cardinal capital · interest in any fund managed by cardinal capital ... ligand pharmaceuticals...

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Small and SMID Cap

Cardinal Capital MANAGEMENT L. L. C.

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Cardinal Disclosure

THIS PRESENTATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY AN INTEREST IN ANY FUND MANAGED BY CARDINAL CAPITAL MANAGEMENT, L.L.C. (“CARDINAL”), WHICH MAY ONLY BE MADE AT THE TIME A QUALIFIED OFFEREE RECEIVES A CONFIDENTIAL PRIVATE OFFERING MEMORANDUM (“CPOM”) DESCRIBING THE OFFERING AND RELATED SUBSCRIPTION AGREEMENT AND IN THE CASE OF ANY INCONSISTENCY BETWEEN THE DESCRIPTIONS OR TERMS IN THIS PRESENTATION AND THE CPOM, THE CPOM SHALL CONTROL. THESE SECURITIES SHALL NOT BE OFFERED OR SOLD IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNTIL THE REQUIREMENTS OF THE LAWS OF SUCH JURISDICTION HAVE BEEN SATISFIED. WHILE ALL THE INFORMATION PREPARED IN THIS PRESENTATION IS BELIEVED TO BE ACCURATE, CARDINAL MAKES NO EXPRESS WARRANTY AS TO THE COMPLETENESS OR ACCURACY OF THE INFORMATION APPEARING IN THIS PRESENTATION. ANY PROJECTIONS, MARKET OUTLOOKS OR ESTIMATES IN THIS PRESENTATION ARE FORWARD-LOOKING STATEMENTS AND ARE BASED UPON CERTAIN ASSUMPTIONS. OTHER EVENTS WHICH WERE NOT TAKEN INTO ACCOUNT MAY OCCUR AND MAY SIGNIFICANTLY AFFECT THE RETURNS OR PERFORMANCE OF A CARDINAL PRODUCT. ANY PROJECTIONS, OUTLOOKS OR ASSUMPTIONS SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE ACTUAL EVENTS WHICH WILL OCCUR. THIS PRESENTATION IS NOT INTENDED FOR PUBLIC USE OR DISTRIBUTION.

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A Small to Mid Cap Value Equity Investment Firm

Experienced team of value investors

Superior long-term investment returns

Free cash flow driven investment strategy

Consensus-building and team-oriented culture

Wholly owned by current and former senior investment professionals

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Client Assets Under Management

Assets by Client Type Assets by Product

February 29, 2016

Total AUM: $1,383 Million

Inception Dates: Small Cap: July 1992 Select Value: January 2002 SMID Cap: April 2010 Microcap: May 2012 ** Includes both SMID Cap and Select Value Portfolios

Corporate36%

Foundation & Endowment

6%

Taft-Hartley11%

Public Pension15%

LPs3%

Mutual Fund13%

Individuals8%

Small Cap $1,066 MM

61%

SMID Cap**$624 MM

35%

Microcap$68 MM

4%

Total AUM: $1.8 Billion

5

Seasoned Team of Value Investment Managers

Eugene Fox, III

Managing Partner/PM/Analyst

April 1995

BA, University of Virginia

MBA, University of Chicago

Investment Experience: 29

Robert Kirkpatrick, CFA

Managing Partner/PM/Analyst

August 2000

BA, Williams College

Chartered Financial Analyst


Rachel Matthews

Partner/PM/Analyst

January 2001

BA, Columbia University

MBA, New York University


Robert Fields

Partner/PM/Analyst

April 2013

BS, Ball State University

MBA, University of Pennsylvania


Chitra Sundaram

Senior Analyst

August 2005

B. Comm. University of Pune

MBA, New York University


Christopher Robertson

Senior Analyst

August 2007

BA, University of Rochester

MBA, Columbia University


Michael Cotogno, CFA

Analyst

September 2011

BA, Rhodes College

Chartered Financial Analyst


A shared passion for team-based and results-oriented investing

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Research Driven & Business Based Strategy

Cardinal’s Value Approach

Buy “good businesses” at a discount

• Stable and Predictable

• Significant Free Cash Flow

• Motivated & Competent Management

• Multiple Levers to Create Value

Tailor the valuation to the business

Value company to target 20% return

Driver: detailed fundamental research

Conventional Value Investing

Buy stocks based on financial statistics

• Low Price/Earnings

• Low Price/Book

• High Dividend Yield

• Net Working Capital

Apply same approach to all companies

Value all stocks relative to the market

Driver: reversion to the mean

Please see the important disclosures at the end of this presentation.

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Idea Generation: Opportunistic and Efficient

Internally Generated Repository of 700+ models

~ 200 recently updated Trade journals/conferences Insider buying Large share repurchases Corporate restructurings

Other Investors 13F filings 20+ years of relationships

Niche Research Spinoff Report CJS Securities, Craig Hallum

Sources:

Attractive Business Model High ROIC Sustainable comp advantage Long-term visibility

Good Management Competent & motivated

Significant FCF Free Cash Flow ≠ Earnings Discretionary vs. reported Cannot be screened for

Focus On Differentiated businesses w/

transparency

Characteristics:

Cyclical or Secular Out of favor industries Out of favor growth

Company Specific Corporate restructurings Turnarounds Special situations

Not in Databases Spin-offs Post-bankruptcies Orphan IPOs Underfollowed securities

Inefficiencies:

~ 500 Companies/ year ~ 75 Companies/ year ~ 35 Companies/ year


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CBIZ InterDigital MDC Partners PDF Solutions

