Hoosier Castings Corporation Case

Hoosier Casting Corporation

Written by: Justin A. Wolfort, MBA Class of 2012

Under the supervision of: Professor David C. Haeberle

Hoosier Castings Corporation

The Dynamics of Transitioning a Family Business

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Hoosier Castings Corporation

Situation Overview When Brendon Morris arrived early at his office on the morning of December 21, 2011, he knew he

would have only a couple hours of time to himself to collect his thoughts and prepare for the Company’s

annual Board of Directors meeting later that afternoon. As the President of The Hoosier Castings

Corporation (“HCC”), the 45 year-old was responsible for the Company’s day-to-day operations and also

managed the Company’s largest customer account. Having been recruited to join HCC upon his

graduation from the MBA program at Indiana University in 1996, Brendon knew that this afternoon’s

annual Board meeting would be unlike any other he had seen in his 15-year tenure with the Company.

During this afternoon’s Board meeting the Company’s Chairman, David DeWitt, had invited the

Investment Bank Riverdale Partners to give a presentation regarding the potential sale of the business.

A few weeks prior, David had received an unsolicited bid to buy the Company from their long time

competitor Ridgecreek Industries. Additionally, Brendon had known of David’s desire to sell HCC since

his health scare six months prior, but was unsure how a company such as HCC would be perceived by a

potential buyer. He wondered if Riverdale Partners would be able to deliver a premium price for the 66

year-old family business. Was a sale to Ridgecreek Industries in the best interest of HCC’s stakeholders?

Furthermore, having been privy to previous Board meetings and family politics, he knew there would be

significant challenges to the sale process as other members of the DeWitt Family may not be

emotionally prepared to relinquish majority ownership and control of HCC.

The Business In 1945 after returning from service in World War II to their home town of Indianapolis, Indiana,

brothers Abraham and David DeWitt founded The Hoosier Castings Corporation to provide various iron,

steel and brass castings to the growing automobile industry in the Midwestern United States. Having

started from the humble beginnings of a ‘back yard’ workshop, the DeWitt brothers had managed to

grow Hoosier Castings into a business with annual revenues of $10 million by the beginning of 1980.

After years of profitable growth the DeWitt brothers decided that they had outgrown their original

location and HCC relocated to a 180,000 square foot greenfield facility, which opened in the fall of 1980.

Situated on 25 acres of land at the edge of downtown, the new Burnham Road Facility would allow for

substantial manufacturing growth and flexibility in the years to come.

Unfortunately, during the spring of 1981 tragedy struck the DeWitt family as older brother Abraham was

killed in an unfortunate automobile accident while leaving the plant late one evening. With the death

of his brother, closest friend, and business partner David decided to ask his oldest son Gregory, who was

graduating from the engineering program at Purdue University, to join the family business in hopes of

filling Abraham’s void. Although he had no previous business training, after a short deliberation Gregory

enthusiastically accepted his father’s offer. In an effort to alleviate the financial stress that Abraham’s

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untimely death had placed on his family, David generously offered and completed the purchase of half

of his late brother’s ownership in t

Mabel with a source of continual income, it was decided that she would retain 22% ownership in the

business and be entitled to a modest annual salary, although not technically employed by

From 1981 to 2005 HCC took active steps to expand the Company’s customer base from the domestic

automotive industry towards a more diversified set of

successfully manufacturing a portfolio of castings f

(OEMs) including agricultural and mining equipment,

power generation equipment, military defense equipment and

In early 2006 business seemed to be looking up

for HCC (Historical Income Statement data

Exhibit III). The Company had successfully

diversified from the declining automotive

industry; management had recently reported a

record fiscal year; and the Company’s robust

order backlog coupled with a strong

manufacturing economy pointed towards

another record year. Given the strength in his

business and having recently celebrated his

80th birthday, David DeWitt decided it was time

to hang up his entrepreneurial spurs and pa

the reigns of the Company onto the next

generation. In January 2006, David retired from the day

son Gregory, President of HCC. Additionally, recognizing the numerous

years of service to HCC; David promoted Brendon Morris to the newly created position of Executive Vice

President and awarded him with a 5% percent ownership stake in the business. This newly created

position made Brendon the only the second

position as the Company’s “Second

With his succession plan in place, David transitioned to the title of Chairman of the Board, modified his

work schedule to a part-time consulting role and began to enjoy his

years-old.

