BU I L D I NG MO ME N TUM [ 2013 AN N U AL RE PORT ]
district 1
Officers & directors
Myron Voth
Cecil Wiebe
district 2
Vice chairman
Duane Johnson
David Mills
district 3
secretary
CJ Blew
2 1
CHAIRMAN
Jason Gaeddert
OFFICERS AT LARGE
Keith Becker
Neal Beam
Randy Ellwood
Dave Christiansen CEO / President
2
Chairman’s report
CJ Blew
Businesses and companies are always in motion and are either moving forward or backward. Simply standing still means the business is moving backward as everything changes around it. A business that is moving forward builds momentum. It can be compared to a sports team that is on a roll in the middle of a game or season and the subsequent unstoppable power that the team has. With strategic initiatives developed by the board and the execution of those initiatives by management and staff, YOUR coop is “building momentum”. The momentum that MKC’s culture and shared mission developed over the last several years has helped you, our farmer/owner succeed. The wave of momentum can seem nice to ride, and it can even carry you through a couple years of drought. However, we can’t become complacent. We must continue to make new waves that will eventually be ridden and keep our heads above the water line. Listening to our customers has told us we need to continue moving faster in order to keep up with the needs of producers. During the last four years, MKC’s board of directors has approved investments of approximately $50 million in infrastructure. We believe these types of efforts will help MKC continue its momentum and maintain a positive relationship with today’s customers as well as customers of the future. New memberships are approved each month, not only within our traditional footprint, but from outside as well. These new members appreciate our efforts and are willing to demonstrate this by increasing the amount of business they do with MKC. Our job is to continue to build a business that will provide what they need to be successful today and in the future. My hope is MKC has helped you succeed in some form or fashion this past year, helping you build a wave of momentum for the upcoming year. Thank you for your support.
4 3
President’s report
Dave Christiansen When I think of building momentum in a company, I’m reminded of an incredibly heavy flywheel. I’ve always pictured one as approximately 40 feet in diameter, made from concrete and balancing on its side. Much like a grist wheel that some of you are familiar with. When I first arrived at MKC we were fortunate to have a very solid base for our organization. The greatest challenge seemed to be while our employees were intentional about providing great service, not everyone was pulling or pushing in the same direction. There were too many different interpretations of our objectives and too many different methods of operation. We found ourselves with a huge flywheel, that for the most part, was idle and clearly lacking any momentum. It was clear the board of directors needed to establish a direction. Once the initial process was completed, efforts turned to getting everyone to grab on to this huge, heavy flywheel with both hands. Our vision became one that focused on helping our owners, customers, vendors and employees to be more successful. Once the vision was clearly explained, getting everyone to push in one direction became much easier. Initially the process was tough. Getting the flywheel to move just an inch took everyone’s effort. After experiencing some success and the impact it was having on not just our customers, but employees and vendors alike, our pushing became more deliberate and with greater enthusiasm.
There are many who are pushing our flywheel today. This is what we believe “building momentum” in our company is all about. By consistently communicating our vision, plans and objectives we find it is much easier to get everyone behind our efforts. Nothing has the potential to weigh heavier on momentum than achieving financial objectives. We are constantly vigilant to something slowing down our progress. Droughts and freeze damaged wheat as experienced over the past few years are scary without a doubt. But to me those are not nearly as concerning as possibly losing the trust and support of our customers. Our efforts placed on customer meetings are done with the intent of constant learning, providing us with opportunity for needed improvement. Building momentum is a continuous journey. We have a long way to go before we can take a deep breath but I’ll settle every day for one more good push! Thank you for your efforts pushing this flywheel. Together we are helping MKC build momentum.
4
PROJECT UPDATES:
MOMENTUM ON THE GROUND MKC continues to invest in facilities across its trade territory, all part of a plan to meet the needs of customers not only today, but as we move into the future. Construction has resulted in increased grain handling speed and more than 3.8 million bushels of storage space since 2009 through additional bins and bunkers. These reinvestments in infrastructure are keeping pace with agricultural advances and the growing needs of our customers.
4 5
1 | Four bulk seed bins installed in Walton doubled the location’s seed storage, meeting the need for a more efficient system for MKC customers. 2 | Bennington and Marquette constructed large bunkers capable of holding nearly 775,000 bushels of grain. The bunkers provide for additional storage as producers’ volumes grow. 3 | Addition of outbound scales in Moundridge and Walton improved traffic flow during peak harvest times and reduced wait times. 4 | New grain facilities planned for Canton and Lyons, and upgrades in Benton and Talmage will add 8.2 million bushels of grain storage space.
