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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MAY 31, 2000
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, 2000
--------------------- ------------
$250 Par Value 484
<PAGE>
MINN-DAK FARMERS COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the nine month periods
ended May 31, 2000 and May 31, 1999 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, 1999. The results of operations for the nine months ended May
31, 2000 are not necessarily indicative of the results for the entire
fiscal year ending August 31, 2000.
2. In August 1999, the company declared a revolvement of 34.1% of the 1990
crop per unit retains and allocated patronage. That amount, $2.4 million,
was paid to the stockholders on October 4, 1999.
3. The cooperative has sold notes receivable from other United Sugars member
processors to a bank. In the event of default the cooperative must
repurchase the notes from the bank. At March 31, 2000, the cooperative is
contingently liable in the amount of $3.2 million relating to such notes
receivable sold with recourse.
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31, 2000 AUGUST 31, 1999
ASSETS (UNAUDITED) (AUDITED)
------ ------------ ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 146 $ 546
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Current portion of long-term note receivable 0 312
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Receivables:
Trade accounts 13,225 19,303
Growers 4,050 4,057
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17,275 23,360
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Advances to affiliate (1,321) (374)
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Inventories:
Refined sugar, pulp and molasses to be sold
on a pooled basis 60,726 17,219
Nonmember refined sugar 468 1
Yeast 48 63
Materials and supplies 4,080 5,005
Beet Inventory 0 710
Other 1,601 --
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66,923 22,998
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Deferred charges 903 1,194
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Prepaid expenses 150 232
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Property and equipment available for sale 588 588
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Total current assets 84,664 48,856
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PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 20,423 20,423
Buildings 35,466 35,378
Factory equipment 109,600 110,134
Other equipment 3,446 3,463
Construction in progress 1,443 230
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170,378 169,628
Less accumulated depreciation (64,389) (60,442)
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105,989 109,186
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LONG-TERM NOTES RECEIVABLE, NET OF
CURRENT PORTION 31 2,915
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OTHER ASSETS:
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 10,392 10,043
Deferred income taxes 1,882 1,962
Other 974 960
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13,248 12,965
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See Notes to Consolidated Financial Statements $ 203,932 $ 173,922
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</TABLE>
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31, 2000 AUGUST 31, 1999
(UNAUDITED) (AUDITED)
------------ ---------------
<S> <C> <C>
LIABILITIES AND MEMBERS' INVESTMENT
CURRENT LIABILITIES:
Short-term notes payable $ 21,151 $ 17,780
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Current portion of long-term debt 4,788 3,743
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Accounts payable:
Trade 3,537 2,892
Growers 18,585 8,340
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22,122 11,232
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Accrued liabilities 2,521 2,697
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Total current liabilities 50,582 35,452
LONG-TERM DEBT, NET OF CURRENT PORTION 43,164 46,173
OBLIGATION UNDER CAPITAL LEASE 10,495 11,270
OTHER 1,091 686
COMMITTMENTS AND CONTINGENCIES -- 0
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Total liabilities 105,332 93,581
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MINORITY INTEREST IN EQUITY OF SUBSIDIARY 1,077 947
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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, 2000
and 72,200 at August 31, 1999 7,581 7,581
Class B - 100,000 shares authorized, $75 par value;
72,200 shares issued and outstanding at May 31, 2000
and 72,200 at August 31, 1999 5,415 5,415
Class C - 100,000 shares authorized, $76 par value;
72,200 shares issued and outstanding at May 31, 2000
and 72,200 at August 31, 1999 5,487 5,487
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18,483 18,483
Common stock, 600 shares authorized, $250 par value;
issued and outstanding, 485 shares at May 31, 2000
and 473 shares at August 31, 1999 121 118
Paid in capital in excess of par value 32,094 32,094
Unit retention capital 7,560 7,560
Qualified allocated patronage 3,855 3,855
Nonqualified allocated patronage 34,299 16,822
Retained earnings (deficit) 1,111 462
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97,523 79,394
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See Notes to Consolidated Financial Statements $ 203,932 $ 173,922
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</TABLE>
<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 NINE MONTHS ENDED
MAY 31, MAY 31,
----------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
From sales of sugar, by-products, and
yeast, net of discounts $ 30,691 $ 45,723 $ 162,866 $ 142,582
Other income 77 (36) 191 101
