UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File
November 30, 1997 Number 0000927536
ALLIANCE FARMS COOPERATIVE ASSOCIATION
(Exact name of registrant as specified in its charter)
Colorado 84-1270685
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
302 Idlewild Street, Yuma, Colorado 80759
(Address of principal executive offices)
970-848-3231
(Issuers telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
At January 14, 1998, there were 155 shares of the issuers common stock
outstanding, of which 119 were shares of Class A common stock and 36 were shares
of Class B common stock.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
ALLIANCE FARMS COOPERATIVE ASSOCIATION
BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
November 30, 1997 August 31, 1997
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents 2,160,000 0
Receivables, trade 0 69,550
Receivables, non-trade (Note 3) 42,078 200,137
Inventory (Note 4) 3,446,538 3,179,402
Other current assets 35,660 0
Total current assets 5,684,276 3,449,089
Property, plant and equipment, at cost 21,841,164 19,610,833
Less accumulated depreciation 2,435,755 2,193,650
19,405,409 17,417,183
Breeding stock 4,577,325 4,603,996
Less accumulated depreciation 1,518,252 1,353,650
3,059,073 3,250,346
Other assets, net of $84,729 and $77,261
accumulated amortization 256,321 263,788
$28,405,079 $24,380,406
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank Overdraft 1,222,729 1,106,122
Current maturities of long-term debt (Note 5) 1,376,700 1,262,700
Accounts payable (Note 3) 2,000,971 952,431
Accrued expenses 333,151 242,261
Total current liabilities 4,933,551 3,563,514
Long-term debt (Note 5) 14,407,923 14,320,724
Shareholders' equity
Class A common stock of $.01 par value;
authorized 5,000 shares,
issued and outstanding 119 shares 1 1
Class B common stock of $.01 par value;
authorized 2,500 shares, issued and
outstanding 36 shares at November 30, 1997 0 0
Class C common stock of $.01 par value;
authorized 2,500 shares, none issued 0 0
Additional paid-in capital 10,823,876 8,719,237
Accumulated deficit (1,760,272) (2,223,070)
Total shareholders' equity 9,063,605 6,496,168
Commitments (Note 6) ------ ------
$28,405,079 $24,380,406
</TABLE>
See accompanying notes to financial statements
ALLIANCE FARMS COOPERATIVE ASSOCIATION
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Three Month Periods Ended
November 30
1997 1996
<S> <C> <C>
Net sales (Note 2) $4,161,906 $ 3,03,015
Cost of goods sold 2,708,172 2,579,463
Gross income 1,453,734 623,552
Expenses related to start-up
of new production facilities 403,609 75,668
Administrative expenses 169,738 92,969
Loss on sale of breeding stock 63,101 59,658
Operating income $817,286 $395,258
Other income (expense):
Interest income(expense) (381,549) (322,652)
Other 27,059 42,532
(354,490) (280,120)
Net income $462,796 $115,138
</TABLE>
See accompanying notes to condensed financial statements
ALLIANCE FARMS COOPERATIVE ASSOCIATION
STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three Month Periods Ended
November 30
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 462,796 $ 115,138
Adjustment to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and amortization 634,503 529,554
Loss on sale of breeding stock 63,101 59,658
Changes in assets and liabilities:
Receivables 227,609 32,732
Inventory (267,136) (296,911)
Other current assets (35,660) (10,939)
Accounts payable 1,048,540 269,123
Accrued expenses 90,890 74,573
Net cash provided by operating activities 2,224,643 772,927
Cash flows from investing activities:
Capital expenditures (2,792,977) (1,156,805)
Proceeds from sale of breeding stock 305,887 132,695
Net cash used in investing activities (2,487,090) (1,024,110)
Cash flows from financing activities:
Proceeds from issuance of long term debt 443,872 0
Net increase (decrease) in revolving term credit (283,369) 448,000
Payment on long term debt (273,600) (217,500)
Increase in note payable to Farmland 314,299 180,000
Issuance of common shares, net of offering cost 2,104,638 0
Increase (decrease) in bank overdraft 116,607 (159,317)
Net cash provided by
financing activities: 2,422,447 251,183
Increase in cash and cash
equivalents 2,160,000 0
Cash and cash equivalents at beginning of period 0 0
Cash and cash equivalents at end of period $2,160,000 $ 0
</TABLE>
See accompanying notes to financial statements
Alliance Farms Cooperative Association
Notes to Condensed Financial Statements
(Unaudited)
1. Interim Financial Statements
The accompanying condensed unaudited financial statements reflect all
adjustments (consisting of only normal recurring adjustments) which in the
opinion of management, are necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods presented. Income taxes have not been provided because Alliance
Farms Cooperative Association (Alliance) expects to derive nearly 100% of
its net income from the sale of feeder pigs to its members which will be
apportioned and distributed to members of Alliance on a patronage basis in
accordance with its by-laws.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying unaudited
condensed financial statements should be read in conjunction with the
financial statements and notes in Alliance's August 31, 1997 Annual Report
on Form 10-KSB.
