CHUX » Topics » Commissary.

These excerpts taken from the CHUX 10-K filed Mar 12, 2008.
Commissary. During 2006, we hired Larry Taylor, who had previously worked in executive-level supply chain positions with Taco Bell Corporation, Carlson Companies Inc. and elsewhere, as our Chief Supply Chain Officer. Larry and his team were hired to identify cost saving opportunities, explore ways to improve the quality of our products, and benchmark all operations performed by our manufacturer and distributions operations located in Nashville, Tennessee; Bellingham, Massachusetts and Woburn, Massachusetts. As a result of benchmarking processes the following actions were taken to better position the Company to serve our guests:

 

At the end of the first quarter of 2007, we entered into agreements to outsource the poultry processing and salad dressing manufacturing activities that we performed at our Nashville commissary. We also decided to close our manufacturing operations in Woburn, Massachusetts, moving meat cutting to Nashville and outsourcing the other manufacturing performed there. On July 13, 2007, we completed the sale of our Nashville commissary facility and entered into an agreement with a third party to cut meat for us. We also entered into an agreement with Performance Food Group Co. to serve as the exclusive master distributor for the O’Charley’s and Stoney River concepts. Performance Food Group Co. purchased our remaining distribution inventories at cost and assumed the leases on our Nashville-based tractors and trailers. We have also outsourced the manufacture of the frozen dough used in our O’Charley’s signature yeast rolls. We continue to consider alternatives for our 79,000 square foot distribution facility in Bellingham, Massachusetts, which continues to serve our Ninety Nine restaurants. As a result of these transactions, we incurred charges of approximately $10.2 million for fiscal 2007, including non-cash charges for the impairment of the commissary real estate and facility and related manufacturing equipment of approximately $7.7 million and employee severance and retention costs, legal costs and transition costs of approximately $2.5 million. We expect that the restructuring of our supply chain will reduce our ongoing costs and expenses by a total of between $2.5 and $3.0 million per year, or between $0.08 and $0.10 cents per diluted share, with approximately half of this amount representing reductions in our cost of food and beverage, and half representing reductions in depreciation expense.

 

With the transition now complete, we believe that our supply chain management team led by Mr. Taylor will be better positioned to focus upon improving the quality and cost of our products. This team will now manage every aspect of our supply chain through specific initiatives dedicated in the areas of strategic sourcing, quality assurance, supply chain operations, and the operation of our remaining distribution center in Bellingham, Massachusetts.

 

Commissary. During 2006, we hired Larry Taylor, who had previously worked in executive-level supply chain positions with Taco Bell Corporation, Carlson Companies Inc. and elsewhere, as our Chief Supply Chain Officer. Larry and his team were hired to identify cost saving opportunities, explore ways to improve the quality of our products, and benchmark all operations performed by our manufacturer and distributions operations located in Nashville, Tennessee; Bellingham, Massachusetts and Woburn, Massachusetts. As a result of benchmarking processes the following actions were taken to better position the Company to serve our guests:



 



At the end of the first quarter of 2007, we entered into agreements to outsource the poultry processing and salad dressing manufacturing activities that we performed at our Nashville commissary. We also decided to close our manufacturing operations in Woburn, Massachusetts, moving meat cutting to Nashville and outsourcing the other manufacturing performed there. On July 13, 2007, we completed the sale of our Nashville commissary facility and entered into an agreement with a third party to cut meat for us. We also entered into an agreement with Performance Food Group Co. to serve as the exclusive master distributor for the O’Charley’s and Stoney River concepts. Performance Food Group Co. purchased our remaining distribution inventories at cost and assumed the leases on our Nashville-based tractors and trailers. We have also outsourced the manufacture of the frozen dough used
in our O’Charley’s signature yeast rolls. We continue to consider alternatives for our 79,000 square foot distribution facility in Bellingham, Massachusetts, which continues to serve our Ninety Nine restaurants. As a result of these transactions, we incurred charges of approximately $10.2 million for fiscal 2007, including non-cash charges for the impairment of the commissary real estate and facility and related manufacturing equipment of approximately $7.7 million and employee severance and retention costs, legal costs and transition costs of approximately $2.5 million. We expect that the restructuring of our supply chain will reduce our ongoing costs and expenses by a total of between $2.5 and $3.0 million per year, or between $0.08 and $0.10 cents per diluted share, with approximately half of this amount representing reductions in our cost of food and beverage, and half representing reductions in depreciation expense.



 



With the transition now complete, we believe that our supply chain management team led by Mr. Taylor will be better positioned to focus upon improving the quality and cost of our products. This team will now manage every aspect of our supply chain through specific initiatives dedicated in the areas of strategic sourcing, quality assurance, supply chain operations, and the operation of our remaining distribution center in Bellingham, Massachusetts.



 



EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 12, 2008
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