farmer cooperatives conference discussion guide · pdf filefarmer cooperatives conference...

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““““ThereThereThereThere’’’’s Value in Belongings Value in Belongings Value in Belongings Value in Belonging””””

Farmer Cooperatives ConferenceFarmer Cooperatives ConferenceFarmer Cooperatives ConferenceFarmer Cooperatives ConferenceNovember 5, 2007November 5, 2007November 5, 2007November 5, 2007

Farmer Cooperatives ConferenceFarmer Cooperatives ConferenceFarmer Cooperatives ConferenceFarmer Cooperatives ConferenceNovember 5, 2007November 5, 2007November 5, 2007November 5, 2007

Valuing Assets During Changing TimesValuing Assets During Changing TimesValuing Assets During Changing TimesValuing Assets During Changing Times

Dennis BollingDennis BollingDennis BollingDennis BollingUnited Producers, Inc.United Producers, Inc.United Producers, Inc.United Producers, Inc.Columbus, OhioColumbus, OhioColumbus, OhioColumbus, Ohio


Discussion GuideDiscussion GuideDiscussion GuideDiscussion GuideDiscussion GuideDiscussion GuideDiscussion GuideDiscussion Guide

• 3 B3 B3 B3 B’’’’s s s s • Brief History LessonBrief History LessonBrief History LessonBrief History Lesson

• Emergency Room PerspectiveEmergency Room PerspectiveEmergency Room PerspectiveEmergency Room Perspective

• Structure Structure Structure Structure –––– Are we going the wrong way?Are we going the wrong way?Are we going the wrong way?Are we going the wrong way?


History LessonHistory LessonHistory LessonHistory LessonHistory LessonHistory LessonHistory LessonHistory Lesson

• 1999 1999 1999 1999 PLA & MFA LS MergerPLA & MFA LS MergerPLA & MFA LS MergerPLA & MFA LS MergerName changeName changeName changeName change

• 2000 2000 2000 2000 Mgmt Agr. with IPLAMgmt Agr. with IPLAMgmt Agr. with IPLAMgmt Agr. with IPLAMgmt. Agr. with DFSMgmt. Agr. with DFSMgmt. Agr. with DFSMgmt. Agr. with DFSLease with AshevilleLease with AshevilleLease with AshevilleLease with AshevilleDiscussions with SSC/MLEDiscussions with SSC/MLEDiscussions with SSC/MLEDiscussions with SSC/MLE



• 2001 2001 2001 2001

Acquired assets of IPLAAcquired assets of IPLAAcquired assets of IPLAAcquired assets of IPLADeal with SSCDeal with SSCDeal with SSCDeal with SSCGeorge Young FraudGeorge Young FraudGeorge Young FraudGeorge Young FraudLitigationLitigationLitigationLitigationDownsizingDownsizingDownsizingDownsizing



• 2002 2002 2002 2002 –––– 2004200420042004

Continuing operational scrutinyContinuing operational scrutinyContinuing operational scrutinyContinuing operational scrutinyGovernance changesGovernance changesGovernance changesGovernance changesIndustry issuesIndustry issuesIndustry issuesIndustry issuesJudgmentsJudgmentsJudgmentsJudgmentsCoBankCoBankCoBankCoBank



• 2005200520052005

Further development of Further development of Further development of Further development of ““““NEWCONEWCONEWCONEWCO””””Move by judgment creditorMove by judgment creditorMove by judgment creditorMove by judgment creditorFiled for Reorg Filed for Reorg Filed for Reorg Filed for Reorg –––– 4/1/054/1/054/1/054/1/05Plan confirmed Plan confirmed Plan confirmed Plan confirmed –––– 9/28/05 !!!9/28/05 !!!9/28/05 !!!9/28/05 !!!Appeal dismissed Appeal dismissed Appeal dismissed Appeal dismissed ---- 2006200620062006Case formally closed Case formally closed Case formally closed Case formally closed –––– early 2007early 2007early 2007early 2007

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HistoryHistoryHistoryHistory

&&&&

HindsightHindsightHindsightHindsight


“Think of three things: from where you

came, where you are going and to whom

you must account.”

--Proverb


““““Where do we go from here?Where do we go from here?Where do we go from here?Where do we go from here?””””““““Where do we go from here?Where do we go from here?Where do we go from here?Where do we go from here?””””

• Are we viable?Are we viable?Are we viable?Are we viable?• Our assets have value, both UPI & PCC.Our assets have value, both UPI & PCC.Our assets have value, both UPI & PCC.Our assets have value, both UPI & PCC.

• We had little or no equity.We had little or no equity.We had little or no equity.We had little or no equity.

• The members supported us!The members supported us!The members supported us!The members supported us!


