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EFCG

EFCG Engineering/Consulting Industry Overview for FIDIC

by Paul Zofnass, President of EFCGSeptember 16, 2009

Compiled by EFCG; Web: www.efcg.com

18 E 48th Street, New York, NY 10017 (212) 752-2203

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EFCG

Participants in the 2008 EFCG SurveyGross Revs. *

Revs # of ($Bil)Size Category ($MM) Firms 2008Mega Major >1 Bil 19 54Mini Major 250-1 Bil 31 15Micro Major 100-250 29 4Mid-Size 25-100 72 4Small <25 46 1

Total 197 79

*Primarily Environmental, Transportation, and Infrastructure Engineering/Consulting ("e/c") Revenues. For the largest firms we use engineering revenues only.

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EFCGOwnership of E/C Firms

Type of Ownership 2000 2005 2008 2000 2005 2008Public 17 11 19 9 14 40Subsidiary of Public 16 5 14 4 3 5Sub-Total Public 33 16 33 12 17 44

Sub-Total Private 140 171 164 14 25 35

Total 173 187 197 26 43 79% Public Firms 17% 56%

Private Equity 20 5

By # of Firms By Revenue ($Bil)

•Most E/C Firms (83%) are “Private” (typically Employee-Owned)•But “Public” Firms, now representing only 17% of total firms, have a dominant 56% market share•Note also entry of Private Equity Investors

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EFCGRevenue Distribution By Firm Size1995 2000 2005 2008

# of Firms> 1 Bil 3 7 13 19250-1 Bil 14 20 23 31100-250 23 23 24 2925-100 43 57 68 72<25 77 66 59 46

Total 160 173 187 197Revenues ($ Billions)

> 1 Bil 3 9 24 54250-1 Bil 5 9 11 15100-250 4 4 4 525-100 2 3 4 4< 25 1 1 1 1

Total 15 26 43 79% of Total Revenues

> 1 Bil 20% 35% 55% 69%250-1 Bil 33% 35% 26% 19%100-250 23% 15% 8% 6%25-100 13% 12% 8% 5%< 25 5% 4% 2% 1%

Total 100% 100% 100% 100%

“Billion Dollar” Players have gone from 20% to 69% Market Share.

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EFCGBusiness Distribution(Of $79 Billion in 2008 Gross Revenues)

Telecom1%

Survey/ Planning/ Land Development

4%Transportation17%

Mining2%

General Building9%

Other3%

Power8%

MEP2%

"Traditional Environmental"

17%

Geotechnical/ Material Testing

4%

Industrial/ Process4%

Homeland Defense / Disaster Relief

1%Water/ Wastewater

14%

Energy13%

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EFCG

“Traditional Environmental” Sector(Of $13 Billion in 2008 Gross Revenues)

Risk Assessment 3%

RI/FS 5%

Permitting 8%

Studies 9% Health & Safety 2%Asbestos/ Industrial

Hygiene 2%Site Assessment

11%

UST 4%

Nuclear 6%

Solid Waste 9%

Labs 1%

Nat. Resource 5%

Air 4% Haz Waste 31%

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EFCGFunctional Distribution(Of $79 Billion in 2008 Gross Revenues)

Consulting28%

Labs2%

Architecture3%

Engineering36%

Construction Management

6%

Program Management

8%

Construction (Incl. Remediation)

9%

Engineer/Procure/Construct

7%

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EFCGCustomer Sector Distribution(Of $79 Billion in 2008 Gross Revenues)

Private52%

State/Muni28%

Federal20%

Other23%

Energy12%

Home Sec.7%

EPA6%

Defense52%

PVT FED State/Muni

2008 52% 20% 28%

2000 38% 31% 31%

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EFCGNon-US Geographic Distribution(Of $79 Billion in 2008 Gross Revenues)

China2%

So. & Cent.

