nsl business plan 2004

36
North Sask Laundry & Support Services Ltd Business Plan 2004 1200 24 th Street West Prince Albert, Saskatchewan, S6V 5T4 Phone: 306-764-5264 Fax: 306-922-4858 Email: [email protected] Website: www.northsasklaundry.com Contact: James T Watchman CONFIDENTIAL INFORMATION

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Page 1: Nsl Business Plan 2004

North Sask Laundry &

Support Services Ltd

Business Plan 2004 1200 24th Street West Prince Albert, Saskatchewan, S6V 5T4 Phone: 306-764-5264 Fax: 306-922-4858 Email: [email protected] Website: www.northsasklaundry.com Contact: James T Watchman

CONFIDENTIAL INFORMATION

Page 2: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

Table of Contents EXECUTIVE SUMMARY ……………………………………………………… Pg 2 STRATEGIC PLAN – 2004 ……………………………………………… Pg 3

Environmental Assessment 1999 Strategic Positions and Issues Review Goals Review Objectives THE COMPANY ……………………………………………………………… Pg 10 Historical Events and Projects Current Projects Management Profile Staffing THE SASKATCHEWAN HEALTH CARE MARKET ……………………… Pg 13 FINANCIAL HISTORY ……………………………………………………… Pg 14 Poundage Revenue Expenses Cash Flow Financial Ratios PRODUCTS AND SERVICES ……………………………………………… Pg 19 THE FINANCIAL PLAN ……………………………………………………… Pg 21 Poundage Financial Forecast Capital Requirements Impact on Balance Sheet Impact on Cash Flow Financial Ratios Projections Conclusion APPENDICES ……………………………………………………………… Pg 25

CONFIDENTIAL INFORMATION Page 1

Page 3: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

EXECUTIVE SUMMARY This business plan has been developed as a continuation to the financial recovery plan

laid out in the Business Plan of 1999. The Strategic Plan was reviewed and revised in

2004 by the Board of Directors (Appendices: page 1). The plan reviews the successes and

failures to achieve the goals of that Plan.

The Laundry faces challenges with decreasing volumes, increasing energy and chemical

costs, and physical limitations with space. The financial challenge will improve with the

retirement of the loan for linens (2005) and the long-term debt (2009). The Quala

tracking system has enabled the improvement of services and financial recovery of lost

and damaged items.

This Plan enables the Laundry to continue on the path of financial recovery while

preparing for major equipment replacement or upgrades to remain a high production

plant. The replacement and upgrades will be financed though the operation without

having to secure bank financing. The improvement of cash flow will be easier to manage

and enable the operation more flexibility financially to take advantage of opportunities

that will come up in the future.

This plan promotes customer participation to control linen cost within their facilities. The

Quala System will continue to be developed to provide customer better access and

reporting capabilities.

CONFIDENTIAL INFORMATION Page 2

Page 4: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

STRATEGIC PLAN – 2004 The Vision and Mission Statement have not changed. These Ends are documented in the

Governance Policies and are reviewed three times a year by the Board of Directors.

Environmental Assessment

The internal strengths, weaknesses, external opportunities and potential threats (SWOT)

were reviewed with the 1999 strategic plan. Changes are highlighted.

Internal Strengths:

• Stable labor relations, employee attitudes are good

• Good equipment but requiring some upgrades

o Fabian Oulette of Lavexco evaluated the washer/dryer system and noted

two requirements for the future are: an upgrade in computers and

replacement of the centre core in two to three years

• Good management

• Good location, central to all customers

• Transportation, interact with Customers and Laundry

• Canadian Benchmarking Initiative

o NSL has participated in an annual benchmarking project with other health

care laundries in Canada

• Improved delivery of linens

o The Quala system has enabled the laundry to improve fill rates from

83.8% in 2001 to 97.8% in 2004

• Financial reporting

o New financial reporting break downs have identified operating cost and

have assisted in better budgeting results

Internal Weaknesses:

CONFIDENTIAL INFORMATION Page 3

Page 5: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

• Financial status

• Need to improve relationship with Customers

• Limited linen inventory space in plant

External Opportunities:

• Add to volume through current and new customers

• Develop new long term care products and services

• K-Bro Report 2002

o Identified NSL as the most productive laundry in Saskatchewan that

provides more value added services than other operations

External Threats:

• The political environment

• Competitors – other laundry services and disposable products

• Lack of space in the plant

This plan must recognize the shortcomings of the 1999 Business Plan, continue to build

on the strengths, resolve the internal weaknesses, exploit the opportunities, and confront

the threats that are identified.

1999 Strategic Positions and Issues Reviewed

The SWOT review revisited the positions and issues that were identified in the 1999

Business Plan. The review evaluated the Laundry’s success and failure in its positions

and issues to meet its objectives.

Position Strengths:

• The operation meets or exceeds all accreditation, OHS, and Health and Welfare

Guidelines and infectious control requirements.

o This continues to be the case. New legislation for Return-To-Work and

Duty to Accommodate programs have been established, a review of the

CONFIDENTIAL INFORMATION Page 4

Page 6: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

impact of SARS and necrotizing fasciitis has been done, and a

representative participates on the accreditation committee of the Prince

Albert Parkland Health Region.

• Transportation routes established to service all Customer/Shareholders.

• Established personal linen services and long-term care products

o With decreasing volume the personal linen services is struggling to be cost

effective. Other central laundries have ventured into to this area of service.

Participation on the Canadian Benchmarking Initiative has provided new

ideas of service and costing.

o Currently Australian sheepskin products are being evaluated for function

and costing from the depot in North Battleford.

• Age and type of equipment is still the latest technology available.

o An evaluation of the washer/dryer equipment by an engineer has identified

that the equipment is in excellent condition. Future considerations were

identified as replacing the computer system and replacement will be

required within the next three years of the center core and steam head.

• Energy supply locations and leases agreements

o Joint discussions with the Prince Albert Parkland Health Region energy

center to review energy savings that can be achieved through heat

recovery.

o The ability of the energy center to meet future increased demand was also

reviewed with positive results.

• Cost of disposable packs.

o The introduction of ‘pack-ready’ OR linens and OR Packs has been well

received by most hospitals. A cost evaluation has proven that the cost is

competitive with disposable products.

Position Opportunities:

• The benefits of other type of products using the transportation system

o Two health regions evaluated the possibility of using the transportation

system to deliver med-surgical supplies. Nothing concrete has resulted.

CONFIDENTIAL INFORMATION Page 5

Page 7: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

• Developing other quality services for Customers

o Bar swabs were introduced as an alternative to dust towels.

o Sheets were upgraded from a polyester cotton 120 thread count to a better

quality 180 thread count but narrower. (66” from 72”)

o A comfort spread is being evaluated to replace the bedspread and thermal

blanket.

o Information is being gathered on the new micro-fiber mop. A trial will be

set up in early fall of 2004.

