SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 31, 1996
OR
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER 33-99834
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DAKOTA GROWERS PASTA COMPANY
(Exact name of registrant as specified in its charter)
NORTH DAKOTA
(State or other jurisdiction of
incorporation or organization)
ONE PASTA AVENUE
CARRINGTON, NORTH DAKOTA
(Address of principal executive offices)
45-0423511
(IRS Employer Identification Number)
58421
(Zip Code)
(701) 652-2855
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No
The number of shares outstanding of the issuer's classes of common
stock was 1,088 shares of membership stock, par value $125.00, and 4,904,034
shares of equity stock, par value $3.85, outstanding as of November 30, 1996.
<PAGE> 2
FINANCIAL STATEMENTS
DAKOTA GROWERS PASTA COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
October 31,
1996 July 31,
(Unaudited) 1996
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<C> <C>
<S> (000's omitted)
ASSETS
Current assets:
Cash and cash equivalents ...................... $ $ 1,448
Trade accounts receivable, less allowance for
cash discounts and doubtful accounts of
$83,000 and $70,000 .......................... 6,349 4,874
Accounts receivable from growers ............... 221 207
Other receivables .............................. 129 116
----------- -----------
Total receivables .............................. 6,699 5,197
Inventories .................................... 8,861 6,737
Prepaid expenses ............................... 139 150
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Total current assets ........................ 15,699 13,532
Property and equipment
In service ..................................... 39,182 39,167
Construction in process ........................ 5,631 1,152
Accumulated depreciation ....................... ( 6,553) ( 5,964)
----------- -----------
Net property and equipment .................. 38,260 34,355
Investment in St. Paul Bank for Cooperatives ...... 1,710 1,710
Other assets ...................................... 341 297
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Total assets ................................ $56,010 $49,894
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</TABLE>
2
<PAGE> 3
DAKOTA GROWERS PASTA COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
October 31,
1996 July 31,
(Unaudited) 1996
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<C> <C>
<S> (000's omitted)
LIABILITIES AND MEMBERS' INVESTMENT
Current liabilities:
Notes payable and current portion of long-term
debt ......................................... $ 72 $ 72
Accounts payable ............................... 3,201 2,889
Excess outstanding checks over cash on deposit . 3,051
Accrued grower payments ........................ 1,373 1,845
Dividends payable .............................. 1,800 8
Accrued liabilities ............................ 965 534
----------- -----------
Total current liabilities ................... 10,462 5,348
Long-term debt, net of current portion ............ 20,501 18,860
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Total liabilities ........................... 30,963 24,208
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Redeemable preferred stock:
Series A, 6%, $100 par value, issued 4,500
shares at October 31, 1996 and 5,500 shares
at July 31, 1996 ............................. 450 550
Series B, 2% non-cumulative, $100 par value,
issued 2,700 shares .......................... 270 270
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Total redeemable preferred stock ............ 720 820
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Members' investment:
Membership stock, $125 par value, issued 1,085
shares at October 31, 1996 and 1,082 shares
at July 31, 1996 ............................. 136 135
Equity stock, $3.85 par value, issued 4,904,034
shares ....................................... 18,881 18,881
Additional paid in capital ..................... 3,610 3,610
Accumulated allocated earnings ................. 413
Accumulated unallocated earnings ............... 1,287 2,240
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Total members' investment ................... 24,327 24,866
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Total liabilities and members' investment ... $56,010 $49,894
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</TABLE>
3
<PAGE> 4
DAKOTA GROWERS PASTA COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
October 31,
(Unaudited)
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(000's omitted)
1996 1995
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<C> <C>
<S>
Net revenues (net of discounts and allowances of
$1,670,000 and $1,362,000 for 1996 and 1995,
respectively) .................................. $16,942 $11,568
Cost of product sold .............................. 15,018 10,148
----------- -----------
Gross proceeds .............................. 1,924 1,420
Marketing and general and administrative expenses . 360 319
----------- -----------
Operating proceeds .......................... 1,564 1,101
Other income (expense):
Interest and other income ...................... 22 4
Capitalized interest ........................... 82
Interest expense, net .......................... ( 395) ( 556)
----------- -----------
Income before income taxes ........................ 1,273 549
Income taxes expense ..............................
