D&B U.S. Business Trends Report 12-month period ending March 2011

Transcription

1 A D&B Special Report June 2011 D&B U.S. Business Trends Report 2011 Dun & Bradstreet

2 June 2011 U.S. Business Trends 2 1. Executive Summary Dun & Bradstreet s U.S. Business Trends Report examines recent failure and delinquency trends on approximately 34 million active U.S.-based businesses in D&B s global database, summarizing data trends for the 12 month period ending March 31, Using delinquency rates and balances past due, business owners can proactively manage cash flow issues and monitor customers who are unable to meet their financial obligations. ECONOMIC SNAPSHOT: Having staged a healthy recovery from 2009 s difficult recession in 2010, the economy is once again slowing. In Q1 2011, the economy suffered a broad-based slowdown. In Q1, delinquencies rose to levels last seen during the height of the financial crisis. With inflation continuing to mount, unemployment levels remaining unsettlingly high, and the housing market stuck in a severe depression, there are few reasons to expect growth to accelerate in the coming quarters. Accordingly, D&B expects that businesses will continue to face high levels of uncertainty and risk across a number of sectors and regions throughout the remainder of the year. D&B tracked key indicators for the past year and identified mixed signals about the state of the economy. D&B s delinquency and failure statistics have thus far been consistent with the economic recovery witnessed in However, Q results show an increase in delinquency rates. If this trend continues further into 2011, an economic slowdown is possible. In order to protect themselves in current economic times, business owners should err on the side of caution and perform rigorous analytics before making business decisions. In challenging economic times, looking at past performance and historical trends may not be enough. Predictive scores, and the ability to forecast delinquencies and failures, are crucial elements in the decision making process. A refinement or balancing of historical inputs with predictive indicators can significantly enhance the bottom line. Highlights of this report include: n Insight 1: Business bankruptcies and business failures continued to decline but declined at a slower pace than in Q Business bankruptcies [as reported by the U.S. courts] fell by 8.4% during the 12 months ending in March 2011 compared to 12 months ending in March Formal bankruptcies tend to understate the overall failure rate by not capturing hidden failures. D&B estimates that business failures are normally much higher than recorded bankruptcies there were 60% higher than recorded bankruptcies during this period. Number of failures also decreased over the same time period but by a smaller percentage 2.2%. n Insight 2: There is some cause for concern coming from our delinquency information. Though it never went down to the pre-recession level, percentage of delinquent dollars had stabilized in Percentage of delinquent dollars stayed around 5% during the whole year until there was a spike in December In the first quarter of 2011, the trend Number of Bankruptcies Reported by U.S. Government D&B Estimate of Business Failures Estimate March-10 59,528 91,696 Estimate March-11 54,550 89,675 % YOY Change -8.36% -2.20% Percentage of Dollars at 91+ Days Past Due 7% 6% 5% 4% 3% 2% 1% 0% 0.30% Jun 07 Sep 07 remained elevated but it did not continue to spike. The percentages currently are only slightly lower than during the peak of recession implying businesses are struggling to pay their lenders and vendors. This is a very important leading indicator of the health of the economy. This may raise the Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 09 Jun 10 Sep 10 Dec 10 Mar 11

