Pacific Grove Spice Company

Exhibit 1 - Income Statement ($ in millions except for price per share)

Income Statement
Net Sales
Cost of Goods Sold
Gross Profit Margin

06/30/07

06/30/08

06/30/09

06/30/10

06/30/11

06/30/12

06/30/13

06/30/14

06/30/15

$46.180
26.784
19.396

$53.107
30.802
22.305

$57.887
33.575
24.312

$68.017
39.790
28.227

$80.940
47.512
33.428

$93.081
54.452
38.629

$105.182
61.531
43.650

$116.751
68.300
48.452

$127.259
74.447
52.813

0.739
14.916
3.741

0.850
17.260
4.195

0.926
18.871
4.515

1.088
21.902
5.237

1.295
26.063
6.070

1.489
29.321
7.819

1.683
33.132
8.835

1.868
36.777
9.807

2.036
40.087
10.690

Interest Expense
Earnings Before Income Taxes

2.906
0.835

2.940
1.255

2.668
1.847

2.423
2.814

2.817
3.253

3.237
4.581

3.582
5.254

3.894
5.913

4.124
6.566

Income Taxes
Net Income

0.225
0.610

0.339
0.916

0.499
1.348

0.760
2.054

0.879
2.374

1.237
3.344

1.418
3.835

1.597
4.316

1.773
4.793

15.00%

9.00%

17.50%

19.00%

15.00%
27.00%

13.00%
27.00%

11.00%
27.00%

9.00%
27.00%

R&D Expense
SG&A Expense
Earnings Before Interest & Taxes

Growth rate of sale

Income tax rate assumed
Price/Earnings Ratio
Market Value of Equity
Common Shares Outstanding
Price per share
Note: 2012-2015 are projected data

16.0
$37.990
1,165,327
$32.60

Pacific Grove Spice Company

Exhibit 2 - Balance Sheet ($ in millions)
Assets

06/30/07

06/30/08

06/30/09

06/30/10

06/30/11

06/30/12

06/30/13

06/30/14

06/30/15

Cash
Accounts Receivable
Inventories
Prepaid Expenses
Total Current Assets

$2.325
9.489
6.697
0.770
19.281

$2.680
10.912
7.701
0.840
22.133

$2.924
11.895
8.394
0.910
24.123

$3.440
13.976
9.947
0.828
28.191

$4.102
16.632
11.878
0.969
33.581

$4.672
19.126
13.613
1.117
38.528

$5.279
21.613
15.383
1.262
43.537

$5.860
23.990
17.075
1.401
48.326

$6.387
26.149
18.612
1.527
52.675

Net Property & Equipment *

Other Long-Term Assets
Total Assets

15.200
2.241
36.722

16.000
2.479
40.612

17.300
2.671
44.094

19.100
3.074
50.365

22.400
3.639
59.620

25.157
4.189
67.874

28.427
4.733
76.697

31.554
5.254
85.134

34.395
5.727
92.797

10.6%

8.6%

14.2%

18.4%

13.8%

13.0%

11.0%

9.0%

Growth rate of assets

Liabilities & Owners' Equity

06/30/07

06/30/08

06/30/09

06/30/10

06/30/11

06/30/12

06/30/13

06/30/14

06/30/15

Bank Notes Payable

Accounts Payable
Current Portion of Long-Term Debt
Accrued Expenses
Total Current Liabilities

