Special Situations Service

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1 Volume 65 Number 5 May 2014 Special Situations Service Contents Newswire... 1 Stock Portfolios... 2 Portfolio Updates Datalink Corp IPG Photonics Corp...3 PowerSecure Int l., Inc...3 New Recommendations BioSpecifics Tech., Corp... 5 Alamo Group, Inc... 8 Company Updates* Depomed Inc Grand Canyon Educ., Inc Insulet Corp KAR Auction Svcs., Inc Measurement Spec., Inc Methanex Corporation *Each review in the Company Updates section is a follow-up to an original recommendation and is not necessarily sufficient by itself to form the basis for an investment decision. A subscriber interested in purchasing any of the securities currently rated Buy/Hold or Especially Recommended, who does not have available Value Line s original recommendation of the security, should feel free to request from us a copy of the original recommendation so that he or she will have more information on which to base a decision Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMIS- SIONS HEREIN OR ANY DAMAGES OR LOSSES ARISING FROM ANY USE OF THE INFORMA- TION CONTAINED HEREIN. This publication is strictly for subscriber s own, non-commercial, internal use. No part of it may be reproduced, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product. Officers, directors, or employees of Value Line, Inc. and its affiliates and subsidiaries, and EULAV Asset Management, may own stocks that are featured in this publication. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. Value Line, the Value Line logo, The Value Line Investment Survey, Value Line Select, The Value Line Special Situations Service, Timeliness and Safety are trademarks or registered trademarks of Value Line Inc. and/or its affiliates in the United States and other countries. All other trademarks are the property of their respective owners. Value Line Geometric and Arithmetic Indices calculated by Thomson Reuters. Information supplied by Thomson Reuters. Economic view Things are heating up across the country. And it is more than just the weather, with one economic issuance after another suggesting that there is a healthy rebound in business activity under way following a difficult first quarter. At that time, growth, under pressure from severe winter weather, had wilted, as GDP barely inched into the plus column, gaining just 0.1% on reductions in business spending and homebuilding. More recently, though, exports, manufacturing activity, and nonmanufacturing have all perked up. But it is employment, which soared in April while the jobless rate fell to nearly a six-year low that really has caused heads to turn. All told... This good news should help the economy improve nicely over the course of this year and into Our sense is that growth may exceed 2.5% in the current quarter, and push into the 3% range by the second half. GDP gains should then hold in that area, on average, next year. However, the economy still isn t firing on all cylinders. Of note here, is the choppiness in housing, where rising mortgage rates and declining affordability have taken some of the steam from this market. Housing had, by comparison, helped to underpin the business Newswire Fidelity National Information Services (FIS) will acquire Atlanta-based Reliance Financial Corporation, an independent trust company with more than $138 billion in assets under management, for about $110 million in cash. Reliance services about 5% of all 401(k) plans in the U.S., with more recovery over the past couple of years. That said, a boost from housing is likely again, as better job numbers and higher incomes start to lure buyers back. But such help is unlikely to come in a straight line. Meanwhile, tensions remain high globally. The headlines here are the ebb and flow of the crisis in Ukraine, and the difficult relations between Russia and the United States. Here, a Cold War standoff evolved for the first time in decades. The ramifications of this are greatest for Europe, given the Continent s proximity to this troubled region and its heavy use of Russia s oil and gas. Still, we cannot rule out some impact stateside. That might really be the case if Europe s tenuous revival starts to teeter. All the while, U.S. stocks are largely holding their ground, seemingly recovering from each price dip. Here, relief on the earnings front is helping to counter the unsettled events abroad. Conclusion: We think the careful accumulation of stocks on weakness is a prudent approach at this time. In all, our Asset Allocation Model which is based on a quantitative analysis that includes a number of economic and monetary factors has turned a little more positive. than 24,000 retirement plan clients. The acquisition will enable FIS to create a fullservice wealth management and retirement plan solution, including back-office operations outsourcing, retirement trust services, and fiduciary services. (cont. on page 4)