3 June 2011 U.S. Business Trends 3 question of economic slowdown especially if the trend continues in the future and points to the need for caution on the part of business decision makers. n Insight 3: Delinquency rates and failure indexes varied by industry from Q to Q The top three industries with highest failure rates continue to be Transportation, Construction and Financial Services, with Transportation industry having a failure rate 69% higher than the U.S. average. Industries with the lowest failure rates, Natural Resources, Other Services, Business Services and Utilities, also remain the same. However, in the last quarter we saw decline in failure rate across the majority of industries. In this quarter, we saw slight increases with Other Services, Natural Resources, and Financial Services. The industries with the highest and lowest delinquency rates also stayed the same as last quarter. The percentage of businesses with severely delinquent payment declined in all industries but by smaller percentages than we have seen in previous quarters. 20.0% 19.5% 19.7% ( 2.7%) Industries with the Highest Deliquency Rates Industries with the Highest Failure Indexes 1.69 ( 8%) 1.55 ( 4%) 1.40 ( 1%) 19.0% 19.0% ( 8.7%) 18.7% ( 1.0%) % % Manufacturing Telecommunications Automotive 0.00 Transportation Construction Financial Services 12.0% 11.5% 11.0% Industries with the Lowest Deliquency Rates 10.8% ( 3.9%) 10.8% ( 4.0%) 11.7% ( 0.2%) Industries with the Lowest Failure Indexes 0.79 ( 3%/ 23%) 0.76 ( 2%) 0.74 ( 1%) 10.5% % Real Estate Natural Resources Insurance 0.70 Natural Resources Other Services Business Services & Utilities 1 Delinquency Rate is the percentage of 91+ days past due amount against the total amount owed and is a leading indicator of a company s likelihood to fail. 2 Failure Index is calculated as a failure rate for industry divided by average failure rate for U.S. overall in the same year.

4 June 2011 U.S. Business Trends 4 n Insight 4: Along with variations in failure and delinquency rates among industries, there is also variation among states. Nevada remains the state with both the highest failure rate and delinquency rate. Alabama, Mississippi, Arizona, and Utah are the states with the next highest delinquency rates. West Virginia and Alaska remain the states with the lowest delinquency rates. For failure indexes, California and Colorado follow Nevada in highest failure indexes by state, and North Dakota continues to be the state with the lowest failure indexes. Deliquency Rates by State Failure Indexes by State Low Delinquencies less than 13 Mid Delinquencies between 13 and 15 High Delinquencies greater than 15 Low Failure Index less than 0.75 Mid Failure Index between 0.75 and 0.99 High Failure Index greater than 1.00 We encourage you to explore the full report below for more detailed information, context and insights, including by industry sector and state. This type of information is designed to provide a more personalized and actionable view of current risk trends based on the unique characteristics of your business. Editor s Note: Independent of the samples used in this report, any failure rate comparison is likely to underestimate the actual extent of economic hardship. It is relatively simple for many businesses to cease operating without leaving debt or filing for bankruptcy. Numerous business owners have simply stopped operating their businesses or reduced their hours or found other sources of income such as consulting, contracting or professional services yet they have not officially or legally closed their doors. Such data would be examples of the additional hidden failures that may not be captured in this report. The positive delinquency trend, reported here, is also based on businesses where we have trade information. There are many small businesses that behave more like consumers, where we do not have trade, and their hardship is likely to be reflected in consumer bureau data.

5 June 2011 U.S. Business Trends 5 2. Characteristics and Trends of Business Failures Current U.S. Business Failure Trends Insight 1: Business bankruptcies and business failures continued to decline but failure declined at a slower pace. Business bankruptcies [as reported by the U.S. courts] fell by 8.4% during the 12 months ending in March 2011 compared to 12 months ending in March Formal bankruptcies tend to understate the overall failure rate by not capturing hidden failures. D&B estimates that business failures are normally much higher than recorded bankruptcies it was 60% higher than recorded bankruptcies during this period. Number of failures also declined over the same time period but by a small percentage 2.2%. Figure 1: Reported Bankruptcies and Estimates of U.S. Business Failures Metric A. Number of Bankruptcies Reported by U.S. Government B. D&B Estimate of Business Failures Estimate March-10 59,528 91,696 Estimate March-11 54,550 89,675 % YOY Change -8.36% -2.20% Source/Definition Administrative Office of the U.S. Courts ( Includes D&B investigation of businesses lack of response or an inability to verify after multiple attempts that it is a going concern; confirmation of business failure with outstanding debt; and severe delinquency in prior periods. As column A shows, the number of formal bankruptcy filings in the 12 months ending March 2011, as reported by the U.S. government, decreased by 8.36% to 54,550 from 59,528 in March However, these formal bankruptcy filings tend to understate overall failure rates by not capturing the hidden failures, i.e. businesses simply ceasing to operate without leaving debt or officially or legally closing their doors. To account for these hidden failures, D&B uses a proprietary, expanded methodology to gauge a broader definition of business failure. This methodology includes: n Investigating a business s lack of response or an inability to verify after multiple attempts that it is a going concern n Confirmation of business failure with outstanding debt n Severe delinquency in prior periods As column B shows, D&B estimates there are a significant number of hidden business failures not captured by official bankruptcy statistics (e.g. filings for Chapters 7, 11 and 13 of the bankruptcy code). D&B bases its estimates of overall business failures on a more detailed analysis including recent payment trends and behaviors such as delinquencies and charge-offs as well as other business failure metrics recorded in D&B s global database. In the 12 months ending in March 2011, there were 89,675 business failures 64% more than the official bankruptcies reported by the U.S. Government. Irrespective of the economic cycle, actual failures will always be higher than filed bankruptcies. From a trend perspective, the business failures are only 2% lower than the business failures recorded in the year before. Another important comparison would be against the previous quarter s report. We publish annualized numbers rather than quarterly numbers in our report number of failures in 12 months ending in Dec 2010 was 87,797. Current statistics implies failure numbers are actually higher for first quarter of 2011 compared to first quarter of 2010.

