Automotive Markets Report

Industrial Research
March 2012
Global Auto & Truck Markets

Cruisin
Road Map to the Auto & Truck Markets
DAVID LEIKER, CFA

Senior Analyst
dleiker@rwbaird.com
414.298.7535
JOE VRUWINK
Research Analyst
jvruwink@rwbaird.com
414.298.5934
JARED PLOTZ
Research Analyst
jplotz@rwbaird.com
414.298.7351
Please Refer to Appendix Important Disclosures

and Analyst Certification
10R.9
Table of Contents
Automotive Market Commentary ...................................................................................................................................................... 1
Commercial Vehicle Market Commentary ......................................................................................................................................... 20
Company Recommendations ........................................................................................................................................................ 30
Auto Supplier Performance - Relative to S&P 500

Six-Month Performance
Source:
FactSet,
Baird estimates
Indexed
Price Performance
Price (Indexed to 100)
110
Baird Auto Coverage

S&P 500
Baird Daily Commercial Vehicle Index Relative to S&P 500

Six-Month Performance
Indexed Price Performance
Baird Truck OEM/Supplier Coverage
S&P 500
110
100
100
90
90
80
80
70
70
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Aug
Sep
Oct
Nov
Dec
Source: FactSet Prices
Jan
Feb
Two-Year Performance
Two-Year Performance

Baird Auto Coverage
S&P 500
180

Baird Truck OEM/Supplier Coverage
S&P 500
200
160
175
140
150
120
125
100
80
4/10
7/10
10/10
1/11
4/11
7/11
10/11
1/12
100
4/10
7/10
10/10
1/11
4/11
7/11
10/11
1/12
All stock prices are as of Friday, February 24, 2012 unless otherwise noted.
Automotive Markets
Recent Trends - Automotive
Regional Auto Sales Quarterly Change
Developed Markets Still Below Peak Demand

25,000
80%
125%
AboveLastCyclePeak
Q1 Automotive Macro Assumptions

USLVSales
DomesticBrands
ForeignBrands
Dom.Mkt.Share
Annualized(inmillions)
NAProductionSchedules:
GM
Ford
Chrysler
DomesticOEMs
Toyota
Honda
Nissan
Others
ForeignOEMs
Total
Annualized
VehicleMix
CarMix
TruckMix
WestEuropeSales
EuropeanBuild
RestofWorldSales
ChinaSales
RestofWorldBuild
Currency(vs.US$)
Euro
Pound
Yuan
Real
DollarIndex
Q12012(Y/YChg)
RWBEst.
Actual*
2%
11%
(2%)
7%
5%
15%
42.9%
44.0%
13.0
14.1
2%
8%
(4%)
3%
1%
5%
5%
24%
10%
6%
13.6
8%
3%
18%
9%
18%
11%
10%
24%
17%
12%
14.5
6%
6%
(5%)
0%
22%
6%
(8%)
(1%)
(5%)
0%
(24%)**
(5%)
(1%)
(1%)
4%
(6%)
1%
40%
20,000
Q1-12E
Q1-12E
Q1-12E
Q1-12E
15,000
75%
10,000
50%
5,000
25%
0%
US
NorthAmerica
WesternEurope
2008
2009
2010
China
2011E
North
America
Japan
Korea
Asia
Germany France
UK
Italy
Spain
Western
Europe
%of20002008Peak
Source: Wards, ACEA, JAMA, KAMA, Baird estimates
European Auto Sales (In Units)
(SAAR in millions)
2010A SAAR=
11.5million
2009ASAAR=
10.4million
Canada
Series1
2012E
US Light Vehicle Sales (SAAR)

2008ASAAR=
13.2million
Mexico
Global
Source: ACEA, JD Power, JAMA, KAMA, Wards, Baird estimates.
16
0%
(40%)
2011A SAAR
=12.7million
2012E SAAR=
13.5million
(units in millions)
2008AQTR AVG
=3.8million
2009A QTRAVG
=4.0million
2010A QTRAVG
=3.9million
2011A QTRAVG
=3.8million
2012E QTRAVG
=3.6million
12
4
8
2
4
0
Q108
Q308
Q109
Q309
Q110
Retail
Fleet
Q310
Q111
Q311
2012E
Q108
Q308
Q109
Q309
Q110
Q310
Q111
Q311
2012E
C4C
Source: Wards, Baird estimates.
Source: Wards Automotive, FactSet, Baird estimates

*Data through January
**Sales distorted due to Chinese Lunar New Year
100%
BelowLastCycle
Source: ACEA, Baird estimates.
Change in NA Production Schedules
US Inventory Excess/Shortage (by Month)
20
3,000
1,800
2,000
1,200
17
1,000
600
14
(in millions)
CurrentQ1
ProductionSchedule
CurrentQ1
estimate
11
Excess Inventory
(600)
Dec-85 Dec-87 Dec-89 Dec-91 Dec-93 Dec-95 Dec-97 Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11
8
Dec-09
Excess
Shortage
3 Month Average (left)
Robert W. Baird & Co.
Global Auto & Truck Markets March 2012
Feb-10
Q1-10
Apr-10
Q2-10
Jun-10
Aug-10
Q3-10
Oct-10
Q4-10
Dec-10
Q1-11
Feb-11
Q2-11
Apr-11
Jun-11
Q3-11
Aug-11
Q4-11
Oct-11
Q1-12
Dec-11
Feb-12
Q1 Estimate
Page 1
Automotive Markets
Stock Performance - Auto
Auto Supplier Index QTR Relative Performance
Auto Supplier Index Relative Performance
2011 Performance
80%
Dec-1970 = 100
200
AverageUp Cycle+129%
AverageDownCycle61%
GNTX
40%
150
S&P500
BWA
S&PIndustrials
0%
100
HAR
JCI
SUP
40%
50
Median
AXL
Average
80%
0
Dec-70
TEN
DAN
Dec-75
Dec-80
ALV
Dec-85
Dec-90
Dec-95
Recession/Soft Landing
MGA
MEI
STRT
60%
45%
30%
15%
0%
Dec-00
Dec-05
1990
Dec-10
1993
1996
1999
2002
2005
2008
2011
OEM Suppliers vs. S&P 500
Source: FactSet, Baird estimates.
Baird Supplier Index Up Cycles vs. S&P 500
Typical Absolute Cycle Performance

800
Source: FactSet, Baird estimates
400
2012 First-QTD Performance
300
Total Price Appreciation
Dec-74 to Aug-78
Expected
Appreciation to 20132014
600
Oct-90 to Jan-94
MGA
DAN
200
HAR
400
Dec-00 to Dec-04
TEN
Jun-82 to Aug-87
BWA
Appreciation from Earnings
100
ALV
200
Current Cycle Return
AXL
Median
Average
MEI
10
15
20
25
STRT
30
35
40
45
50
55
60
65
Appreciation from Valuation

0
0
Months
SUP
10
15
20
25
30
35
40
45
50
55
60
Auto Supplier Recovery Stocks vs. 2011 Earnings
Auto Suppliers Change in 2012/13 Estimates
S&PIndustrials
S&P500
JCI
200%
GNTX
15%
0%
15%
30%
200
StockRecoveryGreater
ThanEarnings
45%
150
% PeakStockPrice
150%
SNA
100%
GNTX
100
ALV
S&P500
MEI
STRT
50
StockRecoveryLessThan
Earnings
HAR
0%
0%
Down3%YTD
JCI
50%
50%
100%
150%
200%
% PeakEarnings
Down2%YTD
BWA
0
Jan09
Jul09
Jan10
Jul10
2012E
Jan11
Jul11
Jan12
2013E
Page 2
Automotive Markets
Macro Environment - Auto
ECRI Leading Index Smoothed Annualized Chg.
U.S. Dollar Index Daily
Industrial Production Germany vs. EU (y/y chg)

25.0%
20
200
10
150
12.5%
100
0.0%
160
120
80
(10)
Y/Y%Chg Q4
Euro1%
Pound1%
Yen+7%
40
(20)
0
Dec-66 Dec-71 Dec-76 Dec-81 Dec-86 Dec-91 Dec-96 Dec-01 Dec-06 Dec-11
0
Dec87 Dec90 Dec93 Dec96 Dec99 Dec02 Dec05 Dec08 Dec11
Index Value; Dec-99 = 100
Y/Y % Change
280%
25.0%
Dec92
Dec95
Dec98
Dec01
GermanIndustrialProduction (Y/YChg)
Dec04
Dec07
Dec10
EUIndustrialProduction (Y/YChg)
Source: Ecowin, Baird estimates.
US Private Non-Farm Payrolls 3 Month Avg. Chg.
Baird Commodities Index
12.5%
ECRI Leading Index (4 Wk Ann. Growth)
Source: ECRI, Baird estimates
Dollar Index
250
50
Consumer Confidence US and Europe
800
125
40
400
100
20
75
50
-20
240%
200
200%
160%
150
120%
0
80%
100
40%
0%
50
Dec-99
(400)
(40%)
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
(800)
Dec-66
Source: LME, PPI, Baird estimates

Commodity Prices Y/Y Change
Lead
Copper
Aluminum NASAAC
High Grade Aluminum
Aluminum Alloy
Zinc
Aluminum
Steel Mill Products
Nickel
Iron Ore
Light Crude
Nat. Gas
Chemicals
Plastics/Resins
Fabricated Products
Foam
(30%)
Source:
LME,
estimates
Dec-71
Dec-76
Dec-81
Dec-86
Dec-91
Metals
Dec-96
Dec-01
Dec-06
Dec-11
25
Dec-66
Payrolls (3-Mo Average)
Dec-71
Dec-76
Dec-81
Dec-86
Dec-91
Michigan Consumer Expectations (L)
Dec-96
Dec-01
Dec-06
-40
Dec-11
EU Consumer Confidence (R)
Source: BLS, Baird estimates.
Source: Univ. of Michigan, Ecowin, Baird estimates.
US Personal Income Y/Y Change
German ifo Business Climate Index - Monthly

120
15%
Energy
110
10%
Other
5%
(15%)
PPI,
0%
15%
NYMEX,
100
30%
Baird
0%
90
(5%)
Personal Income
Source: BEA, Baird estimates.
80
Dec90
Dec94
Dec98
Dec02
Dec06
Dec10
IFOBusinessIndex
Source: IFO, Baird estimates.
Page 3
Automotive Markets
Cyclical Recovery - Automotive
The greatest excess returns from this
group are those seen during a cyclical
recovery in end-market demand.
Cyclical Demand Recovery: We are
looking for global vehicle demand to grow
at a 4-5% annual pace through 2014
with stronger demand in NA and Asia
than Europe.
Organic Revenue Growth:
The
average auto supplier is expected to grow
revenue at a 4-5% annual rate over this
period driven by increasing vehicle
contentsafety, fuel economy, comfort.
Organic Revenue Growth Net New Business
Global Recovery in Demand 2010-2014E

(units in 000s)
North America
Europe
Asia
Total
2010
11,975
18,600
27,363
2014E
15,200
20,272
33,890
CAGR
6%
2%
5%
57,938
69,362
5%
16%
RWB
Estimate
12%
8%
Represents estimated light vehicle production.

4%
Source: ACEA, JAMA, JD Power, KAMA, Wards, Baird estimates.

0%
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
New Business Growth (Quarter)
New Business Growth (LTM)
(Calendar Year Ending)
Source: Company reports, FactSet, Baird estimates.
Cyclical Recovery in Quarterly EBITDA Margins
Up Cycle EPS Growth

(year-over-year)
20%
200%
Margin Recovery: Using normal

contribution margins augmented by
down-sizing and cost cutting, we look for
EBITDA margins to move back to levels
seen in 2002-04.
Cyclical EPS Growth: The combination
of 8-10% revenue growth (4-5% endmarket growth and 4-5% organic growth)
combined with margin improvement
drives 17-20% annualized EPS growth
through 2014.
Normal Valuation:
We look for
enterprise value-to-EBITDA valuations to
move back to the midpoint of past cycles.
This represents an average multiple
around 6.2x EBITDA.
RWB
Estimate
0%
10%
Assumesnormalcontributionmargins
-100%
5%
-200%
1998
0%
Dec-90 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12E Dec-14E
2000
2002
2004
2006
OEM Suppliers
2008
2010
2012E
S&P 500
Median
Potential Stock Performance (3-Year CAGR)
Enterprise Value to EBITDA Multiple
60%
16
45%
12
Potential Stock Performance:

The
combination of EPS growth and mid-cycle
valuations
drives
significant
upside
potential in stock prices from current
levels. The chart to the right highlights
the stocks ranked by potential upside.
Note these represent annualized returns
through 2014 with an assumption that
market return is in the 10-11% range.
Q1E 2012
21%annualEPSgrowth 20102014
100%
15%
67th Percentile (>6.6x)
8
30%
4
33rd Percentile (<5.5x)
15%
0
Dec-90 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10
High / Low
LTM Multiple
0%
S&P 500
MEI
ALV
SNA
HAR
BWA
STRT
Average
GNTX
JCI
TOWR
Page 4
Automotive Markets
US Automotive Demand
US Trend Demand: There are three
broad drivers of trend demand for light
vehicles in the US: 1) replacement
demand, the number of vehicles scrapped
each year; 2) household growth, the
number of new drivers entering the
population; and 3) vehicle penetration,
the number of vehicles per household.
(Units in 000s)
20,000
Trend Demand: 15.3 Million
16,000
The period from 1997 through 2008 saw

actual vehicle sales exceed trend demand
by a cumulative of 15 million vehicles.
We are modeling that actual sales remain
below trend demand through 2013 with a
cumulative under selling of trend by
about 15 million vehicles.
Replacement Demand (82%)
Household Growth:
The number of
new households formed in the US total
about one million units per year. With
constant vehicles per household, this
represents an incremental 2-3 million
units of trend demand.
Vehicle Penetration: The US has 2.2
vehicles per household.
The underselling of trend demand through 2013
should bring this to 1.8-1.9 vehicles per
household seen in the early 1990s.
Trend
15,000
Scrap
Scrap
10,000
15 million units
below trend
Population
8,000
Penetration
Baby Boomer Driver Growth
5,000
Total
Household
Growth
Household Growth (18%)

0
1963
Vehicle Penetration (<1%)
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013EPenetratio
0
Scrap
Source: Polk, Census Bureau, Wards, Baird estimates.
Penetration
US LV Sales
Household Growth
Vehicle Scrap Rates

16,000
New Households
Source: Polk, Census Bureau, Wards, Baird estimates.
(Household Growth In 000s)
(Percentage of Fleet)
(Units Scrapped In 000s)
2,400
Estimates
Scrapped vehiclesrepresent85%ofsalesfrom13yearsprior
12,000
1,800
10%
4,000
5%
1,200
600
Represents1.52.0millionnewvehiclesperyear
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
Vehicles Scrapped (in Units)
1995
2000
2005
2010E
0
0%
1963
1968
1973
1978
Scrappage (As a % of Fleet)
1983
1988
1993
1998
2003
2008
2013E
Household Growth - Three-Year Average
Source: Polk, Wards, Baird estimates.
Source: Census Bureau, Baird estimates.
Vehicle Penetration
Median Age of Vehicle Population
(Vehicles per Household)
300,000
2.6
(Vehicle Population in 000s)
(Median Age)
10.0
2.2
225,000
7.5
1.8
150,000
5.0
1.4
75,000
2.5
1.0
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013E
0.0
0
1963
1968
1973
1978
1983
Vehicle Population (L)
Vehicles per Household
Source: Census Bureau, Wards, Baird estimates.
Estimates
12,000
8,000
Vehicle Scrap Rates: The US scraps

about 5% of the vehicles on the road
each year representing about 12 million
units. The scrap rate has declined over
time due to vehicles lasting longer.
15 million units
above trend
Trend Demand: 15.3 Million
4,000
Adding up these three drivers results in

US trend demand of about 15 million
units today as shown in the Trend
Demand chart to the right.
US Auto Sales Trend Demand
Components of Trend Demand
1988
1993
Car Median Age (R)
1998
2003
2008
2013E
Truck Median Age (R)
Source: BEA, Polk, Baird estimates.
Page 5
Automotive Markets
Supply of Credit
Weekly Bank Loans Commercial vs. Consumer
ABS Securitization - Better but Still Weak
2,000,000
Auto Loans and Leases: Financial

institutions
have
demonstrated
an
increase in the amount of credit extended
for loans and leases in recent months.
(in millionsofdollars)
800
(billions)
1,500,000
600
1,000,000
ABS Market Still Constrained: The

amount of loans securitized, while much
improved from a year ago, remains well
below the levels seen at the markets
peak in 2004-06.
500,000
0
Dec99
FAS166
AccountingRule
Dec01
Dec03
Dec05
CommercialLoans
Credit Standards Remain Tight: The

Federal Reserves Senior Loan Officer
survey continues to show the credit
standards remain relatively tight for
consumer loans. This is improving, but
still exhibits a market of tight credit.
2011 ABS
Issuance:
$68b auto
$57b other
400
Dec07
Dec09
200
Dec11
ConsumerLoans
0
1990
Source: Federal Reserve, Baird estimates
1995
2000
Auto
2005
2010
Other
Source: Federal Reserve, SIFMA, Baird estimates.
Change in Auto Loans / Leases Y/Y Change

50%
Interest Rates on New Auto Loans

20%
Motor Vehicle Loans/Leases - Owned and Securitized Assets

25%
15%
0%
10%
(25%)
5%
(50%)
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
0%
Lending Terms Are Attractive
Interest Rates: The interest rate on

typical auto loans has fallen back to
previous levels after a quick spike
upward a year ago.
Loan-To-Value: The average loanto-value for loans extended has
moved into the 85-90% range,
relatively low compared to the past
two decades.
Loan Maturities: The average loan
maturity has fallen modestly and not
rebounded to previous levels. Today,
the average car loan is 60-65
months, down from approaching 70
months 18 months ago.
Owned Assets - YoY Chg
Source: Federal Reserve, Baird estimates.
Loan-To-Value Ratios
Loan Maturities
*Datasourcechanged fromFederalReservetoExperianAutomotiveinFebruary2011
100%
70
95%
60
90%
50
85%
40
80%
30
Loan-to-Value Ratio
Source: Federal Reserve, Experian Automotive, Baird estimates.
Interest Rate
Securitized Assets - YoY Chg.
Loan Term
Page 6
Automotive Markets
Demand for Credit
Credit Demand Improving: Consumer
demand for credit has rebounded in
recent months:
Senior Loan Officer Survey:

The
Federal Reserve survey of lenders
indicates a significant increase in
consumers willingness to borrow.
Consumer
Confidence:
While
confidence measures have improved
in recent weeks, the overall trend
remains at the low end of a range
seen over the last several years.
Employment: Employment remains a
weak spot in the recovery story,
though
nonfarm
payrolls
have
generally improved over recent
months.
40
Personal Income: The U.S. has now

witnessed 16 straight months of
personal income growth, reversing
the 15 straight months of personal
income declines seen in 2008-2009.
Household
Debt
Is
Improving:
Household debt has declined to 90% of
GDP, down from the 98% observed in
2009. Moving this back to 65% of GDP,
as seen in the early 1990s, represents
financing for about 15 million vehicles.
Going back to the 1960-70s level
represents another 10 million vehicles.
20
160
120
Willingness
20
0
-20
80
-40
40
(20)
(40)
Demand
(60)
Increased Willingness to Make Loans
0
-60
Dec-05Jun-06Dec-06Jun-07Dec-07Jun-08Dec-08Jun-09Dec-09Jun-10Dec-10Jun-11Dec-11Jun-12
Strong Demand for Consumer Loans
ABC (L)
Personal Income Growth
Hiring as a Percent of Total Employment

6.0
Rasmussen (R)
Source: ABC, Rasmussen, Economy.com, Baird estimates.
200
(inpercent)
10%
180
160
4.5
5%
140
120
100
3.0
Consumer Confidence - Weekly
Senior Loan Officer Survey Weak Demand
0%
80
60
1.5
40
(5%)
20
0
0.0
Dec00 Dec01 Dec02 Dec03 Dec04 Dec05 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11
Recession/SoftLanding
Hiresasa%ofTotalEmployment
Source: BLS, Baird estimates.
Household Debt to GDP and Disposable Income
(10%)
Dec00
Dec01
Dec02
Dec03
Dec04
Dec05
Dec06
Dec07
PersonalIncomeGrowth
Dec08
Dec09
Dec10
ExGov'tTransferPayments
Personal Savings Rate
150%
16
12
100%
Savings Rate Is Declining: Following

increased consumer saving patterns
during the downturn, the savings rate
has declined to approximately 5%.
8
50%
0%
Dec-51 Dec-56 Dec-61 Dec-66 Dec-71 Dec-76 Dec-81 Dec-86 Dec-91 Dec-96 Dec-01 Dec-06 Dec-11
Household Debt as % of GDP
Household Debt as % of Disposable Income
0
Dec-66
Dec-71
Dec-76
Dec-81
Dec-86
Dec-91
Dec-96
Personal Savings Rate
Dec-01
Dec-06
Dec-11
1966-1992 Average
Page 7
Dec11
Automotive Markets
International Markets
Sales Growth By Region (Thr. Dec.)
(000s)
LTM Sales North America
LTM Sales Global
2009
2010
2011
10,402
1,459
753
12,614
11,555
1,555
819
13,928
12,734
1,582
895
15,212
% Chg
(in thousands)
70,000
140%
Estimates
Canada
Mexico
Total
60,000
100%
UK
France
Other
Total
China
Korea
Total
50,000
60%
200%
160%
13,000
120%
80%
40%
40,000
20%
3,980
2,183
2,672
7,224
16,059
3,113
2,253
2,667
7,284
15,318
3,407
2,201
2,631
6,975
15,214
9%
-2%
-1%
-6%
-1%
4,627
10,587
1,328
16,542
4,943
14,195
1,395
20,533
4,200
15,137
1,409
20,745
-15%
7%
1%
1%
30,000
9,000
40%
0%
-20%
45,214
Source: Wards,
Estimates
49,778
ACEA,
JADA,
51,171
KAMA,
YOY Change
-40%
YOY Change
LTM Sales
LTM Sales
LTM Sales Western Europe
LTM Sales Asia (Japan, Korea, China)
(in thousands)
18,000
140%
Estimates
28,000
(in thousands)
Estimates
120%
100%
3%
Baird
5,000
16,000
Global Total
240%
17,000
0%
Asia
Japan
280%
Estimates
80%
10%
2%
9%
9%
Western Europe
Germany
(in thousands)
120%
North Am erica
US
21,000
22,000
60%
80%
16,000
60%
40%
40%
20%
12,000
10,000
20%
4,000
-20%
0%
0%
Global Market Share (Through Dec.)

2009
2010
2011
10%
8%
3%
20%
GM
Chrysler
Total
10%
8%
3%
20%
8%
8%
3%
19%
-14%
4%
21%
-2%
Japanese OEMs
Nissan
Total
11%
6%
6%
23%
9%
5%
6%
20%
-16%
-15%
4%
-10%
YOY Change
YOY Change
LTM Sales
Global Sales Rank 2011
LTM Sales China

24,000
(inthousands)
(in thousands)
8,000
19%
18%
18%
5%
Others
38%
38%
42%
15%
6,000
(16%) +17%
100%
Source: Wards,
Estimates
ACEA,
100%
JADA,
100%
KAMA,
2%
Baird
(14%) +4%
4,000
+4%
6,000
Total
2011%Change
Global:+3%
+12%
18,000
12,000
European OEMs (6
largest)
LTM Sales
Source: JAMA, JD Power, KAMA, Baird estimates.
Estimates
11%
6%
6%
22%
Toyota
Honda
-20%
% Chg
North Am erica OEMs

Ford
10,000
120%
100%
80%
14,000
140%
(15%) (4%)
2,000
+13%
(7%)
+21% (13)%
+13% (7%)
China Auto Sales (L, monthly)
Source: JD Power, Baird estimates.
Page 8
Automotive Markets
US Market Share (Through Dec.)
2008
2009
2010
2011
North American OEMs

GM
22.4%
Ford
15.1%
Chrysler
11.0%
19.8%
15.9%
8.9%
19.1%
16.5%
9.3%
19.7%
16.6%
10.5%
Total
44.7%
45.0%
46.8%
48.5%
EU Auto Sales2011 YTD Change (By Country)
US and European Sales Segment Performance
Germany
Total SmallCars
Ranked bysize
France
Small
U.K.
Total MiddleCars
Italy
Spain
Total LargeCars
Belgium
Netherlands
LowerMedium
Total LuxuryCars
Austria
Switzerland
Asian OEMs
Toyota
Honda
Nissan
16.8%
10.8%
7.2%
17.0%
11.1%
7.4%
15.3%
10.7%
7.9%
12.9%
9.0%
8.2%
Hyundai/Kia
Other
Total
5.1%
4.9%
44.9%
7.1%
5.4%
48.1%
7.7%
5.0%
46.5%
8.9%
4.9%
43.9%
Sweden
Total SportUtilities
2.4%
2.8%
3.3%
3.5%
BMW
Mercedes
Other
Total
2.3%
1.9%
6.5%
2.3%
2.0%
7.1%
2.3%
2.0%
0.9%
8.5%
2.4%
2.1%
1.3%
9.3%
100.0%
100.0%
100.0%
100.0%
Source: Wards Auto, Baird estimates

Europe Market Share (Through Jan.)
2009
2010
2011
2012 YTD
Volkswagen
20.9%
21.0%
22.9%
23.6%
PSA
13.3%
13.5%
12.7%
12.7%
Renault
9.0%
10.1%
9.3%
8.1%
Fiat
8.8%
7.8%
7.0%
7.1%
European OEMs
BMW
5.1%
5.7%
6.2%
5.5%
Daimler
4.9%
5.1%
5.1%
5.1%
62.0%
NA OEMs
19.6%
Asian OEMs
Other
Total
Norway
Total Vans
Finland
Greece
Total Pickups
Ireland
Executive
Luxembourg
Comm.Chassis
Iceland
15%
0%
15%
30%
20%
10%
0%
10%
16.6%
1.7%
100.0%
63.0%
17.0%
16.1%
3.9%
100.0%
63.3%
16.6%
16.3%
3.8%
100.0%
Source: ACEA, Baird estimates
62.2%
15.5%
17.3%
4.9%
100.0%
20%
0%
20%
40%
Source: ACEA, Baird estimates. Through December 2011.
EU Auto Sales 2011 YTD Change (By OEM)
US Auto Sales 2011 YTD Change (By OEM)
VW
GRAND TOTAL
Foreign OEMs
NA OEMs
General Motors
Ford
Toyota
Chrysler
Honda
Hyundai Group
Nissan
Volkswagen
BMW
Daimler
Subaru
Mazda
Mitsubishi
Zhejiang Geely
Tata Motors
Porsche
Suzuki
Saab Spyker
Ranked bysize
PSA
Renault
GM
Ford
Fiat
BMW
Daimler
Toyota
TotalWEU
Other
Nissan
Hyundai
Kia
Suzuki
Honda
Mazda
Mitsubishi
(20%)
0%
20%
40%
60%
40%
20%
0%
20%
40%
Source: Wards, Baird estimates. Through December 2011.
US LV Sales 2011 YTD Change (Top Platforms)
European Auto Build2012 YTD Change (By OEM)
GMT900(Silverado,Seirra,Tahoe)
Camry6(Camry,Highlander,RX)
FordCD3 (Fusion,Edge,MKX/Z)
ToyotaNCV(Corolla)
FordP415(FSeries)
NissanD(Altima,Maxima)
Civic8(Civic,CRV)
GMTE(Equinox,Terrian,SRX)
HondaUV(Accord,TL,TSX,Crosstour)
HyundaiYF(Optima,Sonata)
TotalU.S.
GMEpsilon2(Lacrosse,Malibu,Regal)
HyundaiJM2(Elantra,Sportage)
FordU204(Escape)
GMLambda(Acadia,Enclave,Traverse)
GMDelta2(Cruze)
RenaultNissanC(Rogue,Sentra)
ChryslerDS(RamPickup)
ChryslerJS(Avenger,Journey)
ChryslerRT(Caravan,Town&Country)
VWA6(Golf,GTI,Jetta)
20%
Volkswagen
Rankedbysize
Rankedbysize
Renault/Nissan
PSA
GM/Opel
BMW
TotalEurope
Ford
Daimler
Fiat/Chrysler
Hyundai/Kia
Toyota
0%
20%
40%
60%
40%
20%
European OEMs
VW
Total
Denmark
UpperMedium
Portugal
30%
Total Market
TotalWEU
Total CrossUtilities
40%
20%
0%
20%
40%
Source: JD Power, Baird estimates. Through January 2012.
Page 9
Automotive Markets
Share Trends - Auto
US Passenger Car Share 6 Month Moving Average
32%
24%
24%
16%
16%
8%
8%
0%
Dec01
Dec02
Ford
Dec03
GM
Dec04
Dec05
Honda
Dec06
Dec07
Hyundai
Dec08
Nissan
Dec09
Toyota
Dec10
Dec11
Dec12
0%
Dec01
21%
18%
14%
12%
7%
6%
Ford
Dec04
GM
Dec05
Dec06
PSA
Dec06
GM
Dec07
Dec08
Honda
Dec09
Nissan
Dec10
Dec11
Dec12
Toyota
EU Light Truck Share 6 Mo. Moving Average

24%
Dec03
Dec05
Ford
28%
Dec02
Dec04
*Light trucks account for appx. 51% of the Light Vehicle Market
EU Passenger Car Share 6 Mo. Moving Average
Fiat
Dec03
Chrysler
0%
Dec01
Dec02
GermanLuxury*
*German Luxury includes BMW, Mercedes-Benz, and Audi
Dec07
Renault
Dec08
Dec09
Volkswagen
Dec10
Dec11
Dec12
0%
Dec01
Dec02
Dec03
Dec04
Daimler
GermanLuxury*
Fiat
Dec05
Dec06
Ford
Dec07
PSA
Dec08
Dec09
Renault
Dec10
Dec11
Dec12
Volkswagen
*German Luxury includes BMW, Mercedes-Benz, and Audi
*Light trucks account for appx. 10% of the Light Vehicle market
China Passenger Car Share 6 Mo. Moving Average
China Light Truck Share 6 Mo. Moving Average
20%
28%
15%
21%
10%
14%
5%
7%
0%
Dec06
Volkswagen
Dec07
Dec08
GeneralMotors
Hyundai
Dec09
Toyota
Dec10
Chery
Renault/Nissan
Dec11
GermanLuxury*
*German luxury includes BMW, Mercedes-Benz, and Audi
Source: JD Power, Baird estimates
US Light Truck Share 6 Month Moving Average
32%
0%
Dec07
Dec08
SAIC
Chang'an
Dec09
BeiqiFoton
Dec10
Dongfeng
Brilliance
Dec11
Jianghuai
*Light trucks account for appx. 29% of the Light Vehicle market
Page 10
Automotive Markets
Share Trends - Auto
US Domestic/Foreign Mix 6 Mo. Moving Average
US Car/Truck Mix 6 Month Moving Average

80%
8.00
80%
60%
6.00
60%
40%
4.00
40%
20%
2.00
20%
0%
0.00
Dec01 Dec02 Dec03 Dec04 Dec05 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12
Cars
Trucks
Dec02
Dec03
Dec04
Dec05
Dec06
Dec07
Domestic
GasPrices(R,$/Gal)
Dec08
Dec09
Dec10
Dec11
Dec12
Foreign
EU Car/Truck Mix 6 Mo. Moving Average
EU Domestic/Foreign Mix 6 Mo. Moving Average
100%
80%
75%
60%
50%
40%
25%
20%
0%
Dec01
Dec02
Dec03
Dec04
Dec05
Dec06
Cars
Dec07
Dec08
Dec09
Dec10
Dec11
Dec12
0%
Dec01
Dec02
Dec03
Dec04
Trucks
Dec05
Dec06
Dec07
Domestic
Dec08
Dec09
Dec10
Dec11
Dec12
Foreign
China Car/Truck Mix 6 Mo. Moving Average
China Domestic/Foreign Mix 6 Mo. Moving Avg.
80%
80%
60%
60%
40%
40%
20%
20%
0%
Dec05
Dec06
Dec07
Dec08
Cars
Dec09
Dec10
Dec11
Trucks
0%
Dec01
0%
Dec07
Dec08
Dec09
Domestic
Dec10
Dec11
Foreign
Page 11
Automotive Markets
Secular Trends - Automotive
50,000
Developed Markets: The markets in

the US, Europe and Japan are well
established, mature markets that are
increasingly
moving
toward
a
replacement market.
Population and
household growth in the US does offer
some incremental growth.
Emerging Markets: The fastest-growing
auto demand is found in emerging
markets where rapidly improving GDP per
capita is providing consumers the
opportunity to own a car.
China is on track to outsell the US,
becoming the largest auto/truck market
in the world.
Safety Penetration: Safety standards
across the world are rising. New test
processes in Europe and the US will make
it more difficult for vehicles to attain a 5star crash test rating. To maintain this
level of rating will require additional
safety content in the vehicle.
The safety content in emerging markets
is limited to seat belts, maybe. China
appears to be moving toward Europeantype safety standards that will drive
safety content higher.
Emerging Market Demand Growing LTM Sales
Developed Markets Are Mature LTM Sales
28,000
(in thousands)
40,000
(in 000s)
21,000
30,000
14,000
20,000
7,000
10,000
Dec94
Dec96
Dec98
Dec00
Dec02
Dec04
Dec06
Dec08
Dec10
LTMUS,WesternEurope,JapanAutoSales(L,monthly)
1994
Source: ACEA, JAMA, Wards, Baird estimates.
1997
2000
2003
2006
2009
Series1
Vehicle Penetration & Per Capita GDP (2009)
Emerging Markets By Country (BRIC)

16,000
(passenger car production in 000s)
50,000
(GDP Per Capita in $)

US
France
40,000
12,000
Germany
Japan
UK
30,000
8,000
20,000
China: 2009 to2016E
4,000
10,000
1980
1985
1990
Brazil
1995
India
2000
China
2005
Brazil
India
2010
Korea
Russia
China
15
30
45
Russia
60
(Sales per 1,000 population)
Source: BEA, OECD, ACEA, JAMA, JD Power, Wards, Baird estimates.
Safety Content Penetration
Growing Demand for Content US Average Price

$40,000
Rising Content: The amount of content

in a vehicle, essentially tracked by
average price over time, is driven higher
by:
1) increased active and safety
content;
2)
increased
regulation
(emissions, fuel economy); and 3)
creature
comforts
(entertainment,
electronics, trim level).
LightTrucks
$30,000
Cars
$20,000
$10,000
$0
Dec66
Source: Autoliv
Dec70
Dec74
Dec78
Dec82
Dec86
Dec90
Dec94
Dec98
Dec02
Dec06
Source: Department of Commerce, Baird estimates.
Page 12
Dec10
Automotive Markets
China Performance - Auto
Annual Sales and Change
2011 YTD Sales By Brand
20,000
Chinese OEM Market Share

SAIC
DFM
FAW
BAIC
Chang'an
Guangzhou
Chery
BYD
JAC
Geely
Brilliance
Great Wall
Total
Import
2010
17%
15%
15%
9%
9%
5%
5%
4%
3%
3%
3%
2%
80%
4%
Others
16%
2011 2012 YTD

18%
23%
16%
17%
14%
13%
9%
7%
8%
7%
5%
3%
4%
3%
3%
3%
3%
2%
3%
3%
3%
3%
2%
2%
79%
79%
6%
15%
7%
14%
300%
(inthousands)
15,000
% Chg
-5%
-14%
-34%
-28%
-35%
-41%
-54%
-42%
-48%
-16%
6%
-33%
-24%
-3%
-32%
250%
100%
100%
100%
-24%

Through January 2012.
10,000
200%
5,000
150%
100%
5,000
50%
10,000
0%
1999 2000 2001
2002
2003
2004 2005 2006

Units
2007
2008
Mitsubishi
2009 2010 2011 2012E
50%
31%
28%
-36%
*Others
14%
15%
14%
-18%
100%
100%
100%
-24%
25%
0%
1,600,000
900%
1,200,000
SAIC
800%
DFM
700%
FAW
Ranked bysize
BAIC
Chang'an
800,000
500%
TotalIndustry
300%
Chery
100%
(400,000)
Dec98
100%
Dec00
Dec02
Dec04
MonthlySales
Dec06
YOYChange
Dec08
Guangzhou
400%
BYD
Geely
Brilliance
JAC
GreatWall
Dec10
50%
LTMAverage
25%
0%
50%
Source: JD Power, Baird Estimates. Through January 2012.
Number of Vehicles On the Road
2011 YTD Performance By Segment

(ASP inyuan)
ChinaPrivateVehicleGrowthandShare 2000 to2009

80000
(UnitsinThousands)
80%
70%
60000
60%
40000
40%
CompactCar
Ranked bysize
SubCompactCar
SUV
77,000RMB,$11,700
196,000 RMB,$29,800
MidsizeCar
LightTruck
45,000RMB, $6,800
30%
LuxuryCar
20000
20%
130,000 RMB,$19,700
450,000 RMB,$68,300
10%
MiniTruck
0%
2000
2001
2002
Private
2003
Total
2004
2005
2006
PrivateGrowth
2007
2008
2009
PrivateShare
Source: ChinaNationalBureauOfStatistics
Source: China National Bureau of Statistics, Baird estimates
25%
*Listed OEMs represent 91% of total sales

Source: JD Power, Baird Estimates. Through December 2011.
MPV/Minivan

Through January 2012.
50%
2011 YTD Sales By Chinese OEM
Monthly Sales YOY Change
MiniCar
Total
25%
*Listed brands represent 56% of light vehicle sales

Source: JD Power, Baird Estimates. Through January 2012.
50%
34%
Mazda
%Change
Chinese OEMs
Suzuki
BMW
0%
VW
GM
Hyundai
Toyota
Renault-Nissan
Honda
PSA
Suzuki
Ford
Total
PSA
Ford
400,000
% Chg
-13%
-7%
-12%
-31%
-13%
-43%
-17%
-17%
-42%
-18%
Honda
TotalIndustry
200%
2011
2012 YTD
15%
17%
9%
11%
8%
9%
6%
5%
6%
6%
4%
3%
3%
3%
2%
2%
2%
2%
55%
58%
Toyota
RenaultNissan
Brand Market Share

2010
14%
8%
8%
6%
5%
5%
3%
2%
2%
52%
Ranked bysize
Hyundai
600%
Total
VW
GM
SportyCar
236,000 RMB, $35,800
FullsizeCar
50%
25%
0%
25%
50%
Page 13
Automotive Markets
Global Fuel Economy Standards (List by Region)
U.S. Retail Gasoline Prices National Average

5
Fuel Economy Standards: All markets

are pursuing stricter fuel economy and
emission standards.
Gasoline Prices:
The US consumer
reacted to higher gas prices in 2008 by
shifting new vehicle purchases to those
with higher fuel economy; lower gas
prices reversed this trend this past year.
0
Dec99
About 40% of US market is made up

of SUVs, vans, pickups; this is less
than 10% of the European market.
Powertrain (one-third): More-efficient
diesel vehicles capture about 50% of
the European market; diesel cars
barely exist in the US.
European
OEMs
use
advances
in
technology
to
deliver
higher
fuel
economy while maintaining performance;
Americans boosted performance while
maintaining fuel economy.
Dec09
Premium for Gasoline Versus Diesel

51%
69%
44%
<1%
<5%
Canada
44%
Japan
77%
7.50
Dec11
($ per gallon)
UK
3.00
Spain
($ per gallon - gasoline)
Italy
<5%
(diesel penetration)
2.00
5.00
1.00
2.50
Ex-Tax
Tax
*China represents total cost

Source: IEA,China NDRC, Baird estimates (As of October 2011)
US Versus European Segment Mix (2009)

European Market
Market
Segm ent
Share European Model
Minicar
7.9% Fiat Panda
Small Car
24.5% Peugeot 207
Compact Car
21.3% VW Golf
Mid/Full-Size Car
8.4% VW Passat
Luxury
16.6% BMW 3-Series
Total Car
78.7%
Minivan
SUV/CUV
Van
Pickup
Total Light Truck
11.6%
7.2%
1.4%
0.0%
20.2%
Citroen Picasso
Toyota RAV4
Citroen Berlingo
None
Market
Share
N/A
2.8%
16.4%
25.0%
7.8%
52.0%
2.8%
31.0%
1.4%
12.8%
48.0%
Honda Odyssey
Toyota 4Runner
None
Toyota Tundra
Spread
Source: IEA,China NDRC, Baird estimates (As of October 2011)
Engine Power Versus Fuel Economy
United States Market

Equivalent Model
Am erican
Asian
European
None
None
Smart forTw o
Chevrolet Aveo
Honda Fit
Mini Cooper
Dodge Caliber
Honda Civic
VW Golf
Ford Fusion
Hyundai Sonata
VW Passat
Cadillac CTS
Lexus ES
Audi A4
Dodge Caravan
Ford Explorer
Ford Econoline
Ford F-150
-1.00
US
China
US
Canada
Japan
UK
Spain
0.00
Italy
0.00
China
Vehicle Mix (two-thirds): Nearly 50%

of the European market is made up
of small/compact cars; this is only
20% of the US market.
Dec07
NYMEXGasolineFutures($/gal)
Selected Gas Prices
Germany
Dec05
Source: EIA, Baird estimates.
Germany
US Fuel Economy: Fuel economy in

Europe today is roughly where the US
market needs to be in 2016.
The
difference comes from:
Dec03
Source: BorgWarner company presentation.
10.00
The countries with tax policy boosting the

spread between gasoline and diesel also
see the highest penetration rate of
diesel-powered vehicles.
Dec01
U.S.RetailGasPrice($/gal)
France
Gasoline prices in the US (Canada and

China) remain well below global gas
prices. The primary variance is the level
of taxation in each market.
($/gallon)
France
Fuel Economy / Emissions
Horsepower/Displacement
US: 67 hp / L
Europe: 67 hp / L
Miles per Gallon

US: 28 mpg
Europe: 37 mpg
Horsepower
US: 223 hp
Europe: 117 hp
VW Routan
VW Touareg
None
None
Weight
US: 4200 lb
Europe: 2800 lb
Source: ACEA, Wards, Baird estimates.

