This report analyzes the balance sheets and income statements of 208 local farm sup

ply and marketing cooperatives, comparing information from 1991 through 1997. The

data represent four cooperative sizes and types. Common-size income statements and

balance sheets are used to compare and contrast these cooperatives. Charts are used

to look for trends in major balance sheet and income statement items and financial

ratios.

Key words: Cooperatives, balance sheet, income statement, farm supply, marketing,

sales, and financial ratios.

Local Farm Supply, Marketing Cooperatives Financial

Trends: Changes in the 1990s

E. Eldon Eversull

Rural Business-Cooperative Service

Research Report 171

March 1999

Price: Domestic $4.50; Foreign-s.50
Preface This report studied the financial statements of 208 local cooperatives, comparing 1991

through 1997. Trends of major balance sheet and income statement items as well as

financial ratios are presented for four cooperative sizes and types. The information

helps cooperative managers and boards of directors compare their cooperatives’ historical performance with representative cooperative data.

The author thanks the cooperatives that provided their financial statements to Rural

Business-Cooperative Service (RBS) and made this report possible. Special thanks to

staffers Beverly L. Rotan and Roger A. Wissman for reviewing 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 Income Statement

................................... .9

Financial Ratio Analysis ...........................................17

OtherChanges ................................................... ..2 4

Summary and Conclusions ............................................24

Bibliography.................................................~......2 5

Appendix ........................................................ ..2 6
Highlights Financial statements of 208 local farm supply and marketing cooperatives were used

to compare trends from 1991 through 1997. 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 8 percent per year. In 1997, average net sales for all

cooperatives studied was $12.5 million, slightly less than the $12.6 million of 1996.

Forty percent were small-sized cooperatives with sales of less than $2.5 million.

Cooperatives were not only important to their member/patrons, but also were an

important asset to the rural communities in which they operate. They were often one of

the community’s larger employers, averaging 22 full-time and 12 part-time employees

and an average annual payroll of nearly $800,000.

Petroleum products and fertilizer were the primary farm supplies sold. Farm supply

sales provided about 57 percent of the operating income for these cooperatives.

Average total assets grew about 9 percent per year, much of it was fueled by large

increases in grains and oilseeds inventories, mainly in 1995 and 1996. Asset growth

was funded by liabilities that grew more than 12 percent per year and an equity level of

7 percent per year. Borrowings increased 18 percent per year.

Increased borrowing drove up interest expenses 15 percent per year. But decreased

inventories and borrowing curbed interest costs and helped boost local savings to 14

percent between 1997 and 1996, versus the average increase of 3 percent per year.

Patronage refunds rose an average 13 percent, allowing net income for these cooperatives to increase 8 percent per year.

Financial ratio analysis was used to look at trends for the past 7 years:

l the current ratio declined from 1.6 in 1991 to 1.4 in 1997;

l total debt ratio increased as debt financing was substituted for equity; and

l with more debt usage, return on equity increased slightly from 10 in 1991 to 11

percent in 1997.

Among other changes, many cooperatives were reaching out to more customers by

operating convenience stores. Fifteen of the cooperatives had joint ventures or limited

liability companies that could allow them to combine resources with other cooperatives

to provide expanded goods and services. Six cooperatives had entered into the hog

industry either by providing feeder pigs or owning confinement hog operations.

. . . 111
Local Farm Sumh~ Marketina Coor>eratives

Financial Tre& Changes iithe lb9Os

E. Eldon Eversull

Rural Business-Coopera.tive Service

Farm payments from the Government’s Freedom

to Farm program will end in 2002, and agricultural

cooperatives will be asked to play an increasingly

important role for farmers to help themselves. Farmerowned local cooperatives are on the forefront of developing ways for farmers to add value to crops they

have grown and providing a source of quality supplies

at a reasonable cost. This analysis of financial trends of

local agricultural cooperatives is aimed at managers,

directors, and members. Ratio analysis will be discussed. Other changes in the 1990s will also be presented.

The 208 local cooperatives had farm supply sales

(petroleum, fertilizer, feed, etc.) that averaged $7.1 million in 1997 and have been growing 8 percent per year.

Marketing sales (corn, wheat, soybeans, etc.) were

growing 12 percent per year and averaged $5.4 million

in 1997. Income from services (product delivery, fertilizer application, grains and oilseeds hauling, storage,

etc.) averaged $0.4 million per year, while growing

about 7 percent.

These cooperatives were an important asset to

both their member/patrons and their rural communi

ties. The cooperatives paid an average of $34,000 in

annual property taxes. They were also a large empl .oyer in their comm.unities, averaging 22 full-time and 12

part-time employees. The average annual payroll of

nearly $800,000 is growing 8 percent per year.

Because cooperatives are owned by their member

users, when farm income declines, so do cooperatives

sales. The early 1990s were good for farmers, but by

1997 exports were falling and declining farm income

was becoming an issue.

While the number of farm operations declines,

those remaining are becoming larger, even though

overall rural populations are decreasing. The cooperatives in this study have been growing, changing to

meet the needs of their members, and operating

branches in other towns to increase their market territories. Grain and oilseed cooperatives are expanding to

increase their grain-handling capacity to accommodate

unit trains of 110 or more cars. The need for contracting for speciality crops like high oil and waxy corn is

also changing.

Farm supply cooperative members are asking for

more global positioning system (GPS) /geographic

information system (GIS) guided equipment

detailed recordkeeping and analysis services

and

to substantiate fertilizer and crop protectants the cooperative

applied to improve crop yields. Members are also

interested in adding value to farm crops as a means to

boost farm income.

Profile of Respondent Cooperatives

USDA’s Rural Business-Cooperative Service

annually surveys farmer cooperatives. Data from the

survey were used in this study. Participating cooperatives had to sell farm supplies and provide a detailed

financial statement.

There are about 500 cooperatives in the RBS Farm

Supply and Services database. This report focuses on

the 208 that provided information each year from 1991

through 1997. This report is divided into a cross section of four sizes and four types to provide a more

complete understanding of the local cooperatives’

business.

Cooperative Size

Cooperatives were grouped into four sizes by

sales volume (table 1). Many cooperatives grew in size

over the time period. For example, there were 116

small cooperatives in 1991 but only 83 in 1997 (table 2).

1
In other words, 33 cooperatives that had nearly $5 million in sales in 1991 exceeded that mark by 1997 and

became medium-size cooperatives.

There was a gradual shift over the 7 years with

more cooperatives attaining large- and super- size status. The number of small cooperatives fell from more

than half of the respondents to 40 percent, while those

in the large- and super-size classes each increased to 20

percent.

Cooperative Type

To account for differences in operations and orientation based on product mix, cooperatives were

grouped into one of four descriptive categories: 1)

farm supply; 2) mixed farm supply; 3) mixed marketing; and 4) marketing. These descriptions closely represented business operations of these cooperatives

(table 1).

Table i-size and type definitions used for

respondent cooperatives

size

Small

Medium

Large

Super

Type

Farm supply

Mixed farm supply

Mixed marketing

Marketing

Sales

up to $5 million in total sales

$5 million up to $10 million

$10 million up to $20 million

$20 million and more

Farm supply sales

total net sales from farm supplies

from 50 to 99 percent

from 25 to 49 percent

less than 25 percent

This report focuses on cooperatives handling

farm supplies-59 percent in 1997 sold only farm supplies; 15 percent were mixed; 15 percent were mixed

marketing; and 11 percent were marketing (table 2).

There was not much movement between types of

cooperatives, except in 1996 when the dollar value of

grain sales increased dramatically and caused a surge

in the number of marketing cooperatives. Both types

of marketing cooperatives tended to be larger while

the farm supply cooperatives were most often small.

Most respondents were small farm supply cooperatives.

The information in this report also goes beyond

208 cooperatives and rural communities. These cooperatives operated 281 branches and thus had a business impact on 489 rural communities in terms of taxes

and employment. From 1992 through 1997, the number

of branches operated increased almost 20 percent per

year (table 3). Super cooperatives by far operated the

most branches, usually between 3 and 4.

An increase in branches was often due to mergers

and consolidations. Thus, after a merger or consolidation, a rural community lost an independent cooperative when it ceased operations but may have gained a

branch operated by a larger cooperative. This follows

the continuing trend in agriculture toward fewer and

larger farms and the fewer but larger cooperatives.

By type, branches also increased. Mixed farm

supply cooperatives had the largest increase. Both

types of marketing cooperatives had more branches

than farm supply cooperatives except in 1997 when

mixed farm supply cooperatives had the most with 2.3.

Sales Mix

The respondent cooperatives had five major farm

supply and one marketing categories (table 4).

Petroleum was the dominant production supply item

Table 2- Number of cooperative respondents by year, size, and type

1997 1996 1995 1994 1993 1992 1991

Small 83

Medium 44

Large 41

Super 40

Farm supply 124 123 122 122 122 122 123

Mixed farm supply 32 34 36 39 37 33 36

Mixed marketing 31 26 36 35 33 36 32

Marketing 22 25 14 12 16 17 17

90

41

40

37

Number of cooperatives

98 102 106 110 116

45 45 * 46 47 45

38 33 31 30 26

27 28 25 21 21

2
Table 3- Number of branches operated by cooperative size and type

1997 1996 1995 1994 1993 1992

Number

Small .0.19 0.21 0.26 0.24 0.26 0.13

Medium .95 1.10 .98 .87 .51 .26

Large 1.68 1.38 1.55 1.42 1.23 1.07

Super 3.85 4.11 4.48 3.82 3.28 2.86

Farm supply .85 .78 .74 .69 .50 .26

Mixed farm supply 2.34 1.91 1.72 1.08 .92. .27

Mixed marketing 1.71 1.92 1.83 1.71 1.48 1.33

Marketing 2.27 2.40 2.21 2.58 1.69 1.82

All 1.35 1.30 1.20 1.04 63 .57

Table 4- Average farm supplies sold and products marketed as a percent of net sales

1997 1996 1995 1994 1993 1992 1991

Percent

Farm supplies sold:

Feed 10.99 10.09 11.72 13.31 13.45 12.80 12.65

Seed 1.26 1.19 1.34 1.33 1.33 1.27 1.20

Fertilizer 11.06 10.47 11.98 11.74 10.71 10.78 10.59

Crop protectants 7.98 7.41 8.57 8.50 7.55 7.55 7.16

Petroleum products 18.38 16.45 18.89 19.50 20.05 18.54 20.25

Other 7.01 6.69 8.05 8.89 8.87 7.73 7.82

Total 56.68 52.30 60.55 63.27 61.96 58.67 59.67

Farm products marketed:

Grain, oilseeds & other 43.32 47.70 39.45 36.73 38.04 41.33 40.33

Total sales 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Based on net sales of: $12,549,721 $12,578,213 $9,468,046 $8,846,022 $8,104,723 $7,913,753 $7,502,430

sold by small and medium cooperatives. Sales of small

cooperatives, the most numerous, 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 relative to marketing sales (84 percent farm supply sales

for medium-sized cooperatives, 68 percent for large,

and 43 percent for super).

Sales of cooperatives in the mixed farm supply

category averaged $18 million with $13 million in farm

supply sales. Feed was the most important farm supply item sold followed closely by petroleum.

Average sales of marketing and mixed marketing

cooperatives were $28 million and $22 million, respectively, and much larger than both categories of farm

supply cooperatives. As defined, marketing made up

the majority of their sales. Feed, fertilizer, and crop

protectants were the most important farm supplies

sold for both types of marketing cooperatives.

