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Delux Corporation Excel

Submitted by: Group 4


Kajal Patil PGP09192
Margesh Patel PGP09216
Navneet Singh Rana PGP09207
Manohar Gupta PGP09157
Shreyans Jain PGP09237
Kirti Dang PGP09195
Tanu Kumari PGP09054
(in U.S.$ millions except per share values and numbers of shares

AAA AA A
Pretax cost of debt (Exhibit 9) 5.51% 5.52% 5.70%
Required EBIT interest coverage (Exhibit 6) 23.4 13.3 6.3

Estimate of Maximum Debt Capacity


Normalized 5-Year EBIT (Exhibit 4) $ 359.4 $ 359.4 $ 359.4
Maximum interest implied by rating $ 15.4 $ 27.0 $ 57.1
Maximum total debt implied by rating $ 278.9 $ 489.6 $ 1,001.5
Downside EBIT $ 200.0 $ 200.0 $ 200.0
Maximum interest implied by rating $ 8.5 $ 15.0 $ 31.7
Maximum total debt implied by rating $ 155.2 $ 272.5 $ 557.3

Estimate of unused Debt Capacity


Book value of Deluxe's existing debt $ 161.5 $ 161.5 $ 161.5
Maximum debt implied by rating $ 278.9 $ 489.6 $ 1,001.5
unused debt capacity at current rating $ 117.4 $ 328.2 $ 840.1
unused capacity until investment grate rating is lost (atBBB) $ 1,176.9 $ 966.2 $ 454.3

Estimate of Capital Structure


Deluxe corporation market value of Equity $ 2,665.4 $ 2,665.4 $ 2,665.4
Maximum debt implied by rating $ 278.9 $ 489.6 $ 1,001.5
Total debt/equity implied by rating 10.46% 18.37% 37.58%

EBIT/Total Debt %

Pretax cost of debt (Exhibit 9) 5.51% 5.52% 5.70%


Required EBIT/Total Debt % (Exhibit 6) 214% 66% 42%

Estimate of Maximum Debt Capacity


Normalized 5-Year EBIT (Exhibit 4) $ 359.4 $ 359.4 $ 359.4
Maximum total debt implied by rating $ 167.8 $ 547.1 $ 851.7
Downside EBIT $ 200.0 $ 200.0 $ 200.0
Maximum total debt implied by rating $ 93.4 $ 304.4 $ 473.9

Estimate of unused Debt Capacity


Book value of Deluxe's existing debt $ 161.5 $ 161.5 $ 161.5
Maximum debt implied by rating $ 167.8 $ 547.1 $ 851.7
unused debt capacity at current rating $ 6.3 $ 385.6 $ 690.2
unused capacity until investment grate rating is lost (atBBB) $ 1,006.8 $ 627.5 $ 322.9

Estimate of Capital Structure


Deluxe corporation market value of Equity $ 2,665.4 $ 2,665.4 $ 2,665.4
Maximum debt implied by rating $ 167.8 $ 547.1 $ 851.7
Total debt/equity implied by rating 6.30% 20.52% 31.95%
hare values and numbers of shares)

BBB BB B
6.33% 9.01% 11.97%
3.9 2.2 1

$ 359.4 $ 359.4 $ 359.4


$ 92.2 $ 163.4 $ 359.4
$ 1,455.8 $ 1,814.2 $ 3,003.9
$ 200.0 $ 200.0 $ 200.0
$ 51.3 $ 90.9 $ 200.0
$ 810.1 $ 1,009.5 $ 1,671.5

$ 161.5 $ 161.5 $ 161.5


$ 1,455.8 $ 1,814.2 $ 3,003.9
$ 1,294.4 $ 1,652.8 $ 2,842.4
$ - $ -358.4 $ -1,548.1

$ 2,665.4 $ 2,665.4 $ 2,665.4


$ 1,455.8 $ 1,814.2 $ 3,003.9
54.62% 68.07% 112.70%

6.33% 9.01% 11.97%


31% 20% 10%

$ 359.4 $ 359.4 $ 359.4


$ 1,174.6 $ 1,824.5 $ 3,455.9
$ 200.0 $ 200.0 $ 200.0
$ 653.6 $ 1,015.2 $ 1,923.1

$ 161.5 $ 161.5 $ 161.5


$ 1,174.6 $ 1,824.5 $ 3,455.9
$ 1,013.1 $ 1,663.0 $ 3,294.5
$ - $ -649.9 $ -2,281.4