6 June 2011 U.S. Business Trends 6 3. Payment Trends as Leading Indicators of Business Failure Proactive assessments and decisions require more than bankruptcy and failure data For every business that files for bankruptcy, there is an entire network of suppliers and customers that have already felt a tangible impact due to missed deadlines, late payments and other events and indicators that pre-date a legal filing. D&B s proprietary global trade database tracks the historical payment information that can be used to predict financial instability of customers and suppliers and their likelihood of business failure before it impacts your business. D&B archives years of a business's monthly payment history, capturing every reported severe delinquency and charge-off. Trends in Monthly Delinquency Rates Editor s Notes: (a) The analyses in this section are based on month-to-month information, enabling the reader to observe trends on a more granular basis and therefore to understand more immediate and/or subtle changes not reflected in rolling 12-month averages. (b) The data in this section of the report reflect a random, statistically significant sample from the D&B database of 34 million active U.S. businesses. Insight 2: There is some cause for concern coming from our delinquency information. Though it never went down to the pre-recession level, percentage of delinquent dollars had stabilized in Percentage of delinquent dollars stayed around 5% during the whole year. We saw a spike in the statistic in December 2010 and the trend continued in the first quarter of The percentages currently are only slightly lower than during the peak of recession implying businesses are struggling to pay their lenders and vendors. This is a very important leading indicator of the health of the economy. This may raise the question of economic slowdown especially if the trend continues in the future and points to the need for caution on the part of business decision makers. Figure 2: Percentage of Dollars at 91+ Days Past Due 7% 6% 5% 4% 3% 0.30% 2% 1% 0% Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11

