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INCOME STATEMENT PROJECTIONS

Income Statement Support
($ in thousands, except per share data)

2000
5,357
12,239

Depreciation
Amortization of intangibles
Commissions and fees growth
% of Commissions and fees
Investment income
Other income

1999:
$219,293

Actual
2001
6,116
13,868

2002
7,771
5,320

Estimated
2003
8,935
8,019

2004
9,327
7,911

Projected
2005
2006
9,115
8,248
7,095
7,085

2007
Projection Drivers
7,109 % Total Revenue
7,082 10K Note K page F21

16.9%

26.0%

38.3%

30.0%

1.0%
0.5%

0.8%
0.6%

0.5%
0.8%

0.5%
0.9%

% of Total Revenue
Compensation and employee benefits
Other operating expenses
Depreciation

56.3%
19.3%
2.1%

55.7%
19.0%
1.9%

54.2%
17.7%
1.7%

53.7%
17.2%
1.5%

53.2%
16.7%
1.3%

52.7%
16.2%
1.1%

52.2%
15.7%
0.9%

51.7% decrease 1/2 %
15.2% decrease 1/2 %
0.7% decrease 20 basis point

Effective Tax Rate

44.3%

43.0%

40.8%

41.0%

41.0%

41.0%

41.0%

41.0% 10K Note F page F15

Capex

7,514

5,633

6,641

7,500

8,500

9,500

10,500

11,500 Estimated

27,143

34,830
7,687

41,288
6,458

46,895
5,607

50,936
4,042

55,314 1mo comp + op exp
4,378 year to year

DCF Calculations:
Working Capital Calculation
30 Days Operating Expenses
Change in Working Capital

20.0%
15.0%
10.0%
10.0%
CONSTANT IN 2003 (INTEREST RATE TRENDS)
0.6%
0.7%
0.8%
0.9% increase 10 basis point
1.0%
1.1%
1.2%
1.3% increase 10 bp asap

Step 3:
TIP: Estimate working
capital per 1 month of
operating expenses (used
for DCF analysis later)

Using historical growth rates and
margins in combination with
industry and company specific
knowledge, estimate projected
growth rates and margins
WALL ST

Providing financial training to Wall Street ®

TRAINING

www.wallst-training.com

9

© Hamilton Lin, CFA
hamilton@hlcp.net

514 $ 580.889 33.78 NOTE J.502 6.240 32.570 $ 512.191 from Support calc $ 677.366 2.078 $ 287.405 80.22 $ 3. Rogal & Hamilton Income Statement ($ in thousands.274 (58.224 Diluted Shares Outstanding 29.50 $ 2.0% 31.com 10 © Hamilton Lin.57 $ 4.402 $ 452.257 (42.925 $ 327.743) $ 133.694 $ 430.003 $ 588.072 CONVERTED NOTES Interest expense (8.wallst-training.849 $ 696.333 $ 626.275 ENTER IN SUPPORT SECTION: SUM(F41:F42) Expenses Compensation and employee benefits $ 146.095 19.083 (9.596 Total Expenses $ 214.665) - $ 236.203 UPDATE BASIC S/O TO REFLECT EFFECT OF Operating Income $ 46.939 (10.082) $ 61.normalized = zero $ 56.537 $ 302.556 $ 253.893 29.710 (10.559 $ 446.981) from Support calc $ 178.349 $ 103.238 $ 512.411 31.283 $ 260.742) $ 84.665) - $ 195.701 $ 708. CFA hamilton@hlcp.665) - $ 272.175 $ 143.318 (10. except per share data) 2000 Revenue Commissions and fees Investment income Other income Total Revenue $ 256. PG F19 EBITDA $ 63.665) constant cap structure .161 $ 969.397 62.571 17.804 $ 316.532 $ 184.910 $ 376.439 3.708) $ 108.737 (17.464 7.673 2.978 8.381) $ 32.27 $ 5.945 $ 226.07 $ 2.24))) $ 22.675 3.876 33.889 33.412 27.4% $ 126.012 $ 801.393 (123.19/31.668 % Total Revenue 151.868 (10.09 $ 1.849 34.INCOME STATEMENT PROJECTIONS Hilb.817 $ 881.101 % Total Revenue 14.390) $ 154.984 $ 264.210 $ 578.585 1.017 $ 182.653 (75.179) Non-operating gains / (losses) 1.949 $ 469.460 $ 261.331 5.668 EBITDA Margin 24. 2002.84 Basic Earnings Per Share Diluted Earnings Per Share CONVERTIBLE DEBT.0% CONVERTIBLES WERE CONVERTED IN NOV.89 $ 2.507 $ 815.091 $ 338.610) =I26+MAX(0.844 TREASURY METHOD: $ 39.546 16.42 $ 3.160 29.901*(1(12.18 $ 1.889 33.730 (24.248 EBIT + D&A 30. EXCLUDE FROM DILUTED EPS CALC STARTING IN 2003 Step 4: Using projected growth rates and margins.611 % Growth 9.708 $ 113.94 $ 3. $ 0.397 101.067 25.233 % Comm & Fees $ 991.061) 2.127 NOTE I.173 % Comm & Fees 12.171 5.12 $ 3.83 $ 4.559 16.810 4.889 33. PG F-17 Basic Shares Outstanding 26.665) 212 $ 153.0% 33.0% 32.959 $ 63.43 $ 5.889 constant cap structure $ 1.645 141.078 2.784 ADD NUMERATOR FOR EFFECT OF $ 0.954 $ 434.442 Other operating expenses 50.885 118.11 $ 83.203 (92.801 28.308 13.0% $ 170.5% Pre-Tax Income Income taxes Net Income Actual 2001 2002 Estimated 2003 2004 Projected 2005 2006 2007 Projection Drivers $ 323.665) - $ 313.849 34.net . calculate projections WALL ST Providing financial training to Wall Street ® TRAINING www.192 132.165 Depreciation & Amortization 17.0% $ 212.1704.626 1.058 (10.592 (10.849 34.849 34.592 15.896 $ 327.239 $ 899.849 constant cap structure 34.458 10.927 (107.476 $ 245.