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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE PERIOD ENDED MAY 31, 1996
COMMISSION FILE NUMBER: 33-83868
AMERICAN CRYSTAL SUGAR COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 84-0004720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 NORTH THIRD STREET
MOORHEAD, MINNESOTA 56560
(Address of principal executive offices)
TELEPHONE NUMBER (218) 236-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK JULY 1, 1996
--------------------- --------------
$10 PAR VALUE 2,441
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AMERICAN CRYSTAL SUGAR COMPANY
FORM 10-Q
INDEX
PAGE NO.
--------
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS 1
STATEMENTS OF OPERATIONS 3
STATEMENT OF CASH FLOWS 4
NOTES TO THE FINANCIAL STATEMENTS 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION 7
PART II OTHER INFORMATION 9
SIGNATURES 11
<PAGE>
Part I Financial Information
AMERICAN CRYSTAL SUGAR COMPANY
Balance Sheets
(Unaudited)
(Dollars in Thousands)
ASSETS
May 31
------------------- August 31,
1996 1995 1995
-------- -------- ----------
Current Assets: *
Cash and Cash Equivalents $ 4,073 $ 4,842 $ 3,420
Accounts Receivable:
Trade 47,945 37,357 48,113
Members 4,127 4,569 4,207
Other 3,321 3,470 5,194
Advances to Related Parties 19,730 9,280 6,091
Inventories (Note 2) 216,191 238,178 103,291
Prepaid Expenses 3,017 3,690 3,825
-------- -------- ----------
Total Current Assets 298,404 301,386 174,141
-------- -------- ----------
Property and Equipment:
Land 11,875 11,540 11,876
Buildings and Equipment 535,587 499,920 535,587
Construction-in-Progress 57,765 50,494 36,934
Less: Accumulated Depreciation (392,780) (374,037) (373,709)
-------- -------- ----------
Net Property and Equipment 212,447 187,917 210,688
-------- -------- ----------
Other Assets:
Investments in Banks for Cooperatives 15,044 13,486 13,932
Investments in Marketing Cooperatives 8,704 1,155 5,545
Investment in ProGold LLC 48,194 5,612 12,452
Other Assets 3,830 1,505 4,132
-------- -------- ----------
Total Other Assets 75,772 21,758 36,061
-------- -------- ----------
Total Assets $586,623 $511,061 $420,890
-------- -------- ----------
-------- -------- ----------
* Derived from audited financial statements.
The Accompanying Notes are an Integral Part of These Financial Statements.
1
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AMERICAN CRYSTAL SUGAR COMPANY
Balance Sheets
(Unaudited)
(Dollars in Thousands)
LIABILITIES AND MEMBERS' INVESTMENTS
May 31
------------------- August 31,
1996 1995 1995
-------- -------- ----------
Current Liabilities: *
Short-Term Debt $134,761 $144,266 $ 53,932
Current Maturities of Long-Term Debt 14,300 12,115 12,115
Accounts Payable:
Trade 2,224 3,205 21,029
Other 7,124 606 4,864
Accrued Continuing Costs (Note 3) 50,122 17,854 -
Other Current Liabilities 15,224 15,401 13,918
Amounts Due Members 57,406 64,126 40,237
-------- -------- ----------
Total Current Liabilities 281,161 257,573 146,095
Long-Term Debt, Excluding Current
Maturities 145,519 97,614 106,914
Deferred Income Taxes 1,029 4,658 1,029
Other Liabilities 26,519 15,686 24,805
Commitments and Contingencies - - -
-------- -------- ----------
Total Liabilities 454,228 375,531 278,843
-------- -------- ----------
Members' Investments (Note 4):
Preferred Stock 31,879 31,879 31,879
Common Stock 24 23 23
Additional Paid-in Capital 32,417 31,957 32,417
Unit Retains 81,278 71,860 88,487
Pension Liability Adjustment (5,674) (2,386) (5,674)
Retained Earnings (7,529) 2,197 (5,085)
-------- -------- ----------
Total Members' Investments 132,395 135,530 142,047
-------- -------- ----------
Total Liabilities and Members' Investments $586,623 $511,061 $420,890
-------- -------- ----------
-------- -------- ----------
* Derived from audited financial statements.
The Accompanying Notes are an Integral Part of These Financial Statements.