• Operating Room linen pack making services

o Early results are showing this to be a positive addition to the service.

• Expanding personal linen services to other regions

o The service was expanded into the Twin Rivers Health District, but due to

demands for job creation the service was discontinued.

• Warehousing and distribution of other disposable products

o A lack of space at the Prince Albert plant has made this project unfeasible

at the present time.

• Adding other long term care facilities

o Two new facilities have been added; Prince Albert Men’s Home, and the

Parkland Place in Melfort.

• Assisting health regions achieve their goals to consolidate services

o The light table inspected OR linens and “pack ready” delivery of OR

linens is well received in all but two facilities.

o Consolidation inquires have come in from facilities in two other

provinces.

• Provide services to other health regions

o With the formation of health regions a couple of areas of service fell under

new authorities. These have given their notice to discontinue NSL services

in July 2004.

o The K-Bro study recommends the expansion of services to the Saskatoon

area.

CONFIDENTIAL INFORMATION Page 6

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North Sask Laundry & Support Services Ltd – Business Plan 2004

Weakness Issues:

• The financial short term focus on lowest price

o Pricing is still an issue with customers. The charging for lost or damaged

items is viewed as a “new” cost to health care whereas it is a reallocation

as a direct cost to the customer rather than an in-directed cost which

resulted in part to losses on the NSL financial reporting

• The current shipping system does not meet the current needs

o The introduction of the QUALA linen control system has resulted in an

extreme turn around in this area. Fill rates have increased from 83.8% in

2002/03 to an average of 93.9% in 2003/04. The first three months of

2004 has averaged 97.8%.

• Shipping in bulk bags results in poor quality

o New customers have requested the cart-exchange system

o One customer discontinued the cart exchange service

• The Laundry is totally dependant on Customers to control linen stock

o The introduction of the QUALA system has proven its ability to track and

report damaged and lost items. Efforts are continuing to add more items

(uniforms, sheepskin products, and expensive items).

• The space in the Prince Albert plant

o Space is required for new linen storage and expansion of services

Threat Issues:

• Meet OR standards for linens and replacement of disposable products

o The Canadian Standards Association regulations for OR linens to be

inspected over a light table before use in an OR theater has been

accomplished for all the user hospitals. The addition of the light table

inspection has resulted in a better product. The QUALA system tracks

each piece and notifies the inspector when specific product requirements

are required. Both of these additions have enabled NSL to meet the OR

standards requirements.

CONFIDENTIAL INFORMATION Page 7

Page 9: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

o Most of NSL customers have a limited knowledge of guidelines and

regulations that impact the delivery of health care products

o The shareholders need to put emphasis within their facilities to secure OR

linens and take advantage of the benefits of linen control

• Plant space needed to develop more services

o Continues to be an issue

• Attitude of Customers and employees

o The addition of the Customer Representative person has met with positive

response from the Customers. All the new projects start with Customer

participation and approval. Communication within health regions seem to

be very poor when it comes to laundry issues.

o Employees continue to work with changes to production and Customer

services. Currently the Joint Job Evaluation program committee is

working together.

• The political environment

o The concept of laundry services provincially wide is under review.

• Services provided by other laundries and supply companies

Goals

The primary goal of the 1999 Business Plan was a long-term financial plan to restore the

bank and shareholder confidence with longer term goals for customers and staff. In

January 2000, a loan of $740,000 offset the past debts and a monthly pre-billing for

services was established in June 2000 to provide operating funds to support NSL plan for

financial recovery.

The financial projects were in line until 2003. OR linens were upgraded to water proof

fabrics to improve the requirements for patient and staff protection. Hospitals demanded

a 30% increase in inventory which cost $1.3 million. The increased inventory level

should have resulted in better circulation and fill rates, but only increased the inventory

CONFIDENTIAL INFORMATION Page 8

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North Sask Laundry & Support Services Ltd – Business Plan 2004

levels at the customer facilities. The Laundry increased the charge rate from 89.5¢ per

pound to $1.015.

Progress, toward a financially viable position, has been gradual and slower than was

projected. The primary goal of this Plan is to continue building on this the progress.

Based on the review, the following objectives were noted to achieve the primary goal:

Objectives

a) duct dryer intake directly from outside

a. a consulting engineer needs to be hired to investigate this consideration to

reduce static electricity in the plant

b) introduction of new products

a. an evaluation of micro-fiber mop system will be done this fall

c) educate customers on services

a. past efforts to work with customer representatives will continue and the

website will be designed to inform customers

d) establish linen control at customer facilities

a. a computer program is being developed to allow all NSL customers to

track linen used in each facility through the website

e) upgrade computer controls for dryers

a. a capital budget to purchase and install this computer will be presented in

the 2005/06 budget

CONFIDENTIAL INFORMATION Page 9

Page 11: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

THE COMPANY Origin, structure, service and production concepts have not changed since 1999.

Historical Events and Projects

1999 – Business Plan 1999 was approved

- borrowed $740,000 to satisfy past debts

- introduced pre-billing

2000 - upgrades linen inventory program to be Y2K compliant

- developed Board Governance Policies

2001 - developed new financial reports

2002 - joined the Canadian Collaborative Benchmarking Group

2003 - installed QUALA linen tracking system

- upgraded OR linens

- installed equipment preventative maintenance program

- hired a Customer Representative

2004 - upgraded computer in washing machine

Current Projects

• developing website for customer interaction

• introduction of QUALA tracking at each facility

• evaluation of new mop service

• introduction of Australian sheepskin products

• developing process for receipt of goods and service – ACCPAC

• developing Returned Goods Authorization process – ACCPAC

CONFIDENTIAL INFORMATION Page 10

Page 12: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

Management Profile

The management team is made up of five out of scope positions: General Manager, a

Production Supervisor, a Customer Representative, a Confidential Secretary and a

Clerical Secretary.

Diane Oleynik has held the position of Confidential Secretary since May 1986. Diane is a

Grade 12 graduate of the secretarial course of the Carlton Comprehensive High School in

Prince Albert. Her education also includes courses in basic computer training, data entry,

and ACCPAC modules. She has been previously employed in a variety of jobs from clerk

to assistant manager from 1976 to 1986.

Tammy Wilson has held the position of Clerical Secretary since September 2003. Tammy

is Grade 12 graduate of Kelvington High School with an accounting and office education

through the Kelsey Institute. Her previous employment ranged from clerical to office

management.

Karl Henry has held the position of Production Supervisor in Prince Albert since

February 2004. Karl has been employed by NSL since November 1979 and has worked

in every position of the laundry production and maintenance. He also served as the CUPE

President, shop-steward, and served on numerous committees. Karl is currently enrolled

in the American Linen and Laundry College’s Registered Laundry & Linen Director

Program which should be completed by the fall of 2005.

