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Home My WebLink AboutCannon River Relocation ProposaFrank Boyles To: Subject: Chad LeMair; Jack Haugen; Jim Petersen; Joe Zieska; Mike Gundlach; Don Rye INCENTIVES REQUESTED BY MATT PRETTYMAN I have spent a fair amount of time on the telephone with the City Managers of Cannon Falls, Minnesota and El Dorado, Kansas. Both have experience in providing financial incentives to Mr. Prettyman. Neither of them had very much positive to say about their experience with him and his company. Neither would do business with him again. This information is consistent with information I received from a local banker. Don and I will be meeting with Prettyman and with Chadie Anderson on Friday. I will be telling them that the city is not in a position to provide incentives for the following reason: 1. Such action creates an undesirable precedence in that virtually any tenant could request assistance from the city and expect to receive it. 2. The building is already the recipient of financial assistance and we believe it to be most appropriate to assist those who are making a permanent investment though building ownership in the community. 3. The uncertainties created by the litigation which he is involved in and is at present unresolved. I fully expect him to run to you. There are good reasons for wanting to protect the taxpayer from this individual. But he has a persistent personality which will require that we have a consistent position on this matter. I am actually more concerned about Charlie Anderson. I hope my comment about the litigation will get him to ask Prettyman questions or perhaps follow up with me later. Please let me know if you have questions. Frank cannon river 6238 s, wo., Con,,o. Fo, 55009 wood products, ,nc 507-263-7027 Phone 507-263-?075 Fox To: Mr. Frank Boyles, City Manager May 20, 2002 The City of Prior Lake 16200 Eagle Creek Avenue SE Prior Lake, MN 55372-1714 Dear Frank, Thank-you for your prompt response to Cannon River's proposal regarding its' relocation plans to Prior Lake. I agree with you that a guarantee made by the City of Prior Lake on a Cannon River financial obligation is a difficult commitment for the city to make. I realize that this would be the case for most municipalities and respect your decision not to assist Cannon River in this manner. It does make better sense to approach my request in a more traditional acceptable manner. As I view it, there are a few different ways to conservatively accomplish our mutual objectives. I want to operate Cannon River in a more appropriate setting such as the Prior Lake community. You and the city on the other hand, need and deserve quality operations such as Cannon River to conduct their business in the Waterfront Passage Industrial Park. I believe that by working closely together on this project we can both accomplish this objective. What Cannon River is in need of the most is financial assistance. A move such as the one I am proposing has significant costs related to it. Cannon River does not expect the city to pay for these costs in their entirety. However, Cannon River could also use all the financial help the city has to offer. Cannon River's initial projections indicate that relocation expenses incurred as a result of moving to Prior Lake are approximately One Hundred Thousand Dollars ($100,000.00). These expenses pertain to such things as rigging, dismantling, transporting, and re-installing equipment. Moving costs for inventory are also included in this estimated number. In addition to the above mentioned moving costs, I feel that Cannon River will also need another One Hundred Fifty Thousand Dollars ($150,000.00). This additional money is needed for several reasons. The primary reason is to cover business disruption and related costs. A move to Prior Lake at this time of year will adversely affect our order base. In addition, new employee training costs and advertising expenses will be incurred as a result of relocating as well. In total, I estimate that Cannon River will need Two Hundred Fifty Thousand Dollars ($250,000.00) in order to justify this proposed move. So therefore, Cannon River is requesting that the City of Prior Lake provide us with this amount in the name of economic development. Cannon River will need a commitment in writing from the City of Prior Lake. Once we have this commitment, both parties can go about