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BAYOU STORAGE AND FORWARDING, LLC

BUSINESS VALUATION AS OF DECEMBER 31, 2008

PURPOSE OF VALUATION & STANDARD OF VALUE


We understand that you require the determination of the fair market value of Bayou Storage and Forwarding
LLSs common shares. The most commonly used definition of fair market value is located in IRS Revenue
Ruling 59-60. This revenue ruling defines fair market value as:
..the price at which the property would change hands between a willing buyer and
a willing seller when the former is not under any compulsion to buy and the latter is
not under any compulsion to sell, both parties having reasonable knowledge of
relevant facts. Court decisions frequently state in addition that the hypothetical
buyer and seller are assumed to be able, as well as willing, to trade and to be well
informed about the property and concerning the market for such property.
This definition of fair market value is the most widely used in valuation practice. Also implied in this definition is
that the value is to be stated in cash or cash equivalents and that the property would have been exposed on the
open market for a period long enough to allow the market forces to interact to establish the value.
We considered, among other factors, all elements listed in Revenue Ruling 59-60, which provides guidelines for
the valuation of closely held stocks. Revenue Ruling 59-60 states that all relevant factors should be taken into
consideration, including the following:

The nature of the business and the history of the enterprise from its inception.

The economic outlook in general and the condition and outlook of the specific industry in particular.

The book value of the stock and financial condition of the business.

The earning capacity of the company.

The dividend-paying capacity of the company.

Whether or not the enterprise has goodwill or other intangible value.

Sales of the stock and the size of the block of stock to be valued.

The market price of stocks of corporations engaged in the same or similar line of business having their
stock actively traded in a free and open market either on an exchange or over the counter.

VALUATION METHODOLOGIES
A company can be valued on two fundamental bases: (1) as a going concern and (2) as if in liquidation. When
appraising a minority interest, the premise of value that actually exists as of the valuation date is normally adopted.
Accordingly, the premise of value in this appraisal is going concern value. Going concern value assumes that the
company will continue in business and looks to the enterprises earning power and cash generation capabilities as
indicators of its fair market value.
All valuation methods attempt to determine the fair market value of an entity by simulating a hypothetical market
transaction. The methods are categorized within three distinct, but related methodologies: 1) asset approaches, 2)
income approaches, 3) and market approaches. Within each of these approaches are many acceptable valuation
methods available for use by the appraiser. An appraiser should test as many methods as may be applicable to the
facts and circumstances of the entity being appraised, and make an informed judgment as to how he or she may
reconcile these various values in deriving a final estimate of value.

ASSET-BASED METHODS
Net Asset Value Analysis

MARKET-BASED METHODS
Public Comparables Analysis
Precedent Transactions Analysis

ESTIMATED FAIR
MARKET VALUE

INCOME-BASED METHODS
Discounted Cash Flow Analysis

Asset-Based Approaches. Asset based approaches consider the net value of assets in place as of the valuation
date. These techniques include liquidation value, calculated simply as assets minus liabilities, and net asset value,
under which the book value of assets are adjusted to reflect their fair market value. The former method is not
typically applicable in the valuation of a going concern, and serves as an indication of minimum value. Both of these
methods are limited in that they do not consider a companys future earnings capacity.
Market-Based Approaches. Market-based approaches assess the relative valuations of comparable companies
in both the capital markets and in past M&A transactions. These approaches include the public comparable and
precedent transactions techniques. The former implies that the relative prices of publicly traded stocks in the same
or similar markets provide an indication of the subject companys relative value. The precedent transactions
method price is based on the premise that the price paid for a similar company provides objective evidence of the
subject company's value.
Income Approaches. Income approaches are used to determine the value of an enterprise based on its earnings
or cash flow generating abilities. Therefore, there is a relationship between the value of the enterprise and the
earnings or cash flow it produces. The methods that are used in the income approach are known as capitalized
returns methods and discounted future returns methods. These techniques are applicable only when future cash
flows or net earnings are estimated as positive there is a reasonable likelihood that future operations will continue
at a predictable rate.

NORMALIZATION ADJUSTMENTS
In order to more accurately analyze the Companys financial performance as part of the approaches discussed
in the this report, we adjusted the financial statements to remove the effects of unusual accounting treatments,
non-recurring events and discretionary items. Performing these adjustments helps present a clearer picture of
the firms operating performance, which is what a potential acquirer would assess in the event of a transaction.
We made the following normalization adjustments in our analysis.

Balance Sheet. As of June 30, 2008, the Company had approximately $26.1 million in debt on its balance
sheet from financing construction of the Jacksonville Silo facility. Under a contract agreement with the
Company, Kraft Foods, Inc. pays Bayou a fixed charge equal to its required interest and principal repayments
for this debt. Because the Company is not paying down this debt with its own free cash flow, and because
this large debt balance could materially affect the determination of equity value, we normalized Bayous
balance sheets to remove the acquisition debt and related assets. We also adjusted revenue to exclude the
fixed charge. While this adjustment causes EBITDA to fall sharply, we believe that it creates a more accurate
image of the Companys operating performance.

Management Salaries. We normalized EBITDA to add back officers salary in excess of normal market
salary.

I. EXECUTIVE SUMMARY
OVERVIEW OF RESULTS
We analyzed the financial results of each of the companys operating entities and arrived at fair market values for
the Company under several fundamental valuation techniques. Our results are summarized below:

Value on Controlling Basis

15,509,000

Discount for Lack of Control:

17.5%

Value on Noncontrolling Basis

12,789,000

Discount for Lack of Marketability

30.0%

Value on Noncontrolling, Nonmarketable Basis

8,952,000

Value of 33.3% Interest

2,984,000

In light of our analysis and the facts available to it, and based on generally accepted valuation procedures and
practices, it is our opinion that equity value on a noncontrolling basis is $8,952,000 as of September 30, 2008.
This implies a value of $2,984,000 for a 33.3% share of the Company.

II. BUSINESS OVERVIEW


OVERVIEW
Founded in 1936, Bayou, LLC (or the Company) is a large regional warehousing, trucking and logistics
company headquartered in New Orleans, LA. The Company has developed a strong reputation for its
imported and exported commodities handling capabilities, and specializes in the warehousing, handling and
processing of green (or raw) coffee. The Company is a Louisiana C-corporation and has 113 employees, and
is owned by its officers. These principals and their respective shares of the Company are listed below.
Management and Ownership
Officer

Ownership (%)

Allen B. Colley, President

33.3%

Kevin D. Colley, Vice President

33.3%

Christopher B. Colley, Treasurer

33.3%

The Company operates in three states. In New Orleans, LA, it provides over a million square feet of storage
space, operates a local and over-the-road trucking fleet and runs the nations first green coffee silo operation.
It also manages New Orleans Customs Examination Station for specific goods arriving at the port under a
contract with U.S. Customs and Border Protection. In Jacksonville, FL, the Company owns and operates a
state-of-the-art silo facility, providing storage and specialized processing services exclusively to Maxwell
Houses local plant through a subsidiary, Bayou Silo, LLC. In 2007, the Company initiated storage operations
in Houston through subsidiary Bayou Houston, LLC. This segment is expected to grow rapidly and comprise
an increasing proportion of total revenue going forward. Bayous presence extends to Miami, FL as well,
where it holds a 50.0% interest in Miami Storage, LLC, a warehouse facility dedicated primarily to green
coffee storage. The Companys recent expansion to Houston and Miami reflects a strategic effort by
management to enter new markets, diversify its activities and reduce revenue concentration in its New
Orleans operations.

Forecast Financial Performance


Norm. EBITDA
Margin (%)

Revenue and Norm.


EBTDA ($mm)
24.0

25.0%

20.0

20.0%

19.9

18.7

16.0

17.4

15.7

15.0%

13.8

12.0
11.8

10.0%
8.0
5.0%

4.0

0.0

1.8

0.9

2008A

3.5

2.7

3.7

3.8

2009E
Total Revenue

2010E

2011E

Normalized EBITDA

2012E

2013E

Normalized EBITDA Margin

VALUE DRIVERS
A qualitative assessment of a companys value drivers and overall risk profile is an integral part of business
valuation. Significant value drivers, based on our analysis and discussions with management, are summarized
below.
Challenges

Strengths
Recurring revenue. The Company
generates a stream of guaranteed
revenue from Kraft Foods, Inc., and is
successfully restoring New Orleans
revenue to historical levels.

Opportunities

Facilities and Infrastructure. The


Company owns over a million square
feet of facilities space in New Orleans,
and leases over 170,000 square feet in
Houston. Based on our understanding
of company facilities, Bayou has the
infrastructure in place to support
significantly more revenue.

New regional markets. Management


has demonstrated its ability to
outmaneuver the Companys
competitors and claim market share in
unfamiliar geographic markets. Going
forward, Bayou is expected to increase
its share of the Houston and Miami
coffee markets.

Market leadership. Bayou commands


at least a 20.0% coffee market share in
all four major Southeastern U.S. ports.
Since its establishment in 2006, the
Jacksonville operation has managed to
capture 85.0% of the total available
market in that city.

New commodity markets. The


Company is positioned to capture share
in new commodity markets. In
particular, Bayou is seeing an
increasing stake in the non-ferrous
metals storage market.

Customers, pipeline and visibility.


