SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended AUGUST 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 2-60372
FARMLAND INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
KANSAS 44-0209330
(State or Other Jurisdiction
of Incorporation or
Organization) (I.R.S. Employer Identification No.)
3315 N. OAK TRAFFICWAY, KANSAS CITY, MISSOURI 64116-0005
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 816-459-6000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ( X ) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
Farmland Industries, Inc. is a cooperative. Its voting stock can only be held
by its members. No public market for voting stock of Farmland Industries, Inc.
is established and it is unlikely, in the foreseeable future, that a public
market for such voting stock will develop.
Documents incorporated by reference: None
PART 1
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
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. 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."
VOTING MEMBERS
Membership requirements are determined by the Farmland Board of Directors.
The current policy requirements are: 1) 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) Members must maintain a minimum investment of $1,000 in
par value of Farmland's common stock. 3) Cooperatives must limit voting to
agricultural producers and conduct a majority of their business with voting
producers.
ASSOCIATE MEMBERS
Associate membership requirements in Farmland are as follows: 1) Any
person meeting the requirements for membership can be an associate member. 2)
Associate members must maintain a minimum investment of $1,000 in par value of
Farmland's 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.
Associate members have all the rights of membership except that they do not
have the right to vote at a meeting of the shareholders.
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 consists 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--Petroleum, Crop Production and
Feed" for information regarding the Company's manufacturing properties by
business segment.
COOPERATIVE FARM SUPPLY BUSINESS
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"). NCRA operates a refinery at
McPherson, Kansas with a daily production capacity of 70,000 barrels. 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 total barrels processed
by the refinery was 871,000.
<TABLE>
Refinery capacity at August 31, 1994 and production volume for 1994, 1993
and 1992 are as follows:
<CAPTION>
Average Daily Production
Estimated Based on 365 Days per Year
Daily Capacity (barrels)
Location August 31, 1994 1994 1993 1992
<S> <C> <C> <C> <C>
Coffeyville 62,500 barrels 64,211 53,000 57,000
of crude oil
(as certified by the
Department of Energy)
Phillipsburg 26,400 barrels N/A N/A N/A
of crude oil
</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 this
refinery 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. The refinery is being
reassembled at the Coffeyville refinery and 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
blending 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.
The enactment of NAFTA has resulted in removing tariffs on most crop
production products shipped to Canada and Mexico. In the opinion of
management, this will increase marketing opportunities in these countries.
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. Also, under long-term lease arrangements,
the Company operates three anhydrous ammonia plants.
The Company owns and produces phosphate-based products at one plant and
has 50% ownership interest in two ventures which produce phosphate-based
products.
In addition, several custom dry blending and liquid fertilizer mixing
facilities are operated on sites located throughout the Company's trade
territory.
<TABLE>
Nitrogen fertilizer production information for 1994, 1993 and 1992 is as
follows:
<CAPTION>
Estimated Annual
Capacity
Anhydrous Ammonia Actual Annual Production
August 31, 1994 Anhydrous Ammonia
Plant Location (based on 350
days per year)** 1994 1993 1992
(tons) (tons)
<S> <C> <C> <C> <C>
Lawrence 450,000 443,000 375,000 450,000
Dodge City 259,000 257,000 241,000 254,000
Fort Dodge 242,500 256,000 232,000 240,000
Beatrice 278,300 277,000 243,000 250,000
Enid (2 plants)* 1,000,600 985,000 969,000 1,017,000
Pollock* 500,000 526,000 490,000 501,000
* Indicates leased plants
** The capacities in the table above represent current instant capacity which
has increased due to efficiency and capacity improvements.
</TABLE>
Synthetic anhydrous ammonia is the basic component of other commercially
produced nitrogen fertilizer 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 products of urea, ammonium nitrate, urea ammonium nitrate
solutions and other nitrogen products.
<TABLE>
Production of urea, ammonium nitrate, urea ammonium nitrate solutions and
other nitrogen 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 capacity and production at the Joplin plant for 1994, 1993 and
1992 are as follows:
<CAPTION>
Estimated Annual Capacity Actual Annual Production
Location August 31, 1994 1994 1993 1992
(tons)
<S> <C> <C> <C> <C>
Joplin 150,000 tons of 75,000 72,000 88,000
ammonium phosphate
160,000 tons of 157,000 141,000 129,000
feed grade phosphate
</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 with annual phosphoric
acid production capacity of 752,000 tons. 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 capacities of 275,000 and
145,000 tons, respectively. Under the venture agreement, The Company and
Simplot purchase the production of SF Industries in proportion to their
ownership.
The Company, The National Gas Company of Trinidad and Tabago 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 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 nitrogen production 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>
Estimated Annual Capacity Actual Annual Production
Location August 31, 1994 1994 1993 1992
(tons)
<S> <C> <C> <C> <C>
22 feed mills
(combined) 1,660,000 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>
Plant capacities at August 31, 1994 and production for 1994, 1993 and 1992
are as follows:
<CAPTION>
Actual Weekly Production
Estimated Weekly Capacity On a One-Shift Basis
Location August 31, 1994 1994 1993 1992
(pounds) (pounds)
<S> <C> <C> <C> <C>
Wichita 1,100,000 1,884,000 1,514,000 1,618,000
San Leandro** 300,000 -0- 243,000 269,000
Carroll 692,000 1,111,000* 1,204,000* 1,131,000*
Springfield 400,000 622,000 666,000 560,000
Carey/Riegel 260,000 257,000 231,000 220,000
<FN>
* All ham products were produced on 2 shifts during 1994, 1993 and 1992.
** Closed September 1, 1993
</TABLE>
<TABLE>
<CAPTION>
Actual Weekly Production
Estimated Weekly Capacity On a One-Shift Basis
Location August 31, 1994 1994 1993 1992
<S> <C> <C> <C> <C>
Denison 38,000 head slaughtered 40,000 37,000 39,000
Crete 42,000 head slaughtered 47,000 45,000 47,000
Monmouth 30,000 head slaughtered 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. As of August 31, 1994, the two plants
had an estimated daily capacity of 6,800 cattle and had operated during the year
at 97% of capacity.
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, Kansas 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."
ITEM 3. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no established public market for the common stock, associate
member common stock and capital credits of Farmland. In view of the following,
it is unlikely in the foreseeable future that a public market for these equities
will develop:
1) the common stock, associate member common stock and capital
credits are nondividend bearing;
2) the right of any holder of common stock, associate member common
stock and capital credits to receive patronage refunds (including
any cash patronage refunds) from Farmland is dependent on whether
the holder is an eligible member or associate member of Farmland
or is a party to a currently effective patronage refund agreement
with Farmland. See "Business and Properties, the Company, 'Voting
Members' and 'Associate Members'";
3) the amount of patronage refunds (including any cash patronage
refunds) a holder, eligible to receive patronage refunds, may
receive is dependent on the net income of Farmland which is
attributable to the quantity or value of business such holder
transacts with Farmland and the amount by which a holder's
investment in Farmland varies from such holder's base capital
requirement. See "Patronage Refunds and Distribution of Net
Income," and
4) Farmland intends to redeem its equities only in accordance with
provisions of its equity redemption plans which provisions are
determined by the Farmland Board of Directors at its sole
discretion. See "Equity Redemption Plans."
There are approximately 2,570 holders of common stock, 275 holders of
associate member common stock, and 9,835 holders of capital credits based upon
the number of recordholders.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
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.
<CAPTION>
Year Ended August 31
1994 1993 1992 1991 1990
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Summary of Operation:
(3)(4)(5)
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
(1)(2) $ 78,766 $ (36,833)$ 70,504 $ 50,166 $ 58,184
Net income (Loss)
(1)(2) $ 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
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) Effective June 30, 1992, the Company acquired the grain marketing assets of
Union Equity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and note 2 of the notes to
consolidated financial statements.
