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 Quarterly Period Ended Commission File
November 30, 1999 Number 0000927536
ALLIANCE FARMS COOPERATIVE ASSOCIATION
(Exact name of small business issuer as specified in its charter)
Colorado 84-1270685
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
503 East 8th Avenue, 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, 2000, there were 190 shares of the issuer's common stock
outstanding, of which 136 were shares of Class A common stock and 54 were shares
of Class B common stock.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<TABLE>
<CAPTION>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
BALANCE SHEETS
November 30, 1999 August 31, 1999
ASSETS <C> <C>
<S>
Current Assets:
Receivables, trade $4,165 $14,701
Receivables, non-trade (Note 3) 23,420 17,215
Inventory (Note 4) 4,146,890 4,260,949
Other current assets 55,740 85,612
Total current assets $4,230,215 $4,378,477
Property, plant and equipment, at cost $29,930,507 $29,896,188
Less accumulated depreciation 5,094,675 4,686,614
$24,835,832 $25,209,574
Breeding stock $3,577,909 $3,707,900
Less accumulated depreciation 1,238,775 1,166,528
$2,339,134 $2,541,372
Other assets, net of $146,950 and $142,695
accumulated amortization $385,868 $390,123
$31,791,049 $32,519,546
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank Overdraft $658,870 $700,960
Current maturities of long-term debt (Note 5) 1,812,000 1,812,000
Accounts payable (Note 3) 744,590 1,052,504
Patronage refund payable 0 200,000
Accrued property tax 498,488 481,796
Accrued payroll 153,394 157,503
Other accrued expenses 529,515 588,481
Total current liabilities $4,396,857 $4,993,244
Long-term debt (Note 5) $16,081,522 $15,898,422
Shareholders' equity:
Class A common stock of $.01 par value; authorized
5,000 shares, issued and outstanding 136 shares $1 $1
Class B common stock of $.01 par value; authorized
2,500 shares, issued and outstanding 54 shares 1 1
Class C common stock of $.01 par value;
authorized 2,500 shares, none issued 0 0
Additional paid-in capital 13,177,409 13,177,409
Patronage refund for reinvestment 1,379,116 1,379,116
Accumulated deficit (3,243,857) (2,928,647)
Total shareholders' equity $11,312,670 $11,627,880
Commitments and Contingencies (Note 6) ------ ------
$31,791,049 $32,519,546
<FN>
See accompanying notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
STATEMENTS OF EARNINGS
For three months ended November 30, 1999 and 1998
1999 1998
<S> <C> <C>
Net sales (Notes 2 and 3) $4,831,581 $4,301,907
Cost of goods sold (Note 3) 4,344,757 3,688,814
Gross margin $486,824 $613,093
Expenses related to start-up
of new production facilities $0 $85,698
Administrative expenses 266,509 264,957
Loss on sale of breeding stock 125,958 248,651
Operating income $94,357 $13,787
Other income (expense):
Interest expense ($412,782) ($400,241)
Other 3,215 9,988
($409,567) ($390,253)
Net loss ($315,210) ($376,466)
<FN>
See accompanying notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
STATEMENTS OF CASH FLOWS
UNAUDITED
Three Month Periods Ended
November 30
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss ($315,210) ($376,466)
Adjustment to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and amortization 731,275 660,600
Loss on sale of breeding stock 125,958 248,651
Changes in assets and liabilities:
Receivables 4,331 36,705
Inventory 114,059 2,977
Other current assets 29,872 9,346
Other assets 0 (2,105)
Accounts payable (307,914) (245,289)
Accrued expenses (46,383) 264,880
Net cash provided by operating activities $335,988 $599,299
Cash flows from investing activities:
Capital expenditures ($405,820) ($2,150,731)
Proceeds from sale of breeding stock 128,822 150,243
Net cash used in investing activities ($276,998) ($2,000,488)
Cash flows from financing activities:
Proceeds from issuance of long term debt $0 $224,815
Net increase (decrease) in revolving term credit 636,100 (153,909)
Payment on long term debt (453,000) (453,000)
Increase in note payable to Farmland 0 1,526,600
Payment of patronage refund (200,000) 0
Increase (decrease) in bank overdraft (42,090) 256,683
Net cash provided by
financing activities: ($58,990) $1,401,189
Change in cash $0 $0
Cash at beginning of period 0 0
Cash at end of period $0 $0
<FN>
See accompanying notes to financial statements
</TABLE>
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 and weaned 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 August 31, 1999 balance
sheet presented in the accompanying condensed financial statements was
derived from the financial statements in Alliance's August 31, 1999 Annual
Report on Form 10-KSB. The accompanying unaudited condensed financial
statements should be read in conjunction with the financial statements and
notes in Alliance's August 31, 1999 Annual Report on Form 10-KSB.