2 The Value Special Situations Service Stocks currently being followed by The Special Situations Service. Prices quoted are those at the close of the market, May 9, 2014 The Value Line Special Situations Service (ISSN ) is published MONTHLY by Value Line Publishing LLC, 485 Lexington Avenue, New York, NY Subscription rate: one year in the United States and the U.S. possessions: $198. Foreign rates upon request. Periodical postage paid at New York, NY and additional mailing offices. POSTMASTER: Send address changes to The Value Line Special Situations Service, 485 Lexington Avenue, New York, NY Edward W. Ulrich, Editor Aggressive Stock Portfolio Stocks with above-average growth potential Latest Estimated Originally Current Recent Review Name Ticker Yield Next Recommended Advice Price Issue 12 Months Price Date % Gain Jan-14 Ambarella, Inc. AMBA Buy/Hold Nil Nov May-14 Datalink Corp. DTLK Switch* 9.01 Nil Mar May-14 Depomed, Inc. DEPO Esp. Rec Nil Dec Jan-14 Evercore Partners, Inc. EVR Buy/Hold % Aug Jan-14 FleetCor Technologies, Inc. FLT Buy/Hold Nil Sep May-14 IPG Photonics Corp. IPGP Buy/Hold* Nil Feb Mar-14 IMAX Corporation IMAX Buy/Hold Nil May May-14 Insulet Corporation PODD Buy/Hold* Nil Mar Mar-14 InvenSense, Inc. INVN Esp.Rec Nil Jul Jan-14 Jazz Pharmaceuticals plc JAZZ Buy/Hold Nil Mar Apr-14 Manitex Int'l, Inc. MNTX Esp. Rec Nil Apr May-14 Measurement Specialties, Inc. MEAS Hold Nil Oct May-14 Methanex Corporation MEOH Buy/Hold % Aug Mar-14 Monotype Imaging Hldngs. Inc. TYPE Buy/Hold % May Apr-14 Neogen Corporation NEOG Hold Nil (a) Jan Jan-14 PolyOne Corp. POL Buy/Hold % Nov May-14 PowerSecure International, Inc POWR Hold* 6.83 Nil 7.72 Dec Feb-14 Rosetta Resources, Inc. ROSE Hold Nil Nov Feb-14 Salix Pharmaceuticals, Ltd. SLXP Esp. Rec Nil Feb Feb-14 US Silica Holdings, Inc. SLCA Hold % Apr Jan-14 Web.com Group, Inc. WWWW Esp. Rec Nil Jan Feb-14 WisdomTree Investments, Inc. WETF Buy/Hold Nil Jun Feb-14 W.R. Grace & Co. GRA Buy/Hold Nil Apr Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMIS- SIONS HEREIN OR ANY DAMAGES OR LOSSES ARISING FROM ANY USE OF THE INFORMA- TION CONTAINED HEREIN. This publication is strictly for subscriber s own, non-commercial, internal use. No part of it may be reproduced, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product. Officers, directors, or employees of Value Line, Inc. and its affiliates and subsidiaries, and EULAV Asset Management, may own stocks that are featured in this publication. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. Value Line, the Value Line logo, The Value Line Investment Survey, Value Line Select, The Value Line Special Situations Service, Timeliness and Safety are trademarks or registered trademarks of Value Line Inc. and/or its affiliates in the United States and other countries. All other trademarks are the property of their respective owners. Value Line Geometric and Arithmetic Indices calculated by Thomson Reuters. Information supplied by Thomson Reuters. Conservative Stock Portfolio Stocks for investors seeking growth and/or income Latest Estimated Originally Current Recent Review Name Ticker Yield Next Recommended Advice Price Issue 12 Months Price Date % Gain Apr-14 Artesian Resources Corp. ARTNA Buy/Hold % Nov Apr-14 B&G Foods, Inc. BGS Hold % Jan Mar-14 Broadridge Fin cial Sol'ns., Inc. BR Esp. Rec % Nov Apr-14 Cantel Medical Corp. CMN Hold % (a) May Jan-14 CBOE Holdings, Inc. CBOE Esp.Rec % Aug Jan-14 Colfax Corp. CFX Hold Nil Apr Apr-14 Compass Diversified Hldngs. CODI Hold % Apr Feb-14 Fidelity Nat'l. Info. Svcs. FIS Buy/Hold % Mar May-14 Grand Canyon Education, Inc. LOPE Esp. Rec Nil Dec Feb-14 Heartland Payment Sys., Inc. HPY Hold % Sep May-14 KAR Auction Services, Inc. KAR Esp.Rec % Jul Jan-14 LPL Financial Hldngs., Inc. LPLA Esp.Rec % Jan Apr-14 MarketAxess Hldngs, Inc. MKTX Esp. Rec % Apr Mar-14 Martin Midstream Prtns., L.P. MMLP Esp. Rec % May Mar-14 Portfolio Recovery Assoc., Inc. PRAA Esp. Rec Nil Oct Feb-14 Primoris Services Corp. PRIM Buy/Hold % Dec Mar-14 Rocky Mtn. Choc. Fact., Inc. RMCF Hold % Jun Apr-14 SEACOR Holdings Inc. CKH Buy/Hold Nil Jun Mar-14 STRATTEC SECURITY CORP. STRT Hold % Jan Apr-14 Super Micro Computer, Inc. SMCI Hold Nil Feb Mar-14 Syntel, Inc. SYNT Esp. Rec Nil Mar Apr-14 Unitil Corp. UTL Buy/Hold % Feb Dec-13 Virtusa Corp. VRTU Hold Nil Feb *Current advice change. (a) Adjusted for stock splits and/or stock dividends.

