This report analyzes the balance sheets and income statements of local farm supply

and marketing cooperatives, comparing 1996 and 1997 and trends over the past 10

years. The data in this report represent four cooperative sizes and types. Common

size income statements and balance sheets are used to compare different cooperative

sizes and types. Trends for major balance sheet and income statement items and ratio

analysis are used to compare and contrast cooperatives by size and type.

Key womlss Cooperatives, balance sheet, income statement, farm supply, marketing,

sales, and financial ratios.

Financial Performance of Local Farm Supply, Marketing Cooperatives, 1997

Beverly L. Rotan

Rural Business-Cooperative Service

Research Report 172

April 1999

Price: domestic-$4.50; Foreign-$5.50
Preface This report studied the financial statements of local cooperatives, comparing 1996,

1997, and the past 10 years. Trends of major balance sheet and income statement

items as well as financial ratios are presented for four cooperative sizes and types.

The information provides cooperative managers and boards of directors with a basis to

compare their cooperatives’ historical performance with representative cooperative

data.

The authors thank the cooperatives that provided their financial statements to RBS

and made this report possible. Special thanks to RBS staffer Eldon Eversull for review

of the initial draft.
Contents Highlights ...........................................................

Profile of Respondent Cooperatives ......................................l

Balance Sheet Definitions ..............................................3

Analysis of the Balance Sheet .......................................... .4

Description of the Income Statement .................................... .9

Analysis of the

Financial RatioI

Income Statement ....................................... .9

Analysis ............................................ ..16

Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...25
Highlights Financial statements of 386 local farm supply and marketing cooperatives were used

to compare trends over the past 10 years. Cooperatives were divided into four groups

based on their mix of net sales between supplies sold and farm products marketed.

They were also divided into four size categories, based on their total sales volume.

Average net income increased 7 percent from 1996 to 1997. In 1997, average net

sales for all cooperatives studied was $13.3 million, down 0.8 percent from 1996. More

than 36 percent of the cooperatives studied were small cooperatives with sales of less

than $5 million.

Cooperatives are important to rural communities’ economies by employing an average

22 full-time and 12 part-time employees with an average annual payroll of $788,000.

Petroleum products and fertilizer were the two principal farm supplies sold and represent 39 and 16 percent sales for small cooperatives. Farm supply sales provided just

over half of the operating income for these cooperatives.

Average total assets grew 2 percent between 1996 and 1997, while total liabilities

were down by about the same amount. This contrasts the double digit growth in total

assets in both 1995 and 1996, fueled by large increases in (mainly grain) inventories.

Owner equities increased 7 percent, while total borrowed funds decreased almost 13

percent.

With less borrowed funds, interest expenses declined 24 percent. The local savings

category was up 19 percent, patronage refunds received was up 3 percent and net

income was up 7 percent. Financial ratio analysis measured 1 O-year trends for the

386 cooperatives in the data base. The analysis revealed these findings:

l The current ratio was fairly steady at around 1.4 between 1995 and 1997. The

quick ratio mimicked the current ratio’s trend.

l Total debt ratio was 0.45 in 1997, higher than the early 1990’s but lower than

the high of 0.47 in 1995 and 1996.

l The fixed-asset-turnover ratio, a measure of asset use, has averaged at least

9.7 to 11.9 for the entire period ( i.e., net sales were 9.7 to 11.9 times property, plant,

and equipment levels).

l Return-on-total-assets measures the rate of return on total investments. At 8.7

percent, this measure was down slightly from 1996.

l Return-on-total-equity before taxes has remained between 9.2 and 11.2 in the

decade studied.

l Total-asset-turnover and gross margin remained constant throughout the loyear period.

. . . 111
Financial Performance of Local Farm Supply,

Marketing Cooperatives, 1997

Beverly L. Rotan

Rural Business-Cooperative Service

Introduction

With the freedom-to-farm legislation, local agricultural cooperatives are being relied on to play an

increasingly important role in helping farmers to help

themselves. Local cooperatives are owned by their

farmer-members and are at the forefront developing

ways for farmers to add value to their crops and provide a source of quality supplies at reasonable costs.

This report analyzes the financial statements of these

local agricultural cooperatives for comparative purposes for their managers, directors, and members.

Ratio analysis and trends will be discussed. To make

the information more useful, the presentation is subdivided into four cooperative sizes and four types.

The 386 local cooperatives had farm supply sales

(petroleum, fertilizer, feed, etc.) that averaged $7 million in 1997 while marketing sales (corn, wheat, soybeans, etc.) averaged $6.3 million. Income from services (product delivery, fertilizer application, grains

and oilseeds hauling and storage, etc.) averaged about

$500,000 in 1997, up from $400,000 in 1996. . Cooperatives were important not only to their

member-patrons but also to local rural communities.

Cooperatives paid an average of $37,000 in annual

property taxes and often were a large employer in

their communities. They employed an average of 22

full-time and 12 part-time employees with an average

annual payroll of $788,000.

Cooperative annual reports generally contain the

balance sheet and a statement of operations. More

detailed reports may contain a statement of changes in

patrons’ equity and a statement of cash-flows along

with explanations detailing various aspects of the

financial statements. The manager and the president of

the board may also provide a statement on the cooperative’s past year operating results and future plans.

This study focuses on the balance sheet, income statement, and financial ratios derived from these statements.

Profile of Respondent Cooperatives

Data were derived from an annual survey sent to

farmer cooperatives by USDA’s Rural BusinessCooperative Service. A participating cooperative had

to sell some farm supplies and provide detailed financial statements. No exclusively marketing cooperatives were included.

There were 386 cooperatives in the RBS’s Farm

Supply and Services (FSS) database from 1988 through

1997. To obtain a more complete understanding of the

local cooperatives’ business, information in this report

is divided into a cross section of four sizes and four

types:

Cooper8tive Size

Cooperatives were grouped into four sales-volume sizes, using actual figures. Sales groupings were

the same as in prior reports (see RR 154). Sizes and

types of the 386 cooperatives used are summarized in

table 1.

Because of differing standards, product mix was

not a factor in classifying cooperative size with total

sales used alone. For example, a cooperative with $10

million in sales from exclusively marketing grains and

oilseeds could be considered small compared with

most grains and oilseeds marketing organizations. But,

a strictly farm supply cooperative with sales of $10

million, however, was quite substantial.

Cooperative Type

To account for differences in operations and orientation based on product mix, cooperatives were
Table l-size and type definitions used for respondent cooperatives

Size/Type Definition Number

Percent of

total

Small Sales of $5 million or less 131 34

Medium Sales over $5 million to $10 million 91 23

Large Sales over $10 million to $20 million 84 22

Super Sales over $20 million 80 21

Farm supply All sales from farm supplies 210 54

Mixed farm supply 50 to 99 percent sales from farm supplies 56 15

Mixed marketing 25 to 49 percent sales from farm supplies 71 18

Marketing Less than 25 percent sales from farm supplies 49 13

Table 2- Respondent cooperatives by size and type

Cooperative type Small Medium

Cooperative Size

Large Super Total

Percent

of total

Farm supply 113 58

Mixed farm supply 8 14

Mixed marketing 6 13

Marketing 4 6

Total 34 23

Number

31

20

20

13

22

8 210

14 56

32 71

26 49

21 386

Percent

54

15

18

13

100

grouped into one of four descriptive categories: 1)

farm supply; 2) mixed farm supply; 3) mixed marketing; and 4) marketing. These descriptions were chosen

to represent business operations of these cooperatives

as closely as possible and their definitions summarized

in table 1.

This report focuses on cooperatives handling

farm supplies-54 percent in 1997 sold only farm supplies; 15 percent were mixed; 18 percent were mixed

marketing; and 13 percent were marketing (table 2).

Thirty-four percent were small, 23 percent medium, 22

percent large, and 21 percent super. Marketing cooperatives tended to be large while the farm supply cooperatives were most often small. Most respondents were

small farm supply cooperatives.

The first part of this report focuses on the 386

cooperatives that responded in both 1996 and 1997.

Information in the RBS database was not randomly

selected and may not be statistically valid to draw

industry-wide conclusions. However, the samples are

large and represent a cross section of cooperatives selling farm supplies and marketing grains and oilseeds

throughout the United States.

The information in this report also goes beyond

386 cooperatives and rural communities. These cooperatives operated 544 branches and had a significant

business impact on 930 rural communities in terms of

taxes and employment (table 3). Super cooperatives

that averaged almost four branch outlets had an

impact on more rural communities. Marketing cooperatives averaged two branch outlets.

Sales Mix

The respondent cooperatives sold five major farm

supplies and two major products (table 4). Petroleum

was the dominant production supply item sold by

small and medium cooperatives for both years. Sales

of small cooperatives averaged $2.5 million in 1997.

Farm production supplies represented the bulk (90

percent) of their sales. As cooperatives grew in size,
the importance of farm supplies declined (81 percent the majority of their sales. Feed, fertilizer, and crop

for medium-sized cooperatives, 65 percent for large, protectants were the most important farm supplies

and 38 percent for super). sold for both types of marketing cooperatives.

Sales by mixed farm supply cooperatives averaged $15 million, with $11 million of it from farm supply sales. Petroleum was the most important farm supply item sold and feed was a close second.

Average sales of marketing and mixed marketing

cooperatives were $27 million and $24 million, respectively, and much larger than both categories of farm

supply cooperatives. As defined, marketing made up

Balance Sheet Definitions

Balance sheet assets represent what the cooperative owns and are usually listed in decreasing order of

their liquidity-the time it would take to convert them

to cash. Liabilities, or what the cooperative owes to

others, are usually presented in a similar decreasing

order. Equity represents members’ investment in their

cooperative.

