Monmouth

Exhibit 1 Condensed Operating and Stockholder Information, Robertson Tool Company (millions of dollars except
per-share data)
1998
1999
2000
2001
2002
$ 48.5
$ 49.1
$ 53.7
$ 54.8
$ 55.3
32.6
33.1
35.9
37.2
37.9
10.7
11.1
11.5
11.9
12.3
2.0
2.3
2.4
2.3
2.1
.4
.7
.8
.8
.8
Income Before Taxes
2.8
1.9
3.1
2.6
2.2
Taxes
1.1
.8
1.2
1.0
.9
$1.7
$1.1
$1.9
$1.6
$1.3
Cost of Goods
67%
67%
67%
68%
69%
Sell, Genl, Admin.
22%
23%
21%
22%
22%
Operating Income
6.6%
5.3%
7.3%
6.2%
5.4%
$ 2.91
$ 1.88
$ 3.25
$ 2.74
$ 2.23
1.60
1.60
1.60
1.60
1.60
Operations
Sales
Cost of Goods
Selling, General and
Administrative Costs
Depreciation Expense
Interest Expense
Net Income
Percentage of Sales
Stockholder Information
Earnings Per Share
Dividends Per Share
Book Value Per Share
49.40
49.68
51.33
52.47
53.10
Market Price
33-46
35-48
29-41
25-33
23-32
Price/Earnings Ratio
11-16
10-26
9-13
9-12
10-14
Shares Outstanding
584,000
584,000
584,000
584,000
584,000
Exhibit 2 Balance Sheet at December 31, 2002, Robertson Tool Company

dollars)
Assets
(millions of
Liabilities and Net Worth
Cash
$ 1
Accounts Receivable
Inventories
Other
Current Assets
Total Assets
Other
18
1
Net Plant and Equipment
Accounts Payable
$ 2
2
Current Liabilities
Long-term Debt
12
Net Worth
31
28
19
$ 47
Collection Period (days)
53
Days of Inventory (days)
173
Sales/Total Assets
1.18
Total
$ 47
Debt as % Capital
28%
Total Assets/Net Worth
1.52
WCR
24
0.387097
Exhibit 3 Condensed Operating and Stockholder Information, NDP Corporation

(millions of dollars except per-share data)
1998
1999
2000
2001
2002
Sales
$ 45
$ 97
$ 99
$ 98
$ 100
Net Income
1.97
3.20
3.20
1.13
2.98
$ 25
$ 46
$ 49
$ 41
$ 46
11
15
10
13
Net Working Capital
19
35
34
31
33
Long-term Debt
10
18
16
15
17
Shareholders Equity
21
36
40
41
41
$ .78
$ .61
$ .59
$ .21
$ .54
0.20
Operations
Financial Position
Current Assets
Current Liabilities
Stockholders Information
Earnings Per Share
Dividends Per Share
Book Value Per Share
8.31
6.86
7.37
7.38
7.45
Market Price
6-17
10-18
7-18
4-10
5-8
Price/Earnings Ratio
8-22
16-30
12-31
19-48
9-15
Shares Outstanding
2,525,600
5,245,900
5,430,100
5,510,000
5,501,000
Exhibit 4 ProFormas for Robertson Tool (millions of dollars)

Actual
Forecasts
2002
Sales
2003
2004
2005
2006
$ 55.3
$ 58.6
$ 62.1
$ 65.9
$ 69.8
Cost of Goods
37.9
39.8
41.6
43.5
45.4
Gross Profit
17.4
18.8
20.5
22.4
24.4
Sell & Admin
12.3
12.3
12.4
12.5
13.3
Depreciation
2.1
2.3
2.5
2.7
2.9
EBIT
3.0
4.2
5.6
7.2
8.2
Tax @ 40%
1.2
1.7
2.2
2.9
3.3
EBIAT
$ 1.8
$ 2.5
$ 3.4
$ 4.3
$ 4.9
CoGS % Sales
69%
68%
67%
66%
65%
Sell & Admin % Sales
22%
21%
20%
19%
19%
$ 19.0
$ 20.7
$ 21.7
$ 22.6
(4.0)
(3.5)
(3.6)
(3.8)
2.3
2.5
2.7
2.9
$ 20.7
$ 21.7
$ 22.6
$ 23.5
Net Plant & Equip @