(4) During 1993, Farmland obtained a 58% interest in NBPC, a limited liability
company. Effective April 15, 1993, NBPC acquired Idle Wild Food's beef
packing plant and feed lot located in Liberal, Kansas. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and note 2 of the notes to consolidated financial statements.
(5) 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. Effective December 1, 1993, CFA owners approved a
recapitalization plan which limits the voting rights of any owner
(including Farmland) to 20% or less regardless of the number of voting
shares held. Accordingly, CFA is not a subsidiary of Farmland at
August 31, 1993 and Farmland is no longer engaged in commercial lending
operations.
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-, ten- and twenty-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.
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, Farmland's annual net income or loss determined in
accordance with income tax regulations in 1994 and in accordance with generally
accepted accounting principles in 1995 and after 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, 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
Extraordinary Item
Sales-Increase (Decrease) -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
* 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 expensed
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
See note 17 of the notes to consolidated financial statements.
OTHER, NET
See note 16 of the notes to consolidated financial statements.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS
Independent Auditors' Report . . . . . . . . . . . . . . 30
Consolidated Balance Sheets, August 31, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . 31
Consolidated Statements of Operations
for each of the years in
the three-year period ended August 31, 1994 . . . . . 33
Consolidated Statements of Cash Flows for
each of the years in
the three-year period ended August 31, 1994 . . . . . 34
Consolidated Statements of Capital
Shares and Equities for each
of the years in the three-year
period ended August 31, 1994 . . . . . . . . . . . . 36
Notes to Consolidated Financial Statements . . . . . . . 37
FINANCIAL STATEMENT SCHEDULES
Farmland Industries, Inc. and Subsidiaries for each
of the years in the three-year period ended August 31, 1994:
1I--Amounts Receivable from Related Parties 67
V--Property, Plant and Equipment . . . . . . . . . . . . 68
VI--Accumulated Depreciation and Amortization of . . . . 71
Property, Plant and Equipment
IX--Short-term Borrowings . . . . . . . . . . . . . . . 74
X--Supplementary Income Statement Information . . . . . 74
All other schedules are omitted as the required information is
inapplicable or the information is presented in the consolidated financial
statements or related notes.
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.
In connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules 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. Also, in our opinion, the related 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.
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 and 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
Subordinated certificates of investment and
capital investment certificates--
7.25% to 10.5%, maturing 1995 through 2014 210,054 192,857
Subordinated monthly interest certificates
--7.25% 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)
<TABLE>
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:
<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 has been recorded as a
reduction of goodwill in the accompanying consolidated balance sheet as of
August 31, 1992. 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.
<TABLE>
The Company charges pension cost as accrued based on actuarial valuation of
the Plan.
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) $ 55,049
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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No disagreement on any matter of accounting principles or practices or
financial statement disclosure was reported.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors of Farmland are as follows:
<TABLE>
<CAPTION>
Total
Expiration Years of
of Service
Age as of Positions Present 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 1995 10 General Manager--American Pride Co-op
of the Association, Brighton, Colorado, a local
Board cooperative association of farmers and ranchers.
H. D. Cleberg 55 President 1994 4 Mr. Cleberg has been with Farmland since 1968.
and Chief He was named as president-elect in February 1991
Executive and became President in April 1991. From
Officer September 1990 to January 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 1994 11 Producer--Deerfield, Kansas. Mr. Molz has served
Chairman as Chairman of the Board of the National Bank for
and Vice Cooperatives since January 1993. He served as
President Chairman of 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 1994 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 1994 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 * 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 1994 6 General Manager--Lexington Cooperative Oil
Company, Lexington, Nebraska, 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.
Robert Merkle 65 1994 12 Producer--Ashkum, Illinois and a Director of Tri
Central Co-op, Ashkum, Illinois, a local
cooperative association of farmers and ranchers.
Greg Pfenning 45 1994 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.
* Elected to the Farmland Industries, Inc. Board of Directors in April 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, Robert Merkle, Otis Molz, Albert Shivley, and H. D. Cleberg. The
audit committee consists of Ben Griffith, Richard Detten, Steven Erdman, Barry
Jensen and Joe Royster.
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. Berardi 51 Executive Vice President and Chief 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. Cleberg 55 President and Chief Executive Officer - Mr. 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. Dees 51 Executive Vice President, Farmland and 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. Evans 50 Senior Vice President, Agricultural 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. Honse 51 Executive Vice President, Agricultural 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. Sanders 53 Vice President and Corporate Secretary - 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 President 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 reration 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> <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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person owns of record or is known to own beneficially more than five
percent of Farmland's equity securities.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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 IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) Listing of Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets, August 31, 1994 and 1993
Consolidated Statements of Operations for each of
the years in the three-year period ended August 31,
1994
Consolidated Statements of Cash Flows for each of
the years in the three-year period ended August 31,
1994
Consolidated Statements of Capital Shares and
Equities for each of the years in the three-year
period ended August 31, 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Farmland Industries, Inc. and Subsidiaries for each of the
years in the three-year period ended August 31, 1994:
II--Amounts Receivable from Related Parties
V--Property, Plant and Equipment
VI--Accumulated Depreciation and Amortization of
Property, Plant and Equipment
IX--Short-term Borrowings
X--Supplementary Income Statement Information
All other schedules are omitted as the required information is
inapplicable or the information is presented in the consolidated
financial statements or related notes.
(3) Exhibits
Articles of Incorporation and Bylaws:
3.A Articles of Incorporation and Bylaws of Farmland Industries,
Inc. effective December 1, 1993.
Instruments Defining the Rights of Security Holders, Including
Indentures:
4.A(1) 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.A(2) 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.A(2)(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, filed December 3,
1991)
4.A(3) 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.A(3)(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, filed
December 3, 1991)
4.A(4) 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.A(4)(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, filed December 3, 1991)
4.A(5) 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.A(6) 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.B(1) 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.B(2) 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)
Material Contracts:
Lease Contracts:
10.A(1) 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.A(2) 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 Filed Pursuant to Item 14C of this
Report.
10.(iii)(A)(1) Annual Employee Variable Compensation Plan
(September 1, 1994 - August 31, 1995)
10.(iii)(A)(2) Farmland Industries, Inc. Management Long-Term
Incentive Plan (Effective September 1, 1993).
(Incorporated by Reference - Form 10-K, filed
November 29, 1993)
10.(iii)(A)(3) Farmland Industries, Inc. Executive Deferred
Compensation Plan (Incorporated by Reference -
Form SE, filed November 23, 1987)
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.
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 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 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 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 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 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 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 has been included in the
consolidated financial statements filed in this registration.
24. Power of Attorney
27. Financial Data Schedule (Fiscal Year Ended August 31, 1994).
(B) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
(C) Exhibits
The exhibits required by Item 601 of Regulation S-K are filed herewith
or have been filed with the Securities and Exchange Commission and are
incorporated by reference as part of this Form 10-K. See Item
14(A)(3).
(D) Financial Statement Schedules required by Regulation are filed herewith:
See Item 14(A)(2).
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 and payments are made on a daily basis as funds become
available to Hyplains.
