2019 Annual Report 2020 FRTLR FACLTY COG SOO BUILDING · 2020-02-05 · CEO LETTER 2019 “Taking...

2019 Annual Report

NEW IN 2020 – FERTILIZER FACILITY

COMING SOON

BUILDING

CEO LETTER2019 “Taking Action”Relentless. It’s the one word that comes to mind as I summarize Landmark’s 2019 fiscal year. The Energy and Retail divisions maintained their high performance, and the Grain division posted positive earnings for the first time in over seven years. Although the dairy industry continues to face headwinds, Animal Nutrition showed considerable progress, posting a profit in five of the last six months of the fiscal year. The 2018 fall season started with over nine inches of rain, and the 2019 spring season was inundated with recurring rain showers, causing many delayed planting events and making agronomic activity difficult. The rain was so heavy in our eastern trade area that it led to thousands of acres of prevented planting, which resulted in a tough year for many of our members and a loss of over $7M of agronomic revenues for Landmark. Despite these numerous challenges, your Landmark team worked through it and found their way to a solid year.

As I stated last year in the annual meeting report, our goal was to reduce operating expenses by $4M – a goal that we delivered on. In addition, we worked tenaciously to upgrade and modernize your facilities and divest ourselves of both fixed and variable assets that were not contributing to the bottom line.

Through these tireless efforts, we increased gross margins of the business by $1.3M and improved operating margin by $5.8M (prior to the Fall River impairment). We executed a local profit of $1.55M, and our overall profit after patronage earnings was $5.78M. As a result of our earnings from fiscal year 2019, we will be paying $1.3M of patronage to our members. The entire patronage earned will be paid in cash, and no named equity will be allocated in 2020 for the 2019 fiscal year. In addition, we will be sending back roughly $4M in Section 199A tax (formerly known as DPAD) deductions to members. Overall, Landmark remains an extremely strong cooperative with a solid balance sheet and working capital position.

2020 and BeyondFor 2020 and Beyond, we’re continuing to drive improvements to better service our members, add to our solution offerings, focus on safety, and grow your cooperative. Your Board of Directors has approved a $12M, 28,000 ton, state-of-the-art fertilizer blending facility that is under construction at our Union Pacific Railroad location in Evansville, WI. This facility will allow us to efficiently serve a larger portion of our trade area. The expansion will add 14,000 tons of much needed dry fertilizer space, which in turn will enable us to have the right quantities on hand at the right time. We’re also investing $1.5M in our feed load-out bins at our Cottage Grove feed mill. These bins will allow us to procure more product in a timely fashion and serve as inbound ingredient supply and overall finished feed space.

Landmark will reinforce a strong safety culture with new initiatives that have been implemented to bolster safety and increase accountability to the business. Our desire to consistently improve our strong relationships with our member base will be defined by integrity, accountability, passion, and member-centric solutions, all while remaining a financially strong and responsible cooperative.

I would like to thank all of you for your ongoing support of Landmark. We sincerely appreciate your business and your dedication to the cooperative, and are constantly striving to improve the way we serve you and how we partner together.

Jim Dell, President & CEO 608-819-3110 [email protected]

3

BOARD OF DIRECTORS

LEADERSHIP TEAM

Front Row (left to right): Director John Blaska, At-Large Position; Director Max Wenck, Eastern District; Director Sandy Larson, Western District; Director Keven Schultz, Northern District; Secretary & Treasurer Kevin Klahn, Western District. Back Row (left to right): Vice Chairman Jon Prochnow, Northern District; Chairman Jim Lange, Eastern District.

Front Row (left to right): Nick Christen, Director of Agronomy Operations; Cris Breidenbach, VP - Grain and Logistics; Aric Dieter, VP - Animal Nutrition; Lee Parker, VP - Energy and Retail Services; Hans Pflieger, VP - Credit Operations and Agronomy Sales; Mike Elder, VP - Risk Management. Back Row (left to right): Michelle Leeder, VP - Human Resources; Jim Dell, CEO and President; Keith Arnold, Chief Financial Officer; Don Schlising, VP - Information Technology and Marketing.