The Buckeye Acquisition“Castings are not enough!” Having recently assumed the helm of the growing Castings business,

Gregory was eager to make his mark on the Company and transition the business to the next level.

Following several solid years of financial performance, HCC was flush with cash.

After a routine visit from the Company’s long time commercial banker

National Savings, Gregory learned that even the traditionally conservative Evansville, Indiana based


of his late brother’s ownership in the business from his widow Mabel. Additionally, in order to provide


business and be entitled to a modest annual salary, although not technically employed by

HCC took active steps to expand the Company’s customer base from the domestic

automotive industry towards a more diversified set of businesses. By the end of 200

successfully manufacturing a portfolio of castings for numerous Original Equipment

cluding agricultural and mining equipment, gas exploration and collection equipment

power generation equipment, military defense equipment and alternative energy production.

business seemed to be looking up

(Historical Income Statement data in

. The Company had successfully

diversified from the declining automotive

management had recently reported a

and the Company’s robust

coupled with a strong

manufacturing economy pointed towards

another record year. Given the strength in his

having recently celebrated his

birthday, David DeWitt decided it was time

to hang up his entrepreneurial spurs and pass

the reigns of the Company onto the next

, David retired from the day-to-day operations of the business named his

son Gregory, President of HCC. Additionally, recognizing the numerous contributions made over his

ice to HCC; David promoted Brendon Morris to the newly created position of Executive Vice


only the second non-family member to own shares in HCC

position as the Company’s “Second- in- Command”.


time consulting role and began to enjoy his retirement at the youthful age of 80

The Buckeye Acquisition Having recently assumed the helm of the growing Castings business,

to make his mark on the Company and transition the business to the next level.

Following several solid years of financial performance, HCC was flush with cash.

routine visit from the Company’s long time commercial banker Danielle

Gregory learned that even the traditionally conservative Evansville, Indiana based


n order to provide


business and be entitled to a modest annual salary, although not technically employed by the Company.

HCC took active steps to expand the Company’s customer base from the domestic

es. By the end of 2005 HCC was

Equipment Manufacturers

equipment, electric

alternative energy production.

day operations of the business named his

contributions made over his

ice to HCC; David promoted Brendon Morris to the newly created position of Executive Vice


ares in HCC and solidified his


retirement at the youthful age of 80

Having recently assumed the helm of the growing Castings business,

to make his mark on the Company and transition the business to the next level.

Adams of Second

Gregory learned that even the traditionally conservative Evansville, Indiana based bank

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seemed poised to extend HCC a new credit facility with aggressive terms.

history, David DeWitt, a child of the Great Depression, had shunned the use of leverage for growth

however, Gregory saw the current market conditions as

With a “cash-rich” balance sheet and a

diversifying the Company from castings and grow

initially objected to the idea of straying from HCC’s core competency of castings

agreed to help Gregory in the search for a suitable acquisition target.

After an exhausting six month search,

Columbus, Ohio based manufacturer of residential trusses as an attractive acquisition target.

Buckeye Truss, Inc., founded in 1975, was solely owned by the

Yahska Family. Buckeye Truss specialized in the manufacture

of a wide variety of pre-fabricated

triangulated architectural structures used to support the roof

of residential homes. Through a n

representatives, the Company sold

large national homebuilders nationwide.

Company had recorded record sales and profitability a

network of loyal customers placed orders at an

rate.

Buckeye Trust was led by Bernie Yahska,

to the United States in the late 1960’s.

successful business over the last three decades

his late 60’s, decided it was time to enjoy some of his s

retire and move full-time to his vacation home in Naples,

Florida where he could escape the harsh Ohio winters once

and for all. Although they had been encouraged multiple

times by their father, none of Bernie

business. Thus when it came time for Bernie to move to the fairer climate and daily golf games of

Florida, he had no choice but to sell the business.

Not long after Bernie had made the decision to look for a buyer

Samantha Left, a local corporate attorney

initial meeting, the two agreed on an acquisition price of $

7.5x enterprise value multiple to the Company’s 200

transaction would be subject only

Transaction Detail in Exhibit VII).