</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 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%
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, 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>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, FARMLAND INDUSTRIES,
INC. HAS DULY CAUSED THIS FORM 10-K TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF KANSAS CITY, STATE OF
MISSOURI ON NOVEMBER 29, 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 FORM 10-K
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 Board, November 29, 1994
Albert J. Shivley Director
OTIS H. MOLZ Vice Chairman of Board, November 29, 1994
Otis H. Molz Director
LYMAN ADAMS Director November 29, 1994
Lyman Adams
RONALD J. AMUNDSON Director November 29, 1994
Ronald J. Amundson
BAXTER ANKERSTJERNE Director November 29, 1994
Baxter Ankerstjerne
JODY BEZNER Director November 29, 1994
Jody Bezner
RICHARD L. DETTEN Director November 29, 1994
Richard L. Detten
WILLARD ENGEL Director November 29, 1994
Willard Engel
STEVEN ERDMAN Director November 29, 1994
Steven Erdman
BEN GRIFFITH Director November 29, 1994
Ben Griffith
GAIL D. HALL Director November 29, 1994
Gail D. Hall
BARRY JENSEN Director November 29, 1994
Barry Jensen
ROBERT MERKLE Director November 29, 1994
Robert Merkle
GREG PFENNING Director November 29, 1994
Greg Pfenning
VONN RICHARDSON Director November 29, 1994
Vonn Richardson
MONTE ROMOHR Director November 29, 1994
Monte Romohr
Director November 29, 1994
Joe Royster
PAUL RUEDINGER Director November 29, 1994
Paul Ruedinger
RAYMOND J. SCHMITZ Director November 29, 1994
Raymond J. Schmitz
THEODORE J. WEHRBEIN Director November 29, 1994
Theodore J. Wehrbein
ROBERT ZINKULA Director November 29, 1994
Robert Zinkula
Exhibit 99
EXHIBIT INDEX
The following exhibits and financial statement schedules are filed as a part
of this Form 10-K. Certain on these exhibits are incorporated by the reference
indicated. Items marked with an asterisk (*) are filed herewith.
Exhibit No. Exhibit
Articles of Incorporation and Bylaws:
* 3.A Articles of Incorporation and Bylaws of Farmland Industries, Inc.
effective December 1, 1993.
Instruments Defining the Rights of Security Holders, Including
Indentures:
4.A(1) 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.A(2) 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.A(2)(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, filed December 3,
1991)
4.A(3) 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.A(3)(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, filed December 3,
1991)
4.A(4) 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.A(4)(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, filed December 3,
1991)
4.A(5) 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.A(6) 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.B(1) 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.B(2) 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)
Material Contracts:
Lease Contracts:
10.A(1) 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.A(2) 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 Filed Pursuant to Item 14C of this Report.
* 10.(iii)(A)(1) Annual Employee Variable Compensation Plan (September 1,
1994 - August 31, 1995)
10.(iii)(A)(2) Farmland Industries, Inc. Management Long-Term Incentive
Plan (Effective September 1, 1993). (Incorporated by
Reference - Form 10-K, filed November 29, 1993)
10.(iii)(A)(3) Farmland Industries, Inc. Executive Deferred
Compensation Plan (Incorporated by Reference - Form SE,
filed November 23, 1987)
* 21. Subsidiaries of the Registrant
* 24. Power of Attorney
* 27. Financial Data Schedule (Fiscal Year Ended August 31, 1994).
Exhibit 3(A)
ARTICLES OF INCORPORATION AND BYLAWS OF FARMLAND INDUSTRIES, INC.
Kansas City, Missouri
(Effective 12-1-93)
ARTICLES OF INCORPORATION
ARTICLE I - NAME
Section 1. Name. The name of this corporation shall be FARMLAND
INDUSTRIES, INC.
ARTICLE II - PURPOSES
Section 1. Purposes. The purposes for which the Association is organized
are to engage in any activity in connection with the marketing or selling of the
agricultural products of its members and other patrons; or with the harvesting,
threshing, milling, preserving, drying, processing, canning, packing, storing,
handling, shipping, or utilization thereof, including (without limitation) doing
a public warehouse business and storing agricultural products in interstate
commerce; or the manufacturing or marketing of the by-products thereof; or in
connection with the manufacturing, selling, or supplying to its members and
other patrons of machinery, equipment or supplies, or in connection with
agricultural education, research, legislation and economic and social
conditions; or in connection with the improvement of livestock breeds by means
of artificial breeding or otherwise; or in the financing of the above-enumerated
activities; or in any one or more of the activities specified herein.
ARTICLE III - PLACE OF BUSINESS
Section 1. Place. The place where its business is to be transacted is at
3315 North Oak Trafficway, Kansas City, Missouri, and at such other places
either within or outside the State of Kansas as may be provided by the bylaws or
as determined by the Board of Directors.
ARTICLE IV - TERM
Section 1. Term. The term for which this corporation is to exist is fifty
years. (By a Certificate of Renewal filed with the Secretary of State of Kansas
on September 7, 1973, the term was extended for a period of fifty years from and
after September 1, 1973.)
ARTICLE V - NUMBER OF DIRECTORS
Section 1. Number of Directors. The number of directors of this
corporation shall be twenty-two (22), and the term of office of each thereof
shall be three (3) years and until his successor is elected and has qualified.
ARTICLE VI - CAPITAL STOCK
Section 1. Authorized Capital Stock. The capital stock of this
Association shall be $1,500,000,000, consisting of 50,000,000 shares of common
stock of the par value of $25 per share, 2,000,000 shares of associate member
common stock of the par value of $25 per share and 8,000,000 shares of preferred
stock of the par value of $25 per share.
Section 2. Common Stock. The common stock of this Association may be
purchased, owned or held only by producers of agricultural products and
associations of such producers, who patronize the Association in accordance with
uniform terms and conditions and only such producers and associations of such
producers shall be regarded as eligible voting members of the Association. In
the event the Board of Directors of the Association shall determine that any
holder of the common stock of this Association 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 the Association, and the
Association 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 the Association, or (b) in exchange for such common stock, to issue
an equivalent par value amount of associate member common stock or to issue or
record on the books of the Association, capital credits in an equivalent amount.
On the failure of any holder, following any demand by the Association therefor,
to deliver the certificate or certificates evidencing any common stock, the
Association may cancel the same on its books and issue associate member common
stock or issue or record on the books of the Association an equivalent amount of
capital credits, in lieu thereof. The common stock of this Association may be
transferred, and associate member common stock and capital credits may be
converted to common stock and transferred, only with the consent of the Board of
Directors of the Association and on the books of the Association and then only
to persons eligible to hold the same; and no purported assignment or transfer of
common stock shall pass to any person not eligible to hold the same, any rights
or privileges on account of such stock to vote on the management or affairs of
the Association. Each holder of common stock shall be entitled to a minimum of
one vote. Common shareholders will receive one additional vote for each
complete increment of $1,000 in common stock above membership requirements and
one additional vote for each complete increment of dollar volume of business in
an amount equal to the product of $1,000 multiplied by a fraction the numerator
of which is the total dollar volume of patronage business of the Association
during the preceding fiscal year with common shareholders and the denominator of
which is the total dollar amount of the Association's common stock issued and
outstanding at the close of the preceding fiscal year. No common shareholder
shall be entitled to vote more than five percent (5%) of the total votes of the
Association available to be cast. This Association shall have a lien on (and
right of setoff against) all of its issued common stock for all indebtedness of
the holder(s), whether due or to become due, thereof to the Association. No
interest or dividend shall be paid on outstanding common stock. The Board of
Directors, in its sole discretion, may at any time or times and on any basis
deemed appropriate authorize the retirement of any common stock, in whole or in
part. Each certificate of common stock issued subsequent to the date of an
amendment shall have the then applicable provisions printed thereon.