Lucille Georget has held the position of Customer Representative since April 2003.

Lucille’s former position was as Head of Housekeeping and Laundry for the Wakaw

Hospital for 16 years and as a housekeeper for 18 years. These positions have prepared

her as an ideal candidate to bring together NSL’s goals to improve the service image and

the customer representatives.

CONFIDENTIAL INFORMATION Page 11

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North Sask Laundry & Support Services Ltd – Business Plan 2004

Jim Watchman has held the position of General Manager since April 1996. Jim is a

grade 12 graduate of Sisler High School in Winnipeg, Manitoba. His laundry background

covers 36 years and includes both commercial and institutional operations.

Staffing

The staff are members of CUPE, Local 3637. Current staffing levels are 28 full-time in

Prince Albert and 5 in North Battleford. The current collective agreement ended

December 31, 2003. Both sides have given notice of their intention to negotiate. The

agreement is negotiated separately from the Provincial Collective Bargaining. Two

percent of each payroll is being set aside in a mutual fund to cover retro pay that will be

required when the new contract is negotiated.

The Laundry and staff are currently developing the Joint Job Evaluation requirements.

Funding requirements have been submitted to the Provincial Government to address the

expected costs.

CONFIDENTIAL INFORMATION Page 12

Page 14: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

The Saskatchewan Health Care Market In August 2002, health districts gave way to a new provincial division of health regions.

The regionalization reduced the shareholders from 11 members to 4. An operational and a

financial individual were added in advisory capacities to assist the Board members. This

also reduced the customer base by 3 that took place in July 2004, a loss of 90,000 pounds

annually.

The Provincial Government commissioned K-Bro Laundry Services of Albert to evaluate

health care laundry services in Saskatchewan in 2001. The report compared costs,

productivity, and services for 3 groups of laundries; centrals, in-house operations, and

personal linens. Both NSL operations were reported as the most efficient providing more

services than other operations.

In June 2003, the Department of Health initiated open discussions at the Minister’s level.

A group of administrators and laundry operational individuals met to make

recommendations based on the report. This group could not come to a consensus. In

2004, The Department hired a conciliator to work with 3 groups; operational, financial,

and governance. The operational group have met to review provincial volumes and

capacity.

Severe Acute Respiratory Syndrome (SARS) outbreak in March 2003 in Toronto and the

increasing incidence necrotizing fasciitis, the flesh-eating bacteria, have brought attention

to the need to protect health-care providers. The Laundry has been involved with

evaluating new textiles and reviewing the ability to meet the demands of an influenza

pandemic. This has been discussed at various levels of health care and laundries have a

role to play.

In-house operations, privatization and disposables continue to be hurdles to expansion of

laundry services. Even though NSL has developed a first class OR linen products, health

regions continue to invest in disposable products.

CONFIDENTIAL INFORMATION Page 13

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North Sask Laundry & Support Services Ltd – Business Plan 2004

FINANCIAL HISTORY Poundage Overall poundage continued to decrease at an average of 2% each year until 2003/04

(Appendices: 2). The 2003/04 volume increased by 8.5%. 165,000 pounds was due to

new customers, significantly the addition of Parkland Place in Melfort. The Quala system

improved fill rates from 83.4% to 95.7% along with establishing checks and balances that

increased the reported poundage by 3.4%. As more customers increase the awareness of

linen controls, the Laundry can expect further decreases in volume. The Saskatoon Health

Region Laundry removed 90,000 pounds annually to their operation in 2004/05.

Personal Linens have experienced the most significant poundage loss from 331,407

pounds in 1999/2000 to 231,526 in 2003/04. The reduction resulted from bed closures,

service reductions, and a new scale installed in December 2002. This kind of loss makes

it more difficult to maintain a reasonable price.

Revenue While poundage was decreasing, the revenue increased 21% to 2002/03 and then by

another 27% in 2003/04 (Appendices: 3). Due to the losses in the 2002/03 year the rate

was increased to $1.015 per pound. The Quala system added an additional $85,465 to

revenue for lost and damaged items. Personal linen revenues increased by 4% over the 5

year period while interest revenues increased by 239% and miscellaneous sales dropped

by 37%. Customer returned goods for credit have decreased from an average of 8,533

pounds in 2002 to 955 pounds in 2004.

Expenses While revenues grew by 21%, expenses increased by 27% over the same period. Linen

replacement, salaries and benefits, wash chemicals, housekeeping supplies and utilities

were main contributors to this increase. A $700,000 increase to linen was budgeted for

2002/03 to upgrade OR linens. The final cost was $1.3 million between 2002 and 2004.

The increase was 61% over the 5 years. Salaries and benefits increased by 29% over this

CONFIDENTIAL INFORMATION Page 14

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North Sask Laundry & Support Services Ltd – Business Plan 2004

period. Three new positions were established in 2002 to train employees on the Quala

system and light table inspection. The collective agreement was negotiated in 2002 which

accounted for retro pay out of $115,000 and wages over three years increases of 2% each

year until December 31, 2003. Both wash chemicals and cleaning supplies had a 42%

increasing in pricing. Wash chemicals also increased due to new products required for the

new materials. The biggest increase in utilities came from gas prices which increased

almost 30% in one year.

Cash Flow Cash flow (Appendices: 4) steadily increased for the first three years of the 1999

Business Plan. The set back in the forth year was due to the linen replacement costs.

However, in the fifth year due to the price increase and the added inventory lost and

damage charges the improvement is back on track.

Financial Ratios A comparison of ratios from the 1995 to 1999 period and the 2000 to 2004 period is an

acceptable practice to measure the financial performance when similar type business

performance is not available.

Liquidity Ratios (Appendices: 6) A) Current Ratio

1995-1999 3.06 2.74 1.39 1.13 0.59 2000-2004 1.2 1.82 1.77 1.64 2.15

Current Ratio

00.5

11.5

22.5

33.5

1 2 3 4 5

1995-19992000-2004

The Laundry has steadily improved its ability to meet current debts compared to its current capital.

