Carson Distribution Inc

Carson Distribution Inc.

Dr. Greene

Jacob Groezinger | Nate Noss | Abigail Saxe

Team 1

ISE 311 A51 – Enterprise Systems

Monday, March 14, 2016

Agenda

Introduction

Assumptions

Background

Analysis

Conclusions

Recommendations

Ideas for Future Research

Framework Analysis Conclusions Recommendations

Introduction3

Overview

• Location:

• Moline, IL

• Mission:

• Purchases inventory from

manufacturers and sells to retailers

• Experience:

• Increase in sales but decrease in

profit

• Increased distributor competition

• Requests:

• Evaluation of proposals from VP’s

• Turnaround of company


General Assumptions

• 20 year study

• Average weighted inflation rate of 2.014%

• Turnaround is defined as an increase in profits

• ROI must exceed 12%

• No bias towards either proposal

4


General Assumptions (con’t)

• Tax rate of 35% remains constant

• Depreciation and interest payments remain constant

• CDI pays off the interest of the loan each year with a balloon payment of

principal

• Given income statement elements are replicated in year 0 of study

6


Background7

Key Problems

Market:

• Direct competition from distributors

• Changing retailer preferences

• Wide variety of appliances desired

Financial:

• Misaligned pay periods

• Funding options exhausted

Operations:

• Lack of inventory turnover

• Difficulty forecasting orders


Key Pathways8

Streamline Distribution

• VP of Logistics – Pam Grier

• Purchasing an AS/RS system

• Utilizing AS/RS system and other

methods to improve supply chain

Invest in New Infrastructure

• VP of Operations – Donald Goines

• Building a new facility in a new

location

• Fulfill requests from potential new

customers


Investing in New Infrastructure9

Invest in New Infrastructure Streamline Distribution


Assumptions - Investing

• New facility has similar interior functions as current location

• Bank provides CDI with a loan that has a yearly interest rate of 11%

• Loaning bank is in Chicago, IL

• New CDI plant would be in the state of Illinois

• Increase in shipping, direct materials, direct labor/other remain constant after

the initial increase in year 1

• $10 million warehouse depreciates over 39 years based on MACRS

10


Cash Flow Diagram - Investing13

$9,000,000

$6,000,000

$3,000,000

$0

$3,000,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20


Present Worth Analysis - Investing14

Year 20

Net Cash Flow $56,400,000

Net Present Worth $48,300,000

ROI 5.5%


Streamlining Distribution22



Assumptions - Streamlining

• Savings of 16% per year for shipping and labor costs remain constant

• Lifespan of the AS/RS system is 20-25 years

• One AS/RS system is purchased

• AS/RS system is depreciated over 10 years using MACRS

• Increase in fixed operational expenses begin in year 1 and remain constant

23


Cash Flow Diagram - Streamlining26

$4,000,000

$2,000,000

$0

$2,000,000

$4,000,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Streamlining Distribution Net Cash Flow Diagram


Present Worth Analysis - Streamlining27

Year 20

Net Cash Flow $63,900,000

Net Present Worth $51,800,000

ROI 21.8%


Comparison34



Combined Cash Flow Diagram35

$8,800,000

$5,800,000

$2,800,000

$200,000

$3,200,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Investing in New Infrastructure Streamlining Distribution Do Nothing


Combined Present Worth Analysis37

Proposal Present Worth

Investing in New Infrastructure $48,300,000

Streamlining Distribution $51,800,000

Do Nothing $44,500,000

$48,259,490

$51,805,224

$44,479,952

$39,000,000

$42,000,000

$45,000,000

$48,000,000

$51,000,000

$54,000,000

Investing in NewInfrastructure

Streamlining Distribution Do Nothing

Net

Incom

e P

W

Proposal

20 Year Study: Present Worth


Combined Projected ROI38

5.52%

21.81%

0%

5%

10%

15%

20%

25%

Investing in New Infrastructure Streamlining Distribution

20 Year ROI Analysis


Pros and Cons61


20 Year ROI: 5.50% 20 Year ROI: 21.80%

Expanding into new markets Serve current customers more effectively

Competitive delivery lead times More reliable delivery estimates

$43.5 million in assets $36.6 million in assets

Expansion of product portfolio Same product offerings

$7.2 million in inventory $4.5 million in inventory

Higher loan to pay back down the road Lower loan to pay back

Higher risk Lower risk


4 Questions62

1. How will each option affect the firm’s operational and financial performance measures, which investors watch closely?

2. Which supply chain design option would be better for the company?

3. What type of information is vital for Mr. Carson to even make a decision?

4. What role does the Market play in this scenario?


1. Image to Investors63


20 Year ROI: 5.50% 20 Year ROI: 21.80%









2. Supply Chain Design64


20 Year ROI: 5.50% 20 Year ROI: 21.80%









3. Vital Information65


20 Year ROI: 5.50% 20 Year ROI: 21.80%









4. Role of Market66


20 Year ROI: 5.50% 20 Year ROI: 21.80%









Conclusions

• Solve underlying problems in supply chain and core business before expanding

• If new infrastructure is invested in, underlying issues will lead to a loss of customers

• Flexible supply chain allows CDI to serve customers more effectively

72


Recommendation73

StreamlineDistribution

Effective Supply Chain

HigherLong-term

ROI

Customer Retention


3 Year Roadmap

Evaluatecurrent

supply chain

Implement new

strategies

Follow-up to establish

next steps

74


Ideas for Future Research76

Future Research

• Sales and Operations Planning

• Explore expanding to new

locations

• Explore potential new

concentrations

• Further continuous process

improvement

• Sell directly to individual customers

• Harnessing new technologies

Questions

Appendices


Inflation CalculationsH82

Inflation RateYears The

inflation rate is being used

Inflation rate * years

1.82%

1.90% 20 38.00%

1.97% 19 37.43%

2.01% 18 36.18%

2.03% 17 34.51%

2.03% 16 32.48%

2.03% 15 30.45%

2.04% 14 28.56%

2.04% 13 26.52%

2.04% 12 24.48%

2.04% 11 22.44%

2.04% 10 20.40%

2.04% 9 18.36%

2.04% 8 16.32%

2.04% 7 14.28%

2.03% 6 12.18%

2.03% 5 10.15%

2.03% 4 8.12%

2.03% 3 6.09%

2.03% 2 4.06%

2.03% 1 2.03%

Total 210.00 423.04%

Weighted Average 2.0145%


Depreciation CalculationsH83

40 Year MACRS Depreciation over 20 Year 0 1 2 3 4 5 6 7 8 9 10

Rate 0.000% 2.344% 3.662% 3.525% 3.393% 3.265% 3.143% 3.025% 2.912% 2.802% 2.697%

