EnCana Corp. - Washburn

INVESTMENT THESIS

EnCana is well‐positioned to have a strong presence in North American energy for the long term. Anticipated industry and macroeconomic trends point to a business environment in which ECA will thrive.

ECA’s value‐creation potential is supported by their high‐quality asset base and proven strength in growing revenues and free cash flow.

Low‐cost production, a disciplined approach to capital structure, and a strong financial position further reinforce our thesis.

Robust profit margins, a commitment to free cash flow creation, a sustainable ROIC v. WACC spread, and considerable undervaluation all support our “Buy” recommendation.

ECA has plans to split off the company into two independent energy entities ‐ one focused on natural gas and the other on oil sands and refining. The proposed spin‐off holds the potential to unlock significant shareholder value.

Student Investment Fund Stock Report Analysts: James Martin & Ryan Johnson

Recommendation: Long‐Term Buy

Recent Price (4/30/2009): $45.73 Sector: Energy

52‐Week Range: $96.89 ‐ $34.31 Sub‐Sector: Oil/Gas E&P

12‐Month Target Price: $70.00 Stock Classification: Large Value

One Year Price Change: ‐44.8% Institutional Ownership: 65%

Percent Off High: ‐60.0% Insider Ownership: 1%

Market Cap: $35.48 Bil Insider Trading (last 6‐mo): None

P/E: 5.87 Dividend Yield: 3.5%

Earnings per Share 9.12 Beta: 1.2

EnCana Corp.NYSE: ECA

HIGHLIGHTS

ECA is North America’s largest natural gas producer.

80% of ECA’s energy production is clean burning natural gas.

One hundred percent of ECA’s oil production is fully integrated with two refineries in the United States.

ECA has 19.7 trillion cubic feet equivalent of proven reserves.

ECA’s has a drilling inventory of approximately 10 years.

ECA is also a technical and cost leader in the recovery of oil through steam‐assisted gravity drainage (SAGD).

ECA’s Weyburn field in Saskatchewan is the world’s largest CO2 sequestration project (the key technology for clean coal).

ECA recently acquired shale

reservoir plays in Louisiana, Texas,

and British Columbia have to

potential to be the largest sources

of natural gas growth in North

America.

BUSINESS SUMMARY EnCana is a leading North American unconventional natural gas and integrated oil company head‐quartered in Calgary, Alberta. EnCana presents a unique investment opportunity stemming from their strong North American market share and diverse resource portfolio. ECA’s value‐driven and innovative business strategy is underpinned by high‐quality assets and reinforced by a strong financial position. Natural gas and oil resource plays are ECA’s strategic focus. With nine key natural gas and four key oil resource plays in Canada and the United States, ECA is able to invest for the long term as they continue to add quality reserves to their asset portfolio.

ONE YEAR PRICE PERFORMANCE VS. S&P 500

Student Investment Fund: EnCana

OPERATING / REPORTING SEGMENTS

Canada includes the Company’s exploration for and development and production of natural gas, crude oil and natural gas liquids (“NGLs”) and other related activities within the Canadian market.

USA includes the Company’s exploration for, and development and production of natural gas, NGLs and other related activities within the United States.

Downstream Refining (Integrated Oil) is focused on the refining of crude oil into petroleum and chemical products at two refineries located in the United States. The refineries are jointly owned with ConocoPhillips.

Market Optimization is primarily responsible for the sale of the Company’s proprietary production. Market optimization activities include third‐party purchases and sales of product that provide operational flexibility for transportation commitments, product type, delivery points and customer diversification.

Corporate and Other mainly includes unrealized gains or losses recorded on derivative financial instruments. Once amounts are settled, the realized gains and losses are recorded in the operating segment to which the derivative instrument relates.

PRODUCTION BREAKDOWN: Crude Oil & Natural Gas Liquids:

Account for roughly 20% of ECA production.

Crude Oil FYE 2008 Production: 104,813 bbls/d; 1.09% decline from 2007 1

NGLs FYE 2008 Production: 26,038 bbls/d; 2.13% increase from 2007

Crude Oil and NGLs created FYE 2008 revenues of $3,091M 2

Crude Oil and NGLS accounted for 10.28% of 2008 revenues, a 43.63% growth from 2007

Natural Gas:

Accounts for roughly 80% of ECA production.

FYE 2008 Production: 3,775 MMcf/d; 5. 86% increase from 2007 3

FYE 2008 revenues of $10,972M

Natural Gas accounted for 36.5% of 2008 revenues; 56.25% growth from 2007

STRATEGIC BREAKDOWN: Upstream: refers to searching for and the recovery and

production of crude oil and natural gas

FYE 2008 Revenues of $1,117M; 51.36% growth from 2007

Accounted for 3.7% of total revenues

Downstream: refers to the refining of crude oil, and the selling and distribution of natural gas and products derived from crude oil

FYE 2008 Revenues of $9,011M; 23.19% growth

Accounted for 29.97% of total revenues

1 BBLS/D (Billion Barrels per day): measurement of volume used to describe

the amount of crude oil produced or consumed by an entity in one day. 2 Revenue figures are unhedged results. Revenue growth is largely due to price appreciation in underlying commodity prices. 3 MMCF/D (Million Cubic Feet per Day): measure of quantity of gas, equal to a

cubic foot of volume at 60 degrees Fahrenheit and either 14.696 pounds per square inch or 14.73 PSI of pressure

PROVED RESERVES: Natural Gas:

Canada: FYE 2008 $7,847

USA: FYE 2008 $5,832

Approximately 125 percent of Natural Gas production was replaced by reserves additions during 2008

Crude Oil & Natural Gas Liquids:

Canada: FYE 2008 $954

USA: FYE 2008 $51.6

Approximately 260 percent of Crude Oil & NGLs production was replaced by reserves additions during 2008

Crude Oil

13%

NGLs

3% Natural Gas

84%

Production %


MACROECONOMIC OUTLOOK & INDUSTRY ANALYSIS

NEAR‐TERM ENERGY SPECULATION

Natural Gas: Consumption: 2009 USA and Canadian natural gas consumption is expected to decline by 1.8% in 2009. 2010 is

expected to be a year of consumption recovery.

Production: 2009 and 2010 projections vary from moderate decrease in production to slight increases in production. Our overall assumption is that consumption will remain relatively stable through the near future. Price: Natural gas prices are expected to remain suppressed below $4.00 for the remainder of 2009; however, we forecast an expected economic turnaround in 2010 to lift prices to around $6.25 for a 2010 price average. Long‐term forecasts for natural gas prices are bullish.

Crude Oil: Consumption: 2009 US and Canadian crude oil consumption is expected to decline by 2.2% in 2009 (430,000

bbl/d). Forecasts for 2010 are an increase of 1.4% (270,000 bbl/d).

Production: Forecasted US and Canadian oil production to increase by 4.1% in 2009 and 2.8% in 2010.

Price: Economic slowdown is expected to reduce the average price of a barrel to $53 this year. Our 2010 forecast price per barrel average is approximately $75. Long‐term forecasts for crude oil prices are bullish.

Note: Please refer to our commodity pricing analysis on page 9.

FUTURE OF NATURAL GAS Natural gas is a major source of generation for electricity. Use of natural gas has increased at an average annual rate of 4.84% since 2005, while other key sources such as coal have declined at an average annual rate of 0.31%. Additionally, consider that:

900 of the next 1000 power plant additions will be natural gas‐fired,

the aging coal‐fired plant fleet,

the incredible expense of new nuclear power plant construction, and

the relative unpredictability and inconsistency of alternative energy sources.

Macroeconomic trends suggest that natural gas will become an increasingly prominent source of electricity generation compared to other sources of electricity.

According to the EIA, the largest contributor of growth in U.S. natural gas production is from unconventional resource natural gas

formations. North America has become the focus growth area for EnCana. ECA’s core natural gas plays in the U.S. are Jonah,

Piceance, East Texas, and Fort Worth. These four locations accounted for roughly 87% of the total U.S. natural gas production in

2007.

SPECULATION ON THE “NEW ENERGY FOR AMERICA PLAN”: Presidents Obama’s administration has plans to revolutionize the future of U.S. energy production and consumption. Their comprehensive plans include seeking out and investing in alternative and renewable energy, severing our dependence on foreign oil, and addressing the effects of the energy sector on the environment. EnCana’s efforts to mitigate the potential negative effects of these initiatives on their revenues and profits include: Significant production weighting in natural gas;

Increased investment and use of horizontal wells and multi‐stage hydraulic fracturing technology which lessen the “environmental footprint” of extraction;

Expanding their industry leadership in CO2 sequestration (carbon dioxide storage, key to clean coal technology);

Continuing their efforts as the industry leader in the steam to oil ratio, which directly translates into lower emissions intensity; and

Continued recognition for having above‐average investments in renewable energy.

