Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Baird Perspective on Uniform Industry: Good News


Published on

Robert W Baird is the premier financial institution tracking the uniform market. Here is their May Perspective on the outlook for uniform market and the industries we serve. It's good news!

Special thanks to Andrew Wittmann at Baird for allowing us to post.

Published in: Lifestyle
  • Be the first to comment

  • Be the first to like this

Baird Perspective on Uniform Industry: Good News

  1. 1. Business Services ResearchJune 3, 2011Facility ServicesUniform Wearer Growth Remains Better Than Broader National EmploymentTrendsAndrew J. Wittmann, CFA Despite headline disappointment in the May BLS data, strong growth in414.298.1898 uniform-wearing employment continues, with year-over-year growth ratesJustin P Hauke . more than double the broader economy. We note that uniform-wearing were slow to post employment gains earlier this cycle and have only recently begun312.609.5485 adding headcount. Thus, we continue to see upside in uniform rental stocks as incremental wearers boost utilization rates, with recent commodity price declines providing additional support for earnings.Please refer to SummaryAppendix - Important • May employment disappoints but shouldnt be a surprise. Total nonfarmDisclosures and payrolls increased by 54,000, well below expectations of +165,000 and consistentAnalyst Certification. with similar disappointing employment-related reports in recent weeks. - Unemployment rate rose to 9.1% (versus the 8.9% consensus). Positively, the spike in the unemployment rate was driven primarily by a surge in labor market entrants (a positive). • Bairds Add/Stop Index specific to uniform rental-related employment remains healthy, but more modest than recent gains, increasing +26,000. - Importantly, YOY job growth related to uniform wearers is increasing at more than twice the rate of the economy as a whole and is now at its highest level since 2006, a crucial point underpinning our positive view on uniform stocks. - Nonetheless, we note that May gains were below the +50,000-80,000 gains in recent months. • Macroeconomy likely still constructive for uniform rental stocks but recent deceleration is disappointing. Our checks suggest moderating price competition in uniform rental (some markets are even increasing), and anecdotal commentary suggests uniform companies are beginning to see high-margin positive add/stops in their business. - In addition, recent declines in commodity cost pressures (especially cotton) should provide additional support beyond fixed cost leverage. • G&K (Outperform): We believe Street estimates, broadly, underappreciate GKSRs underlying earnings growth potential from even modest top-line growth. Combined with solid progress on the turn-around strategy, solid cash flow, and a likely increase in return of capital to shareholders, we see relative upside to the stock. • Cintas (Outperform): Top-line momentum has accelerated, driving margin and earnings leverage as previous investments in sales staff are paying off. In addition, we believe last months $500M bond offering could provide meaningful accretion if deployed and we are encouraged by recent efforts to expand the company’s higher-growth hygiene/chemicals business through strategic partnerships with established industry suppliers (e.g., Diversey). • UniFirst (Neutral): UniFirst continues to execute admirably, above peer levels. However, we believe expectations for strong execution are largely priced into the stock, increasing the risk, though we do see modest upside to shares.
  2. 2. Facility ServicesJune 3, 2011Details Remain Positive on Uniform Rental Stocks Despite Disappointing Headline Employment Report Despite headline disappointment in the May BLS data, strong growth rates in uniform-wearing employment continues (and is accelerating), with growth rates more than double that of the broader economy. We note that uniform-wearing industries were slow to post employment gains earlier this cycle and have only recently begun adding headcount. Indeed, job growth in uniform-related wearers is now increasing at more than twice the rate of the economy as a whole and is now at its highest level since 2006, a crucial point underpinning our positive view on uniform stocks. The figure below demonstrates this dynamic, a point that we stress is not reflected in a cursory view of the data. Baird Add/Stop Index (YOY Change) 3.00% 2.00% BLS Employment 1.00% Baird Add/Stop Index 0.00% -1.00% -2.00% -3.00% -4.00% -5.00% Growth in Baird Add/Stop -6.00% Index employment is outpacing total NFP -7.00% employment - first time since early 2007 -8.00% Jan-07 Mar-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-07 May-08 May-09 May-10 May-11 Source: Bureau of Labor Statistics and Baird Research Thus we continue to see upside in uniform rental stocks as incremental wearers at existing rental accounts boost utilization rates, generating highly profitable incremental margins, with recent commodity price declines providing additional support for earnings. Indeed, cotton prices have declined 23% since their March peak, a statistic which we believe is unlikely reflected in most Street estimates. 2Robert W. Baird & Co.