Book Value $10,000,000.00 $9,765,600.00 $9,399,400.00 $9,046,900.00 $8,707,600.00 $8,381,100.00 $8,066,800.00 $7,764,300.00 $7,473,100.00 $7,192,900.00 $6,923,200.00

Depreciation $- $234,400.00 $366,200.00 $352,500.00 $339,300.00 $326,500.00 $314,300.00 $302,500.00 $291,200.00 $280,200.00 $269,700.00

11 12 13 14 15 16 17 18 19 20

2.596% 2.499% 2.405% 2.315% 2.253% 2.253% 2.253% 2.253% 2.253% 2.253%

$6,663,600.00 $6,413,700.00 $6,173,200.00 $5,941,700.00 $5,716,400.00 $5,491,100.00 $5,265,800.00 $5,040,500.00 $4,815,200.00 $4,589,900.00

$259,600.00 $249,900.00 $240,500.00 $231,500.00 $225,300.00 $225,300.00 $225,300.00 $225,300.00 $225,300.00 $225,300.00

10 Year MACRS Depreciation Year 0 1 2 3 4 5 6 7 8 9 10 11

Rate 0.000% 10.000% 18.000% 14.400% 11.520% 9.220% 7.370% 6.550% 6.550% 6.560% 6.550% 3.280%

Book Value $7,000,000.00 $6,300,000.00 $5,040,000.00 $4,032,000.00 $3,225,600.00 $2,580,200.00 $2,064,300.00 $1,605,800.00 $1,147,300.00 $688,100.00 $229,600.00 $-

Depreciation $- $700,000.00 $1,260,000.00 $1,008,000.00 $806,400.00 $645,400.00 $515,900.00 $458,500.00 $458,500.00 $459,200.00 $458,500.00 $229,600.00


20 Year Study: Do Nothing Present Worth Analysis

H84

Business as Usual Cash FlowYear Number 0 1 2 3 4 5

Calendar Year 2016 2017 2018 2019 2020 2021

Benefits Revenue $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00

Revenue $33,074,000.00 Costs of Goods Sold (Taxed)

Costs of Goods Sold (Taxed) Shipping $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00

Shipping $8,931,000.00 Direct Materials $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00

Direct Materials $5,963,000.00 Labor and Other $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00

Labor and Other $6,726,000.00 Operation Expenses (Not Taxed)

Total $21,620,000.00 Selling Expense $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00

Gross Profit $11,454,000.00 Fixed Expense $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00

Operation Expenses Depreciation $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00

Selling Expense $2,232,000.00 Interest Expense $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00

Fixed Expense $2,641,000.00 Taxes

Depreciation $1,794,000.00 35% $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00

Total $6,667,000.00 Net Cash Flow $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00

Earnings before Interest & Taxes $4,787,000.00 Present Worth $2,566,850.00 $2,516,162.51 $2,466,475.93 $2,417,770.52 $2,370,026.90 $2,323,226.06

Interest Expense $838,000.00

Earnings Before Taxes $3,949,000.00

Taxes @ 35% $1,382,000.00

Net Income $2,567,000.00

Taxes 0.35


20 Year Study: Do Nothing Present Worth Analysis (cont.)

H85

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Total

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

$33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $694,554,000.00

$8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $187,551,000.00

$5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $125,223,000.00

$6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $141,246,000.00

$2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $46,872,000.00

$2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $55,461,000.00

$1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $37,674,000.00

$838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $17,598,000.00

$1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $29,025,150.00

$2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $53,903,850.00

$2,277,349.40 $2,232,378.66 $2,188,295.96 $2,145,083.76 $2,102,724.87 $2,061,202.44 $2,020,499.94 $1,980,601.21 $1,941,490.34 $1,903,151.80 $1,865,570.33 $1,828,730.98 $1,792,619.10 $1,757,220.31 $1,722,520.55 $44,479,951.58


20 Year Study: Investing in New Infrastructure Present Worth Analysis

H86

Proposal 1: Investing in New Infrastructure Cash FlowYear Number 0 1 2 3 4 5

Calendar Year 2016 2017 2018 2019 2020 2021










Selling Expense $2,232,000.00 Interest Expense $838,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00

Fixed Expense $2,641,000.00 Balloon Payment $- $- $- $- $- $-

Depreciation $1,794,000.00 Taxes

Total $6,667,000.00 35% $1,382,150.00 $1,786,491.00 $1,740,361.00 $1,745,156.00 $1,749,776.00 $1,754,256.00

Earnings before Interest & Taxes $7,496,660.00 Net Cash Flow $2,566,850.00 $3,317,769.00 $3,232,099.00 $3,241,004.00 $3,249,584.00 $3,257,904.00

Interest Expense $2,158,000.00 Present Worth $2,566,850.00 $3,252,253.13 $3,105,711.05 $3,052,770.49 $3,000,409.64 $2,948,690.99


Taxes @ 35% $1,869,000.00

Net Income $3,469,660.00

Taxes 35.00%

Increase in Sales $4,426,000.00

Increase Shipping Cost $955,000.00

Increase Direct Materials Cost 6%

Increase Direct Labor & Other 6%

Interest per year 1320000


20 Year Study: Investing in New Infrastructure Present Worth Analysis (cont.)

H87

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Total

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

$37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $37,500,000.00 $783,074,000.00

$9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $9,886,000.00 $206,651,000.00

$6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $6,320,780.00 $132,378,600.00

$7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $7,129,560.00 $149,317,200.00

$2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $46,872,000.00

$2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $55,461,000.00

$2,108,300.00 $2,096,500.00 $2,085,200.00 $2,074,200.00 $2,063,700.00 $2,053,600.00 $2,043,900.00 $2,034,500.00 $2,025,500.00 $2,019,300.00 $2,019,300.00 $2,019,300.00 $2,019,300.00 $2,019,300.00 $2,019,300.00 $43,084,100.00

$2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $43,998,000.00

$- $- $- $- $- $- $- $- $- $- $- $- $- $- $12,000,000.00 $12,000,000.00

$1,758,526.00 $1,762,656.00 $1,766,611.00 $1,770,461.00 $1,774,136.00 $1,777,671.00 $1,781,066.00 $1,784,356.00 $1,787,506.00 $1,789,676.00 $1,789,676.00 $1,789,676.00 $1,789,676.00 $1,789,676.00 $1,789,676.00 $36,859,235.00