7 June 2011 U.S. Business Trends 7 Observations worth noting: n Delinquency rates are trending upward there was an increase in dollar-based severe delinquency rate in the period from December 2010 to March 2011 compared to prior months. n Delinquency rate changes lead business failure changes there were sharp increases in delinquencies leading to the recession from middle of 2007 to September of Throughout 2010 the percentage of delinquent dollars showed some volatility but not a sharp steady increase. There is significant increase in Q1 of There is some cause for concern about the health of the economy. This is however not to suggest that we are seeing a repeat of change in this statistic of the same magnitude as we saw from mid-2007 to September The increase is 1% rather than 4%. 4. Variations across Industries and Regions in Failure and Delinquency Failure Trends and Delinquency Rates by Industry Insight 3: There are a lot of variations in failure and delinquency rates by industry. The top three industries with highest failure rates continue to be Transportation, Construction and Financial Services, with Transportation industry having a failure rate 69% higher than the U.S. Average. Industries with the lowest failure rates, Natural Resources, Other Services, Business Services and Utilities, also remain the same. However, in the last quarter we saw decline in failure rate across the majority of industries. In this quarter, we saw slight increases with Other Services, Natural Resources, and Financial Services. The industries with the highest and lowest delinquency rates also stayed the same as last quarter. There is decline in percent of businesses with severe delinquent payments across the board, but in smaller rates than before. 20.0% 19.5% 19.7% ( 2.7%) Industries with the Highest Deliquency Rates Industries with the Highest Failure Indexes 1.69 ( 8%) 1.55 ( 4%) 1.40 ( 1%) 19.0% 19.0% ( 8.7%) 18.7% ( 1.0%) % % Manufacturing Telecommunications Automotive 0.00 Transportation Construction Financial Services 12.0% 11.5% 11.0% Industries with the Lowest Deliquency Rates 10.8% ( 3.9%) 10.8% ( 4.0%) 11.7% ( 0.2%) Industries with the Lowest Failure Indexes 0.79 ( 3%/ 23%) 0.76 ( 2%) 0.74 ( 1%) 10.5% % Real Estate Natural Resources Insurance 0.70 Natural Resources Other Services Business Services & Utilities 1 Delinquency Rate is the percentage of 91+ days past due amount against the total amount owed and is a leading indicator of a company s likelihood to fail. 2 Failure Index is calculated as a failure rate for industry divided by average failure rate for U.S. overall in the same year.

8 June 2011 U.S. Business Trends 8 Failure Indexes by Industry Industries with Highest Failure Rates n Transportation remain the top industry with a failure rate 69% higher than average across all industries. Construction industry is still in the top three industries with failure rate 55% higher than average. Telecommunications, which previously held the second highest failure rate, decreased by nearly 38% and moved out of the worst three industries. Financial Services is now within the top three industries with the highest failure rates, with a 1% increase from March 2010 to n Overall, there is a slight decrease in overall failure rate by 1%. Retail, Other Services, Financial Services and Natural Resources were the industries to have increased failure rates, yet only by 1 to 2%. Failure Index is calculated as a failure rate for industry divided by average failure rate for U.S. overall in the same year. Figure 3: Industries with Highest Failure Rates March 2010 Failure Index Industries with Lowest Failure Rates March 2011 Failure Index Largest Change March 2011 vs. March 2010 Transportation 1.81 Transportation 1.69 Retail 2% Telecommunications 1.66 Construction 1.55 Other Services 2% Construction 1.60 Financial Services 1.40 Financial Services 1% All Industries 1.00 All Industries % n The top industries with the lowest failure rates from March 2010 to 2011 were Natural Resources, Other Services and Business Services shared the third position with Utilities. Natural Services and Other Services have the top two lowest failure rates despite 1% and 2% increases, respectively, in their failure rates from March 2010 to n Telecommunications, Utilities and Insurance industries have the largest improvement from March 2010 to March Figure 4: Industries with Lowest Failure Rates March 2010 Failure Index March 2011 Failure Index Largest Change March 2011 vs. March 2010 Natural Resources 0.72 Natural Resources 0.74 Telecommunications -38% Other Services 0.73 Other Services 0.76 Utilities -23% Business Services 0.81 Bus. Serv./Utilities 0.79 Insurance -16% All Industries 1.00 All Industries % Editor s Note: Detailed data on industry failure rates can be found in Appendix A.

