Analyst's Notes. Argus Recommendations

Transcription

1 Report created Oct 19, 2016 Page 1 OF 6 Intel supplies the computing industry with the chips, boards, systems and software that are the primary components of computer architecture. Intel has also expanded through acquisitions, although these businesses are now being reviewed and in some cases sold to other semiconductor firms. Intel has the largest market share in the semiconductor industry, with approximately $55.4 billion in 2015 sales. Analyst's Notes Analysis by Jim Kelleher, CFA, October 19, 2016 ARGUS RATING: BUY DCG concerns overstated; reiterating BUY Intel exceeded its upwardly revised revenue and gross margin guidance for 3Q16, but the stock sold off on below-consensus 4Q16 guidance. We believe that the Street's negative response to this guidance failed to discern positives in the picture, including the solid contribution from mobility to CCG revenue and the strong increase in cloud-based demand in DCG. As Intel succeeds in growing its focus areas while deemphasizing PCs, gross and operating margins should expand over the next several years. Intel remains an impressive cash generator, and its rich dividend yields about 2.8%. We believe that the shares offer a favorable entry point following the post-earnings selloff, and are reiterating our target price of $45. INVESTMENT THESIS BUY-rated Intel Corp. (NGS: INTC) exceeded its upwardly revised revenue and gross margin guidance for 3Q16, resulting in an earnings beat against Street expectations that were raised in September. The third quarter featured surprising strength in the PC market, complemented by Intel's success in winning a socket for its thin modem in the iphone 7 and 7 Plus. The fourth quarter, however, may entail inventory reductions based on excess stockpiles in the global PC supply chain. The Data Center group grew sales 10% year-over-year, but profits flattened due to investment spending and the ramp-up of 14 nm server architecture chips. Traditional enterprise demand weakened, but was offset by surging cloud-based server demand. We believe the Street's negative response to management's guidance failed to discern positives in the picture. While the PC chain may need to consolidate in the fourth quarter, PC demand overall is the strongest it has been in several quarters. And the thin modem contribution to client compute group revenue, in our view, validates Intel's successful investment in the mobile device space. Although the Data Center Group (DCG) reported weak enterprise (i.e., traditional on-premises) demand, the company is seeing robust Data Pricing reflects previous trading week's closing price. 200-Day Moving Average Price ($) 40 Rating EPS ($) Target Price: $ Week High: $ Week Low: $35.23 Closed at $37.45 on 10/14 Quarterly Annual ( Estimate) 2.81 ( Estimate) Revenue ($ in Bil.) Quarterly Annual ( Estimate) 63.9 ( Estimate) FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Dec BUY HOLD SELL Argus Recommendations Twelve Month Rating SELL HOLD BUY Five Year Rating SELL HOLD BUY Rating Weight Under Over Weight Weight Argus assigns a 12-month BUY, HOLD, or SELL rating to each stock under coverage. BUY-rated stocks are expected to outperform the market (the benchmark S&P 500 Index) on a risk-adjusted basis over the next year. HOLD-rated stocks are expected to perform in line with the market. SELL-rated stocks are expected to underperform the market on a risk-adjusted basis. The distribution of ratings across Argus' entire company universe is: 47% Buy, 47% Hold, 6% Sell. Key Statistics Key Statistics pricing data reflects previous trading day's closing price. Other applicable data are trailing 12-months unless otherwise specified Overview Price $37.67 Target Price $ Week Price Range $27.68 to $38.36 Shares Outstanding 4.72 Billion Dividend $1.04 Overview Technology Rating OVER WEIGHT Total % of S&P 500 Cap % Financial Strength Financial Strength Rating HIGH Debt/Capital Ratio 26.8% Return on Equity 18.3% Net Margin 17.8% Payout Ratio 0.41 Current Ratio 2.58 Revenue $56.61 Billion After-Tax Income $10.10 Billion Valuation Current FY P/E Prior FY P/E Price/Sales 3.14 Price/Book 2.86 Book Value/Share $13.17 Capitalization $ Billion Forecasted Growth 1 Year EPS Growth Forecast 5.44% 5 Year EPS Growth Forecast 10.00% 1 Year Dividend Growth Forecast 8.33% Risk Beta 1.20 Institutional Ownership 65.88%

