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““AGME Perishable Expansion AGME Perishable Expansion Project”Project”
Executive Management TeamExecutive Management TeamDecember 21, 2004.December 21, 2004.
PERISHABLE EXPANSION PERISHABLE EXPANSION TIMELINETIMELINE
January 6, 1998January 6, 1998 Management begins Management begins review process for review process for warehouse warehouse expansionexpansion
July 21,1998July 21,1998 Board reviews expansion Board reviews expansion plansplans
November 17,1998November 17,1998 Board reviews Board reviews SORA design optionsSORA design options
PERISHABLE EXPANSION PERISHABLE EXPANSION TIMELINETIMELINE
March 30,1999March 30,1999 Capital expenditures for Y2K Capital expenditures for Y2K exceed budget exceed budget Conversion expenses climbConversion expenses climb
Board appoints building committeeBoard appoints building committee December 6, 1999December 6, 1999 KOM presents final KOM presents final
expansion planexpansion plan December 14, 1999December 14, 1999 Board approves motion to Board approves motion to
finalize expansion finalize expansion plansplans
PERISHABLE EXPANSION PERISHABLE EXPANSION TIMELINETIMELINE
January , 2000January , 2000 Company loses Company loses Irving businessIrving business
March 31,2000March 31,2000 Y2K Capital Budget Y2K Capital Budget exceeds $1.4MMexceeds $1.4MMYear has operating lossYear has operating loss
April 18, 2000April 18, 2000 Board of Directors Board of Directors reviews whse bidsreviews whse bids
PERISHABLE EXPANSION PERISHABLE EXPANSION TIMELINETIMELINE
May 15, 2000May 15, 2000 Management postpones Management postpones expansion projectexpansion project
December 18, 2001December 18, 2001 Board of Directors Board of Directors revives expansionrevives expansion
May 15, 2002May 15, 2002 KOM presents re-sized KOM presents re-sized recommendationrecommendation
December 17, 2002December 17, 2002 Board of Directors Board of Directors authorizes M&A activity authorizes M&A activity Ends expansion Ends expansion plansplans
PERISHABLE EXPANSION PERISHABLE EXPANSION TIMELINETIMELINE
FEBRUARY 17, 2004FEBRUARY 17, 2004
PART OF STRATEGIC PLAN PART OF STRATEGIC PLAN TO SOLVE PERISHABLES TO SOLVE PERISHABLES SPACE PROBLEM !SPACE PROBLEM !
WAREHOUSEWAREHOUSE & &
TRANSPORTATION TRANSPORTATION
RICH RICH HOUDLETTEHOUDLETTEDIRECTOR OF OPERATIONSDIRECTOR OF OPERATIONS
Proposed ExpansionProposed Expansion A total of 41,000 SQ. FT. of Perishable space would be added to A total of 41,000 SQ. FT. of Perishable space would be added to
the existing perishable center.the existing perishable center.
The frozen food would increase from 9,100 SQ. FT. to 18500 SQ. The frozen food would increase from 9,100 SQ. FT. to 18500 SQ. FT., Meat from 6,400 SQ. FT. to 10,750 SQ. FT., Dairy/Deli from FT., Meat from 6,400 SQ. FT. to 10,750 SQ. FT., Dairy/Deli from 4,800 SQ. FT. to 18,400 SQ. FT. and Produce from 9,500 SQ. FT. 4,800 SQ. FT. to 18,400 SQ. FT. and Produce from 9,500 SQ. FT. to 12,850 SQ. FT.to 12,850 SQ. FT.
The Dock area would increase from 4,600 SQ. FT. to 17,900 SQ. The Dock area would increase from 4,600 SQ. FT. to 17,900 SQ. FT. FT.
Eight (8) new loading doors would be installed to allow for Eight (8) new loading doors would be installed to allow for loading off from a temperature controlled dock.loading off from a temperature controlled dock.
The existing Freon refrigeration system would be replaced with The existing Freon refrigeration system would be replaced with an ammonia system.an ammonia system.
Growing Labor ExpensesGrowing Labor Expenses For fiscal 2004 there were 1,643,186 cases received in meat, dairy and For fiscal 2004 there were 1,643,186 cases received in meat, dairy and
frozen or 59,198 pallets of merchandise.frozen or 59,198 pallets of merchandise. Out of that number 423,228 cases we handled 4 times from receipt to the Out of that number 423,228 cases we handled 4 times from receipt to the
delivery truck. Twice more than necessary !delivery truck. Twice more than necessary ! In addition 21,161 were handled 6 times due to going to outside storage. In addition 21,161 were handled 6 times due to going to outside storage.