1975
1980
Fuel Economy
1985
1990
1995
HP/Displacement
2000
Horsepower
2005
Weight
Source: NHTSA, Wards, Baird estimates.
Page 14
Automotive Markets
Secular Demand Drivers
Fuel Efficiency and Carbon Emissions
Energy independence
Greenhouse gas reduction
Vehicle Types
Micro/Mild Hybrid
ICE + start-stop system
Hybrid Electric
ICE + electric-motor assist
Plug-in Electric
Electric-motor drive w/ICE
Electric Vehicle
Full electric vehicle w/battery
Fuel Cell Electric Vehicle
Any of the above w/fuel cell
Technology enables development

Improve internal combustion engine (ICE)
Improve combustion
Downsize engines
Alternative Fuels
Vehicle mix
Enable electrification
Power storage
Electric motors
Power electronics
Electric infrastructure
Electronic components
Companies with Exposure

Improve Existing Engine
BWA TEN MGA PCAR NAV MOD
AXL CTB CMI DAI DAN ETN GT
HON PH TRW VOLVY WBC
Money funds development

Government loans and grants
Private sector capital
Government tax credits
Alternative Fuels
FSYS CLNE WPRT RTK SYNM
CAP
Power Storage
JCI PPO
EFL XIDE
MXWL
HEV
AONE
VLNC
Infrastructure / Smart Grid

ENOC COMV ECTY
Electric Motors and Drivetrain
QTWW AZD ETN ARM
UQM HEV RZ RMYI ENA
BWA
Power Electronics
JCI MGA UQM ETN ARM LEA MEI
Electronic Components
BWA MOD JCI MEI MGA ARM
SRI DAN LEA
MGA
Industry Challenges
Driving range on battery charge
Cost of energy storage - $1000/kW today
Charging infrastructure smart grid needed
Size of carbon footprint source of electricity
Raw materials lithium and rare-earth elements
Redesign vehicle systems and components
Consumer education manage expectations
Legacy costs engine plants
Safety vehicle size, electricity and pedestrian
Electrified Vehicle Sales Annually (US)
400,000
2011Share ofNewElectricVehicleSales:
HybridElectric:96.5%
Plugin/Electric:3.5%
300,000
200,000
100,000
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Payback Analysis PEV Versus ICE

Using Todays Economics
PHEV, 30-mile range
ICE
Vehicle cost
All Electric Range
Miles per gallon
Gasoline Cost
Electricity Cost
Annual Energy Cost
Annual Savings
Payback period (undiscounted)
Payback period (discounted)
$17,069
-29
$1,552
-$1,552
--
$25,069
30
50
$243
$274
$517
$1,035
---
7.73
9.44
Sensitivity Analysis
Battery
Cost
per kWh
Electrification of the Vehicle
Price per Gallon of Gasoline

$2.00
$3.00
$4.00
$5.00
6.68
3.86
2.72
2.10
13.36
7.73
5.44
4.19
20.04
11.59
8.16
6.29
26.72
15.46
10.88
8.39
$250
$500
$750
$1,000
= 3-5 year target - 8-year payback

= Today
= Self sustainable - 2-year payback
Source: Baird estimates.
Expected Electric Vehicle Availability in 2011

OEM
General Motors
Toyota
Ford
Volkswagen
Honda
Hyundai
BMW
Nissan
Chrysler/Fiat
Daimler
Fisker
BYD
Coda
Tesla
Total
Electrified Vehicles (# for Sale in 2011)

Total
HEV
PHEV
9
8
1
9
7
1
7
4
1
5
5
4
4
4
3
1
3
2
3
2
2
1
2
1
1
1
1
1
1
52
37
5
EV
1
2
1
1
1
1
1
1
1
10
Page 15
Automotive Markets
New Vehicle Launches
New Vehicle Debuts Detroit Auto Show
European OEMs
BMW
BMW 5-Series
BMW X1 (N)
BMW X3
Mini Countryman (N)
Chrysler
Fiat 500 (N)
Jeep Grand Cherokee
80
Ford
Ford Explorer
Ford Fiesta (N)
Linc oln MKX
60
40
Daimler
Merc edes-Benz SLS AMG (N)
General Motors
Buick Regal (N)
Cadillac CTS Coupe (N)
Chevrolet Cruze (N)
Chevrolet Volt (N)
20
2005
2006
2007
2008
New/Redesign
2009
2010
Volkswagen
Audi A8
Audi Q3 (N)
Volkswagen Touareg
Volvo
Volvo S60
0
2004
2011
Concept
GM
Ford
Market Share (2011)
15%
Toyota
Chrysler
Honda
5%
VW
Daimler
BMW
0%
0
15
30
45
Hyundai
Hyundai Equus (N)
Hyundai Sonata
Kia Cadenza (N)
Kia Optima
Kia Sorento
Kia Sportage
European OEMs
Asian OEMs
Chrysler
Chrysler Delta*
Chrysler Ypsilon*
Aston Martin
Aston Martin Cygent (N)
Hyundai/Kia
Hyundai i40 (N)
Hyundai Veloster (N)
Kia Picanto (N)
BMW
BMW 1-Series (N)
BMW 6-Series
Ford
Ford B-max (N)
Ford Focus
Daimler
Mercedes-Benz B-Class
Mercedes-Benz M-Class
Mercedes-Benz ML
GM
Chevrolet Aveo
Chevrolet Cruze (N)
Chevy Mailbu
Chevrolet Orlando (N)
Mazda
Mazda MAZDA2 (N)
60
Mazda
Mazda5
Mazda CX-5
Nissan
Nissan Micra (N)
Fiat
Fiat 612
SsangYong
SsangYong XUT-1 (N)
Opel
Opel Astra
Opel Zafira
Subaru
Subaru XV (N)
Tata Motors
Land Rover Evoque (N)
PSA
Citroen C4
Citroen DS4 (N)
Peugeot 508 (N)
Peugeot iOn (N)
Toyota
Lexus CT 200h
Volkswagen
Audi A6
Audi Q3 (N)
Audi RS3
Bentley Continental
Lamborghini V12
Volkswagen Passat
VW Up N)
Toyota
Lexus CT 200h (N)
Lexus LFA (N)
Scion iQ (n)
Scion tC
Toyota Sienna
Hyundai
Nissan
Mazda
Honda
Honda CR-Z (N)
Honda Odyssey
North American OEMs
Nissan
Infiniti M37
Infiniti M56
Infiniti QX56
Nissan Juke (N)
Nissan Leaf (N)
Nissan NV2500 (N)
OEM Positioning in North America
10%
Asian OEMs
Mitsubishi
Mitsubishi Outlander Sport (N)
Source: Automotive News, Baird estimates
20%
European New and Replacement Vehicles - Model Y ears 2011-2012
North American New and Replacement Vehicles - Model Year 2011

North American OEMs
Other
Lotus Elise S
Product Position (Style, Interiors, Powertrain, Technology, Electrification, Max Score = 55)
Source: Wards Automotive, Baird estimates

2010 Product Offering Momentum:
(N) signifies all-new vehic le to North Americ an market. Unmarked vehicles are replacements
Expected Plug-in Hybrid Vehicle Launches

Earlier
Criteria
Top Ranked
Style
Interiors
Powertrain
Technology
Electrification Strategy
Ford, BMW
Ford, Daimler, BMW
Ford, Toyota
BMW, Daimler
Toyota
2010 Market Share Trends:

OEM
Hyundai
Nissan
VW
Daimler
Honda
LTM Share
8%
8%
3%
2%
11%
% of 10-Year Peak
100%
100%
99%
98%
95%
GM
Chevrolet Volt
2011
2012
2013
BYD Auto
BYD F3DM
Fisker
Fisker NINA
General Motors
Cadillac Converj
Chevrolet Yukon
Fisker
Fisker Karma
Ford
Ford Explorer
Ford
Ford Escape
General Motors
Ford Fusion (tentativeHonda Accord (tentativ
Lincoln MKZ (tentative)
Ford C-Max Energi
GM
Opel Ampera
Geely
Volvo 70 Series
Toyota
Lexus LF-ch
Toyota Prius-V
Expected Electric Vehicle Launches

Earlier
Daimler
Smart fortwo
(limited leasing)
Ford
Ford Transit Connect
Nissan
Nissan Leaf
2014
None
Hyundai
Hyundai Blue-Will
(N) signifies a new vehicle introduction. Unmarked vehicles are replacements
General Motors
Cadillac SRX
Cadillac XTS
Mitsubishi
Small Car (unnamed)
Toyota
Toyota Prius
Tesla
Tesla Roadster
2011
2012
2013
BMW
BMW ActiveE
Daimler
Mercedes B-Class
BMW
BMW i3
BYD
BYD E6
Honda
Honda Fit EV
Daimler
Mercedes SLS AMG
Chrysler
Dodge Circuit
Nissan
Infiniti EV
Hyundai
Hyundai Fuel Cell Vehicle
Fiat
Fiat 500 EV
Tesla
Tesla Model S
Volkswagen
Volkswagen Golf EV
Ford
Ford Focus
Toyota
Toyota (unnamed)
Toyota RAV4
Mitsubishi
Mitsubishi i-MiEV
Th!nk
Th!nk City
Coda
Coda Sedan
Volkswagen
Audi e-tron
2014
Tesla
Tesla mid-size sedan
Volkswagen
Volkswagen Jetta EV
Wheego
Wheego pick-up
(unnamed)
Wheego
W heego LiFe
W heego sedan (unnamed)
Source: Ward's Auto, Company reports, Robert W. Baird & Co. estimates
Source: Ward's Auto, Company reports, Robert W. Baird & Co. estimates
Page 16
Automotive Markets
Valuation - Automotive
S&P Industries Short Interest (Days to Cover)
Auto Suppliers Short Interest
Banks
Food & Staples Retailing
Commercial & Professional Services
Automobiles & Components
Consumer Services
Healthcare Equip/Services
Real Estate
Technology Hardware & Equipment
Retailing
Media
Capital Goods
Telecommunication Services
Median
Household & Personal Products
Semis & Semi Equipment
Consumer Durables & Apparel
Baird Auto Supplier Coverage
Software & Services
Materials
Baird Commercial Vehicle Coverage
Food Beverage & Tobacco
Pharma/Biotech/Life Sciences
Transportation
Utilities
Energy
Insurance
Diversified Financials
MEI
BWA
SUP
AXL
GNTX
Group
DAN
TEN
MGA
ALV
HAR
TRW
JCI
STRT
0
4
6
Short Interest - Days to Cover
10
Price to LTM EPS
Enterprise Value to LTM EBITDA
10
16
40
Last Cycle:
16.2X
30
12
20
10
1990s: +/- 8.0x

2012E
2012E
0
Dec-70
Dec-75
Dec-80
Dec-85
Dec-90
Dec-95
Dec-00
Dec-05
0
Dec-70
Dec-10
Dec-75
Dec-80
Dec-85
Dec-90
Dec-95
1.2
0.8
0.4
Dec-85
Dec-90
Dec-95
Dec-00
Dec-05
Dec-10
EV/Sales
Source: Company reports, FactSet, Baird estimates
EV/EBITDA
Price to Book Value
1.6
Dec-80
Dec-10
Enterprise Value to LTM Sales
Dec-75
Dec-05
P/E
0.0
Dec-70
Dec-00
0
Dec-70
Dec-75
Dec-80
Dec-85
Dec-90
Dec-95
Dec-00
Dec-05
Dec-10
P/Book
Page 17
Automotive Markets
Stock Overview - Automotive
Insider Trades (Last 3 months)
Insider Trades
(number of transactions )
80
HAR
Number of Purchases
TOWR
DAN
MEI
40
AXL
VC
TRW
SYPR
Sales
STRT
Purchases
ARGN
LEA
ALV
40
DLPH
JCI
Number of Sales
TEN
BWA
80
Q1-01
GNTX
Q1-02
Q1-03
Q1-04
Q1-05
Q1-06
Q1-07
Q1-08
Q1-09
Q1-10
Q1-11
SUP
-10
Sales
Purchases
-5
10
Net
Source: FactSet, Baird estimates (as of February 23)
Short Interest (Last 3 months)
Short Interest
(basis point change)
2.0%
ARGN
Increase in Short Interest
ALV
BWA
TRW
VC
1.0%
HAR
DLPH
GNTX
STRT
0.0%
JCI
SYPR
DAN
TOWR
ACW
1.0%
TEN
MEI
SUP
LEA
Decrease In Short Interest

2.0%
Q1-01
AXL
Q1-02
Q1-03
Q1-04
Q1-05
Decrease
Q1-06
Q1-07
Increase
Q1-08
Q1-09
Q1-10
Q1-11
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
3 Month Average (Net Change)
Estimate Changes (Last 3 months)
Estimate Changes
(% change)
600
STRT
Number of Upward Revisions
BWA
HAR
300
AXL
MGA
ALV
TEN
SUP
TRW
300
GNTX
JCI
Number of Downward Revisions

600
Q1-02
Q1-03
Q1-04
Q1-05
LEA
Q1-06
Upward Revisions
Q1-07
Q1-08
Downward Revisions
Q1-09
Q1-10
Q1-11
4 Week Average
MEI
-40%
-20%
0%
20%
40%
Page 18
Automotive Markets
Business Model - Automotive
EPS Surprise Last Four Quarters
Revenue Surprise Last Four Quarters

30%
50%
20%
25%
10%
0%
0%
25%
10%
ALV
BWA
GNTX
HAR
JCI
MGA
Average
MEI
STRT
SUP
TEN
TRW
Group
50%
ALV
BWA
GNTX
HAR
LastQuarter
JCI
MGA
Average
MEI
STRT
SUP
TEN
TRW
Group
LastQuarter
Source: FactSet, Baird estimates (current as of Q4-11)
Return on Capital
Pension and Healthcare - % of Assets (FY2011)
60%
DLPH
TOWR*
45%
HAR
STRT
30%
BWA
JCI
15%
ALV
MEI
0%
ALV
BWA
GNTX
HAR
JCI
MEI
LastQuarter(LTMbasis)
STRT
SNA
Group
GNTX
0%
2012E
3%
5%
OPEB
Source: Company reports, Baird estimates. *FY2010
Revenue Growth Peak-to-Peak (2012E)
EPS Growth Peak-to-Peak (2012E)
20%
45%
15%
30%
10%
15%
5%
0%
10%
15%
0%
ALV
BWA
GNTX
HAR
PeaktoPeakGrowth
JCI
MEI
STRT
Average
Cal.2012ERevenueGrowth
Source: Company reports, Baird estimates
8%
Pension
Source: Company reports, Baird estimates (current as of Q4-11)
ALV
BWA
GNTX
HAR
PeaktoPeakGrowth
JCI
MEI
STRT
Average
Cal.2012EEPSGrowth
Page 19
Commercial Vehicle Markets

Recent Trends - Truck
Global Truck Demand Quarterly Change
Developed Markets Still Below Peak Demand
Q1 Truck Macro Assumptions

Q12012(Y/YChg)
RWBEst.
Actual*
NorthAmericaBuild:
Medium
11%
5%
Heavy
38%
58%
Total
26%
36%
EUCVRegistatations
5%
4%
NorthAmerica
ProductionSchedules
ProductionSchedules:
Medium
Heavy
Total
Q12012(Y/YChg)
ChinaProduction:
Light
(24%)
Medium
(13%)
Heavy
(54%)
Total
(18%)
(31%)
Source: ACT Research, Baird estimates
*Data through January
125%
500,000
100%
Q1-12E
AbovePriorCyclePeak
Q1-12E
100%
400,000
BelowPriorCyclePeak
50%
Q1-12E
300,000
75%
200,000
50%
100,000
25%
0%
50%
100%
NorthAmericaOrders
WesternEuropeRegistrations
AsiaProduction
0%
0
US
2008
2009
2010
2011
Canada
Export
North
America
Germany
SAAR
Source: ACT Research, ACEA, JD Power, Baird estimates.
France
UK
Italy
Spain
Western
Europe
%of20002008Peak
Source: ACT Research, ACEA, JD Power, Baird estimates.
European Truck Registrations Monthly (In Units)
NA Commercial Truck Orders (SAAR)

(annualized - units)
600,000
Mexico
2012E
60
EPA Regulation Effective Dates
(in thousands)
Western and Eastern Europe

Western Europe
450,000
45
300,000
30
150,000
15
EmissionChange
0
1987
1989
1991
1993
1995
1997
1999
2001
2003
Class 8 Net Orders
2005
2007
2009
Source: ACT Research, Baird estimates.
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
China Truck Production
NA Commercial Truck Production (SAAR)

600
Dec-01
Class 5-7 Net Orders
160,000
Annualized units, in 000s
120,000
450
80,000
300
40,000
150
0
Dec-99
0
Dec-05
Dec-01
Dec-03
Dec-05
Dec-07
Class 5-7
Dec-09
Dec-11
Class 8
Source: ACT Research, Baird estimates.
Dec-06
Dec-07
Dec-08
Heavy Trucks/Buses
Dec-09
Dec-10
Dec-11
Medium Trucks/Buses
Source: JD Power, Robert W. Baird & Co. estimates
Page 20

Stock Performance - Truck
Commercial Vehicle Index - Relative Performance

200
150%
2011 Performance
AverageUpCycle +85%
AverageDownCycle63%
ETN
CV Index Quarterly Relative Performance
100%
150
S&P500
S&P1500Truck
50%
CMI
MAN
100
Average
0%
WBC
DAN
WNC
50%
50
Median
NAV
100%
PCAR
Volvo
2000
0
Dec79 Dec83 Dec87 Dec91 Dec95 Dec99 Dec03 Dec07 Dec11
MOD
OSK
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
CVGI
SRI
MTOR
80%
40%
0%
40%
80%
2.50
400
2012 First-QTD Performance
Baird CV Index (Rel Perf) vs. Net Orders/Build
Baird CV Index Up Cycles vs. S&P 500
100
(cyclical trough = 100)

2.00
300
75
Current Cycle
MTOR
CVGI
1.50
WBC
200
50
WNC
1.00
CMI
DAN
100
Average
25
0.50
Volvo
(Months from trough)
Median
MAN
S&P1500Truck
12
16
Nov90
20
24
28
Sep00
32
36
Feb09
40
44
48
0.00
Dec87
ExpectedPerformance
0
Dec90
Dec93
Dec96
ETN
SRI
OSK
NAV
S&P500
0%
20%
40%
Dec05
Dec08
Dec11
RelativeIndex
Truck Supplier Recovery - Stocks vs. 2011 Earnings
Commercial Vehicle Change in 2012/13 Estimates

200
60%
Flat YTD
150
150%
StockRecoveryGreater
ThanEarnings
Up1%YTD
100
100%
S&P500
WBC
PCAR
NAV
SRI
50%
50
VOLV.B
CVGI
StockRecoveryLessThan
Earnings
MOD
MTOR
0%
0%
50%
100%
150%
200%
% PeakEarnings
Dec02
NetOrders/Build
% PeakStockPrice
Dec99
EmissionChanges
200%
MOD
20%
Dec80
PCAR
0
Jan09
Jul09
Jan10
Jul10
2012E
Jan11
Jul11
Jan12
2013E
Source: FactSet, Robert W. Baird & Co. estimates
Page 21

Macro Environment - Truck
US Freight Activity
Euro Zone PMI

60
120
90%
90
60%
60
30%
40
30
0%
30
0
Dec-72
50
-30%
Dec-77
Dec-82
Dec-87
Dec-92
Y/Y Chg
Dec-97
ATA Index
Dec-02
Dec-07
20
Dec97
Source: ATA, BTS, Baird estimates.
Dec01
Dec03
Recession
Dec09
4%
0%
4%
Dec91
Dec93
Dec95
Dec97
Dec99
Dec01
Dec03
Dec05
Dec07
Dec09
Dec11
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E2013E2014E
U.S.RealGDP(y/y%chg)
EurozoneIndustrialProduction(Q/Q)
EurozoneRealGDP(y/y%chg)
Source: Federal Reserve, Ecowin, Baird estimates.
Source: Univ. of Michigan, Ecowin, Baird estimates.
US On-Highway Emission Standards
European Emission Standards

5.00
5.00
4.00
1998
U.S.EPAOffroad Standards
2011(hp>751):3.5gNOx/0.10gPM
2015(hp>751):3.5gNOx/0.04gPM
2011(hp174751): 2.0gNOx/.02gPM
2014(hp174751): 0.04gNOx/0.02gPM
3.00
EuroII(1996)
4.00
2000/2004
2.00
NOx (g/bhphr)
1994
NOx (g/bhphr)
Dec11
US and Europe Real GDP Change
8%
U.S.Industrial Production(Q/Q)
Euro III(1999)
3.00
EuroVI(2005)
2.00
2007
EuroVI(2013)
2010
0.00
0.00
Euro V(2008)
1.00
1.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0.20
ParticulateMatter (g/bhphr)
Source: Company reports, Baird estimates.
Dec05
Dec07
EurozonePMI
Source: Markit Economics, Baird estimates.
US and European Industrial Production - Change
8%
Dec89
Dec99
TSI Freight Index
0.00
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
ParticulateMatter (g/bhphr)
Source: Company reports, Baird estimates.
Page 22
0.20

Cyclical Recovery - Truck
Global Recovery in Demand 2010-2014E

(units in 000s)
2010
2014E
CAGR
North America
270
520
18%
Europe
375
600
12%
Asia
2,003
2,466
5%
Total
2,648
3,586
8%
Organic Revenue Growth Net New Business

12%
RWB
Estimate
8%
4%
Represents estimated commercial vehicle production.

0%
-4%
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
New Business Growth (Quarter)
(Calendar Year Ending)
New Business Growth (LTM0
Cyclical Recovery in Quarterly EBITDA Margins

20%
Up Cycle EPS Growth

200%
(year-over-year)
43%annualEPSgrowth 20102014
RWB
Estimate
100%
15%
0%
10%
Assumesnormalcontributionmargins
Q1E 2012
-100%
5%
-200%
1998
0%
Dec-90 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12E Dec-14E
2000
2002
2004
2006
Truck Suppliers
2008
2010
2012E
S&P 500
Median
Potential Stock Performance (3-Year CAGR)
Enterprise Value to EBITDA Multiple
60%
16
45%
12
67th Percentile (>6.7x)
8
30%
4
33rd Percentile (<5.9x)
15%
0
High / Low
LTM Multiple
0%
S&P 500
WBC
PCAR
VOLV.B
Average
CVGI
MOD
MTOR
NAV
Page 23

US / European Truck Markets
US and European Sales Segment Performance
North America Class 8 Share - By Brand
EU CV Registrations 2011 YTD Chg (By Country)

Ranked bysize
GERMANY
Freightliner
Western Star
Sterling
Daimler
2009
26.0%
1.6%
3.1%
30.7%
2010
31.1%
2.0%
0.4%
33.5%
2011 YTD
29.2%
2.0%
0.0%
31.2%
International
27.5%
23.3%
21.4%
Kenworth
Peterbilt
PACCAR
14.4%
10.7%
25.0%
15.2%
9.9%
25.1%
17.6%
11.4%
29.0%
Volv o
Mack
Volvo Truck
6.9%
7.9%
14.8%
8.2%
7.9%
16.1%
10.1%
7.2%
17.4%
2.0%
2.1%
1.0%
100.0%
100.0%
100.0%
MediumTruck
FRANCE
MediumBusandCoach
UNITED KINGDOM
TOTALEUROPE (EU+EFTA)
HeavyTruck
ITALY
SPAIN
HeavyBusandCoach
POLAND
Others
Total Class 8
Source: ACT Research, Baird estimates

Through December 2011.
30%
15%
0%
15%
30%
NA Cl. 8 Sales 2011 YTD Change
20%
40%
60%
80%
EU CV Registrations 2011 YTD Chg (By OEM)

Ranked By
Size
Freightliner
0%
Ranked bysize
Others
International
Daimler
Kenworth
MAN
TotalN.A.
Europe Heavy Truck Share - By OEM

2009
Total
2010
2011 YTD
DAF
12.8%
13.9%
12.4%
Daimler
22.2%
22.0%
21.1%
Fiat
10.2%
9.2%
7.8%
MAN
16.2%
15.8%
16.4%
Renault
9.1%
8.8%
9.2%
Scania
12.7%
12.9%
13.1%
Volv o
12.9%
13.8%
14.9%
Others
3.8%
3.6%
3.0%
100.0%
100.0%
97.9%
Total Heavy Truck
Source: ACEA, Baird estimates

Through December 2011.
Volvo
Volvo
Peterbilt
Mack
Scania
WesternStar
Renault
0%
25%
50%
75%
100%
Source: ACT Research, Baird estimates. Through December 2011.
N.A. Class 5-7 Truck Sales 2011 YTD Change
0%
40%
60%
80%
EU CV Build versus Registrations - Quarterly

320
Ranked By
Size
International
20%
(000s)
240
Ford
Others
160
TotalN.A.
80
Freightliner
Kenworth
0
Q1-07
Peterbilt
0%
25%
50%
75%
100%
Source: ACT Research, Baird estimates. Through December 2011.
Q3-07
Q1-08
Q3-08
Q1-09
Build
Q3-09
Q1-10
Q3-10
Q1-11
Q3-11 Q1-12E
Registrations
Source: JD Power, Baird estimates. Through Q4-11.
Page 24

Market Structure
North American Class 8 Truck - Market Participants

Volvo
North America Class 8 Vehicle Share

Truck Type
Tractor
Sleeper
Day Cab
Total
Straight Truck
Sleeper
Day Cab
Total
Total Class 8
2009
2010
2011
RV
Step Van
Total Class 5-7
Mack
Others
Volvo
Freightliner
DAF
Volvo
Daimler
41.1%
29.1%
70.1%
44.4%
27.4%
71.8%
49.2%
26.6%
75.9%
Peterbilt
0.3%
29.5%
29.9%
0.5%
27.6%
28.2%
0.7%
23.5%
24.1%
100.0%
100.0%
100.0%
2009
64.6%
29.3%
2010
65.2%
22.8%
2011
74.2%
16.9%
4.7%
1.5%
100.0%
10.2%
1.8%
100.0%
7.3%
1.6%
100.0%
Daimler
Scania
Sterling
Western Star
PACCAR
North America Class 5-7 Vehicle Share

Truck Type
Truck
Bus
European Truck - Market Participants
Other
Renault
Kenworth
Navistar
Fiat
MAN
International
Source: ACT Research, Baird estimates. (as of December 2010)
Source: ACEA, Baird estimates. (as of December 2010)
North American Class 8 Truck - Share Trends
European Truck - Share Trends
40%
32%
30%
24%
20%
16%
Source: ACT Research. (as of December 2011)

10%
8%
North America Build for Export - Y/Y Change

Class 8
2009
-77%
2010
117%
2011
96%
-59%
-76%
101%
115%
3%
85%
Class 5-7
Total
North America Exports - Share of Production

2009
Class 8
Class 5-7
Total
2010
6%
1%
4%
9%
2%
6%
2011
11%
1%
8%
0%
Dec96
Dec99
Daimler
Dec02
Navistar
Dec05
PACCAR
Dec08
Volvo
Dec11
0%
Dec02
Dec03
Other
Dec04
Scania
Dec05
DAF
Dec06
Dec07
Fiat
Dec08
Daimler
Dec09
Dec10
Dec11
Volvo/Renault
Source: ACEA, Baird estimates (as of December 2011).
North American Class 5-7 Truck - Share Trends
North American Class 8 Engine - Share Trends

60%
40%
30%
45%
Mexico Build - Y/Y Change

Class 8
Class 5-7
Total
2009
-76%
-55%
2010
214%
53%
2011
27%
14%
-68%
129%
22%
20%
30%
10%
Mexico Build - Share of Production

2009
Class 8
Class 5-7
Total
2010
4%
6%
5%
2011
8%
6%
7%
6%
5%
6%
Source: ACT Research. (as of December 2011)
15%
0%
Dec96
Dec99
Daimler
Navistar
Dec02
PACCAR
Dec05
Volvo
Dec08
Ford
GM
Dec11
Other
0%
Cat
Cummins
Detroit Diesel/Mercedes
Navistar
Volvo
PACCAR
Source: Wards, Baird estimates. (as of December 2011)
Page 25

Market Structure
Global Commercial Vehicle Market (In Units)

Brazil
Russia
Global Commercial Vehicle Market (In Dollars)
North America
Brazil
Russia
North America
India
Europe
India
Japan
China
Korea
Europe
China
Korea
Japan
Source: ACEA, ACT Research, JD Power, Wards, Baird estimates.
Source: ACEA, ACT Research, JD Power, Wards, Baird estimates.
OEM Revenue Exposure Baird Covered Suppliers
Regional Rev. Exposure Baird Covered Suppliers
60%
100%
45%
75%
50%
30%
25%
15%
0%
0%
CommercialVehicleGroup
Meritor
Daimler
ModineManufacturing
Navistar
PACCAR
CommercialVehicle
Group
WABCO
Volvo
Meritor
NorthAmerica
ModineManufacturing
Europe
WABCO
RestofWorld
China Commercial Vehicle Production
China Heavy Truck - Market Participants
1,600
(indicates relationships with Eastern OEMs)
(units in thousands)
SAIC-IVECO
(Fiat)
1,200
Others (26)
Dongfeng
(Renault)
Baotou North
Benz
(Daimler)
800
Beiqi
(Daimler)
400
FAW (Volvo)
Shaanxi
(MAN)
0
1998
2000
2002
MDTruck
2004
MDBus
HDTruck
2006
2008
2010
HDBus
CNHTC
(MAN)
A joint venture between JAC and Navistar is pending approval.

PACCAR has sales offices in China (parts/engines) and a JV with a
Taiwanese company for trucks.
Page 26

Valuation - Truck
S&P Industries Short Interest (Days to Cover)
Truck Suppliers Short Interest
Banks
Food & Staples Retailing
Commercial & Professional Services
Automobiles & Components
Consumer Services
Healthcare Equip/Services
Real Estate
Technology Hardware & Equipment
Retailing
Media
Capital Goods
Telecommunication Services
Median
Household & Personal Products
Semis & Semi Equipment
Consumer Durables & Apparel
Baird Auto Supplier Coverage
Software & Services
Materials
Baird Commercial Vehicle Coverage
Food Beverage & Tobacco
Pharma/Biotech/Life Sciences
Transportation
Utilities
Energy
Insurance
Diversified Financials
CVGI
SRI
MOD
Group
PCAR
MTOR
NAV
WBC
0
4
6
Short Interest - Days to Cover
10
Price to LTM EPS
Enterprise Value to LTM EBITDA
10
16
40
Median Last
Cycle
30
12
20
10
0
Dec-83
2012E
Dec-86
Dec-89
Dec-92
Dec-95
Dec-98
Dec-01
Dec-04
Dec-07
Dec-10
Dec-75
Dec-80
Dec-85
P/E
Dec-90
Dec-95
Dec-00
Enterprise Value to LTM Sales
Price to Book Value
Dec-10
4
Median
Last Cycle
1.2
0.8
0.4
0.0
Dec-70
Dec-05
EV/EBITDA
1.6
Dec-75
Dec-80
Dec-85
Dec-90
Dec-95
Dec-00
Dec-05
Dec-10
EV/Sales
Source: Company reports, FactSet, Baird estimates
0
Dec-70
0
Dec-70
Dec-75
Dec-80
Dec-85
Dec-90
Dec-95
Dec-00
Dec-05
Dec-10
P/Book
Page 27

Stock Overview - Truck
Insider Trades (Last 3 months)
Insider Trades
(number of transactions )
80
CVGI
Number of Purchases
SNA
40
MOD
ACW
0
SRI
Purchases
Sales
NAV
40
PCAR
Number of Sales
WBC
80
Q1-01
MTOR
Q1-02
Q1-03
Q1-04
Q1-05
Q1-06
Q1-07
Q1-08
Q1-09
Q1-10
Q1-11
-10
Sales
Purchases
Net
-5
10
Short Interest (last 3 months)
Short Interest
(basis point change)
2.0%
Increase in Short Interest
PCAR
WBC
1.0%
SRI
CVGI
0.0%
NAV
1.0%
MOD
MTOR
Decrease In Short Interest

2.0%
Q1-01
Q1-02
Q1-03
Q1-04
Q1-05
Decrease
Q1-06
Q1-07
Increase
Q1-08
Q1-09
Q1-10
Q1-11
(6.0%)
(3.0%)
0.0%
3.0%
6.0%
3 Month Average (Net Change)
Estimate Changes
Estimate Changes (last 3 months)
600
(% change)
Number of Upward Revisions

CVGI
300
PCAR
SRI
0
WBC
NAV
300
MTOR
Number of Downward Revisions

600
Q1-02
Q1-03
Q1-04
Q1-05
Q1-06
Upward Revisions
Q1-07
Q1-08
Downward Revisions
Q1-09
Q1-10
Q1-11
4 Week Average
MOD
-60%
-30%
0%
30%
60%
Page 28

Business Model - Truck
EPS Surprise Last Four Quarters
Revenue Surprise Last Four Quarters

30%
50%
20%
25%
10%
0%
0%
25%
50%
10%
MTOR
CVGI
CMI
ETN
MOD
NAV
PCAR
Average
LastQuarter
SRI
VOLV.B
WBC
MTOR
Group
CVGI
CMI
ETN
MOD
NAV
Average
PCAR
SRI
VOLV.B
WBC
Group
LastQuarter
Return on Capital
Pension and Healthcare % of Assets (FY2011)
60%
WBC
45%
MTOR
NAV
30%
CVGI*
15%
MOD
PCAR
0%
MTOR
CVGI
MOD
NAV
PCAR
LastQuarter(LTMbasis)
WBC
VOLV.B
Group
0%
2012E
6%
12%
OPEB
18%
24%
Pension
Source: Company reports, Baird estimates (current as of Q4-11)
Source: Company reports, Baird estimates. *FY2010
Revenue Growth Peak-to-Peak (2012E)
EPS Growth Peak-to-Peak (2012E)

60%
30%
45%
20%
30%
10%
15%
0%
0%
10%
MTOR
CVGI
MOD
PeaktoPeakGrowth
NAV
PCAR
WBC
Average
Cal.2012ERevenueGrowth
15%
ARM
CVGI
MOD
NAV
PeaktoPeakGrowth
PCAR
SRI
WBC
Average
Cal.2012EEPSGrowth
Source: Company reports, Baird estimate
Page 29
Autoliv
Autoliv (ALV - $68.21 Outperform / Higher Risk)
Target Price: $68 (5.9x 2014E EBITDA discounted by 20% - Median Valuation of
Last Cycle Range)
Current View
Passive Safety Leadership: Autoliv is a global leader in the passive
safety market (airbags, seatbelts), with a global market share exceeding
35% in 2011 (more than 50% higher than the nearest competitors). The
biggest passive safety growth opportunity is in emerging markets, where
average content is approximately 25% below the global average and as
much as 45% below that of developed markets. In developed markets,
passive safety growth is driven by ever-tightening safety standards.
Active Safety Investments:
Bolstering the companys strong passive
safety market position, the company is investing in active safety (e.g.
driver information, crash detection, crash avoidance, and crash mitigation
using image/radar/infra red/sonar sensors). Over the next three years, the
active safety market is expected to grow 40% annually to $1.1 billion,
eventually reaching $4-5 billion by 2020. The company recently launched
an integrated radar/image sensor for BMW for several active-safety
applications. Management has noted penetration of the developing active
safety market is better than the companys passive safety share, while also
generating higher return on capital.
Strong Cash Flow: We expect Autoliv to generate average annual free
cash flow of nearly $700 million over the next five years. We expect
management to use free cash flow to pay dividends and fund investments
and acquisitions to strengthen the companys position in active safety. In
the past, the company has also repurchased shares.
Valuation: The stock recently traded near 5.3x LTM EBITDA, below the
5.9x median valuation of the last cycle.
Key Risks: 1) light vehicle demand in Europe and China; 2) rising
commodity prices; 3) pricing pressure; 4) foreign currency; 5) the
automotive market; 6) major customers; 7) emerging markets; 8) costs
associated with new business and new technologies; and 9) ongoing
antitrust investigations.
Price Target. Our $68 price target is based on 5.9 times our 2014
estimate of EBITDA discounted by 20%, the median of the historical range.
Company Description
Autoliv, Inc., headquartered in Stockholm, Sweden, develops and manufactures
integrated safety systems including airbags, seat belts, safety electronics,
infrared night vision systems, steering wheels, anti-whiplash systems, seat
components and child seats. Autoliv was the 20th largest North American and
23rd largest global supplier to automotive OEMs in 2010, as ranked by
Automotive News. The company was founded in 1956, and employs
approximately 48,000 people in approximately 80 wholly-owned or joint
venture facilities located in 29 countries. The company estimates it accounts for
one-third of global restraint systems.
Stock Chart
10
NTM Estimated EPS (Left)
100
Price
7.5
75
50
2.5
25
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
20
NTM Forward P/E
15
10
5
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
4
Price to Book
3
2
1
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile FY December 2011
ByGeography
RoW
22%
ByEndMarket
ByCustomer
Other12%
(China11%)
NAOEMs
28%
GM14%
North
America
29%
Hyundai/Kia9%
Asian
OEMs
Honda4%
18%
Japan
11%
Ford10%
Chrysler/Fiat
6%
Toyota5%
Volvo3%
2
Daimler5%
Europe
38%
Automotive
100%
BMW5%
PSA5%
VW9%
EUOEMs
41%
Source: Company filings, Robert W. Baird & Co. estimates
Page 30
Autoliv Inc. (ALV $68.21)
BAIRD 777 EAST WISCONSIN AVENUE MILWAUKEE, WI 53202

David Leiker, CFA (414) 298-7535 dleiker@rwbaird.com
Joe Vruwink (414) 298-5934 jvruwink@rwbaird.com
Jared Plotz (414) 298-7351 jplotz@rwbaird.com
February 24, 2012

Summary Earnings Model
Rating: Outperform
12-Month Target Price (5.9x 2014E EBITDA, Median Valuation of Last Cycle Range, Discounted by 20%):
$68
Last Cycle Range (2000-08) is 3.0-7.5x LTM EBITDA. Median is 5.9x.

