September 15, 2008 Copyright © 2008 by the University of Virginia Darden School Foundation. All rights reserved.

This spreadsheet supports the SUDENT analysis of the case "Flinder Valves and Controls Inc." (Case 43).

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

Exhibit 1FLINDER VALVES AND CONTROLS INC.Balance Sheet as of December 31, 2007 for Flinder Valves and Controls Inc.(dollars in thousands)

AssetsCash $1,884U.S. Treasury tax notes and other Treasury obligations 9,328Due from U.S. government 868

2,3166,888

Other current assets 116 Total current assets $21,400 Investments 1,768

92Buildings 6,240Equipment 18,904Less: allowance for depreciation 7,056

18,180Construction in process 88

18,268 Patents 156 Cash value of life insurance 376 Deferred assets 156 Total assets 42,124

Liabilities and Stockholders’ EquityAccounts payable 2,016Wages and salaries accrued 504Employees’ pension cost accrued 208Tax accrued 72Dividends payable 560Provision for federal income tax 1,200 Total current liabilities 4,560 Deferred federal income tax 800

1,220Capital surplus 7,180Earned surplus 28,364Total equity 36,764Total liabilities and stockholders’ equity 42,124

Accounts receivable netInventories, at lower of cost or market

Land

Total plant, property, and equipment—gross

Total plant, property, and equipment—net*

Common stock at par (shares authorized and outstanding 2,440,000 shares)

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

(Unaudited)Three months ended 3/30

2003 2004 2005 2006 2007 2007 2008Sales $36,312 $34,984 $35,252 $45,116 $49,364 $11,728 $14,162 Cost of goods sold 25,924 24,200 24,300 31,580 37,044 8,730 10,190 Gross profit 10,388 10,784 10,952 13,536 12,320 2,998 3,972

2,020 2,100 2,252 2,628 2,936 668 896 92 572 108 72 228 14 198

Income before taxes 8,460 9,256 8,808 10,980 9,612 2,344 3,274 Taxes 3,276 3,981 3,620 4,721 4,037 1,009 1,391 Net income 5,184 5,275 5,188 6,259 5,575 1,335 1,883

Cash dividends 1,680 2,008 2,016 2,304 2,304 576 753Depreciation 784 924 1,088 1,280 1,508 364 394Capital expenditures 1,486 1,826 2,011 2,213 2,433 580 640Working capital needs 1,899 3,492 -1,200 4,289 4,757 1,130 1,365

Ratio analysisSales 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Cost of goods sold 71.4 69.2 68.9 70.0 75.0 74.4 72.0 Gross profit 28.6 30.8 31.1 30.0 25.0 25.6 28.0

5.6 6.0 6.4 5.8 5.9 5.7 6.3 0.3 1.6 0.3 0.2 0.5 0.1 1.4

Income before federal taxes 23.3 26.5 25.0 24.3 19.5 20.0 23.1 Net income 14.3 15.1 14.7 13.9 11.3 11.4 13.3

Selling, general, and administrativeOther income—net

Selling, general, and administrativeOther income—net

Exhibit 3

Consolidated Balance Sheet for RSE International as of December 31, 2007(dollars in thousands except per-share figures)

AssetsCash $46,480 U.S. government securities, at cost 117,260 Trade accounts receivable 241,760 Inventories, at lower of cost or market 179,601 Prepaid taxes and insurance 2,120 Total current assets 587,221

Investment in wholly-owned Canadian subsidiary 158,080 Investment in supplier corporation 104,000 Cash value of life insurance 3,920 Miscellaneous assets 2,160 Property, plant, and equipment, at cost: Buildings, machinery, equipment 671,402 Less: allowances for depreciation and amortization 260,001

411,402 Land 22,082

433,484 Patents, at cost, less amortization 1,120 Total assets $1,289,985

Liabilities and Stockholders’ EquityNotes payable to bank $5,795 Accounts payable and accrued expenses 90,512 Payrolls and other compensation 38,399 Taxes other than taxes on income 3,052 Provision for federal taxes on income refund, estimated 32,662 Current maturities of long-term debt 30,900 Total current liabilities 201,320

119,100 Deferred federal income taxes 29,668 2 % cumulative convertible preferred stock, $20 par, 27,783

Common stock, $2 par; 96,000,000 shares authorized; 125,389 62,694,361 shares issued

21,904 Retained earnings 764,821 Total equity 939,897

Total liabilities and stockholders’ equity $1,289,985

Property, plant, and equipment—net

Property, plant, equipment, and land—net

Note payable to bank1

1,389,160 shares outstanding2

Capital surplus3

1 $150,000,000 note, payable semiannually beginning June 30, 2008; $30,900,000 due within one year, shown in current liabilities. One covenant required the company not to pay cash dividends, except on preferred stock, or to make other distribution on its shares or acquire any stock, after December 31, 1999, in excess of net earnings after that date.

