roe to cfroi greg collett,cfa 3.10.12

7/24/2019 Roe to Cfroi Greg Collett,Cfa 3.10.12

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www.credit-suisse.com/holtmethodology Introducing HOLT

HOLT

CONFIDENTIAL For Education and Training Purposes Only

From ROE to CFROI and

everything in between

CFA Institute

2012

Greg Collett CFA

+44 (0) 207 88 33 643

[email protected]

HOLT Custom Solutions


2/54

CLARITY IS CONFIDENCE HOLT

Agenda

Introduction

Accounting

Performance MeasurementFade and Mean Reversion

Link to Valuation

Questions


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Accounting how it all flows around


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The Ideal Performance Metric

Question Problem

Does the metric allow fair comparisonsbetween old and new companies?

New assets = low returnOld assets = high return

How do you compare a short life techcompany to a longer life capital goodscompany?

Ratio vs IRR

Can you compare returns acrosscountries with high and low inflation?

Income statement reflects inflationBalance sheet to a lesser extent

Do the return and growth measures

track Total Shareholder Return (TSR)over time.

Does a rising return lead to greater

TSR?

Is the return measure subject toaccounting manipulation?

Financing manipulation does not alwaysimprove TSR


5/54



Question ROE ROIC CROGI CROIGI CFROI

Old Assets/New

Assets? ? ? ? ?

Asset Life ? ? ? ? ?

Inflation ? ? ? ? ?

Accounting

Distortions ? ? ? ? ?


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RONA

ROIIC

ROCE

ROIC

CROIGI

CROGI

CFROI

ROE

Return on

Invested Capital

Return on Equity

Cash Flow

Return on

Investment

Cash Return on

Gross

Investment

Cash Return on

Inflation

Adjusted Gross

Investment

Comparison of Financial Performance Metrics


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Return on Equity

ROE is defined as Net Earnings / Book Equity.

It is an incomplete measure because it measuresthe return on assets not funded by debt.

ROIC

CROIGI

CROGI

CFROI

ROE

Return on Equity


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Return on Equity Changing Leverage Adds Noise to the Signal

Income 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Costs 700 700 700 700 700 700 700 700 700 700 700

EBIT 300 300 300 300 300 300 300 300 300 300 300

Interest 100 90 80 70 60 50 40 30 20 10 0

PBT 200 210 220 230 240 250 260 270 280 290 300

Tax 60 63 66 69 72 75 78 81 84 87 90

Net Income 140 147 154 161 168 175 182 189 196 203 210

Debt 1000 900 800 700 600 500 400 300 200 100 0

Equity 0 100 200 300 400 500 600 700 800 900 1000

Deb/(Debt+Equity) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

ROE #N/A 147% 77% 54% 42% 35% 30% 27% 25% 23% 21%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

200

400

600

800

1,000

1,200

1 2 3 4 5 6 7 8 9 10 11

Debt Equity ROE


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- Expenses

Revenue

Profit

Understanding Inflations Impact on ROE

ROE =

Net Income

Owners Equity

Inventory

LIFO

FIFO

~

Depreciation~

Wages


10/54

CLARITY IS CONFIDENCE HOLTSource: HOLT analysis

Inflation Can Seriously Distort ROE

0

5

10

15

20

1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

Reported ROE

using actual U.S.

inflation for a 6%

real IRRproject.

6% IRR Project

(Inflation Adjusted)

ReportedROE


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Return on Equity

Issue ROE Reason

Old Assets/New

AssetsNo

Neither net income nor equity

refect asset age

Asset Life NoNeither net income nor equity

refect asset life

Inflation NoNet income reflects inflation. Equity

is an historical value

Accounting

Distortions

NoBoth are subject to non-operating

distortions


12/54


RONA

ROIIC

ROCE

Return on Invested Capital

ROIC is defined as NOPAT / Invested Capital and is key to Economic Profit analysis.

