SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
to
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 1, 1998.
CENEX HARVEST STATES COOPERATIVES
(Exact name of registrant as specified in its charter)
Minnesota 333-17865 41-0251095
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
5500 Cenex Drive, Inver Grove Heights, Minnesota 55077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (651) 451-5151
<PAGE>
The undersigned registrant hereby amends Item 7 of its Current Report
on Form 8-K filed with the Commission on June 10, 1998, to include the financial
statement information indicated in Item 7 below:
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Audited financial statements of business acquired-CENEX, Inc.
Report of Independent Accountants
Consolidated Balance Sheets as of September 30, 1997 and 1996
Consolidated Statements of Equities for the years ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Operations for the years ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
September 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(b) Unaudited interim financial statements of business
acquired-CENEX, Inc.
Consolidated Balance Sheet as of February 28, 1998
Consolidated Statements of Operations for the Five Months
Ended February 28, 1998 and 1997
Consolidated Statement of Equities for the Five Months Ended
February 28, 1998
Consolidated Statements of Cash Flows for the Five Months
Ended February 28, 1998 and 1997
Notes to Unaudited Consolidated Financial Statements
(c) Unaudited pro forma financial information
Unaudited Pro Forma Consolidated Balance Sheet as of February
28, 1998
Unaudited Pro Forma Consolidated Statements of Earnings for
the Nine Months Ended February 28, 1998 and for the years
ended May 31, 1997, 1996 and 1995
Notes to Unaudited Pro Forma Consolidated Financial Statements
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENEX HARVEST STATES COOPERATIVES
By /s/ T.F. Baker
---------------------------
T. F. Baker
Executive Vice-President --
Finance and Administration
Date: August 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Members and Patrons of CENEX, Inc.:
We have audited the accompanying consolidated balance sheets of CENEX, Inc.
and subsidiaries as of September 30, 1997 and 1996, and the related consolidated
statements of operations, cash flows and equities for each of the three years in
the period ended September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CENEX, Inc. and
subsidiaries as of September 30, 1997 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles.
Minneapolis, Minnesota
October 27, 1997, except for note 12,
as to which the date is November 17, 1997
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SEPTEMBER 30
($ IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 28,371 $ 27,063
Accounts and notes receivable, net 254,369 281,593
Inventories 323,053 320,997
Other current assets 33,470 41,086
- ------------------------------------------------------------------------------------------------------------
Total current assets 639,263 670,739
Investments 210,745 175,917
Property, plant and equipment, net 613,493 574,484
Other assets 46,455 37,986
- ------------------------------------------------------------------------------------------------------------
Total assets $ 1,509,956 $ 1,459,126
============================================================================================================
LIABILITIES AND EQUITIES
Current liabilities:
Notes payable $ 15,446 $ 43,347
Current portion of long-term debt 10,410 11,902
Accounts payable 372,748 392,485
Accrued expenses 57,046 75,334
Patrons' equities payable in cash 63,020 52,085
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 518,670 575,153
Long-term debt, less current portion 227,057 189,377
Other liabilities 68,144 64,701
Minority interests in subsidiaries 60,727 55,885
Commitments and contingencies
Equities
Common stock ($25 par value; 5,000 shares authorized, 20 21
814 and 827 shares issued and outstanding, respectively)
Preferred stock ($25 par value; 30,000,000 shares authorized,
21,422,035 and 20,335,497 shares issued and outstanding,
respectively) 502,588 480,133
Patronage refunds 71,960 56,000
Deferred patronage (51,899) (55,473)
Unallocated reserve 112,689 93,329
- ------------------------------------------------------------------------------------------------------------
Total equities 635,358 574,010
- ------------------------------------------------------------------------------------------------------------
Total liabilities and equities $ 1,509,956 $ 1,459,126
============================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITIES
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED Common Stock Preferred Stock
SEPTEMBER 30, 1997, 1996 AND 1995 --------------- ------------------- Patronage Deferred Unallocated Total
($ IN THOUSANDS) Shares Amount Shares Amount Refunds Patronage Reserve Equities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, October 1, 1994 855 $22 17,583,296 $424,098 $52,990 $(62,300) $71,602 $486,412
1994 final patronage determination 22,497 213 22,710
1994 patronage distribution 2,112,179 52,837 (75,487) (22,650)
1994 final equity retirement
determination 14,290 14,290
Equities retired, net (11) (1) (571,061) (13,685) (13,686)
1995 net income 62,300 (9,553) 14,078 66,825
1995 cash patronage refund
provisions (18,690) (18,690)
1995 equity retirement provisions (11,380) (11,380)
- -----------------------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1995 844 21 19,124,414 466,160 43,610 (71,853) 85,893 523,831
1995 final patronage determination 19,047 (357) 18,690
1995 patronage distribution 1,752,981 43,855 (62,657) (18,802)
1995 final equity retirement
determination 11,380 11,380
Equities retired, net (17) (541,898) (13,177) (13,177)
1996 net income 80,000 16,380 7,793 104,173
1996 cash patronage refund
provisions (24,000) (24,000)
1996 equity retirement provisions (28,085) (28,085)
- -----------------------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1996 827 21 20,335,497 480,133 56,000 (55,473) 93,329 574,010
1996 final patronage determination 24,309 (309) 24,000
1996 patronage distribution 2,247,410 56,210 (80,309) (24,099)
1996 final equity retirement
determination 28,085 28,085
Equities retired, net (13) (1) (1,160,872) (29,660) (29,661)
1997 net income 102,800 3,574 19,669 126,043
1997 cash patronage refund
provisions (30,840) (30,840)
1997 equity retirement provisions (32,180) (32,180)
- -----------------------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1997 814 $20 21,422,035 $502,588 $71,960 $(51,899) $112,689 $635,358
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30
($ IN THOUSANDS) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES:
Petroleum $ 1,930,227 $ 1,737,752 $ 1,456,971
Agronomy 810,551 779,804 652,601
Other 177,016 165,458 134,718
- -------------------------------------------------------------------------------------------------------------------
2,917,794 2,683,014 2,244,290
Cost of sales 2,709,705 2,500,250 2,112,844
- -------------------------------------------------------------------------------------------------------------------
Gross margin 208,089 182,764 131,446
- -------------------------------------------------------------------------------------------------------------------
Distribution, marketing and
administrative expenses 47,391 48,236 46,218
Interest expense, net 13,179 8,987 8,869
Minority interests in earnings
(losses) of subsidiaries 6,880 7,985 (148)
Other, net 1,381 303 3,147
- -------------------------------------------------------------------------------------------------------------------
68,831 65,511 58,086
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 139,258 117,253 73,360
Income taxes 13,215 13,080 6,239
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations 126,043 104,173 67,121
Loss from discontinued operations,
net of income tax benefit of $1,439 -- -- 296
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 126,043 $ 104,173 $ 66,825
===================================================================================================================