$3,265,834.00 $3,273,504.00 $3,280,849.00 $3,287,999.00 $3,294,824.00 $3,301,389.00 $3,307,694.00 $3,313,804.00 $3,319,654.00 $3,323,684.00 $3,323,684.00 $3,323,684.00 $3,323,684.00 $3,323,684.00 $(8,676,316.00) $56,452,865.00

$2,897,498.92 $2,846,952.68 $2,796,995.78 $2,747,738.77 $2,699,070.21 $2,651,043.51 $2,603,656.44 $2,556,956.66 $2,510,889.30 $2,464,294.84 $2,415,632.50 $2,367,931.09 $2,321,171.64 $2,275,335.54 $(5,822,363.05) $48,259,490.12


20 Year Study: Incremental Present Worth Analysis

H88

Incremental Analysis Cash FlowYear Number 0 1 2 3 4 5

Calendar Year 2016 2017 2018 2019 2020 2021

Incremental Benefits Incremental Benefits

Revenue $4,426,000.00 Revenue $- $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00

Incremental Costs of Goods Sold (Taxed) Net Incremental Benefits $- $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00

Shipping $955,000.00 Present Value of Net Incremental Benefits $0.00 $4,338,599.94 $4,252,925.76 $4,168,943.39 $4,086,619.41 $4,005,921.09

Direct Materials $357,780.00 Incremental Cost Of Goods Sold

Labor and Other $403,560.00 Shipping $- $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00

Total $1,716,340.00 Direct Materials $- $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00

Incremental Operation Expenses Selling Expense $- Labor and Other

$- $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00

Fixed Expense $- Incremental Operation Expenses

Depreciation $- Selling Expense $- $- $- $- $- $-

Total $- Fixed Expense $- $- $- $- $- $-

Interest Expense $1,320,000.00 Depreciation $- $234,400.00 $366,200.00 $352,500.00 $339,300.00 $326,500.00

Total $1,320,000.00 Interest Expense $- $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00

Gross Incremental Costs $3,036,340.00 Balloon Payment $- $- $- $- $- $-

Net Incremental Cash Flow $1,389,660.00 Incremental Taxes

35% $- $404,341.00 $358,211.00 $363,006.00 $367,626.00 $372,106.00

Inflation Rate 0.020144762 Net Incremental Costs $- $3,675,081.00 $3,760,751.00 $3,751,846.00 $3,743,266.00 $3,734,946.00

Present Value of Incremental Costs $- $3,602,509.31 $3,613,690.65 $3,533,943.42 $3,456,236.67 $3,380,456.15

Net Incremental Cash Flow $- $750,919.00 $665,249.00 $674,154.00 $682,734.00 $691,054.00

Present Value of Net Incremental Cash Flow $- $736,090.63 $639,235.11 $634,999.97 $630,382.74 $625,464.93


20 Year Study: Incremental Present Worth Analysis (cont.)

H89

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Total

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

$4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $88,520,000.00

$4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $4,426,000.00 $88,520,000.00

$3,926,816.31 $3,849,273.61 $3,773,262.14 $3,698,751.67 $3,625,712.55 $3,554,115.74 $3,483,932.74 $3,415,135.65 $3,347,697.09 $3,281,590.23 $3,216,788.79 $3,153,266.98 $3,090,999.53 $3,029,961.67 $2,970,129.13 $72,270,443.38

$955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $955,000.00 $19,100,000.00

$357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $357,780.00 $7,155,600.00

$403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $403,560.00 $8,071,200.00

$- $- $- $- $- $- $- $- $- $- $- $- $- $- $- $-

$- $- $- $- $- $- $- $- $- $- $- $- $- $- $- $-

$314,300.00 $302,500.00 $291,200.00 $280,200.00 $269,700.00 $259,600.00 $249,900.00 $240,500.00 $231,500.00 $225,300.00 $225,300.00 $225,300.00 $225,300.00 $225,300.00 $225,300.00 $5,410,100.00

$1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $1,320,000.00 $26,400,000.00

$- $- $- $- $- $- $- $- $- $- $- $- $- $- $12,000,000.00 $12,000,000.00

$376,376.00 $380,506.00 $384,461.00 $388,311.00 $391,986.00 $395,521.00 $398,916.00 $402,206.00 $405,356.00 $407,526.00 $407,526.00 $407,526.00 $407,526.00 $407,526.00 $407,526.00 $7,834,085.00

$3,727,016.00 $3,719,346.00 $3,712,001.00 $3,704,851.00 $3,698,026.00 $3,691,461.00 $3,685,156.00 $3,679,046.00 $3,673,196.00 $3,669,166.00 $3,669,166.00 $3,669,166.00 $3,669,166.00 $3,669,166.00 $15,669,166.00 $85,970,985.00

$3,306,666.79 $3,234,699.59 $3,164,562.32 $3,096,096.66 $3,029,367.21 $2,964,274.66 $2,900,776.24 $2,838,780.19 $2,778,298.13 $2,720,447.20 $2,666,726.63 $2,614,066.87 $2,562,446.99 $2,511,846.44 $10,515,012.72 $68,490,904.85

$698,984.00 $706,654.00 $713,999.00 $721,149.00 $727,974.00 $734,539.00 $740,844.00 $746,954.00 $752,804.00 $756,834.00 $756,834.00 $756,834.00 $756,834.00 $756,834.00 $(11,243,166.00) $2,549,015.00

$620,149.52 $614,574.02 $608,699.82 $602,655.01 $596,345.34 $589,841.08 $583,156.50 $576,355.45 $569,398.95 $561,143.03 $550,062.16 $539,200.10 $528,552.54 $518,115.23 $(7,544,883.60) $3,779,538.54

Benefits-Costs $3,779,538.54

Profit/Costs 5.52%



H90

Business as Usual Cash FlowYear Number 0 1 2 3 4 5

Calendar Year 2016 2017 2018 2019 2020 2021










Selling Expense $2,232,000.00 Interest Expense $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00


Depreciation $1,794,000.00 35% $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00

Total $6,667,000.00 Net Cash Flow $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00

Earnings before Interest & Taxes $4,787,000.00 Present Worth $2,566,850.00 $2,516,162.51 $2,466,475.93 $2,417,770.52 $2,370,026.90 $2,323,226.06



Taxes @ 35% $1,382,000.00

Net Income $2,567,000.00

Taxes 0.35


Cash Flow - StreamliningH91

Snapshot of Cash Flows: Year 3Year Number 3

Revenue $33,074,000.00

Costs of Goods Sold (Taxed)

Shipping $8,931,000.00

Direct Materials $5,963,000.00

Labor and Other $6,726,000.00

Operation Expenses (Not Taxed)