2. Sales
Alliance sold 100% of its feeder pigs to its members for the three month
periods ended November 30, 1997 and 1996 respectively, at a contractual
price which is based on Alliance's operating costs (which are based on a
twelve month rolling average), debt service and an additional $4.50 per pig
sold.
Because the contractual price for the sale of a feeder pig is determined
based upon, among other things, a twelve month historical rolling average
of operating costs and to the extent that current operating costs per pig
exceed the historical average operating costs, Alliance may incur a
negative gross margin on the sale of its feeder pigs during periods of
rising costs. Conversely, in periods of falling costs, Alliance may earn
higher than normal gross margins.
Alliance's average net sales price and the average industry market price
were as follows:
Three Months Ended
November 30
1997 1996
Average Net Sales Price 59.76 58.18
Average Industry Market* 41.08 51.77
*As published by Spark's Companies, Inc. (from the USDA's Market News
Service)
3. Transactions with Farmland and Yuma
Alliance purchased feed from Yuma Farmers' Milling and Mercantile
Cooperative (Yuma), and animal health supplies and breeding stock from
Farmland Industries, Inc. (Farmland) based on market prices. Yuma and
Farmland are members of Alliance. Alliance also sold feeder pigs to
Farmland and Yuma. Such purchases and sales were as follows:
<TABLE>
<CAPTION>
Three Months Ended
November 30
1997 1996
<S>....................................<C> <C>
Feed Purchases.........................$ 983,953 $ 1,112,412
Animal Health Purchases................ 45,548 211,549
Breeding Stock......................... 597,739 143,694
Feeder Pig Sales....................... 2,753,453 2,004,378
</TABLE>
Farmland also pays Alliance a royalty for any pigs raised by Alliance and
sold to a Farmland finisher that are then selected as breeding stock for
Farmland's contract herds pursuant to a swine production services
agreement. The royalty, which is $10 per head selected, paid to Alliance
under such agreement was as follows:
<TABLE>
<CAPTION>
Three Months Ended
November 30
1997 1996
<S>....................................<C> <C>
Royalty Income.........................$ 6,370 $ 32,600
</TABLE>
Alliance had $42,078 and $200,137 of non-trade receivables at November 30,
1997 August 31, 1997, respectively. The $42,078 owed to Alliance at
November 30, 1997 was owed from Farmland for royalties as described above
and for items received out of Alliance's shop stock inventory, and from Pig
Producers I, LP ("Pig Producers"), a limited partnership in which Farmland
holds a 12.5% interest, for the reimbursement of wages, benefits and other
costs attributable to Alliance employees that are assigned to perform
various duties at Pig Producers, as well as for items received out of
Alliance's shop stock inventory. Of the $200,137 owed to Alliance at August
31, 1997, $120,195 was owed from Yuma Cooperative as a result of a feed
pricing adjustment and the remainder was owed for wages and benefits as
described above from Pig Producers, in addition to charges for items
received out of Alliance's shop stock inventory by both Pig Producers and
Farmland.
Farmland also performs administrative, advisory and consulting services on
behalf of Alliance pursuant to a contractual agreement. The agreement
provides that Farmland will be compensated for such services in an amount
equal to one dollar per pig shipped adjusted annually for inflation for a
term of ten years commencing July 13, 1994. Amounts paid by Alliance to
Farmland under such agreement were as follows:
<TABLE>
<CAPTION>
Three Months Ended
November 30
1997 1996
<S>....................................<C> <C>
Management Fee.........................$ 77,842 $ 57,616
</TABLE>
Alliance owed $148,865 and $168,022 at November 30, 1997 and $197,755 and
$185,413 at August 31, 1997 to Farmland and Yuma respectively, for goods
and services. Alliance is also obligated to Farmland in the amounts of
$930,723 and $616,424 at November 30, 1997 and August 31, 1997,
respectively, pursuant to promissory notes. See note 5.