9 June 2011 U.S. Business Trends 9 Delinquency Rates by Industry Industries with Highest Delinquency Rates n The Manufacturing and Telecommunications sectors experienced a decline in delinquency rates by 3% and 9% accordingly, but not enough to move them out of the top two industries with highest delinquency rates. n The Transportation industry has decreased its delinquency rate by over 8%, being replaced by the Automotive industry in the top three highest delinquency industries. n Construction and Transportation are the next industries with the highest delinquency rates. (See Appendix B). Figure 5: Industries with Highest Delinquency Rates March 2010 % of Businesses with 91+ Days Past Due March 2011 % of Businesses with 91+ Days Past Due Smallest Improvement March 2011 vs. March 2010 Telecommunications 20.8% Manufacturing 19.7% Insurance -0.2% Manufacturing 20.3% Telecommunications 19.0% Automotive -1.0% Transportation 19.6% Automotive 18.7% Other Services -1.8% Industries with Lowest Delinquency Rates n Real Estate, Natural Resources and Insurance continue to hold the top three industries with the lowest delinquency rates, with each industry continuing to decrease delinquency rates from March 2010 to March n Financial Services, Telecommunications and Transportation industries have the largest improvement in delinquency rate from March 2010 to March Figure 6: Industries with Lowest Delinquency Rates March 2010 % of Businesses with 91+ Days Past Due March 2011 % of Businesses with 91+ Days Past Due Largest Change March 2010 vs. March 2011 Real Estate 11.2% Real Estate 10.8% Financial Services -9.4% Natural Resources 11.2% Natural Resources 10.8% Telecommunications -8.7% Insurance 11.8% Insurance 11.7% Transportation -8.5% Editor s Note: Detailed data on industry delinquency rates can be found in Appendix B.

10 June 2011 U.S. Business Trends 10 Industry Failure Rate and Delinquency Rate Correlation n We see improvement in both delinquency and failure rates for Telecommunications industry. This Industry was significantly impacted by the recession, but is now moving towards recovery. Telecommunication industry still has one of the highest delinquency rates, yet also has the largest decrease in failure rates from March 2010 to March 2011, and second largest improvement in delinquency rate. n Transportation industry continues to have the highest failure rate for many months, but we do see an 8.5% drop in delinquency rate for this industry and an 8% drop in failure rate. This shows that there is some consistent improvement for the industry. n After the Transportation industry, Construction and Financial Services industries have the highest failure rates. Both of these industries continue to experience decreases in delinquency rates by 2.7% and 9.4% respectively, but the rate of improvement has slowed down.

11 June 2011 U.S. Business Trends 11 Failure Trends and Delinquency Rates by Industry Insight 4: Along with variations in failure rates among industries, there is also variation among states. Nevada remains the state with both the highest failure rate and delinquency rate. Alabama, Mississippi, Arizona, and Utah are the states with the next highest delinquency rates. West Virginia and Alaska remain the states with the lowest delinquency rates. For failure rates, California and Colorado follow Nevada in highest failure rates by state, and North Dakota continues to be the state with the lowest failure rates. Failure Indexes by State States with Highest Failure Rates n Due to the continued residential housing instability and the drop-off in the tourism, travel and hospitality sectors, Nevada and California failure rates still rank among the highest, with California increasing their failure rates by 9%. New Hampshire is no longer in the top three highest failure rates, with a 25% decrease in failure rates from March 2010 to March n The next cluster is formed by Colorado, Oregon, Tennessee, and Washington 30% higher than national average. n Michigan is equal to the national average, with a decline of 12% from March 2010 to March 2011, signaling the improvement in the auto industry (See Appendix C). n Wyoming and the District of Columbia show the largest increase in failure rates during March 2010 to March 2011; however, they started with small base failure rates and the number of failures in these two states is still small. Figure 7: States with Highest Failure Rates March 2010 Failure Index March 2011 Failure Index Largest Change March 2011 vs. March 2010 Nevada 2.02 Nevada 1.96 Wyoming 57% California 1.67 California 1.85 District of Columbia 31% New Hampshire 1.49 Colorado 1.35 Iowa 24% All States %

12 June 2011 U.S. Business Trends 12 States with Lowest Failure Indexes n North Dakota remains the state with the lowest failure rates during March 2010 to March n States such as Vermont, Alaska, Kansas, and Wyoming continue to have lower failure rates, which reflect the predominantly stable presence of agriculture in more rural states. Figure 8: States with Lowest Failure Rates March 2010 Failure Index March 2011 Failure Index Largest Change March 2011 vs. March 2010 North Dakota 0.29 North Dakota 0.30 New Hampshire -25% Wyoming 0.36 Vermont 0.44 South Carolina -21% Iowa 0.46 Alaska/Kansas 0.56 Vermont -21% All Industries 1.00 All Industries % Editor s Note: Detailed data on state failure indexes can be found in Appendix C.