Selling Expense $2,232,000.00

Fixed Expense $2,641,000.00

Depreciation $1,794,000.00


Taxes

35% $1,382,150.00

Net Cash Flow $2,566,850.00

Present Worth $2,417,770.52


20 Year Study: Streamlining Distribution Present Worth Analysis

H92

Proposal 2: Streamlining Distribution Cash FlowYear Number 0 1 2 3 4 5

Calendar Year 2016 2017 2018 2019 2020 2021










Selling Expense $2,232,000.00 Interest Expense $838,000.00 $1,538,000.00 $1,538,000.00 $1,538,000.00 $1,538,000.00 $1,538,000.00

Fixed Expense $3,141,000.00 Balloon Payment $- $- $- $- $- $-


Total $7,167,000.00 35% $1,382,150.00 $1,593,942.00 $1,397,942.00 $1,486,142.00 $1,556,702.00 $1,613,052.00

Earnings before Interest & Taxes $6,792,120.00 Net Cash Flow $2,566,850.00 $2,960,178.00 $2,596,178.00 $2,759,978.00 $2,891,018.00 $2,995,668.00

Interest Expense $1,538,000.00 Present Worth $2,566,850.00 $2,901,723.47 $2,494,657.09 $2,599,681.89 $2,669,338.07 $2,711,344.24


Taxes @ 35% $1,839,000.00

Net Income $3,415,120.00

Taxes 35.00%

Shipping Savings 16%

Direct Labor Savings 16%

Increase in Fixed Operational Expenses $500,000.00



20 Year Study: Streamlining Distribution Present Worth Analysis (cont.)

H93

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Total

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

$33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $694,554,000.00

$7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $7,502,040.00 $158,971,800.00

$5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $125,223,000.00

$5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $5,649,840.00 $119,722,800.00

$2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $46,872,000.00

$3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $3,141,000.00 $65,461,000.00

$2,309,900.00 $2,252,500.00 $2,252,500.00 $2,253,200.00 $2,252,500.00 $2,023,600.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $44,674,000.00

$1,538,000.00 $1,538,000.00 $1,538,000.00 $1,538,000.00 $1,538,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $838,000.00 $24,598,000.00

$- $- $- $- $7,000,000.00 $- $- $- $- $- $- $- $- $7,000,000.00

$1,658,377.00 $1,678,467.00 $1,678,467.00 $1,678,222.00 $1,678,467.00 $2,003,582.00 $2,083,942.00 $2,083,942.00 $2,083,942.00 $2,083,942.00 $2,083,942.00 $2,083,942.00 $2,083,942.00 $2,083,942.00 $2,083,942.00 $38,160,990.00

$3,079,843.00 $3,117,153.00 $3,117,153.00 $3,116,698.00 $(3,882,847.00) $3,720,938.00 $3,870,178.00 $3,870,178.00 $3,870,178.00 $3,870,178.00 $3,870,178.00 $3,870,178.00 $3,870,178.00 $3,870,178.00 $3,870,178.00 $63,870,410.00

$2,732,484.80 $2,710,974.87 $2,657,441.35 $2,604,584.71 $(3,180,769.79) $2,987,944.94 $3,046,416.59 $2,986,259.12 $2,927,289.56 $2,869,484.48 $2,812,820.88 $2,757,276.20 $2,702,828.37 $2,649,455.71 $2,597,137.01 $51,805,223.56



H94


Calendar Year 2016 2017 2018 2019 2020 2021

Incremental Benefits of Goods Sold Benefits Incremental Benefits

Shipping $1,428,960.00 Shipping $- $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00

Labor and Other $1,076,160.00 Labor and Other $- $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00

Gross Incremental Benefits $2,505,120.00 Net Incremental Benefits $- $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00

Incremental Costs of Goods Sold (Taxed) $- Present Value of Net Incremental Benefits

$0.00 $2,455,651.49 $2,407,159.82 $2,359,625.73 $2,313,030.28 $2,267,354.96

Direct Materials $- Incremental Cost Of Goods Sold

Total $- Direct Materials $- $- $- $- $- $-

Incremental Operation Expenses Incremental Operation Expenses

Selling Expense $- Selling Expense $- $- $- $- $- $-

Fixed Expense $500,000.00 Fixed Expense $- $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00

Depreciation $- Depreciation $- $700,000.00 $1,260,000.00 $1,008,000.00 $806,400.00 $645,400.00

Total $500,000.00 Interest Expense $- $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00

Interest Expense $700,000.00 Balloon Payment $- $- $- $- $- $-

Gross Incremental Costs $1,200,000.00 Incremental Taxes

Net Incremental Cash Flow $1,305,120.00 35% $- $211,792.00 $15,792.00 $103,992.00 $174,552.00 $230,902.00

Net Incremental Costs $- $2,111,792.00 $2,475,792.00 $2,311,992.00 $2,180,952.00 $2,076,302.00

Inflation Rate 0.020144762 Present Value of Incremental Costs $0.00 $2,070,090.52 $2,378,978.67 $2,177,714.36 $2,013,719.11 $1,879,236.77


Present Value of Net Incremental Cash Flow $0.00 $385,560.97 $28,181.16 $181,911.36 $299,311.17 $388,118.18


20 Year Study: Incremental Present Worth Analysis (cont.)

H95

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Total

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

$1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $28,579,200.00

$1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $21,523,200.00

$2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $50,102,400.00

$2,222,581.58 $2,178,692.34 $2,135,669.78 $2,093,496.79 $2,052,156.58 $2,011,632.72 $1,971,909.08 $1,932,969.86 $1,894,799.58 $1,857,383.04 $1,820,705.36 $1,784,751.96 $1,749,508.53 $1,714,961.04 $1,681,095.77 $40,905,136.27

$- $- $- $- $- $- $- $- $- $- $- $- $- $- $- $-

$- $- $- $- $- $- $- $- $- $- $- $- $- $- $- $-

$500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $10,000,000.00

$515,900.00 $458,500.00 $458,500.00 $459,200.00 $458,500.00 $229,600.00 $- $- $- $- $- $- $- $- $- $7,000,000.00

$700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $- $- $- $- $- $- $- $- $- $- $7,000,000.00

$- $- $- $- $7,000,000.00 $- $- $- $- $- $- $- $- $- $7,000,000.00

$276,227.00 $296,317.00 $296,317.00 $296,072.00 $296,317.00 $621,432.00 $701,792.00 $701,792.00 $701,792.00 $701,792.00 $701,792.00 $701,792.00 $701,792.00 $701,792.00 $701,792.00 $9,135,840.00

