SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended February 29, 2000
Commission File No. 1-13479
AGRIBRANDS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
MISSOURI 43-1794250
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(State of Incorporation) (I.R.S. Employer Identification No.)
9811 SOUTH FORTY DRIVE, ST. LOUIS MISSOURI 63124
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(Address of principal executive offices) (Zip Code)
(314) 812-0500
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(Registrant's telephone number, including area code)
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: _____
Number of shares of Agribrands common stock, $.01 par value, outstanding as of
the close of business on March 29, 2000:
10,109,101
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PART I - FINANCIAL INFORMATION
AGRIBRANDS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is a summary of the key factors management
considers necessary in reviewing Agribrands results of operations, operating
segment results, liquidity and capital resources. Management has also included a
section on key measures and concepts for understanding the business.
Agribrands International, Inc. (the "Company") is a leading
international producer and marketer of formula animal feeds and other
agricultural products. Prior to April 1, 1998, the Company was a wholly-owned
subsidiary of Ralston Purina Company ("Ralston"). On that date, Ralston
distributed the common stock of the Company to its shareholders in a tax-free
spin-off (the "Distribution"). The Company is a successor to Ralston's over 100
years of experience in the animal feeds and agricultural products industry.
The production and sale of animal feed was the primary business of
Ralston when it was established in 1894. From that date until the Distribution,
Ralston built and maintained its industry position by consistently providing
high-quality, research-proven products and customer service. Although this
business originated in the United States, it expanded throughout the world,
entering the Americas (outside of the United States) in 1927, Europe in 1957 and
Asia in 1967. The Company now operates 70 manufacturing plants in 16 countries,
and has more than thirty years' experience operating across four continents. The
primary animal feed business of Agribrands is conducted almost exclusively
outside the United States. In 1986, Ralston sold Purina Mills, Inc., its U.S.
animal feeds and agricultural products business. Purina Mills is unrelated to
Agribrands.
REVIEW OF CONSOLIDATED RESULTS OF OPERATIONS
Unless otherwise noted, all references to prices, costs and margins
reflect U.S. Dollar results after translation of foreign currency financial
statements in accordance with Statement of Financial Accounting Standards No. 52
(FAS 52).
Net Sales
Consolidated net sales decreased $22.6 million or 7.3% in the second
quarter and $54.1 million or 8.4% in the six months ended February 29, 2000 as
compared to the same periods last year. Net sales declined in both periods due
to lower feed sales volume and lower average selling prices. Weakness in the
Americas and Europe regions caused consolidated volume to decline 15,300 tons or
1.3% in the second quarter and 67,200 tons or 2.7% in the six month period.
Average selling prices declined in all three regions where Agribrands primarily
operates due to lower commodity costs relative to the same periods last year.
This is consistent with the feed industry's practice of adjusting prices to
reflect changes in ingredient costs.
Operating Profit
Operating profit decreased $2.2 million or 14.0% in the second quarter
and $4.4 million or 11.7% in the six months ended February 29, 2000 as compared
to the same periods last year. For the second quarter, operating profit
decreased due to lower volume and higher operating expenses in the Americas and
lower volume and lower margins in Europe. For the six month period, operating
profit decreased primarily as a result of lower volume and lower margins in the
Americas and Europe. The decline in operating profit for both periods was
mitigated somewhat by better results from the Asia region.
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Interest Expense and Other Income/Expense
Interest expense totaled $0.6 million and $1.5 million for the second
quarter and six months ended February 29, 2000, respectively, compared to $2.3
million and $5.2 million for the same periods last year. The decreases in
interest expense for both periods were due to both lower average borrowings and
lower interest rates in the foreign markets where the Company had outstanding
borrowings.
Other income/expense, net changed favorably by $4.3 million in the
second quarter and $3.8 million in the six months ended February 29, 2000
compared to the same periods last year. The Company recognized a $1.3 million
foreign exchange gain in the second quarter of this year versus a $3.6 million
foreign exchange loss in the second quarter of last year. In this year's second
quarter, the Brazilian Real strengthened versus the U.S. Dollar resulting in an
exchange gain on U.S. Dollar debt carried in Brazil. However, in last year's
second quarter, the Real devalued significantly versus the Dollar accounting for
all of the Company's $3.6 million exchange loss. Investment income was $0.6
million lower in this year's second quarter and $0.7 million lower in the six
months ended February 29, 2000 despite an increase in the level of interest
bearing investments. This was mainly the result of increased holdings of
tax-free securities which have slightly lower stated returns.
Net Earnings
Net earnings were $11.0 million and $24.9 million for the second
quarter and the six months ended February 29, 2000, respectively, compared to
$7.8 million and $18.9 million for the same periods last year. Income taxes,
which include United States and foreign taxes, were 33.3% and 33.6% of pre-tax
earnings for the second quarter and the six months ended February 29, 2000,
respectively, compared to 40.9% and 45.8% for the same periods last year. The
lower effective rate for the current periods primarily resulted from lower
withholding taxes on the repatriation of foreign earnings and a reduction of
valuation allowances against foreign tax credit carryforwards in the United
States. In addition, a larger percentage of the Company's investment income is
now derived from tax-free securities.
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<TABLE>
<CAPTION>
REVIEW OF SEGMENT RESULTS
(Dollars in millions)
Corporate and
Americas Europe Asia Tradico Consolidated
---------------- --------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Quarter Ended February 29, 2000:
- -------------------------------
Net sales $ 129.4 $ 73.6 $ 85.0 $ 0.1 $ 288.1
Operating profit $ 4.3 $ 3.0 $ 9.7 $ (3.5) $ 13.5
Tons of feed product sold 509,200 352,000 332,900 600 1,194,700
Income over ingredient cost $ 32.1 $ 23.6 $ 25.2 $ 0.1 $ 81.0
Quarter Ended February 28, 1999:
- -------------------------------
Net sales $ 138.1 $ 87.9 $ 84.7 - $ 310.7
Operating profit $ 6.4 $ 4.6 $ 8.3 $ (3.6) $ 15.7
Tons of feed product sold 525,000 376,000 309,000 - 1,210,000
Income over ingredient cost $ 33.1 $ 29.4 $ 23.0 - $ 85.5
Six Months Ended February 29, 2000:
- ----------------------------------
Net sales $ 263.9 $ 150.5 $ 174.4 $ 0.2 $ 589.0
Operating profit $ 12.1 $ 7.5 $ 20.4 $ (6.8) $ 33.2
Tons of feed product sold 1,033,900 710,000 675,900 1,000 2,420,800
Income over ingredient cost $ 67.6 $ 50.0 $ 51.7 - $ 169.3
Six Months Ended February 28, 1999:
- ----------------------------------
Net sales $ 287.4 $ 183.4 $ 172.3 - $ 643.1
Operating profit $ 15.8 $ 10.4 $ 17.9 $ (6.5) $ 37.6
Tons of feed product sold 1,082,000 768,000 638,000 - 2,488,000
Income over ingredient cost $ 73.4 $ 61.5 $ 45.5 - $ 180.4
</TABLE>
Americas
Net sales in the Americas segment (which excludes the United States)
decreased $8.7 million or 6.3% in the second quarter and $23.5 million or 8.2%
in the six months ended February 29, 2000 as compared to the same periods last
year. The decreases in net sales were the result of both lower volume and lower
average selling prices. Feed volume declined 15,800 tons or 3.0% in the second
quarter primarily as a result of weakness in consumer purchasing power in
Colombia and Peru and a depressed hog market in Mexico. Average selling prices
for the Americas declined $9 per ton in the second quarter and $10 per ton in
the six month period primarily as a result of lower ingredient costs in most of
the countries included in the Americas segment. This is consistent with the feed
industry's practice of adjusting prices to reflect changes in ingredient costs.
Operating profit in the Americas segment decreased $2.1 million or
32.8% in the second quarter and $3.7 million or 23.4% in the six months ended
February 29, 2000 as compared to the same periods last year. For the second
quarter, the decline in feed volume caused a $1.0 million decline in income over
ingredient cost (IOIC) as IOIC per ton was flat compared to last year. Higher
operating expenses in Brazil also contributed to the decline in second quarter
operating profit. For the six month period, operating profit decreased $3.7
million as a $5.8 million decline in IOIC was only partially offset by lower
operating expenses. IOIC declined $5.8 million due to lower margins in Brazil
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and both lower volume and lower margins in Colombia. Dollar-translated margins
in Brazil are still well below the levels experienced prior to the January 1999
devaluation of the Brazilian Real while Colombia is experiencing difficult
economic conditions. Operating expenses decreased $2.1 million in the six months
ended February 29, 2000 as last year's first quarter included a $1.8 million
charge incurred to settle a claim by a former joint venture partner in Chile.