Outside storage causes the operation to receive the product twice as well.Outside storage causes the operation to receive the product twice as well. Due to space constraints buy quantities have forced the operation to Due to space constraints buy quantities have forced the operation to
receive 821,593 cases 3 times more frequently than necessary. receive 821,593 cases 3 times more frequently than necessary. Industry average of cases per pallet for these 3 categories is 60 cases. Industry average of cases per pallet for these 3 categories is 60 cases.
AGME average? 29 Cases.AGME average? 29 Cases. AGME will spent $39,933 in fuel and labor transporting to and from South AGME will spent $39,933 in fuel and labor transporting to and from South
Gardiner.Gardiner. Net annual affect of additional handling, travel and employee benefits?Net annual affect of additional handling, travel and employee benefits?
$328,711$328,711
Electrical Utilities CostsElectrical Utilities Costs Electrical Utility costs for fiscal 2005 will be Electrical Utility costs for fiscal 2005 will be
$245,000$245,000Half of the load is due to refrigeration!Half of the load is due to refrigeration!
Industry standards report a minimum of 25% savings Industry standards report a minimum of 25% savings in utilities by converting to Ammonia refrigeration in utilities by converting to Ammonia refrigeration systems. systems. Net annual savings of $32,500Net annual savings of $32,500
In addition, the elimination of 5 electric storage In addition, the elimination of 5 electric storage units would result in an additional annual savings of units would result in an additional annual savings of $44,000 in utilities and storage trailer maintenance. $44,000 in utilities and storage trailer maintenance.
The elimination of the South Gardiner facility in year The elimination of the South Gardiner facility in year
3 would provide an additional annual savings of 3 would provide an additional annual savings of $42,000 although this may be offset by the need for $42,000 although this may be offset by the need for outside storage of Holiday Turkeys.outside storage of Holiday Turkeys.
Refrigeration MaintenanceRefrigeration Maintenance Annual refrigeration maintenance costs for the 30 Annual refrigeration maintenance costs for the 30
year old South Gardiner facility & 19 year old AGME year old South Gardiner facility & 19 year old AGME facility are projected to reach $75,000 for fiscal 2005.facility are projected to reach $75,000 for fiscal 2005.
Industry standards report that maintenance costs are Industry standards report that maintenance costs are reduced by as much as 75% by converting from a reduced by as much as 75% by converting from a mechanical Freon based system to an ammonia mechanical Freon based system to an ammonia system.system.
Eliminating the SG Facility in year 3 and converting to Eliminating the SG Facility in year 3 and converting to ammonia at AGME would reduce the annual ammonia at AGME would reduce the annual refrigeration maintenance cost by as much as refrigeration maintenance cost by as much as $56,250 $56,250
Damages & ShrinkDamages & Shrink There are a total of 2,148 pallets in reserve locations in Meat, Dairy and There are a total of 2,148 pallets in reserve locations in Meat, Dairy and
Frozen.Frozen.
There are a total of 1,680 possible reserve bays in Meat, Dairy and There are a total of 1,680 possible reserve bays in Meat, Dairy and Frozen.Frozen.
Currently 77% of the reserve locations in these three coolers have more Currently 77% of the reserve locations in these three coolers have more than 3 pallets in a single reserve.than 3 pallets in a single reserve.
What does that mean?What does that mean?
Replenishment labor is doubled as a result of dropping the stack, Replenishment labor is doubled as a result of dropping the stack, splitting the stack and returning the stack to reserve.splitting the stack and returning the stack to reserve.
In addition the warehouse incurred $8,700 in dairy, $1,500 in bakery, In addition the warehouse incurred $8,700 in dairy, $1,500 in bakery, $2,500 in meat/deli, $3,000 in frozen food and $2,500 in produce as a $2,500 in meat/deli, $3,000 in frozen food and $2,500 in produce as a result of warehouse damage and multi stacking reserve pallets over the result of warehouse damage and multi stacking reserve pallets over the past year.past year.
Grand total of $18,200 in unnecessary damages/shrink.Grand total of $18,200 in unnecessary damages/shrink.
