United States

Department of

Agriculture

RBS Research

Report 205

Analysis of Financial

Statements: Local Farm

Supply, Marketing Co-ops, 2003
Abstract This report updates and analyzes the balance sheets and income statements of local

farm supply and marketing cooperatives, comparing 2002 and 2003 and trends over

the past 10 years. The data represent four cooperative sizes and types. Common-size

income statements and balance sheets compare different cooperative sizes and types.

Trends for major balance sheet and income statement items and ratio analysis compare and contrast cooperatives by size and type.

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

sales, and financial ratios.

Analysis of Financial Statements:

Local Farm Supply, Marketing Co-ops, 2003

Beverly L. Rotan

RBS Research Report 2005

June 2005

On the cover: Inside the co-op store at Valley Springs Farmers Cooperative in Valley

Springs, S.D., are (from left): Co-op President David Kolsrud, Manager Paul

Edmundson and board member John Sjaarda. The co-op is featured in the May-June

2002 issue of USDA's Rural Cooperatives magazine. Photo by Greg Latza
Preface This report studied the financial statements of local cooperatives, comparing 2002,

2003, and the past 10 years. Trends of major balance sheet and income statement

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

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

with which to compare their cooperatives' historical performance with representative

cooperative data.

The author thanks the cooperatives that helped make this report possible by providing

their financial statements to RBS staffers.

i
Contents Profile of Respondent Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Income Statement Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Financial Ratio Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Appendix Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

ii
Highlights Financial statements of 433 local farm supply and marketing cooperatives were used

for this report. The statements of 287 cooperatives were used to compare 2002 to

2003, while those of 433 cooperatives looked at trends over the past 10 years.

Cooperatives were divided into four groups based on their mix of net sales between

supplies sold and farm products marketed. They were also divided into four size categories, based on their total sales volume.

From 2002 to 2003, average net income was down 23 percent and net sales for all

cooperatives increased almost 17 percent. In 2003, average net sales for all cooperatives studied were $18.9 million. About 29 percent of the cooperatives studied were

small cooperatives with sales of less than $5 million.

In some instances, a cooperative was probably one of the community's larger employers. Overall, they employed an average of 28 full-time and 15 part-time employees

with an average annual payroll (including benefits and payroll taxes) of $1.3 million, up

about 4 percent from 2002.

Total sales were up about 17 percent. Total farm supply sales were up 9 percent, with

rises in seed (25 percent), feed (12 percent), crop protectants (10 percent), and petroleum (9 percent). Marketing sales grew 27 percent between 2002 and 2003. Sales of

grain and oilseeds were up 28 percent.

Average total assets grew about 2 percent, fueled by prepaid expenses and cash. To

finance the growth in assets (mainly inventories), total liabilities grew 2 percent while

owner equities increased only about 1 percent.

Interest expenses, almost 2 percent of net sales, increased by about 1 percent.

Patronage refunds received had the greatest decline due to equity write-offs caused by

several large regionals going out of business. Local savings increased 27 percent

while net income decreased 23 percent.

Financial ratio analysis was used to look at 10-year trends for the 433 cooperatives in

the data base. The financial ratio analysis revealed:

● The current assets-to-current liabilities ratio was relatively constant for the last

5 years. The ratio ranged from 1.33 to 1.39 between 1999 and 2003. The quick

ratio (current assets-inventory/current liabilities) mimicked the current ratio's

trend.

● After a slight drop in 2000, the total debt ratio started a small upward movement before leveling off in 2002 and 2003.

● The fixed-asset-turnover ratio, a measure of asset use, averaged around 7 percent or higher during the 10-year period. The elements of this ratio include net

sales, which were 8 percent of property, plant, and equipment levels. This ratio

was lowest in 1999 and 2000 at 6.70.

● Return-on-total assets measures the rate of return on total investments (equity). The ratio was highest (9.04) in 1996 and lowest (3.75) in 2003.

● Return-on-total equity before taxes declined from 1996 to 2003 and declined to

its lowest point at 4.10 in 2003.

iii
Analysis of Financial Statements: Local

Farm Supply, Marketing Cooperatives, 2003

Beverly L. Rotan

This report analyzes the financial statements of

287 local cooperatives. It is meant to be used as a measuring tool by cooperative managers, directors, and

members in the oversight of their local co-op's operation. Ratio analysis and trends are discussed. The

information is sub-divided into four cooperative sizes

and types.

Farm supply sales (petroleum, fertilizer, feed,

etc.) of local cooperatives averaged $10.7 million in

2003, while marketing sales averaged $8.3 million.

Average grain (corn, wheat, soybeans, etc.) sales made

up 28 percent of total marketing sales. Income from

services (product delivery, fertilizer application, grains

and oilseeds hauling and storage, etc.) averaged $0.6

million, up from 2002 by 27 percent.

Local agricultural cooperatives played a vital role

in providing goods and services to their memberpatrons and the rural community. These cooperatives

paid an average of $60,000 in annual property taxes,

averaged 28 full-time and 15 part-time employees, and

had an average annual payroll (including benefits and

payroll taxes) of $1.3 million.

This study focuses on the balance sheet, income

statement, and financial ratios derived from these

statements.

Profile of Respondent Cooperatives

USDA's Rural Business-Cooperative Service

(RBS) annually surveys farmer cooperatives and uses

the data for reports. To be included in this report, a

cooperative had to sell some farm supplies. Those that

exclusively marketed members' products were not

included. In addition to selling farm supplies, cooperatives also had to provide an annual report with a

detailed income statement.

The RBS database has 433 cooperatives. This

report focused on the 287 that provided information

for both 2002 and 2003. When looking at long-term

trends (1994 through 2003) in the financial ratio analysis section, all 433 cooperatives were used to obtain a

more complete understanding of the local cooperatives' business.

Cooperative Size—Cooperatives were

grouped into four sizes by sales volume, using actual

figures: small, medium, large, and super sales

groupings in this report were the same as in prior

reports. Product mix was ignored in classifying size

because it may be related to the cooperative's product

mix. For example, a cooperative with $10 million in

sales that exclusively marketed grains and oilseeds

could be considered small compared with similar

marketing organizations. But, a strictly farm supply

cooperative with sales of $10 million could be quite

substantial.

Cooperative Type—To account for

differences in operations and orientation based on

product mix, cooperatives were placed in four

descriptive categories: 1) farm supply; 2) mixed farm

supply; 3) mixed marketing; and 4) marketing. They

closely represent business operations of these

cooperatives as summarized in table 1.

This report focuses on cooperatives handling

farm supplies: 50 percent in 2003 sold only farm supplies; 24 percent offered mixed farm supplies; nearly

16 percent were mixed marketing; and almost 10 percent were purely marketing (table 2). Of the respondents, 29 percent were each super and small; 22 percent, medium; and 21 percent, large. Both types of

marketing cooperatives had larger sales while most

farm supply cooperatives' sales were smaller.

The first part of this report focuses on the 287

cooperatives. In the financial ratio analysis sections,

1
data between the years were not completely comparable in that the same cooperatives did not respond to

the RBS survey every year. Thus, it may not be statistically valid to draw industry-wide conclusions.

However, the samples are large and do represent a

cross section of cooperatives selling farm supplies and

marketing grains and oilseeds throughout the United

States.

Sales Mix—Responding cooperatives fell into

five major farm supply and two marketing categories

(table 3). Petroleum, fertilizer, and feed were the

dominant production supplies sold. Sales of small

cooperatives, the most numerous, averaged $2.9

million in 2003. Farm production supplies represented

the bulk (91 percent) of their sales. As cooperatives

grew in size, the importance of farm supplies declined

(78 percent for medium-sized cooperatives, 82 percent

for large, and 46 percent for super).

Sales of mixed farm supply cooperatives averaged $23.4 million, with $16.5 million exclusively in

farm supplies. For all sizes of cooperatives, with the

exception of super-sized co-ops, petroleum was the

most important farm supply item sold; with fertilizer

second. All farm supplies (except chemicals) and products marketed increased. Sales of seed were the lowest

of all farm supplies sold, although statistically they

had the largest increase between the 2 years. Grain

sales increased nearly 28 percent. Average sales of

marketing and mixed marketing cooperatives were

both about $36 million, much larger than both categories of farm supply cooperatives.

Balance Sheet Analysis

The balance sheet of a local cooperative states its

financial position at the end of a 12-month fiscal year.

The balance sheet represents the cooperative's assets,

liabilities, member equity, and their mutual relationship. The balance sheets of these 287 local cooperatives

show typical levels for assets, liabilities, and member

equities for different sizes and types.