During the December 2007 Board meeting, l

one to strenuously bolster an object

castings and sure while we are all individually homeowners, we don’t know the first

seemed poised to extend HCC a new credit facility with aggressive terms. Throughout the Company’s

a child of the Great Depression, had shunned the use of leverage for growth

Gregory saw the current market conditions as a way to modernize HCC’s capital structure.

rich” balance sheet and a new credit facility at his disposal, Gregory began to look at

the Company from castings and growing the business through acquisition.

initially objected to the idea of straying from HCC’s core competency of castings production

rch for a suitable acquisition target.

search, Gregory and Brendon had identified Buckeye


ed in 1975, was solely owned by the

Buckeye Truss specialized in the manufacture

fabricated wooden trusses, which are

structures used to support the roof

of residential homes. Through a network of sales

sold its products primarily to

large national homebuilders nationwide. In recent years, the

had recorded record sales and profitability as their

placed orders at an astonishing

was led by Bernie Yahska, who had immigrated

to the United States in the late 1960’s. Having built a

three decades, Bernie now in

decided it was time to enjoy some of his success,

time to his vacation home in Naples,

Florida where he could escape the harsh Ohio winters once

and for all. Although they had been encouraged multiple

times by their father, none of Bernie’s three children had ever displayed an interest in joining the family


Florida, he had no choice but to sell the business.

had made the decision to look for a buyer he was introduced to Gregory DeWitt by

ttorney and board member of HCC. Soon after Bernie and Gregory’s

, the two agreed on an acquisition price of $14.3 million for Buckeye, which represented

to the Company’s 2007 EBITDA (Buckeye Financial Data in Exhibit IV)

only to board approval at HCC’s upcoming annual

Board meeting, long time board member Daniel Michaelson

objection to the transaction saying “Look we know a lot of things about

castings and sure while we are all individually homeowners, we don’t know the first thing about selling

hroughout the Company’s

a child of the Great Depression, had shunned the use of leverage for growth;

way to modernize HCC’s capital structure.

egory began to look at

the business through acquisition. Although he

production, Brendon

Gregory and Brendon had identified Buckeye Truss, Inc., a


an interest in joining the family


as introduced to Gregory DeWitt by

Soon after Bernie and Gregory’s

which represented a

(Buckeye Financial Data in Exhibit IV). The

meeting (Buckeye

Daniel Michaelson was the only

Look we know a lot of things about

thing about selling

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TO homebuilders! If we want to grow by acquisition, why don’t we just wait until we can find another

castings company? If the money is really burning a hole in your pocket, why don’t we look at putting an

expansion onto the plant or taking a special dividend?”

Despite the strenuous objections voiced by Daniel, with a vote of six to one the Board of Directors

approved the $14.3 million acquisition, which successfully closed shortly thereafter.

Integration, The Great Recession and Recovery (2008 to 2011) Following the close of the Buckeye transaction, business resumed as normal for HCC. It was agreed that

in order to fill the void left by Bernie’s retirement that Brendon would remotely manage the truss

business from HCC’s Indianapolis office, making bi-weekly trips to Columbus to inspect the

manufacturing operations.

Late In the first quarter of 2008, shortly after the Buckeye transaction close, purchase orders for trusses

began to slow causing the subsidiary’s backlog to weaken. By June of that year, Buckeye reported a 15%

decline in sales from the prior year, creating significant alarm amongst HCC management. As a result of

the declining performance, Brendon had increased his visits to the Buckeye subsidiary, allocating

significantly more of his attention to the truss business. By the end of 2008, he found himself spending

up to three days a week at the Columbus facility, struggling to turn the subsidiary’s failing financial

performance back to profitable.

Tempers began to flair during the December 2008 Annual Meeting as the Board vented their frustrations

surrounding HCC’s declining financial performance. In addition to the weakened performance of the

Buckeye division, the broader economic recession had resulted in a decrease in demand for HCC’s

castings. The decreased order volume coupled with the increased debt load from the Buckeye

acquisition had created a perfect storm for HCC, making 2008 the worst fiscal year in Company history.

