EXHIBIT (C)(1)
--------------
April 14, 2000
Joe Hardesty
Bank of America Business Credit
6060 Poplar Avenue - Suite 400
Memphis, Tennessee 38119
APPRAISAL
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As requested, an inspection and appraisal of the specific assets of KLLM
TRANSPORT SERVICES has been conducted by MB Valuation Services, Inc. We
assume that all items listed are owned by and belong to KLLM TRANSPORT
SERVICES, although no investigation has been made to verify that ownership.
The purpose of this appraisal is to arrive at a conclusion of ORDERLY
LIQUIDATION VALUE for these items as of the effective date of inspection;
we do not intimate that there could not be any fluctuation of the values in
the future. The fee for this report is for our expressed opinion at the
time of inspection, with no warranties or guarantees of the outcome if
values are tested at any future date.
This appraisal sets forth our findings and conclusions which are based upon
an investigation of conditions affecting value and which are subject to the
Assumptions and Statement of Limiting Conditions and Definition contained
in the following report. Without reading the Assumptions and Statement of
Limiting Conditions and Definition, the report could be erroneously
interpreted.
This appraisal is in compliance with the Uniform Standards of Professional
Appraisal Practices (USPAP) as of January 1, 2000. This is a Summary
Appraisal Report.
Thank you for the opportunity to be of service in this matter. If you have
any questions regarding the method of appraisal, the value concept, or the
indicated values, contact our corporate office in Dallas, Texas.
Respectfully submitted,
MB VALUATION SERVICES, INC.
Robert L. Barber
Appraiser
RLB/jr
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TABLE OF CONTENTS
R E C A P I T U L A T I O N ......................................... 1
GENERAL COMMENTS, ASSUMPTIONS AND
STATEMENT OF LIMITING CONDITIONS .................................... 2
GENERAL INFORMATION - DEFINITIONS ................................... 7
PURPOSE OF APPRAISAL: ............................................... 7
USE AND INTERPRETATION .............................................. 14
CONDITION CODES...................................................... 16
RESEARCH DATA SOURCES 18
PERSONAL PROPERTY LISTING:
Code Directory............................................. 18
Asset Directory............................................ 19
Computer Recap............................................. 512
CERTIFICATE OF APPRAISER............................................. 514
QUALIFICATIONS:...................................................... 515
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ORDERLY LIQUIDATION VALUE
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R E C A P I T U L A T I O N
KLLM TRANSPORT SERVICES
JACKSON, MISSISSIPPI
BASTROP, LOUISIANA
MARCH 30, 2000
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KLLM......................................................$ 62,978,500
VERNON SAWYER............................................. 22,223,200
TOTAL FOR REPORT
* * * $ 85,201,700. 0 0 * * *
(EIGHTY-FIVE MILLION,
TWO HUNDRED ONE THOUSAND,
SEVEN HUNDRED DOLLARS)
NOTE: IF THIS BUSINESS OR ANY EQUIPMENT IS LATER SOLD, CONTACT YOUR
APPRAISER FOR RECOMMENDATIONS OR GENERAL MARKET INFORMATION.
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GENERAL COMMENTS, ASSUMPTIONS AND
STATEMENT OF LIMITING CONDITIONS
In many instances, these statements include general comments for
understanding the study.
All facts and data set forth in this report are true and correct to the
best of your appraiser's knowledge and belief.
All information furnished by company personnel and others, including such
things as capacities and production rates of equipment, upon which all or
portions of this report are based, is believed to be reliable, but has not
been verified in all cases. No warranties are given as to the accuracy of
such information nor does the appraiser (or MB) report to be a technical
expert on any assets as our expertise is confined to valuation.
Personal inspection of specific assets has been made.
The fee for this appraisal report is not contingent upon the values
reported. There have not been any guarantees associated with this fee and
no liability can be intimated or assumed in any manner.
As this report has been purchased by the addressee, we assume it is to be
used only by the addressee in determination of a value opinion as of the
effective date. Use of this report by others should be done so with the
understanding that no guarantees have been made by MB VALUATION SERVICES,
INC. or the appraiser to the owner of the report nor purchased through the
fee paid to the appraiser.
The physical condition of the property described herein was based upon
visual inspection by the appraiser. No responsibility is assumed for
latent defects of ANY nature whatsoever which may affect its value, nor for
any expertise required to disclose such conditions.
