Page 304 - Onboarding May 2017

APPLE SUPPLY CHAIN CO-OP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014

NOTE 4 – MEMBER NOTES RECEIVABLE

During 2015, the Co-op’s Board of Directors authorized a Co-op Member Equipment Financing Program
relative to a system wide rollout of wood assist broiler equipment. The financing program provides that a
member of the Co-op may elect to finance the purchase of the specified equipment under the terms of an
Equipment Obligation Agreement. The Co-op funds each participating member’s equipment purchases.
The Co-op is repaid for the cost of the equipment plus interest at a rate of LIBOR plus 2.85%. The cost of
the financed equipment plus interest will be repaid to the Co-op via per case surcharge on all cases of
products purchased through a distributor. If a distributor cannot accommodate the surcharge, the
member must repay the Co-op via monthly Automated Clearing House payments. Under terms of the
Equipment Obligation Agreement, each member agrees to repay one half of its obligation to the Co-op by
December 31, 2016 with the remaining balance due December 31, 2017.

At December 31, 2015 notes receivable due from members under the financing program amounted to
$825,475. In accordance with the repayment terms $404,467 (net of loan loss reserve of $8,273) is
classified as current in the balance sheet. Interest income for the year ended December 31, 2015 was
$10,697.

NOTE 5 – LONG-TERM DEBT

On December 11, 2015 the Co-op entered into a $4,400,000 multiple advance term loan credit agreement
with its primary bank which expires on December 11, 2018. Advances under the credit agreement will
be used to fund the Co-op Member Equipment Financing Program mentioned in Note 4. Outstanding
borrowings under the credit agreement bear interest at LIBOR plus 2.85%, paid monthly. The principal of
each advance under the credit agreement shall be repaid monthly over a twenty-four month period. The
credit agreement contains restrictive financial covenants related to tangible net worth and debt service
coverage ratio. At December 31, 2015 the Co-op was in compliance with these loan covenants. The line
of credit is secured by substantially all assets of the Co-op and is partially guaranteed by the franchisor.

At December 31, 2015 outstanding borrowings amounted to $1,500,000. In accordance with the
repayment terms of the credit agreement, $750,000 was classified as current in the balance sheet.
Interest expense for the year ended December 31, 2015 was $1,988.

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