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Turning to the Kimball report, we doubt the reliability of
the guideline company method values. First, we question whether
the relationship between revenues, TBVIC, and market value of the
selected public companies has any bearing on the market value of
Black Hills Trucking. The guideline companies were all
profitable over the 5-year period, whereas Black Hills Trucking
sustained losses every year. Also, most of the guideline
companies had significantly higher average revenues over the
analyzed period than Black Hills Trucking. As a result, Mr.
Kimball applied multiples to Black Hills Trucking’s revenues that
were lower than the lowest industry multiples. These facts
suggest a lack of comparability between the selected companies
and Black Hills Trucking.
Second, Mr. Kimball did not adjust the TBVIC multiple to
reflect differences in accounting methods between Black Hills
Trucking and the public companies. TBVIC is a debt-free measure
of a company’s book value. Black Hills Trucking’s book value was
computed on a tax basis, which allowed more accelerated
depreciation deductions than GAAP basis financials. Annually,
the company deducted approximately $2.1 million in depreciation
expense. There is no evidence in the record indicating that Mr.
Kimball adjusted the TBVIC multiples of either the guideline
companies or Black Hills Trucking to reconcile any discrepancies
in accumulated depreciation.
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