Current Multiple = 5.3x LTM EBITDA (25th percentile), 4.9x 2012E and 4.3x 2013E.
Lt. Vehicle Build
(000)
Chg
Year
(in $ Millions)
Revenues
$
Chg
Gross Profit
%
Chg
EBITDA
%
Chg
Operating Income
$
%
Chg
Pretax Income
%
Chg
Tax
Rate
Net Income
%
Chg
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
15,268
14,915
15,083
15,635
15,551
17,035
17,166
15,483
16,369
15,874
15,754
15,753
15,252
15,022
12,579
8,558
11,910
-2.3%
1.1%
3.7%
-0.5%
9.5%
0.8%
-9.8%
5.7%
-3.0%
-0.8%
0.0%
-3.2%
-1.5%
-16.3%
-32.0%
39.2%
3,204.4
3,256.8
3,488.7
3,812.2
4,116.1
3,991.0
4,443.4
5,300.8
6,143.9
6,204.9
6,189.2
6,770.2
6,474.4
5,122.0
7,171.7
1.6%
7.1%
9.3%
8.0%
-3.0%
11.3%
19.3%
15.9%
1.0%
-0.3%
9.4%
-4.4%
-20.9%
40.0%
680.5
719.8
747.5
806.8
786.1
700.9
810.8
1,010.2
1,221.2
1,268.0
1,265.2
1,330.6
1,131.2
853.2
1,592.1
21.2%
22.1%
21.4%
21.2%
19.1%
17.6%
18.2%
19.1%
19.9%
20.4%
20.4%
19.7%
17.5%
16.7%
22.2%
552.6
5.8%
563.7
3.8%
582.1
7.9%
622.0
-2.6%
608.6
-10.8%
519.4
15.7%
579.3
24.6%
687.6
20.9%
811.4
3.8%
821.6
-0.2%
822.6
5.2%
853.2
-15.0%
726.0
-24.6%
517.2
86.6% 1,150.9
17.2%
17.3%
16.7%
16.3%
14.8%
13.0%
13.0%
13.0%
13.2%
13.2%
13.3%
12.6%
11.2%
10.1%
16.0%
2.0%
3.3%
6.9%
-2.2%
-14.7%
11.5%
18.7%
18.0%
1.3%
0.1%
3.7%
-14.9%
-28.8%
122.5%
345.6
356.0
354.1
368.6
339.5
239.0
330.8
408.8
513.1
512.7
520.0
532.4
379.1
202.2
869.2
10.8%
10.9%
10.1%
9.7%
8.2%
6.0%
7.4%
7.7%
8.4%
8.3%
8.4%
7.9%
5.9%
3.9%
12.1%
3.0%
-0.5%
4.1%
-7.9%
-29.6%
38.4%
23.6%
25.5%
-0.1%
1.4%
2.4%
-28.8%
-46.7%
+
300.5
317.5
312.5
329.7
290.6
182.1
286.7
379.0
484.5
482.0
481.4
476.6
321.3
138.8
805.5
9.4%
9.7%
9.0%
8.6%
7.1%
4.6%
6.5%
7.1%
7.9%
7.8%
7.8%
7.0%
5.0%
2.7%
11.2%
5.7%
-1.6%
5.5%
-11.9%
-37.3%
57.4%
32.2%
27.8%
-0.5%
-0.1%
-1.0%
-32.6%
-56.8%
+
41.9%
40.8%
39.6%
40.0%
40.3%
43.0%
33.0%
31.5%
32.1%
35.9%
31.0%
31.9%
30.9%
19.3%
26.1%
173.8
184.9
188.3
199.9
168.7
94.7
180.5
251.2
320.0
292.6
312.2
316.7
214.4
109.4
590.6
5.4%
5.7%
5.4%
5.2%
4.1%
2.4%
4.1%
4.7%
5.2%
4.7%
5.0%
4.7%
3.3%
2.1%
8.2%
6.4%
1.8%
6.2%
-15.6%
-43.9%
90.6%
39.2%
27.4%
-8.6%
6.7%
1.5%
-32.3%
-49.0%
+
Q1
Q2
Q3
Q4
Dec-11
3,350
3,100
3,172
3,421
13,043
16.0%
0.5%
6.5%
15.5%
9.5%
2,108.9
2,061.9
2,017.6
2,044.7
8,233.1
22.5%
14.4%
15.9%
7.2%
14.8%
466.0
421.6
411.2
429.0
1,727.8
22.1%
20.4%
20.4%
21.0%
21.0%
21.5%
320.2
2.3%
271.4
10.0%
271.4
1.5%
294.4
8.5% 1,157.4
15.2%
13.2%
13.5%
14.4%
14.1%
19.1%
-9.1%
0.1%
-5.8%
0.6%
254.8
205.4
204.9
224.0
889.1
12.1%
10.0%
10.2%
11.0%
10.8%
30.4%
-10.3%
1.4%
-7.7%
2.3%
239.8
185.0
192.6
210.8
828.2
11.4%
9.0%
9.5%
10.3%
10.1%
33.8%
-10.2%
1.6%
-8.7%
2.8%
23.9%
21.2%
27.8%
24.3%
24.3%
181.5
145.0
138.4
159.6
624.5
8.6%
7.0%
6.9%
7.8%
7.6%
43.5%
-1.0%
-1.2%
-10.1%
5.7%
Q1E
Q2E
Q3E
Q4E
Dec-12E
3,564
3,490
3,307
3,240
13,600
6.4%
12.6%
4.3%
-5.3%
4.3%
2,174.6
2,223.2
2,072.8
2,151.6
8,622.1
3.1%
7.8%
2.7%
5.2%
4.7%
451.7
474.5
449.7
463.0
1,838.8
20.8%
21.3%
21.7%
21.5%
21.3%
Q1E
Q2E
Q3E
Q4E
Dec-13E
3,585
3,598
3,539
3,678
14,400
0.6%
3.1%
7.0%
13.5%
5.9%
2,236.4
2,304.9
2,199.3
2,303.6
9,044.2
2.8%
3.7%
6.1%
7.1%
4.9%
467.1
494.9
481.3
501.0
1,944.4
20.9%
21.5%
21.9%
21.7%
21.5%
Dec-14E
Dec-15E
15,200
15,500
5.6%
2.0%
9,549.4
9,969.2
5.6%
4.4%
2,070.7
2,175.6
21.7%
21.8%
3.00
0.18
5.85
102.9
102.3
102.2
102.3
100.9
97.9
98.0
95.4
94.2
89.8
82.5
78.3
72.1
82.6
92.2
$1.93
$1.54
$1.48
$1.70
$6.67
38.7%
-3.8%
-2.0%
-10.3%
4.2%
1.75
1.29
1.43
1.62
6.61
94.0
94.2
93.5
93.9
93.6
-3.1%
288.7
13.3% -9.8%
218.7
10.1% -14.2%
206.0
9.5%
-14.1%
27.0%
149.3
6.9%
-17.8%
$1.59
-17.8%
12.5%
302.1
13.6% 11.3%
232.1
10.4%
13.0%
221.7
10.0%
19.8%
27.0%
161.0
7.2%
11.0%
$1.68
9.2%
9.4%
288.9
13.9%
6.4%
218.9
10.6%
6.8%
209.5
10.1%
8.8%
27.0%
152.2
7.3%
9.9%
$1.59
7.3%
7.9%
302.4
14.1%
2.7%
232.4
10.8%
3.7%
223.6
10.4%
6.1%
27.0%
162.7
7.6%
2.0%
$1.70
-0.1%
6.4% 1,182.0
13.7%
2.1%
902.0
10.5%
1.5%
860.8
10.0%
3.9%
27.0%
625.2
7.3%
0.1%
$6.56
-1.7%
Feb-01 Guidance: Q1: Revenue up 2% (+5% organic) (euro = $1.28), operating margin of 10.0%; 2012: Revenue up 4% (up 7% organic), operating margin of 10.0-11.0%
3.4%
302.5
13.5%
4.8%
230.0
10.3%
5.2%
221.9
9.9%
7.7%
27.0%
160.7
7.2%
7.6%
$1.68
5.6%
4.3%
316.4
13.7%
4.7%
243.9
10.6%
5.1%
237.2
10.3%
7.0%
27.0%
172.2
7.5%
7.0%
$1.80
7.0%
7.0%
313.9
14.3%
8.7%
241.4
11.0%
10.3%
235.8
10.7%
12.5%
27.0%
171.2
7.8%
12.5%
$1.79
12.5%
8.2%
324.9
14.1%
7.5%
252.4
11.0%
8.6%
247.4
10.7%
10.6%
27.0%
180.0
7.8%
10.6%
$1.88
10.6%
5.7% 1,257.7
13.9%
6.4%
967.7
10.7%
7.3%
942.3
10.4%
9.5%
27.0%
684.1
7.6%
9.4%
$7.14
8.9%
1.68
1.65
1.43
1.66
6.46
94.0
95.8
95.8
95.8
95.3
7.06
95.8
95.8
95.8
95.8
95.8
14.1%
14.3%
7.3% 1,049.7
5.7% 1,116.2
11.0%
11.2%
Base
Target Price Sensitivity

Upside
Percentile Multiple Downside
1,040.1
1,124.4
10.9%
11.3%
10.4%
8.1%
27.0%
27.0%
754.9
815.7
7.9%
8.2%
10.3%
8.1%
$7.88
$8.51
10.3%
8.1%
95.8
95.8
2014E represents trend EPS with stock price of: $95 (15% CAGR)
*As of February 1.
Shares Outstanding (Dec-11)
New Business Growth*
Year
Downside
2010
$5.20
$6.40
$7.35
25th
5.3
$31
$36
$40
2008
400
6%
Options (Diluted)
0.6
2011
$4.45
$6.67
$8.55
Median
5.9
6.5
$34
$40
$44
2009
300
5%
Convertible Securities
3.6
$37
$43
$48
2010
125
2%
Diluted Shares
93.9
2011
200
3%
Management Owns:
< 1%
2012
300
4%
Headquartered:
2013
300
3%
800
3%
75th
Base
8.5%
6.3%
7.0%
1.9%
6.0%
-14.4%
-42.2%
-
Avg.
Shares
23.4%
42.9%
29.0%
-4.1%
16.2%
6.9%
-26.4%
-57.5%
+
6.5% 1,349.7
5.1% 1,426.2
$1.69
$1.81
$1.84
$1.95
$1.67
$0.97
-
First
Call*
$1.49
$1.84
$2.63
$3.40
$3.26
$3.78
$4.04
$2.98
$1.26
$6.40
*Assumed contribution margin for 2011-15 is in the range of 20-25%

EPS Sensitivity
Fully Diluted EPS

Chg
Cash
Chg
Upside
2010 Macro Assumptions

Downside
NA
10,700
Base
11,910
Upside
13,100
Upside/Downside to Target Price

Percentile
Downside
Base
Upside
Rev
Change
Basic Shares
EU
4%
14%
24%
25th
-52%
-45%
-38%
2011-13
ROW
15%
25%
35%
Median
-48%
-38%
-32%
* Revenue growth with flat NA build ex-price of -2.5%.
75th
-43%
-34%
-26%
Euro/$
$61,798.12 ####### $61,798.12
Source for all models: Company reports, Robert W. Baird & Co. estimates
2012 | Please refer to Appendix - Important Disclosures and Analyst Certification.
89.7
Stockholm, Sweden
BorgWarner
BorgWarner (BWA - $82.43 Neutral / Average Risk)
Target Price: $90 (10.2x 2014E EBITDA plus calendar 2014 equity income less
minority interest at 19x earnings per share discounted by 27.5% - Median
Valuation of Current-Cycle Range)
Current View
Green Growth Prospects. The company is exposed to green secular
trends toward increased fuel economy and reduced emissions worldwide.
Products such as turbochargers (diesel and, more recently, gasoline
engines), timing chain systems (traditional and variable cam timing
systems), diesel engine technologies, 4WD/AWD systems, and new
transmission technologies (dual-clutch transmission) are all capable of
improving fuel economy and/or reducing emissions.
Strong New Business Growth. The new business pipeline (11-12%
annual revenue growth, +/- production and currency) is filled with orders
for new, higher-ROIC products that should further diversify the customer
base and geographic exposure. Recent comments from management have
indicated that this growth can be maintained well beyond the current threeyear backlog.
Diversified Revenue Mix. Sales in North America to North Americanbased OEMs are only 18% of total revenue. North America as a whole
accounts for less than one-third of total sales, while Europe is the
company's largest geographic region at approximately half of revenue.
Key Risk Factors. 1) Raw material and commodity costs; 2) slowing
European end markets; 3) truck (SUV, pickup) demand in North America;
4) slowing penetration of diesel engines; 5) increasing competition in
turbochargers (Continental, Cummins, Bosch); 6) foreign currency; 7)
major customers, programs, and product groups; 8) the commercial vehicle
market; 9) the automotive market; 10) new business launches; 11) new
technology; and 12) post-retirement liabilities.
Target Price. Our $90 target price is based on 10.2x our estimate of
calendar 2014 EBITDA, the median percentile of the current-cycle range,
plus per-share equity income net of minority interest valued at 19.0x
earnings.
Stock Chart
4
100
Price
80
60
40
1
20
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
40
NTM Forward P/E
30
20
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
6
Price to Book
4
2
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
ByGeography
ByEndMarket
North
America
24%
Asia
20%
Commercial
Vehicles16%
ByCustomer
Aftermarket
6%
(China6%)
China6%
Ford11%
NA OEMs18%
GM4%
Chrysler3%
Other29%
VW/Audi15%
EU OEMs 32%
Company Description
BorgWarner Inc., headquartered in Auburn Hills, MI, was incorporated in 1987
and is a leading global supplier of highly engineered systems and components
primarily for automotive powertrain applications (turbochargers, timing chains,
and cooling systems) and drivetrain applications (four-wheel-drive, all-wheeldrive and transmission) for light vehicles. BorgWarner was the 31st largest
North American supplier and 31st largest global supplier in 2010, according to
Automotive News. BorgWarner Inc. employs approximately 19,250 people and
has 60 operations in 19 countries.
Europe
56%
Automotive
78%
Renault/Nissan
Commercial
5%
Vehicle9%
Daimler6%
Hyundai/Kia
AsiaOEMs 9%
BMW3%
Toyota5%
4%
Page 31
BorgWarner (BWA $82.43)

February 24, 2012

Rating: Neutral
12-Month Target Price (10.2x 2014E EBITDA, Median Valuation of Current-Cycle (2009-Present) Range, plus cal-2014E eq inc less min int at 19.0x earnings per share, Discounted by 27.5%):
$90
Current Cycle (2009-Present) Range is 5.1-19.2x LTM EBITDA. Median is 10.2x.

(in $ Millions)
Year
Lt. Vehicle Build

(000)
Chg
Revenues
$
Chg
Gross Profit**
%
Chg
EBITDA
%
Operating Income
$
%
Chg
Chg
6.6% -56.6%
Pretax Income
%
Chg
Dec-93
13,843
11.0%
985.4
-6.0%
216.1
21.9%
-26.3%
132.6
13.5%
-7.7%
65.0
Dec-94
15,268
10.3%
1,223.4
24.2%
275.0
22.5%
27.3%
182.9
15.0%
37.9%
112.4
Dec-95
14,915
-2.3%
1,329.1
8.6%
284.2
21.4%
3.3%
186.4
14.0%
1.9%
108.8
8.2%
-3.2%
113.2
8.5%
3.8%
32.7%
Dec-96
15,083
1.1%
1,540.1
15.9%
334.6
21.7%
17.7%
211.9
13.8%
13.7%
127.1
8.3%
16.8%
118.8
7.7%
4.9%
33.2%
9.2%
72.9%
57.2
Tax
Rate
109.1
Net Income
%
Chg
Fully Diluted EPS

Chg
Cash
GAAP
EPS
Chg
5.8% -47.6%
42.5%
32.8
3.3%
-71.7%
$0.35
39.7%
64.4
5.3%
96.3%
$0.69
95.2%
74.2
5.6%
15.2%
$0.79
14.5%
$1.58
94.2
76.8
5.0%
3.5%
$0.81
3.5%
$0.89
94.3
$2.16
95.6
$2.00
$2.54
$1.77
$1.26
95.0
104.8
106.1
105.9
Dec-97
15,635
3.7%
1,767.0
14.7%
406.7
23.0%
21.5%
274.7
15.5%
29.6%
172.5
9.8%
35.7%
161.1
9.1%
35.6%
34.0%
103.2
5.8%
34.4%
$1.07
31.9%
Dec-98
Dec-99
Dec-00
Dec-01
15,551
17,035
17,166
15,483
-0.5%
9.5%
0.8%
-9.8%
1,836.8
2,458.6
2,645.9
2,351.5
4.0%
33.9%
7.6%
-11.1%
415.8
592.4
667.6
573.3
22.6%
24.1%
25.2%
24.4%
2.2%
42.5%
12.7%
-14.1%
269.3
389.2
423.5
339.0
14.7% -2.0%
15.8% 44.5%
16.0%
8.8%
14.4% -20.0%
159.5
243.4
253.1
169.3
8.7% -7.5%
9.9% 52.6%
9.6%
4.0%
7.2% -33.1%
142.8
208.2
214.3
138.4
7.8% -11.4%
8.5% 45.8%
8.1%
2.9%
5.9% -35.4%
32.2%
35.9%
36.8%
35.5%
94.7
132.2
132.8
85.4
5.2%
5.4%
5.0%
3.6%
-8.2%
39.6%
0.5%
-35.7%
$1.00
$1.26
$1.25
$0.81
-6.6%
25.6%
-0.8%
-35.6%
$1.54
$1.08
-29.8%
Avg
Shs.
8.9%
90.7%
First
Call*
$1.38
93.1
93.7
Dec-02
16,369
5.7%
2,731.1
16.1%
684.0
25.0%
19.3%
388.7
14.2%
14.7%
251.4
9.2%
48.5%
233.9
8.6%
69.0%
33.0%
149.9
5.5%
75.5%
$1.39
29.4%
$2.79
107.5
Dec-03
15,874
-3.0%
3,069.2
12.4%
747.9
24.4%
9.3%
431.5
14.1%
11.0%
270.1
8.8%
7.4%
256.7
8.4%
9.7%
28.5%
174.9
5.7%
16.7%
$1.60
14.8%
$1.60
109.2
Dec-04
Dec-05
15,754
15,753
-0.8%
0.0%
3,525.3
4,293.8
14.9%
21.8%
828.3
1,105.8
23.5%
25.8%
10.8%
33.5%
486.8
620.6
13.8%
14.5%
12.8%
27.5%
309.1
375.3
8.8%
8.7%
14.4%
21.4%
308.6
366.4
8.8%
8.5%
20.2%
18.7%
30.0%
26.2%
206.9
248.4
5.9%
5.8%
18.3%
20.1%
$1.83
$2.16
14.3%
18.2%
$2.03
$2.00
113.0
114.8
Dec-06
Dec-07
15,252
15,022
-3.2%
-1.5%
4,585.4
5,328.6
6.8%
16.2%
1,111.9
1,228.5
24.2%
23.1%
0.6%
10.5%
613.3
705.8
13.4%
13.2%
-1.2%
15.1%
356.8
441.2
7.8%
8.3%
-4.9%
23.7%
352.5
446.8
7.7%
8.4%
-3.8%
26.8%
26.5%
27.2%
232.8
297.3
5.1%
5.6%
-6.3%
27.7%
$2.01
$2.52
-7.2%
25.7%
$2.01
$2.49
116.0
117.8
Dec-08
12,579
-16.3%
5,264.0
-1.2%
1,153.4
21.9%
-6.1%
620.9
11.8% -12.0%
330.8
6.3% -25.0%
330.4
6.3% -26.1%
Dec-09
Dec-10
8,558
11,910
-32.0%
39.2%
3,962.0
5,652.8
-24.7%
42.7%
821.7
1,346.2
20.7%
23.8%
-28.8%
63.8%
339.0
777.5
8.6% -45.4%
13.8% 129.4%
78.1
524.6
2.0% -76.4%
9.3%
+
49.5
498.2
1.2%
8.8%
Q1
Q2
Q3
Q4
3,350
3,100
3,172
3,421
16.0%
0.5%
6.5%
15.5%
1,730.4
1,818.8
1,791.8
1,773.7
34.5%
27.9%
27.0%
15.7%
410.6
429.4
420.8
432.6
23.7%
23.6%
23.5%
24.4%
35.9%
26.3%
24.7%
17.9%
247.1
271.7
268.8
285.5
14.3%
14.9%
15.0%
16.1%
45.2%
34.4%
43.7%
30.9%
179.3
199.4
198.8
212.6
10.4%
11.0%
11.1%
12.0%
68.2%
44.9%
61.6%
35.1%
170.3
188.2
193.1
206.9
9.8%
10.3%
10.8%
11.7%
Dec-11
13,043
9.5%
7,114.7
25.9%
1,693.4
23.8%
25.8% 1,073.1
15.1%
38.0%
790.1
11.1%
50.6%
758.5
Q1E
Q2E
Q3E
Q4E
3,564
3,490
3,307
3,240
6.4%
12.6%
4.3%
-5.3%
1,936.6
1,962.3
1,919.3
2,014.4
11.9%
7.9%
7.1%
13.6%
464.8
473.4
459.8
494.0
24.0%
24.1%
24.0%
24.5%
13.2%
10.2%
9.3%
14.2%
298.2
305.6
290.0
316.7
15.4%
15.6%
15.1%
15.7%
20.7%
12.5%
7.9%
10.9%
224.7
231.2
217.0
240.5
11.6%
11.8%
11.3%
11.9%
25.3%
15.9%
9.2%
13.1%
Dec-12E
13,600
4.3%
7,832.6
10.1%
1,892.0
24.2%
11.7% 1,210.5
15.5%
12.8%
913.4
11.7%
15.6%
232.2
4.4%
-21.9%
$1.97
-22.0%
($0.31)
117.1
45.9
371.7
1.2%
6.6%
-80.3%
+
$0.40
$3.02
-79.9%
+
$0.23
$3.08
$0.16
$2.91
116.9
129.6
66.5%
40.4%
66.9%
41.5%
24.0%
20.6%
24.0%
26.9%
124.5
144.1
141.6
146.1
7.2%
7.9%
7.9%
8.2%
58.0%
50.6%
65.6%
30.8%
$1.00
$1.12
$1.15
$1.19
54.0%
43.9%
62.3%
32.3%
$1.00
$1.12
$1.15
$1.19
$0.96
$0.99
$1.04
$1.17
130.2
128.1
127.9
127.6
10.7%
52.2%
24.0%
556.3
7.8%
49.7%
$4.45
47.6%
$4.46
$4.44
128.4
220.1
228.7
218.3
241.7
11.4%
11.7%
11.4%
12.0%
29.3%
21.5%
13.0%
16.8%
24.5%
24.5%
24.5%
24.5%
161.1
167.1
159.4
177.0
8.3%
8.5%
8.3%
8.8%
29.4%
16.0%
12.6%
21.1%
$1.30
$1.34
$1.28
$1.42
30.3%
19.5%
11.7%
19.6%
$1.30
$1.34
$1.28
$1.42
$1.21
$1.31
$1.30
$1.43
127.6
127.6
127.6
127.6
908.8
11.6%
19.8%
24.5%
664.6
8.5%
19.5%
$5.35
20.2%
$5.35
$5.34
127.6
January 10 Guidance: 2012 = Revenue +10-12% (+14-16% ex-FX), Operating Margin 11.5% or better, EPS $5.35-5.65
11.6% 11.9%
253.9
11.8% 15.3% 25.0%
184.8
8.6% 14.7%
$1.48
11.8% 11.8%
263.4
12.0% 15.1% 25.0%
191.4
8.7% 14.5%
$1.53
11.6% 17.2%
263.7
12.1% 20.8% 25.0%
191.9
8.8% 20.3%
$1.54
12.1% 16.3%
289.1
12.6% 19.6% 25.0%
210.8
9.2% 19.1%
$1.69
14.3%
14.1%
19.8%
18.6%
$1.48
$1.53
$1.54
$1.69
127.6
127.6
127.6
127.6
16.7%
$6.24
127.6
Q1E
Q2E
Q3E
Q4E
3,585
3,598
3,539
3,678
0.6%
3.1%
7.0%
13.5%
2,159.5
2,196.0
2,186.1
2,302.3
11.5%
11.9%
13.9%
14.3%
520.5
531.8
526.5
566.0
24.1%
24.2%
24.1%
24.6%
12.0%
12.3%
14.5%
14.6%
330.4
338.6
334.2
363.4
15.3%
15.4%
15.3%
15.8%
10.8%
10.8%
15.2%
14.7%
Dec-13E
14,400
5.9%
8,843.8
12.9%
2,144.8
24.3%
13.4% 1,366.5
15.5%
12.9% 1,043.9
11.8%
14.3% 1,070.0
12.1%
17.7%
25.0%
778.8
8.8%
17.2%
$6.24
2,397.2
24.3%
11.8% 1,520.2
15.4%
11.2% 1,174.1
11.9%
12.5% 1,231.0
12.5%
15.0%
25.0%
897.2
9.1%
15.2%
$7.17
14.9%
$7.17
127.6
2,624.2
24.4%
9.5% 1,655.6 15.4%
8.9% 1,291.2
*Assumed contribution margin for 2011-2015 is 24-26%
12.0%
10.0% 1,386.5
12.9%
12.6%
25.0%
1,011.2
9.4% 12.7%
$8.06
12.5%
$8.06
127.6
Dec-14E
15,200
5.6%
9,853.3
11.4%
Dec-15E
15,500
2.0%
10,761.4
9.2%
251.5
258.4
254.3
279.7
24.8%
-11.7%
21.6%
* Excludes pretax loss on sale of transmission business of $61.5 million or $0.75 a share.
** Gross Profit = Sales - COGS (excludes Depreciation and Amortization)
*As of February 14.
Year
Company Guidance
NA Production
EU Production
Revenue
EBIT Margin
EPS
Q2
NA
NA
NA
NA
NA
2011
+9%
+2%
Comment
+19-23% Inc. Haldex acq

10.5%
At least 10.5%
$3.85-4.15

Rev
Chg
2008
650
12%
2009
450
9%
2010
570
14%
2011
750
13%
2012
833
12%
2013
833
11%
Basic Shares
Options (Diluted)
Diluted Shares
Insiders Own:
Headquartered:
2011-13
2,417
12%
* Revenue growth with flat NA build (ex-price of -2%).
109.2
1.6
16.8
127.6
3.8%
Auburn Hills, Michigan
Commercial Vehicle Group

Commercial Vehicle Group (CVGI - $13.00 Outperform / Higher Risk)
Target Price: $19 (6.5x 2014E EBITDA, Discounted by 20% - Median of Last
Cycle Range)
Current View
Cyclical Recovery in North America: The North American commercial
vehicle market represents approximately 40% of the companys revenue
and is expected to grow at a 5-10% CAGR through 2014.
International Expansion: The company has recently taken steps to
accelerate international expansion, investing in China and Mexico; recent
wins in China with XCMG, John Deere, and Beiqi Foton have verified this
strategy. Collectively, these awards represent approximately $40 million of
annualized revenue when fully launched.
New Business Wins and Acquisitions: During 2007-2010, the company
won numerous new business awards with both new and existing customers.
Several of these awards were with foreign customers, offering the
opportunity to penetrate fast-growing emerging markets.
These
awards/acquisitions should become more meaningful as volume rebounds,
resulting in a larger, more profitable company. A meaningful portion of this
business will begin to launch during 2012 ($45 million, or 6% net new
business growth).
Valuation: The stock recently traded near 7.3x LTM EBITDA, elevated due
to still-recovering EBITDA, above the historical median (6.5x) and peergroup average (6.0x).
Key Risks: 1) the pace of volume recovery in the North American
commercial vehicle market; 2) mix issues (lower-contented Mexico and
export trucks); 3) international expansion risks; 4) sustaining working
capital management improvements; 5) acquisition integration risk; 6) rising
raw material costs; 7) historical losses; and 8) major customers.
Target Price. Our $19 target price is based on the stock trading at 6.5
times our 2014 estimate of EBITDA, the median of the historical range.
Stock Chart
6
30
20
10
-2
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
40
NTM Forward P/E
30
20
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
24
Price to Book
18
12
6
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
ByGeography
RestofWorld
(China
8%
7%)
ByEndMarket
Bus/Agriculture
5%
Europe
7%
Company Description
Commercial Vehicle Group, Inc. manufactures seat systems, interior trim
systems (instrument and door panels, headliners, flooring), vision safety
systems (exterior mirrors, windshield wipers, switches and controls), cab
structures, and wire harnesses. In addition to the North American medium- and
heavy-duty truck market (40% of 2010 revenue), Commercial Vehicle Group
also supplies the following markets: construction equipment (23%), marine and
RV, agriculture, military, and bus (23%), and the commercial vehicle
aftermarket (14%). The company employs approximately 5,430 people at 37
facilities worldwide.
40
Price
Military
10%
ByCustomer
International
16%
NACl.8
40%
Other32%
Aftermarket
14%
Global
Truck48%
Deere2%
Komatsu2%
Other
8%
UnitedStates
85%
Construction
15%
PACCAR14%
NACl.57
EuropeTruck 4%
4%
Caterpillar7%
Volvo10%
Oshkosh
Truck8%
Freightliner
9%
Page 32
Commercial Vehicle Group, Inc. (CVGI $13.00)

February 24, 2012
Rating: Outperform
12-Month Target Price (6.5x 2014E EBITDA, Median Valuation of Last Cycle Range, Discounted by 20%):
$19

Year
Hvy-Truck Bld Med-Truck Bld

(000)
Chg
(000)
Chg
(in $ Thousands)
Revenues
$
Chg
Dec-98
Dec-99
Dec-00
Dec-00PF
Dec-01
Dec-02
333
252
252
146
181
-24.2%
-42.1%
24.1%
220
219
185
194
-15.7%
4.6%
196,994
244,963
397,000
271,226
298,679
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
182
269
341
376
212
206
118
154
0.4%
47.9%
26.9%
10.2%
-43.7%
-3.1%
-42.4%
30.2%
188
225
245
275
206
158
98
118
-2.8%
19.5%
8.6%
12.3%
-24.9%
-23.3%
-38.2%
20.7%
Q1
Q2
Q3
Q4
Dec-11
52
61
68
75
255
48.2%
72.0%
69.9%
71.0%
65.5%
40
45
42
41
167
Q1E
Q2E
Q3E
Q4E
Dec-12E
71
72
69
73
285
36.9%
19.1%
0.4%
-2.5%
11.6%
Q1E
Q2E
Q3E
Q4E
Dec-13E
71
75
74
75
295
Dec-14E
Dec-15E
315
315
24.4%
10.7%
10.1%
Gross Profit
%
Chg
99.6%
12.9%
18.9%
$
10,779
24,770
39,000
33,196
34,103
EBITDA
%
1,279
15,311
19,417
25,543
$0.15
$0.65
Net Income
%
Chg
17.3%
18.6%
17.8%
16.0%
11.0%
9.7%
2.1%
12.5%
46.1%
58.4%
39.8%
24.3%
41.3%
182,509
206,776
216,909
225,828
832,022
24.7% 24,716
45.3% 27,676
43.7% 29,822
42.9% 33,378
39.2% 115,592
13.5%
13.4%
13.7%
14.8%
13.9%
46.3%
55.9%
50.1%
64.5%
54.5%
11,113
14,621
16,912
19,956
62,602
6.1%
7.1%
7.8%
8.8%
7.5%
+
+
+
+
+
8,212
11,421
13,612
16,157
49,402
4.5%
5.5%
6.3%
7.2%
5.9%
+
+
+
+
+
4,129
6,265
8,215
10,524
29,133
2.3%
3.0%
3.8%
4.7%
3.5%
+
+
+
+
+
20.6%
15.7%
10.2%
4.0%
10.6%
3,277
5,279
7,376
10,091
26,023
1.8%
2.6%
3.4%
4.5%
3.1%
44
45
45
41
175
11.2%
0.4%
6.4%
2.2%
5.0%
232,696
242,442
229,014
239,392
943,544
27.5% 34,137
17.2% 36,673
5.6% 33,431
6.0% 36,137
13.4% 140,378
14.7%
15.1%
14.6%
15.1%
14.9%
38.1%
32.5%
12.1%
8.3%
21.4%
20,408
23,527
19,851
23,444
87,229
8.8%
9.7%
8.7%
9.8%
9.2%
83.6%
60.9%
17.4%
17.5%
39.3%
16,583
19,702
16,026
19,619
71,929
7.1%
8.1%
7.0%
8.2%
7.6%
+
72.5%
17.7%
21.4%
45.6%
11,333
14,471
10,815
14,428
51,047
4.9%
6.0%
4.7%
6.0%
5.4%
+
+
+
+
75.2%
20.0%
20.0%
20.0%
20.0%
20.0%
9,051
11,562
8,637
11,527
40,778
0.1%
4.6%
7.1%
2.6%
3.6%
46
50
43
46
185
5.4%
249,059
10.2%
264,924
-3.4%
249,625
10.8%
257,397
5.7% 1,021,005
7.0% 38,555
9.3% 41,731
9.0% 38,068
7.5% 41,178
8.2% 159,533
15.5%
15.8%
15.3%
16.0%
15.6%
12.9% 25,720
13.8% 27,801
13.9% 25,194
14.0% 27,768
13.6% 106,484
10.3%
10.5%
10.1%
10.8%
10.4%
26.0%
18.2%
26.9%
18.4%
22.1%
21,370
23,451
20,844
23,418
89,084
8.6%
8.9%
8.4%
9.1%
8.7%
28.9%
19.0%
30.1%
19.4%
23.8%
16,179
18,260
15,653
18,227
68,320
6.5%
6.9%
6.3%
7.1%
6.7%
+
26.2%
44.7%
26.3%
33.8%
36.0%
36.0%
36.0%
36.0%
36.0%
6.8%
0.0%
205
205
10.8% 1,122,190
0.0% 1,180,556
9.9% 182,805
5.2% 195,938
16.3%
16.6%
14.6% 128,408
7.2% 140,138
11.4%
11.9%
20.6% 109,908
9.1% 121,638
9.8%
10.3%
23.4% 89,145
10.7% 100,875
7.9%
8.5%
30.5%
13.2%
36.0%
36.0%
EPS Sensitivity
Downside
-3.7% 49,694
32.3% 70,749
98.3% 134,450
22.3% 148,038
-24.5% 76,641
9.6% 74,205
-39.9%
9,657
30.4% 74,797
6.0% 27,673
38.6% 42,139
103.4% 89,886
9.0% 96,088
-67.5% 19,715
-15.6% 11,441
(41,868)
+
16,956
Base
$0.23
$0.93

Upside
$0.50
$1.30

Upside
Downside Base
139
154
170
Class 8
106
118
130
Class 5-7
-19%
-9%
+1%
Const/Ag
$1.33
$1.33
$1.33
Euro/$
Percentile
25th
Median
75th
Multiple Downside
5.7 #VALUE!
6.5 #VALUE!
8.9 #VALUE!
Base
Upside
$10 #VALUE!
$11 #VALUE!
$16 #VALUE!

Percentile
Downside Base
Upside
25th
#VALUE!
-26% #VALUE!
-15% #VALUE!
Median
#VALUE!
75th
#VALUE!
20% #VALUE!
Source for all models: company reports, Robert W. Baird & Co. estimates.
0.6%
(1,291)
6.3% 1097.1% (3,416)
7.2%
26.8%
3,057
8.6%
31.6% (40,244)
Tax
Rate
287,579
380,446
754,481
922,644
696,786
763,489
458,569
597,779
*Assumed contribution margin for 2011-2015 is in the range of 17-25%.
Year
2010
2011
Pretax Income
%
Chg
9.4%
15.1%
15.3%
16.6%
12.6%
13.2%
13.5%
12.0%
5.2%
4.0%
-5.5%
4.8%
18,477
36,880
41,633
49,496
0.4% 36,159
42.4% 50,116
90.0% 101,927
10.1% 111,071
-48.2% 36,140
-3.2% 30,503
-87.0% (25,201)
+
28,693
5.5%
10.1%
9.8%
12.2%
11.4% -
Operating Income
$
%
Chg
Chg
9.6%
11.1%
11.9%
10.4%
2.8%
1.5%
-9.1%
2.8%
8.3%
9,258
52.3% 23,930
113.3% 78,549
6.9% 83,995
-79.5% (4,836)
-42.0% (13,197)
(60,872)
+
4,662
-0.7%
-1.4%
1.1%
-13.5%
164.7%
-189.5%
-1416.5%
35.0%
(839)
-26.9% (4,334)
165.9% (2,015)
-13.0% (45,480)
-0.4%
-1.8% 416.9%
-0.7% -53.5%
-15.2% 2157.1%
3.2%
6.3%
10.4%
9.1%
-0.7%
-1.7%
-13.3%
0.8%
-123.0%
158.5%
228.2%
6.9%
-105.8%
172.9%
+
56.9%
3,992
27.1% 17,449
37.1% 49,411
32.3% 56,887
32.8% (3,251)
38.0% (8,187)
5.5% (57,510)
-39.1%
6,487
1.4% -108.8%
4.6% 337.1%
6.5% 183.2%
6.2%
15.1%
-0.5% -105.7%
-1.1%
-12.5%
1.1%
+
Fully Diluted EPS (GAAP)

$
Chg
Cash
Chg
($3.25)
+
+
+
+
+
$0.12
$0.19
$0.26
$0.36
$0.93
3.9%
4.8%
3.8%
4.8%
4.3%
+
+
+
+
56.7%
$0.32
$0.41
$0.31
$0.41
$1.45
10,339
11,671
10,002
11,650
43,662
4.2%
4.4%
4.0%
4.5%
4.3%
+
0.9%
15.8%
1.1%
7.1%
56,986
64,490
5.1%
5.5%
30.5%
13.2%
$0.29
+
$1.12
+
$2.51
124.5%
$2.63
5.0%
($0.15) -105.8%
($0.38)
($2.64)
$0.23
+
Pro
Forma
First
Call*
2,568
9,337
13,893
13,990
0.19
(2.54)
0.17
13,779
15,635
19,718
21,619
21,439
21,579
21,809
27,026
0.19
0.23
0.21
0.25
0.79
28,186
27,767
28,152
28,195
28,075
176.1%
115.7%
16.9%
14.2%
56.1%
0.29
0.30
0.27
0.29
1.16
28,195
28,195
28,195
28,195
28,195
$0.37
$0.41
$0.35
$0.41
$1.55
14.2%
0.9%
15.8%
1.1%
7.1%
1.48
28,195
28,195
28,195
28,195
28,195
$2.02
$2.29
30.5%
13.2%
28,195
28,195
+
+
+
+
+
$0.43
$1.44
-
Avg.
Shares
*As of February 14.
Year
Rev.
Change
Basic Shares
28,088
2008
35
5%
Options (Diluted)
107
2009
35
5%
0
2010
22
5%
Diluted Shares
28,195
15%
2011
18
3%
Mgt Owns:
2012
46
6%
Headquartered:
New Albany, Ohio
2013
45
5%
2011-13
109
4%
* Revenue growth with flat production (ex-2% price).
Delphi Automotive
Delphi Automotive (DLPH - $32.00 as of March 1 Outperform / Higher Risk)
Target Price: $32 (5.1x 2014E EBITDA, Discounted by 25% - Median Percentile
of 1999-2005 Trading Range)
Current View
Repositioned business model. Since filing for bankruptcy, Delphi has

dramatically reformed its business model by divesting or exiting non-core
businesses and product lines, rationalizing global headcount, and
diversifying exposure to customers, end markets, and geographies.
Secular growth opportunities. Delphis strategic decision in 2006 to

focus on market-relevant products in which the company held technical and
competitive advantages has resulted in a leading portfolio of products
aimed at the most significant secular opportunities in the automotive space:
fuel efficiency, safety, connectivity, and growth in emerging markets.
Cyclical end-market recovery. As of December 2010, North America and

Europe accounted for 75% of Delphis overall revenues. Collectively, these
markets are expected to grow 3% annually through 2014, with growth
driven by a replacing of an aged fleet and return to trend levels of
demand (the level expected based on scrappage and population growth).
Strong free cash flow and balance sheet. Near double-digit top-line
growth over the next several years, coupled with margin expansion as the
company leverages this higher volume, positions Delphi to generate
substantial free cash flow. We estimate free cash flow could average $1.0
billion annually through 2014, representing 25-30% annual growth.
Key risks. Key risks include: 1) the cyclicality of the global automotive and
commercial vehicle industries; 2) the rate and length of growth in emerging
markets; 3) changes in technology and the necessary investments needed
to remain competitive; 4) future stock sales (only 7% of shares are
currently trading); 5) ongoing antitrust investigations by the European
Commission and U.S. Department of Justice; 6) foreign exchange risk; and
7) raw material inflation, particularly copper.
Target Price. Our $32 price target is based on 5.1 times our estimate of
2014 EBITDA, the median percentile valuation of the 1999-2005 time
frame.
Stock Chart
12
40
Price
30
20
10
0
Jan
Feb
Mar
Apr May Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Source: FactSet

ByGeography
SouthAmerica
7%
Asia
15%
ByEndMarket
NorthAmerica
32%
ByCustomer
MD/HDTruck
OEMs8%
Volvo/Geely2%
Aftermarket
8%
Commercial
Vehicle8%
GM19%
NAOEMs26%
Other
Automotive26%
Ford7%
Volkswagen9%
Europe
45%
Automotive
84%
Hyundai2%
Toyota3%
ShanghaiGM4%
Fiat3%
Daimler7%
"Major" EU
Renault5%
PSA5%
OEMs 28%
Company Description
Delphi Automotive PLC, incorporated in Jersey with world operations
headquartered in Troy, Michigan, is a leading global supplier and manufacturer
of electrical and electronic, powertrain, safety and thermal technology for the
global automotive and commercial vehicle industries. The company is well
positioned to help OEM customers meet increasing government regulations and
consumer demands for improved fuel economy, safety, and connectivity with
products such as gasoline and diesel engine management systems, HVAC
modules, passive safety electronics, active safety systems, and infotainment.
Page 33
Delphi Automotive (DLPH $32.00)

March 1, 2012
12-Mo. Target Price (5.1x 2014E EBITDA, Median Valuation of 1999-2005 Range, Discounted by 25%) =
$32
Rating: Outperform
Prior Trading Range as Public Company (1999-2005) is -16.3-26.7x LTM EBITDA. Median is 5.1x.
Year
Lt. Vehicle Build

(000)
Chg
(in $ Millions)
Revenues
$
Chg
Gross Profit
%
Chg
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98PF
Dec-99
Dec-00
Dec-01
Dec-02
13,843
15,268
14,915
15,083
15,635
15,551
17,035
17,166
15,483
16,367
10.3%
-2.3%
1.1%
3.7%
-0.5%
9.5%
0.8%
-9.8%
5.7%
29,327
31,044
31,661
31,032
31,447
28,479
29,192
29,139
26,088
27,427
5.9%
2.0%
-2.0%
1.3%
-9.4%
2.5%
-0.2%
-10.5%
5.1%
3,573
3,963
4,277
3,728
3,737
2,592
4,158
4,395
3,010
3,450
12.2%
12.8%
13.5%
12.0%
11.9%
9.1%
14.2%
15.1%
11.5%
12.6%
10.9%
7.9%
-12.8%
0.2%
-30.6%
60.4%
5.7%
-31.5%
14.6%
2,540
2,806
2,911
2,283
2,322
992
2,539
2,680
1,540
1,940
Dec-02
16,367
5.7%
27,641
6.0%
3,334
12.1%
10.8%
1,865
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Q1
Q2
Q3
Q4
Dec-10
EBITDA*
%
Chg
Operating Income
$
%
Chg
Pretax Income
%
Chg
8.7%
1,763
6.0%
1,226
4.2%
25.0%
9.0%
10.5%
2,084
6.7%
18.2%
1,837
5.9%
49.8% 35.1%
9.2%
3.7%
2,138
6.8%
2.6%
1,899
6.0%
3.4% 33.6%
7.4%
-21.6%
1,520
4.9%
-28.9%
1,055
3.4%
-44.4% 24.5%
7.4%
1.7%
352
1.1%
-76.8%
232
0.7%
-78.0% 19.0%
3.5%
-57.3%
(110)
-0.4% -131.1%
(154)
-0.5% -166.4% 85.0%
8.7% 155.8%
1,682
5.8% -1635.0%
1,721
5.9% -1217.1% 37.1%
9.2%
5.6%
1,744
6.0%
3.7%
1,718
5.9%
-0.2% 36.4%
5.9%
-42.5%
518
2.0%
-70.3%
344
1.3%
-79.9% 36.0%
7.1%
26.0%
952
3.5%
83.8%
793
2.9%
130.2% 34.8%
On June 30, 2005 Delphi restated annual results for 2002 and quarterly results for 2003-2004.
6.7%
21.1%
863
3.1%
66.6%
707
2.6%
105.2% 29.3%
15,873
-3.0%
28,077
2.4%
3,359
12.0%
-2.6%
1,763
6.3%
15,752
-0.8%
28,622
1.9%
2,908
10.2% -13.4%
1,309
4.6%
15,751
0.0%
26,974
-5.8%
1,246
4.6% -57.2%
(788) -2.9%
Results after October 2005 reflect Delphi Corporation in Chapter 11 bankruptcy
15,252
-3.2%
26,392
-2.2%
976
3.7% -21.7% (3,779) -14.3%
15,022
-1.5%
22,283
-15.6%
1,217
5.5%
24.7% (1,031) -4.6%
12,579
-16.3%
18,060
-19.0%
992
5.5% -18.5%
(654) -3.6%
Delphi emerges from bankruptcy August 19, 2009.
8,558
-32.0%
11,758
-34.9%
544
4.6% -45.2%
(425) -3.6%
Results after 2009 include depreciation expense in cost of sales and SG&A expense.
2,887
71.9%
3,410
41.6%
562
16.5%
+
423 12.4%
3,084
73.9%
3,446
24.2%
543
15.8%
+
404 11.7%
2,978
26.9%
3,308
4.9%
502
15.2% 175.8%
311
9.4%
2,962
7.3%
3,652
6.8%
441
12.1%
17.9%
223
6.1%
11,910
39.2%
13,816
17.5%
2,048
14.8% 276.5%
1,361
9.8%
-9.1%
-25.8%
-
705
119
(2,171)
379.6%
-72.7%
-36.6%
(4,858)
(1,945)
(1,481)
-18.4%
-8.7%
-8.2%
-35.0%
(1,104)
2.5%
-25.9%
0.4%
-83.1%
-8.0% -1924.4%
582
(35)
(2,371)
2.1%
-0.1%
-8.8%
123.8%
-60.0%
-23.9%
(5,294)
(2,767)
3,250
-9.4%
-25.5%
948
3.2%
975
3.1%
2.8%
1,307
4.1%
34.1%
853
2.7%
-34.7%
215
0.7%
-74.8%
(23)
-0.1%
-110.7%
1,083
3.7% -4790.0%
1,094
3.8%
0.9%
220
0.8%
-79.8%
517
1.9%
134.5%
Prior results were not restated
468
1.7%
112.3%
F.D. EPS (Oper.)