DISTRIBUTION OF NET INCOME:
Patronage refunds $ 102,800 $ 80,000 $ 62,300
Changes in deferred patronage 3,574 16,380 (9,553)
Changes in unallocated reserve 19,669 7,793 14,078
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 126,043 $ 104,173 $ 66,825
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30
($ IN THOUSANDS) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 126,043 $ 104,173 $ 66,825
Loss from discontinued operations, net of taxes -- -- 296
- ------------------------------------------------------------------------------------------------------------
Income from continuing operations 126,043 104,173 67,121
- ------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 48,264 42,906 40,676
Adjustment of inventories to market value 10,153 (24,385) (3,182)
Noncash patronage refunds received (55,491) (31,116) (21,182)
Other, net (3,708) (6,492) (2,687)
Changes in operating assets and liabilities:
Accounts receivable 26,456 (47,358) (5,948)
Inventories (11,725) 7,968 (12,004)
Other current assets 7,616 (17,271) (1,477)
Other assets (2,531) 124 (3,192)
Accounts payable and accrued expenses (38,025) 93,831 10,895
Other liabilities 3,512 2,646 11,913
- ------------------------------------------------------------------------------------------------------------
Total adjustments (15,479) 20,853 13,812
- ------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 110,564 125,026 80,933
Net cash (used in) provided by discontinued
operations -- (6,630) 4,642
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 110,564 118,396 85,575
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (92,888) (157,896) (89,381)
Disposals of assets 9,046 26,683 8,020
Discontinued operations investing activities, net -- 33,164 (7,048)
Investments in other cooperatives 4,651 6,950 (6,997)
Investments redeemed by other cooperatives 18,959 3,351 2,236
Changes in notes receivable (4,239) (1,983) 5,194
Other investing activities, net (1,038) (4,868) (871)
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (65,509) (94,599) (88,847)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in notes payable (27,901) 1,169 10,618
Proceeds from long-term debt 58,915 56,110 42,000
Payments on long-term debt (22,727) (38,188) (34,155)
Patronage refunds paid and patrons'
equities retired (52,034) (30,051) (36,926)
- ------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (43,747) (10,960) (18,463)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,308 12,837 (21,735)
Cash and cash equivalents at beginning of year 27,063 14,226 35,961
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 28,371 $ 27,063 $ 14,226
============================================================================================================
Cash flow information:
Cash paid during the year for:
Interest $ 18,753 $ 15,546 $ 15,570
Income taxes 16,600 11,991 10,713
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION:
CENEX, Inc. (Cenex) is organized and operated on a cooperative basis as a
supplier of agronomy and petroleum products and other farm supplies for its 799
member cooperatives and 689 other patron cooperatives located primarily
throughout the Midwest and Northwest states.
In accordance with the By-Laws and by action of the Board of Directors, annual
net savings from patronage sources is distributed to the patrons following the
close of each year, and is based on amounts reportable for federal income tax
purposes as adjusted in accordance with the By-Laws. A minimum of 20 percent of
the patronage refund is paid in cash with the balance distributed in the form of
preferred stock. The By-Laws require that annual net savings from sources other
than patronage be added to the unallocated reserve. The By-Laws also provide
that an amount equal to 10 percent of the distributable annual net savings from
patronage sources be added to the unallocated reserve, until the total
unallocated reserve reaches 25 percent of the total equities.
CONSOLIDATION:
The consolidated financial statements include the accounts of Cenex and all of
its wholly-owned and majority-owned subsidiaries, including National Cooperative
Refinery Association (NCRA), collectively referred to herein as "the Company."
The effects of all intercompany transactions have been eliminated.
The Company is currently evaluating the consolidation of NCRA in light of EITF
96-16, which provides new guidance on accounting for investments in which
minority shareholders have certain approval or veto rights. This guidance will
be effective for the Company's investment in NCRA for its fisal year ending
after December 15, 1998.
CASH EQUIVALENTS:
Cash equivalents include short-term highly liquid investments with original
maturities of three months or less at date of acquisition.
INVENTORIES AND HEDGING:
Inventories are valued at the lower of cost or market. The cost of certain
petroleum inventories (refined products, crude oil and asphalt) is determined on
the last-in, first-out (LIFO) method; all other inventories are valued on the
first-in, first-out (FIFO) and average cost methods.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
INVENTORIES AND HEDGING, CONTINUED:
The Company enters into exchange-traded commodity futures and options
contracts to hedge its exposure to price fluctuations on anticipated crude oil,
propane and refined products transactions.
Commodity trading in petroleum futures and options contracts is a natural
extension of cash market trading. The commodity futures and options markets have
underlying principles of increased liquidity and longer trading periods than the
cash market, and hedging is one method of reducing exposure to the price risk
inherent in the petroleum business. Typically, trading is conducted to manage
price risk for near-term supply requirements. The Company's use of futures and
options contracts reduces the effects of price volatility, thereby protecting
against adverse short-term price movements while somewhat limiting the benefits
of short-term price movements. Open hedge positions and deferred gains and
losses for petroleum futures and options contracts were not significant at
September 30, 1997 and 1996.
Gains and losses on futures transactions related to inventories are credited
or charged to cost of sales as such inventories are sold. Gains and losses on
hedge contracts not yet closed are accounted for as unrealized gains and losses,
and accordingly, are deferred in the consolidated balance sheet as part of
inventories.
INVESTMENTS:
Investments in cooperatives are stated at cost, plus patronage refunds
received in the form of capital stock and other equities. Other investments in
which the Company has significant ownership and influence, but not control, are
included in the consolidated financial statements under the equity method of
accounting. The consolidated statement of operations includes patronage refunds
from the St. Paul Bank for Cooperatives (St. Paul Bank) and the National Bank
for Cooperatives (CoBank) as reductions of interest expense, net, and patronage
refunds from other cooperative investees as reductions of cost of sales.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Expenditures for maintenance
and repairs and minor renewals are expensed, while costs of major renewals and
betterments are capitalized. Depreciation and amortization are provided on the
straight-line method by charges to operations at rates based upon the expected
useful lives of individual or groups of assets. The cost and related accumulated
depreciation and amortization of assets sold or otherwise disposed of are
removed from the related accounts and resulting gains or losses are reflected in
operations. The Company periodically reviews property, plant and equipment and
other long-lived assets in order to assess recoverability based on projected
income and related cash flows on an undiscounted basis. Should the sum of the
related, expected future net cash flows be less than the carrying value, an
impairment loss would be recognized. An impairment loss would be measured by the
amount by which the carrying value of the asset exceeds the fair value of the
asset.
