July 1993 Plastics & Engineering Financial Analysis

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Agenda Objectives Approach Trend analysis Productivity analysis Points for discussion

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Objectives Analyze financial information to: –Focus our analysis efforts and tasks –Establish baseline –Set context for business case –Understand key drivers of financial performance

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Approach Financial analysis –Analyzed: XXXX Financial Reports 1993 YTD XXXX Financial Reports 1992/1993 XXXX Budget Jeffersontown Plant Financial Report 1993 YTD Jeffersontown Plant Financial Report 1992 Frankfort Plant Financial Report 1993 YTD Frankfort Plant Financial Report Industry Analysis and Competitor Analysis Internal Gemini Analysis Informational Interviews

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Financial Analysis Helps Identify the Path Forward for XXXX’s Change Program Findings & Conclusions ParentCo Interviews External View Project Design ParentCo Interface Study Mfg Assessment Louisville Frankfort Financial Analysis & Business Case XXX Interviews 8 Executive 31 Focus 1234

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Total Sales Cost of Sales –Materials– –Direct Labor– –Indirect Labor– –Mfg. Overhead– Gross Profit S&E Expenses G&A Expenses Interest Expenses Net Income Before Taxes5.2(2.3)3.0 Total Inventories Accounts Receivable-Trade Net Fixed Assets ($MM)FY 1992 XXXXJeffersontownFrankfort 1992 Financial Baseline Source: XXXX & Engineering Financial report

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) ParentCo Is XXXX’s Largest Customer And Accounts For 65% Of Total Sales ParentCo Appliance Park 35.4% ParentCo Bloomington28.3% ParentCo (Other)14.5% Rev-A-Shelf7.5% Other14.3% JeffersontownFrankfort ParentCo Appliance Park30.5% ParentCo Bloomington34.6% ParentCo Decatur15.0% Rubbermaid6.7% JCI/Hyperion4.5% Other8.7% Rev-A-Shelf 1992 Sales = $39 M 1992 Sales = $47 M In 1992 ParentCo bought $68 M (79% of total plant sales) from these 2 plants. ParentCo Appliance Park ParentCo (Other) ParentCo Bloomington Other ParentCo Appliance Park ParentCo Bloomington Other ParentCo Decatur Rubbermaid JCI/Hyperion Source; XXXX

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) While XXXXs’ Revenue Has Grown Rapidly, Earnings Have Not Kept Pace Much of XXXXs recent growth has been driven by acquisitions CGR = 26% CGR = 10% CGR = 22% Note: Figures include Rev- A- Shelf Revenue Gross Profit Net Income $ in Millions Source: XXXX Financial Reports and FY 1992/93 Budget

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) XXXX Margins Are Below Industry Norms Improving 1993 gross margins to industry average of 21% equals $7.5 million. Source For 1991 Industry Average: Plastics World, June ‘ Industry Average = 21% Operating Margin 17% 14% 14.9% 15.8% 15.3% 4.6% 1.7% 2.5% 2.6% 2.8% Industry Average = 4.6% Gross Margin

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Sales % % %100% Direct Materials– – %29.061%39% b Direct Labor– – 2.87%4.810%12% Indirect Labor– – 3.59%1.63%8% Overhead– – 4.512%5.913%21% –Cost of Sales %36.94%41.388%80% –Gross Margin19.016%2.76%5.912%20% Selling, Engineer- ing, General& %4.411%2.96%16% Administration expenses Operating margin6.35%(1.7)(4%)3.06%4% Relative To Recent Industry Benchmarks, XXXXs’ Cost Of Sales Appears To Be Squeezing Margins % of% of% of% of $(M)Sales$(M)Sales$(M)SalesSales 1991 Industry XXXXJeffersontownFrankfortAverage a a) Source: Plastics World, June 1993; stats rounded off for convenience b) Primarily resin

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Frankfort Is 20% More Productive Than Jeffersontown JeffersontownFrankfort Total Headcount = 395 a Expected 1993 Sales: $40 M Sales/Employee = $101,000 Total Headcount = 361 b Expected 1993 Sales: $45 M Sales/Employee = $125,000 Headcount for the two plants = 756; XXXX Total Headcount = Headcount for the two plants = 756; XXXX Total Headcount = a) Includes 76 office and 23 temporary personnel b) Includes 33 office and 103 temporary personnel Note: Product mix at the 2 plants is different

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Resource Breakdown By Activity a) Includes assemble, trim, pack, clean, count and inspect b) Excludes support and corporate staff c) Excludes support staff Molding accounts for 75% of resources at the Jeffersontown and Frankfort plants. Setup (including material handling) ScheduleMoldAssemble a Store Ship & Receive Orders Jeffersontown =317 b Frankfort –48=293 c FY ‘91FY ‘925/93 Jeffersontown Total Headcount Frankfort Total Headcount

