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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, 1999
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
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(Exact named of registrant as specified in its charter)
North Dakota 23-7222188
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
7525 Red River Road
Wahpeton, North Dakota 58075
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(Address of principal (Zip Code)
executive offices)
(701) 642-8411
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(Registrant's telephone number, including area code)
Not Applicable
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(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 6, 1999
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$250 Par Value 473
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31, 1999 AUGUST 31, 1998
ASSETS (UNAUDITED) (AUDITED)
- ------ ------------ ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 25 $ 1,849
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Current portion of long-term note receivable 288 288
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Receivables:
Trade accounts 16,632 14,045
Growers 4,095 3,540
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20,726 17,585
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Advances to affiliate (30) 2,898
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Inventories:
Refined sugar, pulp and molasses to be sold
on a pooled basis 53,037 27,804
Nonmember refined sugar 461 326
Yeast 79 79
Materials and supplies 3,767 5,211
Beet Inventory 0 --
Other 1,233 72
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58,576 33,492
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Deferred charges 521 1,273
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Prepaid expenses 376 246
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Property and equipment available for sale 588 588
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Total current assets 81,069 58,218
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PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 20,161 20,133
Buildings 35,300 34,736
Factory equipment 107,215 103,922
Other equipment 3,459 3,700
Construction in progress 2,230 4,176
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168,364 166,667
Less accumulated depreciation (58,874) (56,098)
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109,490 110,569
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LONG-TERM NOTES RECEIVABLE, NET OF
CURRENT PORTION 3,293 2,944
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OTHER ASSETS:
Investments restricted for capital lease projects 0 --
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 9,921 9,602
Deferred income taxes 2,576 2,652
Other 853 845
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13,350 13,099
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See Notes to Consolidated Financial Statements $ 207,202 $ 184,830
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</TABLE>
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31, 1999 AUGUST 31, 1998
LIABILITIES AND MEMBERS' INVESTMENT (UNAUDITED) (AUDITED)
- ----------------------------------- ------------ ---------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term notes payable $ 35,840 $ 26,855
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Current portion of long-term debt 2,143 5,613
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Accounts payable:
Trade 3,222 5,124
Growers 9,635 5,971
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12,857 11,094
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Accrued liabilities 2,561 3,486
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Total current liabilities 53,401 47,048
LONG-TERM DEBT, NET OF CURRENT PORTION 47,776 42,185
OBLIGATION UNDER CAPITAL LEASE 11,270 12,000
OTHER 1,620 748
COMMITTMENTS AND CONTINGENCIES -- 0
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Total liabilities 114,067 101,981
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MINORITY INTEREST IN EQUITY OF SUBSIDIARY 924 767
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MEMBERS' INVESTMENT:
Preferred stock:
Class A - 100,000 shares authorized, $105 par value;
72,200 shares issued and outstanding at May 31, 1999
and 66,967 at August 31, 1998 7,581 7,581
Class B - 100,000 shares authorized, $75 par value;
72,200 shares issued and outstanding at May 31, 1999
and 66,967 at August 31, 1998 5,415 5,415
Class C - 100,000 shares authorized, $76 par value;
72,200 shares issued and outstanding at May 31, 1999
and 66,967 at August 31, 1998 5,487 5,487
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18,483 18,483
Common stock, 600 shares authorized, $250 par value;
issued and outstanding, 473 shares at May 31, 1999
and 481 shares at August 31, 1998 118 121
Paid in capital in excess of par value 32,094 32,094
Unit retention capital 7,563 7,584
Qualified allocated patronage 3,971 3,981
Nonqualified allocated patronage 29,881 20,072
Retained earnings (deficit) 99 (254)
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92,211 82,082
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See Notes to Consolidated Financial Statements $ 207,202 $ 184,830
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</TABLE>
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MAY 31, MAY 31,
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1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
From sales of sugar, by-products, and
yeast, net of discounts $ 45,723 $ 39,972 $ 142,582 $ 141,912
Other income (36) 764 101 111
----------- ----------- ----------- -----------
45,687 40,736 142,683 142,023
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EXPENSES:
Production costs of sugar, by-products,
and yeast sold 10,680 9,483 36,638 34,568
Marketing (includes freight and storage) 7,483 5,717 20,393 16,422