REVENUE RECOGNITION:
Sales are recognized upon shipment to customers, net of freight charges.
ENVIRONMENTAL EXPENDITURES:
Liabilities related to remediation of contaminated properties are recognized
when the related costs are considered probable and can be reasonably estimated.
Estimates of these costs are based upon currently available facts, existing
technology, undiscounted site specific costs and currently enacted laws and
regulations. In reporting environmental liabilities, no offset is made for
potential recoveries. All liabilities are monitored and adjusted as new facts or
changes in law or technology occur. Environmental expenditures are capitalized
when such costs provide future economic benefits.
INCOME TAXES:
The Company is a nonexempt agricultural cooperative and files a consolidated
federal income tax return with its subsidiaries, except for NCRA. The Company is
subject to tax on net income from nonpatronage sources and undistributed
patronage-sourced income. Deferred income taxes reflect the impact of temporary
differences between the amounts of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for tax purposes, at
each year-end, based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The most significant
management estimates relate to the determination of doubtful accounts,
assessment of the recoverability of long-lived assets, inventory valuation,
reserves for environmental and self-insured insurance claims, and determination
of benefit plan actuarial assumptions.
SEGMENT INFORMATION:
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, a new standard for reporting
information about operating or business segments in financial statements. This
new standard will be effective for fiscal years beginning after December 15,
1997. Management is in the process of evaluating the new standard and has not
yet determined its impact on the Company's financial statements.
2. ACCOUNTS AND NOTES RECEIVABLE:
The Company's net sales are primarily to member cooperatives who are
stockholders of the Company. Accordingly, accounts receivable are comprised
primarily of amounts due from these member cooperatives. Accounts and notes
receivable are stated net of allowances for doubtful accounts of approximately
$12.9 million and $12.1 million at September 30, 1997 and 1996, respectively.
3. INVENTORIES:
Inventories at September 30, 1997 and 1996 are as follows:
---------------------------
1997 1996
---------------------------
($ IN THOUSANDS)
Petroleum $233,169 $230,292
Agronomy 74,064 71,251
Other 15,820 19,454
---------------------------
$323,053 $320,997
===========================
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
3. INVENTORIES: continued
At September 30, 1997, the Company valued approximately 58 percent of
petroleum inventories using the lower of cost, determined on the LIFO method, or
market (65 percent at September 30, 1996). At September 30, 1997 and 1996,
reserves amounting to $24.6 million and $14.4 million, respectively, have been
established to reduce these petroleum inventories to estimated market value.
4. INVESTMENTS:
Investments at September 30, 1997 and 1996 are as follows:
--------------------------
1997 1996
--------------------------
($ IN THOUSANDS)
CF Industries, Inc. $136,125 $107,406
Cenex/Land O'Lakes Agronomy Company 29,202 23,633
St. Paul Bank 13,288 12,814
CoBank 9,280 8,949
Other 22,850 23,115
--------------------------
$210,745 $175,917
==========================
Investments, principally investments in other cooperatives, have no quoted
market prices, and as such, it is not practicable to estimate their fair value.
Various agreements with other owners of investee companies and a
majority-owned subsidiary set out parameters whereby Cenex may buy and sell
additional interests in those companies, upon the occurrence of certain events,
at fair values determinable as set forth in the specific agreements.
Cenex purchases of plant food, commission expense and the Company's interest
expense related to cooperative investees, are as follows:
----------------------------
1997 1996 1995
----------------------------
($ IN MILLIONS)
CF Industries, Inc. $240 $275 $204
Cenex/Land O'Lakes Agronomy Company 38 35 30
St. Paul Bank 14 9 7
CoBank 2 6 8
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
5. PROPERTY, PLANT AND EQUIPMENT:
Major classes of property, plant and equipment at September 30, 1997 and 1996
are as follows:
-----------------------------
Estimated 1997 1996
Useful Life -----------------------------
in Years ($ IN THOUSANDS)
Petroleum refineries 3-40 $ 601,899 $ 533,820
Distribution and general 3-40 220,267 201,320
Petroleum pipelines and terminals 3-40 211,207 209,513
Construction in progress 35,722 47,074
-----------------------------
1,069,095 991,727
Less accumulated depreciation
and amortization 455,602 417,243
-----------------------------
$ 613,493 $ 574,484
=============================
6. DISCONTINUED OPERATIONS
In May 1995, the Cenex Board of Directors approved a plan to dispose of its
exploration and production (E&P) operations. A purchase and sale agreement was
signed, and the transaction recorded in early fiscal year 1996. The E&P
operations have been accounted for as discontinued operations.
7. NOTES PAYABLE AND LONG-TERM DEBT:
Notes payable and long-term debt at September 30, 1997 and 1996 consisted of
the following:
---------------------------------------------
Interest rates
at Sept. 30, 1997 1997 1996
---------------------------------------------
($ IN THOUSANDS)
Notes payable (a),(e) 5.73% to 6.38% $ 15,446 $ 43,347
=======================
Long-term debt
Revolving term loans from
St. Paul Bank, payable in
installments through 2010,
when the balance is
due (b),(e) 6.65% to 7.63% $178,500 $130,500
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
7. NOTES PAYABLE AND LONG-TERM DEBT: continued
----------------------------------------------
Interest rates
at Sept. 30, 1997 1997 1996
----------------------------------------------
($ IN THOUSANDS)
Industrial Revenue Bonds
payable in installments
through 2010 (c) 5.23% to 9.26% 40,815 50,000
Revolving term loans from
CoBank, payable in
installments through 2004,
when the balance is due
(d),(e) 7.15% to 14.32% 17,596 20,246
Other notes and contracts 4.00% to 10.21% 556 533
--------------------------
Total long-term debt 237,467 201,279
Less current portion 10,410 11,902
--------------------------
Long-term portion $227,057 $189,377
==========================
(a) Amounts represent funds borrowed under seasonal short-term lines of credit
and other notes payable, and are collateralized by substantially all
receivables and inventories of Cenex, and NCRA's investment in CoBank.
There were approximately $124.8 million of unused lines of credit and other
short-term borrowings available at September 30, 1997 ($65 million at
September 30, 1996).