One overlooked aspect is that President Obama's energy team intends to wean the U.S. off of the oil of “less stable” nations,

including the Middle East and South America. The U.S. is expected to strengthen ties with North American energy sources.

Behind Saudi Arabia, Canada is the second leading source of oil sands. Being a prominent Canadian energy supplier, EnCana is

positioned to benefit greatly from this industry transformation.


VALUATION ANALYSIS

Our discounted cash flow model estimates ECA's intrinsic

value at $74.48 per share for 2009. From 2009, our model

forecasts ECA's intrinsic value per share to grow at an

average annual rate of 5.5%, reaching $120.68 in 2018.

The valuation model uses forecasted income statements

and balance sheets using the percent of sales method and

average growth calculations from the 2004 through 2008

historical financial statements.

Income Statement Inputs:

Revenue Growth: Despite a 5‐year historical growth of

nearly 30%, each year’s revenue growth was forecasted

based on macroeconomic and industry assumptions. In

2009, we forecast a 30% decline in revenue. We base this

assumption on the current economy and commodity prices.

We expect that ECA’s revenue will bounce back in 2010

with a growth of 15%. Following 2010, we forecast the

growth of revenue to gradually taper down to a long‐term

growth rate of 3% in 2018.

Cost of Goods Sold: ECA operated with a historical

COGS/Sales average of 32.6%. We applied a 36%

COGS/Sales to reflect the most recent historical years and

to maintain conservatism in the forecasts.

Income Tax Rate: For the forecasted years, we applied a

30% tax rate, which is 3% higher than the historical average.

We did this to conservatively account for uncertainty of

future energy taxation.

Dividend Growth: From 2004 to 2008, ECA’s dividend pay‐

out grew at an average of 60% per year; it was nearly 100%

growth in 2007 and 2008. Considering the revenue decline

in 2009, we forecast a dividend growth of 25%. From 2009,

we forecast the dividend growth rate to steadily decrease

to 5% growth in 2018.

Share Growth: ECA is currently exercising a stock

repurchase plan. The plan is for a repurchase of roughly

10% of ECA’s outstanding stock. We applied a 0.75%

decrease per year for the forecasted years.

Balance Sheet Inputs:

Current Assets: From 2004 to 2008, ECA operated with very

low Current Assets as a percent of sales. We forecast similar

balances for the forecasted years.

Property Plant and Equipment: The historical PP&E/Sales

average was over 165%, but the 2008 PP&E was relatively

low. To account for the dip in 2008 PP&E, we used a 140%

of sales forecast in 2009. From 2009, we modestly

increased the percentage each year to a level that

corresponds with the historical average.

Long‐term Horizon Value: We applied a long‐term horizon

growth rate of 3%. This growth rate is notably conservative

considering the compelling long‐term macroeconomic

expectations and future changes within the energy industry.

Any growth exceeding our expectations will only add to long‐

term shareholder wealth.4

PROFITABILITY

Historically, ECA has posted industry leading profit

margins coupled with stable returns.

Profit Margin:

Hist. Avg.: 67.4%. Projected Avg.: 64%

Operating Profit Margin:

Hist. Avg.: 28.8%. Projected Avg.: 28.1%

Net After‐Tax Margin:

Hist. Avg.: 21%. Projected Avg.: 18%

Return on Assets:


Return on Equity:



VALUE CREATION METRICS

Some of the most compelling ECA statistics come from

assessing the company from a value creation standpoint.

Value Spread: ROIC v. WACC.

ROIC: Historically, ECA has maintained an average

ROIC of 13%. Looking forward, the forecasted ROIC

average for 2009 to 2018 is 13.6%.

WACC: We use a long‐term WACC of 9.95%,

although the current WACC is significantly lower.

Risk Free Rate, Beta, and Market Risk Premiums

were increased to maintain conservatism.

Value Spread (ROIC – WACC): In 2008, ECA’s

value spread was 6.0%. T he forecasted value

spread averages 4.0%.

Economic Value Added: In 2008, ECA created

$2,023 million economic profit. Following a dip in

2009, we are forecasting steady increases to EVA.

Following 2009, we project an average year‐to‐year

growth in EVA of 3.2%.

Market Value Added: ECA posted an MVA of $29.9

million in 2008. Our projections have that number

growing at a yearly average of 5.1% through 2018.

ECA’s forecasted MVA to Market Cap average is a

robust 56% for 2009 to 2018.

Free Cash Flow: Historically, ECA has been committed

to creating Free Cash Flow. They have historically

posted only one year of negative FCF, and all of our

forecasted years have positive FCF. ECA’s average

historical FCF Yield is 9.8%, and we project a future

average above 5.5%. ECA’s current FCF Margin is 14%,

which is well above the 8% industry average.

Net Operating Profit After Tax (NOPAT)

Historically, ECA’s has NOPAT production has been

positive and has grown at an average of 27.4%.

Following a 20% decline in 2009 NOPAT, we forecast

NOPAT growing at an average of 7.4% year‐to‐year.

When posted against our DCF price projections,

you can see how projected profit generation and

free cash flows drive ECA's intrinsic share value.

$25,000

$30,000

$35,000

$40,000

$45,000

$1,000

$1,250

$1,500

$1,750

$2,000

$2,250

$2,500

Marke

t Valu

e Added

Economic Value Added

Economic Value Added & Market Value Added (millions)

Economic Value Added Market Value Added


INDUSTRY COMPARISON

Valuation Metrics (to date) - Thomson Financial Database

Oil & Gas Expl.

& Prod. 5

Big Energy

Stocks 6 ECA

EPS $2.17 $9.82 $5.87

Free CF per Share $7.09 $14.24 $11.37

ROIC 18.1% 25.3% 14.4%

P/E (5Yr. Avg.) 27.1 9.64 14

Dividend Yield 4.5% 5.3% 3.5%

EBITDA per Share $5.81 $18.90 $14.90

Enterprise Value per Share $21.71 $55.89 $57.20 56

Profitability Metrics (2008 %) – Thomson Financial Database

Oil & Gas Expl.

& Prod. 5

Big Energy

Stocks 6 ECA

Return on Equity 11.7 20.6 24.8Return on Assets 19.7 26.6 11.8Gross Margin 73.7 24.3 61.3Operating Margin 28.0 12.0 24.4Net Profit Margin ‐17.0 5.5 17.95 Yr. Revenue Growth Rate 26.7 11.0 29.15 Yr. Earnings Stability 50.7 81.3 97.0

5 Oil & Gas Expl. & Prod. Is an average of the 148 companies in the Oil and Gas Exploration and Production sector. This sample includes the

following key ECA competitors including: APA, CEO, CHK, DVN, and XTO. 6 Big Energy is an average of 5 prominent large cap energy stocks. The company sample includes: BP, COP, CVX, RDSA, and XOM.

MULTIPLES VALUATION

In the table featured below, historical valuation multiples were used to calculate and

forecast share prices averages. The following multiples were used:

Price/Sales Price/EBITDA Enterprise Value/EBITDA Price/Earnings

80

81828384

BY BZ CA CB

Share Prices 2009E 2010E 2018E

Low Price from Multiples $54.12 $62.34 $104.62High Price From Multiples $69.12 $80.29 $141.96

Multiples Average $62.82 $71.58 $123.28

DCF Share Price $70.69 $76.36 $125.22

Our DCF Share Price is above the projected Multiples Share Price High and Average in

2009. In 2010, the DCF Share Price is above the Multiples Average and near the

Multiples High. This supports our undervalue position. Forward looking, in 2018, our

DCF Share Price falls below the Multiples Price High and the Multiples Average. Once

again, this reflects the desire for long‐term conservatism in our forecasting.

EXPERT OPINIONS

Ned Davis Rating: “Buy” / “Hold Long‐term”

recommendations based

upon bullish earnings

expectation.

Standard & Poor:

“Hold” / “B+” rating

centered on ECA’s

historical quantitative data.

Money Central:

Scored 9 out of 10 – ECA is

expected to significantly

outperform the market

with less than average risk

Zacks Equity Research: “Buy” recommendation

rooted in the intrinsic value

of proved and unproved

reserves.

Motley Fool Caps:

11 out of 12 Wall Street

Analyst gave ECA an

outperform ranking.

The Street: “Buy” based on Analysts’

opinion.

McDep’s Oil & Gas

Research:

“Buy” recommendation

rooted in the intrinsic value

of ECA’s asset portfolio.


ALTERNATIVE VALUATION

Share Price Based on Asset Portfolio NPV

Considering the relevance of asset portfolios to valuation in the energy industry, Asset‐Base NPV per share valuation methods are an excellent supplement to conventional valuation metrics. Calculating the NPV of proved and unproved reserves often provides more distinct intrinsic values of companies in the Exploration and Production sector. Given the substantial potential of ECA’s unconventional resource plays, using NPV calculations is a steadfast method for determining their intrinsic value per share.

Valuation based upon the NPV of Proved and Unproved Reserves.

