Registration Statement No. 333-49373
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1 TO FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FARMLAND INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KANSAS 44-0209330
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3315 NORTH OAK TRAFFICWAY, KANSAS CITY, MISSOURI 64116-0005
816-459-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TERRY M. CAMPBELL
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FARMLAND INDUSTRIES, INC.
3315 NORTH OAK TRAFFICWAY, KANSAS CITY, MISSOURI 64116-0005
816-459-6348
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933 CHECK THE FOLLOWING BOX. [ X ]
IF THE REGISTRANT ELECTS TO DELIVER ITS LATEST ANNUAL REPORT TO SECURITY
HOLDERS, OR A COMPLETE AND LEGIBLE FACSIMILE THEREOF, PURSUANT TO ITEM 11(A)(1)
OF THIS FORM, CHECK THE FOLLOWING BOX. [ ]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(D) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states this Registration Statement shall
therefore become effective in accordance with Section 8(a) of the Securities Act
of 1933 or until the Registration Statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL OR OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 5, 1999
PROSPECTUS
2,000,000 SHARES
FARMLAND INDUSTRIES, INC.
8% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES
(PAR VALUE $25 PER SHARE)
(LIQUIDATION PREFERENCE EQUIVALENT TO $50 PER SHARE)
This Prospectus relates to 2,000,000 shares of 8% Series A Cumulative
Redeemable Preferred Stock, $25 par value per share (liquidation preference
equivalent to $50 per share) (the "Preferred Shares"), of Farmland Industries,
Inc. The Preferred Shares were issued in a private placement transaction on
December 19, 1997 when the Company issued and sold the Preferred Shares to
Merrill Lynch, Pierce, Fenner & Smith Incorporated. Merrill Lynch, Pierce,
Fenner & Smith Incorporated then sold the Preferred Shares to persons reasonably
believed by it to be "qualified institutional buyers" and in compliance with
Rule 144A under the Securities Act of 1933, as amended. See "Selling Holders"
beginning on page 19 and "Plan of Distribution" beginning on page 21.
. We will not receive any of the proceeds from the sale of the Preferred Shares
by the selling stockholders. We will, however, pay all expenses incurred in
registering the Preferred Shares, but each selling stockholder will be
responsible for all selling and other expenses incurred by him or her.
.
. Dividends on the Preferred Shares are cumulative and are payable quarterly in
arrears on the 1st day of February, May, August and November of each year at
the rate of 8% of the liquidation preference of $50 per share per annum
(equivalent to $4.00 per share per annum).
.
. We are not allowed to redeem the Preferred Shares before December 15, 2022.
.
. On and after December 15, 2022, we may, at our option, redeem the Preferred
Shares by paying a holder a specified redemption price declining to $50 per
share on and after December 15, 2027, plus accumulated and unpaid dividends
through the date of such redemption.
.
. The Preferred Shares have no stated maturity, will not be subject to any
sinking fund or mandatory redemption and will not be convertible into any
other securities of Farmland.
The selling stockholders named in this Prospectus or in an accompanying
supplement to this Prospectus or their transferees, pledgees, donees or
successors may sell the Preferred Shares pursuant to this Prospectus from time
to time directly to purchasers or through underwriters, dealers or agents. See
"Selling Holders" beginning on page 19 and "Plan of Distribution" beginning on
page 21.
INVESTING IN THE PREFERRED SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
The selling stockholders and any broker executing selling orders on behalf
of the selling stockholders may be deemed to be underwriters within the meaning
of the Securities Act. Commissions received by any such broker may be deemed to
be underwriting commissions under the Securities Act.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
AUTHORITY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 5, 1999
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OTHER THAN THE SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES, OR AN OFFER OR SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES TO
WHICH IT RELATES, OR AN OFFER OR SOLICITATION TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Page
Where You Can Find More Information..................................3
Incorporation of Certain Documents
By Reference.......................................................4
Prospectus Summary...................................................3
Risk Factors.........................................................7
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends...................................................17
Use of Proceeds.....................................................17
Description of Preferred Shares.....................................17
Certain Federal Income Tax
Considerations....................................................31
Selling Holders.....................................................39
Plan of Distribution................................................43
Legal Matters.......................................................45
Experts.............................................................45
Annual Report on Form 10-K.........................................A-1
WHERE YOU CAN FIND MORE INFORMATION
Farmland files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). You can inspect and copy the Registration Statement on Form S-2
of which this Prospectus is a part, as well as reports, proxy statements and
other information filed by Farmland at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, DC 20549.
Copies of these materials can be obtained from the Public Reference Section of
the Commission upon payment of the prescribed fees. Please call the Commission
at 1-800-SEC-0330 for further information regarding the operations of its public
references rooms. The Commission also maintains a World Wide Web site at
http:\www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants (like Farmland) that file electronically
with the Commission.
Farmland has filed with the Commission a Registration Statement (which term
shall include all amendments, exhibits and schedules thereto) on Form S-2 under
the Securities Act of 1933, as amended (the "Securities Act"), of which this
Prospectus is a part. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any document referred to are not
necessarily complete. With respect to each such document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows this Prospectus to "incorporate by reference" certain
other information that Farmland files with them, which means that we can
disclose important information to you by referring to those documents. The
information incorporated by reference is an important part of this Prospectus,
and information that we file later with the Commission will automatically update
and replace this information. We incorporate by reference our Annual Report on
Form 10-K for the fiscal year ended August 31, 1998.
We will provide, without charge, to each person, including any beneficial
owner, who receives a copy of this Prospectus, a copy of our Form 10-K Annual
Report for the year ended August 31, 1998. Also, if you request the above
information in writing or by telephone, we will provide you, without charge, a
copy of any or all of the information incorporated by reference in the
registration statement of which this Prospectus is a part. Requests for such
information should be in writing to Farmland Industries, Inc., 3315 N. Oak
Trafficway, Kansas City, Missouri, 64116-0005, Attention: Vice President and
Treasurer, telephone (816) 459-6000.
We will provide to the holders of the Preferred Shares annual reports on
Form 10-K containing financial statements audited by the Company's independent
auditors and quarterly reports on Form 10-Q containing its unaudited financial
statements.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this Prospectus (and in the
documents that are incorporated by reference) that are subject to risks and
uncertainties. Forward-looking statements include information concerning
possible or assumed future results of our operations. Also, when we use such
words as "believes," "expects," "anticipates" or similar expressions, we are
making forward-looking statements. You should note that an investment in our
securities involves substantial risks and uncertainties that could affect our
future financial results. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in "Risk Factors" and elsewhere in this Prospectus
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus or incorporated herein by reference. Unless the context requires
otherwise, (i) "Farmland", the "Company", "we," "us" and "our" refers to
Farmland Industries, Inc. and its consolidated subsidiaries, and (ii) all
references herein to "year" or "years" are to fiscal years ended August 31.
Farmland is an agricultural farm supply and processing and marketing
cooperative headquartered in Kansas City, Missouri, that is primarily owned by
its members (as defined) and operates on a cooperative basis. Founded in 1929,
Farmland has grown from revenues of $310,000 during its first year of operation
to over $8.8 billion during 1998. As of August 31, 1998, Farmland's membership,
associate membership and patrons eligible for patronage refunds consisted of
approximately 1,500 cooperative associations of farmers and ranchers and 5,800
pork or beef producers or associations of such producers. Management estimates
that over 600,000 farmers and ranchers conduct business through Farmland and its
member cooperatives. The Company believes it is one of the largest cooperatives
in the United States in terms of revenues. In 1998, Farmland had export sales
in excess of $1.3 billion to customers in over 90 countries. Substantially all
of the Company's foreign sales are invoiced and collected in U.S. Dollars.
Kansas City, Missouri is the location of our headquarters. Our mailing
address and telephone number are as follows:
FARMLAND INDUSTRIES, INC.
P.O. Box 7305
Kansas City, Missouri 64116-0005
Telephone (816) 459-6000
THE OFFERING
Securities Offered...... 2,000,000 8% Series A Cumulative Redeemable Preferred
Shares.
Ranking................. With respect to the payment of dividends and amounts
payable upon liquidation, the Preferred Shares rank
(i) senior to the common shares, associate member
common shares, and all other capital credits and
shares of capital stock of the Company which, by their
terms, rank junior to the Preferred Shares and (ii),
except as described in the next sentence, on a parity
with all other preferred shares of the Company which
are not, by their terms, junior to the Preferred
Shares. As of August 31, 1998, Farmland had
outstanding an aggregate of $71,000 liquidation value
of preferred stock which ranks senior to the Preferred
Shares. We have agreed not to authorize or issue any
other preferred shares which are senior to the
Preferred Shares. See "Description of Preferred
Shares-Rank."
