brka 080710 - stifel nicolaus

8/9/2019 BRKA 080710 - Stifel Nicolaus

http://slidepdf.com/reader/full/brka-080710-stifel-nicolaus 1/11 All relevant disclosures and certifications appear on pages 10 - 11 of this report.

July 8, 2010

Blah-Shaped Recovery Not Priced in – Downgrading to Sell

Meyer Shields, FCAS (443) 224-1331 [email protected] M. DeAugustino (443) 224-1330 [email protected]

Arash Soleimani, CPA (443) 224-1377 [email protected]

Company Update

We’re downgrading the shares of Berkshire Hathaway to Sell from Hold asour weak macroeconomic outlook implies poor 2H10 earnings. In this notewe outline the signs we see for a 2H10 economic retreat, and why BRKshould outpace market declines.

• We think declining consumer confidence will slow consumer spending, asemployment very slowly recovers. Additionally, a shrinking appetite forincreased public spending should limit the size of any future economic

stimulus packages. Middle Eastern political instability could also drive realoil prices above $85 a barrel, further impacting consumers’ discretionaryexpenditures.

• Aside from Berkshire’s operating units’ exposure to economic weakness,its shares face a “double whammy,” as its equity portfolio and derivativepositions expose it to additional book value pressure. Investors’ focus onBerkshire’s book value for valuation imply that its shares could outpacebroader market’s declines.

• BRK’s YTD outperformance versus the S&P 500 is nearing an apex thatseems poised for a correction based on the shares' history.

• Berkshire’s property/casualty reserve releases have recently ramped up,but we see that as unsustainable in an enduring soft market, implying

additional earnings pressure as releases slow.

We’ve reduced our EPS estimates to reflect the expected challenging 2H10environment, with modest economic growth expected in 2011. Our EPSestimates move to $5,685 from $5,764 (2010E), and to $6,097 from $6,241(2011E). Our sum-of-the-parts valuation method suggests fair value for theshares at about $104,000, about 13% downside from current levels.

Berkshire Hathaway Inc.

BRK.A – NYSESell

Insurance: Standard/Specialty/Brokers

From ToChanges (Previous) (Cur rent)

Rating Hold Sell

Target Price — —

FY10E EPS (Net) $5,764 $5,685

FY11E EPS (Net) $6,241 $6,097

FY10E Revenue (Net)$122.37B $121.91B

FY11E Revenue (Net)$126.84B $125.19B

Stock Data

Price (07/07/10): $119,889.00

52-Week Range: $125,252 –$84,600

Market Cap.(mm): 197,457

Shr.O/S-Diluted (mm): 1.6

Avg Daily Vol (3 Mo): 937

Dividend ($): $0.00Yield (%): 0.0%

Book Value/Share: 89,374

Stated Book: 89,374

Price/Stated Book: 134%

Tangible Book: 59,799

Price/Tangible Book: 200%

S&P Index: 1,060.27

EPS (Net) 2009A 2010E 2011E

Q1 $1,100 $1,390A $1,488

Q2 1,147 1,319 1,437

Q3 1,325 1,459 1,564Q4 1,306 1,518 1,608

FY Dec $4,878A $5,685 $6,097

P/E 24.6x 21.1x 19.7x

Revenue (Net) 2009A 2010E 2011E

FY Dec $112.49B$121.91B$125.19B

Q2 Q3 Q1 Q2 Q360,000

75,000

90,000

105,000

120,000

135,000

2010

1 Year Price History for BRK/A

Created by BlueMatrix


http://slidepdf.com/reader/full/brka-080710-stifel-nicolaus 2/11

(1) Economic Pullback Investor and Consumer Expectations Poised for Disappointment: We think the market’s recent 13% pullback anddeteriorating consumer confidence reflect investors’ and consumers’ disillusioned hopes for a robust economicrecovery that looks less likely, primarily because of steadily high unemployment data. Our skepticism stems fromrecent recessions' pattern of slowing employment recovery highlighted in Figure 1.

Figure 1: Employment Recovery Takes Increasingly Longer Each Time

55

57

59

61

63

65

67

69

71

73

75

1 9 7 0 M

1

1 9 7 2 M

1

1 9 7 4 M

1

1 9 7 6 M

1

1 9 7 8 M

1

1 9 8 0 M

1

1 9 8 2 M

1

1 9 8 4 M

1

1 9 8 6 M

1

1 9 8 8 M

1

1 9 9 0 M

1

1 9 9 2 M

1

1 9 9 4 M

1

1 9 9 6 M

1

1 9 9 8 M

1

2 0 0 0 M

1

2 0 0 2 M

1

2 0 0 4 M

1

2 0 0 6 M

1

2 0 0 8 M

1

2 0 1 0 M

1

2 0 1 2 M

1 E

E m p l o y m e n t R a t i o

$10

$100

$1,000

$10,000

S P X

( L o g S c a l e )

Employment to Population Ratio (12MMA) SPX Price

?

