2014 annual report - mkc
DESCRIPTION
2014 MKC Annual ReportTRANSCRIPT
2014 ANNUAL REPORTBETTER TOGETHER
OfficERs & diREcTORs
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Myron VothVice chairMan
Duane Johnson
cJ BlewchairMan
cecil Wiebe
David Millssecretary
Jason Gaeddert
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Keith Becker
Kenny carltonassociate Director
neal Beam
hal MayerappointeD Director
randy ellwood
allan WegnerappointeD Director
Dave christiansenceo / presiDent
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cHAiRmAN’s REPORTcj BLEwThank you for your interest and support of MKC this past year. MKC’s 49th annual meeting theme, “Better Together”, is the perfect theme to define MKC and the cooperative system!
From the members of the three initial coops that made up MKC in 1965 to the 217 new members we added this year along with the members of Farmers Cooperative Association of Manhattan who approved a merger with MKC by an overwhelming 91%, farmers have realized the benefits of working with MKC.
One of those benefits is the newly added Domestic Production Activities Deduction, often referred to as Section 199 Deduction. This deduction is only available to cooperatives and can be passed through to members. MKC members also saw a patronage distribution of $6.4 million this past year, all while adding 8.2 million bushel of additional grain storage space that includes three new green field sites.
Your board and management team continue to develop and implement strategic initiatives that leverage what working together can accomplish.
MKC doesn’t have an end date or retirement date. We need to position our coop to be viable for generations to come. There will be opportunities for growth in the future and all stakeholders in the cooperative system will need to keep an open mind about what it will take to compete in an ever-changing market place.
In an effort to accommodate some of MKC’s past and future growth, your board of directors decided to implement the bylaw change that was passed in 2012, allowing membership to vote for director elections by mail. We hope this change will make participation in the governance of your cooperative easier.
Thank you again for your support and I hope that as a member of MKC you’ve found value in many ways by being “better together”.
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PREsidENT’s REPORTdAvE cHRisTiANsEN
Since the inception of what we know today as MKC, your cooperative has stood tall as an example of the good that can be gained by working together. Collaboration in virtually all areas of our business continues to be our mission and drives many of our
strategies. Finding ways to work with others is more of an expectation from our board of directors than it is a suggestion. This drives our leadership team to continually search for ways we can gain advantages or leverage our scale for the benefit of our members.
As you look back through our history, MKC is a collection of producers who decided they would be better off working together than insisting on operating independently. The notes from the first meeting held in 1965 laid out our path clearly and sent a powerful message. Since that meeting we have added over 6,000 members as a result of more than a dozen mergers and acquisitions. I’m proud to work for an organization whose board of directors continues to stay focused on benefiting its members.
One of the things I am most proud of is more and more producers each year are discovering the same advantage. Last year we had 217 new members join your cooperative. Many of these producers are just like you and see the value in working with each other through the cooperative. By doing so, they gain economy of scale and enhance their relevance in the market, something that is so vital today. Self-sufficiency is not now, and has never been, the path to prosperity. Helping our growers be more successful is about the exchange and the
specialization of labor to gain significantly more together than we can individually.
Cooperative success is more about multiplying our efforts than dividing them. As many of you know, MKC was fortunate to have Farmers Cooperative Association, based in Manhattan, join forces with us. This merger made all of us stronger and is a great example of producers deciding they would be better together. As discussed over the past few years, MKC will continue to prepare for partnerships and mergers as more producer-led cooperatives seek to deliver more to their members. We believe we will continue to attract new members if we continue to do the things that provide for a positive customer experience. This will also lead those cooperatives looking to provide that same value and experience to their members to seek collaboration with MKC.
Our primary objectives have not changed. If the only measure of success was financial return, then we didn’t have the kind of year we planned for. Although virtually every business category we include in our portfolio experienced an inverse market this year, our performance actually would have to be considered successful. Just as we had planned for, we saw top line unit growth in all business units. This is a result of our overall focus on helping producers manage their risk and providing an overall positive customer experience.
Our efforts continue on renewing our infrastructure. This past fiscal year we’ve made significant investments in grain, agronomy and energy facilities across our company. Our customers have really shown they appreciate our efforts over the past few years by increasing their volume at every location we’ve upgraded.
I sincerely thank you for all you’ve done to help your cooperative grow, prosper and serve our members better than ever before. We are proof it is better when we work together.
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PROjEcTUPdATEsMKC continued its focus on renewing infrastructure this past year, investing more than $16 million. Our ability to do this, while still delivering a strong financial performance, is a clear reflection of well-developed strategies executed by our employees.
Continued investments in our facilities allow us to keep pace with the growing needs of our customers. By building state-of-the art facilities, we can provide not only speed and space, but also safety for our customers, employees and the environment.
Construction of grain facilities in Canton, Rice County, Benton and Talmage resulted in an additional 8.2 million bushels of grain storage space.
In addition, Manhattan started construction on a 430,000 bushel grain facility, expected to be completed by August 2014.
CANTON
BENTON
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New offices and scales were constructed in Longford and Talmage. The scales provide improved traffic patterns during peak harvest times.