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 (what the cooperative owes to others) are usually presented in a similar decreasing

order. Equity represents members’ investment in their

cooperative. An abbreviated balance sheet is used in

3
this report because some account information was not

available for the 1991 and 1992 data (cash and cash

equivalents, prepaid expenses, patron credit balances,

accrued taxes and expenses, and cash patronage

refunds).

Current assets-are the most liquid assets on the

cooperative balance sheet. Accounts receivable is,money

due the cooperative (i.e., a credit sale payment due

from the customer in 90 days). Inventories are products

the cooperative has purchased from patrons to market

and supplies the cooperative hopes to sell to patrons.

Otlzer current assets in this abbreviated balance sheet

include cash and cash equivalents, prepaid expenses,

and other.

Investments in other cooperatives-represent equity

held in regional cooperatives through which local

cooperatives market products or purchase supplies

and equity in the Bank for Cooperatives and CoBank,

their primary lending sources. These investments are

mainly patronage paid back to the cooperative based

on use. The more sales through or purchases from the

regional cooperative or borrowing from the banks, the

larger the investment. Other assets include past due

accounts receivable and other.

Property, plant, and equipment (P&E&are the

fixed assets of the cooperative (i.e., grain bins, office

equipment, warehouse, and gas station). This is net

P&E, the book value of the fixed assets-their cost

minus accumulated depreciation.

Total assefs-are what the cooperative owns-current assets plus investments plus net fixed assets equal

total assets.

Current liabilities-are obligations the cooperative

must pay within the next year. Accounts payable is

money owed, usually to suppliers (sometimes classified as trade accounts payable). Other liabilities in this

abbreviated balance sheet are accrued expenses and

taxes, grains, and oilseeds accounts payable, retired

equity, cash patronage refunds, and other.

Current portion of long-term debt and notes payableseasonal are the final current liabilities. They are money

owed (principal) for borrowing money and for leases.

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

Member equities-are member and patron investments in the cooperative. Allocated equity is assigned to

members. In most cases, cooperative stock or ownership certificates are not generally traded between

members and, if sold, require board approval.

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

Table 5 presents a common-size balance sheet for

all respondents. Appendix tables l-8 show commonsize balance sheets by size and type. 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. Because the cooperatives in this study were allowed to change their size

classification as they grew, there was little change in

total assets over the years for all sizes except super

cooperatives. Asset growth did occur by type because

there were few cooperatives that changed type while

assets overall grew 8 percent (figure 1). Total assets

averaged $1.3 million for small cooperatives to $13.7

million for super-size cooperatives. By cooperative

type, total assets averaged $2.5 million for farm supply, $6.4 million for mixed farm supply, $7 million for

mixed marketing, and $7.4 million for marketing.

Current Assets

From 1994 to 1996, there was a tremendous

increase in current assets, fueled by increased inventories (figure 2). Most of this growth occurred principally in grains and oilseeds inventories. Some of it was

from increased volumes held, but much of it was from

the overall increase in grain and oilseed prices. Much

of this inventory buildup was paid for by increased

long- and short-term debt.

All three of the major current assets accounts presented in table 5 increased about 9 percent over the

time period, causing current assets to also increase

similarly.

The age of accounts receivable refers to how long

ago the sale that started this receivable was made.

Most cooperatives have credit sales with discounts

offered to promote prompt payment. Terms might be 2

percent-10 days, net 30 days (no discount). Discounts

might be offered on all farm supply sales or on certain

products. The terms and what products had discounts

were not known, but about 40 cooperatives each year

listed their discount on sales. The discount only varied

0.4 points from its high and low over the years-l.11

percent in 1997,1.09 in 1996; 0.98 in 1995; 1.38 in 1994;

1.06 in 1993; 1.12 in 1992; and 1.07 in 1991.

The age of accounts receivable was known for 22

cooperatives for 1995 through 1997 (table 6). About 50

percent were current. Another 13 to 15 percent were

from 31 to 60 days old. Accounts written off increased

4
Table 5- COmfnOn-Size balance sheet fOf ali COOpwatiVeS

1997 1996 1995 1994 1993 1992 1991

Current assets

Accounts receivable 13.04

Inventories

*rain 8.58

-farm supplies 16.11

Other current assets 11.35

Total current assets 49.08

Investments and other assets

Investments

-other cooperatives 20.82

-Bank for Co-ops 1.30

-total 22.12

Other assets 2.32

Total, invest. & other assets 24.44

Net, PP&E 26.48

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.69

Notes payable-seasonal 11.19

Accounts payable 6.40

Other liabilities 16.14

Total current liabilities 35.42

Long-term debt 9.73

Total liabilities 45.15

Owner equities

Allocated equity 42.34

Unallocated equity 12.51

Total owner equities 54.85

Total lia. & owner equities 100.00

Based on total assets of: $5,446,539

12.86 12.44 13.13 12.78 13.04 13.06

11.72 14.60 9.89 10.24 9.28 9.14

15.96 16.22 16.47 16.50 15.65 16.58

12.16 10.62 12.40 12.15 12.38 11.21

Percent

52.70 53.88 51.89 51.67 50.35

19.19 19.22 20.05 19.89 20.04

1.21 1.23 1.34 1.37 1.43

49.99

19.54

1.50

20.40 20.45 21.39 21.26 21.47 21.04

2.06 1.20 1.03 1.03 1.07 1.28

22.46 21.65 22.42 22.29 22.54 22.32

24.84 24.47 25.69 26.04 27.11 27.69

100.00 100.00 100.00 100.00 100.00

1.73 1.82 1.76 1.51

14.68 15.54 11.56 10.11

6.15 6.19 6.27 6.54

15.80 14.27 14.37 15.07

100.00

1 66

9:88

6.16

13.82

38.36 37.82

8.95 7.14

47.31

41.05

11.64

44.96

33.96

6.49

40.45 39.70 38.25 38.16

43.15 46.96 47.99 49.55 50.00

11.89 12.59 12.31 12.20 11.84

52.69 55.04

100.00

$5,292,772

100.00

$4,721,692

59.55

100.00

$4,103,143

1.59

7.66

6.17

16.01

33.23 31.52 31.43

6.47 6.73 6.73

60.30 61.75

100.00 100.00

$3,804,243 $3,480,693

61.84

100.00

$3,295,402

5
Figure I- Total Assets

Million dollars

1:

1c

e

6

4

2

0

Pr

II1 -

Mixed farm supply

Mixed marketing

tiFarm supp’y

I I I I I I I

1991 92 93 94 95 96 97

Figure 2- Inventory and Debt

Million dollars

1.6,

0.8

0.6

Inventory

Long- and short-term debt

o.21

0

I I I I I I I

1991 92 93 94 95 96 97
Table IS- Age of accounts receivable, 1995 through 1997

Age 1997 1996 1995

Current, 0 to 30 days 50.57 51.32 49.77

31 to 60 days 13.34 15.42 14.64

61 to 90 days 6.52 7.64 10.16

91 to 120 days .65 .57 .80

121 to 180 days 11.71 9.17 9.25

Greater than 6 months 15.21 15.88 15.38

Accounts written off this period

Based on accounts receivable of:

7.05

$16,857,731

Percent

6.32

$17,318,101

4.21

$16,808,770

percent were current. Another 13 to 15 percent were

from 31 to 60 days old. Accounts written off increased

from 4 percent in 1995 to 7 percent in 1997.

Investments and Other Assets

About 1.3 percent of cooperative’s total assets

was invested in the Bank for Cooperatives and

CoBank. Larger cooperatives and both types of marketing cooperatives had comparable investments.

Meanwhile, investments in other cooperatives

dropped from a high of 29 percent for small cooperatives to 14 percent for super cooperatives. Across

types, marketing cooperatives had less invested than

farm supply cooperatives. The other assets category in

this study includes overdue accounts receivable and

other.

Property, Plant, and Equipment

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

percent of total assets ranged broadly across cooperative sizes, averaging between 20 and 30 percent. Net

IT&E increased 8 percent per year from 1991. Both

farm supply cooperative types had growth in net

IT&E of at least 10 percent per year while mixed marketing cooperatives averaged 4 percent growth and

marketing cooperatives 7 percent.

Current Liabilities

Current liabilities grew 11 percent per year

between 1991 and 1997. The largest increase was in

notes payable-seasonal used to finance current operations, and usually used for inventories. They grew

from 8 percent of total assets in 1991 to a high of 16

percent in 1995 and leveled at 11 percent in 1997. By

then, all sizes and types of cooperatives had lowered

their inventories and were using seasonal debt at lowered, historical levels.

Long-tear Debt

Long-term debt increased by 16 percent per year

from 1991 to 1997 and was at its highest level in 1997.

As a percent of total assets, it generally increased with

cooperative size, but interestingly, tended to be higher

for both types of farm supply cooperatives. By type as

a percent of total assets, long-term debt ranged from 7

percent to 14 percent in 1997 with the farm supply

cooperatives at the high end, about 2 percentage points

higher than the marketing cooperatives.

Thirty percent of the cooperatives had no longterm debt. More than half of them were small farm

supply cooperatives.

Eighty-seven cooperatives provided information

that broke out the four main sources of their $110 million total debt (yearly average of short- and long-term

combined)-Bank for Cooperatives and CoBank, commercial banks, debentures or notes, and other for 1993

through 1997 (figure 3).

A regional cooperative was most often the source

in the “other” category. The local cooperative often

purchased its farm supplies and marketed its grains

and oilseeds through a regional cooperative. It, then,

becomes the source of debt capital.

The Bank for Cooperatives and CoBank provided

the most debt capital over the years, peaking at 66 percent in 1996 and averaging 62 percent over the time

period. Large and super cooperatives used the Bank

for Cooperatives and CoBank more often.

Small, and especially small farm supply cooperatives, got their debt from “other” sources-most often

the regional cooperative with which they were affiliat7
Figure 3- Source Of Debt

Percent

70 1

30

I

20 .

01 I I I I I

1993 94 95 96 97

ed (average of 24 percent for all cooperatives). The

regional may be popular as a credit and supply source

for small cooperatives because most of their debt is for

seasonal loans used to pay for products purchased.

Interestingly in figure 3, when the use of “other” as a

source of debt increases, use of the Bank for

Cooperatives and CoBank declines.

Debentures or notes and commercial banks both

averaged about 7 percent of the cooperative source of

debt. Both of these sources were above 11 percent in

1993, but fell to about 6 percent by 1997.

Member Equities

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

types of cooperatives, members averaged 58 percent

ownership of their cooperative (figure 4). Member

ownership was highest in 1991 and 1992 and fell to its

lowest point in 1996 before rebounding slightly in

1997.

Members of small cooperatives had the highest

percentage of ownership over the time period (75 percent) while members of super-size cooperatives had

the lowest (49 percent). By cooperative type, farm supply cooperatives’ members owned 69 percent of their

cooperatives’ assets while members of mixed farm

supply cooperatives owned at least 61 percent. Both

types of marketing cooperatives had lower member

ownership-49 percent for mixed marketing and 44

percent for 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 59 percent and more than 49 percent for both

farm supply cooperatives. For all cooperatives, allocated equity fell from a high of 50 percent in 1991 to 42

percent in 1997.

Unallocated equity averaged 12 percent of total

assets for all sizes and types. By type, unallocated

equity was around 14 percent of total assets for farm

supply cooperatives and around 11 percent for the

other three types.

8
Figure 4- COOpet’atiVe Ownership

Percent

60 

701

’

50

40

Members

Credltors

30

20

10

0

I I I I I I I

1991 92 93 94 95 96 97

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. The statement measures the profitability

of the cooperative for a given period of time. 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 106 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” income statement. An

abbreviated income statement was used in this report

because some minor expense information items (such

as office supplies, rent, meetings and travel, and rent

and lease) were not broken out in the years 1991 and

1992.

