization brokeragebeen rendered and Rates forfinancial aSKA, variety Washington,institutions, of purposes DC,retail, including, AICPA restaurants, National but not manufacturing,limited Businessto business trucking, Valuation damages, service, Conference, estate and professiand 2010. gift onaltax matters, business and establishments. family law matters. Assignments have also included the valuation of stock options and various types of intangible assets. • Applications of Standards SKA, Washington, DC, AICPA National Business Valuation BusinessEducationConference, valuation, economic2010. damages and litigation support services have been rendered for a variety of purposes including, but not limited to family law matters, business damages, lender •liability• Defininglitigation, M.S., Finance, Thebuy-sell Engagement Chapman agreements, Graduate SKA, shareholder Washington, School of litigation, Business DC, AICPA estate at Florida National and Internationalgift Businesstax matters, University, Valuation buying and sellingConference,2007. businesses, 2010. malpractice litigation, wrongful death, sexual discrimination, age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional ••Small B.S., Business Business Administration, Valuation Including Belk Personal College of and Business Professional at the UniversityGoodwill, Illinois of North CPA Carolina 2010 litigation services include reasonable compensation analysis for tax and non-tax assignments. Familyat Charlotte, Law Conference, 2006. Illinois CPA Society, Chicago, IL, 2010. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. •AppraisalBusiness Education Valuation During Crazy Economic Times, Get Away Convention, New Jersey Court Testimony.Society of CPAs, Has been Naples, qualified FL, 2010. as an expert witness in State Courts of Florida, New Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court •in Newark,Forecasting:FL, New 2010. Jersey The and Good, Hammond, The Bad Indiana, & the as Ugly well as- Valuation in Bankruptcy the PublicCourt invs. Dallas, the Private Texas and hasCompany performed, 2010 extensive ASA-CICBV services Business relating Valuation to court testimony.Conference, Testimony South Beach has Miami,also been FL, provided• AmericanAdvanced in arbitration Society Topics cases inof Business Appraisers before Valuationthe and National Canadian, American Association Institute Society ofof of SecuritiesCertified Appraisers, Business Dealers Bethesda, Valuers,and MD,the American2010.2010. Stock Exchange, as well as other forms of arbitration.
•Court• Appearances.OtherAICPA Valuation NationalHas Adjustments Business appeared Valuation -in What the followingShould Conference We courts: Do, WithAmerican Florida Them? • PalmInstitute Miami Beach, Beach,of CPAs, Polk, FL, Lee,SanThe Broward,NACVA/IBAFrancisco, Miami-Dade, CA, 201 2009.Leon Annual and Consultants’ Escambia. Conference,New Jersey 2010. • Morris, Atlantic, Sussex, Bergen, Burlington, Passaic, Mercer, Middlesex, Monmouth, Essex, Hunterdon, Warren, Hudson, and •• WorkingThe Market in aApproach Distressed, American Economy Society. Ft. Lauderdale,of Appraisers, FL, Skokie, FICPA IL 2009.Valuation, Forensic Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. Accounting and Litigation Services Conference, 2010. Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. •• ThinkingIntroduction Outside to Business the Box: Valuation Using the, AmericanMarket Approach Society ofto DevelopAppraisers, a Cost Minneapolis, of Capital MN,. Ft. Lauderdale, FL, FICPA Valuation, Forensic Accounting and Litigation Services Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, Conference, 2010. Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. •by numerousUsing judges,Forecasts as inwell Business as Orange Valuation County,. San Florida Francisco, and Cass CA, County, AICPA Minnesota.National Business Valuation Conference, 2009. MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. •• ThinkingAuthor of Outside “Trugman the ValuationBox: Using Associates, the Market Inc. Approach (TVA) Restricted to Develop Stock a Cost Study of Capital,” Business. San Francisco,Valuation ReviewCA, AICPA (Fall National 2009). Business Valuation Conference, 2009. Professional Designations ••Complying Co-Author withof “How Standards Should andYou WritingValue Closelya Good Held Report Businesses. San Francisco, During These CA, AICPACrazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). NationalTimes?,” BusinessBusiness Valuation Valuation Conference, Update (August 2009. 2009). -- - 107 8592 - -- Appendix 4 WILLIAM HARRIS GARYGARY R. R. TRUGMAN, TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A.,A.S.A., M.V.S.M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience LecturerExperience Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. •PresidentExperienceExit of Strategies includesTrugman a for Valuationvariety Increasing of assignmentsAssociates, Your Business’ Inc.,including aSelling firm closely-held specializingPrice, Orlando businesses, in businessand Ft. professionalLauderdale, valuation, economicpracticesFL, damages andFICPA thinly Accounting and traded litigation Show/FABExpo,public support companies. services. 2009. BusinessIndustries valuation include, experience health care, includes retail, a wide variety of assignments including closely-held businesses, professional practices and thinly •manufacturing,So You distributors,Want to be and an service.Expert Witness? Orlando and Ft. Lauderdale, FL, FICPA traded public companies. Industries include but are not limited to security, automotive, funeral Accounting Show/FABExpo, 2009. homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not •manufacturing,limited Businessto business trucking, Valuation damages, service, During estate and Crazy professiand Times gift onaltax, Ft. matters, business Lauderdale and establishments. andfamily Tampa, law matters. FL, Assignments CPAs in Industry have also includedConference, the valuation 2009. of stock options and various types of intangible assets. •BusinessEducationFishman, valuation, Mard economic and Trugman damages on Divorce and litigation Valuations support, Webinar, services Financial have beenConsulting rendered Group, for a variety2009. of purposes including, but not limited to family law matters, business damages, lender liability• litigation, M.S., Finance, buy-sell Chapman agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying •and sellingAsk2007. thebusinesses, Experts, Ft. malpractice Lauderdale, litigation,FL, FICPA wrongful Valuation, death, Forensic sexual Accounting discrimination, and Litigation age discrimination,Services wrongful Conference, termination, 2009. workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. • SSVS1at Charlotte, and the2006. Very Small Business, Ft. Lauderdale, FL, FICPA Valuation, Forensic RepresentationAccounting in litigation and Litigation includes Services plaintiff, Conference, defendant, 2009. mutual, and court-appointed neutral. Appraisal Education •Court Testimony.Hardball with Has Hitchner been ,qualified Las Vegas, as anNV, expert 2008 AICPA/ASAwitness in State National Courts Business of Florida, Valuation New Jersey,• Conference,USPAPNew York, for Pennsylvania,Business 2008. Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas •and hasValuing performed Small extensive Main Street services (Mom relating& Pop) Businessesto court testimony., Las Vegas, Testimony NV, 2008 has AICPA/ASA also been provided• NationalAdvanced in arbitration Business Topics cases inValuation Business before Conference, Valuationthe National, American 2008. Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the American2010. Stock Exchange, as well as other forms of arbitration. • Construction Firm Valuation Issues: What You Need to Know, Orlando, FL, FICPA Court• Appearances.ConstructionAICPA National IndustryHas Business appeared Conference, Valuation in the 2008. following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, • How to Build a Valuable Practice, Ft. Lauderdale, FL, FICPA Practice Management Burlington, Passaic, Mercer, Middlesex, Monmouth, Essex, Hunterdon, Warren, Hudson, and • Conference,The Market Approach2008. , American Society of Appraisers, Skokie, IL 2009. Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. •Pennsylvania• AICPAThe Income •Statement Montgomery, Approach on Standards , Lehigh,American Philadelphia,for Society Valuation of Appraisers, Chester.Services , Orlando,Tallahassee,Massachusetts FL 2009. FL, •Tallahassee Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. • ChapterIntroduction of the to FICPA, Business 2008. Valuation, American Society of Appraisers, Minneapolis, MN, •Court Appointments.Keeping2008. Yourself Has Out been of courtTrouble appointed as an Appraiser, in New Jersey’s IBA Teleconference, Morris, Sussex, 2008. Essex, Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. •by numerousBusiness judges, Valuation as well for as LitigationOrange County,, Detroit, Florida MI, MACPA’s and Cass 2008 County, Litigation Minnesota. & Business Valuation Conference, 2008. MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. •• CurrentAuthor ofIssues “Trugman in Business Valuation Valuation Associates, and Inc.Litigation (TVA) Support... Restricted And Stock the Study Beat,” GoesBusiness On, Detroit,Valuation MI, Review MACPA’s (Fall 2008 2009). Litigation & Business Valuation Conference, 2008. Professional Designations • Personal Goodwill. Orlando, FL, American Academy of Matrimonial Lawyers, 2008. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). • ValuingTimes?,” theBusiness Very Small Valuation Business Update, Business (August Valuation 2009). Resources, Teleconference, 2008. -- - 107 8593 - -- Appendix 4 WILLIAM HARRIS GARYGARY R. R. TRUGMAN, TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A.,A.S.A., M.V.S.M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience LecturerExperience •ValuationPersonal Analyst Goodwill at Trugman - What Valuation to Do With Associates, It, Institute ofInc. Business specializing Appraisers, in business Teleconference, valuation. President of Trugman Valuation Associates, Inc., a firm specializing in business valuation, Experience2008. includes a variety of assignments including closely-held businesses, professional economicpractices damagesand thinly and traded litigation public support companies. services. BusinessIndustries valuation include, experience health care, includes retail, a •widemanufacturing, varietyDiscount of assignments distributors,and Cap Rates includingand service. - Are closely-held They Really businesses, Such a professionalMystery?, Institute practices of andBusiness thinly traded publicAppraisers, companies. Teleconference, Industries 2008. include but are not limited to security, automotive, funeral homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not •manufacturing,limited Askto business the Expertstrucking, damages,. Ft. service, Lauderdale, estate and professiand FL, gift FICPA onaltax matters, businessValuation, and establishments. Accounting family law andmatters. AssignmentsLitigation Services have also includedConference, the valuation 2008. of stock options and various types of intangible assets.
