Registration Statement No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-1
REGISTRATION STATEMENT
THE SECURITIES ACT OF 1933
FARMLAND INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Kansas 44-0209330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2011
(Primary Standard Industrial Classification Code Number)
3315 N. Oak Trafficway, Kansas City, Missouri 64116-0005
816-459-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
J. F. Berardi
Executive Vice President
Chief Financial Officer
Farmland Industries, Inc.
3315 N. Oak Trafficway, Kansas City, Missouri 64116-0005
816-459-6201
(Name, Address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public:
DECEMBER 30, 1994
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. ( X )
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
PROPOSED PROPOSED MAXIMUM
Amount Maximum Aggregate Amount of
Title of Each Class of Being Offering Price Offering or Registration
Security Being Registered Registered Per Unit Exchange Price Fee
<S> <C> <C> <C> <C>
Demand Loan Certificates $ 13,600,000 100% $ 13,600,000 $ 4,690
Subordinated Capital
Investment Certificates
-Ten Year $ 44,100,000 100% $ 44,100,000 $ 15,207
-Five Year $ 44,000,000 100% $ 44,000,000 $ 15,172
Subordinated Monthly Income
Capital Investment Certificates
-Ten Year $ 26,700,000 100% $ 26,700,000 $ 9,207
-Five Year $ 13,100,000 100% $ 13,100,000 $ 4,517
Total $ 141,500,000 $ 48,793
</TABLE>
Pursuant to Rule 429, the combined prospectus filed as a part of this
Registration Statement relates as well to Registrant's Form S-1 Registration
Statement No. 33-49253 and No. 33-51319.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PART I
FARMLAND INDUSTRIES, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
1. Forepart of registration statement and Cover of Registration Statement
outside front cover page of Prospectus Cross Reference Sheet
Front Page of Prospectus
2. Inside front and outside back Available Information
cover pages of Prospectus Reports to Security Holders
3. Summary Information, Risk Factors Prospectus Summary
and Ratio of Earnings to Fixed Charges Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Description of Securities
to be Registered Description of the Ten-Year
Subordinated Capital Investment
Certificates
Description of the Five-Year
Subordinated Capital Investment
Certificates
Description of the Ten-Year
Subordinated Monthly Income
Capital
Investment Certificates
Description of the Five-Year
Subordinated Monthly Income
Capital
Investment Certificates
Description of the Demand Loan
Certificates
10.Interest of Named Experts and Counsel Interest of Named Experts
and Counsel
11.Information with Respect to the
Registrant
(a) 1. General Development of
Business The Company
Business - General
2. Financial Information About Note 12 of Notes to Consolidated
Industry Segments Financial Statements
3. Description of Business Business
(b) Description of Properties Business
(c) Legal Proceedings Legal Proceedings
(d) Market Price of and Dividends
on the Not Applicable
Registrant's Common Equity and
Related
Stockholder Matters
(e) Financial Statements Index to Farmland Consolidated
Financial Statements
(f) Selected Financial Data Selected Consolidated Financial
Data
(g) Supplementary Financial
Information Not Applicable
(h) Management's Discussion
and Analysis of Management's Discussion and
Financial Condition and Analysis of Financial
Results of Operations Condition and Results
of Operations
(i) Changes in and Disagreements with Not Applicable
Accountants on Accounting and
Financial Disclosure
(j) Directors and Executive Officers Management
(k) Executive Compensation Executive Compensation
(l) Security Ownership of Certain
Beneficial Not Applicable
Owners and Management
(m) Certain Relationships and Certain Transactions
Related Transactions
12.Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
PROSPECTUS
FARMLAND INDUSTRIES, INC.
<TABLE>
<CAPTION>
AMOUNTS OFFERED TO:
THE GENERAL EXISTING
PUBLIC SECURITY HOLDERS
<S> <C> <C>
SUBORDINATED CAPITAL INVESTMENT CERTIFICATES
TEN-YEAR $ 40,000,000 $ 20,000,000
FIVE-YEAR $ 45,000,000 $ 25,000,000
SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT CERTIFICATES
TEN-YEAR $ 20,000,000 $ 20,000,000
FIVE-YEAR $ 12,000,000 $ 10,000,000
DEMAND LOAN CERTIFICATES $ 60,000,000 $ -0-
</TABLE>
CERTAIN RISK FACTORS CONNECTED WITH THE PURCHASE OF THESE SECURITIES ARE
DISCUSSED ON PAGE 10. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE
TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Farmland Industries, Inc. ("Farmland") is offering: (1) to the owners of
its Subordinated Capital Investment Certificates ("Certificates") the right to
exchange (see "Exchange Offer") such Certificates for an equivalent principal
amount of any Subordinated Monthly Income Capital Investment Certificate
($5,000 minimum) which, at the time of the exchange, is being offered by this
Prospectus, and (2) to the owners of its Subordinated Capital Investment
Certificates, which have been held until eligible for redemption prior to
maturity at the option of the owner, the right to exchange such certificates
for an equivalent principal amount of any Subordinated Capital Investment
Certificate which, at the time of the exchange, is being offered by this
Prospectus. This offer will expire at 12:00 P.M. Eastern Standard Time on
December 31, 1995, unless terminated prior to such date.
(Continued from preceding page)
<TABLE>
<CAPTION>
Underwriting
Price to Discounts Proceeds to
Public(1) Commissions(2) Farmland(2)
<S> <C> <C> <C>
Subordinated Capital Investment Certificates*
--$100 minimum
Ten-Year Total $ 40,000,000 $ 40,000,000
Five-Year Total $ 45,000,000 $ 45,000,000
Subordinated Monthly Income Capital
Investment Certificates*
--$5,000 minimum (additional units in
incremental amounts of $1,000 or more)
Ten-Year Total $ 20,000,000 $ 20,000,000
Five-Year Total $ 12,000,000 $ 12,000,000
Demand Loan Certificates*
--$100 minimum
Total $ 60,000,000 $ 60,000,000
<FN>
*See "Determination of the Certificate Interest Rate."
</TABLE>
(1) Farmland's offering of debt certificates is being made in compliance with
the terms of a partial exemption from the requirements of Schedule E of the
Bylaws of the National Association of Securities Dealers, Inc. (NASD). As
a condition of this partial exemption, a minimum of 80 percent of the
dollar amount of aggregate sales made in this offering must be to
individuals or entities who are members of a defined group, the definition
of which has been approved by the NASD.
(2) The debt certificates offered hereby for cash and for exchange are offered
on a "best efforts" basis by Farmland Securities Company and American
Heartland Investments, Inc. and may be offered by other broker-dealers
selected by Farmland. See "Plan of Distribution." The offering is for an
indeterminate period of time, not expected to be in excess of two years
with no minimum amount of securities which must be sold. The proceeds to
Farmland are before deducting estimated commissions and expenses to be paid
by Farmland of $5,272,000 and $1,365,000, respectively, assuming that all
securities offered hereby are sold.
AVAILABLE INFORMATION
Farmland is subject to certain of the informational requirements of the
Securities and Exchange Act of 1934, as amended, and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Information filed by Farmland can be inspected and copied
at the offices of the Commission at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C.; Room 1100, Federal Building, 26
Federal Plaza, New York, New York 10278; and Room 1228, Everett McKinley
Dirksen Building, 219 South Dearborn Street, Chicago, Illinois 60604. Copies
of such material may be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
REPORTS TO SECURITY HOLDERS
Farmland intends to make available to holders of its Certificates, upon
written request from any such holder to the address stated on page 4, a copy of
the latest annual report containing the audited consolidated financial
statements of Farmland and its subsidiaries.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF SO GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY FARMLAND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY SUCH SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY DISTRIBUTION OF THE SECURITIES UNDER THIS PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AT ANY TIME SUBSEQUENT TO THE RESPECTIVE DATES AT WHICH INFORMATION IS
GIVEN HEREIN OR THE DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
DETERMINATION OF THE CERTIFICATE INTEREST RATE . . . . . . . . . . . . . 12
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
HOW TO ACCEPT EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . 14
HOW TO TRANSFER OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . 15
DESCRIPTION OF THE TEN-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES 15
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES 19
DESCRIPTION OF THE TEN-YEAR SUBORDINATED MONTHLY INCOME CAPITAL
INVESTMENT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . 23
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED MONTHLY INCOME CAPITAL
INVESTMENT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . 26
DESCRIPTION OF THE DEMAND LOAN CERTIFICATES . . . . . . . . . . . . . . 29
INTEREST OF NAMED EXPERTS AND COUNSEL . . . . . . . . . . . . . . . . . 31
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
PATRONAGE REFUNDS AND DISTRIBUTION OF NET INCOME . . . . . . . . . . . . 40
EQUITY REDEMPTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . 41
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
QUALIFIED INDEPENDENT UNDERWRITER . . . . . . . . . . . . . . . . . . . 47
INDEX TO FARMLAND CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . 48
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . 75
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . 91
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 93
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes appearing
elsewhere in this Prospectus.
FARMLAND INDUSTRIES, INC.
P. O. Box 7305
Kansas City, Missouri 64116
Telephone (816) 459-6000
Business Farmland Industries, Inc. ("Farmland") is a regional farm supply and
marketing cooperative. Farmland is owned by its members and only its
members are eligible to vote for directors or for the management or
affairs of Farmland. Members are entitled to receive patronage
refunds distributed by Farmland from its member-sourced annual net
income. See "Business and Properties - Patronage Refunds and
Distribution of Net Income." Farmland and subsidiaries (the
"Company") conducts business primarily in two operating areas -
cooperative farm supply operations and cooperative processing and
marketing operations.
Cooperative farm supply operations consists of three product
divisions--petroleum, crop production and feed. The Company
distributes farm supply products at wholesale. Approximately 65% of
the Company's sales of farm supply products in 1994 were to farm
cooperative associations (members and owners of Farmland). These
farm cooperatives distribute products primarily to farmers and
ranchers in states which comprise the corn belt and the wheat belt
who utilize the products in the production of farm crops and
livestock.
Cooperative marketing operations include the storage and marketing
of grain, processing pork and beef, and marketing fresh pork,
processed pork, fresh beef and boxed beef. In 1994, approximately
61% of the hogs processed and 46% of the grain marketed were
supplied to the Company by its members. Cattle are purchased from
producers in the proximity of beef plants at Liberal and Dodge City,
Kansas.
A substantial portion of the Company's farm supply, pork and beef
products are produced in facilities owned by the Company or operated
by the Company under long-term lease arrangements. No material part
of the business of any segment of the Company is dependent on a
single customer or a few customers. The Company competes for market
share with numerous participants (including other regional
cooperatives) with various levels of vertical integration, product
diversification, sizes and types of operations.
THE OFFERING
<TABLE>
<CAPTION>
OFFERED AT 100% OF
AGGREGATE FACE AMOUNT
FOR FOR
CASH EXCHANGE
<S> <C> <C>
Description of Securities* (see pages 15 to 29):
Subordinated Capital Investment Certificates - $100 Minimum
Interest payable or compounded semiannually at the
Certificate Interest Rate
10-year maturity $ 40,000,000 $ 20,000,000
5-year maturity $ 45,000,000 $ 25,000,000
Subordinated Monthly Income Capital Investment Certificates
- $5,000 Minimum
Interest payable monthly at the Certificate Interest Rate (additional
units may be purchased in increments of $1,000 or more)
10-year maturity $ 20,000,000 $ 20,000,000
5-year maturity $ 12,000,000 $ 10,000,000
Demand Loan Certificates - $100 minimum $ 60,000,000 $ -0-
*Subordinated Capital Investment Certificates and Subordinated
Monthly Income Capital Investment Certificates are referred
to in this Prospectus as "Subordinated Debt Certificates."
</TABLE>
PLAN OF DISTRIBUTION
Offered on a best efforts basis by Farmland Securities Company ("FSC") and
American Heartland Investments, Inc. ("AHI") and may be offered by selected
broker-dealers. See "Plan of Distribution."
UNDERWRITING DISCOUNTS AND COMMISSIONS
Farmland will pay commissions to FSC not to exceed 4% of the sale price of
Demand Loan Certificates and Subordinated Debt Certificates being offered.
Farmland will pay all expenses and liabilities incurred by FSC, limited to
an amount not to exceed 3% of the aggregate sales price of Demand Loan and
Subordinated Debt Certificates being offered. Farmland will pay to AHI and
to other selected broker-dealers for their services a sales commission of
not more than 4% of the face amount of the Subordinated Debt Certificates
and not more than 1/2 of 1% of the face amount of the Demand Loan
Certificates which the broker-dealers sell. See "Plan of Distribution."
PURPOSE OF THE EXCHANGE OFFER
The purpose of the exchange offer is to extend the period of time for which
Farmland may utilize funds borrowed from an investor in its securities.
METHOD OF TRANSACTING AN EXCHANGE
The exchange offer may be accepted by delivering any of the Certificates,
which are eligible for exchange, to Farmland Securities Company ("FSC")
P.O. Box 7305, Kansas City, Missouri 64116. The Certificates should be
assigned to Farmland in the transfer section (on the reverse side of the
Certificate) and endorsed by all persons whose names appear on the face of
the Certificate. For additional information regarding the exchange, see
"How to Accept Exchange Offer," or call (816) 459-6360 or write to the
above address for specific information.
USE OF PROCEEDS
Any proceeds received will be used to fund portions of capital expenditures
which are estimated to be approximately $289.9 million through August 31,
1996, or to redeem any of the $43.3 million of outstanding Subordinated
Debt Certificates, which mature at various times prior to August 31, 1996,
or to redeem any outstanding Subordinated Debt Certificates prior to
maturity at the request of owners to the extent provided in each
Subordinated Debt Certificates respective trust indenture. Any proceeds in
excess of amounts required for these purposes would be used to reduce bank
or other borrowings with rates of interest higher than the Certificate
Interest Rate of the securities offered hereby. If proceeds from sales of
the securities offered hereby are less than amounts required for these
purposes, additional funds may be obtained from operations or from bank
borrowings. Farmland has reserved the right to change the use of the
proceeds from this offering. See "Use of Proceeds," "Business - Other
Matters - Capital Expenditures," and "Description of Subordinated Capital
Investment Certificates," "Description of Subordinated Monthly Income
Capital Investment Certificates" and "Description of Demand Loan
Certificates."
SELLING PRICE
100% of Face Amount.
PROVISIONS FOR REDEMPTION OR PREPAYMENT
Owners of the Subordinated Debt Certificates may not liquidate their
investments except under restricted conditions summarized below and as more
fully stated in each of the Subordinated Debt Certificates respective trust
indenture.
A. Farmland will not redeem any of the Subordinated Capital Investment
Certificates prior to maturity except:
(i) upon death of an owner; or,
(ii) after the date any Subordinated Capital Investment Certificate
becomes eligible for redemption prior to maturity at the option
of the owner, in additional amounts limited in any month to the
greater of $500,000 or 1/2 of 1% of the balance outstanding
under the Subordinated Capital Investment Certificates
respective trust indenture at the end of the previous month,
provided such balance outstanding is greater than $5,000,000.
If such balance outstanding is less than $5,000,000 there will
be no limitation on early redemption of eligible Subordinated
Capital Certificates outstanding under such trust indenture.
B. Farmland will not redeem the Subordinated Monthly Income Capital
Investment Certificates prior to maturity except upon the death of an
owner.
Farmland has the right to call the Subordinated Capital Investment
Certificates any time after two years from the date of issuance thereof.
See the subcaption, "Redemption" within the description of each type of
certificate.
FARMLAND INDUSTRIES, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992 1991 1990
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Summary of Operations(1)(2)(3):
Sales . . . . . . . . . . . . . . $ 6,677,933 $ 4,722,940 $ 3,429,307 $ 3,638,072 $ 3,377,603
Income (Loss) before Income Taxes and
Extraordinary Item . . . . . . . . . . $ 78,766 $ (36,833) $ 70,504 $ 50,166 $ 58,184
Net Income (Loss) . . . . . . . . . . . . $ 73,876 $ (30,400) $ 62,313 $ 42,693 $ 48,580
Ratio of Earnings to Fixed Charges (4) . . . 2.2 Note 4 2.5 1.9 2.2
Balance Sheets:
Working Capital . . . . . . . . . . . . . $ 290,704 $ 260,519 $ 208,629 $ 122,124 $ 121,518
Property, Plant and Equipment, Net . . . . $ 501,290 $ 504,378 $ 446,002 $ 490,712 $ 469,710
Total Assets . . . . . . . . . . . . . . $ 1,926,631 $ 1,719,981 $ 1,526,392 $ 1,369,231 $ 1,352,889
Long-Term Debt . . . . . . . . . . . . . . $ 517,806 $ 485,861 $ 322,377 $ 291,192 $ 273,071
Capital Shares and Equities . . . . . . . . . $ 585,013 $ 561,707 $ 588,129 $ 497,364 $ 476,011
<FN>
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for details.
</TABLE>
(1) On July 28, 1983, Farmland sold the stock of Terra Resources, Inc.
("Terra"), a wholly-owned subsidiary engaged in oil and gas exploration
and production operations, and exited its oil and gas exploration and
production activities. The gain from the sale of Terra amounted to
$237,200,000 for tax reporting purposes. During 1983, and prior to the
sale of the Terra stock, Farmland received certain distributions from
Terra totaling $24,800,000. For tax purposes, Farmland claimed
intercorporate dividends-received deductions for the entire amount of
such distributions.
On March 24, 1993, the Internal Revenue Service ("IRS") issued a statutory
notice to Farmland asserting deficiencies in federal income taxes (exclusive
of statutory interest thereon) in the aggregate amount of $70,775,000. The
asserted deficiencies relate primarily to the Company's tax treatment of the
sale of the Terra stock and the distributions received from Terra prior to
the sale. The IRS asserts that Farmland incorrectly treated the Terra sale
gain as income against which certain patronage-sourced operating losses
could be offset, and that, as a nonexempt cooperative, Farmland was not
entitled to an intercorporate dividends-received deduction in respect of the
1983 distribution by Terra. It further asserts that Farmland incorrectly
characterized gains for tax purposes aggregating approximately $14,600,000,
and a loss of approximately $2,300,000, from the disposition of certain
other assets. On June 11, 1993, Farmland filed a petition in the United
States Tax Court contesting the asserted deficiencies in their entirety.
Discovery and other pre-trial phases of the litigation have since been
ongoing. The case is scheduled for trial on March 6, 1995.
If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income
tax liabilities aggregating approximately $85,800,000 plus accumulating
statutory interest thereon through October 31, 1994, of approximately
$154,900,000 (before tax benefits of the interest deduction). In addition,
such adjustments would affect the computation of Farmland's taxable income
for its 1989 tax year and, as a result, could increase Farmland's federal
and state income taxes for that year by approximately $5,000,000 plus
applicable statutory interest thereon.
No provision has been made in the consolidated financial statements for
federal or state income taxes (or interest thereon) in respect of the IRS
claims described above. Farmland believes that it has meritorious positions
with respect to all of these claims and will continue to vigorously pursue
their favorable resolution through the pending litigation.
In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i) Farmland's
treatment of the Terra sale gain was substantially, if not entirely,
correct; and (ii) Farmland properly claimed a dividends-received deduction
in respect of the 1983 distributions which it received from Terra prior to
the sale of the Terra stock. Counsel has further advised, however, that
none of the issues involved in these disputes is free from doubt, and that
there can be no assurance that the courts will ultimately rule in favor of
Farmland on any of these issues.
Should the IRS ultimately prevail on all of its asserted claims, all claimed
federal and state income taxes as well as accrued interest would become
immediately due and payable, and would be charged to current operations. In
such case, the Company would be required to renegotiate agreements with its
banks to maintain compliance with various requirements of such agreements,
including working capital and funded indebtedness provisions. However, no
assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale
of assets.
(2) During the year ended August 31, 1991, the Company changed its method for
inventory pricing of certain petroleum inventories from the first-in,
first out (FIFO) method previously used to the last-in, first out (LIFO)
method because the LIFO method better matches current costs with current
revenues. Pro forma effects of retroactive application of the LIFO
method are not determinable.
(3) Acquisitions and Dispositions:
(a) In October 1993, the Company acquired approximately 53% of the common
stock of National Carriers, Inc. ("NCI") and increased its ownership
of NCI to 79% in August 1994. NCI is a trucking company located in
Liberal, Kansas. NCI provides substantially all the trucking service
needs of NBPC. The purchase price of NCI ($4,423,000) was paid in
cash. See note 2 of the notes to consolidated financial statements.
(b) In December 1993, the Company acquired all the common stock of seven
international grain trading companies (collectively referred to as
"Tradigrain"). The purchase price for Tradigrain ($31,367,000) was
paid in cash. See note 2 of the notes to consolidated financial
statements.
(c) During 1993, Farmland obtained a 58% interest in National Beef Packing
Company, L.P. ("NBPC"), a limited partnership. Effective April 15,
1993, NBPC acquired Idle Wild Food's beef packing plant and feedlot
located in Liberal, Kansas. See note 2 of the notes to consolidated
financial statements.
(d) On August 30, 1993, Farmland reduced its ownership interest in The
Cooperative Finance Association, Inc. ("CFA") to 49%. In addition,
CFA purchased the assets and operations of Farmland Financial Services
Company ("FFSC"). Effective December 1, 1993, CFA owners approved a
recapitalization plan which limits the voting rights of any owner
(including Farmland) to 25% or less regardless of the number of voting
shares held. Effective August 31, 1993, CFA is not included in the
consolidated balance sheet of the Company and Farmland is no longer
engaged in commercial lending operations.
(e) Effective June 30, 1992, the Company acquired the grain marketing
assets of Union Equity Co-Operative Exchange ("Union Equity"). See
note 2 of the notes to consolidated financial statements.
<TABLE>
(f) The following unaudited financial information for the year ended
August 31, 1993 and 1992 presents pro forma results of operations of
the Company as if the disposition of CFA and the acquisition of NBPC
had occurred at the beginning each period presented. The pro forma
financial information includes adjustments for amortization of
goodwill, additional depreciation expense, and increased interest
expense on debt assumed in the acquisitions. The pro forma financial
information does not necessarily reflect the results of operations
that would have occurred had the Company been a single entity which
excluded CFA and included Union Equity and NBPC for the full years
1993 and 1992. See note 2 of the notes to consolidated financial
statements.
<CAPTION>
August 31 (Unaudited)
1993 1992
(Amounts in Thousands)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $ 5,357,867 $ 5,441,303
Income (loss) before extraordinary item . . . . $ (44,040) $ 47,225
</TABLE>
(4) In computing the ratio of earnings to fixed charges, income (loss)
represents pretax income (loss) for the enterprise as a whole including
100% of such income (loss) of minority-owned subsidiaries which have
fixed charges, the registrant's share of 50%-owned persons and any
distributed earnings (but not losses or undistributed earnings) of
less-than-fifty percent-owned persons plus fixed charges. Fixed charges
consist of interest and finance charges on all indebtedness plus that
portion of rentals considered to be the interest factor. Income was
inadequate to cover fixed charges for the year ended August 31, 1993.
The dollar amount of the coverage deficiency was $36,609,000.
RISK FACTORS
Prospective investors in the Demand Loan Certificates and Subordinated Debt
Certificates offered hereby are advised to consider the following risk factors:
INCOME TAX MATTERS
The Internal Revenue Services ("IRS") has asserted that Farmland
incorrectly treated as patronage-sourced income a gain for income tax purposes
of $237,200,000 which resulted from the sale of the stock of Terra Resources,
Inc. ("Terra") and that Farmland, as a nonexempt cooperative, was not entitled
to intercorporate dividends-received deductions with respect to distributions
of $24,800,000 received in 1983 from Terra.
On March 24, 1993, the IRS issued a statutory notice to Farmland asserting
deficiencies in federal income taxes (exclusive of statutory interest thereon)
in the aggregate amount of $70,775,000. The asserted deficiencies relate
primarily to the Company's tax treatment of the sale of the Terra stock and the
distributions received from Terra prior to the sale. It further asserts that
Farmland incorrectly characterized gains for tax purposes aggregating
approximately $14,600,000, and a loss of approximately $2,300,000, from
dispositions of certain other assets. On June 11, 1993, Farmland filed a
petition in the United States Tax Court contesting the asserted deficiencies in
their entirety. Discovery and other pre-trial phases of the litigation have
since been ongoing. The case is scheduled for trial on March 6, 1995.
If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income tax
liabilities aggregating approximately $85,800,000 plus accumulating statutory
interest thereon through October 31, 1994, of approximately $154,900,000
(before tax benefits of the interest deduction). In addition, such adjustments
would affect the computation of Farmland's taxable income for its 1989 tax year
and, as a result, could increase Farmland's federal and state income taxes for
that year by approximately $5,000,000 plus applicable statutory interest
thereon.
Should the IRS ultimately prevail on all of its asserted claims, all
claimed federal and state income taxes as well as accrued interest would become
immediately due and payable, and would be charged to current operations. In
such case, the Company would be required to renegotiate agreements with its
banks to maintain compliance with various requirements of such agreements,
including working capital and funded indebtedness provisions. However, no
assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale of
assets. See note 7 of the notes to consolidated financial statements.
GENERAL FACTORS AFFECTING THE COMPANY'S BUSINESS
The Company's revenues depend, to a large extent, on conditions in
agriculture and may be volatile due to factors beyond the Company's control,
such as weather, crop failures, federal agricultural programs, production
efficiencies, and U.S. imports or exports. In addition, various federal and
state regulations to protect the environment encourage farmers to reduce the
amount of fertilizer and other chemicals applications. Federal agricultural
programs continue to encourage U.S. farmers to reduce planted acreage. Global
variables which affect supply, demand and price of crude oil and refined fuels
impact the Company's petroleum operations. Management cannot determine the
extent to which these factors may impact future operations of the Company. The
Company's cash flow and net income may continue to be volatile as conditions
affecting agriculture and markets for the Company's products change. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SOURCE OF FUNDS TO PAY INTEREST AND PRINCIPAL
Farmland does not establish special cash reserves for payment of principal
or interest on its Demand Loan and Subordinated Debt Certificates. In the
past, Farmland has relied on general corporate funds provided by operations,
sales of assets, and other borrowings (including the issuance of other Demand
Loan and Subordinated Debt Certificates) to fund such payments. Farmland
intends to make interest payments on and to redeem Demand Loan and Subordinated
Debt Certificates in accordance with the respective trust indentures with cash
from operations, borrowings, and from issuance of other Demand Loan or
Subordinated Debt Certificates.
SUBORDINATION AND ADDITIONAL DEBT
The Subordinated Debt Certificates offered by this Prospectus for sale and
for exchange are unsecured and subordinated to "senior indebtedness." Such
"senior indebtedness" includes money borrowed from time to time from certain
financial institutions and amounts due and payable under any instrument which
provides that such amounts are to be "senior indebtedness." At August 31,
1994, such money borrowed aggregated approximately $450,827,000. In addition,
such other instruments (principally long-term leases) then in effect provided
for aggregate payments over nine years of approximately $126,505,000. There is
no limitation on the amount of additional senior debt for which Farmland may
become liable, except that, in accordance with covenants in certain borrowing
and lease agreements, the total amount of funded debt and senior funded debt
outstanding may not exceed 52% and 43% of capitalization, respectively. See
"Management Discussion and Analysis of Financial Condition and Results of
Operations" and the subcaption "Subordination" within the description of each
type of certificate. The Demand Loan Certificates are unsecured general
obligations of Farmland Industries, Inc.
RESTRICTED REDEMPTION RIGHTS OF HOLDERS OF SUBORDINATED DEBT CERTIFICATES
OWNERS OF THE SUBORDINATED DEBT CERTIFICATES MAY NOT LIQUIDATE THEIR
INVESTMENTS EXCEPT UNDER RESTRICTED CONDITIONS SUMMARIZED BELOW AND MORE FULLY
STATED IN EACH OF THE SUBORDINATED DEBT CERTIFICATES RESPECTIVE TRUST
INDENTURE. THE RESTRICTED REDEMPTION RIGHTS OF HOLDERS OF THE SUBORDINATED
DEBT CERTIFICATES MAY BE UNSUITABLE TO THE INVESTMENT OBJECTIVES OF CERTAIN
PROSPECTIVE INVESTORS.
Farmland will not redeem any of the Subordinated Capital Investment
Certificates prior to maturity except:
(i) upon death of an owner; or,
(ii) after the date any Subordinated Capital Investment Certificate
becomes eligible for redemption prior to maturity at the option
of the owner, in additional amounts limited in any month to the
greater of $500,000 or 1/2 of 1% of the balance outstanding
under the Subordinated Capital Investment Certificates'
respective trust indenture at the end of the previous month,
provided such balance outstanding is greater than $5,000,000.
If such balance outstanding is less than $5,000,000, there will
be no limitation on early redemption of eligible Subordinated
Capital Investment Certificates outstanding under such trust
indenture..
Farmland will not redeem the Subordinated Monthly Income Capital Investment
Certificates prior to maturity except upon the death of an owner.
Farmland has the right to call the Subordinated Capital Investment
Certificates any time after two years from the date of issuance thereof. See
the subcaption "Redemption" within the description of each type of certificate.
LACK OF AN ESTABLISHED MARKET FOR THE SECURITIES TO BE OFFERED
There is no secondary market for Farmland's Subordinated Debt Certificates
or Demand Loan Certificates presently outstanding and there likely will be no
secondary market for these securities.
AFFILIATED UNDERWRITER
Farmland Securities Company ("FSC") is a wholly-owned subsidiary of
Farmland. FSC's business is limited to the offer and sale of securities issued
by Farmland. This offering is being made in compliance with terms of a partial
exemption from requirements of Schedule E of the NASD Bylaws; no persons, other
than persons associated with Farmland or FSC, participated in determining the
price and other terms of the securities offered hereby. See "Plan of
Distribution."
POTENTIAL TAXABLE GAINS OR LOSSES FROM THE EXCHANGE
An exchange of Certificates in a transaction permitted by this Prospectus
could result in a gain or a loss for purposes of determining taxable income of
holders of Certificates. See "Exchange Offer."
DETERMINATION OF THE CERTIFICATE INTEREST RATE
The Certificate Interest Rate ("CIR") is the interest rate per annum on the
Certificates as determined by the President of Farmland, from time to time, at
his sole discretion after giving consideration to the current rates of interest
established by various money markets, and Farmland's need for funds. Any
change in the CIR will not affect the CIR on any Subordinated Capital
Investment Certificates or Subordinated Monthly Income Capital Investment
Certificates for which the full purchase price was received prior to the
change. With respect to the Demand Loan Certificates, the CIR is the interest
rate for Demand Loan Certificates as determined, from time to time, by the
President of Farmland, in his sole discretion. Except as hereinafter provided,
each Demand Loan Certificate shall earn interest at the CIR in effect on the
date of issuance of such Demand Loan Certificate for a period of six (6) months
only: provided, however, that if during such six (6) month period the CIR for
Demand Loan Certificates is increased to a rate higher than that currently in
effect for a Demand Loan Certificate, then each such Demand Loan Certificate
shall earn interest at the increased rate from the effective date of the
increase to the end of such Demand Loan Certificate's then current six (6)
month period. Six (6) months from the date of issuance of each Demand Loan
Certificate and each six (6) month anniversary date thereafter, such Demand
Loan Certificate shall, if not redeemed, earn interest at the CIR for Demand
Loan Certificates in effect on such anniversary date, but only for a six (6)
month period from such anniversary date, subject to the escalation provisions
previously set forth. A decrease in the CIR for Demand Loan Certificates will
have no effect on the CIR of any Demand Loan Certificate issued prior to the
decrease unless such decreased rate is in effect on the first day of the next
subsequent six (6) month period of such outstanding Demand Loan Certificate.
On the date of this Prospectus, the CIR was 7.75% on Five-Year and 8.25% on
Ten-Year Subordinated Capital Investment Certificates; 7.75% on Five-Year, and
8.25% on Ten-Year Subordinated Monthly Income Capital Investment Certificates;
and 4.75% on Demand Loan Certificates. Whenever the CIR is changed, this
Prospectus shall be amended to specify the interest rate in effect, after the
effective date of the change as specified in the amendment, on the Certificates
to be offered pursuant to such Prospectus. Whenever the CIR is changed each
respective Demand Loan Certificate and Subordinated Debt Certificate owner is
notified in writing of the change as specified in the amendment. Information
concerning the CIR can be obtained from the Prospectus or from Farmland
Securities Company, Post Office Box 7305, Kansas City, Missouri 64116
(telephone 1-800-821-8000, extension 6360). See "Description of the Ten-Year
and Five-Year Subordinated Capital Investment Certificates," "Ten-Year and
Five-Year Subordinated Monthly Income Capital Investment Certificates" and
"Demand Loan Certificates."
USE OF PROCEEDS
The offering is made on a best efforts basis with no established minimum
amount of Subordinated Debt and Demand Loan Certificates that must be sold. No
assurance can be provided as to the amount of net proceeds the Company may
receive as a result of this offering. Assuming that all of the Subordinated
Debt and Demand Loan Certificates offered hereby are sold, net proceeds to the
Company will be approximately $170,363,000 after deducting estimated
commissions and expenses. Any proceeds to the Company from this offering may
be used: 1) to fund portions of the Company's capital expenditures which are
expected to be approximately $289.9 million through the two-year period ending
August 31, 1996; 2) to refinance approximately $43.3 million of Subordinated
Debt Certificates which mature at various times prior to August 31, 1996; 3) to
fund call options which, subject to provisions in each respective trust
indenture, may be exercised by Farmland; or 4) to redeem Subordinated Debt
Certificates prior to maturity at owners' requests, restricted to the limited
redemption rights of owners as described in each Subordinated Debt Certificates
respective trust indenture. See "Other Matters - Capital Expenditures" and the
subcaption "Redemptions" within the description of each type of certificate.
Any proceeds in excess of amounts required for the above purposes would be
applied to reduce bank or other borrowings being used to finance inventories,
operations or facilities provided that such borrowings have interest rates
higher than the CIR of the securities offered hereby. To the extent that
proceeds from sales of the securities offered hereby are less than amounts
required for these purposes, such insufficient amounts may be obtained from
operations, from bank or other borrowings or from other financing arrangements.
At November 30, 1994, under a syndicated credit facility provided by eight
domestic and international banking institutions, additional borrowings of
approximately $371,937,000 were available to Farmland. A summary of the terms
and conditions of these credit agreements is set out in "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Farmland has reserved the right to obtain funds in any manner deemed advisable.
Farmland intends to maintain a continuous offering of securities as it has done
in the past. Farmland has reserved the right to change the use of the proceeds
of this offering due to contingencies related to the volatile nature of the
Company's cash flows as discussed elsewhere herein. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
General."
PLAN OF DISTRIBUTION
The securities offered by this Prospectus for cash and for exchange are
offered by Farmland Securities Company ("FSC"), American Heartland Investments,
Inc. ("AHI") and may be offered by other broker-dealers selected by Farmland.
The offering is on a best efforts basis. There is no requirement that any
minimum amount of securities offered hereby must be sold. The offering shall
be for an indeterminate period of time not expected to be in excess of two
years.
FSC, located at 3315 North Oak Trafficway, Kansas City, Missouri, is a
wholly-owned subsidiary of Farmland organized for the sole purpose of offering
Farmland's Demand Loan and Subordinated Debt Certificates for sale to the
general public and/or for exchange and to solicit offers therefor which are
subject to acceptance by Farmland. FSC is a member of The National Association
of Securities Dealers, Inc. (NASD) and the Securities Investor Protection
Corporation (SIPC). FSC's involvement in this offering is in compliance with
terms of a partial exemption from requirements of Schedule E of the NASD
Bylaws; no persons, other than persons associated with Farmland or FSC,
participated in determining the price and other terms of the securities offered
hereby. FSC is under no firm commitment or obligation to solicit offers for
any specified amount of such debt securities. FSC's commitment is to use its
best efforts to solicit such orders. Farmland will pay commissions to FSC not
to exceed 4% of the aggregate price of Demand Loan Certificates and
Subordinated Debt Certificates being offered. Farmland will pay all expenses
and liabilities incurred by FSC, limited to an amount not to exceed 3% of the
aggregate sales price of Demand Loan and Subordinated Debt Certificates being
offered. FSC is a registered broker-dealer under the Securities Exchange Act
of 1934, but has only limited authority to engage in the offer and sale of
securities issued by Farmland. Farmland will indemnify FSC for certain
liabilities under the Securities Act of 1933.
The Company has engaged AHI, located at 219 South Santa Fe, P. O. Box 1303,
Salina, Kansas 67402, to offer Farmland Demand Loan and Subordinated Debt
Certificates to the general public and for exchange and to solicit offers
therefore which are subject to acceptance by Farmland. Farmland may engage
other broker-dealers that are qualified to offer and sell the Demand Loan
Certificates and Subordinated Debt Certificates in a particular state and that
are members of the National Association of Securities Dealers, Inc. AHI and
each broker-dealer participating in this offering shall be held responsible for
complying with all statutes, rules and regulations of all jurisdictions in
which each participating broker-dealer offers the Demand Loan and Subordinated
Debt Certificates for sale. Farmland will pay to AHI and may pay to other
selected broker-dealers for their services a sales commission of not more than
4% of the face amount of Subordinated Debt Certificates and not more than 1/2
of 1% of the face amount of Demand Loan Certificates which AHI and other
selected broker-dealers sell. In addition, Farmland will pay to AHI and may
pay to other selected broker-dealers an unallocated due diligence and marketing
fee of not more than 1/2 of 1% of the face amount of such certificates the
broker-dealers sell. Farmland may indemnify AHI and other selected
broker-dealers for certain liabilities arising out of violations by Farmland of
blue sky laws, or the Securities Act.
Interstate/Johnson Lane Corporation, a member of the NASD, participated as
a qualified independent underwriter in the "due diligence" review with respect
to the preparation of this Prospectus, however, as discussed above,
Interstate/Johnson Lane Corporation will not be participating in the pricing of
this issue.
EXCHANGE OFFER
Farmland is offering: (1) to the owners of its Subordinated Capital
Investment Certificates the right to exchange such certificates for an
equivalent principal amount of any Subordinated Monthly Income Capital
Investment Certificate ($5,000 minimum) which, at the time of the exchange, is
being offered by this Prospectus, and (2) to the owners of its Subordinated
Capital Investment Certificates, which have been held until eligible for
redemption prior to maturity at the option of the owner, the right to exchange
such certificates for an equivalent principal amount of any Subordinated
Capital Investment Certificate which, at the time of the exchange, is being
offered by this Prospectus.
The exchange will be made effective on the day certificates eligible for
exchange are received at Farmland's office in Kansas City, Missouri, provided,
however, that any certificates received within a ten (10) day period preceding
the record date of such certificates, the exchange shall be made effective as
of the first day following such record date. The exchange is irrevocable after
the effective date, but is revocable at any time prior to the effective date.
Notice of an owner's revocation may be in writing, delivered to the address
given below (see "How to Accept Exchange Offer") or by telephone to (816)
459-6360. This exchange offer will expire at 12:00 P.M. Eastern Standard Time
on December 31, 1995, unless terminated prior to such date. Owners of
certificates eligible for exchange shall be notified by letter from Farmland at
least 30 days prior to the effective date of Farmland's termination of this
exchange offer.
Any interest accrued on a certificate being exchanged will be paid on the
day the exchange is made effective.
The opinion of Robert B. Terry, Vice President and General Counsel of
Farmland, which opinion is set forth herein in full as follows, is: The
exchange of certificates would be considered as taxable exchanges. The basis
for determining a taxable gain or loss on a taxable exchange is for an owner to
take into account as gain or loss the difference between the fair market value
of the security being received and his basis (usually cost) in the security
being exchanged. As a practical matter, most owners should have no gain or
loss since the securities were sold at 100% of Face Amount and are being
exchanged at 100% of Face Amount. However, since it is possible for a prior
owner to have sold his certificate to another person at a cost which is more or
less than he had paid for it, a subsequent owner could have a different cost
than the original issued cost. Any gain or loss recognized on a taxable
exchange would be taken into account for purpose of federal income taxes as a
gain or loss from the sale or disposition of a capital asset and would be
short-term gain or loss unless, at the time of exchange, it had been held for a
period of more than twelve months. Owners of these certificates should seek
advice from their tax advisor before accepting the exchange offer.
HOW TO ACCEPT EXCHANGE OFFER
The exchange offer may be accepted by delivering any of the Subordinated
Capital Investment Certificates, which are eligible for exchange (see "Exchange
Offer" immediately above), to Farmland Securities Company, P.O. Box 7305,
Kansas City, Missouri 64116 or American Heartland Investments, Inc. P. O. Box
1303, Salina, Kansas, 67402. The certificates should be assigned to Farmland
in the transfer section (on the reverse side of the certificate) and endorsed
by all of the persons whose names appear on the face of the certificate.
Should any registered owner be incapable of endorsing the certificate,
additional documentation may be necessary. Call (816) 459-6360 or write to the
above address for specific information. Should registered owners wish to have
the new certificate issued to persons other than as shown on the certificate
being surrendered in the exchange, the endorsement signatures must be
guaranteed by a commercial bank or trust company officer or a NASD member firm
representative. The exchange offer must be accompanied by a completed "Order
and Receipt for Investment" form supplied by Farmland Securities Company or
American Heartland Investments, Inc. The U.S. Treasury Form W-9 Backup
Withholding Certificate included on the order form must be completed and signed
by the principal owner of the new certificate.
HOW TO TRANSFER OWNERSHIP
To transfer ownership of certificates, the certificates should be assigned
to the new owner(s) in the transfer section on the reverse side of the
certificate and endorsed by all persons named on the face of the certificate.
Should any registered owner be incapable of endorsing the certificate,
additional documentation may be necessary. Call (816) 459-6360 or write
Farmland Industries, Inc., P.O. Box 7305, Kansas City, Mo. 64116 for specific
information. All transfer requests require that endorsement signatures be
guaranteed by a commercial bank or trust company officer or an NASD member firm
representative. Requests for transfer should be accompanied by a completed
"Order and Receipt for Investment" form supplied by Farmland Securities
Company. The U.S. Treasury Form W-9 Backup Withholding Certificate included on
the order form must be completed and signed by the new principal owner.
DESCRIPTION OF THE TEN-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES
The Ten-Year Subordinated Capital Investment Certificates, hereinafter
referred to as "Certificates," bearing an interest rate hereinafter described
and referred to as the "Certificate Interest Rate," are issued under an
indenture (the "Indenture of November 8, 1984") dated November 8, 1984, as
amended January 3, 1985 and December 3, 1991, between Farmland Industries, Inc.
("Farmland") and Commerce Bank of Kansas City, National Association, Kansas
City, Missouri, as Trustee (the "Trustee.")
The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 8, 1984, and do not
purport to be complete. The section references therein refer to the sections
of the Indenture of November 8, 1984. Where references are made to particular
sections of the said Indenture, such sections are incorporated by reference as
a part of the statements, made, and such statements are qualified in their
entirety by such reference.
GENERAL
The Certificates are direct obligations of Farmland, but are not secured
and are not negotiable. Interest on the principal sum at the Certificate
Interest Rate per annum is payable at the election of the owner, made at the
time of purchase, (i) semiannually or (ii) at maturity or at the date of
redemption if redeemed prior to maturity. See "Certificate Interest Rate"
below. The Certificates are issued in amounts of $100 or more as of the first
day on which offers acceptable to Farmland and accompanied by payment of the
full purchase price have been received by Farmland in Kansas City, Missouri.
The Certificates mature ten years from date of issue. The payment of the
principal at maturity may, at the request of the owner, be paid in a lump sum
or in equal monthly, quarterly, semiannual or annual installments, including
interest on the unpaid balance at the rate of six percent (6%) per annum, over
a period of not more than thirty-six months.
The issue of Certificates is limited to $500,000,000 outstanding at any one
time under the Indenture of November 8, 1984, but such Indenture does not limit
the amount of other securities, either secured or unsecured, which may be
issued by Farmland. At August 31, 1994, a total of $108,125,000 was
outstanding.
Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited consolidated financial statements
upon written request of the owner to Farmland Industries, Inc., P. O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6201.
CERTIFICATE INTEREST RATE
The Certificate Interest Rate is the rate per annum stated on the face of
the Certificate. The Certificate Interest Rate will be such as Farmland may
from time to time determine but any change of the Certificate Interest Rate
will not affect the Certificate Interest Rate on any Certificate for which the
full purchase price was received prior to the change. See "Determination of
the Certificate Interest Rate."
Interest at the Certificate Interest Rate per annum is payable on the
principal sum at the election of the purchaser, made at the time of purchase,
in one of the following ways: (i) semiannually on January 1 and July 1 to
owners of record on the last preceding December 31 and June 30, respectively;
or (ii) at maturity, or at the date of redemption if redeemed prior to
maturity, compounded semiannually on December 31 and June 30 at the Certificate
Interest Rate which is stated on the face of the Certificate. Any election to
receive payment of the interest semiannually is irrevocable. The election to
receive payment of the interest at maturity, or at the date of redemption if
redeemed prior to maturity, will be terminated upon written request of the
owner, such termination to be effective as of the last previous interest
compounding date. Such termination is irrevocable and, at the same time, is an
election to thereafter receive payment of the interest semiannually. Any
interest attributable to periods starting with the date of purchase and ending
with the effective date of the written request of the holder to terminate the
election to receive payment of the interest at maturity or at the date of
redemption if redeemed prior to maturity will be paid upon receipt of the
written request to terminate the election. Farmland shall have the right at
any time by notice to the owner to terminate any obligation to continue
retaining the interest of any owner pursuant to an owner's election. Such
termination shall be effective as of the opening of business on the day
following the first interest compounding date after such notice is mailed to
the owner and the owner will be paid all the interest in the owner's account on
the effective date.
REMEDIES IN EVENT OF DEFAULT
The Indenture of November 8, 1984 contains provisions identifying events
which are defined for all purposes of the Indenture as "defaults" (except when
the terms are otherwise defined for specific purposes). The Indenture
describes the duties and alternative courses of action which, upon the
occurrence of a default, will be taken by the Trustee as directed by written
notice of the holders of a majority of the principal amount of the Certificates
then outstanding. The Indenture provides that action taken by the Trustee, as
a result of default, will not impair and that no other provisions in the
Indenture will impair the rights of any certificate owner to receive payment of
the principal of and interest on such Certificates on or after the respective
dates expressed on such Certificate nor will such act by the Trustee or other
provisions in the Indenture impair the right of such certificate owner to
institute suit for enforcement of such payment, except that 75 per centum in
principal amount of the Certificates at the time outstanding may consent on
behalf of the owners of all the outstanding Certificates to a postponement of
an interest payment for a period not exceeding three years from its due date.
SUBORDINATION
The payment of the principal and interest on the Certificates is
subordinate in right of payment to the extent set forth in the Indenture to the
prior payment in full of all Senior Indebtedness. Senior Indebtedness is
defined as (a) the principal of and interest on indebtedness of Farmland (other
than the indebtedness of Farmland with respect to its Subordinated Certificates
of Investment issued under indentures dated February 25, 1970 and under
indentures dated November 29, 1971; and with respect to its Subordinated
Capital Investment Certificates issued under indentures dated July 29, 1974,
and under an indenture dated November 29, 1976, and under an indenture dated
October 24, 1978, and under an indenture dated October 24, 1979, and under an
indenture dated May 20, 1980, and under indentures dated November 5, 1980 and
under indentures dated November 8, 1984; and with respect to its Subordinated
Monthly Income Capital Investment Certificates issued under an indenture dated
July 29, 1974, and under an indenture dated October 24, 1979, and under an
indenture dated November 5, 1980, and under an indenture dated November 8,
1984, and under an indenture dated November 11, 1985; and with respect to its
Subordinated Individual Retirement Account Certificates issued under an
indenture dated November 20, 1981 and under an indenture dated November 8,
1984) for money borrowed from or guaranteed to banks, trust companies,
insurance companies, or pension trusts or evidenced by securities issued under
the provisions of an indenture or similar instrument between Farmland and a
bank or trust company other than indebtedness evidenced by instruments which
expressly provide that such indebtedness is not superior, or (b) indebtedness
created after the date of the Indenture of November 8, 1984, as to which the
instrument creating or evidencing the indebtedness provides that such
indebtedness is superior in right of payment to the Certificates.
In the event of any distribution of assets of Farmland under any
dissolution, winding up, total or partial liquidation, reorganization or in
bankruptcy, insolvency, receivership or other proceeding of Farmland, the
holders of all Senior Indebtedness shall be entitled to receive payment in full
before the owners of the Certificates are entitled to receive payment. After
payment in full of the Senior Indebtedness, the owners of the Certificates will
be entitled to participate in any distribution of assets, both as such owners
and by virtue of subrogation to the rights of the holders of the Senior
Indebtedness to the extent that the Senior Indebtedness was benefited by the
receipt of distributions to which the owners of the Certificates would have
been entitled if there had been no subordination. By reason of such
subordination, in the event of Farmland's insolvency, holders of Senior
Indebtedness may receive more, ratably, and owners of the Certificates may
receive less, ratably, than other creditors of Farmland (Section 4.05(a)).
REDEMPTION
The Certificates may be redeemed, after two (2) years from date of
issuance, at the option of Farmland at any time prior to maturity, on at least
ten days written notice, at face value plus accrued interest to the date of
redemption only. The Indenture of November 8, 1984 permits Farmland to select
in any manner at its discretion the Certificates to be redeemed.
Commencing three (3) years after date of issuance, a limited amount of
Certificates can be redeemed prior to maturity during each month. The maximum
amount that Farmland will redeem prior to maturity during any month is the
greater of $500,000 or 1/2 of 1% of the balance outstanding provided the
balance outstanding is greater than $5,000,000. If the balance outstanding is
less than $5,000,000 there will be no limitation on early redemption of
eligible Certificates.
The 1/2 of 1% limitation is determined as follows:
(1) Add the face amount of Certificates held by all investors
at the end of the preceding month to establish the
"combined amount" held by investors at the end of the
preceding month.
(2) Multiply the "combined amount" by 1/2 of 1%.
If the amount made available for redemption prior to maturity (as
determined in step one and two) exceeds the amount requested for redemption
prior to maturity, such excess is carried over to the next month and added to
the amount available for redemption prior to maturity, provided however that
any excess will not be carried beyond Farmland's fiscal year end.
Redemption prior to maturity will be made upon the surrender of such
eligible Certificates properly endorsed accompanied by written request for
early redemption to Farmland, in the order in which such written requests for
redemption prior to maturity are received by Farmland. In addition to the
amount available for redemption prior to maturity as determined above,
redemptions will be made in the case of death of an owner of the Certificates
upon written request of the legal owner accompanied by satisfactory proof of
ownership. Redemptions prior to maturity will be made at the face value of the
Certificates plus interest to the date of redemption only. Amounts available
for redemption prior to maturity are not set aside in a separate fund (Section
3.01 and 3.02).
CONCERNING THE TRUSTEE
The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, is the Trustee under the Indenture of November 8, 1984, and is to
perform only such duties as are specifically set forth in that Indenture. In
the case of a default, the owners of a majority in aggregate principal amount
of the Certificates outstanding at the time of the occurrence of a default have
the right to require the Trustee to take action to remedy such default. Upon
the occurrence of a default, the Trustee may, and upon the written request of a
majority in aggregate principal amount of outstanding Certificates shall,
declare the principal of all Certificates outstanding and interest accrued
thereon immediately due and payable (Section 6.03 and 7.02).
MODIFICATION OF THE INDENTURE
The Indenture of November 8, 1984 contains provisions permitting Farmland,
with the consent of the Trustee, to execute supplemental indentures to, (a)
evidence any succession for another corporation to Farmland and the assumption
by the successor corporation of covenants and obligations of Farmland, (b) to
add further covenants or provisions which Farmland's Board of Directors and the
Trustee consider to be for the protection of the holders of the Certificates,
or, (c) to cure any ambiguity in the Indenture (Section 10.01).
The Indenture of November 8, 1984 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in
aggregate principal amount of the Certificates then outstanding, to execute
supplemental indentures, provided that no such supplemental indenture shall
(1) extend the fixed maturity of any Certificates, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest,
without the consent of the owner of each Certificate so affected, or (2) reduce
the 66-2/3% requirement as to the consent of the owners of the Certificates for
changes in any supplemental indenture, without the consent of the owners of all
Certificates then outstanding (Section 10.02).
DEFAULTS AND NOTICE THEREOF
The Indenture of November 8, 1984 provides that any of the following shall
constitute a default: (1) failure to pay principal when due; (2) failure to pay
interest on Certificates when due, continued for 60 days; (3) certain events of
bankruptcy or insolvency; and (4) failure to perform any other covenant or
agreement contained in the Indenture, continued for 90 days. Failure to pay
either principal or interest when due during the pendency of any dissolution or
liquidation proceeding or action to endorse payment of indebtedness shall also
constitute such a default (Section 6.01).
The Indenture of November 8, 1984 provides that the Trustee shall within 90
days after the occurrence of a default, not including periods of grace, give to
the Certificate owners notice of all such defaults unless such defaults have
been cured; provided, that, except in the case of default in the payment of
principal of or interest on any of the Certificates, the Trustee shall be
protected in withholding such notice if and so long as the Trustee determines
that the withholding of such notice is in the interest of the Certificate
owners (Section 6.02).
The Indenture of November 8, 1984 requires Farmland to file with the
Trustee and the Securities and Exchange Commission such additional information,
documents and reports with respect to compliance by Farmland with the
conditions and covenants provided for in this Indenture as may be required from
time to time by the Securities and Exchange Commission. Summaries of any such
reports filed with the Trustee or the Securities and Exchange Commission
pursuant to rules and regulations as prescribed by the Securities and Exchange
Commission shall be transmitted to the owners of Certificates in the manner and
to the extent provided for in the Indenture (Section 5.03).
The Indenture of November 8, 1984 does not require any periodic evidence to
be furnished as to the absence of default or as to compliance with the terms of
the indenture.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture of November 8, 1984 shall be discharged upon payment or
redemption of all Certificates or upon deposit with the Trustee of funds
sufficient therefor (Section 12.01).