Europe
Net sales in the Europe segment decreased $14.3 million or 16.3% in the
second quarter and $32.9 million or 17.9% in the six months ended February 29,
2000 as compared to the same periods last year. The decrease in net sales in
both periods was due to a combination of lower volume and lower average selling
prices. Feed volume declined by 24,000 tons or 6.4% in the second quarter with
most of the decline occurring in Spain and the remainder occurring in France,
Hungary and Italy. Feed volume declined by 58,000 tons or 7.6% in the six months
ended February 29, 2000 due in part to the December 1998 sale of an unprofitable
subsidiary of the Company's French operations. Average selling prices for the
Europe segment declined $25 per ton in the second quarter and $27 per ton in the
six month period mainly as a result of both lower ingredient costs and
translation of local currency revenues at weaker foreign currency exchange
rates.
Operating profit in the Europe segment decreased $1.6 million or 34.8%
in the second quarter and $2.9 million or 27.9% in the six months ended February
29, 2000 as compared to the same periods last year. IOIC declined $5.8 million
in the second quarter and $11.5 million in the six month period due to both
lower feed volume and lower margins. IOIC per ton declined $11 per ton in the
second quarter and $10 per ton in the six month period primarily as a result of
translating relatively stable local currency margins at significantly weaker
exchange rates versus the U.S. Dollar. The declines in IOIC for both periods
were mostly offset by lower operating expenses also due to translating local
currency costs at weaker exchange rates. Dollar-translated operating expenses
decreased by $4.2 million in the second quarter and $8.6 million in the six
months period.
Asia
Net sales in the Asia segment increased $0.3 million or 0.4% in the
second quarter and $2.1 million or 1.2% in the six months ended February 29,
2000 as compared to the same periods last year. Net sales increased in both
periods due to a rise in volume. Feed volume in Asia increased 23,900 tons or
7.7% in the second quarter and 37,900 tons or 5.9% in the six month period
primarily as a result of new sales promotional campaigns in Korea. Average
selling prices for the Asia segment declined $19 per ton in the second quarter
and $12 per ton in the six month period primarily due to lower ingredient costs.
This is consistent with the feed industry's practice of adjusting prices to
reflect changes in ingredient costs.
Operating profit in the Asia segment increased $1.4 million or 16.9% in
the second quarter and $2.5 million or 14.0% in the six months ended February
29, 2000 as compared to the same periods last year. IOIC increased $2.2 million
in the second quarter and $6.2 million in the six month period mainly due to
higher feed volume and higher margins in Korea. The increase in IOIC for both
periods were partially offset by higher operating expenses. For the second
quarter, operating expenses increased $0.8 million mainly due to an increase in
depreciation associated with recent capital expenditures. For the six month
period, operating expenses increased $3.7 million primarily as a result of both
expenses incurred for new Korean sales promotional campaigns and translation of
local currency costs at stronger foreign currency exchange rates versus the U.S.
Dollar.
Corporate and Tradico
The corporate and Tradico segment is located primarily in the United
States. This segment contains certain corporate items which are not allocated to
other segments. Tradico, a division within the Company, acquires and resells
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ingredients, equipment and feed products primarily to affiliates. In the second
quarter of fiscal year 2000, Tradico recorded intercompany sales of $31.8
million.
On an operating profit basis, the corporate and Tradico segment
recorded losses of $3.5 million and $6.8 million in the quarter and six months
ended February 29, 2000, respectively. These losses are related to unallocated
corporate administrative items.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations were $20.3 million and $52.2 million for the
six months ended February 29, 2000 and February 28, 1999, respectively. The
decrease in operating cash flows between the two periods primarily resulted from
changes in working capital during the respective periods. During the six months
ended February 29, 2000, approximately $10.7 million of cash was used to fund an
increase in inventories and another $7.0 million was used to fund a decrease in
accounts payable and accrued liabilities. Most of the increase in inventories
relates to strategic grain purchases made in Asia. The decrease in accounts
payable and accrued liabilities primarily relates to the payment of employee
bonuses, dealer incentives and other obligations that existed at August 31,
1999. During the six months ended February 28, 1999, the Company experienced
favorable changes in working capital including the collection of approximately
$12 million due from Ralston.
Capital expenditures, primarily to replace or enhance existing
production facilities and equipment, totaled $12.0 million and $15.8 million for
the six months ended February 29, 2000 and February 28, 1999, respectively. The
Company has a formal review procedure for the authorization of capital
expenditures. Anticipated capital expenditures are expected to be funded with
existing cash reserves as well as cash generated from operations.
The Company's working capital requirements for inventories and
receivables are influenced somewhat by seasonality, the availability of raw
materials and changes in commodity costs, and as a result may fluctuate widely.
The Company has generally financed its seasonal and other working capital needs
through short-term borrowings provided by local foreign banks and branches of
multi-national banks. Currently, the Company is borrowing very little from
outside lenders as investment earnings on its U.S. cash balances are generally
less than the cost of external borrowings. Intercompany loans are an important
vehicle for funding cash needs in one location with excess cash balances of
another.
Cash on hand, cash flow from operations and local affiliate borrowings
under various lines of credit are Agribrands' primary sources of liquidity.
Management has a strong focus on cash flow and the effective use of excess cash
flow. The combined operating, cash and equity position of Agribrands should
continue to provide the capital flexibility necessary to fund future
opportunities as well as to meet existing obligations.
On September 25, 1998, the Company's Board of Directors authorized the
purchase by the Company of up to 2,000,000 shares of Agribrands' common stock in
open market transactions at management's discretion and depending on market
conditions. During the six months ended February 29, 2000, the Company purchased
180,204 shares of Agribrands' common stock for $8.3 million. In March 2000, the
Company purchased an additional 95,000 shares of its common stock for
approximately $3.3 million.
KEY MEASURES AND CONCEPTS FOR UNDERSTANDING THE BUSINESS
Income Over Ingredient Cost (IOIC)
The commercial animal feed industry generally prices products on the
basis of aggregate ingredient cost plus a per-unit margin. As ingredient prices
fluctuate, the changes are generally passed on to customers through changes in
the Company's product pricing. Income over ingredient cost (which is equal to
net sales minus the cost of ingredients), rather than sales dollars, is the key
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indicator of revenue performance because of the distortions in sales dollars
caused by changes in commodity prices. Management also monitors IOIC per ton to
evaluate trends in pricing and relative product value.
Dollar-Responsive Economics of International Feed Operations
Feed is manufactured by processing a combination of grains, proteins,
vitamins, and minerals. Approximately 80% of the Company's total costs is the
cost of these ingredients, most of which are widely traded in Dollar-denominated
global commodity markets. Excluding logistics costs, the Dollar values (and
costs) of ingredients around the world are broadly comparable. Local currency
prices for ingredients, therefore, typically adjust quickly to reflect changes
in quoted dollar prices and changes in the exchange rate between the local
currency and the Dollar. As raw materials inventories are replenished after an
exchange rate change, new local currency ingredient costs are reflected in local
currency feed prices.
The margin added to ingredient costs is less responsive to exchange
rate changes because industry pricing is influenced by local competitors.
Nevertheless, exchange rates between the U.S. Dollar and other currencies
(particularly in countries with systemic high inflation like many of those where
the Company operates) are related closely to differentials between the U.S. and
local inflation and interest rates. As a result, Dollar-translated IOIC levels
of the Company's international operations generally fluctuate closely around
long-term norms, particularly on a consolidated basis.
Dollar-Based Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA)
Management believes the required method of translating foreign currency
financial statements for most of the Company's foreign affiliates (that is using
the local currency as the functional currency) can distort the economic impact
of certain items, specifically costs of goods sold and foreign exchange gains
and losses. Because the Company operates predominantly outside of the U.S.,
these distortions can have a disproportionate effect on reported results. For
this reason, management believes it is important to understand the Company's
operational results computed using the U.S. Dollar as the functional currency.
Dollar-based accounting was required practice prior to the issuance of
FAS 52 in 1981 and continues to be required for U.S. affiliates operating in
hyper-inflationary environments. This exception is in recognition of the
possible distortions of local-currency based accounting. "Hyper-inflationary"
accounting is limited under FAS 52 to countries with cumulative inflation
greater than 100% over three years. This fails to cover numerous countries
(including those in which the Company generates the majority of its earnings)
with consistently higher inflation than the U.S., whose currency values remain
unstable (typically devaluing over time versus the Dollar).
When exchange rates fluctuate, earnings results using U.S. Dollar-based
accounting differ from results under local currency based accounting in three
important ways. Under U.S. Dollar-based accounting:
o Cost of goods sold are measured using the exchange rate at the
time inventory was purchased rather than the exchange rate at the
time finished product was sold.
o Foreign exchange gains and losses are computed on assets and
liabilities denominated in currencies other than the Dollar
instead of assets and liabilities denominated in currencies other
than local currency.
o Depreciation is computed by applying the appropriate factor to
the historical Dollar value of the asset rather than by applying
the appropriate factor to the historical local currency value and
translating the result at the current exchange rate.