ROIC

CROIGI

CROGI

CFROI

ROE

Return on

Invested Capital


13/54


Operating Profit (EBIT)

- Effective Tax Charge

= NOPAT (Net Operating Profit After Tax)

Total Assets

- Payables

- Other Current Liabilities

- Cash

= Invested Capital

Invested Capital

NOPATROIC=



14/54


Current Dollar income which includesnoncash items such as depreciationand amortisation

Historical cost depreciated assets

Excludes off balance sheet items

Can we expect this ratio to tell

us anything useful aboutperformance?

NOPAT and Invested Capital

are not in constant dollars!

Invested Capital

NOPATROIC=

Return on Invested Capital Issues


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Accounting Items Can Distort the Return Calculation

Example: Two Plants

Managers A and B operate plants of equal capacity but with different ages

Plants each have 20 year life, original cost of assets = 1,000

Manager B is

penalized for

having a newer

plant!

Plant A Plant B

NOPAT 100 100

Age of Assets 10 0

Invested Capital 500 1,000

ROIC 20% 10%


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Worldwide Accounting and Reporting Issues Prevent Comparability


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Issue ROIC Reason

Old Assets/New

AssetsNo Asset age reduces assets

Asset Life No Not taken into account

Inflation NoNOPAT is current dollars,

Invested Capital is not

Accounting Distortions MaybeDepends on analyst

adjustments (op leases)


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Cash Return on Gross Investment

ROIC

CROIGI

CROGI

CFROI

ROE

Cash Return on

Gross

Investment


19/54


NOPAT

+Depreciation+Other non-cash

items

Invested Capital

+

Accumulated

Depreciation

+

CapitalizedExpenses

... by adding back non-cash items to NOPAT and accumulated depreciation toInvested Capital

This captures the total value of investment in the asset base more accurately

Operating After

Tax Cash Flow

Gross Investment=CROGI

ROIC

ROE



20/54


Example: Two Plants

CROGI shows thatmanagers A and B

are achieving

similar cash returns

on the original

investment!

Plant A Plant B

NOPAT 100 100

Deprecia tion 50 50

Operating After TaxCash Flow

150 150

Invested Capi ta l 500 1,000

Accumulated

Depreciation

500 0

Gross Investment 1,000 1,000

CROGI 15% 15%



21/54


CROGI shows that

managers A, B and

C are achieving

similar cash returns

on the original

investment!

Plant A Plant B Plant C

NOPAT 100 100 100

Depreciation 50 50 0

Operating Leases 0 0 50

Operating After

Tax Cash Flow

150 150 150

Invested Capital 1,000 1,000 0

AccumulatedDepreciation

500 0 0

Gross CapitalisedLeases

0 0 1,000

Gross

Investment

1,000 1,000 1,000

CROGI 15% 15% 15%

Cash Return on Gross Investment Operating Leases

These scenarios assume zero net working capital


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0.44

0.46

0.48

0.50

0.52

0.54

0.56

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Net PPE/Gross PPE

0.00

5.00

10.00

15.00

20.00

25.00

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

PPE Life

0.0

0.5

1.0

1.5

2.0

2.5

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Capex/Depreciation

Europe>1bn Eur ex Financials. Source Credit Suisse HOLT 2 Oct 2012

The Net/Gross plant ratio tells us that the PPE is

50% depreciated.

Capex/Depreciation is greater than one indicating

net growth

Plant life (GrossPPE/depreciation) has increased.

This could be caused by changes in sector

composition and weight over time.


23/54



Issue CROGI Reason

Old Assets/New

AssetsYES

Accumulated depreciation is

added back


Inflation NoCash flow is current dollars,

Invested Capital is historical

Accounting Distortions MaybeDepends on analyst



24/54


From an investors point of view..

What is the impact of inflation on the

investment made ten years ago?

Are you measuring return on what you

spent ten years ago or on what that

investment is worth in todays money(current Dollars)?



