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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(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MAY 31, 1997
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 July 10, 1997
--------------------- --------------
$250 Par Value 482
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MAY 31, 1997 MAY 31, 1997
MAY 31, 1996 MAY 31, 1996
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE:
From sales of sugar, by-products, yeast
and resale commodities, net of discounts $ 32,076 $ 21,603 $ 133,631 $ 110,082
Other income (145) 470 (638) 438
--------- --------- --------- ---------
31,931 22,073 132,993 110,520
--------- --------- --------- ---------
EXPENSES:
Production costs of sugar, by-products,
yeast and resale commodities sold 8,260 6,916 28,272 26,200
Marketing (includes freight and storage) 5,198 5,225 16,092 15,920
General and administrative 1,117 1,137 3,369 3,267
Interest 1,339 826 3,953 2,640
(Gain) loss on disposition of property and equipment 38 -- 138 10
--------- --------- --------- ---------
15,952 14,104 51,825 48,037
--------- --------- --------- ---------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 15,979 $ 7,969 $ 81,168 $ 62,483
========= ========= ========= =========
DISTRIBUTION OF NET PROCEEDS:
Credited to members' investment:
Components of net income:
Income (loss) from non-member business $ (365) $ 385 $ (942) $ 764
Patronage income 1,212 (2,423) 12,683 8,103
--------- --------- --------- ---------
Net income 847 (2,038) 11,741 8,867
Unit retention capital -- -- 753 729
--------- --------- --------- ---------
Net credit to members' investment 847 (2,038) 12,494 9,596
Payments to members for sugarbeets, net of unit
retention capital 15,132 10,007 68,674 52,887
--------- --------- --------- ---------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 15,979 $ 7,969 $ 81,168 $ 62,483
========= ========= ========= =========
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
MAY 31, 1997 AUGUST 31, 1996
ASSETS (UNAUDITED) (AUDITED)
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 277 $ 853
--------- ---------
Receivables:
Trade accounts 11,228 10,294
Growers 2,914 2,840
--------- ---------
14,142 13,134
--------- ---------
Advances to affiliate 1,893 780
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Inventories:
Refined sugar, pulp and molasses to be sold
on a pooled basis 49,705 7,749
Nonmember refined sugar 64 468
Yeast 116 109
Materials and supplies 3,467 4,027
Beet Inventory 0 --
Other 1,144 98
--------- ---------
54,497 12,450
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Deferred charges 848 1,119
--------- ---------
Prepaid expenses 1,513 1,789
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Property and equipment available for sale 768 789
--------- ---------
Total current assets 73,937 30,916
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 15,780 11,956
Buildings 28,342 22,254
Factory equipment 79,294 72,463
Other equipment 2,787 2,201
Construction in progress 19,399 22,352
--------- ---------
145,602 131,226
Less accumulated depreciation (50,391) (48,551)
--------- ---------
95,211 82,675
--------- ---------
OTHER ASSETS:
Investments restricted for capital lease projects 4,566 7,514
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 12,612 12,663
Deferred income taxes 3,450 3,450
Other 682 1,052
--------- ---------
21,310 24,679
--------- ---------
See Notes to Consolidated Financial Statements $ 190,458 $ 138,270
========= =========
</TABLE>
<TABLE>
<CAPTION>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
MAY 31, 1997 AUGUST 31, 1996
(UNAUDITED) (AUDITED)
--------- ---------
<S> <C> <C>
LIABILITIES AND MEMBERS' INVESTMENT
CURRENT LIABILITIES:
Short-term notes payable $ 39,505 $ 0
--------- ---------
Current portion of long-term debt 2,513 2,513
--------- ---------
Accounts payable:
Trade 2,567 6,623
Growers 13,858 6,064
--------- ---------
16,425 12,686
--------- ---------
Advances from affiliate (462) 1,202
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Accrued liabilities 2,235 2,669
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Total current liabilities 60,216 19,070
LONG-TERM DEBT, NET OF CURRENT PORTION 31,801 48,810
OBLIGATION UNDER CAPITAL LEASE 12,000 12,000
OTHER 728 728
COMMITTMENTS AND CONTINGENCIES 0 0
--------- ---------
Total liabilities 104,745 80,609