Section 3. Associate Member Common Stock. The associate member common
stock of the Association may be purchased, owned or held by any person having
the qualifications as may be established by the Board of Directors. Associate
member common stock shall have all of the rights and privileges attendant to
that of common stock, except that such associate member common stock shall not
entitle the holder thereof to vote, irrespective of the number of shares held,
for director(s) or to vote on the management or affairs of the Association. In
the event the Board of Directors of the Association shall determine that any
holder of the associate member common stock of the Association does not meet the
qualifications as may be established by the Board of Directors for holders
thereof, the Association shall have the right, at its option, (a) to purchase
such associate member common stock at its book or par value, whichever is less,
as determined by the Board of Directors of the Association, or (b) to convert
the associate member common stock held by any such person to capital credits by
notifying such holder, after which such associate member common stock shall be
cancelled on the books of the Association. The associate member common stock of
this Association may be transferred, and common stock and capital credits may be
converted to associate member common stock and transferred, only with the
consent of the Board of Directors of the Association and then only to persons
eligible to hold the same; and no purported assignment or transfer of associate
member common stock shall pass to any person not eligible to hold the same, any
rights or privileges on account of such stock. This Association shall have a
lien on (and right of setoff against) all of its issued associate member common
stock for all indebtedness of the holder(s), whether due or to become due,
thereof to the Association. No interest or dividend shall be paid on
outstanding associate member common stock. The Board of Directors, in its sole
discretion, may at any time or times and on any basis deemed appropriate au-
thorize the retirement of any associate member common stock, in whole or in
part. Each certificate of associate member common stock issued subsequent to
the date of an amendment shall have the then applicable provisions printed
thereon.
Section 4. Preferred Stock. The preferred stock shall be nonvoting and
may be (1) made subject to redemption at such time or times, and at such price
or prices, and (2) issued in such series, with such designations, preferences,
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions as shall be stated and expressed in
the Articles of Incorporation of this Association, or in the resolution or
resolutions adopted by the Board of Directors thereof for the issue of such
stock; and the said Board of Directors is hereby granted authority (1) to
provide from time to time for the issue of preferred stock, in one or more
series, and with such designations, preferences, and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, and (2) to make such stock, or any part thereof, subject to
redemption at such time or times, and at such price or prices, as the said Board
of Directors, in its sole discretion, may from time to time determine.
Section 5. Capital Credits. The Association may issue at any time, and
record or transfer on its books and records, one or more classes of capital
credits in the Association. Holders of capital credits shall not be entitled to
vote. The capital credits of this Association may be transferred, and common
stock and associate member common stock may be converted to capital credits and
transferred, only with the consent of the Board of Directors of the Association
and on the books of the Association. The Board of Directors, in its sole
discretion, may at any time or times and on any basis deemed appropriate
authorize the transfer or retirement of any capital credits, in whole or in
part. No interest or dividend shall be paid on outstanding capital credits.
This Association shall have a lien on (and right of setoff against) all of its
issued capital credits for all indebtedness of the holder(s), whether due or to
become due, thereof to the Association. Each certificate of capital credits
issued subsequent to the date of an amendment shall have the then applicable
provisions printed thereon.
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. Section 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.
BYLAWS
ARTICLE I - CAPITAL STOCK
Section 1. Stock Certificates. Certificates of stock shall be issued to
each holder of fully-paid shares. Each certificate shall state the par value of
the shares, the number of shares represented, the name of the person to whom
issued, and shall bear the signature of the president or a vice president and
the secretary or an assistant secretary and the seal of the Association, which
signatures and seal may be facsimiles. Certificates of stock shall be numbered
and issued in numerical order and a record of each certificate issued shall be
kept.
Section 2. Certificates of Indebtedness. The Association shall have the
authority to issue certificates of indebtedness in such form and containing such
terms as may be approved by the Board of Directors, which certificates shall
bear such rate or rates of interest as the Board of Directors may from time to
time determine.
ARTICLE II - DISTRIBUTION OF EARNINGS
Section 1. Current Year's Net Earnings and Patronage Refund Obligation.
(a) The Association shall determine annually its earnings or loss including the
appropriate portions thereof constituting net earnings for patronage refunds.
It shall then allocate and distribute its net overall earnings from its
allocation units as patronage refunds to its Members and Patrons with the
amounts distributed being determined on the basis of their patronage with such
units during the year.
(b) The Association's overall earnings or loss shall first be determined
using generally accepted accounting principles. For the fiscal year ending
August 31, 1994, the overall net earnings or loss shall then be increased or
decreased in accordance with the applicable rules and regulations for computing
income taxes. Beginning with the fiscal year ending August 31, 1995, the
overall net earnings or loss shall no longer be adjusted based on such
applicable rules and regulations for computing income taxes. Then any earnings
or losses of the allocation units shall be offset in accordance with Section 4
of this Article to establish the overall net earnings of the Association's
remaining allocation units which will be available for patronage refunds.
(c) The Association's overall net earnings or loss shall be divided into
(i) a patronage-sourced portion, determined on the basis of the quantity or
value of business done by the Association with or for its Members or Patrons who
are eligible to receive patronage refunds and who acquire supplies or services
from, or market products through the Association, and (ii) a non-patronage-
sourced portion which shall include amounts determined on the basis of the quan-
tity or value of business done with or for persons who are not eligible to
receive patronage refunds from the Association, plus such net amounts of income
(or expense) which are unrelated to the marketing, purchasing or service
operations carried on by the Association for its Members and Patrons on a
cooperative basis.
(d) Any patronage-sourced net earnings shall be further reduced (but not
below zero) by the ratably determined portion of dividends on stock applicable
to such net earnings that are paid or payable for the fiscal year. Then there
shall be deducted the accumulated amount of patronage-sourced losses from prior
years which have not otherwise been disposed of by the Board of Directors but
not in excess of the amount of net operating loss carryforwards available for
use in such year.
(e) If at the conclusion of any fiscal year, the amount of retained
earnings (which shall include the current year's non-patronage-sourced net
earnings) is less than thirty percent (30%) of Member and Associate Member
common stock issued and outstanding, and patronage refunds for reinvestment
balances as of the end of the previous year then, in order to provide for the
Association's reasonable member reserves, there shall be transferred to re-
tained earnings, from patronage-sourced net earnings, as members' contribution
to reserves, an amount equal to the lesser of (i) fifteen percent (15%) of the
current year's remaining patronage-sourced net earnings, or (ii) such amount
necessary to increase retained earnings (which shall include the current year's
non-patronage-sourced net earnings) to thirty percent (30%) of Member and
Associate Member common stock outstanding at the conclusion of the previous
fiscal year.
(f) Any amount then remaining shall constitute the net earnings of the
Association from which Members' and Patrons' patronage refunds shall be paid,
and such amount shall be apportioned among the Members and Patrons of the
appropriate allocation units on any equitable patronage basis approved by the
Board of Directors, and the amounts so determined, shall be paid as patronage
refunds in the form of cash, qualified or non-qualified written notices of
allocation, provided, however, that a payment by qualified written notice of
allocation shall be accompanied by no less than twenty percent (20%) of the
stated dollar amount thereof in cash with the balance at par value in Member
common stock, Associate Member common stock or capital credits at par value or
stated value as determined by the Board of Directors. The Board of Directors
shall determine the cash and non-cash amounts, if any, of a Member's or Patron's
patronage refund to be retained for purposes of collecting amounts due the
Association for such Member's or Patron's subscriptions to any official
publication of the Association or for any or all of such Member's or Patron's
outstanding indebtedness to the Association, provided that no retention of cash
hereunder shall reduce the cash portion of any Member's or Patron's patronage
refund otherwise paid by qualified written notice of allocation, to an amount
which is less than twenty percent (20%) of the total stated dollar amount
thereof.
Section 2. Bylaw Consent. Each applicant for membership who continues as
a voting member after having been accepted to membership in the Association and
after receiving a copy of this bylaw consent provision, shall, by such act
alone, consent that the amount of any distributions paid by qualified written
notices of allocation, respecting such person's patronage with the Association
occurring after it has received a copy of the bylaw consent and while such
person remains a voting member thereafter, shall be taken into account by such
person at its stated dollar amount for the taxable year in which such
distribution(s) are received, in the manner provided by 26 U.S.C. 1385(a).
