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Ascendere Associates LLC December 28, 2009

Steve Castellano steve@ascenderellc.com

Joy Global, Inc. (NasdaqGS: JOYG)


Sector: Industrials
Industry: Construction, Farm Machinery and Heavy Trucks
Joy Global company stands out in the Industrial Sector for its level and momentum in ROIC, strong balance sheet and other key
fundamental metrics. However, ROIC expansion has probably peaked for the short-term as the global inventory restocking theme
may largely played out.

Applying average revenue and EBITDA consensus estimates along with some conservative assumptions implies a $45 12-month stock
price target, far below the consensus average estimate of $63. However, the consensus high target price of $70 or higher is
reasonable in a scenario of a resurgent global economy. In our opinion, applying a probability spread of 50-40-10 percent to
scenarios reflecting a $70-$45-$30 valuation seems reasonable, which justifies a 12-month target price of $56 for now.

Our scenario analysis reflects our view that it is a slightly more defensible position to be optimistic on a global recovery than not.
Over time, the probability of an improving global economy could increase, thereby moving us to justify a higher valuation. In our
opinion, JOYG is not a bargain at the current level, but so are neither many other Industrial stocks. Given its strong fundamental
ranking and reasonable probability for improving economic drivers, JOYG is probably one of the best mid-cap stocks to own in the
Industrial Sector.

LTM FY+1 FY+2 LTM 5yr Avg


JOYG
Description: Joy Global, Inc. is a
Insider manufacturer and servicer of mining
Stock Price $53.67 EPS: $ 4.41 EPS: $2.95 EPS: $3.48 ROE: 67.5% ROE: 58.4% Ownership0.9% equipment used in the extraction of coal,
Market Cap / Shares EBITDA/ EBITDA/ # of
copper, iron ore, sands and other materials.
($B) $5.5 / 103 P/E: 12.2 P/E: 18.2 P/E: 15.4 Capital 58.8% Capital 45.8% Analysts 15 About half of its sales are generated in the
United States, with the balance coming
EBIT EBIT
P/B 6.8 P/CF 7.3 P/CF 9.9 P/CF 8.8 Margin 19.5% Margin 17.0% Debt/Cap: 40.1%
from Europe, Australia and the rest of the
world. This $5.5b market company is a
Income Income constituent of the S&P 400 Index.
Beta 2.31 P/S: 1.5 P/S: 1.9 P/S: 1.7 Margin 12.6% Margin 11.5% Div Yld: 1.3%

Key metrics look very compelling for JOYG


Joy Global company ranks very high on several key characteristics that we look at, including relative value to its peers on a ROIC-
adjusted basis and ROIC momentum and other fundamental metrics. In addition, its balance sheet is strong with $472m cash,
$544m debt for a 5.3% net-debt-to-total-capital ratio.

But ROIC has likely peaked in the short term


But improvements to ROIC may have temporarily peaked in the latest quarter and fiscal year ending 10/31/2009 as industrial
production in China and India show signs of moderating following a surge of commodity imports, and industrial production in
OECD countries have yet to show signs of sustainable demand.

In addition, the stock has seen a nice run from its 3/2/2009 close of $15.75 to a recent price of $54, a return of about 244%. This
is about 3x the 82% return of the S&P 400 Industrials Index over the same period.

Despite a near-term likely peak in ROIC, CEO Michael Sutherlin gave reason for optimism during the 12/16/2009 conference call:
"There may be continued uncertainty about the timing and the early strength of recovery in the OECD countries but there is no
doubt that we are near and moving closer to the start of that recovery." He also said that customers are starting the processes
for the next round of mine expansion, capex announcements have been up significantly, and customers continue to validate
engineering and reconfirm delivery slots for projects previously put on hold. Given long order lead times, it could be a year
before a resurgent global economy could translate into sales.

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 1
JOYG looks fully valued on current consensus estimates
We get a $45 12-month target and a present value of $41 by applying consensus average estimates for revenue and EBITDA and
extrapolating them over time in a fairly conservative DCF model, which assumes a 12.1% WACC and a 2% terminal growth rate.
Other assumptions include single digit revenue growth following a surge to the mid-teens in 2012, an EBITDA margin close to
19% over time, about 9% long-term earnings growth, continued improvements to working capital management in the near-term
and debt/capital roughly staying in the 30% range. This compares to a range of $48-70 and an average of $63 among 11 sell side
analysts.

This $45 target represents a 14.6x PE on an EPS estimate of $3.08 (versus consensus at $2.95) for FY2010. In comparison, over
the last 5 years JOYG has traded at 4.5-39.2x and averaged 20.2x on NTM consensus EPS. This target also assumes an 8x
multiple on FY2010 EBITDA of $537m, versus a 5-year range of 2.5-18.1x and a rough average of 9.6x. Detailed assumptions can
be viewed on our website.

In order to get to the present stock price of $54 (18.3x NTM EPS) using consensus average estimates as above, we would have to
assume a 11% WACC and a 3% terminal growth rate.

In order to get to a $63 average consensus target price using consensus estimates (21x NTM consensus EPS), we must reduce
our market risk premium to 3.6% from the 6% we are using, which would bring down the WACC close to 9%. Or we would have
to adjust the terminal growth rate to almost 5%.

What needs to happen for JOYG to reach the sell-side high target of $70.
In order for JOYG to reach a consensus high $70 target while assuming a 12% WACC and 2% terminal growth rate, there would
have to be material upside revisions to revenue growth, margin expansion and earnings growth assumptions currently implied
by the current consensus average. This scenario would have to assume a significant global economic expansion, which is
certainly possible if OECD countries start resuming some level of expansion along with a resurgent China and India. In detail, a
$70 target could imply 13% average annual sales growth over the next 5 years, gross margin expansion to 32.4% from 29.2%,
SG&A margin improvement to 11.6% from 12.6%, EBITDA margin improvement to 22.5% from 18.1% and expansion of one ROIC
metric to 30.9% from 16.2% currently. EPS assumptions would probably have to move closer to $4.53 in 2011, versus the
current average of $3.48 and high of $3.98. There could be material upside to this $70 target assuming that some kind of
market exuberance could justify a higher longer-term terminal growth rate and lower market risk premium.

JOYG an attractive option for portfolio managers looking for a mid-cap industrials stock
At a current price of $54, JOYG is not a bargain but with its strong balance sheet and room for further upward estimate revisions
as analysts increasingly anticipate a resurgent economy, this is a good stock to hold on to. Fundamentally justified downside risk
appears to be $41 (or $45 in 12 months) in the near-term using conservative long-term assumptions, especially in view of recent
capex increases by JOYG customers. Downside to $30 could be a possibility in an economic environment where EPS decline to
$2.70 in FY2011 (versus the $3.48 average). It is not a stretch to view $70+ as a valid target if momentum builds in the OECD and
emerging market countries. While still anything could happen to our global economy, it is our position given the various data
points coming in that it's a more defensible position to be cautiously optimistic rather than fearful.

Applying a matrix of target values and best guess at the likelihood of these targets occurring (10% x $29, 40% x $45, 50% x $70 =
$56), JOYG should be considered a solid hold in a diversified mid-cap portfolio with ample room for upside.

For details on the models and assumptions used to create this report, please visit us at www.ascenderellc.com.

Risks
Ascendere Associates LLC makes no guarantee on the accuracy of the data, estimates, assumptions or forecasts in this report.
Investing in JOYG or any equity entails a high degree of risk. This report is not a solicitation to buy or sale any securities.