Workmen’s Compensation Workmen’s Compensation
Kathy NasonKathy NasonSr. DIRECTOR HRSr. DIRECTOR HR
“Workers Comp Data” 2003
45 First reports filed for Workers Compensation. 27 of these reports originated in the Perishable Area Total of 1142 restricted days 77% of these days originated in the Perishable Area Average cost shoulder strain $ 10,000 Med only Average cost shoulder surgery $ 30,000 Med only Average cost of a back strain $ 10,000 Med only Average cost of a back surgery $ 25,000 Med only Average cost of a back fusion $ 50,000 Med only
(OSHA Reports 2003)
36
9
27
0
5
10
15
20
25
30
Office Transportation Dry Grocery PerishableArea
# Fi
rst R
port
sReports
(Total Resricted Days 2003)
0103 163
876
0100200300400500600700800900
1000
Office Dry Grocery Transportation Perishable
Total Days
(Productivity Loss in Dollars 2003)
$331 $8,062 $16,456
$142,026
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
Office Transportation Dry Grocery Perishable
Dollars
WAREHOUSE EXPANSION WILL WAREHOUSE EXPANSION WILL ENHANCE SAFETY EFFORTSENHANCE SAFETY EFFORTS
PROACTIVE APPROACHPROACTIVE APPROACH““Safety Culture”Safety Culture”
Reduce Ergonomic Risk FactorsReduce Ergonomic Risk Factors Less Handling of product Less Handling of product Proper Slotting to eliminate ergonomic risk factorsProper Slotting to eliminate ergonomic risk factors
““Safety Culture” Safety Culture” Offer Safe work environment Offer Safe work environment Employee MessageEmployee Message
““Management Commitment to Safety”Management Commitment to Safety”
INSURANCEINSURANCE
KENT JOHNSONKENT JOHNSONVP ALLIED INSURANCEVP ALLIED INSURANCE
IMPACT ON INSURANCEIMPACT ON INSURANCE Building PremiumBuilding Premium
Building and contents estimated at Building and contents estimated at $5,000,000$5,000,000
Premium increase $ 3,526Premium increase $ 3,526 Savings Incurred Savings Incurred
Deletion of 4 Storage trailers ( $ 936)Deletion of 4 Storage trailers ( $ 936)Premium in workers compensation ($ Premium in workers compensation ($
9,067)9,067)
Net Effect: Saving of ($6,477)Net Effect: Saving of ($6,477)
PROCUREMENTPROCUREMENT & &
MARKETINGMARKETING
DAVE MARCUSDAVE MARCUSV.P. V.P.
PROCUREMENT/MARKETINGPROCUREMENT/MARKETING
PROCUREMENT & PROCUREMENT & MARKETINGMARKETING
ELIMINATE BOZZUTOS FUNDELIMINATE BOZZUTOS FUND
A LOSS OF $102,000A LOSS OF $102,000
PROCUREMENT & PROCUREMENT & MARKETINGMARKETING
FROZEN CASH DISCOUNTFROZEN CASH DISCOUNT
90% WILL REALIZE 2%90% WILL REALIZE 2%
10% WILL REALIZE 1%10% WILL REALIZE 1%
GAIN OF $43,700GAIN OF $43,700
PROCUREMENT & PROCUREMENT & MARKETINGMARKETING
$55,250 FIRST YEAR SLOTTING GAIN$55,250 FIRST YEAR SLOTTING GAIN
FROZEN FOODFROZEN FOOD $24,000$24,000 DAIRYDAIRY $12,250$12,250 BAKERYBAKERY $4,000$4,000 MEAT/DELIMEAT/DELI $15,000$15,000
ONGOING IN FROZENONGOING IN FROZEN $14,400$14,400
PROCUREMENT & PROCUREMENT & MARKETINGMARKETING
$64,000 PER YEAR IN FROZEN FOOD $64,000 PER YEAR IN FROZEN FOOD AD INCOMEAD INCOME
RUN 8 FROZEN FOOD ITEMS PER RUN 8 FROZEN FOOD ITEMS PER WEEKWEEK
$200 FLAT FEE PER ITEM$200 FLAT FEE PER ITEM 40 NATIONAL BRAND ITEMS PER YEAR40 NATIONAL BRAND ITEMS PER YEAR
PROCUREMENT & PROCUREMENT & MARKETINGMARKETING
BOZZUTO’S FEE 1.6% ON BOZZUTO’S FEE 1.6% ON PURCHASESPURCHASES
SAVINGS OF $36,800 PER YEARSAVINGS OF $36,800 PER YEAR
PROCUREMENT & PROCUREMENT & MARKETINGMARKETING
$20,800 PER YEAR IN DEAL $20,800 PER YEAR IN DEAL INCOMEINCOME