America5%

U.K.19%

Middle East/ Africa13%

Canada20%

Europe23%

Asia/ Pacific

6%

Australia13%

Non-US$32 Bil

Non-US U.S.2008 40% 60%2007 34% 66%2006 32% 68%2005 26% 74%2000 20% 80%

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EFCG

12.9%

8.0%

11.0%11.0%

7.8%

5.0%

7.0%

5.8%

11.0%

10.0%9.0%

3.0%

6.0%

0%

2%

4%

6%

8%

10%

12%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

E

Growth (Internal)Medians

(1996-2008)

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EFCGProfitability (EBIBT/Net Revs)

Medians(1996- 2008)

7.8%8.5%

9.3% 9.6% 9.4%

11.4%12.0%

12.5%

9.9%

6.5%

9.5%8.8%

10.5%

0%

2%

4%

6%

8%

10%

12%

14%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

E

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EFCGProductivity Analysis(Differences by Sector)

(2008 Data)

Highest paid Next HighestX = 5% paid 10%

By Business Sector*Environmental 3.10 60.8% 1.88 27% 58%Water/Wastewater 2.99 60.8% 1.82 33% 55%Transportation 2.80 64.0% 1.79 28% 59%Survey/Planning/Land Devel. 3.05 60.0% 1.83 29% 59%Power/Energy/Mining 3.16 61.0% 1.93 30% 52%Geotech/Material Test 3.40 59.0% 2.01 24% 50%Mixed 3.00 64.0% 1.83 31% 50%

By Customer Sector*Private 3.13 61.0% 1.91 32% 56%State/Municipal 2.98 60.3% 1.80 29% 57%Federal 2.93 67.8% 1.99 21% 60%

Average Billability of (Employees)Net Rev /Payroll

Dollar (MU)

NetRevenue

MultiplierUtilization

Rate

Major Differences by Sector.

Note: Utilization Rate = Direct Labor Costs / Total Labor Costs

*Firms with greater than 40% of revenues in that sector.

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EFCGOverhead FactorsHistorical Perspective For All Firms

Medians(% of Net Revenues)

2000 2001 2002 2003 2004 2005 2006 2007 2008Overall Trend

Risk Management 2.0 1.9 2.0 2.1 2.1 2.1 2.0 2.0 2.0 Flat

MIS/IT/Communic. 2.6 3.0 3.0 3.0 3.0 3.2 3.2 3.2 3.2 Up

Fin/Acct'g/Treas 2.5 2.2 2.5 2.5 2.5 2.4 2.3 2.3 2.2 Down

Human Resources 1.4 1.5 1.4 1.5 1.5 1.5 1.5 1.7 1.7 Up

Marketing 6.4 6.0 6.5 6.5 6.9 6.4 6.0 5.5 5.9 Fluct

Occupancy 5.2 5.3 5.7 5.7 5.5 5.7 5.8 5.6 5.5 Flat

[EFCG is currently undertaking a major large-firm Overhead Study to further refine and analyze Overhead factors.]

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EFCGEmployee “Turnover” Analysis(By Sub-Groups) (2008 Data)

Involuntary Voluntary TotalTurnover + Turnover = Turnover

By Size>250 2.3% 11.2% 13.5%100-250 3.6% 9.6% 13.2%25-100 2.9% 8.0% 10.9%<25 1.2% 6.0% 7.2%

By Business SectorEnvironmental 3.0% 9.0% 12.0%Water/Wastewater 2.0% 8.4% 10.4%Transportation 2.6% 9.4% 12.0%Survey/Plan/Land Devel. 5.4% 8.2% 13.6%Power/Energy/Mining 2.2% 6.4% 8.6%Geotech/Material Test 1.0% 11.0% 12.0%

By Customer SectorPrivate 2.8% 10.0% 12.8%State/Municipal 3.0% 9.4% 12.4%Federal 3.5% 8.9% 12.4%

By OwnershipEmployee-Owned 2.4% 8.9% 11.3%ESOP 4.2% 10.7% 14.9%Public 4.0% 13.0% 17.0%Private Equity 3.0% 8.9% 11.9%

2008 Median 2.6% 9.4% 12.0%2009 Median 6.0% 5.0% 11.0%

All Professionals

Major Differences by Categories. Also 2009 Change.

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EFCG“Hot & Cold” Sector Analysis(by # of Votes)

(sorted by 2008 “Net Positive”)2008Net

Survey Year: '00 '05 '08 '00 '05 '08 PositivePower/Energy/Oil & Gas 12 91 -2 -3 88Water/WW 71 58 60 -7 -1 59Transport/Infrastructure 46 41 46 -16 -9 37Sustainability 17 0 17Environmental 8 21 23 -13 -8 -8 15Nat. Resources/Mining 8 13 -0 0 13Federal 7 13 -4 -4 9Healthcare/Pharmaceutical 4 6 -1 5Climate Change 4 0 4Design/Build 7 3 5 -3 -1 4Air 11 7 4 -7 -5 -1 3Homeland/Security/Defense 10 6 0 -3 3Brownfields 6 3 2 0 0 2Haz Waste 4 0 -42 -13 -2 -2Industrial/Commercial Development 4 -9 -5Remediation 10 6 4 -23 -17 -9 -5Municipal 3 1 -6 -14 -13Residential/Land Development 5 0 -3 -80 -80