  3. 3. Facility ServicesJune 3, 2011 U.S. Cotton Prices, spot ($/lb) $2.50 160% U.S. Cotton (spot), $/lb 140% U.S. Cotton (Spot), YOY (right) $2.00 120% 100% $1.50 80% 60% $1.00 40% 20% $0.50 0% -20% $0.00 -40% 2006 2007 2008 2009 2010 2011 Source: FactSet Research Systems Perhaps more importantly, we believe the significant operating leverage inherent in the businesses can well-offset input cost pressures in even a modest labor market recovery. We believe significant excess capacity remains at the public uniform companies which should provide opportunity to improve fixed asset utilization rates as employment further improves (even modestly). We also note that recent employment momentum has been slow to materialize in organic growth rates so far. To date, organic growth has been led by lower-margin new account gains and service additions rather than by higher-margin additions to existing accounts. We believe the labor data since February could potentially provide the next leg in earnings growth for the uniform stocks and we have begun to hear anecdotal commentary suggesting improvement in add/stop (i.e., additions at existing accounts) rates. However, if employment growth continues to decelerate, we could turn more cautious in our recommendation. Historically, the uniform sector has been an effective way to invest in early-cycle stocks (the stocks historically bottom 12 months before an employment inflection) or to play an expanding economy (stocks also tend to outperform mid to late cycle when the rate of job growth is higher). Indeed, until recently, stock performance at the uniform rental companies had lagged as the economy moved into more advanced stages of the recovery, following strong outperformance in the stocks prior to the August 2009 employment bottom, confirming the stocks early-cycle nature. However, since February the market has generally been positively surprised with the monthly jobs numbers (with the exception of this months disappointing release). This phenomenon has historically allowed for uniform stock outperformance for a period of roughly 13-24 months. For perspective, current cycle employment bottomed in September 2009 (19 months ago). (Note: Past performance is no guarantee of future results.) 3Robert W. Baird & Co.
  4. 4. Facility ServicesJune 3, 2011 Uniform Stock Performance One-Month Percentage Price Change YTD Percentage Price Change C intas C intas U n iFirs t S & P 500 U n iform Ind e x U niform Ind ex S & P 500 G & K S ervices G & K S e rv ic es U n iFirs t -8% -6% -4% -2 % 0% 2% 4% -10 % -5% 0% 5% 10% 1 5% 20% Three-Month Percentage Price Change Trailing 12 Months Percentage Price Change C in tas G & K S ervic es U niform Inde x C in tas S & P 500 U niform Index G & K S e rv ic es S & P 500 U niFirst U niFirs t -1 0% -5% 0% 5% 10 % 15% 20% 0% 5% 1 0% 15% 20% 25% 30% 35 % Source: FactSet Research Systems Indeed, now that we are seeing consistent employment gains within uniform-wearing sectors, we believe uniform rental companies have become a more compelling investment (and, indeed, offer lower beta exposure to broader macroeconomic headwinds given the businesses recurring revenue stream and solid free cash flow generation). The YTD share performance at in particular (the largest, and most liquid of the uniform rental stocks), suggests to us that the late cycle thesis in the uniform stocks may be gaining momentum, providing conviction in our Outperform rating in those stocks. We also note that valuation multiples for the group appear to have stabilized, particularly at (now posting modest expansion), following several years of decline, which we believe suggests moderate upside now that employment growth rates are improving within our Add/Stop Index. We also believe that should trade at a premium to the group, which we believe is justified by the companys outsized earnings growth potential versus peers resulting from its on-going turnaround strategy focused on improving margins to peer-levels. trades at a discount to peers, which we believe reflects a dual-class share structure and limited float, but is consistent with its historical average (indeed, a slight premium on an earnings basis), which we believe captures s strong recent execution, balanced by emerging company-specific margin pressures from inventory . Uniform Industry Valuation Price Price Target Rating EV/EBITDA, ftm P/E Company Ticker FTM AVG FTM AVG Cintas CTAS $31.99 $35 O 7.9x 9.0x 17.5x 18.7x G&K Services GKSR $31.10 $40 O 7.3x 8.2x 16.0x 17.1x UniFirst UNF $51.48 $60 N 5.7x 5.8x 14.1x 13.6x Average: 7.0x 7.7x 15.9x 16.5x As of 06/03/2011 Source: FactSet Research Systems and Baird estimates 4Robert W. Baird & Co.