Source: FactSet Research and BLS, Stifel Nicolaus analyst Barry Bannister’s format

Figure 2 traces the employment headcount trajectory for the current and recent recessions (i.e., headcounts indexedto the point of initial employment decline), which illustrates the severity of the current employment environment, and thelikely protracted recovery timeline.

Figure 2: Employment Recovery Trajectories during Past Recessions

93%

94%

95%

96%

97%

98%

99%

100%

101%

1 3 5 7 9 1 1 13 1 5 1 7 19 2 1 2 3 25 2 7 2 9 31 3 3 3 5 37 3 9 4 1 43 4 5 4 7 49 51

Months Since Recession Start

2008

2001

1990

1981

1974

1970

2001

Current excl. census

1970 1974 1981 1991

Source: BLS, Stifel Nicolaus analyst Michael Widner’s Format

Berkshire Hathaway Inc. (BRK.A) July 8, 2010



Given that we think the current employment situation will take longer than most consumers and many investors areexpecting, consumer confidence will probably suffer as expectations reconcile with reality. Figure 3 tracks the inverserelationship between unemployment and consumer confidence.

Figure 3: Slower-than-Expected Employment Recovery Likely to Drag on Consumer Confidence

3%

5%

7%

9%

11%

13%

J u n - 8 0

J u n - 8 2

J u n - 8 4

J u n - 8 6

J u n - 8 8

J u n - 9 0

J u n - 9 2

J u n - 9 4

J u n - 9 6

J u n - 9 8

J u n - 0 0

J u n - 0 2

J u n - 0 4

J u n - 0 6

J u n - 0 8 U

n e m p l o y m e n t R a

t e ( S A )

-4%

-2%

0%

2%

4%

6%

8%

E x p e n d i t u r e

s

Unemployment Rate Expenditures

Source: BLS and Consumer Conference Board, via FactSet Research, Inc.

In turn, weak consumer confidence tends to go hand-in-hand with weak personal expenditures ( Figure 4), which wouldotherwise be the key to a sustained economic recovery, as the “shot in the arm” of increased government spendingsubsides.

Figure 4: Consumer Confidence and Personal Spending

-4%

-2%

0%

2%

4%

6%

8%

1 9 8 0 M 6

1 9 8 2 M 6

1 9 8 4 M 6

1 9 8 6 M 6

1 9 8 8 M 6

1 9 9 0 M 6

1 9 9 2 M 6

1 9 9 4 M 6

1 9 9 6 M 6

1 9 9 8 M 6

2 0 0 0 M 6

2 0 0 2 M 6

2 0 0 4 M 6

2 0 0 6 M 6

2 0 0 8 M 6

Y / Y

E x p e n d i t u r e s

020406080100120140160

C C I

Personal Consumption Expenditures, (Bil. $, SAAR) CCI

Source: BLS and Consumer Conference Board, via FactSet Research, Inc.

The Chicken and the Egg: We think consumers are waiting for an employment recovery, while the employmentrecovery is waiting on increased consumer spending. We’re concerned government spending won’t provide the samerelative stimulus strength as a temporary proxy for consumer spending this time around, for two reasons. First, eventhough the drop in personal expenditures, and consequently GDP, is much deeper than in other recent recessions, theincrease in government spending is trailing off (Figure 5). Second, we don’t see much political appetite for additionalstimulus spending without either offsetting budget reductions, or at least definitive repayment plans. Although fiscalresponsibility is (temporarily) great for voter support, zero-sum spending initiatives do little to stimulate increasedspending (the recently failed Senate extension of unemployment benefits is a good example of a faltering appetite forincreased stimulus spending, in our view).