Food Supply Chain DynamicsFood Supply Chain DynamicsFood Supply Chain DynamicsFood Supply Chain DynamicsFood Supply Chain DynamicsFood Supply Chain DynamicsFood Supply Chain DynamicsFood Supply Chain Dynamics

InputInput

ProviderProvider

ManufacturerManufacturer

ProcessorProcessor

ProducerProducer Retailer/Retailer/

WholesalerWholesalerConsumerConsumer


Critical PathsCritical PathsCritical PathsCritical PathsCritical PathsCritical PathsCritical PathsCritical Paths

• Economic performanceEconomic performanceEconomic performanceEconomic performance• Structural alternativesStructural alternativesStructural alternativesStructural alternatives

• Intentional leadershipIntentional leadershipIntentional leadershipIntentional leadership


Economic PerformanceEconomic PerformanceEconomic PerformanceEconomic PerformanceEconomic PerformanceEconomic PerformanceEconomic PerformanceEconomic Performance

• Profits pay for growthProfits pay for growthProfits pay for growthProfits pay for growth• Growth is not a luxuryGrowth is not a luxuryGrowth is not a luxuryGrowth is not a luxury

• What do members value?What do members value?What do members value?What do members value?

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Structural AlternativesStructural AlternativesStructural AlternativesStructural AlternativesStructural AlternativesStructural AlternativesStructural AlternativesStructural Alternatives

• Problem solvingProblem solvingProblem solvingProblem solving

• GovernanceGovernanceGovernanceGovernance• Raising CapitalRaising CapitalRaising CapitalRaising Capital

• Value Proposition & perceptionValue Proposition & perceptionValue Proposition & perceptionValue Proposition & perception



Conclusions & ActionsConclusions & ActionsConclusions & ActionsConclusions & ActionsConclusions & ActionsConclusions & ActionsConclusions & ActionsConclusions & Actions

• Our specialized assets have textbook, coop Our specialized assets have textbook, coop Our specialized assets have textbook, coop Our specialized assets have textbook, coop value, i.e. to the uservalue, i.e. to the uservalue, i.e. to the uservalue, i.e. to the user

• Our loan portfolio is sound and bankableOur loan portfolio is sound and bankableOur loan portfolio is sound and bankableOur loan portfolio is sound and bankable

• Our membership base is willing to do Our membership base is willing to do Our membership base is willing to do Our membership base is willing to do business with us AND capitalize the coopbusiness with us AND capitalize the coopbusiness with us AND capitalize the coopbusiness with us AND capitalize the coop


Capital RetainsCapital RetainsCapital RetainsCapital RetainsCapital RetainsCapital RetainsCapital RetainsCapital Retains

• Stole the idea from dairy coopsStole the idea from dairy coopsStole the idea from dairy coopsStole the idea from dairy coops

• Retain on per head of livestock marketedRetain on per head of livestock marketedRetain on per head of livestock marketedRetain on per head of livestock marketed• Planning a 5 year rolloutPlanning a 5 year rolloutPlanning a 5 year rolloutPlanning a 5 year rollout

• Will raise about $1.0M equity per yearWill raise about $1.0M equity per yearWill raise about $1.0M equity per yearWill raise about $1.0M equity per year

• Not enough!Not enough!Not enough!Not enough!


PCC SolutionsPCC SolutionsPCC SolutionsPCC SolutionsPCC SolutionsPCC SolutionsPCC SolutionsPCC Solutions

• Concluded weConcluded weConcluded weConcluded we’’’’d make no change to core, cooperative d make no change to core, cooperative d make no change to core, cooperative d make no change to core, cooperative structure and tax statusstructure and tax statusstructure and tax statusstructure and tax status

• Loan assets are high qualityLoan assets are high qualityLoan assets are high qualityLoan assets are high quality• Limited access to debt capital for growth in Limited access to debt capital for growth in Limited access to debt capital for growth in Limited access to debt capital for growth in conventional credit facilityconventional credit facilityconventional credit facilityconventional credit facility

• Refinanced 100% of portfolio Refinanced 100% of portfolio Refinanced 100% of portfolio Refinanced 100% of portfolio ---- $ worked$ worked$ worked$ worked• Will receive bank patronage Will receive bank patronage Will receive bank patronage Will receive bank patronage –––– reduce long term debtreduce long term debtreduce long term debtreduce long term debt• DeleveragedDeleveragedDeleveragedDeleveraged the balance sheet by over $50M and the balance sheet by over $50M and the balance sheet by over $50M and the balance sheet by over $50M and therefore need for equity capital overalltherefore need for equity capital overalltherefore need for equity capital overalltherefore need for equity capital overall



Preferred MembershipPreferred MembershipPreferred MembershipPreferred MembershipPreferred MembershipPreferred MembershipPreferred MembershipPreferred Membership

• Established new class of membershipEstablished new class of membershipEstablished new class of membershipEstablished new class of membership

• Charge $25/member/year to belongCharge $25/member/year to belongCharge $25/member/year to belongCharge $25/member/year to belong• To date, over 40,000 Preferred Members!To date, over 40,000 Preferred Members!To date, over 40,000 Preferred Members!To date, over 40,000 Preferred Members!

