KEY FINANCIAL MANAGEMENT TOOLS PRESENTED AT MASTER BUILDERS’ FIRST ANNUAL REGIONAL ECONOMIC OUTLOOK & MANAGEMENT FORUM BY ALLEN & ASSOCIATES

KEY TOOL AREAS l FINANCIAL l OPERATIONS l SALES l MANAGEMENT

TOOLS COVERED TODAY l BALANCE SHEET l P&L l BENCHMARKING l BREAKEVEN ANALYSIS l JOB & PRODUCT COSTING/PRICING l JOB & CUSTOMER CONTRIBUTION

THE TWO KEY FINANCIAL TOOLS l BALANCE SHEET l PROFIT & LOSS STATEMENT

l SNAP SHOT OF THE COMPANY’S FINANCIAL HEALTH CURRENT PERIOD LAST YEAR VARIANCE WORKING CAPITAL RATIOS DSOs BALANCE SHEET

TYPICAL BALANCE SHEET OTHER SSETS

TYPICAL BALANCE SHEET CURRENT LIABILITIES

TYPICAL BALANCE SHEET LONG TERM LIABILITIES

TYPICAL BALANCE SHEET EQUITY

TYPICAL BALANCE SHEET RATIOS

PROFIT & LOSS STATEMENT l MOTION PICTURE OF A COMPANY’S SALES, COSTS & EARNINGS OVER A PERIOD OF TIME: VARIABLE AND FIXED COST CATERGORIES DOLLARS PER CENT TO SALES COST PER UNIT VARIANCE FROM PLAN

COSTS l VARIABLE COSTS DEFINED AS: COST INCURRED WHEN A SALE IS MADE TYPES: l MATERIAL l PLANT l DELIVERY

COSTS l FIXED COSTS DEFINED AS: COSTS FIXED IN RELATION TO TIME l TYPES: l DIRECT l SALES l G&A

VARIABLE & FIXED COSTS

EDITDA l EBITDA =$2,952$ %

BENCHMARKING l ASSISTS IN HELPING TO ANALYZE THE COST OF DOING BUSINESS l ASSISTS IN HELPING TO ANALYZE THE EFFICIENCY OF AN OPERATION

1st Quarter of 1980 to 2nd Quarter of 1996 Cement Prices vs Ready Mix Prices

MODULE III: SESSION 1 - 0H39

MODULE III: SESSION 1 - 0H40

FINACIAL RATIOS 5M CURRENT CASH D/E AR DSO INVENT

l BE PT = FIXED COST DIVIDED BY MARGIN l DATA REQUIRED l CURRENT TOTAL FIXED COSTS = $1,000,000 l CURRENT AVG SELLING PRICE = $60.00/YD l CURRENT AVG VARIABLE CST = $40.00/YD l CURRENT MARGIN = $20.00/YD l BE PT IN YDS=FC/UNIT MARGIN l BE PT IN $ = FC/MARGIN RATIO l $1,000,000/$20 = 50,000 YDS l $1,000,000/.33 = $3,030,303 BREAK-EVEN POINT

ADDITIONAL SALES REQUIRED TO COVER INCREASED FIXED COSTS l CURRENT SP=$60/YD l CURRENT VC=$40.00/YD l CURRENT FC =$1,000,000 l CURRENT BE PT=50,000 YDS l NEW FC=$1,500,000 l MARGIN = $20 l NEW BE PT =75,000 YDS ($1,500,000/$20) l INCREASE OF 25,000 YDS/50%

MODULE III: SESSION 2 OH64 VOLUME REQUIRED TO MAINTAIN CURRENT PROFIT LEVEL IF PRICES ARE INCREASED l NEW SP=$65.00 l % INCREASE=8.33% l NEW MARGIN=$25.00 l NEW BE PT=40,000 YDS ($1,000,000/$25) l % DECREASE=20%

MODULE III: SESSION 2 OH65 VOLUME REQUIRED TO MAINTAIN CURRENT PROFIT LEVEL IF PRICES ARE DECREASED l NEW SP=$50.00/YD l % DECREASE=16.6% l NEW MARGIN=$10.00 l NEW BE PT=100,000 YDS ($1,000,000/$10) l % INCREASE =100%

l BE PT = FIXED COST DIVIDED BY MARGIN l DATA REQUIRED l CURRENT TOTAL FIXED COSTS = $1,000,000 l CURRENT AVG SELLING PRICE = $60.00/YD l CURRENT AVG VARIABLE CST = $40.00/YD l CURRENT MARGIN = $20.00/YD l BE PT IN YDS=FC/UNIT MARGIN l BE PT IN $ = FC/MARGIN RATIO l $1,000,000/$20 = 50,000 YDS l $1,000,000/.33 = $3,030,303 BREAK-EVEN POINT