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES
The Five-Year Subordinated Capital Investment Certificates, hereinafter
referred to as "Certificates," bearing an interest rate herein after described
and referred to as the "Certificate Interest Rate," are issued under an
indenture (the "Indenture of November 8, 1984") dated November 8, 1984, as
amended January 3, 1985 and December 3, 1991, between Farmland Industries, Inc.
("Farmland") and Commerce Bank of Kansas City, National Association, Kansas
City, Missouri, as Trustee (the "Trustee.")
The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 8, 1984, and do not
purport to be complete. The section references therein refer to the sections
of the Indenture of November 8, 1984. Where references are made to particular
sections of the said Indenture, such sections are incorporated by reference as
a part of the statements made, and such statements are qualified in their
entirety by such reference.
GENERAL
The Certificates are direct obligations of Farmland, but are not secured
and are not negotiable. Interest on the principal sum at the Certificate
Interest Rate per annum is payable at the election of the owner made at the
time of purchase (i) semiannually or (ii) at maturity or at the date of
redemption if redeemed prior to maturity. See "Certificate Interest Rate"
below. The Certificates are issued in amounts of $100 or more as of the day on
which offers acceptable to Farmland and accompanied by payment of the full
purchase price have been received by Farmland in Kansas City. The Certificates
mature five years from date of issue. The payment of the principal at maturity
may, at the request of the owner, be paid in a lump sum or in equal monthly,
quarterly, semiannual or annual installments, including interest on the unpaid
balance at the rate of six percent (6%) per annum, over a period of not more
than thirty-six months.
The issue of Certificates is limited to $500,000,000 outstanding at any one
time under the Indenture of November 8, 1984, but such Indenture does not limit
the amount of other securities, either secured or unsecured, which may be
issued by Farmland. At August 31, 1994, a total of $86,561,000 was
outstanding.
Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited consolidated financial statements
upon written request of the owner to Farmland Industries, Inc., P.O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6201.
CERTIFICATE INTEREST RATE
The Certificate Interest Rate is the rate per annum stated on the face of
the Certificate. The Certificate Interest Rate will be such as Farmland may
from time to time determine but any change of the Certificate Interest Rate
will not affect the Certificate Interest Rate on any Certificate for which the
full purchase price was received prior to the change. See "Determination of
the Certificate Interest Rate."
Interest at the Certificate Interest Rate per annum is payable on the
principal sum at the election of the purchaser, made at the time of purchase,
in one of the following ways: (i) semiannually on January 1 and July 1, to
owners of record on the last preceding December 31 and June 30, respectively;
or (ii) at maturity or at the date of redemption if redeemed prior to
maturity, compounded semiannually, on December 31 and June 30 at the
Certificate Interest Rate which is stated on the face of the Certificate. Any
election to receive payment of the interest semiannually is irrevocable. The
election to receive payment of the interest at maturity, or at the date of
redemption if redeemed prior to maturity, will be terminated upon written
request of the owner, such termination to be effective as of the last previous
interest compounding date. Such termination is irrevocable and, at the same
time, is an election to thereafter receive payment of the interest
semiannually. Any interest attributable to periods starting with the date of
purchase and ending with the effective date of the written request of the
holder to terminate the election to receive payment of the interest at maturity
or at the date of redemption if redeemed prior to maturity will be paid upon
receipt of the written request to terminate the election. Farmland shall have
the right at any time by notice to the owner to terminate any obligation to
continue retaining the interest of any owner pursuant to an owner's election.
Such termination shall be effective as of the opening of business on the day
following the first interest compounding date after such notice is mailed to
the owner and the owner will be paid all the interest in the owner's account on
the effective date.
REMEDIES IN EVENT OF DEFAULT
The Indenture of November 8, 1984 contains provisions identifying events
which are defined for all purposes of the Indenture as "defaults" (except when
the terms are otherwise defined for specific purposes). The Indenture
describes the duties and alternative courses of action which, upon the
occurrence of a default, will be taken by the Trustee as directed by written
notice of the holders of a majority of the principal amount of the Certificates
then outstanding. The Indenture provides that action taken by the Trustee, as
a result of default, will not impair and that no other provisions in the
Indenture will impair the rights of any certificate owner to receive payment of
the principal of and interest on such Certificates on or after the respective
dates expressed on such Certificate nor will such act by the Trustee or other
provisions in the Indenture impair the right of such certificate owner to
institute suit for enforcement of such payment, except that 75 per centum in
principal amount of the Certificates at the time outstanding may consent on
behalf of the owners of all the outstanding Certificates to a postponement of
an interest payment for a period not exceeding three years from its due date.
SUBORDINATION
The payment of the principal and interest on the Certificates is
subordinate in right of payment to the extent set forth in the Indenture to the
prior payment in full of all Senior Indebtedness. Senior Indebtedness is
defined as (a) the principal of and interest on indebtedness of Farmland (other
than the indebtedness of Farmland with respect to its Subordinated Certificates
of Investment issued under indentures dated February 25, 1970 and under
indentures dated November 29, 1971; and with respect to its Subordinated
Capital Investment Certificates issued under indentures dated July 29, 1974,
and under an indenture dated November 29, 1976, and under an indenture dated
October 24, 1978, and under an indenture dated October 24, 1979, and under an
indenture dated May 20, 1980, and under indentures dated November 5, 1980 and
under indentures dated November 8, 1984; and with respect to its Subordinated
Monthly Income Capital Investment Certificates issued under an indenture dated
July 29, 1974, and under an indenture dated October 24, 1979, and under an
indenture dated November 5, 1980, and under an indenture dated November 8,
1984, and under an indenture dated November 11, 1985; and with respect to its
Subordinated Individual Retirement Account Certificates issued under an
indenture dated November 20, 1981 and under an indenture dated November 8,
1984) for money borrowed from or guaranteed to banks, trust companies,
insurance companies, or pension trusts or evidenced by securities issued under
the provisions of an indenture or similar instrument between Farmland and a
bank or trust company other than indebtedness evidenced by instruments which
expressly provide that such indebtedness is not superior, or (b) indebtedness
created after the date of the Indenture of November 8, 1984, as to which the
instrument creating or evidencing the indebtedness provides that such
indebtedness is superior in right of payment to the Certificates.
In the event of any distribution of assets of Farmland under any
dissolution, winding up, total or partial liquidation, reorganization or in
bankruptcy, insolvency, receivership or other proceeding of Farmland the
holders of all Senior Indebtedness shall be entitled to receive payment in full
before the owners of the Certificates are entitled to receive payment. After
payment in full of the Senior Indebtedness, the owners of the Certificates will
be entitled to participate in any distribution of assets, both as such owners
and by virtue of subrogation to the rights of the holders of the Senior
Indebtedness to the extent that the Senior Indebtedness was benefited by the
receipt of distributions to which the owners of the Certificates would have
been entitled if there had been no subordination. By reason of such
subordination, in the event of Farmland's insolvency, holders of Senior
Indebtedness may receive more, ratably, and owners of the Certificates may
receive less, ratably, than other creditors of Farmland (Section 4.05(a)).
REDEMPTION
The Certificates may be redeemed, after two (2) years from date of
issuance, at the option of Farmland at any time prior to maturity, on at least
ten days' written notice, at face value plus accrued interest to the date of
redemption only. The Indenture of November 8, 1984 permits Farmland to select
in any manner at its discretion the Certificates to be redeemed.
Commencing two (2) years after date of issuance, a limited amount of
Certificates can be redeemed prior to maturity during each month. The maximum
amount that Farmland will redeem prior to maturity during any month is the
greater of $500,000 or 1/2 of 1% of the balance outstanding provided the
balance outstanding is greater than $5,000,000. If the balance outstanding is
less than $5,000,000 there will be no limitation on early redemption of
eligible Certificates.
The 1/2 of 1% limitation is determined as follows:
(1) Add the face amount of Certificates held by each investor
at the end of the preceding month to establish the
"combined amount" held by investors at the end of the
preceding month.
(2) Multiply the "combined amount" by 1/2 of 1%.
If the amount made available for redemption prior to maturity (as
determined in step one and two) exceeds the amount requested for redemption
prior to maturity, such excess is carried over to the next month and added to
the amount available for redemption prior to maturity, provided however that
any excess will not be carried beyond Farmland's fiscal year end.
Redemption prior to maturity will be made upon the surrender of such
eligible Certificates properly endorsed accompanied by written request for
early redemption to Farmland, the order in which such written requests for
redemption prior to maturity are received by Farmland. In addition to the
amount available for redemption prior to maturity as determined above,
redemptions will be made in the case of death of an owner of the Certificates
upon written request of the legal owner accompanied by satisfactory proof of
ownership. Redemptions prior to maturity will be made at the face value of the
Certificates plus interest to the date of redemption only. Amounts available
for redemption prior to maturity are not set aside in a separate fund (Section
3.01 and 3.02).
CONCERNING THE TRUSTEE
The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, is the Trustee under the Indenture of November 8, 1984, and is to
perform only such duties as are specifically set forth in that Indenture. In
the case of a default, the owners of a majority in aggregate principal amount
of the Certificates outstanding at the time of the occurrence of a default have
the right to require the Trustee to take action to remedy such default. Upon
the occurrence of a default, the Trustee may, and upon the written request of a
majority in aggregate principal amount of the outstanding Certificates shall,
declare the principal of all Certificates outstanding and interest accrued
thereon immediately due and payable (Section 6.03 and 7.02).
MODIFICATION OF THE INDENTURE
The Indenture of November 8, 1984 contains provisions permitting Farmland,
with the consent of the Trustee, to execute supplemental indentures to, (a)
evidence any succession for another corporation to Farmland and the assumption
by the successor corporation of covenants and obligations of Farmland, (b) to
add further covenants or provisions which Farmland's Board of Directors and the
Trustee consider to be for the protection of the holders of the Certificates,
or, (c) to cure any ambiguity in the Indenture (Section 10.01).
The Indenture of November 8, 1984 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in the
aggregate principal amount of the Certificates then outstanding, to execute
supplemental indentures, provided that no such supplemental indenture shall
(1) extend the fixed maturity of any Certificates, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest,
without the consent of the owner of each Certificate so affected, or (2) reduce
the 66-2/3% requirement as to the consent of the owners of the Certificates for
changes in any supplemental indenture, without the consent of the owners of all
Certificates then outstanding (Section 10.02).
DEFAULTS AND NOTICE THEREOF
The Indenture of November 8, 1984 provides that any of the following shall
constitute a default: (1) failure to pay principal when due; (2) failure to
pay interest on Certificates when due, continued for 60 days; (3) certain
events of bankruptcy or insolvency; and (4) failure to perform any other
covenant or agreement contained in the Indenture, continued for 90 days.
Failure to pay either principal or interest when due during the pendency of any
dissolution or liquidation proceeding or action to endorse payment of
indebtedness shall also constitute such a default (Section 6.01).
The Indenture of November 8, 1984 provides that the Trustee shall within 90
days after the occurrence of a default, not including periods of grace, give to
the Certificate owners notice of all such defaults unless such defaults have
been cured; provided, that, except in the case of default in the payment of
principal of or interest on any of the Certificates, the Trustee shall be
protected in withholding such notice if and so long as the Trustee determines
that the withholding of such notice is in the interest of the Certificate
owners (Section 6.02).
The Indenture of November 8, 1984 requires Farmland to file with the
Trustee and the Securities and Exchange Commission such additional information,
documents and reports with respect to compliance by Farmland with the
conditions and covenants provided for in this Indenture as may be required from
time to time by the Securities and Exchange Commission. Summaries of any such
reports filed with the Trustee or the Securities and Exchange Commission
pursuant to rules and regulations as prescribed by the Securities and Exchange
Commission shall be transmitted to the owners of Certificates in the manner and
to the extent provided for in the Indenture (Section 5.03).
The Indenture of November 8, 1984 does not require any periodic evidence to
be furnished as to the absence of default or as to compliance with the terms of
the indenture.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture of November 8, 1984 shall be discharged upon payment or
redemption of all Certificates or upon deposit with the Trustee of funds
sufficient therefor (Section 12.01).
DESCRIPTION OF THE TEN-YEAR SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT
CERTIFICATES
The Ten-Year Subordinated Monthly Income Capital Investment Certificates,
hereinafter referred to as "Certificates," bearing an interest rate hereinafter
described and referred to as the "Certificate Interest Rate," are issued under
an indenture (the "Indenture of November 8, 1984") dated November 8, 1984, as
amended January 3, 1985, between Farmland Industries, Inc. ("Farmland") and
Commerce Bank of Kansas City, National Association, Kansas City, Missouri, as
Trustee (the "Trustee.")
The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 8, 1984, and do not
purport to be complete. The section references therein refer to the sections
of the Indenture of November 8, 1984. Where references are made to particular
sections of the said Indenture, such sections are incorporated by reference as
a part of the statements made, and such statements are qualified in their
entirety by such reference.
GENERAL
The Certificates are direct obligations of Farmland, but are not secured
and are not negotiable. The Certificates are issued in amounts of $5,000 or
more and in additional increments of $1,000 or more as of the day on which
offers acceptable to Farmland and accompanied by payment of the full purchase
price have been received by Farmland in Kansas City, Missouri. The
Certificates mature ten years from date of issue. Interest on the principal
sum at the Certificate Interest Rate per annum is payable monthly on the first
day of each month following the month in which a Certificate is issued. The
payment of the principal at maturity may, at the request of the owner, be paid
in a lump sum or in equal monthly, quarterly, semiannual or annual
installments, including interest on the unpaid balance at the rate of six
percent (6%) per annum, over a period of not more than thirty-six months.
The issue of Certificates is limited to $500,000,000 outstanding at any one
time under the Indenture of November 8, 1984, but such Indenture does not limit
the amount of other securities, either secured or unsecured, which may be
issued by Farmland. At August 31, 1994, a total of $51,446,000 was
outstanding.
Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited consolidated financial statement
upon written request of the owner to Farmland Industries, Inc., P.O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6201.
CERTIFICATE INTEREST RATE
The Certificate Interest Rate is the rate per annum stated on the face of
the Certificate. The Certificate Interest Rate will be such as Farmland may
from time to time determine but any change of the Certificate Interest Rate
will not affect the Certificate Interest Rate on any Certificate for which the
full purchase price was received prior to the change. See "Determination of
the Certificate Interest Rate."
REMEDIES IN EVENT OF DEFAULT
The Indenture of November 8, 1984 contains provisions identifying events
which are defined for all purposes of the Indenture as "defaults" (except when
the terms are otherwise defined for specific purposes). The Indenture
describes the duties and alternative courses of action which, upon the
occurrence of a default, will be taken by the Trustee as directed by written
notice of the holders of a majority of the principal amount of the Certificates
then outstanding. The Indenture provides that action taken by the Trustee, as
a result of default, will not impair and that no other provisions in the
Indenture will impair the rights of any certificate owner to receive payment of
the principal of and interest on such Certificates on or after the respective
dates expressed on such Certificate nor will such act by the Trustee or other
provisions in the Indenture impair the right of such certificate owner to
institute suit for enforcement of such payment, except that 75 per centum in
principal amount of the Certificates at the time outstanding may consent on
behalf of the owners of all the outstanding Certificates to a postponement of
an interest payment for a period not exceeding three years from its due date.
SUBORDINATION
The payment of the principal and interest on the Certificates is
subordinate in right of payment to the extent set forth in the Indenture to the
prior payment in full of all Senior Indebtedness. Senior Indebtedness is
defined as (a) the principal of and interest on indebtedness of Farmland (other
than the indebtedness of Farmland with respect to its Subordinated Certificates
of Investment issued under indentures dated February 25, 1970 and under
indentures dated November 29, 1971; and with respect to its Subordinated
Capital Investment Certificates issued under indentures dated July 29, 1974,
and under an indenture dated November 29, 1976, and under an indenture dated
October 24, 1978, and under an indenture dated October 24, 1979, and under an
indenture dated May 20, 1980, and under indentures dated November 5, 1980, and
under indentures dated November 8, 1984, and under an indenture dated November
11, 1985; and with respect to its Subordinated Monthly Income Capital
Investment Certificates issued under an indenture dated July 29, 1974, and
under an indenture dated October 24, 1979, and under an indenture dated
November 5, 1980 and under an indenture dated November 8, 1984, and under an
indenture dated November 11, 1985; and with respect to its Subordinated
Individual Retirement Account Certificates issued under an indenture dated
November 20, 1981 and under an indenture dated November 8, 1984) for money
borrowed from or guaranteed to banks, trust companies, insurance companies, or
pension trusts or evidenced by securities issued under the provisions of an
indenture or similar instrument between Farmland and a bank or trust company
other than indebtedness evidenced by instruments which expressly provide that
such indebtedness is not superior, or (b) indebtedness created after the date
of the Indenture of November 8, 1984, as to which the instrument creating or
evidencing the indebtedness provides that such indebtedness is superior in
right of payment to the Certificates.
In the event of any distribution of assets of Farmland under any
dissolution, winding up, total or partial liquidation, reorganization or
bankruptcy, insolvency, receivership or other proceeding of Farmland, the
holders of all Senior Indebtedness shall be entitled to receive payment in full
before the owners of the Certificates are entitled to receive payment. After
payment in full of the Senior Indebtedness, the owners of the Certificates will
be entitled to participate in any distribution of assets, both as such owners
and by virtue of subrogation to the rights of the holders of the Senior
Indebtedness to the extent that the Senior Indebtedness was benefited by the
receipt of distributions to which the owners of the Certificates would have
been entitled if there had been no subordination. By reason of such
subordination, in the event of Farmland's insolvency, holders of Senior
Indebtedness may receive more, ratably, and owners of the Certificates may
receive less, ratably, than other creditors of Farmland (Section 4.05(a)).
REDEMPTION
The Certificates can not be called for redemption by Farmland at any time
prior to maturity (Section 3.01).
In addition, Farmland will not redeem the Certificates prior to maturity
upon request of the owner. Redemption will be made in the case of death of an
owner of the Certificates upon written request of the legal owner accompanied
by satisfactory proof of ownership. Redemptions prior to maturity will be made
at the face value of the Certificates plus interest to the date of redemption
only. Amounts available for redemption prior to maturity are not set aside in
a separate fund (Section 3.02).
CONCERNING THE TRUSTEE
The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, is the Trustee under the Indenture of November 8, 1984, and is to
perform only such duties as are specifically set forth in that Indenture. In
the case of a default, the owners of a majority in aggregate principal amount
of the Certificates outstanding at the time of the occurrence of a default have
the right to require the Trustee to take action to remedy such default. Upon
the occurrence of a default, the Trustee may, and upon the written request of a
majority in aggregate principal amount of the outstanding Certificates shall,
declare the principal of all Certificates outstanding and interest accrued
thereon immediately due and payable (Section 6.03 and 7.02).
MODIFICATION OF THE INDENTURE
The Indenture of November 8, 1984 contains provisions permitting Farmland,
with the consent of the Trustee, to execute supplemental indentures to, (a)
evidence any succession for another corporation to Farmland and the assumption
by the successor corporation of covenants and obligations of Farmland, (b) to
add further covenants or provisions which Farmland's Board of Directors and the
Trustee consider to be for the protection of the holders of the Certificates,
or, (c) to cure any ambiguity in the Indenture (Section 10.01).
The Indenture of November 8, 1984 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in
aggregate principal amount of the Certificates then outstanding, to execute
supplemental indentures, provided that no such supplemental indentures shall
(1) extend the fixed maturity of any Certificates, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest,
without the consent of the owner of each Certificate so affected, or (2) reduce
the 66-2/3% requirement as to the consent of the owners of the Certificates for
changes in any supplemental indenture, without the consent of the owners of all
certificates then outstanding (Section 10.02).
DEFAULTS AND NOTICE THEREOF
The Indenture of November 8, 1984 provides that any of the following shall
constitute a default: (1) failure to pay principal when due; (2) failure to
pay interest on Certificates when due, continued for 60 days; (3) certain
events of bankruptcy or insolvency; and (4) failure to perform any other
covenant or agreement contained in the Indenture, continued for 90 days.
Failure to pay either principal or interest when due during the pendency of any
dissolution or liquidation proceeding or action to endorse payment of
indebtedness shall also constitute such a default (Section 6.01).
The Indenture of November 8, 1984 provides that the Trustee shall within 90
days after the occurrence of a default, not including periods of grace, give to
the Certificate owners notice of all such defaults unless such defaults have
been cured; provided, that, except in the case of default in the payment or
principal of or interest on any of the Certificates, the Trustee shall be
protected in withholding such notice if and so long as the Trustee determines
that the withholding of such notice is in the interest of the Certificate
owners (Section 6.02).
The Indenture of November 8, 1984 requires Farmland to file with the
Trustee and the Securities and Exchange Commission such additional information,
documents and reports with respect to compliance by Farmland with the
conditions and covenants provided for in this Indenture as may be required from
time to time by the Securities and Exchange Commission. Summaries of any such
reports filed with the Trustee or the Securities and Exchange Commission
pursuant to rules and regulations as prescribed by the Securities and Exchange
Commission shall be transmitted to the owners of Certificates in the manner and
to the extent provided for in the Indenture (Section 5.03).
The Indenture of November 8, 1984 does not require any periodic evidence to
be furnished as to the absence of default or as to compliance with the terms of
the Indenture.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture of November 8, 1984 shall be discharged upon payment or
redemption of all Certificates or upon deposit with the Trustee of funds
sufficient therefor (Section 12.01).
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT
CERTIFICATES
The Five-Year Subordinated Monthly Income Capital Investment Certificates,
hereinafter referred to as "Certificates," bearing an interest rate hereinafter
described and referred to as the "Certificate Interest Rate," are issued under
an indenture dated November 11, 1985 (the "Indenture of November 11, 1985")
between Farmland Industries, Inc. ("Farmland") and Commerce Bank of Kansas
City, National Association, Kansas City, Missouri, as Trustee (the "Trustee").
The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 11, 1985, and do not
purport to be complete. The section references therein refer to the sections
of the Indenture of November 11, 1985. Where references are made to particular
sections of the said Indenture, such sections are incorporated by reference as
a part of the statements made, and such statements are qualified in their
entirety by such reference.
GENERAL
The Certificates are direct obligations of Farmland, but are not secured
and are not negotiable. The Certificates are issued in amounts of $5,000 or
more and in additional increments of $1,000 or more as of the day on which
offers acceptable to Farmland and accompanied by payment of the full purchase
price have been received by Farmland in Kansas City, Missouri. The
Certificates mature five years from date of issue. Interest on the principal
sum at the Certificate Interest Rate per annum is payable monthly on the first
day of each month to the owners of record on such payment date commencing with
the first day of the month which follows the month in which the certificate is
issued. The payment of the principal at maturity may, at the request of the
owner, be paid in a lump sum or in equal monthly, quarterly, semiannual or
annual installments, including interest on the unpaid balance at the rate of
six percent (6%) per annum, over a period of not more than thirty-six months.
The issue of Certificates is limited to $500,000,000 outstanding at any one
time under the Indenture of November 11, 1985, but such Indenture does not
limit the amount of other securities, either secured or unsecured, which may be
issued by Farmland. At August 31, 1994 a total of $18,611,000 was outstanding.
Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited consolidated financial statements
upon written request of the owner to Farmland Industries, Inc., P. O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6201.
CERTIFICATE INTEREST RATE
The Certificate Interest Rate is the rate per annum stated on the face of
the Certificate. The Certificate Interest Rate will be such as Farmland may
from time to time determine but any change of the Certificate Interest Rate
will not affect the Certificate Interest Rate on any Certificate for which the
full purchase price was received prior to the change. See "Determination of
the Certificate Interest Rate."
REMEDIES IN EVENT OF DEFAULT
The Indenture of November 11, 1985 contains provisions identifying events
which are defined for all purposes of the Indenture as "defaults" (except when
the terms are otherwise defined for specific purposes). The Indenture
describes the duties and alternative courses of action which, upon the
occurrence of a default, will be taken by the Trustee as directed by written
notice of the holders of a majority of the principal amount of the Certificates
then outstanding. The Indenture provides that action taken by the Trustee, as
a result of default, will not impair and that no other provisions in the
Indenture will impair the rights of any certificate owner to receive payment of
the principal of and interest on such Certificates on or after the respective
dates expressed on such Certificate nor will such act by the Trustee or other
provisions in the Indenture impair the right of such certificate owner to
institute suit for enforcement of such payment, except that 75 per centum in
principal amount of the Certificates at the time outstanding may consent on
behalf of the owners of all the outstanding Certificates to a postponement of
an interest payment for a period not exceeding three years from its due date.
SUBORDINATION
The payment of the principal and interest on the Certificates is
subordinate in right of payment to the extent set forth in the Indenture to the
prior payment in full of all Senior Indebtedness. Senior Indebtedness is
defined as (a) the principal of and interest on indebtedness of Farmland (other
than the indebtedness of Farmland with respect to its Subordinated Certificates
of Investment issued under indentures dated February 25, 1970, and under
indentures dated November 29, 1971; and with respect to its Subordinated
Capital Investment Certificates issued under indentures dated July 29, 1974,
and under an indenture dated November 29, 1976, and under an indenture dated
October 24, 1978, and under an indenture dated October 24, 1979, and under an
indenture dated May 20, 1980, and under indentures dated November 5, 1980, and
under indentures dated November 8, 1984, and under an indenture dated November
11, 1985; and with respect to its Subordinated Monthly Income Capital
Investment Certificates issued under an indenture dated July 29, 1974, and
under an indenture dated October 24, 1979, and under an indenture dated
November 5, 1980, and under an indenture dated November 8, 1984, and under an
indenture dated November 11, 1985; and with respect to its Subordinated
Individual Retirement Account Certificates issued under an indenture dated
November 20, 1981, and under an indenture dated November 8, 1984) for money
borrowed from or guaranteed to banks, trust companies, insurance companies, or
pension trusts or evidenced by securities issued under the provisions of an
indenture or similar instrument between Farmland and a bank or trust company
other than indebtedness evidenced by instruments which expressly provide that
such indebtedness is not superior, or (b) indebtedness created after the date
of the Indenture of November 11, 1985, as to which the instrument creating or
evidencing the indebtedness provides that such indebtedness is superior in
right of payment to the Certificates.
In the event of any distribution of assets of Farmland under any
dissolution, winding up, total or partial liquidation, reorganization or
bankruptcy, insolvency, receivership or other proceeding of Farmland, the
holders of all Senior Indebtedness shall be entitled to receive payment in full
before the owners of the Certificates are entitled to receive payment. After
payment in full of the Senior Indebtedness, the owners of the Certificates will
be entitled to participate in any distribution of assets, both as such owners
and by virtue of subrogation to the rights of the holders of the Senior
Indebtedness to the extent that the Senior Indebtedness was benefited by the
receipt of distributions to which the owners of the Certificates would have
been entitled if there had been no subordination. By reason of such
subordination, in the event of Farmland's insolvency, holders of Senior
Indebtedness may receive more, ratably, and owners of the Certificates may
receive less, ratably, than other creditors of Farmland (Section 4.05(a)).
REDEMPTION
The Certificates can not be called for redemption by Farmland at any time
prior to maturity (Section 3.01).
In addition, Farmland will not redeem the Certificates prior to maturity
upon request of the owner. Redemption will be made in the case of death of an
owner of the Certificates upon written request of the legal owner accompanied
by satisfactory proof of ownership. Redemptions prior to maturity will be made
at the face value of the Certificates plus interest to the date of redemption
only. Amounts available for redemption prior to maturity are not set aside in
a separate fund (Section 3.02).
CONCERNING THE TRUSTEE
The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, is the Trustee under the Indenture of November 11, 1985, and is to
perform only such duties as are specifically set forth in that Indenture. In
the case of a default, the owners of a majority in aggregate principal amount
of the Certificates outstanding at the time of the occurrence of a default have
the right to require the Trustee to take action to remedy such default. Upon
the occurrence of a default, the Trustee may, and upon the written request of a
majority in aggregate principal amount of the outstanding Certificates shall,
declare the principal of all Certificates outstanding and interest accrued
thereon immediately due and payable (Section 6.03 and 7.02).
MODIFICATION OF THE INDENTURE
The Indenture of November 11, 1985 contains provisions permitting Farmland,
with the consent of the Trustee, to execute supplemental indentures to, (a)
evidence any succession for another corporation to Farmland and the assumption
by the successor corporation of covenants and obligations of Farmland, (b) to
add further covenants or provisions which Farmland's Board of Directors and the
Trustee consider to be for the protection of the holders of the Certificates,
or, (c) to cure any ambiguity in the Indenture (Section 10.01).
The Indenture of November 11, 1985 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in
aggregate principal amount of the Certificates then outstanding, to execute
supplemental indentures,provided that no such supplemental indentures shall
(1) extend the fixed maturity of any Certificates, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest,
without the consent of the owner of each Certificate so affected, or (2) reduce
the 66-2/3% requirement as to the consent of the owners of the Certificates for
changes in any supplemental indenture, without the consent of the owners of all
certificates then outstanding (Section 10.02).
DEFAULTS AND NOTICE THEREOF
The Indenture of November 11, 1985 provides that any of the following shall
constitute a default: (1) failure to pay principal when due; (2) failure to
pay interest on Certificates when due, continued for 60 days; (3) certain
events of bankruptcy or insolvency; and (4) failure to perform any other
covenant or agreement contained in the Indenture, continued for 90 days.
Failure to pay either principal or interest when due during the pendency of any
dissolution or liquidation proceeding or action to endorse payment of
indebtedness shall also constitute such a default (Section 6.01).
The Indenture of November 11, 1985 provides that the Trustee shall within
90 days after the occurrence of a default, not including periods of grace, give
to the Certificate owners notice of all such defaults unless such defaults have
been cured; provided, that, except in the case of default in the payment or
principal of or interest on any of the Certificates, the Trustee shall be
protected in withholding such notice if and so long as the Trustee determines
that the withholding of such notice is in the interest of the Certificate
owners (Section 6.02).
The Indenture of November 11, 1985 requires Farmland to file with the
Trustee and the Securities and Exchange Commission such additional information,
documents and reports with respect to compliance by Farmland with the
conditions and covenants provided for in this Indenture as may be required from
time to time by the Securities and Exchange Commission. Summaries of any such
reports filed with the Trustee or the Securities and Exchange Commission
pursuant to rules and regulations as prescribed by the Securities and Exchange
Commission shall be transmitted to the owners of Certificates in the manner and
to the extent provided for in the Indenture (Section 5.03).
The Indenture of November 11, 1985 does not require any periodic evidence
to be furnished as to the absence of default or as to compliance with the terms
of the Indenture.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture of November 11, 1985 shall be discharged upon payment or
redemption of all Certificates or upon deposit with the Trustee of funds
sufficient therefor (Section 12.01).
DESCRIPTION OF THE DEMAND LOAN CERTIFICATES
The Demand Loan Certificates are issued under an indenture (the "Indenture
of November 20, 1981") dated November 20, 1981, as amended January 4, 1982,
between Farmland Industries, Inc. ("Farmland") and Commerce Bank of Kansas
City, National Association, Kansas City, Missouri as Trustee (the "Trustee.")
Effective January 31, 1989, Commerce Bank resigned as Trustee and UMB Bank,
National Association, Kansas City, Missouri has been appointed the Trustee.
The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 20, 1981 and do not
purport to be complete. The section references therein refer to the sections
of the Indenture of November 20, 1981. Where references are made to particular
sections of the said Indenture, such sections are incorporated by reference as
part of the statements made, and such statements are qualified in their
entirety by such reference.
GENERAL
The Demand Loan Certificates are direct obligations of Farmland but are not
secured and are not negotiable. The Demand Loan Certificates are issued in
amounts of $100 or more, and dated on the day payment of the full purchase
price is received by Farmland in Kansas City, Missouri. If purchased and held
by a member of Farmland for a one (1) month period or by any other purchaser
for a six (6) month period immediately following the date of issue the
principal amount of the Demand Loan Certificates will bear interest at the
Certificate Interest Rate (herein referred to as the "CIR.") The CIR is the
interest rate for the Demand Loan Certificates as determined, from time to
time, by Farmland. Except as hereinafter provided, each Demand Loan
Certificate shall earn interest at the CIR in effect on the date of issuance of
such Demand Loan Certificate for a period of six (6) months only; provided,
however, that if during such six (6) month period the CIR is increased to a
rate higher than that currently in effect for the Demand Loan Certificates,
then each such Demand Loan Certificate shall earn interest at the increased
rate from the effective date of the increase to the end of such Demand Loan
Certificate's then current six (6) month period. Six (6) months from the date
of issue of each Demand Loan Certificate and each six (6) month anniversary
date thereafter, such Demand Loan Certificate shall, if not redeemed, earn
interest at the CIR in effect on such anniversary date, but only for a six (6)
month period from such anniversary date, subject to the escalation provisions
previously set forth. A decrease in the CIR will have no effect on any Demand
Loan Certificate issued prior to the decrease until the first day of the next
subsequent six (6) month period of such outstanding Demand Loan Certificate.
Holders of Demand Loan Certificates are notified of the effective date of any
change of the CIR which effects the Demand Loan Certificates held. The Demand
Loan Certificates may be redeemed at face value plus interest to date of
redemption at the option of the owner, at any time. No partial redemptions
will be permitted. If redeemed by a Farmland member cooperative during a one
(1) month period or by any other purchaser during a six (6) month period
immediately following the date of issuance, the Demand Loan Certificates shall
bear interest from date of issuance to date of redemption at a demand rate of
2% below the CIR. Interest on the principal amount of any Demand Loan
Certificate held longer than six (6) months will be computed at the effective
CIR and is payable in one of the following ways at the option of the owner,
made at the time of purchase and irrevocable as to the purchaser: (i) six (6)
months after the date of issuance and at the end of each and every six (6)
month period thereafter until the Demand Loan Certificate is surrendered for
redemption, or (ii) only at the date of redemption compounded semi-annually at
the effective CIR.
The issuance of Demand Loan Certificates is limited to $500,000,000
outstanding at any one time under the Indenture of November 20, 1981 but such
Indenture does not limit the amount of other securities either secured or
unsecured, which may be issued by Farmland. At August 31, 1994, a total of
$23,158,000 was outstanding.
REDEMPTION
Farmland will redeem the Demand Loan Certificates at any time upon written
request of the owner. If the certificate is surrendered for redemption by a
Farmland member cooperative during a one (1) month period or by any other owner
during a six (6) month period immediately following the date of issuance,
interest computed at the applicable demand rate from date of issuance to date
of redemption will be paid at the time of redemption of the Demand Loan
Certificate. If the Demand Loan Certificate is held for a period longer than
six (6) months from date of issuance, interest from the last previous date on
which interest was paid or compounded to the date of redemption computed at the
applicable CIR will be paid upon redemption. Any interest held for compounding
by Farmland in accordance with an interest option made by the purchaser will be
paid upon redemption of the Demand Loan Certificate.
CONCERNING THE TRUSTEE
The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, the corporation designated to act as Trustee under the Indenture,
resigned effective January 31, 1989 and UMB Bank, National Association, Kansas
City, Missouri, has been appointed the Trustee under the Indenture of November
20, 1981 and is to perform only such duties as are specifically set forth in
that Indenture. In the case of a default, the owners of a majority in
aggregate principal amount of the Demand Loan Certificates outstanding at the
time of the occurrence of a default have the right to require the Trustee to
take action to remedy such default. Upon the occurrence of a default, the
Trustee may, and upon the written request of a majority in aggregate principal
amount of the Demand Loan Certificates outstanding shall, declare the principal
of all Demand Loan Certificates and interest accrued thereon immediately due
and payable (Section 6.03 and 7.02).
MODIFICATION OF THE INDENTURE
The Indenture of November 20, 1981 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in
aggregate principal amount of the Demand Loan Certificates then outstanding, to
execute supplemental indentures adding to or changing any provisions of the
indenture of November 20, 1981, or supplemental indentures, provided that no
such supplemental indenture shall (1) extend the fixed maturity of any Demand
Loan Certificates, or reduce the principal amount thereof, or reduce the rate
or extend the time of payment of interest, without the consent of the owner of
each Demand Loan Certificate so affected, or (2) reduce the 66-2/3% requirement
as to the consent of the owners of the Demand Loan Certificates for changes in
any supplemental indenture, without the consent of the owner of all Demand Loan
Certificates then outstanding (Section 10.02).
DEFAULTS AND NOTICE THEREOF
The Indenture of November 20, 1981 provides that any of the following shall
constitute a default: (1) failure to pay principal when due; (2) failure to pay
interest on Demand Loan Certificates when due, continued for 60 days; (3)
certain events of bankruptcy or insolvency; and (4) failure to perform any
other covenant or agreement contained in the Indenture, continued for 90 days.
Failure to pay either principal or interest when due during the pendency of any
dissolution or liquidation proceeding or action to endorse payment of
indebtedness shall also constitute such a default (Section 6.01).
The Indenture of November 20, 1981 provides that the Trustee shall within
90 days after the occurrence of a default, not including periods of grace, give
to the Demand Loan Certificate owners notice of all such defaults unless such
defaults have been cured; provided, that, except in the case of default in the
payment of principal of or interest on any of the Demand Loan Certificates, the
Trustee shall be protected in withholding such notice if and so long as the
Trustee determines that the withholding of such notice is in the interest of
the Demand Loan Certificate owners (Section 6.02).
The Indenture of November 20, 1981 requires Farmland to file with the
Trustee and the Securities and Exchange Commission such additional information,
documents and reports with respect to compliance by Farmland with the
conditions and covenants provided for in this Indenture as may be required from
time to time by the Securities and Exchange Commission. Summaries of any such
reports filed with the Trustee or the Securities and Exchange Commission
pursuant to rules and regulations as prescribed by the Securities and Exchange
Commission shall be transmitted to the owners of Certificates in the manner and
to the extent provided for in the Indenture (Section 5.03).
The Indenture of November 20, 1981 does not require any periodic evidence
to be furnished as to the absence of default or as to compliance with the terms
of the Indenture.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture of November 20, 1981 shall be discharged upon payment or
redemption of all Demand Loan Certificates or upon deposit with the Trustee of
funds sufficient therefor (Section 12.01).
INTEREST OF NAMED EXPERTS AND COUNSEL
Robert B. Terry, Vice President and General Counsel of the Registrant, has
given an opinion upon the legality of the securities being registered and upon
certain other legal matters in connection with the registration of these
securities.
THE COMPANY
Farmland Industries, Inc. ("Farmland") is a regional farm supply and
marketing cooperative. Farmland is owned by its members and only its members
are eligible to vote for directors or for the management or affairs of
Farmland. Members are entitled to receive patronage refunds distributed by
Farmland from its member-sourced annual net income. See "Business and
Properties - Patronage Refunds and Distribution of Net Income."
Farmland was incorporated in Kansas in 1931. Its principal executive
offices are at 3315 North Oak Trafficway, Kansas City, Missouri 64116
(telephone 816-459-6000). Unless otherwise noted, references to years are to
fiscal years ended August 31.
MEMBERSHIP
Farmland's membership includes voting members and associate members.
Membership requirements are determined by the Farmland Board of Directors.
VOTING MEMBERS
The current requirements for membership are as follows: 1) Voting
membership is limited to: (a) farmers' and ranchers' cooperative associations
which have purchased farm supplies from or provided grain to Farmland during
Farmland's two most recently completed years, and (b) producers of hogs and
cattle or associations of such producers which have provided hogs or cattle to
Farmland during Farmland's two most recent years. 2) Voting members must
maintain a minimum investment of $1,000 in par value of Farmland common stock.
3) A cooperative must limit voting to agricultural producers and conduct a
majority of their business with voting producers.
ASSOCIATE MEMBERS
Associate members have all the rights of membership except that they do not
have the right to vote at a meeting of the shareholders.
Associate membership requirements in Farmland are as follows: 1) Any
person meeting the requirements for voting membership can be an associate
member. 2) Associate members must maintain a minimum investment of $1,000 in
par value of Farmland associate member common stock. 3) Associations other
than those owned 100% by members, associate members or Farmland must conduct
business on a cooperative basis. 4) Hog and/or cattle feeding businesses must
derive a majority of earned income from such feeding business and agree to
provide the information Farmland needs to pay patronage refunds from its hog
and/or cattle marketing operations to members or other associate members that
are eligible to receive such refunds.
At August 31, 1994, Farmland's membership consisted of 1,480 cooperative
associations of farmers and ranchers and 1,365 pork or beef producers or
associations of such producers. See "Patronage Refunds and Distribution of Net
Income."
In the event the Board of Directors of Farmland shall determine that any
holder of the common stock or associate member common stock of Farmland does
not meet the qualifications as may be established by the Board of Directors for
holders thereof, such person shall have no rights or privileges on account of
such common stock to vote for director(s) or to vote on the management or
affairs of Farmland, and Farmland shall have the right, at its option, (a) to
purchase such common stock at its book or par value, whichever is less, as
determined by the Board of Directors of Farmland, or (b) in exchange for such
common stock or associate member common stock to issue or record on the books
of Farmland capital credits in an equivalent amount. On the failure of any
holder, following any demand by Farmland therefor, to deliver the certificate
or certificates evidencing any common stock or associate member common stock,
Farmland may cancel the same on its books and issue or record on the books of
Farmland an equivalent amount of capital credits in lieu thereof.
BUSINESS
GENERAL
Farmland and subsidiaries (the "Company") conducts business primarily in
two operating areas. On the input side of the agricultural industry, the
Company operates as a farm supply cooperative. On the output side of the
agricultural industry, the Company operates as a processing and marketing
cooperative.
Cooperative farm supply operations consist of three product
divisions--petroleum, crop production and feed. Products of the petroleum
division are principally refined fuels, propane, by-products of petroleum
refining and a complete line of car, truck and tractor tires, batteries and
accessories. Principal products of the crop production division are nitrogen,
phosphate and potash fertilizers and a complete line of insecticides,
herbicides and mixed chemicals. Feed division products include swine, dairy,
pet, beef, poultry, mineral and specialty feeds, feed ingredients and
supplements, animal health products and livestock services.
Geographically, the Company's markets are mid-western states which comprise
the corn belt and the wheat belt. The Company distributes products at
wholesale. Approximately 65% of the Company's farm supply sales in 1994 were
to local farm cooperative associations which are members and owners of
Farmland. These cooperatives distribute products primarily to farmers and
ranchers who utilize the products in the production of farm crops and
livestock.
Cooperative marketing operations include the storage and marketing of
grain, processing pork and beef, and marketing fresh pork, processed pork,
fresh beef and boxed beef. In 1994, approximately 61% of the hogs processed
and 46% of the grain marketed were supplied to the Company by members. Cattle
are purchased from producers in the proximity of the beef plants at Liberal and
Dodge City, Kansas.
A substantial portion of the Company's farm supply, pork and beef products,
is produced in facilities owned by the Company or operated by the Company under
long-term lease arrangements. No material part of the business of any segment
of the Company is dependent on a single customer or a few customers.
Information regarding the Company's property and its business is presented
below. Financial information about the Company's industry segments is
presented in note 12 of the notes to consolidated financial statements.
The Company competes for market share with numerous participants with
various levels of vertical integration, product and geographical
diversification, sizes and types of operations. In the petroleum industry,
competitors include major oil companies, independent refiners, other
cooperatives and product brokers. Competitors in the crop production industry
include global producers of nitrogen and phosphate fertilizers (some of which
are cooperatives) and product importers and brokers. The feed, pork and beef
industries are comprised of an infinite variety of competitive participants.
Approximately 57% of the Company's supply product sales are manufactured by the
Company. See "Cooperative Farm Supply Business and Properties - Petroleum,
Crop Production and Feed" for information regarding the Company's manufacturing
properties by business segment.
COOPERATIVE FARM SUPPLY BUSINESS AND PROPERTIES
PETROLEUM
MARKETING
The principal product of this business segment is refined fuels.
Approximately 68% of refined product sales in 1994 resulted from transactions
with Farmland's members. The balance of the Company's refined product sales
were principally through retailing chains in urban areas. Based on total
volume of refined fuels withdrawn at terminal storage facilities along
pipelines which serve most of the Company's trade territory, the Company
estimates its market share in rural markets is approximately 8%. Other
petroleum products include lube oil, grease, by-products of petroleum refining,
and a complete line of car, truck and tractor tires, batteries and accessories.
Sales of petroleum products as a percent of the Company's consolidated sales
for 1994, 1993 and 1992 were 13%, 19% and 29%, respectively.
Competitive methods in the petroleum industry include service, product
quality and pricing. However, in refined fuel markets, price competition is
most dominant. Many participants in the industry engage in one or more of the
industry's processes (oil production and transportation, refining, wholesale
distribution and retailing). The Company participates in the industry
primarily as a midcontinent refiner and as a wholesale distributor of petroleum
products.
PRODUCTION
The Company owns a refinery at Coffeyville, Kansas and at Phillipsburg,
Kansas. Prior to June 30, 1992 the Company owned approximately 30% of the
National Cooperative Refinery Association ("NCRA"). As a 30% owner, Farmland
was required to purchase 30% of the production of this refinery. On June 30,
1992, the Company sold its ownership interest in NCRA.
The Company owns a refinery at Phillipsburg, Kansas which is closed. A
loading terminal located at the refinery remains in operation. The carrying
value of this refinery at August 31, 1994 was approximately $2,400,000. The
Company is evaluating alternative uses for this facility and cannot at this
time determine the extent of any losses related to the closure of the refinery,
but such losses are expected not to be significant. During the four months of
1992 in which it operated, sales associated with products of the Phillipsburg
refinery amounted to approximately $20,900,000 and the barrels processed by the
refinery were 871,000.
<TABLE>
Production volume for 1994, 1993 and 1992 is as follows:
<CAPTION>
Barrels of Crude Oil Processed
Daily Average
Based on 365 Days per Year
(barrels)
Location 1994 1993 1992
<S> <C> <C> <C>
Coffeyville, Kansas 64,211 53,000 57,000
</TABLE>
The Coffeyville refinery produced 25 million barrels of motor fuels and
heating fuels in 1994, 20 million barrels in 1993, and 23 million barrels in
1992. Approximately 68% of petroleum product sales in 1994 represented
products produced at this location.
Management terminated negotiations with a potential purchaser of the
Coffeyville refinery in 1994 when final sale terms were determined not to be in
the Company's best interest. See note 17 of the notes to consolidated
financial statements. The Company acquired a mothballed refinery in Texas
which is being reassembled at the Coffeyville refinery site. When reassembly
is complete in 1996, crude oil processing capacity is expected to increase.
See "Business - Capital Expenditures."
RAW MATERIALS
Farmland's refinery at Coffeyville, Kansas is designed to process high
quality crude oil with low sulfur content ("sweet crude"). Competition for
sweet crude and declining production in proximity of the refinery has increased
its cost of raw material relative to such cost for coastal refineries with the
capacity for processing and access to lower quality crude grades. The
Company's pipeline/trucking gathering system collects approximately 27% of its
crude oil supplies from producers near its refineries. Additional supplies are
acquired from diversified sources. Modifications to the Coffeyville refinery
which increase its capability to efficiently process crude oil streams
containing greater amounts of lower quality crude are continuing.
Crude oil is purchased approximately 45 to 60 days in advance of the time
the related refined products are marketed. Certain of these advance crude oil
purchase transactions, as well as fixed price refined products advance sales
contracts, are hedged utilizing petroleum futures contracts.
During periods of volatile crude oil price changes or in extremely short
crude supply conditions, the Company's petroleum operations could be affected
to a greater extent than petroleum operations of more vertically integrated
competitors with crude oil supplies available from owned producing reserves.
In past periods of relatively severe crude oil shortages, various governmental
regulations such as price controls and mandatory crude oil allocating programs
have been implemented to spread the adversity among all industry participants.
There can be no assurance as to what, if any, government action would be taken
in the event a crude oil shortage developed.
CROP PRODUCTION
MARKETING
The Company's crop production business segment includes nitrogen-,
phosphate-, and potash-based fertilizer products and a complete line of crop
protection products such as insecticides, herbicides and mixed chemicals.
Sales of the crop production business segment as a percent of consolidated
sales for 1994, 1993 and 1992 were 17%, 19% and 26%, respectively.
Competition in the plant nutrient industry is dominated by price
considerations. However, during the spring and fall plant nutrient application
seasons, farming activities intensify and delivery service capacity is a
significant competitive factor. Therefore, the Company maintains a significant
capital investment in distribution assets and a seasonal investment in
inventory to support its manufacturing operations. The Company has plant
nutrient custom dry blending, liquid mixing, storage and distribution
facilities at 15 locations throughout its trade territory.
The Company's sales of crop production products are primarily at wholesale
to local cooperative associations (the members, owners and customers of the
Company). In view of this owner/customer relationship, management believes
that, with respect to such customers, the Company has a slight competitive
advantage.
Domestic competition, mainly from other regional cooperatives, major
petroleum companies with chemical divisions and integrated chemical companies,
is very aggressive due to customers' sophisticated buying tendencies and
production strategies that focus on costs and service. Also, foreign
competition exists from producers of crop production products manufactured in
countries with lower cost natural gas supplied (the principal raw material in
nitrogen-based fertilizer products). In certain cases, foreign producers of
fertilizer for export to the U.S. may be subsidized by their governments.
PRODUCTION
The Company manufacturers nitrogen-based crop production products. Based
on total production capacity, the Company is one of the largest producers of
anhydrous ammonia fertilizer in the U.S. The Company owns and produces
nitrogen-based products at four anhydrous ammonia plants, four urea ammonium
nitrate plants and two urea plants. In addition, the Company operates three
anhydrous ammonia plants under long-term lease arrangements.
The Company owns and produces phosphate-based products at one plant and
has 50% ownership interest in two ventures which produce phosphate-based
products.
<TABLE>
Nitrogen fertilizer production information for 1994, 1993 and 1992 is as
follows:
Actual Annual Production
Anhydrous Ammonia
Plant Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
Lawrence 443,000 375,000 450,000
Dodge City 257,000 241,000 254,000
Fort Dodge 256,000 232,000 240,000
Beatrice 277,000 243,000 250,000
Enid (2 plants)* 985,000 969,000 1,017,000
Pollock* 526,000 490,000 501,000
*Indicates leased plants
</TABLE>
Synthetic anhydrous ammonia is the basic component of other commercially
produced nitrogen-based crop production products and uses natural gas as the
major raw material.
Ammonia is used as the principal raw material in the production of value-
added nitrogen-based products such as urea, ammonium nitrate, urea ammonium
nitrate solutions and other products.
<TABLE>
Production of urea, ammonium nitrate, urea ammonium nitrate solutions and
other nitrogen-based products from anhydrous ammonia, as a raw material, for
1994, 1993 and 1992 is as follows:
<CAPTION>
Actual Annual Production
Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
Lawrence 654,000 661,000 691,000
Enid 433,000 473,000 452,000
Dodge City 163,000 241,000 217,000
Beatrice 162,000 166,000 177,000
</TABLE>
Ammonia is also used to react with phosphoric acid to produce phosphoric
acid products such as liquid mixed fertilizer, diammonium phosphate and
monoammonium phosphate.
The Company owns a phosphate chemical plant located in Joplin, Missouri and
land in Florida which contains an estimated 40 million tons of phosphate rock.
The Joplin plant produces ammonium phosphate which is combined in varying
ratios with muriate of potash to produce 12 different fertilizer grade
products. In addition, feed grade phosphate (dicalcium phosphate) is produced
at this facility.
<TABLE>
Production at the Joplin plant for 1994, 1993 and 1992 is as follows:
<CAPTION>
Actual Annual Production
Product 1994 1993 1992
(tons)
<S> <C> <C> <C>
Ammonium Phosphate 75,000 72,000 88,000
Feed Grade Phosphate 157,000 141,000 129,000
</TABLE>
Prior to November 15, 1991, the Company owned and operated a phosphate
chemical plant located in Green Bay, Florida. Effective November 15, 1991, the
Company and Norsk Hydro a.s. formed Farmland Hydro, L.P. ("Hydro") to
manufacture phosphate fertilizer products for distribution to international
markets. Hydro operates a phosphate plant at Green Bay, Florida and owns
phosphate rock reserves located in Hardee County, Florida which contain an
estimated 40 million tons of phosphate rock. The Company provides management
and administrative services and Norsk Hydro a.s. provides marketing services to
Hydro. The joint venture's plant produces phosphoric acid products such as
super acid, diammonium phosphate and monoammonium phosphate. Annual production
in short tons of such products for 1994, 1993 and for the ten months in 1992
during which the venture operated is 1,437,000, 1,216,000 and 880,000,
respectively. The phosphate rock required to operate the joint venture's plant
is presently purchased from outside suppliers and adequate supplies of sulfur
are available from several producers.
Plans for development of the phosphate reserves owned by the Company and
Hydro have not been established in view of the availability of adequate
supplies of phosphate rock from alternative sources.
The Company and J.R. Simplot Company formed a joint venture in April 1992,
SF Phosphates, Limited, to own and operate a phosphate mine located in Vernal,
Utah, a phosphate chemical plant located in Rock Springs, Wyoming and a 96-mile
pipeline connecting the mine to the plant. The plant produces monoammonium
phosphate and super acid with annual production of 465,000 tons for 1994,
440,000 tons for 1993 and 131,000 tons for the five months of operations in
1992. Under the venture agreement, the Company and J.R. Simplot Company
purchase the production of the venture in proportion to their ownership.
The Company, The National Gas Company of Trinidad and Tobago LTD., and
Enron International C.V. have entered into an agreement to develop a new
ammonia production facility in LaBrea, Trinidad, West Indies. Upon completion,
the plant contemplated at this time is expected to have a production capacity
of approximately 675,000 short tons of ammonia annually. The Company intends
to operate the plant and to receive and market the production under agreements
being negotiated at this time. The cost to complete this project has not been
determined.
RAW MATERIALS
Natural gas, the largest single component of nitrogen-based fertilizer
production, is purchased directly from natural gas producers. Natural gas
purchase contracts are generally market sensitive and contract prices change as
the market price for natural gas changes. The Company's management believes
that the flexible pricing attributes of its gas supply contracts, without
relinquishing rights to long-term supplies, are essential to its competitive
position. In addition, the Company has a hedging program which utilizes
natural gas futures and options to reduce risks of market price volatility.