Because of its principal focus on cash flows, management uses
Dollar-based EBITDA as a key determinant of awards for corporate management
under its annual incentive plan. The following table provides a reconciliation
of pre-tax earnings to Dollar-based EBITDA for the quarter and six months ended
February 29, 2000:
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<TABLE>
<CAPTION>
Dollar-based EBITDA
(Dollars in millions)
----------------------------- -------------------------------
Quarter Ended Six Months Ended
----------------------------- ------------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Earnings before Income Taxes $ 16.5 $ 13.2 $ 37.5 $ 34.9
Add: Loss/(gain) on sale of property - (0.5) - (0.5)
Depreciation and amortization 6.4 6.0 12.7 11.7
Interest expense 0.6 2.3 1.5 5.2
------- ------- ------- --------
EBITDA reported under FAS 52 23.5 21.0 51.7 51.3
Adjustments to report EBITDA on a Dollar basis:
1) Difference in cost of sales for ingredient costs 0.4 (0.8) (0.5) (3.3)
2) Reversal of foreign exchange loss/(gain) (1.3) 3.6 (1.0) 3.5
reported under FAS 52
3) Dollar-based foreign exchange gain/(loss) 1.4 3.8 3.0 0.2
------- ------- ------- -------
EBITDA reported on a U.S. Dollar basis $ 24.0 $ 27.6 $ 53.2 $ 51.7
======= ======= ======= ========
</TABLE>
Explanation of adjustments to EBITDA:
1) Difference in cost of sales for ingredient costs. Under Dollar-based
accounting, inventories are initially recorded and maintained in Dollars.
Under FAS 52, ingredient costs were $0.4 million higher in the quarter
ended February 29, 2000 mainly due to recent strengthening of the Brazilian
Real and Korean Won, but partially offset by weakening of the Euro.
Ingredient costs were significantly lower under FAS 52 in the quarter and
six months ended February 28, 1999 as the Brazilian Real devalued by around
40% versus the Dollar in January 1999.
2) Reversal of foreign exchange gains and losses reported under FAS 52. In
last year's second quarter, the Company reported a $3.6 million foreign
exchange loss under FAS 52. All of this exchange loss was incurred in
Brazil, where the Company carried U.S. Dollar denominated debt and the
local currency devalued significantly versus the Dollar.
3) Dollar-based foreign exchange gains and losses. If Agribrands had used
Dollar-based accounting worldwide, it would have recognized foreign
exchange gains of $1.4 million and $3.0 million in the quarter and six
months ended February 29, 2000, respectively. Most of these gains occurred
in Europe, where the Company has net liabilities denominated in the Euro.
During the current fiscal year as the Euro has weakened, these liabilities
have decreased in Dollar terms resulting in a foreign exchange gain.
EUROPEAN ECONOMIC MONETARY UNION (EMU)
On January 1, 1999, eleven of the European Union countries (including
four countries where Agribrands' operations are located) adopted the Euro as
their single currency, and there is now a fixed conversion rate between their
existing currencies ("legacy currencies") and the Euro. Following the
introduction of the Euro, the legacy currencies remain legal tender in the
participating countries during the transition period from January 1, 1999
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through January 1, 2002. Beginning on January 1, 2002, the European Central Bank
will issue Euro-denominated bills and coins for use in cash transactions. On or
before July 1, 2002, the participating countries will withdraw all legacy bills
and coins and use the Euro as their legal currency.
The Company's key financial information systems in Europe are equipped
to process both Euro and legacy currency transactions during the transition
period from January 1, 1999 through January 1, 2002; however, they are not ready
to handle the July 1, 2002 withdrawal of all legacy currencies. Management is
currently planning to modify the Company's key financial systems so they can
handle the July 1, 2002 mandatory conversion to the Euro. The Company has not
yet incurred any material costs related to the conversion, and future costs for
replacing computer equipment and reprogramming existing systems are not expected
to be material. The Company plans to complete system modifications and necessary
testing by September 1, 2001.
From a broader business perspective, conversion to the Euro may cause
pricing disparities in different markets to narrow, lowering the Company's
margins. Nevertheless, the Company believes the conversion to the Euro will not
have a material impact on the Company's consolidated financial results.
OUTLOOK
It is difficult to forecast short-term operating results due to the
number of environmental factors that may impact current results. Local
agricultural markets are highly responsive to a number of variables including
macro-economic conditions, weather, and current concerns over food and
environmental safety. Typically, large and small changes in factors like these
in locations where the Company operates will randomly influence consolidated
earnings.
Over the past six months, year-over-year comparisons have been
influenced by a number of environmental factors. In Europe, for example,
unusually high margins in the prior year have been followed with current year
margins below long-term norms. Management believes this effect is primarily the
result of short-term exchange rate variations rather than any fundamental change
in the profit characteristics of the business. Year-over-year results in the
Europe region have been further hurt by depressed results in Hungary.
Performance in the Americas region has declined due primarily to
problems in Brazil and Colombia. Operational issues are being addressed, but the
agricultural sectors in both of these countries remain very depressed. Asia
region improvement has partially offset the declines in Europe and the Americas.
In Asia, environmental factors are having the opposite effect as depressed
conditions in the prior two years have given way to much stronger economic
performance. Here again, the effect of macro economic conditions has had a
larger impact on results than fundamental changes to our business and industry.
Nevertheless, the feed and agricultural industries in Korea are rapidly evolving
toward more efficient structures which will place pressure on the traditional
feed sector.
In the near term, conditions in certain European and Latin American
countries will continue to negatively influence year-over-year comparisons. On
the other hand, European comparisons should be helped by weak earnings in the
fourth quarter of fiscal 1999. Asia is unlikely to continue such strong
year-over-year performance based on very strong earnings in the second half of
fiscal 1999. On a consolidated basis, operating performance for each of the next
two quarters should exceed that of the recently completed second quarter.
Pre-tax earnings remain subject to volatility due, in particular, to
foreign exchange gains and losses generated by volatile exchange rates and
changing capital structures within the foreign affiliates. Currently, the
Company's most significant exposures to foreign exchange gains and losses
impacting net earnings are U.S. Dollar liabilities carried in Brazil, Canada,
Colombia, Mexico and Korea. As discussed earlier, management focuses on the
Company's exposure to the change in the Dollar value of net monetary asset or
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liability positions in currencies other than the U.S. Dollar. These values can
also be volatile as the cost of hedging these exposures often exceeds the likely
benefit. The Company currently has significant net monetary asset or liability
positions in Euros, Canadian Dollars, Colombian Pesos and Philippine Pesos.
FORWARD-LOOKING STATEMENTS & BUSINESS RISKS
Certain statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Outlook" and elsewhere in this
report constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Any statements that express, or involve discussions as to, expectations,
beliefs, plans, objectives, assumptions or future events or performance (which
may use words or phrases such as "will likely result," "are expected to," "will
continue," "anticipates," "expects," "estimates," "intends," "plans,"
"projects," and "outlook") are not historical facts and may be forward-looking.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, levels of activity, cost
savings, performance or achievements of the Company, or industry results, to be
materially different from any future results, levels of activity, cost savings,
performance or achievements expressed or implied by such forward-looking
statements, and accordingly, such statements should be read in conjunction with
and are qualified in their entirety by reference to, such risks, uncertainties
and other factors, which are described below and elsewhere in this report. Such
factors include, among others, the following: (i) changing conditions or market
trends in the animal feeds and agricultural products industries; (ii) general
economic and business conditions, including a regional recession in any of the
various regions of the world in which Agribrands operates; (iii) the ability of
the Company to implement its business strategy and maintain and enhance its
competitive strengths; (iv) the ability of the Company to recover its raw
material costs in the pricing of its products, (v) political and economic
instability in countries or regions where the Company's business is conducted,
(vi) the level of demand for Agribrands' products,(vii) the ability of the
Company to obtain financing for specific or general corporate purposes; (viii)
actions of competitors and government entities; (ix) availability of key
personnel; (x) industry capacity trends; (xi) changes in the economic or
financial impact of, or failure to comply with, government regulations and (xii)
changes brought about by e-commerce initiatives. As a result of the foregoing
and other factors, no assurance can be given as to future results, levels of
activity and achievements, and neither Agribrands nor any other person assumes
responsibility for the accuracy and completeness of these forward-looking
statements. Any forward-looking statements contained herein speak solely as of
the date as of which such statements are made, and Agribrands undertakes no
obligation to update any forward-looking statements to reflect events or
circumstances after the date on which such statements were made or to reflect
the occurrence of unanticipated events.
The Company, as a supplier of animal feeds and other agricultural
products, is subject to the risks and uncertainties associated with the animal
production industry and the resulting fluctuations in demand for Agribrands'
products. The animal production industry, and consequently the animal feeds
industry, in a particular country can be negatively affected by a number of
factors, including the following: the market price of livestock, poultry and
other animals and their food products; alternative feed sources; changes in
consumer demand for, and consumption of, grain, meat, fish, milk and eggs;
outbreaks of diseases in humans or animals (such as BSE or "mad cow disease,"
foot and mouth disease or aviarian virus); real estate values; urban
development; weather conditions; government farm programs; government
regulations; tariffs, restrictive quota and trade policies; production
difficulties, including capacity constraints and supply surpluses; and general
economic conditions, either local, regional or global. In certain markets, the
increasing nutritional efficiency of available feeds has resulted in lower
volume demand for feeds. Profit pressure and overcapacity in various markets
have led to consolidation of both the feed production and animal production
industries in those markets. Larger animal producers have tended to integrate
their business by acquiring or constructing feed production facilities to meet
some or all of their feed requirements, and consequently have relied less on
outside suppliers of animal feeds.