•BusinessEducationTax valuation, Effecting economic S Corporations damages and Otherand litigation Flow Through support Entities services, Ft. have Lauderdale, been rendered FL, FICPA for a varietyValuation, of purposes Accounting including, and but Litigation not limited Services to family Conference, law matters, 2008. business damages, lender liability• litigation, M.S., Finance, buy-sell Chapman agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying • Dream the Impossible Dream: Can Specific Company Risk Really Be Quantified? New and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age Orleans, LA, AICPA National Business Valuation Conference, 2007. discrimination, wrongful termination, workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. • Hardballat Charlotte, with Hitchner2006. , New Orleans, LA, AICPA National Business Valuation Conference, Representation2007. in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. Appraisal Education •Court Testimony.Valuing Small Has Business been qualified and Personal as an and expert Professional witness Goodwillin State ,Courts New Orleans, of Florida, LA, FCGNew Jersey,• Conference,USPAPNew York, for Pennsylvania,Business 2007. Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas •and hasPersonal performed Goodwill extensive, Richmond, services VA, relating VASCPA to court Business testimony. Valuation Testimony Conference, has also 2007. been • Advanced Topics in Business Valuation, American Society of Appraisers, Bethesda, MD, •providedExpert in arbitration Witness -cases A Primer before, Orlando, the National FL, FICPA Association FABExpo, of 2007.Securities Dealers and the American2010. Stock Exchange, as well as other forms of arbitration. • Personal Goodwill: Does the Non-Propertied Spouse Really Lose the Battle? Ft. • AICPA National Business Valuation Conference, American Institute of CPAs, San Court Appearances.Lauderdale, FL,Has Florida appeared Bar Family in the Law following Section, courts: 2007. Florida • Palm Beach, Polk, Lee, Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, • Do’s and Don’t’s of Expert Testimony, Ft. Lauderdale, FL, FICPA Valuation, Accounting Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union. Newand Litigation York • Bronx Services• Westchester. Conference, Connecticut 2007. • Fairfield, Milford/Ansonia, Middlesex. Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. • Valuing Small Businesses for Divorce, Austin, TX, AICPA National Business Valuation Indiana • Marion. California • San Jose. Michigan • Ottawa. • Conference,Introduction 2006.to Business Valuation, American Society of Appraisers, Minneapolis, MN, Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, • Ask the Experts, Austin, TX, AICPA National Business Valuation Conference, 2006. Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. •by numerousChanges judges, to the as 2006 well USPAPas Orange, Overland County, Park, Florida KS, and Kansas Cass Valuation County, Minnesota.Conference, 2006. Author •Mutual TaxExpert. EffectingRegularly S Corporations serves as a andmutually-agreed Other Flow uponThrough expert. Entities, Overland Park, KS, • KansasAuthor ofSociety “Trugman of CPAs Valuation Valuation Associates, Conference, Inc. (TVA) 2006. Restricted Stock Study,” Business Valuation Review (Fall 2009). •ProfessionalValuation Designations Discounts, Minneapolis, MN, MN Society of CPAs Valuation Conference, 2006. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • Malpractice CPA: Licensed and in Business Florida ( 1996Valuation), New, Minneapolis, Jersey (1978 MN,) and MN New Society York (of1977 CPAs). Valuation Times?,” Business Valuation Update (August 2009). Conference, 2006. -- - 107 8594 - -- Appendix 4
GARY R. TRUGMAN,WILLIAM C.P.A./A.B HARRIS.V., M.C.B.A., A.S.A., M.V.S. GARY R. TRUGMAN,PROFESSIONALPROFESSIONAL C.P.A./A.B QUALIFICATIONSQUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS
LecturerExperience Experience •ValuationMock Analyst Trial - atBeing Trugman an Expert Valuation Witness Associates,, Woodbridge, Inc. NJ,specializing NJ Divorce in businessConference, valuation. 2006. PresidentExperience of includesTrugman a Valuationvariety of assignmentsAssociates, Inc.,including a firm closely-held specializing businesses, in business professional valuation, •economicpracticesExpert damagesand Reports thinly and Usedtraded litigation in Divorcepublic support companies., Las services. Vegas, AICPABusinessIndustries Divorce valuation include, Conference, experience health 2006.care, includes retail, a widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly •traded publicAsk the companies. Expert, Ft. Lauderdale,Industries include FL, FICPA but ar Valuation,e not limited Accounting to security, and automotive, Litigation Services funeral Conference, 2006. homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not manufacturing, trucking, service, and professional business establishments.2 Assignments have •limited Valuingto business the damages,Very Small estate Company and gift, Las tax Vegas,matters, NV, and Valuation family law, matters.American Institute of also includedCertified the Public valuation Accountants of stock optionsand American and various Society types of Appraisers, of intangible 2005. assets.
•BusinessEducationBeing valuation, an Effective economic Witness damages, Las andVegas, litigation NV, Valuation support services2, American have Institute been rendered of Certified for a varietyPublic of purposes Accountants including, and Americanbut not limited Society to family of Appraisers, law matters, 2005. business damages, lender liability• litigation, M.S., Finance, buy-sell Chapman agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying •and sellingDivorce2007. businesses, Valuation malpracticeversus Other litigation, Valuations wrongful, Richmond, death, VA, sexual Virginia discrimination, Society of CPA’s age discrimination,Conference, wrongful 2005. termination, workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. at Charlotte, 2006. •RepresentationHot Topics in litigationin Business includes Valuation plaintiff,, Cleveland, defendant, OH, mutual, SSG, 2005. and court-appointed neutral. Appraisal Education •Court Testimony.Valuing Small Has Businesses been qualified and Professionalas an expert Practices witness .in Atlanta, State CourtsGA, George of Florida, Society New of CPAs’ Super Conference, 2005. Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court •in Newark,PersonalFL, New 2010. Jersey Goodwill and in Hammond, a Divorce Setting.Indiana, Ft. as Lauderdale,well as in Bankruptcy FL, Florida Court Institute in Dallas, of Certified Texas and hasPublic performed Accountants’ extensive Valuation services & relatingLitigation to Services court testimony. Conference, Testimony 2005. has also been provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the •AmericanThe2010. Stock Market Exchange, Approach as: Case well as Study. other Orlando, forms of FL, arbitration. American Institute of CPAs, 2004.
•Court• Appearances.ValuingAICPA ProfessionalNationalHas Business appeared Practices Valuation in, Orlando,the following Conference FL, American courts:, American Florida Institute • Palm Instituteof CPAs, Beach, of 2004. CPAs, Polk, Lee,San Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, • How to Develop Discount Rates. Ft. Lauderdale, FL, Florida Institute of CPAs Valuation Burlington, Passaic, Mercer, Middlesex, Monmouth, Essex, Hunterdon, Warren, Hudson, and • andThe Litigation Market Approach Conference,, American 2004; Detroit,Society Michigan, of Appraisers, MI Valuation Skokie, ILConference, 2009. 2004. Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. •Pennsylvania• ToThe Tax Income •or Montgomery, Not Approach to Tax - ,That Lehigh,American is the Philadelphia, Question:Society of TaxAppraisers, Chester. Effecting Orlando,Massachusetts S Corporations, FL 2009. • Chicago,Middlesex. IL, IndianaIllinois • Marion. Business California Valuation • San Conference,Jose. Michigan 2004. • Ottawa. • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, •Court Appointments.Controversial2008. Topics.Has been Richmond, court appointed VA, VA inValuation New Jersey’s and Litigation Morris, Sussex, Conference, Essex, 2004. Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. •by numerousGuideline judges, Company as well Methods:as Orange Levels County, of Florida Value andIssues, Cass Telephone County, Minnesota. Panel, Business Valuation Resources, 2004. MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. • Small Business Case Study. Phoenix, AZ, American Institute of Certified Public • Author of “Trugman Valuation Associates, Inc. (TVA) Restricted Stock Study,” Business Accountants National Business Valuation Conference, 2003; Ft. Lauderdale, FL, Florida Valuation Review (Fall 2009). ProfessionalInstitute Designationsof CPAs, 2004. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • Valuation CPA: Licensed Issues in - Florida What You(1996 Need), New to JerseyKnow. ( 1978San )Antonio, and New TX, York AICPA (1977 National). Auto Times?,” Business Valuation Update (August 2009). Dealer Conference, 2003. -- - 107 8595 - -- Appendix 4 WILLIAM HARRIS GARYGARY R. R. TRUGMAN, TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A.,A.S.A., M.V.S.M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience LecturerExperience Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. • Professional Practice Valuations. Tampa, FL, The Florida Bar - Family Law Section, 2003. PresidentExperience of includesTrugman a Valuationvariety of assignmentsAssociates, Inc.,including a firm closely-held specializing businesses, in business professional valuation, •economicpracticesBusiness damagesand thinlyValuation and traded litigation Basics. public support Orlando, companies. services. FL, The Business FloridaIndustries Bar valuation include,Annual experienceMeeting, health 2003.care, includes retail, a widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly •traded publicBusiness companies. Valuation Industries for Divorce. include Orlando, but ar FL,e not The limited Florida to Bar security, Annual automotive, Meeting, 2003. funeral homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not • Business Valuation in a Litigation Setting. Las Vegas, NV, CPAmerica International, 2003. manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have •also includedThe Transaction the valuation Approach of stock - Howoptions Do Weand Reallyvarious Use types It? ofTampa, intangible FL, American assets. Society of Appraisers International Conference, 2003. BusinessEducation valuation, economic damages and litigation support services have been rendered for •a varietyAdvanced of purposes Testimony including, Techniques but not limited. Chicago, to family IL, lawIllinois matters, Business business Valuation damages, Conference, lender • M.S., Finance, Chapman Graduate School of Business at Florida International University, liability 2003.litigation, buy-sell agreements, shareholder litigation, estate and gift tax matters, buying and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age •discrimination,To Tax orwrongful Not to Tax? termination, Issues Relatingworkers’ tocompensation S Corps and Built-Inand breach Gains of Taxes.contract. Washington, Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigationDC, services Internal include Revenue reasonable Service, compensation 2003. analysis for tax and non-tax assignments. at Charlotte, 2006. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. • Issues for CPAs in Business Valuation Reports. New Orleans, LA, American Institute of Appraisal Education Court Testimony.Certified Public Has Accountants, been qualified 2002. as an expert witness in State Courts of Florida, New Jersey, New York, Pennsylvania, California, Connecticut, Michigan and Federal District Court •• GuidelineUSPAP for Public Business Company Valuation Method: - American Minority Society Versus of Control Appraisers, – Dueling South Experts. Beach Miami, New in Newark, New Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas Orleans,FL, 2010. LA, American Institute of Certified Public Accountants, 2002. and has performed extensive services relating to court testimony. Testimony has also been •provided• ToAdvanced in Tax arbitration or Not Topics To cases Tax?in Business before- That ValuationIsthe The National Question., American Association Minneapolis, Society of of Securities Appraisers, MN, Minnesota Dealers Bethesda, Society and MD,the of AmericanCertified2010. Stock PublicExchange, Accountants, as well as 2002. other forms of arbitration.