No consideration has been given to liens or encumbrances which may be
against the property.
No investigation of legal fee or title to the property has been made and
the claim to the property has been assumed to be valid. Title to the
subject property is assumed to be good and marketable.
Neither the appraiser nor any officer or employee of MB VALUATION SERVICES,
INC. has any financial interest in the property appraised.
Neither MB nor the signatories should be required to give
testimony or attend court or be at any governmental hearing
with references to the said property unless prior arrangements
have been made. However, MB is willing to do so for standard
testimony fee and expense rates subject only to scheduling
conflicts and/or a litigation subject that is outside the function and
purpose of the report which, in the opinion of MB, would be misleading or
confusing.
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This appraisal is based upon ORDERLY LIQUIDATION VALUE as defined in the
Definition section of this report.
All equipment has been considered free and clear of any landlords holds
through lease agreements, and all items are listed assuming the removal of
same without any restrictions.
No additional values or appraisals have been made regarding such
intangibles as patents, rights to manufacture, trademarks, goodwill, going
concern, product line, customer lists, etc. The values made a pat of this
report are for the items listed only and are subject to the Definition of
the report itself.
An appraisal is an estimate of value. When the amount is considered a
reasonable and proper value under the concept of a definition, then it is
applied. For this reason the value is, in many cases, a rounded number.
As stated in ENGINEERING VALUATION AND DEPRECIATION, a textbook published
by Iowa State University Press of Ames, Iowa, "all values are of the nature
of forecast of events and are subject to the uncertainties of all
prophecies."
This appraiser reserves the right to recall all copies of this report to
correct any omission or error.
The valuation concept used in this report is one accepted by the client.
Concept PROBABILITY and/or feasibility is beyond the scope of the
appraisal. The user of the report is to determine the probability of
occurrence. The appraisal is purchased in order to allow an opinion of
value under an assumed set of circumstances, as mutually agreed upon by the
client and MB VALUATION SERVICES, INC. The concept is considered
reasonable for its intended use as a POSSIBLE value to be received or the
project would have been declined.
The valuation study has been made by MB VALUATION SERVICES, INC. and will
be held confidential. It has been prepared by an experienced appraiser and
is based on information, where possible, from contractors, manufacturers,
sales comparables, dealers, etc. The analysis and final conclusion is
arrived at from many years of experience in the sale and appraisal of
industrial properties. The final form for this report is made possible by
omitting many details used in estimating, yet not considered essential to
the report. Due to the complexities and variables required on the MANY
items of fixed assets, itemized values become the guideline for
justification rather than individual summaries for each conclusion. The
total opinion of value for all assets is based upon values applied for
itemized assets of the company. A separate value "out of context" may not
be applicable for any other purpose and must not be used with or compared
to any other appraisal. However, most personal property reports under the
strictest interpretation of Standard 8 of USPAP as of January 1, 2000,
would be styled as a "word of art", A SUMMARY APPRAISAL REPORT.
Neither all nor any part of the contents of this report (especially any
conclusions a to value, the identity of the appraisers, or the firm with
which they are connected) shall be disseminated to the public through
advertising media, news media, sales media, or any other public means of
communication without prior written consent and approval of MB.
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For all areas of this study, the assigned values represent the amount a
reputable and qualified appraiser, unaffected by personal interest, bias or
prejudice, would recommend to a prospective purchaser as a proper price or
cost within the value concept and in light of prevailing conditions.
Items indicated in location codes as made a part of this report are as
observed on the effective date of the study. Codes should be considered
only a guide and not as an accurate indicator of where equipment may be in
the future. In addition, this additional feature made a part of this study
is accomplished in order to aid the reader in locating items inspected when
comparing the study and/or values as they relate to the total of the
completed report. In providing this, MB VALUATION SERVICES, INC. does not
wish this extra effort to carry with it any liabilities arising from same
as it relates to the past, present or if applied some time in the future.
Although the coded areas are believed accurate for use in location,
recapitulation or graphics analysis, there are always changes, alterations,
and unresolved input that could require correction. As a best effort, the
coding is believed correct as related to data input and the descriptive
assignment.
NO RESPONSIBILITY IS TAKEN FOR CHANGES IN MARKET CONDITIONS AND NO
OBLIGATION IS ASSUMED TO REVISE THIS REPORT WITHOUT ADEQUATE COMPENSATION,
TIME, AND PROCEDURAL REQUIREMENTS THAT ALLOW DUE DILIGENCE TO REFLECT
EVENTS OR CONDITIONS WHICH OCCUR SUBSEQUENT TO THE DATE HEREOF.
