© 1999-2009 wRatings Corporation. All rights reserved. The wRatings research methods in this report are protected by US Patent 6,658,391 and other patents

© 1999-2009 wRatings Corporation. All rights reserved.

The wRatings research methods in this report are protected by US Patent 6,658,391 and other patents pending. All trademarks are the properties of their respective owners.

Fortna Customer Analysis

October 2009

wratings.com© 1999-2009 wRatings Corporation. All rights reserved.

Page 2

CONTENTS AT A GLANCE

2 Summary & Purpose (this page)

3 What is the wRating System?

4 How The W Score™ is Calculated

5 wRatings Coverage & Fortna Customer

List

6 Summary Analysis

7 Year-Over-Year Highlights

8 Retail Sector Analysis

9 Industrials & Materials Sector Analysis

10 Conclusions

11 Appendix

12 Backtest: Ratings = Market Return

13 The Data Factory

14 Key Principles

15 Contact wRatings

EXECUTIVE SUMMARY & PURPOSE

PURPOSE

The wRatings Corporation possesses the

only known database measuring the

competitive strengths of market leading

companies. By blending scores of

economic profit with the ability to meet

customer expectations, wRatings reliably

predicts the performance of companies for

investors, business and consultants.

To predict the potential impact of using

Fortna on a corporation, wRatings isolated

the top Fortna customers in its database for

competitive comparison against non-Fortna

customers.

• This 2009 Fortna Customer report updates and replaces the 2008 analysis by wRatings. This report provides analysis at the sector level, with historical data back to 1999 to encompass a more detailed assessment of Fortna performance.

• At wRatings, we cover 5,000+ companies that represent all sectors of the US economy. We limit coverage to only public companies that report financials on a quarterly basis, and are listed on a major North American stock exchange (e.g. NASDAQ, NYSE, TSE).

• Fortna provided wRatings with a list of their top customers through the first half of 2009. To examine the impact of Fortna on the competitive strength of these 125+ companies, wRatings segmented our coverage into two groups: Fortna Customer Group and Non-Fortna Customer Groups.

• We found 37 public companies from the Fortna list included in the wRatings coverage. We then examined the Fortna impact at three levels: Summary, Industrials & Materials and Retail.

• We measured the trailing twelve month (TTM) performance of each group from 1999 through 2009-Q2.

• Based on a year-over-year analysis, the Fortna Customer Group has built superior customer strength over Non-Fortna Customers of 15.0% and 13.2% on average over the past 3- and 5-years respectively.

NOTE:This analysis cannot determine a cause-effect relationship, nor does it hold up at the individual company. Analysis of other technology-driven companies vs. non-technology driven companies may yield similar results.


Page 3

Where You’ve Seen the wRatings System

WHAT IS THE wRATINGS SYSTEM?

Our objective is to measure in-flight

company performance by continually

interviewing customers on how well the

business is meeting their expectations.

We vet both our consumer and business

panels to ensure an accurate and

representative sample.

We interview customers in their most

natural form, which is typically at the time

they need to make a buying decision. This

provides several advantages for our data

versus other sources:

- Recruitment is simple and non-invasive

- Easily scalable by geography/industry

- Limits interviewer bias

- Enhances the quality of our data

Each interview is conducted online and

takes only a few minutes. We blend the

scores from customer interviews with a

calculation of economic profit.

A W Score™ ranks the competitive

strength of the company relative to

every other company in our coverage.

The wRatings data is licensed for

distribution by FactSet Research Systems

and S&P’s CapitalIQ research platforms.

Customer Expectations

An independent & proprietary data source that measures

company performance through real-time monitoring of:

Business Execution Economic Profit Momentum

200,000+ Vetted Panel 5,000+ Stocks 5-Year & Current Average

W Score™[competitive strength]

CapitalInvestment

InvestmentPeriod

Competitive Advantage Period (CAP)*

Price EfficiencyPeriod

High Investment& Limited or No Returns

Sustainable Returns& Decreasing Investment

Below Average Returns &Limited Investment

WACC(Weighted AverageCost of Capital)

ROIC(Return On Invested Capital)


Page 4

HOW THE W SCORE™ IS CALCULATED

A company’s W Score™ is equal parts

historical and forecast. Each part is a

percentile rank of their raw scores relative

to all other companies in the wRatings

universe of coverage. This ensures that

every W Score is directly comparable to

across time-frame and industry.

For the historical portion, we average the

percentage economic profit / revenue (EPR)

over the last five years plus the current EPR

year-to-date. Each company’s EPR is then

percentile ranked against all others for that

time period.

For the forecast portion, we average scores

across the 9 moat barriers. Customers are

only willing to pay for what they need and

want, so we measure expectation scores

separate from delivery scores.