3 Portfolio Updates Datalink Corp., a provider of solutions for that improve the efficiency of data centers, reported disappointing first-quarter results that sent the shares tumbling. Revenues were up only 4.5% over the prior-year period, to $139.5 million, below management s February guidance, and due to delayed orders for storage solutions, as customers continued to evaluate new products for their hybrid cloud and solid-state storage strategies. Management expects sales for these solutions to materialize later in the year, but nonetheless took steps to reduce operating expenses by about $3.6 million over the final nine months of the year, including a restructuring of its sales operations and services delivery organizations. The company projects revenues of between $145 million and $155 million in the second quarter, the mid-point of which implies year-over-year growth of only about 1%. While the storage market is in flux because of new technology, management believes this is also creating long-term opportunities, as customers now have more alternatives that they must sift through. And companies must continue to buy data center products in order to handle their overall data growth and maintain data retention mandates. However, given that near term visibility for the company s prospects is cloudy, and the risk that the shares will fall further if second-quarter results disappoint, we recommend investors liquidate their positions now. Switch. Rank Changes Company Ticker Prev. Rank Curr. Rank Datalink Corp. DTLK Esp. Rec. Switch Insulet Corp. PODD Hold Buy/Hold IPG Photonics Corp. IPGP Esp. Rec. Buy/Hold PowerSecure Int'l, Inc. POWR Buy/Hold Hold Recent Dividends Company Amount Per Share Payable Date Record Date Broadridge Fin'l Sol'ns, Inc. $0.21 July 1 June 16 CBOE Holdings, Inc. $0.18 June 20 May 30 Fidelity Nat'l Info. Svcs., Inc. $0.24 June 30 June 16 Martin Midstream Prtnrs. L.P. $ May 15 May 5 Methanex Corp. $0.25 June 30 June 16 U.S. Silica Hldgs., Inc. $0.125 July 3 June 13 Unitil Corporation $0.345 May 29 May 15 a large order in China for its new, low-cost pulsed laser that will begin shipping in the second quarter. Overall, we continue to believe IPG has solid growth prospects through the adoption of high-power lasers for cutting and welding applications, and its lower-priced pulsed lasers should help it compete in the marketplace. Given management s guidance for the coming quarter, however, we are lowering our ranking to Buy/Hold. IPG Photonics shares also slid after first-quarter results were announced. Revenues and earnings for the period were in-line with our estimates, but management expressed concerns for the second quarter due to softness in demand in North America for lasers for both advanced applications and for medical use. In addition, it is seeing increased competition for low-power pulsed lasers, especially in China. Revenues for the first quarter totaled $170.6 million, an increase of 20.2% over the prior-year period, through demand for high-power fiber lasers used for cutting, welding, cladding, and 3-D printing. The newest of these lasers can produce wall plug efficiency of up to 45%, versus 25% five years ago. In addition, IPG has been successful in reducing manufacturing costs for these lasers by a factor of two or more. Sales in China were up 23%, and 14% over the fourth quarter. Revenues for the period did not include a large shipment to a German auto manufacturer, which will instead be reported in the second quarter due to accounting rules regarding revenue recognition. Sales of high-power lasers were up 33% overall, to $100.0 million, driven by market share gains over conventional lasers for cutting. Medium-power laser sales, used for micro-welding and thin-metal cutting, rose 68%, to $17.4 million. These gains offset lower pulsed laser sales, which declined 16%, to $28.8 million, through increased competition in China and lower demand in S. Korea for smartphone manufacturing. However, it did receive PowerSecure International also reported disappointing first-quarter results. Revenues were up 17.4% year over year, to $52.8 million, below investor expectations, and it became apparent that the company could not handle the rapid growth it experienced last year, as operational efficiencies hurt the gross margin and took a significant bite out of earnings. The gross margin slid to 20.9% of revenues, versus 30.6% the year before, because it mistimed actions to shift people and equipment in its Utility Infrastructure services group away from lower-margined projects to more profitable customers, leading to productivity losses. Moreover, its Distributed Generation segment reported a 16.5% decline in revenues, due to longer sales cycles that are the result of the company pursuing larger projects. Backlog declined to $225 million in May, versus $248 million in the fourth quarter, due to the longer sales cycles and management s intention to slow the growth of its Utilities Infrastructure segment for now. While we are disappointed with these developments, we still think the company has good long-term growth prospects through demand for backup power generation for hospitals and data centers, electricity transmission and distribution infrastructure maintenance and construction services, and LED lighting technologies. We believe the shares are oversold at this point, but we are lowering our ranking to Hold until we see signs that the company is regaining traction in these markets. to subscribe call May 2014 The Value Line Special Situations Service 3