Description of items made a part of this report is believed correct to the
best ability of the appraiser. Any errors or omissions in these
descriptions were unintentional and should not affect the value assignment.
Descriptions are made with the attempt of allowing reasonable
identification although they may not allow specific item identification, in
all cases, unless company number tagging is utilized.
In many cases, an appraiser may indicate that certain equipment was
"observed in operation". This qualification is applicable only to specific
pieces of equipment and should not be construed as an implication that
other equipment was not operable or capable of operation at the time of
inspection. This note could become extremely important as a condition
comparative in the future but is considered more of note "in passing" at
the time of the on-site listing. However, if it is stated "not observed in
operation" it would be an indication that the equipment is not installed or
wired for operation or that the equipment obviously has not been in use for
some time; it would not necessarily mean the equipment was not capable of
operation.
This appraisal has been prepared in conformity with the Principles of
Appraisal Practice and Code of Ethics of the American Society of
Appraisers.
In this report, codes are not used either for appearance or actual
condition, it is understood that the description would suffice the
purposes of the appraiser arriving at a conclusion of value and that
the equipment, in appearance, would be in average condition. It is
understood, for purposes of an appraisal report, actual condition of
that other than the obvious, may be an unknown factor for all
of the many items listed. It is not practical, nor feasible to
operate each and every machine, nor have it demonstrated for tolerance
accuracy, mechanical operating functions, proper computer interface
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and/or gauge measurements due to the various limitations. Appraisers are
oriented to value and must rely on a certain amount of information by
company personnel as it related to condition and/or observations. Company
personnel cannot be available for ALL appraisers while listing ALL
items within a facility. It is for this reason that the M&E appraiser
typically relies on the appearance codes although when proper information
is available, adjustments may be made based upon indicated condition by
company personnel under an appropriate value concept. The condition coding
is used for internal communication and interpretation rather than as an
indication to the users of actual condition. It is advisable, if actual
condition of equipment is required, to consult with those parties that are
independent and qualified to offer such technical advise.
Photographs, if included in this report, are taken at random and may or may
not include all of those developed. Some photographs may be of poor
quality and/or insignificant to the study. Some photographs are used for
recall in correlation work. The selected photographs, if used, are an
additional effort when included in the formal report and unless otherwise
noted, there is no requested criteria for those selected by the MB
production department. The lack of photographs, for whatever reason,
should not create any liability for MB.
SIGNIFICANT CONTRIBUTION:
-------------------------
It is possible that one or more senior appraisers of our firm
assisted in the process of preparing or reviewing this
appraisal. Our research department gathers additional market
information from our sales data base and/or by making appropriate
market inquiries. The on-site senior appraiser was responsible
for personally inspecting the assets, describing them and making
initial estimates of value. He/she also gathered pertinent
information about the assets from the subject company's personnel
and company records. The on-site senior appraiser is responsible
for the final correlation work conducted unless there is more
than one signature. A senior appraiser will have reviewed all of
the information. MB Valuation Services, Inc. considers that the
appraiser(s) making the final decision on value is the
individual(s) contributing in a significant way under the
interpretation of the standards made a part of the UNIFORM
STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP). If on the
other hand, special consultants or outside expertise are
required, and he/she contributes in a significant way to the
correlation of this report, this would be noted.
Some equipment, due to location and/or quantity, may have differing values
assigned with the consideration that even though similar, condition could
be better or worse than other identical pieces. The concept of value
causes these adjustment to be made. Location requirements can cause
differences in removal or installation.
This appraisal is based upon the premise and assumption that there
is full compliance with all applicable federal, state and local
Environmental Protection Agency hazardous waste regulations and
laws. Not study, inspection or observation of any kind or
nature has been made, nor is any consideration given to the
possible presence of hazardous or toxic waste on the property appraised
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unless it has been specifically pointed out by the company or through a
supplied report. The value then reports only to the potential effect on
value of the item and not other associated costs (i.e., clean up, etc.).
This would include any toxic construction material, asbestos, waste or
product from any manufacturing process, polychlorinated biphenyls, or any
other substance or material which is regulated by law or poses a hazard
to health or the environment generally. As the environmental area is
beyond the expertise of an appraiser, you are advised to obtain an expert
in environmental hazards or emissions.