Natural gas is delivered to the Company's facilities under pipeline
transportation delivery contracts which have been negotiated with each plant's
delivering pipeline. Transportation delivery contracts, for the most part, are
interruptible as defined by the Federal Energy Regulatory Commission. No
significant production of nitrogen-based products has been lost, and none is
anticipated, because of curtailments in transportation.
FEED
Products in the Company's feed line include swine, beef, poultry, dairy,
pet, mineral and specialty feeds, feed ingredients and supplements, animal
health products and livestock services.
This business segment's sales were approximately 8%, 10% and 13% of
consolidated sales for the years 1994, 1993 and 1992, respectively.
Approximately 45% of the feed business segment's sales in 1994 was attributable
to products manufactured in the Company's feed mills. The Company operates
feed mixing plants at 19 locations throughout its territory, an animal protein
and premix plant located in Eagle Grove, Iowa and a pet food plant in Muncie,
Kansas.
<TABLE>
Feed production is as follows:
<CAPTION>
Actual Annual Production
Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
22 feed mills (combined) 1,118,000 1,030,000 954,000
</TABLE>
In addition, the Company's feed operations include placement of
Company-owned feeder pigs with individuals who have contractual arrangements
with the Company to feed pigs on a fee basis until weight gain is finished.
During 1994, 1993 and 1992, approximately 250,100 pigs, 113,000 pigs and 46,300
pigs, respectively, were finished under this program. The majority of the
finished pigs were sold to Farmland Foods, Inc. ("Foods") for processing.
The Company owns a 45% interest in Alliance Farm Cooperative Association
(formerly Yuma Feeder Pig Limited Liability Company) which operates farrowing
facilities.
The Company operates a facility for production of quality swine breeding
stock. These animals are placed with farrowers under contractual arrangements.
In addition, the Company purchases swine breeding stock for placement with such
farrowers.
The Company conducts research in genetic selection, breeding, animal health
and nutrition at its research facility in Bonner Springs, Kansas. Through
local cooperative associations of farmers and ranchers, the Company
participates in livestock and hog services designed to produce lean,
feed-efficient animals and help livestock producers select feed formulations
which maximize weight gain.
COOPERATIVE PROCESSING AND MARKETING BUSINESS AND PROPERTIES
PORK PROCESSING AND MARKETING
PRODUCTION
The Company's pork processing and marketing operations are conducted
through a 99%-owned subsidiary, Farmland Foods, Inc. ("Foods"). Foods operates
eight food processing facilities. Meat processing facilities at Springfield,
Massachusetts, Carey, Ohio, and New Riegel, Ohio produce Italian-style
specialty meats and ham products. A facility at Wichita, Kansas processes pork
into fresh sausage, and pork and beef into hot dogs, dry sausage and other
luncheon meats. A facility at San Leandro, California was closed on September
1, 1993. A facility in Denison, Iowa and one in Crete, Nebraska function as
pork abattoirs and have additional capabilities for processing pork into bacon,
ham and smoked meats. An additional facility at Monmouth, Illinois was
purchased on February 15, 1993. These facilities also process fresh pork into
primal cuts for additional processing into fabricated meats which are sold to
commercial users and to retail grocery chains, as well as case-ready and
label-branded cuts for retail distribution. The eighth plant located in
Carroll, Iowa is primarily a packaging facility for canned or cook-in-bag
products. A previously closed pork processing plant at Iowa Falls, Iowa is
currently held for sale.
<TABLE>
Production for 1994, 1993 and 1992 is as follows:
<CAPTION>
Actual Weekly Production
On a One-Shift Basis
Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
Wichita 1,884,000 1,514,000 1,618,000
San Leandro** -0- 243,000 269,000
Carroll 1,111,000* 1,204,000* 1,131,000*
Springfield 622,000 666,000 560,000
Carey/Riegel 257,000 231,000 220,000
<FN>
* All ham products were produced on 2 shifts during 1994, 1993 and 1992.
** Closed September 1, 1993
</TABLE>
<TABLE>
<CAPTION>
Actual Weekly Production
On a One-Shift Basis
Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
Denison 40,000 37,000 39,000
Crete 47,000 45,000 47,000
Monmouth 28,000 25,000 -0-*
<FN>
*The Company did not own the Monmouth facility in 1992.
</TABLE>
MARKETING
The Company's pork marketing operations include meat processing, primarily
pork, and marketing. Products marketed include fresh pork, fabricated pork,
smoked meats, ham, bacon, fresh sausage, dry sausage, hot dogs, and packing
house by-products. These products are marketed under Farmland, Maple River,
Marco Polo, Carando, Regal, and other brand names. Product distribution is
through national and regional retail food chains, food service accounts,
distributors and international marketing activities.
Pork marketing is a highly competitive industry with many suppliers of live
hogs, fresh pork and processed pork products. Other meat products such as
beef, poultry and fish also compete directly with pork products. Competitive
methods in this segment include price, product quality, product differentiation
and customer service.
BEEF PROCESSING AND MARKETING
PRODUCTION
The Company's beef processing and marketing operations are conducted
through two ventures. National Beef Packing Company, L.P., formed in April
1993, is located in Liberal, Kansas and is 58%-owned by Farmland. Hyplains
Beef, L.C., formed in July 1992, is located in Dodge City, Kansas and is
50%-owned by Farmland. These facilities function as beef abattoirs and have
capabilities for processing fresh beef into primal cuts for additional
processing into fabricated or boxed beef. During the year ended August 31,
1994, the two plants operated at 97% of capacity and slaughtered 1,708,00
cattle.
MARKETING
Products in the Company's beef processing and marketing operations include
fresh beef, boxed beef and packing house by-products. Product distribution is
through national and regional retail and food service customers under Farmland
Black Angus Beef and other brand names. There is also a limited amount of
international product distribution.
Beef marketing is a highly competitive industry with many suppliers of live
cattle, fresh beef and processed beef. Other meat products such as pork,
poultry and fish also compete directly with beef products. Competitive methods
in this industry include price, product quality and customer service.
GRAIN MARKETING
Effective June 30, 1992, the Company acquired substantially all the
business and assets of Union Equity Co-Operative Exchange ("Union Equity") and
conducts the grain marketing and storage operations, previously conducted by
Union Equity, using the Union Equity name.
The Company markets wheat, milo, corn, soybeans, barley and oats, with
wheat constituting the majority of the marketing business. The Company
purchases grain from members, associate members and nonmembers located in the
midwestern part of the United States. Once the grain is purchased, the Company
assumes all risks related to selling such grain. Since grain is a commodity,
pricing of grain in the United States is principally conducted through bids
based on the commodity futures markets.
In 1994, approximately 37% of grain revenues have been from export sales.
The five largest purchasers in terms of total revenues from grain operations
were Mexico (6%), Jordan (5%), Egypt (4%), Israel (4%) and South Africa (2%).
In 1993 and 1992, export sales or sales to domestic customers for export
accounted for approximately 60% and 55%, respectively, of consolidated grain
revenues. A majority of the grain export sales are under price subsidies or
credit arrangements guaranteed by the United States Government, primarily
through programs administered by the United States Department of Agriculture
("USDA"). Export-related sales are subject to international political
upheavals and changes in other countries' trade policies which are not within
the control of the United States or the Company. Foreign sales of grain are
required to be paid in U.S. Dollars.
TRADIGRAIN
In December 1993, the Company acquired all the common stock of seven
international grain trading companies (collectively referred to as
"Tradigrain") formerly owned by B.P. Nutrition B.V. Tradigrain imports,
exports and ships all major grains from the major producing countries to final
consumers which are either governmental entities, private companies or other
major grain companies.
Tradigrain's purchases of grain are made on a cash basis against
presentation of documents. Its sales of grain are mostly done against
confirmed Letters of Credit at sight or on 180/360 days deferred basis. The
volume of grain traded by Tradigrain varies from seven to ten million metric
tons per year and represents total sales of between U.S. $800 million to U.S.
$1.2 billion per year.
PROPERTY
<TABLE>
The Company owns or leases thirty-one (31) inland elevators, and one (1)
export elevator with a total licensed capacity of approximately 177,157,000
bushels of grain. The location, type, number and aggregate licensed capacity
in bushels of the elevators at August 31, 1994 are as follows:
<CAPTION>
Aggregate
Location Type Number Capacity
<S> <C> <C> <C>
Amarillo, Texas Inland 1 3,226,000
Black, Texas Inland 1 1,418,000
Commerce City, Colorado Inland 1 3,234,000
Darrouzett, Texas Inland 1 1,277,000
Enid, Oklahoma Inland 4 50,300,000
Fairfax, Kansas Inland 1 10,047,000
Galveston, Texas Export 1 3,253,000
Hutchinson, Kansas Inland 3 25,268,000
Idaho and Utah Inland 11 9,825,000
Lincoln, Nebraska Inland 1 5,099,000
Omaha, Nebraska Inland 1 4,266,000
Saginaw, Texas Inland 2 37,274,000
Stratford, Texas Inland 1 112,000
Topeka, Kansas Inland 1 12,055,000
Wichita, Kansas Inland 1 10,503,000
</TABLE>
Storage of grain has declined because of changes in the U.S. Government's
farm policies. As a result, several of the above elevators are substantially
under-utilized. The Commerce City, Colorado elevator is leased to another
operator. Seven of the above elevators are closed, including two at Enid,
Oklahoma, two at Hutchinson, Kansas, one at Saginaw, Texas and the elevators at
Stratford, Texas and Wichita, Kansas. The aggregate licensed bushel capacity
of the closed elevators is 61,446,000 bushels.
PATRONAGE REFUNDS AND DISTRIBUTION OF NET INCOME
For purposes of this section, annual income for 1994 means income before
income taxes determined in accordance with federal income tax regulations. For
1995 and after, annual income means income before income taxes determined in
accordance with generally accepted accounting principles. For this purpose,
the term "member," means any member, associate member or any other person with
which Farmland is a party to a currently effective patronage refund agreement.
Farmland operates on a cooperative basis. In accordance with its bylaws,
Farmland returns the member-sourced portion of its annual income to its
members. Each member's portion of the annual patronage refund is determined by
the quantity or value of business transacted by the member with Farmland and
Farmland's income from such transactions. Such returns are referred to as
patronage refunds.
Generally, a portion of the patronage refund is returned in cash and for
the balance of the patronage refund (the "invested portion") the members
receive, Farmland common stock, associate member common stock or capital
credits (the equity type received is determined by the membership status). The
invested portion of the patronage refund is determined annually by Farmland's
Board of Directors. The annual patronage refund is returned to members as soon
as practical after the end of each fiscal year. The Internal Revenue Code
allows a cooperative to deduct from its taxable income the total amount of the
patronage refunds returned, provided that not less than 20% of the total
patronage refund returned is cash. The Bylaws of Farmland provide that its
Board of Directors has complete discretion with respect to the handling and
ultimate disposition of any member-sourced losses.
<TABLE>
For the years ended 1994, 1993 and 1992, Farmland returned the following
patronage refunds.
<CAPTION>
Cash Portion Invested Portion Total Patronage
of Patronage Refunds of Patronage Refunds Refunds
(Amounts in thousands)
<S> <C> <C> <C>
1994 $ 26,552 $ 44,032 $ 70,584
1993 $ -0- $ -0- $ -0-
1992 $ 17,449 $ -0- $ 17,449
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of the reasons for changes in the
Company's income for 1994, 1993 and 1992.
Income or loss from transactions with patrons not eligible to receive
patronage refunds and extraneous income or loss (income from sources unrelated
to the type of transactions conducted by the cooperative with its members) is
subject to income taxes computed on the same basis as such tax is computed on
the income or loss of other corporations.
EQUITY REDEMPTION PLANS
The Equity Redemption Plans described below (the "Plans") may be changed at
any time or from time to time at the sole and absolute discretion of the Board
of Directors. The Plans are also not binding upon the Board of Directors or
the Company and the Board of Directors reserves the right to redeem, or to not
redeem, any equities of the Company without regard to whether such action or
inaction is in compliance with the Plans. Equity holders should therefore not
rely to their detriment on the current terms of the Plans because they are
subject to change without advance notice and may be deviated from in the sole
and absolute discretion of the Board of Directors. The factors which may be
considered by the Board of Directors in determining when, and under what
circumstances, the Company may redeem equities include, but are not limited to,
the terms of the Company's base capital plan, income and other tax
considerations, the Company's results of operations, financial position, cash
flow, capital requirements, long-term financial planning needs and other
relevant considerations. By retaining discretion to determine the amount,
timing and ordering of any equity redemptions, the Board believes that it can
continue to assure that the best interests of the Company and thus of its
members will be protected.
BASE CAPITAL PLAN
For the purposes of acquiring and maintaining adequate capital to finance
the business of the Company, the Board of Directors has established a base
capital plan ("Plan"). The Plan provides a mechanism for determining the
Company's total capital requirements and each member's or patron's share
thereof (the base capital requirement). As part of the Plan, the Board of
Directors may, in its discretion, provide for redemption of Farmland common
stock or associate member common stock held by members or associate members who
have an investment in Farmland common stock or associate member common stock
which exceeds the members' or associate members' base capital requirement. The
Plan may provide a mechanism under which the cash portion of the patronage
refund payable to members or patrons will depend upon the degree to which such
members or associate members meet their base capital requirements.
ESTATE SETTLEMENT PLAN
The "Estate Settlement Plan" is subject to paragraph one above under the
heading, "Equity Redemption Plans."
The estate settlement plan provides that in the event of the death of an
individual (a natural person) equity holder, the equity holdings of the
deceased will be redeemed at par value with the exception of purchased equity
holdings owned by the decreased for less than five years. This provision is
subject to a limitation of $1.0 million in any one fiscal year without further
authorization by the Board of Directors.
SPECIAL REDEMPTION PLAN
The "Special Redemption Plan" is subject to paragraph one above under the
heading "Equity Redemption Plans."
Provisions of the special redemption plan are as follows:
1. No special redemption will be made if the redemption of equities may
result in a violation of the lending covenants; and
2. The targeted amount for special redemptions is based on consolidated
net income (member and nonmember) and the ratio of funded indebtedness
to capitalization before the special redemption but after giving effect
to the distribution of cash and the redemption of equities under the
base capital plan. The calculation for special redemption is as
follows:
Funded Indebtedness as Total Special Redemption
as a Percent of as a Percent of
Capitalization Consolidated Net Income
> 50 % None
48 - 50 % 2.5 %
44 - 47 % 5.0 %
40 - 43 % 7.5 %
< 40 % 10.0 %
3. The priority for redeeming equities under the Special Redemption
Program will be as follows listed in order of first to be redeemed.
a. Capital Credits (Series of Ten) which, on or before August 31,
1992, were issued to and which are currently held by, any dissolved
cooperative for the benefit of its membership. One-third of the
total outstanding amount of such Capital Credits, Series of Ten to
be redeemed pro rata to such holders following each of the next
three fiscal year-ends.
b. Capital Credits (Series of Ten) outstanding ten years or longer --
paid in order of lowest numbered series first.
c. Capital Credits held by individual livestock producers age 70 or
older who have been held for five years or longer -- paid in
descending order of age of the individual (oldest person first).
Holders of equities in Farmland Foods, Inc. will have their
equities redeemed on the same basis as holders of Farmland equity.
Former Farmland Foods equity holders who accepted the exchange
offer for Farmland Industries' equities in 1991 will be deemed to
have met the five-year holding requirement for those equities
involved in the exchange.
d. Capital Credits (Series of Ten) outstanding five years or longer --
paid in order of lowest numbered series first.
e. Capital Credits held by individual livestock producers age 65 or
older that have been held for five years or longer -- paid in
descending order of age of the individual (oldest person first).
Holders of equities in Farmland Foods, Inc. will have their
equities redeemed on the same basis as holders of Farmland equity.
Former Farmland Foods equity holders who accepted the exchange
offer for Farmland Industries' equities in 1991 will be deemed to
have met the five-year holding requirement for those equities
involved in the exchange.
f. Any Capital Credits outstanding for twenty years or more -- paid in
order of year issued, oldest first. Holders of equities in
Farmland Foods, Inc. will have their equities redeemed on the same
basis as holders of Farmland equity. Former Farmland Foods equity
holders who accepted the exchange offer for Farmland Industries'
equities in 1991 will be deemed to have met the five-year holding
requirement for those equities involved in the exchange. Nonmember
capital will participate on the same bassi as capital credits in
the redemption.
g. Capital Credits (Series of Ten) remaining balance -- paid in order
of lowest numbered series first.
h. Minority held equities in Farmland Foods, Inc. remaining balance --
paid in descending order of years outstanding, oldest first.
i. Any Capital Credits outstanding for ten years or more -- paid in
order of year issued, oldest first. Nonmember capital will
participate on the same bassi as capital credits in the redemption.
j. Any Common Stock or Associate Member Common Stock outstanding for
twenty years or more -- in order of year issued, oldest first.
k. Any Capital Credit outstanding for five years or more -- paid in
order of year issued, oldest first. Nonmember capital will
participate on the same bassi as capital credits in the redemption.
l. Any Common Stock or Associate Member Common Stock outstanding for
five years or more -- paid in order of year issued, oldest first.
OTHER MATTERS
RESEARCH
The Company operates a research and development farm near Bonner Springs,
Kansas where many aspects of animal nutrition are studied. The research is
directed toward improving the nutrition and feeding practices of livestock and
pets.
Research related to commercialization of a wheat processing plant to
produce wheat gluten as a replacement source for raw material used in certain
consumer products has been completed and technology for an economically viable
plant has been developed. Farmland has formed Heartland Wheat Growers, L.P., a
joint venture with local cooperatives, and is currently building a wheat
processing plant in Russell, Kansas that will process approximately 4.25
million bushels of wheat a year. See "Capital Expenditures."
Expenditures related to Company-sponsored product and process improvements
amounted to $2,702,000, $3,303,000 and $3,338,000 for the years ended 1994,
1993 and 1992, respectively.
CAPITAL EXPENDITURES
The Company plans capital expenditures of approximately $289.9 million
during its two fiscal years ending August 31, 1995 and 1996.
Capital expenditures of approximately $111.8 million are planned for the
crop production business segment (excluding costs for construction of an
anhydrous ammonia plant in Trinidad which is being evaluated at this time). A
new urea ammonium nitrate ("UAN") facility is planned at the Fort Dodge, Iowa
anhydrous ammonium plant. The new facility is expected to cost approximately
$30.0 million of which $21.0 million are to be expended during this period.
This facility will upgrade anhydrous ammonium to produce approximately 115,000
tons of UAN per year. A UAN plant at the Lawrence, Kansas facility is being
expanded to increase production by approximately 128,000 tons per year. An
estimated $2.5 million will be expended in fiscal 1995 to complete the project.
Expenditures at the Dodge City, Kansas facility of approximately $6.0 million
are expected to increase anhydrous ammonia and UAN production capacity by
52,500 tons and 10,500 tons, respectively. Capital expenditures of $66.4
million are planned for operating efficiency improvements, necessities and
replacements, and $15.9 million is for environmental and safety issues,
predominately at nitrogen fertilizer plants.
Capital expenditures in the feed business segment are estimated to be $23.4
million. A feed mill in southeast New Mexico is being constructed at an
approximate cost of $1.3 million. The remaining projected expenditures of
$22.1 million are for feed mill and livestock production efficiencies,
operating necessities and replacements.
Capital expenditures in the petroleum business segment are expected to be
$87.4 million and include approximately $32.9 million to increase daily crude
oil processing capacity at the Coffeyville, Kansas refinery of which $27.9
million is to be expended during this period. The remaining projected
expenditures of the petroleum business segment are as follows: $23.6 million
for operating necessities; $20.7 million for increased operating efficiency;
and, $10.2 million for environmental and safety issues.
Capital expenditures of approximately $32.6 million are planned in the pork
marketing business segment. A waste water expansion project at the Crete,
Nebraska facility is expected to cost approximately $2.4 million. A 10,000
square foot loading dock and storage facility will be constructed at the
Monmouth, Illinois plant for an estimated $1.5 million. The remaining
expenditures are mostly for operational improvements and replacements.
Capital expenditures of approximately $7.3 million planned for the grain
business segment are mainly for expansion and replacements.
Heartland Wheat Growers, L.P. (a partnership between the Company and local
cooperatives) located in Russell, Kansas, was formed for the purpose of
constructing and operating a wheat processing facility, to produce wheat
gluten, wheat starch and derivative products and to market and distribute such
products. The Company has a seventy-nine percent (79%) interest in the
partnership. The Company's planned investment to finance construction of the
wheat gluten plant amounts to approximately $25.5 million of which $21.5
million will be expended during the period.
The Company intends to fund its capital program with cash from operations
or from its primary sources of debt capital. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity and Capital
Resources."
MATTERS INVOLVING THE ENVIRONMENT
The Company's farm supply manufacturing and distribution operations, its
food processing and marketing operations and its grain marketing operations
continue to be affected to some extent by federal, state and local regulations
regarding the environment. The Company recognizes liabilities related to
remediation of contaminated properties when the related costs are probable and
can be reasonably estimated. Estimates of these costs are based upon currently
available facts, existing technology, undiscounted site specific costs, and
currently enacted laws and regulations. In reporting environmental
liabilities, no offset is made for potential recoveries. Such liabilities
include estimates of the Company's share of costs attributable to potentially
responsible parties ("PRPs") which are insolvent or otherwise unable to pay.
All liabilities are monitored and adjusted regularly as new facts or changes in
law or technology occur.
The Company has been designated as a PRP under the Comprehensive
Environmental Response, Compensation and Liability Act, at 17 sites. The
Company's responsibilities at nine sites appear to be de minimis. The Company
is aware of probable obligations for environmental matters at 30 other sites.
At certain of these sites no claim or assessment has been made. In the opinion
of management, the probable and reasonably determinable costs related to PRP
and other sites are $7,164,000 and such amount has been accrued.
The costs of resolving environmental matters are not quantifiable because
many such matters are in preliminary stages and the timing, extent and costs of
various actions which governmental authorities may require are unknown. It is
possible that costs of such resolution may be greater than the liabilities
which, in the opinion of management, are probable and reasonably determinable
at August 31, 1994. In the opinion of management, it is reasonably possible
for such costs to approximate $39,000,000 and to extend over 30 years.
Under the Resource Conservation Recovery Act of 1976 ("RCRA"), the company
has four closure and five post-closure plans in place for six locations.
Closure and post-closure plans are also in place for three landfills and two
injections wells as required by state regulations. Operations are being
conducted at these locations and the Company does not plan to terminate such
operations in the foreseeable future. Therefore, the Company has not accrued
these environmental exit costs. The Company accrues these liabilities when
plans for termination of plant operations have been made. Such closure and
post-closure care costs are estimated to be $5.4 million at August 31, 1994.
The Company has been notified by the Environmental Protection Agency
("EPA") of proposed civil penalties totaling approximately $1,715,000 for
alleged violations of environmental regulations at the Coffeyville refinery.
The Company is negotiating with the EPA concerning these matters and believes
that such negotiations may result in compromise settlements. Absent such
settlements, the Company may contest these matters. Accordingly, no provision
has been made in the accompanying financial statements for these proposed
penalties.
Protection of the environment requires the Company to incur expenditures
for equipment or processes, which may impact the Company's future net income.
However, the Company does not anticipate that its competitive position will be
adversely affected by such expenditures or by laws and regulations enacted to
protect the environment. Environmental expenditures are capitalized when such
costs provide future economic benefits. In 1994, the Company had capital
expenditures of approximately $2,592,000 to prevent future discharges into the
environment. The majority of such expenditures was for improvements at the
Coffeyville refinery. Management believes the Company is currently in
substantial compliance with existing environmental rules and regulations.
GOVERNMENT REGULATION
The Company's business is conducted within a legal environment created by
numerous federal, state and local laws which have been enacted to protect the
public's interest by promoting fair trade practices, safety, health and
welfare. The Company's operating procedures conform to the intent of these
laws and management believes that the Company is currently in compliance with
all such laws, the violation of which could have a material effect on the
Company.
Certain policies may be implemented from time to time by the U.S.
Department of Agriculture, the Department of Energy, or by other governmental
agencies which may impact the demands of farmers and ranchers for the Company's
products or which may impact the methods by which certain of the Company's
operations are conducted. Such policies may impact the Company's farm supply
and marketing operations.
Management is not aware of any newly implemented or pending policies having
a significant impact or which may have a significant impact on operations of
the Company.
EMPLOYEE RELATIONS
At August 31, 1994, the Company had approximately 11,000 employees.
Approximately 41% of the Company's employees were represented by unions having
national affiliations. The Company's relationship with employees is considered
to be generally satisfactory. No labor strikes or work stoppages within the
last three fiscal years have had a materially adverse effect on the Company's
operating results. Current labor contracts expire on various dates through
March 1997. There are no wage re-openers in any of the collective bargaining
agreements.
RECENT ACCOUNTING PRONOUNCEMENTS
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
LEGAL PROCEEDINGS
In the opinion of Robert B. Terry, Vice President and General Counsel of
Farmland, there is no litigation existing or pending against Farmland, or any
of its subsidiaries, which if determined adversely, would have a material
adverse effect on the financial position of the Company, and with respect to
income tax matters as explained in note 7 of the notes to consolidated
financial statements, he has no knowledge which would result in a different
conclusion than the opinion of special tax counsel to the Company which is
cited in note 7 of the notes to consolidated financial statements.
The Company is involved in two environmental regulatory matters with the
government involving potential monetary sanctions as follows:
1) The Company is a party to an administrative enforcement action
brought by the U.S. Environmental Protection Agency ("EPA") which
alleges violations of the Emergency Planning and Community
Right-to-Know Act and the release reporting requirements of the
Comprehensive Environmental Response, Compensation, and Liability
Act, as amended, at its Coffeyville, Kansas refinery. This action
involves alleged violations of release reporting requirements and
seeks a civil fine in the amount of $350,000.
2) The Company is a party to an administrative enforcement action
brought by the EPA which alleges violations of the Resource
Conservation Recovery Act of 1976, as amended, at its Coffeyville,
Kansas refinery. In this action, the government has proposed a
civil penalty in the amount of $1,365,000.
EXPERTS
The consolidated financial statements and schedules of Farmland and
subsidiaries as of August 31, 1994 and 1993 and for each of the years in the
three-year period ended August 31, 1994 included herein and elsewhere in the
Registration Statement, have been included herein and in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the consolidated financial
statements contains an explanatory paragraph concerning income tax adjustments
proposed by the Internal Revenue Service on the gain on sale of and certain
distributions by Terra Resources, Inc.
QUALIFIED INDEPENDENT UNDERWRITER
Interstate/Johnson Lane Corporation, a member of the NASD, has participated
as a qualified independent underwriter in the "due diligence" review with
respect to the preparation of this Prospectus. See "Plan of Distribution"
regarding the exception from pricing by the qualified independent underwriter.
INDEX TO FARMLAND CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report . . . . . . . . . . . . . . 49
Consolidated Balance Sheets, August 31,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . 50
Consolidated Statements of Operations for
each of the years in
the three-year period ended August 31, 1994 . . . . . . 52
Consolidated Statements of Cash Flows for
each of the years in
the three-year period ended August 31, 1994 . . . . . . 53
Consolidated Statements of Capital
Shares and Equities for
each of the years in the three-year
period ended August 31, 1994 . . . . . . . . . . . . . . 55
Notes to Consolidated Financial Statements . . . . . . . 56
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Farmland Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Farmland
Industries, Inc. and subsidiaries as of August 31, 1994 and 1993, and the
related consolidated statements of operations, cash flows and capital shares
and equities for each of the years in the three-year period ended August 31,
1994. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Farmland
Industries, Inc. and subsidiaries as of August 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended August 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in note 7 to the consolidated financial statements, the
Internal Revenue Service (IRS) has examined the Company's tax returns for the
years ended August 31, 1984 and 1983, and has proposed certain adjustments.
Should the IRS ultimately prevail, the federal and state income taxes and
statutory interest thereon could be significant. Farmland believes it has
meritorious positions with respect to such claims and, based upon the opinion
of special tax counsel, management believes it is more likely than not that the
courts will ultimately conclude that Farmland's treatment of such items was
substantially, if not entirely, correct. The ultimate outcome of this matter
can not presently be determined. Therefore, no provision for such income taxes
and interest has been made in the accompanying consolidated financial
statements.
KPMG PEAT MARWICK LLP
Kansas City, Missouri
October 21, 1994
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . $ 44,084 $ 28,373
Accounts receivable - trade . . . . . . 394,906 320,980
Inventories (note 3) . . . . . . . . . 538,314 496,690
Other current assets . . . . . . . . . 119,139 69,357
Total Current Assets . . . . . . . $ 1,096,443 $ 915,400
Investments and Long-Term Receivables (note 4) $ 189,601 $ 183,312
Property, Plant and Equipment (notes 5 and 6):
Property, plant and equipment, at cost . . . $ 1,202,159 $ 1,154,343
Less accumulated depreciation and amortization 700,869 649,965
Net Property, Plant and Equipment . . . $ 501,290 $ 504,378
Other Assets . . . . . . . . . . . . . . $ 139,297 $ 116,891
Total Assets . . . . . . . . . . . . . . $ 1.926,631 $ 1,719,981
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITIES
<TABLE>
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Current Liabilities:
Demand loan certificates . . . . . . . . . . $ 23,158 $ 29,860
Short-term notes payable (note 6) . . . . . . 279,137 256,655
Current maturities of long-term debt (note 6) 27,840 31,947
Accounts payable - trade . . . . . . . . . . 246,181 217,982
Other current liabilities (note 9) . . . . . 229,423 118,437
Total Current Liabilities . . . . $ 805,739 $ 654,881
Long-Term Debt (excluding current maturities)
(note 6) . . . . . . . . . $ 517,806 $ 485,861
Deferred Income Taxes (note 7) . . . . . . . . . .$ 6,340 $ 2,169
Minority Owners' Equity in Subsidiaries (note 8) .$ 11,733 $ 15,363
Capital Shares and Equities (note 9):
Preferred shares, $25 par value--Authorized
8,000,000 shares,
148,069 shares issued and outstanding
(148,325 shares in 1993) . . $ 3,702 $ 3,708
Common shares, $25 par value -- Authorized
50,000,000 shares,
14,542,478 shares issued and outstanding
(15,199,833 shares in 1993) . . . . . . . . 363,562 379,996
Associate member common shares
(nonvoting), $25 par value --
Authorized 2,000,000 shares,
370,707 shares issued and
outstanding (327,828 shares in 1993) . . . . 9,268 8,196
Earned surplus and other equities . . . . . . . . . . 208,481 169,807
Total Capital Shares and Equities .$ 585,013 $ 561,707
Contingent Liabilities and Commitments
(notes 4, 6, 7, 10 and 11)
Total Liabilities and Equities . . . . . . . . . .$ 1,926,631 $ 1,719,981
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . $ 6,677,933 $ 4,722,940 $ 3,429,307
Cost of sales . . . . . . . . . . . . . . . . . . . 6,284,084 4,470,290 3,099,316
Gross income . . . . . . . . . . . . . . . . . . . $ 393,849 $ 252,650 $ 329,991
Selling, general and administrative expenses . . . . . $ 305,279 $ 223,792 $ 236,065
Other income (deductions):
Interest expense . . . . . . . . . . . . . . . . $ (51,485) $ (36,764) $ (27,965)
Interest income . . . . . . . . . . . . . . . . . 6,170 4,189 2,667
Equity in income (loss) of investees (note 4) . . 10,878 (12,394) (2,341)
Provision for loss on disposition of assets
(note 17) . . . . . . . . . . . . . . . . . -0- (29,430) -0-
Other, net (note 16) . . . . . . . . . . . . . . 20,111 9,536 4,217
$ (14,326) $ (64,863) $ (23,422)
Income (loss) before income taxes, minority
owners' interest and extraordinary item . . . . . $ 74,244 $ (36,005) $ 70,504
Income tax (expense) benefit (note 7) . . . . . . . . . (4,890) 6,433 (9,458)
Minority owners' interest in loss (income)
of subsidiaries . . . . . . . . . . . . . . . . . 4,522 (828) -0-
Income (loss) before extraordinary item . . . . . . . . $ 73,876 $ (30,400) $ 61,046
Extraordinary item - Utilization of loss
carryforward (note 7) . . . . . . . . . . . . . . -0- -0- 1,267
Net income (loss) . . . . . . . . . . . . . $ 73,876 $ (30,400) $ 62,313
Distribution of net income (note 9):
Patronage refunds:
Farm supply patrons . . . . . . . . . . . . $ 59,685 $ -0- $ 16,229
Pork marketing patrons . . . . . . . . . . . 10,927 -0- 1,245
The Cooperative Finance
Association's patrons . . . . . . . . . -0- 1,650 1,482
$ 70,612 $ 1,650 $ 18,956
Earned surplus and other equities . . . . . . . . . . . 3,264 (32,050) 43,357
$ 73,876 $ (30,400) $ 62,313
<FN>
See notes to consolidated financial statements
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 73,876 $ (30,400) $ 62,313
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . 62,960 57,730 50,784
Provision for loss on disposition of assets . . . -0- 29,430 -0-
(Gain) on disposition of fixed assets . . . . . . (1,794) (385) (1,181)
Patronage refunds received in equities . . . . . (2,171) (2,241) (2,320)
Proceeds from redemption of patronage equities . 573 1,731 7,727
Equity in (income) loss of investees . . . . . . (10,878) 12,394 2,341
Deferred income tax (benefit) expense . . . . . . (5,034) (3,463) 1,752
Other . . . . . . . . . . . . . . . . . . . 770 7,604 3,786
Changes in assets and liabilities (exclusive
of assets and liabilities of businesses acquired):
Accounts receivable . . . . . . . . . . . . (12,079) (92,024) 9,095
Inventories . . . . . . . . . . . . . . . . (4,692) (65,402) (27,483)
Other assets . . . . . . . . . . . . . . . . (45,990) (30,154) 11,490
Accounts payable . . . . . . . . . . . . . . 17,884 19,630 (48,425)
Other liabilities . . . . . . . . . . . . . 32,617 (17,981) 10,722
Net cash provided by (used in) operating activities . . $ 106,042 $ (113,531) $ 80,601
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to borrowers by finance companies . . . . . . $ -0- $ (624,618) $ (733,403)
Collections from borrowers by finance companies . . . . -0- 631,668 685,383
Acquisition of businesses . . . . . . . . . . . . . . . (35,790) (10,500) -0-
Proceeds from disposal of investments and
notes receivable . . . . . . . . . . . . . . . . 34,577 12,115 71,582
Acquisition of investments and notes receivable . . . . (22,117) (50,378) (58,979)
Capital expenditures . . . . . . . . . . . . . . . . . (69,776) (98,238) (79,954)
Proceeds from sale of fixed assets . . . . . . . . . . 14,785 10,900 8,191
Distribution from joint venture, net . . . . . . . . . -0- -0- 29,324
Proceeds from sale of assets to
joint venture partner . . . . . . . . . . . . . . 2,310 -0- 62,104
Proceeds from disposition of subsidiary (note 2) . . . -0- 87,227 -0-
Other . . . . . . . . . . . . . . . . . . . 5,547 (2,140) -0-
Net cash used in investing activities . . . . . . . . . $ (70,464) $ (43,964) $ (15,752)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease of demand loan certificates . . . . . . . $ (6,702) $ (13,224) $ (13,712)
Proceeds from bank loans and notes payable . . . . . . 888,088 916,799 669,608
Payments of bank loans and notes payable . . . . . . . (924,731) (777,268) (711,101)
Proceeds from issuance of subordinated
debt certificates . . . . . . . . . . . . . . . 57,636 72,423 57,780
Payments for redemption of subordinated
debt certificates . . . . . . . . . . . . . . . (33,034) (16,490) (22,557)
Payments for redemption of equities . . . . . . . . . . (3,244) (13,505) (8,046)
Payments of patronage refunds and dividends . . . . . . -0- (17,946) (12,204)
Other . . . . . . . . . . . . . . . . . . . 2,120 340 (3,853)
Net cash provided by (used in) financing activities . . $ (19,867) $ 151,129 $ (44,085)
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . $ 15,711 $ (6,366) $ 20,764
Cash and cash equivalents at beginning of year . . . . 28,373 34,739 13,975
Cash and cash equivalents at end of year . . . . . . . $ 44,084 $ 28,373 $ 34,739
SUPPLEMENTAL SCHEDULE OF CASH PAID
FOR INTEREST AND INCOME TAXES:
Interest . . . . . . . . . . . . . . . . . . . $ 38,425 $ 41,136 $ 35,626
Income taxes (net of refunds) . . . . . . . . . . . . . $ 9,746 $ 1,479 $ 12,181
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Equities and minority owners' interest
called for redemption . . . . . . . . . . . . . . $ 12,935 $ -0- $ 13,365
Transfer of assets in exchange for
investment in joint ventures . . . . . . . . . . $ 309 $ -0- $ 63,911
Issuance of Farmland equities to minority owners'
of Foods . . . . . . . . . . . . . . . . . . . $ -0- $ -0- $ 16,680
Appropriation of current year's net income
as patronage refunds . . . . . . . . . . . . . . $ 70,612 $ -0- $ 18,956
Acquisition of businesses:
Fair value of net assets acquired . . . . . . . . $ 35,539 $ 1,414 $ 30,321
Goodwill . . . . . . . . . . . . . . . . . . . 1,094 16,086 20,976
Minority owners' investment . . . . . . . . . . . (843) (7,000) -0-
$ 35,790 $ 10,500 $ 51,297
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL SHARES AND EQUITIES
<TABLE>
<CAPTION>
Years Ended August 31, 1994, 1993 and 1992
Earned Total
Associate Surplus Capital
Member And Shares
Preferred Common Common Other And
Shares Shares Shares Equities Equities
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1991 . . . . . . . . . $ 3,733 $ 330,646 $ 7,680 $ 155,305 $ 497,364
Issue, redemption and cancellation of equities (20) 44,297 (15) 13 44,275
Appropriation of current year's net income . -0- -0- -0- 62,313 62,313
Transfers to current liabilities . . . . . . -0- (12,045) (6) (19,329) (31,380)
Transfers from minority owners' equity . . . -0- 5,570 -0- 10,072 15,642
Dividends on preferred stock . . . . . . . . -0- -0- -0- (5) (5)
Distribution to farm supply patrons in common
stock, associate member common stock
and other equities . . . . . . . . . . -0- 15,807 873 (16,760) (80)
Exchange of common stock, associate member
common stock and other equities . . . . -0- (7,892) (356) 8,248 -0-
BALANCE AT AUGUST 31, 1992 . . . . . . . . . $ 3,713 $ 376,383 $ 8,176 $ 199,857 $ 588,129
Issue, redemption and cancellation of equities (5) 6,740 (49) (1,058) 5,628
Appropriation of current year's net loss . . -0- -0- -0- (30,400) (30,400)
Transfers to current liabilities . . . . . . -0- -0- -0- (1,650) (1,650)
Exchange of common stock, associate member
common stock and other equities . . . . -0- (3,127) 69 3,058 -0-
BALANCE AT AUGUST 31, 1993 . . . . . . . . . $ 3,708 $ 379,996 $ 8,196 $ 169,807 $ 561,707
Issue, redemption and cancellation of equities (6) (364) 17 (3,475) (3,828)
Appropriation of current year's net income . -0- -0- -0- 73,876 73,876
Patronage refund payable in cash transferred
to current liabilities . . . . . . . . -0- -0- -0- (26,552) (26,552)
Base capital redemptions transferred
to current liabilities . . . . . . . . -0- (8,628) (112) -0- (8,740)
Other equity redemptions transferred
to current liabilities . . . . . . . . -0- -0- -0- (3,362) (3,362)
Transferred to liabilities . . . . . . . . . -0- -0- -0- (8,084) (8,084)
Dividends on preferred stock . . . . . . . . -0- -0- -0- (4) (4)
Exchange of common stock, associate member
common stock and other equities . . . . -0- (7,442) 1,167 6,275 -0-
BALANCE AT AUGUST 31, 1994 . . . . . . . . . $ 3,702 $ 363,562 $ 9,268 $ 208,481 $ 585,013
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Farmland Industries, Inc. ("Farmland"), a Kansas corporation, is organized
and operated as a cooperative and its mission is to be a producer-driven and
profitable agricultural supply to consumer foods cooperative system.
Principles of Consolidation -- The consolidated financial statements
include the accounts of Farmland and all its majority-owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
Cash and Cash Equivalents -- Investments with maturities of less than three
months are included in "Cash and cash equivalents."
Investments -- Investments in companies 20% to 50% owned are accounted for
by the equity method. Other investments are stated at cost.
Accounts Receivable -- The Company uses the allowance method to account for
doubtful accounts and notes. Uncollectible accounts and notes receivable from
members are written off against the Farmland common stock held by members
before such uncollectible accounts are charged to operations.
Inventories -- Grain inventories are valued at market adjusted for net
unrealized gains or losses on open commodity contracts. Crude oil, refined
petroleum products, cattle and beef inventories are valued at the lower of
last-in, first-out cost or market. Other inventories are valued at the lower
of first-in, first-out cost or market. Supplies are valued at cost. When
practicable, the Company hedges certain inventories, advance sales and purchase
contracts with fixed prices and anticipated purchases of raw materials.
Property, Plant and Equipment -- These assets are stated at cost and
depreciated principally on a straight-line basis over the estimated useful life
of the individual assets (3 to 40 years). Leasehold improvements are amortized
on a straight-line basis over the terms of the individual leases (15 to 21
years).
Goodwill -- The excess of cost over the fair market value of assets of
businesses purchased is amortized on a straight-line basis over a period of 15
to 25 years.
Sales -- The Company's policy is to recognize sales at the time product is
shipped. Net margins on international grain merchandised and sales commissions
on brokered agricultural chemicals, rather than the value of such products, are
included in net sales.
Environmental Costs -- Liabilities related to remediation of contaminated
properties are recognized when the related costs are considered probable and
can be reasonably estimated. Estimates of these costs are based upon currently
available facts, existing technology, undiscounted site specific costs, and
currently enacted laws and regulations. In reporting environmental
liabilities, no offset is made for potential recoveries. All liabilities are
monitored and adjusted regularly as new facts or changes in law or technology
occur. Environmental expenditures are capitalized when such costs provide
future economic benefits.
Research and Development Costs -- Total research and development costs for
the Company for the years ended August 31, 1994, 1993 and 1992 were $2,702,000,
$3,303,000 and $3,338,000, respectively.
Federal Income Taxes -- Farmland and its cooperative subsidiaries are
subject to income taxes on all income not distributed to patrons as patronage
refunds. Farmland and all its subsidiaries file consolidated federal and state
income tax returns. Effective September 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
Company accounted for income taxes using the deferred method under APB Opinion
11 for the year ended August 31, 1993 and 1992.
(2) ACQUISITIONS AND DISPOSITIONS
Effective June 30, 1992, Farmland acquired substantially all the business
and assets of Union Equity Co-Operative Exchange ("Union Equity") in exchange
for 2,051,880 shares of Farmland common stock with a par value of $51,297,000
and Farmland's assumption of substantially all of Union Equity's liabilities.
The acquisition has been accounted for as a purchase and, accordingly, the
results of operations of Union Equity have been included in the Company's
consolidated financial statements from June 30, 1992. The excess of the
purchase price over the fair value of the net identifiable assets acquired
($20,976,000) has been recorded as goodwill and is being amortized on a
straight-line basis over 25 years.
During 1993, Farmland and partners organized NBPC. Farmland retained a 58%
ownership interest in NBPC by investing $10,500,000 in cash. On April 15,
1993, NBPC acquired the business of Idle Wild Foods, Inc. ("Idle Wild"), a beef
packing plant and feedlot located in Liberal, Kansas. NBPC acquired the assets
by assuming liabilities of Idle Wild with a fair value of approximately
$130,605,000 (including bank loans which are nonrecourse to NBPC's partners).
The acquisition has been accounted for as a purchase and, accordingly, the
results of operations of NBPC have been included in the Company's consolidated
financial statements from April 15, 1993. The liabilities assumed over the
fair value of the net identifiable assets acquired has been recorded as
goodwill.
To establish The Cooperative Finance Association ("CFA") as an independent
finance association for its members, on August 30, 1993 CFA purchased
10,113,000 shares of its voting common stock from Farmland for a purchase price
comprised of $1,541,000 in cash, equities of Farmland (with a par value of
$2,406,000) held by CFA and a $6,166,000 subordinated promissory note payable
to Farmland bearing interest of 5.3%. In addition, during 1993, CFA:
1) repaid its operating loan from Farmland ($25,181,000); and, 2) purchased the
lending operations and assets of Farmland Financial Services Company for a cash
payment of $60,505,000 and a $2,128,000, 6% subordinated note payable to
Farmland. Farmland repaid $87,227,000 of its borrowings from the National Bank
for Cooperatives with the proceeds received from CFA. As a result of CFA's
stock purchase and amendments to CFA's bylaws, Farmland's voting control in CFA
decreased to 25%. Accordingly, effective August 31, 1993, CFA is not included
in the consolidated balance sheet of the Company.
The following unaudited financial information, for the years ended August
31, 1993 and 1992, presents pro forma results of operations of the Company as
if the disposition of CFA and the acquisitions of Union Equity and NBPC had
occurred at the beginning of each period presented. The pro forma financial
information includes adjustments for amortization of goodwill, additional
depreciation expense and increased interest expense on debt assumed in the
acquisitions. The pro forma financial information does not necessarily reflect
the results of operations that would have occurred had the Company been a
single entity which excluded CFA and included Union Equity and NBPC for the
full years 1993 and 1992.
<TABLE>
<CAPTION>
August 31 (Unaudited)
1993 1992
(Amounts in Thousands)
<S> <C> <C>
Net sales $ 5,357,867 $ 5,441,303
Income (loss) before
extraordinary item $ (44,040) $ 47,225
</TABLE>
In October 1993, the Company acquired approximately 53% of the common stock
of National Carriers, Inc. ("NCI") and increased its ownership of NCI to 79% in
August 1994. NCI is a trucking company located in Liberal, Kansas. NCI
provides substantially all the trucking service needs of NBPC. The purchase
price of NCI ($4,423,000) was paid in cash.
In December 1993, the Company acquired all the common stock of seven
international grain trading companies (collectively referred to as
"Tradigrain"). The purchase price for Tradigrain ($31,367,000) was paid in
cash.
The acquisitions of NCI and Tradigrain have been accounted for by the
purchase method of accounting and, accordingly, the operating results of each
enterprise have been included in the Company's consolidated financial
statements from the respective dates of acquisition. The excess of the cash
paid over the fair value of the net assets acquired has been recorded as
goodwill. The pro forma effects of acquisitions of NCI and Tradigrain on the
consolidated financial statements are not significant.
(3) INVENTORIES
<TABLE>
Major components of inventories are as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Grain . . . . . . . . . . . . . . . $ 136,353 $ 91,990
Beef . . . . . . . . . . . . . . . 24,267 27,754
Materials . . . . . . . . . . . . . 51,428 43,857
Supplies . . . . . . . . . . . . . . 39,885 41,388
Finished and in-process products . . 286,381 291,701
$ 538,314 $ 496,690
</TABLE>
The carrying values of crude oil and refined petroleum inventories stated
under the lower of last-in, first-out ("LIFO") cost or market at August 31,
1994 and 1993 were $86,179,000 and $84,088,000, respectively. Had the lower of
first-in, first-out ("FIFO") cost or market been used to value these products,
the carrying values of inventories at August 31, 1994 and 1993 would have been
lower by $4,145,000 and $5,754,000, respectively.
Net income for 1994, 1993 and 1992 was $1,609,000 lower, $4,119,000 higher
and $1,935,000 lower, respectively, as a result of using LIFO as compared with
FIFO, including a $3,164,000 recovery in 1994 of an $8,346,000 lower of cost or
market adjustment in 1993. Liquidation of prior year inventory layers in 1992
reduced income before income taxes and patronage refunds by $3,302,000.
The carrying values of beef inventories stated under LIFO at August 31,
1994 and 1993 were $24,267,000 and $27,754,000, respectively. The LIFO method
of accounting for beef inventories had no effect on the carrying value of
inventories or on the results reported in 1994 and 1993, as market value of
these inventories was lower than LIFO or FIFO cost.
(4) INVESTMENTS AND LONG-TERM RECEIVABLES
<TABLE>
Investments and long-term receivables are as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> . . . . . . . . . . . . . . . . . . <C> <C>
Investments accounted for by the equity method . $ 52,478 $ 37,456
Notes receivable from ventures, 20% to 50% owned 48,955 60,204
National Bank for Cooperatives . . . . . . . . . 28,786 31,824
Investments in and advances to other cooperatives 42,662 37,690
Other investments and long-term receivables . . . 16,720 16,138
$ 189,601 $ 183,312
</TABLE>
National Bank for Cooperatives ("CoBank") requires borrowers from the bank
to maintain an investment in stock of the bank. The amount of investment
required is based on the average amount borrowed from CoBank during the
previous five years. At August 31, 1994, Farmland's investment in CoBank
approximated its requirement. This investment has been pledged to secure
borrowings from CoBank under the syndicated loan agreement.
<TABLE>
Summarized financial information of investees accounted for by the equity
method is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Current Assets . . . . . . . . . $ 105,981 $ 66,532
Long-Term Assets . . . . . . . . 252,704 223,937
Total Assets . . . . . . . . . $ 358,685 $ 290,469
Current Liabilities . . . . . . . $ 111,077 $ 79,224
Long-Term Liabilities . . . . . . 144,255 141,991
Total Liabilities . . . . . . $ 255,332 $ 221,215
Net Assets . . . . . . . . . . . $ 103,353 $ 69,254
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
Net sales $ 803,516 $ 601,194 $ 218,913
Net income (loss) $ 24,285 $ (22,755) $ (5,046)
Farmland's equity
in net income (loss) $ 10,878 $ (12,394) $ (2,341)
</TABLE>
The Company's investments accounted for by the equity method consist
principally of 50% equity interests in Hyplains Beef, L.L.C. and in two
phosphate fertilizer manufacturing ventures (Farmland Hydro, L.P. and
SF Phosphates Limited Company).
On November 15, 1991, Farmland and Norsk Hydro a.s. ("Hydro") formed a
joint venture company, Farmland Hydro, to manufacture phosphate fertilizer
products for distribution to international markets. As part of the joint
venture agreement, Farmland sold a 50% interest in its Green Bay, Florida
phosphate fertilizer plant and certain phosphate rock reserves located in
Hardee County, Florida to Hydro for an amount approximately equal to Farmland's
carrying value of the assets. Subsequently, Farmland and Hydro contributed the
assets to the joint venture. Farmland operates the plant under a management
agreement with the joint venture and Hydro provides international marketing
services. See note 15 of the notes to consolidated financial statements.
Farmland and J. R. Simplot formed a joint venture (SF Phosphates, Limited
Company) to operate a phosphate mine located in Vernal, Utah, a fertilizer
plant located in Rock Springs, Wyoming, and a 96-mile pipeline that connects
the mine with the fertilizer plant. The purchase of the mine, plant and
pipeline from Chevron Corporation was completed in April 1992.
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," was issued by the Financial
Accounting Standards Board ("FASB") in May 1993 and is effective for fiscal
years beginning after December 15, 1993 (the Company's 1995 fiscal year).
Statement 115 expands the use of fair value accounting and the reporting for
certain investments in debt and equity securities. In the opinion of
management, the adoption of Statement 115 will not have a significant impact on
the Company's consolidated financial statements.
(5) PROPERTY, PLANT AND EQUIPMENT
<TABLE>
A summary of cost for property, plant and equipment is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Land and improvements . . . . . . . $ 13,614 $ 11,825
Site improvements . . . . . . . . . 28,647 26,877
Buildings . . . . . . . . . . . . . 224,767 215,420
Machinery and equipment . . . . . . 716,683 678,784
Automotive equipment . . . . . . . . 65,986 46,807
Furniture and fixtures . . . . . . . 48,613 45,405
Livestock . . . . . . . . . . . . . 3,926 4,373
Mining properties . . . . . . . . . 3,119 3,119
Leasehold improvements . . . . . . . 15,085 12,149
Capital lease . . . . . . . . . . . 50,956 52,342
Construction in progress . . . . . . 30,763 57,242
. . . . . . . . . . . . . . . $ 1,202,159 $ 1,154,343
</TABLE>
For the years ended August 31, 1994, 1993 and 1992, the Company capitalized
construction period interest of $357,000, $1,611,000 and $330,000,
respectively.
(6) BANK LOANS, SUBORDINATED DEBT CERTIFICATES AND NOTES PAYABLE
<TABLE>
Bank loans, subordinated debt certificates and notes payable are as
follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
National Bank for Cooperatives
--5.61% to 9.2%, maturing 1995 through 2001 $ 74,278 $ 66,098
Other bank notes--5.74% to 7.75%,
maturing 1995 through 2001 . . . . . . . . 117,813 138,244
Capital investment certificates
--6% to 9.5%, maturing 1995 through 2014 . 210,054 192,857
Subordinated monthly interest certificates
--6.25% to 12%, maturing 1995 through 2014 70,057 62,913
Industrial revenue bonds--5.75% to 8.0%,
maturing 1995 through 2007 . . . . . . . . 25,055 27,880
Promissory notes--7% to 10%,
maturing 1995 through 2001 . . . . . . . . 18,684 13,805
Other--5% to 13% . . . . . . . . . . . . . . . . 29,705 16,011
$ 545,646 $ 517,808
Less current maturities . . . . . . . . . . . . . 27,840 31,947
$ 517,806 $ 485,861
</TABLE>
In 1994, Farmland entered into a $650,000,000 syndicated credit facility
provided by eight domestic and international banking institutions. This
agreement provides short-term credit of up to $450,000,000 to finance seasonal
operations and inventory, and revolving term credit of up to $200,000,000. At
August 31, 1994, short-term borrowings under this facility were $217,399,000,
revolving term borrowings were $95,000,000 and $62,600,000 was being utilized
to support letters of credit issued on behalf of Farmland by participating
banks.
