final - confidential kraftmaid freight revenue and cost overview february 2011

Final - Confidential

KraftMaid Freight Revenue and Cost

OverviewFebruary 2011


Executive Overview

Review of freight and home delivery of the KraftMaid brand requested to identify level of subsidy and competitive landscape

Key findings• Overall KraftMaid freight costs are approximately $54 million

(2010) and include a subsidy of around $3.1 million• Net program costs have increased the past 2 years but are

projected to improve in 2011• Our competitors have similar logistics strategies for Home Centers• All prices are “landed” with approximately 7% of total price

allocated to freight• Home Delivery is most prevalent in home center channel• Home Delivery pricing was last adjusted in 2008


Key Contributors

• David Lahie• Ron Drenski• Tom Bolden• Christina Frush• Ken Williams• Shawn McNeil• Roland Minogue• Mark Oleskiewicz• Doug Bennett

6/2/2010 3


Cost Summary by Year

Net Cost of KraftMaid delivery program has increased over the past 2 years

2008* 2009 2010 2011 (est)**Per UnitASP ($175+ Delivery) 5.84$ 6.92$ 6.42$ 6.27$ ASP (7% in Factor) 21.87$ 21.32$ 21.98$ 22.42$

Total ASP 27.71$ 28.24$ 28.40$ 28.69$

Cost Per Unit 28.15$ 28.20$ 30.12$ 29.14$ Total Profit/(Loss) (0.44)$ 0.05$ (1.72)$ (0.45)$

Units 2,852,095 2,120,505 1,800,775 1,913,230

DollarsASP (non-factor) 16,655,617$ 14,675,191$ 11,559,532$ 11,997,285$ ASP (7% Factor) 62,386,779$ 45,214,517$ 39,573,833$ 42,896,679$

Total ASP 79,042,396$ 59,889,708$ 51,133,365$ 54,893,964$

Cost 80,288,960$ 59,788,934$ 54,236,050$ 55,756,012$ Total Profit/(Loss) (1,246,564)$ 100,774$ (3,102,685)$ (862,048)$

* Rate change in 2008 from $125/$135 to $175 per delivery (7/15/2008) - - if at $175 all year est. revenue approx. $2 million higher** Assumes 2% average year price increase

KraftMaid


2010 Cost Summary

$3 million of subsidies in 2010 driven primarily by the dealer channel

Dealers Home Depot Lowes TotalPer UnitASP ($175+ Delivery) 2.40$ 9.26$ 8.49$ 6.42$ ASP (7% in Factor) 20.53$ 24.70$ 21.43$ 21.98$

Total ASP 22.94$ 33.96$ 29.92$ 28.40$

Cost Per Unit 27.20$ 33.39$ 30.72$ 30.12$ Total Profit/(Loss) (4.26)$ 0.57$ (0.79)$ (1.72)$

Units 674,072 484,906 641,797 1,800,775

DollarsASP (non-factor) 1,620,099$ 4,488,463$ 5,450,970$ 11,559,532$ ASP (7% Factor) 13,840,651$ 11,979,172$ 13,754,010$ 39,573,833$

Total ASP 15,460,750$ 16,467,635$ 19,204,980$ 51,133,365$

Cost 18,334,265$ 16,188,881$ 19,712,904$ 54,236,050$ Total Profit/(Loss) (2,873,515)$ 278,754$ (507,924)$ (3,102,685)$

Home Delivery Units 148,915 412,567 501,038 1,062,520 Number of Cabs/Delivery (@$175) 16 16 16 16

2010 KraftMaid


Masco Cabinetry Private Fleet Overview

• Merillat and Quality– Tractor’s 13– Straight Trucks 35– Yard Tractor’s 2– Trailer’s 54

• KraftMaid– Ottawa's 4– Straight Trucks 3– Tractor’s 2– Interplant Trailer’s 37– Trailer’s 530 (subleased)

Most of the Present Masco Cabinetry fleet lease cost is transferred to freight

providers and included in their rates to us. Volume is “guaranteed”, and excess

leases of around $200k were billed back to us in 2010.