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MINORITY INTEREST IN EQUITY OF SUBSIDIARY 442 337
--------- ---------
MEMBERS' INVESTMENT:
Preferred stock:
Class A - 100,000 shares authorized, $105 par value;
58,525 shares issued and outstanding at August 31, 1996
and 66,967 at May 31, 1997 7,032 6,145
Class B - 100,000 shares authorized, $75 par value;
58,525 shares issued and outstanding at August 31, 1996
and 66,967 at May 31, 1997 5,023 4,389
Class C - 100,000 shares authorized, $76 par value;
58,525 shares issued and outstanding at August 31, 1996
and 66,967 at May 31, 1997 5,089 4,448
--------- ---------
17,144 14,982
Common stock, 600 shares authorized on May 31, 1997
and 600 shares authorized on August 31, 1996, $250 par value;
issued and outstanding, 482 shares at May 31, 1997
and 481 shares at August 31, 1996 121 120
Paid in capital in excess of par value 23,753 10,296
Unit retention capital 6,982 6,262
Qualified allocated patronage 3,702 3,720
Nonqualified allocated patronage 34,146 21,575
Retained earnings (deficit) (575) 367
--------- ---------
85,271 57,324
--------- ---------
See Notes to Consolidated Financial Statements $ 190,458 $ 138,270
========= =========
</TABLE>
<TABLE>
<CAPTION>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
MAY 31, 1997
MAY 31, 1996
---------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income allocated to members' investment $ 11,741 $ 8,867
Add (deduct) noncash items:
Depreciation and amortization 3,367 2,194
Equipment disposals - loss 138 10
Net loss allocated from unconsolidated marketing subsidiaries
Noncash portion of patronage capital credits (593)
Retention of nonqualified unit retains 753 730
Changes in operating assets and liabilities:
Accounts receivable and advances (2,120) (2,097)
Inventory and prepaid expenses (41,771) (18,399)
Deferred charges 271 137
Other assets 370 (341)
Accounts payable, advances, and accrued liabilities 4,676 8,961
-------- --------
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (23,168) 62
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of property, plant and equipment 5 3
Capital expenditures (12,814) (15,666)
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 51 (4,999)
Minority interest in equity of subsidiaries 105 191
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (12,653) (20,472)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 39,505 13,112
Payment of long-term debt (21,509) (5,543)
Payment of unit retains and allocated patronage (2,870) (2,493)
Issuance of long-term debt 4,500 2,000
Sale and repurchase of common stock, net 0
Issuance of stock 15,619 12,105
Issuance of long term tax-exempt bonds 0 12,150
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 35,245 31,331
-------- --------
NET INCREASE (DECREASE) IN CASH (576) 10,922
CASH, BEGINNING OF YEAR 853 287
-------- --------
CASH, END OF QUARTER $ 277 $ 11,209
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 2,646 $ 2,646
======== ========
Income taxes, net of refunds $ 33 $ 33
======== ========
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 nine month periods
ended May 31, 1997 and May 31, 1996 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 nine months ended May
31, 1997, 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.
In August, 1996 the company declared a revolvement of 35% of the 1995 crop
allocated patronage. On January 2, 1997, that payment was made to the
stockholders in the amount of $196,700.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED MAY 31, 1997 AND 1996
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 and nine months ended May 31, 1997 (the third quarter of the
Company's 1996-1997 fiscal year) and 1996 (the third 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 MAY 31, 1997 AND 1996
Revenue for the three months ended May 31, 1997 increased $10.5 million from
the1996 period, an increase of 48.5%. Revenue from sales of finished goods
increased $2.6 million, while the change in the value of finished goods
inventory decreased $7.9 million less than in the prior period. Revenue from
sugar sales increased $1.7 million, or 6.3%, reflecting a 0.2% decrease in sales
volume, offset by a 6.5% increase in average gross selling price. The Company is
projecting the average net selling price for sugar to increase approximately 6%
for the fiscal year due mostly to price/customer mix changes and favorable
market conditions.