Farmland pays commitment fees of 1/8 of 1% annually on the unused portion
of the short-term commitment and 1/4 of 1% annually on the unused portion of
the revolving term commitment. In addition, Farmland must maintain
consolidated working capital of not less than $150,000,000, consolidated net
worth of not less than $475,000,000 and funded indebtedness and senior funded
indebtedness of not more than 52% and 43% of capitalization, respectively. All
computations are based on consolidated financial data adjusted to exclude
nonrecourse subsidiaries (as defined in the credit agreement). Computed in
accordance with the agreement, at August 31, 1994, working capital was
$207,383,000, net worth was $585,013,000 and funded indebtedness and senior
funded indebtedness were 47.03% and 23.34% of capitalization, respectively.
Farmland and subsidiaries maintain other borrowing arrangements with banks
and financial institutions. Under such agreements, at August 31, 1994,
$35,495,000 was borrowed from banks and letters of credit issued by banks
amounted to $2,200,000. Financial covenants of these arrangements are not more
restrictive than the Company's syndicated credit facility.
NBPC, 58%-owned by Farmland, maintains borrowing agreements with a bank
which provides financing support for its beef packing operations. Borrowings
under this credit agreement are nonrecourse to Farmland or Farmland's other
affiliates. At August 31, 1994, NBPC's available bank credit of $61,596,000
had been borrowed. All assets of NBPC (carried at $150,409,000) are pledged to
support its borrowings. At August 31, 1994, Farmland had issued letters of
credit in the amount of $15,000,000 to support NBPC's bank credit agreements.
Tradigrain has borrowing agreements with various international banks which
provide financing and letters of credit to support current international grain
trading transactions. Obligations of Tradigrain under these loan agreements
are nonrecourse to the Company.
The subordinated debt certificates have been issued under several different
indentures. Farmland may redeem subordinated certificates of investments and
capital investment certificates in advance of scheduled maturities. Farmland
may redeem subordinated certificates of investments, capital investment
certificates and subordinated monthly interest certificates upon death of the
holder.
The outstanding subordinated debt certificates are subordinated to senior
indebtedness. At August 31, 1994, senior indebtedness included $450,827,000
for money borrowed, and other instruments (principally long-term operating
leases) provide for aggregate payments over nine years of approximately
$126,505,000.
Under industrial revenue bonds and other agreements, property, plant and
equipment with a carrying value of $29,267,000 have been pledged.
Bank loans, subordinated debt certificates and notes payable mature during
the fiscal years ending August 31 in the following amounts:
(Amounts in Thousands)
1995 . . . . . . . . . . . . . . . $ 27,840
1996 . . . . . . . . . . . . . . . 44,884
1997 . . . . . . . . . . . . . . 182,996
1998 . . . . . . . . . . . . . . . 54,057
1999 . . . . . . . . . . . . . . . 32,921
2000 and after . . .. . . . . . . 202,948
$ 545,646
(7) INCOME TAXES
On July 28, 1983, Farmland sold the stock of Terra Resources, Inc.
("Terra"), a wholly-owned subsidiary engaged in oil and gas exploration and
production operations, and exited its oil and gas exploration and production
activities. The gain from the sale of Terra amounted to $237,200,000 for tax
reporting purposes. During 1983, and prior to the sale of the Terra stock,
Farmland received certain distributions from Terra totaling $24,800,000. For
tax purposes, Farmland claimed intercorporate dividends-received deductions for
the entire amount of such distributions.
On March 24, 1993, the Internal Revenue Service ("IRS") issued a statutory
notice to Farmland asserting deficiencies in federal income taxes (exclusive of
statutory interest thereon) in the aggregate amount of $70,775,000. The
asserted deficiencies relate primarily to the Company's tax treatment of the
sale of the Terra stock and the distributions received from Terra prior to the
sale. The IRS asserts that Farmland incorrectly treated the Terra sale gain as
income against which certain patronage-sourced operating losses could be
offset, and that, as a nonexempt cooperative, Farmland was not entitled to an
intercorporate dividends-received deduction in respect of the 1983 distribution
by Terra. It further asserts that Farmland incorrectly characterized gains for
tax purposes aggregating approximately $14,600,000, and a loss of approximately
$2,300,000, from the disposition of certain other assets. On June 11, 1993,
Farmland filed a petition in the United States Tax Court contesting the
asserted deficiencies in their entirety. Discovery and other pre-trial phases
of the litigation have since been ongoing. The case is scheduled for trial on
March 6, 1995.
If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income tax
liabilities aggregating approximately $85,800,000 plus accumulating statutory
interest thereon through October 31, 1994, of approximately $154,900,000
(before tax benefits of the interest deduction). In addition, such adjustments
would affect the computation of Farmland's taxable income for its 1989 tax year
and, as a result, could increase Farmland's federal and state income taxes for
that year by approximately $5,000,000 plus applicable statutory interest
thereon.
No provision has been made in the consolidated financial statements for
federal or state income taxes (or interest thereon) in respect of the IRS
claims described above. Farmland believes that it has meritorious positions
with respect to all of these claims and will continue to vigorously pursue
their favorable resolution through the pending litigation.
In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i) Farmland's
treatment of the Terra sale gain was substantially, if not entirely, correct;
and (ii) Farmland properly claimed a dividends-received deduction in respect of
the 1983 distributions which it received from Terra prior to the sale of the
Terra stock. Counsel has further advised, however, that none of the issues
involved in these disputes is free from doubt, and that there can be no
assurance that the courts will ultimately rule in favor of Farmland on any of
these issues.
Should the IRS ultimately prevail on all of its asserted claims, all
claimed federal and state income taxes as well as accrued interest would become
immediately due and payable, and would be charged to current operations. In
such case, the Company would be required to renegotiate agreements with its
banks to maintain compliance with various requirements of such agreements,
including working capital and funded indebtedness provisions. However, no
assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale of
assets.
The Company adopted FASB Statement 109 effective September 1, 1993. The
cumulative effect of this change in accounting for income taxes was immaterial.
Prior years' financial statements have not been restated to apply the
provisions of Statement 109.
<TABLE>
Income tax expense (benefit) attributable to income from continuing
operations is comprised of the following:
<CAPTION>
Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
Federal:
Current . . . . $ 10,076 $ (2,502) $ 6,600
Deferred . . . . (3,217) (2,944) 1,490
$ 6,859 $ (5,446) $ 8,090
State:
Current . . . . $ 1,965 $ (468) $ 1,106
Deferred . . . . (755) (519) 262
$ 1,210 $ (987) $ 1,368
Foreign:
Current . . . . $ (2,117) $ -0- $ -0-
Deferred . . . . (1,062) -0- -0-
$ (3,179) $ -0- $ -0-
$ 4,890 $ (6,433) $ 9,458
</TABLE>
<TABLE>
Income tax expense (benefit) attributable to income from continuing
operations differs from the "expected" income tax expense (benefit) using
statutory rate of 35% (34% for 1993 and 1992), as follows:
<CAPTION>
Year Ended August 31
1994 1993 1992
<S> <C> <C> <C>
Computed "expected" income tax expense (benefit)
on income (loss) before income taxes . . . . . . . . . 35.0 % (34.0) % 34.0 %
Increase (reduction) in income tax expense (benefit)
attributable to:
Patronage refunds . . . . . . . . . . . . . . . . . . . (33.3) (4.0) (9.2)
Utilization of member-sourced losses . . . . . . . . . -0- -0- (11.4)
Patronage-sourced items for
which no benefit is available . . . . . . . . . . -0- 26.5 -0-
State income tax expense (benefit) net of
federal income tax effect . . . . . . . . . . . . 1.1 (2.2) 1.2
Benefit associated with exempt income of
foreign sales corporation . . . . . . . . . . . . -0- (1.4) (1.5)
Other, net . . . . . . . . . . . . . . . . . . . . . . 3.8 (2.7) .3
Income tax expense (benefit) . . . . . . . . . . . . . . . . 6.6 % (17.8) % 13.4 %
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of deferred tax liabilities and deferred tax assets at August 31, 1994
is as follows:
August 31, 1994
(Amounts in Thousands)
Deferred tax liabilities:
Property, plant and equipment
principally due to
differences in depreciation . . . $ 20,242
Prepaid pension cost . . . . . . . . 21,124
Other . . . . . . . . . . . . . . . . 14,021
Total gross deferred
liabilities . . . . . . . . . . . $ 55,387
Deferred tax assets:
Safe harbor leases . . . . . . . . . $ 5,391
Accrued expenses . . . . . . . . . . 27,017
Accounts receivable, principally due to
allowance for doubtful accounts . 4,394
Other . . . . . . . . . . . . . . . . 12,245
Total gross deferred assets . . . $ 49,047
Net deferred tax liability . . . . . . . $ 6,340
A valuation allowance for deferred tax assets was not necessary at August
31, 1994.
The significant components of deferred income tax benefit attributable to
income from continuing operations for the year ended August 31, 1994 are as
follows:
August 31, 1994
(Amounts in Thousands)
Deferred tax benefit . . . . . . . . . . $ (8,044)
Charge in lieu of taxes resulting
from initial recognition
of acquired tax benefits that
are allocated to reduce
goodwill related to the
acquired entity . . . . . . . . . . . 3,010
$ (5,034)
Deferred income taxes for the year ended August 31, 1993 and 1992 result
from timing differences in the recognition of income and expenses for financial
reporting and income tax reporting purposes. The sources of these timing
differences and their tax effect are as follows:
<TABLE>
<CAPTION>
Year Ended August 31
1993 1992
(Amounts in Thousands)
<S> <C> <C>
Depreciation . . . . . . . . . . . . $ 473 $ 1,562
Safe harbor lease rentals . . . . . (378) (478)
Provision for loss on proposed
sale of assets . . . . . . . . . 3,454) -0-
Unfunded pension expense . . . . . . (355) (129)
Reinstatement of deferred income
taxes previously
offset by net operating
loss carryforward
for financial reporting
purposes . . . . . . . . . . . . -0- 1,294
Other, net . . . . . . . . . . . . . 251 (497)
$ (3,463) $ 1,752
</TABLE>
At August 31, 1994, Farmland and its consolidated subsidiaries have
alternative minimum tax credit carryforwards of approximately $7,025,000.
The tax benefit for the year ended August 31, 1993 results from the
carryback of nonpatronage-sourced losses to reduce the amount of federal and
state income taxes paid during prior years.
During the year ended August 31, 1994, Farmland utilized nonmember-sourced
loss carryforwards amounting to $7,525,000 to reduce goodwill for financial
reporting purposes by $3,010,000.
During the year ended August 31, 1992, all of Foods' nonmember-sourced loss
carryforwards were utilized and deferred income taxes amounting to $1,294,000
were reinstated. During the year ended August 31, 1992, Farmland utilized
nonmember-sourced loss carryforwards amounting to $3,168,000 to reduce income
tax expense for financial reporting purposes by $1,267,000. Utilization of
these loss carryforwards has been presented as an extraordinary item in the
accompanying consolidated statement of operations for the year ended August 31,
1992.
In connection with the acquisition of Union Equity, Farmland acquired
member-sourced and nonmember-sourced loss carryforwards from Union Equity
amounting to approximately $18,600,000 and $10,600,000, respectively. For the
year ended August 31, 1992, Farmland was able to utilize member-sourced and
nonmember-sourced loss carryforwards amounting to $18,600,000 and $2,800,000,
respectively. The benefit of the utilization of the nonmember-sourced loss
carryforward amounting to $1,134,000 was recorded as a reduction of goodwill.
See note 2 of the notes to consolidated financial statements.
(8) MINORITY OWNERS' EQUITY IN SUBSIDIARIES
<TABLE>
A summary of the equity of subsidiaries owned by others is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Farmland Foods, Inc. $ 5,618 $ 6,401
National Beef Packing Company,
L.P. and G.P. 2,925 7,865
Heartland Wheat Growers, L.P. and G.P. 2,100 -0-
Other subsidiaries 1,090 1,097
$ 11,733 $ 15,363
</TABLE>
(9) PREFERRED STOCK, EARNED SURPLUS AND OTHER EQUITIES
<TABLE>
A summary of preferred stock is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Preferred shares, $25 par value -
Authorized 8,000,000 shares:
6% - 608 shares issued and outstanding
(624 shares in 1993) . . . . . . . . $ 15 $ 15
5-1/2% - 2,592 shares issued and
outstanding
(2,832 shares in 1993) . . . . . . . 65 71
Series F - 144,869 shares
issued and outstanding
(144,869 shares in 1993) . . . . . . 3,622 3,622
$3,702 $3,708
</TABLE>
The 5-1/2% and 6% preferred stocks have preferential liquidation rights
over the Series F preferred stock. Dividends on the 5-1/2% and 6% preferred
stock are cumulative if declared by the Farmland Board of Directors and only to
the extent earned each year. Series F preferred stock is nondividend bearing.
Upon liquidation, holders of all preferred stock are entitled to the par value
thereof and, with respect to the 5-1/2% and 6% preferred stock, any declared or
unpaid earned dividends.
<TABLE>
A summary of earned surplus and other equities is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Earned surplus . . . . . . . . . . . . . $ 130,250 $ 123,974
Patronage refund payable in equities . . 44,032 -0-
Nonmember capital . . . . . . . . . . . 103 104
Capital credits . . . . . . . . . . . . 32,547 38,105
Unallocated equity . . . . . . . . . . . -0- 6,021
Additional paid-in surplus . . . . . . . 1,603 1,603
Currency translation adjustment . . . . (54) -0-
$ 208,481 $ 169,807
</TABLE>
In accordance with the bylaws of Farmland, the member-sourced portion of
its net income or loss and the resulting patronage refund payable to members
and patrons are determined annually. The bylaws provide that the amount of the
patronage refund payable be reduced if immediately after the payment of such
patronage refund, the amount of earned surplus would be less than 30% of the
previous year-end balance of members' equity accounts (defined for this purpose
as the sum of common stock, associate member common stock, capital credits,
nonmember capital and patronage refunds payable in equities). The reduction of
patronage refunds is limited to the lesser of 15% or the amount required to
increase the balance of the earned surplus account to the required 30%. As of
August 31, 1994 and 1993, earned surplus exceeded the required amount by
approximately $2,329,000 and $3,874,000, respectively. The patronage refund
payable for 1994 is $70,584,000. The cash portion is $26,552,000 and is
included in "Other current liabilities" in the consolidated balance sheet at
August 31, 1994. The balance ($44,032,000) of the patronage refund is payable
in equities of Farmland and is included in the consolidated balance sheet as
"Earned surplus and other equities." No patronage refunds were paid by
Farmland for 1993. The patronage refund for 1992 was $17,449,000, all of which
was paid in cash.
Farmland maintains a base capital plan. The plan's objectives are as
follows: 1) to achieve proportionality between the dollar amount of business a
member or associate member of Farmland ("Participant") transacts with Farmland
and the par value of Farmland equity which the Participant should hold
(hereinafter referred to as the Participants' "Base Capital Requirement"); and,
2) provide a method for the Board of Directors, in its discretion, to redeem
equities held by a Participant when the par value of the Participant's
investment exceeds the Participant's Base Capital Requirement. This plan
provides that the relationship between the par value of a Participant's
investment in Farmland equity and the Participant's Base Capital Requirement
shall influence the cash portion of any patronage refund paid to the
Participant.
The Base Capital Requirement shall be determined annually by the Farmland
Board of Directors at its sole discretion. At August 31, 1994, common stock
and associate member common stock with a par value of $8,740,000 have been
approved for redemption by the Board of Directors under the base capital plan
and such amounts have been included in "Other current liabilities" in the
consolidated balance sheet at August 31, 1994.
Farmland maintains an estate settlement plan for redemption of equities
held by estates of deceased individuals (except equities purchased and held
less than five years) and a special equity redemption plan to redeem equities
of holders who do not participate in the Farmland base capital plan. Under
these plans, the Board of Directors, in its discretion, may redeem equities
based on certain factors, including the financial position and consolidated net
income of the Company. A priority for redeeming equities under these plans has
been established.
At August 31, 1994, certain equities of Farmland with a face amount of
$3,448,000 and capital equity fund certificates held by certain members of
Farmland Foods, Inc. in the amount of $747,000 have been approved by the Board
of Directors for redemption under the estate settlement and special equity
redemption plan. Accordingly, such amounts have been included in "Other
current liabilities" in the consolidated balance sheet at August 31, 1994.
Nonmember capital represents patronage refunds distributed in the form of
book credits.
Capital credits are issued: 1) for payment of patronage refunds to patrons
who do not satisfy requirements for membership or associate membership; and,
2) upon conversion of common stock or associate member common stock held by
persons who do not meet qualifications for membership or associate membership
in Farmland.
Unallocated equity represents the cumulative difference between the amount
of member-sourced income for financial reporting and income tax reporting
purposes.
Additional paid-in surplus results from members donating Farmland equity to
Farmland.
None of the aforementioned equities are held by or for the account of
Farmland or in any sinking or other special fund of Farmland and none have been
pledged by Farmland.
(10) CONTINGENT LIABILITIES AND COMMITMENTS
The Company leases various equipment and real properties under long-term
operating leases. For the years ended August 31, 1994, 1993 and 1992, rental
expenses totaled $41,794,000, $41,104,000 and $43,300,000, respectively.
Rental expense is reduced for mileage credits received on leased railroad cars
($1,866,000 in 1994, $1,939,000 in 1993 and $663,000 in 1992).
The leases have various remaining terms ranging from one year to fifteen
years. Some leases are renewable, at Farmland's option, for additional
periods. The minimum amount Farmland must pay for these leases during the
fiscal years ending August 31 are as follows:
(Amounts in Thousands)
1995 . . . . . . . . . $ 49,883
1996 . . . . . . . . . 40,275
1997 . . . . . . . . . 36,154
1998 . . . . . . . . . 29,440
1999 . . . . . . . . . 22,209
2000 and after . . . . 69,008
$ 246,969
Farmland and its subsidiaries are involved in various lawsuits incidental
to the businesses. In the opinion of management, the ultimate resolution of
these litigation issues will not have a material adverse effect on the
Company's consolidated financial statements.
The Company has certain throughput agreements, take-or-pay agreements,
minimum quantity agreements, and minimum charge agreements for various raw
material supplies and services through 1996. The Company's minimum obligations
under such agreements are $1,248,000 in 1995 and $924,000 in 1996.
The Company has been designated by the Environmental Protection Agency as a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), at various National
Priority List ("NPL") sites. In addition, the Company is aware of possible
obligations associated with environmental matters at other sites, including
sites where no claim or assessment has been made. The Company's probable and
reasonably determinable obligations for resolution of environmental matters at
NPL and other sites are estimated to be $7,164,000 and such amount has been
accrued.
The ultimate costs of resolving environmental matters are not quantifiable
because many such matters are in preliminary stages and the timing and extent
of actions which governmental authorities may ultimately require are unknown.
It is possible that the costs of such resolution may be greater than the
liabilities which, in the opinion of management, are probable and reasonably
determinable at August 31, 1994. In the opinion of management, it is
reasonably possible for such costs to approximate $39,000,000 and to extend
over 30 years.
CFA has loans receivable from customers engaged in pork production
operations and from cooperative associations which are guaranteed by Farmland.
At August 31, 1994, such guarantees amounted to $5,868,000. In addition,
Farmland has issued letters of credit to support borrowing arrangements of a
subsidiary as described in note 6.
At August 31, 1994, the Company was committed to expenditures for
acquisition and completion of construction of plant and equipment aggregating
approximately $19,000,000.
(11) EMPLOYEE BENEFIT PLANS
The Farmland Industries, Inc. Employee Retirement Plan ("the Plan") is a
defined benefit plan covering substantially all employees of Farmland and its
subsidiaries who meet minimum age and length-of-service requirements. Benefits
payable under the Plan are based on years of service and the employee's average
compensation during the highest four of the employee's last ten years of
employment.
The assets of the Plan are maintained in a trust fund. The majority of the
Plan's assets are invested in common stocks, corporate bonds, United States
Government securities and short-term investment funds.
The Company's funding policy is to make the maximum annual contribution to
the Plan's trust fund that can be deducted for federal income tax purposes.
The Company charges pension cost as accrued based on actuarial valuation of
the Plan.
<TABLE>
Components of the Company's pension cost are as follows:
<CAPTION>
August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period . . . $ 8,663 $ 7,449 $ 6,519
Interest cost on projected benefit obligation . . . . 15,292 12,134 11,332
Actual return on Plan assets . . . . . . . . . . . . . (10,949) (15,842) (20,591)
Net amortization and deferral . . . . . . . . . . . . (7,860) (374) 4,027
Pension expense . . . . . . . . . . . . . . . . . . $ 5,146 $ 3,367 $ 1,287
</TABLE>
The discount rate and the rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligations at August 31, 1994 were 8.0% and 4.5%, respectively (8.5% and 5% at
August 31, 1993, and 9% and 5% at August 31, 1992, respectively). The expected
long-term rate of return on assets at August 31, 1994, 1993 and 1992 were 8.5%,
8.5% and 9%, respectively.
<TABLE>
The following table sets forth the Plan's funded status and amounts
recognized in the Company's consolidated balance sheet at August 31, 1994 and
1993. Such prepaid pension cost is based on the Plan's funded status as of May
31, 1994 and 1993.
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,648 $ 123,061
Nonvested benefits . . . . . . . . . . . . . . . . . . . . . . . . 9,163 7,102
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . $ 157,811 $ 130,163
Increase in benefits due to future compensation increases . . . . . 53,533 51,633
Projected benefit obligation . . . . . . . . . . . . . . . . . . . $ 211,344 $ 181,796
Estimated fair value of Plan assets . . . . . . . . . . . . . . . . 226,681 212,647
Plan assets in excess of projected benefit obligation . . . . . . . $ 15,337 $ 30,851
Unrecognized net loss from past experience different
from that assumed and effects of changes
in assumptions . . . . . . . . . . . . . . . . . . . . . . . . 37,332 21,754
Unrecognized net transition asset being
recognized over 10 years . . . . . . . . . . . . . . . . . . . (933) (1,866)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . 1,308 2,590
Prepaid pension cost at end of year . . . . . . . . . . . . . . . . . . . $ 53,044 $ 53,329
</TABLE>
The Company provides group life insurance benefits for retired employees
who were hired before January 1, 1988 and reach normal retirement age while
working for the Company. Prior to 1994, the Company charged operations for the
amount of an annual insurance premium paid for group life insurance covering
both retired and active employees. In 1994, the cost of providing group life
insurance for retired employees was not separable from the cost of providing
group life insurance for active employees. For the years ended August 31, 1993
and 1992, such insurance premium were $1,178,000 and $783,000, respectively.
In fiscal year 1994, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" and the effect was insignificant.
Statement of Financial Accounting Standards No. 112, "Employer's Accounting
for Postemployment Benefits," was issued by the FASB in November 1992 and is
effective for fiscal years beginning after December 15, 1993 (the Company's
1995 fiscal year). Statement 112 establishes standards of accounting and
reporting for the estimated cost of benefits provided to former or inactive
employees. Management expects that the adoption of Statement 112 will not have
a significant impact on the Company's consolidated financial statements.
(12) INDUSTRY SEGMENT INFORMATION
The Company's business is conducted within three general operating areas:
cooperative farm supply operations, cooperative marketing operations and other
operations. As a farm supply cooperative, the Company engages in manufacturing
and wholesale distribution of input products of agricultural production. The
Company's principal farm supply products are petroleum, crop production and
feed.
Petroleum products include gasoline, distillate, diesel fuel, propane, lube
oils, grease and automotive parts and accessories. Products in the crop
production area include nitrogen, phosphate and potash fertilizers, herbicides,
insecticides and other farm chemicals. Feed products include a complete line
of formulated feeds. Supply products are sold primarily at wholesale to local
farm cooperatives.
Marketing operations include pork and beef processing, marketing and the
distribution of fresh meat products, ham, bacon, sausage, deli meats, Italian
specialty meats and boxed beef, and the marketing and storage of grain.
Other operations include convenience fuel and food stores, farm supply
stores, finance company operations and services such as accounting, financial,
management, environmental and safety, and transportation. See note 2 of the
notes to consolidated financial statements.
The operating income (loss) of each industry segment includes the revenue
generated on transactions involving products within that industry segment less
identifiable and allocated expenses. In computing operating income (loss) of
industry segments none of the following items has been added or deducted:
interest expense, interest income, other income (deductions) or corporate
expenses (included in the statements of operations as selling, general and
administrative expenses), which cannot practicably be identified or allocated
by industry segment. Operating income (loss) of industry segments for the
years ended August 31, 1993 and 1992 have been restated for comparative
purposes to exclude certain costs which were not identified to business
segments in 1994 but which were identified to business segments in 1993 and
1992. Corporate assets include cash, investments in other cooperatives, the
corporate headquarters of Farmland and certain other assets.
<TABLE>
Following is a summary of industry segment information as of and for the
years ended August 31, 1994, 1993 and 1992:
<CAPTION>
Unallocated
Cooperative Corporate
Cooperative Farm Supply Marketing and Items and
Crop Processing Other Inter-Segment
Petroleum Production Feed Foods Grain Operations Eliminations Consolidated
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994
Sales to
unaffiliated
customers . . . $ 855,479 $ 1,163,357 $ 527,864 $ 2,355,599 $ 1,627,156 $ 148,478 $ -0- $ 6,677,933
Transfers
between
segments . . . 4,843 9,513 2,072 3,007 -0- -0- (19,435) -0-
Total sales
and transfers . $ 860,322 $ 1,172,870 $ 529,936 $ 2,358,606 $ 1,627,156 $ 148,478 $ (19,435) $ 6,677,933
Operating
income (loss) of
industry
segments . . . $ 27,172 $ 126,047 $ 17,019 $ 20,634 $ (33,455) $ (2,368) $ 155,049
Equity in
income (loss)
of investees
(note 4) . . . $ (41) $ 15,466 $ 155 $ (4,404) $ -0- $ (298) $ 10,878
General corporate
expenses . . . (66,479)
Other corporate
income . . . . 26,281
Interest expense (51,485)
Minority interest 4,522
Income before income taxes and
extraordinary item $ 78,766
Identifiable assets at
August 31,
1994 . . . . . $ 306,366 $ 357,178 $ 92,767 $ 395,159 $ 341,367 $ 62,301 $ 1,555,138
Investment in and advances to
investees . . . $ 746 $ 76,439 $ 1,761 $ 13,927 $ -0- $ 8,560 $ -0- $ 101,433
Corporate assets 270,060
Total assets . . $ 1,926,631
Provision for depreciation and
amortization . $ 9,911 $ 14,700 $ 3,815 $ 16,776 $ 4,011 $ 7,982 $ 5,765 $ 62,960
Capital expenditures
(including
$16,888,000 of
capital assets
of business
acquired) . . . $ 14,399 $ 14,136 $ 4,508 $ 19,040 $ 6,256 $ 26,051 $ 2,274 $ 86,664
1993
Sales to
unaffiliated
customers . . . $ 887,389 $ 884,811 $ 479,205 $ 1,412,634 $ 953,521 $ 105,380 $ -0- $ 4,722,940
Transfers between
segments . . . 5,591 7,970 2,330 3,496 -0- -0- (19,387) -0-
Total sales
and transfers . $ 892,980 $ 892,781 $ 481,535 $ 1,416,130 $ 953,521 $ 105,380 $ (19,387) $ 4,722,940
Operating income
(loss) of
industry
segments . . . $ (4,602) $ 51,654 $ 20,676 $ 16,485 $ 104 $ 2,262 $ 86,579
Equity in income (loss)
of investees
(note 4) . . . $ 2 $ (8,223) $ (35) $ (3,306) $ -0- $ (832) $ (12,394)
Provision for
loss on disposition
of assets
(note 17) . . . (20,022) (6,155) (3,253) (29,430)
General corporate expenses (57,721)
Other corporate income 13,725
Interest expense (36,764)
Minority interest (828)
(Loss) before income taxes and
extraordinary item $ (36,833)
Identifiable assets at
August 31,
1993 . . . . . $ 308,731 $ 324,956 $ 94,948 $ 391,152 $ 254,734 $ 35,986 $ 1,410,507
Investment in
and advances to
investees . . . $ 526 $ 72,166 $ 1,572 $ 18,686 - $ 3,553 $ 1,606 $ 98,109
Corporate assets 211,365
Total assets . . $ 1,719,981
Provision for
depreciation and
amortization . $ 13,546 $ 13,843 $ 4,487 $ 10,807 $ 2,637 $ 3,369 $ 9,041 $ 57,730
Capital expenditures
(including
$48,362,000
of capital assets
of business
acquired) . . . $ 35,629 $ 17,972 $ 6,590 $ 73,561 $ 1,894 $ 3,613 $ 7,341 $ 146,600
1992
Sales to
unaffiliated
customers . . . $ 979,542 $ 897,820 $ 445,338 $ 850,103 $ 155,169 $ 101,335 $ -0- $ 3,429,307
Transfers
between segments 5,727 9,744 2,531 4,064 -0- -0- (22,066) -0-
Total sales
and transfers . $ 985,269 $ 907,564 $ 447,869 $ 854,167 $ 155,169 $ 101,335 $ (22,066) $ 3,429,307
Operating
income (loss)
of industry
segments . . . $ 8,241 $ 111,907 $ 21,346 $ 25,162 $ (726) $ (5,018) $ 160,912
Equity in
loss of investees
(note 4) . . . $ (31) $ (1,362) $ 15 $ (963) $ (2,341)
General corporate expenses (66,982)
Other corporate income 6,880
Interest expense (27,965)
Income before income taxes
and extraordinary item $ 70,504
Identifiable assets at
August 31,
1992 . . . . . $ 289,021 $ 313,943 $ 76,300 $ 201,726 $ 173,376 $ 207,274 $ 1,261,640
Investment in and advances
to investees . $ 139 $ 66,899 $ 1,143 $ 6,004 $ 1,197 $ 4,408 $ 79,790
Corporate assets 184,962
Total assets . . $ 1,526,392
Provision for
depreciation and
amortization . $ 12,269 $ 14,888 $ 3,013 $ 9,051 $ 613 $ 4,513 $ 6,437 $ 50,784
Capital expenditures
(including
$47,977,000 of
capital assets
of business
acquired) . . . $ 25,089 $ 17,119 $ 5,115 $ 14,862 $ 48,440 $ 11,141 $ 6,165 $ 127,931
</TABLE>
(13) SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
Farmland extends credit to its customers on terms no more favorable than
standard terms of the industries it serves. A substantial portion of
Farmland's receivables are concentrated in the agricultural industry.
Collections on these receivables may be dependent upon economic returns from
farm crop and livestock production. The Company's credit risks are continually
reviewed and management believes that adequate provisions have been made for
doubtful accounts.
Farmland maintains investments in and advances to cooperatives, cooperative
banks and joint ventures from which it purchases products or services. A
substantial portion of the business of these investees is dependent upon the
agribusiness economic sector. See note 4 of the notes to consolidated
financial statements.
(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
Estimates of fair values are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could affect the estimates. Except as
follows, the fair market value of the Company's financial instruments
approximates the carrying value:
<CAPTION>
August 31, 1994 August 31, 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
(Amounts in Thousands)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Investment and long-term receivables:
Notes receivable from investees,
20% to 50% owned . . . . . . . $ 48,955 $ 45,414 $ 60,204 $ 58,111
National Bank for Cooperatives . 28,786 **** 31,824 ****
Other cooperatives:
Equities . . . . . . . . . . 28,132 **** 22,877 ****
Notes receivable . . . . . . 14,530 13,385 14,813 13,408
FINANCIAL LIABILITIES:
Long-term debt:
Subordinated certificates of investment,
capital investment certificates and
subordinated monthly
interest certificates . . . . . $ 280,111 $ 284,523 $ 255,770 $ 287,168
</TABLE>
The estimated fair value of notes receivable has been determined by
discounting future cash flows using a market interest rate.
The estimated fair value of the subordinated debt certificates was
calculated using the discount rate for subordinated debt certificates with
similar maturities currently offered for sale.
****Investments in National Bank for Cooperatives and other cooperatives'
equities which have been purchased are carried at cost and securities received
as patronage refunds are carried at par value, less provisions for other than
temporary impairment. The Company believes it is not practicable to estimate
the fair value of these securities because there is no established market for
these securities and it is inappropriate to estimate future cash flows which
are largely dependent on future patronage earnings of the cooperatives.
(15) RELATED PARTY TRANSACTIONS
Farmland Hydro, L.P., Hyplains Beef, L.C. (50%-owned investees) and
National Beef Packing Company, L.P. (a 58%-owned consolidated limited
partnership) have credit agreements with various banks. Borrowings under these
agreements are nonrecourse to Farmland and its other affiliates. Cash
distributions by these entities to their owners are restricted by these credit
agreements. To support the efforts of these entities to meet compliance
provisions of their credit agreements, Farmland advances funds and provides
management and administrative services to these entities, in certain instances,
on terms less advantageous to Farmland than transactions conducted by Farmland
in the ordinary course of its business. At August 31, 1994, Farmland's equity
investments in and advances to these entities amounted to $132,613,000.
(16) OTHER INCOME
In June 1993, the Company filed a lawsuit against 43 insurance carriers and
other parties (the "Defendants") seeking declaratory judgments regarding
Defendants' insurance coverage obligations for environmental remediation costs.
In fiscal year 1994, the Company negotiated settlements with 20 insurance
companies and as part of the settlements, the Company provided Defendants with
releases of various possible environmental obligations. As a result of these
settlements, the Company received cash payments of $13,566,000 in 1994 and has
included such amount in the caption "Other income" in the consolidated
statement of operations for the year then ended.
(17) PROVISION FOR LOSS ON DISPOSITION OF ASSETS
At August 31, 1993, management was negotiating to sell the Company's
refinery at Coffeyville, Kansas. Based on the progress of negotiation and the
transactions contemplated, operations for the year ended August 31, 1993
included a $20,022,000 provision for loss on the sale of the refinery.
Accordingly, the net carrying value of property, plant and equipment has been
reduced by $20,022,000 in the consolidated balance sheets at August 31, 1993.
The transactions contemplated were subject to certain conditions, including
negotiation of final agreements. During 1994, management determined that final
sale terms anticipated by the potential purchaser were not in the Company's
best interest. Accordingly, negotiations were terminated and the sale was not
consummated.
In 1993, the Company entered discussions with a potential purchaser of a
dragline. Based on these discussions, the Company estimated a loss of
$6,155,000 from the sale. Accordingly, at August 31, 1993, the carrying value
of the dragline was written down by $6,155,000 and a provision for this loss
was included in the Company's consolidated statement of operations for the year
then ended. In 1994, this sale was consummated on terms substantially as
expected.
At August 31, 1993, the carrying value of a pork processing plant at Iowa
Falls, Iowa was written down by $3,253,000 to an estimated disposal value.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of the end of, and
for each of the years in the five-year period ended August 31, 1994 are derived
from the consolidated financial statements of the Company, which consolidated
financial statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The consolidated financial statements as of
August 31, 1994 and 1993 and for each of the years in the three-year period
ended August 31, 1994, and the independent auditors' report thereon, are
included elsewhere herein. The information set forth below should be read in
conjunction with information included elsewhere herein: Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
consolidated financial statements and related notes, and the independent
auditors' report which contains an explanatory paragraph concerning income tax
adjustments proposed by the Internal Revenue Service on the gain on sale of and
certain distributions by Terra Resources, Inc.
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992 1991 1990
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Summary of Operation: (1)(2)(3)
Net Sales . . . . . . . . . . . . . $ 6,677,933 $ 4,722,940 $ 3,429,307 $ 3,638,072 $ 3,377,603
Interest Expense (net of
interest capitalized) . . . . . $ 51,485 $ 36,764 $ 27,965 $ 36,951 $ 30,090
Income (Loss) Before
Income Taxes and
extraordinary item . . . . . . $ 78,766 $ (36,833) $ 70,504 $ 50,166 $ 58,184
Net income (Loss) . . . . . . . . . $ 73,876 $ (30,400) $ 62,313 $ 42,693 $ 48,580
Distribution of Net Income:
Patronage Refunds:
Equity Reinvestments . . . . . . $ 44,032 $ 1,155 $ 1,038 $ 17,837 $ 24,403
Cash or Equivalent . . . . . . . . 26,580 495 17,918 12,571 8,800
Earned Surplus and
Other Equities . . . . . . . . . 3,264 (32,050) 43,357 12,285 15,377
$ 73,876 $ (30,400) $ 62,313 $ 42,693 $ 48,580
Ratio of Earnings (Loss) to
Fixed Charges (4) . . . . . . . 2.2 Note 4 2.5 1.9 2.2
Balance Sheets:
Working Capital . . . . . . . . . . $ 290,704 $ 260,519 $ 208,629 $ 122,124 $ 121,518
Property, Plant and
Equipment, Net . . . . . . . . . $ 501,290 $ 504,378 $ 446,002 $ 490,712 $ 469,710
Total Assets . . . . . . . . . . . $ 1,926,631 $ 1,719,981$ 1,526,392 $ 1,369,231 $ 1,352,889
Long-Term Debt . . . . . . . . . . $ 517,806 $ 485,861 $ 322,377 $ 291,192 $ 273,071
Capital Shares and Equities . . . . $ 585,013 $ 561,707 $ 588,129 $ 497,364 $ 476,011
<FN>
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for details.
</TABLE>
(1) On July 28, 1983, Farmland sold the stock of Terra Resources, Inc.
("Terra"), a wholly-owned subsidiary engaged in oil and gas exploration and
production operations, and exited its oil and gas exploration and
production activities. The gain from the sale of Terra amounted to
$237,200,000 for tax reporting purposes. During 1983, and prior to the
sale of the Terra stock, Farmland received certain distributions from Terra
totaling $24,800,000. For tax purposes, Farmland claimed intercorporate
dividends-received deductions for the entire amount of such distributions.
On March 24, 1993, the Internal Revenue Service ("IRS") issued a statutory
notice to Farmland asserting deficiencies in federal income taxes
(exclusive of statutory interest thereon) in the aggregate amount of
$70,775,000. The asserted deficiencies relate primarily to the Company's
tax treatment of the sale of the Terra stock and the distributions received
from Terra prior to the sale. The IRS asserts that Farmland incorrectly
treated the Terra sale gain as income against which certain
patronage-sourced operating losses could be offset, and that, as a
nonexempt cooperative, Farmland was not entitled to an intercorporate
dividends-received deduction in respect of the 1983 distribution by Terra.
It further asserts that Farmland incorrectly characterized gains for tax
purposes aggregating approximately $14,600,000, and a loss of approximately
$2,300,000, from the disposition of certain other assets. On June 11,
1993, Farmland filed a petition in the United States Tax Court contesting
the asserted deficiencies in their entirety. Discovery and other pre-trial
phases of the litigation have since been ongoing. The case is scheduled
for trial on March 6, 1995.
If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income
tax liabilities aggregating approximately $85,800,000 plus accumulating
statutory interest thereon through October 31, 1994, of approximately
$154,900,000 (before tax benefits of the interest deduction). In addition,
such adjustments would affect the computation of Farmland's taxable income
for its 1989 tax year and, as a result, could increase Farmland's federal
and state income taxes for that year by approximately $5,000,000 plus
applicable statutory interest thereon.
No provision has been made in the consolidated financial statements for
federal or state income taxes (or interest thereon) in respect of the IRS
claims described above. Farmland believes that it has meritorious
positions with respect to all of these claims and will continue to
vigorously pursue their favorable resolution through the pending
litigation.
In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i)
Farmland's treatment of the Terra sale gain was substantially, if not
entirely, correct; and (ii) Farmland properly claimed a dividends-received
deduction in respect of the 1983 distributions which it received from Terra
prior to the sale of the Terra stock. Counsel has further advised,
however, that none of the issues involved in these disputes is free from
doubt, and that there can be no assurance that the courts will ultimately
rule in favor of Farmland on any of these issues.
Should the IRS ultimately prevail on all of its asserted claims, all
claimed federal and state income taxes as well as accrued interest would
become immediately due and payable, and would be charged to current
operations. In such case, the Company would be required to renegotiate
agreements with its banks to maintain compliance with various requirements
of such agreements, including working capital and funded indebtedness
provisions. However, no assurance can be given that such renegotiation
would be successful. Alternatives could include other financing
arrangements or the possible sale of assets.
(2) During the year ended August 31, 1991, the Company changed its method for
inventory pricing of certain petroleum inventories from the first-in, first
out (FIFO) method previously used to the last-in, first out (LIFO) method
because the LIFO method better matches current costs with current revenues.
Pro forma effects of retroactive application of the LIFO method are not
determinable.
(3) Acquisitions and Dispositions:
(a) In October 1993, the Company acquired approximately 53% of the common
stock of National Carriers, Inc. ("NCI") and increased its ownership of
NCI to 79% in August 1994. NCI is a trucking company located in
Liberal, Kansas. NCI provides substantially all the trucking service
needs of NBPC. The purchase price of NCI ($4,423,000) was paid in
cash. See note 2 of the notes to consolidated financial statements.
(b) In December 1993, the Company acquired all the common stock of seven
international grain trading companies (collectively referred to as
"Tradigrain"). The purchase price for Tradigrain ($31,367,000) was
paid in cash. See note 2 of the notes to consolidated financial
statements.
(c) During 1993, Farmland obtained a 58% interest in National Beef Packing
Company, L.P. ("NBPC"), a limited partnership. Effective April 15,
1993, NBPC acquired Idle Wild Food's beef packing plant and feedlot
located in Liberal, Kansas. See note 2 of the notes to consolidated
financial statements.
(d) On August 30, 1993, Farmland reduced its ownership interest in The
Cooperative Finance Association, Inc. ("CFA") to 49%. In addition, CFA
purchased the assets and operations of Farmland Financial Services
Company ("FFSC"). Effective December 1, 1993, CFA owners approved a
recapitalization plan which limits the voting rights of any owner
(including Farmland) to 25% or less regardless of the number of voting
shares held. Effective August 31, 1993, CFA is not included in the
consolidated balance sheet of the Company and Farmland is no longer
engaged in commercial lending operations.
(e) Effective June 30, 1992, the Company acquired the grain marketing
assets of Union Equity Co-Operative Exchange ("Union Equity"). See
note 2 of the notes to consolidated financial statements.
<TABLE>
(f) The following unaudited financial information for the year ended August
31, 1993 and 1992 presents pro forma results of operations of the
Company as if the disposition of CFA and the acquisition of NBPC had
occurred at the beginning each period presented. The pro forma
financial information includes adjustments for amortization of
goodwill, additional depreciation expense, and increased interest
expense on debt assumed in the acquisitions. The pro forma financial
information does not necessarily reflect the results of operations that
would have occurred had the Company been a single entity which excluded
CFA and included Union Equity and NBPC for the full years 1993 and
1992. See note 2 of the notes to consolidated financial statements.
<CAPTION>
August 31 (Unaudited)
1993 1992
(Amounts in Thousands)
<S> <C> <C>
Net sales . . . . . . . . $ 5,357,867 $ 5,441,303
Income (loss) before
extraordinary item . . . $ (44,040) $ 47,225
</TABLE>
(4) In computing the ratio of earnings to fixed charges, income (loss)
represents pretax income (loss) for the enterprise as a whole including
100% of such income (loss) of minority-owned subsidiaries which have
fixed charges, the registrant's share of 50%-owned persons and any
distributed earnings (but not losses or undistributed earnings) of
less-than-fifty percent-owned persons plus fixed charges. Fixed charges
consist of interest and finance charges on all indebtedness plus that
portion of rentals considered to be the interest factor. Income was
inadequate to cover fixed charges for the year ended August 31, 1993.
The dollar amount of the coverage deficiency was $36,609,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company maintains two primary sources for debt capital: a continuous
public offering of its debt securities and bank lines of credit.
The Company's debt securities are offered through a wholly-owned
broker/dealer subsidiary on a best-efforts basis. The types of securities
offered include certificates payable on demand and five- and ten-year
subordinated debt certificates. The total amount of such debt outstanding and
the flow of funds to, or from, the Company as a result of this public offering
is influenced by the rate of interest which Farmland establishes for each type
of debt certificate offered and by options of Farmland to call for redemption
certain of its outstanding debt certificates. During 1994, the outstanding
balance of demand loan and subordinated debt certificates increased $17.6
million.
In 1994, Farmland entered into a $650,000,000 syndicated credit facility
provided by eight domestic and international banking institutions. This
agreement provides short-term credit of up to $450,000,000 to finance seasonal
operations and inventory, and revolving term credit of up to $200,000,000. In
addition, this credit facility supports letters of credit issued by
participating banks on behalf of Farmland. At August 31, 1994, short-term
borrowings under this facility were $217,399,000, revolving term borrowings
were $95,000,000 and $62,600,000 was being utilized to support letters of
credit.
Farmland pays commitment fees of 1/8 of 1% annually on the unused portion
of the short-term commitment and 1/4 of 1% annually on the unused portion of
the revolving term commitment. In addition, Farmland must maintain
consolidated working capital of not less than $150,000,000, consolidated net
worth of not less than $475,000,000 and funded indebtedness and senior funded
indebtedness of not more than 52% and 43% of capitalization, respectively. All
computations are based on consolidated financial data adjusted to exclude
nonrecourse subsidiaries (as defined in the credit agreement). Computed in
accordance with the agreement, at August 31, 1994, working capital was
$207,383,000, net worth was $585,013,000 and funded indebtedness and senior
funded indebtedness were 47.03% and 23.34% of capitalization, respectively.
In addition to the syndicated credit facility, Farmland has credit
facilities with various commercial banks. At August 31, 1994, Farmland's
available credit from commercial banks under committed and uncommitted
arrangements was $26.2 million and $37.2 million, respectively. Borrowings
under these committed and uncommitted credit facilities were $26.2 million and
$25.0 million, respectively, at August 31, 1994. In addition, $2.2 million was
used to support letters of credit issued by such banks on Farmland's behalf.
Financial covenants of these arrangements are not more restrictive than
Farmland's syndicated credit facilities.
In the opinion of management, these arrangements for debt capital are
adequate for the Company's present operating and capital plans. However,
alternative financing arrangements are continuously evaluated.
National Beef Packing Company ("NBPC"), 58%-owned by Farmland, maintains
borrowing agreements with a bank which provides financing support for its beef
packing operations. Borrowings under this credit agreement are nonrecourse to
Farmland or Farmland's other affiliates. At August 31, 1994, NBPC's available
bank credit of $61,596,000 had been borrowed. All assets of NBPC (carried at
$150,409,000) are pledged to support its borrowings. At August 31, 1994,
Farmland had issued letters of credit in the amount of $15,000,000 to support
NBPC's bank credit agreements.
Tradigrain has borrowing agreements with various international banks which
provide financing and letters of credit to support current international grain
trading transactions. Obligations of Tradigrain under these loan agreements
are nonrecourse to the Company.
Leveraged leasing has been utilized to finance data processing equipment,
railcars, and a substantial portion of nitrogen fertilizer production
equipment. Under the most restrictive covenants of its leases, the Company has
agreed to maintain working capital of at least $75 million, consolidated funded
indebtedness not greater than 65% of consolidated capitalization, and
consolidated senior funded indebtedness not greater than 50% of consolidated
capitalization.
As a cooperative, a portion of Farmland's annual net income is distributed
to its members, associate members and patrons with which it is a party to a
currently effective patronage refund agreement. For this purpose, annual net
income or loss shall be determined in accordance with income tax regulations in
1994 and in accordance with generally accepted accounting principles in 1995
and after. Such income is identified to transactions with members eligible to
receive patronage refunds ("member-sourced income") or to transactions with
parties not entitled to receive patronage refunds ("nonmember-sourced income").
The annual nonmember-sourced income or loss is adjusted for the amount of
applicable income tax expense or benefit thereon and the amount remaining is
transferred to retained earnings. The member-sourced income is distributed to
members as patronage refunds unless the earned surplus account, after such
distribution, would be lower than 30% of the sum of the prior year-end balance
of outstanding common stock, associate member stock, capital credits, nonmember
capital and patronage refunds for reinvestment. In such cases, member-sourced
income shall be reduced by the lesser of 15% or an amount required to increase
the earned surplus account to the required 30%. The amount by which the
member-sourced income is so reduced is treated as nonmember-sourced income.
The member-sourced income remaining is distributed to members as patronage
refunds. For the years ended August 31, 1994, 1993 and 1992, the earned
surplus account exceeded the required amount by $2.3 million, $3.8 million and
$49.5 million, respectively.
Generally, a portion of the patronage refund is distributed in cash and the
balance (the "invested portion") is distributed in common stock, associate
member common stock, or capital credits (depending on the membership status of
the recipient), or the Board of Directors may determine to distribute the
invested portion in any other form or forms of equities. The invested portion
of the patronage refund is determined annually by the Board of Directors but
such invested portion shall not, for any year, exceed 80% of the total
patronage refunds. The invested portion of the patronage refund is a source of
funds from operations which is retained for use in the business and increases
Farmland's equity base. Common stock and associate member common stock
representing the invested portion of patronage refunds may be redeemed by cash
payments from Farmland to holders thereof who participate in Farmland's base
capital plan. Capital credits and other equities of Farmland and Farmland
Foods, Inc. may be redeemed under other equity redemptions. The base capital
plan and other equity redemption plans are explained under the heading "Equity
Redemption Plans."
In 1994, operations generated a net cash inflow of $106.0 million. Other
major cash sources include $34.6 million from dispositions of investments and
notes receivables, $17.6 million (net) from investors in demand loan and
subordinated debt certificates and $17.1 million from sales of property, plant
and equipment.
The primary uses of cash include $69.8 million for capital additions or
improvements, $36.6 million (net) for repayment of bank loans and other notes
payable, $35.8 million for acquisition of businesses (Tradigrain and National
Carriers, Inc.) and $22.1 million for investments and notes receivables.
On July 28, 1983, Farmland sold the stock of Terra Resources, Inc.
("Terra"), a wholly-owned subsidiary engaged in oil and gas exploration and
production operations, and exited its oil and gas exploration and production
activities. The gain from the sale of Terra amounted to $237,200,000 for tax
reporting purposes. During 1983, and prior to the sale of the Terra stock,
Farmland received certain distributions from Terra totaling $24,800,000. For
tax purposes, Farmland claimed intercorporate dividends-received deductions for
the entire amount of such distributions.
On March 24, 1993, the Internal Revenue Service ("IRS") issued a statutory
notice to Farmland asserting deficiencies in federal income taxes (exclusive of
statutory interest thereon) in the aggregate amount of $70,775,000. The
asserted deficiencies relate primarily to the Company's tax treatment of the
sale of the Terra stock and the distributions received from Terra prior to the
sale. The IRS asserts that Farmland incorrectly treated the Terra sale gain as
income against which certain patronage-sourced operating losses could be
offset, and that, as a nonexempt cooperative, Farmland was not entitled to an
intercorporate dividends-received deduction in respect of the 1983 distribution
by Terra. It further asserts that Farmland incorrectly characterized gains for
tax purposes aggregating approximately $14,600,000, and a loss of approximately
$2,300,000, from the disposition of certain other assets. On June 11, 1993,
Farmland filed a petition in the United States Tax Court contesting the
asserted deficiencies in their entirety. Discovery and other pre-trial phases
of the litigation have since been ongoing. The case is scheduled for trial on
March 6, 1995.
If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income tax
liabilities aggregating approximately $85,800,000 plus accumulating statutory
interest thereon through October 31, 1994, of approximately $154,900,000
(before tax benefits of the interest deduction). In addition, such adjustments
would affect the computation of Farmland's taxable income for its 1989 tax year
and, as a result, could increase Farmland's federal and state income taxes for
that year by approximately $5,000,000 plus applicable statutory interest
thereon.
No provision has been made in the consolidated financial statements for
federal or state income taxes (or interest thereon) in respect of the IRS
claims described above. Farmland believes that it has meritorious positions
with respect to all of these claims and will continue to vigorously pursue
their favorable resolution through the pending litigation.
In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i) Farmland's
treatment of the Terra sale gain was substantially, if not entirely, correct;
and (ii) Farmland properly claimed a dividends-received deduction in respect of
the 1983 distributions which it received from Terra prior to the sale of the
Terra stock. Counsel has further advised, however, that none of the issues
involved in these disputes is free from doubt, and that there can be no
assurance that the courts will ultimately rule in favor of Farmland on any of
these issues.
Should the IRS ultimately prevail on all of its asserted claims, all
claimed federal and state income taxes as well as accrued interest thereon
would become immediately due and payable, and would be charged to current
operations. In such case, the Company would be required to renegotiate
agreements with its banks to maintain compliance with various requirements of
such agreements, including working capital and funded indebtedness provisions.
However, no assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale of
assets.
RESULTS OF OPERATIONS
The Company's revenues depend to a large extent on conditions in
agriculture and may be volatile due to factors beyond the Company's control,
such as weather, crop failures, federal agricultural programs, production
efficiencies, and direct imports or exports. In addition, global variables
which affect supply, demand and price of crude oil and refined fuels impact the
Company's petroleum operations. Management cannot determine the extent to
which future operations of the Company may be impacted by these factors. The
Company's cash flow and net income may continue to be volatile as conditions
affecting agriculture and markets for the Company's products change.
<TABLE>
The increase (decrease) in sales and operating profit by business segment
in each of the years in the three-year period ended August 31, 1994, compared
with the prior year is presented in the table below. Management's discussion
of business segment sales, operating profit or loss and other factors affecting
the Company's income before income taxes and extraordinary item during 1994,
1993 and 1992 follows the table.