$1,992,127.00 $1,954,817.00 $1,954,817.00 $1,955,272.00 $8,954,817.00 $1,351,032.00 $1,201,792.00 $1,201,792.00 $1,201,792.00 $1,201,792.00 $1,201,792.00 $1,201,792.00 $1,201,792.00 $1,201,792.00 $1,201,792.00 $40,135,840.00

$1,767,446.18 $1,700,096.13 $1,666,524.40 $1,633,995.84 $7,335,651.24 $1,084,890.22 $945,992.43 $927,311.95 $909,000.36 $891,050.36 $873,454.82 $856,206.74 $839,299.25 $822,725.64 $806,479.31 $33,579,864.29

$512,993.00 $550,303.00 $550,303.00 $549,848.00 $(6,449,697.00) $1,154,088.00 $1,303,328.00 $1,303,328.00 $1,303,328.00 $1,303,328.00 $1,303,328.00 $1,303,328.00 $1,303,328.00 $1,303,328.00 $1,303,328.00 $9,966,560.00

$455,135.40 $478,596.21 $469,145.39 $459,500.95 ($5,283,494.66) $926,742.50 $1,025,916.65 $1,005,657.91 $985,799.22 $966,332.68 $947,250.54 $928,545.22 $910,209.27 $892,235.40 $874,616.46 $7,325,271.98

Benefits – Costs $7,325,271.98

Profit/Costs 21.81%


20 Year Study: Incremental Comparison (cont.)

H96

$(12,000,000.00)

$(10,000,000.00)

$(8,000,000.00)

$(6,000,000.00)

$(4,000,000.00)

$(2,000,000.00)

$-

$2,000,000.00

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Incremental Analysis: Investing in New Infrastructure vs. Streamlining Distrbution

Investing in New Infrastructure vs. Do Nothing Streamlining Distribution vs. Do Nothing


Projected ROIH97

InvestinginNew

Infrastructure

Streamlining

Distribution

BenefitsPW 12,760,469.09$ 7,222,437.04$

CostsPW 10,750,143.38$ 6,626,783.55$

NetPW(Profit) 2,010,325.71$ 595,653.49$

ROI 18.70% 8.99%

3YearIncrementalAnalysis

InvestinginNew

Infrastructure

Streamlining

Distribution

BenefitsPW 72,270,443.38$ 40,905,136.27$

CostsPW 68,490,904.85$ 33,579,864.29$

NetPW(Profit) 3,779,538.54$ 7,325,271.98$

ROI 5.52% 21.81%

20YearIncrementalAnalysis


Projected ROI: Investing in New Infrastructure

H98

Year 0 1 2 3 4 5 6 7 8 9 10

Investing in New Infrastructure vs. Do Nothing

Benefits $- $4,338,599.94 $4,252,925.76 $4,168,943.39 $4,086,619.41 $4,005,921.09 $3,926,816.31 $3,849,273.61 $3,773,262.14 $3,698,751.67 $3,625,712.55

Costs $- $3,602,509.31 $3,613,690.65 $3,533,943.42 $3,456,236.67 $3,380,456.15 $3,306,666.79 $3,234,699.59 $3,164,562.32 $3,096,096.66 $3,029,367.21

Cumulative Benefits

$- $4,338,599.94 $8,591,525.70 $12,760,469.09 $16,847,088.50 $20,853,009.59 $24,779,825.89 $28,629,099.50 $32,402,361.64 $36,101,113.31 $39,726,825.86

Cumulative Costs

$- $3,602,509.31 $7,216,199.96 $10,750,143.38 $14,206,380.05 $17,586,836.20 $20,893,502.99 $24,128,202.58 $27,292,764.90 $30,388,861.56 $33,418,228.78

ROI 0% 20.43% 19.06% 18.70% 18.59% 18.57% 18.60% 18.65% 18.72% 18.80% 18.88%

11 12 13 14 15 16 17 18 19 20 Total

$3,554,115.74 $3,483,932.74 $3,415,135.65 $3,347,697.09 $3,281,590.23 $3,216,788.79 $3,153,266.98 $3,090,999.53 $3,029,961.67 $2,970,129.13 $72,270,443.38

$2,964,274.66 $2,900,776.24 $2,838,780.19 $2,778,298.13 $2,720,447.20 $2,666,726.63 $2,614,066.87 $2,562,446.99 $2,511,846.44 $10,515,012.72 $68,490,904.85

$43,280,941.60 $46,764,874.34 $50,180,009.98 $53,527,707.07 $56,809,297.30 $60,026,086.09 $63,179,353.06 $66,270,352.59 $69,300,314.26 $72,270,443.38 $806,639,298.69

$36,382,503.43 $39,283,279.67 $42,122,059.87 $44,900,358.00 $47,620,805.20 $50,287,531.83 $52,901,598.70 $55,464,045.69 $57,975,892.13 $68,490,904.85 $684,912,609.06

18.96% 19.05% 19.13% 19.21% 19.30% 19.37% 19.43% 19.48% 19.53% 5.52% 17.52%


Projected ROI: Streamlining Distribution

H99

Year 0 1 2 3 4 5 6 7 8 9 10

Investing in New Infrastructure vs. Do Nothing

Benefits $0.00 $2,455,651.49 $2,407,159.82 $2,359,625.73 $2,313,030.28 $2,267,354.96 $2,222,581.58 $2,178,692.34 $2,135,669.78 $2,093,496.79 $2,052,156.58

Costs $0.00 $2,070,090.52 $2,378,978.67 $2,177,714.36 $2,013,719.11 $1,879,236.77 $1,767,446.18 $1,700,096.13 $1,666,524.40 $1,633,995.84 $7,335,651.24

Cumulative Benefits

$- $2,455,651.49 $4,862,811.31 $7,222,437.04 $9,535,467.32 $11,802,822.27 $14,025,403.85 $16,204,096.19 $18,339,765.97 $20,433,262.76 $22,485,419.34

Cumulative Costs

$- $2,070,090.52 $4,449,069.19 $6,626,783.55 $8,640,502.66 $10,519,739.43 $12,287,185.61 $13,987,281.74 $15,653,806.14 $17,287,801.98 $24,623,453.22

ROI 0% 18.63% 9.30% 8.99% 10.36% 12.20% 14.15% 15.85% 17.16% 18.19% -8.68%

11 12 13 14 15 16 17 18 19 20 Total

$2,011,632.72 $1,971,909.08 $1,932,969.86 $1,894,799.58 $1,857,383.04 $1,820,705.36 $1,784,751.96 $1,749,508.53 $1,714,961.04 $1,681,095.77 $40,905,136.27

$1,084,890.22 $945,992.43 $927,311.95 $909,000.36 $891,050.36 $873,454.82 $856,206.74 $839,299.25 $822,725.64 $806,479.31 $33,579,864.29

