FINANCIAL OVERVIEW

with two primary metrics: customer satisfaction and customer retention.

DANNY POSCH EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER

Over the past three years, we have experienced a tremendous amount of disruption in the world that directly impacted agriculture, including a Covid outbreak, domestic and international political unrest, logistic challenges, and a new war in Ukraine. In addition to those disruptions, in 2023 we added fears of inflation and a corresponding response by the FOMC of increasing the federal funds rate by 5.00% over ten separate meetings. The impact of significantly higher interest rates sent shockwaves through the agricultural industry. Higher interest rates impact the cost of carry for your organization of not only grain inventories, but also fertilizer, seed, crop protection, feed, and energy inventories. Most of these disruptions had some level of financial impact on your cooperative for 2023, but despite all that, we had a lot of successes to share with our members. Here is a list of key successes that impacted our member-owners and your cooperative this past fiscal year:

• The grain, agronomy and energy business units were profitable again for 2023. Business unit profitability enables us to invest back into assets and growth. Past investments have allowed your cooperative to be well diversified.

• On April 10, 2023, MKC announced that Producer Ag, our grain logistics and marketing company, will be expanded to add CHS as a partner. This expanded partnership is expected to maximize the value of our farm to end-user cooperative supply chain in the Southern Plains.

• The future of the MKC grain business is strong; the construction of a third grain terminal in Rice County has begun. This continues to build on our strategy to align Kansas producers’ grain with global market access. We anticipate this project will be completed in the summer of 2024.

• On May 16, 2022, MKC completed the unification with Progressive Ag Cooperative (PAC). This strategically grows the MKC footprint an additional twelve locations in south-central Kansas. We are well positioned to service this market. These locations surround the Sumner County Grain Terminal.

Four years ago, we identified three financial metrics to measure success of our financial performance: net earnings, net fixed assets and working capital. We also measure the value brought to our member-owners

Net earnings measure the level of success or profitability achieved, net fixed assets measure MKC’s commitment to growing and upgrading the infrastructure of the cooperative for future generations and working capital measures the strength and stability of the cooperatives’ balance sheet and overall financial position.

Our net earnings for the 2023 fiscal year were $11.1 million; although a decrease from prior years, we remain committed to performing at a strong financial level.

MKC’s net fixed assets have grown from $52 million to $190 million in the past ten years. We are often reminded that the cooperative has no end date and that we must provide future generations with a company that can serve them as well as it has served previous generations. Our commitment to future generations is demonstrated through the growth of our net fixed assets.

At fiscal year-end, our cooperative has a strong working capital position of $68 million. This is critical because it provides a platform for growth and allows the cooperative to execute its strategic goals, strengthen relationships with creditors, and allows the cooperative to maintain adequate lines of credit with lenders.

We continue down the path of issuing non-qualified patronage to our members because we believe it has significant tax savings for our member-owners and MKC. We are pleased that we were able to allocate patronage in the grain, agronomy, and energy business units again this year. In addition to patronage, our pass-through of the section 199A deduction offers significant value to our member-owners because the allocated 199A deduction can be utilized on the tax return of the member-owner.

A customer satisfaction metric measures how well our products and services meet or exceed our memberowners’ expectations, while a customer retention metric measures the ability of a business to retain customers. We are proud to report our customer satisfaction and customer retention metrics were 87% and 98%, respectively this past year. Both of those metrics are considered extraordinarily strong in any industry.

We are pleased to share our success with our memberowners, as well as our commitment to be a financially sound company that adds value for our member-owners today, and for future generations to follow.

Consolidated Statements Of Operation

Consolidated Statements Of Operations

CONSOLIDATED STATEMENTS OF OPERATIONS FOR YEARS ENDED FEBRUARY 28, 2022 AND 2021

FOR YEAR ENDING, FEBRUARY 28, 2023 AND 2022

FOR YEARS ENDING FEBRUARY 28, 2023 AND 2022

CONSOLIDATED STATEMENTS OF OPERATIONS

For Years Ended February 28, 2023 and 2022