----------- -----------
Net income from patronage and non-patronage
business ....................................... 1,273 549
Dividends on preferred stock ...................... 13 11
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Earnings from patronage and non-patronage business
available for members ........................... $ 1,260 $ 538
=========== ===========
Average equity shares outstanding ................. 4,904 3,116
Earnings from patronage and non-patronage
business per average equity share outstanding... $ .26 $ .17
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</TABLE>
4
<PAGE> 5
DAKOTA GROWERS PASTA COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
October 31,
(Unaudited)
-----------------------
(000's omitted)
1996 1995
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<C> <C>
<S>
Cash flows from operating activities:
Net income ..................................... $ 1,273 $ 549
Add (deduct) non-cash items:
Depreciation and amortization ................ 593 604
Non-cash portion of patronage dividend ....... ( 48) ( 137)
Interest capitalized ......................... ( 82)
Changes in assets and liabilities:
Trade receivables ............................ (1,475) ( 428)
Accounts receivable from growers ............. ( 14) ( 89)
Other receivables ............................ ( 13) 14
Inventories .................................. (2,124) (1,053)
Prepaid expenses and other assets ............ 11 165
Accounts payable ............................. 312 ( 47)
Excess outstanding checks over cash on deposit 3,051 146
Grower payables .............................. ( 472) ( 631)
Retainage payable ............................ 8
Other accrued liabilities .................... 431 55
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Net cash from (used in) operating activities 1,443 (1,174)
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Cash flows from investing activities:
Purchases of property and equipment ............ (4,412) ( 188)
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Cash flows from financing activities:
Issuance of short-term debt .................... 2,150
Issuance of long-term debt ..................... 1,650
Payments on long-term debt ..................... ( 9) ( 827)
Preferred stock retired ........................ ( 100)
Dividends on preferred stock ................... ( 21) ( 116)
Membership stock issued ........................ 1
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Net cash from financing activities .......... 1,521 1,207
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Net increase (decrease) in cash and cash
equivalents ..................................... (1,448) ( 155)
Cash and cash equivalents, beginning of period .... 1,448 155
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Cash and cash equivalents, end of period .......... $ $
=========== ===========
</TABLE>
5
<PAGE> 6
DAKOTA GROWERS PASTA COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. Dakota Growers Pasta Company ("the Company" or "the Cooperative") is
organized as a farmers' cooperative for purposes of manufacturing food for human
consumption from durum and other grain products. Net proceeds are allocated to
patrons who are members on the basis of their participation in the cooperative.
The ownership of membership stock, which signifies membership in the
Cooperative, is restricted to producers of agricultural products. The ownership
of equity stock is restricted to members of the Cooperative. Preferred stock
may be held by persons who are not members of the Cooperative.
NOTE 2. The financial information included herein as at October 31, 1996,
and for the three months ended October 31, 1996 and 1995, is unaudited and, in
the opinion of the Company, reflects all adjustments (which include only normal
recurring accruals) necessary for a fair presentation of the financial position
as of those dates and the results of operations for those periods. The
information in the Balance Sheet at July 31, 1996, was derived from the
Company's audited annual report for 1996. Reclassifications may have been made
consistent with current presentation. Such reclassifications have no effect on
the net results of operations.
NOTE 3. Inventories of $8,862,000 at October 31, 1996, include raw materials
of $3,411,000 and finished goods of $5,451,000. At July 31, 1996, inventories
of $6,737,000 included raw materials of $2,384,000 and finished goods of
$4,353,000.
NOTE 4. The Company's business is conducted on a cooperative basis.
Business conducted with its members constitutes patronage business as defined by
the Internal Revenue Code. For the three months ended October 31, 1996, net
income allocable to patronage business was $1,318,000 compared to $551,000 for
the period ended in 1995.
NOTE 5. The Company allocates its patronage earnings and patronage
distributions based on patronage business (bushels of durum delivered, which
approximates one bushel of durum per equity share). For presentation purposes,
it has calculated net income per share by dividing earnings from patronage and
non-patronage business available for members (net income less preferred
dividends) by the weighted average number of equity shares outstanding during
the period. The weighted average number of equity shares was 4,904,034 for the
three months ended October 31, 1996, and 3,116,026 for the three months ended
October 31, 1995.
A qualified patronage allocation of $1,800,000, $.50 per bushel, was authorized
by the Board of Directors in October 1996 and was distributed in November 1996.
Additionally, $413,000, $.115 per bushel, was allocated to the members but not
distributed, or qualified for income tax purposes.
A qualified patronage allocation of $935,000, $.308 per bushel, was authorized
by the Board of Directors and distributed to members in November 1995.