This solves the issue where a company is

building a superb product but customers no

longer want to buy it – for example, a vinyl-

disc record manufacturer. This also solves

the issue where customers would love to

buy something (high expectations) but a

company cannot deliver well – for example,

General Motors in early 2009.

Moat barrier scores are proven leading

indicators to generating economic profit.

So companies with high moat scores

consistently over multiple quarters should

generate economic profit, or investors

should be questioning management on their

performance.

Customer Expectations Business Execution Economic Profit Momentum

CapitalInvestment

InvestmentPeriod








Every company’s performance is ranked relative

to the wRatings universe of coverage in three areas:

25%Average scores across functional & emotional needs of moat barriers

50%Average of the

Economic Profit / Revenuein each of the previous 5 years plus current YTD

Eco

nom

ies

of

Skill

Eco

nom

ies

of

Sca

le

Cost

Conta

inm

ent

Desi

gn

Dom

inance

Bra

nd

Perc

epti

on

Routi

ne R

elia

nce

Ch

an

nel Lo

ck-O

ut

Sw

itch

ing

Lock

-In

Netw

ork

Eff

ect

Eco

nom

ies

of

Skill

Eco

nom

ies

of

Sca

le

Cost

Conta

inm

ent

Desi

gn

D

om

inance

Bra

nd

Perc

epti

on

Routi

ne R

elia

nce

Ch

an

nel Lo

ck-O

ut

Sw

itch

ing

Lock

-In

Netw

ork

Eff

ect

25%Average scores across functional & emotional

delivery of moat barriers

5 Y

ears

Ag

o

4 Y

ears

Ag

o

3 Y

ears

Ag

o

2 Y

ears

Ag

o

Last

Cale

nd

ar

Year

Year

to D

ate


Page 5

92

290

224

465

982

550

811

275

289

620

264

194

Automotive

Consumer Goods

Electronics

Energy

Finance

Health Care

Industrials & Materials

Media

Retail

Technology

Telecom

Travel & Transport

THE wRATINGS COVERAGE & FORTNA

At wRatings, we cover 5,000+

companies that represent all sectors of

the US economy. For a list of our

coverage, go to wRatings.com.

We limit coverage to only public companies

that report financials on a quarterly basis,

and are listed on a major North American

stock exchange (e.g. NASDAQ, NYSE, TSE).

Fortna provided wRatings with a list of their

top customers through the first half of

2009.

To examine the impact of Fortna on the

competitive strength of these 125+

companies, wRatings segmented our

coverage into two groups:

1) Fortna Customer Group

2) Non-Fortna Customer Groups

We found 37 public companies from the

Fortna list included in the wRatings

coverage. The remaining companies in the

Fortna customer groups are privately held

and do not publish detailed financials

(which is a requirement to be in the

wRatings universe of coverage).

To conduct the analysis, wRatings

examined the Fortna impact at three levels:

Summary, Industrials & Materials and

Retail.

Top Sectors in which Fortna Competes

Total

Companies:

5,056


Page 6

SUMMARY ANALYSIS

SCORES

A company’s W Score is a blended view of

financial and customer strength. We

measure financial strength by economic

profit/revenues, where EP is how much

money a company earns above its cost of

capital. We measure customer strength by

Moat Barriers, which is a proprietary

measure of how well a company is creating

barriers to entry to protect rivals from

taking customers away.

ANALYSIS

The starting point for analysis is 1999-Q1

showing the Fortna Customer group with a

W Score below that of the non-Fortna

Customer group.

Over the next 10.5 years, the Fortna

Customer group increased its competitive

strength by a 1.22% compound annual

growth rate (CAGR) whereas the non-Fortna

Customer group decreased by 0.50% CAGR.

Based on this CAGR average, we found the

Fortna Customer group grew more

competitive than the non-Fortna customers

at a rate of 1.71% per year since 1999.

Taken in total over 10 years, the Fortna

customer group has increased their

competitive strength 17.1% more than non-

Fortna customers.

Source: wRatings 2009

Competitive Strength 10-Year TTM Trend

56.9

50.449.2

51.7

44

46

48

50

52

54

56

58

60

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

W Score™Fortna Customer Group Non-Fortna Customer Group

Moat Barriers Rank by Year

35%

40%

45%

50%

55%

60%

65%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Fortna Customer Group Non-Fortna Customer Group

Economic Profit / Revenues Rank by Year

35%

40%

45%

50%

55%

60%

65%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009



Page 7

YEAR-OVER-YEAR ANALYSIS

ANALYSIS

To better examine the impact of Fortna

solutions on their customer group, we

extracted the W Scores at the trailing

twelve month (TTM) level at year-end

starting in 2005.