Figure 5: Y/Y Personal Consumption and Government Spending (Treasury Outlays)

-15%-10%-5%0%

5%10%15%20%25%30%

2 0 0 5 Q 1

2 0 0 5 Q 2

2 0 0 5 Q 3

2 0 0 5 Q 4

2 0 0 6 Q 1

2 0 0 6 Q 2

2 0 0 6 Q 3

2 0 0 6 Q 4

2 0 0 7 Q 1

2 0 0 7 Q 2

2 0 0 7 Q 3

2 0 0 7 Q 4

2 0 0 8 Q 1

2 0 0 8 Q 2

2 0 0 8 Q 3

2 0 0 8 Q 4

2 0 0 9 Q 1

2 0 0 9 Q 2

2 0 0 9 Q 3

2 0 0 9 Q 4

2 0 1 0 Q 1

Treasury Outlays Personal Consumption & Gross Investment

Source: BLS, Department of Treasury

Further, in no recent recessions have households deleveraged to the same degree (Figure 6) as they have in thisrecession. Even if we were to assume the U.S. government can keep issuing paper at ultra-low rates (in fact, we don’t)

to effectively jump-start the economy, we think consumers won’t take the lead in driving GDP growth, as favorablefinancing terms and a housing bubble likely won't work this time around. We believe consumers' spending growth willslow as they gradually work off the last decade of added leverage (regardless of low interest rates), which we thinkwidens the gap between investors’ expectations and economic reality.

Figure 6: Y/Y Debt Balance Changes

-15%

0%

15%

30%

45%

2 0 0 5 Q 1

2 0 0 5 Q 3

2 0 0 6 Q 1

2 0 0 6 Q 3

2 0 0 7 Q 1

2 0 0 7 Q 3

2 0 0 8 Q 1

2 0 0 8 Q 3

2 0 0 9 Q 1

2 0 0 9 Q 3

2 0 1 0 Q 1

F e d . G o v t . D e b t B a l a n c e

C h

a n g e , Y / Y

-5%

0%

5%

10%

15%

H o u s e h o

l d D e b t B a l a n c e

C h a n g e , Y / Y

Federal Government Households

Source: BLS

The Oil Wild Card: While the U.S. is not directly dependent on Iranian oil, any Iranian/Israeli conflict intensification

could induce a worldwide oil supply shock. We think such a scenario could push real oil prices well above $85 a barrel.Figure 7 illustrates that rising oil prices have foretold recessions, with oil above $85 per barrel leading to particularlydeep recessions (late 70’s and current recession). Rising oil prices deter GDP growth even without a shock, but thesituation could get far worse if geopolitical tensions worsen.




Figure 7: Real Crude Oil Prices vs. GDP Growth

$-

$20

$40

$60$80

$100

$120

$140

$160

J a n - 7 5

J a n - 7 7

J a n - 7 9

J a n - 8 1

J a n - 8 3

J a n - 8 5

J a n - 8 7

J a n - 8 9

J a n - 9 1

J a n - 9 3

J a n - 9 5

J a n - 9 7

J a n - 9 9

J a n - 0 1

J a n - 0 3

J a n - 0 5

J a n - 0 7

-6%

-4%

-2%

0%2%

4%

6%

8%

10%

Real Crude Oil $ per Barrel Real GDP Y/Y%

Source: EIA, and BLS

(2) Double-Dip's Double-Whammy Impact to Book Value We’ve taken our EPS estimates down to $5,685 from $5,764 (2010E) and $6,097 from $6,241 (2011E). Using thesum-of-the-parts calculator built into our model (available for clients to alter per their assumptions), our moreconservative earnings outlook and float-based valuation assumption changes produce an estimated fair value of$104,000 (Table 1) - implying 13% downside from current levels.

Table 1: Sum-of-the-Parts Valuation$ in millions, except per share data

Step Float Valuation Input Result

(1) Estimated "float" (Insurance Float at 3/31/10, Derivative Float at 12/31/09) 69,800.0

(2) After-tax "look-though" investment return on float 7.50%

(3) Projected "look-through" investment growth 2.0%

(4) Risk-free rate (Rf) 3.85%

(5) Beta ( ) 0.90

(6) Equity Risk Premium (ERP) 6.75%

(7) Required rate of return (Rf+ *ERP) 9.93%

(8) "Float" perpetuity = ((1)X(2))/((7)-(4)) 66,057

Operating companies 2011E After-tax Earnings Peer P/E Valuation

GEICO 472 10.0x 4,716

Other insurance/reinsurance (90) 7.0x (629)

Investment income (excluding float) 2,427 15.0x 36,405

Railroads, Utilities and Energy 3,334 12.8x 42,671

Manufacturing, Service and Retailing 1,356 13.0x 17,630

Finance and Financial Products 445 10.0x 4,453

Total valuation, operating companies 7,944 13.2x 105,246Total valuation, float 66,057

Total 171,303

Shares outstanding (est. 2011) 1.651

Valuation, Class A 103,742

Valuation, Class B 69.16

Source: Stifel Nicolaus estimates




In particular, we think that widespread institutional ownership of BRK's Class B shares means that the stock willbehave less like a cult stock, and more like a "normal" stock following earnings beats and misses - in other words, weexpect a much higher 'beta' than in the past.