McDep’s Oil & Gas Research $74.97

Zacks Equity Research $54.47

DCF Price $70.69

PLANNED COMPANY SPLIT

On May 11, 2008 EnCana announced that the Board of Directors had unanimously approved a plan to split the company into two publicly traded companies. The proposal will create a publicly traded integrated oil producer concentrating on producing oil from oil sands in Canada and running refineries in a joint venture with ConocoPhillips in Texas and Illinois, and a separate pure play natural gas company with operations in the U.S. and Canada. The transaction will be a tax‐free transaction in which current shareholders of EnCana will receive a share in each of the two companies for every EnCana share held. The proposed corporate reorganization is scheduled to be implemented when the economic situation can better facilitate the reorganization.

The natural gas company, with the working name GasCo, will represent roughly two‐thirds of EnCana's current production and proved reserves. It is expected that GasCo will eventually retain the EnCana name and be the second largest gas producer in North America. GasCo is likely to target an annual production growth rate of 7% to 9%, and is expected to deliver sufficient free cash flow to pay an attractive dividend as well as conduct an active share repurchase program.

The oil company, on the other hand, will operate under a new name, tentatively called Integrated Oil Co (or IOCo). It will develop the corporation's Canadian oil sands assets and refinery interests in the U.S. and most likely be called Cenavus. This company will be positioned to deliver sustained growth from oil‐sands properties that contain enough resources to fuel long term growth. The company will target an annual production growth rate of 4% to 6% and is expected to pay an attractive dividend, as well as conduct a share buyback program.

We believe that the proposed spinoff will unlock significant long term value for shareholders. After the reorganization, EnCana will be divided into two highly specialized energy enterprises with more focused management teams, independent financial flexibility, and it should enable optimal capital allocation between the two companies.

Further research into corporate reorganizations indicates that there is a significant market premium for focused company splits. Multiple academic studies indicate that in first few years following the split, the stock prices of the two entities individually outpace the stock market by more than 30 percent. The stock’s annual return for those years typically ranges from 20 to 50 percent.

STOCK REPURCHASE PLAN

In November of 2008, the Toronto Stock Exchange approved ECA’s proposed share repurchase plan. The plan commenced on November 10, 2008. Under the bid, the company will repurchase up to 74,957,086 shares representing 10% of the public float of the company. EnCana plans to fund its share purchases with cash flow and the proceeds from potential dispositions. The bid commenced on November 13, 2008 and purchases of common shares may be made until November 12, 2009. Daily purchases will not exceed 25% (888,176) of the average daily trading volume of 3,552,706 common shares.


IN‐DEPTH TOPIC DISCUSSION

Conventional v. Unconventional Resource Plays

Conventional Natural Gas: Employ traditional resource extraction methods that are typically large scale, have minimal exploration, low

engineering risk, low organic content, and low reserve potential.

Unconventional Energy Sources: Require progressive techniques other than the traditional methods of extracting resources. Unconventional

plays typically apply advanced extraction technology, and also have low geological risk, high organic content, high reserve potential, and a low

average decline rate.

Resource Play: A term used by EnCana to describe their unconventional asset plays that are in the early stages of development and have

substantial long‐term extraction potential. By EnCana’s criterion, resource plays have a high accumulation of hydrocarbons known to exist over

a large areal expanse and/or thick vertical section. EnCana’s chief resource play is natural gas shale reservoirs which has the potential to be the

largest source of North American natural gas.

Upstream v. Downstream Operations

Upstream Operations: refer to the searching for and the recovery and production of crude oil and natural gas. The upstream oil sector is also

known as the exploration and production (E&P) sector.

Downstream Operations: refer to the refining of crude oil and the selling and distribution of natural gas and products derived from crude oil.

Downstream operations typically include midstream operations, which is storing, marketing and transporting crude oil, natural gas, and natural

gas liquids.

The Economics of Energy Pricing

The energy industry tends to be very sensitive to economic changes. Demand for energy is inelastic; therefore, it does not easily change with price changes. Changes in supply have the foremost impact on the fuel prices. The nature of the energy sector is that extraction typically requires long term investments, which can cause difficulty in adjusting supply with demand. The result is commodity price volatility. Energy stock prices tend to move in line with energy commodity prices. Changes in commodity prices are a direct result of changes in supply and demand. Energy costs are typically inflexible, because they are needed for everyday living. As a result, stock prices are less influenced by changes in the economy.

Reserve Strength of Natural Gas The US Geological Survey estimates total global natural gas reserves in range from 100,000 to 300,000,000 TCF. Putting these numbers in perspective, natural gas reserves equal more than 10,000 times the world’s estimated coal reserves and anywhere from 15 to 40,000 times the world’s remaining oil reserves. Therefore, the world’s natural gas reserves have more energy content than the world’s coal and oil reserves combined.

True Value of Gas vs. Oil It is generally recognized that one barrel of oil is equivalent to about 6000 cubic feet of natural gas. Oil is currently trading at over 12x the price of 1000 cubic feet in the market. Using the conversion, you would get twice the “bang for your buck” using natural gas as an energy source rather than oil.

“Renewable” Energy against Conventional Sources ‐ Load Factors The capacity factor, or load factor, is a common measure of operational effectiveness of power plants and reliability of electricity sources. Load factor is the ratio of the actual output of a power plant over a period of time and its output if it had operated at full capacity the entire time. Dispatchability, which refers to a plant’s ease of stopping and starting energy production, is also an important facet of energy plants when considering the supply and demand characteristics of the energy sector.

Renewable Sources

Renewable energy sources have questionable dependability based upon load factor, and lack of dispatchability.

Wind Farms are highly intermittent, due to the inconsistencies of the wind. Typical load factors of wind energy sources range

from 20‐40%.


Solar Energy is variable because of the daily rotation of the earth and cloud cover. Solar power load factors typically range from 10‐75%, depending on the structure of the energy unit. The load factors tend to be at the lower end of the given range.

Hydroelectric Plants are the most reliable renewable energy sources but do have production variances due to the availability

of water and required water level maintenance. Hydroelectric load factors range from 20‐60%.

Conventional Sources:

Conventional sources of electricity generation are considered the most reliable and practical sources of electricity.

Gas‐fired Plants are a steadfast electricity source and are the most easily dispatched. The load factor for gas plants is over

60%. Gas fired plants have the capability of maintaining 100% production; however, production levels are centered on

demand and often follow a cyclical operation schedule.

Nuclear Power Plants are considered a base load power sources because their output typically remains constant. Nuclear

plant load factors generally range from 80% to 100%.

Coal‐fired Plants are very similar to gas‐fired plants in that they are extremely reliable and maintain reasonable dispatchability. Coal‐fired plants’ typically maintain load factors in the range of 70‐90%.

Break‐Even Price Analysis

A variety of sources provide that the Break‐Even

Price for North American natural gas production

ranges from $4.00‐$9.00. Gas Prices are currently

sitting around $3.50. With the resulting small income

margins, firms with a low‐cost structure will

observably be the most profitable. The chart

presented to the right presents the historical natural

gas prices plotted against average gas production

costs (break‐even prices).

ECA has identified the Break‐Even Price for its overall

gas portfolio at $4.75. This is an industry leading

break‐even price. Also consider that ECA has hedged

2/3rds of its gas production at $9.13 through October

of 2009. That contributes to a robust profit margin.

Specific Natural Gas Pricing Trends

The chart presented to the left depicts the 18‐month price history for each sector use of natural gas. All sectors typically reflect each other and their price changes tend to correlate with the economic state.


Commodity Price Analysis

In making our natural gas and crude oil price projections, our investment team used four primary sources:

‐ First Energy Capital ‐ Tudor, Pickering, & Holt ‐ Energy Information Agency ‐ DOE ‐ NYMEX futures prices

We used an average of the source data

to make our projections. Notice all

projections for the presented

commodity prices are long‐term

bullish.

2009 2010 2011 2012

First Energy $70.00 $90.00 $95.00 $100.00

Tudor Pickering $45.00 $65.00 $75.00 $90.00

EIA $61.09 $81.69 $91.37 $102.99

NYMEX Futures $52.16 $60.84 $66.11 $68.81

Average $57.06 $74.38 $81.87 $90.45

$35.00

$50.00

$65.00

$80.00

$95.00

$110.00

$/barrel

Crude Oil Price Projections

2009 2010 2011 2012

First Energy $5.00 $7.75 $9.50 $11.00

Tudor Pickering $4.50 $5.50 $7.50 $8.00

EIA $4.24 $5.83 $6.66 $6.75

NYMEX Futures $4.16 $5.95 $6.81 $7.11

Average $4.48 $6.26 $7.62 $8.22

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$/ Mcf

Natural Gas Price Projections

Our Investment Team would like to thank the following sources for their quantitative and qualitative contributions to our

stock report.