Section 3. Losses. The Board of Directors of this Association shall have
complete discretion to determine the handling and ultimate disposition of the
Association's losses (including allocation unit losses) and the form, priority
and manner in which such losses or portions thereof shall be taken into account,
retained, and ultimately disposed of or recovered. The Board may retain losses
of the Association and subsequently (i) dispose of them by offset against the
net earnings of the Association of subsequent years, (ii) apply such losses to
prior years' patronage allocations at any time in order to dispose of them by
means of offset and cancellation against members' and patrons' equity account
balances, (iii) select and use any other method of disposition as the Board of
Directors, in its sole discretion, shall from time to time then determine.
Section 4. Netting of Allocation Unit Earnings and Loss. If one or more
of the Association's allocation units experience both earnings and losses during
any fiscal year, the earnings and losses of such allocation unit or units shall
be ratably allocated to and netted with the earnings and losses of the remaining
allocation units of the Association in order to determine the Association's
overall net earnings. The Association's Patrons and Members shall be notified
in any fiscal year for which such netting has occurred.
Section 5. Definitions. (a) As used in this Article, the term "Member"
shall mean a holder of common stock or Associate Member common stock of the
Association; the term "Patron" shall include any person, firm or association
which is not also a Member or Associate Member of the Association, with whom the
Association has in effect an agreement pursuant to which it has agreed to pay
patronage refunds to such person on the basis of the quantity or value of the
Association's business done with or for such person during the fiscal year.
(b) As used in this Article, the term "allocation unit" shall mean any
business or other unit of the Association with respect to which patronage
refunds are to be paid (or patronage-sourced losses are to be taken into
account) on the basis of the quantity or value of business done during the year
with the Association by its Members and Patrons.
ARTICLE III - CAPITALIZATION
Section 1. Base Capital Plan. For the purposes of acquiring and
maintaining adequate capital to finance the business of the Association, the
Board of Directors may establish a Base Capital Plan. The Plan may provide a
mechanism for determining the Association'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 capital held by members or patrons in excess of their base capital
requirements and 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 patrons meet their base capital requirements. Such Plan
may be amended or modified from time to time or suspended by the Board of
Directors as it deems fit.
ARTICLE IV - MEMBERS' AND PATRONS' INVESTMENTS
Section 1. Common Stock, Associate Member Common Stock, Capital Credits.
As a condition of the right to receive patronage refunds as hereinbefore
provided, and as a condition of each purchase from, or other transaction with,
the Association, and in consideration of similar subscriptions by others, each
Member and Patron entitled to receive patronage refunds under the bylaws shall
and does hereby, as of the first day of each fiscal year of the Association,
irrevocably subscribe for and agree to purchase common stock, associate member
common stock or other capital credit(s) of the Association, at par, in an amount
of not more than eighty percent (80%) of the amount to be paid to such patron by
the Association as patronage refunds resulting from business transacted during
such year, as conclusively determined by the Board of Directors of the
Association at the time of payment of such refunds. Such subscriptions shall be
payable in cash on or before the last day of such fiscal year, without the
execution and delivery of any further agreement, and without any acceptance,
call or notice by the Association, but only out of such patronage refunds.
ARTICLE V - MEETINGS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held each year at such time and at such place as may be fixed from time to
time by the Board of Directors.
Section 2. Special Meetings. The chairman of the board shall call a
special meeting of the shareholders upon a written request of at least ten
percent (10%) of the shareholders, or upon a majority vote of the directors.
The notice of the time, place, and purpose of such special meeting shall be
issued within fifteen (15) days from and after the presentation of such
petition, and such special meeting shall be held within thirty (30) days from
and after the date of presenting such petition.
Section 3. Notice of Meetings. Notice shall be given by the secretary of
all annual and special meetings of the shareholders by mailing a notice thereof
to each shareholder not less than fifteen (15) days preceding the date of the
proposed meeting.
Section 4. Presiding Officer. The chairman of the board of the
Association shall preside at all meetings of shareholders, and shall cast the
deciding vote in all cases of a tie.
Section 5. Absent Members Voting. Voting by proxy shall not be permitted,
but absent shareholders entitled to vote may vote on specific questions, other
than the removal of directors, by ballots transmitted to the secretary, and such
ballots shall be counted only in the meeting at the time at which such vote is
taken.
Section 6. Quorum. A quorum for the transaction of business shall consist
of at least two hundred (200) shareholders entitled to vote and at least one-
third of the total votes eligible to be cast. All shareholders voting by mail
and all votes cast by mail shall be counted as present in determining a quorum
for the consideration of a specified question on which votes may be cast by
mail.
ARTICLE VI - DIRECTORS AND OFFICERS
Section 1. Directors. The business and affairs of the Association shall
be managed under the direction and control of the Board of Directors, consisting
of twenty-two (22) members, elected at annual meetings by the shareholders
entitled to vote from their own numbers for three-year terms. Twenty-one
members of the Board of Directors shall be elected according to districts as
hereinafter provided and shall be known as district directors. The remaining
member of the Board of Directors shall be nominated and elected from the floor
and shall be known as a director-at-large.
Section 2. Election of Directors.
(a) The territory in which the Association operates shall, for the purpose
of electing district directors, be divided into districts, each of which shall
be entitled to the number of directors herein specified.
DISTRICT 1 (Missouri and Kentucky) -- 1 director; DISTRICT 2
(Kansas) -- 4 directors; DISTRICT 3 (Colorado, Wyoming, Utah, Oregon
and Idaho) -- 1 director; DISTRICT 4 (Nebraska) -- 4 directors;
DISTRICT 5 (South Dakota, North Dakota and Montana) -- 1 director;
DISTRICT 6 (Iowa, Illinois and Indiana) -- 4 directors; DISTRICT 7
(Oklahoma and Arkansas) -- 3 directors; DISTRICT 8 (Michigan,
Minnesota and Wisconsin) -- 2 directors; and DISTRICT 9 (Texas and New
Mexico) -- 1 director.
(b) The Board of Directors may from time to time assign to any of the
aforesaid districts any member or members residing in any state or states or
foreign country or foreign countries, other than the states named in the
foregoing paragraph. In any such case a member so assigned to any district
shall for all purposes be deemed to belong to such district and shall be
entitled to attend and participate in the hereinafter mentioned caucus of that
district.
(c) The various districts shall, by caucus, nominate their candidate or
candidates for director as herein provided. The following persons shall be
eligible for election as a director at the annual meeting of members: individual
shareholders; members, directors, officers, or employees of an association
shareholder; and, employees of the Association. In the event the number of
directors who are employees of shareholders entitled to vote totals ten or more
at any given time, no employee of a shareholder may be elected or appointed to
the Board of Directors, provided however, this limitation shall not disqualify
any director in office from being eligible for election or re-election as a
director. No person shall be eligible for nomination as a director if such
person has attained 65 years of age. Five months prior to the annual meeting the
chairman of the board shall appoint a nominating committee for each district in
which the term of a director expires at the next annual meeting. The district
nominating committee shall consist of three persons (one person to be appointed
as chairman) meeting the qualifications required to be a director as set forth
above. As promptly as possible after the appointment of district nominating
committees, the secretary of the Association shall notify the president of each
member association in each such district, by mail, of the members of the
district nominating committee. Each member association may notify the chairman
of the district nominating committee of the member association's candidate or
candidates for director at least three months prior to the date of the annual
meeting. Such action shall be evidenced by board resolution duly recorded in its
minutes. The district nominating committee shall mail its report to the
president of each member association in each such district at least one month
prior to the annual meeting and shall render its report at the caucus of such
district to be held at and in conjunction with the annual meeting, and in doing
so, shall provide at least one candidate, but not more than three candidates,
for each director term which is expiring. In addition to the names of candidate
or candidates provided by member associations for consideration by the district
nominating committee, such committee may also consider as candidates persons the
committee feels qualified. Any official delegate may make nominations at the
district caucus. Such district shall thereupon nominate its nominee or nominees
for directors and the names of said nominee or nominees shall be placed before
the members at the annual meeting for election. Should said nominee or nominees
fail to receive a majority of the votes cast by shareholders entitled to vote
and present and voting, nominations may be made from the floor, of nominee or
nominees from the district involved, and such shareholders shall thereupon vote
on said nominee or nominees. In each district caucus wherein directors are
nominated and in the election of directors at the annual meeting, shareholders
entitled to vote shall have the number of votes as determined under the Articles
of Incorporation, of the Association, for each director to be elected.
