Army & Air Force Exchange Service

Army & Air Force Exchange Service Annual Report 2008

The AAFES Story: For 114 years, ‘serving the best customers in the world’ The AAFES Story

For 114 years, AAFES has provided Soldiers, Airmen, National Guard members, Reservists, Families and retirees throughout the world with exceptional services and brand-name goods at competitive prices.

The AAFES Story: Table of Contents

1 — Commander Maj. 10 — AAFES’ credit Gen. Keith Thurgood: cards, CD for the AAFES bouyed in troops, Gifts from the economic storm Homefront and more

2 — 2008: A Year of 11 — Our family of Many ‘Firsts’ restaurants continues 3 — We served troops to grow helping Hurricane Ike 12 — We reach out to relief effort the Guard, Reserves, 4 — AAFES by the and Soldiers in isolated numbers camps

5 — Chief Operating 13 — Diversity is a Officer Michael Howard: good business strategy ‘The best customers in the world’ are the 18 – A new way to reasons we exist 7-8 — We have ‘sustainability’ in serve shoppers: the bag Freedom Crossing 6 — Leverging technology: How we streamline and cut costs 9 — We’re change our thinking, not 20 – Audited financials our oil Commander’s Column The AAFES Story: strategic goals, right-sized inventories, profitable sales, supply-chain efficiency

AFES is clearly allocation, forecasting, merchandising, operating in pricing, purchasing, replenishment and challenging times in inventory management practices. which the national • Introducing 36 new items under economy’s dramatic the 593-product Exchange Select exclusive Adownturn devastated the retail brand to help budget-conscious shoppers landscape and resulted in decreased sales save 20 to 50 percent on goods comparable and sinking consumer confidence. in quality to national brands. • Increasing the percentage of Energy- In this annual report, however, you’ll Star appliances to nearly 35 percent of our read how our remarkable reputation, total stock of appliances and enacting other excellent credit rating, and deliberate We remain a financially sustainability measures (See Page 7). actions by our 43,000+ forward-thinking • Creating an integrated business stable, global multi-channel associates buoyed AAFES during this model—Operation Be Fit—to promote retailer serving 12.2 million economic storm. We accomplished these health and wellness solutions for customers goals by: active-duty, Reserve, and associates that will transform outcomes • Increasing total sales to nearly $10 and reduce healthcare costs. National Guard, Family billion—about three percent higher than the • Continuing to provide expeditionary members and retirees in 30+ previous year. and mission support capabilities to our • Achieving earnings of $376 million. countries, five U.S. territories troops at home and abroad. • Providing dividends of $264.5 As you can see, we remain a financially and 50 states. million to Morale, Welfare and Recreation stable, global multi-channel retailer that programs for the troops. serves 12.2 million active-duty, Reserve, • Delivering more than $150 million National Guard, Family members, and in supply-chain productivity. AAFES Factoid retirees in 30-plus countries, five U.S. • Expanding our award-winning territories and 50 states. In 2008, we Web site, www.aafes.com, to more than 18 AAFES is a military command operated more than 3,100 facilities; 1,765 million items. name-brand restaurants like Burger King, with a retail mission carried out • Managing a $1.2 billion, five- Starbucks, Subway and Taco Bell; and year program to build unique shopping more than 5,100 concessions. We continue by 43,000+ military and civilian destinations and address the Department of providing a “taste of home” to America’s associates and managers. A Defense’s military transformation initiatives. From 2005 to 2008, we completed 50 See “Commander’s Column,” Page 14 Board of Directors comprised projects valued at $442 million, and 10 of civilians and senior Army and projects at $173 million are now under construction. Air Force military leaders • Improving customer and associate satisfaction scores by 200 and 400 basis oversees operations. points respectively. • Receiving local and national accolades for our groundbreaking employee and supplier diversity, restaurant operations, and sales (See Pages 11 and 13). The • Completing implementation of AAFES Oracle Retail, the sophisticated technology Story that provides us with industry-best

2008: A year of The AAFES many ‘firsts’ Story Historic collaborations give customers even greater selections for every room of their homes

e give our valued sensibility,” Ana says. “The products are the shoppers plenty of most authentic expressions of the Martha The products are reasons to make us brand.” their “first choice,” inspired by Martha’s Power in the PowerZones whetherW they walk through the doors favorite things, mixing the of our worldwide brick-and-mortar Additionally, Ana’s team boosted the exchanges or visit our award-winning best of the past with number of Apple-authorized dealers from Web site, www.aafes.com. 25 stores to 69, resulting in sales of $31 innovative styling In 2008, AAFES, America’s 41st million, up from $16 million the previous year. and modern sensibility. largest retailer, scored several “firsts” in product deals for Soldiers, Airmen, National What’s more, 23 PowerZone Guard members, Reservists, Family electronics departments underwent strategic, members and military retirees, and they “consumer friendly” redesigning and have carried over to this year, “The rebranding, as well as product repositioning Year of the Customer.” to increase add-on sales. High-tech signs now entice shoppers to visit the “endless Bassett, Simply Perfect aisles” of electronic gadgetry on www. aafes.com. Collaborations with valued In 2008, AAFES became the vendors Sony, Samsung, Panasonic, JVC and first retailer that furniture giant Hewlett-Packard on interactive, informative Bassett allowed to use its name for and solutions-based displays created “WOW our private-label Simply Perfect factors” in the minds of customers. as part of a global strategy to The initiatives hiked sales by $3 provide greater value on furniture, million for the last three months of 2008. home décor, dinnerware and linens. Thanks to Vice President Softlines’ major wins Ana Middleton’s Hardlines team, Ana’s team also expanded our AAFES sales and marketing experts Simply Perfect sales hit nearly $29 entered into a historic partnership with million, 39 percent higher than in successful “electronic roadshows” to place Martha Stewart, above, to offer her 2007. name-brand electronics in smaller stores exclusive product lines throughout the In 2008, the Sales that don’t normally carry the breadth of world. Directorate’s Hardlines team assortments found in larger exchanges. entered into historic partnerships to Meanwhile, our Softlines division, offer Macy’s selection of Martha Stewart headed by Vice President Alicia Scott, products in 59 of our stores around the scored major wins in 2008, including more world. In just November and December, than $23 million in revenue from the sale sales of Martha Stewart Collection of Coach handbags and accessories and $16 bed and bath textiles, housewares, million in sales of Under Armour athletic dinnerware, glassware, cookware, home wear. décor and gifts hit $1.3 million. This year, Softlines rolled out nine “The products are inspired by Martha’s more Coach Concept shops, which will grow favorite things, mixing the best of the sales for the exclusive brand to more than

past with innovative styling and modern See “Coach, Macy’s links,” Page 15

Going where they go Associates leave safety of own homes to The serve troops in hurricane recovery efforts AAFES Story “We’re here and ready to assist in the from our San Antonio rebuilding process with a full assortment of exchanges served generators, chain saws and lots and lots of bug 7,000 National Guard spray. Whatever is needed, we’re going to do members helping everything we can to get the resources needed communities recover “All we want to do is make life to complete the difficult task of getting this from Ike’s wrath. community back on its feet.” To grasp the a little more —Theresa Palu, store manager, enormity of the mission, consider AAFES comfortable Camp Mabry Commander Maj. Gen. Keith Thurgood’s column from the Exchange Post, the for those company’s global internal print and online working to hroughout our 114-year magazine: history, our associates bring life back have voluntarily left their hen Hurricane Ike hit the to normal for Families and comforts Texas Gulf Coast, millions Tof home to deploy around the world Wof people were evacuated the residents here.” to serve America’s Fighting Heroes. to safer places further inland. A few We take seriously our motto, “We Go days later, many of them, especially in —John Burk, team leader Where You Go”—and that also means Galveston, returned to their homes, deploying into the face of forest fires only to find piles of rubble and and natural disasters. memories.