2 Issued in January 2007; convertible at rate of 1.24 common share to one preferred share; redeemable beginning in 2012; sinking fund beginning in 2016.3 Resulting principally from the excess of par value of 827,800 shares of preferred stock over the pay value of common share issues in conversion in 2007.

Exhibit 4

Summary of Consolidated Earnings and Dividends for RSE International(dollars in thousands)

2003 2004 2005 2006 2007Net sales $1,623,963 $1,477,402 $1,498,645 $1,980,801 $2,187,208 Cost of products sold 1,271,563 1,180,444 1,140,469 1,642,084 1,793,511

Gross profit 352,400 296,958 358,176 338,717 393,697 Selling, general, and administrative 58,463 69,438 74,932 87,155 120,296 Earnings before federal income taxes 293,937 227,520 283,244 251,562 273,401 Tax expense 126,393 95,558 116,130 101,883 109,360 Net earnings 167,544 131,962 167,114 149,679 164,041

Depreciation 19,160 20,000 21,480 24,200 26,800Cash dividends declared 85,754 77,052 53,116 77,340 92,238

Exhibit 5

Forecast Financial Statements for RSE International

(dollars in thousands except per-share figures)

Actual Projected2007 2008 2009 2010 2011 2012

Sales $2,187,208 $2,329,373 $2,480,785 $2,642,037 $2,813,769 $2,996,658 Cost of goods sold 1,793,510 1,920,085 2,064,243 2,216,470 2,367,290 2,537,259 Gross profit 393,698 409,288 416,542 425,567 446,479 459,399 Selling, general, and admin. 120,296 129,786 139,481 151,027 161,315 169,826 Income before tax 273,402 279,502 277,061 274,540 285,164 289,573 Tax expense 109,361 111,801 110,824 109,816 114,066 115,829 Net income 164,041 167,701 166,237 164,724 171,098 173,744

Cash dividends 92,238 102,082 108,714 115,779 125,185 133,313

Depreciation 26,800 27,950 29,770 31,700 33,170 35,960Net PPE 389,321 426,522 459,404 498,497 541,109 587,580Net working capital 422,597 447,956 486,428 528,407 574,238 624,303

$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

for the Years Ending December 31, 2007–12

Earnings per share1

Divs. per share common stock1

Div. per share preferred stock2

1 62,694,361 common shares in 2007. Thereafter, 64,416,919 shares reflecting conversion of the preferred stock.2 1,389,160 preferred shares in 2007. Conversion into 1,722,558 shares of common stock assumed in 2008.

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

Flinder Valves and Controls RSE International CorporationCommon Stock Common Stock Preferred Stock

High Low Close High Low Close High Low 2003 $16.25 $8.75 $15.00 $12.31 $10.05 $11.88 2004 24.75 14.00 22.63 14.36 11.77 13.16 2005 25.00 20.00 22.25 12.81 9.27 11.13

2006 Quarter Ended:March 31 24.38 20.75 21.50 14.13 12.83 13.95 June 30 22.75 20.38 21.00 13.69 12.04 11.78 September 30 22.75 20.38 21.50 12.83 10.48 11.26 December 31 24.36 20.13 21.00 12.39 11.26 11.87

2007 Quarter Ended:March 31 23.50 20.00 21.75 11.60 10.20 10.67 13.61 12.21 June 30 23.63 19.88 22.00 11.60 10.90 10.90 13.15 12.04 September 30 22.75 20.00 22.50 13.61 11.13 13.61 14.22 12.37 December 31 30.00 22.25 28.50 17.01 13.30 16.78 17.32 13.77

2008 Quarter Ended:March 31 32.13 26.00 31.50 20.73 15.08 20.69 17.32 13.98

May 1, 2008 $39.75 $38.90 $39.75 $22.58 $18.30 $21.98 $17.63 $15.35

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

Expected Price/ Growth

Earnings Dividend Rate Ratio Beta Yield to 2010 Debt/Capital

Cascade Corp.Manufactures loading engagement devices 10.5 0.95 1.7% 5.1% 29%

Curtiss-Wright CorporationManufactures highly engineered, advanced technologiesthat perform critical functions 17.2 1.0 0.7 12.3 36%

Flowserve Corp.Makes, designs, and markets fluid handlingequipment (pumps, valves, and mechanical seals) 20.8 1.3 1.0 27.0 30%

Gardner DenverManufacturers stationary air compressors, vacuum products, and blowers 10.9 1.3 Nil NMF 19%

Idex Corp.Manufactures a wide range of pumps and machinery products 16.1 1.05 1.5 10.8 22%

Roper Inds.Manufacturers energy systems and controls, imaging equipment, and radio frequency products 19.7 1.2 0.5 10.8 29%

Tecumseh ProductsManufactures compressors, condensers, and pumps 38.2 1.05 Nil NMF 8%

Watts IndustriesManufactures and sells and extensive line of valves for the plumbing and heating and water quality markets 15 1.3 1.5 8.4 32%

NMF = not meaningful figure.Source: Value Line Investment Survey, April 25, 2008.

