- 191 -
Mr. Kimball concluded that fair market value of True Oil’s
total equity on a marketable minority basis was $37,253,000 on
January 1, 1993, and $34,623,000 on both June 4 and June 30,
1994.
b. Final Lax Report
The final Lax report calculated fair market value of
interests in the disputed companies without considering any
obligations or restrictions imposed by the book value buy-sell
agreement. Mr. Lax valued the subject interests as of June 3,
1994, the day before Dave True’s death. However, he opined that
the value remained unchanged on June 4, 1994.
The final Lax report employed two market-based valuation
approaches, the guideline company method and the reserves method,
to determine the value of True Oil.61 First, Mr. Lax used the
guideline company method to arrive at a marketable, minority
value of $24,500,000. He identified six publicly traded
companies that he considered to be comparable to True Oil; four
of those companies also were used by Mr. Kimball. Mr. Lax
applied EBDIT, EBIT, pretax earnings, and book value multiples to
True Oil’s financial results for the 12-month period ending
May 31, 1994. Unlike the Kimball reports, the final Lax report
did not provide detailed supporting schedules showing how Mr. Lax
61Mr. Lax stated that he did not employ the income approach
for any of the True entities because, like Mr. Kimball, he
believed that it was too difficult to forecast the future prices
of oil and gas needed to estimate future revenues and cash-flows.
Page: Previous 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 NextLast modified: May 25, 2011