In September 2008, Hurricane Ike, To help the cities, the third most destructive hurricane to towns and people recover ever make landfall in the United States, and get back to normal, slammed into the Texas Gulf Coast, 7,500 National Guard bringing Houston—the country’s fifth members and other troops largest city—to a standstill and destroying deployed to the Houston much of Galveston Island. area. Associates from From one of our mobile field Texas exchanges jumped exchanges for at least two weeks, associates into action the day after the hurricane to set up and operate a 53-foot mobile field exchange at Ellington Field in Houston. Dedicated associates from our From Houston to Galveston Texas exchanges left the safety and comfort of their homes and families The trailer, stocked with merchandise to staff serve troops helping with Hurricane Ike relief efforts. from the Ellington exchange, opened to support local troops, members of the Air, Army and Texas National Guards, Marine and Navy Reserves, and the Coast Guard, Authorized shoppers looking for emergency products file in and out of the AAFES mobile field See “Hurricane Ike,” Page 16 exchange. 3 The AAFES Story by the Numbers

3,100+ — Number of retail outlets at Army and Air Force installations across the world in 50 U.S. states, more than 30 countries and five U.S. territories.

12.2 million — Number of active-duty troops, Reserves, National Guard members, retirees and Family members served by AAFES.

43,000+ — The number of AAFES associates around the world, including nearly 11,000 spouses and children of Soldiers and Airmen.

90 and 224 — The number of AAFES exchanges and restaurants in Iraq, Afghanistan and throughout the Middle East.

72— Number of AAFES phone centers in the Middle East and the Balkans for troops to call home. Service members in Afghanistan 2,065 — Number of restaurants operated by AAFES throughout the world.

430+ — Number of AAFES associates deployed to the $264.5 million — The dividend for 2008. Middle East and other places throughout the world. 20,926 and $1.6 million — Number and amount of 4,500+ — Number of AAFES associates who have phone cards bought in 2008 for the “Help our Troops deployed since the start of the war on terror. Call Home” program.

$2.4 billion+ — Estimated total dividends contributed 2,700 and $6.4 billion — The number of “vendor part- by AAFES to military Morale, Welfare and Recreation ners,” many with household names, and their annual programs during the past 10 years. sales with AAFES. 18 million — Number of items offered on AAFES’ Web site, www.aafes.com.

20 percent — The average savings a customer re- ceives at AAFES compared to the competition, not counting the no sales tax benefit!

4 million — The number of meals served to children each year by AAFES at 90 Department of Defense schools in nine countries on a break-even basis.

$1.2 billion — The total investment of new construction for AAFES shopping centers over the past five years around the world.

500+ — Number of items in the “Click to Brick” program, where shoppers who prefer the ease and comfort of Internet shopping can have their products delivered to nearby exchanges in the U.S. for pickup, Honoring our fighting heroes with a cookout at thus saving shipping costs. Camp Stryker, Iraq

4 AAFES to 12.2 million shoppers: ‘We have value for you!’ The ‘The best customers in the world’ is AAFES the reason we exist Story

n these perilous economic times visibility across all demographic segments when shoppers are looking in the military community to communicate Today, the typical to stretch their dollars and our value. For instance, our customers are customer is no longer the customers are coming back to “shareholders” who invest in AAFES by 20-year, career- the exchanges, we are seizing buying our products and services. In turn, oriented military member Ithe opportunity to say, “Welcome! We AAFES sends 60 percent of its profits as have value for you!” “dividends” to the troops for Morale, Welfare whose use of our and Recreation programs. services was a daily part of We have christened 2009 as the “Year We also differentiate ourselves from of the Customer” as our associates focus on military life. the pack by being the world’s only retailer providing the best service and best deals to serve our Warriors possible. fighting the Global War Many of them already are like Pam on Terror. Thompson, one of our jewelry buyers. Customers compliment her continuously for Outstanding work, how she cares for them, including a woman smiles who told us that thanks to Pam’s service, she Late last year, I purchased an expensive and beautiful ring returned from Kuwait, from AAFES and hasn’t taken it off since. Afghanistan and Qatar, Pam went above and beyond to ensure the where our volunteer ring got to the customer and was exactly associates, with smiles what she wanted—that is the foundation of on their faces, provided the “Year of the Customer.” products and services A different customer that vastly improved the quality of life for our When we think about these customers, fighting heroes. Truly, I Mat Dromey, our chief marketing officer, says couldn’t be more proud of them. that we face a very different shopper today Chief Operating Officer than several years ago. Today, the typical A global organization customer is no longer the 20-year, career- Being a global organization oriented military member whose use of our Earnings, 2006-2008 with a unique mission to “go where services was a daily part of military life. Our you go,” AAFES is positioned to challenge is to educate today’s customers live up to those words, whether the about who we are, what we do and how troops are fighting our enemies in the important AAFES is to their installations. Middle East, forest fires in the United We already are reaching out to them. States or building medical clinics in In a marketing tabloid aimed at the critical Peru. demographic, 18- to 24-year-old male “The best customers in the Soldiers and Airmen, Mat’s team promoted world” is the reason we exist. With our low prices and no-tax value on our wide determination and hard work from selection of electronics, such as Wii video- All audited figures in millions. our 43,000+ associates, our customers game systems. will continue to view AAFES as their In 2009, through our “Rediscover the “first choice” for exceptional service, low Value of AAFES” program, we will boost our prices and great merchandise. 5 Leveraging Technology Investing millions to get the right products The AAFES to the right people at the right places Story lthough we’ve served trainers” in 2008 began training all sales America’s fighting associates on how to use the technology. heroes for 114 years, As a result, we enhanced our ability Hunter Cole and our forward-looking to establish data-driven pricing strategies managersA and associates keenly and manage promotions and clearance John Englehart are anticipate future challenges and create pricing programs more efficiently. During directing the most solutions so we continue getting the the next two years, we will improve right products to the right places at the replenishment processes so that our Sales expensive tech project right times. Directorate can create critical seasonal and fashion allocation plans targeted for the in AAFES’ 114-year We have invested millions of dollars right stores with the right inventory levels in sophisticated technologies to streamline history. of top-selling products and sizes. our sales, logistics and procurement divisions so we can slash operating costs, A warehouse ‘symphony’ enhance productivity and get any kinks out of our supply chains. But Oracle Retail is just one piece For every dollar we save in this For every dollar we save in this of the tech strategy that will help us serve integrated network of suppliers, buyers, integrated network of suppliers, buyers, our valued customers well into the future. distribution centers and stores, our distribution centers and stores, our A $22 million warehouse management “dividends” climb proportionately for system, which is scheduled for 2009 at our “dividends” climb proportionately Morale, Welfare and Recreation programs Waco (Texas) Distribution Center, gives for Morale, Welfare and Recreation for America’s fighting heroes and their logistics experts access to their industry’s programs for America’s fighting heroes Families—one of the major reasons we’re best practices. Once the system from RedPrairie of and their Families—one of the major here in the first place. Waukesha, Wisc., hits the rest of AAFES’ reasons we’re here. Costliest project to date distribution centers around the world by mid-2011, we will gain greater inventory In February 2008, we completed the control over nearly 5 million square feet of costliest technology project—the $177 warehouse space and save more than $13 million Oracle Retail system to gain the million a year, said George Carpenter, the retail industry’s best allocation, forecasting, project’s director. merchandising, pricing, purchasing, “We can see it, ship it, process it replenishment and inventory management and put it away in the most efficient way practices. This technology could boost possible,” he says. “We’re in control over AAFES earnings by $84.6 million by 2012 what’s coming in the door and what are we through increased sales, improved profit going to do with it.” margins, reduced inventories and lower Like a conductor leading a symphony, operating costs. RedPrairie’s technology orchestrates all Toys “R” Us, Walgreens, Office movement of goods and people throughout A $22 million warehouse Depot, Nordstrom, Pier 1 Imports, Barnes the distribution centers by essentially management system is giving & Noble, Borders, Radio Shack, Wal- thinking of the best placement and routes AAFES logistics experts access Mart, and 15 of the top 16 food and drug for everyone and everything. The system to the industry’s best practices at retailers also use Oracle Retail. our distribution centers around the tracks our tractor-trailer trucks from the Under guidance from Vice President world. moment they arrive to the time they leave. Hunter Cole and Strategic Business Architect John Englehart, “retail master See “Leveraging,” next page