The Board’s frustrations where largely directed towards Gregory who had championed the Buckeye

acquisition as a turning point for HCC. By the end of the meeting Gregory had been relieved from

managerial duties as President and was demoted to Executive Vice President. It was decided that

Gregory’s role would revert to a sales position and that Brendan Morris would take over the daily

operations of the Company as HCC’s new President.

Over the next two years, Brendon, with the help of his management team, charted and executed a plan

for reversing the Company’s losses. Brendon had successfully identified a number of operational

improvements and cost cutting measures that improved the Company’s margins. In addition to the

profitability improvements put in place, by the 2011 Annual Meeting the economy had begun to show

signs of improvement and the Company’s backlog had shown improvement.

The Plant Prior to receiving the offer from Ridgecreek Capital the most significant item on the December 2011

Annual Meeting agenda had been to discuss the potential relocation of HCC from their Burnham Road

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Facility. In recent years, the area surrounding HCC’s primary facility had gone through an economic

transformation from that of a predominately industrial area to a “hip” residential neighborhood

dominated by renovated loft warehouse apartments and art galleries. Although HCC had never formally

been contacted by a real estate agent, the surrounding development convinced management that their

25 acre property would create significant interest in the market, should it go up for auction. (Details

regarding real estate values can be found in Exhibit VI.)

The 2011 Annual Meeting Brendon took the last sips of his morning coffee, got up from his desk and began to walk down the hall

to the Board Room. As he stopped at his assistant’s desk to grab a handful of Skittles candy to satisfy his

sweet tooth, Brendon could not help but worry about how the impending meeting would play out.

Having never been through a process like this, Brendon asked himself:

� How could he be sure that all of HCC’s stakeholders’ objectives where met?

� Should HCC still entertain the sale of the Burnham Road Facility? If so, how disruptive would

a move be for the Company?

� Was Ridgecreek’s offer fair or should we see what other potential buyers are willing to pay?

� Do we have time to market the Company to other prospective buyers and still respond to

the Ridgecreek offer considering their stated deadline?

� Would the advice from Riverdale truly be objective?

� How would a bidder view the DeWitt Family’s involvement with the business?

� Was now the right time to sell the Company?

� How would the Board react to Ridgecreek’s offer & to Riverdale’s recommendation?

� If the Company was sold, would he still have a job?

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Exhibits

I. Consolidated Historical Income Statement of Hoosier Castings

($ in thousands) Actual Year Ended December 31,

Proforma

2007 2008 2009 2010 2011

Income Statement

Sales $73,355 $68,228 $65,810 $68,017 $71,044

Cost of Sales 51,644 49,776 47,733 48,659 50,702

Gross Profit 21,710 18,453 18,077 19,358 20,342

Gross Margin 29.6% 27.0% 27.5% 28.5% 28.6%

SG&A Expense 14,671 14,018 13,512 13,909 14,404

Operating Income 7,040 4,435 4,566 5,448 5,938

Operating Margin 9.6% 6.5% 6.9% 8.0% 8.4%

Interest Expense 446 446 386 327 267

Amortization of Deferred Financing Fees 22 22 22 22 22

Pretax Income 6,571 3,967 4,158 5,100 5,649

Income Taxes 2,300 1,389 1,455 1,785 1,977

Net Income $4,271 $2,579 $2,702 $3,315 $3,672

Depreciation & Amortization 927 881 856 884 924

EBITDA $7,967 $5,316 $5,421 $6,333 $6,861

EBITDA Margin 10.9% 7.8% 8.2% 9.3% 9.7%

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II. Consolidated Historical Balance Sheet of Hoosier Castings