4. Inventories
Major components of inventories as of November 30, 1997 and August 31, 1997
are as follows:
November 30 August 31
1997 1997
Feeder Pigs............$ 3,254,248 $ 2,922,594
Other.................. 192,290 256,808
$ 3,446,538 $ 3,179,402
5. Long-Term Debt
Long term debt at November 30, 1997 and August 31, 1997 consisted of the
following:
November 30 August 31
1997 1997
CoBank Term Loan $ 12,695,400 $ 12,525,131
CoBank Revolving
Term Credit $ 2,158,500 $ 2,441,869
Note Payable, Farmland $ 930,723 616,424
$ 15,784,623 $ 15,583,424
Less Current Maturities $ 1,376,700 $ 1,262,700
$14,407,923 $ 14,320,724
On May 19, 1995, Alliance entered into a $23,600,000 secured credit
facility with CoBank. This agreement provides for $18,850,000 of term
loans and $4,750,000 of revolving term credit. Proceeds from the term
loans are used for construction of feeder pig production facilities and are
advanced by CoBank as Alliance incurs construction costs. Proceeds from
revolving term credit may be used for working capital and other purposes.
The expiration date for the unused commitments for the term loans has been
extended from December 31, 1997 to March 31, 1998. The credit facility was
also amended to accommodate the construction of two weaned pig facilities
in place of two feeder pig facilities. The unused revolving term credit
expires June 20, 2006. Interest accrues on the outstanding principle
balance of the loan at a rate equal to CoBank's national variable rate,
plus 1.25% (9.75% at November 30, 1997). Alliance capitalized $5,564 and
$8,241 of interest on construction for the three months ended November 30,
1997 and 1996 respectively.
At November 30, 1997, no additional term loans were immediately available,
$211,000 of term loans will be made available by CoBank upon final
acceptance of the second feeder pig production facility constructed in
Wayne County, Illinois and $1,224,500 of revolving term credit was
immediately available. An additional $485,000 of revolving term credit was
made available on January 5, 1998 as a result of construction on Alliance's
first weaned pig production facility in Yuma County, Colorado. Additional
amounts of term loans of $3,350,000 and revolving term credit of $485,000
are to become available following CoBank's acceptance of certain documents
as specified in the loan agreement.
Alliance is required to comply with various covenants, including, but not
limited to (i) maintaining at least $3,900,000 of shareholders' equity,
(ii) maintaining modified working capital (calculated as current assets
plus the available revolving term credit minus current liabilities
excluding the current portion of term debt payments) of at least $504,000,
(iii) restrictions on the occurrence of additional indebtedness, (iv)
restrictions on the declaration and payment of the cash portion of
patronage distributions and other distributions or allocations of earnings,
surplus or assets. As of November 30, 1997 Alliance was in compliance with
all covenants. Alliance may be required to make equity investments in
CoBank in an amount not to exceed 1% of the average five-year principal
loan balance until Alliance meets CoBank's target level of equity
investment, which is currently 11.5% of the average five-year principal
loan balance. As of November 30, 1997, substantially all assets of
Alliance were pledged to CoBank.
At November 30, 1997, $930,723 had been borrowed from Farmland pursuant to
a $760,000 loan agreement and a $1,360,000 loan agreement. The $760,000
loan agreement provides for interest at CoBank's prime rate and requires
repayment in 2005. The $1,360,000 loan agreement provides for interest at
CoBank's prime rate plus 1.25% and requires repayment in November 2006, or
upon the sale of an additional 17 shares of common stock by Alliance if
that occurs prior to November 2006.
Long-term debt as of November 30, 1997 matures during the fiscal years
ending August 31 in the following amounts:
1998........$ 1,262,700
1999........ 1,550,400
2000........ 1,550,400
2001........ 1,550,400
2002........ 1,550,400
Thereafter.. 8,320,323
$ 15,784,623
6. Commitments
Alliance Farms is currently operating seven 2,450 sow feeder pig facilities
and has one weaned pig facility under construction in Yuma County, Colorado
and one in Wayne County, Illinois. As of November 30, 1997, commitments
for construction of these two facilities totaled approximately $2,074,609.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS MADE IN
THIS REPORT ON FORM 10-QSB ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ALLIANCE'S ACTUAL RESULTS, FINANCIAL CONDITION OR BUSINESS COULD
DIFFER MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL CONDITION OR BUSINESS,
OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS CONTEMPLATED BY
SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN ALLIANCE FARMS'
AUGUST 31, 1996 ANNUAL REPORT ON FORM 10-KSB UNDER THE CAPTION "FACTORS THAT MAY
AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS", AS WELL
AS THOSE DISCUSSED ELSEWHERE IN ALLIANCE'S REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1997, Alliance reported working capital of $750,725 and
total assets of $28,405,079. Alliance issued 17 shares of Class A common stock
in August 1997 for net proceeds of $1,231,584. Alliance used these funds, in
combination with $1,899,000 of borrowings through November 30, 1997 for the
repayment of a $1,360,000 loan made by Farmland, and for the development,
population, and start-up of its second feeder pig facility in Wayne County,
Illinois. Alliance issued 36 shares of Class B common stock in November 1997 for
net proceeds of $2,104,638. Alliance is using these funds to repay Farmland the
$430,965 balance owed pursuant to a $1,360,000 loan agreement, and for the
development, population, and start-up of one weaned pig facility in Yuma County,
Colorado and one in Wayne County, Illinois.