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30,768 45,687 163,057 142,683
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EXPENSES:
Production costs of sugar, by-products,
and yeast sold 9,467 10,680 38,050 36,638
Marketing (includes freight and storage) 6,473 7,483 20,693 20,393
General and administrative 1,528 1,398 4,359 4,227
Interest 1,452 1,520 4,044 4,262
(Gain) loss on disposition of property and equipment 6 28 166 100
------------ ------------ ------------ ------------
18,926 21,109 67,312 65,620
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NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 11,842 $ 24,578 $ 95,745 $ 77,063
============ ============ ============ ============
DISTRIBUTION OF NET PROCEEDS:
Credited to members' investment:
Components of net income:
Income (loss) from non-member business $ 241 $ 211 $ 649 $ 701
Patronage income (4,290) 3,540 17,477 9,875
------------ ------------ ------------ ------------
Net income (4,049) 3,751 18,126 10,576
Unit retention capital 0 0 0 0
------------ ------------ ------------ ------------
Net credit to members' investment (4,049) 3,751 18,126 10,576
Payments to members for sugarbeets, net of unit
retention capital 15,891 20,827 77,619 66,487
------------ ------------ ------------ ------------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 11,842 $ 24,578 $ 95,745 $ 77,063
============ ============ ============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31,
-----------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income allocated to members' investment $ 18,254 $ 10,300
Add (deduct) noncash items:
Depreciation and amortization 4,918 4,780
Equipment disposals - loss 166 100
Discount on estate payout 0 36
Net income allocated from unconsolidated marketing subsidiaries (128) (72)
Noncash portion of patronage capital credits (221) (311)
Retention of nonqualified unit retains 0 0
Changes in operating assets and liabilities:
Accounts receivable and advances 7,033 (214)
Inventory and prepaid expenses (43,842) (25,214)
Deferred charges 291 752
Other assets (14) (8)
Accounts payable, advances, and accrued liabilities 13,068 4,142
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NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (475) (5,709)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of property, plant and equipment 61 3
Capital expenditures (1,955) (3,817)
Investment in notes receivable from other cooperatives 3,196 (349)
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives (128)
Minority interest in equity of subsidiaries 130 157
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NET CASH USED IN INVESTING ACTIVITIES 1,304 (4,006)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 3,371 8,985
Payment of long-term debt (2,009) (1,409)
Payment of unit retains and allocated patronage (2,377) (2,483)
Issuance of long-term debt 0 2,800
Provision for long-term tax 512 0
Sale and repurchase of common stock, net 3 (3)
Issuance of stock 0 0
Payment of long term tax-exempt bonds (730) 0
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NET CASH PROVIDED BY FINANCING ACTIVITIES (1,230) 7,890
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NET INCREASE (DECREASE) IN CASH (401) (1,824)
CASH, BEGINNING OF YEAR 546 1,849
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CASH, END OF QUARTER $ 146 $ 25
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 3,699 $ 4,226
============ ============
Income taxes, net of refunds $ 9 $ 10
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<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, 2000 AND 1999
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, 2000 (the third quarter of the Company's 1999-2000
fiscal year) and 1999 (the third quarter of the Company's 1998-1999 fiscal
year). The Company's fiscal year runs from September 1 to August 31.
Any statements regarding future market prices, anticipated costs, agricultural
results, operating results and other statements that are not historical facts
contained in this Quarterly Report on Form 10-Q are forward-looking statements.
The words "expect", "project", "estimate", "believe", "anticipate", "plan",
"intend", "could", "may", "predict" and similar expressions are also intended to
identify forward-looking statements. Such statements involve risks,
uncertainties and assumptions, including, without limitation, market factors,
the effect of weather and economic conditions, farm and trade policy, the
available supply of sugar, available quantity and quality of sugarbeets and
other factors detailed elsewhere in this and other Company filings with the
Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
RESULTS FROM OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MAY 31, 2000 AND 1999
Revenue for the three months ended May 31, 2000 decreased $15.0 million from the
1999 period, a decrease of 33%. Revenue from the sale of finished goods
decreased $2.2 million, while the change in the value of finished goods
inventory decreased $12.9 million. Other income increased $0.1 million.
Revenue from the sales of sugar decreased $0.1 million or 2%, reflecting a 6%
increase in volume, offset by an 8% decrease in the price for sugar. The
increase in volume is the result of a higher estimate of sugar to be produced in
fiscal year 2000, and thus more sugar to ship. Based upon marketing information
developed by United Sugars Corporation, the Company's marketing agent, the
average net selling price of sugar will decrease approximately 7% from the prior
year. The decrease in sugar prices is the result of expected excess volume
available for sale (domestic production & foreign imports) relative to the
estimated domestic consumption.
