7.0. EDSR 01-10-2005 ITEM # 7.
City of
Elk -�-1
River
MEMORANDUM
TO: Economic Development Authority
CC: Lori Johnson, Finance Director
FROM: Heidi Steinmetz, Assistant Director of Economic Development
DATE: January 10, 2005
SUBJECT: Consider Micro Loan Extension — Minnesota Fabrication &
Machine, Inc.
Attachments
• Staff report to EDA Finance Committee dated January 4, 2005
• • Finance Committee Minutes,January 4, 2005
• Proposed amortization schedule
Background
In December 2001, the EDA awarded a $50,000, 3.75% Micro Loan to Minnesota Fabrication
&Machine, Inc. The loan was used for the purchase of equipment and the remodeling of the
former Industrial Hardfacing, Inc. building located on Twin Lakes Road. The loan was
structured as a participation loan with First National Bank of Elk River and payments have
been consistent.
Issue
The balloon payment on this loan in the amount of$ 41,732.03 was due December 31, 2004.
The company is eligible for a two-year extension at a market rate of interest,which is currently
about 6.5%. The EDA's security on the loan is first position for the mortgage on the
property. The bank is willing to continue servicing the loan if the EDA approves the two-year
extension.
Prior to the due date of the balloon payment, the company provided the processing fee and
necessary documents for the request,which are attached in the staff report to the Finance
Committee.
Finance Committee Recommendation
• The Finance Committee reviewed the extension request at its January 4, 2005 meeting. The
attached Finance Committee Minutes indicate that the consensus of the Finance Committee
Consider Loan Extension Request: MN Fabrication&Machine
January 10,2005,EDA Meeting
Page 2 of 2
• was to recommend that the EDA approve a two-year extension of the December 2001
$50,000 Micro Loan awarded to MN Fabrication&Machine, Inc. with the following terms:
• Interest rate of 6.5%
• Monthly payments of$400
Action Requested
Staff requests that the EDA consider approval of a two-year extension of the December 2001
$50,000 Micro Loan awarded to MN Fabrication&Machine, Inc. at an interest rate of 6.5%
and monthly payments of$400, effective January 1,2005. The proposed amortization
schedule is attached.
A company representative will be present at the EDA meeting to answer questions.
•
•
City of
Elk
River
MEMORANDUM
TO: EDA Finance Committee
CC: Lori Johnson, Finance Director
FROM: Heidi Steinmetz, Assistant Director of Economic Development
DATE: January 4, 2005
SUBJECT: Consider Loan Extension Request: Minnesota Fabrication &
Machine, Inc.
Attachments
• Letter from Kenneth Millslagle of Minnesota Fabrication&Machine, Inc. dated
• December 6, 2004
• Letter from Mary Paidosh of First National Bank of Elk River dated December 6,
2004
• Minnesota Fabrication&Machine, Inc. Financial Statements
o Balance Sheet
o Comparative Income Statement
Background
In December 2001, the EDA awarded a $50,000, 3.75% Micro Loan to Minnesota Fabrication
&Machine, Inc. The Micro Loan was used for the purchase of equipment and the
remodeling of the former Industrial Hardfacing, Inc. building located on Twin Lakes Road.
The loan was structured as a participation loan with First National Bank of Elk River.
Minnesota Fabrication&Machine was formed by the owners of Industrial Hardfacing.
Industrial Hardfacing had a long presence in Elk River rebuilding and manufacturing new
parts for mechanical pressing,grinding, extruding and expanding equipment of the rendering
and packing industries. In 2001, Industrial Hardfacing relocated and consolidated the Elk
River corporate office&much of their operations to its Lamoni, Iowa facility in order to be
closer to their major markets. Minnesota Fabrication&Machine was formed to allow
Industrial Hardfacing to retain a presence in Elk River. Minnesota Fabrication&Machine
continues to build components for Industrial Hardfacing and has developed contract
manufacturing for specialty customers. Those customers include Great River Energy,Barilla
• Pasta, and North America Pasta, among others. The company plans are to continue to
expand its external customer base,both among pasta markets and other markets.
Consider Loan Extension Request: MN Fabrication&Machine
January 4,2005,EDA Finance Committee Meeting
Page 2 of 2
• Issue
The balloon payment on this loan in the amount of$ 41,732.03 was due December 31, 2004.
