industrial products and services march 2017 in millions, except per share ticker (3/9/2017) cap...

Matt Duncan, CFA, Analyst [email protected] (501) 377-3723

The analyst primarily responsible for the preparation of the content of this presentation certifies that (i) all views expressed in this presentation accurately reflect the analyst’s personal views about the subject company and securities, and (ii) no part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in this presentation. See important disclosures and analyst certification on page 53 of this presentation. This presentation constitutes a compendium report (covers six or more subject companies). As such, Stephens Inc. chooses to provide specific disclosures for the companies mentioned by reference. To access current disclosures for the companies in this presentation, clients should refer to https://stephens2.bluematrix.com/sellside/Disclosures.action or contact your Stephens Inc. representative for additional information.

© 2017 Stephens Inc.

111 Center Street Little Rock, AR 72201 501-377-2000 800-643-9691 stephens.com Member NYSE, SIPC

Industrial Products and Services March 2017

2

Our Current View and Our Favorite Ideas

Distributor Group: Industrial driven distributor stocks have moved higher since the November 2016 U.S. election as the outlook for the U.S. industrial economy has improved. Monthly sales data and economic data points are already beginning to show signs of improvement, trends we expect to continue. Energy distributors are expected to see improving demand in 2017. Residential driven distributors businesses remain strong. E&C/Industrial Services Group: The outlook for the E&C and industrial service stocks on our coverage list is improved since the U.S. election as well. Regulatory burdens are expected to ease and more projects are expected to move forward in a number of markets. Communications and pipeline demand are strong, electrical demand is expected to improve, and downstream energy maintenance spend is expected to start improving in 2017 as well. Favorite Names:

DY (2017 Best Idea): Increasing data demand is fueling a large telecommunications investment cycle, driving substantial revenue and profit growth for DY. We expect backlog to generally move higher over time as well.

PWR: Outlook for pipeline construction continues to improve and electrical transmission spending looks to have bottomed; balance sheet remains strong; upside potential remains to consensus estimates for 2017 and 2018.

MTZ: Big O&G backlog growth driven by pipeline wins; expect sales and profit growth in 2017; wireline communications business has been strong; electrical transmission profit headwinds abating in 2017.

TISI: Furmanite integration proceeding well, creating substantial operating leverage when revenue growth returns; refinery maintenance spending should grow in 2017, but timing of when pent-up demand shakes loose is uncertain.

MSM: Improved growth outlook; 30% incremental operating margin on first $100 mil. of revenue growth.

Price Price Implied

Ticker Rating (3/9/2017) Target % Change 30-Day 90-Day 6 Month YTD 2016 2015

Covered Companies

Altra Industrial Motion Corp. AIMC Overweight (Vol) $38.30 $48.00 25.3% (1.7%) (3.8%) 39.8% 3.8% 47.1% (11.7%)

NOW, Inc. DNOW Equal-Weight (Vol) $17.45 $24.00 37.5% (22.1%) (23.9%) (13.7%) (14.8%) 29.4% (38.5%)

DXP Enterprises, Inc. DXPE Overweight (Vol) $31.37 $46.00 46.6% (15.6%) (16.0%) 19.2% (9.7%) 52.4% (54.9%)

Dycom Industries, Inc. DY Overweight (Vol) $94.46 $120.00 27.0% 20.1% 16.8% 15.7% 17.6% 14.8% 99.4%

W.W. Grainger, Inc. GWW Equal-Weight $244.02 $265.00 8.6% (3.5%) 1.8% 9.7% 5.1% 14.6% (20.5%)

Mistras Group, Inc. MG Equal-Weight (Vol) $21.96 $27.00 23.0% (1.5%) (12.9%) (8.5%) (14.5%) 34.5% 4.1%

MRC Global Inc. MRC Overweight (Vol) $18.11 $25.00 38.0% (12.4%) (17.7%) 24.0% (10.6%) 57.1% (14.9%)

MSC Industrial Direct Co., Inc. Class A MSM Overweight $101.34 $116.00 14.5% (2.6%) 8.5% 40.5% 9.7% 64.2% (30.7%)

Matrix Service Company MTRX Overweight (Vol) $15.70 $24.00 52.9% (15.1%) (28.1%) (15.9%) (30.8%) 10.5% (8.0%)

MasTec, Inc. MTZ Overweight (Vol) $38.70 $48.00 24.0% 1.2% (3.0%) 37.2% 1.2% 120.1% (23.1%)

Orion Group Holdings, Inc. ORN Overweight (Vol) $9.21 $12.00 30.3% (9.4%) (10.8%) 55.3% (7.4%) 138.6% (62.3%)

Pool Corporation POOL Equal-Weight $116.99 $118.00 0.9% 7.0% 9.6% 23.2% 12.1% 29.2% 27.3%

Primoris Services Corporation PRIM Equal-Weight (Vol) $23.77 $28.00 17.8% (2.7%) (2.1%) 23.3% 4.3% 3.4% (5.2%)

Quanta Services, Inc. PWR Overweight (Vol) $36.72 $44.00 19.8% (0.5%) 3.2% 45.0% 5.4% 72.1% (28.7%)

Team, Inc. TISI Overweight (Vol) $27.00 $36.00 33.3% (16.4%) (26.9%) (12.8%) (31.2%) 22.8% (21.0%)

WESCO International, Inc. WCC Overweight (Vol) $68.15 $86.00 26.2% (3.5%) (4.1%) 17.8% 2.4% 52.4% (42.7%)

Watsco, Inc. WSO Equal-Weight $147.28 $160.00 8.6% (4.7%) (7.2%) 3.7% (0.6%) 26.5% 9.5%

Average (4.9%) (6.9%) 17.8% (3.4%) 46.4% (13.0%)

Index

Russell 2000 RUT - $1,360.12 - - (1.3%) (2.0%) 11.6% 0.2% (5.7%) 3.5%

S&P Small Cap 600 SML - $827.26 - - (1.8%) (3.5%) 11.8% (1.3%) (3.4%) 4.4%

S&P 500 (Operating Basis) SPX - $2,364.87 - - 2.5% 4.7% 11.1% 5.6% (0.7%) 11.4%

NASDAQ Composite Index COMP - $5,838.81 - - 2.2% 7.2% 13.9% 8.5% 5.7% 13.4%

Average 0.4% 1.6% 12.1% 3.3% (1.0%) 8.2%

Source: FactSet Research Systems Inc. and Stephens Inc. estimates.

Price Change (%)

3

Coverage List: Price Performance

Price Market Enterprise EV/Sales EV/EBITDA P/E

$ in Millions, Except per Share Ticker (3/9/2017) Cap Value 2017 2018 2017 2018 2017 2018

Industrial Distributors

Applied Industrial Technologies, Inc. AIT $59.65 $2,348.5 $2,612.8 1.0x 0.9x 12.2x 10.7x 21.9x 18.6x

Anixter International Inc. AXE $78.65 $2,658.4 $3,922.1 0.5x 0.5x 9.4x 8.9x 14.9x 13.4x

NOW, Inc. DNOW $17.45 $1,870.6 $1,829.6 0.7x 0.6x NM 24.2x NM NM

DXP Enterprises, Inc. DXPE $31.37 $564.2 $797.1 0.8x 0.7x 13.2x 10.3x 54.1x 26.6x

Fastenal Company FAST $50.18 $14,513.1 $14,790.4 3.5x 3.3x 15.5x 14.2x 27.2x 24.7x

Genuine Parts Company GPC $92.95 $13,866.0 $14,537.3 0.9x 0.9x 10.7x 10.2x 19.5x 17.9x

W.W. Grainger, Inc. GWW $244.02 $14,535.3 $16,508.3 1.6x 1.5x 11.2x 10.5x 20.5x 18.4x

HD Supply Holdings, Inc. HDS $41.92 $8,468.1 $12,419.1 1.6x 1.5x 12.5x 11.5x 12.9x 11.1x

Kaman Corporation Class A KAMN $48.75 $1,387.4 $1,769.3 0.9x 0.9x 10.1x 9.2x 19.1x 16.9x

MRC Global Inc. MRC $18.11 $1,722.3 $2,390.3 0.7x 0.6x 17.1x 9.8x NM 26.6x

MSC Industrial Direct Co., Inc. Class A MSM $101.34 $5,733.0 $6,244.7 2.1x 2.0x 13.8x 12.1x 24.9x 21.5x

Pool Corporation POOL $116.99 $4,949.8 $5,365.8 2.0x 1.9x 17.5x 16.0x 28.4x 25.7x

SiteOne Landscape Supply, Inc. SITE $39.76 $1,630.5 $2,049.7 1.2x 1.1x 13.2x 11.6x 28.2x 20.1x

WESCO International, Inc. WCC $68.15 $3,353.0 $4,645.9 0.6x 0.6x 11.2x 9.9x 17.3x 14.4x

Watsco, Inc. WSO $147.28 $4,810.5 $4,990.0 1.1x 1.1x 14.6x 13.3x 25.3x 22.9x

Average $5,494.0 $6,324.8 1.3x 1.2x 12.7x 11.4x 21.7x 18.8x

Median $3,353.0 $4,645.9 1.0x 0.9x 12.5x 11.1x 21.9x 18.6x

Source: FactSet Research Systems Inc.; EPS, EBITDA and sales are consensus estimates courtesy of FactSet except DNOW, DXPE, GWW, MRC, MSM, POOL, WCC and WSO, which are Stephens Inc. estimates.

WSO EBITDA excludes Carrier Corp.'s interest in joint ventures.

Estimates for MSM are for the 12 months ending in November.

MRC and DNOW multiples excluded from average & DXPE P/E multiples excluded from average.

4

Coverage List: Distributor Valuation

Price Market Enterprise EV/Sales EV/EBITDA P/E


Industrial Services

Mistras Group, Inc. MG $21.96 $658.8 $742.9 1.0x 1.0x 9.1x 8.0x 22.6x 18.5x

Team, Inc. TISI $27.00 $798.1 $1,118.8 0.9x 0.8x 9.5x 7.5x 24.1x 15.2x

Average $728.4 $930.8 1.0x 0.9x 9.3x 7.7x 23.4x 16.8x

Median $728.4 $930.8 1.0x 0.9x 9.3x 7.7x 23.4x 16.8x

Engineering & Construction

AECOM ACM $35.11 $5,547.1 $9,412.0 0.5x 0.5x 9.7x 8.4x 11.7x 10.6x

Chicago Bridge & Iron Co. NV CBI $30.26 $3,028.7 $4,612.0 0.5x 0.5x 5.4x 5.3x 7.1x 6.6x

Dycom Industries, Inc. DY $94.46 $3,038.0 $3,870.4 1.2x 1.1x 8.0x 7.1x 16.3x 13.9x

Fluor Corporation FLR $53.52 $7,551.7 $7,190.4 0.4x 0.3x 7.9x 7.2x 18.4x 16.6x

Great Lakes Dredge & Dock Corporation GLDD $4.25 $259.0 $639.8 0.8x 0.8x 6.2x 5.8x 30.4x 20.2x

Jacobs Engineering Group Inc. JEC $55.87 $6,807.8 $6,461.2 0.6x 0.6x 9.6x 8.9x 17.6x 15.7x

Matrix Service Company MTRX $15.70 $421.3 $427.5 0.3x 0.3x 6.6x 4.9x 16.7x 11.1x

MasTec, Inc. MTZ $38.70 $3,163.3 $4,150.5 0.8x 0.7x 7.5x 7.0x 16.5x 14.8x

MYR Group Inc. MYRG $37.09 $606.2 $669.6 0.6x 0.5x 7.7x 7.1x 22.8x 19.3x

Orion Group Holdings, Inc. ORN $9.21 $253.2 $354.2 0.5x 0.5x 6.5x 5.7x 23.0x 15.4x

Primoris Services Corporation PRIM $23.77 $1,236.5 $1,362.5 0.6x 0.5x 7.5x 6.4x 20.5x 15.6x

Quanta Services, Inc. PWR $36.72 $5,690.0 $5,938.9 0.7x 0.7x 8.7x 7.5x 18.0x 14.8x

Tutor Perini Corporation TPC $29.55 $1,492.5 $2,055.4 0.4x 0.4x 6.6x 5.9x 13.1x 10.8x

Average $3,007.3 $3,626.5 0.6x 0.6x 7.5x 6.7x 17.8x 14.3x

Median $3,028.7 $3,870.4 0.6x 0.5x 7.5x 7.0x 17.6x 14.8x

Source: FactSet Research Systems Inc.; EPS, EBITDA and sales are consensus estimates courtesy of FactSet except MG, TISI, MTRX, MTZ, ORN, PRIM and PWR, which are Stephens Inc. estimates.

Estimates for MG are for the 12 months ending in November.

5

Coverage List: Industrial Services and E&C Valuation

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Near Fully Valued Stock – POOL

9

Coverage List: Estimates

Price Market Enterprise Calendar Sales Calendar EBITDA Calendar EPS


Altra Industrial Motion Corp.* AIMC $38.30 $992.6 $1,293.2 $708.9 $846.0 $97.4 $125.8 $1.56 $1.82% Change (5.1%) 19.3% (3.2%) 29.2% (4.9%) 16.7%NOW, Inc.* DNOW $17.45 $1,870.6 $1,829.6 $2,107.0 $2,538.1 ($161.0) ($23.6) (1.30) (0.50)% Change (30.0%) 20.5% (147.3%) 85.3% (132.1%) 61.5%DXP Enterprises, Inc.* DXPE $31.37 $564.2 $797.1 $956.9 $964.5 $46.7 $60.3 $0.09 $0.58% Change (23.3%) 0.8% (43.5%) 29.1% (94.1%) 544.4%Dycom Industries, Inc.* DY $94.46 $3,038.0 $3,870.4 $2,954.2 $3,224.3 $433.3 $483.4 $5.21 $5.81% Change 29.0% 9.1% 33.9% 11.6% 56.5% 11.5%W.W. Grainger, Inc.* GWW $244.02 $14,535.3 $16,508.3 $10,137.2 $10,569.7 $1,481.9 $1,474.4 $11.58 $11.88% Change 1.6% 4.3% (2.0%) (0.5%) (3.0%) 2.6%Mistras Group, Inc.* MG $21.96 $658.8 $742.9 $689.6 $720.2 $75.2 $81.5 $0.83 $0.97% Change (3.2%) 4.4% 1.6% 8.4% 0.0% 16.9%MRC Global Inc.* MRC $18.11 $1,722.3 $2,390.3 $3,041.0 $3,424.2 $65.8 $139.6 ($0.59) $0.01% Change (32.8%) 12.6% (70.7%) 112.2% (234.1%) 101.7%MSC Industrial Direct Co., Inc. Class A MSM $101.34 $5,733.0 $6,244.7 $2,843.0 $2,910.4 $446.2 $452.2 $3.83 $4.07% Change (1.5%) 2.4% 0.1% 1.3% 2.7% 6.3%Matrix Service Company MTRX $15.70 $421.3 $427.5 $1,323.5 $1,336.6 $64.9 $65.1 $1.08 $0.94% Change (0.3%) 1.0% 39.6% 0.3% (21.2%) (13.0%)MasTec, Inc.* MTZ $38.70 $3,163.3 $4,150.5 $5,134.7 $5,506.7 $479.9 $550.6 $1.90 $2.35% Change 22.0% 7.2% 55.8% 14.7% 196.9% 23.7%Orion Group Holdings, Inc. ORN $9.21 $253.2 $354.2 $578.2 $679.0 $38.3 $54.8 $0.21 $0.40% Change 23.9% 17.4% 85.9% 43.1% 170.0% 90.5%Pool Corporation POOL $116.99 $4,949.8 $5,365.8 $2,570.8 $2,716.2 $278.3 $306.1 $3.47 $4.12% Change 8.8% 5.7% 19.1% 10.0% 19.7% 18.7%Primoris Services Corporation PRIM $23.77 $1,236.5 $1,362.5 $1,996.9 $2,304.6 $130.0 $180.7 $0.51 $1.16% Change 3.5% 15.4% (2.9%) 39.0% (28.2%) 127.5%Quanta Services, Inc.* PWR $36.72 $5,690.0 $5,938.9 $7,651.3 $8,234.1 $585.8 $679.4 $1.54 $2.04% Change 1.0% 7.6% 11.4% 16.0% 38.7% 32.5%Team, Inc.* TISI $27.00 $798.1 $1,118.8 $1,196.7 $1,277.2 $80.1 $117.4 $0.41 $1.12% Change 30.5% 6.7% (11.6%) 46.6% (75.4%) 173.2%WESCO International, Inc. WCC $68.15 $3,353.0 $4,645.9 $7,336.0 $7,558.4 $398.9 $414.8 $3.80 $3.94% Change (2.4%) 3.0% (9.1%) 4.0% (9.1%) 3.7%Watsco, Inc. WSO $147.28 $4,810.5 $4,990.0 $4,220.7 $4,394.2 $298.7 $340.9 $5.15 $5.82% Change 2.6% 4.1% 2.1% 14.1% 5.1% 13.0%

Estimates for MG and MSM are for the 12 months ending in November & DY for January.

*Indicates PF EPS estimates.

WSO EBITDA excludes Carrier Corp.'s interest in joint ventures.

Source: FactSet Research Systems Inc. and Stephens Inc. estimates.

85

90

95

100

105

110

Jan

-07

Jun

-07

No

v-0

7

Ap

r-0

8

Sep

-08

Feb

-09

Jul-

09

Dec

-09

May

-10

Oct

-10

Mar

-11

Au

g-1

1

Jan

-12

Jun

-12

No

v-1

2

Ap

r-1

3

Sep

-13

Feb

-14

Jul-

14

Dec

-14

May

-15

Oct

-15

Mar

-16

Au

g-1

6

Jan

-17

65%

70%

75%

80%

85%

Jan

-07

Jun

-07

No

v-0

7

Ap

r-0

8

Sep

-08

Feb

-09

Jul-

09

Dec

-09

May

-10

Oct

-10

Mar

-11

Au

g-1

1

Jan

-12

Jun

-12

No

v-1

2

Ap

r-1

3

Sep

-13

Feb

-14

Jul-

14

Dec

-14

May

-15

Oct

-15

Mar

-16

Au

g-1

6

Jan

-17

30%

35%

40%

45%

50%

55%

60%

65%

Feb

-07

Jul-

07

Dec

-07

May

-08

Oct

-08

Mar

-09

Au

g-0

9

Jan

-10

Jun

-10

No

v-1

0

Ap

r-1

1

Sep

-11

Feb

-12

Jul-

12

Dec

-12

May

-13

Oct

-13

Mar

-14

Au

g-1

4

Jan

-15

Jun

-15

No

v-1

5

Ap

r-1

6

Sep

-16

Feb

-17

10

Industrial Economic Indexes

Source: Federal Reserve Board and Institute for Supply Management

U.S. Capacity Utilization: Total Industry U.S. Capacity Utilization: Manufacturing

U.S. Purchasing Managers Index Industrial Production Index (2012=100)

60%

65%

70%

75%

80%

Jan

-07

Jun

-07

No

v-0

7

Ap

r-0

8

Sep

-08

Feb

-09

Jul-

09

Dec

-09

May

-10

Oct

-10

Mar

-11

Au

g-1

1

Jan

-12

Jun

-12

No

v-1

2

Ap

r-1

3

Sep

-13

Feb

-14

Jul-

14

Dec

-14

May

-15

Oct

-15

Mar

-16

Au

g-1

6

Jan

-17

12

Distribution

Price Price

Ticker Rating (3/9/2017) Target

Covered Companies

NOW, Inc. DNOW Equal-Weight (Vol) $17.45 $24.00

DXP Enterprises, Inc. DXPE Overweight (Vol) $31.37 $46.00

W.W. Grainger, Inc. GWW Equal-Weight $244.02 $265.00

MRC Global Inc. MRC Overweight (Vol) $18.11 $25.00

MSC Industrial Direct Co., Inc. Class A MSM Overweight $101.34 $116.00

Pool Corporation POOL Equal-Weight $116.99 $118.00

WESCO International, Inc. WCC Overweight (Vol) $68.15 $86.00

Watsco, Inc. WSO Equal-Weight $147.28 $160.00

Source: FactSet Research Systems and Stephens Inc.