MC MB AWC Comment

3rd Party Outsource Yes Yes Yes Primary for All

Own Trailers Partial – trailer leases funded by suppliers

Partial Partial MB and AWC in Midwest only

Delivery Time Pre-scheduled date

1 week from product arrival

1 week from product arrival

2 Person Crews Yes Yes Yes

Home Delivery Any Location

Yes Everywhere

New York Only

Mid-West and New York Only

MB and AWC Lowes – 1st dry, secure location

Add On Charge $175 $175 $175 except West where $100 non-1st floor fee

Competitive Freight Overview


Appendix


Cardinal and 3PD Area Map


Location DeliveriesArlington 5,258 Atlanta 3,662 Chicago 17,404 Denver 5,252 Hayward 6,380 Houston 3,514 Jacksonville 2,306 Kent 6,079 Miramar 4,181 Oldsmar 6,147 Ontario 6,881 Phoenix 3,180 TOTAL 70,244

2010 Masco 3PD Retail Cabinet Deliveries by Location


Cardinal Deliveries in 2010

7,359

19,008

13,073

9,061

9,132

9,712

10,403

15,689

3,854

97,300


External Masco Numbers

0+12 Cabs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FYKM Dealer 44,833 56,199 69,664 70,933 73,103 73,895 61,302 60,827 49,337 42,894 52,270 36,774 692,030 KM Builder - - - - - - - - - - - - - KM THD 32,303 41,546 45,260 45,296 45,003 47,141 36,251 37,628 38,617 32,158 33,296 23,991 458,490 KM Lowe's 40,270 47,237 54,737 54,936 59,380 55,867 44,211 62,572 55,992 50,537 50,671 34,352 610,761 Classic Dealer 27,355 33,053 45,024 41,836 48,001 55,422 54,645 65,263 61,974 63,013 55,368 42,243 593,198 Classic Builder 14,979 17,092 22,613 21,694 25,297 29,142 28,535 34,062 31,699 32,377 28,332 21,726 307,549 Essentials Dealer 9,239 11,163 15,207 14,130 16,213 18,718 18,456 22,043 20,932 21,283 18,701 14,266 200,351 Essentials Builder 4,115 4,695 6,212 5,960 6,949 8,006 7,839 9,357 8,708 8,894 7,783 5,968 84,486 MP Dealer 2,672 3,228 4,398 4,086 4,689 5,414 5,337 6,375 6,054 6,155 5,408 4,127 57,944 MP Builder 482 550 728 698 814 938 918 1,096 1,020 1,042 912 699 9,899 Quality Dealer 11,546 13,952 19,004 17,658 20,262 23,393 23,066 27,548 26,160 26,598 23,371 17,831 250,389 Quality Builder 5,008 5,714 7,560 7,253 8,458 9,743 9,540 11,388 10,598 10,825 9,473 7,264 102,825 Woodstar Dealer 3,360 4,059 5,529 5,138 5,895 6,807 6,711 8,015 7,612 7,739 6,800 5,189 72,854 Woodstar Builder 999 1,140 1,508 1,447 1,687 1,943 1,903 2,272 2,114 2,159 1,889 1,449 20,510 OPP Dealer 18,776 22,687 30,904 28,716 32,948 38,041 37,508 44,796 42,539 43,252 38,004 28,997 407,169 OPP Builder 16,019 18,278 24,183 23,201 27,053 31,166 30,516 36,427 33,900 34,625 30,299 23,235 328,901 Other - - - - - - - - - - - - - Total - Core Cabs 231,956 280,597 352,529 342,983 375,754 405,638 366,737 429,669 397,256 383,549 362,577 268,111 4,197,354

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Masco Cabinetry CpC KPI $22.53 $22.68 $22.06 $22.33 $21.91 $21.32 $20.51 $20.43 $20.29 $19.73 $20.43 $20.09 $21.12

KM Budgeted CpC THD & Lowes $2,351,573 $2,876,833 $3,240,153 $3,247,790 $3,382,307 $3,337,725 $2,607,201 $3,246,776 $3,065,563 $2,679,548 $2,720,765 $1,890,476 $34,646,710

KM Budgeted CpC Dealers & MP $1,311,490 $1,639,184 $2,044,002 $2,069,372 $2,148,308 $2,193,153 $1,846,350 $1,866,577 $1,541,721 $1,368,979 $1,601,264 $1,136,930 $20,767,331

Total Budgeted Freight Expense $3,663,063 $4,516,017 $5,284,155 $5,317,162 $5,530,615 $5,530,878 $4,453,551 $5,113,352 $4,607,284 $4,048,527 $4,322,029 $3,027,406 $55,414,041