$ 2,665.4 $ 2,665.4 $ 2,665.4


$ 1,174.6 $ 1,824.5 $ 3,455.9
44.07% 68.45% 129.66%
(in U.S.$ millions except per share values and

AAA AA A BBB
cost fo debt (pretax) 5.47% 5.50% 5.70% 6.30%
cost of equity 10.3% 10.4% 10.5% 10.6%

Approach based on Hudson Bancorp Estimates of Equity costs


Tax rate @38%
After-tax cost of debt 3.4% 3.4% 3.5% 3.9%
cost of equity 10.3% 10.4% 10.5% 10.6%
Debt/capital (Exhibit 6) 5.0% 35.9% 42.6% 47.0%
Weight of debt (implied by coverage ratio) 9.5% 15.5% 27.3% 35.3%

WACC (using Hudson's estimates - Interest coverage) 9.60% 9.27% 8.60% 8.24%
WACC (using book weighs) 9.91% 7.86% 7.53% 7.45%

Alternative approach based on CAPM and Levered Beta


cost of debt (pretax) 5.51% 5.52% 5.70% 6.33%
Unlevered beta 0.82 0.82 0.82 0.82
Debt/equity (Market) 10.5% 18.4% 37.6% 54.6%
Levered beta 0.87 0.91 1.01 1.10
cost of equity (rf=0.0530, MP=0.054) 10.0% 10.2% 10.8% 11.2%

After-tax cost of debt 3.4% 3.4% 3.5% 3.9%


Cost of equity 10.0% 10.2% 10.8% 11.2%
Debt/capital book value Exhibit 6 5.0% 35.9% 42.6% 47.0%
Weight of debt (implied by coverage ratio) 9.5% 15.5% 27.3% 35.3%

WACC (using market weights - Interest coverage) 9.38% 9.17% 8.78% 8.64%
WACC (using book weighs) 9.68% 7.78% 7.68% 7.78%

EBIT/Total Debt %
cost of debt (pretax) 5.51% 5.52% 5.70% 6.33%
Unlevered beta 0.82 0.82 0.82 0.82
Debt/equity (Market) 6.30% 20.52% 31.95% 44.07%
Levered beta 0.85 0.92 0.98 1.04
cost of equity (rf=0.0530, MP=0.054) 9.9% 10.3% 10.6% 10.9%

After-tax cost of debt 3.4% 3.4% 3.5% 3.9%


Cost of equity 9.9% 10.3% 10.6% 10.9%
Weight of debt (EBIT/Total Debt) 6.3% 20.5% 32.0% 44.1%

WACC (using market weights - EBIT/Total Debt) 9.49% 8.88% 8.34% 7.84%
cept per share values and numbers of shares)

BB B AAA AA
9.00% 12.00% WACC (using Hudson's estimates - Interest coverage 9.60% 9.27%
12.0% 14.3% WACC (using market weights - Interest coverage) 9.38% 9.17%
WACC (using market weights - EBIT/Total Debt) 9.49% 8.88%
Cost of Debt (Based on future assumptions, yield) 5.51% 5.52%
Cost of Equity (Hudson Estimate) 10.25% 10.35%
5.6% 7.4%
12.0% 14.3%
57.7% 75.1%
40.5% 53.0% WACC
9.40% 10.64% 14.00%
8.30% 9.14%
12.00%

10.00%
9.01% 11.97%
0.82 0.82 8.00%
68.1% 112.7%
1.16 1.39 6.00%
11.6% 12.8%
4.00%
AAA AA A BBB
5.6% 7.4%
WACC (us i ng Huds on's estimates - Interest covera ge) WACC (us i ng mark
11.6% 12.8%
WACC (us i ng market wei ghts - EBIT/Total Debt) Cost of Debt (Bas
57.7% 75.1%
Cost of Equity (Huds on Estimate)
40.5% 53.0%

9.16% 9.97%
8.12% 8.78%
Unlevered Beta calculation:
Long-term debt 11.5 Levered beta
9.01% 11.97% Short-term debt 150.0
0.82 0.82 Total debt 161.5 Risk-free rate
68.45% 129.66% Market value of equity 2,665.4 Market premium
1.17 1.48 Debt/capital (market) 5.71%
11.6% 13.3%
Debt/equity (market) 6.06% Unlevered beta
5.6% 7.4%
11.6% 13.3%
68.5% 129.7%