$
Chg
2.04
2.10
2.81
1.83
0.46
(0.04)
1.91
1.93
0.39
0.92
0.83
2.8%
34.1%
-34.7%
-74.8%
-108.8%
-4783.5%
1.1%
-79.8%
134.3%
113.0%
GAAP
EPS
First
Call*
Avg
Shs.
(0.20)
1.95
1.88
(0.66)
0.61
465
465
465
465
465
565
566
564
564
565
0.57
562
-26.6% 27.5%
-106.0% 616.7%
6674.3%
-2.3%
377
181
(2,340)
1.3%
0.6%
-8.7%
-27.1%
-52.0%
-1394.0%
0.67
0.32
(4.18)
-26.5%
-52.7%
-1410.9%
(0.02)
(8.47)
(4.45)
0.23
(1.99)
560
562
560
-20.1%
-12.4%
18.0%
123.3%
-47.7%
-217.5%
-2.6%
18.9%
5.1%
(5,467)
(2,308)
3,056
-20.7%
-10.4%
16.9%
133.6%
-57.8%
-232.4%
(9.74)
(4.10)
5.60
133.1%
-57.9%
-236.4%
(9.74)
(4.10)
5.60
560
562
546
9,074
77.2%
179.2%
-3.7%
9,369
79.7%
206.6%
16.50
194.8%
16.50
568
-162.3%
-183.2%
-187.9%
1515.7%
-185.1%
320
295
206
140
960
9.4%
8.6%
6.2%
3.8%
7.0%
-34.6%
-154.7%
-107.3%
-98.8%
-89.4%
26.6%
21.0%
30.2%
35.1%
26.9%
215
214
127
75
631
6.3%
6.2%
3.8%
2.1%
4.6%
-59.9%
-122.0%
-102.9%
-94.7%
-
0.32
0.32
0.19
0.11
0.93
-65.5%
-131.0%
-104.1%
-99.5%
-94.4%
0.32
0.32
0.19
0.11
0.93
677
677
679
679
678
412
428
393
411
1,644
10.3%
10.2%
10.0%
10.5%
10.2%
27.2%
44.1%
91.1%
263.4%
74.9%
426
389
372
341
1,528
10.7%
9.2%
9.5%
8.7%
9.5%
33.1%
31.9%
80.9%
144.1%
59.1%
27.2%
18.8%
23.4%
8.5%
20.0%
291
298
266
290
1,145
7.3%
7.1%
6.8%
7.4%
7.1%
38.6%
24.3%
129.1%
1422.6%
81.5%
0.43
0.88
0.79
0.88
2.98
35.0%
179.2%
323.6%
697.6%
220.6%
0.43
0.88
0.79
0.88
2.98
0.56
679
338
337
328
419
432
10.5%
4.9%
411
10.0%
-3.5% 19.0%
313
7.6%
11.9%
0.95
447
10.4%
4.4%
425
9.9%
9.4% 19.0%
326
7.6%
-8.8%
0.99
385
9.9%
-2.0%
360
9.3%
-3.2% 19.0%
272
7.0%
8.6%
0.83
415
10.6%
0.9%
385
9.8%
13.0% 19.0%
289
7.4%
313.6%
0.88
1,679
10.3%
2.1%
1,582
9.7%
3.5% 19.0%
1,200
7.4%
4.8%
3.65
Q1 Guidance: Revenue $4.0-$4.1 billion, EPS $0.83-$0.96. 2012 Guidance: Revenue $16.2-$16.5 billion, EPS $3.44-$3.69
14.6%
1,928
11.0%
14.8%
1,842
10.5%
16.4% 19.0%
1,394
7.9%
16.2%
4.25
10.5%
2,160
11.4%
12.0%
2,081
11.0%
13.0% 19.0%
1,568
8.3%
12.5%
4.78
9.2%
2,414
12.1%
11.8%
2,343
11.8%
12.6% 20.0%
1,741
8.8%
11.1%
5.31
122.5%
12.5%
4.9%
-0.3%
22.5%
0.95
0.99
0.83
0.88
3.65
0.92
0.98
0.86
0.81
3.50
328
328
328
328
328
16.2%
12.5%
11.1%
4.25
4.78
5.31
3,997
4,213
3,931
3,900
16,041
17.2%
22.3%
18.8%
6.8%
16.1%
644
695
637
679
2,655
16.1%
16.5%
16.2%
17.4%
16.6%
14.6%
28.0%
26.9%
54.0%
29.6%
529
544
516
530
2,119
13.2%
12.9%
13.1%
13.6%
13.2%
25.1%
34.7%
66.1%
137.6%
55.7%
Q1E
Q2E
Q3E
Q4E
Dec-12E
3,564
3,490
3,307
3,240
13,600
6.4%
12.6%
4.3%
-5.3%
4.3%
4,127
4,304
3,886
3,928
16,244
3.2%
2.2%
-1.1%
0.7%
1.3%
684
715
632
677
2,708
16.6%
16.6%
16.3%
17.2%
16.7%
6.2%
2.9%
-0.7%
-0.3%
2.0%
557
572
510
540
2,179
13.5%
13.3%
13.1%
13.7%
13.4%
5.3%
5.1%
-1.1%
1.8%
2.8%
Dec-13E
Dec-14E
Dec-15E
14,400
15,200
15,500
5.9%
5.6%
2.0%
17,545
18,914
19,870
8.0%
7.8%
5.1%
3,019
3,327
3,542
17.2%
17.6%
17.8%
11.5%
10.2%
6.5%
2,498
2,760
3,014
14.2%
14.6%
15.2%
*Gross margin contribution is in the range of 20-30% during 2011-2015

*EBITDA = Operating Income (incl. Restructuring) + D&A
32%
45%
16%
7%
100%
Chg
9.5%
8.6%
6.2%
3.1%
6.8%
16.0%
0.5%
6.5%
15.5%
9.5%
NA
Europe
Asia
South America
Total
Net Income
%
324
297
206
113
940
3,350
3,100
3,172
3,421
13,043
Revenue Mix - End Market (2011)

General Motors (NA, Int'l)
12%
Ford
7%
Total Detroit 3
19%
Foreign Auto
65%
Total Auto
84%
MD/HD Truck
8%
Aftermarket
8%
Total
100%
+
+
+
+
+
Q1
Q2
Q3
Q4
Dec-11
Revenue Mix - Geography (2011)
Tax
Rate
Revenue Mix - Product (2011)

Electrical/Electronic Architecture
Powertrain Systems
Electronics/Safety
Thermal Systems
Total
328
328
328
*As of January 26.

41%
31%
18%
11%
100%
Basic Shares
Options (Diluted)
Diluted Shares
Insiders Own
Major (>5%) Equity Shareholders:
Headquartered:
328
0
0
328
<1%
45%
Troy, Michigan
Gentex
Gentex (GNTX - $27.64 as of Feb. 28 Outperform / Average Risk)
of "Steady Growth" Phase from 2000-2004)
Current View
Secular Revenue Growth: We expect Gentex to grow revenue at a 1520% annual rate for the next several years, driven by the cyclical recovery
in global light vehicle production (4-5% annual growth through 2015) and
10-15% organic growth above end market growth.
Incremental Revenue Drivers: We expect Gentex to grow revenue 1015% above end market growth, driven by increasing vehicle penetration
(low- and mid-priced vehicles, exterior mirrors, underpenetrated OEMs,)
and increasing content (embedded technology interfaces, Rear Camera
Display, SmartBeam, emerging potential for driver assistance features).
Upward Pressure on Margins: As revenue grows at a 15-20% rate, we

expect the company to generate a 35-40% incremental contribution margin
on fixed costs leverage, productivity gains, and value-added valueengineering activities.
Near-term, contribution margin is under pressure from increased costs

associated with capacity expansions at existing facilities.
Attractive Valuation: Gentex recently traded near 12.2x LTM EBITDA,

below the 14.6x median of the steady growth period during 2000-2004.
We continue to believe that the shares will see an upward revaluation over
the next several years, as revenue and earnings growth accelerate. Upside
could be as high as the 15.1x multiple reached during the rapid growth
period during 1994-1999.
Key Risks: 1) timing the pace and slope of end-market recovery; 2)

adoption of auto-dimming mirrors and advanced features, especially Rear
Camera Display; 3) a shift in mix between large and small vehicles; 4) raw
material and component costs, primarily purchased electronics components;
5) costs associated with bringing concepts to market and winning new
business; 6) major customers and vehicle programs; 7) modeling risk; 8)
the automotive and competitive environment; and 9) premium valuation.
Target Price. Our $35 price target is based on 14.5 times our estimate of
2014 EBITDA, the median percentile valuation of the 2000-2004 time
frame.
Company Description
Gentex Corporation was founded in 1974 to manufacture residential smoke
detectors. In 1982, the company introduced an automatic rear view mirror that
was the first commercially successful glare-control product offered as an
alternative to the conventional prism mirror. Today, Gentex operates out of five
facilities in Zealand, Michigan (four automotive); automotive sales/engineering
offices in Livonia, Michigan; China, France, Germany, Japan, South Korea,
Sweden, and the United Kingdom; and four regional U.S. sales offices for the
Fire Protection Group.
Stock Chart
2
40
Price
1.5
30
20
0.5
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
40
NTM Forward P/E
30
20
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
6
Price to Book
4
2
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
ByGeography
ByEndMarket
ByCustomer
FireProtection
2%
Other
International*
34%
OtherOEMs
16%
UnitedStates
33%
GM12%
Hyundai/Kia
11%
Chrysler5%
Toyota12%
Japan
8%
NAOEMs29%
Ford9%
Germany
25%
Automotive
98%
BMW9%
VW/Audi15%
Daimler11%
EUOEMs 31%
Page 34
$27.64)
Gentex Corporation (GNTX

February 28, 2012

Rating: Outperform
12-Month Target Price (14.5x 2014E EBITDA, 50th Percentile Valuation of 2000-2004 Range, Discounted by 15%):
$35
Last Cycle Range is 9.0-27.6x LTM EBITDA. Median is 14.6x.
Year
Lt. Vehicle Build

(000)
Chg
(in $ Thousands)
Revenue
$
Chg
63,664
Gross Profit
%
Chg
$
-
EBITDA
%
Chg
-
Operating Income
$
%
Chg
-
Pretax Income
Tax
Net Income
F.D. EPS
First
Avg.
$
%
Chg Rate
$
%
Chg
$
Chg
Call*
Shares
Dec-93
13,843
25,212
39.6%
17,895
28.1%
13,854
21.8%
14,746
23.2%
33.2%
9,845
136,900
Dec-94
15,268
10.3%
98,762
55.1%
38,442
38.9%
52.5%
25,955
26.3%
45.0%
22,971
23.3%
65.8%
24,669
25.0%
67.3%
33.3%
16,465
16.7% 167.2%
$0.12
67.1%
137,000
Dec-95
14,915
-2.3%
111,566
13.0%
43,799
39.3%
13.9%
28,164
25.2%
8.5%
24,962
22.4%
8.7%
27,931
25.0%
13.2%
32.4%
18,895
16.9%
15.5%
14.8%
$0.07
$0.14
14.6%
137,162
Dec-96
15,085
1.1%
148,708
33.3%
55,125
37.1%
25.9%
39,759
26.7%
41.2%
35,840
24.1%
43.6%
39,482
26.6%
41.4%
32.5%
26,663
17.9%
41.1%
$0.19
36.3%
142,049
Dec-97
15,635
3.6%
186,328
25.3%
67,387
36.2%
22.2%
53,900
28.9%
35.6%
47,482
25.5%
32.5%
52,190
28.0%
32.2%
32.5%
35,231
18.9%
32.1%
$0.24
30.4%
143,939
Dec-98
15,551
-0.5%
222,292
19.3%
90,391
40.7%
34.1%
74,866
33.7%
38.9%
67,343
30.3%
41.8%
74,663
33.6%
43.1%
32.6%
50,307
22.6%
42.8%
$0.34
39.6%
147,210
Dec-99
17,035
9.5%
262,155
17.9%
113,335
43.2%
25.4%
95,179
36.3%
27.1%
85,522
32.6%
27.0%
96,216
36.7%
28.9%
32.6%
64,864
24.7%
28.9%
$0.43
26.3%
149,927
Dec-00
Dec-01
17,166
15,484
0.8%
-9.8%
297,421
310,305
13.5%
4.3%
124,953
122,003
42.0%
39.3%
10.3% 101,746
-2.4% 97,260
34.2%
31.3%
6.9%
-4.4%
90,412
82,060
30.4%
26.4%
5.7%
-9.2%
104,524
96,617
35.1%
31.1%
8.6%
-7.6%
32.5%
32.5%
70,545
65,216
23.7%
21.0%
8.8%
-7.6%
$0.47
$0.43
8.3%
-7.9%
150,958
151,526
Dec-02
16,369
5.7%
395,268
27.4%
159,647
40.4%
30.9% 133,829
33.9%
37.6%
115,200
29.1%
40.4%
127,072
32.1%
31.5%
32.5%
85,771
21.7%
31.5%
$0.56
30.1%
153,199
Dec-03
15,874
-3.0%
469,019
18.7%
196,501
41.9%
23.1% 167,001
35.6%
24.8%
146,575
31.3%
27.2%
158,164
33.7%
24.5%
32.5%
106,761
22.8%
24.5%
$0.69
23.3%
154,715
Dec-04
15,754
-0.8%
505,667
7.8%
207,745
41.1%
5.7% 171,842
34.0%
2.9%
150,066
29.7%
2.4%
165,732
32.8%
4.8%
32.0%
112,655
22.3%
5.5%
$0.72
4.2%
156,669
Dec-05
15,753
0.0%
536,484
6.1%
198,641
37.0%
-4.4% 160,119
29.8%
-6.8%
136,296
25.4%
-9.2%
159,895
29.8%
-3.5%
31.5%
109,527
20.4%
-2.8%
$0.70
-3.1%
157,210
Dec-06
15,252
-3.2%
572,268
6.7%
199,104
34.8%
0.2% 154,210
26.9%
-3.7%
126,447
22.1%
-7.2%
158,973
27.8%
-0.6%
31.6%
108,744
19.0%
-0.7%
$0.73
5.0%
148,646
Dec-07
15,022
-1.5%
653,932
14.3%
227,698
34.8%
14.4% 178,895
27.4%
16.0%
146,460
22.4%
15.8%
179,740
27.5%
13.1%
32.1%
122,131
18.7%
12.3%
$0.85
15.9%
144,059
Dec-08
12,579
-16.3%
623,800
-4.6%
203,127
32.6%
-10.8% 148,505
23.8%
-17.0%
112,614
18.1%
-23.1%
92,185
14.8% -48.7%
32.7%
62,078
10.0% -49.2%
$0.44
-48.1%
Dec-09
8,558
-32.0%
544,523
-12.7%
177,555
32.6%
-12.6% 132,983
24.4%
-10.5%
94,618
17.4%
-16.0%
96,352
17.7%
4.5%
32.9%
64,636
11.9%
$0.47
6.7%
0.32
137,659
Dec-10
11,910
39.2%
816,264
49.9%
295,690
36.2%
66.5% 229,591
28.1%
72.6%
190,971
23.4% 101.8%
203,439
24.9% 111.1%
32.3%
137,733
$0.98 108.5%
0.97
140,712
Q1
3,350
16.0%
250,946
35.1%
90,317
36.0%
31.7%
70,691
28.2%
30.2%
60,091
23.9%
34.7%
63,455
25.3%
33.1%
33.3%
42,333
16.9%
30.4%
$0.29
26.4%
0.29
143,986
Q2
3,100
0.5%
243,031
20.6%
85,625
35.2%
15.9%
63,947
26.3%
9.0%
53,247
21.9%
9.1%
57,748
23.8%
14.7%
33.4%
38,472
15.8%
13.0%
$0.27
10.1%
0.27
144,197
144,315
4.1%
16.9% 113.1%
141,119
Q3
3,172
6.5%
269,468
30.3%
95,285
35.4%
29.2%
74,247
27.6%
30.2%
62,247
23.1%
32.5%
64,499
23.9%
28.6%
32.7%
43,397
16.1%
26.6%
$0.30
23.3%
0.28
Q4
3,421
15.5%
260,347
17.2%
90,354
34.7%
13.7%
66,408
25.5%
11.4%
55,783
21.4%
10.2%
58,730
22.6%
6.3%
31.1%
40,466
15.5%
9.6%
$0.28
7.6%
0.30
144,806
Dec-11
13,043
9.5% 1,023,792
25.4%
361,581
35.3%
22.3% 275,293
26.9%
19.9%
231,368
22.6%
21.2%
244,432
23.9%
20.2%
32.6%
164,668
16.1%
19.6%
$1.14
16.6%
1.16
144,326
Q1E
3,564
6.4%
300,745
19.8%
104,416
34.7%
15.6%
78,455
26.1%
11.0%
67,955
22.6%
13.1%
70,505
23.4%
11.1%
33.0%
47,239
15.7%
11.6%
$0.33
11.0%
0.34
144,806
Q2E
3,490
12.6%
292,429
20.3%
101,108
34.6%
18.1%
72,551
24.8%
13.5%
62,051
21.2%
16.5%
64,609
22.1%
11.9%
33.0%
43,288
14.8%
12.5%
$0.30
12.0%
0.34
144,806
Q3E
3,307
4.3%
309,315
14.8%
106,972
34.6%
12.3%
77,619
25.1%
4.5%
67,119
21.7%
7.8%
69,683
22.5%
8.0%
33.0%
46,688
15.1%
7.6%
$0.32
7.2%
0.36
144,806
Q4E
3,240
-5.3%
305,790
17.5%
106,262
34.8%
17.6%
75,051
24.5%
13.0%
64,551
21.1%
15.7%
67,123
22.0%
14.3%
33.0%
44,972
14.7%
11.1%
$0.31
11.1%
0.37
144,806
Dec-12E
13,600
4.3% 1,208,279
18.0%
418,758
34.7%
15.8% 303,676
25.1%
10.3%
261,676
21.7%
13.1%
271,921
22.5%
11.2%
33.0%
182,187
15.1%
10.6%
$1.26
10.3%
1.39
144,806
Jan. 31 Guidance: Q1 revenue +15-20%, gross margin "in the same range" as Q4 (34.7%).
Q1E
3,585
0.6%
347,277
15.5%
121,865
35.1%
16.7%
90,276
26.0%
15.1%
78,776
22.7%
15.9%
81,548
23.5%
15.7%
33.0%
54,637
15.7%
15.7%
$0.38
15.7%
144,806
Q2E
3,598
3.1%
339,041
15.9%
118,587
35.0%
17.3%
83,932
24.8%
15.7%
72,432
21.4%
16.7%
75,210
22.2%
16.4%
33.0%
50,391
14.9%
16.4%
$0.35
16.4%
144,806
Q3E
3,539
7.0%
352,766
14.0%
123,266
34.9%
15.2%
87,669
24.9%
12.9%
76,169
21.6%
13.5%
78,954
22.4%
13.3%
33.0%
52,899
15.0%
13.3%
$0.37
13.3%
144,806
Q4E
3,678
13.5%
352,691
15.3%
123,850
35.1%
16.6%
86,047
24.4%
14.7%
74,547
21.1%
15.5%
77,339
21.9%
15.2%
33.0%
51,817
14.7%
15.2%
$0.36
15.2%
Dec-13E
14,400
5.9% 1,391,774
15.2%
487,569
35.0%
16.4% 347,924
25.0%
14.6%
301,924
21.7%
15.4%
313,052
22.5%
15.1%
33.0%
209,745
15.1%
15.1%
$1.45
15.1%
144,806
144,806
Dec-14E
15,200
5.6% 1,613,136
15.9%
576,114
35.7%
18.2% 409,263
25.4%
17.6%
361,263
22.4%
19.7%
373,353
23.1%
19.3%
33.0%
250,147
15.5%
19.3%
$1.73
19.3%
144,806
Dec-15E
15,500
2.0% 1,857,122
15.1%
673,708
36.3%
16.9% 476,630
25.7%
16.5%
426,630
23.0%
18.1%
439,770
23.7%
17.8%
33.0%
294,646
15.9%
17.8%
$2.03
17.8%
144,806
Assumed contribution margin for 2011-15 is in the range of 35%
EPS estimates include $0.04 of FAS-12R expense annually in 2006, 2007, and 2008.
* As of January 31.

EPS Sensitivity
Base

Upside
Year
11%
Options (Diluted)
$17
$19
2009
$56,000
9%
$17
$20
$22
2010
$183,000
35%
Diluted Shares
$21
$24
$26
2011
$182,000
23%
Insiders Own:
2012
$166,000
17%
Headquartered:
2013
$144,000
$0.90
$0.98
$1.35
25th
12.3
$15
2011
$1.05
$1.14
$1.40
Median
14.5
Percentile Multiple Downside
75th
17.7
Base
10,700
Base
11,910
Upside
13,100

Percentile
Basic Shares
$68,000
2010
Downside
2008
Downside
NA
Total
Upside
Year
Downside
Base
Upside
EU
5%
15%
25%
25th
-46%
-38%
-33%
ROW
17%
27%
37%
Median
-37%
-28%
-22%
Euro/$
$1.40
$1.40
$1.40
75th
-25%
-14%
-6%
2011-13
$492,000
12%
17%
* Revenue growth with flat NA build (ex-price of -3%).
143,133
1,673
0
144,806
3%
Zeeland, MI
Harman International
Harman International (HAR - $49.95 Neutral / Higher Risk)
Target Price: $49 (7.8x Cal-2014E EBITDA, Discounted by 30% - 50th Percentile
Valuation of 1998-2003 range)
Stock Chart
10
160
Price
7.5
Current View
Revenue Growth Opportunities. The company is a leader in nextgeneration technology for in-vehicle entertainment, evidenced by recent
orders from Toyota, Fiat/Chrysler, and entry-level BMWs. Building on this
leadership, management is targeting growth in: 1) incremental
infotainment features and content; 2) mid-level infotainment systems; 3)
emerging markets; and 4) professional video, where the company currently
has no offering for the market.
Key Near-Term Issues. Our key near-term issue is the timing of old
business running off and new business launching, with a high risk of a
hiccup in margin over the next few quarters.
Margin Recovery. After arriving in July 2007, CEO Dinesh Paliwal launched
an ambitious restructuring program, called STEP Change, during the first
quarter of fiscal 2009 (September). The program targeted $400 million of
sustainable, annualized cost savings, relative to the fiscal 2008 baseline, by
the end of fiscal 2011, and achieved its goal by the end of its third quarter.
Business Model Strengths. The key strengths of the business model
include: 1) strong and well-recognized brand names, including JBL, Harman
Kardon, Mark Levinson, Lexicon, Infinity, and Revel; 2) a leading position in
automotive branded audio, with an estimated 45% global market share; 3)
a leading position in the global professional audio market; and 4) a strong
balance sheet, currently in a net cash position, and good cash flow.
Key Risks. 1) new vehicle demand in Europe, 2) costs associated with new
business launches, 3) volatile/weak results from the Consumer business, 4)
softer-than-expected organic growth, 5) lower-than-expected STEP change
savings, 6) the automotive market, 7) major customers and vehicle
programs, and 8) technology adoption.
Target Price. Our $49 price target is based on 7.8x estimated calendar
2014 EBITDA, the 50th percentile valuation of 1998-2003 range.
Company Description
Harman International Industries, Inc. is a leading supplier of high-fidelity audio
products and electronics systems for the consumer and professional end
markets. In the consumer segment, Harman sells audio and integrated
multimedia systems, loudspeakers and electronics for home audio systems
under several brand names including JBL, Harman Kardon, Mark Levinson,
Lexicon, Infinity and Revel. In the automotive segment the company provides
infotainment and branded audio systems to OEMs worldwide, though primarily
to European luxury vehicle OEMs. Harman employs approximately 10,100
people throughout North America and Europe.
120
80
2.5
40
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
40
NTM Forward P/E
30
20
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
12
Price to Book
9
6
3
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile FY June 2011
Page 35
Harman International Industries Inc. (HAR $49.95)

February 24, 2012

Rating: Neutral
12-Month Target Price (7.8x Cal-2014E EBITDA, 50th Percentile Valuation of 1998-2003 Range, discounted at 30%):
$49
Valuation Range (1994-2003) is 5.3-18.4x LTM EBITDA. Median is 11.8x.

Year
Jun-91
Jun-92
Jun-93
Jun-94
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Q1
Q2
Q3
Q4
Jun-11
NA Lt. Veh. Build

(000)
Chg
(in $ thousands)
Revenues
$
Chg
Gross Profit
%
Chg
11,384
12,225
7.4%
604,454
164,622
27.2%
13,265
8.5%
664,913
10.0%
190,563
28.7%
14,600
10.1%
862,147
29.7%
269,162
31.2%
15,247
4.4% 1,170,224
35.7%
364,081
31.1%
14,825
-2.8% 1,361,595
16.4%
408,125
30.0%
15,260
2.9% 1,474,094
8.3%
420,480
28.5%
15,529
1.8% 1,513,255
2.7%
406,026
26.8%
16,387
5.5% 1,500,135
-0.9%
397,735
26.5%
17,527
7.0% 1,677,939
11.9%
469,336
28.0%
15,993
-8.8% 1,716,547
2.3%
461,835
26.9%
15,950
-0.3% 1,826,188
6.4%
499,871
27.4%
16,049
0.6% 2,228,519
22.0%
660,672
29.6%
15,882
-1.0% 2,711,374
21.7%
888,592
32.8%
15,525
-2.2% 3,030,889
11.8% 1,031,702
34.0%
15,902
2.4% 3,247,897
7.2% 1,152,570
35.5%
14,860
-6.6% 3,551,144
9.3% 1,211,206
34.1%
14,111
-5.0% 4,111,983
15.8% 1,109,406
27.0%
9,091
-35.6% 2,891,022
-29.7%
683,359
23.6%
11,077
21.8% 3,394,050
17.4%
912,787
26.9%
Results after 2010 reflect Harman's new reporting segments
2,978
26.9%
837,000
10.6%
223,600
26.7%
2,962
7.3%
955,000
1.9%
270,763
28.4%
3,350
16.0%
948,000
11.7%
250,144
26.4%
3,100
0.5% 1,031,000
21.1%
246,950
24.0%
12,390
11.8% 3,771,000
11.1%
991,457
26.3%
15.8%
41.2%
35.3%
12.1%
3.0%
-3.4%
-2.0%
18.0%
-1.6%
8.2%
32.2%
34.5%
16.1%
11.7%
5.1%
-8.4%
-38.4%
33.6%
3,172
3,421
3,564
3,490
13,647
6.5%
15.5%
6.4%
12.6%
10.1%
1,051,000
1,127,000
1,045,454
1,114,903
4,338,358
25.6%
289,344
18.0%
305,802
10.3%
276,728
8.1%
287,277
15.0% 1,159,151
27.5%
27.1%
26.5%
25.8%
26.7%
29.4%
12.9%
10.6%
16.3%
16.9%
Q1E
Q2E
Q3E
Q4E
Jun-13E
3,307
3,240
3,585
3,598
13,729
4.3%
-5.3%
0.6%
3.1%
0.6%
1,087,939
1,160,758
1,127,609
1,201,709
4,578,016
3.5%
308,344
3.0%
323,868
7.9%
313,090
7.8%
326,000
5.5% 1,271,301
28.3%
27.9%
27.8%
27.1%
27.8%
6.6%
5.9%
13.1%
13.5%
9.7%
Jun-14E
14,977
9.1% 4,991,079
9.0% 1,405,546
Jun-15E
15,098
0.8% 5,297,290
6.1% 1,505,065
Mid-Term Target (Fiscal 2013, updated October 2011):
4,675,000
28.2%
28.4%
10.6%
7.1%
EPS Sensitivity
Downside
Base
$1.60
$1.76
$2.46
$2.15
Upside
$3.45
$4.80

Downside
Base
Upside
10,700
11,900
13,100
NA
5%
15%
25%
EU
23%
33%
43%
ROW
$1.23
$1.33
$1.43
Euro/$
25th
Median
75th
50,982
65,628
99,136
132,919
157,390
156,159
162,839
171,807
186,340
174,729
189,605
255,439
360,497
469,646
527,190
517,349
338,113
72,963
259,351
EBITDA
%
8.4%
9.9%
11.5%
11.4%
11.6%
10.6%
10.8%
11.5%
11.1%
10.2%
10.4%
11.5%
13.3%
15.5%
16.2%
14.6%
8.2%
2.5%
7.6%
11.8%
67,998
3.5% 103,329
10.1%
79,341
10.4%
66,782
8.6% 317,450
Q1
Q2
Q3E
Q4E
Jun-12E
Year
Cal-2010
Cal-2011
Chg
28.7%
51.1%
34.1%
18.4%
-0.8%
4.3%
5.5%
8.5%
-6.2%
8.5%
34.7%
41.1%
30.3%
12.3%
-1.9%
-34.6%
-78.4%
+
8.1%
65.7%
10.8%
23.4%
8.4%
14.8%
6.5%
3.7%
8.4%
22.4%
Contribution Margin:
103,405
9.8%
52.1%
123,762
11.0%
19.8%
96,183
9.2%
21.2%
98,486
8.8%
47.5%
421,835
9.7%
32.9%
121,356
11.2%
17.4%
143,587
12.4%
16.0%
123,967
11.0%
28.9%
128,732
10.7%
30.7%
518,642
11.3%
22.9%
600,572
12.0%
15.8%
655,345
12.4%
9.1%
Operating Income
$
%
Chg
27,547
41,255
65,584
87,175
105,378
101,973
100,325
105,027
121,722
107,528
111,521
166,894
254,465
350,981
397,241
390,187
185,771
(74,494)
124,351
4.6%
6.2%
7.6%
7.4%
7.7%
6.9%
6.6%
7.0%
7.3%
6.3%
6.1%
7.5%
9.4%
11.6%
12.2%
11.0%
4.5%
-2.6%
3.7%
49.8%
59.0%
32.9%
20.9%
-3.2%
-1.6%
4.7%
15.9%
-11.7%
3.7%
49.7%
52.5%
37.9%
13.2%
-1.8%
-52.4%
-140.1%
+
Pretax Income
%
Chg
5,893
18,570
41,938
60,883
75,024
77,901
75,707
80,811
102,829
81,399
88,477
142,471
227,520
335,337
376,187
386,005
171,754
(84,916)
87,766
39,841
4.8%
+
32,168
72,900
7.6%
38.4%
64,731
47,002
5.0%
28.7%
56,460
34,443
3.3%
15.9%
27,507
194,186
5.1%
56.2% 180,866
5.4% (second-half of fiscal 2011)
75,905
7.2%
90.5%
65,249
96,262
8.5%
32.0%
82,888
68,683
6.6%
46.1%
62,465
70,986
6.4%
106.1%
64,111
311,835
7.2%
60.6% 274,713
20.7%
96,106
8.8%
26.6%
89,005
117,337
10.1%
21.9% 109,510
97,717
8.7%
42.3%
89,163
102,482
8.5%
44.4%
93,202
413,642
9.0%
32.6% 380,880
42.5%
505,572
10.1%
22.2% 476,322
560,345
10.6%
10.8% 544,721

Multiple Downside Base
Upside
$25
$27
$29
6.7
$28
$31
$33
7.8
$36
$40
$43
10.6

Percentile
Downside Base
Upside
25th
-46%
-42%
-37%
Median
-39%
-33%
-29%
75th
-22%
-13%
-7%
1.0%
2.8% 215.1%
4.9% 125.8%
5.2%
45.2%
5.5%
23.2%
5.3%
3.8%
5.0%
-2.8%
5.4%
6.7%
6.1%
27.2%
4.7%
-20.8%
4.8%
8.7%
6.4%
61.0%
8.4%
59.7%
11.1%
47.4%
11.6%
12.2%
10.9%
2.6%
4.2%
-55.5%
-2.9% -149.4%
2.6%
+
3.8%
6.8%
6.0%
2.7%
4.8%
6.2%
7.4%
6.0%
5.8%
6.3%
8.2%
9.4%
7.9%
7.8%
8.3%
9.5%
10.3%
Tax
Rate
40.8%
39.4%
38.7%
32.3%
31.7%
29.5%
28.9%
28.7%
29.1%
28.8%
28.3%
26.0%
30.6%
30.6%
32.4%
30.3%
20.0%
34.4%
16.1%
Net Income
%
Chg
3,487
11,246
25,664
41,161
50,506
54,832
53,826
57,587
72,838
57,914
63,413
105,428
157,883
232,848
255,295
270,863
137,844
(56,416)
68,306
0.6%
1.7% 222.5%
3.0% 128.2%
3.5%
60.4%
3.7%
22.7%
3.7%
8.6%
3.6%
-1.8%
3.8%
7.0%
4.3%
26.5%
3.4%
-20.5%
3.5%
9.5%
4.7%
66.3%
5.8%
49.8%
7.7%
47.5%
7.9%
9.6%
7.6%
6.1%
3.4%
-49.1%
-2.0% -140.9%
2.0%
+
F.D. EPS
$
Chg
$0.09
$0.23
$0.45
$0.63
$0.77
$0.73
$0.71
$0.80
$1.03
$0.87
$0.94
-
144.4%
96.6%
41.8%
20.9%
-5.3%
-1.6%
11.8%
29.6%
-16.2%
8.1%
-
GAAP EPS
$
Chg
First
Call*
Avg.
Shares
37,484
45,468
56,169
63,921
65,896
75,576
75,376
72,244
70,571
66,826
$1.02
67,681
$1.55
52.4%
68,070
$2.27
46.7%
69,487
$3.31
45.7%
70,315
$3.75
13.2%
68,130
$4.07
8.7%
66,470
$2.22
-45.5%
62,031
($0.96)
-143.1%
(1.02)
58,858
$0.97
+
0.95
70,772
Cal-2010 = $1.76
+
21.6%
25,215
3.0%
+
$0.35
+
0.32
71,094
50.1%
13.0%
56,331
5.9%
98.8%
$0.79
98.6%
0.53
71,629
93.8%
23.2%
43,377
4.6%
94.4%
$0.60
92.6%
0.44
71,924
31.6%
12.3%
24,133
2.3%
13.6%
$0.34
13.2%
0.44
71,970
106.1%
17.6% 149,056
4.0% 118.2%
$2.10
117.2%
2.19
71,109
Cal-2011 = $2.46
102.8%
23.6%
49,839
4.7%
97.7%
$0.69
95.5%
0.52
71,882
28.0%
27.8%
59,814
5.3%
6.2%
$0.83
4.4%
0.73
72,299
10.6%
25.0%
46,849
4.5%
8.0%
$0.65
7.4%
0.65
72,299
133.1%
25.0%
48,083
4.3%
99.2%
$0.67
96.0%
0.69
72,299
51.9%
25.5% 204,585
4.7%
37.3%
$2.83
35.2%
2.81
72,195
October 21 Guidance: Fiscal 2012 Rev $4.2-4.4 billion, EPS $2.75-3.00. Cal-2012 = $3.32
36.4%
28.0%
64,084
5.9%
28.6%
$0.90
29.7%
0.75
71,283
32.1%
28.0%
78,847
6.8%
31.8%
$1.11
33.7%
1.11
71,283
42.7%
28.0%
64,197
5.7%
37.0%
$0.90
39.0%
0.86
71,283
45.4%
28.0%
67,105
5.6%
39.6%
$0.94
41.6%
0.84
71,283
38.6%
28.0% 274,234
6.0%
34.0%
$3.85
35.8%
3.73
71,283
October 21 Guidance: Fiscal 2013 Rev $4.55-4.80 billion, EPS $3.75-4.00. Cal-2013 = $4.27
25.1%
29.0% 338,189
6.8%
23.3%
$4.74
23.3%
71,283
14.4%
29.0% 386,752
7.3%
14.4%
$5.43
14.4%
71,283
$3.75-4.00
*As of February 7.
Fiscal
Rev.
Change
Basic Shares
71,463
2008
350,000
14%
Options (Diluted)
836
2009
105,000
4%
0
2010
90,000
4%
Diluted Shares
72,299
2011
189,000
6%
Insiders Own:
1.1%
2012
358,000
9%
Headquartered:
Stamford, CT
2013
297,000
7%
2011-13
844,000
7%
* Revenue growth with flat NA build.
Johnson Controls
Johnson Controls (JCI - $33.19 Outperform / Lower Risk)
Target Price: $53 (10.5x Cal-2014E EBITDA, Discounted by 15% - Median
Valuation of the S&P Industrials over the last cycle)
Current View
Power Solutions: In addition to a modest cyclical recovery in aftermarket volumes, the

companys revenue growth should benefit from secular opportunities such as penetration of
AGM batteries (start-stop hybrids) and traditional lead-acid volume in China and emerging
markets. Margin expansion opportunities come from increasing sales of higher-margin AGM
batteries, vertical integration, and capacity expansion in China.
Building Efficiency: Traditional non-residential end markets have begun to rebound, with
the companys backlog registering 8% year-over-year growth to an all-time high $5.3 billion
during the most recent December quarter. While segment margin is expected to be
challenged during the upcoming quarter largely a function of weaker residential HVAC
demand we believe the second half will represent solid margin improvement and bring
full-year results closer to managements original October guidance (for 50 basis points of
margin improvement).
Automotive Experience: We expect global light vehicle production to increase 4-5%

annually over the next four years, with Johnson Controls outpacing the market due to
meaningful China exposure, increasing interior content (electronic features/functionality,
interior refinement and creature comforts). The main near-term driver of margin recovery
will be improvement in Europe, currently near 1-2% EBIT margin versus the 7-8% margin
in the companys North America/Asia automotive businesses. Additional margin expansion
opportunities arise from operating leverage as light vehicle production rebounds, highermargin new business launches, and vertical integration.
Capital Reinvestment: Johnson Controls has a strong balance sheet and we expect the
company to generate significant cash flow over the next several years. Management has
historically deployed free cash flow to fund acquisitions, which the company views as new
platforms to support continued growth. Assuming free cash flow is used towards acquisitions
that generate a 15% return on capital adds $1.00 per share to our mid-term earnings
estimates; presently, our model applies free cash flow to debt reduction and acquisitions
would provide upside to our target price.
Valuation: The stock recently traded near 10.1x LTM EBITDA, below the 10.5x median
valuation of the S&P 500 Industrials during the last cycle. We believe the stock should move
near the 10.5x median valuation given financial performance/metrics that compares
favorably to other S&P 500 Industrials.
Key Risks: 1) uncertainty regarding the pace and trajectory of the recovery in global light
vehicle production, particularly in Europe and China; 2) the pace and recovery of residential
and non-residential new construction markets (about 5-10% of total sales); 3) the
automotive and new construction environment; 4) major customers; 5) automotive new
business; 6) raw material prices; 7) acquisitions; and 8) post-retirement liabilities.
Price Target. Our $53 price target is based on the stock trading at 10.5 times our estimate
of calendar 2014 EBITDA, the median valuation of the S&P 500 Industrials, plus per-share
equity income net of minority interest valued at 12.0x earnings.
Company Description
Headquartered in Milwaukee, Wisconsin, Johnson Controls is a global market leader in
automotive systems and facility management and control. In the automotive market, Johnson
Controls is a major supplier of seating and interior systems, electronics, lead-acid batteries, and
advanced lithium-ion batteries for hybrid and electric vehicle applications. For non-residential
facilities, JCI provides building control systems and services, energy management and integrated
facility management. Johnson Controls was the 2nd largest North American supplier and the 7th
largest global supplier to automotive OEMs in 2010, as ranked by Automotive News.
Stock Chart
4
60
Price
45
30
15
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
24
NTM Forward P/E
18
12
6
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
4
Price to Book
3
2
1
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue and Earnings Profile FY September 2011
Page 36
$33.19)
Johnson Controls, Inc. (JCI

David Leiker, CFA w (414) 298-7535 w dleiker@rwbaird.com
Joe Vruwink w (414) 298-5934 w jvruwink@rwbaird.com
Jared Plotz w (414) 298-7351 w jplotz@rwbaird.com
February 24, 2012

Rating: Outperform
12-Month Target Price (10.5x cal-2014E EBITDA, median valuation of S&P Industrials, plus cal-2014E equity income less minority interest at 12.0x earnings per share, discounted by 15%):
$53
Current Multiple = 10.1x LTM EBITDA (92nd percentile), 8.7x 2012E and 6.9x 2013E.
Year
Lt. Veh. Build