4 | Landmark Annual Report | 2019

Statement of Operations

Consolidated Balance Sheet

FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018

FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018

2019 2018 Amount % of Sales Amount % of Sales

Sales $373,439,184 100.00% $373,293,822 100.00%

Cost of Goods Sold 311,718,803 83.47% 312,935,595 83.83%

GROSS PROFIT 61,720,381 16.53% 60,358,227 16.17%

Distribution Expenses 33,226,304 8.90% 35,006,408 9.38%

General Expenses 20,026,500 5.36% 21,603,955 5.79%

Administrative Expenses 4,804,916 1.29% 5,490,790 1.47%

TOTAL OPERATING EXPENSES 58,057,720 15.55% 62,101,153 16.64%

Interest Expense 4,362,713 1.17% 3,630,566 0.97%

Net (Gain)/Loss on Disposals of Assets (712,916) -0.19% (205,639) -0.06%

Other (Income) Expense (1,544,264) -0.41% (857,184) -0.23%

TOTAL OTHER (INCOME) EXPENSE 2,105,533 0.56% 2,567,743 0.69%

LOCAL NET SAVINGS / (LOSS) 1,557,128 0.42% (4,310,669) -1.15%

Impairment on Property, Plant & Equipment – – 15,726,938 4.21%

Patronage Refunds Received 4,484,820 1.20% 2,537,357 0.68%

NET SAVINGS / (LOSS) BEFORE INCOME TAXES 6,041,948 1.62% (17,500,250) -4.69%

Income Tax Expense (Benefit) 263,282 0.07% (1,968,702) -0.53%

NET SAVINGS / (LOSS) $5,778,666 1.55% $(15,531,548) -4.16%

2019 2018ASSETS

Current Assets $80,712,245 $89,388,522 Property & Equipment 73,051,413 77,787,282 Investments & Other Assets 49,824,523 47,586,729 TOTAL ASSETS $203,588,181 $214,762,533

LIABILITIES & EQUITY

Current Liabilities $42,709,553 $55,171,771 Noncurrent Liabilities 34,531,882 36,364,838 Patron Equities 126,346,746 123,225,924 TOTAL LIABILITIES & EQUITY $203,588,181 $214,762,533

5

Financial and Cooperative Highlights

286FULL-TIME EMPLOYEES

2,207VOTING MEMBERS

11,000+ACTIVE MEMBERS

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77%19%

Corn 24,745,979

Soybean 6,183,000

Wheat 1,420,000

Bushels 32,348,979

Gasoline 5,743,740

Diesel 16,804,075

LP 17,106,788

Gallons 39,654,603

$24,000,000209 FARMS

32,122,379 3,138,181 148,397

Gallons Hauled Bushels Hauled Tons Hauled

134,845 113,135

$13,752,254

Bags of SeedTons of Crop Nutrients Crop Protection Sales

132,718 50,498

Tons of Total FeedTons of Commodities and Direct Ship Business

4%

Total Loan Committments Provided Loans


The theme 2020 and Beyond hits home for the agronomy team. Like all of our growers, we have faced challenges in 2019 that most of us have never experienced, such as the drawn-out planting season and logistical issues with the river flooding. But the silver lining is what we can learn from those challenges to help us serve you even better in the future.

The past year has seen many changes in our supply chain management and capacity scaling. During the tail end of 2019 we worked on the migration of our agronomy business software, which went live on October 1st . Moving forward, this will allow for a more streamlined and seamless process from start to finish, with increased accuracy. We also broke ground on a new dry fertilizer building project in Evansville. This new building will give us the opportunity to grow with our members and increase capacity along with efficiency. We seek to bring a solution from farm planning to harvest and every step in between, making fluid, in-season adjustments and drawing on available technology. And as we look to 2020 and Beyond as a division, we will focus on three core aspects of our business: delivering operational excellence, evaluating our assets to bring the highest level of service to our members, and helping our members use technology platforms to their advantage and fullest potential.

