Merrell Brothers, LLC Research Note on Ashtead Group

Sum Zero Ex-US Challenge

www.merrellinvestments.com

Brennan W. Merrell, Investment Manager

November 28, 2017

Ashtead Group. (OTC: ASHTY, LSE:AHT): Helping the world build a strong future and portfolio one rental at a time

Investment Thesis:

The Merrell Brothers investment management team recommends international investors acquire the shares of Ashtead Group, a global equipment rental company at current levels. Ashtead Group's shares are significantly undervalued and the company offers long-term stock appreciation. We believe Ashtead Group is currently worth $137.00 (OTC: ASHTY) per share. Offering a 32.5% premium based on a 24 P/E (TTY) multiple and EPS of £4.26 (1£=$1.34, $5.708 EPS) and a $103.41 ADR (11/28/2017). Trading on the Stock Exchange, Ashtead Group earned 107.8 per share (GBX, TTY) and currently trades at 1,949.00 (GBX) or 18.08 times Price to Earnings. We value the company at a 24 multiple, meaning Ashtead Group has an estimated valuation of 2,587.2 (GBX) or a 32.75% premium to the current level.

Ashtead Group deserves a spot in your portfolio because of its strong brand recognition, potential market share growth, strong balance sheet, young rental fleet, and solid margins. The company operates in the , Canada, and the United States under two business lines, Sunbelt Rentals and A-Plant. Sunbelt Rentals is Ashtead's North America brand and represents 87% of their revenues while Ashtead Group's A-Plant operates exclusively in the United Kingdom. Ashtead Group is currently the second largest rental company in the United States with 7% market share and the leading rental company in the United Kingdom with 7% market share. Their goal is to attain a market share of 15% in the United States with a long-term goal of 20%. During the past year, Sunbelt increased revenues by 2/3 in Canada. Their long- term Canada goal is to generate 10% to 15% North American revenue from Canada and attain over 5% market share. Since 2010, Sunbelt has doubled their North American market share. Their goal is to expand their North American store footprint by nearly 40% within four years. Presumably, Ashtead Group will benefit from the forecasted continuation of the robust market in North America and the United Kingdom. Their significant market share

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and national scale provides them with lower cost of capital, superior buying power, technology advantage, and the ability to make accretive bolt on acquisitions. The Merrell Brothers rate Ashtead Group a strong buy at the current market price.

Introduction to Ashtead Group:

The Ashtead Group is based in London, UK and founded in 1947. The company operates in the United Kingdom, Canada, and the United States under two business lines, Sunbelt Rentals and A-Plant. Sunbelt Rentals is Ashtead's North America brand and represents 87% of their revenues while Ashtead Group's A-Plant operates exclusively in the United Kingdom. Ashtead Group operates 646 Sunbelt locations in North America where they employ 10,610 employees and A-Plant has 189 locations where they employ 3,546 workers. The Ashtead Group provides equipment rentals that serve the construction, entertainment, facilities & maintenance, and emergency response markets. Their rental equipment helps customers in both residential and commercial construction, as well as specialty clients including oil & gas, industrial, flooring solutions, remediation & restoration, scaffolding services, climate control, and asset maintenance. Ashtead's equipment helps customers lift, move, dig, weld, compact, drill, pump, generate, air condition, light, and scrub among others. Sunbelt operates the largest spot climate control business in North America. Equipment Rentals provides companies more flexibility and understanding of their costs with no need to worry about the equipment maintenance. Their team focuses on outstanding customer service and having an updated rental fleet that is readily available. There are over 600,000 rental assets in their global fleet severing over 600,000 customers. During the last year, they severed over 2,000 events and rented 950,000 small tools. In summation, they generated over 2.6 million rental contracts during the last year.

Ashtead Group's Sunbelt Rentals is the second largest rental company in the United States with 7% market share behind United Rentals (NYSE: URI) with 10%. The number three United States rental company is Herc Holdings (NYSE:HRI) with only 3% market share and Home Depot owns 1% of the rental market share. The market is highly fragmented with numerous smaller rental companies across North America and the United Kingdom. The Ashtead Group fueled past growth by expanding into additional markets through bolt on acquisitions, adding new geographical areas, and expanding into specialty rentals. Ashtead Group sees a long runway for future growth and are projecting double digit growth for the next five years.