KM Invoiced Revenue Cabinets 120,560 148,761 174,786 175,950 182,989 183,254 148,020 168,498 151,019 132,786 142,557 99,943 1,829,125

Cabs as a % of MC Monthly Total 52.0% 53.0% 49.6% 51.3% 48.7% 45.2% 40.4% 39.2% 38.0% 34.6% 39.3% 37.3% 43.6%

CPC $30.38 $30.36 $30.23 $30.22 $30.22 $30.18 $30.09 $30.35 $30.51 $30.49 $30.32 $30.29 $30.30

Weighted Cost per Cab $15.79 $16.09 $14.99 $15.50 $14.72 $13.64 $12.14 $11.90 $11.60 $10.56 $11.92 $11.29 $13.20

BCG Expense $1,562,014 $1,849,102 $2,493,314 $2,342,746 $2,703,447 $3,118,878 $3,067,554 $3,662,986 $3,453,832 $3,517,257 $3,086,109 $2,358,743 $33,215,982

Patch Adjustment -$4 -$4 -$6 -$5 -$6 -$7 -$7 -$8 -$8 -$8 -$7 -$5 -$77

Adjusted BCG Expense $1,562,017 $1,849,106 $2,493,320 $2,342,751 $2,703,454 $3,118,885 $3,067,562 $3,662,994 $3,453,840 $3,517,265 $3,086,116 $2,358,749 $33,216,059

Total Revenue Cabinets 111,395 131,836 177,743 167,033 192,764 222,383 218,717 261,171 246,237 250,763 220,020 168,168 2,368,230

% of Monthly Total 48.0% 47.0% 50.4% 48.7% 51.3% 54.8% 59.6% 60.8% 62.0% 65.4% 60.7% 62.7% 56.4%

CPC $14.02 $14.03 $14.03 $14.03 $14.02 $14.02 $14.03 $14.03 $14.03 $14.03 $14.03 $14.03 $14.03

Weighted Cost per Cab $6.73 $6.59 $7.07 $6.83 $7.19 $7.69 $8.36 $8.53 $8.69 $9.17 $8.51 $8.80 $7.91


Suggested Carryover

Starting Monthly

Carryover Total Sale Orders Display AllocationTotal Production

DemandAverage Daily Build Total Monthly

LTPStandard Work

Days Extra DaysTotal Work

Days

Date Ohio

J an-11 99,924 92,963 129,723 4,100 133,823 7,686 130,670 17 0 17

Feb-11 111,410 96,116 154,611 5,800 160,411 8,570 137,120 16 0 16

Mar-11 111,410 119,407 187,570 8,000 195,570 8,570 188,540 19 3 22

Apr-11 111,410 126,438 186,129 6,800 192,929 8,570 171,400 16 4 20

May-11 111,410 147,966 163,067 8,200 171,267 8,570 179,970 17 4 21

J un-11 111,410 139,263 157,878 7,900 165,778 8,570 188,540 18 4 22

J ul-11 111,410 116,502 162,587 8,300 170,887 8,570 145,690 15 2 17

Aug-11 111,410 141,698 137,315 5,300 142,615 8,570 188,540 19 3 22

Sep-11 111,410 95,773 153,170 5,500 158,670 8,570 145,690 17 0 17

Oct-11 111,410 108,752 175,367 6,700 182,067 8,570 162,830 17 2 19

Nov-11 111,410 127,989 144,377 5,400 149,777 8,570 162,830 17 2 19

Dec-11 111,410 114,936 105,172 4,400 109,572 8,570 111,410 16 (3) 13

113,098 1,856,965 76,400 1,933,365 8,503 1,913,230 204 21 225

Annualized Average Daily Build

New Production Plan - 2010 4th Qtr through 20112011 Production Plan @ 1,856,965 - Operations Bridge

1,933,365

2011 Stats Only

1,913,230 - Produced(11,430) - Estimated FOB Impact(76,400) - Non- Revenue Cabinets

-------------------1,825,430 - Prod Plan Fcst Revenue Cabinets1,824,670 - 0 + 12 Revenue Cabinets 760 - Positive Variance from 0 + 12


