================================================================================
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: NOVEMBER 30, 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 January 12, 1998
--------------------- ----------------
$250 Par Value 479
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
REVENUE:
From sales of sugar, by-products, yeast
and resale commodities, net of discounts $ 46,078 $ 48,662
Other income (787) (283)
-------- --------
45,291 48,379
-------- --------
EXPENSES:
Production costs of sugar, by-products,
yeast and resale commodities sold 10,597 9,900
Marketing (includes freight and storage) 5,724 5,829
General and administrative 951 1,130
Interest 1,060 1,186
(Gain) loss on disposition of property and equipment 2 97
-------- --------
18,334 18,142
-------- --------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 26,957 $ 30,237
======== ========
DISTRIBUTION OF NET PROCEEDS:
Credited to members' investment:
Components of net income:
Income (loss) from non-member business $ (480) $ (89)
Patronage income 4,725 4,895
-------- --------
Net income 4,244 4,806
Unit retention capital 621 528
-------- --------
Net credit to members' investment 4,865 5,334
Payments to members for sugarbeets, net of unit
retention capital 22,093 24,903
-------- --------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 26,958 $ 30,237
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, 1997 AUGUST 31, 1997
ASSETS (UNAUDITED) (AUDITED)
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 653 $ 1,235
--------- ---------
Current portion of long-term note receivable 216 216
--------- ---------
Receivables:
Trade accounts 14,540 12,649
Growers 418 2,819
--------- ---------
14,958 15,468
--------- ---------
Advances to affiliate 1,280 1,910
--------- ---------
Inventories:
Refined sugar, pulp and molasses to be sold
on a pooled basis 32,735 21,576
Nonmember refined sugar 634 112
Yeast 80 89
Materials and supplies 4,315 4,699
Beet Inventory 49,034 --
Other 78 82
--------- ---------
86,877 26,558
--------- ---------
Deferred charges 366 1,249
--------- ---------
Prepaid expenses 2,587 2,402
--------- ---------
Property and equipment available for sale 616 616
--------- ---------
Total current assets 107,553 49,653
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 20,077 16,546
Buildings 33,352 30,259
Factory equipment 99,416 82,002
Other equipment 2,824 2,810
Construction in progress 6,227 24,157
--------- ---------
161,896 155,773
Less accumulated depreciation (52,690) (51,524)
--------- ---------
109,206 104,249
--------- ---------
LONG-TERM NOTES RECEIVABLE, NET OF
CURRENT PORTION 2,381 2,381
--------- ---------
OTHER ASSETS:
Investments restricted for capital lease projects 2,580 4,058
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 8,823 9,425
Deferred income taxes 3,450 3,450
Other 871 923
--------- ---------
15,724 17,856
--------- ---------
See Notes to Consolidated Financial Statements. $ 234,864 $ 174,141
========= =========
</TABLE>
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, 1997 AUGUST 31, 1997
(UNAUDITED) (AUDITED)
--------- ---------
<S> <C> <C>
LIABILITIES AND MEMBERS' INVESTMENT
CURRENT LIABILITIES:
Short-term notes payable $ 47,320 $ 19,890
--------- ---------
Current portion of long-term debt 2,513 2,513
--------- ---------
Accounts payable:
Trade 2,586 4,229
Growers 38,827 8,335
--------- ---------
41,413 12,564
--------- ---------
Advances from affiliate 2,630 1,793
--------- ---------
Accrued liabilities 2,400 2,731
--------- ---------
Total current liabilities 96,276 39,490
LONG-TERM DEBT, NET OF CURRENT PORTION 46,795 47,798
OBLIGATION UNDER CAPITAL LEASE 12,000 12,000
OTHER 689 689
COMMITTMENTS AND CONTINGENCIES 0 0
--------- ---------
Total liabilities 155,759 99,977
--------- ---------
MINORITY INTEREST IN EQUITY OF SUBSIDIARY 593 518
--------- ---------
MEMBERS' INVESTMENT:
Preferred stock:
Class A - 100,000 shares authorized, $105 par value;
66,967 shares issued and outstanding at November 30, 1997
and 66,967 at August 31, 1997 7,032 7,032
Class B - 100,000 shares authorized, $75 par value;
66,967 shares issued and outstanding at November 30, 1997
and 66,967 at August 31, 1997 5,023 5,023
Class C - 100,000 shares authorized, $76 par value;
66,967 shares issued and outstanding at November 30, 1997
and 66,967 at August 31, 1997 5,089 5,089
--------- ---------
17,144 17,144
Common stock, 600 shares authorized, $250 par value;
issued and outstanding, 479 shares at November 30, 1997
and 481 shares at August 31, 1997 120 120
Paid in capital in excess of par value 23,753 23,753
Unit retention capital 7,360 6,740
Qualified allocated patronage 4,081 4,081
Nonqualified allocated patronage 27,222 22,497
Retained earnings (deficit) (1,169) (689)
--------- ---------
78,511 73,646
--------- ---------
See Notes to Consolidated Financial Statements $ 234,864 $ 174,141
========= =========
