Industrial Sector Research Monthly Update on Key End Markets

Industrial
Sector Research
The Industrial Cycle:

Monthly Update on Key End Markets
May 2010
Steve Barger Jeffrey D. Hammond Anthony Kure Matt J. Summerville

(216) 689-0210 (216) 689-0236 (216) 689-0339 (216) 689-0282
sbarger@keybanccm.com jhammond@keybanccm.com akure@keybanccm.com msummerville@keybanccm.com
Joe Box Joshua C. Pokrzywinski Joseph K. Radigan

(216) 689-0283 (216) 689-0351 (216) 689-0355
jbox@keybanccm.com jpokrzywinski@keybanccm.com jradigan@keybanccm.com
Important disclosures for the companies

mentioned in this report can be found at
https://key.bluematrix.com/bluematrix/Disclosure.
KeyBanc Capital Markets Inc.,

Member NYSE/FINRA/SIPC
KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC
Equity Research
Contents
EXECUTIVE SUMMARY......................................................................................................................................3
SECTION 1. END MARKET AND MACROECONOMIC DATA..........................................................................4
SECTION 2. CALENDAR, COMMODITIES AND CURRENCY..........................................................................7
SECTION 3. END MARKET DISCUSSIONS ....................................................................................................11
COMMERCIAL AEROSPACE .......................................................................................................................................... 11
AGRICULTURE ................................................................................................................................................................ 13
AUTOMOTIVE .................................................................................................................................................................. 14
CONSTRUCTION (NON-RESIDENTIAL)......................................................................................................................... 15
CONSTRUCTION (RESIDENTIAL).................................................................................................................................. 17
CONSTRUCTION EQUIPMENT ...................................................................................................................................... 19
GENERAL INDUSTRIAL .................................................................................................................................................. 20
OIL & GAS ........................................................................................................................................................................ 22
SEMICONDUCTOR.......................................................................................................................................................... 23
MEDIUM/HEAVY-DUTY TRUCK...................................................................................................................................... 24
SECTION 4. MONTHLY ORDERS....................................................................................................................28
SECTION 5. END MARKET AND GEOGRAPHIC BREAKDOWNS BY COMPANY.......................................32
Reg A/C Certification

The research analyst(s) responsible for the preparation of this research report certifies that:(1) all the views expressed in this research report accurately
reflect the research analyst's personal views about any and all of the subject securities or issuers; and (2) no part of the research analyst's
compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this
research report.
Rating System:
BUY - The security is expected to outperform the market over the next six to 12 months; investors should consider adding the security to their holdings
opportunistically, subject to their overall diversification requirements.
HOLD - The security is expected to perform in line with general market indices over the next six to 12 months; no buy or sell action is recommended at
this time.
UNDERWEIGHT - The security is expected to underperform the market over the next six to 12 months; investors should reduce their holdings
opportunistically.
The information contained in this report is based on sources considered to be reliable but is not represented to be complete and its accuracy is not
guaranteed. The opinions expressed reflect the judgment of the author as of the date of publication and are subject to change without notice. This
report does not constitute an offer to sell or a solicitation of an offer to buy any securities. Our company policy prohibits research analysts and members
of their families from owning securities of any company followed by that analyst, unless otherwise disclosed. Our officers, directors, shareholders and
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Page 2 of 53
May 2010
Equity Research
The Industrial Cycle: Monthly Update on Key End Markets

MAY 2010
Steve Barger: (216) 689-0210 — sbarger@keybanccm.com Joe Box: (216) 689-0283 — jbox@keybanccm.com
Jeffrey D. Hammond: (216) 689-0236 — jhammond@keybanccm.com Joshua Pokrzywinski: (216) 689-0351 — jpokrzywinski@keybanccm.com
Anthony Kure: (216) 689-0339 — akure@keybanccm.com Joseph K. Radigan: (216) 689-0355 — jradigan@keybanccm.com
Matt J. Summerville: (216) 689-0282 — msummerville@keybanccm.com
EXECUTIVE SUMMARY
Industrial End Market Monthly – Macro Trends and Quarterly Earnings Solidify an Early Recovery Is Underway; 1Q10 Earnings
Reports Dampened by Rosy Investor Expectations; Expanding Valuations Warrant Additional Stock Selection; Recommend
Low Visibility Names with Improving Leading Indicators and Favorable Valuation, Strong Execution/Acquisition Stories and
Names with Positive Geographic Exposure
When Good Is Just Not Good Enough

While many of our industrial names experienced a solid EPS rebound in 1Q10, when quarterly results came to light, investors did not
necessarily share the love. For our names that have reported through May 6, the median earnings surprise relative to consensus was
+13%. In most other situations, we would expect for this earnings delta to be favorably received by investors. However, given the rally
that transpired from early February through late April (Dow up 11.1% from February 8 through April 30), we believe stock valuations
appropriately discounted the strong 1Q10 earnings recovery and the expectation for a more favorable management outlook. Generally
speaking, we found that not only was an earnings beat needed, but also a healthy guidance increase and/or management commentary
that suggested a more rapid earnings recovery than previously expected. For stocks like IDEX Corporation (IEX-NYSE), Lennox
International Inc. (LII-NYSE), Oshkosh Corporation (OSK-NYSE) and Westinghouse Air Brake Technologies Corporation (WAB-NYSE),
even a beat and positive commentary was not enough to get a positive reaction in the shares.
Optimistic on the Recovery Prospects, Realistic About Several Headwinds

In our view, there are a number of headwinds that could slow the pace of earnings recovery. That uncertainty could be one of the
factors driving management teams to err on the conservative side when providing forward-looking guidance. These headwinds include
rising raw material input costs and a strengthening U.S. dollar. While we do not believe these headwinds will derail the recovery story,
we believe some companies with significant raw material exposure and/or U.S. dollar exposure may lag other industrial names. With
respect to raw materials, the pace of several key manufacturing inputs has experienced considerable upside since respective troughs in
early 2009 (late 2008 for crude/copper). Specifically, copper spot pricing increased 5.8% per month since its trough. That considerably
outpaces the 1.5% monthly rate of growth during the early expansion phase in 2002-2003. Similarly, crude oil and hot-rolled steel are
up a respective 5.0% and 2.0% per month over the last 15-month period, relative to a respective 1.9% and 1.6% monthly CAGR for the
2002-2003 cycle. With respect to the U.S. dollar relative to the Euro, firms will be going from roughly a 6% tailwind in 1Q10 to a 2%
headwind in 2Q10 (based on the average through April 2010). While we reiterate our view that these factors are not likely to derail the
economic recovery, their addition to forward guidance could lower optimistic Street expectations for some companies.
Highlighted Names
Given our optimistic view on macro prospects in conjunction with some valuation-related concerns, our top picks remain names that are
trading at a deep discount to normalized or out year earnings, including Terex Corporation (TEX-NYSE; BUY, $30 price target), Trinity
Industries, Inc. (TRN-NYSE; BUY, $28 price target) and Federal Signal Corporation (FSS-NYSE; BUY, $11 price target). We also
continue to recommend higher quality, less cyclical multi-industry names possessing execution track records, exposures to markets
with secular growth prospects, solid FCF generation through a cycle (not just being able to temporarily generate substantial FCF during
a downturn due to temporary working capital reductions) and strong balance sheets that largely self-fund their respective acquisition
strategies. Along these lines, we remain favorably disposed toward AMETEK, Inc. (AME-NYSE; BUY, $50 price target), Danaher
Corporation (DHR-NYSE; BUY, $96 price target), ITT Corporation (ITT-NYSE; BUY $62 price target), Roper Industries, Inc. (ROP-
NYSE; BUY, $69 price target) and Westinghouse Air Brake Technologies Corporation (WAB-NYSE; BUY, $54 price target). As a result
of the significant leverage to positive international fundamentals, we are also favorable on Bucyrus International, Inc. (BUCY-NASDAQ;
BUY, $82 price target). Additionally, we are positive on Regal-Beloit Corporation (RBC-NYSE; BUY, $83 price target) based on a strong
operating culture and leverage to an HVAC recovery (as well as secular trends toward high efficiency). Also, as volumes stabilize and
attention shifts toward names that have internal catalysts, we are favorably biased toward Ingersoll-Rand plc (IR-NYSE; BUY, $45 price
target).
Industrial Group Stock Performance Scorecard. For the month of April, our group of recommended stocks posted a 7.7% gain, as
compared to the 1.5%, 4.2% and 5.6% returns for the S&P 500, S&P Midcap Index and the Russell 2000, respectively. Our
recommended names outperformed their peer group, the S&P Industrials, which increased 5.2% for the month. The recommended
names that performed the best in March were TriMas Corporation (TRS-NYSE; BUY, $13 price target; +58%) and Applied Industrial
Technologies, Inc. (AIT-NYSE; HOLD; +24%).
Page 3 of 53
May 2010
Equity Research
SECTION 1. END MARKET AND MACROECONOMIC DATA

CHART 1. TRACKING THE END MARKET CYCLES – WHERE DO WE STAND TODAY?
¦ Non-Cyclical Semicon ductor

Equipment Pea k
¦ Early-Cycle Growth
Auto motive
¦ Mid-Cycle
S teel
¦ Late-Cycle
G ener al Indus tr ial
H eavy Truck
Acceleratin g
Decel erat ing M ilitar y/D efense
Res id ential Cons truction Growth Growth
A g Equ ipment
Accelerati ng Decelera ting
Decl ine Decli ne O il & G as
Water / Wastew ater
M ining Equipment Accelerating D ecline to T ro ugh :
Cons truction Machiner y (Light) Chemicals
Co mm’l Aeros pace (Aftermkt) Troug h to D ecelerating Declin e:
Trou gh Decline C onstructio n Machinery (Heavy) Commer cial A erosp ace O EM
C omm’l Aeros pace (OE M)
Non- Res . Con struction
Pow er G eneration
C hemicals
Page 4 of 53
May 2010
Equity Research
TABLE 1. END MARKET AND MACROECONOMIC DATA
Macroeconomic 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 Jan-10 Feb-10 Mar-10 1Q10
Leading Economic Indicators Index: 1996=100 - - 86.3 84.7 88.9 93.4 100.0 102.7 104.0 103.7 101.5 98.4 100.4 103.3 105.9 102.0 107.7 108.1 109.6 105.9
Leading Economic Indicators (%, YOY Chg) - - 196.5% -0.1% 4.9% 5.1% 7.1% 2.7% 1.3% -0.4% -2.1% -4.3% -2.2% 2.1% 6.5% 0.5% 9.0% 10.0% 11.7% 7.6%
Industrial Production Index: 1997=100 94.9 99.3 103.5 99.9 100.0 100.6 104.7 108.0 112.1 111.4 109.1 99.1 96.4 98.0 99.6 98.3 101.2 101.5 101.6 99.6
Industrial Production (%, YOY Chg) 4.2% 5.1% 2.1% -5.3% 2.3% 1.5% 4.3% 3.0% 2.7% -0.1% -6.9% -11.6% -13.4% -9.9% -4.6% -4.6% 1.0% 2.2% 4.0% 0.5%
Capacity Utilization (%) 82.7% 81.9% 81.8% 76.3% 75.1% 75.7% 78.6% 80.2% 81.7% 81.5% 78.0% 70.4% 68.7% 70.0% 71.4% 70.1% 72.7% 73.0% 73.2% 71.4%
ISM PMI Index Index 50.2 54.6 51.7 43.9 52.4 53.3 60.5 55.5 53.9 51.1 45.6 35.9 42.6 51.5 54.7 46.2 58.4 56.5 59.6 54.7
ISM PMI New Orders Index Index 51.8 57.9 52.0 46.2 56.6 57.7 63.5 57.4 55.4 54.5 42.2 35.8 49.2 60.3 61.2 51.6 65.9 59.5 61.5 61.2
Unemployment Rate (%, SA) 4.5% 4.2% 4.0% 4.8% 5.8% 6.0% 5.5% 5.1% 4.6% 4.6% 5.8% 8.1% 9.3% 9.6% 10.1% 9.3% 9.7% 9.7% 9.7% 10.1%
Employment Overtime (NSA, hours) 4.5 4.7 4.0 3.8 4.2 4.5 4.5 4.5 4.2 4.0 3.0 2.1 2.9 3.0 2.7 2.7 2.8 2.8 2.9 2.7
Fed Funds Target Rate (%) 4.75% 5.50% 6.50% 1.75% 1.25% 1.00% 2.25% 4.25% 5.25% 4.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Consumer Price Index (SA, 1982-1984=100) 163.0 166.6 172.2 177.0 179.9 184.0 188.9 195.3 201.6 207.4 215.3 212.6 213.3 215.2 216.8 214.5 217.6 217.6 217.7 216.8
Consumer Price Index (%, YOY Chg) 1.5% 2.2% 3.4% 2.8% 1.6% 2.3% 2.7% 3.4% 3.2% 2.9% 3.8% -0.1% -1.0% -1.7% 1.4% -0.4% 0.2% 0.0% 0.1% 2.0%
Durable Goods Orders ($ bil., NSA) 2,138 2,254 2,322 2,097 2,073 2,060 2,192 2,390 2,560 2,595 2,459 480 484 500 506 1,970 177 179 177 506
Durable Goods Orders (%, YOY Chg) 3.5% 9.5% -4.6% -10.6% -0.9% 6.8% 6.4% 14.1% 2.9% 1.0% -23.1% -26.6% -25.7% -18.7% -1.3% -1.3% 11.1% 10.1% 11.6% -1.3%
Inventory/Sales (Ratio) 1.43 1.40 1.41 1.43 1.38 1.35 1.30 1.28 1.27 1.27 1.30 1.45 1.41 1.33 1.28 1.37 1.27 1.27 NA 1.28
U of M Consumer Sentiment Index: 1967=100 104.6 105.8 107.6 89.2 89.6 87.6 95.5 88.6 87.3 85.6 63.8 58.3 68.2 68.4 70.2 66.3 74.4 73.6 73.6 70.2
Italian Business Confidence Index: 2000=100 90.3 89.7 100.0 89.3 90.1 88.0 89.5 88.3 95.8 94.3 82.8 64.3 68.5 74.1 79.9 71.7 83.0 84.0 84.4 79.9
German Business Climate Index: 2000=100 97.7 95.7 100.0 92.2 89.6 91.8 95.5 95.6 105.5 106.2 96.8 82.6 84.7 89.8 93.5 87.7 95.9 95.3 98.2 93.5
Euro Manufacturing PMI Index - - - - 49.8 49.3 53.1 51.2 56.4 54.3 46.5 33.9 40.0 47.9 51.2 43.3 52.4 54.2 56.6 51.2
Aerospace 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 Jan-10 Feb-10 Mar-10 1Q10
Rev. Pass. Miles, Domestic (units) 427.6 446.6 474.6 446.3 436.0 439.1 474.5 487.0 485.8 488.3 480.0 104.8 117.9 121.4 108.5 452.6 33.8 31.1 39.8 104.7
Rev. Pass. Miles, Domestic (%, YOY Chg) 2.3% 4.4% 6.3% -6.0% -2.3% 0.7% 8.1% 2.6% -0.2% 0.5% -1.7% -9.6% -8.0% -3.9% -0.9% -5.7% 0.9% -2.7% 1.2% -0.1%
Avail. Seat Miles, Domestic (units) 604.8 644.8 662.4 642.2 614.1 598.6 630.4 624.1 608.1 604.4 594.1 135.0 140.9 142.9 133.8 552.6 44.5 39.7 47.3 131.5
Avail. Seat Miles, Domestic (%, YOY Chg) 0.8% 6.6% 2.7% -3.0% -4.4% -2.5% 5.3% -1.0% -2.6% -0.6% -1.7% 153.8% 168.1% 213.2% 187.6% -7.0% -1.8% -5.0% -1.3% 174.4%
Load Factor, Domestic (%) 70.7% 69.3% 71.7% 69.5% 71.0% 73.3% 75.3% 78.0% 79.9% 80.8% 80.8% 77.6% 83.7% 85.0% 81.1% 81.9% 76.0% 78.2% 84.3% 79.6%
Rev. Pass. Miles, Int'l (units) 160.2 169.3 183.1 170.2 165.0 156.0 180.1 196.3 206.8 219.2 227.0 47.5 55.7 61.5 50.6 215.2 17.0 14.1 18.1 49.2
Rev. Pass. Miles, Int'l (%, YOY Chg) 1.6% 5.7% 8.1% -7.0% -3.1% -5.5% 15.5% 9.0% 5.4% 6.0% 3.5% -10.2% -6.8% -2.0% -2.1% -5.2% 1.3% 2.9% 6.3% 3.6%
Avail. Seat Miles, Int'l (units) 219.8 227.2 240.5 233.4 215.6 203.3 227.2 246.3 257.9 271.8 285.4 65.5 70.5 73.3 62.3 271.6 21.9 19.0 22.3 63.1
Avail. Seat Miles, Int'l (%, YOY Chg) 3.4% 3.3% 5.9% -3.0% -7.6% -5.7% 11.7% 8.4% 4.7% 5.4% 5.0% 177.3% 178.2% -3.9% -7.1% -4.8% -4.1% -5.5% -1.4% -3.6%
Load Factor, Int'l (%) 72.9% 74.5% 76.1% 72.9% 76.5% 76.7% 79.3% 79.7% 80.2% 80.7% 79.5% 72.6% 79.0% 83.9% 81.1% 79.3% 77.8% 74.4% 81.2% 78.0%
New Orders Aero Equip ($, NSA, bil.) 124.4 125.9 162.0 116.3 115.5 100.9 119.5 197.6 203.7 233.5 182.6 28.5 27.7 34.6 30.8 121.6 14.3 15.3 8.8 30.8
New Orders Aero Equip (%, AR, YOY Chg) 0.2% 1.2% 28.7% -28.2% -0.6% -12.7% 18.5% 65.2% 3.1% 14.6% -21.8% -51.0% -41.0% -21.8% -7.3% -33.4% 86.1% 74.1% -26.7% 8.4%
Boeing Orders (units) 630 370 608 329 251 250 277 1,031 1,058 1,425 668 (5) 26 66 55 142 10 47 43 55
Airbus Orders (units) 642 406 468 375 300 284 370 1,111 818 1,458 777 3 65 55 148 271 11 - 49 148
Boeing Deliveries (units) 564 622 491 527 381 281 285 290 398 441 375 121 125 113 122 481 28 37 43 122
Airbus Deliveries (units) 227 299 308 325 303 305 320 378 425 453 483 116 138 104 140 498 29 38 55 140
Automotive 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 Jan-10 Feb-10 Mar-10 1Q10
North American Auto Production (units, 000s) 15,551 17,035 17,166 15,483 16,370 15,874 15,754 15,753 15,252 15,021 12,579 1,678 1,773 2,346 2,761 8,557 NA NA NA 2,895
North American Auto Production (%, YOY Chg) -0.5% 13.2% 0.3% -10.4% 5.7% -3.0% -0.8% 0.0% -3.2% -1.5% -16.3% -51.9% -49.0% -20.9% 3.3% -32.0% NA NA NA 72.5%
Agriculture 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 Jan-10 Feb-10 Mar-10 1Q10
2-4 WD Trac. & Comb. Sales (units, 000s) 147.1 144.9 158.6 172.2 172.4 207.8 235.1 233.3 223.5 225.6 203.4 32.0 56.7 42.3 33.9 165.0 9.3 8.6 15.1 33.9
2-4 WD Trac. & Comb. Sales (%, AR, YOY Chg) 6.5% -1.5% 9.4% 8.6% 0.1% 20.5% 13.2% -0.8% -4.2% 1.0% -9.9% -18.7% -21.3% -16.1% -18.1% -18.9% 4.5% -6.2% 7.4% 5.9%
Construction 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 Jan-10 Feb-10 Mar-10 1Q10
Housing Starts (units, SAAR, 000s) 1,617 1,641 1,569 1,603 1,607 1,848 1,956 2,068 1,811 1,343 903 528 540 587 559 553 609 616 626 559
Housing Starts (%, YOY Chg) 9.7% 1.5% -4.4% 2.2% 0.2% 15.0% 5.9% 5.8% -12.4% -25.8% -32.7% -49.9% -47.3% -33.0% -15.4% -16.2% 24.8% 7.3% 20.2% 5.9%
Existing Home Sales (units, SAAR, mil.) 4.49 4.63 4.61 4.72 5.00 5.43 5.91 6.18 5.71 4.96 4.34 4.13 4.25 4.65 5.23 4.57 4.43 4.36 4.68 5.23
Existing Home Sales (%, YOY Chg) 13.1% 3.0% -0.4% 2.5% 5.8% 8.6% 9.0% 4.5% -7.7% -13.1% -12.4% -5.3% -1.8% 4.8% 23.6% 7.9% 8.6% 4.1% 13.3% 26.6%
30-Year Fixed Mortgage Rate (%) 6.95% 7.43% 8.06% 6.97% 6.54% 5.82% 5.84% 5.87% 6.41% 6.34% 6.04% 5.06% 5.03% 5.16% 4.92% 5.04% 5.03% 4.99% 4.97% 4.92%
Non-Residential Construction (1996$, SAAR, bil.) 236.8 249.4 275.0 274.2 238.4 229.3 238.1 256.7 298.3 356.8 410.8 398.9 394.1 359.6 325.4 369.5 305.5 301.1 299.0 325.4
Non-Residential Construction (%, SAAR, YOY Chg) 10.9% 5.3% 10.3% -0.3% -13.0% -3.8% 3.8% 7.8% 16.2% 19.6% 15.1% 1.5% -5.2% -14.4% -21.5% -10.1% -22.7% -24.8% -25.5% -18.4%
Construction Put In Place (1996$, SAAR, bil.) 705.6 768.6 832.2 863.6 872.9 920.1 1,021.2 1,130.6 1,170.2 1,138.2 1,075.1 970.5 958.3 923.4 898.2 937.6 863.5 845.5 847.3 898.2
Construction Put In Place (%, SAAR, YOY Chg) 7.6% 8.9% 8.3% 3.8% 1.1% 5.4% 11.0% 10.7% 3.5% -2.7% -5.5% -10.5% -11.9% -14.7% -14.2% -10.4% -11.4% -12.9% -12.3% -7.5%
F.W. Dodge Index Index 100 102 105 118 127 139 132 108 90 83 82 84 90 90 89 92 92 90
Page 5 of 53
May 2010
Equity Research
TABLE 2. END MARKET AND MACROECONOMIC DATA (CONTINUED)