Thomson Financial Database Oil Price Net – Energy News Source

Energy Information Agency – U.S. Department of Energy RigZone‐ Exploration & Production Industry News

EnCana Corp. Annual Report Ned Davis Research Inc. Stock Report – ECA

Tudor, Pickering, & Holt Energy Investments Standard & Poor’s Stock Report ‐ ECA

First Energy Capital Research Reuters Provestor Plus Company Report – ECA

Energy Intelligence Zacks Investment Research

McDeps Oil and Gas Investment Research WikiWealth/Editgrid – Stock Research Summary – ECA

National Renewable Energy Laboratory MSN MoneyCentral – Stock Quote – ECA

The Grand Energy Transition by Robert Hefner, III Motley Fool Caps – Stock Research – ECA

The Oil & Gas Journal The Street – Stock Quote ‐ ECA

Energy Investment Strategies by Jim Kingsdale

OilDrum – Energy News Source

Investment Summary and Recommendation

As mentioned before, our 2009 target price for ECA is $70.00 based upon our DCF model. With a market price of $45.67, our

Investment team believes that ECA could be undervalued by up to 35%. We also expect steady long‐term price appreciation.

EnCana is a proven industry leader in profit margins and financial stability making them an even more attractive investment.

Commitment to free cash flow, a secure ROIC to WACC spread and growing MVA and EVA prove that ECA is a strong value

creator. Based upon our Macroeconomic assessment, ECA is strategically positioned to be a best‐in‐class North American

energy firm.

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A B C D E F G H I J K L M N

Enter Firm Ticker ECA

Enter first financial statement year in cell B6 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Average Manual

Total revenue 10,836.0 14,356.0 16,578.0 21,431.0 30,064.0 Revenue Growth 32.5% 15.5% 29.3% 40.3% 29.1%

Cost of goods sold 3,403.0 4,612.0 3,211.0 8,874.0 11,644.0 COGS % of Sales 31.4% 32.1% 19.4% 41.4% 38.7% 32.6% 36.0%

Gross profit 7,433.0 9,744.0 13,367.0 12,557.0 18,420.0

SG&A expense 2,043.0 2,577.0 3,019.0 3,673.0 4,723.0 SG&A % of Sales 18.9% 18.0% 18.2% 17.1% 15.7% 17.6% 16.0%

Research & Development 0.0 0.0 0.0 0.0 0.0 R&D % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Depreciation/Amortization 2,348.0 2,714.0 3,017.0 3,730.0 5,978.0 D&A % of Sales 21.7% 18.9% 18.2% 17.4% 19.9% 19.2%

Interest expense (income), operating 439.0 540.0 411.0 430.0 589.0 Inc. Exp. Oper. 4.1% 3.8% 2.5% 2.0% 2.0% 2.9% 1.8%

Non-recurring expenses (59.0) 0.0 (323.0) (65.0) (140.0) Exp. Non-rec -0.5% 0.0% -1.9% -0.3% -0.5% -0.7%

Other operating expenses (37.0) 37.0 (273.0) (1.0) (61.0) Other exp. -0.3% 0.3% -1.6% 0.0% -0.2% -0.4%

Operating Income 2,699.0 3,876.0 7,516.0 4,790.0 7,331.0

Interest income (expense), non-operating 0.0 0.0 0.0 0.0 0.0 Int. inc. non-oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Gain (loss) on sale of assets 0.0 0.0 0.0 0.0 0.0 Gain (loss) asset sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other income, net 0.0 0.0 0.0 0.0 0.0 Other income, net 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Income before tax 2,699.0 3,876.0 7,516.0 4,790.0 7,331.0

Income tax 737.0 1,201.0 1,972.0 1,141.0 1,938.0 Tax rate 27.3% 31.0% 26.2% 23.8% 26.4% 27.0% 30.0%

Income after tax 1,962.0 2,675.0 5,544.0 3,649.0 5,393.0

Minority interest 0.0 0.0 0.0 0.0 0.0 Minority interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Equity in affiliates 0.0 0.0 0.0 0.0 0.0 Equity in affiliates 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

U.S. GAAP adjustment 0.0 0.0 0.0 0.0 0.0 U.S. GAAP adjust. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net income before extraordinary items 1,962.0 2,675.0 5,544.0 3,649.0 5,393.0

Extraordinary items, total 1,418.0 553.0 629.0 75.0 0.0 Extrordinary items

Net income 3,380.0 3,228.0 6,173.0 3,724.0 5,393.0

Total adjustments to net income 0.0 0.0 0.0 0.0 0.0 Adjustments to NI

Basic weighted average shares 920.8 868.3 819.9 756.8 750.1 Share growth -5.7% -5.6% -7.7% -0.9% -5.0% -0.75%

Basic EPS excluding extraordinary items 2.13 3.08 6.76 4.82 7.19

Basic EPS including extraordinary items 3.67 3.72 7.53 4.92 7.19

Diluted weighted average shares 936 889 837 765 752 Diluted share growth -5.0% -5.9% -8.6% -1.7% -5.3% -0.75%

Diluted EPS excluding extraordinary items 2.10 3.01 6.63 4.77 7.17

Diluted EPS including extraordinary items 3.61 3.63 7.38 4.87 7.17

Dividends per share -- common stock 0.20 0.27 0.37 0.80 1.60

Gross dividends -- common stock 183 238 304 603 1,199 Dividend growth 30.1% 27.7% 98.4% 98.8% 60.0% 50.0%

Retained earnings 3,197 2,990 5,869 3,121 4,194

Data Source: Thomson/Reuters

values in millions

Too unpredictable to forecast, set to zero in the forecast

Too unpredictable to forecast, set to zero in the forecast

Forecasting PercentagesHistorical Income Statements

Forecasted income statement items are based on 5 years of historical average ratios unless a value is entered in the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the historical average is truly representative of what the firm can achieve in the future.













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O P Q R S T U V W X Y Z

Year-by-year dividend growth 25.00% 25.00% 25.00% 20.00% 20.00% 15.00% 15.00% 10.00% 10.00% 5.00%

Year-by-year revenue growth -30.00% 15.00% 10.00% 10.00% 7.50% 7.50% 5.00% 5.00% 4.00% 3.00%

year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total revenue 21,045 24,202 26,622 29,284 31,480 33,841 35,533 37,310 38,802 39,966

Cost of goods sold 7,576 8,713 9,584 10,542 11,333 12,183 12,792 13,432 13,969 14,388

Gross profit 13,469 15,489 17,038 18,742 20,147 21,658 22,741 23,878 24,833 25,578

SG&A expense 3,367 3,872 4,259 4,685 5,037 5,415 5,685 5,970 6,208 6,395

Research & Development 0 0 0 0 0 0 0 0 0 0

Depreciation/Amortization 4,043 4,650 5,115 5,626 6,048 6,502 6,827 7,168 7,455 7,678

Interest expense (income), operating 368 424 466 512 551 592 622 653 679 699

Non-recurring expenses (137) (158) (174) (191) (205) (221) (232) (243) (253) (261)

Other operating expenses (82) (94) (103) (114) (122) (131) (138) (145) (150) (155)

Operating Income 5,909 6,795 7,475 8,222 8,839 9,502 9,977 10,476 10,895 11,222

Interest income (expense), non-operating (111) (215) (288) (381) (456) (560) (632) (728) (821) (824)

Gain (loss) on sale of assets 0 0 0 0 0 0 0 0 0 0

Other income, net 0 0 0 0 0 0 0 0 0 0

Income before tax 5,798 6,580 7,187 7,841 8,383 8,942 9,345 9,748 10,074 10,398

Income tax 1,739 1,974 2,156 2,352 2,515 2,683 2,804 2,924 3,022 3,119

Income after tax 4,058 4,606 5,031 5,489 5,868 6,259 6,542 6,824 7,052 7,279

Minority interest 0 0 0 0 0 0 0 0 0 0

Equity in affiliates 0 0 0 0 0 0 0 0 0 0

U.S. GAAP adjustment 0 0 0 0 0 0 0 0 0 0

Net income before extraordinary items 4,058 4,606 5,031 5,489 5,868 6,259 6,542 6,824 7,052 7,279

Extraordinary items, total 0 0 0 0 0 0 0 0 0 0

Net income 4,058 4,606 5,031 5,489 5,868 6,259 6,542 6,824 7,052 7,279

Total adjustments to net income 0 0 0 0 0 0 0 0 0 0

Basic weighted average shares 744 739 733 728 722 717 712 706 701 696

Basic EPS excluding extraordinary items 5.45 6.23 6.86 7.54 8.12 8.73 9.19 9.66 10.06 10.46

Basic EPS including extraordinary items 5.45 6.23 6.86 7.54 8.12 8.73 9.19 9.66 10.06 10.46

Diluted weighted average shares 746 741 735 729 724 719 713 708 703 697

Diluted EPS excluding extraordinary items 5.44 6.22 6.84 7.52 8.10 8.71 9.17 9.64 10.04 10.44

Diluted EPS including extraordinary items 5.44 6.22 6.84 7.52 8.10 8.71 9.17 9.64 10.04 10.44