General and administrative 1,398 1,455 4,227 3,732
Interest 1,520 1,602 4,262 4,186
(Gain) loss on disposition of property and equipment 28 41 100 140
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21,109 18,298 65,620 59,048
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NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 24,578 $ 22,438 $ 77,063 $ 82,975
=========== =========== =========== ===========
DISTRIBUTION OF NET PROCEEDS:
Credited to members' investment:
Components of net income:
Income (loss) from non-member business $ 211 $ 143 $ 701 $ 93
Patronage income 3,540 2,625 9,875 11,134
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Net income 3,751 2,767 10,577 11,226
Unit retention capital 0 0 0 861
----------- ----------- ----------- -----------
Net credit to members' investment 3,751 2,767 10,577 12,087
Payments to members for sugarbeets, net of unit
retention capital 20,827 19,670 66,487 70,887
----------- ----------- ----------- -----------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 24,578 $ 22,438 $ 77,063 $ 82,975
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31,
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1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income allocated to members' investment $ 10,300 $ 10,668
Add (deduct) noncash items:
Depreciation and amortization 4,780 4,326
Equipment disposals - loss 100 140
Discount on estate payout 36 (23)
Net income allocated from unconsolidated marketing subsidiaries (72) 559
Noncash portion of patronage capital credits (311) (732)
Retention of nonqualified unit retains 0 861
Changes in operating assets and liabilities:
Accounts receivable and advances (214) (3,990)
Inventory and prepaid expenses (25,214) (34,289)
Deferred charges 752 400
Other assets (8) (29)
Accounts payable, advances, and accrued liabilities 4,142 6,207
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NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (5,707) (15,901)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of property, plant and equipment 3 16
Capital expenditures (3,817) (4,848)
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives (349) 299
Minority interest in equity of subsidiaries 157 164
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NET CASH USED IN INVESTING ACTIVITIES (4,006) (4,369)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 8,985 15,040
Payment of long-term debt (1,409) (2,010)
Payment of unit retains and allocated patronage (2,483) (3,440)
Issuance of long-term debt 2,800 0
Provision for long-term tax 0 272
Sale and repurchase of common stock, net (3) 1
Issuance of stock 0 9,681
Issuance of long term tax-exempt bonds 0 0
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NET CASH PROVIDED BY FINANCING ACTIVITIES 7,889 19,543
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NET INCREASE (DECREASE) IN CASH (1,824) (727)
CASH, BEGINNING OF YEAR 1,849 1,235
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CASH, END OF QUARTER $ 25 $ 507
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 4,226 $ 4,620
=========== ===========
Income taxes, net of refunds $ 10 $ 12
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</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
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MINN-DAK FARMERS COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the nine month periods
ended May 31, 1999 and May 31, 1998 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, 1998. The results of operations for the nine
months ended May 31, 1999 are not necessarily indicative of the results
for the entire fiscal year ending August 31, 1999.
2. In August 1998, the company declared a revolvement of 35% of the 1990 crop
per unit retains and allocated patronage. That amount, $2.4 million, was
paid to the stockholders on October 17, 1998.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED MAY 31, 1999 AND 1998
The following discussion and analysis relates to the financial condition and
results of operations of Minn-Dak Farmers Cooperative ("the Company") for the
nine months ended May 31, 1999 (the third quarter of the Company's 1998-1999
fiscal year) and 1998 (the third quarter of the Company's 1997-1998 fiscal
year). The Company's fiscal year runs from September 1 to August 31.
This discussion contains forward-looking statements that involve risks and
uncertainties. These forward -looking statements include, among others, those
statements that include the words "estimate," "current estimate," "expected,"
"believes," and similar expressions. The actual results experienced by the
Company could differ materially from the forward-looking statements contained
herein. Important factors that could cause or contribute to such differences
include, without limitation, quality and quantity of sugar beets, weather,
market factors, farm and trade policy and general economic conditions.
RESULTS FROM OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MAY 31, 1999 AND 1998
Revenue for the three months ended May 31, 1999 increased $5.0 million from the
1998 period, an increase of 12%. Revenue from the sale of finished goods
increased $2.2 million, while the change in the value of finished goods
inventory increased $3.6 million. Other income decreased $0.8 million.
Revenue from the sales of sugar increased $2.0million or 6%, reflecting a 4%
increase in volume, and a 2% increase in the price for sugar. The increase in
volume is the result of generally more customer orders for the current period
versus the last. For the fiscal year 1998-1999 period, inventories of sugar
ended below recent historical levels, but at levels desirable for this time of
year. Based upon marketing information developed by United Sugars Corporation,
the Company's marketing agent, the current estimate is that the average net
selling price of the Company's sugar will increase less than 2% from the prior
year.
