There are several key assumptions that this report relies on. Some of these include that the key personnel especially, Mr. Jones remains with the company. Other assumptions include no adverse changes in government regulation with respect to budgets for government contracts as well as no pending liabilities.
This valuation report has been prepared in accordance with the Statement on Standards for Valuation Services (SSVS) of the American Institute of Certified Public Accountants. In accordance with these standards, Assumptions and Limiting Conditions are provided as Appendix B and a Statement of Appraiser Qualifications is included in Appendix C.
The scope of this valuation engagement report was limited. «Cell│[1]ReportWriter!b20│0││I was» engaged to perform a valuation for «Cell│[1]ReportWriter!B3│0││Peachtree Plumbing, Inc» with the intent of ascertaining an opinion of value. However, «Cell│[1]ReportWriter!B21│0││I was» limited to the information that was provided as of «Cell│[1]ReportWriter!B5│0│mmmm d, YYYY│June 30, 2006» regarding updated data basis for discounts and premiums for control interest, and there was no independent verification of data nor was there any audited financials. I had to rely and the accuracy of the data and financials submitted by management. If more information were available to «Cell│[1]ReportWriter!B18│0││me», matters may have come to «Cell│[1]ReportWriter!B19│0││my» attention that could have a material impact on the opinion of value contained in this report.
Accordingly, «Cell│[1]ReportWriter!B19│0││my» level of assurance on the estimate of value is reduced. This report is not intended to serve as a basis for expert testimony in a court of law or other governmental agency without further analysis and resulting documentation.
Company History
Peachtree plumbing, Inc is a plumbing contracting company. Mike Jones father, Reginald Jones, founded the company in Atlanta, Georgia in 1989. The company remained fairly small until 2000 when the founder, Reginal Jones died and Mike & Shirley Jones and their family inherited the company. Mike and Shirley have been more aggressive in their marketing of the company to the general construction trade. The company is located in their own facilities, which are owned by the Jones Family Limited Partnership and leased back to the company which allows them to be flexible with the lease rates. The facility is adequate for further expansion and it is in excellent shape. In the last quarter of 2003 the company realized some economies of scale by branching out into the residential plumbing sector (instead of just commercial) which greatly increased their revenue and net margins. The company has a great reputation and Mike Jones is well known throughout the business. The primary market for the company’s services is the general construction markets of Georgia and Northern Florida, with the major share of its business coming from the Atlanta Area. The market for these services is moderately large and stable. Most of the company’s services are marketed through the reputation of the company as well as through Mike’s association and reputation through construction trades organizations. Mike uses the “green sheet” to keep abreast of the construction work in the areas the company services. The company has issued one class of common stock in the amount of 55,000 shares. Mike & Shirley Jones owns 91% of the company and their two children Mark and Jill own the remaining 9 %. Each share of stock carries one vote so Mike Jones can have majority vote because he owns more than 50% of the shares. Historically there have been neither prior sales transactions of common stock nor any related party transactions of company interest.
Nature of the Business
The company focuses on plumbing construction for residential and commercial application. Their core competency is in the rough plumbing on new construction. Peachtree Plumbing inc. now has gross sales of $7,295,000 and employs 51 people. The employee turnover rate is very low by industry standards, which implies a high degree of employee satisfaction, a relative constant level of construction work, and low employee costs. Peachtree offers great competitive benefits along with competitive wages. The Company’s production workers have excellent skills and are paid accordingly. There is an adequate supply of labor in the area when occasional help is needed and the compensation for these individuals is average for the area. The company operates as a union shop and does not make its employees sign a non-compete. Entry into this type of specialized construction is moderately difficult as it takes large sums of money and equipment. Exit, on the other hand, is relatively easy. Given the small level of market share that Peachtree owns (1/5 of 1%) the threat of new entry is minimal because of how much market share is still available for Peachtree to try and win over.
Products or Services
Peachtree products include supplying all commercial and residential plumbing parts from rough plumbing to finished products. The company doesn’t manufacture the products but plays as a middle man in the mark-up chain; however most of the revenues come from their services they provide on new construction contracts for plumbing installation. There appears to be no proprietary content or technology owned or used by the company. The company’s products and service don’t differ much from its competitors, except for the quality of service performed and reputation, in which Peachtree is considered to be in the top rankings for quality of service and reputation.
Operating and Investment Assets
The bulk of the companies operating and investments assets come from there working capital and their investments in short term securities (30 day reset bonds). A big percentage of these assets are held in the company’s name for tax purposes but are not important to the daily operations of the company. Another large asset the company has in the adjacent land which is held for investment with the intent to expand the facility to that lot at a future date. Other operating assets include equipment at the facility that assembles certain plumbing equipment to specs of the customer. Other assets include vehicles and trucks.
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