Babcock & Wilcox Compass Minerals Medical Properties Trust World Fuel

BGC Partners Howard Hughes Monotype Wendy’s

Special Situations Out of Favor Industries

ACI Worldwide j2 Global Communications Ligand Six Flags

American Capital IAC/InterActive Corp Kaman Trimas

Convergys CTS Corp Krispy Kreme TechTarget

Turnarounds Underfollowed Out of Favor Growth

Corporate Restructurings

Holdings Reflect Our Opportunistic Approach Cardinal Representative Holdings

Structural inefficiencies provide consistent sources of investment opportunities


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Research Process

Analyze financial disclosures Speak w/ experts & other investors Building management relationship Evaluate business & competition Assess capital allocation decisions

Due Diligence:

Tool to set buy & sell prices Template provides consistency Customized business segments Discount rate = return target Updated at least quarterly 5 new models per analyst yearly Models take 1-3 weeks to build

5-Year DCF Model: Decision making All PMs must consent Investment team compensated

on total portfolio performance

Position sizes based on Business predictability Valuation Catalyst Liquidity

Risk management 40 – 60 stocks across sectors Benchmark agnostic Mkt cap similar to benchmark

Portfolio Construction:

Is the company run as we would

if we owned it all?

Yields a superior understanding

of key value drivers

Conviction-weighted portfolios

balance risk and reward


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Valuation: Redeployment Opportunities & Choices

Insight into capital deployment comes from robust relationships with management

Discretionary Free Cash Flow

Hold Cash Pay Down

Debt Acquisitions

Internal

Investments

Share

Repurchase Dividend

0 - 1%

Interest Rate

Dependent

3–5% Rate /

Credit

Sensitive

Opportunity

Set /

Hurdle Rate

Dependent

Opportunity

Set /

Hurdle Rate

Dependent

Share Price

Dependent Tax Rates

Deployment

Option

After-Tax

Return

Cardinal

Perspective

50¢/ Dollar

Hurts Value

Only If

Optimizing

Capital

Structure

Proven

Expertise &

Execution

Lower Risk /

Attractive If

High Hurdle

Rate

Attractive

When Shares

Depressed

Attractive If

No Other

Opportunity/

Tax Leakage


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Disciplined Approach to Buying and Selling

Buy & Sell Price Targets

Value of Business (EBITDA x Terminal Multiple)

- Debt

+ Cash

Present Value

=

Equity Value =

Buy & Sell Price Targets

= Present Value

Equity Value =

Fifth Year

Value of Business (EBITDA x Terminal Multiple)

- Debt

+ Cash

Our analytical framework provides us with a robust tool for setting price targets consistently across companies

Key Assumptions : Buy Price Sell Price Discount Rate 20% 15%

Terminal Multiple 5x – 9x 8x – 11x

Terminal multiple is based on the following factors: M&A transactions and public market valuations Consistency of EBITDA & capital intensity 70+ M&A transactions in portfolio companies


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Portfolios Constructed to Balance Risk and Return Small Cap Top 15 Holdings as of February 29, 2016

Equity

Market Enterprise Net Cash 5 Year

Stock Portfolio Value Value/2016 (Debt) 2016 Est. Est. EPS

Company Name Symbol Industry Weight (MM) EBITDA (MM) P/E Ratio Growth

Ligand Pharmaceuticals LGND Biotechnology 4.2% $2,160 NM $211.44 NM NM

BWX Technologies BWXT Aerospace & Defense 4.0% $3,399 11.4x ($318.00) 22.3x 9.9%

KAR Auction Services KAR Miscellaneous Commercial Services 3.7% $5,169 8.9x ($1,700.00) 17.5x 17.4%

MDC Partners MDCA Advertising/Marketing Services 3.2% $1,084 6.7x ($449.40) 8.1x 24.6%

PacWest Bancorp PACW Regional Banks 3.1% $5,181 NM NM 10.3x 8.0%

Six Flags SIX Movies/Entertainment 3.0% $5,046 11.4x ($1,234.50) 14.8x 20.9%

Kaman Corporation KAMN Aerospace & Defense 3.0% $1,110 7.7x ($261.70) 13.4x 14.4%

World Fuel Services INT Wholesale Distributors 3.0% $2,761 7.8x ($274.80) 14.6x 11.4%

BGC Partners BGCP Investment Banks/Brokers 3.0% $4,114 8.1x ($381.90) 10.5x 9.1%

Silgan Holdings SLGN Containers/Packaging 3.0% $3,245 9.7x ($1,827.60) 15.7x 22.3%

Howard Hughes HHC Real Estate Development 2.8% $4,494 NM ($1,862.19) NM NM

PDF Solutions PDFS Electronic Production Equipment 2.6% $341 4.3x $126.30 8.9x 26.2%

Medical Properties Trust MPW Real Estate Investment Trusts 2.5% $2,738 14.2x ($3,010.60) 10.4x 14.2%

Cash America International CSH Finance/Rental/Leasing 2.3% $802 7.3x ($109.40) 24.4x 38.4%

CBIZ CBZ Miscellaneous Commercial Services 2.3% $505 6.3x ($180.90) 13.9x 20.3%

45.8%

Cardinal Composite Portfolio Weighted Average $2,240 7.9 x 13.3 x 15.6%

Russell 2000 Value $1,620 15.1 x 10.0%


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Portfolios Constructed to Balance Risk and Return SMID Cap Top 15 Holdings as of February 29, 2016