CONFIDENTIAL INFORMATION Page 15

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North Sask Laundry & Support Services Ltd – Business Plan 2004

B) Quick Ratio 1995-1999 1.77 1.66 0.82 0.73 0.42 2000-2004 0.54 0.77 0.92 0.91 1.44

Quick Ratio

0

0.5

1

1.5

2

1 2 3 4 5

1995-19992000-2004

The Quick Ratio measures the ability of a company to meet its current debt without having to convert its inventory into cash. C) Accounts Receivable Turnover

1995-1999 9.06 9.9 7.97 9.01 9.12 2000-2004 9.14 10.29 9.73 9.82 9.89

Accounts Receivable Turnover

77.5

88.5

99.510

10.5

1 2 3 4 5

1995-19992000-2004

This ratio reports how many times during the year the accounts receivable are turned into cash. Leverage Ratios (Appendices: 7) A) Total Debt To Assets Ratio

1995-1999 0.1 0.13 0.44 0.48 0.7 2000-2004 0.41 0.32 0.38 0.39 0.33

Total Debt to Asset Ratio

00.10.20.30.40.50.60.70.8

1 2 3 4 5

1995-19992000-2004

For creditors, a lower Debt-to-Asset Ratio is preferred as it means shareholders have contributed a large portion of the funds to the business, and thus creditors are more likely to be paid.

CONFIDENTIAL INFORMATION Page 16

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North Sask Laundry & Support Services Ltd – Business Plan 2004

B) Debt to Equity Ratio 1995-1999 0.12 0.15 0.8 0.91 2.37 2000-2004 4.8 2.29 2.0 51.77 4.11

Debt to Equity Ratio

0

10

20

30

40

50

60

1 2 3 4 5

1995-19992000-2004

Term lenders prefer a lower debt-to-equity ratio as it indicates a lower reliance on creditors and therefore a greater capacity for the business to repay its creditors. Operating Ratios A) Return on Assets

1995-1999 9 -0.8 -24.9 -7 -24 2000-2004 -19.4 13.4 6.4 -36.4 17.7

Return on Assets Ratio

-40

-30

-20

-10

0

10

20

30

1 2 3 4 51995-19992000-2004

A higher ratio result than industry standards usually indicates an efficient use of assets. B) Return on Investment

1995-1999 10 -9.2 -44.8 -13.4 -81 2000-2004 -112.6 44.2 19.2 -1902.4 90.44

Return on Investment Ratio

-200

-150

-100

-50

0

50

100

150

1 2 3 4 51995-19992000-2004

This percentage indicates the return generated on the capital invested in the Laundry by the owners.

CONFIDENTIAL INFORMATION Page 17

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North Sask Laundry & Support Services Ltd – Business Plan 2004

C) Net Earnings Margin 1995-1999 7.6 -6.6 -20.5 -4 -12.4 2000-2004 -10.7 6.5 3.4 -16.66 6.5

Net Earnings Margin

-25

-20

-15

-10

-5

0

5

10

1 2 3 4 5 1995-19992000-2004

This percentage indicates how much of each dollar of sales we convert to earnings. Overall, the ratios and percentages indicate an improvement in the Laundry’s financial

picture with the exception of the 2002/03 year, but a quick recovery in 2003/04.

CONFIDENTIAL INFORMATION Page 18

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North Sask Laundry & Support Services Ltd – Business Plan 2004

PRODUCTS AND SERVICES The shifting of NSL’s focus from the “linen supplier” model to the “support services”

model has met with mixed reactions from the customers. The Quala system has almost

eliminated the short shipments, but most customers are reluctant to trust the accuracy of

the tracking of items that result in loss and damage charges. Three of the objectives (Page

9) of this plan are to improve services.

The Victoria Hospital, which pays the highest cost for lost and damaged goods were

investigating ways to identify where the losses occur. The presentation by Lac Mac Ltd

could be adapted to a website and all NSL customers could access to track barcodes in

their own facilities. This idea was presented to the Board of Directors and a capital

budget was approved. A joint venture was set up between NSL and Lac Mac Ltd to

develop the software. The project will be tested with the Victoria Hospital starting

November 2004. The website will also be developed for online ordering and purchasing.

A trial of Australian Medical Sheepskins was undertaken in the spring of 2004. The

clinical results proved that the product will be a positive contribution to reduce and heal

bedsores. The costing was calculated and a report was presented to the Board.

Presentations will continue at the Regional Boards in the fall of 2004. It was determined

that the initial capital requirement to supply the product was too high for the Laundry.

The Health Regions will be asked to partnership with NSL to purchase the necessary

inventory. A trial of micro-fiber mops has been scheduled for the fall of 2004. Improved

products (comfort spread, bar wipes, and scrubs) are being tested for customer approval.

Although there are more operating room linens in circulation than ever before, customer

satisfaction has not improved. The two largest customers of OR linens continue to re-

inspect the delivered product. Individuals have individual quality requirements with little

agreement between facilities. NSL will develop a catalogue identifying what is

acceptable and what’s not based on the Canadian Standards Association and the OR

Nursing Associations. Based on our discussions with other recyclable OR linen service

providers, NSL is providing a first class product.

CONFIDENTIAL INFORMATION Page 19

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North Sask Laundry & Support Services Ltd – Business Plan 2004

The upgrade to water proof OR linens has enabled the Laundry to meet all the current

requirements to protect both hospital staff and patients. Some changes to procedures had

to be made to address blood fluids on the floor during some operations or deliveries. NSL

staffing adjusted to the processing changes with a positive response.

Other issues identified in the 1999 Marketing Plan continue to be issues. Some of these

issues are:

a) space to develop new services

b) unaccountable losses

c) untapped volume potential in both the west and east service areas

d) increasing use of disposable products

CONFIDENTIAL INFORMATION Page 20

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North Sask Laundry & Support Services Ltd – Business Plan 2004

THE FINANCIAL PLAN Poundage

Total Poundage

3,5003,7003,9004,1004,3004,500

1 2 3 4 5

Years

poun

dage

(th

ousa

nds)

2000/042005/09

Since 1994, laundry volumes have decreased by an average of 2.4% per year primarily in

the acute care services.

However, from 1999 to 2003

the long-term care services

have seen the same decrease.

This percentage is expected to

increase as North Sask

Laundry introduces more

linen control methods to its

customers. The loss in customer base and customers using in-house laundry facilities will

impact this loss dramatically in the first couple of years of this plan. (Appendices: 9)

Financial Forecast

With poundage dropping below 4.0M pounds in the second year, as experienced in the

2002/03 year, the operation will struggle to maintain efficient productive. The best break

even production objective should be 4.8 to 5.5M annually. As production decreases, fixed

costs (administrative and service cost) consume a higher percentage of the overall costs.

Price will increase by 13.5% over the next five years. This trend can be offset by a strong

restraint program and/or the addition of poundage. Increasing the productivity of wash

system, replacing two small piece folders, and reducing the new linen inventory should

reduce this by 5.5%. The addition of poundage could offset the pricing for 100,000

pounds by 3.4%, 200,000 pounds by 4.7%, and 300,000 pounds by 6.5%.

Energy, chemical, and linen prices are expected to increase significantly in the years

ahead. However, the loan for linens (2005/06) and the long-term loan (2008/09) will be

repaid. Generally expenses are expected to increase by 2% per year.