Bayou has a strong customer roster of
coffee industry leaders, and is
expanding its pipeline to customers in
other industries. Moreover, the
contractual nature of most of its
revenue provides a large degree of
visibility.
Experienced management team. No
member of the Companys executive
team has contributed less than 30
years experience to the Company.
Through this experience, management
has a unique understanding of the its
customers requirements and of the
competitive dynamics prevailing in the
market.

Scope for margin improvement. The


Company has a considerable degree of
operating leverage. Also costs as a
percentage of revenue have been much
lower historically. Continuing its
recovery from Hurricane Katrina, Bayou
is expected to unlock significant value
through EBITDA margin increases
going forward.

Regional concentration. 45.6% of


Bayous total revenue derives from its
New Orleans operations. This
represents a risk to the company, given
the impact that events such as
Hurricane Katrina have historically had
on New Orleans businesses.
Customer concentration. 48.6% of the
Companys total revenue is contributed
by Kraft Foods at the Jacksonville
location.
Industry concentration. The coffee
industry delivers a significant
percentage of Bayous total revenue.
Adverse developments in the coffee
industry could negatively impact
financial results.

III. ECONOMIC AND MARKET ANALYSIS


MARKET OVERVIEW
The warehousing and storage markets are volume-driven, in that a companys revenue is dependent on the volume
of the goods being stored. Business reflects pricing and demand for the underlying product in storage.
A significant percentage of the Companys revenue derives from green coffee storage, loading and related
services. Its revenue and that of its direct competitors is materially affected by the performance of the coffee
industry and overall demand for coffee in the United States.
Increasing consolidation in the coffee industry is making contractual arrangements with large coffee makers a very
important determinant in companies success. The market for coffee storage is also driven by location and
reputation. Warehousing and processing facilities are necessarily located at ports, which offer coffee manufacturers
access to both raw materials and large coffee drinking markets. Success in Bayous market requires significant
operations at port sites and a strong track record at these locations. Because coffee storage alone is a relatively
homogenous activity across industry participants, differentiation in Bayous market is difficult. Competitive
advantages can be established through technologically advanced facilities, value-added service offerings and
advanced knowledge of both coffee manufacturer and port authority requirements. Barriers to entry include
difficulties establishing high-volume contractual arrangements with coffee industry leaders and attaining port
authority contracts. Moreover, scale is another major barrier, meaning that new entrants must have a large amount
of warehouse space and coffee processing infrastructure in place for a top coffee maker to even consider doing
business.
Like Bayou, its competitors are engaged in the storage of commodities and other goods. The Companys key
competitors and coffee market share by port are given below
Principal Competitors
Port Cargo Service
Silocaf (Pacorini)

Bayous Estimated Coffee Market Share by Port


Port

Share (%)

New Orleans

20.0%

The Kearney Companies

Miami

40.0%

Gulf Winds International

Jacksonville

85.0%

Cadeco

Houston

25.0%

TCI Trucking and Warehousing Services

H&M Warehouse
Econocaribe
Miami International Warehouse

THE U.S. COFFEE INDUSTRY


Importing approximately 20.0 million bags of coffee annually (25.0% percent of the worlds total coffee exports),
the U.S. is both the largest coffee importer and largest coffee consuming nation in the world. In 2009, the U.S. is
expected to import nearly $1.3 billion in coffee products
U.S. Coffee Industry Revenue and Revenue Growth (2006-2014E)
Growth (%)

Revenue ($B)
9.0

8.0%

8.0
7.0
6.0

6.8

6.4

7.2

7.0

7.4

7.6

7.8

8.0

8.2

6.0%
4.0%
2.0%

5.0

0.0%
4.0
-2.0%

3.0

-4.0%

2.0

-6.0%

1.0
0.0

-8.0%
2006

2007

2008

2009E

2010E

Industry Revenue ($B)

2011E

2012E

2013E

2014E

Growth %

Source: IBISWorld Research

Coffee bean prices are a central determinant of industry profits, purchasing volumes and supply levels to
consumers. Bean prices have increased dramatically over the last five years, creating cost pressures and
causing significant industry consolidation. Industry research specialist IBISWorld estimates that the number of
companies in the industry has decreased from approximately 272 in 2004 to 253 in 2008.
These developments have allowed the four leading producers to exert a strong influence on the market. This
year, Sara Lee Corporation, Kraft Foods, Inc., Nestle SA, and the Procter & Gamble Company are expected to
command 61.3% of the domestic market.
Despite these trends, IBISWorld forecasts a 9.4% decrease in coffee bean prices in 2009 and another 9.4% drop
in 2010. These input pricing adjustments, along with the staple nature of the product, are expected to support
industry profitability through the current economic downturn.
Coffee Bean Price Forecast (2006-2014E)
Cents per Pound
76.0
74.0

74.6

72.0
70.0
68.0
67.6

66.0

66.2
64.0

64.9
63.6

62.0
60.0
58.0
2009E

Source: IBISWorld Research

2010E

2011E

2012E

2013E

Brazil is the worlds largest coffee exporter, and has grown its export market share 47.0 percentage points over
the last five years. Columbia is the experiencing more aggressive growth than any other global market,
increasing its market share of exports 70.0 percentage points over the same period. Notably, China has
advanced its export activities 49.0 percentage points over this period.
Concerning Bayou and its competitors, increasing U.S. coffee consumption, decreasing input prices and rapidly
growing South American markets should increase the market size for storage and other volume-based services
to major coffee manufacturers in the Southeast.
NEW ORLEANS LOCAL ECONOMY
Progress continues in New Orleans, three years after Hurricane Katrina. The hard work of rebuilding New
Orleans is still in motion. The mayor has converted the Unified New Orleans Plan into an aggressive short-term
action plan, with investments prioritized to 17 target areas. A new district attorney has been working to reform the
criminal justice system. Along with key business leaders, the city recently announced its financial support to
create a new public-private economic development entity to strengthen the citys recovering economy. The
federal government, for its part, has been working closely with city and state leaders to accelerate the spenddown of federal dollars to repair public infrastructure. Progress in greater New Orleans is also evident in the
numbers. The Brookings Institutes New Orleans Index identifies the following trends:
Greater New Orleans is entering the fourth year of recovery with the vast majority of her pre-storm
numbers of people and jobs. By the summer of 2008, New Orleans had recovered 72.0% of its pre-Katrina
households and nearly 90.0% of its sales tax revenue. Similarly, the region as a whole is now home to 87.0%
of pre-storm populations, 86.0% of jobs, and 76.0% of all previous public and private school students.
Population, economic, and housing recovery has continued in the past year, though at a dramatically
slower pace. The first two years of post-Katrina recovery was marked by enormous churning in the housing
market and a steady surge in population and jobs. By the third year, stabilization prevailed. Entering the fourth
year, population growth has slowed and appears to be tapering off.
The market in greater New Orleans is shifting geographically. The rapidly growing St. Tammany Parish
now has more households, greater sales, tax revenues, and higher home values today than it had before the
storm. Within Orleans Parish, a majority of the citys households now lives in the least flooded planning
districts, such as the Uptown, Garden District, Algiers, and other neighborhoods, up from 39 percent before the
storm. Downtown and the French Quarter remain the center for jobs, outpacing employment growth for all
other planning districts.

Year 1

Year 3

Year 2

95.0%
90.0%

Orleans

85.0%

85.6%

88.1%

80.0%
75.0%

SevenParish

77.6%
70.0%

73.7%
69.2%

65.0%
60.0%
55.0%
50.0%

49.5%

2008

Source: Brookings Institute, New Orleans Index

Dec

Oct

Nov

Sep

Jul

Aug

Jun

Apr

May

Mar

Jan

Feb

Dec

Oct

Nov

Sep

Jul

2007

Aug

Jun

Apr

May

Mar

Jan

Feb

Dec

Oct

2006

Nov

Sep

45.0%
Aug

Percent of Pre-Katrina
Households Actively
Receiving Mail

These indicators also reinforce that major challenges remain. The city may be confronting nearly 65,000 blighted
properties or empty lots. Rising rents, now 46.0% higher than before the storm, threaten the ability of many
essential service workers to afford housing, as wages are not keeping pace. The public service infrastructure in
the city remains thin, especially public transit, which saw ridership grow by 45% in the past year. Finally, the
latest maps from the Army Corps of Engineers suggest that a number of neighborhoods in the city remain at risk
of six to eight feet of flooding from a 1 percent storm, signaling the need to commit to a coastal restoration plan
that goes well beyond levees.
With a strong economic base and a highly engaged group of citizens and leaders, the region is poised to tackle
some of the tougher challenges ahead.
THE U.S. ECONOMY
Despite a 2008 marked by low output growth, high price levels and growing unemployment, sentiment regarding
economic improvement is positive. Several macroeconomic developments suggest that we may be working
toward recovery. The index of leading indicators ended a poor 2008 with a December gain. The index fell by the
largest amount over the course of the year since 1990, reflecting increasing money supply and a steep yield
curve. The index of leading indicators ended 2008 with a 0.3% rise in December, well above the -0.2% median
analyst forecast (according to Bloomberg). It was the largest rise in the index in 2008 and the first gain since
June.
Historical GDP Growth (Q1 2005 through Q4 2008)
GDP % Change
10.0
9.0
8.6

8.0
8.1

7.0
7.1

6.9

6.0

6.3
5.5

5.0
4.0

4.8

5.1
4.3

3.6

3.0

4.1

3.7

3.5

2.0

3.4

3.2

2.3

1.0
0.0
Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08

Source: Banc of America Capital Markets, Bureau of Economic Analysis

The National Association of Realtors reports that sales of existing homes rebounded strongly in December,
following a large November decline. Furthermore, inventories of existing homes for sale, which have remained
stubbornly high in recent years, plummeted in December. Prices of existing homes continue to decline at a rapid
pace, while existing home sales jumped 6.5% to 4.7 million units in December, well above the 4.4 million median
analyst forecast. This represented the largest monthly increase in almost seven years, following a huge drop in
November. Moreover, the inventory of existing homes for sale dropped 12.3% to its lowest level since January
2007. This is significant because the inventory of homes on the market is necessary to stimulate a recovery in
new home construction.
Forecast Percent Changes in Key Metrics
% Change
GDP
Unemployment
CPI
Source: Banc of America Capital Markets

2008A
1.2
5.8
3.3

2009E
(2.1)
8.2
(0.5)

2010E
2.6
8.2
1.3

Despite these developments, recession is expected to continue until at least mid-year, and economic activity is
likely to reflect expected stimulus efforts by the President and Congress. Banc of America Capital Markets pegs
the expected fiscal package at a minimum of $300 billion (2.5% of GDP) and expects it to draw on the following:

Tax cuts for middle and lower income households.