Equity

Market Enterprise Net Cash 5 Year

Stock Portfolio Value Value/2016 (Debt) 2016 Est. Est. EPS

Company Name Symbol Industry Weight (MM) EBITDA (MM) P/E Ratio Growth

Ligand Pharmaceuticals LGND Biotechnology 5.1% $2,160 NM $211 NM NM

BWX Technologies BWXT Aerospace & Defense 4.0% $3,399 11.4x ($318) 22.3x 9.9%

KAR Auction Services KAR Miscellaneous Commercial Services 3.9% $5,169 8.9x ($1,700) 17.5x 17.4%

PacWest Bancorp PACW Regional Banks 3.6% $5,181 NM NM 10.3x 8.0%

Howard Hughes HHC Real Estate Development 3.4% $4,494 NM ($1,862) NM NM

MDC Partners MDCA Advertising/Marketing Services 3.2% $1,084 6.7x ($449) 8.1x 24.6%

Silgan Holdings SLGN Containers/Packaging 3.1% $3,245 9.7x ($1,828) 15.7x 22.3%

Six Flags SIX Movies/Entertainment 3.0% $5,046 11.4x ($1,235) 14.8x 20.9%

World Fuel Services INT Wholesale Distributors 3.0% $2,761 7.8x ($275) 14.6x 11.4%

BGC Partners BGCP Investment Banks/Brokers 3.0% $4,114 8.1x ($382) 10.5x 9.1%

Starwood Property Trust STWD Real Estate Investment Trusts 2.8% $4,905 NM ($5,040) 7.9x 7.0%

American Capital LTD ACAS Diversified Financials 2.7% $3,277 NM $4,822 15.6x 7.0%

Medical Properties Trust MPW Real Estate Investment Trusts 2.6% $2,738 14.2x ($3,011) 10.4x 14.2%

Lithia Motors LAD Specialty Stores 2.5% $2,810 8.4x ($429) 12.6x 14.6%

Concho Resources CXO Oil & Gas Production 2.4% $11,992 8.9x ($2,408) NM 11.0%

48.3%

Cardinal Composite Portfolio Weighted Average $3,352 8.4 x 12.6 x 13.0%

Russell 2500 Value $3,634 15.5 x 8.6%


Case Study: Six Flags

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Six Flags Entertainment

• Global leader in the attractive regional theme park industry

• Resilient in a weak economy

• High barriers to entry

• Exceptional brand and business foundation

• Substantial growth opportunities

• Pricing and ticket yield management

• Season Pass / Membership penetration

• International licensing

• Financial Excellence

• Strong recurring revenue and cash flow

• High margins

• Favorable capital allocation strategy

• $0.7 billion NOL carry forward

• Employees closely aligned with shareholders

Six Flags Chicago, IL

Source: Six Flags Entertainment Corporation 15 Please see the important disclosures at the end of this presentation.

18 Strategically Located Parks

Source: Six Flags Entertainment Corporation

• Locations provide economic and weather diversity with limited direct competition

• High barriers to entry – land and zoning

16 Please see the important disclosures at the end of this presentation.

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Six Flags: Idea Generation and Vetting

Internal Research: News announcement:

Emerged f/ bankruptcy: 2010

New CEO was CEO of former holding, Dade Behring: Successfully sold to Siemens Had been turnaround exec at

Apollo and non-compete had expired

Sources:

Attractive Business Model: High recurring revenue High barriers to entry Resilient in weak economy Low cash taxes Good Management: CEO record of post

bankruptcy management Substantial stock and

option ownership Significant FCF Yield: 2010: 7.6% FCF/EV 2016: 6.1%

Characteristics:

Perceived To Be: Economically cyclical Limited Growth

Investment Opportunities: Focus strategy to core biz Increase ticket yields/cut

costs International licensing Share repurchases Information-based: Post bankruptcy

Inefficiencies:

Six Flags was found by Rob. The PM’s vetted the idea, then agreed that Rob would be the primary analyst performing ongoing due diligence


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Six Flags: Research, Modeling & Position Sizing

Analyzed Financial Disclosures: Last three 10-K’s Last two years’ 10-Q’s 8-K’s and last two proxies

Spoke With: Industry experts Customers/product users Sell side analysts Existing and former shareholders

Strong Relationship w/ Mgmt: Knew CEO and his team from

previous holding

Due Diligence:

Buy and Sell Prices: 2010: $13 - $20* Current: $37 - $49 *Adj for two stock splits

Scenarios: Revenue growth Incremental margins

Buy/Sell Terminal Multiples: 2010: 8.5x to 10.0x Current: 10.5x to 12.0x

Valuation Benchmarks: Competitors:

Cedar Fair: 10.0x M&A transactions:

Sea World IPO: 12.0x

5-Year DCF Model:

Position Size (2/29/16): Initial: 1.5% Current SCV/SMID: 3.0%/3.0%

Investment Strengths: Wise capital redeployment Excellent operators

Weaknesses & Risks: Weather sensitivity NOL depletion

Why Large Position? Confidence in business & mgmt Growth opportunities Valuation: still attractive Trading: liquid

Portfolio Management:


Substantial Growth Opportunities


(1) 2009 Revenue restated to include Six Flags Great Escape Lodge and Indoor Waterpark, which was consolidated beginning January 1, 2010

• Effective execution driving revenue and profit growth

• Improving ticket yields

• Season pass/ membership penetration

• In-park intiatives

• Innovative product/programs

• Long-term strategy to license brand internationally

• Agreements in Middle East and China

• Fees from design & development, licensing and mgmt services

• Zero capital investment

• Innovation: news in every park, every year

• Thrills for all ages:

• Guest-centered attractions

• Mix of family, teen and tween thrills


Ticket Yields


• Higher ticket yields and attendance are primary drivers of growth

• A multi-year plan to improve ticket yields

• Increase ticket prices

• Reduce and fence discounts

• Continue to raise guests’ value-for-the-

money ratings

• Close/surpass pricing gap vs others


Growing Season Passes/Memberships


(1) Introduced membership program in February 2013

• Season pass holders and members:

• Generate more annual revenue and

cash flow than single day visitors

• Build recurring revenue

• Visit during off-peak periods

• Provide weather hedge

• Put downward pressure on per caps



Growing Earnings and Margins


(1) Excludes SFKK as discontinued operation

(2) 2009 Modified EBITDA Margin calculation includes revenue from Six Flags Great Escape Lodge and Indoor Water Park so it is consistent with future periods

Adjusted EBITDA ($MM’s)(1) and Modified EBITDA Margin (1)(2)

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Capital Allocation



(1) As of December 31 for each year except 2015

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Case Study: Ligand Pharmaceuticals

24


Company Overview: Ligand is a biopharmaceutical company with a business model

based upon acquiring royalty generating assets and licensing them to well-funded

development partners, coupled with a lean corporate cost structure.

Four dominant sources of value:

• Royalties

• Material sales (Captisol)

• Portfolio of biological compounds

• Tax assets (NOL’s)

25

Please see the important disclosures at the end of this presentation. 26

Diverse Partner Companies

• Portfolio of 140+ fully-funded partnerships driving future growth

• 70+ partners spent more than $1.8 billion in R&D during 2015 to advance Ligand

programs

Source: Ligand

14 58 38 13 2 Please see the important disclosures at the end of this presentation.

Expansion of Revenue-generating Assets

27 Source: Ligand

Preclinical Phase 1 Phase 2 Phase 3/NDA Phase 4


Diverse Capital Allocation

28 Source: Ligand

Building asset base and increasing returns for investors

• Over last several years, Ligand has deployed capital in the following ways

- Company acquisitions

- Royalty acquisitions

- Share buybacks

- Seed investment in a private drug company (recently IPO’d)

- Investment in drug delivery technologies

• Ligand takes advantage of market knowledge and experience gained

from partnerships to find opportunities to invest and create value within

the biopharma industry


Financial Overview

29 Source: Ligand

• Business model provides tremendous earnings leverage

- Growing total revenues: 33% compound annual growth projected 2015-2017

- Robust margins:

• 2014 gross margins ~86%

• Adjusted cash flow margins ~50%

- Strong earnings growth: 2017 adjusted EPS projected to be >$4.45 (vs $1.52 in 2014)

- Significant tax assets:

• > $500mm in NOLs

• Projected cash tax rate < 5% for next several years

30

Ligand: Idea Generation and Vetting

Previous investment: Originally held 2007-2008

Sources:

Attractive Business Model: Recurring revenue Strong growth prospects Low opex/low capex Large NOLs Small share count Good Management: Strong record & pedigree Disciplined capital allocators 16% ownership Growing FCF: Current: 2% disc FCF yield Enormous incremental FCF

margins

Characteristics:

Perceived To Be: Expensive based on historical

earnings

Investment Opportunities: Accretive acquisitions Share repurchases

Information-based: Complex drug-by-drug valuation Limited analyst coverage

Inefficiencies:

Ligand was a previous Cardinal investment. Management visited our office for an update post-transformation. The PMs vetted the idea, then agreed that Bob would

be the primary analyst performing ongoing due diligence


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Ligand: Research, Modeling & Position Sizing

Analyzed Financial Disclosures: Last three 10-K’s Last two years’ 10-Q’s 8-K’s and last two proxies Public filings of licensing partners Spoke With: Competition (Amgen, Celgene,

Johnson & Johnson) Partners (Retrophin, Spectrum

Pharma) Industry/medical professionals Other analysts Built Relationship w/ Mgmt: Met w/ CEO & COO several times

at our offices and in NYC Attended shareholder conferences

Due Diligence:

Buy and Sell Prices: Original: $55 - $80 Current: $81 - $107

Scenarios: Probablity weighted analysis of

incremental drug launches Conservative modeling

Buy/Sell Terminal Multiples: Drug by drug Discount rate-based/ absolute

rate of return hurdle

Valuation Benchmarks: No real company comparables

5-Year DCF Model:

Position Size (2/29/16): Current SCV: 4.2% Current SMID: 5.1% Investment Strengths: High barriers to entry:

FDA Intellectual property

High growth; high margins Low capital employed

Weaknesses & Risks: FDA approvals Near-term drug concentration

risk

Why Large Position? Confidence in business & mgmt Catalyst: incremental drug

royalties Valuation: attractive Liquidity: moderate



Case Study: Howard Hughes


Howard Hughes Corp

• Developer of master planned communities

and other strategic developments in U.S.

• Spun off after GGP bankruptcy

Strategic Developments:

• 3 Waterway Square Office

• One Ala Moana

• Alameda Plaza

• Allentowne

• Bridges at Mint Hill

• Century Plaza Mall

• Circle T Ranch and Power Center

• Columbia Parcel D

• Cottonwood Mall

• Elk Grove Promenade

• 80% Interest in Fashion Show Air Rights

• Kendall Town Center

• Lakemoor (Volo) Land

• Maui Ranch Land

• Millennium Woodlands Phase II, LLC

• Nouvell at Natick Condominium

• Redlands Promenade

• West Windsor

Master Planned Communities:

• Bridgeland

• Maryland Communities

• Summerlin

• The Woodlands

Retail Operating Assets:

• 20/25 Waterway Avenue Retail

• Cottonwood Square

• Landmark Mall

• Park West

• Rio West Mall

• Riverwalk Marketplace

• South Street Seaport

• Ward Centers

• Waterway Garage Retail

Other Operating Assets:

• 110 N. Wacker

• 4 Waterway Square Office

• 9303 New Trails Office

• 1400 Woodloch Forest

• Arizona 2 Lease

• The Club at Carlton Woods

• Columbia Office Properties

• Golf Courses at Summerlin and TPC Las Vegas*

• 2201 Lake Woodlands Drive

• Millennium Waterway Apartments

• Stewart Title of Montgomery County, TX

• Summerlin Hospital Medical Center

• The Woodlands Parking Garages

• The Woodlands Resort and Conference Center

• Woodlands Sarofim #1

• Hexalon

Source: Howard Hughes Corp

*Participation interest in


Company Overview




Portfolio of Trophy MPCs


(1) Recorded impairment charges of $346 million for Summerlin South and $59 million for the Maryland MPCs in 2010.

35


Increasing NOI

Source: Howard Hughes Corp 36


Unlocking Value

Source: Howard Hughes Corp 37

The Woodlands




Downtown Summerlin


39

South Street Seaport

40 Please see the important disclosures at the end of this presentation. Source: Howard Hughes Corp

Ward Village

41 Please see the important disclosures at the end of this presentation. Source: Howard Hughes Corp

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Howard Hughes: Idea Generation and Vetting

Previous Cardinal Experience:

Newhall Land

Crescent Real Estate

Niche Research:

Compass Point

Sources:

Attractive Business Model:

Entitled land & CRE

Capabilities across spectrum

Limited financial leverage

Partnerships leverage capital

Good Management:

$20M personal investment

10% effective ownership

Significant FCF:

Arises as assets converted

60% of NAV

Characteristics:

Perceived To Be:

Orphan illiquid assets

Investment Opportunities:

Develop unique sites

Additional investments

Information-based:

Spinoff f/ bankrupt company

No conference calls

1 analyst covers

Inefficiencies:

Howard Hughes was sourced by Rob. The PMs vetted the idea and then agreed

that Rob would be the primary analyst performing due diligence.


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Howard Hughes: Research, Modeling & Position Sizing

Analyzed Financial Disclosure:

Last three 10-K’s

Last two year’s 10-Q’s

8-K’s and last 2 proxies

Spoke With:

Competitors (Newhall/Crescent)

Real estate professionals (DLC)

Sell side analyst

Built Mgmt Relationship:

Met CFO & General Counsel

Know MPC head

Site Visits: Woodlands (Houston)

Summerlin (Las Vegas)

Maryland Comm (Columbia)

Due Diligence:

Buy and Sell Prices:

Initial: $77 - 110

Current: $124 - 155

Scenarios:

Development

Capital allocation

Buy/Sell Terminal Multiples:

Initial: 0.8x to 1.2x NAV

Current: 0.8x to 1.0x NAV

Valuation Benchmarks:

Comps at 0.85x NAV

NAV Model:

Position Size (2/29/16:

Current SCV: 2.8%

Current SMID: 3.4%

Investment Strengths:

Prime asset locations

Attractive returns on land sales

and development

Weaknesses & Risks:

Moderate current cash flow

Economic & financing

Why Large Position?

Confidence in assets & mgt.

Catalyst: simplify & develop

Valuation: attractive



Case Study: BWX Technologies

44

BWX Technologies

Company Overview: BWX Technologies is a leading supplier of nuclear components

and fuel to the U.S. government; the company also supplies precision manufactured

components and services for the commercial nuclear power industry.

• BWX Technologies completed a tax-free spin-off of its Power Generation business

July 2015; that portion now trades under the name Babcock and Wilcox.

• The main benefits of the spin-off include:

• Greater management focus on this distinctive business

• Greater alignment with investor base (not wanting to own coal)

Source: BWX Technologies 45 Please see the important disclosures at the end of this presentation.

Nuclear Operations Group

• The Nuclear Operations Group produces ~90% of EBITDA


(1) LTM as of 9/30/15

(2) The government shutdown and delayed budget approvals resulted in certain awards being delayed until the first quarter of 2014.

Source: BWX Technologies

Nuclear Operations Group

47


NOG: US Navy Visibility Through 2040

Source: BWX Technologies. 48 Please see the important disclosures at the end of this presentation.

Technical Services Group (TSG)

TSG: work covers various government agencies with potential for expansion


Nuclear Energy (NE)

NE: primarily a Canadian business with modest growth opportunities over the cycle


Growth Opportunities

• Organic growth strategy: new contract wins in TSG should drive majority of organic

growth driver.

Source: BWX Technologies, Inc. All rights reserved. 51 Please see the important disclosures at the end of this presentation.

• M&A growth strategy: modest additions that do not dilute the highly coveted NOG

segment which investors and potential acquirers assign a high multiple to.

BWX Technologies

• BWXT: Unique assets / Stable Cash flows / Very long-term contracts

Source: BWX Technologies, Inc. All rights reserved. 52 Please see the important disclosures at the end of this presentation.