Dividends per share -- common stock 2.01 2.54 3.19 3.86 4.67 5.41 6.27 6.95 7.70 8.14

Gross dividends -- common stock 1,499 1,873 2,342 2,810 3,372 3,878 4,460 4,906 5,396 5,666

Retained earnings 2,560 2,732 2,689 2,678 2,496 2,381 2,082 1,918 1,656 1,613

Forecasted Income Statements -- 10 Years


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AA AB AC AD AE AF AG AH AI AJ AK AL AM AN


year 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Average Manual

Assets

Cash & equivalents 593.0 0.0 0.0 0.0 0.0 Cash % of Sales 5.5% 0.0% 0.0% 0.0% 0.0% 1.1% 0.0%

Short term investments 317.0 0.0 0.0 0.0 0.0 ST Invest. % of Sales 2.9% 0.0% 0.0% 0.0% 0.0% 0.6% 0.0%

Receivables, total 1,566.0 0.0 0.0 0.0 0.0 Receivables % Sales 14.5% 0.0% 0.0% 0.0% 0.0% 2.9% 0.0%

Inventory, total 58.0 0.0 0.0 0.0 0.0 Inventory % of Sales 0.5% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0%

Prepaid expenses 0.0 0.0 0.0 0.0 0.0 Pre. Exp. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other current assets, total 971.0 3,603.0 3,703.0 4,446.0 5,604.0 Other CA % of Sales 9.0% 25.1% 22.3% 20.7% 18.6% 19.2% 18.0%

Total Current Assets 3,505.0 3,603.0 3,703.0 4,446.0 5,604.0

Property, plant and equipment (net) 22,503.0 24,841.0 28,299.0 36,060.0 33,862.0 Net PPE % of Sales 207.7% 173.0% 170.7% 168.3% 112.6% 166.5% 112.0%

Goodwill 2,459.0 2,524.0 2,525.0 2,893.0 2,426.0 Goodwill % of Sales 22.7% 17.6% 15.2% 13.5% 8.1% 15.4% 7.0%

Intangibles 0.0 0.0 0.0 0.0 0.0 Intangibles % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Long term investments 421.0 1,021.0 621.0 575.0 915.0 LT Invest. % of Sales 3.9% 7.1% 3.7% 2.7% 3.0% 4.1% 3.0%

Notes receivable -- long term 0.0 0.0 0.0 3,147.0 2,834.0 Notes Rec. % of Sales 0.0% 0.0% 0.0% 14.7% 9.4% 4.8% 10.0%

Other long term assets, total 2,325.0 2,113.0 0.0 0.0 0.0 Other LT ass. % Sales 21.5% 14.7% 0.0% 0.0% 0.0% 7.2% 0.0%

Other assets, total 0.0 0.0 0.0 0.0 0.0 Other assets % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total assets 31,213.0 34,102.0 35,148.0 47,121.0 45,641.0

Liabilities and Shareholders' Equity

Accounts payable 0.0 0.0 0.0 0.0 0.0 Acc. Payable % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Payable/accrued 1,742.0 0.0 0.0 0.0 0.0 Pay/accured % Sales 16.1% 0.0% 0.0% 0.0% 0.0% 3.2% 0.0%

Accrued expenses 0.0 0.0 0.0 0.0 0.0 Acc. Exp. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Notes payable/short term debt 0.0 0.0 0.0 0.0 0.0 Notes payable % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Current portion of LT debt/Capital leases 188.0 0.0 0.0 0.0 0.0 Curr. debt % of Sales 1.7% 0.0% 0.0% 0.0% 0.0% 0.3% 0.0%

Other current liabilities 1,017.0 4,821.0 3,742.0 6,574.0 4,201.0 Other curr liab % Sales 9.4% 33.6% 22.6% 30.7% 14.0% 22.0%

Total Current Liabilities 2,947.0 4,821.0 3,742.0 6,574.0 4,201.0

Long term debt, total 7,742.0 6,703.0 6,577.0 8,840.0 8,755.0 LT debt % of Sales

Deferred income tax 5,082.0 5,153.0 6,189.0 6,172.0 6,198.0 Def. inc. tax % Sales 46.9% 35.9% 37.3% 28.8% 20.6% 33.9% 20.6%

Minority interest 0.0 0.0 0.0 0.0 0.0 Min. Int. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other liabilities, total 1,134.0 1,207.0 1,159.0 4,927.0 4,742.0 Other liab. % of Sales 10.5% 8.4% 7.0% 23.0% 15.8% 12.9% 16.0%

Total Liabilities 16,905.0 17,884.0 17,667.0 26,513.0 23,896.0

Preferred stock (redeemable) 0.0 0.0 0.0 0.0 0.0

Preferred stock (unredeemable) 0.0 0.0 0.0 0.0 0.0

Common stock 5,299.0 5,160.0 4,617.0 4,514.0 4,590.0 -2.6% -10.5% -2.2% 1.7% -3.5% -0.75%Additonal paid-in capital 38.0 133.0 160.0 80.0 0.0Retained earnings (accumluated deficit) 7,935.0 9,327.0 11,374.0 12,976.0 16,344.0

Treasury stock -- common 0.0 0.0 0.0 0.0 0.0ESOP Debt Guarantee 0.0 0.0 0.0 0.0 0.0Other equity, total 1,036.0 1,598.0 1,330.0 3,038.0 811.0

Total Shareholders' Equity 14,308.0 16,218.0 17,481.0 20,608.0 21,745.0Total Liabilities and Shareholders' Equity 31,213.0 34,102.0 35,148.0 47,121.0 45,641.0Diluted weighted average shares 936 889 837 765 752 Diluted share growth -5.0% -5.9% -8.6% -1.7% -5.3% -0.75%Total preferred shares outstanding 0 0 0 0 0 Preferred share growth

values in millions

Historical Balance Sheets

LT debt is manually adjusted for AFN in the pro formas

Forecasting Percentages

Forecasted balance sheet items are based on 5 years of historical average ratios unless a value is entered in the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the historical average is truly representative of what the firm can achieve in the future.

The model uses the more conservative diluted common shares number for total shares outstanding.


















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AO AP AQ AR AS AT AU AV AW AX AY AZ

Year-by-year PPE/Sales 140.00% 142.00% 145.00% 147.50% 150.00% 152.50% 155.00% 157.50% 160.00% 160.00%

year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Assets

Cash & equivalents 0 0 0 0 0 0 0 0 0 0

Short term investments 0 0 0 0 0 0 0 0 0 0

Receivables, total 0 0 0 0 0 0 0 0 0 0

Inventory, total 0 0 0 0 0 0 0 0 0 0

Prepaid expenses 0 0 0 0 0 0 0 0 0 0

Other current assets, total 3,788 4,356 4,792 5,271 5,666 6,091 6,396 6,716 6,984 7,194

Total Current Assets 3,788 4,356 4,792 5,271 5,666 6,091 6,396 6,716 6,984 7,194

Property, plant and equipment (net) 29,463 34,366 38,601 43,194 47,220 51,608 55,076 58,763 62,084 63,946

Goodwill 1,473 1,694 1,864 2,050 2,204 2,369 2,487 2,612 2,716 2,798

Intangibles 0 0 0 0 0 0 0 0 0 0

Long term investments 631 726 799 879 944 1,015 1,066 1,119 1,164 1,199

Notes receivable -- long term 2,104 2,420 2,662 2,928 3,148 3,384 3,553 3,731 3,880 3,997

Other long term assets, total 0 0 0 0 0 0 0 0 0 0

Other assets, total 0 0 0 0 0 0 0 0 0 0

Total assets 37,460 43,563 48,718 54,322 59,183 64,467 68,579 72,941 76,828 79,133

Liabilities and Shareholders' Equity

Accounts payable 0 0 0 0 0 0 0 0 0 0

Payable/accrued 0 0 0 0 0 0 0 0 0 0

Accrued expenses 0 0 0 0 0 0 0 0 0 0

Notes payable/short term debt 0 0 0 0 0 0 0 0 0 0

Current portion of LT debt/Capital leases 0 0 0 0 0 0 0 0 0 0

Other current liabilities 4,638 5,333 5,867 6,453 6,937 7,458 7,831 8,222 8,551 8,808

Total Current Liabilities 4,638 5,333 5,867 6,453 6,937 7,458 7,831 8,222 8,551 8,808

Long term debt, total 1,660 3,214 4,295 5,693 6,803 8,355 9,426 10,860 12,250 12,292

Deferred income tax 4,335 4,986 5,484 6,032 6,485 6,971 7,320 7,686 7,993 8,233

Minority interest 0 0 0 0 0 0 0 0 0 0

Other liabilities, total 3,367 3,872 4,259 4,685 5,037 5,415 5,685 5,970 6,208 6,395

Total Liabilities 14,001 17,405 19,905 22,864 25,263 28,199 30,262 32,738 35,003 35,727