Dividends............... Dividends on the Preferred Shares are cumulative from
December 19, 1997 and are payable quarterly in arrears
on the 1st day of February, May, August and November
of each year at the rate of 8% of the liquidation
preference of $50 per share per annum (equivalent to
$4.00 per share per annum). Dividends on the
Preferred Shares will accumulate whether or not
Farmland has earnings, whether or not there are funds
legally available for the payment of such dividends
and whether or not such dividends are declared. See
"Description of Preferred Shares-Dividends."
Liquidation Preference.. ThePreferred Shares have a liquidation preference of
$50 per share, plus an amount equal to any accumulated
and unpaid dividends. See "Description of Preferred
Shares-Liquidation Preference."
Redemption ............. We are not allowed to redeem the Preferred Shares
before December 15, 2022. On and after December 15,
2022, we may, at our option, redeem the Preferred
Shares, in whole or in part, at redemption prices
declining to $50 per share on and after December 15,
2027, plus accumulated and unpaid dividends, if any,
thereon. The Preferred Shares do not have any stated
maturity, are not subject to any sinking fund or
mandatory redemption provisions and are not
convertible into any other securities of the Company.
See "Description of Preferred Shares-Redemption."
Voting Rights .......... None, except that we will not, without the affirmative
vote or consent of the holders of at least a majority
of the Preferred Shares outstanding at the time, given
in person or by proxy, either in writing or at a
meeting, alter or change the powers, preferences or
special rights of the Preferred Shares so as to affect
them adversely. See "Description of Preferred Shares-
Voting Rights."
Conversion.............. The Preferred Shares are not convertible or
exchangeable by their terms for any other property or
securities of the Company.
Form ................... The Preferred Shares will be issued in book-entry form
and represented by the Global Certificate registered
in the name of the nominee of the Depository Trust
Company (the "DTC"), except under limited
circumstances. See "Description of Preferred Shares-
Form, Book-Entry System and Transfer."
Absence of Market for
the Preferred Shares.. The Company believes that its Preferred Shares trade
from time to time. Merrill Lynch, Pierce Fenner &
Smith Incorporated (the "Initial Purchaser") has
facilitated trades between institutional investors
and brokers. However, the Initial Purchaser is not
obligated to do so, and any such market making may be
discontinued at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
Preferred Shares. See "Plan of Distribution."
Use of Proceeds......... We will not receive any proceeds from the sale of such
Preferred Shares, by the Selling Shareholders. We
will, however, pay all expenses incurred in
registering the Preferred Shares, but each Selling
Shareholder will be responsible for all selling and
other expenses incurred by him or her.
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus and in the documents incorporated by
reference, the following factors before purchasing the Preferred Shares offered
hereby.
INCOME TAX MATTERS
In July 1983, we sold the stock of Terra Resources, Inc. ("Terra"), a
100% owned subsidiary engaged in oil and gas exploration and production
operations. The gain from the sale of Terra amounted to $237.2 million for tax
reporting purposes.
On March 24, 1993, the Internal Revenue Service ("IRS") issued a statutory
notice to Farmland asserting deficiencies in federal income taxes of $70.8
million, excluding statutory interest. The asserted deficiencies relate
primarily to our tax treatment of the Terra sale gain as income against which
certain patronage-sourced operating losses could be offset. The statutory
notice also claims that Farmland incorrectly characterized for tax purposes
$14.6 million of gains and a $2.3 million loss related to dispositions of
certain other assets.
On June 11,1993, Farmland filed a petition in the United States Tax Court
contesting the claimed deficiencies in their entirety. The case was tried on
June 13-15, 1995. The parties submitted post-trial briefs to the court in
September 1995 and reply briefs were submitted to the court in November 1995.
If the United States Tax Court decides in favor of the IRS on all unresolved
issues raised in the statutory notice, Farmland would have additional federal
and state income tax liabilities of about $85.8 million plus statutory interest.
Through August 31, 1998, statutory interest, before tax benefits of the interest
deduction, totaled about $279.9 million. Therefore, the total potential
liability resulting from a loss of this tax case is approximately $365.7
million. In addition, such a decision would affect the computation of
Farmland's taxable income for its 1989 tax year and, as a result, could increase
that year's federal and state income taxes and related statutory interest by
approximately $15.3 million. The asserted federal and state income tax
liabilities and accumulated statutory interest would become immediately due and
payable unless the Company appealed the decision and posted the bond required to
postpone assessment and collection.
In March 1998, Farmland received notice from the IRS assessing the $15.3 million
tax and accumulated statutory interest related to the Company's 1989 tax year
(as described above). In order to establish the trial court in which initial
litigation, if any, of the dispute would occur and to stop the accumulation of
interest, the Company deposited funds with the IRS in the amount of the
assessment. After making this deposit, the Company filed for a refund of the
entire amount deposited.
The liability resulting from an adverse decision by the United States Tax Court
would be charged to current earnings and would have a material adverse effect on
the Company. In the event of an adverse determination of the Terra tax issue,
certain financial covenants of the Company's Syndicated Credit Facility (the
"Credit Facility"), dated May 15, 1996, become less restrictive. If we assume
the United States Tax Court had decided in favor of the IRS on all unresolved
issues, and that all related additional federal and state income taxes and
accumulated statutory interest had been due and payable on August 31, 1998,
Farmland's borrowing capacity under the Credit Facility was adequate at that
time to finance the liability. However, Farmland's ability to finance an
adverse decision depends substantially on the financial effects of future
operating events on its borrowing capacity under the Credit Facility
GENERAL FACTORS THAT MAY AFFECT BUSINESS
Our financial success depends largely on factors which affect agricultural
production and marketing conditions. These factors, which are outside of
Farmland's control, often change agricultural conditions in an unpredictable
manner. Therefore, we cannot determine the future impact on our operations from
changes in these external factors. We expect both demand for and selling prices
of our products to continue to be volatile as agricultural conditions change.
External factors that affect agricultural conditions and Farmland's financial
results include:
REGULATORY: Our ability to grow through acquisitions and investments in ventures
may be affected adversely by regulatory delays. Also, various federal and state
regulations to protect the environment encourage farmers to use less fertilizer
and other chemical applications.
COMPETITION: Competitors may offer a greater variety of products and may
possess greater resources than our company. Competitors may also have better
access to equity capital markets than Farmland.
IMPORTS AND EXPORTS: The following factors may affect the amount of
agricultural products imported or exported:
. Foreign trade and monetary policies;
. Laws and regulations;
. Political and governmental changes;
. Inflation and exchange rates;
. Taxes;
. Operating conditions; and
. World demand.
WEATHER: Global weather conditions may cause:
. Shifts in relationships between supply and demand for finished product
that result in price changes for agricultural input products sold by
Farmland; and
. Shifts in relationships between supply and demand of raw materials that
result in cost changes for agricultural output products sold by Farmland.
RAW MATERIALS COST: Historically, we periodically have been limited in our
ability to increase our products' selling prices in order to pass through the
price increases in our raw materials.
YEAR 2000: The Company does not know with certainty all of the consequences of
its most reasonably likely worst case Year 2000 contingency.
OTHER FACTORS: Domestic variables, such as crop failures, federal agricultural
programs and production efficiencies, and global variables, such as general
economic conditions, conditions in financial markets, embargoes, political
instabilities and local conflicts, affect the supply, demand and price of crude
oil, refined fuels, natural gas and other commodities and may unfavorably impact
the Company's operations.
Management cannot determine the extent to which these factors may impact future
operations of the Company. The Company's revenues, margins, net income and cash
flow may be volatile as conditions affecting agriculture and markets for the
Company's products change.
LIMITED ACCESS TO EQUITY CAPITAL
As a cooperative, we raise equity primarily through the reinvestment of a
portion of patronage refunds as common stock or capital credits and through
retention of net income (retained earnings) generated from transactions with
non-members.
ENVIRONMENTAL MATTERS
The Company is subject to various stringent federal, state and local
environmental laws governing the use, storage, discharge and disposal of
hazardous materials. These laws may impose liability for cleanup of
environmental contamination. The Company uses hazardous materials and generates
hazardous wastes in the ordinary course of its manufacturing processes
IMPACT OF CERTAIN PREFERRED STOCK PROVISIONS
The terms of the Preferred Shares provide that the Company will be
prohibited from making certain cash patronage refunds and from making
redemptions of equity under the various equity redemption plans during any
period when the payment of dividends on the Preferred Shares is in arrears.
Management believes that a key element which encourages its members to do
business with the Company is the payment of such patronage refunds and
redemptions of equity. Accordingly, if the Company is not permitted to make
such payments, members may reduce the amount of business they transact with the
Company, thereby negatively impacting the ability to generate profits in future
periods.
