Transcript of COOPERATIVES in an ERA of CONSOLIDATION 14 TH ANNUAL FARMER COOPERATIVES CONFERENCE “Meeting...
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- COOPERATIVES in an ERA of CONSOLIDATION 14 TH ANNUAL FARMER
COOPERATIVES CONFERENCE Meeting Competitive Challenges: Cooperative
Structure & Finance for the Future Jeff Nielsen, General
Manager United Farmers Cooperative (UFC)
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- Mission Statement: To supply our customers with technology,
products and services in a manner that is extraordinary enough to
add value to their lives. Vision Statement: To be recognized by our
customers as their first choice in the markets that we serve.
Values: We Will Maintain financial stability Be competitive Retain,
train and recruit employees to meet the highest professional
standards Be open to new business concepts Embrace innovation and
change as a way to achieve internal and external growth Communicate
with employees, members, our communities and vendors in an open,
forthright manner UFCs Purpose People.Pride.Purpose. Since
1915
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- UFCs History United Farmers Cooperative (UFC) is a farmer owned
cooperative that was formed in 1915 in the town of Lafayette,
Minnesota. At that time, it was formed as the Cooperative Creamery
Association of Lafayette. Over the next 85 years, the cooperative
would undergo many changes as the needs of the members that it
served evolved to keep pace with the changing world. Some of the
highlights over the decades were as follows: 1915Cooperative was
organized into Cooperative Creamery Association 1920Produce
department was added 1940Locker plant and butcher shop was added
1960sOngoing construction with the addition of fertilizer blending
equipment and bagging equipment for fertilizer products 1966First
grain elevator purchased in Lafayette 1968Purchased and merged in
the Klossner elevator facilities 1969The two Elevator operations
and the Farm Supply operations merged into a single operation. The
creamery division was sold to Mid America Dairies. 1971The name of
the organization was changed to The Farmers Cooperative of
Lafayette. 1972Winthrop Farm Services and Elevator purchased
1986Purchased the Norseland location from the dissolved Tri
Ag.Co-op organization 1995The Klossner Coop Oil Association was
merged into the operation and the Name of the organization was
changed to the current United Farmers Cooperative 1995The new
Livestock Service Center Opens greatly expanding the feed
operations 1998LeSueur Farmers Elevator was merged into the
operation 2000United Farmers Cooperative purchased a liquid
Fertilizer Business from Ankers Inc in Gibbon Minnesota. Also
purchased was the assets from Tri-County Builders of Gaylord to
expand their building and construction business. 2002Complete
redesign and reconstruction of LeSueur location. Built new retail
franchise and opened Giant Valley Trading Company (GVTC) to address
rapidly growing farm store market. 2003Purchased Turbes Oil Company
and formed UDS (United Distribution Services) in Searles,
Minnesota. This greatly increased petroleum volume and expanded
UFCs service area. 2004Started our own insurance company Parthenon
Risk Partners 2006Ag-Land Co-op and UFC unified their operations
into UFCs 2008Hector Location Acquired 2010Green Isle United Xpress
Bird Island Merged in July 1, 2010 2011Working on new World Class
Grain Terminal at Brownton MN
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- UFC Today Who We Are We are a member owned cooperative and have
been since 1915. Profits go back to the members. We serve producers
and consumers from a wide and expanding territory with sales over
230 million dollars in 2011. We are locally owned and locally
controlled. We are involved in a very diverse business with
operations in Grain, Feed, Agronomy, Seed, Energy, Farm Equipment,
Grain System Construction and Convenience Stores. We employ over
200 people across the system.
