As a former 16-year MFA board member who served during Dennis Purcell's tenure with the board, succeeded him as board president and served for almost two years in that capacity, I am writing this in response to The Salem News article about MFA July 30 (MFA Incorporated takes over local store this week) and the opinion piece from June 18 (Sale of local MFA coop signals the end of an era).
I do not call being over $500,000 in debt and having roughly a quarter of a million dollars in delinquent/uncollectible accounts receivable debt as of Fiscal Year end July 31, 2016, sound financial footing. Dennis was not re-elected at the annual meeting in Fall 2016 and the new board convened in November. The financials presented to the new board through the end of November (which was already four months into the 2017 fiscal year) showed a loss year to date of over $120,000 in four months. Our board was in crisis mode from day one. We were determined to figure out the best course of action to stop the bleeding and requested detailed information about operations and expenses. As I said at the annual meeting in the Fall of 2017, during the next six months we faced an onslaught of employee issues, repairs and mechanical failures, the likes of which (coop) manager Marianne Skiles and I agreed was unprecedented. Most of the mechanical issues were due to age of equipment or lack of preventative maintenance. We had trucks that were unsafe/unroadworthy, an obsolete loader for which parts were no longer available and costly mill repairs due to electronics sitting in wet feed that should not have been allowed to build up.
We also had a lime spreading backlog, some instances over two years old. In some cases, lime had been dumped but not spread which was washed away and had to be replaced. Some of these were already booked as sales and paid for in years past, but we were left with the dead expense of spreading and in some cases replacing. We ended up with around $100,000 in capital expense to correct some of the above-mentioned items. Couple that with the loss from operations in fiscal year 2017 of about $125,000, and you have just been hit by an avalanche.
This resulted in a breach of the loan covenant that we had with our lender CoBank concerning working capital. In order for us to rectify this breach we had to move money from our operating loan to long term debt, which we did. A breach in a loan covenant can result in the lender calling the full note due. Manager Skiles was notified of this problem via an email from the bank in late November 2017 after the bank received our financial report. The board didn't find out about it until I received a call from our bank representative on Jan. 4, 2018, asking what we were going to do about it. The result of this was a larger yearly payment, and we couldn't access the additional credit line if needed. This was not the first breach, however. The lender had required us to move $200,000 to long-term debt in 2014. The board did not receive an explanation of a working capital covenant breach at that time, only that the bank wanted us to set up some money on a yearly repayment schedule. I don't know if Dennis Purcell was aware of this as board president, but as a board member I was not. It would have been a red flag indicating the deteriorating financial condition of the cooperative.
I think I have shown that we were not a "tight ship" or on "sound financial footing." There is so much more than can possibly be mentioned in regards to problems and the many positive actions the board took to try and help the business. These problems and the debt have been building for years.
As to the question about member equity, that and many other questions were answered at the June 13 meeting that all patrons were invited to attend.
I did not want to use a public forum, and the board and I have avoided many public responses, but I cannot stand by any longer and let the current board be denigrated. We have been attacked both personally and professionally by various individuals whose only goal is to create turmoil and dissent. They care nothing about solving problems and hope to see MFA Salem fail. By writing this, I do not intend to lay blame on Dennis Purcell, Marianne Skiles or any particular individual. I appreciate their years of service and thank them for it. I know that they did their best, just as other board members and employees have done their best. Sometimes in business our best just isn't good enough, and we fail.
Concerning the editorial piece from June 18, I have a hard time understanding the negativity. The free bags of feed mentioned have always been given by MFA Incorporated, as well as the bulk of college scholarships given to our youth yearly and many other programs that they have been providing. MFA Incorporated has been labeled "a giant corporation," as if this is a foreign hostile takeover. Salem MFA has been affiliated with them from the beginning. We participated in their pension plan and numerous programs they have offered. Our governing bylaws and monthly accounting came from MFA Incorporated. They have been a reliable partner and provided much benefit to the community behind the scenes since 1932. Additionally, MFA Incorporated is a member-owned cooperative, just as Salem MFA was. By doing business with them, members will have the opportunity to earn patronage going forward.
How is keeping a multi-million dollar business in town not a good thing? Where is the county commission, city of Salem and economic development? Why aren't they welcoming MFA Incorporated with open arms? This merger saved multiple jobs and kept the only feed mill in Dent County in business. The alternative was good people losing their livelihoods.
I would like to personally thank Ernie Verslues, president of MFA Incorporated, and his team for agreeing to meet with us and offer advice and help when we needed it most. The community should be grateful for their help and ultimately their willingness to keep MFA in our community. I also want to thank the board members. They have spent many hours at meetings that ran hours long and helped with issues outside of meetings. They have been attentive, and we all always had the patrons of MFA's best interests at heart. I couldn't have asked for a better group of volunteers to work with.
Thank you for taking the time to read this. I was tired of the rumors and misinformation that is out there and realized it was time to provide facts.