10
<PAGE>
The animal feeds and agricultural products business is expected to
remain highly competitive in the foreseeable future. Future growth opportunities
are expected to depend on the Company's ability to implement its strategies for
competing effectively in new, growing agricultural markets, maintaining
effective cost controls, making strategic acquisitions, effectively managing
customers changing preferences for complete feeds, concentrates or premixes, and
developing and implementing methods for more efficient manufacturing and
distribution operations, including development of e-commerce strategies, while
at the same time maintaining aggressive pricing and promotion of its products.
<TABLE>
<CAPTION>
AGRIBRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(Dollars in millions except per share data)
Quarter Ended Six Months Ended
---------------------------- ------------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 288.1 $ 310.7 $ 589.0 $ 643.1
------- ------- ------- -------
Costs and Expenses
Cost of products sold 241.7 260.7 488.9 534.4
Selling, general and administrative 32.9 34.3 66.9 71.1
Interest 0.6 2.3 1.5 5.2
Gain on sale of property - (0.5) - (0.5)
Other (income)/expense, net (3.6) 0.7 (5.8) (2.0)
------- ------- ------- -------
271.6 297.5 551.5 608.2
------- ------- ------- -------
Earnings before Income Taxes 16.5 13.2 37.5 34.9
Income Taxes 5.5 5.4 12.6 16.0
------- ------- ------- -------
Net Earnings $ 11.0 $ 7.8 $ 24.9 $ 18.9
======= ======= ======= =======
Earnings Per Share
Basic $ 1.08 $ .73 $ 2.42 $ 1.77
======= ======= ======= =======
Diluted $ 1.04 $ .72 $ 2.34 $ 1.76
======= ======= ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
11
<PAGE>
<TABLE>
AGRIBRANDS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollars in millions)
<CAPTION>
February 29, August 31,
2000 1999
------------- -----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 174.1 $ 174.5
Short-term investments 1.8 3.5
Receivables, less allowance for doubtful accounts 73.5 77.0
Inventories 90.9 81.3
Other current assets 5.3 4.6
----------- ---------
Total Current Assets 345.6 340.9
----------- ---------
Investments and Other Assets 55.5 51.3
Property at Cost 352.8 346.3
Accumulated Depreciation (179.9) (172.3)
----------- ---------
172.9 174.0
----------- ---------
Total $ 574.0 $ 566.2
=========== =========
Liabilities and Shareholders' Equity
Current Liabilities
Current maturities of long-term debt $ 0.5 $ 2.4
Notes payable 21.7 18.5
Accounts payable and accrued liabilities 114.9 125.1
Income taxes 5.8 8.5
----------- ---------
Total Current Liabilities 142.9 154.5
----------- ---------
Long-Term Debt 11.3 11.5
Deferred Income Taxes and Other Liabilities 29.7 26.9
Shareholders' Equity
Common stock .1 .1
Capital in excess of par 419.5 419.5
Retained earnings 75.0 50.1
Accumulated other comprehensive loss (85.4) (85.6)
Common stock in treasury, at cost (19.1) (10.8)
----------- ---------
Total Shareholders' Equity 390.1 373.3
----------- ---------
Total $ 574.0 $ 566.2
=========== =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
12
<PAGE>
<TABLE>
AGRIBRANDS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
<CAPTION>
Six Months Ended
-----------------------------------
February 29, February 28,
2000 1999
------------- ------------
<S> <C> <C>
Cash Flow from Operations
Net earnings $ 24.9 $ 18.9
Non-cash items included in income
Depreciation and amortization 12.7 11.7
Foreign exchange (gain)/loss (1.0) 3.5
Provision for doubtful accounts 1.4 1.9
Deferred income taxes 3.3 2.5
Gain on sale of property - (0.5)
Changes in operating assets and liabilities used in
operations (19.5) 14.2
Other, net (1.5) -
--------- --------
Net cash provided by operations 20.3 52.2
--------- ---------
Cash Flow from Investing Activities
Property additions (12.0) (15.8)
Proceeds from the sale of property 0.6 2.5
Proceeds from sale of Korean pet food business 2.0 -
Purchase of key man life insurance (5.0) (5.0)
Other, net 1.5 (0.7)
--------- ---------
Net cash used by investing activities (12.9) (19.0)
--------- ---------
Cash Flow from Financing Activities
Proceeds from issuance of long-term debt - 1.7
Principal payments on long-term debt, including current
maturities (2.2) (1.9)
Net increase (decrease) in notes payable 3.4 (3.9)
Treasury stock purchases (8.3) (4.6)
--------- ---------
Net cash used by financing activities (7.1) (8.7)
--------- ---------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (0.7) (0.6)
--------- ---------
Net (Decrease) Increase in Cash and Cash Equivalents (0.4) 23.9
Cash and Cash Equivalents, Beginning of Period 174.5 136.5
--------- ---------
Cash and Cash Equivalents, End of Period $ 174.1 $ 160.4
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
13
<PAGE>
AGRIBRANDS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)
Note 1 - GENERAL INFORMATION. Effective April 1, 1998, Agribrands
International, Inc. (the Company) became an independent,
publicly owned company as a result of the distribution by
Ralston Purina Company (Ralston) of the Company's $.01 par
value Common Stock to holders of Ralston Purina Company Common
Stock at a distribution ratio of one for ten (the
Distribution). Prior to the Distribution, the Company was
formed as a wholly-owned subsidiary of Ralston for the purpose
of effecting the Distribution. Ralston did not retain any
ownership interest in the Company.
Note 2 - UNAUDITED FINANCIAL STATEMENTS. The accompanying unaudited
financial statements have been prepared in accordance with
generally accepted accounting principles and applicable SEC
guidelines pertaining to interim financial information. In the
opinion of management, all adjustments, consisting only of
normal recurring adjustments considered necessary for a fair
presentation, have been included. Operating results for any
quarter are not necessarily indicative of the results for any
other quarter or for the full year. These statements should be
read in conjunction with the Company's financial statements
and notes thereto for the year ended August 31, 1999.
Note 3 - COMPREHENSIVE INCOME:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
--------------------------- ----------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net earnings $ 11.0 $ 7.8 $ 24.9 $ 18.9
Foreign currency translation adjustment 0.4 (3.2) 0.2 0.6
------- -------- ------- -------
Comprehensive income $ 11.4 $ 4.6 $ 25.1 $ 19.5
======= ======== ====== =======
</TABLE>
Note 4 - BUSINESS SEGMENT INFORMATION. Sales, operating profit and
total assets are presented below for each of the Company's
reportable segments along with a reconciliation of operating
profit for the reportable segments to total earnings before
income taxes:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
----------------------------- -----------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net Sales - External:
Americas $ 129.4 $ 138.1 $ 263.9 $ 287.4
Europe 73.6 87.9 150.5 183.4
Asia 85.0 84.7 174.4 172.3
Corporate and Tradico (U.S.) 0.1 - 0.2 -
------- ------- ------- -------
Total $ 288.1 $ 310.7 $ 589.0 $ 643.1
======= ======= ======= =======
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------------------- -------------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales - Intersegment:
Americas $ - $ - $ - $ -
Europe - - - -
Asia - - - -
Corporate and Tradico (U.S.) 31.8 24.0 54.6 41.0
-------- --------- --------- ---------
Total $ 31.8 $ 24.0 $ 54.6 $ 41.0
======== ========= ========= =========
Operating Profit:
Americas $ 4.3 $ 6.4 $ 12.1 $ 15.8
Europe 3.0 4.6 7.5 10.4
Asia 9.7 8.3 20.4 17.9
Corporate and Tradico (U.S.) (3.5) (3.6) (6.8) (6.5)
-------- --------- --------- ---------
13.5 15.7 33.2 37.6
Gain on sale of property - 0.5 - 0.5
Interest expense (0.6) (2.3) (1.5) (5.2)
Other income/(expense), net 3.6 (0.7) 5.8 2.0
-------- --------- -------- ---------
Earnings before Income Taxes $ 16.5 $ 13.2 $ 37.5 $ 34.9
======== ========= ======== =========
Depreciation and Amortization:
Americas $ 1.9 $ 1.9 $ 3.7 $ 3.7
Europe 1.8 2.1 3.7 4.1
Asia 2.5 1.8 4.9 3.5
Corporate and Tradico (U.S.) 0.2 0.2 0.4 0.4
-------- -------- -------- ---------
Total $ 6.4 $ 6.0 $ 12.7 $ 11.7
======== ======== ======== =========
</TABLE>
February 29, August 31,
2000 1999
------------ ----------
Total Assets:
Americas $ 160.4 $ 169.3
Europe 104.7 116.0
Asia 150.1 144.5
Corporate and Tradico (U.S.) 158.8 136.4
---------- --------
Total $ 574.0 $ 566.2
========== ========
Note 5 - SUPPLEMENTAL BALANCE SHEET INFORMATION:
February 29, August 31,
2000 1999
------------ ----------
Receivables:
Gross receivables $ 85.6 $ 88.4
Allowance for doubtful accounts (12.1) (11.4)
---------- --------
$ 73.5 $ 77.0
========== ========
15
<PAGE>
February 29, August 31,
2000 1999
------------ ----------
Inventories:
Raw materials and supplies $ 68.9 $ 61.1
Finished products 22.0 20.2
--------- --------
$ 90.9 $ 81.3
========= ========
Investments and Other Assets:
Goodwill, net of accumulated amortization of $ 28.1 $ 29.1
$7.4 at February 29 and $6.5 at August 31
Investments in affiliated companies 6.8 6.3
Cash surrender value of key man life insurance 10.0 5.0
Deferred charges and other assets 10.6 10.9
--------- --------
$ 55.5 $ 51.3
======== ========
Accounts payable and accrued liabilities:
Trade accounts payable $ 74.9 $ 75.2
Incentive compensation, salaries and vacations 12.6 15.4
Other items 27.4 34.5
--------- --------
$ 114.9 $ 125.1
========= ========
Note 6 - OTHER (INCOME)/EXPENSE, NET:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------------------- -------------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Foreign exchange (gain)/loss $ (1.3) $ 3.6 $ (1.0) $ 3.5
Investment income (2.3) (2.9) (4.8) (5.5)
-------- -------- -------- --------
$ (3.6) $ 0.7 $ (5.8) $ (2.0)
======== ======== ======== ========
</TABLE>
Note 7 - COMMON STOCK. There were 10,199,101 and 10,379,305 shares of
common stock outstanding at February 29, 2000 and August 31,
1999, respectively. During the six months ended February 29,
2000, the Company purchased 180,204 shares of Agribrands'
common stock for $8.3 million.
