SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 31, 2000
AGWAY INC.
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(Exact name of registrant as specified in its charter)
Delaware 2-22791 15-0277720
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
333 Butternut Drive, DeWitt, New York 13214
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (315) 449-6436
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<PAGE>
ITEM 2. DISPOSITION OF ASSETS
On July 31, 2000, Agway, Inc. (Agway) and Southern States Cooperative, Inc.,
Richmond, Virginia (Southern States), announced that they had finalized Southern
States' purchase of Agway's consumer wholesale dealer business. Effective
immediately, Southern States assumed all dealer marketing, development,
operations, distribution and logistics for this business. Under the terms of the
agreement, Southern States will supply farm, lawn, home and garden, vegetable
seed and bird food products for over 500 Agway consumer dealers in the
Northeast. These dealers will continue using the Agway name, as will new
independent dealers established by Southern States as it expands the dealer
network within the northeastern geography historically serviced by Agway. Agway
will continue to manufacture, promote, distribute and sell its Agway and Legends
bagged feed products through the dealer channel in the Northeast. Agway will
also continue to manufacture its branded products, including Feathered Friend
bird food, Agway seed and Seedway vegetable seed and turf seed products, for
distribution by Southern States.
The aggregate consideration received by Agway consisted of $9,080,000 in cash,
assumption of $1,963,000 of accounts payable by Southern States and a
$13,300,000 interest-bearing promissory note to Agway from Southern States
payable in 30 months. These proceeds purchased accounts receivable totaling
approximately $13,395,000, inventory of $10,215,000 and personal property of
$733,000. The accounts receivable and personal property sold were based on net
realizable value at the closing date, and the inventory value was based on lower
of cost or market with any devaluation being negotiated by Agway and Southern
States. Agway expects to recognize a net loss on this transaction of
approximately $4,200,000.
As part of the transaction, Agway and Southern States also entered into a
10-year license agreement whereby Southern States will pay Agway for the use of
the name "Agway" and certain registered and unregistered trademarks associated
therewith throughout the consumer wholesale dealer business trade area in
connection with the sale of products manufactured or distributed by Agway.
Currently, Agway and Southern States co-own a bulk and bagged feed manufacturing
plant in Gettysburg, Pennsylvania, and are co-owners of a pet food joint venture
with four other farmer-owned cooperatives. Brands currently available through
Agway and Southern States dealers now include Legends(R), Response(R),
Pro-Pet(R), Big Red(R), Li'l Red(R), and Statesman(R).
Furthermore, as was previously disclosed, in October 1999, Agway approved a plan
to restructure its retail operations by converting the majority of
Agway-operated retail stores into dealer-operated stores and to add additional
dealer-operated stores to the consumer wholesale dealer business. This
conversion is taking place in a series of transactions with numerous
counter-parties. As a result of the above sale of the consumer wholesale dealer
business to Southern States, Agway is expected to account for its former retail
segment (its retail/wholesale operations) as a discontinued operation for its
annual financial statements for the fiscal year ended June 30, 2000, which will
be filed on Form 10-K in September 2000. The operating results and the gain or
loss on the disposition of these discontinued operations will be disclosed
separately from those results of continuing operations and are anticipated to
reflect a significant level of loss for the year ended June 30, 2000.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial statements
are filed with this report:
<TABLE>
<S> <C>
Pro Forma Condensed Consolidated Balance Sheet at March 31, 2000................................... Page F-1
Pro Forma Condensed Consolidated Statement of Operations as of the nine months
ended March 31, 2000.......................................................................... Page F-2
Pro Forma Condensed Consolidated Statement of Operations as of the year ended June 30, 1999........ Page F-3
</TABLE>
The pro forma condensed consolidated balance sheet of Agway as of March 31, 2000
reflects the financial position of the Company assuming disposition of the
consumer wholesale dealer business of Agway, as discussed in Item 2 above, took
place on March 31, 2000 and after giving effect to that disposition.
The pro forma condensed consolidated statements of operations for the nine
months ended March 31, 2000 and the fiscal year ended June 30, 1999 give effect
to the disposition as if such disposition occurred on July 1, 1998 and are based
on the operations of the Registrant for the nine months ended March 31, 2000 and
the fiscal year ended June 30, 1999. Nonrecurring charges or credits resulting
directly from the transaction such as asset write-downs, liability accruals and
severance have not been considered in these pro forma statements of operations.