Beginning of Year
Capital Expenditures
Net Plant & Equip @
End of Year
Exhibit 4 ProFormas for Robertson Tool (millions of dollars)

Actual
2007 to Infinity
$ 69.8
2002
2003
Sales
55.3
58.6
45.4
Cost of Goods
37.9
39.8
24.4
Gross Profit
17.4
18.8
13.3
Sell & Admin
12.3
12.3
2.9
Depreciation
2.1
2.3
8.2
EBIT
3.0
4.2
3.3
Tax @ 40%
1.2
1.7
$ 4.9
EBIAT
1.8
2.5
65%
CoGS % Sales
69%
68%
19%
Sell & Admin % Sales
22%
21%
Net Plant & Equip @

$ 23.5
(2.9)
2.9
Beginning of Year
$ 19.0
(4.0)
2.3
Net Plant & Equip @

$ 23.5
End of Year
$ 20.7
ollars)
% of sales
Forecasts
2004
2005
2006
2007 to Infinity
62.1
65.9
69.8
69.8
41.6
43.5
45.4
45.4
20.5
22.4
24.4
24.4
12.4
12.5
13.3
13.3
2.5
2.7
2.9
2.9
5.6
7.2
8.2
8.2
2.2
2.9
3.3
3.3
3.4
4.3
4.9
4.9
67%
66%
65%
65%
20%
19%
19%
19%
$ 20.7
$ 21.7
$ 22.6
$ 23.5
(3.5)
(3.6)
(3.8)
(2.9)
2.5
2.7
2.9
2.9
$ 21.7
$ 22.6
$ 23.5
$ 23.5
2002
1.00
###
###
###
###
###
###
###
0
0
###
###
0
0
0
0
0
0
0
0
0
2003
1.00
0.68
0.32
0.21
0.04
0.07
0.03
0.04
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.32
-0.07
0.04
0.00
0.35
0.00
2004
1.00
0.67
0.33
0.20
0.04
0.09
0.04
0.05
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.33
-0.06
0.04
0.00
0.35
0.00
2005
1.00
0.66
0.34
0.19
0.04
0.11
0.04
0.07
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.33
-0.05
0.04
0.00
0.34
0.00
2006
1.00
0.65
0.35
0.19
0.04
0.12
0.05
0.07
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.32
-0.05
0.04
0.00
0.34
0.00
2007 to Infinity
1.00
0.65
0.35
0.19
0.04
0.12
0.05
0.07
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.34
-0.04
0.04
0.00
0.34
0.00
Exhibit 5 Five-Year Forecast of Monmouth, Inc. Earnings, Excluding Robertson Tool

per-share data)
Net Income
Shares Outstanding (mil)
Earnings Per Share
(millions of dollars except
2003
2004
2005
2006
2007
$ 11.0
$ 11.9
$ 12.8
$ 13.8
$ 15.0
4.21
4.21
4.21
4.21
4.21
$ 2.61
$ 2.83
$ 3.04
$ 3.27
$ 3.56
Exhibit 6 Selected Financial Information on Quasi-Comparable Firms, 2002

Actuant Corp.
Collection Period (days)
Briggs & Stratton
Idex Corp.
Lincoln Electric
Snap On Inc.
Stanley Works
Robertson Tool Co.
55
77
47
61
96
77
53
Inventory % Sales
12%
18%
13%
17%
18%
16%
33%
Operating Margin % Sales
17%
13%
20%
15%
10%
15%
5%
Return on Capital
21%
9%
10%
12%
11%
14%
4%
3.8
3.2
7.1
11.5
7.8
9.3
3.5
Times Interest Earned