When and if applicable, the indicated value in this report gives no
consideration to any loss in value that may be attributed to the type of
refrigerant charge utilized in any of the subject's equipment including air
conditioning and/or refrigeration equipment. The user of this report is
hereby informed that the use of restricted CFC's may, in the future,
greatly affect the usefulness and value of equipment that contains any of
the EPA-restricted refrigerant gases.
During the site visit, we requested identification of any property which
may be on site but not owned, leased or rented. Our best effort was made
to identify this equipment and relied on information provided by the
company.
Highest and best use is defined as the reasonably probable and legal use of
personal property, which is physically possible, appropriately supported,
financially feasible, and results in the highest value in the appropriate
marketplace, consistent with the purpose of the appraisal. As generally
understood, the highest and best use of the subject equipment is that for
which it was designed by the manufacturer.
Although a small sampling of vehicles was observed, the values shown in the
report are primarily based on information obtained from Excel spreadsheets
provided by principals. Descriptions are those contained on the excel
disk, and it is assumed that all assets included in this study are as
described and MB Valuation Services, Inc. cannot be held responsible for
any discrepancies which may be found in the information provided.
To the best of our knowledge, no leased assets are considered in the total
value, although they may be listed.
Other limitations, if any, are clearly defined and individually set out at
that point relating to the subject.
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PERSONAL PROPERTY
GENERAL INFORMATION AND DEFINITION
FAIR MARKET VALUE APPRAISAL
PURPOSE OF APPRAISAL:
---------------------
The purpose of this appraisal is to estimate the ORDERLY LIQUIDATION VALUE
of the subject's personal property. In estimating this value, it has been
necessary to make a physical inspection and listing of the property
contained in this report. The results are reported in this study. The
property interest (rights) appraised is that of ownership in fee simple,
and the subject's assets are appraised as if free and clear, without liens
or encumbrances (unless otherwise noted).
FUNCTION OF APPRAISAL:
----------------------
The function of this report is to serve as a value guideline for financing
purposes of the subject property. The effective date of valuation is March
30, 2000, which was the date of inspection of the subject property.
There are proper uses for various appraisal concepts. However, a
particular individual, company or organization may determine that the
concept fits a particular need and, therefore, use it in a way that would
be typically improper. As the American Society of Appraisers has standard
definitions for concepts, each concept, as specifically defined, indicates
a conclusion of value that would be the same as performed by this company
regardless of the client or its use. It is up to the user to determine if
the concept is proper for its purpose, as it is clearly defined and should
be understood. Prudent users are not prohibited from investigating value
concepts to determine their typical and known common uses. They are also
not prohibited after their investigations to choose to adapt any concept to
their purpose as they consider reasonable by their standards. The
appraisal is performed at the behest of a client based upon a requested
concept of value. In many cases, MB Valuation Services, Inc. must perform
one or more concepts whose uses may vary. Therefore, the function of this
study is the use of the report with the knowledge of the defined concept of
value. The reader and/or user is advised to contact the appraiser with ANY
questions regarding value, typical uses, or intended uses.
SCOPE OF APPRAISAL:
-------------------
Sample inspection was done on March 30, 2000 for the purpose of arriving at
Orderly Liquidation Value of the list of assets.
INFORMATION ANALYZED:
---------------------
See "Purpose and Method of Appraised" and Research Data Sources.
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HIGHEST AND BEST USE:
---------------------
The equipment was being used for the purpose as designed unless otherwise
indicated. The only alternative use, other than that as designed, was
salvage or scrap. It is the appraiser's opinion that the equipment was
being utilized for the purpose as designed and, therefore, at its highest
and best use unless otherwise stated. Therefore, highest and best use has
been considered in the valuation of all property listed in the report and
is defined as: "The reasonably probable and legal use of personal property
that is physically possible, appropriately supported and financially
feasible, and results in the highest value in the appropriate marketplace."
The appropriate marketplace must be consistent with the concept of value.
ORDERLY LIQUIDATION VALUE CONCEPT:
----------------------------------
"The estimated amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time
to find a purchaser(s), the seller being compelled to sell on an
as is-where is basis."
This concept assumes "Forced Sale" with only a limited time for market
exposure and has no "willing seller" assumptions. It also takes into
consideration the physical condition, quality, difficulty and cost of
removal, and overall psychological appeal of the assets.