(000)
Chg
Sep-95
(in $ Millions)
Revenues
$
Chg
6,870.5
11.1%
Gross Profit
%
Chg
1,108.5
16.1%
16.9%
$
653.7
EBITDA
%
9.5%
Chg
18.5%
Operating Income
$
%
Chg
365.2
326.4
5.3%
5977.1%
Pretax Income
%
Chg
4.8%
22.6%
Tax
Rate
43.0%
Net Income
%
Chg
165.2
2.4%
19.8%
$0.30
158.6
213.2
255.2
294.0
377.9
522.0
517.9
592.8
675.8
2.1%
2.3%
2.3%
2.3%
2.3%
3.0%
2.8%
2.9%
3.0%
-4.0%
34.4%
19.7%
15.2%
28.5%
38.1%
-0.8%
14.5%
14.0%
$0.30
$0.41
$0.47
$0.55
$0.69
$0.85
$0.85
-
Fully Diluted EPS

Chg
Cash
Chg
GAAP
EPS
First
Call*
Avg
Shs
532.8
$0.85
$1.05
$1.20
534.6
539.4
544.5
549.8
553.4
551.4
545.3
554.2
557.5
$0.83
$1.52
577.8
578.3
RESULTS ABOVE THIS LINE HAVE NOT BEEN RESTATED TO GIVE EFFECT FOR THE SALE OF PCD
Sep-95pf
Sep-96pf
Sep-97
Sep-98
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
15,106
7,400.7
7.7% 1,164.7
15.7%
5.1%
683.6
9.2%
4.6%
395.1
5.3%
8.2%
15,140
0.2% 9,210.0
24.4% 1,331.7
14.5%
14.3%
741.4
8.0%
8.5%
478.9
5.2%
21.2%
15,244
0.7% 11,145.4
21.0% 1,665.8
14.9%
25.1%
958.0
8.6%
29.2%
603.1
5.4%
25.9%
15,431
1.2% 12,586.8
12.9% 1,810.6
14.4%
8.7% 1,048.2
8.3%
9.4%
664.0
5.3%
10.1%
16,900
9.5% 16,139.4
28.2% 2,323.9
14.4%
28.3% 1,300.5
8.1%
24.1%
854.9
5.3%
28.8%
17,483
3.4% 17,154.6
6.3% 2,594.5
15.1%
11.6% 1,493.3
8.7%
14.8% 1,031.5
6.0%
20.7%
15,615
-10.7% 18,427.2
7.4% 2,604.0
14.1%
0.4% 1,547.8
8.4%
3.6% 1,031.9
5.6%
0.0%
16,325
4.5% 20,103.4
9.1% 2,846.9
14.2%
9.3% 1,638.8
8.2%
5.9% 1,122.0
5.6%
8.7%
15,856
-2.9% 22,646.0
12.6% 3,220.2
14.2%
13.1% 1,719.6
7.6%
4.9% 1,161.6
5.1%
3.5%
Results below this line are restated to adjust for discontinued operations (World Services and Engine Controls sold March 30, 2005)
Sep-04
15,858
0.0% 25,363.4
12.0% 3,390.1
13.4%
5.3% 1,833.7
7.2%
6.6% 1,217.1
4.8%
4.8%
Sep-05
15,623
-1.5% 27,883.2
9.9% 3,531.2
12.7%
4.2% 1,944.3
7.0%
6.0% 1,312.4
4.7%
7.8%
Results include the impact of York International, acquired on December 9, 2005.
Sep-06
15,566
-0.4% 32,235.0
15.6% 4,429.0
13.7%
25.4% 2,154.0
6.7%
10.8% 1,463.0
4.5%
11.5%
Sep-07
14,987
-3.7% 34,624.0
7.4% 5,076.0
14.7%
14.6% 2,527.0
7.3%
17.3% 1,795.0
5.2%
22.7%
Sep-08
13,550
-9.6% 38,062.0
9.9% 5,526.0
14.5%
8.9% 2,744.0
7.2%
8.6% 1,961.0
5.2%
9.2%
Sep-09
8,471
-37.5% 28,503.8
-25.1% 3,764.0
13.2%
-31.9% 1,299.0
4.6%
-52.7%
554.0
1.9%
-71.7%
Sep-10
11,709
38.2% 34,308.0
20.4% 5,300.0
15.4%
40.8% 2,391.0
7.0%
84.1% 1,700.0
5.0%
206.9%
Contribution margin:
20%
Q1
2,962
7.3% 9,613.1
14.3% 1,414.0
14.7%
14.4%
636.0
6.6%
19.3%
467.0
4.9%
32.3%
Q2
3,350
16.0% 10,144.0
22.0% 1,474.0
14.5%
20.5%
683.3
6.7%
23.8%
496.0
4.9%
31.9%
Q3
3,100
0.5% 10,364.2
21.3% 1,550.0
15.0%
15.8%
678.0
6.5%
10.8%
485.0
4.7%
9.2%
Q4
3,172
6.5% 10,788.3
19.3% 1,738.0
16.1%
15.7%
794.0
7.4%
14.4%
610.0
5.7%
15.7%
Sep-11
12,584
7.5% 40,909.7
19.2% 6,176.0
15.1%
16.5% 2,791.3
6.8%
16.7% 2,058.0
5.0%
21.1%
5%
Q1
3,421
15.5% 10,417.2
8.4% 1,532.0
14.7%
8.3%
674.0
6.5%
6.0%
478.0
4.6%
2.4%
Q2E
3,564
6.4% 10,640.5
4.9% 1,535.6
14.4%
4.2%
652.2
6.1%
-4.6%
459.2
4.3%
-7.4%
Q3E
3,490
12.6% 10,861.7
4.8% 1,695.0
15.6%
9.4%
841.2
7.7%
24.1%
648.2
6.0%
33.6%
Q4E
3,307
4.3% 11,034.8
2.3% 1,800.6
16.3%
3.6%
896.9
8.1%
13.0%
703.9
6.4%
15.4%
Sep-12E
13,782
9.5% 42,954.2
5.0% 6,563.2
15.3%
6.3% 3,064.3
7.1%
9.8% 2,289.3
5.3%
11.2%
11%
Q1E
3,240
-5.3% 10,677.1
2.5% 1,598.9
15.0%
4.4%
814.0
7.6%
20.8%
607.7
5.7%
27.1%
Q2E
3,585
0.6% 11,225.2
5.5% 1,662.6
14.8%
8.3%
828.9
7.4%
27.1%
622.6
5.5%
35.6%
Q3E
3,598
3.1% 11,534.1
6.2% 1,829.4
15.9%
7.9%
965.5
8.4%
14.8%
759.3
6.6%
17.1%
Q4E
3,539
7.0% 11,910.7
7.9% 1,975.8
16.6%
9.7% 1,132.7
9.5%
26.3%
926.5
7.8%
31.6%
Sep-13E
13,961
1.3% 45,347.2
5.6% 7,066.7
15.6%
7.7% 3,741.1
8.2%
22.1% 2,916.1
6.4%
27.4%
Sep-14E
Sep-15E
15,154
15,417
8.5% 49,279.0
1.7% 52,043.2
8.7%
5.6%
7,878.1
8,372.8
16.0%
16.1%
11.5%
6.3%
4,430.8
4,897.7
9.0%
9.4%
18.4%
10.5%
3,555.8
3,972.7
7.2%
7.6%
* Assumed gross contribution margin for 2011-2015 is in the range of 16-20%
21.9%
11.7%
338.3
421.5
501.6
556.9
715.3
922.2
915.5
1,006.0
1,057.5
1,135.0
1,240.9
1,299.0
1,607.0
1,819.0
396.0
1,745.0
498.0
511.0
498.0
675.0
2,182.0
549.0
489.8
687.7
756.2
2,482.7
669.3
669.3
816.5
998.6
3,153.7
3,837.3
4,301.2
4.6%
4.6%
4.5%
4.4%
4.4%
5.4%
5.0%
5.0%
4.7%
3.6%
24.6%
19.0%
11.0%
28.4%
28.9%
-0.7%
9.9%
5.1%
42.3%
40.8%
42.5%
41.5%
40.5%
37.6%
37.5%
34.6%
31.0%
1.4%
33.7%
17.2%
16.0%
25.1%
23.1%
0.5%
-
$0.96
$0.97
1.0%
$1.08
11.5%
$1.22
13.5%
Cal-2003
$1.21
4.5%
7.3%
28.0%
738.4
2.9%
9.3%
$1.27
4.4%
4.5%
9.3%
26.1%
861.6
3.1%
16.7%
$1.49
16.8%
Cal-2005
$1.50
4.0%
4.7%
19.8% 1,000.1
3.1%
16.1%
$1.70
14.0%
4.6%
23.7%
21.0% 1,257.1
3.6%
25.7%
$2.10
23.8%
4.8%
13.2%
21.0% 1,402.0
3.7%
11.5%
$2.33
11.0%
1.4%
-78.2%
22.5%
320.0
1.1%
-77.2%
$0.50
-78.7%
5.1%
340.7%
17.9% 1,357.0
4.0%
324.1%
$1.99
300.5%
Cal-2010
$2.11
5.2%
34.2%
19.1%
375.0
3.9%
30.2%
$0.55
26.8%
5.0%
33.1%
17.6%
390.0
3.8%
33.6%
$0.56
31.9%
4.8%
9.0%
17.9%
386.0
3.7%
5.2%
$0.56
4.0%
24.6%
6.3%
26.6%
18.3%
516.8
4.8%
26.0%
$0.75
5.3%
25.0%
18.2% 1,667.8
4.1%
22.9%
$2.42
21.4%
Cal-2011
$2.47
5.3%
10.2%
18.9%
410.0
3.9%
9.3%
$0.60
10.0%
4.6%
-4.1%
19.0%
358.0
3.4%
-8.2%
$0.52
-8.0%
6.3%
38.1%
19.0%
522.6
4.8%
35.4%
$0.76
35.7%
6.9%
12.0%
19.0%
568.7
5.2%
10.0%
$0.83
10.3%
5.8%
13.8%
19.0% 1,859.3
4.3%
11.5%
$2.70
11.7%
Jan. 19 Guidance: 2012 EPS=$2.70-2.85; Revenue=$43.5 billion. Q2 EPS=$0.52-0.54. Cal-2012
$2.82
6.3%
21.9%
20.0%
491.7
4.6%
19.9%
$0.71
18.9%
6.0%
36.6%
20.0%
487.0
4.3%
36.0%
$0.71
36.0%
7.1%
18.7%
20.0%
610.1
5.3%
16.8%
$0.89
16.8%
8.4%
32.1%
20.0%
744.2
6.2%
30.9%
$1.08
30.9%
7.0%
27.0%
20.0% 2,333.0
5.1%
25.5%
$3.38
25.5%
Cal-2013
$3.51
7.8%
21.7%
22.5% 2,745.9
5.6%
17.7%
$3.98
17.7%
8.3%
12.1%
22.5% 3,082.6
5.9%
12.3%
$4.47
12.3%
$1.75
$2.29
$2.33
$0.50
$1.99
$0.47
$2.00
589.4
598.7
601.3
644.1
682.1
$0.55
$0.56
$0.56
$0.75
$2.42
$0.52
$0.56
$0.54
$0.78
$2.44
687.9
691.0
691.2
680.0
690.6
$0.60
$0.52
$0.76
$0.83
$2.70
$0.62
$0.70
$0.75
$0.88
$2.93
689.0
689.3
689.3
689.3
689.2
$0.71
$0.71
$0.89
$1.08
$3.38
$0.81
$0.84
$0.90
$1.02
$3.52
689.3
689.3
689.3
689.3
689.3
$3.98
$4.47
689.3
689.3
*As of January 18.

Year
$
%
Basic Shares
679.8
2009
900
5%
Options (Diluted)
5.6
2010
450
4%
Equity Units
3.7
2011
853
5%
Diluted Shares
689.1
2012
710
4%
Insiders Own:
0.4%
2013
1,065
5%
Headquartered:
Milwaukee, Wisconsin
2014
1,207
5%
2012-14
2,982
5%
* Revenue growth with flat NA build (excludes 2% price downs in NA)
* Excludes revenue in unconsolidated joint ventures
Meritor
Meritor (MTOR - $7.73 Outperform / Higher Risk)
Valuation of Last Cycle Range)
Current View
Near-Term Headwinds: Revenues look to be flat sequentially as South
America and Europe see declines in truck volumes. However, pricing actions and
manufacturing rationalization undertaken by the company should aid in margin
improvement sequentially (~100 bps of adjusted EBITDA margin).
Secular Business Model Improvement: Over the past five years, Meritor has
transformed itself into a pure-play commercial vehicle supplier, with a globallydiversified footprint, lean cost structure, and improved product portfolio.
Cyclical Truck Volumes: The company has a diversified exposure to global onhighway truck markets, with North America, Europe, and South America each
accounting for roughly one third of Truck segment revenues. While Europe and
South America are expected to have flat/down volumes during 2012, North
America should continue to offer solid end-market growth.
Balance Sheet Deleveraging: As end markets recover, financial performance
improves and cash flow increases, we expect net debt to decline to under 2.0x
EBITDA from current levels of 4.0x EBITDA (through 2014).
Valuation: The stock recently traded near 6.3x LTM EBITDA, a premium to the
historical median (5.9x).
Key Risks: 1) exposure to steel (though the company has pass-through
agreements covering 85% of purchases); 2) a slower-than-expected recovery in
North American volumes; 3) weakness in European commercial vehicle volumes,
particularly at Volvo; 4) a potential slowdown in emerging markets such China,
Brazil, and India; 5) lumpiness in military awards, the near-term timing in FMTV
volumes, and the associated modeling risk.
Target Price. Our $12 target price is based on 5.9x our estimate of calendar
2014 EBITDA, the median of the last cycle range, plus per-share equity income
net of minority interest valued at 8.0x earnings.
Stock Chart
4
40
Price
30
20
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
20
NTM Forward P/E
15
10
5
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
4
Price to Book
3
2
1
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile FY September 2011
Company Description
Meritor, Inc., headquartered in Troy Michigan, is a global supplier of axles,
undercarriages, drivelines, and brakes and braking systems to commercial truck
OEMs (56% of fiscal 2011 revenue), to trailer OEMs and the global commercial
vehicle aftermarket (22% of fiscal 2011 revenue), and to military and specialty
vehicle OEMs, off-highway equipment manufacturers in China, and commercial
truck OEMs in India (22% of fiscal 2011 revenue. Meritor employs
approximately 14,100 people in 19 countries worldwide.
Source: Company filings, Robert W. Baird & Co. estimate
Page 37
Meritor, Inc. (MTOR $7.73)

February 24, 2012

Rating: Outperform
12-Month Target Price (5.9x cal-2014E EBITDA, median valuation of last cycle range, plus cal-2014E equity inc less min int at 7.0x earnings per share, discounted by 30%):
NA Cl. 8 Build
(000)
Chg
Year
Sep-94
Sep-95
Sep-96
15,140
Sep-97
Sep-98
(in $ Millions)
Revenues
$
Chg
-
ARM CVS EBITDA1

$
%
Gross Profit
%
Chg
5,319
15,244
0.7%
5,644
6.1%
258
-98.3%
6,268
11.1%
881
14.1%
Sep-99
318
23.3%
7,491
19.5%
1,052
14.0%
Sep-00
295
-7.5%
7,722
3.1%
1,050
13.6%
Sep-01
154
-47.7%
6,805
-11.9%
733
Sep-02
174
12.9%
6,883
1.1%
752
Operating Income
$
%
Chg
Pretax Income
%
Chg
Tax
Rate
308
5.8%
144
2.7%
348
6.2%
13.0%
444
7.1%
27.6%
394
6.3%
19.4%
531
7.1%
19.6%
461
6.2%
-0.2%
515
6.7%
-3.0%
413
5.3%
10.8%
-30.2%
119
5.4%
279
4.1%
-45.8%
148
2.2%
10.9%
2.6%
168
7.5%
352
5.1%
26.2%
244
3.5%
307
316
4.9%
2.8%
5,323
5,524
4.8%
3.8%
610
11.5%
8.8%
459
8.6%
301
5.7%
650
11.8%
6.6%
491
8.9%
330
6.0%
13.1%
9.5%
286
318
5.4%
5.8%
$1.85
172
3.0%
19.4%
$2.30
24.2%
74.8
3.8%
37.2%
$3.11
35.2%
2.84
75.9
17.0%
38.0%
279
3.7%
18.2%
$3.65
17.5%
3.75
76.4
-10.4%
37.3%
254
3.3%
-9.0%
$3.57
-2.3%
4.12
-64.3%
33.8%
91
1.3%
-64.1%
$1.38
-61.4%
0.53
1.36
66.2
65.4%
32.0%
155
2.3%
70.1%
2.22
2.30
67.2
67.7
68.8
70.1
69.8
16.4%
11.2%
29.1%
27.1%
185
212
1.3%
1.5%
1.3%
1.3%
-42.5%
34.7%
-6.7%
5.4%
0.6%
1.6%
-2.3%
0.5%
-68.1%
210.1%
-188.3%
+
0.05
-
-0.7%
1.2%
1.9%
3.1%
1.5%
+
+
+
+
+
0.9%
1.6%
3.3%
3.1%
2.3%
+
+
69.8%
-3.8%
52.9%
2.0%
2.6%
3.7%
3.4%
2.9%
114.1%
75.6%
19.6%
37.6%
3.5%
3.8%
23.7%
15.0%
$1.08-1.39
$2.31
Year
Downside
Cal-2011
#DIV/0!
#DIV/0!
Cal-2012
Cl 8 Build
Cl 5-7 Build
Trailer Build
EU CV Build
ROW CV Build
Euro/$
236
130
+61%
+6%
-16%
Fiscal 2011
Base
256
(1.24)
0.21
70.5
72.1
72.6
87.2
(0.07)
0.01
0.26
0.40
0.74
0.01
0.11
0.29
0.25
0.60
93.3
96.9
96.8
96.8
96.0
0.12
0.19
0.45
0.39
1.15
0.20
0.30
0.42
0.39
1.22
94.5
94.5
94.5
94.5
94.5
0.25
0.34
0.54
0.46
1.58
0.41
0.56
0.58
0.49
1.76
94.5
94.5
94.5
94.5
94.5
1.95
2.25
94.5
94.5
*As of February 2.
Downside
Fiscal
North
Downside
(0.43)
(1.26)
(14.90)
0.29
** GAAP EPS ex-accounting change.
$0.91
$1.28 Revenue Mix
1.48
1.85
0.50
(2.55)
71.2
Base
37.4%
Cal-2002 =
$2.33
$1.32 -43.0%
$1.75
32.7%
$1.60
-8.5%
$1.69
5.8%
Cal-2006 =
$1.70
$0.53 -68.5%
$1.60 199.5%
($1.42) -188.9%
$0.29
+
Cal-2010 =
$0.22
($0.07)
+
$0.14
+
$0.26
+
$0.40
+
$0.74
+
Cal-2011 =
$0.91
$0.12
+
$0.19
+
$0.45
73.9%
$0.39
-1.5%
$1.15
55.2%
Cal-2012 =
$1.28
$0.25 114.1%
$0.34
75.6%
$0.54
19.6%
$0.46
16.9%
$1.58
37.6%
Cal-2013 =
$1.66
$1.95
23.7%
$2.25
15.0%
1) Adjusted net income + minority interest expense + income tax expense + interest expense + D&A - loss on sale of receivables - LVS segment EBITDA (after 2007) or LVS segment EBIT and D&A (prior to 2007) - LVA EBIT and D&A (prior to 2003)
EPS Sensitivity
77.8
236
$1.68
37.8%
Results below are restated to reflect divestiture of Light Vehicle Aftermarket and Roll Coater businesses.
Sep-03
172
-1.0%
6,723
-2.3%
591
8.8%
-21.4%
180
7.4%
231
3.4% -34.4%
135
2.0% -44.7%
30.3%
89
Sep-04
242
40.8%
8,033
19.5%
667
8.3%
12.9%
264
8.2%
264
3.3%
14.3%
167
2.1%
23.7%
22.7%
120
Sep-05
338
39.3%
8,903
10.8%
637
7.1%
-4.6%
314
7.7%
249
2.8%
-5.6%
154
1.7%
-7.8%
25.3%
112
Sep-06
364
7.9%
9,150
2.8%
631
6.9%
-0.9%
321
7.5%
251
2.7%
0.8%
163
1.8%
5.8%
20.2%
118
Q1-07 results are restated to reflect divestiture of Emissions Technology business.
Sep-07
260
-28.6%
6,466
-29.3%
499
7.7%
-21.0%
208
4.9%
125
1.9% -50.4%
56
0.9% -65.9%
5.4%
38
Sep-08
206
-20.9%
7,167
10.8%
653
9.1%
31.0%
347
7.2%
226
3.2%
81.4%
178
2.5% 220.1%
26.1%
117
Sep-09
130
-37.0%
4,517
-37.0%
321
7.1%
-50.8%
173
5.6%
18
0.4% -92.0%
(55)
-1.2% -130.9% -69.1%
(103)
Sep-10
146
12.5%
4,584
1.5%
500
10.9%
55.8%
248
6.9%
148
3.2%
101
2.2% -283.6%
61.8%
25
Pro forma:
3,590
419
11.7%
248
6.9%
130
3.6%
75
2.1%
76.5%
4
Q1
44
24.1%
971
-15.3%
104
10.7%
-9.6%
62
6.4%
32
3.3%
6.7%
18
1.9%
+
113.3%
(6)
Q2
52
48.2%
1,192
-1.2%
118
9.9%
-4.8%
81
6.8%
47
3.9%
34.3%
38
3.2%
+
50.0%
14
Q3
61
72.0%
1,287
0.9%
134
10.4%
-7.6%
102
7.9%
61
4.7%
35.6%
60
4.7%
+
50.0%
25
Q4
68
69.9%
1,217
27.3%
118
9.7%
1.7%
97
8.0%
52
4.3%
36.8%
49
4.0%
+
16.3%
38
Sep-11
224
53.8%
4,667
1.8%
474
10.2%
-5.2%
342
7.3%
192
4.1%
165
3.5%
+
46.9%
71
Results after Q3-2010 exclude the Light Vehicle Systems business; Results after Q3-11 exclude the European Trailer business.
Q1
75
71.0%
1,159
19.4%
106
9.1%
1.9%
79
6.8%
41
3.5%
28.1%
35
3.0%
94.4%
57.1%
11
Q2E
71
36.9%
1,160
-2.6%
117
10.1%
-1.0%
91
7.8%
51
4.4%
7.8%
46
4.0%
21.3%
50.4%
18
Q3E
72
19.1%
1,296
0.7%
142
11.0%
5.9%
115
8.8%
73
5.7%
20.1%
70
5.4%
16.4%
32.4%
42
Q4E
69
0.4%
1,181
-3.0%
128
10.8%
8.1%
103
8.7%
65
5.5%
25.0%
58
4.9%
18.1%
31.9%
37
Sep-12E
287
27.9%
4,796
2.8%
492
10.3%
3.9%
387
8.1%
230
4.8%
19.7%
209
4.4%
26.5%
40.4%
108
Fiscal 2012 Guidance:
~$4,800
$105-135
8.2-8.6% (exit Q4 ~9.0%)
Q1E
73
-2.5%
1,189
2.6%
124
10.4%
16.9%
89
7.5%
55
4.6%
34.2%
47
3.9%
33.0%
39.9%
24
Q2E
71
0.1%
1,235
6.4%
132
10.7%
12.8%
99
8.0%
60
4.9%
18.6%
56
4.5%
21.9%
34.4%
32
Q3E
75
4.6%
1,386
7.0%
160
11.5%
12.7%
120
8.7%
80
5.7%
8.7%
77
5.6%
10.9%
28.0%
51
Q4E
74
7.1%
1,268
7.3%
145
11.4%
13.6%
108
8.5%
71
5.6%
9.9%
66
5.2%
30.2%
43
Sep-13E
293
2.2%
5,078
5.9%
561
11.0%
13.9%
417
8.2%
266
5.2%
15.8%
246
4.8%
17.7%
32.3%
149
Sep-14E
Sep-15E
$12

Net Income
Fully Diluted EPS
GAAP First
Avg.
%
Chg
$
Chg
Cash
Chg EPS** Call*
Shares
America
Commercial Truck
41%
Industrial
167
Aftermkt/Trailer
+71% Total
+16%
-6%
Europe
South
America
Asia
Total
Chg
Shares Outstanding (Sep-11)

Basic Shares
100
4%
Options (Diluted)
2009
75
3%
0.0
2010
75
5%
Diluted Shares
96.8
32%
27%
0%
56%
41%
0%
0%
59%
22%
2011
80
4%
Insiders Own:
74%
48%
18%
22%
4%
16%
4%
14%
22%
100%
2012
85
3%
Headquartered:
96.8
2008
2013
125
4%
2011-13
290
4%
* Commercial Truck revenue growth
with flat production (ex-price of -2%).
0.0
5%
Troy, Michigan
Methode Electronics
Methode Electronics (MEI - $9.74 Neutral / Average Risk)
Current View
Volatile Earnings: Methode has missed earnings expectations the past
two quarters due to high launch costs, new product development costs and
supplier issues. These costs should continue in coming quarters, limiting
earnings visibility.
Weak Near-term Revenue Opportunity: Near-term outlook lacks a
revenue catalyst, with the Ford center stack award not launching until
2013. Weakening end-market demand outside the EU, particularly in
Europe (which represents roughly one-third of total revenues) likely to be a
headwind in 2012.
Margin Contraction: EBIT margins are running at about one-half the level
seen last year (2.6% in FQ2-12 vs. 5.6% in FQ2-11), without any
meaningful margin improvement expected over the next two quarters.
Valuation: The stock recently traded near 7.2x estimated CY12 EBITDA, a
Stock Chart
2
20
Price
15
10
-1
-2
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
30
NTM Forward P/E
25
20
15
10
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
4
Price to Book
premium to the historical median (6.6x) and to the peer-group average (5.4x).
Key Risks: 1) exposure to the automotive industry, particularly to two

large customers (Ford and GM) that account for approximately 60% of total
Automotive revenue (32% of consolidated revenue); 2) volatile and lumpy
results in the companys non-automotive businesses; 3) modeling
uncertainty as legacy Delphi/Ford business finished rolling off in the October
2010 quarter; 4) acquisition integration risk; 5) execution risk as new
business is launched; and 6) non-automotive businesses and end markets.
Target Price. Our $9 price target is based on the stock trading at 6.6
times our estimate of calendar 2014 EBITDA, the median percentile of the
last cycle range.
Company Description
Methode Electronics manufactures electronic component devices for original
equipment manufacturers in several industries. Methode's automotive segment
is the company's largest product group, accounting for approximately 53% of
sales. Products include full-engineered center stacks as well as sensors,
connectors and switches (ergonomic and hidden) on steering columns, steering
wheels, instrument panels and seats (occupant detection). Non-automotive
products (47% of sales) include PC cards, copper interconnect devices, fiber
optic connectors, field-effect switches, and remote control HMIs. Methode
employs 2,743 people in 23 plants worldwide.
2
1
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile FY April 2011
Page 38
$9.74)
Methode Electronics, Inc. (MEI

February 24, 2012

Rating: Neutral
12-Mo. Target Price (6.6x Cal-2014E EBITDA, Median Valuation of 2000-2008 Range, Discounted at 20%):
Year
Apr-93
Apr-94
Apr-95
Apr-96
Apr-97
Apr-98
Apr-99
Apr-00
Apr-01
Apr-02
Lt. Vehicle Build

(000)
Chg
(in $ Thousands)
Prod. Rev.
$
Chg
Tooling
$
Total Revenue
$
Chg
Gross Profit
%
Chg
EBITDA
%
Chg
Operating Income
$
%
Chg
15,342
14,707
15,378
15,682
15,923
Results prior
17,281
16,334
15,871
261,140
69,557
26.6%
47,561
18.2%
36,953
14.2%
-4.1%
293,053
12.2%
80,353
27.4%
15.5% 57,852
19.7%
21.6%
45,735
15.6%
23.8%
4.6%
322,127
9.9%
89,924
27.9%
11.9% 67,830
21.1%
17.2%
53,162
16.5%
16.2%
2.0%
355,142
10.2%
92,617
26.1%
3.0% 67,003
18.9%
-1.2%
49,376
13.9%
-7.1%
1.5%
357,272
0.6%
87,066
24.4%
-6.0% 60,523
16.9%
-9.7%
42,788
12.0%
-13.3%
to April-00 are Robert W. Baird estimates for the "New" Methode.
8.5%
356,771
-0.1%
83,665
23.5%
-3.9% 52,462
14.7% -13.3%
36,192
10.1%
-15.4%
-5.5%
359,710
0.8%
67,928
18.9% -18.8% 39,400
11.0% -24.9%
21,792
6.1%
-39.8%
-2.8%
319,659
-11.1%
58,298
18.2% -14.2% 36,436
11.4%
-7.5%
18,970
5.9%
-12.9%
As of Q1-2003, our model reflects the adoption of FAS-142, adding about $0.02 to EPS.
2.5% 359,348
3,709
363,057
13.6%
70,131
19.3%
20.3% 48,749
13.4%
33.8%
31,468
8.7%
65.9%
-2.2% 347,557
-3.3%
11,309
358,866
-1.2%
71,066
19.8%
1.3% 52,464
14.6%
7.6%
30,084
8.4%
-4.4%
-2.4% 375,545
8.1%
17,181
392,726
9.4%
86,108
21.9%
21.2% 57,646
14.7%
9.9%
34,923
8.9%
16.1%
1.6% 412,096
9.7%
9,519
421,615
7.4%
85,204
20.2%
-1.0% 53,298
12.6%
-7.5%
29,647
7.0%
-15.1%
-5.0% 444,898
8.0%
3,530
448,427
6.4%
86,485
19.3%
1.5% 56,038
12.5%
5.1%
31,218
7.0%
5.3%
-2.6% 551,073
23.9%
551,073
22.9%
117,559
18.2%
35.9% 78,092
14.2%
39.4%
48,524
8.8%
55.4%
-29.6% 425,644 -22.8%
425,644
-22.8%
43,870
8.7% -62.7% 18,903
4.4% -75.8% (20,534)
-4.8% -142.3%
-2.0% 373,136 -12.3%
373,136
-12.3%
67,657
18.1%
54.2% 31,520
8.4%
66.7%
8,729
2.3%
+
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
16,266
15,908
15,521
15,777
14,984
14,597
10,271
10,069
Q1
Q2
Q3
Q4
Apr-11
2,921
3,284
2,853
3,299
12,357
72.6%
18.3%
9.0%
10.5%
22.7%
98,585
106,614
101,263
117,838
424,300
9.8%
8.2%
13.6%
23.1%
13.7%
98,585
106,614
101,263
117,838
424,300
9.8%
8.2%
13.6%
23.1%
13.7%
18,756
22,562
18,595
24,317
84,230
19.0%
21.2%
18.4%
20.6%
19.9%
22.9%
28.5%
36.3%
14.7%
24.5%
9,089
10,670
7,066
10,824
37,649
9.2%
10.0%
7.0%
9.2%
8.9%
41.5%
17.4%
+
-8.2%
19.4%
4,661
5,969
2,599
5,514
18,743
4.7%
5.6%
2.6%
4.7%
4.4%
Q1
Q2
Q3E
Q4E
Apr-12E
2,962
3,612
3,128
3,595
13,298
1.4%
10.0%
9.6%
9.0%
7.6%
109,604
115,095
108,605
123,963
457,267
11.2%
8.0%
7.3%
5.2%
7.8%
109,604
115,095
108,605
123,963
457,267
11.2%
8.0%
7.3%
5.2%
7.8%
19,980
20,123
18,684
22,964
81,751
18.2%
17.5%
17.2%
18.5%
17.9%
6.5%
-10.8%
0.5%
-5.6%
-2.9%
6,794
6,787
7,549
10,315
31,445
6.2%
5.9%
7.0%
8.3%
6.9%
-25.3%
-36.4%
6.8%
-4.7%
-16.5%
2,218
3,045
1,851
4,617
11,731
2.0%
2.6%
1.7%
3.7%
2.6%
-52.4%
-49.0%
-28.8%
-16.3%
-37.4%
Q1E
Q2E
Q3E
Q4E
Apr-13E
3,262
3,694
3,104
3,618
13,678
10.1%
2.3%
-0.8%
0.6%
2.9%
124,442
132,844
121,732
142,864
521,883
13.5%
15.4%
12.1%
15.2%
14.1%
124,442
132,844
121,732
142,864
521,883
13.5%
15.4%
12.1%
15.2%
14.1%
24,295
25,521
22,976
28,902
101,693
19.5%
19.2%
18.9%
20.2%
19.5%
21.6%
26.8%
23.0%
25.9%
24.4%
10,288
10,835
9,929
13,810
44,862
8.3%
8.2%
8.2%
9.7%
8.6%
51.4%
59.6%
31.5%
33.9%
42.7%
5,380
5,926
5,020
8,901
25,227
4.3%
4.5%
4.1%
6.2%
4.8%
142.5%
94.6%
171.3%
92.8%
115.0%
Apr-14E
Apr-15E
14,834
15,326
8.4%
3.3%
638,804
673,830
22.4%
5.5%
638,804
673,830
22.4%
5.5%
133,734
20.9%
31.5% 63,687
10.0%
42.0%
44,302
142,755
21.2%
6.7% 67,803
10.1%
6.5%
48,418
*Assumed contribution margin for 2013-2015 is in the range of 25-35%.
6.9%
7.2%
75.6%
9.3%
Year
Cal-2010
Cal-2011
EPS Sensitivity
Downside Base
#VALUE!
$0.00
$0.69
$0.22
Upside
#VALUE!
$0.40

Downside Base
Upside
10,800
12,043
13,200
NA LV
5%
15%
25%
EU LV
5%
10%
15%
Int'connect
-1%
4%
9%
Power
Euro/$
Percentile
25th
50th
75th
Percentile
25th
Median
75th

Multiple Downside
Base
$4
$4
5.1
$5
$5
6.6
7.9
$5
$6
Upside
$5
$6
$7

Downside
Base
Upside
-60%
-60%
-50%
-50%
-40%
-50%
-50%
-40%
-30%
+
+
+
+
+
$9

Pretax Income
Tax
Net Income
F.D. EPS
First
Avg.
$
%
Chg
Rate
$
%
Chg
$
Chg
Call*
Shares
40,685
50,679
59,326
53,993
47,486
15.6%
17.3%
18.4%
15.2%
13.3%
24.6%
17.1%
-9.0%
-12.1%
36.0%
36.5%
36.4%
34.9%
35.0%
26,025
32,196
37,726
35,123
30,857
10.0%
11.0%
11.7%
9.9%
8.6%
23.7%
17.2%
-6.9%
-12.1%
41,135
26,942
23,258
11.5%
7.5%
7.3%
-13.4%
-34.5%
-13.7%
33.6%
30.5%
30.0%
27,098
18,604
16,279
7.6%
5.2%
5.1%
-12.2%
-31.3%
-12.5%
$0.75
$0.92
$1.07
$1.00
$0.87
22.7%
16.7%
-7.3%
-12.7%
34,671
34,967
35,114
35,262
35,425
$0.76
-12.4%
35,544
$0.52
-31.8%
0.88
35,796
-13.0%
0.44
36,028
$0.45
Cal-01
$0.41
31,380
8.6%
34.9%
33.4%
20,895
5.8%
28.4%
27.1%
0.57
36,390
$0.57
31,781
8.9%
1.3%
32.4%
21,481
6.0%
2.8%
3.6%
0.55
36,102
$0.60
37,447
9.5%
17.8%
34.5%
24,533
6.2%
14.2%
14.0%
36,154
$0.68
32,369
7.7%
-13.6%
47.3%
17,049
4.0% -30.5%
-31.1%
36,456
$0.47
35,775
8.0%
10.5%
27.4%
25,983
5.8%
52.4%
51.7%
36,628
$0.71
49,477
9.0%
38.3%
19.7%
39,754
7.2%
53.0%
49.6%
37,451
$1.06
(16,429)
-3.9%
-133.2%
-21.0% (19,875)
-4.7% -150.0%
-147.6%
37,098
($0.51)
7,816
2.1%
+
-76.3%
13,654
3.7%
+
+
(0.02)
36,778
$0.37
(Includes $8 million, or $0.15 of restructuring)
Cal-09
($0.58)
4,672
4.7%
+
13.7%
4,065
4.1%
+
+
0.10
37,290
$0.11
278
0.3%
+
276.3%
(513)
-0.5%
+
+
0.06
37,058
($0.01)
4,312
4.3%
+
-34.8%
5,883
5.8%
+
+
0.10
37,408
$0.16
5,199
4.4%
+
-9.4%
5,910
5.0%
+
+
0.11
38,128
$0.16
14,461
3.4%
+
-4.0%
15,345
3.6%
+
+
0.30
37,471
$0.41
(Includes $4.8 million, or $0.13 of Delphi legal fees)
Cal-10
$0.69
1,457
1.3%
-68.8%
1.5%
1,494
1.4% -63.2%
-64.1%
0.10
38,128
$0.04
2,445
2.1%
+
90.8%
311
0.3%
+
+
0.05
37,520
$0.01
1,141
1.1%
-73.5%
50.0%
570
0.5% -90.3%
-90.3%
0.03
37,520
$0.02
3,904
3.1%
-24.9%
40.0%
2,342
1.9% -60.4%
-59.7%
0.08
37,520
$0.06
8,946
2.0%
-38.1%
48.9%
4,717
1.0% -69.3%
-69.4%
0.16
37,672
$0.13
Fiscal 2012 Guidance: Revenue $450-465 million, EPS $0.13-0.21
Cal-11
$0.22
5,682
4.6%
290.0%
20.0%
4,545
3.7% 204.2%
209.2%
0.12
37,520
$0.12
6,244
4.7%
155.4%
20.0%
4,996
3.8% 1507.7%
1507.7%
0.13
37,520
$0.13
5,354
4.4%
369.3%
20.0%
4,283
3.5% 650.9%
650.9%
0.13
37,520
$0.11
9,251
6.5%
137.0%
20.0%
7,400
5.2% 216.0%
216.0%
0.21
37,520
$0.20
26,531
5.1%
196.6%
20.0%
21,225
4.1% 349.9%
351.8%
0.58
37,520
$0.57
Fiscal 2013 Guidance: Revenue $495-525 million, EPS $0.52-0.67
Cal-12
$0.43
46,131
7.2%
73.9%
22.0%
35,982
5.6%
69.5%
69.5%
37,520
$0.96
51,549
7.7%
11.7%
22.0%
40,208
6.0%
11.7%
11.7%
37,520
$1.07
*As of January 29.
Shares Outstanding (Sep-11)
New Business Growth (Auto)*
Basic Shares
37,310
Year
Fisc-Rev
Chg.
2009
20,000
6%
Options (Diluted)
210
2010
20,000
8%
0
2011
15,000
8%
Total
37,520
2012
14,000
6%
Insiders Own
4%
2013
27,000
10%
Headquartered:
Chicago, Illinois
2014
90,000
30%
2012-14
131,000
16%
* Automotive revenue growth with flat NA build (ex-price of -2%).
Modine Manufacturing
Modine Manufacturing (MOD - $9.64 Outperform / Higher Risk)
Target Price: $16 (6.6x 2014E EBITDA, Discounted by 25% - 25th Percentile of
Last Cycle Range)
Current View
Valuation: The stock trades at 4.8x 2011 EBITDA, a discount to both the
7.7x median valuation over the last cycle and the 6.0x median valuation of
a peer group of commercial vehicle companies. Closing this gap represents
$3-4 per share of equity value.
Secular Business Model Improvement: Modine enters the cyclical
recovery with a restructured global footprint, streamlined operations, and
an improved product portfolio. Recent technology investments have the
company positioned to capitalize on trends toward energy efficiency and
reduced emissions.
Strong Balance Sheet: The companys balance sheet is the strongest
since the early 2000s, with net debt slightly above 1.0x LTM EBITDA. We
expect the company to generate average annual cash flow in excess of $60
million over the next four years, to be used to reduce financial leverage and
pursue growth opportunities, and potentially pay a dividend.
Key Risks: 1) execution risk; 2) a delayed and/or more muted recovery in
global vehicular end markets; 3) rising raw material costs; 4) modeling risk
related to an unpredictable tax rate; 5) risks associated with global
vehicular end markets; 6) major customers/programs; 7) the roll-off of the
BMW module business; and 8) post-retirement liabilities.
Target Price. Our $16 target price is based on the shares trading at 6.6x
our estimate of 2014 EBITDA, the 25th percentile of the last cycle range.
Company Description
Modine Manufacturing Co., headquartered in Racine, Wisconsin, is a global
supplier of thermal management systems and components for several end
markets, including automotive, commercial vehicle, industrial, and building
markets. Modine manufactures heat-transfer products and systems including
radiators, air, fuel and oil coolers, condensers and heaters, as well as air
conditioning systems, and engine cooling modules. Modine employs
approximately 6,800 people in 27 manufacturing facilities located in 14 countries.
Stock Chart
6
40
Price
30
20
10
-2
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
60
NTM Forward P/E
45
30
15
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
4
Price to Book
3
2
1
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile FY March 2011
Page 39
Modine Manufacturing Company (MOD $9.64)