$24,497,052.06 $26,468,961.14 $28,401,931.00 $30,296,730.58 $32,154,113.61 $33,974,818.98 $35,759,570.93 $37,509,079.46 $39,224,040.50 $40,905,136.27 $456,558,572.06

$25,708,343.43 $26,654,335.86 $27,581,647.81 $28,490,648.17 $29,381,698.53 $30,255,153.35 $31,111,360.09 $31,950,659.34 $32,773,384.99 $33,579,864.29 $413,632,809.89

-4.71% -0.70% 2.97% 6.34% 9.44% 12.29% 14.94% 17.40% 19.68% 21.81% 10.27%


Projected ROI Sensitivity Analysis: Investing in New Infrastructure

H100

Loan Interest

ROI

11% 5.52%

12% 3.59%

13% 1.73%

14% -0.06%

15% -1.79%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

11% 12% 13% 14% 15%

RO

I

Loan Interest Rate

Loan Interest Sensitivity Analysis


Projected ROI Sensitivity Analysis: Investing in New Infrastructure (cont.)

H101

Revenue Increase (in millions)

ROI

$4.00 -1.12%

$4.20 2.05%

$4.43 5.52%

$4.60 8.10%

$4.80 10.97%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

$4.00 $4.20 $4.43 $4.60 $4.80

RO

I

Revenue Increase (in Millions of Dollars)

Revenue Increase Sensitivity Analysis


Projected ROI Sensitivity Analysis: Streamlining Distribution

H102

Shipping Increase Labor Increase ROI

13% 13% 7.6%

14% 14% 12.6%

15% 15% 17.3%

16% 16% 21.8%

17% 17% 26.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

13% 14% 15% 16% 17%

RO

I

Percent Shipping/Labor Savings

ROI Sensitivity Analysis


13% 13% 7.6%

13% 14% 9.8%

13% 15% 11.9%

13% 16% 14.0%

13% 17% 16.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

13% 14% 15% 16% 17%

RO

I

Percent Labor Savings

13% Shipping Savings


14% 13% 10.5%

14% 14% 12.6%

14% 15% 14.7%

14% 16% 16.7%

14% 17% 18.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

13% 14% 15% 16% 17%

RO

I




Projected ROI Sensitivity Analysis: Streamlining Distribution (cont.)

H103


15% 13% 13.3%

15% 14% 15.3%

15% 15% 17.3%

15% 16% 19.3%

15% 17% 21.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

13% 14% 15% 16% 17%

RO

I




16% 13% 16.0%

16% 14% 18.0%

16% 15% 19.9%

16% 16% 21.8%

16% 17% 23.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

13% 14% 15% 16% 17%

RO

I




17% 13% 18.6%

17% 14% 20.5%

17% 15% 22.4%

17% 16% 24.3%

17% 17% 26.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

13% 14% 15% 16% 17%

RO

I




Projected ROI Sensitivity Analysis: Streamlining Distribution (cont.) – 2 Systems

H104


Calendar Year 2016 2017 2018 2019 2020 2021


Shipping $1,428,960.00 Shipping $- $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00

Labor and Other $1,076,160.00 Labor and Other $- $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00

Gross Incremental Benefits $2,505,120.00 Net Incremental Benefits $- $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00

Incremental Costs of Goods Sold (Taxed) $- Present Value of Net Incremental Benefits $0.00 $2,455,651.49 $2,407,159.82 $2,359,625.73 $2,313,030.28 $2,267,354.96


Total $- Direct Materials $- $- $- $- $- $-


Selling Expense $- Selling Expense $- $- $- $- $- $-

Fixed Expense $500,000.00 Fixed Expense $- $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00

Depreciation $- Depreciation $- $700,000.00 $1,260,000.00 $1,008,000.00 $806,400.00 $645,400.00

Total $500,000.00 Interest Expense $- $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00

Interest Expense $700,000.00 Balloon Payment $- $- $- $- $- $-


Net Incremental Cash Flow $1,305,120.00 35% $- $211,792.00 $15,792.00 $103,992.00 $174,552.00 $230,902.00

Net Incremental Costs $- $2,111,792.00 $2,475,792.00 $2,311,992.00 $2,180,952.00 $2,076,302.00

Inflation Rate 0.020144762 Present Value of Incremental Costs $0.00 $2,070,090.52 $2,378,978.67 $2,177,714.36 $2,013,719.11 $1,879,236.77


Present Value of Net Incremental Cash Flow

$0.00 $385,560.97 $28,181.16 $181,911.36 $299,311.17 $388,118.18


H105

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Total

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

$1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $1,428,960.00 $28,579,200.00

$1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $1,076,160.00 $21,523,200.00

$2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $2,505,120.00 $50,102,400.00

$2,222,581.58 $2,178,692.34 $2,135,669.78 $2,093,496.79 $2,052,156.58 $2,011,632.72 $1,971,909.08 $1,932,969.86 $1,894,799.58 $1,857,383.04 $1,820,705.36 $1,784,751.96 $1,749,508.53 $1,714,961.04 $1,681,095.77 $40,905,136.27

$- $- $- $- $- $- $- $- $- $- $- $- $- $- $- $-

$- $- $- $- $- $- $- $- $- $- $- $- $- $- $- $-

$500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $500,000.00 $10,000,000.00

$515,900.00 $458,500.00 $458,500.00 $459,200.00 $458,500.00 $229,600.00 $- $700,000.00 $1,260,000.00 $1,008,000.00 $806,400.00 $645,400.00 $515,900.00 $458,500.00 $458,500.00 $12,852,700.00

$700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $700,000.00 $- $13,300,000.00

$- $- $- $- $7,000,000.00 $- $- $- $- $- $- $- $- $- $7,000,000.00 $14,000,000.00

$276,227.00 $296,317.00 $296,317.00 $296,072.00 $296,317.00 $376,432.00 $456,792.00 $211,792.00 $15,792.00 $103,992.00 $174,552.00 $230,902.00 $276,227.00 $296,317.00 $541,317.00 $4,882,395.00

$1,992,127.00 $1,954,817.00 $1,954,817.00 $1,955,272.00 $8,954,817.00 $1,806,032.00 $1,656,792.00 $2,111,792.00 $2,475,792.00 $2,311,992.00 $2,180,952.00 $2,076,302.00 $1,992,127.00 $1,954,817.00 $8,499,817.00 $55,035,095.00

$1,767,446.18 $1,700,096.13 $1,666,524.40 $1,633,995.84 $7,335,651.24 $1,450,259.09 $1,304,146.38 $1,629,474.95 $1,872,616.73 $1,714,191.23 $1,585,102.11 $1,479,244.13 $1,391,247.99 $1,338,233.30 $5,703,920.93 $44,091,890.07