Table 5- Average and total number of branches

Cooperative SizeIType Average Total

Small 0.26 34

Medium 0.97 88

Large 1.55 130

Super 3.65 292

Farm supply

Mixed farm supply

Mixed marketing

Marketing

All

1 .Ol 213

1.88 105

1.85 131

1.94 95

1.41 544

Current asset-These are the most liquid assets

on the cooperative balance sheet. Cash and cash equivaZents represent monies either in the bank, in short-term

investments, or on hand at the cooperative. Accounts

receivable is money due the cooperative (i.e., a credit

sale due from the customer in 90 days). Znventories are

products the cooperative has purchased from patrons

to market and supplies the cooperative hopes to sell to

patrons. Prepaid expenses are those paid up-front and

then expensed as period costs throughout the fiscal

year (i.e., taxes or insurance).

Investments in other cooperatives-represent

equity held in regional cooperatives through whom

local cooperatives market products or purchase supplies and equity in the Bank for Cooperatives or

CoBank, their lending source. These investments are

purchased equity as well as equity (patronage) paid

Table E Average farm supplies sold and products marketed as a percent of total sales and percent change,

1996 to 1997

Item 1997 1996 - Percent change

Percent

Farm supplies sold:

Feed 9.94 8.98 9.85

Seed 1.10 1.02 7.15

Fertilizer 10.98 10.47 4.14

Crop protectants 8.26 7.65 7.18

Petroleum products 16.18 14.75 8.87

Other 6 5.66 5.06

Total 52.46 48.53 7.29

Products marketed:

Grains, oilseeds, and other 47.54 51.47 -8.35

Total sales 100 100

Based on sales of: $13,330,034 $13,432,360 -0.80

3
back to the cooperative based on use. The more sales

through or purchases from the regional cooperative or

borrowing from the bank, the larger the investment.

Other assets are usually past due accounts receivable

not yet considered as bad debt losses.

Property, plant, and equipment-are the fixed

assets of the cooperative (i.e., grain bins, office equipment, warehouse, gas station). Accumulated depreciation

is the sum of all the year’s depreciation expenses taken

on the assets. Net property, plant, and equipment (PP&E)

is the book value of the fixed assets-their cost minus

accumulated depreciation.

Tota2 assets-are what the cooperative ownscurrent assets, plus investments, plus net fixed assets

equal total assets.

Cuwent liabilities-are obligations the cooperative must pay within the next year. Accounts payable is

money owed, usually to suppliers (sometimes classified as accounts payable--trade accounts). Accrued

expenses and accrued taxes are unpaid expenses. They

often include unpaid salaries and benefits earned by

employees. Accrued taxes often include property and

sales taxes that have been incurred but not yet. paid.

Other liabilities in this study are most often accounts

payable-grains and oilseeds delivered and sold to the

cooperative by its patrons who have not yet been paid.

Retired equity represents allocated equity that the board

has approved to revolve to members but not yet paid

as of the closing date of the books. This equity accumulated from past sales to or purchases from

patrons-usually revolved to members on a set schedule (often 7 or more years later). Patronage refunds and

dividends are monies declared but not yet paid to members for current use of the cooperative and for investing in preferred stock.

Cooperatives are required to pay at least 20 percent of their refunds in cash, with the rest becoming

allocated equity to be revolved to the members at a

later date. The refunds are based on cents per product

(weight or bushel) sold and/or on a percent of the dollars of farm supplies purchased. The refunds are determined by the board of directors. Dividends paid on

preferred stock ownership are based on a set percent

return on the investment. Current portion of long-term

debt and seasonal short-term debt are the final current liabilities. They are money owed (principal) for borrowing money and for leases. Long-term debt typically is

used to finance long-term assets, while short-term debt

is usually used for operating or seasonal loans.

Long-term de&t-includes notes, bonds, mortgages, and leases not due within the current year.

Member equities-are member and patron investments in the cooperative. The two main types are allocated and unallocated. Allocated equity is assigned to

members in one of two forms. Unallocated equity is the

retained earnings of the cooperative and often thought

of as nonmember-nonpatronage business but can also

be based on member business.

Analysis of the Balance Sheet

The balance sheet of a local cooperative states its

financial position at the end of its 12.month fiscal

year. This report analyzes the balance sheets of 386

local cooperatives to provide examples of typical levels

for assets, liabilities, and member equities for different

sizes and types.

Table 5 compares common-size balance sheets for

all respondents for 1996 and 1997. Appendix tables l-4

show common-size balance sheets by size and type for

1997. Each account is listed as a percentage of total

assets. The dollar amount of total assets the balance

sheets represent is listed at the bottom of the table. For

1997, total assets ranged from $1.3 million for small

cooperatives to $14.7 million for super-sized cooperatives. By cooperative type, total assets were $3.4 million for farm supply, $7.4 million for mixed farm supply, $8.5 million for mixed marketing, and nearly $9

million for marketing.

Current Assets

Cash and cash equivalents as a percent of total

assets decreased as cooperative size increased except

for super-sized cooperatives. For small cooperatives,

cash was 9.1 percent of total assets and dropped to 5.4

percent for large cooperatives. Cash and cash equivalents as a percent of total assets for super cooperatives

was 7.02 percent (table 6). Mixed marketing cooperatives held the most cash by type (10.2 percent), followed by farm supply cooperatives (5.9 percent) as

shown in table 7.

From 1996 to 1997, current assets decreased by

4.3 percent. Most occurred in inventories, principally

grains and oilseeds inventories. Overall, these inventories decreased 22 percent while farm supplies

increased nearly 3 percent. The dollar value of farm

supplies and grains and oilseed inventories increased

with cooperative size. Farm supply inventories were

larger for mixed farm supply cooperatives and mixed

marketing cooperatives. Grain and oilseeds inventories of about 80 percent of the cooperatives declined

between 1996 and 1997.

Accounts receivable in this study refer to farm

supply trade accounts, not grains and oilseeds. Farm
Table 5- Common size balance sheet and change, 1996 to 1997

Item 1997 1996 Percent change

Percent of assetsASSETS

Current assets

Cash and cash equivalents

Accounts receivable

Inventories-grain

-farm supplies

Prepaid expenses

Other current assets l

6.76 5.66 22.2

12.61 12.34 4.6

8.96 11.72 -21.8

14.77 14.73 2.6

1.26 1.33 -3.3

4.89 6.91 -35.5

Total current assets 49.25 52.69 -4.3

lnvestments and other assets

Investments-Other cooperatives

-Bank for cooperatives

20.88 19.27 14.2

1.30 1.23 8.2

-Total

Other assets *

22.18 20.50 10.7

1.78 1.60 14.2

Total investments and other assets 23.96 22.09 11.0

Property, Plant, and Equipment

At cost

Less accumulated depreciation

67.54 64.08 7.9

40.74 38.87 7.4

Net, property, plant, and equipment 26.79 25.22 8.7

Total Assets 100 100 2.3

LIABILITIES AND OWNER EQUITIES

Current Ilabllltles

Current portion of long-term debt

Notes payable-seasonal

Accounts payable

Patrons credit balances and other liabilities

Accrued taxes

Accrued expenses

Patronage refunds (ash)

1.54 1.64 -7.3

9.90 14.18 -28.6

6.28 6.16 4.3

14.07 13.26 8.6

0.60 0.61 1.2

1.64 1.51 11 .o

1.53 1.42 10.4

Total current liabilities 35.56 38.70 -6.2

Long-term debt

Total Llabllltles

9.23 8.35 13.2

44.79 47.14 -2.7

Owner equltles

Allocated equity

Unallocated equity

41.31 39.75 6.4

13.90 13.11 8.4

Total owner equity 55.21 52.86 6.9

Total Llabllltles and Owner Equity 100 100 2.3

Based on assets of: $5,579,390 $5,451,626

1 ‘Other” current assets include prepaid expenses and other receivables.

2 “Other” assets include investments, goodwill, notes receivable, etc.

5
Table 6- Common size balance sheets by cooperative size, 1997

Item Small Medium Large Super

ASSETS

Current assets

Cash and cash equivalents

Accounts receivable

Inventories-grain

-farm supplies

Prepaid expenses

Other current assets l

9.08 6.62 5.42 7.02

15.16 14.58 13.56 11.31

1.37 1.96 4.72 13.52

19.86 17.15 15.59 13.23

2.31 1.11 0.87 1.30

1.71 2.98 3.65 6.39

Total current assets 49.48 44.40 43.82 52.77

Investments and other assets

Investments-Other cooperatives

-Bank for cooperatives

28.30 25.75 23.79 17.27

0.41 0.79 1.30 1.57

-Total 28.71 26.55 25.08 18.84

Other assets * 0.51 1.51 2.73 1.64

Total investments and other assets 29.22 28.06 27.81 20.48

Property, Plant, and Equipment

At cost

Less accumulated depreciation

69.26 69.25 67.82

41.72 40.87 41.07

Net, property, plant, and equipment 27.54 28.38 26.75

Total Assets

57.78

36.49

21.30

100 100 100 100

LIABILiTlES AND OWNER EQUITIES

Current liabilities

Current portion of long-term debt

Notes payable--seasonal

Accounts payable

Patrons credit balances and other liabilities

Accrued taxes

Accrued expenses

Patronage refunds (cash)

1.59 1.71 1.73 1.40

6.14 5.02 8.51 12.31

5.99 6.65 6.74 6.14

4.86 7.37 9.48 19.13

0.28 0.45 0.58 0.70

1.39 1.70 1.71 1.63

1.33 1.73 1.50 1.53

Total current liabilities 21.58

5.26

26.83

24.63 30.25 42.84

Long-term debt

Total Liabilities

8.24 11. 9.33

32.87 40.96 52.18

Owner equities

Allocated equity

Unallocated equity

Total owner equity

Total Liabilities and Owner Equity

Based on assets of:

55.19

17.99

73.18

100

$1,330,795

50.69 45.39 35.09

16.44 13.65 12.73

67.13 59.04 47.82

100

fK3,350,730

100 100

$5,941,567 $14,691,277

Percent of assets

l “Other” current assets include prepaid expenses and other receivables.