The company is eligible for a two-year extension at a market rate of interest. Prior to the due
date,Ken Millslage,President, provided staff with the attached written request for the EDA's
consideration of a two-year extension. The company's lender also submitted the attached
letter regarding its inability to refinance the Micro Loan at this time. In addition, Mr.
Millslagle submitted the attached financial statements in order for the EDA Finance
Committee to review and provide recommendation to the EDA regarding the extension.
Tom Berry, CFO,will be present at the Finance Committee meeting to answer questions.
Following any questions and answers, Mr. Berry will be excused during the Finance
Committee's discussion and recommendation.
Recommendation
Staff recommends that the Finance Committee consider recommending that the EDA
approve the loan extension request to Minnesota Fabrication&Machine, Inc. The company
has made consistent Micro Loan payments and has remained current.
Next Step
The Finance Committee's recommendation will be brought to the EDA for final action at its
January 10, 2005 Regular Meeting at 5:30 p.m.
•
TA
FAB7R[CAT[ON
IV I E, [NC.
December 6,2004
Miss Heidi Steinmetz
Assistant Director of Economic Development
City of Elk River
13065 Orono Parkway
Elk River,MN 55330
Re: Minnesota Fabrication&Machine Micro Loan
Dear Miss Steinmetz:
As we discussed on Friday, December 3, Minnesota Fabrication&Machine requests a
two year extension of our EDA Micro Loan. We understand it would be at a market rate
of interest.
You mentioned that our letter of application should be accompanied by a copy of our
current financial statements,which we are enclosing, along with a$500 upfront
processing fee, which would be returned if the request is denied.
Mary Paidosh at First National Bank of Elk River will provide the requisite letter of
denial from a conventional lender,under separate cover.
We need these funds in order that we may have sufficient working capital to continue
operations, and to develop our growing markets in the pasta knife lines, and other areas.
Thank you for considering our application. Please feel free to call me with any questions.
Sincerely,
Minnesota Fabrication and Machine, Inc.
Kenneth L. Millslagle
18489 TWIN LAKES ROAD • ELK RIVER, MN 55330
.
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11
FIRST NATIONAL BANK of Elk River oNIN� F'TU0� 77(>;4J
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December 6, 2004
Ms. Heidi Steinmetz
Asst. Director of Economic Development
City of Elk River
13065 Orono Parkway
Elk River. MN. 55330
Dear Ms. Steirunetz,
io
Minnesota Fabrication and Machine, Inc. has asked First National Bank of Elk River to
refinance an existing City of Elk River EDA Micro loan which matures on 12-31-04. At
this time, the Bank is unable to offer such refinancing on behalf of the borrower.
Please contact me at 763-241-3601 if you should have any questions.
Sincerely,
FIRST NATIONAL BANK OF ELK RIVER
,. /
Mary C. idosh
Vice President
cc. Tom Berry
12/07/2004 M N ESOTA FAB & MCH NE I NC Page 1
