Minutes of January 21, 2009 Open Meeting
387 E. College St. (Robynn’s NCGA office)
Present:  all board (Grimlund via speaker phone); GM Hartz; staff member T. Carbrey

Sarah called the meeting to order at 6:31 PM.

Approval of Minutes
Ramji moved and Robynn seconded that the board approve the minutes of the 12/17/08 open meeting.  Voting:  7-0 (passed).

Member Open Forum
No one wished to speak to the board, but Sarah reported that the board had received a letter from a staff member who wasn’t able to attend tonight’s meeting and is concerned about job security and wages in light of the economy, lower sales, and VB remodeling expenses. Matt agreed that his response to the staff member’s letter be printed in the minutes:

“I would say that all of your concerns are valid. I was writing a letter to all of our people this Friday explaining the coop’s current financial picture as we head into 2009, but let me try to answer your concerns here as best I can.
 
You are 100% right about investing in aesthetic improvements at a time when we are running with tight schedules. The recent lighting project was put out to bid last spring and engaged under contract in late summer when the coop’s sales growth was still quite strong. Lighting fixtures were already shipping to our general contractor and work beginning in the store prior to the economic picture getting so bad so fast. It was not until December that we realized overall negative sales growth. The air-door in the back room lowers utility expense by keeping cold air out in the winter and hot air out in the summer. Importantly, it also helps create a barrier to flies in the summer.
 
There was significant additional remodel work planned for 2009. This included more interior improvements, new windows and exterior building lighting. Jason and I decided that this project was getting indefinitely shelved a couple of months ago when we saw the economic picture dimming. We did not believe it right to pursue a project focused on aesthetics at a time when schedules are tight.
 
On the scheduling front of modeling 25% lower sales, Jason was being proactive only going through a worst-case “what if” exercise. We are nowhere near that, though January’s sales are declining at a somewhat faster rate than December. Actual hours scheduled are running about 6% below last year at the moment.
 
I still look back to 2001 with anger and bewilderment on how management took no proactive steps at all for an entire year despite enormous ongoing financial losses and ran the coop to near bankruptcy, threatening the coop’s very existence and all 200 jobs at the time. I simply can’t grasp it. My responsibility is to make sure that we never ever get anywhere near that again.
 
I appreciate that you recognize we are running tight schedules because of the poor economy. We certainly are not doing to maximize profitability, which at the moment is the lowest we have realized in years. Despite some people working less than 36 hours, no benefits status will be negatively affected. As soon as we can get people to full hours we will. Further, there is not going to be any cost increase for employee’s health insurance this coming year and everyone is still going to receive their regularly scheduled raises.
 
I am striving to run things in such a way so that every employee who wants to stay at the coop in 2009 can stay, no matter how bad the economy gets. I would be lying to you if I said I could guarantee that, but we are in good overall financial shape and I believe that we can achieve that goal. I absolutely agree with you on the welfare of our employees, and I hope that you know me well enough after all these years to believe my sincerity on this.
Matt”

The board complimented Matt on his reply, and Matt noted that he knows there indeed is worry among the staff about the points the letter addresses.

Reports
President
Sarah noted that the board had held one executive session, on Jan. 9, to discuss the possible acquisition of new administrative space.

GM
Matt expanded on some of the items in his e-mail note that was received by the board prior to the meeting:

Attached are the December financials and the mission monitoring report.
 
A few items:
 
The sprinkler project looks to come in at around $80,000 with an approved budget of $105,000. I will have a final cost number in February. The VB lighting/painting project is substantially complete. There are a few darker spots that need some touch-ups. The work is being performed under stipulated sum contract of $116,500 which the general contractor is adhering to. Expenditures to date for both projects combined stand at $85,805.

I am in New Orleans next week for NCGA member and board meeting.

RE: follow up on the Humane Society’s efforts regarding the Canadian seal hunt from December’s meeting: there were some mixed views, but in general the management team was supportive. I think it is almost a certainty that the coop will support the Humane Society’s efforts (likely by early February).

We have seen better months financially. I sent the following comments to the finance committee:
 
Revenue y-o-y declined 4.8% and was 10.3% lower than budget. Gross margin came in about right.
 