2 ‘Other” assets include investments, goodwill, notes receivable, etc.

6
Table 7- Common size balance sheets by cooperative type, 1997

Item Farm Mixed farm Mixed

. SUPPlY SUPPlY Marketing Marketing

Assets

Current assets

Cash and cash equivalents

Accounts receivable

Inventories-grain

-farm supplies

Prepaid expenses

Other current assets 1

5.91 4.27 10.23 5.67

14.41 16.00 11.64 7.78

0 4.20 12.95 22.03

19.88 17.30 12.02 8.33

1.46 0.69 0.79 2.12

2.94 2.70 6.17 8.39

Total current assets 44.60 45.17

21.29

1.33

53.79 54.33

Investments and other assets

Investments-Other cooperatives

-Bank for cooperatives

26.25

0.91

17.89 15.92

1.38 1.80

-Total 27.16 22.62 19.27 17.72

Other assets 2 1.84 2.56 1.12 1.86

Total investments and other assets 29.01 25.18 20.39 19.58

Property, Plant, and Equipment

At cost

Less accumulated depreciation

61.46 72.80 69.75 69.33

35.07 43.14 43.94 43.23

Net, property, plant, and equipment 26.39 29.66 25.81 26.10

Total Assets 100 100 100 100

LIABILITIES AND OWNER EQUITIES

Current liabilities

Current portion of long-term debt

Notes payable-seasonal

Accounts payable

Patrons credit balances and other liabilities

Accrued taxes

Accrued expenses

Patronage refunds (cash)

1.70 1.69 1.14 1.68

7.23 10.27 9.00 15.15

7.07 8.45 5.43 4.11

5.92 6.43 22.79 22.43

0.42 0.44 0.92 0.60

1.86 2.40 1.25 1.08

1.74 1.33 1.67 1.20

Total current liabilities

Long-term debt

Total Liabilities

25.95

8.83

31.01 42.21 46.25

12.42 6.91 10.10

34.78 43.43 49.12 56.35

Owner equities

Allocated equity

Unallocated equity

50.32 44.56 35.65 31.20

14.90 12.02 15.23 12.45

Total owner equity 65.22 56.58 50.88 43.65

TOTAL LIABILITIES AND OWNER EQUITY 100 100

$7,359,495

100 100

Percent of assets

Based on assets of: $3,353,388 $8,520,976 $8,822,690

l ‘Qther” current assets include prepaid expenses and other receivables.

2 Wther assets include investments, goodwill, notes receivable, etc.

7
supply and grains and oilseeds trade receivables

(“other” current assets) were separated to allow ratio

analysis elsewhere in this study. Accounts receivable

increased nearly 5 percent, growing at about the same

rate as the increase in farm supply sales.

Most cooperatives have credit sales with discounts offered to promote prompt payment. Terms

might be a 2 percent discount if paid within 10 days or

no discount if paid within 30 days. Discounts might be

offered on all farm supply sales or on certain products.

The terms and what products had discounts were not

known, but 81 cooperatives listed their discount on

sales, and it was .32 percent on total farm supply sales.

The age of accou.nts receivable is known for 62

cooperati ves (table 8). Forty-three percent were current

in both years. In 1997, another 13 percent were from 31

to 60 days old. The largest difference between the 2

years was only 2 percentage points from receivables 61

to 90 days old.

Investments and Other Assets

About 1.3 percent of cooperative’s total assets

was invested in the Bank for Cooperatives or CoBank.

Larger cooperatives and both types of marketing cooperatives had comparable investments. Meanwhile,

in other cooperatives dropped from a .investments hlsh

of 28 percent for small cooperatives to 17 percent for

super cooperativ ‘es. Across types, farmsupply cooperatives had less invested while marketing cooperatives

had the largest amounts invested in other cooperatives

and Bank for Cooperatives.

Property, Plant, and Equipment

Net property, plant, and equipment (W&E) as a

percent of total assets ranged from 21 percent to 28

percent and increased with cooperative size except for

super cooperatives. Net R&E increased 8.7 percent

Table t+ Age of accounts receivable, 1997 and 1996

Accounts receivable age 1997 1996

Small 0.26

Current (0 to 30 days) 43

31 to 60 days 13

61 to 90 days 10

91 to 120 days 6

121 to 180 days 13

Greater than 6 months 15

Based on accounts

receivable of: $271,507,696

Percent

34

43

14

8

7

12

16

$259,611,950

from 1996. Cooperatives that handled grains and

oilseeds had higher dollar amounts of PP&E, probably

because marketing cooperatives were larger than farm

supply cooperatives and had larger grains and

oilseeds storage and handling facilities.

Current Liabilities

Current liabilities declined 6 percent between

1996 and 1997. The largest decrease was in notes

payable-seasonal used to finance current operations

and usually for inventories. Notes payable-seasonal

declined from 14 percent of total liabilities and owners’

equity to about 10 percent. Notes payable-seasonal’s

dollar value increased between cooperative types.

Marketing cooperatives’ notes payable-seasonal was

more than five times larger than farm supply cooperatives. Also, patrons’ credit balances and other liabilities grew by 8.6 percent.

Accrued expenses and patronage refunds were

the only other current liabilities that grew in double

digits. Accrued expenses grew by 11 percent and

patronage refunds grew by almost 3 percent. For both

types of farm supply cooperatives, accrued expenses

as a percent of assets were greater than for both types

of marketing cooperatives. Cash patronage refunds

and dividends grew 10.4 percent but were less than 2

percent of total assets for all sizes and types of cooperatives.

Long-tear Debt

Long-term debt increased by 13.2 percent. As a

percent of total assets, long-term debt generally

increased with cooperative, except for super cooperatives (9.3 percent). By type as a percent of total assets,

long-term debt was highest for mixed farm supply

cooperatives (12.4 percent) and lowest for mixed marketing cooperatives (6.9 percent). More than onefourth of the cooperatives had no long-term debt.

Usually these were small farm supply cooperatives.

Nearly 84 percent of the cooperatives provided

information in four main sources of their $412 million

total debt (short- and long-term combined)-Bank for

Cooperatives and CoBank, commercial banks, debentures or notes, and other. A regional cooperative was

most often the “other” category source because the

local cooperative often purchases its farm supplies and

markets its grains and oilseeds through that regional.

The debt may be short-term operating capital or longterm investment capital.

Bank for Cooperatives and CoBank were the

most frequent source of debt capital (61 percent).

Others were regional cooperatives (26 percent), deben8
tures or notes (7 percent), and commercial banks (6

percent). Most sources, except debentures and notes,

extend lines of credit.

Member Equities

Member equities to total assets represent the percent of the cooperative’s assets owned by the members, with creditors claiming the rest. Members of

small cooperatives had the highest percentage of ownership (73.2 percent) while members of super-sized

cooperatives had the lowest (47.8 percent). By cooperative type, members of farm supply cooperatives

owned at least 65 percent of their cooperatives’ assets

while members of mixed farm supply cooperatives

owned more than 56 percent. Both types had lower

member ownership-43.6 percent for marketing and

50.9 percent for mixed marketing cooperatives.

Member equities consisted of both allocated (preferred, common, and other kinds of ownership certificates) and unallocated equity. Allocated equity as a

percentage of total assets was highest for small cooperatives at 55.2 percent.

Unallocated equity average for all types of cooperatives ranged from 12.0 to 15.2 percent of total assets

with mixed farm supply at the low end and mixed

marketing at the high end. For all sizes, unallocated

equity to total assets fell as cooperative size increased.

Description of Income Statement

The income statement shows the results of operations for the past year and usually includes both the

current and prior year. It lists all sources of revenue

and expenses. Although it does not show timing of

cash-flows, the statement best describes the status of

the business.

In the analysis of income statements, net sales

were set at 100 percent to find out the proportion that

a single item represented in a total group or subgroup.

Because the income statement variables were

expressed as a percent of net sales, comparisons were

possible between different sizes and types of operations. Thus, the statement used in this report became

known as a “common size.” This statement was provided for the average cooperative respondent in table

9. The first item listed on the income statement, net

sales, was the primary source of revenue---farm supplies sold and products marketed.

Cost of goods sold (COGS) was the amount a

cooperative paid for the products it sold and marketed-cost to the cooperative for the supplies sold and

payments to farmers for products marketed. Net sales

less COGS represented the gross margin on sales.

Service and other income came mainly from providing services to cooperative patrons such as delivery,

chemical and fertilizer application, grain drying, and

storage. Although substantial for some cooperatives,

service income was not considered a primary source of

revenue.

Operating expenses were usually classified by

function like employee, administrative, general, and

depreciation, interest, and bad debts.

Local savings resulted from operations before

taxes and patronage refunds from other cooperatives.

Patronage refunds were based on volume of business

conducted with another cooperative and were dependent on the other cooperative’s net income. Usually,

this income was allocated equity and not actual cash

coming into the respondent cooperatives.

Net income was the end result of operations for

that year. Distribution of net income was not part of

the income statement. The board of directors decides

how to distribute net income or allocate a net loss.

Analysis of the Income Statement

The income statement displays the net results of

cooperative operations. Because most managers’ performance is judged by net income, members focus on

the income statement. In the following sections, the

underling values of the income statement are studied.