•Court• Appearances.PressingAICPA National ProblemsHas Business appearedand Savvy Valuation in Solutions the following Conference When courts: Retained, American Florida by the • Non-PropertiedPalmInstitute Beach, of CPAs, Polk, Spouse. Lee,San Broward,LasFrancisco, Miami-Dade, Vegas, NV,CA, American2009.Leon and Institute Escambia. of Certified New Jersey Public • Accountants/American Morris, Atlantic, Sussex, Academy Bergen, of Burlington,• MatrimonialThe Passaic, Market Lawyers,Approach Mercer, 2002.Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. •Pennsylvania• TheThe Transaction Income • Montgomery, Approach Method , Lehigh, American- IBA Database. Philadelphia, Society Atlanta, of Appraisers, Chester. GA, Financial Orlando,Massachusetts Consulting FL 2009. Group,• Middlesex. 2002. Indiana • Marion. California • San Jose. Michigan • Ottawa. •• ValuationIntroduction Landmines to Business - How Valuation Not To, American Get In Trouble. Society ofWashington, Appraisers, DC,Minneapolis, 2002 Annual MN, Court Appointments.Business2008. Valuation Has been Conference, court appointed The Institute in New of Jersey’sBusiness Morris, Appraisers, Sussex, 2002. Essex, Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties •• GuestCFA Candidate Lecturer on, Passed Business Levels Valuation. 1, 2 and New3 of the York, Chartered NY, Fordham Financial Law Analyst School, Curriculum. 2002. by numerous judges, as well as Orange County, Florida and Cass County, Minnesota. • Guideline Company Analysis. Chicago, IL, Illinois CPA Foundation, 2002. MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. •• GuidelineAuthor of “TrugmanCompany ValuationAnalysis. Associates, Las Vegas, Inc. NV, (TVA) American Restricted Institute Stock of Study Certified,” Business Public Accountants,Valuation Review 2001. (Fall 2009). Professional Designations ••Discount Co-Author and of Capitalization “How Should Rates You .Value Bloomington, Closely HeldMN, MinnesotaBusinesses Society During of These CPAs, Crazy2001. • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). • ValuationTimes?,” PremiumsBusiness Valuation and Discounts Update. Louisville, (August 2009). KY, Kentucky Tax Institute, 2001. -- - 107 8596 - -- Appendix 4 WILLIAM HARRIS GARYGARY R. R. TRUGMAN, TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A.,A.S.A., M.V.S.M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience LecturerExperience Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. •PresidentExperienceBusiness of includesTrugman Valuation. a Valuationvariety St. of Louis, assignmentsAssociates, MO, Edward Inc.,including Jones,a firm closely-held 2001.specializing businesses, in business professional valuation, economic damages and litigation support services. Business valuation experience includes a •practicesBusiness and thinlyValuation traded for Maritalpublic Dissolutions.companies. Dublin, Industries OH, Ohioinclude, Supreme health Court, care, 2001. retail, widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly •traded publicTestimony companies. Techniques. Industries Chicago, include IL, Illinoisbut are CPA not limitedSociety, to 2001.security, automotive, funeral homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not •manufacturing,limited Valuingto business trucking,the Verydamages, Smallservice, estateBusiness. and professiand giftChicago, onaltax matters, business IL, Illinois and establishments. CPA family Society, law matters. 2001. Assignments have also included the valuation of stock options and various types of intangible assets. • Valuations in Divorce. Ft. Lauderdale, FL, Florida Institute of Certified Public Accountants, BusinessEducation2001. valuation, economic damages and litigation support services have been rendered for a variety of purposes including, but not limited to family law matters, business damages, lender • Valuation Land Mines To Watch Out For. Miami, FL, American Institute of Certified Public liability• litigation, M.S., Finance, buy-sell Chapman agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying Accountants, 2000. and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age •discrimination,Ask the wrongfulExperts - termination,Discounts and workers’ Premia compensation. Miami, FL, American and breach Institute of contract. of Certified Additional Public • B.S., Business Administration, Belk College of Business at the University of North Carolina litigationAccountants, services include 2000. reasonable compensation analysis for tax and non-tax assignments. at Charlotte, 2006. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. •AppraisalUnderstanding Education a Financial Report. Columbia, SC, South Carolina Bar Association, 2000. Court Testimony. Has been qualified as an expert witness in State Courts of Florida, New • Business Damages. Columbia, SC, South Carolina Bar Association, 2000. Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court •in Newark,AFL, Fresh New 2010. JerseyLook atand Revenue Hammond, Rulings Indiana, 59-60 as welland as 68-609. in Bankruptcy New Orleans,Court in Dallas,LA, Practice Texas and hasValuation performed Study extensive Group, services 2000. relating to court testimony. Testimony has also been provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the •AmericanBusiness2010. Stock Exchange,Valuation: What’sas well Itas Really other Allforms About? of arbitration. New York, NY, New York State Society of Certified Public Accountants, 1999. Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San •Broward,UnderstandingFrancisco, Miami-Dade, CA, and2009.Leon Increasing and Escambia. the Value New of Jersey Your Business • Morris,. Atlantic,Phoenix, Sussex,AZ, Inc. Bergen,Growth Conference, 1999. Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. • Equitable Distribution of Closely-Held Businesses – Fair Market Value or Fair Value? Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Atlantic City, NJ, Association of Trial Lawyers of America -- New Jersey, 1999. Indiana • Marion. California • San Jose. Michigan • Ottawa. • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, • Controversial Topics In Business Valuation. Orlando, FL, The Institute of Business Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, Appraisers, Inc., 1999; Ft. Lauderdale, FL, Florida Institute of Certified Public Accountants, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • 1999,CFA Candidate 2003. , Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by numerous judges, as well as Orange County, Florida and Cass County, Minnesota. • Discount and Capitalization Rates. San Antonio, TX, The Institute of Business Appraise, MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. Inc., 1998; Asheville, NC, North Carolina Association of Certified Public Accountants, • 1998;Author Ohio, of “Trugman Ohio Society Valuation of Certified Associates, Public Inc. Accountants, (TVA) Restricted 1998. Stock Study,” Business Valuation Review (Fall 2009). •ProfessionalDeveloping Designations a Niche in Business Valuation. Las Vegas, NV, American Institute of Certified • Co-Author of “How Should You Value Closely Held Businesses During These Crazy •Public CPA: LicensedAccountants, in Florida 1998. (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). -- - 107 8597 - -- Appendix 4 WILLIAM HARRIS GARYGARY R. R. TRUGMAN, TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A.,A.S.A., M.V.S.M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience LecturerExperience •ValuationDigesting Analyst Business at Trugman Valuation Valuation for Legal Associates, Transactions Inc. specializing. New Brunswick, in business NJ, Institutevaluation. of President of Trugman Valuation Associates, Inc., a firm specializing in business valuation, ExperienceContinuing includes Legal a variety Education, of assignments 1997. including closely-held businesses, professional economicpractices damagesand thinly and traded litigation public support companies. services. BusinessIndustries valuation include, experience health care, includes retail, a •widemanufacturing, varietyThe ofMarket assignments distributors, Approach includingand toservice. Business closely-held Valuati businesses,on. Baltimore, professional MD, practices CPA Associates and thinly traded publicInternational, companies. 1997. Industries include but are not limited to security, automotive, funeral homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not •manufacturing,limited Valuingto business Accountingtrucking, damages, service, Practices estate and forprofessiand Sale gift oronaltax Merger. matters, business New and establishments. Orleans, family law LA, matters. American Assignments Institute have of also includedCertified the Public valuation Accountants of stock optionsPractitioners and various Symposium, types of1997. intangible assets.