</TABLE>
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income allocated to members' investment $ 5,027 $ 4,806
Add (deduct) noncash items:
Depreciation and amortization 1,212 977
Equipment disposals - loss 2 97
Net loss allocated from unconsolidated marketing subsidiaries (782) (89)
Noncash portion of patronage capital credits 0 (1)
Retention of nonqualified unit retains 621 528
Changes in operating assets and liabilities:
Accounts receivable and advances 1,141 654
Inventory and prepaid expenses (60,504) (63,993)
Deferred charges 883 766
Other assets 52 381
Accounts payable, advances, and accrued liabilities 32,013 29,533
-------- --------
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (20,337) (26,342)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of property, plant and equipment 1 0
Capital expenditures (4,690) (2,952)
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 602 (288)
Minority interest in equity of subsidiaries 75 44
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (4,012) (3,196)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 27,430 32,330
Payment of long-term debt (1,003) (1,003)
Payment of unit retains and allocated patronage (2,659) (2,508)
Issuance of long-term debt (1) 0
Sale and repurchase of common stock, net 0 0
Issuance of stock 0 1
Issuance of long term tax-exempt bonds 0 0
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 23,767 28,819
-------- --------
NET INCREASE (DECREASE) IN CASH (581) (720)
CASH, BEGINNING OF YEAR 1,235 853
-------- --------
CASH, END OF QUARTER $ 653 $ 134
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 1,399 $ 932
======== ========
Income taxes, net of refunds $ 6 $ 245
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
================================================================================
MINN-DAK FARMERS COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the three month periods
ended November 30, 1997 and November 30, 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, 1997. The results of operations for the three months ended
November 30, 1997, are not necessarily indicative of the results for the
entire fiscal year ending August 31, 1998.
2. In August 1997, the company declared a revolvement of the remaining 1989
crop per unit retains and allocated patronage. That amount, $2.7 million,
was paid to the stockholders on October 17, 1997. In August 1997 the
company declared a revolvement of 35% of the 1996 crop allocated patronage.
On January 2, 1998, that payment was made to the stockholders in the amount
of $.7 million.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED NOVEMBER 30, 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 November 30, 1997 (the first quarter of the Company's
1997-1998 fiscal year) and 1996 (the first quarter of the Company's 1996-1997
fiscal year). The Company's fiscal year runs from September 1 to August 31.
This discussion contains the Company's current estimates of the financial
results to be obtained from the Company's processing of the 1997 sugar beet
crop. Given the nature of the estimates required in connection with the payments
to members for their sugar beets, this discussion includes forward-looking
statements regarding the quantity of sugar to be produced from the 1997 sugar
beet crop, the net selling price for the sugar and by-products produced by the
Company and the Company's operating costs. These forward-looking statements are
based largely upon the Company's expectations and estimates of future events; as
a result, they are subject to a variety of risks and uncertainties. Some of
those estimates, such as the selling price for the Company's products and the
quantity of sugar produced from the sugar beet crop are beyond the Company's
control. The actual results experienced by the Company could differ materially
from the forward-looking statements contained herein.
RESULTS FROM OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
Revenue for the three months ended November 30, 1997 decreased $3.1 million from
the 1996 period, a decrease of 6%. Revenue from the sale of finished goods
increased $6.5 million, while the change in the value of finished goods
inventory decreased $9.1 million. Other income decreased $0.5 million.
Revenue from the sales of sugar increased $5.2 million, or 21%, reflecting a 22%
increase in volume, and offset by a 1% decrease in the price for sugar. The
increase in volume is the result of a lack of sugar available to ship during the
fiscal year 1996-1997 period due to low beginning inventories. For the fiscal
year 1997-1998 period inventories were restored to more normal levels. Based on
marketing information developed by United Sugars Corporation, the Company's
marketing agent, the Company's current estimate is that the average net selling
price of the Company's sugar will be approximately $23.68 per hundredweight
(CWT.), a decrease of 4% from the prior year.