ABILITY TO PURCHASE EXTRA ABILITY TO PURCHASE EXTRA PRODUCTPRODUCT
MAKE SPECIAL BUYS & MAKE SPECIAL BUYS & TRUCKLOAD PURCHASESTRUCKLOAD PURCHASES
PROCUREMENT & PROCUREMENT & MARKETINGMARKETING
$112,770 ADDITIONAL PROFIT ON SALES $112,770 ADDITIONAL PROFIT ON SALES OF ADDITIONAL VARIETYOF ADDITIONAL VARIETY
USED NUMBER OF NEW ITEMS PER USED NUMBER OF NEW ITEMS PER DEPARTMENTDEPARTMENT
AVERAGE WEEKLY MOVEMENT OF 7 CASESAVERAGE WEEKLY MOVEMENT OF 7 CASES AVERAGE DEPARTMENT CASE COSTAVERAGE DEPARTMENT CASE COST USED CURRENT DEPARTMENT MARGINUSED CURRENT DEPARTMENT MARGIN
PROCUREMENT & MARKETINGPROCUREMENT & MARKETING
FROZENFROZEN $21,245$21,245
DAIRYDAIRY $24,309$24,309
BAKERYBAKERY $15,998$15,998
MEAT/DELIMEAT/DELI $40,810$40,810
PRODUCEPRODUCE $10,408$10,408
PROCUREMENT & PROCUREMENT & MARKETINGMARKETING
WILL REALIZE LOSS OF 2% IN MARGINWILL REALIZE LOSS OF 2% IN MARGIN LACK OF ABILITY TO BUY IN LACK OF ABILITY TO BUY IN
TRUCKLOAD AT THE BEGINNINGTRUCKLOAD AT THE BEGINNING ENSURE KEEPING PRODUCT COSTS THE ENSURE KEEPING PRODUCT COSTS THE
SAME TO OUR CUSTOMERSSAME TO OUR CUSTOMERS THE DIFFERENCE IN THIS LOSS AND THE DIFFERENCE IN THIS LOSS AND
THE ELIMINATION OF BOZZUTO’S FEE IS THE ELIMINATION OF BOZZUTO’S FEE IS A LOSS OF .40% MARGINA LOSS OF .40% MARGIN
FINANCIALSFINANCIALS
RON CLOUTIERRON CLOUTIERCHIEF FINANCIAL CHIEF FINANCIAL
OFFICEROFFICER
OTHER EXPENSESOTHER EXPENSES DEPRECIATIONDEPRECIATION
EXPANSION COSTS OF $4.7 MIILIONEXPANSION COSTS OF $4.7 MIILION PRE-COSTS OF $100,000PRE-COSTS OF $100,000 INTERIM INTEREST OF $76,000INTERIM INTEREST OF $76,000 DEPRECIATE OVER 39 YEARS FOR BOOKDEPRECIATE OVER 39 YEARS FOR BOOK YEARLY NON-CASH EXPENSE OF $125KYEARLY NON-CASH EXPENSE OF $125K
OTHER EXPENSESOTHER EXPENSES INTERESTINTEREST
6 MONTH CONSTRUCTION LOAN USING A 6 MONTH CONSTRUCTION LOAN USING A 30 DAY LIBOR RATE30 DAY LIBOR RATE
CONVERT TO A MORTGAGE LOAN IN CONVERT TO A MORTGAGE LOAN IN OCTOBEROCTOBER
MORTGAGE LEVEL PAYMENT OF 15 YEARS MORTGAGE LEVEL PAYMENT OF 15 YEARS WITH A 15 YEAR AMORTIZATION AT WITH A 15 YEAR AMORTIZATION AT 6.62% FIXED RATE6.62% FIXED RATE
TOTAL MORTGAGE LOAN OF $4,815,000 TOTAL MORTGAGE LOAN OF $4,815,000
OTHER EXPENSESOTHER EXPENSES
REAL ESTATE TAXESREAL ESTATE TAXES ASSUMPTION TO HAVE A 5 YEAR TIF ASSUMPTION TO HAVE A 5 YEAR TIF
CREDITCREDIT THIS WOULD REDUCE OUR TAXES BY THIS WOULD REDUCE OUR TAXES BY
50% FOR YEARS 1 THROUGH 550% FOR YEARS 1 THROUGH 5
ASSUMPTIONSASSUMPTIONS USED 2% INFLATION FACTOR FOR:USED 2% INFLATION FACTOR FOR:
ADDT’L GROSS ON SALES-VARIETYADDT’L GROSS ON SALES-VARIETY DIRECT LABORDIRECT LABOR REDUCTION IN REFRIDGERATION COSTSREDUCTION IN REFRIDGERATION COSTS ELECTRICAL UTILITIES SAVINGSELECTRICAL UTILITIES SAVINGS OUTSIDE STORAGE COSTS-SO. GARDINEROUTSIDE STORAGE COSTS-SO. GARDINER OUTSIDE STORAGE COSTS-TURKEYSOUTSIDE STORAGE COSTS-TURKEYS TRAILER STORAGE LABOR COST TRAILER STORAGE LABOR COST
REDUCTIONREDUCTION
ASSUMPTIONSASSUMPTIONS
USED 39 YEARS TO DEPRECIATEUSED 39 YEARS TO DEPRECIATE TIF CREDIT FOR 5 YRS AT 50% TIF CREDIT FOR 5 YRS AT 50%
SAVINGS FOR REAL ESTATE TAXESSAVINGS FOR REAL ESTATE TAXES FOR THIS PROPOSAL A 10 YEAR FOR THIS PROPOSAL A 10 YEAR
CASH FLOW ANALYSIS WAS USED.CASH FLOW ANALYSIS WAS USED. ONLY 1 MILLION IN SALES GROWTH ONLY 1 MILLION IN SALES GROWTH
WAS FACTORED (VARIETY) FOR THIS WAS FACTORED (VARIETY) FOR THIS ANALYSIS.ANALYSIS.