7.48% 5.71%
A BBB BB B
8.60% 8.24% 9.40% 10.64%
8.78% 8.64% 9.16% 9.97%
8.34% 7.84% 7.48% 5.71%
5.70% 6.33% 9.01% 11.97%
10.50% 10.60% 12.00% 14.25%

WACC

BBB BB B
era ge) WACC (us i ng market wei ghts - Interest covera ge)
) Cost of Debt (Bas ed on future a ss umptions , yi el d)

Levered beta 0.85


Tax rate 38.00%
Risk-free rate 5.30%
Market premium 5.40%

Unlevered beta 0.82


(in U.S.$ millions except per share values and numbers of shares)

Forecast on basis of future yields & market CAPM return calculations with rating BBB

Actual Projected
2001 2002 2003 2004
Annual increase in sales 1.2% 1.4% 1.6% 2.0%
Operating profit/sales 23.6% 26.6% 26.7% 26.7%
Tax rate 37.0% 38.0%
Working capital/sales 2.9% 2.9%

Income Statement
Net sales $1,278.4 $1,296.3 $1,317.0 $1,343.4
Operating profit 302.0 344.8 351.6 358.7
Interest expense, net 3.2 92.2 92.2 92.2
Pretax income 298.8 252.7 259.5 266.5
Tax expense 111.6 96.0 98.6 101.3
Net income 187.1 156.6 160.9 165.2
Dividends 94.9 94.9 94.9 94.9
Retentions to earnings $92.2 $61.8 $66.0 $70.4

Balance Sheet
Debt (long- and short-term) $161.5 $1,455.8 $1,455.8 $1,455.8
Other long-term liabilities 37.0 146.9 337.0 522.9
Equity 78.7 137.3 198.0 259.1
Total capital 277.2 1,740.0 1,990.8 2,237.9

Cash 9.6 1,551.4 1,801.6 2,047.9


Working capital (without debt) 116.6 37.5 38.1 38.9
Net fixed assets 151.1 151.1 151.1 151.1
Total assets $277.2 $1,740.0 $1,990.8 $2,237.9
$ - $ - - -
Share Repurchase
Shares outstandings (Beginning) 64,102.0 61,459.0 57,156.9 53,155.9
Net Shares Repurchased (7%) (2,643.0) (4,302.1) (4,001.0) (3,720.9)
Shares outstandings (Ending) 61,459 57,156.9 53,155.9 49,435.0
Market/Book Equity ratio 33.9 36.0 20.1 14.1
Share price in $ 41.6 44.2 46.5 50.2
Cash used to repurchase (in Mn) (109.9) (190.1) (185.9) (186.8)
Book value equity per share in $ 1.2 1.2 2.3 3.6
Decrease in book value of equity (3.2) (5.3) (9.2) (13.2)
Book value per share at end 1.2 2.3 3.6 5.0

Free Cash Flows 1 2 3


EBIT $344.8 $351.6 $358.7
Less taxes on EBIT (131.0) (133.6) (136.3)
Plus depreciation 50.0 50.0 50.0
Less capital expenditures (50.0) (50.0) (50.0)
Less additions to/plus reductions in workng capital 79.1 (0.6) (0.8)
Free cash flow $292.8 $217.4 $221.6
Terminal value
Total FCF $292.8 $217.4 $221.6
Valuation
WACC from market considerations 8.64% Assumption: We have taken WACC for BBB rating, using
As we want to focus mainly on the capital structure of the
EV 2,715,475 2,655,897 2,668,005 2,676,961
Shares outstanding 61,459 57,157 53,156 49,435
Share price 44.183528346 46.4667997 50.1920947 54.151165216
nd numbers of shares)

tions with rating BBB

Projected
2005 2006
2.2% 2.4%
26.7% 26.7%

$1,372.9 $1,405.9 Assumptions:


366.6 375.4 Annual increase of sales are taken directly from estimations
92.2 92.2 Operating profit/sales & taken directly from estimated
274.4 283.2 Working capital/sales % taken drirectly from estimated
104.3 107.6 Fixed assets are considered to be constant over next 5 years
170.1 175.6 Other long term libilities are increasing to fund share repurchase
94.9 94.9 Debt is considered to be taken as full capacity till reaching BBB
$75.3 $80.7 rating, as derviced from 'Unused Debt' sheet
Zero growth is considered for terminal value
7% of total shares outstandings are considered to be repurchased
$1,455.8 $1,455.8
709.7 897.1
321.2 384.7
2,486.7 2,737.6