Table 9 presents a common-size income statement for

386 cooperatives and the change between 1996 and

1997. Appendix tables 5 to 8 show common-size abbreviated income statements by size and type for 1997.

Net Sales

The first item of the income statement analyzed

in this report was net sales determined by subtracting

sales discounts and returns and allowances from gross

sales. The average for the 386 cooperatives in 1997 was

$13.3 million, down $102,300 or 0.8 percent from 1996.

Net sales for 1996 and 1997 by cooperative size are presented in table 10 and by type in table 11. Super-sized

cooperative sales were 15 times larger than those of

small cooperatives. Net sales were about twice the

level of assets for all types (except marketing) and

sizes of cooperatives.

Cost of Goods Sold

Cost of goods sold (COGS) represented the

largest single component of expenses, usually

expressed as a percent of net sales. For these cooperatives, COGS was the purchase price of the farm supplies sold or products marketed. Table 11 shows COGS

as a percent of net sales for the different types of coop9
Table Q- Income statement and change, 1996 to 1997

Item 1997 1996 Percent change

Net sales 100 100 -0.8

Cost of goods sold 89.94 90.18 -1.0

Gross margin 10.06 9.82 1.6

Service and other income 3.60 2.93 21.9

Gross revenue 13.66 12.75 6.3

OPERATING EXPENSES

Employee:

Salaries and wages

Payroll taxes

Employee insurance

Pension expense

5.03 4.63 7.7

.34 .32 6.6

.41 .39 3.9

.I1 .I2 -6.1

Total 5.89 5.46 7.1

Administrative:

Professional services

Off ice supplies (includes postage)

Telephone, markets

Meetings

Donations 1

Dues and subscriptions

Directors’ fees and expense

Annualmeetingsexpensel

.I7 .I6 1.9

.20 .I9 4.3

.09 .09 5.8

.06 .06 6.7

.oo .oo -8.3

.Ol .Ol 0.0

.03 .03 8.1

.oo .oo -4.0

Total .56 .54 4.1

General:

Advertising and promotion

Delivery (autoandtruck) expense

Insurance

Property and business taxes

Other taxes and licenses

Rent and lease expense

Plant supplies and repairs

Repair and maintenance

Utilities (includes dryer expense)

Miscellaneous expenses

Other expenses

.18 .I7 3.3

.71 .65 7.4

.46 .45 2.5

.28 .27 3.0

.03 .03 7.8

.I6 .I4 14.0

.07 .06 11.4

.73 .64 12.3

.47 .38 22.3

.06 .05 14.8

.32 .29 9.3

Total 3.47 3.14 9.6

Depreciation 1.63 1.51 7.3

Interest expense .83 1.08 -23.8

Bad debts .I7 .I1 54.9

Total expenses

Local savings

Patronage refunds received

Savings before income taxes

Less income taxes

Net income

Based on sales of:

12.55 11.83 5.3

1.11 .92 18.9

1.73 1.67 2.9

2.84 2.59 8.6

.23 .I8 26.2

2.61 2.41 7.3

13,330,034 13,432,360

-Percent of net sales -

l Less than 0.003.

10
Table IO- Abbreviated income statement as a percent of net sales, by cooperative size, 1997

Item Small Medium Large Super

Percent of assets

Net sales 100 100 100 100

Cost of goods sold 85.22 85.72 87.90 92.01

Gross margins 14.78 14.28 12.10 7.99

Service and other income 3.04 3.93 3.51 3.62

Gross revenue 17.82 18.21 15.61 11.61

Expenses:

Employee l 8.76 8.06 7.16 4.74

Administrative 2 1.10 0.88 0.70 0.40

General 3 3.98 4.14 3.78 3.13

Depreciation 1.85 2.15 1.83 1.43

Interest 0.73 0.79 0.90 0.82

Bad debts 0.24 0.22 0.20 0.14

Total expenses 16.66 16.28 14.57 10.66

Local savings 1.16 1.93 1.05 0.96

Patronage refunds received 2.21 2.11 1.99 1.52

Savings before income taxes 3.37 4.04 3.04 2.48

Less income taxes 0.19 0.26 0.31 0.21

Net income 3.18 3.78 2.73 2.27

Based on total sales of: $2,490,154 $6,757,352 $13,192,852 $38,700,803

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors’ fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.

eratives. Both types of marketing cooperatives had a

relatively high COGS compared with farm supply

cooperatives because the former generally market

grains and oilseeds for their patrons with only a few

cents per bushel margin. There was negligible change

in COGS for all cooperative sizes between the 2 years.

Gross Margins

Gross margin for all cooperatives was down 1

percent from 1996. A cooperative manager must maintain a gross margin near industry averages. Thus, least

cost sources of supplies need to be developed and

marketing cooperatives must pay market rates on the

products they purchase.

Cooperatives are often characterized as businesses that provide goods and services “at cost.” However,

a cooperative cannot continuously operate at cost.

Therefore, unless a cooperative has an adequate gross

margin, it can neither be profitable nor afford to

finance essential future-directed discretionary expenditures such as expansion and advertising.

Cooperatives with higher COGS had lower gross

margins. COGS were higher for marketing and larger

cooperatives, so gross margins as a percent of net sales

were highest for farm supply and small cooperatives.

Farm supply cooperatives-17.3 percent-had the

highest gross margin. Although both types of farm

supply cooperatives had less business volume than

11
Table I I- Abbreviated income statement as a percent of net sales, by cooperative type, 1997

Item Farm Mixed farm Mixed

SupPly SupPly Marketing Marketing

Percent of assets

Net sales 100 100 100 100

Cost of goods sold 82.67 86.08 93.15 95.08

Gross margins 17.33 13.92 6.85 4.92

Service and other income 3.40 4.38 3.81 3.00

Gross revenue 20.73 18.30 10.66 7.92

Expenses:

Employee l 9.60 8.54 4.11 3.09

Administrative * 3.19 2.68 0.75 0.95

General 3 4.53 4.31 2.39 1.67

Depreciation 2.33 2.10 1.33 1.95

Interest 0.95 1.11 0.61 0.82

Bad debts 0.21 0.27 0.06 0.20

Total expenses 20.81 19.01 9.25 8.68

Local savings 2.11 1.19 1.18 0.54

Patronage refunds received 2.59 1.82 1.48 1.21

Savings before income taxes 4.70 3.01 2.66 1.75

Less income taxes 0.30 0.17 0.24 0.12

Net income 4.40 2.74 2.42 1.63

Based on total sales of: $5,914,583 $15,275,288 $24,387,467 $26,865,394

l Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

* Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors’ fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other

those that performed marketing activities, their gross

margin percentage was about 8 percentage points

higher.

Gross margins vary by cooperative and by farm

supply sold or product marketed. Margins are different for each product. Cooperatives that provided their

individual product gross margins are shown in table

12. Margins vary with product type and competition.

For instance, fertilizer sold by the truckload has a different margin than a single-bag sale. The services

offered in conjunction with a sale (e.g., fertilizer spread

by a cooperative truck) impact margins. Competition

is another factor. The gross margin discussed earlier is

a blended margin on all products the cooperative sold,

services rendered, and products marketed.

12

The highest weighted (by volume) gross margin

for the five main farm supplies was for fertilizer with a

gross margin of almost 18 percent. If the gross margin

is extremely low, it may mean that the cooperative is in

a very competitive market. Grains and oilseeds were

the only products marketed where gross margins were

known. Grains and oilseeds margins were low, only

around 3 percent.

Service and Other Income

Service and other income, for the most part, consisted of trucking services (both delivery of purchases

to patrons and transfer of their products to market),

custom application of fertilizers and crop protectants,

and drying and storing of grains and oilseeds. Local
Table w- Gross margin on farm supplies sold and grains and oilseeds marketed

Item 1997 1996

--Percent ----

Feed 13.94 14.39

Seed 13.73 12.79

Fertilizer 17.72 17.69

Crop protectants 14.98 13.99

Petroleum products 15.22 16.27

Tires, batteries, and auto accessories 20.75 21.28

Machinery 17.05 16.21

Building materials 18.14 20.50

Food 24.83 25.64

Other farm supplies 18.73 18.24

All farm supplies 15.96 16.34

Grains and oilseeds 2.99 4.20

All products marketed 3.02 5.23

Number of observations

Number

66

64

71

64

49

36

6

I5

I3

73

77

40

40

cooperatives provided many other services to their

patrons, but these were the primary ones of respondents. This income averaged between 3 percent and 4

percent of net sales for all sizes and types of cooperatives and grew among all types and sizes between the

2 years.

Other income was derived from non-operating

sources such as interest and finance charges. This

income included interest on cash equivalents and

interest charged on credit sales.

Other income also came from the sale of property,

plant, and equipment, rentals, and extraordinary

items. Sometimes they are sold to generate income, but

usually they were fully depreciated assets where the

market value was greater than the book value. In some

cases, disposal of a fully depreciated asset meant a loss

to the cooperative. Rental income from unused facilities or equipment provided income flows.

Extraordinary items might be either a gain or a loss. A

gain could result from a fire loss where the insurance

settlement was greater than the book value of the

asset. A loss might be from flood damage for which

the cooperative had no coverage.

Operating Expenses

Operating expenses were divided into four main

categories-employee; administrative; general; and

depreciation, interest, and bad debts. Employee

expenses were related to labor costs. Administrative

expenses were overhead costs associated with a cooperative and indirectly related to revenue production.

General expenses were directly related to revenue production in employee, general, and depreciation categories.

Employee Expenses -Employee expenses included

salaries, wages, and benefits (payroll taxes, employee

insurance, unemployment compensation, and pension

expense) and averaged 5.9 percent of net sales for all

respondents. Employee expenses were up 7.1 percent

from 1996.

