Co-op holds Annual Meeting

The Pulaski Chase Cooperative held its 77th Annual Meeting of Stockholders on November 8th at the Rock Garden Banquet Hall in Green Bay. At the meeting, the Co-op paid retired members $93,826 in redeemed equities and over $22,000 in cash back to active members, representing 30% of the total dividend for purchases made in the recently completed fiscal year. Carlson and Highland LLP auditor Roger Van Someren presented the audit report to the members. He reported increased sales with earnings of $249,705 on sales of $16,046,452.

Incumbents David Gwidt and Ron Leja were re-elected to serve as directors for another term. Other directors are Allen Kohn, Greg Tauchen, Ron Maroszek, Scott Schaumberg and David Hischke.

Robert Tauscher and John Malcheski received their equity checks from General Manager Todd Rosvold.

To end the meeting General Manager Todd Rosvold presented employee John Jurecki with an award for thirty years of service with the Co-op.

Welcome to the 77th Annual Meeting of the Stockholders of the Pulaski-Chase Cooperative and congratulations on a successful year for the Co-op. The year was a successful and very busy one with continued solid growth in sales and financial strength. We grew nearly 10% in sales during the year; fertilizer tonnage grew 11% in spite of drought conditions, and units of Grain sold were up 16%. Along with the sales increase, local net profit grew 60% to $162,460, similar and in some cases much better than results of other cooperatives in Wisconsin this year. Our net profit with patronage grew nearly 9% to $260,559, 1.6% of sales.

In departmental operations, Agronomy had a 6.6% sales increase to $6.69 million for the year. This past year we saw higher costs to bring in product resulting in a much greater cost to store fertilizer. Like many farm supply cooperatives, to compensate for higher carrying costs we had to set up an additional $800,000 in operating capital last winter from our Bank, Premier Community Bank. We appreciate the prompt action by Premier to accommodate us in these changing markets. This increase in the cost of fertilizer was a marked change in the markets for the third year in a row.

Along with higher prices have come additional challenges in buying fertilizer. In the past we've always purchased our plant food in a timeframe ranging from fall to winter. Our suppliers often times offered us deferred payment terms and price protections until spring to encourage early fill. Except for in season, supply was almost never a concern. These things have changed also, and last year nitrogen products had to be purchased months earlier than normal, mid-summer, to save $75 to $125 per ton on the cost of urea. No price protection was offered to us, and might never again be available, and the risk of prices greatly going up or down was very high. This last spring we saw unprecedented volatility in the fertilizer market and by spring prices were very high, another record for two years in a row. This volatility cost us about $150,000 in reduced gross margins.

Supply is also an issue, and where in the past we might not have enough fertilizer on hand to fill the back of a pick-up truck at our fiscal year end, this year we brought in $250,000 worth of potash mid-July to guarantee summer and fall supply. This was a wise move and we've ended up selling much of that product, but product ordered since then has still not arrived and we can't get a firm date on when it will come in. We are no longer the only major purchaser of fertilizer. China and India are using tremendous amounts of fertilizer now and willing to pay almost any price to obtain supply. A few years ago their usage was a fraction of what it is now. Their increased use of fertilizer and South America's growing plant food needs have turned fertilizer into a truly global market. Tight supply and the falling value of the dollar have made fertilizer a very high priced commodity in the United States. In our current fiscal year starting August 1, 2007 we are seeing the same market conditions

In spite of market challenges last year we had very good early spring planting weather. However, in the summer we had drought conditions that a few years ago might have almost caused a complete loss of our area's corn crop, but improved varieties of corn were able to compensate for the weather, and though yields were generally below county average, most of our customers had expected much worse.

Partly because of the uncooperative growing season Agronomy's local net profit companywide dropped $28,555 from fiscal year 2006, in spite of the sales increase. Patronage from Cenex Harvest State and Land O'Lakes was improved over the previous year. While our finances are good, we are still not generating anywhere near adequate profitability in our Agronomy department to enhance cash flow in light of the departments fixed asset purchases, debt repayment, equity retirement and other cash uses, and are working on maximizing efficiency and purchasing effectiveness to improve our return on sales and return on equity.