2 Report created Oct 19, 2016 Page 2 OF 6 demand growth from cloud hosts and telecom service providers. INTC shares sold off following 4Q16 guidance that was below the prereporting consensus and the slight dial-down in long-term growth projections for the DCG server business. We believe that the pullback in INTC shares provides an opportunity to buy into Intel's significant transformation, which is reducing its top- and bottom-line reliance on PCs while better defining the company's mission. As Intel succeeds in growing its focus areas while deemphasizing PCs, gross and operating margins should expand over the next several years. Intel remains an impressive cash generator, and its rich dividend yields about 2.8%. INTC shares appear attractive, particularly based on our more forward-looking discounted free cash flow model. We are reiterating our BUY rating to a 12-month target price of $45. RECENT DEVELOPMENTS Following the post-earnings selloff, INTC is up about 5% year-to-date, cutting its prereporting annual gain in half. The peer group of Argus-covered communications and computing semiconductor stocks is up 33% in 2016, while the Philadelphia Semiconductor Index (SOX) is up 21%. INTC shares declined 5% in 2015, lagging the 9% gain for the peer group. INTC rose 40% in 2014, compared to an 18% advance for the peer group and a 28% gain for the SOX. Intel rose 26% in 2013, declined 15% in 2012, and rose 15% in For 3Q16, Intel delivered revenue of $15.78 billion, which was up 9.1% year-over-year and 16.6% sequentially in a seasonally strong quarter. Revenue topped the midpoint of management's revised guidance of $15.6 billion, +/- $300 million, issued in mid-september; the company had originally guided for 3Q16 revenue of $14.9 billion, +/- $500 million, in July Non-GAAP earnings totaled $0.80 per diluted share, which was up 8.3% year-over-year and $0.21 on a sequential basis. Non-GAAP EPS topped the consensus forecast of $0.73. INTC shares fell more than 6% following the 3Q16 release and the 4Q16 guidance that failed to match prereporting expectations. While the shares of Netflix rallied following the company's quarterly results, we expect many top-tier tech stocks to weaken after their earnings reports, based on the strong trends in these stocks thus far in 2H16. INTC had risen 7% over the past three months prior to the recent selloff. Beyond mere profit-taking following a strong run-up in the stock, investors were responding to certain elements of guidance that reignited concerns about future growth. In the Client Compute Group (CCG), which now encompasses mobile devices such as thin modems along with traditional x86 CPUs, third-quarter revenue of $8.89 billion (56% of total) rose 4.5% from the prior year - the strongest annual comparison in two years (since 3Q14). CCG operating profit surged 37% annually, reflecting very strong pricing realizations as the company's core i5 and 17 processors benefited from strong demand. Pricing improved Growth & Valuation Analysis GROWTH ANALYSIS ($ in Millions, except per share data) Revenue 54,058 53,015 52,892 55,887 56,276 COGS 19,921 21,063 20,824 20,161 21,197 Gross Profit 34,137 31,952 32,068 35,726 35,079 SG&A 7,868 8,031 8,188 8,042 8,203 R&D 8,835 10,274 10,930 11,686 12,379 Operating Income 17,129 13,347 12,282 15,452 13,955 Interest Expense Pretax Income 17,224 13,502 12,838 15,804 14,047 Income Taxes 4,704 3,190 3,333 4,038 2,573 Tax Rate (%) Net Income 12,520 10,312 9,505 11,766 11,474 Diluted Shares Outstanding EPS Dividend GROWTH RATES (%) Revenue Operating Income Net Income EPS Dividend Sustainable Growth Rate VALUATION ANALYSIS Price: High $28.34 $26.22 $38.21 $37.51 Price: Low $19.85 $20.26 $23.00 $27.50 Price/Sales: High-Low P/E: High-Low Price/Cash Flow: High-Low Financial & Risk Analysis FINANCIAL STRENGTH Cash ($ in Millions) Working Capital ($ in Millions) Current Ratio LT Debt/Equity Ratio (%) Total Debt/Equity Ratio (%) RATIOS (%) Gross Profit Margin Operating Margin Net Margin Return On Assets Return On Equity RISK ANALYSIS Cash Cycle (days) Cash Flow/Cap Ex Oper. Income/Int. Exp. (ratio) Payout Ratio The data contained on this page of this report has been provided by Morningstar, Inc. ( 2016 Morningstar, Inc. All Rights Reserved). This data (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. This data is set forth herein for historical reference only and is not necessarily used in Argus analysis of the stock set forth on this page of this report or any other stock or other security. All earnings figures are in GAAP.