4 Portfolio Updates Recent Earnings Company Last Review Period Sales (mill.) Ago (mill.) Pct. Change Share Earn. Ago Pct. Change Artesian Resources Corp. Apr Quarter (Mar. 31) B&G Foods, Inc. Apr Quarter (Mar. 29) Broadridge Fin'l Sol'ns, Inc. Mar Quarter (Mar. 31) CBOE Holdings, Inc. Jan Quarter (Mar. 31) Colfax Corporation Jan Quarter (Mar. 31) Compass Diversified Holdings Apr Quarter (Mar. 31) Datalink Corp. May 2014 Quarter (Mar. 31) Depomed, Inc. May 2014 Quarter (Mar. 31) d0.10 Evercore Partners, Inc. Jan Quarter (Mar. 31) Fidelity Nat'l Info. Svcs., Inc. Feb Quarter (Mar. 31) FleetCor Technologies, Inc. Jan Quarter (Mar. 31) Grand Canyon Education, Inc. May 2014 Quarter (Mar. 31) Heartland Payment Sys., Inc. Feb Quarter (Mar. 31) IMAX Corporation Mar Quarter (Mar. 31) Insulet Corporation May 2014 Quarter (Mar. 31) d0.11 d0.20 InvenSense, Inc. Mar (Mar. 31) IPG Photonics Corp. May 2014 Quarter (Mar. 31) Jazz Pharmaceuticals plc Jan Quarter (Mar. 31) d KAR Auction Services, Inc. May 2014 Quarter (Mar. 31) LPL Financial Hldgs., Inc. Jan Quarter (Mar. 31) Manitex Int'l, Inc. Apr Quarter (Mar. 31) MarketAxess Holdings, Inc. Apr Quarter (Mar. 31) Martin Midstream Prtnrs. L.P. Mar Quarter (Mar. 31) Methanex Corporation May 2014 Quarter (Mar. 31) Monotype Imaging Hldgs. Inc. Mar Quarter (Mar. 31) PolyOne Corp. Jan Quarter (Mar. 31) Portfolio Recovery Assoc., Inc. Mar Quarter (Mar. 31) PowerSecure International, Inc. May 2014 Quarter (Mar. 31) d Primoris Services Corp. Feb Quarter (Mar. 31) Rosetta Resources, Inc. Feb Quarter (Mar. 31) Salix Pharmaceuticals, Ltd. Feb Quarter (Mar. 31) d SEACOR Holdings Inc. Apr Quarter (Mar. 31) d1.06 STRATTEC SECURITY CORP. Mar Quarter (Mar. 31) Super Micro Computer, Inc. Apr Quarter (Mar. 31) Syntel, Inc. Mar Quarter (Mar. 31) Unitil Corporation Apr Quarter (Mar. 31) U.S. Silica Holdings, Inc. Feb Quarter (Mar. 31) Virtusa Corporation Dec (Mar. 31) Web.com Group, Inc. Jan Quarter (Mar. 31) d0.97 WisdomTree Investments, Inc. Feb Quarter (Mar. 31) W.R. Grace & Co. Feb Quarter (Mar. 31) (cont. from page 1) Newswire FleetCor Technologies announced plans to acquire part of Shell Oil s German fuel card customer portfolio. It also signed an agreement for the potential acquisition of fuel card portfolios in up to 12 additional European markets. Terms were not disclosed. 4 The Value Line Special Situations Service May 2014 to subscribe call

5 New Recommendations For Aggressive Investors BioSpecifics Technologies Corp. Recent Price: $25.20 Current dividend Yield: Nil Projected Valuation Revenues: $35 million Earnings Per Share: $2.25 Three- to Five- Price Target: $56 Company Website: Traded: NDQ BSTC BioSpecifics Technologies is a biopharmaceutical company engaged in the development of products based on collagenase, an enzyme that breaks down the peptide bond in collagen. Collagenase has been shown to be effective in treating Dupuytren s Contracture, a condition in which the connective tissue within the palm of the hand thickens, preventing full extension of one or more fingers and reducing grip strength. Its effectiveness has also been demonstrated in Peyronie s disease, a connective tissue disorder that causes the formation of fibrous plaques in the soft tissue of the penis that affects about 5% of the adult male population. BioSpecifics has a development and licensing agreement with Auxilium Pharmaceuticals, Inc. for XIAFLEX (XIAPEX in Europe), an injectable collagenase, for the treatment of these two conditions. It also has an agreement with Auxilium for collagenase clostridium histolyticum (CCH), which is being developed for several indications, including frozen shoulder syndrome, cellulite, lipomas (fatty benign tumors) in humans and canines, and uterine fibroids. Auxilium has been marketing XIAFLEX for the treatment of Dupuytren s contracture since It launched XIAFLEX for the treatment of Peyronie s disease in the United States in January, and sales for this indication are gaining momentum. We believe the company has good growth potential through higher sales of XIAFLEX, and through the development of CCH. the clostridial collagenase that Biospecifics produces is more efficient than mammalian collagenase. It can cleave collagen at multiple sites along the collagen molecule, whereas mammalian collagenase can only cleave it at a single site. Since the tissue responsible for the deformities associated with Peyronie s disease and Dupuytren s contracture is composed mainly of collagen, injectable collagenase provides a minimally invasive treatment method. Dupuytren s contracture starts with the formation of nodules in the palm of the hand. As the disease progresses, the nodules form a cord, which prevents the patient from fully opening the hand. A long-term evaluation of patients treated with XIAF- LEX that was presented last year indicated that 57.9% of those successfully treated with XIAFLEX did not experience disease recurrence, and for those that did, most were retreated with the compound. Another study presented last year demonstrated its effectiveness in treating patients with multiple cords that resulted in comparable improvement to those that had only one cord. Auxilium submitted a supplemental application seeking label expansion for the treatment of multiple cords last year, and FDA approval is expected by the end of this year. Peyronie s disease can cause distortion of the erect penis, which can make intercourse difficult or even impossible. In severe cases, the penis can be bent 90 degrees during an erection, causing pain and erectile dysfunction. These patients are also more likely to suffer from Dupuytren s contracture, frozen shoulder, plantar fibromatosis, knuckle pads, hypertension, and diabetes. It has been reported to affect 5% of adult males, although the disease is believed to be underdiagnosed. Auxilium claims that between 65,000 and 120,000 patients are diagnosed every year, but only between 5,000 and 6,500 are treated annually with injectables or surgery. In clinical studies, XIAFLEX demonstrated clinically significant improvement in penile curvature deformity, and was approved by the FDA to treat the condition last December. Collagen comprises about one-third of the total protein in mammals; it is the main constituent of skin, tendons, and cartilage. The body manufactures its own collagenase in order to break down and remove dead collagen tissue. However, to subscribe call Frozen shoulder, or adhesive capsulitis, causes pain and significantly reduced range of motion in the shoulder joint. It is a very difficult condition to treat. There are no FDA-approved pharmaceutical therapies available, although corticosteroids are (cont. on page 7) May 2014 The Value Line Special Situations Service 5