<CAPTION>
Income Before Income Taxes and
Sales-Increase (Decrease) Extraordinary Item-Increase (Decrease)
1994 1993 1992 1994 1993 1992
Compared Compared Compared Compared Compared Compared
with 1993 with 1992 with 1991 with 1993 with 1992 with 1991
(Amounts in Millions) (Amounts in Millions)
<S> <C> <C> <C> <C> <C> <C>
Sales and Operating Profit of
Business Segments:
Petroleum . . . . . . . . . . . . . $ (32) $ (92) $ (210) $ 32 $ (13) $ 17
Crop Production . . . . . . . . . . 278 (13) (138) 74 (60) (13)
Feed . . . . . . . . . . . . . . . 49 34 (21) (4) (1) (3)
Food Processing and Marketing . . 943 563 21 4 (8) 14
Grain Marketing* . . . . . . . . . 674 798 155 (34) 1 (1)
Other . . . . . . . . . . . . . . . 43 4 (16) (4) 7 (10)
$ 1,955 $ 1,294 $ (209) $ 68 $ (74) $ 4
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Corporate Expenses and Other:
General corporate expenses (increase) decrease . . . . . . . . . . . . (9) 9 13
Other income and deductions (net) increase (decrease) . . . . . . . . 14 7 (5)
Interest expense (increase) decrease . . . . . . . . . . . . . . . . . (14) (9) 9
Equity in income (loss) of investees . . . . . . . . . . . . . . . . . 23 (10) (1)
Minority owners' interest in loss
(income) of subsidiaries . . . . . . . . . . . . . . . . . . . . . 5 (1) -0-
Provision for (loss) on disposition of assets . . . . . . . . . . . . 29 (29) -0-
Income before income taxes and extraordinary item . . . . . . . . . . $ 116 $ (107) $ 20
<FN>
* Grain marketing operations were acquired in 1992
</TABLE>
In computing the operating profit (loss) of a business segment, none of the
following have been added or deducted: corporate, general and administrative
expenses which cannot practicably be identified or allocated to a business
segment, interest expense, equity in income (loss) of investees, and
miscellaneous income or deductions.
PETROLEUM
SALES
Sales of petroleum products reflect a decrease of $31.9 million in 1994
compared with 1993 primarily due to lower prices of refined fuels and propane.
The effect of lower prices was to reduce reported sales by approximately
$62.4 million. Part of this decrease was offset by the effect of a 6% increase
of refined fuels and propane unit sales.
Sales of the petroleum segment decreased $92.2 million in 1993 compared
with 1992, primarily a result of 12% lower unit sales of refined fuels
(gasoline, diesel and distillates) and a 2% decline of the average selling
price. Unit sales decreased principally because the Company sold its
investment in National Cooperative Refinery Association ("NCRA") in June 1992.
The refined fuels unit sales decrease in 1993 reduced sales by approximately
$92.2 million compared with 1992 and lower prices of refined fuels reduced
sales by $17.7 million. Sales of other products (principally asphalt and coke)
decreased $12.4 million. Propane sales increased approximately $30.1 million
in 1993 due to 27% higher unit sales and 18% higher prices.
In 1992, sales of petroleum products declined $209.7 million compared with
1991. This decrease resulted primarily because unit sales of refined products
(gasoline, distillate and diesel) and the average price of these products were
lower in 1992 than 1991 by 19% and 16%, respectively. The unit sales and price
declines reduced sales of these products by approximately $37.3 million and
$154.2 million, respectively. In addition, propane prices in 1992 averaged
approximately 82% of the prior year's level, which reduced sales by
approximately $13.5 million.
OPERATING PROFIT
Results from petroleum operations increased $31.7 million primarily because
unit margins on diesel fuels with low levels of sulfur (required by the
Environmental Protection Agency for diesel fuel sold after September 30, 1993)
were higher than the corresponding period of the prior year. These margins
were significantly higher immediately after the crossover to the low sulfur
level diesel. In addition, margins on other refined fuels improved because the
cost per barrel of crude oil decreased and because production at the
Coffeyville, Kansas refinery was substantially higher than in the prior year.
Operating profit of the petroleum segment decreased $12.8 million in 1993
compared with 1992. The favorable effects of improved margins in propane and
lower marketing and administrative expenses were more than offset by the
unfavorable effects of lower income from distributing fuels produced by NCRA
and the write-down to market value of certain petroleum inventories.
Operating profit of the petroleum segment was $8.2 million in 1992 compared
with a loss of $9.3 million loss in 1991. Most of this improvement resulted
from elimination in 1992 of losses experienced in 1991 on petroleum futures
contracts. The Company changed its hedging practice in March 1991.
CROP PRODUCTION
SALES
Crop production sales in 1994 increased $278.5 million compared with 1994
due to higher plant nutrient prices and unit sales. The average price per ton
of nutrient increased approximately 13.3% and unit sales increased
approximately 1.1 million tons or 18%.
Sales of the crop production segment decreased $13.0 million in 1993
compared with 1992. Nitrogen fertilizer sales increased $54.1 million due to
8% higher unit sales and because the average selling price increased 3%.
Phosphate fertilizer sales decreased $67.1 million. This decrease is primarily
a result of the sale of the Green Bay, Florida phosphate plant to a 50%-owned
joint venture. Subsequent to this sale (on November 15, 1991) export sales
from the Green Bay plant have not been reported in the Company's operations.
In 1992, the Company's sales included export sales from the Green Bay plant of
$60.9 million.
The crop production segment's sales declined $137.7 million in 1992
compared with 1991. Substantially all of this decrease resulted from lower
unit sales and prices for phosphate fertilizers. The Company reported 30%
lower phosphate unit sales in 1992 which reduced sales approximately $117.3
million. This decrease resulted principally from the sale on November 15, 1991
of the Green Bay, Florida phosphate plant to a 50%-owned joint venture. In
addition, sales of phosphate fertilizer decreased approximately $18.2 million,
because the average price was 7% lower. Sales of turf and garden products were
approximately $2.9 million lower.
OPERATING PROFIT
Operating profits of the crop production business in 1994 increased $74.4
million compared with 1993. This increase resulted from higher unit sales and
unit margins. Unit margins in 1994 were approximately twice the level of 1993
which increased operating profit in this segment approximately $66.8 million.
Unit sales increased over one million tons (18%) which increased operating
profit approximately $10.8 million. In addition, included in the statement of
operations in the caption, "Equity in income (loss) of investees", is $15.3
million in 1994 representing the Company's share of net income from fertilizer
joint ventures. This is an increase of $23.4 million compared with 1993.
Demand for plant nutrients in 1994 was stronger than in 1993 due to an increase
in the number of acres under cultivation, principally corn acreage (corn
acreage harvested was relatively low in 1993 due to wet weather and the
resulting floods in the Company's trade territory). In addition, demand for
plant nutrients was stimulated by favorable weather conditions during the fall
and spring application seasons. The increased demand for plant nutrients
translated into higher unit sales and margins and contributed significantly to
the Company's increased net income in 1994.
Operating profit of the crop production segment decreased $60.3 million in
1993 compared with 1992, primarily because of 29% higher natural gas cost (the
principal raw material consumed in producing nitrogen fertilizer) which was not
recovered through selling prices. Fertilizer margins decreased approximately
$43.2 million because of higher gas cost. In addition, phosphate fertilizer
margins decreased approximately $7.1 million because decreased phosphate
fertilizer selling prices more than offset decreased cost. In addition, the
Company's share of the net loss of fertilizer ventures (included in the
Company's statement of operations in the caption, "Equity in loss of
investees"), was $8.2 million in 1993 compared with a loss of $1.3 million in
1992.
The crop production segment's operating profit of $111.9 million decreased
$13.4 million in 1992 compared with 1991. The decrease resulted primarily from
lower phosphate fertilizer selling prices and from realignment of the Company's
phosphate fertilizer production operations into two 50%-owned ventures.
FEED
SALES
Sales of feed products increased $48.7 million in 1994 compared with 1993.
Unit sales of formula feed and feed ingredients each increased approximately
10% which generated a $39.6 million increase in sales. The balance of the
sales increase resulted primarily from higher feed ingredient prices.
Sales of the feed segment increased $33.9 million in 1993 compared with
1992, primarily because of higher unit sales. Formula feed unit sales
increased approximately 9% which increased sales $20.3 million. Feed
ingredients unit sales increased approximately 12% which increased sales by
$18.0 million. In addition, sales of animal health products increased $2.5
million. Lower formula feed selling prices partly offset the effect of higher
unit sales.
The feed segment's sales for 1992 decreased $20.9 million compared with
1991, principally because feed ingredients unit sales decreased 22%. Unit
sales of feed ingredients decreased because sales efforts were directed from
products with near break-even margins to products with higher margins. Feed
ingredient sales decreased approximately $41.7 million because of the unit
sales decline. Feed ingredient prices increased an average of 8% which
increased sales by approximately $11.2 million and formula feed sales increased
$6.8 million, principally due to higher unit sales.
OPERATING PROFIT
Operating profit of the feed business segment decreased $3.7 million in
1994 compared with 1993. Gross margins decreased approximately $.5 million
reflecting lower margins on feed ingredients and pet food of $.8 million and
$.4 million, respectively, partly offset by $.7 million higher margins on
animal health products. In addition, sales marketing and feed administration
expenses increased $3.2 million primarily due to higher commissions and other
variable compensation plans.
Operating profit of the feed segment of $20.7 million in 1993 decreased
slightly compared with 1992. The decrease was due to the impact of lower
selling prices.
Operating profit of the feed segment for 1992 of $21.3 million decreased
$3.2 million compared with 1991. The decrease resulted from $1.3 million lower
patronage refund income on purchases from other cooperatives and from $2.2
million higher expenses partly offset by $.4 million higher gross margins.
FOOD PROCESSING AND MARKETING
SALES
Sales of the food marketing and processing business increased $943.0
million in 1994 compared with 1993. Sales of beef increased $735.5 million
principally because National Beef Packing Company, L.P. ("NBPC") has been
included in the Company's 1994 results for the full year. NBPC was acquired in
April 1993. Pork sales increased $207.5 million, due mostly to including
operations of the Monmouth, Illinois plant in the Company's results for a full
year in 1994. This plant was acquired in February 1993. In addition, sales of
specialty meats of the Carando division increased $13.0 million.
Food marketing sales increased $562.5 million in 1993 compared with 1992,
primarily due to business acquisitions. In April 1993, the Company and
partners organized National Beef Packing Company, L.P. ("NBPC"). Farmland
obtained a 58% ownership interest in NBPC which acquired a beef packing plant
and feedlot located in Liberal, Kansas. As a result of this acquisition, the
Company's sales included beef sales of $442.1 million in 1993. In February
1993, Foods, a 99%-owned subsidiary, purchased a pork processing plant located
at Monmouth, Illinois. As a result of this acquisition, sales of pork products
increased approximately $90.0 million. Sales of fabricated pork products at
the Company's other plants increased $17.0 million and sales of specialty meats
of the Carando division increased $8.3 million.
Sales of the food marketing segment in 1992 increased $21.1 million
compared with 1991. Sales of specialty meats increased $50.3 million primarily
because these products were not included in sales for 1991 prior to April 1,
when the Company acquired three specialty meats plants. Fresh and processed
pork sales were lower than in 1991 because the effect of lower wholesale prices
was greater than the effect of higher unit sales.
OPERATING PROFIT
Operating profit in the Food Marketing and Processing business segment of
$20.6 million in 1994 reflects an increase of $4.1 million compared with 1993.
The increase includes $13.0 million higher operating profit of the pork
business partly offset by an $8.9 million decrease of operating profit of the
beef business. Operating profit from pork marketing and processing operations
increased primarily due to higher volume and higher margins on fresh pork,
branded pork, hams and specialty meats of the Carando division. Operating
profit of the beef business decreased owing to weak consumer demands for beef
and industry price competition.
Operating profit of the food marketing segment decreased $8.7 million in
1993 compared with 1992. The decrease is primarily due to 4.6% higher live hog
cost. Margins on fabricated products and hams increased $3.6 million and $4.4
million, respectively, and margins on beef products (not included in the
Company's operations in 1992) were $4.2 million. These increases resulted from
acquisitions which increased sales as discussed above. However, these
increases were more than offset by the effects of 4.6% higher cost of live hogs
which could not be fully recovered through increased wholesale prices of fresh
and processed pork products and by higher selling and administrative expenses.
Operating profits of the food marketing segment for 1992 increased $13.8
million compared with 1991. The improvement includes higher gross margins of
approximately $26.8 million, partially offset by approximately $13.4 million
higher selling, general and administrative expenses. The gross margin increase
includes $9.9 million higher margins on specialty meats attributable to
ownership of specialty meats plants during all of 1992, compared with only five
months of 1991. Additional improvements of gross margins resulted from a more
favorable spread between the costs of live hogs and wholesale pork prices, from
higher unit sales, and from a shift of sales to value-added products with
higher unit margins. Selling, general and administrative expenses of this
segment increased, primarily due to expenses incurred in connection with the
specialty meats plants which were operated by the Company for only five months
in the prior year.
GRAIN MARKETING
SALES AND OPERATING PROFIT
Grain sales increased $673.6 million in 1994 compared with 1993 primarily
due to the acquisition of Wells-Bowman Trading Company and from operating
elevators in Utah and Idaho which were leased to the Company in 1994.
The grain marketing business had an operating loss of $33.5 million in 1994
compared with near break-even operations in 1993. The operating loss in 1994
includes an operating loss of $14.4 million in the international operations of
Tradigrain and an operating loss of $19.1 million in the Company's Union Equity
division. The loss in 1994 resulted primarily from negative unit margins on
international grain transactions and higher domestic operating expenses.
Grain operations which were acquired in July 1992, reported sales for the
full year in 1993 of $953.5 million. Sales for the two months ended August 31,
1992 were $155.2 million.
In 1993, operating profit of the grain business was $.1 million compared
with a loss of $.7 million for the two months ended August 31, 1992. In 1993,
grain marketing operations were relocated to Kansas City from Enid, Oklahoma,
an export elevator at Houston, Texas was sold and certain duplicative
administrative assets costs were eliminated. As a result, cost reductions were
realized in 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG & A") increased $81.5
million in 1994 compared with 1993. However, as a percent of sales, these
expenses were slightly lower in 1994 than in 1993. Approximately $17.6 million
of the increase resulted from acquisition of Tradigrain and National Carriers,
Inc. and from including NBPC in the Company's financial statements for the full
year in 1994. Approximately $29.0 million of the increase was in pork
marketing and processing and resulted primarily from including the Monmouth,
Illinois pork plant in the Company's operations for a full year, and from
higher sales of pork. Farm supply businesses and the grain marketing business
had higher SG & A of $13.1 million and $3.4 million, respectively. The balance
of the SG & A increase was primarily variable compensation plans.
These expenses decreased $12.3 million in 1993 compared with 1992 primarily
due to SG & A directly connected to business segments. Corporate, general and
administrative expenses, not identified to business segments (see note 12 of
the notes to consolidated financial statements), decreased $6.3 million in 1993
compared with 1992.
In 1992, corporate general and administrative expenses not identified to
business segments decreased $5.2 million compared with 1991. This decrease was
mostly lower retirement plan costs, reduced corporate advertising and reduced
coverage and cost of liability insurance.
OTHER INCOME (DEDUCTIONS)
INTEREST EXPENSE
Interest expense reflects an increase of $14.7 million in 1994 compared
with 1993. The increase is primarily attributable to including the interest
costs of NBPC's beef operations in the Company's financial statements for a
full year in 1994, the acquisition of National Carriers, Inc. and Tradigrain in
May 1994 and by higher interest rates.
Interest expense increased $8.8 million in 1993 compared with 1992 due to
an increase of the average level of borrowings, partly offset by lower interest
rates. Interest expense decreased $8.9 million in 1992 compared with 1991.
The decrease results from lower borrowings and lower interest rates.
PROVISION FOR LOSS ON DISPOSITION OF ASSETS
At August 31, 1993, management was negotiating to sell the Company's
refinery at Coffeyville, Kansas. Based on the progress of negotiation and the
transactions contemplated, operations for the year ended August 31, 1993
included a $20,022,000 provision for loss on the sale of the refinery.
Accordingly, the net carrying value of property, plant and equipment has been
reduced by $20,022,000 in the consolidated balance sheets at August 31, 1993.
The transactions contemplated were subject to certain conditions, including
negotiation of final agreements. During 1994, management determined that final
sale terms anticipated by the potential purchaser were not in the Company's
best interest. Accordingly, negotiations were terminated and the sale was not
consummated.
In 1993, the Company entered discussions with a potential purchaser of a
dragline. Based on these discussions, the Company estimated a loss of
$6,155,000 from the sale. Accordingly, at August 31, 1993, the carrying value
of the dragline was written down by $6,155,000 and a provision for this loss
was included in the Company's consolidated statement of operations for the year
then ended. In 1994, this sale was consummated on terms substantially as
expected.
At August 31, 1993, the carrying value of a pork processing plant at Iowa
Falls, Iowa was written down by $3,253,000 to an estimated disposal value.
OTHER, NET
In June 1993, the Company filed a lawsuit against 43 insurance carriers and
other parties (the "Defendants") seeking declaratory judgments regarding
Defendants' insurance coverage obligations for environmental remediation costs.
In fiscal year 1994, the Company negotiated settlements with 20 insurance
companies and as part of the settlements, the Company provided Defendants with
releases of various possible environmental obligations. As a result of these
settlements, the Company received cash payments of $13,566,000 in 1994 and has
included such amount in the caption "Other income" in the consolidated
statement of operations for the year then ended.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," was issued by the Financial
Accounting Standards Board ("FASB") in May 1993 and is effective for fiscal
years beginning after December 15, 1993 (the Company's 1995 fiscal year).
Statement 115 expands the use of fair value accounting and the reporting for
certain investments in debt and equity securities. Management expects the
adoption of Statement 115 will not have a significant impact on the Company's
consolidated financial statements.
Statement of Financial Accounting Standards No. 112, "Employer's Accounting
for Postemployment Benefits," was issued by the FASB in November 1992 and is
effective for fiscal years beginning after December 15, 1993 (the Company's
1995 fiscal year). Statement 112 establishes standards of accounting and
reporting for the estimated cost of benefits provided to former or inactive
employees. Management expects that the adoption of Statement 112 will not have
a significant impact on the Company's consolidated financial statements.
MANAGEMENT
The directors of Farmland are as follows:
<TABLE>
<CAPTION>
Total
Expiration Years of
Age as of Positions of Present Service as
August 31, Held With Term as Board
Name 1994 Farmland Director Member Business Experience During Last Five Years
<S> <C> <C> <C> <C> <C>
Albert J. Shivley 51 Chairman of 1995 10 General Manager--American Pride Co-op Association,
the Board Brighton, Colorado, a local cooperative association of
farmers and ranchers.
H. D. Cleberg 55 President 1997 4 Mr. Cleberg has been with Farmland since 1968. He was
and Chief named as president-elect in February 1991 and became
Executive President in April 1991. From September 1990 to January
Officer 1991 he served as Senior Vice President and Chief
Operating Officer, Agricultural Group. From April 1989 to
August 1990 he served as Executive Vice President,
Operations.
Otis H. Molz 63 Vice 1997 11 Producer--Deerfield, Kansas. Mr. Molz has served as
Chairman and Chairman of the Board of the National Bank for
Vice Cooperatives since January 1993. He served as Chairman of
President the Board of Directors of Farmland Industries, Inc. from
December 1991 to December 1992. He served as First Vice
President of the National Bank for Cooperatives from
January 1990 to January of 1993. He was Second Vice
Chairman from January 1, 1989 to January 1, 1990.
Lyman Adams, Jr. 43 1995 2 General Manager--Cooperative Grain and Supply, Hillsboro,
Kansas, a local cooperative association of farmers and
ranchers.
Ronald J. Amundson 50 1997 6 General Manager--Central Iowa Cooperative, Jewell, Iowa, a
local cooperative association of farmers and ranchers.
Baxter Ankerstjerne 58 1996 4 Producer--Peterson, Iowa. Since December 1988 Mr.
Ankerstjerne has served as Chairman of the Board of
Directors of Farmers Cooperative, Association, Marathon,
Iowa, a local cooperative association of farmers and
ranchers.
Jody Bezner 53 1997 3 Producer--Texline, Texas.
Richard L. Detten 60 1996 7 Producer--Ponca City, Oklahoma.
Steven Erdman 44 1995 2 Producer--Bayard, Nebraska
Warren Gerdes 46 1995 1 General Manager--Farmers Cooperative Elevator Company,
Buffalo Lake, Minnesota, a local cooperative association
of farmers and ranchers.
Ben Griffith 45 1995 5 General Manager--Central Cooperatives, Inc., Pleasant
Hill, Missouri, a local cooperative association of farmers
and ranchers.
Gail D. Hall 52 1997 6 General Manager--Lexington Cooperative Oil Company,
Lexington, Nebraska, a local cooperative association of
farmers and ranchers.
Jerome Heuertz 53 1997 * General Manager--Farm Service Cooperative, Council Bluffs,
Iowa, a local cooperative association of farmers and
ranchers.
Barry Jensen 49 1996 4 Producer--White River, South Dakota. Since May 1989 Mr.
Jensen has served as President of Farmers Co-op Oil
Association, Winner, South Dakota, a local cooperative
association of farmers and ranchers.
Greg Pfenning 45 1997 2 Producer--Hobart, Oklahoma. Director of Hobart &
Roosevelt Cooperative, a local cooperative association of
farmers and ranchers.
Vonn Richardson 61 1996 7 Producer--Plains, Kansas. President of The Plains Equity
Exchange and Cooperative Union, Plains, Kansas, a local
cooperative association of farmers and ranchers.
Monte Romohr 41 1996 4 Producer--Gresham, Nebraska. In March 1988, Mr. Romohr
became President of Farmers Co-op Business Association,
Shelby, Nebraska, a local cooperative association of
farmers and ranchers.
Joe Royster 42 1996 1 General Manager--Dacoma Farmers Cooperative, Inc., Dacoma,
Oklahoma, a local cooperative association of farmers and
ranchers.
Paul Ruedinger 64 1995 11 Producer--Van Dyne, Wisconsin.
Raymond J. Schmitz 63 1996 7 Producer--Baileyville, Kansas
Theodore J. Wehrbein 49 1995 8 Producer--Plattsmouth, Nebraska. Past Director of Nehawka
Farmers Cooperative Company, Nehawka, Nebraska, a local
cooperative association of farmers and ranchers.
Robert Zinkula 64 1996 4 Producer--Mount Vernon, Iowa. Secretary and Treasurer of
Linn Cooperative Oil Company, Marion, Iowa, a local
cooperative association of farmers and ranchers.
<FN>
*Mr. Heuertz was elected to the Farmland Industries, Inc. Board of Directors in
December 1994.
</TABLE>
Directors are elected for a term of three years by the shareholders of
Farmland at its annual meeting. The expiration dates for such three-year terms
are sequenced so that about one-third of Farmland's Board of Directors is
elected each year. H. D. Cleberg is serving as director-at-large; the
remaining twenty-one directors were elected from nine geographically defined
districts in Farmland's territory. The executive committee consists of Ronald
Amundson, Ben Griffith, Otis Molz, Monte Romohr, Albert Shivley and
H. D. Cleberg. With the exception of H.D. Cleberg, President and Chief
Executive Officer, members of the executive committee serve as chairman of
standing committees of the Board of Directors as follows: Ronald Amundson,
corporate responsibility committee; Ben Griffith, audit committee; Otis Molz,
compensation committee; Monte Romohr, finance committee; and Albert Shivley,
nominating committee.
The executive officers of Farmland are:
<TABLE>
<CAPTION>
Age as of
August 31,
Name 1994 Principal Occupation and Other Positions
<S> <C> <C>
J. F. 51 Executive Vice President and Chief
Berardi Financial Officer - Mr. Berardi joined
Farmland March 1, 1992 to serve in his
present position. Mr. Berardi served as
Executive Vice President and Treasurer of
Harcourt Brace Jovanovich, Inc., a
diversified Fortune 200 company, and was
a member of its Board of Directors from
1988 until 1990. From 1986 to 1989
Mr. Berardi served as Senior Vice
President and Chief Financial Officer of
Harcourt Brace Jovanovich, Inc.
H. D. 55 President and Chief Executive Officer - Mr.
Cleberg Cleberg has been with Farmland since
1968. He was appointed to his present
position effective April 1991. From
September 1990 to March 1991 he served as
Senior Vice President and Chief Operating
Officer. From April 1989 to August 1990
he served as Executive Vice President,
Operations. From October 1987 to March
1989 he served as Vice President and
General Manager, Fertilizer and Ag
Chemicals Operations, and from July 1986
to September 1987 he served as President,
Farmland Foods. Prior to July 1986 he
held several executive management
positions, most recently Vice President,
Field Services and Operations Support.
S. P. 51 Executive Vice President, Farmland and
Dees Director General of Farmland Industrias,
S.A. de C.V. - Mr. Dees was appointed to
his present position in September 1993.
From October 1990 to September 1993 he
served as Executive Vice President,
Administrative Group and General Counsel.
Mr. Dees joined Farmland in October 1984,
serving as Vice President and General
Counsel, Law and Administration until
September 1990. He was a partner in the
law firm of Stinson, Mag and Fizzell,
Kansas City, Missouri, from 1971 until
his employment by Farmland.
G. E. 50 Senior Vice President, Agricultural
Evans Production Marketing/Processing -
Mr. Evans has been with Farmland since
1971. He was appointed to his present
position in January 1992. From April
1991 to January 1992 he served as Senior
Vice President, Agricultural Inputs. He
served as Executive Vice President,
Agricultural Marketing from October 1990
to March 1991. He served as Executive
Vice President, Operations from January
1990 to September 1990. He served as
Vice President, Farmland Industries and
President, Farmland Foods from October
1987 to December 1989. He served as Vice
President and General Manager, Feed
Operations from June 1986 to September
1987, and from May 1983 to June 1986 he
served as Vice President, Feed
Operations.
R. W. 51 Executive Vice President, Agricultural
Honse Inputs Operations - Mr. Honse has been
with Farmland since September 1983. He
was appointed to his present position in
January 1992, and served as Executive
Vice President, Agricultural Operations
from October 1990 to January 1992. From
April 1989 to September 1990, he served
as Vice President and General Manager,
Crop Production Operations. From July
1986 to March 1989 he served as General
Manager of the Florida phosphate
fertilizer complex.
B. L. 53 Vice President and Corporate Secretary -
Sanders Dr. Sanders has been with Farmland since
1968. He was appointed to his present
position in September 1991. From April
1990 to September 1991 he served as Vice
President, Strategic Planning and
Development. From October 1987 to March
1990 he served as Vice President,
Planning. From July 1986 to September
1987 he served as Director, Management
Information Services. From July 1984 to
June 1986 he served as Executive
Director, Corporate Strategy and Research
and from 1968 to June 1984, as Executive
Director, Economic and Market Research.
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation awarded to, earned
by, or paid to the Chief Executive Officer and the Company's next four most
highly compensated executive officers for services rendered to the Company in
all capacities during 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Annual Compensation
Employee
Year Variable Other
Name and Ending Compensation Annual
Principal Position August 31 Salary Plan Compensation
<S> <C> <C> <C> <C>
H. D. Cleberg, . . . . . . . . . . 1994 $ 439,728 $ 338,481
President and . . . . . . . . . . 1993 $ 433,506
Chief Executive Officer 1992 $ 408,972 $ 185,745
G. E. Evans, . . . . . . . . . . 1994 $ 278,304 $ 217,761
Senior Vice President 1993 $ 278,304
Agricultural Production 1992 $ 255,900 $ 114,257
Marketing/Processing
R. W. Honse, . . . . . . . . . . 1994 $ 251,532 $ 205,206
Executive Vice President 1993 $ 231,964
Agricultural Inputs Operations 1992 $ 204,686 $ 94,433
J. F. Berardi, . . . . . . . . . . 1994 $ 216,252 $ 146,576
Executive Vice President 1993 $ 206,016
and Chief Financial Officer 1992 $ 100,008 $ 28,075
S. P. Dees, . . . . . . . . 1994 $ 205,066 $ 119,093 $ 124,138(a)
Executive Vice Preside 1993 $ 205,366
Farmland and Director 1992 $ 195,738 $ 51,521
General of Farmland
Industrias, S.A. de C.V.
<FN>
(a) Mr. Dees received a differential remuneration and reimbursements for
taxes in connection with foreign assignments.
</TABLE>
An Annual Employee Variable Compensation Plan, a Long-Term Management
Incentive Plan, and an Executive Deferred Compensation Plan have been
established by the Company to meet the competitive salary programs of other
companies, and to provide a method of compensation which is based on the
Company's performance.
Under the Company's Annual Employee Variable Compensation Plan, all regular
salaried employees total compensation is based on a combination of base and
variable pay. The variable compensation payment is dependent upon the
employee's position, the performance of the Company for the fiscal year or
other performance criteria of the individual's operating unit. Variable
compensation is awarded only in years that the Company achieves a performance
level, approved each year by the Board of Directors. The Company intends for
its total cash compensation (base plus variable) to be competitive, recognizing
that in the event the Company fails to achieve a predetermined threshold level
of performance, the base pay alone will place the employees well under market
rates. This system of variable compensation allows the company to keep its
fixed costs (base salaries) lower, and only increase payroll costs consistent
with the Company's ability to pay. Amounts accrued under this plan for the
years ended August 31, 1994, 1993 and 1992 amounted to $17,779,000, $-0- and
$10,033,000, respectively. Distributions under this plan are made annually
after the close of each fiscal year.
Under the Long-Term Management Incentive Plan, the Company's executive
management employees are paid cash bonus amounts determined by a formula which
takes into account the level of management and the average annual net income of
the Company over a three-year period. The current Long-Term Management
Incentive Plan is effective September 1, 1994 through August 31, 1996. For the
year ended August 31, 1994, the Company accrued $1,607,000 under this plan.
The Company's performance did not reach a level where incentive was earned
under the Long-Term Management Incentive Plan that covered the three-year
period ended August 31, 1993. As a result, operations in 1993 were credited by
$2,463,000 to reverse provisions for management incentive awards previously
charged against operations in 1992 and 1991 ($1,171,000 and $1,292,000,
respectively).
The Company's Executive Deferred Compensation Plan permits executive
employees to defer part of their salary and/or part or all of their bonus
compensation. The amount to be deferred and the period for deferral is
specified by an election made semi-annually. Payments of deferred amounts
shall begin at the earlier of the end of the specified deferral period,
retirement, disability or death. The employee's deferred account balance is
credited annually with interest at the highest rate of interest paid by the
Company on any subordinated debt certificate sold during the year. Payment of
an employee's account balance shall, at the employee's election, be a lump sum
or in ten annual installments. Amounts deferred pursuant to the plan for the
accounts of the named individuals during the fiscal years 1994, 1993 and 1992
are included in the cash compensation table.
The Company established the Farmland Industries, Inc. Employee Retirement
Plan ("Plan") in 1986 for all employees whose customary employment is at the
rate of at least 1000 hours per year. Participation in the Plan is optional
prior to age 34, but mandatory thereafter. Approximately 6,560 active and
6,540 inactive employees were participants in the Plan on August 31, 1994. The
Plan is funded by employer and employee contributions to provide lifetime
retirement income at normal retirement age 65, or a reduced income beginning as
early as age 55. The Plan also contains provisions for death and disability
benefits. The Plan has been determined qualified under the Internal Revenue
Code. The Plan is administered by a committee appointed by the Board of
Directors of Farmland, and all funds of the Plan are held by a bank trustee in
accordance with the terms of the trust agreement. It is the present intent to
continue this plan indefinitely. The Company's funding policy is to make the
maximum annual contributions to the Plan's trust fund that can be deducted for
federal income tax purposes. Company contributions made to the Plan for the
year ended August 31, 1994 were $2,885,000. No contributions were made to the
Plan in 1993 and 1992.
Payments to participants in the Plan are based upon length of participation
and compensation (limited to $150,000 annually for any employee) reported to
the Plan for the four highest of the last ten years of employment. See note 11
of the notes to consolidated financial statements.
In 1982, the Tax Equity and Fiscal Responsibility Act (TEFRA) imposed a
maximum retirement benefit which may be paid by a qualified retirement plan.
At the present time, that limit is $118,000.
The following table sets forth the estimated annual benefits payable at age
65 for members of the Retirement Plan, which benefits are not reduced by virtue
of Social Security payments:
<TABLE>
<CAPTION>
Remuneration Years of Service
Salaries 15 20 25 30
<S> <C> <C> <C> <C>
$ 100,000. . $ 26,250 $ 35,000 $ 43,750 $ 52,500
125,000. . 32,812 43,750 54,687 65,625
150,000. . 39,375 52,500 65,625 78,750
175,000. . 45,937 61,250 76,562 91,875
200,000. . 52,500 70,000 87,500 105,000
225,000. . 59,062 78,750 98,437 118,125*
250,000. . 65,625 87,500 109,375 131,250*
275,000. . 72,187 96,250 120,312* 144,375*
300,000. . 78,750 105,000 131,250* 157,500*
<FN>
*Exceeds the actual amount which can be paid pursuant to the present
limitations of TEFRA.
</TABLE>
Subject to the $150,000 maximum limit on annual compensation which may be
covered by a qualified pension plan, amounts included in the cash compensation
table do not vary substantially from the compensation covered by the pension
plan.
The following table sets forth the credited years of service for the
executive officers of the Company at August 31, 1994.
Name Years of Creditable Service
H. D. Cleberg . . . . . . . . . . 29
G. E. Evans . . . . . . . . . . . 20
R. W. Honse . . . . . . . . . . . 20
J. F. Berardi . . . . . . . . . . 1
S. P. Dees . . . . . . . . . . . 9
The Company established the Farmland Industries, Inc. Supplemental
Executive Retirement Plan ("SERP") effective January 1, 1994. The SERP is
intended to supplement the retirement income of executive participants in the
Farmland Industries, Inc. Employee Retirement Plan whose retirement benefit
would otherwise be reduced because of the limitation of the Internal Revenue
Code on the amount of salary which can be included in the computation of
retirement income ($150,000) or the amount of retirement benefit which may be
paid by a qualified retirement plan ($118,000).
The Company's Board of Directors has appointed an Administrative Committee
to administer the SERP. To fund the SERP, the Company purchased cash value
life insurance polices on the lives of plan participants. The Company owns
these insurance policies and has the sole right to name policy beneficiaries.
The total SERP premiums for all participants for the eight months ended August
31, 1994 was $621,012 of which $383,736 was charged to operations.
The Company's obligation to pay supplemental retirement benefits under the
SERP is limited to the aggregate cash value of the life insurance policies
designated by the Administrative Committee as policies of the SERP. If the
benefits under the plan for a year would exceed the total cash value of the
policies, each participant's payment will be reduced.
CERTAIN TRANSACTIONS
The Company transacts business in the ordinary course with its directors
and with its local cooperative members with which the directors are associated
on terms no more favorable than those available to its other local cooperative
members. PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses (excluding commissions) to be incurred in connection with the
issuance and distribution of the securities to be offered are estimated as
follows and will be borne by the Company:
Estimated
Item Expense
Federal and state registration fees . . . $ 106,000
State taxes and fees . . . . . . . . . . . 8,000
Printing and engraving . . . . . . . . . . 211,000
Accounting and legal . . . . . . . . . . . 54,000
Trustee fee . . . . . . . . . . . . . . . 13,000
Advertising and administration . . . . . . 973,000
$ 1,365,000
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 6002(b) of Chapter 17 of the Kansas Statutes (1987), permits the
following provision to be included in the articles of incorporation of the
Company: a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders, policyholders or members for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (A) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, policyholders or members, (B) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(C) under the provision of K.S.A. 17-6424 and amendments thereto or (D) for any
transaction from which the director derived an improper personal benefit. No
such provision shall eliminate or limit the liability of a director for any act
or omission occurring prior to the date when such provision becomes effective.
All references in this subsection to a director shall be deemed also to refer
to a member of the governing body of a corporation which is not authorized to
issue capital stock. Section 6002(c) provides that "It shall not be necessary
to set forth in the articles of incorporation any of the powers conferred on
corporations by this act."
Farmland Industries, Inc.'s Board of Directors, and shareholders at their
regularly scheduled meeting on September 15, 1987 and December 4, 1987,
respectively, adopted the following resolution:
RESOLVED, That the Board of Directors hereby approves and
recommends for adoption by the members, the amendment of Article VII of
the Association by the addition thereto of a new section to read as
follows:
ARTICLE VII - INDEMNIFICATION
Section 1. Indemnification. The Association may agree to the
terms and conditions upon which any director, officer, employee or
agent accepts his office or position and in its bylaws, by contract or
in any other manner may agree to indemnify and protect any director,
officer, employee or agent of the Association, or any person who serves
at the request of the Association as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, to the fullest extent permitted by the laws of the
State of Kansas.
Section 2. Limitation of Liability. Without limiting the
generality of the foregoing provisions of this ARTICLE VII, to the
fullest extent permitted or authorized by the laws of the State of
Kansas, including without limitation the provisions of subsection
(b)(8) of Kan. Stat. Ann. Sec. 17-6002 (1981) as now in effect and as
it may from time to time hereafter be amended, no person who is
currently or shall hereinafter become a director of the Association
shall have personal liability to the Association for monetary damages
for breach of fiduciary duty as a director for any act or omission
occurring subsequent to the date this provision becomes effective. If
the Kansas General Corporation Code is amended after approval of this
provision by the shareholders of the Association, to authorize
corporate action further limiting or eliminating the personal liability
of directors, then the liability of a director of the Association shall
be limited or eliminated to the fullest extent permitted by the Kansas
General Corporation Code, as so amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Unregistered equities issued by Farmland during each of the years in the
three-year period ended August 31, 1994 were as follows:
<TABLE>
<CAPTION>
Associate Member
Common Stock Common Stock
Nondividend Bearing) (Nondividend Bearing) Capital
Year Ended Par Value $25 Par Value $25 Credits
August 31 Shares Amount Shares Amount Amount
<S> <C> <C> <C> <C> <C>
1994 32,202 $ 805,050 83,273 $ 2,081,825 $ 7,740,453
1993 46,993 $ 1,174,825 11,348 $ 283,700 $ 1,947,119
1992 50,614 $ 1,265,350 25,829 $ 645,725 $ 12,967,039
</TABLE>
Farmland issues common stock, associate member common stock and capital
credits: 1) to satisfy one of the requirements of eligible persons for
membership in the cooperative; 2) as the form of payment of the portion of
patronage refunds not paid with cash; and, 3) upon conversion (to common stock,
associate member common stock or capital credits) by holders of other types of
these equities. Such conversions result from a change of membership status.
See "The Company - Membership."
In addition, in 1992, capital credits, exceeding the amount registered by
$4,610,653 were issued in accordance with provisions of an exchange offer to
other owners of Farmland Foods, Inc.
Registration of such common stock, associate member common stock and capital
credits issued to qualify eligible persons for membership in the cooperative
and for payment of patronage refunds is not required under the Securities Act
of 1933 (the "Act") under the provisions of Section 2(3) thereof, as there is
"no sale" or "offer to sell" a security for value as those terms are used in
Section 2(3).
An exemption from registration under the Act of common stock, associate
member common stock and capital credits issued upon conversion of other types
of these equities is claimed under Section 3(a) 9 thereof for an exchange of
securities by an issuer with its own security holders exclusively where no
commission or other remuneration is paid or given directly or indirectly for
soliciting such exchange.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
The following exhibits and financial statement schedules are filed as a part of
this Registration Statement.
Exhibit No. Exhibit
UNDERWRITING AGREEMENT:
1.A Underwriting Agreement between Farmland Industries, Inc. and Farmland
Securities Company, dated December 6, 1989.
1.A(1) Amendment, dated December 5, 1994, to the agreement, dated
December 6, 1989 between Farmland Industries, Inc. and Farmland
Securities Company.
1.B Sales Agency Agreement between Farmland Industries, Inc. and American
Heartland Investment, Inc., dated December 29, 1993.
ARTICLES OF INCORPORATION AND BYLAWS:
3.A Articles of Incorporation and Bylaws of Farmland Industries, Inc.
effective December 1, 1993. (Incorporated by Reference - Form 10-K,
filed November 29, 1994)
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
4.(i)A Trust Indenture dated November 20, 1981, as amended January 4, 1982,
including specimen of Demand Loan Certificates. (Incorporated by
Reference - Form S-1, No.2-75071, effective January 7, 1982)
4.(i)B Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 10-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)
4.(i)B(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3, 1985
covering Farmland Industries, Inc.'s 10-Year Subordinated
Capital Investment Certificates. (Incorporated by
Reference - Form SE, dated December 3, 1991)
4.(i)C Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 5-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)
4.(i)C(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3, 1985
covering Farmland Industries, Inc.'s 5-Year Subordinated
Capital Investment Certificates. (Incorporated by
Reference - Form SE, dated December 3, 1991)
4.(i)D Trust Indenture dated November 8, 1984, as amended January 3, 1985
and November 20, 1985, including specimen of 10-year Subordinated
Monthly Income Capital Investment Certificates. (Incorporated by
Reference - Form S-1, No. 2-94400, effective December 31, 1984)
4.(i)E Trust Indenture dated November 11, 1985 including specimen of the
5-year Subordinated Monthly Income Capital Investment Certificates.
(Incorporated by Reference - Form S-1, No. 33-1970, effective
December 31, 1985)
INSTRUMENTS DEFINING RIGHTS OF OWNERS OF INDEBTEDNESS NOT REGISTERED:
4.(ii)A Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 20-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)
4.(ii)A(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3, 1985
covering Farmland Industries, Inc.'s 20-Year Subordinated
Capital Investment Certificates. (Incorporated by
Reference - Form SE, dated December 3, 1991)
4.(ii)B Credit Agreement among Farmland Industries, Inc., as Borrower, ABN
Amro Bank N.V., The Bank of Nova Scotia, Boatmen's First National
Bank of Kansas City, The Chase Manhattan Bank, N.A., Commerce Bank
of Kansas City, N.A., NBD Bank, N.A., as Banks and The National Bank
for Cooperatives, Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A. "Rabobank Nederland", New York Branch, as Banks and as Co-
Agents, dated May 19, 1994, (the "Syndicated Credit Facility").
(Incorporated by Reference - Form 10-Q filed July 14, 1994)
4.(ii)B(1) List identifying contents of all omitted schedules
referenced in and not filed with, the Syndicated Credit
Facility, dated May 19, 1994. (Incorporated by Reference -
Form 10-Q, filed July 14, 1994)
5. Opinion re Legality
MATERIAL CONTRACTS:
LEASE CONTRACTS:
10.(i)A The First National Bank of Chicago, not individually but solely as
Trustee for AT&T Commercial Finance Corporation, The Boatmen's
National Bank of St. Louis, Firstier Bank, N.A. and Norwest Bank
Minnesota, National Association and Farmland Industries, Inc.
consummated a leveraged lease in the amount of $73,153,000 dated
September 6, 1991. (Incorporated by Reference - Form SE, filed
December 3, 1991)
10.(i)B The First National Bank of Commerce as Trustee for General Electric
Credit Corporation as Beneficiary and Farmland Industries, Inc.
consummated a leveraged lease in the amount of $51,909,257.90 dated
March 17, 1977. (Incorporated by Reference - Form S-1, No.2-60372,
effective December 22, 1977)
MANAGEMENT REMUNERATIVE PLANS:
10.(ii)(A)(1) Annual Employee Variable Compensation Plan (September 1,
1994 - August 31, 1995). (Incorporated by Reference - Form
10-K, filed November 29, 1994)
10.(ii)(A)(2) Farmland Industries, Inc. Management Long-Term Incentive
Plan (Effective September 1993) (Incorporated by Reference
- Form 10-K, filed November 29, 1993).
12. Computation of Ratios
21. Subsidiaries of the Registrant
CONSENTS OF EXPERTS AND COUNSEL:
23.A Independent Auditors' Consent and Report on Schedules
23.B Consent of Legal Counsel
23.C Consent of Special Tax Counsel
23.D Consent of Qualified Independent Underwriter
24 Power of Attorney (Incorporated by Reference - Form 10-K, filed
November 29, 1994)
25.A Statement of Eligibility of Trustee and Qualification of UMB Bank,
National Association Trustee, Form T-1.
25.B Statement of Eligibility of Trustee and Qualification of Commerce Bank
of Kansas City, National Association as Trustee, Form T-1.
EXHIBIT 5
Farmland Industries, Inc.
3315 North Oak Trafficway
Kansas City, Missouri 64116
Gentlemen:
I have reviewed your Demand Loan Certificates bearing the Certificate
Interest Rate; your 10-year Subordinated Capital Investment Certificates and
your 5-year Subordinated Capital Investment Certificates each bearing the
Certificate Interest Rate; your 10-year Subordinated Monthly Income Capital
Investment Certificates and your 5-year Subordinated Monthly Income Capital
Investment Certificates each bearing the Certificate Interest Rate. It is my
opinion that all such Demand Loan Certificates, Subordinated Capital Investment
Certificates and Subordinated Monthly Income Capital Investment Certificates,
and the issuance thereof, have been duly authorized; that said Demand Loan
Certificates are covered by that certain Trust Indenture dated November 20,
1981, between your Association and UMB Bank, National Association, as successor
trustee to Commerce Bank of Kansas City, National Association; that said
10-year and 5-year Subordinated Capital Investment Certificates bearing the
Certificate Interest Rate are covered by those certain Trust Indentures dated
November 8, 1984, between your Association and Commerce Bank of Kansas City,
National Association; that said 10-year Subordinated Monthly Income Capital
Investment Certificates bearing interest at the Certificate Interest Rate are
covered by that certain Trust Indenture dated November 8, 1984, between your
Association and Commerce Bank of Kansas City, National Association, and that
said 5-year Subordinated Monthly Income Capital Investment Certificates bearing
interest at the Certificate Interest Rate are covered by that certain Trust
Indenture dated November 11, 1985 between your Association and Commerce Bank of
Kansas City, National Association. That said Certificates, when issued and
sold in accordance with Registration Statement No.________, presently to be
filed with the Securities and Exchange Commission, Washington, D.C., and
registered in accordance with the laws of the States in which the Certificates
are and will be sold, will constitute valid and binding obligations according
to their tenor and effect.
Respectfully submitted,
ROBERT B. TERRY
Robert B. Terry
Vice President,
and General Counsel
December 12, 1994
EXHIBIT 12
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
FIVE YEARS ENDED AUGUST 31, 1994
<TABLE>
<CAPTION>
For the Year Ended August 31
1994 1993 1992 1991 1990
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Income (Loss) before Extraordinary Item . . . $ 73,876 $ (30,400) $ 61,046 $ 42,693 $ 48,580
Income Tax Expense (Benefit) . . . . . . . . $ 4,890 $ (6,433) $ 9,458 7,473 9,604
Minority Interest in Income of
Subsidiary that has Fixed Charges . . . . 333 865 -0- -0- -0-
Minority Interest in Loss of
Subsidiary . . . . . . . . . . . . . . . . (4,855) (37) -0- -0- -0-
Equity Interest in Loss (Earnings) of
Less-than-fifty Percent Owned
Investees . . . . . . . . . . . . . . . . 603 1,007 2,341 856 113
Total Fixed Charges
(excluding interest capitalized) . . . . . 64,383 55,268 47,719 54,443 47,000
Earnings . . . . . . . . . . . . . . . . . . $ 139,230 $ 20,270 $ 120,564 $ 105,465 $ 105,297
Fixed Charges:
Interest (including amounts
capitalized) . . . . . . . . . . . . . $ 51,842 $ 43,873 $ 34,426 $ 42,481 $ 37,226
Estimated Interest Component
of Rentals . . . . . . . . . . . . . . 12,898 13,006 13,293 12,290 11,652
Total Fixed Charges . . . . . . . . . . $ 64,740 $ 56,879 $ 47,719 $ 54,771 $ 48,878
Ratio of Earnings to Fixed Charges . . . . . 2.2 0.4 2.5 1.9 2.2
Earnings Inadequate to Cover
Fixed Charges . . . . . . . . . . . . . . $ 36,609
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Farmland Foods, Inc., a 99%-owned subsidiary, was incorporated under the laws
of the State of Kansas. Farmland Foods, Inc. has been included in the
consolidated financial statements filed in this registration.
Farmland Insurance Agency, a wholly-owned subsidiary, was incorporated under
the laws of the State of Missouri. Farmland Insurance Agency has been included
in the consolidated financial statements filed in this registration.
Farmers Chemical Company, a wholly-owned subsidiary, was incorporated under the
laws of the State of Kansas. Farmers Chemical Company has been included in the
consolidated financial statements filed in this registration.
Farmland Securities Company, a wholly-owned subsidiary, was incorporated under
the laws of the State of Delaware. Farmland Securities Company has been
included in the consolidated financial statements filed in this registration.
Cooperative Service Company, a wholly-owned subsidiary, was incorporated under
the laws of the State of Nebraska. Cooperative Service Company has been
included in the consolidated financial statements filed in this registration.
Double Circle Farm Supply Company, a wholly-owned subsidiary, was incorporated
under the laws of the State of Nevada. Double Circle Farm Supply Company has
been included in the consolidated financial statements filed in this
registration.
National Beef Packing Company, L.P., a 58%-owned subsidiary, was formed under
the laws of the State of Delaware. National Beef Packing Company has been
included in the consolidated financial statements filed in this registration.
NBPCo, L.L.C., a wholly-owned subsidiary, was formed under the laws of the
State of Kansas. NBPCo has been included in the consolidated financial
statements filed in this registration.
Farmland Financial Services Company, a wholly-owned subsidiary, was
incorporated under the laws of the State of Kansas. Farmland Financial
Services Company has been included in the consolidated financial statements
filed in this registration.
Farmland Transportation, Inc., a wholly-owned subsidiary, was incorporated
under the laws of the State of Missouri. Farmland Transportation, Inc. has
been included in the consolidated financial statements filed in this
registration.
Environmental and Safety Services, Inc., a wholly-owned subsidiary, was
incorporated under the laws of the State of Missouri. Environmental and Safety
Services, Inc. has been filed in the consolidated financial statements included
in this registration.
Penterra, Inc., a 81%-owned subsidiary, was incorporated under the laws of the
State of Kansas. Penterra, Inc. has been included in the consolidated
financial statements filed in this registration.
Farmland Industries, Ltd., a wholly-owned subsidiary, was incorporated under
the laws of the United States Virgin Islands. Farmland Industries, Ltd. has
been included in the consolidated financial statements filed in this
registration.
Heartland Data Services, Inc., a wholly-owned subsidiary, was incorporated
under the laws of the State of Kansas. Heartland Data Services, Inc. has been
included in the consolidated financial statements filed in this registration.
Yuma Feeder Pig, Inc., a 72%-owned subsidiary, was incorporated under the laws
of the state of Colorado. Yuma Feeder Pig, Inc. has been included in the
consolidated financial statements filed in this registration.
Equity Country, Inc., a wholly-owned subsidiary, was incorporated under the
laws of the State of Delaware. Equity Country, Inc. has been included in the
consolidated financial statements filed in this registration.
Equity Export Oil and Gas Company, Inc., a wholly-owned subsidiary, was
incorporated under the laws of the State of Oklahoma. Equity Export Oil and
Gas Company, Inc. has been included in the consolidated financial statements
filed in this registration.
Ceres Realty Corporation, a wholly-owned subsidiary, was incorporated under the
laws of the State of Missouri. Ceres Realty Corporation has been included in
the consolidated financial statements filed in this registration.
Heartland Wheat Growers, L.P., a 79%-owned subsidiary, was formed under the
laws of the State of Kansas. Heartland Wheat Growers has been included in the
consolidated financial statements filed in this registration.
Heartland Wheat Growers, Inc., a 79%-owned subsidiary, was incorporated under
the laws of the State of Kansas. Heartland Wheat Growers has been included in
the consolidated financial statements filed in this registration.
Farmland Industrias S.A. de C.V., a wholly-owned subsidiary, was formed under
the laws of Mexico. Farmland Industrias has been included in the consolidated
financial statements filed in this registration.
National Carriers, Inc., a 79%-owned subsidiary, was incorporated under the
laws of the State of Kansas. National Carriers has been included in the
consolidated financial statements filed in this registration.
Supreme Land, Inc., a wholly-owned subsidiary, was incorporated under the laws
of the State of Kansas. Supreme Land has been included in the consolidated
financial statements filed in this registration.
Tradigrain, Inc., a wholly-owned subsidiary, was incorporated under the laws of
the State of Tennessee. Tradigrain, Inc. has been included in the consolidated
financial statements filed in this registration.
Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
Switzerland. Tradigrain S.A. of Switzerland has been included in the
consolidated financial statements filed in this registration.
Tradigrain Shipping S.A., a wholly-owned subsidiary, was formed under the laws
of Switzerland. Tradigrain Shipping S.A. has been included in the consolidated
financial statements filed in this registration.
Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
France. Tradigrain S.A. of France has been included in the consolidated
financial statements filed in this registration.
Tradigrain GmbH, a wholly-owned subsidiary, was formed under the laws of
Germany. Tradigrain GmbH has been included in the consolidated financial
statements filed in this registration.
Tradigrain LTD., a wholly-owned subsidiary, was formed under the laws of Great
Britain. Tradigrain LTD. has been included in the consolidated financial
statements filed in this registration.
Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
Argentina. Tradigrain S.A. of Argentina has been included in the consolidated
financial statements filed in this registration.
EXHIBIT 23.A
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
The Board of Directors
Farmland Industries, Inc.:
The audits referred to in our report dated October 21, 1994 included the
related financial statement schedules as of August 31, 1994, and for each of
the years in the three-year period ended August 31, 1994, included in the
Registration Statement in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits. In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
Our report dated October 21, 1994 contains an explanatory paragraph
concerning income tax adjustments proposed by the Internal Revenue Service on
the gain on sale of and certain distributions by Terra Resources, Inc.
We consent to the use of our reports included herein and to the references
to our firm under the headings "Selected Consolidated Financial Data", and
"Experts" in the Prospectus.
KPMG PEAT MARWICK LLP
Kansas City, Missouri
December 12, 1994
EXHIBIT 23.B
CONSENT OF LEGAL COUNSEL
Farmland Industries, Inc.:
The undersigned consents to the use herein of his opinion, dated December
12, 1994, relating to the legality of Subordinated Capital Investment
Certificates, Subordinated Monthly Income Capital Investment Certificates, and
Demand Loan Certificates being registered, and of all other statements and
opinions attributed to him appearing in this Registration Statement No. .
