Transcript Presentation Title - UW Center for Cooperatives

West Central Cooperative
Craig Heineman
Alternative Approaches to Building & Managing Capital
West Central History
West Central’s full service 3,500+ farmerowned cooperative headquarters in Ralston,
Iowa. West Central markets products through
out most of North America and to several other
foreign destinations.
Operating divisions
Grain
Agronomy
Feed
Soy processing
Biodiesel
West Central Board of Directors
West Central is governed by 9 elected board
members and 2 appointed associate board
members
Annual Operations
West Central employs 228 people
Sales this year will be $375 million
One of the largest 20 grain companies in North
America – markets 75 million bushels
Largest marketer of biodiesel in the United States
SoyPLUS is the most recognized name in dairy protein
rations -feeding more dairy cows than any other branded By
Pass Protein
West Central Biodiesel Plant
West Central’s 12 million gallon capacity biodiesel plant uses
technology jointly developed by West Central and Crown Iron Works.
The biodiesel plant
processes 90
Biodiesel Processing
million pounds of
soybean oil into
biodiesel and other
methyl ester
products each
year.
Soy Processing
Core Values
QUALITY
Providing superior
products and services
PROFESSIONALISM
Employees assisting
customers
CUSTOMER
FOCUS
INNOVATION
Research, new products,
new solutions
INTEGRITY
Honesty, trust,
partnerships
Sales History (millions)
400
375.0
350
300
311.0
250
253.5
200
150
219.0
187.6
100
50
0
2002
2003
2004
2005
2006
Sales
4%
5%
23%
21%
47%
Grain
Soy Center
Feed
Agronomy
Biodiesel
History of cash returned to members (millions)
$2.5
$2.0
$2.1
$1.8
$1.5
$1.6
$1.5
$1.2
$1.0
$0.5
$0.0
2002
2003
2004
2005
2006
Additional Information
www.westcentral.coop
www.soychlor.coop
www.soyplus.coop
www.soypower.coop
www.renewable-energy-group.com
Stock Issues
The JOBS Bill, passed in October 2004 included the
Repeal of the Dividend Allocation Rule
This removed a layer of taxation in the payment of
Dividends on cooperative stock
As a result Cooperatives are better able to convey
non patronage earnings to stockholders through
dividends
Proposed Stock Characteristics
The West Central Board of Directors proposed a new
issue of Preferred stock that would be Dividend
bearing (D Preferred stock)
This will provide a vehicle to distribute non-patronage
based earnings to its membership
Proposed Stock Characteristics
D Preferred stock will be more “liquid” than C
Preferred stock
This stock will provide a positive incentive to
voluntarily hold cooperative stock
This stock will not be for sale and will be issued as
a revolvement of C Preferred stock to D Preferred
stock
Proposed Stock Characteristics
Paying dividends on Cooperative stock provides tax
benefits to the stockholders
Dividends are taxed at the capital gains rates
There is no self employment tax on dividends
received
Other changes in the articles refer to complying
with the law repealing the Dividend Allocation Rule
Current Stock
Class A Common – voting “membership” stock
$100 par value
Class B Common – Non-voting “membership” stock
$100 par value
Class B Preferred – non revolving equity stock
$ 10 par value
Class C Preferred – revolving equity stock
$ 10 par value
New Issue of Stock
Class D Preferred
$ 10 par value
Summary
Changes to the company’s Articles of Incorporation
and Bylaws were necessary to allow West Central to
take advantage of the repeal of the federal Dividend
Allocation Rule.
West Central will not be required to reduce its net
earnings available for patronage refunds by the
dividends paid on capital stock.
Cooperative Profits $200
$100
Patronage
$100
Non-Patronage
Existing Stock
$1,000
8% Dividend Declared
$100
Allocated
$80
$20
Reserve Account
Thank You!