(d) A redistricting of the territory served by the Association, or a
reapportionment of the number of directors for each district, may be made by the
members at any annual meeting.
Section 3. Officers. The officers, each of whom shall serve at the will
of the Board of Directors and shall be elected by the Board of Directors, shall
consist of a chairman of the board, vice chairman, president, vice president,
secretary, one or more assistant secretaries, treasurer, one or more assistant
treasurers, and such other officers as the Board of Directors may from time to
time deem advisable. Only the chairman of the board, vice chairman, president,
and the vice president need be members of the Board of Directors. No person may
hold the offices of chairman of the board and president at the same time.
Section 4. Vacancies. Any vacancy on the Board of Directors shall be
filled by appointment by the remainder of the board until the next annual
meeting when a replacement for the unexpired term shall be elected.
Section 5. Meetings. The board shall meet upon the call of the chairman
of the board who shall determine the time and place of meetings, or upon call by
a majority of the directors; and meetings shall be held at least quarterly.
Section 6. Quorum. A majority of the qualified members shall constitute a
quorum both for the Board of Directors and the executive committee.
Section 7. Compensation. The compensation of the directors for attendance
at meetings shall be Three Hundred Dollars ($300.00) per day, plus necessary
expenses.
Section 8. Removal. Any director of the Association may be removed for
cause, by vote of not less than two-thirds of the members present, at any annual
meeting or at any special meeting called for the purpose. A director shall be
informed in writing of the charges preferred against him at least fifteen (15)
days before the meeting and at such meeting shall have an opportunity to be
heard in person or by counsel and by witnesses thereto. Officers or agents of
the Board of Directors may be removed from office or employment at any time by
action of the Board of Directors.
Section 9. Indemnification of Directors, Officers and Employees. Each
person who is or was a director, officer or employee of the Association or is or
was serving at the request of the Association as a director, officer or employee
of another corporation (including the heirs, executors, administrators or estate
of such person) shall be indemnified by the Association as of right to the full
extent permitted or authorized by the laws of the State of Kansas, as now in
effect and as hereafter amended, against any liability, judgment, fine, amount
paid in settlement, cost and expense (including attorneys' fees) asserted or
threatened against and incurred by such person in his capacity as or arising out
of his status as a director, officer or employee of the Association, or, if
serving at the request of the Association, as a director, officer or employee of
another corporation. The indemnification provided by this bylaw provision shall
not be exclusive of any other rights to which those indemnified may be entitled
under any other bylaw or under any agreement, vote of shareholders or
disinterested directors or otherwise, and shall not limit in any way any right
which the Association may have to make different or further indemnifications
with respect to the same or different persons or classes of persons.
ARTICLE VII - DUTIES OF DIRECTORS
Section 1. Management of Business. The Board of Directors shall direct
the management of the affairs of the Association and shall make all necessary
rules and regulations, not inconsistent with the law or the articles of
incorporation or bylaws of the Association, for the management and control of
the affairs of the Association and the guidance of the officers, agents, and
employees thereof. The day-to-day business affairs of the Association shall be
in the management and control of the president, selected by the board.
Section 2. Executive Committee. An executive committee of six, which
shall include the chairman, vice chairman, and president of the Association and
three other members to be elected by the board from among its own members at its
first meeting after the annual meeting shall have all the powers and exercise
all the functions of the Board of Directors, subject to the Board of Directors'
general control and direction.
Section 3. Bonds. The Board of Directors shall require all officers and
employees charged by the Association with responsibility for the custody of any
of its funds or property to give adequate bonds, and the costs thereof shall be
paid by the Association.
Section 4. Audits. As often as the Board of Directors may consider
necessary, but at least once a year, the Board of Directors shall obtain the
services of a competent and disinterested auditor, who shall make a careful
audit of the books and accounts of the Association and render a report in
writing thereon. The annual audit report shall be submitted to the members of
the Association at the annual meeting.
ARTICLE VIII - DUTIES OF OFFICERS
Section 1. Duties of Chairman of the Board. The chairman of the board
shall preside over all meetings of the shareholders and of the Board of
Directors and call special meetings of the shareholders and of the Board of
Directors whenever he deems such action advisable.
Section 2. Duties of Vice Chairman. In the absence or disability of the
chairman, the vice chairman shall perform the duties and exercise the powers of
the chairman. The vice chairman shall perform such other duties as may be
imposed upon him from time to time by the board.
Section 3. Duties of President. The president shall be the chief
executive officer; shall sign or delegate to such other officers or employees of
the Association as the president may, in his sole discretion, determine, the
authority to sign stock certificates, deeds, leases, bills of sale and other
instruments conveying any interest in real estate or personal property of the
Association and such other instruments or documents as the Board of Directors
may authorize or direct from time to time; shall have and exercise the power to
hire and fire all employees other than officers, administrative officers, agents
or employees selected by the Board of Directors; see that the management and
business operations of the Association are exercised and conducted in accordance
with general policies established by the Board of Directors; and perform such
other duties and exercise such other power or powers as the Board of Directors
may from time to time authorize or direct.
Section 4. Duties of Vice Presidents. One vice president shall be chosen
from the membership of the board. The president may appoint such additional
vice presidents as he deems appropriate to conduct the affairs of the
Association. The duties of vice presidents shall be assigned to them by the
president. The president may delegate to one or more elected officer(s) the
authority to perform his duties during his absence in such manner as he deems
appropriate. In the event of the total disability or death of the president,
the vice president who is a board member shall perform the duties of the
president until such time as the board shall otherwise direct or until a
successor to the president is elected.
Section 5. Duties of Secretary. The secretary shall (1) keep a complete
record of the meetings of the shareholders and of the directors; (2) sign all
stock and membership certificates with the president or a vice president, and
such other papers pertaining to the Association as he may be authorized or
directed to sign by the directors; (3) serve all notices and make all reports
required by law and these bylaws, and perform such other secretarial duties as
may be required by the Board of Directors. The assistant secretaries shall
perform the duties and exercise the powers of the secretary during the absence
or disability of the secretary.
Section 6. Duties of Treasurer. The treasurer shall keep such records and
perform such other duties pertaining to his office as the Board of Directors may
require. The assistant treasurers shall perform the duties and exercise the
powers of the treasurer during the absence or disability of the treasurer.
ARTICLE IX - GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of this Association shall
commence September 1 and end on August 31.
Section 2. Amendments. These bylaws may be amended or altered, in whole
or in part, as provided by law, at any regular meeting of the members or at any
special meeting, when such action has been duly announced in the call, provided
that a majority of the votes cast by the shareholders entitled to vote and
present and voting, including those votes cast by mail, shall approve such
amendment or alteration.
Section 3. Official Publication. The Association may publish an official
publication. It may be mailed to subscriber lists provided by member
associations and the subscription price may be deducted from patronage refunds
earned by members.
Section 4. Membership Vote for Sale of Principal Business. The
Association shall not, without approval by a vote of the majority of the votes
cast by members entitled to vote and present and voting at a duly called meeting
of the Association, sell or convey or cause or permit the sale or conveyance of
more than forty-nine percent (49%) of the voting shares in any subsidiary which
accounted for fifty percent (50%) or more of the Association's gross sales on a
consolidated basis during any one of the Association's three (3) most recently
completed fiscal years or during such shorter period as such subsidiary has been
in existence.