As of the date of this report, Alliance has 119 shares of Class A Common
Stock issued and outstanding, 36 shares of Class B Common Stock issued and
outstanding, no issued and outstanding shares of Class C Common Stock and is
offering an additional 34 shares of Class A Common Stock, 18 shares of Class B
Common Stock, and 72 shares of Class C Common Stock to qualified prospective
investors. At November 30, 1997, no additional term loans were immediately
available, $211,000 of term loans will be made available by CoBank upon final
acceptance of the second feeder pig production facility constructed in Wayne
County, Illinois and $1,224,500 of revolving term credit was immediately
available. An additional $485,000 of revolving term credit was made available
on January 5, 1998 as a result of construction on Alliance's first weaned pig
production facility in Yuma County, Colorado. Additional amounts of term loans
of $3,350,000 and revolving term credit of $485,000 are to become available
following CoBank's acceptance of certain documents as specified in the loan
agreement. The availability of non-revolving term debt and revolving term
credit under the CoBank credit facility is subject to specified equity
investment levels in the Company being satisfied. In the event that additional
shares of Alliance common stock are issued and sold, Alliance would have to
complete negotiations with CoBank regarding their proposed new credit facility
before any additional debt required for expansion would become available.
However; there is no assurance that additional shares of common stock will be
sold and that the additional debt required for such expansion would be
available.
As of November 30, 1997, Alliance has borrowed $930,723 from Farmland,
including $430,965 borrowed for the construction of Alliance's sixth Colorado
facility pursuant to a $1,360,000 loan agreement. The $430,965 was repaid on
December 11, 1997 with a portion of the proceeds from the November 1997 sale of
Class B Common Stock, leaving a balance of $499,758 that was borrowed to
purchase land for future expansion.
During the three month period ended November 30, 1997, Alliance incurred
capital expenditures of $442,669 for construction of its second feeder pig unit
in Wayne County, Illinois in addition to $852,127 for construction of its first
weaned pig unit in Yuma County, Colorado and $453,125 for its first weaned pig
unit in Wayne County, Illinois. The remaining capital expenditures were for
replacement breeding stock and building construction for the first six units.
Major uses of cash during the three months ended November 30, 1997 include:
$2,792,977 for capital expenditures on new and existing facilities, a $283,369
decrease in revolving term credit outstanding, and $273,600 of principal
payments on long term debt. Major sources of cash include: $2,104,638 of
proceeds, net of offering costs, from the issuance of common shares, $443,872 of
proceeds from the issuance of long term debt, $314,299 borrowed from Farmland
for new construction and $2,224,643 in cash provided by operating activities.
THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
Shipments of feeder pigs were higher for the three months ended November
30, 1997 than in the prior year's period. Alliance shipped 69,644 feeder pigs
for the quarter ended November 30, 1997 compared to 55,054 feeder pigs shipped
for the quarter ended November 30, 1996 for an increase of 27%. Net sales for
the quarter ended November 30, 1997 increased to $4,161,906 from $3,203,015 for
the prior year period, an increase of $958,891 or 30%. The selling price per
pig is determined pursuant to the formula established under Alliance's Feeder
Pig Purchase Agreements with its members. The selling price is based on
Alliance's operating costs (which are based on a twelve month rolling average),
debt service and an additional $4.50 per pig. The above increase in volume and
sales dollars is partially a result of having six units in production for the
quarter ended November 30, 1997 as compared to five units in production for two
months and six units in production for one month of the quarter ended November
30, 1996, as well as improved productivity for the quarter ended November 30,
1997 as compared to the quarter ended November 30, 1996. The per pig sales price
was higher during the three months ended November 30, 1997 compared to the three
months ended November 30, 1996 because the twelve months of costs used to
compute the per pig prices was slightly higher and the twelve months of
productivity used to compute the per pig prices was lower for the three months
ended November 30, 1997 than the three months ended November 30, 1996. Average
net sales price was $59.76 and $58.18 during the quarters ended November 30,
1997 and 1996, respectively.
