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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE PERIOD ENDED NOVEMBER 30, 1997
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
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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 JANUARY 6, 1998
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$10 PAR VALUE 2,587
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<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
FORM 10-Q
INDEX
PAGE NO.
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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 10
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
Balance Sheets
(Unaudited)
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
November 30
-------------------------- August 31,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current Assets: *
Cash and Cash Equivalents $ 587 $ 5,034 $ 11,551
Accounts Receivable:
Trade 60,611 54,810 60,940
Members 827 965 2,857
Other 4,612 4,332 5,618
Advances to Related Parties 13,786 2,942 15,064
Inventories (Note 2) 421,412 405,877 140,057
Prepaid Expenses 2,418 2,256 2,892
----------- ----------- -----------
Total Current Assets 504,253 476,216 238,979
----------- ----------- -----------
Property and Equipment:
Land 13,101 12,059 13,101
Buildings and Equipment 639,409 572,446 635,671
Construction-in-Progress 50,552 50,142 43,938
Less: Accumulated Depreciation (420,121) (400,419) (413,211)
----------- ----------- -----------
Net Property and Equipment 282,941 234,228 279,499
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Other Assets:
Investments in Banks for Cooperatives 14,546 15,707 14,568
Investments in Marketing Cooperatives 1,678 17,075 1,650
Investment in ProGold LLC 36,225 53,336 43,007
Other Assets 5,990 3,073 3,801
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Total Other Assets 58,439 89,191 63,026
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Total Assets $ 845,633 $ 799,635 $ 581,504
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</TABLE>
* Derived from audited financial statements.
The Accompanying Notes are an Integral Part of These Financial Statements.
1
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
Balance Sheets
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
LIABILITIES AND MEMBERS' INVESTMENTS
November 30
-------------------------- August 31,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current Liabilities: *
Short-Term Debt $ 165,000 $ 158,000 $ 67,960
Current Maturities of Long-Term Debt 18,800 14,525 17,800
Accounts Payable:
Trade 12,398 3,384 21,538
Other 18,384 23,247 4,359
Accrued Continuing Costs (Note 3) 15,721 25,743 -
Other Current Liabilities 14,877 13,257 15,515
Amounts Due Members 181,629 189,949 66,155
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Total Current Liabilities 426,809 428,105 193,327
Long-Term Debt, Excluding Current
Maturities 185,800 176,394 186,800
Deferred Income Taxes 1,540 - 1,540
Other Liabilities 24,884 22,402 23,909
Commitments and Contingencies - - -
----------- ----------- -----------
Total Liabilities 639,033 626,901 405,576
----------- ----------- -----------
Members' Investments (Note 4):
Preferred Stock 37,747 33,369 33,542
Common Stock 26 24 26
Additional Paid-in Capital 104,849 60,655 64,596
Unit Retains 97,516 89,393 105,450
Pension Liability Adjustment (4,131) (4,518) (4,131)
Retained Earnings (29,407) (6,189) (23,555)
----------- ----------- -----------
Total Members' Investments 206,600 172,734 175,928
----------- ----------- -----------
Total Liabilities and Members'
Investments $ 845,633 $ 799,635 $ 581,504
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
* Derived from audited financial statements.
The Accompanying Notes are an Integral Part of These Financial Statements.
2
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
Statement of Operations
(Unaudited)
(Dollars in Thousands)
For the Three Months Ended
November 30
--------------------------
1997 1996
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Net Revenue $ 179,169 $ 150,018
Cost of Product Sold 14,650 (28,529)
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Gross Proceeds 164,519 178,547
Selling, General & Administrative
Expenses 39,584 30,836
Accrued Continuing Costs (Note 3) 15,721 25,743
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Operating Proceeds 109,214 121,968
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Other Income (Expenses)
Interest Income 386 697
Interest Expense (2,991) (2,910)
Other Income (Loss) 55 326
Other Expenses (5,538) (347)
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Other Income (Expense) (8,088) (2,234)
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Proceeds before Income Taxes 101,126 119,734
Income Taxes Provision/(Benefit) - -
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Net Proceeds Resulting from
Member and Non-Member Business $ 101,126 $ 119,734
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Distribution of Net Proceeds:
Credited/(Charged) to Member's
Investments:
Non-Member Business Income/(Loss) $ (5,852) $ (708)
Unit Retains Declared to Members - -
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Net Credit/(Charge) to Members'
Investments (5,852) (708)
Payments to/due Members for
Sugarbeets, Net of Unit Retains
Declared 106,978 120,442
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Total $ 101,126 $ 119,734
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The Accompanying Notes are an Integral Part of These Financial Statements.