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 2
About Ascendere Associates, LLC
J. Stephen Castellano – is the owner of Ascendere Associates, LLC, an equity research and financial consulting firm. Steve has
over 10 years of experience in equity research. At PaineWebber, Warburg Dillon Read and Credit Lyonnais Securities he
developed fundamental equity valuation models and conducted in-depth research on the steel and telecom services industries.
At Boston Private Value Investors, he developed quantitative models for stock idea generation and also provided general
fundamental equity research coverage. Steve received a MBA from the F. W. Olin School of Business at Babson College (2005)
and a BA from Oberlin College (1993).

Steve’s career history is highlighted below:

 Ascendere Associates, LLC (2009-Present)


 Boston Private Value Investors , Equity Research, Equity Research Analyst (2005-2009)
 Pyramid Research, Contract Consultant, Telecom Services (2002-2003)
 Credit Lyonnais Securities (USA), Equity Research, Telecom Services, Vice President (2000-2001)
 Warburg Dillon Read, Equity Research, Telecom Services, Research Associate (1999-2000)
 PaineWebber, Equity Research, Steel and Nonferrous Metals, Research Associate, Editor (1995-1999)

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 3
Competitor Overview

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 4
>---------------------------Calendar Year---------------------------<
EV / EV /
Company Stock Mkt Total Total Enterprise Rev EBITDA EPS EPS PE PE
Name Price Val Cash Debt Other Val 2009E 2010E 2009E 2010E 2009E 2010E
Joy Global, Inc. $ 53.67 $ 5,502 $ 472 $ 544 $ - $ 5,574 1.6x 10.9x $ 4.19 $ 2.92 12.8x 18.4x
AGCO Corp. 32.51 3,006 218 650 7 3,444 0.5x 8.8x $ 1.42 $ 1.65 22.8x 19.7x
Alamo Group Inc. 16.08 189 13 70 (0) 245 1.6x 2.1x $ 0.88 $ 0.92 18.3x 17.5x
American Railcar Industries 10.75 229 337 275 - 167 0.3x 5.3x $ 0.19 $ 0.03 56.6x 358.3x
Astec Industries, Inc. 27.04 610 38 - 0 572 0.8x 9.9x $ 0.93 $ 0.97 29.1x 27.9x
Bucyrus International Inc. 58.12 4,367 143 531 (0) 4,754 1.8x 9.9x $ 3.97 $ 3.32 14.7x 17.5x
Cascade Corp. 27.12 295 16 63 0 342 1.1x 9.8x $ (2.65) $ 1.08 25.1x
Caterpillar Inc. 58.51 36,436 1,826 32,231 537 67,378 2.2x 15.4x $ 2.00 $ 2.68 29.3x 21.8x
China Yuchai International Limited 15.48 577 102 194 142 812 $ - $ -
CNH Global NV 25.27 5,999 1,169 10,316 - 15,146 1.2x 12.8x $ (0.70) $ 0.78 32.5x
Commercial Vehicle Group Inc. 6.30 143 10 161 - 294 0.7x 12.1x $ (2.10) $ (0.50)
Cummins Inc. 47.41 9,567 834 681 240 9,654 0.9x 10.6x $ 1.90 $ 1.97 24.9x 24.1x
Deere & Co. 55.93 23,638 3,690 24,607 - 44,555 2.2x 14.8x $ 1.83 $ 2.72 30.6x 20.6x
Federal Signal Corp. 6.12 298 21 239 0 516 0.7x 8.1x $ 0.35 $ 0.59 17.3x 10.5x
Force Protection Inc. 5.47 383 122 - - 261 0.3x 4.0x $ - $ 0.53 10.4x
FreightCar America Inc. 19.42 232 134 - 0 99 0.4x 78.0x $ 0.91 $ 0.11 21.3x 173.4x
Greenbrier Companies 10.81 185 76 558 9 675 0.7x 7.8x $ (0.27) $ 0.14 78.4x
Kubota Corporation 9.40 11,958 1,055 5,025 393 16,321 1.5x 12.5x $ 0.38 $ 0.45 24.6x 21.0x
Lindsay Corporation 41.68 517 86 27 - 458 1.4x 12.8x $ 1.22 $ 1.35 34.2x 31.0x
Manitowoc Co. Inc. 10.13 1,323 161 2,401 (1) 3,562 0.9x 10.0x $ 0.36 $ 0.24 27.8x 41.7x
Miller Industries Inc. 11.57 134 38 0 - 96 $ - $ -
Nacco Industries Inc. 50.81 421 188 474 0 708 0.3x 6.0x $ 0.08 $ 2.60 635.1x 19.5x
Navistar International Corp. 39.70 2,808 751 5,207 62 7,326 0.6x 8.5x $ 3.39 $ 3.73 11.7x 10.6x
Oshkosh Corporation 38.57 3,452 530 2,038 2 4,962 0.8x 5.7x $ 0.73 $ 3.67 53.2x 10.5x
PACCAR Inc. 36.64 13,319 1,984 6,370 - 17,705 2.4x 23.4x $ 0.19 $ 0.90 198.1x 40.5x
Sauer-Danfoss Inc. 12.05 583 44 543 72 1,155 $ (2.14) $ (0.79)
Tata Motors Ltd. 16.79 9,130 - - 6,727 15,857 $ - $ -
Terex Corp. 20.55 2,221 1,033 2,003 23 3,214 0.6x 16.8x $ (2.17) $ (0.19)
Titan International Inc. 8.01 282 45 194 - 431 0.6x 5.3x $ 0.05 $ 0.49 178.0x 16.3x
Toro Co. 43.40 1,452 188 233 - 1,498 1.0x 9.5x $ 1.73 $ 2.16 25.1x 20.1x
Trinity Industries Inc. 18.06 1,432 543 1,829 - 2,718 1.1x 7.3x $ 1.25 $ 0.66 14.4x 27.3x
Twin Disc Inc. 10.18 114 17 49 1 147 0.6x 6.7x $ 0.72 $ 0.95 14.2x 10.8x
Westinghouse Air Brake Technologies Corp.
41.37 1,968 255 432 1 2,146 1.5x 9.2x $ 2.45 $ 2.52 16.9x 16.4x

EV / EV /
Rev EBITDA EPS EPS PE PE
Calendar Year Comps 2009E 2010E 2009E 2010E 2009E 2010E
NasdaqGS:JOYG 1.6x 10.9x $ 4.19 $ 2.92 12.8x 18.4x

Peer Average 1.0x 12.3x 68.1x 42.4x


Peer Min 0.3x 2.1x 11.7x 10.4x
Peer Max 2.4x 78.0x 635.1x 358.3x
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 5
Sensitivity Analysis

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 6
Sensitivity Analysis

Joy Global, Inc.


Industrials
Construction and Farm Machinery and Heavy Trucks
JOYG $ 53.67 12/28/2009

>--------------------10-year Historical Range--------------------<


Low Average Median High YTD Scenario +5 Consensus Scenario -5
Adjusted Present Value current $ 63 $ 41 $ 27
Adjusted Present Value +12 months $ 70 $ 45 $ 29

Unlevered equity discount rate 12.9% 12.9% 12.9%


Tax shield discount rate 6.3% 6.3% 6.3%

Levered equity discount rate 12.9% 12.9% 12.9%


After tax cost of debt 4.2% 4.2% 4.2%
WACC 12.1% 12.1% 12.1%

Risk free rate 3.8% 3.8% 3.8%


Market risk premium 6.0% 6.0% 6.0%
Terminal growth rate 2.0% 2.0% 2.0%

Equity beta 2.31 2.31 2.31


Industry asset beta, company levered 2.15 2.15 2.15
Industry asset beta 1.53 1.53 1.53

Next 5yr Sales CAGR 12.9% 7.4% 2.0%


Next 5yr Free Cash Flow CAGR 9.2% 0.7% -5.8%
Next 5yr EPS CAGR 18.5% 8.5% -1.9%

ROIC FY2010E 16.2% 16.2% 16.2%


ROIC FY2011E 23.0% 18.8% 14.7%
ROIC FY2015E 30.9% 22.0% 14.6%
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 7
Sensitivity Analysis

Joy Global, Inc.