6 RECENT BIOSPECIFICS TECH. NDQ--BSTC Nil PRICE TRAILING P/E RATIO RELATIVE P/E RATIO DIV D YLD BETA.90 Financial Strength 3 Average 3 Average 3 Average Price Stability 45 Price Growth Persistence 55 Earnings Predictability 10 B ANNUAL RATES of change (per share) 5 Yrs. 1 Yr. Sales 23.0% 30.0% Cash Flow % Earnings % Dividends Book Value % QUARTERLY SALES ($mill.) 1Q 2Q 3Q 4Q LEGENDS 12 Mos Mov Avg... Rel Price Strength Shaded area indicates recession Full 12/31/ /31/ /31/ /31/14 EARNINGS PER SHARE 1Q 2Q 3Q 4Q Full 12/31/10 d.04 d.15 d.08 d.01 d.28 12/31/ /31/ /31/ /31/14 Calendar RANKS PERFORMANCE Technical SAFETY (1.00 = Market) QUARTERLY DIVIDENDS PAID 1Q 2Q 3Q 4Q Full INSTITUTIONAL DECISIONS 2Q 13 3Q 13 4Q 13 to Buy to Sell Hld s(000) High Low VALUE LINE PUBLISHING LLC /2015 SALES PER SH CASH FLOW PER SH d.12 d.59 d d.31 d EARNINGS PER SH d.26 d.64 d d.32 d A,B /1.31 C DIV DS DECL D PER SH CAP L SPENDING PER SH BOOK VALUE PER SH d.60 d.62 d COMMON SHS OUTST G (MILL) AVG ANN L P/E RATIO /20.0 RELATIVE P/E RATIO AVG ANN L DIV D YIELD SALES ($MILL) Bold figures OPERATING MARGIN NMF NMF NMF 45.6% NMF NMF 46.0% 46.5% 55.4% are consensus DEPRECIATION ($MILL) earnings NET PROFIT ($MILL) d1.3 d3.4 d d2.0 d estimates INCOME TAX RATE % % 33.7% and, using the NET PROFIT MARGIN NMF NMF NMF 44.5% NMF NMF 57.9% 26.7% 36.5% recent prices, WORKING CAP L ($MILL) d1.3.8 d P/E ratios. LONG-TERM DEBT ($MILL) SHR. EQUITY ($MILL) d3.2 d3.3 d RETURN ON TOTAL CAP L % NMF NMF 44.4% 17.1% 23.7% RETURN ON SHR. EQUITY % NMF NMF 44.4% 17.1% 23.7% RETAINED TO COM EQ % NMF NMF 44.4% 17.1% 23.7% ALL DIV DS TO NET PROF A No. of analysts changing earn. est. in last 4 days: 0 up, 0 down, consensus 5-year earnings growth not available. B Based upon one analyst s estimate. C Based upon one analyst s estimate. ASSETS ($mill.) /31/13 Cash Assets Receivables Inventory Other Current Assets Property, Plant & Equip, at cost Accum Depreciation Net Property Other Total Assets LIABILITIES ($mill.) Accts Payable Debt Due Other Current Liab LONG-TERM DEBT AND EQUITY as of 12/31/13 Total Debt None LT Debt None Including Cap. Leases None Leases, Uncapitalized Annual rentals $.1 mill. Due in 5 Yrs. None Pension Liability None in 13 vs. None in 12 Pfd Stock None New Recommendations Common Stock 6,354,429 shares Pfd Div d Paid None (100% of Cap l) INDUSTRY: Biotechnology VOL. (thous.) BUSINESS: BioSpecifics Technologies Corp. develops injectable collagenase in the US, currently marketed as XIAFLEX (collagenase clostridium histolyticum (CCH))for the treatment of adult Dupuytren s contracture with a palpable cord in the palm by the company s partner, Auxilium Pharmaceuticals, Inc., and marketed in Europe and approved in Canada. Swedish Orphan Biovitrum AB has marketing rights for XIAPEX (the EU tradename for CCH) for the treatment of Dupuytren s contracture and Peyronie s disease in 71 Eurasian and African countries. Asahi Kasei Pharma Corp. has development and commercialization rights for XIAFLEX in Japan, and Actelion Pharmaceuticals Ltd. has development and commercialization rights for XIAFLEX in Canada, Mexico, Brazil, and Australia. BioSpecifics is currently managing the development of CCH for the treatment of human and canine lipomas, both of which are in Phase II trials. Has 5 employees. Chairman & President: Thomas L. Wegman. Inc.: DE. Address: 35 Wilbur Street, Lynbrook, NY Tel.: (516) Internet: L.Y. April 18, 2014 VALUE LINE TOTAL SHAREHOLDER RETURN Dividends plus appreciation as of 3/31/ Mos. 6 Mos. 1 Yr. 3 Yrs. 5 Yrs % 33.13% 52.02% 1.65% 26.44% 2014 Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber s own, non-commercial, internal use. No part To subscribe call of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product. 6 The Value Line Special Situations Service May 2014 to subscribe call

7 New Recommendations (cont. from page 5) sometimes used. Other treatments include extensive physical therapy, arthroscopic surgery, and drugs for pain management. In the first quarter of last year, the results of a Phase IIa study evaluating the effectiveness and safety of CCH versus an exercise-only control group showed a statistically significant improvement in shoulder range of motion for those that received CCH versus the exercise-only group. Adverse events included bruising, injection site pain and swelling, and musculoskeletal pain, all of which resolved without medical intervention. A larger, Phase IIb study that will enroll 300 patients was initiated in the fourth quarter. Top-line data are expected in the first quarter of next year. The development of collagenase to treat cellulite is still in the early stages, but the results of a Phase I study compelled Auxilium to exercise an exclusive option to expand the field of its license to include the potential treatment of adult patients with the condition. Cellulite involves the loss of elasticity or shrinking of collagen cords that attach the skin to muscle. When fat in cellulite-prone areas expands, the cords pull on the skin, causing dimpling. It affects more than 