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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: NOVEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE
SECURITES EXCHANGE ACT OF 1934
Commission file: No. 33-94644
MINN-DAK FARMERS COOPERATIVE
(Exact named of registrant as specified in its charter)
North Dakota 23-7222188
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7525 Red River Road
Wahpeton, North Dakota 58075
(Address of principal (Zip Code)
executive offices)
(701) 642-8411
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES __X__ NO _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock January 8, 1997
$250 Par Value 481
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
Three Months Ended
November 30, 1996
November 30, 1995
------------------
1996 1995
-------- --------
REVENUE:
From sales of sugar, by-products, yeast
and resale commodities, net of discounts $ 48,662 $ 37,361
Other income (283) 18
-------- --------
48,379 37,379
-------- --------
EXPENSES:
Production costs of sugar, by-products,
yeast and resale commodities sold 9,900 9,112
Marketing (includes freight and storage) 5,829 5,802
General and administrative 1,130 942
Interest 1,186 773
(Gain) loss on disposition of property and equipment 97 10
-------- --------
18,142 16,639
-------- --------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 30,237 $ 20,740
======== ========
DISTRIBUTION OF NET PROCEEDS:
Credited to members' investment:
Components of net income:
Income (loss) from non-member business $ (89) $ 139
Patronage income 4,895 70
-------- --------
Net income 4,806 209
Unit retention capital 528 501
-------- --------
Net credit to members' investment 5,334 710
Payments to members for sugarbeets, net of unit
retention capital 24,903 20,030
-------- --------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 30,237 $ 20,740
======== ========
See Notes to Consolidated Financial Statements.
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
<TABLE>
<CAPTION>
November 30, 1996 August 31, 1996
ASSETS (Unaudited) (Audited)
----------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 134 $ 853
--------- ---------
Receivables:
Trade accounts 11,886 10,294
Growers 493 2,840
--------- ---------
12,379 13,134
--------- ---------
Advances to affiliate 881 780
--------- ---------
Inventories:
Refined sugar, pulp and molasses to be sold
on a pooled basis 28,002 7,749
Nonmember refined sugar 138 468
Yeast 113 109
Materials and supplies 4,045 4,027
Beet Inventory 43,996 --
Other 98 98
--------- ---------
76,391 12,450
--------- ---------
Deferred charges 353 1,119
--------- ---------
Prepaid expenses 1,877 1,789
--------- ---------
Property and equipment available for sale 789 789
--------- ---------
Total current assets 92,805 30,916
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 11,956 11,956
Buildings 22,209 22,254
Factory equipment 71,176 72,463
Other equipment 2,183 2,201
Construction in progress 27,723 22,352
--------- ---------
135,248 131,226
Less accumulated depreciation (48,222) (48,551)
--------- ---------
87,026 82,675
--------- ---------
OTHER ASSETS:
Investments restricted for capital lease projects 5,095 7,514
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 12,951 12,663
Deferred income taxes 3,450 3,450
Other 671 1,052
--------- ---------
22,167 24,679
--------- ---------
See Notes to Consolidated Financial Statements $ 201,998 $ 138,270
========= =========
</TABLE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
November 30, 1996 August 31, 1996
(Unaudited) (Audited)
----------------- ---------------
<S> <C> <C>
LIABILITIES AND MEMBERS' INVESTMENT
CURRENT LIABILITIES:
Short-term notes payable $ 32,330 $ 0
-------- --------
Current portion of long-term debt 2,513 2,513
-------- --------
Accounts payable:
Trade 1,884 6,623
Growers 37,965 6,064
-------- --------
39,849 12,686
-------- --------
Advances from affiliate 1,384 1,202
-------- --------
Accrued liabilities 2,348 2,669
-------- --------
Total current liabilities 78,424 19,070
LONG-TERM DEBT, NET OF CURRENT PORTION 47,807 48,810
OBLIGATION UNDER CAPITAL LEASE 12,000 12,000
OTHER 728 728
COMMITTMENTS AND CONTINGENCIES 0 0
-------- --------
Total liabilities 138,959 80,609
-------- --------
MINORITY INTEREST IN EQUITY OF SUBSIDIARY 381 337
-------- --------
MEMBERS' INVESTMENT:
Preferred stock:
Class A - 100,000 shares authorized, $105 par value;
58,525 shares issued and outstanding at August 31, 1996
and 58,525 at November 30, 1996 6,145 6,145
Class B - 100,000 shares authorized, $75 par value;
58,525 shares issued and outstanding at August 31, 1996
and 58,525 at November 30, 1996 4,389 4,389
Class C - 100,000 shares authorized, $76 par value;
58,525 shares issued and outstanding at August 31, 1996
and 58,525 at November 30, 1996 4,448 4,448
-------- --------
14,982 14,982
Common stock, 600 shares authorized on November 30, 1996
and 600 shares authorized on August 31, 1996, $250 par value;