($ in thousands) Actual Year Ended December 31,

Proforma

2007 2008 2009 2010 2011

Balance Sheet

Cash $0 $1,854 $3,670 $5,161 $6,703

Accounts Receivable, net 6,029 5,608 5,409 5,590 5,839

Inventory 13,757 13,264 12,724 12,968 13,510

Other Current Assets 1,834 1,706 1,645 1,700 1,776

Total Current Assets $21,620 $22,432 $23,447 $25,420 $27,829

PP&E, net 23,469 23,717 23,894 24,137 24,453

Transaction Goodwill 5,432 5,432 5,432 5,432 5,432

Deferred Financing Fees 176 154 132 110 88

Total Assets $50,696 $51,735 $52,905 $55,098 $57,801

Accounts Payable $4,952 $4,773 $4,577 $4,666 $4,862

Accrued Expenses 878 846 811 827 862

Other Current Liabilities 1,291 1,244 1,193 1,216 1,268

Total Current Liabilities $7,121 $6,864 $6,582 $6,710 $6,991

Revolving Credit Facility 33 0 0 0 0

Buckeye Senior Term Debt 10,000 8,750 7,500 6,250 5,000

Deferred Income Taxes 1,000 1,000 1,000 1,000 1,000

Other Long-Term Liabilities 250 250 250 250 250

Total Liabilities $18,404 $16,864 $15,332 $14,210 $13,241

Total Equity $32,292 $34,871 $37,573 $40,888 $44,560

Total Liabilities and Equity $50,696 $51,735 $52,905 $55,098 $57,801

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III. Historical & Projected Operating Results of Casting Division

($ in thousands) Actual Year Ended December 31, Projected Year Ending December 31,

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Select Income Statement Data

Sales $50,000 $51,500 $53,560 $55,970 $58,769 $55,830 $54,155 $55,780 $58,011 $60,912 $63,957 $65,876 $67,523 $69,211

Cost of Sales 35,500 36,565 38,028 39,739 41,726 40,477 38,992 39,604 41,188 43,247 45,410 46,772 47,941 49,140

Gross Profit 14,500 14,935 15,532 16,231 17,043 15,353 15,164 16,176 16,823 17,664 18,548 19,104 19,582 20,071

Gross Margin 29.0% 29.0% 29.0% 29.0% 29.0% 27.5% 28.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0%

SG&A Expense 10,000 10,300 10,712 11,194 11,754 11,166 10,831 11,156 11,602 12,182 12,791 13,175 13,505 13,842

Operating Income 4,500 4,635 4,820 5,037 5,289 4,187 4,332 5,020 5,221 5,482 5,756 5,929 6,077 6,229

Operating Margin 9.0% 9.0% 9.0% 9.0% 9.0% 7.5% 8.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%

Depreciation & Amortization 650 670 696 728 764 726 704 725 754 792 831 856 878 900

EBITDA $5,150 $5,305 $5,517 $5,765 $6,053 $4,913 $5,036 $5,745 $5,975 $6,274 $6,588 $6,785 $6,955 $7,129

EBITDA Margin 10.3% 10.3% 10.3% 10.3% 10.3% 8.8% 9.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3%

Effective Tax Rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%

Select Balance Sheet Data

Accounts Receivable, net $4,110 $4,233 $4,402 $4,600 $4,830 $4,589 $4,451 $4,585 $4,768 $5,006 $5,257 $5,414 $5,550 $5,689

Inventory 9,595 9,882 10,278 10,740 11,277 10,940 10,538 10,704 11,132 11,688 12,273 12,641 12,957 13,281

Other Current Assets 1,250 1,288 1,339 1,399 1,469 1,396 1,354 1,395 1,450 1,523 1,599 1,647 1,688 1,730

PP&E, net $15,000 $15,258 $15,525 $15,805 $16,099 $16,378 $16,649 $16,928 $17,218 $17,522 $17,842 $18,172 $18,509 $18,855

Accounts Payable $3,404 $3,506 $3,646 $3,811 $4,001 $3,881 $3,739 $3,798 $3,950 $4,147 $4,354 $4,485 $4,597 $4,712

Accrued Expenses 604 622 646 676 709 688 663 673 700 735 772 795 815 835

Other Current Liabilities 888 914 951 993 1,043 1,012 975 990 1,030 1,081 1,135 1,169 1,199 1,228

Total Current Liabilities $4,895 $5,042 $5,244 $5,480 $5,754 $5,581 $5,377 $5,461 $5,679 $5,963 $6,262 $6,449 $6,611 $6,776

Deferred Income Taxes $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Other Long-Term Liabilities $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125

Capital Expenditures $900 $927 $964 $1,007 $1,058 $1,005 $975 $1,004 $1,044 $1,096 $1,151 $1,186 $1,215 $1,246

Weighted Average Cost of Capital 15.5%

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IV. Historical & Projected Operating Results of Buckeye Division

($ in thousands) Actual Year Ended December 31, Projected Year Ending December 31,

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Select Income Statement Data