6 Sustainability We have environmental change ‘in the bag’ The Sustainability—forms of progress that meet the Our Energy Management Team, AAFES needs of the present without compromising the headed by Ann Scott, has launched many Story ability of future generations to meet their needs. initiatives during the past two years to reduce energy, water, waste and fossil fuels, - World Commission on Environment and Development while we construct earth-friendly buildings and buy and sell environmentally-friendly leaning up the environment goods and services that our customers desire. begins at home, and “home” for For example, in June 2008, we us are the military communities introduced throughout the world reusable C bags made of non-woven polypropylene where our valued customers live, serve and shop. mesh and capable of carrying up to 35 pounds. In 2008, shoppers bought more Shoppers bought more As we seek to make the “homes” we than 83,000 bags. than 83,000 share better places to live, we incorporated To help our customers throughout the sustainability as one of five AAFES corporate of our earth- world slash their utility bills, we sold both friendly bags strategies for winning the future and online and in our stores 63 different Energy in 2008. reducing our carbon footprint. Star products, including washing machines, With 3,100+ facilities around the refrigerators, DVD players and other items. world, our impact on the environment See “Sustainability,” next page cannot be overstated. AAFES Factoid

Leveraging technology: becoming the In 2008, thanks to Dallas best retailer we can be technology giant Texas Instruments, the film industry and AAFES, more Continued from previous page than 200 troops at Camp Arifjan in Kuwait became the world’s first We also will gain access to the top this about our efforts: group to screen Will Smith’s summer procurement processes through “Operation “AAFES has been around a long blockbuster movie, “Hancock,” in a Blowtorch,” which kicked off in March time, but the past few years have seen digital cinema projector format. 2008. Once completed by more than 100 the organization digest a massive amount The high-tech projector provided procurement and IT specialists, Blowtorch of change en route to becoming a more the Soldiers and Airmen with the will transform nearly every aspect of modern and efficient retailer. The changes highest quality image free of the AAFES business, even the plastic bags in are largely enabled by investments in normal wear that takes place with all of our stores. Oracle once again enters technology. However, the organization’s normal projectors. the picture, this time with its E-Business philosophy about how to manage its Suite, which Virgil DeArmond, our business also has evolved in a way director of corporate procurement, says that puts it on an equal footing with will adeptly address problems and give best-in-class retailers against whom it AAFES’ philosophy “about how customers greater control and visibility competes. As investments were made in to manage its business has over tracking their items. merchandising systems that centralized evolved in a way that puts it on At AAFES, we believe that product assortment decisions, it freed up an equal footing with leveraging technology drives results, store managers who are now better able to best-in-class retailers against creates sustainable business platforms and manage their stores.” allows the company to be the best retailer We couldn’t have said it better. whom it competes.” it can be. Retailing Today’s “2008 Annual —Retailing Today Top 150 Annual Industry Report” wrote

7 Sustainability: a major key The to winning the future AAFES Continued from previous page Story In 2008, nearly 35 percent of our appliances and air-conditioning systems; digital signs; were Energy-Star rated—and we’re aiming heat reduction and holding equipment; for 50 percent this year. more than 200 Energy Star reach-in Sales of energy-efficient CFL light refrigerators, dishwashers, steamers, fryers ‘Sustainability’ is bulbs in our exchanges shot up by 290 and ice machines; and walk-in coolers. percent in 2008, compared to the previous The expected savings from the not a corporate year. restaurant initiatives will only add to buzzword—it’s a Worldwide marketing tabloids our bottom line and enable us to devote promote sustainable products, such as hundreds of thousands of dollars more in responsibility. bamboo coffee filters and rugs made from dividends to Morale, Welfare and Recreation —Ann Scott, recycled plastic bottles. We spread the programs for service members. For example, sustainability ethic through board games flexible batch broilers in all of our Burger AAFES corporate like “EarthOpoly,” where players are the King restaurants are expected to yield more energy program manager Earth’s stewards. than $924,000 in savings by the end of 2010. Sustainability at the gas pumps Shoppers will even notice the “green When customers fill up their vehicles wave” washing over our award-winning at our gas stations, energy-efficient light- Web site, www.aafes.com, which we call emitting diodes (LEDs) illuminate “the largest BX/PX in the world.” In 2008, the pumps. Those small solid-state MilitaryRecycling.com, through the AAFES lamps are 75 percent more energy site, began paying shoppers for recycling efficient and will provide paybacks electronics, cell phones and computers. in about five years. And that’s something that excites At Fort Polk, La., for our merchandise manager at the time, Don instance, just changing to LEDs in Walker: “They just log on and get rewarded the canopies over the gas pumps for their stuff.” reduced the annual kilowatt hours Earth-friendly buildings from nearly 39,000 to 5,000 saving nearly $4,100. At Fort But we’re not stopping with our Hood, Texas, wattage dropped products and restaurant equipment. Our by 77 percent after “intelligent new “lifestyle centers” and other new lighting systems” were installed. facilities will be energy-efficient and built What’s more, thirsty or hungry according to the latest earth-friendly shoppers can slip coins into nearly 2,100 standards. Energy Star-compliant vending machines Ann’s team also uses a Web-based in the continental United States—and program they designed to track and compare we’re making more of our 17,107 machines utility costs in all AAFES buildings, which energy-efficient. helped us reduce utility costs by $5.9 Motorists are filling up at our many When our customers dine in more million in 2008, compared with 2007. gas stations illuminated by energy- than 2,000 of our brand-name restaurants, Our sustainability initiatives aren’t to efficient canopy lights, while CFL they probably won’t realize that their be taken lightly. At AAFES, like Ann says, light bulbs are hot sellers in our delicious meals are made with energy- ‘sustainability’ is not a corporate buzzword, stores throughout the world. efficient equipment. In 2008, we teamed up it’s a corporate responsibility that we take with brand partners Burger King, Subway very seriously so we can win the future. and Taco Bell to install on-demand heating