2. Sales
Alliance has sold virtually all of its feeder and weaned pigs to its
members for the three month periods ended November 30, 1999 and 1998 at a
contractual price which is based on Alliance's operating costs (which are
based on a five month rolling average), debt service and an additional
amount of $0 to $4.50 per pig sold as determined periodically by the Board
of Directors at its discretion. For the three months ended November 30,
1999 and 1998 no additional amount per pig was charged in addition to the
operating costs and debt service for feeder and weaned pigs.
Because the contractual price for the sale of a feeder and a weaned pig is
determined based upon, among other things, a five 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 and weaned pigs during
periods of rising costs.
Alliance's average net sales price and the average industry market price
were as follows:
Three Months Ended
November 30
1999 1998
Feeder Pig Average Net Sales Price 44.31 50.19
Feeder Pig Average Industry Market* 32.82 29.75
Weaned Pig Average Net Sales Price 33.00 37.12
Weaned Pig Average Industry Market* 22.80 17.01
* From the USDA's Market News Service
3. Transactions with Farmland, Yuma Cooperative and Effingham Equity
As of November 30, 1999 and 1998, Farmland Industries, Inc. (Farmland)
owned approximately 35.3% and 36.1%, respectively, of the Common Stock of
Alliance, Yuma Farmers' Milling and Mercantile Cooperative (Yuma
Cooperative) owned approximately 6.3% and 7.7%, respectively, of the Common
Stock of Alliance, and Effingham Equity owned approximately 1.1% and 0%,
respectively, of the Common Stock of Alliance.
Alliance purchased feed from Yuma Cooperative, animal health supplies and
breeding stock from Farmland, and feed and propane from Effingham Equity,
based on market prices. Yuma Cooperative, Farmland and Effingham Equity
are members of Alliance. Alliance also sold feeder or weaned pigs to
Farmland, Yuma Cooperative and Effingham Equity. Such purchases and sales
were as follows:
Three Months Ended
November 30
1999 1998
Feed Purchases $1,114,331 $1,132,695
Propane Purchases 11,160 16,075
Animal Health Purchases 320,944 97,351
Breeding Stock Purchases 405,820 396,418
Feeder & Weaned Pig Sales 1,998,632 2,224,164
Alliance and Farmland equally share the rent for an administrative office
in Yuma, Colorado. 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:
Three Months Ended
November 30
1999 1998
Management Fee $134,785 $102,351
Alliance had $23,420 and $17,215 of non-trade receivables at November 30,
1999 and August 31, 1999, respectively, due 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.
Alliance owed $71,694, $60,124 and $30,241 at November 30, 1999 and
$318,604, $95,292 and $32,147 at August 31, 1999 to Farmland, Yuma and
Effingham, respectively, for goods and services. Alliance is also obligated
to Farmland in the amount of $333,172 at November 30, 1999 for funds used
to purchase land for future expansion. See note 5.
