Grain - Heritage Cooperative

UPPER SANDUSKY: Monday, August 10th @ 6 p.m. at Wyandot County Fairgrounds Dining Hall in Upper Sandusky
PANDORA: Tuesday, August 11th @ 8 a.m. at Legacy’s Pandora Agronomy facility
ARLINGTON: Tuesday, August 11th @ 6 p.m. at Legacy’s Arlington Agronomy facility
KENTON: Wednesday, August 12th @ 8 a.m. at Henry’s Restaurant in Kenton
ADA: Wednesday, August 12th @ Noon at VFW in Ada
ARCADIA: Monday, August 24th @ 8 a.m. at Legacy’s Arcadia Agronomy facility
CUSTAR: Monday, August 24th @ 6 p.m. at Legacy’s Custar Agronomy facility
PLAIN CITY: Tuesday, August 25th @ 8 a.m. at Der Dutchman Restaurant in Plain City
URBANA: Tuesday, August 25th @ 6 p.m. at Champaign County Fairgrounds in Urbana
Food and Refreshments will be available at each meeting location relative to time of day of meeting.
Why are the boards recommending this merger?
This is a unique opportunity to combine two successful companies in a way that will meet member and customer
needs today and well into the future.
In today’s evolving competitive business climate continued success depends on your ability to change and adapt.
While both of these cooperatives are performing well today, we recognize that market conditions require us
to seek both economies of scale and access to resources to better service all of our customers and grow for the
future. You have changed quickly and will continue to change. You will not wait for your co-op if it doesn’t
change with the speed of your change. Our co-ops must continually challenge ourselves to grow and develop
sustainability and advantages that are needed to be your first choice. We must be relevant to you and in order to
do that we must be relevant in the marketplace.
Things to ask yourself regarding Change?
Do you do business differently today than you did last year? Two years ago? Ten years ago? Why?
Does your business look differently today than when you started? Did you grow? Why?
Why did you change the way you do business or how you farm?
Did you need to seek out efficiencies? Spread your costs? Spread your risk?
Did opportunities for change happen at the best time possible or did they happen at a time the opportunity
presented itself and you had to make a decision on change?
Vision:
“To be the Customer’s Preferred Choice by providing Customer
relevancy and opportunity to gain sustainable market advantage
and benefits.”
Mission Statement:
“To provide real quality products and services to our members
and stakeholders in a manner that adds lasting value to their
personal enterprises.”
Vision:
“To be the Customer’s First Choice.”
Mission Statement:
“To exceed customer expectations by delivering the best value
to their business, while providing a financial return to the
cooperative and its member-owners.”
Future Leadership
of Heritage Cooperative
Eric Parthemore
Heritage Cooperative
President & CEO
Projected President & CEO of Heritage Cooperative
Eric N. Parthemore (66) a native of Hardin County and graduate of The Ohio State University (BS & MS) has been the President
and Chief Executive Officer of Heritage Cooperative Inc. since its formation in 2009. Prior to that he was the President and CEO
of The Farmers Commission Company.
Eric has served the agriculture industry for over 40 years after serving in the Navy during the Vietnam era. His knowledge
and experience in private, cooperative, and publicly-traded companies, both large and small, is well known and respected
throughout the industry. This is evident by his past selection and leadership on industry boards such as OABA, OABA Scholarship
Committee, and appointment by Ohio Director of Agriculture to the ODA Commodity Warehouse Advisory Commission. Eric
continues to serve the industry and cooperative system by serving on the Cooperative Pension Board as well as the Grain Railcar
Council, a US Department of Transportation appointed position to the Surface Transportation Board.
Eric’s experience and professional network extends well beyond normal agricultural cooperative bounds as evidenced by his
continued election to the Board of Directors of INTLFCStone Inc. INTLFCStone is a Fortune 100 publicly-traded risk management
company with an international and multi-commodity footprint.
Eric and his wife Kay will celebrate their 41st wedding anniversary November 30, at their home in Marysville, Ohio.