85% of all adult women. There are no drugs currently approved by the FDA to treat the condition. XIAFLEX is being investigated as a means to break up these cords in order to reduce dimpling. Results of a Phase Ib study evaluating the safety and effectiveness of CCH for the treatment of cellulite were released in December Various doses were administered, and approximately 63% experienced some improvement in dimpling, with 40% experiencing an improvement of greater than 30% after 30 days. Adverse effects included bruising and swelling, and resolved without medical intervention. A Phase IIa study of CCH for the treatment of cellulite was initiated last fall. It will enroll approximately 144 women, and top-line results are expected early next year. Lipomas, fatty benign tumors that affect humans and dogs, present as bulges under the skin. About 575,000 people in the United States are diagnosed with them each year. The only current treatment is surgery, which may be inappropriate in cases with multiple tumors. In a Phase I human clinical trial, 10 of 12 patients had a reduction in the size of their tumors of between 50% and 90%. Results of a Phase II study demonstrated a 67% average reduction in tumor size at the highest dose. Enrollment for a new, placebo-controlled study was recently completed ahead of schedule, and top-line data are expected in the fourth quarter of this year. Lipomas are very common in older dogs. Results of Chien-804, a Phase II study evaluating CCH in canines with benign lipomas, were announced in December. The trial enrolled 37 dogs in a single injection study, with lipoma volume being measured by CT scan and with calipers at baseline, one month, and 90 days after treatment. CT studies did not show a statistically significant improvement in tumor size, although improvement as measured by calipers did approach statistical significance. The full report of the study is being finalized, and Auxilium will have a 120-day opt-in window for license exclusivity for this indication. Highly purified collagenase has been shown in laboratory experiments to reduce the stiffness of human uterine fibroid tissue. Tissue rigidity has been implicated as the cause of the pain in this condition. The experiments studied uterine tissue ex-vivo, after it was removed through hysterectomy or myomectomy surgery. The study is being led by researchers at Duke Medicine, and top-line results are expected later this year. XIAFLEX U.S. revenues rose 38% year over year in the first quarter, to $16.6 million. For Dupuytren s contracture, vial sales rose 10%, and market share for the treatment of this condition reached 28% in February. XIAFLEX for the treatment of Peyronie s disease was launched in January. Revenues on royalties for this indication have a one-quarter lag, however, so they will not be reported until the second quarter. The company shipped 524 vials for the treatment of Peyronie s disease in the first quarter, and sales are gaining traction for this indication, with 498 vials shipped in April. All eight of the Medicare-administered contractors have confirmed coverage of XIAFLEX for Peyronie s disease, as have 15 major commercial health plans. It is also a covered benefit of the Veterans Administration, and is covered under the U.S. Military s TRICARE healthcare program. Total revenues were down, however, due to the expiration of earn-out payments from DFB Biotech, Inc., which purchased the rights to its topical collagenase business. The balance sheet at the end of the quarter was solid, with current assets of $19.5 million and current liabilities of $1.0 million. It listed no long-term debt. We have set a three- to five-year price target of $56 a share. The stock trades on the Nasdaq under the symbol BSTC. We recommend the use of limit orders, as well as a stop loss of approximately 20%. to subscribe call May 2014 The Value Line Special Situations Service 7

8 New Recommendations For Conservative Investors Alamo Group, Inc. Recent Price: $52.39 Current dividend Yield: 0.5% Projected Valuation Revenues: $900 million Earnings Per Share: $4.75 Three- to Five- Price Target: $95 Company Website: Traded: NDQ ALG Alamo Group designs and manufactures agricultural and infrastructure maintenance equipment for industrial and governmental use. Products include tractor-mounted mowers, vegetation maintenance equipment, street sweepers, excavators, vacuum trucks, snow removal equipment, pothole patchers, zero-turn-radius mowers, agricultural implements, and aftermarket parts and service. In addition to developing its own products, this well-managed company has successfully integrated several acquisitions over the years. It seeks businesses or product lines that either complement, command, or have the potential to garner a meaningful share of the markets they serve. With the recent acquisition of Specialized Industries, Alamo now operates 24 plants in North America, Europe, and Australia, and sells its products through a network of independent dealers and distributors that serve governmental end-users, independent contractors, and the agricultural and commercialturf markets. Alamo operates primarily in the United States, Canada, England, France, and Australia. The shares are a solid choice for conservative investors seeking steady growth along with some current income. Founded in 1969, the company has made more than a dozen acquisitions since 2000, including two so far this year. The first, Specialized Industries, LP, included the businesses Superior Products LLC, Wausau-Everest LP, and Howard P. Fairfield LLC. Superior is a manufacturer of vacuum trucks and related equipment, and complements Alamo s VacAll operation. Wausau-Everest is a manufacturer of snow removal equipment, and complements the company s Tenco and