  5. 5. Facility ServicesJune 3, 2011 May Employment Report Disappoints, Consistent with Recent Derivative Data Total nonfarm payrolls increased by 54,000 in May, well below expectations of +165,000 and consistent with similar disappointing employment-related reports in recent weeks (in other words, the report was not surprising, but confirmatory). Private sector payrolls also retreated, posting a +83,000 gain, well below the +251,000 gain in April, which was the largest single month gain in the report since February 2006. Furthermore, economists predict seasonally lower employment gains in the data in 2H11, as the BLS birth/death adjustment factor (an adjustment to the data to reflect small firms not captured in the survey data) is expected to be more modest in 2H11. Forward-looking employment indicators, however, suggest stability, with total average hours worked holding constant at 34.3 hours in May (essentially constant since February). The private employment diffusion index also declined to 53.6 (from 65.0 in April). Note, however that a reading above 50 indicates sequential improvement in the data. Thus, while the lower sequential reading indicates that employment acceleration has slowed, overall growth rates remain positive (and the outlook stable). Baird Add/Stop Index Growth Outpacing Broader Employment Gains Despite Disappointing Headline Data Bairds Add/Stop Index specific to uniform rental-related employment remains generally healthy; however, we saw more modest gains this month with our Index increasing +26,000. The May gains were below the +50,000-80,000 gains we have seen in recent months; however, the general trend in the data remains positive, with average year-to-date employment gains in 2011 consistent with previous cyclical averages of +65,000 and +54,000 (see figure below). Baird Add/Stop Index 4% 200 2011 Average = 62k Average = 65k Average = 54k 2% 100 0% 0 -2% (100) Cycle Average = 38k -4% (200) -6% Baird Add/Stop Indicator Monthly Job Gains/Losses (000), right (300) Baird Add/Stop Indicator YOY Growth Rate, left -8% (400) 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Bureau of Labor Statistics and Baird Research In addition, we note that the YOY growth rate in Add/Stop employment categories continues to outpace the broader economy for the first time since late 2006/early 2007 (and is now more than double the rate of general economic growth). This is a critical element of the data as uniform employment has lagged broader employment categories throughout the recovery until recently (indeed, until February 2011). April Add/Stop employment increased 1.6% YOY versus the just 0.7% YOY gain in total non-farm payroll employment, which is a key reason why we remain constructive on the uniform stocks. 5Robert W. Baird & Co.