2,295.9 2,545.8
39.8 40.7
151.1 151.1
$2,486.7 $2,737.6
- -
Assumptions for shares repurchase
49,435.0 45,974.5 Company is aiming to at least maintain share price of 2001
(3,460.4) (3,218.2) 7% of total shares outstandings are considered to be repurchased
45,974.5 42,756.3
10.9 8.8 Share repurchase Cash used in repurchase is financed through Other Long-Term liabilities
54.2 58.3 calculations
(187.4) (187.7)
5.0 6.6
(17.2) (21.3)
6.6 #DIV/0!

4 5
$366.6 $375.4 $359.4
(139.3) (142.6)
50.0 50.0
(50.0) (50.0)
(0.9) (1.0)
$226.4 $231.8
$2,683.3
$226.4 $2,915.1

WACC for BBB rating, using Interest coverage ratio.


on the capital structure of the firm
2,681,892
45,975
58.334301471
purchase
share price of 2001
ered to be repurchased

Other Long-Term liabilities


Exh. 1

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Selected Income Statement Information
Net sales $1,534.4 $1,581.8 $1,747.9 $1,858.0 $1,895.7 $1,919.4 $1,931.8 $1,650.5 $1,262.7 $1,278.4
Operating expenses $722.2 $739.5 $797.3 $819.4 $862.4 $806.7 $805.9 $688.9 $417.9 $421.1
Profit from operations $812.2 $842.3 $950.6 $1,038.6 $1,033.3 $1,112.7 $1,125.9 $961.6 $844.8 $857.2
Interest expense $15.4 $10.3 $11.3 $14.7 $12.0 $9.7 $9.7 $9.5 $10.8 $5.6
Net earnings $202.8 $141.9 $140.9 $87.0 $65.5 $44.7 $143.1 $203.0 $161.9 $185.9

Common shares, end of year (000s) 83,797 82,549 82,375 82,364 82,056 81,326 80,481 72,020 72,555 64,102
Common shares repurchased (000s) (2,197) (1,341) (1,191) (1,414) (1,715) (1,833) (9,573) (48) (11,332) (3,898)
Common shares issued (000s) 949 1,167 1,181 1,106 985 988 1,112 583 2,890 1,255

Earnings per share1 $2.42 $2.09 $1.71 $1.15 $1.65 $2.15 $2.34 $2.64 $2.34 $2.70
Dividend per share $1.34 $1.42 $1.46 $1.48 $1.48 $1.48 $1.48 $1.48 $1.48 $1.48

Selected Balance Sheet Information


Working capital $330.9 $386.9 $224.5 $130.4 $12.3 $108.1 $131.0 $167.8 $14.0 $116.6
Net property, plant, & equipment $389.0 $401.6 $461.8 $494.2 $446.9 $415.0 $340.1 $294.8 $174.0 $149.6
Total assets $1,199.6 $1,252.0 $1,256.3 $1,295.1 $1,176.4 $1,148.4 $1,171.5 $992.6 $649.5 $537.7
Long-term debt $115.5 $110.8 $110.9 $111.0 $108.9 $110.0 $106.3 $115.5 $10.2 $10.1
Common stockholders' equity $829.8 $801.2 $814.4 $780.4 $712.9 $610.2 $606.6 $417.3 $262.8 $78.6

Book value: LT debt/capital 12.2% 12.1% 12.0% 12.5% 13.3% 15.3% 14.9% 21.7% 3.7% 11.4%
Market value: LT debt/capital 2.9% 3.6% 4.9% 4.4% 3.9% 3.8% 3.5% 5.5% 0.6% 0.4%