Sales $12,000 $12,600 $13,230 $13,892 $14,586 $12,398 $11,654 $12,237 $13,032 $13,554 $13,960 $14,240 $14,524 $14,815

Cost of Sales 8,400 8,820 9,195 9,585 9,919 9,299 8,741 9,055 9,514 9,826 10,121 10,324 10,457 10,667

Gross Profit 3,600 3,780 4,035 4,306 4,668 3,100 2,914 3,182 3,519 3,727 3,839 3,916 4,067 4,148

Gross Margin 30.0% 30.0% 30.5% 31.0% 32.0% 25.0% 25.0% 26.0% 27.0% 27.5% 27.5% 27.5% 28.0% 28.0%

SG&A Expense 2,400 2,520 2,646 2,778 2,917 2,852 2,680 2,753 2,802 2,982 3,071 3,133 3,159 3,185

Operating Income 1,200 1,260 1,389 1,528 1,750 248 233 428 717 745 768 783 908 963

Operating Margin 10.0% 10.0% 10.5% 11.0% 12.0% 2.0% 2.0% 3.5% 5.5% 5.5% 5.5% 5.5% 6.3% 6.5%

Depreciation & Amortization 134 141 148 155 163 155 152 159 169 169 175 185 189 193

EBITDA $1,334 $1,401 $1,537 $1,684 $1,914 $403 $385 $587 $886 $915 $942 $968 $1,097 $1,156

EBITDA Margin 11.1% 11.1% 11.6% 12.1% 13.1% 3.3% 3.3% 4.8% 6.8% 6.8% 6.8% 6.8% 7.6% 7.8%

Effective Tax Rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%

Select Balance Sheet Data

Accounts Receivable, net $986 $1,036 $1,087 $1,142 $1,199 $1,019 $958 $1,006 $1,071 $1,114 $1,147 $1,170 $1,194 $1,218

Inventory 2,100 2,205 2,299 2,396 2,480 2,325 2,185 2,264 2,378 2,457 2,530 2,581 2,614 2,667

Other Current Assets 300 315 331 347 365 310 291 306 326 339 349 356 363 370

PP&E, net $7,000 $7,086 $7,176 $7,270 $7,370 $7,339 $7,245 $7,209 $7,235 $7,323 $7,414 $7,499 $7,586 $7,675

Accounts Payable $805 $846 $882 $919 $951 $892 $838 $868 $912 $942 $971 $990 $1,003 $1,023

Accrued Expenses 143 150 156 163 169 158 149 154 162 167 172 176 178 181

Other Current Liabilities 210 221 230 240 248 232 219 226 238 246 253 258 261 267

Total Current Liabilities $1,158 $1,216 $1,268 $1,322 $1,368 $1,282 $1,205 $1,249 $1,312 $1,355 $1,396 $1,424 $1,442 $1,471

Deferred Income Taxes $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Other Long-Term Liabilities $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125

Capital Expenditures $216 $227 $238 $250 $263 $124 $58 $122 $195 $258 $265 $271 $276 $281

Weighted Average Cost of Capital 15.5%

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V. Hoosier Castings Corporation’s Board of Directors

David DeWitt

David, an Indianapolis native, founded HCC with his older brother Abraham in 1945. David served as the

Company’s Executive Vice President until Abraham’s death in 1981. From 1981 until his retirement in

2006, David served as HCC’s President overseeing the Company’s daily operations and managing key

customer accounts. Prior to founding HCC, David was enlisted in the United States Marine Corps where

he received the Silver Star for heroic acts during combat in the Pacific Theatre of WWII. Currently, David

serves as HCC’s Chairman and remains the largest shareholder of the Company.

Mabel DeWitt

Mabel is a retired schoolteacher and the widow of Abraham DeWitt. Although she has never worked at

HCC, she has been familiar with its operations since its foundation. Upon her husband’s untimely death

in 1981, she assumed his seat on the Company’s Board of Directors. She is an active participant in

company Board meetings. Mabel relies on her income from HCC as a supplement to her pension from

the local school district.

Gregory DeWitt

Gregory joined HCC in 1981 following the completion of his undergraduate studies. Currently, Gregory

serves as HCC’s Executive Vice President where he focuses primarily on sales. Prior to assuming this roll

in 2008, Gregory served as the Company’s President, a position he assumed from his father in 2006.

