This spreadsheet supports the SUDENT analysis of the case "Flinder Valves

and Controls Inc." (Case 43).

September 15, 2008

Copyright 2008 by the University of Virginia Darden School Foundation. All rights reserved.

on. All rights reserved.

Exhibit 1
FLINDER VALVES AND CONTROLS INC.
Balance Sheet as of December 31, 2007 for Flinder Valves and Controls Inc.
(dollars in thousands)
Assets
Cash
U.S. Treasury tax notes and other Treasury obligations
Due from U.S. government
Accounts receivable net
Inventories, at lower of cost or market
Other current assets
Total current assets
Investments
Land
Buildings
Equipment
Less: allowance for depreciation
Total plant, property, and equipmentgross
Construction in process
Total plant, property, and equipmentnet*
Patents
Cash value of life insurance
Deferred assets
Total assets
Liabilities and Stockholders Equity
Accounts payable
Wages and salaries accrued
Employees pension cost accrued
Tax accrued
Dividends payable
Provision for federal income tax
Total current liabilities
Deferred federal income tax
Common stock at par (shares authorized and outstanding
2,440,000 shares)
Capital surplus
Earned surplus
Total equity
Total liabilities and stockholders equity

$1,884
9,328
868
2,316
6,888
116
$21,400
1,768
92
6,240
18,904
7,056
18,180
88
18,268
156
376
156
42,124

2,016
504
208
72
560
1,200
4,560
800
1,220
7,180
28,364
36,764
42,124

* Equivalent land in the area had a market value of $320,000, and the building
had an estimated market worth of $16,800,000. Equipment had a replacement
cost of approximately $24,000,000 but a market value of about $16,000,000
in an orderly liquidation.

Exhibit 2
FLINDER VALVES AND CONTROLS INC.
Summary of Earnings and Dividends for Flinder Valves and Controls Inc.
(dollars in thousands)

Sales
Cost of goods sold
Gross profit general,
Selling,
administrative
Other incomenet
Income before taxes
Taxes
Net income

and

Cash dividends
Depreciation
Capital expenditures
Working capital needs
Ratio analysis
Sales
Cost of goods sold
Gross profit general,
Selling,
administrative
Other incomenet
Income before federal taxes
Net income

and

2003
$36,312
25,924
10,388
2,020
92
8,460
3,276
5,184

2004
$34,984
24,200
10,784
2,100
572
9,256
3,981
5,275

2005
$35,252
24,300
10,952
2,252
108
8,808
3,620
5,188

2006
$45,116
31,580
13,536
2,628
72
10,980
4,721
6,259

2007
$49,364
37,044
12,320
2,936
228
9,612
4,037
5,575

1,680
784
1,486
1,899

2,008
924
1,826
3,492

2,016
1,088
2,011
-1,200

2,304
1,280
2,213
4,289

2,304
1,508
2,433
4,757

100.0
71.4
28.6
5.6
0.3
23.3
14.3

100.0
69.2
30.8
6.0
1.6
26.5
15.1

100.0
68.9
31.1
6.4
0.3
25.0
14.7

100.0
70.0
30.0
5.8
0.2
24.3
13.9

100.0
75.0
25.0
5.9
0.5
19.5
11.3

(Unaudited)
Three months ended 3/30
2007
2008
$11,728
$14,162
8,730
10,190
2,998
3,972
668
896
14
198
2,344
3,274
1,009
1,391
1,335
1,883
576
364
580
1,130

100.0
74.4
25.6
5.7
0.1
20.0
11.4

753
394
640
1,365

100.0
72.0
28.0
6.3
1.4
23.1
13.3

Exhibit 3
FLINDER VALVES AND CONTROLS INC.
Consolidated Balance Sheet for RSE International as of December 31, 2007
(dollars in thousands except per-share figures)
Assets
Cash
U.S. government securities, at cost
Trade accounts receivable
Inventories, at lower of cost or market
Prepaid taxes and insurance
Total current assets
Investment in wholly-owned Canadian subsidiary
Investment in supplier corporation
Cash value of life insurance
Miscellaneous assets
Property, plant, and equipment, at cost:
Buildings, machinery, equipment
Less: allowances for depreciation and amortization
Property, plant, and equipmentnet
Land
Property, plant, equipment, and landnet
Patents, at cost, less amortization
Total assets
Liabilities and Stockholders Equity
Notes payable to bank
Accounts payable and accrued expenses
Payrolls and other compensation
Taxes other than taxes on income
Provision for federal taxes on income refund, estimated
Current maturities of long-term debt
Total current liabilities