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Source: Ashtead Group

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Souce: Ashtead Group

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Ashtead Group Taking Market Share & Leading The Group

During the last five years, Sunbelt has added over 250 new store locations in the United States totaling 646 North American locations. Sunbelt believes they can easily add another 250 store locations by 2021. In the United States, Sunbelt has grown their market share to 7% in 2017 from 2% in 2002. Their goal is to attain market share of 15% in the United States with a long- term goal of 20%. In Canada, Sunbelt has increased revenues by 2/3 during the past year. Their stated long-term Canada goal is to generate 10% to 15% North American revenue from Canada and to attain over 5% market share. Currently, there are 19 stores centered in southwest Canada with significant long-term expansion opportunity. Additionally, they recently added 30 locations in Eastern Canada with the C$275 million acquisition of CRS Contractors Rental Supply Limited Partnership.

Since 2010, Sunbelt has doubled their market share in North America from acquisitions, expanding organically, and by broadening the variety of rental assets. In the United Kingdom, Ashtead's A-Plant is the largest equipment rental player with 189 locations and only 7% market share. The company sees opportunity to expand their UK market share by 50% to 10.5% in the near future. Ashtead believes as the market grows they will continue to grow their market share. During the past five years, the larger rental players have increased their market share by 25%. This consolidation and growth is likely to continue in the near future and Ashtead Group predicts the larger players will continue to grow an additional 30% to 40% during the medium term.

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Source: Ashtead Group

Large Size Means Scale

The strong brands of Ashtead Group resonates with customers all over the country and their catchy green paint creates subliminal advertising. They can move equipment around on a national base and serve clients around the country. Due to the magnitude of the annual purchases from manufacturers, Ashtead's large size allows them to buy rental equipment at lower cost than its competitors. They have the resources to properly maintain the assets, which could be a challenge for smaller underfunded competitors. Their large size and clean balance sheet allows Ashtead Group to access discounted financing versus their smaller competitors. Their robust balance sheet provides the opportunity for Ashtead Group to quickly acquire smaller competitors to expand their market. They are able to expand organically by growing the store count responsibly and broadening the rental mix at each location. New store openings have a positive correlation to their market share growth and profitability. Below, stockholders will clearly see how Sunbelt has dominated the third largest rental company, Herc Rentals. The lower cost of capital, discounted equipment, and national scale is a competitive advantage for Ashtead Group.

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Source: Ashtead Group Source: Herc Rentals Investor Relations

Technology Advantage

Ashtead Group has developed a significant technological advantage over their smaller competitors. Sunbelt offers a complete ecosystem that allows customers to see a current view of their account via desktop or mobile app. Customers can track current rentals in use, order future rentals or service, request a rental return, extend their current rental, and locate store locations. Additionally, their sales representatives can locate all their equipment, customer contacts, customer needs & preferences, and additional CRM tools to help serve their customers. Finally, Sunbelt uses a Vehicle Delivery Optimization System to efficiently manage equipment deliveries and scheduled pickups through the drivers' mobile phones. Seemingly, Ashtead is responsive to the customers by delivering 70% of orders within 24 hours. Ashtead Group served over 600,000 customers during the past year. A review of the Sunbelt App on the Apple iTunes and Google Play yielded positive reviews. However, some reviews have suggested more improvements need to be worked on. I have reviewed Herc Rental and United Rentals mobile app on the Apple and Google platform and discovered reported flaws in the competitions offerings. Recently, Sunbelt has updated their app, while the last update from United Rentals was two years ago.

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Opportunity for Future Growth

Ashtead Group is focused on growing same store sales and the company is projecting to earn five years of double digit top line growth with strong cash flow generation. Their plan to continue growing includes future bolt on acquisitions, Greenfield opportunities, expansion of the specialty business, store growth, and best in class customer service. We see an untapped and significant growth opportunities in the United States, Canada, and the United Kingdom rental market. We believe Ashtead Group will double their market share within their established markets within five years. Their goal is to expand their North American store footprint by nearly 40% within four years. The North American and United Kingdom economy is firing on all cylinders and will ultimately benefit Ashtead Group. Low unemployment, low oil prices, depressed interest rates have increased income and lead to a robust residential construction and remodeling markets across North America and the United Kingdom. Additionally, pent-up commercial and government construction created a backlog of projects, which have benefited and will continue to benefit the Ashtead Group. Their specialty business generated 16% of total revenue in 2011 and grew to 21% of total revenue in 2017. Nearly 50% of their Greenfield openings in North America have been specialty store openings. Their goal is to attain over $1 billion in yearly revenue from their specialty business. In 2015, Ashtead successfully introduced flooring options as the market was limited. Additionally, Ashtead Group sees additional opportunity in their subscription based ToolFlex, a small tool rental program that allows customers to pay a flat monthly fee for unlimited use of three to ten tools at a time. Customers can swap out a rental at any Sunbelt location and the list includes hundred of primarily smaller tools. This is a unique offering for diverse jobs, which require numerous smaller tools. ToolFlex has attracted a new mix of smaller customers looking to get their jobs finished. Today, Ashtead Group generates about 5% of revenues from the residental constrution and we beleive this number will increase because of the ToolFlex program.