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- Coop Finance Historical Perspective Co-ops relied on
traditional capitalization methods Retained earnings, long term
debt, etc Focus on Revolving Equity Managing allocated equity
obligation at present, $600,000 annually pretty well handles
estates and age 70/72 redemptions for the foreseeable future. Nice
position to be in. But we also are not satisfied. We have an
obligation to redeem equity as expeditiously as possible. Need
patience this is a marathon not a sprint. Need urgency too for
example, evolving culture from small co-op to a big co-op. Almost
cannot happen fast enough. Is the old system sustainable? Producer
& Consumer demands are endless and cost $$
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- Historical Financial Information
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- Co-op Finance Future Needs Earnings and financial performance
focus The absolute necessity of strong earnings Honor the
commitments of the past. Must be able to perform at World Class
levels Importance of a Plan for the Cooperative. Vision, Access to
Capital, Creative Marketing, Execution Diversify sources of capital
particularly equity capital-UFC now a 521 tax exempt co-op.
Traditional & Non Traditional alike need balance. Local
sourcing Use for Bird Island merger substitute for allocated
equity; and, Raise cash from members and non-members Re-Inventing
the cooperative model May need to look at cooperative partnerships
differently
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- Built 40,000 ton hub dry fertilizer plant $7M
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- COOPERATIVE defined Adjective: Involving mutual assistance in
working toward a common goal. Noun: A farm, business, or other
organization that is owned and run jointly by its members, who
share the profits or benefits.
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- UFC Grain Systems LLC Connecting our Growers to the World
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- UFC Historical Grain Volumes Est. Budget SALES2000200520102011
Corn4,722,1986,508,16712,809,78917,000,000
Beans2,479,9501,880,9172,760,5173,850,000
*TOTAL7,202,1488,389,08415,570,30620,850,000
Corn5,803,6928,813,87516,049,83020,750,000
Beans2,244,5881,723,2392,548,9163,650,000
*TOTAL8,048,28010,537,11418,598,74624,400,000 ACTUAL BUSHELS
HANDLED
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- Vertical Partnerships - Success Partnered with Winfield
Solutions to create first ever wholesale/retail facility
partnership in 2009 Result of multi year study of logistics and
inventory management by both UFC and Winfield. Developed 80,000 sq
ft facility built on property adjacent to UFC headquarters, that
serves UFC retail patrons as well as Winfield wholesale accounts.
Resulting partnership and success of this project has now led to
several more facilities being built across upper Midwest by
Winfield.
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- Proposal Rationale UFC and Grain Partner create the new Grain
Division. UFC Grain Systems LLC UFC contributes all of its current
grain operations & facilities into the LLC. (appraised value =
20m, Book at 9.8m) Grain Partner contributes 15 million in cash
Build new Shuttle Facility Cost = 27 million Creates New LLC with
50M in assets- (including working capital) Governed by Board of
Directors UFC majority share holder Shared governance with grain
partner LLC finances balance with term debt and/or local investment
contributions. Total debt approximately 15 million
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- Proposal Rationale cont. This approach has the following
advantages: UFC leverages its brand to buy grain. UFC does not
compete with itself. Grain Partners investment is more diversified
because it shares in UFCs grain department profits regardless how
the profits are generated including ethanol, livestock, soybean
processors and of course export markets. LLC operates the grain
operations, takes the risk of operating losses, and provides the
working capital to operate. Grain partner brings global access to
markets along with expertise and experience. UFC maintains a strong
independent balance sheet.
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- Applying the Coop Model Keeping it Local UFC Investment Options
Current UFC Patron Notes Program Now open to anyone, members and
general public Demand Notes, 3 and 5 Year Investment Certificates
Current rates are: Demand 2%, 3 year 3%, 5 year 4% New UFC
Preferred Equity program Class PPE, Series Brownton 1 Open to
anyone, members and general public 5 million shares offered 7%
dividend Assume 1 to 7 year redemption cycle Proposed UFC Grain
Systems Common Equity Program Ownership opportunity in the new
Grain LLC Returns based on the performance of the LLC Must be a
qualifying member of UFC to participate Limited to 5 million shares
at $1.00 per share
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- Thank You ! 14 TH ANNUAL FARMER COOPERATIVES CONFERENCE Meeting
Competitive Challenges: Cooperative Structure & Finance for the
Future