Given Berkshire’s sizable investment portfolio and derivative positions, many investors use book value as a valuationbasis. In that vein, we adjust Berkshire’s investment portfolio (and book value) for an expected 8% market pullback in2H10. Table 2 includes a +/-10% scale for its equity and derivative portfolios, while we assume its fixed incomeportfolio remains unchanged, reflecting expected sustained low yields.

Table 2: Book Value Impact from Declining Equity Markets$ millions except per share amounts

E qu it y R el ate d I nv est me nt s: 2Q 10E V al ue -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%

Equity securities $51,863 -$5,186 -$4,149 -$3,112 -$2,075 -$1,037 $0 $1,037 $2,075 $3,112 $4,149 $5,186

Derivatives (Assuming no F/X change) -$7,947 -568 -429 -291 -152 -14 0 263 401 540 678 817

GS Warrants 707 -571 -457 -342 -228 -114 0 114 228 342 457 571

Fixed Income (No Price Change):

Fixed Income and Other 60,121 0 0 0 0 0 0 0 0 0 0 0

Total BVPS Impact 112,691 -2,496 -1,987 -1,478 -969 -460 0 558 1,067 1,576 2,085 2,594

Price Change w/ 1.3x P/BVPS -3,245 -2,583 -1,921 -1,260 -598 0 726 1,387 2,049 2,711 3,373

% of Current -2.8% -2.2% -1.7% -1.1% -0.5% 0.0% 0.6% 1.2% 1.8% 2.3% 2.9%

Equity Market Price Change Assumption Range

Base Case

Source: Stifel Nicolaus estimates

(3) Relative Performance Correction We think BRK's 13% outperformance since early June leaves the shares poised for a correction. YTD, the shares haveoutperformed the S&P by about 26%; over the past 20 years, 30% annual outperformance has typically been a turningpoint for a correction (Figure 8). Additionally, while we've speculated that Berkshire should be a perpetual Hold basedon its size and diversification, Figure 8 contradicts this thesis, highlighting that the shares either outperform orunderperform the S&P 500 by at least 10% about 75% of the time.

Figure 8: Annual BRK Relative Performance

-50%-40%-30%-20%-10%

0%10%20%30%

40%50%

1

2 / 3 1 / 1 9 9 1

1

2 / 3 1 / 1 9 9 2

1

2 / 3 1 / 1 9 9 3

1

2 / 3 0 / 1 9 9 4

1

2 / 2 9 / 1 9 9 5

1

2 / 3 1 / 1 9 9 6

1

2 / 3 1 / 1 9 9 7

1

2 / 3 1 / 1 9 9 8

1

2 / 3 1 / 1 9 9 9

1

2 / 2 9 / 2 0 0 0

1

2 / 3 1 / 2 0 0 1

1

2 / 3 1 / 2 0 0 2

1

2 / 3 1 / 2 0 0 3

1

2 / 3 1 / 2 0 0 4

1

2 / 3 0 / 2 0 0 5

1

2 / 2 9 / 2 0 0 6

1

2 / 3 1 / 2 0 0 7

1

2 / 3 1 / 2 0 0 8

1

2 / 3 1 / 2 0 0 9

2 0 0 9 Y T D

R e l a t i v e P e r f o r m a n

c e

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

B R K . A P r i c e

BRK Relative Performance +10% Threshold

-10% Threshold BRK.A Price

75% of Years' Relative Performance > +/- 10%

Source: FactSet Research Systems, Inc.




Table 3 shows Berkshire’s performance vs. the S&P since several key dates. Most recently the shares haveoutperformed the S&P since the beginning of June without much of a catalyst, putting it at risk for a correction, in ourview.

Table 3: Relative Performance from Key Dates

Event Date BRK.A SPX Diff

Start of Relative Outperform ance Resurgence June 7th, 2010 14.2% 0.9% 13.3%

Recent Market High April 23rd, 2010 1.3% -12.9% 14.2%BRK Addition to S&P Announcement January 26th, 2010 17.8% -2.9% 20.8%

Year Ago July 7th, 2009 37.5% 20.3% 17.2%

BRK Bear Market Low March 5th, 2009 65.6% 55.3% 10.3%

Source: FactSet Research Systems, Inc.