  6. 6. Facility ServicesJune 3, 2011 Employment gains were also positive across most sectors within our Add/Stop Index with the exception of construction and repair and maintenance, both of which have been drags to the data over the past several months. Gains were particularly concentrated within the Food Services and Drinking Places industry (similar to last month) which has been a key theme throughout this recovery (we believe this has also aided Direct Sale purchases at the uniform rental companies). We also think that gains in Food Services and Drinking Places should benefit many of the uniform rental companies ancillary offerings, such as chemicals, hygiene products, shop towels and linens. For perspective, ancillary offerings at the uniform rental companies encompass roughly 50% of total rental revenue and are meaningful parts of the overall business, though garment rental is still the largest individual category. The figure below shows the absolute job gains/losses within several of the primary uniform-wearing industries comprising our Index over the last month. Baird Add/Stop Index Component Industries: 1-Month Employment Change (000s) Specialty Trade Contractors (7) Repair and Maintenance (6) W holesale Trade - Nondurable Goods (1) Gasoline Stations (1) Chemicals 0 W holesale Trade - Durable Goods 2 Truck Transportation 2 Fabricated Metal Products 3 Machinery 4 Food and Beverage Stores 5 Motor Vehicle and Parts Dealers 6 Food Manufacturing 7 Food Services and Drinking Places 14 1-month Employment Change (000s) Source: Bureau of Labor Statistics and Baird Research Recent Derivative Employment Data Has Been Similarly Disappointing Similar to this mornings BLS report, employment data over the past few weeks has been generally disappointing, indicating slowing momentum and still-elevated new jobless claims. For example, this week’s ADP employment report indicated net job growth of just 38,000 in May, well below expectations (+180,000) and a reduction from average gains of ~200,000 since December. Recall that the ADP report tracks employment gains/losses in the U.S. private sector only. 6Robert W. Baird & Co.
  7. 7. Facility ServicesJune 3, 2011 Total Nonfarm Private Payrolls, by Firm Size 400 117,000 200 115,000 - 113,000 (200) 111,000 (400) Large (499+) Medium (50-499) 109,000 (600) Small (1-49) Total Employment, millions (right) 107,000 (800) (1,000) 105,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: ADP Employment Report Goods-producing sectors (greater uniform customer exposure) also moderated, posting their first decline since October 2010, falling by 10,000. Job growth in the service-producing sector also moderated significantly, increasing 48,000 in May versus a gain of 141,000 in April (and +165,000 in March). Job gains in May continue to be concentrated among small (1-49 employees) and medium (50-499 employees) firms with large firms posting a modest decline. Initial jobless claims remain elevated with the 4-week moving average still above the key 400,000 level this month, which is viewed as indicative of sustainable job growth. Furthermore, claims have generally overshot expectations, which is concerning. Still, initial jobless claims are 34% below their prior cycle peak of 658,750 in March 2009 and did post a modest sequential over the past month (see figure below). Initial Jobless Claims 700,000 Initial Jobless Claims (4-wk MA) 650,000 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Note: The solid red line indicates the level of jobless claims historically associated with net employment growth Source: U.S. Department of Labor, Bureau of Labor Statistics Continuing jobless claims held steady in May (despite the increase in the unemployment rate), with the 4-week moving average increasing modestly from 3.727 million at the end of April to 3.737 million currently. This week’s continuing claims decreased by 1,000, suggesting little change in structural unemployment rates. 7Robert W. Baird & Co.
  8. 8. Facility ServicesJune 3, 2011 Continuing Jobless Claims 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Jan-67 Jan-72 Jan-77 Jan-82 Jan-87 Jan-92 Jan-97 Jan-02 Jan-07 Source: U.S. Department of Labor, Bureau of Labor Statistics The unemployment rate (which is based on a separate survey) increased 10 bps sequentially to 9.1% in May (versus expectations that the unemployment rate would decline to 8.9%), though we note can be viewed positively, as the increase was accompanied by an increase in the labor force--potentially indicating better job prospects. Indeed, 272,000 people entered the labor force in May, the highest monthly increase since August 2010. The U-6 unemployment rate (which includes involuntary part-time employment and discouraged workers – i.e., unemployed workers who have ceased looking for employment) also declined by 10 bps in May to 15.8%, and has steadily declined from a rate of 17% in November 2010. Despite recent employment gains, the unemployment rate remains well above the previous cyclical peaks of 6.3% in June 2003 and 7.8% in June 1992. Eventually, declines from this high unemployment rate will be a large opportunity for the uniform companies, in our view. Civilian Unemployment Rate (persons 16 years of age and older) 12 10 8 6 4 2 0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Note: The solid grey bars indicate recessions, as determined by the National Bureau of Economic Research Source: U.S. Department of Labor, Bureau of Labor Statistics Uniform Stock Investment Perspectives • We rate G&K Services (-$31.10; $40 price target) at Outperform. We believe Street estimates, broadly, GKSRs underlying earnings growth potential from even modest 8Robert W. Baird & Co.