3:57 FM ill VE I N OVE STATENEM
I NINE STATEMENT W TH LAST YEAR OCA PAR SCN
• FCR TI-E PER CIS END CCT 31, 2004
CESCRIFTI CN *** CURRE NT PERI OD *** *** YEAR TO - DATE ***
TH S YEAR % LAST YEAR % THS YEAR % LAST YEAR %
I H MV C£IENT P&L
SALES
PLL OT1-ER PARTS .00 .00 .00 .00 2000.00 .22 00 .00
LABOR&M SS SALES 2010.00 2.66 986.CO 1.40 30634.13 3.36 37331.58 3. 10
STCRJ PARTS (100.00) (. 13) .00 .00 18137.32 1.99 .00 CO
\EI LER PARTS ,CO .00 .00 .00 3552.00 39 .00 .00
SALES TO I H 47656.32 63. 11 60617.57 86.31 673476.83 73.92 772480.30 64.08
NENGELKCCH .00 .00 .00 .CO .00 .00 14987.00 1.24
A11AS STCN) 11775.80 15.59 5301.40 7.55 23352 45 256 228552 37 18.96
FOUR RANTS .00 .00 00 .00 20075.CO 2.20 22175.00 1.84
M N Na .CX) .00 .OO .00 .00 .CO 503.00 04
MK}1 NE SI-CFS .CO .0O 1186.00 1.69 10328.46 1. 13 1236.CO 10
PASTA .CO .00 ,CX) .00 13772 50 1.51 00 .00
PET FOC,PARTS 14208.25 18.82 2139.50 3.05 115910.76 12 72 128378:72 10.65
GFS SALES 75550.37 103.05 70230.47 100.00 911239.45 100.02 1205643.97 100.01
D SCCLNTS (35.03) (.05) .01 .00 (170. 17) (.02) (114.00) (.01)
NET SALES 75515.37 100.00 710230.48 100.00 911069.28 100.00 1205529.97 100.00
liCF FRCCLCT1 CN
M\TER ALS 22256.25 29.47 26910.00 38.32 65890.07 7.23 275827.08 22 88
U FECT LABOR 8632 04 11,43 12858.46 18.31 98527.67 10.81 175948.68 14.60
RANT OJER-EAD 35751.31 47.34 43289.44 61.64 442527.06 48.57 493233.51 40.91
SLECCINTRACTS 1364.53 1.81 3514.29 5.CO 119222.67 13.09 40962 76 3.40
I OI AL PRI1C11 CN 68004. 13 90.05 86572 19 123.27 726167.47 79.70 935972 03 81.79
FR3D GESS PFZFI T 7511.24 9.95 (16341.71) (23.27) 184901.81 20.30 219557.94 18 21
FIR FIN GIS 4017.33 5.32 (354.49) (.50) 38173.48 4.19 43950.83 3.65
G P. B/4 U SIR 3493.91 . 4.63 (15987.22) (22.76) 146728.33 16.11 175607.11 14.57
U STR B J11 CN EXFENEE
CCRT AWTG G P. LVL 3493.91 4.63 (15987.22) (22.76) 146728.33 16.11 175607.11 14.57
CPERATI Na D(FEI\SES
FLEET DVEN5ES
FFEI G-TT 21.48 .03 1024.08 1.46 2111.13 .23 2907.72 24
TOTAL FLEET 21.48 .03 1024.08 1.46 2111. 13 .23 2937.72 24
TOTAL U SIR B JT1 CN 21.48 .03 1024.OS 1.46 2111. 13 .23 2907.72 24
(181 CF GIES SOLD 72042.94 95.40 87241.78 124.22 766452 08 84.13 1032830.58 85.67
GROSS FRCFI T 3472.43 4.60 (17011.30) (24.22) 144617.20 15.87 172699.39 14.33
0
U'ALU TED
1
12/08/2004 M NN=SOFA FAB &MCH NE I NC Page 1
4:17 FM
• PALANyE S1-EET W TH O-f NL
PS CF CCT 31, 2004
PCCT CESCR FI1 CN aRTNIT LAST ***** CHANGE **-*
ND YEAR YEAR AM7.NF %
OJ ENT ASSETS
CX�SH (10281.01) (18278. 14) 7997. 13 56.25
ACOCLNTS RECEVA R F (NEI) 36015.17 15935.72 2C079.45 226.00
108 CIE FROM AFFI LI ATE I H 481813.08 514105.85 (62592.77) 88.50
TOTAL I NUENTCR{ 138486.00 133357.00 5129.00 103.85
ADJAN.ES, CEF(S TS,AND PREPA C8 (7412.46) 606.02 (8018.48) (1223. 14)
TOTAL C1f€NT ASSETS 638620.78 676026.45 (37405.67) 94.47
LCN3 TERM ASSETS
LAND .00 33916.CO (33916.03) .CO
DU LD NLS &EQ J P..NET CF CEFR 69197.08 91307.66 (22110.58) 75.78
TOTAL LONG TERM ASSETS 69197.08 12522 .66 (56026.58) 55.26
OFFER ASSETS 452.51 396. 12 56.39 114.24