8 Changing our thinking, not our oil Something no bigger than two coffee cans slashes a truck’s oil changes from six to one a year The AAFES ur own Rose Marie Brady Most OPS clients pay for their investments Story knows every inch and within six months. North America’s largest what’s under the hoods independent fuel delivery carrier now runs of nearly 400 trucks that its trucks 120,000 miles between traverseO America’s highways delivering oil changes and slashed its our products to exchanges. As chief of maintenance costs by 60 percent, Fleet Operations, her quest in 2008 to or $480 a truck each year. keep the trucks running as smoothly More bio-diesel fuel as Swiss watches and cut maintenance costs hit the jackpot—and it took To Rose Marie, in this age something no bigger than two coffee of cost cutting, installing the cans. systems on AAFES’ trucks was a Starting in April 2008, Rose Marie’s no-brainer. “Like Oil Purification team in the Logistics Directorate installed Systems says, when it comes to Within two years, the majority of sophisticated oil purification systems on 294 vehicle maintenance, we are changing our our 400 trucks will roll down thinking, not our oil,” she says. of our nearly 400 trucks, and discovered the America’s highways for 150,000 devices dropped the number of required oil “The system has proven to save miles between oil changes. changes from six a year per truck to only money, which is critical in these economic one. Now, mechanics change the oil in the times. However, the effect on our 18-wheelers after 150,000 miles, rather than environment would be the most visible “We expect to save 17,640 15,000. accomplishment.” She and other AAFES logistics gallons of oil a year—70 Two-year payback experts also are using 15 percent more gallons per truck—and earth-friendly bio-diesel fuel in 2008 Although the systems cost $176,000 $882,000 in oil and than in the previous year; installing to install, we expect to save 17,640 gallons maintenance costs over auxiliary power units on trucks so of oil a year—70 gallons per truck—and drivers can operate TVs, coffee makers two years.” $882,000 in oil and maintenance costs and other devices while their rigs are over two years, which will recoup our —Rose Marie Brady, off; and using inflation devices that investment. Eventually, Rose Marie’s chief, fleet operations maintain proper tire pressure at all mechanics will install the devices on new times. trucks we buy to replace old ones. Oil Purification Systems of Shelton, Conn., developed the on-board refining technology to meet a growing demand among trucking, busing, construction, mining and other companies with large fleets to cut costs and create more environmentally-friendly operations. OPS-1 removes solid and liquid contaminants from engine oil, which allows users to reduce oil consumption dramatically, cut maintenance costs by 80 percent and extend equipment life, says Mark Genereaux, a company vice president. The company has installed more AAFES’ new environmentally friendly than 6,000 refining units since 2002. tractor-trailer truck 9 The AAFES Story’s Factoids ‘Venerable’ company provides savings, music, gift certificates, phone cards, brand- name electronics, low-interest credit cards to America’s Fighting Heroes and Families

• Helping Soldiers, Airmen, National Guard members, • Helping troops reach out and touch. Reservists, Family members and military AAFES is keeping deployed troops connected retirees stretch their bucks. An exhaustive with loved ones back home with the Military Market Basket Survey by an independent Exchange Global Prepaid Phone Cards. With research firm of more than 300 products, rates as low as 15 cents a minute, the phone including shampoo, diapers and makeup, cards provide the best value for troops calling shows that AAFES does indeed save from the Middle East to the United States. authorized shoppers more than 20 percent. Since 2004, when the Help our Troops The complete results are available at www. Call Home program aafes.com/docs/valuestory.htm. began, nearly 175,000 individual orders for • Providing music to the ears of troops. Recognizing that about 344,000 phone good music is integral to morale, we teamed up with 14 recording cards valued at nearly artists, including Grammy Award winners/nominees and multi- $8 million have been platinum sellers, to deliver a special gift to purchased. The phone troops during the 2008 holiday season—a cards enable troops to free CD produced exclusively for troops with call from any of the 60+ tunes by Trace Adkins, Five for Fighting, Josh phone centers in Iraq, Afghanistan or Kuwait. Groban, Isaac Hayes, Alan Jackson Jude, Roy Any American can send a Military Exchange phone card Orbison, Joe Perry, Three Doors Down and to deployed troops or their Families, through our “Help Our others. Troops Call Home” program. To do so, visit www.aafes.com This made the second “CD for the Troops” from Grammy- or call (800) 527-2345. nominated, platinum-selling singer/songwriter John Ondrasik of Five for Fighting. In 2007, the first CD reached more than • Two more big reasons to shop AAFES. Our new Military 500,000 service members, with 400,000 downloads off www.aafes. Star Rewards MasterCard began in 2008 rewarding shoppers for com alone. everyday purchases on and off military installations. They also can get three-cent • Gifts from the Homefront. In the five years since we launched discounts off a gallon of gas when they “Gifts from the Homefront,” people from throughout the country use the cards to pay at AAFES stations. have contributed more than $2 million toward gift The regular Military Star private- cards and certificates to lift the morale of troops. label card generated nearly $2 billion in Active-duty Soldiers, Airmen, Sailors, Marines revenue for AAFES and the other military National Guard members and Reservists around exchanges. The new card, besides creating the world have redeemed 67,245 gift cards and loyal customers, also provided us with a certificates for Military Exchange Global prepaid supplementary source of income of about phone cards; snacks and drinks; DVDs; and other products. $437,000 in 2008. To send gift cards of up to $500 under Gifts from the Homefront, visit www.aafes.com or call (800) 527-2345. • Sony partnership thrives. In recognition of AAFES exceeding $100 million in purchases from Sony, the • Major accolades. AAFES received major kudos from Retailing company’s leaders in Tokyo presented a plaque to Today’s “2008 Annual Top 150 Annual Industry AAFES Chief Operating Officer Michael Howard Report,” which picked the organization as one of to commemorate the 50-year relationship. Our 12 “most venerable” companies whose “influence PowerZones throughout the world feature many on retailing cannot be overstated.” The others products from Sony and other dealers. included Wal-Mart, Target, Sears, JC Penney and Kohl’s.