CONFIDENTIAL INFORMATION Page 21

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North Sask Laundry & Support Services Ltd – Business Plan 2004

Capital Requirements

The plan identifies the following capital requirements over the time period:

a) upgrade to the washer computer (2004/05: $75,000)

b) upgrade to the dryer and shuttle computer (2005/06: $55,000)

c) replacement of 2 small piece folders (2006/07: $60,000)

d) replacement of the single-stage press (2008/09: $150,000)

Impact on Balance Sheet

Assets and Equity continue to improve. Fixed asset value and long-term debt continue to

decrease. Increasing the linen inventory and the Quala tracking system have improved the

overall services. Linen replacement is budgeted at 20¢ per pound and will cause the linen

inventory value to decrease over the plan period. The reserve is maintained to provide

flexibility and meet un-expected financial requirements.

Impact on Cash Flow The cash flow statement converts the accrual basis of accounting used to prepare the

income statement and balance sheet back to a cash basis. It is important to analyze the

actual level of cash flowing into and out of the business. Like the income statement, the

statement of cash flow measures financial activity over a period of time. The cash flow

statement also tracks the effects of changes in balance sheet accounts. The impact on cash

flow is more aggressive than in the past. The improvement is impacted by reducing

inventory levels and the retirement of the long-term debt.

CONFIDENTIAL INFORMATION Page 22

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North Sask Laundry & Support Services Ltd – Business Plan 2004

Financial Ratios Projections Liquidity Ratios Current Ratios

00.5

11.5

22.5

33.5

44.5

1 2 3 4 5

1995/99

2000/04

2005/09

The financial plan continues to

strengthen the liquidity of NSL that

the 1999 Plan established. The

Current Ratio and Quick Ratio

measures the Laundry’s ability to

pay its creditors. The Quick Ratio

meets its current debt without

having to convert its inventory into

cash. The Accounts Receivable are

budgeted at 1/12 the total sales so

the Accounts Receivable Turnover

Ratio is a consistent 11.85.

Quick Ratio

0

0.5

1

1.5

2

2.5

3

1 2 3 4 5

1995/99

2000/04

2005/09

Debt to Assests Ratio

00.10.20.30.40.50.60.70.8

1 2 3 4 5

1995/99

2000/04

2005/09

Debt to Equity Ratio

0

2

4

6

8

10

1 2 3 4 5

1995/99

2000/04

2005/09

Leverage Ratios

These ratios measures whether or

not the Laundry has sufficient

resources to provide for interest and

principal payments as they come

due. The Laundry is still recovering

from the deficit in 2002-2004, but

the future projects a decrease in

debt that was formulated in the

1999 Plan.

CONFIDENTIAL INFORMATION Page 23

Page 25: Nsl Business Plan 2004

North Sask Laundry & Support Services Ltd – Business Plan 2004

Operating Percentages

Return on Assets Percentage

-60

-40

-20

0

20

40

60

1 2 3 4 5

1995/99

2000/04

2005/09

Return on Investment Percentage

-200

-150

-100

-50

0

50

100

150

1 2 3 4 5

1995/99

2000/04

2005/09

These percentages show a

decline as the profits are at

a break even point. A

portion of the returns is

being transferred to a

reserve that results in a

reduction in the net earnings

lowers the percentage.

These percentages indicate

that the charge rate is not

too high.

Net Earnings Margin Percentage

-25-20-15-10-505

1015

1 2 3 4 51995/992000/042005/09

Conclusion This Plan continues to produce a viable and solid financial position while planning for the

replacement and upgrade of equipment that has made the Laundry a productive plant. The

Laundry has established the ground work in establishing a first class service. These

factors will project NSL with an optimistic future. The full extent of the Quala System

has not been realized which will become one of the objectives to improve services as

customers become involved with controlling laundry costs. A stronger financial position

will restore the bank and shareholder confidence.

CONFIDENTIAL INFORMATION Page 24

Page 26: Nsl Business Plan 2004

APPENDICES

Page 27: Nsl Business Plan 2004

Board of Directors

Howard Gange, Chairperson Prince Albert Parkland Health Region

Bonnie O’Grady, Vice-chair Prairie North Health Region

Steve Rudy Kelsey Trail Health Region

Charlene Logan Mamawetan Churchill River Health Region

Resources

Irene Denis Prairie North Health Region

Morgan Kennedy Prince Albert Parkland Health Region

Appendices: 1

Page 28: Nsl Business Plan 2004

Poundage Comparison

2000 2001 2002 2003 2004 4,209 4,109 4,036 3,962 4,298

Poundage

3,500

3,700

3,900

4,100

4,300

4,500

1 2 3 4 5

Years

Poun

ds (0

00)

Keewatin Yahtte Health Region 32,463 42,233 44,904 41,066 43,653Kelsey Trail Health Region 554,617 551,259 542,749 520,654 695,484Mamawetan Churchill River Health Region 110,744 114,909 116,703 122,315 125,586Prairie North Health Region 1,394,014 1,383,747 1,361,510 1,338,080 1,411,842

Personal Linens 331,407 312,409 301,024 271,187 231,526Prince Albert Parkland Health Region 1,686,802 1,616,655 1,579,109 1,579,803 1,688,175Saskatoon Health Region 98,642 88,106 87,329 86,287 98,507Other 2,967 2,823 2,821 4,208,689 4,109,318 4,036,295 3,962,215 4,297,594

Poundage

0200,000400,000600,000800,000

1,000,0001,200,0001,400,0001,600,0001,800,000

1 2 3 4 5

Health Region

Poun

ds

Keewatin Yahtte HealthRegionKelsey Trail HealthRegionMamawetan ChurchillRiver Health RegionPrairie North HealthRegionPersonal Linens

Prince Albert ParklandHealth RegionSaskatoon Health Region

Other

Appendices: 2

Page 29: Nsl Business Plan 2004

Income/Expense ComparisonWorksheet: Statement of Operations Comparisons/Projections 5 year

Average 2004/05 2005/06 2006/07 2007/08 2008/09Mar 31/99 Mar 31/00 Mar 31/01 Mar 31/02 Mar 31/03 Mar 31/04 Inc/Dec

RevenueLaundry Services 2,372,102 2,648,398 0.12 3,137,588 0.18 3,192,052 0.02 3,298,512 0.03 4,127,551 0.25 0.121 4,263,393 4,256,621 4,170,164 4,182,316 4,211,264Personal Linen Servi 250,484 283,692 0.13 272,331 -0.04 265,458 -0.03 248,002 -0.07 293,783 0.18 0.037 348,272 40,590 0 0 0Invest Income 536 725 0.35 4,126 4.69 5,244 0.27 6,359 0.21 2,457 -0.61 0.983 6,166 4,896 4,500 4,500 4,500Damaged & Lost 85,465 97,305 36,000 36,000 36,000 36,000Insurance Claim 54,332Delivery Service 3,432 3,500 3,500 3,500 3,500Other 18,023Misc Sales 15,434 10,005 -0.35 5,753 -0.42 4,416 -0.23 6,460 0.46 6,316 -0.02 -0.114 33,758 8,000 8,000 8,000 8,000