$46,480
117,260
241,760
179,601
2,120
587,221
158,080
104,000
3,920
2,160
671,402
260,001
411,402
22,082
433,484
1,120
$1,289,985
$5,795
90,512
38,399
3,052
32,662
30,900
201,320

Note payable to bank1

Deferred federal income taxes
2 % cumulative convertible preferred stock, $20 par,

119,100
29,668
27,783

1,389,160 shares outstanding2

Common stock, $2 par; 96,000,000 shares authorized;
62,694,361 shares issued

125,389

Capital surplus3
Retained earnings
Total equity

21,904
764,821
939,897

Total liabilities and stockholders equity

$1,289,985

$150,000,000 note, payable semiannually beginning June 30, 2008; $30,900,000 due within
one year, shown in current liabilities. One covenant required the company not to pay cash
dividends, except on preferred stock, or to make other distribution on its shares or acquire any
stock, after December 31, 1999, in excess of net earnings after that date.
2

Issued in January 2007; convertible at rate of 1.24 common share to one preferred share;
redeemable beginning in 2012; sinking fund beginning in 2016.
3

Resulting principally from the excess of par value of 827,800 shares of preferred stock over
the pay value of common share issues in conversion in 2007.

Chua sap nhap

E
D
V
E/V
D/V
Rd
Re
WACC

V
Re
Rd
WACC

970,797
11.40%
6.98%
11.17%

Pay by cash
V
Re
WACC

Chua sap nhap

939,897
30,900
970,797
0.9681705
0.0318295
6.98%
11.39500%
11.17%

207687

Sap nhap
E1
D
V
E/V
D/V
Rd
Re
WACC

1,084,133
11.40%
10.44%

976,661
144,236
1,120,897
0.8713208
0.1286792
6.98%

Exhibit 4
FLINDER VALVES AND CONTROLS INC.
Summary of Consolidated Earnings and Dividends for RSE International
(dollars in thousands)

Net sales
Cost of products sold
Gross profit
Selling, general, and administrative
Earnings before federal income taxes
Tax expense
Net earnings
Depreciation
Cash dividends declared

2003
$1,623,963
1,271,563
352,400
58,463
293,937
126,393
167,544

2004
$1,477,402
1,180,444
296,958
69,438
227,520
95,558
131,962

2005
$1,498,645
1,140,469
358,176
74,932
283,244
116,130
167,114

2006
$1,980,801
1,642,084
338,717
87,155
251,562
101,883
149,679

2007
$2,187,208
1,793,511
393,697
120,296
273,401
109,360
164,041

19,160
85,754

20,000
77,052

21,480
53,116

24,200
77,340

26,800
92,238

Exhibit 5
FLINDER VALVES AND CONTROLS INC.
Forecast Financial Statements for RSE International
for the Years Ending December 31, 200712
(dollars in thousands except per-share figures)
Actual
Projected
2007
2008
2009
2010
2011
2012
$2,187,208 $2,329,373 $2,480,785 $2,642,037 $2,813,769 $2,996,658
1,793,510
1,920,085
2,064,243
2,216,470
2,367,290
2,537,259
393,698
409,288
416,542
425,567
446,479
459,399
120,296
129,786
139,481
151,027
161,315
169,826
273,402
279,502
277,061
274,540
285,164
289,573
109,361
111,801
110,824
109,816
114,066
115,829
164,041
167,701
166,237
164,724
171,098
173,744

Sales
Cost of goods sold
Gross profit
Selling, general, and admin.
Income before tax
Tax expense
Net income
Cash dividends
Depreciation
Net PPE
Net working capital
Earnings per share1
Divs. per share common stock
Div. per share preferred stock
1
2