This value concept is one requested by the client and should not be
considered as a recommendation by the appraiser. The concept is considered
fair and reasonable under the assumptions made but could have some risks
due to changing conditions and the assumed resale of ALL assets. The
overall indicator is the appraiser's opinion of the result of an orderly
liquidation based upon averaging. It should not be used as a starting
selling point. Fair Market Value is considered to be the proper value to
use for pricing.
NOTE: It should be understood that any removal concept does not
consider product lines or their marketability unless otherwise
specified to be included. It is for this reason that product
line is not a part of this study nor are special tooling, jigs,
fixtures and devices considered other than for parts or adaptable
use.
CLIENT: Bank of American Business Credit
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SUBJECT: KLLM TRANSPORT SERVICES
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USER(S): Bank of America Business Credit
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PROPERTY: Rolling Stock
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PROPERTY CHARACTERISTICS:
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(1) Physical: Age Life or Observed Condition
(2) Functional: Contained in market of comparison to replacement
(3) Economic: Industry and/or market derived
INTEREST APPRAISED: Fee Simple
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ORDERLY LIQUIDATION VALUE
PURPOSE AND METHODS OF APPRAISAL
IT IS STANDARD FOR MB VALUATION SERVICES, INC. REPORTS TO BE EXTREMELY
DETAILED UNLESS OTHERWISE REQUESTED. FOR THIS REASON, THERE MAY BE SOME
ITEMS LISTED WHICH ARE CONSIDERED NOMINAL OR INSIGNIFICANT TO THE READER.
HOWEVER, WHEN THE DICTATION METHOD IS EMPLOYED, IT IS FASTER, WITH CERTAIN
EXCEPTIONS, TO LIST THESE ITEMS INDIVIDUALLY THAN TO COUNT THEM AND HAVE
ONE ENTRY. ALTHOUGH THE FILE MAY CONTAIN MORE DETAIL THAN REQUIRED, IT IS
POSSIBLE TO REQUEST THIS SAME STUDY WITH LIMITS FOR VALUE AND/OR
DESCRIPTION. WHEN THE DATA IS USED FOR ASSET CONTROL, THERE IS USUALLY AN
APPRECIATION FOR THE DETAIL BY THE MAJORITY OF CLIENTS, ALTHOUGH EACH USER
MAY HAVE A DIFFERENT REQUIREMENT FROM OTHERS. AS THESE REQUIREMENTS CANNOT
BE ANTICIPATED, UNLESS OTHERWISE SPECIFIED, THE FULL DETAIL IS USUALLY
SUPPLIED. THE SUBJECT REPORT AFTER USPAP 2000 IS CONSIDERED A SUMMARY
REPORT.
The purpose of this appraisal is to estimate the ORDERLY LIQUIDATION VALUE
of the subject machinery and equipment in terms of United States Dollars.
In estimating this value, the Appraisers has considered the following
approaches in arriving at indicators of value.
COST APPROACH - An estimate of the present replacement cost of
the machinery and equipment less accrued depreciation.
Depreciation includes loss in value due to physical deterioration
as well as functional and economic obsolescence. Functional
obsolescence is the decreased capacity of the item to perform the
function for which it is intended in terms of current standards
and specifications. Functional obsolescence may stem either from
a deficiency within the item such as poor design or outmoded
style or may result from superadequacy or overdesign. Economic
obsolescence represents a loss in value from factors outside the
item appraised, such as a depressed market for the end product
manufactured by the item of machinery or equipment. These
factors generally are characterized as "negative external forces"
which have an impact upon the item appraised. The Cost Approach
is utilized primarily as a secondary value indicator since it
often fails to qualify the inherent loss in value under
liquidation conditions. Comparisons are sometimes made to cost
when comparable sales are not found under the appraisal concept.
MARKET COMPARISON APPROACH - Comparison with similar items that
have sold or are currently offered for sale in the
marketplace. By comparing the items appraised with similar
items which have recently sold or are currently offered for
sale, an estimate can be made of the Orderly Liquidation
Value. Within these comparable items there may be pertinent
factors of comparison which include capacity, age, location,
and date of sale, when applicable. These items may be considered
in arriving at an adjusted value for each subject item appraised.