Table 4 compares common-size balance sheets for

all respondents for 2002 and 2003. Appendix tables 1-4

show common-size balance sheets by size and type for

2003. Each account is listed as a percentage of total

assets. The dollar amount of total assets is listed at the

2

Table 1—Size and type definitions used for respondent cooperatives 

Cooperative size Definition Number

Small up to $5 million in total sales 83

Medium over $5 million to $10 million 62

Large over $10 million to $20 million 60

Super over $20 million 82

Cooperative type

Farm supply total net sales from farm supplies 144

Mixed farm supply from 50 to 99 percent 70

Mixed marketing from 25 to 49 percent 4

Marketing less than 25 percent 28

Table 2—Respondent cooperatives by size and type, 2003

Cooperative size

__________________________________________________________________________________________

Cooperative type Small Medium Large Super Total

---------------------------------------- Number ---------------------------------------- Percent

Farm supply 68 36 31 9 50.2

Mixed farm supply 10 11 21 28 24.4

Mixed marketing 1 9 6 29 15.7

Marketing 4 6 2 16 9.7

Percent of total 28.9 21.6 20.9 28.6 100.0
bottom of the table. By cooperative size, total assets

ranged from $1.9 million for small to $19.6 million for

super-size cooperatives. By co-op type, total assets

were $4.7 million for farm supply, $12.1 million for

mixed farm supply, $14.7 million for mixed marketing,

and $10.8 million for marketing.

Current Assets—Cash and cash equivalents

as a percent of total assets decreased as cooperative

size increased. Cash was 9.3 percent of total assets for

small cooperatives and dropped to 3.8 percent for

super cooperatives. By type and as a percent of total

assets, farm supply cooperatives were first with 5.7

percent of total assets followed by mixed farm supply

and mixed marketing cooperatives, both with 4

percent of total assets.

Current assets increased by 6 percent from 2002

to 2003 due to prepaid expenses and farm supply

inventories. Total inventories increased 4 percentalthough individually grain and oilseed inventories

fell 0.50 percent, farm supply increased almost 10 percent.

By size, small cooperatives' farm supply inventories were about 15 percent of total assets. As cooperatives' sizes increased, farm supply inventories as a percent of assets declined.

Accounts receivable in this study were farm supply trade accounts, not grains and oilseeds trade

receivables. Farm supply and grains and oilseeds trade

receivables (“other”current assets) were separated to

allow ratio analysis elsewhere in this study. Accounts

receivable for farm supply sales increased almost 10

percent as the result of 17 percent higher sales.

Investments and Other Assets—There was

a decline in investment due to the demise of several

large regional farm supply cooperatives. Investment

showed a 2-percent decrease. About 24 percent of

cooperatives' total assets was invested in other

cooperatives and/or CoBank in 2003. Surprisingly,

medium and small cooperatives' investment amounted

to 28 and 27 percent of total assets, respectively (table

5). As a percentage of assets, mixed marketing and

marketing cooperatives had less invested than the

farm supply cooperatives (table 6).

Property, Plant, and Equipment—Net

property, plant, and equipment (net PP&E) decreased

0.47 percent from the previous year. As a percent of

total assets, net PP&E ranged between 22 percent and

28 percent for all cooperative sizes. Marketing and

mixed farm supply cooperatives handling grains and

3

Table 3—Average farm supplies sold and products marketed as a percent of total sales, and change from 2002

to 2003

2002 2003 Percentage change

------------------------------------------------- Percent ------------------------------------------------- 

Feed 10.1 9.8 12.93

Seed 2.1 2.2 25.36

Fertilizer 11.1 10.3 9.20

Crop protectants 8.8 8.3 9.92

Petroleum products 20.2 18.8 8.58

Other 7.7 6.8 2.52

___ ___ ___

Total 60.0 56.2 9.48

Products marketed:

Grains and oilseeds 39.8 43.5 27.69

Other 0.2 0.3 1.08 ___ ___ ____

Total 40.0 43.8 27.44 ____ ____ ____

Total sales 100.0 100.0

Based on average sales of: $16,235,925 $18,952,753
4

Table 4—Common-size balance sheet and change in accounts, 2002 to 2003

2002 2003 Percentage change

-------------------------------------------------- Percent --------------------------------------------------

Assets

Current assets

Cash and cash equivalents 3.92 4.57 18.90

Accounts receivable 10.35 10.10 -0.50

Inventories—grains and oilseeds 9.85 9.34 -2.73

—farm supplies 14.50 15.66 9.53

Prepaid expenses 1.13 1.67 30.65

Other current assets 6.35 6.66 7.17

____ ____ ____

Total current assets 46.28 48.00 5.67

Investments and other assets

Investments 23.97 23.16 1.88

Other assets 2.27 1.98 -13.09

Net property, plant, and equipment 27.48 26.86 -0.47 _____ _____ ____

Total assets 100.00 100.00 1.75

Liabilities and owner equities

Current liabilities

Current portion of long term debt 5.16 4.51 -10.84

Notes payable seasonal 11.36 10.65 -4.43

Accounts payable 6.61 7.43 14.61

Patrons credit balances & other

liabilities 8.53 10.34 23.70

Accrued taxes 0.60 0.52 -10.33

Accrued expenses 1.60 1.68 7.03

Patronage refunds (cash) 0.85 0.65 -22.29 ____ ____ ____

Total current liabilities 34.71 35.79 5.14

Long term debt 10.95 10.10 -6.56

Total liabilities 39.38 38.95 2.34

Owner equities

Allocated equity 39.38 38.95 0.51

Unallocated equity 14.96 15.17 3.22 ____ ____ ____

Total owner equities 54.34 54.11 1.25 _____ _____ ____

Total liabilities and owner

equities 100.00 100.00 1.75

Based on total assets of: $8,147,610 $8,678,236
5

Table 5—Common-size balance sheets by cooperative size, 2003

Small Medium Large Super

------------------------------------------- Percent of total assets ------------------------------------------

Assets

Current assets

Cash and cash equivalents 9.26 5.77 5.26 3.75

Accounts receivable 10.27 11.61 11.33 9.53

Inventories—grains and oilseeds 0.40 2.94 3.49 12.42

—farm supplies 24.60 18.15 18.70 13.92

Prepaid expenses 1.28 2.31 1.76 1.59

Other current assets 3.19 3.53 5.27 7.82

Total current assets 49.00 44.31 45.82 49.03 ____ ____ ____ ____

Investments and other assets

Investments 26.76 27.62 24.69 21.77

Other assets 2.53 2.01 2.99 1.64

Net property, plant, and equipment 21.71 26.07 26.51 27.56 _____ _____ _____ _____

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long term debt 1.45 2.49 1.63 5.90

Notes payable seasonal 5.99 6.98 9.74 11.87

Accounts payable 8.44 7.61 8.27 7.07

Other liabilities 5.99 8.67 10.50 10.94

Accrued taxes 0.16 0.21 0.48 0.62

Accrued expenses 1.53 1.56 1.66 1.72

Patronage refunds (cash) 0.59 0.47 0.97 0.59 ____ ____ ____ ____

Total current liabilities 24.15 27.99 33.25 38.71

Long term debt 7.01 7.78 7.69 11.39

Total liabilities 31.16 35.77 40.94 50.10

Owner equities

Allocated equity 50.13 46.02 41.94 36.05

Unallocated equity 18.71 18.21 17.12 13.85 ____ ____ ____ ____

Total owner equities 68.84 64.23 59.06 49.90 _____ _____ _____ _____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,896,686 $3,729,323 $7,713,824 $19,853,729
6

Table 6—Common-size balance sheets by cooperative type, 2003

Farm Mixed farm Mixed

supply supply marketing Marketing

-------------------------------------------- Percent of total assets --------------------------------------------

Assets

Current assets

Cash and cash equivalents 5.71 4.28 4.63 2.75

Accounts receivable 10.21 12.36 8.55 7.02

Inventories—grains and oilseeds 0.03 7.31 16.60 17.45

—farm supplies 22.16 16.13 12.44 9.26

Prepaid expenses 2.23 1.03 2.23 1.02

Other current assets 3.91 6.44 9.19 7.79 ____ ____ ____ ____

Total current assets 44.25 47.55 53.64 45.29

Investments and other assets

Investments 27.53 22.81 20.01 21.41

Other assets 2.25 2.58 1.02 0.73

Net, property, plant, and equipment 25.47 27.06 25.33 32.57 _____ _____ _____ _____

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long term debt 2.14 4.34 7.98 2.71

Notes payable seasonal 6.76 12.39 13.76 7.76

Accounts payable 8.95 8.23 6.01 4.99

Patrons credit balances & other liabilities 8.51 7.60 12.69 16.72

Accrued taxes 0.29 0.40 0.81 0.75

Accrued expenses 1.80 1.69 1.64 1.48

Patronage refunds (cash) 0.73 0.62 0.53 0.82 ____ ____ ____ ____

Total current liabilities 29.18 35.27 43.42 35.23

Long term debt 8.05 11.27 9.92 11.70

Total liabilities 37.23 46.54 53.34 46.93

Owner equities

Allocated equity 46.13 39.07 33.63 34.41

Unallocated equity 16.64 14.39 13.03 18.66 ____ ____ ____ ____

Total owner equities 62.77 53.46 46.66 53.07 _____ _____ _____ _____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on assets of: $4,675,454 $12,140,881 $14,738,946 $10,791,458
oilseeds had higher dollar amounts of PP&E, probably

due to extensive storage and handling facilities.