Mark Sunderman
Legacy Farmers Cooperative
President & CEO
Projected Chief Operating Officer and future
President/Chief Executive Officer of Heritage Cooperative (one year after merger)
Mark graduated from Grove City College in Pennsylvania in 1995 with a Bachelor of Science degree in Business Management.
Mark worked briefly for Deerfield Farms Service before accepting a position with the U.S. Commission Company in Upper
Sandusky, Ohio as a grain merchant. In 1998 Mark was promoted to Branch Manager of the Kenton Location for the company,
which had then become The Farmers Commission Company. His job responsibilities included managing the grain facility for
eight years, while also having additional roles over some of those same eight years managing the feed division, buying the crop
nutrients for the company, and managing the Kenton agronomy wholesale and retail facility. In 2006 Mark was hired as the
President and CEO of Deshler Farmers Elevator Company.
While at Deshler Farmers the cooperative’s sales grew from $28 million to $76 million, net worth of the company grew from
$4.5 million to $8.1 million, and working capital increased from $800,000 to $3.2 million at the same time the cooperative was
investing in asset growth in grain, agronomy, a quality employee team as well as paying patronage and redeeming past equities.
In March of 2014, Mark was named President and CEO of the newly-formed Legacy Farmers Cooperative.
Mark has served five years on the Board of Directors of the Ohio Agribusiness Association and is the elected Chairman. He is
serving his eighth year on the Land O Lakes Executive Council and held the Chairman position of Ag Region 4 for two years.
Mark also serves on the Agri Insurance Exchange Board of Directors and is a member of the Nutrient Stewardship Council.
Mark and his wife Wendy live just west of Findlay, Ohio with their 14-year old son Luke.
SUMMARY OF PROVISIONS
AGREEMENT OF MERGER
The Agreement of Merger (“Agreement”) provides how Heritage Cooperative, Inc. (“Heritage”) and Legacy
Farmers Cooperative (“Legacy”) propose to merge their cooperatives into Heritage Cooperative, Inc. (the
“Surviving Association”). Both Boards of Directors unanimously approved this Agreement and recommend its
approval by their respective members. The following information provides a brief summary of each Article of
the Merger Agreement:
Article 1
Merger
• For the merger to happen, the members must approve it. Both Boards will encourage their members to vote
for the merger.
Article 2
Effective Date
•
If the members of both cooperatives approve the merger, the Effective Date of the Merger will be March 1,
2016.
Article 3
Articles of Incorporation, Bylaws
•
Heritage and Legacy have similar Articles of Incorporation and Bylaws.
•
The Articles of Incorporation and Bylaws for the Surviving Association, Heritage, have been revised
slightly to accommodate the transitions required by the merger and to update provisions based on how the
boards and cooperatives operate and anticipate operating.
•
Amendments to the Articles of Incorporation authorize more common and preferred stock to accommodate
the increase in the number of members.
•
Amendments to the Bylaws:
o Allow for 14 directors on the Initial Board and after transition 14 to 16 directors, 2 each from 7 districts
and, if the board desires, up to 2 additional directors to serve at-large.
o Board meetings may be held by conference call or other authorized communications equipment.
•
Both documents are attached to the agreement and are adopted upon approval of the Agreement.
Article 4
Exchange of Stock and Capital Credits
•
Common stock and capital credits held by Heritage members will not change. Preferred stock classes will be
redeemed prior to the Effective Date of the merger. Heritage is not bound to redeem preferred stock if the
merger does not occur.
•
Legacy members will exchange their equities as follows:
Before Consolidation
After Consolidation
Exchanged for
One share Legacy Common ($100 par value)
One share Surviving Association Common ($100
par value)
All Legacy Capital Credits
Surviving Association Capital Credits with an
equal Stated Value
Summary of Agreement of Merger •
Legacy does not have any issued and outstanding preferred stock and will not have any as of the Effective
Date of the merger (March 1, 2016).