4. Inventories
Major components of inventories as of November 30, 1999 and August 31, 1999
are as follows:
November 30 August 31
1999 1999
Feeder and Weaned Pigs.$ 4,017,054 $ 4,125,765
Other.................. 129,836 135,184
$ 4,146,890 $ 4,260,949
5. Long-Term Debt
Long term debt at November 30, 1999 and August 31, 1999 consisted of the
following:
November 30 August 31
1999 1999
CoBank Term Loan $12,908,800 $13,361,800
CoBank Construction Loan 4,015,450 4,015,450
CoBank Revolving Term Credit 636,100 0
Note Payable to Farmland 333,172 333,172
$17,893,522 $17,710,422
Less Current Maturities 1,812,000 1,812,000
$16,081,522 $15,898,422
On March 18, 1998, the Company entered into various loan agreements with
CoBank, ACB ("CoBank") related to a secured credit facility which provides
for up to $26,846,700 of non-revolving term debt, $7,660,000 of revolving
term credit and $18,400,00 of construction financing. Proceeds from the
term debt were used for refinancing the then existing non-revolving term
debt, and will be used to finance the construction or acquisition of
additional pig production facilities. Proceeds from the revolving term
credit were used for refinancing the existing revolving term credit, and
will be used to provide working capital. Proceeds from the construction
loan may be used for the construction or acquisition of pig production
facilities and are advanced by CoBank as construction costs are incurred by
Alliance. The actual advance of funds under this credit facility is
subject to the satisfaction of certain conditions and may be withdrawn or
terminated by CoBank under certain circumstances. The unused portion of
the credit facility expires August 31, 2001 with the unpaid balance on that
date due by September 30, 2011 with respect to the revolving term credit,
December 31, 2001 with respect to the non-revolving term debt and September
30, 2001 with respect to the construction financing.
The availability of non-revolving term debt, revolving term credit and
construction debt under the CoBank credit facility is subject to specified
equity investment levels in the Company being satisfied. As of November
30, 1999, $4,243,450 was immediately available to Alliance under its credit
facility. The availability of $13,936,900 of unused term loans and
$3,645,000 of revolving term credit and $13,520,000 of construction loans
under the CoBank credit facility is restricted and may be available only as
additional shares of common stock are sold ($2,110,000 of term loans and
$610,000 of revolving term credit for every $1,360,000 of Class A common
stock sold and $1,675,000 of term loans and $485,000 of revolving term
credit for every $1,080,000 of Class B or Class C common stock sold).
The CoBank credit facility provides for the monthly payment of principal
and interest. Principal payments pursuant to the existing non-revolving
term debt are to be made in equal monthly installments of $151,000, with
the remaining unpaid balance being due and payable on that date which is
ninety-nine months after the final advance under the non-revolving term
loan. Principal payments pursuant to each $2,110,000 of new non-revolving
term loans are to be made in monthly installments of $21,800 each,
beginning on the 20th day of the eighteenth month following the date of the
initial advance of such $2,110,000 loan. For each $2,720,000 of new
construction loans, payment of the entire outstanding principal balance is
to be made on that date that is sixteen (16) months after the date of the
initial advance for construction of the proposed facility. The revolving
loan commitment will be reduced in 40 equal payments commencing on August
31, 2001, such that after the fortieth reduction, the revolving loan
commitment will be zero. To the extent that the outstanding principal
balance under the revolving loan exceeds the revolving loan commitment, the
Company will be required to immediately make a principal payment in a
amount sufficient to reduce the outstanding principal balance under the
revolving loan to an amount not exceeding the revolving loan commitment.
Interest accrues on the outstanding principal balance of the loan at a rate
equal to either (i) a variable rate equal to CoBank's then national
variable rate plus a base rate margin of 1.25% for non-revolving term loans
and for revolving loans or 2.25% for construction loans, or (ii) CoBank's
then quoted rates for fixed rate loans, as may be elected from time to time
by the Company, and is payable monthly in arrears by the 20th day of the
following month. During the period in which principal under the loan is
outstanding, portions of such principal may bear interest at such variable
rate while other portions may bear interest at such fixed rate. As of
November 30, 1999, interest accrued on the outstanding principal balance on
the respective loan portions under variable rates at 9.75% per annum for
non-revolving term loans, 9.75% per annum for revolving term loans and
10.75% per annum for construction loans and between 8.01% and 9.14% for
those portions under fixed rates. The interest rates applicable to the
loan are subject to reduction at specified times upon the Company's
satisfaction of certain conditions relating to the Company's equity level
and debt service coverage ratio. As of November 30, 1999, no reductions in
the Company's interest rate had been made. The Company is permitted to
prepay the loan at any time without penalty, except that in the event that
fixed rate balances are prepaid, the Company is required to pay CoBank a
surcharge in an amount equal to CoBank's funding losses with respect
thereto. Alliance capitalized $0 and $34,710 of interest on construction
for the three months ended November 30, 1999 and 1998 respectively.