Current Liabilities—Current liabilities grew

at a rate of about 5 percent between 2002 and 2003. The

largest increase was in patron credit balances and

other liabilities and accounts payable. Revolving

equity redeemed had the largest decrease of 31.8

percent, reflecting multiple causes-losses were

allocated, the cooperative didn't need more capital,

merger, capital stock buy back, etc. At about 39 percent

of total assets, allocated equity remained almost

constant between the 2 years.

Current-term and seasonal-short-term debt used

for financing operating expenses grew. Accrued

expenses grew 7 percent. Allocated equity--cash

declined 22 percent.

Long-term Debt—Long-term debt decreased

about 7 percent from 2002 to 2003. Except for super

cooperatives, as a percent of total assets by size, longterm debt was around 7 percent. By type, mixed farm

supply and marketing cooperatives had 11 percent in

long-term debt. Twenty-one percent (59 of 287) of the

cooperatives had no long-term debt. The Bank for

Cooperatives, CoBank, commercial banks, and

regional cooperatives were sources of debt capital.

Member Equities—Member equities

consisted of both allocated (preferred, common, and

other kinds of ownership certificates) and unallocated

equity. Comparing this to total assets represents the

percent of the cooperative's assets owned by the

members, with creditors claiming the rest. Member

equity ranged from 50 to 69 percent by size of

cooperative. By type the range was from 47 to 63

percent.

Members of small cooperatives had the highest

percentage of ownership (69 percent) while those in

super-size cooperatives had the lowest (50 percent). By

type, members of farm supply cooperatives had the

highest percent of total assets. Both types of marketing

cooperatives had slightly lower member ownership-53

percent for marketing and 47 percent for mixed marketing.

Allocated equity as a percentage of total assets

declined as size grew, with small co-ops at 50 percent

to super co-ops at 36 percent. Both farm supplies cooperatives had the highest percent of allocated equity as

a percent of total assets.

Unallocated equity averages ranged from 13.0 to

18.7 percent of total assets for all types and sizes of

cooperatives.

Income Statement Analysis

This shows the net results of cooperative operations. Because most managers' performance is judged

by net income, members attach great importance to the

income statement. The underlying values of the

income statement are studied. Table 7 presents a common-size income statement for 287 cooperatives and

the change between 2002 and 2003. Appendix tables 5

to 8 show common-size income statements by size and

type for 2003.

Net Sales—Net sales are obtained by

subtracting sales discounts and returns and allowances

from gross sales. Average net sales for the 287

cooperatives in 2003 were $18.9 million, up more than

$2 million or 16.7 percent from 2002. Table 8 shows net

sales by cooperative size and table 9 by type. Net sales

of all sizes and types of cooperatives grew from 2002

to 2003.

Cost of Goods Sold (COGS)—This

represented the largest single expense component

expressed as a percent of net sales. For this study,

COGS includes the beginning inventory plus

purchases and freight costs, minus purchase returns

and allowances, purchase discounts, and ending

inventory. COGS, therefore, was the purchase price of

the farm supplies sold or products marketed. Table 9

shows COGS as a percent of net sales for different

cooperative types. COGS for all types and sizes were

at least 83 percent of net sales.

Gross Margins—The excess of net sales over

the cost of goods sold averaged 12.5 percent of sales

for all cooperatives, up three-quarters of a percent

from 2003. The gross margin or gross margin

percentage is an important operating ratio. A small

change in the gross margin can tremendously impact

local savings. A cooperative manager must maintain a

gross margin near industry averages. Thus, marketing

co-ops must develop least-cost sources of supplies and

pay market rates on the products they purchase.

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

a cooperative cannot operate at cost on a daily basis.

Cooperatives need to be profitable so as to afford to

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

7
Gross margin equals net sales less cost of goods

sold, so cooperatives with higher COGS had lower

gross margins. COGS were slightly larger for marketing and super cooperatives. As a proportion of sales,

farm supply cooperatives had the highest gross margin: 17.1 percent. Although both types of farm supply

cooperatives generally had less business volume than

their marketing counterparts, their gross margin was

from 6 to 11 percentage points higher.

Sixty, or 21 percent, of cooperatives provided

their individual product gross margins (table 10).

Gross margins vary not only by cooperative, but also

by farm supplies sold or products marketed.

Cooperatives have different margins for different

products. For instance, fertilizer sold by the truckload

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

spread by a cooperative truck) also have an impact on

margins. Margins are also subject to competition. The

8

Table 7—Income statement and change in accounts, 2002 to 2003

2002 2003 Percentage change

---------------------------------------- Percent of net sales ----------------------------------------

Net sales 100.00 100.00 16.73

Cost of goods sold 88.95 87.55 18.61

_____ ____ ____

Gross margin 11.05 12.45 0.75

Service and other income 4.23 4.57 10.44 ____ ____ ____

Gross revenue 15.28 17.02 15.64

Operating expenses

Employee1 7.08 7.95 3.70

Administrative2 0.62 0.72 3.87

General3 4.10 4.51 0.02

Depreciation 1.86 2.14 1.36

Interest expense 0.60 0.70 -0.06

Bad debts 0.12 0.15 -9.25 ____ ____ ____

Total expenses 14.38 16.17 3.62

Local savings 0.91 0.85 27.27

Patronage refunds received 0.19 0.84 -73.73 ____ ____ _____

Savings before income taxes 1.10 1.69 -23.07

Less income taxes 0.10 0.14 -18.42 ____ ____ _____

Net income 1.00 .55 -23.49

Based on sales of: $16,235,925 $18,952,753

1 Includes salaries and wages, employee insurance, payroll taxes, and pension expense.

2 Includes professional services, office supplies (includes postage), telephone, markets, meetings and travel, donations, dues and

subscriptions, directors' fees and expense, and annual meetings expense.

3 Advertising and promotion, delivery (auto and truck) expense, insurance, property and business taxes, other taxes /and licenses, rent and

lease expense, plant supplies and repairs, repairs and maintenance, utilities (includes dryer expense), miscellaneous expenses, patronage

refunds paid out, and other expenses.
gross margin represents a blended margin derived

from all products the cooperative sold and services it

rendered.

The highest weighted (by volume) gross margin

for the five main farm supplies (feed, seed, fertilizer,

crop protectants, and petroleum products) was for fertilizer at 4.6 percent. Margins for other farm supplies

ranged from 2 to 16 percent. Grains and oilseeds were

the only products marketed for which gross margins

were known.

Service and Other Income—This mostly

consisted of trucking services (delivery of purchases

and transfer of products to market), custom

application of fertilizers and crop protectants, and

drying and storing of grains and oilseeds. While local

cooperatives provided many other services to their

patrons, these were the primary ones. Service and

other income increased 7.6 percent over the 2-year 

9

Table 8—Abbreviated income statement as a percent of net sales for cooperatives by size, 2003

Small Medium Large Super

------------------------------------------- Percent of net sales -------------------------------------------

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 83.75 86.54 85.11 90.34 ____ ____ ____ ____

Gross margin 16.25 13.46 14.89 9.66

Service and other income 3.81 3.85 4.52 4.24 ____ ____ ____ ____

Gross revenue 20.06 17.31 19.41 13.90

Operating expenses

Employee1 10.57 8.36 9.32 6.25

Administrative2 1.19 .93 0.82 0.50

General3 4.95 4.65 4.79 3.85

Depreciation 2.06 1.99 2.23 1.75

Interest 0.51 0.54 0.55 0.63

Bad debts 0.23 0.13 0.18 0.09 ____ ____ ____ ____

Total expenses 19.51 16.60 17.89 13.07

Local savings 0.54 0.71 1.52 0.83

Patronage refunds received 0.16 0.47 0.48 0.10 ____ ____ ____ ____

Savings before income taxes 0.70 1.18 2.00 0.93

Less income taxes 0.00 0.05 0.14 0.10 ____ ____ ____ ____

Net income 0.70 1.13 1.86 0.83

Based on total sales of: $2,883,596 $7,069,936 $13,738,809 $47,488,462

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

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

directors' fees and expens be, 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.
period and averaged between 3 to 4 percent of net

sales for all sizes and types of cooperatives.

Other income, derived from non-operating

sources such as interest and finance charges on cash

equivalents and interest charged on credit sales,

increased 10.4 percent over the 2 years. Other income

also included that from the sale of property, plant, and

equipment, rentals, and extraordinary items.

Sometimes property, plant, and equipment were sold

to generate income, but usually they were fully depreciated and the market value was greater than the book

value. In some cases, however, disposal of a fully

depreciated asset may mean a loss. Rental income from

unused facilities or equipment provided income flows.