Industrials
Construction and Farm Machinery and Heavy Trucks
JOYG $ 53.67 12/28/2009

>--------------------10-year Historical Range--------------------<


Low Average Median High YTD Scenario +5 Consensus Scenario -5
Adjusted Present Value current $ 63 $ 41 $ 27
Adjusted Present Value +12 months $ 70 $ 45 $ 29

Gross Margin FY2010E 17.1% 26.1% 28.0% 32.5% 32.0% 29.2% 29.2% 29.2%
Gross Margin FY2015E 32.4% 29.9% 27.4%
Gross Margin Expansion 3.3% 0.8% -1.7%

SG&A + R&D Margin FY2010E 12.6% 16.5% 17.0% 21.4% 12.6% 12.6% 12.6% 12.6%
SG&A + R&D Margin FY2015E 11.6% 12.6% 13.6%
SG&A Margin Expansion -1.0% 0.0% 1.0%

EBITDA Margin FY2010E 0.3% 12.9% 13.6% 21.0% 21.0% 18.1% 18.1% 18.1%
EBITDA Margin FY2015E 22.5% 19.0% 15.5%
EBITDA Margin Expansion 4.4% 0.9% -2.6%

EBIT Margin FY2010E -3.9% 9.8% 10.8% 19.5% 19.5% 16.5% 16.5% 16.5%
EBIT Margin FY2015E 20.8% 17.3% 13.8%
EBIT Margin Expansion 4.3% 0.8% -2.7%

Debt FY2010E 3 380 254 1,370 544 519 519 519


Debt FY2015E 1,094 1,094 1,094

Cash FY2010E 40 182 146 472 472 779 779 779


Cash FY2015E 3,504 2,827 2,456

Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 8
Sensitivity Analysis

Joy Global, Inc.


Industrials
Construction and Farm Machinery and Heavy Trucks
JOYG $ 53.67 12/28/2009

>--------------------10-year Historical Range--------------------<


Low Average Median High YTD Scenario +5 Consensus Scenario -5
Adjusted Present Value current $ 63 $ 41 $ 27
Adjusted Present Value +12 months $ 70 $ 45 $ 29

EPS FY2010E (+1 FY) 0.18 1.53 0.91 4.19 4.19 3.08 3.08 3.08
EPS FY2011E (+2 FY) 0.33 1.51 1.18 2.92 2.92 4.53 3.58 2.70
EPS FY2015E 7.20 4.63 2.79

Justified PE FY2010E (+1 FY) 12.8 22.7 14.6 9.6


Justified PE FY2011E (+2 FY) 18.4 15.4 12.5 10.9

Sales FY2010E (+1 FY) 2,965 2,965 2,965


Sales FY2011E (+2 FY) 3,375 3,213 3,051

Justified EV / Sales FY2010E (+1 FY) 2.2 1.4 0.9


Justified EV / Sales FY2011E (+2 FY) 2.0 1.3 0.9

EBITDA FY2010E (+1 FY) 537 537 537


EBITDA FY2011E (+2 FY) 766 616 479

Justified EV / EBITDA FY2010E (+1 FY) 12.3 8.0 5.3


Justified EV / EBITDA FY2011E (+2 FY) 8.6 6.9 6.0

Free Cash Flow FY2010E (+1 FY) 443 406 372


Free Cash Flow FY2011E (+2 FY) 16 10 7

Justified EV / Free Cash Flow FY2010E (+1 FY) 14.9 10.6 7.7
Justified EV / Free Cash Flow FY2011E (+2 FY) 15.6 10.1 6.6
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 9
WACC Assumptions

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 10
Peer Group Cost of Capital
Joy Global, Inc. Caterpillar Inc. Deere & Co. PACCAR Inc. Cummins Inc. CNH Global NV Bucyrus International Inc
Company NasdaqGS:JOYG NYSE:CAT NYSE:DE NasdaqGS:PCAR NYSE:CMI NYSE:CNH NasdaqGS:BUCY
Cost of Equity:
Beta S&P (5-yr monthly) 2.31 1.81 1.64 1.28 1.98 2.39 2.39
Industry average beta, levered 1.53 2.24 2.38 1.87 1.51 2.96 1.55

Current Risk Free Rate (US 10yr bond) 3.8% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8%
Equity Risk Premium 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Cost of Equity 12.9% 17.2% 18.0% 15.0% 12.8% 21.5% 13.0%
Cost of Debt:
Estimated Cost of Debt 6.2% 4.5% 4.2% 5.1% 5.2% 6.3% 5.8%
Normalized Tax Rate 37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5%
After Tax Cost of Debt 3.8% 2.8% 2.6% 3.2% 3.2% 4.0% 3.6%
Capital Structure:
Debt to Equity Ratio 9.8% 88.7% 103.9% 47.8% 7.1% 168.8% 11.9%
Unlevered Beta 2.18 1.17 0.99 0.99 1.90 1.16 2.22
Cost of Capital
Equity 5,555 36,317 23,693 13,319 9,555 6,111 4,446
Debt 544 32,231 24,607 6,370 681 10,316 531
Market Value of Total Capitalization 6,099 68,548 48,300 19,689 10,236 16,427 4,976
Weighting
Equity 91.1% 53.0% 49.1% 67.6% 93.3% 37.2% 89.3%
Debt 8.9% 47.0% 50.9% 32.4% 6.7% 62.8% 10.7%
Cost
Equity 12.9% 17.2% 18.0% 15.0% 12.8% 21.5% 13.0%
Debt 3.8% 2.8% 2.6% 3.2% 3.2% 4.0% 3.6%
Weighted Average Cost of Capital (WACC) =
12.1% 10.4% 10.2% 11.2% 12.2% 10.5% 12.0%

Peer Group Cost of Capital


Oshkosh CorporationA GCO Corp. Navistar International
Trinity
Corp.Industries Inc.
Toro Co. Manitowoc Co. Inc.
Company NYSE:OSK NYSE:AGCO NYSE:NAV NYSE:TRN NYSE:TTC NYSE:MTW Average
Cost of Equity:
Beta S&P (5-yr monthly) 2.78 1.72 1.34 2.54 1.44 2.66 2.02
Industry average beta, levered 1.99 1.64 3.10 2.60 1.59 3.03 2.15

Current Risk Free Rate (US 10yr bond) 3.8% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8%
Equity Risk Premium 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Cost of Equity 15.7% 13.6% 22.3% 19.4% 13.3% 21.9% 16.7%
Cost of Debt:
Estimated Cost of Debt 8.8% 9.6% 3.1% 6.2% 7.5% 14.7% 6.7%
Normalized Tax Rate 37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5%
After Tax Cost of Debt 5.5% 6.0% 1.9% 3.9% 4.7% 9.2% 4.2%
Capital Structure:
Debt to Equity Ratio 60.9% 21.5% 183.7% 128.9% 16.6% 176.2% 78.9%
Unlevered Beta 2.01 1.52 0.63 1.41 1.31 1.27 1.44
Cost of Capital
Equity 3,348 3,019 2,835 1,419 1,405 1,362 8,645
Debt 2,038 650 5,207 1,829 233 2,401 6,741
Market Value of Total Capitalization 5,386 3,669 8,042 3,248 1,639 3,764 15,386
Weighting
Equity 62.2% 82.3% 35.3% 43.7% 85.8% 36.2% 63.5%
Debt 37.8% 17.7% 64.7% 56.3% 14.2% 63.8% 36.5%
Cost
Equity 15.7% 13.6% 22.3% 19.4% 13.3% 21.9% 16.7%
Debt 5.5% 6.0% 1.9% 3.9% 4.7% 9.2% 4.2%
Weighted Average Cost of Capital (WACC) =
11.8% 12.2% 9.1% 10.7% 12.1% 13.8% 11.4%
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 11
$45 Stock Price Target Implied by
Consensus Average Estimates