3
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
Statements of Cash Flows
(Unaudited)
(Dollars In Thousands)
Three Months Ended
November 30
--------------------------
1997 1996
----------- -----------
Cash Used for Operations:
Net Proceeds Resulting from Member
and Non-Member Business $ 101,126 $ 119,734
Payments to/due Members for Sugarbeets,
Including Unit Retains (106,978) (120,442)
Add/(Deduct) Noncash Items:
Depreciation and Amortization 6,929 8,871
Loss on Investment Activities 5,494 40
(Gain)/loss on the Disposition of
Property and Equipment (4) (59)
Noncash Portion of Patronage Dividend
from Banks for Cooperatives - (551)
Deferred Gain Recognition (52) (53)
Changes in Certain Elements of Working
Capital Accounts Receivable:
Trade 329 (3,895)
Members 2,030 2,880
Other 1,006 (2,933)
Inventories (281,355) (333,200)
Prepaid Expenses 474 832
Advances to Related Parties 1,278 7,366
Accounts Payable:
Trade (9,140) (13,676)
Other 14,025 15,757
Other Current Liabilities 15,081 23,868
Amount Due Growers 115,474 142,831
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Net Cash Used In Operations (134,283) (152,630)
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Cash Used In Investing Activities:
Purchases of Property and Equipment (10,352) (9,044)
Proceeds from the Sale of Property
and Equipment 4 59
Investment in Banks for Cooperatives 22 20
Investment in Marketing Coops 24 (1,554)
Investment in ProGold LLC 1,288 (2,046)
Changes in Other Assets (2,207) (6)
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Net Cash Used In Investing Activities (11,221) (12,571)
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Cash Provided by Financing Activities:
Net Proceeds (Payments) on Short-Term
Debt 97,040 144,357
Proceeds from Long-Term Debt - -
Long-Term Debt Repayment - -
Changes in Other Long-Term Liabilities 976 765
Changes in Preferred Stock 4,205 1,490
Changes in Common Stock - -
Changes in Additional Paid-In Capital 40,253 27,614
Payment of Unit Retains (7,934) (7,798)
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Net Cash Provided by Financing Activities 134,540 166,428
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Decrease in Cash and Cash Equivalents (10,964) 1,227
Cash and Cash Equivalents Beginning
of Period 11,551 3,807
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Cash and Cash Equivalents End of Period $ 587 $ 5,034
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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 THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
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 three month period ended November 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
August 31, 1998.
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.
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, 1997.
NOTE 2: INVENTORIES
The major components of inventories are as follows (In Thousands):
11/30/97 11/30/96 8/31/97
-------- -------- --------
Refined Sugar, Pulp, Molasses,
CSB and Beet Seed $149,433 $137,702 $115,026
Corn - - 3,758
Unprocessed Sugarbeets 251,415 245,343 -
Maintenance Parts & Supplies 20,564 22,832 21,273
-------- -------- --------
Total Inventories $421,412 $405,877 $140,057
-------- -------- --------
-------- -------- --------
Sugar, pulp, molasses and CSB inventories are valued at estimated net realizable
value. Unprocessed sugarbeets are valued at the estimated net beet payment plus
estimated unit retains to be withheld. Maintenance parts & supplies and beet
seed inventories are valued the lower of average cost or market.
5
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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:
January 5, 1998 $76.77 600,000 497,990
November 30, 1997 $76.77 600,000 491,689
August 31, 1997 $76.77 600,000 436,915
November 30, 1996 $76.77 600,000 434,665
Common Stock:
January 5, 1998 $10.00 4,000 2,587
November 30, 1997 $10.00 4,000 2,585
August 31, 1997 $10.00 4,000 2,585
November 30, 1996 $10.00 4,000 2,443
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE AND THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
Revenue for the three months ended November 30, 1997, was $179.2 million, an
increase of $29.2 million from 1996. Revenue from total sugar sales increased
18.7 percent reflecting an 19.4 percent increase in hundredweight sold partially
offset by a .6 percent decrease in the average selling price per hundredweight.
Revenue from pulp sales increased 57.6 percent due to a 58.9 percent increase in
the volume of pulp sold partially offset by a .8 percent decrease in the average
selling price per ton. Revenue from molasses sales decreased 5.6 percent due to
a 12.3 percent decrease in the average selling price per ton partially offset by
a 7.7 percent increase in the volume of molasses sold. Revenue from the sales
of Concentrated Separated By-Produce (CSB), a by-product of the molasses
desugarization process, increased 46.2 percent due to a 33 percent increase in
sales volume and a 9.9 percent increase in the average selling price per ton.
Cost of product sold, exclusive of payments for sugarbeets, increased $43.2
million. Direct processing costs for sugar and pulp decreased .9 percent. Fixed
and committed expenses decreased 9.6 percent reflecting lower maintenance costs.