10 The AAFES story: a ‘taste of home’ Our Top 10 Name-Brand With Whoppers to Frappacino Mochas, troops can get Restaurants away from war and return home . . . if only in their minds 1. Burger King—210 oldiers, Airmen, National Our restaurant support in 2008 to 2. Subway—133 Guard members and Reservists troops fighting the Global War on Terror 3. Charley’s Grilled Subs—93 around the world turned to throughout the Middle East grew to 232 4. Baskin Robbins—93 the organization’s 2,000-plus locations, up from 197 in the previous 5. Taco Bell—69 Srestaurants to enjoy special “tastes of year—sometimes not far from where bullets 6. Green Bean Coffee, home” in the forms of Whoppers, sub were flying. Popeyes—64 each sandwiches, bagels, pizza, fried chicken, At AAFES, we take very seriously our 7. Pizza Hut—51 and boatloads of Frappacino Mochas. mission of providing troops unique tastes of 8. Cinnabon—41 home, because as long as it takes them to From Baghdad’s battlefields to North 9. Starbucks—33 eat a burger or pizza, they can return home, Dakota’s frozen tundra to the lush island of 10. Manchu Wok—23 if only in their minds. Like Roy Robertson, Okinawa, customers bought nearly $825 vice president over our food service division, million worth of food and drinks in 2008 puts it, “We make sure the Whoppers in at our nearly 1,100 brand-name and 538 Baghdad taste the same as the Whoppers in signature-brand restaurants—a 9 percent their hometowns.” “We make sure increase from the previous year. But we also give them plenty of other We also operated 131 movie theaters, the Whoppers in opportunities to unwind. In an exclusive six plants in Europe that made baked goods Baghdad taste deal with AAFES, GameStop, the world’s and bottled water, and 92 lunch programs at the same as the largest video-game retailer, opened 22 Department of Defense schools. stores, which are expected to generate at Whoppers in their Opening new restaurants least $3.6 million in earnings annually. hometowns.” More GameStops are on the way for 2009. To meet customer demand during Patrick McGhee, our general manager 2008, we opened 86 eateries—Burger King, —Roy Robertson, at Fort Lewis, expects big things out of Charley’s Grilled Subs, Pizza Hut, Popeye’s, vice president, the relationship, even at the Pizza Hut Manchu Wok, Baskin Robbins, Captain D’s, and Blimpie’s restaurants next door to the Restaurant, Hospitality and Einstein Bagels, Starbucks, among others, dynamic store. Theater Division and our own Anthony’s Pizza, Main Street “I visited the location several times Expresso and Robin Hood—around the today and at one time the check-out line was planet, from one of the world’s largest coral 20-plus Soldiers,” he says. atolls in the South Pacific to Camp Taji in That’s news we like to hear. In 2008, AAFES racked up even Iraq. more awards for its restaurants. AAFES Factoid The Schofield Barracks’ Popeyes in Hawaii won the International If a customer calls, we’ll deliver. Gold Plate award from Popeyes Now, troops can get pizzas from Pizza Hut, Domino’s and Papa John’s Chicken & Biscuits. AAFES received delivered right to their doorsteps, thanks to a new pizza delivery program that the Operator of the Year award and started at nine military installations in the United States. Camp Casey in Korea received the Just in 2008, the program drove “Bronze Plate.” additional earnings of $1.4 million. In Schofield Barracks also was 2009, 13 more delivery programs are recognized for logging $2 million in planned. The sales, while Camp Casey and Kadena AAFES Story AB on Okinawa hit $1.5 million each in sales.

11 Serving Soldiers in Harm’s Way New Air Assault PX reaches troops in isolated, The AAFES dangerous mountains of Afghanistan Story EEP IN THE AFGHAN “Out here, there isn’t much MOUNTAINS—Soldiers at a D that reminds us of home. With remote combat outpost in eastern AAFES, it’s indeed been like a Afghanistan got the products they needed in late 2008 thanks to a little slice of home.” new mobile exchange airlifted by helicopter into the volatile container no bigger than a typical laundry mountainous region teeming with room, they buy deodorant, toothpaste, enemy insurgents. shampoo, shaving products, snacks, drinks AAFES’ new Air Assault PX and tobacco. program focused on serving troops at “When I first heard they were going Combat Outpost Malekshay, about to fly a PX out here, I thought they were three miles from the Pakistani border lying. Who’s going fly all the way out here at what arguably is the Global War with a PX?” said Spec. Benjamin Nelson, Army choppers begin flying on Terror’s ground zero. one of Charlie’s members. “Out here, there AAFES “air assault PXs” “The guys at these locations are put isn’t much that reminds us of home. With to Soldiers isolated in the in some of the most extreme conditions,” AAFES, it’s indeed been like a little slice rugged Afghan mountains in the background. said Robert Van Oss, a retired service of home.” member who is the only AAFES associate The troops are encouraged by at the mobile exchange. “We know there the program, which AAFES leaders in is a need out here, and we’re trying to Afghanistan may expand this year to other We Reach Out to find the best way to fill it with as much as remote locations. possible and as often as possible.” “Getting a chance to look at these National Guard, The Soldiers survive without the magazines helps me keep up-to-date on Reservists, too amenities of larger military installations, what’s going on back home and makes me such as showers and normal AAFES feel closer to the States,” said Sgt. Ronald he brave citizen-warriors of the facilities. But from our 5-by-8-foot metal Rucker Jr. TNational Guard and Army and Air Force Reserves represent a unique cus- than during their training weekends or instantaneous and actionable feedback. tomer base for AAFES. when called to active duty. We’re also on Twitter and YouTube. In fact, members of the National Furthermore, a majority of National Our National Guard and Reserves Guard and Reserves make up about 25 Guard members and Reservists are unaware fight terror in Iraq and Afghanistan, as percent—or nearly 3 million—of the that they can still shop at AAFES when they well as battle raging forest fires and aid 12.2 million armed forces members, their are not on active duty. in disaster recovery projects in the United Families, and retirees who are eligible to In 2008, we let them know their States—and sometimes they’re taken for shop at our exchanges throughout the world exchange benefits were just waiting for them granted. and on our Web site, www.aafes.com. One through mailings to millions of Reservists This unending devotion on the part of of them is our commander, Maj. Gen. Keith and Guard members and then “parking lot the National Guard members and Reservists Thurgood, an active-duty member of the sales” outside exchanges and commissaries. to serving America is why we’re unleashing U.S. Army Reserves. In November, our Marketing’s the power of AAFES to support them and Reaching these potential shoppers Strategic Corporate Communications group their Families like never before. is critical because more than half of the created the Salute to Your Service blog, As in the words of General Thurgood, National Guard members and Reservists www.salutetoyourservice.com, a robust “They, like all our patrons, deserve our very live nowhere near traditional exchanges and online community where shoppers and best effort.” never set foot on military installations other our managers engage in conversations for 12 Diversity This competitive business strategy is woven The into our overall plans to win the future AAFES Story t AAFES, our strength lies incorporated into our overall strategy as a with a workforce of more key to winning the future. Athan 43,000 associates that is Workforce diversity also means “As we seek to better comprised of 60 percent people of color creating a professional environment understand our customers, we and 64 percent women. Forty-three where the unique and diverse strengths grow the business in new and percent of our managers are people of of associates and suppliers are valued, improved ways.” color. leveraged, recognized and rewarded. Companies with strong diversity programs This incredibly diverse workforce outperform those that don’t; and a mix of —AAFES Commander serves an equally diverse customer base ethnic backgrounds, thought, age and life Maj. Gen. Keith Thurgood of 12.2 million military members, their experiences add value to the organization Families and retirees. To meet these through innovation and creativity. customers’ needs, AAFES must understand Under the leadership of and reflect the same diversity within its Diversity Director Jeanne McDonald organization. and others, we are paving the way Major recognition with forward-thinking strategies.