the business of making the transaction. Today Cannon River is sending Mr. Charlie Anderson a letter of intent regarding leasing his vacant facility in the industrial park. Cannon River's offer is contingent upon obtaining economic assistance from the City of Prior Lake. Both Mr. Anderson and myself have reason to sign an actual five (5) year lease by June 1st, 2002. With this in mind, we would both appreciate a prompt response from you, the Mayor, and the City Council. As an aside, I would like to make some comparisons and points regarding Cannon River's proposal to other options that I believe the city is considering. When comparing Cannon River's proposal to other options, I feel that it is important that the city keep long range plans and zoning ordinances in perspective. Cannon River's business operation is compatible with the purpose behind the industrial park's origin. Cannon River is a light manufacturing business. Cannon River's operation will create entirely new jobs. Initial plans call for twenty five (25) new jobs and realistically have the potential for as many as forty (40). Cannon River's operation does not require any rezoning within the park as well. I think that these are important factors for the city to be aware of. In addition, I would like to compare my proposal to the recent deal that was given to Norex. I feel that the parcel of land recently sold to Norex had a market value of at least Two Hundred Fifty Thousand Dollars ($250,000.00). I realize that there may be soil concerns on that parcel, however I do believe that this site can be built on. Cannon River's proposal creates new jobs whereas Norex's offer retains existing jobs. Time will tell as to both proposals whether or not one is better than the other. As a citizen of Prior Lake since 1983, I am in favor of both deals. I think that the city benefits from both of them and I feel that they both have a similar cost. I also would like to point out that a Prior Lake resident who has resided there for nearly twenty (20) years owns Cannon River. My wife Barbara, my three (3) children, and myself are actively involved in the community. It is safe to say that we have no plans to ever move from Prior Lake. Establishing our business in our hometown will more than likely increase our involvement within the community as we would have a vested interest in doing so. Frank, this is a sincere, well planned proposal. I apologize for the short timeframe in which you and the city have been given to reach a decision. This short timeframe has more to do with the availability of Mr. Anderson's building than anything else. The fact that I have identified the need for such a relocation plan as the one I have presented to the city is also a contributing factor. In summary, this is a mutually beneficial proposal for all three (3) parties. I can meet on short notice to discuss this further. In addition, please feel free to call me with your questions and concerns regarding this letter. I will be looking forward to your response. Cc~ Mayor Jack Haugen Mr. Don Rye Mr. Charlie Anderson Ms. Kathy Dubbels cannon river MANUFACTURING FACILITY 6238 318TM ST. WAY CANNON FALLS, MINNESOTA MANUFACTURING AREA GENERAL OFFICES INTRODUCTION Cannon River Wood Products, Incorporated was established on August 25, 2000. Cannon River Wood Products, ("Cannon River"), is actively engaged in the business of manufacturing and distributing wood products. Cannon River's main emphasis, or core business, is manufacturing all wood kitchen cabinets, bathroom vanities, and other cabinetry for the home. In addition to manufacturing cabinetry, Cannon River sells complimentary products associated to cabinets. Countertops, marble bathroom vanity tops, mouldings and items like these are also sold by Cannon River. Jobsite, or home delivery is also a service provided by Cannon River. Cannon River arranges installation for its' customers using only licensed, insured, and reputable contractors. Cannon River professionally designs and estimates jobs for its customer as well. Cannon River is presently located in Cannon Falls, Minnesota. In Cannon Falls, Cannon River owns and operates a two building manufacturing facility. Total square footage is approximately twenty thousand (20,000) square feet situated on approximately four (4) acres. Cannon River's asset base primarily consists of state of the art woodworking machinery, wood-prefinishing