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Capacity Utilization At XXXXs Lags Industry Average By A Wide Margin Source: Plastics World, Survey of Plastic Processors, June 1993 Capacity: 7 days, 24 hrs/day, 3 shifts 33 machines X 24 hours = 792 mfc hrs/day Machine uptime, productivity and scheduling adversely affect Jeffersontown capacity utilization. Capacity Utilization Jeffersontown Frankfort Industry Average 79% ? 62%

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) ? $ 62% $11M XXXX Can Grow Revenue Significantly By Improving Capacity Utilization Capacity Utilization Jeffersontown Frankfort Industry Average 79%

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) While Inventory Management Appears To Have Improved At Jeffersontown... RMComponentsPkg MaterialFG FY 1991FY 1992As of 5/ FY1991FY1992 Jeffersontown Source; XXXX Financial Reports

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations)... Frankfort May Well Present An Opportunity RMComponentsPkg MaterialFG Our initial analysis suggests that inventory management can be further improved FY 1991FY 1992As of 5/93 Frankfort FY1991FY1992As of 5/93 Source; XXXX Financial Reports

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Unless Operational Improvements Occur, Target 10 Will Drive Jeffersontown Deeper Into The Red In Jeffersontown Source: XXXX FY 1992/93 Budget Controllable $26.1M$7.8 M $6.7 M$5.5 M $3.1M$1.3 M $1.6 M$1.0 M $2.9 M$2.5 M $0.6 M – $41M$18M Raw Material Direct Labor Indirect Labor Manu. Overhead S&E Expense G&A Expense Interest Total Costs Total Sales Net Income Before Taxes ($540 K) $41M $40M } A 10% price reduction equates to a 13% ($2.3 million) reduction of controllable costs.

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Frankfort Note: Annualized on 6 months results ended 3/31/93 Controllable $27.7 M$8.3 M $3.3 M$2.6 M $7.9 M$3.2 M $0.2 M$0.1 M $2.4 M$2.1 M $0.3 M – $42M$16M Raw Material Direct Labor Indirect Labor Manu. Overhead S&E Expense G&A Expense Interest Total Costs Total Sales Net Income $2.6 M $42M $45M } A 10% price reduction equates to a 14% ($2.3 million) reduction of controllable costs.... And Will Threaten Frankfort’s Profitability

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) To Maintain Margins, Analysis Efforts Must Focus On Both Cost Efficiencies And Improving Capacity Utilization 1) Excluding raw material cost 2) Assuming 25% incremental margin on additional sales Cost Reduction OperatingAt Frankfort AndCapacity Utilization MarginJeffersontown toImprovement to ImprovementAchieve Target 1 Achieve Target 2 $1 million5.6%3.2% $3 million16.7%9.2% $5 million27.8%15.3%

Span of Control

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Content Objective Approach Findings Next Steps

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Objective To gain a thorough understanding of reporting relationships at the Jeffersontown and Frankfort Plants vis-a-vis industry norms To graphically depict the numbers of direct reports at varying levels of the organization To compare spans and reporting relationships between departments and functional areas

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Approach Reviewed and analyzed most recent (May ‘93) organization chart for Jeffersontown and Frankfort Reviewed average spans of control by department

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Hierarchical Levels Aligned all Jeffersontown and Frankfort plant personnel by level –Plant Manager is considered to be Level 0 –Direct reports to the Plant Manager (Functional Managers) are considered Level 1 –Direct reports to Functional Managers (Department Managers) are considered Level 2, and so on... –Only those employees who supervise people are included in subsequent organizational levels to develop span of control relationships Our analysis covers the entire Jeffersontown and Frankfort operations personnel.

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Jeffersontown Spans of Control Are Within Industry Norms Our analysis reveals that major functional areas are at or above industry norms. Average Industry Spans – 1:7 to 1: Level 4 Level 3 Level 2 Level 1 Total Supervisor – Total Headcount

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) By And Large, Frankfort Spans of Control Are Within Industry Norms Level 3 shift supervisors have 80+ hourly employees reporting in to them. Average Industry Spans – 1:7 to 1: Level 3 Level 2 Level 1 Total Supervisor 7 9 – Total Headcount

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Findings Jeffersontown The Jeffersontown plant organization has only four management levels Many functional areas have only two or three management levels Overall spans of control appear to be in line with industry norms Frankfort The Frankfort plant organization has only three management levels Some Level 2 managers have spans of control below industry norms. However, these tend to be small departments with relatively few employees 80+ hourly production workers report directly to Level 3 Shift Supervisors Most other Level 3 managers have spans of control within industry norms

10: FINANCIAL ANALYSIS © 1993 Gemini Consulting. Reproduction with Express Permission Only Fin Analy – V1.2 (Presentations) Conclusion XXXX has a fairly optimal organizational structure and presents little opportunity to reduce overall headcount There may be an opportunity to re-organize Frankfort plant operations to better align Shift Supervisors’ spans