In 2008, we received the following Sharing culture, networking recognitions: For instance, associate resource • Continued Excellence in groups provide opportunities for Diversity, from Latina Style 50 magazine. workers to share cultures, give back • One of the country’s top 50 to communities, network with senior retailers, awarded by Professional Woman’s managers, attend career-building magazine. workshops and assist in guiding • America’s Top Government product selection and advertising. Agency for Diverse Business In addition, we increased Opportunities, from DiversityBusiness. our spending with diverse business AAFES received com, a leading business-to-business Web owners last year by more than $59 national accolades in 2008 for site, for the third straight year. workplace diversity initiatives. million. • Best Practices, U.S. Office of In our five-year Strategic Plan, Government Ethics. linking diversity to organizational goals, • Million Dollar Roundtable leadership, workforce, customers and Award, from the Dallas Regional Minority suppliers will ensure we build a business Business Development Agency for the sustainable over the next century. third year in a row. “Valuing diversity means creating • Federal Employer of the Year, a culture where every individual can from the Texas Governor’s Committee on achieve and contribute to the success People with Disabilities. of AAFES,” says AAFES Commander Fostering unique, diverse strengths Maj. Gen. Keith Thurgood. “As we seek to understand each other, we grow A generation ago, some experts associates and show we value them. described workforce diversity as the right As we seek to better understand our thing to do or a corporate responsibility. A diverse group of AAFES customers, we grow the business in new Today, diversity is recognized as a associates serve an equally diverse and improved ways.” group of customers competitive business strategy and around the world.

13 Commander’s Column We’re spreading the news of our unique ‘value story,’ the AAFES story Continued from Page 3 Fighting Heroes in Iraq, Afghanistan and the rest of the Middle “Winning the future” is not accomplished in one East, where more than 400 associates were deployed voluntarily in 2008. giant leap, but through measured steps along

Bakeries and barbers, gas and glasses a path where teamwork, excellent customer

We also fix and sell cars and the gas that goes in them; cut service, innovation and results are rewarded. and style hair; issue low-interest credit cards; operate overseas bakeries making 6 million loaves of bread and factories making 6 million gallons of bottled water; provide dry cleaning, packing, with customers; shipping, florist, and optometry and optical services; run Internet • Building a culture of loyalty, ownership, sustainability and cafes; furnish pre-paid continuous improvement; phone cards so troops • Providing expeditionary and mission capabilities to “go in Afghanistan and where you go,” like our motto says; Iraq can call loved The • Collaborating with our federal and commercial partners; ones back home; and • Communicating the benefit, value and capabilities of AAFES dish up 4 million Story AAFES. nutritious meals In my congressional testimony this year, I said “winning the annually to children future” is not accomplished in one giant leap, but through measured in 92 Department of Defense schools in nine countries. steps along a path where teamwork, excellent customer service, Our valued customers enjoy the latest fashions, including a innovation and results are rewarded. wide selection of exclusive-brand quality clothing. They also find AAFES will remain a viable force in the lives of our customers the most up-to-date electronics in our “PowerZones,” a virtual and military communities for many years to come and wherever our Nirvana for the gadget-minded. fighting heroes serve. Furthermore, thousands of our customers log onto www.aafes. com and browse 100-plus name-brand retailers and 18 million items. In February 2008, 870,000 new visitors came to the site, and 370,000-plus repeat customers logged 5 million page views. Maj. Gen. Keith Thurgood, Commander Additionally, we are interacting with customers in online chat rooms, on a blog and even Twitter. I’m proud that these products and services are giving our shoppers what they want. In fact, Total Sales, 2006-2008 an independent “market basket” survey confirms that AAFES is a one-stop solution offering overall savings of more than 20 percent compared to the competition.

Spreading the ‘value story’

We are spreading the news of this value story as we finish the Patriot Family Deployment Passbook, a comprehensive coupon book packed with unique savings at AAFES retail, food and services locations. To focus on serving shoppers into the future, we refined our strategic goals in 2008 to build on past successes and take actions at the local level—the stores. These Strategic Goals will guide us through

2009 and beyond: Figures in millions • Developing a lifelong emotional connection 14 Coach, Macy’s links, to boost sales, product lines The Continued from Page 2 AAFES Story $37 million. Representing another AAFES merchandising, allocation, replenishment, “first,” ladies’ apparel will be driven by forecasting, pricing and inventory two mutually-exclusive brands from management practices. Macy’s—STYLE&CO and INC—for missy At our worldwide to women’s sizes. We expect sales to hit $8 distribution centers, we are million on these products. rolling out a $22 million warehouse management system Expanding exclusive labels that will get products into Already, AAFES stores are updating customers’ hands faster than our highly profitable exclusive brands of ever. To read more, see Pages men’s, women’s and children’s clothing 6-7. that convey the overall “personalities” In 2008, meanwhile, of our target we completed nearly $202 customers. million in new and refurbished A display of Coach purses at Fort Sam Houston, Texas. Our family of shoppettes, restaurants and shopping exclusive-label centers at 118 installations. apparel will grow From Alaska to Germany this year with Drift Away ladies’ We also set up operations on the sleepwear, and South Pacific’s Kwajalein to serve troops at we certainly will a missile test site. One of our many capture the young This year, we’ll open new or 2008 catalogs. men’s business, expanded shopping centers at Okinawa’s with cutting- Kadena AB, Germany’s Ramstein AB, edge denim lines Minot AFB, N.D., and Eielson AFB and like Mavi, X-Ray, Kentucky Jean Co. and Fort Wainwright, Alaska. Customers MEK, with sales projected to grow to $1 at Japan’s Misawa AB will get a new million annually. shoppette and Popeyes restaurant, while a new shoppette and AAFES gas station are Coffee, computers and construction coming to Yokota AB. For coffee lovers, our Consumables We view these developments as division launched our exclusive “Premium opportunities to accomplish a dual mission Java” in 381 exchanges, and sales have 114 years in the making—providing already climbed by 45 percent. John quality goods and services at competitively Engroff, vice president for consumables, low prices and generating earnings to Our family of exclusive-label says a loyalty program, seasonal flavor support Morale, Welfare and Recreation products brought in millions in profiles and combo promotions will build programs for the troops. revenue in 2008. For instance, an “emotional connection” with customers. Like AAFES Commander Maj. Gen. sales of 593 Exchange Select products topped $41 To keep track of all the sales and Keith Thurgood says, “We will take million, up 2.4 percent from the proactive action at the lowest levels of our supply chain, we’re leveraging previous year. Exchange Select the retail and distribution industries’ the organization—the stores—to win the offers a full and competitive line latest technology. In February 2008, we future by establishing lifelong emotional of health & beauty, household implemented the $177 million Oracle connections with the best customers in the cleaning, laundry, office, picnic Retail technology, which provides the best world, one person at a time.” and camera products.