equipment, and its' manufacturing facility. Cannon River, the "company" is a small privately held Minnesota "C" corporation. Its' first year's core business cabinet manufacturing revenues were in excess of Six Hundred Thousand Dollars ($600,000.00). The company has experienced management and relationships with quality experienced outside professional service providers and raw material suppliers. In it's first year, the company endured a series of unusual events which significantly adversely affected its' financial performance. In April of 2001, the company lost a large promising ready-m-assemble furniture customer. This customer had an arrangement with the company to sell its' wood products over the Internet and in catalogs. This customer failed, as did many "dot-corn" retailers, at selling large volumes of merchandise over the Internet. In May, the company's manufacturing plant was hit by a tomado and sustained major damage. The company endured several various production setbacks as a result of the building and machinery repair. In July of 2001, the company lost its' only public street access as a resuR of an annexation project for municipal services. Street access was fully restored in November approximately twenty (20) weeks later. Our Country's September 11t~ disaster also contributed to "softer" than expected sales in historically good cabinet sales months in September, October, and November. The company also owned and operated semi-trucks and trailers with the authority to transport goods for other parties. This past year was a poor year for the trucking industry as it was also for the company. The company exited its' trucking venue in November. In addition to the above stated reasons for the company's lack-luster financial performance, it has been plagued with inability to hire quality, experienced help. Cannon Falls is too far of a commute for most of our interested applicants as most live in the Twin Cities south metro. The few very good employees we originally employed eventually took new jobs closer to their homes citing the long drive to and from work as their only drawback to working at Cannon River. The Cannon Falls community is rather small and is located in a rural area. The company has exhausted all efforts in trying to recruit and sustain an experienced woodworking staff. The company has also found it difficult and costly to effectively advertise its' products in the rural marketplace. The vast majority of our sales are coming from the south metro communities of Apple Valley, Farmington, Lakeville, Burnsville, Prior Lake, New Prague, New Market, and Jordan. These communities possess more cabinet sales potential than we are presently getting for one reason and that is that we are "too far" away for most of the customers residing in those areas. For these primary reasons Cannon River feels that is necessary to move its' state of the art wood manufacturing operation into one of these south metro communities. Being closer to the "action" would tremendously benefit the small company's future outlook. The company's straggle with recruiting employees and customers would be instantly cured by such a move as well. The Prior Lake community interests the company's management the most. Its' primary principal resides in Prior Lake and has since 1983. The company's management is confident that it has a great chance of becoming very successful in the City of Prior Lake quicker than in other neighboring cities. For the fact that the City of Prior Lake has adopted a new meaningful approach to Economic Development and already has in its' possession a vacant T.I.F. facility that serves the company's purpose. Cannon River is optimistic that an agreement to relocate in the city's Waterfront Passage Business Park can be reached. TABLE OF CONTENTS I. BUSINESS STRATEGY II. FINANCIAL OVERVIEW III. THE PRIOR LAKE FACILITY IV. EMPLOYMENT OPPORTUNITIES V. ECONOMIC DEVELOPMENT REQUEST VI. PRODUCT INFORMATION cannon river BUS1NESS STRATEGY BUSINESS STRATEGY Cannon River Wood Products has the ability to manufacture and distribute its' cabinet products to both the wholesaler and the end use customer. Cannon River's core business is manufacturing all wood prefinished cabinetry. Kitchen cabinets, bathroom vanities, home office and home entertainment centers are the primary product mix. Since the company manufactures its' products at the same location as they're