The unaudited pro forma condensed consolidated financial statements have been
prepared by Agway based upon assumptions deemed proper by it. The unaudited pro
forma condensed consolidated financial statements presented herein are shown for
illustrative purposes only and are not necessarily indicative of the future
financial position or future results of operations of Agway, or of the financial
position or results of operations of Agway that would have actually occurred had
the transaction been in effect as of the date or for the period presented. In
addition, it should be noted that Agway's financial statements will reflect the
disposition as part of discontinued operations as of June 30, 2000, as noted in
Item 2.
The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the historical financial statements and related notes
of Agway.
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<PAGE>
PRO FORMA FINANCIAL INFORMATION
AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 2000
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------
ASSETS As reported Wholesale (a) Other Pro Forma
------ -------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Trade accounts receivable ........... $ 166,787 $ (16,511) $ 3,116 (e) $ 153,392
Leases receivable, less unearned
income of $68,491 ............... 148,191 (0) 0 148,191
Advances and other receivables ...... 39,625 (170) 0 39,455
Inventories ......................... 202,780 (34,369) 0 168,411
Prepaid expenses .................... 51,269 (45) 0 51,224
---------- ---------- ---------- -----------
Total current assets ............ 608,652 (51,095) 3,116 560,673
Marketable securities available for sale . 36,539 (0) 0 36,539
Other security investments ............... 52,062 (0) 0 52,062
Properties and equipment, net ............ 214,213 (1,808) 0 212,405
Long-term leases receivable, less unearned
income of $156,348 .................. 442,862 (0) 0 442,862
Net pension asset ........................ 208,459 (0) 0 208,459
Other assets ............................. 21,017 (191) 13,300 (b) 34,126
---------- ---------- ---------- -----------
Total assets ................. $1,583,804 $ (53,094) $ 16,416 $ 1,547,126
========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes payable ...................... $ 160,388 $ (0) $ (27,626) (c) $ 132,762
Current installments of long-term .. 100,249 (0) 0 100,249
debt............................
Current installments of subordinated 72,109 (0) 0 72,109
debt............................
Intercompany operating advance ..... 0 (33,025) 33,025 (d) 0
Accounts payable ................... 163,533 (17,167) 15,204 (e) 161,570
Other current liabilities .......... 111,149 (1,062) 0 110,087
---------- ----------- ----------- -----------
Total current liabilities ...... 607,428 (51,254) 20,603 576,777
Long-term debt .......................... 274,547 (0) 0 274,547
Subordinated debt ....................... 417,097 (0) 0 417,097
Other liabilities ....................... 107,617 (1,840) 0 105,777
---------- ----------- ----------- -----------
Total liabilities .............. 1,406,689 (53,094) 20,603 1,374,198
Commitments and contingencies
Shareholders' equity:
Preferred stock, net ............... 40,389 (0) 0 40,389
Common stock, net .................. 2,479 (0) 0 2,479
Accumulated other comprehensive
income (loss) .................. (825) (0) 0 (825)
Retained earnings .................. 135,072 (0) (4,187) (f) 130,885
---------- ----------- ----------- -----------
Total shareholders' equity ..... 177,115 (0) (4,187) 172,928
---------- ----------- ----------- -----------
Total liabilities and
shareholders' equity .... $1,583,804 $ (53,094) $ 16,416 $ 1,547,126
========== =========== =========== ===========
</TABLE>
(a) To eliminate the assets and liabilities included in the balance sheet
of Agway's consumer wholesale dealer business as of March 31, 2000.
(b) To reflect the $13,300 promissory note.
(c) To reflect the cash proceeds from the sale, elimination of working
capital needs and the income statement impact from the transaction.
(d) To eliminate the intercompany operating advance payable and to reflect
it as a reduction to notes payable.
(e) To reflect amounts retained by Agway.
(f) To reflect net income statement impact from the transaction.
F-1
<PAGE>
PRO FORMA FINANCIAL INFORMATION
AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------
As Reported Wholesale (a) Other Pro Forma
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and revenues from:
Product sales (including excise taxes) $ 1,084,519 $ (99,189) $ 52,338 (b) $ 1,037,668
Leasing operations......................... 56,592 (0) 0 56,592
Insurance operations....................... 20,589 (0) 0 20,589
------------- ------------- ---------- -----------
Total net sales and revenues.......... 1,161,700 (99,189) 52,338 1,114,849
Cost and expenses from:
Products and plant operations.............. 1,021,143 (93,334) 52,338 (b) 980,147
Leasing operations......................... 22,801 (0) 0 22,801
Insurance operations....................... 12,153 (0) 0 12,153
Selling, general and administrative
activities.............................. 116,829 (6,778) 0 110,051
------------- ------------- ---------- -----------
Total costs and expenses.............. 1,172,926 (100,112) 52,338 1,125,152
Operating earnings (loss)....................... (11,226) 923 0 (10,303)
Interest (expense) revenue, net.................. (25,591) 938 898 (c) (23,755)
Other income, net................................ 13,312 (58) 0 13,254
------------- ------------- ---------- -----------
Earnings (loss) before income taxes.............. (23,505) 1,803 898 (20,804)
Income tax (expense) benefit .................... 6,387 (650) (d) (323) (d) 5,414
------------- ------------- ---------- -----------
Net earnings (loss).............................. $ (17,118) $ 1,153 $ 575 $ (15,390)
============= ============= ========== ============
</TABLE>
(a) To eliminate the profit and loss of the consumer wholesale dealer business
for the nine-month period.