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Source: Sunbelt rentals, Ashtead Group

Continued Acquisitions:

Sunbelt completed 15 North American acquisitions totaling £437 million and A-Plant made four bolt on acquisitions totaling £46 million during the past year. Ashtead Group sees a healthily pipeline of future deals because of the highly fragmented rental markets. Store margins initially compress when they open new locations or acquire competitors. However, stores profitability quickly improves as they add additional sales from the expansion of the new rental fleet and customer mix. Ashtead Group is focused on growing same store sales and new stores generate on average 7% year over year growth. Ashtead's acquisitions can improve operationally or with additional investment. Most acquisitions are operating below Sunbelt or A-Plants historical margins and investment returns. On average, Ashtead Group is able to significantly improve the operations of the acquired firm after one year.

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Source: Ashtead Group

Source: Ashtead Group

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Source: Ashtead Group

Construction Forecast a Boon of Ashtead Group

The United States, Canada, and the United Kingdom are planning on spending trillions of U.S. Dollars on improving their infrastructure, to boast their economy and living standards. There is no denying America's infrastructure needs a major overhaul, including roads, bridges, airports, dams, rail, wastewater, drinking water, and terminals. From 2016 to 2025, it has been estimated there is a $4.6 trillion cumulative need for infrastructure spending in the United States. During 2016-2017, President Trump campaigned and proposed a $1 trillion infrastructure spend. However, Trump's proposal is light on details and an actionable plan. However, there could be a major push to ramp up United States infrastructure spending in the near future. Canada implemented the "Investing in Canada" plan and mandated $180 billion to be spent on infrastructure over 12 years with $33 billion proposed spending during 2017. Finally, the United Kingdom has detailed £483 billion national infrastructure plan with nearly 50/50 funding, which stem from public and private funding. Current and future target areas include roads, rail, ports & airports, energy, flood defense, water & waste water, housing, and social infrastructure (schools, hospitals, prisons, etc.) among others. Spending billions and trillions of U.S. dollars on infrastructure will undoubtedly benefit the Ashtead Group.

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Source: Oldcastle Inc.

Source: https://www.infrastructurereportcard.org/the-impact/economic-impact/

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Source:www.gov.uk/government/publications/national-infrastructure-delivery-plan-2016-to-2021

Financials, Clean Balance Sheet, Solid Margins, & Valuation

Ashtead Group is an industry leader with solid market share and best in class operating margins. Since 2013, Ashtead Group generated average operating margins of 25.38% while Herc Rentals and United Rentals have produced an operating margin of 10.22% and 22.28%, respectively. Ashtead Group has the most unlevered balance sheet of the group. Currently, they have a debt to equity level of 1.23, which is the lowest level in a decade. On the contrary, Herc Rentals and United Rentals have a debt to equity level of 7.66 and 3.47, respectively. During the past 12 months, Ashtead Group generated revenues of £3.36 billion and earnings £533 million. Currently, Ashtead Groups market capitalization is worth £9.505 billion (11/28/2017). Ashtead Group trades at a price to earnings multiple (TTM) of 18.2 times, while United Rentals trades at 22.8 times earnings and Herc Rentals is unprofitable. We believe that Ashtead Group deserves the premium valuation in the group due to higher margins, unlevered balance sheet, and stronger growth. We believe Ashtead Group is currently worth $137.00 (OTC: ASHTY) per share. Offering a 32.5% premium based on a 24 P/E (TTY) multiple and EPS of £4.26 (1£=$1.34, $5.708 EPS) and a $103.41 ADR close (11/28/2017). Trading on the , Ashtead Group (LSE: AHT) earned per share 107.8 (GBX) and currently trades at 1,949.00 (GBX) or 18.08 times Price to Earnings (TTM). We value the company at a 24 multiple,

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meaning Ashtead Group has an estimated valuation of 2,587.2 (GBX) or a 32.75% premium to the current level. Shares of OTC: ASHTY is equivalent of 4 London Stock Exchange shares of Ashtead Group (LSE:AHT).

