Wyoming Cooperative ModelWyoming Cooperative Model

A Case Study

5th Annual

Farmer Cooperatives Conference

November 15, 2002

The Wyoming Cooperative ModelThe Wyoming Cooperative ModelEvolves cooperative structure into new formsOffers flexibility in structureCooperatives may be organized similar to LLCOpportunity for outside investmentCooperative owners are it’s members

– Patron Members– Investment Members

Patron members guaranteed 15% profit distributionWyoming model effective 7/1/01

Cottage Grove CooperativeCottage Grove Cooperative

Core Divisions

Feed GrainEnergy Agronomy

Supporting Divisions

Hardware Stores

Convenience StoresTruck Stop

Heating & Cooling

TransportationServices

Union CooperativeUnion Cooperative

Core Divisions

Feed GrainEnergy Agronomy

Supporting Divisions

Convenience Stores

Tire SalesTransportation

Services

Reasons behind an Reasons behind an Agronomy Joint VentureAgronomy Joint Venture

Enhance profitability – greater ROIExcel in customer service over a large trade

territoryEfficient utilization of people and assetsProduce necessary critical massIncrease purchasing powerMaximum advantage of dealer programs

Events Leading to the Events Leading to the Formation of LandmarkFormation of Landmark

Our supplier, Agrilliance, owned four facilities near our trade territory

Union Cooperative handled the accounting for Agrilliance for a fee

Cottage Grove and Union had earlier developed a joint venture in Precision Agriculture

Agrilliance and both boards met to plan the futureBusiness service manager employed to lead

feasibility study of combining nine agronomy locations

Landmark ContinuedLandmark Continued

Attorney hired to create joint venture agreementWyoming model selected for business structureName selection committee appointedLandmark Services Cooperative organized in

October 2001

Landmark Startup CostLandmark Startup Cost

50% investment by Union and Cottage GroveLandmark is approved for $12 million dollar

seasonal line of creditComputer related expenses exceeded $100,000 Attorney fees - $50,000Consulting fees $5,000Selection of name and logos - $2500Identification of vehicles and facilitiesSearch of General Manager

Operating LandmarkOperating LandmarkNew equipment is purchased by LandmarkPresent facilities and equipment are leased to

LandmarkEmployees are Leased to LandmarkCottage Grove administers human resource

programsLandmark profit stream 60%CG and 40% UnionUnion can increase investment to 50% profit distCG and Union each distribute patronage to growers

Landmark Governance StructureLandmark Governance Structure

Union Director

Union CEO

CGController

CGCEO

Union Controller

CGDirector

Board of Directors

LandmarkGM

Hub Managers

Employees

EdgertonJudaCottageGrove

Evansville

Employees EmployeesEmployees

Computer SystemsComputer Systems

User Group Selected SSI SoftwareInitial learning curveChallenge to setup customers, products, tonnage

taxes, etc.Evaluated and upgraded hardware at all locationsConnected all locations with wide area network

Accounting SystemsAccounting Systems

Blended Cultures between the agronomy locationsAdoption of 5% cash discount programChanged statement due date to the 20th of each

monthDevelopment of fall deferred billing programEmployees initially resistant to changesDevelopment of newsletter to communicate policies

Development of Future joint Development of Future joint VenturesVentures

Wyoming model is favorable for many applicationsEach player should have reasonable profit

expectationsCommunications to customers and employees

should be given high priorityBringing philosophies & business practices together

is a major challenge

ContinuedContinued

Startup costs generally will be higher than budgetedEliminating employee positions may not be as high

as anticipatedPlan for tighter marginsForming Landmark Agronomy Services firmly

positions our cooperative for future success