issued and outstanding, 481 shares at November 30, 1996
and 481 shares at August 31, 1996 120 120
Paid in capital in excess of par value 10,296 10,296
Unit retention capital 6,791 6,262
Qualified allocated patronage 3,720 3,720
Nonqualified allocated patronage 26,470 21,575
Retained earnings (deficit) 278 367
-------- --------
62,658 57,324
-------- --------
See Notes to Consolidated Financial Statements $201,998 $138,270
======== ========
</TABLE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30, 1996
November 30, 1995
---------------------------------------
1996 1995
------------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income allocated to members' investment $ 4,806 $ 209
Add (deduct) noncash items:
Depreciation and amortization 977 715
Equipment disposals - loss 97 10
Net loss allocated from unconsolidated marketing subsidiaries (89) 0
Noncash portion of patronage capital credits (1) 0
Retention of nonqualified unit retains 528 501
Changes in operating assets and liabilities:
Accounts receivable and advances 654 2,652
Inventory and prepaid expenses (63,993) (38,818)
Deferred charges 766 587
Other assets 381 0
Accounts payable, advances, and accrued liabilities 29,533 27,411
-------- --------
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (26,342) (6,733)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of property, plant and equipment 0 2
Capital expenditures (2,952) (2,956)
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives (288) (1,723)
Minority interest in equity of subsidiaries 44 33
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (3,196) (4,644)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 32,330 14,793
Payment of long-term debt (1,003) (1,036)
Payment of unit retains and allocated patronage (2,508) (2,493)
Issuance of long-term debt 0 0
Sale and repurchase of common stock, net 0 0
Issuance of stock 1 0
Issuance of long term tax-exempt bonds 0 0
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 28,819 11,264
-------- --------
NET INCREASE (DECREASE) IN CASH (720) (113)
CASH, BEGINNING OF YEAR 853 287
-------- --------
CASH, END OF QUARTER $ 134 $ 174
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 932 $ 689
======== ========
Income taxes, net of refunds $ 245 $ 21
======== ========
See Notes to Consolidated Financial Statements
</TABLE>
MINN-DAK FARMERS COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the three month
periods ended November 30, 1996 and 1995 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim period. The
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto, together
with management's discussion and analysis of financial condition and
results of operations, contained in the Company's Annual Report to
Stockholders previously submitted in the Company's Annual 10-K for the
fiscal year ended August 31, 1996. The results of operations for the three
months ended November 30, 1996, are not necessarily indicative of the
results for the entire fiscal year ending August 31, 1997.
2. In August 1996, the company declared a revolvement of the remaining 1988
crop and 35% of the 1989 crop per unit retains and allocated patronage.
That amount, $2,508,453, was paid to the stockholders on October 18, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
The following discussion and analysis relates to the financial condition and
results of operations of Minn-Dak Farmers Cooperative ("the Company") for the
three months ended November 30, 1996 (the first quarter of the Company's
1996-1997 fiscal year) and 1995 (the first quarter of the Company's 1995-1996
fiscal year). The Company's fiscal year runs from September 1 to August 31.
RESULTS FROM OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
Revenue for the three months ended November 30, 1996 increased $11.3 million
from the 1995 period, an increase of 29.4%. Revenue from sales of finished goods
decreased $3.2 million, while the change in finished goods inventory increased
by $14.5 million. Revenue from sugar sales decreased 11.7%, reflecting a 16.9%
decrease in sales volume, offset by a 6.3% increase in average selling price.
The decreased sales volume is a result of a lack of sufficient product to sell
at the start of the Company's fiscal year due to the low prior year ending sugar
inventories. This lack of sugar inventory was due to overestimating production
of sugar for the year ended August 31, 1996 and from out-of-condition sugar in
public warehouses used by the Company's marketing subsidiary, United Sugars
Corporation, and is not expected to continue each year. While there can be no
assurance that the Company's estimates will be accurate, the increase in average
net selling price for sugar of 6.3% is expected to continue, and the Company is
projecting the average net selling price for sugar to increase approximately 6%
for the fiscal year. The increase is expected to be due mostly to price/customer
mix changes.