Preferred stock (redeemable) 0 0 0 0 0 0 0 0 0 0

Preferred stock (unredeemable) 0 0 0 0 0 0 0 0 0 0

Common stock 4,556 4,521 4,487 4,454 4,420 4,387 4,354 4,322 4,289 4,257Additonal paid-in capital 0 0 0 0 0 0 0 0 0 0Retained earnings (accumluated deficit) 18,904 21,636 24,325 27,004 29,500 31,881 33,963 35,881 37,537 39,149

Treasury stock -- common 0 0 0 0 0 0 0 0 0 0ESOP Debt Guarantee 0 0 0 0 0 0 0 0 0 0Other equity, total 0 0 0 0 0 0 0 0 0 0

Total Shareholders' Equity 23,459 26,158 28,813 31,457 33,920 36,268 38,317 40,203 41,826 43,406Total Liabilities and Shareholders' Equity 37,460 43,563 48,718 54,322 59,183 64,467 68,579 72,941 76,828 79,133Total common shares (diluted) 746 741 735 729 724 719 713 708 703 697Total preferred shares outstandingAFN (interactive with 3 items below) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adjustment to LT Debt (iterate or use Goal Seek (7,094.6) 1,553.6 1,080.6 1,398.1 1,110.7 1,552.1 1,070.4 1,434.6 1,389.4 41.9Issue Common Stock to Fund AFNSet Balance Sheet Cash Lower to Fund AFN

Forecasted Balance Sheets -- 10 Years

Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries


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BA BB BC BD BE BF BG BH BI BJ BK BL BM BN BO BPEnter Firm Ticker ECA

2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Liquidity

Current 1.19 0.75 0.99 0.68 1.33 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82

Quick 1.17 0.75 0.99 0.68 1.33 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82

Net Working Capital to Total Assets 0.02 (0.04) (0.00) (0.05) 0.03 (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) (0.02)

Asset Management

Days Sales Outstanding 52.75 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Inventory Turnover 186.83 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Fixed Assets Turnover 0.48 0.58 0.59 0.59 0.89 0.71 0.70 0.69 0.68 0.67 0.66 0.65 0.63 0.63 0.63

Total Assets Turnover 0.35 0.42 0.47 0.45 0.66 0.56 0.56 0.55 0.54 0.53 0.52 0.52 0.51 0.51 0.51

Debt Management

Long-Term Debt to Equity 54.1% 41.3% 37.6% 42.9% 40.3% 7.1% 12.3% 14.9% 18.1% 20.1% 23.0% 24.6% 27.0% 29.3% 28.3%

Total Debt to Total Assets 24.8% 19.7% 18.7% 18.8% 19.2% 4.4% 7.4% 8.8% 10.5% 11.5% 13.0% 13.7% 14.9% 15.9% 15.5%

Times Interest Earned n/a n/a n/a n/a n/a 53.1 31.6 26.0 21.6 19.4 17.0 15.8 14.4 13.3 13.6

Profitability

Gross Profit Margin 68.6% 67.9% 80.6% 58.6% 61.3% 64.0% 64.0% 64.0% 64.0% 64.0% 64.0% 64.0% 64.0% 64.0% 64.0%

Operating Profit Margin 24.9% 27.0% 45.3% 22.4% 24.4% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1%

Net After-Tax Profit Margin 18.1% 18.6% 33.4% 17.0% 17.9% 19.3% 19.0% 18.9% 18.7% 18.6% 18.5% 18.4% 18.3% 18.2% 18.2%

Total Assets Turnover 0.35 0.42 0.47 0.45 0.66 0.56 0.56 0.55 0.54 0.53 0.52 0.52 0.51 0.51 0.51

Return on Assets 10.8% 9.5% 17.6% 7.9% 11.8% 10.8% 10.6% 10.3% 10.1% 9.9% 9.7% 9.5% 9.4% 9.2% 9.2%

Equity Multiplier 2.18 2.10 2.01 2.29 2.10 1.60 1.67 1.69 1.73 1.74 1.78 1.79 1.81 1.84 1.82

Return on Equity 23.6% 19.9% 35.3% 18.1% 24.8% 17.3% 17.6% 17.5% 17.4% 17.3% 17.3% 17.1% 17.0% 16.9% 16.8%

EPS (using diluted shares, excluding extraordinary items 3.61 3.63 7.38 4.87 7.17 5.44 6.22 6.84 7.52 8.10 8.71 9.17 9.64 10.04 10.44

DPS (dividends per share) 0.20 0.27 0.36 0.79 1.59 2.01 2.53 3.19 3.85 4.66 5.40 6.25 6.93 7.68 8.13

Forecasted Valuation Metrics -- 10 Years

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

NOPAT (net operating profit after tax) 1,962 2,675 5,544 3,649 5,393 4,316 4,963 5,460 6,006 6,456 6,940 7,287 7,652 7,958 8,197

ROIC (return on invested capital) 8.5% 10.8% 19.6% 10.1% 15.9% 14.6% 14.4% 14.1% 13.9% 13.7% 13.4% 13.2% 13.0% 12.8% 12.8%

EVA (economic value added) (325) 203 2,728 60 2,023 1,384 1,543 1,618 1,707 1,757 1,804 1,806 1,804 1,779 1,833

FCF (free cash flow) N/A 812 2,086 (4,112) 7,591 8,715 60 1,225 1,414 2,430 2,553 3,819 3,965 4,637 6,334

Weighted Average Cost of Capital 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95% 9.95%

Net Operating Working Capital (NOWC) 475 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Operating Long Term Assets 22,503 24,841 28,299 36,060 33,862 29,463 34,366 38,601 43,194 47,220 51,608 55,076 58,763 62,084 63,946Total Operating Capital 22,978 24,841 28,299 36,060 33,862 29,463 34,366 38,601 43,194 47,220 51,608 55,076 58,763 62,084 63,946

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Long-term Horizon Value Growth Rate (user-supplied) 3.00%PV of Forecasted FCF, discounted at 9.95% $57,411 $54,409 $59,764 $64,487 $69,491 $73,977 $78,786 $82,808 $87,084 $91,113 $99,607Value of Non-Operating Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Intrinsic Value of the Firm $57,411 $54,409 $59,764 $64,487 $69,491 $73,977 $78,786 $82,808 $87,084 $91,113 $99,607Intrinsic Market Value of the Equity $48,656 $52,749 $56,550 $60,192 $63,798 $67,174 $70,431 $73,382 $76,224 $78,863 $87,316Per Share Intrinsic Value of the Firm $64.72 $70.69 $76.36 $81.89 $87.46 $92.78 $98.01 $102.89 $107.68 $112.25 $125.22MVA (market value added) $26,911 $29,289 $30,392 $31,380 $32,341 $33,254 $34,163 $35,065 $36,021 $37,038 $43,909

Item Value Percent Cost Weighted Cost Risk Free Rate 4.00%ST Debt (from most recent balance sheet) 0 0.00% 0.60% 0.00% Beta 1.20LT Debt (from most recent balance sheet) 8,755 19.79% 6.70% 0.97% Market Risk Prem. 6.00%MV Equity (look up stock's mkt. cap and enter in cell BB53 35,480 80.21% 11.20% 8.98% Cost of Equity 11.20%Weighted Average Cost of Capital 9.95%

Capital Asset Pricing Model

Forecasted Ratios and Valuation Model -- 10 Years

values in millions

Historical Ratios and Valuation Model

Valuation (in millions where appropriate) -- through year 2018

Weighted Average Cost of Capital Calculations

Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions)


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BQ BR BS BT BU BV BW BX BY BZ CA CB CC CD CE CF CG CH

Inputs 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Per share value (hist. & DCF est.) $28.53 $45.16 $45.59 $67.00 $46.48 $70.69 $76.36 $81.89 $87.46 $92.78 $98.01 $102.89 $107.68 $112.25 $125.22

Market capitalization $26,270 $39,212 $37,379 $50,706 $34,865 $52,629 $56,422 $60,056 $63,654 $67,022 $70,272 $73,217 $76,051 $78,685 $87,118

EBITDA $6,465 $7,143 $11,162 $8,595 $13,309 $8,234 $9,492 $10,454 $11,517 $12,393 $13,342 $14,021 $14,740 $15,348 $15,802

Enterprise Value $33,419 $45,915 $43,956 $59,546 $43,620 $54,290 $59,636 $64,351 $69,347 $73,825 $78,627 $82,642 $86,912 $90,935 $99,410

Multiples

Price/Sales 2.42 2.73 2.25 2.37 1.16 2.50 2.33 2.26 2.17 2.13 2.08 2.06 2.04 2.03 2.18

Price/EBITDA 4.06 5.49 3.35 5.90 2.62 6.39 5.94 5.74 5.53 5.41 5.27 5.22 5.16 5.13 5.51