25/54


Differing Inflation Rates Make International Comparisons Difficult

Can you use CROGI to compare companies across time and in different countries?

Source Credit Suisse HOLT 2 Oct 2012


26/54


Cash Return on Inflation Adjusted Gross Investment

CROIGI is defined as Cash Return / Inflation Adjusted Gross Investment.

ROIC

CROIGI

CROGI

CFROI

ROE

Cash Return on

Inflation

Adjusted Gross

Investment


27/54


Operating After Tax

Cash Flow

Inflation Adjusted

Gross Investment

=CROIGI

Operating After TaxCash Flow

Gross Investment +

Inflation Adjustment on

Gross Investment

... by adding an inflation adjustment to the gross fixed assets toapproximate their value in todays money.

This gives a fair value to the entire asset base, regardless of age.

ROIC

CROGI

ROE



28/54


Example: Two Plants

CROIGI shows that

plant As return is

actually less than

Bs when the value

of investment is

compared in todaysmoney!

* Assuming 2% Annual Inflation


Plant A Plant B

Operating After TaxCash Flow 150 150

Gross

Investment

1,000 1,000

Age 10 0

Inflation

Adjustment*

220 0

Inflation AdjustedGross Investment

1,220 1,000

CROIGI 12% 15%


29/54


Year 1 2 3 4 5 6 7 8 9 10

USA Inflation 3.9% 2.8% 2.6% 2.4% 2.5% 2.3% 1.6% 0.6% 1.4% 2.2%

SA Inflation 13.5% 12.7% 10.4% 9.8% 8.8% 8.4% 7.8% 7.7% 6.8% 6.2%

Avg Exchange Rate 2.76 2.85 3.27 3.55 3.63 4.3 4.61 5.55 6.12 6.94

Life (Years) 10

Analysys in USD

Cost in USD 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Accumulated Depreciation 100 200 300 400 500 600 700 800 900 1000

Net Asset Value 900 800 700 600 500 400 300 200 100 0

GCF 150 154 158 162 166 170 173 174 176 180 Grows with US inflation

Inflation Adjusted Cost 1,000 1,028 1,055 1,080 1,107 1,133 1,151 1,158 1,174 1,200 Grows with US inflation

ROIC 15% 17% 20% 23% 28% 34% 43% 58% 88% 180%

CROGI 15% 15% 16% 16% 17% 17% 17% 17% 18% 18%

CROIGI 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%

CFROI 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%

Analysys in ZAR

Cost in USD 2,760 2,760 2,760 2,760 2,760 2,760 2,760 2,760 2,760 2,760

Accumulated Depreciation 276 552 828 1,104 1,380 1,656 1,932 2,208 2,484 2,760

Net Asset Value 2,484 2,208 1,932 1,656 1,380 1,104 828 552 276 0

GCF 414 467 515 566 615 667 719 774 827 878 Grows with SA inflation

Inflation Adjusted Cost 2,760 3,111 3,434 3,771 4,102 4,447 4,794 5,163 5,514 5,856 Grows with SA inflation

ROIC 15% 19% 23% 29% 37% 48% 65% 94% 150% 318%

CROGI 15% 17% 19% 20% 22% 24% 26% 28% 30% 32%

CROIGI 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%

CFROI 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%

GP Factor in USA 1.00 1.03 1.05 1.08 1.11 1.13 1.15 1.16 1.17 1.20

GP Factor in SA 1.00 1.13 1.24 1.37 1.49 1.61 1.74 1.87 2.00 2.12

Notes

1. A South African company buys an asset in US$ in 1991 and places it on i ts books in ZAR. The asset does not get revalued

2. The company produces a profit stream that can be priced in US$ or ZAR. Products are sold at a local price or global commodity price

3. It is assumed that NDA (working capital) is zero for the CFROI calculation.

Why Is It Important to Adjust for Inflation?