Best Sector Worst Sector

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EFCG

Global Geographic Perceptions(April 2008 CFO Conference)

(# votes)2008

Net Happiness*Country/Region Fastest Slowest Most Least QuotientMiddle East 13 0 9 0 22Asia (including China) 14 7 11 7 11Australia/ New Zealand 6 0 6 2 10South & Central America 9 5 8 3 9Canada 6 2 6 3 7Africa 5 0 2 1 6Europe 9 10 7 10 -4US 0 10 3 6 -13

Growth Profitability

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EFCGSustainability Practices(out of 163 Responses – 2008 Data)

146

125

102 9886

73 66 6152 48

3926

0

20

40

60

80

100

120

140

160

Office R

ecycli

ng Progra

m

Donati

ons t

o Non

-Profit

Recycle

d Purch./W

aste R

educt.

Plan

Training

on Sust

ainab

le Desi

gn

Offer S

ustain

abilit

y Con

sulting

Sustaina

bility

in M

ission S

tatem

ent

Employee

Commute

r Inc

entives

Pro-Bon

o Consu

lting Serv

ices

Sustaina

bility

Dire

ctor

Occupy

LEED/ "Gree

n" Offic

esCorpo

rate F

oundat

ion

Purchase

Rene

wable

Energy

•EFCG performs a complimentary annual Sustainability Survey and Newsletter. Contact us if interested.•EFCG funds a $500,000 Sustainability Initiative at the Harvard Graduate School of Design to develop a set of sustainability standards for the design of infrastructure. Any firms interested in helping Harvard develop this protocol, please contact us.

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EFCGIs e/c business more risky today?

(April 2007 CFO Conference)

Yes 89 No 19 Same 8

Growth 15Workload pressures 10Litigious clients 10Risk transfer from clients (contract terms, indemnifications, 'standards of care') 10Fixed Price contracts/alternative delivery requirements 10Corporate governance requirements 5Government customer requirements 5

More Risky Today?

Causes?

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EFCGShareholder Net Worth in Firm StockEmployee-Owned Firms Only

*Includes ownership through ESOP

All Shareholders*

Top 10% most highly compensated

employees

Upper Quartile 59% 70%Median 34% 45%Lower Quartile 15% 22%

(April 2008 CFO Conference)

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EFCG

Years toEquity/ Total Liab/ Debt/ Pay Down

Gr. Revs Equity Equity Debt

2003 0.15 1.7 0.5 1.92004 0.15 1.6 0.4 1.42005 0.15 1.5 0.3 1.12006 0.15 1.6 0.4 1.02007 0.16 1.4 0.3 0.82008 0.16 1.4 0.3 0.8

Financial Leverage Analysis Historical Perspective For E/C Firms

E/C Firms are less leveraged today

See EFCG 15-metric Financial Leverage Analysis

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EFCGPublic Valuation:EFCG E/C Index* vs. S&P 500 **

(Through August 31, 2009)

“Peak”10/31/07

8/31/09

2/28/09

“Peak”10/31/07

2/28/098/31/09

53%Increase

39%Increase

** Both indices were set equal to 100 at Dec. 31, 1995. Neither index is adjusted to take dividend distributions into account.

* The EFCG Index is currently made up of 21 Firms: Arcadis, AECOM, Michael Baker, Ecology & Environment, ENGlobal, Exponent, Fluor, Foster Wheeler, Hill Int'l, ICF Int'l, Jacobs, KBR, SAIC, Shaw Group, SNC Lavalin, Stantec, Tetra Tech, TRC, URS, Versar, Willdan

0

100

200

300

400

500

600

700

800

12/95 12/96 12/97 12/98 12/99 12/00 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08

S&P 500 Index EFCG E/C Index

“Peak to Low”-48%

“Peak to Low”-53%

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EFCG

Green shaded area = periods when E/C valuations exceeded S&P 500

Price-Earnings RatiosEFCG Index* Versus S&P 500 Index

(Through August 31, 2009)

EFCGEFCG S&P "Premium"29x 17x 71%

EFCGEFCG S&P "Premium"15x 23x -35%

8/31/09

10/31/07 or "Peak"

EFCG 10-yr avg.