13 June 2011 U.S. Business Trends 13 Delinquency Rates by State States with Highest Delinquency Rates n The states with the highest delinquency rates are Nevada, Alabama, and Mississippi. These states are still doing much worse than the rest of the country with delinquency rates 38%- 50% higher than the national average. n Georgia, which previously ranked first with the highest delinquency rates, decreased by 34.2% during March 2010 to March n Virginia, Nevada and Illinois had the largest increase in delinquency rate over prior period. Figure 9: States with Highest Delinquency Rates March 2010 % of Businesses with 91+ Days Past Due States with Lowest Delinquency Rates March 2011 % of Businesses with 91+ Days Past Due Largest Change March 2011 vs. March 2010 Georgia 23.9% Nevada 22.3% Virginia 19.6% Mississippi 23.6% Alabama 20.5% Nevada 18.6% Alabama 23.0% Mississippi 20.5% Illinois 7.9% n West Virginia and Alaska continues to be the top two states with the lowest delinquency rates in the country. Hawaii replaced Virginia in the top third position as Hawaii experienced 23% decline in delinquency rate in the analyzed period. n Georgia, Hawaii, and Louisiana represent that largest improvement in delinquency rate over prior year. Figure 10: States with Lowest Delinquency Rates March 2010 % of Businesses with 91+ Days Past Due March 2011 % of Businesses with 91+ Days Past Due Largest Change March 2011 vs. March 2010 West Virginia 7.2% West Virginia 7.4% Georgia -34.2% Alaska 9.7% Alaska 7.9% Hawaii -23.1% Virginia 9.7% Hawaii 9.3% Louisiana -22.2% Editor s Note: Detailed data on state delinquency rates can be found in Appendix D. State Failure Index and Delinquency Rate Comparison n Nevada and California are still two states with the highest failure rate in the country 96% and 85% respectively higher than the U.S. average. Nevada also has the highest delinquency rate in the country and experienced one of the highest delinquency growth rates in the period from March 2010 to March This is signaling there is still a long road to recovery for Nevada. n New Hampshire has the biggest improvement in failure rate in analyzed period 25% as well as an 11% decrease in delinquency rates. South Carolina has also improved in failure rate by 21%, and it also has improvement in delinquency rate improving by 16%. These are signaling strong economic improvement in the state. n Georgia and Hawaii are two states with the biggest improvement in delinquency rate. Georgia also has decline in the failure rate. Hawaii, however, has increase in its failure rates by an estimated 21%, signaling mixed recovery.

14 June 2011 U.S. Business Trends Economic Snapshot Having staged a healthy recovery from 2009 s difficult recession in 2010, the economy is again slowing. In Q1 2011, the economy grew by just 1.75% in annualized terms versus 3.11% in Q The Q1 data showed a broad-based slowdown. Investment and government spending both contracted while net exports detracted from overall growth. Private consumption, despite coming under pressure from increasing prices, and inventory adjustments were the primary drivers of the expansion. This slowdown coincides with the D&B data in this report, which shows that in Q1 delinquencies rose to levels last seen during the height of the financial crisis in late We expect businesses will continue to face high levels of uncertainty and risk across a number of sectors and sub-regions throughout the rest of There are in fact few reasons to expect growth to accelerate in the coming quarters. Inflation continues to mount; unemployment levels remain unsettling; and the housing market is stuck in a severe depression. With so few clear signs of economic improvement, the average U.S. consumer, who remains heavily indebted, will continue to focus on paying down debt at the expense of consumption. Weak consumer spending, the core driver of the U.S. economy, will continue to weigh on key sectors such as construction, transportation as well as manufacturing. The government spending and loose monetary policy of the Federal Reserve that helped drive the early stages of the recovery will provide little support to the economy throughout the rest of Politicians are now focused on spending cuts. Tackling the U.S. s large deficit and debt has become a serious concern. A credible medium-term deficit reduction plan is critical, not only because of the dire state of the government s finances in the wake of the financial crisis but also because of the large number of baby boomers that will retire over the next decade. Without a sufficiently aggressive plan to cut the deficit, bond investors could push up the cost of borrowing significantly. While the Fed is unlikely to raise official interest rates until the labor market shows some substantial improvements, it is set to introduce some de facto tightening in June when it ends its quantitative easing program. This could tighten borrowing conditions. As it is, the Fed s exceptionally loose monetary policy over the past two years has done little to significantly ease the tight credit conditions facing small and medium-sized firms. Renewed tightening will further challenge their ability to roll-over debts and pay suppliers.