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 12
Consensus
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2020
10/30/2009 10/30/2010 10/30/2011 10/30/2012 10/30/2013 10/30/2014 10/30/2015 10/30/2020
Income Statement
Acquired sales - - - - - - - -
Disposed Sales - - - - - - - -

Total sales 3,598 2,965 3,213 3,662 3,882 4,076 4,239 4,867
Total sales growth 0.0% -17.6% 8.4% 14.0% 6.0% 5.0% 4.0% 2.0%

Gross margin 32.0% 29.2% 30.2% 29.9% 29.9% 29.9% 29.9% 29.9%
SG&A margin 12.6% 12.6% 12.6% 12.6% 12.6% 12.6% 12.6% 12.6%

EBITDA 756 537 616 693 735 773 806 934


EBITDA margin 21.0% 18.1% 19.2% 18.9% 18.9% 19.0% 19.0% 19.2%

EBIT 698 490 565 633 671 704 733 841


EBIT margin 19.4% 16.5% 17.6% 17.3% 17.3% 17.3% 17.3% 17.3%

Other recurring income - - - - - - - -


Nonrecurring income - - - - - - - -

Net interest expense (25) (21) (14) (9) (7) (8) (9) (9)

Tax rate 33.4% 32.3% 33.0% 34.0% 34.0% 34.0% 34.0% 34.0%
Earnings from Continuing Operations449 318 369 412 438 459 478 549

Shares outstanding 103 103 103 103 103 103 103 103
EPS from Continuing Operations 4.35 3.08 3.58 3.99 4.25 4.46 4.63 5.33

Dividend per share 0.70 0.70 0.77 0.85 0.94 1.13 1.47 5.45
Dividends (72) (72) (79) (87) (97) (116) (151) (561)

Cash Flow Statement


Cash from Operations 655 483 481 466 502 521 541 633
Cash from Investing (94) (79) (85) (97) (103) (108) (112) (129)
Cash from Financing (99) (97) (54) (62) 78 59 24 (386)
Change in Cash 462 307 342 306 477 471 452 118

Free Cash Flow to the Firm


EBIAT 465 332 379 418 443 465 484 555
Depreciation 57 47 51 60 64 69 73 93
Capital investment (94) (79) (85) (97) (103) (108) (112) (129)
Working capital investment 149 118 61 (6) (1) (8) (10) (9)
Free cash flow 577 419 406 375 404 418 434 510

Economic Profit
Operating Capital 2,101 2,043 2,016 2,059 2,098 2,145 2,194 2,438
WACC (rough estimate) 12.1% 12.1% 12.1% 12.0% 11.8% 11.5% 11.2% 9.8%
Capital Charge 254 248 243 248 247 246 246 240
NOPAT (adjusted for leases, R&D) 465 332 379 418 443 465 484 555
Economic Profit 211 84 135 170 196 219 238 315
EP as % of Operating Capital 10.0% 4.1% 6.7% 8.3% 9.3% 10.2% 10.8% 12.9%

Adjusted Present Value


Unlevered equity discount rate 12.4% 12.4% 12.4% 12.9% 12.9% 12.9% 13.4%
Tax shield discount rate 6.0% 6.0% 6.0% 6.3% 6.3% 6.3% 6.5%
Terminal growth rate 1.5% 2.0% 2.5% 1.5% 2.0% 2.5% 1.5%
Current Value 42 43 45 40 41 42 38
+12 Months Value 46 47 49 44 45 46 42
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 13
Consensus
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2020
10/30/2009 10/30/2010 10/30/2011 10/30/2012 10/30/2013 10/30/2014 10/30/2015 10/30/2020
Balance Sheet
Cash 472 779 1,121 1,427 1,904 2,375 2,827 4,288
Accounts Receivable 581 581 617 696 733 768 797 914
Inventory 770 680 752 848 893 935 971 1,114
Other Current Assets 128 99 77 87 91 95 99 114
Total Current Assets 1,950 2,139 2,567 3,057 3,622 4,174 4,695 6,430

Gross PP&E 619 697 783 880 983 1,091 1,204 1,817
Net PP&E 347 378 412 450 489 528 567 757
Other Fixed Assets 711 711 711 711 711 711 711 711
Total Fixed Assets 1,058 1,090 1,124 1,161 1,200 1,239 1,278 1,468

Total Assets 3,008 3,229 3,690 4,218 4,821 5,413 5,973 7,898

Accounts Payable 207 207 240 281 301 318 331 381
Other NIB Current Liabilities 700 700 814 951 1019 1075 1121 1290
Total NIB Current Liabilities 907 907 1054 1232 1320 1393 1452 1671

Total Debt 544 519 544 569 744 919 1,094 1,969
Capital Leases - - - - - - - -
Minority Interest - - - - - - - -
Shareholder Equity 814 1,059 1,349 1,673 2,014 2,357 2,684 3,514
Total Capital 1,357 1,578 1,893 2,242 2,758 3,276 3,777 5,483

Other Non Current Liabilities 744 744 744 744 744 744 744 744
Total Liabilities and SE 3,008 3,229 3,690 4,218 4,821 5,413 5,973 7,898

Working Capital
Current Assets Less Cash 1,478 1,360 1,446 1,630 1,718 1,799 1,868 2,142
Current Liabilities Less Debt 907 907 1,054 1,232 1,320 1,393 1,452 1,671
Net Working Capital 571 453 392 398 398 406 416 470
NWC as a % of Sales 15.9% 15.3% 12.2% 10.9% 10.3% 10.0% 9.8% 9.7%
Working Capital Turnover 6.3 5.8 7.6 9.3 9.8 10.1 10.3 10.4

Cash Cycle
Days Inventory in Stock 115 126 117 114 117 117 117 118
Days Sales Outstanding 59 71 68 65 67 67 67 68
Days Payables Outstanding 32 38 35 36 38 39 39 40
Cash Cycle 142 160 149 143 146 145 145 146

Operating Efficiency
NI / Sales 12.5% 10.7% 11.5% 11.2% 11.3% 11.3% 11.3% 11.3%
Sales / Operating Assets 171% 145% 159% 178% 185% 190% 193% 200%
Operating Assets / Equity 2.6 1.9 1.5 1.2 1.0 0.9 0.8 0.7
Operating ROE 55.1% 30.0% 27.4% 24.6% 21.7% 19.5% 17.8% 15.6%

Accounting Efficiency
(EBITDA - Capex) / Net Interest 26.8 22.1 37.1 64.0 84.7 79.1 76.3 93.2
Debt/Equity 67% 57% 44% 37% 36% 38% 40% 53%
Debt/Total Capital 40% 36% 31% 27% 26% 28% 29% 35%

NI / Sales 12.5% 10.7% 11.5% 11.2% 11.3% 11.3% 11.3% 11.3%


Sales / Assets 119.6% 95.1% 92.9% 92.6% 85.9% 79.7% 74.5% 62.4%
Assets / Equity 3.7 3.8 3.3 2.9 2.7 2.5 2.4 2.2
ROE 55.1% 39.0% 34.8% 30.5% 26.2% 22.8% 20.3% 15.6%