Extraordinary items might be either gains or losses. A

gain could result from a fire loss where the insurance

10

Table 9—Abbreviated income statement as a percent of net sales for cooperatives by type, 2003

Farm Mixed farm Mixed

supply supply marketing Marketing

-------------------------------------------- Percent of net sales --------------------------------------------

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 82.89 86.44 92.83 93.89 ____ ____ ____ ____

Gross margin 17.11 13.56 7.47 6.11

Service and other income 3.77 4.71 4.63 3.35

____ ____ ____ ____

Gross revenue 20.88 18.27 12.10 9.46

Operating expenses

Employee1 10.35 8.93 5.07 3.71

Administrative2 0.97 0.77 0.43 0.37

General3 5.01 4.66 3.67 2.93

Depreciation 2.22 2.11 1.64 1.40

Interest 0.60 0.71 0.61 0.44

Bad debts 0.22 0.13 0.09 0.02 ____ ____ ____ ____

Total expenses 19.37 17.31 11.51 8.77

Local savings 1.51 0.96 0.59 0.69

Patronage refunds received 0.63 0.45 -0.25 -0.02 ____ ____ ____ ____

Savings before income taxes 2.14 1.41 0.34 0.67

Less income taxes 0.17 0.09 0.06 0.08 ____ ____ ____ ____

Net income 1.97 1.32 0.27 0.59

Based on sales of: $7,834,450 $23,581,563 $35,923,682 $36,141,710

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

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

directors' fees and expense, and annual meetings.

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

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
settlement was greater than the book value. A loss

might occur from flood damage for which the cooperative had no coverage.

Operating Expenses—Total operating

expenses increased about 4 percent in 2 years. These

were divided into four main categories--employee;

administrative; general; and depreciation, interest, and

bad debts. Employee expenses were those related to

labor costs. Administrative expenses included

overhead costs associated with a cooperative and

indirectly related to revenue production. General

expenses were directly related to revenue production.

The bulk of expenses were in the employee, general,

and depreciation categories.

Employee Expenses—These costs included

salaries, wages, and benefits (payroll taxes, employee

insurance, unemployment compensation, and pension

expense) and averaged at least 7.0 percent of net sales

for both years.

Cooperatives surveyed had both part-time and

full-time employees. For study purposes, four parttime employees were considered equivalent to one

full-time employee. The expense for a single employee

averaged $41,569, up about 4 percent from 2002, with

co-ops each having an average of 34 employees. By

size, employee expenses ranged from $36,296 for small

to $50,287 for super cooperatives and by type from

$44,904 for those selling only farm supplies to $49,895

for mixed marketing cooperatives (table 11). Small

cooperatives averaged 8 full-time employees (excludes

part-time); medium, 14; large, 27; and super, 59. Farm

supply cooperatives averaged 18 employees; mixed

farm supply, 44; mixed marketing, 36; and marketing,

27.

Cooperatives with significant farm supply sales

tended to be more labor intensive. Operating a feed

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

employees. For instance, a small farm supply cooperative had eight full-time employees while a small marketing cooperative used fewer employees--often only a

manager, bookkeeper, and two others. As a proportion

of net sales, employee expenses ranged from 10.6 to

6.3 percent. For small co-ops, they took 10.6 percent;

for medium, 8.4; for large, 9.3; and for super, 6.3 percent. By type, employee expenses were 10.3 percent of

net sales for farm supply cooperatives; 8.9 for mixed

farm supply; 5.1 for mixed marketing; and 3.7 percent

for marketing cooperatives.

Administrative Expenses—These were

indirectly related to generating income. Managers

usually had more control over administrative

expenses than any other cost. In years when revenues

were down, managers could reduce expenses here

more easily than elsewhere. Administrative costs

include professional services, donations, dues and

subscriptions, directors' fees and expenses, annual

meetings, meetings and travel, office supplies, and

telephone and market information.

Total administrative expenses were 0.72 percent

of net sales. They ranged from 0.50 percent for super

11

Table 10—Gross margin on farm supplies sold and grains and oilseeds marketed, 2003

Weighted Number of

Farm supply margin Maximum Minimum observations

---------------------------------- Percent --------------------------------- Number

Feed 2.49 16.42 0.00 57

Seed 3.41 5.16 0.00 59

Fertilizer 4.65 6.79 0.00 60

Crop protectants 3.56 12.22 0.00 56

Petroleum products 2.12 10.36 0.00 43

Tires, batteries, and auto accessories 16.41 44.55 -0.01

Machinery 1.16 53.18 2.31 5

Building materials 4.84 41.70 0.40 8

Hardware 7.62 44.30 (0.14) 17

Food 2.71 40.59 0.32 7

Other farm supplies 2.48 11.26 (0.84) 62

Grains and oilseeds 1.09 18.80 (0.27) 33
cooperatives to 1.19 percent for small cooperatives.

Professional services, the largest administrative

expense, comprised 0.19 percent of net sales.

Although directors' fees and expenses were a

small part of total costs, director compensation was

important to many cooperatives. This fee was a small

incentive for farmers to sacrifice time normally spent

on their own operations and devote several hours of

service each month to guiding their cooperative. Table

12 shows the fees paid to directors by cooperative size

and type. In 2003, data were provided by 246 cooperatives with fees ranging from a low of $270 to a high of

$69,140 annually. These fees were divided between 2 to

15 directors. Small cooperatives paid directors an average of $416 while super cooperatives paid the most:

$1,594. By type, mixed farm supply cooperatives paid

the most at $1,401.

General Expenses—Those were usually

fixed in the short run and associated with income

production--advertising and promotion, delivery (auto

and truck), general insurance, property, business and

other taxes and licenses, rent and lease expenses, plant

supplies and repairs, repairs and maintenance, utilities

(including dryer expenses), miscellaneous, and

“other.” Most expenses, except advertising and

promotion, were not under direct management

control.

General expenses averaged 4.5 percent of net

sales in 2003. Delivery expenses and repairs and maintenance at 0.76 and 0.74, respectively, represented the largest in the general category, followed

by insurance and utilities, at 0.67 and 0.56 percent. For

12

Table 11—Calculated wages (using both full- and part-time employee expenses and including benefits) and

actual number of full-time employees, 2003

Small Medium Large Super All

Farm supply salaries $37,492 $41,125 $48,923 $48,284 $44,904

Full-time employees 8 17 29 61 18

Part-time/seasonal employees 6 14 24 46 14

Mixed farm supply salaries 28,696 38,821 45,646 49,309 47,459

Full-time employees 10 15 30 80 44

Part-time/seasonal employees 3 9 16 38 22

Mixed marketing salaries 23,651 44,278 44,241 51,694 50,879

Full-time employees 5 9 12 50 36

Part-time/seasonal employees 1 3 2 19 13

Marketing salaries 41,385 45,261 48,529 50,463 49,895

Full-time employees 5 8 8 41 27

Part-time/seasonal employees 1 5 3 12 8

All salaries 36,256 41,235 47,442 50,287 47,569

Full-time employees 8 14 27 59 28

Part-time/seasonal employees 5 11 18 27 15

Table 12—Board member compensation, 2003

Cooperative type Compensation Cooperative size Compensation

Farm supply $ 770 Small $ 416

Mixed farm supply 1,401 Medium 559

Mixed marketing 1,013 Large 1,039

Marketing 459 Super 1,594

Average of all 805
all sizes of co-ops, general expenses were at least 4 percent of net sales. By type of cooperative, expenses

ranged from 2.9 to 5.0 percent of net sales.

Depreciation, Interest, and Bad Debts—

Depreciation expenses averaged 2.1 percent of net

sales; interest, 0.70 percent; and bad debts, 0.15

percent. By co-op size, depreciation expense as a

percent of net sales was at about 2 percent for all

cooperatives with the exception of super-sized

cooperatives at 1.7 percent. For co-op type, the range

was from a low 0.02 percent of net sales for marketing

cooperatives to 0.09 for mixed marketing cooperative,

0.13 for mixed farm supply co-ops and 0.22 percent for

farm supply cooperatives.

Interest expenses-long- and short-term debt

financing-decreased 0.06 percent. As a percent of sales,

they rose slightly from 0.60 percent in 2002 to 0.70 percent in 2003. Interest expenses were lowest among

small cooperatives at 0.51 and highest among super

cooperatives at 0.63. For medium and large cooperatives, interest expense was about the same at 0.54 and

0.55 percent, respectively. By type, interest expenses

went from a low of 0.44 percent of net sales for marketing co-ops to 0.71 percent for mixed farm supply coops. Farm supply and mixed marketing cooperatives

were about the same, with 0.60 and 0.61 percent,

respectively.

Bad debts as a proportion of net sales fell for

small cooperatives to 0.3 percent; medium co-ops had

0.2 percent; large co-ops, 0.25 percent; and super coops, 0.10 percent. By co-op type, bad debts were 0.02

percent for marketing, 0.06 percent for mixed marketing, 0.18 percent for mixed farm supply co-ops and

0.28 percent for farm supply cooperatives.

Local Savings—Local savings were

generated from operations before taxes and patronage

refunds from other cooperatives. Local savings were a

little more than 1 percent of net sales for all sizes of

cooperatives, except small cooperatives, which had

0.43 percent. By type, they were the highest for farm

supply cooperatives-1.61 percent--and the lowest for

marketing cooperatives, at 0.70 percent.

