AGI 2014 Fall issue

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Ag Innovator is the quarterly magazine of the Farm Equipment Manufacturers Association. We represent manufacturers of specialized agricultural equipment and understand their needs. The Association serves as the voice of a specialized industry that brings choice, value and innovation to agriculture. We connect small manufacturers, suppliers and distributors, giving them the advantage over their competitors.

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  • Presort

    Standard

    US Postage

    PAID

    St Louis MO

    Permit 2828

    Fall 2014

    FarmEquip.org

    Of cial Magazine Of The Farm Equipment Manufacturers Association

    Presort

    First Class Mail

    US Postage

    PAID

    St Louis MO

    Permit 2828

    Ag Innovator

    Supplier member Osmundson Mfg. built pioneering company on tradition

    AFP Liquidity Survey fi nds businesses cautiously optimistic

    ASABE standards program promotes ag industry safety

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  • FarmEquip.org

    Fall 2014 Volume 4 Issue 4

    Ag Innovator

    Follow Us On TwitterTwitter.com/Shortliner

    6 Legal Focus

    Significant Changes are Coming to Overtime Exemptions

    by Joseph G. Schmitt and David A. James

    4 Executive Vice Presidents Message

    The Associations Board of Directors Keeps Us Moving Forward

    by Vernon Schmidt

    14 ASABE Standards Program

    Promotes Ag Industry Safety

    24 Member Focus

    Osmundson Mfg. Co. A Pioneering Company Built on Traditional Principles

    Contents

    26 5 Trade Show Strategies to

    Boost Your Sales to the Next Levelby Timothy Carter

    8 What You Need to Know About FASBs

    Proposed New Lease Accounting Standards by John E. Oeltjen, CPA

    10 Liquidity Survey Finds Businesses

    Cautiously Optimistic

    20 Fall Convention Special Presentation:

    North American Ag Faces Challenges and Opportunities in 2015

  • AGI Executive Vice Presidents Message

    4 Farm Equipment Manufacturers Association | Fall 2014

    Almost every week, someone asks our Association to endorse a program they can offer our membership. Unfortunately, most offer no real benefit for our members or dont have the track record to earn our endorsement. I call it passing the Sentry test: Can we trust this partner to care about our members as much as we do?

    In the early 1970s, shortline manufacturers had difficulty finding quality product liability insurance. Many insurance companies underwriters simply did not understand our members products and were unwilling to invest time and effort to provide the coverage needed.

    In 1975, Sentry Insurance Co. and the Farm Equipment Manufacturers Association began a partnership to provide products liability coverage to our members. Working with our Risk Management Committee, Sentry developed loss-control programs and educational materials that have improved product safety, reduced liability and established a relationship that has served our members well for many years.

    In the late 1990s, participants in our products liability program also qualified for Sentrys package policy program, which includes property, inland marine, crime, premises liability, auto, umbrella, Employment Practices Liability (EPLI) and workers compensation coverages. Currently, 251 Canadian and U.S. companies participate in the products liability program, and another 130 companies participate in the property and casualty program, which includes workers compensation insurance.

    I recently announced that Sentry will pay an average dividend of 10% to product liability insurance participants whose policy expired in the 2014 calendar year. Those in their first year with their policy expiring in 2014 will receive 3.5% of their premium as a dividend. Those in the program for two years will receive a 7.1% dividend, and those in the program for three full years will receive a 10.6% dividend.

    During our Fall Convention in Las Vegas in November, We will formally introduce our Associations exclusive endorsement of another Sentry program, this one offering employer-sponsored Retirement Plan & Employee Benefit Plan products and services. In the meantime, here are some of the features it will include.

    401(k) Profit Sharing Plans Profit Sharing Only Plans Money Purchase Plans Investment Only Plans Retirement Plan Compliance and Administrative Service Group Life, Disability & Dental Plans

    Todd Thompson, Director of Sales with Sentry Life, will join our long-time Sentry friends, Bob Bonifas and Greg Pellegrom at the Fall Convention and will also be available during the EMDA Showcase on Thursday afternoon. While you are there, please take the time to visit with Todd and the Sentry team. AGI

    Association Board Of Directors

    President: Marc McConnellArts Way Manufacturing Co.

