BLAINE KITCHENWARE

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

Shares Repurchased 14,000 Purchase Price

Rearrange 2006 B/S Restate 2006 B/S showing effect of Repo

2006
Cash 230,866 Cash
NWC 32,231 NWC
NFA 174,321 NFA
Other, net 50,945 Other, net
Total 488,363 Total

Debt 0 Debt
Equity 488,363 Equity
Total 488,363 Total

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

Exhibit 3 Selected Operating and Financial Data for Public Kitchenware Producers

Home & HearthAutoTech

Design Appliances
XQL Corp. Bunkerhill, Inc.
EasyLiving Systems
Revenue $589,747 $18,080,000 $4,313,300 $3,671,100 $188,955
BLAINE KITCHENWARE Pro Forma Results
Harvard Business Publishing
BLAINE KITCHENWARE Pro Forma Results

TN Exhibit 2: Effect of Repurchase on Blaine's 2006 Income Statement ($ in ThousaTN Exhibit 3: Comparison of 2006 Distributable Funds with and without the Repurchase ($ in
Restate 2006 I/S to give effect to the repo 2006 2006
2006 BLAINE's ACCOUNT w/o Repo with Repo Tax Bill
Post-Repo Int. Rate 6.75% EBITDA 73,860 73,860
EBIT 63,946 less depreciation (9,914) (9,914)
Plus: Other Income 0 EBIT 63,946 63,946
Less: Interest expense 3,375 EBIT/Int 18.9 Plus: Other Income 13,506 0
Earnings Before Tax 60,571 Coverage Less: Interest expense 0 (3,375)
Less: Taxes 18,629 Earnings Before Tax 77,451 60,571
Net Income 41,942 Less: Taxes 31% (23,821) (18,656) (5,165)
Post-Repo Pre-Repo Net Income 53,630 41,915
Net Income 41,942 53,630
Shares 45,052 59,052 SHAREHOLDERS' ACCOUNT
EPS $ 0.93 $ 0.91 Dividends @ 100% payout 53,630 41,915
Book Equity 229,363 488,363 Earnings on excess cash 0 13,506
ROE 18.3% 11.0% Pre-tax income 53,630 55,421
2006 taxes 18,656 23,821 taxes delta (5,165) Taxes @ 36% 36% (19,307) (19,951) 644
Net 34,323 35,469
Value Creation
LENDERS ACCOUNT
Tax Shield ('thousands) Interest earned 0 3,375
Change in debt 259,000 $ 14.98 Taxes 0 (1,038) 1,038
Tax Rate 30.80% Net 0 2,337
Value created 79,772
Shares 59,052 DISTRIBUTABLE FUNDS Difference
Tax shield gain/sh $ 1.35 Shareholders after tax 34,323 35,469 1,146
Share price before repo $ 16.25 Lenders after tax 0 2,337 2,337
Share price + gain $ 17.60 3,483
Purchase price $ 18.50 Total taxes (43,128) (39,645) 3,483
Premium paid 12,588 Thousand Note: for simplicity, shareholders' personal tax rate is assumed to be 36%; lenders' tax rate is assumed
Final share price $ 16.70 752,447 to equal Blaine's 30.8%

PROS Better EPS

Better ROE
Family Control
Tax Shields
CONS Jeopardizes acquisitions program
Vulnerable to product setbacks
Increased expected costs of financial distress
E(CFD) = Prob(financial distress)x(Cost of financial distress|distress)
Harvard Business Publishing
rma Results
ess Publishing
rma Results

hout the Repurchase ($ in Thousands)

8.220% Return on Excess Marketable Securities

50MM x 6.75%

Tax rate from case document

Assumes shareholders can invest at the same rate as Blaine

Assuming 30.8% Tax Rate

ess Publishing
 Harvard Business Publishing
BLAINE KITCHENWARE Weighted Average Cost of Capital

Debt ###
Shares ### Tax rat 40%
EV 0.79205143

675

Part of Tn Exhibit 5: Computing Minimum WACC for Blaine over a Range of Capital Structures
Cost Cost
Debt / Debt / Unlevered Levered of of Assumptions
Debt Cap. Equity Beta Beta Equity Debt WACC Marginal Tax Rate 30.80%
Existing 1 (230,866) -31.7% -24.1% 0.74 0.56 7.82% 5.02% 9.20% Risk-Free Rate 5.02%
Proposal 50,000 674,788 6.899% 7.4% 0.74 0.78 8.87% 6.75% 8.54% Market Risk Premium 5.00%

AAA 84,041 11.4% 12.8% 0.74 0.80 9.03% 5.67% 8.45% Debt Beta 0.00
AA- 14.2% 16.6% 0.74 0.82 9.13% 5.82% 8.40%
A 20.8% 26.2% 0.74 0.87 9.38% 5.87% 8.27% Cash to employ 209,000
BBB+ 22.3% 28.8% 0.74 0.88 9.44% 6.85% 8.39%
BB 28.3% 39.5% 0.74 0.94 9.72% 8.00% 8.53%
B+ 30.9% 44.6% 0.74 0.97 9.85% 9.12% 8.76%

Note: Re-levered beta calculation is based on a constant capital structure

1
Un-levered beta is the weighted average of the operating asset beta and the beta of cash, and is
βa = βOperations(Operating Assets/Enterprise Value) + β Cash(Cash/Enterprise Value). This is equivalent to
βe(Equity Value/Enterprise Value). ($ in Thousands.)