A LeMar storage system was added at Groveland, increasing grain storage capacity by an additional 1.2 million bushels.
Groveland’s agronomy center also started offering 24-hour access to customers to pick up liquid fertilizer orders.
A seed warehouse in Abilene was completed, providing centralization for bagged seed storage. The seed treater was also moved inside the warehouse, allowing for multiple applications of treatments in a timelier and more accurate manner.
cONsOLidATEdBALANcE sHEETs
CURRENT ASSETS 2014 2013
Cash and cash equivalents $ 1,029,642 $ 2,275,645
Marketable securities, available for sale 1,190,796 1,324,891
Accounts and notes receivable - trade
Patrons and customers 7,075,330 7,152,181
Allowance for doubtful accounts (100,000) (135,000)
Grain shipments 4,294,986 2,475,804
Grain storage receivable 2,446,466 2,126,284
Commodity margin deposits 3,635,236 6,416,330
Other 5,471,728 6,223,340
Deferred income taxes 142,828 199,907
Prepaid inventories 13,501,428 20,012,430
Inventories on hand 90,011,355 117,300,487
TOTAL CURRENT ASSETS 128,699,795 165,372,299
OTHER ASSETS
Notes receivable, net of current portion 423,087 281,781
Equity in other cooperatives 23,052,165 20,459,795
Limited liability companies 11,792,641 7,872,829
Other 1,091,442 976,747
TOTAL OTHER ASSETS 36,359,335 29,591,152
PROPERTY, PLANT, AND EQUIPMENT
Cost 78,487,762 69,695,379
Accumulated depreciation (37,376,005) (37,154,262)
NET PROPERTY, PLANT, AND EQUIPMENT 41,111,757 32,541,117
TOTAL ASSETS $ 206,170,887 $ 227,504,568
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cONsOLidATEdBALANcE sHEETs
CURRENT LIABILITIES 2014 2013
Accounts payable and accrued expenses $ 33,498,414 $ 43,194,289
Customer forward contracts 10,534,608 8,581,907
Revolving bank notes 48,000,826 72,314,923
Patron demand certificates 1,811,771 1,779,624
Current maturities of long-term debt 5,887,449 5,666,531
Patronage dividends payable 2,566,204 3,417,300
Income taxes payable 970,308 1,788,769
TOTAL CURRENT LIABILITIES 103,269,580 136,743,343
LONG-TERM LIABILITIES, excluding current maturities
Non-revolving bank notes 17,759,002 10,732,057
Patron certificates of indebtedness 3,935,329 3,793,943
Capital lease obligations 249,297 710,294
Deferred income taxes 1,200,769 1,223,631
Other 1,841,651 1,508,108
TOTAL LONG-TERM LIABILITIES 24,986,048 17,968,033
MEMBERS’ EQUITY
Common stock 4,487,169 4,354,700
Participating stock 934,215 931,975
Qualified patronage allocations 27,497,170 24,793,559
Retained earnings 39,476,626 36,722,565
Noncontrolling interests 5,749,976 6,119,938
Accumulated other comprehensive income (loss) (229,897) (129,545)
TOTAL MEMBERS’ EQUITY 77,915,259 72,793,192
TOTAL LIABILITIES AND MEMBERS’ EQUITY $ 206,170,887 $ 227,504,568
February 28, 2014 and 2013
Financial Statement PresentationThe statements presented within do not contain all the necessary disclosures to be considered in conformity with accounting principles generally accepted in the United States of America. A report containing the required disclosures is on file at the general office.
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cONsOLidATEd sTATEmENTs OfOPERATiONsSALES 2014 2013
Grain $ 381,168,847 $ 315,516,174
Farm supply 119,950,474 124,466,905
TOTAL SALES 501,119,321 439,983,079
COST OF SALES
Grain 368,347,116 299,030,993
Farm supply 108,765,417 112,450,628
TOTAL COST OF SALES 477,112,533 411,481,621
GROSS MARGINS ON SALES 24,006,788 28,501,458
OTHER OPERATING INCOME
Grain storage and handling services 10,700,684 8,336,271
Limited liability companies 328,931 919,430
Agronomy services 5,461,451 5,293,795
Interest income 248,129 275,726
Gain on disposal of property, plant and equipment 513,883 557,249
Miscellaneous 1,106,083 1,391,054
TOTAL OTHER OPERATING INCOME 18,359,161 16,773,525
GROSS INCOME FROM LOCAL OPERATIONS $ 42,365,949 $ 45,274,983
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OPERATING EXPENSES 2014 2013
Personnel costs $ 16,207,802 $ 15,695,798
Fixed expenses 7,152,631 8,090,342
Other operating expenses 13,435,642 12,041,551
TOTAL OPERATING EXPENSES 36,796,075 35,827,691
EARNINGS FROM LOCAL OPERATIONS 5,569,874 9,447,292
OTHER EARNINGS
Patronage dividends 6,221,171 7,576,782
Investment income 2,174,980 2,976,900
TOTAL OTHER EARNINGS 8,396,151 10,553,682
NET EARNINGS BEFORE INCOME TAXES 13,966,025 20,000,974
PROVISION FOR INCOME TAXES
Current income taxes (990,641) (1,544,695)
Deferred income taxes (102,525) 268,806