ROA 14.9% 10.2% 10.7% 10.4% 9.7% 9.0% 8.4% 7.0%


ROI (Earnings / TotalCap) 33.0% 21.6% 21.3% 19.9% 17.5% 15.2% 13.5% 10.2%
ROIC (RetainEarn / TotalCap) 27.7% 16.7% 16.7% 15.7% 13.6% 11.4% 9.3% -0.2%
ROIC (Noplat / Operating Assets) 22.1% 16.2% 18.8% 20.3% 21.1% 21.7% 22.0% 22.8%
EBIT / Capital 51.4% 33.4% 32.6% 30.6% 26.8% 23.4% 20.8% 15.6%
EBITDA / Capital 55.7% 36.6% 35.5% 33.5% 29.4% 25.6% 22.9% 17.3%
Book value per share $ 8 $ 10 $ 13 $ 16 $ 20 $ 23 $ 26 $ 34
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 14
Consensus

Stock price 53.67


Shares outstanding 102.5 103.1
Market value 5,502

Cash (472)
Non operating assets -
Debt market value 544
Preferred stock market value -
Minority interest -
Other non operating liabilities -
Enterprise Value 5,574

Unlevered Cost of Equity 12.9%


Pretax Cost of Debt 6.25%
Terminal growth rate 2.0%
Current WACC* 12.1%

Discount unlevered free cash flows at the unlevered cost of equity to determine value of the unlevered firm

Period - 1 2 3 4 5 6 7 8 9 10
Adjusted Present Value FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Total Sales 3,598 2,965 3,213 3,662 3,882 4,076 4,239 4,367 4,498 4,633 4,771 4,867
EBIT 698 490 565 633 671 704 733 755 777 801 825 841

Tax rate 33% 32% 33% 34% 34% 34% 34% 34% 34% 34% 34% 34%
Cash income taxes 233 158 187 215 228 240 249 257 264 272 280 286
EBIAT 465 332 379 418 443 465 484 498 513 528 544 555

Depreciation 57 47 51 60 64 69 73 77 81 85 89 93
Capital Spending, recurring (94) (79) (85) (97) (103) (108) (112) (116) (119) (123) (127) (129)
Working Capital Investment 149 118 61 (6) (1) (8) (10) (9) (11) (12) (13) (9)
Free cash flow to the entity 577 419 406 375 404 418 434 450 463 478 494 510
Residual value of free cash flows 4,755
Free cash flow plus residual value 419 406 375 404 418 434 450 463 478 494 5,265

Present value of future cash flows - 359 294 280 257 236 217 198 181 165 1,560

Value of unlevered firm 3,747

Discount interest tax shields at cost of debt to determine value of interest tax shields

- 1 2 3 4 5 6 7 8 9 10
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Total Debt $ 544 $ 519 $ 544 $ 569 $ 744 $ 919 $ 1,094 $ 1,269 $ 1,444 $ 1,619 $ 1,794 $ 1,969
Cash interest expense as % of Debt 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3%
Cash interest expense 34 33 33 35 41 52 63 74 85 96 107 118
Interest tax shield 11 11 12 14 18 21 25 29 33 36 40
Residual value of interest tax shields 959
Interest tax shields plus residual value 11 11 12 14 18 21 25 29 33 36 999

Cost of debt 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3%
Present value of future cash flows - 10 10 12 14 16 17 19 20 21 545

Value of interest tax shields 684

Cost of Potential Bankruptcy


Probability of bankruptcy 4.0%
Negative impact to PV 100.0%
Unlevered firm value 3,747
Expected bankruptcy costs (150)

Valuation
Value of unlelvered firm 3,747
Value of interest tax shields 684
Expected bankruptcy costs (150) Current Value
Enterprise value 4,282 Terminal Growth
Equity 1.5% 2.0% 2.5% Tax shield
Cash 472 Current ValueConsensus0.124337577984888
12.4% $ 41.66 $ 43.02 $ 44.64 6.0%
Other non-operating assets - Current ValueConsensus0.129337577984888
12.9% $ 39.64 $ 40.83 $ 42.23 6.3%
Debt (544) Current ValueConsensus0.134337577984888
13.4% $ 37.80 $ 38.85 $ 40.07 6.5%
Preferred -
Minority Interest -
Other non operating liabilities - Value 12+ months
Value of equity 4,210 Terminal Growth
Equity 1.5% 2.0% 2.5% Tax shield
Value 12+ monthsConsensus0.124337577984888
12.4% $ 45.61 $ 47.10 $ 48.86 6.0%
Shares outstanding 103.1 103.1 Value 12+ monthsConsensus0.129337577984888
12.9% $ 43.55 $ 44.86 $ 46.39 6.3%
Value per share 40.83 Value 12+ monthsConsensus0.134337577984888
13.4% $ 41.67 $ 42.83 $ 44.17 6.5%

Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 15
Assumptions Required for a
Consensus-High $70 Stock Price Target

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 16
Scenario +5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2020
10/30/2009 10/30/2010 10/30/2011 10/30/2012 10/30/2013 10/30/2014 10/30/2015 10/30/2020

Income Statement
Acquired sales - - - - - - - -
Disposed Sales - - - - - - - -

Total sales 3,598 2,965 3,375 4,031 4,493 4,962 5,432 8,075
Total sales growth 0.0% -17.6% 13.8% 19.4% 11.5% 10.5% 9.5% 7.5%

Gross margin 32.0% 29.2% 32.7% 32.4% 32.4% 32.4% 32.4% 32.4%
SG&A margin 12.6% 12.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6%

EBITDA 756 537 766 903 1,008 1,115 1,223 1,832


EBITDA margin 21.0% 18.1% 22.7% 22.4% 22.4% 22.5% 22.5% 22.7%

EBIT 698 490 712 838 934 1,031 1,129 1,678


EBIT margin 19.4% 16.5% 21.1% 20.8% 20.8% 20.8% 20.8% 20.8%

Other recurring income - - - - - - - -


Nonrecurring income - - - - - - - -

Net interest expense (25) (21) (14) (8) (5) (5) (4) 11

Tax rate 33.4% 32.3% 33.0% 34.0% 34.0% 34.0% 34.0% 34.0%
Earnings from Continuing Operations449 318 467 547 613 677 743 1,115

Shares outstanding 103 103 103 103 103 103 103 103
EPS from Continuing Operations 4.35 3.08 4.53 5.31 5.94 6.57 7.20 10.82

Dividend per share 0.70 0.70 0.77 0.85 0.94 1.13 1.47 5.45
Dividends (72) (72) (79) (87) (97) (116) (151) (561)

Cash Flow Statement


Cash from Operations 655 483 523 578 658 722 792 1,208
Cash from Investing (94) (79) (90) (107) (119) (132) (144) (214)
Cash from Financing (99) (97) (54) (62) 78 59 24 (386)
Change in Cash 462 307 379 409 617 649 671 608

Free Cash Flow to the Firm


EBIAT 465 332 477 553 616 681 745 1,108
Depreciation 57 47 54 66 75 84 94 154
Capital investment (94) (79) (90) (107) (119) (132) (144) (214)
Working capital investment 149 118 2 (35) (29) (39) (44) (61)
Free cash flow 577 419 443 477 542 594 650 987

Economic Profit
Operating Capital 2101 2043 2077 2153 2227 2314 2409 2972
WACC (rough estimate) 12.1% 12.1% 12.1% 12.0% 11.8% 11.5% 11.2% 9.8%
Capital Charge 254 248 251 259 262 266 270 292
NOPAT (adjusted for leases, R&D) 465 332 477 553 616 681 745 1108
Economic Profit 211 84 226 294 354 415 475 815
EP as % of Operating Capital 10.0% 4.1% 10.9% 13.6% 15.9% 17.9% 19.7% 27.4%

