agme expansion project final 122104

““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


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


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


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


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


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


$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


$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


BOZZUTO’S FEE 1.6% ON BOZZUTO’S FEE 1.6% ON PURCHASESPURCHASES

SAVINGS OF $36,800 PER YEARSAVINGS OF $36,800 PER YEAR


$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


$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


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 ?

agme expansion project final 122104

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