13

Industrial Distribution Industry Overview

Industrial distributors serve as intermediaries between manufacturers and end users of a wide variety of industrial products

North American market for MRO products is ~$300 bil.–$400 bil. Highly fragmented - 100,000–150,000 participants, most of whom focus on a local or regional geography and/or a niche segment of the market Intensely competitive

Large number of industry participants Relatively low barriers to entry Minimal differentiation between products

We believe industry consolidation is inevitable Customers seeking to reduce the number of suppliers

Administrative costs of procuring MRO products can be very high Companies with broad product offerings benefiting

Value-added services becoming more important to customers Benefits large industry players with greater levels of service

Grow, focus or be acquired Smaller distributors will likely be faced with the decision to be acquired or attempt to dominate a niche market segment on a national level to stay in business

14

NOW Inc. (DNOW) – Summary

NOW Inc., commonly referred as DistributionNOW, is one of the largest distributors to the oil and gas industry on a worldwide basis, with a legacy of over 150 years operating in the oilfield industry

Over 300 locations and 5,000+ employees worldwide Serves each of the 3 primary energy end markets: Upstream, Midstream, and Downstream

Investment Thesis: We are Equal-Weight/Vol. due to the weak outlook for DNOW’s business and mounting profit losses. We continue think the stock can do well over the long term due to our expectation that DNOW will deploy its strong balance sheet on accretive M&A, but we would steer clear of the stock in the short term. Our long-term positive bias is based on the following:

Leading global distributor of pipes, valves, and fittings and other energy products DNOW provides a one-stop shop and leverages its scale against smaller, regional and local players A recovery in energy markets should help DNOW take share from its smaller, less capitalized competitors and allows for additional acquisition opportunities

Operating margin expansion expected Implementation of the company-wide ERP platform should drive cost savings from the integration of the legacy NOV distribution business with that of Wilson and CE Franklin The Company expects to reach break-even EBITDA on ~$650 mil. in quarterly sales, which we expect to occur in 3Q17 with net income turning positive in 2018

DNOW deploys its strong balance sheet DNOW has made several acquisitions through the energy downturn including two recent, larger deals: Power Service and Odessa Pump which signal DNOW’s desire to grow its pump distribution business We expect DNOW to be active in making accretive acquisitions to grow its business, adding to the Company’s earnings power once its end markets recover, but the pace of deals could slow in the near-term as it integrates recent deals

( in 000's, except per share) FY Mar-16 Jun-16 Sep-16 Dec-16 FY Mar-17 Jun-17 Sep-17 Dec-17 FY Mar-18 Jun-18 Sep-18 Dec-18 FY

(Year end D ec. 31) 2015A 1Q16A 2Q16A 3Q16A 4Q16A 2016A 1Q17E 2Q17E 3Q17E 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E

Total Revenues $3,010,000 $548,000 $501,000 $520,000 $538,000 $2,107,000 $603,980 $608,820 $658,350 $666,980 $2,538,130 $724,608 $736,899 $796,377 $799,848 $3,057,733

Cost of Goods Sold 2,508,000 461,000 418,000 433,000 450,000 1,762,000 501,303 500,450 536,555 540,254 2,078,562 584,759 592,467 637,898 639,079 2,454,203

Gross Profits $502,000 $87,000 $83,000 $87,000 $88,000 $345,000 $102,677 $108,370 $121,795 $126,726 $459,568 $139,849 $144,432 $158,479 $160,769 $603,530

OPERATING EXPENSES

Operating Expenses 604,000 148,000 141,000 139,000 133,000 561,000 134,732 135,424 135,823 136,308 542,287 142,801 144,754 150,760 151,464 589,780

Other Operating Exp. (Inc.) 408,000 4,000 (1,000) 1,000 2,000 6,000 0 0 0 0 0 0 0 0 0 0

Operating Expenses 1,012,000 152,000 140,000 140,000 135,000 567,000 134,732 135,424 135,823 136,308 542,287 142,801 144,754 150,760 151,464 589,780

Operating Income ($510,000) ($65,000) ($57,000) ($53,000) ($47,000) ($222,000) ($32,055) ($27,054) ($14,028) ($9,582) ($82,719) ($2,951) ($322) $7,719 $9,305 $13,750

Interest Expense (Income) 1,900 0 1,000 1,000 1,000 3,000 1,000 1,000 1,000 1,000 4,000 1,000 1,000 1,000 1,000 4,000

Other Expense (Income) 6,100 2,000 1,000 2,000 0 5,000 0 0 0 0 0 0 0 0 0 0

Income (Loss) Before Taxes (518,000) (67,000) (59,000) (56,000) (48,000) (230,000) (33,055) (28,054) (15,028) (10,582) (86,719) (3,951) (1,322) 6,719 8,305 9,750

Tax Expense or (Break) (16,100) (4,000) (15,000) 0 23,000 4,000 (1,653) (1,403) (751) (529) (4,336) (1,502) (502) 2,553 3,156 3,705

Net Income ($501,900) ($63,000) ($44,000) ($56,000) ($71,000) ($234,000) ($31,402) ($26,652) ($14,277) ($10,053) ($82,383) ($2,450) ($820) $4,166 $5,149 $6,045

Reported EPS ($4.68) ($0.59) ($0.40) ($0.53) ($0.66) ($2.18) ($0.29) ($0.25) ($0.13) ($0.09) ($0.77) ($0.02) ($0.01) $0.04 $0.05 $0.06

Pro Forma EPS* ($0.56) ($0.33) ($0.34) ($0.34) ($0.29) ($1.30) ($0.19) ($0.16) ($0.09) ($0.06) ($0.50) ($0.02) ($0.01) $0.04 $0.05 $0.06

Average Fully Diluted Shares 107,154 107,000 107,100 106,600 107,200 107,100 107,200 107,300 107,400 107,500 107,350 107,600 107,700 107,800 107,900 107,750

EBITDA (478,100) (55,000) (45,000) (41,000) (33,000) (174,000) (17,746) (12,430) 918 5,694 (23,565) 12,431 15,091 23,163 24,780 75,466

Adjusted EBITDA* ($37,100) ($48,000) ($42,000) ($40,000) ($31,000) ($161,000) ($17,746) ($12,430) $918 $5,694 ($23,565) $12,431 $15,091 $23,163 $24,780 $75,466

MARGIN ANALYSIS

Gross Margin 16.7% 15.9% 16.6% 16.7% 16.4% 16.4% 17.0% 17.8% 18.5% 19.0% 18.1% 19.3% 19.6% 19.9% 20.1% 19.7%

Adjusted Gross Margin 17.6% 16.4% 16.6% 16.7% 16.4% 16.5% 17.0% 17.8% 18.5% 19.0% 18.1% 19.3% 19.6% 19.9% 20.1% 19.7%

Selling, General and Admin. 20.1% 27.0% 28.1% 26.7% 26.0% 26.6% 22.3% 22.2% 20.6% 20.4% 21.4% 19.7% 19.6% 18.9% 18.9% 19.3%

Operating Income NM NM NM NM NM NM NM NM NM NM NM NM NM 1.0% 1.2% 0.4%

Adjusted EBITDA NM NM NM NM NM NM NM NM 0.1% 0.9% NM 1.7% 2.0% 2.9% 3.1% 2.5%

Income Before Taxes NM NM NM NM NM NM NM NM NM NM NM NM NM 0.8% 1.0% 0.3%

Tax Rate 3.1% NM 25.4% NM 5.0% -1.7% 5.0% 5.0% 5.0% 5.0% 5.0% 38.0% 38.0% 38.0% 38.0% 38.0%

Net Income NM NM NM NM NM NM NM NM NM NM NM NM NM 0.5% 0.6% 0.2%

GROWTH ANALYSIS

Net Product Revenues (26.7%) (36.5%) (33.2%) (30.9%) (16.5%) (30.0%) 10.2% 21.5% 26.6% 24.0% 20.5% 20.0% 21.0% 21.0% 19.9% 20.5%

Gross Profit (38.7%) (43.9%) (33.1%) (25.6%) (17.0%) (31.3%) 18.0% 30.6% 40.0% 44.0% 33.2% 36.2% 33.3% 30.1% 26.9% 31.3%

Selling, General and Admin. (5.4%) (6.9%) (4.7%) (6.1%) (10.7%) (7.1%) (9.0%) (4.0%) (2.3%) 2.5% (3.3%) 6.0% 6.9% 11.0% 11.1% 8.8%

Operating Income NM NM (111.1%) 81.8% 74.5% 56.5% 50.7% 52.5% 73.5% 79.6% 62.7% 90.8% 98.8% NM NM NM

EBITDA NM NM (130.8%) 85.4% 81.0% 63.6% 67.7% 72.4% NM NM 86.5% NM NM NM 335.2% NM

Adjusted EBITDA NM NM (342.1%) NM (13.6%) (334.0%) 63.0% 70.4% NM NM 85.4% NM NM NM 335.2% NM

Income Before Taxes NM (458.3%) (103.4%) 80.8% 74.2% 55.6% 50.7% 52.5% 73.2% 78.0% 62.3% 88.0% 95.3% NM NM NM

Net Income NM NM (131.6%) 75.0% 71.5% 53.4% 50.2% 39.4% 74.5% 85.8% 64.8% 92.2% 96.9% NM NM NM

PF EPS NM NM (196.5%) (97.3%) (14.0%) (133.9%) 42.9% 52.5% 74.1% 78.8% 61.4% 88.1% 95.3% NM NM NM

*Adj EBITDA and PF EPS exclude non- recurring items, including inventory cost adjustments. PF EPS are taxed at a normalized rate.

Source: Company reports and Stephens Inc. estimates

Analyst: Matt Duncan, CFA, (501) 377-3723

15

NOW Inc. (DNOW) – Model

16

Distributes industrial MRO products; provides safety services and fabricates pump packages 5 primary product categories: 1) pumps and pumping accessories, 2) bearings and power transmission, 3) safety, 4) cutting tools and 5) general industrial supplies Diverse end market exposures – 50% oil & gas and 50% industrial Operates ~180 service centers, ~60 supply chain service locations (integrated supply), 12 pump fabrication facilities and 8 distribution centers 3 segments

Service Centers (66% of LTM sales) Supply Chain Services/Integrated Supply (13% of LTM sales) Innovative Pumping Solutions (20% of LTM sales)

Investment Thesis: While predicting near-term movements in the stock is difficult, we believe there is significant earnings potential when DXPE’s end markets begin to recover and recommend investors with 12+ month investment horizon build positions in the stock. We are Overweight/Vol. for the following reasons:

Growth initiatives should drive above-average long-term growth DXP has a long history of strong growth, with sales doubling about once every 5 years on average since the 1980s Generates robust organic revenue growth when economy grows Service center to Super Center conversion process increases cross-selling opportunities, adding new product inventory and sales expertise to existing DXP locations and leveraging existing infrastructure

Operating leverage should drive strong EPS growth once energy market recovers DXPE’s business model contains significant operating leverage Peak operating margin in the last cycle was 8%

Industrial-focused M&A remains a focus LT Leverage limits M&A capabilities near-term, but we expect DXP to continue making small, accretive acquisitions, with a current focus on industrial markets over the intermediate to long-term

DXP Enterprises (DXPE) – Summary

17

DXP Enterprises (DXPE) – Model ( in 000s, except per share) Mar-15 Jun-15 Sep-15 Dec-15 FY Mar-16 Jun-16 Sep-16 Dec-16 FY Mar-17 Jun-17 Sep-17 Dec-17 FY FY

(Year end D ec. 31) 1Q15A 2Q15A 3Q15A 4Q15A 2015A 1Q16A 2Q16A 3Q16A 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E

Total Revenues $341,594 $323,688 $303,080 $278,681 $1,247,043 $253,561 $256,215 $230,025 $217,121 $956,922 $229,934 $241,186 $246,710 $246,666 $964,496 $1,075,739

Cost of Goods Sold 243,545 232,389 217,374 201,749 895,057 184,743 184,612 166,205 157,726 693,286 166,954 174,748 178,507 178,325 698,534 774,801

Gross Profits $98,049 $91,299 $85,706 $76,932 $351,986 $68,818 $71,603 $63,820 $59,395 $263,636 $62,980 $66,438 $68,202 $68,341 $265,962 $300,939

OPERATING EXPENSES

Selling, General and Admin. 79,950 77,304 75,082 71,483 303,819 70,070 62,104 58,887 55,693 246,754 57,103 58,461 59,581 60,064 235,209 253,068

Goodwill and other impairment 0 0 66,236 9,847 76,083 750 650 0 0 1,400 0 0 0 0 0 0


Operating Income $18,099 $13,995 ($55,612) ($4,398) ($27,916) ($2,002) $8,849 $4,933 $3,703 $15,483 $5,878 $7,977 $8,621 $8,276 $30,752 $47,871

Interest Expense (Income) 2,683 2,592 2,630 3,027 10,932 3,409 3,951 4,338 3,725 15,423 3,510 3,440 3,371 3,337 13,658 13,019

Other Expense (Income) (249) (145) 327 139 72 (155) 9 (251) 0 (397) 0 0 0 0 0 0

Income (Loss) Before Taxes 15,665 11,548 (58,569) (7,564) (38,920) (5,256) 4,889 846 (22) 457 2,368 4,537 5,250 4,939 17,094 34,852

Tax Expense or (Break) 6,014 4,381 (5,885) (4,360) 150 (8) (197) 664 (9) 450 900 1,724 1,995 1,877 6,496 13,244

Net Income $9,651 $7,167 ($52,684) ($3,204) ($39,070) ($5,248) $5,086 $182 ($14) $6 $1,468 $2,813 $3,255 $3,062 $10,599 $21,608

Preferred Stock Dividend 23 22 23 22 90 23 22 23 22 90 23 22 23 22 90 90

Non-Controlling Interest (249) (285) (534) (136) (84) (81) (301) 0 0

Net Inc. Avail. To Common $9,628 $7,145 ($52,458) ($2,941) ($38,626) ($5,135) $5,148 $240 ($36) $217 $1,445 $2,791 $3,232 $3,040 $10,509 $21,518

Reported EPS $0.63 $0.47 ($3.64) ($0.20) ($2.68) ($0.35) $0.34 $0.02 ($0.00) $0.01 $0.08 $0.16 $0.18 $0.17 $0.58 $1.18

Pro Forma EPS* $0.63 $0.47 $0.32 $0.10 $1.52 ($0.17) $0.25 $0.02 ($0.00) $0.09 $0.08 $0.16 $0.18 $0.17 $0.58 $1.18


EBITDA* $26,607 $22,467 $20,006 $13,638 $82,718 $6,449 $16,329 $12,776 $11,145 $46,699 $13,300 $15,379 $16,003 $15,637 $60,319 $77,114

MARGIN ANALYSIS

Gross Margin 28.7% 28.2% 28.3% 27.6% 28.2% 27.1% 27.9% 27.7% 27.4% 27.6% 27.4% 27.5% 27.6% 27.7% 27.6% 28.0%


Operating Income 5.3% 4.3% NM NM NM NM 3.5% 2.1% 1.7% 1.6% 2.6% 3.3% 3.5% 3.4% 3.2% 4.5%

EBITDA 7.8% 6.9% 6.6% 4.9% 6.6% 2.5% 6.4% 5.6% 5.1% 4.9% 5.8% 6.4% 6.5% 6.3% 6.3% 7.2%

Income Before Taxes 4.6% 3.6% NM NM NM NM 1.9% 0.4% NM 0.0% 1.0% 1.9% 2.1% 2.0% 1.8% 3.2%

Tax Rate 38.4% 37.9% 10.0% 57.6% NM 0.2% NM 78.5% 38.0% 98.7% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%

Net Income 2.8% 2.2% NM NM NM NM 2.0% 0.1% NM 0.0% 0.6% 1.2% 1.3% 1.2% 1.1% 2.0%

GROWTH ANALYSIS

Net Product Revenues (2.0%) (15.2%) (21.7%) (27.1%) (16.8%) (25.8%) (20.8%) (24.1%) (22.1%) (23.3%) (9.3%) (5.9%) 7.3% 13.6% 0.8% 11.5%

Gross Profit (3.6%) (17.8%) (24.4%) (27.9%) (18.7%) (29.8%) (21.6%) (25.5%) (22.8%) (25.1%) (8.5%) (7.2%) 6.9% 15.1% 0.9% 13.2%

Selling, General and Admin. (0.7%) (7.6%) (9.1%) (11.8%) (7.3%) (12.4%) (19.7%) (21.6%) (22.1%) (18.8%) (18.5%) (5.9%) 1.2% 7.8% (4.7%) 7.6%

Operating Income (14.4%) (48.9%) NM 95.2% (121.1%) NM (36.8%) NM NM NM NM (9.9%) 74.8% 123.5% 98.6% 55.7%

EBITDA (7.8%) (35.8%) (48.4%) (63.4%) (40.9%) (75.8%) (27.3%) (36.1%) (18.3%) (43.5%) 106.2% (5.8%) 25.3% 40.3% 29.2% 27.8%

Income Before Taxes (12.5%) (52.0%) NM 92.0% (52.3%) NM (57.7%) NM 99.7% NM NM (7.2%) NM NM NM 103.9%

Net Income (12.0%) (51.8%) NM 96.4% 13.6% NM (29.0%) NM 99.6% NM NM (44.7%) NM NM NM 103.9%

EPS (10.1%) (50.8%) NM 96.5% 8.4% NM (28.8%) NM 99.0% NM NM (53.7%) NM NM NM 103.6%


*Excludes non-recurring items.


18

Grainger is a leading broad-line distributor of industrial maintenance, repair and operating (MRO) products in North America

Broad product offering and diversified customer base ~2 million customers and 1 million unique SKUs

Extensive distribution network 717 branches in the U.S., Canada, Europe, Mexico, China, Colombia and Latin America 30 distribution centers Strong e-commerce business (~30% of sales) Global sourcing

Investment Thesis: We rate GWW Equal-Weight due to continued near-term end market uncertainty. Demand has been hurt by the strength of the U.S. dollar and weakness in energy. Margins have also been under pressure, and until inflation comes back margins are likely to remain challenged. Our positive long-term bias is based on the following:

Market leader with scale advantages Scale gives GWW leverage when purchasing products in the form of higher rebates Ongoing growth initiatives allow Grainger to leverage these advantages to capture market share

Operating leverage and global sourcing should drive margin expansion Stated goal is for operating margin of 16%-17% (2016 op. margin was 11.0%) Drivers of margin expansion include: 1) e-commerce growth and 2) increased global sourcing

Returning cash to shareholders Since 1984, GWW has reduced the number of shares outstanding by >40% and returned $4.9 bil. to shareholders Pays an annual dividend of $4.88 for a yield of 2.0% (has increased dividend for 40+ cons. years) Announced a large $3 bil. stock buyback plan in April 2015 ($1.4 bil. in 2015, $800 mil. in 2016 and 2017)

W.W. Grainger (GWW) – Summary

( in 000s, except per share) FY Mar-16 Jun-16 Sep-16 Dec-16 FY Mar-17 Jun-17 Sep-17 Dec-17 FY Mar-18 Jun-18 Sep-18 Dec-18 FY

(Year end D ecember 31) 2015A 1Q16A 2Q16A 3Q16A 4Q16A 2016A 1Q17E 2Q17E 3Q17E 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E

Total Revenues $9,973,384 $2,506,538 $2,563,668 $2,596,288 $2,470,710 $10,137,204 $2,570,153 $2,667,561 $2,702,662 $2,629,373 $10,569,748 $2,710,905 $2,824,485 $2,872,831 $2,795,681 $11,203,902

Cost of Goods Sold 5,741,955 1,461,485 1,523,609 1,556,536 1,481,017 6,022,647 1,529,419 1,601,359 1,628,417 1,585,327 6,344,522 1,621,309 1,704,035 1,737,556 1,691,190 6,754,090

Gross Profits $4,231,429 $1,045,053 $1,040,059 $1,039,752 $989,693 $4,114,557 $1,040,734 $1,066,202 $1,074,244 $1,044,046 $4,225,226 $1,089,596 $1,120,450 $1,135,275 $1,104,490 $4,449,812

OPERATING EXPENSES

Warehousing, Marketing & Admin. 2,889,845 715,431 726,820 707,928 714,916 2,865,095 734,874 745,604 746,392 748,994 2,975,864 764,275 776,473 777,587 779,594 3,097,929

Other Expense (Income) 41,265 12,530 7,650 9,237 100,548 129,965 0 0 0 0 0 0 0 0 0 0

Operating Expenses 2,931,110 727,961 734,470 717,165 815,464 2,995,060 734,874 745,604 746,392 748,994 2,975,864 764,275 776,473 777,587 779,594 3,097,929

Operating Income $1,300,319 $317,092 $305,589 $322,587 $174,229 $1,119,497 $305,861 $320,598 $327,852 $295,052 $1,249,363 $325,322 $343,977 $357,688 $324,897 $1,351,883


Other Expense (Income) 17,208 5,948 5,965 11,525 11,386 34,824 6,000 6,000 6,000 6,000 24,000 6,000 6,000 6,000 6,000 24,000

Income (Loss) Before Taxes 1,250,705 297,584 282,980 293,185 145,309 1,019,058 282,853 297,560 303,784 271,165 1,155,362 301,793 320,798 334,853 302,398 1,259,842

Tax Expense or (Break) 465,531 105,940 103,535 99,776 76,969 386,220 103,241 108,609 110,881 98,975 421,707 110,154 117,091 122,221 110,375 459,842

Net Income $785,174 $191,644 $179,445 $193,409 $68,340 $632,838 $179,612 $188,951 $192,903 $172,190 $733,655 $191,638 $203,707 $212,632 $192,023 $800,000

Net Inc. from Noncontrolling Interest 16,178 4,931 6,769 7,536 7,674 26,910 8,134 8,460 8,714 8,017 33,324 8,498 8,837 9,103 8,374 34,812

Net Inc. Attributeable to GWW $768,996 $186,713 $172,676 $185,873 $60,666 $605,928 $171,477 $180,491 $184,190 $164,173 $700,331 $183,141 $194,870 $203,529 $183,649 $765,188

Reported EPS $11.57 $2.98 $2.79 $3.05 $1.01 $9.87 $2.87 $3.05 $3.14 $2.82 $11.88 $3.15 $3.37 $3.53 $3.19 $13.24

Pro-Forma EPS* $11.94 $3.18 $2.89 $3.06 $2.45 $11.58 $2.87 $3.05 $3.14 $2.82 $11.88 $3.15 $3.37 $3.53 $3.19 $13.24