19x

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EFCG

E/C Firm Valuation “Arbitrage”Median Multiple of EBIT

13 x(equivalent to 19x

after-tax P/E)

7-10 x

~ 4 x

0 x

3 x

6 x

9 x

12 x

15 x

Public Value M&A Value Employee OwnedValue (IOT)*

*IOT = Internal Ownership Transition

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EFCGAcquisition Activity# of Acquisitions

2839 46

56 60 67 7087

60 60

85

107

131

185 181

203

020406080

100120140160180200

2002 2003 2004 2005 2006 2007 2008E 2009P# of Firms Making Acquisitions # of Acquisitions

EFCG has served as advisor on roughly 100 M&A transactions.

Major increase in M&A Activity…with major impact on firms’ competitive positioning within industry.

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EFCG

Growth FromAcquisitions

2007 2008E 2009P 3-yr Avg 2007 2008E 2009P 3-yr Avg [Total - Internal]

> 1 Bil 18.0 11.0 10.0 13.0 23.7 23.7 13.2 20.2 7%*

250-1 Bil 12.2 10.0 8.1 10.1 16.4 16.9 8.7 14.0 4%

100-250 14.0 7.6 10.0 10.5 14.3 7.6 11.6 11.2 1%

25-100 10.7 8.3 9.0 9.3 9.9 10.0 9.6 9.8 1%

<25 8.0 4.0 10.0 7.3 9.7 4.5 10.0 8.1 1%

Internal Growth Total Growth

The Impact of Size and Acquisitions on Revenue Growth Rate

By Size (2008 Data) (%)

*Acquisitions are making the big guys grow much faster

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EFCG

MajorOwnership

(in $Billions) 1997 Revs 2008 Revs B/S/D Change1 CH2M Hill 0.8 6.0 *2 AECOM 0.7 5.0 *3 Black & Veatch 0.5 3.0 *4 ICF Kaiser 0.5 B * *5 Parsons Brinckerhoff 0.5 2.06 Dames & Moore 0.4 1.0 / S D / URS * *7 IT Group 0.4 1.3 / B S D / Shaw * *8 URS 0.4 10.09 Montgomery Watson (MWH) 0.4 1.5 *10 CDM 0.4 1.011 Tetra Tech 0.3 2.012 ERM 0.3 0.6 *13 Foster Wheeler Environmental 0.3 S D / Ttek * *14 OHM 0.3 0.6 / S D / IT * *15 AWT 0.3 S D /Vivendi * *16 Woodward Clyde 0.3 S D / URS * *17 Arthur D. Little 0.2 B S D * *18 Morrison Knudsen Envir. 0.2 2.0 /BSD/Wash/URS * *19 Radian 0.2 S D / URS * *20 Earth Tech 0.2 S /Tyco/ 1.5 / AECOM * *21 HNTB 0.2 0.8 *22 HDR 0.2 1.423 Roy F. Weston 0.2 0.5 *24 SAIC Envir. 0.2 0.6 *25 Law 0.2 S D / Mactec * *26 GTI 0.2 S D /FD / IT * *27 Metcalf & Eddy 0.2 S / AECOM * *28 Golder 0.2 0.929 Geraghty & Miller (ARCADIS) 0.2 0.930 Rust 0.2 S D / EarthTech / AECOM * *31 Smith 0.2 B D * *

“Where Are They Now?”How Quickly the Players are Changing

B = BankruptS = SoldD = Disappeared

• 16 of 31 (52%) have gone Bankrupt or Sold Out

•23 of 31 (74%) have undergone a major ownership change

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EFCGThe Challenge of Internal Ownership Transition (IOT):

For Employee-Owned Firms•70% of EFCG Conference participants identify that IOT is a major issue. •E/C Industry faces a unique “capital challenge” due to:

– Employee Ownership = One-way annual outflow of capital (“Retirement Capital”)– Low Profit Margins = Slow build-up to retained earnings– Slow Receivables Collections = Requires significant incremental “Working Capital” to grow

•Additional Needs for Capital:– “Acquisition Capital”: Very high capital costs to make acquisitions– “Strategic Capital”: Higher-risk business; fixed-price contracts; design-build contracts;

“alternative delivery” mechanisms•Some Solutions:

– Improve profitability (key source of capital)– Manage assets (collect receivables faster)– Balance financial leverage (use “free capital” where possible)– Consider prudent acquisitions or merger for market share