1
4
2
3
6 5
Consolidated
Balance sheets CURRENT ASSETS
2013
2012
$ 2,275,645
$ 4,037,661
1,324,891
1,238,509
Patrons and customers
7,152,181
8,407,942
Allowance for doubtful accounts
(135,000)
(100,000)
Grain shipments
2,475,804
1,884,480
Grain storage receivable
2,126,284
1,761,905
Commodity margin deposits
6,416,330
6,289,778
Other
6,223,340
6,010,367
199,907
210,771
Prepaid inventories
20,012,430
14,388,342
Inventories on hand
117,300,487
110,539,810
165,372,299
154,669,565
281,781
-
Equity in other cooperatives
20,459,795
16,650,472
Limited liability companies
7,872,829
5,769,635
976,747
1,581,558
29,591,152
24,001,665
69,695,379
67,078,644
(37,154,262)
(36,338,788)
32,541,117
30,739,856
$ 227,504,568
$ 209,411,086
Cash and cash equivalents Marketable securities, available for sale Accounts and notes receivable - trade
Deferred income taxes
TOTAL CURRENT ASSETS OTHER ASSETS Notes receivable, net of current portion
Other
TOTAL OTHER ASSETS PROPERTY, PLANT & EQUIPMENT Cost Accumulated depreciation
NET PROPERTY, PLANT & EQUIPMENT TOTAL ASSETS
7
Financial Statement Presentation The 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.
February 28, 2013 and February 29, 2012
CURRENT LIABILITIES
2013
2012
$ 43,194,289
$ 35,321,247
8,581,907
8,722,368
72,314,923
75,161,074
Patron demand certificates
1,779,624
955,328
Current maturities of long-term debt
5,666,531
4,495,514
Patronage dividends payable
3,417,300
2,379,444
Income taxes payable
1,788,769
884,712
136,743,343
127,919,687
Accounts payable and accrued expenses Customer forward contracts Revolving bank notes
TOTAL CURRENT LIABILITIES
LONG-TERM LIABILITIES, excluding current maturities Nonrevolving bank notes
10,732,057
12,527,580
3,793,943
3,161,265
710,294
1,264,577
Deferred income taxes
1,223,631
1,380,021
Other
1,508,108
888,684
17,968,033
19,222,127
4,354,700
4,237,500
931,975
936,450
Qualified patronage allocations
24,793,559
20,365,635
Retained earnings
36,722,565
31,278,096
Noncontrolling interests
6,119,938
5,523,259
Accumulated other comprehensive income (loss)
(129,545)
(71,668)
72,793,192
62,269,272
$ 227,504,568
$ 209,411,086
Patron certificates of indebtedness Capital lease obligations
TOTAL LONG-TERM LIABILITIES MEMBERS’ EQUITY Common stock Participating stock
TOTAL MEMBERS’ EQUITY TOTAL LIABILITIES & MEMBERS’ EQUITY
8
Consolidated
statements of Operations SALES
2013
2012
$ 315,516,174
$ 297,102,925
124,466,905
122,687,056
439,983,079
419,789,981
Grain
298,056,046
271,138,490
Farm supply
112,450,628
110,543,890
410,506,674
381,682,380
29,476,405
38,107,601
7,361,324
4,893,644
919,430
1,113,935
5,293,795
4,833,498
Interest income
275,726
291,550
Gain on disposal of property, plant and equipment
557,249
560,560
1,391,054
810,919
15,798,578
12,504,106
$ 45,274,983
$ 50,611,707
Grain Farm supply
TOTAL SALES COST OF SALES
TOTAL COST OF SALES GROSS MARGINS ON SALES OTHER OPERATING INCOME Grain storage and handling services Limited liability companies Agronomy services
Miscellaneous
TOTAL OTHER OPERATING INCOME GROSS INCOME FROM LOCAL OPERATIONS
9
For Years Ended February 28, 2013 and February 29, 2012
OPERATING EXPENSES
2013
2012
Personnel costs
$ 15,695,798
$ 15,888,281
Fixed expenses
8,090,342
8,065,770
12,041,551
11,609,957
35,827,691
35,564,008
9,447,292
15,047,699
Patronage dividends
7,576,782
4,749,075
Investment income