AGRONOMY

Let's take a look at each of our departments...

This new building will give us the opportunity to grow with our members and

increase capacity along with efficiency.

→ Nick ChristenDirector of Agronomy Operations

[email protected] 608-819-3363

7

GRAIN

We will continue to communicate opportunities to

members, and are thankful for the opportunity

to serve you.

→ Cris BreidenbachVP - Grain and Logistics


2019 was a challenging year, but the theme of Taking Action motivated all of us at Landmark. As we head into 2020 and Beyond, we look to the future with a renewed commitment to meeting our members' needs.

Markets reacted to late plantings this spring, which offered pricing opportunities that our origination team quickly communicated to Landmark’s producer members.

Grain merchandising strategically marketed through old bin bottoms and pile damage from transportation shortages. We reduced our wheat inventory to meet market needs, and leveraged strong demand to ship corn inventory closing out the fiscal year.

Landmark has strengthened our ability to create value for members with the addition of two talented and experienced regional operations managers, who work cross-divisionally to serve our members.

Safety is a top priority. Grain has improved employee training as well as hazard monitoring for belts and bucked elevators, and new zero-entry sweeps have been installed at Evansville.

Landmark Logistics is utilizing more trucks and trailers, and H-2A agricultural workers have helped with logistics and other areas.

For 2020 and Beyond, grain intends to enhance facilities, increasing the Whitewater piling space by 1,500,000 bushels, and deploying a new 25,000 bushel-per-hour LeMar conveyor belt. In Cottage Grove, we plan to install new grain bin sweeps and possibly a rail upgrade. Additionally, we are refitting Fall River’s bulk ingredient warehouse with enclosed receiving conveyors to eliminate hazardous conditions and constant cleaning needs. The Fall River grain terminal is also being considered for a second 750,000 bushel bin, two additional 1.5 million bushel ground piles, and a third pit.


ENERGY & RETAIL

Every year has its positives and negatives. The farming economy and continued challenges to our producers is a headline we would like to remove from the news. There are, however, many positive changes we are proud of at Landmark and within your energy division.

Our HVAC segment experienced a strong year, with over 700 systems on an annual maintenance program. Our heating and air conditioning installation and service has grown largely through word of mouth, which is a testament to the quality of our work. And we are proud to have participated again in the Feel the Love program by installing a free furnace for a family in need.

Your retail fuel segment is enhancing the customer experience by updating equipment. In the next year, we will be advancing the security of our credit card transactions with EMV chip readers at the pumps. We will also be looking at new ways to serve our members as the mobile network continues to evolve.

The bulk propane and fuel components of our business are also performing very well in both delivery and service as we implement tablets and other technology to improve dispatching, tank monitoring, scheduling, and customer transactions.

For 2020 and Beyond, the use of technology is growing in your world, and we believe it is also important to expand here at Landmark. We continue to invest in self-service tools for our members, including online credit applications and online bill pay.

Our focus remains on meeting our customers’ needs by keeping in touch with their operations and staying ahead of their expectations. We will accomplish this by leveraging the talent within our division to help our customers be successful.

Our focus remains on

meeting our customers’ needs

by keeping in touch with their

operations and staying

ahead of their expectations.

→ Lee ParkerVP - Energy and Retail Services


9

We reduced our overall operating expenses by

more than $500,000 vs. 2018 while increasing

total sales.

→ Aric DieterVP - Animal Nutrition


ANIMAL NUTRITION

Looking back at 2019, the theme of Taking Action truly resonated with the Animal Nutrition Division. After multiple years of contending with challenging milk markets within the dairy industry, we found ourselves in the midst of an industry restructuring. This rapidly changing landscape has required everyone to evaluate their current business models and identify areas where they can reduce costs or improve efficiencies.