53

BWX Technology: Idea Generation and Vetting

Small Regional Broker: Followed previously

Announced spin-off provided

opportunity

Sources:

Attractive Business Model: High barriers to entry

Proprietary IP Sole service provider Irreplaceable value-added

service High operating margins: ~19-20% Visibility:

Long-term/evergreen contracts Significant backlog

Economy agnostic Good Management: Shareholder friendly Focus on execution Return cash to shareholders FCF Yield: 2016: 4.6% FCF/EV

Characteristics:

Perceived To Be: Limited growth Problem assets in NOG/TSG

Investment Opportunities: Highly attractive asset to large

U.S. defense companies

Information-based: Misunderstood by sell-side Limited historical coverage

Inefficiencies:

BWXT’s predecessor company was found by Chris. The PMs vetted the idea, then agreed that Chris would be the primary analyst performing ongoing due diligence


54

BWX Technology: Research, Modeling & Position Sizing

Analyzed Financial Disclosures: Last three 10-K’s Last two years’ 10-Q’s 8-K’s and last two proxies Form 10

Spoke With: Existing and former shareholders Sell side analysts

Strong Relationship w/ Mgmt: Met w/ CEO & CFO several times Attended investor conferences Two headquarter visits

Due Diligence:

Buy and Sell Prices: 2014: $31 - $43* Current: $26 - $35 * Prior to Spin

Scenarios: CPI-type growth Two new contract wins Share repurchases

Buy/Sell Terminal Multiples: 2010: 9.5x to 11.0x* Current: 14.5x to 16.0x * Prior to Spin

Valuation Benchmarks: M&A transactions:

Defense company Unique asset

5-Year DCF Model:

Position Size (2/29/16): Current: SCV/SMID: 4.0%

Investment Strengths: Intellectual property High visibility

Weaknesses & Risks: Alternative non-nuclear power

sources within Canada Alternative non-nuclear power

source for submarines/aircraft carriers

Why Large Position? Strategic assets Visibility & growth prospects Valuation: attractive



Cardinal Composite Performance and Disclosures

55

56

*Small Cap Inception Date: July 1, 1992

20-Year Record of Superior Small Cap Performance

Time Period Cardinal

Gross of Fees Cardinal

Net of Fees Russell 2000 Value Index

Relative Gross Performance

1-Year -7.0 -7.6 -13.4 6.4

3-Year 9.2 8.5 4.4 4.8

5-Year 9.4 8.7 5.3 4.1

10-Year 6.6 5.9 4.1 2.5

Inception-to-Date* 13.2 12.3 10.2 3.0

For Periods Ending February 29, 2016

Past performance is not indicative of future results. Please see the important disclosures at the end of this presentation.

57

-15

-10

-5

0

5

10

15

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Cardinal Small Cap Performance In Different Markets

Index Returns > +20 %

Index Returns -10 % to +20%

Index Returns < -10 %

1993 1995 1996 1997 2000 2004 2003 2006 2009

2010 2013

1994 1998 1999 2001 2005 2007 2011 2012 2014

2015

2002 2008 Years Outperformed/

Underperformed

+130 bps +595 bps +80 bps Average Excess Return

Cardinal Annual Excess Return Since Inception - Small Cap

Ex

cess

Re

turn

(%

)


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*Select Value Inception Date: January 1, 2002

SMID Cap Product Family Performance

Time Period Cardinal Select

Value Gross Cardinal Select

Value Net Russell 2500 Value Index


1-Year -11.6 -12.4 -12.1 0.5

3-Year 7.3 6.4 5.7 1.6

5-Year 8.5 7.6 6.9 1.6

10-Year 6.4 5.7 5.3 1.1


Time Period Cardinal

SMID Gross Cardinal SMID Net

Russell 2500 Value Index


1-Year -11.8 -12.1 -12.1 0.3

3-Year 6.4 5.9 5.7 0.7

5-Year 8.5 8.1 6.9 1.6


*SMID Inception Date: April 1, 2010

For Periods Ending February 29, 2016


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What to Remember About Cardinal

Longevity of philosophy, process and people

Fundamental research driven, free cash flow-based value investors

Superior investment performance across products

We own the firm and have invested significant capital in our products


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Disclosures

The information presented herein should not be considered a recommendation to purchase or sell any particular security. The investments presented herein are included merely to provide a general example of Cardinal’s research and investment process. There can be no assurance that any securities discussed herein will remain in a client's portfolio or if sold will not be repurchased. The securities discussed herein do not represent a client’s entire portfolio and in the aggregate may represent only a small percentage of a client’s portfolio holdings. It should not be assumed that any of the securities discussed herein have been or will be profitable, or that investments will be profitable or will equal the investment performance of the securities discussed herein. Current performance may be lower or higher than the performance data quoted. No assurances can be made that profits will be achieved or that substantial losses will not be incurred. Net performance reflects the deduction of advisory fees, which reduce a client’s total return of investment. Gross performance is presented without deduction of advisory fees and expenses. Returns presume investment for the entire period shown and reinvestment of all interest income, capital gains, dividends and other distributions. Performance returns for 2015 are unaudited estimates and have been computed by Cardinal. Depending on the timing of an investor’s investment in the strategy, net performance for such investor may vary from the net performance as stated herein. Past performance is not indicative of future results. In order to obtain a list of portfolio holdings during the periods discussed herein, please contact Cardinal. The sector exposure and portfolio weighting composition discussed herein should not be viewed as an indication that future exposures and weightings will remain the same. The sector exposure and portfolio weighting composition of the strategies are subject to change by Cardinal at any time in its sole discretion without prior notice to investors. The Russell Microcap Index consists of the smallest 1,000 stocks in the Russell 2000 Index plus the next 1,000 smallest eligible stocks by market cap. The Russell Microcap Value Index measures the performance of the microcap value segment of the U.S. equity market. It includes Russell Microcap companies that are considered more value oriented relative to the overall market as defined by Russell's style methodology. The Russell 2000 Index consists of the 2000 smallest stocks in the Russell 3000 Index that represents approximately 10% of the total market capitalization of that index. The Russell 2000 Value Index measures the performance of small-cap value segment of the U.S. equity universe and includes those Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2500™ Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as "smid" cap. The Russell 2500 Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2500 Value Index measures the performance of small to mid-cap value segment of the U.S. equity universe and includes those Russell 2500 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Index represents approximately 31% of the total market capitalization of the Russell 1000 companies. The Russell Midcap Value Index measures the performance of the mid-cap value segment of the U.S. equity universe and includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values. This index is included merely to show the general trend in the mid-cap equity markets in the periods indicated and is not intended to imply that Cardinal's investments were comparable to the index either in composition or element of risk. There is no guarantee that the performance of a Cardinal strategy will meet or exceed any index. An investor cannot invest directly in an index.