Revenue from pulp (wet and dry pelleted) sales increased $0.2 million or 7%,
reflecting a 5% increase in sales volume, and a 2% increase in the average gross
selling price. The larger volume of wet and pelleted pulp sales for this period
is the result of the larger volume 1998 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 decrease 23% from the prior
year. The expected decrease in pulp prices is attributable to a combination of
tremendous excess supply of competing products, lower demand in Europe because
of reduced cattle and swine herds, poor economic conditions in Japan and a
stronger US dollar.
Revenue from beet molasses sales increased $0.2 million or 12%, reflecting an
87% increase in sales volume, offset by a 40% decrease in the average gross
selling price. The increase in molasses sales volume is due to an estimated 33%
more production of beet molasses for fiscal year 1998-1999 versus the previous
year and the timing of customer shipments that allow for the clearing of storage
at the plant site. The larger volume of beet molasses is the result of the
larger volume, lower quality 1998 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 beet molasses will be approximately 48% less
than the prior year. The expected decrease in beet molasses prices is
attributable to abundant, low-priced competing product - both domestic and
international, lower priced corn markets and soft feed market conditions in the
beet molasses marketplace.
<PAGE>
Revenues from yeast sales from the Company's subsidiary yeast production
facility, Minn-Dak Yeast Company ("MDYC"), decreased $0.2 million or 11%,
reflecting a 10% decrease in sales volume and a 1% decrease in the average
selling price. Sales volume is down because of an unusually strong demand for
yeast from customers in the prior year.
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 May 31, 1999 amounted to
$4.2 million or $3.6 million more than the increase in the value of finished
goods inventories for May 31, 1998. The increase in finished goods inventory
mainly results from the level of the inventory of sugar on hand at the end of
this period versus last.
In the consolidated statements of operations, Expenses section, Production costs
of sugar, by-products and yeast sold increased $1.2 million, or 13%. The
increase in production costs is due to 40% more sugar beets being processed for
this period versus last. Marketing costs (which include freight and storage) are
$1.8 million or 31% more than the prior period because of the increase in sales
volume for sugar and by-products. Depreciation and interest expenses for fiscal
year 1998-1999 are expected to be higher than fiscal year 1997-1998 due to the
Company's large capital expansion program that was basically competed at the end
of fiscal year 1998. The Company's plant Depreciation expense is expected to
increase approximately $0.6 million or 12% in fiscal year 1998-1999 versus the
prior year, while Interest expense is expected to increase approximately $0.7
million or 14%.
In the section Distribution of Net Proceeds, payments to members for sugarbeets
(net of unit retention capital and unprocessed sugarbeet inventory) increased
$1.2 million or 6% from the 1997-1998 period. However, for fiscal year 1998-1999
the Company is projecting a payment to growers for sugarbeets totaling $60.4
million, which is $11.3 million or 16% less than the prior fiscal year. The
payment is based upon (i) an average delivered sugar content of 17.43%, (ii) a
total sugarbeet crop to process of 1.971 million tons and (iii) the Company's
projected selling price for its sugar, which is currently estimated to increase
less than 2% from the prior year. This forward-looking material is based on the
Company's expectations regarding the processing of the 1998 sugar beet crop and
resulting sales and expenses therefrom. The actual operating results obtained by
processing the sugar beets and selling the finished goods could differ
materially from the Company's current estimate.
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 1999 AND 1998
Revenue for the nine months ended May 31, 1999 increased $0.7 million from the
1998 period, an increase of less than 1%. Revenue from the sale of finished
goods increased $11.2 million, while the change in the value of finished goods
inventory decreased $10.5 million. Other income had no change.
Revenue from the sales of sugar increased $10.0 million or 11%, reflecting an
11% increase in volume. The increase in volume is the result of generally more
customer orders for the current period versus the last. Based upon marketing
information developed by United Sugars Corporation, the Company's marketing
agent, the current estimate is that the average net selling price of the
Company's sugar will increase less than 2% from the prior year.