Revenue from pulp (wet and dry pelleted) sales increased $1.1 million or 63.5%,
reflecting a 104.1% increase in sales volume, offset by a 19.9% decrease in
average gross selling price. The increase in volume is attributable to
additional volume of dry pelleted pulp produced for sale and sold this period
versus last, and from the additional sales of wet pulp. The Company experienced
throughput problems with the beet pulp dryer for a period of time during the
1997 operating season. This resulted in the inability to dry all of the wet pulp
produced from the factory operations. The wet pulp was sold immediately in order
to prevent spoilage, which was done by selling to local cattle feeders. The wet
pulp sells for less money than dry pelleted pulp because of lower production
costs and market conditions. 6,262 tons of wet pulp was sold during this period,
compared to zero tons for the 1996 period. The Company is projecting the average
net selling price for pulp to increase 11% for the fiscal year as a result of a
stronger domestic market (feed prices are up), coupled with more domestic sales
volume and value added sales.
Revenue from molasses was approximately the same for both periods with both
volume and gross selling price being about the same for each period. While gross
selling prices are approximately the same for both reporting periods (a function
of the mix of FOB versus delivered sales for each period), the Company is
currently projecting an increase in average net selling price for molasses of
approximately 8% for the fiscal year as a result of tighter molasses supplies
nationally.
Revenues from yeast sales decreased $0.2 million or 10.4%, reflecting a 12.6%
decrease in sales volume, offset by a 2.6% increase in average selling price.
The reduction in sales volume is mostly attributable to a particularly strong
May 1996 sales month and a temporary lack of sales volume for the 1997 period,
particularly in April 1997.
Another factor contributing to the change in revenues results from the increase
or decrease in finished goods inventories. The decrease in the value of all
finished goods inventories for the three months ended May 31, 1997 was $2.5
million, or 76% less than the decrease in the value of the finished goods
inventories for the prior year. The decrease in the value of the finished goods
inventories was mostly a result of the amount of sugar available during that
period. Production of sugar was 274,000 cwt. more for the period, while the
sugar sales volume change was 1,200 cwt. less, thus resulting in a lesser
decrease in the value of sugar inventory for the three months ended.
Finally, Other Income, which is made up of mostly non-member business totaled
$(0.1) million for the period, or $0.6 million less than the prior period. The
majority of the loss related to the Company's investment in ProGold, LLC. The
Company has invested $5.2 million as a 5% partner in ProGold, LLC. ProGold is
operating a corn wet milling plant, which produces high-fructose corn syrup
(HFCS) sweetener. Initial operation of the plant started October 25, 1996. The
Company originally anticipated that ProGold would incur a $28 million loss
during its initial year of operation. The Company's share of that loss was
expected to be approximately $1.4 million. The current projected loss is in the
range of $28 million to $32 million. The Company's share of that loss would be
in the range of $1.4 million to $1.6 million. The additional loss for ProGold is
attributable to significantly lower market prices for HFCS, which is partially
offset by lower than expected operating expenses. Future changes in the market
price of HFCS will significantly affect the future earnings of ProGold. Due to
the unpredictable nature of the HFCS market, the future impact of the investment
in ProGold on the Company's financial condition and results of operations is
uncertain.
Production costs of sugar, by-products, yeast and resale commodities sold
increased $1.3 million for the period. Costs were higher due to the longer
processing season experienced by the Company. The Company operated the factory
for 16 days longer (+7.8%) in the current processing season than in the prior
one. This resulted in 14 more days of operating expenditures in the month of
April than in the prior period. Maintenance costs for agricultural and factory
operations were higher in this period than that of the same period of the prior
year. Depreciation expense increased $0.32 million for the period, or 56% higher
than for the prior period. Depreciation expense for fiscal year 1996-1997 is
expected to be higher than fiscal year 1995-1996 due to more fixed asset
purchases associated with the Company's plant expansion activities, and is
estimated to increase approximately $1.0 million to $1.5 million for the entire
year (see the Liquidity and Capital Resources section).
Interest expense increased $0.51 million for the current period, or 62% higher
than for the prior period. Interest expense for fiscal year 1996-1997 is
expected to be higher than for fiscal year 1995-1996 due to more long term debt
associated with the Company's plant expansion plan activities, and is estimated
to increase approximately $1.5 million to $2.0 million for the entire year (see
the Liquidity and Capital Resources section).
In the section Distribution of Net Proceeds, payments to members for sugarbeets,
net of unit retention capital, for the three months ended May 31, 1997 increased
$5.1 million, or 51% from the 1996 period. For fiscal year 1996-1997 the Company
is projecting a payment to growers for sugarbeets totaling $69.4 million, which
is $15.1 million, or 28% 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).
