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SUBMITTED AGENDA ITEMS:
Review of May Financials
Finance Manager Kevin Oder presented the May financial statements.
· On the monthly sales graphs, I'd like to see the very topmost
point of the owner sale day amount. Either that or put the actual day's
sale amount in a separate table so I can see the actual amounts for each
year and compare them.
· What is the increase in prior year expense?
There is an escalation clause in our lease with Dari Mart. Last year we
didn't increase our payments and Dari Mart didn't realize it either until
last month. They sent us a bill for the difference between the two lease
rates for all of the months that it had been paid at the lower rate. The
portion of the bill from 2006 was expensed to the
· Please explain the restricted fund accounts for the DOE.
o The restriction is for $190,000, which was the amount we owed the DOE
at the time we took out the loan for the North Store. We borrowed enough
money from Key to payoff the DOE loan, but there the DOE loan could not
be prepaid at that time. In order to remove the DOE from the south store
deed, the DOE accepted a collateral swap wherein we purchased Fannie Mae
investment bonds and used those as the collateral on the DOE loan until
it could be paid off this month. This week we sold the investment bonds
and sent the DOE the money to payoff their loan.
o There are two lines on the balance sheet which represent these investments
"Cash: McDonald Money Market" and "Invest: DOE Support
Bonds". Together they represent the investment made with the Key
bank funds used for the DOE collateral. In May there was a large shift
between these two accounts in preparation for cashing them out in July.
Between the extra investment income and the difference in the amount we
actually owe the DOE after making payments each month for the last four
years, we will realize enough extra cash from the bond sale to pay off
the six-year owner loans in September with a little bit more left over
for reinvesting.
· The Annex purchase was completed in June and those changes will
show up on the June balance sheet. The Annex purchase will increase the
Property, Plant, and Equipment line on the balance sheet. The monthly
loan payments on this new purchase will be less than the current monthly
lease payment.
· There will be quite a few changes to the balance sheet and some
of the financial ratios over the next few months. All of these changes
should be completed by the end of September.
o The June financial statements will have the Annex purchase, the new
Key loan for that purchase, and the removal of the Evanite lease deposit
restriction.
o July will have the DOE loan paid off and the removal of the restricted
DOE collateral, the sale of the CD investment of the $25,000 that was
being held for the Evanite lease deposit, and the payback of the those
funds to the MM Sinking fund where the $25,000 was borrowed from to put
into escrow for the Annex purchase, and the temporary deposit of the extra
funds from the bond sale in the MM Sinking fund.
o September will see the payoff of the six-year owner loans out of these
extra funds in the MM Sinking Fund.
· Being open this year on the 4th of July worked out well. Sales
were just under a normal day and we were open for customers who wanted
to shop. Although some staff weren't happy we were open, overall it was
positive and we will go ahead and continue being open on the 4th from
now on.
o Do you give holiday pay?
§ No, we don't give holiday pay for any holiday.
· Went over the Commissary Operations section with net expenses
exceeding in-house transfers by $23,168.
o The Deli has made corrections to their retail pricing based on the transfer
price from the Commissary and their numbers are looking better. Now the
Commissary needs to get all of their recipes priced properly, though.
They are working on updating their pricing and costs. As transfer prices
change, the Deli will then need to look at their pricing again. There
have been some additional personnel changes made to the Deli and Commissary
to continue to resolve these issues.
Non-Ops Budgeting / Patronage Dividend Planning
Went over the board input from the discussion at the June board meeting.
· There was a request to get actual figures for comparison of the
amount of owner appreciation sale day discounts vs. the amount given as
a patronage dividend each year.
o This is no problem as these are both income statement items and are
easily compared year to year.
· What I heard from a majority of the Board was a low priority
placed on planning for a patronage dividend. The Board was more supportive
of constrained growth in the non-ops programs, but not of cutting back
on existing programs. There was strong support for continuing out community
outreach programs.
o The owner worker labor will included in the labor percentages for each
department next year. The intent is to have the departments manage their
owner worker labor more carefully. The labor for overseeing the owner
workers and their extra training needs will continue to be in outreach
administration.
· When our banker came to our committee meeting again last month,
I asked questions to clarify the intent of his proposal. My understanding
from him was that they were ultimately concerned with a stable bottom
line, not necessarily the means used to achieve it.
· During the owner comment period at the June board meeting, two
owners came to express their disappointment with the changes to the alternative
transportation program. I agree with them that the co-op should be encouraging
alternative transportation not cutting back on the program.
o Every outreach program we have is important. We haven't received very
much feedback on the changes to the alternative transportation program.
We've received more complaints about not having the free magazines available.
· If I were to make cuts, I wouldn't choose such visible items.
It seems like the cuts to the non-ops programs were premature and more
time should have been taken to think them through before implementing
them.
o With the current problems with margin and the bottom line, we're looking
at cutting expenses wherever we can until the situation improves. I try
to allow my department managers the ability to make decisions for their
own departments and not tell them what decisions to make to achieve a
particular goal.
Discussed the upcoming budgeting process for the 2008 budget. Should
the line-by-line detail of the non-ops budget go to the board for approval,
or should just the target percentage be included in the overall assumptions
for approval? The governance budget, what the board spends on itself and
conducting it's own business, would probably need input from the board
so that everything they're planning on for the upcoming year is provided
for. Dave will send this as an agenda item to the August board meeting
to get input for us to use in planning this year's budget process.
Meeting adjourned: 6:25pm
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