Revenue from pulp (wet and dry pelleted) sales increased $0.7 million or 12%,
reflecting a 23% increase in sales volume, offset by an 8% decrease in the
average gross selling price. The larger volume of wet and pelleted pulp sales
for this period is the result of the larger volume 1998 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
decrease 23% from the prior year. The expected decrease in pulp prices is
attributable to a combination of tremendous excess supply of competing products,
lower demand in Europe because of reduced cattle and swine herds, poor economic
conditions in Japan and a stronger US dollar.
Revenue from beet molasses sales increased $0.4 million or 12%, reflecting a 66%
increase in sales volume, but offset by a 32% decrease in the average gross
selling price. The larger volume of beet molasses is the result of the larger
volume, lower quality 1998 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 beet molasses will be approximately 48% less
than the prior year. The expected decrease in beet molasses prices is
attributable to
<PAGE>
abundant, low-priced competing product - both domestic and international, lower
priced corn markets and soft feed market conditions in the beet molasses
marketplace.
Revenues from yeast sales from the Company's subsidiary yeast production
facility, Minn-Dak Yeast Company ("MDYC"), increased less than $0.1 million or
1%, reflecting a 3% increase in sales volume, but offset by a 2% decrease in the
average selling price. Sales volume is up because of continued strong demand of
bagged fresh yeast from Red Star Yeast & Products, the company that is
contractually obligated annually to purchase minimum levels of fresh yeast
produced by the yeast company.
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 nine months ended May 31, 1999 amounted to
$25.2 million or $10.5 million less than the increase in the value of finished
goods inventories for May 31, 1998. The reduction in the increase in finished
goods inventory mainly results from the level of the inventory of sugar on hand
at the end of the period. Lower inventories of sugar are the result of a greater
level of sugar orders for the current reporting period versus last.
In the consolidated statements of operations, Expenses section, Production costs
of sugar, by-products and yeast sold increased $2.1 million or 6%. The increase
in production costs for the nine months ended May 31, 1999 is mainly due to the
additional slicing days (+20 days) for the current period ending versus the same
period last year. Marketing costs (which include freight and storage) are $4.0
million or 24% more than the prior period because of the increase in sales
volume for sugar and by-products. Depreciation and interest expenses for fiscal
year 1998-1999 are expected to be higher than fiscal year 1997-1998 due to the
Company's large capital expansion program that was basically competed at the end
of fiscal year 1998. The Company's plant Depreciation expense is expected to
increase approximately $0.6 million or 12% in fiscal year 1998-1999 versus the
prior year, while Interest expense is expected to increase approximately $0.7
million or 14%.
In the section Distribution of Net Proceeds, payments to members for sugarbeets
(net of unit retention capital and unprocessed sugarbeet inventory) decreased
$4.4 million or 6% from the 1997-1998 period. For fiscal year 1998-1999 the
Company is projecting a payment to growers for sugarbeets totaling $60.4
million, which is $11.3 million or 16% less than the prior fiscal year. The
payment is based upon (i) an average delivered sugar content of 17.43%, (ii) a
total sugarbeet crop to process of 1.971 million tons and (iii) the Company's
projected selling price for its sugar, which is currently estimated to increase
less than 2% from the prior year. This forward-looking material is based on the
Company's expectations regarding the processing of the 1998 sugar beet crop and
resulting sales and expenses therefrom. The actual operating results obtained by
processing the sugar beets and selling the finished goods could differ
materially from the Company's current estimate.
ESTIMATED FISCAL YEAR 1999 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, 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 and the subsequent sale of the products
produced from the processing the crop. 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 1998 sugarbeet crop. Given the nature of the
estimates required in connection with the payments to members for their
sugarbeets, this discussion includes forward-looking statements regarding 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. The actual results
experienced by the Company could differ materially from the forward-looking
statements contained herein.
The completed harvest of the sugar beet crop grown during 1998 produced a total
of 1,772,648 tons of sugarbeets. The sugar content on the 1998 crop is 17.43%.
The Company also purchased approximately 200,000 tons of sugarbeets from another
sugarbeet processor in the area. The 1.971 million tons of sugarbeets to process
took approximately 259 days of plant operations. While unseasonably warm
temperatures have occurred from time to time in the months of November through
March, the amount of deterioration of the sugar beets (defined as shrink)
appears to be normal to slightly better than normal. However the quality of the
sugar beets deteriorated more than normal from the unseasonably warm winter
weather.