$512,993.00 $550,303.00 $550,303.00 $549,848.00 $(6,449,697.00) $699,088.00 $848,328.00 $393,328.00 $29,328.00 $193,128.00 $324,168.00 $428,818.00 $512,993.00 $550,303.00 $(5,994,697.00) $(4,932,695.00)

$455,135.40 $478,596.21 $469,145.39 $459,500.95 ($5,283,494.66) $561,373.62 $667,762.70 $303,494.91 $22,182.84 $143,191.81 $235,603.25 $305,507.83 $358,260.53 $376,727.74 ($4,022,825.16) ($3,186,753.80)

Benefits – Costs $(3,186,753.80)

Profit/Costs -7.23%

Projected ROI Sensitivity Analysis: Streamlining Distribution (cont.) – 2 Systems


3 Year Study: Investing in New Infrastructure Cash Flow Diagram

H106

$2,566,850.00

$3,317,769.00 $3,232,099.00 $3,241,004.00

0 1 2 3

Investing in New Infrastructure Net Cash Flow Diagram



H107

Business as Usual Cash Flow: Do NothingYear Number 0 1 2 3

TotalCalendar Year 2016 2017 2018 2019

Benefits Revenue $33,074,000.00 $33,074,000.00 $33,074,000.00 $33,074,000.00 $132,296,000.00


Costs of Goods Sold (Taxed) Shipping $8,931,000.00 $8,931,000.00 $8,931,000.00 $8,931,000.00 $35,724,000.00

Shipping $8,931,000.00 Direct Materials $5,963,000.00 $5,963,000.00 $5,963,000.00 $5,963,000.00 $23,852,000.00

Direct Materials $5,963,000.00 Labor and Other $6,726,000.00 $6,726,000.00 $6,726,000.00 $6,726,000.00 $26,904,000.00


Total $21,620,000.00 Selling Expense $2,232,000.00 $2,232,000.00 $2,232,000.00 $2,232,000.00 $8,928,000.00

Gross Profit $11,454,000.00 Fixed Expense $2,641,000.00 $2,641,000.00 $2,641,000.00 $2,641,000.00 $10,564,000.00

Operation Expenses Depreciation $1,794,000.00 $1,794,000.00 $1,794,000.00 $1,794,000.00 $7,176,000.00

Selling Expense $2,232,000.00 Interest Expense $838,000.00 $838,000.00 $838,000.00 $838,000.00 $3,352,000.00


Depreciation $1,794,000.00 35% $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $5,528,600.00

Total $6,667,000.00 Net Cash Flow $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $10,267,400.00

Earnings before Interest & Taxes $4,787,000.00 Present Worth $2,566,850.00 $2,516,162.51 $2,466,475.93 $2,417,770.52 $9,967,258.96



Taxes @ 35% $1,382,000.00

Net Income $2,567,000.00

Taxes 0.35


3 Year Study: Investing in New Infrastructure Present Worth Analysis

H108

Proposal 1: Investing in New Infrastructure Cash Flow: Investing in New InfrastructureYear Number 0 1 2 3











Selling Expense $2,232,000.00 Interest Expense $838,000.00 $2,158,000.00 $2,158,000.00 $2,158,000.00 $7,312,000.00

Fixed Expense $2,641,000.00 Balloon Payment $- $- $- $- $-


Total $6,667,000.00 35% $1,382,150.00 $1,786,491.00 $1,740,361.00 $1,745,156.00 $6,654,158.00

Earnings before Interest & Taxes $7,496,660.00 Net Cash Flow $2,566,850.00 $3,317,769.00 $3,232,099.00 $3,241,004.00 $12,357,722.00

Interest Expense $2,158,000.00 Present Worth $2,566,850.00 $3,252,253.13 $3,105,711.05 $3,052,770.49 $11,977,584.67


Taxes @ 35% $1,869,000.00

Net Income $3,469,660.00

Taxes 35.00%

Increase in Sales $4,426,000.00

Increase Shipping Cost $955,000.00

Increase Direct Materials Cost 6%

Increase Direct Labor & Other 6%




H109

Incremental Analysis Incremental Cash FlowYear Number 0 1 2 3


Incremental Benefits Incremental Benefits

Revenue $4,426,000.00 Revenue $- $4,426,000.00 $4,426,000.00 $4,426,000.00 $13,278,000.00

Incremental Costs of Goods Sold (Taxed) Net Incremental Benefits $- $4,426,000.00 $4,426,000.00 $4,426,000.00 $13,278,000.00

Shipping $955,000.00 Present Value of Net Incremental Benefits $0.00 $4,338,599.94 $4,252,925.76 $4,168,943.39 $12,760,469.09

Direct Materials $357,780.00 Incremental Cost Of Goods Sold

Labor and Other $403,560.00 Shipping $- $955,000.00 $955,000.00 $955,000.00 $2,865,000.00

Total $1,716,340.00 Direct Materials $- $357,780.00 $357,780.00 $357,780.00 $1,073,340.00

Incremental Operation Expenses Selling Expense $- Labor and Other $- $403,560.00 $403,560.00 $403,560.00 $1,210,680.00

Fixed Expense $- Incremental Operation Expenses

Depreciation $- Selling Expense $- $- $- $- $-

Total $- Fixed Expense $- $- $- $- $-

Interest Expense $1,320,000.00 Depreciation $- $234,400.00 $366,200.00 $352,500.00 $953,100.00

Total $1,320,000.00 Interest Expense $- $1,320,000.00 $1,320,000.00 $1,320,000.00 $3,960,000.00

Gross Incremental Costs $3,036,340.00 Balloon Payment $- $- $- $- $-

Net Incremental Cash Flow $1,389,660.00 Incremental Taxes

35% $- $404,341.00 $358,211.00 $363,006.00 $1,125,558.00

Inflation Rate 0.020144762 Net Incremental Costs $- $3,675,081.00 $3,760,751.00 $3,751,846.00 $11,187,678.00

Present Value of Incremental Costs $- $3,602,509.31 $3,613,690.65 $3,533,943.42 $10,750,143.38

Net Incremental Cash Flow $- $750,919.00 $665,249.00 $674,154.00 $2,090,322.00

Present Value of Net Incremental Cash Flow $- $736,090.63 $639,235.11 $634,999.97 $2,010,325.71