Revenue from pulp (wet and dry pelleted) sales increased $1.0 million or 88%,
reflecting a 218% increase in sales volume, offset by a 13% decrease in the
average gross selling price. The increase in sales volume is attributable to
both wet and pelleted pulp shipments, with wet pulp shipments accounting for 57%
of the 218% increase, and pelleted pulp shipments the balance. Wet pulp
shipments are a relatively new market that was developed, to some extent,
starting with the 2nd quarter of fiscal year 1996-1997. There was no wet pulp
sales made during the first quarter of fiscal year 1996-1997. The increase in
pelleted pulp sales volume is due to an estimated 23% more production of wet and
pelleted pulp for fiscal year 1997-1998 versus the previous year. The larger
volume of wet and pelleted pulp is the result of the larger volume 1997 beet
crop delivered for processing. Based upon marketing information developed by
Midwest Agri-Commodities Company, the Company's marketing agent, the Company's
current estimate is that the average net selling price of the Company's pulp
will be approximately $70.00 per ton, a decrease of 19% from the prior year. The
expected decrease in pulp prices is attributable to a combination of excess
supply of competing products, lower demand in Europe because of reduced cattle
and swine herds and a stronger US dollar.
Revenue from beet molasses sales increased $0.1 million or 13%, reflecting a 28%
increase in sales volume, offset by a 12% decrease in the average gross selling
price. The increase in molasses sales volume is due to an estimated 12% more
production of beet molasses for fiscal year 1997-1998 versus the previous year.
The larger volume of beet molasses is the result of the larger volume 1997 beet
crop delivered for processing. Based upon marketing information developed by
Midwest Agri-Commodities Company, the Company's marketing agent, the Company's
current estimate is that the average net selling price of the Company's
<PAGE>
beet molasses will be approximately $61.50 per ton, a decrease of 24% from the
prior year. The expected decrease in beet molasses prices is attributable to
abundant, low-priced competing product, uncertain corn markets and lower initial
demand conditions in the beet molasses marketplace.
Revenues from yeast sales increased $0.2 million or 16%, reflecting a 19%
increase in sales volume, offset by a 2% decrease in the average selling price.
Sales volume is up because November's sales this year exceeded last year's by
some 26%, and thus reflecting more normal monthly sales volume levels.
The other contributing factor to the change in revenues results from the
increase or decrease in finished goods inventories. The increase in the value of
finished goods inventories for the three months ended November 30, 1997 amounted
to $11.2 million or $9.1 million less than the increase in the value of finished
goods inventories for November 30, 1996. For November 30, 1997 the increase in
the value of sugar inventories were $9.4 million less than that of the previous
year. The reduced increase in sugar inventory values is the result of a
combination of less sugar produced (88,500 CWT.) and more sugar shipped and sold
(252,300 CWT.) for the three month period ending November 30, 1997 than that of
the previous fiscal year's same period.
In the consolidated statements of operations, Expenses section, depreciation and
interest expenses for fiscal year 1997-1998 are expected to be higher than
fiscal year 1996-1997 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 $0.75 million to $1.0 million.
In the section Distribution of Net Proceeds, payments to members for sugarbeets,
net of unit retention capital and unprocessed sugarbeet inventory decreased $2.8
million or 11% from the 1996-1997 period. For fiscal year 1997-1998 the Company
is projecting a payment to growers for sugarbeets totaling $71.7 million, which
is $0.8 million or 1% more than the prior fiscal year. The payment is based upon
(i) an average delivered sugar content of 17.94%, (ii) a total sugarbeet crop of
1.72 million tons and (iii) the Company's projected selling price for its sugar,
which is currently estimated at $23.68 per CWT. This forward-looking material is
based on the Company's expectations regarding the processing of the 1997 sugar
beet crop. The actual production results obtained by processing those sugar
beets could differ materially from the Company's current estimate as a result of
factors such as changes in production efficiencies and storage conditions for
the Company's sugar beets.
ESTIMATED FISCAL YEAR 1998 INFORMATION
The agreements between the Company and its members regarding the delivery of
sugar beets to the Company require payment for members' sugar beets in several
installments throughout the year. As only the final payment is made after the
close of the fiscal year in question, the first payments to members for their
sugar beets are based upon the Company's then-current estimates of the financial
results to be obtained from processing the crop in question and the subsequent
sale of the products obtained from processing those sugar beets. This discussion
contains a summary of the Company's current estimates of the financial results
to be obtained from the Company's processing of the 1997 sugar beet crop. Given
the nature of the estimates required in connection with the payments to members
for their sugar beets, this discussion includes forward-looking statements
regarding the quantity of sugar to be produced from the 1997 sugar beet crop,
the net selling price for the sugar and by-products produced by the Company and
the Company's operating costs. These forward-looking statements are based
largely upon the Company's expectations and estimates of future events; as a
result, they are subject to a variety of risks and uncertainties. Some of those
estimates, such as the selling price for the Company's products and the quantity
of sugar produced from the sugar beet crop are beyond the Company's control. The
actual results experienced by the Company could differ materially from the
forward-looking statements contained herein.
The recently completed harvest of the sugar beet crop grown during 1997 produced
a total of 1,721,240 tons of sugar beets. The sugar content on the 1997 crop is
17.94%. As of this filing, no significant sugarbeet storage problems have been
encountered. While unseasonably warm temperatures occurred in the months of
November and December, other favorable storage factors (such as fewer sunny days
and lack of significant snowfall) helped offset the warmer temperatures.