Estimate Changes Table 4 includes a summary of our earnings model and estimate changes.

Table 4: Model and Estimate Change Summary($ in millions, except per share data) Previous Estimates % Change

2008 2009 2010E 2011E 2010E 2011E 2010E 2011E

Revenues

Insurance and Other: $95,698 $92,780 $92,572 $93,172 $92,649 $94,118 0% -1%

Utilities and Energy: 13,971 11,443 2 4,448 27,535 24,809 28,217 -1% -2%

Finance and Financial Products: (1,883) 8,270 4,891 4,483 4,907 4,500 0% 0%Total revenues 107,786 112,493 121,910 125,190 1 22,365 126,835 0% -1%

Cost and expenses

Insurance and Other: 85,044 87,219 82,531 84,290 82,515 85,052 0% -1%

Utilities and Energy: 11,008 9,915 2 0,175 22,406 20,432 22,899 -1% -2%

Finance and Financial Products: 4,160 3,807 3,759 3,765 3,774 3 ,780 0% 0%

Total Costs and Expenses 100,212 100,941 106,465 1 10,461 106,721 111,731 0% -1%

Pretax operating income 15,035 10,765 13,716 14,729 13,915 15,104 -1% -2%

Income tax on operating income 4,794 2,812 3,698 4,242 3,767 4,378 -2% -3%

Minority shareholders' interests 602 386 479 420 479 420 0% 0%

Operating income 9,639 7,567 9,540 10,067 9,669 10,306 -1% -2%

W eighted average common shares outstanding (Class A basis) 1.549 1.551 1.636 1.651 1.636 1.651 0% 0%

Operating EPS $6,223 $4,878 $5,685 $6,097 $5,764 $6,241 -1% - 2%

Non-operating EPS ($2,999) $313 $973 $121 $973 $121 0% 0%

Net EPS $3,224 $5,190 $6,658 $6,218 $ 6,737 $6,363 -1% -2%

Book value per share $70,530 $84,487 $90,883 $96,914 $93,702 $99,871 -3% -3%

TTM Operating ROE 6.5% 6.5% 6.4% 6.5% 6.4% 6.5% 1% 1%

TTM Net ROE 6.9% 6.9% 7.5% 6 .6% 7.5% 6.6% 1% 1%

Source: Company reports and Stifel Nicolaus estimates

Consistent with our unenthusiastic 2H10 outlook, and slower anticipated 2011 economic growth, we’ve adjusted ourestimates for many of Berkshire’s non-insurance subsidiaries' revenues and earnings. While its insurance businessesare typically more insulated from macroeconomic fluctuation, recent reserve release increases (Figure 9) are probablyunsustainable (reserve redundancies tend to fade as soft markets persist), leading to additional earnings pressure asreserve releases slow.




Figure 9: Recent Reserve Releases Likely to Decelerate as Soft Market Persists$ in millions

a a a a a a a a a a a a
























(229)

60 20

1,453

(126)(20)

(296)

(96)

(287)

193

55 46

1,026

(88)(196)

(1,270)

(314)

(11)

(211)(204)(205)

(388)

(204)

(391)(418)(311)

(139)

(587)

(449)(502)

(163)

(406)

(892)

(1,500)

(1,000)

(500)

0

500

1,000

1,500

2,000

1 Q

0 2

2 Q

0 2

3 Q

0 2

4 Q

0 2

1 Q

0 3

2 Q

0 3

3 Q

0 3

4 Q

0 3

1 Q

0 4

2 Q

0 4

3 Q

0 4

4 Q

0 4

1 Q

0 5

2 Q

0 5

3 Q

0 5

4 Q

0 5

1 Q

0 6

2 Q

0 6

3 Q

0 6

4 Q

0 6

1 Q

0 7

2 Q

0 7

3 Q

0 7

4 Q

0 7

1 Q

0 8

2 Q

0 8

3 Q

0 8

4 Q

0 8

1 Q

0 9

2 Q

0 9

3 Q

0 9

4 Q

0 9

1 Q

1 0

Source: Highline data and Stifel Nicolaus analysis

Company Description

Berkshire Hathaway Inc. is the holding company of a diverse group of businesses including personal and commercialinsurance and reinsurance, energy generation, transmission, and distribution, consumer and commercial lending, andan extensive array of manufacturing, retail, and service businesses. Its primary strategy is to grow earnings throughacquisitions.




