Pennsylvania Code › Title 7 - AGRICULTURE › Part VI - Milk Marketing Board › Chapter 143 - TRANSACTIONS BETWEEN DEALERS AND PRODUCERS › TERMINATION OF DEALER-PRODUCER CONTRACT › Section 143.31 - Written notice required

Current through Register Vol. 54, No. 28, July 13, 2024
(a) No
				  dealer shall terminate its contract or purchasing agreement or ordinary
				  continuance of a previous course of dealing with a producer except by giving
				  such producer at least a 90-day written notice before termination. No producer
				  shall terminate its contract or purchasing agreement or ordinary continuance of
				  a previous course of dealing with a dealer except by giving such dealer at
				  least a 28-day written notice before termination. The period of notice shall
				  begin when the producer or dealer receives the notice. The dealer shall specify
				  in such notice the reasons for termination, shall include the list of agencies
				  and organizations required by section (j), and shall pay in full the producer
				  whose contract has been terminated by the 20th day of the month following
				  actual termination. If a dealer petitions for a shorter notice period under
				  subsections (c), (d), (e) and (f), the notice to the producer must inform the
				  producer that the dealer is petitioning for the shorter notice period, this
				  notice must be provided simultaneously to the Board, and this notice shall be
				  sent by certified mail return receipt requested to affected producers and the
				  Board with notice effective no later than on the first date of attempted
				  delivery. If a dealer petitions for a shorter notice period under subsections
				  (c), (d), (e) or (f), the Board shall notify the dealer and affected producers
				  by certified mail return receipt requested within 10 business days of receiving
				  from the dealer the information required by the respective clause its decision
				  to either approve or disapprove the petition.
(b) Repetitions of the causes set forth in
				  §
										143.44 (relating to rejection of
				  producer's milk) may, however, cause termination of the contract without the
				  requisite notice.
(c) A dealer may
				  terminate a contract or purchasing agreement or ordinary continuance of a
				  previous course of dealing with a producer by giving a 28-day written notice if
				  the dealer is in financial distress. "Financial distress" means an Ohlson
				  O-score of 0.5 and higher. The dealer's Ohlson O-score shall be calculated as
				  follows:
O = -1.32 - 0.407log(TAt/GNP) +
					 6.03TLt/TAt - 1.43
					 WCt/TAt + 0.0757
					 CLt/CAt - 1.72X -
					 2.37NIt/TAt -
					 1.83FFOt/TLt = + 0.285Y - 0.521
					 (NIt-NIt-1)/(|NIt|
					 + |NIt-1|)
Where
TA = total assets
GNP = Gross National Product price index level found at
					 (https://fred.stlouisfed.org/series/A001RG3A086NBEA)
TL = total liabilities
WC = working capital = (current assets) - (current
					 liabilities)
CL = current liabilities
CA = current assets
X = 1 if TL [GREATER THAN] TA, 0 otherwise
NI = net income after taxes
FFO = cash flow from operating activities
Y = 1 if a net loss for the last 2 years, 0
					 otherwise
t = most recent year data
t-1 = prior year data
The Board shall complete its computation and review of the
					 Ohlson O-score, and notify the dealer and affected producers, within 10
					 business days of receiving the necessary documentation from a dealer.
					 "Necessary documentation" is the Balance Sheet and Statement of Operations
					 found in the Milk Dealer's Financial Statement (PMMB-60), and the Statement of
					 Cash Flows prepared annually with the dealer's financial statements.
(d) A dealer may terminate a
				  contract or purchasing agreement or ordinary continuance of a previous course
				  of dealing with a producer by giving a 28-day written notice if the dealer's
				  Ohlson O-score is between -1.0 and 0.5 if any three of the following five
				  solvency ratio conditions are met:
(1) Quick
				  ratio less than or equal to 0.6, where quick ratio = (cash on hand + accounts
				  receivable)/current liabilities.
(2) Current ratio less than 1.0, where
				  current ratio = current assets/current liabilities.
(3) Current liabilities/total equity greater
				  than 2/3.
(4) Total
				  liabilities/total equity greater than 1.0.
(5) Fixed assets/total equity greater than
				  3/4.