    1st Vice President: Mike KlosterWorksaver Inc.

    2nd Vice President: Richard KirbyKirby Manufacturing Inc.

    Treasurer: Robert AtkinsonW & A Manufacturing Co.

    Secretary: Paul JeffreyMacDon, Inc.

    Ex Officio: Andrew CummingsT. G. Schmeiser Company, Inc.

    Tony BakkerMonosem Inc.

    Nick JensenThurston Mfg. Co./Blu-Jet Products

    Donny JonesBelltec Industries, Inc.

    Mike LessiterFarm Equipment/Ag Equipment Intelligence

    Stanley McFarlaneMcFarlane Manufacturing Co., Inc.

    Arlon RahnA&R Marketing

    Ron RoglisHCC, Inc.

    Bob SonntagS3 Enterprises Inc.

    Tom TaylorAlamo Group

    Jacqueline VassarVassar Manufacturing Company

    Ag Innovator Staff

    Executive Vice PresidentVernon Schmidt

    Publications EditorMarlene Weeks

    Ag Innovator, a quarterly publication, is published, edited and copyrighted by the Farm Equipment

    Manufacturers Association to serve and promote the interests of its members, who bring choice, value

    and innovation to the worlds farmers.

    Unsolicited manuscripts and photographs are welcome. The editor reserves the right to edit all items.

    Address all mail to Ag Innovator, 1000 Executive Parkway, Suite 100, St. Louis, MO 63141-6369 and

    emails to AgInnovator@FarmEquip.org.

    Submit all advertising inquires for future publications to Ads@FarmEquip.org.

    Vernon SchmidtExecutive Vice PresidentVernon@FarmEquip.org

    New benefits program targets members needs

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  • 6 Farm Equipment Manufacturers Association | Fall 2014

    Legal Focus AGI

    As we have discussed in recent articles, increasing wages is a priority of President Obamas agenda. Most recently, he has directed the Department of Labor (DOL) to

    narrow the so-called white-collar exemptions to the Fair Labor Standards Act, which permit employers to pay certain employees on a salary basis without an overtime premium. While the details of the revisions are not yet known, they are likely to change the exemption landscape dramatically.

    To be exempt from overtime, an employee must (1) meet a certain salary threshold, (2) be paid on a salary basis, and (3) perform exempt job duties. Since 2004, the salary threshold has been $455 per week or $23,660 annually. It is nearly certain that the DOL will raise this threshold; the only question is, by how much? Expectations are that the threshold will become something in the neighborhood of $30,000 annually. In this event, anyone currently paid under $30,000 will need to be paid overtime (and likely on an hourly basis to track overtime) or receive a raise to the new salary threshold to remain salaried.

    It is not absurd to raise the salary threshold from time to time to keep up with inflation, and it could be argued that the current threshold is dated. However, the DOL is expected to compound the problem of raising the threshold by providing that the threshold will continue to rise on an annual basis consistent with the cost-of-living index or another inflation index. In this scenario, employers will need to adjust to the salary threshold annually or risk their employees vacillating from exempt to non-exempt.

    For example, imagine that the salary threshold is raised to $30,000 in 2015. In an effort to keep a certain employee exemptand to continue paying her a salary, which almost all employees preferthe employer raises the employees salary

    to $30,000. Toward the end of 2015, the DOL announces that the salary threshold will rise to $31,500 in 2016 to account for inflation. This leaves the employer two options. First, to keep the employee exempt and paid a salary, it could provide the employee a minimum $1,500 raise, regardless of the employees or the companys performance in 2015. Otherwise, the employer must treat the employee as non-exempt in 2016, paying her an hourly wage and overtime, to both the employers and the employees dismay. Neither option is especially palatable.

    Beyond the salary threshold, the DOL likely will revise the job-duties test for the exemption. Currently, the exemption asks what is the primary duty of the job to determine whether it meets the executive, administrative or professional white-collar exemption. The DOL may require that the

    employee spend more than 50% of her time performing exempt duties, raising the bar from the existing primary-duty test. This revision threatens to narrow the white-collar exemptions, regardless of how much the employee is paid.

    Readers in California may be familiar with the 50% test, which is the state standard. Those outside of California likely recognize that any move toward California employment law standards is not good for business.