3 Report created Oct 19, 2016 Page 3 OF 6 6% year-over-year, helped by the abatement of the contra-revenue program in mobility. CFO Stacy Smith noted that in 3Q, CCG saw stronger demand and rising inventories in the worldwide PC supply chain. China showed surprising strength. Overall, enterprise PC demand remains stronger than consumer PC demand, which (along with contra-revenue abatement) partly explains the strong pricing performance. For 4Q16, Intel expects some slowing in PC CPU shipments following strong inventory accumulation in 3Q16. Management noted that this impact would not be significant, and would amount to just a few days of inventory in the supply chain. Additionally, in many cases, Intel holds inventories at customers' supply hubs, which will further reduce inventory mitigation. While reduction in the global inventory supply chain will act as a modest headwind in the fourth quarter, strength in mobility demand from key customers should help to moderate that impact. The Data Center Group, a key growth focus for Intel, is also a frequent source of anxiety for investors. In 3Q16, DCG revenue (29% of total) grew 9.7% year-over-year. DCG profit fell 0.5%, though margins remained strong at 46.7%. Margins were pinched by costs associated with the ramp up of the Xeon 'Broadwell,' Intel's first 14 nm server architecture chip, along with other investments. During the quarter, traditional enterprise demand - reflecting server demand for on-premise data centers - continued to moderate, as this category declined 3% annually. As a counterweight, demand from cloud hosts and cloud service providers jumped by more than 30%. DCG also saw mid-teens demand growth from telco service providers, who are shifting to a managed services model for cloud services. Intel has dialed down its long-term growth forecast for DCG to the high single-digit range from earlier guidance in the low double digits. This reflects the company's balancing act as more server workloads shift to a utility-computing (cloud) model. We expect weakness in traditional enterprise server demand to be more than offset by continued strength in cloud and service provider demand. Approximately 15% of Intel revenue comes from outside the CCG and DCG buckets. This includes Internet of Things, Non-volatile Memory, Intel Security Group, and the Programmable Solutions Group. In the aggregate, revenue from these areas grew 29% year-over-year in 3Q16. In September 2016, Intel reached an agreement to sell a majority stake in Intel Security (the former McAfee) to TPG. Although Intel will not recoup its full $7.7 billion investment in McAfee, it will receive $3.1 billion in cash from TPG and retain a 49% stake in Intel Security. TPG is making a $1.1 billion equity investment in the joint venture to drive growth and enhance its focus as a stand-alone company. For 4Q16, Intel guided for revenue of $15.7 billion, +/- $500 million. At the guidance midpoint, revenue would be up 6% annually. The Street, however, had been modeling a guidance midpoint of $15.9 billion. Both slower growth at DCG and Peer & Industry Analysis The graphics in this section are designed to allow investors to compare INTC versus its industry peers, the broader sector, and the market as a whole, as defined by the Argus Universe of Coverage. The scatterplot shows how INTC stacks up versus its peers on two key characteristics: long-term growth and value. In general, companies in the lower left-hand corner are more value-oriented, while those in the upper right-hand corner are more growth-oriented. The table builds on the scatterplot by displaying more financial information. The bar charts on the right take the analysis two steps further, by broadening the comparison groups into the sector level and the market as a whole. This tool is designed to help investors understand how INTC might fit into or modify a diversified portfolio. P/E Value NVDA XLNX TXN INTC AMAT AVGO FSLR 5-yr Growth Rate(%) ADI AMD Growth 5-yr Net 1-yr EPS Cap Growth Current Margin Growth Argus Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating INTC Intel Corp 178, BUY TXN Texas Instruments Inc 69, BUY AVGO Broadcom Ltd 47, BUY NVDA NVIDIA Corp 35, BUY AMAT Applied Materials Inc 30, BUY ADI Analog Devices Inc 19, BUY XLNX Xilinx Inc 12, BUY AMD Advanced Micro Devices Inc 5, HOLD FSLR First Solar Inc 4, HOLD Peer Average 44, P/E Price/Sales Price/Book PEG 5 Year Growth Debt/Capital