Oil & Gas 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 Jan-10 Feb-10 Mar-10 1Q10
Baker & Hughes US Rig Count (units) 653 798 1,097 901 837 1,114 1,246 1,470 1,718 1,811 1,782 1,105 895 1,009 1,172 1,172 1,267 1,350 1,419 1,172
Baker & Hughes US Rig Count (%, YOY Chg) -35.4% 22.2% 37.5% -17.9% -7.1% 33.1% 11.8% 18.0% 16.9% 5.4% -1.6% -38.5% -52.9% -49.9% -34.2% -34.2% -18.4% 2.3% 28.4% 6.1%
Baker & Hughes Canada Rig Count (units) 248 385 410 264 348 417 440 575 456 360 361 196 125 208 313 313 459 564 386 313
Baker & Hughes Canada Rig Count (%, YOY Chg) -49.0% 55.2% 6.5% -35.6% 31.8% 19.8% 5.5% 30.7% -20.7% -21.1% 0.3% -52.0% -53.0% -52.2% -13.3% -13.3% 21.8% 36.6% 96.9% 59.7%
Baker & Hughes Int'l Rig Count (units) 671 574 705 752 753 803 869 891 951 1,036 1,078 1,012 967 986 1,024 1,024 1,047 1,068 1,074 1,024
Baker & Hughes Int'l Rig Count (%, YOY Chg) -18.1% -14.5% 22.8% 6.7% 0.1% 6.6% 8.2% 2.5% 6.7% 8.9% 4.1% -4.0% -12.3% -11.0% -5.0% -5.0% 0.3% 4.7% 6.1% 1.2%
Semiconductor 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 Jan-10 Feb-10 Mar-10 1Q10
Semi Billings: WW (units, 000s) 125,680 145,330 200,590 147,170 138,360 162,430 210,470 225,530 245,910 255,030 256,120 44,192 49,575 57,862 66,903 218,531 22,318 22,042 23,060 66,903
Semi Billings: WW (%, YOY Chg) -8.2% 15.6% 38.0% -26.6% -6.0% 17.4% 29.6% 7.2% 9.0% 3.7% 0.4% -29.7% -23.3% -14.7% 10.2% 259.9% 45.5% 56.2% 56.4% 51.4%
Semi Billings: Americas (units, 000s) 41,590 46,340 62,500 39,205 31,200 31,770 38,920 40,120 44,930 42,480 39,320 7,585 8,338 9,790 11,367 37,080 3,748 3,616 3,817 11,367
Semi Billings: Americas (%, YOY Chg) -8.7% 11.4% 34.9% -37.3% -20.4% 1.8% 22.5% 3.1% 12.0% -5.5% -7.4% -24.7% -19.7% -0.9% 26.4% 312.5% 47.3% 48.2% 46.8% 49.9%
Semi Billings: Europe (units, 000s) 29,310 31,340 41,630 31,755 27,460 34,820 38,890 39,590 39,630 40,950 39,750 6,573 6,564 7,340 8,758 29,235 2,930 2,879 3,084 8,758
Semi Billings: Europe (%, YOY Chg) 1.7% 6.9% 32.8% -23.7% -13.5% 26.8% 11.7% 1.8% 0.1% 3.3% -2.9% -34.9% -35.6% -28.9% -4.2% 219.9% 29.0% 36.4% 40.8% 33.2%
Semi Billings: Japan (units, 000s) 26,070 31,740 45,800 35,360 29,820 37,810 45,440 44,340 46,480 48,490 49,470 8,541 8,311 10,199 11,186 38,238 3,474 3,435 3,593 11,186
Semi Billings: Japan (%, YOY Chg) -19.7% 21.7% 44.3% -22.8% -15.7% 26.8% 20.2% -2.4% 4.8% 4.3% 2.0% -30.6% -33.7% -19.1% -7.1% 217.6% 7.5% 23.6% 42.0% 31.0%
Semi Billings: Asia Pacific (units, 000s) 28,710 35,920 50,660 40,830 49,870 61,070 87,200 101,500 105,880 123,100 127,540 21,492 26,363 30,533 35,591 113,979 12,167 12,111 12,566 35,591
Semi Billings: Asia Pacific (%, YOY Chg) -4.4% 25.1% 41.0% -19.4% 22.1% 22.5% 42.8% 16.4% 4.3% 16.3% 3.6% -29.2% -16.4% -12.9% 16.5% 273.0% 66.8% 78.6% 69.4% 65.6%
Sources: Airbus, Airline Transport Association, Baker Hughes, Baseline, Bloomberg, Boeing Company, Equipment Manufacturers Institute, ACT Research, Association for Manufacturing Technology, SEMI, Infrastructure
Page 6 of 53
May 2010
Equity Research
SECTION 2. CALENDAR, COMMODITIES AND CURRENCY

UPCOMING EVENTS: MAY 3, 2010 – JUNE 11, 2010
MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY

May 3, 2010 May 4, 2010 May 5, 2010 May 6, 2010 May 7, 2010
8:30 a.m. Initial Claims 8:30 a.m. Unemployment Rate

8:30 a.m. Non-farm Payrolls
8:30 a.m. Initial Claims 8:30 a.m. Retail Sales

9:15 a.m. Capacity Utilization
9:15 a.m. Industrial Production
9:55 a.m. Michigan Sentiment
10:00 a.m. Business Inventories
8:30 a.m. Building Permits 8:30 a.m. CPI 8:30 a.m. Initial Claims
8:30 a.m. Housing Starts 10:00 a.m. Leading Indicators
8:30 a.m. PPI 10:00 a.m. Philadelphia Fed.
10:00 a.m. Existing Home Sales 10:00 a.m. Consumer Confidence 8:30 a.m. Durable Orders 8:30 a.m. Continuing Claims 8:30 a.m. Personal Spending
10:00 a.m. New Home Sales 8:30 a.m. Initial Claims 9:45 a.m. Chicago PMI
May 31, 2010 June 1, 2010 June 2, 2010 June 3, 2010 June 4, 2010
10:00 a.m. Construction Spending 2:00 p.m. Auto Sales 8:30 a.m. Initial Claims 8:30 a.m. Non-farm Payrolls
10:00 a.m. ISM Index 10:00 a.m. Factory Orders 8:30 a.m. Unemployment Rate
June 7, 2010 June 8, 2010 June 9, 2010 June 10, 2010 June 11, 2010
9:15 a.m. Capacity Utilization 2:00 p.m. Fed’s Beige Book 8:30 a.m. Initial Claims 8:30 a.m. Retail Sales
9:15 a.m. Industrial Production 9:55 a.m. Michigan Sentiment
10:00 a.m. Business Inventories
Page 7 of 53
May 2010
Equity Research
TABLE 3. COMMODITY PRICES

(2000 to Present)
Energy 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 1Q10 Apr-10
Crude Oil ($ per barrel) 29.7 25.2 26.6 30.8 41.6 57.3 67.0 74.9 98.6 45.4 62.4 70.0 77.9 63.9 78.8 86.2
Crude Oil (%, YOY Chg) -15.1% 5.2% 16.1% 34.9% 37.7% 16.9% 11.9% 5.9% -53.9% -50.8% -38.3% 40.0% -35.2% 73.6% 68.5%
Natural Gas ($ per MMBtu) 4.57 3.56 3.43 5.59 5.98 9.00 6.68 6.99 8.79 4.13 3.63 3.01 4.79 3.89 4.64 3.94
Natural Gas (%, YOY Chg) -22.2% -3.6% 62.9% 7.0% 50.5% -25.8% 4.7% 23.8% -54.2% -69.3% -63.4% -21.4% -55.7% 12.3% 21.3%
Base Metals 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 1Q10 Apr-10
Nickel ($ per pound) 4.2 2.9 3.3 4.9 6.7 7.1 11.9 17.6 10.1 5.2 6.7 8.9 8.9 7.4 10.7 12.9
Nickel (%, YOY Chg) -30.9% 13.1% 49.0% 37.4% 6.4% 67.4% 47.5% -24.2% -63.6% -42.7% -1.4% 56.7% -27.0% 108.0% 120.0%
Copper ($ per pound) 0.85 0.74 0.74 0.86 1.40 1.77 3.16 3.35 3.20 1.65 2.23 2.83 3.16 2.47 3.34 3.40
Copper (%, YOY Chg) -13.3% 0.1% 16.4% 63.1% 26.3% 78.9% 5.9% -2.6% -55.8% -43.3% -17.4% 83.5% -22.9% 102.2% 61.7%
Aluminum ($ per pound) 0.75 0.70 0.65 0.70 0.86 0.93 1.24 1.26 1.19 0.60 0.67 0.85 0.93 0.76 0.97 0.99
Aluminum (%, YOY Chg) -7.3% -5.8% 7.1% 22.6% 8.0% 33.8% 1.4% 2.4% -56.2% -51.4% -30.1% 17.8% -35.9% 61.3% 52.7%
Tungsten ($ per short ton) 60 90 64 63 86 224 266 257 253 221 178 165 170 184 175 178
Tungsten (%, YOY Chg) 48.6% -28.6% -1.9% 36.3% 161.1% 19.0% -3.4% 0.0% -12.5% -29.4% -34.7% -32.7% -27.3% -20.8% -13.4%
Various 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 1Q10 Apr-10
Steel (Hot Rolled) ($ per ton) 294 231 323 288 592 540 581 530 853 495 398 534 538 491 615 720
Steel (Hot Rolled) (%, YOY Chg) -21.3% 39.7% -10.8% 105.4% -8.8% 7.6% -8.9% 61.9% -23.4% -62.6% -48.5% -18.8% -42.4% 24.2% 86.5%
Steel (Cold Rolled) ($ per ton) 405 318 424 384 680 635 672 609 941 577 487 567 648 570 707 830
Steel (Cold Rolled) (%, YOY Chg) -21.5% 33.3% -9.2% 76.9% -6.7% 5.9% -9.4% 55.1% -21.7% -58.0% -49.2% -13.7% -39.4% 22.5% 72.9%
Gold (London PM) ($ per troy ounce) 277 271 313 368 410 449 613 704 880 929 931 963 1101 981 1101 1179
Gold (London PM) (%, YOY Chg) -2.2% 15.5% 17.4% 11.6% 9.4% 36.5% 14.9% 9.7% -1.4% 4.0% 9.7% 36.8% 11.4% 18.4% 33.5%
Agricultural 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2009 1Q10 Apr-10
Corn ($ per bushel) 1.87 1.89 2.17 2.27 2.38 1.90 2.49 3.53 4.92 3.59 3.81 3.27 3.69 3.59 3.39 3.50
Corn (%, YOY Chg) 0.7% 15.2% 4.5% 4.7% -20.2% 31.3% 41.7% 27.7% -29.1% -36.6% -35.2% 3.6% -27.0% -5.7% -8.2%
Soybean ($ per bushel) 4.81 4.43 5.10 6.35 7.29 5.91 5.72 8.40 11.94 9.18 11.58 10.48 10.10 10.34 9.26 9.68
Soybean (%, YOY Chg) -7.9% 15.2% 24.5% 14.8% -19.0% -3.2% 47.0% 13.0% -27.6% -16.5% -14.1% 11.8% -13.5% 0.8% -7.5%
Wheat ($ per bushel) 2.33 2.61 3.26 3.45 3.60 3.24 3.88 6.12 6.03 4.53 4.85 3.22 3.81 4.10 4.09 4.16
Wheat (%, YOY Chg) 12.0% 24.7% 5.9% 4.3% -9.9% 19.8% 57.6% -25.9% -46.5% -19.4% -40.4% -10.1% -32.0% -9.6% -10.2%
Sources: Baseline, Bloomberg
TABLE 4. FOREIGN CURRENCY VALUATION