sold, layers of additional expenses that traditionally are incurred by home centers and cabinet retailers are eliminated. This translates into a better value for the cabinet-buying consumer whether it is price or quality. Cannon River promotes selling direct and eliminating the "middleman markup". Cannon River's customers find this concept very attractive when comparing its' products to others. In addition to the company's core business, Cannon River also offers complimentary products to its' own, such as laminate, solid surface, and granite countertops as well as marble bathroom vanity tops and sinks. The company presently has the opportunity to expand these value added lines further. Premium grade interior and exterior doors, stair parts, ceramic tile, wainscot, solid wood paneling, hardwood mouldings and lumber are all compatible with cabinet sales. These product lines will all be integrated into Cannon River's product offering within the first year of operation in the south metro area. Services related to construction and remodeling like professional installation and delivery are also offered by the company. Designing and draRing cabinet plans are all provided by Cannon River at no charge to its' customers. The company's present customer base consists primarily of the actual homeowner. So far, the majority of its cabinet sales have been for remodeling projects and basement finishing. This customer base is very solid with a great deal of new business potential. The company is also starting to establish itself as a new construction cabinet provider. Presently, the company has a significant amount of new home construction orders scheduled in the south metro. New construction projects in New Market, New Prague, Prior Lake, Credit River, and Savage are where most of these cabinets are needed. Cannon River currently has a few wholesale customers. Known as "dealers", these outfits sell Cannon River products for a profit to their customers. The company's vision is to continue expanding its' core business sales to the homeowner and new home builder. Adding more complimentary product lines and promoting professional installation and delivery services are also within the company's growth vision. cannon river FINANCIAL OVERVIEW FINANCIAL OVERVIEW BASIC FINANCIAL OVERVIEW Cannon River Wood Products, Incorporated is a privately held Minnesota Corporation. Cannon River Wood Products ("Cannon River") fiscal year runs from September through August. Cannon River has four (4) primary debt obligations. A machinery loan at the Vermillion State Bank for approximately Three Hundred Fifty Thousand Dollars ($350,000.00). A Contract for Deed with the Cannon Falls Economic Development Corporation for the company's buildings and real estate in the amount of Four Hundred and Five Thousand Dollars ($405,000.00). A truck lease for the company's delivery truck with Syverson Leasing Company in the amount of Forty Thousand Dollars ($40,000.00). And a forklift lease, also with the Vermillion State Bank, for Twenty Three Thousand Dollars ($23,000.00). Cannon River has virtually no equity in the delivery track and forklift capital leases. Both pieces are relatively brand new and had very little down payment requirements. Cannon River, (the "company"), has substantial equity in its' manufacturing facility. Presently, the company's management feels confident that its' two building facility is worth a minimum of Six Hundred Thousand Dollars ($600,000.00) on a "quick sale" basis, and has the potential to be "split" and sold for a combined amount in excess of Seven Hundred Thousand Dollars ($700,000.00). The company's management estimates that the equity range for its' Cannon Falls facility is between One Hundred Fifty Thousand Dollars ($150,000.00) and Two Hundred Fifty Thousand Dollars ($250,000.00). In addition to real estate equity, the company has a significant investment in woodworking and wood prefinishing equipment. The company's present loan against these assets is well below fifty percent (50%) of what they cost. Equipment values range greatly as a result of many factors. Moving costs, should they be moved, significantly reduce their values. If left operational and in place, their value is significantly greater. Preliminary estimates indicate that this asset base is worth more than Five Hundred Thousand Dollars ($500,000.00) on the low end and well in excess of Seven Hundred