  9. 9. Facility ServicesJune 3, 2011 top-line growth. Furthermore, G&K reported better-than-expected F3Q11 earnings in May, driven by strong top-line results (above our estimate) and much better-than-expected margin expansion. Investors are gaining confidence in managements targeted “10/10” plan to achieve 10% operating margins and ROIC by F2014, which should unlock material value creation over the next several years. Combined with solid cash flow, and a likely increase in return of capital to shareholders (likely through a dividend increase later this summer), we see relative upside to the stock. Against this backdrop, we continue to believe investors are best served by taking a multi-year look at GKSR’s ability to create value by bridging the profitability gap versus peers over time. In addition, we believe outsized earnings growth potential at GKSR relative to peers continues to justify a growth multiple for the stock. Our $40 price target is supported by our DCF analysis which incorporates management’s long-term profitability targets and by the application of an 8.0x forward EV/EBITDA (in line with the stock’s historical average multiple of 8.2x and a slight premium to peers and consistent with what we see as above-average earnings growth potential). Our price target also implies a 17.9x NTM P/E. Risks to our price target include a highly competitive industry, employment trends, energy price fluctuations and acquisition integration. • We rate Cintas (CTAS-$31.66; $35 price target) at Outperform. Top-line momentum has accelerated, driving margin and earnings leverage as previous investments in sales staff have begun to pay off. Although rising commodity costs remain a source of caution (though have recently declined), with broad-based top-line improvement, increasing capital allocation towards M&A, and moderating pricing pressure, we believe CTAS offers lower-risk leverage to a slowly improving employment market. In addition, we believe a $500M bond offering in May 2011 could also provide meaningful accretion (we estimate up to $0.12 in F2012) from share repurchases or other capital deployments and we are encouraged by recent efforts to expand the company’s higher-growth hygiene/chemicals business through strategic partnerships with established industry suppliers (e.g., Diversey). Our $35 price target assumes modest (essentially flat) multiple expansion to 7.7x FTM EBITDA, below the company’s historical average of 9.2x but which we believe more fully reflects the industry’s challenging fundamentals and a slower growth rate, with downside supported by the company’s $500M share repurchase authorization. We also see upside to our price target to the extent CTAS can deploy its balance sheet toward additional accretive opportunities. Risks include a highly competitive market, employment trends, energy and scrap paper price fluctuations. • We rate UniFirst (UNF-$51.10; $60 price target) at Neutral. UniFirst continues to execute at a very high level, which we believe was well appreciated by the market throughout the downturn. However, with margin pressures building from (still high) commodity costs and the companys inventory cycle versus peers providing a counterbalance to cyclical tailwinds at GKSR/CTAS, we view risk/reward as balanced. That being said, we do see modest upside to the stock. Our $60 price target assumes modest multiple expansion to 6.1x FTM EBITDA, a modest premium to the stock’s 5.8x average and current levels, recognizing the improving investment landscape and UNFs recent performance versus peers but balanced by what we see as emerging risk. Risks include a highly competitive industry, employment trends, energy price fluctuations, acquisition integration risks, and 10:1 super-voting insider shares. 9Robert W. Baird & Co.