Part of TN Exhibit 5
Blaine Debt Waterfall:
10-year Treasury 5.02% Debt Relationships: Proposal AAA AA- A BBB+ BB B+
Interest FY 2006 EBIT 73,860 73,860 73,860 73,860 73,860 73,860 73,860
Coverage Debt Default Interest Expense 3,375 4,765 6,423 9,232 12,310 16,413 19,696
Ratio Rating Spread Coverage Ratio 21.9x 15.5x 11.5x 8.0x 6.0x 4.5x 3.8x
>13.0 AAA 0.65%
9.5 - 12.0 AA- 0.80%
7.0 - 9.5 A 0.85% Estimated Cost of Debt 6.75% 5.67% 5.82% 5.87% 6.85% 8.00% 9.12%
5.0 - 7.00 BBB+ 1.83%
4.0 - 5.0 BB 2.98% Implied Debt 50,000 84,041 110,354 157,282 179,707 205,166 215,964
2.50 - 4.0 B+ 4.10%
Harvard Business Publishing
INC

INCOME STATEMENT BALANCE SHEET

Case Exhibit 1 Case Exhibit 2

Operating Results: 2004 2005 2006 Assets:

Revenue 291,940 307,964 342,251 Cash & Cash Equivalents
Less: Cost of Goods Sold 204,265 220,234 249,794 Marketable Securities
Gross Profit 87,676 87,731 92,458 Accounts Receivable
Less: Selling, General & Administrative 25,293 27,049 28,512 Inventory
Operating Income 62,383 60,682 63,946 Other Current Assets
Plus: Depreciation & Amortization 6,987 8,213 9,914 Total Current Assets
EBITDA 69,370 68,895 73,860
Property, Plant & Equipment
EBIT 62,383 60,682 63,946 Goodwill
Plus: Other Income (expense) 15,719 16,057 13,506 Other Assets
Earnings Before Tax 78,101 76,738 77,451 Total Assets
Less: Taxes 24,989 24,303 23,821
Net Income 53,112 52,435 53,630 Liabilities & Shareholders' Equity:
Dividends 18,589 22,871 28,345 Accounts Payable
Accrued Liabilities
Taxes Payable
Margins: Total Current Liabilities
Revenue Growth 3.2% 5.5% 11.1% Other liabilities
Gross Margin 30.0% 28.5% 27.0% Deferred Taxes
EBIT Margin 21.4% 19.7% 18.7% Total Liabilities
EBITDA Margin 23.8% 22.4% 21.6% Shareholders' Equity
Effective Tax Rate (1) 32.0% 31.7% 30.8% Total Liabilities & Shareholders' Equity
Net Income Margin 18.2% 17.0% 15.7%
Dividend payout ratio 35.0% 43.6% 52.9%
Note: Many items in BKI's historical balance sheets, e.g. Pr
(1) Blaine's future tax rate is assumed to revert to the statutory rate of 40%. have been affected by the firm's acquisitions.
 SIMPLIFIED BALANCE SHEET
Case Exhibit 2

2004 2005 2006 Assets: 2004 2005 2006

67,391 70,853 66,557 Cash & Marketable Securities 67,391 70,853 230,866
218,403 196,763 164,309 Net Working Capital 218,403 196,763 32,231
40,709 43,235 48,780 Net Fixed Assets 40,709 43,235 174,321
47,262 49,728 54,874 Other, net 47,262 49,728 50,945
2,586 3,871 5,157 Total Assets 373,765 360,578 488,363
376,351 364,449 339,678
Debt 0 0 0
99,402 138,546 174,321 Equity 417,377 458,538 488,363
8,134 20,439 38,281 Total Liabilities & Shareholders' Equity 417,377 458,538 488,363
13,331 27,394 39,973
497,217 550,829 592,253

eholders' Equity:
26,106 28,589 31,936
22,605 24,921 27,761
14,225 17,196 16,884
62,935 70,705 76,581
1,794 3,151 4,814
15,111 18,434 22,495
79,840 92,290 103,890
417,377 458,538 488,363
& Shareholders' Equity 497,217 550,829 592,253

s 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
d by the firm's acquisitions. have been affected by the firm's acquisitions.
Case Exhibit 1