2,692,888 2,942,820 0.09 3,419,798 0.16 3,467,170 0.01 3,559,333 0.03 4,515,572 0.27 0.113 4,770,349 4,349,608 4,222,164 4,234,316 4,263,264

ExpenseSalaries 1,334,245 1,444,587 0.08 1,415,415 -0.02 1,466,700 0.04 1,829,482 0.25 1,857,357 0.02 0.072 1,981,582 1,813,949 1,850,228 1,887,232 1,924,977Administration 26,888 26,494 -0.01 32,941 0.24 25,702 -0.22 21,609 -0.16 34,083 0.58 0.085 37,705 38,107 38,869 39,646 40,439Rent 22,656 23,565 0.04 24,559 0.04 24,165 -0.02 24,491 0.01 25,436 0.04 0.024 25,376 25,884 100 100 100Other Administration 37,421 37,118 -0.01 22,520 -0.39 21,000 -0.07 23,582 0.12 33,043 0.40 0.011 38,165 57,123 56,928 57,437 57,956Supplies - Mending 45,471 36,695 -0.19 19,012 -0.48 12,795 -0.33 14,359 0.12 19,848 0.38 -0.099 7,337 7,484 7,634 7,786 7,942 - Shipping 36,161 39,415 0.09 27,296 -0.31 42,091 0.54 42,353 0.01 38,409 -0.09 0.048 25,946 19,465 19,854 20,251 20,656 - Washing 49,332 44,355 -0.10 52,749 0.19 47,088 -0.11 54,263 0.15 81,307 0.50 0.126 89,817 86,164 87,875 89,621 91,401Linen Replacement 510,035 598,896 0.17 471,089 -0.21 561,841 0.19 1,055,796 0.88 964,608 -0.09 0.189 825,286 812,942 790,553 774,503 758,786Housekeeping 4,372 4,832 0.11 8,408 0.74 7,919 -0.06 13,939 0.76 15,906 -0.12 0.285 16,000 16,320 16,646 16,979 17,319Physical Plant 62,398 87,446 0.40 106,923 0.22 124,431 0.16 106,175 -0.15 138,527 0.30 0.189 163,017 166,278 169,603 172,995 176,455 - Insurance 10,065 10,181 0.01 10,481 0.03 10,324 -0.01 11,594 0.12 15,394 0.33 0.095 16,218 16,542 16,873 17,211 17,555Printing, postage, & s 4,506 5,180 0.15 5,102 -0.02 6,748 0.32 6,912 0.02 7,227 0.05 0.105 6,649 6,782 6,918 7,056 7,197Repair/Mtnce 93,955 84,085 -0.11 102,540 0.22 92,532 -0.10 74,563 -0.19 80,092 0.07 -0.021 35,353 73,598 75,070 76,571 78,103 - other 120,950 57,837 -0.52 113,269 0.96 123,857 0.09 62,829 -0.49 60,674 -0.03 0.001 4,757 62,300 63,546 64,817 66,113Telephone 8,216 8,998 0.10 12,245 0.36 7,669 -0.37 9,342 0.22 8,400 -0.10 0.040 10,791 8,732 8,907 9,085 9,267Transportation 423,352 438,509 0.04 463,416 0.06 465,172 0.00 482,841 0.04 514,970 0.07 0.040 542,571 533,592 536,104 546,826 557,763Travel & convention - 13,582 11,556 -0.15 12,574 0.09 12,759 0.01 8,193 -0.36 10,586 0.29 -0.022 8,123 15,086 15,388 15,695 16,009 - s 2,256 4,854 1.15 5,433 0.12 6,205 0.14 14,832 1.39 4,147 -0.72 0.417 12,950 12,000 12,240 12,485 12,734Utilities 106,080 106,094 0.00 101,164 -0.05 114,197 0.13 111,772 -0.02 121,401 0.09 0.029 188,813 169,589 172,981 176,441 179,970Loan Interest 21,026 23,997 0.14 52,321 1.18 35,024 -0.33 29,297 -0.16 34,401 0.17 0.200 26,448 13,936 10,722 10,722 10,722

2,932,967 3,094,694 0.06 3,059,457 -0.01 3,208,219 0.05 3,998,224 0.25 4,065,816 0.02 0.071 4,062,904 3,955,872 3,957,038 4,003,460 4,051,464

Operational Surplus/(De -240,079 -151,874 -0.37 360,341 -3.37 258,951 -0.28 -438,891 -2.69 449,756 -2.02 -1.748 707,445 393,736 265,127 230,856 211,800Depreciation 162,100 163,572 0.01 138,235 -0.15 139,830 0.01 151,490 0.08 154,066 0.02 -0.007 164,168 144,378 119,065 83,345 58,342Reserve Account 66,612 102,410 0.54 -30,993 -1.30 -200,962 5.48 92,953 -1.46 -32,013 -1.34 0.382 43,491 40,647 39,528 38,725 37,939

-468,791 -417,856 253,099 320,083 -683,334 327,703 499,786 208,711 106,534 108,786 115,519Non-Operational

Principal Payment 80,074 275,222 2.44 47,377 -0.83 64,673 0.37 105,688 0.63 171,158 0.62 0.646 187,414 191,074 93,871 96,245 107,014

Net Surplus/(Deficit) -548,865 -693,078 0.26 205,722 -1.30 255,410 0.24 -789,022 -4.09 156,545 -1.20 -1.216 312,372 17,637 12,663 12,541 8,505

PoundageAcute Care 2,864,502 2,502,270 -0.13 2,447,720 -0.02 2,396,894 -0.02 2,331,416 -0.03 2,446,413 0.05 -0.029 2,452,599 2,403,547 2,355,476 2,308,366 2,262,199Personal Linen 362,542 331,407 -0.09 312,409 -0.06 301,024 -0.04 271,187 -0.10 231,526 -0.15 -0.085 230,702 30,000Long Term Care 1,499,370 1,320,877 -0.12 1,286,606 -0.03 1,272,895 -0.01 1,280,269 0.01 1,541,338 0.20 0.011 1,621,754 1,589,319 1,557,533 1,526,382 1,495,854Health Centres 3,223 5,075 0.57 10,238 1.02 10,509 0.03 12,461 0.19 1,699 -0.86 0.188 11,480 10,906 10,361 9,843 9,351Other 53,488 48,770 -0.09 54,139 0.11 55,172 0.02 62,557 0.13 74,113 0.18 0.072 32,569 30,940 29,393 27,924 26,527