The Agronomy department was able to bring a good employee on board last spring. Ken Polzin joined us as Agronomy Operations & Sales manager, second in command in that department under Dick Gwidt. Ken is well respected in the industry and has many years successfully serving the Agronomy needs of farmers in northeast Wisconsin. We had been seeking the best person for this position for several years and are very happy to have achieved that goal with Ken, a person who shares our service and cooperative philosophy. We also have two more experienced and successful agronomists coming on Board this fall and winter; Jeremy Hunt and Gene Bosin. Both have successful cooperative experience working for farmer members in northeast Wisconsin and we are very fortunate and grateful to have them join us soon.

Our Agronomy equipment is generally in excellent shape and up to date with our fixed asset replacement schedule. The Agronomy department's sales coming into the new fiscal year are trending even stronger and as of October 31, 2007, are up by 48% year to date. As mentioned before, the current fertilizer markets are very uncertain and trending high. There is huge risk for the co-op to buy and hold onto fertilizer. To do this is akin to gambling. This isn't our personal money that we are using so we must minimize risk. At present, the only way to do this is to offer firm contracts on fertilizer using back-to-back buying and selling to producers. Because of supply concerns and higher prices, our current inventory is up nearly $500,000 over last year at this time, with another $500,000 in inventory arriving later in November and December. As noted before, these new markets have caused a huge increase in the need for cash in the Agronomy business industry wide. Looking ahead, we expect prepays and spring sales to be very strong and we are looking for strong Agronomy sales and operations for the current fiscal year ending July 31, 2008.

Last year the price of crude oil varied from the low $50's per barrel to nearly $80 per barrel in July. At present, the crude price is in the high $90 range and poised to break $100 per barrel. Due to customer demand, we contracted fuel last fall after the price fell 25 cents per gallon and our supplier, Cenex, felt that it had reached a low. We sold 25 percent of this contracted fuel in back to back contracting to mitigate risk, when the price fell another 25cents per gallon, and as can be expected, no more fuel on this contract was purchased. This contract cost the Co-op $45,000. Cenex makes no guarantees that they can make firm predictions on what the market will do. They have good information on which to make better educated guesses than we can, but a terrorist act, or revised worldwide fuel inventory number can have a huge unforeseen impact on crude oil prices.

In an effort to reduce risk, we are in the cooperative process of forming a limited liability company with a group of like-minded co-ops with similar needs for the purpose of contracting fuel together to comply with new higher minimum contract amounts that the industry has gone to. These amounts are high enough that each one of these cooperatives individually would be taking on too much risk by using the contracting program. In addition, through the LLC, we anticipate developing and using new risk management tools to counter price volatility. Our goal is to have this available by Prepay Days in December.

In spite of a very dry summer and fall, resulting in less haying and field work, our bulk petroleum Gallonage grew seven percent last year. This is 22 percent in two years, a fine accomplishment. Our driver, Al Staley has done an excellent job, but will be retiring in a few months so we are now looking for a replacement. As always, we are seeking internal and external growth opportunities in bulk petroleum, including acquisitions and joint ventures. Our bulk petroleum volume remains strong after July 31, and the current fiscal year's sales are up over last year to date by nearly 10 percent. Patronage from Cenex on the quality refined fuels they supply us was 16 cents per gallon, as they had an excellent year and they've told us we can expect at least as much this year and maybe more.

Our Feed/Grain department had an excellent year with a $149,931 improvement in local net profitability. Feed tonnage was down slightly for the fiscal year of 2007, but is up 22% in the current year to date as of October 31. Mark, Dave, Jerry and the entire feed crew did an excellent job this last year as they always do. A year ago we said we have excellent market share in our area, but needed to profitably expand our customer base geography. We are doing this now and picking up business ranging to Marion and beyond south and west of here and getting new business in the Oconto Falls area.

People are the key to successfully serving our customers and we welcome our new Feed salesman Pete Krolow. We took three years to find the right person in an industry with critical shortages of qualified job candidates. At any one time there are 20 to 25 feed sales positions open at Wisconsin Land O'Lakes affiliated cooperatives. Pete is a Land O'Lakes trained and contracted employee working for us with many years of successful feed sales experience. He is dedicated to helping our customers improve their milking operations and effectiveness to maximize their profitability.

