Detailed Version - UFA.com

For members and customers not moving to the Bank of Nova Scotia credit program, UFA continues to be exposed
to credit risk on accounts receivable for approximately 40 to 45 days of regular sales, at any time throughout the
year, as most accounts receivable are due by the end of the month following purchase. Although UFA offers an
extended credit finance plan for crop inputs and grain bins whereby customers do not have to pay for these
products until February 15 of the subsequent year, Farm Credit Canada provides the financing for the plan.
UFA partly mitigates exposure to credit risk through the Bank of Nova Scotia credit program, diversity of its
customer base and the large geographic area in which it operates. In addition, a full credit review and monitoring is
conducted by an experienced credit department. UFA follows established policies regarding credit limits, payment
terms and account reviews. In addition, delinquent accounts are followed up regularly, including engaging external
collection and legal assistance when required.
There is nominal exposure to credit risk in the subsidiaries as none offer credit programs to retail customers.
Liquidity Risk
UFA manages liquidity risk to ensure that it has sufficient liquidity to meet liabilities when they come due. UFA
completed an Asset Based Credit Agreement in December 2010 to guarantee it had the financial capacity and
sufficient access to cost effective financing sources to fund its capital and operating activities. This facility replaced
the Bank Credit Facility and Senior Secured Notes. At December 25, 2011 UFA had current assets of
$362.5 million to settle current liabilities of $145.8 million. All accounts payable, accrued liabilities and deferred
revenue are subject to normal trade terms.
UFA expects to be compliant with all of its financial covenants in 2012.
Interest Rate Risk
To manage interest rate risk, UFA utilizes short-term floating interest rate borrowings issued under the Asset
Based Credit Facility and member loans program. UFA has not hedged any of the interest rate risk associated with
short-term borrowings as it considers the risk to be acceptable. UFA no longer has exposure to interest rate risk on
long-term debt raised under the Senior Secured Notes as the debt has been repaid in full.
Foreign Currency Risk
The acquisition of fifteen outdoor adventure stores in the United States exposes UFA to the impact of changes in
the US dollar to the Canadian dollar exchange rate. For accounting purposes, the US operations are considered to
be a self-sustaining and, therefore, the impact of changes in the foreign currency translation of the US operations
balance sheet are recognized as Cumulative Translation Adjustments in UFA‟s Consolidated Balance Sheet.
Advances of funds to and cash flow from the US operations also expose UFA to fluctuations in the value of the
US dollar. Changes in the Canadian dollar value of the US dollar for advances to and cash flow from the US
operations are reported in the Consolidated Statement of Income (Loss).
UFA mitigates the risk of fluctuations of the Canadian dollar against the US dollar and the impact of UFA‟s financial
results by hedging.
24 RISK MANAGEMENT
UFA 2011 Unabridged Annual Report 26