Selected Valuation Information


(year-end)
Deluxe Corp. stock price $ 46.75 $ 36.25 $ 26.38 $ 29.00 $ 32.75 $ 34.50 $ 36.56 $ 27.44 $ 25.27 $ 41.58
S&P 500 Composite Index 418.17 464.30 462.62 576.70 700.92 941.64 1,072.32 1,281.91 1,364.44 1,104.61
Deluxe Corp. average P/E2 17.60x 19.00x 17.40x 25.90x 20.60x 15.40x 14.30x 12.70x 10.20x 11.01x
S&P 500 Composite average P/E 2
24.38x 24.11x 18.36x 16.92x 20.26x 23.88x 27.45x 31.43x 26.29x 29.50x
Deluxe Corp. market/book ratio 4.72x 3.73x 2.67x 3.06x 3.77x 4.60x 4.85x 4.74x 6.98x 33.91x
Deluxe Corp. Beta 1.00 1.00 1.00 0.95 0.90 0.95 0.85 0.90 0.90 0.85
Yield on 20 year T-bonds 7.67% 6.48% 8.02% 6.01% 6.73% 6.02% 5.39% 6.83% 5.59% 5.74%
Yield on 90-day T-bills 3.08% 3.01% 5.53% 4.96% 5.07% 5.22% 4.37% 5.17% 5.73% 1.71%
Total annual ret. on large co. stocks 7.67% 9.99% 1.31% 37.43% 23.07% 33.36% 28.58% 21.04% -9.11% -11.88%
Notes:

Page 12
Exh. 2

Exhibit 2
Deluxe Corp.
Consolidated Statement of Income
(in U.S. $ millions)

Years ended December 31


2001 2000

Revenue $1,278.4 $1,262.7

Cost of goods sold 453.8 453.0


Selling, general, and admin. expense 514.4 518.2
Goodwill amortization expense 6.2 5.2
Asset impairment and disposition losses 2.1 7.3
Total costs 976.4 983.8
Profit/(loss) from operations 302.0 278.9

Interest income 2.4 4.8


Other income (1.2) 1.2
Interest expense (5.6) (11.4)
Earnings/(loss) before taxes 297.6 273.4
Tax expense 111.6 104.0
Discontinued operations income/(loss) - (7.5)
Net earnings/(loss) $185.9 $161.9

Source of data: Company regulatory filings.

Page 13
Exh. 3

Exhibit 3
Deluxe Corp.
Consolidated Balance Sheets
(in U.S. $ millions)

2001 2000
Assets
Current assets
Cash and cash equivalents $9.6 $80.7
Marketable securities - 18.5
Trade accounts receivable – net 37.7 46.0
Inventories 11.2 11.3
Supplies 11.1 11.8
Deferred income taxes 4.6 7.4
Prepaid expenses and other 9.9 12.0
Total current assets 84.0 187.8
Long-term investments 37.7 35.6
Property, plant, and equipment – net 151.1 174.0
Intangibles – net 115.0 134.5
Goodwill–net 82.2 88.4
Other noncurrent assets 67.9 36.2
Total assets $537.8 $656.4

Liabilities and Stockholders' Equity


Current liabilities
Accounts payable $52.8 $44.7
Accrued liabilities 162.9 148.5
Short-term debt 150.0 -
Long-term debt due within one year 1.4 100.7
Total current liabilities 367.1 293.9
Long-term debt 10.1 10.2
Deferred income taxes 44.9 51.1
Other long-term liabilities 37.0 38.3
Total liabilities 459.1 393.5
Common stockholders' equity
Common shares 64.1 72.6
Additional paid-in capital - 44.2
Retained earnings 14.6 146.2
Unearned compensation 0.1 0.1
Accum. other comprehensive income - (0.2)
Total common stockholders' equity 78.7 262.9
Total liabilities and stockholders' equity $537.8 $656.4

Source of data: Company regulatory filings.

Page 14
Exh. 4

Exhibit 4
Deluxe Corp. Financial Forecast, 2002-2006
(values in U.S. $ millions)

Actual Projected
2001 2002 2003 2004
Annual increase in sales 1.2% 1.4% 1.6% 2.0%
Operating profit/sales 23.6% 26.6% 26.7% 26.7%
Tax rate 37.0% 38.0%
Working capital/sales 9.1% 9.1%
Dividend payout ratio 52.0%
Income Statement
Net sales $1,278.4 $1,296.3 $1,317.0 $1,343.4
Operating profit 302.0 344.8 351.6 358.7
Interest expense, net 3.2 4.0 4.0 4.0
Pretax income 298.8 340.8 347.6 354.7
Tax expense 111.6 129.5 132.1 134.8
Net income 187.1 211.3 215.5 219.9
Dividends 94.9 94.9 94.9 94.9
Retentions to earnings $92.2 $116.4 $120.7 $125.0
Balance Sheet
Cash $9.6 $124.3 $243.1 $365.8
Working capital (without debt) 116.6 118.2 120.1 122.5
Net fixed assets 151.1 151.1 151.1 151.1
Total assets 277.2 393.6 514.3 639.3