Further subsidies for distressed homeowners.
Job creation programs.
Block grants to states.
Tax credits for home purchases.

Whether the package adds economic value will be determined by its components as much as its magnitude,
though the press and financial markets will focus primarily on the total size of the package.

IV. FINANCIAL ANALYSIS


Continuing its recovery from Hurricane Katrina, the Company recorded $11.8 million in total 2008 revenue and
posted a 7.5% normalized EBITDA margin. Subsidiary Bayou Silo, LLC has supported the enterprise since
2007, driving the Companys revenue and operating profits. Realignment of the New Orleans business cost
structure and the establishment of scale in the Houston business are expected to contribute greatly to EBITDA
going forward, as operating losses decrease and these businesses become profitable over the forecast period.
Historical and forecast performance for each segment are discussed below. We developed our forecasts
through management discussions and our understanding of the economics of the business. Applying scenario
analysis, we assessed future company performance under three operating cases and determined the forecasts
used in this report to have the highest likelihood of realization, given the competitive dynamics of Bayous
markets and independent forecasts for its customer industries.
Historical and Forecast Financial Data (000s)
Forecast
2005A
Revenue
Dupuy New Orleans
Dupuy Silo

2006A

2007A

2008A

2009E

2010E

2011E

2012E

2013E

2014E

2015E

8,800
-

6,988
3,698
-

4,564
5,421
67

5,371
5,731
684

6,759
5,900
1,095

8,074
5,997
1,642

9,195
6,103
2,135

10,074
6,196
2,455

10,880
6,297
2,701

11,424
6,365
2,917

11,995
6,437
3,150

8,800

10,686

10,052

11,787

13,755

15,714

17,433

18,726

19,878

20,706

21,582

(2.6%)
NA
NA
(2.6%)

(20.6%)
NA
NA
21.4%

(34.7%)
46.6%
NA
(5.9%)

17.7%
5.7%
925.7%
17.3%

25.8%
2.9%
60.0%
16.7%

19.5%
1.6%
50.0%
14.2%

13.9%
1.8%
30.0%
10.9%

9.6%
1.5%
15.0%
7.4%

8.0%
1.6%
10.0%
6.2%

5.0%
1.1%
8.0%
4.2%

5.0%
1.1%
8.0%
4.2%

100.0%
-

65.4%
34.6%
-

45.4%
53.9%
0.7%

45.6%
48.6%
5.8%

49.1%
42.9%
8.0%

51.4%
38.2%
10.5%

52.7%
35.0%
12.2%

53.8%
33.1%
13.1%

54.7%
31.7%
13.6%

55.2%
30.7%
14.1%

55.6%
29.8%
14.6%

148
-

264
2,119
-

(2,204)
1,848
(159)

148

2,383

(515)

EBITDA Margin
Dupuy New Orleans
Dupuy Silo
Dupuy Houston
Total

1.7%
NA
NA
1.7%

3.8%
57.3%
NA
22.3%

Normalized EBITDA
% Margin

60.1
0.7%

2,541.7
23.8%

Dupuy Houston
Total Revenue
Revenue Growth
Dupuy New Orleans
Dupuy Silo
Dupuy Houston
Total
% Total Revenue
Dupuy New Orleans
Dupuy Silo
Dupuy Houston
EBITDA
Dupuy New Orleans
Dupuy Silo
Dupuy Houston
Total

(955)
2,187
(497)

(487)
2,418
(301)

217
2,469
(118)

689
2,513
103

815
2,551
136

946
2,593
150

1,016
2,621
153

1,067
2,651
156

735

1,630

2,569

3,305

3,503

3,688

3,790

3,873

NM
34.1%
NM
NM

NM
38.2%
NM
6.2%

NM
41.0%
NM
11.9%

2.7%
41.2%
NM
16.3%

7.5%
41.2%
4.8%
19.0%

8.1%
41.2%
5.5%
18.7%

8.7%
41.2%
5.5%
18.6%

8.9%
41.2%
5.2%
18.3%

8.9%
41.2%
5.0%
17.9%

(362.2)
NM

885
7.5%

1,780
12.9%

2,719
17.3%

3,455
19.8%

3,653
19.5%

3,838
19.3%

3,940
19.0%

4,023
18.6%

BAYOU STORAGE & FORWARDING, NEW ORLEANS OPERATION


The New Orleans operation was hit hard by Hurricane Katrina, which flooded 80.0% of the Companys New
Orleans warehouse facilities. Customer confidence decreased, and in 2006 and 2007, revenue dropped 20.6%
and 34.7%, respectively. In 2008, business began to return as the Company won back many of its former
customers and added new names to its customer roster, recording $5.4 million in 2008 revenue (17.7% growth).
In 2009, revenue is expected to increase 25.8%, to $6.8 million. Over the forecast period, revenue is expected to
advance at a 12.6% compound annual growth rate (CAGR), to approximately $12.0 million by 2015.

Historical and Forecast Financials New Orleans (000s)


2004A
Revenue
Drayage
Warehousing and Storage
Bulk Operation

2005A

2006A

2007A

2008A

2009E

2010E

2011E

2012E

2013E

2014E

2015E

Customer Service
Total Revenue
% Growth

841
7,436
457
304

893
7,185
449
274

338
6,356
206
89

492
3,698
270
104

807
4,028
414
121

995
5,164
464
136

1,144
6,254
520
156

1,259
7,192
572
172

1,359
7,911
617
186

1,468
8,544
667
201

1,542
8,971
700
211

1,619
9,420
735
221

9,037
NA

8,800
(2.6%)

6,988
(20.6%)

4,564
(34.7%)

5,371
17.7%

6,759
25.8%

8,074
19.5%

9,195
13.9%

10,074
9.6%

10,880
8.0%

11,424
5.0%

11,995
5.0%

Cost of Goods Sold


Labor
Warehouse and Fleet Expenses
Other Direct Expenses

1,953
1,623
86

2,134
1,424
177

1,371
949
62

1,264
904
54

1,490
996
105

1,690
1,129
132

1,857
1,147
158

1,903
1,195
180

2,085
1,310
197

2,252
1,414
213

2,365
1,485
223

2,483
1,559
234

Total Cost of Goods Sold


% Revenue

3,663
40.5%

3,735
42.4%

2,382
34.1%

2,222
48.7%

2,592
48.2%

2,951
43.7%

3,161
39.2%

3,278
35.7%

3,592
35.7%

3,879
35.7%

4,073
35.7%

4,277
35.7%

Gross Profit
% Margin

5,374
59.5%

5,065
57.6%

4,607
65.9%

2,343
51.3%

2,780
51.8%

3,809
56.3%

4,913
60.8%

5,916
64.3%

6,482
64.3%

7,001
64.3%

7,351
64.3%

7,718
64.3%

2,421
400
380
571
1,132

2,108
484
389
510
1,425

1,696
302
729
426
1,190

1,833
270
702
527
1,215

1,675
273
568
500
718

1,859
343
715
554
825

1,938
410
854
549
945

2,207
467
972
552
1,030

2,418
511
1,066
604
1,068

2,611
552
1,151
653
1,088

2,742
580
1,208
685
1,120

2,879
609
1,269
720
1,176

4,904
54.3%

4,918
55.9%

4,343
62.1%

4,547
99.6%

3,734
69.5%

4,296
63.6%

4,695
58.2%

5,227
56.9%

5,667
56.3%

6,055
55.7%

6,335
55.5%

6,652
55.5%

471
5.2%
NA

148
1.7%
(68.7%)

264
3.8%
78.9%

(2,204)
NM
(934.8%)

(955)
NM
NA

(487)
NM
NA

217
2.7%
NA

689
7.5%
216.8%

815
8.1%
18.3%

946
8.7%
16.0%

1,016
8.9%
7.4%

1,067
8.9%
5.0%

Operating Expenses
Salaries, Wages and Benefits
Payroll Taxes & Payroll Insurance
General Insurance
Other General & Administrative
Fixed: Licenses, Premiums and Rent
Total Operating Expenses
% Revenue
EBITDA
% Margin
% Growth

The New Orleans business posted operating losses in 2007 and 2008, largely due to the high degree of operating
leverage involved in the segments operations. Because fixed costs are largely independent of company
performance and do not change with revenue, the business operating profitability is impacted particularly
adversely by dramatic revenue decreases and affected more favorably by revenue growth than less leveraged
companies. This said, the segment has decreased its operating losses dramatically, from approximately $2.2
million in 2007 to approximately $1.0 million in 2008. Profitability is expected to be restored in 2010, and EBITDA
margin is expected to increase to 8.9% by 2015.

