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6.60%
43.40%
3.74%
(Exhibit 8)
6%
7.50%
Equity Beta
We use comparable firms. But, first we need to decompose Kohler into its various groups.
Exhibit 4
Kohler Co. Income Statements 1997 by Group (in $ thousands, as of December 31)
Kitchen & Bath
Group
Power
Systems
1,485,831
1,045,038
540,260
461,140
145,414
92,564
50,789
43,041
Gross Profit
440,793
79,120
52,850
7,748
284,097
156,696
44,600
###
34,520
45,580
7,270
4,872
2,876
-6,400
1,477
10,181
-269
180
2,428
514
142
1,633
0
12
1,040
Pretax Income
141,591
32,004
6,292
1,848
54,179
11,605
2,291
727
Net Income
87,411
20,398
4,001
1,121
Net Sales
Cost of Sales
67%
76%
77%
24%
14%
18%
7%
9%
4%
2%
1%
1%
American American
Standard Woodmark
Stock Market Data as of 4/30/1998
Ticker
Shares Outstanding (in thousands)
Stock Price ($)
Market Value of Equity
Market Value of Equity,
Average of Latest 36 Mths.
Equity Beta Over Latest 36 Months
Masco
Briggs &
Stratton
ASD
71,929
48.69
3,502.0
AMWD
7,811
30.25
236.3
MAS
169,634
58
9,838.8
BGG
24,514
45.25
1,109.3
2,762.9
0.82
82.0
0.76
5,937.3
1.28
1,210.0
0.66
2,404.0
6,139.5
699.3
462.5
292.6
13.4
327.0
37.6
27.4
17.1
1,187.9
3,945.0
838.4
553.4
437.3
259.6
1,327.2
178.3
127.2
80.4
2,216.6
5,767.8
667
420.9
263.5
12.3
262.7
30.7
22.1
13.7
1,341.3
3,414.0
721.9
473.6
367.4
155.4
1,282.2
187
132.1
87.1
5,906.0
0.59
0.49
249.7
0.95
0.72
11,026.7
0.89
1.14
1,368.9
0.81
0.53
V=D+E
E/V
Asset Beta = Equity Beta*(E/V)
538992
513056
Asset Beta
Ba
0.78
0.78
E/V
D/V
0.81
0.77
0.19
0.23
Equity Beta
Be
0.97
1.02
0.78
0.80
0.20
0.98
D/V = 1-E/V
-8,891
(4,398)
-4,492
$
$
$
576,019
2,222,294
1,641,783
580,511
$
$
$
2,026,091
1,506,178
519,913
379,149
328,697
201,362
191,216
(6,155)
1,811
15,282
181,735
$
$
$
$
(6,669)
1,657
12,609
173,595
$
$
87,974
68,802
112,931
$
$
65,784
107,809
2,213,403
1,637,385
942
21,618
-27,052
380,091
21,618
174,310
409
426
(1,251)
-5,746 $
2,237 $
14,031 $
-24,965
156,770
(6)
68,796
-24,957
Cummins Engine
Detroit Diesel
CUM
42,036
54.38
2,285.7
DDC
24,701
23
568.1
2,053.6
1.09
502.5
1.30
1,250.0
5,821.0
487
390.2
224.2
107.4
2,233.0
105.5
82.8
41
686.7
5,431.0
448.3
377.5
221
127.3
2,090.7
100.2
78.2
40.5
3,535.7
0.65
0.70
675.5
0.84
1.09
Rf
MRP
A-T Rd
Cost of Equity
Ke
13.24%
13.61%
13.32%
6.00%
7.50%
3.74%
WACC
Kd*(1-T) * D/V+ E/V*Ke
11.4%
11.3%
11.4%
American Standard
American Woodmark
Masco
Briggs & Stratton
Cummins Engine
Detroit Diesel
Market
Value of Equity
3502.00
236.30
9838.80
1109.30
2285.70
568.10
Total
Debt
2404.00
13.40
1187.90
259.60
1250.00
107.40
EBITDA
Multiple
2,270
194.04
3420.65
2183.67
1826.47
1638.78
1468.94
1378.81
1380.30
1408.76
2444.80
1958.53
1603.39
1449.25
3030.31
1737.24
Sales
Multiple
0.96
0.76
2.80
1.03
0.61
0.30
EBITDA
Multiple
8.45
6.64
13.15
7.68
7.26
6.40
Cash Flow
Multiple
12.77
9.11
19.93
10.76
9.06
8.16
EBIAT
Multiple
20.18
14.60
25.22
17.03
15.77
16.48
1.51
0.96
9.41
8.45
13.94
12.77
20.00
20.18
0.65
0.61
7.11
7.26
9.33
9.06
16.42
16.48
1.08
0.86
8.26
7.47
11.63
9.94
18.21
16.75
1.33
8.95
13.01
19.29
Cash Flow
Multiple
EBIAT
Multiple
Avearge of
4 Multiples
Median of
4 Multiples
119.13
98.34
1660.21
1521.26
1966.88
1984.95
2218.55
1832.16
1896.67
1811.87
1111.14
1079.47
1615.14
1620.21
1393.88
1371.81
1424.62
1393.78
1385.67
1183.85
1791.01
1647.28
1806.22
1559.73
1697.20
1548.27
1550.39
1896.53
2053.62
1816.88
n $ millions)
11%
4%
1998
1999
2000
2001
160,121
126,032
171,619
187,978
44.3%
43.42%
43.42%
43.42%
70,872
54,724
74,518
81,621
89,249 $
71,308 $ 97,101 $ 106,357
$
$
$
$
56,113
(87,691) $
(1,435)
24,224
87,661
(97,205) $
(5,762)
56,002
91,786
(96,971) $
(27,705)
64,211
94,593
(96,811)
(17,702)
86,437
1.17
$49,565
2.17
$51,199
3.17
$62,091
0.33
$23,404
239,085
Terminal Value
Present Value of Terminal Value
874,192
$ 1,113,277
$
$
You can change the valuation by having a monority discount (start approx 20%) Al
2002
2002 Normalized
201,604
201,604
43.42%
43.42%
$
87,537
114,067
87,537
114,067
NWC
97,355
(106,647)
(23,145)
81,630
-23145
90,922
4.17
$52,827
4.17
$58,840
9,097
6,644
(15,744)
21707
-23139
(1,435)
$1,350,840
onority discount (start approx 20%) Also tack on discount for market instability (start approx 40%)
Shares
COMMON VOTING STOCK
RESTICTED VOTING STOCK
NON VOTING SERIES A STOCK
NON VOTING SERIES B STOCK
TOTAL
Apr-98
9000
250000
2196000
45000
2500000
Dec-98
( Additional)
6611
33965
1613084
33055
1686715
Total
15611
283965
3809084
78055
4186715