Positively, total labor expense declined 4.5% y-o-y and was 10.4% lower than budget.
 
G&A ran high from timing issues on some store supplies invoices and maintenance/repair. We ran marketing higher for the holiday month but in general are keeping marketing expenses reined in for this fiscal year.
 
We continue to work to bring staffing in line with sales volume, as well as running tight schedules. Moving into January we have 11 fewer employees than the same period last year (and about 15 fewer than our peak this past summer). Attrition is slow as few employees are leaving (which is a positive thing since product knowledge is valuable and training is expensive, but it pressures our labor expenses in the immediate term). We have now gone 107 days since our last hire. An IT assistant is the only position we plan to hire in the near future.
Matt

Discussion followed.  Ramji said he agreed with Matt that all non-essential capital expenditures should be delayed.  Matt reiterated that the remodeling work now being completed at VB (sprinkler system, lighting) was put out to bid last spring and started during the summer before the recession began. The remaining portion of the VB remodeling – planned earlier – is mainly aesthetic and on the store exterior; it can be delayed until the economy picks up.
Robynn said that excessive caution would mean that NPC will be doing nothing to get the economy rolling again – and NPC currently is in a position of strength.
Ramji said this is a well-studied problem in economics: “the commons” – i.e., the entity that departs from the common behavior is (usually) a casualty; he said he thinks a conservative position, preserving liquidity, is the prudent thing to do at this point.  
Jen said she doesn’t want the staff’s hours cut to fund unnecessary items and projects, and that protecting our staff should be a first priority.
Robynn said she doesn’t want Matt constrained by the board from doing what he thinks NPC can afford to do – and noted that staffing and capital improvements are two separate areas of the budget.
Caroline agreed with Ramji’s position of exercising caution and waiting to see what the next 6 months bring.
Matt said NPC is still pumping a lot of money into the local economy with its purchases of local products and its payroll.
Sarah, replying to Robynn’s point, said that the board is simply agreeing with Matt’s cautious position and not constraining him from going ahead with previously approved projects.
Ramji agreed.
Hank said he thinks Matt has taken the correct steps for fiscal prudence: controlling personnel expenses by means of attrition (not replacing staff who have left) and delaying projects that can wait.
He noted that running a business in a shrinking sales position is much harder than when sales are growing, and said that Matt is doing a fine job. Hank thinks the current recession may well last several years.
Matt said the staff is still working on the Canadian east coast seafood boycott question; the official position will be announced in early February via a press release as well as putting it on the web site. A new source of mussels is yet to be found.

The board looked at the financial report materials. Ramji asked whether the reduction in accounts payable could be reversed (using suppliers’ credit) to increase the cash in hand, noting that this figure (accounts payable) is out of line (low) in comparison with the comparative data from other co-ops.
Matt said the only vendor NPC shares with the other co-ops is UNFI – so NPC is working with a much different set of vendors.
Robynn said that paying small producers should be done promptly, and doing so helps the economy.
Hank said that holding cash doesn’t get us any (significant) money (the bank currently pays only 1% interest on NPC’s sweep account).
Ramji said he thinks it is financially prudent to manage for profit and conserve cash considering the economy. He emphasized the importance of cash management.
Matt said small vendors are indeed paid very promptly.
Ramji said he was not proposing to require a change in accounts payable by a specific percentage, just suggesting that conservative cash management be kept in mind.
Caroline said the lower accounts payable amount could be due in part to NPC’s progress in increasing the products it is getting from local small producers that are being paid promptly; she wants the trend toward local producers to continue. 
Matt and Robynn agreed.
Richard noted that he has a couple of low cost capital improvement project suggestions, but thinks the board should wait until March to see how things are going financially.
 Ramji asked about the change in margin on bulk products (39.3% now vs. 24% in the 4th qtr. of ’05 shown in the segment data). Matt replied that this is due to the change in the intervening time in UNFI contracts from ‘volume discount’ to ‘cost plus’ and the accompanying change in accounting methods; correcting for this, the margin is approximately constant.** (See additional note below.)
Sales month-to-date (December) were down 4.8%, but fiscal year- to-date they are up 1.7%. But personnel expense year-over-year has declined for the first time.