EBITDA* $1,553,373 $380,985 $373,519 $388,787 $338,565 $1,481,856 $360,318 $376,046 $384,389 $353,658 $1,474,411 $380,052 $398,936 $413,593 $382,763 $1,575,344

MARGIN ANALYSIS

Gross Margin 42.4% 41.7% 40.6% 40.0% 40.1% 40.6% 40.5% 40.0% 39.7% 39.7% 40.0% 40.2% 39.7% 39.5% 39.5% 39.7%

Warehousing, Marketing & Admin. 29.0% 28.5% 28.4% 27.3% 28.9% 28.3% 28.6% 28.0% 27.6% 28.5% 28.2% 28.2% 27.5% 27.1% 27.9% 27.7%

Operating Income 13.0% 12.7% 11.9% 12.4% 7.1% 11.0% 11.9% 12.0% 12.1% 11.2% 11.8% 12.0% 12.2% 12.5% 11.6% 12.1%

EBITDA 15.6% 15.2% 14.6% 15.0% 13.7% 14.6% 14.0% 14.1% 14.2% 13.5% 13.9% 14.0% 14.1% 14.4% 13.7% 14.1%

Income Before Taxes 12.5% 11.9% 11.0% 11.3% 5.9% 10.1% 11.0% 11.2% 11.2% 10.3% 10.9% 11.1% 11.4% 11.7% 10.8% 11.2%

Tax Rate 37.2% 35.6% 36.6% 34.0% 53.0% 37.9% 36.5% 36.5% 36.5% 36.5% 36.5% 36.5% 36.5% 36.5% 36.5% 36.5%

Net Income 7.9% 7.6% 7.0% 7.4% 2.8% 6.2% 7.0% 7.1% 7.1% 6.5% 6.9% 7.1% 7.2% 7.4% 6.9% 7.1%

GROWTH ANALYSIS

Net Product Revenues 0.1% 2.7% 1.6% 2.5% (0.3%) 1.6% 2.5% 4.1% 4.1% 6.4% 4.3% 5.5% 5.9% 6.3% 6.3% 6.0%

Gross Profit (1.9%) (4.5%) (3.1%) (2.1%) (1.3%) (2.8%) (0.4%) 2.5% 3.3% 5.5% 2.7% 4.7% 5.1% 5.7% 5.8% 5.3%

Warehousing, Marketing & Admin. (1.3%) (3.6%) 1.4% (0.3%) (0.8%) (0.9%) 2.7% 2.6% 5.4% 4.8% 3.9% 4.0% 4.1% 4.2% 4.1% 4.1%

Operating Income (3.5%) (9.7%) (14.3%) (5.3%) (30.8%) (13.9%) (3.5%) 4.9% 1.6% 69.3% 11.6% 6.4% 7.3% 9.1% 10.1% 8.2%

EBITDA 0.6% (4.9%) (8.1%) (3.9%) (0.9%) (4.6%) (5.4%) 0.7% (1.1%) 4.5% (0.5%) 5.5% 6.1% 7.6% 8.2% 6.8%

Income Before Taxes (6.3%) (14.4%) (18.8%) (8.2%) (38.1%) (18.5%) (5.0%) 5.2% 3.6% 86.6% 13.4% 6.7% 7.8% 10.2% 11.5% 9.0%

Net Income (3.3%) (10.5%) (20.3%) (1.6%) (54.2%) (19.4%) (6.3%) 5.3% (0.3%) 152.0% 15.9% 6.7% 7.8% 10.2% 11.5% 9.0%

Pro Forma EPS (2.6%) 2.6% (11.6%) 1.2% (1.4%) (3.0%) (9.9%) 5.5% 2.6% 15.0% 2.5% 10.0% 10.5% 12.4% 13.0% 11.5%

* Excludes non- reucrring items.



19

W.W. Grainger (GWW) – Model

20

MRC Global is the largest North American distributor of pipes, valves and fittings (PVF) to the energy end market

Broad product offering and stable customer base 175,000 SKUs

Diverse North American footprint with a growing international presence 152 branches in the U.S. & Canada; 54 branches internationally (Europe, Middle East, Asia Pacific) In 2008, the Company had no international exposure; now MRC has 14% of sales outside North America

Investment Thesis: We upgraded MRC to Overweight/Vol. following the Company’s solid performance in 1Q15, with very good expense controls and strong free cash flow. Short-term outlook for MRC’s energy end markets continues to be challenging, but once a recovery begins we expect sales and profits to expand rapidly. We like MRC for long-term value buyers for the following reasons:

Dominant player in the PVF vertical MRC has ~25% share of the available PVF distribution market (~$25 bil. market); this gives MRC purchasing advantages when dealing with its suppliers “One-stop shop” poised to benefit from customer desire to consolidate their supplier base

Taking market share MRC is likely to continue to ink large supply agreements with large energy companies as they seek to cut their supplier base and get cost savings by consolidating their spend The Company is also taking share from smaller competitors during the current downturn in energy markets, which enhances its sales and earnings potential when its markets recover

Operating leverage should be significant once end market recovers Through the energy downturn, especially 2016, MRC did well lowering operating expenses as revenues declined rapidly As a result of those actions, operating leverage should be significant when its energy end markets recover

MRC Global Inc. (MRC) – Summary

( in 000's, except per share) FY Mar-16 Jun-16 Sep-16 Dec-16 FY Mar-17 Jun-17 Sep-17 Dec-17 FY Mar-18 Jun-18 Sep-18 Dec-18 FY


Total Revenues $4,528,613 $783,000 $746,000 $793,000 $719,000 $3,041,000 $783,840 $854,700 $915,040 $870,620 $3,424,200 $910,347 $995,325 $1,058,844 $1,007,157 $3,971,673

Cost of Goods Sold 3,742,548 650,400 621,000 705,000 597,000 2,573,400 655,801 713,196 760,425 722,893 2,852,314 753,450 819,590 869,341 825,184 3,267,566

Gross Profits $786,065 $132,600 $125,000 $88,000 $122,000 $467,600 $128,039 $141,504 $154,615 $147,727 $571,886 $156,897 $175,735 $189,502 $181,973 $704,108

OPERATING EXPENSES


Other Operating Exp. (Inc.) 476,408 5,000 4,000 3,000 8,000 20,000 0 0 0 0 0 0 0 0 0 0

Operating Expenses 1,068,411 137,000 135,000 124,000 128,000 524,000 122,736 125,302 126,353 125,281 499,672 128,889 131,983 133,504 133,346 527,723

Operating Income ($282,346) ($4,400) ($10,000) ($36,000) ($6,000) ($56,400) $5,304 $16,203 $28,262 $22,446 $72,214 $28,008 $43,752 $55,998 $48,627 $176,385


Other Expense (Income) 12,483 1,000 0 (3,000) 2,000 0 0 0 0 0 0 0 0 0 0 0

Income (Loss) Before Taxes (342,369) (13,400) (19,000) (42,000) (17,000) (91,400) (2,946) 8,035 20,176 14,441 39,706 19,923 35,505 47,586 40,047 143,061

Tax Expense or (Break) (10,790) (5,000) (2,000) (2,000) 1,000 (8,000) (1,120) 3,053 7,667 5,488 15,088 7,571 13,492 18,083 15,218 54,363

Net Income ($331,579) ($8,400) ($17,000) ($40,000) ($18,000) ($83,400) ($1,827) $4,982 $12,509 $8,953 $24,618 $12,352 $22,013 $29,503 $24,829 $88,698

Preferred Stock Dividends 13,174 6,000 6,000 6,000 6,000 24,000 6,000 6,000 6,000 6,000 24,000 6,000 6,000 6,000 6,000 24,000

Net Income Available to Common ($344,753) ($14,400) ($23,000) ($46,000) ($24,000) ($107,400) ($7,827) ($1,018) $6,509 $2,953 $618 $6,352 $16,013 $23,503 $18,829 $64,698

Reported EPS* ($3.38) ($0.14) ($0.24) ($0.48) ($0.25) ($1.10) ($0.08) ($0.01) $0.07 $0.03 $0.01 $0.07 $0.17 $0.25 $0.20 $0.68

Pro Forma EPS $0.44 ($0.12) ($0.19) ($0.08) ($0.20) ($0.59) ($0.08) ($0.01) $0.07 $0.03 $0.01 $0.07 $0.17 $0.25 $0.20 $0.68


EBITDA (214,257) 11,800 6,000 (15,000) 10,000 12,800 22,074 33,018 45,122 39,352 139,566 44,936 60,701 72,969 65,620 244,226

Adjusted EBITDA* $224,202 $15,800 $11,000 $25,000 $14,000 $65,800 $22,074 $33,018 $45,122 $39,352 $139,566 $44,936 $60,701 $72,969 $65,620 $244,226

MARGIN ANALYSIS

Gross Margin 17.4% 16.9% 16.8% 11.1% 17.0% 15.4% 16.3% 16.6% 16.9% 17.0% 16.7% 17.2% 17.7% 17.9% 18.1% 17.7%

Adjusted Gross Margin 18.0% 18.7% 18.8% 18.4% 18.5% 18.6% 18.5% 18.5% 18.7% 18.9% 18.7% 19.1% 19.4% 19.5% 19.8% 19.4%


Operating Income NM NM NM NM NM NM 0.7% 1.9% 3.1% 2.6% 2.1% 3.1% 4.4% 5.3% 4.8% 4.4%

Adjusted EBITDA 5.0% 2.0% 1.5% 3.2% 1.9% 2.2% 2.8% 3.9% 4.9% 4.5% 4.1% 4.9% 6.1% 6.9% 6.5% 6.1%

Income Before Taxes NM NM NM NM NM NM NM 0.9% 2.2% 1.7% 1.2% 2.2% 3.6% 4.5% 4.0% 3.6%

Tax Rate 3.2% 37.3% 10.5% 4.8% 12.0% 8.8% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%

Net Income NM NM NM NM NM NM NM 0.6% 1.4% 1.0% 0.7% 1.4% 2.2% 2.8% 2.5% 2.2%

GROWTH ANALYSIS


Gross Profit (22.8%) (39.7%) (39.3%) (52.5%) (30.3%) (40.5%) (3.4%) 13.2% 75.7% 21.1% 22.3% 22.5% 24.2% 22.6% 23.2% 23.1%

Adjusted Gross Profit (27.4%) (39.0%) (33.7%) (23.2%) (22.4%) (30.4%) (1.4%) 13.1% 17.4% 23.8% 13.0% 20.0% 21.7% 20.4% 20.9% 20.8%

Selling, General and Admin. (15.7%) (16.3%) (13.8%) (14.4%) (14.9%) (14.9%) (7.0%) (4.3%) 4.4% 4.4% (0.9%) 5.0% 5.3% 5.7% 6.4% 5.6%

Operating Income NM NM NM NM 98.6% 80.0% NM NM NM NM NM 428.1% 170.0% 98.1% 116.6% 144.3%

EBITDA NM (84.8%) (90.5%) NM NM NM 87.1% 450.3% NM 293.5% NM 103.6% 83.8% 61.7% 66.8% 75.0%

Adjusted EBITDA (46.0%) (81.2%) (81.7%) (48.4%) (55.4%) (70.7%) 39.7% 200.2% 80.5% 181.1% 112.1% 103.6% 83.8% 61.7% 66.8% 75.0%

Income Before Taxes NM NM NM NM 96.2% 73.3% 78.0% NM NM NM NM NM 341.9% 135.9% 177.3% 260.3%

Net Income NM NM NM NM 95.4% 74.8% 78.3% NM NM NM NM NM 341.9% 135.9% 177.3% 260.3%

PF EPS (73.1%) NM NM NM (343.9%) NM 33.8% 94.4% NM NM NM NM NM 259.6% NM NM

*Adj EBITDA excludes the impact of LIFO accounting and other non- recurring items.



21

MRC Global Inc. (MRC) – Model

22

MSC Industrial Direct (MSM) – Summary

MSC is a leading distributor of metalworking and industrial MRO products in North America Differentiated distribution model relying on its sales force and direct marketing rather than a significant network of local branch locations ~70% of sales are tied to the industrial economy, and 50% of these sales are tied to durable manufacturing Key end markets include: metalworking, abrasives fasteners, electrical supplies, hand tools and safety 600,000 unique stock keeping units (SKUs)

Investment Thesis: We recently upgraded MSM to Overweight due to our belief for an improved growth outlook. MSM has as much or more operating leverage as any other industrial distributor on our coverage list (MSM expects that the first $100 mil. of revenue growth it experiences will result in $30 mil. additional operating profit), and the Company has substantial exposure to manufacturing (one of the most depressed markets served by distributors). We forecast FY17 sales growth of 0% and FY18 growth of 7% which could prove conservative. Differentiated business model, company specific initiatives driving share gains and superior returns

We think MSC’s model puts it in a very strong position to take market share over the next few years “Just-in-time” customer demand gives MSC pricing power and drives superior gross margins Smaller branch footprint lowers operating expense overhead Company specific growth drivers include: vending initiative, expansion into adjacent verticals, increasing product offering and expanding its current sales force

Operating leverage should be significant once sales start to recover MSC’s business model contains a substantial amount of operating leverage In FY13-FY15 MSC’s investments in growth drivers are temporarily weighing on operating margins As the Company leverages those investments once its sales start to grow in the mid to high single-digits again, we expect its operating margin to expand over the coming fiscal years

Strong balance sheet and cash flow characteristics The Company has a healthy balance sheet with $32.1 mil. in cash and $543.8 mil. in debt (now 1.2x levered on LTM EBITDA) We look for MSM to pursue accretive M&A to grow its product offering

( in 000s, except per share) Nov-15 Feb-16 May-16 Aug-16 FY Nov-16 Feb-17 May-17 Aug-17 FY Nov-17 Feb-18 May-18 Aug-18 FY

(Year end A ugust 31) 1Q16A 2Q16A 3Q16A 4Q16A 2016A 1Q17A 2Q17E 3Q17E 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E

Total Revenues $706,819 $684,117 $727,495 $745,074 $2,863,505 $686,271 $692,563 $741,964 $743,680 $2,864,478 $732,161 $740,305 $795,073 $796,785 $3,064,324

Cost of Goods Sold 387,847 375,326 400,467 411,007 1,574,647 377,536 383,680 409,935 409,768 1,580,919 401,317 407,538 436,098 435,841 1,680,794

Gross Profits $318,972 $308,791 $327,028 $334,067 $1,288,858 $308,735 $308,883 $332,029 $333,912 $1,283,559 $330,844 $332,767 $358,976 $360,944 $1,383,530

OPERATING EXPENSES

Operating Expenses 228,584 228,249 221,244 234,821 912,898 218,135 223,795 230,096 232,894 904,920 234,186 235,521 242,591 243,151 955,448

Other Expense (Income) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0


Operating Income $90,388 $80,542 $105,784 $99,246 $375,960 $90,600 $85,088 $101,933 $101,018 $378,639 $96,658 $97,246 $116,385 $117,793 $428,082

Interest Expense (Income) 1,393 1,131 1,040 1,589 5,153 2,771 2,743 2,688 2,635 10,837 2,529 2,428 2,331 2,238 9,526

Other Expense (Income) (63) (739) (110) (12) (924) 284 0 0 0 284 0 0 0 0 0

Income (Loss) Before Taxes 89,058 80,150 104,854 97,669 371,731 87,545 82,345 99,244 98,383 367,518 94,129 94,818 114,054 115,555 418,556

Tax Expense or (Break) 34,029 30,625 40,038 35,823 140,515 33,442 31,456 37,911 37,582 140,391 35,957 36,221 43,569 44,142 159,888

Net Income $55,029 $49,525 $64,816 $61,846 $231,216 $54,103 $50,889 $61,333 $60,801 $227,127 $58,172 $58,598 $70,485 $71,413 $258,668

Reported EPS $0.89 $0.80 $1.05 $1.02 $3.77 $0.95 $0.90 $1.08 $1.07 $4.00 $1.02 $1.03 $1.24 $1.25 $4.54

Pro Forma EPS* $0.89 $0.80 $1.05 $1.02 $3.77 $0.95 $0.90 $1.08 $1.07 $4.00 $1.02 $1.03 $1.24 $1.25 $4.54

Average Fully Diluted Shares 61,408 61,313 61,369 60,278 61,076 56,572 56,600 56,650 56,700 56,631 56,750 56,800 56,850 56,900 56,825

EBITDA* $108,376 $98,737 $123,856 $117,845 $448,814 $105,763 $101,380 $118,630 $118,130 $443,902 $114,028 $114,877 $134,281 $135,958 $499,144

MARGIN ANALYSIS

Gross Margin 45.1% 45.1% 45.0% 44.8% 45.0% 45.0% 44.6% 44.8% 44.9% 44.8% 45.2% 45.0% 45.2% 45.3% 45.1%

Selling, General and Admin. 32.3% 33.4% 30.4% 31.5% 31.9% 31.8% 32.3% 31.0% 31.3% 31.6% 32.0% 31.8% 30.5% 30.5% 31.2%

Operating Income 12.8% 11.8% 14.5% 13.3% 13.1% 13.2% 12.3% 13.7% 13.6% 13.2% 13.2% 13.1% 14.6% 14.8% 14.0%

EBITDA 15.3% 14.4% 17.0% 15.8% 15.7% 15.4% 14.6% 16.0% 15.9% 15.5% 15.6% 15.5% 16.9% 17.1% 16.3%

Income Before Taxes 12.6% 11.7% 14.4% 13.1% 13.0% 12.8% 11.9% 13.4% 13.2% 12.8% 12.9% 12.8% 14.3% 14.5% 13.7%

Tax Rate 38.2% 38.2% 38.2% 36.7% 37.8% 38.2% 38.2% 38.2% 38.2% 38.2% 38.2% 38.2% 38.2% 38.2% 38.2%

Net Income 7.8% 7.2% 8.9% 8.3% 8.1% 7.9% 7.3% 8.3% 8.2% 7.9% 7.9% 7.9% 8.9% 9.0% 8.4%

GROWTH ANALYSIS

Net Product Revenues (3.3%) (3.2%) (2.4%) 2.4% (1.6%) (2.9%) 1.2% 2.0% (0.2%) 0.0% 6.7% 6.9% 7.2% 7.1% 7.0%

Gross Profit (3.4%) (3.8%) (3.4%) 2.1% (2.1%) (3.2%) 0.0% 1.5% (0.0%) (0.4%) 7.2% 7.7% 8.1% 8.1% 7.8%

Selling, Distribution and Admin. (3.2%) (2.9%) (5.5%) 1.3% (2.6%) (4.6%) (2.0%) 4.0% (0.8%) (0.9%) 7.4% 5.2% 5.4% 4.4% 5.6%

Operating Income (3.8%) (6.2%) 1.5% 4.0% (0.9%) 0.2% 5.6% (3.6%) 1.8% 0.7% 6.7% 14.3% 14.2% 16.6% 13.1%

EBITDA (2.5%) (3.9%) 1.6% 4.6% 0.1% (2.4%) 2.7% (4.2%) 0.2% (1.1%) 7.8% 13.3% 13.2% 15.1% 12.4%

Income Before Taxes (4.5%) (4.3%) 2.2% 4.3% (0.4%) (1.7%) 2.7% (5.3%) 0.7% (1.1%) 7.5% 15.1% 14.9% 17.5% 13.9%

Net Income (4.2%) (3.9%) 2.3% 4.8% (0.0%) (1.7%) 2.8% (5.4%) (1.7%) (1.8%) 7.5% 15.1% 14.9% 17.5% 13.9%

EPS (6.5%) (4.4%) 1.9% 6.1% 0.9% 6.7% 11.3% 2.5% 4.5% 5.9% 7.2% 14.8% 14.6% 17.1% 13.5%

*Excludes non- recurring costs associated with the Company's headquarters co- location.