30/54



Issue CROIGI Reason

Old Assets/New

AssetsYES

Accumulated depreciation is

added back


Inflation YESNumerator and denominator

are in current dollars

Accounting Distortions Maybe

Depends on analyst



31/54



What if two projects with the same return

have different lives?

How do you select the correct one?

For the same investment would you choose

a 10% project with a 5 year life or a 10 yearlife?


32/54

CLARITY IS CONFIDENCE HOLT31

Gross Cash Flow

Gross Investm ent

12,249

77,174

Gross Cash Flow

Gross Investm ent

5,449

34,343

Ericsson and GSKs returns look the same..but are they?

= =15.9

GLAXOSMITHKLINE PLC (2009)

= =15.9

ERICSSON LM (2009)



33/54


Cash Flow Return On Investment (CFROI)

ROIC

CROIGI

CROGI

CFROI

ROE

Cash Flow

Return on

Investment


34/54


Gross Cash

Flow

Current

Gross

Investment

Life = 4 Years

50

10

100

Life helps measure the economic returnearned

today, by forecasting how much cash flow will

be received over a realistic time period.

Consider a 100 investment that earns 10 in

cash flows for 4 years. The CROIGI return

looks like 10% (10/100), yet when life is

considered, the economic return (CFROI) is

negative.

10% return?

CFROI = - 3.1%

Why is Project Life so Important?


35/54


Infl. Adj.

Gross Cash

Flow

Current

Gross

Investment

10

100

Consider that same 100 investment that earns 10 in cash flows for 30 years.

The CROIGA return looks like 10%, however, the cash flows are forecasted to

last 30 years, making the economicreturn 9.68%.

10% return?

Non-Depreciating

Asset Release50

Life = 30 Years

CFROI = 9.68%

Why is Project Life so Important?


36/54


CFROI Not Distorted By Asset Mix

100

Machine Tools

10 Years

Distribution Company

10

20

100

10 Years

10

75

IRR = 3.0%

IRR = 8.3%


37/54


Gross Cash Flow

Gross Investm ent

12,249

77,174

Gross Cash Flow

Gross Investm ent

5,449

34,343

CFROI accounts for asset life differences offering more insightthan a ratio

= =15.9

GLAXOSMITHKLINE PLC (2009)

= =15.9

ERICSSON LM (2009)

Asset li fe: 6.2 years

Asset li fe: 12.4 years

CFROI = 6.9

CFROI = 12.6

Traditional Return Metric (Ratio ) CFROI



38/54


Adjustments Are Essential to True Economic PerformanceMeasurement

ROIC

CROIGI

CROGI

CFROI

ROE

Cash Flow

Return on

Investment

Adjustments

Accumulated Depreciation

Inflation Adjustment

Asset Life

Enterprise levelmeasure


39/54


From Cash To CFROI (Internal Rate of Return)

Net Monetary Assets

+ Inflation Adjusted Land & Improvements

+ Investments (Non-Equity Method )+ Inventory (w/ LIFO Inventory Reserve)

+ Other LT Assets less Pension Assets

Net Income (Before Extraordinary Items)

+/- Special Items (after tax)

+ Depreciation/Amortization Expense

+ Interest Expense

+ R&D Expense

+ Rental Expense

+ Minority Interest Expense

+ Net Pension Cash Flow Adjustment

+ LIFO charge to FIFO Inventory

+ Monetary Holding Gain/Loss

- Equity Method Investment Income

100

Inflation Adjusted

Gross Investment

13-Year Asset Life

10

25

Gross Cash Flow

CFROI = 6.0%

Non-Depreciating Assets

Net Book Assets

+ Accumulated Depreciation

+ Inflation Adjustment to Gross Plant

+ LIFO Inventory Reserve+ Capitalized Operating Leases

+ Capitalized R&D

- Equity Method Investments

- Pension Assets

- Goodwill

- Non-Debt Monetary Liabilities & Deferred Taxes


40/54


PositiveSpread

Business

NeutralSpread

Business NegativeSpread

Business

Discount Rate(Cost of Capital)

Increase returns

Hold returnsand grow assets

Increase returns

Then grow

Increase returns

ReduceReinvestment

Divest or Liquidate

Return Measure

StrategicOptions

Rules for Value Creation What is Good Growth?