Benefits-Costs $2,010,325.71

Profit/Costs 18.70%


3 Year Study: Streamlining Distribution Cash Flow Diagram

H110

$2,566,850.00

$2,960,178.00

$2,596,178.00

$2,759,978.00

0 1 2 3

Streamlining Distribution Net Cash Flow Diagram



H111

Business as Usual Cash Flow: Do NothingYear Number 0 1 2 3











Selling Expense $2,232,000.00 Interest Expense $838,000.00 $838,000.00 $838,000.00 $838,000.00 $3,352,000.00


Depreciation $1,794,000.00 35% $1,382,150.00 $1,382,150.00 $1,382,150.00 $1,382,150.00 $5,528,600.00

Total $6,667,000.00 Net Cash Flow $2,566,850.00 $2,566,850.00 $2,566,850.00 $2,566,850.00 $10,267,400.00

Earnings before Interest & Taxes $4,787,000.00 Present Worth $2,566,850.00 $2,516,162.51 $2,466,475.93 $2,417,770.52 $9,967,258.96



Taxes @ 35% $1,382,000.00

Net Income $2,567,000.00

Taxes 0.35


3 Year Study: Streamlining Distribution Present Worth Analysis

H112

Proposal 2: Streamlining Distribution Cash Flow: Streamlining DistributionYear Number 0 1 2 3 4

Calendar Year 2016 2017 2018 2019










Selling Expense $2,232,000.00 Interest Expense $838,000.00 $1,538,000.00 $1,538,000.00 $1,538,000.00 $5,452,000.00

Fixed Expense $3,141,000.00 Balloon Payment $- $- $- $- $-


Total $7,167,000.00 35% $1,382,150.00 $1,593,942.00 $1,397,942.00 $1,486,142.00 $5,860,176.00

Earnings before Interest & Taxes $6,792,120.00 Net Cash Flow $2,566,850.00 $2,960,178.00 $2,596,178.00 $2,759,978.00 $10,883,184.00

Interest Expense $1,538,000.00 Present Worth $2,566,850.00 $2,901,723.47 $2,494,657.09 $2,599,681.89 $10,562,912.45


Taxes @ 35% $1,839,000.00

Net Income $3,415,120.00

Taxes 35.00%

Shipping Savings 16%

Direct Labor Savings 16%

Increase in Fixed Operational Expenses $500,000.00




H113

Incremental Analysis Incremental Cash FlowYear Number 0 1 2 3



Shipping $1,428,960.00 Shipping $- $1,428,960.00 $1,428,960.00 $1,428,960.00 $4,286,880.00

Labor and Other $1,076,160.00 Labor and Other $- $1,076,160.00 $1,076,160.00 $1,076,160.00 $3,228,480.00

Gross Incremental Benefits $2,505,120.00 Net Incremental Benefits $- $2,505,120.00 $2,505,120.00 $2,505,120.00 $7,515,360.00

Incremental Costs of Goods Sold (Taxed) $- Present Value of Net Incremental Benefits $0.00 $2,455,651.49 $2,407,159.82 $2,359,625.73 $7,222,437.04


Total $- Direct Materials $- $- $- $- $-


Selling Expense $- Selling Expense $- $- $- $- $-

Fixed Expense $500,000.00 Fixed Expense $- $500,000.00 $500,000.00 $500,000.00 $1,500,000.00

Depreciation $- Depreciation $- $700,000.00 $1,260,000.00 $1,008,000.00 $2,968,000.00

Total $500,000.00 Interest Expense $- $700,000.00 $700,000.00 $700,000.00 $2,100,000.00

Interest Expense $700,000.00 Balloon Payment $- $- $- $- $-


Net Incremental Cash Flow $1,305,120.00 35% $- $211,792.00 $15,792.00 $103,992.00 $331,576.00

Net Incremental Costs $- $2,111,792.00 $2,475,792.00 $2,311,992.00 $6,899,576.00

Inflation Rate 2.0145% Present Value of Incremental Costs $0.00 $2,070,090.52 $2,378,978.67 $2,177,714.36 $6,626,783.55

Net Incremental Cash Flow $- $393,328.00 $29,328.00 $193,128.00 $615,784.00

Present Value of Net Incremental Cash Flow $0.00 $385,560.97 $28,181.16 $181,911.36 $595,653.49

Benefits – Costs $595,653.49

Profit/Costs 8.99%


3 Year Study: Incremental ComparisonH114

Year 0 1 2 3

Investing in New Infrastructure vs. Do

Nothing$- $750,919.00 $665,249.00 $674,154.00

Streamlining Distribution vs. Do

Nothing$- $393,328.00 $29,328.00 $193,128.00


3 Year Study: Present Worth AnalysisH115

$11,977,584.67

$10,562,912.45 $9,967,258.96

$-

$2,000,000.00

$4,000,000.00

$6,000,000.00

$8,000,000.00

$10,000,000.00

$12,000,000.00

$14,000,000.00


StreamliningDistribution

Do NothingN

et In

co

me

PW

Proposal

3 Year Study: Present Worth

Proposal Present Worth

Investing in New Infrastructure $11,977,584.67

Streamlining Distribution $10,562,912.45

Do Nothing $9,967,258.96


3 Year Study: Incremental Comparison (cont.)

H116

$-

$100,000.00

$200,000.00

$300,000.00

$400,000.00

$500,000.00

$600,000.00

$700,000.00

$800,000.00

0 1 2 3

Incremental Analysis: Investing in New Infrastructure vs. Streamlining Distrbution

Investing in New Infrastructure vs. Do Nothing Streamlining Distribution vs. Do Nothing


3 Year Cash Flow DiagramH117

$-

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

$3,000,000.00

$3,500,000.00

0 1 2 3

3 Year Cash Flow Diagram

PW Proposal 1 PW Proposal 2 PW Business As Usual


3 Year Projected ROIH118

18.70%

8.99%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%


Streamlining Distribution

3 Year ROI Analysis


Pros and Cons (includes 3 year study)H119


Year 3 ROI: 18.70% Year 20 ROI: 5.50% Year 3 ROI: 8.99% Year 20 ROI: 21.80%

Expanding into new markets Serving current customers more efficiently








Image to Investors (includes 3 year study)H120











Which supply chain design option is better? (includes 3 year study)

H121











Vital Information (includes 3 year study)H122











Role of Market (includes 3 year study)H123











Key Performance Indicators (KPIs)

SalesOperating Expenses

InventoryCustomer

Satisfaction

H124


Sales & Operations Planning

• Alignment and synchronization

• Collaboration amongst all business units

• Monthly meeting amongst all departments to plan

• Regularly balancing supply and demand

H125

Relocation

Joliet Springfield Rockford

Potential LocationsH126

Relocation EvaluationsH127

Engineering

Carson Distribution Inc