Thousand Dollars ($700,000.00) on the high end. With this wide range of value in mind, company management estimates that the there is approximately One Hundred Fifty Thousand Dollars ($150,000.00) equity in its' machinery and equipment. In addition to the above-mentioned assets, the company presently has approximately Fifty Thousand Dollars ($50,000.00) in inventory. The company presently has a "zero" cash position with a bank balance of less than Five Thousand Dollars ($5,000.00). Factoring in minimal values when considering the company's equity position, company management feels that Three Hundred Fifty Thousand Dollars ($350,000.00) is a fair and conservative estimate. RELOCATION EXPENSES At the present time, the company's initial moving plan has identified the major expenses related to its' proposed move. Dismantling, rigging, transporting, and re- installing machinery and inventory in Prior Lake has expenses associated to this between Fifty and Seventy Thousand Dollars ($50,000.00 - $70,000.00). Building renovation, displays, and sign expenses have not been completely determined. However, the company's initial plans for this indicate that these will be in the Twenty Five Thousand Dollar ($25,000.00) range. Winding down the Cannon Falls operation while simultaneously ramping up the new Prior Lake operation is considered optimal by company management. While this generates revenue, it will also incur additional costs. Revenues as well as additional costs such as labor, utilities, etc., have been projected by the company in its' Financial Projections. FINANCIAL PROJECTIONS Attached is a preliminary cash flow analysis for the company. (See attached schedule. F-I). Several assumptions like lease expense, company management knowing that they may be different has factored in bank finance expense, and labor expense. Other expense categories were projected based on actual expenses incurred by the company thus far. Revenues have been projected based upon company management's ability to identify it's potential markets if conducting business in Prior Lake, or another neighboring south metro community. INCOME STATEMENT Attached is a schedule representing Cannon River's Income Statement since November 1st, 2000. (See attached schedule, F-2). BALANCE SHEET Attached is a schedule representing Cannon River's current Balance Sheet. (See attached schedule, F-3). Z ~88~8888888888888888885 8~8888~88888888888888888 888888888888888888888888 888888888888888888888888 L~ s~l~noa I,U Z U.I X 1,1.1 Z I,LI LU I..- LU 0 2: f- Z 0 0 0 o 0 0 0 0 0 0 0 ~ 0 0 o 0 0 0 0 o 0 cD o 0 c~ o 0 c~ o' o' o o o' o~ c~ o su'~rloa o -- BALANCE SHEET CURRENT ASSETS CASH ACCOUNTS RECEIVABLE INVENTORY TOTAL CURRENTASSETS ASSETS $ 5,000.00 $ 445.00 $ 63,643.30 $ 69,088.30 3/31102 FIXED ASSETS BUILDING BUILDING IMPROVEMENTS SHOP EQUIPMENT OFFICE EQUIPMENT ACC. DEPRECIATION TOTAL FIXED ASSETS $ 450,000.00 $ 16,165.00 $ 304,702.47 $ 10,761.47 $ (45,448.00) $ 736,180.94 TOTAL ASSETS CURRENT LIABILmES ACCOUNTS PAYABLE CUSTOMER DEPOSITS SALES TAX PAYABLE BUILDING LOAN MACHINERY LOAN(S) $ 805,269.24 LIABILITIES $ 48,607.24 $ 7,392.00 $ 270.00 $ 405,000.00 $ 344,000.00 TOTAL LIABILITIES $ 805,269.24 SCHEDULE F-3 SOURCE OF REVENUE MONTH #1 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $ 70,000.00 $ 16,600.00 $ 86,600.00 MONTH #2 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $ 97,000.00 $ 18,000.00 $115,000.00 MONTH #3 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $150,000.00 $ 32,000.00 $182,000.00 MONTH #4 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $152,500.00 $ 47,500.00 $200,000.00 MONTH #5 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $160,000.00 $ 61,200.00 $221200.00 MONTH #6 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $ 90,000.00 $ 31,500.00 $121,500.00 MONTH #7 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $155,000.00 $ 63,000.00 $218,000.00 MONTH #8 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $173,000.00 $ 81,800.00 $254,800.00 MONTH #9 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $173,000.00 $ 84,300.00 $257,300.00 MONTH #10 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $180,000.00 $103,500.00 $283,500.00 MONTH #11 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $180,000.00 $103,500.00 $283,500.00 MONTH #12 SALES - MANUFACTURED GOODS SALES - COMPLIMENTARY GOODS TOTAL PROJECTED REVENUES $190,000.00 $103,500.00 $293,500.00 SOURCE OF REVENUE DETAIL BY MONTH MONTH #1 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL $ 20,000.00 $ 45,000.00 $ 5,0O0.00 $ 70,000.00 COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE DELIVERY SUBTOTAL $ 6,000.00 $ 6,000.00 $ 3,000.00 $ 1,000.00 $ 600.00 $16,600.00 TOTAL REVENUES $ 86,600.00 MONTH #2 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE DELIVERY SUBTOTAL TOTAL REVENUES $ 25,000.00 $ 65,000.00 $ 7,ooo.oo $ 97,000.00 $ 7,000.00 $ 6,000.00 $ 3,000.00 $ 1,000.00 $ !,ooo.oo $18,000.00 $115,000.00 MONTH #3 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE DELIVERY SUBTOTAL TOTAL REVENUES $ 40,000.00 $100,000.00 $ 10,000.00 $150.000.00 $ 8,000.00 $ 15,000.00 $ 6,OOO.00 $ 1,500.00 $ 1,500.00 $ 32,000.00 $182,000.00 MONTH #4 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK DELIVERY SUBTOTAL $ 40,000.00 $100,000.00 $ 12,500.00 $152,500.00 $ 10,000.00 $ 15,000.00 $ 8,000.00 $ 2,50O.00 $ 5,000.00 $ 5,000.00 $...2,000.00 $ 47,500.00 TOTAL REVENUES $200,000.00 MONTH #5 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK DELIVERY SUBTOTAL TOTAL REVENUES MONTH #6 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK TOOL RENTAL DELIVERY SUBTOTAL $ 45,000.00 $100,000.00 $ 15,000.00 $160,000.00 $ 11,000.00 $ 15,000.00 $ 10,000.00 $ 3,000.00 $ 10,000.00 $ 10,000.00 $ 2,200.00 $ 61,200.00 $221,200.00 $ 20,000.00 $ 55,000.00 $ 15,000.00 $ 90,000.00 $ 7,000.00 $ 6,000.00 $ 5,000.00 $ 1,000.00 $ 5,000.00 $ 5,000.00 $ 1,000.00 $ 1,500.00 $ 31,500.00 TOTAL REVENUES $121,500.00 MONTH #7 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL $ 55,000.00 $ 85,000.00 $ 15,000.00 $155,000.00 COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK TOOL RENTAL DELIVERY SUBTOTAL $ 11,000.00 $ 15,000.00 $ 10,000.00 $ 3,000.00 $ 10,000.00 $ 10,000.00 $ 1,500.00 $ 2,500.00 $ 63,000.00 TOTAL REVENUES $218,000.00 MONTH #8 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CAB1NETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL $ 55,000.00 $100,000.00 $ 18,000.00 $173,000.00 COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK TOOL RENTAL INSTALLATION SERVICE DELIVERY SUBTOTAL $ 13,000.00 $ 15,000.00 $ 12,000.00 $ 3,5O0.00 $ 12,500.00 $ 15,000.00 $ 3,000.00 $ 5,000.00 $ 2,800.00 $ 81,800.00 TOTAL REVENUES $254,800.00 MONTH//9 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL $ 55,000.00 $100,000.00 $ 18,000.00 $173,000.00 C.O..MPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK TOOL RENTAL INSTALLATION SERVICE DELIVERY SUBTOTAL $ 13,000.00 $ 15,000.00 $ 12,000.00 $ 3,5OO.0O $ 12,500.00 $ 15,000.00 $ 3,000.00 $ 7,500.00 $ 2,800.00 $ 84,300.00 TOTAL REVENUES $257,300.00 MONTH #10 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL $ 60,000.00 $100,000.00 $ 20,000.00 $180,000.00 C.QMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK TOOL RENTAL INSTALLATION SERVICE DELIVERY SUBTOTAL $ 15,000.00 $ 20,00O.O0 $ 13,000.00 $ 4,000.00 $ 15,000.00 $ 20,000.00 $ 3,500.00 $ 10,000.00 $ 3,000.00 $103,500.00 TOTAL REVENUES $283,500.00 MONTH #11 MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL COMPLIMENTARY GOODS & SERVICES LAMYNATE COIfNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK TOOL RENTAL INSTALLATION SERVICE DELIVERY SUBTOTAL TOTAL REVENUES $ 60,000.00 $100,000.00 $ 20,000.00 $180,000.00 $ 15,000.00 $ 20,000.00 $ 13,000.00 $ 4,000.00 $ 15,000.00 $ 20,000.00 $ 3,500.00 $ 10,000.00 $, 3,000.00 $103,500.00 $283,500.00 MONTH #12 ..MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES CUSTOM KITCHEN CABINETS & BATH VANITIES OTHER MANUFACTURED WOOD PRODUCTS SUBTOTAL COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES SOLID SURFACE COUNTERTOP SALES MARBLE TOP SALES SPECIALTY HARDWARE HARDWOOD MOULDINGS MILLWORK TOOL RENTAL INSTALLATION SERVICE DELIVERY SUBTOTAL $ 65,000.00 $105,000.00 $ 20,000.00 $190,000.00 $ 15,000.00 $ 20,000.00 $ 13,000.00 $ 4,000.00 $ 15,000.00 $ 20,000.00 $ 3,500.00 $ 10,000.00 $ 3,000.00 $103,500.00 TOTAL REVENUES $293,500.00 REVENUE CATEGORY PROFIT ANALYSIS MANUFACTURED GOODS STOCK KITCHEN CABINETS & BATH VANITIES Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 65%. , ,cu,, STOM KITCHEN CABINETS & BATH VANITIES Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 60%. OTHER MANUFACTURED WOOD PRODUCTS Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 60%. COMPLIMENTARY GOODS & SERVICES LAMINATE COUNTERTOP SALES Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 