(b) Term loans are collateralized by substantially all receivables and
inventories of Cenex. Under the revolving term loan agreement, there was an
additional $47.6 million of committed credit available at September 30,
1997 ($65 million at September 30, 1996).
(c) Industrial Revenue Bonds are collateralized by property, plant and
equipment, primarily refinery equipment, with a cost of approximately
$156.1 million and $156.3 million, less accumulated depreciation of
approximately $85.7 million and $79.6 million at September 30, 1997 and
1996, respectively.
(d) Term loans collateralized by NCRA's investment in CoBank.
(e) Restrictive covenants under various note agreements have requirements for
maintenance of minimum working capital levels and other financial ratios.
During the year ended September 30, 1997, the Company violated the minimum
working capital covenant under one of its note agreements. The Company has
obtained a waiver for this violation.
Based on quoted market prices for the same or similar issues, the fair value of
long-term debt approximates book value at September 30, 1997 and 1996.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
7. NOTES PAYABLE AND LONG-TERM DEBT: continued
Interest expense was $17.2 million, $14.0 million and $14.1 million, and is
net of interest capitalized on construction in progress of $1.5 million, $3.1
million and $1.3 million for 1997, 1996 and 1995, respectively.
The aggregate amount of long-term debt payable is as follows ($ in thousands):
1998 $ 10,410
1999 31,012
2000 24,015
2001 32,130
2002 20,141
Thereafter 119,759
8. INCOME TAXES:
The provisions for income taxes for the years ended September 30 are as
follows:
-----------------------------------------
1997 1996 1995
-----------------------------------------
($ IN THOUSANDS)
Continuing operations:
Current $11,586 $14,929 $ 7,318
Deferred 1,629 (1,849) (1,079)
-----------------------------------------
Income taxes related to
continuing operations 13,215 13,080 6,239
Income tax benefit from
discontinued operations (1,439)
-----------------------------------------
Income taxes $13,215 $13,080 $ 4,800
=========================================
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
8. INCOME TAXES: continued
The tax effect of temporary differences that give rise to significant portions
of deferred tax assets and deferred tax liabilities at September 30, are as
follows:
---------------------------------
1997 1996
---------------------------------
Deferred tax assets:
Accrued expenses and valuation reserves $11,655 $ 8,725
Postretirement health care and
pension liabilities 2,645 2,036
AMT credit carryforward 1,013 1,131
Other 3,553 3,168
---------------------------------
Total deferred tax assets 18,866 15,060
---------------------------------
Deferred tax liabilities:
Property, plant and equipment 5,578 2,731
Equity method investments 4,266 2,612
Other 1,564 630
---------------------------------
Total deferred tax liabilities 11,408 5,973
---------------------------------
Net deferred tax asset $ 7,458 $ 9,087
=================================
A reconciliation of the statutory federal income tax rate to the effective rate
for continuing operations for each of the three years ended September 30, is as
follows:
------------------------------
1997 1996 1995
------------------------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes, net of
federal income tax benefit 3.9 3.9 3.9
Patronage earnings (28.7) (26.5) (33.1)
Tax effect of changes in deferred patronage (1.0) (5.4) 5.1
Other 0.3 4.2 (2.4)
------------------------------
Effective rate, continuing operations 9.5% 11.2% 8.5%
==============================
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
8. INCOME TAXES, continued
The principal differences between financial statement income and taxable
income for the years ended September 30 are as follows:
---------------------------------------
1997 1996 1995
---------------------------------------
($ IN THOUSANDS)
Income from continuing operations
before income taxes $139,258 $117,253 $ 73,360
Loss from discontinued
operations, net of taxes -- -- (296)
Income tax benefit from
discontinued operations -- -- (1,439)
---------------------------------------
139,258 117,253 71,625
Financial reporting/tax differences:
Environmental reserves 1,916 (776) (1,732)
Oil and gas activities, net (405) (13,851) 8,707
Petroleum inventory market
reserves (9,279) (21,064) (3,684)
Other, net 2,582 25,241 10,347
Patronage refund provisions (102,800) (80,000) (62,300)
---------------------------------------
Taxable income $ 31,272 $ 26,803 $ 22,963
=======================================
9. EQUITIES:
PREFERRED AND COMMON STOCK:
The authorized preferred stock consists of 30,000,000 shares at a par value of
$25 each, of which 21,422,035 shares were issued and outstanding at September
30, 1997 including 31,355 shares pending stock retirement offset (20,335,497 and
6,792 shares at September 30, 1996, respectively). The preferred stock is
nonvoting and is not subject to the payment of dividends.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
9. EQUITIES, continued
The Articles of Incorporation provide that the preferred stock may be retired
at any time and in any order as determined by the Board of Directors. In
September 1997 the Board of Directors authorized total cash distributions during
1998, in the form of cash patronage and preferred stock retirements, equal to 50
percent of 1997 net income.
The authorized common stock consists of 5,000 shares at a par value of $25
each, of which 814 shares were issued and outstanding at September 30, 1997 (827
shares at September 30, 1996). Common stock is not subject to the payment of
dividends. Voting rights are limited to holders of common stock, with
cooperative associations entitled to one vote for each of their registered
producer members, plus one additional vote for each $1,000, or major fraction
thereof, of preferred stock or equity issued as patronage.
DEFERRED PATRONAGE:
The Company follows the practice of accounting for deferred patronage charges
and credits in a separate equity account instead of including such amounts in
the unallocated reserve. Deferred patronage results from the fact that patronage
distributions are primarily determined on the basis of taxable income rather
than net income as reported in the consolidated financial statements. Deferred
patronage consists of items which have been included in the computation of net
income for financial statement purposes but not for income tax or patronage
purposes. As the items reverse, patronage refunds and deferred patronage are
affected.