•Some Problems:– Higher internal valuation makes acquisitions easier, but increases retirement payouts– Low internal valuations encourage companies to “sell out”

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EFCGGrowth & Profitability“Quadrant Analysis”

(Distribution Relative to the Median)

Profitability

Inte

rnal

Gro

wth 28

"Risk Takers"

Low High

"Outperformers"

28 16

Hig

hLo

w

16

"Underperformers" "Cash Cows"

Total 44 + 44 = 88

44

44

Total

+

Data taken from 2009 CFO Survey

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EFCGManaging Your Balance Sheet(Typical “Common Size” for E/C Firms)

(Gross Revenues = 100)

Balance Sheet Management:

•Squeeze assets: particularly Cash & Receivables

•Maximize “Free Capital”

•Manage appropriate percentage of Debt/Equity ratio

Capital

Cash 3 PayablesCust.Adv. 16 ("Free Capital")

Receivables 26 Def'd Tax(Incl. WIP)

Fixed Assets 5 Debt 8 (Expensive)

Other 6 Equity 16("Book Value")

Total Assets 40 Total Capital 40

Assets

"Invested Capital"(Most

Expensive)

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EFCGEFCG “Multi-Profitability” Analysis(modified from classic DuPont Analysis – Example Only)

Peer Analysis Exhibit

Profit Asset LeverageMargin X Turnover = ROA X Multiplier = ROE

(EBIBT/ (Gross Revs/ (EBIBT/ (Assets/ (EBIBT/Gross Revs) Assets) Assets) Equity) Equity)

1 14.6% 3.90 35.9% neg eq neg eq2 11.5% 3.74 26.9% 118.76 1206.9%3 11.3% 3.65 25.7% 17.47 162.8%4 9.9% 3.33 23.9% 12.50 150.0%5 9.8% 3.26 23.4% 10.96 125.5%6 9.6% A 3.07 B 22.5% 10.45 D 105.0% D7 8.8% 2.88 20.3% B 5.20 91.0%8 8.6% 2.69 19.8% 5.07 88.6%9 8.4% 2.59 19.5% 4.90 87.3%

10 8.4% 2.54 19.5% 4.62 82.4%11 7.8% 2.45 19.2% 3.86 68.1%12 7.6% 2.43 19.1% 3.75 65.8%13 7.5% 2.40 18.6% 3.56 62.6% B14 6.9% 2.32 17.6% 3.33 52.6%15 6.9% 2.29 17.4% 3.12 B 51.6%16 6.6% B 2.29 16.7% 3.09 C 50.6%17 6.6% C 2.28 16.7% 3.00 49.2%18 6.4% 2.23 15.6% 2.93 46.8%19 6.3% 2.18 14.7% A 2.78 46.5%20 6.3% 2.14 12.9% 2.73 45.2%21 5.8% 2.04 12.7% 2.71 43.2%22 5.8% 2.04 12.0% 2.57 42.6%23 5.6% 2.01 D 12.0% 2.54 40.7%24 5.3% 1.71 11.3% 2.29 33.8%25 5.2% 1.69 10.8% C 2.12 33.6% C26 5.1% 1.66 10.5% 2.00 31.3%27 5.0% D 1.63 C 10.1% D 1.91

Profit Asset LeverageX Turnover = ROA X Multiplier = ROE

(EBIBT/ (Gross Revs/ (EBIBT/ (Assets/ (EBIBT/Gross Revs) Assets) Assets) Equity) Equity)

1 14.6% 3.90 35.9% neg eq neg eq2 11.5% 3.74 26.9% 118.76 1206.9%3 11.3% 3.65 25.7% 17.47 162.8%4 9.9% 3.33 23.9% 12.50 150.0%5 9.8% 3.26 23.4% 10.96 125.5%6 9.6% A 3.07 B 22.5% 10.45 D 105.0% D7 8.8% 2.88 20.3% B 5.20 91.0%8 8.6% 2.69 19.8% 5.07 88.6%9 8.4% 2.59 19.5% 4.90 87.3%

10 8.4% 2.54 19.5% 4.62 82.4%11 7.8% 2.45 19.2% 3.86 68.1%12 7.6% 2.43 19.1%

Profit Asset LeverageX Turnover = ROA X Multiplier = ROE

(EBIBT/ (Gross Revs/ (EBIBT/ (Assets/ (EBIBT/Gross Revs) Assets) Assets) Equity) Equity)