23

MSC Industrial Direct (MSM) – Model

24

POOL is the world’s largest distributor of swimming pool supplies, equipment and related leisure products, as well as a top 3 domestic distributor of irrigation and landscape products

N.A. pool market is ~$6 bil. POOL has 239 pool sales centers in N.A. ~60% of N.A. pool sales are non-discretionary in nature (chemicals, minor repair and service, etc.) Highly seasonal business: over the past 5 years the 2Q has accounted for an average of ~39% of annual sales and ~84% of annual EPS

Investment Thesis: We downgraded POOL to Equal-Weight in early 2016 after the stock experienced a strong run higher and valuation expanded above previous peak multiples. While we believe valuation limits near-term upside, we have a positive bias towards the stock over the long-term for the following reasons:

Dominant position in the domestic pool market POOL has ~40% market share in the domestic pool market Broadest product portfolio; significant purchasing advantages and better technology than its peers

Poised to benefit from pent-up replacement and refurbishment demand and a housing recovery POOL estimates there is ~$300 mil.-$320 mil. of pent-up replacement and refurbishment demand New pool construction is ~70% below normalized levels after the housing recession As pent-up demand shakes loose and pool construction recovers, the industry should see above-average growth for a period of 5-10 years

Strong cash flow generation and returning cash to shareholders Over the past 10 years, POOL’s annual free cash flow has averaged 112% of net income Over the same time frame, POOL returned over $700 mil. in cash to holders via dividends and share repurchases Average annual dividend + buyback yield of 3.3%

Significant operating leverage should drive consistent double-digit EPS growth We look for EPS growth to be 19% in 2017 and 11% in 2018 on mid single-digit revenue growth and incremental operating margin of ~15%-20% per year (POOL’s target)

Pool Corp. (POOL) – Summary



Total Revenues $2,363,139 $515,250 $918,889 $691,429 $445,235 $2,570,803 $529,258 $980,610 $737,534 $468,771 $2,716,173 $564,407 $1,038,032 $780,426 $499,923 $2,882,788

Cost of Sales $1,687,495 372,227 648,153 491,878 317,458 $1,829,716 381,288 690,708 524,677 333,771 $1,930,444 406,046 730,117 554,409 355,451 $2,046,023

Gross Profits $675,644 $143,023 $270,736 $199,551 $127,777 $741,087 $147,970 $289,902 $212,857 $135,000 $785,729 $158,361 $307,916 $226,016 $144,472 $836,765

OPERATING EXPENSES


Other Operating Exp. (Inc.) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0


Operating Income $216,222 $29,530 $142,420 $74,166 $9,743 $255,859 $30,333 $157,870 $82,799 $12,602 $283,604 $34,605 $171,267 $90,736 $15,439 $312,047


Other Expense (Income) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Income (Loss) Before Taxes 208,150 26,566 138,419 71,177 5,216 241,378 26,833 153,740 79,702 10,124 270,398 32,003 168,144 88,301 13,491 301,939

Tax Expense or (Break) 80,137 10,228 53,209 26,807 2,687 92,931 9,284 58,267 28,055 (1,822) 93,784 11,297 64,904 31,700 (2,334) 105,567

Equity earnings (loss) in unconsol. inv. 211 25 37 51 43 156 26 39 54 (5) 114 28 41 56 (5) 120

Net Income $128,224 $16,363 $85,247 $44,421 $2,572 $148,603 $17,575 $95,511 $51,700 $11,941 $176,728 $20,734 $103,281 $56,657 $15,820 $196,491

NI Attrib. to Noncontrolling Interest $178 ($8) ($188) ($113) ($43) ($352) $25 $195 ($130) $85 $175 $30 $200 ($135) $90 $185

Net Income Attributable to Pool Corp. $128,046 $16,371 $85,435 $44,534 $2,615 $148,955 $17,550 $95,316 $51,830 $11,856 $176,553 $20,704 $103,081 $56,792 $15,730 $196,306

Diluted EPS $2.90 $0.38 $1.98 $1.03 $0.06 $3.47 $0.41 $2.23 $1.21 $0.28 $4.12 $0.48 $2.40 $1.31 $0.37 $4.56

Pro Forma EPS $2.90 $0.38 $1.98 $1.03 $0.06 $3.47 $0.41 $2.23 $1.21 $0.28 $4.12 $0.48 $2.40 $1.31 $0.37 $4.56


Adjusted EBITDA** $233,610 $34,605 $147,823 $80,474 $15,412 $278,314 $35,960 $163,488 $88,408 $18,202 $306,058 $40,196 $176,849 $96,309 $21,004 $334,358

MARGIN ANALYSIS

Gross Margin 28.6% 27.8% 29.5% 28.9% 28.7% 28.8% 28.0% 29.6% 28.9% 28.8% 28.9% 28.1% 29.7% 29.0% 28.9% 29.0%



Incremental Oper. Margin 23.5% 21.5% 19.8% 19.0% 12.5% 19.1% 5.7% 25.0% 18.7% 12.1% 19.1% 12.2% 23.3% 18.5% 9.1% 17.1%

EBITDA 9.9% 6.7% 16.1% 11.6% 3.5% 10.8% 6.8% 16.7% 12.0% 3.9% 11.3% 7.1% 17.0% 12.3% 4.2% 11.6%


Tax Rate 38.5% 38.5% 38.4% 37.7% 51.5% 38.5% 34.6% 37.9% 35.2% -18.0% 34.7% 35.3% 38.6% 35.9% -17.3% 35.0%

Net Income 5.4% 3.2% 9.3% 6.4% 0.6% 5.8% 3.3% 9.7% 7.0% 2.5% 6.5% 3.7% 9.9% 7.3% 3.2% 6.8%

GROWTH ANALYSIS

Net Product Revenues 5.2% 14.4% 7.9% 7.1% 7.3% 8.8% 2.7% 6.7% 6.7% 5.3% 5.7% 6.6% 5.9% 5.8% 6.6% 6.1%

Gross Profit 5.0% 14.6% 9.1% 8.3% 8.0% 9.7% 3.5% 7.1% 6.7% 5.7% 6.0% 7.0% 6.2% 6.2% 7.0% 6.5%



EBITDA 14.2% 76.7% 10.8% 15.0% 44.4% 19.1% 3.9% 10.6% 9.9% 18.1% 10.0% 11.8% 8.2% 8.9% 15.4% 9.2%


Net Income 15.5% 94.0% 9.6% 12.7% (0.3%) 15.9% 7.4% 12.0% 16.4% 364.3% 18.9% 18.0% 8.1% 9.6% 32.5% 11.2%

PF EPS 18.6% 100.5% 12.9% 14.9% 3.3% 19.8% 8.7% 12.7% 17.0% 356.8% 18.8% 17.2% 7.6% 9.1% 32.2% 10.6%

**Adj. EBITDA excludes one- time charges; does not add back stock comp



25

POOL Corp. (POOL) – Model

26

WESCO is the largest distributor of electrical products in North America Distributes over 1 mil. products to 100,000+ industrial, commercial, utility and construction customers for MRO, OEM and new construction uses Offers other MRO products through its best-of-breed integrated supply business 400 branches and 8 distribution centers in the U.S., Canada and Mexico

Investment Thesis: We recently upgraded WCC to Overweight/Vol. as we believe the odds are increasing that growth may finally return to industrial markets following the recent election. WCC has a substantial amount of operating leverage in its business. The Company has done a good job reducing costs during the downturn, setting it up well for substantial operating leverage once its sales return to growth. We believe our top-line growth forecasts could prove conservative if the industrial economy experiences a normal early-cycle growth period during that time frame (historically 10% for WCC).

WCC performing well relative to end markets Growing sales to construction and utility customers

Significant operating leverage should result in strong earnings growth Operating margin peaked at 7% in the last cycle We think WCC can reach an operating margin of 5% by 2018 on low-to-mid single digit top-line growth which we believe could prove to be conservative given positive industry data points thus far in 2017

Proven track record of accretive M&A WCC has made a number of accretive acquisitions over the past 10 years; this trend should continue Target leverage range is 2.0x-3.5x (currently at the high-end of the range)

Valuation WCC trades at 2017 and 2018 EV/EBITDA multiples of 11.2x and 9.9x versus the industrial distribution group average multiples of 12.7x and 11.4x. Our $86 target represents a calendar 2018 EV/EBITDA multiple of 11.3x after giving the Company credit for expected FCF over the next 12 months.

WESCO International (WCC) – Summary



Total Revenues $7,518,472 $1,775,961 $1,911,582 $1,855,212 $1,793,275 $7,336,030 $1,762,919 $1,928,520 $1,947,111 $1,919,855 $7,558,404 $1,877,477 $2,053,814 $2,073,474 $2,044,229 $8,048,994

Cost of Goods Sold 6,024,836 1,420,793 1,532,113 1,490,173 1,444,725 5,887,804 1,415,624 1,548,602 1,561,583 1,539,723 6,065,532 1,505,737 1,647,159 1,660,853 1,637,427 6,451,175

Gross Profits $1,493,636 $355,168 $379,469 $365,039 $348,550 $1,448,226 $347,295 $379,918 $385,528 $380,131 $1,492,873 $371,741 $406,655 $412,621 $406,802 $1,597,819

OPERATING EXPENSES

Selling, General and Admin. 1,054,918 269,286 274,523 255,547 249,925 1,049,281 261,138 274,063 270,542 272,366 1,078,109 276,230 285,707 281,879 284,287 1,128,103

Depreciation and Amort. 64,972 16,374 16,959 16,937 16,600 66,870 16,434 16,843 16,926 16,842 67,045 16,506 16,916 16,916 16,831 67,169

Operating Expenses 1,119,890 285,660 291,482 272,484 266,525 1,116,151 277,573 290,906 287,468 289,207 1,145,154 292,736 302,623 298,795 301,118 1,195,272



Other Expense (Income) 0 0 0 123,933 0 123,933 0 0 0 0 0 0 0 0 0 0

Income (Loss) Before Taxes 303,947 50,679 68,535 (52,170) 64,500 131,544 52,197 71,488 80,535 73,399 277,619 61,830 87,029 96,994 89,019 334,872

Tax Expense or (Break) 95,546 16,145 18,683 (21,149) 16,770 30,449 15,659 21,446 24,160 22,020 83,286 18,549 26,109 29,098 26,706 100,462

Net Income $208,401 $34,534 $49,852 ($31,021) $47,730 $101,095 $36,538 $50,042 $56,374 $51,379 $194,333 $43,281 $60,921 $67,895 $62,314 $234,411

Net Loss (Inc.) from Noncontrolling Interest ($2,259) ($1,519) $54 $590 $400 ($475) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Income Attributable to WCC $210,660 $36,053 $49,798 ($31,611) $47,330 $101,570 $36,538 $50,042 $56,374 $51,379 $194,333 $43,281 $60,921 $67,895 $62,314 $234,411

Reported EPS $4.18 $0.77 $1.02 ($0.65) $0.96 $2.10 $0.74 $1.02 $1.14 $1.04 $3.94 $0.87 $1.23 $1.37 $1.25 $4.72

Pro Forma EPS* $4.18 $0.77 $1.02 $1.05 $0.96 $3.80 $0.74 $1.02 $1.14 $1.04 $3.94 $0.87 $1.23 $1.37 $1.25 $4.72


EBITDA* $438,714 $85,882 $104,945 $109,492 $98,625 $398,944 $86,157 $105,856 $114,986 $107,765 $414,764 $95,510 $120,948 $130,742 $122,515 $469,716

MARGIN ANALYSIS

Gross Margin 19.9% 20.0% 19.9% 19.7% 19.4% 19.7% 19.7% 19.7% 19.8% 19.8% 19.8% 19.8% 19.8% 19.9% 19.9% 19.9%



EBITDA 5.8% 4.8% 5.5% 5.9% 5.5% 5.4% 4.9% 5.5% 5.9% 5.6% 5.5% 5.1% 5.9% 6.3% 6.0% 5.8%

Income Before Taxes 4.0% 2.9% 3.6% NM 3.6% 1.8% 3.0% 3.7% 4.1% 3.8% 3.7% 3.3% 4.2% 4.7% 4.4% 4.2%

Tax Rate 31.4% 31.9% 27.3% 40.5% 26.0% 23.1% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%

Net Income 2.8% 1.9% 2.6% NM 2.7% 1.4% 2.1% 2.6% 2.9% 2.7% 2.6% 2.3% 3.0% 3.3% 3.0% 2.9%

GROWTH ANALYSIS

Net Product Revenues (4.7%) (2.2%) (0.3%) (3.6%) (3.7%) (2.4%) (0.7%) 0.9% 5.0% 7.1% 3.0% 6.5% 6.5% 6.5% 6.5% 6.5%

Gross Profit (7.3%) (3.4%) (0.6%) (4.1%) (4.1%) (3.0%) (2.2%) 0.1% 5.6% 9.1% 3.1% 7.0% 7.0% 7.0% 7.0% 7.0%

Selling, General and Admin. (2.0%) 1.8% (0.3%) (1.0%) (2.7%) (0.5%) (3.0%) (0.2%) 5.9% 9.0% 2.7% 5.8% 4.2% 4.2% 4.4% 4.6%

Operating Income (19.8%) (20.3%) (2.5%) (13.0%) (8.8%) (11.1%) 0.3% 1.2% 5.9% 10.8% 4.7% 13.3% 16.9% 16.1% 16.2% 15.8%

EBITDA (17.9%) (16.7%) (1.4%) (10.7%) (7.5%) (9.1%) 0.3% 0.9% 5.0% 9.3% 4.0% 10.9% 14.3% 13.7% 13.7% 13.2%

Income Before Taxes (20.9%) (23.6%) (4.3%) NM (19.5%) (56.7%) 3.0% 4.3% NM 13.8% 111.0% 18.5% 21.7% 20.4% 21.3% 20.6%

Net Income (24.3%) (26.2%) (1.6%) NM (1.8%) (51.5%) 5.8% 0.4% NM 7.6% 92.2% 18.5% 21.7% 20.4% 21.3% 20.6%

PFEPS (19.3%) (14.5%) 2.7% (17.9%) (6.2%) (9.0%) (3.7%) (0.9%) 9.0% 8.1% 3.6% 17.9% 21.0% 19.6% 20.3% 19.8%

*Excludes non- recurring items.



27

WESCO Inc. (WCC) – Model

28

Watsco Inc. (WSO) – Summary

Watsco is the largest distributor of heating, ventilation, A/C and refrigeration (HVAC) products Distributes a wide array of HVAC equipment, parts and supplies Heavily concentrated in the Sun Belt region ~12% market share in a $30 billion market

Investment Thesis: We downgraded shares of WSO to Equal-Weight in late 2016 on robust valuation levels, but we continue to believe in the Company’s long term earnings power driven by: 1) our expectation that WSO continues to take market share, due in part to ongoing technology investments that make its contractor customers more efficient; 2) continued strong cash flow (which could be further enhanced by ongoing technology investments) and increases in WSO’s dividend; and 4) we expect WSO’s longer term consistent earnings growth outperformance vs. its distribution peers to continue. Key investment highlights include:

Carrier Enterprises JVs provide significant long-term opportunities JVs with Carrier since 2009 have meaningfully expanded WSO market share within the Company’s core Sun Belt residential HVAC market, expanded its presence in the Northeast U.S., expanded into Mexico and announced a JV with Carrier (a division of UTX) in Canada in 1Q12 In 4Q16, WSO announced two additional separate transactions which increased its Carrier Enterprise NE JV ownership by 10% each, raising ownership to 80% from 60% Provides opportunities for cross-selling and margin expansion through increased sales of parts and supplies at Carrier Enterprises locations

Core HVAC replacement market seeing steady demand increases Pent-up AC replacement demand seems to be shaking loose, likely with an assist from rises in existing home sales Increased focus on energy efficiency resulting in a mix-up effect as homeowners select more efficient (and more expensive) units

Valuation appears fair WSO trades at 2017 and 2018 EV/EBITDA multiples of 14.6x and 13.3x, respectively vs. its peers which trade at 12.7x and 11.4x



Total Revenues $4,113,239 $851,424 $1,214,435 $1,241,232 $913,611 $4,220,702 $886,629 $1,279,329 $1,279,957 $948,316 $4,394,231 $927,898 $1,339,728 $1,340,132 $992,027 $4,599,785

Cost of Sales 3,105,882 638,977 922,574 939,028 685,539 3,186,118 664,511 969,314 967,044 711,580 3,312,450 694,513 1,013,736 1,011,169 743,387 3,462,806

Gross Profits $1,007,357 $212,447 $291,861 $302,204 $228,072 $1,034,584 $222,118 $310,016 $312,912 $236,736 $1,081,781 $233,385 $325,991 $328,964 $248,640 $1,136,979

OPERATING EXPENSES




Interest Expense (Income) 5,547 986 1,054 996 677 3,713 650 845 676 608 2,779 578 751 601 541 2,471



Net Income $226,524 $34,174 $81,424 $80,518 $39,867 $235,983 $38,178 $89,991 $86,852 $42,398 $257,420 $42,476 $97,864 $94,545 $47,043 $281,928

Net Inc. Attributable to Minority Int. (53,595) (8,637) (16,803) (17,419) (10,314) (53,173) (8,404) (16,250) (16,053) (9,707) (50,415) (8,783) (17,436) (17,230) (10,470) (53,918)

Net Income Attributable to WSO $172,929 $25,537 $64,621 $63,099 $29,553 $182,810 $29,775 $73,740 $70,799 $32,691 $207,005 $33,693 $80,429 $77,315 $36,572 $228,010

Reported EPS $4.90 $0.71 $1.82 $1.78 $0.81 $5.15 $0.83 $2.09 $2.00 $0.90 $5.82 $0.95 $2.28 $2.19 $1.03 $6.44

Pro Forma EPS1

$4.90 $0.71 $1.82 $1.78 $0.81 $5.15 $0.83 $2.09 $2.00 $0.90 $5.82 $0.95 $2.28 $2.19 $1.03 $6.44


EBITDA $355,865 $55,625 $122,676 $124,335 $63,359 $365,995 $61,750 $138,723 $134,107 $67,265 $401,845 $68,348 $150,640 $145,783 $74,350 $439,121

Adjusted EBITDA1

$288,289 $44,331 $101,603 $102,702 $50,033 $298,670 $51,172 $119,328 $115,088 $55,273 $340,861 $57,499 $129,869 $125,407 $61,460 $374,235

MARGIN ANALYSIS

Gross Margin 24.5% 25.0% 24.0% 24.3% 25.0% 24.5% 25.1% 24.2% 24.4% 25.0% 24.6% 25.2% 24.3% 24.5% 25.1% 24.7%



EBITDA 8.7% 6.5% 10.1% 10.0% 6.9% 8.7% 7.0% 10.8% 10.5% 7.1% 9.1% 7.4% 11.2% 10.9% 7.5% 9.5%


Tax Rate 31.6% 31.2% 30.1% 31.9% 30.5% 31.0% 30.9% 31.8% 31.9% 30.1% 31.4% 31.0% 31.9% 31.9% 30.3% 31.5%

Net Income 5.5% 4.0% 6.7% 6.5% 4.4% 5.6% 4.3% 7.0% 6.8% 4.5% 5.9% 4.6% 7.3% 7.1% 4.7% 6.1%

GROWTH ANALYSIS

Net Product Revenues 4.3% 5.2% (0.7%) 5.5% 1.1% 2.6% 4.1% 5.3% 3.1% 3.8% 4.1% 4.7% 4.7% 4.7% 4.6% 4.7%

Gross Profit 5.3% 4.0% (1.1%) 5.7% 2.7% 2.7% 4.6% 6.2% 3.5% 3.8% 4.6% 5.1% 5.2% 5.1% 5.0% 5.1%


Operating Income 10.1% 7.8% (5.8%) 7.8% 7.1% 2.6% 10.3% 13.0% 7.4% 5.4% 9.4% 11.3% 8.8% 8.9% 11.1% 9.6%

EBITDA 9.9% 7.7% (5.4%) 7.7% 7.2% 2.8% 11.0% 13.1% 7.9% 6.2% 9.8% 10.7% 8.6% 8.7% 10.5% 9.3%

Income Before Taxes 10.2% 8.9% (5.4%) 8.4% 7.9% 3.2% 11.1% 13.3% 7.7% 5.6% 9.8% 11.6% 8.9% 9.0% 11.3% 9.7%

Net Income 8.5% 9.2% (3.3%) 7.9% 9.7% 4.2% 11.7% 10.5% 7.9% 6.3% 9.1% 11.3% 8.7% 8.9% 11.0% 9.5%

EPS 13.3% 8.8% (1.8%) 8.2% 8.2% 5.1% 17.4% 14.8% 12.5% 10.6% 13.0% 13.3% 9.0% 9.3% 14.8% 10.6%


1Adjusted EBITDA excludes Carrier's interest in Carrier Enterprises' EBITDA.


29

Watsco Inc. (WSO) – Model

Price Price


Covered Companies

Team, Inc. TISI Overweight (Vol) $27.00 $36.00

Mistras Group, Inc. MG Equal-Weight (Vol) $21.96 $27.00

Matrix Service Company MTRX Overweight (Vol) $15.70 $24.00

Dycom Industries, Inc. DY Overweight (Vol) $94.46 $120.00

Quanta Services, Inc. PWR Overweight (Vol) $36.72 $44.00

MasTec, Inc. MTZ Overweight (Vol) $38.70 $48.00

Orion Group Holdings, Inc. ORN Overweight (Vol) $9.21 $12.00

Primoris Services Corporation PRIM Equal-Weight (Vol) $23.77 $28.00


31

Engineering & Construction/Industrial Services

32

The largest provider of repair and maintenance services on high pressure, high temperature piping systems and vessels, principally to the oil and gas and power generation industries in N.A.

Offers 9 services lines through 3 segments Team QualSpec (49% of FY16 sales): NDT, inspection & assessment, and field heat treating Team Furmanite (45% of FY16 sales): leak repair, hot tapping, field machining, technical bolting, field valve repair, pipe isolation, and heat exchanger repair Quest Integrity (6% of FY16 sales): advanced inspection and engineering assessment services

Investment Thesis: We rate TISI OW/Vol. While TISI’s business has been hampered by the fall in oil (which hurts its major integrated energy customers’ capex spending levels), we like the stock from current levels. The acquisition of Furmanite created the dominant #1 player in the downstream energy industrial services space. The deal gives TISI an avenue for cross-selling services and profit improvements which should create significant operating leverage once TISI’s markets recover.

End-market conditions remain challenging Project deferrals and an uncertain energy market weighed on the Company’s organic growth prospects and caused a resource imbalance which pressured margins during the downturn Deferrals, however, create pent-up demand that should result in a period of above-average growth once TISI’s end markets start to recover.