4 Report created Oct 19, 2016 Page 4 OF 6 inventory burn-off in the global PC supply chain impacted guidance. Based on other elements of guidance, we believe that Intel can earn $0.72-$0.76 per diluted share in 4Q16; the Street had been modeling $0.76. At the midpoint level of $0.74, 4Q16 adjusted EPS would be up 7.2%. INTC shares fell following the 4Q16 guidance that was below the prereporting consensus and the slight dial-down in long-term growth projections for DCG, Intel's server business. We believe that the pullback in INTC shares provides an opportunity to buy into Intel's significant transformation, which is reducing its topand bottom-line reliance on PCs while better defining the company's mission. EARNINGS & GROWTH ANALYSIS For 3Q16, Intel delivered revenue of $15.78 billion, which was up 9.1% year-over-year and 16.6% sequentially in a seasonally strong quarter. Revenue topped the midpoint of management's revised guidance of about $15.6 billion, +/- $300 million, issued in mid-september; the company had originally guided for 3Q16 revenue of $14.9 billion, +/- $500 million, in July The GAAP gross margin rose to 63.3% in 3Q16 from 58.9% in 2Q16 and 62.5% a year earlier. Backing out items related to restructuring and the acquisition of Altera, Intel's non-gaap gross margin was 64.8% in 3Q16, compared to 61.8% in 2Q16 and 64.3% a year earlier. Reflecting strong cost controls along with volume-leverage benefits, the non-gaap operating margin expanded to 32.2% in 3Q16 from 23.8% in 2Q16 and 29.0% a year earlier. Intel now trades on non-gaap results, given costs related to the acquisition of Altera. Intel's non-gaap earnings were $0.80 per diluted share in 3Q16, compared to $0.59 per diluted share in 2Q16 and $0.69 a year earlier. On a GAAP basis, Intel earned $0.69 per diluted share in 3Q16, compared to $0.27 in 2Q16 and $0.64 in the year-earlier quarter. Non-GAAP EPS rose 8.3% year-over-year and $0.21 on a sequential basis. Non-GAAP EPS topped the consensus forecast of $0.73. For all of 2015, Intel's total revenue of $55.37 billion declined 0.9% from Intel earned $2.34 per diluted share on a GAAP basis in 2015, up from $2.32 in For 4Q16, Intel guided for revenue of $15.7 billion, +/- $500 million. At the guidance midpoint, revenue would be up 6% annually. The Street, however, had been modeling a guidance midpoint of $15.9 billion. Both slower growth at DCG and inventory burn-off in the global PC supply chain impacted guidance. Other elements of directional (line-item) guidance include a non-gaap gross margin of 63%, plus or minus a couple of points, and non-gaap operating costs of $5.2 billion. Based on these and other elements of guidance, we believe that Intel can earn $0.72-$0.76 per diluted share in 4Q16; the Street had been modeling $0.76. At the midpoint level of $0.74, 4Q16 adjusted EPS would be up 7.2%. We are raising our 2016 non-gaap earnings estimate to $2.68 per diluted share from $2.52 and our 2017 forecast to $2.81 from $2.73. Our 2016 GAAP forecast for Intel is $2.02 per diluted share (reflecting higher anticipated restructuring costs) and our 2017 GAAP forecast is $2.59. Our long-term EPS growth rate estimate is 10%. FINANCIAL STRENGTH & DIVIDEND Our financial strength rating for Intel is High. Intel's credit ratings are mainly A1 or A2, per Moody's. To pay for the $16.7 billion Altera acquisition, Intel issued $8 billion in debt in 3Q15. The company used cash and/or short-term paper for the balance. In an effort to accelerate the process of rebuilding cash following the acquisition, we expect Intel to slow share repurchases and seek synergies from the combination of the two companies. Intel has begun the process of rebuilding its cash hoard following the Altera deal. Intel's cash & equivalents and investments totaled $23.8 billion at the end of 3Q16. Cash was reduced from $31.3 billion at the end of 2015 by the Altera acquisition. Cash & equivalents and investments totaled $21.15 billion at the end of 2014, $20.1 billion at year-end 2013, $18.8 billion at year-end 2012 (including $6.2 billion in debt issued in 4Q12), and $14.8 billion at the end of Total debt was $27.6 billion at the end of 3Q16, mainly reflecting Altera financing costs. Total debt was $22.7 billion at the end of 2015, up from $13.2 billion at midyear Total debt was $13.6 billion at the end of 2014 and $13.8 billion at the end of Cash flow from operations was approximately $19.0 billion in Intel generated $20.5 billion in cash flow from operations in 2014, $20.9 billion in 2013, and $18.0 billion in Intel projects 2016 capital spending of $10 billion. Intel spent $4 billion to repurchase shares in 2014, after spending $2.1 billion on buybacks in Share repurchases totaled $5.5 billion in 2012 and approximately $10 billion in Over the past 10 years, Intel has spent $55 billion to repurchase stock. On 11/19/15, Intel announced an 8.3% hike in its quarterly dividend, to $0.26 per common share, or $1.04 annually, beginning in 1Q16. Before that, Intel raised its quarterly dividend to $0.24 in November 2014 and to $0.225 in May Our annual dividend forecasts are $1.04 for 2016 and $1.12 for MANAGEMENT & RISKS Longtime