BAYOU SILO, LLC


As detailed in the Normalization Adjustments section, we normalized the Silo revenue to exclude a fixed charge
paid to the Company by Kraft Foods for debt service and interest expense. Under the normalized model, the Silo
business revenue is broken into a fixed tolling fee of approximately $4.9 million (also paid by Kraft) and a storage
revenue component. In 2008, the segment posted $5.7 million in revenue (5.7% growth). In 2009, the segment is
expected to grow only 2.9% and is forecast to advance at only a 1.7% CAGR through the forecast period, due to
the limitations that the fixed tolling fee places on revenue growth.
Despite its lower revenue growth potential relative to the other segments, the Silo business labor, warehousing
and G&A expenses as a percentage of revenue are considerably lower than those of the New Orleans and
Houston operations. Bayou Silos lighter relative cost structure allowed the segment to tally approximately $2.2
million in 2008 EBITDA (38.2% margin). As the only profitable business unit since 2007, the segment is keeping
the enterprise afloat through its recovery from Hurricane Katrina, offsetting nearly $1.5 million in combined
operating losses from the New Orleans and Houston businesses in 2008.

Historical and Forecast Financials Bayou Silo, LLC (000s)


2006A
Revenue
Tolling Fees

2007A

2008A

2009E

2010E

2011E

2012E

2013E

2014E

2015E

3,221
477

4,919
503

4,892
839

4,935
965

4,935
1,062

4,935
1,168

4,935
1,261

4,935
1,362

4,935
1,430

4,935
1,502

3,698
NA

5,421
46.6%

5,731
5.7%

5,900
2.9%

5,997
1.6%

6,103
1.8%

6,196
1.5%

6,297
1.6%

6,365
1.1%

6,437
1.1%

907
303
8

1,385
251
9

1,037
295
281

1,068
283
177

1,085
276
180

1,104
281
183

1,121
285
186

1,140
290
189

1,152
293
191

1,165
296
193

Total Cost of Goods Sold


% Revenue

1,218
32.9%

1,645
30.3%

1,613
28.2%

1,528
25.9%

1,541
25.7%

1,568
25.7%

1,592
25.7%

1,618
25.7%

1,636
25.7%

1,654
25.7%

Gross Profit
% Margin

2,480
67.1%

3,776
69.7%

4,118
71.8%

4,372
74.1%

4,456
74.3%

4,535
74.3%

4,604
74.3%

4,679
74.3%

4,730
74.3%

4,783
74.3%

96
201
64

646
103
355
592
232

827
148
313
434
209

818
153
322
447
215

831
155
327
454
219

846
158
333
462
223

859
160
338
469
226

873
163
344
477
230

882
165
348
482
232

892
166
352
487
235

361
9.8%

1,929
35.6%

1,931
33.7%

1,955
33.1%

1,986
33.1%

2,022
33.1%

2,053
33.1%

2,086
33.1%

2,109
33.1%

2,132
33.1%

2,119
57.3%
NA

1,848
34.1%
(12.8%)

2,187
38.2%
18.4%

2,418
41.0%
10.5%

2,469
41.2%
2.1%

2,513
41.2%
1.8%

2,551
41.2%
1.5%

2,593
41.2%
1.6%

2,621
41.2%
1.1%

2,651
41.2%
1.1%

Storage and Other Revenue


Total Revenue
% Growth
Cost of Goods Sold
Labor
Warehouse Expenses
Other Direct Expenses

Operating Expenses
Salaries, Wages and Benefits
Payroll Taxes & Payroll Insurance
General Insurance
Other General & Administrative
Fixed: Licenses, Taxes and Rent
Total Operating Expenses
% Revenue
EBITDA
% Margin
% Growth

BAYOU HOUSTON, LLC


Launched in 2007, Bayou Houston, LLC is a product of managements strategic initiative to reduce revenue
concentration in New Orleans and expand its operations to other Southeastern ports. The plan is paying off, as
Bayou has captured an estimated 25.0% of the available coffee market in Houston in just two years. In 2008, the
Houston business posted approximately $0.7 million in 2008 revenue, up 925.7% from its inception year. In 2009,
revenue is expected to grow 60.0%, to $1.1 million, and is forecast to increase at a 24.4% CAGR over the forecast
period. These are conservative estimates considering the business ability to establish its presence in Houston so
rapidly.
The segment has not yet attained the scale to reach breakeven profitability, and recorded 2007 and 2008
operating losses of approximately $0.2 million and $0.5 million, respectively. As a start-up with a high degree of
operating leverage, the Company must reach a threshold level of revenue in order to cover its relatively high rent
and warehouse expenses, which are largely fixed. Bayou Houston is expected to make this hurdle in 2011 and
increase EBITDA margin to 5.5% during the forecast period. Financial forecasts for the Houston business are
provided below.

Historical and Forecast Financials Bayou Houston (000s)


2007A
Total Revenue
% Growth

2008A

2009E

2010E

2011E

2012E

2013E

2014E

2015E

67
NA

684
925.7%

1,095
60.0%

1,642
50.0%

2,135
30.0%

2,455
15.0%

2,701
10.0%

2,917
8.0%

3,150
8.0%

7
40
5

226
169
1

274
227
1

378
301
1

427
346
2

491
398
2

540
438
2

583
467
2

630
498
2

Total Cost of Goods Sold


% Revenue

52
78.0%

395
57.8%

501
45.8%

680
41.4%

775
36.3%

891
36.3%

980
36.3%

1,052
36.1%

1,130
35.9%

Gross Profit
% Margin

15
22.0%

289
42.2%

594
54.2%

963
58.6%

1,361
63.7%

1,565
63.7%

1,721
63.7%

1,865
63.9%

2,020
64.1%

79
11
22
31
31

201
56
23
61
445

230
77
38
74
476

312
99
56
90
523

384
107
73
117
576

442
123
84
135
645

486
135
93
149
709

525
146
100
160
780

567
158
108
173
858

173
259.6%

786
114.9%

894
81.7%

1,081
65.8%

1,258
58.9%

1,429
58.2%

1,572
58.2%

1,712
58.7%

1,864
59.2%

(159)
NM
NA

(497)
NM
NA

(301)
NM
NA

(118)
NM
NA

103
4.8%
NA

136
5.5%
31.7%

150
5.5%
10.0%

153
5.2%
2.4%

156
5.0%
1.9%

Cost of Goods Sold


Labor
Warehouse and Fleet Expenses
Other Direct Expenses

Operating Expenses
Salaries, Wages and Benefits
Payroll Taxes & Payroll Insurance
General Insurance
Other General & Administrative
Fixed: Licenses, Taxes and Rent
Total Operating Expenses
% Margin
EBITDA
% Margin
% Growth

Consolidated Historical and Forecast Income Statements (000s)


2004A

2005A

2006A

2007A

2008A

2009E

2010E

2011E

2012E

2013E

2014E

2015E

Revenue
Drayage Services

841

893

338

492

807

995

1,144

1,259

1,359

1,468

1,542

1,619

7,436

7,185

6,356

3,698

4,028

5,164

6,254

7,192

7,911

8,544

8,971

9,420

Bulk Operations

457

449

206

270

414

464

520

572

617

667

700

735

Customer Service

304

274

89

104

121

136

156

172

186

201

211

221

3,698
-

5,421
67

5,731
684

5,900
1,095

5,997
1,642

6,103
2,135

6,196
2,455

6,297
2,701

6,365
2,917

6,437
3,150

10,686
21.4%

10,052
(5.9%)

11,787
17.3%

13,755
16.7%

15,714
14.2%

17,433
10.9%

18,726
7.4%

19,878
6.2%

20,706
4.2%

21,582
4.2%

Warehouse/Storage Services

Dupuy Silo, LLC


Dupuy Storage Houston, LLC
Normalized Revenue
% Growth
Total Cost of Goods Sold
% Revenue
Gross Profit
% Margin
Total Operating Expenses
% Revenue
EBITDA

9,037
NA

8,800
(2.6%)

3,663

3,735

3,600

3,918

4,600

4,980

5,382

5,621

6,075

6,477

6,761

7,061

40.5%

42.4%

33.7%

39.0%

39.0%

36.2%

34.3%

32.2%

32.4%

32.6%

32.7%

32.7%

5,374

5,065

7,086

6,134

7,186

8,775

10,332

11,812

12,651

13,401

13,945

14,521

59.5%

57.6%

66.3%

61.0%

61.0%

63.8%

65.7%

67.8%

67.6%

67.4%

67.3%

67.3%

4,904

4,918

4,704

6,648

6,451

7,145

7,763

8,507

9,148

9,713

10,155

10,648

54.3%

55.9%

44.0%

66.1%

54.7%

51.9%

49.4%

48.8%

48.9%

48.9%

49.0%

49.3%

471

148

2,383

(515)