Foreign Exchange 2003 2004 2005 2006 2007 1Q08 2Q08 3Q08 4Q08 2008 1Q09 Apr-09 May-09 Jun-09 2Q09 3Q09 4Q09 2009 Jan-10 Feb-10 Mar-10 1Q10 Apr-10
US $ per Euro $1.235 $1.244 $1.248 $1.256 $1.370 $1.500 $1.562 $1.504 $1.316 $1.469 $1.316 $1.322 $1.365 $1.400 $1.361 $1.431 $1.476 $1.395 $1.427 $1.368 $1.357 $1.382 $1.342
(%, Qtr-Qtr Chg) - - - - - 3.6% 4.1% -3.7% -12.5% - -10.4% - - - 3.4% 5.1% 3.1% - - - - -1.0% -
(%, YOY Chg) 10.7% 0.3% 0.7% 9.1% 14.4% 15.8% 9.4% -9.1% 7.2% -12.2% -16.0% -12.2% -10.0% -12.8% -4.9% 12.1% -5.0% 7.1% 7.0% 4.1% 5.0% 1.5%
US $ per UK Pound $1.632 $1.832 $1.819 $1.839 $2.002 $1.979 $1.971 $1.894 $1.568 $1.851 $1.438 $1.466 $1.541 $1.636 $1.542 $1.641 $1.632 $1.568 $1.616 $1.562 $1.506 $1.558 $1.533
(%, Qtr-Qtr Chg) - - - 1.1% - -3.2% -0.4% -3.9% -17.2% - -22.3% - - - 7.2% 6.4% -0.5% - - - - -0.6% -
(%, YOY Chg) 12.2% -0.7% 1.1% 8.8% 1.2% -0.8% -6.3% -23.3% -7.5% -27.3% -26.0% -21.6% -16.8% -21.7% -13.4% 4.1% -15.3% 10.5% 8.3% 6.3% 8.3% 4.6%
US $ per Brazilian Real $0.325 $0.342 $0.413 $0.460 $0.516 $0.576 $0.604 $0.600 $0.440 $0.556 $0.433 $0.451 $0.483 $0.511 $0.481 $0.536 $0.575 $0.501 $0.561 $0.543 $0.560 $0.555 $0.569
(%, Qtr-Qtr Chg) - - - - - 2.8% 4.9% -0.7% -26.7% - -22.1% - - - 11.1% 11.4% 7.3% - - - - 10.8% -
(%, YOY Chg) -5.0% 5.1% 20.7% 11.6% 12.0% 21.3% 19.7% 14.9% -21.5% 7.8% -24.8% -23.8% -19.8% -17.3% -20.4% -10.7% 30.7% -9.9% 28.8% 26.3% 29.7% 28.2% 26.2%
Yen per US $ 115.94 108.08 109.89 116.27 117.73 105.05 104.57 107.56 95.84 97.12 93.83 98.47 96.64 96.91 97.27 93.49 89.86 93.66 91.13 90.14 90.71 90.65 93.45
(%, Qtr-Qtr Chg) - - 1.7% 5.8% - -7.2% -0.5% 2.9% -10.9% - -3.4% - - - 3.7% -3.9% -3.9% - - - - -3.2% -
(%, YOY Chg) -6.8% 1.7% 5.8% 1.3% -11.9% -13.4% -8.6% -15.3% -17.5% -10.7% -4.1% -7.4% -9.4% -7.0% -13.1% -6.2% -3.6% 0.8% -3.0% -7.3% -3.4% -5.1%
Source: United States Federal Reserve
Page 8 of 53
May 2010
Equity Research
COMMODITIES
CHART 2. COPPER
($/lb)
Copper futures closed April at $3.40/lb, below the prior month
close of $3.60, though 61.7% above the April 2009 close of
$2.10/lb. According to the International Copper Study Group
$5 (ICSG), “there is much uncertainty imposed by the rate of
economic recovery in many of the major copper consuming
$4
regions…the projected copper semi-manufacture growth rate
for China (the substitution of refined copper for scrap
$3
copper)…and the potential release or further accumulation of
$2
inventories in China.” Although many have speculated that
China would aggressively curb its copper imports, March
$1
import activity in China was very robust at 456.2 thousand
tons/month, up 42% sequentially from 322.3 thousand tons
$- and up 22% vs. the prior year. Also interestingly, copper
J a n -0 6 J a n -0 7 J a n -0 8 J a n -0 9 J a n -1 0 exchange inventories, after increasing from the trough of
258,575 metric tons (MT) in July 2009, appear to have peaked
Sources: Baseline, Bloomberg at 554,775 MT in February 2010 and have since moderated to
492,700 MT as of May 7.
CHART 3. INDIAN IRON ORE
SPOT PRICES 63% Fe
($/ton)
Iron ore spot rates have continued their upward momentum
into May, with Indian iron ore pricing at $185.5/ton, up 197%
from the prior year, which coincidentally is the trough of the
market; year-to-date, Indian iron ore is up 51%. As we have
$200
mentioned in prior write-ups, the primary driver for the upside
has been a recovery in global steel production, stemming first
from emerging economies (China) and secondarily from a
$150
recovery in production among developed nations. Global steel
production was 90,365,000 MT for March, up 31% over the
$100
prior year and up 11% from February. As a result of growing
demand and strong spot pricing, a number of producers have
announced recent mine expansions, or greenfields. The
$50 largest iron ore miner, VALE, recently agreed to a $2.5 billion
J a n -0 7 A u g -0 7 M a r-0 8 N o v -0 8 J u n -0 9 J a n -1 0 stake in a Guinea mine with the expectation to invest about $5
billion, with expansion starting in 2012 and ramping to roughly
Sources: Baseline, Bloomberg $50 million tons by 2014. Similarly, Rio Tinto recently
announced a $401 million expansion of a Canadian iron ore
mine.
CHART 4. GOLD
($/troy oz.)
On a monthly closing basis, gold notched a new high in April,

$ 1 ,2 0 0 closing the month at $1,179 per troy oz, up 33.5% from the
prior year and up 5.7% from March. We believe the surge in
gold is being driven by increasing U.S. dollar and Euro
$ 1 ,0 0 0
concerns, in conjunction with greater inflation expectations.
We surmise that these potential headwinds are resulting in a
$800
rotation into gold from the aforementioned currencies.
According to Dennis Gartman, “What we’re seeing is money
quietly moving away from Euros as a reservable asset on the
$600 part of larger central banks and to other potential reservable
assets such as gold.”
$400
J a n -0 6 J a n -0 7 J a n -0 8 J a n -0 9 J a n -1 0
Sources: Baseline, Bloomberg
Page 9 of 53
May 2010
Equity Research
CURRENCIES
Pound
The U.K. pound traded sideways for most of April, closing the month at $1.53 vs. the U.S. dollar, amid uncertainty surrounding the
general election in early May and indications pointing to the possibility of a hung parliament for the first time since 1974. With a
climbing budget deficit and no clear direction for fiscal policy until the post-election dust settles, the currency remained range bound
near the $1.50 mark. While the U.K. has lagged the United States in terms of economic recovery, signs continue to mount that a
gradual recovery is starting to gain traction. The U.K. PMI increased to 58.0 in April, which was its highest reading since 1994, with
encouraging growth trends in new orders, backlogs and employment. In addition, according to a recent survey from the Confederation
for British Industry, future expectations for retail sales reached a five-month high in April. While the pound has been somewhat resilient
in recent months, it could continue to see downside pressure in the wake of the election results, as well as collateral impact from the
falling Euro and flight to the safety of the U.S. dollar amid European debt concerns, in our view.
CHART 5. U.S. DOLLAR PER POUND
$2.25
$2.15
USD$/Pound
$2.05
$1.95
$1.85
$1.75
$1.65
$1.55
$1.45
$1.35
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
Source: U.S. Federal Reserve
Page 10 of 53
May 2010
Equity Research
SECTION 3. END MARKET DISCUSSIONS

COMMERCIAL AEROSPACE
CHART 6. COMMERCIAL AEROSPACE ORDERS
(Boeing and Airbus Monthly Orders)
3 ,5 0 0
3 ,0 0 0
2 ,5 0 0
Orders (Commercial Aircraft)
2 ,0 0 0
1 ,5 0 0
1 ,0 0 0
5 0 0
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
A ir b u s B o e in g T o ta l
Sources: Boeing and Airbus; Airbus orders not available 1990-1994
As we have written in past editions, sentiment in the aerospace channel appears to be improving, despite limited year-to-date order
activity. We concur with KeyBanc Capital Markets Inc.’s Metal & Mining Analyst, Mark Parr, who recently updated his aerospace thesis
(below). While the focus is on specialty material manufacturers with aerospace exposure, we believe it can be extrapolated to other
aerospace suppliers.
The resumption of the global aerospace up-cycle is re-gaining traction via the recent production uptick of select
Boeing and Airbus commercial aircraft platforms. Via recent due diligence, we expect 1Q10 results and 2Q10 outlooks to
point to increasing sequential progress in late cycle end market momentum, particularly aerospace, following a multi-quarter
lull in activity. We view 2010 as a transition year and expect a stronger recovery to manifest in 2011-2013 as inventory
excesses are purged and production of newer airframe technologies accelerate. We are aware that respective shares have
begun to appreciate in recognition of a positive inflection in the aerospace cycle following the slowdown that emerged in 4Q08.
That said, our positive long-term view as the companies begin the movement into a more earnings driven upside is reinforced
via: 1) a leveraged correlation between average annual global air travel growth and GDP growth; 2) Boeing’s and Airbus's
deep and geographically diversified backlogs; 3) increased specialty metals consumption in newer platforms; and 4) the fact it
is becoming more expensive for the consumer to drive relative to increased affordability of air travel.
Aerospace sentiment has turned, and we believe demand recovery will follow. Boeing recently pulled forward builds for
the 777 and 747-8, while Airbus announced a production increase for its 320 single-aisle family of planes. This, in concert with
the initial test flight of the B-787 in December, may not manifest in a vast change in specialty metals consumption in the near
term; however, we believe these actions mark a change in sentiment given many supply chain participants had awaited
incremental production cutbacks or further delays. We now sense jet engine demand is improving following a multi-quarter de-
stocking campaign as OEs for single-aisles are taking delivery of material and aftermarket fundamentals appear to be
recovering. We expect growth for airframe components and fasteners to lag jet engine demand recovery by a couple quarters
due to inventory corrections at aircraft manufacturers following the 2H08-4Q09 lull in activity, with the airframe demand being
relatively more stable given LTAs. – Mark Parr, KBCM’s Senior Metals & Mining Analyst
CHART 7. ESTIMATED OEM AEROSPACE BACKLOG

4 ,0 0 0
3 ,5 0 0
3 ,0 0 0
(Commercial Aircraft)
2 ,5 0 0
2 ,0 0 0
1 ,5 0 0
1 ,0 0 0
5 0 0
0
2010 YTD
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
A ir b u s B o e in g
Sources: Boeing, Airbus and KeyBanc Capital Markets Inc. estimates
Page 11 of 53
May 2010
Equity Research
TABLE 5. FUEL COST CHART 8. AVERAGE JET FUEL PRICE (PAID) PER
(Average) GALLON
Fuel Cost Oil Price
¢ Per gallon YOY % $ Per barrel YOY %
1999 53.0 19.3
2000 80.6 52.1% 30.3 57.4%
2001 77.3 -2.8% 26.0 -14.3% 395¢
2002 71.3 -8.2% 26.1 0.5% 370¢

2003 84.8 19.3% 31.1 19.1% 345¢
2004 114.7 35.3% 41.4 33.4%
Jan. 2005 129.3 34.4% 46.8 36.7% 320¢
Feb. 2005 133.1 36.1% 48.0 38.1% 295¢
Mar. 2005 144.8 47.0% 54.3 47.7% 270¢
Apr. 2005 158.3 57.0% 53.0 44.6%
May 2005 154.6 42.8% 49.8 23.7% 245¢
Jun. 2005 157.3 45.1% 56.3 48.0% 220¢ Apr 2009 - Mar 2010
July 2005 163.4 47.7% 58.7 44.3% Apr 2008 - Mar 2009
195¢
Aug. 2005 173.3 47.5% 65.0 44.6%
Sep. 2005 191.4 53.1% 65.6 42.7% 170¢
Oct. 2005 214.5 54.2% 62.4 17.4% 145¢
Nov. 2005 191.2 36.1% 58.3 20.3%
120¢
Dec. 2005 173.8 33.7% 59.4 37.1%
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Jan. 2006 180.4 39.5% 65.5 39.8%
Feb. 2006 183.6 37.9% 61.6 28.5% Source: Air Transport Association
Mar. 2006 184.0 27.1% 62.9 15.8%
Apr. 2006 192.7 21.7% 69.7 31.4%
May 2006 206.2 33.4% 71.1 34.1%
June 2006 209.0 32.9% 71.5 27.1%
July 2006 211.3 29.3% 74.6 27.1% CHART 9. AVERAGE PRICES ($/BARREL):
Aug. 2006 214.5 23.8% 74.4 14.6%
Sept. 2006 204.7 7.0% 63.9 (2.6%) CRUDE OIL (SPOT) AND JET FUEL (PAID)
Oct. 2006 191.8 -10.6% 58.9 (5.6%)
Nov. 2006 184.2 -3.6% 59.4 1.9%
Dec. 2006 188.7 8.6% 62.0 4.4%
Jan. 2007 170.9 -5.3% 54.6 -16.7%
460¢ $160
Feb. 2007 179.1 -2.5% 59.3 -3.8%
Mar. 2007 188.3 2.3% 60.6 -3.7% 410¢ Jet Fuel Crude Oil $140
Apr. 2007 205.2 6.5% 64.0 -8.2%
May 2007 208.1 0.9% 63.5 -10.8%
Crude Oil Price ($ Per Barrel)

360¢
Jet Fuel Price (¢ Per gallon)
June 2007 212.4 1.6% 67.5 -5.6% $120

July 2007 216.9 2.7% 74.2 -0.6% 310¢
Aug. 2007 211.7 -1.3% 72.4 -2.7% $100
Sep. 2007 228.2 11.5% 79.9 25.1% 260¢
Oct. 2007 240.3 25.3% 86.2 46.4% $80
Nov. 2007 271.8 47.5% 94.6 59.4% 210¢
Dec. 2007 216.4 14.7% 91.7 47.9% $60
Jan. 2008 261.6 53.1% 93.0 70.3% 160¢
Feb. 2008 259.1 44.7% 95.4 60.9% $40
Mar. 2008 290.3 54.2% 105.6 74.3% 110¢
Apr. 2008 301.8 47.1% 112.6 76.0% $20