COO Brian Krzanich became CEO on 5/16/13. Former CFO and director of corporate strategy Stacy Smith has taken on a larger role overseeing sales, manufacturing, and operations. Intel has appointed Robert Swan as its new CFO. In November 2015, 'Murthy' Renduchintala came over from Qualcomm to run Intel's mobile chip division. According to CEO Krzanich, Mr. Renduchintala will conduct 'a complete review of products' as part of the restructuring program and report his findings directly to the CEO. In July 2015, Intel announced several leadership changes. Aicha Evans is now part of the management committee and is Communications and Devices Group General Manager. Josh Walden is General Manager of Intel's New Technology Group. Former Intel President Renee James left the company in January The restructuring program, while painful, reflects the reality of reduced global PC demand. This business throws off substantial cash, and Intel will be challenged to replace volumes and improve margins as it seeks to grow its focus businesses. The acquisition of Altera creates risks related to the premium price and Intel's spotty record in integrating past acquisitions. While ALTR is expensive, the acquisition should 'future-proof' Intel's presence in the data center. Altera also looks like a better and more logical fit than McAfee.

5 Report created Oct 19, 2016 Page 5 OF 6 Intel faces the usual array of competitive risks, but is the clear leader in microprocessors with a roughly 80% share in PCs and 95% in the data center. Given this near hegemony, we see more stock-price risk than business risk for the company. In other words, the loss of a few points of market share would likely hit the stock much harder than it would impact the bottom line. Given the company's history of technology leadership, we do not expect any meaningful market share losses going forward. COMPANY DESCRIPTION Intel supplies the computing industry with the chips, boards, systems and software that are the primary components of computer architecture. Intel has also expanded through acquisitions, although these businesses are now being reviewed and in some cases sold to other semiconductor firms. Intel has the largest market share in the semiconductor industry, with approximately $55.4 billion in 2015 sales. INDUSTRY Our rating on the Technology sector is Over-Weight. We believe that CIOs and IT managers are becoming more accustomed to transformative technology, including mobile broadband and enterprise mobility; social networking and the explosion in bi-directional data traffic; Analytics, including Big Data and business intelligence; Cloud, including multiple variants (public, private, and hybrid); and enabling technologies such as Network Function Virtualization, Software-Defined (SD) Networking, Storage, Data Center, and Software/Platform/Infrastructure-as-a-service. valuations remain attractive, while growth prospects remain highly positive. For the long term, we expect the technology sector to increase its weighting within the S&P 500 from the current 20.6% to 22%-23%, based on pervasive digitization across the economy, greater acceptance of transformative technologies, and the development of the Internet of Things (IoT). Healthy company and sector fundamentals are also positive. For individual companies, these include high cash levels, low debt, and broad international business exposure. In terms of performance, the sector rose 4.3% in 2015, above the market average, after gaining 18.2% in The sector is outperforming thus far in 2016, with a gain of about 9.6%. Fundamentals for the Technology sector look reasonably balanced. By our calculations, the P/E ratio on projected 2017 earnings is 15.9, below the market multiple of Earnings are expected to grow 21.0% in 2017 and 5.0% in 2016 following growth of 2.6% in The sector's debt ratios are below the market average, as is the average dividend yield of 1.7%. VALUATION In the wake of the Altera acquisition, the Street is valuing INTC on non-gaap results; we have adjusted our model accordingly. INTC shares are trading at 13.3-times our 2016 non-gaap EPS estimate and at 12.7-times our 2017 estimate; the five-year ( ) historical average P/E is Our historical comparable valuation model renders a value for INTC in the mid-$30s, in a rising trend and near current prices. Given Intel's exceptional cash-generating capabilities, our more forward-looking DFCF model indicates a fair value in the mid-$50s, also in a slightly rising trend. We calculate a blended value in the mid-$40s. Appreciation to our 12-month target price of $45, along with the 2.8% dividend yield, implies a risk-adjusted return above our projected return for the broad market. As such, our rating remains BUY. On October 19 at midday, BUY-rated INTC traded at $35.38, down $2.37.