<PAGE>
The Company produced 1% less sugar from the 1998 sugar beet crop (including
sugarbeets purchased from another sugarbeet processing company) than the prior
year, even though it sliced 13% more sugar beets. Less sugar production is due
to lower quality of the 1998 crop.
From the revenues generated from the sale of products produced from each ton of
sugarbeets, the Company's operating and fixed costs must be deducted, which when
done, results in an estimated gross beet payment of $34.08 per ton of sugar
beets.
In preparation for the Year 2000, the Company has developed plans to address the
possible exposures related to the impact on its information systems and the
company as a whole of the Year 2000 issue. Such plans include identification of
software and hardware systems, and equipment and processing machinery with
imbedded technology that may be affected by the Year 2000 problem; determination
of the existence of problems; remediation of problems identified; testing of
systems and machinery and equipment where remediation will be required; and
identification of risks of the Year 2000 issue relative to third parties which
have a material relationship with the Company.
The Company expects to complete its plan to deal with the Year 2000 issue before
the end of calendar year 1999. To date the Company has tested and upgraded its
information system and has started testing its operations systems, which is
expected to also be ready for the Year 2000. Key customers and suppliers have
been contacted, and to date the Company has identified no significant concerns.
However, the Company continues to bear some risk related to the Year 2000 issue
if other entities not directly affiliated with the Company do not appropriately
address their own Year 2000 compliance issues. A contingency plan will be
developed to deal with material vendors and suppliers who are identified as not
being Year 2000 compliant.
Based upon its assessment to date, the Company's management presently believes
that problems related to the Year 2000 issue will be not have a material effect
on operations and financial results.
LIQUIDITY AND CAPITAL RESOURCES
Because the Company operates as a cooperative, payments for member-delivered
sugarbeets, 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 sugarbeet 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 sugarbeets 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 years 1998 and 1999 of $55.0 million.
The loan agreements between the Bank and the Company obligate the company to
maintain the following financial covenants, and in accordance with GAAP:
1. Maintain working capital of not less than $8.0 million as of August 31,
1999 and $9.0 million as of August 31, 2000.
2. Maintain a long-term debt and capitalized leases to equity ratio of not
greater than 1.05:1.
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, 1999 the Company was in compliance with its loan agreement
covenants with the Bank.
<PAGE>
Working Capital as of May 31, 1999 totals $27.7 million compared to $11.2
million at August 31, 1998, an increase of $16.5 million for the period.
Increased working capital is a result of normal financing, operational and
capital expenditure activities of the Company.
The targeted working capital for August 31, 1999 is approximately $12.0 million
dollars and, in the Company's opinion, will be attained. The August 31, 1999
working capital estimate is substantially higher than historical fiscal year end
working capital targets. The working capital increases are the result of the
January 1999 loan agreement with the Company's primary lender, the St. Paul Bank
for Cooperatives, in which lower interest rate incentives were provided in
return for a higher working capital position. The funding for increased working
capital was generated by shifting approximately $4.5 million in seasonal debt to
long term debt. The net result for the Company will be savings in annual
interest costs, without incurring added overall debt.
The St Paul Bank for Cooperatives and Co-Bank, Denver, Colorado have voted to
merge. The banks are completing a July 1, 1999 merger date. The Company does not
expect to encounter any material impact in its ability to borrow from the merged
bank nor in its cost of funds.
The primary factor for the changes in the Company's financial condition for the
nine months ended May 31, 1999 was due to the seasonal needs of the 1998/1999
sugarbeet-processing season. The cash used to provide for operations of $5.7
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 of $7.9 million was primarily provided through
proceeds from the issuance of short term debt of $9.0 million; net long term
debt borrowings of $1.4 million; 35% payment of the 1990 crop unit retains and
allocated patronage payment of $2.4 million and estate equity buy outs of $0.1
million.
Capital expenditures for the nine months ended May 31, 1999 totaled $3.8
million. Capital expenditures for fiscal year 1999 are currently estimated at
$6.2 million, $2.0 million resulting from the carryover of fiscal 1998 projects.
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: July 13, 1999 /s/ LARRY D. STEWARD
------------------ -------------------------------------
Larry D. Steward
President and Chief Executive Officer
Date: July 13, 1999 /s/ STEVEN M. CASPERS
------------------ -------------------------------------
Steven M. Caspers
Executive Vice President, and
Chief Financial Officer
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<NAME> MINN DAK FARMERS COOPERATIVE
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