15 AAFES responds to Ike’s

The havoc, devastation AAFES Continued from Page 3 Story who picked up drinks and grabbed snacks cell phone to round up a power generator after long days of recovery operations. from our Atlanta warehouse. Authorized shoppers also traveled up to 30 This manager who worked nearly miles to pick up basic necessities, such as around the clock at the BX then returned “Our most important ice, at the mobile exchange. home through debris-filled streets to make A few days later, the associates whatever repairs he could to his house. mission is to support troops moved the exchange-on-wheels 40 miles Roger is the real example of enduring an in contingency locations, to to Galveston’s airport. As homeowners unbelievably horrendous personal tragedy, returned, AAFES’ mobile field exchange but stepping up for our customers. bring that ‘taste of home’ took on a special importance for military Isn’t that why AAFES is here? These when they absolutely need retirees rebuilding their lives: it offered from-the-heart feelings and actions make generators, chain saws and bug spray. me proud to tell people I am the AAFES it the most.” commander. Making life a little comfortable When troops need us, we’re there with Team leader John Burk, sales and our mobile exchanges and sacrificing our —Capt. Kristin Burt, AAFES merchandise manager at Lackland AFB, personal lives, and not just for hurricane relief efforts. contingency planning officer summed up their task quite beautifully: “All we want to do is make life a little more Pride in dedication, commitment comfortable for those working to bring life back to normal for In fact, such assistance is so important the residents here. By to the AAFES mission that we have volunteering to support contingency planners here at our Dallas the troops, it’s our way of headquarters. giving back to them for “Our most important mission is to all the hard work they’re support troops in contingency locations, doing. to bring that ‘taste of home’ when they “They appreciate absolutely need it the most,” said Capt. that we’re here when they Kristin Burt, an AAFES contingency didn’t expect us. Even planning officer. “Troops can rely on AAFES though we’re only doing to be on the ground with what they need our job, it’s very rewarding and want during a deployment or a domestic and worthwhile to be here supporting the emergency.” troops.” There are no words to adequately I’m also proud of folks like Roger describe the AAFES team’s dedication and Lindsey, our acting facility manager at the commitment to excellence in this endeavor. Ellington Field exchange. Despite his house The military and civilian leaders who suffering extensive damage from Ike, Roger formed AAFES more than a century ago still reported to work to serve our customers would be proud of how we are still living up and ensure his associates were safe. to our mission, whether in the Global War AAFES associates from San Roger unloaded trucks, stocked, on Terror or a hurricane’s aftermath. Antonio and Waco staffed a 53-foot mobile exchange, above, cleaned, priced and worked the customer I am proud of the work our teams have to serve troops helping resi- carry-outs from the early-morning hours done to bring the full spectrum of AAFES’ dents recover from Hurricane to well into the evening. He moved mission support capabilities to bear at home Ike’s wrath. merchandise from the Ellington BX to the and abroad. mobile field operation, and used his personal You can count on us!

16 Mobile exchanges: helping us ‘go where you go’

ur mobile exchanges Ayacucho region of Peru, where 950 troops The certainly help us live up spent three months building medical AAFES to the motto, “We Go clinics, schoolhouses and a water well. Story Where You Go”—and They found an AAFES mobile thereO was no better example of that exchange staffed by two of our Honduras in 2008 than in northern California’s Exchange associates and fully stocked with forests and the isolated mountains of snacks, drinks, baby wipes, deodorant and Peru. toothpaste. When 600 California National “Let me tell you, I Guard members deployed this past fall to didn’t expect AAFES to be battle raging fires, associates from Travis here in Peru to support a AFB and Beale AFB came as far as 240 small task force for a such miles from their own homes to set up three short period of time,” said mobile exchanges. Capt. Aurelio Perez, from Throughout their stay, they never Fort Buchanan, Puerto knew when the menacing fire would pour Rico. “But to have AAFES over the ridge and force them to flee. To here, carrying items that I Associate Debi Monaghan, the air quality forgot to bring, need more was so poor that “the sun appeared red.” of, or just plain want to “The fire fighters and National have, has made this bare bones camp feel a Guard are working hard to stop the fires bit like home.” that have devastated California for more That’s exactly why our associates than a month, so our associates don’t deploy to the ends of the earth to serve mind working the long hours necessary to America’s Fighting Heroes—to give them support them,” she said. tastes of home, whether they’re fighting Many associates share that same the Global War on Terror in the Middle attitude regardless of where they’re East or serving impoverished residents in deployed, even in the remote, mountainous the mountains of Peru. Tired firefighters file into an AAFES mobile exchange in northern California, while Personal shoppers for you,’” says Mark Shutte, one of our an Airman looks for snacks We care for our wounded personal shoppers at Ramstein AB in at another mobile exchange fighters while they recover Germany. in the Peruvian mountains. Soldiers at Walter Reed Medical o wounded troops at Brooke Center and Brooke also get free TArmy Medical Center in San uniform modifications for their injuries Antonio and Germany’s Landstuhl under a program the U.S. Army began Regional Medical Center, they can through AAFES. Changes include concentrate on rehabilitation rather Velcro closures, sleeve zippers, and than worrying about getting clean footwear designed for prosthetics. socks. Our support also continues into Associates at Fort Sam Houston, civilian life. We attend the Department where Brooke is located, and Landstuhl of Defense’s Hiring Heroes career fairs serve as their “personal shoppers,” to recruit them for jobs. ensuring they get from our stores the These vital programs for our clothes, personal hygiene items and wounded warriors show that our A vendor donated a pool table to other products they need. support to combat troops is central to Fort Sam Houston for Soldiers our call, whether they’re fighting in “AAFES says, ‘We Go Where You recovering from injuries in the Go,’ and I’m adding to it, ‘We are here battle or recovering from their injuries. Global War on Terror. 17 Freedom Crossing The ‘Lifestyle centers’ to become shopping AAFES destinations with small-town, Main Street flair Story s heat from summer’s commissary will sandwich 172,000 square blast furnace scorches feet of third-party retailers. Fort Bliss, Texas, and Freedom Crossing is expected to create surrounding El Paso $488 million in earnings for AAFES. in 2010, Soldiers and Preliminary planning continues on What an apropos name Atheir families can cool their heels and similar centers at Fort Sam Houston, Texas, for this never-before-seen lunch inside the installation’s nationally and Fort Lewis, Wash., where we plan to known restaurants, then watch first-run start construction in mid-2011. Smaller shopping destination for movies on one of 10 movie screens in a installations will continue to see traditional Soldiers: Freedom top-rung theater. AAFES exchanges. Maybe they’ll browse in a well-known Crossing. Major paradigm shift shoe store or sporting-goods outlet, and then check out the hottest movies and games at a Freedom Crossing represents a major video retailer. major paradigm shift for us, because This spring, three we historically have built big-box retail years of planning came stores beside the Defense Commissary to fruition when we Agency’s big-box grocery stores. But under broke ground on a nearly the guidance of Joseph Giuffreda, a vice 500,000-square-foot, $97 president in our Strategic Planning & million unique mix of Partnerships Directorate, AAFES is opening shopping, entertainment, the vast military market to outside retailers. dining and relaxation Under the Defense Department’s venues that no military troop redeployment program, Fort Bliss—a complex has ever seen. 1.12-million-acre spread bigger than Rhode The “lifestyle center” Island—will morph into the country’s The Fort Bliss ‘lifestyle center’ is expected to open in October 2010 to an fourth largest Army installation by 2013, will be the first of its kind on excited throng of shoppers numbering in the with more than 90,000 Soldiers by 2012. any military installation in the thousands. Add family members to the mix, and world. And what an apropos name for this 136,000 total customers represent an ideal never-seen-before shopping destination market for retailers. Will Soldiers, their Families and that serves our Fighting Heroes: Freedom Stable economic pool retirees who live off-base return to Fort Bliss Crossing. for leisure and shopping? To ensure they “This development will be the Quaint surroundings, comfy benches do, we have designed an environment far social gathering spot for Soldiers and their Families where they feel a sense of superior to any retail setting in the El Paso Freedom Crossing will resemble a belonging,” says Todd Rosen, vice president area. small town’s Main Street, with quaint surroundings accented by fountains, comfy with Denver’s ServiceStar Development What’s more, they will pay no sales benches and lots of green space over 52 Co., the center’s developer. “Even with the tax at AAFES’ direct operations and the acres—a destination where military families economic challenges the retail industry is commissary at Freedom Crossing—and stay as long as they like and spend more facing, those retailers who are open to new know that about 60 percent of the profits money rather than going outside the gates locations understand the possibility of a new will be reinvested as dividends into Morale, to our competitors. sales channel never before open to them— and military personnel who would give Welfare and Recreation programs for the A traditional AAFES main store, them a stable economic pool of customers in troops. nearly 79,000 square feet bigger than the present facility, and a 111,000-square-foot a world with uncertain paychecks.” 18 AAFES Leadership