Revenue from pulp sales decreased $0.9 million or 41%, reflecting a 50% decrease
in sales volume, offset by a 9% increase in the average gross selling price. The
sales volume decrease is due to reduced production and market timing. Based upon
marketing information developed by Midwest Agri-Commodities Company, the
Company's marketing agent, the average net selling price of the Company's pulp
will increase approximately 16% from the prior year. The expected increase in
pulp prices is mostly a result of improved economic conditions, improved dairy
consumption and less pulp production from a major competitor in certain of the
Company's markets.
Revenue from beet molasses sales decreased $0.4 million or 30%, reflecting an
43% decrease in sales volume, offset by a 13% increase in the average gross
selling price. The decrease in molasses sales volume is due to 15% less
production of beet molasses for fiscal year 1999-2000 versus the previous year.
The smaller volume of beet molasses is the result of a high quality 1999 beet
crop delivered for processing. Based upon marketing information developed by
Midwest Agri-Commodities Company, the Company's marketing agent, the average net
selling price of the Company's beet molasses will increase approximately 23%
versus the prior year. The expected increase in beet molasses prices is
attributable to overall lower domestic production of beet molasses.
Revenues from yeast sales from the Company's subsidiary yeast production
facility, Minn-Dak Yeast Company ("MDYC") decreased $0.1 million or 5%,
reflecting a 10% increase in sales volume and a 15% decrease in the average
selling price. Sales
<PAGE>
volume is up because of strong customer demand for fresh bagged and cream yeast
for the period. Selling prices are down due to strong competitive pricing,
resulting from efforts to gain/retain market-share.
The other contributing factor to the change in revenues resulted from the
decrease in finished goods production. The Company produced 292,000 cwt more
during the three month period ending May 31, 1999 than it did in the three month
period ending May 31, 2000.
In the consolidated statements of operations, Expenses section, Production costs
of sugar, by-products and yeast sold decreased $1.2 million, or 11%. The
decrease in production costs is due to 44% less sugar beets being processed for
this period versus last, thereby reducing the variable production costs for the
period offset by an increase in the estimated grower payment to $35.25 per ton
of delivered sugarbeets or an addition of $3.8MM in operating expenses from the
February 29, 2000 estimate. Marketing costs (which include freight and storage)
are $1.0 million or 13% less than the prior period because of the decrease in
sales volume for by-products and lower per unit marketing costs for sugar. In
the third quarter of 1999, the company paid $.4MM of CCC assessment fees, vs
$.0MM for this quarter 2000. General and Administrative costs total $1.5 million
or 9% higher than the prior period, due largely to an increase in the provision
for income taxes increasing for 2000 vs 1999.
Interest expense totaled $1.4 million, down 4% from the prior year. Interest
costs are lower due to better cash flow from increased sales volume, offset by
somewhat higher seasonal interest rates.
In the section Distribution of Net Proceeds, payments to members for sugarbeets
(net of unit retention capital) decreased $4.9 million or 24% from the prior
period. For fiscal year 2000 the Company is projecting a payment to growers for
sugar beets totaling $77.6 million, which is $15.0 million or 24% more than the
prior fiscal year. The increased payment is due to increased harvested tons
(+24%), but offset somewhat by lower per unit payments. The payment is based
upon (i) an average delivered sugar content of 16.89%, (ii) a total sugar beet
crop to process of 2.2 million tons and (iii) the Company's projected selling
price for its sugar, which is currently estimated to be lower than the previous
year.
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
Revenue for the nine months ended May 31, 2000 increased $20.4 million from the
1999 period, an increase of less than 14%. Revenue from the sale of finished
goods increased $2.0 million, while the change in the value of finished goods
inventory increased $18.3 million. Other income increased $0.1 million.
Revenue from the sales of sugar increased $4.2 million or 4%, reflecting a 6%
increase in volume, and offset by a 2% decrease in pricing. The increase in
volume is the result of higher sugar production in fiscal year 1999-2000 (and
thus more sugar to ship). Based upon marketing information developed by United
Sugars Corporation, the Company's marketing agent, the average net selling price
of the Company's sugar is estimated to decrease 7% from the prior year.
Revenue from pulp sales decreased $1.3 million or 21%, reflecting a 33% decrease
in sales volume, offset by a 12% increase in the average gross selling price.
The sales volume decrease is due to reduced production and market timing. Based
upon marketing information developed by Midwest Agri-Commodities Company, the
Company's marketing agent, the average net selling price of the Company's pulp
will increase approximately 16% from the prior year. The expected increase in
pulp prices is mostly a result of improved economic conditions, improved dairy
consumption and less pulp production from a major competitor in certain of the
Company's markets.