Debt (long- and short-term) 161.5 161.5 161.5 161.5


Other long-term liabilities 37.0 37.0 37.0 37.0
Equity 78.7 195.2 315.8 440.9
Total capital $277.2 $393.6 $514.3 $639.3
Free Cash Flows
EBIT $344.8 $351.6 $358.7
Less taxes on EBIT (131.0) (133.6) (136.3)
Plus depreciation 50.0 50.0 50.0
Less capital expenditures (50.0) (50.0) (50.0)
Less additions to/plus reductions in workng capital (1.6) (1.9) (2.4)
Free cash flow $212.2 $216.1 $220.0

Source: Case writers' analysis, consistent with forecast expectations of securities analysts.

Page 15
Exh. 4

2005 2006
2.2% 2.4%
26.7% 26.7%

$1,372.9 $1,405.9
366.6 375.4
4.0 4.0
362.6 371.4
137.8 141.1
224.8 230.3
94.9 94.9
$129.9 $135.4

$493.0 $625.4
125.2 128.2
151.1 151.1
769.3 904.6

161.5 161.5
37.0 37.0
570.8 706.2
$769.3 $904.6

$366.6 $375.4
(139.3) (142.6)
50.0 50.0
(50.0) (50.0)
(2.7) (3.0)
$224.6 $229.7

Page 16
Exh. 6

Exhibit 6
Key Industrial Financial Ratios by Rating Categories
Credit Rating

Investment grade
Key Industrial Financial Ratios (Three-year medians 2000–02) AAA AA

EBIT interest coverage (x) 23.4 13.3


EBITDA interest coverage (x) 25.3 16.9
Funds from operations/total debt (%) 214% 66%
Free operating cash flow/total debt (%) 157% 34%
Return on capital (%) 35% 27%
Operating income/sales (%) 23% 24%
Long-term debt/capital (%) -1% 21%
Total debt/capital, incl. short-term debt (%) 5% 36%

Standard & Poor's defined these ratios based on the book value of these items as follows:
EBIT interest coverage = EBIT/interest expense.
EBITDA interest coverage = (EBIT plus depreciation and amortization)/interest expense
Long-term debt/capital = long-term debt/(long-term debt + stockholders' equity)
Total debt/capital, incl. short-term debt = (short-term debt + long-term debt)/(short-term debt + long-term debt + stockholders' eq

Source of data: Standard & Poor's CreditStats.

Page 17
Exh. 6

g Categories
Credit Rating

Investment grade Noninvestment grade


A BBB BB B

6.3 3.9 2.2 1.0


8.5 5.4 3.2 1.7
42% 31% 20% 10%
22% 13% 7% 2%
18% 13% 12% 8%
18% 16% 15% 15%
34% 40% 54% 73%
43% 47% 58% 75%

+ long-term debt + stockholders' equity)

Page 18
60.0x
EBIT Divided by Interest

50.0x

40.0x

30.0x
55.2x

20.0x
32.4x 32.8x 31.0x
27.3x 26.3x
21.0x 20.7x 21.9x
10.0x 16.1x

0.0x
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Exhibit 7
Deluxe Corp.
EBIT Interest Coverage Ratios By Year

1992 1993 1994 1995 1996 1997 1998


EBIT 322.2 280.8 233.7 236.3 262.8 315.9 316.6
Interest expense 15.4 10.3 11.3 14.7 12.0 9.7 9.7
Coverage ratio (x) 21.0x 27.3x 20.7x 16.1x 21.9x 32.4x 32.8x
r

1999 2000 2001


293.8 284.7 308.2
9.5 10.8 5.6
31.0x 26.3x 55.2x
Exhibit 8
Capital Costs by Rating Category

AAA AA A BBB BB B
Cost of debt
(pretax) 5.47% 5.50% 5.70% 6.30% 9.00% 12.00%
Cost of
equity 10.25% 10.35% 10.50% 10.60% 12.00% 14.25%

Source of data: Hudson Bancorp


Exhibit 9
Capital Market Conditons
(as of July 31, 2002)