As a percent of net sales, employee expenses

decreased as cooperative size increased-8.8 percent of

net sales for small cooperatives to 4.7 percent for super

cooperatives. By type, employee expenses as a percent

of net sales were 9.6 percent for farm supply cooperatives and 3.1 percent for marketing cooperatives.

These expenses were for all employees and .

include both wages and benefits. For purposes of this

study, four part-time employees were considered the

equivalent of one full-time employee. * Based on that

calculation, the expense for a single employee averaged $35,814 for an average 22 employees, up almost 3

percent from 1996. By size, they ranged from $31,148

for small to $37,405 for super cooperatives and by type

from $35,472 for cooperatives selling only farm supplies to $38,590 for mixed marketing cooperatives.

Small cooperatives averaged seven actual full-time

employees (excludes part-time), medium, 16; large, 25;

and super, 49 (table 13). Farm supply cooperatives

1 Based on previous research conducted by RBS economist David

E. Cummins.

13
averaged 16 employees, mixed farm supply, 37; mixed

marketing, 26; and marketing, 22. The average number

of employees was about the same for both years. The

largest increase in the number of employees (4) was in

super cooperatives.

Cooperatives with mostly farm supply sales

tended to be more labor intensive. Operating a feed

mill or service station, applying chemicals and fertilizers, and selling hardware required the use of several

employees. For instance, a small farm supply cooperative had seven full-time employees while a small marketing cooperative often used only a manager, bookkeeper, and two others.

Bad debts as a percent of net sales fell as cooperative size increased+!rom 0.2 for small cooperatives

and 0.1 for super cooperatives. Bad debts were 0.2 for

both farm supply and marketing cooperatives and

around 0.1 for mixed marketing cooperatives.

Although directors’ fees and expenses were a

small part of total costs, director compensation was

important to many cooperatives to get farmers to sacrifice time normally spent on their own operations to

devote time each month to guiding their cooperative.

Table 14 shows compensation for directors in 1997.

Expenses averaged a modest amount, $618 per director

for a typical seven-member board. Small cooperatives

Table IA Board member compensation

Cooperative Size/type Compensation

Small $319

Medium 646

Large 812

Super 921

Farm supply 638

Mixed farm supply 1,084

Mixed marketing 517

Marketing 470

Average of all 618

Administrative Expenses -Administrative expenses

were indirectly related to generating income.

Managers usually had most control over

administrative expenses. In years when revenues were

down, managers could reduce these expenses more

easily than others. Administrative costs include

professional services, donations, dues and

subscriptions, directors’ fees and expenses, annual

meetings, meetings and travel, office supplies, and

telephone and market information.

Office supplies were 0.2 percent of net sales-the

largest administrative expense. Professional services

(legal, accounting, and computer) were 0.17 percent or

the second largest expense category. Total administrative expenses were 0.6 percent of net sales. These

expenses decline from 1.1 percent for small cooperatives to 0.4 percent for super cooperatives.

Table 13-Calculated salaries (using both full- and part-time employee expenses) and actual number of fulltime employees, 1997

Item Small Medium Large Super All

Percent of net sales

Farm supply salaries $32,295 $34,521 $36,705 $40,762 $35,472

Number of employees 7 18 34 58 16

Mixed farm supply salaries

Number of employees

26 291 - 9

8

35,411 40,456 37,283 33,249

16 30 75 37

Mixed marketing salaries 32,510 37,249 35,709 39,890 38,590

Number of employees 4 9 15 43 26

Marketing salaries 34,686 35,061 39,812 35,981 37,728

Number of employees 4 6 10 36 22

All salaries 31,148 34,061 37,784 37,405 35,814

Number of employees 7 16 25 49 22

14
paid directors the least ($319) and super ones paid the

most ($921). Mixed farm supply cooperatives paid the

most at $1,084 per director.

General Expenses -Fixed short-run expenses were

associated with income production. These expenses

included advertising and promotion, delivery (auto

and truck), general insurance, property, business and

other taxes and licenses, rent and lease expenses, plant

supplies and repairs, repairs and maintenance, utilities

(including dryer expenses), miscellaneous, and other.

Most (except for advertising and promotion) were not

under direct management control.

General expenses averaged 3.5 percent of net

sales in 1997-repairs and maintenance at 0.73 percent

followed by delivery expense, 0.71 percent; utilities,

0.47 percent; and insurance, 0.46 percent. General

expenses were 4 percent for small cooperatives and 3.1

percent for super cooperatives and 4 percent for both

farm supply cooperatives and around 2 percent for

both marketing cooperatives.

Depreciation as a percent of sales for mediumsized cooperatives was about 2.2 percent and fell to 1.4

percent for super cooperatives and 2.3 percent for farm

supply cooperatives, 2.1 percent for mixed farm supply, 1.3 percent for mixed marketing, and 1.9 percent

for marketing cooperatives.

Interest Expenses

Interest expenses, especially for short-term borrowing fell dramatically, from 1.08 percent of net sales

in 1996 to 0.83 percent in 1997 and were lowest among

small cooperatives at 0.73 and grew to 0.90 percent for

large cooperatives. For super cooperatives, interest

expense to net sales was 0.82 percent and ranged from

0.61 for mixed marketing to 1.1 for mixed farm supply

cooperatives.

Local Savings

Local savings (income) was generated from operations (before taxes and patronage refunds from other

cooperatives). As a percent of net sales, it was highest

for medium cooperatives (1.9 percent) and lowest for

super cooperatives (almost 1 percent) and highest for

farm supply cooperatives (2.1 percent) and the lowest

for marketing cooperatives (0.54 percent). Medium

farm supply cooperatives had higher local savings

than larger marketing cooperatives.

About 25 percent or 94 cooperatives studied had

losses. Forty-nine or 36 percent of small cooperatives

lost money Table 15 shows losses by size and type.

Thirty-nine percent of the mixed farm supply cooperatives lost money. Most likely to lose money were small

mixed farm supply cooperatives (34 percent).

Although 50 percent of small mixed farm supply,

mixed marketing, and marketing cooperatives, and

medium mixed farm supply cooperatives had small

losses. Overall, local savings fell by $23,000 or 19 percent.

Patronage Refunds Received

Patronage refunds received or income from other

cooperatives resulted from business with other cooperatives such as regionals or cooperative banks.

The patronage refund from regionals was based

on business volume and consisted of cash refunds and

equity stock. The equity stock was usually revolved

back to the local cooperative on a set schedule. Many

respondent cooperatives also borrowed funds from

CoBank and the Bank for Cooperatives and received

both cash and noncash patronage income. The noncash

patronage from CoBank or the Bank for Cooperatives

was from investing in the bank which was usually

required in proportion to the funds borrowed.

Patronage refunds reflect the volume of business

with regional cooperatives, CoBank or the Bank for

Cooperatives. Patronage refunds were up 3 percent

able IS- Respondent cooperatives that had losses

Cooperative size

Item Small Medium Large Super Average

Percent

Farm supply 34 12 13 0 23

Mixed farm supply 50 50 40 21 39

Mixed marketing 50 38 10 6 15

Marketing 50 17 23 19 22

Average 36 22 20 13 24

1 5
from 1996 to 1997 or 2.2 percent of net sales for small

cooperatives and 1.5 percent for super cooperatives.

Refunds received as a percent of net sales were higher

for farm supply cooperatives than for marketing cooperatives. Refunds were an important source of revenue

for 60 of the 94 cooperatives and allowed them to

show net income.

Income Taxes

Cooperatives paid income taxes on earnings not

allocated to members (retained earnings) and on dividend payments. The board determines what amounts

of income are allocated to retained earnings and to

members. The treatment of nonmember business has

an impact on retained earnings because the cooperative could allocate the earnings to nonmembers or

retain the income. In terms of net sales, income tax

paid was 0.2 percent of net sales in 1997.

Income tax paid by cooperatives varied by size

and type-O.2 percent for small cooperatives, 0.3 for

medium and large and 0.2 for super cooperatives. Both

mixed farm supply and mixed marketing cooperatives

paid income taxes equal to almost 0.2 percent of their

net sales; farm supply cooperatives, 0.3 and mixed

marketing, 0.1.

Net Income

Net income for medium cooperatives decreased

as they grew in size. Generally, net income was up 7

percent from 1996. For small cooperatives net income

represented 3.2 percent of net sales, medium, 3.8 percent; large, 2.7 percent; and super, 2.3 percent. Farm

supply cooperatives had returns of 4.4 percent on net

sales, mixed farm supply had 2.7 percent, mixed marketing cooperatives, 2.4 percent, and marketing coopera tives, 1.6 percent.

Pre-tax income was generally distributed five

ways-non-cash patronage allocations, cash patronage

refunds, retained earnings, income taxes, and dividends on patron’s equity (table 16). Nearly 54 percent

of net income before taxes was held as non-cash

patronage allocations. Cash patronage refunds were 15

percent. Distributions of income were basically

unchanged from 1996. For both years, about 8 percent

of those reporting had dividends on preferred stock.

Financial Ratio Analysis

Looking beyond levels of assets, liabilities, member equities, sales, and expenses, cooperative managers and boards of directors need comparative measures to evaluate their cooperative’s financial

performance.

gable 16- Distribution of net income before taxes

Item 1997 1996

Percent

Non-cash patronage

allocations

Cash patronage refunds

Retained earnings

Taxes

Dividends

53.78 54.32

15.37 15.80

23.18 22.64

7.53 7.11

0.14 0.13

Net income before taxes: $145,005,260 $134,562,341

Standard financial ratio analysis allows performance comparisons between years and different cooperatives. No single financial indicator will provide

enough information to determine a cooperative’s

financial health. Therefore, ratios must be carefully

interpreted. It is important to look at a group of financial ratios over a period of time, evaluate other cooperatives with similar sales and functions, and/or compare performance with other cooperatives in the same

geographical area.