February 24, 2012

Rating: Outperform
12-Month Target Price (6.6x 2014E EBITDA, 25th Percentile of Last Cycle Range, Discounted by 25%):
$16
Current Multiple = 4.8x LTM EBITDA (3rd percentile), 4.0x 2012E and 3.2x 2013E.
Year
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
NA LV Build
(000)
Chg
(in $ thousands)
Revenues
$
Chg
Gross Profit
%
Chg
EBITDA
%
Chg
Operating Income
$
%
Chg
3,084
2,978
2,962
3,350
12,373
73.9%
26.9%
7.3%
16.0%
26.7%
345,169
345,902
360,043
396,758
1,447,871
47.3%
38.5%
31.6%
37.1%
38.3%
58,674
57,627
57,095
60,075
233,471
17.0%
16.7%
15.9%
15.1%
16.1%
63.6% 31,403
36.0% 24,916
19.7% 24,046
35.7% 21,824
37.2% 102,189
9.1%
7.2%
6.7%
5.5%
7.1%
173.6%
16.5%
10.5%
30.9%
43.3%
16,825
11,169
9,878
7,825
45,697
4.9%
3.2%
2.7%
2.0%
3.2%
Q1
Q2
Q3
Q4E
Mar-12E
3,100
3,172
3,421
3,564
13,257
0.5%
6.5%
15.5%
6.4%
7.1%
417,864
397,290
373,282
383,827
1,572,262
21.1%
14.9%
3.7%
-3.3%
8.6%
69,431
62,019
59,743
61,609
252,802
16.6%
15.6%
16.0%
16.1%
16.1%
18.3% 34,945
7.6% 27,793
4.6% 30,434
2.6% 35,721
8.3% 128,894
8.4%
7.0%
8.2%
9.3%
8.2%
11.3%
11.5%
26.6%
63.7%
26.1%
19,993
11,944
16,220
18,237
66,394
4.8%
3.0%
4.3%
4.8%
4.2%
18.8%
6.9%
64.2%
133.1%
45.3%
Q1E
Q2E
Q3E
Q4E
Mar-13E
3,490
3,307
3,240
3,585
13,621
12.6%
4.3%
-5.3%
0.6%
2.7%
399,902
385,638
374,369
405,721
1,565,631
-4.3%
-2.9%
0.3%
5.7%
-0.4%
65,856
62,662
60,680
67,740
256,938
16.5%
16.2%
16.2%
16.7%
16.4%
-5.1% 37,317
1.0% 34,564
1.6% 34,206
10.0% 37,332
1.6% 143,419
9.3%
9.0%
9.1%
9.2%
9.2%
6.8%
24.4%
12.4%
4.5%
11.3%
21,067
18,314
17,956
21,082
78,419
5.3%
4.7%
4.8%
5.2%
5.0%
5.4%
53.3%
10.7%
15.6%
18.1%
14,742
8.2%
15,241
3.4%
Mid-Term Targets:
1,705,248
1,806,918
8.9%
6.0%
295,333
320,751
17.3% 14.9% 167,278

17.8%
8.6% 181,040
18.0-20.0%
9.8%
10.0%
16.6% 99,778
8.2% 113,540
5.9%
6.3%
6.5-8.5%
27.2%
13.8%
Tax
Rate
Net Income
%
Chg
EPS Sensitivity
Downside Base
$0.73
Upside
$0.00
$1.30

Downside Base
Upside
NA LV
10,700 11,910
13,100
0
0
0
NA CV
5%
15%
25%
EU LV
26%
36%
46%
EU CV
39%
49%
59%
Asia CV
-12%
-2%
8%
HVAC
$1.39
$1.39
$1.39
Euro/$

Percentile Multiple Downside Base
10th
$7
$9
5.8
25th
$8
$10
6.6
7.7
Median
$9
$12
+
-
F.D. EPS
$
Chg
5.1%
6.0%
6.4%
7.5%
5.9%
6.4%
7.0%
6.2%
5.7%
3.3%
29.1%
24.9%
58.8%
-14.8%
9.4%
13.7%
-4.3%
-5.7%
-46.7%
$0.89
$1.14
$1.41
$2.24
$1.92
$2.10
$2.39
$2.31
$2.20
$1.18
28.3%
23.4%
58.8%
-14.5%
9.4%
13.9%
-3.2%
-4.7%
-46.2%
2.7%
3.3%
3.3%
-16.9%
23.8%
9.3%
$0.87
-
-26.7%
-
Cash EPS (Oper)

$
Chg
-
$1.01
$1.06
$1.15
Cal-03 =
3.9%
$0.99
3.6%
6.3%
$1.04
4.6%
73.8%
$1.79
3.7%
-1.5%
$1.78
2.2%
-35.2%
$1.22
Cal-06 =
1.2%
-45.1%
$0.67
-3.1%
($1.51)
-1.9%
+
($0.52)
Cal-09 =
9,119
2.6%
40.7%
5,404
1.6%
$0.12
(6,750)
-2.0%
-74.3% (11,762)
-3.4%
($0.26)
7,455
2.1%
22.0%
5,818
1.6%
$0.12
13,474
3.4%
+
9.4% 12,206
3.1%
+
$0.26
15,598
1.1%
74.6%
3,966
0.3%
$0.09
Cal-10 =
17,145
4.1%
88.0%
23.5% 13,116
3.1%
142.7%
$0.28
3,150
0.8%
+
67.0%
1,038
0.3%
+
$0.02
11,660
3.1%
56.4%
31.0%
7,932
2.1%
36.3%
$0.17
15,292
4.0%
13.5%
25.0% 11,359
3.0%
-6.9%
$0.24
47,247
3.0%
202.9%
28.7% 33,665
2.1%
748.8%
$0.72
Feb. 3: Fiscal 2012 = Revenue up 8-10% with EBIT margin of 4.1-4.5% and EPS of $0.70-0.75 Cal-11 =
18,356
4.6%
7.1%
30.0% 12,739
3.2%
-2.9%
$0.27
15,836
4.1%
402.7%
30.0% 10,975
2.8%
957.3%
$0.23
15,711
4.2%
34.7%
30.0% 10,888
2.9%
37.3%
$0.23
19,070
4.7%
24.7%
30.0% 13,239
3.3%
16.5%
$0.28
68,973
4.4%
46.0%
30.0% 48,721
3.1%
44.7%
$1.04
Cal-12 =
92,778
5.4%
34.5%
30.0% 65,385
3.8%
34.2%
$1.40
108,754
6.0%
17.2%
30.0% 76,568
4.2%
17.1%
$1.64
5.8%
8.3%
$1.06
5.3%
71.9%
-0.7%
-31.4%
$1.78
-44.8%
+
($1.13)
+
($0.27)
140.2%
+
+
+
+
$0.73
-2.6%
958.0%
37.3%
16.5%
44.9%
$0.98
34.2%
17.1%
GAAP FC-Comp First

EPS
EPS^
Call*
Avg.
Shares
$0.93
$1.12
$1.41
$2.24
$2.02
$2.10
$2.39
$2.46
$2.20
$1.62
29,992
30,164
30,534
30,534
30,416
30,420
30,349
30,015
29,713
29,444
$0.70
$1.02
$1.19
33,407
33,759
34,073
$1.79
$1.78
$1.22
$1.78
$1.22
1.66
1.60
33,758
34,073
34,446
34,149
32,246
($1.32)
($1.51)
($0.52)
$0.67
($1.51)
($0.52)
0.95
(2.76)
(0.30)
32,093
32,098
39,402
$0.12
($0.26)
$0.12
$0.26
$0.09
$0.07
$0.20
$0.12
$0.26
$0.65
(0.08)
0.04
0.07
0.16
0.37
46,487
46,067
46,982
47,055
46,648
$0.28
$0.02
$0.17
$0.24
$0.72
$0.28
$0.02
$0.17
$0.24
$0.72
0.23
0.25
0.28
0.26
0.83
46,980
46,858
46,828
46,828
46,874
$0.27
$0.23
$0.23
$0.28
$1.04
$0.27
$0.23
$0.23
$0.28
$1.04
0.32
0.25
0.31
0.38
1.25
46,828
46,828
46,828
46,828
46,828
$1.40
$1.64
$1.40
$1.64
46,828
46,828
* As of February 3.
Excludes non-operating costs, charges and gains.

^ Includes/excludes special items consistent with First Call consensus
Year
2010
2011
Pretax Income
%
Chg
11,905
526,580
150,609
28.6%
70,942
13.5%
44,094
8.4%
41,357
7.9%
26,719
12,985
9.1%
570,839
8.4% 167,181
29.3% 11.0% 84,368
14.8%
18.9% 58,820
10.3%
33.4%
55,389
9.7%
33.9%
37.7% 34,487
14,241
9.7%
669,553
17.3% 202,978
30.3% 21.4% 104,355
15.6%
23.7% 76,239
11.4%
29.6%
73,026
10.9%
31.8%
41.0% 43,091
15,421
8.3%
913,010
36.4% 268,257
29.4% 32.2% 146,538
16.0%
40.4% 112,054
12.3%
47.0% 108,827
11.9%
49.0%
37.1% 68,442
14,528
-5.8%
990,493
8.5% 255,373
25.8%
-4.8% 133,931
13.5%
-8.6% 94,291
9.5%
-15.9%
94,140
9.5%
-13.5%
38.1% 58,299
15,349
5.7%
999,046
0.9% 277,997
27.8%
8.9% 142,372
14.3%
6.3% 100,868
10.1%
7.0%
97,783
9.8%
3.9%
34.8% 63,763
15,704
2.3%
1,040,418
4.1% 300,799
28.9%
8.2% 159,243
15.3%
11.8% 117,476
11.3%
16.5% 115,972
11.1%
18.6%
37.5% 72,471
15,853
0.9%
1,111,447
6.8% 309,927
27.9%
3.0% 157,475
14.2%
-1.1% 113,291
10.2%
-3.6% 110,413
9.9%
-4.8%
37.2% 69,343
17,343
9.4%
1,139,269
2.5% 317,490
27.9%
2.4% 149,418
13.1%
-5.1% 99,038
8.7%
-12.6%
95,331
8.4%
-13.7%
31.4% 65,403
16,425
-5.3%
1,065,395
-6.5% 278,704
26.2% -12.2% 113,609
10.7%
-24.0% 61,701
5.8%
-37.7%
61,365
5.8%
-35.6%
43.2% 34,886
Results prior to Mar-02 are not restated for "pooling of interest" acquisition of Thermacore.
15,635
-4.8%
1,074,760
0.9% 265,699
24.7%
-4.7% 108,275
10.1%
-4.7% 44,767
4.2%
-27.4%
46,181
4.3%
-24.7%
37.2% 29,007
16,458
5.3%
1,092,652
1.7% 274,971
25.2%
3.5% 108,325
9.9%
0.0% 53,515
4.9%
19.5%
57,271
5.2%
24.0%
37.3% 35,924
15,861
-3.6%
1,199,799
9.8% 289,398
24.1%
5.2% 111,389
9.3%
2.8% 49,968
4.2%
-6.6%
61,713
5.1%
7.8%
36.4% 39,271
Results below are restated for spin-off of Aftermarket business.
16,458
862,989
184,913
21.4%
- 102,381
11.9%
51,571
6.0%
51,898
6.0%
35.7% 33,388
15,861
-3.6%
980,675
13.6% 211,517
21.6% 14.4% 114,740
11.7%
12.1% 57,319
5.8%
11.1%
57,467
5.9%
0.3%
38.2% 35,493
15,565
-1.9%
1,342,416
36.9% 279,840
20.8% 32.3% 164,943
12.3%
43.8% 96,449
7.2%
68.3%
97,917
7.3%
70.4%
37.0% 61,686
15,926
2.3%
1,628,900
21.3% 309,605
19.0% 10.6% 160,814
9.9%
-2.5% 89,125
5.5%
-7.6%
90,539
5.6%
-7.5%
32.9% 60,751
14,935
-6.2%
1,759,969
8.0% 281,966
16.0%
-8.9% 110,827
6.3%
-31.1% 39,723
2.3%
-55.4%
36,387
2.1%
-59.8%
-8.2% 39,362
Q1-Q3 results for fiscal 2008/2009 restated to correct foreign ops' reporting lag; Q4 results for fiscal 2008/2009 restated to correct foreign ops' reporting lag and Korean ops in disc. ops.
14,695
-1.6%
1,801,072
2.3% 263,203
14.6%
-6.7% 98,082
5.4%
-11.5% 17,131
1.0%
-56.9%
22,160
1.2%
-39.1%
2.4% 21,625
10,772
-26.7%
1,552,960
-13.8% 198,799
12.8% -24.5% 47,654
3.1%
-51.4% (24,048)
-1.5%
(40,222)
-2.6%
-20.5% (48,461)
9,766
-9.3%
1,047,069
-32.6% 170,209
16.3% -14.4% 71,288
6.8%
49.6%
6,838
0.7%
+
(10,466)
-1.0%
+
-93.9% (20,298)
Q1
Q2
Q3
Q4
Mar-11
Mar-14E
Mar-15E
Upside
$11
$12
$14

Percentile
Downside Base
Upside
25th
-30%
-10%
10%
Median
-20%
0%
20%
75th
-10%
20%
40%

Year
Rev.
Change
2008
75,000
4%
2009
40,000
2%
2010
50,000
3%
2011
50,000
5%
2012
10,000
1%
2013
50,000
3%
2011-13
110,000
3%
* Revenue growth with flat NA build ex-price of -2%.

Basic Shares
Options (Diluted)
Diluted Shares
Insiders / ESOP Own:
Headquartered:
46,533
295
0
46,828
10%
Racine, Wisconsin
Navistar International
Navistar International (NAV - $43.31 Outperform / Higher Risk)
Target Price: $62 (6.6x 2014E EBITDA, Discounted by 30% - Median of Last
Cycle Range)
Current View
Delivering on Promises:
Navistar has consistently delivered promised
performance over the past 12 months, certifying both a 13-liter and 15-liter
engine as EPA 2010 compliant (with credits), producing military revenue at or
above the high-end of the sustainable range, and meeting or exceeding earnings
guidance and analyst expectations.
Valuation: The stock recently traded near 6.0x calendar 2011 EBITDA, a
discount to the 6.6x median valuation over the last cycle and a significant
discount to a peer group of global commercial vehicle OEMs.
Cyclical Recovery in North America: The North American commercial vehicle
market represents approximately 60% of revenue and is expected to grow at a
5-10% CAGR through 2014.
We also expect the company to benefit from improving North American
commercial vehicle aftermarket volumes.
Secular Business Model Improvement: The company has taken significant
action during the recession to reduce its cost structure, expand its product
lineup into new markets, expand its geographic reach outside or North America,
and implement a differentiated engine strategy. Collectively, these actions are
expected to result in a larger, more profitable Navistar during the current
cyclical recovery.
Key Risks:
1) cyclical end markets; 2) emissions regulations; 3) fuel
economy/CO2 regulations; 4) near-term engine transition; 5) major customers;
6) credit markets/availability; 7) loan portfolio performance; 8) raw material
prices; 9) post-retirement liabilities; 10) union labor agreements; and 11)
modeling risk.
Target Price. Our $62 target price is based on the stock trading at 6.6x our
estimate of 2014 EBITDA, the median percentile of the last cycle range.
Company Description
Navistar, based in Lisle, Illinois, is a major manufacturer of medium- and
heavy-duty commercial trucks, buses, and military vehicles in North America.
The company also produces engines for both its own vehicles and external
customers in North and South America and has an in-house financing operation
for retail and wholesale customers. In 2010, Navistar was the largest North
American medium-duty truck and school bus OEM, third-largest North American
heavy-duty truck OEM, and 10th-largest US defense contractor.
Stock Chart
10
100
Price
7.5
75
50
2.5
25
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
20
NTM Forward P/E
15
10
5
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
20
Price to Book
15
10
5
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile FY October 2011
ByGeography
ByEndMarket
Restof
World7%
South
America9%
Parts: 14%
Parts
Finance Bus
Medium
TotalTruck:69%
Engine: 15%
Engine
North
America
84%
Military
Truck
Heavy
NonU.S.
Truck
Severe
Service
Page 40
Navistar International Corp. (NAV $43.31)

February 24, 2012

Rating: Outperform
12-Month Target Price (6.6x 2014E EBITDA, Median Valuation of Last Cycle Range, Discounted at 30%):
$62
Last Cycle (1999-2008) Range is 3.1-11.2x LTM EBITDA. Median is 6.6x.

(in $ Millions)
Year
Class 8 Build
(000)
Chg
Class 5-7 Build

(000)
Chg
Revenues
$
Chg
Gross Profit
%
Chg
EBITDA (Mfg. Co.)

$
%
Chg
Oct-93
181
72.5%
115
-12.8%
4,526
22.3%
607
13.4%
32.8%
144
3.2%
Oct-94
222
22.2%
132
14.6%
5,178
14.4%
684
13.2%
12.7%
242
4.7%
68.1%
Operating Income
$
%
Chg
75
174
1.7%
$
-
3.4% 132.0%
Pretax Income
%
Chg
68
1.5%
158
3.1%
Tax
Rate
-
132.4%
Net Income
%
39.6%
13
0.3%
35.4%
74
1.4%
Chg
Fully Diluted EPS

Chg
Cash
$
-
471.5%
$0.37
$0.94
GAAP
EPS
Chg
153.8%
First
Call*
Avg
Shs.
$0.37
34.9
$0.94
74.6
Oct-95
250
12.7%
149
12.8%
6,168
19.1%
888
14.4%
29.8%
368
6.0%
52.1%
293
4.8%
68.4%
262
4.2%
65.8%
37.4%
135
2.2%
83.7%
$1.77
88.8%
$1.77
74.3
Oct-96
201
-19.5%
160
7.7%
5,550
-10.0%
732
13.2% -17.6%
192
3.5% -47.8%
102
1.8%
-65.2%
105
1.9%
-59.9%
38.1%
36
0.6%
-73.3%
$0.44
-75.2%
$0.44
73.8
Oct-97
Oct-98
Oct-99
Oct-00
Oct-01
Oct-02
Oct-03
Oct-04
213
261
323
279
153
179
173
250
6.2%
22.2%
24.0%
-13.8%
-45.1%
17.2%
-3.6%
44.8%
194
219
274
247
201
200
189
231
21.4%
12.7%
25.2%
-10.0%
-18.7%
-0.5%
-5.2%
21.9%
6,191
7,678
8,375
8,128
6,419
6,504
7,049
9,474
242
410
591
239
(33)
(227)
(45)
311
3.9%
5.3%
7.1%
2.9%
-0.5%
-3.5%
-0.6%
3.3%
130.5%
69.4%
44.1%
-59.6%
-113.8%
-
38.0%
27.1%
8.0%
27.2%
72.7%
40.9%
68.9%
20.6%
121
288
544
174
(9)
(134)
(14)
247
2.0%
3.8%
6.5%
2.1%
-0.1%
-2.1%
-0.2%
2.6%
236.1%
138.0%
88.9%
-68.0%
-105.2%
-
$1.59
$4.12
$8.17
$2.74
($0.15)
($2.23)
($0.20)
$3.08
264.0%
158.8%
98.1%
-66.5%
-105.5%
-
$1.59
$4.12
$8.17
$2.74
($0.15)
($7.88)
($0.20)
$3.08
73.6
70.0
66.4
61.5
59.5
60.3
68.7
80.1
Oct-05
340
35.9%
258
11.8%
145
1.2%
-53.4%
4.1%
139
1.2%
-43.7%
$1.90
-38.3%
$1.90
76.3
Oct-06
Oct-07
369
242
8.4%
-34.4%
266
220
3.2%
-17.5%
13,878
11,910
395
(73)
2.8%
-0.6%
172.4%
-118.5%
23.8%
-64.4%
301
(120)
2.2%
-1.0%
116.5%
-139.9%
$4.12
($1.70)
116.5%
-141.2%
$4.12
($1.70)
74.5
70.3
206
-14.8%
165
-25.0%
14,399
20.9%
2,469
17.1%
$7.23
123
-40.4%
99 -39.7%
11,300
Fiscal 2009 Actual: US/Canada Class 6-8 182k
-21.5%
1,898
16.8% -23.1%
$2.84
Cal-09
11,922
5.5%
2,204

45
31.2%
32 16.8%
2,693
53
53.3%
44 65.1%
3,298
62
72.9%
39 37.1%
3,490
74
73.0%
45 39.6%
4,277
-2.4%
22.7%
10.5%
29.0%
491
595
559
820
15.4%
2,465
Oct-08
Oct-09
Oct-10
Q1
Q2
Q3
Q4
Oct-11
Q1E
Q2E
Q3E
Q4E
Oct-12E
Q1E
Q2E
Q3E
Q4E
Oct-13E
148
235
20.6%
115
58.8%
161
16.0%
39.9%
11.5%
917
14.8% 25.3%
344
5.6% 79.2%
24.0%
1,214
15.8% 32.4%
581
7.6% 68.9%
9.1%
1,549
18.5% 27.6%
745
8.9% 28.2%
-2.9%
1,402
17.2% -9.5%
695
8.6%
-6.7%
-21.0%
871
13.6% -37.9%
136
2.1% -80.4%
1.3%
750
11.5% -13.9%
(29)
-0.4%
8.4%
868
12.3% 15.7%
149
2.1%
34.4%
1,363
14.4% 57.0%
571
6.0% 283.2%
Results above this line not adjusted for restatements
11,827
24.8%
1,577
13.3% 15.7%
484
4.1% -15.2%
13,758

67
48.0%
38 18.7%
2,928
71
32.5%
45
1.5%
3,614
69
12.1%
45 15.5%
4,014
76
1.6%
45
-0.2%
4,524
283
20.2%
174
7.5%
15,080
17.3%
-14.2%
5.0%
183
5.6%
16,317
15.7% 37.9%
14.9% -18.2%
18.5%
805
357
38.8% 1,113
537
201
9.8%
17,579
7.7%
207
2.6%
18,594
5.8%
4.1%
264
2.3%
-54.9%
9.7%
529
3.7%
12.9%
205
1.8%
-61.2%
3.7%
80.9%
290
2.4%
10.0%
7.7%
224
1.9%
9.0%
$3.05
60
127
115
337
2.2% -25.9%
3.8%
+
3.3% -43.4%
7.9% 190.8%
24
96
77
313
0.9%
2.9%
2.2%
7.3%
-37.5%
+
-54.2%
+
0.0%
1.6%
8.4%
14.7%
12
80
61
247
0.4%
2.4%
1.8%
5.8%
-27.7%
+
-55.4%
+
Cal-10
$0.16
$1.02
$0.79
$3.37
17.9%
925
6.7%
639
4.6%
510
3.7%
10.6%
400
2.9%
79.0%
$5.28
Cal-11
($0.17)
$1.02
$2.07
$2.59
555
716
803
930
17.4%
18.1%
18.5%
19.3%
3,003
18.4%
3,256
586
-68.3%
447
11.8%
11.8% 1,041
3.0%
5.4%
2.2%
31.8%
18.3%
4.2%
780
247
5.9%
2,756
318
7.7% 211.8%
4.8% -51.7%
4.8% -14.5%
6.0% 88.2%
5.4% -29.9%
9.6% 123.7%
9.6%
309
-39.7%
708
2.3%
8.7%
31.9%
6.0%
Oct-15E
1.6%
3.5% 156.8%
0.4% -90.8%
130
198
188
409
17.2%
17.9%
18.4%
19.2%
Oct-14E
190
488
45
16.1%
502
646
738
870
8.2%
5.8% 66.3%
3.0% -55.7%
4.0% 142.2%
6.0% 85.4%
7.4% 35.2%
6.8% -10.3%
-0.2% -102.5%
-2.8%
-1.3%
3.3%
-
18.2% -1.0%
18.0% 18.7%
16.0% -13.6%
19.2% 46.5%
8.7%
9.6%
15.0%
5.8%
Fiscal 2012 Guidance: US/Canada Class 6-8 275-310k

71
7.1%
40
5.9%
3,191
9.0%
77
8.9%
48
6.3%
3,960
9.6%
72
4.3%
48
6.1%
4,339
8.1%
76
0.1%
47
4.3%
4,827
6.7%
297
2,175
1,779
247
458
619
555
(14)
(184)
(90)
315
18.5%
10.5%
10.7%
8.8%
7.0%
99
225
324
393
30.6%
43.0%
3.4% -23.7%
6.2% 13.7%
8.1% 72.3%
8.7%
-4.0%
24
150
249
318
0.8% -59.6%
4.1% 18.2%
6.2% 116.5%
7.0%
-5.7%
4
126
225
300
0.1%
3.5%
5.6%
6.6%
+
31.8%
192.8%
-4.1%
30.0%
30.0%
30.0%
30.0%
(12)
71
147
186
-0.4%
2.0%
3.6%
4.1%
+
-10.9%
139.9%
-24.7%
6.9%
741
4.9%
655
4.3%
28.6%
30.0%
392
2.6%
-2.0%
12.5%
15.9%
Fiscal 2012 Guidance (updated Feb. 1): Revenue $15.0-$16.0 billion, adjusted manufacturing profit $1.00-$1.15 billion, adjusted EPS $5.00-$5.75
207
6.5% 108.5%
132
4.1% 444.0%
118
3.7%
3230.3%
30.0%
68
2.1% -670.7%
248
6.3% 10.6%
173
4.4% 15.9%
159
4.0%
26.3%
30.0%
95
2.4%
32.5%
334
7.7%
3.2%
259
6.0%
4.1%
250
5.8%
10.7%
30.0%
163
3.8%
11.5%
413
8.6%
5.1%
338
7.0%
6.3%
331
6.9%
10.4%
30.0%
208
4.3%
11.7%
-
9.0% 1,202
8.4% 1,297
7.4%
7.4%
15.5%
7.9%
902
997
3,462
18.6%
6.4% 1,386
7.5%
6.8% 1,086
Assumed contribution margin for 2011-2015 in the range of 20-25%
5.5%
21.8%
858
5.3%
31.0%
30.0%
534
3.3%
3.5%
36.2%
15.6%
$5.60
Cal-12
$0.97
$1.35
$2.33
$2.97
-60.7%
2.40
$1.82
73.2
$4.20
$2.91
71.5
7.2%
$3.02
$3.06
73.1
2.95
-31.4%
+
-57.2%
+
$0.16
$1.02
$0.79
$3.37
$0.24
$1.17
$1.42
$3.05
75.9
78.6
76.8
73.2
$5.34
$5.45
76.1
($0.17)
$1.02
$2.07
$2.59
($0.10)
$1.16
$1.50
$2.93
70.0
70.0
70.8
71.8
+
5.01
+
0.1%
163.3%
-23.2%
6.1%
$5.51
$5.48
70.0
6.65
-670.7%
32.5%
12.9%
14.6%
$0.97
$1.35
$2.33
$2.97
$0.63
$1.50
$2.05
$3.28
70.0
70.0
70.0
70.0
$7.63
$7.49
70.0
$7.63
36.2%
Cal-13
7.71
$8.82
5.7%
10.5%
977
5.6%
13.8%
30.0%
617
15.6%
$8.82
70.0
5.8%
8.9%
1,092
5.9%
11.8%
30.0%
698
3.8%
13.1%
$9.97
13.1%
$9.97
70.0
* As of February 8.
EPS Sensitivity
Organic Growth / Share

Upside
Year
Cal-2010
$1.55
$2.95
$5.35
25th
4.9
$18
$27
$30
2008
(100)
Cal-2011
$2.70
$5.01
$9.05
Median
6.6
$28
$40
$43
2009
200
1%
75th
9.0
$41
$58
$62
2010
(300)
-3%
-3%
Year
Downside
Base
Upside
Percentile
Multiple Downside
Base

Downside
Base
Upside
NA HD
140
159
170
NA MD
110
18%
-28%
-54%
$1.40
120
28%
-18%
-44%
$1.40
130
38%
-8%
-34%
$1.40
ROW CV
Military
Engine
Euro/$

Percentile
Downside
Base
Upside
25th
-61%
-42%
-35%
Median
75th
-39%
-11%
-14%
25%
-7%
34%
%
-1%
2011
(300)
2012
300
2%
2013
200
1%
2011-13
200
0%
Shares Outstanding (Oct-11)

Basic Shares
72,500
Options (Diluted)
700
0
Diluted Shares
73,200
Insiders Own:
9.2%
Headquartered:
Lisle, Illinois
PACCAR
PACCAR (PCAR - $45.84 Outperform / Average Risk)
Target Price: $54 (8.3x 2014E EBITDA, Discounted by 20% - Median Valuation
of Last Cycle Range)
Current View
Pull Back on Margin Concerns Creates Buying Opportunity. Investors
quickly discounted PACCARs strong Q4-2011 performance on comments gross
margin performance would be flat to slightly down in 2012 versus 2011. While
Europe is a headwind, we believe PACCAR has the ability to deliver solid
incremental margins on the back of strong N.A. truck demand and aftermarket
parts.
Cyclical Recovery in Europe, North America: The European and North
American commercial vehicle markets represent more than 80% of the
companys revenue. In 2012, we expect North America Class 8 production to
increase roughly 12%.
Outgrowing End Markets: Historically, PACCAR has outgrown its end markets
by 5-7 percentage points over the course of a cyclical recovery, via market
share gains and acquisitions/international expansion. We expect this trend to
continue, driven by market share gains (DAF vocational trucks, North America
medium-duty) and organic growth internationally (primarily South America).
Secular Margin Expansion: Historically, PACCAR has grown margins by 100200 basis points over the course of a cyclical recovery. We expect this trend to
continue due to an improved cost structure, engine in-sourcing in North
America, higher parts revenue, and Financial Services growth.
Valuation: The stock recently traded near 7.7x LTM EBITDA, a discount to the
companys median valuation over the last cycle and a slight premium to a peer
group of global commercial vehicle OEMs.
Key Risks: 1) Cyclical end markets, 2) commodity prices, 3) credit markets
and credit availability, 4) loan portfolio performance, 5) post-retirement
liabilities, 6) foreign exchange, 7) premium market position, 8) the EPA 2010
emissions regulation and GHG emissions/fuel economy regulations, and 9) major
shareholders.
Target Price. Our $54 target price is based on 8.3x our estimate of 2014
EBITDA, the median percentile of the valuation range over the last cycle.
Company Description
PACCAR Inc., headquartered in Bellevue, WA, was incorporated in 1924. The
company can trace its roots back to the Seattle Car Manufacturing Company, formed
in 1905. PACCAR is a leader in the design and manufacture of medium- and heavyduty trucks marketed under the Kenworth, Peterbilt, and DAF nameplates. The
company's trucks are used for both over-the-road and off-highway hauling of freight
and other goods. In addition, PACCAR provides financing and leasing to its customers
and dealers through its wholly-owned finance subsidiaries. The company employs
approximately 17,700 and has 12 manufacturing/assembly facilities in seven
countries
Stock Chart
6
80
Price
4.5
60
40
1.5
20
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
40
NTM Forward P/E
30
20
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
6
Price to Book
4.5
3
1.5
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
ByGeography
ByEndMarket
Financial
Services6%
RoW
15%
NorthAmerica
54%
Aftermarket
Parts16%
MediumTruck
8%
Europe
31%
HeavyTruck
70%
Commercial Truck 80%
Page 41
$45.84)
PACCAR Inc. (PCAR

February 24, 2012

Rating: Outperform
12-Month Target Price (8.3x 2014E EBITDA, Median Valuation of Last Cycle Range, Discounted at 20%):
$54

Current Multiple = 7.7x LTM EBITDA (32nd percentile), 6.9x 2012E and 6.0x 2013E.
(in $ Millions)
Year
Class 8 Build
(000)
Chg
Class 5-7 Build

(000)
Chg
Revenues
$
Chg
Gross Profit
%
Chg
EBITDA
%
Chg
Operating Income
$
%
Chg
Pretax Income
%
Tax
Rate
Chg
Net Income
%
Chg
F.D. EPS
Chg
GAAP
EPS
First
Call*
Avg
Shs.
Dec-93
188
34.5%
119
12.3%
3,390.5
30.5%
471.0
13.9%
32.2%
195.6
5.8%
98.0%
162.5
4.8% 132.5%
219.8
6.5%
95.2%
35.3%
142.2
4.2%
65.0%
$0.36
65.0%
$0.36
393.9
Dec-94
228
21.3%
134
12.4%
4,294.2
26.7%
636.2
14.8%
35.1%
298.8
7.0%
52.8%
257.7
6.0%
58.6%
320.1
7.5%
45.6%
36.1%
204.5
4.8%
43.8%
$0.52
43.8%
$0.52
393.9
Dec-95
248
8.8%
146
8.5%
4,590.7
6.9%
677.0
14.7%
6.4%
351.5
7.7%
17.6%
305.4
6.7%
18.5%
399.6
8.7%
24.8%
36.7%
252.8
5.5%
23.6%
$0.64
23.6%
$0.64
393.9
Dec-96
194 -21.5%
165
13.2%
4,331.8
-5.6%
641.5
14.8%
-5.2%
273.7
6.3% -22.1%
218.7
5.0%
-28.4%
312.9
7.2%
-21.7%
35.8%
201.0
4.6% -20.5%
$0.51
-20.5%
$0.51
393.9
Dec-97
224
15.2%
199
20.7%
6,479.4
49.6% 1,014.1
15.7%
58.1%
468.9
7.2%
71.3%
394.6
6.1%
80.4%
534.7
8.3%
70.9%
35.6%
344.6
5.3%
71.4%
$0.87
70.6%
$0.87
395.9
Dec-98
Dec-99
267
333
19.1%
24.7%
230
279
15.4%
21.5%
7,577.7
8,648.2
17.0% 1,265.7
14.1% 1,490.8
16.7%
17.2%
24.8%
17.8%
658.1
890.5
8.7%
10.3%
40.3%
35.3%
566.4
783.3
7.5%
9.1%
43.5%
38.3%
653.1
923.2
8.6%
10.7%
22.1%
41.4%
36.2%
36.8%
416.8
583.6
5.5%
6.7%
21.0%
40.0%
$1.05
$1.46
20.2%
40.0%
$1.05
$1.46
398.5
398.6
Dec-00
252 -24.2%
231 -17.2%
7,437.0
-14.0% 1,042.2
14.0% -30.1%
643.2
8.6% -27.8%
544.4
7.3%
-30.5%
665.1
8.9%
-28.0%
33.6%
441.8
5.9% -24.3%
$1.14
-22.3%
$1.14
388.3
Dec-01
146 -42.1%
197 -14.8%
5,641.7
-24.1%
636.6
11.3% -38.9%
303.0
5.4% -52.9%
195.5
3.5%
-64.1%
255.3
4.5%
-61.6%
32.0%
173.6
3.1% -60.7%
$0.45
-60.8%
$0.45
389.5
Dec-02
181
202
6,786.0
20.3%
894.8
13.2%
40.6%
602.3
8.9%
98.8%
484.3
7.1% 147.7%
574.1
8.5%
124.9%
35.2%
372.0
5.5% 114.3%
$0.95
112.4%
$0.95
392.9
Dec-03
182
0.4%
197
-2.7%
7,721.1
13.8% 1,070.2
13.9%
19.6%
760.2
9.8%
26.2%
644.1
8.3%
33.0%
805.5
10.4%
40.3%
34.6%
526.5
6.8%
41.5%
$1.33
40.3%
$1.33
396.2
Dec-04
269
48.0%
235
19.6%
10,833.7
40.3% 1,668.3
15.4%
55.9% 1,296.7
12.0%
70.6% 1,174.7
10.8%
82.4%
1,368.2
12.6%
69.9%
33.7%
906.8
8.4%
72.2%
$2.29
72.6%
$2.29
395.4
Dec-05
339
26.0%
253
7.6%
13,298.4
22.8% 2,075.7
15.6%
24.4% 1,661.3
12.5%
28.1% 1,528.0
11.5%
30.1%
1,773.6
13.3%
29.6%
36.1% 1,133.2
8.5%
25.0%
$2.92
27.1%
$2.92
388.7
Dec-06
376
11.0%
275
8.6%
15,503.3
16.6% 2,466.7
15.9%
18.8% 2,009.7
13.0%
21.0% 1,846.3
11.9%
20.8%
2,175.3
14.0%
22.6%
31.2% 1,496.0
9.6%
32.0%
$3.97
36.0%
$3.97
377.2
Dec-07
212 -43.6%
206 -24.9%
14,030.4
-9.5% 2,113.1
15.1% -14.3% 1,562.6
11.1% -22.2% 1,366.2
9.7%
-26.0%
1,764.3
12.6%
-18.9%
30.4% 1,227.3
8.7% -18.0%
$3.29
-17.1%
$3.29
373.3
Dec-08
205
-3.4%
158 -23.6%
13,709.6
-2.3% 1,972.7
14.4%
10.1% -11.2% 1,160.7
Dec-09
118 -42.3%
98 -38.0%
7,076.7
Dec-10
154
30.2%
118
20.6%
9,324.9
31.8% 1,126.3
12.1%
Q1
52
48.2%
40
46.1%
3,042.6
53.3%
410.3
Q2
61
72.0%
45
58.4%
3,702.7
66.4%
471.6
Q3
68
69.9%
42
40.7%
3,993.0
73.3%
509.0
Q4
75
71.0%
41
24.3%
4,587.6
63.2%
Dec-11
255
65.5%
167
41.5%
15,325.9
Q1E
71
36.9%
44
11.2%
Q2E
72
19.1%
45
0.4%
Q3E
69
0.4%
45
Q4E
73
-2.5%
Dec-12E
285
Q1E
24.1%
2.8%
8.5%
-15.0%
1,464.0
10.7%
-17.0%
30.5% 1,017.9
7.4% -17.1%
$2.78
-15.4%
$2.78
365.9
233.7
3.3% -83.2%
45.7
0.6%
-96.1%
175.0
2.5%
-88.0%
35.8%
112.3
1.6% -89.0%
$0.31
-88.9%
$0.31
$0.23
364.7
89.8%
684.9
7.3% 193.1%
495.0
5.3%
660.3
7.1%
30.7%
457.6
4.9%
$1.25
$1.25
$1.25
366.1
13.5%
89.5%
279.1
9.2% 141.2%
232.0
7.6%
286.3
9.4%
198.2%
32.5%
193.3
6.4% 183.0%
$0.53
181.6%
$0.53
$0.49
367.2
12.7%
74.7%
335.6
9.1% 110.0%
285.5
7.7% 150.0%
353.2
9.5%
137.7%
32.1%
239.7
6.5% 140.7%
$0.65
139.9%
$0.65
$0.69
367.2
12.7%
78.6%
375.1
9.4% 109.2%
325.9
8.2% 149.2%
394.7
9.9%
123.2%
28.7%
281.6
7.1% 134.9%
$0.77
136.1%
$0.77
$0.70
364.2
593.2
12.9%
67.1%
449.7
9.8%
399.6
8.7% 119.1%
472.7
10.3%
97.9%
30.7%
327.7
7.1%
93.0%
$0.91
97.2%
$0.91
$0.79
359.1
64.4% 1,984.1
12.9%
76.2% 1,439.5
9.4% 110.2% 1,243.0
8.1% 151.1%
1,506.9
9.8%
128.2%
30.8% 1,042.3
6.8% 127.8%
$2.86
128.8%
$2.86
$2.62
364.4
3,833.8
26.0%
489.0
12.8%
19.2%
346.0
9.0%
24.0%
293.5
7.7%
26.5%
356.7
9.3%
24.6%
30.0%
249.7
6.5%
29.2%
$0.70
32.1%
$0.70
$0.73
359.1
4,142.8
11.9%
534.4
12.9%
13.3%
379.7
9.2%
13.2%
327.2
7.9%
14.6%
405.7
9.8%
14.9%
30.0%
284.0
6.9%
18.5%
$0.79
21.2%
$0.79
$0.82
359.1
6.4%
4,189.3
4.9%
540.3
12.9%
6.1%
387.5
9.2%
3.3%
335.0
8.0%
2.8%
419.7
10.0%
6.3%
30.0%
293.8
7.0%
4.3%
$0.82
5.8%
$0.82
$0.85
359.1
41
2.2%
4,645.0
1.3%
603.7
13.0%
1.8%
433.2
9.3%
-3.7%
380.7
8.2%
-4.7%
477.4
10.3%
1.0%
30.0%
334.2
7.2%
2.0%
$0.93
2.0%
$0.93
$0.92
359.1
11.6%
175
5.0%
16,811.0
9.7% 2,167.4
12.9%
9.2% 1,546.5
9.2%
7.4% 1,336.5
8.0%
7.5%
1,659.4
9.9%
10.1%
30.0% 1,161.6
6.9%
11.4%
$3.23
13.1%
$3.23
$3.35
359.1
71
0.1%
46
5.4%
4,096.6
6.9%
535.0
13.1%
9.4%
375.4
9.2%
8.5%
317.9
7.8%
8.3%
385.9
9.4%
8.2%
30.0%
270.1
6.6%
8.2%
$0.75
8.2%
$0.75
359.1
Q2E
75
4.6%
50
10.2%
4,499.1
8.6%
596.7
13.3%
11.7%
433.8
9.6%
14.2%
376.3
8.4%
15.0%
456.5
10.1%
12.5%
30.0%
319.5
7.1%
12.5%
$0.89
12.5%
$0.89
359.1
Q3E
74
7.1%
43
-3.4%
4,614.6
10.2%
614.7
13.3%
13.8%
436.9
9.5%
12.7%
379.4
8.2%
13.2%
462.8
10.0%
10.3%
30.0%
323.9
7.0%
10.3%
$0.90
10.3%
$0.90
359.1
Q4E
75
2.6%
46
10.8%
4,938.2
6.3%
655.0
13.3%
8.5%
480.4
9.7%
10.9%
422.9
8.6%
11.1%
515.7
10.4%
8.0%
30.0%
361.0
7.3%
8.0%
$1.01
8.0%
$1.01
359.1
Dec-13E
295
3.6%
185
5.7%
18,148.5
8.0% 2,401.5
13.2%
10.8% 1,726.4
9.5%
11.6% 1,496.4
8.2%
12.0%
1,820.8
10.0%
9.7%
30.0% 1,274.6
7.0%
9.7%
$3.55
9.7%
$3.55
359.1
19.1%
30.0% 1,517.8
7.7%
19.1%
-48.4%
593.3
-6.6% 1,387.2
8.4% -69.9%
95.4%
Gross margin "flat-to-down versus 2011, depending on Europe"
Dec-14E
315
6.8%
205
10.8%
19,776.1
9.0% 2,694.4
13.6%
12.2% 1,987.0
10.0%
15.1% 1,737.0
8.8%
16.1%
2,168.3
11.0%
$4.23
19.1%
$4.23
359.1
Dec-15E
315
0.0%
205
0.0%
20,719.5
4.8% 2,864.2
13.8%
6.3% 2,151.8
10.4%
8.3% 1,881.8
9.1%
8.3%
2,418.7
11.7%
11.5%
30.0% 1,693.1
8.2% 11.5%
$4.71
11.5%
$4.71
359.1
Assumed contribution margin for 2011-2015 is in the range of 15-20%
* As of January 31.
New Business Growth