Henke businesses. And Howard P. Fairfield is a dealer/distributor with operations in the New England area. Together, they operate six manufacturing plants, with combined sales of $146.7 million last year. Alamo paid approximately $190 million for the acquisition, which was completed just before we went to press. Superior s management team joined Alamo, and the businesses will continue to operate under their existing names. In connection with the acquisition, Alamo expanded its existing credit facility from $100 million to $250 million, with the potential to expand it to $300 million. The second acquisition, Kellands Agricultural Ltd., was completed by Alamo s European subsidiary, Alamo Group Europe Ltd. Kellands manufactures and markets a line of self-propelled sprayers. Its subsidiary, Multidrive Tractors Ltd., produces a range of multi-purpose load-carrying tractor vehicles. It had sales of about $11 million last year. Terms of the deal were not disclosed. Alamo is a leading supplier to governmental markets in the United States and the U.S. agricultural market, and is a leading supplier in the European market for its niche products. Products are sold through a worldwide dealer and distributor network. Brands include Alamo Industrial, Terrain King, Tiger, Gradall, VacAll, Schwarze, Nite-Hawk, Henke, Tenco, Bush Hog, Rhino, Earthmaster, Herschel, Valu-Bilt, Schulte, McConnel, Bomford, Spearhead, Twose, SMA, Forges Gorce, Faucheux, Rousseau, and Rivard. The company operates three divisions North American Industrial, North American Agricultural, and European. Its North American Industrial Division sells Alamo Industrial equipment through independent dealers to governmental end-users, related independent contractors, utilities, and other right-of-way maintenance operators. Governmental agencies and their contractors mainly purchase hydraulically powered, tractor-mounted mowers, including boom-type mowers, as well as other types of cutters and replacement parts for heavy-duty applications, including maintenance around highways, airports, parks, and other public areas. A portion of Alamo Industrial s sales includes tractors that are not manufactured by Alamo Industrial. Tiger equipment includes heavy-duty, tractor- and truckmounted mowing and vegetation maintenance equipment. (cont. on page 10) 8 The Value Line Special Situations Service May 2014 to subscribe call

9 New Recommendations RECENT ALAMO GROUP NYSE--ALG % PRICE TRAILING P/E RATIO RELATIVE P/E RATIO DIV D YLD BETA 1.10 RANKS PERFORMANCE Technical SAFETY 3 Average 3 Average 3 Average (1.00 = Market) LEGENDS 12 Mos Mov Avg... Rel Price Strength Shaded area indicates recession VALUE LINE High Low Financial Strength B+ Price Stability Price Growth Persistence 80 Earnings Predictability 55 VALUE LINE PUBLISHING LLC /2015 SALES PER SH CASH FLOW PER SH EARNINGS PER SH A,B /NA DIV DS DECL D PER SH CAP L SPENDING PER SH BOOK VALUE PER SH COMMON SHS OUTST G (MILL) AVG ANN L P/E RATIO /NA RELATIVE P/E RATIO AVG ANN L DIV D YIELD 1.1% 1.1% 1.0% 1.3% 1.8% 1.1% 1.0%.8%.6% SALES ($MILL) Bold figures OPERATING MARGIN 6.9% 7.1% 6.5% 6.4% 6.1% 8.0% 8.8% 8.9% 8.8% are consensus DEPRECIATION ($MILL) earnings NET PROFIT ($MILL) estimates INCOME TAX RATE 32.5% 32.3% 31.4% 36.1% 45.1% 27.3% 31.7% 33.5% 29.8% and, using the NET PROFIT MARGIN 3.1% 2.5% 2.5% 2.0% 1.9% 4.0% 4.7% 4.6% 5.3% recent prices, WORKING CAP L ($MILL) P/E ratios. LONG-TERM DEBT ($MILL) SHR. EQUITY ($MILL) RETURN ON TOTAL CAP L 6.6% 5.7% 6.0% 5.2% 3.8% 8.3% 10.3% 9.6% 10.5% RETURN ON SHR. EQUITY 6.9% 6.3% 6.2% 6.0% 3.5% 8.3% 10.2% 9.3% 10.3% RETAINED TO COM EQ 5.5% 5.0% 5.0% 4.7% 2.5% 7.2% 9.2% 8.4% 9.3% ALL DIV DS TO NET PROF 21% 20% 19% 21% 29% 13% 10% 10% 9% A No. of analysts changing earn. est. in last 4 days: 0 up, 0 down, consensus 5-year earnings growth 11.0% per year. B Based upon one analyst s estimate. ANNUAL RATES of change (per share) 5 Yrs. 1 Yr. Sales 0.5% 7.0% Cash Flow 10.0% 15.0% Earnings 17.0% 23.5% Dividends 1.0% 16.5% Book Value 6.5% 12.0% QUARTERLY SALES ($mill.) 1Q 2Q 3Q 4Q Full 12/31/ /31/ /31/ /31/14 EARNINGS PER SHARE 1Q 2Q 3Q 4Q Full 12/31/ /31/ /31/ /31/ /31/ Calendar QUARTERLY DIVIDENDS PAID 1Q 2Q 3Q 4Q Full INSTITUTIONAL DECISIONS 2Q 13 3Q 13 4Q 13 to Buy to Sell Hld s(000) ASSETS ($mill.) /31/13 Cash Assets Receivables Inventory (LIFO) Other Current Assets Property, Plant & Equip, at cost Accum Depreciation Net Property Other Total Assets LIABILITIES ($mill.) Accts Payable Debt Due Other Current Liab LONG-TERM DEBT AND EQUITY as of 12/31/13 Total Debt $.4 mill. Due in 5 Yrs. $.4 mill. LT Debt $.0 mill. Including Cap. Leases $.0 mill. Leases, Uncapitalized Annual rentals $1.5 mill. Pension Liability $2.5 mill. in 13 vs. $9.9 mill. in 12 Pfd Stock None Common Stock 12,071,000 shares Pfd Div d Paid None (100% of Cap l) INDUSTRY: Machinery VOL. (thous.) BUSINESS: Alamo Group, Inc. engages in the design and manufacture of high-quality agricultural equipment and infrastructure maintenance equipment. Its products include tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, excavators, vacuum trucks, snow removal equipment, pothole patchers, zero-turn radius mowers, agricultural implements, and related aftermarket parts and services. The company operates 18 plants in North America, Europe, and Australia, and sells its products, primarily through a network of independent dealers and distributors to governmental end-users, related independent contractors, as well as to the agricultural and commercial turf markets, under the Alamo Industrial, Terrain King, Tiger, Gradall, VacAll, Schwarze, Nite-Hawk, Henke, Tenco, Bush Hog, Rhino, Earthmaster, Herschel, Valu-Bilt, Schulte, Superior, and McConnel trademarks. Recently, Alamo acquired the operating units of Specialized Industries, LP for approximately $186 million. Has 2550 employees. C.E.O. & President: Ronald A. Robinson. Inc.: DE. Address: 1627 East Walnut, Seguin, TX Tel.: (830) Internet: E.B. April 18, 2014 TOTAL SHAREHOLDER RETURN Dividends plus appreciation as of 3/31/ Mos. 6 Mos. 1 Yr. 3 Yrs. 5 Yrs % 11.39% 42.70% % % 2014 Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber s own, non-commercial, internal use. No part To subscribe call of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product. to subscribe call May 2014 The Value Line Special Situations Service 9