1 14.6% 3.90 35.9% neg eq neg eq2 11.5% 3.74 26.9% 118.76 1206.9%3 11.3% 3.65 25.7% 17.47 162.8%4 9.9% 3.33 23.9% 12.50 150.0%5 9.8% 3.26 23.4% 10.96 125.5%6 9.6% A 3.07 B 22.5% 10.45 D 105.0% D7 8.8% 2.88 20.3% B 5.20 91.0%8 8.6% 2.69 19.8% 5.07 88.6%9 8.4% 2.59 19.5% 4.90 87.3%

10 8.4% 2.54 19.5% 4.62 82.4%11 7.8% 2.45 19.2% 3.86 68.1%12 7.6% 2.43 19.1% 3.75 65.8%13 7.5% 2.40 18.6% 3.56 62.6% B14 6.9% 2.32 17.6% 3.33 52.6%15 6.9% 2.29 17.4% 3.12 B 51.6%16 6.6% B 2.29 16.7% 3.09 C 50.6%17 6.6% C 2.28 16.7% 3.00 49.2%18 6.4% 2.23 15.6% 2.93 46.8%19 6.3% 2.18 14.7% A 2.78 46.5%20 6.3% 2.14 12.9% 2.73 45.2%21 5.8% 2.04 12.7% 2.71 43.2%22 5.8% 2.04 12.0% 2.57 42.6%23 5.6% 2.01 D 12.0% 2.54 40.7%24 5.3% 1.71 11.3% 2.29 33.8%25 5.2% 1.69 10.8% C 2.12 33.6% C26 5.1% 1.66 10.5% 2.00 31.3%27 5.0% D 1.63 C

3.75 65.8%13 7.5% 2.40 18.6% 3.56 62.6% B14 6.9% 2.32 17.6% 3.33 52.6%15 6.9% 2.29 17.4% 3.12 B 51.6%16 6.6% B 2.29 16.7% 3.09 C 50.6%17 6.6% C 2.28 16.7% 3.00 49.2%18 6.4% 2.23 15.6% 2.93 46.8%19 6.3% 2.18 14.7% A 2.78 46.5%20 6.3% 2.14 12.9% 2.73 45.2%21 5.8% 2.04 12.7% 2.71 43.2%22 5.8% 2.04 12.0% 2.57 42.6%23 5.6% 2.01 D 12.0% 2.54 40.7%24 5.3% 1.71 11.3% 2.29 33.8%25 5.2% 1.69 10.8% C 2.12 33.6% C26 5.1% 1.66 10.5% 2.00 31.3%27 5.0% D 1.63 C 10.1% D 1.91 A 29.7%28 4.3% 1.53 A 9.4% 1.74 28.0% A29 4.1% 1.47 9.3% 1.73 28.7%30 4.0% 1.27 9.0% 1.68 28.4%31 3.8% 1.15 8.3% 1.50 13.3%32 2.8% 0.93 4.8% 1.47 12.9%

Profit Asset LeverageX Turnover = ROA X Multiplier = ROE

(EBIBT/ (Gross Revs/ (EBIBT/ (Assets/ (EBIBT/Gross Revs) Assets) Assets) Equity) Equity)

1 14.6% 3.90 35.9% neg eq neg eq2 11.5% 3.74 26.9% 118.76 1206.9%3 11.3% 3.65 25.7% 17.47 162.8%4 9.9% 3.33 23.9% 12.50 150.0%5 9.8% 3.26 23.4% 10.96 125.5%6 9.6% A 3.07 B 22.5% 10.45 D 105.0% D7 8.8% 2.88 20.3% B 5.20 91.0%8 8.6% 2.69 19.8% 5.07 88.6%9 8.4% 2.59 19.5% 4.90 87.3%

10 8.4% 2.54 19.5% 4.62 82.4%11 7.8% 2.45 19.2% 3.86 68.1%12 7.6% 2.43 19.1%

Profit Asset LeverageX Turnover = ROA X Multiplier = ROE

(EBIBT/ (Gross Revs/ (EBIBT/ (Assets/ (EBIBT/Gross Revs) Assets) Assets) Equity) Equity)

1 14.6% 3.90 35.9% neg eq neg eq2 11.5% 3.74 26.9% 118.76 1206.9%3 11.3% 3.65 25.7% 17.47 162.8%4 9.9% 3.33 23.9% 12.50 150.0%5 9.8% 3.26 23.4% 10.96 125.5%6 9.6% A 3.07 B 22.5% 10.45 D 105.0% D7 8.8% 2.88 20.3% B 5.20 91.0%8 8.6% 2.69 19.8% 5.07 88.6%9 8.4% 2.59 19.5% 4.90 87.3%