In obtaining the secured credit facility, and for each year in which the
credit facility is effective, the Company is required to pay a commitment
fee equal to 0.5% on the outstanding revolving loan commitment and 0.25% on
the unadvanced amount of the construction loan commitment. In addition,
the Company will be required to pay an activation fee equal to 1% on the
amount withdrawn under the construction loan, along with a $6,000 fee with
respect to the origination of each $2,110,000 of new non-revolving term
loans. During the course of the loan, the Company may be required to make
additional equity investments at a rate not to exceed 1% of the average
five-year principal loan balance (which additional equity investments may
be satisfied out of CoBank's non-cash patronage distributions) until the
Company meets CoBank's target level of equity investment, which currently
is 11.5% of the Company's average five-year principal loan balance. In
addition, the Company was required to grant a first perfected lien and
security interest on substantially all of its properties and assets to
CoBank and to assign to CoBank all of the Company's rights in and to the
existing and future Pig Purchase Agreements. The Company is required to
comply with various affirmative and negative covenants, including but not
limited to (i) maintenance of at least a 0.25 ratio of total equity to
total assets for the period ended August 31, 1998, and thereafter a 0.35
ratio of total equity to total assets, (ii) maintenance of a debt service
coverage ratio (calculated by dividing average annual cash flow by the
current debt) of not less than one, (iii) provision of monthly financial
statements and audited annual financial statements to CoBank, (iv)
restrictions on the incurrence of additional indebtedness, (v) restrictions
on certain liens, mergers, sales of assets, investments, guaranties, loans,
advances and business activities unrelated to existing operations, and (vi)
restrictions on the declaration and payment of the cash portion of
patronage distributions and other distributions or allocations of the
Company's earnings, surplus or assets. The Company was in compliance with
each of these covenants as of November 30, 1999.
As of November 30, 1999, Alliance has borrowed $333,172 from Farmland to
purchase land for future expansion. The loan agreement with Farmland for
the purchase of land is evidenced by a promissory note providing for
amortization over a ten-year period, at a variable rate of interest equal
to CoBank's prime rate (8.5% at November 30, 1999). The payment schedule
for this loan requires the Company to make interest-only payments for the
life of the loan, with a final balloon payment of all principal to be made
upon the expiration of the ten-year term in September 30, 2005.
Long-term debt as of November 30, 1999 matures during the fiscal years
ending August 31 in the following amounts:
2000 $ 1,359,000
2001 2,101,603
2002 2,472,030
2003 2,472,030
Thereafter 9,488,859
$ 17,893,522
6. Commitments and Contingencies
As of November 30, 1999, Alliance Farms was operating five 2,450-sow feeder
pig production facilities in Yuma County, Colorado, two 2,450-sow feeder
pig production facilities in Wayne County, Illinois, one 2,450-sow weaned
pig production facility in Yuma County, Colorado, one 2,450-sow weaned pig
production facility in Wayne County, Illinois, and one 5,000-sow (2,500
feeder and 2,500 weaned pig production facility) unit in Yuma County,
Colorado. At November 30, 1999, commitments for construction of such
facilities totaled $15,000. These commitments will be funded through bank
borrowings.
In the November 1998 general election, Colorado voters adopted amendments
to the Colorado Revised Statutes concerning the regulation of housed
commercial swine feeding operations. Such amendments may have material and
adverse consequences to Alliance Farms and its business. These amendments
mandate certain water and air quality control measures that must be
implemented by commercial swine feeding operations housing at least 800,000
pounds of swine or which are deemed commercial under local law.
Regulations implementing the amendments were recently promulgated and the
amendments are applicable to Alliance's Colorado operations.
Alliance has obtained the initial operating permits required to comply with
the new provisions. These permits include requirements to manage the
application of manure as a fertilizer according to specified agronomic crop
production requirements, to control off-site odors and to identify and
evaluate cover alternatives for anaerobic treatment lagoons. Alliance has
implemented and is evaluating the use of biological feed and lagoon
additives in an effort to comply with applicable requirements governing
off-site odor management and cover requirements. Alliance's permit to
operate allows for continued evaluation of experimental covers and odor-
control measures until July 1, 2000, after which time the applicable
regulatory authorities will determine whether the control measures
implemented are an acceptable cover technology. Costs to comply with the
applicable requirements are expensed as incurred.