2
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Statements of Operations
(Unaudited)
(Dollars in Thousands)
Nine Months Ended Three Months Ended
May 31 May 31
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
Net Revenue $511,592 $439,693 $187,448 $165,445
Cost of Product Sold 41,833 (15,840) 46,518 25,020
-------- -------- -------- --------
Gross Proceeds 469,759 455,533 140,930 140,425
Selling, General & Administrative
Expenses 110,009 96,192 38,934 38,211
Accrued Continuing Costs (Note 3) 50,122 17,854 22,958 5,244
-------- -------- -------- --------
Operating Proceeds 309,628 341,487 79,038 96,970
-------- -------- -------- --------
Other Income (Expenses)
Interest Income 319 265 119 50
Interest Expense (11,703) (8,633) (4,737) (3,631)
Other Income 4,210 1,867 2,473 716
Other Expenses (48) (200) (3) (55)
-------- -------- -------- --------
Other Income (Expense) (7,222) (6,701) (2,148) (2,920)
-------- -------- -------- --------
Proceeds before Income Taxes 302,406 334,787 76,890 94,050
Income Taxes Provision/(Benefit) - (286) - 1
-------- -------- -------- --------
Net Proceeds Before Cummulative
Effect of Changes in Accounting
Principle 302,406 335,073 76,890 94,049
Cummulative Effect of Changes in
Accounting Principle - - - -
-------- -------- -------- --------
Net Proceeds Resulting from
Member and Non-Member Business $302,406 $335,073 $ 76,890 $ 94,049
-------- -------- -------- --------
-------- -------- -------- --------
Distribution of Net Proceeds:
Credited/(Charged) to Member's
Investments:
Member Tax Accounting
Adjustment, Net $ - $ 2,518 $ - $ 1,240
Non-Member Business Income/(Loss) (2,444) (872) (897) 333
-------- -------- -------- --------
Net Credit/(Charge) to Members'
Investments (2,444) 1,646 (897) 1,573
Payments to/due Members for
Sugarbeets, Net of Unit Retains
Declared 304,850 333,427 77,787 92,476
-------- -------- -------- --------
Total $302,406 $335,073 $ 76,890 $ 94,049
-------- -------- -------- --------
-------- -------- -------- --------
The Accompanying Notes are an Integral Part of These Financial Statements.
3
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AMERICAN CRYSTAL SUGAR COMPANY
Statement of Cash Flows
(Unaudited)
(Dollars In Thousands)
Nine Months Ended
May 31
---------------------
1996 1995
--------- ---------
Cash Provided by/(Used for) Operations:
Net Proceeds Resulting from Member and Non-
Member Business $ 302,406 $ 335,073
Payments to/due Members for Sugarbeets,
Including Unit Retains (304,850) (333,427)
Add/(Deduct) Noncash Items:
Depreciation and Amortization 19,482 27,224
Deferred Income Taxes - -
(Gain)/loss on the Disposition of Property
and Equipment (143) (123)
Noncash Portion of Patronage Dividend from
Banks for Cooperatives (1,884) (1,147)
Deferred Gain Recognition (168) (168)
Changes in Certain Elements of Working Capital
Accounts Receivable:
Trade 169 (3,365)
Members 79 (354)
Other 1,594 (1,382)
Inventories (112,900) (184,398)
Prepaid Expenses 1,098 1,943
Advances to Related Parties (13,928) (5,167)
Accounts Payable:
Trade (18,806) (1,902)
Other 2,260 (10,349)
Other Current Liabilities 51,428 19,861
Amount Due Growers 17,169 20,232
--------- ---------
Net Cash (Used In) Operations (56,994) (137,449)
--------- ---------
Cash Provided by/(Used In) Investing Activities:
Purchases of Property and Equipment (20,831) (24,772)
Proceeds from the Sale of Property and Equipment 143 123
Investment in Banks for Cooperatives 773 710
Investment in Marketing Coops (2,992) (147)
Investment in ProGold LLC (35,742) (5,422)
Changes in Other Assets 175 286
--------- ---------
Net Cash (Used In) Investing Activities (58,474) (29,222)
--------- ---------
Cash Provided by/(Used In) Financing Activities:
Net Proceeds (Payments) on Short-Term Debt 80,829 144,266
Proceeds from Long-Term Debt 52,900 10,000
Long-Term Debt Repayment (12,115) (16,110)
Changes in Other Long-Term Liabilities 1,715 667
Changes in Preferred Stock - 1,450
Changes in Common Stock 1 (0)
Changes in Additional Paid-In Capital - 26,399
Payment of Unit Retains (7,209) (9,573)
--------- ---------
Net Cash Provided by Financing Activities 116,121 157,099
--------- ---------
Decrease in Cash and Cash Equivalents 653 (9,572)
Cash and Cash Equivalents Beginning of Period 3,420 14,414
--------- ---------
Cash and Cash Equivalents End of Period $ 4,073 $ 4,842
--------- ---------
--------- ---------
The Accompanying Notes are an Integral Part of These Financial Statements.