ARTICLE X - DISSOLUTION
Section 1. Upon dissolution or liquidation of the Association in any
manner, except as may be otherwise provided by law, the assets of the
Association shall be distributed in the following order and manner, to wit:
1. To pay all costs and expenses of dissolution, liquidation and
distribution;
2. To pay and discharge all indebtedness of the Association, exclusive of
any liability for the distribution of net earnings;
3. To retire, at par value plus unpaid accrued dividends thereon, if any,
the five and one-half percent (5 1/2%) and the six percent (6%) preferred stock;
4. To retire, at par value plus unpaid accrued dividends thereon, if any,
all other preferred stock of the Association, in the order and in accordance
with such priority as may be provided for by the terms and provisions of the
outstanding certificates therefor;
5. To pay all patronage refunds payable from current net earnings; and
6. All remaining assets, if any, shall be distributed among the holders of
common stock and associate member common stock or other capital credit(s) in
proportion to the amounts thereof held by each.
Exhibit 10.(iii)(A)(1)
FY 95 STANDARD VARIABLE COMPENSATION PLAN
(SEPTEMBER 1, 1994 - AUGUST 31, 1995)
OBJECTIVE To pay additional cash beyond base salary to eligible employees
of Farmland Industries, Inc. or one of its units, contingent upon
the company's financial performance. Farmland Industries, Inc.
("Corporate") must achieve a threshold or minimum income before
extraordinary items, or no payout
occurs, regardless of individual business/service unit
results.
This plan includes three important exhibits which are an integral
part of the plan structure. Please be aware of and consult
them.
They include the following:
Exhibit A - Corporate and Unit financial performance criteria
and levels
Exhibit B - A summary chart of plan structure
Exhibit C - Descriptions and definitions of accounting terms
and methodologies relevant to this plan
PLAN STRUCTURE The plan provides a one-time cash payment following the
conclusion of FY 95 to eligible employees for the attainment of
corporate and unit objectives. Participation is divided into
four categories. Category 1 participants receive payout based
solely on corporate net income. A category 1, non-management
employee at grade 72 or below will normally have a payout
opportunity based 100% on corporate results; however, such
employees in a production environment or in a subsidiary may be
in a customized plan. Whether on a customized plan or standard
plan, they will not be allowed to switch back and forth from year
to year.
Individuals employed by a business unit, but whose functions
provide service to the entire company, may be placed on a 100%
corporate payout opportunity. Such employees shall remain on a
100% corporate opportunity until the nature of their job changes.
Payout opportunity for category 1 will be determined as a
percentage of eligible gross wages or salary paid during the
fiscal year. Payout opportunities for categories 2,3, and 4 will
be a percentage of salary range midpoint.
Any variations in the criteria explained in categories 1-4 below
result in a customized variation from the standard plan (i.e., a
customized plan).
CATEGORY 1
Participants
All eligible corporate and business unit employees with job
grades 0-72 (excluding grade 0-72 production supervisors).
Payout Opportunity
3%-5%-8%
Based on gross earnings during the fiscal year.
Measure
100% Corporate Return on Equity
CATEGORY 2
Participants
All eligible corporate and business unit employees with job
grades 73-79. Grade 0-72 production supervisors.
Payout Opportunity
5%-8%-15% - Grade 0-72 Production Supervisors
5%-8%-15% - Grades 73-74
6%-12%-20% - Grades 75-77
8%-18%-34% - Grades 78-79
Based on Midpoint
Measures
Corporate Units: 100% Corporate Return on Equity
Corporate unit participants include eligible corporate and region
employees, as well as any eligible employee of a business unit,
as designated by management.
Business Units: 50% Corporate Return on Equity
50% Business Unit Cash Flow
Return on Assets
Earnings After Interest
(Note: The three business unit measures
are weighted equally)
CATEGORY 3
Participants
All eligible employees with job grades 80 or above who are not
Farmland Industries, Inc. vice presidents.
Payout Opportunity
10%-22%-40%
Based on Midpoint
Measures
Corporate Units: 100% Corporate Return on Equity
Corporate unit participants include eligible corporate and
regional employees, as well as any eligible employees of a
business unit, as designated by management.
Business Units: 30% Corporate Return on Equity
70% Business Unit Cash Flow
Return on Assets
Earnings After Interest
CATEGORY 4
Participants
All eligible Farmland Industries, Inc. vice presidents and
above.
Payout Opportunity
15%-31%-52% - VPs serving on the Management Council
Designated members of senior management
20%-40%-64% - Designated members of senior management
25%-45%-70% - Chief Executive Officer
Based on Midpoint
A cash patronage payment will be required prior to any payout to
participants in this category.
Measures
Senior Management
and Corporate Unit 100% Corporate Return on Equity
Vice Presidents
Business Unit 30% Corporate Return on Equity
Vice Presidents 70% Business Unit Cash Flow
Return on Assets
Earnings After Interest
ELIGIBILITY The following types of employees are ineligible for payout
under the Standard Variable Compensation Plan:
- Employees represented by an organized bargaining unit.
- Employees hired after 5/31/95. (Waived if the employee is a
former regular full time employee during FY 95. Payout is
prorated.)
- Regular part time employees with less than 500 hours of
service during FY 95.
- Temporary employees with less than 1000 hours of service
during FY 95.
- Employees terminated for cause prior to 8/31/95.
- Employees who terminate voluntarily prior to 8/31/95.
(Employees who terminate to accept a position with a member
cooperative may be eligible for a prorated payout.)
- Employees included in variable compensation plans other than
the standard variable compensation plan.
PRORATIONS The circumstances listed below result in a prorated payout
(the amount of payout is proportionate to time served as an
active employee in this plan during the fiscal year):
Death/Disability
Retirement
Reduction in Force
Focus Team member obtaining outside employment
Layoff
Leave of Absence
Involuntary separations, other than for reasons listed above,
which are not for performance or for cause may result in
prorated payout.
Employees who voluntarily terminate prior to 08/31/95 for the
purpose of assuming a position with an MCA cooperative may be
eligible to receive a prorated payout. To secure eligibility,
the employee must notify Corporate Human Resources, in writing,
at the time of separation and ensure that the MCA cooperative
notifies Farmland's Corporate Human Resources Department, in
writing, to verify employment from the point of separation
through the conclusion of the plan year.
Employees on formal disciplinary or performance probation are
ineligible for that portion of the fiscal year.
Employees who transfer from one business/service unit to another
receive a prorated award based on the goals attained and eligible
gross wages paid or the salary range midpoint in each unit.
DETERMINATION
OF PAYOUT Payout is determined as a percentage of salary range midpoint or
eligible gross wages paid during the fiscal year. Business unit
or corporate performance measurements are labeled "threshold",
"target", and "maximum".
Threshold - The performance level required for the plan to pay
out. Attainment of threshold results in a payout equivalent to
3% of eligible gross wages or salary paid during the fiscal year
to category 1 participants. Payouts for categories 2, 3 and 4
range from 5% to 25% of midpoint. No payout occurs for
achievement below threshold.
Target - Identifies the actual performance objective. Attainment
of target results in a payout to category 1 participants
equivalent to 5% of eligible gross wages or salary earned during
the fiscal year. Category 2, 3 and 4 participants receive
payouts ranging from 8% to 45% of midpoint.
Maximum - A performance level exceeding target at which the
payout percentage is frozen. Attainment of maximum results in a
payout equivalent to 8% of eligible gross wages or salary earned
during the fiscal year to category 1 participants. Category 2,
3, and 4 participants would receive payouts ranging from 15% to
70% of midpoint. No payout occurs beyond these percentages
regardless of performance.
Payout for performance between threshold and target or target and
maximum is prorated.