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

Effective Date Acquirer Business Target Business

5/25/2006 Armor Holdings Inc. Law enforcement equip Stewart & Stevenson Turbine-driven products6/26/2006 Bouygues S.A. Construction Alstom SA Power generation equip9/20/2006 Boeing Co. Aircraft Aviall Inc Vehicle parts

11/10/2006 Daikin Industries Ltd. Air conditioning sys OYL Industries Bhd Airconditioners12/8/2006 Oshkosh Truck Corp. Heavy duty trucks JLG Industries Inc Excavators/telehandlers4/11/2007 Rank Group Ltd. Investment holding co SIG Holding AG Packaging/plastics machinery6/22/2007 Meggitt PLC Aerospace/defense system K&F Industries Holdings Aircraft braking systems7/31/2007 BAE Systems Inc. Electronic systems Armor Holdings Inc Law enforcement equip12/3/2007 Carlyle Group LLC Private equity firm Sequa Corp Aircraft engine component

12/20/2007 ITT Corp. Pumps/valves EDO Corp Electn system products2/6/2008 London Acquisition BV Investment holding co Stork NV Components6/5/2008 Ingersoll-Rand Co Ltd. Industrial machinery/equip Trane Inc Airconditioners

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

Acquirer Target

Armor Holdings Inc. Stewart & Stevenson 1,123 726 65.3 1.12 33.1 23.7 40.6Bouygues S.A. Alstom S.A. 2,467 17,679 nmf 1.48 77.9 22.5 -1.2Boeing Co. Aviall Inc. 2,057 1,371 28.9 1.53 18.7 14.9 27.2Daikin Industries Ltd. OYL Industries Bhd 1,152 1,581 27.6 1.41 21.5 16.8 19.4Oshkosh Truck Corp. JLG Industries Inc. 3,252 2,289 20.5 1.30 11.9 10.7 52.3Rank Group Ltd. SIG Holding AG 2,314 1,418 38.6 1.56 64.8 14.2 19.3Meggitt PLC K&F Industries Holdings 1,802 424 20.3 4.26 13.1 10.8 13.5BAE Systems Inc. Armor Holdings Inc. 4,328 2,805 30.5 1.71 17.1 14.3 29.3Carlyle Group LLC Sequa Corp. 2,007 2,181 34.4 1.25 20.6 12.5 63.3ITT Corp EDO Corp. 1,678 945 86.8 1.99 34.0 23.9 40.5London Acquisition BV Stork NV 2,347 2,153 17.1 0.02 na na 35.2Ingersoll-Rand Co. Ltd. Trane Inc. 9,751 8,328 21.2 1.39 14.9 11.6 na

Transaction Size ($mm)

Target Net Sales Last 12 Months

($mm)

Equity Value/ Target Net

Income

Enterprise Value/ Target

Net Sales

Enterprise Value/ Target

Operating Income

Enterprise Value/ Target

Cash Flow

Premium 4 Weeks Prior to Announcement

Date (%)

Exhibit 9FLINDER 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 2008U.S. Treasury Yields3-month bills 4.70% 4.40% 1.28%30-year bonds 5.00% 4.91% 4.52%

Aaa 5.59% 5.56% 5.58%Aa 5.80% 5.90% 5.96%A 6.06% 6.09% 6.32%Baa 6.48% 6.48% 6.98%

Stock MarketS&P 500 Index 1,418 1,468 1,398Price/earnings ratio 17.7× 18.3× 17.4×

Industrial Machinery StocksPrice/earnings ratio 13.9× 14.0×Dividend yield 1.4% 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

Corporate Bond Yields by Rating

Exhibit 10FLINDER VALVES AND CONTROLS INC.Forecast of Financial Statements for Flinders Control and Valv

(dollars in thousands)

Actual Projected2007 2008 2009 2010 2011 2012

Sales $49,364 $59,600 $66,000 $73,200 $81,200 $90,000 Cost of goods sold 37,044 43,816 48,750 54,104 59,958 66,200 Gross profit 12,320 15,784 17,250 19,096 21,242 23,800

2,936 3,612 4,124 4,564 5,052 5,692 228 240 264 288 320 352

Income before taxes 9,612 12,412 13,390 14,820 16,510 18,460 Taxes 4,037 4,965 5,356 5,928 6,604 7,384 Net income $5,575 $7,447 $8,034 $8,892 $9,906 $11,076

Depreciation $1,508 $1,660 $1,828 $2,012 $2,212 $2,432

Net PPE $18,268 $22,056 $24,424 $27,088 $30,049 $33,306Net working capital $16,840 $20,331 $22,515 $24,971 $27,700 $30,702

for Years Ending December 31, 2008–12

Selling, general, and administrativeOther income—net