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Marketability of each item of machinery and equipment is also a
determinant of value. Marketability, as a measure of demand, is
approximated through recent sales under liquidation conditions of
comparable items of machinery and equipment. Where actual sales
are not available, relationships are often established based upon
used equipment prices for comparable items with subsequent
adjustments for orderly liquidation conditions. (See Cost
Approach).
DIRECT SALES COMPARISON of like items of machinery and equipment
(where possible) under liquidation conditions is the preferable
and most accepted approach in determining Orderly Liquidation
Value.
INCOME APPROACH not typically applied under the Orderly
Liquidation Concept. After consideration, a decision is made as
to whether the income approach could be appropriate. If it is
used, it is made a separate section to the study where it is
thoroughly explained.
The assignment for any Liquidation Concept appraisal does not necessarily
indicate the scenario as a proper method of disposal if market testing
should be required at a future date. These value concepts and their
inherent assumptions are requested for various uses or guidelines by the
addressee shown on the letter of transmittal. The assumed set of
circumstances may not allow the concept to be recommended when and if a
liquidation should be required.
In certain instances, as in the case of custom machinery and equipment, a
market analysis may be undertaken to ascertain current demand/marketability
and subsequent assignment value. Market analysis may also be undertaken if
functional or economic obsolescence is a key factor in a major machine tool
or piece of equipment. A justment call may be required with no comparable
backup. That value assignment could be formed by an experienced appraiser
having acquired value orientation from years of observations under
liquidation concepts. SPECIAL or custom equipment, in most cases, is
appraised in this manner.
Certain categories of machinery and equipment are subject to routine loss
in value as a result of usage (physical deterioration). In other
instances, functional obsolescence is determined through a comparison with
other items that may have a more efficient and cost effective operation.
Note that the summary value indicated in this report represents an
"aggregate" value based upon all items noted herein. For this
reason, isolation of any single element as a sole basis of comparison
may be inaccurate, and subsequent isolation of any single item
appraised, or group of items appraised, could result in a variance
from the values reported. The Forced Sale requires not only
the judgment and ability of the appraiser to evaluate a specific piece
of equipment, but also the experience to anticipate what could happen
under a given set of circumstances based upon actual sales (held under
forced sale conditions) of like or similar machinery and equipment, with
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adjustments made for:
1) conditions at time of inspection
2) quantities and desirability
3) location
4) general appearance
5) psychological appeal
6) cost of similar or like used and new equipment
7) degree of specialization or modification
The balance of forces which affects value for particular types of machinery
or pieces of equipment is analyzed by the appraiser and the final value
assignment on each item is, in part, a reflection of this analysis.
Machinery and equipment is described and valued as it would be typically
advertised and sold. In some instances, an entire line of related
machinery is designed to perform a particular function as an integral unit
and should justify greater value application as a unit rather than if it
was separated out.
It should be understood that the value indicated is not for its replacement
in like kind and utility, but rather what the specific equipment observed
is worth under the scenario as defined. However, replacement or
reproduction cost may be used in the cost approach to arrive at the value
indicated for the specific piece. With all things equal, it is possible
that an exact piece of equipment, if found, could be obtained for the value
indicated under the concept. Comparisons would have to take into account
adjustments for exacts such as location, installation, condition, industry,
locational economics and possible draw through all "causes and effects"
associated with the concept. Realistically, exact comparables are not
always possible, therefore, it should be applied to the specific equipment
at its location; it is not to be used, nor is it to represented as a
valuation that would be applied to replacement or depreciated replacement
for insurance purposes. However, the item DESCRIPTION, in most cases,
contains the specifics that would be needed for determining replacement in
like kind and utility, although values may be different than those
indicated by this study.
An appraisal has never been considered the product of an exact science,
although measurements of accuracy may be employed. Determining the
reactions of the public to value an asset at a particular point in time is
a valuation process based upon history, whereas the actual test of an
appraisal value may vary up or down. for this reason, one sale does not
necessarily make a comparable. Although equipment may have been observed
selling at higher or lower numbers than its appraised value, it is the
appraiser's judgment and responsibility to make adjustments in order
to maintain a set of circumstances which might be considered average
under a particular value concept. For this reason, the total number
indicator is the important measurement on a PROPER future test.
Typically, the averaging method adjusts for location, condition, time,
and other factors. However, it would not simply indicate some high or
low recovery for an asset under some particular past sale. The
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appraiser strives for an average. In a tested sale, one might find that
average being exceeded in some cases, yet below the value indicated in
others. It is the existence of these variables that requires the use of
the averaging method in order to maintain greater accuracy.