Ratios used in this study were similar to prior

studies. Data reflected information gathered from the

same 386 cooperatives that reported for both years.

Performance ratios were used in four categories-liquidity, leverage, activity, and profitability.

Many factors underlie each ratio and examining one

ratio may not help pinpoint problems.

Liquidity Ratios

Current and qu.ick liquidity ratios

cooperative’s ability to meet shor‘t-term

measure the

obliga tions

and remain solvent. The current ratio is current assets

divided by current liabilities. However, this ratio does

not consider the degree of liquidity of each of the components of current assets. In other words, if the current

assets of a cooperative were mainly cash, they would

be much more liquid than inventory.

If the ratio is less than 1, current liabilities exceed

current assets and the cooperative’s liquidity is threatened. This ratio can be improved by selling additional

capital stock, borrowing additional long-term debt, or

disposing of unproductive fixed assets and retaining

proceeds. Current liabilities may also be reduced by

retaining more allocated savings (reducing the cash

portion).

A high current ratiOi.ndicates the ability to Pay

current liabilities from the conversion of current assets

into cash. Operationally, this same high ratio tends to

16
increase operating freedom and reduce the probability

of bill-paying difficulty from writedowns of accounts

receivable or inventory.

Figure 1 shows the current and quick ratios for

the surveyed cooperatives. The current rafio was relatively constant for the last 3 years, at or near 1.4. The

total current assets and total current liabilities

decreased in 1997,4.3 and 6.2 percent, respectively.

From 1996 to 1997, farm supply inventories; cash and

cash equivalents; and accounts receivable-classified

as a current asset-and all liabilities classified as current grew except for notes payable-seasonable and current portion of long-term debt.

The current ratio fell as cooperative size

increased. The ratio was highest for small cooperatives

(2.29) and fell to 1.23 for super cooperatives (table 17).

The ratio was 1.17 for marketing cooperatives and 1.72

for farm supply cooperatives (table 18).

Quick ratio is current assets minus inventories,

divided by current liabilities. A high ratio allows little

dependence on the salability of inventory to meet current obligations. Operationally, the results are the same

as with current ratio.

Until 1995, the quick ratio mimicked the movement of the current ratio. For the next 3 years, this

ratio climbed slightly each year. Small cooperatives

(1.31) had the highest ratio and it also decreased as

size increased to 0.61 for super cooperatives (table 17).

The quick ratio ranged from 0.52 for marketing cooperatives to a high of 0.95 for farm supply cooperatives.

This ratio was highest in 1990 and lowest in 1995 (figure 1).

Leverage Ratios

Leverage ratios look at the long-term solvency of

the cooperative. They help to analyze the use of debt

and the ability to meet obligations in times of crisis.

Debt ratio is defined as total liabilities divided by total

assets. Total liabilities decreased while total assets

increased, so the debt ratio should have improved.

Short-term debt also decreased 28.6 percent

between 1996 and 1997 (table 5). Lenders would rather

see a low ratio indicating the cooperative’s ability to

repay the loan. Overall, this ratio decreased from .47 to

.45 because assets increased by 2 percent while liabiliTable 17-Financial analysis ratios by COOperatiVe Size, 1997

Ratio Small Medium Large Super

Liquidity

Current

Quick

Leverage

Debt

Debt-to-total-equity

Times-interest-earned

Activity

Total-asset-turnover

Fixed-asset-turnover

Profitability

Gross profit margin

Return on total assets before

interest and taxes

Return on total equity

Average total revenue $2,620,678 $7,165,746 $13,918:565 $40,691,006

Average total assets 1,330,795 3,350,730 5,941,567 14,691,277

2.29 1.80 1.46 1.23

1.31 1.03 0.70 0.61

0.27 0.33 0.41 0.52

0.63 0.51 0.31 -0.09

5.60 6.14 4.36 4.02

1 .a7 2.02 2.22 2.63

0.79 7.32 7.83 9.05

14.78 14.28 12.10 7.99

7.67 9.73 8.74 8.68

0.13 11.34 10.25 12.51

17
Figure I- Current and Quick Ratios

Ratio

2

1.5

1

0.5

0

Current

Quick

I I I I I I I I I I

1988 89 90 91 92 93 94 95 96 97

ties decreased by almost 3 percent (figure 2).

Increasing savings or financing more assets with working capital may improve this ratio.

Larger cooperatives were financing more of their

assets with debt and the highest ratio for any size or

type of cooperative was 0.56 (table 18). Small cooperatives had the lowest use of debt at 0.27 but 0.56 for

marketing cooperatives. Farm supply cooperatives had

the lowest use of debt.

Debt-to-equity ratio is calculated by dividing debt

ratio by total equity divided by total assets. This ratio

shows the financial flexibility and the long-term capital structure of the cooperative. High ratios indicate

inadequate borrowing power of the cooperative. Debtto- equity ratio increased from 0.11 in 1996 to 0.19 in

1997 (figure 2 & table 19). A low ratio is more favorable and has a financial impact on the cooperative

through independence on outside sources of funds relative to owners’ equity. A low ratio may indicate low

return on equity but also tends to reduce interest cost.

Improvement may be gained by reducing long-term

debt by disposing of unproductive assets and using

proceeds to liquidate debt, or accelerating payments

on long-term loans. Other ways include increasing

local equity by generating higher levels of local savings, slowing equity retirement programs, selling additional capital stock, or retaining more allocated savings.

Use of long-term debt declined as cooperative

size grew. The ratio for farm supply cooperatives was

0.63 and -0.09 for super cooperatives (table 17). Longterm debt for super cooperatives was almost 20 times

that of small cooperatives. Mixed marketing cooperatives, at 0.97, had the highest ratio by type while farm

supply cooperatives had the lowest at 0.53.

Times-interest-earned ratio is the number of times

interest expense is covered by earnings. It is calculated

by dividing earnings before interest and taxes by interest expense. A ratio of one or more indicates the ability

of current earnings to pay current interest expenses.

Lending institutions are more apt to loan to cooperatives whose times-interest-earned ratio is more than

one (1) because it shows their ability to pay interest

payments. Subsequently, a lending institution may

lend funds at lower rates more readily for capital

improvements.

Times-interest-earned ratio was higher for respondent cooperatives in 1993, declined, but recovered in

18
Figure 2- Debt-to-Equity and Debt Ratio

Ratio

to Equity

I I I I I I I I I I

1900 89 90 91 92 93 94 95 96 97

1997 (figure 3). This ratio may be improved by collecting old receivables, improving inventory turnover, disposing of assets and reducing debt with proceeds, or

reducing debt with working capital. A high ratio

impacts the return on equity and tends to increase it.

Over time, a high ratio will reduce interest cost.

Interest coverage was the greatest for smaller cooperatives and generally increased with super-size cooperatives (table.17). The ratio ranged from 2.48 for marketing to 5.97 for farm supply.

Activity Ratios

Activity ratios measure how well cooperatives

use assets. A low ratio could mean that the cooperative

was overcapitalized or carrying too much inventory. A

high ratio could be deceptive. A cooperative with fully

depreciated older assets could have an artificially high

ratio even though those assets were no longer operating efficiently.

Total-asset-turnover ratio for 1997 was 2.39 (figure

4). Total sales decreased by 0.8 percent and total assets

increased by 2.3 percent. A high ratio exerts a favorable financial influence through the reduction of financial leverage and/or increased return on equity. A high

ratio operationally tends to reduce interest costs.

The ratio was higher for larger cooperatives

(table 17), topped by 2.63 for super cooperatives indicating the most efficient use of assets. This ratio was

lowest in 1995 at 2.10 and highest in 1989 at 2.77. By

cooperative type, it was higher for marketing than for

farm supply.

Fixed-asset-turnover ratio is similar to the total

asset turnover ratio and shows how well the cooperative is using its fixed assets. This ratio by itself might

not give a complete picture of the cooperative’s financial health. One with fully depreciated assets would

have an artificially high ratio. Another that invested

heavily in R&E for future expansion would have a

temporarily low ratio.

After a high in 1989 of 10.05, this ratio has

remained relatively level in the 1990s until 1996. The

fixed-asset-turnover ratio was relatively flat for the

1990s with spikes in 1989 and 1996 (figure 4). It was

lowest in 1989 and 1993 (8.24 percent). In 1996, the

ratio jumped to 9.78 from 8.46 (1995) then decreased

slightly in 1997 because sales decreased 0.8 percent

19
Figure 3- Times Interest Earned

Ratio

1988 89 90 91 92 93 94 95 96 97

Figure A Total and Fixed Asset Turnover

Ratio

12

8

6

Fixed asset turnover

Total asset turnover

I I I I I I I I I I

1988 89 90 91 92 93 94 95 96 97

20
while investment in fixed assets increased 8.7 percent.

The measure for this ratio simply reflects cooperative

conditions. An abnormally high ratio usually indicates

very old, nearly depreciated fixed assets or the leasing

of property and equipment.

A high ratio shows a favorable influence by

increasing asset use, reducing financial leverage,

and/or increasing return on equity, A high ratio, operationally, tends to reduce depreciation and interest

costs. It may also increase costs related to operating

leases, personnel and travel or delivery expenses. This

ratio may be improved by restricting further investments in fixed assets; redesigning production, or office

facilities to increase the sales generating potential of

existing space and equipment; and/or selling idle

machinery and parts, unused vehicles, and unnecessary equipment.

By size, the ratio of 9.85 was greatest for super

cooperatives and by type, higher for marketing cooperatives.