4
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AMERICAN CRYSTAL SUGAR COMPANY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 1996 AND 1995
NOTE 1: BASIS OF PRESENTATION
The unaudited financial statements contained herein have been prepared pursuant
to the rules and regulations of the Security and Exchange Commission.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles. However, in the opinion of
management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included.
The operating results for the nine month period ended May 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
August 31, 1996.
The amount paid to growers for sugarbeets (beet payment) depends on the future
selling prices of sugar and by-products as well as processing and other costs to
be incurred during the remainder of the fiscal year. For the purposes of this
report, the amount of the beet payment, future revenues and costs have been
estimated. Therefore, adjustments with respect to these estimates may be
necessary in the future as additional information becomes available.
At a special meeting of the shareholders held on April 26, 1995, a resolution
was adopted to amend the Bylaws of the Company and the Grower Agreement between
the Company and each of its shareholders. The resolution changes the method by
which the Company calculates the Cooperative's income for purposes of the grower
beet payment. Under the current method, the Company's income for the purposes
of the grower beet payment is calculated on the basis of the Company's taxable
income. The adopted resolution provides that effective with the fiscal year
beginning September 1, 1995, income, for the purposes of the grower beet
payment, will be calculated on the basis of the Company's book income.
Property and equipment acquired prior to September 1, 1995, was depreciated for
financial statement purposes, principally using declining balance methods with
estimated useful lives ranging from 3 to 45 years. Effective September 1, 1995,
property and equipment was depreciated using the straight-line method. The
straight-line method of depreciation was adopted during fiscal 1996 to more
accurately reflect the allocation of the cost of the property and equipment in
the proper period and to conform with general industry practice. The effect of
the change on proceeds before income taxes and net proceeds resulting from
member and non-member business for the nine month period ended May 31, 1996
was $9.3 million and $19.4 thousand, respectively.
These financial statements should be read in conjunction with the financial
statements and notes included in the company's annual report for the year ended
August 31, 1995.
5
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NOTE 2: INVENTORIES
The major components of inventories are as follows (In Thousands):
5/31/96 5/31/95 8/31/95
------- ------- -------
Refined Sugar, Pulp, Molasses,
CSB and Beet Seed $191,197 $215,499 $ 78,440
Maintenance Parts & Supplies 24,994 22,679 24,851
-------- ---------- ---------
Total Inventories $216,191 $238,178 $103,291
-------- ---------- ---------
-------- ---------- ---------
Sugar, pulp, molasses and CSB inventories are valued at estimated net realizable
value. Maintenance parts & supplies and beet seed inventories are valued the
lower of average cost or market.
NOTE 3: ACCRUED CONTINUING COSTS
For interim reporting, the Net Proceeds from Member Business is determined based
on the forecasted beet payment and the percentage of the tons of sugarbeets
processed to the total estimated tons of sugarbeets to process for a given crop
year. Accrued continuing costs represents the difference between the Net
Proceeds from Member Business as determined above and actual member business
crop year revenues realized and expenses incurred through the end of the
reporting period. Accrued continuing costs are reflected in the Financial
Statements as a cost on the Statements of Operations and as a current liability
on the Balance Sheets.
NOTE 4: MEMBERS' INVESTMENTS
Shares Shares Issued
Par Value Authorized & Outstanding
--------- ---------- -------------
Preferred Stock:
July 1, 1996 $76.77 600,000 415,255
May 31, 1996 $76.77 600,000 415,255
August 31, 1995 $76.77 600,000 415,255
May 31, 1995 $76.77 600,000 415,255
Common Stock:
July 1, 1996 $10.00 4,000 2,441
May 31, 1996 $10.00 4,000 2,428
August 31, 1995 $10.00 4,000 2,343
May 31, 1995 $10.00 4,000 2,318
NOTE 5: COMMITMENTS AND CONTINGENCIES
American Crystal has signed agreements to invest approximately $48 million as a
46% partner in ProGold Limited Liability Company. ProGold Limited Liability
Company is to construct and operate a corn wet milling plant, which intends to
produce high-fructose corn syrup sweetener. As of May 31, 1996, American
Crystal had invested $48.1 million. Construction of the plant began in May,
1995, with the anticipated plant start-up set for the Fall of 1996.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 1996 AND 1995
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 1996 AND 1995
Revenue for the nine months ended May 31, 1996, was $511.6 million, an increase
of $71.9 million from 1995. Revenue from total sugar sales increased 19.9
percent reflecting a 2.1 percent increase in the average selling price per
hundredweight and a 17.5 percent increase in hundredweight sold. Revenue from
pulp sales decreased 25.1 percent due to a 32.8 percent decrease in the volume
of pulp sold partially offset by an 11.5 percent increase in the average selling
price per ton. Revenue from molasses sales increased 40.6 percent due to a 37.1
percent increase in the volume of molasses sold and an 2.6 percent increase in
the average selling price per ton. Revenue from the sales of Concentrated
Separated By-Product (CSB), a by-product of the molasses desugarization process,
increased 32.8 percent due to a 18.9 percent increase in sales volume and an
11.7 percent increase in the average selling price per ton.