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USE AND INTERPRETATION OF COMPUTER PRINTOUT
As the enclosed listing is a comprehensive report, certain areas of the
print may need clarification. The following example and subsequent
explanation should be of assistance.
COMPUTER PRINTOUT EXAMPLE
-------------------------
MB VALUATION APPRAISAL OF:
(HYPOTHETICAL EXAMPLE - NOT SUBJECT)
C1 (CODE 1): LOCATION
C2 (CODE 2): TYPE
---------------------------------------------------------------------------
ENTRY C1 C2 QTY DESCRIPTION FMV
---------------------------------------------------------------------------
301 S1 D1 1 FAN, PEDESTAL 10.00
308 S1 D1 1 AIR COMPRESSOR, TWIN STAGE,
15 HP, TANK MOUNTED 2600.00
412 S2 D1 1 PALLET TRUCK, 5500 #CAP. 500.00
513 S2 D1 1 AIR CONDITIONING SYSTEM,
CENTRAL HEAT & AIR,
*IMPROVEMENTS *
617 S2 D1 LOT TOOLS AND ACCESSORIES, MISC.
NOT OTHERWISE LISTED OR
CONSIDERED 150.00
---------------------------------------------------------------------------
EXPLANATION:
Reading from left to right, note the far left (ENTRY) column contains an
ENTRY NUMBER (such as 301) to reference as appraisal item.
Next are code columns if used. Note they are labeled C1 and C2, meaning
Code 1 and Code 2. A quick glance to the upper left will reveal that C1
(Code 1) represents LOCATION, and that C2 (Code 2) represents TYPE:
therefore, entry number 301, for instance, would be at location S1 and
would be categorized as equipment type D1. Codes of this sort are
optional, and may not appear on the printout; however, they can be added at
a later time.
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The codes S1 and D1 may be interpreted by referring to a code directory
(not shown) located immediately before the listing. The directory might
show, for example, that location S1 is Building A, and that equipment type
D1 is drilling equipment. This code directory also shows the pages on
which the first set of codes can be found. If codes are used, the end of
the computer printout will have a recapitulation, which also references the
codes and their descriptions.
It is possible to obtain a printout of all or a portion of the items,
sorted by any code, by order of entry (the far left computer generated
entry number), ascending or descending values, or by category, which would
group the assets alphabetically.
The quantity column (QTY) indicates the count of items listed. When the
word "Lot" is used in this column, an itemized count was not made. The
term "Lot" considers a group as one and is the same to the computer as the
quantity of one. Quantities greater than one are automatically extended.
To the right of quantify (QTY) is the data description which contains a
reasonable description of the item listed. the data description may also
contain any special noted considerations, explanations or references.
The far right number is the EXTENDED appraisal value for quantities greater
than one. If an asterisk (*) is used in the value column, the value is
equal to zero. (See Entry No. 513 in the example.) The asterisk (*) is
used primarily to reference an explanation found in the item's description
when no value is used. In some cases the value, if applicable, could have
been considered elsewhere. If the value is actually zero, the number zero
is used.
If you have not requested your report to be updated or revised yearly, or
at some point in the future, and wish to investigate this service, contact
us for both an explanation and a fee quote. In any event, you should
receive an update reminder letter and quote in approximately eleven months.
NOTE: The overall conceptual design of this program, dictation
methodology for appraisals and input, and procedural applications
of this methodology were originated by the principals of MB
Valuation Services, Inc. over many years, with continual
upgrading of all applications and technology. These procedures,
or similar techniques, can be observed used by others within the
sales and appraisal profession.