•
Legacy’s unallocated capital reserve, forfeitable amounts of capital stock and capital credits and other
unallocated surplus or capital reserves will become part of the Surviving Association’s unallocated capital
reserves. Legacy will redeem 10% of its members’ capital credits during February prior to the Effective
Date of the merger. Legacy is not bound to redeem capital credits if the merger does not occur.
Article 5
Effect of Merger
•
•
Legacy’s rights, powers, property, debts and obligations will become the property of the Surviving
Association.
The merger is intended to be tax-free and to qualify for non-recognition of gain or loss under the Internal
Revenue Code.
Article 6
Representations and Warranties
•
•
•
•
•
Each cooperative has represented to the other that:
o It is in good standing with the state of Ohio:
o Its Audit Report presents its financial condition fairly and there has been no adverse material change
since the date of the Audit Report; and
o The merger will not cause a default under any agreements or governing documents.
In addition, except as disclosed in the Audit Report, each cooperative:
o Has no liabilities that could adversely affect its business or financial condition; and
o Has good title to its property without liens or defects in title.
Neither cooperative will make material changes prior to the merger unless agreed to as a prior condition to
the merger.
Both agree to disclose in writing any situations that may cause its representations to be untrue or will
otherwise cause adverse changes in its business.
A breach of this section is cause for the board of the non-breaching cooperative to terminate the Merger
Agreement and abandon the merger.
Article 7
Board of Directors
•
The initial board will be 14 elected directors, 8 from Heritage and 6 from Legacy.
Article 8
Future Development
•
Both Board of Directors support and charge the Initial Board with the priority of developing the Custar
facility into an “agricultural campus” for the benefit of the Surviving Association’s members.
2
Heritage Cooperative/Legacy Farmers Merger Considerations
• Help Secure a Future in the Marketplace for the two cooperatives and their members
Enables the cooperatives to compete long term and build sustainability, gain sustainable market advantages, and retain and
recruit a top quality employee team to service our customers.
Both Boards share similar philosophy that promotes top-quality customer service to meet the customers’ needs.

Similarities in geographical areas and services offered make our cooperatives natural partners.

Keep local facilities updated and relevant to service all members.

Large enough to have a seat at the table to compete and leverage economies of scale.
• Expands grain markets available for both companies
 CSX/NS mainline rail access along with short-line rail facilities to take advantage of best rail rates and leverage nearly 100
million bushels of grain for better marketing opportunities.
 Opportunity to improve harvest logistics for facilities with more outlet choices and dedicated rail freight.
• Enhances Agronomy Purchasing Markets and Opportunities
Will have multiple rail markets and rates available for fertilizer.
Kenton Ag Campus in place with the addition of Marysville Ag Campus coming on line with the focus on developing the
Custar Ag Campus to give liquid and dry fertilizer train quantity access in a central spine of the geographic area from North
toSouth and 24/7 liquid fertilizer load-out.
 More Chemical and Seed Volume for purchase discount opportunities.
Ability to offer a wider product line without having to give up max rebates and the ability to offer our own proprietary
products to a larger market.

At current volume an increase in buying influence of crop protection of 1% would equate to $250,000, 2% = $500,000,
3% = $750,000.
• Share employees and equipment based on workload, weather, and specialization
 Gain efficiencies of departments, locations, equipment, storage and services.

More specialization of services and products provided.
Efficiency of assets (rain in a specific area, but not in another or Insects attacking a crop).
In-House Company Millwright and Maintenance Services expanded.
Merge strengths to get better.
Regulation, Safety, and Security focus improved and specialized.
Share other specialized equipment to save on downtime due to a breakdown or weather.
Invest in technology that is key to future benefits for our customers.
• Enables more employee specialization over a larger customer base to bring more cost-effective progressive services to customers
 Employee specialization to get the right answers for your farm in a more timely fashion.
 Enhances the ability to retain and attract quality employees for the future.
• Reduces crop weather risk by expanding area (drought or prevented planting)
• Reduces Major Project financial risk with bigger balance sheet and income sources. Greater financial horsepower and ability
to grow
• Reduces duplicate costs (volume breaks on insurance, computer system, advertising, audit costs, etc.)