Profitability Ratios

Profitability ratios, such as gross profit margin,

indicate the efficiency of the cooperative’s operations.

Gross profit margin is an important operating

ratio. A small change can have a tremendous impact

on local savings. It indicates the cooperative’s pricing

policy and cost of goods offered for sale.

For all cooperatives, the margin averaged 10.06

percent in 1997. It peaked in 1993 at 11.90 percent (figure 5). By size, the margin diminished as cooperative

sales grew. At 14.78 percent, small cooperatives had

the highest gross margin. By type, farm supply (17.33

percent) and mixed farm supply cooperatives (13.92

percent) had the highest margins in 1997 (table 18).

Return on total assets measures the rate of return

on total investment. It measures performance. It is not

sensitive to the leverage position of the cooperative.

Although some assets were financed through debt, the

ratio measures return to both members and lenders.

This ratio fell by 0.18 percent to 8.76 percentbetween

1997 and 1996 (9.04) (table 19).

Net savings (before income taxes) increased 7.3

percent while interest expense decreased 23.7 percent

and debt usage fell during the 2-year period (table 9).

For the decade, this ratio was highest in 1989 and 1996

and has been increasing steadily since 1993 (figure 6).

Figure 5- Gross Margin Percent

Perceent

1988 89 95 96 97

21
Table its- Financial analySiS ratios by CoOpmWlve type, 1997

tern

Liquidity

Current

Quick

Leverage

Debt

Debt-Metal-equity

Times-interest-earned

Activity

Total-asset-turnover

Fixed-asset-turnover

Profitability

Gross profti margin

Return on total assets before

interest and taxes

Return on total equity

Average total revenue

Average total assets

Farm Mixed farm Mixed

SUPPlY SUPPlY Marketing

1.72 1.46 1.27

0.95 0.76 0.68

0.35 0.43 0.49

0.53 0.77 0.97

5.97 3.71 5.36

1.76 2.08 2.86

6.68 7.00 11.09

17.33 13.92 6.85

9.97 8.55 9.34

11.89 9.96 13.60

$6,268,763 $16,222,859 $25,677,369

3,353,388 7,359,495 8,822,976

Marketing

1.17

0.52

0.56

1.29

2.48

3.05

11.67

4.92

6.18

7.63

$27,996,242

8,822,690

Table I+ Financial analysis ratios for all cooperatives,

1997 and 1996

Ratio 1997 1996

Non-cash patronage allocations 53.78

Current 1.38

Quick 0.72

Debt 0.45

Debt-to-total-equity 0.19

Times-interest-earned 4.43

Total-asset-turnover 2.39

Fixed-asset-turnover 8.93

Gross profit margin 10.06

Return on total assets

before interest and taxes 8.76

Return on total equity 11.28

Average total revenue $14,041,009

Average total assets 5,579,390

54.32

1.36

0.68

0.47

0.11

3.41

2.47

9.78

9.95

9.04

11.24

$14,050,432

5,451,626

Operationally, a high ratio tends to reduce interest cost

and financially indicates a comparatively high rate of

return on assets employed.

All cooperative sizes had between a 1 and 2 percentage point difference (table 17). Medium-sized

cooperatives were slightly higher at 9.73 percent. This

measure was highest for farm supply cooperatives at

9.97 percent.

Return otz total equity represents member investment in their cooperative and is an important measure

of profitability. This ratio is sensitive to the amount of

debt capital in the cooperative and best used in conjunction with other measures such as the return on

total assets. Net savings and total equity both

increased to about 7 percent from 1996 to 1997.

Financially, a high ratio is preferred and tends to

decrease financial leverage. However, a high ratio may

also be a symptom of low investment adequacy.

Operationally, this ratio tends to reduce interest cost

over time but may occur when both total debt and

interest costs are high.

Generally, this ratio increased as the cooperative

grew in size. Super cooperatives had the highest return

on total equity (12.51 percent). Ratios for cooperatives

by type were: 1) mixed marketing, 13.60 percent; 2)

farm supply, 11.89 percent; 3) mixed farm supply, 9.96

22
Figure 6- Return on Total Assets and Total Equity

Percent

8

6

Total Equity

Assets

1988 89 90 91 92 93 94 95 96 97

percent; and 4) marketing cooperatives, 7.63 percent

(table 18).

Summary and Conclusions

Although some elements of the balance sheet and

income statement have decreased from 1994-95 reporting period, local cooperatives studied here generally

had strong financial statements. Some highlights from

the financial statements include: 1) assets increased 2

percent from 1996 to 1997; 2) about half of the accounts

receivable were less than 30 days old; 3) investment in

IT&E grew about 9 percent; 4) owner equities grew by

about 7 percent and member ownership in the local

exceeded 50 percent; 5) net sales decreased 0.8 percent;

and 6) both total expenses and net income grew, 5 and

7 percent, respectively

These cooperatives maintained strong ties to

regional cooperatives, CoBank or the Bank for

Cooperatives through which they obtained products,

gained marketing opportunities, or borrowed needed

capital. Investment in other cooperatives rose 14 percent from 1996. In turn, patronage refunds to local

cooperatives from regionals and the banks increased

10 percent and made the year profitable for 60 cooperatives that would have otherwise had losses. But, local

cooperatives cannot depend on large patronage

refunds. With numerous locals losing money, even further consolidation of locals may be necessary in the

future.

Agricultural cooperatives continue to play a vital Grain and oilseeds inventories that decreased by

role in supplying goods and services to farmers and about 22 percent and short-term debt that decreased

marketing their products. They are also important to by 29 percent pushed down interest costs 24 percent.

rural communities, often one of the largest employers, The impact of the specified ratios follows:

and provide considerable tax revenues. The extensive 1) liquidity ratios, current and quick, increased

consolidation of local cooperatives during the past two slightly in 1997 because current liabilities decreased

decades reflects attempts to maintain an adequate size

from which to provide their members with expanded

products and markets. Despite consolidation, cooperatives studied maintained an average of one other

branch location from which to better serve members.

23
more than current assets while farm supply inventories increased at about the same rate as accounts

receivable;

2) leverage ratios-debt ratio, went down slightly

from 0.47 in 1996 to 0.45 in 1997;

3) activi ty ratios-total-asset-turnover ratio

stayed about the same for the 2-year period-2.47

1996 and 2.39 in 1997, and finally;

4) profitability ratios-return on total assets ratio

in

fell from 9.04 in 1996 to 8.76 in 1997 because net

income increased more than total assets. Total assets

reflected increased farm supply inventory while

decreased interest costs increased net income.

24
Appendix table l- Common size balanca sheets for farm supply cooperatives by cooperative size, 1997

Item Small Medium Large Super

Assets

Current assets

Cash and cash equivalents

Accounts receivable

Inventories--grain

-farm supplies

Prepaid expenses

Other current assets l

Total current assets

Investments and other assets

Investments-Other cooperatives

-Bank for cooperatives

-Total

Other assets *

Total investments and other assets

Property, Plant, and Equipment

At cost

Less accumulated depreciation

Net, property, plant, and equipment

Total Assets

LIABILITIES AND OWNER EQUITIES

Current liabilities

Current portion of long-term debt

Notes payable-seasonal

Accounts payable

Patrons credit balances and other liabilities

Accrued taxes

Accrued expenses

Patronage refunds (cash)

Total current liabilities

Long-term debt

Total Liabilities

Owner equities

Allocated equity

Unallocated equity

Total owner equity

Total Liabilities and Owner Equity

Based on assets of:

8.98

15.11

0

20.83

2.50

1.33

Percent of assets

6.64

14.46

0

18.61

1.36

2.43

4.93

14.62

0

19.53

1.02

2.37

2.34

13.02

0

21.69

1.10

7.01

48.74

29.03

0.42

43.50

27.03

0.72

42.50

24.67

1.43

24.08

0.95

29.45

0.55

30

54.66

33.41

27.75

1.53

29.28

64.63

37.41

26.10

3.39

29.48

62.90

34.88

25.03

1.30

26.32

61.74

33.21

21.26 27.22 28.02 28.52

100

1.68

5.96

6.08

4.43

0.26

1.46

1.40

100

1.85

4.64

6.56

6.68

0.43

1.82

1.88

1.61

7.92

7.94

5.85

0.61

2.09

1.53

100

1.59

12.49

7.70

6.59

0.27

2.07

2.31

21.26

5.67

23.87

8.33

27.55 33.02

7.87

26.93

55.35

17.72

32.20

53.19

14.60

39.67

48.23

12.09

40.89

43.21

15.90

73.07 67.80 60.33 59.11

100

$1,352,068

100

$3,785,930 $6,923,399 $14,652,318

1 “Other” current assets include prepaid expenses and other receivables.

2 “Other” assets include investments, goodwill, notes receivable, etc.