Note 8 - EARNINGS PER SHARE. Basic earnings per share is based on the
average number of common shares outstanding during the period.
Diluted earnings per share is based on the average number of
shares used for the basic earnings per share calculation,
adjusted for the dilutive effect of stock options. The
following table sets forth the computation of basic and
diluted earnings per share:
16
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
-------------------------------- --------------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Numerator:
Net earnings $ 11.0 $ 7.8 $ 24.9 $ 18.9
============ =========== =========== ===========
Denominator:
Weighted average shares outstanding 10,215,321 10,639,605 10,291,814 10,654,168
Assumed conversion of stock options (1) 324,583 125,930 361,191 100,661
------------ ----------- ----------- -----------
Weighted average shares - assuming dilution 10,539,904 10,765,535 10,653,005 10,754,829
============ =========== =========== ===========
Basic earnings per share (2) $ 1.08 $ .73 $ 2.42 $ 1.77
============ =========== =========== ===========
Diluted earnings per share (2) $ 1.04 $ .72 $ 2.34 $ 1.76
============ =========== =========== ===========
<FN>
(1) Stock options to purchase 1,114,500 shares of common stock were
outstanding during the quarter and six months ended February 28,
1999 but were not included in the computation of diluted earnings
per share because the options' exercise prices were greater than
the average market price of the common shares.
(2) The sum of quarterly EPS data will not necessarily equal
year-to-date EPS data.
</FN>
</TABLE>
Note 9 - NEW ACCOUNTING STANDARD. The Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," in June 1998. The Company is still
evaluating the effect this statement will have on its financial
reporting and disclosures. Agribrands will adopt FAS 133 on
September 1, 2000.
PART II - OTHER INFORMATION
There is no information required to be reported under any
items except those indicated below.
Item 4. Submission of Matter to a Vote of Security Holders
On January 28, 2000, the Registrant held its Annual Meeting
for the purpose of electing two Directors to serve three-year
terms ending at the Annual Meeting of Shareholders in January
2003, or when their successors are elected.
The number of shares voting for or against each candidate is as
follows:
VOTES VOTES BROKER
FOR WITHHELD NON-VOTES
H. Davis McCarty 9,195,151 162,721 N/A
Joe R. Micheletto 9,187,949 169,923 N/A
17
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Report:
(10.1) Purchase Option and Indemnification Agreement
between the Company and Land O' Lakes, Inc. dated
January 1, 2000.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the Company during
the quarter ended February 29, 2000.
18
<PAGE>
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.
AGRIBRANDS INTERNATIONAL, INC.
----------------------------------------
Registrant
By: / s / David R. Wenzel
----------------------------------------
David R. Wenzel
Chief Financial Officer
Date: March 29, 2000
19
<PAGE>
EXHIBIT INDEX
- -------------
Exhibits
- --------
EX-10.1 Purchase Option and Indemnification Agreement between the
Company and Land O' Lakes, Inc. dated January 1, 2000.
EX-27 Financial data schedule for 2nd Quarter of Fiscal 2000.
(Documents prepared on Edgar and provided electronically)
20
Exhibit 10.1
PURCHASE OPTION AND INDEMNIFICATION AGREEMENT
THIS PURCHASE OPTION AND INDEMNIFICATION AGREEMENT, entered into as of
the 1st day of January, 2000 by and between LAND O'LAKES, INC., a Minnesota
cooperative corporation with its corporate offices at 1275 Red Fox Road, Arden
Hills, Minnesota 55112 ("Land O'Lakes") and AGRIBRANDS INTERNATIONAL, INC. a
Missouri corporation with its corporate offices at 9811 South Forty Drive, St.
Louis, Missouri 63124 ("Agribrands").
WITNESSETH:
WHEREAS, Land O'Lakes owns and operates an animal feed business in
Poland through its wholly owned Polish subsidiary known as LOL Ltd. Sp. z o.o.,
a limited liability company duly organized and validly existing under the laws
of the Republic of Poland with its corporate offices at ul. Gornoslaska 14,
00-432 Warszawa, Poland (hereinafter referred to as "LOL Ltd.") and through
Pozbac S.A. a Polish corporation under the control of and solely operated by LOL
Ltd. who owns a controlling interest therein (hereinafter referred to as "Pozbac
S.A."), and collectively Land O'Lakes animal feed business in Poland shall be
hereinafter referred to as the "Business"; and
WHEREAS, Land O'Lakes desires that Agribrands or one of its Affiliates
make certain personnel, technology, trademarks and services available to LOL
Ltd. for its use in operating the Business; and
WHEREAS, Agribrands and its Affiliates desire to acquire an option from
Land O'Lakes for the Business; and
WHEREAS, Agribrands is willing to enter into certain agreements, or
cause its Affiliates to enter into certain agreements to provide such personnel,
technology, trademarks and services to LOL Ltd. (such agreements hereinafter
referred to as the Ancillary Agreements) provided that Land O'Lakes grants to
Agribrands an option to purchase an interest in LOL Ltd., and provided that Land
O'Lakes grants Agribrands indemnification for the risks of supplying such
personnel, technology, trademarks and services to the Business; and
WHEREAS, upon the terms and conditions contained herein, Land O'Lakes
is willing to grant Agribrands or any of its Affiliates an option to purchase an
interest in LOL Ltd., and provide an indemnification for certain risks
associated with supplying personnel, technology, trademarks and services;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the parties agree as follows:
<PAGE>
ARTICLE I - DEFINITIONS.
"Affiliate" shall mean any person and/or entity that directly or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with the person or entity
specified.
"Agricultural Products" shall mean products formulated to provide
nourishment to or care of horses (whether or not agricultural),
laboratory or zoo animals (but not including Pet Products sold to such
institutions) and agricultural animals (whether terrestrial, aquatic,
or aviary) including by way of illustration, but not limitation,
commercial livestock, commercial poultry, fish, reptiles or shellfish
raised in commercial agriculture facilities; rabbits raised for
commercial purposes; animals raised for fur; wild or game birds; and
services for the care and feeding of such animals. Except as provided
elsewhere in this Agreement, "Agricultural Products" shall also include
accessories, health products and services for the care and feeding of
horses, zoo animals, laboratory animals and agricultural animals.
"Ancillary Agreements" shall mean that certain Technology and Trademark
License Agreement, commencing January 1, 2000 between LOL Ltd. and AGX
TECH Licensing and Services Limited Liability Company, or that certain
Formulation Agreement, commencing January 1, 2000 between LOL Ltd. and
Agribrands Europe Espana S.A., and that certain Secondment Agreement
commencing January 1, 2000 between Land O'Lakes and Agribrands.
"Average EBITDAR" shall mean the average Net Earnings plus interest,
taxes, depreciation, amortization, and royalties ("Earnings Before
Interest, Taxes, Depreciation, Amortization, and Royalties") for a
complete three calendar year period.