92,238

102,082

108,714

115,779

125,185

133,313

26,800
389,321
422,597

27,950
426,522
447,956

29,770
459,404
486,428

31,700
498,497
528,407

33,170
541,109
574,238

35,960
587,580
624,303

$2.62

$2.60

$2.58

$2.56

$2.66

$2.70

$1.42

$1.58

$1.69

$1.80

$1.94

$2.07

$0.40

62,694,361 common shares in 2007. Thereafter, 64,416,919 shares reflecting conversion of the preferred stock.
1,389,160 preferred shares in 2007. Conversion into 1,722,558 shares of common stock assumed in 2008.

Net income
Depreciation
PPE
NET WORKING
FCF
WACC
FCFF

164,041
26,800

167,701
166,237
164,724
171,098
173,744
27,950
29,770
31,700
33,170
35,960
37,201
32,882
39,093
42,612
46,471
25,359
38,472
41,979
45,831
50,065
133,091
124,653
115,352
115,825
113,168
0.11395
0.11395
0.11395
0.11395
0.11395
1.11395 1.2408846 1.3822834 1.5397946 1.71525419
119476.817 100454.627 83450.3256 75221.3316 65977.2765

1083286 1527866
0.0231 23.1007

Exhibit 6
FLINDER VALVES AND CONTROLS INC.
Market Prices of Flinder Valves and RSE International Corporation

2003
2004
2005

Flinder Valves and Controls

Common Stock
High
Low
Close
$16.25
$8.75 $15.00
24.75
14.00
22.63
25.00
20.00
22.25

RSE International Corporation

Common Stock
Preferred Stock
High
Low
Close
High
Low
$12.31 $10.05 $11.88
14.36
11.77
13.16
12.81
9.27
11.13

2006 Quarter Ended:

March 31
June 30
September 30
December 31

24.38
22.75
22.75
24.36

20.75
20.38
20.38
20.13

21.50
21.00
21.50
21.00

14.13
13.69
12.83
12.39

12.83
12.04
10.48
11.26

13.95
11.78
11.26
11.87

2007 Quarter Ended:

March 31
June 30
September 30
December 31

23.50
23.63
22.75
30.00

20.00
19.88
20.00
22.25

21.75
22.00
22.50
28.50

11.60
11.60
13.61
17.01

10.20
10.90
11.13
13.30

10.67
10.90
13.61
16.78

13.61
13.15
14.22
17.32

12.21
12.04
12.37
13.77

2008 Quarter Ended:

March 31

32.13

26.00

31.50

20.73

15.08

20.69

17.32

13.98

$39.75

$38.90

$39.75

$22.58

$18.30

$21.98

$17.63

$15.35

May 1, 2008

Exhibit 7
FLINDER VALVES AND CONTROLS INC.
Market Information on Firms in the Industrial Machinery Sector

Cascade Corp.
Manufactures loading engagement devices
Curtiss-Wright Corporation
Manufactures highly engineered, advanced technologies
that perform critical functions
Flowserve Corp.
Makes, designs, and markets fluid handling
equipment (pumps, valves, and mechanical seals)
Gardner Denver
Manufacturers stationary air compressors, vacuum
products, and blowers
Idex Corp.
Manufactures a wide range of pumps and machinery
products
Roper Inds.
Manufacturers energy systems and controls, imaging
equipment, and radio frequency products
Tecumseh Products
Manufactures compressors, condensers, and pumps
Watts Industries
Manufactures and sells and extensive line of valves
for the plumbing and heating and water quality markets

NMF = not meaningful figure.

Source: Value Line Investment Survey, April 25, 2008.

Expected
Growth
Dividend Rate
Yield
to 2010 Debt/Capital

Price/
Earnings
Ratio

Beta

10.5

0.95

1.7%

5.1%

29%

17.2

1.0

0.7

12.3

36%

20.8

1.3

1.0

27.0

30%

10.9

1.3

Nil

NMF

19%

16.1

1.05

1.5

10.8

22%

19.7

1.2

0.5

10.8

29%

38.2

1.05

Nil

NMF

8%

15

1.3

1.5

8.4

32%

Exhibit 8
FLINDER VALVES AND CONTROLS INC.
Information on Selected Recent Related Mergers
Effective Date
5/25/2006
6/26/2006
9/20/2006
11/10/2006
12/8/2006
4/11/2007
6/22/2007
7/31/2007
12/3/2007
12/20/2007
2/6/2008
6/5/2008

Acquirer

Business

Target

Business

Armor Holdings Inc.

