- 42 -
Well, with regard to these particular industries
and with regard to Hess, I mean, even though they are
in a cyclical industry, it appeared that they were
going through a period of secular growth, which would
mean a growth without regard to the normal patterns of
the industry.
And, certainly, that’s borne out in the growth
rate of the company’s sales, the growth rate of the
company’s earnings and the budget data regarding what
expectations were for the future. So for this
particular company, I don’t think that it’s appropriate
to measure it over a period of years.
Under these circumstances, we cannot agree that Mr. Engstrom’s
use of the 1995 fiscal year information alone renders his
analysis unreliable.39 We are not convinced that his reliance on
the 1995 financial information necessarily overstates the fair
market value of HII stock. Nevertheless, we recognize this
possibility and consider it in reaching our conclusions.
Petitioners also suggest that Mr. Engstrom should have made
a downward adjustment to the P/E ratios to reflect the fact that
HII’s asset utilization (sales to total assets) was higher than
that of the guidelines. In Mr. Heebink’s market comparable
analysis, he made a downward adjustment to reflect the
differences in HII’s asset utilization. According to Mr.
38(...continued)
217.
39Mr. Heebink testified generally regarding the benefits and
preferability of using longer periods for comparison and the
potential of an overstatement when using financial information
for only 1 year. However, he did not testify regarding whether
the use of a longer period or averages would have affected Mr.
Engstrom’s conclusions.
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