APPROVED:
H. D. Cleberg
--------------------------------------------
H.D. Cleberg
President and CEO
EXHIBIT A
FY 95 PERFORMANCE CRITERIA AND GOALS
CORPORATE:
Threshold Target Maximum
Return on Equity 8% 11.5% 15%
Business Unit:
Threshold Target Maximum
Cash Flow
Return on Assets
Earnings after interest
<TABLE>
EXHIBIT B
FY 95 STANDARD VARIABLE COMPENSATION PLAN
<CAPTION>
Management Corporate Employees Basis Business Unit Employees Basis
Category Level for Payout for Payout Thr Target Max Grades
<S> <C> <C> <C> <C> <C> <C> <C>
1 Non-Mgmt. 100% Corporate Return on Equity 100% Corporate Return on Equity 3% 5% 8% 0-72
2 Managers 100% Corporate Return on Equity 50% Corporate Return on Equity 5% 8% 15% Production
& Above Supv. &
50% Business Unit Measures 73-74
Cashflow 6% 12% 20% 75-77
Return on Assets
Earnings after interest 8% 18% 34% 78-79
3 Managers & 100% Corporate Return on Equity 30% Corporate Return on Equity 10% 22% 40% 80+
Directors Non-Farmland
70% Business Unit Measures Industries, Inc
Cash Flow VPs)
Return on Asset
Earnings after interest
4 Vice Presidents (All Senior Management, Corporate, (Business Unit VP's) 15% 31% 52% FII VPs &
and Senior and Regional VP's) Designated Sr
Management 30% Corporate Return on Equity Mgmt
100% Corporate Return on Equity
70% Business Unit Measures 20% 40% 64% Designated
Cash Patronage Qualifier Cash Flow Sr Mgmt
Return on Assets
Earnings after interest 25% 45% 70% CEO
Cash Patronage Qualifier
<FN>
Notes: (1) No payout unless the Company achieves the threshold
(i.e., minimally acceptable) return on equity level.
(2) Employees may at management discretion be placed at payout
opportunity levels lower than those for which they would be
qualified based on grade and/or organizational level.
(3) No payout for category 4 unless cash patronage is paid.
(4) The business unit measures of cash flow, return on assets,
and earnings after interest are weighted equally.
</TABLE>
EXHIBIT C
ACCOUNTING TERMS AND METHODOLOGY
DEFINITIONS
INCOME is defined as income before taxes and extraordinary items as reported for
Key Results purposes.
EQUITY is the prior year's ending equity. Equity includes all capital shares
and equities ( preferred, common and associate member shares, patronage refunds
for reinvestment, and earned surplus). It does not include minority owners
equity in subsidiaries.
RETURN ON EQUITY (ROE) is the ratio determined by dividing Income by Equity.
CASH FLOW will be measured by using the Net Cash Generated formula of net income
plus beginning assets minus ending assets. The assets are those reported for
Key Results purposes, and at the business unit level, exclude such items as
prepayments and redating of inventory.
AVERAGE ASSETS are the key results assets averaged by adding the previous year-
end assets, September through July ending assets multiplied by two, the current
year ending assets and dividing by 24.
RETURN ON AVERAGE ASSETS is the ratio of income divided by the Average Assets.
EARNINGS AFTER INTEREST is the Key Results income for the operating unit after
interest, other income and joint venture income.
TREATMENT OF THE VARIABLE COMPENSATION EXPENSE
The ROE targets have been expressed after the recognition of the variable
compensation expense. In calculating the level at which variable compensation
will be paid, the variable compensation expense is added back to Income. For
example, assume Equity is $586 million and the ROE for threshold is expressed as
8%. This would correspond to Income of $46.9 million (.08 times $586 million).
However, the $46.9 million includes variable compensation expense (variable
compensation expense is budgeted at target and an accrual is made each month).
EXAMPLE OF REQUIRED INCOME *
(ASSUMING PRIOR YEAR ENDING EQUITY OF $586 MILLION)
ROE REQUIRED
INCOME
Threshold 8 % $46,880,000
Target 11.5% $67,390,000
Maximum 15 % $87,900,000
* Actual FY 94 ending ROE has yet to be determined. When it is, these income
figures will be subject to some modification.
DETERMINATION OF EXTRAORDINARY ITEM
If Farmland achieves its performance goals, but experiences a loss year due to
extraordinary items, the Board of Directors of Farmland Industries, Inc.
maintains the discretion to authorize, adjust, or deny payout of the management
portion of the Variable Compensation Plan (include employee in categories 2-4).
This also applies to employees with management level payout opportunities who
participate in customized plans. Employees on sales incentive plans, with base
pay administered through sales paylines, are not affected by this provision
unless specific portions of their plans are tied to corporate performance; nor
are employees in category 1.
GUIDELINES FOR "EXTRAORDINARY" DESIGNATION
The Chief Financial Officer and the Chief Executive Officer must approve the
classification of any item as "extraordinary." Transactions deemed as
"extraordinary" and therefore excluded in the determination of Income for
variable compensation include:
* The punitive portion of litigation results in favor of or against
Farmland, excluding redemptive payments on normal business matter
where the intent is to substantially restore net income to where it
would have been had the incident not occurred.
* Nonrecurring (one-time) adjustments to income or expense such as the
gain from settlement of the retirement plan. Any such items would
generally be reported as extraordinary items on Farmland financial
statements under generally accepted accounting principles.
* The gain or loss on the disposal of a major asset, group of assets, or
investments.
* The gain or loss from any new business activity or business unit added
subsequent to the approval of the Business Plan, provided that the
acquisition was such that it required specific Board of Director
approval outside of the business plan.
* The impact of adjustments resulting from LIFO inventory computations
or reserves.
* Other items as approved.
Specific requests by an operating unit for treatment of an item as
"extraordinary" must be approved by the Senior Management representative before
review by the Chief Financial Officer and the Chief Executive Officer.
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 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 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 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 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 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 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 has been included in the consolidated financial
statements filed in this registration.
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints H.D. Cleberg and John F. Berardi, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign any and all Farmland Industries, Inc.'s Registration
Statements and annual reports pursuant to Sections 13 or 15d of the Securities
Act of 1934, including any amendments to such registration statements and
reports and file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Signature Title Date
ALBERT J. SHIVLEY Chairman of Board, October 19, 1994
Albert J. Shivley Director
OTIS H. MOLZ Vice Chairman of Board, October 19, 1994
Otis H. Molz Director
LYMAN ADAMS Director October 19, 1994
Lyman Adams
RONALD J. AMUNDSON Director October 19, 1994
Ronald J. Amundson
BAXTER ANKERSTJERNE Director October 19, 1994
Baxter Ankerstjerne
JODY BEZNER Director October 19, 1994
Jody Bezner
RICHARD L. DETTEN Director October 19, 1994
Richard L. Detten
STEVEN ERDMAN Director October 19, 1994
Steven Erdman
WARREN GERDES Director October 19, 1994
Warren Gerdes
BEN GRIFFITH Director October 19, 1994
Ben Griffith
GAIL D. HALL Director October 19, 1994
Gail D. Hall
BARRY JENSEN Director October 19, 1994
Barry Jensen
ROBERT MERKLE Director October 19, 1994
Robert Merkle
GREG PFENNING Director October 19, 1994
Greg Pfenning
VONN RICHARDSON Director October 19, 1994
Vonn Richardson
MONTE ROMOHR Director October 19, 1994
Monte Romohr
JOE ROYSTER Director October 19, 1994
Joe Royster
PAUL RUEDINGER Director October 19, 1994
Paul Ruedinger
RAYMOND J. SCHMITZ Director October 19, 1994
Raymond J. Schmitz
THEODORE J. WEHRBEIN Director October 19, 1994
Theodore J. Wehrbein
ROBERT ZINKULA Director October 19, 1994
Robert Zinkula
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FDS Form 10-K Fiscal Year Ended August 31, 1994
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-START> SEP-01-1993
<PERIOD-END> AUG-31-1994
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0
3,702
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