Alliance earned gross margins of $1,453,734 and $623,552 for the three
month periods ended November 30, 1997 and 1996, respectively. This improvement
in gross margin is primarily due to the nature of the contractual pricing
arrangements applicable to Alliance's sale of feeder pigs to its members. As
previously described, the selling price is based on, among other things,
Alliance's operating costs on a twelve month historical rolling average. For
the first quarter of fiscal 1998, Alliance's net sales price exceeded then
current production costs by $20.87 per pig sold. For the first quarter of
fiscal 1997, the net sales price exceeded then current production costs by
$11.33 per pig sold.
Sales to Farmland for the three month periods ended November 30, 1997 and
1996 were $2,753,453 and $2,004,378, respectively. The average net sales price
per head was $59.76 and $58.18 and the average industry market price per head
was $41.08 and $51.77 during 1997 and 1996, respectively.
Alliance recorded $403,609 of start-up costs relating to the operation of
it's second feeder pig production facility in Wayne County, Illinois under
construction during the three months ended November 30, 1997 and $75,668 of
start-up costs relating to the operation of the two production facilities under
construction during the three months ended November 30, 1996. Start-up costs
for the three month period ended November 30, 1997 and 1996 were comprised of
utilities, feed, labor and other general expenses prior to the operation of the
new feeder pig production facilities.
Administrative expenses were $169,738 for the three months ended November
30, 1997 compared to $92,969 for the prior year period. This increase reflects
the increased operations and includes higher administrative, payroll and
professional fees, related primarily to additional facilities being in
operation.
Interest expense of $381,549 for the three months ended November 30, 1997
as compared to $322,652 for the prior year period, was incurred in financing the
development of six existing and one new feeder pig facilities. This increase is
primarily due to the increase in the outstanding loan balance. As of November
30, 1997, Alliance had borrowed $14,853,900 from CoBank for construction and
start up costs and $930,723 from Farmland for construction and start-up costs
and for the purchase of land which is intended to be used for future expansion.
Alliance earned net income of $462,796 for the three months ended November
30, 1997 compared to $115,138 for the prior year period. The net income for the
first quarter of fiscal 1998 was attributable to the rolling average cost that
per pig sales prices are based on exceeding then current costs per pig by $6.65
per pig shipped, caused primarily by an improvement in productivity. The net
income for the first quarter of fiscal 1997 was attributable to the rolling
average cost that per pig sales prices are based on exceeding then current costs
by $2.09 per pig shipped, caused in part by improved productivity as well as
decreasing corn prices. In addition to operating risks and uncertainties
associated with any business, Alliance's ability to generate net income is
limited by any start-up expenses that are incurred with respect to facilities
development and by the selling price formula for feeder pigs that contains a
$4.50 production margin.
YEAR 2000
Alliance has made an assessment of its key financial, informational and
operational systems. Management does not anticipate that Alliance will
encounter significant operational issues or difficulties related to the Year
2000. Furthermore, the financial impact of making systems changes is not
expected to be material to Alliance's financial position, results of operations
or cash flows, although no assurances can be given in this regard.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the FASB issued Statement Number 130, "Reporting Comprehensive
Income." This statement, which is effective for periods beginning after December
15, 1997, expand or modify disclosures and, accordingly, will have no impact on
the Company's reported financial position, results of operations or cash flows.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Members of Alliance Farms Cooperative Association was
held on December 2, 1997. The following matters were submitted to a vote of the
members:
Item 1. Election of Directors
Wayne N. Snyder, Doug Brown, Merl Daniel, Gerald Johnson, Loren Keppy and
Larry Welsh each were elected as directors of Alliance Farms for a term
expiring at the 1998 Annual Meeting of Members and until their respective
successors are duly elected and qualified or until their earlier
resignation or removal. The vote with respect to the election of directors
was as follows:
Nominee Affirmative Votes Withheld Authority
Mr. Snyder 103 0
Mr. Brown 103 0
Mr. Daniel 103 0
Mr. Johnson 103 0
Mr. Keppy 103 0
Mr. Welsh 103 0
Item 2. Selection of Independent Auditors
KPMG Peat Marwick LLP was selected as the Association's independent
auditors for the fiscal year ending August 31, 1998. The vote with respect
to the approval of KPMG Peat Marwick LLP was as follows:
Affirmative Votes 103
Negative Votes 0
Abstentions 0
There were no broker non-votes received with respect to any of the above issues.