According to Fortna, the level of solutions

available to customers was significantly

expanded starting in 2007.

Averages of W Scores were then analyzed

at the 1-, 3- and 5-year time periods. Note

that data for the 3- and 5-year time periods

only reflect scores through Q2-2009.

Based on a year-over-year analysis, the

Fortna Customer Group has built superior

customer strength over Non-Fortna

Customers of 15.0% and 13.2% on average

over the past 3- and 5-years respectively.


56.9

50.449.2

51.7

44

46

48

50

52

54

56

58

60

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


W Scores™ (TTM) 2005 2006 2007 20082009

*

Fortna 55.2 55.3 55.0 57.0 56.9

Non-Fortna 50.5 49.5 48.6 49.0 49.2

Strength Difference 9.2%11.6

%

13.1

%

16.2

%

15.7

%3-Year Average: 15.0%

5-Year Average: 13.2%


* Through Q2


Page 8


30%

35%

40%

45%

50%

55%

60%

65%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009



35%

40%

45%

50%

55%

60%

65%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009



38

40

42

44

46

48

50

52

54

56

58

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


RETAIL SECTOR ANALYSIS

SCORES









barriers to entry to protect rivals from taking

customers away.

SECTOR ANALYSIS

Retail covers industries such as Department

Stores, Grocery, Home Furnishing and

Specialty Stores. The Retail Fortna Customer

group grew at a compound annual growth

rate (CAGR) of 2.91% faster than its peers

over 10 years.

Economic Profit has been hit hard for all

retailers over the past 7 years. Yet, during

that period, the Fortna Customer Group

continued to rank above its peer group.

Significant impact has been made on the

retail shopper for the Fortna Retailer group,

and the impact has been consistent from

year to year. The average ranking has risen

a total of 27.5% in terms of customer moat

barriers, compared to only 13.4% for Non-

Fortna retailers.

This shows the increasing impact that supply

chain solutions has on the delivery chain

capabilities of retailers in areas such as

preventing out of stocks, merchandising mix

and inventory forecasting.



Page 9

INDUSTRIALS & MATERIALS SECTOR ANALYSIS

SCORES









barriers to entry to protect rivals from

taking customers away.

SECTOR ANALYSIS

Industrials & Materials cover industries such

as Aerospace & Defense, Chemicals, Food

Wholesalers, Home Building and Steel &

Metals.

For each of the past 10 years, the Fortna

Customer group has outperformed the non-

Fortna Customer group in terms of

economic profit and moat barriers.

The Fortna Customer group has performed

the best during the years just following a

recession when the economy is at its

greatest risk.



38

43

48

53

58

63

68

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009



35%

40%

45%

50%

55%

60%

65%

70%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009



35%

40%

45%

50%

55%

60%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009



Page 10

CONCLUSIONS

This analysis cannot determine a cause-

effect relationship, nor does it hold up at

the individual company level.

Analysis of other technology-driven

companies vs. non-technology driven

companies may yield similar results.

• Although Fortna products don’t directly impact customer relationships, improvements in supply chain show a clear impact on moat barriers for retailers. Moat barriers are leading indicators to future profits since they create walls (loyalty) around customers to protect rivals from taking them away.

• Fortna’s greatest impact is found with Retailers, as this customer group grew at a compound annual growth rate (CAGR) of 2.91% faster than its peers over 10 years. Since 2005, the degree of separation from its peer rivals continues to widen every year.

• Industrial & Materials is the most consistently high performing sectors over the past 10 years for the Fortna Customer Group. The Fortna Customer group for Industrials & Materials has performed the best during the years just following a recession when the economy is at its greatest risk.

• Based on a year-over-year analysis, the Fortna Customer Group has built superior customer strength over Non-Fortna Customers every year since 2000.

APPENDIX


Page 12

BACKTEST: RATINGS = MARKET RETURN

The Ratings are similar to the hotel

industry's five-star rating system, except

we rate competitive strength. The ratings

are tiers of W Scores™ at the 20, 40, 60

and 80 levels. The higher the score, the

more competitively strong the company.

We continually backtest our algorithms to

show the power of tracking competitive

strength. We benchmark using Rydex ETF

Trust (RSP) with an equal dollar amount to

invest in each tier of stocks (e.g. 5Ws,

4Ws). Quarterly rebalancing is required

and we do not include transaction costs in

this analysis.

The Market Returns chart shows that

investing in just the 5W stocks (green line)

in every quarter since 2006, you would

have beat the S&P 500 index by 39.6%

through July 2009. The 4W, 3W and 2W

tiers performed better than the S&P 500 as

well.

This chart shows that the Ratings

System works in a variety of market

conditions.