•BusinessEducationThe valuation, Value of economic a Deal. New damages York, NY,and Practicinglitigation support Law Institute, services 1997. have been rendered for a variety of purposes including, but not limited to family law matters, business damages, lender • Revenue Ruling 59-60 Revisited . San Diego, CA, The Institute of Business Appraisers, liability• litigation, M.S., Finance, buy-sell Chapman agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying Inc., 1997. and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional ••Capitalization B.S., Business Rates.Administration, Greensboro, Belk College NC, National of Business Association at the University of Certified of North Valuation Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. Analysts,at Charlotte, 1996. 2006. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. •AppraisalValuation Education Discounts and Premiums. Greensboro, NC, National Association of Certified Court Testimony.Valuation Analysts, Has been 1996; qualified New asYork, an NY,expert New witness York Statein State Society Courts of ofCertified Florida, Public New Jersey,• Accountants,USPAPNew York, for Pennsylvania,Business 1999; San Valuation Francisco, California, - American CA, Connecticut, Accounting Society Michigan Firmsof Appraisers, Associated, and Federal South Inc., BeachDistrict 1999. Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas •and hasEquitable performed Distribution extensive Value services of Small relating Closel toy-Held court Businesses testimony. and Testimony Professional has alsoPractices. been provided• Greensboro,Advanced in arbitration Topics NC, cases North in Business before Carolina Valuationthe Association National, American Association of Certified Society ofPublic of Securities Appraisers, Accountants, Dealers Bethesda, 1996. and MD,the 2010. •AmericanDoes Stock the Exchange, Market Transaction as well as Methodother forms Really of arbitration.Work? Phoenix, AZ, National Business Court• Appearances.ValuationAICPA National Conference,Has Business appeared American Valuation in the Institute following Conference of Certified courts:, American PublicFlorida Accountants, • PalmInstitute Beach, of 1996. CPAs, Polk, Lee,San Francisco, CA, 2009. •Broward,Valuation Miami-Dade, Issues Leon Affecting and TransfersEscambia. of New Family Jersey Businesses. • Morris, Princeton,Atlantic, Sussex, NJ, New Bergen, Jersey Burlington,• SocietyThe Passaic, Market of Certified Approach Mercer, Public Middlesex,, American Accountants Monmouth,Society Financial of Appraisers, Essex, Planning Hunterdon, Skokie, Conference ILWarren, 2009., 1996. Hudson, and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. •Pennsylvania• Crossfire:The Income • Montgomery, Why Approach You Should , Lehigh,American Not Philadelphia,Use Society the Excessof Appraisers, Chester. Earnings Orlando,Massachusetts Method. FL New2009. •Orleans, Middlesex. LA, IndianaAmerican • Marion. InstituteCalifornia of •Certified San Jose. Public Michigan Accountants • Ottawa. Business Valuation Conference, 1995. • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, •Court Appointments.Practice2008. Aid 93-3, Has beenWhat courtDid Weappointed Do? Tampa, in New Jersey’sFL, Florida Morris, Institute Sussex, of Certified Essex, Union,Public Hunterdon,Accountants, Somerset, 1995. Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by numerous judges, as well as Orange County, Florida and Cass County, Minnesota. • Revenue Ruling 59-60: What Does It Really Say? East Brunswick, NJ, New Jersey MutualAuthor SocietyExpert. ofRegularly Certified serves Public asAccountants, a mutually-agreed 1995. upon expert. •• PreparingAuthor of “Trugmanand Defending Valuation a Business Associates, Valuation Inc. (TVA) Report Restricted in Litigation. Stock Holmdel, Study,” BusinessNJ, New Valuation Review (Fall 2009). ProfessionalJersey Society Designations of Certified Public Accountants, 1995. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). -- - 107 8598 - -- Appendix 4 WILLIAM HARRIS GARYGARY R. R. TRUGMAN, TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A.,A.S.A., M.V.S.M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience LecturerExperience Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. •PresidentExperienceUsing of includes Trugmanthe Market a Valuationvariety Approach of assignmentsAssociates, to Value Small Inc.,including and a firmMedium closely-held specializing Sized businesses,Businesses. in business professional San valuation, Diego, economicpracticesCA; damages andOrlando, thinly andFL, traded Americanlitigation public support Institute companies. services. of Certified BusinessIndustries Public Accountants, valuation include, experience Institutehealth care, of includes Business retail, a widemanufacturing, varietyAppraisers, of assignments distributors, Inc., Joint includingand Conference, service. closely-held 1995 - 1996.businesses, professional practices and thinly traded public companies. Industries include but are not limited to security, automotive, funeral • CPA’s Role in Divorce Litigation. Holmdel, NJ, New Jersey Society of Certified Public homes, health care, securities brokerage and financial institutions, retail, restaurants, BusinessAccountants, valuation services1995. have been rendered for a variety of purposes including, but not manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have •also includedBusiness the Valuation valuation andof stock Litigation. options Reno and and various Las Vegas,types of NV, intangible Nevada assets. Society of Certified Public Accountants, 1994. BusinessEducation valuation, economic damages and litigation support services have been rendered for •a varietyBusiness of purposes Valuation including, with anbut Emphasis not limited on to Employee family law Stock matters, Ownership business Plans, damages, Mergers lender and liability• Acquisitions,litigation, M.S., Finance, buy-sell and Chapman agreements,Initial Public Graduate shareholderOfferings. School ofPhoenix, litigation, Business AZ, estate at FloridaNational and Internationalgift Industry tax matters, Conference, University, buying and sellingAmerican2007. businesses, Institute ofmalpractice Certified Public litigation, Accountants, wrongful 1994.death, sexual discrimination, age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina •litigationBusiness services Valuation-There's include reasonable a Rightcompensation Way and analysisa Wrong for Way tax to and Do non-taxIt. Dallas, assignments. TX, Dallas at Charlotte, 2006. RepresentationEstate Planning in litigation Council, includes 1993, plaintiff, Chattanooga, defendant, TN, mutual,Chattanooga and court-appointed Estate Planning neutral. Council, Appraisal1998. Education Court Testimony. Has been qualified as an expert witness in State Courts of Florida, New •Jersey,• TheUSPAPNew CPA's York, for Role Pennsylvania,Business in Divorce Valuation Litigation.California, - American Louisville,Connecticut, Society KY, Michigan Kentuckyof Appraisers, and Society Federal South of Certified BeachDistrict Miami, PublicCourt in Newark,Accountants,FL, New 2010. Jersey 1993. and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas and has performed extensive services relating to court testimony. Testimony has also been •• ValuationAdvanced of Topics Accounting in Business and Other Valuation Professional, American Practices. Society ofWest Appraisers, Orange, Bethesda, NJ, Small MD,and providedMedium in arbitration Firm Conference, cases before NJ Societythe National of Certified Association Public ofAccountants, Securities 1993.Dealers and the American2010. Stock Exchange, as well as other forms of arbitration. • Information Gathering Strategies for Business Appraisal. San Diego, CA, National Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San ConferenceFrancisco, CA,on Appraising 2009. Closely-Held Businesses, The Institute of Business Appraisers, Broward,Inc., Miami-Dade, 1993. Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and •Union. NewCapitalization York • Bronx Rates• .Westchester. Edison, NJ, Matrimonial Connecticut Conference, • Fairfield, NJMilford/Ansonia, Society of Certified Middlesex. Public Pennsylvania• Accountants,The Income • Montgomery, Approach1993. , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. •• MeasureIntroduction of Value to Business in Theory Valuation and Reality, American for Marital Society Dissolutions. of Appraisers, Orlando, Minneapolis, FL, National MN, Court Appointments.Conference2008. on Has Appraising been court Closely-Held appointed Businesses, in New Jersey’s The Institute Morris, of Sussex, Business Essex, Appraisers, Union, Hunterdon,Inc., Somerset,1992. Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by numerous judges, as well as Orange County, Florida and Cass County, Minnesota. • Equitable Distribution Value of Closely-Held Companies and Professional Practices. San MutualAuthor Diego,Expert. CA,Regularly National serves Conference as a mutually-agreed on Appraising Closely-Held upon expert. Businesses, The Institute of • BusinessAuthor of Appraisers,“Trugman Valuation Inc., 1991. Associates, Inc. (TVA) Restricted Stock Study,” Business Valuation Review (Fall 2009). •ProfessionalTax Aspects Designations of Divorce. NJ, Institute of Continuing Legal Education, 1989-1990, 1992. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). -- - 107 8599 - -- Appendix 4 WILLIAM HARRIS GARYGARY R. R. TRUGMAN, TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A.,A.S.A., M.V.S.M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience LecturerExperience Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. •PresidentExperienceAppraising of includesTrugman Closely-Held a Valuationvariety of assignmentsBusinesses:Associates, Inc.,including Expert a firm closely-heldTestimony. specializing businesses, Orlando,in business FL, professional valuation,National economicpracticesConference damagesand thinly on and Appraisingtraded litigation public Closely-Held support companies. services. Businesses, BusinessIndustries The valuation Institute include, of experience Businesshealth care, Appraisers, includes retail, a widemanufacturing, varietyInc., 1990.of assignments distributors, includingand service. closely-held businesses, professional practices and thinly traded public companies. Industries include but are not limited to security, automotive, funeral • Business Valuation for Accountants. NJ, The Institute of Business Appraisers, Inc., 1988, homes, health care, securities brokerage and financial institutions, retail, restaurants, Business1989, valuation 1990. services have been rendered for a variety of purposes including, but not manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have •also includedUsing theForecasts valuation and of Projections stock options in Businessand various Valuation types of. Orlando,intangible FL, assets. Valuation Study Group, 1989. BusinessEducation valuation, economic damages and litigation support services have been rendered for •a varietyWhat of purposes You Need including, to Know butAbout not Valuation limited to and family Litigation law matters, Support business Services damages,. East Hanover, lender liability• NJ,litigation, M.S., CPA Finance, Club,buy-sell Chapman1989. agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age •discrimination,Valuing wrongfulProfessional termination, Practices. workers’ San compensationDiego, CA, National and breach Conference of contract. on Appraising Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigationClosely-Held services include Businesses, reasonable The compensationInstitute of Business analysis Appraisers, for tax and Inc., non-tax 1989. assignments. at Charlotte, 2006. •RepresentationWhat is Yourin litigation Business includes Worth? plaintiff,Wayne, defendant, NJ, Dean mutual, Witter Reynolds,and court-appointed 1988. neutral. Appraisal Education •Court Testimony.Understanding Has Business been qualified Valuation as anfor expertthe Practice witness of Law.in State NJ, Courts Institute of ofFlorida, Continuing New Jersey,• LegalUSPAPNew York,Education, for Pennsylvania,Business 1987. Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas and has performed extensive services relating to court testimony. Testimony has also been provided•InstructorAdvanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the American2010. Stock Exchange, as well as other forms of arbitration. • Advanced Topics in Business Valuation. American Society of Appraisers, Bethesda, MD, Court• Appearances.AICPA2010. NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, • Principles of Business Valuation - Part 1. American Society of Appraisers, Atlanta, GA, Burlington, Passaic, Mercer, Middlesex, Monmouth, Essex, Hunterdon, Warren, Hudson, and • The2009; Market Las Vegas, Approach NV,, 2010,American Annapolis, Society MD, of Appraisers, 2010. Skokie, IL 2009. Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. Pennsylvania•• TheEssentials Income • Montgomery, of Approach Business , Lehigh,AppraisalAmerican Philadelphia,. SocietyThe Institute of Appraisers, Chester. of Business Orlando,Massachusetts Appraisers, FL 2009. Ft. • Lauderdale,Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. • IntroductionFL, 2008. to Business Valuation, American Society of Appraisers, Minneapolis, MN, Court• Appointments.2008.Business Valuation Has been Basics court. New appointed Jersey inJudicial New Jersey’s Conference, Morris, Teaneck, Sussex, NJ, Essex, 2007. Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by• numerousStandards judges, and as Ethics: well as An Orange Appraiser’s County, Obligation Florida .and The Cass Institute County, of Business Minnesota. Appraisers, Denver, CO, 2007. MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. •• AuthorPrinciples of “Trugman of Valuation Valuation - Part Associates, 2. American Inc. Society (TVA) Restrictedof Appraisers, Stock Austin, Study ,”TX,Business 2005; Chicago, IL, 2006; Brooklyn, NY, 2006; Herndon, VA 2007; Chicago, IL, 2007, 2008; Valuation Review (Fall 2009). ProfessionalDeloitte Designations & Touche, NY, 2007; Arlington, VA, 2008; Houston, TX, 2009. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). --- 10010785 - -- Appendix 4 WILLIAM HARRIS GARY R. TRUGMAN,PROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience ExperienceInstructor Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. •PresidentExperienceSmall of includes TrugmanBusiness a Valuation:Valuationvariety of assignmentsAAssociates, Real Life Case Inc.,including Studya firm closely-held. Americanspecializing Institute businesses, in business of Certified professional valuation, Public economicpracticesAccountants, damagesand thinly and Rockytraded litigation Hill, public supportCT, companies.2005; services. Richmond, BusinessIndustries VA, valuation 2005;include, Columbia, experience health care,MD, includes 2005,retail, a widemanufacturing, varietyProvidence, of assignments distributors, RI, 2007. includingand service. closely-held businesses, professional practices and thinly traded public companies. Industries include but are not limited to security, automotive, funeral • Valuation Discount and Capitalization Rates, Valuations Premiums and Discounts. homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not Rhode Island Society of CPAs, Providence, RI, 2004. manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have •also includedMergers the and valuation Acquisitions of stock. Rhode options Island and Societyvarious typesof CPAs, of intangible Providence, assets. RI, 2004.
•BusinessEducationValuing valuation, a Small economic Business: damages Case Studyand litigation. Rhode support Island Societyservices of have CPAs, been Providence, rendered RI,for a variety2004. of purposes including, but not limited to family law matters, business damages, lender liability• litigation, M.S., Finance, buy-sell Chapman agreements, Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying •and sellingDiscounts2007. businesses, & Premiums malpractice in a Business litigation, Valuation wrongful Environment.death, sexual American discrimination, Institute age of discrimination,Certified wrongful Public Accountants, termination, workers’Roseland, compensation NJ; 2004, Rocky and breach Hill, CT, of 2005.contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. • Advancedat Charlotte, Cost 2006. of Capital Computations. American Society of Certified Public Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. Accountants, Rhode Island, NJ 2004. Appraisal Education Court Testimony. Has been qualified as an expert witness in State Courts of Florida, New • Fundamentals of Business Valuation - Part 2. American Institute of Certified Public Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court Accountants, Atlanta, GA, 2004. in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas •and hasSplitting performed Up isextensive Hard to Do:services Advanced relating Valuation to court Issuestestimony. in Divorce Testimony and Other has also Litigation been • Advanced Topics in Business Valuation, American Society of Appraisers, Bethesda, MD, providedDisputes. in arbitration American cases Institute before ofthe Certified National Public Association Accountants, of Securities Providence, Dealers RI, 2002.and the American2010. Stock Exchange, as well as other forms of arbitration. • Fundamentals of Business Valuation - Part 1. American Institute of Certified Public • AICPA National Business Valuation Conference, American Institute of CPAs, San Court Appearances.Accountants, Dallas,Has appeared TX, 2001. in the following courts: Florida • Palm Beach, Polk, Lee, Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, • Advanced Topics. The Institute of Business Appraisers, Orlando, FL, 2001. Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. • Business Valuation. Federal Judicial Center, Washington, DC, 2001. Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. •IndianaBusiness • Marion. Issues:California Business • San Jose. Valuation-State Michigan • Ottawa. Issues; Marital Dissolution; Shareholder • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, Issues and Economic Damages. National Judicial College, Charleston, SC, 2000. Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties •• BusinessCFA Candidate Valuation, Passed for Marital Levels Dissolutions 1, 2 and 3 of. National the Chartered Judicial Financial College, AnalystSan Francisco, Curriculum. CA, by numerous2000. judges, as well as Orange County, Florida and Cass County, Minnesota. Author •Mutual BusinessExpert. Regularly Valuation serves Workshop. as a mutually-agreed2000 Spring Industry upon Conference,expert. American Institute of • CertifiedAuthor of Public “Trugman Accountants, Valuation Seattle, Associates, WA, Inc.2000. (TVA) Restricted Stock Study,” Business Valuation Review (Fall 2009). •ProfessionalDeveloping Designations Discount & Capitalization Rates. The Institute of Business Appraisers, •Phoenix, Co-Author AZ, of 2000.“How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). --- 10110785 - -- Appendix 4 WILLIAM HARRIS GARY R. TRUGMAN,PROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience InstructorExperience Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. •PresidentExperienceMergers of includesTrugman & Acquisitions a Valuationvariety .of National assignmentsAssociates, Association Inc.,including a offirm Certifiedclosely-held specializing Valuation businesses, in business Analysts, professional valuation, Nevada, economicpractices1998; damagesand Ohio, thinly 1998.and traded litigation public support companies. services. BusinessIndustries valuation include, experience health care, includes retail, a widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly traded• publicValuation companies. Issues in IndustriesDivorce Settings include. Americanbut are not Institute limited ofto Certifiedsecurity, Publicautomotive, Accountants, funeral New Jersey, 1998. homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not manufacturing,•limited Financialto business trucking, Statements damages, service, inestate theand Courtroomprofessiand gift onaltax (Businessmatters, business and Valuationestablishments. family law Component). matters. Assignments American have also includedInstitute the of valuation Certified ofPublic stock Accountants options and forvarious the National types of Judicial intangible College, assets. Texas, 1997; Florida, 1997, 1998, 2001; Louisiana, 1998, 1999; Nevada, 1999, 2001; South Carolina, BusinessEducation valuation, economic damages and litigation support services have been rendered for a variety2000, of purposes 2006; Georgia, including, 2000; but Arizona,not limited 2001; to family New York,law matters, 2002; Colorado, business 2003; damages, Ohio, lender 2003; liability• litigation,Florida, M.S., Finance, 2003; buy-sell NewChapman agreements, Jersey Graduate 2005, shareholder 2007; School Chicago, of litigation, Business 2008. estate at Florida and Internationalgift tax matters, University, buying 2007. and• sellingPreparing businesses, for AICPA’s malpractice ABV Examination litigation, Review wrongful Course. death, American sexual discrimination,Institute of Certified age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional •Public B.S., Business Accountants, Administration, New York, Belk 1997, College 2000, of 2001; Business Pennsylvania, at the University 1998; of Kansas, North Carolina 1998; litigation services include reasonable compensation analysis for tax and non-tax assignments. Maryland,at Charlotte, 2000, 2006. 