Alliance continues to evaluate the impact that the new statutes and
regulations may have; however Alliance presently is unable to estimate the
costs that reasonably could be expected to be incurred to comply with them.
If Alliance is required to place rigid covers over its waste lagoons, it
may have a material adverse impact on Alliance and its business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
STATEMENTS MADE IN THIS REPORT THAT ARE NOT HISTORICAL IN NATURE, OR THAT
STATE ALLIANCE'S, OR MANAGEMENT'S INTENTIONS, HOPES, BELIEFS, EXPECTATIONS, OR
PREDICTIONS OF THE FUTURE, ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING
OF SECTION 21E OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED, AND
INVOLVE RISKS AND UNCERTAINTIES. IT IS IMPORTANT TO NOTE THAT ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER THE CAPTION *FACTORS
THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS*
IN ALLIANCE'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED AUGUST
31, 1999, AS WELL AS THOSE DISCUSSED ELSEWHERE IN ALLIANCE'S REPORTS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1999, Alliance reported a working capital deficit of
$166,642 and total assets of $31,791,049.
As of November 30, 1999, Alliance has 136 shares of Class A Common Stock
issued and outstanding, 54 shares of Class B Common Stock issued and outstanding
and no issued and outstanding shares of Class C Common Stock. As of November
30, 1999, Alliance had $4,243,450 immediately available under its credit
facility with CoBank, consisting of $864,550 of construction loans and
$3,378,900 of revolving term credit. 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.
As of November 30, 1999, Alliance has borrowed $333,172 from Farmland to
purchase land for future expansion. The loan agreement with Farmland for the
purchase of land is evidenced by a promissory note providing for amortization
over a ten-year period, at a variable rate of interest equal to CoBank's prime
rate (8.5% at November 30, 1999). The payment schedule for this loan requires
the Company to make interest-only payments for the life of the loan, with a
final balloon payment of all principal to be made upon the expiration of the
ten-year term in September 30, 2005.
Major uses of cash during the three months ended November 30, 1999 include
$405,820 for capital expenditures on facilities, $453,000 of principal payments
on long term debt and $200,000 payment of patronage refunds. Major sources of
cash include $128,822 of proceeds from the sale of breeding stock, a $636,100
increase in revolving term credit and $335,988 in cash provided by operating
activities.
THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
Shipments of feeder pigs and weaned pigs were higher for the three months
ended November 30, 1999 than in the prior year. Alliance shipped 83,437 feeder
pigs and 34,382 weaned pigs for the quarter ended November 30, 1999 compared to
71,000 feeder pigs and 19,896 weaned pigs shipped for the quarter ended November
30, 1998 for an increase in feeder pigs shipped of approximately 18% and an
increase in weaned pigs shipped of approximately 73%. Net sales for the quarter
ended November 30, 1999 increased to $4,831,581 from $4,301,907 for the prior
year period. Net sales for the quarter ended November 30, 1999 consisted of
$3,697,132 feeder pig sales and $1,134,449 weaned pig sales. Net sales for the
quarter ended November 30, 1998 consisted of $3,563,402 feeder pig sales and
$738,505 weaned pig sales. Seven 2,450-sow feeder pig units, two 2,450-sow
weaned pig units and one 5,000-sow unit (2,500 feeder and 2,500 weaned pig unit)
were in operation for the quarter ended November 30, 1999. Seven 2,450-sow
feeder pig units were in operation for the quarter ended November 30, 1998. One
2,450-sow weaned pig unit was in operation for three months of the quarter ended
November 30, 1998 and one was in operation for only two months. The sales price
per feeder pig pursuant to Alliance's Pig Purchase Agreements was lower for the
quarter ended November 30, 1999 due to the five month rolling average of
operating costs being less than the five month rolling average of operating
costs for the quarter ended November 30, 1998. Average net sales prices for
feeder and weaned pigs were $44.31 and $33.00 during the quarter ended November
30, 1999 and $50.19 and $37.12 during the quarter ended November 30, 1998,
respectively.