NOTE: Market Return includes reinvesting dividends, but not transaction costs. We use Rydex ETF Trust RSP as a benchmark (versus SPY or IVV) due to being an equal-weighted index. For transparency, wRatings provides our subscribers with original data to verify performance.

Market Returns: S&P500 (RSP) vs. W Ratings TiersJan 2006 - July 2009, Quarterly Rebalance (excludes transaction costs)

39.6%

28.7%

17.04%

24.7%

-16.6%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

2006 2007 2008 2009

WWWWW

WWWW

WWW

WW

W


Page 13

THE DATA FACTORY

Our patented, turn-key system is highly

scalable across all geographies and

industries. We conduct tens of thousands

of interviews every month through our

panel websites.

Step 1. Since 1999, we’ve recruited

panelists offline at points-of-purchase such

as airports, hotels, restaurants and retail

districts. We now also accept panel

registrations online.

Step 2. We pre-qualify respondents as

current, former and potential customers of

the companies they rate. For lesser known

companies, we conduct special panels.

Step 3. Respondents complete an online

interview in 2-4 minutes. Each receives a

description of their buying style and a list of

companies that meet their expectations.

Step 4. Unknown to panelists, we score

their answers to vet respondents and

prevent bad data from entering our system.

Only genuine answers pass, which allows a

respondent to be paid an incentive or

entered into a drawing. Failed respondents

will never pass pre-qualification again.

Step 5. Our system automatically scores

their answers for customer strengths.

Step 6. We blend the scores with financial

calculations of economic profit momentum.

Step 7. Each week, we publish new ratings

on all 5,000+ companies in our coverage.

Our patented data factory is a turn-key system that

vets panelists, pre-screens respondents,

conducts interviews and computes ratings/rankings.

Recruit Panelists1

Vet Respondents4 Blend Financials6

CapitalInvestment

InvestmentPeriod








Conduct Interview3 Pre-Qualification2

Compute Scores5

Final Ranks7

US Patent 6,658,391


Page 14

KEY PRINCIPLES

Basic economic theory shows that in a

highly competitive market, returns will be

driven down to essentially no economic

profit as rivals will imitate any advantage.

To achieve a durable advantage, companies

must essentially defy this very powerful

force of competition.

For executives, the key is to identify new

areas of competitive strength before others.

The Ratings system provides executives

with unprecedented visibility into this

capability. Our foundation is built on five

key principles:

1. Competitive strength is the ability of a

company to allocate capital (seen in their

Competitive Life Cycle) to attract, keep

and hold customers captive better than its

rivals (seen in their Moat Barriers).

2. Competitive strength determines the

long- and short-term ability of a company to

grow revenues and earnings.

3. Competitive strength is highly dynamic

and complex, yet consists of key

foundations (CLC and Moat Barriers) that

can be tracked over time.

4. Changes in competitive strength are

visible at the customer level (Moat

Barriers) that remain unrecognized by

many executives.

5. Executives can exploit these insights to

improve their resource allocation and build

durable advantages over rivals. * The concept of CAP was formalized by Miller & Modigliani in 1961. The competitive life cycle is a generic concept proven useful by

several Wall Street firms, including CSFB HOLT (CFROI) and Collins Stewart (CFROC).

ReinvestRate

INVESTMENT PERIODCOMPETITIVE ADVANTAGE

PERIOD (CAP)*PRICE EFFICIENCY

PERIOD






HISTORICAL:A company’s

Competitive Life Cycle measures financial

competitive strength

FORECAST:A company’s Moat Barriers

measure customer competitive strength

9 MOAT BARRIERS

SUPPLY CHAIN

PRODUCTS

Economies of Scale

Economies of Skill

Cost Containment

Design Dominance

Brand Perception

Routine Reliance

Channel Lock-Out

Switching Lock-In

Network Effect

DELIVERY CHAIN

Fair-Price, Availability

Fair-Price, Competence

Fair-Price, Useful

Leadership, Quality

Leadership, Coolness

Leadership, Simplicity

Unique, Safety

Unique, Consistent

Unique, Time-Sensitive

CUSTOMER NEEDS


Page 15

CONTACT US

wRatings Corporation2325 Dulles Corner BlvdSuite 500Herndon, VA 20171 USA

703.788.6532 Worldwide

[email protected]

The wRatings Corporation is a fully

independent stock research firm.

The research team was originally founded

in March 1998 by Gary A. Williams as part

of a joint research and sales consulting

firm. In January 2004, the research team

split from the consulting firm to focus all

resources on publishing the wRatings.

For more information on the wRatings

Corporation, go to www.wratings.com.

Documents

© 1999-2009 wRatings Corporation. All rights reserved. The wRatings research methods in this report are protected by US Patent 6,658,391 and other patents