TN 1BLAINE KITCHENWAREHistorical Balance Sheet

Project:BLAINE KITCHENWAREAnalysis:Historical Balance SheetDraft:NFooter:Harvard Business Publishing

Results Multiplier:275.00%

Harvard Business Publishing BLAINE KITCHENWAREHistorical Balance Sheet

TN Exhbit 1Effects of the Proposed Repurchase on Blaine's 2006 Balance Sheet ($ in Thousands)

Shares Repurchased14,000Purchase Price$18.50

Rearrange 2006 B/SRestate 2006 B/S showing effect of Repo20062006Cash230,866Cash21,866NWC32,231NWC32,231NFA174,321NFA174,321Other, net50,945Other, net50,945Total488,363Total279,363

Debt0Debt50,000D/E =22%Equity488,363Equity229,363D/Capital18%Total488,363Total279,363

Note: The post-transaction equity figure should be (488,363 - (18.50*14,000)), which is a reduction equal to $259MM

Exhibit 3Selected Operating and Financial Data for Public Kitchenware ProducersBefore RepoHome & Hearth DesignAutoTech AppliancesXQL Corp.Bunkerhill, Inc.EasyLiving SystemsPeer AvgBlaine KitchenwareRevenue$589,747$18,080,000$4,313,300$3,671,100$188,955$342,251EBIT106,7632,505,200721,297566,09919,61363,946EBITDA119,1903,055,200796,497610,39923,35673,86059,05245,052Net income$53,698$1,416,012$412,307$335,073$13,173$53,630$16.2500$18.5000Cash & securities$21,495$536,099$21,425$153,680$242,102$230,866Net working capital*54,3161,247,520353,691334,80421,22032,23113.85%Net fixed assets900,8037,463,5643,322,837815,30468,788174,321Total assets$976,613$9,247,183$3,697,952$1,303,788$332,110$592,253

Net debt (1)$350,798$4,437,314$950,802$238,056($64,800)($230,866)Total debt372,2934,973,413972,227391,736177,3020.0Book equity$475,377$3,283,000$2,109,400$804,400$94,919$488,363

Market capitalization776,42713,978,3755,290,1453,962,780418,749959,596Enterprise value (MVIC)$1,127,226$18,415,689$6,240,947$4,200,836$353,949$728,730

Equity beta1.031.240.960.920.670.56

LTM Trading MultiplesMVIC/Revenue1.91x1.02x1.45x1.14x1.87x2.13xMVIC/EBIT10.56x7.35x8.65x7.42x18.05x11.40xMVIC/EBITDA9.46x6.03x7.84x6.88x15.15x9.87xMarket/Book equity1.63x4.26x2.51x4.93x4.41x1.96x

Net Debt/Equity45.18%31.74%17.97%6.01%-15.47%17.09%-24.06%Net Debt/Enterprise Value31.12%24.10%15.23%5.67%-18.31%11.56%-31.68%

* Net working capital excludes cash and securities(1) Net debt is total long term and short term debt less excess cash.

TN 2 & 3BLAINE KITCHENWAREPro Forma Results

Project:BLAINE KITCHENWAREAnalysis:Pro Forma ResultsDraft:NFooter:Harvard Business Publishing

Results Multiplier:275.00%

Harvard Business Publishing BLAINE KITCHENWAREPro Forma Results

TN Exhibit 2: Effect of Repurchase on Blaine's 2006 Income Statement ($ in Thousands)TN Exhibit 3: Comparison of 2006 Distributable Funds with and without the Repurchase ($ in Thousands)Restate 2006 I/S to give effect to the repo200620062006BLAINE's ACCOUNTw/o Repowith RepoTax BillPost-RepoInt. Rate6.75%EBITDA73,86073,860EBIT63,946less depreciation(9,914)(9,914)Plus: Other Income0EBIT63,94663,946Less: Interest expense3,375EBIT/Int18.9Plus: Other Income13,50608.220%Return on Excess Marketable SecuritiesEarnings Before Tax60,571CoverageLess: Interest expense0(3,375)50MM x 6.75%Less: Taxes18,629Earnings Before Tax77,45160,571Net Income41,942Less: Taxes31%(23,821)(18,656)(5,165)Tax rate from case documentPost-RepoPre-RepoNet Income53,63041,915Net Income41,94253,630Shares45,05259,052SHAREHOLDERS' ACCOUNTEPS$0.93$0.91Dividends @ 100% payout53,63041,915Book Equity229,363488,363Earnings on excess cash013,506Assumes shareholders can invest at the same rate as BlaineROE18.3%11.0%Pre-tax income53,63055,4212006 taxes18,65623,821taxes delta =(5,165)Taxes @ 36%36%(19,307)(19,951)644Net34,32335,469Value CreationLENDERS ACCOUNTTax Shield ('thousands)Interest earned03,375Change in debt259,000$14.98Taxes0(1,038)1,038Assuming 30.8% Tax RateTax Rate30.80%Net02,337Value created79,772Shares59,052DISTRIBUTABLE FUNDSDifferenceTax shield gain/sh$1.35Shareholders after tax34,32335,4691,146Share price before repo$16.25Lenders after tax02,3372,337Share price + gain$17.603,483Purchase price$18.50Total taxes(43,128)(39,645)3,483Premium paid12,588ThousandNote: for simplicity, shareholders' personal tax rate is assumed to be 36%; lenders' tax rate is assumedFinal share price$16.70752,447to equal Blaine's 30.8%PROSBetter EPSBetter ROEFamily ControlTax ShieldsCONSJeopardizes acquisitions programVulnerable to product setbacksIncreased expected costs of financial distressE(CFD) = Prob(financial distress)x(Cost of financial distress|distress)