% Margin

5.2%

1.7%

22.3%

NM

% Growth

NA

(68.7%)

Normalized D&A

745

565

EBIT

(274)

(417)

% Margin

NM

NM

Normalized Interest Expense

(86)

(253)

Total Other Income/(Expenses)

480

525

Pretax Income
Income Taxes

119
(42)

(146)
-

77

Net Income/(Loss)
% Margin

0.9%

1,514.5%
567

(121.6%)

735

1,630

2,569

3,305

3,503

3,688

3,790

3,873

6.2%

11.9%

16.3%

19.0%

18.7%

18.6%

18.3%

17.9%

NA

121.6%

57.6%

28.7%

6.0%

5.3%

2.8%

2.2%

381

745

1,816

(895)

(10)

17.0%

NM

(104)
(88)

773

818

868

921

978

1,037

1,099

857

1,751

2,437

2,581

2,710

2,753

2,774

NM

6.2%

11.1%

14.0%

13.8%

13.6%

13.3%

12.9%

(225)

(149)

(135)

(75)

(50)

(26)

341

432

432

432

432

432

432

432

432

1,623
(568)

(779)
-

273
(96)

1,154
(300)

2,108
(613)

2,819
(853)

2,987
(904)

3,135
(949)

3,184
(964)

3,206
(971)

(146)

1,055

(779)

NM

9.9%

NM

(7)

177

854

1,495

1,965

2,084

2,186

2,221

2,235

1.5%

6.2%

9.5%

11.3%

11.1%

11.0%

10.7%

10.4%

Normalizations to EBITDA
EBITDA

471

148

2,383

(515)

735

1,630

2,569

3,305

3,503

3,688

3,790

3,873

Add: Non-Market Exec. Salary

485
-

(88)
-

159
-

153
-

150
-

150
-

150
-

150
-

150
-

150
-

150
-

150
-

Rent Adjustments
Normalized EBITDA

956

60

2,542

(362)

885

1,780

2,719

3,455

3,653

3,838

3,940

4,023

% Margin

10.6%

0.7%

23.8%

(3.6%)

7.5%

12.9%

17.3%

19.8%

19.5%

19.3%

19.0%

18.6%

% Growth

NA

4,131.2%

(114.2%)

NA

101.0%

52.8%

27.1%

5.7%

5.1%

2.7%

2.1%

(93.7%)

Normalized Historical and Forecast Balance Sheets (000s)


2008A
Assets
Cash
Accounts Receivable
Inventory
Loans and Notes Receivable
Prepaid Expenses
Total Current Assets

2009E

2010E

2011E

2012E

2013E

2014E

2015E

2,039
737
291
110
623

1,612
860
315
128
727

2,969
982
340
147
831

4,904
1,089
355
163
921

7,036
1,170
384
175
990

9,467
1,242
409
185
1,051

12,225
1,294
427
193
1,095

15,036
1,349
446
201
1,141

3,799

3,641

5,268

7,433

9,755

12,354

15,234

18,173

Total Investments

1,156

1,156

1,156

1,156

1,156

1,156

1,156

1,156

Normalized Net PP&E

5,411

4,913

4,409

3,890

3,344

2,763

2,140

1,473

793

793

793

793

793

793

793

793

11,160

10,504

11,627

13,273

15,048

17,067

19,323

21,596

341
31
171
100

369
36
200
100

399
41
228
100

416
46
253
100

450
49
272
100

480
52
288
100

501
55
300
100

523
57
313
100

Normalized Other Assets


Total Assets
Liabilities and Equity
Accounts Payable
Salaries Payable
Accrued Expenses
Bank Notes Payable
Total Current Liabilities

643

705

768

815

871

920

956

993

Normalized Long Term Debt

3,247

1,541

1,031

614

223

Other Liabilities

2,295

2,295

2,295

2,295

2,295

2,295

2,295

2,295

Normalized Total Liabilities

6,185

4,541

4,094

3,724

3,390

3,216

3,251

3,288

Normalized Equity
Total Liabilities & Equity
* 214.6 shares at June 30 2007 and 2008

4,974

5,963

7,533

9,549

11,658

13,851

16,072

18,307

11,160

10,504

11,627

13,273

15,048

17,067

19,323

21,596

Forecast Statements of Cash Flows (000s)


2009E
Operating Activities
Net Income
Depreciation & Amortization
Changes in Working Capital
Accounts Receivable
Inventory
Loans and Notes Receivable
Prepaid Expenses
Accounts Payable
Salaries Payable
Accrued Expenses
Net Change in Working Capital
Cash from Operating Activities
Investing Activities
Capital Expenditures
Free Cash to Equity

854
773

2010E
1,495
818

2011E
1,965
868

2012E
2,084
921

2013E
2,186
978

2014E

2015E

2,221
1,037

2,235
1,099

(123)
(24)
(18)
(104)
28
5
29

(122)
(25)
(18)
(104)
30
5
28

(107)
(15)
(16)
(91)
18
5
25

(81)
(29)
(12)
(68)
34
3
19

(72)
(25)
(11)
(61)
30
3
17

(52)
(18)
(8)
(44)
21
2
12

(55)
(19)
(8)
(46)
22
2
13

(208)

(206)

(182)

(134)

(120)

(86)

(91)

1,419

(275)

2,107

(314)

2,651

(349)

2,871

(375)

3,045

(398)

3,172

(414)

3,243

(432)

1,144

1,792

2,302

2,496

2,647

2,758

2,811

Financing Activities
Mandatory Debt Repayments
Payments on Notes Payable
Beginning Cash Balance
Cash Available for Optional Repayments

(1,706)
2,039
1,477

(510)
1,477
2,759

(417)
2,759
4,644

(390)
4,644
6,750

(223)
6,750
9,174

9,174
11,932

11,932
14,743

Cash From Financing Activities

(1,706)

Beginning Cash Balance


Net Change in Cash
Ending Cash Balance

2,039
(562)
1,477

(510)
1,477
1,282
2,759

(417)
2,759
1,885
4,644

(390)
4,644
2,106
6,750

(223)
6,750
2,424
9,174

9,174
2,758
11,932

11,932
2,811
14,743

V. VALUATION
OVERVIEW OF RESULTS
Our analysis of Bayou Storage and Forwarding, LLC is driven by three valuation approaches. We applied net
asset value, precedent transactions and discounted cash flow analyses in our valuation of the Company. The
results under each of these techniques are discussed in turn in this section.
Our determination of fair market value involves subjective selection of the appropriate value from the indications
given in the below table. Based on the three companies differences in financial position, operations and risk
profiles, we believe that the appropriate measure of value for Bayou Storage & Forwarding, LLC is sum-of-theparts analysis, which values the Companys operating entities separately and under different valuation techniques.
Under this model, the New Orleans and Houston businesses are valued using the net asset value (NAV)
approach, while the Silo operation is valued using discounted cash flow analysis. This approach yields a
controlling equity value of $15,509,000 and an equity value of $8,952,000 on a noncontrolling, nonmarketable
basis.

Summary of Valuation
Results under Various Approaches (000s)
Enterprise

Equity

Net Asset Value


2009E EBITDA Multiple

11,132
6.8x

9,924
6.1x

Precedent Transactions Analysis


2009E EBITDA Multiple

14,026
8.6x

12,817
7.9x

Consolidated DCF Analysis


2009E EBITDA Multiple

10,664
6.5x

9,456
5.8x

Sum-of-the Parts Analysis


2009E EBITDA Multiple

16,717
10.3x

15,509
9.5x

NET ASSET VALUE (NAV) METHOD


Under the net asset value (NAV) method, the companys assets are adjusted to appraised fair market values to
determine the value of a companys equity. The NAV method assumes that a companys value is realized as a
going concern in an asset sale transaction. This valuation technique is typically used under the following
circumstances:
The subject company has significant tangible assets on its balance sheet.
The balance sheet fully reflects all of the subject companys tangible assets.
Labor contributes little value to the subject companys products or services.
The companys intangible assets are negligible.
Based on these criteria, Bayou is a fair qualitative match for the NAV approach. The key limitation in applying this
technique to the enterprise is that it does not consider the value related to the future earnings of the Silo business.
In order to accurately assess the Companys net asset value, we normalized the historical and forecast balance
sheets to remove the debt and associated assets related to its agreement with Kraft Foods. Our results are
summarized below.

Net Asset Value Results (000s)


Open
Normalized
6/30/2008
Assets
Current assets
Investments
Property, plant and equipment
Accumulated depreciation
Other assets

Debits

3,799
1,156
17,080
(11,669)
793

Total assets

Credits

3,799
1,156
13,661
0
793

(3,419)
11,669

11,160

19,409

643
5,542
4,974

643
5,542
3,300
9,924

Liabilities & Stockholders' Equity


Current liabilities
Long term liabilities
Estimated taxes on value in excess of basis
Stockholders' equity
Total liabilities & stockholders' equity

Close
Normalized
6/30/2008

Adjustments

3,300
4,950

11,160

19,409

Value indicated by the NAV method

9,924

Under the NAV approach, equity value is $9,924,000. Because this method does not consider the future cash
flows related to the Jacksonville Silo business, we do not believe that it provides a complete indication of equity
value.