CERTAIN RIGHTS OF PREFERRED SHAREHOLDERS
In accordance with certain provisions of Kansas law relating to
cooperatives and the terms of the Company's articles of incorporation and
bylaws, the holders of Preferred Shares do not have the right to elect directors
of the Company, even if dividend payments are in arrears, and do not have any
other voting rights.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's consolidated ratios of
earnings to combined fixed charges and preferred stock dividends for the periods
shown. The ratios of earnings to fixed charges have been computed by dividing
fixed charges into the sum of (a) income (loss) before taxes for the enterprise
as a whole, less capitalized interest and with adjustments to appropriately
reflect the Company's majority-owned and 20%-to 50%-owned affiliates, and (b)
fixed charges. Fixed charges consist of interest on all indebtedness (including
amortization of debt issuance expenses) and the component of operating rents
determined to be interest, with adjustments as appropriate to reflect the
Company's 20%-to 50%-owned affiliates.
The information below should be read in conjunction with information
appearing in the Company's consolidated financial statements, the notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the 1998 Form 10-K, which is incorporated by reference
into this Prospectus.
<TABLE>
<CAPTION>
Year Ended August 31,
1994 . 1995 . 1996 . 1997 . 1998 .
<C> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined
Fixed Charges and
Preferred Stock Dividends....... 2.1 4.0 3.0 3.0 1.5
</TABLE>
.
RECENT DEVELOPMENTS
Based on preliminary operating information available at this time, the
Company estimates a net loss of $5 million to $7 million for the quarter ended
November 30, 1998 (the "First Quarter") compared with net income of $ 17.3
million for the corresponding quarter of last year.
Market prices of nitrogen-based plant nutrients have declined as the
industry experienced increased inventory positions relative to the prior year.
As a result, selling prices of the Company's nitrogen-based plant nutrients in
the First Quarter were 34% lower than in the same period last year. The
decreased selling prices more than offset the favorable effects of lower product
costs (primarily a result of lower costs for natural gas, the primary raw
material consumed in nitrogen manufacturing). Gross margins on nitrogen-based
products decreased approximately $19 million in the First Quarter compared with
the same period of last year. Although demand for such products was below
expected levels early in the quarter, demand increased significantly in the
later weeks of November. Also, the Company's quoted price for tons purchased
under prepayment programs for spring use are considerably above current selling
prices owing to an expectation for normal to above normal spring demand.
At November 30, 1998, the carrying value of petroleum inventories was
$142.3 million stated under the LIFO method, which exceeded the market value of
such inventory by approximately $34.3 million. At the present time, management
reasonably expects that this decline will be recovered during fiscal year 1999
and, accordingly, this market value decline will not be recognized in the
Company's First Quarter results of operations. However, given the volatility of
the crude oil and refined fuels markets, no assurance can be provided that the
market value of petroleum inventories will exceed their carrying value at the
time of the Company's future interim reporting period, or at the Company's year-
end.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Preferred Shares offered under this Prospectus. The Company will not receive
any proceeds from the sale of such Preferred Shares.
DESCRIPTION OF PREFERRED SHARES
The following description of the Preferred Shares is a summary of the
terms and provisions of the Preferred Shares. The summary does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the applicable provisions of the Company's articles of incorporation and by-
laws.
GENERAL
The Company is authorized to issue up to 8,000,000 preferred shares, $25
par value per share, in one or more series of which the Preferred Shares
constitute a new series. The Company's articles of incorporation authorizes the
Board of Directors to fix the number of shares constituting each class of
preferred shares and the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof. The Preferred Shares are fully paid and nonassessable and do not have,
or are not subject to, any preemptive or similar rights.
The registrar, transfer agent and dividends disbursing agent for the
Preferred Shares is ChaseMellon Shareholder Services, L.L.C.
RANK
The Preferred Shares, with respect to dividend rights and rights upon
liquidation of the Company, rank (i) senior to the common shares, associate
member common shares and all other capital credits and shares of capital stock
of the Company which, by their terms, rank junior to the Preferred Shares and
(ii), except as described in the next sentence, on a parity with all other
preferred shares of the Company which are not, by their terms, junior to the
Preferred Shares. As of August 31, 1998, the Company had outstanding an
aggregate of $71,000 liquidation value of preferred stock which ranks senior to
the Preferred Shares. The Company has agreed not to authorize or issue any
other preferred shares which are senior to the Preferred Shares.
DIVIDENDS
Holders of the Preferred Shares are entitled to receive, when and as
authorized by the Board of Directors of the Company, out of funds legally
available for the payment of dividends, cumulative cash dividends at the rate of
8% of the liquidation preference of $50 per share per annum (equivalent to $4.00
per share per annum). Such dividends accumulate from December 19, 1997 and are
payable quarterly in arrears on the 1st day of each February, May, August and
November or, if not a business day, the succeeding business day (each, a
"Dividend Payment Date"). The first dividend on the Preferred Shares was paid
on February 2, 1998 to holders of record as of January 15, 1998. Through
November 1, 1998, all Preferred Shares dividends have been paid on a timely
basis and no Preferred Shares dividends are in arrears. Any dividends payable
on the Preferred Shares will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Any dividends payable will be payable to
holders of record as they appear in the records of the Company at the close of
business on the applicable record date, which shall be the 15th day of the
calendar month immediately prior to the month in which the applicable Dividend
Payment Date falls or such other date designated by the Board of Directors of
the Company that is not more than 30 nor less than 10 days prior to such
Dividend Payment Date (each, a "Dividend Record Date").
No dividends on the Preferred Shares shall be authorized by the Board of
Directors of the Company or be paid or set apart for payment by the Company at
such time as the terms and provisions of any agreement of the Company, including
any agreement relating to its indebtedness, prohibits such authorization,
payment or setting apart for payment or provides that such authorization,
payment or setting apart for payment would constitute a breach thereof or a
default thereunder, or if such authorization or payment shall be restricted or
prohibited by law. The Company's Credit Facility requires the Company to comply
with certain financial covenants regarding working capital, the ratio of certain
debt to average cash flow and the ratio of equity to total capitalization, all
as defined in the Credit Facility, which may affect the Company's ability to
make dividend payments.
Notwithstanding the foregoing, dividends on the Preferred Shares shall
accumulate whether or not the Company has earnings, whether or not there are
funds legally available for the payment of such dividends and whether or not
such dividends are authorized or declared. Accumulated but unpaid dividends on
the Preferred Shares will not bear interest and holders of the Preferred Shares
will not be entitled to any dividends in excess of full cumulative dividends as
described above.
Except as provided in the immediately following paragraph, unless full
cumulative dividends on the Preferred Shares have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment therefor set
apart for such payment on the Preferred Shares for all past dividend periods and
the then current dividend period, no dividends (other than in common shares,
associate member common shares or other capital stock or capital credits ranking
junior to the Preferred Shares as to dividends and upon liquidation) shall be
declared or paid or set aside for payment upon any preferred shares, common
shares, associate member common shares or any other capital stock or capital
credits of the Company ranking junior to or on a parity with the Preferred
Shares as to dividends or upon liquidation, nor shall any preferred shares,
common shares, associate member common shares or any other capital stock or
capital credits of the Company ranking junior to or on a parity with the
Preferred Shares as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid or made
available for a sinking fund for the redemption of such shares) by the Company
(except by conversion into or exchange for other capital stock or capital
credits of the Company ranking junior to the Preferred Shares as to dividends
and upon liquidation and except to the extent any preferred shares existing at
the date of original issue of the Preferred Shares are redeemed at the option of
the holders thereof as permitted by the terms of such preferred shares).
Notwithstanding the foregoing paragraph, the Company shall be permitted to
declare and pay or set apart for payment patronage dividends or refunds, subject
to the limitation that, whenever the terms described in the foregoing paragraph
would operate to restrict dividends, not more than 20% of such aggregate
patronage dividends or refunds for any fiscal year shall be in cash, with the
remainder to be paid in the form of common stock, associate member common stock,
or capital credits. In addition, when dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Preferred Shares
and other preferred shares of the Company ranking on a parity as to dividends
with the Preferred Shares, dividends may be declared on the Preferred Shares and
such other preferred shares provided that such dividends shall be declared pro
rata so that the amount of dividends declared per Preferred Share and per each
other preferred share shall in all cases bear to each other the same ratio that
the accumulated dividends per Preferred Share and per such other preferred share
bear to each other.
Any dividend payment made on the Preferred Shares shall first be credited
against the earliest accumulated but unpaid dividend due with respect to such
Preferred Shares which remains payable.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the affairs
of the Company (collectively referred to as a "liquidation"), the holders of the
Preferred Shares will be entitled to be paid out of the assets of the Company
legally available for distribution to its shareholders liquidating distributions
in cash or property at its fair market value as determined by the Company's
Board of Directors in the amount of a liquidation preference equal to $50 per
share plus accumulated and unpaid dividends, if any, thereon to the date of such
liquidation, before any distribution of assets is made to holders of common
shares, associate member common shares or any other capital stock or capital
credits of the Company ranking junior to the Preferred Shares as to liquidation
rights. After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Shares will have no right or
claim to any of the remaining assets of the Company.