NOTE 6. In November 1996, the Company's loan agreement with the St. Paul
Bank for Cooperatives was modified to add $18,000,000 in construction term loans
with quarterly payments of $625,000 commencing September 30, 1997.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company is a North Dakota agricultural cooperative and has 1,085 members
at October 31, 1996. Membership in the Company is limited to agricultural
producers whose operations are located within the states of North Dakota,
Minnesota or Montana. The Company mills durum wheat into semolina, which is
sold or used for the manufacture of the Company's pasta products. The pasta
products are then marketed and sold by the Company. The Company also sells
by-products of the milling process.
The cost of durum, ingredients, packaging and freight constitute a major
portion of the cost of product sold. These costs will increase or decrease with
changes in sales volumes. The cost of production is also significantly impacted
by changes in durum wheat prices.
QUARTER ENDED APRIL 30, 1996 COMPARED TO QUARTER ENDED APRIL 30, 1995
Revenues increased by $5,374,000, or 46%, as total pasta sales increased by
54%, offset in part by semolina sales which decreased as more semolina was used
in pasta production and unavailable for outside sale. Most of the pasta
increase was experienced in the retail segment. This segment, which increased
by 106%, represented 51% of pasta sales for the quarter, compared with 37% last
year. The increase was primarily due to the roll out of five significant new
programs, mostly private label, and was also positively impacted by increased
volume of several other existing private label programs. Pricing in the retail
segment remains competitive; the average prices were essentially unchanged from
last year's period. The ingredient segment experienced a 53% increase in pasta
volumes, while the food service segment showed only a slight improvement. The
increase in the ingredient segment was predominantly driven by greater sales to
existing customers, although two new larger customers were added since last
year. In the by-products area, increased prices for mill feed sales were
negated by reduced prices for flour sales.
Cost of product sold was up $4,870,000 primarily due to a 49% increase in
pasta produced and purchased. These items totalled over $3.1 million of the
increase. Price increases for packaging, ingredients (egg) and freight added
$588,000 to the cost of product sold. The average cost of durum was up $.31 per
bushel, adding an additional $280,000.
Marketing and general and administrative expenses increased $41,000,
primarily due to increased travel costs for the marketing department.
Interest expense decreased $161,000 due to a $5.5 million decline in average
borrowings, the result of the temporary pay down of debt utilizing the proceeds
of the stock offering, and a .73% reduction in the average rate. The Company
capitalized $82,000 of interest to the major expansion projects during the
quarter.
As a result of the above, net income increased $724,000, more than doubling
from $549,000 last year to $1,273,000 for the quarter ended October 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The increased sales resulted in increases in receivables and inventories
which exceeded net income before depreciation by $1.7 million. The Company's
seasonal line of credit is more than adequate to fund these increases.
7
<PAGE> 8
For the three months ended October 31, 1996, purchases of property and
equipment totalled $4.4 million, financed at October 31, 1996 by payables
(outstanding checks in excess of cash on deposit) and a $1,650,000 increase in
long-term debt. The Company anticipates expending an additional $15.3 million
on expansion projects through July 1997. The Company's loan agreement with the
St. Paul Bank for Cooperatives has been modified to provide $18,000,000 in
construction financing on these projects.
8
<PAGE> 9
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
------- -----------
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
(b) Reports on Form 8-K
None
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dakota Growers Pasta Company
<TABLE>
<S> <C>
Date: December 9, 1996 /s/ Timothy J. Dodd
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Timothy J. Dodd (President and
General Manager, and Principal
Executive Officer)
Date: December 9, 1996 /s/ Thomas P. Friezen
---------------- ----------------------------------
Thomas P. Friezen (Vice President,
Finance and Principal Financial
and Accounting Officer)
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF INCOME FILED AS PART OF THE QUARTERLY REPORT ON FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON
FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 6,782
<ALLOWANCES> 83
<INVENTORY> 8,861
<CURRENT-ASSETS> 15,699
<PP&E> 44,813
<DEPRECIATION> 6,553
<TOTAL-ASSETS> 56,010
<CURRENT-LIABILITIES> 10,462
<BONDS> 20,501
450
270
<COMMON> 19,017
<OTHER-SE> 5,310
<TOTAL-LIABILITY-AND-EQUITY> 56,010
<SALES> 16,942
<TOTAL-REVENUES> 16,942
<CGS> 15,018
<TOTAL-COSTS> 15,018
<OTHER-EXPENSES> 360
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 395
<INCOME-PRETAX> 1,273
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,273
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