Analysis of the Income Statement

This displays the net results of cooperative operations. Because most managers’ performance is judged

by net income, members attach great importance to the

income statement. In the following sections, the underlying values of the income statement are studied.

Table 7 presents a common-size income statement for

208 cooperatives while appendix tables 9 to 16 show

these income statements by size and type.

Net S&s

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 net sales for the 208 cooperatives in

1997 was $12.5 million, up $5 million or 9.4 percent per

year from 1991. Net sales of all of these cooperatives

grew during the study period. As an operating barometer, if assets are compared with net sales, sales for all

types (except marketing) and sizes are about twice the

level of assets.

Cost of Goods Sold (COGS)

COGS represented the largest single component

of expenses. For this study, COGS includes the beginning inventory plus purchases and freight costs, minus

purchase returns and allowances, purchase discounts,

and ending inventory. So, for these cooperatives,

9
Table 7-Abbreviated inCOme StStSftISnt for all COOpSrStheS

1997 1996 1995 1994 1993 1992 1991

Net sales

Cost of goods sold

Gross margin

100.00 100.00

89.34 89.51

100.00

87.18

10.66 10.49

100.00

87.56

12.44

Percent

100.00

87.16

12.84 12.82

100.00

88.01

11.99

Service and other income 3.60 2.91 3.81 3.57 3.78 3.65

100.00

88.21

11.79

Gross revenue 14.26 13.40 16.25 16.41 16.60 15.64

3.84

15.63

Operating expenses

Employee I

Administrative *

General 3

Depreciation

Interest

Bad debts

6.35 5.92 7.13 7.11 7.25 6.89 6.81

.64 .61 .72 .65 .54 .35 .30

3.47 3.21 3.94 4.16 4.47 4.37 4.60

1.66 1.55 1.84 1.82 1.82 1.70 1.65

.90 1.10 .94 .71 .62 .67 .62

.22 .12 .15 .14 .14 .15 .14

Total expenses 13.24 12.51 14.72 14.59 14.84 14.13 14.11

Local savings 1.02 .89 1.53 1.82 1.76 1.51 1.51

Patronage refunds received 1.75 1.68 1.71 1.46 1.38 1.40 1.42

3.24 3.28 3.14 2.91

.21 .19 .17 .17

Savings before income taxes 2.77 2.57

Less income taxes .19 .17

Net savings 2.58 2.40

Based on net sales of: $12549,721 $12,578,213

3.03 3.09 2.97 2.74

2.93

.19

2.74

$9,468,046 88846,022 $8,104,723 $7,913,753 $7,502,466

1 Salaries and wages include 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.

COGS was the purchase price of the farm supplies sold

or products marketed. Both types of marketing cooperatives had a relatively high COGS when compared

with farm supply cooperatives, which was to be

expected because they were generally marketing

grains and oilseeds for their patrons with only a few

cents-per-bushel margin. COGS had the same rate of

growth as net sales. There was small decline in 1993 to

1995, but COGS rose to 89 percent in both 1996 and

1997.

age is an important operating ratio. A small change in

the gross margin has a tremendous impact on local

savings. 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 producer-members market

rates on commodities purchased.

Cooperatives are sometimes characterized as

businesses that provide goods and services at cost.

However, a cooperative cannot operate at cost on a

day-to-day basis. Without an adequate gross margin, a

cooperative, like any other business, can neither be

profitable nor afford to finance improvements needed

for expansion or offering new services.

Gross margin equals net sales less cost of goods

sold, so those cooperatives with higher COGS had

lower gross margins. COGS were higher for marketing

Gross Margins

Gross margins were the excess of net sales over

the cost of goods sold. The gross margin averaged 12

percent for all cooperatives, but with COGS rising in

1996 and 1997, gross margins declined to a little under

11 percent. The gross margin or gross margin percent10
and larger cooperatives, so gross margins as a percent

of net sales were highest for farm supply and small

cooperatives. Farm supply cooperatives, averaging 18

percent, had the highest gross margin. Although both

types of farm supply cooperatives had less business

volume than their marketing counterparts, the supply

gross margin percentage was from 7 to 9 points higher.

Small cooperatives, mostly selling farm supplies, had

the highest gross margin by size (16 percent).

Gross margins vary not only by cooperative, but

also by farm supply sold or product marketed.

Cooperatives, like other businesses, have different

margins for different products. Table 8 shows individual product gross margins for the 34 cooperatives that

provided this information for years 1993 through 1997.

Of the four major farm supplies sold, gross margins

declined over the time period for all but crop protectants (figure 5).

Margins vary due to product type and competition. For instance, fertilizer sold by the truckload has a

different margin than a sale of a single bag. The services offered in conjunction with a sale (e.g., fertilizer

spread on the field by a cooperative applicator) also

impact margins as does competition. The gross margin

discussed earlier in this section is a blended margin

derived from all products the cooperative sold, services rendered, and products marketed.

The highest weighted (by volume) gross margin

for the five main farm supplies was for fertilizeralmost 17 percent in 1997. Petroleum followed closely

at 16 percent. Petroleum margins have been fairly

steady, while those on feed, seed, and fertilizer have

been declining.

Grains and oilseeds were the only products marketed where gross margins were known. Those margins were low and have been on the decline from 5

percent in 1993 to 3 percent in 1997.

Service and Other income

Local cooperatives provide many services to their

patrons. Those of the surveyed cooperatives include:

transporting purchases to patrons and transferring

their products to market; custom application of fertilizers and crop protectants, and drying and storing of

grains and oilseeds. Service income averaged about 4

percent of net sales from 1991 to 1997.

Other income was derived from non-operating

sources such as interest and finance charges. This

Figure 5- Gross Margins by Product Sold

Percent

25

20

15

10

- Fertilizer

Petroleum

~ Crop protectants

I I I I I

1993 94 95 96 97

11
Table IS Weighted gross margin on farm supplies sold and grains and oilseeds marketed

1997 1996 1995 1994 1993

-

Number of

observations

Percent Number

Feed 13.90 14.63 17.20 17.25 17.63 31

Seed 14.16 13.26 14.46 17.36 15.66 26

Fertilizer 16.72 16.94 17.65 16.63 20.11 30

Crop protectants 13.19 13.74 11.59 12.63 12.51 30

Petroleum 16.01 16.65 17.08 16.83 16.81 24

TBA 18.83 20.68 18.86 18.48 21.03 16

Food 24.92 25.43 23.57 23.85 23.56 7

Other farm supplies 19.41 18.21 18.77 17.85 17.59 31

Grains and oilseeds 2.64 4.09 4.68 4.70 5.12 19

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 property,

plant, and equipment were sold to generate income,

but usually it was the sale of a fully depreciated asset

where the market value was maybe greater or less than

the book value. 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 categorized as employee, administrative, general, depreciation, interest, and

bad debts. Employee expenses, of course, were related

to labor costs. Administrative expenses included a

variety of overhead costs associated with a business

and indirectly related to revenue production. General

expenses were those directly related to revenue production. The majority were in employee, general, and

depreciation categories.

Employee Expenses -From 1991 to 1997, employee

expenses-salaries, wages, and benefits (payroll taxes,

employee insurance, unemployment compensation,

and pension expense)-averaged between 5.9 and 7.3

percent of net sales. Employee expenses, the largest

category, were up 7.7 percent per year.

As a percent of net sales, employee expenses

decreased as cooperative size increased. This expense

averaged 9 percent of net sales for small cooperatives

12

and fell to 5.3 percent for super cooperatives. By type,

employee expenses as a percent of net sales averaged

about 9.4 percent for farm supply cooperatives and 3.8

percent for marketing cooperatives.

More than 80 percent of the cooperatives provided employee numbers. Collectively, these cooperatives

averaged 4,162 full-time employees and 1,849 parttime employees. Full-time employees increased 2.5

percent per year while part-time employees increased

7.6 percent per year.

Small cooperatives averaged 8 full-time employees and 4 part-time; medium, 18 and 8; large, 32 and

15; and super, 53 and 20 respectively (figure 6). Small,

medium, and large cooperatives had fewer employees

in 1997 than 1991, but this reflected that many changed

size classifications due to growth. Super cooperatives

increased their average number of employees from 53

in 1991 to 55 in 1997.

Farm supply cooperatives averaged 15 full-time

employees and 8 part-time employees; mixed farm

supply, 35 and 14; mixed marketing, 24 and 9; and

marketing, 20 and 6 respectively. Employment levels

generally increased for all but the mixed marketing

cooperatives (figure 7). Except for farm supply cooperatives, employee numbers dropped slightly in 1994.

Mixed farm supply cooperatives already had the highest employee numbers, but also showed considerable

growth from 31 in 1991 to 44 in 1997.

Cooperatives with greater farm supplies sales

tended to be more labor intensive. Operating a feed

mill or service station, applying crop protection and

fertilizers, and selling hardware required the use of

several employees. For instance, a small farm supply

cooperative had 7 full-time employees while many

small marketing cooperatives used only a manager,
~~~ G- Full-Time Employees, by Cooperative Size

Number

60

50

40

30

20

10

0

lI -

I -

I -

I -

I -

l-

-

Super

:+SS

E

 Large

 Medium

Small

I I I I I I I

1991 92 93 94 95 96 97

Figun, 7- Full-Time Employees, by COOperatiVe Qpe

Number

50

40

30

20

10

0

I I I I I I I

1991 92 93 94 95 96 97

Mixed farm supply

13
cooperative had 7 full-time employees while many

small marketing cooperatives used only a manager,

bookkeeper, and two others.

Administrative Expenses -These were indirectly

related to generating income. Managers usually had

more control over this area than others. In years when

revenues were down, managers could reduce expenses

in this area more easily than elsewhere. These costs

include professional services (such as legal,

accounting, and computer), donations, dues and

subscriptions, directors’ fees and expenses, annual

meetings, meetings and travel, office supplies, and

telephone and market information. They represented

less than 1 percent of net sales and were highest for

small and farm supply cooperatives.

General Expenses -These were usually fixed in the

short run and associated with income productionadvertising and promotion, delivery (auto and truck),

general insurance, property, business and other taxes

and licenses, rent and lease expenses, plant supplies,

repairs and maintenance, utilities (including grain

dryer expenses), miscellaneous, and other. Most

(except advertising and promotion) were not under

direct management control.

General expenses averaged about 4 percent of net

sales over the time period but differed little by cooperative size-around 5 percent for farm supply cooperatives and around 3 percent for marketing cooperatives.

Depreciation, Interest, and Bad Debts

Depreciation expense averaged around 2 percent

of net sales; interest, 1 percent; and bad debts, 0.1 percent. Depreciation expense was about the same for

small, medium, and large cooperatives and declined

slightly for super cooperatives (1.5 percent). By cooperative type, depreciation expense was 2 percent of net

sales for farm supply cooperatives and less than 1.5

percent for marketing cooperatives.

As discussed earlier, interest expenses, especially

for short-term borrowing, increased dramatically in

1995 and 1996, but was generally less than 1 percent

for all sizes and types of cooperatives.

Bad debts as a percent of net sales fell as cooperative size increased-O.2 for small cooperatives to 0.1

for super cooperatives. By type, bad debts were 0.2 for

both farm supply cooperatives and around 0.1 for both

marketing cooperatives.

Table Q- Average number of respondent COOperatiVeS

with losses in any one year

Size

Type Small Medium Large Super

Number

Farm supply 20.57 3.33 2.29 0.00

Mixed farm supply 3.14 3.17 2.40 2.50

Mixed marketing 1.50 2.33 2.75 1.40

Marketing 1.29 1 .oo 1.50 1.60

Local Savings

Local income was generated from individual

cooperative operations (before taxes and patronage

refunds from other cooperatives). Local savings as a

percent of net sales were highest for medium cooperatives in 1997 (figure 8) and lowest for super cooperatives. Local savings peaked in 1994 but dropped in

1995 or 1996 due to increased inventories and interest

expenses.

By type, local savings were the highest for both

types of farm supply cooperatives (figure 9) and much

lower for marketing cooperatives. Small cooperatives,

especially those in farm supply, had higher local savings than larger marketing cooperatives.

About 21 percent of the cooperatives in this study

had losses in any year. Over the 7-year period, 14 percent had cumulative losses. Seven had losses in each

year and 55 had losses in at least 2 consecutive years.

While small cooperatives had higher returns on net

sales, 21 small farm supply cooperatives lost money in

any year (table 9).

Patronage Refunds Received

Patronage refunds received or income from other

cooperatives resulted from locals doing business with

other cooperatives, generally regionals, or cooperative

banks such as Bank for Cooperatives and CoBank.

The patronage refund from regionals was based

on business volume and consisted of equity stock and

cash refunds. The equity stock was usually revolved

back to the local cooperative on a set schedule. Many

respondent cooperatives also borrowed funds from the

Bank for Cooperatives and CoBank and received both

cash and noncash patronage income. Patronage from

the Bank for Cooperatives and CoBank was also based

on use, in the amount borrowed.

14
~~~~ E- Local Savings, by Cooperative Size