Adjusted Present Value


Unlevered equity discount rate 12.4% 12.4% 12.4% 12.9% 12.9% 12.9% 13.4%
Tax shield discount rate 6.0% 6.0% 6.0% 6.3% 6.3% 6.3% 6.5%
Terminal growth rate 1.5% 2.0% 2.5% 1.5% 2.0% 2.5% 1.5%
Current Value 65 67 69 62 63 65 59
+12 Months Value 72 74 76 68 70 72 65
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 17
Scenario +5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2020
10/30/2009 10/30/2010 10/30/2011 10/30/2012 10/30/2013 10/30/2014 10/30/2015 10/30/2020

Balance Sheet
Cash 472 779 1,158 1,567 2,184 2,833 3,504 6,824
Accounts Receivable 581 581 648 766 849 935 1,022 1,517
Inventory 770 680 790 933 1,034 1,139 1,245 1,848
Other Current Assets 128 99 81 95 106 116 127 189
Total Current Assets 1,950 2,139 2,677 3,361 4,172 5,023 5,898 10,378

Gross PP&E 619 697 787 894 1,013 1,145 1,289 2,212
Net PP&E 347 378 414 456 500 548 598 882
Other Fixed Assets 711 711 711 711 711 711 711 711
Total Fixed Assets 1,058 1,090 1,125 1,167 1,211 1,259 1,309 1,593

Total Assets 3,008 3,229 3,802 4,528 5,383 6,282 7,207 11,971

Accounts Payable 207 207 243 298 336 373 409 610
Other NIB Current Liabilities 700 700 824 1010 1137 1262 1385 2065
Total NIB Current Liabilities 907 907 1067 1308 1473 1635 1794 2674

Total Debt 544 519 544 569 744 919 1,094 1,969
Capital Leases - - - - - - - -
Minority Interest - - - - - - - -
Shareholder Equity 814 1,059 1,447 1,907 2,423 2,984 3,575 6,584
Total Capital 1,357 1,578 1,991 2,476 3,167 3,903 4,669 8,553

Other Non Current Liabilities 744 744 744 744 744 744 744 744
Total Liabilities and SE 3,008 3,229 3,802 4,528 5,383 6,282 7,207 11,971

Working Capital
Current Assets Less Cash 1478 1360 1519 1794 1988 2190 2393 3553
Current Liabilities Less Debt 907 907 1067 1308 1473 1635 1794 2674
Net Working Capital 571 453 452 486 515 555 599 879
NWC as a % of Sales 15.9% 15.3% 13.4% 12.1% 11.5% 11.2% 11.0% 10.9%
Working Capital Turnover 6.3 5.8 7.5 8.6 9.0 9.3 9.4 9.5

Cash Cycle
Days Inventory in Stock 115 126 118 115 118 118 118 119
Days Sales Outstanding 59 71 66 64 66 66 66 66
Days Payables Outstanding 32 38 35 34 37 37 38 38
Cash Cycle 142 160 150 145 147 146 146 147

Operating Efficiency
NI / Sales 12.5% 10.7% 13.8% 13.6% 13.6% 13.7% 13.7% 13.8%
Sales / Operating Assets 171% 145% 162% 187% 202% 214% 226% 272%
Operating Assets / Equity 2.6 1.9 1.4 1.1 0.9 0.8 0.7 0.5
Operating ROE 55.1% 30.0% 32.3% 28.7% 25.3% 22.7% 20.8% 16.9%

Accounting Efficiency
(EBITDA - Capex) / Net Interest 26.8 22.1 47.8 94.3 162.9 199.7 283.6 NMF
Debt/Equity 67% 57% 42% 33% 30% 31% 31% 30%
Debt/Total Capital 40% 36% 30% 25% 23% 24% 23% 23%

NI / Sales 12.5% 10.7% 13.8% 13.6% 13.6% 13.7% 13.7% 13.8%


Sales / Assets 119.6% 95.1% 96.0% 96.8% 90.7% 85.1% 80.5% 70.1%
Assets / Equity 3.7 3.8 3.3 2.9 2.6 2.4 2.3 1.9
ROE 55.1% 39.0% 44.1% 37.8% 32.1% 28.0% 24.9% 18.5%

ROA 14.9% 10.2% 13.3% 13.1% 12.4% 11.6% 11.0% 9.7%


ROI 33.0% 21.6% 26.2% 24.5% 21.7% 19.2% 17.3% 13.6%
ROIC (RetainEarn / TotalCap) 27.7% 16.7% 21.7% 20.6% 18.3% 15.9% 13.8% 6.8%
ROIC (Noplat / Net Assets) 22.1% 16.2% 23.0% 25.7% 27.7% 29.4% 30.9% 37.3%
ROC 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
CROC 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Book value per share 8 10 14 18 24 29 35 64
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 18
Scenario +5

Stock price 53.67


Shares outstanding 102.5 103.1
Market value 5,502

Cash (472)
Non operating assets -
Debt market value 544
Preferred stock market value -
Minority interest -
Other non operating liabilities -
Enterprise Value 5,574

Unlevered Cost of Equity 12.9%


Pretax Cost of Debt 6.25%
Terminal growth rate 2.0%
Current WACC* 12.1%

Discount unlevered free cash flows at the unlevered cost of equity to determine value of the unlevered firm

Period - 1 2 3 4 5 6 7 8 9 10
Adjusted Present Value FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Total Sales 3,598 2,965 3,375 4,031 4,493 4,962 5,432 5,891 6,389 6,929 7,515 8,075
EBIT 698 490 712 838 934 1,031 1,129 1,224 1,328 1,440 1,562 1,678

Tax rate 33% 32% 33% 34% 34% 34% 34% 34% 34% 34% 34% 34%
Cash income taxes 233 158 235 285 317 351 384 416 451 490 531 571
EBIAT 465 332 477 553 616 681 745 808 876 950 1,031 1,108

Depreciation 57 47 54 66 75 84 94 104 115 127 140 154


Capital Spending, recurring (94) (79) (90) (107) (119) (132) (144) (156) (170) (184) (199) (214)
Working Capital Investment 149 118 2 (35) (29) (39) (44) (46) (52) (58) (63) (61)
Free cash flow to the entity 577 419 443 477 542 594 650 709 769 836 909 987
Residual value of free cash flows 9,204
Free cash flow plus residual value 419 443 477 542 594 650 709 769 836 909 10,191

Present value of future cash flows - 392 374 376 365 354 342 328 316 304 3,020

Value of unlevered firm 6,171

Discount interest tax shields at cost of debt to determine value of interest tax shields

- 1 2 3 4 5 6 7 8 9 10
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Total Debt $ 544 $ 519 $ 544 $ 569 $ 744 $ 919 $ 1,094 $ 1,269 $ 1,444 $ 1,619 $ 1,794 $ 1,969
Cash interest expense as % of Debt 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3%
Cash interest expense 34 33 33 35 41 52 63 74 85 96 107 118
Interest tax shield 11 11 12 14 18 21 25 29 33 36 40
Residual value of interest tax shields 959
Interest tax shields plus residual value 11 11 12 14 18 21 25 29 33 36 999

Cost of debt 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3%
Present value of future cash flows - 10 10 12 14 16 17 19 20 21 545

Value of interest tax shields 684

Cost of Potential Bankruptcy


Probability of bankruptcy 4.0%
Negative impact to PV 100.0%
Unlevered firm value 6,171
Expected bankruptcy costs (247)