2001; Massachusetts, 2000; Virginia, 2002. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. •AppraisalHow toEducation Value Mid-Size and Smaller Businesses/Using Transaction Data to Value Court Testimony.Closely-Held Has Businesses. been qualified Atlanta, as anGA, expert Chicago, witness IL, 1996. in State Courts of Florida, New Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in• Newark,ConductingFL, New 2010. Jersey a Valuationand Hammond, of a Indiana,Closely-Held as well Business. as in Bankruptcy The CourtInstitute in Dallas,of Business Texas and hasAppraisers, performed Inc.,extensive 1996. services relating to court testimony. Testimony has also been provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the • How To Value Mid-Size and Smaller Businesses. The Institute of Business Appraisers, American2010. Stock Exchange, as well as other forms of arbitration. Inc., 1995. Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San • Valuation of Small Businesses and Professional Practices. American Society of Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, Appraisers, 1995. Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union.• NewUniform York Standards • Bronx • of Westchester. Professional AppraisalConnecticut Practice. • Fairfield, American Milford/Ansonia, Society of Appraisers,Middlesex. Pennsylvania• 1995.The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. •• AdvancedIntroduction Topics to Business in Business Valuation Valuation., American New Society Jersey of Appraisers, Society of Minneapolis, Certified Public MN, Court Appointments.Accountants,2008. 1995,Has been 1996, court 1997. appointed in New Jersey’s Morris, Sussex, Essex, Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by• numerousBusiness judges, Valuation as well Theory. as Orange New County, Jersey, Florida 1994, 1995,and Cass 1996, County, 1997, Minnesota.1999, 2000, 2002; Rhode Island, 2004. MutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. •• BusinessAuthor of Valuation“Trugman ApproachesValuation Associates, and Methods. Inc. (TVA) New RestrictedJersey, 1994, Stock 1995, Study 1996,,” Business 1997, 1998,Valuation 1999, Review 2000, (Fall 2002; 2009). North Carolina, 1997, 1999, 2000; Louisiana, 1997, 1998; ProfessionalMassachusetts, Designations 1997, 1998, 1999; Pennsylvania, 1997; New York, 1997, 2000; Indiana, •1997; Co-Author Connecticut, of “How 1997, Should 2000; You Ohio, Value 1998; Closely Rhode Held Island, Businesses 1999, 2003.During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). --- 10210785 - -- Appendix 4 WILLIAM HARRIS GARY R. TRUGMAN,PROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience ExperienceInstructor Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. •PresidentExperienceBusiness of includesTrugman Valuation a Valuationvariety Discount of assignmentsAssociates, Rates, Capitalization Inc.,including a firm closely-held specializing Rates, Valuation businesses, in business Premiums professional valuation, and economicpracticesDiscounts. damagesand thinly New and traded Jersey, litigation public1998, support 2000,companies. services. 2002; North BusinessIndustries Carolina, valuation include, 1997, 1999,experience health 2000; care, Louisiana,includes retail, a widemanufacturing, variety1997; of assignmentsMassachusetts, distributors, includingand 1997,service. closely-held 1998; Rhode businesses, Island, professional1997, 1999; practices Indiana, and 1997;thinly traded publicConnecticut, companies. 1997, Industries2000. include but are not limited to security, automotive, funeral homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not • Business Valuation. Champaign, IL, American Institute of Certified Public Accountants manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have also includedNational the Tax valuation School, of 1994, stock 1995,options 1996. and various types of intangible assets. • Principles of Valuation: Introduction to Business Valuation. American Society of BusinessEducation valuation, economic damages and litigation support services have been rendered for a varietyAppraisers, of purposes 1998, including, 1999, but 2001, not 2002.limited to family law matters, business damages, lender • M.S., Finance, Chapman Graduate School of Business at Florida International University, •liability litigation,Principles buy-sell of Valuation: agreements, Business shareholder Valuation litigation, Methodology. estate and Americangift tax matters, Society buying of 2007. and sellingAppraisers, businesses, 1992, 1993,malpractice 1995, 1996,litigation, 1997, wrongful 1998, 1999, death, 2001. sexual discrimination, age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina •litigationPrinciples services ofinclude Valuation: reasonable Case Study. compensation American analysis Society for of Appraisers,tax and non-tax 1993, assignments. 1999, 2000, at Charlotte, 2006. Representation2001, 2002, in litigation 2003. includes plaintiff, defendant, mutual, and court-appointed neutral. Appraisal Education •Court Testimony.Principles of Has Valuation: been qualified Selected as Advanced an expert Topics.witness Americanin State Courts Society of of Florida, Appraisers, New Jersey,• 1992,USPAPNew York,1994, for Pennsylvania, Business1995, 1996, Valuation 1998, California, 2002.- American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas • Developing Your Business Valuation Skills: An Engagement Approach. NJ Society of and has performed extensive services relating to court testimony. Testimony has also been Certified Public Accountants, 1992, 1993. provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the 2010. •AmericanAdvanced Stock Exchange, Business Valuationas well as Seminar. other forms The of Institute arbitration. of Business Appraisers, Inc., 1991, 1992. Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Francisco, CA, 2009. Broward,• 10 Miami-Dade,Day Workshop Leon on andAppraising Escambia. Closely-Held New Jersey Businesses. • Morris, Atlantic,The Institute Sussex, of Business Bergen, Burlington,• Appraisers,The Passaic, Market Inc.,Approach Mercer, 1991, Middlesex,, 1998.American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. •Pennsylvania• FinancialThe Income • Montgomery,Statement Approach Analysis. , Lehigh,American St. Philadelphia, Charles, Society MO,of Appraisers, Chester.Lindenwood Orlando,Massachusetts College FL Valuation 2009. • Middlesex. Sciences IndianaProgram, • Marion. 1989,California 1990. • San Jose. Michigan • Ottawa. • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, •Court Appointments.Former2008. Adjunct Has Instructor been court of appointedFederal Income in New Taxation Jersey’s andMorris, Intermediate Sussex, Essex, Accounting. Union, Hunterdon,Centenary Somerset, College, Monmouth, Hackettstown, Middlesex, NJ, Passaic,1982-1987. Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by numerous judges, as well as Orange County, Florida and Cass County, Minnesota.
OrganizationsMutualAuthor Expert. Regularly serves as a mutually-agreed upon expert. •• TheAuthor Institute of “Trugman of Business Valuation Appraisers, Associates, Inc. Inc. (TVA) Restricted Stock Study,” Business Valuation Review (Fall 2009). Professional Designations • American Society of Appraisers. • Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). • AmericanTimes?,” BusinessInstitute of Valuation Certified Update Public Accountants.(August 2009). -- 10310785 - - Appendix 4 WILLIAM HARRIS GARYGARY R.R. TRUGMAN,TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A., M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience ExperienceOrganizations Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. • New Jersey Society of Certified Public Accountants. PresidentExperience of includesTrugman a Valuationvariety of assignmentsAssociates, Inc.,including a firm closely-held specializing businesses, in business professional valuation, economic damages and litigation support services. Business valuation experience includes a •practices Florida and Institutethinly tradedof Certified public Public companies. Accountants. Industries include, health care, retail, widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly traded public companies. Industries include but are not limited to security, automotive, funeral homes,AwardsBusiness health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have also• included Presented the valuation with the “Outstandingof stock options Chair and Award” various by types the Florida of intangible Institute assets. of Certified Public Accountants in June 2007 for service to the 2006-2007 Valuation, Forensic Accounting BusinessEducationand valuation, Litigation economic Services damages Section. and litigation support services have been rendered for a variety of purposes including, but not limited to family law matters, business damages, lender liability•• litigation, M.S., Presented Finance, buy-sell with Chapman the agreements, “Hall Graduateof Fame shareholder Award”School ofby litigation, Business the American estate at Florida andInstitute Internationalgift tax of matters,Certified University, buyingPublic and selling2007.Accountants businesses, in December malpractice 1999 litigation,for dedication wrongful towards death, the advancement sexual discrimination, of the business age discrimination,valuation wrongful profession. termination, workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. •at Presented Charlotte, with 2006. the “Fellow Award” by The Institute of Business Appraisers Inc., in RepresentationJanuary in1996 litigation for contributions includes plaintiff, made defendant,to the profession. mutual, and court-appointed neutral. Appraisal Education Court Testimony. Has been qualified as an expert witness in State Courts of Florida, New ProfessionalJersey,• USPAPNew York, Appointments for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas •and hasThe performed Institute extensiveof Business services Appraisers, relating Inc. to Former court testimony.Regional Governor Testimony for thehas Mid-Atlantic also been provided• RegionAdvanced in arbitration consisting Topics cases inof Business Delaware, before Valuationthe Kentucky, National, American Maryland,Association Society New of of Jersey,Securities Appraisers, Pennsylvania, Dealers Bethesda, and Ohio, MD,the AmericanVirginia,2010. Stock andExchange, West Virginia. as well as other forms of arbitration.