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

OE

Meri

llat

Quali

tyKr

aftM

aid br

and

JDR production Cycle Key to Ship - 15 days Western Planned Line Haul - 6 & 7 daysOE - 2 day First Contact / Route Planning / Production Leveling - 5 Days

Cross Dock & Delivery -1 - 3 days

JDR production Cycle Key to Ship - 15 days Southeast Planned Line Haul - 5 & 6 daysOE - 2 day First Contact / Route Planning / Production Leveling - 5 days


JDR production Cycle Key to Ship - 15 days Rocky Mountains & TX Line Haul - 4 & 5 days

OE - 2 day First Contact / Route Planning / Production Leveling - 5 days


JDR production Cycle Key to Ship - 15 days

EastcoastPlanned Line Haul - 1 & 2

days

OE - 2day First Contact / Route Planning / Production Leveling - 5 days

Delivery - 1 &2 days

Scheduled to production / ship -3 to 4 days from booked

Planned Line Haul - Transit 1 to 4 days

Order Booked

Delivery - 1 &2 days if cross

dock or SC

Scheduled to production / ship - 8 to 11 days from booked Planned Line Haul - Transit 1 to 4 days

Order Booked

Delivery - 1 &2 days if cross

dock or SC

Lead-time Overview by Product Line


KM Delivery Statistics

Dealer Cabinets 2010– KM 487,228– HMD 148,474– LTL 1,212 Home Depot Cabinets 2010– KM 70,511– HMD 412,567– LTL 1,828 Lowes Cabinets 2010– KM 137,367– HMD 501,038– LTL 3,392 Masterpiece Cabinets 2010– KM 53,839– HMD 441– LTL 932


Delivery Cost per CabinetMASCO CABINETRY COST PER CABINET BY BRAND

2010

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Totals YTD

Freight Costs $5,079,636 $4,133,054 $5,193,541 $5,049,353 $5,635,165 $4,943,311 $4,311,648 $4,536,569 $4,238,533 $4,173,858 $3,791,247 $3,150,135 $54,236,050Cabinets 172,611 151,160 173,010 189,473 195,471 163,730 138,796 149,117 136,508 137,078 108,134 85,687 $1,800,775

Freight Cost per Cabinet $29.43 $27.34 $30.02 $26.65 $28.83 $30.19 $31.06 $30.42 $31.05 $30.45 $35.06 $36.76 $30.12

Freight Income ($1,073,746) ($1,024,941) ($851,014) ($1,245,304) ($1,328,693) ($1,008,278) ($918,197) ($992,972) ($966,634) ($863,654) ($726,234) ($559,866) ($11,559,532)Total w/ rev $4,005,890 $3,108,113 $4,342,527 $3,804,049 $4,306,472 $3,935,033 $3,393,451 $3,543,597 $3,271,899 $3,310,204 $3,065,013 $2,590,269 $42,676,518


Outbound freight $860,810 $230,752 $815,225 $855,024 $1,031,354 $393,777 $681,248 $525,586 $845,101 $640,730 $609,811 $685,559 $8,174,977Cross dock $151,584 $144,351 $168,604 $196,766 $137,563 $189,097 $203,516 $179,999 $217,705 $173,131 $155,267 $155,442 $2,073,025Total $1,012,395 $375,102 $983,829 $1,051,790 $1,168,917 $582,874 $884,764 $705,585 $1,062,807 $813,861 $765,078 $841,001 $10,248,003Cabinets 89,932 78,236 101,244 103,593 99,725 95,230 91,897 89,826 89,480 83,751 76,179 63,539 $1,062,632


Outbound freight $447,662 $485,589 $584,542 $807,490 $445,879 $721,020 $660,307 $947,140 $712,100 $857,247 $544,614 $690,892 $7,904,484Cross dock $0 $0 $0 $0 $0 $0 $0 $318 $0 $0 $0 $0 $318Total $447,662 $485,589 $584,542 $807,490 $445,879 $721,020 $660,307 $947,458 $712,100 $857,247 $544,614 $690,892 $7,904,802Cabinets 69,424 66,439 100,070 103,020 100,532 87,043 81,701 86,747 82,799 74,076 61,205 57,518 $970,574


Quality

Merillat

Kraftmaid

final - confidential kraftmaid freight revenue and cost overview february 2011

Documents

location slide

freight home delivery

dealer channel slide

non revenue cabinets

product line slide

home depot cabinets

lowes cabinets

cost overview