Valuation
Value of unlelvered firm 6,171
Value of interest tax shields 684
Expected bankruptcy costs (247) Current Value
Enterprise value 6,609 Terminal Growth
Equity 1.5% 2.0% 2.5% Tax shield
Cash 472 Current ValueScenario
12.4% +50.124337577984888
$ 65.01 $ 67.05 $ 69.41 6.0%
Other non-operating assets - Current ValueScenario
12.9% +50.129337577984888
$ 61.61 $ 63.40 $ 65.45 6.3%
Debt (544) Current ValueScenario
13.4% +50.134337577984888
$ 58.52 $ 60.09 $ 61.89 6.5%
Preferred -
Minority Interest -
Other non operating liabilities - Value 12+ months
Value of equity 6,537 Terminal Growth
Equity 1.5% 2.0% 2.5% Tax shield
Value 12+ monthsScenario
12.4% $ +50.124337577984888
71.52 $ 73.77 $ 76.37 6.0%
Shares outstanding 103.1 103.1 Value 12+ monthsScenario
12.9% $ +50.129337577984888
68.02 $ 70.00 $ 72.27 6.3%
Value per share 63.40 Value 12+ monthsScenario
13.4% $ +50.134337577984888
64.83 $ 66.58 $ 68.57 6.5%

Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 19
Consensus Quarterly Estimates

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 20
Period Date 1/31/11 10/31/10 7/31/10 4/30/10 1/31/10 10/30/2009 7/31/2009 5/1/2009 1/30/2009 10/31/2008 8/1/2008 5/2/2008 2/1/2008 10/26/2007
Period +5Q +4Q +3Q +2Q +1Q Last QTR QTR-1 QTR-2 QTR -3 QTR -4 QTR -5 QTR -6 QTR -7 QTR -8
Average Consensus Estimates - - -
Revenue 667 806 763 729 667 3,598 964 956 924 755 1,032 904 843 640 736
Gross Profit 186 241 226 216 195 312 304 295 241 310 246 222 212 246
SG&A 90 108 103 98 90 130 106 108 107 119 113 108 102 99
R&D - - - - - - - - - - - - - -
EBITDA 105 142 133 127 115 197 212 202 150 208 153 138 123 159
Depreciation 9 9 9 9 9 10 13 13 15 16 19 24 12 12
EBIT (or EBT) 96 133 124 118 105 184 199 188 135 192 134 114 111 147
Income (recurring earnings) 61 84 78 74 65 112 121 113 80 116 80 68 67 89
Income (reported) 63 86 78 73 64 124 124 121 86 118 113 72 71 70

# of Consensus Estimates
Revenue 3 10 10 10 10
Gross Profit - - - - -
SG&A - - - - -
EBITDA 2 6 6 6 6
Depreciation - - - - -
EBIT (or EBT) 3 9 9 9 9
Income (recurring earnings) 3 9 9 9 9
Income (reported) 2 7 7 7 7
NOPLAT - - - - -
EP - - - - -
Free Cash Flow - - - - -

Margins 1/31/11 10/31/10 7/31/10 4/30/10 1/31/10 Trend 10/30/2009 7/31/2009 5/1/2009 1/30/2009 10/31/2008
Revenue growth 0.0% -16.4% -20.2% -21.1% -11.7% (5) -6.6% 5.8% 9.5% 17.9% 40.2% 45.4% 34.0% 14.2% 6.8%
Gross margin 27.8% 29.9% 29.7% 29.7% 29.3% 1 32.4% 31.8% 32.0% 31.9% 30.0% 27.2% 26.4% 33.1% 33.4%
SG&A margin 13.5% 13.5% 13.5% 13.5% 13.5% 1 13.5% 11.1% 11.7% 14.2% 11.5% 12.6% 12.8% 15.9% 13.4%
R&D margin 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBITDA margin 15.7% 17.6% 17.4% 17.5% 17.2% (1) 20.5% 22.2% 21.8% 19.8% 20.2% 16.9% 16.4% 19.3% 21.6%
Depreciation margin 1.2% 1.1% 1.2% 1.1% 1.2% (3) 1.0% 1.4% 1.5% 1.9% 1.6% 2.1% 2.8% 1.9% 1.6%
EBIT margin (or EBT) 14.4% 16.5% 16.2% 16.2% 15.8% (1) 19.1% 20.8% 20.4% 17.9% 18.6% 14.8% 13.6% 17.4% 20.0%
Income (recurring earnings) 9.1% 10.4% 10.2% 10.1% 9.8% (1) 11.6% 12.6% 12.3% 10.6% 11.2% 8.9% 8.1% 10.4% 12.1%
Income (reported) 9.4% 10.7% 10.2% 10.0% 9.6% (2) 12.9% 13.0% 13.1% 11.4% 11.4% 12.5% 8.6% 11.1% 9.5%

CROC -- Annualized 38.1% 41.7% 47.6% (1) 61.3% 64.9% 61.7% 47.2% 66.6% 48.8% 46.4% 43.8% 57.8%
ROIC -- Annualized 22.5% 24.5% 27.5% 1 27.5% 9.1% 18.3% -3.9% -4.3% 27.4% -9.3% 6.8% -3.4%
EP -4.8% -7.6% -7.3% 1 13.7% 4.8% 8.6% -4.4% 0.4% 15.2% -9.9% 5.3% 0.7%
Free Cash Flow 15.5% 5.4% 3.5% 3 85.4% 7.3% -0.4% -65.4% 53.1% 6.5% -8.5% 62.9% 15.0%
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 21
Economic Profit Model
(Consensus Estimates)

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 22
ECONOMIC PROFIT MODEL

Joy Global, Inc.


NasdaqGS:JOYG
8.5%
Economic Profit Model 1/31/11 10/31/10 7/31/10 4/30/10 1/31/10 10/30/2009 7/31/2009 5/1/2009 1/30/2009 10/31/2008 8/1/2008 5/2/2008 2/1/2008 10/26/2007
Adjusted Working Capital 514 514 542 575 609 624 724 729 633 473 652 673 642 649
Net PP&E 360 358 357 354 350 347 331 313 297 289 294 285 238 234
Other fixed assets 948 948 948 948 948 948 866 898 929 974 981 1,015 781 825
Operating Capital (McKinsey) 1,823 1,821 1,848 1,877 1,908 1,920 1,921 1,939 1,860 1,736 1,927 1,974 1,661 1,708

Cost of Debt 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% 5.9% 6.0% 6.5% 6.8% 6.6% 6.6% 7.0% 8.2%
Cost of Equity 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 15.0% 14.7% 14.4% 15.5% 15.5% 15.4% 15.1% 15.9%
WACC* 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1%
Economic Charge 221 220 224 227 231 232 232 235 225 210 233 239 201 207

EBIT 470 480 531 607 677 707 715 649 575 551 506 483 490 473
Interest on Operating Leases 2 2 2 2 2 2 2 2 2 2 2 2 2 2
R&D Expenditure - - - - - - - - - - - - - -
R&D Amortization (117) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117)
Goodwill Amortization 10 10 10 10 10 10 10 14 17 16 14 10 7 9
Adjustment for Provisions and Extraordinary Items (1) (1) (1) (1) (1) (1) (1) (1) (1) (2) (1) (1) (1) 1
Adjusted EBITA 364 374 426 501 571 601 609 548 478 451 405 377 382 368

Operating tax rate 18.1% 18.1% 18.1% 18.1% 18.1% 18.1% 18.1% 21.2% 24.7% 24.4% 5.5% 34.2% 20.0% 19.0%
Taxes on EBITA (66) (68) (77) (91) (103) (109) (110) (116) (118) (110) (22) (129) (76) (70)
Increase in deferred taxes (smoothed) 115 115 115 115 115 115 (23) 1 (16) 21 (2) (0) (12) (33)
NOPLAT 415 422 465 527 584 608 476 433 344 362 380 248 294 266

