Freres Lumber Co., Inc. - Page 25

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                  Clausen did not use a weighted average of upbids to                                      
            calculate the value of the covenants.  However, he used weighted                               
            averages in other parts of his report.  He believed that more                                  
            weight should be given to recent events in analyzing the forest                                
            products industry because the industry was highly cyclical.  He                                
            weighted earnings as 5 for 1987, 4 for 1986, 3 for 1985, 2 for                                 
            1984, and 1 for 1983.  Thus, he gave more weight to the years                                  
            immediately before the sale when he evaluated earnings.  On the                                
            other hand, Clausen's method of evaluating upbids minimized the                                
            bids from the 3 years immediately before the sale, even though,                                
            according to Clausen, the earlier years should be given less                                   
                  Clausen assumed that no other bidder would take the Walkers'                             
            place.  However, he estimated that Brent Walker cost petitioner                                
            $1,169,400 in upbids.  This shows that others can cause                                        
            substantial upbids for petitioner on timber contracts.  Clausen                                
            listed 10 entities in the North Santiam Canyon that competed for                               
            timber.  Robert T. Freres, Jr., testified that petitioner's                                    
            principal competitors for public timber in the North Santiam                                   
            Canyon area during the 1980's were Cedar Lumber, Lyons Veneer,                                 
            Young & Morgan, and Frank Lumber.  Petitioner also competed,                                   
            for example, with Avison Lumber, Frasier Lumber, Vanport                                       
            Manufacturing, Boise Cascade, Willamette Industries, and Bohemia.                              
            Clausen did not discuss whether any of these companies would                                   

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Last modified: May 25, 2011