Important Disclosures and Certifications

I, Meyer Shields, certify that the views expressed in this research report accurately reflect my personal viewsabout the subject securities or issuers; and I, Meyer Shields, certify that no part of my compensation was, is,or will be directly or indirectly related to the specific recommendation or views contained in this researchreport.

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q350,000

75,000

100,000

125,000

150,000

175,000

2008 2009 2010

10/01/09I:H:NA

Rating and Price Target History for: Berkshire Hathaway Inc. (BRK/A) as of 07-02-2010

Created by BlueMatrix

Rating Key

B - Buy UR - Under Review

H - Hold NR - No Rating

S - Sell NA - Not Applicable

I - Initiation RS - Rating Suspended

D - Dropped

For a price chart with our ratings and target price changes for BRK.A go tohttp://sf.bluematrix.com/bluematrix/Disclosure?ticker=BRK.A

Stifel, Nicolaus & Company, Inc.'s research analysts receive compensation that is based upon (among other factors)Stifel Nicolaus' overall investment banking revenues.

Our investment rating system is three tiered, defined as follows:

BUY -We expect this stock to outperform the S&P 500 by more than 10% over the next 12 months. For higher-yieldingequities such as REITs and Utilities, we expect a total return in excess of 12% over the next 12 months.

HOLD -We expect this stock to perform within 10% (plus or minus) of the S&P 500 over the next 12 months. A Holdrating is also used for those higher-yielding securities where we are comfortable with the safety of the dividend, butbelieve that upside in the share price is limited.

SELL -We expect this stock to underperform the S&P 500 by more than 10% over the next 12 months and believe thestock could decline in value.

Of the securities we rate, 43% are rated Buy, 54% are rated Hold, and 3% are rated Sell.

Within the last 12 months, Stifel, Nicolaus & Company, Inc. or an af filiate has provided investment banking services for 17%, 11% and 8% of the companies whose shares are rated Buy, Hold and Sell, respectively.

Additional Disclosures

Please visit the Research Page at www.stifel.com for the current research disclosures applicable to the companiesmentioned in this publication that are within Stifel Nicolaus' coverage universe. For a discussion of risks to target priceplease see our stand-alone company reports and notes for all Buy-rated stocks.

The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by usand is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell anysecurities referred to herein. Opinions expressed are subject to change without notice and do not take into account the


http://sf.bluematrix.com/bluematrix/Disclosure?ticker=BRK.A

http://sf.bluematrix.com/bluematrix/Disclosure?ticker=BRK.A



particular investment objectives, financial situation or needs of individual investors. Employees of Stifel, Nicolaus &Company, Inc. or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategiesthat differ from the opinions expressed within. Past performance should not and cannot be viewed as an indicator of future performance.

Stifel, Nicolaus & Company, Inc. is a multi-disciplined financial services firm that regularly seeks investment bankingassignments and compensation from issuers for services including, but not limited to, acting as an underwriter in anoffering or financial advisor in a merger or acquisition, or serving as a placement agent in private transactions.Moreover, Stifel Nicolaus and its affiliates and their respective shareholders, directors, officers and/or employees, mayfrom time to time have long or short positions in such securities or in options or other derivative instruments basedthereon.These materials have been approved by Stifel Nicolaus Limited, authorized and regulated by the FinancialServices Authority (UK), in connection with its distribution to professional clients and eligible counterparties in theEuropean Economic Area. (Stifel Nicolaus Limited home office: London +44 20 7557 6030.) No investments or services mentioned are available in the European Economic Area to retail clients or to anyone in Canada other than aDesignated Institution. This investment research report is classified as objective for the purposes of the FSA rules.Please contact a Stifel Nicolaus entity in your jurisdiction if you require additional information.

The use of information or data in this research report provided by or derived from Standard & Poor’s FinancialServices, LLC is © 2010, Standard & Poor’s Financial Services, LLC (“S&P”). Reproduction of Compustat data and/or information in any form is prohibited except with the prior written permission of S&P. Because of the possibility of human or mechanical error by S&P’s sources, S&P or others, S&P does not guarantee the accuracy, adequacy,completeness or availability of any information and is not responsible for any errors or omissions or for the resultsobtained from the use of such information. S&P GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT

NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ORUSE. In no event shall S&P be liable for any indirect, special or consequential damages in connection with subscriber’sor others’ use of Compustat data and/or information. For recipient’s internal use only.

Additional Information Is Available Upon Request

© 2010 Stifel, Nicolaus & Company, Inc. One South Street Baltimore, MD 21202. All rights reserved.


brka 080710 - stifel nicolaus

Documents