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Small Cap Value Composite GIPS® Table Total Total Russell 3-Year 3-Year Total Total Total

Gross Net 2000 Value Number of Composite Composite Russell 2000 Composite Assets Equity Assets Firm Assets

Year/ Return Return Return of Dispersion* Standard Value Standard at End of Period*** at End of Period*** at End of Period***

Period (%) (%) (%) Portfolios (%) Deviation (%) Deviation (%) (USD millions) (USD millions) (USD millions)

6/92-12/92 15.4 14.6 17.3 1 NA NA NA 1 1 153

1993 28.9 27.0 23.8 1 NA NA NA 6 6 433

1994 6.9 5.3 -1.6 1 NA NA NA 18 38 528

1995 28.3 26.5 25.8 4 1.0 NA NA 36 36 149

1996 29.2 27.4 21.4 3 1.0 NA NA 42 43 222

1997 36.4 34.5 31.8 6 0.6 NA NA 64 65 219

1998 4.9 3.9 -6.5 10 2.4 NA NA 171 228 417

1999 -1.2 -2.0 -1.5 21 1.1 NA NA 287 321 485

2000 13.3 12.5 22.8 15 3.7 NA NA 259 280 409

2001** 19.0 18.2 14.1 16 1.2 NA NA 324 346 346

2002 -1.6 -2.4 -11.4 20 1.1 NA NA 342 359 359

2003 34.3 33.3 46.0 21 1.9 NA NA 467 665 665

2004 24.4 23.6 22.3 25 0.3 NA NA 635 1093 1093

2005 13.0 12.3 4.7 25 0.4 NA NA 784 1363 1363

2006 15.8 15.0 23.5 33 0.4 NA NA 951 1670 1670

2007 -2.5 -3.1 -9.8 32 0.5 NA NA 917 1571 1571

2008 -36.1 -36.5 -28.9 28 0.9 NA NA 530 892 892

2009 34.2 33.4 20.6 29 0.6 NA NA 707 1138 1138

2010 25.8 25.0 24.5 24 0.5 NA NA 668 1115 1115

2011 -0.1 -0.6 -5.5 24 0.2 19.0 26.1 595 1184 1184

2012 18.3 17.6 18.1 25 0.2 15.8 19.9 673 1526 1526

2013 35.2 34.3 34.5 23 0.3 13.2 15.6 823 1980 1980

2014 7.6 6.9 4.2 22 0.2 11.1 12.8 1012 1803 1803

6/30/2015 7.2 6.9 0.8 24 --- --- --- 1088 1985 1985*Asset-weighted standard deviation of annual gross returns for accounts that are in the Cardinal Small Cap Value Composite for the full year. **Firm assets prior to September 2001 comprise small cap value equity and high yield bond assets. Subsequent to the lift-out of Cardinal's high yield group by another firm in September 2001, firm assets consist solely of value equity assets. ***Includes cash assets

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Small Cap Value Performance Disclosures 1. Cardinal Capital Management, LLC (“Cardinal” or the “Firm”) is an investment advisor registered with the Securities and Exchange Commission under the Investment

Advisors Act of 1940. Cardinal is a specialty investment firm focused on small and mid cap value equity investing. The Firm strives to generate superior risk-adjusted returns through active management, while serving clients with the highest level of integrity and diligence. Cardinal serves institutions such as pension plan sponsors, public funds and foundations as well as high net worth individuals.

2. On 12/31/2002, the minimum portfolio size for the Cardinal Small Cap Value Equity Composite became $5 million. Prior to 12/31/2002, the minimum was $500,000. 3. Valuations and returns are computed and stated in U.S. dollars. 4. Composite returns are calculated both net and gross of fees. Gross of fees returns are calculated gross of actual management and custodial fees and net of all trading

expenses. Net of fees returns are calculated net of trading expenses and actual management fees and gross of custodial fees. The management fee schedule for the Cardinal Small Cap Value Equity Strategy is:

Separate Accounts First $10 MM: 1.00% Next $15 MM: 0.90% Next $25 MM: 0.85% Next $50 MM: 0.75%

Separately Managed Account Platforms Funds Between $10 MM and $25 MM: 0.90% applied to entire balance Funds Over $25 MM: 0.80% applied to entire balance Commingled Limited Partnership Vehicle Funds under $5 MM: 1.25% applied to entire balance Funds from $5 MM to $10 MM: 1.00% applied to entire balance Funds over $10 MM: 0.85% applied to entire balance

5. Performance for the period prior to April 1995 represents the results of clients’ assets managed by the investment professionals of Cardinal Capital Management while at Deltec Asset Management and employing the same investment style being used by Cardinal Capital Management.

6. The Cardinal Capital Small Cap Value Equity Composite was created in June 2001 and is one of the firm's four composites. A complete description of all composites is available upon request.