Debt % Capital
balance sheet values
98%
52%
30%
27%
29%
40%
28%
market values
29%
37%
20%
17%
19%
24%
37%
BB-
BB+
BBB
A+
$ 712
$ 1,443
$ 1,191
$ 1,145
$ 1,861
$ 3,014
$ 29
55
119
98
90
129
234
1.80
EBIAT Multiple
12.8
12.1
12.2
12.7
14.4
12.9
16.1
Share Price
$ 42
$ 42
$ 29
$ 22
$ 26
$ 27
$ 30
Earnings Per Share
2.80
3.20
2.00
1.78
1.80
2.32
2.32
Price/Earnings
15.0
13.1
14.5
12.4
14.4
11.6
13.5
Equity Beta
1.00
1.00
1.00
.75
1.05
.95
avg equity beta
.71
.63
.80
.63
.85
.73
avg asset beta
Bond Rating
Value of Firm ($ mil)
EBIAT ($ mil)
Asset Beta
=
=
B levered =
.73
1.05
Exhibit 7 Information on United States Capital Markets

I. Interest Rates in May 2003
30-Year U.S.
U.S. Corporate Bonds Rated
Treasury Bonds
4.10%
AA
BBB
BB
4.52%
5.07%
6.07%
7.96%
II. Estimated Market Risk Premium = 5.5% over 30-Year U.S. Treasury Bonds
III. Median Values of Key Ratios by Standard & Poors Rating Category
AAA
AA
BBB
BB
Times Interest Earned (X)

EBITDA / Interest (X)
Pre-tax Return on Capital (%)
27.3
31.0
25.2
18.0
21.4
25.4
10.4
12.8
19.7
5.9
7.6
15.1
3.4
4.6
12.5
1.5
2.3
8.8
Debt as % Capital (%)

Number of companies
12.6
6
36.1
15
38.4
118
43.7
213
51.9
297
74.9
345
IV. Debt and Times Interest Earned Ratios for Selected Industries
AAA
AA
BBB
BB
Food Processing
Debt % Capital
Electrical Equipment
44%
7.9
51%
6.7
54%
4.3
53%
2.9
Debt % Capital
36%
7.3
48%
3.2
72%
1.6
46%
54%
57%
73%
4.0
3.4
2.7
2.0
Electric Utilities
Debt % Capital
Guide Questions:
1
If you were Mr Vincent, EVP of Monmouth Inc, would you try to gain control of Robertson Tool in May 2003?
2
Why is Simmons eager to sell its Robertson position to Monmouth for $50 per share? What are the concerns of and alternatives
for each of the other groups of Robertson shareholders?
3
What is WACC of Robertson Tool using CAPM? Carefully consider which equity value you will use:
Current
Prospective with synergy values
Required value to get transaction done (see question 7)
4
What is maximum price Monmouth can afford to pay using DCF? Use company forecast on Exhhibit 4. Run the valuation
as of the start of 2003. Is this a reasonable forecast? Why or why not? If not, what changes would you make?
5
For comparison, run a DCF of Robertson using sales growth on Exhibit 4 but without synergies/margin improvements.
Compare this value to #3 above.
6
What is maximum price Monmouth should pay based on market multiples of EBIAT? Use 2002 numbers for
Robertson. Would your answers change if you modify the 2002 Robertson EBIAT based on margin improvements
anticipated by Monmouth?
7
What offer would you make to gain the support of the Robertson family and the great majority of the stockholders?
Will you offer to give away all the expected synergy values/margin improvements, why or why not?
Question 1
Yes,
due to extensive distribution and the ability to be the market leader by generating 6 - 7% sales growth per year.
Current WACC
B un =
D/E =
BL=
Ke
Kd=
question 2
Question 3
WACC =
II
Question 4, 5,6
0.73
0.56
0.8964
9.0302
7.96
7.839024
Prospective with synergy values