15 June 2011 U.S. Business Trends Recommendation to Businesses For some businesses, failure may be unavoidable; however, as this report shows, failure does not have to come as a surprise to suppliers, clients, and business partners who have armed themselves with the necessary data and insights. Using delinquency rates and balances past due, business owners can effectively and proactively anticipate customers and partners future financial health and propensity to fail. It is important for businesses to regularly and systematically review this data as part of their overall business planning process and day to day operations. In challenging economic times, looking at past performance and historical trends/measures is not enough. One should also consider the use of predictive scores. The ability to forecast delinquencies and even failures are crucial elements in a well rounded decisioning scorecards or even when using simple eye ball analysis for manual reviews. This refinement or balancing of historical inputs with predictive indicators can significantly enhance the overall results that are achieved. Armed with delinquency rates for customers and business partners as well as business failure data, among industries and states, business owners can take specific steps, including: When a customer or business partner shows negative trends: n Revise collection behavior to minimize outstanding AR and limit customer exposure n Tighten pricing and terms by industry or region When a customer or business partner shows stable or positive trends in delinquency: n Expand their credit line and encourage revenue growth n Look for new products and services that might expand their relationship with this customer It really is about using all the available tools to enable your own success and to mirror the appropriate go to market strategy for your companies. Incorporating these types of portfolio analytics and metrics (regional and state trends, industry specific delinquency detail, etc.) are what best-in-class companies do to drive their success.

16 June 2011 U.S. Business Trends 16 About Dun & Bradstreet (D&B) Dun & Bradstreet (NYSE:DNB) is the world's leading source of commercial information and insight on businesses, enabling companies to Decide with Confidence for 172 years. D&B s global commercial database contains more than 195 million business records in over 190 countries with nearly 700 million payment and bank experiences. The database is enhanced by D&B s proprietary DUNSRight Quality Process, which provides our customers with quality business information. This quality information is the foundation of our global solutions that customers rely on to make critical business decisions. D&B provides solution sets that meet a diverse set of customer needs globally. Customers use D&B Risk Management Solutions to mitigate credit and supplier risk, increase cash flow and drive increased profitability; D&B Sales & Marketing Solutions to increase revenue from new and existing customers; and D&B Internet Solutions to convert prospects into clients faster by enabling business professionals to research companies, executives and industries. For more information, please visit, or call At D&B, we are dedicated to helping our customers achieve success in all their business endeavors. Our objective is for you to find useful and practical perspectives within this report that enable your business to enhance its market position and experience future growth. In addition to this report, we offer other services that may be helpful to you. Custom Reports For a customized report based on your particular requirements, or many other solutions and tools to help businesses make better-informed and more confident decisions, please visit, or call to speak to a D&B Customer Service Representative at or industrytrends@dnb.com. D&B Country Risk Services D&B has a team of economists dedicated to analyzing the risks of doing business across the world (we currently cover 132 countries). We monitor each of these countries on a daily basis and produce both shorter analytical pieces (Country RiskLine Reports), at least one per country per month for most countries, as well as more detailed 50-page Country Reports. For further details please contact Country Risk Services on or CountryRisk@dnb.com.

17 U.S. Business Trends Appendix A Failure Index by Industry Major Industry Failure Index 2010 Q1 Failure Index 2011 Q1 % Change in Failure Rate Automotive % Business Services % Construction % Financial Services % Insurance % Manufacturing % Natural Resources % Other Services % Real Estate % Retail % Telecommunications % Transportation % Utilities % Wholesale % ALL % NOTE: D&B does not include the Government industry when calculating the rate of bankruptcies, failures and delinquencies.