6 METHODOLOGY & DISCLAIMERS Report created Oct 19, 2016 Page 6 OF 6 About Argus Argus Research, founded by Economist Harold Dorsey in 1934, has built a top-down, fundamental system that is used by Argus analysts. This six-point system includes Industry Analysis, Growth Analysis, Financial Strength Analysis, Management Assessment, Risk Analysis and Valuation Analysis. Utilizing forecasts from Argus Economist, the Industry Analysis identifies industries expected to perform well over the next one-to-two years. The Growth Analysis generates proprietary estimates for companies under coverage. In the Financial Strength Analysis, analysts study ratios to understand profitability, liquidity and capital structure. During the Management Assessment, analysts meet with and familiarize themselves with the processes of corporate management teams. Quantitative trends and qualitative threats are assessed under the Risk Analysis. And finally, Argus Valuation Analysis model integrates a historical ratio matrix, discounted cash flow modeling, and peer comparison. THE ARGUS RESEARCH RATING SYSTEM Argus uses three ratings for stocks: BUY, HOLD, and SELL. Stocks are rated relative to a benchmark, the S&P 500. A BUY-rated stock is expected to outperform the S&P 500 on a risk-adjusted basis over a 12-month period. To make this determination, Argus Analysts set target prices, use beta as the measure of risk, and compare expected risk-adjusted stock returns to the S&P 500 forecasts set by the Argus Strategist. A HOLD-rated stock is expected to perform in line with the S&P 500. A SELL-rated stock is expected to underperform the S&P 500. Argus Research Disclaimer Argus Research is an independent investment research provider and is not a member of the FINRA or the SIPC. Argus Research is not a registered broker dealer and does not have investment banking operations. The Argus trademark, service mark and logo are the intellectual property of Argus Group Inc. The information contained in this research report is produced and copyrighted by Argus, and any unauthorized use, duplication, redistribution or disclosure is prohibited by law and can result in prosecution. The content of this report may be derived from Argus research reports, notes, or analyses. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. This report is not an offer to sell or a solicitation of an offer to buy any security. The information and material presented in this report are for general information only and do not specifically address individual investment objectives, financial situations or the particular needs of any specific person who may receive this report. Investing in any security or investment strategies discussed may not be suitable for you and it is recommended that you consult an independent investment advisor. Nothing in this report constitutes individual investment, legal or tax advice. Argus may issue or may have issued other reports that are inconsistent with or may reach different conclusions than those represented in this report, and all opinions are reflective of judgments made on the original date of publication. Argus is under no obligation to ensure that other reports are brought to the attention of any recipient of this report. Argus shall accept no liability for any loss arising from the use of this report, nor shall Argus treat all recipients of this report as customers simply by virtue of their receipt of this material. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. Argus has provided independent research since Argus officers, employees, agents and/or affiliates may have positions in stocks discussed in this report. No Argus officers, employees, agents and/or affiliates may serve as officers or directors of covered companies, or may own more than one percent of a covered company s stock. Morningstar Disclaimer 2016 Morningstar, Inc. All Rights Reserved. Certain financial information included in this report: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.