Sheet DCF
next sheet.
for Robertson
Actual
Forecasts
2002
Sales
COGS
Gross Profit
SG and A
Depreciation
EBIT
Tax @ 40%
EAT
Dep
WCR
change in WCR
2003
55.3
2004
58.6
2005
62.1
2006
65.9
69.8
37.90
39.80
41.60
43.50
45.40
17.4
18.8
20.5
22.4
24.4
12.3
12.3
12.4
12.5
13.3
2.10
2.30
2.50
2.70
2.90
3
1.2
1.8
4.2
1.68
2.52
5.6
2.24
3.36
###
2.88
4.32
8.2
3.28
4.92
2.10
2.30
2.50
2.70
2.90
24
25.44
1.44
26.97
1.53
28.58
1.62
30.30
1.72
(4.0)
(3.5)
(3.6)
(3.8)
Cash Flow
Terminal Value
Free Cash Flow
DCF
-0.620
0.834
1.802
2.305
-0.620
0.834
1.802
2.305
-0.574979 0.716933 1.437275 1.704907
SUM DCF
Less : Debt
DCF Equity
Number of shares
Share Price
65.61494
12
53.61494
0.584
91.80641
without synergies
on the basis of 2002 forecast

Actual
Forecast
s
Without synergy
2002
Sales
COGS
Gross Profit
SG&A
Depreciation
EBIT
Tax @ 40%
EBIAT
Add depreciation
WCR
Less change in WCR
Less Net Capex
2003
2004
2005
2006
55.30
58.60
62.10
65.90
69.80
38.16
17.14
0.00
2.10
15.04
6.02
9.03
2.10
24.00
40.43
18.17
12.89
2.30
2.97
1.19
1.78
2.30
25.43
1.43
4.00
42.85
19.25
13.66
2.50
3.09
1.24
1.85
2.50
26.95
1.52
3.50
45.47
20.43
14.50
2.70
3.23
1.29
1.94
2.70
28.60
1.65
3.60
48.16
21.64
15.36
2.90
3.38
1.35
2.03
2.90
30.29
1.69
3.80
Cash flow from assets

Terminal Value
Free cash flow
DCF
-1.35
-0.67
-0.61
-0.56
-1.35
-0.67
-0.61
-0.56
-1.249108 -0.571692 -0.486052 -0.415643
SUM DCF
Less debt
Equity
Share Price
16.22763
12
4.227626
7.239085
2007 to Infinity
WACC =
69.8
45.40
24.4
13.3
2.90
8.2
3.28
4.92
2.90
30.30
0.00
(2.9)
4.920
85.94587
90.866
62.33081
2007 to Infinity
69.80
48.16
21.64
15.36
2.90
3.38
1.35
2.03
2.90
30.29
0.00
2.90
0.69
0.22
0.43
7.839024
2.03
25.68608
27.72
18.95012

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Exhibit 1 Condensed Operating and Stockholder Information, Robertson Tool Company (millions of dollars except

Income Before Taxes

Sell, Genl, Admin.

Exhibit 2 Balance Sheet at December 31, 2002, Robertson Tool Company

Liabilities and Net Worth

Net Plant and Equipment

Collection Period (days)

Days of Inventory (days)

Total Assets/Net Worth

Exhibit 3 Condensed Operating and Stockholder Information, NDP Corporation

Net Working Capital

Exhibit 4 ProFormas for Robertson Tool (millions of dollars)

Sell & Admin

Sell & Admin % Sales

Net Plant & Equip @

Exhibit 4 ProFormas for Robertson Tool (millions of dollars)

Sell & Admin

Sell & Admin % Sales

Net Plant & Equip @

Net Plant & Equip @

Exhibit 5 Five-Year Forecast of Monmouth, Inc. Earnings, Excluding Robertson Tool

(millions of dollars except

Exhibit 6 Selected Financial Information on Quasi-Comparable Firms, 2002

Collection Period (days)

Briggs & Stratton

Robertson Tool Co.

Operating Margin % Sales

Times Interest Earned

balance sheet values

Earnings Per Share

avg equity beta

avg asset beta

Exhibit 7 Information on United States Capital Markets

U.S. Corporate Bonds Rated

Times Interest Earned (X)

Debt as % Capital (%)

Prospective with synergy values

on the basis of 2002 forecast

Cash flow from assets

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