• You do the mathYou do the mathYou do the mathYou do the math


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Community MarketsCommunity MarketsCommunity MarketsCommunity MarketsCommunity MarketsCommunity MarketsCommunity MarketsCommunity Markets

• 80/20 rule 80/20 rule 80/20 rule 80/20 rule –––– most members do business at a most members do business at a most members do business at a most members do business at a facilityfacilityfacilityfacility

• Local auctions are integral part of Local auctions are integral part of Local auctions are integral part of Local auctions are integral part of agagagag business in business in business in business in rural communitiesrural communitiesrural communitiesrural communities

• During legal crisis, farmers were most concerned During legal crisis, farmers were most concerned During legal crisis, farmers were most concerned During legal crisis, farmers were most concerned about whether about whether about whether about whether ““““theirtheirtheirtheir”””” local market would still be local market would still be local market would still be local market would still be there versus loss of equitythere versus loss of equitythere versus loss of equitythere versus loss of equity

• Assets appraised more than term debtAssets appraised more than term debtAssets appraised more than term debtAssets appraised more than term debt



• Creating new, local cooperatives in each stateCreating new, local cooperatives in each stateCreating new, local cooperatives in each stateCreating new, local cooperatives in each state• Facility will be contributed from UPI to localFacility will be contributed from UPI to localFacility will be contributed from UPI to localFacility will be contributed from UPI to local• Local cooperative, i.e. community market, will be a stock Local cooperative, i.e. community market, will be a stock Local cooperative, i.e. community market, will be a stock Local cooperative, i.e. community market, will be a stock cooperativecooperativecooperativecooperative

• UPI will retain common stock; operational management via UPI will retain common stock; operational management via UPI will retain common stock; operational management via UPI will retain common stock; operational management via a Management Agreementa Management Agreementa Management Agreementa Management Agreement

• Farmers and related parties can buy preferred stock in local Farmers and related parties can buy preferred stock in local Farmers and related parties can buy preferred stock in local Farmers and related parties can buy preferred stock in local coopcoopcoopcoop

• Bite size bitesBite size bitesBite size bitesBite size bites………….$1000/share; dividend bearing.$1000/share; dividend bearing.$1000/share; dividend bearing.$1000/share; dividend bearing• Goal is to raise appraised value of facilityGoal is to raise appraised value of facilityGoal is to raise appraised value of facilityGoal is to raise appraised value of facility• Buy the coop back from the bankBuy the coop back from the bankBuy the coop back from the bankBuy the coop back from the bank• Move to local patronage pools Move to local patronage pools Move to local patronage pools Move to local patronage pools –––– end of 2008end of 2008end of 2008end of 2008



• Goal is to raise $5M over next 18Goal is to raise $5M over next 18Goal is to raise $5M over next 18Goal is to raise $5M over next 18----24 months24 months24 months24 months

• First one has been formed in Michigan and First one has been formed in Michigan and First one has been formed in Michigan and First one has been formed in Michigan and has received 521 IRS exemptionhas received 521 IRS exemptionhas received 521 IRS exemptionhas received 521 IRS exemption



SummarySummarySummarySummarySummarySummarySummarySummary

• Community Markets, capital retains and Preferred Community Markets, capital retains and Preferred Community Markets, capital retains and Preferred Community Markets, capital retains and Preferred Membership reaffirm Membership reaffirm Membership reaffirm Membership reaffirm cooperative cooperative cooperative cooperative solutionssolutionssolutionssolutions

• Specialized assets have value when directly Specialized assets have value when directly Specialized assets have value when directly Specialized assets have value when directly correlated to meeting correlated to meeting correlated to meeting correlated to meeting membersmembersmembersmembers’’’’ needsneedsneedsneeds

• Structure may need to change to best meet Structure may need to change to best meet Structure may need to change to best meet Structure may need to change to best meet membersmembersmembersmembers’’’’ needsneedsneedsneeds

• Producer lending is a critically needed service but Producer lending is a critically needed service but Producer lending is a critically needed service but Producer lending is a critically needed service but must have a flexible must have a flexible must have a flexible must have a flexible wholesalewholesalewholesalewholesale source of fundssource of fundssource of fundssource of funds


Thank you!Thank you!Thank you!Thank you!

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