$7.669
2.203
0.973
0.771
11.616

$8.820
2.532
1.060
0.884
13.296

$9.613
2.760
1.124
0.965
14.462

$11.295
3.271
1.240
1.129
16.935

$13.442
3.905
1.483
1.345
20.175

$15.492
4.476
1.614
1.545
23.127

$17.506
5.057
1.751
1.746
26.061

$19.432
5.614
1.842
1.938
28.826

$21.181
6.119
1.869
2.113
31.282

Long-Term Debt
Total Liabilities

14.600
26.216

15.894
29.190

16.862
31.324

18.606
35.541

22.247
42.422

24.204
47.331

26.258
52.319

27.614
56.440

28.028
59.310

Common Stock
Retained Earnings
Total Shareholder Equity

6.881
3.625
10.506

6.881
4.541
11.422

6.881
5.889
12.770

6.881
7.943
14.824

6.881
10.317
17.198

6.881
13.661
20.543

6.881
17.497
24.378

6.881
21.813
28.694

6.881
26.606
33.488

Total Liabilities & Net Worth

36.722

40.612

44.094

50.365

59.620

67.874

76.697

85.134

92.797

* Net property & equipment for all years is calculated as net property & equipment from the prior year, plus capital expenditures in the same year, minus
depreciation expense in the same year. Depreciation expense is included in reported operating expenses; it is not broken out separately.
Note: 2012-2015 are projected data

Pacific Grove Spice Company

Exhibit 3 - Capital Budgeting Analysis of Television Program Opportunity
Initial Investment Cash Flows
Equipment

Year 0
-$1,440,000

Growth Rate of Sales

Operating Cash Flows

Year 1

Sales
Cost of Goods Sold at 58.5% of sales
Gross Profit Margin

5.0%
Year 2

5.0%
Year 3

5.0%
Year 4

5.0%
Year 5

$8,100,000
4,738,500
3,361,500

$8,505,000
4,975,425
3,529,575

$8,930,250
5,224,196
3,706,054

$9,376,763
5,485,406
3,891,356

$9,845,601
5,759,676
4,085,924

Promotion Expense at 11% of sales

General & Administrative Expense
Depreciation Expense
Incremental Operating Profit

891,000
760,000
288,000
1,422,500

935,550
798,000
288,000
1,508,025

982,328
837,900
288,000
1,597,826

1,031,444
879,795
288,000
1,692,118

1,083,016
923,785
288,000
1,791,123

Income Taxes at 27%

Incremental Net Income

384,075
1,038,425

407,167
1,100,858

431,413
1,166,413

456,872
1,235,246

483,603
1,307,520

+ Depreciation Expense
Incremental Operating Cash Flow

288,000
1,326,425

288,000
1,388,858

288,000
1,454,413

288,000
1,523,246

288,000
1,595,520

Year 1
$1,664,384
1,184,625
389,466
-2,459,543

Year 2
$83,219
59,231
19,473
-122,977

Year 3
$87,380
62,193
20,447
-129,126

Year 4
$91,749
65,302
21,469
-135,582

Year 5
$96,337
68,568
22,543
-142,361

Year 2

Year 3

Year 4

Yearly Net Working Capital Investment

Additional A/R at 75 Days Sales Outstanding
Additional Inventory at 4 Inventory Turns
Additional A/P at 30 Days COGS
Total NWC Investment
Terminal Cash Flows
Recovery of NWC
Total Project Cash Flows
Internal Rate of Return
Net Present Value at 20%
Net Present Value at 15%
Net Present Value at 10%

Year 1

-$1,440,000
41.28%
$1,716,414
$2,405,498
$3,278,174

-$1,133,118

$1,265,881

$1,325,287

$1,387,664

Year 5
$2,989,590
$4,442,748

Pacific Grove Spice Company

Exhibit 4 - High Country Seasonings Income Statement ($ in millions)
Income Statement