10 8.4% 2.54 19.5% 4.62 82.4%11 7.8% 2.45 19.2% 3.86 68.1%12 7.6% 2.43 19.1% 3.75 65.8%13 7.5% 2.40 18.6% 3.56 62.6% B14 6.9% 2.32 17.6% 3.33 52.6%15 6.9% 2.29 17.4% 3.12 B 51.6%16 6.6% B 2.29 16.7% 3.09 C 50.6%17 6.6% C 2.28 16.7% 3.00 49.2%18 6.4% 2.23 15.6% 2.93 46.8%19 6.3% 2.18 14.7% A 2.78 46.5%20 6.3% 2.14 12.9% 2.73 45.2%21 5.8% 2.04 12.7% 2.71 43.2%22 5.8% 2.04 12.0% 2.57 42.6%23 5.6% 2.01 D 12.0% 2.54 40.7%24 5.3% 1.71 11.3% 2.29 33.8%25 5.2% 1.69 10.8% C 2.12 33.6% C26 5.1% 1.66 10.5% 2.00 31.3%27 5.0% D 1.63 C

3.75 65.8%13 7.5% 2.40 18.6% 3.56 62.6% B14 6.9% 2.32 17.6% 3.33 52.6%15 6.9% 2.29 17.4% 3.12 B 51.6%16 6.6% B 2.29 16.7% 3.09 C 50.6%17 6.6% C 2.28 16.7% 3.00 49.2%18 6.4% 2.23 15.6% 2.93 46.8%19 6.3% 2.18 14.7% A 2.78 46.5%20 6.3% 2.14 12.9% 2.73 45.2%21 5.8% 2.04 12.7% 2.71 43.2%22 5.8% 2.04 12.0% 2.57 42.6%23 5.6% 2.01 D 12.0% 2.54 40.7%24 5.3% 1.71 11.3% 2.29 33.8%25 5.2% 1.69 10.8% C 2.12 33.6% C26 5.1% 1.66 10.5% 2.00 31.3%27 5.0% D 1.63 C 10.1% D 1.91

Profit Asset LeverageX Turnover = ROA X Multiplier = ROE

(EBIBT/ (Gross Revs/ (EBIBT/ (Assets/ (EBIBT/Gross Revs) Assets) Assets) Equity) Equity)

1 14.6% 3.90 35.9% neg eq neg eq2 11.5% 3.74 26.9% 118.76 1206.9%3 11.3% 3.65 25.7% 17.47 162.8%4 9.9% 3.33 23.9% 12.50 150.0%5 9.8% 3.26 23.4% 10.96 125.5%6 9.6% A 3.07 B 22.5% 10.45 D 105.0% D7 8.8% 2.88 20.3% B 5.20 91.0%8 8.6% 2.69 19.8% 5.07 88.6%9 8.4% 2.59 19.5% 4.90 87.3%

10 8.4% 2.54 19.5% 4.62 82.4%11 7.8% 2.45 19.2% 3.86 68.1%12 7.6%

10.1% D 1.91

Return on Sales Asset Leverage(Profit Margin = X Turnover = (ROA= X = ROE

(EBIBT/ (Gross Revs/ (EBIBT/ (Assets/ (EBIBT/Gross Revs) Assets) Assets) Equity) Equity)

1 14.6% 3.90 35.9% neg eq neg eq2 11.5% 3.74 26.9% 118.76 1206.9%3 11.3% 3.65 25.7% 17.47 162.8%4 9.9% 3.33 23.9% 12.50 150.0%5 9.8% 3.26 23.4% 10.96 125.5%6 9.6% A 3.07 B 22.5% 10.45 D 105.0% D7 8.8% 2.88 20.3% B 5.20 91.0%8 8.6% 2.69 19.8% 5.07 88.6%9 8.4% 2.59 19.5% 4.90 87.3%