2,976,900
1,519,595
TOTAL OTHER EARNINGS
10,553,682
6,268,670
NET EARNINGS BEFORE INCOME TAXES
20,000,974
21,316,369
(1,544,695)
(877,644)
268,806
(915,913)
TOTAL PROVISION FOR INCOME TAXES
(1,275,889)
(1,793,557)
NET EARNINGS BEFORE NONCONTROLLING INTERESTS
18,725,085
19,522,812
NONCONTROLLING INTERESTS
(4,651,309)
(6,179,958)
$ 14,073,776
$ 13,342,854
Other operating expenses
TOTAL OPERATING EXPENSES EARNINGS FROM LOCAL OPERATIONS OTHER EARNINGS
PROVISION FOR INCOME TAXES Current income taxes Deferred income taxes
NET EARNINGS
DISTRIBUTION OF NET EARNINGS Patronage dividends Retained earnings
TOTAL
$ 8,543,250
$ 5,948,610
5,530,526
7,394,244
$ 14,073,776
$ 13,342,854
10
Patronage distribution and
Equity redemptions 2013 PATRONAGE ALLOCATION
RATE
AMOUNT
Grain
20.02 cents / bushel
$ 3,557,062
Agronomy - Seed - Crop Protection
7.34% (avg. $44) / ton on fertilizer
Petroleum - Lubricants
3.61% (avg. 13 cents) / gallon on fuel
729,579
Feed - Merchandise
1.60%
161,338
TOTAL PATRONAGE ALLOCATION
4,095,271
8,543,250
EQUITY REDEMPTIONS
650,512
TOTAL DISTRIBUTIONS
$ 9,193,762
Patronage Distribution & Equity Redemptions – $9,193,762 Patronage Distribution Equity Redemptions
92.92% 7.08%
CASH DISTRIBUTIONS TO MEMBERS - 10 YEAR HISTORY YEAR ENDED
EQUITY REDEPMPTIONS
CASH PATRONAGE
TOTAL
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
2004
523,156
0
523,156
$ 6,169,821
$ 15,694,987
$ 21,864,808
TOTALS
11
Net earnings and
Local benefits 40
60
30
10
20
10
Millions
20
NET EARNINGS
30
40 Millions
GRAIN BUSHELS RECEIVED
50
0
0 2008
2009
2010
2011
2012
2013
Grain Receipts Net Earnings
2013 local benefits - $24,797,234 Personnel Costs Property Taxes Income Taxes Other Expenses
3% 5%
63%
29%
12
Historical data HISTORICAL NET EARNINGS $15,000,000
$14,073,776 $13,342,854
$12,000,000 $10,837,662 $8,871,405
$9,000,000
$8,219,209
$6,000,000 $4,324,814 $3,674,858
$3,000,000
0
$3,191,862
$3,033,082
$229,384
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
HISTORICAL RETURN ON EQUITY 35% 30.20%
30% 25% 21.43%
20%
20.48%
19.33% 17.22%
18.57% 16.31%
15%
12.77%
13.80%
10% 5% 1.41%
0%
13
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
COMMUNITY
STEWARDSHIP MKC takes great pride in contributing to the quality of life in the communities throughout its territory. This commitment is reflected by our contributions and activities that focus primarily on alleviating hunger, leadership development, ag education and community safety. Over the past five years, MKC has donated more than $300,000 to communities throughout central Kansas. • 4-H Leadership Development
• City and County Emergency Services
• Farm Safety Camps
• Women in Agriculture
• Kansas FFA Foundation and local FFA Chapters
• Young Business Professionals Programs
• Community Events and Festivals
• School Programs
• Ag in the Classroom
• Mennonite Relief
Top left: Programs supporting ag education benefited from over $5,000 in contributions in 2012. Top right: A total of $11,200 was donated to 10 area 4-H Leadership Development Funds in 2012.
Nine community food banks located throughout central Kansas benefited from donations totaling $15,700. In addition, MKC employees hosted their first-ever food drive, collecting more than 2,600 pounds of food.
15 14
mkcoop.com
MKC | 307 West Cole | P.O. Box D | Moundridge, KS 67107 | 620.345.6328 | fax 620.345.6330