    The Obama administration has asked the DOL to publish its proposed revisions to the Fair Labor Standards Act by this November. The proposal will be followed by a comment period and testimony, culminating in final rules. If the proposed rules meet the November deadline, implementation could occur as early as mid-2015.

    Undoubtedly, the white-collar exemptions are going to shrink. We expect to know soon just how much, and will report back. AGI

    David James and Joe Schmitt are shareholders in the labor and employment group at Nilan Johnson Lewis. Our members are entitled to 30 minutes of free advice from David or Joe regarding labor and employment issues as a benefit of their membership. For more information, call us at the Association office at 314-878-2304.

    JOSEPH G. SCHMITT DAVID A. JAMES

    Significant changes are coming to overtime exemptionsby Joseph G. Schmitt and David A. James

  • 8 Farm Equipment Manufacturers Association | Fall 2014

    Feature AGI

    What you need to know about FASBs proposed new lease accounting standards by John E. Oeltjen, CPA

    Last spring, the Financial Accounting Standards Board (FASB) issued its proposed Accounting Standards Update (Revised), Leases (Topic 842), a revision of its 2010 proposal on lease accounting standards. The proposed model is the latest in what has been a lengthy attempt to address the current standards failing to

    meet the needs of users of financial statements because they do not always provide a faithful representation of leasing transactions, according to FASB.

    Whats different?For manufacturers and

    distributors, many of whom have significant leasing arrangements, the proposed standards would force them to include leases on their balance sheets as part of their overall debt obligations. The following is a recap of what is proposed.

    Currently, generally accepted accounting principles (GAAP) distinguish between two types of leases: capital leases and operating leases. With the former, assets and liabilities are recorded on the balance sheet and the asset is depreciated, while the lease obligation is amortized over time as debt. With the latter, assets and liabilities are not recorded on the balance sheet, but lease payments are expensed on a straight-line basis. In other words, operating leases treat assets and liabilities as off-balance-sheet items.

    The proposed standards would dramatically change the way leases are handled for accounting purposes. The theory behind the change, according to FASB, is that a company should recognize assets and liabilities arising from a lease, which it deems an improvement over existing lease requirements. Under the new standards, a lessee would recognize the net present value of lease payments as a liability and also recognize a right to use asset representing the lease payments due over the term of the lease, and related value of having access to the underlying property.

    Potential impactFor manufacturers and distributors, lease expenses are often

    the largest operating cost other than materials and payroll. By forcing manufacturers and distributors to recognize future liabilities for operating lease payments in their financial statements, these proposals will have a major impact on the balance sheet.

    It all comes down to leverage. The requirement to record lease liabilitiesand thus long-term payment obligationson the

    balance sheet will result in substantially more leverage being added to the balance sheet. This could then impact a manufacturers or distributors ability to meet loan covenants and agreements with its bank, including debt service coverage and financial leverage ratios, and could also affect a banks calculation of tangible net worth.

    Will the standards be adopted?

    FASB has received hundreds of comment letters on the proposed new lease accounting standards from trade groups, companies and individuals all over the world. Many of the comments have been negative. During the first quarter of 2014, FASB and IASB once again began deliberating the 2013 proposal, but they have not made any firm decisions to date.

    Since new lease accounting standards are not likely to go into effect before 2017, there is plenty of time for next steps to unfold. We will keep you updated on new developments. AGI

    Mueller Prost and PKF North America provided this article to the Farm Equipment Manufacturers Association. For additional information on this topic, please contact John Oeltjen or Mike Devereux, both shareholders at Mueller Prost, a CPA and business advisory firm headquartered in St. Louis, MO. Their website is www.muellerprost.com.

    JOHN E. OELTJEN

  • Full_GKN_FE_0913.indd 1 10/2/13 9:41 AM

  • 10 Farm Equipment Manufacturers Association | Fall 2014

    Feature AGI

    Companies face a number of challenges when deciding how to manage their cash holdings. The business and regulatory climate remains one of middling economic growth and uncertainty, yet the current ultra-low interest rate environment offers little opportunity to generate yield. Consequently, many organizations rely on Treasury functions to ensure the safety of their large cash and short-term investment holdings and to maintain corporate liquidity.

    A...