NasdaqGS:JOYG 1/31/11 10/31/10 7/31/10 4/30/10 1/31/10 10/30/2009 7/31/2009 5/1/2009 1/30/2009 10/31/2008
NOPLAT 415 422 465 527 584 608 476 433 344 362 380 248 294 266
Economic Charge 221 220 224 227 231 232 232 235 225 210 233 239 201 207
Economic Profit 194 202 241 300 353 376 244 198 119 152 147 9 93 59
Sequential growth -4% -16% -19% -15% -6% 54% 23% 67% -22% 3% 1475% -90% 57% 9%

NOPLAT 415 422 465 527 584 608 476 433 344 362 380 248 294 266
Operating Capital 1,823 1,821 1,848 1,877 1,908 1,920 1,921 1,939 1,860 1,736 1,927 1,974 1,661 1,708
ROIC (NOPLAT / Operating Capital) 22.3% 22.5% 24.5% 27.5% 30.6% 32.4% 25.4% 22.9% 18.8% 20.1% 20.8% 13.6% 16.1% 14.2%
Sequential growth -1% -8% -11% -10% -6% 28% 11% 22% -7% -3% 53% -16% 13% -4%

ECONOMIC PROFIT MODEL, SUPPORTING CALCULATIONS

1/31/11 10/31/10 7/31/10 4/30/10 1/31/10 10/30/2009 7/31/2009 5/1/2009 1/30/2009 10/31/2008 8/1/2008 5/2/2008 2/1/2008 10/26/2007
Other Long-term Assets 64 64 64 64 64 64 68 45 41 42 44 40 32 35
Total Other Fixed Assets 831 850 872 895 921 948 866 898 929 974 981 1,015 781 825
$ 75

Total Current Assets 1,632 1,652 1,713 1,800 1,893 1,950 1,905 1,897 1,827 1,738 1,924 1,838 1,651 1,538
less Cash and Short Term Equivalents (414) (435) (431) (438) (451) (472) (267) (181) (164) (202) (307) (233) (227) (173)
plus Estimated Cash Required for WC 44 44 46 49 52 53 54 53 52 50 46 42 39 38
Adjusted Current Assets 1,262 1,262 1,329 1,411 1,494 1,531 1,693 1,769 1,715 1,587 1,664 1,647 1,463 1,402

Total Current Liabilities 927 927 927 927 927 927 989 1,067 1,108 1,140 1,030 993 821 754
less Current Portion of Cap. Leases - - - - - - - - - - - - - -
less Current Portion of LT Debt - - - - - - 19 20 20 18 18 19 0 0
Short-term Borrowings 20 20 20 20 20 20 1 7 6 8 - - - -
Finance Div. Debt Current - - - - - - - - - - - - - -
Short-term Finance Div. Loans and Leases - - - - - - - - - - - - - -
Adjusted Current Liabilities 907 907 907 907 907 907 969 1,040 1,082 1,114 1,011 974 821 753

Adjusted Net Working Capital 355 355 422 504 587 624 724 729 633 473 652 673 642 649

Capitalized R&D, Beginning Balance 204 222 243 265 290 316 346 375 404 433 462 491 520 550
R&D Expenditure - - - - - - - - - - - - - -
Annual Amortization (10yr life) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117) (117)
Capitalized R&D, Ending Balance 87 106 126 149 173 200 229 258 287 316 346 375 404 433

Total Current Assets less Cash & ST Invest 1,218 1,218 1,283 1,362 1,442 1,478 1,639 1,716 1,663 1,537 1,618 1,605 1,424 1,365
Current Liabilities less Interest Bearing Debt 907 907 907 907 907 907 969 1,040 1,082 1,114 1,011 974 821 753
Cash Shortfall -- Required for Working Capital - - - - - - - - - - - - - - -
Cash -- 3-month Cushion 44 44 46 49 52 53 54 53 52 50 46 42 39 38
Total Cash Required for Working Capital 44 44 46 49 52 53 54 53 52 50 46 42 39 38

Excess Cash (above WC Requirements) 370 391 385 390 399 419 213 128 112 151 261 191 188 136
Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 23
Charts and Other

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 24
Joy Global, Inc. Price 54.25
JOYG NTM EPS $ 2.95
Industrials NTM PE 18.2
Construction and Farm MachineryR/R
and Heavy Trucks
0.2 to 1

Price / Earnings (NTM) vs. Stock Price


45.0 $90

40.0 $80

35.0 $70

30.0 $60
P
P 25.0 $50 r
/ i
20.0 $40
E c
15.0 $30
e
10.0 $20

5.0 $10

0.0 $-
M-00

M-01

M-02

M-03

M-04

M-05

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M-07

M-08

M-09
S-00

S-01

S-02

S-03

S-04

S-05

S-06

S-07

S-08

S-09
J-00

J-01

J-02

J-03

J-04

J-05

J-06

J-07

J-08

J-09
D-99

D-00

D-01

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D-04

D-05

D-06

D-07

D-08

D-09
P/E Average +1 St. Dev. -1 St. Dev. Stock Price

Max up to ten years Three years One year One year historically implied target range

06/13/01 to 12/09/09 12/13/06 to 12/09/09 12/10/08 to 12/09/09 NTM EPS Target $ 53.67
Max PE 39.2 12/10/03 Max PE 39.2 12/10/03 Max PE 18.7 10/21/09 Max EPS $ 3.20 $ 60 12%
Average PE 20.2 Average PE 20.2 Average PE 10.9 Average EPS $ 2.95 $ 32 -40%
Min PE 4.5 11/19/08 Min PE 4.5 11/19/08 Min PE 5.0 02/25/09 Min EPS $ 2.70 $ 14 -75%

Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 25
Ticker: JOYG

Company: Joy Global, Inc.

Graph Metric: TEV / LTM EBITDA

JOYG ## 12/31/2004 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/28/2009 Last 5 years

TEV / NTM Total Revenue Average 1.1x 1.5x 2.2x 2.1x 1.9x 1.2x 1.8x
High 1.3x 2.1x 3.4x 2.5x 2.6x 2.1x 3.4x
Low 0.9x 0.8x 1.4x 1.7x 0.5x 0.6x 0.5x
Close 1.2x 2.0x 2.0x 2.5x 0.7x 1.9x 1.9x

TEV / NTM EBITDA Average 9.4x 9.6x 11.5x 10.0x 9.5x 6.8x 9.6x
High 11.0x 12.0x 18.1x 12.1x 13.6x 11.2x 18.1x
Low 7.9x 5.8x 7.1x 8.2x 2.5x 3.0x 2.5x
Close 9.5x 11.2x 9.5x 11.8x 3.9x 10.2x 10.2x

TEV / NTM EBIT Average 12.2x 11.0x 12.7x 11.0x 10.4x 7.6x 10.7x
High 14.2x 13.4x 20.1x 13.2x 15.0x 12.7x 20.1x
Low 10.5x 7.1x 7.6x 9.0x 2.8x 3.4x 2.8x
Close 11.5x 12.2x 10.5x 12.9x 4.5x 11.6x 11.6x

Price / NTM EPS Average 25.1x 18.7x 19.4x 16.1x 15.7x 11.1x 16.5x
High 33.6x 21.9x 30.1x 20.3x 23.9x 19.6x 33.6x
Low 19.4x 15.1x 11.8x 13.1x 3.7x 4.5x 3.7x
Close 21.1x 20.0x 15.6x 19.8x 6.2x 18.5x 18.5x

Source: Ascendere Associates LLC models and Capital IQ, Inc. data

Steve Castellano Ascendere Associates LLC


steve@ascenderellc.com Page 26

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