ROBERT B. TERRY
Robert B. Terry
Vice President,
and General Counsel
Kansas City, Missouri
December 12, 1994
EXHIBIT 23.C
CONSENT OF SPECIAL TAX COUNSEL
Farmland Industries, Inc.:
We consent to the references to our firm in the Prospectus filed as part of
this Registration Statement.
BRYAN CAVE
December 12, 1994
EXHIBIT 23.D
CONSENT OF QUALIFIED INDEPENDENT UNDERWRITER
Farmland Industries, Inc.:
We consent to the references to our firm under the caption "Qualified
Independent Underwriter" in the Prospectus.
JAMES H. GLEN, JR.
James H. Glen, Jr.
INTERSTATE/JOHNSON LANE CORPORATION
December 12, 1994
(B) FINANCIAL STATEMENT SCHEDULES
Farmland Industries, Inc. and Subsidiaries for each of the years in the
three-year period ended August 31, 1994:
Page
II--Amounts Receivable from Related Parties S-14
V--Property, Plant and Equipment S-15
VI--Accumulated Depreciation and Amortization of
Property, Plant and Equipment S-18
IX--Short-term Borrowings S-21
X--Supplementary Income Statement Information S-21
All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Balance at Deductions Balance at
the Beginning Amounts Amounts the End
Name of Debtor of the Period Additions Collected Written Off of the Period
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
AUGUST 31, 1994
S.F. Industries (a) . . $ 450 $ 2,000 $ 2,450 $ -0- $ -0-
Hyplains Beef (b) . . $ 6,126 $ 17,744 $ -0- $ -0- $ 23,870
AUGUST 31, 1993
S.F. Industries . . . $ 950 $ -0- $ 500 $ -0- $ 450
Hyplains Beef . . . . $ 4,348 $ 1,778 $ -0- $ -0- $ 6,126
AUGUST 31, 1992
S.F. Industries . . . $ -0- $ 3,950 $ 3,000 $ -0- $ 950
Hyplains Beef . . . . $ -0- $ 4,348 $ -0- $ -0- $ 4,348
<FN>
(a) Farmland has a $5,000,000 commitment to S.F. Industries, L.L.C. to
fund working capital requirements, interest on the working capital
loan, calculated at the LIBOR rate plus .50% is payable on the last
day of September, December, March and June.
(b) Farmland purchases cattle for the day-to-day operations of its 50%
owned venture, Hyplains Beef L.C. This receivable is non-interest
bearing.
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<CAPTION>
Other
Balance Charges Balance
September 1, Additions Retirements Add/ August 31,
Classification 1993 at Cost or Sales (Deduct) 1994
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land and Land Improvements . . $ 11,825 $ 2,214 $ 16 $ (409) $ 13,614
Site Improvements . . . . . . . 26,877 1,524 129 375 28,647
Buildings . . . . . . . 215,420 7,814 1,523 3,056 224,767
Machinery and Equipment . . . . 678,784 61,997 12,976 (11,122) 716,683
Automotive Equipment . . . . . 46,807 8,349 8,617 19,447 65,986
Furniture and Fixtures . . . . 45,405 7,982 4,236 (538) 48,613
Livestock . . . . . . . 4,373 1,968 1,639 (776) 3,926
Mining Properties . . . . . . . 3,119 -0- -0- -0- 3,119
Leasehold Improvements . . . . 12,149 2,716 -0- 220 15,085
Capital Lease . . . . . . . 52,342 1,691 2,955 (122) 50,956
Construction and Acquisitions
in Progress (a) . . . . . 57,242 (26,479) -0- -0- 30,763
Total Property, Plant
and Equipment . . . $ 1,154,343 $ 69,776 $ 32,091 $ 10,131 $ 1,202,159
<FN>
(a) Construction and acquisitions in progress reflects the net change for the
period after transfers to other classifications.
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED AUGUST 31, 1993
<TABLE>
<CAPTION>
Other
Balance Charges Balance
September 1, Additions Retirements Add/ August 31,
Classification 1992 at Cost or Sales (Deduct) 1993
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land and Land Improvements . . . . . . . $ 11,437 $ 880 $ 1,043 $ 551 $ 11,825
Site Improvements . . . . . . . . . . . . 15,308 10,087 96 1,578 26,877
Buildings . . . . . . . . . . . . 193,215 34,531 9,806 (2,520) 215,420
Machinery and Equipment . . . . . . . . . 593,014 77,998 11,409 19,181 678,784
Automotive Equipment . . . . . . . . . . 46,324 6,459 2,032 (3,944) 46,807
Furniture and Fixtures . . . . . . . . . 37,850 7,251 1,491 1,795 45,405
Livestock . . . . . . . . . . . . -0- -0- -0- 4,373 4,373
Mining Properties . . . . . . . . . . . . 26,569 217 -0- (23,667) 3,119
Leasehold Improvements . . . . . . . . . 10,215 5,745 158 (3,653) 12,149
Fertilizer Properties . . . . . . . . . . 48,695 -0- -0- (48,695) -0-
Capital Lease . . . . . . . . . . . . -0- -0- -0- 52,342 52,342
Construction and Acquisitions
in Progress(a) . . . . . . . . . . 53,812 3,432 -0- (2) 57,242
Total Property, Plant
and Equipment . . . . . . . . $ 1,036,439 $ 146,600 $ 26,035 $ (2,661) $ 1,154,343
<FN>
(a) Construction and acquisitions in progress reflects the net change for the
period after transfers to other classifications.
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED AUGUST 31, 1992
<TABLE>
<CAPTION>
Other
Balance Charges Balance
September 1, Additions Retirements Add/ August 31,
Classification 1991 at Cost or Sales (Deduct) 1992
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land and Land Improvements . . . . . . . $ 12,560 $ 2,618 $ 3,534 $ (207) $ 11,437
Site Improvements . . . . . . . . . . . . 19,751 425 6,146 1,278 15,308
Buildings . . . . . . . . . . . . 154,062 50,132 10,217 (762) 193,215
Machinery and Equipment . . . . . . . . . 711,751 35,653 151,368 (3,022) 593,014
Automotive Equipment . . . . . . . . . . 44,328 8,071 5,852 (223) 46,324
Furniture and Fixtures . . . . . . . . . 37,166 5,462 5,264 486 37,850
Mining Properties . . . . . . . . . . . . 82,672 -0- 54,826 (1,277) 26,569
Leasehold Improvements . . . . . . . . . 9,465 749 -0- 1 10,215
Fertilizer Properties . . . . . . . . . . 49,544 -0- 849 -0- 48,695
Construction and Acquisitions
in Progress(a) . . . . . . . . . . 35,207 24,821 4,574 (1,642) 53,812
Total Property, Plant
and Equipment . . . . . . . . $ 1,156,506 $ 127,931 $ 242,630 $ (5,368) $ 1,036,439
<FN>
(a) Construction and acquisitions in progress reflects the net change for the
period after transfers to other classifications.
</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT
FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<CAPTION> Additions
Charged to Other
Balance Profit and Retirements, Charges Balance
September 1, Loss of Renewals and Add/ August 31,
Classification 1993 Income Replacements (Deduct) 1994
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land Improvements . . . . . . . . . . . . $ 154 $ 1 $ -0- $ -0- $ 155
Site Improvements . . . . . . . . . . . . 12,707 1,337 91 (7) 13,946
Buildings . . . . . . . . . . . . 76,426 8,950 820 2,740 87,296
Machinery and Equipment . . . . . . . . . 453,705 28,449 4,472 (2,215) 475,467
Automotive Equipment . . . . . . . . . . 36,062 4,356 3,623 9,626 46,421
Furniture and Fixtures . . . . . . . . . 27,855 7,361 3,227 162 32,151
Livestock . . . . . . . . . . . . 1,768 1,396 1,013 (362) 1,789
Mining Properties . . . . . . . . . . . . 192 19 -0- -0- 211
Leasehold Improvements . . . . . . . . . 3,847 1,323 -0- 213 5,383
Capital Lease . . . . . . . . . . . . 37,249 3,350 2,429 (120) 38,050
Construction and Acquisitions
in Progress (a) . . . . . . . . . . -0- -0- -0- -0- -0-
Totals . . . . . . . . . . . . $ 649,965 $ 56,542 $ 15,675 $ 10,037 $ 700,869
<FN>
(a) Construction and acquisitions in progress reflects the net change for the
period after transfers to other classifications.
</TABLE>
NOTE: The following percentages are used for computing depreciation:
Land Improvements . . . 6 to 10%
Site Improvements . . . 3 to 30%
Buildings . . . . . . . 2 to 10%
Machinery and Equipment 3 to 20%
Automotive Equipment . 10 to 33%
Furniture and Fixtures 10 to 20%
Livestock . . . . . . 25 to 50%
Mining Properties . . . 4 to 21%
Leasehold Improvements . 4 to 6%
Capital Lease . . . . . 6 to 7%
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT
FOR THE YEAR ENDED AUGUST 31, 1993
<TABLE>
<CAPTION> Additions
Charged to Other
Balance Profit and Retirements, Charges Balance
September 1, Loss of Renewals and Add/ August 31,
Classification 1992 Income Replacements (Deduct) 1993
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land Improvements . . . . . . . . . . . . $ 153 $ 1 $ -0- $ -0- $ 154
Site Improvements . . . . . . . . . . . . 10,377 2,439 94 (15) 12,707
Buildings . . . . . . . . . . . . 69,907 7,832 875 (438) 76,426
Machinery and Equipment(a) . . . . . . . 418,331 28,720 10,499 17,153 453,705
Automotive Equipment . . . . . . . . . . 32,827 4,366 1,474 343 36,062
Furniture and Fixtures . . . . . . . . . 21,537 6,398 1,333 1,253 27,855
Livestock . . . . . . . . . . . . 1,768 1,768
Mining Property . . . . . . . . . . . . . 192 192
Leasehold Improvements . . . . . . . . . 3,211 872 11 (225) 3,847
Fertilizer Properties . . . . . . . . . . 34,094 3,199 78 (37,215) -0-
Capital Lease . . . . . . . . . . . . 37,249 37,249
Construction and Acquisitions
in Progress (b) . . . . . . . . . . -0- -0- -0- -0- -0-
Totals . . . . . . . . . . . . $ 590,437 $ 53,827 $ 14,364 $ 20,065 $ 649,965
<FN>
(a) Based on negotiations with potential purchasers, the carrying values of
the Coffeyville, Kansas refinery and a dragline were reduced by adjusting
accumulated depreciation by $17,622,000 and $6,155,000, respectively.
(b) Construction and acquisitions in progress reflects the net change for the
period after transfers to other classifications.
</TABLE>
NOTE: The following percentages are used for computing depreciation:
Land Improvements . . . 6 to 10%
Site Improvements . . . 3 to 30%
Buildings . . . . . . . 2 to 10%
Machinery and Equipment 3 to 20%
Automotive Equipment . 10 to 33%
Furniture and Fixtures 10 to 20%
Livestock . . . . . . 25 to 50%
Mining Properties . . . 4 to 21%
Leasehold Improvements . 4 to 6%
Fertilizer Properties . 6 to 7%
Capital Lease . . . . . 6 to 7%
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT
FOR THE YEAR ENDED AUGUST 31, 1992
<TABLE>
<CAPTION> Additions
Charged to Other
Balance Profit and Retirements, Charges Balance
September 1, Loss of Renewals and Add/ August 31,
Classification 1991 Income Replacements (Deduct) 1992
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land Improvements . . . . . . . . . . . . $ 153 $ 1 $ -0- $ (1) $ 153
Site Improvements . . . . . . . . . . . . 13,666 676 3,968 3 10,377
Buildings . . . . . . . . . . . . 72,369 5,810 8,261 (11) 69,907
Machinery and Equipment . . . . . . . . . 488,684 29,592 98,262 (1,683) 418,331
Automotive Equipment . . . . . . . . . . 32,293 3,149 2,626 11 32,827
Furniture and Fixtures . . . . . . . . . 22,075 3,738 5,486 1,210 21,537
Leasehold Improvements . . . . . . . . . 2,375 836 -0- -0- 3,211
Fertilizer Properties . . . . . . . . . . 34,066 3,591 3,563 -0- 34,094
Construction and Acquisitions in
Progress(a) . . . . . . . . . . . 113 -0- -0- (113) -0-
Totals . . . . . . . . . . . . $ 665,794 $ 47,393 $ 122,166 $ (584) $ 590,437
<FN>
(a) Construction and acquisitions in progress reflects the net change for the
period after transfers to other classifications.
</TABLE>
NOTE: The following percentages are used for computing depreciation:
Land Improvements . . . 6 to 10%
Site Improvements . . . 3 to 30%
Buildings . . . . . . . 2 to 10%
Machinery and Equipment 3 to 20%
Automotive Equipment . 10 to 33%
Furniture and Fixtures 10 to 20%
Leasehold Improvements . 4 to 6%
Fertilizer Properties . 6 to 7%
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Weighted
Maximum Average Average
Amount Amount Interest
Balance Weighted Outstanding Outstanding Rate
Category of Aggregate End of Average During During During the
Short-Term Borrowings Period Interest Rate the Period the Period Period (1)
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
August 31, 1994:
Demand Loan Certificates . . . . . . . . $ 23,158 4.3% $ 39,873 $ 28,299 3.9%
Bank Debt . . . . . . . . . . . . $ 281,886 5.2% $ 417,446 $ 302,500 4.2%
August 31, 1993:
Demand Loan Certificates . . . . . . . . $ 29,860 3.8% $ 46,403 $ 35,002 4.3%
Bank Debt . . . . . . . . . . . . $ 268,783 4.1% $ 370,726 $ 348,230 4.2%
August 31, 1992:
Demand Loan Certificates . . . . . . . . $ 43,084 5.5% $ 58,684 $ 50,516 6.3%
Bank Debt . . . . . . . . . . . . $ 200,072 4.5% $ 200,822 $ 174,397 5.3%
<FN>
(1)The weighted average interest rate was calculated by dividing an interest
amount on short-term borrowings by the average daily balance of short-term
borrowings during the period.
</TABLE>
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
Charged to Costs and Expenses
For the Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
1. Maintenance and repairs $ 58,730 $ 61,273 $ 50,252
<FN>
NOTE: All other items required by Schedule X are excluded as such items are
less than one (1) percent of total sales for each of the years
presented.
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person in
connection with the securities being registered), the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, FARMLAND
INDUSTRIES, INC. HAS DULY CAUSED THIS FORM S-1 TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF KANSAS CITY, STATE OF
MISSOURI ON DECEMBER 12, 1994.
FARMLAND INDUSTRIES, INC.
BY H. D. CLEBERG
H. D. Cleberg
President and Chief Executive Officer
BY JOHN F. BERARDI
John F. Berardi
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED FOR THE FOLLOWING PERSONS ON THE DATE
INDICATED PURSUANT TO VALID POWER OF ATTORNEY EXECUTED ON OCTOBER 19, 1994.
Signature Title Date
ALBERT J. SHIVLEY Chairman of December 12, 1994
Albert J. Shivley Board
Director
OTIS H. MOLZ Vice Chairman of December 12, 1994
Otis H. Molz Board
Director
LYMAN ADAMS Director December 12, 1994
Lyman Adams
RONALD J. AMUNDSON Director December 12, 1994
Ronald J. Amundson
BAXTER ANKERSTJERNE Director December 12, 1994
Baxter Ankerstjerne
JODY BEZNER Director December 12, 1994
Jody Bezner
RICHARD L. DETTEN Director December 12, 1994
Richard L. Detten
STEVEN ERDMAN Director December 12, 1994
Steven Erdman
WARREN GERDES Director December 12, 1994
Warren Gerdes
BEN GRIFFITH Director December 12, 1994
Ben Griffith
GAIL D. HALL Director December 12, 1994
Gail D. Hall
Director December 12, 1994
Jerome Heuertz
BARRY JENSEN Director December 12, 1994
Barry Jensen
GREG PFENNING Director December 12, 1994
Greg Pfenning
VONN RICHARDSON Director December 12, 1994
Vonn Richardson
MONTE ROMOHR Director December 12, 1994
Monte Romohr
Director December 12, 1994
Joe Royster
PAUL RUEDINGER Director December 12, 1994
Paul Ruedinger
RAYMOND J. SCHMITZ Director December 12, 1994
Raymond J. Schmitz
THEODORE J. WEHRBEIN Director December 12, 1994
Theodore J. Wehrbein
ROBERT ZINKULA Director December 12, 1994
Robert Zinkula
EXHIBIT 99
EXHIBIT INDEX
The following exhibits and financial statement schedules are filed as a part
of this Registration Statement. Certain of these exhibits are incorporated by
reference as indiciated. Items marked with an asterisk (*) are filed herewith.
Exhibit No. Exhibit
UNDERWRITING AGREEMENT:
* 1.A Underwriting Agreement between Farmland Industries, Inc. and Farmland
Securities Company, dated December 6, 1989.
* 1.A(1) Amendment, dated December 5, 1994, to the agreement, dated
December 6, 1989 between Farmland Industries, Inc. and Farmland
Securities Company.
* 1.B Sales Agency Agreement between Farmland Industries, Inc. and American
Heartland Investment, Inc., dated December 29, 1993.
ARTICLES OF INCORPORATION AND BYLAWS:
3.A Articles of Incorporation and Bylaws of Farmland Industries, Inc.
effective December 1, 1993. (Incorporated by Reference - Form 10-K,
filed November 29, 1994)
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
4.(i)A Trust Indenture dated November 20, 1981, as amended January 4, 1982,
including specimen of Demand Loan Certificates. (Incorporated by
Reference - Form S-1, No.2-75071, effective January 7, 1982)
4.(i)B Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 10-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)
4.(i)B(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3, 1985
covering Farmland Industries, Inc.'s 10-Year Subordinated
Capital Investment Certificates. (Incorporated by Reference
- Form SE, dated December 3, 1991)
4.(i)C Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 5-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)
4.(i)C(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3, 1985
covering Farmland Industries, Inc.'s 5-Year Subordinated
Capital Investment Certificates. (Incorporated by Reference
- Form SE, dated December 3, 1991)
4.(i)D Trust Indenture dated November 8, 1984, as amended January 3, 1985
and November 20, 1985, including specimen of 10-year Subordinated
Monthly Income Capital Investment Certificates. (Incorporated by
Reference - Form S-1, No. 2-94400, effective December 31, 1984)
4.(i)E Trust Indenture dated November 11, 1985 including specimen of the
5-year Subordinated Monthly Income Capital Investment Certificates.
(Incorporated by Reference - Form S-1, No. 33-1970, effective
December 31, 1985)
INSTRUMENTS DEFINING RIGHTS OF OWNERS OF INDEBTEDNESS NOT REGISTERED:
4.(ii)A Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 20-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)
4.(ii)A(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3, 1985
covering Farmland Industries, Inc.'s 20-Year Subordinated
Capital Investment Certificates. (Incorporated by Reference
- Form SE, dated December 3, 1991)
4.(ii)B Credit Agreement among Farmland Industries, Inc., as Borrower, ABN
Amro Bank N.V., The Bank of Nova Scotia, Boatmen's First National
Bank of Kansas City, The Chase Manhattan Bank, N.A., Commerce Bank of
Kansas City, N.A., NBD Bank, N.A., as Banks and The National Bank for
Cooperatives, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
"Rabobank Nederland", New York Branch, as Banks and as Co-Agents,
dated May 19, 1994, (the "Syndicated Credit Facility").
(Incorporated by Reference - Form 10-Q filed July 14, 1994)
4.(ii)B(1) List identifying contents of all omitted schedules
referenced in and not filed with, the Syndicated Credit
Facility, dated May 19, 1994. (Incorporated by Reference -
Form 10-Q, filed July 14, 1994)
* 5. Opinion re Legality
MATERIAL CONTRACTS:
LEASE CONTRACTS:
10.(i)A The First National Bank of Chicago, not individually but solely as
Trustee for AT&T Commercial Finance Corporation, The Boatmen's
National Bank of St. Louis, Firstier Bank, N.A. and Norwest Bank
Minnesota, National Association and Farmland Industries, Inc.
consummated a leveraged lease in the amount of $73,153,000 dated
September 6, 1991. (Incorporated by Reference - Form SE, filed
December 3, 1991)
10.(i)B The First National Bank of Commerce as Trustee for General Electric
Credit Corporation as Beneficiary and Farmland Industries, Inc.
consummated a leveraged lease in the amount of $51,909,257.90 dated
March 17, 1977. (Incorporated by Reference - Form S-1, No.2-60372,
effective December 22, 1977)
MANAGEMENT REMUNERATIVE PLANS:
10.(ii)(A)(1) Annual Employee Variable Compensation Plan (September 1,
1994 - August 31, 1995). (Incorporated by Reference - Form
10-K, filed November 29, 1994)
10.(ii)(A)(2) Farmland Industries, Inc. Management Long-Term Incentive
Plan (Effective September 1993) (Incorporated by Reference -
Form 10-K, filed November 29, 1993).
*12. Computation of Ratios
*21. Subsidiaries of the Registrant
CONSENTS OF EXPERTS AND COUNSEL:
*23.A Independent Auditors' Consent and Report on Schedules
*23.B Consent of Legal Counsel
*23.C Consent of Special Tax Counsel
*23.D Consent of Qualified Independent Underwriter
24 Power of Attorney (Incorporated by Reference - Form 10-K, filed November
29, 1994)
*25.A Statement of Eligibility of Trustee and Qualification of UMB Bank,
National Association as Trustee, Form T-1.
*25.B Statement of Eligibility of Trustee and Qualification of Commerce Bank of
Kansas City, National Association as Trustee, Form T-1.
EXHIBIT 1.A
UNDERWRITING AGREEMENT
THIS AGREEMENT, made and entered into on this 6th day of December, 1989, by
nd between Farmland Industries, Inc., a Kansas cooperative corporation ("
Farmland"), and Farmland Securities Company, a Delaware corporation ("FSC").
WITNESSETH:
WHEREAS, FSC is a wholly-owned subsidiary of Farmland and has been
organized by Farmland solely for the purpose of selling securities of Farmland
on a "best efforts" basis; and
WHEREAS, FSC and Farmland desire to set forth their mutual
understandings regarding their respective responsibilities;
NOW, THEREFORE, in consideration of the premises and their mutual
agreements herein set forth, the parties hereto agree as follows:
1. Employment of FSC. Farmland hereby engages FSC to offer Debt Securities of
Farmland to the public and to solicit subscriptions from the public to
buy Debt Securities of Farmland anywhere within the Territory as
hereinafter defined. FSC accepts such appointment and agrees that it will
not engage in the offer, purchase or sale of any security other than Debt
Securities of Farmland.
As used herein the phrases "Debt Securities of Farmland" and "Debt
Securities" shall mean such various classes and types of Debt Securities
as may from time to time be offered by Farmland for sale and distribution
to the public pursuant to an effective registration statement filed by
Farmland under the Securities Act of 1933 (the "1933 Act"). The term "
Territory" means any state in which Farmland desires to sell its Debt
Securities and in which the Debt Securities are duly registered for offer,
sale and distribution under the "Blue Sky" or securities laws thereof
or are exempt from such registration.
2. Function of FSC. The sole function of FSC shall be to use its best efforts
to offer and solicit through its associated persons subscriptions for Debt
Securities of Farmland within the Territory upon the terms set forth in
the prospectus delivered by Farmland to FSC with respect to such Debt
Securities. FSC will at all times solicit such subscriptions upon Farmland
subscription forms provided by Farmland to FSC. At the time FSC secures a
subscription, it shall also secure a check or draft from the subscriber
payable to Farmland in payment for the Debt Securities covered by the
subscription and shall promptly forward or deliver the subscription and
all checks and drafts received in payment therefor to Farmland. FSC shall
not accept any cash in payment of any Debt Securities from any subscriber.
FSC makes no commitment that it will in fact be able to secure
subscriptions for Debt Securities of Farmland.
3. Functions of Farmland with Respect to Subscriptions Obtained by FSC;
Mailing of Confirmations by Farmland. Upon receipt of a subscription for
Debt Securities solicited by FSC and acceptance thereof by Farmland,
Farmland will handle the delivery or mailing of the confirmation thereof
to the subscriber as well as any billings and all other administrative work
involved therewith. Farmland will also mail or deliver directly to the
subscriber all certificates for Debt Securities sold to the subscriber.
Any such confirmation will comply with any requirements of Rule 15c1-4
under the Securities Exchange Act of 1934 (the "1934 Act") and will
reflect to the extent required by said Rule, that it is being sent on
behalf of FSC acting in the capacity of broker for Farmland. All
subscriptions solicited by FSC shall be subject to acceptance by Farmland
and Farmland shall have the absolute right to refuse to accept any
subscription. The acceptance of a subscription by Farmland will be
effective only at the time of the delivery or mailing by Farmland of a
confirmation with respect thereto or of the certificates evidencing the
Debt Securities covered thereby, whichever shall first occur.
4. All Expenses of FSC to be Paid by Farmland; Farmland to Furnish All Funds
and Capital Required by FSC. Farmland will either pay directly on behalf
of FSC or reimburse FSC for any and all actual expenses and liabilities
incurred by FSC of every kind and character, provided however, that such
expenses, liabilities and disbursements shall not exceed three
percent (3%) of the face amount of the securities being offered, and
provided further, that the compensation which FSC shall pay its associated
persons for the sale of securities shall not exceed four percent (4%) of
the aggregate sales price of said securities. FSC shall advise Farmland of
the amount of commissions which is to be paid to its associated persons
and such commissions shall be paid by Farmland directly to FSC's
associated persons on behalf of FSC.
Without limiting the generality of the foregoing, Farmland agrees to make
available to FSC all funds, without limitation, as are necessary to
enable FSC to maintain the minimum capital required under the 1934 Act and
the rules and regulations thereunder.
5. Furnishing of Physical Facilities and Personnel by Farmland to FSC;
Maintenance of Books and Records by Farmland on Behalf of FSC. Farmland
will make and continue to make physical facilities available to FSC which
shall be adequate and suitable for FSC to conduct its business and will
make and continue to make available to FSC all accounting and clerical
personnel necessary for FSC to carry on its business.
Farmland will maintain and hold on behalf of and as agent for FSC all of
FSC's books and records, including without limitation, all books and
records required under the 1934 Act and the rules and regulations
thereunder and applicable state securities laws. To the extent
applicable, such books and records shall be maintained and preserved in
conformity with the requirements of Rules 17a-3 and 17a-4 under the 1934
Act. Such books and records shall be and remain the property of FSC and
shall at all times be subject to inspection by the Securities and
Exchange Commission in accordance with Section 17(a) of the 1934 Act.
6. FSC Responsible for Supervision of its Associated Persons- FSC has and
assumes full responsibility for the securities activities of its
associated persons, including the training, supervision and control
thereof, provided, however, that FSC will not permit any of its
employees to have discretionary authority with respect to any customer's
account and that when FSC recommends a Farmland Security, it will have
reasonable grounds to believe that the recommendation is suitable for such
customer concerning the customer's investment objectives, financial
situation and needs, and any other information known by FSC.
7. FSC as Independent Contractor. FSC is an independent contractor and,
except as expressly provided or authorized herein or otherwise in writing
by Farmland, shall have no authority to act for Farmland or to make any
representations concerning the Debt Securities except those contained in
the then current prospectus covering the Debt Securities.
8. Advertising and Promotional Materials Farmland will provide FSC with
such advertising and promotional literature as it shall deem helpful in
selling its Debt Securities. FSC, at its own expense, may prepare and
use literature, brochures, information letters or other written
materials or visual aids for distribution to and use by its
representatives as FSC shall reasonably deem helpful in offering the Debt
Securities; provided, however, that all such materials shall be submitted
to Farmland for its approval and FSC shall have received the written
approval of Farmland prior to the use thereof.
9. Expenses. FSC shall bear all of its own costs and expenses incurred in
the solicitation of subscriptions for the Debt Securities and in
performing its obligations hereunder. Farmland will bear and pay all costs
and expenses incident to the performance of its obligations hereunder,
including, without limiting the generality of the foregoing:
a. All expenses and costs of preparing, printing, and filing any and
all registration statements, preliminary prospectuses, prospectuses,
and each amendment and supplement thereto, relating to the Debt
Securities;
b. All costs and expenses, including fees and disbursements, if any, of
counsel, incident to the qualification of any and all Debt Securities
for sale under the Blue Sky or securities laws of the states in the
Territory; and
c. The fees and disbursements, if any, of counsel and any accountants
for Farmland.
10. Supervision of FSC's Partners, Employees and Other Representatives FSC
hereby agrees that it will use its best efforts and utmost diligence to
supervise its partners and employees and any other persons acting on its
behalf who will be offering and soliciting subscriptions for Debt
Securities from the public to make certain that such partners, employees
r representatives do not take any action or make any representation that
will in any manner make Farmland subject to any disciplinary action or
other sanction of the SEC or of any other governmental authority, whether
state, local or federal.
11. Representations and Warranties of Farmland Regarding Registration
Statements Farmland represents and warrants to FSC that:
a. When any registration statement becomes effective during the period
subsequent thereto during which a prospectus is required to be
delivered to purchasers or proposed purchasers of Debt Securities (i)
such registration statement and prospectus and any and
all amendments or supplements thereto will comply in all material
respects with the requirements of the 1933 Act and the rules and
regulations, and (ii) neither such registration statement nor
prospectus nor any amendments or supplements thereto will
include any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that Farmland
makes no representations, warranties or agreements as to information
contained in or omitted from any such registration statement,
prospectus, or any such amendment or supplement in reliance upon and
in conformity with written information furnished to Farmland by FSC
specifically for use in the preparation thereof; and
b. If at any time when a prospectus relating to any Security is required
to be delivered under the 1933 Act, any event occurs as a result of
which such prospectus as then in effect would include an untrue
statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is necessary at
any time to amend such prospectus to comply with the 1933 Act,
Farmland will promptly prepare an amended or supplemental prospectus
which will correct such statement or omission or which will effect
such compliance.
12. Indemnification.
a. Farmland will indemnify and hold FSC, and any person who controls FSC
within the meaning of the 1933 Act, harmless from and against any
losses, claims, damages or liabilities to which FSC or such controlling
person may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
i. Farmland's failure to take any and all action required to
qualify any of the Debt Securities for offer and sale under
the Blue Sky or securities laws of any state in the Territory
as to which Farmland advised FSC in writing that such
action had been taken;
ii. Any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement,
preliminary prospectus, prospectus, or any amendment or
supplement thereto, or any other prospectus relating to any of
the Debt Securities; or
iii. Arise out of, or are based upon the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary, to make the statements therein
not misleading.
Farmland will reimburse FSC and each such controlling person for
any legal or other expenses reasonably incurred by FSC and such
controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided,
however, that Farmland will not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any registration
statement, preliminary prospectus, prospectus, or any amendment or
supplement or such other prospectus in reliance upon and in
conformity with written information furnished to Farmland by FSC
for use in the preparation thereof. This indemnity will be in
addition to any liability which Farmland may otherwise have.
b. FSC will indemnify and hold Farmland and each of its directors, each
of its officers who have signed or will sign any registration
statement or application under the Blue Sky or securities laws of any
state in the Territory, and each person, if any, who controls Farmland
within the meaning of the 1933 Act, harmless from and against any
losses, claims, damages, liabilities to which Farmland or any such
director, officer or controlling person may become subject, under the
Act, the Blue Sky or securities laws of any state in the Territory or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
i. FSC's failure to deliver a prospectus to any purchaser
solicited by the FSC as required by the 1933 Act;
ii. Any written or oral untrue statement or alleged untrue
statement of any material fact made by FSC or its
representatives to any customer, otherwise than through
a prospectus, a preliminary prospectus or other material
furnished FSC by Farmland;
iii. Any untrue or alleged untrue statement of any material fact
contained in any registration statement, preliminary
prospectus, prospectus or amendment or supplement thereto,
or any other prospectus relating to any Debt Securities, or
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements contained therein not misleading, in each
case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in any such registration statement,
preliminary prospectus, prospectus or amendment or supplement
or other prospectus in reliance upon and in conformity with
written information furnished to Farmland by FSC specifically
for use in the preparation thereof; and
iv. Any and all actions by the FSC or any representative of FSC,
including without limiting the generality of the foregoing,
the offer of any Security to, and the solicitation of an offer
to buy any Security from, the public by FSC or any
representative of FSC in any state in the Territory in which
FSC or such representative of FSC is not duly registered as
a broker, dealer, agent, salesman or otherwise as required by
the laws thereof; any offer, solicitation or other action
concerning the Debt Securities of Farmland by FSC or any
representative of FSC in any jurisdiction outside the
Territory; any breach of this Agreement and any
misrepresentation or other wrongful conduct occurring in the
course of such offer or solicitation.
FSC will reimburse Farmland or the appropriate person or firm for
any legal or other expenses reasonably incurred by Farmland or any
such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability
or action. This indemnity will be in addition to any liability which
FSC may otherwise have.
c. Promptly after receipt by a party indemnified under this Section 12
of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 12, notify the indemnifying
party in writing of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party
otherwise than under this Section 12. In case any such action is
brought against an indemnified party, and an indemnified party
notifies an indemnifying party of the commencement thereof, the
indemnifying party shall assume the defense thereof, including the
employment of counsel and the payment of all expenses. Any
indemnified party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless the employment thereof has been
specifically authorized by the indemnifying party or unless the
indemnifying party has failed to assume the defense and employ
counsel.
13. Agreement Not Assignable and Shall Not Inure to the Benefit of Third
Partied This Agreement may not be assigned by either party. Nothing in
this Agreement is intended to give or shall give any person not a party
hereto any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any provision hereof, this Agreement and all
conditions and provisions hereof being intended to be, and being for the
sole and exclusive benefit of the parties hereto.
14. Agreement Subject to Applicable Laws and Regulation The parties hereto
agree that all provisions of this Agreement will be performed in
accordance with the requirements of the 1933 Act, the 1934 Act, the rules
and regulations thereunder and the applicable laws and regulations of each
of the states in the Territory.
15. Entire Agreement; Headings This Agreement constitutes the entire
agreement between Farmland and FSC with respect to the transactions
contemplated hereby, and supersedes all prior oral or written
communications, correspondence, agreements, commitments or understandings
with respect thereto. No amendment or waiver of the terms hereof shall be
binding unless in writing and signed by authorized representatives of
both parties. The headings used in this Agreement are for convenience of
reference only and shall not affect the meaning of any term.
16. Effective Date, Duration and Termination of Agreement This Agreement shall
become effective concurrently with the effectiveness under the 1933 Act of
the first registration statement filed by Farmland after November 1, 1989.
The term of this Agreement shall be for a period of five (5) years from
the date hereof unless sooner terminated as herein provided by
either party hereto. Either party shall have the right to renew this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above mentioned.
(SEAL)
FARMLAND INDUSTRIES, INC.
Mark L. Baldwin James L. Rainey
Assistant Secretary President
(SEAL)
FARMLAND SECURITIES COMPANY
James W. Bargfrede Kenneth J. Swails
Secretary President
EXHIBIT 1.A(1)
EXTENSION OF UNDERWRITING AGREEMENT
THIS AGREEMENT is made and entered into on this 5th day of December, 1994,
by and between Farmland Industries, Inc., a Kansas cooperative corporation
("Farmland"), and Farmland Securities Company, a Delaware corporation ("FSC").
WITNESSETH:
WHEREAS, Farmland and FSC entered into that certain Underwriting Agreement
dated December 6, 1989 by which FSC agreed to sell debt securities of Farmland
to the public, and to perform related responsibilities and Farmland and FSC
agreed to assume certain related responsibilities (hereafter "Underwriting
Agreement"); and
WHEREAS Farmland and FSC desire to amend and renew the Underwriting
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
1. Farmland and FSC hereby renew the Underwriting Agreement effective
December 5, 1994, with the amendment that Paragraph 16 of the
Underwriting Agreement shall be deleted in its entirety and replaced
with the following:
16. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT. This
Agreement shall become effective concurrently with the
effectiveness under the 1933 Act of the First Registration
Statement filed by Farmland Industries, Inc. after
December 5, 1994. Unless sooner terminated as herein
provided by either party hereto, this Agreement shall
terminate on January 1, 2000. Either party shall have the
right to renew this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above mentioned.
FARMLAND INDUSTRIES, INC.
ATTEST: JOHN F. BERARDI
_______________________________________
ROBERT B. TERRY
_________________________ John F. Berardi
Assistant Secretary Executive Vice President &
Chief Financial Officer
( SEAL )
FARMLAND SECURITIES COMPANY
ATTEST:
KEITH VICKERS
JAMES W. BARGFREDE _______________________________________
__________________________ Keith Vickers
James W. Bargfrede President
Secretary
EXHIBIT 1.B
FARMLAND INDUSTRIES, INC.
AND AMERICAN HEARTLAND INVESTMENTS, INC.
SALES AGENCY AGREEMENT
THIS AGREEMENT is made as of the date which is set forth at the end of
this Agreement, by and between American Heartland Investments, Inc., a Kansas
corporation, (hereinafter referred to as the "BROKER-DEALER"), and FARMLAND
INDUSTRIES, INC, a Kansas corporation, having its principal offices at 3315
North Oak Trafficway, Kansas City, Missouri 64116 (hereinafter referred to as
the "COMPANY").
The COMPANY is offering debt certificates to the general public and to
owners of Farmland's securities for exchange.
The COMPANY hereby agrees to appoint the BROKER-DEALER and its agents to
effect sales of the Certificates under the following terms and conditions:
Section 1. Appointment and Suspension.
(a) The BROKER-DEALER is hereby appointed, subject to the provisions of
this Agreement, to act as BROKER-DEALER for the sale of the COMPANY'S
Subordinated Capital Investment Certificates, Subordinated Monthly Income
Capital Investment Certificates and Demand Loan Certificates and other debt
securities which may be offered by the COMPANY (the "Certificates"). The
offerings of the COMPANY are to be made pursuant to Rule 415 of the Securities
and Exchange Commission (the "SEC") on a continuous basis.
(b) The COMPANY'S offering of Certificates may be temporarily suspended
pursuant to Item 17 of the COMPANY'S Registration Statement dated December 29,
1993. The COMPANY shall promptly advise the BROKER-DEALER of any such
suspension, and the subsequent recommencement of the offering. Upon receipt of
such a suspension notice, the BROKER-DEALER shall immediately suspend its sales
efforts hereunder, until the BROKER-DEALER receives a notice of recommencement.
Section 2. Representations and Warranties of BROKER-DEALER. The BROKER-
DEALER hereby covenants, represents and warrants to and for the benefit of the
COMPANY that:
(a) The BROKER-DEALER is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended, is registered as a
broker-dealer in all states in which it conducts business and is a member in
good standing of the National Association of Securities Dealers, Inc.
(hereinafter referred to as the "NASD"). The BROKER-DEALER will notify the
COMPANY in writing of any change in its status as described in this subsection
(a).
(b) The BROKER-DEALER will aid in the placement of the Certificates on a
"best efforts" basis through the distribution to potential investors, subject to
the provisions of this Agreement and to applicable securities laws and
regulations and the rules and regulations of the NASD. The BROKER-DEALER agrees
to utilize only the current prospectus relating to the Certificates (the
"Prospectus") and appropriate amendments and such offering materials which are
provided by the COMPANY or which have been previously approved by the COMPANY in
writing in connection with the offering and sale of the Certificates. The
BROKER-DEALER acknowledges that from time to time the COMPANY may, in its sole
discretion, provide the BROKER-DEALER or its representatives with certain
information not contained in the Prospectus in connection with the BROKER-
DEALER'S "due diligence" examination. The BROKER-DEALER agrees that no
reference to any such material, which is not described or contained in the
Prospectus or any amendment thereto, will be disclosed, whether orally or in
writing, to any potential investor or appear in any analysis, report or
literature prepared by the BROKER-DEALER or its representatives, except with
prior written consent of the COMPANY.
(c) The BROKER-DEALER will at all times comply with all applicable
Federal, state, local and common laws and all applicable rules, regulations and
orders of any court, government or unit or agency thereof, and of the NASD.
(d) The BROKER-DEALER will offer placement services for the Certificates
only in those states where both of the following occur:
(1) The BROKER-DEALER is licensed as a broker-dealer, from time to
time; and
(2) The COMPANY has advised the BROKER-DEALER in writing that: (A)
the COMPANY has obtained "blue sky" clearance, (B) an exemption from the
applicable filing requirements is available, or (C) there are no "filing"
requirements;
Such placement services by the BROKER-DEALER will be offered only in
amounts within the maximum amount of securities for which such clearance or
exemption may, from time to time, exist. The BROKER-DEALER is at this time
registered as a broker-dealer and licensed to sell securities in the states of
Kansas and Texas.
(e) The BROKER-DEALER will diligently make inquiries of all prospective
investors to ascertain whether a purchase of any Certificates is suitable for
each prospective investor.
(f) The BROKER-DEALER will obtain from Certificate purchasers fully
completed and duly executed documents as required by the COMPANY and promptly
transmit same to the COMPANY or its designee.
(g) There is no action, suit, litigation or proceeding before or by any
court or governmental agency pending or threatened against, or involving the
property or business of the BROKER-DEALER which might result in any material
adverse change of the condition (financial or otherwise), business or prospects
of the BROKER-DEALER and there is no action or proceeding of which the BROKER-
DEALER has been advised, in any court or governmental agency concerning its
activities as a broker or dealer, nor has the BROKER-DEALER been named as a
"cause" in any such action or proceeding.
(h) This Agreement has been duly and validly authorized, executed and
delivered by and on behalf of the BROKER-DEALER and constitutes the valid and
binding agreement of the BROKER-DEALER enforceable against it in accordance with
its terms subject to any applicable bankruptcy, insolvency, moratorium,
reorganization or other laws affecting the enforceability of creditor's rights
generally, from time to time in effect and except as the indemnification
provisions of Section 6 hereof may be limited under the Federal securities laws.
(i) The BROKER-DEALER has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and has taken all
action required by law, its Certificate of Incorporation, its By-Laws, or
otherwise to authorize the execution, delivery and performance of this Agree-
ment. And the execution, delivery and performance of this Agreement does not
violate the provisions of the Certificate of Incorporation or By-Laws of the
BROKER-DEALER or any law or any agreement to which the BROKER-DEALER is party or
by which the BROKER-DEALER and/or its assets are bound, or any order, rule or
regulation applicable to the BROKER-DEALER of any court or any governmental body
or administrative agency having jurisdiction of the BROKER-DEALER.
(j) The BROKER-DEALER will not sell any certificates to discretary
accounts without prior specific written approval of the customer.
Section 3. Representation and Warranties of the COMPANY. The COMPANY
hereby covenants, represents and warrants to and for the benefit of the BROKER-
DEALER that:
(a) The COMPANY will at all times comply with all applicable rules,
regulations and orders of any court, government or unit or agency thereof, and
the NASD.
(b) There is no action, suit, litigation or proceeding before or by any
court or governmental agency pending or threatened against or involving the
property or business of the COMPANY or its Affiliates, which is likely to result
in any material adverse change of the condition (financial or otherwise),
business or prospects of the COMPANY or its Affiliates, other than as disclosed
in the COMPANY'S annual report filed with the SEC on Form 10K for the year ended
August 31, 1993.
(c) This Agreement has been duly and validly authorized, executed and
delivered by and on behalf of the COMPANY and constitutes the valid and binding
agreement of the COMPANY enforceable against it in accordance with its terms
subject to any applicable bankruptcy, insolvency, moratorium, reorganization or
other laws affecting the enforceability of creditor's rights generally, from
time to time in effect and except as the indemnification provisions of the
Section 6 hereof may be limited under the Federal securities laws.
(d) The COMPANY has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and has taken all
action required by law, its Certificate of Incorporation, its By-Laws, or
otherwise to authorize the execution, delivery and performance of the Agreement
and the execution, delivery and performance of the Agreement does not violate
the provision of the Certificate of Incorporation or By-Laws of the COMPANY or
agreement to which the COMPANY is a party or by which the Company and/or its
assets are bound, or any order, rule or regulation applicable to the COMPANY of
any court or any governmental body or administrative agency having jurisdiction
over the COMPANY.
(e) A registration statement has been prepared with respect to the
Certificates, including a prospectus prepared by the COMPANY which is materially
in conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations of the SEC thereunder and has been
filed with the SEC under the Act.
(f) To the Company's knowledge, neither the SEC nor the National
Association of Securities Dealers has issued any order preventing or suspending
the use of any Prospectus with respect to the Certificates and any further
amendments or supplements thereto. The COMPANY further represents that said
Prospectus and related documents contain all statements which are required to be
stated therein by the Act and the Rules and Regulations and conform in all
material respects with the requirements of the Act and the Rules and
Regulations; neither the Registration Statement nor the Prospectus nor any
amendment or supplement contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided that no representations or warranties are made
as to information contained in or omitted from the Registration Statement or the
Prospectus or any amendment or supplement thereto in reliance upon written
information furnished to the COMPANY by the BROKER-DEALER or its representatives
specifically for inclusion therein.
(g) The consolidated financial statements of the COMPANY included in the
Prospectus fairly present the balance sheets, statements of operations, cash
flows, and capital, shares and equities of the COMPANY at the respective dates
of such statements and for the periods therein set forth and have been prepared
in conformity with generally accepted accounting principles.
(h) The COMPANY represents that there are no minimum requirement of
Certificates to be sold to make the offering effective and that no escrow
requirement exists under NASD or under the Act.
(i) The COMPANY assures the BROKER-DEALER that the States' "blue sky"
securities laws shall have been complied with and all conditions pertaining to
State securities laws and regulations in the states in which the COMPANY allows
the BROKER-DEALER to offer Certificates will have been met prior to such
offering of said Certificates by the BROKER-DEALER or its agents.
(j) The COMPANY has presently obtained "blue sky" clearance in the
states of Arizona, Arkansas, California, Colorado, Illinois, Iowa, Kansas,
Minnesota, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South
Dakota, Texas, Washington, and Wyoming. The COMPANY shall promptly notify the
BROKER-DEALER in the event of any changes.
Section 4. Compensation.
A. The COMPANY shall pay the BROKER-DEALER as its compensation for
acting as the sales agent in accordance with the other provisions of this
agreement, the compensation described in the attached Exhibit A, herein
incorporated by reference.
B. The BROKER-DEALER shall not be entitled to receive compensation
based upon purchases of Certificates by investors who have, within the two (2)
years prior to such purchase through the BROKER-DEALER, purchased a Certificate
either through a Farmland Securities Company agent or from Farmland, unless such
investor has previously or concurrent with the purchase through the BROKER-
DEALER delivered to Farmland a signed written election appointing the BROKER-
DEALER as the investor's agent of record.
C. Immediately upon expiration or termination of this Agreement,
Farmland shall no longer recognize the BROKER-DEALER as an agent of record for
sales of Certificates. Farmland shall compensate the BROKER-DEALER for each
subscription for a Certificate received by Farmland in acceptable form on or
before the date of termination, regardless of whether Farmland actually accepts
the subscription before or after the expiration or termination date.
D. The compensation shall be paid to the BROKER-DEALER only to the
extent permitted under applicable Federal and state securities laws, and then
only upon the BROKER-DEALER'S satisfaction of the following:
(1) That the BROKER-DEALER has delivered to the COMPANY all
subscription documents, properly completed and signed by the applicable
investor; and
(2) That the investor's payment for his Certificate has cleared
such investor's bank; provided that if the COMPANY, in its sole
discretion, compensates BROKER-DEALER with respect to an investor whose
check is thereafter dishonored (or otherwise not paid by the investor's
bank), then the COMPANY shall offset such compensation repayment against
compensation that is due for the month in which the COMPANY discovers
such dishonored check.
E. The BROKER-DEALER acknowledges that the COMPANY shall have the
right, in its sole and absolute discretion, to reject any investor which is
secured by, or through, the BROKER-DEALER, in which case, no compensation shall
be due to the BROKER-DEALER with respect to said rejected investor.
F. In the event this contract is signed by both parties and becomes
effective, the COMPANY shall pay the BROKER-DEALER, in compensation for the
BROKER-DEALER'S legal fees and expenses, due diligence, marketing and
advertising one-half of one percent (1/2 %) of the face amount of the COMPANY'S
Subordinated Capital Investment Certificates and Subordinated Monthly Income
Capital Investment Certificates (but excluding Demand Loan Certificates) which
the BROKER-DEALER sells for cash (excluding exchanges and calls). The COMPANY
shall add the BROKER-DEALER as an additional beneficiary of the due diligence
work performed by Interstate/Johnson Lane Corporation with respect to the
COMPANY'S offering of the Certificates.
Section 5. Condition of Performance. The COMPANY acknowledges that
the obligations of the BROKER-DEALER are limited to a "best efforts" basis, and
that there is no obligation or undertaking, express or implied, that the BROKER-
DEALER is making a commitment to sell a minimum face amount of Certificates. In
addition, the duties and obligations of the parties which are provided for in
this Agreement shall be subject to the accuracy, between the date hereof and the
date of completion of the sale of the Certificates, of the representations and
warranties which are made by the parties herein.
Section 6. Indemnification.
A. The COMPANY agrees to indemnify and hold harmless the BROKER-DEALER
and its employees, officers, directors and each person who controls the BROKER-
DEALER within the meaning of Section of 15 of the Act, from and against any
losses, claims, damages or liabilities, joint or several, to which it may become
subject, under said Act or otherwise (including any reasonable legal or other
reasonable expenses incurred in connection therewith), insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any material violation of the Act by the COMPANY; (ii) any
material violation by the COMPANY of the blue sky laws of any state in which the
Certificates shall be offered or sold by the BROKER-DEALER; or (iii) any
material violation of the covenants, representations or warranties of the
COMPANY which are contained in this Agreement.
B. The BROKER-DEALER agrees to indemnify and hold harmless the COMPANY,
its subsidiaries and affiliates, and their employees, agents, officers,
directors, legal counsel and each person, if any, who controls the COMPANY, its
subsidiaries and affiliates, within the meaning of Section 15 of the Act, from
and against any losses, claims, damages or liabilities, joint or several, to
which any of them may become subject, under said Act or otherwise (including any
legal or other reasonable expenses incurred in connection therewith) insofar as
such losses, claims, damages or liabilities (or such actions in respect thereof)
arise out of or are based upon (i) a failure by the BROKER-DEALER to comply with
the applicable laws, rules and regulations governing qualification and conduct
of BROKER-DEALER under Federal and/or state securities laws; (ii) any other
violation of said Act by the BROKER-DEALER, (iii) any violation by the BROKER-
DEALER of the blue sky laws of any state in which the Certificates shall be
offered or sold; or (iv) any violation of the covenants, representations or
warranties of the BROKER-DEALER in this Agreement.
Section 7. Termination of Agreement
A. This Agreement may be terminated by either party, either with cause
or without cause. "Cause" shall be defined as a material breach of this
Agreement. Either party may exercise its right to terminate without Cause upon
sixty (60) days written notice to the other party. Either party may exercise
its right to terminate for Cause upon seven (7) days notice to the other party,
during which period the other party shall have the right to cure the default.
In the event of either such termination, all of the obligations of the parties
hereto which are required to be performed pursuant to this Agreement shall be
performed with respect to any sales which are made pursuant to this Agreement.
B. Upon any termination of this Agreement, the COMPANY's obligation to
the BROKER-DEALER shall cease, with the exception of the obligation of the
COMPANY to pay the BROKER-DEALER the amount of any compensation which is due the
BROKER-DEALER (as provided for in Section 4 of the Agreement) for sales made
prior to the date of termination. Not withstanding anything to the contrary
herein contained, Section 6 of this Agreement shall survive termination.
Section 8. Independent Contractors. It is understood and agreed that
the BROKER-DEALER's relationship with the COMPANY is that of an independent
contractor and nothing herein shall be construed as creating a relationship of
partners, joint venture, or employer and employees, between the BROKER-DEALER
and COMPANY or its Affiliates.
Section 9. Assignment. No rights or interest of the BROKER-DEALER
arising hereunder may be assigned by the BROKER-DEALER except with prior written
consent of the COMPANY; provided, however that the BROKER-DEALER shall have the
right to assign any payments which are due to it hereunder; provided further,
however, that in the event of any such assignments, the BROKER-DEALER continues
to be obligated to perform its obligations hereunder; and provided further,
however, that such assignment is permitted pursuant to applicable Federal and
state securities laws.
Section 10. Waiver. Except as otherwise specifically provided for
hereunder, no party shall be deemed to have waived any of its rights hereunder
or under any other agreement, instrument or paper signed by any of them with
respect to the subject matter hereof, unless such waiver is in writing and
signed by the party waiving said right. Except as otherwise specifically
provided for hereunder, no delay or omission by any party in exercising any
right with respect to the subject matter hereof shall operate as a waiver of
such right or any such other right. A waiver on any one occasion with respect
to the subject matter hereof shall not be construed as a bar to, or waiver on
any future occasion.
Section 11. Rights Cumulative. All rights and remedies with respect to
the subject matter hereof, whether evidenced hereby or other agreement,
instrument, or paper, will be cumulative, and may be exercised separately or
concurrently.
Section 12. Entire Agreement. The parties have not made any
representations, warranties, or covenants not set forth herein with respect to
hereof, and this Agreement constitutes the entire Agreement between them with
respect to the subject matter.
Section 13. Amendments. This Agreement may not be changed, modified,
terminated, or discharged orally, but only by a written agreement which is
signed by all of the parties to this Agreement.
Section 14. Further Instruments. The parties agree to execute any and
all such other and further instruments and documents, and to take any and all
such further actions reasonably required to effectuate this Agreement and the
intent and purpose hereof.
Section 15. Notice. All notices or other communications required or
permitted hereunder shall be in writing and shall be mailed by First Class,
Registered or Certified Mail, Return Receipt Requested, postage prepaid, or
acceptable overnight courier as follows:
To the COMPANY: Farmland Industries, Inc.
P.O. Box 7305
3315 North Oak Trafficway
Kansas City, MO 64116-0005
Attn: Director, Corporate Securities
To the BROKER-DEALER: American Heartland Investments Inc.
P. O. Box 1303
219 South Santa Fe
Salina, KS 67401
Attn: Robert Hamman, Pres.