Percent of net sales

2.5

2.0

1.5

1.a

0.5

0/-

/)-Medium

I I I I I I 1

1991 92 93 94 95 96 97

Figure g- Local Savings, by Cooperative vpe

Percent of net sales

,

\

2.5

2

1.5

1

0.5

Farm supply

Mixed marketing

Mixed farm supply

Marketing

1991 92 93 94 95 96 97

15
Patronage refunds reflect the volume of business

with regional cooperatives, the Bank for Cooperatives

and CoBank. Refunds between 1991 and 1997

increased 13 percent per year, suggesting that their

regional cooperatives or banks either increased their

refund level or had increased incomes. Patronage

refunds received were 2.1 percent of net sales for small

cooperatives to 1.2 percent for super cooperatives. By

type, patronage refunds as a percent of net sales were

higher for farm supply cooperatives than those in marke ting.

Losses in local savings are increasing-53 had

them in 1997. Twenty-one reported declining net

income that year. Patronage refunds, an important revenue source, allowed 32 of 53 cooperatives to show a

net income in 1997 (figure 10). The gap between the

two lines in figure 10 represents the number of cooperatives made profitable by patronage refunds averages

29 per year.

Income Taes

Cooperatives paid income taxes on earnings not

allocated to members (retained earnings) and on dividend payments. The board of directors decided what

amounts of income were allocated to retained earnings

and to members. In terms of net sales, income tax paid

averaged 0.2 percent.

Income tax paid by cooperatives varied little by

size and type during the study period.

Net Income

Net income refers to profits on cooperative

income statements. As a percent of net sales, it

decreased by cooperative size. For small and medium

cooperatives it was 3.5 percent; large, 3 percent; and

super, 2.5 percent. Net income as a percent of net sales

was its highest in 1994 (3.1 percent), fell in 1995 and

1996 and then surged to 2.6 percent in 1997.

By cooperative type, farm supply had average

returns of 4.2 percent on net sales, mixed farm supply

had 2.9 percent, mixed marketing cooperatives, 2.1

percent, and marketing cooperatives, 1.7 percent.

Net income (before taxes) was generally distributed five ways-non-cash patronage allocations, cash

patronage refunds, retained earnings, income taxes,

and dividends on patron’s equity (figure 11). For the

197 cooperatives that provided this information from

1994 through 1997, an average of 56 percent of net

income before taxes was held as non-cash patronage

allocations. Cash patronage refunds (22 percent), taxes

Figure IO- Cooperatives With Losses-Local Savings or Net lncome

Number

60

Local savings

h

I I I I I I I

1991 92 93 94 95 96 97

16
(6 percent), and dividends (less than 1 percent) have

remained fairly steady. Non-cash patronage allocations

were at their highest in 1996, forcing retained earnings

to their lowest (13 percent).

Financial Ratio Analysis

Managers and boards of directors can use financial ratios to evaluate their cooperative’s performance.

Standard ratios allow comparisons between years and

different cooperatives. No single financial indicator

will provide enough information to determine a cooperative’s financial health so it’s important to look at a

group of them over a period of time for better interpretation. Performance ratios-liquidity, leverage, activity,

and profitability (table IO&measure various levels of

cooperative operations and generally have both a

financial and operational impact.

Liquidity Ratios

Current and quick liquidity ratios measure the

cooperative’s ability to meet short-term obligations

and focus on its ability to 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. If

the current assets of a cooperative were mainly cash,

they would be much more liquid than if comprised of

mainly inventory.

If the ratio is less than 1, current liabilities exceed

current assets and the cooperative’s liquidity is threatened. A high current ratio is a favorable financial condition. It indicates the ability to pay current liabilities

by converting current assets into cash.

The current ratio was relatively constant in the

early 1990s before falling in 1995 and 1996 due to

increased grains and oilseeds and farm supply inventories and the subsequent buildup of seasonal debt to

finance these inventories (figure 12). In 1997, the current ratio rebounded, but was still lower than in the

early 1990s.

The current ratio fell as cooperative size

increased. It was highest for small cooperatives

(appendix tables 17-24). The ratio also declined for

small cooperatives but rebounded in 1997.

By cooperative type, the ratio was the highest for

farm supply cooperatives (figure 13) followed by

mixed farm supply cooperatives. Both marketing

cooperatives had lower current ratios, always less than

1.4.

Quick ratio is current assets minus inventories,

divided by current liabilities. Inventories-the least

Figure II- Distribution of Net Income Before Taxes

Percent

30

Non-cash patronage allocations

Cash patronage refunds

Retained earnings

Income taxes

Dividends on equity

17
Table lo- Financial ratios for all respondent cooperatives

Ratio 1997 1996 1995 1994 1993 1992 1991

Liquidity

Current

Quick

1.39 1.37 1.42 1.53 1.56 1.60 1.59

.69 .65 .61 .75 .75 .61 .77

Leverage

Debt

Debt-to-equity

Times-interest-earned

.45 .47 .45 .40 .40 .36 .36

.62 .90 .62 .66 .66 .62 .62

4.06 3.33 4.43 5.62 6.06 5.02 4.66

Activity

Total-asset-turnover

Fixed-asset-turnover

2.30 2.36 2.01 2.16 2.13 2.27 2.26

6.70 9.57 6.19 6.39 6.16 6.39 6.22

Profitability

Gross profit margin

Return on total assets

before interest and taxes

Return on equity

10.66 10.49 12.44 12.64 12.62 11.99 11.79

6.46 6.73 6.39 6.60 6.01 6.27 6.41

10.62 10.65 11.05 11.20 10.49 10.07 10.10

Figure 12- Current Ratio, by Size

Ratio

3

2.5

2

1.5

1

0.5

0

tisma”

Medium

Large

Super

I I I I I I I

1991 92 93 94 95 96 97

18
liquid of all current assets-are excluded. The movement of the quick ratio mirrored the current ratio,

although with the exclusion of inventories, at a lower

level.

As with the current ratio, small cooperatives had

the highest ratio and it decreased as size increased. The

quick ratio had been more than 1 for farm supply

cooperatives in the early 199Os, but dropped to 0.9 in

1997. Both marketing cooperative types had a ratio of

about 0.6 in 1997.

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.

Overall, this ratio has been increasing, especially

in 1995 and 1996 with the seasonal debt buildup (figure 14). Larger cooperatives used more debt financing.

The debt ratio was 0.55 for super cooperatives in 1995

and 1996. In other words, 55 percent of the super cooperatives’ assets were financed by debt in those years. In

1997, the ratio declined for all sizes of cooperatives.

Debt usage was highest for marketing and mixed

marketing cooperatives, peaking in 1995 and 1996 (figure 15). Both farm supply and mixed farm supply

cooperatives increased debt usage, especially in 1997

when the ratios were respectively 0.35 and 0.46.

Debt-to-equity ratio is calculated by dividing the

debt ratio by the equity ratio (total equity divided by

total assets). This ratio compares debt and equity

financing, a higher ratio (greater than 1) indicates more

use of debt relative to equity financing and thus higher

interest costs. With more debt usage, the debt-to-equity

ratio has been climbing for all cooperatives, with the

highest ratio mostly in either 1995 or 1996. The highest

debt-to-equity ratio was for super cooperatives in 1996

(1.25). They used 1.25 times more debt than equity to

finance their assets in 1996. As inventories fell in 1997,

less debt was needed to finance them and the debt-toequity ratio also fell.

This ratio was higher for marketing cooperatives

than farm supply, but both types of farm supply cooperatives used more long-term debt in 1993 and 1994

and still were increasing that use through 1997. Given

more debt, the debt-to-equity ratio increased greatlyFigure 1% Current Ratio, by Type

Ratio

- Farm supply

1

Mixed farm SUDD~V

zMarkethg ” -

Mixed marketing supply

1991 92 93 94 95 96 97

19
Figure 14- Debt Ratio, by Size

Ratio

.6

tiSuper

1 Small

1991 92 93 94 95 96 97

Figure 1% Debt Ratio, by Type

Ratio

.ir

.Ei -

.5

.4

.3

.2 I I I I I I I

1991 92 93 94 95 96 97

Marketing

Mixed marketing

Mixed farm supply

Farm supply

20
for farm supply cooperatives from 0.4 in 1994 to 0.54 in

1997; and for mixed farm supply cooperatives from 0.6

to 0.84.

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.

The previous two debt ratios have indicated a general

increase in debt, so interest coverage, or times-interestearned ratio, has fallen recently.

Interest coverage was the greatest for small cooperatives and it fell as cooperative size increased. This

ratio was the highest for small cooperatives in 1994,

and has generally fallen for all cooperatives since then.

Small and medium cooperatives had a ratio of about 6

in 1997, while large had 4 and super 3. By cooperative

type, the ratio also started to fall in 1994 and fell

through 1997 for all but mixed marketing cooperatives,

whose ratio jumped from a low of 2.6 in 1996 to 4.9 in

1997.

Activity ratios measure how well cooperatives

use assets. A low ratio could mean that the cooperative

was carrying too much inventory. A high ratio could

be deceptive. A cooperative with fully depreciated

older assets could have an artificially high ratio based

on the low book value of the assets.

Total-asset-turnover ratio was found by dividing

net sales by total cooperative assets. This ratio has

been fairly steady for small, medium, and large cooperatives, remaining between 1.8 and 2.2 for most of the

period (figure 16). Super cooperatives showed a little

more variability, with a dip in 1995 due to increased

inventories, and an increase in 1996 when most of the

buildup in grain and oilseed inventory had been

drawn down by both sales and lower prices.

By cooperative type, both marketing cooperatives

had a higher level of asset turnover because of their

higher sales levels, and higher sales (of grains and

oilseeds) relative to total assets owned (figure 17).