10. RETIREMENT PLANS:
The Company has several defined benefit pension plans covering substantially
all employees. Benefits are based on years of service. Assets of the plans
consist principally of equity and fixed income securities. The Cenex policy is
to annually fund pension cost accrued.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
10. RETIREMENT PLANS continued
Components of net periodic pension cost, funded status and other information,
computed for the years ended September 30 are as follows:
-------------------------------------------
1997 1996 1995
-------------------------------------------
($ IN THOUSANDS)
Service cost for benefits earned
during the period $ 4,571 $ 4,590 $ 4,007
Interest cost 10,472 10,302 10,022
Net amortization and deferral 20,378 2,430 7,882
Income on plan assets (33,139) (14,492) (18,820)
-------------------------------------------
Net periodic pension cost $ 2,282 $ 2,830 $ 3,091
===========================================
Funded status at September 30, 1997 and 1996 is as follows:
-------------------------------------------------
1997 1996
-------------------------------------------------
NCRA CENEX NCRA Cenex
-------------------------------------------------
($ IN THOUSANDS)
Actuarial present value
of benefit obligations:
Vested $ 50,684 $ 72,904 $ 46,914 $ 67,388
Nonvested 1,884 1,268 1,570 1,261
-------------------------------------------------
Accumulated benefit
obligations $ 52,568 $ 74,172 $ 48,484 $ 68,649
=================================================
Projected benefit
obligations $ 61,874 $ 89,496 $ 58,994 $ 82,215
Plan assets at fair value 77,106 92,000 64,933 75,272
-------------------------------------------------
Plan assets in excess of
(less than) projected benefit
obligations 15,232 2,504 5,939 (6,943)
Add:
Unrecognized net (gain) loss (2,461) 6,932
Unrecognized prior service
cost 1,051 923
Unrecognized net transition
asset (540) (826)
Additional liabilities (433) (118)
-------------------------------------------------
Net pension asset (liability) $ 15,232 $ 121 $ 5,939 $ (32)
=================================================
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
10. RETIREMENT PLANS continued
Weighted average percent assumptions used in the actuarial determination of
the above amounts are as follows:
------------------------------------
1997 1996 1995
------------------------------------
Discount rate 7.4% 7.7% 7.8%
Rates of increase in compensation
levels 5.2 5.2 5.3
Expected long-term rate of return
on assets 8.4 8.5 8.7
The Company has other contributory defined contribution plans covering
substantially all employees. Total contributions by the Company to these plans
were approximately $3.0 million, $2.9 million and $2.7 million, for the years
ended September 30, 1997, 1996 and 1995, respectively.
In addition to providing pension and contributory benefits, the Company
provides defined life and health care benefits for certain retired employees.
The plan is contributory based on years of service and family status, with
retiree contributions adjusted annually.
The Company adopted SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other than Pensions, effective October 1, 1993. The Company elected to
recognize the transition obligation of $8.1 million over 20 years as a component
of net periodic postretirement benefit cost. The Company previously recognized
the estimated costs of these benefits on a different accrual method.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
10. RETIREMENT PLANS continued
Components of net periodic postretirement benefit cost, funded status
reconciled to the accrued postretirement benefit cost and other information
computed for the years ended September 30 are as follows:
-------------------------------------
1997 1996 1995
-------------------------------------
($ IN THOUSANDS)
Service cost for benefits
earned during the period $ 253 $ 237 $ 270
Interest cost 868 955 1,070
Amortization of transition
obligation 153 284 327
-------------------------------------
Net periodic postretirement
benefit cost $ 1,274 $ 1,476 $1,667
=====================================
Actuarial present value of
accumulated postretirement
benefit obligations for:
Retirees $ 5,743 $ 6,629
Fully eligible active
participants 3,212 3,880
Other active participants 2,995 2,609
------------------------
11,950 13,118
Unrecognized transition
obligation 6,477 6,882
Unrecognized net gain (5,638) (4,290)
------------------------
Accrued postretirement benefit
obligations $ 11,111 $10,526
========================
For measurement purposes, 9.1 percent (for pre-age 65 retirees) and 7.4
percent (for post-age 65 retirees) annual rates of increase in the per capita
cost of covered health care were assumed for the year ended September 30, 1997
(10 percent and 8 percent for the year ended September 30, 1996, respectively).
The rates were assumed to decrease gradually to 6 percent over 20 years and
remain at that level thereafter. The health care cost trend rate assumption has
a significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rate by one percentage point in each year would
increase the accumulated
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
10. RETIREMENT PLANS continued
postretirement benefit obligation as of September 30, 1997 by approximately $0.8
million and 1997 expense by approximately $0.1 million. The discount rate used
in determining the accumulated postretirement benefit obligation was 7.6 percent
and 7.7 percent at September 30, 1997 and 1996, respectively.
11. COMMITMENTS AND CONTINGENCIES:
ENVIRONMENTAL:
The Company is required to comply with various environmental laws and
regulations incident to its normal business operations. In order to meet its
compliance requirements, the Company establishes reserves for the future costs
of remediation of identified issues, which are included in cost of sales in the
consolidated statement of operations. Additional costs for matters which may be
identified in the future cannot be presently determined; while the resolution of
any such matters may have an impact on the Company's consolidated financial
results for a particular reporting period, management believes any such matters
will not have a material adverse effect on the consolidated financial position
of the Company.
OTHER LITIGATION AND CLAIMS:
The Company is involved as a defendant in various lawsuits, claims and
disputes which are in the normal course of the Company's business. The
resolution of any such matters may have an impact on the Company's consolidated
financial results for a particular reporting period; however, management
believes any resulting liability will not have a material adverse effect on the
consolidated financial position of the Company.
INTERNAL REVENUE SERVICE:
The Cenex 1994 and 1995 returns are currently being reviewed; while the
outcome of any such reviews may have an impact on the Company's consolidated
financial results for a particular reporting period, management believes that
any tax assessment which may result from proposed adjustments or reviews in
process will not have a material adverse effect on the consolidated financial
position of the Company.
<PAGE>
================================================================================
CENEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
11. COMMITMENTS AND CONTINGENCIES, continued
LEASE COMMITMENTS:
Total rental expense for all operating leases for the years ended September
30, 1997, 1996 and 1995 was $15.3 million, $16.4 million and $18.3 million,
respectively. Cenex leases the Inver Grove Heights office building under a
noncancellable lease with increasing lease payments, expiring in 2009, and has
options to renew this lease for six additional five-year terms and to purchase
the building at the greater of the amount specified in the lease or the fair
market value at various times during the lease. The lease payments are
collateralized by a second lien on $10.0 million of inventories and receivables.
The Company also has commitments under other operating leases for refinery and
transportation equipment, rail tank cars and office space. Some leases include
purchase options at not less than fair market value at the end of the leases.
Minimum future payments required under noncancellable operating leases at
September 30, 1997 are as follows:
-------------------------------------------
Office
Building Other Total
-------------------------------------------
($ IN THOUSANDS)
1998 $ 3,447 $ 8,373 $ 11,820
1999 3,447 7,785 11,232
2000 3,447 7,329 10,776
2001 3,447 7,101 10,548
2002 3,447 7,043 10,490
Thereafter 37,059 12,783 49,842
-------------------------------------------
Total minimum future
lease payments $ 54,294 $ 50,414 $104,708
==========================================
12. SUBSEQUENT EVENT:
During November 1997, the Boards of Directors of Cenex and Harvest States
Cooperatives approved a memorandum of intent to explore unification of these two
cooperatives.