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 1997 AND 1996
Revenue for the nine months ended May 31, 1997 increased $23.5 million from the
1996 period, an increase of 21.4%. Revenue from sales of finished goods
decreased $.08 million, while the change in the value of finished goods
inventory increased $24.3 million more than in the prior period. Revenue from
sugar sales decreased $1.1 million, or 1.3%, reflecting a 7% decrease in sales
volume, offset by a 6% increase in average gross selling price. The Company is
projecting the average net selling price for sugar to increase approximately 6%
for the fiscal year due mostly to price/customer mix changes and favorable
market conditions.
Revenue from pulp (wet and dry pelleted) sales increased $0.9 million or 17.1%,
reflecting a 24.1% increase in sales volume, offset by a 5.7% decrease in
average gross selling price. The increase in volume is attributable to
additional volume of dry pelleted pulp produced for sale and sold this period
versus last, and from the additional sales of wet pulp. The Company experienced
throughput problems with the beet pulp dryer for a period of time during the
1997 period. This resulted in the inability to dry all of the wet pulp produced
from the factory operations. The wet pulp was sold immediately in order to
prevent spoilage, which was done by selling to local cattle feeders. The wet
pulp sells for less money than dry pelleted pulp because of lower production
costs and market conditions. 6,262 tons of wet pulp was sold during this period,
compared to zero tons for the 1996 period. The Company is projecting the average
net selling price for pulp to increase 11% for the fiscal year as a result of a
stronger domestic market (feed prices are up), coupled with more domestic sales
volume and value added sales.
Revenue from molasses was approximately the same for both periods with both
volume and gross selling price being about the same for each period. While gross
selling prices are approximately the same for both reporting periods (a function
of the mix of FOB versus delivered sales for each period), the Company is
currently projecting an increase in average net selling price for molasses to
increase approximately 8% for the fiscal year.
Revenues from yeast sales decreased $0.56 million or 11.6%, reflecting a 15.2%
decrease in sales volume, offset by a 4.1% increase in average selling price.
The reduction in sales volume is attributable to reduced production of yeast,
which was due to the inability of the plant to produce quality fresh yeast. The
yeast quality problem was due to the poor quality of the growth medium for the
yeast - beet molasses. The problem was resolved by the end of January but actual
sales were limited in January and February to approximately 50% of budget. Steps
have been taken to insure this type of problem is minimized or eliminated in the
future. The reduction in sales volume is also attributable to a particularly
strong May 1996 sales month compared to that of the current period.
Another factor contributing to the change in revenues results from the increase
or decrease in finished goods inventories. The increase in the value of all
finished goods inventories for the nine months ended May 31, 1997 was $42.0
million, or 237% more than the increase in the value of the finished goods
inventories for the prior year. The increase in the value of the finished goods
inventories was mostly a result of the amount of sugar available during that
period. Production of sugar was 791,100 cwt. more for the period, while the
sugar sales volume change was 271,600 cwt. less, thus resulting in a greater
increase in the value of sugar inventory for the nine months ended.
Finally, Other Income, which is made up of mostly non-member business totaled
$(0.6) million for the period, or $1.1 million less than the prior period. The
majority of the loss related to the Company's investment in ProGold, LLC. The
Company has invested $5.2 million as a 5% partner in ProGold, LLC. ProGold is
operating a corn wet milling plant, which produces high-fructose corn syrup
(HFCS) sweetener. Initial operation of the plant started October 25, 1996. The
Company originally anticipated that ProGold would incur a $28 million loss
during its initial year of operation. The Company's share of that loss was
expected to be approximately $1.4 million. The current projected loss is in the
range of $28 million to $32 million. The Company's share of that loss would be
in the range of $1.4 million to $1.6 million. The additional loss for ProGold is
attributable to significantly lower market prices for HFCS, which is partially
offset by lower than expected operating expenses. Future changes in the market
price of HFCS will significantly affect the future earnings of ProGold. Due to
the unpredictable nature of the HFCS market, the future impact of the investment
in ProGold on the Company's financial condition and results of operations is
uncertain.