  10. 10. Facility ServicesJune 3, 2011Appendix - Important Disclosures and Analyst Certification Rating and Price Target History for: Cintas Corporation (CTAS) as of 06-02-2011 07/16/08 09/19/08 12/18/08 12/22/08 06/01/09 09/23/09 12/23/09 02/17/10 07/21/10 09/22/10 12/22/10 O:$36 O:$37 O:$35 O:$31 N:$27 U:$28 U:$26 U:$22 N:$28 N:$30 N:$32 35 30 25 20 15 10 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 2009 2010 2011 03/14/11 03/23/11 O:$34 O:$35 Created by BlueMatrix Rating and Price Target History for: G&K Services, Inc. (GKSR) as of 06-02-2011 08/13/08 10/07/08 10/29/08 12/18/08 04/29/09 06/01/09 08/07/09 09/23/09 10/28/09 01/27/10 04/28/10 N:$36 N:$32 N:$23 N:$21 N:$26 N:$22 N:$21 U:$21 N:$23 N:$26 N:$28 40 32 24 16 8 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 2009 2010 2011 06/15/10 08/18/10 11/02/10 01/19/11 02/02/11 05/03/11 N:$23 N:$24 N:$30 O:$37 O:$38 O:$40 Created by BlueMatrix 10Robert W. Baird & Co.
  11. 11. Facility ServicesJune 3, 2011 Rating and Price Target History for: UniFirst Corporation (UNF) as of 06-02-2011 07/03/08 10/30/08 06/01/09 06/02/09 07/02/09 09/23/09 10/29/09 01/07/10 04/01/10 07/01/10 10/20/10 N:$53 O:$38 N:$37 N:$36 N:$39 U:$42 U:$43 O:$59 O:$60 O:$51 O:$54 60 50 40 30 20 10 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 2009 2010 2011 01/05/11 01/19/11 03/30/11 O:$57 N:$58 N:$60 Created by BlueMatrix1 Robert W. Baird & Co. Incorporated makes a market in the securities of CTAS, GKSR and UNF .Robert W. Baird & Co. Incorporated and/or its affiliates expect to receive or intend to seek investment bankingrelated compensation from the company or companies mentioned in this report within the next three months.Investment Ratings: Outperform (O) - Expected to outperform on a total return, risk-adjusted basis the broaderU.S. equity market over the next 12 months. Neutral (N) - Expected to perform in line with the broader U.S. equitymarket over the next 12 months. Underperform (U) - Expected to underperform on a total return, risk-adjustedbasis the broader U.S. equity market over the next 12 months.Risk Ratings: L - Lower Risk - Higher-quality companies for investors seeking capital appreciation or income withan emphasis on safety. Company characteristics may include: stable earnings, conservative balance sheets, andan established history of revenue and earnings. A - Average Risk - Growth situations for investors seeking capitalappreciation with an emphasis on safety. Company characteristics may include: moderate volatility, modestbalance-sheet leverage, and stable patterns of revenue and earnings. H - Higher Risk - Higher-growth situationsappropriate for investors seeking capital appreciation with the acceptance of risk. Company characteristics mayinclude: higher balance-sheet leverage, dynamic business environments, and higher levels of earnings and pricevolatility. S - Speculative Risk - High-growth situations appropriate only for investors willing to accept a highdegree of volatility and risk. Company characteristics may include: unpredictable earnings, small capitalization,aggressive growth strategies, rapidly changing market dynamics, high leverage, extreme price volatility andunknown competitive challenges.Valuation, Ratings and Risks. The recommendation and price target contained within this report are based on atime horizon of 12 months but there is no guarantee the objective will be achieved within the specified time horizon.Price targets are determined by a subjective review of fundamental and/or quantitative factors of the issuer, itsindustry, and the security type. A variety of methods may be used to determine the value of a security including,but not limited to, discounted cash flow, earnings multiples, peer group comparisons, and sum of the parts. Overallmarket risk, interest rate risk, and general economic risks impact all securities. Specific information regarding theprice target and recommendation is provided in the text of our most recent research report.Distribution of Investment Ratings. As of May 31, 2011, Baird U.S. Equity Research covered 657 companies,with 52% rated Outperform/Buy, 47% rated Neutral/Hold