<PAGE>
CENEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1998
(UNAUDITED)
1998
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 57,590,187
ACCOUNTS AND NOTES RECEIVABLE, NET 202,337,698
INVENTORIES 313,266,042
OTHER CURRENT ASSETS 92,584,199
--------------
TOTAL CURRENT ASSETS 665,778,126
INVESTMENTS 226,880,106
PROPERTY, PLANT AND EQUIPMENT, NET 622,125,790
OTHER ASSETS 43,682,638
--------------
TOTAL ASSETS $1,558,466,660
==============
LIABILITIES AND EQUITIES
CURRENT LIABILITIES:
NOTES PAYABLE $ 52,510,040
CURRENT PORTION OF LONG-TERM DEBT 13,670,904
PATRON CREDIT BALANCES 85,022,442
ACCOUNTS PAYABLE 304,873,858
ACCRUED EXPENSES 51,955,150
PATRONS' EQUITIES PAYABLE IN CASH 48,071,498
--------------
TOTAL CURRENT LIABILITIES 556,103,892
LONG-TERM DEBT, LESS CURRENT PORTION 220,232,061
OTHER LIABILITIES 71,999,269
MINORITY INTERESTS IN SUBSIDIARIES 55,281,887
COMMITMENTS AND CONTINGENCIES
EQUITIES 654,849,551
--------------
TOTAL LIABILITIES AND EQUITIES $1,558,466,660
==============
See notes to unaudited consolidated financial statements
<PAGE>
CENEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIVE MONTHS ENDED FEBRUARY 28
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
NET SALES:
PETROLEUM PRODUCTS $ 663,812,586 $ 873,651,891
AGRONOMY 223,683,120 199,954,657
FEED AND FARM SUPPLIES 105,156,169 112,952,111
--------------- ---------------
992,651,875 1,186,558,659
COST OF SALES 935,999,580 1,097,365,444
--------------- ---------------
GROSS MARGIN ON SALES 56,652,295 89,193,215
--------------- ---------------
OPERATING EXPENSES AND OTHER:
DISTRIBUTION, MARKETING AND
ADMINISTRATIVE EXPENSES 29,060,185 24,216,737
INTEREST EXPENSE, NET 6,778,239 5,851,036
MINORITY INTERESTS IN EARNINGS (LOSSES)
OF SUBSIDIARIES (4,309,000) (1,875,139)
--------------- ---------------
31,529,424 28,192,634
--------------- ---------------
INCOME BEFORE INCOME TAXES 25,122,871 61,000,581
INCOME TAXES 5,650,000 4,470,000
--------------- ---------------
NET INCOME $ 19,472,871 $ 56,530,581
=============== ===============
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
CENEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITIES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
COMMON PREFERRED PATRONAGE DEFERRED UNALLOCATED TOTAL
STOCK STOCK REFUNDS PATRONAGE RESERVES EQUITIES
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, SEPTEMBER 30, 1997 $20,350 $502,586,993 $71,960,000 ($51,899,495) $112,689,784 $635,357,632
1997 FINAL EQUITY RETIREMENT
DETERMINATION (UNAUDITED) 14,968,050 14,968,050
EQUITIES RETIRED, NET (UNAUDITED) (500) (14,948,502) (14,949,002)
1998 NET INCOME (UNAUDITED) 18,840,000 632,871 19,472,871
--------------------------------------------------------------------------------------
BALANCES, FEBRUARY 28, 1998 (UNAUDITED) $19,850 $502,606,541 $90,800,000 ($51,899,495) $113,322,655 $654,849,551
======================================================================================
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
CENEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTHS ENDED FEBRUARY 28
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,472,871 $ 56,530,581
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,493,771 19,141,487
Adjustment of inventories to market value 17,794,000 8,611,000
Noncash patronage refunds received (17,875,712) (45,707,389)
Other, net (618,627) 133,032
Changes in operating assets and liabilities:
Accounts receivable 53,666,585 91,324,932
Inventories (8,006,806) (7,355,621)
Other current assets (59,114,209) (99,722,141)
Other assets 2,946,423
Accounts payable and accrued expenses 12,058,821 9,806,331
Other liabilities 3,855,182 (421,246)
------------ ------------
Total adjustments 26,199,428 (24,189,615)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 45,672,299 32,340,966
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (31,804,049) (41,059,852)
Disposals of assets 3,905,120 3,048,177
Investments in other cooperatives (6,765,551) (3,030,472)
Investments redeemed by other cooperatives 1,496,060 844,931
Changes in notes receivable 1,164,972 3,469,452
Other investing activities, net (2,995,294) 1,412,665
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (34,998,742) (35,315,099)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 36,441,926 5,480,513
Proceeds from long-term debt 415,359
Payments on long-term debt (3,564,884) (3,957,851)
Patronage refunds paid and
patrons' equities retired (14,331,250) (11,451,539)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 18,545,792 (9,513,518)
------------ ------------
Net increase (decrease) in cash and cash equivalents 29,219,349 (12,487,651)
Cash and cash equivalents at beginning of year 28,370,838 27,062,536
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 57,590,187 $ 14,574,885
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
CENEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements as of February 28,
1998 and for the five months ended February 28, 1998 and 1997, reflect, in the
opinion of management of CENEX, Inc. (Cenex), all normal, recurring adjustments
necessary for a fair statement of the results of operations for the interim
periods. The results of operations for any interim period are not necessarily
indicative of results for the full year. The unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto of Cenex for the year ended September 30, 1996,
included elsewhere in this Form 8-K/A.
2. RECEIVABLES
February 28,
1998
--------------
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . $214,983,662
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 548,446
--------------
215,532,108
Less allowance for doubtful accounts (13,194,410)
--------------
$202,337,698
==============
3. INVENTORIES
February 28,
1998
--------------
Petroleum.................................................. $202,277,904
Agronomy................................................... 88,172,860
Feed and Seed.............................................. 4,655,788
Other...................................................... 18,159,490
--------------
$313,266,042
==============
At February 28, 1998, reserves amounting to $42.3 million have been established
to reduce petroleum inventories to estimated market value.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, a new standard related to the accounting
for derivative transactions and hedging activities. This new standard will be
effective for fiscal years beginning after June 15, 1999. Management is in the
process of evaluating this new standard and has not yet determined its impact on
the Company's financial statements.