25
Appendix table 2-Common size balance sheets for mixed farm supply cooperatives by cooperative size, 1997

Item Small

~~~

Medium Large Super

Percent of assets

Assets

Current assets

Cash and cash equivalents

Accounts receivable

Inventories*rain

-farm supplies

Prepaid expenses

Other current assets l

4.74 4.42 4.16 4.30

23.33 17.01 15.1 I 16.09

6.36 2.22 3.37 4.60

14.45 15.35 13.68 20.50

0.69 0.48 0.69 0.74

I .08 2.52 3.25 2.44

Total current assets 50.66 42 40.62 48.66

Investments and other assets

Investments-Other cooperatives

-Bank for cooperatives

-Total

Other assets 2

23.17

0.52

25.10

0.85

25.95

I .39

23.99 18.58

I .09 I .63

23.69

0.56

25.08 20.20

3.72 2.10

Total investments and other assets 24.25 27.34 28.81 22.31

Property, Plant, and Equipment

At cost

Less accumulated depreciation

65.75

40.66

25.09

100

80.06 71.22 72.65

49.40 40.64 43.62

Net, property, plant, and equipment 30.65 30.58 29.03

Total Assets 100 100 100

LIABILITIES AND OWNER EQUITIES

Current liabilities

Current portion of long-term debt

Notes payableseasonal

Accounts payable

Patrons credit balances and other liabilities

Accrued taxes

Accrued expenses

Patronage refunds (cash)

I .52 I .43 2.02 I .54

6.93 4.89 9.81 II.83

7.88 8.53 6.62 9.68

5.96 8.11 6.11 6.33

0.51 0.37 0.49 0.42

I .42 I .64 I .85 2.96

I .48 0.98 I .37 I .37

Total current liabilities 28.28 34.12

Long-term debt

Total Liabilities

25.70 25.95

4.62 IO.62

30.32 36.56

13.63 12.31

41.90 46.43

Owner equities

Allocated equity

Unallocated equity

Total owner equity

Total Liabilities and Owner Equity

Based on assets of:

48.43

21.25

69.68

100

$1 ,I 33,917

46.50 45.55 43.32

16.93 12.55 IO.24

63.44

100

$3, I 79,745

58.10 53.57

100 100

$7,208,61 I $15,312,266

l “Other” current assets include prepaid expenses and other receivables.

2 ‘Other” assets include investments, goodwill, notes receivable, etc.

26
Appendix table 3- Common size balance sheets for mixed marketing cooperatives by cooperative size, 1997

Item Small Medium Large Super

Assets

Current assets

Cash and cash equivalents

Accounts receivable

Inventories-grain

-farfn supplies

Prepaid expenses

Other current assets l

Total current assets

investments and other assets

Investments-Other cooperatives

-Bank for cooperatives

-Total

Other assets *

Total investments and other assets

Property, Plant, and Equipment

At cost

Less accumulated depreciation

Net, property, plant, and equipment

Total Assets

LiABiLiTiES AND OWNER EQUITIES

Current iiabiiities

Current portion of long-term debt

Notes payable-seasonal

Accounts payable

Patrons credit balances and other liabilities

Accrued taxes

Accrued expenses

Patronage refunds (cash)

Total current liabilities

Long-term debt

Total Liabilities

Owner equities

Allocated equity

Unallocated equity

Total owner equity

Total Liabilities and Owner Equity

Based on assets of:

19.94

9.93

15.71

10.49

0.40

7.76

Percent of assets

10.18

11.80

12.42

10.66

0.57

6.25

6.10

13.10

10.80

12.87

0.86

5.03

11.03

11.25

13.63

11.85

0.79

6.28

64.23

19.74

0.17

51.89

20.89

0.94

48.75

22.20

1.16

54.81

16.91

1.44

19.91

0.01

21.82

2.08

23.36

0.62

18.35

1.16

19.92

87.74

71.88

23.90

78.79

54.58

23.98

75.09

47.82

19.51

67.48

41.81

15.86 24.21 27.27 25.67

100

0.57

4.18

2.96

13.44

0.27

0.28

0.15

100

0.72

8.33

5.56

9.94

0.64

1.26

1.68

1.57

7.05

5.22

16.42

0.69

1.01

1.66

100

1.09

9.36

5.46

25.32

0.98

1.30

1.69

21.85

0.67

28.13

4.18

33.62

6.64

45.20

7.15

22.52

57.88

19.60

32.32

40.61

27.08

40.25

41.74

18.00

52.35

33.78

13.87

77.48 - -

100

$1,215,186

67.68 59.75 47.65

100

$2,329,788 $4,378,259 $15,065,994

l “Other” current assets include prepaid expenses and other receivables.

* “Other” assets include investments, goodwill, notes receivable, etc.

27
Appendix table 4-Common size balance sheets for marketing cooperatives by cooperative size, 1997

Item Small Medium Large Super

Assets

Current assets

Cash and cash equivalents

Accounts receivable

Inventories-grain

-farm supplies

Prepaid expenses

Other current assets l

4.36 5.42 11.50 4.81

9.77 14.76 4.80 8.01

19.27 16.32 19.71 23.00

7.20 8.01 7.48 8.08

2.22 0.31 0.66 2.39

5.61 6.97 7.03 8.68

Total current assets 48.44 51.78 51.17 54.96

Investments and other assets

Investments-Other cooperatives

-Bank for cooperatives

-Total

Other assets *

16.03 22.22

1.62 1.38

Total investments and other assets

27.89

0.26

28.15

0.00

28.15

17.64 23.60

0.06 0.73

14.78

1.89

16.67

2.11

17.71 24.32 18.79

Property, Plant, and Equipment

At cost

Less accumulated depreciation

93.53 92.50 75.57 67.35

70.11 61.99 51.07 41.10

Net, property, plant, and equipment 23.42 30.51 24.50 26.25

Total Assets 100 100 100 100

LIABILITIES AND OWNER EQUITIES

Current liabilities

Current portion of long-term debt

Notes payable--seasonal

Accounts payable

Patrons credit balances and other liabilities

Accrued taxes

Accrued expenses

Patronage refunds (cash)

0.45 2.82 1.57 1.68

12.80 3.89 8.76 16.48

4.47 3.68 2.02 4.44

3.79 11.10 25.65 22.54

0.28 0.73 0.39 0.63

0.79 0.69 0.81 1.14

0.58 1.90 1.40 1.15

Total current liabilities

Long-term debt

Total Liabilities

23.16 24.82

0.58 8.00

23.74 32.81

40.60 48.06

5.77 10.96

46.37 59.02

Owner equities

Allocated equity

Unallocated equity

58.46 45.09 38.35

17.80 22.10 15.28

Total owner equity

Total Liabilities and Owner Equity

Based on assets of:

76.26 67.19 53.63

100

$1,297,009

100 100

$1,754,803 $4,230,374

29.32

11.66

40.98

100

$13,907,696

Percent of assets

l “Other” current assets include prepaid expenses and other receivables.

2 “Other” assets include investments, goodwill, notes receivable, etc.

28
Appendix table & Abbreviated income statement as a percent of net sales for farm supply cooperatives by

cooperative size, 1997

Item Small Medium Large

Percent of net sales

Super

Net sales 100 100 100 100

Cost of goods sold 83.59 82.50 82.19 82.70

Gross margins 16.41 17.50 17.81 17.31

Service and other income 2.76 3.75 3.42 3.57

Gross revenue 19.17 21.26 21.23 20.87

Expenses:

Employee 1

Administrative 2

General 3

Depreciation

Interest

Bad debts

Total expenses 17.78 18.68 19.23 18.40

Local savings 1.39 2.58 2 2.47

Patronage refunds received 2.42 2.53 2.30 3.47

Savings before income taxes 3.80 5.11 4.30 5.94

Less income taxes 0.21 0.32 0.27

Net income 3.59 4.79 4.03

Based on total sales of: $2,385,862 $6,590,429 $12,612,288

9.48 9.43 9.89 9.49

1.16 1.03 0.97 0.79

4.12 4.56 4.83 4.42

1.96 2.55 2.27 2.54

0.79 0.89 1.08 1.02

0.27 0.22 0.20 0.14

0.51

5.43

$24,904,283

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional senrices, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors’ fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.

29
Appmdix table 6- Abbreviated income statement as a percent of net sales for mixed farm supply cooperatives by

cooperative size, 1097

Item Small Medium Large I Super

Net sales

Cost of goods sold

Gross margins

Service and other income

Gross revenue

Expenses:

Employee 1

Administrative 2

General 3

Depreciation

Interest

Bad debts

Total expenses

Local savings

Patronage refunds received

Savings before income taxes

Less income taxes

Net income

Based on total sales of:

100

90.43

100

82.50

Percent of net sales

100

82.19

9.57

5.93

17.50

3.75

17.81

3.42

15.50

7.58

1.17

3.65

1.44

0.77

0.18

21.25

9.43

1.03

4.56

2.55

0.89

0.22

21.23

9.89

0.97

4.83

2.27

1.08

0.20

14.79

0.71

1.08

18.68

2.57

2.53

1.99

2.30

1.79 5.10 4.29

0.15 0.32 0.27

1.64 4.78 4.02

$13,164,365

100

82.70

17.31

3.57

20.84

9.49

0.79

4.42

2.54

1.02

0.14

18.40

2.44

3.47

5.91

0.51

5.40

$33,827,605

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors’ fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.

30
Appendix table -r-Abbreviated income statement as a percent of net sales for mixed marketing cooperatives by

cooperative size, 1997

Item Small Medium Large Super

Percent of net sales

Net sales 100 100 100 100

Cost of goods sold 93.85 93.14 93.43 93.12

Gross margins 6.15 6.86 6.57 6.88

Service and other income 3.65 3.41 3.58 3.87

Gross revenue 9.80 10.27 10.15 10.75

Expenses:

Employee 1 4.47 4.41 4.03 4.08

Administrative 2 0.73 0.52 0.42 0.32

General 3 3.40 2.86 2.87 3.05

Depreciation 1.35 1.18 1.28 1.34

Interest 0.19 0.39 0.60 0.63

Bad debts 0. 0.11 0.10 0.05

Total expenses 10.14 9.47 9.30 9.47

Local savings -0.34 0.80 0.85 1.28

Patronage refunds received 1.12 1.40 1.65 1.46

Savings before income taxes 0.78 2.20 2.50 2.74

Less income taxes 0.09 0.18 0.18 0.25

Net income 0.69 2.02 2.32 2.49

Based on total sales of: $2,910,389 $7,606,070 $13,665,643 $42,006,597

l Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors’ fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.

31