PRECEDENT TRANSACTIONS ANALYSIS


As part of our analysis, we reviewed several large industry databases, including Capital IQ, Pratts Stats,
BIZCOMPS and Done Deals, for acquisitions of comparable companies within the storage and warehousing
market. We developed value indications from the EBITDA multiples at which the companies were sold. Analyzing
22 transactions that have been announced and/or closed since 2003 in SIC industry code 422 (warehousing and
storage) and in several GICS codes relating to commodities storage, we identified five deals that provided
meaningful indications of value. Cancelled transactions were not included in the analysis. Our results are
summarized below.
Precedent Transactions Analysis Summary (000s)

Transaction Multiples
Implied Enterprise Value Based on:
##
2009E EBITDA

Low

Mean

Median

High

2.1x

4.2x

3.6x

7.9x

3,684

7,520

6,479

14,026

A listing of the meaningful transactions that we analyzed and associated transaction multiples are provided below.

Summary of Meaningful Transactions


Enterprise
Value ($000s)

Enterprise Value/

Closed

Target Business Description

Revenue

EBITDA

07/31/2007

Storage provider.

06/30/2007

Commodities storage company with 15 grain elevator facilities, 13 highthroughput facilities, and nine stand-alone crop input locations.

06/30/2006

Storage provider.

200

3.7x

02/13/2006

Storage provider.

431

2.4x

5.3x

04/30/2003

Storage provider.

645

0.8x

2.1x

0.4x
1.1x
0.8x
2.4x

2.1x
4.2x
3.6x
7.9x

2,986

0.4x

3.6x

284,680

7.9x

Low
Mean
Median
High

The analysis resulted in a mean EBITDA multiple of 4.2x. Based on seller descriptions, though, we believe that
the company selling for the high multiple of 7.9x is most comparable to Bayou. Prior to its sale, the company
operated grain elevators and other commodity storage facilities. Bayou and this company are similar in their
specialized infrastructure and high degree of capital intensity. Applying this 7.9x multiple to 2009E EBITDA yields
an implied enterprise value of $14,026,000 and a controlling equity value of $12,817,000. However, we do not
consider this value meaningful to our analysis due to the lack of available transaction data on other commodities
storage companies.

DISCOUNTED CASH FLOW ANALYSIS


The premise for the discounted cash flow method is the basic valuation principle that an investment in a business
is worth the present value of all the future benefits it will produce for its owners, with each expected future benefit
discounted back to present value at a discount rate that reflects the risk that those benefits may not be realized.
The application of this method requires a determination of the present value of an expected future stream of cash
flow that asset generates for that owner. This is accomplished by discounting those expected cash flows at the
owners required rate of return.
In general, valuation of a going concern focuses on the future earnings capacity of a companys operations. In this
regard, free cash flow, the cash available to all claimants after capital expenditures, working capital investments
and cash taxes, is used in our analysis because it reflects the performance of a companys core operations. Other
income streams, such as net income, can reflect factors unrelated to a companys operating activities and provide
misleading indications of a companys ability to deliver consistent returns to its owners. The fair market value of an
enterprise is calculated under the discounted cash flow method as the present value of an explicitly forecast
stream of free cash flow plus the present value of a terminal value, which represents the value of a companys
cash flow beyond the explicit forecast period.

Present Value of Free Cash Flow


Over Explicit Forecast Period

Present Value of
Terminal Value

Estimated Fair Market


Value of Enterprise

The discounted cash flow results for Bayou Storage and Forwarding, LLC are summarized below.

Summary of Consolidated DCF Results (000s)


Perpetuity
Present Value of Forecast Free Cash Flow

Exit Multiple

6,527

6,527

Terminal Value
Present Value of Terminal Value

14,455
4,137

14,082
4,030

Total Enterprise Value


Less: Debt

10,664
(3,247)
2,039

10,557
(3,247)
2,039

9,456

9,349

Plus: Cash
Equity Value on Controlling Basis

We applied discounted cash flow analysis to Bayous consolidated financial forecasts. Our analysis indicates an
enterprise value of $10,664,000 and a controlling equity value of $9,456,000 using a perpetuity growth terminal
value. This analysis assumes a 23.2% weighted average cost of capital and a 5.0% terminal growth rate. Using
a terminal value based on a 3.5x representative exit multiple, enterprise value is $10,557,000 and controlling
equity value is $9,349,000.
We believe that the stand-alone DCF analysis in the case of Bayou is limited by the operating losses projected
for the New Orleans and Houston operations, and that this technique applies more to Bayou Silo than to these
businesses.
Discount Rate Derivation
An important assumption in discounted cash flow analysis is the discount rate. A discount rate is the rate of
return that a potential investor would require to make an investment, given the nature and risk of the underlying
investment.
Weighted Average Cost of Capital. A weighted average cost of capital (WACC) is applied in discounted cash
flow valuations based on free cash flow, and represents the average required rate of return for both debt and
equity investors. It is based on the idea that, since a company is financed with both equity and debt, the
required return on an investment should consider the risks associated with both forms of capital. The WACC is
calculated as the weighted average of the cost of equity and the after-tax cost of debt, with the respective
proportions of total capitalization comprised by equity and debt serving as weights. After-tax cost of debt is the
interest rate on the debt less the effect of taxes. Cost of equity is derived and discussed in detail on the
following page. Bayous WACC calculation is provided below.
Weighted Average Cost of Capital Calculation

2009E

2010E

2011E

2012E

2013E

2014E

2015E

Capital Structure
Unsecured Promissory Note
Term Loan
Equity

457
936
5,828

333
671
7,323

208
405
9,289

84
140
11,372

13,559

15,780

18,015

Normalized Capitalization

7,222

8,327

9,902

11,596

13,559

15,780

18,015

Proportions
Unsecured Promissory Note
Term Loan
Equity

6.3%
13.0%
80.7%

4.0%
8.1%
87.9%

2.1%
4.1%
93.8%

0.7%
1.2%
98.1%

100.0%

100.0%

100.0%

Cost of Capital
Unsecured Promissory Note
Term Loan
Equity

3.3%
4.5%
24.4%

3.3%
4.5%
24.4%

3.3%
4.5%
24.4%

3.3%
4.5%
24.4%

3.3%
4.5%
24.4%

3.3%
4.5%
24.4%

3.3%
4.5%
24.4%

Annual WACC

20.5%

21.9%

23.1%

24.0%

24.4%

24.4%

24.4%

Average WACC (2009-2015)

23.3%

As the above table indicates, Bayous WACC varies over time. While cost of equity is assumed constant
throughout the forecast period, its declining debt balances make WACC increasingly reflective of the cost of equity
as the forecast period advances. We discounted the free cash flow for each forecast year by the weighted
average cost of capital for each year.
Cost of Equity. We have applied the build-up method to arrive at our cost of equity. This approach starts with
the risk-free treasury bond yield and systematically adds risk premia which quantify the risk factors associated with
equity investments in general, ultimately ending with those specific to the entity being valued. These factors
include the risks associated with the following:

The industry and nature of products


Leverage / Equity
Management depth
The local economy

Location and facilities


Competition
Potential to trade on a public exchange
Earnings stability

We considered each of these factors carefully in our cost of equity determination. As indicated, Bayous cost of
equity consists of the risk free rate plus premia related equity size and specific company risk factors. Bayous cost
of equity buildup is provided below.
Cost of Equity Build-Up
Risk-Free Rate

3.6%

Equity Risk Premium

7.1%

Risk Premium for Size

9.7%

Industry and Company-Specific Risk

4.0%

Estimated Cost of Equity

24.4%

Risk Free Rate. The risk-free rate is the rate available on instruments considered to have virtually no default
risk, such as US Treasury obligations. The risk free rate is formally considered specifically to be the rate on the
30-day US Treasury Bill, but most analysts prefer to use a 20-year yield to maturity since published equity risk
premium data is related to a 20-year US Treasury coupon bond. The corresponding rate for the 20-year US
Treasury bond, maturing June 2029, is 3.6%, as reported by the US Treasury.
Equity and Size Risk Premium. The equity and size risk premium represents additional return that investors
expect to earn in excess of the risk free rate in order to compensate for the additional risk, or degree of
uncertainty, that expected future equity returns will not be realized. Ibbotson Associates publishes the most
commonly cited sources of equity risk premium data. In our analysis, we used Ibbotsons Stocks, Bonds, Bills &
Inflation (SBBI) Yearbook, which contains a history of capital markets returns. In general, the long-term equity
risk premium is the arithmetic mean total return for the S&P 500 Index less the average 20-year treasury bond
return.