Bouygues S.A.
Boeing Co.
Daikin Industries Ltd.
Oshkosh Truck Corp.
Rank Group Ltd.
Meggitt PLC
BAE Systems Inc.
Carlyle Group LLC
ITT Corp.
London Acquisition BV
Ingersoll-Rand Co Ltd.

Law enforcement equip

Construction
Aircraft
Air conditioning sys
Heavy duty trucks
Investment holding co
Aerospace/defense system
Electronic systems
Private equity firm
Pumps/valves
Investment holding co
Industrial machinery/equip

Stewart & Stevenson

Alstom SA
Aviall Inc
OYL Industries Bhd
JLG Industries Inc
SIG Holding AG
K&F Industries Holdings
Armor Holdings Inc
Sequa Corp
EDO Corp
Stork NV
Trane Inc

Turbine-driven products
Power generation equip
Vehicle parts
Airconditioners
Excavators/telehandlers
Packaging/plastics machinery
Aircraft braking systems
Law enforcement equip
Aircraft engine component
Electn system products
Components
Airconditioners

Exhibit 8 (Continued)
FLINDER VALVES AND CONTROLS INC.
Information on Selected Recent Related Mergers

Acquirer

Target

Armor Holdings Inc.

Bouygues S.A.
Boeing Co.
Daikin Industries Ltd.
Oshkosh Truck Corp.
Rank Group Ltd.
Meggitt PLC
BAE Systems Inc.
Carlyle Group LLC
ITT Corp
London Acquisition BV
Ingersoll-Rand Co. Ltd.

Stewart & Stevenson

Alstom S.A.
Aviall Inc.
OYL Industries Bhd
JLG Industries Inc.
SIG Holding AG
K&F Industries Holdings
Armor Holdings Inc.
Sequa Corp.
EDO Corp.
Stork NV
Trane Inc.

Transaction
Size ($mm)

Target Net
Sales Last 12
Months ($mm)

Equity Value/
Target Net
Income

1,123
2,467
2,057
1,152
3,252
2,314
1,802
4,328
2,007
1,678
2,347
9,751

726
17,679
1,371
1,581
2,289
1,418
424
2,805
2,181
945
2,153
8,328

65.3
nmf
28.9
27.6
20.5
38.6
20.3
30.5
34.4
86.8
17.1
21.2

Enterprise
Enterprise Value/ Target
Enterprise
Value/ Target
Operating Value/ Target
Net Sales
Income
Cash Flow
1.12
1.48
1.53
1.41
1.30
1.56
4.26
1.71
1.25
1.99
0.02
1.39

33.1
77.9
18.7
21.5
11.9
64.8
13.1
17.1
20.6
34.0
na
14.9

23.7
22.5
14.9
16.8
10.7
14.2
10.8
14.3
12.5
23.9
na
11.6

Premium 4
Weeks Prior to
Announcement
Date (%)
40.6
-1.2
27.2
19.4
52.3
19.3
13.5
29.3
63.3
40.5
35.2
na
339.4
28.27916667

Exhibit 9
FLINDER VALVES AND CONTROLS INC.
Capital Market Interest Rates and Stock Price Indexes
(averages per annum, except April 2008 which offers closing values for April 25, 2008)
2006

2007

April 2008

U.S. Treasury Yields

3-month bills
30-year bonds

4.70%
5.00%

4.40%
4.91%

1.28%
4.52%

Corporate Bond Yields by

Aaa
Aa
A
Baa

5.59%
5.80%
6.06%
6.48%

5.56%
5.90%
6.09%
6.48%

5.58%
5.96%
6.32%
6.98%

Stock Market
S&P 500 Index
Price/earnings ratio

1,418
17.7

1,468
18.3

1,398
17.4

Industrial Machinery Stocks

Price/earnings ratio
Dividend yield

13.9
1.4%

14.0
1.4%

Historical return premium of equity over government debt (1926-2007)