Source: Ashtead Group Financials 2008-04 2009-04 2010-04 2011-04 2012-04 2013-04 2014-04 2015-04 2016-04 2017-04 TTM Asttead Group: Revenue GBP Mil 1,047 1,124 838 949 1,134 1,362 1,635 2,039 2,545 3,187 3,360 Operating Income GBP Mil 185 68 66 97 178 284 404 541 700 869 925 Operating Margin % 17.6 6.1 7.9 10.2 15.7 20.9 24.7 26.5 27.5 27.3 27.5 Net Income GBP Mil 77 63 2 1 89 138 231 303 408 501 533 Earnings Per Share GBP 0.56 0.5 0.02 0.01 0.69 1.08 1.83 2.4 3.24 4 4.26 Shares Mil 137 126 124 124 127 127 126 126 126 125 125 Financial Leverage 3.79 3.54 3.38 3.32 3.4 3.33 3.24 3.47 3.21 3.11 3.05 Debt/Equity 2.17 1.96 1.76 1.65 1.58 1.51 1.39 1.53 1.36 1.28 1.23

Herc Holdings (NYSE:HRI): Revenue USD Mil 1,608 1,735 1,770 1,678 1,554 1,668 Operating Income USD Mil 176 270 197 138 81 71 Operating Margin % 11 15.6 11.1 8.2 5.2 4.3 Net Income USD Mil 61 98 90 111 -19 -67 Earnings Per Share USD 3.45 2.87 3.69 -0.7 -2.38 Shares Mil 31 32 30 28 28 Financial Leverage 2.2 2.14 1.47 10.9 12.43 Debt/Equity 0.19 0.24 0.02 6.86 7.66

United Rentals (NYSE: URI): Revenue USD Mil 3,715 3,267 2,358 2,237 2,611 4,117 4,955 5,685 5,817 5,762 6,242 Operating Income USD Mil 658 -630 114 197 396 591 1,078 1,391 1,518 1,415 1,447 Operating Margin % 17.7 -19.3 4.8 8.8 15.2 14.4 21.8 24.5 26.1 24.6 23.2 Net Income USD Mil 369 -704 -62 -26 101 75 387 540 585 566 602 Earnings Per Share USD 3.25 -12.62 -1.02 -0.44 1.38 0.79 3.64 5.15 6.07 6.45 7.05 Shares Mil 114 75 60 60 73 95 106 105 96 88 85 Financial Leverage 2.89 64.73 7.15 6.14 6.94 8.19 7.27 6.22 Debt/Equity 1.27 41.36 4.36 3.59 4.14 5.12 4.36 3.47 Source: Morningstar data, 11/28/2017

Utilization Rate & Market Size

Ashtead Group's Sunbelt and A-Plant generates an impressive rental utilizaiton rate of approximently 70%. Ashtead Group targets a utilization rate between 60% and 70% becuase

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above 70% and they would underserve the market and miss out on potential rental income. If the utilizaiton rates are below 60%, then the company has too much rental equipment in inventory and their margins will compress. During 2017, the rental market is estimated to generate nearly $50 billion in annual sales and continue growing 4.5% per year to the year 2021. The U.S. rental market has grown nearly 60% since 2009. Additonally, Ashtead Group has expanded outside of the construction industry and into the speciality market. During 2009, construction rentals represented 55% and non construction was 45% of their business. During 2017, contruction only represented 48% and non construction was 52% of their revenues. Ashtead Group generates about 5% of revenue from the residental constrution, and we beleive this number can significantly increase. Currently, the oil and gas division has returned to postive growth. However, Ashtead Group earns a diminutive amount of sales from the oil and gas industry.