In the event that, upon any liquidation of the Company, the legally
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on the Preferred Shares and the corresponding amounts
payable on all other preferred shares of the Company ranking on a parity with
the Preferred Shares in the distribution of assets upon liquidation, then the
holders of the Preferred Shares and such other preferred shares shall share
ratably in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
The consolidation or merger of the Company with or into any other entity
or the sale, lease, transfer or conveyance of all or substantially all of the
property or business of the Company shall not be deemed to constitute a
liquidation of the Company.
REDEMPTION
The Preferred Shares are not redeemable prior to December 15, 2022. On
and after December 15, 2022, the Company may redeem the Preferred Shares, in
whole or in part, at any time or from time to time, in cash at a per share
redemption price set forth in the table below plus, in each case, accumulated
and unpaid dividends, if any, thereon to the date fixed for redemption, without
interest, to the extent the Company will have funds legally available therefor.
If redeemed during the twelve month period,
Beginning December 15, Redemption Price
2022 ................................. $52.00
2023 ................................. 51.60
2024 ................................. 51.20
2025 ................................. 50.80
2026 ................................. 50.40
2027 and thereafter................... 50.00
Holders of Preferred Shares to be redeemed shall surrender such Preferred
Shares at the place designated in the notice of redemption and shall be entitled
to the redemption price upon such surrender. If notice of redemption of any
Preferred Shares has been given and if the funds necessary for such redemption
have been irrevocably set aside by the Company in trust for the benefit of the
holders of any Preferred Shares so called for redemption, then from and after
the redemption date dividends will cease to accumulate on such Preferred Shares,
such shares shall no longer be deemed outstanding and all rights of the holders
of such Preferred Shares will terminate, except the right to receive the
redemption price. If fewer than all of the outstanding Preferred Shares are to
be redeemed, the Preferred Shares to be redeemed shall be selected pro rata (as
nearly as may be practicable without creating fractional Preferred Shares) or by
any other equitable method determined by the Company.
Notwithstanding the foregoing, unless full cumulative dividends on the
Preferred Shares shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment therefor set apart for such
payment on the Preferred Shares for all past dividend periods and the then
current dividend period, no Preferred Shares shall be redeemed unless all
outstanding Preferred Shares are simultaneously redeemed; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Shares pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding Preferred Shares. In addition, unless full
cumulative dividends on the Preferred Shares shall have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment therefor set apart for such payment on the Preferred Shares for all past
dividend periods and the then current dividend period, the Company shall not
purchase or otherwise acquire, directly or indirectly, any Preferred Shares;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Shares pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding Preferred Shares.
Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days prior to
the redemption date. A similar notice furnished by the Company will be mailed
by the registrar, postage prepaid, not less than 30 nor more than 60 days prior
to the redemption date, addressed to the respective holders of record of the
Preferred Shares to be redeemed at their respective addresses as they appear on
the records of the registrar. No failure to give such notice or any defect
thereto or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any Preferred Shares except as to the holder to whom
notice was defective or not given. In addition to any information required by
law or by the applicable rules of any exchange on which the Preferred Shares may
be listed or admitted to trading, each notice shall state: (i) the redemption
date; (ii) the redemption price; (iii) the number of Preferred Shares to be
redeemed; (iv) the place or places where the Preferred Shares are to be
surrendered for payment of the redemption price; and (v) that dividends on the
Preferred Shares to be redeemed will cease to accumulate on such redemption
date. If fewer than all the Preferred Shares held by any holder are to be
redeemed, the notice mailed to such holder shall also specify the number of
Preferred Shares to be redeemed from such holder.
The holders of Preferred Shares at the close of business on a Dividend
Record Date will be entitled to receive the dividend payable with respect to the
Preferred Shares on the corresponding Dividend Payment Date notwithstanding the
redemption thereof between such Dividend Record Date and the corresponding
Dividend Payment Date or the Company's default in the payment of the dividend
due. Except as provided above, the Company will make no payment or allowance
for unpaid dividends, whether or not in arrears, on Preferred Shares to be
redeemed.
The Preferred Shares do not have stated maturity and are not subject to any
sinking fund or mandatory redemption provisions.
VOTING RIGHTS
Except as indicated below or except as otherwise from time to time required
by applicable law, the holders of Preferred Shares have no voting rights.
So long as any Preferred Shares remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least a majority of
the Preferred Shares outstanding at the time, given in person or by proxy,
either in writing or at a meeting, alter or change the powers, preferences or
special rights of the Preferred Shares so as to affect them adversely; provided,
however, that (x) any increase in the amount of the authorized preferred shares
of the Company or the creation or the issuance of any other preferred shares of
the Company, or (y) any increase in the amount of authorized Preferred Shares,
in each case ranking on a parity with or junior to the Preferred Shares with
respect to the payment of dividends and the distribution of assets upon
liquidation, shall not be deemed to adversely affect such powers, preferences or
special rights.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to such vote or consent would otherwise be required
shall be effected, all outstanding Preferred Shares shall have been redeemed or
called for redemption and sufficient funds shall have been irrevocably deposited
in trust to effect such redemption.
CONVERSION
The Preferred Shares are not convertible into or exchangeable by their
terms for any other property or securities of the Company.
FORM, BOOK-ENTRY SYSTEM AND TRANSFER
The Preferred Shares will be represented by a single fully registered
certificate in book-entry form (the "Global Certificate") which will be
deposited with, or on behalf of, DTC and registered in the name of DTC's
nominee. Except as set forth below, the Global Certificate may not be
transferred except as a whole by DTC to a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor of DTC or a nominee
of such successor..
Except as set forth below, the Preferred Shares represented by the Global
Certificate may be transferred, in whole and not in part, only to another
nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in
the Global Certificate may not be exchanged for Preferred Shares in certificated
form except in limited circumstances.
The Global Certificate or beneficial interests therein are exchangeable for
Preferred Shares in registered, certificated form if (i) DTC (x) notifies the
Company that it is unwilling or unable to continue as Depositary for the
Preferred Share or (y) has ceased to be a clearing agency registered under the
Exchange Act and, in either case, the Company thereupon fails to appoint a
successor Depositary within 60 days or (ii) the Company in its sole discretion
elects to cause the issuance of the Preferred Shares in certificated form. In
all cases, certificated Preferred Shares delivered in exchange for the Global
Certificate or beneficial interests therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of DTC (in
accordance with its customary procedures).
So long as DTC or its nominee is the registered owner of the Global
Certificate, DTC or its nominee, as the case may be, will be considered the sole
recordholder of the Preferred Shares represented by the Global Certificate.
Except as provided herein, owners of beneficial interests in the Global
Certificate will not be entitled to have Preferred Shares represented by the
Global Certificate registered in their names, will not receive or be entitled to
receive physical delivery of Preferred Shares in certificated form and will not
be considered the recordholders thereof. The laws of some states require that
certain purchasers of securities take physical delivery of securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in the Global Certificate.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Preferred Shares. The
Preferred Shares will be issued as fully registered securities registered
in the name of Cede & Co. (DTC's partnership nominee).
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC
is owned by a number of its Direct Participants and by The New York Stock
Exchange, the American Stock Exchange and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks and trust companies
that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of Preferred Shares under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Shares on DTC's records. The ownership interest of each actual purchaser
of each Preferred Share ("Beneficial Owner") is in turn recorded on the
Direct and Indirect Participants' records. A Beneficial Owner does not
receive written confirmation from DTC of its purchase, but such Beneficial
Owner is expected to receive a written confirmation providing details of
the transaction, as well as periodic statements of its holdings, from the
Direct or Indirect Participant through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in Preferred Shares
are accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners do not receive certificates
representing their ownership interests in Preferred Shares, except in the
event that use of the book-entry system for the Preferred Shares is
discontinued.
To facilitate subsequent transfers, all Preferred Shares deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Preferred Shares with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Preferred Shares; DTC records reflect only the identity of the Direct
Participants to whose accounts Preferred Shares were credited, which may or
may not be the Beneficial Owners. The Participants remain responsible for
keeping account of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct and Indirect Participants to Beneficial Owners are governed by
arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of
the Preferred Shares represented by the Global Certificate are to be
redeemed, DTC's practice is to determine by lot the amount of the interest
of each Direct Participant to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Preferred Shares. Under its usual procedures, DTC mails a proxy (an
"Omnibus Proxy") to the issuer as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Preferred Shares are credited on
the record date (identified on a list attached to the Omnibus Proxy).