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CONDITION CODES
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These are standard condition codes which have been used for years and are
generally understood. These codes are defined below for any needed
clarification. At the outset, it should be understood that standard
condition codes should typically be used for actual rather than assumed
conditions. It is for this reason that there should be two forms of
condition codes: (1), codes used for actual condition, and (2), codes used
for appearance or assumed condition. Through the use of two sets of codes
(actual and assumed) there is allowed a better understanding or aid for the
following uses:
1. Justification of value judgment and/or any alterations from
average return;
2. Testimony or presentation support; future court testimony;
3. Indicators of or lack of preventative maintenance;
4. Like equipment - different return justification;
5. Potential use for residual forecasting;
6. Contribution to overall observations (aid to notes);
7. Later sale recovery - differences from original study;
8. Quicker references than notes for value correlation;
9. Better item interpretation by outside users of report;
10. Aid to value credibility contained within the report;
11. In-house training aid;
12. Future comparable interpretation (when applied by reporter of
actual sales);
13. Upward or downward adjustments in fine tuning the more
questionable value application;
14. Quicker verbal communication to others having an understanding of
codes;
15. Additional indicator of having completed an on-site inspection;
16. Component differences on individual entry (see EXAMPLE at the end
of this section);
17. Support in value controversy within the same concept;
18. Better interpretation of photographs, drawings, or facsimile
reproduction not necessarily representative of subject;
19. Special considerations more readily understood;
20. Indicator of special effort for client appreciation;
21. Aids in future revision to other value concepts or updating.
Below are COMMON CONDITION CODES as should be applied for ACTUAL condition:
N - New and has not been used
E - Excellent and in like new condition
VG - VERY GOOD, excellent condition with no requirement for repairs
and usually considered above average, longer time than average before any
required maintenance.
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G - GOOD CONDITION, usually considered average to that which would be
expected for an item of like age and utility; would require standard
continued maintenance.
F - FAIR CONDITION, generally considered below average but operable;
could use repairs or improvement; questionable continued or extended use.
P - POOR CONDITION, may or may not work and in all likelihood requires
maintenance for even the most limited use; needs immediate attention.
X OR S - SCRAP CONDITION, considered parts only or less and cannot be
operated for original intended use; 100% depreciated by physical condition
and/or some form of obsolescence.
NOTE: Standard condition codes can be variable such as G-F or F-G. G-F
would indicate more good than fair, whereastheh reverse would be
more fair than good. Variable condition codes are helpful in
averaging in such areas as tires in which many variable
conditions placement apply to the item(s) under appraisement.
Following are codes used for ASSUMED derived condition from observation.
NOTE: The codes listed below are commonly referred as bracket codes by
those who use them. These codes are SPECIAL CODES that were
developed and initiated many years ago by the principal of MB
Valuation Services, Inc. and are becoming more widely used after
an article on the use of "appearance codes" was previously
published in the M&E Newsletter of the American Society of
Appraisers.
[A] = new
[B] = new or late model appearance, yet obviously used somewhat
[C] = average condition for age
[D] = below average but operable
[E] = below average; may or may not work; condition questionable;
repairs obviously needed
[F] = inoperable and undetermined whether repairs will allow use;
usually considered parts and repair doubtful
[G] = scrap or salvage
[O] = older - that equipment which would exhibit great difficulty in
remarketing due to age; not necessarily to be confused with
obsolescence but rather the appearance of age
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[S] = special - a specialized piece of equipment usually proprietary
or shop built or having a very narrow or limited market - could
be a highly adapted standard piece of equipment
[Q] = condition questionable
[L] = late model
In all cases for code applications, there may be some variation of a code
in which the appraiser would not wish to use the higher or lower reference.
An example of this could be a machine that the appraiser considered average
[C], although slightly lower than others observed yet not so low as the
indicator for below average [D]. For this reason, an appraiser would use a
plus (+) or minus (-); in the above example the indicator would possibly be
shown as [C-].
NOTE: The above codes could be used in combination within a bracket or
used several times within a description for component indicators,
i.e. [SC+] indicates a SPECIAL item just SLIGHTLY ABOVE AVERAGE
in condition; [SQD] would mean a SPECIAL piece of equipment that
appears BELOW AVERAGE, but operational, however, the appraiser is
still QUESTIONING whether the equipment is, in fact, operable. An
example of such an item would be a watchband link machine that
was in storage, greasy, and there being no way to ascertain
whether it was operable when it was placed in storage.
For purposes of clarification, the following is a hypothetical example for
using some of the various codes referred to above:
EXAMPLE: FORKLIFT, CLARK, MDL. C500. YS80, S/N Y685-0299-921S, W/DUAL
FRONT TIRES, OVERHEAD GUARD, TRIPLEX MAST, PNEU. TIRES, GAS
ENGINE, [C]
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RESEARCH DATA SOURCES
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MB Data Base
The Last Bid - Trucks & Trailers
Truck Blue Book
Various Truck & Trailer Price Guides
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