CLE FF:M CWERS 550000.CO .00 550000.CO .CO
TOTAL ASSETS 1258270.37 801646.23 456624.14 156.96
• LI AD LI TI ES
CRNT LI AD U 11 ES
AOZCUVTS PAYAELE 135399. 13 78278.62 57120.51 172.97
NOTES PAYAaE CO 37000.00 (37000.CO) .CO
220 Q1TCt',ER CEFCSI TS 5450.00 .CO 5450.00 .CO
ACC .ED DTENSES/TAXES 38977.44 48535.90 (9558.46) 80.31
260 CJNf FCRTI CN CF LCNa I LH l 10X00.00 36335.CO (26335.00) 27.52
TOTAL CLFTENT LI AD LI 11 ES 18926.57 200149.52 (10322.95) 94.84
LC1\G TERM LI PD LI TI ES
NOTES AND hCRTCCC£S LESS O:J2 73864.28 462199.22 (388334.94)' 15.98
TOTAL LCNa TERM LI AB LI TI ES 73864.28 462199.22 (388334.94) 15.98
TOTAL LI PB LI 11 ES 263690.85 662348.74 (398657.89) 39.81
STCCKH:LCER S ECS 1 TY
351 NfM E:LI TY 202507.99 202507.99 CO 1(X).00
352 AID 11 CNaL PAI D I N CAR TAL 468593.60 .CX) 468593.60 CO
355 FETAI NED EARN NZ (63210.50) 71333. 16 (134543.66) (88.61)
O$3 NT YEAR 1 NCC7VE 386688.43 (134543.66) 521232.0 (287.41)
TOTAL STZI4CLCER S EQJ TY 934579.52 139297.49 - 855282.03 714.CO
TOTAL LI AD LI 11 ES AND EQJ TY 1258270.37 801646.23 456624. 14 156.96
411
UAW TED
12/07/2004 M N\FA FAS &M10-1 NE I NC Page 2
3:57 PM ODhPARA11 VE I Mak STATEMENT
I NILE STATEKENT W TH LAST YEAR OAR 3 N
FCR TI-E PER CC6 ENS ccr 31, 2004
•
CESJ: PTI CN *** CURRENT PERIOD *** *** YEAR • TO • DATE ***
TH S YEAR % LAST YEAR % TH S YEAR % LAST YEAR %
SELLI Na& M\RE 1 Na
SELLI f SALAR ES 2640.00 3.50 5490.00 7.82 34C20.00 3.73 59327.20 4.92
(Thu SSI C1\E 549.88 .73 644.31 .92 4903.25 54 7996. 15 66
FER CI EM 10.00 .01 CC) .00 60.0D 01 460.00 04
TRAVEL EXPENSES 1178.34 1.56 755.23 1.08 13091.57 1.44 11169.73 93
CEl'ER4L SELLI Na D(FE1\6ES 32.94 04 65.53 .09 328. 18 .04 993.33 .08
TOTAL SELLI Na&KAViKET1 N3 4411.16 5.84 6955.07 9.90 52403.00 5.75 79946.41 6.63
ACM N STRATI VE EXPENSES
ACM N PEF&. \EL EXPENSE 12044.45 15.95 11689.38 16.64 144277.57 15.84 128035.37 10.62
ACM N TRAVEL EXPENSE 5.65 .01 988.16 1.41 2400.52 .26 3284.58 .27
On-ER ACM N EXPENSES 13085.51 17.33 16277.87 23. 18 78652. 13 8.63 97552.53 8.09
TOTAL ACM N EXPE'SES 25135.61 33.29 28955.41 41.23 225330.22 24.73 228872.48 18.99
TOTAL FLEET, SELLI Na AND ADN
CPER411 Na EXP.: 29568.25 39. 16 36934.56 52.59 279844.35 30.72 311726.61 25.86
OST AC TG G P. S/E >ABDIE
CP. PR:FI T (LOSS) (26074.34) (34.53) (52921.78) (75.35) (133116.02) (14.61) (136119.50) (11.29)
itrASSETS 550000.00 728.33 .00 .CO 551793. 15 60.57 .00 .CX)
EXPENSE .OD .00 .00 00 (1048.70) (. 12) .OD .00
COST CF ASSETS :QLD (34746.45) (46.01) - .00 .00 (36539.60) (4.01) .CO .OD
Dl'A11 C1'6 00 .00 .00 .CO (30.00) .W (50.00) .00
NET FENT I N:CME 2171. 13 2.88 2171. 13 3.09 8684.52 .95 8684.52 .72
NCV CP I NX (EXP) 517424.68 685. 19 2171. 13 3.09 522859.37 57.39 8634.52 .72
NOV CECLCT. EXPENSE .CO .00 OD .00 (3054.92) (.34) (7058.68) (.59)
NET I N (LOBS) 491350.34 650.66 (50750.65) (72 26) 386688.43 42.44 (134543.66) (11. 16)
UWLCI TED
MEETING OF THE EDA FINANCE COMMITTEE
• HELD AT THE ELK RIVER CITY HALL
TUESDAY,JANUARY 4, 2005
Members Present: Cliff Lundberg,Tom McNair,Paul Motin,Dave Rymanowski,and Dan
Tveite (arrived at 4:50 p.m.)