60¢
May. 2008 323.7 55.6% 125.4 97.6%
June. 2008 347.3 63.5% 133.9 98.5%
10¢ $0
July. 2008 383.6 76.9% 133.44 79.9%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Aug. 2008 355.0 67.7% 116.73 61.3%
Sept. 2008 342.8 50.2% 103.9 30.0%
Oct. 2008 334.1 39.0% 76.65 -11.1%
Nov. 2008 255.4 -6.0% 57.62 -39.1%
Source: Air Transport Association
Dec. 2008 206.4 -4.6% 41.02 -55.3%
Jan. 2009 175.7 -32.8% 41.74 -55.1%
Feb. 2009 184.5 -28.8% 39.16 -58.9%
Mar. 2009 165.3 -43.1% 47.98 -54.5%
Apr. 2009 174.2 -42.3% 49.79 -55.8%
May. 2009 173.1 -46.5% 59.16 -52.8%
June. 2009 187.5 -46.0% 69.68 -48.0%
July. 2009 190.1 -50.4% 64.09 -52.0%
Aug. 2009 201.6 -43.2% 71.06 -39.1%
Sept. 2009 200.9 -41.4% 69.46 -33.1%
Oct. 2009 199.8 -40.2% 75.82 -1.1%
Nov. 2009 212.8 -16.7% 78.08 35.5%
Dec. 2009 212.5 3.0% 74.30 81.1%
Jan. 2010 220.2 25.3% 78.22 87.4%
Feb. 2010 216.4 17.3% 76.42 95.1%
Mar. 2010 81.24 69.3%
Apr. 2010 84.48 69.7%
Source: Air Transport Association
TABLE 6. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE AEROSPACE MARKET EXPOSURE

Company Ticker Commercial Commercial Military Military
Name Symbol (OE) (Aftermarket) (OE) (Aftermarket)
AMETEK, Inc. AME 6% 6% 5% 5%
Barnes Group Inc. B 13% 7% 4% 2%
CLARCOR Inc. CLC 1% 1% 1% 1%
Crane Co. CR 8% 5% 1% 1%
Danaher Corporation DHR 1% 2% 0% 0%
Donaldson Company DCI 1% 2% 1% 2%
Eaton Corporation ETN 4% 3% 3% 2%
ITT Industries ITT 1% 1% 5% 0%
Kaydon KDN 3% 2% 6% 3%
Kennametal KMT 9% 0% 0% 0%
Parker-Hannifin PH 6% 5% 5% 3%
RBC Bearings ROLL 17% 15% 10% 11%
Roper Industries ROP 1% 0% 0% 0%
Sources: Company reports and KeyBanc Capital Markets Inc. estimates
Page 12 of 53
May 2010
Equity Research
AGRICULTURE
CHART 10. TRACTOR & COMBINE SALES
50%
40%
YOY Percent Change
30%
M ar + 7.4%
20%
10%
0%
-1 0 %
-2 0 %
-3 0 %
-4 0 %
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Association of Equipment Manufacturers (AEM)
At its investor day, CNH Global provided a detailed outlook for the agricultural equipment market by region and product category
through 2014. It expected that the global agricultural equipment should be “flat to up 5%” in 2010. According to CNH’s breakdown, the
greatest driver of future demand is strength from Latin America, followed by an elevated level of combine volume in the United States,
as well as growth in high horsepower tractors in the Rest of World region. Specifically, Latin American industry volumes for tractors and
combines are expected to lead the way with a respective growth rate of 10-15% and 20-25%, respectively. U.S. combines are
expected to increase 0-5% in 2010 and activity for high horsepower tractors in Rest of World are expected to increase 0-5%. The
weakest category/region is combine harvesters in Western Europe, which are expected to decline 25-30% in 2010. On its call, CNH
specifically noted “production on the agriculture side is moving up above retail’s in preparation of what we believe the market is going to
look like going forward… principally, the [positive] change is based on rest of world demand, Brazil and Latin America and an amount of
high horsepower tractors in the United States.”
Relative to agricultural equipment sales in the United States for March, volumes expanded 7.4% relative to the prior year; total sales
came in at 15,057 units vs. 14,017 units in March 2009. By specific category, compact tractors (<40 hp) increased 16.4% to 7,467 units
from 6,417 units in the prior year (year-to-date up 5.7%). Utility tractor (40 hp and <100hp) sales declined 8.6% in March to 3,839 units
from 4,198 in 2009 (year-to-date down 11.1%). Row crop tractors (>100 hp) reported a 5.5% increase from the previous year with
March unit sales of 2,571 tractors vs. 2,431 in the previous year (year-to-date up 14.8%). Four-wheel drive tractor volumes increased
46.5% in March to 558 from 381 in 2009 (year-to-date up 31.9%). Finally, the largest category by equipment size, combines, expanded
6.5% from the previous year to 622 units from 584 in March 2009 (year-to-date up 3.1%).
TABLE 7. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE AGRICULTURE MARKET

EXPOSURE
Company Ticker Percent of Company Ticker Percent of
Name Symbol Total Sales Name Symbol Total Sales
Altra Holdings Inc. AIMC 21% Harsco Corporation HSC 9%
AMETEK, Inc. AME 1% ITT Industries ITT 1%
Applied Industrial Technologies AIT 5% Kennametal Inc. KMT 9%
Barnes Group Inc. B 13% Lincoln Electric Holdings LECO 10%
CLARCOR Inc. CLC 17% Parker-Hannifin PH 13%
Crane Co. CR 4% Pentair, Inc. PNR 4%
Donaldson Company DCI 13% Roper Industries ROP 3%
Eaton Corporation ETN 5% Terex Corporation TEX 1%
Franklin Electric FELE 35%
Note: Includes Agriculture, Construction and Other Mobile Equipment.
Page 13 of 53
May 2010
Equity Research
AUTOMOTIVE
TABLE 8. NORTH AMERICAN LIGHT VEHICLE PRODUCTION AND FORECAST
North American Quarterly Production
Cars Light Trucks Total Light Vehicle MD & HD Truck Total Vehicle
Quarter YOY YOY YOY YOY YOY
Ending Units % Chg Units % Chg Units % Chg Units % Chg Units % Chg
Mar-06 1,864,181 14% 2,265,093 -3% 4,129,274 4% 157,906 15% 4,287,180 5%
Jun-06 1,783,790 5% 2,329,849 -4% 4,113,639 -1% 160,700 4% 4,274,339 0%
Sep-06 1,551,918 1% 1,847,404 -16% 3,399,322 -9% 157,900 14% 3,557,222 -8%
Dec-06 1,660,950 0% 1,948,424 -14% 3,609,374 -8% 149,046 13% 3,758,420 -7%
Mar-07 1,664,788 -11% 2,147,543 -5% 3,812,331 -8% 126,601 -20% 3,938,932 -8%
Jun-07 1,693,256 -5% 2,345,750 1% 4,039,006 -2% 102,586 -36% 4,141,592 -3%
Sep-07 1,531,066 -1% 1,995,769 8% 3,526,835 4% 87,507 -45% 3,614,342 2%
Dec-07 1,586,388 -4% 2,056,484 6% 3,642,872 1% 88,607 -41% 3,731,479 -1%
Mar-08 1,577,571 -5% 1,908,369 -11% 3,485,940 -9% 89,118 -30% 3,575,058 -9%
Jun-08 1,603,803 -5% 1,849,874 -21% 3,453,903 -14% 96,977 -5% 3,550,880 -14%
Sep-08 1,607,890 5% 1,358,115 -32% 2,966,005 -16% 82,958 -5% 3,048,963 -16%
Dec-08 1,399,989 -12% 1,273,158 -38% 2,673,147 -27% 74,220 -16% 2,747,367 -26%
Mar-09 750,197 -52% 928,821 -51% 1,679,018 -52% 53,601 -40% 1,732,619 -52%
Jun-09 885,044 -45% 887,788 -52% 1,772,832 -49% 43,360 -55% 1,816,192 -49%
Sep-09 1,095,376 -32% 1,250,189 -8% 2,345,565 -21% 46,898 -43% 2,392,463 -22%
Dec-09 1,281,007 -8% 1,479,804 16% 2,760,811 3% 58,880 -21% 2,819,691 3%
Mar 10 1,299,808 73% 1,594,971 72% 2,894,779 72% 58,065 8% 2,952,844 70%
Jun 10E 1,329,230 50% 1,636,933 84% 2,966,163 67% 53,692 24% 3,019,855 66%
Sep 10E 1,250,735 14% 1,583,631 27% 2,834,366 21% 54,082 15% 2,888,448 21%
Dec 10E 1,277,888 0% 1,631,490 10% 2,909,378 5% 68,144 16% 2,977,522 6%
Annual Production
Cars Light Trucks Total Light Vehicle MD & HD Truck Total Vehicle
Year YOY YOY YOY YOY YOY
Ending Units % Chg Units % Chg Units % Chg Units % Chg Units % Chg
2001 7,154,687 -13% 8,326,389 -7% 15,481,076 -10% 333,259 -33% 15,814,335 -10%
2002 7,347,916 3% 9,020,615 8% 16,368,531 6% 348,055 4% 16,716,586 6%
2003 6,624,692 -10% 9,249,150 3% 15,873,842 -3% 341,037 -2% 16,214,879 -3%
2004 6,346,968 -4% 9,406,423 2% 15,753,391 -1% 470,861 38% 16,224,252 0%
2005 6,523,591 3% 9,228,740 -2% 15,752,331 0% 563,692 20% 16,316,023 1%
2006 6,860,839 5% 8,390,770 -9% 15,251,609 -3% 625,552 11% 15,877,161 -3%
2007 6,475,498 -6% 8,545,546 2% 15,021,044 -2% 405,301 -35% 15,426,345 -3%
2008 6,189,479 -4% 6,389,516 -25% 12,578,995 -16% 343,273 -15% 12,922,268 -16%
2009 4,011,624 -35% 4,546,602 -29% 8,558,226 -32% 202,739 -41% 8,760,965 -32%
2010E 5,157,661 29% 6,447,024 42% 11,604,686 36% 233,983 15% 11,838,669 35%
2011E 5,837,908 13% 6,862,004 6% 12,699,912 9% 358,566 53% 13,058,478 10%
Sources: Ward's AutoInfoBank; KeyBanc Capital Markets Inc. estimates
The U.S. light vehicle SAAR registered 11.2 million units, up 20% year-over-year but a little light of expectations (11.5 million) and
below last month’s 11.8 million SAAR. Despite the sequential decline, the April results were largely viewed as a positive given the
reduced level of incentives during the month. In March, the industry recorded its highest selling rate in 18 months (excluding the August
2009 “Cash for Clunkers” spike) driven by industry incentives, led by Toyota (i.e., 0% financing, two-year maintenance package and
limited cash rebates) as it looked to recover from negative press over quality concerns, and followed to some extent by other
manufacturers. Although Toyota actually increased its incentives in April (to an average of $2,500 per vehicle), total industry incentives
declined to about $2,650 per vehicle (a decrease of $150 sequentially and $400 year-over-year), which suggests strengthening
underlying demand. Most of the large auto manufacturers reiterated their expectation for moderate growth in the industry for the
remainder of 2010. Notable U.S. sales results in March included GM (+7% year-over-year), Ford (+25%), Toyota (+24%), Honda
(+13%), Chrysler (+25%) and Nissan (+35%). As of the end of the 1Q, we estimate that total North American vehicle production in 2010
will increase 35%, with car production up 29% and light truck production up 42%.
TABLE 9. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE AUTOMOTIVE MARKET EXPOSURE

Actuant Corporation ATU 9% IDEX Corporation IDEX 4%
Altra Holdings Inc. AIMC 6% ITT Industries ITT 14%
Applied Industrial Technologies AIT 5% Kennametal KMT 14%
Barnes Group Inc. B 16% Lincoln Electric Holdings LECO 20%
CLARCOR Inc. CLC 4% Nordson Corporation NDSN 4%
Danaher Corporation DHR 5% Parker-Hannifin PH 8%
Eaton Corporation ETN 17% Roper Industries ROP 6%
Graco Inc. GGG 7% WABCO Holdings Inc. WBC 5%
Note: Includes Automotive Components, Automotive Manufacturing (Factory Floor) and Automotive Service.
Page 14 of 53
May 2010
Equity Research
CONSTRUCTION (NON-RESIDENTIAL)
CHART 11. NON-RESIDENTIAL CONSTRUCTION
4 5 0 3 0 %
4 2 5 2 5 %
4 0 0
2 0 %
3 7 5
1 5 %
YOY Percent Change

3 5 0
$ in Billions
1 0 %
3 2 5
5 %
3 0 0
0 %
2 7 5
-5 %
2 5 0
-1 0 %
2 2 5
2 0 0 -1 5 %
1 7 5 -2 0 %
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Y /Y % P rivN o n re s C o n s t
Source: U.S. Department of Commerce
We continue to look for signs that bad will turn to less bad in the non-residential construction marketplace, and while spending rose
modestly from February levels (total non-residential up 0.8% month-over-month, down approximately 17% year-over-year), a definitive
change in the trend is elusive. Many players in the market suggest that we are reaching a bottom, but near-term challenges [persisting
weakness in North American and European light commercial markets, cited by Ingersoll-Rand, Harsco Corporation (HSC-NYSE) and
others] dictate that calling the bottom will require seeing the turn.
Commercial-related verticals remain the most challenged, even as comparisons ease. Lodging (-60% year-over-year, -5% month-over-
month), office (-34% year-over-year, -1% month-over-month) and the catch-all commercial segment (-37% year-over-year, -2% month-
over-month) all retreated from February levels, despite easier comparisons – a repeat of February’s disappointment. Bifurcating public
vs. private spending, results continue to vary, with the most recent month showing support for public (+2.3%), with a 0.7% decline in
private spend. Given the inconsistent results there, it is difficult to ascribe the challenges to a particular market or vertical. That said,
deep municipal and state budget crises will likely temper public spending as private markets begin to bounce.
If any non-residential market has adopted a soft landing, it is the institutional markets. While health care and educational both continue
to feel the pressure (both running down mid-teens year-over-year), Dodge results (healthy starts activity) and spending figures suggest
an inflection point (particularly in health care). Compared to February, health care rose 3.4%, while educational declined 1.6%.
Standing relatively firm at high levels, Power (-1%, -2% year-over-year), Transportation (+10, +22% year-over-year) and Highway &
Street (+2%, -1% year-over-year) continue to outpace overall construction spending levels. Unfortunately, these collectively only make
up roughly 30% of spending and are offset by some much larger declines. Among those, manufacturing appears to be finding footing
early despite rolling over late, increasing about 5% vs. February (down 28% year-over-year)
As seen in the chart below, non-residential construction and lagged ABI appear to be falling into lockstep again. We are encouraged
that this could be signaling a bottom in the market, but given that we have been fooled before (and recently, at that), it appears
premature to ascribe too much to the trend.
CHART 12. VALUE OF PUBLIC CONSTRUCTION
2 0 %
3 1 0
2 8 0
1 0 %
YOY Percent Change
2 5 0
$ in Billions
2 2 0
0 %
1 9 0
1 6 0 -1 0 %
1 3 0
1 0 0 -2 0 %
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Y /Y % T o t a lP u b lic C o n s t
Source: U.S. Department of Commerce
Page 15 of 53
May 2010
Equity Research
CHART 13. ABI 3-MONTH MOVING AVERAGE LAGGED 8 MONTHS VS.