25%. SOLID SURFACE COUNTERTOP SALES Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 10%. .MA. RBLE TOP SALES Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 25%. SPECIALTY HARDWARE Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 50%. DELIVERY SERVICE Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 10%. ,HARDWOOD MOULDING SALES Revenue and profit projections are based upon current operating conditions. Actual gross profit margins for this category average 33%. MILLWORK SALES Revenue and profit projections are based upon current operating conditions. Estimated gross profit margins for this category average 33%. TOOL RENTAL Revenue and profit projections are based upon current operating conditions. Estimated gross profit margins for this category average 50%. INSTALLATION SERVICE Revenue and profit projections are based upon current operating conditions. Estimated gross profit margins for this category average 10%. cannon river ECONOMIC DEVELOPMENT REQUEST :cannon river 6238 318,h $, Wc~y, Cc~nnorl Fol's, /Minnesotcl 55009 wood producl$ In¢ 507 263 7027 Phone 507 263-7075 Fax TO,* Mr. Don Rye, Community Development Director The City of Prior Lake 16200 Eagle Creek Ave. S.E. Prior Lake, MN 55372-1714 Re: Specific Proposal May 13, 2002 Dear Don, As you requested, Cannon River Wood Products has assembled a specific proposal for you and the City of Prior Lake to review regarding our previously discussed relocation project. Since our initial discussions regarding this opportunity began a month ago, I have been able to conduct research with respect to this proposal. New financial projections have been prepared as a result of my research. Now the financing element of the proposal is a much clearer picture. Therefore, Cannon River feels confident that this specific proposal requesting the City's assistance is a comprehensive one as a result of being well though out. Cannon River's desire to relocate in Prior Lake appears to be one of the company's best options to choose when considering future growth and prosperity. Although the move provides several challenges and requires effort from a few separate parties, I believe ultimately in the end everyone involved will benefit. In order to relocate, there are two key components to the project that need to be addressed and taken care of. One component is agreeing to lease terms with the building owner. I have had several discussions with the property manager. As a result, I have been presented with two lease proposals. Without going into detail, the last lease proposal still needs refinement. I would like to agree to terms on this building soon, however, I am unable to do so because of the fact that the other key component to this project is not yet secured. The other key component in this relocation process is financing. Financing is this project's primary key component. The company needs to be financed for this project and is in need of assistance in this area. Financing requirements have been formulated based upon the company's financial projections. In brief, Cannon River is seeking a term loan in the amount of Five Hundred Fifty Thousand Dollars ($550,000.00). In order_tot' the _company ~o 9b _t~i_'~ this lo~,_it_may be required l?y a lender that additional guarantees are made up above and beYond_t_he company and it's o__ffi~ce~rs. At this po!~,..it i~ ~st~mated that approximately Two Handred~___ / ~ThouSand dollars ($_20~000.00_) b~_..g_uar_an~teCd by anotller co=signer. Grant monies, economic development assistance funds etc., if included may reduce this number also. Whether it is providing or guaranteeing additional funds, the company needs the City's assistance in this area. Cannon River has assets to sell once the relocation to Prior Lake has taken place. The sale of these assets, primarily real estate based, will generate additional revenues. The sale of these assets has also been projected and do have a positive impact on the project's finances. The additional revenues realized by selling these assets are expected to put the company in a stable financial cash position. Once this stabilization has taken place, it is believed that a lender would agree to remove the City's guarantee. According to company projections, this guarantee period should not exceed twelve months. The projections do not factor in grant monies or other additional economic assistance. If grants and