Changes in product inventory levels between 1997 and 1996 affected the cost of
product sold unfavorably by $61.1 million. The cost associated with sugar
purchased to meet customer needs was up $1.9 million due to the increase in
purchased sugar activity in distant geographic markets.
Selling expenses increased $8 million due primarily to the increase in the
volume of products sold. General and Administrative expenses increased $.6
million also due to the increased software amortization and depreciation
expense.
The decrease in accrued continuing costs was due primarily to changes in sugar
sales and production and the differences in the timing of incurring processing
costs.
Interest expense increased slightly due to higher average borrowing levels for
short and long-term debt this year.
Non-member activities resulted in a loss of $5.9 million for the three months
ended November 30, 1997 as compared to a loss of $.75 million for the same
period last year. The majority of this loss is related to American Crystal's
investment in ProGold Limited Liability Company.
7
<PAGE>
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. 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 1997 of $240 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
November 30, 1997, American Crystal was in compliance with its loan agreements.
The primary factor for the changes in American Crystal's financial condition for
the three months ended November 30, 1997 was due to the 1997/1998 sugarbeet
processing campaign. The cash used in operations of $134.3 million and
investing activities of $11.2 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 $97 million and
proceeds from sale of stock of $44.5 million, partially offset by the payment of
the unit retains of $7.9 million. Working capital has increased $31.8 million
from $45.7 million at the beginning of the year to $77.4 million as of November
30, 1997 primarily due to increased inventories, partially offset by increased
short term and current maturities of long term debt. Working capital for the
three months ended November 30, 1997 was $77.4 million, an increase of $29.3
million compared to $48.1 million in the same period in 1996.
Capital expenditures for the three months ended November 30, 1997 were $10.4
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.
The growth in the market for refined sugar in the late 1980's and the mid 1990's
is a reversal of trends in the 1970's and early 1980's which resulted in a
reduced market for refined sugar. During the 1970's and early 1980's, high
fructose corn syrup was increasingly used as a replacement for refined sugar in
certain food products. (The prime example of this trend was the use of high
fructose corn syrup in beverages such as soft drinks.) In addition,
non-nutritive sweeteners such as aspartame were developed and used in food
products. While high fructose corn syrup and non-nutritive sweeteners
constitute a large portion of the overall sweetener market, the Company believes
that the recent trend of increased use of refined sugar results from population
growth and, more importantly, increased acceptance of the use of sugar as a
desirable natural ingredient in a normal diet.
8
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PART II. OTHER INFORMATION
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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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Hillsboro Factory District Meeting on November 10, 1997, an election of a
Board of Director was held. Francis Kritzberger who sought re-election received
98 of the 98 votes cast. His three year term expires in December, 2000.
At the Drayton Factory District Meeting on November 11, 1997, an election of a
Board of Director was held. Wayne Langen who sought re-election received 235 of
the 235 votes cast. His three year term expires in December, 2000.
At the East Grand Forks Factory District Meeting on November 11, 1997, an
election of a Board of Director was held. Aime Dufault who sought re-election
received 137 of the 137 votes cast. His three year term expires in December,
2000.
At the Crookston Factory District Meeting on November 12, 1997, an election of a
Board of Director was held. Lonn Kiel who sought re-election received 153 of
the 153 votes cast. His three year term expires in December, 2000.
At the Moorhead Factory District Meeting on November 14, 1997, an election of a
Board of Director was held. Jay Nord received 96 votes and Richard Borgen
received 104 of the 200 votes cast. Richard Borgen's three year term expires in
December, 2000. Mr. Borgen replaces Paul Borgen who was unable to stand for
re-election due to the provisions of the Company By-Laws which prohibit a person
from serving more than four (4) consecutive terms as a Director.
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 three months ended
November 30, 1997.
9
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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: JANUARY 3, 1997 /s/ Samuel S. M. Wai
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SAMUEL S. M. WAI
CORPORATE CONTROLLER
DULY AUTHORIZED OFFICER
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 587
<SECURITIES> 0
<RECEIVABLES> 79,836
<ALLOWANCES> 0
<INVENTORY> 421,412
<CURRENT-ASSETS> 504,253
<PP&E> 703,062
<DEPRECIATION> 420,121
<TOTAL-ASSETS> 845,633
<CURRENT-LIABILITIES> 426,809
<BONDS> 185,800
0
37,747
<COMMON> 26
<OTHER-SE> 168,827
<TOTAL-LIABILITY-AND-EQUITY> 845,633
<SALES> 179,169
<TOTAL-REVENUES> 179,169
<CGS> 14,650
<TOTAL-COSTS> 14,650
<OTHER-EXPENSES> 5,097
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,991
<INCOME-PRETAX> 101,126
<INCOME-TAX> 0
<INCOME-CONTINUING> 101,126
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,126
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
