Page 82 - New Employee Onboarding

Date: January 29 , 2016
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To: Apple Supply Chain Co-op Audit & Finance Committee
Roy Raeburn, Chairman
Mark Schostak

From: Dustin Pittman

Subject: Final 2015 Cost Management Performance – Apple Co-op

The Apple Co-op Board approved a change to the 2015 Cost Management measurement to utilize a
modified Producer Price Index as the benchmark to compare against the Applebee’s Market Basket
performance. This approach replaced the Cost Impact Reporting methodology used in previous
years’ reviews to provide a perspective on the Co-op’s procurement performance in comparison to
industry. The enclosed work papers are meant to provide the Co-op’s Audit & Finance Committee
transparency into the methodology, calculation, and supporting detail in order to substantiate
published performance results. Enclosed please find the final 2015 audited Cost Management results
for the Apple Co-op, including:

 2015 Cost Management target calculation
 Cost Management methodology explanation
 2015 Market Basket performance compared to the Modified Producer Price Index
 2015 Market Basket category performance detail
 Actual store delivered costs 2014 vs. 2015 (backup detail to the Apple Market Basket)
 PPI sub-index performance detail for 2014 and 2015 (backup detail to the MPPI Index)

All inputs to the Cost Management calculation were audited against the approved methodology. The
audited performance by category was calculated based on static purchase volumes for year-over-
year comparability.

For calendar year 2015, the Apple Market Basket saw an unfavorable increase of 1.9%, while the
MPPI showed a favorable decrease in costs of 2.0%. This performance gap of -3.9% lagged the 2015
target of 2.25%.

We look forward to reviewing this information with you on the February 1 conference call.
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Enclosures

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