Baking & Snack - February 2005 - 43

2005 Projected
Capital Improvement Budget

BY SHANE WHITAKER AND
MARJORIE TROXEL HELLMER
n important lesson you learn quickly when playing the game Monopoly
is, "You have got to spend money to
1.6%
0.8%
make money." If you make your way
2.3%
around a Monopoly board a couple of times
and don't purchase any property, you will have
collected money for passing "Go," but you
18.0%
have not set yourself up to make any money
in the long run. The same can be said about
capital expenditures in the business world.
19.5%
While capital spending is not a game,
No capital spending
Monopoly could teach companies what
Less than $500,000
they need to know to increase their busi$500,000 - $749,999
2.3%
ness. Baking and snack companies gener$750,000 - $999,999
ally have to invest in new equipment, build$1 Million to $9.9 Million
8.6%
ings or system improvements to increase
$10 Million to $19.9 Million
revenues. Capital expenditures are purchases
$20 Million to $29.9 Million
43.0%
that last more than a year, and they are capital$40 Million to $49.9 Million
ized on a balance sheet and depreciated annually.
$50 Million to $59.9 Million
$30 Million to $39.9 Million
After several years of less than stellar capital
spending in the baking and snack industries, following a downturn in the stock market and the
overall economy, suppliers to these industries are
looking for a breakout year. They are hoping for
money to ﬂow as food producers invest in new
equipment and expansions for a variety of reasons.
"It looks to me as if there will be some money
spent this year," said Darren Jackson, marketing
director at The Henry Group, Greenville, TX.
16.9%
"You can only go so long before you have to
do something. You have to repair plants and
make upgrades. We have seen a few lean
49.7%
years, and this might be the year bakers do a
21.1%
little bit of that spending."
Mike Steur, director of client development for the food industry at Hixson
Architects/Engineers., Cincinnati, OH, said
he also believes capital spending is "on the
21.7%
up tick." "It's moving in a positive direction,
New equipment
as a big picture commentary," he said.
New buildings (bricks & mortar)
31.7%
While these expert observers voiced opSystems improvements
timism, Baking & Snack's 12th annual capital
Maintenance & replacement parts
spending study of baking and snack executives, unUpgrade facilities
fortunately, did not reveal the same upbeat attitude. In
fact, it found that more companies have nothing budgeted
those with annual sales of less than $10 million. In fact,
for capital projects than at any time during the past ﬁve
more than one-third (33.8%) of companies this size indiyears. According to 2005 survey results, 18% of companies
cated that they had no money budgeted for capital expendiindicated they do not plan to spend any money on capital
tures in 2005, up 11.5 percentage points from last year. Only
projects compared with 12% in 2004. In 2003, only 3.2%
1.6% of midsize to large companies, those with revenues of
of respondents reported they would not spend any money
$10 million or more, reported they did not plan to spend
on capital improvements.
anything on capital improvements this year.
Most no-spend responses were from smaller companies,
Additionally, according to the 2005 study, one-third of

Allocation of 2005 Capital
Spending Budget

February 2005 / BAKING & SNACK / 45

Baking & Snack - February 2005

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