Dividend payments, redemption proceeds and other distributions in
respect of the Preferred Shares will be made in immediately available funds
by the Company or the Company's agent to DTC. DTC's practice is to credit
Direct Participant's accounts, upon receipt of funds and corresponding
detail information from the Company or the Company's agent, on the payable
date in accordance with their respective holdings as shown on DTC's
records. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and
not of DTC, the Company or the Company's agent, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payments in
respect of the Preferred Shares to DTC are the responsibility of the
Company or the Company's agent, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as securities depository
with respect to the Preferred Shares at any time by giving reasonable
notice to the Company or the Company's agent. Under such circumstances, in
the event that a successor securities depository is not appointed,
Preferred Share certificates are required to be delivered as set forth
herein.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that
event, Preferred Share certificates will be delivered as set forth herein.
None of the Company, the Company's agent or the Initial Purchaser will
have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial interests in the Global
Certificate, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material federal income tax
consequences of the purchase, ownership, redemption, and disposition of
Preferred Shares. This summary is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the final, temporary and proposed
regulations promulgated thereunder and administrative rulings and judicial
decisions now in effect, all of which are subject to change (possibly with
retroactive effect). This summary addresses only the tax consequences of the
purchase, ownership, redemption and disposition of the Preferred Shares by a
person who is (i) for United States federal income tax purposes a citizen or
resident of the United States (including certain former citizens and former
long-term residents), (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (except, to the extent, in the case of a partnership, the
partnership is treated as foreign under regulations), (iii) an estate the income
of which is subject to United States federal income taxation regardless of its
source or (iv) a trust with respect to the administration of which a court
within the United States is able to exercise primary decisions of the trust
(each, a "U.S. Holder"). Notwithstanding the preceding clause (iv), to the
extent provided in regulations, certain trusts in existence on August 20, 1996
and treated as United States persons prior to such date that elect to continue
to be so treated also shall be considered U.S. Holders. This summary does not
purport to deal with all aspects of federal income taxation that may be relevant
to an investor's decision to purchase the Preferred Shares, such as foreign,
state and local, or estate and gift tax consequences, and it is not intended to
be applicable to all categories of investors, some of which, such as dealers in
securities, financial institutions, insurance companies, tax-exempt
organizations and foreign persons, may be subject to special rules.
In addition, the summary assumes that the Preferred Shares will be held as
capital assets. Holders should note that there can be no assurance that the
Internal Revenue Service ("IRS") will take a similar view with respect to the
tax consequences described below and that no ruling has been or will be
requested by the Company from the IRS on any tax matters relating to the
Preferred Shares. ALL PROSPECTIVE HOLDERS OF PREFERRED SHARES ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN
TAX CONSEQUENCES OF THE PURCHASE OF OWNERSHIP, REDEMPTION, AND DISPOSITION OF
PREFERRED SHARES.
DIVIDENDS AND OTHER DISTRIBUTIONS
Distributions on the Preferred Shares will be treated as dividends and
taxable as ordinary income to the extent of the Company's current or accumulated
earnings and profits, as determined for federal income tax purposes. Any
distribution in excess of current or accumulated earnings and profits will be
treated first as a nontaxable return of capital reducing the holder's tax basis
in the Preferred Shares and any amount in excess of the holder's tax basis will
be treated as a capital gain.
Dividends received by corporate holders of Preferred Shares will qualify
for the 70% dividends received deduction under Section 243 of the Code if the
holding period and other requirements for such deduction are met, subject to the
limitations in Section 246 and 246A of the Code (although the benefits of such
deductions may be reduced or eliminated by the corporate alternative minimum
tax). Section 246(c) of the Code generally provides that the 70% dividends
received deduction is disallowed for any dividend with respect to stock (i) that
is held for 45 days or less during the 90-day period beginning 45 days before
the ex-dividend (or held 90 days or less in the 180-day period beginning 90 days
before the ex-dividend date in the case of a dividend on stock having preference
in dividends which are attributable to a period or periods aggregating more than
366 days), or (ii) if the taxpayer is under an obligation to make related
payments with respect to positions in substantially similar or related property.
Accordingly, under clause (i), a taxpayer will only be entitled to the
dividends-received deduction with respect to any dividend if the taxpayer
satisfies the requisite holding period requirement immediately before or
immediately after the taxpayer becomes entitled to the dividend. In addition, a
taxpayer's holding period for these purposes is suspended during any period in
which the taxpayer has an option to sell, is under a contractual obligation to
sell, has made (and not closed) a short sale of, or has granted an option to
buy, substantially identical stock or securities, or holds one or more positions
with respect to substantially similar or related property that diminish the risk
of loss from holding the stock. Finally, under Section 246A of the Code, the
dividends received deduction may be reduced or eliminated if a corporate
holder's shares of Preferred Shares are debt financed.
In its proposed fiscal 1997 budget submitted to Congress, the Clinton
Administration included a proposal which would have reduced the 70-percent
dividends-received deduction generally available to corporate shareholders to 50
percent. This provision was not contained in the Taxpayer Relief Act of 1997.
No assurance can be given on whether such proposal will be included in a future
Administration budget or whether Congress will enact such proposal or
legislation containing a similar provision in the future.
Section 1059 of the Code requires a corporate holder of stock to reduce
(but not below zero) its basis in the stock by the "nontaxed portion" of any
"extraordinary dividend" if the holder has not held the stock subject to a risk
of loss for more than 2 years before the date of the announcement, declaration,
or agreement (whichever is earliest) with respect to the extraordinary dividend
or if the distribution occurs in the context of a redemption, as discussed
below.
If Section 1059 applies, such corporate holder will recognize gain in the
year the extraordinary dividend is received to the extent the nontaxed portion
of such extraordinary dividend exceeds the holder's adjusted tax basis for the
stock. Generally, the "nontaxed portion" of an extraordinary dividend is the
amount excluded from income under Section 243 of the Code (relating to the
dividends received deduction described above). An "extraordinary dividend" is a
dividend that (i) equals or exceeds 5% of the holder's adjusted tax basis in the
stock (reduced for this purpose by the nontaxed portion of any prior
extraordinary dividend), treating all dividends having ex-dividend dates within
an 85-day period as one dividend, or (ii) exceeds 20% of the holder's adjusted
tax basis in the stock, treating all dividends having ex-dividend dates within a
365-day period as one dividend, provided, however, that in either case the fair
market value of the stock (as of the day before the ex-dividend date) may be
substituted for stock basis if the fair market value of the stock can be
established by the holder to the satisfaction of the IRS.
Under Section 1059, an extraordinary dividend would also include any
amount treated as a dividend in the case of a redemption that is either non-pro
rata as to all stockholders or in partial liquidation of the Company, regardless
of the relative size of the dividend and regardless of the corporate holder's
holding period for the Preferred Shares. In addition, "extraordinary dividend"
treatment will result without regard to the period any such stock is held if a
redemption is treated as a dividend by reason of options being taken into
account under Section 318(a)(4) of the Code.
Special rules overriding the general application of Code Section 1059
apply with respect to "qualified preferred dividends," which are defined as any
fixed dividends paid on stock that provide for a fixed preferred dividend to be
paid not less frequently than annually, provided that no such dividends were in
arrears at the time the holder acquired the stock. Where a qualified preferred
dividend exceeds the 5% or 20% limitations described above, it will be treated
as an extraordinary dividend only if (i) the actual rate of return on the stock
for the period the stock has been held by the holder receiving the dividend
exceeds 15%, or (ii) such rate of return does not exceed 15% and the holder
disposes of such stock before holding it, subject to risk of loss, for 5 years.
In the latter case, however, the amount treated as an extraordinary dividend is
generally limited to the excess of the actual rate of return over the stated
rate of return. For purposes of determining the actual or stated rate of
return, a holder should compare the actual or stated annual dividends to the
lesser of (a) the holder's adjusted tax basis for the stock, or (b) the
liquidation preference of the stock. The length of time that a taxpayer is
deemed to have held stock for purposes of Section 1059 of the Code is determined
under principles similar to those contained in Section 246(c) of the Code,
described above.
SALE, REDEMPTION, OR EXCHANGE OF PREFERRED SHARES
SALE
On the sale of shares of Preferred Shares, gain or loss will be recognized
by the holder in an amount equal to the difference between (i) the amount of
cash and fair market value of any property received on such sale (less any
portion thereof attributable to accumulated and declared by unpaid dividends,
which will be taxable as a dividend to the extent of the Company's current or
accumulated earnings and profits), and (ii) the holder's adjusted tax basis in
the Preferred Shares. Such gain or loss will be capital gain or loss if the
shares of Preferred Shares are held as capital assets. For certain noncorporate
holders (including individuals), the rate of taxation of capital gains will
depend upon (i) the holder's holding period for the Preferred Shares (with the
lowest rate available only for Preferred Shares held more than 18 months) and
(ii) the holder's marginal tax rate for ordinary income. Holders of Preferred
Shares should consult their tax advisors with respect to applicable rates and
holding periods, and netting rules for capital losses.