4. SUBSEQUENT EVENT
Effective June 1, 1998, the Company merged with Harvest States Cooperatives. The
merger will be accounted for as a pooling of interest. As a result of the
merger, each share of common stock and preferred stock of the Company was
exchanged for one capital equity certificate of Cenex Harvest States
Cooperatives with a face value of $25.
<PAGE>
CENEX HARVEST STATES COOPERATIVES
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements give effect
to the June 1, 1998 merger of Harvest States Cooperatives (the Company) and
CENEX, Inc. (Cenex). Cenex was a cooperative with operations centering on
providing supplies and services to its members, including refined fuels,
propane, lubricants, tires and accessories, plant food and crop protection
products. The Company was Cenex's largest customer for agronomy products, and
had a similar membership area.
The unaudited pro forma consolidated balance sheets as of February 28, 1998
combine the historical consolidated balance sheets of Harvest States
Cooperatives and Cenex as if the merger had been effective on February 28, 1998
after giving effect to certain adjustments described in the accompanying notes
to the unaudited pro forma consolidated financial statements.
The unaudited pro forma consolidated statements of earnings for the nine months
ended February 28, 1998 and for each of the three years ended May 31, 1997, 1996
and 1995, present the combined results of operations of Harvest States
Cooperatives and Cenex as if the merger had been effective at the beginning of
each respective period after giving effect to certain adjustments described in
the accompanying notes to the unaudited pro forma consolidated financial
statements.
The unaudited pro forma consolidated financial statements reflect the
application of the pooling of interests method of accounting for the merger.
Under this method of accounting, the recorded assets, liabilities, capital,
income and expenses of Harvest States Cooperatives and Cenex are combined and
reflected at their historical amounts.
The unaudited pro forma consolidated financial statements are not necessarily
indicative of the financial position or results of operations of Cenex Harvest
States Cooperatives as they may be in the future or as they might have been for
the periods presented had the merger been effective as of June 1, 1996, 1995 and
1994, or as of the date of the unaudited pro forma balance sheet. The unaudited
pro forma consolidated financial statements and accompanying notes should be
read in conjunction with the historical financial statements of Harvest States
Cooperatives, as filed on Form 10-K for the year ended May 31, 1997, and the
historical financial statements of Cenex, including the notes to such financial
statements, for the year ended September 30 and the five months ended February
28, 1998, as set forth in this Form 8-K/A. The pro forma adjustments are based
upon information available at this time and upon certain assumptions that Cenex
Harvest States Cooperatives' management believes are reasonable in the
circumstances.
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF FEBRUARY 28, 1998
<TABLE>
<CAPTION>
ASSETS
Historical Pro Forma
Harvest States Historical Pro Forma Cenex Harvest
Cooperatives Cenex, Inc. Adjustments States Cooperatives
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,600,425 $ 57,590,187 $ 62,190,612
Receivables 366,655,486 202,337,698 $ (2,547,539)(1) 566,445,645
Inventories 156,050,736 313,266,042 469,316,778
Other current assets 58,229,994 92,584,199 (10,140,118)(2) 140,674,075
---------------------------------------------------------------------------------
Total current assets 585,536,641 665,778,126 (12,687,657) 1,238,627,110
OTHER ASSETS:
Investments 142,076,842 226,880,106 (15,169,985)(3) 353,786,963
Other 45,386,033 43,682,638 89,068,671
---------------------------------------------------------------------------------
Total other assets 187,462,875 270,562,744 (15,169,985) 442,855,634
PROPERTY PLANT AND EQUIPMENT 238,879,780 622,125,790 861,005,570
---------------------------------------------------------------------------------
$ 1,011,879,296 $ 1,558,466,660 $ (27,857,642) $ 2,542,488,314
=================================================================================
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Notes payable $ 112,000,000 $ 52,510,040 $ 164,510,040
Patron credit balances 112,166,457 85,022,442 $ (10,140,118)(2) 187,048,781
Advances received on grain sales 108,992,354 108,992,354
Drafts outstanding 22,745,473 22,745,473
Accounts payable and accrued expenses 97,310,529 356,829,008 (2,547,539)(1) 451,591,998
Patronage dividends and retirements payable 10,000,000 48,071,498 (2,281,545)(4) 55,789,953
Current portion of long-term debt 16,505,486 13,670,904 30,176,390
---------------------------------------------------------------------------------
Total current liabilities 479,720,299 556,103,892 (14,969,202) 1,020,854,989
LONG-TERM DEBT 102,347,552 220,232,061 322,579,613
OTHER LIABILITIES 11,537,156 71,999,269 83,536,425
MINORITY INTERESTS IN SUBSIDIARIES 55,281,887 55,281,887
COMMITMENTS AND CONTINGENCIES
CAPITAL 418,274,289 654,849,551 (12,888,440)(3,4) 1,060,235,400
---------------------------------------------------------------------------------
$ 1,011,879,296 $ 1,558,466,660 $ (27,857,642) $ 2,542,488,314
=================================================================================
</TABLE>
See notes to unaudited pro forma consolidated financial statements
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
Harvest States Historical Pro Forma Cenex Harvest
Cooperatives Cenex, Inc. Adjustments States Cooperatives
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales:
Grain and oilseed $ 3,813,583,403 $ 3,813,583,403
Petroleum products $ 1,240,565,560 $ (7,579,128) 1,232,986,432
Agronomy 421,995,391 (31,263,418) 390,731,973
Processed grain and oilseed 457,430,021 457,430,021
Feed and farm supplies 146,242,394 209,608,914 355,851,308
----------------------------------------------------------------------------------
4,417,255,818 1,872,169,865 (38,842,546)(5) 6,250,583,137
Patronage dividends 7,396,271 44,246,727 51,642,998
Other revenues 65,537,310 1,063,801 66,601,111
----------------------------------------------------------------------------------
4,490,189,399 1,917,480,393 (38,842,546) 6,368,827,246
COSTS AND EXPENSES:
Cost of good sold 4,376,526,323 1,797,038,838 (38,842,546)(5) 6,134,722,615
Marketing, general and administrative 53,824,262 37,358,763 91,183,025
Interest 12,209,300 14,125,923 26,335,223
Minority Interests 2,282,963 2,282,963
----------------------------------------------------------------------------------
4,442,559,885 1,850,806,487 (38,842,546) 6,254,523,826
----------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 47,629,514 66,673,906 114,303,420
INCOME TAXES 5,300,000 11,590,000 16,890,000