18 U.S. Business Trends Appendix B Delinquency Rates by Industry 91+ DPD Apr 2009 to Mar DPD Apr 2010 to Mar 2011 % Change in Delinquency Rate Automotive 18.9% 18.7% -1.0% Business Services 14.5% 13.3% -8.3% Construction 18.4% 17.9% -2.7% Financial Services 16.7% 15.1% -9.4% Insurance 11.8% 11.7% -0.2% Manufacturing 20.3% 19.7% -2.7% Natural Resources 11.2% 10.8% -4.0% Other Services 13.6% 13.3% -1.8% Real Estate 11.2% 10.8% -3.9% Retail 17.4% 16.7% -4.1% Telecommunications 20.8% 19.0% -8.7% Transportation 19.6% 17.9% -8.5% Utilities 15.1% 14.5% -4.0% Wholesale 18.6% 17.8% -4.4% All 15.78% 14.90% -5.60%

19 U.S. Business Trends Appendix C Failure Index by State State Failure Index 2010 Q1 Failure Index 2011 Q1 % Change in Failure Rate AK % AL % AR % AZ % CA % CO % CT % DE % FL % GA % HI % IA % ID % IL % IN % KS % KY % LA % MA % MD % ME % MI % MN % MO % MS % MT % NC % ND % NE % NH % NJ % NM % NV % NY % OH % OK % OR % PA % RI % SC % SD % TN % TX % UT % VA % VT % WA % WI % WV % WY % ALL %

20 U.S. Business Trends Appendix D Delinquency Rates by State State 91+ DPD Plus Apr 2009 to Mar DPD Plus Apr 2010 to Mar 2011 % Change in Delinquency Rate AK 9.7% 7.9% -18.4% AL 23.0% 20.5% -10.8% AR 11.0% 10.9% -0.4% AZ 21.0% 20.0% -4.8% CA 15.9% 15.6% -2.0% CO 17.9% 15.3% -14.3% CT 15.5% 15.6% 0.8% DE 15.6% 15.8% 1.4% FL 19.9% 18.3% -8.3% GA 23.9% 15.7% -34.2% HI 12.1% 9.3% -23.1% IA 13.2% 13.2% 0.2% ID 17.9% 17.0% -5.1% IL 15.9% 17.2% 7.9% IN 12.2% 12.3% 0.8% KS 11.6% 11.6% 0.2% KY 16.1% 13.6% -15.3% LA 17.2% 13.4% -22.2% MA 12.1% 12.3% 2.1% MD 15.3% 15.2% -1.1% ME 9.8% 9.4% -4.0% MI 15.8% 15.3% -2.9% MN 15.9% 16.0% 0.9% MO 13.6% 14.0% 3.1% MS 23.6% 20.5% -13.2% MT 15.5% 14.2% -8.4% NC 18.0% 16.2% -10.1% ND 12.8% 13.0% 1.5% NE 13.7% 12.9% -6.2% NH 10.9% 9.7% -10.8% NJ 15.9% 16.7% 4.6% NM 19.1% 18.6% -2.5% NV 18.8% 22.3% 18.6% NY 15.1% 15.6% 3.3% OH 11.6% 11.7% 1.2% OK 10.7% 10.8% 1.2% OR 14.2% 13.3% -6.3% PA 12.0% 12.1% 1.0% RI 14.8% 14.8% -0.5% SC 19.5% 16.4% -15.8% SD 13.9% 14.0% 0.4% TN 18.4% 19.1% 3.8% TX 13.4% 12.9% -4.1% UT 19.9% 19.3% -3.3% VA 9.7% 11.6% 19.6% VT 10.0% 9.8% -1.4% WA 16.4% 15.0% -8.8% WI 12.7% 13.1% 3.3% WV 7.2% 7.4% 2.7% WY 13.9% 12.1% -12.7% ALL 15.78% 14.90% -5.60%