4,783,125 4,208,398 -0.12 4,111,112 -0.02 4,036,493 -0.02 3,957,888 -0.02 4,295,088 0.09 -0.019 4,349,104 4,064,712 3,952,763 3,872,515 3,793,931

Cost per Pound 0.6777 0.8640 0.7818 0.7957 1.0987 1.0149 Cost/pound 1.0250 1.0202 1.0248 1.0587 1.0961

Charge Rates 60¢ 74¢ 85¢ 86¢ 89.5¢ 98.5¢ Charge Rates $1.0350 $1.0550 $1.0550 $1.0800 $1.1100Personal Linens 78¢ 83¢ 84¢ 85¢ 87¢ $1.015 $1.3200 $1.3530

Appendices: 3

Page 30: Nsl Business Plan 2004

Balance Sheet Comparison

Balance Sheet Comparisons/Projections

Mar 31/00 Mar 31/01 Mar 31/02 Mar 31/03 Mar 31/04 Inc/Dec Mar 31/05 Mar 31/06 Mar 31/07 Mar 31/08 Mar 31/09AssetsCurrent

Cash 100 100 100 100 100 100 100 100 100 100Bank 163,724 370,383 418,484 576,174 556,292Bank Reserve 0 30,993 231,955 139,001 171,015 139,506 125,153 104,681 143,406 31,345Accounts Receivable 330,881 351,754 399,850 412,164 600,133 397,529 362,467 351,847 352,860 355,272Inventory 443,997 544,961 597,575 458,111 392,536 698,427 628,584 565,726 509,153 458,238Prepaid expenses 24,172 20,257 17,241 24,873 30,377 23,384 23,384 23,384 23,384 23,384

799,150 948,065 1,246,721 1,034,249 1,194,161 1,422,670 1,510,072 1,464,222 1,605,076 1,424,631

Property & EquipmentBuilding

DepreciationEquipment 826,325 704,260 620,076 585,795 476,079 476,079 386,911 297,533 238,468 155,123New EquipmentAdditions/Deletions 75,000 55,000 60,000 150,000

DepreciationCurrent Period -164,168 -144,378 -119,065 -83,345 -58,342

826,325 704,260 620,076 585,795 476,079 386,911 297,533 238,468 155,123 246,782

1,625,475 1,652,325 1,866,797 1,620,044 1,670,240 1,809,581 1,807,605 1,702,690 1,760,200 1,671,413LiabilitiesCurrent

Bank Line of Credit 421,283 60,489 184,821 233,504 176,637Accounts Payable 192,125 130,404 162,732 227,471 200,015 338,575 329,656 329,753 333,622 337,622Loan Payment 50,050 55,179 77,780 170,567 178,534 187,414 191,074 93,871 96,245 107,014

663,458 246,072 425,333 631,542 555,186 525,989 520,730 423,624 429,867 444,636

Payable to Shareholders 275,000 278,000 313,900 323,500 355,283 354,718 347,514 348,526 350,939

Long Term DebtLoans 681,824 629,318 542,044 643,569 464,444 488,204 297,130 203,259 107,014 0

EquityShare Capital 11 11 11 4 4 4 4 4 4 4Reserve for Capital 25,348 176,884 139,001 171,015 139,506 125,153 104,681 143,406 31,345Reserve for Salaries 5,645 55,071

Current Period 0Retained Earnings 280,182 471,295 389,454 -107,972 156,091 156,091 655,877 864,589 971,123 1,079,909Current Period 499,786 208,711 106,534 108,786 115,519

280,193 502,299 621,420 31,033 327,110 795,387 989,746 1,075,808 1,223,319 1,226,777

1,625,475 1,652,689 1,866,797 1,620,044 1,670,240 1,809,581 1,807,606 1,702,691 1,760,199 1,671,413

Appendices: 4

Page 31: Nsl Business Plan 2004

Cash Flow Comparison

Cash Flow Comparisons/ProjectionsMra 31/00 Mar 31/01 Mar 31/02 Mar 31/03 Mar 31/04 Mar 31/05 Mar 31/06 Mar 31/07 Mar 31/08 Mar 31/09

Operating ActivitiesNet Income -315,446 222,106 119,121 -590,381 296,076 499,786 208,711 106,534 108,786 115,519

Depreciation 163,572 138,235 139,830 151,490 154,066 164,168 144,378 119,065 83,345 58,342Disposal of Fixed Assets - - - -386 - - - - -

Reserve transfer (net) -31,509 -14,353 -20,472 38,725 37,939-151,874 360,341 258,951 -438,891 449,756 632,445 338,736 205,127 230,856 211,800

Changes in Capital AccountsAccount Receivable -17,893 -20,873 -48,097 -12,314 -187,969 202,604 35,062 10,620 -1,013 -2,412

Inventories -121,217 -100,964 -52,614 139,465 65,575 -305,891 69,843 62,858 56,573 50,915Prepaid Expenses -6,916 3,915 3,016 -7,632 -5,504 6,993 0 0 0 0Unearned Income 275,000 3,000 35,900 9,600 31,783 -564 -7,205 1,013 2,412

Accounts Payable/Accruals -126,232 -62,085 32,693 64,740 -27,456 138,560 -8,919 97 3,868 4,000-424,132 455,334 196,949 -218,732 304,002 706,494 434,157 271,498 291,297 266,716

Financing ActivitiesAdvances long-term debt 300,000

Payment of Long-Term Debt -275,222 -47,377 -64,673 -105,688 -171,158 -187,414 -223,371 -93,871 -96,245 -107,014Redemption of Share Capital - - - -7 - - - - - -

New Long Term Financing 740,000 - - - - - - - -Issuance of Shares - - - - - - - - - -

Transfer to/from Equipment Reserve - - - - 6,166 4,896 4,500 4,500 4,500464,778 -47,377 -64,673 194,305 -171,158 -181,248 -218,475 -89,371 -91,745 -102,514

Investment ActivitiesPurchase of Fixed Assets -70,570 -16,170 -55,646 -117,209 -43,961 -75,000 -55,000 -60000 - -150000

Proceeds from Disposal of Fixed Assets - - 92,953 - - - - - --70,570 -16,170 -55,646 -24,256 -43,961 -75,000 -55,000 -60,000 0 -150,000

Increase/Decrease in Cash Resources -29,924 391,787 76,630 -48,683 88,883 450,247 160,683 122,127 199,552 14,202

Cash ResourcesBeginning of Year -391,259 -421,183 -29,396 -184,721 -233,404 -144,521 305,726 466,408 588,535 788,087