Competitive dynamics working in TISI’s favor over the long term Team is now the only national service provider with multiple service lines (Furmanite was the other), which allows it to offer its customers price breaks in the form of volume discounts Customers are opting to both 1) reduce the number of service providers and 2) shift to the larger providers with better safety records and more service lines

Stock undervalued on expected 2017 and 2018 EBITDA TISI is currently trading at 2017 and 2018 EV/EBITDA multiples of 9.5x and 7.5x. Our $36 price target represents a 2018 EV/EBITDA multiple of 9x after giving TISI credit for FCF over the next 12 months.

Team Inc. (TISI) – Summary



Total Revenues $926,356 $250,854 $336,440 $289,577 $319,825 $1,196,696 $288,675 $340,206 $306,584 $341,719 $1,277,183 $311,283 $366,875 $330,571 $368,461 $1,377,190

Cost of Revenues 655,465 184,872 237,747 212,871 232,654 868,144 211,310 238,144 220,127 238,520 908,101 225,369 253,877 234,706 254,975 968,927

Gross Profits $270,891 $65,982 $98,693 $76,706 $87,171 $328,552 $77,365 $102,062 $86,457 $103,199 $369,082 $85,914 $112,997 $95,866 $113,486 $408,263

OPERATING EXPENSES


Other 14,205 9,664 6,056 6,013 12,836 34,569 4,500 4,500 4,500 4,500 18,000 1,500 1,500 1,500 1,500 6,000


Operating Income $47,291 ($7,380) $14,008 ($4,043) ($5,703) ($3,118) ($1,303) $20,434 $6,817 $20,358 $46,306 $8,796 $31,992 $16,653 $31,199 $88,640


Other 2,309 28 (166) (61) 72 (127) 72 72 72 72 288 72 72 72 72 288

Income (Loss) Before Taxes 39,190 (10,343) 10,766 (7,193) (8,888) (15,658) (4,301) 17,524 3,992 17,615 34,830 6,187 29,434 14,144 28,739 78,504

Tax Expense or (Break) 13,744 (3,783) 3,796 (2,656) (450) (3,093) (1,591) 6,484 1,477 6,518 12,887 2,289 10,891 5,233 10,633 29,046

Net Income $25,446 ($6,560) $6,970 ($4,537) ($8,438) ($12,565) ($2,710) $11,040 $2,515 $11,098 $21,943 $3,898 $18,543 $8,911 $18,106 $49,457

Inc. from non-controlling int $213 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Inc Avail. To Common $25,233 ($6,560) $6,970 ($4,537) ($8,438) ($12,565) ($2,710) $11,040 $2,515 $11,098 $21,943 $3,898 $18,543 $8,911 $18,106 $49,457

Reported EPS From Continuing Ops $1.18 ($0.27) $0.24 ($0.15) ($0.29) ($0.45) ($0.09) $0.37 $0.08 $0.37 $0.74 $0.13 $0.62 $0.30 $0.60 $1.66

Pro Forma EPS From Continuing Ops* $1.67 ($0.01) $0.36 ($0.03) $0.08 $0.41 $0.00 $0.47 $0.18 $0.47 $1.12 $0.16 $0.65 $0.33 $0.64 $1.78

Inc. (Loss) From Discont. Ops $126 $386 $316 ($939) ($111)

Net Income ($6,434) $7,356 ($4,221) ($9,377) ($12,676)

Reported EPS ($0.27) $0.25 ($0.14) ($0.32) ($0.45)


EBITDA* $90,634 $12,353 $32,888 $14,509 $20,374 $80,124 $16,036 $38,420 $24,393 $38,593 $117,441 $23,613 $47,481 $31,716 $46,945 $149,755

MARGIN ANALYSIS

Gross Margin 29.2% 26.3% 29.3% 26.5% 27.3% 27.5% 26.8% 30.0% 28.2% 30.2% 28.9% 27.6% 30.8% 29.0% 30.8% 29.6%


Operating Income 5.1% NM 4.2% NM NM NM NM 6.0% 2.2% 6.0% 3.6% 2.8% 8.7% 5.0% 8.5% 6.4%

EBITDA 9.8% 4.9% 9.8% 5.0% 6.4% 6.7% 5.6% 11.3% 8.0% 11.3% 9.2% 7.6% 12.9% 9.6% 12.7% 10.9%

Income Before Taxes 4.2% NM 3.2% NM NM NM NM 5.2% 1.3% 5.2% 2.7% 2.0% 8.0% 4.3% 7.8% 5.7%

Tax Rate 35.1% 36.6% 35.3% 36.9% 5.1% 19.8% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0%

Net Income 2.7% NM 2.1% NM NM NM NM 3.2% 0.8% 3.2% 1.7% 1.3% 5.1% 2.7% 4.9% 3.6%

GROWTH ANALYSIS

Net Product Revenues 13.9% 30.4% 42.9% 18.9% 25.4% 29.2% 15.1% 1.1% 5.9% 6.8% 6.7% 7.8% 7.8% 7.8% 7.8% 7.8%

Gross Profit 10.0% 22.1% 30.8% 10.2% 21.5% 21.3% 17.3% 3.4% 12.7% 18.4% 12.3% 11.1% 10.7% 10.9% 10.0% 10.6%

Selling, General and Admin. 14.3% 42.0% 60.6% 26.9% 41.3% 41.9% 16.4% (1.9%) 0.5% (2.1%) 2.6% 2.0% 3.1% 3.4% 3.1% 2.9%

Operating Income (25.1%) NM (36.4%) NM NM NM 82.3% 45.9% NM NM NM NM 56.6% 144.3% 53.3% 91.4%

EBITDA 6.1% (16.9%) 1.0% (25.5%) (14.1%) (11.6%) 29.8% 16.8% 68.1% 89.4% 46.6% 47.3% 23.6% 30.0% 21.6% 27.5%

Income Before Taxes (29.8%) NM (50.0%) NM NM NM 58.4% 62.8% NM NM NM NM 68.0% 254.3% 63.1% 125.4%

Net Income (29.8%) NM (50.5%) NM NM NM 58.7% 58.4% NM NM NM NM 68.0% 254.3% 63.1% 125.4%

EPS (27.9%) NM (63.8%) NM NM NM 66.5% 57.7% NM NM NM NM 66.8% 252.0% 62.1% 123.9%

*Excludes non-recurring charges associated with an ERP installation and acquisition integration costs.

Source: Company documents and Stephens Inc. estimates


33

Team Inc. (TISI) – Model

34

Mistras provides traditional and advanced nondestructive testing (NDT) and inspection services Key customer groups: oil and gas ~54% of sales and power generation ~9% of sales We estimate that the total potential market for asset protection in North America is ~$9 bil.-~$10 bil. and $25 bil.-$30 bil. globally, with ~50% of the market still performed in house by customers We believe MG’s currently addressable market to be ~$2.5 bil. in North America and $3.0 bil.-$3.5 bil. globally Operates 3 segments:

Services (76% of FY16 sales): traditional and advanced NDT and mechanical integrity inspection Products and Systems (4% of FY15 sales): designs and manufactures proprietary inspection software and instruments International (20% of FY15 sales)

Investment Thesis: We rate MG Equal-Weight/Vol. MG’s end markets are challenging right now, and while the Company has done a very good job of improving margins during the downturn through a heightened focus on profits, valuation looks full to us. Long-term top-line and profitability growth drivers include:

Leader in the large asset protection services industry MG has the broadest portfolio of asset protection services in the industry Taking market share through new customer wins and acquisitions

Acquisitions adding to growth profile via new technologies and geographies Using accretive acquisitions to expand service offering and add new geographies; recent example: GMA Holdings should expand presence in both Germany and the aerospace end market

New end markets expanding addressable market size Asset protection services largely have been used by the oil and gas industry and power generation Other industries are likely to become bigger users of these services, expanding the addressable market size for MG: i.e., wind power, public infrastructure (bridges), nuclear power, aerospace and defense

Increased focus on profitability should help drive margins higher CFO has MG more focused on profitable growth as opposed to just growth

Mistras Group (MG) – Summary

35

Mistras Group (MG) – Model ( in 000s, except per share) Aug-14 Nov-14 Feb-15 May-15 FY Aug-15 Nov-15 Feb-16 May-16 FY Aug-16 Nov-16 Feb-17 May-17 FY Aug-17 Nov-17 Feb-18 May-18 FY

(Year end M ay. 31) 1Q15A 2Q15A 3Q15A 4Q15A 2015A 1Q16A 2Q16A 3Q16A 4Q16A 2016A 1Q17A 2Q17A 3Q17E 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E

Total Revenues $166,573 $206,893 $163,100 $174,686 $711,252 $179,853 $194,786 $160,355 $184,187 $719,181 $168,443 $176,642 $160,250 $185,958 $691,293 $179,710 $194,309 $174,125 $202,690 $750,834

Cost of Revenues 119,722 142,940 119,356 124,263 506,281 123,400 132,720 112,357 126,434 494,911 112,981 119,214 111,178 127,567 470,940 121,925 130,785 120,383 137,517 510,609

Depreciation 4,857 4,914 5,010 5,457 20,238 5,179 5,141 5,189 5,753 21,262 5,406 5,352 5,039 5,200 20,997 5,106 5,219 5,229 5,502 21,056

Gross Profit $41,994 $59,039 $38,734 $44,966 $184,733 $51,274 $56,925 $42,809 $52,000 $203,008 $50,056 $52,076 $44,034 $53,191 $199,357 $52,679 $58,305 $48,513 $59,672 $219,169

OPERATING EXPENSES

Selling, General and Admin. 35,220 37,180 32,758 35,275 140,433 35,836 33,820 33,693 36,824 140,173 35,013 35,357 34,793 36,248 141,411 36,456 37,339 36,760 38,496 149,052

Research and Eng. Exp. 649 629 644 599 2,521 621 601 677 624 2,523 632 580 586 592 2,389 598 604 610 616 2,426

Depreciation and Amort. 3,422 3,472 3,104 3,050 13,048 2,781 2,822 2,742 2,867 11,212 2,597 2,542 2,713 2,800 10,652 2,750 2,810 2,816 2,962 11,338

Other (961) (434) (1,642) 1,415 (1,622) (896) 113 (61) 6,767 5,923 659 357 0 0 1,016 0 0 0 0 0

Operating Expenses 38,330 40,847 34,864 40,339 154,380 38,342 37,356 37,051 47,082 159,831 38,901 38,836 38,092 39,640 155,469 39,804 40,752 40,186 42,075 162,816

Operating Income $3,664 $18,192 $3,870 $4,627 $30,353 $12,932 $19,569 $5,758 $4,918 $43,177 $11,155 $13,240 $5,942 $13,551 $43,888 $12,876 $17,553 $8,327 $17,597 $56,353

Interest Expense (Income) 905 1,352 1,161 1,204 4,622 1,922 1,335 1,123 382 4,762 820 928 925 897 3,570 870 844 819 794 3,328

Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Income (Loss) Before Taxes 2,759 16,840 2,709 3,423 25,731 11,010 18,234 4,635 4,536 38,415 10,335 12,312 5,017 12,654 40,318 12,005 16,709 7,508 16,803 53,025

Tax Expense or (Break) 1,088 6,428 941 1,283 9,740 4,163 6,804 1,034 1,764 13,765 3,726 4,555 1,856 4,682 14,819 4,442 6,182 2,778 6,216 19,617

Minority Interest (5) 15 49 31 90 25 (5) (8) (8) 4 (13) (26) (26) (26) (91) (26) (26) (26) (26) (104)

Net Income $1,666 $10,427 $1,817 $2,171 $16,081 $6,872 $11,425 $3,593 $2,764 $24,654 $6,596 $7,731 $3,135 $7,947 $25,409 $7,538 $10,501 $4,704 $10,560 $33,304

Reported EPS $0.06 $0.35 $0.06 $0.07 $0.54 $0.23 $0.39 $0.12 $0.09 $0.82 $0.22 $0.26 $0.10 $0.27 $0.85 $0.25 $0.35 $0.16 $0.35 $1.11

Pro Forma EPS $0.04 $0.33 $0.01 $0.20 $0.58 $0.23 $0.39 $0.12 $0.22 $0.96 $0.22 $0.26 $0.10 $0.27 $0.86 $0.25 $0.35 $0.16 $0.35 $1.11

Average Fully Diluted Shares 29,552 29,397 29,529 29,594 29,590 29,595 29,594 29,899 30,126 29,891 30,210 29,998 30,000 29,800 30,002 29,850 29,900 29,950 30,000 29,925

EBITDA $11,938 $26,593 $12,033 $13,165 $63,729 $20,917 $27,527 $13,681 $13,530 $75,655 $19,145 $21,108 $13,668 $21,525 $75,446 $20,706 $25,556 $16,346 $26,035 $88,643

Adj. EBITDA $10,977 $26,159 $10,391 $15,984 $63,511 $20,021 $27,640 $13,674 $20,297 $81,632 $19,804 $21,465 $13,668 $21,525 $76,462 $20,706 $25,556 $16,346 $26,035 $88,643

MARGIN ANALYSIS

Cost of Revenues 71.9% 69.1% 73.2% 71.1% 71.2% 68.6% 68.1% 70.1% 68.6% 68.8% 67.1% 67.5% 69.4% 68.6% 68.1% 67.8% 67.3% 69.1% 67.8% 68.0%

Gross Margin 25.2% 28.5% 23.7% 25.7% 26.0% 28.5% 29.2% 26.7% 28.2% 28.2% 29.7% 29.5% 27.5% 28.6% 28.8% 29.3% 30.0% 27.9% 29.4% 29.2%

Selling, General and Admin. 21.1% 18.0% 20.1% 20.2% 19.7% 19.9% 17.4% 21.0% 20.0% 19.5% 20.8% 20.0% 21.7% 19.5% 20.5% 20.3% 19.2% 21.1% 19.0% 19.9%

Operating Income 2.2% 8.8% 2.4% 2.6% 4.3% 7.2% 10.0% 3.6% 2.7% 6.0% 6.6% 7.5% 3.7% 7.3% 6.3% 7.2% 9.0% 4.8% 8.7% 7.5%

Adj. EBITDA 6.6% 12.6% 6.4% 9.2% 8.9% 11.1% 14.2% 8.5% 11.0% 11.4% 11.8% 12.2% 8.5% 11.6% 11.1% 11.5% 13.2% 9.4% 12.8% 11.8%

Tax Rate 39.4% 38.2% 34.7% 37.5% 37.9% 37.8% 37.3% 22.3% 38.9% 35.8% 36.1% 37.0% 37.0% 37.0% 36.8% 37.0% 37.0% 37.0% 37.0% 37.0%

Net Income 1.0% 5.0% 1.1% 1.2% 2.3% 3.8% 5.9% 2.2% 1.5% 3.4% 3.9% 4.4% 2.0% 4.3% 3.7% 4.2% 5.4% 2.7% 5.2% 4.4%

GROWTH ANALYSIS

Net Product Revenues 22.6% 32.0% 7.5% (2.5%) 14.1% 8.0% (5.9%) (1.7%) 5.4% 1.1% (6.3%) (9.3%) (0.1%) 1.0% (3.9%) 6.7% 10.0% 8.7% 9.0% 8.6%

Gross Profit 6.9% 23.1% (1.4%) (3.1%) 6.8% 22.1% (3.6%) 10.5% 15.6% 9.9% (2.4%) (8.5%) 2.9% 2.3% (1.8%) 5.2% 12.0% 10.2% 12.2% 9.9%

Selling, General and Admin. 22.7% 24.6% 3.0% 5.8% 13.5% 1.7% (9.0%) 2.9% 4.4% (0.2%) (2.3%) 4.5% 3.3% (1.6%) 0.9% 4.1% 5.6% 5.7% 6.2% 5.4%

Operating Income (61.7%) 19.3% 29.0% (55.8%) (20.7%) 252.9% 7.6% 48.8% 6.3% 42.2% (13.7%) (32.3%) 3.2% 175.5% 1.6% 15.4% 32.6% 40.1% 29.9% 28.4%

Adj. EBITDA (23.0%) 21.1% (7.7%) (5.5%) (0.8%) 82.4% 5.7% 31.6% 27.0% 28.5% (1.1%) (22.3%) (0.0%) 6.1% (6.3%) 4.6% 19.1% 19.6% 21.0% 15.9%

Net Income (70.5%) 12.6% 51.3% (66.2%) (28.6%) 312.5% 9.6% 97.7% 27.3% 53.3% (4.0%) (32.3%) (12.7%) 187.5% 3.1% 14.3% 35.8% 50.1% 32.9% 31.1%

PF EPS (75.0%) 6.5% (83.4%) 11.1% (17.3%) NM 17.0% NM 10.9% 66.5% (3.6%) (32.4%) (13.0%) 20.2% (10.8%) 12.8% 34.5% 50.3% 32.0% 30.0%

Source: Company documents and Stephens Inc. estimates


36

Matrix is an E&C and industrial services firm providing industrial construction services and repair and maintenance services primarily to oil & gas / industrial customers

MTRX operates 4 segments: Electrical Infrastructure (27% of FY16 revenue) consists of 1) high voltage services to investor owned utilities and 2) construction & maintenance services to clients with power plants Oil, Gas & Chemical (19% of FY16 revenue) includes both turnaround and construction work in the downstream petroleum industry, as well as industrial cleaning services Storage Solutions (43% of FY16 revenue) is comprised of construction and maintenance of AST (above-ground storage tanks). Also includes specialty storage tank work (i.e., LNG, LPG tanks) Industrial (11% of FY16 revenue) serves a variety of end markets including fertilizer plants, mining & metals, material handling, and other industrial/manufacturing markets

Investment Thesis: MTRX has struggled to grow organically over FY16 and into FY17, but we believe the Company’s outlook is improving and view shares as relatively cheap. We like the stock for the following reasons:

End-Market diversification increases MTRX’s growth opportunities Historically MTRX has focused largely on above-ground storage tanks and refinery work The Company has added capabilities in new end markets, namely 1) expanding its AST business into Canada; and 2) adding footprint for its Electrical and Industrial businesses (organically and via M&A), which recently helped it win a $450 mil.+ power plant job in Canada

Strong balance sheet; poised for future M&A Matrix ended 2Q17 with $66.2 mil. in cash and $72.4 mil. in debt with a debt / LTM EBITDA ratio of 1.1x The Company recently acquired Tulsa-Based Houston Interests for $46 mil. in an all-cash transaction which brings Matrix more toward the front-end engineering process and creates new revenue opportunities

Valuation attractive MTRX trades at calendar 2017 and 2018 EV/EBITDA multiples of 6.6x and 4.9x vs. its peer group average multiples of 7.5x and 6.7x

Matrix Service Company (MTRX) – Summary

( in 000s, except per share) Sep-15 Dec-15 Mar-16 Jun-16 FY Sep-16 Dec-16 Mar-17 Jun-17 FY Sep-17 Dec-17 Mar-18 Jun-18 FY

(Year end June 30) 1Q16A 2Q16A 3Q16A 4Q16A 2016A 1Q17A 2Q17A 3Q17E 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E

Total Revenues $319,331 $323,529 $309,422 $359,635 $1,311,917 $341,781 $312,655 $314,876 $339,935 $1,309,248 $332,472 $349,271 $352,973 $372,877 $1,407,593

Cost of Revenues 284,747 293,524 282,119 325,536 1,185,926 309,503 284,443 287,968 308,397 1,190,311 301,572 313,940 317,553 333,910 1,266,975

Gross Profits $34,584 $30,005 $27,303 $34,099 $125,991 $32,278 $28,212 $26,908 $31,539 $118,937 $30,899 $35,331 $35,419 $38,968 $140,618

OPERATING EXPENSES

Selling, General and Admin. 19,483 25,070 20,156 19,600 84,309 17,977 19,275 19,882 20,226 77,360 20,313 21,358 21,581 21,813 85,065

Restructuring and Other 0 0 800 0 800 0 700 750 750 2,200 0 0 0 0 0


Operating Income $15,101 $4,935 $6,347 $14,499 $40,882 $14,301 $8,237 $6,277 $10,562 $39,377 $10,586 $13,974 $13,838 $17,155 $55,553

Interest Expense (Income) 232 192 185 53 662 231 471 750 750 2,202 735 720 706 692 2,853

Other 54 148 109 256 567 (7) (47) 100 100 146 0 0 0 0 0

Income (Loss) Before Taxes 14,815 4,595 6,053 14,190 39,653 14,077 7,813 5,427 9,712 37,029 9,851 13,253 13,132 16,463 52,700

Tax Expense or (Break) 5,076 1,477 2,507 5,056 14,116 4,735 2,563 1,954 3,496 12,748 3,546 4,771 4,728 5,927 18,972

Net Income $9,739 $3,118 $3,546 $9,134 $25,537 $9,342 $5,250 $3,473 $6,216 $24,281 $6,305 $8,482 $8,405 $10,536 $33,728

Non-controlling Interest (202) (2,313) (811) 0 (3,326) 0 0 0 0 0 0 0 0 0 0

Net Income Attributable to Common $9,941 $5,431 $4,357 $9,134 $28,863 $9,342 $5,250 $3,473 $6,216 $24,281 $6,305 $8,482 $8,405 $10,536 $33,728

Reported EPS $0.37 $0.20 $0.16 $0.34 $1.07 $0.35 $0.20 $0.13 $0.23 $0.90 $0.23 $0.31 $0.31 $0.39 $1.25