Consolidated DCF Analysis (000s)

DCF Analysis (Consolidated)


Forecast
Free Cash Flow Forecast
Total Revenue
% Growth
EBITDA
% Margin
% Growth

2009E
2009
13,755
16.7%
1,780
12.9%
121.6%

2010E

2011E

2012E

Perpetuity Growth Method Sensitivity Tables


2013E

2014E

2015E

2010
15,714
14.2%

2011
17,433
10.9%

2012
18,726
7.4%

2013
19,878
6.2%

2014
20,706
4.2%

2015
21,582
4.2%

2,719
17.3%
57.6%

3,455
19.8%
28.7%

3,653
19.5%
6.0%

3,838
19.3%
5.3%

3,940
19.0%
2.8%

4,023
18.6%
2.2%

Free Cash Flow Calculation


EBITDA
Capital Expenditures
Changes in Working Capital
Cash Taxes on EBIT
Free Cash Flow
% Margin
% EBITDA

1,780
(275)
(208)
(326)
971
7.1%
54.6%

2,719
(314)
(206)
(639)
1,559
9.9%
57.4%

3,455
(349)
(182)
(879)
2,045
11.7%
59.2%

3,653
(375)
(134)
(930)
2,214
11.8%
60.6%

3,838
(398)
(120)
(975)
2,347
11.8%
61.1%

3,940
(414)
(86)
(990)
2,450
11.8%
62.2%

4,023
(432)
(91)
(997)
2,504
11.6%
62.2%

Discount Rate
Periods (Mid-Year Convention)
NPV of Each Year

20.2%
0.5
886

21.8%
1.5
1,160

23.1%
2.5
1,217

24.0%
3.5
1,043

24.4%
4.5
878

24.4%
5.5
737

24.4%
6.5
606

Valuation

Perpetuity Growth Method


4.0%

Present Value of FCF


Terminal Value
Present Value of Terminal Value
Total Enterprise Value
% Forecast FCF
% Terminal Value
Implied Multiples
2008 EBITDA
2009E EBITDA
2008 EBIT
2009E EBIT
2008 Revenue
2009E Revenue
Reconciliation to Equity Value
Total Enterprise Value
Less: Debt
Plus: Cash
Total Equity Value

5.0%

6.0%

Exit Multiple Method


2.5x

3.5x

Discount
Rate

10,664
21.2%
22.2%
23.2%
24.2%
25.2%

3.0%
11,004
10,566
10,183
9,846
9,547

Terminal Growth
4.0%
5.0%
6.0%
11,310
11,655
12,045
10,830
11,124
11,455
10,411
10,664
10,946
10,044
10,263
10,506
9,720
9,911
10,121

7.0%
12,489
11,829
11,264
10,777
10,354

EBITDA
Margin

10,664
14.6%
16.6%
18.6%
20.6%
22.6%

3.0%
8,714
9,448
10,183
10,918
11,653

Terminal Growth
4.0%
5.0%
6.0%
8,863
9,029
9,214
9,637
9,846
10,080
10,411
10,664
10,946
11,185
11,482
11,813
11,959
12,299
12,679

7.0%
9,422
10,343
11,264
12,185
13,106

Exit Multiple Method Sensitivity Tables

Discount
Rate

10,557
21.2%
22.2%
23.2%
24.2%
25.2%

1.5x
8,433
8,341
8,254
8,173
8,095

2.5x
9,703
9,550
9,406
9,269
9,141

Exit Multiple
3.5x
10,973
10,759
10,557
10,366
10,186

4.5x
12,243
11,968
11,708
11,463
11,231

5.5x
13,513
13,177
12,860
12,560
12,277

EBITDA
Margin

10,557
14.6%
16.6%
18.6%
20.6%
22.6%

1.5x
7,675
7,965
8,254
8,544
8,834

2.5x
8,579
8,992
9,406
9,819
10,232

Exit Multiple
3.5x
9,484
10,020
10,557
11,094
11,631

4.5x
10,388
11,048
11,708
12,369
13,029

5.5x
11,292
12,076
12,860
13,644
14,428

4.5x

6,527

6,527

6,527

6,527

6,527

6,527

13,571
3,884

14,455
4,137

15,442
4,419

10,058
2,878

14,082
4,030

18,105
5,181

10,411
62.7%
37.3%

10,664
61.2%
38.8%

10,946
59.6%
40.4%

9,406
69.4%
30.6%

10,557
61.8%
38.2%

11,708
55.7%
44.3%

14.2x
5.8x
NM
11.2x
0.9x
0.8x

14.5x
6.0x
NM
11.5x
0.9x
0.8x

14.9x
6.1x
NM
11.8x
0.9x
0.8x

12.8x
5.3x
NM
10.1x
0.8x
0.7x

14.4x
5.9x
NM
11.3x
0.9x
0.8x

15.9x
6.6x
NM
12.6x
1.0x
0.9x

10,411
(3,247)
2,039

10,664
(3,247)
2,039

10,946
(3,247)
2,039

9,406
(3,247)
2,039

10,557
(3,247)
2,039

11,708
(3,247)
2,039

9,203

9,456

9,738

8,197

9,349

10,500

SUM-OF-THE PARTS ANALYSIS


Valuation techniques each have their own limitations and are applicable under different conditions. Sum-of-theparts analysis is often applied in the valuation of businesses composed of several distinct segments. It provides a
way to apply the most relevant valuation technique to each individual business unit to arrive and calculate
enterprise value as the sum of these parts. In the case of Bayou, we believe that sum-of-the-parts analysis is
appropriate because neither the consolidated net asset value nor the consolidated DCF approaches provide an
accurate indication of fair market value on a stand-alone basis. This follows because neither technique applies to
all three business units.
Bayous businesses operate in different geographic markets, each subject to their own set of risks. More
importantly, their financial conditions are completely different. The New Orleans and Houston segments are
expected to operate at a loss into the forecast period, making the DCF technique less applicable the these
businesses. The value of these segments lies more in the assets in place than in their future earnings potential,
making the NAV approach applicable. By contrast, the Silos inherent profitability places its value in its future
earnings, making the DCF approach the most appropriate valuation technique for this segment. Accordingly, we
valued the New Orleans and Houston businesses using the NAV method and the Silo operations using the DCF
technique. We arrived at a controlling equity value of $15,509,000 under our sum-of-the-parts analysis. We
believe that this is the most accurate representation of value identified in our analysis and have based our final
conclusions on this value. Our results are detailed below.
Sum-of-the-Parts Analysis Results (000s)
Dupuy New Orleans and Houston - Net Asset Value

Dupuy Silo - DCF Valuation

2009E

2010E

2011E

2012E

2013E

2014E

2015E

2009
5,900

2010
5,997

2011
6,103

2012
6,196

2013
6,297

2014
6,365

2015
6,437

% Growth

2.9%

1.6%

1.8%

1.5%

1.6%

1.1%

1.1%

EBITDA
% Margin
% Growth

2,418
41.0%
10.5%

2,469
41.2%
2.1%

2,513
41.2%
1.8%

2,551
41.2%
1.5%

2,593
41.2%
1.6%

2,621
41.2%
1.1%

2,651
41.2%
1.1%

Total Revenue

FCF Calculation
EBITDA
Maintenance CAPEX
Changes in Working Capital
Cash Taxes on EBIT
Free Cash Flow
% Margin
% EBITDA

2,418
(118)
(89)
(846)
1,365
23.1%
56.4%

2,469
(120)
(79)
(864)
1,406
23.5%
57.0%

2,513
(122)
(64)
(880)
1,448
23.7%
57.6%

2,551
(124)
(44)
(893)
1,490
24.0%
58.4%

2,593
(126)
(38)
(908)
1,522
24.2%
58.7%

2,621
(127)
(26)
(917)
1,550
24.4%
59.1%

2,651
(129)
(27)
(928)
1,567
24.3%
59.1%

Discount Rate
Periods
NPV of Each Year

32.0%
0.5
1,188

32.0%
1.5
927

32.0%
2.5
723

32.0%
3.5
564

32.0%
4.5
436

32.0%
5.5
337

32.0%
6.5
258

Open
Normalized
6/30/2008
Assets
Current Assets
Investments
PP&E
Acc. Depreciation
Other assets
Total Assets
Liabilities & Equity
Current Liabilities
Long term Liabilities
Estimated Taxes
Stockholders' Equity
Total Liabilities & Equity
Implied Equity Value

Valuation
Discount Rate
Terminal Growth

32.0%
5.0%

Total Equity Value


Dupuy New Orleans and Houston - NAV
Dupuy Silo - DCF
Total Equity Value (Controlling Value)

Present Value of Forecast Free Cash Flow


Terminal Value
Present Value of Terminal Value

4,433
6,094
1,152

Enterprise Value
Less: Net Debt

5,585
-

Total Equity Value

5,585

9,924
5,585
15,509

3,799
1,156
17,080
(11,669)
793

Close
Adjustments
Credits
Debits

(3,419)
11,669

Normalized
6/30/2008

3,799
1,156
13,661
793

11,160

19,409

643
5,542
4,974

643
5,542
3,300
9,924

11,160

3,300
4,950

19,409
9,924

SECONDARY ADJUSTMENTS
Secondary adjustments are those increases and/or decreases to an entitys value that may be necessary to
reflect ownership and marketability characteristics. The two most relevant ownership characteristics that impact
value are the degree of control inherent in the interest and the degree of marketability of the interest.
Minority Discount. A minority discount is a reduction in the control value of the subject company to reflect the
fact that a minority stockholder cannot control the daily activities or policy decisions of an enterprise. A minority
discount is the opposite of a premium for control. This type of discount is used to obtain the value of a noncontrolling interest in the subject being valued when a control value is its reference. The discounted net cash
flow method can be used to determine either a control value or a minority interest value depending on whether
or not the expected benefit streams have been adjusted for control prerogatives.
We believe that a 17.5% discount for lack of control is appropriate in the valuation of Bayou Storage &
Forwarding, LLC.
Control Premium. A control premium is the amount paid over and above the enterprise value of a company to
reflect the percentages available to control ownership such as the ability to sell and acquire assets, enter into
contracts and set compensation, etc. Because we are valuing a minority interest, a control premium does not
apply.
Discount for Lack of Marketability. A discount for lack of marketability is used to compensate for the difficulty
of selling shares of stock that are not traded on a stock exchange, compared with those that are publicly traded.
A discount for lack of marketability may also be appropriate when the shares have either legal or contractual
restrictions placed upon them (for example, restricted stocks, buy sell agreements, and bank loan restrictions).
A number of studies during the past 25 years have attempted to determine average levels of discounts for lack
of marketability. These studies fall into one of two basic categories depending on the type of market transaction
data on which they are based:

Restricted Stock Studies. Restricted stocks are identical in all respects to the freely traded stocks of public
companies except that they are restricted from trading on the open market for a certain time period.
Marketability is the only difference between a restricted stock and its freely traded counterpart. The studies
have therefore attempted to find differences in the prices at which restricted stock transactions take place
compared with open market transactions in the same stock on the same date.