With the exception of summer internships during college, all of Gregory’s work experience has been

with HCC. Gregory has a B.S. in Engineering from Purdue University.

Daniel Michaelson

Daniel is a successful local entrepreneur, having started and sold three manufacturing business of his

own. Daniel is a highly respected within the Indianapolis business and civic communities, as he serves as

a Director on multiple corporate and non-profit boards. Daniel decided to invest $500,000 in HCC in

1996 after meeting David through a mutual friend. The proceeds from his investment were used to

purchase new equipment. Typically Daniel targets a 16% annual return on private investments he

makes.

Name Title Age Ownership % Year Joined Board

Salary and/or

Board Fee Relationship to Company

1 David DeWitt Chairman & Founder 86 51.0% 1945 $125,000 Founder

2 Mabel DeWitt Board Member 79 22.0% 1981 $65,000 Abe DeWitt's Widow, never worked at HCC

3 Gregory DeWitt Executive Vice President 55 15.0% 1981 $200,000 David's Son, President since 1990

4 Daniel Michaelson Board Member 62 7.0% 1996 $7,500 Local entrepreneur and private investor

5 Brendon Morris President 45 5.0% 2006 $250,000 EVP from 2006 to 2008, joined Company in 1996

6 Samantha Left, Esq. Board Member 52 0.0% 1995 $7,500 Company's Corporate Attorney since 1995

7 James Sherriff Board Member 56 0.0% 2010 $7,500 Former management consultant

100.0%

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Brendon Morris

Brendon joined HCC in 1996 after completing his graduate studies. During his tenure with HCC, Brendon

has held multiple positions across various departments, making him uniquely familiar with the

operations of the Company. Prior to business school, Brendon worked at a regional private wealth firm

where he focused primarily on portfolio creation and gained critical valuation skills. Outside of his

equity ownership in HCC, Brendon has accumulated a modest savings. Brendon and his wife currently

have a daughter enrolled in college who is considering law school and two other children who are in

high school. Brendon has a B.A. from Syracuse University and an M.B.A. from Indiana University.

Samantha Left, Esq.

Samantha has served as the Company’s Corporate Attorney since 1995. Recently Samantha was named

Managing Partner of her law firm, one of the largest in the State of Indiana employing over 200

attorneys. As a highly respected member of the local legal community, Samantha is often asked to join

corporate boards although rarely accepts. Currently she serves on the board of two other local

companies and is the Chairman of the Board of Trustees for the local Children’s Hospital. Samantha

brings a unique perspective on legal and business issues to the Board.

James Sherriff

James recently retired as a partner from a leading regional management consulting firm. During his

career as a consultant, James advised numerous companies on a variety of strategic issues including:

management succession planning, market entry strategies and turn around management. Although his

tenure on the Board is significantly less than his counterparts, James has become very familiar with the

Company’s operations.

VI. Land Value Exhibits

Comparable Recent Land Sales (per acre)

Burnham Road $1,000,000 to $1,500,000

Comparable Industrial Park $300,000 to $500,000

Average Construction Cost for Industrial Property $25 to $35 per sq. ft.

Average time of construction 6 to 8 months

Average Cost of a business disruption due to a move Loss of $5.0 million in Revenue

Probability of a business disruption due to a move 25%

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VII. Buckeye Transaction Detail

VIII. Precedent Transactions for the Casting Industry

IX. Precedent Transactions for the Building Products Industry

X. Current Debt Capital Markets Conditions

($ in thousands)