Fixed-asset-turnover ratio represents net sales divided

by net PP&E. This 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. A cooperative with fully depreciated assets

Figure I+ Total-Asset-Turnover, by Size

Ra tie

3

2.5

I I I I I I I

1991 92 93 94 95 96 97

21
Figure 17-Total-Asset-Turnover, by Type

Ratio

3.5

3

2.5

2

1.5

1

0.5

0

~ Mixed farm supply

1~ Farm supply

I I I I I I I

1991 92 93 94 95 96 97

would have an artificially high ratio, but if invested

heavily in W&E for future expansion, it will have a

temporarily low ratio.

By cooperative size, this ratio has been fairly

steady, mostly ranging between 6 and 9. Most of the

ratios described so far have small cooperatives as the

highest or lowest, with medium, large, and super

cooperatives following in an orderly fashion. Fixedasset-turnover ratio is an exception because super

cooperatives have the highest ratio around 9 or 9.5; followed by small cooperatives at 8 to 9; large cooperatives, 7 to 8; and medium cooperatives, 6 to 7.

ProfftabMty Ratios

Profitability ratios, such as gross profit margin,

indicate the efficiency of the cooperative’s operations.

Gross profit margin is found by subtracting the cost of

goods sold from net sales and then dividing this

amount (gross margin) by net sales. This margin is an

important operating ratio. A small change has a

tremendous impact on local savings. It indicates the

cooperative’s pricing policy and cost of goods offered

for sale.

For all cooperatives, this margin averaged

around 11 percent in 1997 and held steady between 11

22

and 13 percent from 1991 through 1997. Gross profit

margin was the highest for small cooperatives, averaging almost 16 percent and fell to 9.5 percent for super

cooperatives. Both farm supply cooperatives had a

much higher gross profit margin than the marketing

cooperatives.

Return on total assets measures the rate of return

on total investment. It is found by dividing net income

by total assets and usually calculated before interest

and taxes. This ratio measures performance. It is not

sensitive to the leverage position of the cooperative.

Super and large cooperatives generally had a higher

return on total assets except in 1994 when medium

cooperatives had a return of 9.3 and 1997 when they

had a return of 9.6 (figure 18). The increase in return

on total assets for both small and medium cooperatives seems to correspond to their increased leverage

that started in 1994.

The return on total assets was about 8.5 for all

types in 1991 and rose slightly by 1997 for farm supply

and mixed marketing cooperatives (figure 191. For

marketing cooperatives the return dived below 6 in

1997 and fell to 7.7 for mixed farm supply cooperatives.
Figure la-- Return on Total Assets, by Size

Percent

11

7

6

I-

/-

,-

I-

- Medium

Super

Large

Small

I I I I I I I

1991 92 93 94 95 96 97

Figure W- Return on Total Assets, by Type

Percent

12

Farm supply

- Mixed marketing

a

~ Mixed farm supply

6 D Marketing

1991 92 93 94 95 96 97

23
Return on equity represents income on member

Other Changes

Aside from the changes in their balance sheet and

percentmuch higher than most farm supplies sold. If located

along major highways, the local cooperative can

expand its customer base with a convenience store.

The stores can also provide another source of food

items in small communities that may not have a grocery store. These cooperatives also operated two fast

food restaurants that may or may not be connected to

convenience stores.

Another change *was the formation of 11 joint

ventures and 4 limited liability companies (LLC’s).

They allow cooperatives (and investor-owned firms) to

work together to provide goods and services that they

alone might not be able to provide. These efforts also

allow the cooperatives to keep their regular assets separate from the venture. Cooperatives were involved in

these joint ventures or LLC’s:

l energy ventures t

l 

l 

 equipment and services, liquid fertilizer

facility, crop protection services,

feed and agronomy sharing of as

grain venture.

The last change noted here is ownership, or contractual growing of livestock. Four cooperatives provided feeder pigs to farmers. Two cooperatives had

 facilities.

With most of the studied cooperatives having feed

sales (and feedmills), ownership of hogs and contractual growing of feeder pigs provide an outlet for feed

sales. Several regional cooperatives have helped develop breeding stock and financing for hog operations,

further strengthening local cooperative participation in

the hog industry.

Aside from the standard farm supply and marketing business, some of the studied cooperatives had

branded hardware stores, appliance stores, implement

dealerships, lumberyards, grocery store, and an auto

parts store.

Summary and Conclusions

Local cooperatives remained strong throughout

this study, with assets increasing almost 9 percent per

year. More than half of the accounts receivable were

 grew 8 percent per year. Owner equities grew 7 percent per year

and member ownership in the local was about 55 percent in 1997. Net sales grew 9 percent per year while

total expenses and net income both grew 8 percent.

Agricultural cooperatives continue to play a vital

role by helping farmers help themselves gain access to

markets for their produce and a source for production

supplies. Some cooperatives are embracing 

24
Local cooperatives are also important to the rural

communities in which they operate-often one of the

largest employers and providing considerable tax revenues. Along with the shift to fewer and larger farms,

cooperatives have also undergone changes through

extensive consolidation during the past two decades,

attempting to maintain an adequate size from which to

provide expanded products and markets to their members.

Membership or affiliation with a regional cooperative was important to the studied cooperatives as a

source of supplies, marketing opportunities, or needed

seasonal capital. Patronage refunds from regional

cooperatives equaled almost 2 percent of net sales and

provided an important source of income.

Financial ratio analysis showed an increased use

of debt by local cooperatives, probably fueled by a

strong growth in the national economy and low interest rates. Cash patronage refunds from the locals to

farmers remains at historic levels, providing income to

members when crop prices were low.

Bibliography

Eversull, E. Eldon, Fertilizer Operations of LocuZ Farm

Supply and Marketing Cooperatives, U.S. Department

of Agriculture, Rural Business-Cooperative

Service, RR 161, November 1997.

Eversull, E. Eldon, and Beverly L. Rotan, Analysis of

Financial Statements: Local Farm Supply and

Marketing Cooperatives, U.S. Department of

Agriculture, Rural Business-Cooperative Service,

RR 154, March 1997.

Rotan, Beverly L. Performance of Cooperatives Handling

Farm Supplies, by Region, U.S. Department of

Agriculture, Rural Business-Cooperative Service,

RR 160, April 1998.
Appendix table t- COIYIIYIOII-SiZS balance sheet for small cooperath!es