PRIVATE NON-RESIDENTIAL CONSTRUCTION SPENDING
40% % changes year over year 66

64
Non-res spending is here
30% 62
60
20% 58
56
10% 54
52
0% 50
48
-10% 46
44
-20% 42
Private Non - Residential Const. 40
-30% Spend % Chg. 38
ABI Index 3 mth MA 36
-40% 34
Aug-10E
Aug-97
Aug-98
Aug-99
Aug-00
Aug-01
Aug-02
Aug-03
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Feb-97
Feb-98
Feb-99
Feb-00
Feb-01
Feb-02
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Last 3 Months: December-09: 45.4, January-10: 42.5, February-10: 44.8
Sources: U.S. Census Bureau, Construction Spending put in place, The American Institute of Architects Architectural Billings Index,
KeyBanc Capital Markets Inc. estimates
TABLE 10. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE COMMERCIAL

CONSTRUCTION MARKET EXPOSURE
Actuant Corporation ATU 9% ITT Industries ITT 6%
AMETEK, Inc. AME 7% Ingersoll-Rand IR 55%
A.O. Smith Corporation AOS 24% Lennox International LII 23%
Baldor Electric Co. BEZ 2% Lincoln Electric Holdings LECO 10%
Crane Co. CR 9% Oshkosh Truck Corporation OSK 35%
Donaldson Co. DCI 8% Pentair, Inc. PNR 16%
Eaton Corporation ETN 29% Regal-Beloit Corporation RBC 16%
Generac Holdings Inc. GNRC 38% Terex Corporation TEX 56%
Graco Inc. GGG 10% Watsco Inc. WSO 17%
Harsco Corporation HSC 34% Watts Water Technologies WTS 55%
Sources: Company reports and KeyBanc Capital Markets Inc.
Page 16 of 53
May 2010
Equity Research
CONSTRUCTION (RESIDENTIAL)
CHART 14. HOUSING STARTS VS. 30-YEAR MORTGAGE RATE
1 1 %
2 ,2 0 0
H o u s i n g s ta r ts
1 0 %
1 ,9 0 0
30-Yr. Mortgage - Percent

9 %
Units SAAR, Thousands
1 ,6 0 0
8 %
1 ,3 0 0
7 %
1 ,0 0 0
6 %
7 0 0
5 %
3 0 y e a r m o r tg a g e r a te
4 0 0 4 %
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sources: U.S. Department of Commerce and Fannie Mae
CHART 15. EXISTING HOME SALES

8
2 5 %
1 5 %
6
YOY Percent Change

SAAR, millions
5 %
5
-5 %
4
3 -1 5 %
2 -2 5 %
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Y O Y % E x is t in g O n e F a m ily H o m e S a le s
Sources: The National Association of Realtors and Fannie Mae
While housing was a leader in the last economic cycle and played a role in the downturn, it does not appear that it will take up the same
mantle for this cycle. That said, data in the most recent month points to a steady improvement in the various housing data, even as
stimulus exits the system. We view the interest rate dynamic as an additional form of stimulus given the savings over the course of a
30-year mortgage vs. historical averages (around 100 bps lower vs. last cycle, which already had historically low rates). All in all, the
fact that new construction continues to improve as the window for housing tax credits closes and mortgage rates are holding steady
(despite the end of Fed mortgage purchases) gives us confidence that the direction of the recovery is sustainable, even if the pace is
less reliable.
In the interest of being balanced, we do not expect a smooth recovery and acknowledge that a bet on the consumer and a bet on
housing are different. Home prices remain near trough levels and well off their possible purchase prices/home equity loan valuations of
two to three years ago, limiting the real (from a home equity loan) or perceived (from the general “feeling” of having accumulated value)
consumer wealth. As such, we would expect consumers to buy name-brand peanut butter and replace a broken air conditioner before
looking at high end cabinetry in a new home.
During March, permit and start activity rose nicely from February levels, with permits up approximately 7.5% sequentially and starts up
roughly 2% vs. the prior month. While the tax credit does not require occupancy until June 30 and near-term activity could still come
from spec homes underway as of the April 30 cutoff for contract signing, we believe builders have been very selective with respect to
speculative building.
Existing home sales gained a little momentum in March, inching up 7% from a challenged February and 13% vs. last year. As we reach
easy comparisons, the improvement year-over-year should be taken with a grain of salt given the unsustainable levels at the trough.
Page 17 of 53
May 2010
Equity Research
TABLE 11. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE RESIDENTIAL CONSTRUCTION

MARKET EXPOSURE
A.O. Smith Corporation AOS 53% Ingersoll-Rand IR 15%
Actuant Corporation ATU 14% Lennox International LII 63%
Eaton Corporation ETN 6% Parker-Hannifin PH 3%
Franklin Electric FELE 25% Pentair, Inc. PNR 12%
Generac Holdings Inc. GNRC 60% Regal-Beloit Corporation RBC 33%
Graco Inc. GGG 37% Terex Corporation TEX 8%
Harsco Corporation HSC 3% Watsco Inc. WSO 83%
ITT Industries ITT 6% Watts Water Technologies WTS 45%
Page 18 of 53
May 2010
Equity Research
CONSTRUCTION EQUIPMENT
CHART 16. CATERPILLAR NORTH AMERICAN DEALER SALES
70
50
30
YOY Percent Change
10
-1 0
-3 0
-5 0
M a r -2 1 %
-7 0
2003
2004
2005
2006
2007
2008
2009
2010
Source: CAT Website
After a tumultuous three to four years, order appears to have been restored to the construction equipment markets. While this provided
no EPS benefit to manufacturers in 1Q10, early cycle leading indicators appear to be turning the corner, suggesting a pick-up in
demand over the next few quarters. These factors include used equipment prices (highlighted in last month’s write-up), stabilizing time
utilization rates at the rental firms and improved sentiment. Given the typical trajectory of a recovery, we would expect compact
equipment to accelerate first, followed by a heavy equipment recovery (including aerials and telehandlers) 12-18 months later. This is
best evidenced by two recent earning reports from CNH Global (CNH) and United Rentals (URI).
Given the magnitude of URI’s equipment fleet and its buying power, we believe more optimistic commentary from management could
translate into near-term purchases. URI specifically stated, “We're starting to see some positive indicators; the turn in the industry, as
far as our cycle is concerned, was always not a question of if, it was more a question of when… we expect to see an increasing number
of local markets begin to recover as we move through the balance of the year. It's not going to be an upward trajectory; it's going to
remain choppy. A broader recovery will begin in the back half of 2010 and take hold in 2011.” URI also noted it plans to grow its fleet
in areas that support its customer growth. Specifically, “We're buying high-capacity reach forklifts, we're buying light towers,
compressors, excavators and a host of gen rent and earthmoving products that help us focus on the earlier stage activity that we're
starting to see. We're skewing our buy away from aerial products except for very specific categories that continue to see good demand.”
Reinforcing URI’s comments, CNH noted that light construction equipment in North America was down 4% in 1Q10, whereas heavy
equipment was off by 16% from the prior year. With demand expected to slowly improve in 2H10, CNH estimates full-year 2010 light
equipment will be up 0-5%, while heavy equipment could be lower by 0-5%.
Page 19 of 53
May 2010
Equity Research
GENERAL INDUSTRIAL
CHART 17. INSTITUTE OF SUPPLY MANAGEMENT (ISM) PURCHASING MANAGERS’ INDEX
(PMI)
8 0
7 0
6 0
Monthly Index
5 0
4 0
3 0
2 0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
P M I In d e x N e w O rd e rs
Source: Institute of Supply Management
The ISM's PMI for April was 60.4%, 80 basis points above the March reading of 59.6% and 40 basis points above the consensus
estimate of 60.0%, indicating continuing growth in the manufacturing sector. The improvement in the index continued from the previous
month as the pace of growth rebounded to its fastest rate since June 2004. It was the ninth consecutive month of manufacturing
expansion as new orders, production and the employment index all rose during the month, which continues to represent an
encouraging trend for the sustainability of the current recovery. The threshold for manufacturing growth is a reading of 50.0%. We note
that 17 of the 18 industry segments reported growth in April, consistent with the March reading.
The April results correspond to a 5.6% increase in annualized GDP for the broader U.S. economy, which has now been above the
threshold that is correlated to growth (which for the ISM is a reading of 42%) for 12 consecutive months.
The New Orders Index of 65.7% in April increased 420 basis points sequentially and has now been above 60% for five of the last six
months. New orders have remained above the growth threshold (which is 50.2%) for 10 consecutive months. The customers’ inventory
index fell to 33.0%, 600 basis points lower than February, and has now been below 50% for 12 months, which suggests that the
respondents feel their customers’ inventories are “too low.”
Production increased 580 basis points to 66.9% in April from 61.1% last month and has exceeded the 51% threshold that is consistent
with expanding Industrial Production for 11 months in a row. Order backlog declined by 50 basis points sequentially to 57.5% in April
from 58.0% last month, which represents the fourth month of contraction. The Price Index increased 300 basis points to 78.0% in April
from 75.0% last month, remaining above the threshold that is consistent with pricing increases (49.3%) over the long term for the 10th
consecutive month.
CHART 18. CAPACITY UTILIZATION

8 6 %
8 3 %
Monthly Utilization Level
8 0 %
7 7 %
7 4 %
7 1 %
6 8 %
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Federal Reserve
Page 20 of 53
May 2010
Equity Research
Seasonally adjusted capacity utilization, which measures the percentage of plants in use, increased 20 basis points to 73.2% in March.
It was the ninth consecutive monthly increase and was slightly below the consensus expectation of 73.3%. Capacity utilization remains
well below its long-term (1972-2009) average of 80.6%, though it was 370 basis points higher year-over-year in March. Manufacturing
utilization, which comprises about 80% of the index, increased 60 basis points to 70.0%, including a 90 basis point sequential increase
in durable manufacturing utilization and a 50 basis point increase in non-durable good manufacturing to 64.1% and 77.3%, respectively.
Mining utilization rates increased 100 basis points to 90.2% of capacity in March, while capacity utilization in the Utilities segment
decreased to 78.6% sequentially from 84.1% sequentially.
CHART 19. INDUSTRIAL PRODUCTION INDEX

(1997=100, SA, Year-Over-Year Percent Change)
9 %
6 %
3 %
0 %
YOY Percent Change
-3 %
-6 %
-9 %
-1 2 %
-1 5 %
-1 8 %
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Industrial production increased in March for the ninth consecutive month, though it fell short of expectations following an upward
revision for February. The Federal Reserve reported a 0.1% sequential increase in IP for February, which was below the consensus
forecast of 0.7%, while February results were revised to 0.3% growth vs. the original report of 0.1%. With respect to the three major
industry groups, Manufacturing, which comprises 79% of the index, increased 0.9%, while Mining grew 2.3% in the month and warmer
spring weather resulted in lower heating demand and resulted in a 6.4% drop in production from Utilities for the month. Both durable
and non-durable manufacturing posted sequential gains (0.9% and 0.5%, respectively), though adverse weather likely depressed
manufacturing in February. Production gains were broad-based across most industry groups, with the largest increases related to
petroleum and coal products (+3.0%), motor vehicles and parts (+2.2%) and furniture and related products (+2.2%). Total industrial
production was up 4.0% year-over-year in March.
TABLE 12. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE GENERAL INDUSTRIAL

MARKET EXPOSURE
Actuant Corporation ATU 25% Gardner Denver Inc. GDI 23%
Altra Holdings Inc. AIMC 35% Graco Inc. GGG 37%
AMETEK, Inc. AME 16% Harsco Corporation HSC 15%
Applied Industrial Technologies AIT 25% ITT Industries ITT 9%
A.O. Smith Corporation AOS 23% Ingersoll-Rand IR 14%
Baldor Electric Co. BEZ 91% Kaydon Corporation KDN 70%
Barnes Group Inc. B 28% Kennametal Inc. KMT 35%
Colfax Corporation CFX 44% Lincoln Electric Holdings LECO 25%
CLARCOR Inc. CLC 33% Nordson Corporation NDSN 10%
Crane Co. CR 16% Parker-Hannifin PH 18%
Danaher Corporation DHR 26% Pentair, Inc. PNR 21%
Donaldson Co. DCI 30% Regal-Beloit Corporation RBC 30%
Eaton Corporation ETN 6% Robbins & Myers RBN 7%
Federal Signal FSS 20% Roper Industries ROP 11%
Franklin Electric FELE 25%
Page 21 of 53
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Equity Research
OIL & GAS
CHART 20. NORTH AMERICAN AND INTERNATIONAL RIG COUNTS

2700
2500
2300
2100
1900
Active Rigs
1700
1500
1300
1100
900
700
500
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
N o rt h A m e ric a In t e rn a t io n a l
Source: Baker Hughes
Global rig count continued its path upward in March, stopping at 2,879 (up 25% year-over-year, down modestly sequentially on Canada
seasonality). In the United States, which does not face the same seasonal patterns, count was up 5% sequentially. As we parse
through the data, we are increasingly focused on two dynamics, which, amid the recovery, have delineated the drivers of production
increases. First, while vertical rig count is up nicely off the trough (approximately 50%), the gap vs. peak levels is still very wide
(roughly 50% of peak). That said, horizontal drilling is up 100% vs. the trough and currently stands at all-time highs. Similarly, the mix
of oil vs. gas drilling has trended upward since mid-2009 and is now at levels not seen since the late 1990s (had trended about 20%,
currently around 35% of the mix).
Looking at the data above and coupled with comments from the recent Helmrich and Payne (HP-NYSE), we come to several
conclusions. It appears that much of the gas production in the market is being made above spot rates and most operators are hedged
through at least 1H10. As hedged operators move closer to spot rates on gas, rig count will likely retrench, particularly in conventional
drilling, starting in the 2H. Second, shale plays appear to be changing the rig landscape as we turn from a cycle where “any asset will
do” to requiring specialized rigs to tackle the formations. In this regard, new build activity appears to have perked up modestly, but is
still soft. For those exposed to shales and more oil vs. gas, trends should remain positive.
On the commodity price front, natural gas remains under pressure during this “shoulder” season in demand (between summer and
winter), and currently stands around $4/MMBtu. While the demand side (absent weather) appears to be firming as industrial metrics
improve, we do not anticipate a meaningful increase in supply given the recent BP oil spill in the Gulf, which will surely have regulatory
consequences.
TABLE 13. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE OIL & GAS MARKET
EXPOSURE
Actuant Corporation ATU 8% Harsco Corporation HSC 3%
Altra Holdings Inc. AIMC 8% IDEX Corporation IEX 8%
AMETEK, Inc. AME 20% Kaydon Corporation KDN 4%
Circor International, Inc. CIR 65% Kennametal Inc. KMT 14%
CLARCOR Inc. CLC 3% Lincoln Electric Holdings LECO 22%
Crane Co. CR 10% Parker-Hannifin PH 7%
Danaher Corporation* DHR 11% RBC Bearings ROLL 3%
Franklin Electric FELE 15% Robbins & Myers RBN 31%
Gardner Denver Inc. GDI 23% Roper Industries ROP 24%
*Retail Petroleum.
Page 22 of 53
May 2010
Equity Research
SEMICONDUCTOR
CHART 21. SEMICONDUCTOR BOOKINGS VS. BILLINGS
$ 3 ,5 0 0
$ 3 ,0 0 0
$ 2 ,5 0 0
J a n 2 0 1 0 B o o k -to -B i ll = 1 .2 3
F e b 2 0 1 0 B o o k -to -B il l = 1 .2 3
M a r 2 0 1 0 B o o k -to -B il l = 1 .1 9
$ in Millions
$ 2 ,0 0 0
$ 1 ,5 0 0
$ 1 ,0 0 0
$500
$0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
B o o k in g s B illin g s
Source: Semiconductor Equipment and Materials International (SEMI)
The North American-based semiconductor equipment book-to bill-ratio (rolling three-month average) receded in March, but is still near
late 2007 levels, which indicates steady industry growth is likely going forward. According to industry trade group Semiconductor
Equipment and Materials International (SEMI), the preliminary March ratio is 1.19, down from the final February result of 1.23 (which
was revised upward from the preliminary report of 1.22 last month and equivalent the final January ratio). The ratio has remained above
1.0 (indicating that more orders were received than product billed) for nine consecutive months. The three-month average bookings in
March increased 3% on a sequential basis (423% higher year-over-year), while billings increased 6% sequentially (147% higher year-
over-year). According to SEMI’s annual forecast, worldwide sales of new semiconductor manufacturing equipment are expected to
grow 53% in 2010 to $24.5 billion, following successive declines of 31% and 46% in 2008 and 2009, respectively.
Also, the SIA reported that global semiconductor sales (rolling three-month average) increased 58% year-over-year (+5% sequentially)
in March to $23 billion. For 1Q10, global sales also increased 58% to $69 billion compared to $44 billion in 1Q09, which represented
the trough on the current cycle. SIA President George Scalise recently noted that “healthy demand from major end markets, coupled
with restocking to normal inventory levels, contributed to 1Q growth.” While the growth rate is expected to moderate vs. increasingly
difficult comps through the course of the year, the SIA remains “cautiously optimistic that global sales will show double-digit growth in
2010.”
CHART 22. WORLDWIDE SEMICONDUCTOR SALES