Managing for shareholder value requires an understanding of the trade-off between cash flow returns and growth. Capitalshould be allocated to positive spread businesses and projects that are creating value. Marginal businesses shouldconcentrate on improving operating efficiencies instead of growth.


41/54


40

0

60

120

180

240

-5 0 5 10 15 20 25

0

20

40

60

80

-5 0 5 10 15 20 25

0

100

200

300

400

500

600

700

800

900

1000

-5 0 5 10 15 20 25

0

100

200

300

400

500

600

700

-5 0 5 10 15 20 25

CFROI Observations: Fade Happens

0

50

100

150

200

250

300

-5 0 5 10 15 20 25

0

50

100

150

200

250

300

350

400

450

500

-5 0 5 10 15 20 25

Ending CFROI(t+5)Initial CFROI(t+1)

10-15%

6-10%

15-20%

USA Large & Mid-Cap:

1980-2005


42/54


41

0

20

40

60

80

100

120

140

-20 -10 0 10 20 30 40

`

0

5

10

15

20

25

30

35

40

45

-20 -10 0 10 20 30 40

`

0

100

200

300

400

500

600

700

-20 -10 0 10 20 30 40

0

20

40

60

80

100

120

140

-20 -10 0 10 20 30 40

0

50

100

150

200

250

-20 -10 0 10 20 30 40

0

10

20

30

40

50

60

70

80

90

-20 -10 0 10 20 30 40

Growth Observations: Fade Really Happens!

Initia l Growth

(t+1)

20-30

10-20

-20 to -10

Ending Growth (t+5)

USA Large & Mid-Cap:

1985-2005


43/54


Drivers of Firm Value

Firm Value = PV Cash Flows + Market Value of Investments

Returnsvs. Discount Rate,

Asset Growth and hence, Sales Growth,

Competitive Advantage Period,

Fade Rate of Returns and Asset GrowthFirm Value =


44/54


Valuation Continuum

PE Multiple

EPS Growth

PEG RatioEV/EBITDA

Price/Sales

Tobins Q

Price/Book

Value/Cost

Discounted EVA

Gordon Growth

Dividend Discount Model

Discounted FCFF

HOLT CFROI DCF

Real Options

Increasing Sophistication and Completeness

Relative Valuation

Cash Distribution Models

Cash Production Models

Variance andProbability Models

Monte Carlo

Simulations


45/54


Case Study: NOKIA

ROIC rises while price, TSR and other measures are fallingwhy?

NOKIA CORPORATION

0.00

500.00

1000.00

1500.00

2000.00

2500.00

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

ROE ROIC CROGI CROIAGI CFROI Price TSR (RHS)



46/54


0

10

20

30

40

50

60

70

80

90

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

NOPAT Operating Invested Capital ROIC (RHS)

Case Study: NOKIAROIC why so volatile?

Invested capital is the problem



47/54



Current assets declined from 2000 to 2004 while current liabilities

remained relatively unchanged. Assets increased significantly from 2006

without a proportional increase in current liabilities.

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Plant (Net ) Current Ass ets Current Liabilities Other Long Term Assets



48/54


0

5

10

15

20

25

30

35

0

10,000

20,000

30,000

40,000

50,000

60,000

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Working Capital Gross Fixed Assets Gross Investment Gross Cash Flow (RHS) CFROI (RHS)


0

10

20

30

40

50

60

70

80

90

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

NOPAT Operating Invested Capital ROIC (RHS)