economic assistance become factors, the lending risk will be reduced. If this is indeed the case, it is expected that the guarantee period will be shorter and perhaps not even be necessary at all. In summary, Cannon River Wood Products is mquest'mg specifically that the City of Prior Lake assists it in obtaining adequate financing for the purpose of relocating to Prior Lake, creating jobs, and conducting it's manufacturing business there. Cannon River is also requesting that the City and it's Economic Development Authority group together and provide in writing a list to the company of whatever economic assistance there is available to it with respe~ to this relocation proposal. In addition to these two requests, the company also asks for the City's assistance by acting as a liaison on it's behalf with a local lender, the State and County, as well as any other agencies such as grant providers, jobs and training organizations, and utility providers. In other words, Cannon River needs the City's assistance in bringing all the necessary interested parties to the negotiation table. Don, I would like to get this project started immediately. Cannon River needs to relocate as soon as possible. Obviously there is a great deal of work to be done by both of us in a short time frame. I am willing and able to work with you in any manner so as to speed this process up. The facility more than likely won't be available much longer. In fairness to the property's manager, I need to give him an answer fairly soon. For this reason and others, we need to act quickly. Please let me know as soon as possible what the probability is of this project becoming a reality early this summer. I will assist you in any manner that you feel is necessary. Thank-you for expressing interest in this project. I am confident that this project is a winner for all of us. I look forward to a mutually beneficial relationship between Cannon River Wood Products and the City of Prior Lake. Cc' Mr. Frank Boyles Mayor Jack Haugen Ms. Kathy Dubbels cannon river THE PRIOR LAKE FACILITY PRIOR LAKE FACILITY 5500 COTTONWOOD LANE PRIOR LAKE, MINNESOTA LOADING DOCKS MANUFACTURING SPACE Lease Proposal Mathew Prettyman Five Year lease May 1, 2002 to April 30, 2007 17,700 sq. ft. ( 3,700 sq. ft. office / 14,000 sq. ft. warehouse ) 5-1-2002 $8.25 Office & $5.00 sq. ft Warehouse - $2.50 cam and taxes ( 3,700 sq. fi. office @ $ 30,525.00 yr./$2,547.00 mo. & 14,000 sq. fi. warehouse @ $70,000.00 yr./$5,834.00 mo. ) ( cam & taxes - 17,700 sq. ft. @ $2.50 sq. ft is $44.250.0o yr. / $3,688.00 mo. ) 5-1-2003 ., · $8.50 Office & $5.50 sq. ft Warehouse + cam and taxes 5-1-2004 .:.~ ~ . 5-1-2005 .. 5-1-2006 tO 5-30,07 $9.00 Office & $5.75 sq. ft Warehouse + cam and taxes $9.75 Office & $6.50 sq. ft Warehouse + cam and taxes $10.50 Office & $7.00 sq. ft Warehouse + cam and taxes First month (5-1-02) and last month (4-1-07) rent in advance. Additional 3,500 sq. ft. available April 30th 2003 cannon river EMPLOYMENT OPPORTUNITIES EMPLOYMENT OPPORTUNITIES Cannon River Wood Products anticipated relocation of its' wood manufacturing facility to a south metro community will adversely affect the company's present small workforce. Because of the anticipated move, company management recognizes that the new operation will most likely have to be completely re-staffed. The company offers a wide variety of positions in the wood products manufacturing sector. The relocated operation will need staff at virtually all levels of management. In addition, the company requires many various wood production functions be performed. Experienced machine operators, prefinishing technicians, cabinetmakers, track and forklift drivers are just a few of the positions that need to be filled. Entry-level woodworking as well as retail sales positions will also be available. In brief, the company's relocation plan to a south metro community will make it too far of a commute to work on a daily basis for the majority its' present small work force. Therefore, in the community where Cannon River relocates, true new job creation will take place. CNC MACHINE OPERATORS AUTOMATED HIGH-TECH WOODWORKING POSITIONS MATERIAL HANDLERS COMPUTERIZED PANEL SAW OPERATORS FINISH TECHNICIANS cannon river PRODUCT INFORMATION ' 6238 31~fl~ ~. cannon raver ,.~,,,.,,,,,?,,,,~.,.,x FACTORY OUTLET OPEN TO THE PUBLIC IN-STOCK ITEMS TV STANDS MAPLE VANITIES MAPLE CHESTS CUSTOM CHESTS