Section 16. Missouri Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Missouri, without giving effect to
the principle of conflicts of law.
Section 17. Successors and Assigns. Subject to the restrictions which
are contained in Section 9 of this Agreement, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their heirs, executors,
administrators, personal representatives, successors or assigns.
Section 18. Conditions Precedent. The effectiveness of this contract
shall be subject to the following conditions precedent: (a) any clearance of
this contract that may be required by the NASD, and (b) the acceptance by the
SEC of the COMPANY'S change in its plan of distribution.
WITNESS WHEREOF, the parties to hand or caused these presents to be
signed officers, effective as of the 29th day of December 1993.
AMERICAN HEARTLAND FARMLAND INDUSTRIES, INC.
INVESTMENTS, INC.
By: ROBERT L. HAMMAN By: H. D. CLEBERG
Robert L. Hamman, H.D. Cleberg
Its President President & CEO
State of incorporation: Kansas
Address: 219 South Santa Fe
P.O. Box 1303
Salina, KS 67402
Phone: (913) 825-5050
Corporate Tax ID No.: 48-1069296
CRD Number:
19768
American Heartland Investments, Inc.
Farmland Industries, Inc.
Sales Agency Agreement
EXHIBIT A
COMPENSATION
(Section 4)
The COMPANY shall compensate the BROKER-DEALER, at the following rates, payable
upon sale and acceptance of such Certificates (to purchasers other than local
Cooperatives which are members of Farmland Industries):
(1) For each Subordinated Capital Investment Certificate or
Subordinated Monthly Income Capital Investment Certificate, a commission of
four percent (4%) of the purchase price of such Certificate, payable upon
sale and acceptance of the Certificate.
(2) For each Demand Loan Certificate, a commission of one-half of
one percent (1/2%) of the purchase price of the Demand Loan Certificate,
payable upon initial sale and acceptance of the Certificate; and a
commission of one quarter of one percent (1/4%) of the amount renewed of a
Demand Loan Certificate, payable upon any renewal not in excess of three
renewals of each such Demand Loan Certificate. (No commission shall be paid
on such renewals in excess of three.)
(3) For each exchange of a Subordinated Capital Investment
Certificate or Subordinated Monthly Income Capital Investment Certificate, a
commission of one and one-half of one percent (1-1/2%) of the amount
exchanged, payable upon issuance of the replacement Certificate.
(4) For each COMPANY call (or refinancing) of a Subordinated
Capital Investment Certificate or Subordinated Monthly Income Capital
Investment Certificate, a commission of two and one-half of one percent (2-
1/2%) of the amount exchanged, payable upon issuance of the replacement
Certificate..
This commission rate schedule shall remain in effect until sixty (60) days after
BROKER-DEALER'S receipt of a revised rate schedule adopted in COMPANY'S sole
discretion.
Exhibit effective date: Date of execution of Sales Agency Agreement.
EXHIBIT 5
Farmland Industries, Inc.
3315 North Oak Trafficway
Kansas City, Missouri 64116
Gentlemen:
I have reviewed your 5-year Subordinated Capital Investment Certificates and
your 10-year Subordinated Capital Investment Certificates each bearing the
Certificate Interest Rate; your 5-year Subordinated Monthly Income Capital
Investment Certificates and your 10-year Subordinated Monthly Income Capital
Investment Certificates each bearing the Certificate Interest Rate; and your
Demand Loan Certificates bearing the Certificate Interest Rate. It is my
opinion that all such Subordinated Capital Investment Certificates, Subordinated
Monthly Income Capital Investment Certificates, and Demand Loan Certificates,
and the issuance thereof, have been duly authorized; that said 5-year and
10-year Subordinated Capital Investment Certificates bearing the Certificate
Interest Rate are covered by those certain Trust Indentures dated November 8,
1984, between your Association and Commerce Bank of Kansas City, N.A.; that said
5-year Subordinated Monthly Income Capital Investment Certificates bearing
interest at the Certificate Interest Rate are covered by that certain Trust
Indenture dated November 11, 1985 between your Association and Commerce Bank of
Kansas City, N.A.; that said 10-year Subordinated Monthly Income Capital
Investment Certificates bearing interest at the Certificate Interest Rate are
covered by that certain Trust Indenture dated November 8, 1984, between your
Association and Commerce Bank of Kansas City, N.A.; and that said Demand Loan
Certificates are covered by that certain Trust Indenture dated November 20,
1981, between your Association and UMB Bank, N.A., as successor trustee to
Commerce Bank of Kansas City, N.A. That said Certificates, when issued and sold
in accordance with Registration Statement No.________, presently to be filed
with the Securities and Exchange Commission, Washington, D.C., and registered in
accordance with the laws of the States in which the Certificates are and will be
sold, will constitute valid and binding obligations according to their tenor and
effect.
Respectfully submitted,
Robert B. Terry
Vice President,
and General Counsel
December 12, 1994
EXHIBIT 12
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
FIVE YEARS ENDED AUGUST 31, 1994
<TABLE>
<CAPTION>
For the Year Ended August 31
1994 1993 1992 1991 1990
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Income (Loss) before
Extraordinary Item . . . . . . . . . . . . $ 73,876 $ (30,400) $ 61,046 $ 42,693 $ 48,580
Income Tax Expense (Benefit) . . . . . . . . $ 4,890 $ (6,433) $ 9,458 7,473 9,604
Minority Interest in Income of
Subsidiary that has Fixed Charges . . . . 333 865 -0- -0- -0-
Minority Interest in Loss of
Subsidiary . . . . . . . . . . . . . . . . (4,855) (37) -0- -0- -0-
Equity Interest in Loss (Earnings) of
Less-than-fifty Percent Owned
Investees . . . . . . . . . . . . . . . . 603 1,007 2,341 856 113
Total Fixed Charges
(excluding interest capitalized) . . . . . 64,383 55,268 47,719 54,443 47,000
Earnings . . . . . . . . . . . . . . . . . . $ 139,230 $ 20,270 $ 120,564 $ 105,465 $ 105,297
Fixed Charges:
Interest (including amounts
capitalized) . . . . . . . . . . . . . $ 51,842 $ 43,873 $ 34,426 $ 42,481 $ 37,226
Estimated Interest Component
of Rentals . . . . . . . . . . . . . . 12,898 13,006 13,293 12,290 11,652
Total Fixed Charges . . . . . . . . . . $ 64,740 $ 56,879 $ 47,719 $ 54,771 $ 48,878
Ratio of Earnings to Fixed Charges . . . . . 2.2 0.4 2.5 1.9 2.2
Earnings Inadequate to Cover
Fixed Charges . . . . . . . . . . . . . . $ 36,609
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Farmland Foods, Inc., a 99%-owned subsidiary, was incorporated under the laws of
the State of Kansas. Farmland Foods, Inc. has been included in the consolidated
financial statements filed in this registration.
Farmland Insurance Agency, a wholly-owned subsidiary, was incorporated under the
laws of the State of Missouri. Farmland Insurance Agency has been included in
the consolidated financial statements filed in this registration.
Farmers Chemical Company, a wholly-owned subsidiary, was incorporated under the
laws of the State of Kansas. Farmers Chemical Company has been included in the
consolidated financial statements filed in this registration.
Farmland Securities Company, a wholly-owned subsidiary, was incorporated under
the laws of the State of Delaware. Farmland Securities Company has been
included in the consolidated financial statements filed in this registration.
Cooperative Service Company, a wholly-owned subsidiary, was incorporated under
the laws of the State of Nebraska. Cooperative Service Company has been
included in the consolidated financial statements filed in this registration.
Double Circle Farm Supply Company, a wholly-owned subsidiary, was incorporated
under the laws of the State of Nevada. Double Circle Farm Supply Company has
been included in the consolidated financial statements filed in this
registration.
National Beef Packing Company, L.P., a 58%-owned subsidiary, was formed under
the laws of the State of Delaware. National Beef Packing Company has been
included in the consolidated financial statements filed in this registration.
NBPCo, L.L.C., a wholly-owned subsidiary, was formed under the laws of the State
of Kansas. NBPCo has been included in the consolidated financial statements
filed in this registration.
Farmland Financial Services Company, a wholly-owned subsidiary, was incorporated
under the laws of the State of Kansas. Farmland Financial Services Company has
been included in the consolidated financial statements filed in this
registration.
Farmland Transportation, Inc., a wholly-owned subsidiary, was incorporated under
the laws of the State of Missouri. Farmland Transportation, Inc. has been
included in the consolidated financial statements filed in this registration.
Environmental and Safety Services, Inc., a wholly-owned subsidiary, was
incorporated under the laws of the State of Missouri. Environmental and Safety
Services, Inc. has been filed in the consolidated financial statements included
in this registration.
Penterra, Inc., a 81%-owned subsidiary, was incorporated under the laws of the
State of Kansas. Penterra, Inc. has been included in the consolidated financial
statements filed in this registration.
Farmland Industries, Ltd., a wholly-owned subsidiary, was incorporated under the
laws of the United States Virgin Islands. Farmland Industries, Ltd. has been
included in the consolidated financial statements filed in this registration.
Heartland Data Services, Inc., a wholly-owned subsidiary, was incorporated under
the laws of the State of Kansas. Heartland Data Services, Inc. has been
included in the consolidated financial statements filed in this registration.
Yuma Feeder Pig, Inc., a 72%-owned subsidiary, was incorporated under the laws
of the state of Colorado. Yuma Feeder Pig, Inc. has been included in the
consolidated financial statements filed in this registration.
Equity Country, Inc., a wholly-owned subsidiary, was incorporated under the laws
of the State of Delaware. Equity Country, Inc. has been included in the
consolidated financial statements filed in this registration.
Equity Export Oil and Gas Company, Inc., a wholly-owned subsidiary, was
incorporated under the laws of the State of Oklahoma. Equity Export Oil and Gas
Company, Inc. has been included in the consolidated financial statements filed
in this registration.
Ceres Realty Corporation, a wholly-owned subsidiary, was incorporated under the
laws of the State of Missouri. Ceres Realty Corporation has been included in
the consolidated financial statements filed in this registration.
Heartland Wheat Growers, L.P., a 79%-owned subsidiary, was formed under the laws
of the State of Kansas. Heartland Wheat Growers has been included in the
consolidated financial statements filed in this registration.
Heartland Wheat Growers, Inc., a 79%-owned subsidiary, was incorporated under
the laws of the State of Kansas. Heartland Wheat Growers has been included in
the consolidated financial statements filed in this registration.
Farmland Industrias S.A. de C.V., a wholly-owned subsidiary, was formed under
the laws of Mexico. Farmland Industrias has been included in the consolidated
financial statements filed in this registration.
National Carriers, Inc., a 79%-owned subsidiary, was incorporated under the laws
of the State of Kansas. National Carriers has been included in the consolidated
financial statements filed in this registration.
Supreme Land, Inc., a wholly-owned subsidiary, was incorporated under the laws
of the State of Kansas. Supreme Land has been included in the consolidated
financial statements filed in this registration.
Tradigrain, Inc., a wholly-owned subsidiary, was incorporated under the laws of
the State of Tennessee. Tradigrain, Inc. has been included in the consolidated
financial statements filed in this registration.
Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
Switzerland. Tradigrain S.A. of Switzerland has been included in the
consolidated financial statements filed in this registration.
Tradigrain Shipping S.A., a wholly-owned subsidiary, was formed under the laws
of Switzerland. Tradigrain Shipping S.A. has been included in the consolidated
financial statements filed in this registration.
Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
France. Tradigrain S.A. of France has been included in the consolidated
financial statements filed in this registration.
Tradigrain GmbH, a wholly-owned subsidiary, was formed under the laws of
Germany. Tradigrain GmbH has been included in the consolidated financial
statements filed in this registration.
Tradigrain LTD., a wholly-owned subsidiary, was formed under the laws of Great
Britain. Tradigrain LTD. has been included in the consolidated financial
statements filed in this registration.
Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
Argentina. Tradigrain S.A. of Argentina has been included in the consolidated
financial statements filed in this registration.
EXHIBIT 23.A
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
The Board of Directors
Farmland Industries, Inc.:
The audits referred to in our report dated October 21, 1994 included the
related financial statement schedules as of August 31, 1994, and for each of the
years in the three-year period ended August 31, 1994, included in the
Registration Statement in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits. In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
Our report dated October 21, 1994 contains an explanatory paragraph
concerning income tax adjustments proposed by the Internal Revenue Service on
the gain on sale of and certain distributions by Terra Resources, Inc.
We consent to the use of our reports included herein and to the references
to our firm under the headings "Selected Consolidated Financial Data", and
"Experts" in the Prospectus.
KPMG PEAT MARWICK LLP
Kansas City, Missouri
December 12, 1994
EXHIBIT 23.B
CONSENT OF LEGAL COUNSEL
Farmland Industries, Inc.:
The undersigned consents to the use herein of his opinion, dated December
12, 1994, relating to the legality of Subordinated Capital Investment
Certificates, Subordinated Monthly Income Capital Investment Certificates, and
Demand Loan Certificates being registered, and of all other statements and
opinions attributed to him appearing in this Registration Statement No. .
Robert B. Terry
Vice President,
and General Counsel
Kansas City, Missouri
December 12, 1994
EXHIBIT 23.C
CONSENT OF SPECIAL TAX COUNSEL
Farmland Industries, Inc.:
We consent to the references to our firm in the Prospectus filed as part of this
Registration Statement.
BRYAN CAVE
December 12, 1994
EXHIBIT 23.D
CONSENT OF QUALIFIED INDEPENDENT UNDERWRITER
Farmland Industries, Inc.:
We consent to the references to our firm under the caption "Qualified
Independent Underwriter" in the Prospectus.
James H. Glen, Jr.
INTERSTATE/JOHNSON LANE CORPORATION
December 12, 1994
EXHIBIT 25.A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
UMB BANK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
44-0201230
(I.R.S. Employer
Identification No.)
928 Grand Avenue, Kansas City, Missouri 64106
(Address of principal executive offices) (Zip Code)
FARMLAND INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
KANSAS 42-0209330
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification No.)
3315 North Oak Trafficway
Post Office Box 7305
Kansas City, Missouri 64116
(Address of principal executive offices) (Zip Code)
DEMAND LOAN CERTIFICATES
Dated: November 20, 1981
Title of the indenture securities)
Item 1.General Information
(a) Name and address of each examining or supervising authority to
which the Trustee is subject is as follows:
The Comptroller of the Currency
Mid-Western District
2345 Grand Avenue, Suite 700
Kansas City, Missouri 64108
Federal Reserve Bank of Kansas City
Federal Reserve P.O. Station
Kansas City, Missouri 64198
Supervising Examiner
Federal Deposit Insurance Corporation
720 Olive Street, Suite 2909
St. Louis, Missouri 63101
(b) The Trustee is authorized to exercise corporate trust powers.
Item 2.Affiliations with obligor and underwriters.
The Obligor is not affiliated with the Trustee.
No person, who is not an affiliate of the Obligor, has served as an
underwriter for the Obligor.
Item 3.Voting securities of the Trustee.
The following information as to each class of voting securities of
the Trustee is furnished as of November 29, 1994:
Column A Column B
Title of Amount
Class Outstanding
Common 660,000
Item 4.Trusteeships under other indentures.
The Trustee is not a trustee under another indenture under which
any other securities, or certificates of interest or participation
in other securities, of the Obligor are outstanding.
Item 5.Interlocking directorates and similar relationships with the
obligor or underwriters.
Neither the Trustee nor any of its directors or officers is a
director, officer, partner, employee, appointee, or represen-
tative of the Obligor.
No person, who is not an affiliate of the Obligor, has served as an
underwriter for the Obligor.
Item 6.Voting securities of the trustee owned by the obligor or its
officials.
No voting securities of the Trustee are owned beneficially by the
Obligor or its directors and executive officers as of
November 29, 1994.
Item 7.Voting securities of the trustee owned by underwriters or their
officials.
Not applicable
Item 8.Securities of the obligor owned or held by the trustee.
No securities of Obligor are owned beneficially or held as collateral
security for obligations in default by the Trustee as of November 29,
1994.
Item 9.Securities of the underwriters owned or held by the trustee.
Not applicable
Item 10.Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor.
The Trustee neither owns beneficially nor holds as collateral
security for obligations in default any voting securities of a person
who, to the knowledge of the Trustee, (1) owns 10 percent or more of
the voting securities of the Obligor, or (2) is an affiliate, other
than a subsidiary of Obligor, as of
November 29, 1994.
Item 11.Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
The Trustee neither owns beneficially nor holds as collateral
security for obligations in default any securities of a person who,
to the knowledge of the Trustee, owns 50 percent or more of the
voting shares of the Obligor as of November 29, 1994.
Item 12.Indebtedness of the Obligor to the Trustee.
None
Item 13.Defaults of the Obligor.
There has been no default with respect to the securities under this
Indenture.
Item 14.Affilitiations with the Underwriters.
Not Applicable
Item 16.List of exhibits.
Item 15.Foreign Trustee.
Not Applicable
Listed below are all exhibits filed as a part of this statement of
eligibility and qualification.
Exhibit No. Exhibit
1. Articles of Association of the Trustee, as now in effect.
2. Certificate of Authority from the Comptroller of the
Currency evidencing a change of the corporate title of
the Association. Incorporated by Reference - In the
Statement of Eligibility and Qualification of United
Missouri Bank, National Association, as Trustee, Form T-1
#22-21530, Filed on FORM SE dated December 19, 1991.
3. Certificate from the Comptroller of the Currency
evidencing authority to exercise corporate trust powers
and a letter evidencing a change of the corporate title
of the Association. Incorporated by Reference - In the
Statement of Eligibility and Qualification of United
Missouri Bank, National Association, as Trustee, Form T-1
#22-21530, Filed on FORM SE dated December 19, 1991.
4. Bylaws, as amended, of the Trustee.
5. N/A
6. Consent of the Trustee required by Section 321 (b) of the
Act.
7. Report of Condition of the Trustee as of
September 30, 1994.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, UMB Bank, National Association, a national bank organized and
existing under the laws of the United States of America, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the city of Kansas City, and State of
Missouri, on the 5th day of December 1994.
UMB BANK, NATIONAL ASSOCIATION
BY: Frank C. Bramwell, Vice President
Frank C. Bramwell, Vice President
EXHIBIT 1
UMB BANK, NATIONAL ASSOCIATION
RESTATED ARTICLES OF ASSOCIATION
FIRST: The title of this Association shall be "UMB Bank, National
Association" (amended as of October 1, 1994).
SECOND: The main office shall be in the City of Kansas City, County
of Jackson, State of Missouri. The general business of this Association,
and its operations of discount and deposit, shall be conducted at its
main office.
THIRD: The Board of Directors of this Association shall consist of
not less than five nor more than twenty-five shareholders, the exact
number of Directors within such minimum and maximum limits to be fixed
and determined from time to time by resolution of a majority of the full
Board of Directors or by resolution of the shareholders at any annual or
special meeting thereof. Unless otherwise provided by the laws of the
Untied States, any vacancy in the Board of Directors for any reason,
including an increase in the number thereof, may be filled by action of
the Board of Directors.
FOURTH: The regular annual meeting of the shareholders for the
election of directors and the transaction of whatever other business
which may be brought before said meeting shall be held at the main
office, or at such other place as the Board of Directors may designate,
on the day of each year specified therefor in the By-Laws of the
Association, but if no election be held on that day it may be held on any
subsequent day according to the provisions of law.
FIFTH: The amount of authorized capital stock of this Association
shall be Thirteen Million Two Hundred Fifty Thousand Dollars
($16,500,000), divided into 660,000 shares of common stock of the par
value of Twenty-Five Dollars ($25) each; but said capital stock may be
increased or decreased from time to time in accordance with the
provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares
thereof, each shareholder shall be entitled to subscribe for such
additional shares in proportion to the number of shares of said capital
stock owned by him at the time the increase is authorized by the
shareholders, unless another time subsequent to the date of the
shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized. The Board of
Directors shall have the power to prescribe a reasonable period of time
within which the pre-emptive rights to subscribe to the new shares of
capital stock must be exercised.
If the capital stock is increased by a stock dividend, each
shareholder shall be entitled to his proportion of the amount of such
increase in accordance with the number of shares of capital stock owned
by him at the time the increase is authorized by the shareholders, unless
another time subsequent to the date of the shareholders' meeting is
specified in a resolution adopted by the shareholders at the time the
increase is authorized.
SIXTH: The Board of Directors shall appoint one of its members to be
President of this Association. The Board of Directors may appoint one of
its members to be Chairman of the Board, who shall perform such duties as
the Board of Directors may designate.
The Board of Directors shall have the power to appoint one or more Vice
Presidents and to appoint a Cashier and such other officers and employees
as may be required to transact the business of the Association.
The Board of Directors shall have the power to define the duties of
the officers and employees of the Association; to fix the salaries to be
paid to them; to dismiss them; to require bonds from them and to fix the
penalty thereof; to regulate the manner in which any increase in the
capital of the Association shall be made; to manage and administer the
business and affairs of the Association; to make all By-Laws that it may
be lawful for them to make; and generally to do and perform all acts that
it may be legal for the Board of Directors to do and perform.
The Board of Directors, without the approval of the shareholders, but
subject to the approval of the Comptroller of the Currency, shall have
the power to change the location of the main office of the Association to
any other place within the limits of Kansas City, Missouri and to
establish or change the location of any branch or branches to any other
location permitted under applicable law.
SEVENTH: The corporate existence of this Association shall continue
until terminated in accordance with the laws of the United States.
EIGHTH: The Board of Directors of this Association, or any three or
more shareholders owning, in the aggregate, not less than ten percentum
(10%) of the stock of this Association, may call a special meeting of the
shareholders at any time; provided, however, that unless otherwise
provided by law, not less than ten (10) days prior to the date fixed for
any such meeting, a notice of the time, place and purpose of the meeting
shall be given by first class mail, postage prepaid, to all shareholders
of record at their respective addresses as shown upon the books of the
Association.
Subject to the provisions of the laws of the United States, these
Articles of Association may be amended at any meeting of the
shareholders, for which adequate notice has been given, by the
affirmative vote of the owners of two-thirds of the stock of this
Association, voting in person or by proxy.
NINTH: Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the Association for reasonable expenses
actually incurred in connection with any action, suit, or proceeding,
civil or criminal, to which he or they shall be made a party by reason of
his being or having been a director, officer, or employee of the
Association or any firm, corporation, or organization which he served in
any capacity at the request of the Association; provided, however, that
no person shall be so indemnified or reimbursed in relation to any matter
in such action, suit, or proceeding as to which he shall finally be
adjudged to have been guilty of or liable for gross negligence or willful
misconduct or criminal acts in the performance of his duties to the
Association; and, provided further, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit,
or proceeding which has been made the subject of a compromise settlement
except with the approval of a court of competent jurisdiction, or the
holders of record of a majority of the outstanding shares of the
Association, or the Board of Directors, acting by vote of directors not
parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of the directors.
The foregoing right of indemnification or reimbursement shall not be
exclusive of other rights to which such person, his heirs, executors, or
administrators, may be entitled as a matter of law.
EXHIBIT 2
Certificate, dated January 10th, 1934, of the Office of Comptroller of
the Currency authorizing the City National Bank and Trust Company of Kansas
City to Commence the business of Banking.
C E R T I F I C A T E
For and on behalf of UMB Bank, National Association, a national banking
association organized under the laws of the United States of America (formerly
named The City National Bank and Trust Company of Kansas City and the United
Missouri Bank of Kansas City, National Association and United Missouri Bank,
National Association), the undersigned, R. William Bloemker, Assistant
Secretary of said Association, hereby certifies that attached hereto are the
following:
1) A true and correct copy of the certificate of the
Comptroller of the Currency, dated December 19,
1972, evidencing a change in corporate title from
The City National Bank and Trust Company of Kansas
City to United Missouri Bank of Kansas City,
National Association;
2) A true and correct copy of the letter of
authorization from the Comptroller of the Currency,
dated April 9, 1991, authorizing the Association to
adopt the name United Missouri Bank, National
Association; and
3) Certified Resolution evidencing recordation of
change of the name of the Association to UMB Bank,
National Association.
Certified under the corporate seal of said Association this 31st
day of October, 1994.
R. WILLIAM BOEMKER
/s/ R. William Bloemker
Assistant Secretary
Certificate, dated December 19, 1972, of the Comptroller of the
Currency evidencing change in corporate title from the City National
Bank and Trust Company of Kansas City to United Missouri Bank of Kansas
City, National Association.
Letter, dated April 9, 1991, from the Comptroller of the currency,
authorizing the Association to adopt the name United Missouri Bank,
National Association.
Comptroller of the Currency
Administrator of National Banks
Midwestern District Office
2345 Grand Blvd., Suite 700
Kansas City, Missouri 64108-2625
October 3, 1994
Mr. David D. Miller
Executive Vice President
UMB Bank, National Association
P.O. Box 419226
Kansas City, Missouri 64141-6226
Dear Mr. Miller:
The Office of the Comptroller of the Currency (OCC) has received your letter
concerning the title change and the appropriate amendment to the Articles of
Association. The OCC has recorded that as of October 1, 1994, the title of
United Missouri Bank, National Association, Charter No. 13936, was changed
to "UMB Bank, National Association".
As a result of Garn-St Germain Depository Institutions Act of 1982, the OCC
is no longer responsible for the approval of national bank name changes nor
does it maintain official records on the use of alternate titles. The use of
other titles or the retention of the rights to any previously used title is
the responsibility of the bank's board of directors. Legal counsel should be
consulted to determine whether or not the new title, or any previously used
title, could be challenged by competing institutions under the provisions of
federal or state law.
Sincerely,
JUDITH A. BOLLIG
Judith A. Bollig
Analysis Specialist
CERTIFIED RESOLUTION
I hereby certify that the following is an excerpt from a letter dated
October 3, 1994 from the Office of the Comptroller of the Currency
(OCC) confirming the Bank's change of name:
The OCC has recorded that as of October 1, 1994, the title of
United Missouri Bank, National Association, Charter No. 13936, was
changed to "UMB Bank, National Association."
R. WILLIAM BLOEMKER
/s/ R. William Bloemker
Assistant Secretary
[SEAL]
EXHIBIT 3
C E R T I F I C A T E
For and on behalf of UMB Bank, National Association, a national
banking association under the laws of the United States of America, the
undersigned, R. William Bloemker, Assistant Secretary of said
Association, hereby certifies that the attached document is a true and
correct copy of the certificate issued by the Comptroller of the
Currency of the United States evidencing its authority to exercise
fiduciary powers under the statutes of the United States.
Certified under the corporate seal of said Association this 5th day
of October, 1994.
R. WILLIAM BLOEMKER
/s/ R. William Bloemker
Assistant Secretary
Certificate, dated December 31, 1972, of the Comptroller of the
Currency evidencing the authority of the Association to exercise
fiduciary powers under the statutes of the United States.
EXHIBIT 4
TO WHOM IT MAY CONCERN
The attached ByLaws are the ByLaws for the UMB Bank, National
Association and are current as of this date.
R. WILLIAM BLOEMKER
/s/ R. William Bloemker
Assistant Secretary
October 31, 1994
[SEAL]
UMB BANK, NATIONAL ASSOCIATION
BY-LAWS
ARTICLE I
Meetings of Shareholders
Section 1.1 - Where Held. All meetings of shareholders of this
Association shall be held at its main banking house in Kansas City,
Jackson County, Missouri, or at such other place as the Board of
Directors may from time to time designate.
Section 1.2 - Annual Meeting. The annual meeting of shareholders
shall be held at 11 o'clock in the forenoon, or at such other time as
shall be stated in the notice thereof, on the third Wednesday of
January in each year or, if that day be a legal holiday, on the next
succeeding banking day, for the purpose of electing a Board of
Directors and transacting such other business as may properly come
before the meeting.
Section 1.3 - Special Meetings. Except as otherwise provided by law,
special meetings of shareholders may be called for any purpose, at any
time, by the Board of Directors or by any three or more shareholders
owning, in the aggregate, not less than ten percent (10%) of the
outstanding stock in the Association.
Section 1.4 - Notice of Meetings. Written notice of the time, place,
and purpose of any meeting of shareholders shall be given to each
shareholder (a) by delivering a copy thereof in person to the
shareholder, or (b) by depositing a copy thereof in the U.S. mails,
postage prepaid, addressed to the shareholder at his address appearing
on the books of the Association, in either case at least ten (10) days
prior to the date fixed for the meeting.
Section 1.5 - Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum for the
transaction of business at any meeting or shareholders, unless
otherwise provided by law. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting,
unless otherwise provided by law or by the Articles of Association.
Section 1.6 - Adjournment. Any meeting of shareholders may, by
majority vote of the shares represented at such meeting, in person or
by proxy, though less than a quorum, be adjourned from day to day or
from time to time, not exceeding, in the case of elections of
directors, sixty (60) days from such adjournment, without further
notice, until a quorum shall attend or the business thereof shall be
completed. At any such adjourned meeting, any business may be
transacted which might have been transacted at the meeting as
originally called.
Section 1.7 - Voting. Each shareholder shall be entitled to one (1)
vote on each share of stock held, except that in the election of
directors each shareholder shall have the right to cast as many votes,
in the aggregate, as shall equal the number of shares owned by him,
multiplied by the number of directors to be elected, and said votes may
be cast for one director or distributed among two (2) or more
candidates. Voting may be in person or by proxy, but no officer or
employee of this Association shall act as proxy. Authority to vote by
proxy shall be by written instrument, dated and filed with the records
of the meeting, and shall be valid only for one meeting, to be
specified therein, and any adjournments of such meeting.
ARTICLE II
Directors
Section 2.1 - Number and Qualifications. The Board of Directors
(hereinafter sometimes referred to as the "Board") shall consist of not
less than five (5) nor more than twenty-five (25) shareholders, the
exact number, within such limits, to be fixed and determined from time
to time by resolution of a majority of the full Board of Directors or
by resolution of the shareholders at any meeting thereof; provided,
however, that a majority of the full Board of Directors shall not
increase the number of directors to a number which: (a) exceeds by more
than two (2) the number of directors last elected by shareholders where
such number was fifteen (15) or less; or (b) exceeds by more than four
(4) the number of directors last elected by shareholders where such
number was sixteen (16) or more. No person who has attained the age of
seventy (70) shall be eligible for election to the Board of Directors
unless such person is actively engaged in business at the time of his
election, but any person not so disqualified at the time of his
election as a director shall be entitled to serve until the end of his
term. All directors shall hold office for one (1) year and until their
successors are elected and qualified.
Section 2.2 - Advisory Directors. The Board of Directors may appoint
Advisory Directors, chosen from former directors of the Association or
such other persons as the Board shall select. The Advisory Directors
shall meet with the Board at all regular and special meetings of the
Board and may participate in such meetings but shall have no vote.
They shall perform such other advisory functions and shall render such
services as may from time to time be directed by the Board.
Section 2.3 - Powers. The Board shall manage and administer the
business and affairs of the Association. Except as expressly limited
by law, all corporate powers of the Association shall be vested in and
may be exercised by said Board. It may not delegate responsibility for
its duties to others, but may assign the authority and responsibility
for various functions to such directors, committees and officers or
other employees as it shall see fit.
Section 2.4 - Vacancies. In case of vacancy occurring on the Board
through death, resignation, disqualification, disability or any other
cause, such vacancy may be filled at any regular or special meeting of
the Board by vote of a majority of the surviving or remaining directors
then in office. Any director elected to fill a vacancy shall hold
office for the unexpired term of the director whose place was vacated
and until the election and qualification of his successor.
Section 2.5 - Organization Meeting. Following the annual meeting of
shareholders, the Corporate Secretary shall notify the directors elect
of their election and of the time and place of the next regular meeting
of the Board, at which the new Board will be organized and the members
of the Board will take the oath required by law, after which the Board
will appoint committees and the executive officers of the Association,
and transact such other business as may properly come before the
meeting; provided, however, that if the organization meeting of the
Board shall be held immediately following the annual meeting of
shareholders, no notice thereof shall be required except an
announcement thereof at the meeting of directors.
Section 2.6 - Regular Meetings. The regular meetings of the Board of
Directors shall be held, without notice except as provided for the
organization meeting, on the third Wednesday of each month at the main
banking house in Kansas City, Jackson County, Missouri. When any
regular meeting of the Board falls upon a holiday, the meeting shall be
held on the next banking day, unless the Board shall designate some
other day. A regular monthly meeting of the Board may, by action of
the Board at its preceding meeting, be postponed to a later day in the
same month.
Section 2.7 - Special Meetings. Special meetings of the Board may be
called by the Corporate Secretary on direction of the President or of
the Chairman of the Board, or at the request of three (3) or more
directors. Each member of the Board shall be given notice, by
telegram, letter, or in person, stating the time, place and purpose of
such meeting.
Section 2.8 - Quorum. Except when otherwise provided by law, a
majority of the directors shall constitute a quorum for the transaction
of business at any meeting, but a lesser number may adjourn any
meeting, from time to time, and the meeting may be held, as adjourned,
without further notice.
Section 2.9 - Voting. A majority of the directors present and voting
at any meeting of the Board shall decide each matter considered. A
director may not vote by proxy.
Section 2.10 - Compensation of Directors. The compensation to be paid
the directors of the Association for their services shall be determined
from time to time by the Board.
ARTICLE III
Committees Appointed by the Board
Section 3.1 - Standing Committees. The standing committees of this
Association shall be the Management Committee, Executive Committee, the
Officers' Salary Committee, the Discount Committee, the Bond Investment
Committee, the Trust Policy Committee, the Bank Examining Committee and
the Trust Auditing Committee. The members of the standing committees
shall be appointed annually by the Board of Directors at its
organization meeting, or, on notice, at any subsequent meeting of the
Board, to serve until their respective successors shall have been
appointed. The President and the Chairman of the Board shall be, ex
officio, members of all standing committees except the Bank Examining
Committee and the Trust Auditing Committee. Each standing committee
shall keep minutes of its meetings, showing the action taken on all
matters considered. A report of all action so taken shall be made to
the Board, and a copy of such minutes shall be available for
examination by members of the Board.
Section 3.2 - Management Committee. The Management Committee shall
consist of such executive officers of the Association as shall be
designated by the Board. One of the members of the Committee shall be
designated by the Board as Chairman. The Committee may adopt policies
(not inconsistent with policies and delegations of authority prescribed
by these By-Laws or by the Board) with respect to the executive and
administrative functions of the Association, and in general, it shall
coordinate the performance of such functions in and among
the various departments of the Association, assisting and advising the
executive officers or department heads upon matters referred to it by
such officers or department heads. The Committee shall make reports
and recommendations to the Board upon such policies or other matters as
it deems advisable or as may be referred to it by the Board, and shall
have such other powers and duties as may be delegated or assigned to it
by the Board from time to time. The secretary of the Committee may be
designated by the Board, or, in default thereof, by the Committee, and
may but need not be a member thereof.
Section 3.3 - Executive Committee. The Executive Committee shall
consist of such executive officers of the Association as shall be
designated by the Board. One of the members of the Committee shall be
designated by the Board as Chairman. The Committee shall carry out
such responsibilities and duties as the Management Committee shall
delegate to it, from time to time.
Section 3.4 - Officers' Salary Committee. The Officers' Salary
Committee shall consist of such directors and officers of the
Association as may be designated by the Board. It shall study and
consider the compensation to be paid to officers of the Association and
shall make recommendations to the Board with respect thereto and with
respect to such other matters as may be referred to it by the Board.
Section 3.5 - Discount Committee. The Discount Committee shall
consist of such directors and officers as shall be designated by the
Board of Directors. It shall have the power to discount and purchase
bills, notes and other evidences of debt; to buy and sell bills of
exchange; to examine and approve loans and discounts; and to exercise
authority regarding loans and discounts held by the Association. At
each regular meeting of the Board, the Board shall approve or
disapprove the report filed with it by the Discount Committee and
record its actions in the minutes of its meeting. The powers and
authority conferred upon the Discount Committee by this Section may,
with the approval of the Board of Directors, be assigned or delegated
by it, to officers of the Association, subject to such limits and
controls as the Committee may deem advisable.
Section 3.6 - Bond Investment Committee. The Bond Investment Committee
shall consist of such directors and officers as shall be designated by
the Board of Directors. It shall have power to buy and sell bonds, to
examine and approve the purchase and sale of bonds, and to exercise
authority regarding bonds held by the Association. At each regular
meeting of the Board, the Board shall approve or disapprove the report
iled with it by the Bond Investment Committee and record its action in
the minutes of its meeting.
Section 3.7 - Trust Policy Committee. The Trust Policy Committee shall
consist of such directors and officers of the Association as shall be
designated by the Board of Directors. Such committee shall have and
exercise such of the Bank's fiduciary powers as may be assigned to it
by the Board, with power to further assign, subject to its control, the
exercise of such powers to other committees, officers and employees.
The action of the Trust Policy Committee shall, at all times, be
subject to control by the Board.
Section 3.8 - Bank Examining Committee. The Bank Examining Committee
shall consist of such directors of the Association as shall be
designated by the Board, none of whom shall be an active officer of the
Association. It shall make suitable examinations at least once during
each period of twelve (12) months of the affairs of the Association or cause
a suitable audit to be made by auditors responsible only to the Board of
Directors. The result of such examinations shall be reported in writing, to
the Board at the next regular meeting thereafter and shall state whether the
Association is in a sound and solvent condition, whether adequate
internal controls and procedures are being maintained, and shall
recommend to the Board such changes as the Committee shall deem
advisable. The Bank Examining Committee, with the approval of the
Board of Directors, may employ a qualified firm of certified public
accountants to make an examination and audit of the Association. If
such a procedure is followed, the annual examination of directors, will
be deemed sufficient to comply with the requirements of this section of
the By-Laws.
Section 3.9 - Trust Auditing Committee. The Trust Auditing Committee
shall consist of such directors of the Association as shall be
designated by the Board, none of whom shall be an active officer of the
Association. At least once during each calendar year, and within
fifteen (15) months of the last such audit, the Trust Auditing
Committee shall make suitable audits of the Trust Departments or cause
suitable audit to be made by auditors responsible only to the Board of
Directors, and at such time shall ascertain whether the Departments
have been administered in accordance with law, the Regulations of the
Comptroller and sound fiduciary practices. As an alternative, in lieu
of such periodic audits, the Board may elect to adopt an adequate
continuous audit system.
Section 3.10 - Other Committees. The Board may appoint, from time to
time, from its own members or from officers of the Association, or
both, other committees of one or more persons for such purposes and
with such powers as the Board may determine.
Section 3.11 - Compensation of Committee Members. The Board shall
determine the compensation to be paid to each member of any committee
appointed by it for services on such committee, but no such
compensation shall be paid to any committee member who shall at the
time be receiving a salary from the Association as an officer thereof.
ARTICLE IV
Officers and Employees
Section 4.1 - Chairman of the Board. The Board of Directors shall
appoint one of its members (who may, but need not, be President of the
Association) as Chairman of the Board. He shall preside at all meeting
of the Board of Directors and shall have general executive powers and
such further powers and duties as from time to time may be conferred
upon, or assigned to, him by the Board of Directors. He shall be, ex
officio, a member of all standing committees except the Bank Examining
Committee and the Trust Auditing Committee.
Section 4.2 - President. The Board of Directors shall appoint one of
its members to be the President of this Association. The President
shall be the chief executive officer of the Association, except as the
Board of Directors may otherwise provide, and shall have and may
exercise any and all other powers and duties pertaining to such office.
He shall also have and may exercise such further powers and duties as
from time to time may be conferred upon, or assigned to, him by the
Board of Directors. He shall be, ex officio, a member of all standing
committees except the Bank Examining Committee and the Trust Auditing
Committee.
Section 4.3 - Chairman of the Executive Committee. The Board of
Directors may appoint a Chairman of the Executive Committee, who shall
have general executive powers and shall have and may exercise such
further powers and duties as from time to time may be conferred upon,
or assigned to, him by the Board of Directors.
Section 4.4 - Vice Presidents. The Board of Directors shall appoint
one or more Vice Presidents. Each Vice President shall have such
powers and duties as may be assigned to him by the Board and may be
given such descriptive or functional titles as the Board may designate.
Section 4.5 - Trust Officers. The Board of Directors shall appoint one
or more Trust Officers. Each Trust Officer shall have such powers and
duties as may be assigned to him by the Board of Directors in
accordance with the provisions of Article V. The Trust Officers may be
given such descriptive or functional titles as the Board may designate.
Section 4.6 - Corporate Secretary. The Board of Directors shall
appoint a Corporate Secretary. The Corporate Secretary shall be
responsible for the minutes book of the Association, in which he shall
maintain and preserve the organization papers of the Association, the
Articles of Association, the By-Laws, minutes of regular and special
meetings of the shareholders and of the Board of Directors, and reports
by officers and committees of the Association to the shareholders and
to the Board of Directors. He shall attend all meetings of the
shareholders and of the Board of Directors and shall act as the clerk
of such meetings and shall prepare and sign the minutes of such
meetings. He shall have custody of the corporate seal of the
Association and of the stock transfer books, except as given to the
Comptroller's Department or the Corporate Trust Department to act as
transfer agent and registrar of the Association's capital stock, and of
such other documents and records as the Board of Directors shall
entrust to him. The Secretary shall give such notice of meetings of
the shareholders and of the Board of Directors as is required by law,
the Articles of the Association and the By-Laws. In addition, he shall
perform such other duties as may be assigned to him from time to time
by the Board of Directors. The Assistant Secretaries shall render the
Corporate Secretary such assistance as he shall require in the
performance of his office. During his absence or inability to act, the
Assistant Secretaries shall be vested with the powers and perform the
duties of the Corporate Secretary.
Section 4.7 - Cashier. The Board of Directors may appoint a Cashier.
He shall have such powers and shall perform such duties as may be
assigned to him by resolution of the Board of Directors.
Section 4.8 - Comptroller. The Board of Directors shall appoint a
Comptroller. The Comptroller shall institute and maintain the
accounting policies and practices established by the Board of
Directors. He shall maintain, or cause to be maintained, adequate
records of all transactions of the Association. He shall be
responsible for the preparation of reports and returns to taxing and
regulatory authorities, and at meetings of the Board of Directors shall
furnish true and correct statements of condition and statements of
operations of the Association and such further information and data,
and analyses thereof, as the Board of Directors may require. He shall
have custody of the Association's insurance policies. In addition, the
Comptroller shall perform such other duties as may be assigned to him,
from time to time by the Board of Directors. The Assistant
Comptroller(s) shall render the Comptroller such assistance as he shall
require in the performance of the duties of his office and, during his
absence or inability to act, the Assistant Comptroller(s), in the order
designated by the Board of Directors, shall be vested with the powers
and perform the duties of the Comptroller.
Section 4.9 - Auditor. The Board of Directors shall appoint an Auditor
of the Association. He shall see that adequate audits of the
Association are currently and regularly made and that adequate audit
systems and controls are established and maintained. He shall examine
each department and activity of the Association and may inquire into
transactions affecting the Association involving any officer or
employee thereof. The Board, however, may, in lieu of appointing an
Auditor, assign the duties thereof to the Auditor of the parent company
of the Association.
Section 4.10 - Other Officers. The Board of Directors may appoint one
or more Assistant Vice Presidents, one or more Assistant Trust
Officers, one or more Assistant Secretaries, one or more Assistant
Cashiers, and such other officers and Attorneys-In-Fact as from time to
time may appear to the Board of Directors to be required or desirable
to transact the business of the Association. The power to appoint such
assistant or the additional officers may be delegated to the Chairman
of the Board or the President, or to such other executive officer or
officers as the Board may designate, but the power to appoint any
officer of the Audit Department or any Assistant Secretary may not be
so delegated. Any officer and Attorney-In-Fact appointed as herein
provided shall exercise such powers and perform such duties as pertain
to his office or as may be conferred upon or assigned to him by the
Board of Directors of by the officer authorized to make such
appointment.
Section 4.11 - Tenure of Office. The Chairman of the Board and the
President shall hold office for the current year for which Board of
Directors of which they are members was elected, unless either of them
shall resign, become disqualified or be removed, and any vacancy
occurring in either of such offices shall be filled promptly by the
Board of Directors. All other officers of the Association shall serve
at the pleasure of the Board of Directors.
Section 4.12 - Compensation of Officers. The compensation of the
officers of the Association shall be fixed and may be altered, from
time to time, by the Board of Directors or, in the case of officers
appointed by another officer, as authorized by Section 4.10 of this
Article, by the officer or officers making such appointment, subject to
the supervisory control of, and in accordance with the policies
established by, the Board.
Section 4.13 - Combining Offices. The Board of Directors, in its
discretion, may combine two or more offices and direct that they be
filled by the same individual, except that (a) the office of Corporate
Secretary shall not be combined with that of the Chairman of the Board
or of the President and (b) the office of Auditor shall not be combined
with any other office.
Section 4.14 - Succession. During the absence of the Chairman of the
Board, or such other officer designated as Chief Executive Officer, all
of the duties pertaining to his office under these By-Laws and the
resolutions of the Board of Directors shall, subject to the supervisory
control of the Board, devolve upon, and be performed by, the officers,
successively, who are next in the order of authority as established by
the Board of Directors from time to time, or, in the absence of an
order of authority so established, in the order of Chairman of the
Board, President and Chairman of the Executive Committee as may be
applicable in the particular case.
Section 4.15 - Clerks and Agents. Any one of the Chairman of the
Board, President or Chairman of the Executive Committee, or any officer
of the Association authorized by them, may appoint and dismiss all or
any clerks, agents and employees and prescribe their duties and the
conditions of their employment, and from time to time fix their
compensation.
Section 4.16 - Requiring Bond. The Board of Directors shall require
such officers and employees of the Association as it shall designate to
give bond, of suitable amount, with security to be approved by the
Board, conditioned for the honest and faithful discharge by each such
officer or employee of his respective duties. In the discretion of the
Board, such bonds may be in blanket form and the premiums may be paid
by the Association. The amount of such bonds, form of coverage, and
the company acting as surety therefor, shall be reviewed by the Board
of Directors each year.
ARTICLE V
Administration of Trust Powers
Section 5.1 - Trust Department. Organization. There shall be one or
more departments of the Association which shall perform the fiduciary
responsibilities of the Association.
Section 5.2 - Management of Department. The Board of Directors shall
be responsible for the management and administration of the Trust
Department or Departments, but is may assign or delegate such of its
powers and authority to the Trust Policy Committee and to such other
committees and officers of the Association as it may deem advisable.
Section 5.3 - Department Heads. The Board of Directors shall designate
one of the Trust Officers as the chief executive of each Trust
Department. His duties shall be to manage, supervise and direct all
activities of such Department, subject to such supervision as may be
vested in the Trust Policy and other committees. He shall do, or cause
to be done, all things necessary or proper in carrying on the business
of such Department in accordance with provisions of law, applicable
regulations and policies established by authority of the Board. He
shall act pursuant to opinions of counsel where such opinion is deemed
necessary. He shall be responsible for all assets and documents held
by the Association in connection with fiduciary matters, in such
Department, except as otherwise provided in this Article V.
Section 5.4 - Custody of Securities. The Board of Directors shall
designate two or more officers or employees of the Association to have
joint custody of the investments of each trust account administered by
the Trust Department or Departments.
Section 5.5 - Trust Department Files. There shall be maintained in
each Trust Department files containing all fiduciary records necessary
to assure that it fiduciary responsibilities have been properly
undertaken and discharged.
Section 5.6 - Trust Investments. Funds held in a fiduciary capacity
shall be invested in accordance with the instrument establishing the
fiduciary relationship and governing law. Where such instrument does
not specify the character and class of investments to be made and does
not vest in the Association a discretion in the matter, funds held
pursuant to such instrument shall be invested in investments in which
corporate fiduciaries may invest under the laws of the State of
Missouri and the decisions of its courts.
ARTICLE VI
Stock and Stock Certificates
Section 6.1 - Transfers. Shares of the capital stock of the
Association shall be transferable only on the books of the Association,
and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 6.2 - Stock Certificates. Certificates of stock shall bear the
signatures of (i) the Chairman of the Board, the President or any Vice
President, and (ii) the Secretary, Cashier, any Assistant Secretary, or
any other officer appointed by the Board of Directors for that purpose;
and the seal of the Association shall be impressed, engraved, or
printed thereon. Such signatures may be manual or engraved, printed or
otherwise impressed by facsimile process; but if both of the required
signatures are by facsimile then such certificates shall be manually
countersigned by the person or persons thereunto authorized by the
Board of Directors. Certificates bearing the facsimile signature of an
authorized officer may be validly issued even though the person so
named shall have ceased to hold such office at the time of issuance.
Each certificate shall recite on its face that the stock represented
thereby is transferable only upon the books of the Association upon the
surrender of such certificate properly endorsed.
Section 6.3 - Closing Transfer Books or Fixing Record Date. The Board
of Directors shall have power to close the transfer books of the
Association for a period not exceeding thirty (30) days preceding the
date of any meeting of shareholders, or the date of payment of any
dividend, or the date of allotment of rights, or the date when any
change or conversion of exchange of shares shall go into effect;
provided, however, that in lieu of closing the said transfer books, the
Board of Directors may fix, in advance, a date, not exceeding thirty
(30) days preceding the date of any such event, as record date for the
determination of the shareholders entitled to notice of, and to vote
at, any such meeting (and any adjournment thereof), or entitled to
receive payment of any such dividend or allotment of such rights, or to
exercise rights in respect of any such change, conversion or exchange
of shares, and in such case, only such shareholders as shall be
shareholders of record at the close of business on the date of closing
the transfer books or on the record date so fixed shall be entitled to
notice of, and to vote at, such meeting (and any adjournment thereof),
or to receive payment of such dividend or allotment of such rights, or
to exercise such rights, as the case may be.
ARTICLE VII
Corporate Seal
Section 7.1 - Authority to Affix. The President, the Corporate
Secretary, the Cashier, and any Assistant Secretary or other officer
designated by the Board of Directors, shall have authority to affix the
corporate seal on any document requiring such seal, and to attest the
same. The seal shall be substantially in the following form:
ARTICLE VIII
Miscellaneous Provisions
Section 8.1 - Fiscal Year. The fiscal year of the Association shall be
the calendar year.
Section 8.2 - Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations,
receipts, discharges, releases, satisfactions, settlements, petitions,
schedules, accounts, affidavits, bonds, undertakings, proxies and other
instruments or documents may be signed, executed, acknowledged,
verified, delivered or accepted on behalf of the Association by the
Chairman of the Board, the President, any Vice President, or the
Cashier; and, if in connection with the exercise of fiduciary powers of
the Association, by any of said officers or by any authorized officer
of the Trust Department or Departments. Any such instruments may also
be executed, acknowledged, verified, delivered, or accepted on behalf
of the Association in such other manner and by such other officers as
the Board of Directors may from time to time direct. The provisions of
this Section are supplementary to any other provisions of these
By-Laws.
Section 8.3 - Banking Hours. The Association shall be open for
business on such days and during such hours as may be prescribed by
resolution of the Board of Directors. Unless and until the Directors
shall prescribe other and different banking hours, this Association's
main office shall be open for business from 9:30 o'clock a.m. to 2:00
o'clock p.m. of each day, except Fridays when the hours shall be from
9:30 o'clock a.m. to 6:00 o'clock p.m., and except that the Association
shall be closed on Saturdays and Sundays, and, with the approval of the
Board on days recognized by the laws of the State of Missouri as public
holiday.
ARTICLE IX
By-Laws
Section 9.1. - Inspection. A copy of the By-Laws, with all amendments
thereto, shall at all times be kept in a convenient place at the main
office of the Association and shall be open for inspection to all
shareholders during banking hours.
Section 9.2 - Amendments. The By-Laws may be amended, altered or
repealed by vote of a majority of the entire Board of Directors at any
meeting of the Board, provided that ten (10) days' written notice of
the proposed change has been given to each Director. No amendment may
be made unless the By-Laws, as amended, is consistent with the
requirements of the laws of the United States and with the provisions
of the Articles of the Association. A certified copy of all amendments
to the By-Laws shall be forwarded to the Comptroller of the Currency
immediately after adoption.
10-1-94
EXHIBIT 6
Consent of Trustee
Pursuant to Section 32l(b) of the Trust Indenture Act of l939, UMB
Bank, National Association, a national bank organized under the laws of
the United States, hereby consents that reports of examinations by the
Comptroller of the Currency, of the Federal Deposit Insurance
Corporation, and any other federal, state, territorial or district
authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
UMB BANK, NATIONAL ASSOCIATION
BY: /S/ Frank C. Bramwell
Frank C. Bramwell, Vice President
Date: December 5, 1994
EXHIBIT 7
This form is for use by National Banks only. It should be used for
publication purposes only, and should not be returned to the FDIC.
Comptroller of the Currency
Administrator of National Banks
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
UNITED MISSOURI BANK, N.A. of KANSAS CITY
Name of Bank City
in the state of Missouri, at the close of business on September 30, 1994,
published in response to call made by Comptroller of the Currency, under
title 12, United States Code, Section 161.
Charter Number l3936 Comptroller of the Currency Midwestern
District
Statement of Resources and Liabilities
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin 349,771
Interest -bearing balances 0
Held-to-maturity securities 94,510
Available-for-sale securities 999,127
Federal funds sold 326,532
Securities purchased under agreements to resell 0
Loans and lease financing receivables:
Loans and leases, net of unearned income 1,044,628
LESS: Allowance for loan and lease losses 9,870
LESS: Allocated transfer risk reserve 0
Loans and leases, net of unearned
income, allowance, and reserve 1,034,758
Assets held in trading accounts 64,025
Premises and fixed assets (including capitalized leases) 75,008
Other real estate owned 4,483
Investments in unconsolidated subsidiaries
and associated companies 0
Customers' liability to this bank on
acceptances outstanding 3,613
Intangible assets 2,413
Other assets 77,570
Total assets 3,031,810
LIABILITIES
Deposits:
In domestic offices 2,570,861
Noninterest-bearing 1,049,967
Interest-bearing 1,520,894
Federal funds purchased 201,605
Securities sold under agreements to repurchase 0
Demand notes issued to the U.S. Treasury 0
Trading liabilities 0
Other borrowed money:
With original maturity of one year or less 0
With original maturity of more than one year 0
Mortgage indebtedness and obligations under
capitalized leases 0
Bank's liability on acceptances executed and outstanding 3,613
Subordinated notes and debentures 0
Other liabilities 28,603
Total liabilities 2,804,682
Limited-life preferred stock and related surplus 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock 16,500
Surplus 22,742
Undivided profits and capital reserves 196,473
Net unrealized holding gains (losses) on
available-for-sale securities (8,587)
Total equity capital 227,128
Total liabilities. limited-life preferred
stock, and equity capital 3,031,810
We, the undersigned directors, attest to the correctness of
this statement of resources and liabilities. We declare that it
has been examined by us, and to the best of our knowledge
and belief has been prepared in conformance with the
instructions and is true and correct.