49/54


Case Study: NOKIAthrough the CFROI lens


d l h h d h h d l d


50/54


Case Study: WPP plchigh returns and growth have not delivered


C S d SCO l S l d l b k h i d O C


51/54


Case Study: TESCO plcSale and leaseback has increased ROIC


Th Id l P f M t i


52/54



Question ROE ROIC CROGI CROIGI CFROI

Old Assets/New

Assets

No No Yes Yes Yes

Asset Life No No No No Yes

Inflation No No No Yes Yes

Accounting

Distortions No No Partial Partial Yes

C l i


53/54


Conclusions

Return measures are essential to our understanding of companies

They can be volatile which makes forecasting difficult and uncertain

Mean reversion happens

Most important of all

Returns are not a measure of either absolute or relative value. You need to know what you are measuring

You need to know what your measure is telling you

Disclosure and Notice


54/54


Disclosure and NoticeThis material has been prepared by individual traders or sales personnel of Credit Suisse Securities (USA) LLC ("Credit Suisse") and not by the Credit Suisse researchdepartment. It is provided for informational purposes, is intended for your use only and does not constitute an invitation or offer to subscribe for or purchase any of the products or

services mentioned. It is intended only to provide observations and views of individual traders or sales personnel, which may be different from, or inconsistent with, theobservations and views of Credit Suisse research department analysts, other Credit Suisse traders or sales personnel, or the proprietary positions of Credit Suisse. Observationsand views expressed herein may be changed by the trader or sales personnel at any time without prior notice. Past performance should not be taken as an indication or guarantee

of future performance, and no representation or warranty, expressed or implied is made regarding future performance. The information set forth above has been obtained from orbased upon sources believed to be reliable, but Credit Suisse does not represent or warrant its accuracy or completeness and is not responsible for losses or damages arising out

of errors, omissions or changes in market factors. This material does not purport to contain all of the information that an interested party may desire and, in fact, may provides onlya limited view of a particular security or market. Credit Suisse may participate or invest in transactions with issuers of securities that participate in the markets referred to herein,perform services for or solicit business from such issuers, and/or have a position or effect transactions in the securities or derivatives thereof. Also, Credit Suisse may have

accumulated, be in the process of accumulating or accumulate long or short positions in the subject security or related securities. This material does not constitute objectiveresearch under FSA rules.

To obtain a copy of the most recent Credit Suisse research on any company mentioned please contact your sales representative or go to http://www.credit-suisse.com/researchandanalytics.

FOR IMPORTANT DISCLOSURESon companies covered in Credit Suisse Investment Banking Division research reports, please see www.credit-suisse.com/researchdisclosures.

Backtested, hypothetical or simulated performance results have inherent limitations. Simulated results are achieved by the retroactive application of a backtested model itselfdesigned with the benefit of hindsight. The backtesting of performance differs from the actual account performance because the investment strategy may be adjusted at any time,for any reason and can continue to be changed until desired or better performance results are achieved. Alternative modeling techniques or assumptions might produce

significantly different results and prove to be more appropriate. Past hypothetical backtest results are neither an indicator nor a guarantee of future returns. Actual results will varyfrom the analysis.

The HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations,collectively called the HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates)are systematically translated into a number of default variables and incorporated into the algorithms available in the HOLT valuation model. The source financial statement, pricing,

and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firmperformance. These adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The

default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables toproduce alternative scenarios, any of which could occur. The HOLT methodology does not assign a price target to a security. The default scenario that is produced by the HOLTvaluation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may a lso change. The default variables may also beadjusted to produce alternative warranted prices, any of which could occur. Additional information about the HOLT methodology is available on request.

CFROI, CFROE, HOLT, HOLTfolio, HOLTSelect, HS60, HS40, ValueSearch, AggreGator, Signal Flag and Powered by HOLT are trademarks or registered trademarks ofCredit Suisse Group AG or its affiliates in the United States and other countries.

HOLT is a corporate performance and valuation advisory service of Credit Suisse

2011 Credit Suisse Group AG and its subsidiaries and affiliates. All rights reserved.

roe to cfroi greg collett,cfa 3.10.12

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