CASHFLOWCASHFLOW POSITIVE CASHFLOW ALL 10 POSITIVE CASHFLOW ALL 10
YEARSYEARS CASHFLOW DEVELOPED BY:CASHFLOW DEVELOPED BY:
TAKING TOTAL INCOME TAKING TOTAL INCOME PLUS DEPRECIATIONPLUS DEPRECIATION PLUS INTERESTPLUS INTEREST LESS LOAN PAYMENTLESS LOAN PAYMENT
RETAIL SALES AND RETAIL SALES AND DEVELOPMENTDEVELOPMENT
RAY JACQUESRAY JACQUESV.P. SALESV.P. SALES
PERCEPTIONPERCEPTION TEAM MOVING IN A POSITIVE DIRECTIONTEAM MOVING IN A POSITIVE DIRECTION LACK OF VARIETY IN PERISHABLESLACK OF VARIETY IN PERISHABLES SERVICE LARGER STORES NEEDSSERVICE LARGER STORES NEEDS NEED LARGER ACCOUNTS FOR ROTATION NEED LARGER ACCOUNTS FOR ROTATION
AND TURNSAND TURNS GROWTH IN PERISHABLESGROWTH IN PERISHABLES FROZEN FOOD FASTEST GROWING CATEGORYFROZEN FOOD FASTEST GROWING CATEGORY TAKE ADVANTAGE OF TRENDTAKE ADVANTAGE OF TREND
DIRECTIONDIRECTION BECOME BEST INDEPENDENT BECOME BEST INDEPENDENT
DISTRIBUTORDISTRIBUTOR SET AN EXAMPLE FOR CURRENT SET AN EXAMPLE FOR CURRENT
CUSTOMER BASECUSTOMER BASE INSPIRE DEVELOPMENT AND INSPIRE DEVELOPMENT AND
EXPANSIONEXPANSION TOOLS TO GROW MEMBERSHIPTOOLS TO GROW MEMBERSHIP
DIRECTIONDIRECTION WE MUST UPGRADE AND EXPAND WE MUST UPGRADE AND EXPAND
OUR PERISHABLE FACILITYOUR PERISHABLE FACILITY
““THIS IS OUR GREATEST THIS IS OUR GREATEST TOOL, OUR GREATEST TOOL, OUR GREATEST
ASSET”ASSET”
IMAGEIMAGE CREATE A NEW PERCEPTION OF CREATE A NEW PERCEPTION OF
AGMEAGME INSTILL EXCITEMENT AND PRIDEINSTILL EXCITEMENT AND PRIDE INSPIRE GROWTH AND INSPIRE GROWTH AND
DEVELOPMENTDEVELOPMENT PART OF A WINNING TEAMPART OF A WINNING TEAM NEW PERCEIVED IMAGENEW PERCEIVED IMAGE
AGME A WINNING TEAMAGME A WINNING TEAM
THE THE BESTBEST INDEPENDENT INDEPENDENT DISTRIBUTOR DISTRIBUTOR
IN IN NEW ENGLANDNEW ENGLAND
PROJECT SCHEDULEPROJECT SCHEDULE
ID Task Name Start Finish Duration2005
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1 45d2/22/200512/22/2004DEP Permitting
2 45d2/22/200512/22/2004Gardiner Building Permitting
4 23d1/21/200512/22/2004KOM prepare RFP
5 25d2/25/20051/24/2005Request Bids
7 8d3/25/20053/16/2005Close Loan
8 145d11/11/20054/25/2005Building Construction
6 2d3/15/20053/14/2005Board Final Approval
3 38d2/11/200512/22/2004Negotiate Bank Financing
2006
Nov Dec Jan
AGME Board of Directors
Q & A Session ?