"Business" shall mean Land O'Lakes animal feed business in Poland as
operated by LOL Ltd., including LOL Ltd.'s interest in and control of
Pozbac S.A., collectively referred to as the "Business".
"Closing Date" shall mean the date on which the last of the required
approvals from any relevant Polish authorities is obtained enabling the
closing of a sale by Land O'Lakes and a purchase by Agribrands or one
of its Affiliates of an interest in LOL Ltd. as set forth in Article 3
below.
"Net Earnings" shall mean LOL Ltd. revenues generated by operation of
the Business less all costs and expenses incurred by LOL Ltd. which
include: royalties, operating expenses, depreciation, amortization,
interest expenses, and income taxes, but before Profit Sharing as
applied pursuant to U.S. generally accepted accounting principles.
"Profit Sharing" shall have the meaning set forth in Article 5 below.
"Royalties" shall mean amounts paid to Agribrands and its Affiliates
under that certain Technology and Trademark License Agreement,
2
<PAGE>
commencing January 1, 2000 between LOL Ltd. and AGX TECH Licensing and
Services Limited Liability Company.
"Territory" shall mean those areas existing within a Fifty (50) mile
radius surrounding each of the Animal Product production facilities of
the Business in the Republic of Poland, including the facilities in
Paslek, Miescisko, Grodzisk, and Kozmin.
"U.S.A ", "US" and "United States" shall each refer to the United
States of America.
ARTICLE 2 - OPTION TO PURCHASE.
Land O'Lakes grants to Agribrands, or at the discretion of Agribrands
to any of its Affiliates, during the period of exercise provided in Article 3
below, an exclusive option to purchase the Business by purchasing One Hundred
percent (100%) of the interest in LOL Ltd., subject to the terms and conditions
herein. As of December 20, 1999 the authorized shares of LOL Ltd. (hereinafter
referred to as "Shares") consist of 92,913 shares of 111.00 Polish Zloty each.
The parties agree that any alteration (increase or decrease) of LOL Ltd.'s share
capital resulting in the issuance or cancellation of Shares will not interfere
with the purchase of an ownership interest in LOL Ltd. by Agribrands or its
Affiliates as Article 3 below provides for the purchase of a certain percentage
of Shares existing at the moment of exercising of an option.
ARTICLE 3 - PERIOD OF EXERCISE.
(a) On or after December 31, 2002 through December 31, 2003, upon
thirty (30) days prior written notice, Agribrands or one of
its Affiliates may inform Land O'Lakes of its desire to
purchase fifty-one percent (51 %) interest in LOL Ltd. (as of
December 20, 1999 calculated as 51% of 92,913 or 47,386
Shares), and, subject to obtaining the approvals required from
the relevant Polish authorities, if any, Agribrands or its
Affiliate shall deliver within Ten (10) days from the Closing
Date fifty-one percent (51 %) of the Purchase Price to Land
O'Lakes via wire transfer to an account designated by Land
O'Lakes.
(b) After December 31, 2004 through December 31, 2006, upon thirty
(30) days prior written notice, Agribrands or one of its
Affiliates may inform Land O'Lakes of its desire to purchase
all of Land O'Lakes remaining interest in LOL Ltd. (either
Forty-nine percent (49%) interest in LOL Ltd. (as of December
20, 1999 calculated as 49% of 92,913 or 45,527 Shares) if
Agribrands or one of its Affiliates has previously exercised
its first purchase option under Article 2(a) above, or One
Hundred percent (100%) of Land O'Lakes interest in LOL Ltd.
(as of December 20, 1999 92,913 Shares), if Agribrands or one
of its Affiliates did not exercise its purchase option under
Article 2(a) above), and, subject to obtaining the approvals
required from the relevant Polish authorities, if any,
Agribrands or its Affiliate shall deliver within Ten (10) days
from the Closing Date the balance of the Purchase Price to
Land O'Lakes via wire transfer to an account designated by
Land O'Lakes.
3
<PAGE>
(c) In the event that Land O'Lakes or any of its Affiliates gives
Agribrands or any of its Affiliates notice of its intent to
terminate any of the Ancillary Agreements at any time prior to
December 31, 2006, then this Option Agreement shall terminate
and Agribrands and its Affiliates shall be entitled to a
period of Ninety (90) days in which to provide written notice
to Land O'Lakes of its desire to purchase all of Land O'Lakes
interest in LOL Ltd. subject to the terms and conditions
herein (either Forty-nine percent (49%) interest in LOL Ltd.
(as of December 20, 1999 calculated as 49% of 92,913 or 45,527
Shares) if Agribrands or one of its Affiliates has previously
exercised the purchase option under Article 2(a) above, or One
Hundred percent (100%) of Land O'Lakes interest in LOL Ltd.
(as of December 20, 1999 92,913 Shares), if Agribrands or one
of its Affiliates did not exercise the purchase option under
Article 2(a) above), and, subject to obtaining the approvals
required from the relevant Polish authorities, if any,
Agribrands or its Affiliate shall deliver within Ten (10) days
from the Closing Date the balance of the Purchase Price to
Land O'Lakes via wire transfer to an account designated by
Land O'Lakes.
(d) In the event that Agribrands or any of its Affiliates gives
Land O'Lakes or any of its Affiliates notice of its intent to
terminate any of the Ancillary Agreements prior to December
31, 2006, then Agribrands and its Affiliates shall be entitled
to a period of Ninety (90) days in which to provide written
notice to Land O'Lakes of its desire to purchase all of Land
O'Lakes interest in LOL Ltd. subject to the terms and
conditions herein (either Forty-nine percent (49%) interest in
LOL Ltd. (as of December 20, 1999 calculated as 49% of 92,913
or 45,527 Shares), if Agribrands or one of its Affiliates has
previously exercised the purchase option under Article 2(a)
above, or One Hundred percent (100%) of Land O'Lakes interest
in LOL Ltd. (as of December 20, 1999 92,913 Shares), if
Agribrands or one of its Affiliates did not exercise the
purchase option under Article 2(a) above), and, subject to
obtaining the approvals required from the relevant Polish
authorities, if any, Agribrands or its Affiliate shall deliver
within Ten (10) days from the Closing Date the balance of the
Purchase Price to Land O'Lakes via wire transfer to an account
designated by Land O'Lakes.
ARTICLE 4 - PURCHASE PRICE.
For each exercise of an option by Agribrands or one of its Affiliates
under Article 3 above the Purchase Price for the shares of LOL Ltd. shall be
calculated as of the date that Land O'Lakes receives written notice from
Agribrands, or one of its Affiliates, and shall be the greater of:
(a) Five (5X) times Average EBITDAR calculated in U.S. Dollars,
less the liabilities assumed by Agribrands or retained by LOL
Ltd., for the three complete calendar years preceding the date
of the receipt by Land O'Lakes of written notice by Agribrands
or its Affiliate of the exercise of an option, calculated in
4
<PAGE>
accordance with U.S. generally accepted accounting principles
applied on a consistent basis;
Or,
(b) The value of the fixed assets of the Business, provided such
value shall not be more than Eight Million U.S. Dollars
($8,000,000), calculated as the sum of:
(i) The original cost of all fixed assets of the Business
owned by LOL Ltd. less accumulated depreciation, plus
the book value of all working capital, inventories,
and account receivables, excluding all cash, debt,
and intercompany balances at the Closing Date;
calculated in accordance with U.S. generally accepted
accounting principles on a consistent basis;
Plus,
(ii) LOL Ltd.'s pro rata share (based upon LOL Ltd.'s
ownership interest in Pozbac S.A.) of the original
cost of all fixed assets of the Business owned by
Pozbac S.A. less accumulated depreciation, plus the
book value of all working capital, inventories, and
account receivables, excluding all cash, debt, and
intercompany balances at the Closing Date; calculated
in accordance with U.S. generally accepted accounting
principles on a consistent basis.
The parties agree to bear an equal fifty percent of all for any stamp
duty or tax associated with the exercise of such option that is levied by any
relevant Polish authority.
ARTICLE 5 - PROFIT SHARING.
(a) As and for Profit Sharing, Agribrands shall be
entitled to forty (40%) percent of the Net Earnings of LOL
Ltd. from January 1, 2000 through the earlier to occur of:
(i) The Closing Date pursuant to Article 3(a) hereof or
if said option is not executed under Article 3(a)
then the Closing Date pursuant to Article 3(b)
hereof, or
(ii) December 31, 2006; or
(iii) The expiration or termination of any of the Ancillary
Agreements.
(b) Within one hundred and eighty days following the close of each
fiscal year of LOL Ltd., Agribrands may request payment, net
of the withholding taxes which would have been payable by Land
O'Lakes on distribution of a dividend from LOL Ltd. for any or
5
<PAGE>
all of the amounts accrued for all prior fiscal years but
unpaid under Article 5(a) above, or may allow such amounts to
accrue and upon the exercise of the purchase option be applied
as a reduction of the Purchase Price payable to Land O'Lakes
without deduction for such hypothetical withholding taxes.