We are sharing Pete in a cooperative effort with the Suring Milling Company, who we've found to have many similarities in philosophy, service and effectiveness to your cooperative. We are pleased to be able to reduce the costs to both companies in this cooperative venture and are seeing positive results immediately in welcoming new business through our doors. Last year we said we needed to tap into a new type of dairy feed and grain customer to us, the large herd farmer, and are now seeing good progress in this area. We have been approached by other cooperatives about joint ventures, mergers, or purchase of their feed facilities and evaluate these situations as they occur to determine if there is an economic benefit to our members generating an adequate financial return.

At present, Mark Yanke, our Feed & Grain department manager is overseeing the completion of a new 240,000 bushel corn bin in Pulaski. The current grain movement is very strong and we expect this trend to continue in light of very favorable grain prices. We continue to service our traditional customer base and are adding new customers. We appreciate and welcome this business.

The Hardware department finished a year filled with challenges. With moving Machinery sales from Hardware to the Machinery Shop, departmental sales were reduced $305,000. We also had a hardware competitor in town relocate to a new mini-mall on the south side of Pulaski and this negatively affected the department's sales for the first six months of the recently completed fiscal year. However, the second six months showed strong increases over the previous year; even with the increased competitiveness of the relocation of the other hardware store. In spite of these challenges, Hardware Department manager Bob Bostedt showed a $13,617 improvement in local net profitability. We saw strong performance in power equipment sales and record sales of zero turn lawnmowers. While we had a loss for the year, it was still better than historical averages and we are seeing continued growth in power equipment sales to the point we will be expanding our chain saw and outdoor power equipment offerings through a store remodel. Our crew in the Hardware department is very good, the best since I've come to the Co-op. Challenges in the Hardware market continue, though, with our close proximity to Green Bay and slowly diminishing farmer numbers - the small and average sized dairy farmer always has been and still is the lifeblood of the Hardware department, but much less in numbers than 10, 20 or 30 years ago. We are evaluating ways to increase both non-farm and farm business and to grow in sales and profitability, including adding new products and remerchandising.

Our Parts department had improved operations with a loss reduced by 41 percent from last year's loss, which was also improved over the year before. While overall sales were down slightly - two percent - the automotive segment showed a solid increase. Our parts crew is very strong with Nate Zuleger moving from the Machinery Shop to the parts counter. Greg Wilson also joined us. Greg has many years of parts experience and comes to us from another NAPA store. We would still like the addition of another Ag parts counterman, but are willing to wait for the right person. After five years, we still have our competition still telling customers that we are out of or going out of the Parts and Machinery business. This is wishful thinking on their part, but we do need continued and additional support from our members to make the Parts department a success.

Sales for Machinery Shop were up 46 percent last year. Sales of machinery alone were increased 27 percent over the previous year. This continues a four year trend of double digit machinery sales growth. Our line of quality Mahindra tractors were responsible for most of the growth, as we continue to watch the popularity of those compact and economical tractors increase. We also sold the first Buhler Versatile tractor a few months ago. Labor sales, the best measure we have for effectiveness of our shop grew six percent to $333,772. Within the labor sales was a 40% growth in non-Ag labor. Five years ago we put forth a plan to increase non-Ag business in the Shop and we are achieving that goal.

The Machinery Shop had about the same level of local profitability as last year, a slight loss of ($7,221). An additional technician for the entire year would have made the Shop profitable. We had a good technician hired right out of trade school, but he left the Ag Industry and our employ. Our employee group in the Shop is excellent and we hired one new employee last year, Steve Blaser who has been progressing well with us. Our work continues to be excellent with Ag equipment and we are growing very well in the heavy duty truck and construction equipment repairs.

Sales in the Station increased just less than three percent last year. John Marsh's department was profitable again with $9,202 in local net savings. Our Station is the leader in tire sales and service and light repairs, with very good on-farm tire service. We have ASE certified technicians able to use the latest technology in diagnostic equipment to make effective and economical repairs. Last year we also started subscribing to NAPA Internet based resources to assist in fixing problems with late model vehicles.

I am happy to be able to report that your cooperative had very significant achievements last year. The overall financial condition improved in 2007 even with drought and high energy and fertilizer prices. We grew in equity $102,687 to $4.56 million. Local ownership also improved from 38 percent to 40 percent, one of the best for cooperatives in northeast Wisconsin. Tonight we will be retiring $93,000 in active equity, with plans to continue to do this at a rate of $120,000 per year. Term Debt to Patrons Equity was lowered from 41 percent to a much improved 31 percent. We continue to pay a 30% cash dividend to customers for purchases in FY 2007. There was continued growth and growth opportunities in both core businesses and other departments. Lastly your cooperative was recognized for it successful community involvement and strong operations by receiving the Business Achievement Award for the year from the Pulaski Area Chamber of Commerce. We are very grateful for this honor and it is made possible only by the support and involvement of the cooperative's members.