• Additional Energy Market possibilities
 Share programs we separately operate today.
 New Propane Market in Northern Trade Area.
• Estimate Conservatively a benefit of $1.2 million in first year and by year five $3 million-plus annually
• Geographically it encompasses an area in Ohio with no major overlap or void of service areas for grain, agronomy, or energy
• Both companies are in a very strong position financially, which creates a financially solid merged cooperative
HERITAGE COOPERATIVE/LEGACY FARMERS COOPERATIVE
Financial Snapshop at Conclusion of Last 12 Months Fiscal Year end
(Aug 2014)
(Feb 2015)
ItemHeritageLegacyAggregate
(in 000’s)
(in 000’s)
(in 000’s)
Supply Sales 119,834 77,354 197,188
Marketing Sales 411,866 201,117 612,983
Total Sales
531,700 278,471 810,171
Supply Margin 21,475 12,860 34,335
Marketing Margin
20,000 9,802 29,802
Total Margin
41,475 22,662 64,137
Other Revenue 14,225 12,243 26,468
Total Revenue 56,700 34,905 91,605
Operating Expense
44,904 32,103 77,007
Net Operating Income 10,796 2,802 13,598
Grain Received Bushels 59,099 34,151 93,250
Current Assets
94,717 115,423 210,140
Net Property & Equipment
37,541 30,465 68,006
Other Assets 19,417 8,497 27,914
Total Assets # 151,675 154,385 306,060
Current Liabilities
67,193 96,950 164,143
Long-Term Liabilities 4,222 9,305 13,527
Total Liabilities 71,415 106,255 177,670
Total Net Worth 80,261 48,130 128,391
Working Capital 27,524 18,473 45,997
Long-Term Loans/NW5.2%19.3%10.5%
Supply Gross Margin17.9%12.6%16.1%
Grain Gross Margin4.9%4.9%4.9%
Revenue/Sales10.6%12.5%11.2%
OE/Sales8.4%11.5%9.43%
Operating Income/Sales2.1%1.0%1.73%
Last Five Years
Total Patronage$49,132 $26,864 $75,996
Equities Redeemed$9,938 $4,767 $14,705
Total Cash Back to Members
$27,134 $17,933 $45,067
Asset Investments*$71,000 $35,000 $106,000
# Current assets discrepency due to timing of inventory on hand at respective year ends
* Five-year asset investment estimates Marysville Project
For more information on a particular facility, please refer to each individual company’s website.
Heritage Cooperative (www.heritagecooperative.com) Legacy Farmers Cooperative (www.legacyfarmers.com)
For more information on a particular facility, please refer to each individual company’s website.
Heritage Cooperative (www.heritagecooperative.com) Legacy Farmers Cooperative (www.legacyfarmers.com)
For more information on a particular facility, please refer to each individual company’s website.
Heritage Cooperative (www.heritagecooperative.com) Legacy Farmers Cooperative (www.legacyfarmers.com)
For more information on a particular facility, please refer to each individual company’s website.
Heritage Cooperative (www.heritagecooperative.com) Legacy Farmers Cooperative (www.legacyfarmers.com)
For more information on a particular facility, please refer to each individual company’s website.
Heritage Cooperative (www.heritagecooperative.com) Legacy Farmers Cooperative (www.legacyfarmers.com)
For more information on a particular facility, please refer to each individual company’s website.
Heritage Cooperative (www.heritagecooperative.com) Legacy Farmers Cooperative (www.legacyfarmers.com)
For more information on a particular facility, please refer to each individual company’s website.
Heritage Cooperative (www.heritagecooperative.com) Legacy Farmers Cooperative (www.legacyfarmers.com)
CORPORATE OFFICE:
11177 Twp. Road 133
West Mansfield, OH 43358
Phone: 877-240-4393
Fax: 937-355-0005
CORPORATE OFFICE:
6566 County Road 236
Findlay, OH 45840
Phone: 800-283-2611
Fax: 419-423-9706