Price/Free Cash Flow N/A 51.21 18.98 -13.36 4.63 6.04 940.38 49.04 45.03 27.58 27.53 19.17 19.18 16.97 13.75

Enterprise Value/EBITDA 5.17 6.43 3.94 6.93 3.28 6.59 6.28 6.16 6.02 5.96 5.89 5.89 5.90 5.92 6.29

Price/Earnings 7.90 12.44 6.18 13.76 6.48 13.00 12.28 11.96 11.62 11.45 11.25 11.22 11.17 11.18 12.00

Dividend Yield 0.69% 0.59% 0.80% 1.18% 3.43% 2.84% 3.31% 3.89% 4.40% 5.02% 5.51% 6.08% 6.44% 6.84% 6.49%

Historical Override

Valuation Estimates Based On: Average w/Manual 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Price/Sales 2.19 $61.69 $71.48 $79.22 $87.80 $95.10 $103.00 $108.97 $115.29 $120.80 $125.37

Price/EBITDA 4.28 5.25 $58.06 $67.44 $74.84 $83.07 $90.07 $97.70 $103.44 $109.57 $114.95 $119.24

Price/Free Cash Flow 15.37 - - - - - - - - - - -

Enterprise Value/EBITDA 5.15 6.25 $69.12 $80.29 $89.10 $98.90 $107.22 $116.30 $123.15 $130.44 $136.85 $141.96

Price/Earnings 9.35 10.00 $54.51 $62.34 $68.60 $75.41 $81.23 $87.30 $91.93 $96.62 $100.60 $104.62

Multiples Low Price $54.51 $62.34 $68.60 $75.41 $81.23 $87.30 $91.93 $96.62 $100.60 $104.62

Multiples High Price $69.12 $80.29 $89.10 $98.90 $107.22 $116.30 $123.15 $130.44 $136.85 $141.96

DCF Price $70.69 $76.36 $81.89 $87.46 $92.78 $98.01 $102.89 $107.68 $112.25 $125.22

Multiples Average $62.82 $71.58 $78.73 $86.53 $93.28 $100.46 $106.08 $111.92 $117.09 $123.28

Forecasted Stock Prices Based on Historical Multiples -- 10 Years

Historical Ratios and Valuation Forecasted Ratios and Valuation

In this section we are going to examine historical and forecasted ratios (or "multiples") typically used to value stocks ‐‐ P/CF, Enterprise Value/EBITDA, etc. We first want to compare the historical trends in these ratios to the trends in their forecasted values. If our forecasted multiples are systematically increasing or decreasing our forecasts may be too optimistic or pessimistic, and our forecast assumptions may have to be adjusted. Second, we want to compare our discounted cash flow valuation estimates with those derived from the various multiples. Once again, if there is a large discrepancy between our DCF valuation estimate of the company's stock and the range of values obtained from the variousmultiples, we may want to adjust our forecast assumptions. 1. You will need to look up the company's year‐end stock prices and enter them in the first 5 (historical) years of the "per share value" category.2. Use the estimated DCF price per share in the forecasted period (link to your forecasted prices in cells BG47‐BP47.3. Market capitalization will be calculated as basic weighted shares x historical year‐end prices and then forecasted basic weighted shares x DCF forecasted prices.4. As with previous calculations, historical multiples use actual historical values and forecasted multiples use forecasted values.

$50

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Forecasted Value Per Sh

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Forecasted Per Share Stock Values

DCF Price Low Price High Price Multiples Average

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DCF Price

P/S and Ent. Value/EBITDA

Price/Sales and Enterprise Value/EBITDA vs. Price

Price/Sales Enterprise Value/EBITDA DCF Price

In this section we are going to examine historical and forecasted ratios (or "multiples") typically used to value stocks ‐‐ P/CF, Enterprise Value/EBITDA, etc. We first want to compare the historical trends in these ratios to the trends in their forecasted values. If our forecasted multiples are systematically increasing or decreasing our forecasts may be too optimistic or pessimistic, and our forecast assumptions may have to be adjusted. Second, we want to compare our discounted cash flow valuation estimates with those derived from the various multiples. Once again, if there is a large discrepancy between our DCF valuation estimate of the company's stock and the range of values obtained from the variousmultiples, we may want to adjust our forecast assumptions. 1. You will need to look up the company's year‐end stock prices and enter them in the first 5 (historical) years of the "per share value" category.2. Use the estimated DCF price per share in the forecasted period (link to your forecasted prices in cells BG47‐BP47.3. Market capitalization will be calculated as basic weighted shares x historical year‐end prices and then forecasted basic weighted shares x DCF forecasted prices.4. As with previous calculations, historical multiples use actual historical values and forecasted multiples use forecasted values.

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P/S and Ent. Value/EBITDA

Price/Sales and Enterprise Value/EBITDA vs. Price

Price/Sales Enterprise Value/EBITDA DCF Price


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CI CJ CK CL CM CN CO CP CQ CR CS CT CU CV CW CX CY CZ DA DB

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Gross, Operating and Net Profit Margins

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Return on Assets, Equity and Invested Capital

Return on Assets Return on Equity Return on Invested Capital

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NOPAT and Free Cash Flow (millions)

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Market Value Added




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Earnings and Dividends Per Share

Earnings Per Share Dividends Per Share

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Return on Assets, Equity and Invested Capital

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NOPAT & FCF (millions) vs. DCF Price

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Earnings and Dividends Per Share

Earnings Per Share Dividends Per Share

Enhanced Financial Scorecard Page 1 of 2

Enter Firm Ticker ECA Disfavored 0% to 20%

Historical Score 137 Forecasted Score 310 Total Score 447 Mediocre 20% to 40%

Historical Max 264 Forecast Max 580 Max Points 844 Noteworthy 40% to 60%

Hist. Acc. Threshold 132 Forec. Acc. Threshold 300 Acceptible Threshold 432 Exceptional 60% to 80%

Historical Grade % 52% Forecast Grade % 53% Final Grade % 53% Robust 80% to 100%

1 Scorecard Criterion Acceptable Superior Year 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E Hisore

EPS Growth 5.0% 10.0% Criterion Value 44.6% 119.5% -28.7% 49.1% -24.2% 14.3% 10.1% 9.9% 7.7% 7.5% 5.3% 5.1% 4.1% 4.0% 2.285714286 5.714285714

Points 2 4 Scorecard Value 4.0 4.0 0.0 4.0 0.0 4.0 4.0 2.0 2.0 2.0 2.0 2.0 0.0 0.0 12 18 30

2 Scorecard Criterion Acceptable Superior Year 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Net Income Growth 5.0% 10.0% Criterion Value -4.5% 91.2% -39.7% 44.8% -24.7% 13.5% 9.2% 9.1% 6.9% 6.7% 4.5% 4.3% 3.3% 3.2% 2.285714286 5.714285714



Dividend Yield 2.5% 5.0% Criterion Value 0.59% 0.80% 1.18% 3.43% 2.8% 3.3% 3.9% 4.4% 5.0% 5.5% 6.1% 6.4% 6.8% 6.5% 2.285714286 5.714285714


Scorecard Criterion Acceptable Superior Year 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Di id d G th % % C % % % % % % % % % % % % % %

Historical Total Score

Forecasted Total Score

Grand Total

Grade Scale:This scorecard performs the following assessment:

1. Evalutates 20 desired investment related Criterion.2. Historical and Forecasted values of each Criterion are presented where applicable.3. It provides an Acceptable and a Superior benchmark for each Criterion.4. Each benchmark is assigned a Point Score, and that score is given to each year that the benchmark is acheived. 5. The Scores aretotaled for theHistorical, Forecasted, and Total data.6. A Percentage Gradeis given based on the achieved points and the total points possible. 7. A Grading Scale is provided to assess the Percentage Score.

4 Dividend Growth 5.0% 10.0% Criterion Value 0.5% 103.3% -34.0% 47.3% -24.2% 14.3% 10.1% 9.9% 7.7% 7.5% 5.3% 5.1% 4.1% 4.0% 2.285714286 5.714285714



EVA Growth 5.0% 10.0% Criterion Value N/A 1244.7% -97.8% 3252.4% -31.6% 11.5% 4.9% 5.5% 2.9% 2.7% 0.1% -0.1% -1.4% 3.0% 2.285714286 5.714285714



MVA / Mkt Cap. 35.0% 70.0% Criterion Value N/A N/A N/A 77.2% 55.7% 53.9% 52.3% 50.8% 49.6% 48.6% 47.9% 47.4% 47.1% 50.4% 2.285714286 5.714285714



Share Price Growth 5.0% 10.0% Criterion Value 58.3% 1.0% 47.0% -30.6% 52.1% 8.0% 7.2% 6.8% 6.1% 5.6% 5.0% 4.7% 4.2% 11.6% #REF! #REF!

