Estate of Ross H. Freeman, Deceased, Dennis Hersey, Executor - Page 17

                                       - 17 -                                         
          testimony with respect to the identification of comparable                  
          companies.  Except perhaps for one company, no comparable                   
          companies are identified in his expert testimony.  During his               
          oral testimony, Klemm tried to explain that discrepancy; he also            
          asked that his expert testimony be amended to make his earlier              
          identification of comparable companies part of that testimony.              
          We cannot reconcile his explanation of why he took the                      
          comparables out (which we do not fully comprehend) with his                 
          request to amend his expert testimony and add them back in.  We             
          have little confidence in his quantification of appropriate                 
          variables reflective of the market (e.g., capitalization rates).            
          Klemm’s oral testimony has raised for us serious doubts as to his           
          understanding of the approaches to valuation that he selected.              
          That, alone, is sufficient reason for us to reject the                      
          conclusions resulting from those approaches.                                
               We are also concerned that in relying on his three                     
          approaches Klemm ignored the dynamic state of the corporation,              
          which had experienced exceptional growth in both revenues and               
          earnings since its inception.  We can find in neither Klemm’s               
          identification of (1) market variables or (2) variables                     
          particular to the corporation (e.g., earnings) nor in his                   
          manipulation of those variables any recognition that future                 
          earnings and revenues might be any different than they were in              
          1989 (i.e., that earnings and revenues would continue to grow).             
          Although, in the body of his report, Klemm takes note of the                




Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  Next

Last modified: May 25, 2011