10 New Recommendations (cont. from page 8) Schwarze equipment includes air, mechanical-broom, and regenerative-air sweepers, pothole patchers, and replacement parts. A portion of its sales include truck chassis that are not manufactured by the company. Schwarze complements Alamo Industrial since the dealers and end-users of both products are the same. The Gradall brand produces a range of models used for excavation and grading for land clearing and road building. VacAll produces roadway debris vacuum systems and catch basin cleaners. This equipment can be used to remove wet or dry debris, and for spill elimination and the cleaning of sludge beds. It offers a line of sewer cleaners, as well. VacAll sales also include truck chassis not manufactured by the company. Nite-Hawk manufactures parking-lot sweepers that are fuel-efficient and cost-effective to operate. Alamo s Henke brand manufactures snow plows and heavyduty snow removal equipment. Tenco designs and manufactures heavy-duty snow plows, snow blowers, and spreaders. Several brands are marketed through its North American Agricultural Division, including Bush Hog, Rhino, and Earthmaster. These brands are sold to farmers and ranchers to clear brush, maintain pastures and unused farmland, shred crops, and till fields for haymaking. Bush Hog and Rhino feature a comprehensive line of tractor-powered equipment, including rotary cutters, mowers, front-end loaders, backhoes, rotary tillers, and posthole diggers. The Herschel/ and Valu-Bilt brands offer aftermarket replacement parts for farm equipment, tractors, and mowing and construction equipment. Schulte offers heavy-duty mechanical rotary mowers, snow blowers, and rock removal equipment. It primarily serves the Canadian and U.S. markets. Alamo s European Division markets McConnel equipment, which includes a line of hydraulic, boom-mounted hedge and grass cutters, as well as various tractor attachments, including backhoes, cultivators, subsoilers, buckets, and other digging implements. McConnel is mainly sold in the U.K., Ireland, and France. The division also markets Bomford products, which include hydraulic, boom-mounted hedge and hedgerow cutters, industrial mowers, agricultural seedbed preparation cultivators, and related parts. Rhino sells some Bomford equipment in the United States. SMA equipment includes hydraulic, boom-mounted hedge and hedgerow cutters. Its principal customers are French local authorities. Forges Gorce manufactures cutting blades. Rousseau sells hydraulic and mechanical boom mowers in France, although its products are now being introduced to other markets. Rivard manufactures vacuum trucks, high-pressure cleaning systems, and trenchers. Alamo derives a significant portion of its revenues from sales of replacement parts, which include the Herschel and Valu- Bilt brands. It also offers replacement parts through each of its individual brand lines. Replacement parts accounted for about 23% of sales in The company did not disclose the percentage for last year. Sales in the first quarter totaled $171.2 million, an increase of 8.1% over the prior-year period and a company record. The North American Industrial Division had sales of $77.3 million, up 11.5%, through higher demand for infrastructure maintenance products, including snow-removal equipment. At the time, snow removal was only a small part of Alamo s business, but the acquisition of Specialized Industries has increased its exposure here. The European Division also performed well, with sales rising 11.7%, to $44.1 million, a result of improving economic conditions there. Looking ahead, the Kellands acquisition will broaden its agricultural product range in Europe, while the acquisition itself should benefit from access to Alamo s distribution network. Sales for the North American Agricultural Division were up marginally, to $49.8 million, as harsh winter weather hurt sales early in the quarter, but finished strong. Management warned that farm incomes are projected to be lower this year, however, and while it was encouraged by strong sales in March, lower incomes could still hurt sales over the next few quarters. Meanwhile, manufacturing productivity improvements offset an unfavorable shift in the product mix, resulting in a slight increase in the gross margin, and operating expenses rose only 9.2%. As a result, operating income was up 9.1%, to $10.6 million. However, the effective tax rate rose to nearly 34%, versus 29% the year before, due to the expiration of research and development tax credits. Thus, earnings were only two cents higher, at $0.59 a share. The balance sheet at the end of the quarter listed current assets of $364.2 million and current liabilities of $101.9 million. It listed no long-term debt, although the acquisition of Specialized Industries, which was purchased in the second quarter for approximately $190 million and funded through a credit facility, was not included. We have set a three- to five-year price target of $95 a share. The stock trades on the New York Stock Exchange under the symbol ALG. We recommend the use of limit orders, as well as a stop loss of approximately 20%. 10 The Value Line Special Situations Service May 2014 to subscribe call