Harvard Business Publishing

TN 5BLAINE KITCHENWAREWeighted Average Cost of Capital

Project:BLAINE KITCHENWAREAnalysis:Weighted Average Cost of CapitalDraft:NFooter:Harvard Business Publishing

Results Multiplier:275.00%

Harvard Business Publishing BLAINE KITCHENWAREWeighted Average Cost of Capital

Debt50,000Shares45,052Tax rate40%EV0.79205143

675Part of Tn Exhibit 5: Computing Minimum WACC for Blaine over a Range of Capital StructuresCostCostDebt /Debt /UnleveredLeveredofofAssumptionsDebtCap.EquityBetaBetaEquityDebtWACCMarginal Tax Rate30.80%Existing 1(230,866)-31.7%-24.1%0.740.567.82%5.02%9.20%Risk-Free Rate5.02%Proposal50,000674,7886.899%7.4%0.740.788.87%6.75%8.54%Market Risk Premium5.00%

AAA84,04111.4%12.8%0.740.809.03%5.67%8.45%Debt Beta0.00AA-14.2%16.6%0.740.829.13%5.82%8.40%A20.8%26.2%0.740.879.38%5.87%8.27%Cash to employ209,000BBB+22.3%28.8%0.740.889.44%6.85%8.39%BB28.3%39.5%0.740.949.72%8.00%8.53%B+30.9%44.6%0.740.979.85%9.12%8.76%

Note: Re-levered beta calculation is based on a constant capital structure1 Un-levered beta is the weighted average of the operating asset beta and the beta of cash, and is a = Operations(Operating Assets/Enterprise Value) + Cash(Cash/Enterprise Value). This is equivalent to e(Equity Value/Enterprise Value). ($ in Thousands.)

Part of TN Exhibit 5BlaineDebt Waterfall:10-year Treasury5.02%Debt Relationships:ProposalAAAAA-ABBB+BBB+InterestFY 2006 EBIT73,86073,86073,86073,86073,86073,86073,860CoverageDebtDefaultInterest Expense3,3754,7656,4239,23212,31016,41319,696RatioRatingSpreadCoverage Ratio21.9x15.5x11.5x8.0x6.0x4.5x3.8x>13.0AAA0.65%9.5 - 12.0AA-0.80%7.0 - 9.5A0.85%Estimated Cost of Debt6.75%5.67%5.82%5.87%6.85%8.00%9.12%5.0 - 7.00BBB+1.83%4.0 - 5.0BB2.98%Implied Debt50,00084,041110,354157,282179,707205,166215,9642.50 - 4.0B+4.10%

Harvard Business Publishing

Sheet1INCINCOME STATEMENTBALANCE SHEETSIMPLIFIED BALANCE SHEETCase Exhibit 1Case Exhibit 2Case Exhibit 2

Operating Results:200420052006Assets:200420052006Assets:200420052006Revenue291,940307,964342,251Cash & Cash Equivalents67,39170,85366,557Cash & Marketable Securities67,39170,853230,866Less: Cost of Goods Sold204,265220,234249,794Marketable Securities218,403196,763164,309Net Working Capital218,403196,76332,231Gross Profit87,67687,73192,458Accounts Receivable40,70943,23548,780Net Fixed Assets40,70943,235174,321Less: Selling, General & Administrative25,29327,04928,512Inventory47,26249,72854,874Other, net47,26249,72850,945Operating Income62,38360,68263,946Other Current Assets2,5863,8715,157Total Assets373,765360,578488,363Plus: Depreciation & Amortization6,9878,2139,914Total Current Assets376,351364,449339,678EBITDA69,37068,89573,860Debt000Property, Plant & Equipment99,402138,546174,321Equity417,377458,538488,363EBIT62,38360,68263,946Goodwill8,13420,43938,281Total Liabilities & Shareholders' Equity417,377458,538488,363Plus: Other Income (expense)15,71916,05713,506Other Assets13,33127,39439,973Earnings Before Tax78,10176,73877,451Total Assets497,217550,829592,253Less: Taxes24,98924,30323,821Net Income53,11252,43553,630Liabilities & Shareholders' Equity:Dividends18,58922,87128,345Accounts Payable26,10628,58931,936Accrued Liabilities22,60524,92127,761Taxes Payable14,22517,19616,884Margins:Total Current Liabilities62,93570,70576,581Revenue Growth3.2%5.5%11.1%Other liabilities1,7943,1514,814Gross Margin30.0%28.5%27.0%Deferred Taxes15,11118,43422,495EBIT Margin21.4%19.7%18.7%Total Liabilities 79,84092,290103,890EBITDA Margin23.8%22.4%21.6%Shareholders' Equity417,377458,538488,363Effective Tax Rate (1)32.0%31.7%30.8%Total Liabilities & Shareholders' Equity497,217550,829592,253Net Income Margin18.2%17.0%15.7%Dividend payout ratio35.0%43.6%52.9%Note: Many items in BKI's historical balance sheets, e.g. Property, Plant & Equipment Note: Many items in BKI's historical balance sheets, e.g. Property, Plant & Equipment (1) Blaine's future tax rate is assumed to revert to the statutory rate of 40%.have been affected by the firm's acquisitions.have been affected by the firm's acquisitions.