SRN Presentation 12/09/09

1. SRN Presentation12/09/09 Tools to weather an Economic downturn and Capitalize on the Recovery

2. Rick FullingtonCEO Milwaukee Gear company

3. What are the challenges • During an Economic Downturn • Manage for the moment • Prepare for the future • It’s about the numbers

4. MANAGING FOR THE MOMENT • Be ahead of the curve • Proactive rather than reactive • Bias towards Action • Constantly re-assessing length and steepness • React timely • Management-lead by example • Share the pain • Market place should support these actions

5. Managing for the moment---continued • Customers • Communicate, communicate, communicate • Goes both ways • Constantly monitor credit • Cancellations • Push outs • Always be business like • Always approach from the economic/good business practices standpoint

6. Managing for the moment---continued • Suppliers • Communicate, communicate, communicate • Everything is negotiable • Reward good performance • Take stock of what you have • Communicate to all levels of your organization • Nothing is bought unless absolutely needed • Make things last • Take care of “our things”

7. Managing for the moment---continued • People (employees/associates) • Various tools that can be deployed • Reduce/eliminate overtime • Reduce/eliminate shifts • Weekly crewing • Rolling deferrals • Shortened work weeks • Planned shutdowns • Communicate, communicate, communicate

8. Managing for the moment----continued • Various tools---continued • Layoffs • MAINTAIN THE BEST TEAM • Review everyone-classify as A, B, C, etc. • Set or reset expectations • Clearly communicate responsibilities • Skill and ability • Super Seniority • Seniority • Direct vs. indirect/support • Pay cuts • Benefit cuts • What works for your organization

9. Managing for the moment---continued • Communication • Early • Often • Impact on Morale • Keeps anxiety manageable • Transparency • No hiding • No holding back • No sugar coating • Bad news first • On-going, even with those laid off

10. PREPARE FOR THE FUTURE • Leaner Organization • Processes/Procedures • Lean Mfg./Continuous Improvement efforts • Shop • Office • Systems • IT • Supply Chain • Internal Pipelines

11. Prepare for the future---contd. • Leaner Organization---contd. • People • Training • Education • Flexibility • The tools you give them to work with • It’s about change • Assumes you want to maintain or improve your competitive position

12. Prepare for the future---contd. • Markets • How good are the industries that you serve • How good are the customers you serve • How to increase your market share • Short term • Mid term • Long term • Products/Services • Sales/Marketing Organization • How are customers changing • How might competitors be changing • How will things be changing globally • What impact will technology have

13. IT’S ABOUT THE NUMBERS! • Communications-with investors, bankers or owner/operators • How good is your story • Common themes for all of their businesses • Covenants • EBITDA • Ability to service debt

14. It’s about the numbers---contd. • Good Forecasts • Revenue • Monthly, Quarterly, Annual • Data points • Customers • Economic • Industry • Leading Indicators

15. It’s about the numbers---contd. • Good Forecasts---contd. • Costs • Establish new run rate • Prepare a detailed budget • Monthly, quarterly, annual • Incorporate all cost saving measures • Cash Flow • Working Capital—short term/long term • Service debt • Factor in Maintenance Capital Expenditures • Cash is King!!!

16. It’s about the numbers---contd. • Good tools to control and monitor • Financial Statements • Business Scorecard • Financial reports • Balance Sheet • Statement of Operations (Income or P&L Statement) • Statement of Cash flows (Sources and Uses of Funds) • Covenant analysis • EBITDA (Earnings Before Interest, Taxes, Depr., Amort.) • Debt service coverage • Funded debt to EBITDA

17. It’s about the numbers---contd. • ORR ratios • Financial ratios • Asset Productivity ratios • Employee Productivity ratios

18. It’s about the numbers---contd. • Financial Ratios • They are the basic scores on which managers are judged by creditors and the suppliers of capital to the business, the investors. • EBITDA • Times Interest Earned • Current Ratio • Sales to Working Capital • Debt to Equity

19. It’s about the numbers---contd. • Asset Productivity Ratios • Defined • Average Collection Period • Inventory Turnover • Inventory holding Period (Days) • Sales to Fixed assets

20. It’s about the numbers---contd. • Employee Productivity Ratios • Defined • Sales Per Employee • Value Added Per Employee • Gross Margin Per Employee • Total Payroll (% of Net Sales)

22. It’s about the numbers---contd. • Operational Analysis • Sales Volume Analysis • Historical Comparison • Fixed Costs • Variable Costs • Semi-Fixed/Variable Costs • Benchmarking—ORR • Operate to a plan and a budget

24. It’s about the numbers---contd. • Cash is King • If nothing else, you should build cash from; • Inventory reduction • Accounts receivable reduction • Absolute must for bank to see • Will be needed to finance inventory and A/R when upturn occurs

25. It’s about the numbers---contd. • Cash Flow statements/forecasts • Quarterly • Several years worth • Capex • Maintenance • Productivity • capacity

26. Summary • Manage for the moment • It’s about the numbers • Work to a plan • Make your numbers • Prepare for the future • Hard to recover if you fall behind • Questions