1997 1996 1995 1994 1993 1992 1991

Assets

Current assets

Accounts receivable 15.54

Inventories

-grain 1.09

-farm supplies 18.82

Other current assets 12.55

Total current assets 48.00

Investments and other assets

Investments

-other cooperatives 30.38

-Bank for Co-ops .40

-total 30.78

Other assets .44

Total invest. & other assets 31.22

Net property, plant & equip. 20.78

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.39

Notes payable-seasonal 5.34

Accounts payable 5.43

Other liabilities 7.83

Total current liabilities 19.99

Long-term debt 5.21

Total liabilities 25.20

Owner equities

Allocated equity 57.95

Unallocated equity 18.85

Total owner equities 74.80

Total lia. 8 owner equities 100.00

Based on assets of: $1,331,516

15.07 13.80 13.49 13.72 13.74 13.98

1.20 88 2.55 1.20 1.45 1.62

19.65 20.48 19.49 20.36 19.26 19.88

12.38 12.94 13.41 14.10 14.45 14.22

Percent

48.30 48.10

28.67 28.67

.32 .38

28.99 29.05

64 .76

29.63 29.81

22.07 22.09

48.94 49.38 48.90 49.70

28.59 29.44 28.66 28.65

.43 .41 .51 .64

29.02 29.85 29.17 27.29

.62 .75 .68 .91

29.64 30.60 29.85 28.20

21.42 20.02 21.25 22.10

100.00 100.00

1.49 1.21

4.91 6.02

7.58 6.20

9.27 8.19

100.00

1.04

4.99

5.59

9.21

100.00 100.00 100.00

.87 .85 85

4.59 4.88 5.77

6.52 5.82 6.07

8.12 7.85 8.75

23.25 21.62 20.83 20.10 19.40 21.44

5.70 5.11 3.61 2.62 3.02 3.15

28.95 26.73 24.44 22.72 22.42 24.59

55.42 56.69 59.04 60.78 61.22 59.43

15.63 16.58 16.52 16.50 16.36 15.98

71.05 73.27 75.56 77.28 77.58 75.41

100.00 100.00 100.00 100.00 100.00 100.00

$1,407,947 $1,390,114 $1,361,718 $1,316,897 $1,232,517 $1,226,910

26
Appendix table 2- Common-size balance sheet for medium cooperatives

1997 1996 1995 1994 1993 1992 1991

Assets

Current assets

Accounts receivable 13.36

Inventories

-grain 2.24

-farm supplies 17.74

Other current assets 9.11

Total current assets 42.45

Investments and other assets

Investment

-other cooperatives 25.64

-Bank for Co-ops .68

-total 26.32

Other assets 2.10

Total invest. 8 other assets 28.42

Net property, plant & equip. 29.13

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.95

Notes payable-seasonal 6.18

Accounts payable 6.17

Other liabilities 10.14

Total current liabilities 24.44

Long-term debt 9.83

Total liabilities 34.27

Owner equities

Allocated equity 50.38

Unallocated equity 15.35

Total owner equities 65.73

Total lia. & owner equities 100.00

Based on assets of: !$3,548,500

14.42 13.61 14.70 13.87 13.54 13.76

2.72 5.83 3.41 3.26 2.60 2.78

19.47 18.91 19.80 19.56 20.14 19.65

9.48 9.24 9.96 8.81 8.09 8.90

Percent

46.09 47.59 47.87 45.50 44.37 45.09

24.61 23.70 24.69 24.80 25.17 24.47

.75 83 .85 1.25 1.09 1.21

25.36 24.53 25.54 26.05 26.26 25.68

1.64 1.67 .88 .59 .62 .81

27.00 26.20 26.42 26.64 26.88 26.49

26.91 26.21 25.71 27.86 28.75 28.42

100.00 100.00 100.00 100.00 100.00 100.00

1.91 1.17 1.24 1.53 1.49 1.50

8.86 8.53 7.44 6.97 6.35 6.21

6.54 7.12 6.61 6.20 6.27 6.79

9.52 12.18 11.66 12.12 12.22 12.63

26.83 29.00 26.95 26.82 26.33 27.13

9.10 7.63 6.22 7.06 5.70 6.15

35.93 36.63 33.17 33.88 32.03 33.28

48.57

15.50

52.41 52.84 55.16 55.53

14.42 13.28 12.81 11.19

64.07

49.63

13.74

63.37

100.00

66.83 66.12 67.97 66.72

100.00 100.00 100.00

$3,597,416 $3,785,640 83,421,069 !$3,327,611

100.00

93,371,297

100.00

!$3,362,316

27
Appendix table 3- Common-size balance sheet for large COOperStiVSS

1997 1996 1995 1994 1993 1992 1991

Assets

Current assets

Accounts receivable 13.30

Inventories

-grain 4.87

-farm supplies 17.06

Other current assets 9.21

Total current assets 44.44

Investments and other assets

Investments

-other cooperatives 22.80

-Bank for Co-ops 1.36

-total 24.16

Other assets 3.08

Total invest. & other assets 27.24

Net property, plant 8 equip. 28.32

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.91

Notes payable-seasonal 7.64

Accounts payable 6.80

Other liabilities 14.02

Total current liabilities 30.37

Long-term debt 12.03

Total liabilities 42.40

Owner equities

Allocated equity 44.34

Unallocated equity 13.26

Total owner equities 57.60

Total lia. & owner equities 100.00

Based on assets of: $6,121,611

13.84 13.60 13.72 14.35 14.18

7.37

16.85

9.67

il.38

17.20

7.80

49.98

7.25

la.13

9.03

9.20 a.38

16.62 20.22

9.07 9.24

47.73 49.24 52.02

21.77

1.27

23.04

2.47

25.51

20.79 21.53

1.18 1.27

21.97 22.80

1.43 1.12

23.40 23.92

26.76 26.62 27.95

Percent

48.13

la.87

1.35

20.22

.a0

I 3.48

a.23

17.40

lo.87

49.98

17.72 18.69

1.48 1.41

19.20 20.10

.75 .60

21.02

29.74

100.00 100.00 100.00 100.00

19.95

28.03

100.00

2.35 1.88 1.76 1.40 1.86

10.70 12.97 9.67 9.15 10.41

5.89 6.10 5.92 6.40 7.84

15.57 14.38 13.62 14.50 13.19

34.51

9.89

35.33

7.86

44.40 43.19

a.33

39.30

43.80 44.60 48.61

11.80 12.21 12.09

55.60 56.81 60.70

30.97

~100.00

$6,191,2aa

100.00

$6,502,874

100.00

$5,917,812

20.70

29.32

100.00

1.53

6.83

5.57

15.14

31.45 33.30 29.07

a.49

39.94

9.29

42.59

8.64

37.71

47.80 44.42 47.28

12.26 12.99 15.01

60.06 57.41 62.29

100.00 100.00 100.00

$5,897,026 $6,258,121 $5,714,966

28
Appendix table 4- COIIIfIIOn-SiZS balance sheet for super COOpathS

1997 1996 1995 1994 1993 1992 1991

Assets

Current assets

Accounts receivable 12.40

Inventories

-grain 12.49

-farm supplies 15.38

Other current assets 12.59

Total current assets 52.86

Investments and other assets

Investments

-other cooperatives 17.08

-Bank for Co-ops 1.59

-total 18.67

Other assets 2.40

Total invest. & other assets 21.07

Net property, plant & equip. 26.07

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.59

Notes payableseasonal 14.96

Accounts payable 6.47

Other liabilities 20.01

Total current liabilities 43.03

Long-term debt 9.58

Total liabilities 52.61

Owner equities

Allocated equity 38.68

Unallocated equity 10.71

Total owner equities 47.39

Total lia. & owner equities 100.00

Based on assets of: $15,381,106

11.55

17.51

14.54

13.88

10.88 12.01 10.92 11.43 11.82

23.85

13.67

12.07

15.53 16.05

14.33 15.40

14.85 14.72

56.72 57.09

15.86 16.39

10.02 13.91

16.47 11.09

57.48 60.47

14.62

1.51

16.13

2.30

18.43

13.54

1.69

15.23

.99

16.22 17.19

24.09 23.31

100.00 100.00

1.47 2.24

20.00 22.85

5.85 5.87

18.93 16.95

46.25 47.91

9.21 7.17

55.46 55.08

34.83

9.71

44.54

100.00

35.45

9.47

44.92

100.00

Percent

14.05

1.93

15.97

1.22

15.74

1.50

17.24

26.09 25.67

100.00 100.00

2.25 1.84

16.81 14.64

8.51 6.79

17.94 19.89

43.51 43.16

6.70 6.74

50.21 49.90

39.21 40.08

10.58 10.02

49.79

100.00

$15,649,616 $15,867,328 $13,047,234 $12,632,540 $11,533,937 $11,582,318

13.88

1.86

50.10

100.00

53.78 53.21

13.65

2.12

15.78

1.83

17.61

12.83

2.24

15.06

2.22

17.28

28.63 29.51

100.00 100.00

2.07 2.10

14.58 10.18

4.97 6.19

18.72 22.92

40.34 41.39

7.48 8.03

47.82 49.42

43.33

8.85

52.18

100.00

42.70

7.88

50.58

100.00

29
Appendix table 5- COfNIIOn-Ske balance sheet for fam’I supply cooperatives

1997 1996 1995 1994 1993 1992 1991

Assets

Current assets

Accounts receivable 14.42

Inventories-farm supplies 20.47

Other current assets 8.87

Total current assets 43.78

Investments and other assets

Investments

-other cooperatives 28.99

-Bank for Co-ops .94

-total 27.93

Other assets 2.24

Total invest. & other assets 30.17

Net property, plant & equip. 28.07

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.98

Notes payable-seasonal 7.20

Accounts payable 8.72

Other liabilities 9.19

Total current liabilities 25.07

Long-term debt 10.19

Total liabilities 35.26

Owner equities

Allocated equity 50.22

Unallocated equity 14.52

Total owner equities 64.74

Total lia. 8 owner equities 100.00

Based on assets of: $3,303,118

14.10

22.00

9.85

45.75

13.66 14.21 13.96 14.11 13.98

22.58 22.93 22.38 21.49 21.72

10.21 10.19 11.07 10.70 11.65

46.45 47.33 47.41 46.30 47.33

26.58 27.08 27.41 27.70 28.20 28.98

.81 .78 .79 .84 .88 1 .oo

Percent

27.39 27.86 28.20 28.54 29.08 27.98

1.76 1.74 1.17 1.03 .91 .91

29.15 29.60 29.37 29.57

25.10 23.95 23.30 23.02

100.00 100.00 100.00 100.00

2.07 1.39 1.26

7.91 7.43 7.23

6.39 7.19 6.53

10.01 9.38 9.27

26.38 25.39 24.29

1.29 1.35 1.43

5.24 4.78 5.57

6.79 6.28 6.58

9.70 9.33 9.15

23.02

8.83 7.20 5.69 5.77 5.67 6.12

35.21 32.59 29.98 28.79 27.41 28.85

51 .Ol

13.78

64.79

100.00

$3,021,526

29.99 28.89

23.71 23.78

100.00 100.00

21.74 22.73

52.94 55.89 57.18 58.23

14.47 14.13 14.03 14.36

67.41 70.02 71.21 72.59

100.00 100.00 100.00 100.00

57.63

13.52

71.15

100.00

$2,714,714 $2,454,349 !$2,232,341 !$2,058,812 $2,000,235

30
Appendix table 6 COI?IIIIOn-Size balance sheet for mixed farm Supply cooperatives

1997 1996 1995 1994 1993 1992 1991

Assets

Current assets

Accounts receivable 16.36

Inventories

-grain 3.90

-farm supplies 19.36

Other current assets 5.48

Total current assets 45.12

Investments and other assets

Investments

-other cooperatives 19.10

-Bank for Co-ops 1.64

-total 20.74

Other assets 2.54

Total invest. & other assets 23.28

Net property, plant & equip. 31.60

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.81

Notes payable-seasonal 11.03

Accounts payable 9.71

Other liabilities 9.11

Total current liabilities 31.66

Long-term debt 13.90

Total liabilities 45.56

Owner equities

Allocated equity 43.70

Unallocated equity 10.74

Total owner equities 54.44

Total lia. & owner equities 100.00

Based on assets of: $8,601,424

16.21 15.67 16.06 15.84 16.16 15.60

4.72 10.15

19.13 18.12

6.49 6.73

46.55 50.67

3.55

20.01

9.69

1.85 1.14

19.96 24.18

8.43 7.20

49.31

3.74

20.35

7.54

47.48 46.40 48.12

19.17 17.56 18.72

1.59 1.57 1.74

19.11 18.64

1.70 1.65

20.76 19.13

2.40 1.19

20.46

.55

21 .Ol

18.51

1.78

20.29

.56

20.85

20.81

.39

20.29

.28

23.16 20.32 20.57

30.29

100.00

29.01 29.68

100.00 100.00

1.64 2.95 2.47

10.48 14.50 10.19

9.46 7.81 7.48

9.60 9.64 10.08

56.31

Percent

100.00

$7,245,973

31.18 34.90 30.22

2.63

8.12

a.37

9.98

29.10

12.51 8.53 7.32 7.54

43.69 43.43 37.54 36.64

45.24 46.05

11.07 10.52

50.55 51.38

11.91 11.98

62.46 63.36

100.00 100.00

56.57

100.00

$7,305,652

25.67

1.42

6.66

7.95

12.02

28.05

7.64

33.31

54.90

11.79

6.83

34.88

54.03

11.09

66.69 65.12

100.00 100.00

$5,918,238 $5,583,503 !$5,063,405 $4,744,506

31.67

100.00

21.20

32.40

100.00

1.70

6.96

7.76

9.25

31.31

100.00

31
Appendix table 7- Common-size balance sheet for mlxed marketlng cooperatives

1997 1995 1995 1994 1993 1992 1991

Assets

Current assets

Accounts receivable 12.78

Inventories

-grain 14.28

-farm supplies 13.93

Other current assets 13.80

Total current assets 54.57

Investments and other assets

Investments