Geometric average
5.5%
Arithmetic average
7.2%

Data Source: Value Line Investment Survey, 25 April 2008; Federal Reserve Bulletin; Compustat

Exhibit 10
FLINDER VALVES AND CONTROLS INC.
Forecast of Financial Statements for Flinders Control and Valve
for Years Ending December 31, 200812
(dollars in thousands)
Actual
2007
$49,364
37,044
12,320
2,936
228
9,612
4,037
$5,575

2008
$59,600
43,816
15,784
3,612
240
12,412
4,965
$7,447

2009
$66,000
48,750
17,250
4,124
264
13,390
5,356
$8,034

$1,508

$1,660

$1,828

Net PPE
Net working capital

$18,268
$16,840

$22,056
$20,331

Income before taxes

Depreciation

9,612
$1,508

EBITDA
Working capital

Sales
Cost of goods sold
Gross profit general,
Selling,
administrative
Other incomenet
Income before taxes
Taxes
Net income
Depreciation

Taxes

Net income
Depreciation
changing in Working capital
Changing in Expenditure
FCF
WACC
WACC formula
FCFF

and

Projected
2010
$73,200
54,104
19,096
4,564
288
14,820
5,928
$8,892

2011
$81,200
59,958
21,242
5,052
320
16,510
6,604
$9,906

2012
$90,000
66,200
23,800
5,692
352
18,460
7,384
$11,076

$2,012

$2,212

$2,432

$24,424
$22,515

$27,088
$24,971

$30,049
$27,700

$33,306
$30,702

12,412
$1,660

13,390
$1,828

14,820
$2,012

16,510
$2,212

18,460
$2,432

$11,120

$14,072
$3,491

$15,218
$2,184

$16,832
$2,456

$18,722
$2,729

$20,892
$3,002

4,037

4,965

5,356

5,928

6,604

7,384

5,616
10.02%
110.02%

7,678
10.02%
1.21

8,448
10.02%
1.33172613

9,389
10.02%
1.46516509

10,506
10.02%
1.61197463

$7,447
$1,660

$8,034
$1,828

$8,892
$2,012

$9,906
$2,212

$11,076
$2,432

$3,491
$3,788
1,828
10.02%
110.02%
1,661.70

$2,184
$2,368
5,310
10.02%
1.21
4,386.83

$5,575
$1,508

$2,456
$2,664
5,784
10.02%
1.33172613
4,343.24

$2,729
$2,961
6,428
10.02%
1.46516509
4,387.22

$3,002
$3,257
7,249
10.02%
1.61197463
4,496.97

94060.1092

113,336.06

Sales
Cost of goods sold
Gross profit general,
Selling,
administrative
Other incomenet
Income before taxes
Taxes
Net income
Depreciation
Net PPE
Net working capital
Ebit TA
Depreciation
EBITDA
delta Net working capital
Taxes

and

Actual
2007
$49,364
37,044
12,320
2,936
228
9,612
4,037
$5,575

2008
$59,600
43,816
15,784
3,612
240
12,412
4,965
$7,447

$1,508

$1,660

$0
$0

Projected

$22,056
$20,331

9,612
$1,508

12,412
$1,660

11,120

14,072

$0

4,037

4,965

2009
$66,000
48,750
17,250
4,124
264
13,390
5,356
$8,034

Projected
2010
$73,200
54,104
19,096
4,564
288
14,820
5,928
$8,892

2011
$81,200
59,958
21,242
5,052
320
16,510
6,604
$9,906

2012
$90,000
66,200
23,800
5,692
352
18,460
7,384
$11,076

$1,828

$2,012

$2,212

$2,432

$24,424
$22,515

$27,088
$24,971

$30,049
$27,700

$33,306
$30,702

13,390
$1,828

14,820
$2,012

16,510
$2,212

18,460
$2,432

15,218

16,832

18,722

20,892

5,356

5,928

6,604

7,384

EbitTA