Alliance earned gross margins of $486,824 and $613,093 for the three month
periods ended November 30, 1999 and 1998, respectively. This reduction in gross
margin is primarily due to the nature of the contractual pricing arrangements
applicable to Alliance's sale of feeder and weaned pigs to its members. As
previously described, the selling price for Alliance's feeder and weaned pigs is
based on, among other things, the five-month rolling average of operating costs
per pig for feeder and weaned pigs. For the first quarter of fiscal 2000,
Alliance's average net sales price for feeder and weaned pigs exceeded then
current production costs by $4.13 per pig sold. For the first quarter of fiscal
1999, the net sales price exceeded then current production costs by $6.75 per
pig sold.
Sales to Farmland and Yuma for the three month periods ended November 30,
1999 and 1998 were $1,998,632 and $2,224,164, respectively. The average feeder
pig net sales price per head was $44.31 and $50.19 and the average feeder pig
industry market price per head was $32.82 and $29.75 during the quarters ended
November 30, 1999 and 1998, respectively. The average weaned pig net sales
price per head was $33.00 and $37.12 and the average weaned pig industry market
price per head was $22.80 and $17.01 during the quarters ended November 30, 1999
and 1998, respectively.
No start-up costs were recorded during the three months ended November 30,
1999. Alliance recorded $85,698 of start-up costs relating primarily to the
operation of the 5,000 sow pig production facility under construction in Yuma
County, Colorado during the three months ended November 30, 1998. All costs for
the three month period ended November 30, 1998 were comprised of utilities,
feed, labor and other general expenses prior to the operation of the new pig
production facilities.
Administrative expenses were $266,509 for the three months ended November
30, 1999 compared to $264,957 for the prior year period.
Loss on sale of breeding stock was $125,958 for the three months ended
November 30, 1999 compared to $248,651 for the prior year period. This decrease
is attributable to improved market conditions during the three months ended
November 30, 1999 as compared to the prior year period.
Interest expense of $412,782 for the three months ended November 30, 1999
as compared to $400,241 for the prior year period, was incurred in financing the
development of the ten existing production facilities. As of November 30,
1999, Alliance had borrowed $17,560,350 from CoBank for construction and start
up costs and $333,172 from Farmland for the purchase of land which is intended
to be used for future expansion.
Alliance incurred a net loss of $315,210 for the three months ended
November 30, 1999 compared to a net loss of $376,466 for the prior year period.
The net loss for the first quarter of fiscal 2000 was partially attributable to
$125,958 of losses incurred on the sale of breeding stock due to market
conditions. These losses are somewhat offset by the per pig sales price
exceeding current operating costs, as previously discussed. The net loss for
the first quarter of fiscal 1999 was due to $248,651 of losses incurred on the
sale of breeding stock due to market conditions as well as $85,698 of start-up
costs incurred. These losses are somewhat offset by the per pig sales price
exceeding current operating costs, as previously discussed. 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 the Company's selling price
formula that contains a production margin.
YEAR 2000
Alliance has not experienced any significant problems related to Year 2000
issues. Also, we do not anticipate encountering significant Year 2000 problems
in the future. The cost of replacement software was approximately $20,000.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, as amended, is effective
for all fiscal quarters beginning after June 15, 2000. The company currently
has no derivative instruments subject to SFAS No. 133.
PART II. OTHER INFORMATION
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, 1999.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended November 30,
1999.
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, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the November
30, 1999 form 10Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 27,585
<ALLOWANCES> 0
<INVENTORY> 4,146,890
<CURRENT-ASSETS> 4,230,215
<PP&E> 29,930,507
<DEPRECIATION> 5,094,675
<TOTAL-ASSETS> 31,791,049
<CURRENT-LIABILITIES> 4,396,857
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 11,312,670
<TOTAL-LIABILITY-AND-EQUITY> 31,791,049
<SALES> 4,831,581
<TOTAL-REVENUES> 4,831,581
<CGS> 4,344,757
<TOTAL-COSTS> 4,737,224
<OTHER-EXPENSES> (3,215)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 412,782
<INCOME-PRETAX> (315,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (315,210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (315,210)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