-other cooperatives 18.32

-Bank for Co-ops 1.50

-total 19.82

Other assets 1.80

Total invest. & other assets 21.42

Net property, plant & equip. 24.01

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.51

Notes payableseasonal 12.25

Accounts payable 4.55

Other liabilities 25.18

Total current liabilities 43.49

Long-term debt 8.50

Total liabilities 49.99

Owner equities

Allocated equity 37.67

Unallocated equity 12.34

Total owner equities 50.01

Total lia. 8. owner equities 100.00

Based on assets of: $8,105,372

14.69

15.48

14.84

14.48

59.49

14.66

1.50

10.69

27.81

12.67

10.84

Percent

12.20

18.99

12.24

13.04

19.58

13.61

12.71

62.01

14.83

1.27

56.47

16.55

1.50

16.16

1.24

16.10

53

17.40

23.11

100.00

1.64

19.31

5.05

21.96

47.96

6.92

16.63

21.36

18.05

.87

18.92

24.61

15.98

1.48

17.46

.55

18.01

24.58

100.00

1.14

25.49

4.58

18.86

100.00

1.44

16.71

6.01

19.26

.99

15.08

5.88

21.56

50.07

5.71

43.42

6.68

54.88

33.83

11.29

55.78

33.68

10.54

45.12 44.22

50.10

37.46

12.44

49.90

100.08

$8,112,691

100.00

$8,266,573

100.00

$6,681,318

6.77

50.28

39.05

10.67

49.72

100.00

$6,558,143

13.12

18.86

12.06

11.73

55.77

15.15

1.69

16.84

.46

17.30

26.93

100.00

1.85

14.86

6.32

18.68

41.71

!%,609,760

12.69

21.19

12.07

9.53

55.48

15.73

.85

16.58

1.76

11.35

5.54

24.02

42.67

6.13

48.80

40.02

11.18

!!5,428,296
Appendix table 6- Common-Size balance sheet for marketing COOpWatiWS

1997 1996 1995 1994 1993 1992 1991

Assets

Current assets

Accounts receivable 6.95

Inventories

-grain 23.34

-farm supplies 6.59

Other current assets 20.69

Total current assets 57.57

Investments and other assets

Investments

-other cooperatives 13.92

-Bank for Coops 1.49

-total 15.41

Other assets 3.14

Total invest. & other assets 16.55

Net property, plant 8. equip. 23.88

Total assets 100.00

Liabilities and owner equities

Current liabilities

Cur. portion of long-term debt 1.47

Notes payable-seasonal 17.80

Accounts payable 3.62

Other liabilities 27.49

Total current liabilities 50.38

Long-term debt 8.25

Total liabilities 58.63

Owner equities

Allocated equity 29.94

Unallocated equity 11.43

Total owner equities 41.37

Total lia. & owner equities 100.00

Based on assets of: $9,501,982

6.70 4.29 4.31 5.66 5.29 6.80

30.20

6.67

18.94

32.54 28.59 25.02 21.63 16.67

4.05 3.80 5.19 5.02 6.32

22.79 25.17 23.99 24.02 20.41

62.51 63.67 61.87 59.86 55.96 50.20

12.60 9.72 7.99 9.54 11.33 12.02

1.20 1.75 1.72 1.69 1.79 2.09

Percent

13.80 11.47 9.71 11.23 13.12 14.11

2.81 1.41 2.25 3.14 3.73 4.88

16.61 12.88 11.96 14.37 16.85 18.99

20.88 23.45 26.17 25.77 27.19 30.81

100.00 100.00 100.00 100.00 100.00 100.00

1.40 2.37 2.43

24.13 15.58 16.15

3.67 3.16 2.79

24.58 30.44 29.93

53.78 51.55 51.30

.90 1.99 1.97

17.03 17.25 8.12

3.36 2.98 3.00

26.59 22.60 26.42

47.88 44.82 39.51

7.45 7.53 6.47 5.53 6.69 9.24

61.23 59.08 57.77 53.41 51.51 48.75

29.28 30.11 32.71

9.49 10.81 9.52

38.77 40.92 42.23

1 ob.00 100.00 100.00

$10,878,233 $6,451,198 $7,447,146

34.77 37.95 41.23

11.82 10.54 10.02

46.59 48.49 51.25

100.00 100.00 100.00

$5,995,537 $6,103,842 !$5,582,767

33
Appendix tabte 4- Abbreviated income statement for small cooperatives

1997 1996 1995 1994 1993 1992 1991

Net sales

Cost of goods sold

Gross margin

100.00

85.55

100.00 100.00

84.44 83.73

15.5$ 18.27

Percent

100.00

83.90

16.10

100.00

83.81

16.19

100.00

84.24

14.45 15.76

Service and other income 3.23 3.28 3.00 3.30

Gross revenue 17.88 18.84 19.27

3.21

19.31 19.49

3.23 3.28

18.99 18.15

Expenses

Employee 1

Administrative *

General 3

Depreciation

Interest

Bad debts

8.84 8.93 9.28 8.88 9.28 9.20

1.10 1.22 1.20 0.98 0.92 0.55

3.90 4.25 4.43 4.53 4.73 5.21

1.90 2.13 2.15 1.99 1.98 1.93

.73 .72 .67 .42 .43 .50

.24 .28 .30 .20 .17 .17

Total expenses 16.51 17.53 18.03 17.00 17.51 17.56

Local savings 1.17 1.31 1.24 2.31 1.98 1.43

Patronage refunds received 2.37 2.32 2.56 2.03 1.90 1.97

Savings before income taxes 3.54

Less income taxes .17

Net income 3.37

Based on net sales of: $2,501,248

3.63 3.80 4.34

.16 .20 .17

3.47 3.60 4.17

3.88 3.40

.15 .16

3.73 3.24

1.18

1.64

2.82

.14

2.68

$2,498&I $2,461,876 $2.455.263 $2,377,478 $2,305,765 $2,351,265

100.00

85.13

14.87

8.76

0.50

5.33

1.79

.43

.16

16.97

t Salaries and wages include 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.
-

Appendix table to- Abbreviated income statement for medium cooperatives

1997 1996 1995 1994 1993 1992 1991

Net sales 100.00

Cost of goods sold 84.70

Gross margin 15.30

Service and other income 3.88

Gross revenue 19.18

Expenses

Employee 1 8.48

Administrative 2 .95

General 3 4.25

Depreciation 2.29

Interest .89

Bad debts .20

Total expenses 17.04

Local savings 2.12

Patronage refunds received 2.07

Savings before income taxes 4.19

Less income taxes .27

Net income 3.92

Based on net sales of: $8,733,538

100.00

85.40

14.80

3.59

100.00 100.00 100.00 100.00 100.00

88.12 88.05 86.28 85.97 86.39

13.88 13.95 13.74 14.03 13.61

4.24 3.58 3.52 3.18 3.09

18.19 18.12 17.53 17.28 17.21 16.70

8.21 8.01 7.82 7.88 7.97 7.60

.99 .94 .73 .59 .43 .40

4.07 4.18 4.23 4.58 4.78 4.89

2.12 2.17 2.03 2.07 1.98 1.85

.97 .88 .81 .81 .58 .59

.24 .27 .20 .21 .19 .18

18.80 18.41 15.42 15.70 15.89

1.59 1.71 2.11 1.56 1.32

2.17 2.20 1.98 1.88 1.96

3.76 3.91 4.09 3.44 3.28

.26 .19 .20 .16 .19

3.50 3.72 3.89 3.28 3.09

1.19

1.93

3.12

.18

2.94

!$6,708,885 $6,643,151 $6,753,615 $6,570,556 $6,856,237 $6845,418

15.51

1 Salaries and wages include 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.

35
Appendix tabte I I- Abbreviated income statement for large cooperatives

1997 1996 1995 1994 1993 1992 1991

Percent

100.00

85.23

Net sales

Cost of goods sold

Gross margin

100.00

88.17

100.00

87.75

100.00

86.68

100.00 100.00 100.00

86.16 86.44 86.48

11.83 12.25 13.32 14.77 13.84 13.56 13.52

Service and other income 3.78 3.04

15.29

3.88 3.12 3.74 3.98 4.17

Gross revenue 15.61 17.20 17.89 17.58 17.54 17.69

Expenses

Employee 1

Administrative 2

General 3

Depreciation

Interest

Bad debts

7.20 7.18 8.07 8.32 8.08 8.16 8.14

.76 .71 .68 .68 .56 .30 .25

3.73 3.64 4.19 4.36 4.61 4.72 4.77

1.76 1.76 1.87 1.92 1.87 1.81 1.79

.89 .89 .98 .75 .67 .69 .70

.18 .15 .13 .14 .14 .13 .12

Total expenses 14.52 14.33 15.92 16.17 15.93 15.81

Local savings 1.09 .96 1.28 1.72 1.65 1.73

Patronage refunds received 1.86 1.98 1.78 1.49 1.39 1.47

15.77

1.92

1.51

3.06 3.21 3.04 3.20 3.43

.18 .17 .17 .24 .26

2.88 3.04 2.87 2.96 3.17

Savings before income taxes 2.95 2.94

Less income taxes .22 .18

Net income 2.73 2.76

Based on net sales of: $13,287,037 $13,336,842 $13,356,966 $12,657,719 $12,807,345 $13,412,710 $13,579,176

1 Salaries and wages include 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.

36
Appendix table 12-Abbreviated income statement for super cooperatives

1997 1996 1995 1994 1993 1992 1991

Net sales

Cost of goods sold

Gross margin

100.00

91.13

100.00

91.54

100.00 100.00

89.28 91.37

8.87 8.46

100.00 100.00

89.52 89.43

10.48 10.57 10.72 8.83

100.00

91.43

8.57

Service and other income 3.54 2.69 3.85 3.91 4.08 3.83 4.27

Gross revenue 12.41 11.15 14.33 14.48 14.80 12.46

Expenses

Employee I

Administrative 2

General 3

Depreciation

interest

Bad debts

5.35 4.67 5.76 5.83 5.93 4.73

.48 .43 54 .51 .37 .26

3.15 2.75 3.61 3.93 4.27 3.65

1.48 1.30 1.63 1.66 1.64 1.42

.94 1.25 1.02 .81 .66 .78

.24 .07 .08 .ll .lO .12

12.84

4.83

.20

3.99

1.43

.68

.ll

Total expenses 11.64 10.47 12.64 12.85 12.97 10.96 11.24

Local savings .77 0.68 1.69 1.63 1.83 1.50 1.60

Patronage refunds received 1.56 1.41 1.29 1.09 .99 .88 1 .Ol

Savings before income taxes 2.33 2.09

Less income taxes .17 .14

Net income 2.16 1.95

2.98 2.72 2.82 2.38 2.61

.24 .19 .19 .14 .17

2.74 2.53 2.63 2.24 2.44

Based on net sales of: $39,042,353 $42,779,282 $34,132,710 $30,997,079 $29379,856 $31,800,104 $29,841,133

1 Salaries and wages include 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.

37
Appendix table is- Abbreviated Income statement for farm supply cooperatives

1997 1996 1995 1994 1993 1992 1991

Net sales

cost of goods sold

Gross margin

100.00 100.00 100.00

83.04 82.85 82.12

18.96 17.15 17.88 17.92 18.14 17.71 17.55

Service and other income

Gross revenue

3.49 3.04 3.48 3.15 2.81 3.18 3.04

20.45 20.19 21.36 21.07 20.95 20.89 20.59

Expenses

Employee I

Administrative 2

General 3

Depreciation

Interest

Bad debts

9.64 9.62 10.22

1 .Ol 1.04 1.08

4.46 4.46 4.70

2.21 2.20 2.23

1 .oo .94 .89

.21 .20 .20

Total expenses 18.53

Local savings 1.92

Patronage refunds received 2.63

Percent

100.00

82.08

100.00 100.00 100.00

81.88 82.29 82.45

Savings before income taxes 4.55

Less income taxes .27

Net income 4.28

Based on net sales of: $5,822,989

9.82

.89

4.83

2.06

.62

.19

18.41

10.00 10.24 10.09

.76 .43 .34

5.05 5.62 5.83

2.02 1.99 1.92

.57 .59 .65

.18 .19 .17

18.46 19.32 18.58 19.06 19.00

1.73 2.04 2.66

2.58 2.71 2.26

4.31 4.75 4.92

.24 .25 .27

4.07 4.50 4.65

2.37

2.10

4.47

.24

4.23

1.83 1.59

2.26 2.08

4.09 3.67

.24 .23

3.85 3.44

$5,254,056 $4,591,042 $4,488,527 $4,061,057 $3,782,900 $3,685,319

1 Salaries and wages include 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.

9 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.

38
Appendix take M- Abbreviated income statement for mlxed farm supply cooperatives

1997 1996 1995 1994 1993 1992 1991

Net sales 100.00

cost of goods soid 85.67

Gross margin 14.33

Service and other income 4.32

Gross revenue 16.65

Expenses

Employee 1

Administrative 2

General 3

Depreciation

Interest

Bad debts

Total expenses

6.63

84

4.53

2.16

1.21

.32

17.69

Local savings .76

Patronage refunds received 1.64

Savings before income taxes 2.40

Less income taxes .12

Net income 2.26

100.00

65.73

14.27

3.61 4.36

17.88 19.74

8.40 6.95 8.70 9.34 9.33 8.86

.81 85 .77 .65 .22 .15

4.31 4.85 5.08 5.69 5.69 5.58

2.01 2.24 2.25 2.41 2.31 2.16

1.20 1.10 .82 .78 .65 .67

.24 .23 .25 .23 .23 .18

16.97 18.22 17.87 19.10 18.40 17.60

.91 1.52 1.86 1.79

1.68 1.66 1.44 1.36

100.00

84.62

15.38

Percent

100.00

83.99

100.00

83.24

16.01 16.76

3.72

19.73

4.13

20.89

2.59 3.18 3.30 3.15

.19 .16 .15 .17

2.40 3.02 3.15 2.98

Based on net sales of: $18,208,446 $16,231,029 $14,062,212 $12.254,937 $10841,637 89,824,309

100.00 100.00

84.28 85.44

15.72 14.56

4.47

20.19

4.92

19.48

1.79

1.65

3.44

.18

3.26

1.88

1.64

3.52

.18

3.34

$9,412,459

i Salaries and wages include 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.

8 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.