•Court• Appearances.TheAICPA American National HasSociety Business appeared of Appraisers Valuation in the followingChapter Conference 73.courts: Treasurer,, American Florida 1996• PalmInstitute - 1997.Beach, of CPAs, Polk, Lee,San Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, Burlington, Passaic, Mercer, Middlesex, Monmouth, Essex, Hunterdon, Warren, Hudson, and Current• The Committee Market Approach Service, American Society of Appraisers, Skokie, IL 2009. Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. Pennsylvania•• AICPAThe Income •ABV Montgomery, ExaminationApproach , Lehigh,American Committee. Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. •• 2010Introduction AICPA toBusiness Business Valuation Valuation Conference, American Committee. Society of Appraisers, Minneapolis, MN, Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, Hunterdon, Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. Pastby numerous Committee judges, Service as well as Orange County, Florida and Cass County, Minnesota.
•MutualAuthor ChairmanExpert. Regularly of Disciplinary serves and as Ethicsa mutually-agreed Committee -The upon Institute expert. of Business Appraisers, Inc. • (committeeAuthor of “Trugman established Valuation 1989). Associates, Inc. (TVA) Restricted Stock Study,” Business Valuation Review (Fall 2009). •Professional Chairman Designations of Valuation, Forensic Accounting and Litigation Services Section - Florida •Institute Co-Author of CPAs.of “How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). • AICPATimes?,” CommitteeBusiness with Valuation the Judiciary. Update (August 2009). -- 10410785 - - Appendix 4 WILLIAM HARRIS GARYGARY R.R. TRUGMAN,TRUGMAN,PROFESSIONAL C.P.A./A.BC.P.A./A.B QUALIFICATIONS.V.,.V., M.C.B.A.,M.C.B.A., A.S.A., M.V.S. PROFESSIONALPROFESSIONAL QUALIFICATIONSQUALIFICATIONS Experience PastExperience Committee Service Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. • AICPA ABV Credential Committee. PresidentExperience of includesTrugman a Valuationvariety of assignmentsAssociates, Inc.,including a firm closely-held specializing businesses, in business professional valuation, economic damages and litigation support services. Business valuation experience includes a •practices AICPA and Management thinly traded Consulting public companies. Services Division Industries - Executive include, Committee. health care, retail, widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly •traded public Chairman companies. of the Valuation Industries Standards include but Subcommittee are not limited - toNJ security, Society automotive, of Certified funeral Public homes,BusinessAccountants health valuation care, servicesLitigation securities have Services brokeragebeen Committee. rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have •also included Matrimonial the valuation Subcommittee of stock - NJoptions Society and of variousCertified types Public of Accountants intangible assets. Litigation Services Committee. BusinessEducation valuation, economic damages and litigation support services have been rendered for •a variety Co-Chair of purposes of Courses including, and but Seminars not limited for toCertified family lawPublic matters, Accountants business Subcommittee damages, lender - NJ liability• litigation,Society M.S., Finance, of buy-sell Certified Chapman agreements, Public Graduate Accountants. shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying 2007. •and selling Education businesses, Committee malpractice - The Institute litigation, of Business wrongful Appraisers, death, sexual Inc. discrimination, age discrimination, wrongful termination, workers’ compensation and breach of contract. Additional • B.S., Business Administration, Belk College of Business at the University of North Carolina •litigation Chairman services includeof Education reasonable Committee compensation - North analysisJersey forChapter tax and of non-taxAmerican assignments. Society of at Charlotte, 2006. RepresentationAppraisers. in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. Appraisal Education •Court Testimony. AICPA Subcommittee Has been onqualified Business as anValuation expert &witness Appraisal. in State Courts of Florida, New Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court • International Board of Examiners - American Society of Appraisers. in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas •and has Qualifications performed extensive Review Committee services relating - The Institute to court of testimony. Business Appraisers,Testimony hasInc. also been provided• Advanced in arbitration Topics cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the American2010. Stock Exchange, as well as other forms of arbitration. Editor Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Broward,• EditorialFrancisco, Miami-Dade, Advisors CA, 2009.Leon for Businessand Escambia. Valuation New Update, Jersey Business • Morris, ValuationAtlantic, Sussex,Resources, Bergen, LLC Burlington, Passaic, Mercer, Middlesex, Monmouth, Essex, Hunterdon, Warren, Hudson, and •• EditorialThe Market Advisor Approach for Financial, American Valuation Society and of Appraisers, Litigation Expert Skokie,, Valuation IL 2009. Products and Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. Services. Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. Indiana• Former• Marion. Editorial California Advisor • San Jose.for CPA Michigan Expert • Ottawa., American Institute of Certified Public • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, Accountants. Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, Hunterdon,• Editorial Somerset, Advisor Monmouth, for The Journal Middlesex, of Accountancy Passaic, Warren,, American Bergen, Institute and of Hudson Certified counties Public • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. by numerousAccountants. judges, as well as Orange County, Florida and Cass County, Minnesota. Author Mutual• Expert. Former EditorialRegularly Advisor serves of as BV a mutually-agreedQ&A, Business Valuationupon expert. Resources. • Author of “Trugman Valuation Associates, Inc. (TVA) Restricted Stock Study,” Business • Former Editorial Board of CPA Litigation Service Counselor, Harcourt Brace, San Diego, Valuation Review (Fall 2009). ProfessionalCA. Designations • Co-Author of “How Should You Value Closely Held Businesses During These Crazy •• CPA Former: Licensed Editorial in Board Florida of (Business1996), New Valuation Jersey Review(1978) and, American New York Society (1977 of). Appraisers, Times?,” Business Valuation Update (August 2009). Herndon, VA. --- 10510785 - -- Appendix 4 WILLIAM HARRIS GARY R. TRUGMAN,PROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience ExperienceAuthor Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. President•ExperiencePrinciples of includesTrugman of Business a Valuationvariety Valuation:of assignmentsAssociates, Part 1 Inc.,including, American a firm closely-held Societyspecializing of Appraisersbusinesses, in business (2010). professional valuation, economicpractices damagesand thinly and traded litigation public support companies. services. BusinessIndustries valuation include, experience health care, includes retail, a • Co-author of How Should You Value Closely Held Businesses During Crazy Times?, widemanufacturing, variety of assignments distributors, includingand service. closely-held businesses, professional practices and thinly traded publicBusiness companies. Valuation Industries Update (August include 2009). but are not limited to security, automotive, funeral homes,•BusinessEssentials health valuation care, of servicesValuing securities ahave Closely brokeragebeen Held rendered Business and forfinancial , aAmerican variety institutions, of Institute purposes ofretail, CPAsincluding, restaurants, (2008). but not manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have also• includedPractical the Solutions valuation to of Problems stock options in Valuing and various the Very types Small of Businessintangible, Businessassets. Valuation Update (2008). BusinessEducation valuation, economic damages and litigation support services have been rendered for a• variety Course of purposes entitled including, Standards but notand limited Ethics: to familyAn Appraiser’s law matters, Obligation business, damages,The Institute lender of liability• litigation,Business M.S., Finance, buy-sellAppraisers Chapman agreements, (2007). Graduate shareholder School of litigation, Business estate at Florida and Internationalgift tax matters, University, buying and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age • Course entitled Small Business Valuation: A Real Life Case Study, American Institute of discrimination, wrongful termination, workers’ compensation and breach of contract. Additional •Certified B.S., Business Public Administration, Accountants (2005). Belk College of Business at the University of North Carolina litigation services include reasonable compensation analysis for tax and non-tax assignments. at Charlotte, 2006. Representation• Guideline in Publiclitigation Company includes plaintiff,Method defendant,- Control ormutual, Minority and Value?court-appointed, Shannon neutral. Pratt’s AppraisalBusiness Education Valuation Update (2003). Court Testimony. Has been qualified as an expert witness in State Courts of Florida, New Jersey,C• Signed,USPAPNew York, Sealed,for Pennsylvania,Business Delivered Valuation ,California, Journal - American of Connecticut,Accountancy Society Michigan (2002).of Appraisers, and Federal South BeachDistrict Miami, Court in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas andC hasA performedCPA’s Guide extensive to Valuing services a Closely relating Held Businessto court testimony., American InstituteTestimony of Certifiedhas also Public been provided• AccountantsAdvanced in arbitration Topics (2001). cases in Business before Valuationthe National, American Association Society of of Securities Appraisers, Dealers Bethesda, and MD,the American2010. Stock Exchange, as well as other forms of arbitration. C Course entitled Business Issues - State Courts, National Judicial College, Reno, NV Court• Appearances.