ADDITIONAL SALES REQUIRED TO COVER INCREASED FIXED COSTS l CURRENT SP=$60/YD l CURRENT VC=$40.00/YD l CURRENT FC =$1,000,000 l CURRENT BE PT=50,000 YDS l NEW FC=$1,500,000 l MARGIN = $20 l NEW BE PT =75,000 YDS ($1,500,000/$20) l INCREASE OF 25,000 YDS/50%

VOLUME REQUIRED TO MAINTAIN CURRENT PROFIT LEVEL IF PRICES ARE INCREASED l NEW SP=$65.00 l % INCREASE=8.33% l NEW MARGIN=$25.00 l NEW BE PT=40,000 YDS ($1,000,000/$25) l % DECREASE=20%

VOLUME REQUIRED TO MAINTAIN CURRENT PROFIT LEVEL IF PRICES ARE DECREASED l NEW SP=$50.00/YD l % DECREASE=16.6% l NEW MARGIN=$10.00 l NEW BE PT=100,000 YDS ($1,000,000/$10) l % INCREASE =100%

KEY OPERATIONAL TOOLS l PAYROLL ANAYLSIS NUMBER OF EMPLOYES BY CATEGORY OVERTIME FRINGES

KEY OPERATIONAL TOOLS l PRODUCTION YDS PER YR PER PLANT YDS PER YR PER TRUCK AVG DAILY LOADS PER TRUCK AVG YDS PER LOAD AVG YDS PER MAN HOUR VARIABLE DELIVERY COST PER MINUTE

SALES TOOLS l DAILY/M-T-D/Y-T-D $ SALES & YARDS BY PLANT l JOBS AVAILABLE l JOBS BID YDS/PRICE/COMPETITION l JOBS SOLD YDS/PRICE COMPETITION l BACKLOG YDS/WEIGHTED AVERAGE PRICE COMPETITION

l JOB COSTING l TARGET MARGIN PRICING l PRICE LISTS SALES TOOLS

MODULE III: SESSION 1 - 0H81

MODULE III: SESSION 1 - 0H82

C0ST COMPARISON SHEET

JOB 1 l MARKET PRICE = $60.00 l VARIABLE COST =$59.70 l MARGIN=$00.30 l JOB CONTRIBUTION=$3,000 l PRE-TAX PROFIT=? l AFTER TAX PROFIT=?

JOB 2 l MARKET PRICE=$60.00 l VARIABLE COSTS=$41.57 l MARGIN=$18.43 l JOB CONTRIBUTION=$184,300 l PRE-TAX PROFIT= $8.43 l AFTER TAX PROFIT= $5.05

JOB 1 l MARKET PRICE =$55.00 l VARIABLE COST=$59.70 l MARGIN=($4.70) l JOB CONTRIBUTION=($47,000)

JOB 2 l MARKET PRICE=$55.00 l VARIABLE COSTS=$41.57 l MARGIN=$13.43 l JOB CONTRIBUTION=$134,300 l PRE-TAX PROFIT=$3.43 l AFTER-TAX PROFIT=$2.05

JOB 2 l MARKET PRICE=$50.00 l VARIABLE COST=$41.57 l MARGIN=$8.43 l JOB CONTRIBUTION=$84,300 l PRE-TAX PROFIT=?

DAILY & J-T-D JOB INFORMATION l YARDS l VARIABLE DELIVERY COST PER YD l UNIT MARGIN PER YARD l $ CONTRIBUTION l VARIANCE FROM BID DATA l JOB SUMMARY SALES & MANAGEMENT TOOLS

OTHER MANAGEMENT TOOLS l BUDGETS l CASH FORECASTS l 3-5 YEAR PLAN l MODELS

SUMMARY l ONLY THE INTELLIGENT WILL SURVIVE l ONLY THE INFORMED WILL BE INTELLIGENT l MANAGEMENT MUST BE ABLE TO IDENTIFY AND QUANTIFY ALL PROBLEMS IF IT IS GOING TO SOLVE THEM l MANAGEMENT MUST USE ALL TOOLS AND TECHNOLOGY AVAILABLE TO MANAGE