Operating Results: 2004 2005

Revenue 291,940 307,964
Less: Cost of Goods Sold 204,265 220,234
Gross Profit 87,676 87,731
Less: Selling, General & Administrative 25,293 27,049
Operating Income 62,383 60,682
Plus: Depreciation & Amortization 6,987 8,213
EBITDA 69,370 68,895

EBIT 62,383 60,682

Plus: Other Income (expense) 15,719 16,057
Earnings Before Tax 78,101 76,738
Less: Taxes 24,989 24,303
Net Income 53,112 52,435
Dividends 18,589 22,871

Margins:
Revenue Growth 3.2% 5.5%
Gross Margin 30.0% 28.5%
EBIT Margin 21.4% 19.7%
EBITDA Margin 23.8% 22.4%
Effective Tax Rate (1) 32.0% 31.7%
Net Income Margin 18.2% 17.0%
Dividend payout ratio 35.0% 43.6%

(1) Blaine's future tax rate is assumed to revert to the statutory rate of 40%.
 2006
342,251
249,794
92,458
28,512
63,946
9,914
73,860

63,946
13,506
77,451
23,821
53,630
28,345

11.1%
27.0%
18.7%
21.6%
30.8%
15.7%
52.9%
Case Exhibit 2

Assets: 2004 2005

Cash & Cash Equivalents 67,391 70,853
Marketable Securities 218,403 196,763
Accounts Receivable 40,709 43,235
Inventory 47,262 49,728
Other Current Assets 2,586 3,871
Total Current Assets 376,351 364,449

Property, Plant & Equipment 99,402 138,546

Goodwill 8,134 20,439
Other Assets 13,331 27,394
Total Assets 497,217 550,829

Liabilities & Shareholders' Equity:

Accounts Payable 26,106 28,589
Accrued Liabilities 22,605 24,921
Taxes Payable 14,225 17,196
Total Current Liabilities 62,935 70,705
Other liabilities 1,794 3,151
Deferred Taxes 15,111 18,434
Total Liabilities 79,840 92,290
Shareholders' Equity 417,377 458,538
Total Liabilities & Shareholders' Equity 497,217 550,829

Note: Many items in BKI's historical balance sheets, e.g. Property, Plant & Equipment
have been affected by the firm's acquisitions.
 2006
66,557
164,309
48,780
54,874
5,157
339,678

174,321
38,281
39,973
592,253

31,936
27,761
16,884
76,581
4,814
22,495
103,890
488,363
592,253
Exhibit 3 Selected Operating and Financial Data for Public Kitchenware Producers

Home & Hearth Design AutoTech Appliances XQL Corp. Bunkerhill, Inc.
Revenue $589,747 $18,080,000 $4,313,300 $3,671,100
EBIT 106,763 2,505,200 721,297 566,099
EBITDA 119,190 3,055,200 796,497 610,399
Net income $53,698 $1,416,012 $412,307 $335,073

Cash & securities $21,495 $536,099 $21,425 $153,680

Net working capital* 54,316 1,247,520 353,691 334,804
Net fixed assets 900,803 7,463,564 3,322,837 815,304
Total assets $976,613 $9,247,183 $3,697,952 $1,303,788

Net debt (1) $350,798 $4,437,314 $950,802 $238,056

Total debt 372,293 4,973,413 972,227 391,736
Book equity $475,377 $3,283,000 $2,109,400 $804,400

Market capitalization 776,427 13,978,375 5,290,145 3,962,780

Enterprise value (MVIC) $1,127,226 $18,415,689 $6,240,947 $4,200,836

Equity beta 1.03 1.24 0.96 0.92

LTM Trading Multiples

MVIC/Revenue 1.91x 1.02x 1.45x 1.14x
MVIC/EBIT 10.56x 7.35x 8.65x 7.42x
MVIC/EBITDA 9.46x 6.03x 7.84x 6.88x
Market/Book equity 1.63x 4.26x 2.51x 4.93x

Net Debt/Equity 45.18% 31.74% 17.97% 6.01%

Net Debt/Enterprise Value 31.12% 24.10% 15.23% 5.67%

* Net working capital excludes cash and securities

(1) Net debt is total long term and short term debt less excess cash.
EasyLiving Systems Blaine Kitchenware
$188,955 $342,251
19,613 63,946
23,356 73,860
$13,173 $53,630

$242,102 $230,866
21,220 32,231
68,788 174,321
$332,110 $592,253

($64,800) ($230,866)
177,302 -
$94,919 $488,363

418,749 959,596
$353,949 $728,730

0.67 0.56

1.87x 2.13x
18.05x 11.40x
15.15x 9.87x
4.41x 1.96x

-15.47% -24.06%
-18.31% -31.68%