6 0 %
4 0 %
2 0 %
YOY Percent Change
0 %
-2 0 %
-4 0 %
-6 0 %
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: Semiconductor Industry Association (SIA)
TABLE 14. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE SEMICONDUCTOR MARKET

EXPOSURE
Company Name Ticker Percent Total Sales Company Name Ticker Percent Total Sales
AMETEK, Inc. AME 2% ITT Industries ITT 4%
Barnes Group Inc. B 1% Nordson Corporation NDSN 18%
Donaldson Co. DCI 6% Roper Industries ROP 6%
Page 23 of 53
May 2010
Equity Research
MEDIUM/HEAVY-DUTY TRUCK
CHART 23. CLASS 8 TRUCK BUILDS & BACKLOG
(Three-Month Rolling Average)
40 300
NA FTA C la s s 8 B u ild
2003 - 1 7 6 ,6 6 8
2004 - 2 6 2 ,6 1 7
35 2005 - 3 4 1 ,2 8 7
2006 - 3 7 7 ,7 4 4
2007 - 2 1 2 ,8 4 4
250
2008 - 2 0 5 ,2 5 5
30
Units (Backlog, thousands)

Units (Builds, thousands)
200
25
20 150
15
100
10
50
5
0 0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
8 B u i ld 8 B a c k lo g
Sources: America’s Commercial Transportation Research Co. (A.C.T.) and KeyBanc Capital Markets Inc. estimates
It appears there are plenty of reasons to be optimistic on the heavy truck cycle. While March/April orders usually see a spike around
the new model year availability (more detail below), we believe the pace of the recovery is consistent with abating overcapacity and an
improving pricing environment (as well as a general improvement in freight volume). Moreover, the problematic credit environment for
truckers appears to be improving as well, with key players such as GE Capital getting back in the game. In the interest of gauging
stock reactions, it is difficult to gauge if it was priced in terms of recovery pace, but expectations for a 2H10 acceleration in truck
demand appear grounded.
Around temporary noise in order intake about the change in model years is common in the April/May time frame, one source of surprise
from our perspective is the number pre-mandate engines available in the marketplace, which appear to be pushing out as far as the 2Q.
Moreover, given carriers’ ability to purchase 2010 model year equipment with 2009 engines, we believe the EPA 2010 disruption
continues to obscure the month-to-month results. As stated above, however, fundamentals are moving in the right direction, even if
near-term results are somewhat volatile. While the industry tends to move quickly, we believe the base case should focus on a return
to replacement levels in 2011, with a release of the pent-up demand a 2012 story. We view replacement at something near 200,000
units, plus 15,000-20,000 per point of GDP growth.
As it pertains to the most recent month’s activity, March net orders came in at 12,600 units, a solid move upward from February’s 8,300
and better than historical trends following EPA mandates. That said, we believe March included a large order and, consistent with past
years, included a small bump (likely to persist in April) related to the model year changeover. Based on the current month’s order
intake, we believe the OEM build plan (calling for about 32,500 builds in the 2Q), with a 22% air ball as of March on the 2Q production
vs. orders, could see some minor risk (1,000-2,000 units).
Looking at the freight market, recent readings of the ATA Tonnage Index grew by 0.4% vs. the prior month (+8% year-over-year) and is
now at a 16-month high. Commentary from the ATA’s economist points to modest channel fill, but generally attributes the freight
recovery to an overall macro improvement. The ATA also believes supply/demand balance for equipment is improving, which is
consistent with broader market feedback.
Page 24 of 53
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Equity Research
CHART 24. CLASS 8 NET ORDERS CHART 25. CLASS 5-7 TRUCK BUILDS &
BACKLOG
55,000 300% 30 120
NAFTA Class 5-7
Build
2003 - 194,027
2004 - 240,462
45,000 200% 2005 - 251,168
25 2006 - 263.403 100
2007 - 207 511
35,000 100%
20 80
Units (Backlog, thousands)

Units (Builds, thousands)
YOY Percent Change
Units (Orders)
25,000 0%
15 60
15,000 -100%
10 40
5,000 -200%
-5,000 -300% 5 20
-15,000 -400%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
0 0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
8 Net Orders YOY
5-7 Build 5-7 Backlog
Sources: America’s Commercial Transportation Research Co. (A.C.T.) Source: America’s Commercial Transportation Research Co. (A.C.T.)
and KeyBanc Capital Markets Inc. estimates
CHART 26. TRUCK TONNAGE INDEX

(Rolling 12-Month Year-Over-Year % Change)
20% 75
70
15%
Adjusted Truck Tonnage YOY Percent Change
65
ISM's Purchasing Manager's Index

10%
60
5% 55
0% 50
45
-5 %
40
-1 0 %
35
-1 5 % 30
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
IS M P M I A d j. T ru c k T o n n a g e
Source: American Trucking Association (ATA)
TABLE 15. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE MEDIUM/HEAVY-DUTY TRUCK

MARKET EXPOSURE
Actuant Corporation ATU 10% Federal Signal FSS 20%
AMETEK, Inc. AME 3% Gardner Denver Inc. GDI 14%
Barnes Group Inc. B 2% Ingersoll-Rand IR 12%
CLARCOR Inc. CLC 25% Kennametal Inc. KMT 4%
Crane Co. CR 4% Lincoln Electric Holdings LECO 10%
Danaher Corporation DHR 1% RBC Bearings ROLL 12%
Donaldson Co. DCI 25% Parker-Hannifin PH 8%
Eaton Corporation ETN 22% WABCO Holdings Inc. WBC 96%
Page 25 of 53
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Equity Research
CHART 27. UNIVERSITY OF MICHIGAN

CONSUMER SENTIMENT
Despite a solid start to earnings season, consumer confidence
drifted lower in April. The confidence index declined to 72.2
120 (from 73.6) and generally remains range-bound in the low to
mid 70s. The outlook index, which many view as an indicator
110
of future spending conditions, also edged down and appears
100
similarly stuck in the upper 60s over the past six months
(currently 66.5 vs. 67.9 in March) The present situation Index
declined to 81.0 (from 82.4), but has generally trended upward
Monthly Index
90
as the recovery has materialized. Inflationary expectations

80
increased modestly as consumers are anticipating a 2.9% rate
70
of inflation over the next year, up 0.2% from the March reading.
60
50
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: University of Michigan
CHART 28. FEDERAL FUNDS TARGET

RATE
With unemployment remaining at elevated levels and
inflationary pressures as measured by the Personal
9.0% Consumption Expenditure (PCE) index relatively muted, it
8.0%
appears the pressure to raise the federal funds has not fully set
in. According to an article produced by Bloomberg, “The Fed
7.0%
has said the stable inflation expectations, high unemployment
6.0% and subdued inflation trends warrant continued low rates. Even
5.0%
after two quarters of growth, economists in a Bloomberg
survey predict the jobless rate will remain elevated, with the
4.0%
median forecast at 9.6% for 2010 and 9% for 2011. They
3.0% estimate inflation will be 1.3% this year and 1.45% in 2011.”
2.0%
For now, rates are likely to remain exceptionally low. We
believe a greater resurgence in the consumer is needed to be
1.0%
evident in order to provide the Fed with enough confidence that
0.0% the market has recovered and is now ready to absorb tighter
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
monetary policy.
CHART 29. U.S. UNEMPLOYMENT RATE

Percent Number of jobs created, 000s
10 700
A combination of a general improvement in employment trends
9
500
and contribution of Census workers drove a solid positive
300
employment reading in April. Of the 290,000 additions to non-
8
100
farm payrolls, Federal employees made up 66,000 of the
-100
increase. Temporary and administrative service workers made
7 -300
up a substantial portion of the increase as well (approximately
-500
60,000), which we believe serves as a leading indicator of an
6 -700
improvement in permanent hiring trends. Manufacturing jobs
5
-900
rose more modestly than the service side, but added a healthy
-1100
65,000 all the same. Overall, the unemployment rate inched up
4
-1300
to 9.9% (from 9.7%).
-1500
3 -1700
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Change in Payrolls Unemployment Rate
Source: Bureau of Labor Statistics
Page 26 of 53
May 2010
Equity Research
CHART 30. CONSUMER PRICE INDEX (CPI)

7% Consumer prices were up nominally in March, with core levels
6%
essentially flat vs. the prior month (+1.2% year-over-year). Concerns
over rising input costs for industrial companies have yet to filter down
5% to the consumer level for the time being. Among the major verticals,
4%
food, vehicles and medical commodities were up modestly, while
Core CPI (ex. food and energy)
offsetting weakness in energy commodities (namely gasoline, -0.8%
sequentially) and apparel (-0.1%) negated the overall impact. Given a
YOY Percent Change
3%
2%
sustained period of low interest rates and what appears to be an
improving landscape for consumer lending, core inflation is trending
1% lower than we would like.
0% CPI - Overall
-1%
-2%
-3%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: Bureau of Labor Statistics
CHART 31. INVENTORY-TO-SALES RATIO

15.0% 1.80 According to the U.S. Census Bureau’s latest data, business
inventories were up 0.5% sequentially in February (-6.7% year-over-
10.0% 1.70
year), while sales increased 0.3% sequentially (+6.8% year-over-year).
As a result, the closely-watched ratio of inventories-to-sales remained
at 1.27 in February, unchanged vs. the revised January reading. For
5.0% 1.60
February, the inventory/sales ratio was 1.29 for manufacturers, 1.36 for
Inventory/Sales Ratio
retailers and 1.16 for wholesalers, all of which were unchanged from
YOY%
0.0% 1.50 January (the January results for manufacturers and retailers were
revised slightly in the current release). Total business sales increased
sequentially for the eighth time in the last nine months, posting a 0.3%
-5.0% 1.40
increase from January as increases in retailer (+0.2%) and wholesaler
(+0.8%) sales offset a slight sequential decline in manufacturer sales (-
-10.0% 1.30
0.1%). Meanwhile, inventories increased slightly across the board in
retail (+0.1%), wholesale (+0.1%) and manufacturing (+0.3%) channels
-15.0% 1.20 on a sequential basis in February.
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YOY% Change Inventory/Sales
Source: U.S. Census Bureau
CHART 32. DURABLE GOODS ORDERS

60%
Durable goods orders decreased in March for the first time in four
50% months. The Commerce Department reported a 1.3% sequential
decline in March orders compared to the consensus expectation of
40%
0.1% growth. Excluding the volatile transportation series, new orders
30% increased 2.8%. Transportation equipment orders declined 12.9% due
20%
to a significant drop in non-defense aircraft and parts (-67.1%)
following significant growth the prior two months. Defense aircraft and
YOY%
10%
parts (+2.0%) and motor vehicles and parts (+2.5%) both posted
0% sequential gains in March. The remaining segments exhibited broad
based order growth in March, including positive trends in machinery
-10%
(+8.0%), primary metals (+3.5%), and computers and related products
-20% (+12.9%). Outside of transportation, the only segment that reported an
-30%
order decline was fabricated metal products (-1.2%). Orders for non-
defense capital goods excluding aircraft (+4.0%), often viewed as an
-40%
indicator of business spending, increased for the second month in a
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
row and have now increased in four of the last five months. Meanwhile,
Durable Goods Non-Defense Capital Goods
shipments of manufactured durable goods increased 1.2% ($2.2
Source: U.S. Census Bureau billion) after two straight declines, while inventories increased for the
third consecutive month in March (0.2% or $0.5 billion), following a
positive revision to 0.5% growth in February.
Page 27 of 53
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SECTION 4. MONTHLY ORDERS

TABLE 16. EMERSON MONTHLY ORDERS
(Trailing Three-Month Average Year-Over-Year Percent Change)
Industrial Automation Climate Technologies Network Power Appliance & Tools Process Management Total
% of 2008 Sales 19% 15% 25% 15% 26% 100%
Jan-06 +5-10 +10-15 20+ +5 +10 +10-15
Feb-06 +5-10 +10-15 20+ +0-5 +15-20 +10-15
Mar-06 +10 +5 20+ +5 +15-20 +10-15
Apr-06 +5-10 +5-10 20+ +0-5 +10 +10-15
May-06 +10-15 +10-15 20+ +5-10 +15 +10-15
Jun-06 +10-15 20+ 20+ +5-10 +15-20 +15-20
Jul-06 +15 20+ +15-20 +5-10 20+ +15-20
Aug-06 +10-15 +10 +10-15 +5-10 +20 +10-15
Sep-06 +10-15 -5-10 +5-10 +0-5 +15-20 +5-10
Oct-06 +10-15 -10-15 +5-10 +0-5 +10-15 +5
Nov-06 +15 -10-15 +10-15 +0-5 +10 +5-10
Dec-06 +15 -5-10 +10-15 +0-5 +15-20 +5-10
Jan-07 +10-15 -5-0 +5-10 +0-5 +15 +5-10
Feb-07 +15 +0-5 0 +0-5 +15 +5-10
Mar-07 +10-15 +5-10 +5 +0-5 +10-15 +5-10
Apr-07 +10-15 +10-15 +5-10 +0-5 +10-15 +10
May-07 +10 +10-15 +10-15 0 +15-20 +10
Jun-07 +10 +5 +10-15 -5-0 +10 +5-10
Jul-07 +10 -5-0 +20 -5-0 +15 +5-10
Aug-07 +10-15 -5-0 +15-20 0 +10-15 +5-10
Sep-07 +10 +0-5 +20 -5-0 20+ +10-15
Oct-07 +10-15 +5-10 +20 -5-0 +15-20 +10-15
Nov-07 +10-15 +10-15 +15-20 -5-0 +20 +10-15
Dec-07 +15-20 +15 +10-15 -5-0 +15 +10-15
Jan-08 +10-15 +5-10 +15-20 -5 +10-15 +10
Feb-08 +10-15 +0-5 +15-20 -5-10 +15 +10
Mar-08 +15-20 +0-5 +15-20 -5-0 20+ +10-15
Apr-08 20+ +0-5 +15-20 -5-0 +15-20 +10-15
May-08 +15-20 +0-5 +10-15 -5-0 +10-15 +10
Jun-08 20+ +5-10 +5-10 -5-0 +15 +10-15
Jul-08 +15-20 +10-15 +0-5 -5-0 +15-20 +10
Aug-08 +10-15 +10-15 +0-5 -5-0 +10-15 +5-10
Sep-08 +5-10 +5-10 +0-5 -5 +0-5 +0-5
Oct-08 -5-0 -5 -5 -15-10 -5 -10-5
Nov-08 -15 -10-5 -15-10 -20-15 -15-10 -15-10
Dec-08 -25-20 -20-15 -15 -25 -10-5 -20-15
Jan-09 -30-25 -25-20 -25-20 -30-25 -15-10 -25-20
Feb-09 >-30 -30-25 -20-15 -25 -20-15 -25-20
Mar-09 >-30 -30 -25-20 -30-25 -30-25 -30-25
Apr-09 >-30 -30-25 -25-20 -30-25 -25 -30-25
May-09 >-30 -25-20 -20 -25-20 -20-15 -25
Jun-09 >-30 -20 -25-20 -30-25 -25-20 -30-25
Jul-09 >-30 -15-10 -20-15 -25 -25-20 -25
Aug-09 >-30 -15-10 -20-15 -25 -25-20 -25-20
Sep-09 >-30 -5-0 -15 -25-20 -15-10 -20-15
Oct-09 -30-25 +5 -15-10 -20 -10-5 -15-10
Nov-09 -20 +5-10 -5-0 -10 -5-0 -10-5
Dec-09 -15-10 +15-20 +0-5 -5-0 -15-10 -5-0
Jan-10 -5-0 20+ +10-15 +0-5 -10-5 +0-5
Feb-10 +5 20+ +5-10 +0-5 -10-5 +5-10
Mar-10 +10-15 20+ +10 +0-5 +10 +10-15
Source: Company reports
CHART 33. W. W. GRAINGER MONTHLY ORDERS