Pro Forma EPS* $0.37 $0.35 $0.18 $0.34 $1.24 $0.35 $0.21 $0.15 $0.25 $0.96 $0.23 $0.31 $0.31 $0.39 $1.25

Average Fully Diluted Shares 27,050 27,248 27,054 26,774 27,100 26,796 26,832 26,875 26,925 26,857 26,975 27,025 27,075 27,125 27,050

EBITDA* $20,476 $10,078 $12,457 $19,545 $62,556 $19,212 $13,661 $12,100 $16,415 $61,389 $16,568 $19,986 $19,880 $23,226 $79,660

MARGIN ANALYSIS

Gross Margin 10.8% 9.3% 8.8% 9.5% 9.6% 9.4% 9.0% 8.5% 9.3% 9.1% 9.3% 10.1% 10.0% 10.5% 10.0%

Selling, General and Admin. 6.1% 7.7% 6.5% 5.4% 6.4% 5.3% 6.2% 6.3% 5.9% 5.9% 6.1% 6.1% 6.1% 5.8% 6.0%

Operating Income 4.7% 1.5% 2.1% 4.0% 3.1% 4.2% 2.6% 2.0% 3.1% 3.0% 3.2% 4.0% 3.9% 4.6% 3.9%

EBITDA 6.4% 3.1% 4.0% 5.4% 4.8% 5.6% 4.4% 3.8% 4.8% 4.7% 5.0% 5.7% 5.6% 6.2% 5.7%

Income Before Taxes 4.6% 1.4% 2.0% 3.9% 3.0% 4.1% 2.5% 1.7% 2.9% 2.8% 3.0% 3.8% 3.7% 4.4% 3.7%

Tax Rate 34.3% 32.1% 41.4% 35.6% 35.6% 33.6% 32.8% 36.0% 36.0% 34.4% 36.0% 36.0% 36.0% 36.0% 36.0%

Net Income 3.1% 1.7% 1.4% 2.5% 2.2% 2.7% 1.7% 1.1% 1.8% 1.9% 1.9% 2.4% 2.4% 2.8% 2.4%

GROWTH ANALYSIS

Net Product Revenues (0.7%) (5.6%) (1.5%) (1.3%) (2.3%) 7.0% (3.4%) 1.8% (5.5%) (0.2%) (2.7%) 11.7% 12.1% 9.7% 7.5%

Gross Profit 21.9% 88.1% NM (15.6%) 44.2% (6.7%) (6.0%) (1.4%) (7.5%) (5.6%) (4.3%) 25.2% 31.6% 23.6% 18.2%

Selling, General and Admin. (1.8%) 27.7% 18.0% (11.0%) 7.3% (7.7%) (23.1%) (1.4%) 3.2% (8.2%) 13.0% 10.8% 8.5% 7.8% 10.0%

Operating Income 76.7% NM NM (21.1%) 364.5% (5.3%) 66.9% (1.1%) (27.2%) (3.7%) (26.0%) 69.6% 120.5% 62.4% 41.1%

EBITDA 42.4% 386.9% NM (19.9%) 92.8% (6.2%) 35.6% (2.9%) (16.0%) (1.9%) (13.8%) 46.3% 64.3% 41.5% 29.8%

Income Before Taxes 78.6% NM NM (21.3%) 384.0% (5.0%) 70.0% (10.3%) (31.6%) (6.6%) (30.0%) 69.6% 142.0% 69.5% 42.3%

Net Income 68.1% 65.3% NM (16.3%) 68.2% (6.0%) (3.3%) (20.3%) (31.9%) (15.9%) (32.5%) 61.6% 142.0% 69.5% 38.9%

EPS 68.6% 64.7% NM (15.2%) 68.7% (5.1%) (1.8%) (19.8%) (32.3%) (15.1%) (33.0%) 60.4% 140.2% 68.3% 37.9%

*Excludes non-recurring items.



37

Matrix Service Company (MTRX) – Model

38

Dycom is a leading provider of specialty contracting services to telecommunications providers throughout the U.S. and Canada.

Services include engineering; construction, maintenance and installation; premise wiring; and underground facility locating (among others)

Investment Thesis: We rate DY Overweight/Vol. and named it as our 2017 Best Idea. We recommend owning the stock for the following reasons:

Increasing data demand fueling a large telecommunications investment cycle DY’s customers are racing to improve their networks to be able to offer customers faster data speeds We expect the current cycle to last through at least calendar 2019, and possibly longer Google entering the high-speed broadband market is driving the Company’s other customers (such as AT&T) to spend in order to keep market share

Connect America Fund Phase II contributing to growth outlook FCC providing funding to large telecomm providers to make broadband more available in rural areas Projects started to enter the construction phase in 2016, will likely ramp in 2017 and should be ongoing through at least 2020

Leading service provider with a strong growth profile DY is the largest wireline telecommunications services provider by a factor of at least 4x Backlog has increased significantly y-o-y over the past several quarters Sales were up 32% in FY16 and we expect growth to be 10% in FY17 and 10% in FY18 while strong operating leverage should grow earnings in the high-teens in each year Adj. EBITDA margin has gone from 10.4% in FY14 to an estimated 15.1% in FY18

Capital allocation structure should allow for continued M&A and share repurchases DY has been very active on the M&A front over the past 10-20 years The Company has also been an active buyer of its own stock We expect both actions to continue

Dycom Industries (DY) – Summary

( in 000s, except per share) Oct-15 Jan-16 Apr-16 Jul-16 FY Oct-16 Jan-17 Apr-17 Jul-17 FY Oct-17 Jan-18 Apr-18 Jul-18 FY FY

(Year ends the Last Saturday o f July) 1Q16A 2Q16A 3Q16A 4Q16A 2016A 1Q17A 2Q17A 3Q17E 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E 2019E

Total Revenues $659,268 $559,470 $664,645 $789,159 $2,672,542 $799,223 $701,131 $736,128 $846,735 $3,083,217 $882,119 $759,284 $817,045 $931,694 $3,390,143 $3,728,581

Cost of Revenues 506,978 450,284 520,408 605,909 2,083,579 614,990 561,371 574,538 648,422 2,399,321 677,013 607,173 636,467 712,085 2,632,739 2,891,845

Gross Profits $152,290 $109,186 $144,237 $183,250 $588,963 $184,233 $139,760 $161,590 $198,313 $683,896 $205,106 $152,111 $180,578 $219,609 $757,404 $836,736

OPERATING EXPENSES

General & Administrative 51,464 47,020 56,519 62,146 217,149 60,204 58,191 62,598 64,987 245,979 66,448 62,258 68,662 71,041 268,410 289,615

Depreciation & Amortization 27,449 29,898 31,583 36,010 124,940 34,546 35,705 36,781 37,889 144,920 37,457 37,449 37,440 37,432 149,778 152,708



Interest Expense (Income), Net 9,131 7,872 8,007 9,710 34,720 9,067 9,181 9,200 9,400 36,848 9,306 9,259 9,213 9,167 36,946 36,212

Other Expense (Income), Net 14,791 (1,072) (4,323) (3,569) 5,827 (940) (1,006) (2,900) (1,000) (5,846) (1,000) (1,000) (1,000) (1,000) (4,000) (4,000)



Net Income $30,824 $15,473 $33,083 $49,360 $128,740 $51,050 $23,663 $35,057 $54,573 $164,343 $58,059 $27,591 $41,414 $64,355 $191,420 $226,375

Total Adjustments, Net of Tax 11,203 2,520 2,612 3,310 19,645 2,696 2,748 2,759 2,822 11,024 2,813 2,813 2,813 2,813 11,250 11,250

Adjusted Net Income $42,027 $17,993 $35,695 $52,670 $148,385 $53,746 $26,411 $37,816 $57,394 $175,367 $60,872 $30,403 $44,227 $67,168 $202,670 $237,625

GAAP EPS $0.91 $0.46 $1.00 $1.54 $3.89 $1.59 $0.74 $1.10 $1.70 $5.12 $1.81 $0.86 $1.29 $2.00 $5.95 $6.99

Pro Forma EPS $1.24 $0.54 $1.08 $1.64 $4.48 $1.67 $0.82 $1.18 $1.79 $5.46 $1.90 $0.95 $1.37 $2.08 $6.30 $7.34


EBITDA $86,035 $63,238 $92,041 $124,673 $365,987 $124,969 $82,575 $101,892 $134,327 $443,763 $139,658 $90,853 $112,917 $149,568 $492,995 $551,121

Adjusted EBITDA $105,668 $66,422 $91,872 $126,044 $390,006 $129,233 $86,155 $104,092 $138,327 $457,807 $145,158 $95,853 $117,667 $154,318 $512,995 $573,121

MARGIN ANALYSIS

Gross Margin 23.1% 19.5% 21.7% 23.2% 22.0% 23.1% 19.9% 22.0% 23.4% 22.2% 23.3% 20.0% 22.1% 23.6% 22.3% 22.4%



EBITDA 13.1% 11.3% 13.8% 15.8% 13.7% 15.6% 11.8% 13.8% 15.9% 14.4% 15.8% 12.0% 13.8% 16.1% 14.5% 14.8%

Adj. EBITDA 16.0% 11.9% 13.8% 16.0% 14.6% 16.2% 12.3% 14.1% 16.3% 14.8% 16.5% 12.6% 14.4% 16.6% 15.1% 15.4%


Tax Rate 37.7% 39.2% 36.9% 37.5% 37.6% 37.3% 37.2% 37.3% 37.3% 37.3% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5%

Net Income 4.7% 2.8% 5.0% 6.3% 4.8% 6.4% 3.4% 4.8% 6.4% 5.3% 6.6% 3.6% 5.1% 6.9% 5.6% 6.1%

Adj. Net Income 6.4% 3.2% 5.4% 6.7% 5.6% 6.7% 3.8% 5.1% 6.8% 5.7% 6.9% 4.0% 5.4% 7.2% 6.0% 6.4%

GROWTH ANALYSIS

Total Revenues 29.2% 26.8% 35.0% 36.4% 32.2% 21.2% 25.3% 10.8% 7.3% 15.4% 10.4% 8.3% 11.0% 10.0% 10.0% 10.0%

Gross Profit 42.4% 27.5% 38.5% 38.4% 37.3% 21.0% 28.0% 12.0% 8.2% 16.1% 11.3% 8.8% 11.8% 10.7% 10.7% 10.5%

General & Administrative 15.1% 12.4% 26.4% 30.9% 21.5% 17.0% 23.8% 10.8% 4.6% 13.3% 10.4% 7.0% 9.7% 9.3% 9.1% 7.9%


EBITDA 34.4% 38.8% 46.4% 44.7% 41.5% 45.3% 30.6% 10.7% 7.7% 21.3% 11.8% 10.0% 10.8% 11.3% 11.1% 11.8%

Adj. EBITDA 59.2% 39.6% 45.7% 42.5% 46.9% 22.3% 29.7% 13.3% 9.7% 17.4% 12.3% 11.3% 13.0% 11.6% 12.1% 11.7%


Net Income 48.1% 64.0% 63.3% 45.9% 52.7% 65.6% 52.9% 6.0% 10.6% 27.7% 13.7% 16.6% 18.1% 17.9% 16.5% 18.3%

GAAP EPS 53.6% 71.9% 73.1% 58.5% 61.5% 74.2% 59.4% 9.4% 10.6% 31.7% 14.1% 16.6% 17.4% 17.2% 16.2% 17.5%

Pro Forma EPS 109.4% 99.9% 86.7% 69.1% 85.9% 34.5% 53.0% 9.4% 9.1% 21.9% 13.6% 15.2% 16.2% 16.3% 15.3% 16.5%



39

Dycom Industries (DY) – Model

40

Quanta is the leading North American specialty contractor for the electric transmission/oil & gas markets which provides services that include design, installation, upgrade, repair and maintenance of infrastructure within electric power T&D networks and pipeline T&D facilities

PWR operates 2 segments: Electric Power Infrastructure (63% of FY16 revenue): Dominant market share with solid growth opportunities driven by the need to repair, replace, upgrade and maintain T&D infrastructure throughout North America O&G Infrastructure (37% of FY16 revenue): PWR is the largest pipeline construction company in North America operating in the mainline pipeline market, midstream gathering, and other O&G services

Investment Thesis: We like PWR over a 12-month horizon due to 1) its growth potential within the underinvested North American energy infrastructure market, 2) potential for operating margin expansion, and 3) compelling valuation at current levels. We like the stock for the following reasons:

End market outlook remains strong over the intermediate to long term PWR is well positioned to capture share as electric companies deploy capital to meet the increased demand of the nation’s digital society and reliability standards Despite the recent drop in O&G prices, pipeline construction activity was robust in 2016 and is expected to remain strong into 2018 and beyond

Poised for operating margin expansion We expect 100-200 bps of core operating margin expansion over the next 2 years on mid-single digit revenue growth estimates

Valuation justifies a buying opportunity PWR trades at calendar 2017 and 2018 EV/EBITDA multiples of 8.7x and 7.5x, respectively vs. its NTM 5-year average multiple of 7.4x and peers of 7.5x 2017 EBITDA and 6.7x 2018 EBITDA Shares trade at 2017 and 2018 P/E multiples of 18.0x and 14.8x, respectively vs. its E&C peers trading at 17.8x and 14.3x

Quanta Services, Inc. (PWR) – Summary



Total Revenues $7,572,436 $1,713,737 $1,792,430 $2,042,186 $2,102,966 $7,651,319 $2,062,794 $2,071,753 $2,126,093 $1,973,423 $8,234,063 $2,064,144 $2,160,547 $2,272,405 $2,186,479 $8,683,575

Cost of Revenues (Inc. Depreciation) 6,648,771 1,510,424 1,592,213 1,739,604 1,795,278 6,637,519 1,782,254 1,769,277 1,807,179 1,716,878 7,075,588 1,771,036 1,838,625 1,924,727 1,875,999 7,410,387

Gross Profits $923,665 $203,313 $200,217 $302,582 $307,688 $1,013,800 $280,540 $302,476 $318,914 $256,545 $1,158,475 $293,108 $321,921 $347,678 $310,480 $1,273,188

OPERATING EXPENSES

Selling, General & Administrative 592,863 152,172 156,607 164,325 167,882 640,986 171,821 173,761 173,203 171,354 690,139 172,966 174,726 176,032 173,456 697,180

Amortization of Intangibles 34,848 7,495 8,141 8,094 7,955 31,685 6,365 6,454 6,372 6,437 25,629 6,463 6,473 6,514 6,525 25,975

Other Expense (Income), Net 58,451 6,352 0 0 13,964 20,316 0 0 0 0 0 0 0 0 0 0




Other Expense (Income), Net 2,297 (81) 1,103 (752) 393 663 500 500 500 500 2,000 500 500 500 500 2,000



Net Income from Continuing Operations $131,203 $20,859 $16,729 $73,547 $89,305 $200,440 $66,434 $75,691 $85,253 $49,361 $276,739 $74,327 $87,659 $101,575 $83,169 $346,730

Loss (Income) From Discontinued Operations (190,621) 0 0 (605) 947 342 0 0 0 0 0 0 0 0 0 0

Net Income $321,824 $20,859 $16,729 $74,152 $88,358 $200,098 $66,434 $75,691 $85,253 $49,361 $276,739 $74,327 $87,659 $101,575 $83,169 $346,730

Net Income Attributable to Non-Controlling Interests 10,917 363 167 410 775 1,715 400 400 400 400 1,600 500 500 500 500 2,000

Net Income Attributable to Quanta $310,907 $20,496 $16,562 $73,742 $87,583 $198,383 $66,034 $75,291 $84,853 $48,961 $275,139 $73,827 $87,159 $101,075 $82,669 $344,730

Net Extraordinary Items 96,955 17,251 11,882 12,324 1,679 43,136 10,466 10,524 10,471 10,513 41,974 10,606 10,612 10,639 10,646 42,504

Adj. Net Income from Continuing Ops. Attr. to Quanta $217,241 $37,747 $28,444 $85,461 $90,209 $241,861 $76,500 $85,815 $95,323 $59,474 $317,113 $84,433 $97,772 $111,714 $93,315 $387,234

EPS from Continuing Ops.(Less NI Att. To NCI) $0.62 $0.13 $0.11 $0.47 $0.57 $1.26 $0.42 $0.48 $0.54 $0.31 $1.77 $0.47 $0.56 $0.65 $0.53 $2.20

GAAP EPS $1.59 $0.13 $0.11 $0.47 $0.57 $1.26 $0.42 $0.48 $0.54 $0.31 $1.77 $0.47 $0.56 $0.65 $0.53 $2.20

Pro Forma EPS* $1.11 $0.23 $0.18 $0.55 $0.58 $1.54 $0.49 $0.55 $0.61 $0.38 $2.04 $0.54 $0.63 $0.71 $0.60 $2.48


EBITDA $422,448 $85,858 $85,477 $181,366 $168,638 $521,339 $151,176 $171,033 $188,060 $127,673 $637,942 $162,699 $189,941 $214,551 $180,121 $747,313

Adjusted EBITDA $525,804 $105,473 $95,810 $192,082 $192,477 $585,842 $161,551 $181,408 $198,435 $138,048 $679,442 $173,199 $200,441 $225,051 $190,621 $789,313

MARGIN ANALYSIS

Gross Margin 12.2% 11.9% 11.2% 14.8% 14.6% 13.3% 13.6% 14.6% 15.0% 13.0% 14.1% 14.2% 14.9% 15.3% 14.2% 14.7%



EBITDA 5.6% 5.0% 4.8% 8.9% 8.0% 6.8% 7.3% 8.3% 8.8% 6.5% 7.7% 7.9% 8.8% 9.4% 8.2% 8.6%

Adj. EBITDA 6.9% 6.2% 5.3% 9.4% 9.2% 7.7% 7.8% 8.8% 9.3% 7.0% 8.3% 8.4% 9.3% 9.9% 8.7% 9.1%


Tax Rate 42.6% 39.2% 46.8% 42.6% 21.6% 34.9% 33.0% 36.5% 37.5% 35.0% 35.7% 33.0% 36.5% 37.5% 35.0% 35.7%

Net Income 4.2% 1.2% 0.9% 3.6% 4.2% 2.6% 3.2% 3.7% 4.0% 2.5% 3.4% 3.6% 4.1% 4.5% 3.8% 4.0%

Net Income Attributable to Quanta 4.1% 1.2% 0.9% 3.6% 4.2% 2.6% 3.2% 3.6% 4.0% 2.5% 3.3% 3.6% 4.0% 4.4% 3.8% 4.0%

Adj. Net Income 2.9% 2.2% 1.6% 4.2% 4.3% 3.2% 3.7% 4.1% 4.5% 3.0% 3.9% 4.1% 4.5% 4.9% 4.3% 4.5%

GROWTH ANALYSIS

Net Product Revenues (2.3%) (7.9%) (4.3%) 5.3% 10.7% 1.0% 20.4% 15.6% 4.1% (6.2%) 7.6% 0.1% 4.3% 6.9% 10.8% 5.5%

Gross Profit (21.0%) (14.5%) (12.0%) 28.6% 38.0% 9.8% 38.0% 51.1% 5.4% (16.6%) 14.3% 4.5% 6.4% 9.0% 21.0% 9.9%

Selling, General and Admin. (9.6%) 4.6% 4.5% 12.8% 10.6% 8.1% 12.9% 11.0% 5.4% 2.1% 7.7% 0.7% 0.6% 1.6% 1.2% 1.0%

Operating Income (44.6%) (55.7%) (48.5%) 60.9% NM 35.1% 174.5% 244.7% 7.0% (33.2%) 38.0% 11.1% 15.1% 18.5% 65.7% 24.2%

EBITDA (27.8%) (32.4%) (25.7%) 43.0% 214.3% 23.4% 76.1% 100.1% 3.7% (24.3%) 22.4% 7.6% 11.1% 14.1% 41.1% 17.1%

Adj. EBITDA (32.5%) (23.5%) (24.5%) 37.7% 58.4% 11.4% 53.2% 89.3% 3.3% (28.3%) 16.0% 7.2% 10.5% 13.4% 38.1% 16.2%

Income Before Taxes (46.4%) (58.7%) (53.1%) 63.9% NM 34.6% 189.1% 279.3% 6.5% (33.3%) 40.0% 11.9% 15.8% 19.1% 68.5% 25.3%

Net Income 2.1% (64.2%) (66.2%) (66.1%) NM (37.8%) 218.5% 352.5% 15.0% (44.1%) 38.3% 11.9% 15.8% 19.1% 68.5% 25.3%

Net Income Attributable to Quanta 4.8% (61.7%) (64.1%) (65.9%) NM (36.2%) 222.2% 354.6% 15.1% (44.1%) 38.7% 11.8% 15.8% 19.1% 68.8% 25.3%

Adj. Net Income (46.6%) (37.4%) (43.8%) 49.9% 82.7% 11.3% 102.7% 201.7% 11.5% (34.1%) 31.1% 10.4% 13.9% 17.2% 56.9% 22.1%

EPS (39.8%) (17.1%) (23.2%) 82.7% 92.9% 38.1% 112.2% 202.5% 10.9% (34.6%) 32.4% 9.9% 13.5% 16.8% 56.5% 21.7%



41

Quanta Services, Inc. (PWR) – Model

42

MasTec provides services which include the engineering, building, installation, maintenance and upgrade of 1) oil and natural gas pipelines/facilities, 2) electrical transmission/distribution, 3) wireless, wireline/fiber and install-to-the-home, and 4) power generation and industrial

MTZ operates through 4 segments: Communications (~45% of FY16 revenue): Services consist of cell tower construction, wireline fiber expansion, broadband cable trenching, and emergency maintenance O&G (~39% of FY16 revenue): Construction services include oil and natural gas pipelines, processing stations, and power generation facilities Electrical Transmission (~8% of FY16 revenue): Provides EPC contracting/construction services to power plants, electrical transmission and distribution systems Power Gen & Industrial (~9% of FY16 revenue): Primarily serves energy and utility markets through the installation/construction of conventional and renewable power facilities, related electrical transmission infrastructure, ethanol facilities and various types of industrial infrastructure

Investment Thesis: 2016 was a transformative year for MTZ following a year of revenue and earnings challenges. We believe the outlook for the Company’s rapidly growing O&G pipeline market and Communications segment remain strong in 2017 and 2018.