About 26 percent of the cooperatives studied had

losses. While small cooperatives have higher returns

on net sales, 23 out of 83 small cooperatives lost

money. Thirty-six percent of the mixed farm supply

cooperatives lost money (table 13).

Patronage Refunds Received—Refunds

received or income from other cooperatives resulted

from business local co-ops generated with other

cooperatives, generally regionals or cooperative banks

such as CoBank. The patronage refund from regionals

was based on business volume and consisted of cash

refunds and equity stock. Stock was usually revolved

back to the local cooperative on a set schedule. Many

cooperatives that borrowed funds from CoBank and

the Bank for Cooperatives received both cash and

noncash patronage income. The noncash patronage

from CoBank or the Bank for Cooperatives was from

investing in the bank, which was usually required in

proportion to funds borrowed.

The dollar amount of patronage refunds between

2002 and 2003 was down 74 percent. This great decline

may have been the result of several large regionals

going out of business in 2003. Patronage refunds

received were less than 1 percent for all cooperative

sizes. By type, patronage refunds as a percent of net

sales were higher for farm supply than for marketing

cooperatives, which had negative patronage refunds.

The refunds were an important source of revenues and

allowed 16 out of 71 cooperatives that had local losses

to show net income. A unique situation occurred in

2003 with the demise of several large regional cooperatives. Cooperatives that originally had positive net

13

Table 13—Respondent cooperatives that had losses, 2003

Cooperative size

__________________________________________________________________________________________

Cooperative type Small Medium Large Super Average

----------------------------------------------------------------- Percent ------------------------------------------------------------------------

Farm supply 21.69 11.29 6.67 0.00 40.28

Mixed farm supply 2.41 9.68 5.00 6.10 30.00

Mixed marketing 0.00 4.84 3.33 13.41 48.89

Marketing 3.61 1.61 0.00 1.22 35.71

Average 28.92 21.60 20.91 28.57 23.00
income ended up with negative net incomes. Twentynine of the 71 cooperatives with losses had losses

because of equity write-offs.

Income Taxes—Cooperatives paid income

taxes on earnings not allocated to members (retained

earnings) and on dividend payments. Each board of

directors determined the amounts of income allocated

to retained earnings and to members. Nonmember

business has an impact on retained earnings because

cooperatives can allocate the earnings to nonmembers

or retain the income. Income tax paid was 0.14 percent

of net sales in 2003.

Income tax paid by cooperatives varied by size

and type. Small cooperatives paid income taxes equal

to less than to 0.01 percent of their net sales, medium,

0.5; large, 0.14; and super, 0.10. Marketing cooperatives

paid less as a percent of net sales in income taxes--0.08

percent; mixed marketing, 0.06; farm supply, 0.17; and

mixed farm supply, 0.09 percent.

Net Income—In 2003, net income decreased

23 percent. As a percent of net sales, it was 0.55

percent. By co-op size, the breakdown was: large, 1.86

percent; medium, 1.13 percent; super, 0.83 percent; and

small cooperatives, 0.70 percent. By type, farm supply

co-ops had returns of 1.97 percent on net sales; mixed

farm supply co-ops, 1.32 percent; mixed marketing

cooperatives, 0.32 percent; and marketing

cooperatives, 0.59 percent.

Pretax net income was generally distributed five

ways-non-cash patronage allocations, cash patronage

refunds, retained earnings, income taxes, and dividends on patrons' equity (table 14). Sixty-six percent of

net income before taxes was held as non-cash patronage allocations by the 287 cooperatives that provided

income allocations. Cash patronage refunds were 27

percent.

Financial Ratio Analysis

Looking beyond levels of assets, liabilities, member equities, sales, and expenses, managers and boards

of directors need comparative measures to evaluate

their cooperatives' financial performance.

Standard ratios used in this report included

financial ratio analyses that allow performance comparisons between years and different cooperatives. No

single financial indicator provides enough information

to determine a cooperative's financial health, so ratios

must be carefully interpreted. It is important to look at

a group of financial ratios over a period of time, evaluate other cooperatives with similar sales and functions,

and/or compare performance with others in the same

geographical area.

Most figures show ratios for the 10-year period

for all 433 cooperatives. Data for 2002 and 2003 reflect

information gathered from the same 287 cooperatives

that reported for both years. Performance ratios measure various levels of cooperative operations and generally have both a financial and operational impact.

Four categories were used: liquidity, leverage, activity,

and profitability. Many factors underlie each, and

examining one ratio may not pinpoint problems.

Liquidity Ratios—These include current and

quick ratios and measure the cooperative's ability to

meet short-term obligations. They 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 current asset

components. 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. Improvements can be achieved by selling additional capital stock, borrowing additional long-term

14

Table 14—Distribution of net income before taxes

Item 2002 2003

------------------- Percent --------------------

Non-cash patronage allocations 70.64 66.17

Cash patronage refunds 26.55 27.06

Retained earnings -7.09 -2.02

Taxes 9.75 8.66

Dividends 0.15 0.15

Net income before taxes: $253,173 $208,139

Number of cooperatives: 287 287
debt, or disposing of unproductive fixed assets and

retaining proceeds. Current liabilities may also be

reduced by retaining a greater portion of allocated

savings (reducing the cash portion).

A high current ratio is a favorable condition

financially because it indicates the ability to pay current liabilities from the conversion of current assets

into cash. Operationally, this same high ratio tends to

increase operating freedom and reduce the probability

of bill-paying difficulty from write-downs of accounts

receivable or inventory.

Figure 1 shows the current and quick ratios for

the surveyed cooperatives. Current ratio was relatively constant for the last 5 years. The total current assets

and liabilities increased 5.7 and 5.1 percent, respectively. From 2002 to 2003, all elements of current assets

except accounts receivables-cash (18.9 percent), other

receivables (7.7 percent), prepaid expenses (30.7 percent), and inventory (4.4 percent)-increased. Revolving

equity redeemed and allocated equity (cash) declined

over the 2-year period. Current liabilities that grew in

that time period included accrued expenses, accounts

payable, patron prepayment and other liabilities. All

other current liabilities fell.

The current ratio fell as cooperative size

increased. The ratio was highest for small cooperatives, 2.03, and lowest at 1.27 for super cooperatives

(table 15). By type, the ratio was 1.52 percent for farm

supply co-ops, 1.35 for mixed farm supply co-ops, 1.29

for marketing co-ops, and 1.24 for mixed marketing

cooperatives (table 16).

Quick ratio is current assets minus inventories,

divided by current liabilities. Inventories--the least liquid of all current assets--are excluded. Financially, a

high ratio allows much less dependence on the salability of inventory to meet current obligations.

Operationally, the results are the same as with the current ratio.

The quick ratio mimicked the movement of the

current ratio. Small cooperatives had the highest ratio

at 0.99 and it decreased as size increased to 0.59 for

super cooperatives (Table 15). The quick ratio ranged

from 0.53 for marketing cooperatives to 0.76 for farm

supply cooperatives. This ratio was highest in 1994

and lowest in 1995 (figure 1).

Leverage Ratios—These ratios look at the

long-term solvency of the cooperative and help

analyze the use of debt and the ability to meet

obligations in times of crisis. Debt ratio is defined as

total debt divided by total assets. Elements include

long-term debt, short-term debt, and total assets.

Long-term debt increased at about half the same rate

of total assets, which may indicate that some shortterm obligations were being carried and converted to

long-term debt.

With inventories increasing in the short term,

quick financing is needed, usually through the use of

short-term debt. Between 2002 and 2003, both shortterm and long-term debt decreased, 4.4 and 6.6 percent, respectively. Lenders would rather see a low

ratio indicating the cooperative's ability to repay the

loan. Overall, the debt ratio remained the same for

both years (figure 2 and table 17). Reducing debt,

increasing savings, or financing a greater portion of

assets with working capital may improve this ratio.

Larger cooperatives financed more assets with

debt, but the highest ratio for any cooperative size was

still only 0.50 (table 15). Small cooperatives had the

lowest use of debt at 0.31. By type, farm supply cooperatives had the lowest use of debt and mixed marketing cooperatives had the highest.

Debt-to-total equity ratio is calculated by dividing long-term debt by total member equity. This ratio

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

inadequate borrowing power. Debt-to-total equity

ratio increased slightly from 0.84 in 2002 to 0.85 in

2003 (figure 2 and table 17). A low ratio is more favorable and gives the cooperative independence from

outside sources of funds relative to owners' equity. A

low ratio may indicate low return on equity.

Operationally, a low ratio tends to reduce interest cost.