Revenue from pulp sales decreased 3.9%, reflecting a decrease of 17.2% in
volume, offset by an increase of 16% in average selling price. The decrease in
volume is attributable to the shipping plan established for fiscal year 1997,
which calls for very few shipments in the first five months of the fiscal year
to one of the Company's major markets. While there can be no assurance that the
Company's estimates will be accurate, the increase in average selling price for
pulp is expected to continue, and the Company is projecting the average net
selling price for pulp to increase approximately 11% for the fiscal year.
Revenue from beet molasses increased 6.8%, reflecting a 3.0% increase in volume
and a 3.6% increase in selling price. While there can be no assurance that the
Company's estimates will be accurate, the Company is projecting the average net
selling price for beet molasses to increase approximately 14% for the fiscal
year.
Revenue from yeast sales increased 3.0%, reflecting an increase of 2.5% in
volume.
The other contributing factor to the change in revenues stems from the increase
or decrease in finished goods inventories. The increase in the value of all
finished goods inventories for the three months ended November 30, 1996 amounted
to $20.3 million, or $14.5 million more than the increase in the value of the
November 30, 1995 inventories. The majority of the $14.5 million increase is in
the area of sugar inventory, and is mainly due to the difference in the amount
of beginning inventory in fiscal year 1996-1997 versus fiscal year 1995-1996.
Fiscal year 1995-1996's beginning inventory was unusually high due to government
imposed marketing allocations, which didn't allow the Company to sell the sugar
production down to normal levels by fiscal year end 1994-1995. With the removal
of the government marketing allocations starting October 1, 1995 the Company
returned to more normal marketing patterns. This, in turn, meant fiscal year
1996-1997 beginning inventories were at more traditional levels.
Depreciation and Interest expenses for fiscal year 1996-1997 are expected to be
higher than fiscal year 1995-1996 due to more fixed asset purchases and more
long term debt, both associated with the Company's plant expansion plan
activities (see the Liquidity and Capital Resources section). Depreciation
expense is expected to increase approximately $1.0 million to $1.5 million,
while Interest expense is expected to increase approximately $1.5 million to
$2.0 million.
In the section Distribution of Net Proceeds, payments to members for sugarbeets,
net of unit retention capital and unprocessed sugarbeet inventory, for the
period ended November 30, 1996 increased $4.9 million from the 1995 period. For
fiscal year 1996-1997 the Company is projecting a payment to growers for
sugarbeets of $69.5 million, or $15.1 million more than the prior fiscal year.
The payment is based upon (i) an average delivered sugar content of 18.61%, (ii)
a total sugarbeet crop of 1,506,646 tons and (iii) the Company's projected
selling price for its sugar. The projected increase is the result of higher
selling prices for all products, and greater production of products as a result
of increased tons of beets harvested and increased quality of the beets
delivered (higher sugar content).
LIQUIDITY AND CAPITAL RESOURCES
Because the Company operates as a cooperative, payments for member-delivered
sugar beets, the principal raw material used in producing the sugar and
agri-products it sells, are subordinated to all member business expenses. In
addition, actual cash payments to members are spread over a period of
approximately one year following delivery of sugar beet crops to the Company and
are net of unit retains and patronage allocated to them, all three of which
remain available to meet the Company's capital requirements. This member
financing arrangement may result in an additional source of liquidity and
reduced outside financing requirements in comparison to a similar business
operated on a non-cooperative basis. However, because sugar is sold throughout
the year (while sugar beets are processed primarily between September and April)
and because substantial amounts of equipment are required for its operations,
the Company has utilized substantial outside financing on both a seasonal and
long-term basis to fund such operations. The majority of such financing has been
provided by the St. Paul Bank for Cooperatives (the "Bank"). The Company has a
short-term line of credit with the Bank in 1996 of $35.0 million and anticipates
a short-term line of credit with the Bank in 1997 of $50.0 million.
The various loan agreements between the Bank and the Company obligate the
Company to maintain or achieve certain amounts of working capital and certain
financial ratios, as well as imposing other restrictions. As of November 30,
1996 the Company was in compliance with its loan agreements with the bank.