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
The exhibits listed below are filed as part of Form 10-QSB for the quarter
ended November 30, 1997.
10.1 Extension of Master Loan Agreement E039, dated as of
December 29, 1997, between CoBank, ACB and the Registrant
10.2 First Amendment to Revolving Term Loan Supplement, dated as of
December 29, 1997, between CoBank, ACB and the Registrant
10.3 Third Amendment to Multiple Advance Term Loan Supplement, dated
as of December 29, 1997, between CoBank, ACB and the Registrant
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended November 30,
1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ALLIANCE FARMS COOPERATIVE ASSOCIATION
(Registrant)
/s/ WAYNE SNYDER
Wayne Snyder
Chairman of the Board, President
and Director
(Principal Executive Officer and Principal
Financial and Accounting Officer)
Dated: January 14, 1998
EXHIBIT 99
EXHIBIT INDEX
The following exhibits are filed as a part of Form 10-QSB for the quarter
ended November 30, 1997. th an asterisk (*) are filed herein.
Exhibit No Description Page No
10.1 Extension of Master Loan Agreement E039, dated as of December 29, 1997,
between CoBank, ACB and the Registrant
10.2 First Amendment to Revolving Term Loan Supplement, dated as of
December 29, 1997, between CoBank, ACB and the Registrant
10.3 Third Amendment to Multiple Advance Term Loan Supplement, dated as
of December 29, 1997, between CoBank, ACB and the Registrant
27 Financial Data Schedule
EXHIBIT 10.1
COBANK (R) Post Office Box 13010-A
Rural America's Sacramento, California 95813-3010
Cooperative Bank (C) 3636 American River Drive
Sacramento, California 95864-5901
Phone: 916-973-3000
FAX: 916-973-3001
December 29, 1997
VIA FACSIMILE
Alliance Farms Cooperative Association
3315 North Oak Trafficway
Kansas City, MO 64116
Attention: President
Gentlemen:
Reference is made to the Master Loan Agreement numbered E039, dated as of May
19, 1995 ("MLA"), between CoBank, ACB ("CoBank") and Alliance Farms Cooperative
Association ("Company"), as supplemented by Multiple Advance Term Loan
Supplement numbered E039T01 dated as of May 19, 1995, as amended ("Multiple
Advance Supplement"), and by Revolving Term Loan Supplement numbered E039T02
also dated as of May 19, 1995 ("Revolving Supplement"), and to the related Loan
Agreement numbered T2300, dated September 21, 1994 as amended (the "Original
Loan Agreement"). The MLA, Multiple Advance Supplement, Revolving Supplement,
Original Loan Agreement, together with all mortgages, deeds of trust, security
agreements, waivers, consents and other documents entered into with respect
thereto or as contemplated thereby, being referred to herein as the "CoBank Loan
Documentation."
Reference is further made to the commitment letter dated October 9, 1997 of
CoBank, accepted and agreed to by the Company ("Commitment Letter").
As you know, pursuant to the CoBank Loan Documentation, CoBank has committed to
make loans to the Company from time to time to finance the debt portion of the
construction, development and start-up costs of up to five farrow to feeder pig
units and related support facilities ("Feeder Pig Units") upon the Company
attaining specified equity investment levels. To Date, CoBank has provided debt
financing for three such Feeder Pig Units.
Pursuant to the Commitment Letter, CoBank has committed, subject to negotiation,
execution and delivery of loan and loan related documentation satisfactory to
CoBank and its counsel in all material respects, to make loans to the Company
from time to time to finance the debt portion of the construction, development
and start-up costs of up to six farrow to weaned pig units and related support
facilities ("Weaned Pig Units") and to provide the necessary refinancing of the
existing commitments under the Multiple Advance Supplement and the Revolving
Supplement for the remaining two Feeder Pig Units upon the Company attaining
specified equity investment levels.
We understand that on November 14, 1997, the Company issued and sold 36 shares
of its Class B common stock in exchange for $2,160,000, which amount is to be
applied to finance a portion of the construction, development and start-up costs
of two Weaned Pig Units. You have requested that in lieu of making loans to the
Company to finance the debt portion of the construction, development and start-
up costs of the two remaining Feeder Pig Units contemplated by the CoBank Loan
Documentation, that CoBank instead make up to $4,320,000 of term and revolving
term loans to the Company to finance the debt portion of the construction,
development and start-up costs to two Weaned Pig Units.