REDEMPTION
A redemption of shares of Preferred Shares will be treated under Section
302 of the Code as a distribution that is taxable at ordinary income tax rates
as a dividend, a non-taxable return of capital, or capital gain, pursuant to the
rules summarized above under the caption "Dividends and Other Distributions"
unless the redemption satisfies certain tests set forth in Section 302(b) of the
Code, in which case the redemption will be treated as a sale or exchange of the
Preferred Shares, the tax treatment of which is described in the preceding
paragraph. The redemption will have satisfied such tests under Section 302(b)
of the Code if it (i) is "substantially disproportionate" with respect to the
holder, (ii) results in a "complete termination" of the holder's stock interest
in the company, or (iii) is "not essentially equivalent to a dividend" with
respect to the holder. A distribution to a holder is "not essentially
equivalent to a dividend" if it results in a "meaning reduction" in such
holder's proportionate interest in the Company. If, as a result of the
redemption of the Preferred Shares, a holder, whose relative stock interest in
the Company is minimal and who exercises no control over corporate affairs,
experiences a reduction in his proportional interest in the Company (taking into
account shares deemed owned by the holder under Sections 302(c) and 318 of the
Code and, in certain events, dispositions of stock which occur contemporaneously
with the redemption), then, based upon published IRS rulings, such holder may be
regarded as having suffered a meaningful reduction in his interest in the
Company. In determining whether any of these tests has been met, shares
considered to be owned by the holder by reason of certain constructive ownership
rules set forth in Sections 302(c) and 318 of the Code, as well as shares
actually owned, must generally be taken into account. Because the determination
as to whether any of the alternatives tests of Section 302(b) of the Code will
be satisfied with respect to any particular holder of Preferred Shares depends
on the facts and circumstances at the time that the determination must be made,
prospective investors are advised to consult their own tax advisors to determine
such tax treatment.
If a redemption of the Preferred Shares is treated as a distribution that
is taxable as a dividend, the amount of the distribution will be measured by the
amount of cash and the fair market value of property received by the holder
without any offset for the holder's basis in the Preferred Shares. The holder's
adjusted tax basis in the redeemed Preferred Shares will be transferred to any
of the holder's remaining stock holdings in the Company. If, however, the
holder has no remaining stock holdings in the Company, such basis could be lost.
Any redemption of the Preferred Shares that is treated as a dividend and
that is non-pro rata as to all stockholders will be subject to the
"extraordinary dividend" provisions of Code Section 1059 discussed above under
the caption "Dividends and Other Distributions."
BACKUP WITHHOLDING AND REPORTING REQUIREMENTS
Information reporting to the IRS is required for dividends for certain
noncorporate holders (including individuals). These noncorporate holders may be
subject to backup withholding at a rate of 31 percent on payments of dividends
on, and the proceeds of a sale or redemption of the Preferred Shares. Backup
withholding will apply only if the holder (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, would be his Social
Security number, (ii) furnishes an incorrect TIN, (iii) is notified by the
Internal Revenue Service that it has failed to properly report payments of
interest and dividends, or (iv) under certain circumstances, fails to certify,
under penalty of perjury, that such holder has furnished a correct TIN and has
not been notified by the IRS that he is subject to backup withholding for
failure to report interest and dividend payments. Holders should consult their
tax advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining such an exemption if applicable.
The Company will report to the holders of Preferred Shares and the IRS the
amount of any "reportable payments" and any amount withheld with respect to the
Preferred Shares during each calendar year.
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the backup withholding
and information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE HOLDER OF PREFERRED SHARES SHOULD CONSULT HIS OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE PURCHASE,
OWNERSHIP, REDEMPTION AND DISPOSITION OF THE PREFERRED SHARES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND ANY RECENT
OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
SELLING HOLDERS
The Preferred Shares were issued and sold to the Initial Purchaser in
December 1997 (the "Original Offering"), who then sold the Preferred Shares in
transactions exempt from the registration requirements of the Securities Act to
persons reasonably believed by the Initial Purchaser to be "qualified
institutional buyers" (as defined by Rule 144A). These purchasers or their
transferees, pledgees, donees, or successors named below or in any Prospectus
Supplement, namely, the Selling Holders, (collectively, the "Selling Holders"),
may from time to time offer and sell pursuant to this Prospectus any or all of
the Preferred Shares.
The table below sets forth certain information with respect to the number
of Preferred Shares beneficially owned as of February 24, 1998 and the number of
Preferred Shares that may be sold by certain of the Selling Holders. To the
knowledge of the Company, other than a result of the ownership of the Preferred
Shares, none of the Selling Holders listed below has had any material
relationship with the Company or any of its affiliates within the past three
years, except for Merrill Lynch, Pierce, Fenner & Smith Incorporated who was the
Initial Purchaser in the Original Offering and who has provided, from time to
time, investment banking services to the Company.
Number of Number of
Preferred Shares Preferred Shares
Name of Selling Holder Beneficially Owned That May be Sold
Midland National Life Insurance 70,000 70,000
Company............................
Publix Super Markets, Inc.......... 70,000 70,000
Merrill Lynch Capital 100,000 100,000
Services_______.
Hartford Steam Boiler Inspection &
Insurance Co.................... 120,000 120,000
Flaherty & Crumrine Incorporated... 300,000 300,000
Erie Indemnity Company............. 20,000 20,000
Erie Insurance Exchange............ 100,000 100,000
John Hancock Mutual Life
Insurance Company............... 500,000 500,000
The preceding table has been prepared based on information furnished to
the Company by or on behalf of the Selling Holders. With respect to each
Selling Holder listed above, the number of Preferred Shares set forth may have
increased or decreased since the information was furnished, and there may be
additional Selling Holders of which the Company is unaware.
In view of the fact that Selling Holders may offer all or a portion of the
Preferred Shares held by them pursuant to this offering, and because this
offering is not being underwritten on a firm commitment basis, no estimate can
be given as to the number of Preferred Shares that will be held by the Selling
Holders after completion of this offering. In addition, the Selling Holders
identified above may have sold, transferred or otherwise disposed of all or a
portion of their Preferred Shares since the date on which they provided
information regarding their Preferred Shares.
This Prospectus will be supplemented, to the extent necessary and to the
extent not indicated above, to set forth the name and number of shares
beneficially owned by the Selling Holders not listed above that intend to sell
such Preferred Shares, and the number of Preferred Shares to be offered. The
Prospectus Supplement will also disclose, to the extent not indicated above,
whether any such Selling Holder has held any position or office with, been
employed by or otherwise has a material relationship with, the Company or any of
its affiliates during the three years prior to the date of the Prospectus
Supplement.
Pursuant to a registration rights agreement entered into between the
Company and the Initial Purchaser (the "Registration Rights Agreement") the
Company agreed to use its best efforts to file with the Commission a
Registration Statement (the "Shelf Registration Statement"), of which this
Prospectus is a part, covering the Preferred Shares and to keep the Shelf
Registration Statement effective until December 19, 1999 or such time as all of
the Preferred Shares have been sold thereunder or otherwise cease to be
Registrable Securities (as defined in the Registration Rights Agreement) or when
all Preferred Shares are eligible for resale pursuant to Rule 144 of the
Securities Act without volume and manner of sale restrictions. Subject to
certain exceptions, the Company is required to pay all costs and expenses
related to the filing of the Shelf Registration Statement.
The Registration Rights Agreement provides that an additional amount
("Liquidated Damages") shall become payable in respect of the Preferred Shares
in certain circumstances, including if the Shelf Registration Statement has been
declared effective and the Shelf Registration Statement, subject to certain
exceptions as described below, ceases to be effective or usable for resale at
any time prior to December 19, 1999 (other than after such time as all Preferred
Shares have been disposed of thereunder or otherwise cease to be Registrable
Securities). In such circumstances, Liquidated Damages shall be payable to each
Selling Holder, for so long as it holds Registrable Securities, at a rate of
.50% per annum of the liquidation preference of the Preferred Shares held,
commencing on the day the Registration Statement ceases to be effective or
usable and ending on the date the Shelf Registration Statement again becomes
effective or usable; provided, however, that the Liquidated Damages may not
exceed in the aggregate .50% per annum of the liquidation preference of the
Preferred Shares. Any amount of Liquidated Damages due shall be paid in cash on
the next succeeding Dividend Payment Date to the applicable Selling Holders of
record at the close of business on the Dividend Record Date immediately
preceding such Dividend Payment Date. The Company is permitted to suspend use
of this Prospectus for one or more periods not to exceed 90 days in any twelve-
month period under certain circumstances relating to corporate developments or
the negotiation or completion of any transaction being contemplated by the
Company. During any such permitted periods of suspension, the Registration
Rights Agreement provides that the Company is not required to pay Liquidated
Damages.