1. R.C. Kemper
R.C. KEMPER
2. J. Lyle Wells Directors
J. LYLE WELLS
3. Alexander C. Kemper
ALEXANDER C. KEMPER
I, TIMOTHY C. CONNEALY
Name
SENIOR VICE PRESIDENT
Title
of the above-named bank do hereby
declare that this
Report of Condition is true and correct to
the best of my knowledge and belief.
EXHIBIT 25.B
FORM T - 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)______
COMMERCE BANK, NATIONAL ASSOCIATION
(exact name of trustee as specified in its charter)
NATIONAL BANKING ASSOCIATION
(State of incorporation if not a national bank)
44-0206815
(I.R.S. employer identification No.)
1000 WALNUT STREET, KANSAS CITY, MISSOURI
(Address of principal executive offices)
64106
(Zip Code)
William E. Ekey
922 Walnut Street, Kansas City, MO 64106 (816) 234-2101
(Name, Address and telephone number of agent for service
Farmland Industries, Inc.
(Exact name of obligator as specified in its charter)
Kansas
(State or other jurisdiction of incorporation or organization)
44-0209330
(I.R.S. Employer Identification No.)
3315 N. Oak Trafficway, Kansas City, MO
(Address of principal executive offices)
64116
(Zip Code)
10-Year Subordinated Capital Investment Certificates
5-year Subordinated Capital Investment Certificates
10-Year Subordinated Monthly Income Capital Investment Certificates
5-Year Subordinated Monthly Income Capital Investment Certificates
___________________________________
(Title of the indenture securities)
ITEM 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Kansas City,
Kansas City, Missouri
Federal Deposit Insurance Corporation
Washington, D.C.
Kansas City Clearing House Association,
Kansas City, Missouri.
(b) Whether it is authorized to exercise corporation trust
powers.
Yes. As authorized by the Comptroller of the Currency,
effective June 30, 1972. Previously organized as a
trust company under the Laws of the State of Missouri.
ITEM 2. Affiliations with obligor and underwriters.
If the obligor or any underwriter for the obligor is an
affiliate of the trustee, describe each such affiliation.
None
ITEM 3. Voting securities of the trustee.
Furnish the following information as to each class of voting
securities of the trustee:
As of November 30, 1994
____________________________________________________________________________
COL. A. COL. B.
Title of class Amount Outstanding
Capital Stock - par $20 900,000 Shares
ITEM 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participa-
tion in any other securities, of the obligor are outstanding,
furnish the following information:
(a) Title of the securities outstanding under each such
other indenture.
FARMLAND INDUSTRIES, INC.
(F.K.A. Consumers Cooperative Association)
Subordinated Certificates of Investment (under
Indenture dated February 25, 1970, as amended by
Supplemental Indenture dated April 1, 1970) 8-1/2%,
due 10 years from date of issue
and
Subordinated Certificates of Investment (under
Indenture dated November 29, 1971, amended by
Supplemental Indenture dated December 22, 1971, as
amended by Amended Indenture dated January 6, 1972),
7-1/2%, due 10 years from date of issue
and
Subordinated Capital Investment Certificates (under
Indenture dated July 29, 1974) 8-1/2%, due 10 years
from date of issue
and
Subordinated Capital Investment Certificates (under
Indenture dated July 29, 1974) 9%, due 15 years from
date of issue
and
Subordinated Capital Investment Certificates (under
Indenture dated July 29, 1974) 9-1/2%, due 20 years
from date of issue
and
Subordinated Capital Investment Certificates (under
Indenture dated November 29, 1976) 9-1/2%, due 20
years from date of issue
and
Subordinated Capital Investment Certificates (under
Indenture dated October 24, 1979) 10-1/2%, due 25
years from date of issue
and
Subordinated Capital Investment Certificates (under Indenture
dated October 24, 1978, as amended by Supplemental Indenture
dated December 21, 1978) 9-1/2% due 20 years from date of issue
and
Subordinated Monthly Income Capital Investment
Certificates (under Indenture dated November 5, 1980)
due 10 years from date of issue
and
Subordinated Monthly Income Capital Investment
Certificates (under Indenture dated November 11,
1985) due 5 years from date of issue
and
Subordinated Capital Investment Certificates (under indenture
dated November 8, 1984, as amended January 3, 1985), due 5 years
from date of issue
and
Subordinated Capital Investment Certificates (under Indenture
dated November 8, 1984, as amended January 3, 1985), due 10 years
from date of issue
and
Subordinated Capital Investment Certificates (under Indenture
dated November 8, 1984, as amended January 3, 1985), due 20 years
from date of issue
and
Subordianted Monthly Income Capital Investment Certificates
(under Indenture dated November 8, 1984, as amended January 3,
1985 and November 20, 1985), due 10 years from date of issue
and
Subordinated Individual Retirement Account Certificates (under
Indenture dated November 8, 1984, as amended January 3, 1985),
due 10 years from date of issue
(b) A brief statement of the facts relied upon as a basis
for the claim that no conflicting interest within the
meaning of Section 310 (b) (1) of the Act arises as a
result of the trusteeship under any such other inden-
ture, including a statement as to how the securities
will rank with the securities issued under such other
indenture.
The securities issued, or to be issued, under the
indentures named herein are wholly unsecured and rank
equally with each other without priority.
ITEM 5. Interlocking directorates and similar relationships with
obligor or underwriters.
If the trustee or any of the directors or executive officers
of the trustee is a director, officer, partner, employee,
appointee, or representative of the obligor or of any under-
writer for the obligor, identify each such person having any
such connection and state the nature of each such connection.
H. D. Cleberg, President and CEO of Farmland Industries, Inc. is
a director of Commerce Bank, N.A.
ITEM 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities
of the trustee owned beneficially by the obligor and each
director, partner and executive officer of the obligor.
As of November 30, 1994
_____________________________________________________________________________
COL. A. COL. B. COL. C. COL. D.
Amount Percentage of voting
Name of Title of owned securities represented by
owner class beneficially amount given in Col. C.
NONE
[The remainder of this page was intentionally left blank]
ITEM 7. Voting securities owned by underwriters or their officials.
Furnish the following information as to the voting securities
of the trustee owned beneficially by each underwriter for the
obligor and each director, partner, and executive officer or
each underwriter.
As of November 30, 1994
_____________________________________________________________________________
COL. A. COL. B. COL. C. COL. D.
Percentage of voting
securities represented
Name of Title of Amount Owned by amount given in
owner class beneficially Col. C.
NONE
ITEM 8. Securities of the obligor owned or held by the trustee.
Furnish the following information as to the securities of the
obligor owned beneficially or held as collateral security for
obligations in default by the trustee.
As of November 30, 1994
_____________________________________________________________________________
COL. A. COL. B. COL. C. COL. D.
Whether the Amount owned Percent of
securities are beneficially or held as class represented
Title of voting or non- collateral security for by amount given
class voting securities obligations in default in Col. C.
NONE
ITEM 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds collateral security
for obligations in default any securities of an underwriter
for the obligor, furnish the following information as to each
class of securities of such underwriter any of which are so
owned or held by the trustee.
As of November 30, 1994
_____________________________________________________________________________
COL. A. COL. B. COL. C. COL. D.
Amount owned beneficially Percent of
Name of issuer or held as collateral class represented
and Amount security for obligations by amount given
title of class outstanding in default by trustee in Col. C.
NONE
ITEM 10. Ownership or holdings by the trustee of voting securities of
certain affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral security
for obligations in default voting securities of a person who, to
the knowledge of the trustee (1) owns 10 percent or more of the
voting securities or the obligor or (2) is an affiliate, other
than a subsidiary or the obligor, furnish the following
information as to the voting securities of such person.
As of November 30, 1994
_____________________________________________________________________________
COL. A. COL. B. COL. C. COL. D.
Amount owned beneficially Percent of
Name of issuer or held as collateral class represented
and Amount security for obligations by amount given
title of class outstanding in default by trustee in Col. C.
NONE
ITEM 11. Ownership or holdings by the trustee of any securities of a
person owning 50 percent or more of the voting securities of
the obligor.
If the trustee owns beneficially or holds as collateral security
for obligations in default any securities of a person who, to
the knowledge of the trustee, owns 50 percent or more of the
voting securities of the obligor, furnish the following informa-
tion as to each class of securities of such person any of which
are so owned or held by the trustee.
As of November 30, 1994
_____________________________________________________________________________
COL. A. COL. B. COL. C. COL. D.
Amount owned beneficially Percent of
Name of issuer or held as collateral class represented
and Amount security for obligations by amount given
title of class outstanding in default by trustee in Col. C.
NONE
ITEM 12. Indebtedness of the Obligor to the Trustee
Except as noted in the instructions, if the obligor is indebted
to the trustee, furnish the following information:
_____________________________________________________________________________
COL. A. COL. B. COL. C
Nature of Indebtedness Amount Outstanding Date Due
Advances under an $ 979,802.00 12/1/94
Unsecured line of credit 699,355.75 12/12/94
698,295.00 1/6/95
1,166,666.63 1/24/95
1,166,666.63 2/21/95
ITEM 13. Defaults by the Obligor
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any
such default
There is not currently, nor has there been a default with respect
to the securities under the indentures.
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding series
of securities under the indenture, state whether thee has been a
default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such
default.
There has been no default under any of the securities for which
the Trustee is a Trustee under any other indenture.
ITEM 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
No underwriter is an affiliate of the trustee.
ITEM 15. Foreign Trustee
Identify the order or rule pursuant to which the foreign trustee
is authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
Not applicable.
ITEM 16. List of Exhibits:
1. A copy of the articles of association of the trustee as
now in effect.
2. A copy of the certificate of authority of the trustee to
commence business, if not contained in the articles of
association.
3. A copy of the authorization of the trustee to exercise
corporate trust powers.
4. A copy of the existing By-Laws of the trustee or instru-
ments corresponding thereto.
5. A copy of each indenture referred to in Item 4 hereof.
6. The consents of the trustee required by Section 321(b)
of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of the
supervising examining authority.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Commerce Bank of Kansas City, National Association, a banking
association organized and existing under the laws of the United States, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Kansas City, and
State of Missouri, on the 30th day of November , 1994.
COMMERCE BANK,
NATIONAL ASSOCIATION
By WILLIAM E. EKEY
William E. Ekey
Vice-President
EXHIBIT 1
COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT
COMMERCE BANK OF KANSAS CITY, NATIONAL ASSOCIATION
CHARTER NO. 15985
ARTICLES OF ASSOCIATION
For the purpose of organizing an Association to carry on the
business of banking under the laws of the United States, the undersigned do
enter into the following Articles of Association:
FIRST. The title of this Association shall be Commerce Bank of
Kansas City, National Association.
SECOND. The main office of the Association shall be in the City of
Kansas City, County of Jackson, State of Missouri. The general business of the
Association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of
not less than five nor more than twenty-five shareholders, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time to time by resolution of a majority of the full Board of Directors or by
resolution of the shareholders at any annual or special meeting thereof. Unless
otherwise provided by the laws of the United States, any vacancy in the Board
of Directors for any reason, including an increase in the number thereof, may
be filled by action of the Board of Directors.
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office or such other place as the Board
of Directors may designate, on the day of each year specified therefor in the
By-Laws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the Board of
Directors.
Nominations for election to the Board of Directors may be made by
the Board of Directors or by any shareholder of any outstanding class of capital
stock of the bank entitled to vote for election of directors.
FIFTH. The authorized amount of capital stock of this Association
shall be nine hundred thousand shares of common stock of the par value of twenty
dollars ($20.00) each; but said capital stock may be increased or decreased from
time to time, in accordance with the provisions of the laws of the United
States.
No holder of shares of the capital stock of any class of the
corporation shall have any preemptive or preferential right of subscription to
any shares of any class of stock of the corporation, whether now or hereafter
authorized, or to any obligations convertible into stock of the corporation,
issued or sold, nor any right of subscription to any thereof other than such,
if any, as the Board of Directors, in its discretion, may from time to time
determine and at such price as the Board of Directors may from time to time fix.
The Association, at any time and from time to time, may authorize
and issue debt obligations, whether or not Subordinated, without the approval
of the shareholders.
SIXTH. The Board of Directors shall appoint one of its members
President of this Association, who shall be Chairman of the Board, unless the
Board appoints another director to be the Chairman. The Board of Directors
shall have the power to appoint one or more Vice Presidents; and to appoint a
Cashier and such other officers and employees as may be required to transact the
business of this Association.
The Board of Directors shall have the power to define the duties of
the officers and employees of the Association; to fix the salaries to be paid
to them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all By-Laws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of Kansas City,
Missouri, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency; and shall have the power to establish or
change the location of any branch or branches of the Association to any other
location, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue
until terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any
shareholder owning, in the aggregate, not less than 25 per cent of the stock of
this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place, and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this Association.
TENTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the Association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the Association or of any firm, corporation,
or organization which he served in any such capacity at the request of the
Association: Provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for gross
negligence, willful misconduct or criminal acts in the performance of his duties
to the Association: And, provided further, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit, or
proceeding which has been made the subject of a compromise settlement except
with the approval of a court of competent jurisdiction, or the holders of record
of a majority of the outstanding shares of the Association, or the Board of
Directors, acting by vote of directors not parties to the same or substantially
the same action, suit, or proceeding, constituting a majority of the whole
number of directors. The foregoing right of indemnification or reimbursement
shall not be exclusive of other rights to which such person, his heirs,
executors, or administrators, may be entitled as a matter of law.
ELEVENTH. These Articles of Association may be amended at any
regular or special meeting of the shareholders by the affirmative vote of the
holders of a majority of the stock of this Association, unless the vote of the
holders of a greater amount of stock is required by law, and in that case by the
vote of the holders of such greater amount.
EXHIBIT 2
COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE
TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE
ARTICLES OF ASSOCIATION
Comptroller of the Currency
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D. C.
WHEREAS, satisfactory evidence has been presented to the Comptroller of
the Currency that Commerce Bank of Kansas City, located in Kansas Ci ty, State
of Missouri, has complied with all provisions of, the statutes of the United
States required to be complied with before being authorized to commence the
business of banking as a National Banking Association;
NOW, THEREFORE, I hereby certify that the above-named association is
authorized to commence the business of banking as a National Banking
Association under the title "Commerce Bank of Kansas City, National
Association", effective as of the commencement of business on June 30, 1972.
IN TESTIMONY WHEREOF witness my signature
and seal of Office this June, 1972.
COMPTROLLER OF THE CURRENCY
Charter No. 15985.
Certificate for Certified Copy
Comptroller of the Currency
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D. C.
I hereby certify that the foregoing is a true and complete copy of the
certificate recorded in this Office, dated June 28, 1972, of William B. Camp,
Comptroller of the Currency, approving the conversion of the bank mentioned
therein.
IN WITNESS WHEREOF, I have on JUL 27 1972
caused the seal of the Comptroller of the currency to be affixed to these
presents.
EXHIBIT 3
COPY OF THE AUTHORIZATION OF THE TRUSTEE
TO EXERCISE CORPORATE TRUST POWERS
THE ADMINISTRATOR OF NATIONAL BANKS
WASHINGTON, D.C. 20220
June 29, 1972
THE ADMINISTRATOR OF NATIONAL BANKS
WASHINGTON, D.C. 20220
June 29, 1972
Office of the
Comptroller of the Currency
Mr. T. Allen Peschka
Senior Vice President
Commerce Bank of Kansas City
922 Walnut
Kansa,s City, Missouri 64l4l
Dear Mr. Peschka:
There is transmitted herewith a certificate indicating the fiduciary
powers which"Commerce Bank of Kansas City, National Association" will be
authorized to exercise, effective upon the commencement of business as a
National Bank. The fiduciary powers are granted under authority of the
Act of Congress approved September 28, l962, 76 Stat. 668, 12 U.S.C. 92a.
After the National Bank has commenced business, the Board of Directors
is requested to pass a resolution adopting the application for permission
to exercise fiduciary powers which wa,s filed by the State institution on
behalf of the converted National Bank. A certified copy of the resolution
as pa,ssed should then be forwarded to this Office.
National Banks are governed in the exercise of their fiduciary powers
by Regulation 9, a copy of which is enclosed. The officers of your trust
department should be thoroughly familiar with Regulation 9.
Through the adoption of bylaws or resolutions, or the amendment of
existing bylaws or resolutions, provision for the establishment and admin-
istration of the trust department should be mad.e to accord with the require-
ments of Regulation 9. You will note that Section 9.7 of Regulation 9
places on the Board of Directors responsibility for the proper exercise of
the bank's fiduciary powers, but leaves to that body full discretion as to
whether it shall directly supervise the administration of all such powers
or assign supervisory and/or administrative duties to individuals or
committees. Except for the directors' examining committee, which must be
appointed in conformity with the requirements of Section 9.9 of Regulation 9,
it is not necessary that any specific committee by appointed. If any com-
mittee is appointed, however, its functions should be outlined in reasonable
detail in the bylaws or resolutions of the board.
Unless already covered by bylaws or resolutions, the following matters
should also be provided for:
(a) the appointment of a principal trust officer or officers and
a delineation of the duties involved, or otherwise specifically
indicating the means by which the activities of the trust depart-
ment will be directed.
(b) the pledging of securities to secure trust funds on deposit in
the bank as required by Section 9.10(b).
(c) the designation of the officers or employees responsible for
custody of the trust investments in conformity with Section
9.13(a).
(d) the pledging of securities with state authorities where
required by local law, per Section 9.14.
By letter dated June 26, 1972 addressed to you and signed by Mr. J. T.
Watson, Deputy Comptroller of the Currency, advising that this Office ha,s
given preliminary approval to the conversion, you were furnished a copy of
Form CC-7O25-O3, Suggested National Bank Bylaws. Your attention is invited
to Article V of this form which has particular reference to the trust depart-
ment. Form CC-7O25-O3 contains no provisions having reference to items
designated (b), (c) and (d) in the preceding paragraph, ina,smuch as it is
customary for such matters to be covered in resolutions of the Board of
Directors.
As indicated, it is i:aterial to this Office whether provisions for
the establishment and administration of the trust department appear in the
bylaws or in resolutions of the board, or partly in the bylaws and partly
in resolutions. If and when such provisions have been adopted, a copy
thereof should be furnished to the trust officer(s) for guidance and a copy
forwarded to this Office.
Sincerely,
DEAN E. MILLER
Dean E. Miller
Deputy Comptroller of the Currency for Trusts
Encl.
EXHIBIT 4
COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE
OR INSTRUMENTS CORRESPONDING THERETO
COMMERCE BANK OF KANSAS CITY, N.A.
AMENDED AND RESTATED BY-LAWS
(Currently in effect; last amended March 17, 1992)
AMENDED AND RESTATED BY-LAWS OF
COMMERCE BANK OF KANSAS CITY, NATIONAL ASSOCIATION
KANSAS CITY, MISSOURI
(Currently in effect; last amended March 17, 1992)
_____________________
ARTICLE I
STOCKHOLDERS' MEETING
Section 1.1 Stockholders' Annual Meeting. The annual meeting of
the stockholders of this Association for the election of directors and the
transaction of other business shall be held at the offices of the Association
in Kansas City, Missouri, on the third Tuesday of February in each year, and
shall be convened by the Chairman of the Board or the President at the hour
of ten o'clock A.M.
Section 1.2 Special Meetings of Stockholders. Special meetings of
the stockholders may be called by the Chairman of the Board or the President
at any time, and shall be called whenever so directed by resolution of the
Board of Directors, or whenever stockholders holding a majority of the capital
stock issued and outstanding, request either of them in writing so to do.
Section 1.3 Notice. Notice of each annual and each special meeting
of stockholders shall be given by the Secretary as required by law; provided,
that notice of any meeting of stockholders may be waived by any stockholder
executing a written waiver of notice either before, during or after such
meeting.
Section 1.4 Votes. Each share of stock shall entitle its owner to
one vote, and in case of election for Directors, each stockholder shall have
the right to cast as many votes in the aggregate as shall equal the number of
shares held by such stockholder, multiplied by the number of directors to be
elected, and may cast the whole number of votes, in person or by proxy, for
one candidate or distribute them among two or more.
Section 1.5 Proxies. Stockholders may vote at any meeting of the
stockholders by proxies duly authorized in writing; provided, however, that
each proxy shall be valid only for the specific meeting of stockholders
specified therein and at any adjournments of such meeting, and, provided
further, that no officer or employee of this Association shall act as proxy.
Proxies shall be dated and shall be filed with the records of the meeting.
ARTICLE II
DIRECTORS
Section 2.1 Board of Directors. The affairs of this Association
shall be controlled and managed by a Board of Directors (hereinafter referred
to as the "Board") consisting of not less than five nor more than twenty-five
shareholders, the exact number within such minimum and maximum limits to be
fixed and determined from time to time by resolution of a majority of the full
Board or by resolution of the shareholders at any meeting thereof; provided,
however, that a majority of the full Board may not increase the number of
directors to a number which: (i) exceeds by more than two the number of
directors last elected by shareholders where such number was fifteen or less;
and (ii) exceeds by more than four the number of directors last elected by
shareholders where such number was sixteen or more, but in no event shall the
number of directors exceed twenty-five.
In addition the Board may appoint, from time to time, one or more
advisory directors to serve in advisory capacities only without the power of
final decision in matters concerning the business of the bank.
Advisory directors shall be entitled to the same compensation as
other directors and shall be subject to the same requirements relating to
retirement. Advisory directors may also serve in an advisory capacity on any
committee; provided, that an advisory director may not fill any committee
position which, according to these By-Laws, must be filled by a regular member
of the Board.
Section 2.2 Retirement of Directors. No person shall be elected
a director of this Association who shall have attained the age of 70 years, and
each person serving as a director of this Association upon attaining the age
of 70 years shall be deemed to have submitted his resignation as a director of
this Association with such resignation to become effective on the day such
director attains the age of 70 years. Notwithstanding the foregoing, a
director who is also an officer of this Association shall retire from the
Board on the date he shall resign, retire or otherwise terminate his services
as an officer of this Association; provided, however, that for the purposes
of this Section only, a director serving as Chairman of the Board or as
Chairman of any Committee of the directors shall not be deemed to be an officer
of this Association, and provided further that without establishing any
precedent and because of the unique position of James M. Kemper, Jr., he
may continue to serve as a director of this Association after attaining the
age of 70 years and may thereafter be elected to serve as a director of this
Association. The election or re-election by mistake or otherwise of a
director in violation of the aforesaid policy shall not, ipso facto, void
such election or re-election or nullify any actions such person might
take as a director.
Section 2.3 Board Meetings. Regular meetings of the Board shall
be held at the office of the Association in Kansas City, Missouri, at the hour
of 1:00 o'clock in the afternoon, on the third Tuesday of every January, March,
May, July, September and November, if not a legal holiday, and if the same
be a legal holiday, then on the first day following which is not a legal
holiday. No notice shall be required for any such regular monthly meetings of
the Board, and any and all business may be transacted thereat.
At the first regular meeting of the Board following a stockholders
meeting at which directors are elected, the Board shall first proceed with the
organization of the new Board and shall elect and appoint such officers as
these By-Laws or the Board may prescribe.
Section 2.4 Special Board Meetings. Special meetings of the Board
may be held at any time on the call of the Chairman of the Board, the
Chairman of the Executive Committee, if one be elected, or the President, or
any three (3) directors.
Section 2.5 Notice of Board Meetings. While no notice shall be
required for any regular meeting of the Board, nevertheless, the Secretary, for
the information of the directors, shall mail to each director a written or
printed notice specifying the time and place of such meeting, addressed to him
at his last known business address (postage prepaid), not less than twenty-four
(24) hours before the hour fixed for the meeting. Except in the case of
special meetings called by reason of emergency, as hereinafter provided,
notice of the time and place of special meetings shall be given by the
Secretary, in writing, delivered to, or by telephone message communicated to,
or by prepaid telegram deposited in the telegraph office at Kansas City,
Missouri, addressed to each director not less than twenty-four (24) hours
before the hour fixed for the meeting. Such notices and communications may
be addressed to or communicated to such director at his last known place of
business or residence, and shall be sufficient if delivered to, addressed to,
or communicated to, such place of business or residence. If in the opinion
of the Chairman of the Board, or the President, and of three directors, the
matters to be presented at such special meeting are so urgent in their
character as to constitute an emergency requiring a shorter notice, and they
shall so certify in writing, notice of such meeting may be given in the same
manner as hereinbefore provided, but shall be sufficient if given at least one
(l) hour before the hour fixed for the meeting. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a special meeting.
Section 2.6 Quorum. A majority of the directors shall constitute
a quorum at any meeting, except when otherwise provided by law, but a lesser
number may adjourn any meeting from time to time and the meeting may be held,
as adjourned, without further notice.
Section 2.7 Vacancies. When any vacancy occurs among the directors
the remaining members of the Board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the Board or at a special meeting called for that purpose.
Section 2.8 Compensation of Directors. The compensation of
directors of this Association for services shall be $650.00 for each regular
or special meeting of the Board attended; provided that no such compensation
shall be paid to any director who shall at the time be receiving a salary from
the Association, the parent of the Association or any other subsidiary of the
parent, as an officer thereof, without express order from the Board. Each
director shall be entitled to two paid absences per year.
ARTICLE III
COMMITTEES
Section 3.1 Executive Committee. The Executive Committee shall
consist of seven directors, of whom the Chairman of the Board, the Chairman of
the Executive Committee, if one be so elected, and the President shall be
members and such other members of the Board as may be appointed, from time to
time, by the Chairman of the Board with the approval of the Board.
The Executive Committee shall have, and exercise, all the powers of
the Board during the intervals between meetings of the Board, including the
power to control the conduct of the Association's business, and full power to
appoint committees and prescribe their duties, and to direct the actions of
all officers, agents and employees of the Association.
The Executive Committee shall meet at the office of the Association
on such days and at such hour as meetings of such Committee may be called,
from time to time, by any three members thereof, or by the Chairman of the
Executive Committee, the Chairman of the Board, or the President. Notices of
meetings shall be given in the same manner as is provided for in the case of
special emergency meetings of the Board. Four (4) members of the Executive
Committee shall constitute a quorum for the transaction of business. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at any meeting of the Committee.
Minutes of the meetings of the Executive Committee shall be recorded
in chronological order in the same Minute Book of the Association in which the
minutes of the meetings of the stockholders and of the Board are recorded, and
shall be approved at the next succeeding meeting of the Board as the report of
that committee to the Board, together with any special report that said
Committee may wish to make to the Board not contained in said minutes.
Section 3.2 Trust Committee. There shall be a committee to be known
as the Trust Committee, consisting of nine regular members selected from the
members of the Board. At least one of the members shall be an ex-officio
member selected from the Chairman of the Board, any Vice Chairman or the
President, and at least three other members of the Committee shall be selected
from Board members who are not officers of the Association. The regular
members shall be appointed by the Chairman of the Board with the approval of
the Board, such appointment to be made annually at the regular meeting of the
Board in December of each year, and shall hold their offices as such until
their successors are duly appointed. Vacancies occurring in the Trust
Committee shall be filled by the Chairman of the Board, subject to the
approval of the Board at a regular meeting after such vacancy occurs. The
powers of appointment hereby given to the Chairman of the Board may be
exercised by the President in the absence of the Chairman.
Said Committee shall have general supervision and control of the sale
and disposition of all property and assets, as well as of the investments and
reinvestments of all funds and other property, which have, or may at any time,
come into the custody, possession, control of, or have been, or may be
acquired by the Association through its Trust Division, in its fiduciary
capacity (including, but not by way of limitation, in the capacity of executor,
administrator, guardian, curator, trustee and/or agent), and with reference to
the same, and each of the same, said Committee shall possess the same authority
and power as the Board. Three members shall constitute a quorum.
Regular meetings of the Committee shall be held at the offices of
the Association on such days and at such hour as may be fixed by the Committee;
and special meetings may be held at any time upon call of the Chairman of the
Board, the President of the Association or the Chairman of the Committee. A
Vice President assigned to the Trust Division or a Trust Officer shall attend
all meetings of the Committee.
Section 3.3 Examining Committee. At the December meeting of the
Board held in each year, the Chairman, with the approval of the Board, shall
appoint not less than three directors to serve for the ensuing year as members
of the Examining Committee. Such members shall not consist of any director
who may at the same time be serving as an officer or employee of the
Association. Vacancies occurring from time to time in the Committee may be
filled by the Chairman with the approval of the Board. The Committee shall
meet at such time or times as it shall deem appropriate and shall have the
duty of meeting with and receiving the reports of the Auditor of the
Association and such independent accountants as may, from time to time, conduct
audits of the Association. The Committee shall determine whether adequate
internal audit controls and procedures are being maintained, shall supervise
the continuous audit system of the Association and shall recommend to the Board
such changes in the manner of doing business or conducting the affairs of the
Association as it shall deem advisable. The Examining Committee shall also
make, or cause to be made by auditors responsible only to the Board, suitable
audits of the Trust Division at least once during each calendar year and
within fifteen months of the last audit.
Section 3.4 Other Committees. From time to time the Board may
create such other committees, consisting of such persons, as the Board may
determine to be necessary or desirable and may fix the powers and duties of
any such committee.
Section 3.5 Compensation of Committee Members. The compensation
of committee members for service shall be $150.00 (or such lesser amount as
shall be specified in the resolution establishing any other committee) for
each meeting attended; provided, that no such compensation shall be paid to
any committee member who shall at the time be receiving a salary from the
Association, the parent of the Association or any other subsidiary of the
parent, as an officer thereof, without express order from the Board.
ARTICLE IV
OFFICERS
Section 4.1 Executive Officers. The executive officers of this
Association shall be the Chairman of the Board, the Vice Chairman of the
Board, if one or more is so elected, the Chairman of the Executive Committee,
if one be so elected, the President, the Senior Executive Vice Presidents, the
Executive Vice Presidents, the Senior Vice Presidents, and the Secretary. Any
person may hold two or more offices except the offices of President and
Secretary.
Section 4.2 Chairman of the Board. The Board shall elect one of
its members to be Chairman of the Board. He shall preside at all meetings of
the Board and shall supervise the establishment of policies adopted or
approved by the Board. He shall have general executive powers, including, by
way of illustration, the power to fix remuneration of officers, agents and
employees; to employ and dismiss any officer, agent or employee; and to assign
officers, agents and employees to duties in the various areas of the
Association, as well as the specific powers conferred by these By-Laws and
shall also have and may exercise such further powers and duties as may from
time to time be conferred upon, or assigned to him by the Board.
Section 4.3 Vice Chairman of the Board. The Board may elect one
or more of its members to the office of Vice Chairman of the Board. In the
absence of the Chairman, any Vice Chairman may preside at any meeting of the
Board. The Vice Chairman of the Board shall assist the Chairman of the Board
in establishing policies adopted or approved by the Board. A Vice Chairman of
the Board shall have such general executive powers as may be assigned by the
Chairman as well as specific powers conferred by these By-Laws, and shall also
have and may exercise such further powers and duties as may from time to time
be conferred upon or assigned to him by the Board.
Section 4.4 Chairman of the Executive Committee. The Board may
elect one of its members to the office of Chairman of the Executive Committee,
and such officer shall preside over all meetings of the Executive Committee.
In the absence of the Chairman or any Vice Chairman of the Board, the Chairman
of the Executive Committee shall preside at any meeting of the Board. The
Chairman of the Executive Committee shall have such general executive powers
as may be assigned by the Chairman as well as specific powers conferred upon
or assigned to him by the Board.
Section 4.5 President. The Board shall elect one of its members
to be President of the Association. In the absence of the Chairman, any
Vice Chairman, or Chairman of the Executive Committee, the President shall
preside at any meeting of the Board. The President shall have such general
executive powers as may be assigned by the Chairman, and shall have and may
exercise any and all other powers and duties pertaining by law, regulation, or
practice, to the office of President, or imposed by these By-Laws, and
shall also have and may exercise such further powers and duties as may from
time to time be conferred upon or assigned to him by the Board.
Section 4.6 Vice President. The Board shall elect one or more Vice
Presidents and may classify one or more of such Vice Presidents so elected as
Senior Executive Vice President, Executive Vice President, Senior Vice
President or otherwise as the Board may deem appropriate. The offices of
Senior Executive Vice President, Executive Vice President, and Senior Vice
President shall be deemed executive offices of the Association and the persons
holding such office shall be authorized to participate in the major policy
making functions of the Association and shall additionally have such powers and
duties as imposed by the By-Laws or assigned or conferred from time to time by
the Board, the Chairman of the Board, a Vice Chairman or the President. Each
Vice President shall have and may exercise any and all powers and duties
pertaining to the office of Vice President as imposed by these By-Laws and
shall also have and may exercise such further powers and duties as may from
time to time be conferred upon or assigned to him by the Board, the Chairman
of the Board, a Vice Chairman or the President.
Section 4.7 Secretary. The Board shall elect a Secretary (who may
also be designated as Cashier) who shall be the Secretary of the Board and of
the Association. He shall attend the meetings of stockholders, the Board, and
the Executive Committee and keep minutes of said meetings and shall have
custody of the corporate records of the Association. He shall have custody
of the seal of the Association and shall have authority to affix the same to
any instrument executed on behalf of the Association and also to attest the
same. He shall also attend to the giving of all notices required by these
By-Laws to be given and shall have and may exercise any and all other powers
and duties pertaining by law, regulation or practice or imposed by these By-
Laws or as may be assigned to him, from time to time, by the Board.
Section 4.8 General Counsel. The Board shall elect a General
Counsel who shall have charge of the legal business of the Association and
shall appear or provide for proper appearances for the Association in suits
and proceedings to which it is a party. He shall advise the Board, Executive
Committee, Chairman of the Board, President and other officers of the
Association concerning the affairs of the Association when by them requested.
He shall also have such other powers and duties as may be imposed by these
By-Laws.
Section 4.9 Controller. The Board shall elect a Controller who
shall receive and take care of all monies, securities and evidences of
indebtedness belonging to the Association, keep full and complete accounts of
receipts and disbursements, and make reports thereof to the Executive
Committee and the Board as often as may be requested. He shall, under the
direction of the Chairman of the Board, a Vice Chairman, or the President,
perform such other duties pertinent to his office as they may require.
Section 4.10 Other Officers. The Board may elect one or more Trust
Officers, one or more Assistant Vice Presidents, and one or more Assistant
Secretaries together with such other junior officers, to be designated by such
titles as the Board may determine, from time to time, as may appear to the
Board to be required or desirable to transact the business of the Association.
Such officers shall respectively exercise such powers and perform such duties
as pertain to their several offices, or as may be conferred upon them or
assigned to them by the Board, the Chairman of the Board, a Vice Chairman of
the Board or the President. As used in these By-Laws a Trust Officer shall
include Trust Investment Officer, Corporate Trust Officer, Trust Operations
Officer, and a Trust Officer with such other descriptive term as may be
applied by the Board. A person elected a junior officer under this Section
shall use such title, approved by the Board, as the Chairman, from time to
time, may designate.
Section 4.11 Bonds. All officers shall be bonded with such security
and approved in such manner as the Board or the Executive Committee may from
time to time direct.
Section 4.12 Tenure of Office. The officers of this Association
shall be elected by the Board annually at the annual meeting of the Board and
such officers as shall be elected to such offices shall continue in office for
one year and until their successors shall be elected, unless such officer
shall resign, become disqualified, or be removed. Persons may be elected
officers or be promoted to a different office at any meeting of the Board;
provided, that such person so elected shall continue in office only until the
next annual meeting of the Board at which all officers are to be elected or
re-elected, unless any such person shall resign, become disqualified, or be
removed. The Board shall have the power to remove any officer at any time
and, in addition, may designate by resolution, officers who shall have the
authority to dismiss any officer, agent or employee.
ARTICLE V
POWERS AND DUTIES OF OFFICERS
Section 5.1 Representation. The Chairman of the Board, any Vice
Chairman, the President, the General Counsel, and such other officer or
officers of the Association as may be empowered so to do by the Board, or any
one of them, shall have power to act for, appear in behalf of, and represent
this Association before all Departments and Courts of the United States of
America, and any State, Territory or Possession thereof, and to execute
general or special powers of attorney for litigation in favor of lawyers,
solicitors, agents, or any other legal representatives, granting to them such
powers and authorization, whether ordinary or extraordinary, and with or
without limitation, which any such officer may deem advisable, including the
power to settle in or out of court, or to submit to arbitrators or other
adjustment, any question in which this Association may be interested; and to
employ counsel and direct the taking of any legal action in reference to
any of the foregoing, or any other matter or thing touching the interest of
the Association.
Section 5.2 Real Estate Conveyances. All transfers and conveyances
of real estate, including releases of mortgages, deeds of trust and other real
estate interests held, or purportedly held, by the Association, may be
executed by the Chairman of the Board, any Vice Chairman, the President, or
any Vice President and sealed with the corporate seal of the Association and,
if required, attested by the Secretary or one of the Assistant Secretaries of
the Association; and such instruments may be executed and delivered by the
Chairman of the Board, the President, or any Vice President without any order
of the Board of Directors.
Section 5.3 Voting of Securities. Unless otherwise ordered by the
Board or the Executive Committee, the Chairman of the Board, any Vice Chairman,
the President, and any Vice President, (and, with respect to stock held in a
fiduciary capacity, any Trust Officer) shall each have full power and
authority in behalf of the Association to attend, and to act and to vote at
any meeting of the stockholders of any corporation in which the Association
may hold stock, in its own capacity or in any fiduciary capacity, and in
connection with such meeting each of said officers shall possess and may
exercise in behalf of the Association any and all rights and powers incident
to the ownership of such stock, including the power to sign proxies therefor;
provided, that any proxy granted with respect to stock held in a fiduciary
capacity shall be limited to a single meeting and shall either be limited to
voting for trustees or directors or shall direct how such proxy holder shall
vote.
Section 5.4 Foreclosure of Collateral. The Chairman of the Board,
any Vice Chairman, the President, and any Vice President, shall each have
power and authority for and on behalf of this Association to request, order or
direct the foreclosure of any mortgage, deed of trust or other security
agreement in favor of the Association held or owned by the Association (or
held by this Association in trust) securing a loan or loans or other
obligations and to exercise any or all of the options and powers inuring to
this Association under the provisions of such mortgages, deeds of trust or
security agreements or under the terms of the note or notes thereby secured,
including the power and authority to appoint and designate a successor trustee
or trustees as substitutes for the trustee or trustees named in any such
mortgage or deed of trust.
Section 5.5 Refusal to Serve as Trustee. The Chairman of the Board,
any Vice Chairman, the President, and any Vice President, shall each have
power and authority to act for the Association in refusing or declining to act
as trustee under any mortgage or deed of trust securing a loan on real or
personal property in which this Association is named or designated as trustee,
and/or to resign as such trustee, and to make, execute and deliver in the name
of, and for and in behalf of the Association, appropriate instruments, in
writing, evidencing such refusal or declination to so act or such resignation.
Section 5.6 Authentication of Securities. The Chairman of the
Board, any Vice Chairman, the President, any Vice President, any Trust
Officer, and any Assistant Trust Officer, shall each have authority to
countersign or authenticate bonds or certificates on behalf of this
Association as Trustee, and to sign, in behalf of this Association as Trustee,
authentications or certifications of this Association as Trustee under any
mortgage, deed of trust or other agreement securing an issue of bonds,
debentures, notes or other obligations of any corporation, association or
individual, or as registrar or transfer agent, and also certificates of
deposit for stock, bonds, debentures, notes or other obligations, interim
certificates and trust certificates. The Chairman of the Board, any Vice
Chairman, the President, any Vice President, or the Secretary and any Assistant
Secretary shall each have authority to countersign or authenticate bonds or
certificates on behalf of this Association where this Association is the
direct purchaser of the issue and to execute any closing documents required
for the purchase of such bonds.
Section 5.7 Trust Division. The Chairman of the Board shall assign
a Vice President who shall have and may exercise, subject to the control of
the Chairman, a Vice Chairman or the President, general supervision over the
Trust Division. Such Vice President together with other Vice Presidents
assigned to the Trust Division and the Trust Officers, and each of them, may
represent the Association in any of the business of said division. All
securities and funds held by the Association in a fiduciary capacity and the
accounts of each trust or other fiduciary relationship shall be held separate
and apart from those of every other and entirely separate and apart from the
assets of the Association, and such securities shall be subject to the joint
control of any two Trust Officers or, if designated by the Vice President
having general supervision of the Trust Division, employees of the Trust
Division. Each Vice President assigned to the Trust Division shall have and
may exercise, so long as he remains assigned to said division, all of the
powers granted by these By-Laws or by the Board to a Trust Officer.
Section 5.8 Trusts. The Chairman of the Board, any Vice Chairman,
the President, any Vice President assigned to the Trust Division, and the
Trust Counsel, shall each have authority, for and on behalf of this
Association, to accept or reject any and all trusts or other fiduciary duties
or responsibilities which may be offered to this Association, and in
connection therewith to execute, on behalf of this Association, all trust
agreements or other appropriate instruments and the Secretary, or any Assistant
Secretary of this Association, is authorized to affix the seal of this
Association to any such trust agreement or other instrument which has been
duly signed by any such officer.
Section 5.9 Substitution of Attorney-in-Fact. Whenever this
Association has been, or may be appointed Attorney-in-Fact, with power of
substitution in and about the transfer of shares of capital stock, bonds or
other instruments commonly referred to as securities of any corporation or
other entity, the Chairman of the Board, any Vice Chairman, the President, or
any Vice President of this Association may substitute, by a proper written
instrument, an attorney-in-fact to act in the place and stead of this
Association in and about such transfer.
Section 5.10 Purchase or Transfer of Securities. The Chairman of
the Board, any Vice Chairman, the President, and any Vice President of this
Association, shall each have authority for and in behalf of the Association,
and in its name, to sell, assign and transfer, or to purchase or otherwise
acquire, directly or through a cash account of this Association established
or maintained with a brokerage firm selected by such person, any and all
shares of the capital stock, bonds, or other instruments commonly referred to
as securities, and notes, mortgages and deeds of trust issued by any
corporation or other entity and held or to be held by this Association in its
own capacity or in any fiduciary capacity; and the Chairman of the Board, any
Vice Chairman or the President may designate, in writing, from time to time,
such other officers or employees as shall be authorized to exercise the powers
granted by this Section.
Section 5.11 Banking Relationships. The Chairman of the Board, any
Vice Chairman and the President shall each have authority for and in behalf of
the Association to designate from time to time institutions with which this
Association may maintain checking or other depository accounts, safekeeping
accounts, clearing accounts or such other form of account as may be deemed
necessary or appropriate for the conduct of the Association's business,
whether any such account shall be in the name of this Association or in the
name of this Association in any custodial or fiduciary capacity, and to
designate from time to time such individuals, who may be officers or employees
of this Association, as shall be authorized to effect transactions with
respect thereto, and with respect to any and all accounts or transactions with
the Federal Reserve Bank of Kansas City, including, without limitation, the
signing of checks, drafts or other orders with respect to any depository
account to effect the deposit or withdrawal of funds, securities, instruments
or other documents held in or subject to any such account, including delivery
instructions with respect to any safekeeping, clearing or other form of
account, and any such transactions as may be effected by a designated
individual shall include authority to effect transfers of funds, securities,
instruments or other documents subject to any such account by wire or
telephone instruction.
ARTICLE VI
STOCK
Section 6.1 Stock Certificates--Transferred. The capital stock of
this Association shall be represented by certificates signed by the Chairman
of the Board, any Vice Chairman, the President, or any Vice President, and
attested by the Secretary or an Assistant Secretary, with the corporate seal
affixed, and shall be transferable only on the books of the Association, in
person or by attorney duly authorized according to law; and when stock is
transferred, the certificate therefor shall be returned to the Association and
cancelled, and new certificate issued.
Section 6.2 Stockholders Recognized. Until stock shall be transferred,
as provided in Section 6.l, no person shall be recognized by this Association
as the owner of said stock, except the person to whom the same was issued, and
in whose name the same stands on the books of the Association, except as
provided by law in case of executor, administrator, guardian or trustee.
Section 6.3 Record Date. With respect to each meeting of stockholders,
each declaration and payment of a dividend or distribution, or each
declaration and grant of allotment of rights, the Board may fix a date
preceding the date on which such event affecting the rights of any stockholder
shall occur as a record date for the determination of the stockholders entitled
to notice of and to vote at any such meeting or entitled to receive payment
of any such dividend or to any such allotment of rights or to exercise the
rights in respect of any change, conversion or exchange of capital stock,
and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to notice of
and to vote at such meeting or to receive payment of such dividend or to
receive such allotment of rights or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the Association
after any such record date fixed as aforesaid. Any such date as may be fixed
by the Board as the record date shall not precede the date of any meeting of
stockholders, the date for the payment of any dividend or the date for
allotment of rights or the date when any change, conversion or exchange of
capital stock shall go into effect by more than fifty days. If the Board
shall not have set a record date for the determination of its stockholders
entitled to participate in the event for which a record date be established,
the date on which notice of the meeting is mailed or the date such dividend is
declared or other right announced shall be the record date for such
determination of stockholders so entitled to participate.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fiscal Year. The fiscal year of this Association shall
end on the 31st day of December in each year, and at the close of each fiscal
year it shall be the duty of the Board to cause a complete and accurate
statement of the financial condition of the Association to be made forthwith
from the books thereof, a copy of which shall be submitted to the stockholders
at the annual meeting.
Section 7.2 Seal. The Association shall have a corporate seal which
shall have inscribed around the upper circumference thereof "Commerce Bank of
Kansas City" and around the lower circumference thereof "National Association:
and elsewhere thereon shall bear the word "Seal".
Section 7.3 Business Hours. The main office and all other facilities of
the Association shall be open for the transaction of business on such days and
during such hours as the Board or the Executive Committee may in its
discretion determine. The Board of Directors, or the Executive Committee,
however, may in its discretion change said hours and days, or close the office
entirely, whenever the interests of the Association will be best served
thereby, or circumstances shall render the same proper.
Section 7.4 Amendments. The Board shall have the power to make,
alter, amend, or repeal the By-Laws of this Association from time to time.
EXHIBIT 5
COPIES OF INDENTURES
Copies of the Indentures referred to in Item 4 hereof have heretofore
been filed with the Securities and Exchange Commission under the Securities
Act of 1933 and the Securities Exchange Act of 1934 as Exhibits to the
Registration Settlements of the Farmland Industries, Inc. (formerly Consumers
Cooperative Association). The copies of Indentures listed in this Exhibit 5
hereof are hereby incorporated by reference to the Exhibits to the Registration
Statements which are listed as items (a) through (n) as follows:
(a) Trust Indenture dated February 25, 1970, as amended by Supplemental
Indenture dated April 1, 1970, and amended January 29, 1982.
(Form S-1, No. 2-36418, effective April 6, 1970).
8-1/2%, 10-Year Subordinated Certificates of Investment
(b) Trust Indenture dated November 29, 1971, as amended by
Supplemental Indenture dated December 22, 1971, as amended by
Amended Indenture dated January 6, 1972, and amended January
29, 1982. (Form S-1, No. 2-42493, effective January 14, 1972).
7-1/2%, 10-Year Subordinated Certificates of Investment
(c) Trust Indenture dated July 29, 1974, as amended January 29,
1982. (Form S-1, No. 2-51757 effective October 22, 1974).
8-1/2%, 10-Year Subordinated Capital Investment Certificates
(d) Trust Indenture dated July 29, 1974, as amended January 29,
1982. (Form S-1, No. 2-51757 effective October 22, 1974).
9%, 15-Year Subordinated Capital InvestmentCertificates
(e) Trust Indenture dated July 29, 1974, as amended January 29,
1982. (Form S-1, No. 2-51757 effective October 22, 1974).
9-1/2%, 20-year Subordinated Capital Investment Certificates
(f) Trust Indenture dated November 29, 1976, as amended January 29,
1982. (Form S-1, No. 2-55767 effective January 10, 1977).
9-1/2%, 20-Year Subordinated Capital Investment Certificates
(g) Trust Indenture dated October 24, 1978, as amended December 21,
1978 (Form S-1, No. 2-63106)
9-1/2% 20-Year Subordinated Capital Investment Certificates
(h) Trust Indenture dated October 24, 1979, as amended January 29,
1982. (Form S-1, No. 2-66090 effective January 3, 1980).
10-1/2%, 25-Year Subordinated Capital Investment Certificates
(i) Trust Indenture dated November 8, 1984. (Form S-1, No. 2-94400
effective December 31, 1984
10-Year Subordinated Capital Investment Certificates
(j) Trust Indenture dated November 8, 1984. (Form S-1, No. 2-94400
effective December 31, 1984).
5-Year Subordinated Capital Investment Certificates
(k) Trust Indenture dated November 8, 1984. (Form S-1, No. 2-94400
effective December 31, 1984).
20-Year Subordinated Capital Investment Certificates
(l) Trust Indenture dated November 5, 1980. (Form S-1, No. 2-26998
effective December 31, 1980).
10-Year Subordinated Monthly Income Capital Investment
Certificates
(m) Trust Indenture dated November 11, 1985 (Form S-1, No. 33-1970,
effective December 3, 1985)
5-year Subordinated Monthly Income Capitol Investment
Certificates
Trust Indenture dated November 8, 1984 (Form S-1, No. 2-94400
effective December 31, 1984)
10-year Subordinated Individual Retirement Account
Certificates
Trust Indenture dated November 8, 1984 (FOrm S-1, No. 2-94400
effective December 31, 1984)
10-year Subordinated Monthly Income Capital Investment
Certificates
EXHIBIT 6
CONSENTS OF THE TRUSTEE REQUIRED
BY SECTION 321(B) OF THE ACT
CONSENT OF THE TRUSTEE
Pursuant to Section 321(b) of the Trust Indenture Act, Commerce Bank
of Kansas City, National Association, hereby consents to the release of
reports of examinations by Federal, State, Territorial or District authorities
to the Securities and Exchange Commission upon request therefor. Dated this
30th day of November, 1994.
COMMERCE BANK,
NATIONAL ASSOCIATION, Trustees
By: WILLIAM E. EKEY
William E. Ekey, Vice-President
EXHIBIT 7
COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS
OF THE SUPERVISING EXAMINING AUTHORITY
This form is for use by National Banks only. It should be used for
publication purposes only. and should not be returned to the FDIC.
Comptroller of the Currency
Administrator of National Banks
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
COMMERCE BANK OF KANSAS CITY. N.A. of KANSAS CITY
Name of Bank City
in the state of Missouri, at the close of business on June 30. l994,
published in response to call made by Comptroller of the Currency. under
title 12. United States Code, Section 161. Charter Number 15985
Comptroller of the Currency Midwestern District
Statement of Resources and Liabilities
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin 277,363
Interest-bearing balances 0
Held-to-maturity securities 0
Available-for-sale securities 6l9,886
Federal funds sold and securities purchased under
agreements to resell in domestic offices
of the bank and of its Edge and Agreement
subsidiaries, and in IBFs:
Federal funds sold 129,985
Securities purchased under agreements to resell 0
Loans and lease financing receivables:
Loans and leases, net of unearned income 1,046,249
LESS: Allowance for loan and lease losses 24,384
LESS: Allocated transfer risk reserve 0
Loans and leases, net of unearned income,
allowance, and reserve 1,021,865
Assets held in trading accounts 11.568
Premises and fixed assets (including capitalized leases) 69,840
Other real estate owned 6,377
Investments in unconsolidated subsidiaries and
associated companies 0
Customers' liability to this bank on acceptances outstanding 8,124
Intangible assets 0
Other assets 41,389
Total assets 2,186,397
LIABILITIES
Deposits:
In domestic offices 1.772,909
Noninterest-bearing 553,913
Interest-bearing 1,218.996
In foreign offices, Edge and Agreement
subsidiaries, and IBFs 0
Noninterest-bearing 0
Interest-bearing 0
Federal funds purchased and securities
sold under agreements to repurchase in
domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased 220,121
Securities sold under agreements to repurchase 0
Demand notes issued to the U.S. Treasury 0
Trading liabilities 3,137
Other borrowed money:
With original maturity of one year or less 1,969
With original maturity of more than one year 0
Mortgage indebtedness and obligations under
capitalized leases 0
Bank's liability on acceptances executed and
outstanding 8,124
Subordinated notes and debentures 0
Other liabilities 15,274
Total liabilities 2,021,534
Limited-life preferred stock and related surplus 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock 18,000
Surplus 47,215
Undivided profits and capital reserves 106,372
Net unrealized holding gains (losses) on
available-for-sale securities (6,724)
Cumulative foreign currency translation
adjustments 0
Total equity capital 164.863
Total liabilities, limited-life preferred stock,
and equity capital 2,186,397
We, the undersigned directors, attest to the correctness of
this statement of resources and liabilities. We declare that it
has been examined by us, and to the best of our knowledge
and belief has been prepared in conformance with the
instructions and is true and correct.
JONATHAN KEMPER
Jonathan Kemper
JOHN O. BROWN
John O. Brown Directors
WARREN W. WEAVER
Warren W. Weaver
I, JEFFERY D. ABERDEEN
Name
CONTROLLER
Title
July 18, 1994
Date
of the above-named bank do hereby declare that this
Report of Condition is true and correct to the best
of my knowledge and belief.