Maj. Gen. Brig. Gen. Michael Howard, Chief Master Sgt. Col. Thomas Baker, Keith Thurgood, Fran Hendricks, Chief Operating Jeffry Helm Chief of Staff Commander Deputy Commander Officer Assistant to the Commander Board of Directors

Lt. Gen. Richard Y. Newton III, Kathleen I. Ferguson, SES, Deputy Assistant Secretary of the USAF, Chairman Air Force (Installations) Deputy Chief of Staff, Manpower & Charles E. Milam, SES, Deputy Director, Air Force Services (HQ Personnel, U.S. Air Force (AF/A1) USAF/A1S)

Karl Schneider, SES, Assistant Deputy Chief of Staff, G-1

Brig. Gen. David E. Price, USAF, Director of Budget Ops, HQ USAF Lt. Gen. Mitchell H. Stevenson, USA, Senior Member Deputy Chief of Staff, G-4, U.S. Army Gregg Cox, Executive Secretary, AAFES

SMA Kenneth O. Preston, USA, Sergeant Major of the A position representing the U.S. Army Family and MWR Command Army was vacant.

CMSAF Rodney McKinley, USAF, Chief Master Sergeant of the Air Force Regional Commanders Lt. Gen. Gary D. Speer, USA, Deputy Commanding General/Chief of Staff, U.S. Army Europe and Seventh Army

Lt. Gen. Joseph F. Peterson, USA, DCG/CS, U.S. Army Forces Command

Lt. Gen. Edgar E. Stanton III, USA, Military Deputy for Budget

Maj. Gen. Gilmary M. Hostage III, USAF Col. Steve Kimball, Vice Commander, Pacific Air Forces Col. Chuck Salvo, Pacific Region Europe Region Maj. Gen. Robert B. Newman Jr., USAF Adjuctant General of Virginia

Maj. Gen. Larry Spencer, USAF, Deputy Assistant Secretary of the Air Force (Budget)

Maj. Gen. Keith Thurgood, USA, Commander, Army and Air Force Exchange Service

Lynn S. Heirakuji, SES, Deputy Assistant Secretary of the Army (Personnel Oversight) Sgt. Maj. James Sgt. Maj. Douglas Pigford, Assistant to Dunn, Assistant to the Barbara J. Barger, SES, Deputy Assistant Secretary of the the Commander Commander Air Force (Force Management Integration)

19 AAFES Dividends to Morale, Welfare and Recreation Programs for the Armed Services

Financial charts by Veronica Nelson, AAFES financial analyst

The AAFES Story in Pictures

Our Yokota AB main store in Japan won the Best Exchange Store in the The past seven AAFES Drivers of the Year for the continental United States Pacific from customers polled by gather at the Dan Daniel Distribution Center in Newport News, Va., with Stars and Stripes newspaper, the Logistics Senior Vice President Dale Bryan, left, and AAFES Commander sixth time in seven years associates Maj. Gen. Keith Thurgood. Roger Brown, third from left, was named the were honored with the award. The 2008 Driver of the Year in the United States after driving more than 2 BX got high marks for its furniture million accident-free miles. store, food court, shoppette, gift shop, and long-distance service.

Troops file into a new temporary Associates from AAFES-Europe AAFES exchange at Camp Bastion serve troops during military in Afghanistan. exercises in the country of Georgia Soldiers give a thumbs-up during in 2008—another example of “We the opening of a GameStop at Fort Go Where You Go.” Hood, Texas. AAFES and the country’s largest video-game dealer are opening stores around the world for the troops’ enjoyment.

Cashier Colline Arnold bids farewell to the final customer at our Hanau main store in Germany, which A crowd of shoppers get ready closed after 63 years in response to Associates at Maxwell AFB, Ala., for good deals at the grand open- the drawdown of troops in Europe. sign a banner for troops and civil- ing of the AAFES exchange at An AAFES store at Wurzburg, ians serving in Afghanistan. Minot AFB, N.D. Germany, also closed.

Army and Air Force Exchange Service P.O. Box 660202 Dallas, TX 75266-0202

(800) 527-6790