Our approach in 2019 was consistent with this theme, and we reduced our overall operating expenses by more than $500,000 vs. 2018 while increasing total sales. Although a number of factors contributed to this success, a few key areas stand out:

- Realigning roles and responsibilities within the divisional structure.

- Evaluating our assets and manufacturing locations to ensure maximum efficiency with where and how we manufacture products, as well as how we deliver them to the market.

- Evolving our nutrient supply chain and procurement approach to make sure that we are sourcing the best products at the best prices.

Overall, I was pleased with the improvements and progress that we made this past year, and I feel that we have positioned ourselves well for continued growth.

As we look at 2020 and Beyond, we will explore additional opportunities for driving efficiency and productivity, and change will undoubtedly be a constant. In addition, we will place a strong emphasis on growing our business and providing innovative solutions for our members so that they can prosper. Thank you for the opportunity to serve your Animal Nutrition needs this past year, and please let us know how we can best support your success in 2020!


VERITY BUSINESS SOLUTIONS

Verity Business Solutions had another strong year in 2019. Despite a challenging agricultural economy and planting season, Verity was able to provide producers with $24,000,000 in crop operating loans.

This continued strong performance indicates that each year, more Landmark members are viewing Verity as a reliable partner that provides convenient financing options, flexible disbursement and repayment terms, and competitive rates. Many of these members take advantage of Landmark’s special Agronomy financing programs, which enable them to reduce their overall interest expense or improve their cash position. This is a win-win for both the farmer and for Landmark.

Moving into 2020 and Beyond, Verity is committed to providing Landmark members with excellent financing offers and programs that fit their needs. In 2020, Verity has again partnered with Landmark Agronomy to provide up to a Prime Minus 2% interest rate on all Agronomy and qualifying Energy products.

As a key part of our commitment to our members, Verity evaluates our product portfolio annually to ensure that we are providing the best financing offerings in the marketplace. Because of this, beginning in the fall of 2019, Verity established a new lending relationship that will improve our ability to provide machinery loans, real estate loans, leasing, and crop insurance to Landmark members.

As a key part of our commitment to our members, Verity evaluates

our product portfolio annually to ensure that we are providing the

best financing offerings in the

marketplace.

→ Hans PfliegerVP - Credit Operations and Agronomy Sales

[email protected]

11

It is our goal to make responsible decisions on how

we operate in our communities,

whether at our facility or on the

roadways.

→ Mike ElderVP - Risk Management

608-819-3117 [email protected]

RISK MANAGEM

ENT

This past year has been one of change, especially with the addition of two new key members to our safety team. While we have always maintained a strong emphasis on safety to keep our employees out of harm's way, the safety team is helping take us to the next level of safety, to exceed compliance with a zero-risk target for operations.

As we continue to roll out a cloud-based safety management system, our team is working side by side with employees to train them in life safety permits and make sure that operations are conducted safely. Our low injury and DART rates (OSHA’s safety metric that tracks Days Away, Restricted, or Transferred) demonstrate the benefits of these tactics.

Moving to 2020 and Beyond, our focus is on implementing a safety program that allows staff members to concentrate on critical tasks and prioritize their well-being along with that of their co-workers'. We are conducting quarterly safety audits of our locations, reviewing the physical site while talking with employees to determine their understanding of the safety program. Moreover, we are setting objectives and putting a structure in place for regular assessment and continuous improvement.

Our safety program extends to our customers and community as well. It is our goal to make responsible decisions on how we operate in our communities, whether at our facility or on the roadways. We continually monitor our fleet safety performance, and work with regulatory agencies to make sure that our facilities and operations protect the environment and the public.