<PAGE>
The Company expects to produce a total of approximately 4,651,500 CWT. of sugar
from the 1997 sugar beet crop. Currently, the factory is averaging a sugarbeet
slice rate of 7,260 tons per day, above the 7,000 tons per day rate under the
expansion plan. Other parts of the factory affected by the expansion are also
performing as planned, with the exception of the pulp dryer particulate
emissions control equipment. Company personnel and hired consultants continue to
work on solutions for this area. While the Company cannot provide assurances
that an answer will be found to the emissions control equipment problems, the
Company is confident that the problem will be resolved.
Based on marketing information developed by United Sugars Corporation, the
Company's current estimate is that the average net selling price of the
Company's sugar will be approximately $23.68 per hundredweight.
From the revenues generated from the sale of products produced from each ton of
sugar beets, the Company's operating and fixed costs must be deducted, which are
currently estimated to be $26.61 per ton. The deduction of those operating costs
results in an estimated gross beet payment of $41.68 per ton of sugar beets.
<PAGE>
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 Bank for calendar 1997 of $50.0 million and calendar 1998 of
$55.0 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 November 30, 1997 the Company was in compliance with its loan agreements
with the Bank.
Working capital increased $1.1 million for the three months ended November 30,
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, 1998 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
three months ended November 30, 1997 was due to the seasonal needs of the
1997/1998 sugarbeet-processing season. The cash used to provide for operations
of $20.3 million and for investing activities of $4.0 million was funded through
cash flow financing activities and a reduction in cash. The net cash provided
through financing activities was mostly provided through proceeds from the
issuance of short term debt of $27.4 million, net of repayment of long term debt
of $1.0 million and payment of the remaining 1989 crop unit retains and
allocated patronage of $2.7 million. Working capital as of November 30, 1997
totals $11.3 million compared to $10.2 million at August 31, 1997.
Capital expenditures for the three months ended November 30, 1997 totaled $4.7
million. Capital expenditures for fiscal year 1998 are currently estimated at
$15.2 million, $13.0 million resulting from the Company's strategy of expanding
capacity and improving operating efficiencies. For fiscal year 1998, the final
year of the three year plan to expand the facilities, additional capital jobs to
be completed are located in the factory and include a new mud filter system, a
new sugar juice pre-treatment system, changes to the sugar juice carbonation
station, modification of granulated sugar pans and the purchase of a number of
large juice pumps and pump drives.
<PAGE>
The $13.0 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 three years, current year and next fiscal
year, which is estimated to total $86.2 million, are expected to be derived a
number of ways. The Company issued a stock offering of its common and preferred
stock (net of stock offering costs of $0.1 million) totaling $37.3 million. The
$37.4 million was raised through the sale of the Units subscribed and sold via
the Company's 1995 stock offering. The funds generated from the stock offering
have been and will continue to be used to assist in paying for the costs
associated with expansion. The units of stock sold by the Company are paid for
by shareholder subscribers over a three year period beginning in January 1996.
The stock offering provides for payment of 32 percent of the value of the stock
purchased, or $12.1 million in January 1996; 43 percent, or $15.6 million in
January 1997; and the balance of 26 percent, or $9.7 million in January 1998.
The Company has received all of the 1996 and 1997 annual installments from its
shareholder subscribers. The balance of the funds necessary to finance the
Company's expansion plan, or $50.0 million, is from long-term debt secured from
the St. Paul Bank for Cooperatives (the Bank) and 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 November 30,
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 preferred stock offering that was completed in fiscal
year 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 economies 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-governmental 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.
<PAGE>
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
<PAGE>
================================================================================
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 12, 1998 /s/ LARRY D. STEWARD
-------------------- -------------------------------------
Larry D. Steward
President and Chief Executive Officer
Date: January 12, 1998 /s/ STEVEN M. CASPERS
-------------------- -------------------------------------
Steven M. Caspers
Executive Vice President, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000948218
<NAME> MINN-DAK FARMERS COOPERATIVE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1998
<CASH> 653
<SECURITIES> 0
<RECEIVABLES> 14,958
<ALLOWANCES> 0
<INVENTORY> 86,877
<CURRENT-ASSETS> 107,553
<PP&E> 161,896
<DEPRECIATION> 52,690
<TOTAL-ASSETS> 234,864
<CURRENT-LIABILITIES> 96,276
<BONDS> 12,000
0
17,144
<COMMON> 120
<OTHER-SE> 61,247
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<SALES> 46,078
<TOTAL-REVENUES> 45,291
<CGS> 16,321
<TOTAL-COSTS> 16,321
<OTHER-EXPENSES> 953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,060
<INCOME-PRETAX> 4,865
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,865
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,865
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