Source: Ashtead Group (above & below)

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Source: Herc Rentals,ARA/IHS Global Insights Oct 2017

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Potential Acquisition of United Rentals or Ashtead Group

Home Depot(NYSE: HD) or Lowes (NYSE: LOW) should consider buying Ashtead or United Rentals due to their higher margins, rental market share, and customer overlap. Home Depot has about 1% market share in the United States and we feel Ashtead Group would be the acquisition target because of their unlevered balance sheet. Ashtead Group generates double the operating margins of Home Depot and further consolidation in the industry would be beneficial. Home Depot seeks to attract commercial business and do it yourselfers. The additional reach of Ashtead Group would provide them with additional rental assets, market leadership, and a long client list. Additionally, Home Depot could cross sell to the Ashtead Group's customers. Currently, Sunbelt has a professional relationship with Lowes as they have a Sunbelt center located in 23 Lowes stores. However, Home Depot is a much better operator and has experience successfully integrating acquisitions. Home Depot has successfully completed the $1.63 billion acquisition of Interline Brands in 2015 and the $265 million acquisition of Compact Power Equipment in 2017. Compact Power Equipment offers customers equipment maintenance plans and towable rental equipment like mini excavators, material handling, trailers, tree care, among others. Compact Power Equipment has some rental overlap with Sunbelt. However, Compact Power Equipment is a small fraction of size of Sunbelt Rental's revenue (less than $100 million) and product fleet. Another potential acquirer of Ashtead Group might include a private equity firm looking for a growing and reasonably valued firm. However, our valuation does not include an acquisition premium.

Risks & Cyclicality

Ashtead Group operates in a cyclical business that is tied to the growth of the economy. However, we believe they are better positioned to weather an economic downturn. Ashtead Group is resilient to a downturn because of their diversified rental mix, geographical diversification, and strong balance sheet. Their strong balance sheet allows them to buy competitors when the rental market becomes challenging. Between 2011 and 2016, Sunbelt achieved 22% compounded annual growth in the United States. Potential risks include a lower asset utilization rate of below 60% which means their margins will be heavily squeezed. Potentially, Ashtead Group might sell assets below their book value and incur a loss if they need to raise cash and reduce its fleet. Additional risks include the reliance of debt and lower interest rates to acquire competitors and rental assets. New locations take a year or two before they become profitable. In an economic downturn, the newly opened stores could be unprofitable for longer periods of time. They are in a highly competitive market and competitors could become irrational. Today, employees are mostly happy working and well trained at Ashtead Group according to Glassdoor. If this were to change, customer service and sales would suffer.

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Conclusion

Ashtead Group offers investors a chance to own a well run and growing company at a projected 32% discount. The company has a long runway of future growth with global construction expanding, organic growth in new stores, enhanced product mix, and future bolt on acquisitions. Ashtead Group has numerous competitive advantages including: significant market share, national scale, strong margins, brand recognition, lower cost of capital, superior buying power, young rental fleet, robust balance sheet, technology advantage, and the ability to make accretive acquisitions. Ashtead Group deserves a spot in your portfolio today.

Appendix:

Source: Ashtead Group

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Source: Ashtead Group

Source: Ashtead Group

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Source: Ashtead Group

Source: Ashtead Group

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Ashtead Group Financials 2008-04 2009-04 2010-04 2011-04 2012-04 2013-04 2014-04 2015-04 2016-04 2017-04 TTM Revenue GBP Mil 1,047 1,124 838 949 1,134 1,362 1,635 2,039 2,545 3,187 3,360 Operating Income GBP Mil 185 68 66 97 178 284 404 541 700 869 925 Operating Margin % 17.6 6.1 7.9 10.2 15.7 20.9 24.7 26.5 27.5 27.3 27.5 Net Income GBP Mil 77 63 2 1 89 138 231 303 408 501 533 Earnings Per Share GBP 0.56 0.5 0.02 0.01 0.69 1.08 1.83 2.40 3.24 4.00 4.26 Dividends GBP 0.07 0.45 0.64 0.94 0.94 Payout Ratio % * 20 21.7 24.5 22.1 Shares Mil 137 126 124 124 127 127 126 126 126 125 125 Book Value Per Share * GBP 13.18 16.58 22.25 22.26 Operating Cash Flow GBP Mil 264 346 193 70 30 0 23 -17 33 425 531 Cap Spending GBP Mil -352 -235 -7 -20 -49 -58 -85 -79 -110 -112 -119 Free Cash Flow GBP Mil -87 110 187 49 -20 -58 -62 -96 -76 312 411 Free Cash Flow Per Share * GBP -1.21 -0.93 1.9 Working Capital GBP Mil 61 33 53 0 -64 -58 -77 -80 2 74

