When the Growing Gets Tough, the Tough Get Growing


I would like to extend a heartfelt thank you to all of the dedicated UFC employees and member-owners for their continued loyalty and support of our co-op, especially as we have navigated the challenges of the COVID-19 pandemic and its aftermath over the past few years. It is because of good people and careful planning that we have been able to overcome obstacles.

As I’m sure many of you know, the massive economic shutdowns at the start of the pandemic led to an immediate drop in consumer spending. In response businesses and financial institutions lowered prices and interest rates to encourage spending. The government provided additional stimulus through measures like stimulus checks and low-interest loans to businesses to help cover lost profits. However, as some businesses failed or could not maintain previous production levels, prices for goods and services began to rise. The combination of low rates and continued high spending by consumers fed growing inflationary pressures.

Over the last 18 months, the US Federal Fund (Federal Reserve) has aggressively raised interest rates, now at a 22-year high, in an effort to reduce spending and curb inflation. Many economists anticipate an economic downturn in early 2024 as pandemic savings dwindle, household debt climbs, and student loan repayments resume for many in Q4 2023. Historically, such downturns or recessions mark the peak of interest rate hikes before rates start to fall again.

So, how does all of this relate to our co-op? In short, when times are good, we must plan for the inevitability that they will get tough again. And, we do this with a spirit of grit and resilience as your trusted co-op.

UFC has worked hard over the past several years on strengthening our balance sheet, one of the smartest strategies a business can employ to prepare for the future. A strong balance sheet starts with cash, the most liquid asset. Cash is KING. Even if profits were minimal, selling non-core assets and business units in recent years generated vital cash flow. This cash allowed us to pay off seasonal debt and make capital investments without borrowing, a huge advantage with today’s high interest rates. Restructuring initiatives and an emphasis on efficiency and profitability also boosted cash reserves from operations. UFC has been fortunate enough to have generated enough cash, allowing NO seasonal borrowings for the entire fiscal year. The cash held has also earned interest income exceeding our interest expense on borrowings.

Other key balance sheet metrics like debt-to-asset and debt-to-equity ratios have also improved as we’ve paid off debt without taking on significant new obligations. A strong balance sheet gives us flexibility to seize opportunities when markets allow. Specifically, it enables us to provide timely, quality service to member-owners by investing in more efficient and precise equipment and technology. It also allows us to give back to our member-owners through equity redemptions ($2.1 million in 2022) and patronage dividends ($2.7 million in cash from 2022 fiscal year). After another great year with solid local savings, I anticipate strong patronage payouts for 2023! A win-win for all.

“A strong balance sheet gives us flexibility to seize opportunities when markets allow.”

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