Cost of product sold, exclusive of payments for sugarbeets, increased $57.7
million. Direct processing costs for sugar and pulp decreased 4.1 percent
primarily due to the harvesting and processing of a 3.6 percent smaller crop.
Fixed and committed expenses decreased 4.9 percent reflecting decreased
depreciation due to a change to a straight line method from double-declining.
Changes in product inventory levels between 1996 and 1995, impacted the cost of
product sold unfavorably by $67.6 million. The cost associated with sugar
purchased to meet customer needs was down $3.8 million due to decreased sales
volume.
Selling expenses increased $12.3 million due primarily to the increased freight
and storage expense and the increases in the sales volumes of sugar and by-
products. General and Administrative expenses increased $1.5 million reflecting
higher personnel costs and other general cost increases.
The increase in accrued continuing costs was due primarily to changes in sugar
sales and production, differences in the timing of incurring processing costs
and member tax accounting adjustments.
Interest expense increased due to higher average borrowing levels for short and
long-term debt.
Non-member activities resulted in a loss of $2,444,000 for the nine months
ended May 31, 1996 as compared to a loss of $872,000 for the same period last
year. This increase was primarily due to lower profits from the sale of beet
seed and additional costs for our outside sales offices.
Net payments to/due members for sugarbeets decreased by $28.6 million from
$333.4 million for the first nine months in 1995, to $304.9 million for the
first nine months in 1996. This decrease was due to a 3.1 percent decrease in
the number of tons of beets sliced this year as compared to last year along with
a slightly lower projected per ton beet payment.
7
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED MAY 31, 1995 AND 1994
Revenue for the three months ended May 31, 1996, was $187.4 million, an increase
of $22.0 million from 1995. Revenue from total sugar sales increased 18.8
percent reflecting a 1.4 percent increase in the average selling price per
hundredweight and a 17.1 percent increase in hundredweight sold. Revenue from
pulp sales decreased 40.2 percent due to a 46.9 percent decrease in the volume
of pulp sold partially offset by a 12.6 percent increase in the average selling
price per ton. Revenue from molasses sales increased 59.1 percent due to a 6.2
percent increase in the average selling price per ton and a 49.9 percent
increase in the volume of molasses sold. Revenue from the sales of Concentrated
Separated By-Product (CSB), a by-product of the molasses desugarization process,
increased 72.9 percent due to a 15.5 percent increase in the average selling
price per ton and a 49.8 percent increase in the volume of CSB sold.
Cost of product sold, exclusive of payments for sugarbeets, increased $21.5
million. Direct processing costs for sugar and pulp decreased 12.8 percent
primarily due to the shorter campaign resulting from harvesting and processing
of a smaller crop. Fixed and committed expenses decreased 13.8 percent due to
lower depreciation resulting from changing to a straight line depreciation
method from double-declining. Changes in product inventory levels between 1996
and 1995, impacted the cost of product sold unfavorably by $23.8 million. The
cost associated with sugar purchased to meet customer needs was up $1.9 million
due to increased sales volume during this quarter.
Selling expenses increased $1.7 million due primarily to the increased freight
and storage expense and the increases in the sales volumes of sugar, purchased
sugar and by-products. General and Administrative expenses decreased $1.0
million reflecting lower uninsured losses and outside services expenses.
The increase in accrued continuing costs was due primarily to changes in sugar
sales and production, differences in the timing of incurring processing costs
and member tax accounting adjustments.
Interest expense increased due to higher average borrowing levels for short and
long-term debt.
Non-member activities resulted in the loss of $897,000 for the three months
ended May 31, 1996 as compared to the income of $333,000 for the same period
last year.