Profitability 2008-04 2009-04 2010-04 2011-04 2012-04 2013-04 2014-04 2015-04 2016-04 2017-04 TTM Tax Rate % 36.19 77.08 47.06 34.35 35.59 35.15 35.96 33.91 34.52 34.59 Net Margin % 7.41 5.61 0.25 0.09 7.8 10.19 14.14 14.88 16.01 15.72 15.89 Asset Turnover (Average) 0.64 0.64 0.47 0.58 0.65 0.66 0.66 0.62 0.59 0.59 0.57 Return on Assets % 4.76 3.57 0.12 0.05 5.08 6.68 9.35 9.29 9.47 9.21 9.05 Financial Leverage (Average) 3.79 3.54 3.38 3.32 3.4 3.33 3.24 3.47 3.21 3.11 3.05 Return on Equity % 18.54 13.04 0.41 0.18 17.08 22.44 30.69 31.34 31.45 29.04 28.21 Return on Invested Capital % 9.12 7.38 2.82 3.27 8.67 10.49 14.1 14.43 14.61 14.18 13.84 Interest Coverage 2.51 1.01 1.08 1.03 3.8 6.26 8.94 8.27 8.7 8.55 8.68

Key Ratios -> Growth 2008-04 2009-04 2010-04 2011-04 2012-04 2013-04 2014-04 2015-04 2016-04 2017-04 Latest Qtr Revenue % Year over Year 19.82 7.27 -25.41 13.13 19.62 20.03 20.03 24.73 24.86 25.18 24.47 3-Year Average 26.01 20.78 -1.4 -3.26 0.31 17.55 19.89 21.58 23.18 24.92 5-Year Average 14.2 17.73 9.87 8.25 5.35 5.38 7.78 19.45 21.83 22.94 10-Year Average 17.87 15.95 10.74 5.56 6.87 9.7 12.64 14.56 14.84 13.8 Operating Income % Year over Year 94.42 -62.93 -3.51 47.12 83.52 59.65 41.86 34.07 29.29 24.26 27.87 3-Year Average 40.1 -18.1 -11.4 -19.26 37.6 62.75 60.78 44.81 34.98 29.14 5-Year Average 214.46 33.39 -0.33 -4.85 13.43 9.05 42.62 52.32 48.43 37.29 10-Year Average 16.37 3.08 1.46 3.6 9.41 85.18 37.93 23.21 18.84 24.79 Net Income % Year over Year 882.28 -18.81 -96.67 -57.14 9733.33 56.84 66.57 31.23 34.34 22.91 3-Year Average 62.15 4.25 -35.7 -77.36 12 304.32 535.69 50.78 43.2 29.4 5-Year Average -35.07 -56.16 62.13 12.33 29.7 170.37 239.78 41.44 10-Year Average 10.31 5.3 -25.76 -8.55 37.36 32.49 22.04 51.43 EPS % Year over Year 840 -11.35 -95.2 -66.67 57.8 67.77 31.22 34.78 23.46 28.76 3-Year Average 39.75 0.88 -26.32 -75.79 11.44 257 511.8 51.45 43.69 29.73 5-Year Average -34.99 -56.04 63.08 14.13 29.66 151.27 232.27 42.03 10-Year Average 4.55 1.14 -25.65 -11.06 32.79 27.81 20.86 52.19 Key Ratios -> Financial Health Balance Sheet Items (in %) 2008-04 2009-04 2010-04 2011-04 2012-04 2013-04 2014-04 2015-04 2016-04 2017-04 Latest Qtr Cash & Short-Term Investments 0.11 0.09 3.24 1.18 1.24 0.89 0.1 0.27 0.27 0.1 0.12 Accounts Receivable 8.22 6.66 6.75 8.27 7.9 8.15 8.28 8.46 8.31 8.26 9.54 Inventory 1.36 0.56 0.58 0.72 0.71 0.73 0.69 0.62 0.87 0.72 0.68 Other Current Assets 3.11 1.47 1.28 1.59 1.69 1.5 1.81 2 1.44 1.51 Total Current Assets 12.79 8.78 11.85 11.75 11.54 11.28 10.89 11.35 10.9 10.6 10.34 Net PP&E 67.79 69.52 65.09 64.82 67.06 69.73 72.19 72.8 75.57 73.53 73.98 Intangibles 17.99 21.02 22.27 22.97 20.84 18.92 16.7 15.77 13.49 15.87 15.68 Other Long-Term Assets 1.43 0.68 0.8 0.45 0.56 0.07 0.23 0.08 0.05 Total Assets 100 100 100 100 100 100 100 100 100 100 100 Accounts Payable 2.63 1.38 2.88 5.07 6.35 6.46 6.04 6.85 4.89 3.64 8.92 Short-Term Debt 0.46 0.37 0.18 0.11 0.11 Taxes Payable 0.12 0.15 0.15 1.01 1.03 0.88 