Entry into new markets provides additional growth opportunities Likely to benefit from the 5G / 1 Gig Fiber buildout in the Communications segment and entry to the Mexican market in the Oil & Gas segment (already has won key contracts here)

Meaningful growth opportunities exist in O&G segment following robust backlog growth in 2016 Pipeline construction market expected to be robust through at least 2018

Effective allocators of capital; M&A likely to continue over time While the Company has been relatively quiet on the acquisition front, we believe M&A will continue to be a growth driver through time with a focus on Communications/O&G segments

Valuation justifies a buying opportunity MTZ trades at calendar 2017 and 2018 EV/EBITDA multiples of 7.5x and 7.0x vs. its peers at 7.5x and 6.4x, respectively

MasTec, Inc. (MTZ) – Summary



Total Revenues $4,208,330 $974,225 $1,232,404 $1,586,181 $1,341,892 $5,134,702 $1,050,263 $1,441,461 $1,585,831 $1,429,113 $5,506,668 $1,150,825 $1,549,361 $1,700,332 $1,481,892 $5,882,410

Cost of Revenues 3,721,303 884,401 1,068,182 1,368,988 1,120,554 4,442,125 870,353 1,243,116 1,351,128 1,233,324 4,697,922 994,313 1,325,323 1,438,481 1,268,500 5,026,617

Gross Profits $487,028 $89,824 $164,222 $217,193 $221,338 $692,577 $179,910 $198,345 $234,703 $195,788 $808,747 $156,512 $224,038 $261,851 $213,392 $855,793

OPERATING EXPENSES

General & Administrative 265,910 55,948 62,752 62,431 65,002 246,133 57,164 66,190 70,346 64,685 258,385 60,911 67,271 71,175 64,852 264,208

Depreciation & Amortization 169,662 39,008 40,657 42,584 42,666 164,915 43,005 43,262 43,950 42,899 173,116 42,258 43,308 45,246 45,470 176,281

Restructuring/Other 78,625 4,100 5,100 4,700 1,400 15,300 0 0 0 0 0 0 0 0 0 0


Operating Income ($27,169) ($9,232) $55,713 $107,478 $112,270 $266,229 $79,741 $88,894 $120,406 $88,204 $377,245 $53,343 $113,459 $145,431 $103,071 $415,304


Other Expense (Income), Net (7,478) (16,422) 1,035 (965) 6,029 (10,323) 1,000 4,700 4,700 4,700 15,100 4,700 4,700 4,700 4,700 18,800

Income (Loss) Before Taxes (67,746) (4,968) 42,039 95,346 93,402 225,819 65,741 70,544 101,920 69,855 308,060 35,268 95,651 127,885 85,782 344,585

Tax Expense or (Break) 11,957 (2,087) 17,601 38,816 37,454 91,784 25,639 27,512 39,749 27,244 120,143 13,754 37,304 49,875 33,455 134,388

Net Income from Continuing Operations ($79,703) ($2,881) $24,438 $56,530 $55,948 $134,035 $40,102 $43,032 $62,171 $42,612 $187,917 $21,513 $58,347 $78,010 $52,327 $210,197

Loss (Income) from Discontinued Operations 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net Income ($79,703) ($2,881) $24,438 $56,530 $55,948 $134,035 $40,102 $43,032 $62,171 $42,612 $187,917 $21,513 $58,347 $78,010 $52,327 $210,197

Net Income Attributable to Non-Controlling Interests (593) (189) 350 253 2,357 2,772 750 750 750 750 3,000 750 750 750 750 3,000

Net Income Attributable to MasTec ($79,110) ($2,692) $24,088 $56,277 $53,591 $131,263 $39,352 $42,282 $61,421 $41,862 $184,917 $20,763 $57,597 $77,260 $51,577 $207,197

Net Extraordinary Items 131,350 4,408 5,450 9,750 4,000 23,608 2,288 2,379 2,379 2,288 9,333 2,745 2,745 2,745 2,745 10,980

Adjusted Net Income $51,647 $1,527 $29,888 $66,280 $59,948 $157,643 $41,639 $44,661 $63,800 $44,149 $194,250 $23,508 $60,342 $80,005 $54,322 $218,177

EPS from Continuing Ops. ($0.98) ($0.04) $0.30 $0.69 $0.68 $1.64 $0.49 $0.52 $0.75 $0.51 $2.28 $0.26 $0.70 $0.93 $0.63 $2.52

GAAP EPS ($0.98) ($0.03) $0.30 $0.69 $0.66 $1.61 $0.48 $0.51 $0.74 $0.51 $2.24 $0.25 $0.69 $0.93 $0.62 $2.49

Pro Forma EPS* $0.64 $0.02 $0.36 $0.81 $0.70 $1.90 $0.51 $0.54 $0.77 $0.53 $2.35 $0.28 $0.72 $0.96 $0.65 $2.62


EBITDA $149,970 $46,198 $95,335 $151,027 $148,907 $441,467 $121,746 $127,456 $159,657 $126,403 $535,261 $90,901 $152,067 $185,976 $143,841 $572,785

Adjusted EBITDA* $308,100 $53,798 $104,295 $164,777 $154,077 $476,947 $125,496 $131,356 $163,557 $130,153 $550,561 $95,401 $156,567 $190,476 $148,341 $590,785

MARGIN ANALYSIS

Gross Margin 11.6% 9.2% 13.3% 13.7% 16.5% 13.5% 17.1% 13.8% 14.8% 13.7% 14.7% 13.6% 14.5% 15.4% 14.4% 14.5%


Operating Income NM NM 4.5% 6.8% 8.4% 5.2% 7.6% 6.2% 7.6% 6.2% 6.9% 4.6% 7.3% 8.6% 7.0% 7.1%

EBITDA 3.6% 4.7% 7.7% 9.5% 11.1% 8.6% 11.6% 8.8% 10.1% 8.8% 9.7% 7.9% 9.8% 10.9% 9.7% 9.7%

Adj. EBITDA 7.3% 5.5% 8.5% 10.4% 11.5% 9.3% 11.9% 9.1% 10.3% 9.1% 10.0% 8.3% 10.1% 11.2% 10.0% 10.0%

Income Before Taxes NM NM 3.4% 6.0% 7.0% 4.4% 6.3% 4.9% 6.4% 4.9% 5.6% 3.1% 6.2% 7.5% 5.8% 5.9%

Tax Rate (17.6%) 42.0% 41.9% 40.7% 40.1% 40.6% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0%

Net Income from Cont. Ops NM NM 2.0% 3.6% 4.2% 2.6% 3.8% 3.0% 3.9% 3.0% 3.4% 1.9% 3.8% 4.6% 3.5% 3.6%

Net Income Attributable to MasTec NM NM 2.0% 3.5% 4.0% 2.6% 3.7% 2.9% 3.9% 2.9% 3.4% 1.8% 3.7% 4.5% 3.5% 3.5%

Adj. Net Income 1.2% 0.2% 2.4% 4.2% 4.5% 3.1% 4.0% 3.1% 4.0% 3.1% 3.5% 2.0% 3.9% 4.7% 3.7% 3.7%

GROWTH ANALYSIS

Net Product Revenues (8.7%) (2.9%) 15.5% 42.8% 30.6% 22.0% 7.8% 17.0% (0.0%) 6.5% 7.2% 9.6% 7.5% 7.2% 3.7% 6.8%

Gross Profit (23.2%) (23.1%) 36.1% 57.0% 99.1% 42.2% 100.3% 20.8% 8.1% (11.5%) 16.8% (13.0%) 13.0% 11.6% 9.0% 5.8%

Selling, General and Admin. 11.6% (24.4%) (9.4%) (2.1%) 10.5% (7.4%) 2.2% 5.5% 12.7% (0.5%) 5.0% 6.6% 1.6% 1.2% 0.3% 2.3%

Operating Income NM NM NM 232.7% NM NM NM 59.6% 12.0% (21.4%) 41.7% (33.1%) 27.6% 20.8% 16.9% 10.1%

EBITDA (62.8%) 7.9% 77.3% 122.8% NM 194.4% 163.5% 33.7% 5.7% (15.1%) 21.2% (25.3%) 19.3% 16.5% 13.8% 7.0%

Adjusted EBITDA (27.5%) (15.6%) 46.9% 80.8% 87.3% 54.8% 133.3% 25.9% (0.7%) (15.5%) 15.4% (24.0%) 19.2% 16.5% 14.0% 7.3%

Income Before Taxes NM 53.7% NM NM NM NM NM 67.8% 6.9% (25.2%) 36.4% (46.4%) 35.6% 25.5% 22.8% 11.9%

Net Income NM 54.9% NM NM NM NM NM 76.1% 10.0% (23.8%) 40.2% (46.4%) 35.6% 25.5% 22.8% 11.9%

EPS NM 53.6% NM NM NM NM NM 73.6% 8.5% (24.9%) 38.8% (46.9%) 34.3% 24.3% 21.6% 10.8%

*Excludes non-cash stock-based compensation and non-recurring items.



43

MasTec, Inc. (MTZ) – Model

44

Orion provides marine construction and dredging services to a variety of end market customers along the Gulf Coast, Atlantic seaboard, and Caribbean Basin, and commercial concrete services throughout the Houston and Dallas/Fort-Worth areas.

In the fall of 2015, ORN announced acquisition of TAS, the second largest Texas-based concrete contractor, for approximately $115 million in cash (~4.8x FY14 EV/EBITDA) ORN operates 2 segments:

Marine Construction (~57% FY16 revenue): Provides heavy civil marine construction as well as other related services such as environmental, dredging, pipeline, transportation, and marine specialty. TAS (commercial concrete (~43% FY16 revenue): Services the rapidly growing Houston and DFW non-residential construction market through its light commercial, structural concrete, and labor-only (pouring and finishing) segments; provides turn-key and cross-sell contract opportunities.

Investment Thesis: We like ORN as a value play due to its 1) strong end market outlook 2) recent strategic acquisition 3) potential for operating margin expansion and 4) attractive valuation.

End market demand in civil marine construction business likely to improve in the near term Increase in project opportunities expected in the near term from the U.S. Army Corps of Engineers, WRRDA of 2014, further expansion of the Panama Canal, BP Deepwater Horizon settlement, and increased funding of the Harbor Maintenance Trust Fund

Acquisition of TAS provides cross-sell opportunities and diversifies customer base ORN will now be able to bid on inland concrete jobs that are often required for its other services Decreases Orion’s reliance on government revenue with a more recurring, private customer base

Operating margin expansion likely in 2017 Improved execution and pricing and labor market improvements should fuel a rebound to previous EBITDA margins of 10%-12%

Valuation very compelling ORN currently trades at 2017 and 2018 EV/EBITDA multiples of 6.5x and 5.7x vs. E&C peers of 7.5x and 6.7x, respectively

Orion Marine Group, Inc. (ORN) – Summary



Marine Construction Revenues $347,117 $62,415 $79,966 $82,169 $60,082 $284,632 $58,947 $95,775 $101,402 $99,612 $355,736 $72,136 $99,476 $106,792 $104,646 $383,050

Commercial Concrete Revenues 119,381 67,208 60,335 81,848 84,213 293,604 68,985 81,862 87,579 84,828 323,254 72,872 86,882 91,889 88,655 340,298

Contract Revenues $466,498 $129,623 $140,301 $164,017 $144,295 $578,236 $127,932 $177,637 $188,981 $184,440 $678,989 $145,008 $186,358 $198,681 $193,300 $723,348

Costs of Contract Revenues 426,316 114,912 123,355 139,849 132,638 510,754 111,557 151,702 160,255 156,958 580,472 124,707 158,405 167,687 163,725 614,524

Gross Profit $40,182 $14,711 $16,946 $24,168 $11,657 $67,482 $16,375 $25,935 $28,725 $27,482 $98,517 $20,301 $27,954 $30,994 $29,575 $108,824

OPERATING EXPENSES


Other Expense (Income), Net 0 0 566 (654) (319) (407) 0 0 0 0 0 0 0 0 0 0


Operating Income ($7,533) ($827) $281 $9,531 ($5,283) $3,702 ($879) $6,973 $9,217 $8,187 $23,498 $1,614 $8,806 $11,280 $10,127 $31,827


Other Expense (Income), Net (70) (385) (9) (10) (27) (431) (27) (27) (27) (27) (108) (27) (27) (27) (27) (108)

Income (Loss) Before Taxes (10,579) (1,958) (1,310) 7,963 (6,734) (2,039) (2,286) 5,609 7,895 6,906 18,125 372 7,602 10,112 8,996 27,082

Tax Expense or (Break) (2,519) (750) (502) 3,224 (391) 1,581 (880) 2,160 3,040 2,659 6,978 143 2,927 3,893 3,463 10,426

Net Income ($8,060) ($1,208) ($808) $4,739 ($6,343) ($3,620) ($1,406) $3,450 $4,855 $4,247 $11,147 $229 $4,675 $6,219 $5,532 $16,655

Net Inc. Attributable to Non-Controlling Interests 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net Income Attributable to Orion Marine ($8,060) ($1,208) ($808) $4,739 ($6,343) ($3,620) ($1,406) $3,450 $4,855 $4,247 $11,147 $229 $4,675 $6,219 $5,532 $16,655

GAAP EPS ($0.30) ($0.04) ($0.03) $0.17 ($0.23) ($0.13) ($0.05) $0.12 $0.18 $0.15 $0.40 $0.01 $0.17 $0.22 $0.20 $0.60

Pro Forma EPS* ($0.30) ($0.04) ($0.01) $0.17 $0.09 $0.21 ($0.05) $0.12 $0.18 $0.15 $0.40 $0.01 $0.17 $0.22 $0.20 $0.60


EBITDA $20,620 $8,108 $8,943 $18,103 $3,141 $38,295 $7,155 $14,870 $16,981 $15,820 $54,825 $9,245 $16,437 $18,909 $17,756 $62,348

MARGIN ANALYSIS

Gross Margin 8.6% 11.3% 12.1% 14.7% 8.1% 11.7% 12.8% 14.6% 15.2% 14.9% 14.5% 14.0% 15.0% 15.6% 15.3% 15.0%


Operating Income NM NM 0.2% 5.8% NM 0.6% NM 3.9% 4.9% 4.4% 3.5% 1.1% 4.7% 5.7% 5.2% 4.4%

EBITDA 4.4% 6.3% 6.4% 11.0% 2.2% 6.6% 5.6% 8.4% 9.0% 8.6% 8.1% 6.4% 8.8% 9.5% 9.2% 8.6%

Income Before Taxes NM NM NM 4.9% NM NM NM 3.2% 4.2% 3.7% 2.7% 0.3% 4.1% 5.1% 4.7% 3.7%

Tax Rate 23.8% 38.3% 38.3% 40.5% 5.8% (77.5%) 38.5% 38.5% 38.5% 38.5% 38.5% 38.5% 38.5% 38.5% 38.5% 38.5%

Net Income NM NM NM 2.9% NM NM NM 1.9% 2.6% 2.3% 1.6% 0.2% 2.5% 3.1% 2.9% 2.3%

Net Income Attributable to Orion Marine NM NM NM 2.9% NM NM NM 1.9% 2.6% 2.3% 1.6% 0.2% 2.5% 3.1% 2.9% 2.3%

GROWTH ANALYSIS

Net Product Revenues 20.9% 59.1% 63.0% 19.7% (10.9%) 24.0% (1.3%) 26.6% 15.2% 27.8% 17.4% 13.3% 4.9% 5.1% 4.8% 6.5%

Gross Profit (9.9%) 74.0% 181.3% 192.0% (33.1%) 67.9% 11.3% 53.0% 18.9% 135.8% 46.0% 24.0% 7.8% 7.9% 7.6% 10.5%


Operating Income NM (250.4%) NM NM NM NM (6.3%) NM (3.3%) NM NM NM 26.3% 22.4% 23.7% 35.4%

EBITDA (39.7%) 54.4% 258.1% NM (75.5%) 85.7% (11.8%) 66.3% (6.2%) 403.6% 43.2% 29.2% 10.5% 11.4% 12.2% 13.7%

Income Before Taxes NM (367.3%) 55.7% NM NM 80.7% (16.7%) NM (0.9%) NM NM NM 35.5% 28.1% 30.3% 49.4%

Net Income NM (368.2%) 56.2% NM NM 55.1% (16.4%) NM 2.5% NM NM NM 35.5% 28.1% 30.3% 49.4%

Net Income Attributable to Orion Marine NM (368.2%) 56.2% NM NM 55.1% (16.4%) NM 2.5% NM NM NM 35.5% 28.1% 30.3% 49.4%

EPS NM (361.6%) 83.0% NM 72.0% NM (18.3%) NM 1.8% 69.8% 93.8% NM 34.6% 27.2% 29.3% 48.3%



45

Orion Marine Group, Inc. (ORN) – Model

46

Primoris provides a wide range of construction, fabrication, maintenance, replacement, and engineering services to major public utilities, petrochemical companies, energy companies, municipalities, state departments of transportation and various other customers.

PRIM operates through 3 segments: West (52% of 2016 revenue): The West segment consists of 5 subsidiaries with pipeline operations across the U.S. while other diverse units focus primarily in California, Colorado and the upper Midwest East (26% of 2016 revenue): The East segment consists of 4 subsidiaries located primarily in the southeast U.S. / Gulf Coast and includes heavy civil construction and infrastructure and maintenance operations Energy (~22% of 2016 revenue): The Energy segment is made up of 5 subsidiaries located primarily in the southeastern U.S. and Gulf Coast region

Investment Thesis: PRIM has grown its project capabilities by supplementing organic growth with acquisitions, which we expect to continue. We believe large pipeline projects should provide gross margin stability while additional improvements could arrive from the start of a large power plant project that is set to start in CA. However, given PRIM's current valuation and planned sale of its TX heavy civil business, we recommend investors wait for a more attractive entry point in the stock.