Production costs of sugar, by-products, yeast and resale commodities sold
increased $2.1 million for the period. Costs were higher due to the longer
processing season experienced by the Company. The Company operated the factory
for 16 days longer (+7.8%) in the current processing season than in the prior
one. This resulted in 14 more days of operating expenditures in the month of
April than in the prior period. Maintenance costs for agricultural and factory
operations were higher in this period than that of the same period of the prior
year. Depreciation expense increased $0.8 million for the period, or 49.6%
higher than for the prior period. Depreciation expense for fiscal year 1996-1997
is expected to be higher than fiscal year 1995-1996 due to more fixed asset
purchases associated with the Company's plant expansion activities, and is
estimated to increase approximately $1.0 million to $1.5 million for the entire
year (see the Liquidity and Capital Resources section).
Interest expense increased $1.3 million for the current period, or 49.7% higher
than for the prior period. Interest expense for fiscal year 1996-1997 is
expected to be higher than for fiscal year 1995-1996 due to more long term debt
associated with the Company's plant expansion plan activities, and is estimated
to increase approximately $1.5 million to $2.0 million for the entire year (see
the Liquidity and Capital Resources section).
In the section Distribution of Net Proceeds, payments to members for sugarbeets,
net of unit retention capital, for the nine months ended May 31, 1997 increased
$15.8 million, or 29.9% from the 1996 period. For fiscal year 1996-1997 the
Company is projecting a payment to growers for sugarbeets totaling $69.4
million, which is $15.1 million, or 28% 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 financing has been provided by the
St. Paul Bank for Cooperatives (the "Bank"). The Company has a short-term line
of credit with the St. Paul Bank for Cooperatives for calendar 1997 of $50.0
million.
The loan agreements between the Bank and the Company obligate the company to
maintain the following financial covenants in accordance with GAAP:
1. Maintain working capital of not less than $6.8 million. Working
capital may be adjusted to include unadvanced solid waste disposal
bond funds and current stock subscriptions receivable.
2. Maintain a long-term debt and capitalized leases to equity ratio
of not greater than 1:1. Equity includes subscribed stock;
long-term debt is adjusted for the unadvanced solid waste disposal
bond funds.
3. Maintain a current ratio of not less than 1.0:1.0 based on monthly
financial statements and attain a current ratio of not less than
1.2:1.0 based on fiscal year end audits.
As of May 31, 1997 the Company was in compliance with its loan agreements with
the bank.
Working capital increased $1.9 million for the nine months ended May 31, 1997.
Increased working capital is a result of normal financing, operational and
capital expenditure activities of the Company. The targeted working capital for
August 31, 1997 is approximately $7.0 million dollars and, in the Company's
opinion, will be attained.
The primary factor for the changes in the Company's financial condition for the
nine months ended May 31, 1997 was due to the seasonal needs of the 1996/1997
sugarbeet-processing season. The cash used to provide for operations of $23.2
million and for investing activities of $12.7 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 $39.5 million, net of repayment of long term debt of $17.0
million; payment of the remaining 1988 crop and 35% of the 1989 crop unit
retains and allocated patronage of $2.5 million; payment of 1995 crop qualified
allocated patronage of $.3 million and issuance of stock of $15.6 million.
Working capital as of May 31, 1997 totals $13.7 million compared to $11.8
million at August 31, 1996.
Capital expenditures for the nine months ended May 31, 1997 totaled $12.8
million. Capital expenditures for fiscal year 1997 are currently estimated at
$35.9 million, $33.9 million resulting from the Company's strategy of expanding
capacity and improving operating efficiencies.
The $33.9 million capital expenditure is 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 two years, current year and next fiscal year,
which is estimated to total $86.2 million, are expected to 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 (the Bank) 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 May 31, 1997, 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.)
The strategic plan of the Company calls for the economics of scale generated by
the expansion project to first be applied to the long-term debt associated with
the project. The initial operational savings and working capital considerations
will be used to pay off the incremental debt for the project. After the
incremental long term debt has been satisfied, the Company believes that the
shareholders will see the savings through operations and other working capital
considerations being reflected in higher per ton beet payments, all other
factors affecting the per ton payments being equal.
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
None
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: July 11, 1997 /s/ LARRY D. STEWARD
----------------- -------------------------------------
Larry D. Steward
President and Chief Executive Officer
Date: July 11, 1997 /s/ STEVEN M. CASPERS
----------------- -------------------------------------
Steven M. Caspers
Executive Vice President, and
Chief Financial Officer
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