25%
20%
15%
M a r+ 1 0 %
10%
Percent Change YOY
5%
0%
-5 %
-1 0 %
-1 5 %
-2 0 %
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Page 28 of 53
May 2010
Equity Research
TABLE 17. CATERPILLAR MONTHLY TURBINE SALES

Reciprocating & Turbine Truck & Electric
Engines (Total) Bus Power Industrial Marine Petroleum
Jan-07 +14% +22% +17% +26% +23% -1%
Feb-07 -2% -26% +13% +12% +18% -7%
Mar-07 -7% -66% +17% +1% +28% +26%
Apr-07 -8% -70% +14% -5% +17% +36%
May-07 -5% -65% +15% +4% +19% +31%
Jun-07 -6% -64% +15% +1% +16% +29%
Jul-07 -6% -67% +19% +10% +15% +26%
Aug-07 -3% -69% +29% +19% +16% +27%
Sep-07 -1% -69% +34% +14% +15% +33%
Oct-07 -5% -73% +32% +10% +13% +31%
Nov-07 -6% -76% +23% +5% +24% +28%
Dec-07 -8% -77% +21% +6% +17% +19%
Jan-08 +1% -69% +18% +8% +30% +31%
Feb-08 +10% -52% +20% +13% +13% +39%
Mar-08 +16% +14% +11% +12% +1% +31%
Apr-08 +23% +46% +33% +20% -5% +19%
May-08 +22% +31% +32% +10% 0% +24%
Jun-08 +28% +28% +34% +19% +1% +35%
Jul-08 +18% +15% +21% +14% +1% +24%
Aug-08 +8% +4% +9% +8% -9% +13%
Sep-08 +3% -3% +15% +2% +11% -7%
Oct-08 +6% +1% +15% -1% +18% flat
Nov-08 +8% -8% +19% -2% +28% -1%
Dec-08 +6% -30% +3% -7% +35% +13%
Jan-09 +1% -55% +1% -19% +13% +16%
Feb-09 -1% -56% +1% -25% +19% +13%
Mar-09 -2% -62% +15% -30% +12% +13%
Apr-09 -9% -69% -12% -32% +48% +7%
May-09 -21% -75% -25% -37% +20% -5%
Jun-09 -32% -75% -33% -43% +15% -25%
Jul-09 -33% -72% -29% -46% +1% -28%
Aug-09 -27% -69% -21% -47% +13% -25%
Sep-09 -27% -68% -26% -49% -8% -13%
Oct-09 -30% -63% -27% -49% -25% -19%
Nov-09 -36% -48% -35% -47% -35% -29%
Dec-09 -36% -16% -27% -44% -29% -46%
Jan-10 -33% NM -27% -22% -18% -46%
Feb-10 -33% NM -26% -15% -23% -47%
Mar-10 -30% NM -28% -1% -22% -44%
TABLE 18. CATERPILLAR MONTHLY RETAIL MACHINE SALES

Asia/Pacific EAME L. America Total Int'l N. America Worldwide

Jan-07 +21% +27% +0% +20% -9% +4%
Feb-07 +10% +32% +1% +19% -10% +3%
Mar-07 +20% +43% +25% +32% -15% +6%
Apr-07 +16% +32% +29% +27% -14% +4%
May-07 +23% +35% +15% +27% -13% +4%
Jun-07 +12% +27% -1% +17% -13% -1%
Jul-07 +16% +32% -5% +19% -14% +1%
Aug-07 +10% +27% 0% +17% -9% +3%
Sep-07 +16% +26% +3% +19% -12% +3%
Oct-07 +16% +25% +21% +22% -14% +3.5%
Nov-07 +23% +31% +49% +32% -15% +9%
Dec-07 +19% +24% +70% +30% -13% +9%
Jan-08 +16% +21% +50% +25% -13% +7%
Feb-08 +11% +18% +43% +20% -15% +4%
Mar-08 +10% +14% +14% +13% -20% -1%
Apr-08 +19% +21% +15% +19% -18% +2.2%
May-08 +24% +9% +11% +13% -17% -1%
Jun-08 +31% +12% +23% +18% -15% +2%
Jul-08 +28% Flat +18% +9% -13% -1%
Aug-08 +32% -2% +23% +10% -18% -3%
Sep-08 +32% -4% +34% +11% -13% +1%
Oct-08 +16% -9% +35% +5% -12% -2%
Nov-08 +5% -15% +18% -3% -11% -6%
Dec-08 -13% -20% +11% -12% -21% -15%
Jan-09 -15% -27% +4% -17% -30% -22%
Feb-09 -8% -37% -2% -22% -35% -27%
Mar-09 -13% -44% -6% -28% -41% -33%
Apr-09 -21% -47% -9% -32% -51% -39%
May-09 -30% -46% -12% -35% -57% -43%
Jun-09 -27% -51% -23% -38% -59% -47%
Jul-09 -30% -50% -28% -40% -59% -48%
Aug-09 -33% -50% -37% -42% -57% -48%
Sep-09 -40% -55% -41% -47% -60% -52%
Oct-09 -36% -53% -41% -45% -58% -50%
Nov-09 -31% -53% -27% -40% -54% -45%
Dec-09 -12% -41% -24% -28% -46% -35%
Jan-10 +1% -35% -15% -19% -40% -27%
Feb-10 -2% -22% -20% -15% -30% -20%
Mar-10 +11% -18% -15% -7% -21% -11%
Page 29 of 53
May 2010
Equity Research
TABLE 19. PARKER-HANNIFIN QUARTERLY ORDERS

Industrial Industrial Climate & Total
No America International Aerospace Ind'l Controls PH
Sep-93 17% 3% -24%
Dec-93 15% 15% -17%
Mar-94 17% 12% -6%
Jun-94 19% 18% -9%
Sep-94 16% 29% 24%
Dec-94 15% 35% 24%
Mar-95 15% 26% 16%
Jun-95 12% 18% 29%
Sep-95 3% 12% 20%
Dec-95 6% 2% 14%
Mar-96 1% 0% 11%
Jun-96 3% 1% 6%
Sep-96 6% 4% 3%
Dec-96 4% 3% 15%
Mar-97 13% 7% 25%
Jun-97 15% 19% 27%
Sep-97 15% 19% 25%
Dec-97 18% 14% 20%
Mar-98 11% 15% 13%
Jun-98 8% 11% 9%
Sep-98 1% 5% 11%
Dec-98 -8% -1% -4%
Mar-99 -5% -6% 6%
Jun-99 3% 7% 4%
Sep-99 8% 3% -5%
Dec-99 21% 10% 6%
Mar-00 13% 12% -5%
Jun-00 11% 19% -1%
Sep-00 12% 21% 10%
Dec-00 -8% 18% 13%
Mar-01 -18% 3% 19%
Jun-01 -20% 0% 24%
Sep-01 -26% -7% 9% -11% 0%
Dec-01 -19% -11% -6% -10% -1%
Mar-02 -2% -1% -15% 8% -2%
Jun-02 2% -1% -29% 10% -3%
Sep-02 6% 2% -24% 3% 0%
Dec-02 6% 9% -11% 2% 9%
Mar-03 -5% 4% -5% -2% 15%
Jun-03 -7% -1% 14% -7% 20%
Sep-03 -2% 1% 11% -11% 15%
Dec-03 12% 8% -9% 3% 11%
Mar-04 21% 17% 1% 3% 7%
Jun-04 26% 20% 15% 5% 2%
Sep-04 17% 15% 19% 1% 7%
Dec-04 10% 10% 25% -5% 10%
Mar-05 5% 9% 12% -3% 9%
Jun-05 2% 0% 7% -3% 14%
Sep-05 8% 3% 8% 11% 7%
Dec-05 9% 8% 13% 21% 10%
Mar-06 9% 9% 23% 16% 11%
Jun-06 8% 13% 15% 22% 12%
Sep-06 5% 14% 18% 6% 9%
Dec-06 -1% 13% 10% -2% 5%
Mar-07 -2% 11% 2% -4% 2%
Jun-07 -3% 14% 8% -6% 3%
Sep-07 0% 19% 12% -13% 7%
Dec-07 4% 16% 19% -6% 10%
Mar-08 2% 11% 28% -1% 9%
Jun-08 4% 8% 23% -7% 8%
Sep-08 2% -2% 9% 5% 1%
Dec-08 -18% -28% 2% -28% -20%
Mar-09 -35% -41% -12% -36% -34%
Jun-09 -40% -43% -22% -31% -38%
Sep-09 -27% -25% -23% -17% -25%
Dec-09 -3% 0% -27% 6% -7%
Mar-10 30% 42% -22% 38% 23%
Page 30 of 53
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Equity Research
CHART 34. KENNAMETAL MONTHLY ORDER RATE

(Three-Month Rolling Average Year-Over-Year Percent Change)
20%
March +11%
10%
0%
YOY Percent Change
-10%
-20%
-30%
-40%
-50%
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Page 31 of 53
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Equity Research
SECTION 5. END MARKET AND GEOGRAPHIC BREAKDOWNS BY COMPANY
TABLE 20. END MARKET BREAKDOWN

End Market AIMC AIT AOS AME ATU B BEZ BRC CFX CIR CLC CR DCI DHR ETN FELE FSS GDI GGG GNRC HSC IEX IR ITT KAMN KDN KMT LECO LII NDSN OSK PH PNR RBC RBN ROLL ROP TEX WBC WSO WTS
Aerospace (Commercial) 12% 15% 5% 2% 17% 2% 4% 8% 4% 12% 3% 9% 10% 31%
Aerospace (Military) 9% 7% 7% 3% 8% 3% 5% 24% 12% 9% 21%
Automotive 7% 3% 6% 17% 2% 4% 3% 11% 15% 4% 13% 4% 8% 3% 5%
Basic Materials 9% 32% 5% 5% 5% 46% 12% 20%
Chemical Processing 8% 4% 9% 5% 12% 24%
Construction (Non-Residential) 28% 2% 12% 2% 2% 5% 16% 6% 1% 28% 12% 38% 42% 34% 6% 12% 2% 23% 32% 4% 16% 9% 56% 3% 55%
Construction (Residential) 72% 10% 7% 36% 23% 60% 12% 2% 60% 8% 3% 30% 34% 7% 89% 45%
Consumer-Related 14% 2% 22% 7% 13% 2% 8% 8% 65% 9% 4%
Defense 2% 7% 6% 47% 30%
Semiconductor/Electronics 7% 2% 7% 8% 21% 8% 9% 4% 2%
Fire & Rescue (Municipal) 56% 21% 15%
Food & Beverage 5% 8% 2% 2% 2% 5% 2%
General Industrial 33% 26% 27% 23% 91% 45% 44% 30% 8% 26% 27% 20% 14% 28% 50% 34% 4% 64% 70% 29% 42% 7% 18% 21% 41% 17% 6%
Industrial Process/Control 9% 8% 11% 14% 28%
Marine 2% 24% 3%
Machine Tools 8% 18% 8% 5%
Medical/Pharmaceutical 3% 2% 2% 27% 8% 19% 3% 2% 23% 7%
Medium/Heavy Truck 2% 8% 11% 22% 2% 20% 1% 13% 30% 9% 9% 5% 15% 8% 12% 95%
Mobile/Agriculture 13% 7% 8% 16% 6% 25% 8% 26% 7% 3% 15% 4% 24% 13% 2% 1% 1%
Oil & Gas 10% 20% 18% 15% 65% 12% 3% 10% 24% 24% 5% 10% 12% 22% 7% 3% 33% 3% 15%
Other 4% 4% 11% 8% 12% 8% 13% 6% 3% 8% 9% 7% 9% 6%
Power Generation 2% 7% 4% 2% 4% 11% 4% 16% 10% 4% 2% 6% 10%
Refrigeration (Commercial) 4% 8% 17% 3% 2% 8%
Research 10% 13%
Water Treatment/Wastewater
(Municipal) 5% 10% 14% 3% 11% 18% 10% 7% 17%
Total Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Page 32 of 53
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TABLE 21. GEOGRAPHIC BREAKDOWN

Geography AIMC AIT AME AOS ATU B BEZ BRC CFX CLC CR DCI DHR ETN FELE FSS GDI GGG GNRC HSC IEX IR ITT KAMN KDN KMT LECO LII NDSN OSK PH PNR RBC RBN ROLL ROP TEX WBC WSO WTS
United States 88% 50% 80% 61% 82% 24% 62% 49% 52% 63% 70% 32% 96% 55% 70% 65% 70% 40% 89% 59% 37%
Canada 11% 6% 8% 3% 6% 3% 4% 4% 4% 6%
Mexico 1%
North America 70% 100% 50% 86% 50% 61% 90% 46% 24% 73% 62% 43% 49% 55% 63% 76% 35% 59% 100% 33% 55% 66% 61% 91% 70% 50% 66% 83% 38% 80% 61% 69% 74% 50% 89% 65% 37% 7% 98% 63%
Germany 6%
United Kingdom 7%
Eastern Europe 5% 5%
Europe 22% 16% 41% 3% 29% 48% 12% 21% 32% 31% 24% 23% 39% 26% 51% 25% 19% 28% 5% 30% 19% 11% 37% 15% 26% 20% 6% 27% 18% 36% 76% 33%
China 4% 4%
Asia/Pacific* 8% 15% 7% 4% 25% 16% 21% 13% 12% 16% 15% 5% 10% 12% 7% 6% 25% 7% 7% 17% 14% 9% 12% 4%
Latin/South America 3% 6% 9% 4% 6% 7% 6% 4%
Other/International 19% 7% 9% 39% 6% 15% 17% 4% 7% 37% 1% 6% 5% 3% 3% 4% 4% 30% 20% 15% 5% 3% 9% 11% 8% 28% 5% 2%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
*Asia/Pacific includes Japan.
Page 33 of 53
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CHART 35. AIMC END MARKET BREAKDOWN CHART 36. AIMC GEOGRAPHIC BREAKDOWN
Other Automotive Asia/Pacific

4% 7% 8%
Oil & Gas
10% Basic Materials
9%
Defense
2%
Europe
Mobile/Agriculture Food & Beverage 22%
13% 5%
Machine Tools
8%
North America
70%
Industrial Process/Control General Industrial

9% 33%
Sources: Company reports and KeyBanc Capital Markets Inc. estimates Sources: Company reports and KeyBanc Capital Markets Inc. estimates
CHART 37. AIT END MARKET BREAKDOWN CHART 38. AIT GEOGRAPHIC BREAKDOWN
Mobile/Agriculture Automotive Mexico

7% 4% Canada 3%
9%
Machine Tools
21%
Basic Materials
34%
General Industrial Food & Beverage

27% 7% United States
88%
Page 34 of 53
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CHART 39. AME END MARKET BREAKDOWN CHART 40. AME GEOGRAPHIC BREAKDOWN
Research Aerospace (Commercial)

10% 12%
Other/International
19%
Power Generation
7%
Aerospace (Military)
9%
Chemical Processing United States

8% Asia/Pacific 50%
Oil & Gas
15%
20%
Construction (Commercial)
2%
Medium/Heavy Truck
2% Consumer-Related
14%
Food & Beverage Europe
2% 16%
Semiconductor/Electronics Defense
7% 7%
CHART 41. AOS END MARKET BREAKDOWN CHART 42. AOS GEOGRAPHIC BREAKDOWN
Other/International
7%
Asia/Pacific
7%
28%
Construction (Residential)
72%
North America
86%
Page 35 of 53
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Equity Research
CHART 43. ATU END MARKET BREAKDOWN CHART 44. ATU GEOGRAPHIC BREAKDOWN
Power Generation Asia/Pacific