Information concerning the Selling Holders may change from time to time
and any such changed information that the Company becomes aware of will be set
forth in supplements to this Prospectus if and when necessary. Accordingly, the
number of Preferred Shares offered pursuant to this Prospectus may increase or
decrease.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of the
Preferred Shares, all of which will be received by Selling Holders. The Selling
Holders will pay all applicable underwriting discounts and selling commissions,
if any. The Preferred Shares may be sold from time to time to purchasers
directly by the Selling Holders. Alternatively, the Selling Holders may from
time to time offer the Preferred Shares to or through underwriters, dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, dealers or agents that participate in the distribution of
Preferred Shares may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
dealer or agent may be deemed to be underwriting discounts and commissions under
the Securities Act.
The Preferred Shares may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, at prices related
to the then current market price at the time of sale, at varying prices
determined at the time of sale or at negotiated prices. The sale of the
Preferred Shares may be effectuated in transactions (which may involve crosses
or block transactions) (i) on any national securities exchange or quotation
service on which the Preferred Shares may be listed or quoted at the time of
sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than
on such exchanges or in the over-the-counter market, or (iv) through the writing
and exercise of options. At the time a particular offering of the Preferred
Shares is made, a Prospectus Supplement, if required, will be distributed which
will set forth the aggregate amount of any Preferred Shares being offered and
the terms of the offering, including the name or names of any underwriters,
dealers or agents, any discounts, commissions and other terms constituting
compensation from the Selling Holders and any discounts, commissions or
concessions allowed or reallowed to be paid to dealers. The Prospectus
Supplement and, if necessary, a post-effective amendment to the Registration
Statement, will be filed with the Commission to reflect the disclosure of
additional information with respect to the distribution of the Preferred Shares.
In addition, the Preferred Shares covered by this Prospectus may be sold in
private transactions or under Rule 144 rather than pursuant to this Prospectus.
To comply with the securities laws of certain jurisdictions, if applicable, the
Preferred Shares will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Preferred Shares may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and rules and regulations thereunder, which provisions may limit
the timing of purchases and sales of any of the Preferred Shares by the Selling
Holders.
The Selling Holders will be indemnified by the Company against certain
civil liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection therewith.
LEGAL MATTERS
The legality of the Preferred Shares has been passed upon for the Company
by Stinson, Mag & Fizzell, P.C., Kansas City, Missouri, and Robert B. Terry,
General Counsel of the Company.
EXPERTS
The consolidated financial statements of the Company at August 31, 1997
and 1998, and for each of the years in the three year period ended August 31,
1998, appearing in the 1998 Form 10-K for the year ended August 31, 1998, have
been audited by KPMG Peat Marwick LLP, independent certified public accountants,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated by reference
in reliance upon the authority of such firm as experts in accounting and
auditing.
2,000,000 SHARES
THERE IS A GRAPHIC OF FARMLAND'S LOGO HERE
FARMLAND INDUSTRIES, INC.
8% SERIES A CUMULATIVE
REDEEMABLE PREFERRED SHARES
PROSPECTUS
JANUARY 5, 1999
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses (excluding commissions) to be incurred by the Company in
connection with this registration of the Preferred Shares which Selling Holders
may sell from time to time are estimated as follows:
Estimated
Item Expense
Federal registration fees......... $ 29,500
Printing and engraving............ 500
Accounting and legal fees......... 30,000
Miscellaneous expenses............ 5,000
$ 65,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 6002(b) of Chapter 17 of the Kansas Statutes (1987), permits the
following provision to be included in the articles of incorporation of the
Company: a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders, policyholders or members for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (A) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
policyholders or members, (B) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (C) under the
provision of K.S.A. 17-6424 and amendments thereto or (D) for any transaction
from which the director derived an improper personal benefit. No such provision
shall eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision becomes effective. All
references in this subsection to a director shall be deemed also to refer to a
member of the governing body of a corporation which is not authorized to issue
capital stock. Section 6002(c) provides that "It shall not be necessary to set
forth in the articles of incorporation any of the powers conferred on
corporations by this act."
Article VII of the Articles of Incorporation of Farmland reads as follows:
ARTICLE VII - INDEMNIFICATION
Section 1. Indemnification. The Association may agree to the terms
and conditions upon which any director, officer, employee or agent
accepts his office or position and in its bylaws, by contract or in any
other manner may agree to indemnify and protect any director, officer,
employee or agent of the Association, or any person who serves at the
request of the Association as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, to the fullest extent permitted by the laws of the State of
Kansas.
Section 2. Limitation of Liability. Without limiting the generality
of the foregoing provisions of this ARTICLE VII, to the fullest extent
permitted or authorized by the laws of the State of Kansas, including,
without limitation, the provisions of subsection (b)(8) of Kan. Stat.
Ann. Sec. 17-6002 (1981) as now in effect and as it may from time to
time hereafter be amended, no person who is currently or shall
hereinafter become a director of the Association shall have personal
liability to the Association for monetary damages for breach of
fiduciary duty as a director for any act or omission occurring
subsequent to the date this provision becomes effective. If the Kansas
General Corporation Code is amended after approval of this provision by
the shareholders of the Association, to authorize corporate action
further limiting or eliminating the personal liability of directors,
then the liability of a director of the Association shall be limited or
eliminated to the fullest extent permitted by the Kansas General
Corporation Code, as so amended.
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
The following exhibits are filed as a part of this Registration Statement
on Amendment No. 2 to Form S-2. Certain of these exhibits are incorporated by
reference.
Exhibit No. Description of Exhibits
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
3(i) A Articles of Incorporation and Bylaws of Farmland Industries, Inc.
effective December 5, 1996. (Incorporated by Reference - Form 10-Q
for the quarter ended November 30, 1996, filed January 14, 1997)
3(i) B Certificate of Board of Directors Resolution for the Decrease and
Elimination of Preferred Stock, dated December 19, 1997.
(Incorporated by Reference - Amendment No. 1 to Form S-2, filed
May 6, 1998)
4(i)A Certificate of Designation for a Series of Preferred Shares
Designated as 8% Series A Cumulative Redeemable Preferred Shares,
dated December 19, 1997. (Incorporated by Reference - Form S-2,
filed April 3,1998)
4(i)B Registration Rights Agreement dated as of December 16, 1997 between
Farmland Industries, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated as Initial Purchaser. (Incorporated by Reference -
Form S-2, filed April 3, 1998)
OPINIONS RE LEGALITY:
5.(i)A Opinion of Robert B. Terry, Vice President and General Counsel of
Farmland Industries, Inc. re legality of Preferred Shares.
(Incorporated by Reference - Form S-2, filed April 3, 1998)
5.(i)B Opinion of Stinson, Mag & Fizzell, P.C., re legality of Preferred
Shares. (Incorporated by Reference - Form S-2, filed
April 3, 1998)
MANAGEMENT REMUNERATIVE PLANS:
10.(iii)A Farmland Industries, Inc. Employee Variable Compensation Plan
(September 1, 1997 - August 31, 1998). (Incorporated by Reference
- Form 10-K filed November 7, 1997)
10.(iii)B Farmland Industries, Inc. Management Long-Term Incentive Plan
(Effective September 1, 1993) (Incorporated by Reference - Form
10-K, filed November 28, 1995)
10.(iii)B(1) Exhibit E (Fiscal years 1997 through 1999) (Incorporated
by Reference - Form 10-K filed November 7, 1997)
10.(iii)B(2) Exhibit F (Fiscal years 1998 through 2000) (Incorporated
by Reference - Form 10-K filed November 7, 1997)
10.(iii)B(3) Exhibit G (Fiscal years 1999 through 2001)(Incorporated
by Reference -Form 10-K filed November 20, 1998).
10.(iii)C Farmland Industries, Inc. Supplemental Executive Retirement Plan
(Effective January 1, 1994) (Incorporated by Reference - Form 10-K,
filed November 28, 1995)
10.(iii)C(1) Resolution Approving the Revision of Appendix A and
Appendix A (Incorporated by Reference - Form 10-K, filed
November 27, 1996)
10.(iii)D Farmland Industries, Inc. Executive Deferred Compensation Plan (As
Amended and Restated Effective November 1, 1996) (Incorporated by
Reference - Form 10-K, filed November 27, 1996)
* 12 Computation of Ratios
CONSENTS OF EXPERTS AND COUNSEL:
* 23.A Independent Auditors' Consent
23.B Consent of Stinson, Mag & Fizzell, P.C. (included in Exhibit 5)
23.C Consent of Robert B. Terry, Vice President and General Counsel of
Farmland Industries, Inc. (included in Exhibit 5)
24 Power of Attorney (Incorporated by Reference - Form S-2, filed
April 3, 1998)
* Filed herewith
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section 230.424(b)) if,
in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, FARMLAND
INDUSTRIES, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS
POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT ON FORM S-2 TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
KANSAS CITY, STATE OF MISSOURI ON JANUARY 5, 1999.
FARMLAND INDUSTRIES, INC.