Members Absent: Chris Carlson
Staff Present: Assistant Director of Economic Development Heidi Steinmetz
1. Consider Micro Loan Extension Request: MN Fabrication&Machine.Inc. (MF&M)
Ken Millslagle and Tom Berry of MF&M provided the Committee with a company update
and reasons for the extension request.
Tom McNair asked questions regarding future sales,if the company will continue to
manufacture machine parts,the ownership status of the current facility, and if the company
currently occupies the entire building. Mr.Milllslagle indicated that he expects sales to
increase by$200,000 in 2005,which is the amount the company lost in 2004, that most of
the machine parts manufactured by MF&M are being shipped overseas, that he,Don
Millslagle,and Steve Dittbenner purchased the building,that the building is currently fully
occupied by the company,and that the property includes two additional acres.
• Cliff Lundberg inquired of the EDA's security on the loan. Heidi Steinmetz indicated that
the EDA is in first position of the mortgage on the property. Mr.Lundberg mentioned that
new loan documents would need to be drafted since typically the EDA is in second position.
The Committee discussed whether the loan should be re-amortized at fifteen years or if the
current amortization schedule should remain. Ms. Steinmetz indicated that loan extensions
are typically re-amortized and the Committee agreed since the interest rate would be
increasing due to the Micro Loan Policy requirement that the interest rate for loan
extensions must increase to market rate.
MOVED BY CLIFF LUNDBERG AND SECONDED BY TOM MCNAIR,THE
FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDER A
TWO-YEAR EXTENTION OF THE DECEMBER 2001$50,000 MICRO LOAN
AWARDED TO MN FABRICATION& MACHINE, INC.WITH THE
FOLLOWING TERMS:
• INTEREST RATE OF 6.5%
• MONTHLY PAYMENTS OF $400
THE MOTION CARRIED 5-0.
2. Discuss Micro Loan Portfolio Report
Paul Motin asked about the"4440 Miscellaneous"line item in the amount of$50,000 listed
on the December 28,2004 Micro Loan Fund Revenue/Expenditure Report. Ms. Steinmetz
indicated that she believed it was the $50,000 Micro Loan awarded to Display Solutions in
Spring of 2004 but that she would confirm that and get back to the Committee viae-mail.
EDA Finance Committee Minutes Page 2
January 4,2005
• Tom McNair mentioned that in addition to the six loans listed in Ms. Steinmetz's staff
report,another$100,000 loan will be awarded to Badger Ventures,LLC (Gradient
Technology)in about a month.
Cliff Lundberg asked for the year-end Micro Loan summary. Ms. Steinmetz mentioned that
it was not available at the time the meeting packet was prepared but that the report would be
provided at the next meeting in addition to past meeting minutes.
3. Closing
The EDA Finance Committee meeting ended at 5:20 p.m.
Respectfully submitted by,e
i:d //tSf&,-r-•tine --
Heidi Steinmetz
Assistant Director of Economic Development
.
Monthly
. MF&M
50,000 Micro Loan
01-Jan-05
Loan Amount 41,732.03
Annual Interest 6.50%
Monthly Payment 400.00
Pay Beginning Interest Principal
Period Principal Paid Paid
Balance
1 41,732.03 226.05 173.95
2 41,558.08 225.11 174.89
3 41,383.19 224.16 175.84
4 41,207.35 223.21 176.79
5 41,030.56 222.25 177.75
6 40,852.81 221.29 178.71
7 40,674.10 220.32 179.68
8 40,494.42 219.34 180.66
9 40,313.76 218.37 181.63
10 40,132.13 217.38 182.62
11 39,949.51 216.39 183.61
12 39,765.90 215.40 184.60
13 39,581.30 214.40 185.60
14 39,395.70 213.39 186.61
• 15 39,209.09
39,021.47 212.38 187.62
16 211.37 188.63
17 38,832.84 210.34 189.66
18 38,643.18 209.32 190.68
19 38,452.50 208.28 191.72
20 38,260.78 207.25 192.75
21 38,068.03 206.20 193.80
22 37,874.23 205.15 194.85
23 37,679.38 204.10 195.90
24 37,483.48 203.04 196.96 Balloon Payment
•
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