The purpose to this letter is to inform you that CoBank hereby acknowledges and
consents to the above request. Accordingly, please fine enclosed two execution
counterparts of Third Amendment to Multiple Advance Term Loan Supplement
("E039T01C") and two execution counterparts to First Amendment to Revolving Term
Loan Supplement ("E039T02A"). Please execute and return all of the enclosed
counterparts to CoBank, whereupon CoBank will in turn execute all counterparts
and return a fully executed set of these amendments to you for your files.
In addition to the amendments to the two supplements, CoBank hereby agrees to
the extension of the Commitment Letter to provide the credit facilities referred
therein, up to and including March 31, 1998.
Please acknowledge your receipt and acceptance of this letter by signing and
returning a copy of this letter in the space provided below and returning such
copy, together with executed enclosures, to the undersigned.
Sincerely,
CoBank, ACB
By: ______________________
Greg Somerhalder
Vice President
Enclosures
Receipt and acceptance of the provisions of the above letter are acknowledged
this ___ day of December, 1997.
Alliance Farms Cooperative Association
By: _________________________
Title: _________________________
EXHIBIT 10.2
LOAN NO. E039T02A
FIRST AMENDMENT TO
REVOLVING TERM LOAN SUPPLEMENT
THIS FIRST AMENDMENT TO REVOLVING TERM LOAN SUPPLEMENT is entered into as
of December 29, 1997 between CoBANK, ACB ("CoBank") and ALLIANCE FARMS
COOPERATIVE ASSOCIATION, Kansas City, Missouri (the "Company").
BACKGROUND
CoBank and the Company are parties to a Revolving Term Loan Supplement
dated May 19, 1995 (such agreement is hereinafter referred to as the
"Supplement"). CoBank and the Company now desire to amend the Supplement. For
that reason, and for valuable consideration (the receipt and sufficiency of
which are hereby acknowledged), CoBank and the Company agree as follows:
1. Section 1 of the Supplement is hereby amended as follows:
a. The preamble paragraph of such Section is hereby amended by deleting
in line three the reference to "$4,750,000" and inserting "$4,500,000."
b. Subsection e. is hereby amended by (i) deleting in line three thereof
the reference to "$5,440,000" and inserting "$5,160,000" and (ii) deleting in
line four thereof the reference to "$4,140,000" and inserting "$4,015,000."
c. Subsection f. is hereby amended by (i) deleting in line three thereof
the reference to "$6,800,000" and inserting "$6,240,000" and (ii) deleting in
line four thereof the reference to "$4,750,000" and inserting "$4,500,000."
2. Section 2 of the Supplement is hereby amended in its entirety as follows:
"SECTION 2. PURPOSE. The purpose of the Commitment is to finance,
together with the financing being provided by CoBank pursuant to Multiple
Advance Term Loan Supplement dated as of May 19, 1995, as amended (Loan No.
E039T01), the debt portion of the construction costs of up to three 2,450 sow
farrowing units (not including the three farrowing units for which debt
financing is being provided by CoBank pursuant to Loan Agreement dated as of
September 21, 1994 (Loan Agreement T2300)), and two 2,450 sow weaned pig units,
related support facilities, the initial breeding stock and the capitalization
start up costs related with these facilities."
3. Section 4 of the Supplement is hereby amended as follows:
a. Subsection b.(1)(b) thereof is hereby amended in its entirety to
read as follows:
" (b) Net worth of the Company as reported as of then most
recent fiscal year end being not less than $3,000,000 plus $800,000
for each of the incremental $610,000 increases in the Commitment that
have been utilized as set forth in Subsections 1. b., c., and d. and
for each incremental $485,000 as set forth in Subsections 1.e. and f.
above; and"
b. Subsection b.(2)(b) thereof is hereby amended in its entirety to read
as follows:
" (b) Net worth of the Company as reported as of then most
recent fiscal year end being not less than $4,000,000 plus $1,000,000
for each of the incremental $2,110,000 increases in the Commitment
that have been utilized as set forth in Subsections 1. b., c. and d.,
and for each incremental $485,000 as set forth in Subsections 1.e.,
and f. above; and"
4. Except as set forth in this amendment, the Supplement shall continue in full
force and effect as written.
IN WITNESS WHEREOF, the parties have caused this amendment to be executed
by their duly authorized officers as of the date shown above.