Improvement of the debt-to-total equity ratio may be

gained by disposing of unproductive assets and using

proceeds to liquidate debt, or accelerating payments

15

2.00

1.50

1:00

0.50

0.00

Figure 1—Current and Quick Ratios

1994 95 96 97 98 99 2000 01 02 03

current

quick
16

Table 15—Financial analysis ratios by cooperative size, 2003

Ratio Small Medium Large Super

Liquidity

Current 2.03 1.58 1.38 1.27

Quick 0.99 0.83 0.71 0.59

Leverage

Debt 0.31 0.36 0.41 0.50

Debt-to-total equity 0.45 0.56 0.69 1.00

Times-interest-earned 2.37 3.16 4.62 2.48

Activity

Total-asset turnover 1.52 1.90 1.78 2.39

Fixed-asset turnover 7.00 7.27 6.72 8.68

Profitability

Gross profit margin 16.25 13.46 14.89 9.66

Return-on-total-assets

before interest & taxes 1.85 3.26 4.55 3.72

Return-on-total-equity 2.12 4.65 7.88 5.53

Table 16—Financial analysis ratios by cooperative type, 2003

Ratio Farm Mixed farm Mixed

supply supply Marketing marketing

Liquidity

Current 1.52 1.35 1.29 1.24

Quick 0.76 0.68 0.53 0.57

Leverage

Debt 0.37 0.47 0.47 0.53

Debt-to-total equity 0.59 0.87 0.88 1.14

Times-interest-earned 4.57 3.00 2.54 1.55

Activity

Total-asset turnover 1.68 1.94 3.35 2.44

Fixed-asset turnover 6.58 7.18 10.28 9.62

Profitability

Gross profit margin 17.11 13.56 6.11 7.47

Return-on-total-assets

before interest & taxes 4.59 4.12 3.73 2.29

Return-on-total-equity 7.17 6.60 5.76 1.96
on long-term loans. Other ways include increasing

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

As cooperatives' size grew, so did their use of

long-term debt. The ratio for small cooperatives was

0.45 and for super cooperatives was 1.00 (table 15).

Marketing cooperatives had, at 1.14, the highest ratio

by type, while farm supply cooperatives had the lowest at 0.57.

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 1.0 or more indicates the

ability of current earnings to pay current interest

expenses. Lending institutions are more apt to loan to

cooperatives whose times-interest-earned ratio is more

than 1.0 because it shows their ability to pay interest

payments. As a result, a lending institution may lend

funds at lower rates more readily for capital improvements.

This ratio started on a downward slide in 1994

(figure 3). It enjoyed a short-lived rebound in 1997

before beginning another downward trend. This pattern seems to be starting again with another steep

decline in 2000 and a very slight upward movement

for 2001 and 2002 before another decline in 2003.

Collecting old receivables, improving inventory

turnover, disposing of assets and reducing debt with

the proceeds, or reducing debt with working capital

may improve this ratio. Financially, a high ratio affects

the return on equity and tends to increase it.

Operationally, a high ratio reduces interest cost.

Interest coverage was the greatest for medium

and large cooperatives, with ratios of 3.16 and 4.62,

respectively. By type, the ratio ranged from 1.55 for

mixed marketing co-ops to 4.57 for farm supply cooperatives.

Activity Ratios—These ratios measure how

well cooperatives use assets. A low ratio could mean

that the cooperative is overcapitalized or that it is

carrying too much inventory. However, a high ratio

may be deceptive. A cooperative with fully

depreciated older assets might have an artificially high

ratio even though those assets were no longer

operating efficiently.

Total-asset turnover ratio is found by dividing

net sales by total cooperative assets. This ratio went up

slightly from 1.91 in 2002 to 2.18 in 2003 (figure 4 and

table 15). Total sales and total assets increased by 16.7

and 1.8 percent, respectively. A high ratio favorably

influences finances through the reduction of financial

leverage and/or increased return on equity. A high

ratio operationally tends to reduce interest costs.

The ratio was higher for super-sized cooperatives

(table 15). This ratio, at 2.39 percent, indicated the

most efficient use of assets. By cooperative type, the

total-asset turnover ratio was higher for marketing coops. The total-asset turnover ratio was lowest in 2002

at 1.91 and highest in 1996 at 2.47.

Fixed-asset turnover ratio represents net sales

divided by net property, plant and equipment (PP&E).

17

Figure 2—Debt-to-Total Equity and Debt Ratio

0.60

0.50

0.40

0.30

0.20

0.10

0.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00

1994 95 96 97 98 99 2000 01 02 03

Figure 3—Times Interest Earned

Debt-to-Total-Equity

Debt
This ratio is similar to the total-asset turnover ratio

and shows how well the cooperative used 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 will have an artificially high ratio. A cooperative that invested heavily in

PP&E for future expansion will have a temporarily low

ratio.

After a high in 1996 of 9.78, the fixed-asset

turnover ratio seesawed before becoming relatively

steady from 1999 to 2001. There seems to be some

recovery starting in 2000 (figure 4). Sales increased

about 7 percent while investment in fixed assets

decreased only slightly, 0.47 percent. The measure for

this ratio may or may not show favorable conditions.

An abnormally high ratio usually indicates very old,

nearly depreciated fixed assets or the leasing of property and equipment.

By size, a fixed-asset-turnover ratio of 8.68 was

greatest for super cooperatives. By type, the highest

ratio was 10.28 for marketing cooperatives.

Financially, a high ratio is influenced favorably

by increasing asset use, reducing financial leverage,

and/or increasing return on equity. Operationally, a

high ratio tends to reduce depreciation and interest

costs. It may also increase costs related to operating

leases, personnel and travel, or delivery expenses. This

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

facilities to increase the sales- generating potential of

18

Figure 4—Times Interest Earned

10.00

8.00

6.00

4.00

2.00

0.00

1994 95 96 97 98 99 2000 01 02 03

Figure 5—Gross Margin Percent

14.00

9.00

4.00

(1.00)

1994 95 96 97 98 99 2000 01 02 03

Total asset turnover

Fixed asset turnover

Table 17—Financial analysis ratios for all cooperatives, 2002 and 2003

Ratio 2002 2003

Current 1.33 1.34

Quick 0.63 0.64

Debt 0.46 0.46

Debt-to-total equity 0.84 0.85

Times-interest-earned 3.39 2.83

Total-asset turnover 1.91 2.18

Fixed-asset turnover 6.94 8.11

Gross profit margin 12.45 11.05

Return-on-total assets before

interest & taxes 4.55 3.71

Return-on-total equity 7.48 5.63
existing space and equipment; and/or selling idle

machinery and parts, unused vehicles, and unnecessary equipment.

Profitability Ratios—These ratios, such as

gross profit margin, indicate the efficiency of the

cooperative's operations. Because a cooperative is

owned by its user-members, many common industry

profitability ratios have little meaning for it. For

instance, profitability ratios measuring the return on

common or preferred stock, as in similar investororiented firms, are not appropriate for co-ops because

there is seldom an open market for cooperative stock.

Gross profit margin-an important operating ratio-

-is found by subtracting the cost of goods sold from

net sales and then dividing that amount by net sales. A

small change in the gross margin has a tremendous

impact on local savings. It indicates the cooperative's

pricing policy and cost of goods offered for sale.

For all cooperatives, the gross profit margin averaged 12.82 percent in 2001, the highest for the 10-year

period (figure 5). By size, this margin was 16.25 for

small co-ops and 14.89 for large cooperatives. Gross

profit margin for medium cooperatives was 13.46 and

for super cooperatives it was 9.66. Farm supply and

mixed farm supply had the highest gross margin ratio,

17.11 and 13.56, respectively (table 16).

Return-on-total assets measures the rate of return

on total investment. It is determined by dividing net

income by total assets and is usually calculated before

interest and taxes. This ratio is a measure of performance. It is not sensitive to the leverage position of the

cooperative. Although some assets were financed

through debt, the ratio measures return to both members and lenders. This ratio fell from 4.55 to 3.71 in the

2-year period (table 17).

Net savings (before income taxes) decreased

nearly 23 percent and interest expense decreased 0.06

percent from 2000 to 2003. For the decade--1994 to

2003--this ratio was highest in 1996 and 1997 before

declining (figure 6). Operationally, a high ratio tends to

reduce interest cost; financially, it indicates a comparatively high rate of return on assets employed.

Large-, super-, and medium-sized cooperatives

had a higher return-on-total assets (table 15). Largesized cooperatives had slightly higher returns at 4.55

percent. By cooperative type, return-on-total assets

was 4.59 percent for farm supply co-ops, 4.12 percent

for mixed farm supply co-ops, 3.73 percent for marketing co-ops; and 2.29 percent for mixed marketing

cooperatives.

Return-on-total equity is net income divided by

total equity. It represents members' investment in their

cooperative and is an important measure of profitability.

This ratio went down between 2002 and 2003

(table 17). It is sensitive to the amount of debt capital

in the cooperative and is best used in conjunction with

other measures such as the return-on-total assets. Net

savings decreased about 23 percent while total equity

increased by little over 1 percent from 2002 to 2003.

Financially, a high return-on-total equity ratio is

favorable and it tends to decrease financial leverage.

However, a high ratio may also be a symptom of insufficient investment. Operationally, a high ratio tends to

reduce interest cost over time, but it may occur when

both total debt and interest costs are high. This ratio

was highest in 1997 before declining.