Financial Five-Year Comparisons2015 2016 2017 2018 2019

WORKING CAPITAL ($ in millions)

LOCAL EQUITY

($ in millions)

CASH PAID TO MEMBERS

($ in millions)

CAPITAL EXPENDITURES

($ in millions)

199A (DPAD) PASSED THROUGH

TO MEMBERS ($ in millions)

$95.9 $96.0 $95.7 $79.0

$2.7 $3.7 $2.6 $2.1

$44.1 $39.1 $36.7 $34.2

$9.9 $9.5 $10.3 $7.8

$8.2 $7.9 $8.0

$79.7

$1.0

$38.0

$6.4

$4.0(Projected)

13

Landmark Gives Back

→ Second Harvest Foodbank Share your Holidays

During the season of giving, Landmark Services Cooperative (LSC) did just that to help local families in need. Thanks to the generosity and caring nature of the employees, members, and business partners, LSC was able to raise and donate 81,982 meals to Second Harvest Foodbank through their 2018 NBC15 Share Your Holidays campaign.

→ Scholarship

Landmark has awarded 365 scholarships totaling $234,250 to students since 1989, and in 2019 the cooperative presented 15 scholarships of $750 each to a group of local high school seniors and collegiate students pursuing post-secondary education. “It is our responsibility to invest in the future of agriculture. It is a pleasure to help students along their academic journey. By awarding scholarships, we are able to set students on a path to success,” emphasized Jon Prochnow, vice-chairman of LSC.


→ Milton Lunch Program

“Hunger is an issue in every community. Landmark is thankful to United Methodist Church and One Apple Lunch Bunch for its commitment to provide nourishing food to children and families who may not know where their next meal is coming from,” said Shannon Horstmeyer, of Landmark. “It’s truly incredible what this group is doing for the Milton community.”

→ Edgerton Lunch Program

This year, Landmark Services Cooperative provided over 2,000 beef sticks and a monetary donation to the Lunch in the Park program. "Landmark’s partnership has given Lunch in the Park another year to provide children and families an opportunity to enjoy a meal together,” expressed Alyssa Meyers, food pantry coordinator of Edgerton Community Outreach.

→ Deforest Lunch Program

More than 3,500 free, healthy lunches were served throughout DeForest and Morrisonville during the summer of 2019. Landmark Services Cooperative was honored to continue to sponsor the Norski Nibbles summer lunch program. The $3,000 donation was dedicated to the purchase of fresh, healthy produce from the DeForest Area Farmers’ Market (DAFM). The market produce was incorporated into the kids’ daily lunches and distributed at several sheltered parks.


15

→ Farm Breakfasts

“Breakfast on the Farm is an important event because it creates a positive environment to share the agricultural story,” commented Yogi Brown, treasurer of the Dane County Dairy Promotion Committee. “It’s great to see thousands and thousands of folks enjoying themselves at the dairy breakfast and expose many non-farm and farm people to modern agriculture. Landmark has supported the Breakfast on the Farm for many years and understands the importance of helping promote community and telling the Ag story.”

→ Interns

During the internship program the students learn and practice skills in their desired areas of interest that benefit them in their future careers. “We hope all of our interns gain general business acumen, a better understanding of agriculture, improve communication skills, and the confidence to follow their passions,” explains Brian Musser, talent acquisition partner of Landmark.

→ Feel The Love (formerly Heat UP WI)

The Landmark Heating and Cooling team donated all labor and installation materials to install a brand new high-efficiency furnace, which was generously donated by Lennox Industries, for a Madison family whose existing unit was severely damaged during the widespread flooding. “There’s no better feeling than knowing that you’re bringing warmth and a sense of security to a well-deserving neighbor in your community,” says Tom Stangl, sales coordinator at Landmark Heating and Cooling.

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2019 Annual Report 2020 FRTLR FACLTY COG SOO BUILDING · 2020-02-05 · CEO LETTER 2019 “Taking...

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Transcript of 2019 Annual Report 2020 FRTLR FACLTY COG SOO BUILDING · 2020-02-05 · CEO LETTER 2019 “Taking...