EPS Sensitivity
Year
2010
2011
Downside Base
$1.90 $1.25
$2.20 $2.86

Upside
$3.15
$3.45
Percentile
25th
Median
75th
Multiple Downside
$25
7.4
8.3
$28
9.9
$33
Rev
Base Upside
$28
$31
$32
$35
$38
$42

Downside Base
NA
EU
ROW
Parts
Euro/$
140
32%
37%
6%
$1.40
154
42%
47%
16%
$1.40
Upside
170
52%
57%
26%
$1.40

Percentile
25th
Median
75th
Downside
-43%
-37%
-25%
Base
-37%
-28%
-14%
2008
2009
2010
-30%
-21%
-5%
Source for all models: Company Reports, Robert W. Baird & Co. estimates.
Chg
5%
2%
4%
Basic Shares
358.3
Options (Diluted)
Diluted Shares
0.8
0.0
359.1
2011
600
6%
Insiders Own:
2012
600
4%
Headquartered:
2013
Upside
650
300
300
2011-13
300
2%
1,500
4%
7.0%
Bellevue, Washington
Snap-On
Snap-on (SNA - $60.73 Outperform / Lower Risk)
Target Price: $74 (8.8x 2014E EBITDA - Median Valuation of Last Cycle Range)
Current View
Revenue Growth. Snap-on has reported strong organic growth during
2011, offsetting headwinds from continued weakness in Southern Europe
and a run off of Defense business. Long term, end-market demand for auto
repair tools, equipment and information is estimated to be 3-4% with
incremental 2-4% from:
o
New products and productivity solutions such as wheel imaging
aligners, innovative power tools, and advanced diagnostic/information
products that are increasingly software-related
o
Expansion into emerging markets
o
Selective expansion in North America and Europe
o
Expansion into "mission critical" industrial end markets such as
aerospace, mining, government/military, and vocational markets
o
Expansion
into
adjacent
repair
markets
such
as
construction/agricultural equipment and commercial trucks.
EBIT Margin. Snap-on management has also successfully improved
profitability through intense focus on execution, cost reduction and
streamlining operations. During the downturn, management was able to
hold EBIT margins above 9% with current run rate back to pre-recession
levels. The company believes it can boost EBIT margin (ex-Snap-on Credit)
by another 300-400 basis points through growing volume, continuous
improvement activities and business mix.
Business Model Strengths. The key strengths of the business model
include: 1) fantastic brands (Snap-on, Bahco; Snap-on named best in five
categories in Frost & Sullivan survey of automotive repair technicians); 2)
strong distribution system; 3) broad product offering to supply everything
needed to repair vehicles (tools, equipment, diagnostic products,
information systems); and 4) significant free cash flow.
Key Risk Factors. 1) Modest economic sensitivity, though the US auto
repair tool market is just 30% of sales; 2) dealer business depends on
automotive repair spending; 3) weakness versus our assumptions for
annual end-market performance in the base business; and 4) limited intraquarter visibility into performance.
Price Target. Our $74 price target is based on the shares trading at 8.8x
our estimate of expected 2014 EBITDA, the median of the last cycle range.
Company Description
Headquartered in Kenosha, Wisconsin, Snap-on Incorporated is a leading global
developer, manufacturer and marketer of tool, equipment and diagnostic
solutions for professional technicians, automotive service centers and OEMs,
and commercial and industrial tool users worldwide. Snap-on has evolved from
the leading hand-tool provider for the technician to the company with the most
complete set of capabilities in the automotive service industry.
Stock Chart
6
80
Price
4.5
60
40
1.5
20
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
24
NTM Forward P/E
18
12
6
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
4
Price to Book
3
2
1
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue by Segment
Snap-on Tools
Group
35%
Repair Systems
& Information
Group
27%
Revenue by Geography
Revenue by End Markets

Repair
Systems&
Information
Rest of World
Asia
8%
Equipment9%
U.S.26%
OEM/Dealer
Service9%
Snapon Tools
Diagnostics9%
International
10%
Europe
25%
Financial
Services
4%
United States
59%
Commercial &
Industrial
Group
34%
Industrial
(aerospace,
military,
China)24%
Commercial&
Industrial
Commercial
(autorepair
equipment)
12%
Page 42
$60.73)
Snap-on Incorporated (SNA

February 24, 2012

Rating: Outperform
12-Month Target Price (8.8x 2014E EBITDA, Median Percentile of Last Cycle Range, Discounted by 15%):
$74

Year
(in Thousands)
Revenues
$
Chg
Gross Profit
%
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Pro Forma
Dec-07
Dec-08
Dec-09
Dec-10
1,132,010
1,194,296
1,292,125
1,485,279
1,672,215
1,772,637
1,945,621
2,175,700
2,095,700
2,109,100
2,233,200
2,329,100
2,308,600
2,473,400
2,663,100
2,845,200
2,853,300
2,362,500
2,619,200
15.1%
5.5%
8.2%
14.9%
12.6%
6.0%
9.8%
11.8%
-3.7%
0.6%
5.9%
4.3%
-0.9%
7.1%
595,728
608,837
663,491
750,784
843,828
823,876
918,785
1,006,276
963,100
964,900
978,000
1,009,300
1,019,900
1,085,900
52.6%
51.0%
51.3%
50.5%
50.5%
46.5%
47.2%
46.3%
46.0%
45.7%
43.8%
43.3%
44.2%
43.9%
15.0%
0.3%
-17.2%
10.9%
1,268,600
1,284,600
1,057,600
1,211,100
Q1
Q2
Q3
Q4
Dec-11
693,700
726,700
697,200
736,600
2,854,200
11.6%
12.2%
6.8%
5.7%
9.0%
Q1E
Q2E
Q3E
Q4E
Dec-12E
716,419
727,951
706,520
752,444
2,903,335
Q1E
Q2E
Q3E
Q4E
Dec-13E
Dec-14E
Dec-15E
Chg
16.9%
2.2%
9.0%
13.2%
12.4%
-2.4%
11.5%
9.5%
-4.3%
0.2%
1.4%
3.2%
1.1%
6.5%
$
179,064
188,566
220,178
252,405
303,914
228,983
316,468
334,752
275,000
250,000
223,700
202,800
217,050
251,400
EBITDA
%
Chg
Op. Inc. (Inc. SOC)

$
%
Chg
44.6% 16.8% 401,500

45.0%
1.3% 460,800
44.8% -17.7% 325,300
46.2% 14.5% 404,100
15.8%
- 146,933
15.8%
5.3% 158,934
17.0% 16.8% 188,644
17.0% 14.6% 220,526
18.2% 20.4% 265,537
12.9% -24.7% 183,998
16.3% 38.2% 261,103
15.4%
5.8% 268,552
13.1% -17.8% 207,000
11.9%
-9.1% 198,300
10.0% -10.5% 163,400
8.7%
-9.3% 142,300
9.4%
7.0% 168,000
10.2% 15.8% 202,900
204,400
14.1% 59.7% 325,800
16.1% 14.8% 388,800
13.8% -29.4% 250,700
15.4% 24.2% 331,400
13.0%
13.3%
14.6%
14.8%
15.9%
10.4%
13.4%
12.3%
9.9%
9.4%
7.3%
6.1%
7.3%
8.2%
7.7%
11.5%
13.6%
10.6%
12.7%
330,600
342,200
329,300
335,800
1,337,900
47.7%
47.1%
47.2%
45.6%
46.9%
15.0%
12.6%
9.3%
5.4%
10.5%
118,100
134,600
133,900
145,100
531,700
17.0%
18.5%
19.2%
19.7%
18.6%
33.9%
36.0%
31.5%
26.1%
31.6%
99,800
116,300
115,100
125,900
457,100
14.4%
16.0%
16.5%
17.1%
16.0%
3.3%
0.2%
1.3%
2.2%
1.7%
340,396
335,935
332,925
342,859
1,352,115
47.5%
46.1%
47.1%
45.6%
46.6%
3.0%
-1.8%
1.1%
2.1%
1.1%
139,666
136,136
141,443
152,282
569,527
19.5%
18.7%
20.0%
20.2%
19.6%
18.3%
1.1%
5.6%
4.9%
7.1%
121,166
117,636
122,943
133,782
495,527
753,717
765,838
743,326
791,696
3,054,577
5.2%
5.2%
5.2%
5.2%
5.2%
359,045
361,878
351,328
362,484
1,434,736
47.6%
47.3%
47.3%
45.8%
47.0%
5.5%
7.7%
5.5%
5.7%
6.1%
149,006
156,999
153,584
163,390
622,978
19.8%
20.5%
20.7%
20.6%
20.4%
6.7%
15.3%
8.6%
7.3%
9.4%
130,506
138,499
135,084
144,890
548,978
3,209,631
3,363,329
5.1%
4.8%
Pretax Income
$
%
Chg
Tax
Rate
Net Income
%
Chg
8.2%
18.7%
16.9%
20.4%
-30.7%
41.9%
2.9%
-22.9%
-4.2%
-17.6%
-12.9%
18.1%
20.8%
136,491
153,669
179,889
208,653
238,676
160,703
238,981
231,175
168,000
161,200
130,000
120,400
148,000
184,900
12.1% 24.6%
12.9% 12.6%
13.9% 17.1%
14.0% 16.0%
14.3% 14.4%
9.1% -32.7%
12.3% 48.7%
10.6%
-3.3%
8.0% -27.3%
7.6%
-4.0%
5.8% -19.4%
5.2%
-7.4%
6.4% 22.9%
7.5% 24.9%
37.1%
36.0%
37.0%
37.0%
37.0%
36.0%
36.0%
36.0%
36.5%
36.0%
35.0%
35.0%
37.2%
32.7%
7.6% 30.1%
8.2% 14.6%
8.8% 15.3%
8.9% 16.0%
9.0% 14.4%
5.8% -31.6%
7.9% 48.7%
6.8%
-3.3%
5.1% -27.9%
4.9%
-3.3%
3.8% -18.1%
3.4%
-7.5%
4.0% 18.8%
5.0% 34.0%
60.6%
19.3%
-35.5%
32.2%
285,200
357,800
205,300
277,400
10.0% 54.2%
12.5% 25.5%
8.7% -42.6%
10.6% 35.1%
32.4%
32.9%
30.5%
31.6%
42.6% 84,300
44.1% 100,900
37.4% 98,300
29.9% 111,400
37.9% 394,900
12.2%
13.9%
14.1%
15.1%
13.8%
49.7%
51.3%
38.5%
33.6%
42.4%
32.3% 56,200
32.6% 66,900
31.0% 67,800
32.5% 74,300
32.1% 265,200
8.1%
9.2%
9.7%
10.1%
9.3%
52.7%
47.7%
45.8%
28.3%
42.2%
16.9%
16.2%
17.4%
17.8%
17.1%
21.4%
1.1%
6.8%
6.3%
8.4%
107,896
104,597
110,135
121,205
443,833
15.1%
14.4%
15.6%
16.1%
15.3%
28.0%
3.7%
12.0%
8.8%
12.4%
33.5% 70,951
33.5% 68,757
33.5% 72,440
33.5% 79,801
33.5% 291,949
9.9%
9.4%
10.3%
10.6%
10.1%
26.2%
2.8%
6.8%
7.4%
10.1%
17.3%
18.1%
18.2%
18.3%
18.0%
7.7%
17.7%
9.9%
8.3%
10.8%
118,052
126,169
122,877
132,807
499,906
15.7%
16.5%
16.5%
16.8%
16.4%
9.4%
20.6%
11.6%
9.6%
12.6%
33.5% 77,705
33.5% 83,102
33.5% 80,913
33.5% 87,517
33.5% 329,237
10.3%
10.9%
10.9%
11.1%
10.8%
9.5%
20.9%
11.7%
9.7%
12.8%
Chg
Fully Diluted Operating EPS

Cash
Chg
Ex-FS*
FS %
GAAP
EPS
Avg
Shs.
$0.96
$1.14
$1.16
$1.27
$4.52
51.7%
46.4%
45.1%
28.3%
41.5%
$0.81
$0.94
$0.91
$1.01
$3.67
25.0%
23.8%
23.2%
15.8%
21.5%
15.1%
17.6%
21.2%
20.1%
18.7%
$0.96
$1.14
$1.16
$1.27
$4.52
$0.86
$1.08
$1.03
$1.18
$4.29
58,700
58,800
58,700
58,700
58,725
$1.21
$1.17
$1.23
$1.36
$4.97
None.
$1.32
$1.42
$1.38
$1.49
$5.61
26.2%
3.0%
6.8%
7.4%
10.1%
$0.93
$0.88
$0.95
$1.09
$3.85
14.7%
(5.9%)
4.1%
7.3%
4.7%
22.8%
24.7%
23.2%
20.2%
22.6%
$1.21
$1.17
$1.23
$1.36
$4.97
$1.14
$1.30
$1.17
$1.33
$4.92
58,700
58,700
58,700
58,700
58,700
9.5%
20.9%
11.7%
9.7%
12.8%
$1.01
$1.08
$1.05
$1.18
$4.32
8.2%
22.9%
10.7%
8.3%
12.2%
23.7%
23.5%
23.9%
21.1%
23.0%
$1.32
$1.42
$1.38
$1.49
$5.61
$1.24
$1.40
$1.24
$1.42
$5.45
58,700
58,700
58,700
58,700
58,700
1,512,263
47.1%
5.4% 663,933
20.7%
6.6% 589,933
18.4%
7.5% 543,282
16.9%
8.7% 33.5% 358,083
11.2%
8.8%
$6.10
1,589,112
47.2%
5.1% 711,971
21.2%
7.2% 637,971
19.0%
8.1% 594,420
17.7%
9.4% 33.5% 392,089
11.7%
9.5%
$6.68
* Assumed contribution margin for 2011-2015 is in the range of 45-50%
Operating EPS = GAAP EPS less FASB-recognized restructuring costs, asset write-downs, asset gains/losses and out-of-period items.
* Adjusted to exclude the earnings of the Financial Services segment (before interest expense).
EPS Sensitivity
Year
Downside
Base
Upside
Upside
$2.70
$3.19
$3.60
7.5
2010
25th
$57
$62
$67
$3.50
$4.52
$5.50
8.8
$74
2011
Median
$68
$80
10.1
75th
$78
$86
$92
Downside
Base
Upside
6%
11%
16%
Dealer
Percentile
Downside Base
Upside
12%
17%
22%
C&I
25th
-3%
7%
15%
4%
9%
14%
D&I
Median
16%
27%
37%
Euro
1.33
1.33
1.33
75th
35%
47%
59%
8.8%
9.5%
$4.68
$5.15
8.4%
10.0%
23.3%
22.9%
$6.10
$6.68
58,700
58,700
February 2 Guidance:
-
$0.74
44.8%
$0.93
25.2%
39.3% $1.53
$1.20
28.9%
35.1% $1.84
$1.47
23.0%
30.8% $2.13
$1.70
15.8%
30.1% $2.44
$1.01
(40.5%)
41.0% ($0.08)
$1.94
91.2%
25.3% $2.16
$2.11
8.8%
16.5% $2.10
-25.4%
$1.64
(22.1%)
19.2% $0.37
-13.4%
$1.35
(17.9%)
23.3% $1.76
-17.8%
$0.96
(28.9%)
33.7% $1.35
-7.6%
$0.96
(0.1%)
28.3% $1.40
18.7%
$1.42
48.0%
10.6% $1.59
32.8%
$1.96
38.1%
7.0% $1.71
(ex-litigation charge and tax benefit)
53.8%
$2.99
52.3%
8.0% $3.25
25.5%
$3.64
21.9%
10.6% $4.07
-43.0%
$2.11
(42.1%)
9.1% $2.32
37.6%
$3.02
43.3%
5.3% $3.19
First
Call*
6.7% 52.8%
8.3% 24.4%
5.7% -43.3%
7.1% 39.0%
$1.34 29.3%
$1.53 14.0%
$1.84 20.4%
$2.13 15.4%
$2.44 14.6%
$1.72 -29.5%
$2.60 50.9%
$2.53
-2.7%
$1.84 -27.3%
-
Chg
$2.73
$2.03
$1.76
$1.45
$1.34
$1.59
$2.11
$2.22
$3.25
$4.07
$2.32
$3.19
85,812
98,314
113,330
131,451
150,366
102,874
152,948
147,896
106,700
103,200
84,525
78,200
92,900
124,500
100,100
190,200
236,700
134,200
186,500
63,857
64,188
61,510
61,768
61,637
59,784
58,898
58,561
58,125
58,675
58,350
58,425
58,475
59,000
$4.10
$2.09
$3.11
58,600
58,125
57,850
58,425
*As of Feb. 2.

Basic Shares
58,200
Options (Diluted)
500
0
Diluted Shares
58,700
Insiders Own:
1%
Headquartered:
Kenosha, Wisconsin
STRATTEC Security
STRATTEC Security (STRT - $23.07 Neutral / Higher Risk)
Target Price: $25 (4.3x 2014E EBITDA, Discounted by 27.5% - 25th Percentile
of Last Cycle Valuation Range)
Current View
Delphi Power Products Acquisition. We view the acquisition of Delphi
Power Products as a positive. It offers access to a new customer in Hyundai
and expands the company's product offering into areas (sliding doors,
liftgates, trunk lids, and latches/strikers) complementary to the existing
suite of vehicle access technologies.
Investment in New Technologies. The company continues to invest in
new technology and looks to gain content by adding electronic content to
the head of the key and provide backup systems for keyless vehicle
operation.
Market Share Gains. After losing the business several years ago, the
company has recently taken back significant business on several car
platforms at GM.
Business Model Strengths. 1) Leading market share position with
Chrysler, Ford, and General Motors; 2) strong financial position with no
debt and $14 million of cash ($4.00 per share); and 3) membership in the
VAST alliance, which provides exposure to the Chinese market.
Key Risk Factors. 1) Exposure to the North American OEMs in North
America, which we estimate represent close to two-thirds of revenue; 2)
de-contenting, as OEMs have removed locks from passenger doors, truck
lids, and lift gates; and 3) rising raw material costs, primarily zinc and
brass.
Target Price. Our $25 target price is 4.3x our estimate of 2014 EBITDA,
the 25th percentile of last cycle range.
Company Description
Headquartered in Milwaukee, Wisconsin, STRATTEC SECURITY CORPORATION
designs, develops, manufactures, and markets mechanical locks, electromechanical locks, and related access control products and sliding doors, lift
gates, and trunk lids for major global automotive manufacturers with operations
in the United States, Mexico, and Canada. STRATTEC also supplies products for
the heavy truck, recreational vehicle, marine, and industrial markets, as well as
precision die castings for the transportation, security and recreational products
industries. The company has been the world's largest manufacturer of
automotive locks and keys since the late 1920's and currently maintains a
dominant share of the North American market for these products.
Stock Chart
6
80
Price
4.5
60
40
1.5
20
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
32
NTM Forward P/E
24
16
8
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
4
Price to Book
3
2
1
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile FY June 2011
ByGeography
ByEndMarket
ByCustomer
Aftermarket
10%
GM25%
Other34%
Foreign(export
sales)
40%
Ford10%
U.S.
60%
NA OEMs67%
Automotive
90%
Chrysler31%
Page 43
$23.07)
STRATTEC Security Corporation (STRT

Lt. Vehicle Build

(000)
Chg
Year
Dollar Content
$
Chg
Jun-91
Jun-92
Jun-93
Jun-94
11,372
12,233
13,269
14,600
Jun-94PF
14,600
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
15,249
14,828
15,260
15,530
16,387
17,527
15,994
15,949
16,049
15,882
15,526
15,902
14,860
14,111
9,091
11,077
4.4%
-2.8%
2.9%
1.8%
5.5%
7.0%
-8.7%
-0.3%
0.6%
-1.0%
-2.2%
2.4%
-6.6%
-5.0%
-35.6%
21.8%
7.24
9.42
10.42
12.03
12.36
12.83
12.69
13.00
12.26
12.32
12.26
11.39
11.29
11.31
13.76
18.77
8.9%
30.2%
10.6%
15.4%
2.8%
3.7%
-1.1%
2.4%
-5.6%
0.4%
-0.5%
-7.0%
-1.0%
0.2%
21.6%
36.4%
110,372
139,745
159,054
186,805
202,625
224,817
202,973
207,286
196,827
195,646
190,314
181,197
167,707
159,642
125,097
207,964
Q1
Q2
Q3
Q4
Jun-11
2,978
2,962
3,350
3,100
12,390
26.9%
7.3%
16.0%
0.5%
11.8%
20.10
20.67
19.60
23.94
21.06
14.5%
8.6%
7.0%
20.3%
12.2%
Q1
Q2
Q3E
Q4E
Jun-12E
3,172
3,421
3,564
3,490
13,647
6.5%
15.5%
6.4%
12.6%
10.1%
20.93
19.26
19.03
22.11
20.31
Q1E
Q2E
Q3E
Q4E
Jun-13E
3,307
3,240
3,585
3,598
13,729
4.3%
-5.3%
0.6%
3.1%
0.6%
Jun-14E
Jun-15E
15,116
15,321
10.1%
1.4%
7.6%
-2.9%
10.0%
7.02
6.91
6.18
6.65
(in $ Thousands)
Revenues
$
Chg
Gross Profit
%
Chg
EBITDA
%
Chg
Operating Income
$
%
Chg
Pretax Income
$
%
11,166
14,757
13,449
23,248
14.0%
17.5%
16.4%
23.9%
23,800
24.5%
13.7%
26.6%
13.8%
17.4%
8.5%
11.0%
-9.7%
2.1%
-5.0%
-0.6%
-2.7%
-4.8%
-7.4%
-4.8%
-21.6%
66.2%
27,893
29,231
33,319
39,940
46,804
49,495
40,527
43,916
45,359
47,487
42,696
36,085
26,494
25,551
13,217
33,042
25.3%
20.9%
20.9%
21.4%
23.1%
22.0%
20.0%
21.2%
23.0%
24.3%
22.4%
19.9%
15.8%
16.0%
10.6%
15.9%
20.0%
4.8%
14.0%
19.9%
17.2%
5.7%
-18.1%
8.4%
3.3%
4.7%
-10.1%
-15.5%
-26.6%
-3.6%
-48.3%
150.0%
14,048
16,560
21,274
27,791
33,720
36,817
29,015
32,474
33,600
34,567
29,233
21,173
13,293
8,419
(6,523)
11,569
11.9%
13.4%
14.9%
16.6%
16.4%
14.3%
15.7%
17.1%
17.7%
15.4%
11.7%
7.9%
5.3%
-5.2%
5.6%
59,849
61,212
65,650
74,222
260,933
45.3%
16.5%
24.1%
21.0%
25.5%
10,153
9,973
9,119
12,918
42,163
17.0%
16.3%
13.9%
17.4%
16.2%
49.4%
30.3%
2.9%
32.8%
27.6%
3,626
3,244
2,843
5,626
15,339
6.1%
5.3%
4.3%
7.6%
5.9%
41.1%
3.7%
-5.2%
95.8%
32.6%
1,988
1,655
1,166
3,911
8,720
3.3% 142.7%
2.7% 27.2%
1.8%
-6.0%
5.3% 267.2%
3.3% 97.0%
2,581
2,073
1,004
4,472
10,130
4.1%
-6.8%
-2.9%
-7.7%
-3.5%
66,377
65,886
67,822
77,149
277,233
10.9%
7.6%
3.3%
3.9%
6.2%
11,504
11,240
11,462
13,503
47,709
17.3%
17.1%
16.9%
17.5%
17.2%
13.3%
12.7%
25.7%
4.5%
13.2%
4,948
4,940
4,819
6,080
20,787
7.5%
7.5%
7.1%
7.9%
7.5%
36.5%
52.3%
69.5%
8.1%
35.5%
3,296
3,261
2,984
4,246
13,787
5.0% 65.8%
4.9% 97.0%
4.4% 155.9%
5.5%
8.6%
5.0% 58.1%
2,294
3,564
2,929
4,295
13,082
20.50
18.60
18.92
21.96
20.02
-2.0%
-3.4%
-0.6%
-0.7%
-1.4%
67,789
60,251
67,817
79,007
274,864
2.1%
-8.6%
0.0%
2.4%
-0.9%
11,822
9,972
11,461
13,921
47,176
17.4%
2.8%
16.6% -11.3%
16.9%
0.0%
17.6%
3.1%
17.2%
-1.1%
4,884
3,834
4,520
5,723
18,961
7.2%
-1.3%
6.4% -22.4%
6.7%
-6.2%
7.2%
-5.9%
6.9%
-8.8%
3,009
1,959
2,645
3,848
11,461
4.4%
-8.7%
3.3% -39.9%
3.9% -11.4%
4.9%
-9.4%
4.2% -16.9%
3,408
2,382
3,092
4,320
13,202
19.41
18.85
-3.1%
-2.9%
293,385
288,769
6.7%
-1.6%
4.1%
4.1%
14,203
14,293
-1.7%
-2.9%
7.6%
6.65
79,870
84,497
82,005
97,077
February 24, 2012

Rating: Neutral
12-Month Target Price (4.3x 2014E EBITDA, 25th Percentile of Last Cycle Valuation Range, Discounted by 27.5%)
$25
5.8%
-2.9%
18.4%
97,077
32.2%
-8.9%
72.9%
5,248
7,793
5,682
14,333
4,370
4,732
1,617
13,151
5.5%
5.6%
2.0%
13.5%
12,700
11,400
11.7%
11,133
12,544
15,550
21,420
27,506
30,349
21,126
24,768
25,959
27,651
23,497
17,541
10,706
4,482
(10,346)
5,607
10.1%
9.0%
9.8%
11.5%
13.6%
13.5%
10.4%
11.9%
13.2%
14.1%
12.3%
9.7%
6.4%
2.8%
-8.3%
2.7%
14,048
12,599
9.0%
28.5% 15,635
9.8%
30.6% 21,015
11.2%
21.3% 26,613
13.1%
9.2% 29,241
13.0%
-21.2% 21,076
10.4%
11.9% 24,272
11.7%
3.5% 25,746
13.1%
2.9% 26,863
13.7%
-15.4% 22,008
11.6%
-27.6% 14,018
7.7%
-37.2%
6,305
3.8%
-36.7%
1,589
1.0%
-177.5% (12,763) -10.2%
+
4,426
2.1%
50,880
17.3%
7.9% 20,154
6.9%
6.3% 12,154
49,957
17.3%
-1.8% 20,407
7.1%
1.3% 11,907
* Assumed contribution margin for 2011-2015 is in range of 20-25%
24.1%
34.4%
26.6%
9.9%
-27.9%
15.2%
6.1%
4.3%
-18.1%
-36.3%
-55.0%
-74.8%
+
6.0%
-2.0%
Chg
Tax
Rate
8.3%
-65.8%
713.3%
39.4%
39.3%
40.8%
40.5%
2,650
2,872
957
7,821
3.3%
3.4%
1.2%
8.1%
40.4%
6,800
7.0%
41.8%
38.5%
36.8%
37.0%
38.1%
39.0%
37.0%
37.0%
37.0%
37.5%
36.5%
34.7%
33.8%
27.3%
40.6%
29.7%
6,476
7,714
9,820
13,489
17,015
18,513
13,305
15,604
16,354
17,282
14,924
11,457
7,087
3,257
(6,145)
3,421
5.9%
5.5%
6.2%
7.2%
8.4%
8.2%
6.6%
7.5%
8.3%
8.8%
7.8%
6.3%
4.2%
2.0%
-4.9%
1.6%
-15.3%
12.7%
24.0%
37.7%
28.4%
10.3%
-30.4%
17.2%
4.8%
6.5%
-15.0%
-25.3%
-39.0%
-58.1%
+
Net Income
%
Chg
8.4%
-66.7%
717.2%
-17.2%
19.1%
27.3%
37.4%
26.1%
8.8%
-28.1%
17.3%
4.8%
5.7%
-13.6%
-23.2%
-38.1%
-54.0%
+
F.D. EPS
$
Chg
First
Call*
Avg
Shs
$1.35
5,785
$1.18
5,785
$1.12
$1.33
$1.70
$2.30
$2.94
$3.65
$3.02
$3.73
$4.24
$4.49
$3.91
$3.08
$1.99
$0.93
($1.87)
$1.04
Cal-2010E =
4.3%
103.2%
31.0%
1,418
2.4%
50.4%
$0.43
3.4%
32.3%
16.0%
1,247
2.0%
47.7%
$0.37
1.5%
-27.1%
26.1%
55
0.1%
-93.0%
$0.02
6.0%
221.0%
25.6%
2,698
3.6% 216.3%
$0.81
3.9%
80.7%
25.1%
5,418
2.1%
58.4%
$1.63
Cal-2011E =
3.5%
-11.1%
14.0%
1,282
1.9%
-9.6%
$0.39
5.4%
71.9%
35.4%
1,548
2.3%
24.1%
$0.47
4.3%
191.7%
32.0%
1,236
1.8%
+
$0.37
5.6%
-4.0%
32.0%
2,292
3.0%
-15.0%
$0.69
4.7%
29.1%
29.8%
6,358
2.3%
17.4%
$1.91
Cal-2012E =
5.0%
48.6%
35.0%
1,524
2.2%
18.9%
$0.46
4.0%
-33.2%
35.0%
792
1.3%
-48.8%
$0.24
4.6%
5.6%
35.0%
1,254
1.8%
1.5%
$0.38
5.5%
0.6%
35.0%
2,180
2.8%
-4.9%
$0.65
4.8%
0.9%
35.0%
5,750
2.1%
-9.6%
$1.73
Cal-2013E =
4.8%
7.6%
35.0%
6,401
2.2%
11.3%
$1.92
4.9%
0.6%
35.0%
6,459
2.2%
0.9%
$1.94
-17.2%
19.1%
27.3%
35.5%
27.7%
24.1%
-17.1%
23.5%
13.8%
5.8%
-12.9%
-21.2%
-35.3%
-53.2%
$ 1.30
49.1%
45.2%
-93.1%
213.4%
56.3%
$ 1.68
-10.3%
24.1%
+
-15.1%
17.2%
$ 1.76
18.8%
-48.8%
1.5%
-4.9%
-9.6%
$ 1.90
11.3%
0.9%
($2.04)
$1.07
5,785
5,785
5,785
5,863
5,791
5,079
4,406
4,185
3,855
3,850
3,818
3,720
3,555
3,494
3,284
3,281
$0.08
$0.48
$0.52
$0.37
$1.89
3,299
3,329
3,339
3,326
3,323
$0.58
$0.46
$0.37
$0.62
$1.90
3,326
3,329
3,329
3,329
3,328
$0.47
$0.41
$0.42
$0.64
$2.06
3,329
3,329
3,329
3,329
3,329
3,329
3,329
* As of January 26.
EPS Sensitivity (Calendar Year)
Year
Downside
Base
Upside
2010
$0.60
$1.30
$2.80
2011
$1.20
$1.68
$3.80

Downside
Base
Upside
10,700 11,910
13,100
NA Build

25%
$12
$15
4.3
Median
$13
$17
5.2
75%
$15
$20
6.3
Upside
$19
$22
$25

Percentile
Downside Base Upside
25th
-43%
-29%
-10%
Median
-39%
-20%
4%
75th
-29%
-6%
18%

Fiscal Year
$
%
2008
$8,000
5%
Basic Shares
3,288
2009
$4,500
3%
Options (Diluted)
41
2010
$5,000
4%
0
2011
$5,000
2%
Diluted Shares
3,329
2012
$2,500
1%
Insiders Own:
3%
2013
$2,500
1%
Headquartered:
Milwaukee, Wisconsin
2011-13
1%
$10,000
* Revenue growth with flat NA build (ex-price of -1.5%).
Tower International
Tower International (TOWR - $13.15 Outperform / Speculative Risk)
of the Post-IPO Trading Range)
Current View
Valuation: Following its initial public offering in October 2010, the stock
recently traded near 3.6x LTM EBITDA, a 20-30% discount to the supplier
group and a ~40% discount to the predecessor companys historical median
valuation. Every one-half multiple point adds $5-6 to our target prices,
meaning that closing this valuation gap could add $10-15 to our target
price.
Improved Business Model: New Towers business model is significantly
improved versus the predecessor company. New management, brought in
by Cerberus, immediately made significant operating improvements and
exited unprofitable/low-margin contracts. Exposure to the North American
OEMs in North America and to frame-based SUVs and pickups has fallen
dramatically, while emerging markets now represent nearly one-fifth of
revenue.
Free Cash Flow: From 2013-2015, we expect the company to generate
average annual free cash flow over $50 million. Free cash flow will be used
primarily for deleveraging, but also small acquisitions and capacity
expansion to serve growing emerging markets.
Key Risks: 1) the cyclicality and competitive dynamics of the global
automotive industry, 2) elevated financial leverage, 3) high fixed costs and
operating leverage, 4) major customers and programs/platforms, 5) rising
commodity prices (primarily steel), 6) post-retirement liabilities, 7) foreign
exchange rate volatility, 8) investment in solar and other non-automotive
revenue opportunities, 9) the company relationship with its majority
shareholder Cerberus, 10) modeling risk, 11) net losses, and 12) belowaverage organic (net new business) revenue growth.
Target Price. Our $17 target price is 4.1x our estimate of 2014 EBITDA,
the median percentile of the post-IPO valuation range.
Company Description
Tower International, Inc., headquartered in Livonia, Michigan, is a leading
global supplier and manufacturer of engineered structural metal components
and assemblies for the global automotive industry. Products include bodystructure stampings, frame and chassis structures, and complex welded
assemblies. The company employs approximately 7,900 associates in 30
manufacturing and product development facilities worldwide. In 2010, Tower
ranked as the 61st largest North American automotive supplier and the 71st
largest global automotive supplier. Tower International, Inc. emerged from
bankruptcy protection as Tower Automotive, LLC on July 31, 2007. Cerberus
Capital Management acquired substantially all of the assets and assumed
certain liabilities of the predecessor company, Tower Automotive, Inc. from
Chapter XI bankruptcy protection. The predecessor company filed for Chapter
XI
bankruptcy
protection
on
February
2,
2005.
Stock Chart
4
20
Price
15
10
0
10/10
0
1/11
4/11
7/11
10/11
1/12
40
NTM Forward P/E
30
20
10
0
10/10
1/11
4/11
7/11
10/11
1/12
10
Price to Book
7.5
5
2.5
0
10/10
1/11
4/11
7/11
10/11
1/12
Source: FactSet

ByGeography
ByEndMarket
China
9%
ByCustomer
Opel1% Other5%
Honda3%
Chery3%
BMW5%
SouthAmerica
10%
VW17%
Toyota5%
Europe
40%
Fiat13%
Chrysler5%
Korea
12%
Daimler5%
Nissan6%
NorthAmerica
29%
Automotive
100%
Volvo10%
Ford13%
Hyundai/Kia
10%
Page 44
$13.15)
Tower International, Inc. (TOWR

February 24, 2012

Rating: Outperform
12-Month Target Price (4.1x 2014E EBITDA, Median Percentile of Post-IPO Range, Discounted by 45%):
$17
Post-IPO Range (2010-Present) is 4.4-2.9x LTM EBITDA. Median is 4.1x.

(in $ Thousands)
Year
Lt. Vehicle Build

(000)
Chg
Revenues
$
Chg
Gross Profit
%
Chg
Dec-93PF
Dec-94PF
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
13,843
15,268
14,909
15,085
15,635
15,551
17,035
17,166
15,483
16,367
15,873
15,752
15,751
15,252
15,022
-82.9%
10.3%
-2.4%
1.2%
3.6%
-0.5%
9.5%
0.8%
-9.8%
5.7%
-3.0%
-0.8%
0.0%
-3.2%
-1.5%
195,321
222,390
222,801
399,925
1,235,829
1,836,479
2,170,003
2,531,953
2,467,433
2,754,464
2,815,749
3,178,724
3,283,653
2,539,443
2,541,559
141.6%
13.9%
0.2%
79.5%
209.0%
48.6%
18.2%
16.7%
-2.5%
11.6%
2.2%
12.9%
3.3%
-22.7%
0.1%
34,020
37,594
41,819
61,635
176,916
274,312
346,900
371,594
277,185
298,887
256,225
225,683
180,800
150,158
245,191
17.4%
16.9%
18.8%
15.4%
14.3%
14.9%
16.0%
14.7%
11.2%
10.9%
9.1%
7.1%
5.5%
5.9%
9.6%
Dec-08
Dec-09
Dec-10
12,579
8,558
11,910
-16.3% 2,171,700
-32.0% 1,634,362
39.2% 1,997,058
-14.6%
-24.7%
22.2%
183,500
97,611
210,582
8.4%
6.0%
10.5%
Q1
Q2
Q3
Q4
Dec-11
3,350
3,100
3,172
3,421
13,043
16.0%
599,635
0.5%
602,718
6.5%
588,991
15.5%
614,745
9.5% 2,406,088
25.2%
20.1%
24.1%
13.5%
20.5%
69,570
58,699
59,656
68,187
256,112
11.6%
9.7%
10.1%
11.1%
10.6%
EBITDA
%
Chg
Adjusted EBITDA(1)
%
Chg
Operating Income
%
Chg
Pretax Income
%
Chg
Tax
Rate
Net Income
%
Chg
NM
17,226
8.8%
NM
17,226
8.8%
NM
16,652
8.5%
NM
42.4%
9,594
4.9%
10.5% 23,639
10.6%
37.2%
19,501
8.8%
13.2%
18,414
8.3%
10.6%
39.5%
11,136
5.0%
11.2% 28,469
12.8%
20.4%
21,920
9.8%
12.4%
20,121
9.0%
9.3%
40.0%
12,071
5.4%
47.4% 52,194
13.1%
83.3%
39,440
9.9%
79.9%
34,337
8.6%
70.7%
39.9%
20,637
5.2%
187.0% 157,476
12.7%
201.7%
109,510
8.9%
177.7%
80,741
6.5% 135.1%
40.0%
48,671
3.9%
55.1% 263,043
14.3%
67.0%
175,671
9.6%
60.4% 135,353
7.4%
67.6%
40.0%
88,040
4.8%
26.5% 336,758
15.5%
28.0%
225,147
10.4%
28.2% 187,166
8.6%
38.3%
40.0% 117,088
5.4%
7.1% 357,879
14.1%
6.3%
213,074
8.4%
-5.4% 148,363
5.9%
-20.7%
39.8% 101,369
4.0%
-25.4% 272,908
11.1%
-23.7%
113,178
4.6%
-46.9%
39,413
1.6%
-73.4%
29.4%
31,315
1.3%
7.8% 291,763
10.6%
6.9%
150,904
5.5%
33.3%
83,995
3.0% 113.1%
35.0%
56,508
2.1%
-14.3% 251,923
8.9%
-13.7%
100,725
3.6%
-33.3%
8,421
0.3%
-90.0%
34.6%
7,994
0.3%
-11.9% 236,687
7.4%
-6.0%
84,531
2.7%
-16.1% (57,447) -1.8% -782.2%
33.5% (30,615)
-1.0%
-19.9% 209,764
6.4%
-11.4%
31,077
0.9%
-63.2% (361,241) -11.0%
+
-4.6% (365,520)
-11.1%
-16.9% 187,848
7.4%
-10.4%
19,383
0.8%
-37.6% (212,675) -8.4%
+
-5.5% (206,118)
-8.1%
63.3% 261,508
10.3%
39.2%
109,708
4.3%
+
(76,257) -3.0%
+
-33.2% (90,503)
-3.6%
Financial Results for 2007 reflect the successor company for the five months ended December 31, 2007 and predecessor company for the seven months ended July 31, 2007
-25.2% 212,100
9.8%
-18.9% 212,900
9.8%
41,800
1.9%
-61.9% (26,300) -1.2%
+
-63.5% (64,600)
-3.0%
-46.8% 124,465
7.6%
-41.3% 125,000
7.6%
-41.3%
(23,165)
-1.4%
-155.4% (55,891) -3.4%
2.0% (79,861)
-4.9%
115.7% 183,025
9.2%
47.0% 190,200
9.5%
52.2%
68,357
3.4%
+
(3,294) -0.2%
+
NMF
(32,962)
-1.7%
30.7% 65,602
5.7% 55,390
32.9% 48,806
19.8% 57,363
21.6% 227,161
10.9%
9.2%
8.3%
9.3%
9.4%
EU
5%
15%
25%
25th
-78%
-57%
17%
27%
37%
Median
-71%
-43%
-35%
-28%
Euro/$
$1.40
$1.40
$1.40
75th
-64%
-35%
-14%
65,700
55,600
48,900
57,400
227,600
11.0%
9.2%
8.3%
9.3%
9.5%
29.6%
7.5%
25.1%
17.9%
19.7%
35,455
23,829
20,999
32,300
112,583
5.9%
4.0%
3.6%
5.3%
4.7%
81.9%
4.7%
+
60.0%
64.7%
+
+
0.42
0.48
0.52
0.78
1.14
1.68
2.10
1.85
0.69
-
NM
15.8%
8.3%
48.2%
46.9%
47.0%
25.2%
-11.7%
-62.9% 1.03
0.99
0.14
(0.53)
(6.23)
(3.51)
(6.41)
(2.36)
0.37
0.43
0.52
0.77
1.09
1.68
2.10
0.28
(5.87)
-4.0%
0.26
-85.7%
(2.05)
+ (0.53) (0.31) (0.19)
+ (6.23) (6.28) 0.25
+ (3.51) (3.51) 0.45
(6.41)
(3.43) (1.60)
F.D.
Shares
23,400
23,400
23,394
26,830
45,202
59,709
63,974
63,254
45,579
57,329
56,707
58,077
58,645
58,659
12,468
13,987
19,878
3.3%
+
34.0%
11,382
1.9%
+
0.57
+
0.57
0.09
19,890
6,775
1.1%
-20.6%
61.4%
1,394
0.2%
+
0.07
+
0.07
0.08
19,102
4,539
0.8%
+
63.7%
566
0.1%
+
0.03
+
0.03 (0.20)
19,563
15,754
2.6%
+
20.5%
11,446
1.9%
+
0.57
+
0.33
0.16
20,221
46,946
2.0%
+
36.3%
24,788
1.0%
+
1.26
+
1.26
0.62
19,694
Our 2011 EPS estimate excludes $18.7 million ($0.97 per share) of incentive compensation expense.
Q1E
3,564
6.4%
584,542
-2.5%
59,069
10.1%
-15.1% 48,633
8.3%
-25.9%
48,600
8.3%
-26.0%
19,883
3.4%
-43.9%
2,683
0.5%
-86.5%
55.9%
(566)
-0.1%
(0.03) -104.9%
(0.03) 0.34
20,221
Q2E
3,490
12.6%
590,077
-2.1%
60,551
10.3%
3.2% 55,066
9.3%
-0.6%
55,100
9.3%
-0.9%
26,316
4.5%
10.4%
9,068
1.5%
+
33.1%
4,769
0.8%
+
0.24 223.2%
0.24
0.35
20,221
Q3E
3,307
4.3%
566,439
-3.8%
57,506
10.2%
-3.6% 48,247
8.5%
-1.1%
48,200
8.5%
-1.4%
19,497
3.4%
-7.2%
2,200
0.4%
+
68.2%
(400)
-0.1%
+
(0.02) -168.3%
(0.02) 0.03
20,221
Q4E
3,240
-5.3%
601,051
-2.2%
66,187
11.0%
-2.9% 56,481
9.4%
-1.5%
56,500
9.4%
-1.6%
27,731
4.6%
-14.1%
10,385
1.7%
-34.1%
38.5%
5,257
0.9%
-54.1%
0.26
-54.1%
0.26
0.28
20,221
Dec-12E 13,600
4.3% 2,342,107
-2.7% 243,314
10.4%
-5.0% 208,427
8.9%
-8.2% 208,400
8.9%
-8.4%
93,427
4.0%
-17.0%
24,336
1.0%
-48.2%
41.1%
9,061
0.4%
-63.4%
0.45
-64.4%
0.45
0.95
20,221
2012 Guidance (Feb 2012):
2,300,000
205,000
Our 2012 EPS estimate excludes $5.5 million ($0.29 per share) of incentive compensation expense.
8.9%
Q1E
3,585
0.6%
645,104
10.4%
71,044
11.0%
20.3% 58,647
9.1%
20.6%
58,600
9.1%
20.6%
31,147
4.8%
56.7%
13,958
2.2% 420.2%
30.0%
7,886
1.2%
+
0.39
+
0.39
0.64
20,221
Q2E
3,598
3.1%
654,022
10.8%
76,375
11.7%
26.1% 63,442
9.7%
15.2%
63,400
9.7%
15.1%
35,942
5.5%
36.6%
18,910
2.9% 108.5%
30.0%
11,840
1.8% 148.3%
0.59 148.3%
0.59
0.59
20,221
Q3E
3,539
7.0%
644,414
13.8%
74,430
11.6%
29.4% 62,074
9.6%
28.7%
62,100
9.6%
28.8%
34,574
5.4%
77.3%
17,698
2.7% 704.5%
30.0%
11,207
1.7%
+
0.55
+
0.55
0.17
20,221
Q4E
3,678
13.5%
687,890
14.4%
84,941
12.3%
28.3% 69,977
10.2%
23.9%
70,000
10.2%
23.9%
42,477
6.2%
53.2%
25,758
3.7% 148.0%
30.0%
16,817
2.4%
+
0.83 219.9%
0.83
0.53
20,221
Dec-13E 14,400
5.9% 2,631,429
12.4% 306,790
11.7%
26.1% 254,141
9.7%
21.9% 254,100
9.7%
21.9% 144,141
5.5%
54.3%
76,324
2.9% 213.6%
30.0%
47,749
1.8% 427.0%
2.36 427.0%
2.36
1.86
20,221
Our 2013 EPS estimate includes $5.0 million ($0.25 per share) of restructuring expense.
Dec-14E 15,200
5.6% 2,724,803
3.5% 324,990
11.9%
5.9% 266,501
9.8%
4.9% 266,500
9.8%
4.9% 161,501
5.9%
12.0%
96,091
3.5%
25.9%
30.0%
61,215
2.2%
28.2%
3.03
28.2%
3.03
20,221
Dec-15E 15,500
2.0% 2,797,738
2.7% 339,212
12.1%
4.4% 276,348
9.9%
3.7% 276,400
9.9%
3.7% 171,348
6.1%
6.1% 108,599
3.9%
13.0%
30.0%
69,548
2.5%
13.6%
3.44
13.6%
3.44
20,221
"Old Tower Automotive" filed for Chapter XI bankruptcy on February 2, 2005; the current company emerged from bankruptcy on July 31, 2007 when Cerberus purchased certain assets of "Old Tower Automotive"
*As of February 16.
1) As defined and reported by the company to exclude items such as restructuring, receivables factoring charges, acquisition costs, and certain incentive compensation.
Basic Shares
19,683
EPS Sensitivity
Revenue
Chg
Options (Diluted)
538
Year
Downside
Base
Upside
Percentile
Multiple
Downside
Base
Upside
2010
0
0%
0
2010
0th
$3
$6
$9
($5.05)
($2.36)
$0.32
2.9
2011
115,000
6%
Diluted Shares
20,221
2011
10th
$4
$8
$10
($2.22)
$1.26
$4.94
3.2
2012
0
0%
Cerberus Owns:
65%
25th
$5
$9
$12
3.5
2013
200,000
9%
Management Owns:
3%
2011-2013
315,000
5%
Headquartered:
Livonia, Michigan
Downside
Base
Upside
*
Revenue
growth
with
flat
NA
build
(ex-price
of
1.3%).
NA
Percentile
Downside
Base
Upside
10,700
11,910
13,100
ROW
31.8%
8.2%
45.9%
18.0%
24.1%
NM
16.1%
8.4%
71.0%
135.8%
80.9%
33.0%
-13.4%
-69.1%
80.5%
-85.9%
-483.0%
+
+
+
Fully Diluted EPS