(b) To reflect elimination of intercompany amounts.
(c) To reflect interest revenue on the promissory note receivable using an
estimated rate of 9%.
(d) To reflect the estimated tax impact of pro forma adjustments.
F-2
<PAGE>
PRO FORMA FINANCIAL INFORMATION
AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------
As Reported Wholesale (a) Other Pro Forma
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales and revenues from:
Product sales (including excise taxes) $ 1,386,388 $ (144,655) $ 83,038 (b) $ 1,324,771
Leasing operations ................... 70,006 (0) 0 70,006
Insurance operations ................. 27,968 (0) 0 27,968
----------- ----------- ----------- -----------
Total net sales and revenues .... 1,484,362 (144,655) 83,038 1,422,745
Cost and expenses from:
Products and plant operations ........ 1,268,899 (136,502) 83,038 (b) 1,215,435
Leasing operations ................... 27,626 (0) 0 27,626
Insurance operations ................. 17,152 (0) 0 17,152
Selling, general and administrative
activities ........................ 152,221 (13,191) 0 139,030
----------- ----------- ----------- -----------
Total costs and expenses ........ 1,465,898 (149,693) 83,038 1,399,243
Operating earnings (loss) .................. 18,464 5,038 0 23,502
Interest (expense) revenue, net ............ (32,286) 1,370 1,197 (c) (29,719)
Other income, net .......................... 19,790 (115) 0 19,675
----------- ----------- ----------- -----------
Earnings (loss) before income taxes ........ 5,968 6,293 1,197 13,458
Income tax expense ......................... (4,173) (2,265) (d) (430) (d) (6,438)
----------- ----------- ----------- -----------
Net earnings (loss) ........................ $ 1,795 $ 4,028 $ 767 $ 6,590
=========== =========== =========== ===========
</TABLE>
(a) To eliminate the profit and loss of the consumer wholesale dealer business
for the year ended June 30, 1999.
(b) To reflect elimination of intercompany amounts.
(c) To reflect interest revenue on the promissory note receivable using an
estimated rate of 9%.
(d) To reflect the estimated tax impact of pro forma adjustments.
F-3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (CONT.)
(b) Exhibits
The following is a complete list of exhibits filed as part of this report:
Exhibit 99.1 Asset Purchase Agreement, dated as of June 20, 2000, between
Agway Inc. and Southern States Cooperative Inc.
Exhibit 99.2 Letter to confirm certain agreements between Agway Inc. and
Southern States Cooperative Inc. relating to the payment of
the purchase price, dated as of July 31, 2000.
As set forth in Exhibits 99.1 and 99.2, certain schedules have been omitted in
accordance with Item 601(b)(2) of Regulation S-K. Agway will furnish a copy of
any such schedule to the Commission upon its request.
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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 hereunto duly authorized.
AGWAY INC.
(Registrant)
Date August 15, 2000 By /s/ PETER J. O'NEILL
----------------------------- ------------------------------
Peter J. O'Neill
Senior Vice President
Finance & Control
(Principal Financial Officer and
Chief Accounting Officer)
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Schedule # Title
2.1 Vendor rebate/recover programs
3.1(d) Assumed liabilities
3.1(e) Obligations or liabilities of ongoing contracts
6.1 Qualified jurisdictions
6.2.1 Conflicts real property leases
6.2.2 Required consents
6.3 Absence of change of business
6.4 Tax disclosure
6.5.1 Real estate leases/subleases
6.5.2 Real property conflicts of rights
6.5.3 Real property - easements, etc.
6.6.1 Dealer agreements and related commitments
6.7 All material governmental licenses, permits, consents or
certificates
6.8.1 List of machinery, equipment, furniture and fixtures
6.8.2 Personal property liens
6.8.3 List of leased personal property
6.9 Accounts receivable
6.11 Inventory title defects/liens
6.13 Litigation
6.14 Environmental
14.1.2 Consumer fertilizer specifications
14.8 Products subject to non-competition agreement
19.6 Officers with knowledge