10 8.4% 2.54 19.5% 4.62 82.4%11 7.8% 2.45 19.2% 3.86 68.1%12 7.6% 2.43 19.1% 3.75 65.8%13 7.5% 2.40 18.6% 3.56 62.6% B14 6.9% 2.32 17.6% 3.33 52.6%15 6.9% 2.29 17.4% 3.12 B 51.6%16 6.6% B 2.29 16.7% 3.09 C 50.6%17 6.6% C 2.28 16.7% 3.00 49.2%18 6.4% 2.23 15.6% 2.93 46.8%19 6.3% 2.18 14.7% A 2.78 46.5%20 6.3% 2.14 12.9% 2.73 45.2%21 5.8% 2.04 12.7% 2.71 43.2%22 5.8% 2.04 12.0% 2.57 42.6%23 5.6% 2.01 D 12.0% 2.54 40.7%24 5.3% 1.71 11.3% 2.29 33.8%25 5.2% 1.69 10.8% C 2.12 33.6% C26 5.1% 1.66 10.5% 2.00 31.3%27 5.0% D

2.43 19.1% 3.75 65.8%13 7.5% 2.40 18.6% 3.56 62.6% B14 6.9% 2.32 17.6% 3.33 52.6%15 6.9% 2.29 17.4% 3.12 B 51.6%16 6.6% B 2.29 16.7% 3.09 C 50.6%17 6.6% C 2.28 16.7% 3.00 49.2%18 6.4% 2.23 15.6% 2.93 46.8%19 6.3% 2.18 14.7% A 2.78 46.5%20 6.3% 2.14 12.9% 2.73 45.2%21 5.8% 2.04 12.7% 2.71 43.2%22 5.8% 2.04 12.0% 2.57 42.6%23 5.6% 2.01 D 12.0% 2.54 40.7%24 5.3% 1.71 11.3% 2.29 33.8%25 5.2% 1.69 10.8% C 2.12 33.6% C26 5.1% 1.66 10.5% 2.00 31.3%27 5.0% D 1.63 C 10.1% D 1.91 A 29.7%28 4.3% 1.53 A 9.4% 1.74 28.0% A29 4.1% 1.47 9.3% 1.73 28.7%30 4.0% 1.27 9.0% 1.68 28.4%31 3.8% 1.15 8.3% 1.50 13.3%32 2.8% 0.93 4.8% 1.47 12.9%

TurnoverAsset Return on Assets

MultiplierLeverage

(ROE=Return on Equity

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EFCGAre You a “10&5” or a “5&10”? (Profitability vs. Growth In Financial Sustainability)

"10&5" Company "5&10" CompanyProfit Margin: @ 10% @ 5%

EBIBT Margin on Net Revs 10.00% 5.00%EBIBT Margin on Gross Revs 7.00% 3.50%

Less: Interest Expense -0.50% -0.50%EBBT Margin on Gross Revs 6.50% 3.00%

25% Bonus Payout -1.63% -0.75%EBT Margin on Gross Revs 4.88% 2.25%

40% Tax Rate -1.95% -0.90%PAT Margin on Gross Revs 2.93% 1.35%

Growth Rate: @ 5% @ 10%PAT Margin on Gross Revs 2.93% 1.35%

Less: 16% Working Capital/Rev Ratio -0.80% -1.60%Less: Est. CapEx (Net of Deprec.) -0.25% -0.25%

Available Cash Flow on Gross Revs(Before Retirements)

Less: Avg. Annual Retirement Payments 1 -1.25% -1.25%

Net Cash Flow on Gross Revs(After Retirements, but Before New Share Sales)

Conclusion: Financially Sustainable? Yes No

1.88% -0.50%

0.62% -1.75%

1 Assumes Company Equity value is @25% Gross Revenues & Avg. period of an employee's ownership is 20 years. Hence, 25%/20 years = 1.25% of Revenues per year needs to be used for retirement.

(If a company has significant debt, equity value payouts may be less --- but, debt amortization will be more.)

Note: Excludes cost of any acquisitions

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EFCGUseful Analytical Tools & Practices:Analysis Frequency

•Peer Benchmarking Analysis (“PBA”) (100 Key Metrics) Annual–Multi-Profitability Analysis, Growth Rates–Balance Sheet Analysis (Capitalization Efficiency)–Managing Assets & Liabilities–Efficiency ratios: Overhead Costs, Productivity (MU Analysis)–Personnel costs, Turnover, etc.

•OCCP (Ownership, Compensation & Capitalization Plan) 3-5 Years–Including Capital Flow Analysis

•Strategic Analysis & Planning (Industry Trends Analysis) 3-5 Years

•Management Interview Analysis (MIA) 5 Years

•ARMIA (A/R Management & Improvement Analysis) 5 Years

•Valuations (Internal and M&A) Annually or As Needed

•M&A Advice As Needed