(c) Neither Agribrands nor any of its affiliates shall bear any
financial responsibility for losses incurred by LOL Ltd. and
shall have no obligation to loan or contribute funds to LOL
Ltd.
ARTICLE 6 - NON-COMPETITION.
(a) Agribrands and Affiliates
(i) The parties agree that for good and valuable
consideration, the receipt and adequacy of which are
hereby acknowledged, that within the Territory,
Agribrands shall not, and shall not permit an
Affiliate of Agribrands to directly or indirectly,
either for Agribrands' own benefit or for the benefit
of an Affiliate (i) distribute, market, or sell
Agricultural Products or otherwise engage in any
retail or wholesale activity in any manner or
capacity (e.g. through any form of ownership or as an
advisor, principal, agent, partner, officer,
director, employer, consultant, or otherwise) that is
principally engaged in by the Business on the date
hereof, provided, however, that nothing herein shall
restrict Agribrands or its Affiliates from providing
certain services to Land O'Lakes and its Affiliates
under the Ancillary Agreements.; or (ii) induce, or
attempt to induce or influence (other than by means
of general advertising) any customer, supplier,
distributor, licensee or other business relation of
the Business to cease such relationship with the
Business, or in any way interfere with the
relationship; provided however, that nothing herein
is intended to limit Agribrands' ability to compete
with Land O'Lakes and its Affiliates to the extent
not prohibited herein.
(ii) Said restriction on competition shall commence on the
date first above written and continue until the
earlier of the following:
(1) The acquisition of any interest in LOL Ltd.
by Agribrands and/or its Affiliates under
Article 3 above; or
(2) Eighteen (18) months beyond the date of
termination of any of the Ancillary
Agreements; or
(3) December 31, 2006.
6
<PAGE>
(iii) Agribrands hereby acknowledges that the geographic
boundaries, scope of prohibited activities and the
time duration of this non-competition provision are
reasonable and are no broader than are necessary to
protect the legitimate business interests of Land
O'Lakes.
(b) Land O'Lakes and Affiliates
(i) If Agribrands or one of its Affiliate acquires an
ownership interest in LOL Ltd. under Article 3 above,
then within the Republic of Poland, Land O'Lakes
shall not, and shall not permit an Affiliate of Land
O'Lakes to directly or indirectly, either for Land
O'Lakes' own benefit or for the benefit of an
Affiliate (i) distribute, market, or sell
Agricultural Products or otherwise engage in any
retail or wholesale activity in any manner or
capacity ( e.g. through any form of ownership or as
an advisor, principal, agent, partner, officer,
director, employer, consultant, or otherwise) that is
principally engaged in by the Business on the date
hereof, provided, however, that nothing herein shall
restrict Land O'Lakes or its Affiliates from
providing certain services to Agribrands and its
Affiliates; or (ii) induce, or attempt to induce or
influence (other than by means of general
advertising) any customer, supplier, distributor,
licensee or other business relation of the Business
to cease such relationship with the Business, or in
any way interfere with the relationship; provided
however, that nothing herein is intended to limit
Land O'Lakes' ability to compete with Agribrands and
its Affiliates to the extent not prohibited herein.
(ii) Said restriction upon Land O'Lakes ability to compete
shall commence, if at all, upon the acquisition of
any interest in LOL Ltd. by Agribrands and/or its
Affiliates under Article 3 above and shall continue
until the earlier of the following:
(1) Eighteen (18) months from the date on which
Agribrands by itself or together with its
Affiliates acquires one hundred percent
(100%) ownership interest in LOL Ltd.
(2) June 30, 2008.
(iii) Land O'Lakes hereby acknowledges that the geographic
boundaries, scope of prohibited activities and the
time duration of this non-competition provision are
reasonable and are no broader than are necessary to
protect the legitimate business interests of
Agribrands.
ARTICLE 7 - LAND O'LAKES' REPRESENTATIONS AND WARRANTIES.
As a material inducement to Agribrands to enter into this Agreement and
with the understanding that Agribrands and its Affiliates shall be relying
thereon in consummating this Agreement, Land O'Lakes hereby represents and
7
<PAGE>
warrants as to the best of its knowledge as of the date first above written as
follows:
(a) Organization and Standing. Land O'Lakes is a cooperative
corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota, and has all
requisite power and authority to consummate the transactions
contemplated hereby. LOL Ltd. is a limited liability company
duly organized, validly existing, and in good standing under
the laws of the Republic of Poland.
(b) Authorization. All necessary consents and approvals, internal
to the organization, have been obtained for the execution and
performance of this Agreement.
(c) Breaches. The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby do not and shall not result in any
material breach of any of the terms or conditions of Land
O'Lakes' articles or certificate of incorporation or bylaws or
any mortgage, bond, indenture, agreement, contract, license or
other instrument or obligation to which Land O'Lakes is a
party or to which the Business is subject. To the best
knowledge of Land O'Lakes, the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby do not and shall not violate
any statute or regulation or any judgment, writ, injunction or
decree of any court threatened or entered in a proceeding or
action in which Land O'Lakes may be bound or to which the
Business may be subject.
(d) Default. Land O'Lakes is not in default with respect to any of
its obligations or liabilities pertaining to the Business.
(e) Commitments. Land O'Lakes has not entered into any other
contracts for the sale of all or any part of the Assets or the
Business, and there are not any first rights of refusal or
options to purchase the Assets or the Business or any part
thereof.
(f) Information Furnished by Land O'Lakes. All of the information
furnished by Land O'Lakes to Agribrands, including, without
limitation, the financial and statistical data in connection
with the Business has been true, accurate and complete and has
not omitted any material fact.
(g) Stock of LOL Ltd. The authorized shares of LOL Ltd. consist of
92,913 shares (herein referred to as "the Shares") all of
which are owned by Land O'Lakes. Land O'Lakes has good, valid,
and marketable title to one-hundred percent (100%) of the
Shares free and clear of all liens, claims, security
interests, charges and other encumbrances of any kind or
nature (hereinafter collectively referred to as "Liens"). Land
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<PAGE>
O'Lakes shall not offer or transfer title to any of the Shares
to any other party, nor encumber the Shares during the term of
this Agreement.
(h) Technology and Trademark License. Land O'Lakes agrees to enter
into a license agreement with LOL Ltd. for the use of the
Technology and Trademarks in the Republic of Poland for an
initial period of three years, renewable thereafter for
consecutive three year terms. The license shall be in the form
of the license agreement attached hereto, marked Appendix A,
and incorporated herein by reference.
ARTICLE 8 - AGRIBRANDS' REPRESENTATIONS AND WARRANTIES.
As a material inducement to Land O'Lakes to enter into this Agreement
and with the understanding that Land O'Lakes shall be relying thereon in
consummating this Agreement, Agribrands represents and warrants as follows:
(a) Organization and Standing. Agribrands is a corporation duly
organized, validly existing and in good standing under the
laws of Missouri, with full power and authority to consummate
the transactions contemplated hereby.
(b) Authorization. All necessary consents and approvals, internal
to the organization, have been obtained for the execution and
performance of this Agreement.
(c) Breaches. The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby do not and shall not result in any
material breach of any of the terms or conditions of
Agribrands's articles or certificate of incorporation or
bylaws or any mortgage, bond, indenture, agreement, contract,
license or other instrument or obligation to which Agribrands
is a party. To the best of Agribrands's knowledge, the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not
and shall not violate any statute, regulation, judgment, writ,
injunction or decree of any court threatened or entered in a
proceeding or action in which Agribrands may be bound.
(d) General. The representations and warranties contained in this
Article 8 shall be correct in all respects on and as of each
Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the
Closing Date.
ARTICLE 9 - TRANSFER OF TITLE TO SHARES.
The ownership title to shares paid for under Article 3 shall pass to
Agribrands, or any of its Affiliates, within three (3) days following tender by
Agribrands or such Affiliates of the Purchase Price for such shares to Land
O'Lakes.
9
<PAGE>
ARTICLE 10 - EVIDENCE OF TRANSFER OF SHARES.
Upon the transfer of title to shares under Article 9, within a
reasonable amount of time the parties shall sign a pro forma document confirming
that the ownership of shares of LOL Ltd. has passed from Land O'Lakes to
Agribrands or one of its Affiliates. The parties recognize and acknowledge that
the shares pass at the time specified in Article 9, however the parties agree
that the execution of said pro forma document may be used as evidence and
confirmation of the transfer as such may be required by Polish authorities.
ARTICLE 11 - INDEMNIFICATION.