This ratio increased as the size of the cooperative

grew from small to large. Large cooperatives had the

highest return-on-total equity: 7.88. Farm supply and

mixed farm supply cooperatives' ratios were 7.17 and

6.60, while marketing and mixed marketing cooperatives' ratios were 5.76 and 1.96 (table 16).

19

Figure 6—Return on Total Assets and Total Equity

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00

1994 95 96 97 98 99 2000 01 02 03

Assets

Total

equity
Conclusions

Throughout the survey period (10 years), agricultural cooperatives continued to play a vital role in supplying goods and services to farmers and marketing

their products. They were also important to rural communities, often being one of the largest employers, and

provided considerable tax revenues. There has been

extensive consolidation of local cooperatives during

the past two decades, reflecting an attempt to maintain

an adequate size so as to provide their members with

expanded products and markets. In many consolidations, cooperatives maintained branch locations to better serve members.

Locals maintained strong ties to regional cooperatives and CoBank, through which they obtained products, gained marketing opportunities, or borrowed

needed capital. Although patronage refunds from

regionals to local cooperatives decreased in the 2-year

period, they helped 16 cooperatives remain profitable.

Locals, however, can't depend consistently on large

patronage refunds, as shown by additional losses

occurred by profitable cooperatives who had to write

off equity due to large regionals going under.

Both current and total assets increased, by 5.7

and 1.8 percent, respectively, from 2002 to 2003.

Investment in property, plant and equipment, grain

and oilseed inventories, farm supply inventories, and

accounts receivable for farm supply sales grew.

Current liabilities increased 5.1 percent in the 2-

year period, with patrons' credit balances and accounts

payable having the largest increase. Current term and

seasonal short-term debt declined. Accrued expenses

and “other” liabilities grew, as did all other liabilities.

Overall, owners' equity grew a little over 1 percent. As a percent of assets, owners' equity in all cooperative types and sizes changed little over the 2-year

period. Also, through all size and type categories,

members represented at least 47 percent ownership as

a percent of total assets for both years. Members of

small cooperatives had the highest percentage of ownership while those in super-size cooperatives had the

lowest. Both types of farm supply co-ops had higher

percentage of ownership than both kinds of marketing

cooperative.

Net sales and cost of goods sold increased.

Projected grain production and actual sales were up

slightly, affecting feed sales, which were also up slightly in 2001. Gross margins vary not only by cooperative,

but also by farm supplies sold or products marketed.

Margins increased about 4 percent.

The impact on ratio analysis follows:

1) Liquidity ratios—current ratio (current assets/current liabilities) was fairly steady, ranging from 1.33 to

1.48. The quick ratio (current assets-inventory/current

liabilities) mimicked the current ratio's trend;

2) Leverage ratios—debt ratio was highest in 1995

and 1996 at 0.47. This ratio was fairly steady over the

10-year period;

3) Activity ratios—total-asset turnover ratio was lowest in 2002 with a slight upturn in 2003. Total sales and

total assets increased by 17 percent and about 2 percent, respectively. Cash was the current asset with the

largest increase for the 2-year period;

4) Profitability ratios--return-on-total-assets ratio

fell from 7.48 in 2002 to 3.71 in 2003-the lowest it's

been in the 10-year period.

Cooperatives are owned by their farmer/member/patrons who want to own a business that will provide production supplies and market their products. In

the interest of those member-owners, cooperatives will

continue to adapt to changing economic conditions.

20
21

Appendix table 1—Common-size balance sheets for farm supply cooperatives, 2003

Cooperative size

________________________________________________________________

Item Small Medium Large Super

-------------------------------- Percent of total assets --------------------------------

Assets

Current assets

Cash and cash equivalents 8.37 5.30 5.57 3.86

Accounts receivable 10.24 11.56 9.81 9.47

Inventories—grains and oilseeds 0.00 0.11 0.00 0.04

—farm supplies 25.01 19.75 22.16 21.97

Prepaid expenses 1.39 2.81 2.74 1.48

Other current assets 3.22 2.08 5.91 2.93 ____ ____ ____ ____

Total current assets 48.23 41.61 46.19 39.75

Investments and other assets

Investments 28.09 29.88 23.79 31.24

Other assets 2.64 2.72 3.02 2.40

Net property, plant, and equipment 21.04 25.79 27.00 26.61

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long

term debt 1.15 1.85 1.62 4.35

Notes payable

seasonal 5.88 7.42 7.52 5.54

Accounts payable 8.48 8.30 9.34 9.42

Other liabilities 5.52 6.66 11.99 7.04

Accrued taxes 0.15 0.21 0.49 0.17

Accrued expenses 1.61 1.79 1.90 1.78

Patronage refunds (cash) 0.55 0.48 0.95 0.75 ____ ____ ____ ____

Total current liabilities 23.35 26.71 33.81 29.05

Long-term debt 6.40 8.06 7.42 10.76

Total liabilities 29.75 34.77 41.23 39.81

Owner equities

Allocated equity 51.01 49.63 42.34 44.57

Unallocated equity 19.24 15.60 16.43 15.62 ____ ____ ____ ____

Total owner equities 70.25 65.24 58.77 60.19 _____ _____ _____ _____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,970,762 $4,094,798 $8,119,071 $15,572,188

–Number 68 36 31 9
22

Appendix table 2—Common-size balance sheets for mixed farm supply cooperatives, 2003

Cooperative size

________________________________________________________________

Item Small Medium Large Super

------------------------------- Percent of total assets ------------------------------

Assets

Current assets

Cash and cash equivalents 12.60 3.97 4.51 4.04

Accounts receivable 13.72 13.03 13.34 12.02

Inventories—grains and oilseeds -0.46 4.48 5.74 7.55

—farm supplies 23.01 19.85 16.19 16.25

Prepaid expenses 0.67 0.96 0.41 1.22

Other current assets 1.54 5.72 2.96 7.54 ____ ____ ____ ____

Total current assets 51.08 48.01 43.15 48.62

Investments and other assets

Investments 20.36 26.51 26.65 21.63

Other assets 2.83 1.16 3.38 2.43

Net property, plant, and equipment 25.73 24.32 26.82 27.32

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long term debt 4.02 4.86 3.68 5.04

Notes payable seasonal 9.31 7.62 11.39 13.00

Accounts payable 7.89 8.33 7.31 8.47

Patrons credit balances & other liabilities 3.74 9.85 6.68 7.82

Accrued taxes 0.12 0.12 0.45 0.41

Accrued expenses 1.37 1.27 1.43 1.80

Patronage refunds (cash) 0.91 0.27 1.05 0.52 ____ ____ ____ ____

Total current liabilities 27.36 32.32 29.99 37.06

Long

term debt 11.82 7.35 8.98 12.10

Total liabilities 39.18 39.67 38.97 49.16

Owner equities

Allocated equity 44.96 42.86 43.05 37.64

Unallocated equity 15.86 17.47 17.98 13.20

____ ____ ____ ____

Total owner equities 60.82 60.33 61.03 50.84 ____ ____ ____ ____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,533,423 $3,304,244 $8,075,892 $22,449,536

Total owner equities 60.82 60.33 61.03 50.84

–Number 10 11 21 28
23

Appendix table 3—Common-size balance sheets for mixed marketing cooperatives, 2003

Cooperative size

________________________________________________________________

Item Small Medium Large Super

------------------------------ Percent of total assets --------------------------------

Assets

Current assets

Cash and cash equivalents 11.99 6.51 3.79 2.28

Accounts receivable 3.34 13.45 21.13 6.35

Inventories—grains and oilseeds 15.83 13.09 8.88 17.97

—farm supplies 15.30 8.81 9.88 9.14

Prepaid expenses 0.43 0.49 5.64 0.95

Other current assets 5.43 6.23 7.70 7.94 ____ ____ ____ ____

Total current assets 52.41 48.58 57.02 44.63

Investments and other assets

Investments 20.27 14.22 24.42 21.80

Other assets 0.00 0.11 0.13 0.81

Net property, plant, and equipment 27.32 37.09 18.43 32.76

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long term debt 1.94 1.96 0.92 2.82

Notes payable seasonal 2.10 2.24 8.30 8.22

Accounts payable 10.67 2.75 15.12 4.74

Patrons credit balances & other liabilities 11.64 13.24 15.03 17.09

Accrued taxes 0.49 0.25 0.11 0.81

Accrued expenses 0.55 1.32 1.34 1.51

Patronage refunds (cash) 0.50 0.68 2.04 0.80

____ ____ ____ ____

Total current liabilities 27.89 22.44 42.86 35.99

Long term debt 9.60 9.87 0.00 12.16

Total liabilities 37.49 32.31 42.86 48.15

Owner equities

Allocated equity 48.70 33.77 44.90 33.86

Unallocated equity 13.81 33.92 12.24 17.99 ____ ____ ____ ____

Total owner equities 62.51 67.69 57.14 51.85 ____ ____ ____ ____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,607,447 $2,891,123 $3,602,874 $16,586,459