Points 2 4 Scorecard Value 4.0 0.0 4.0 0.0 4.0 2.0 2.0 2.0 2.0 2.0 0.0 0.0 0.0 4.0 8.0 18.0 26.0


Value Spread 4.0% 8.0% Criterion Value -1.4% 0.8% 9.6% 0.2% 6.0% 4.7% 4.5% 4.2% 4.0% 3.7% 3.5% 3.3% 3.1% 2.9% 2.285714286 5.714285714



Undervalue % 15.0% 30.0% Criterion Value 28.2% 5

Points 4 8 Scorecard Value 4.0 4 0 4

This scorecard performs the following assessment:1. Evalutates 20 desired investment related Criterion.2. Historical and Forecasted values of each Criterion are presented where applicable.3. It provides an Acceptable and a Superior benchmark for each Criterion.4. Each benchmark is assigned a Point Score, and that score is given to each year that the benchmark is acheived. 5. The Scores aretotaled for theHistorical, Forecasted, and Total data.6. A Percentage Gradeis given based on the achieved points and the total points possible. 7. A Grading Scale is provided to assess the Percentage Score.

Enhanced Financial Scorecard Page 2 of 2


Financial Fitness 6 9 Criterion Value 7 11 4 10 9 8 8 7 7 7 7 7 7 7 2.285714286 5.714285714



Bankruptcy Score 1.23 2.9 Criterion Value 2.62 5

Points 4 8 Scorecard Value 4.0 4 0 4


Price / FCF 25.0 15.0 Criterion Value 49.5 18.3 N/A 4.6 6.1 942.5 49.2 45.1 27.6 27.6 19.2 19.2 17.0 13.8 1.142857143 2.857142857



Price / Sales 2.5 1.5 Criterion Value 2.8 2.3 2.4 1.2 2.5 2.3 2.3 2.2 2.1 2.1 2.1 2.0 2.0 2.2 1.142857143 2.857142857



Price / EBITDA 7.0 4.0 Criterion Value 5.6 3.4 6.0 2.6 6.4 6.0 5.8 5.5 5.4 5.3 5.2 5.2 5.1 5.5 1.142857143 2.857142857



Enterprise / EBITDA 8.0 4.0 Criterion Value 6.4 3.9 6.9 3.3 6.6 6.3 6.2 6.0 6.0 5.9 5.9 5.9 5.9 6.3 1.142857143 2.857142857



Cash / Sales 5.0% 2.5% Criterion Value 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% 2.285714286 5.714285714



LT Debt / Equity 100.0% 50.0% Criterion Value 41.3% 37.6% 42.9% 40.3% 7.1% 12.3% 14.9% 18.1% 20.1% 23.0% 24.6% 27.0% 29.3% 28.3% 2.285714286 5.714285714



FCF Yield 5.0% 10.0% Criterion Value 2.1% 5.6% N/A 21.8% 16.6% 0.1% 2.0% 2.2% 3.6% 3.6% 5.2% 5.2% 5.9% 7.3% 2.285714286 5.714285714



FCF Growth 5.0% 10.0% Criterion Value 156.9% N/A N/A 14.8% -99.3% 1940.9% 15.4% 71.9% 5.1% 49.6% 3.8% 16.9% 36.6% 2.285714286 5.714285714

Points 2 4 Scorecard Value 4.0 0.0 0.0 4.0 0.0 4.0 4.0 4.0 2.0 4.0 0.0 4.0 4.0 4 30 34

20 Scorecard Criterion Acceptable Superior Year 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 39.7 74.3

Beta 1.25 0.75 Criterion Value 1.20

Points 4 8 Scorecard Value 4.0 4.0 0.0 4.0

137.0 310.0 447.0MIN

MAX

Piotroski Scorecard Page 1 of 2


Piotroski's Financial Fitness EvaluatorValue Score Value Score Value Score Value Score Value Score Value Score Value Score

Net Income 3,228 1 6,173 1 3,724 1 5,393 1 4,058 1 4,606 1 5,031 1Free Cash Flow 812 1 2,086 1 (4,112) 0 7,591 1 8,715 1 60 1 1,225 1ROA (% change NI ÷ % change TA) (0.49) 0 29.74 1 (1.16) 0 (14.27) 1 1.38 0 0.83 1 0.78 1Earnings Quality (EBIT ÷ NI) 1.20 1 1.22 1 1.29 1 1.36 1 1.46 1 1.48 1 1.49 1Total Assets to Total Liabilities 1.60 1 (2.53) 1 0.68 0 0.32 1 0.43 1 0.67 0 0.82 0Working Capital (Current Ratio) 0.75 0 0.99 1 0.68 0 1.33 1 0.82 0 0.82 1 0.82 1% Change Shares Outstanding (Diluted) -5.0% 1 -5.9% 1 -8.6% 1 -1.7% 1 -0.8% 1 -0.8% 1 -0.8% 1Gross Margin 67.9% 0 80.6% 1 58.6% 0 61.3% 1 64.0% 1 64.0% 0 64.0% 0Asset Turnover (% change sales ÷ % change assets) 3.51 1 5.05 1 0.86 0 (12.83) 0 1.67 1 0.92 0 0.85 0Total Liabilities to EBITDA 2.50 1 1.71 1 2.98 1 1.74 1 1.39 1 1.50 1 1.56 1Total Liabilities to Operating Cash Flow (EBIT) 4.61 0 2.35 1 5.54 0 3.26 1 2.37 1 2.56 1 2.66 1

Total Score (11 = maximum) 7 11 4 10 9 8 8

Historical Average 8(2005 - 2008)

Forecasted Average 8(2009 - 2018)

20082005 2006 2007 2009 2010 2011

Piotroski Scorecard Page 2 of 2

Value Score Value Score Value Score Value Score Value Score Value Score Value Score Rationale5,489 1 5,868 1 6,259 1 6,542 1 6,824 1 7,052 1 7,279 1 Score 1 point for positive net income.1,414 1 2,430 1 2,553 1 3,819 1 3,965 1 4,637 1 6,334 1 Score 1 point for positive free cash flow.0.77 0 0.77 0 0.75 0 0.71 0 0.68 0 0.63 0 1.07 1 Score 1 point if % increase in NI > % increase in total assets.1.50 1 1.51 1 1.52 1 1.53 1 1.54 1 1.54 1 1.54 1 Score 1 point if EBIT > NI.0.77 0 0.85 0 0.77 0 0.87 0 0.78 0 0.77 0 1.45 1 Score 1 point if % increase in TA > % increase in TL.0.82 1 0.82 1 0.82 1 0.82 1 0.82 1 0.82 1 0.82 1 Award 1 point if Current Ratio at least as large as last year.

-0.7% 1 -0.8% 1 -0.8% 1 -0.8% 1 -0.7% 1 -0.8% 1 -0.7% 1 Award 1 point if total diluted shares increased by less than 2%.64.0% 0 64.0% 0 64.0% 0 64.0% 0 64.0% 0 64.0% 0 64.0% 0 Award 1 point if gross margin increased over last year.0.87 0 0.84 0 0.84 0 0.78 0 0.79 0 0.75 0 1.00 1 Award 1 point if sales increased faster than total assets.1.63 1 1.67 1 1.74 1 1.77 1 1.83 1 1.88 1 1.86 1 Award 1 point if ratio less than 5.0.2.78 1 2.86 1 2.97 1 3.03 1 3.13 1 3.21 1 3.18 1 Award 1 point if ratio less than 4.0.

7 7 7 7 7 7 10

2017 20182012 2013 2014 2015 2016

ECA-Valuation-Spread-Final ROIC Analysis, Page 1 of 2

ECA Gross Marginpercent 2003

68.6%61.3%2007

Operating Margin SG&A/Revenues2003 2003

Pre-tax ROIC 24.9% 18.9%2003 24.4% 15.7%

11.7% 2007 2007ROIC 21.6%2003 2007 Depreciation/Revenues8.5% 200315.9% 21.7%2007 Cash tax rate 19.9%

2003 2007

Historical ROIC: Decomposition and Drivers

Enter Firm Ticker

2003 200727.3%26.4% Average Capital Turns Oper. Working Capital/Revenues2007 2003 2003

0.5 4.4%0.9 0.0%

2007 2007

Fixed Assets/Revenues2003

207.7%112.6%

2007


ECA-Valuation-Spread-Final ROIC Analysis, Page 2 of 2

ECA Gross Marginpercent 2008

64.0%64.0%2017

Operating Margin SG&A/Revenues2008 2008

Pre-tax ROIC 28.1% 16.0%2008 28.1% 16.0%

20.1% 2017 2017ROIC 17.5%2008 2017 Depreciation/Revenues

14.6% 200812.8% 19.2%2017 Cash tax rate 19.2%

2008 2017

Forecasted ROIC: Decomposition and Drivers

Enter Firm Ticker

2008 201727.0%27.0% Average Capital Turns Oper. Working Capital/Revenues2017 2008 2008

0.7 0.0%0.6 0.0%

2017 2017

Fixed Assets/Revenues2008

140.0%160.0%

2017


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