Mainebiz

V I E W P O I N T S W W W. M A I N E B I Z . B I Z 3 M AY 4 , 2 0 1 5 For a daily digest of Maine's top busi- ness news, sign up for the Mainebiz Daily Report at mainebiz.biz/enews Get Maine's business news daily at mainebiz.biz and on Twitter (@Mainebiz). Below is some of the best from our online-only offerings: Featured @ Mainebiz.biz From the Editor Iceland's nice, but don't ignore Asia T his issue of Mainebiz has a focus on exports and imports. Senior Writer Lori Valigra has a story that goes a long way toward explaining the complexities of foreign exchange and how some companies have gotten bitten by currency fluctuations. WEX and Sterling Rope Co. Inc. are just two companies that have had to decipher the forex mess of recent months. Two other stories with an export theme are taking tradi- tional products — lobsters and baby eels known as elvers — and finding burgeoning markets in Asia. Senior Writer James McCarthy talked to Tom Adams, founder of Maine Coast Shellfish, a York company whose sales skyrocketed from zero four years ago to $40 million. e company's most significant export is lobster — and certain markets apparently can't get enough of it. State numbers buttress what Jim's story shows, which is that China and other global markets have become huge for some of Maine's fisheries. Correspondent Laurie Schreiber, who is based in Bass Harbor, helps us make sense of an elver fishery that was once little noticed — that is, until fish buyers from Asia started knocking on the door. Dock prices of $1,000 a pound brought what was once a Wild West kind of unregulated fishery into the modern world. State quotas have brought the industry under control, but regulations have done little to temper sales. A lot has been said in the past year about Maine's trade with Iceland, and rightly so. It is a significant market and a gateway to northern Europe. But there's ample evidence that Asia will be getting similar attention, particularly with the Maine International Trade Center's fall trade mission to Japan and China. Peter Van Allen pvanallen@mainebiz.biz Just a note on a Mainebiz story in the April 20 print edition, "Investment banker sees an uptick in M&A activity." EBITDA includes depreciation, which was, I think, inadvertently left out. And there's a big difference between EBITDA and "free cash" flow. It seems that part of the story suggests they're the same. I don't at all dis- pute EBITDA is used as a metric to enterprise value, but free cash flow (or net free cash flow) is a very different metric altogether than EBITDA. ere are fat books written about valuation methods and I understand you can't get too into detail, but I think the dis- parities are important enough to at least point out they exist. EBITDA became popular during the '80s LBO era so buy- out firms could estimate how much debt they could take on, thus the term "leveraged buyout." But EBITDA compared to free cash flow doesn't take into account several factors anyone should consider when valuing a company, which are indicative of the big differences between the two. Probably the most important thing EBITDA doesn't take into account is capital expenditures. CapEx is an ongoing, operational cash outflow and any capital-inten- sive company will be spending money on fixed assets on a regular basis, which can significantly reduce the bottom line or free cash flow. If you have two identical companies in the same industry with the same EBITDA but one is spending more on capital expenditures and thus expected to generate a higher return on invested capital, it's possible to overvalue one when in reality that company's free cash flow may be less. And theoretically, different companies can measure EBITDA differently whereas, generally, free cash flow is free cash flow. ere are other differences between the two but I just wanted to point out they are very different. And I know from reading that Warren Buffet tries exclusively to analyze companies based on free cash flow, not EBITDA. I also worked with Roger Grabowski for a number of years, in some respects the father of valuation. He would always say, "You can't put EBITDA in your pocket, but free cash flow fits nicely." Chris Johnson, New Gloucester To the Editor Race for the prize Saco River Dyehouse in Biddeford is one of the 10 semifinalists named in Gorham Savings Bank's third annual LaunchPad Competition. The winner, who will be chosen in June, will walk away with $30,000. See the other semi- finalists at mainebiz.biz/launchpad The real 'Vandelay Industries' A Portland retail project is moving forward after a local developer recently purchased property in the city's Bayside neighborhood for development. Oddly enough, the property will be run by Vandelay Industries LLC, a name any "Seinfeld" fan should know. Find out more at mainebiz.biz/vandelay IN MEMORY OF PETER RUBIN. Bernstein Shur mourns the passing of its president, long-time general counsel, partner and friend, Peter J. Rubin, who passed away on April 17. We honor his integrity, loyalty and wise counsel and we are grateful for his many contributions to our community, our clients, the legal profession and our firm. He will long be remembered as the consummate trial lawyer whose passion for his client's cause was unparalleled. Portland, ME | Augusta, ME | Manchester, NH 207 774-1200 | bernsteinshur.com An inside look Get a digest of the state's largest commercial real estate transactions, industry movers and more in our weekly Real Estate Insider newsletter. Sign up at mainebiz.biz/enews.

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