Source of Funds Use of Proceeds

HCC Cash $4,995 Cash to Shareholders $14,352

Revolving Credit Facility1 33 Financing Fees 176

Senior Term Debt2 10,000 Transaction Expenses 500

Total Sources $15,028 Total Uses $15,028

1 Interest rate of 4.5% & a financing fee of 2%2 Interest rate of 4.75%, 8 year term & a financing fee of 1.75%

($ in millions) Target EBITDA Enterprise Value Enterprise Value

Transaction Enterprise Value Revenues EBITDA Margins to Revenue to EBITDA

Transaction 1 $1,503.8 $4,796.7 $72.0 1.5% 0.3x 20.9x

Transaction 2 $96.0 $163.3 $17.2 10.5% 0.6x 5.6x

Transaction 3 $14,525.1 $17,616.9 $1,708.8 9.7% 0.8x 8.5x

Transaction 4 $27.3 $64.0 $5.6 8.7% 0.4x 4.9x

Transaction 5 $162.4 $235.9 $27.1 11.5% 0.7x 6.0x

Transaction 6 $54.5 $136.0 $12.1 8.9% 0.4x 4.5x

Transaction 7 $111.7 $213.3 $20.7 9.7% 0.5x 5.4x

Transaction 8 $413.0 $132.6 $46.4 35.0% 3.1x 8.9x

Transaction 9 $16.5 $51.1 $3.8 7.3% 0.3x 4.4x

Transaction 10 $23.0 $41.1 $4.2 10.2% 0.6x 5.5x

Transaction 11 $282.0 $560.1 $53.2 9.5% 0.5x 5.3x

($ in millions) Target EBITDA Enterprise Value Enterprise Value

Transaction Enterprise Value Revenues EBITDA Margins to Revenue to EBITDA

Transaction 1 $24.5 $140.0 $7.0 5.0% 0.2x 3.5x

Transaction 2 $6.3 $23.1 $1.5 6.5% 0.3x 4.2x

Transaction 3 $34.7 $97.1 $6.8 7.0% 0.4x 5.1x

Transaction 4 $21.6 $59.8 $4.9 8.2% 0.4x 4.4x

Transaction 5 $5.4 $20.9 $0.9 4.3% 0.3x 6.0x

Senior Debt Rate Financing Fee

Senior Secured Revolving Credit Facilities 4.50% 2.00%

Senior Secured Term Debt (5 Year Term, Fully Amortizing) 4.80% 1.75%

Subordinated Debt (5 Year Note, Bullet Repayment) 12.00% 3.50%

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XI. Ridgecreek Industries Offer Letter

November 1, 2011

David DeWitt

Chairman

Hoosier Casting Corp.

5881 Burnham Rd.

Indianapolis, IN

Dear David,

We are pleased to submit to you our Letter of Intent setting forth the terms and conditions under which

Ridgecreek Industries proposes to acquire 100.0% of the fully-diluted common stock of Hoosier Casting Corp.

(“HCC” or the “Company”). The terms and conditions of our offer are as follows:

� Purchase Price: Ridgecreek will value the HCC business at a total enterprise value of $30 million. Our

purchase price will be subject to a net working capital adjustment, using the October 31, 2011 financial

statements as a baseline.

� Escrow and Indemnification: We would require a 24-month escrow of $3 million. The escrow will be used

to pay damages arising from breach of representations or warranties by the Company. The aggregate

liability of the seller for damages arising from breach of representations or warranties will not commence

until such liability exceeds the sum of $100,000 and shall not exceed the aggregate sum of the escrow.

� Financing: We have discussed this Transaction with several senior lenders and are comfortable that we

can secure debt financing at close of 2.5x LTM EBITDA. In addition to the senior financing we anticipate,

we would ask the shareholders to provide up to $6 million in subordinated seller financing. The

subordinated seller financing would have a five year “bullet term” and carry an interest rate of 10%,

payable semi-annually.

� Due Diligence & Interrogation Period: We would anticipate closing the proposed transaction by March

31, 2012, following a typical due diligence investigation. During our due diligence process, we would

require a guarantee of exclusivity. During our due diligence process we intend to identify the

representations or warranties which we will require of the Company. Post-closing, we plan to operate

HCC as a fully interrogated subsidiary of Ridgecreek. We would expect the integration process between

HCC and Ridgecreek to take approximately six to nine months.

In order to close this transaction by March 31, 2012, it is imperative that we receive a response from you no later

than January 3, 2012. Should we not receive your response by then, our offer will expire.

Having long competed with HCC, my Management team and I at Ridgecreek have a tremendous amount of respect

for HCC and are excited about the possibility of having you join our “family.” Please do not hesitate to contact me

personally with questions regarding our offer. We look forward to hearing from you by January 3, 2012.

Sincerely,

Daniel Duberstein

Chairman & CEO

Ridgecreek Industries

Documents

Hoosier Castings Corporation Case