(a) Land O'Lakes and its Affiliates agree to indemnify and hold
harmless Agribrands and its Affiliates, and their respective
directors, officers, employees, agents from and against all
claims, demands, actions, causes of action, judgments,
liabilities, losses, damages, costs and expenses (including
but not limited to attorneys fees and expenses) which:
(i) Relate to or arise out of the ownership, use, or
operation of the Business, or interest in LOL Ltd.
prior to January 1, 2000 whether such claim is
asserted before or after January 1, 2000; or
(ii) Relate to or arise out of the ownership, use, or
operation of the Business, or interest in LOL Ltd.
occurring after January 1, 2000 through the delivery
of any of the shares of LOL Ltd. to Agribrands or its
Affiliates whether such claim is asserted before or
after the delivery of such shares to Agribrands or
its Affiliates, except for willful misconduct or
fraud by the employees of Agribrands working under
contract for LOL Ltd.; provided, however, that this
Agreement does not negate or alleviate any obligation
of Land O'Lakes and Agribrands and their respective
Affiliates to indemnify and hold harmless each other
and each parties' respective Affiliates under the
terms of any of the Ancillary Agreements.
ARTICLE 12 - COVENANTS OF THE PARTIES.
(a) Agribrands and its Affiliates agrees to apply to effect a
change of the business name of LOL Ltd. to a business name
selected by Agribrands provided the new name does not include
the words "Land O'Lakes" or "LOL," within thirty (30) days
after transfer of ownership of any shares of LOL Ltd.
purchased by Agribrands or its Affiliates under the provisions
of Article 3 above by taking action to amend the articles of
the notorial deed for LOL Ltd. with the full assistance of
Land O'Lakes. Furthermore, Agribrands agrees that within a
reasonable time, not to exceed six months, upon transfer of
ownership of any shares of LOL Ltd. it shall, with the
cooperation of Land O'Lakes, cease using the business name and
10
<PAGE>
commence operations under its new name to the fullest extent
allowed under applicable law.
(b) Agribrands and Land O'Lakes and their respective Affiliates
agree to comply with the relevant rules, regulations, laws of
the Republic of Poland regarding the sale and transfer,
purchase and acquisition of an interest in LOL Ltd. by
Agribrands or its Affiliates as contemplated herein. To the
extent that the parties must file or record certain
information with any relevant Polish authorities to gain
approval for any transaction contemplated herein, the parties
agree to cooperate with one another. All costs and expenses
relating to such requirements of the Polish authorities that
are not expressly assigned in this Agreement shall be
allocated on an equal fifty per cent basis between Land
O'Lakes and Agribrands or its Affiliates. Each party shall pay
its own incidental costs and expenses including, without
limitation, legal, accounting, and consulting fees and travel
expenses.
ARTICLE 13 - SURVIVAL UPON TERMINATION.
Upon termination of this Agreement as provided under Article 3(c) or
(d) above, all further obligations under this Agreement will terminate, except
for the following provisions which shall remain in effect for the specified
period of time:
(a) Article 6 relating to restrictions on competition which shall
continue according to the specified period of time therein;
(b) Article 7 and Article 8 relating to the representations and
warranties made by the parties which shall continue for a
period of ninety (90) days;
(c) Article 11 (b) relating to indemnification by LOL Ltd. for
liabilities related to the ownership and operation of the
Business, which shall continue for a period of two (2) years;
(d) Article 12 (a) relating to the covenants of the parties to
change the name of LOL Ltd., which shall survive until such
date as such covenants are fully performed.
(e) Article 12(b) relating to the covenants of the parties to
cooperation and compliance in transferring an interest in LOL
Ltd. to Agribrands or its Affiliate which shall survive until
such date as such covenants are fully performed.
(f) Article 15 relating to the use of binding arbitration to
resolve disputes arising under this Agreement which shall
continue indefinitely;
(g) Article 16 relating to the choice of law which will be applied
in the construction, interpretation and performance of this
Agreement which shall continue indefinitely;
11
<PAGE>
ARTICLE 14 - NOTICES.
Any notices or communications permitted or required hereunder shall be
deemed sufficiently given if sent (i) by an internationally recognized air
courier service, or (ii) by telecopy, or (iii) by facsimile as set forth below
or to such other address as any party may notify the other party in writing:
If to Agribrands, to: If to Land O'Lakes, to:
9811 South Forty Drive 1275 Red Fox Road
St. Louis, Missouri 63124 Arden Hills, Minnesota 55112
Facsimile Number: (314) 812-0403 Facsimile Number: (651) 634-8017
Attention: General Counsel Attention: Bob DeGregorio
Copy to:
Land O'Lakes, Inc.
4001 Lexington Avenue N.
Arden Hills, MN 55126
Facsimile Number: 651-481-2832
Attn: Law Department
ARTICLE 15 - DISPUTE RESOLUTION.
In the event that any dispute is not resolved as provided for above,
then all such disputes arising under this Agreement, including but not limited
to the validity and enforceability of any provision of this Agreement shall be
finally submitted to binding arbitration in accordance with the International
Arbitration Rules of the American Arbitration Association in effect as of the
date of this Agreement. The number of arbitrators shall be one and shall be a
person familiar with the legal system of the United States and Poland. All
arbitral proceedings will be held in Chicago, Illinois, U.S.A. and shall be
conducted in the English language. The decisions of the arbitrator shall be
final and nonappealable. The arbitration award shall be final and binding upon
the parties, not subject to appeal and shall deal with the question of the costs
and legal fees incurred in connection with the arbitration proceeding.
ARTICLE 16 - APPLICABLE LAW.
The construction, interpretation and performance of this Agreement
shall be governed by and construed in accordance with the internal laws of the
State of Illinois, U.S.A.
ARTICLE 17 - MISCELLANEOUS.
(a) Binding Effect; Assignment. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties and their
affiliates and their respective successors, legal
12
<PAGE>
representatives and assigns. Except as expressly provided
herein, nothing herein shall create or be deemed to create any
third party beneficiary rights in any person or entity not a
party to this Agreement. No assignment of this Agreement or of
any rights or obligations hereunder may be made by any party
(by operation of law or otherwise) without the prior written
consent of the other party; provided, however, that Agribrands
may assign this option to any of its affiliates. Any attempted
assignment without the required consents shall be void.
(b) Counterparts. This Agreement shall be executed in two (2)
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument. In pleading or proving any provision of this
Agreement, it shall not be necessary to provide more than one
such counterpart.
(c) Section Headings. The section headings contained in this
Agreement are inserted for convenience of reference only and
shall not otherwise affect the meaning of interpretation of or
be deemed to be a substantive part of this Agreement.
(d) Waiver. The failure of either party at any time or times to
enforce or require performance of any provision hereof shall
in no way operate as a waiver or affect the right of such
party at a later time to enforce the same. No waiver by either
party of any condition or the breach of any provision
contained in this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be or
construed as a further or continuing waiver of any such
condition or breach, or a waiver of any other condition or of
any breach of any other provision contained in this Agreement.
(e) Severability. If any provision of this Agreement shall
hereafter be held to be invalid or unenforceable for any
reason, that provision shall be reformed to the maximum extent
permitted to preserve the parties' original intent, failing
which it shall be severed from this Agreement with the balance
of the Agreement continuing in full force and effect. Such
occurrence shall not have the effect of rendering the
provision in question invalid in any other jurisdiction or in
any other case or circumstances or of rendering invalid any
other provisions contained herein to the extent that such
other provisions are not themselves actually in conflict with
any applicable law.
(f) Entire Agreement. This Agreement cancels and supersedes all
previous agreements and understandings, oral or written,
between the parties with respect to the subject matter hereof.
No modification of this Agreement or waiver of any provision
or right hereunder will be binding upon either party unless
signed in writing by an authorized representative of such
party.
13
<PAGE>
(g) Controlling Language. The official text of this Agreement is
in the English language. If the Agreement is translated into
any other language for the convenience of the parties or any
other person, the English language text shall govern any
question with respect to interpretation.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
Agribrands International, Inc. Land O'Lakes, Inc.
("Agribrands") ("Land O'Lakes)
By:___________________________ By:_________________________
Name: ________________________ Name:_______________________
Title: _______________________ Title:______________________
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 2/29/00
AGRIBRANDS INTERNATIONAL, INC. BALANCE SHEET AND STATEMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001047598
<NAME> AGRIBRANDS INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 174,100
<SECURITIES> 1,800
<RECEIVABLES> 85,600
<ALLOWANCES> 12,100
<INVENTORY> 90,900
<CURRENT-ASSETS> 345,600
<PP&E> 352,800
<DEPRECIATION> 179,900
<TOTAL-ASSETS> 574,000
<CURRENT-LIABILITIES> 142,900
<BONDS> 11,300
<COMMON> 100
0
0
<OTHER-SE> 390,000
<TOTAL-LIABILITY-AND-EQUITY> 574,000
<SALES> 589,000
<TOTAL-REVENUES> 589,000
<CGS> 488,900
<TOTAL-COSTS> 488,900
<OTHER-EXPENSES> 61,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,500
<INCOME-PRETAX> 37,500
<INCOME-TAX> 12,600
<INCOME-CONTINUING> 24,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,900
<EPS-BASIC> 2.42
<EPS-DILUTED> 2.34
<FN>
F1 LOSS - PROVISION INCLUDED IN OTHER-EXPENSE ABOVE
</FN>
</TABLE>