Working capital as of November 30, 1996 totals $14.4 million, an increase of
$2.6 million for the three months ended 11-30-96. Increased working capital is a
result of normal financing, operational and capital expenditure activities of
the Company. The targeted working capital for 8-31-97 is approximately $7.0
million dollars and, in the Company's opinion, is the most accurate expectation.
The primary factor for the changes in the Company's financial condition for the
three months ended November 30, 1996 was due to the commencement of the
1996/1997 sugarbeet processing season. The cash used to provide for operations
of $26.3 million and from investing activities of $3.2 million was funded
through cash flow financing activities and a reduction in cash. The net cash
provided through financing activities was primarily provided through proceeds
from the issuance of short term debt of $32.3 million, less repayment of long
term debt of $1.0 million and payment of remaining 1988 crop and 35% of 1989
crop unit retains and allocated patronage of $2.5 million.
Capital expenditures for the three months ended November 30, 1996 totaled $3.0
million. Capital expenditures for fiscal year 1997 are currently estimated at
$35.9 million, $33.9 million resulting from the Company's decision to expand
capacity and improving operating efficiencies.
These capital expenditures are a continuation of the strategy to improve
operating efficiencies and the Company's announced plan to expand the capacity
of its manufacturing and agricultural receiving facilities. The funds necessary
to finance the Company's expansion plan, environmental and general capital
expenditures for the prior, current and next fiscal year, which is estimated to
total $86.2 million, will be derived from the sale of its common and preferred
stock (net of stock offering costs of $0.1 million) totaling $37.3 million and
the balance, or $50.0 million, from long-term debt secured from the St. Paul
Bank for Cooperatives and/or through the use of a lease (through Richland
County, North Dakota) financed by the issuance of solid waste disposal revenue
and industrial development revenue bonds. As of the date of this filing, the
expansion plan was on schedule and projected to be within budget.
The company anticipates that the funds necessary for compliance with the Bank's
working capital requirements and future capital expenditures will be derived
from the net proceeds of a stock offering that was completed in 1996, Company
depreciation, unit retains, non-patronage income, and long-term borrowing. Those
costs not covered through the stock offering will be funded through a long term
debt agreement, with the Bank who is the principal lender. The long term debt
created by this expansion will be repaid with funds generated through
depreciation, income tax savings, and reduced costs per cwt of production.
(Depreciation expense is a non-cash expense that under the Company's accounting
procedures reduces the amounts available for payments to the Company's members.
The resources represented by such non-cash expenses are available as a source of
working capital for the Company, which may be used for payment of long term
debt.) In fiscal 1996, the company was able to secure a lease from Richland
County, North Dakota funded by low interest, fifteen year tax exempt solid waste
disposal bonds in the amount of $12.0 million with zero principle amortization
for the first three years, and $1.0 million per year of principle amortization
for the next 12 years. These bonds were required to be secured by a Letter of
Credit from a non-government agency bank (Norwest Bank North Dakota) who in turn
was secured by a Letter of Credit from the St. Paul Bank for Cooperatives, the
Company's primary lender. Solid waste disposal bonds are available under certain
conditions where a by-product of manufacturing must be further manufactured or
refined to produce a salable product.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedule
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MINN-DAK FARMERS COOPERATIVE
(Registrant)
Date: January 10, 1997 /s/ LARRY D. STEWARD
-------------------- -----------------------------------
Larry D. Steward
President and Chief Executive Officer
Date: January 10, 1997 /s/ STEVEN M. CASPERS
-------------------- -----------------------------------
Steven M. Caspers
Executive Vice President, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000948218
<NAME> MINN DAK FARMER'S COOP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 134
<SECURITIES> 0
<RECEIVABLES> 12,379
<ALLOWANCES> 0
<INVENTORY> 76,391
<CURRENT-ASSETS> 92,805
<PP&E> 135,248
<DEPRECIATION> (48,222)
<TOTAL-ASSETS> 201,998
<CURRENT-LIABILITIES> 78,424
<BONDS> 12,000
0
14,982
<COMMON> 120
<OTHER-SE> 47,556
<TOTAL-LIABILITY-AND-EQUITY> 201,998
<SALES> 48,662
<TOTAL-REVENUES> 48,379
<CGS> 15,729
<TOTAL-COSTS> 15,729
<OTHER-EXPENSES> 1,227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,186
<INCOME-PRETAX> 5,334
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,334
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