GAAP First
Chg Cash Chg Cont.^ EPS Call*
AB Volvo
AB Volvo (VOLV.B - SEK 94.60 Outperform / Average Risk)
Target Price: SEK 107 (8.2x Cal-2014E EBITDA, Discounted by 25% - Median
Current View
Margin Performance:
Volvo has shown the ability to generate strong
incremental profitability on the rising truck/construction volumes seen recently.
Both Truck and Construction Equipment operating margins are currently running
at/near record levels.
Valuation: The stock recently traded near 7.2x estimated 2011 EBITDA, a
discount to the 8.2x median valuation over the last cycle and nearly a full
multiple point discount to a peer group of global commercial vehicle OEMs.
Major End Markets: The European and North American commercial truck/bus
and construction equipment markets represent just over 50% of revenue. The
company expects 14% growth in North America truck volumes and 11% growth
in global construction equipment demand in 2012.
Margin Expansion: We expect Volvo to achieve higher profit margins over the
next capital goods cycle than over previous cycles, after reducing structural
costs by SEK 21 billion during the recession.
Product Line Expansion: Volvos primary strategy to outperform end markets
is to expand its product lineup into unfilled areas, typically organically but
occasionally via acquisition.
Key Risks: 1) cyclical end markets; 2) foreign exchange; 3) commodity risk;
4) credit markets/availability; 5) residual value risk; 6) union labor agreements;
7) government emissions/fuel efficiency regulations; 8) dual-class share
structure; 9) major shareholders (Renault SA); 10) modeling risk; and 11) postretirement liabilities.
Target Price. Our SEK 107 target price is based on the shares trading at 8.2x
our estimate of 2014 EBITDA, the median percentile over the last cycle.
Stock Chart
12
160
Price
120
80
40
0
'02
'03
'04
'05
'06
'07
'08
'10
'11
40
NTM Forward P/E
30
20
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
4
Price to Book
3
2
1
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile December 2011
ByGeography
Company Description
The Volvo Group, headquartered in Gothenborg, Sweden, is a leading global
manufacturer of commercial trucks, construction and road building equipment,
commercial buses, marine and industrial engines, and aircraft engine components
with a meaningful presence in nearly every major geographic market worldwide. The
Group also offers various financial services solutions to its customers via Volvo
Financial Services. The Group can trace its roots back to 1915, with the first Volvo
car produced in 1927 (a business that was divested in 1999), and has grown both
organically and via acquisitions over the years to focus on providing a broad array of
commercial transportation solutions in all regions of the world.
'09
SouthAmerica
11%
Other
6%
ByEndMarket
Europe
37%
PentaAero Finance
2%
3% 2%
Construction
21%
AsiaPacific
23%
(China6%)
Bus
7%
NorthAmerica
18%
Commercial
Truck
65%
Page 45
AB Volvo (VOLV.B-OME SEK 94.60)

February 24, 2012
Rating: Outperform
12-Month Target Price (8.2x Cal-2014E EBITDA - Median Valuation of Last Cycle Range - Discounted by 25%): SEK 107
Current Multiple = 7.2x LTM EBITDA (35th percentile), 7.0x 2012E And 5.8x 2013E.
Year
EU T&B
Truck & Bus Production

Chg.
NA Cl. 8
Chg.
1995
248
1996
194
1997
224
1998
267
Results prior to 1999 include Volvo Cars.
1999
333
(in SEK millions) - Note: 1 U.S. Dollar Equals Approximately 6.7 SEK as of February 03, 2012
EBITDA (Industrial Group)
Op. Income (Industrial Group)
Revenue
Gross Profit
SEK
Chg.
SEK
%
Chg.
SEK
%
Chg.
SEK
%
Chg.
Op. Income (Volvo Group)

SEK
%
Chg.
SEK
13,048
14,203
13,176
13,950
(21.5%)
15.2%
19.1%
171,511
156,060
183,625
212,936
(9.0%)
17.7%
16.0%
34,811
44,635
49,060
22.3%
24.3%
23.0%
28.2%
9.9%
13,172
13,031
12,515
13,980
7.7%
8.3%
6.8%
6.6%
24.7%
116,635
(45.2%)
25,518
21.9%
(48.0%)
7,463
6.4%
(24.2%)
(42.1%)
24.1%
0.4%
48.0%
26.0%
11.0%
(43.6%)
(3.2%)
(42.4%)
30.2%
120,392
180,615
177,080
174,768
201,478
222,275
249,020
276,815
294,932
208,489
257,376
3.2%
50.0%
(2.0%)
(1.3%)
15.3%
10.3%
12.0%
11.2%
6.5%
(29.3%)
23.4%
23,261
31,138
31,627
33,512
43,718
50,368
56,620
62,635
62,685
28,909
59,895
19.3%
17.2%
17.9%
19.2%
21.7%
22.7%
22.7%
22.6%
21.3%
13.9%
23.3%
(8.8%)
33.9%
1.6%
6.0%
30.5%
15.2%
12.4%
10.6%
0.1%
(53.9%)
107.2%
9,042
6,046
10,110
8,801
19,807
23,010
28,384
30,306
25,482
(3,951)
29,170
7.5%
3.3%
5.7%
5.0%
9.8%
10.4%
11.4%
10.9%
8.6%
(1.9%)
11.3%
(33.1%)
67.2%
(12.9%)
125.1%
16.2%
23.4%
6.8%
(15.9%)
(115.5%)
+
5,169
(1,001)
2,347
1,578
13,314
16,118
18,713
20,583
14,454
(16,333)
17,833
4.3%
(0.6%)
1.3%
0.9%
6.6%
7.3%
7.5%
7.4%
4.9%
(7.8%)
6.9%
(119.4%)
(334.5%)
(32.8%)
743.7%
21.1%
16.1%
10.0%
(29.8%)
(213.0%)
+
6,668
(676)
2,837
2,504
14,679
18,151
20,399
22,231
15,851
(17,013)
18,000
5.5%
(0.4%)
1.6%
1.4%
7.3%
8.2%
8.2%
8.0%
5.4%
(8.2%)
7.0%
(1.1%)
(4.0%)
11.7%
Pre-Tax Income
%
Chg.
7.6%
9.1%
7.2%
6.6%
8.9%
(7.2%)
5.9%
Tax
Rate
SEK
28.7%
12.8%
20.5%
21.1%
9,262
12,477
10,359
8,638
Net Income
%
5.4%
8.0%
5.6%
4.1%
Chg.
34.7%
(17.0%)
(16.6%)
(46.6%)
7,901
6.8%
(43.4%)
28.7%
32,222
27.6%
273.0%
Adjusted EPS for 1999, excluding non-recurring gain on the sale of Volvo Cars:
(10.7%)
6,246
5.2%
(20.9%)
24.2%
4,709
3.9%
(85.4%)
(110.1%)
(1,866)
(1.0%) (129.9%)
17.5%
(1,467)
(0.8%) (131.2%)
(519.7%)
2,013
1.1% (207.9%)
29.3%
1,393
0.8% (195.0%)
(11.7%)
1,657
0.9%
(17.7%)
80.5%
298
0.2%
(78.6%)
486.2%
13,036
6.5%
686.7%
24.0%
9,867
4.9% 3211.1%
23.7%
18,014
8.1%
38.2%
27.2%
13,062
5.9%
32.4%
12.4%
20,299
8.2%
12.7%
19.6%
16,268
6.5%
24.5%
9.0%
21,557
7.8%
6.2%
30.3%
14,932
5.4%
(8.2%)
(28.7%)
14,010
4.8%
(35.0%)
28.5%
9,942
3.4%
(33.4%)
(207.3%) (20,575)
(9.9%) (246.9%)
28.6%
(14,720)
(7.1%) (248.1%)
+
15,513
6.0%
+
27.7%
10,865
4.2%
+
Full-Diluted EPS*
SEK
Chg.
4.01
5.36
4.58
3.91
First
Call*
Average
Shares
33.8%
(14.6%)
(14.5%)
2,311
2,327
2,263
2,208
14.60
273.0%
2.50
2.23
(84.7%)
(0.69) (131.1%)
0.66 (195.6%)
0.14
(78.6%)
4.71 3212.9%
6.45
36.9%
8.04
24.7%
7.37
(8.3%)
4.91
(33.4%)
(7.26) (248.0%)
5.36
+
2,208
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
297
348
356
372
278
290
17.1%
2.4%
4.5%
(25.5%)
4.5%
252
146
181
182
269
339
376
212
206
118
154
5.86
(6.67)
5.74
2,108
2,112
2,097
2,097
2,096
2,026
2,024
2,026
2,027
2,027
2,027
Q1
Q2
Q3
Q4
2011
82
88
84
91
345
34.7%
22.6%
12.1%
10.0%
18.9%
51
61
68
75
255
47.0%
72.0%
69.9%
71.0%
65.5%
69,956
77,286
71,559
84,788
303,588
23.9%
15.8%
15.0%
17.8%
18.0%
17,475
18,668
16,420
19,510
72,073
25.0%
24.2%
22.9%
23.0%
23.7%
35.7%
19.3%
8.0%
20.8%
20.3%
9,001
9,698
8,507
9,593
36,799
12.9%
12.5%
11.9%
11.3%
12.1%
61.7%
27.3%
9.1%
17.2%
26.2%
6,343
7,398
5,523
6,693
25,957
9.1%
9.6%
7.7%
7.9%
8.6%
127.8%
55.4%
13.5%
23.5%
45.6%
6,522
7,648
5,774
6,955
26,898
9.3%
9.9%
8.1%
8.2%
8.9%
133.0%
60.4%
17.5%
26.0%
49.4%
5,847
7,249
5,443
6,390
24,929
8.4%
9.4%
7.6%
7.5%
8.2%
162.4%
59.6%
28.0%
42.2%
60.7%
28.5%
27.7%
28.4%
24.9%
27.3%
4,085
5,117
3,827
4,722
17,751
5.8%
6.6%
5.3%
5.6%
5.8%
143.0%
62.7%
36.4%
46.1%
63.4%
2.01
2.52
1.89
2.33
8.76
143.0%
62.7%
36.4%
46.0%
63.3%
1.89
2.42
1.93
2.31
8.95
2,027
2,027
2,027
2,027
2,027
Q1E
Q2E
Q3E
Q4E
2012E
78
75
67
91
311
(5.0%)
(15.0%)
(20.0%)
0.0%
(9.9%)
71
72
69
73
285
38.1%
19.1%
0.4%
(2.5%)
11.6%
73,456
81,146
72,827
86,534
313,963
5.0%
5.0%
1.8%
2.1%
3.4%
16,575
18,704
16,674
19,946
71,899
22.6%
23.0%
22.9%
23.1%
22.9%
(5.1%)
0.2%
1.5%
2.2%
(0.2%)
7,514
9,019
7,856
9,378
33,768
10.2%
11.1%
10.8%
10.8%
10.8%
(16.5%)
(7.0%)
(7.7%)
(2.2%)
(8.2%)
4,764
6,269
5,106
6,628
22,768
6.5%
7.7%
7.0%
7.7%
7.3%
(24.9%)
(15.3%)
(7.5%)
(1.0%)
(12.3%)
5,302
6,789
5,646
7,144
24,881
7.2%
8.4%
7.8%
8.3%
7.9%
(18.7%)
(11.2%)
(2.2%)
2.7%
(7.5%)
4,811
6,329
5,218
6,747
23,106
6.5%
7.8%
7.2%
7.8%
7.4%
(17.7%)
(12.7%)
(4.1%)
5.6%
(7.3%)
30.0%
30.0%
30.0%
30.0%
30.0%
3,353
4,416
3,638
4,708
16,114
4.6%
5.4%
5.0%
5.4%
5.1%
(17.9%)
(13.7%)
(5.0%)
(0.3%)
(9.2%)
1.65
2.18
1.79
2.32
7.95
(17.9%)
(13.7%)
(5.0%)
(0.3%)
(9.2%)
1.90
2.20
1.79
2.08
7.93
2,027
2,027
2,027
2,027
2,027
Q1E
Q2E
Q3E
Q4E
2013E
80
77
69
93
319
2.5%
2.5%
2.5%
2.5%
2.5%
71
75
74
77
295
0.1%
4.6%
7.1%
5.5%
3.6%
79,164
87,862
80,025
91,272
338,323
7.8%
8.3%
9.9%
5.5%
7.8%
18,059
20,450
18,545
21,178
78,233
22.8%
23.3%
23.2%
23.2%
23.1%
9.0%
9.3%
11.2%
6.2%
8.8%
8,489
10,111
9,086
10,625
38,311
10.7%
11.5%
11.4%
11.6%
11.3%
13.0%
12.1%
15.7%
13.3%
13.5%
5,739
7,361
6,336
7,875
27,311
7.2%
8.4%
7.9%
8.6%
8.1%
20.5%
17.4%
24.1%
18.8%
20.0%
6,326
7,940
6,937
8,461
29,665
8.0%
9.0%
8.7%
9.3%
8.8%
19.3%
17.0%
22.9%
18.4%
19.2%
5,981
7,646
6,694
8,270
28,591
7.6%
8.7%
8.4%
9.1%
8.5%
24.3%
20.8%
28.3%
22.6%
23.7%
30.0%
30.0%
30.0%
30.0%
30.0%
4,171
5,338
4,671
5,774
19,954
5.3%
6.1%
5.8%
6.3%
5.9%
24.4%
20.9%
28.4%
22.6%
23.8%
2.06
2.63
2.30
2.85
9.84
24.4%
20.9%
28.4%
22.6%
23.8%
9.62
2,027
2,027
2,027
2,027
2,027
2014E
2015E
334
334
5.0%
0.0%
315
315
6.8%
0.0%
361,775
378,528
6.9%
4.6%
84,096
23.2%
7.5%
40,728
11.3%
6.3%
29,728
88,284
23.3%
5.0%
43,854
11.6%
7.7%
32,354
Assumed contribution margin for 2013-2015 is in the range of 25-30%
8.2%
8.5%
8.9%
8.8%
32,144
34,796
8.9%
9.2%
8.4%
8.3%
31,771
35,125
8.8%
9.3%
11.1%
10.6%
30.0%
30.0%
22,179
24,527
6.1%
6.5%
11.2%
10.6%
10.94
12.10
11.2%
10.6%
2,027
2,027
2014E represents trend EPS with stock price of: SEK 164 (22% CAGR)
Industrial Group: includes Volvo Truck, Volvo Construction Equipment, Volvo Bus, Volvo Penta, and Volvo Aero
Volvo Group: includes the Industrial Group as well as Volvo Financial Services
EPS Sensitivity
Year
Downside
2010
3.20
2011
6.30
Base
5.36
8.76
Upside
7.50
11.20

Downside
Base
Upside
NA CV
256
285
313
EU CV
280
311
342
RoW CV
(5.9%)
4.1%
14.1%
CE
(0.0%)
10.0%
20.0%
Bus
0.0%
10.0%
20.0%
Penta
(5.0%)
5.0%
15.0%
Aero
(7.5%)
2.5%
12.5%
Percentile
25th
Median
75th
Percentile
25th
Median
75th
Multiple Downside
6.6
41
8.2
54
9.7
65
Base
50
65
78
Upside
56
71
86

Downside
Base
Upside
(56.5%)
(47.0%)
(41.3%)
(43.5%)
(31.6%)
(24.5%)
(31.3%)
(17.2%)
(8.8%)
Shares
As of December 2011
Class A
Class B
Total
643
1,385
2,027
1 Vote
1/10 of 1 Vote
Votes
%
31.7%
68.3%
100.0%
#
643
138
781
%
82.3%
17.7%
100.0%
*As of February 3.
Basic Shares
2,027
Options (Diluted)
0
Diluted Shares
2,027
1
7%
Insider Ownership :
Headquartered:
Gothenburg, Sweden
1) Consists of 5.5% Volvo; management
owns <1%
WABCO Holdings
WABCO Holdings (WBC - $60.72 Outperform / Higher Risk)
Target Price: $69 (8.0 x Cal-2014E EBITDA, Discounted by 15% - Median
Valuation of Commercial Vehicle Peers over Last Cycle)
Current View
Earnings Momentum:
WABCO has significant earnings momentum,
beating analyst expectations each of the last eight quarters. We expect this
momentum to continue into 2012, as the North American truck market
continues recovery and the company increases content growth globally.
Strong Content Growth Story: WABCO has perhaps the best content
growth story among commercial vehicle suppliers, capitalizing on secular
trends toward increased safety and fuel efficiency with its product portfolio
of braking technology, air management systems, and electronics
capabilities. Content growth potential is largest in emerging markets, which
represent more than 20% of revenue.
Strong Cash Flow: We expect average free cash flow of more than $350
million annually through 2015, which we expect will fund acquisitions,
dividends, or repurchases.
Key Risks: 1) the cyclicality of European/North American commercial
vehicle markets; 2) contractual price reductions; 3) major customers; 4)
costs to develop new technologies, enter new markets; 5) foreign
exchange; 6) rising commodity prices; and 7) post-retirement liabilities.
Target Price. Our $69 target price is based on the shares trading at 8.0x
our estimate of 2014 EBITDA, the median percentile over the last cycle of a
comparable group of commercial vehicle suppliers.
Stock Chart
8
80
Price
60
40
20
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
40
NTM Forward P/E
30
20
10
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
20
Price to Book
15
10
5
0
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet
Revenue Profile December 2011
ByGeography
Company Description
WABCO Holdings Inc., headquartered in Brussels, Belgium, is a leading provider
of air management and electronic technologies, supplying advanced braking,
stability, suspension, transmission control, and air compressing and processing
systems for the world's leading commercial truck, trailer, bus, and passenger
car manufacturers. The company's products improve vehicle performance and
safety and reduce overall vehicle operating costs. WABCO was founded in 1869
as the Westinghouse Air Brake Company, purchased by American Standard
Companies Inc. in 1968, and separated and spun off to shareholders in July
2007.
RestofWorld
SouthAmerica
6%
7%
ByEndMarket
NorthAmerica
9%
Trailer9%
ByCustomer(estimated)
AutoOEMs
Trailer
4%
Manufacturers
9%
Automotive
4%
Volvo11%
AsiaPacific18%
(India7%)
(China6%)
Daimler12%
Aftermarket
23%
Aftermarket
Distributors
23%
Europe62%
TruckandBus
64%
Othertruck
bus41%
Page 46
WABCO Holdings, Inc. (WBC $60.72)

February 24, 2012

Rating: Outperform
12-Month Target Price (8.0x Cal-2014E EBITDA, Median Valuation of Peer Group Last Cycle Range, Discounted by 15%):
$69

Current Multiple = 7.9x LTM EBITDA (58th percentile), 7.3x 2012E And 5.6x 2013E.
($ in millions)
EU CV Build
Year
(000)
NA CV Build
Chg
(000)
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
483
343
Dec-02
Dec-03
Dec 04
Dec-05
Dec-06
552
577
383
378
504
592
651
Dec-07
Dec-08
Dec-09
Dec-10
704
714
281
399
22.1%
1.4%
(60.7%)
42.1%
Q1
Q2
Q3
Q4
Dec-11
116
126
123
137
501
Q1E
Q2E
Q3E
Q4E
Dec-12E
NA LV Build
Chg
(000)
Revenues
Chg
Gross Profit
Chg
17,166
15,483
(9.8%)
730.0
563.0
759.0
998.0
916.0
952.0
1,106.0
1,098.0
1,069.0
960.0
11.9%
(1.3%)
33.2%
17.4%
-
16,367
15,873
15,752
15,751
15,252
5.7%
(3.0%)
(0.8%)
(0.0%)
(3.2%)
1,057.0
1,358.0
1,724.0
1,831.0
2,015.2
10.1%
28.5%
27.0%
6.2%
10.1%
418
364
216
272
(35.8%)
(13.0%)
(40.6%)
25.9%
15,022
12,579
8,558
11,910
(1.5%)
(16.3%)
(32.0%)
39.2%
2,415.8
2,588.0
1,491.6
2,175.9
60.0%
30.0%
26.0%
3.0%
25.5%
91
105
110
115
422
47.3%
65.9%
57.0%
51.1%
55.0%
3,350
3,100
3,172
3,421
13,043
16.0%
0.5%
6.5%
15.5%
9.5%
678.2
737.7
706.3
672.0
2,794.2
116
113
110
130
469
0.0%
(10.0%)
(10.0%)
(5.0%)
(6.3%)
115
117
113
115
460
25.8%
11.2%
2.7%
(0.9%)
9.0%
3,564
3,490
3,307
3,240
13,600
6.4%
12.6%
4.3%
(5.3%)
4.3%
Q1E
Q2E
Q3E
Q4E
Dec-13E
122
119
121
130
491
5.0%
5.0%
10.0%
0.0%
4.8%
117
125
117
121
480
2.1%
6.8%
3.0%
5.6%
4.4%
3,585
3,598
3,539
3,678
14,400
0.6%
3.1%
7.0%
13.5%
5.9%
Dec-14E
Dec-15E
506
506
2.9%
0.0%
520
520
8.3%
0.0%
15,200
15,500
5.6%
2.0%
(22.9%)
34.8%
31.5%
(8.2%)
3.9%
16.2%
(0.7%)
(2.6%)
(10.2%)
Operating Income
Chg
Chg
Pretax Income
$
Tax
Chg
Rate
Net Income
$
289.4
385.7
471.4
518.5
553.1
Results prior to 2002 reflect the company's performance as an operating segment of American Standard
27.4%
96.4
9.1%
112.3
10.6%
28.4%
33.3%
145.9
10.7%
51.3%
148.7
10.9%
32.4%
27.3%
22.2%
262.2
15.2%
192.5
11.2%
31.9%
214.6
12.4%
44.3%
28.3%
10.0%
288.0
15.7%
9.8%
211.5
11.6%
9.9%
232.7
12.7%
8.4%
27.4%
6.7%
315.3
15.6%
9.5%
233.5
11.6%
10.4%
234.3
11.6%
0.7%
27.2%
24.6%
10.8%
37.6%
36.4%
81.7
112.1
191.4
145.3
148.9
19.9%
7.1%
(42.4%)
45.9%
652.4
704.7
365.9
620.4
27.0%
27.2%
24.5%
28.5%
18.0%
8.0%
(48.1%)
69.6%
373.5
395.9
128.9
318.6
15.5%
15.3%
8.6%
14.6%
18.5%
6.0%
(67.4%)
147.1%
281.2
301.6
39.2
236.5
11.6%
11.7%
2.6%
10.9%
20.4%
7.3%
(87.0%)
+
276.4
305.1
45.5
237.1
11.4%
11.8%
3.1%
10.9%
18.0%
10.4%
(85.1%)
+
24.7%
19.2%
32.3%
14.7%
208.2
246.6
25.7
190.2
38.1%
44.0%
29.6%
7.1%
28.4%
197.7
218.2
205.2
189.5
810.6
29.2%
29.6%
29.1%
28.2%
29.0%
40.7%
45.5%
36.1%
5.8%
30.7%
112.3
121.1
115.0
110.6
459.0
16.6%
16.4%
16.3%
16.5%
16.4%
69.1%
57.9%
46.2%
14.3%
44.1%
92.2
101.9
95.8
91.1
381.0
13.6%
13.8%
13.6%
13.6%
13.6%
102.2%
81.3%
66.0%
18.3%
61.1%
94.7
101.4
97.8
93.2
387.1
14.0%
13.7%
13.8%
13.9%
13.9%
111.4%
90.6%
63.0%
17.8%
63.3%
14.3%
13.8%
13.1%
9.9%
12.8%
77.6
86.1
81.9
80.7
326.3
(10.5%)
(6.3%)
(3.3%)
3.7%
(4.2%)
104.7
120.5
115.9
116.9
458.0
15.1%
13.9%
16.3%
12.5%
14.4%
124.0
144.4
140.8
137.3
546.5
12.5%
11.1%
631.4
688.9
642.4
(5.3%)
177.0
27.5%
702.7
(4.7%)
204.5
29.1%
689.0
(2.5%)
198.5
28.8%
688.6
2.5%
196.6
28.6%
2,722.7
(2.6%)
776.5
28.5%
RWB est. up 1.4% in local currency.
731.2
13.8%
203.6
27.8%
797.4
13.5%
232.9
29.2%
796.7
15.6%
230.8
29.0%
770.5
11.9%
221.2
28.7%
3,095.7
13.7%
888.5
28.7%
3,465.6
3,836.5
EBITDA
Chg
12.0%
10.7%
999.4
1,110.7
28.8%
29.0%
Fully Diluted EPS

Chg
15.5%
9.1%
506.4
563.9
14.6%
14.7%
16.0%
11.4%
527.1
588.8
15.2%
15.3%
16.6%
11.7%
16.5%
16.5%
426.8
477.4
GAAP
First
Avg
EPS
Call*
Shs
7.7%
1.18
8.3%
37.2%
1.62
11.1%
70.7%
2.77
7.9%
(24.1%)
2.11
7.4%
2.5%
2.16
2006 Performance EPS = $2.07
8.6%
39.8%
3.01
9.5%
18.4%
3.73
1.7%
(89.6%)
0.40
8.7%
+
2.86
11.4%
11.7%
11.6%
12.0%
11.7%
131.0%
107.5%
73.9%
18.7%
71.6%
1.12
1.23
1.19
1.21
4.75
16.3%
(6.7%)
81.9
12.7%
(11.2%)
86.0
13.4%
(9.2%) 16.5%
68.2
10.6%
(12.1%)
1.04
17.1%
(0.5%)
97.7
13.9%
(4.2%)
100.2
14.3%
(1.2%) 16.5%
82.3
11.7%
(4.4%)
1.26
16.8%
0.8%
93.1
13.5%
(2.8%)
95.6
13.9%
(2.3%) 16.5%
76.7
11.1%
(6.3%)
1.17
17.0%
5.7%
94.0
13.7%
3.2%
96.7
14.0%
3.8% 16.5%
77.2
11.2%
(4.3%)
1.18
16.8%
(0.2%)
366.6
13.5%
(3.8%)
378.4
13.9%
(2.2%) 16.5%
304.4
11.2%
(6.7%)
4.65
February 2: 2012 Guidance: Revenue down 2% to up 3% in local currency, performance operating margin 12.8-13.8%; EPS $4.30-4.80
17.0%
18.4%
96.5
13.2%
17.8%
101.4
13.9%
17.9% 16.5%
80.8
11.0%
18.5%
1.23
18.1%
19.8%
116.9
14.7%
19.7%
120.4
15.1%
20.2% 16.5%
99.1
12.4%
20.4%
1.51
17.7%
21.4%
113.3
14.2%
21.7%
116.7
14.6%
22.1% 16.5%
94.1
11.8%
22.7%
1.44
17.8%
17.5%
109.8
14.3%
16.8%
113.6
14.7%
17.5% 16.5%
91.1
11.8%
18.0%
1.39
17.7%
19.3%
436.5
14.1%
19.0%
452.1
14.6%
19.5% 16.5%
365.0
11.8%
19.9%
5.57
18.2%
18.0%
Chg
12.3%
12.4%
16.9%
11.8%
6.52
7.29
37.2%
70.7%
(24.1%)
2.5%
69.0
69.0
69.0
69.0
69.0
39.4%
24.0%
(89.3%)
+
3.34
0.27
2.72
3.76
0.33
2.73
69.3
65.9
64.5
66.5
120.1%
95.6%
68.4%
20.1%
66.2%
1.66
1.23
1.19
1.21
4.75
0.93
1.09
1.14
1.17
4.71
69.0
70.1
68.7
66.8
68.6
(7.5%)
2.3%
(1.8%)
(2.4%)
(2.2%)
1.04
1.26
1.17
1.18
4.65
1.11
1.19
1.16
1.21
4.66
65.5
65.5
65.5
65.5
65.5
18.5%
20.4%
22.7%
18.0%
19.9%
1.23
1.51
1.44
1.39
5.57
5.67
65.5
65.5
65.5
65.5
65.5
16.9%
11.8%
6.52
7.29
65.5
65.5
*As of February 2.
EPS Sensitivity
Base
Year
Downside
Upside
2010
#VALUE!
$2.86
#VALUE!
2011
$3.80
$4.75
$5.75
Percentile
Multiple
Downside
Base
Upside
25th
6.5
$28
$33
Median
8.0
$33
$39
$34
$41
75th
9.5
$38
$45
$48

Downside
Base
Upside
EU CV
15%
25%
35%
Percentile
NA CV
380
422
464
25th
-50%
ROW CV
(15%)
(5%)
5%
Median
-41%
-29%
-26%
75th
-32%
-18%
-14%
Aftmkt
(1%)
9%
19%
Trailer
191
212
233
NA LV
11,700
13,043
14,300
$/Euro
$1.30
$1.30
$1.30
Downside
Base
-41%
Upside
-38%
Source for all models: Company reports, Robert W. Baird & Co. estimates.

Year
$
%
Basic Shares
65.3
2008
$200
8%
Dilutive Securities
1.5
2009
$225
9%
Diluted Shares
66.8
2010
$40
3%
Insiders Own:
<1%
2011
$218
10%
Headquartered:
Brussels, Belgium
2012
$140
5%
2013
$218
8%
2011-13
$575
8%
* Revenue growth with flat build (ex-price of -2%).
Appendix Important Disclosures and Analyst Certification

Robert W. Baird & Co. Incorporated and/or its affiliates expect to receive or intend to seek investment-banking related compensation from the company or companies
mentioned in this report within the next three months.
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prohibited for residents of the United States. Please contact a Baird representative for more information.
Investment Ratings: Outperform (O) - Expected to outperform on a total return, risk-adjusted basis the broader U.S. equity market over the next 12 months. Neutral
(N) - Expected to perform in line with the broader U.S. equity market over the next 12 months. Underperform (U) - Expected to underperform on a total return, riskadjusted basis 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 with an emphasis on safety. Company characteristics may
include: stable earnings, conservative balance sheets, and an established history of revenue and earnings. A - Average Risk - Growth situations for investors seeking
capital appreciation with an emphasis on safety. Company characteristics may include: moderate volatility, modest balance-sheet leverage, and stable patterns of revenue
and earnings. H - Higher Risk - Higher-growth situations appropriate for investors seeking capital appreciation with the acceptance of risk. Company characteristics may
include: higher balance-sheet leverage, dynamic business environments, and higher levels of earnings and price volatility. S - Speculative Risk - High-growth situations
appropriate only for investors willing to accept a high degree of volatility and risk. Company characteristics may include: unpredictable earnings, small capitalization,
aggressive growth strategies, rapidly changing market dynamics, high leverage, extreme price volatility and unknown competitive challenges.
Valuation, Ratings and Risks. The recommendation and price target contained within this report are based on a time 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, its
industry, 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. Overall market risk, interest rate risk, and general economic risks impact all securities. Specific information
regarding the price target and recommendation is provided in the text of our most recent research report.
Distribution of Investment Ratings. As of February 29, 2012, Baird U.S. Equity Research covered 672 companies, with 53% rated Outperform/Buy, 45% rated
Neutral/Hold and 2% rated Underperform/Sell. Within these rating categories, 13% of Outperform/Buy-rated, 8% of Neutral/Hold-rated and 17% of Underperform/sell-rated
companies have compensated Baird for investment banking services in the past 12 months and/or Baird managed or co-managed a public offering of securities for these
companies in the past 12 months.
Analyst Compensation. Analyst compensation is based on: 1) The correlation between the analysts recommendations and stock price performance; 2) Ratings and
direct feedback from our investing clients, our sales force and from independent rating services; and 3) The analysts productivity, including the quality of the analysts
research and the analysts contribution to the growth and development of our overall research effort. This compensation criteria and actual compensation is reviewed and
approved on an annual basis by Bairds Research Oversight Committee.
Analyst compensation is derived from all revenue sources of the firm, including revenues from investment banking. Baird does not compensate research analysts based
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Analyst Certification
The senior research analyst(s) certifies that the views expressed in this research report and/or financial model accurately reflect such senior analyst's personal views about
the subject securities or issuers and that no part of his or her compensation was, is, or will be directly or indirectly related to the specific recommendations or views
contained in the research report.
Disclaimers
Baird 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 opinions expressed here reflect our judgment at this date and are
subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy.
ADDITIONAL INFORMATION ON COMPANIES MENTIONED HEREIN IS AVAILABLE UPON REQUEST
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the laws and regulations governing United States broker-dealers and not Australian laws.
Copyright 2012 Robert W. Baird & Co. Incorporated
Other Disclosures
The information and rating included in this report represent the Analysts long-term (12 month) view as described above. Robert W. Baird & Co. Incorporated and/or its
affiliates (Baird) may provide to certain clients additional or research supplemental products or services, such as outlooks, commentaries and other detailed analyses,
which focus on covered stocks, companies, industries or sectors. Not all clients who receive our standard company-specific research reports are eligible to receive these
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of various factors including the size and scope of the client relationships. These additional or supplemental products or services may feature different analytical or research
techniques and information than are contained in Bairds standard research reports. Any ratings and recommendations contained in such additional or research
supplemental products are consistent with the Analysts long-term ratings and recommendations contained in more broadly disseminated standard research reports.
UK disclosure requirements for the purpose of distributing this research into the UK and other countries for which Robert 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) of the Financial Services and Markets Act 2000 (financial
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Limited, 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
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Research
M&A and Investment Banking

North America
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414.298.7535
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Industrial Research

Global Auto & Truck Markets

DAVID LEIKER, CFA

Please Refer to Appendix Important Disclosures

Auto Supplier Performance - Relative to S&P 500

Baird Auto Coverage

Baird Daily Commercial Vehicle Index Relative to S&P 500

Price (Indexed to 100)

Source: FactSet Prices

Source: FactSet Prices

Indexed Price Performance

Price (Indexed to 100)

Indexed Price Performance

Price (Indexed to 100)

Source: FactSet Prices

Source: FactSet Prices

Regional Auto Sales Quarterly Change

Developed Markets Still Below Peak Demand

Q1 Automotive Macro Assumptions

Source: Wards, ACEA, JAMA, KAMA, Baird estimates

European Auto Sales (In Units)

US Light Vehicle Sales (SAAR)

Source: ACEA, JD Power, JAMA, KAMA, Wards, Baird estimates.

Source: Wards, Baird estimates.

Source: Wards Automotive, FactSet, Baird estimates

Source: ACEA, Baird estimates.

Change in NA Production Schedules

US Inventory Excess/Shortage (by Month)

3 Month Average (left)

Source: Wards, Baird estimates.

Robert W. Baird & Co.

Global Auto & Truck Markets March 2012

Source: Wards, Baird estimates.

Auto Supplier Index QTR Relative Performance

Auto Supplier Index Relative Performance

OEM Suppliers vs. S&P 500

Source: FactSet, Baird estimates.

Source: FactSet, Baird estimates.

Baird Supplier Index Up Cycles vs. S&P 500

Typical Absolute Cycle Performance

Source: FactSet, Baird estimates

2012 First-QTD Performance

Total Price Appreciation

Appreciation from Earnings

Current Cycle Return

Appreciation from Valuation

Source: FactSet, Baird estimates.

Source: FactSet, Baird estimates.

Auto Supplier Recovery Stocks vs. 2011 Earnings

Auto Suppliers Change in 2012/13 Estimates

Source: FactSet, Baird estimates

Source: FactSet, Baird estimates

Robert W. Baird & Co.

Global Auto & Truck Markets March 2012

Source: FactSet, Baird estimates.

ECRI Leading Index Smoothed Annualized Chg.

U.S. Dollar Index Daily

Industrial Production Germany vs. EU (y/y chg)

Index Value; Dec-99 = 100

Source: Ecowin, Baird estimates.

US Private Non-Farm Payrolls 3 Month Avg. Chg.

Baird Commodities Index

ECRI Leading Index (4 Wk Ann. Growth)