39
Appendix table IS- Abbreviated inCOme statement for mixed marketlng COoperatives

1997 1996 1995 1994 1993 1992 1991

Net sales 100.00

Cost of goods sold 93.11

Gross margin 8.89

100.00

93.22

100.00

92.14

Percent

100.00

92.10

7.90

100.00

92.11

100.00

91.85

100.00

92.22

8.78 7.86 7.89 8.15 7.78

Service and other income 3.44 2.84 3.80 4.28

Gross revenue 10.33 9.82 11.88

3.88

11.78 12.17

3.51 3.81

11.88 11.59

Expanses

Employee 1

Administrative 2

General 3

Depreciation

Interest

Bad debts

4.09 3.82 4.64 4.85 4.97 4.61 4.41

.42 .38 .45 .47 .38 .37 .33

2.80 2.32 2.93 3.09 3.44 3.30 3.82

1.32 1.22 1.41 1.49 1.45 1.34 1.32

.89 1.25 .92 .88 .56 .68 .55

.06 .05 .07 .08 .07 .14 .lO

Total expenses 9.18 9.04 10.42 10.82 10.87 10.44 10.33

Local savings 1.15 .58 1.24

Patronage refunds received 1.51 1.42 1.20

Savings before income taxes 2.66 2.00

Less income taxes .22 .15

Net income 2.44 1.85

2.44

.22

2.22

1.18

1.10

2.28

.18

2.10

1.30

1.07

2.37

.13

2.24

1.22 1.28

.91 .95

2.13 2.21

.14 .17

1.99 2.04

Based on net sales of: $22,895,704 $24,879,783 $18,885,017 $18,954,793 $16,299,521 $16,392,477 $15841,969

1 Salaries and wages include 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.

40
Apfmdix table 16 Abbreviated income statement for marketing cooperatives

1997 1996 1995 1994 1993 1992 1991

Percent

100.00

93.36

6.64

100.00 100.00

93.43 93.66

6.57 6.14

100.00

94.02

5.96

3.53 4.06 3.76 3.66

Net sales

Cost of goods sold

Gross margin

100.00 100.00

95.45 94.67

4.55 5.33

Service and other income 3.31 2.34

100.00

93.92

6.06

3.43

Gross revenue 7.66 7.67 9.51 10.17 10.63 9.92 9.66

Expenses

Employee 1

Administrative 2

General 3

Depreciation

interest

Bad debts

3.00 2.61 2.83 3.01 3.33 3.23 3.13

.29 .29 .32 .30 .26 .30 .33

2.40 2.12 3.04 3.39 3.56 3.06 3.04

.96 0.95 1.24 1.21 1.29 1.23 1.20

.79 1.04 .60 .61 .59 .60 .71

.33 .03 99 .Ol .07 .04 64

Total expenses 7.79 7.24 6.32 6.73 9.12 6.66 6.45

Local savings .07 .43 1.19 1.44 1.51 1.26 1.41

Patronage refunds received 1.10 1.15 84 .47 .65 .71 .66

2.03 1.91 2.16 1.97 2.29

.17 .12 .13 .13 .16

Savings before income taxes 1 .17 1.56

Less income taxes .13 .ll

Net income 1.04 1.47 1.86 1.79 2.03 1.84 2.13

Based on net sales of: $28,339,367 830,851,603 $15,939,010 $18,417,662 $15,706.787 $15.895.032 $15,378,071

1 Salaries and wages include 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.

4 1
appendix tabk3 17- Financial ratios for small cooperatlves

Ratio 1997 1996 1995 1994 1993 1992 1991

Liquidity

Current

Quick

2.40 2.08 2.22 2.35 2.46 2.52 2.32

1.41 1.18 1.24 1.29 1.36 1.45 1.32

Leverage

Debt

Debt-to-equity

Times-interest-earned

.25 .29 .27 .24 .23 -22 .25

34 .41 .36 .32 .29 .29 .33

5.66 6.01 6.66 11.34 10.05 7.36 5.79

Activity

Total-asset-turnover 1.68 1.77 1.77 1.80 1.81 1.87 1.92

Fixed-asset-turnover 9.04 8.04 8.02 8.42 9.02 8.81 8.67

Profltebillty

Gross profti margin

Return on total assets

before interest 8 taxes

Return on equity

14.45 15.56 16.27 16.10 16.19 15.76 14.87

8.02 7.73 7.93 8.59 7.78 7.36 6.53

8.46 8.67 8.71 9.96 8.70 7.82 6.81

Appendix table m- Financial ratlos for medium cooperatives

Ratio 1997 1996 1995 1994 1993 1992 1991

Liquldity

Current

Quick

1.74 1.72 1.64 1.78 1.70 1.69 1.66

.92 .89 .79 .91 .85 .82 .84

Leverage

Debt

Debt-to-equity

Times-interest-earned

.34 .36 .37 .33 .34 .32 .33

.52 .56 .58 .50 .51 .47 .50

5.71 4.68 5.56 7.76 6.61 5.92 5.03

Activity

Total-asset-turnover 1.90 1.86 1.75 1.97 1.97 2.03 2.04

Fixed-asset-turnover 6.52 6.93 6.70 7.68 7.09 7.07 7.16

Profitebliity

Gross profit margin

Return on total assets

before interest 8 taxes

Return on equity

15.30 14.60 13.66 13.95 13.74 14.03 13.61

9.63 6.82 8.36 9.28 8.00 8.02 7.92

11.31 10.19 10.31 11.50 9.81 9.26 8.97

42
Appendix tab 19- Financial ratios for large cooperatlves

Ratio

Liquidity

Current

Quick

1997 1996 1995 1994 1993 1992 1991

1.46 1.36 1.41 1.55 1.57 1.56 1.72

.74 .68 .61 .73 .74 .70 .84

Leverage

Debt

Debt-twquity

Times-interest-earned

.42 A4 .43 .39 .40 .43 .38

.74 .80 .76 .65 .66 .74 .61

4.33 4.32 4.11 5.31 5.54 4.98 5.16

Activity

Total-asset-turnover 2.17 2.15 2.05 2.14 2.17 2.14 2.38

Fixed-asset-turnover 7.66 8.05 7.72 7.65 7.30 7.65 8.11

Profitebliity

Gross profti margin

Return on total assets

before interest & taxes

Return on equity

11.83 12.25 13.32 14.77 13.84 13.56 13.52

8.32 8.25 8.30 8.47 8.05 8.57 10.11

10.29 10.68 10.42 10.71 10.39 11.05 12.11

Appendix table 20- Flnanclal ratlos for super cooperatives

Ratii 1997 1996 1995 1994 1993 1992 1991

Llquldity

Current

Quick

1.23 1.24 1.26 1.30 1.32 1.33 1.29

.58 .55 .48 .62 .59 .69 .55

Leverage

Debt

Debt-twquity

Times-interest-earned

.53 .55 .55 .50 .50 .48 .49

1.11 1.25 1.23 1 .Ol 1 .oo .92 .98

3.49 2.67 3.91 4.35 5.29 4.06 4.30

Actlvity

Total-asset-turnover 2.54 2.73 2.15 2.38 2.33 2.76 2.58

Fixed-asset-turnover 9.73 11.35 9.23 9.11 9.06 9.63 8.73

Profitebliity

Gross profti margin

Return on total assets

before interest &taxes

Return on equity

8.87 8.46 10.48 10.57 10.72 8.63 8.57

8.31 9.13 8.61 8.38 8.10 8.71 8.77

11.58 11.94 13.14 12.06 12.22 11.82 12.40

43
Appendix table 21- Financial ratios for farm supply cooperatlves

Ratio 1997 1996 1995 1994 1993 1992 1991

Liquidity

Current

Quick

1.75 1.73 1.83 1.95 2.06 2.13 2.08

.93 .90 .94 1 .oo 1.09 1.14 1.13

Leverage

Debt

Debt-to-equity

Times-interest-earned

.35 .35 .33 .30 .29 .27 .29

54 54 .48 .43 .40 .38 .41

5.55 5.60 6.35 8.89 8.85 7.05 5.46

Activity

Total-asset-turnover

Fixed-asset-turnover

1.76 1.74 1.69 1.83 1.82 1.84 1.84

6.76 6.93 7.06 7.85 7.90 7.75 7.75

Profttabiifty

Gross profit margin

Return on total assets

before interest & taxes

Return on equity

16.96 17.15 17.88 17.92 18.14 17.71 17.55

9.78 9.13 9.54 10.13 9.16 8.77 8.27

11.65 10.93 11.29 12.14 10.81 9.74 8.91

Appendix tabte 22- Financial ratios for mixed farm supply COOpSrStiVeS

Ratio

Liquidity

Current

Quick

1997 1996 1995 1994 1993 1992 1991

1.43 1.49 1.45 1.63 1.83 1.81 1.72

.69 .73 .64 .85 .80 .96 .81

Leverage

Debt

Debt-to-equity

Times-interest-earned

.46 .44 .43 .38 .37 .33 .35

.84 .78 .77 .60 .58 .50 .54

2.98 3.15 3.89 5.02 5.06 5.18 5.13

Activity

Total-asset-turnover 2.12 2.24 1.92 2.07 1.94 1.94 1’.98

Fixed-asset-turnover 6.70 7.40 6.63 6.97 6.13 5.99 6.34

Profitabliity

Gross profit margin

Return on total assets

before interest 8 taxes

Return on equity

14.33 14.27 15.38 16.01 16.76 15.72 14.56

7.65 8.49 8.24 8.53 7.62 8.27 8.68

8.86 9.56 10.26 10.44 9.14 9.47 10.16
Appendix table n- Financfal ratios for mixed marketing cooperatives

Ratio 1997 1996 1995 1994 1993 1992 1991

Liquidity

Current

Quick

1.25 1.24 1.24 1.30 1.32 1.34 1.30

.61 .61 .43 .56 .56 .60 52

Leverage

Debt

Debt-to-equity

Times-interest-earned

.50 .55 .56 .50 .50 .49 .49

1.00 1.22 1.26 1 .oo 1 .Ol .96 .95

4.65 2.60 3.64 4.40 5.23 4.16 4.41

Activity

Total-asset-turnover

Fixed-asset-turnover

2.62 3.07 2.26 2.54 2.49 2.92 2.92

11.77 13.27 10.70 10.31 10.11 10.65 10.44

6.69 6.76 7.66 7.90 7.69 6.15 7.76

Profltability

Gross profh margin

Return on total assets

before interest & taxes

Return on equity

9.47 9.96 7.66 7.42 7.29 6.20 6.34

13.79 12.61 11.46 10.66 11.19 11.42 11.63

Appendix table 2; Financial ratios for marketing COOperStiVeS

Ratio 1997 1996 1995 1994 1993 1992 1991

Liquldity

Current

Quick

Leverage

Debt

Debt-to-equity

Times-intdrest-earned

Activity

1.14 1.16 1.24 1.21

.55 .46 .53 .57

.59 .61 .59 .56

1.42 1.56 1.44 1.37

2.47 2.51 3.54 3.36

.25 1.25 1.27

.62 .65 .69

.53 .52 .49

.I5 1.06 .95

.66 3.46 4.05

1

1

4

Total-asset-turnover 2.96 2.64 2.47 2.47 2.62 2.60 2.75

Fixed-asset-turnover 12.49 13.59 10.54 9.45 10.16 9.56 6.94

Profitability

Gross profit margin

Return on total assets

before interest a taxes

Return on equity

4.55 5.33 6.06 6.64 6.57 6.14 5.96

5.65 7.44 7.00 6.72 7.20 7.21 6.37

7.46 10.77 11.22 10.46 11.40 9.66 11.47

45