There are challenges facing our cooperative as we move forward. We and other cooperatives are facing tight financing in light of the recent increased product prices and inventory cost requirements to service our customers. Grain inventories are up $1.1 million over last year at this time. Agronomy inventories are up $500,000 with another $500,000 on order and expected to come in the next month. We and our farmer members face continued price volatility and risk in all the major commodities such as fertilizer, energy and grain. To accommodate our changing industry the size and scale of some departments need to increase to remain viable in the future. The Bulk Petroleum, Hardware and Parts are relatively small in relation to total company sales, and we are looking at ways to achieve the growth needed in these departments so they can continue to have a significant positive impact for our members.

Another challenge is the shortage of new people coming into Agriculture to replace those retiring. Agriculture is a good industry and career and we need to ensure we promote it as a vibrant and exciting vocation locally through our schools and at the Wisconsin college level.

Our future goals and direction include a continued focus on improving and growing the cooperative's core businesses ; both internal - we have very good market share locally and gaining are new business almost daily in areas outside of Pulaski, especially fuel and agronomy, and external by being open to mergers and consolidation. In the last year we had two other businesses approach us about mergers or buying some or all of their assets. After careful consideration we felt that neither was a good fit at this time, but the next opportunity might be a good fit. With this in mind we will continue to explore other business opportunities. They must make sense for our customers and in the case of a merger, must present a win/win outcome for the parent companies, and give an acceptable level of profitability.

We will also continue to develop employees through training and education, and grow those capable of handling more responsibility and authority. The Co-op will continue to adhere to the cooperative principles that have brought success to its members. Support, investment and improvement in the communities the co-op serves will also remain high on the priority list. In the last year the Pulaski-Chase Cooperative awarded the Gillett, Seymour, Bonduel, Shawano, and Pulaski High Schools a total of six $250 scholarships. The Co-op was also responsible for funding $500 each to the Assumption Blessed Virgin Mary playground fund, the Pulaski Community Pool, the Pulaski Fire Department. We also deposited unclaimed property money into the Federated Youth Foundation to award future scholarships and charitable donations to better the communities we serve.

The Board, management and employees of the Pulaski-Chase Cooperative will continue to advocate farming and the Industry of Agriculture as a growing, dynamic industry with good career potential for students coming out of high school and college. We will also support other cooperative organizations such as Cenex Harvest States and Land O'Lakes through membership and active participation for the betterment of our members. To support our member's needs and achieve our goals we will need to continue to operate at a level of profitability that supports the purchases of necessary fixed assets, timely revolvement of equity, proper levels of borrowed funds, sales growth and continued financial strength.

Lastly, and more importantly, we want the Pulaski-Chase Cooperative to be more than the best supplier and advocate for our members and their agricultural needs, but also their partner. To have a very real and positive impact in their farming operations like no other business can.

I would like to recognize the employees for their hard work every day, their competence and desire to succeed, for the value they ad to the Co-op and our customer's business. The best compliment I can get is when I get a compliment on an employee, and I get many complements on our employees from those who they serve.

I would also like to recognize the Board. They have made many hard and good business decisions on your behalf over the last few years that have led us to where we are now. They are faced with new important challenges in our industry, such as risk management and fixed asset improvement, replacing the basic challenges of financial viability a few years ago. They have demonstrated their confidence and responsiveness to our member's needs time and again this last fiscal year and during their entire board terms.

The key suppliers exemplify the close relationship we strive for with our members. Land O'Lakes, Cenex Harvest States, Cargill, True Value, Syngenta/NK Seeds, Mahindra, NAPA, Buhler Versatile and Brillion are all important components of our success and we value the partnership we have with them.

The reason Co-op exists, however, is because of this last group of stakeholders in the cooperative, our customers. We appreciate and place great value on the partnership we have with our customers and the role we have in their business success. Thank you for supporting us now and in the past. Without strong and loyal member support, no co-op can thrive and achieve the type of goals we have set for this locally owned, controlled, and involved cooperative organization.