06/30/08

06/30/09

06/30/10

06/30/11

Net Sales
Cost of Goods Sold
Gross Profit Margin

$15.401
9.887
5.514

$15.919
10.284
5.635

$16.664
10.732
5.932

$17.564
11.329
6.235

R&D Expense
SG&A Expense
Earnings Before Interest & Taxes

0.000
4.359
1.155

0.000
4.553
1.082

0.000
4.816
1.116

0.000
5.041
1.194

Interest Expense
Earnings Before Income Taxes

0.057
1.098

0.072
1.010

0.060
1.056

0.063
1.131

Income Taxes
Net Income

0.297
0.801

0.273
0.737

0.285
0.771

0.306
0.825

Dividends Paid

0.288

0.254

0.422

0.401

Pacific Grove Spice Company

Exhibit 5 - High Country Seasonings Balance Sheet ($ in millions)
Assets

06/30/08

06/30/09

06/30/10

06/30/11

Cash
Accounts Receivable
Inventories
Prepaid Expenses
Total Current Assets

$0.585
3.165
2.060
0.231
6.041

$0.610
3.271
2.142
0.239
6.262

$0.639
3.424
2.236
0.250
6.549

$0.673
3.609
2.360
0.263
6.905

Net Property & Equipment *

Other Long-Term Assets
Total Assets

3.831
0.462
10.334

4.146
0.477
10.885

4.273
0.500
11.322

4.424
0.527
11.856

06/30/08

06/30/09

06/30/10

06/30/11

$0.791
0.813
0.000
0.262
1.866

$0.818
0.845
0.000
0.271
1.934

$0.856
0.882
0.000
0.283
2.021

$0.902
0.931
0.000
0.299
2.132

Long-Term Debt
Total Liabilities

0.000
1.866

0.000
1.934

0.000
2.021

0.000
2.132

Common Stock
Retained Earnings
Total Shareholder Equity

4.584
3.884
8.468

4.584
4.367
8.951

4.584
4.716
9.300

4.584
5.140
9.724

10.334

10.885

11.322

11.856

Liabilities + Owners' Equity

Bank Notes Payable
Accounts Payable
Current Portion of Long-Term Debt
Accrued Expenses
Total Current Liabilities

Total Liabilities & Net Worth

* Net property & equipment for all years is calculated as net property & equipment from the
prior year, plus capital expenditures in the same year, minus depreciation expense in the
same year. Depreciation expense is included in reported operating expenses; it is not
broken out separetely.

Pacific Grove Spice Company

Exhibit 6 - Industry Information
McCormick & Company*
2010
2011

ConAgra Foods**
2010
2011

Pacific Grove Spice Co.

2010
2011

Sales revenue (in millions)

Net income (in millions)
Earnings per share
Closing stock price
Price/earnings ratio

$3,336.8
$370.2
$2.79
$44.01
15.8

$3,440.5
$386.5
$2.92
$49.60
17.0

$12,014.9
$725.8
$1.63
$24.02
14.7

$12,303.1
$817.0
$1.90
$25.76
13.6

$68.0
$2.1
$1.76
$25.87
14.7

$80.9
$2.4
$2.04
$32.60
16.0

Total liabilities (in millions)

Interest-bearing debt (in millions)

$1,957.0
$880.3

$1,947.3
$989.7

$6,809.1
$3,487.2

$6,700.2
$3,233.8

$35.5
$31.1

$42.4
$37.2

Book value of equity (in millions)

$1,462.7

$1,642.1

$4,928.9

$4,708.5

$14.8

$17.2

Shares outstanding (in millions)

Market value of equity (in millions)

133.1
$5,857.7

132.4
$6,567.0

443.6
$10,655.3

429.7
$11,069.1

1.2
$30.1

1.2
$38.0

Equity beta coefficient

0.50

0.60

* McCormick's fiscal year-end is November 30. The 2011 data presents the most recent four quarters of
income statement information and the May 31, 2011, balance sheet information.
** ConAgra's fiscal year-end is May 31. The 2011 data presents the full 2011 fiscal year.

Current market interest rates in July of 2011:

Long-term U.S. Treasury Bonds

4.25%

Long-term AA Corporate Bonds

5.20%

Long-Term BBB Corporate Bonds

5.65%

Market Risk Premium, S&P 500 vs. Long-term Treasuries

7.00%

0.85

Prime Interest Rate

3.25%