End of Year -421,183 -29,396 47,234 -233,404 -144,521 305,726 466,408 588,535 788,087 802,289

Cash Represeted byCash 100 100 100 100 100 100 100 100 100 100

Reserve Account 0 30,993 231,955 32,014 139,506 125,153 104,681 143,406 31,345Bank -421,283 -60,489 -184,821 -233,504 -176,637 166,120 341,155 483,754 644,581 770,844

-421,183 -29,396 47,234 -233,404 -144,523 305,726 466,408 588,535 788,087 802,289

Appendices: 5

Page 32: Nsl Business Plan 2004

Financial Ratios Liquidity Ratios 2000 2001 2002 2003 2004 Current Ratio (Working Capital Ratio) 1.2 1.82 1.77 1.64 2.15 provides a measure of the ability of the laundry to meet its current debt. The ratio (current assets/current liabilities) is an indication of the current assets which are available to cover the current liabilities (due within the next 12 months). The Current Ratio indicates whether the business has ample working capital used to meet short-term obligations, quickly take advantage of opportunities, and qualify for favorable credit terms. The 1999 ratio was .59. A Current Ratio of 1.0 or greater is considered acceptable for most businesses. Other factors need to be considered before drawing conclusions from the Current Ratio such as how quickly current assets can be converted into cash, and the credit terms extended by suppliers and to customers. A high ratio (greater than 2) indicates excessive current assets in the form of inventory, and underemployed capital. A low ratio (less than 1.0) indicates difficulty to meet short-term financial

obligations, and the inability to take advantage of opportunities requiring quick cash.

Quick Ratio (Acid Test Ratio) 0.54 0.77 0.92 0.91 1.44 provides a measure of the ability of the Laundry to meet its current debt without having to convert inventory into cash. The ratio (current assets less inventory/ current liabilities) is an indication of the current assets less inventory which is available to cover the current liabilities. The quick ratio in 1999 was .42. The Laundry's ability to pay off the immediate demands of creditors using its most liquid and current assets; these can be converted quickly into cash, temporary investments, and marketable securities. It gives a more realistic picture of a business's ability to repay current obligations. Generally, a Quick Ratio of 1.0 or greater is considered adequate to ensure a company's ability to pay its current obligations. A value of less than 1.0 signals a problem in meeting short-term obligations.

Accounts Receivable Turnover 9.14 10.29 9.73 9.82 9.89 indicates how many times during the year the accounts receivable are turned into cash. The ratio (net sales / average accounts receivable) is an indication of the quality of the receivables and an idea of how successful the Laundry is in collecting its outstanding receivables. The 1999 ratio was 8.94. Measures how liquid accounts receivable are for the year. Average Accounts Receivable is the average of the opening and closing balances for Accounts Receivable. Indicates the number of times receivables were turned over during the year. This result may be considered positive or negative, depending on the industry standard for companies of similar size and activity. A higher turnover rate generally indicates less investment in accounts receivable because customers are paying more quickly.

Appendices: 6

Page 33: Nsl Business Plan 2004

Financial Ratios Leverage Ratios 2000 2001 2002 2003 2004

Total Debt to Assets Ratio 0.41 0.32 0.38 0.39 0.33 (total debt / total tangible assets) measures the portion of the Laundry's total tangible assets that are financed through debt. The 1999 ratio was .7. For creditors, a lower Debt-to-Asset Ratio is preferred as it means shareholders have contributed a large portion of the funds to the business, and thus creditors are more likely to be paid.

Debt to Equity Ratio 4.8 2.29 2.0 51.77 4.11 provides a comparison between the amount borrowed from creditors and the amount invested by the owners. The ratio (total liabilities / adjusted equity) provides an indication whether the Laundry is over or under capitalized. The 1999 ratio was 2.37. Measures management's reliance on creditor financing as well as the business's indebtedness compared to the amount invested by its owners. This ratio indicates the amount of liabilities the business has for every dollar of shareholders' equity. Because this ratio is a good indicator of a business's capacity to repay its creditors, it is considered very important by most term lenders. The reliance on creditor financing needs to be analyzed in light of other factors such as: the historical trend of this ratio for the business, industry standards for companies of similar size and activity, and whether the company is in the start-up or established phase. Term lenders prefer a lower debt-to-equity ratio as it indicates a lower reliance on creditors and therefore a greater capacity for the business to repay its creditors.

Appendices: 7

Page 34: Nsl Business Plan 2004

Financial Ratios Operating Ratios 2000 2001 2002 2003 2004 Return on Assets Percentage -19.4 13.4 6.4 -36.4 17.7 the percentage (earnings before income taxes / adjusted equity) indicates the effectiveness of the management in using assets to generate earnings. The 199 ratio was -28.8. Measures the efficiency of assets used to generate income by the amount of profit generated for every $100 invested in assets. Income from Operations excludes any expenses such as income taxes and financing charges. Average Total Assets are used due to the variation in the amount of assets used by the business. A higher ratio result than industry standards usually indicates an efficient use of assets. There are several factors to consider before drawing conclusions from this ratio such as seasonal variability in sales and whether assets are bought or leased. Return On Investment Percentage -112.6 44.2 19.2 -1902.4 90.44 The percentage (earnings before income taxes / adjusted equity) indicates the return generated on the capital invested in the Laundry by the owners. The 1999 percentage was -97.1. Net Earnings Margin Percentage -10.7 6.5 3.4 -16.66 6.5 the percentage (earnings before income taxes / sales) indicates how much of each dollar of sales we convert to earnings. The 1999 percentage was -15.1. It shows the after-tax profit (net income) generated by each sales dollar by measuring the percentage of sales revenue retained by the company after operating expenses, creditor interest expenses, and income taxes have been paid.

Appendices: 8

Page 35: Nsl Business Plan 2004

Projections Poundage (thousands) Actual Projected 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09acute care 2,502 2,448 2,397 2,331 2,446 2,453 2,314 2,267 2,222 2,177personal 331 312 301 271 232 231 30 Long term care 1,321 1,287 1,273 1,280 1,541 1,622 1,541 1,464 1,390 1,321health centers 5 10 11 12 2 11 11 10 10 9other 49 54 55 63 74 33 31 29 28 27Total: 4,208 4,111 4,036 3,958 4,295 4,349 3,926 3,771 3,650 3,534

Poundage

0500

1,0001,5002,0002,5003,000

1999

/00

2001

/02

2003

/04

2004

/05

2006

/07

2008

/09

acute carepersonalLong term carehealth centersother

Total Poundage Comparison

Total Poundage

3,5003,7003,9004,1004,3004,500

1 2 3 4 5

Years

poun

dage

(th

ousa

nds)

2000/042005/09

Appendices: 9

Page 36: Nsl Business Plan 2004