BY /s/ TERRY M. CAMPBELL
Terry M. Campbell
Executive Vice President and
Chief Financial Officer
BY /s/ ROBERT B. TERRY
Robert B. Terry
Vice President and General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-2 HAS BEEN
SIGNED FOR THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
* Chairman of Board, January 5, 1999
Albert J. Shivley Director
/s/ H. D. Cleberg President, January 5, 1999
H. D. Cleberg Chief Executive Officer
(Principal Executive Officer)
* Vice Chairman of Board January 5, 1999
Jody Bezner Vice President and Director
* Director January 5, 1999
Lyman L. Adams, Jr.
* Director January 5, 1999
Ronald J. Amundson
* Director January 5, 1999
Baxter Ankerstjerne
* Director January 5, 1999
Richard L. Detten
* Director January 5, 1999
Steven Erdman
* Director January 5, 1999
Harry Fehrenbacher
* Director January 5, 1999
Warren Gerdes
* Director January 5, 1999
Ben Griffith
* Director January 5, 1999
Gail D. Hall
* Director January 5, 1999
Barry Jensen
* Director January 5, 1999
Ron Jurgens
* Director January 5, 1999
William F. Kuhlman
* Director January 5, 1999
Greg Pfenning
* Director January 5, 1999
Monte Romohr
* Director January 5, 1999
Joe Royster
* Director January 5, 1999
E. Kent Stamper
* Director January 5, 1999
Eli F. Vaughn
* Director January 5, 1999
Frank Wilson
/s/ TERRY M. CAMPBELL Executive Vice President January 5, 1999
Terry M. Campbell and Chief Financial Officer
(Principal Financial Officer)
/s/ MERL DANIEL Vice President and January 5, 1999
Merl Daniel Controller
(Principal Accounting Officer)
*BY /s/ TERRY M. CAMPBELL
Terry M. Campbell
Attorney-In-Fact
EXHIBIT 12
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended August 31
1994 1995 1996 1997 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Earnings:
Pretax Income (Loss)............ $ 78,766 $ 197,641 $ 155,754 $ 163,672 $ 55,025
Minority Interest in Income
of Consolidated
Subsidiary that has
Fixed Charges............... 333 9,793 7,604 10,586 8,346
Minority Interest in Loss of
Consolidated Subsidiary .... (4,855) -0- (221) (1,902) (1,341)
Equity Interest in Loss
(Income) (Earnings less
distributions) of
Investees (A)............... 603 (623) 574 (868) (56,531)
Distributions from
Investees (A)............... -0- -0- -0- 5 57,620
Total Fixed Charges
(excluding interest
capitalized)................ 64,838 68,271 76,658 79,247 $ 94,960
Total Earnings.................... $ 139,685 $ 275,082 $ 240,369 $ 250,740 $ 158,079
Fixed Charges:
Interest (including amounts
capitalized and amortization
of debt issuance costs) and
preferred dividends......... $ 52,301 $ 55,501 $ 65,365 $ 68,103 $ 85,021
Estimated Interest Component
of Rentals.................. 12,898 13,494 12,926 15,127 19,483
Total Combined Fixed Charges...... $ 65,199 $ 68,995 $ 78,291 $ 83,230 $ 104,504
Ratio of Earnings to
Combined Fixed Charges.......... 2.1 4.0 3.0 3.0 1.5
</TABLE>
(A) For 1994 through 1997, equity interest and distributions shown represent
less-than-50%-owned Investees. For 1998, equity interest and distributions
shown represent 50%-owned and less-than-50%-owned Investees.
EXHIBIT 23.A
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Farmland Industries, Inc.:
We consent to the use of our reports, incorporated herein by reference, on
the consolidated financial statements and financial statement schedule of
Farmland Industries, Inc. as of August 31, 1998 and 1997 and for each of the
years in the three-year period ended August 31, 1998 and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Kansas City, Missouri
January 5, 1999
EXHIBIT 99
EXHIBIT INDEX
The following exhibits are filed as a part of this Form S-1 Registration
Statement. Certain of these exhibits are incorporated by reference. Items
marked with an asterisk (*) are filed herein.
Exhibit No. Description of Exhibits
UNDERWRITING AGREEMENT:
1.A Underwriting Agreement between Farmland Industries, Inc. and Farmland
Securities Company, dated December 6, 1989. (Incorporated by Reference
- Form S-1 No. 33-56821 filed December 12, 1994)
1.A(1) Amendment, dated December 5, 1994, to the agreement, dated
December 6, 1989 between Farmland Industries, Inc. and Farmland
Securities Company. (Incorporated by Reference - Form S-1 No.
33-56821, filed December 12, 1994)
1.BS Sales Agency Agreement between Farmland Industries, Inc. and American
Heartland Investment, Inc., dated December 29, 1993. (Incorporated by
Reference - Form S-1 No. 33-56821, filed December 12, 1994)
** 1.C. Sales Agency Agreement between Farmland industries, Inc. and Iron Street
Securities Inc. dated , 1998.
ARTICLES OF INCORPORATION AND BYLAWS:
3.A Articles of Incorporation and Bylaws of Farmland Industries, Inc.
effective December 5, 1996. (Incorporated by Reference - Form 10-Q,
filed January 14, 1997)
3.B Certificate of Designation for a Series of Preferred Shares Designated as
8% Series A Cumulative Redeemable Preferred Shares, dated December 19,
1997. (Incorporated by Reference - Form S2, filed April 3, 1998)
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
4.(i)A Form of Trust Indenture with UMB Bank, National Association,
providing for issuance of unsubordinated debt securities, including form
of Demand Loan Certificates. (Incorporated by Reference - Form S-1, No.
33-40759, effective December 31, 1997)
4.(i)B Form of Trust Indenture with Commerce Bank, National Association,
providing for issuance of subordinated debt securities, including forms
of Ten-Year Bond, Series A, Ten-Year Bond, Series B, Five-Year Bond,
Series C, Five-Year Bond, Series D, Ten-Year Monthly Income Bond, Series
E, Ten-Year Monthly Income Bond, Series F, Five-Year Monthly Income Bond,
Series G and Five-Year Monthly Income Bond, Series H. (Incorporated by
Reference - Form S-1, No. 33-40759, effective December 31, 1997)
4(.ii)A Syndicated Credit Facility between Farmland Industries, Inc. and
various banks dated May 15, 1996, (Incorporated by Reference - Form 10-Q
filed July 15, 1996)
Certain instruments relating to long-term debt not being registered have
been omitted in accordance with Item 601(b)(4)(iii) of Regulation S-K.
Registrant will furnish a copy of any such instrument to the Commission
upon its request.
** 5 Opinion of Robert B. Terry, Vice President and General Counsel of
Farmland Industries, Inc. re Legality
MANAGEMENT REMUNERATIVE PLANS:
10.(iii)A Employee Variable Compensation Plan (September 1, 1998- August 31,
1999). (Incorporated by Reference - Form 10-K filed November 20,
1998)
10.(iii)B Farmland Industries, Inc. Management Long-Term Incentive Plan
(Effective September 1, 1993) (Incorporated by Reference - Form 10-K,
filed November 28, 1995)
10.(iii)B(1) Exhibit E (Fiscal years 1997 through 1999) (Incorporated
by Reference - Form 10-K filed November 7,1997)
10.(iii)B(2) Exhibit F (Fiscal years 1998 through 2000) (Incorporated
by Reference - Form 10-K filed November 7, 1997)
10.(iii)B(3) Exhibit G (Fiscal years 1999 through 2001)(Incorporated
by Reference-Form 10-K filed November 20, 1998).
10.(iii)C Farmland Industries, Inc. Supplemental Executive Retirement Plan
(Effective January 1, 1994) (Incorporated by Reference - Form 10-K,
filed November 28, 1995)
10.(iii)C(1) Resolution Approving the Revision of Appendix A and
Appendix A (Incorporated by Reference - Form 10-K, filed
November 27, 1996)
10.(iii)D Farmland Industries, Inc. Executive Deferred Compensation Plan (As
Amended and Restated Effective November 1, 1996) (Incorporated by
Reference - Form 10-K, filed November 27, 1996)
* 12 Computation of Ratios
21 Subsidiaries of the Registrant . (Incorporated by Reference - Form 10-K
filed November 20, 1998)
CONSENTS OF EXPERTS AND COUNSEL:
* 23.A Independent Auditors' Consent
**23.B Consent of Special Tax Counsel
**23.C Consent of Qualified Independent Underwriter
**23.D Consent of Robert B. Terry, Vice President and General Counsel of
Farmland Industries, Inc. (included in Exhibit 5)
* 24 Power of Attorney
* 25.A Statement of Eligibility of Trustee and Qualification of UMB Bank,
National Association Trustee, Form T-1.
* 25.B Statement of Eligibility of Trustee and Qualification of Commerce Bank,
National Association as Trustee, Form T-1.
* Filed herewith
** To be filed by amendment