Automotive 7%
4%
6%
Other
11%
Construction (Non-Residential)
12%
Oil & Gas 10%
18%
Europe North America
39% 54%
Consumer-Related
2%
Medium/Heavy Truck
8%
Marine General Industrial
2% 27%
CHART 45. B END MARKET BREAKDOWN CHART 46. B GEOGRAPHIC BREAKDOWN
Power Generation
2%
Other Aerospace (Commercial)
8% 15%
Mobile/Agriculture
8%
7% Other/International
39%
Medium/Heavy Truck
11%
Automotive United States

17% 61%
General Industrial Basic Materials

23% 5%
2%
Semiconductor/Electronics
2%
Page 36 of 53
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CHART 47. BEZ END MARKET BREAKDOWN CHART 48. BEZ GEOGRAPHIC BREAKDOWN
Latin/
Basic Materials Asia/Pacific South America
5% Construction (Non-Residential) 4% 3%
2%
Europe
Food & Beverage 3%
2%
Canada
8%
General Industrial United States

91%
82%
CHART 49. BRC END MARKET BREAKDOWN CHART 50. BRC GEOGRAPHIC BREAKDOWN
Power Generation
4% Construction
2%
5%
Other Asia/Pacific
12% 25%
Medical/Pharmaceutical Consumer
3% 22%
North America
46%
7%
Europe
General Industrial
29%
45%
Page 37 of 53
May 2010
Equity Research
CHART 51. CFX END MARKET BREAKDOWN CHART 52. CFX GEOGRAPHIC BREAKDOWN
Defense
Other/International
Power Generation 6%
6%
11%
Latin/South America
6% North America
24%
Oil & Gas

15% Asia/Pacific
16%
General Industrial
44%
Marine
24%
Europe
48%
CHART 53. CLC END MARKET BREAKDOWN CHART 54. CLC GEOGRAPHIC BREAKDOWN
Aerospace
Aerospace
(Commercial)
(Military)
2%
Oil & Gas 15%
Automotive
12% 4%
Consumer-Related
7%
Food & Beverage
2%
Mobile/Agriculture
Europe
16%
12%
General Industrial
30%
North America
Medium/Heavy Truck 73%
22%
Medical/Pharmaceutical
2%
Page 38 of 53
May 2010
Equity Research
CHART 55. CR END MARKET BREAKDOWN CHART 56. CR GEOGRAPHIC BREAKDOWN
(Municipal)
5%
Other/International
Aerospace (Commercial) 17%
17%
Power Generation
16%
8%
Other
8%
Europe
Construction (Commercial) 21%
Oil & Gas 9%
North America
3%
62%
Mobile/Agriculture
6%
Medium/Heavy Truck
16%
2%
2% General Industrial
8%
CHART 57. DCI END MARKET BREAKDOWN CHART 58. DCI GEOGRAPHIC BREAKDOWN
Aerospace (Commercial)
2% Aerospace (Military)
Power Generation 3% Other
10% Construction (Non- 2%
Residential)
6%
Semiconductor/
Electronics
8%
Asia Pacific
19%
Mobile/Agriculture
25% North America
49%
General Industrial Europe

26% 30%
Medium/Heavy Truck
20%
Page 39 of 53
May 2010
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CHART 59. DHR END MARKET BREAKDOWN CHART 60. DHR GEOGRAPHIC BREAKDOWN
Water Treatment/Wastewater Aerospace (Commercial)

Latin/South America
(Municipal) 4%
Automotive 7%
10%
3%
Power Generation Construction (Commercial)

Asia/Pacific
4% 1%
13%
Consumer-Related
13%
Oil & Gas
10%
Medium/Heavy Truck North America

1% 49%
General Industrial
27%
Europe
Medical/Pharmaceutical 31%
27%
CHART 61. ETN END MARKET BREAKDOWN CHART 62. ETN GEOGRAPHIC BREAKDOWN
Mobile/Agriculture Aerospace (Commercial)

7% Latin/South America
8%
9%
4%
Asia/Pacific
8%
Medium/Heavy Truck
15%
Automotive
13%
Europe
19%
General Industrial
13% United States
61%
Construction (Residential) Canada

5% 3%
35%
Page 40 of 53
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Equity Research
CHART 63. FELE END MARKET BREAKDOWN CHART 64. FELE GEOGRAPHIC BREAKDOWN
(Municipal)
14%
Construction (Residential) International

36% 37%
Oil & Gas

24%
United States
63%
Mobile/Agriculture
26%
CHART 65. FSS END MARKET BREAKDOWN CHART 66. FSS GEOGRAPHIC BREAKDOWN
Europe
30%
Fire & Rescue (Municipal)

56%
General Industrial
14% United States
75%
Page 41 of 53
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Equity Research
CHART 67. GDI END MARKET BREAKDOWN CHART 68. GDI GEOGRAPHIC BREAKDOWN
Other/International
(Municipal)
Chemical Processing 3%
4%
5% Latin/South America
Other 5%
Food & Beverage
11%
5%
Asia/Pacific
13%
North America
Oil & Gas 44%
General Industrial
22% 33%
Mobile/Agriculture
5%
Medium/Heavy Truck Medical/Pharmaceutical

9% 6% Europe
35%
CHART 69. GGG END MARKET BREAKDOWN CHART 70. GGG GEOGRAPHIC BREAKDOWN
Automotive
Asia/Pacific
15%
15%
12%
General Industrial
50%
Europe
26% The Americas
59%
23%
Page 42 of 53
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Equity Research
CHART 71. GNRC END MARKET BREAKDOWN CHART 72. GNRC GEOGRAPHIC BREAKDOWN
Consumer-Related Canada
2% 4%
Construction (Non-Residential)
38%
60%
United States
96%
CHART 73. HSC END MARKET BREAKDOWN CHART 74. HSC GEOGRAPHIC BREAKDOWN
Other/International
Oil & Gas
5%
5%
Mobile/Agriculture Latin/South America
7% 6%
Asia/Pacific
5%
North America
33%
Basic Materials
46%
42%
Europe
51%
Page 43 of 53
May 2010
Equity Research
CHART 75. IEX END MARKET BREAKDOWN CHART 76. IEX GEOGRAPHIC BREAKDOWN
Other/International
Water Treatment/Wastewater 3%
(Municipal)
Chemical Processing Latin/South America
3%
9% 7%
Other
9%
Asia/Pacific
10%
Consumer-Related
Oil & Gas 14%
11%
North America
55%
Fire & Rescue (Municipal) Europe

Medical/Pharmaceutical 21% 25%
24%
Food & Beverage

Industrial Process/Control 4%
5%
.
CHART 77. IR END MARKET BREAKDOWN CHART 78. IR GEOGRAPHIC BREAKDOWN
Other/International
Refrigeration (Commercial) 3%
8% Asia/Pacific
11%
Mobile/Agriculture
3%
Medium/Heavy Truck
9% Construction (Non-Residential)
34%
Europe
18%
North America
68%
General Industrial
34%
12%
Page 44 of 53
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CHART 79. ITT END MARKET BREAKDOWN CHART 80. ITT GEOGRAPHIC BREAKDOWN
Other/International
Automotive 4%
4%
Water Treatment/Wastewater Asia/Pacific
(Municipal) 7%
6%
19%
Other
3%
Europe
28%
Industrial Process/Control
15% North America
61%
Defense
49%
General Industrial
4%
CHART 81. KAMN END MARKET BREAKDOWN CHART 82. KAMN GEOGRAPHIC BREAKDOWN
Other/International
4%
12% Europe
5%
24%
General Industrial
64%
North America
91%
Page 45 of 53
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CHART 83. KDN END MARKET BREAKDOWN CHART 84. KDN GEOGRAPHIC BREAKDOWN
Mobile/Agriculture
12%
15%
Other/International
30%
United States
70%
General Industrial
73%
CHART 85. KMT END MARKET BREAKDOWN CHART 86. KMT GEOGRAPHIC BREAKDOWN
Other Aerospace (Commercial)

8% 9%
Other/International
20%
Oil & Gas

12% Automotive
13%
Mobile/Agriculture
4%
North America
5% Construction (Commercial)
12%
Machine Tools
8%
Europe
30%
General Industrial
29%
Page 46 of 53
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Equity Research
CHART 87. LECO END MARKET BREAKDOWN CHART 88. LECO GEOGRAPHIC BREAKDOWN
2%
2%
Other/International
15%
Oil & Gas Consumer-Related
22% 8%
Europe
19%
General Industrial North America

Mobile/Agriculture 42% 66%
24%
CHART 89. LII END MARKET BREAKDOWN CHART 90. LII GEOGRAPHIC BREAKDOWN
Asia/Pacific
6%
Refrigeration (Commercial)
17% Construction (Commercial) Europe
23% 11%
North America
83%
60%
Page 47 of 53
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Equity Research
CHART 91. NDSN END MARKET BREAKDOWN CHART 92. NDSN GEOGRAPHIC BREAKDOWN
3% Automotive
4%
General Industrial
7%
Asia/Pacific
25%
North America
38%
21%
Consumer-Related
65%
Europe
37%
CHART 93. OSK END MARKET BREAKDOWN CHART 94. OSK GEOGRAPHIC BREAKDOWN
Other/International
5%
Medium/Heavy Truck
15%
Europe
15%
32%
Fire & Rescue (Municipal)

15%
8%
North America
80%
Defense
30%
Page 48 of 53
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CHART 95. PH END MARKET BREAKDOWN CHART 96. PH GEOGRAPHIC BREAKDOWN

3%
Power Generation Latin/South America
2% 6%
10%
Oil & Gas Asia/Pacific
7% 7%
9%
Mobile/Agriculture
13%
Automotive
8%
Europe
26%
Medium/Heavy Truck Construction (Commercial)

8% 4%
North America
61%
Medical/Pharmaceutical 3%
2%
Machine Tools Semiconductor/Electronics
5% 8%
General Industrial
18%
CHART 97. PNR END MARKET BREAKDOWN CHART 98. PNR GEOGRAPHIC BREAKDOWN
Latin/South America
Water 4%
Treatment/Wastewater Asia/Pacific
(Municipal) Construction (Non-
7%
10% Residential)
16%
Other
9%
Europe
Oil & Gas
20%
3%
Mobile/Agriculture
2%
Construction (Residential) United States

30% Canada
65%
4%
General Industrial
21%
Semiconductor/
Electronics
9%
Page 49 of 53
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CHART 99. RBC END MARKET BREAKDOWN CHART 100. RBC GEOGRAPHIC BREAKDOWN
Other/International
Construction (Non- 3%
Other Residential)
7% 9% Asia/Pacific
17%
Europe
6%
General Industrial 34% Canada
4%
41%
United States
70%
Consumer-Related
9%
CHART 101. RBN END MARKET BREAKDOWN CHART 102. RBN GEOGRAPHIC BREAKDOWN
Other/International
Water Treatment/Wastewater 9%
(Municipal)
7%
Other Chemical Processing

9% 25% Asia/Pacific
14%
North America
50%
Oil & Gas

35%
Europe
27%
24%

Page 50 of 53
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Equity Research
CHART 103. ROLL END MARKET BREAKDOWN CHART 104. ROLL GEOGRAPHIC BREAKDOWN
Oil & Gas

11%
Medium/Heavy Truck
12%
31%
General Industrial
17%
4%
Basic Materials Aerospace (Military)

12% 21% North America
89%
CHART 105. ROP END MARKET BREAKDOWN CHART 106. ROP GEOGRAPHIC BREAKDOWN
Automotive Semiconductor/Electronics Other/International

3% 2% 8%
(Municipal)
General Industrial Asia/Pacific
17%
6% 9%
Research
13%
Industrial Process/Control Europe
28% 18%
2%
North America
65%
Power Generation
6%
7%
Oil & Gas
Mobile/Agriculture
15%
1%
Page 51 of 53
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Equity Research
CHART 107. TEX END MARKET BREAKDOWN CHART 108. TEX GEOGRAPHIC BREAKDOWN
Basic Materials
10%
Power Generation
20%
28%
1% North America
36%
Mobile/Agriculture
7%
Other Europe
56% 36%
CHART 109. WBC END MARKET BREAKDOWN CHART 110. WBC GEOGRAPHIC BREAKDOWN
Automotive Other/International North America

5% 5% 7%
Asia/Pacific
12%
Europe
Medium/Heavy Truck
76%
95%
Page 52 of 53
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Equity Research
CHART 111. WSO END MARKET BREAKDOWN CHART 112. WSO GEOGRAPHIC BREAKDOWN
Commercial Construction
Refrigeration (Commercial) 3%
8%
North America
100%
Residential Construction
89%
CHART 113. WTS END MARKET BREAKDOWN CHART 114. WTS GEOGRAPHIC BREAKDOWN
Asia/Pacific
4%
Europe
Construction 33%
(Residential)
45%
Construction
(Commercial)
55%
North America
63%
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May 2010

Industrial Sector Research Monthly Update on Key End Markets

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Industrial Sector Research Monthly Update on Key End Markets

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Industrial

The Industrial Cycle:

Steve Barger Jeffrey D. Hammond Anthony Kure Matt J. Summerville

Joe Box Joshua C. Pokrzywinski Joseph K. Radigan

Important disclosures for the companies

KeyBanc Capital Markets Inc.,

Reg A/C Certification

The Industrial Cycle: Monthly Update on Key End Markets

When Good Is Just Not Good Enough

Optimistic on the Recovery Prospects, Realistic About Several Headwinds

SECTION 1. END MARKET AND MACROECONOMIC DATA

¦ Non-Cyclical Semicon ductor

TABLE 1. END MARKET AND MACROECONOMIC DATA

TABLE 2. END MARKET AND MACROECONOMIC DATA (CONTINUED)

SECTION 2. CALENDAR, COMMODITIES AND CURRENCY

MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY

8:30 a.m. Initial Claims 8:30 a.m. Unemployment Rate

8:30 a.m. Initial Claims 8:30 a.m. Retail Sales

TABLE 3. COMMODITY PRICES

TABLE 4. FOREIGN CURRENCY VALUATION

On a monthly closing basis, gold notched a new high in April,

Sources: Baseline, Bloomberg

CHART 5. U.S. DOLLAR PER POUND

Source: U.S. Federal Reserve

SECTION 3. END MARKET DISCUSSIONS

Sources: Boeing and Airbus; Airbus orders not available 1990-1994

CHART 7. ESTIMATED OEM AEROSPACE BACKLOG

Sources: Boeing, Airbus and KeyBanc Capital Markets Inc. estimates

2002 71.3 -8.2% 26.1 0.5% 370¢

Crude Oil Price ($ Per Barrel)

June 2007 212.4 1.6% 67.5 -5.6% $120

Apr. 2008 301.8 47.1% 112.6 76.0% $20

Source: Air Transport Association

TABLE 6. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE AEROSPACE MARKET EXPOSURE

CHART 10. TRACTOR & COMBINE SALES

TABLE 7. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE AGRICULTURE MARKET

TABLE 9. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE AUTOMOTIVE MARKET EXPOSURE

YOY Percent Change

Source: U.S. Department of Commerce

CHART 12. VALUE OF PUBLIC CONSTRUCTION

Source: U.S. Department of Commerce

CHART 13. ABI 3-MONTH MOVING AVERAGE LAGGED 8 MONTHS VS.

40% % changes year over year 66

TABLE 10. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE COMMERCIAL

30-Yr. Mortgage - Percent

CHART 15. EXISTING HOME SALES

YOY Percent Change

Sources: The National Association of Realtors and Fannie Mae

TABLE 11. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE RESIDENTIAL CONSTRUCTION

CHART 16. CATERPILLAR NORTH AMERICAN DEALER SALES

Source: Institute of Supply Management

CHART 18. CAPACITY UTILIZATION

Source: Federal Reserve

CHART 19. INDUSTRIAL PRODUCTION INDEX

TABLE 12. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE GENERAL INDUSTRIAL

OIL & GAS

CHART 20. NORTH AMERICAN AND INTERNATIONAL RIG COUNTS

Source: Baker Hughes

Source: Semiconductor Equipment and Materials International (SEMI)

CHART 22. WORLDWIDE SEMICONDUCTOR SALES

Source: Semiconductor Industry Association (SIA)

TABLE 14. KEYBANC CAPITAL MARKETS INDUSTRIAL UNIVERSE SEMICONDUCTOR MARKET