–Number 4 6 2 17
24

Appendix table 4—Common-size balance sheets for marketing cooperatives, 2003

Cooperative size

________________________________________________________________

Item Small Medium Large Super

------------------------------ Percent of total assets --------------------------------

Assets

Current assets

Cash and cash equivalents 40.25 9.80 7.03 4.13

Accounts receivable 7.61 9.09 10.53 8.42

Inventories—grains and oilseeds 23.33 9.15 17.27 17.10

—farm supplies 0.00 13.56 7.14 12.55

Prepaid expenses 0.67 2.50 0.46 2.32

Other current assets 7.28 6.45 11.49 9.19 ____ ____ ____ ____

Total current assets 79.14 50.54 53.92 53.71

Investments and other assets

Investments

other cooperatives 3.88 25.63 21.60 19.68

Other assets 0.00 0.64 1.43 1.20

Net property, plant, and equipment 16.98 23.19 23.05 25.59 _____ _____ _____ _____

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current Portion of long term debt 0.00 3.09 1.64 8.62

Notes payable seasonal 0.00 0.00 18.14 13.90

Accounts payable 1.31 6.17 3.78 6.14

Patrons credit balances & other liabilities 42.61 14.42 17.40 12.25

Accrued taxes 0.42 0.26 0.72 0.84

Accrued expenses 0.25 0.90 1.02 1.72

Patronage refunds (cash) 0.68 0.59 0.49 0.53

____ ____ ____ ____

Total current liabilities 45.27 32.21 43.19 44.00

Long term debt 1.57 5.76 4.95 10.44

Total liabilities 46.84 37.97 48.14 54.44

Owner equities

Allocated equity 32.31 39.20 32.93 33.39

Unallocated equity 20.85 22.83 18.93 12.17 ____ ____ ____ ____

Total owner equities 53.16 62.03 51.86 45.56 _____ _____ _____ _____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,649,127 $3,345,762 $5,723,289 $20,591,484

–Number 1 9 6 29
25

Appendix table 5—Abbreviated income statement as a percent of net sales for farm supply cooperatives, 2003

Cooperative size

________________________________________________________________

Small Medium Large Super

-------------------------------- Percent of net sales --------------------------------

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 82.34 83.69 82.61 83.00

____ ____ ____ ____

Gross margin 17.66 16.31 17.39 17.00

Service and other income 3.53 3.47 3.55 4.62 ____ ____ ____ ____

Gross revenue 21.19 19.78 20.94 21.62

Operating expenses

Employee1 11.23 9.80 10.27 10.35

Administrative2 1.23 1.06 0.89 0.85

General3 5.04 4.98 4.99 5.08

Depreciation 2.15 2.11 2.28 2.26

Interest 0.53 0.57 0.53 0.80

Bad debts 0.27 0.13 0.25 0.22 ____ ____ ____ ____

Total expenses 20.45 18.65 19.21 19.56

Local savings 0.75 1.14 1.74 2.06

Patronage refunds received 0.05 0.46 0.64 1.22 ____ ____ ____ ____

Savings before income taxes 0.80 1.60 2.38 3.28

Less income taxes -0.01 0.08 0.14 0.43 ____ ____ ____ ____

Net income 0.81 1.52 2.24 2.85

Based on sales of: $2,823,357 $6,973,042 $13,905,800 $28,229,240

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

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

directors' fees and expense, and annual meetings.

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

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
26

Appendix table 6—Abbreviated income statement as a percent of net sales for mixed farm supply cooperatives,

2003

Cooperative size

________________________________________________________________

Small Medium Large Super

-------------------------------- Percent of net sales --------------------------------

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 87.31 87.12 85.51 86.60 ____ ____ ____ ____

Gross margin 12.69 12.88 14.49 13.40

Service and other income 5.60 4.32 6.31 4.36 ____ ____ ____ ____

Gross revenue 18.29 17.20 20.80 17.76

Operating expenses 

Employee1 9.78 8.41 9.98 8.70

Administrative2 1.27 0.92 0.88 0.73

General3 4.90 5.79 5.29 4.45

Depreciation 1.64 1.81 2.46 2.06

Interest 0.42 0.59 0.65 0.73

Bad debts 0.11 0.01 0.12 0.14 ____ ____ ____ ____

Total expenses 18.12 17.53 19.38 16.81

Local savings 0.17 -0.33 1.42 0.95

Patronage refunds received 0.86 1.38 0.25 0.44 ____ ____ ____ ____

Savings before income taxes 1.03 1.05 1.67 1.39

Less income taxes 0.06 -0.07 0.15 0.08 ____ ____ ____ ____

Net income 0.97 1.12 1.52 1.31

Based on sales of: $2,905,643 $6,696,847 $13,627,930 $45,064,325

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

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

directors' fees and expense, and annual meetings.

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

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
27

Appendix table 7—Abbreviated income statement as a percent of net sales for mixed marketing cooperatives,

2003

Cooperative size

________________________________________________________________

Small Medium Large Super

-------------------------------- Percent of net sales --------------------------------

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 92.68 93.00 96.00 93.88 ____ ____ ____ ____

Gross margin 7.32 7.00 4.00 6.12

Service and other income 4.16 3.53 1.43 3.39 ____ ____ ____ ____

Gross revenue 11.48 10.53 5.43 9.51

Operating expenses

Employee1 5.36 4.20 2.39 3.71

Administrative2 0.67 0.45 0.20 0.26

General3 4.43 3.12 1.24 2.94

Depreciation 2.13 1.81 0.79 1.38

Interest 0.62 0.53 0.05 0.44

Bad debts 0.01 0.05 0.00 0.02 ____ ____ ____ ____

Total expenses 13.24 10.61 5.12 8.75

Local savings -1.76 0.37 0.75 0.75

Patronage refunds received 0.26 0.01 0.58 -0.05 ____ ____ ____ ____

Savings before income taxes -1.50 0.38 1.33 0.70

Less income taxes 0.01 0.10 0.03 0.08

____ ____ ____ ____

Net income -1.51 0.28 1.30 0.62

Based on assets of: $3,662,980 $8,270,911 $16,241,069 $55,961,768

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

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

directors' fees and expense, and annual meetings.

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

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
28

Appendix table 8—Abbreviated income statement as a percent of net sales for marketing cooperatives, 2003

Cooperative size

________________________________________________________________

Small Medium Large Super

-------------------------------- Percent of net sales --------------------------------

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 93.94 92.04 93.23 92.51 ____ ____ ____ ____

Gross margin 6.06 7.96 6.77 7.49

Service and other income 3.04 5.00 4.57 4.62 ____ ____ ____ ____

Gross revenue 9.10 12.96 11.34 12.11

Operating expenses

Employee1 3.25 5.88 4.33 5.09

Administrativ 2 0.39 0.78 0.45 0.41

General3 3.07 3.25 3.20 3.71

Depreciation 0.65 1.85 1.74 1.63

Interest 0.00 0.40 0.53 0.62

Bad debts 0.00 0.36 0.12 0.07 ____ ____ ____ ____

Total expenses 7.36 12.52 10.37 11.53

Local savings 1.74 0.45 0.96 0.57

Patronage refunds received 0.10 -0.19 0.43 -0.29 ____ ____ ____ ____

Savings before income taxes 1.84 0.26 1.39 0.28

Less income taxes 0.13 0.01 0.19 0.06 ____ ____ ____ ____

Net income 1.71 0.25 1.20 0.22

Based on sales of: $3,641,787 $7,112,863 $12,430,013 $50,838,899

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

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

directors' fees and expense, and annual meetings.

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

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
U.S. Department of Agriculture

Rural Business–Cooperative Service

Stop 3250

Washington, D.C. 20250-3250

Rural Business–Cooperative Service (RBS) provides research,

management, and educational assistance to cooperatives to

strengthen the economic position of farmers and other rural

residents. It works directly with cooperative leaders and

Federal and State agencies to improve organization,

leadership, and operation of cooperatives and to give guidance

to further development.

The cooperative segment of RBS (1) helps farmers and other

rural residents develop cooperatives to obtain supplies and

services at lower cost and to get better prices for products they

sell; (2) advises rural residents on developing existing

resources through cooperative action to enhance rural living;

(3) helps cooperatives improve services and operating

efficiency; (4) informs members, directors, employees, and the

public on how cooperatives work and benefit their members

and their communities; and (5) encourages international

cooperative programs. RBS also publishes research and

educational materials and issues Rural Cooperatives magazine.

The U.S. Department of Agriculture (USDA) prohibits

discrimination in all its programs and activities on the basis of

race, color, national origin, sex, religion, age, disability,

political beliefs, sexual orientation, and marital or family

status. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for

communication of program information (braille, large print,

audiotape, etc.) should contact USDA’s TARGET Center at

(202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director,

Office of Civil Rights, Room 326-W, Whitten Building, 14th and

Independence Avenue, SW, Washington, D.C. 20250-9410 or

call (202) 720-5964 (voice or TDD). USDA is an equal

opportunity provider and employer.