Net payments to/due members for sugarbeets decreased by $14.7 million from $92.5
million for the third quarter of 1995, to $77.8 million for the same period in
1996. This decrease was due to the decrease in the number of tons of beets
sliced this quarter as compared to last year along with a slightly lower
projected per ton beet payment.
LIQUIDITY AND CAPITAL RESOURCES
Because American Crystal operates as a cooperative, payments for member
delivered sugarbeets, the principal raw material used in producing the sugar and
agri-products it sells, are subordinated to all member business expenses. In
addition, actual cash payments to members are spread over a period of
approximately one year following delivery of their sugarbeet crops to American
Crystal and are net of unit retains allocated to them, both of which remain
available to meet American Crystal's capital requirements. This member financing
arrangement may result in an additional source of liquidity and reduced outside
financing requirements in comparison to a similar business operated on a
non-cooperative basis.
8
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However, because sugar is sold throughout the year (while sugarbeets are
processed primarily in the fall and winter) and because substantial amounts of
equipment are required for its operations, American Crystal has utilized
substantial outside financing on both a seasonal and long-term basis to fund
such operations. The majority of such financing has been provided by the St.
Paul Bank for Cooperatives ("Bank"). American Crystal has a short-term line of
credit with the Bank in 1996 of $210 million.
The various loan agreements between the Bank and American Crystal obligate
American Crystal to maintain or achieve certain amounts of working capital and
certain financial ratios and impose restrictions on American Crystal. As of May
31, 1996, American Crystal was in compliance with its loan agreements.
The primary factor for the changes in American Crystal's financial condition for
the nine months ended May 31, 1996 was due to the 1995/1996 sugar beet
processing campaign and the company's investing activities. The cash used in
operations of $57.0 million and investing activities of $58.5 million was funded
through the cash provided by financing activities. The net cash provided by
financing activities was primarily comprised of the net proceeds from short-term
debt of $80.8 million and proceeds from long-term debt of $52.9 million,
partially offset by the repayment on long-term debt of $12.1 million and the
payment of the unit retains of $7.2 million. Working capital has decreased
$10.8 million from $28 million at the beginning of the year to $17.2 million as
of May 31, 1996 primarily due to increased short-term debt, and higher amounts
due growers, partially offset by increased inventories and lower trade payables.
Capital expenditures for the nine months ended May 31, 1996 were $20.8 million.
These capital expenditures are a continuation of American Crystal's strategy of
expanding capacity and improving operating efficiencies.
American Crystal has signed agreements to invest up to approximately $48 million
to become one of three members of ProGold Limited Liability Company. During
1996, American Crystal invested an additional $35.7 million bringing the total
investment in ProGold LLC as of May 31, 1996, to $48.1 million.
American Crystal anticipates that the funds necessary for the Bank's working
capital requirements and future capital expenditures will be derived from
depreciation, unit retains and long-term borrowing.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
American Crystal is subject to various lawsuits and claims which arise in the
ordinary course of its business. While the results of such litigation and
claims cannot be predicted with certainty, management believes the disposition
of all such proceedings, individually or in the aggregate, should not have a
material adverse effect on the Company's financial position, results of
operations or cash flows. Management is not aware of any threatened claims which
could result in the commencement of legal proceedings.
9
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No exhibits are included herein:
The Company did not file any reports on Form 8-K during the nine months ended
May 31, 1996.
10
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SIGNATURES
PURSUANT TO THE REQUIREMENT OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
AMERICAN CRYSTAL SUGAR COMPANY
------------------------------
(REGISTRANT)
DATE: JULY 1, 1995 /S/ JOSEPH J. TALLEY
-------------- ------------------------------
JOSEPH J. TALLEY
FINANCE DIRECTOR
DULY AUTHORIZED OFFICER AND
PRINCIPAL FINANCIAL OFFICER
11
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 36
<SECURITIES> 4,037
<RECEIVABLES> 47,945
<ALLOWANCES> 0
<INVENTORY> 216,191
<CURRENT-ASSETS> 298,404
<PP&E> 605,227
<DEPRECIATION> 392,780
<TOTAL-ASSETS> 586,623
<CURRENT-LIABILITIES> 281,161
<BONDS> 0
0
31,879
<COMMON> 24
<OTHER-SE> 100,492
<TOTAL-LIABILITY-AND-EQUITY> 586,623
<SALES> 469,759
<TOTAL-REVENUES> 511,592
<CGS> 41,833
<TOTAL-COSTS> 160,131
<OTHER-EXPENSES> 7,222
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,703
<INCOME-PRETAX> 302,406
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 302,406
<EPS-PRIMARY> 0
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