TOTAL PROVISION FOR INCOME TAXES (1,093,166) (1,275,889)
NET EARNINGS BEFORE NONCONTROLLING INTERESTS 12,872,859 18,725,085
NONCONTROLLING INTERESTS (3,661,406) (4,651,309)
NET EARNINGS $ 9,211,453 $ 14,073,776
DISTRIBUTION OF NET EARNINGS
Patronage dividends $ 6,415,511 $ 8,543,250
Retained earnings 2,795,942 5,530,526
TOTAL $ 9,211,453 $ 14,073,776
For Years Ended February 28, 2014 and 2013
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PATRONAGE disTRiBUTiON ANd EqUiTy REdEmPTiONs2014 PATRONAGE ALLOCATION RATE AMOUNT
Grain 12.00 cents / bushel $ 2,926,367
Agronomy - Seed - Crop Protection 5.35% or $26 / ton on fertilizer 3,128,492
Petroleum - Lubricants 1.30% or 5 cents / gallon on fuel 249,756
Feed - Merchandise 1.13% 110,896
TOTAL PATRONAGE ALLOCATION 6,415,511
EQUITY REDEMPTIONS 1,052,323
TOTAL DISTRIBUTIONS $ 7,467,834
Patronage Distribution Equity Redemptions
PATRONAGE DISTRIBUTION AND EQUITY REDEMPTIONS – $7,467,834
14.09%
85.91%
CASH DISTRIBUTIONS TO MEMBERS - 10 YEAR HISTORYYEAR ENDED EQUITY REDEPMPTIONS CASH PATRONAGE TOTAL
2014 $ 1,052,323 $ 2,566,204 $ 3,618,527
2013 650,512 3,417,300 4,067,812
2012 698,399 2,379,444 3,077,843
2011 746,339 2,296,816 3,043,155
2010 649,765 1,703,704 2,353,469
2009 714,116 2,673,170 3,387,286
2008 563,574 805,434 1,369,008
2007 835,730 675,936 1,511,666
2006 558,727 1,263,906 1,822,633
2005 229,503 479,277 708,780
TOTALS $ 6,698,988 $ 18,261,191 $ 24,960,179
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NET EARNiNGs ANdLOcAL BENEfiTs
Personnel Costs
Other Expenses
Income Taxes
Property Taxes
2009 2010 2011 2012 2013 2014
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60
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Grain Receipts
Net Earnings
2014 local beneFitS - $26,305,850
3%
4%
31%
62%
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MKC provides benefits to as many as 50 local communities in the form of personnel costs, local taxes and other expenses. These payments have a significant impact on the communities and help support the businesses and services we all utilize.
HisTORicAL dATA
$14,073,776
2013 2014
$9,211,453
2009
30.20%
2012
21.43%
2011
17.22%
2010
18.57%
2008
12.77%
2007
13.80%
2006
20.48%
2005
16.31%
2005
$3,033,082
2006
$4,324,814
2007
$3,191,862
2008
$3,674,858
2009
$10,837,662
2010
$8,219,209
2011
$8,871,405
2012
$13,342,854
2014
11.82%
2013
19.33%
0%
5%
10%
15%
20%
25%
30%
35%
0
$3,000,000
$6,000,000
$9,000,000
$12,000,000
$15,000,000
HISTORICAL NET EARNINGS
HISTORICAL RETURN ON EQUITY
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HisTORicAL dATA cOmmUNiTysTEwARdsHiP
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At MKC, we’re committed to keeping our rural communities strong by giving back to our communities with our time, talent and resources. Over the past five years, MKC has invested more than $300,000 in our communities. The majority of these investments help develop future leaders of our communities, assist with community safety, alleviate hunger and support ag education.
We’re proud to play a role in the following programs:
A: Each year MKC employees present educational programs to fourth grade students throughout our trade territory. Entitled, Ag in Our Every Day Lives, the program teaches students about different types of grains, how they are grown and the many products developed from the grains. In addition, programs supporting ag education benefited from more than $5,000 in contributions last year.
B: Community food banks located throughout central Kansas benefited from donations totaling more than $15,000. In addition, MKC employees collected more than 12,000 pounds of food.
C: We believe the leadership programs available through 4-H further develop the leadership skills of today’s youth – those same youth who will some day be the future leaders of our communities. To help strengthen these programs, MKC donated more than $11,000 to 10 area 4-H leadership development programs this past year.
• 4- Leadership Development
• Farm Safety Camps
• Kansas FFA Foundation and Local FFA Chapters
• Community Events and Festivals
• Ag in the Classroom
• City and County Emergency Services
• Women in Agriculture
• Young Business Professionals Programs
• Mennonite Relief
• School Programs
• Community Food Drives
• Community Blood Drives
• Community Angel Tree Programs
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mkcoop.com
MKc | 307 West cole | p.o. Box D | Moundridge, Ks 67107 | 620.345.6328 | fax 620.345.6330