(2000).AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Broward,Francisco, Miami-Dade, CA, 2009.Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, C Understanding Business Valuation: A Practical Guide to Valuing Small to Medium-Sized Burlington, Passaic, Mercer, Middlesex, Monmouth, Essex, Hunterdon, Warren, Hudson, and • Businesses,The Market ApproachAmerican, AmericanInstitute of Society Certified of Appraisers, Public Accountants, Skokie, IL First2009. Edition (1998) Union. New York • Bronx • Westchester. Connecticut • Fairfield, Milford/Ansonia, Middlesex. Second Edition (2002), Third Edition (2008). Pennsylvania• The Income • Montgomery, Approach , Lehigh,American Philadelphia, Society of Appraisers, Chester. Orlando,Massachusetts FL 2009. • Middlesex. IndianaC Contributing • Marion. California author to• San The Jose. Handbook Michigan of Advanced• Ottawa. Business Valuation, McGraw-Hill • Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, (1999). Court Appointments.2008. Has been court appointed in New Jersey’s Morris, Sussex, Essex, Union, Hunterdon,C Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CourseCFA Candidate entitled Valuation, Passed Levels Issues 1, in 2Divorce and 3 of Settings the Chartered for the AmericanFinancial AnalystInstitute Curriculum. of Certified by numerousPublic judges,Accountants as well (1997). as Orange County, Florida and Cass County, Minnesota. Author MutualC Co-authorExpert. Regularly of course serves entitled as a mutually-agreedAccredited Business upon expert.Valuer Review Course (Market • ApproachAuthor of “TrugmanChapter) for Valuation the American Associates, Institute Inc. of (TVA) Certified Restricted Public StockAccountants Study,” (1997).Business Valuation Review (Fall 2009). ProfessionalC Understanding Designations Business Valuations for The Institute of Continuing Legal Education •(1997). Co-Author of “How Should You Value Closely Held Businesses During These Crazy • CPA: Licensed in Florida (1996), New Jersey (1978) and New York (1977). Times?,” Business Valuation Update (August 2009). - 106 - Appendix 4 -- 10785 - - Appendix 4
GARY R. TRUGMAN,WILLIAM C.P.A./A.B HARRIS.V., M.C.B.A., A.S.A., M.V.S. GARY R. TRUGMAN,PROFESSIONALPROFESSIONAL C.P.A./A.B QUALIFICATIONS.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS AuthorExperience Experience CValuationSix Analyst Day Business at Trugman Valuation Valuation Series Associates, consisting ofInc. Business specializing Valuation in business Theory, valuation.Valuation PresidentExperienceApproaches of includesTrugman & a Methods Valuationvariety of and assignmentsAssociates, Advanced Inc.,includingTopics a firmin closely-heldBusiness specializing Valuation businesses, in business (1994, professional 1995.)valuation, economicpractices damagesand thinly and traded litigation public support companies. services. BusinessIndustries valuation include, experience health care, includes retail, a wideCmanufacturing, varietyAdvocacy of assignments distributors, vs. Objectivity includingand, service.CPA closely-held Litigation Service businesses, Counselor professional, Harcourt practices Brace, San and Diego, thinly traded publicCA (1993). companies. Industries include but are not limited to security, automotive, funeral homes,Business health valuation care, services securities have brokeragebeen rendered and forfinancial a variety institutions, of purposes retail, including, restaurants, but not C Valuation of a Closely-Held Business, Practice Aid for the American Institute of Certified manufacturing,limited to business trucking, damages, service, estate and professiand gift onaltax matters, business and establishments. family law matters. Assignments have also includedPublic the Accountants valuation of(1993). stock options and various types of intangible assets. C Co-author of Guide to Divorce Engagements, Practitioners Publishing Company, Fort BusinessEducation valuation, economic damages and litigation support services have been rendered for a varietyWorth, of purposes TX (1992). including, but not limited to family law matters, business damages, lender • M.S., Finance, Chapman Graduate School of Business at Florida International University, liabilityC litigation,A Threat buy-sellto Business agreements, Valuation shareholder Practices, Journal litigation, of estateAccountancy and gift (December tax matters, 1991). buying and selling2007. businesses, malpractice litigation, wrongful death, sexual discrimination, age discrimination,C Course wrongful entitled Advanced termination, One workers’ Day Seminar compensation for The Institute and breach of Business of contract. Appraisers, Additional Inc. • B.S., Business Administration, Belk College of Business at the University of North Carolina litigation(1991). services include reasonable compensation analysis for tax and non-tax assignments. at Charlotte, 2006. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. C Course entitled Understanding Business Valuation for the Practice of Law for the Institute Appraisal Education Court Testimony.of Continuing Has Legal been Education qualified inas NJ. an expert witness in State Courts of Florida, New Jersey,• USPAPNew York, for Pennsylvania,Business Valuation California, - American Connecticut, Society Michigan of Appraisers, and Federal South BeachDistrict Miami, Court C An Appraiser's Approach to Business Valuation, Fair$hare, Prentice Hall Law & Business in Newark,FL, New 2010. Jersey and Hammond, Indiana, as well as in Bankruptcy Court in Dallas, Texas (July & August, 1991). and has performed extensive services relating to court testimony. Testimony has also been • Advanced Topics in Business Valuation, American Society of Appraisers, Bethesda, MD, providedC What in arbitration is Fair Market cases Value? before Back the Nationalto Basics, AssociationFair$hare , ofPrentice Securities Hall DealersLaw & Business and the 2010. American(June Stock 1990). Exchange, as well as other forms of arbitration. Court• Appearances.AICPA NationalHas Business appeared Valuation in the following Conference courts:, American Florida • PalmInstitute Beach, of CPAs, Polk, Lee,San Francisco, CA, 2009. TechnicalBroward, Miami-Dade, Reviewer Leon and Escambia. New Jersey • Morris, Atlantic, Sussex, Bergen, Burlington,• The Passaic, Market Approach Mercer, Middlesex,, American Monmouth,Society of Appraisers, Essex, Hunterdon, Skokie, ILWarren, 2009. Hudson, and CUnion. NewShannon York P. • BronxPratt and• Westchester. Alina V. Niculita. Connecticut Valuing a• Business:Fairfield, Milford/Ansonia, The Analysis and Middlesex. Appraisal th Pennsylvania• ofThe Closely Income • Montgomery, Held Approach Companies, , Lehigh,American 5 EditionPhiladelphia, Society (McGraw of Appraisers, Chester. Hill: New Orlando,Massachusetts York, 2008). FL 2009. • Middlesex. Indiana • Marion. California • San Jose. Michigan • Ottawa. C• ShannonIntroduction P. Pratt,to Business Robert Valuation F. Reilly, andAmerican Robert Society P. Schweihs. of Appraisers, Valuing Minneapolis, a Business: MN,The th Court Appointments.Analysis2008. and Appraisal Has been of court Closely appointed Held Companies, in New Jersey’s 4 Edition Morris, (McGraw Sussex, Hill:Essex, New Union, York, Hunterdon,2000). Somerset, Monmouth, Middlesex, Passaic, Warren, Bergen, and Hudson counties • CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. Cby numerousShannon judges, P. Pratt, as well Robert as Orange F. Reilly County, and Robert Florida P. Schweihs. and Cass ValuingCounty, SmallMinnesota. Businesses & rd MutualAuthor ProfessionalExpert. Regularly Practices, serves 3 as Edition a mutually-agreed (McGraw Hill: uponNew expert.York, 1998). C• JamesAuthor R.of “TrugmanHitchner. ValuationFinancial Associates,Valuation: ApplicationsInc. (TVA) Restricted and Models Stock, 1Studyst Edition,” Business (Wiley Valuation Review (Fall 2009). ProfessionalFinance: Designations New Jersey, 2003). • Co-Author of “How Should You Value Closely Held Businesses During These Crazy C•Jay CPA E.: Licensed Fishman, in Shannon Florida (P.1996 Pratt,), New Williams Jersey J Morrison.(1978) and Standards New York of ( Value:1977). Theory and ApplicationsTimes?,” Business (John Wiley Valuation & Sons, Update Inc.: (August New Jersey, 2009). 2007). - 107 - Appendix 4 WILLIAM HARRIS PROFESSIONAL QUALIFICATIONS
Experience Valuation Analyst at Trugman Valuation Associates, Inc. specializing in business valuation. Experience includes a variety of assignments including closely-held businesses, professional practices and thinly traded public companies. Industries include, health care, retail, manufacturing, distributors, and service.
Business valuation services have been rendered for a variety of purposes including, but not limited to business damages, estate and gift tax matters, and family law matters.
Education • M.S., Finance, Chapman Graduate School of Business at Florida International University, 2007.
• B.S., Business Administration, Belk College of Business at the University of North Carolina at Charlotte, 2006. Appraisal Education • USPAP for Business Valuation - American Society of Appraisers, South Beach Miami, FL, 2010.
• Advanced Topics in Business Valuation, American Society of Appraisers, Bethesda, MD, 2010.
• AICPA National Business Valuation Conference, American Institute of CPAs, San Francisco, CA, 2009.
• The Market Approach, American Society of Appraisers, Skokie, IL 2009.
• The Income Approach, American Society of Appraisers, Orlando, FL 2009.
• Introduction to Business Valuation, American Society of Appraisers, Minneapolis, MN, 2008.
• CFA Candidate, Passed Levels 1, 2 and 3 of the Chartered Financial Analyst Curriculum. Author • Author of “Trugman Valuation Associates, Inc. (TVA) Restricted Stock Study,” Business Valuation Review (Fall 2009).
• Co-Author of “How Should You Value Closely Held Businesses During These Crazy Times?,” Business Valuation Update (August 2009).