COBANK, ACB ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By: ___________________________ By: ___________________________
Title ___________________________ Title ___________________________
EXHIBIT 10.3
LOAN NO. E039T01C
THIRD AMENDMENT TO
MULTIPLE ADVANCE TERM LOAN SUPPLEMENT
THIS THIRD AMENDMENT TO MULTIPLE ADVANCE TERM LOAN SUPPLEMENT is entered
into as of December 29, 1997 between CoBANK, ACB ("CoBank") and ALLIANCE FARMS
COOPERATIVE ASSOCIATION, Kansas City, Missouri (the "Company").
BACKGROUND
CoBank and the Company are parties to a Multiple Advance Term Loan
Supplement dated May 19, 1995 (such agreement, as previously amended, is
hereinafter referred to as the "Supplement"). CoBank and the Company now desire
to amend the Supplement. For that reason, and for valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), CoBank and the
Company agree as follows:
1. Section 1 of the Supplement is hereby amended as follows:
a. The preamble paragraph of such Section is hereby amended by deleting
in line three the reference to "$10,550,000" and inserting "$9,680,000."
b. Subsection d. is hereby amended by (i) deleting in line three thereof
the reference to "$5,440,000" and inserting "$5,160,000" and (ii) deleting in
line four thereof the reference to "$8,440,000" and inserting "$8,005,000."
c. Subsection e. is hereby amended by (i) deleting in line three thereof
the reference to "$6,800,000" and inserting "$6,240,000" and (ii) deleting in
line four thereof the reference to "$10,550,000" and inserting "$9,680,000."
2. Section 2 of the Supplement is hereby amended in its entirety as follows:
"SECTION 2. PURPOSE. The purpose of the Commitment is to finance,
together with the financing being provided by CoBank pursuant to Revolving Term
Loan Supplement dated as of May 19, 1995, as amended (Loan No. E039T02), the
debt portion of the construction costs of up to three 2,450 sow farrowing units
(not including the three farrowing units for which debt financing is being
provided by CoBank pursuant to Loan Agreement dated as of September 21, 1994
(Loan Agreement T2300)), and two 2,450 sow weaned pig units, related support
facilities, the initial breeding stock and the capitalization start up costs
related with these facilities."
3. Section 3 of the Supplement is hereby amended by deleting in line three
thereof the reference to "December 31, 1997" and inserting "March 31, 1998."
4. Section 4 of the Supplement is hereby amended as follows:
a. Subsection b.(1)(b) thereof is hereby amended in its entirety to
read as follows:
" (b) Net worth of the Company as reported as of then most
recent fiscal year end being not less than $3,000,000 plus $800,000
for each of the incremental $2,110,000 increases in the Commitment
that have been utilized as set forth in Subsections 1.a, b., c., and
for each incremental $1,675,000 as set forth in Subsections 1.d. and
e. above; and"
b. Subsection b.(2)(b) thereof is hereby amended in its entirety to read
as follows:
" (b) Net worth of the Company as reported as of then most
recent fiscal year end being not less than $4,000,000 plus $1,000,000
for each of the incremental $2,110,000 increases in the Commitment
that have been utilized as set forth in Subsections 1.a., b., c., and
for each incremental $1,675,000 as set forth in Subsections 1.d., and
e. above; and"
5. Section 5, subsections d. and e. are hereby amended by deleting the
reference to "$2,110,000" and inserting "$1,675,000."
6. Except as set forth in this amendment, the Supplement shall continue in full
force and effect as written.
IN WITNESS WHEREOF, the parties have caused this amendment to be executed
by their duly authorized officers as of the date shown above.
COBANK, ACB ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By: ___________________________ By: ___________________________
Title: ___________________________ Title: ___________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from
Form 10-QSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 2,160,000
<SECURITIES> 0
<RECEIVABLES> 42,078
<ALLOWANCES> 0
<INVENTORY> 3,446,538
<CURRENT-ASSETS> 35,660
<PP&E> 21,841,164
<DEPRECIATION> 2,435,755
<TOTAL-ASSETS> 28,405,079
<CURRENT-LIABILITIES> 4,933,551
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 9,063,605
<TOTAL-LIABILITY-AND-EQUITY> 28,405,079
<SALES> 4,161,906
<TOTAL-REVENUES> 4,161,906
<CGS> 2,708,172
<TOTAL-COSTS> 3,344,620
<OTHER-EXPENSES> (27,059)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 381,549
<INCOME-PRETAX> 462,796
<INCOME-TAX> 0
<INCOME-CONTINUING> 462,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 462,796
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
