SMWIA - SMACNA Partnership Conference Market Share Breakout Session March 4, 2002

1 Reasons for Contractors to Grow (1 of 2) Key employees career growth Best of the best employees Increased incentives Funds for improved systems, facilities, and equipment Satisfy customer needs

2 Reasons for Contractors to Grow (2 of 2) Improve competitive position Improve services to new customers Stimulate creativity Improve the life for employees in the Sheet Metal Industry

3 Reasons for Sheet Metal Locals to Grow (1 of 2) Attract new entrants - More vibrant local union membership Improve pension, health and welfare programs Enhance benefits with more members New market penetration Union local - improve financial position with more members

4 Reasons for Sheet Metal Locals to Grow (2 of 2) Strengthen local union’s position in the community Improve the quality of life for employees in the Sheet Metal Industry

5 Understanding Growth Measurement –Reference point –Managerial tool –Motivational tool –Communication vehicle Which Measurement? –Market Share

6 What Is Market Share? Discussion

7 What Is Market Share? Ratio “Our Volume”/“Total Market Volume” Usually expressed as a percent (e.g., “Johnson Sheet Metal has 40% of the duct market in East Timbuktu, North Dakota) Volume basis Dollars Units (heads, pounds of metal installed)

8 What should we consider before measuring market share? Discussion

9 Important Considerations for Calculating Market Share Defining the components –Numerator What units should be used to define “our volume?” Example: should we consider fabrication employees as well as installation employees? –Denominator How do you define “Total Market Volume?” Impact of how “Total Market Volume” is defined –Major influence on overall “market share” number –Can drive perception of results internally and externally

10 Other Considerations Proposed use of the data Complexity vs. Cost Precision vs. Accuracy Absolute vs. Trend Repeatability

Method I FMI Duct Market Opportunity Index

12 Objectives Estimate of Market Size Opportunity at the local level Provide a quantitative assessment of local market success in accessing opportunities Develop trends in the opportunity index

13 Background Three successive iterations of the model have yielded increasing refinements –May 1998, Duct Fabrication Survey –May 1999, Duct Fabrication Survey Update –May 2000, Best Practices Task Force Trend data available, 1992 to 1999 Econometric forecasting and modeling, 2000 to 2005

14 Opportunity Matrix Model 1. Construction Put in Place by Market Segment 2. Apply Model Factors for Usage by Segment and Region 3. HVAC Duct Installed Value 4. Deduct for Usage of Flex Duct and Ductboard 5. Local Duct Opportunity 6. Local Hours Reported 7. Opportunity Index (Hours per $1,000 Opportunity)

15 Key Definitions Constant Dollars — 1992 dollars without inflation are used to maintain year-to-year index consistency. Put-in-Place Construction — The total value paid by the building owner (in constant dollars). HVAC Duct Installed Value — The portion of Put-in-Place Construction represented by HVAC duct work including labor, overhead, and profit, and excluding HVAC equipment. Local Duct Opportunity — HVAC Duct Installed Value adjusted down by the local market value of flex duct and ductboard. Tons of Steel — Estimated tons of steel indicated by the Local Duct Opportunity. This is used by FMI to validate findings against available industry benchmarks.

16 Interpretive Guidelines The Index is based on privately owned construction only. Residential construction is not included. Anomalies in reported hours have been smoothed. Hourly data is not adjusted for non-duct work (e.g., architectural metal). Put-in-Place Construction is based on the local market trading area (MSA). Local data does not sum to regional data due to market coverage. The Opportunity Index estimates hours per thousand dollars of opportunity. This is not market share.

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Method II Best Practices Presentation/”Headcount” Method

19 Local X: Building Trades Apprentices and Journeymen

20 Establishing Market Trends Determine local’s construction membership –Building Trades, Roofing, Residential –Journeymen, Apprentices Members, Apprentices Determine total construction employment –Department of Labor database of all state unemployment contributions by specific business type matched to local jurisdiction, county by county

21 Total Construction Employment Versus Local X Membership Construction Employment 1992—43, —47, % increase 1996—47, —66, % increase Building Trades Membership 1992—1, — % decrease 1996— — % increase

22 Establishing Union Density Density is the percentage of workers in a union Union members –Building Trades, Roofing, Residential –Journeymen, Apprentice Members, Apprentices Sheet metal workers –What percentage of workers in construction perform sheet metal work?

23 Local X Union Density

24 Summary Growth is vital Managing growth demands measurement Market share is a very basic component of measuring growth Market share measurement can be a managerial tool, a motivational tool, and a communications tool Go ahead and start measuring market share…but do it collaboratively!