U.S. Treasury Obligations Yield Other Instruments


90-day bills 1.69% Discount Notes
180-day bills 1.68% Certificates of Deposit (3-month)
2-year notes 2.23% Commercial Paper (6-month)
3-year notes 2.79% Term Fed Funds
5-year notes 3.45%
10-year notes 4.46%
30-year notes 5.30%

Corporate Debt Obligations (10-year) Yield


AAA 5.51%
AA 5.52%
A 5.70%
BBB 6.33%
BB 9.01%
B 11.97%

Source of data: Bloomberg LP, S&P's Research Insight, Value Line Investment Survey, Datastream Advance
Yield
1.70%
1.72%
1.75%
1.78%
Dec92 Dec93 Dec94 Dec95 Dec96 Dec97
Sales 1534.351 1581.767 1747.92 1857.981 1895.664 1919.366
Cost from operations 722.155 739.493 797.314 819.408 862.358 806.671
Operating Profit 812.1959 842.274 950.606 1038.573 1033.306 1112.695
EBITDA 388.834 353.147 320.075 339.587 329.078 384.729
EBIT 322.219 280.827 233.659 236.284 262.809 315.913
Interest Expense 15.371 10.276 11.305 14.714 11.978 9.742
Total Taxes 121.999 94.052 100.02 74.885 53.302 70.478
Depreciation 66.615 72.32 86.416 103.303 66.269 68.816
Net Income 202.784 141.861 140.866 87.021 65.463 44.672

Com Shares Outstanding 83.797 82.549 82.375 82.364 82.056 81.326


Treasury Stock-# Com Shares 0 0 0 0 0 0
Treasury Stock-Total $ Amt 0 0 0 0 0 0
Earnings Per Share (Value Line) 2.42 2.09 1.71 1.15 1.65 2.15
Div. Per Share (Value Line) 1.34 1.42 1.46 1.48 1.48 1.48

Working Capital (Value Line) 330.9 386.9 224.5 130.4 12.3 108.1
PP&E-Total Net 389.017 401.641 461.818 494.158 446.858 415.008
Assets-Total 1199.556 1251.994 1256.272 1295.095 1176.44 1148.364
LT Debt-Total 115.522 110.755 110.867 110.997 108.937 109.986
Preferred Stock 0 0 0 0 0 0
Common Equity-Total 829.808 801.249 814.393 780.374 712.916 610.248

Long-Term Debt/Total Capital 12.22028 12.14413 11.98225 12.45239 13.25505 15.27087

Price-Close Fiscal Year 46.75 36.25 26.375 29 32.75 34.5


Avg. Annl. P/E (Value Line) 17.6 19 17.4 25.9 20.6 15.4
Price to Book Fiscal Yr End 4.720983 3.734671 2.667804 3.060783 3.769496 4.597716
Beta
Gov Bonds-20 Year 7.67 6.48 8.02 6.01 6.73 6.02
T-Bill-3 Month 3.08 3.01 5.53 4.96 5.07 5.22
S&P 500 (Datastream) 418.17 464.30 462.62 576.70 700.92 941.64
S&P 500 P/E (Datastream) 24.38 24.11 18.36 16.92 20.26 23.88
Dec98 Dec99 Dec00 Dec01
1931.796 1650.5 1262.712 1278.375
805.874 688.936 417.882 421.149
1125.922 961.564 844.83 857.226
375.541 348.099 318.054 345.857
316.61 293.794 284.679 308.2
9.664 9.479 10.837 5.583
99.852 121.633 103.957 111.634
58.931 54.305 33.375 37.657
143.063 203.022 161.936 185.9

80.481 72.02 72.555 64.102


0 0 0 0
0 0 0 0
2.34 2.64 2.34 2.70
1.48 1.48 1.48 1.48

131 167.8 14 116.6


340.077 294.785 173.956 149.552
1171.519 992.643 649.469 537.721
106.321 115.542 10.201 10.084
0 0 0 0
606.565 417.308 262.808 78.605

14.91417 21.68378 3.736507 11.37007

36.5625 27.4375 25.27 41.58


14.3 12.7 10.2 11.01
4.849 4.984877 6.976538 35.10112
0.90 0.90 0.85
5.39 6.83 5.59 5.74
4.37 5.17 5.73 1.71
1072.32 1281.91 1364.44 1104.61
27.45 31.43 26.29 29.50