7. Cardinal Capital Management, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Cardinal has been independently verified for the periods June 30, 1992 through June 30, 2015. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Small Cap Value composite has been examined for the periods June 30, 1992 through June 30, 2015. The verification and performance examination reports are available upon request. The benchmark returns are not covered by the report of independent verifiers.

8. Returns are calculated gross of withholding taxes on dividends from foreign securities. Cardinal’s strategies are very rarely invested in foreign securities not traded on U.S. exchanges.

9. Policies for valuing portfolios, calculating performance and preparing compliant presentations are also available upon request. 10. Composite description: the Small Cap Value Equity Composite comprises all of the strategy’s accounts under management for at least one month, with the exception of

those with client imposed trading restrictions and those that do not meet the $5 million minimum size requirement. The Small Cap Value Equity Composite adheres to the Firm’s model-driven, free cash flow analysis-based investment style and consists mainly of small cap value stocks. The benchmark is the Russell 2000 Value Index.

63

SMID Cap Value Composite GIPS® Table Gross Net 2500 Value Number of Composite Composite Russell 2500 Composite Assets Equity Assets Firm Assets at

Year/ Return Return Return of Dispersion** Standard Value Standard at End of Period*** at End of Period*** End of Period***

Period (%) (%) (%) Portfolios (%) Deviation (%) Deviation (%) (USD millions) (USD millions) (USD millions)

2002 -5.4 -5.4* -9.9 1 NA NA NA 1 359 359

2003 37.7 37.58* 44.9 1 NA NA NA 115 665 665

2004 26.5 26.1 21.6 4 NA NA NA 238 1093 1093

2005 13.5 13.1 7.7 6 0.3 NA NA 345 1363 1363

2006 15.8 15.2 20.2 6 0.2 NA NA 211 1670 1670

2007 0.8 0.3 -7.3 6 0.2 NA NA 191 1571 1571

2008 -35.7 -36.0 -32.0 5 0.1 NA NA 102 892 892

2009 35.4 34.6 27.7 3 0.2 NA NA 140 1138 1138

2010 22.0 21.3 24.9 3 0.0 NA NA 119 1115 1115

2011 1.7 1.2 -3.4 4 0.3 18.0 24.2 190 1184 1184

2012 19.7 19.2 19.2 7 0.3 15.5 18.4 490 1526 1526

2013 31.2 30.6 33.3 8 0.3 12.9 14.9 546 1980 1980

2014 7.3 6.7 7.1 8 0.1 10.2 11.2 583 1803 1803

06/30/2015 7.2 6.9 1.7 9 --- --- --- 685 1985 1985

*Between 12/31/2001 and 9/30/2003, the composite consisted solely of one non-fee paying portfolio. **Asset-weighted standard deviation of annual gross returns that are in the Cardinal SMID Cap Value Composite for the full year. ***Includes cash assets

64

SMID Cap Value Performance Disclosures 1. Cardinal Capital Management, LLC (“Cardinal” or the “Firm”) is an investment advisor registered with the Securities and Exchange Commission under the

Investment Advisors Act of 1940. Cardinal is a specialty investment firm focused on small and mid cap value equity investing. The Firm strives to generate superior risk-adjusted returns through active management, while serving clients with the highest level of integrity and diligence. Cardinal serves institutions such as pension plan sponsors, public funds and foundations as well as high net worth individuals.

2. As of 9/30/2003, the minimum portfolio size for the Cardinal Capital Small-to-Mid (SMID) Cap Value Equity Composite is $5 million. Prior to 9/30/2003, the minimum was $500,000.

3. Valuations and returns are computed and stated in U.S. Dollars. 4. Between 11/30/2001 and 9/30/2003, the composite consisted solely of one non-fee paying portfolio, and as such, returns were only calculated gross of fees. As of

9/30/2003, composite returns are calculated both net and gross of fees. Gross of fees returns are calculated gross of actual management and custodial fees and net of all trading expenses. Net of fees returns are calculated net of trading expenses and actual management fees and gross of custodial fees. The separate accounts management fee schedule is:

First $10 MM: 1.00% Next $15 MM: 0.85% Next $25 MM: 0.80% Next $50 MM: 0.70%

5. The Cardinal Capital SMID Cap Value Equity Composite was created in October 2003 and is one of the firm's four composites. A complete list and description of the firm’s composites are available upon request.

6. Cardinal Capital Management, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Cardinal has been independently verified for the periods June 30, 1992 through June 30, 2015. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The SMID Cap Value composite has been examined for the periods December 31, 2001 through June 30, 2015. The verification and performance examination reports are available upon request. The benchmark returns are not covered by the report of independent verifiers.

7. Returns are calculated gross of withholdings taxes on dividends from foreign securities. Cardinal’s strategies are very rarely invested in foreign securities not traded on U.S. exchanges.

8. Policies for valuing portfolios, calculating performance and preparing compliant presentations are also available upon request. 9. Composite description: the SMID Cap Value Equity Composite comprises all of the strategy’s accounts under management for at least one month, with the exception

of those with client imposed trading restrictions and those that do not meet the $5 million minimum size requirement. The SMID Cap Value Equity Composite adheres to Firm’s model-driven, free cash flow analysis-based investment style and consists mainly of small and mid cap value stocks. The benchmark is the Russell 2500 Value Index.

10. In 2012, the name of this composite changed from Small-to-Mid Cap Value to SMID Cap Value. The performance and composite assets changed materially in 2010 as a result of a change in the characteristics of the composite from Small-to-Mid to SMID and the corresponding changes in market cap ranges.

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Four Greenwich Office Park Greenwich, Connecticut 06831 Telephone: 203-863-8990 Fax: 203-861-4112

www.cardcap.com

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