and 1% rated Underperform/Sell. Within these ratingcategories, 12% of Outperform/Buy-rated, and 6% of Neutral/Hold-rated companies have compensated Baird forinvestment banking services in the past 12 months and/or Baird managed or co-managed a public offering ofsecurities for these companies in the past 12 months.Analyst Compensation. Analyst compensation is based on: 1) The correlation between the analystsrecommendations and stock price performance; 2) Ratings and direct feedback from our investing clients, oursales force and from independent rating services; and 3) The analysts productivity, including the quality of theanalysts research and the analysts contribution to the growth and development of our overall research effort. Thiscompensation criteria and actual compensation is reviewed and approved on an annual basis by Bairds ResearchOversight Committee. Analyst compensation is derived from all revenue sources of the firm, including revenuesfrom investment banking. Baird does not compensate research analysts based on specific investment bankingtransactions.A complete listing of all companies covered by Baird U.S. Equity Research and applicable researchdisclosures can be accessed at . 11Robert W. Baird & Co.
  12. 12. Facility ServicesJune 3, 2011You can also call 1-800-792-2473 or write: Robert W. Baird & Co., Equity Research, 24th Floor, 777 E. WisconsinAvenue, Milwaukee, WI 53202.Analyst Certification. The senior research analyst(s) certifies that the views expressed in this research reportand/or financial model accurately reflect such senior analysts personal views about the subject securities orissuers and that no part of his or her compensation was, is, or will be directly or indirectly related to the specificrecommendations or views contained in the research report.DisclaimersBaird prohibits analysts from owning stock in companies they cover.This is not a complete analysis of every material fact regarding any company, industry or security. The opinionsexpressed here reflect our judgment at this date and are subject to change. The information has been obtainedfrom sources we consider to be reliable, but we cannot guarantee the accuracy.ADDITIONAL INFORMATION ON COMPANIES MENTIONED HEREIN IS AVAILABLE UPON REQUESTThe Dow Jones Industrial Average, S&P 500, S&P 400 and Russell 2000 are unmanaged common stock indicesused to measure and report performance of various sectors of the stock market; direct investment in indices is notavailable.Baird is exempt from the requirement to hold an Australian financial services license. Baird is regulated by theUnited States Securities and Exchange Commission, FINRA, and various other self-regulatory organizations andthose laws and regulations may differ from Australian laws. This report has been prepared in accordance with thelaws and regulations governing United States broker-dealers and not Australian laws.Copyright 2011 Robert W. Baird & Co. IncorporatedOther DisclosuresUK disclosure requirements for the purpose of distributing this research into the UK and other countries for whichRobert W. Baird Limited holds an ISD passport.This report is for distribution into the United Kingdom only to persons who fall within Article 19 or Article 49(2) ofthe Financial Services and Markets Act 2000 (financial promotion) order 2001 being persons who are investmentprofessionals and may not be distributed to private clients. Issued in the United Kingdom by Robert W. BairdLimited, which has offices at Mint House 77 Mansell Street, London, E1 8AF and is a company authorized and ,regulated by the Financial Services Authority. For the purposes of the Financial Services Authority requirements,this investment research report is classified as objective.Robert W. Baird Limited ("RWBL") is exempt from the requirement to hold an Australian financial services license.RWBL is regulated by the Financial Services Authority ("FSA") under UK laws and those laws may differ fromAustralian laws. This document has been prepared in accordance with FSA requirements and not Australian laws.Ask the analyst a question Click here to unsubscribe 12Robert W. Baird & Co.