----------------------------------------------------------------------------------
NET EARNINGS $ 42,329,514 $ 55,083,906 $ -- $ 97,413,420
==================================================================================
</TABLE>
See notes to unaudited pro forma consolidated financial statements
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
Historical Pro Forma
Harvest States Historical Pro Forma Cenex Harvest
Cooperatives Cenex, Inc. Adjustments States Cooperatives
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales:
Grain and oilseed $ 6,036,502,624 $ 6,036,502,624
Petroleum products $ 1,892,628,306 $ (8,914,833) 1,883,713,473
Agronomy 757,995,278 (36,487,031) 721,508,247
Processed grain and oilseed 730,101,124 730,101,124
Feed and farm supplies 258,235,512 306,989,039 565,224,551
--------------------------------------------------------------------------------------
7,024,839,260 2,957,612,623 (45,401,864)(5) 9,937,050,019
Patronage dividends 15,947,049 67,941,261 (4,828,210)(6) 79,060,100
Other revenues 68,627,552 1,529,849 70,157,401
--------------------------------------------------------------------------------------
7,109,413,861 3,027,083,733 (50,230,074) 10,086,267,520
COSTS AND EXPENSES:
Cost of good sold 6,967,937,476 2,850,447,907 (45,401,864)(5) 9,772,983,519
Marketing, general and administrative 63,341,552 49,792,825 113,134,377
Interest 19,378,833 15,626,457 35,005,290
Minority Interest 2,276,055 2,276,055
--------------------------------------------------------------------------------------
7,050,657,861 2,918,143,244 (45,401,864) 9,923,399,241
--------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 58,756,000 108,940,489 (4,828,210) 162,868,279
INCOME TAXES 6,200,000 12,390,000 18,590,000
--------------------------------------------------------------------------------------
NET EARNINGS $ 52,556,000 $ 96,550,489 $ (4,828,210) $ 144,278,279
======================================================================================
</TABLE>
See notes to unaudited pro forma consolidated financial statements
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<CAPTION>
Historical Pro Forma
Harvest States Historical Pro Forma Cenex Harvest
Cooperatives Cenex, Inc. Adjustments States Cooperatives
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales:
Grain and oilseed $ 7,127,223,407 $ 7,127,223,407
Petroleum products $ 1,582,680,204 $ (5,108,549) 1,577,571,655
Agronomy 664,552,080 (25,713,694) 638,838,386
Processed grain and oilseed 819,863,541 819,863,541
Feed and farm supplies 207,252,696 276,003,438 483,256,134
--------------------------------------------------------------------------------------
8,154,339,644 2,523,235,722 (30,822,243)(5) 10,646,753,123
Patronage dividends 13,278,997 67,644,567 (2,629,044)(6) 78,294,520
Other revenues 68,339,523 1,229,413 69,568,936
--------------------------------------------------------------------------------------
8,235,958,164 2,592,109,702 (33,451,287) 10,794,616,579
COSTS AND EXPENSES:
Cost of good sold 8,076,073,326 2,395,877,932 (30,822,243)(5) 10,441,129,015
Marketing, general and administrative 70,054,248 42,047,928 112,102,176
Interest 31,921,936 14,205,354 46,127,290
Minority Interest 6,472,514 6,472,514
--------------------------------------------------------------------------------------
8,178,049,510 2,458,603,728 (30,822,243) 10,605,830,995
--------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES
AND DISCONTINUED OPERATIONS 57,908,654 133,505,974 (2,629,044) 188,785,584
INCOME TAXES 6,900,000 5,023,575 11,923,575
--------------------------------------------------------------------------------------
EARNINGS BEFORE DISCONTINUED
OPERATIONS 51,008,654 128,482,399 (2,629,044) 176,862,009
DISCONTINUED OPERATIONS 296,146 296,146
--------------------------------------------------------------------------------------
NET EARNINGS $ 51,008,654 $ 128,186,253 $ (2,629,044) $ 176,565,863
======================================================================================
</TABLE>
See notes to unaudited pro forma consolidated financial statements
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MAY 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
Harvest States Historical Pro Forma Cenex Harvest
Cooperatives Cenex, Inc. Adjustments States Cooperatives
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales:
Grain and oilseed $ 4,191,665,535 $ 4,191,665,535
Petroleum products $ 1,393,096,528 $ (2,258,664) 1,390,837,864
Agronomy 548,449,444 (24,957,126) 523,492,318
Processed grain and oilseed 708,219,307 708,219,307
Feed and farm supplies 156,699,068 244,846,204 401,545,272
----------------------------------------------------------------------------------
5,056,583,910 2,186,392,176 (27,215,790)(5) 7,215,760,296
Patronage dividends 6,512,481 40,824,437 (604,671)(6) 46,732,247
Other revenues 57,556,984 3,000,415 60,557,399
----------------------------------------------------------------------------------
5,120,653,375 2,230,217,028 (27,820,461) 7,323,049,942
COSTS AND EXPENSES:
Cost of good sold 4,981,820,272 2,085,818,910 (27,215,790)(5) 7,040,423,392
Marketing, general and administrative 69,509,491 54,542,394 124,051,885
Interest 19,268,575 15,016,317 34,284,892
Minority Interest 2,381,087 2,381,087
----------------------------------------------------------------------------------
5,070,598,338 2,157,758,708 (27,215,790) 7,201,141,256
----------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 50,055,037 72,458,320 (604,671) 121,908,686
AND CUMULATIVE EFFECT
INCOME TAXES 5,100,000 15,925,000 21,025,000
----------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE
EFFECT 44,955,037 56,533,320 (604,671) 100,883,686
CUMULATIVE EFFECT 6,480,000 6,480,000
----------------------------------------------------------------------------------
NET EARNINGS $ 44,955,037 $ 63,013,320 $ (604,671) $ 107,363,686
==================================================================================
</TABLE>
See notes to unaudited pro forma consolidated financial statements
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of items and adjustments reflected in the unaudited
pro forma consolidated financial statements:
1) The payable to Cenex for products sold to the Company has been eliminated
as well as the related receivable.
2) The Company prepaid Cenex for products not yet received. This prepaid
amount and the related patron credit balance have been eliminated.
3) The Company received patronage dividends each year from Cenex in the form
of cash and equity, as well as cash retirements of previous years' equity.
This investment has been eliminated along with the related Cenex equity.
4) Cenex had recorded patronage dividends and retirements payable to the
Company which has been reclassified to capital.
5) The sales to the Company from Cenex, and the related cost of goods sold
have been eliminated.
6) Patronage dividends received by the Company from Cenex have been
eliminated.
