Menard, Inc. - Page 60

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           Company       Gross Revenue       Revenue Growth     Net Income            
          Home Depot       1$24.156          23.7%               $1.160               
          Lowe’s         10.137              17.9                0.357                
          Menards           3.420            12.7                  20.204             
               1All dollar amounts are in billions and have been rounded to           
          the nearest million.                                                        
               2A slight discrepancy existed between Mr. Rowley’s and Dr.             
          Hakala’s numbers for the value of Menards’s net income for TYE              
          1998.  See Appendix.  After comparing the expert reports to                 
          Menards’s TYE 1998 financial statement, we accept the net income            
          value as contained in Mr. Rowley’s report.                                  
          Across all three measures, Menards performed in third place.  In            
          contrast, however, Menards had the highest return on equity and             
          return on assets of its direct competitors:50                               
                                  Return on          Return on                        
               Company         Equity             Assets                              
                                                                                     
               Menards        18.8%             14.2%                                 
             Home Depot         16.1              10.3                                
               Lowe’s         13.7                6.8                                 




               50Mr. Rowley calculated the companies’ returns on “beginning           
          shareholders’ equity”, “average shareholders’ equity”, and                  
          “average assets”, but did not explain how he arrived at those               
          numbers or why he used such variations on return on equity.                 
          Additionally, petitioners’ expert on investor returns, John                 
          Gilbertson of Goldman, Sachs & Co., calculated returns on                   
          “beginning shareholders’ equity”, “average shareholders’ equity”,           
          “beginning assets”, and “average assets”.  Although Mr.                     
          Gilbertson explained how he arrived at those numbers, other than            
          stating his rationale for emphasizing the return on average                 
          shareholders’ equity over the return on beginning shareholders’             
          equity, Mr. Gilbertson did not explain why he used these                    
          variations on return on equity and return on assets.  In the                
          absence of credible evidence to explain the calculations made by            
          petitioners’ experts, we shall rely on Dr. Hakala’s values                  
          computed for the companies’ return on equity and return on                  
          assets.                                                                     




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