Broad based end market exposure creates multiple growth avenues PRIM is exposed to multiple industrial end markets across the country, including the fast growing large diameter pipeline market, which should support growth over the next few years

Focus on SG&A cost reductions should drive earnings leverage Throughout 2016, PRIM executed well on lowering its operating expense margin vs. 2015

Long history of acquisitions which we believe will continue going forward The Company has ample liquidity on its balance sheet to execute on its long path of making deals

Valuation appears fair PRIM trades at calendar 2017 and 2018 EV/EBITDA multiples of 7.5x and 6.4x vs. its E&C peers at 7.5x and 6.7x, respectively

Primoris Services Corporation (PRIM) – Summary



West Segment Revenue 913,626 165,955 222,432 264,463 388,491 1,041,341 358,530 394,142 318,348 309,809 1,380,829 299,740 432,849 451,747 401,209 1,585,545

East Segment Revenue 612,174 147,971 127,479 122,854 122,997 521,301 115,850 120,699 122,375 124,861 483,785 118,756 125,541 126,627 127,722 498,646

Energy Segment Revenue 403,615 116,520 106,900 120,511 90,375 434,306 94,620 106,335 116,148 122,884 439,988 124,996 128,534 133,740 134,002 521,273

Total Revenue $1,929,415 $430,446 $456,811 $507,828 $601,863 $1,996,948 $569,000 $621,177 $556,871 $557,553 $2,304,601 $543,492 $686,924 $712,113 $662,934 $2,605,463

Cost of Revenue 1,709,542 391,169 413,526 457,699 533,247 1,795,641 512,447 543,431 490,825 493,844 2,040,546 483,179 602,425 620,952 584,116 2,290,673

Gross Profit $219,873 $39,277 $43,285 $50,129 $68,616 $201,307 $56,553 $77,746 $66,047 $63,709 $264,055 $60,313 $84,499 $91,161 $78,818 $314,791

OPERATING EXPENSES


Other 0 0 0 2,716 0 2,716 0 0 0 0 0 0 0 0 0 0


Interest Expense, Net 7,632 2,229 2,188 2,215 2,133 8,765 2,090 2,049 2,008 1,967 8,114 1,948 1,928 1,909 1,890 7,675

Other Expense (Gain) (960) (359) (21) 370 123 113 0 0 0 0 0 0 0 0 0 0


Income Tax Expense (Benefit) 23,946 1,833 3,333 4,078 11,902 21,146 6,793 14,218 10,830 9,989 41,829 8,809 15,679 17,933 13,548 55,969

Net Income from Continuing Operations $37,151 $2,916 $5,287 $4,756 $14,766 $27,725 $10,189 $21,327 $16,245 $14,983 $62,744 $13,213 $23,519 $26,899 $20,323 $83,953

Loss (Income) From Discontinued Operations 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net Income $37,151 $2,916 $5,287 $4,756 $14,766 $27,725 $10,189 $21,327 $16,245 $14,983 $62,744 $13,213 $23,519 $26,899 $20,323 $83,953

Net Income Attributable to Non-Controlling Interests (279) (223) (231) (252) (296) (1,002) (300) (393) (675) (1,200) (2,568) (1,620) (2,100) (1,050) 0 (4,770)

Net Income Attributable to Primoris $36,872 $2,693 $5,056 $4,504 $14,470 $26,723 $9,889 $20,934 $15,570 $13,783 $60,176 $11,593 $21,419 $25,849 $20,323 $79,183

EPS from Continuing Operations $0.72 $0.06 $0.10 $0.09 $0.28 $0.53 $0.20 $0.41 $0.31 $0.29 $1.20 $0.25 $0.45 $0.52 $0.39 $1.61

GAAP EPS $0.71 $0.05 $0.10 $0.09 $0.28 $0.51 $0.19 $0.40 $0.30 $0.26 $1.16 $0.22 $0.41 $0.50 $0.39 $1.52

Pro Forma EPS $0.71 $0.05 $0.10 $0.09 $0.28 $0.51 $0.19 $0.40 $0.30 $0.26 $1.16 $0.22 $0.41 $0.50 $0.39 $1.52


EBITDA $133,930 $23,883 $27,992 $28,405 $45,386 $125,666 $35,948 $54,851 $46,732 $44,990 $182,521 $42,020 $59,176 $64,790 $53,810 $219,796

Adjusted EBITDA $134,980 $24,145 $28,440 $31,580 $45,844 $130,009 $36,448 $54,696 $46,107 $43,490 $180,741 $39,820 $56,176 $63,540 $54,310 $213,846

MARGIN ANALYSIS

Gross Margin 11.4% 9.1% 9.5% 9.9% 11.4% 10.1% 9.9% 12.5% 11.9% 11.4% 11.5% 11.1% 12.3% 12.8% 11.9% 12.1%



EBITDA 6.9% 5.5% 6.1% 5.6% 7.5% 6.3% 6.3% 8.8% 8.4% 8.1% 7.9% 7.7% 8.6% 9.1% 8.1% 8.4%

Adj. EBITDA 7.0% 5.6% 6.2% 6.2% 7.6% 6.5% 6.4% 8.8% 8.3% 7.8% 7.8% 7.3% 8.2% 8.9% 8.2% 8.2%


Tax Rate 39.2% 38.6% 38.7% 46.2% 44.6% 43.3% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%

Net Income 1.9% 0.7% 1.2% 0.9% 2.5% 1.4% 1.8% 3.4% 2.9% 2.7% 2.7% 2.4% 3.4% 3.8% 3.1% 3.2%

Net Income Attributable to Primoris 1.9% 0.6% 1.1% 0.9% 2.4% 1.3% 1.7% 3.4% 2.8% 2.5% 2.6% 2.1% 3.1% 3.6% 3.1% 3.0%

GROWTH ANALYSIS

Net Product Revenues (7.5%) 9.6% (5.5%) (8.7%) 21.1% 3.5% 32.2% 36.0% 9.7% (7.4%) 15.4% (4.5%) 10.6% 27.9% 18.9% 13.1%

Gross Profit (6.8%) 3.3% (6.9%) (30.0%) 7.7% (8.4%) 44.0% 79.6% 31.8% (7.2%) 31.2% 6.6% 8.7% 38.0% 23.7% 19.2%

Selling, General and Admin. 15.0% (3.3%) (15.7%) (6.6%) (3.8%) (7.4%) 14.8% 23.6% 2.7% (7.4%) 7.5% (3.0%) 8.0% 20.2% 17.1% 10.5%

Operating Income (34.7%) 55.9% 35.7% (65.5%) 28.7% (14.8%) 188.1% 248.5% 154.7% (6.9%) 95.1% 25.7% 9.4% 60.7% 32.7% 31.0%

EBITDA (19.8%) 18.6% 16.0% (42.5%) 12.8% (6.2%) 50.5% 96.0% 64.5% (0.9%) 45.2% 16.9% 7.9% 38.6% 19.6% 20.4%

Adj. EBITDA (19.7%) 18.3% 16.5% (36.4%) 13.2% (3.7%) 51.0% 92.3% 46.0% (5.1%) 39.0% 9.2% 2.7% 37.8% 24.9% 18.3%

Income Before Taxes (40.3%) 74.1% 42.9% (71.4%) 24.1% (20.0%) 257.6% 312.3% 206.5% (6.4%) 114.0% 29.7% 10.3% 65.6% 35.6% 33.8%

Net Income (41.7%) 74.4% 43.2% (75.1%) 16.2% (25.4%) 249.4% 303.4% 241.6% 1.5% 126.3% 29.7% 10.3% 65.6% 35.6% 33.8%

Net Income Attributable to Primoris (41.6%) 61.1% 39.0% (76.3%) 15.3% (27.5%) 267.2% 314.0% 245.7% (4.7%) 125.2% 17.2% 2.3% 66.0% 47.4% 31.6%

PF EPS (41.7%) 60.6% 38.4% (76.5%) 14.8% (27.9%) 265.7% 313.4% 247.0% (4.9%) 125.0% 17.2% 2.3% 66.0% 47.4% 31.6%



47

Primoris Services Corporation (PRIM) – Model

48

Other Covered Companies

Price Price


Covered Companies

Altra Industrial Motion Corp. AIMC Overweight (Vol) $38.30 $48.00


49

AIMC is a leading manufacturer of mechanical power transmission (MPT) products #1 or #2 market share in many of its key product platforms (clutches, gearings, brakes, couplings, belt drives, etc.) Operates within a highly fragmented $18 bil. U.S. MPT market

Top 5 players make up ~20% of the overall share

Investment Thesis: We recently upgraded shares of AIMC to Overweight/Vol. as the Company has executed very well on its business simplification plan, improving gross margin on a y-o-y basis in each quarter of 2016 despite sales declines of 5%+ in each and consolidating facilities (plus cutting SG&A costs), setting up well for substantial operating leverage when its end markets begin to improve. Further, AIMC announced the acquisition of Stromag, which we expect to be ~$0.10-$0.20 accretive to annual EPS upon closing. While it is hard to predict when AIMC’s end markets will improve, we applaud the Company’s hard work over the past two years to protect margins and set itself up for strong earnings growth when its markets turn. We believe shares of AIMC are attractively valued and recommend investors build positions in the stock.

$216 mil. accretive acquisition of Stromag In conjunction with 3Q16 earnings, AIMC announced the acquisition of Stromag for 198 mil. euros/$216 mil. or ~9.5x EBITDA pre-synergies and closer to 7.5x post-synergies Headquartered in Germany with manufacturing locations in France, the U.K., the U.S., China, India and Brazil (in addition to Germany), Stromag is a leading electromechanical power transmission and motion control company with 2015 sales of $143 mil. 77% of revenues are derived in Europe while 11% are in the Americas and 12% are in the Asia Pacific and the rest of the world.

Substantial operating leverage We expect organic top-line growth to be relatively flat in 2017 after falling in 2016 and 2015, but expect the acquisition of Stromag and base business margin enhancements to benefit earnings when growth improves

Valuation AIMC trades at 2017 and 2018 EV/EBITDA multiples of 10.3x and 9.3x vs. peers at 11.6x and 10.6x, respectively

Altra Industrial Motion (AIMC) – Summary



Total Revenues $746,652 $180,453 $182,674 $173,132 $172,647 $708,906 $208,146 $217,896 $208,958 $210,967 $845,967 $219,809 $228,777 $220,452 $223,525 $892,564

Cost of Sales $518,189 125,823 124,474 118,957 117,520 $486,774 143,467 148,038 142,737 143,393 $577,636 150,847 154,745 149,927 151,258 $606,777

Gross Profits $228,463 $54,630 $58,200 $54,175 $55,127 $222,132 $64,679 $69,857 $66,221 $67,574 $268,331 $68,963 $74,032 $70,525 $72,267 $285,787

OPERATING EXPENSES


R&D Expense 17,818 4,564 4,514 4,267 4,332 17,677 4,655 4,604 4,352 4,419 18,031 4,748 4,696 4,439 4,507 18,391

Other Operating Exp. (Inc.) 7,214 1,553 2,175 5,219 11,045 19,992 1,250 1,250 1,250 1,250 5,000 0 0 0 0 0




Other Expense (Income) 963 (278) (205) 45 2,420 1,982 0 0 0 0 0 0 0 0 0 0

Income (Loss) Before Taxes 51,087 12,359 13,476 7,509 541 33,885 15,776 20,050 17,536 18,645 72,009 20,670 24,434 21,956 23,266 90,326

Tax Expense or (Break) 15,744 3,549 4,127 2,196 (1,127) 8,745 4,891 6,216 5,436 5,780 22,323 6,408 7,575 6,806 7,212 28,001

Net Income $35,343 $8,810 $9,349 $5,313 $1,668 $25,140 $10,886 $13,835 $12,100 $12,865 $49,686 $14,262 $16,859 $15,150 $16,053 $62,325

Net loss attributable to non-controlling interest (63) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net Income Attributable to AIMC $35,406 $8,810 $9,349 $5,313 $1,668 $25,140 $10,886 $13,835 $12,100 $12,865 $49,686 $14,262 $16,859 $15,150 $16,053 $62,325

Reported EPS $1.35 $0.34 $0.36 $0.20 $0.06 $0.97 $0.38 $0.47 $0.41 $0.44 $1.71 $0.49 $0.57 $0.51 $0.54 $2.12

Pro Forma EPS $1.64 $0.38 $0.42 $0.35 $0.41 $1.56 $0.41 $0.50 $0.44 $0.47 $1.82 $0.49 $0.57 $0.51 $0.54 $2.12


EBITDA $100,586 $24,046 $26,066 $23,413 $23,918 $97,443 $29,312 $33,383 $30,966 $32,176 $125,836 $32,949 $36,693 $34,197 $35,488 $139,327

MARGIN ANALYSIS

Gross Margin 30.6% 30.3% 31.9% 31.3% 31.9% 31.3% 31.1% 32.1% 31.7% 32.0% 31.7% 31.4% 32.4% 32.0% 32.3% 32.0%



EBITDA 13.5% 13.3% 14.3% 13.5% 13.9% 13.7% 14.1% 15.3% 14.8% 15.3% 14.9% 15.0% 16.0% 15.5% 15.9% 15.6%


Tax Rate 30.8% 28.7% 30.6% 29.2% NM 25.8% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0%

Net Income 4.7% 4.9% 5.1% 3.1% 1.0% 3.5% 5.2% 6.3% 5.8% 6.1% 5.9% 6.5% 7.4% 6.9% 7.2% 7.0%

GROWTH ANALYSIS


Gross Profit (8.2%) (6.6%) (3.0%) (2.9%) 1.7% (2.8%) 18.4% 20.0% 22.2% 22.6% 20.8% 6.6% 6.0% 6.5% 6.9% 6.5%

Selling, General and Admin. (11.0%) (7.6%) 0.5% 0.1% 0.7% (1.7%) 22.2% 19.6% 20.7% 23.4% 21.4% 2.4% 2.6% 2.8% 3.3% 2.8%

Operating Income (14.5%) (4.3%) (8.7%) (37.8%) (57.5%) (26.0%) 18.9% 34.4% 85.1% 236.5% 66.2% 25.1% 19.6% 22.4% 22.2% 22.1%

EBITDA (7.7%) (6.6%) (4.1%) (3.1%) 1.8% (3.1%) 21.9% 28.1% 32.3% 34.5% 29.1% 12.4% 9.9% 10.4% 10.3% 10.7%

Income Before Taxes (19.1%) (8.6%) (3.6%) (42.5%) (94.9%) (33.7%) 27.7% 48.8% 133.5% NM 112.5% 31.0% 21.9% 25.2% 24.8% 25.4%

Net Income (12.0%) (6.2%) (2.9%) (48.0%) (72.7%) (28.9%) 23.6% 48.0% 127.7% NM 97.6% 31.0% 21.9% 25.2% 24.8% 25.4%

EPS (10.3%) (10.4%) (3.7%) (19.1%) 14.9% (5.0%) 8.4% 20.3% 28.0% 14.2% 17.0% 18.3% 13.9% 16.1% 16.1% 16.0%



50

Altra Industrial Motion (AIMC) – Model

51

AIMC Peer Group Valuation

Price Market Enterprise

$ in Millions, Except per Share Ticker Rating (3/9/2017) Cap Value 2017 2018 2017 2018 2017 2018 2017 2018

Covered Companies

Altra Industrial Motion Corp. AIMC Overweight (Vol) $38.30 $992.6 $1,293.2 $125.8 $139.3 10.3x 9.3x $1.82 $2.12 21.0x 18.1x

Manufacturing

SKF AB Class B SKF.B-OME - $174.70 $79,598.8 $103,248.8 $10,365.0 $10,974.6 10.0x 9.4x $10.89 $11.87 16.0x 14.7x

ABB Ltd. Sponsored ADR ABB - $22.36 $47,872.8 $49,354.5 $4,908.8 $5,362.2 10.1x 9.2x $1.23 $1.39 18.1x 16.1x

Emerson Electric Co. EMR - $59.28 $38,194.1 $38,112.1 $3,281.7 $3,545.7 11.6x 10.7x $2.63 $2.89 22.6x 20.5x

Rockwell Automation, Inc. ROK - $152.18 $19,737.7 $19,154.6 $1,331.9 $1,436.5 14.4x 13.3x $6.43 $7.05 23.7x 21.6x

Hubbell Incorporated Class B HUB.B - $119.44 $6,640.9 $7,185.8 $604.2 $648.9 11.9x 11.1x $5.71 $6.24 20.9x 19.1x

Timken Company TKR - $43.35 $3,402.2 $3,898.2 $392.5 $441.7 9.9x 8.8x $2.11 $2.59 20.5x 16.8x

Rexnord Corporation RXN - $22.39 $2,341.1 $3,538.7 $375.6 $402.8 9.4x 8.8x $1.33 $1.51 16.8x 14.8x

Actuant Corporation Class A ATU - $26.45 $1,576.8 $1,976.8 $148.8 $168.1 13.3x 11.8x $1.20 $1.38 22.1x 19.2x

Franklin Electric Co., Inc. FELE - $40.10 $1,880.7 $1,992.0 $155.4 $167.5 12.8x 11.9x $1.83 $2.01 21.9x 19.9x

RBC Bearings Incorporated ROLL - $89.51 $2,131.6 $2,387.0 $161.1 $183.8 14.8x 13.0x $3.52 $4.33 25.4x 20.7x

Regal Beloit Corp RBC - $73.85 $3,330.6 $4,457.6 $488.0 $513.6 9.1x 8.7x $4.72 $5.18 15.7x 14.3x

Average 11.6x 10.6x 20.3x 18.0x

Median 11.6x 10.7x 20.9x 19.1x

Source: FactSet Research Systems Inc.; EPS, EBITDA and sales estimates are consensus estimates courtesy of FactSet except for AIMC which are Stephens Inc. non-GAAP estimates.

Calendar EPS P/ECalendar EBITDA EV/EBITDA

Pri

ce

Tick

er

Rat

ing

(3/9

/201

7)

Alt

ra In

du

stri

al M

oti

on

Co

rp.

AIM

CO

verw

eig

ht

(Vo

l)$3

8.30

AB

B L

td. S

po

nso

red

AD

RA

BB

-$2

2.36

AEC

OM

AC

M-

$35.

11

Ap

pli

ed

Ind

ust

rial

Te

chn

olo

gie

s, In

c.A

IT-

$59.

65

Act

uan

t C

orp

ora

tio

n C

lass

AA

TU-

$26.

45

An

ixte

r In

tern

atio

nal

Inc.

AX

E-

$78.

65

BP

p.l

.c. S

po

nso

red

AD

RB

P$3

3.50

Bu

reau

Ve

rita

s SA

BV

I-P

AR

-$1

7.90

Ch

icag

o B

rid

ge &

Iro

n C

o. N

VC

BI

-$3

0.26

Ch

arte

r C

om

mu

nic

atio

ns,

Inc.

Cla

ss A

CH

TR-

$323

.14

Co

mca

st C

orp

ora

tio

n C

lass

AC

MC

SA-

$37.

38

Ce

ntu

ryLi

nk,

Inc.

CTL

-$2

2.73

NO

W, I

nc.

DN

OW

Equ

al-W

eig

ht

(Vo

l)$1

7.45

DX

P E

nte

rpri

ses,

Inc.

DX

PE

Ove

rwe

igh

t (V

ol)

$31.

37

Dyc

om

Ind

ust

rie

s, In

c.D

YO

verw

eig

ht

(Vo

l)$9

4.46

Eme

rso

n E

lect

ric

Co

.EM

R-

$59.

28

Fast

en

al C

om

pan

yFA

ST-

$50.

18

Fran

klin

Ele

ctri

c C

o.,

Inc.

FELE

-$4

0.10

Flu

or

Co

rpo

rati

on

FLR

-$5

3.52

Gre

at L

ake

s D

red

ge &

Do

ck C

orp

ora

tio

nG

LDD

-$4

.25

Alp

hab

et

Inc.

Cla

ss C

GO

OG

-$8

38.6

8

Ge

nu

ine

Par

ts C

om

pan

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PC

-$9

2.95

W.W

. Gra

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r, In

c.G

WW

Equ

al-W

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ht

$244

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HD

Su

pp

ly H

old

ings

, In

c.H

DS

-$4

1.92

Hu

bb

ell

Inco

rpo

rate

d C

lass

BH

UB

.B-

$119

.44

Jaco

bs

Engi

ne

eri

ng

Gro

up

Inc.

JEC

-$5

5.87

Kam

an C

orp

ora

tio

n C

lass

AK

AM

N-

$48.

75

Mis

tras

Gro

up

, In

c.M

GEq

ual

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igh

t (V

ol)

$21.

96

MR

C G

lob

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c.M

RC

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rwe

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t (V

ol)

$18.

11

MSC

Ind

ust

rial

Dir

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Co

., In

c. C

lass

AM

SMO

verw

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ht

$101

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Mat

rix

Serv

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Co

mp

any

MTR

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verw

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(Vo

l)$1

5.70

Mas

Tec,

Inc.

MTZ

Ove

rwe

igh

t (V

ol)

$38.

70

MYR

Gro

up

Inc.

MYR

G-

$37.

09

Ori

on

Gro

up

Ho

ldin

gs, I

nc.

OR

NO

verw

eig

ht

(Vo

l)$9

.21

Po

ol C

orp

ora

tio

nP

OO

LEq

ual

-We

igh

t$1

16.9

9

Pri

mo

ris

Serv

ice

s C

orp

ora

tio

nP

RIM

Equ

al-W

eig

ht

(Vo

l)$2

3.77

Qu

anta

Se

rvic

es,

Inc.

PW

RO

verw

eig

ht

(Vo

l)$3

6.72

Re

gal B

elo

it C

orp

RB

C-

$73.

85

Ro

ckw

ell

Au

tom

atio

n, I

nc.

RO

K-

$152

.18

RB

C B

ear

ings

Inco

rpo

rate

dR

OLL

-$8

9.51

Re

xno

rd C

orp

ora

tio

nR

XN

-$2

2.39

Site

On

e L

and

scap

e S

up

ply

, In

c.SI

TE-

$39.

76

SKF

AB

Cla

ss B

SKF.

B-O

ME

-$1

74.7

0

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T In

c.T

-$4

1.94

Team

, In

c.TI

SIO

verw

eig

ht

(Vo

l)$2

7.00

Tim

ken

Co

mp

any

TKR

-$4

3.35

Tuto

r P

eri

ni C

orp

ora

tio

nTP

C-

$29.

55

Tim

e W

arn

er

Cab

le In

c.TW

C-

-

Un

ite

d T

ech

no

logi

es

Co

rpo

rati

on

UTX

-$1

11.9

3

Ve

rizo

n C

om

mu

nic

atio

ns

Inc.

VZ

-$4

9.28

WES

CO

Inte

rnat

ion

al, I

nc.

WC

CO

verw

eig

ht

(Vo

l)$6

8.15

Win

dst

ream

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ldin

gs, I

nc.

WIN

-$6

.50

Wat

sco

, In

c.W

SOEq

ual

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igh

t$1

47.2

8

Sou

rce:

Fa

ctSe

t R

esea

rch

Sys

tem

s a

nd

Ste

ph

ens

Inc.

52

53

REQUIRED DISCLOSURES

The research analyst principally responsible for preparation of this presentation has received compensation that is based on the firm’s overall revenue which includes investment banking revenue. Rating Definitions: Company Stock Ratings: OVERWEIGHT (O) – The stock’s total return is expected to be greater than the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. EQUAL-WEIGHT (E) – The stock’s total return is expected to be equivalent to the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. UNDERWEIGHT (U) – The stock’s total return is expected to be less than the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. VOLATILE (V) – The stock’s price volatility is potentially higher than that of the company’s industry sector. Distribution of Stephens Inc.'s Ratings (as of 12/31/16) % Investment Banking Clients Rating % (Past 12 Months) BUY 53 26 HOLD 45 13 SELL 2 0

OTHER DISCLOSURES

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