0.76 0.8 0.61 Accrued Liabilities Other Short-Term Liabilities 6.05 5.29 5.55 6.45 8.35 6.34 6.74 5.7 5.21 4.95 0.39 Total Current Liabilities 9.14 7.04 8.73 11.78 14.96 13.82 13.8 13.42 10.85 9.38 9.91 Long-Term Debt 57.43 55.37 52.04 49.6 46.47 45.39 42.91 43.83 42.31 41.29 40.46 Other Long-Term Liabilities 7.02 9.33 9.67 8.51 9.13 10.76 12.44 13.96 15.66 17.17 16.81 Total Liabilities 73.59 71.74 70.44 69.88 70.56 69.97 69.15 71.21 68.83 67.84 67.19 Total Stockholders' Equity 26.41 28.26 29.56 30.12 29.44 30.03 30.85 28.79 31.17 32.16 32.81 Total Liabilities & Equity 100 100 100 100 100 100 100 100 100 100 100 Liquidity/Financial Health 2008-04 2009-04 2010-04 2011-04 2012-04 2013-04 2014-04 2015-04 2016-04 2017-04 Latest Qtr Current Ratio 1.4 1.25 1.36 1 0.77 0.82 0.79 0.85 1 1.13 1.04 Quick Ratio 1.08 1.16 1.29 0.94 0.72 0.76 0.67 0.71 0.86 0.98 0.97 Financial Leverage 3.79 3.54 3.38 3.32 3.4 3.33 3.24 3.47 3.21 3.11 3.05 Debt/Equity 2.17 1.96 1.76 1.65 1.58 1.51 1.39 1.53 1.36 1.28 1.23 Key Ratios -> Efficiency Ratios Efficiency 2008-04 2009-04 2010-04 2011-04 2012-04 2013-04 2014-04 2015-04 2016-04 2017-04 TTM Days Sales Outstanding 48.94 42.39 51.85 47.41 45.2 44.76 45.39 49.04 51.7 51.58 61.56 Receivables Turnover 7.46 8.61 7.04 7.7 8.08 8.16 8.04 7.44 7.06 7.08 5.93 Fixed Assets Turnover 0.96 0.93 0.7 0.89 0.99 0.96 0.93 0.86 0.8 0.79 0.76 Asset Turnover 0.64 0.64 0.47 0.58 0.65 0.66 0.66 0.62 0.59 0.59 0.57 Source: Morningstar data, 11/28/2017 Page 21 of 22

About the Merrell Brothers, LLC

The Merrell Brothers, LLC is a Jacksonville, FL based Independent Registered Investment Advisor that offers financial planning and long-term investment management in securities. Our investment objective is to create a portfolio of undervalued securities that contain high quality companies for our clients that achieves meaningful long-term growth. The Merrell Brothers follow several of Warren Buffett, Charlie Munger, and Benjamin Graham’s core investment principals. These potentially include finding investments that maintain a corporate moat or a durable competitive advantage, high return on equity, minimal or no debt, high cash and cash equivalent balances, low capital expenditures, growing earnings, and high free cash flows. We also like to invest in stocks that pay dividends that we will reinvest in new companies. For your consideration, please review our website at www.merrellinvestments.com or call the office at 904-222-8881 to gain more information about our firm.

Disclosures:

This report was created for the Sum Zero Ex-US Challenge and distributed to the Merrell Brothers, LLC investment management clients. This research note is not a solicitation for an investment or a recommendation for the securities listed above. Potential investors should understand the risks and objectives before investing and returns are not guaranteed. As such, past performance does not guarantee future returns.

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