Studies of Transactions in Closely Held Stocks Prior to IPO. It is recognized that restricted stocks are only
restricted from public trading for a limited period of time. Following that, they will be eligible to trade in a
public market that is already established. It is logical, then, to expect that the discount for lack of
marketability for truly closely held stocks, for which no public market has been established (and may never
be), would be greater than discounts for lack of marketability for restricted stocks that in the foreseeable
future would be eligible for trading in an established public market.

The various studies discussed above appear to suggest that the marketability discount for closely held stock
compared with a publicly traded counterpart should average between 30.0% and 50.0%. The level of discount
that should be applied to a specific investment, however, must be adjusted for various factors specific to the
company being appraised. The following is a discussion of other factors that, in our opinion, affect the
marketability of the interest being valued:

The existence of potential hypothetical buyers: there is a limited pool of potential buyers for a minority nonvoting ownership interest in the Company. This increases the discount for lack of marketability.

The potential for receiving future dividend payments: The Company has historically retained its earnings
rather than paying dividends, which increases the lack of marketability discount..

The size of the block of equity being valued: the stock being valued represents 33.3% of the total shares
outstanding. This increases the lack of marketability discount.

The prospect for a public offering: The Company's owners and management have no plans or desires to
have the Company go public. This increases a potential owner's holding period for the stock and therefore
increases the discount for lack of marketability.

Based upon the factors discussed above, it is our opinion that a 30.0% discount for lack or marketability is
appropriate.

CONCLUSION
It is our opinion that the equity value of Bayou Storage & Forwarding, LLC on a noncontrolling basis is
$8,952,000 as of December 31, 2008, implying a value of $2,984,000 for a 33.3% share of the Company.

LIMITING CONDITIONS
1. The conclusion of value is valid only for the stated purpose as of the valuation date indicated. We take no
responsibility for changes in market conditions and assume no obligation to revise our conclusion of value to
reflect events or conditions which occur subsequent to the valuation date.
2. Our report and conclusion of value is restricted to the internal use of the management of the Company and
shall not be used to obtain credit or for any other purpose or by any other party for any purpose. Neither our
work product nor any portions thereof, including any conclusions or the identity of our firm, any individuals
signing or associated with this report, or the professional associations or organizations with which they are
affiliated, shall be disseminated to third parties other than the Company, its financial accounting firm and
attorneys, and governmental agencies by any means without our prior written consent and approval.
3. No change of any item in this valuation report shall be made by anyone other than the firm performing the
valuation and we shall have no responsibility for any such unauthorized change.
4. Users of this business valuation report should be aware that business valuations are based on assumptions
regarding future earnings potential, and/or certain asset values, that may or may not materialize. Therefore,
the actual results achieved in the future will vary from the assumptions utilized in this valuation, and the
variations may be material.
5. Public, industry, statistical, and other information furnished by others, upon which all or portions of this
analysis is based, is believed to be reliable. However, we make no representation as to the accuracy or
completeness of such information and have performed no procedures to corroborate the information.
6. Our report is based on historical and/or prospective financial information provided to us by management and
other third parties. The Company and its representatives warranted to us that the information they supplied
was complete and accurate to the best of their knowledge and that the financial statement information
reflects the companys results of operations and financial and business condition in accordance with
generally accepted accounting principles, unless otherwise noted. The financial statements and other
related information supplied by management has been accepted as correct without further verification. Had
we audited or reviewed the underlying data, matters may have come to our attention which would have
resulted in our using amounts which differ from those provided, accordingly, we take no responsibility for the
underlying data presented or relied upon in this report.
7. The historical financial information presented in this report is included solely to assist in the development of
the value conclusion presented in this report, and it should not be used to obtain credit or for any other
purpose. Because of the limited purpose of this presentation, it may be incomplete and contain departure
from generally accepted accounting principles. We have not audited, reviewed, or compiled this
presentation and express no assurance on it.
8. We have relied upon the representations of the management concerning the reasonableness of budgeted
financial information. Unless specifically noted, we have relied on the representations of the owners,
management, and other third parties concerning the value and useful condition of all equipment, real estate,
and any other assets or liabilities, except as specifically stated to the contrary in this report. We have not
attempted to confirm whether or not all assets of the business are free and clear of liens and encumbrances
or that the Company has good title to all assets.

9. This conclusion of value assumes that the company will continue to operate as a going concern, and that
the character and integrity of the Company through any sale, reorganization, exchange, or diminution of the
owners participation would not be materially or significantly changed. It also assumes that the current level
of management expertise and effectiveness would continue to be maintained.
10. Full compliance by the Company with all applicable federal, state, and local zoning and use, occupancy,
environmental, and similar laws and regulations is assumed, unless otherwise stated. Furthermore, no effort
has been made to determine the possible effect, if any, on the Company due to future Federal, state, or
local legislation including any environmental or ecological matters or interpretations thereof, unless
otherwise stated.
11. We have not determined independently whether the Company is subject to any present or future liability
relating to environmental matters. Our valuation takes no such liabilities into account, unless they have been
reported to us by the Company or by an environmental consultant working for the Company, and then only
to the extent that the liability was reported to us in an actual or estimated dollar amount. Such matters, if
any, are noted in the report. To the extent such information has been reported to us, we relied on it without
verification and offer no warranty or representation as to its accuracy or completeness.
12. The valuation services firm does not purport to be a guarantor of value. Valuation of closely-held
companies is an imprecise science, with value being a question of fact, and reasonable people can differ in
their estimates of value. The valuation services firm has, however, used conceptually sound and commonly
accepted methods and procedures of valuation in determining the estimate of value included in this report.
13. Any recasted financial statements, forecasts or pro forma statements are the result of data provided by the
subject company, its officers or representatives, or are based on assumptions, the reasonableness of which
has been agreed to by our client in this engagement. Such recasted, forecasted or pro forma statements
may not anticipate the economic, socio-economic, political, market or legal factors which may impact the
operations of the subject company. Accordingly, the valuation services firm makes no representations,
expressed or implied, as to the validity of such recasted financial statements, forecasts or pro forma
statements.
14. The valuation analyst, by reason of performing this valuation and preparing this report, is not to be required
to give expert testimony nor to be in attendance in court or at any government hearing with reference to the
matters contained herein unless prior arrangements have been made with the valuation services firm
regarding such additional engagement.
15. This report and the conclusion of value arrived at herein are not intended by the author and should not be
construed by the reader to be investment advice in any manner whatsoever. The conclusion of value
represents the considered opinion of the valuation services firm based on information furnished to them by
the Company and other sources. This report is neither an offer to sell, nor a solicitation to buy securities,
and/or equity in, or assets of, the subject company.

Certification
1. The signatory to this report certifies that to the best of his knowledge and belief, the statements of
fact contained in this report are true and correct.
2. The analyses, opinions, and conclusion of value included in the valuation report are subject to the
specified assumptions and limiting conditions, and they are our personal analyses, opinions, and
conclusion of value.
3. The economic and industry data included in the valuation report have been obtained from various
printed or electronic reference sources that we believe to be reliable. We have not performed any
corroborating procedures to substantiate that data.
4. This valuation engagement was performed in accordance with the American Institute of Certified
Public Accountants Statement on Standards for Valuation Services and the National Association of
Certified Valuation Analysts standards for conducting and reporting on business valuation.
5. All accredited Certified Valuation Analysts employed by the valuation services firm are in compliance
with the requirements of the National Association of Certified Valuation Analysts mandatory
recertification program.
6. This valuation report is solely for the information and use of the management of Bayou Storage &
Forwarding, L.L.C. to assist with estate planning related to the possible transfer of membership units
in the Company.
7. The signor of this report nor any of the officers, agents, or employees of the valuation services firm
has any bias, present interest, or prospective interest with respect to the property that is the subject
of this report or any bias or personal interest with respect to the parties involved with this
assignment.
8. Our engagement in this assignment and the compensation for completing this assignment is not
contingent upon the development or reporting of a predetermined value or direction in value that
favors the cause of Bayou Storage & Forwarding, L.L.C., the amount of the value opinion, the
attainment of a stipulated result, or the occurrence of a subsequent event directly related to the
intended use of this valuation.
9. We did not use the work of outside specialists to assist us during the valuation engagement.
10. We have no obligation to update the report or the opinion of value for information that comes to our
attention after the date of the report.
11. Other than nominal and nonjudgmental staff assistance, closely supervised by the individual signing
this report, no one provided significant professional assistance in the performance of this valuation
except for the co-authors.