Finance
Hank said there was nothing to report.

Governance
Caroline said there was nothing to report.

Management Relations
Robynn said there was nothing to report.

Member Relations
Jen said there was nothing to report.

Planning
Richard said that possible new administrative space has been identified; more information will be available later.

Mission Statement Monitoring Report – Wages and Benefits for Calendar Year 2008
The board discussed and considered the report.  It was noted that 88% of staff are now full-time (NPC’s all time high and a very high figure in the grocery industry), and 95% of all eligible employees are now participating in the health insurance plan. Tenure of staff is also increasing. The total number of employees has declined (from 172 in Dec. ’07 to 161 in Dec. ’08); this is due to the staff attrition mentioned earlier: not replacing those who leave. The board concluded that the staff health insurance plan is a very good one – especially for single persons – but that family coverage is very expensive, a problem not confined to NPC’s plan.
In reply to a question by Ramji, Robynn said that NCGA cannot negotiate a health plan for all co-ops (getting the advantage of volume) because it would involve crossing state lines; a change in current law would be required, but efforts are being made to find a way.  The 401K enrollment has increased steadily and substantially since the board substituted the ‘opt out’ policy for the former ‘opt in’ one.

Strategic Planning
Sarah reported that she has contacted Craig Fleck and has told him about the $5000 budget amount. He is willing to plan and assist with gathering of member input and to come to a board planning retreat. CF can be in Iowa City for that meeting in either May or August.  The board discussed this at length.
Hank and Ramji thought August is late.
Sarah wondered if the board could be ready by April – meetings with members would need to be done in late March or early April. Sarah suggested four meetings (IC, CV, CR or Mt. Vernon, and staff). 
Caroline asked who would be recording what is said in the meetings. Videotaping them was suggested..
Jen and Sarah said that staff members and the member relations committee (with Jen, as chair) will coordinate arrangements and will take notes and conduct the meetings. The moderator of the meeting should be someone knowledgeable about NPC but without an agenda him/herself. The consensus became that the retreat with CF shall be in May, and the member meetings in April and March. 
Hank said two meetings should be enough (IC and CV), and Caroline and Richard agreed; staff can attend either or both.
In reply to board questions, Sarah said that the planning retreat will be done using: information from the ‘08 ballot survey; the market survey done 2 years ago; and the input from the spring member meetings.
Richard noted that choosing goals involves making trade-offs – so that information from members should be prompted by questions, the answers to which could indicate what trade-offs members prefer to make; the questions could help motivate members to attend the meetings.
Sarah said that those who answered the ballot questions will get invitations in the mail to attend the meetings – though all members will be welcome.
Richard said a broad sample of members should be sought.  He volunteered to be on the committee. Caroline said a committee should be set up, and after brief discussion the board set up the ad hoc, Strategic Planning Committee.  Sarah, Jen and Richard will be the board representatives on it; others (members) will be added later and their names will be reported to the board.

Robynn noted that if May proves to be too early for the meeting, CF can be asked to come at a later time; however, this would be more expensive, since at the May and August times he will be in Iowa City anyway to work with NCGA and NPC can ‘piggyback’ on NCGA’s agreement with CF.


Robynn moved and Hank seconded that the board president’s stipend be doubled in view of the work load.

Discussion ensued.  Caroline strongly disagreed, noting that all board members contribute from their own areas of expertise and do a lot of work.
Sarah said that this proposal was not on tonight’s agenda and that the board is required to give notice to members when considering raising its compensation (Board of Directors’ Policies (Point 10).

Robynn moved and Hank seconded that the motion be tabled until the next meeting. Voting:  7-0 (passed).

Ramji moved that the meeting be adjourned. Voting:  7-0 (passed).

The meeting was adjourned at 7:45 PM.



_______________________   ________________________
Sarah Walz, President               Caroline Dieterle, Secretary

**A clarification added after the meeting and further discussion: the volume discount (on bulk products) in earlier quarters was spread out among all products. After the change, the volume discount is accounted for in the cost of bulk products directly, leading to an artificial increase in margin for this item. There has been no substantive change in the overall discount.