Revenue from beet molasses sales decreased $0.2 million or 5%, reflecting a 10%
decrease in sales volume, and offset by a 5% increase in the average gross
selling price. The decrease in molasses sales volume is due to 15% less
production of beet molasses for fiscal year 1999-2000 versus the previous year.
The smaller volume of beet molasses is the result of a high quality 1999 beet
crop delivered for processing. Based upon marketing information developed by
Midwest Agri-Commodities Company, the Company's marketing agent, the average net
selling price of the Company's beet molasses will increase approximately 23%
versus the prior year. The expected increase in beet molasses prices is
attributable to overall lower domestic production of beet molasses.
<PAGE>
Revenues from yeast sales from the Company's subsidiary yeast production
facility, Minn-Dak Yeast Company ("MDYC"), decreased $0.7 million or 13%,
reflecting a 1% decrease in sales volume and a 12% decrease in the average
selling price. Selling prices are down due to strong competitive pricing,
resulting from efforts to gain/retain market-share.
The other contributing factor to the change in revenues resulted from the
increase in finished goods production The increase in the value of finished
goods inventories for the nine months ended May 31, 2000 amounted to $43.5
million or $18.3 million more than the increase in the value of finished goods
inventories for May 31, 1999. The increase is mainly the result of the level of
the inventory of sugar on hand, and the value of that sugar, 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 $1.4 million or 4%. The increase
in production costs for the nine months ended May 31, 2000 is mainly due to the
additional tons of beets sliced (+10%) for the current period versus the same
period last year. Marketing costs (which include freight and storage) are $0.3
million or 1% more than the prior period because of the increase in sales volume
for sugar, and offset somewhat by lower by-product sales volume. General and
Administrative costs increased $0.1 million or 3%. Interest expense decreased
$0.2 million, down 5% from the prior year. Interest costs are lower due to
better cash flow from increased sales volume, offset by somewhat higher seasonal
interest rates.
In the section Distribution of Net Proceeds, payments to members for sugarbeets
(net of unit retention capital) increased $11.1 million or 17% from the
1998-1999 period. For fiscal year 2000 the Company is projecting a payment to
growers for sugar beets totaling $77.6 million, which is $15.0 million or 24%
more than the prior fiscal year. The increased payment is due to increased
harvested tons (+24%), but offset somewhat by lower per unit payments. The
payment is based upon (i) an average delivered sugar content of 16.89%, (ii) a
total sugar beet crop to process of 2.2 million tons and (iii) the Company's
projected selling price for its sugar, which is currently estimated to be lower
than the previous year.
ESTIMATED FISCAL YEAR 2000 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 sale of finished products. 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 1999 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. 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 may differ materially from the
forward-looking statements contained herein.
The harvest of the sugar beet crop grown during 1999 produced a total of 2.2
million tons of sugar beets. The sugar content on the 1999 crop was below
long-term averages but purity was average. As of this filing the processing
season has been completed. No significant sugarbeet storage problems were
encountered during the processing season. While unseasonably warm temperatures
occurred in the months of November and most of December, the Company did not
ascertain any significant detrimental effects to the operations of the factory
due to the unusual weather. In fact, other factors that can affect long-term
storageability of the beets (such as freeze/thaw kind of weather, condition of
the beets going into the piles, etc.) were favorable to the Company.
The Company produced a record volume of sugar from the 1999 sugar beet crop
because of the record tons of beets delivered. The factory average sugarbeet
slice rate was in excess of 9,600 tons per day; well above the planned slice for
the processing season of 8,500 tons per day. The high slice rate resulted from
better than planned quality from the sugarbeets that were sliced. The better
than planned quality resulted in better than planned sugar production, and lower
overall operating costs.
<PAGE>
Based upon 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 7% less than that of the prior year because of the
volume available for sale (domestic production & foreign imports) relative to
the estimated domestic consumption. In fact, selling prices for sugar in the
past six months have decreased significantly due to an oversupply of sugar that
is available for sale to the domestic marketplace. Significantly lower sugar
prices currently will result in lower than planned sugar prices for the year.
Lower sugar prices will have an offsetting effect on the grower payment relative
to the higher sugar production and lower production costs.
Record domestic production of both beet and cane sugar along with required
minimum levels of sugar imported under the GATT (General Agreement on Tariffs
and Trade) agreement and the NAFTA (North American Free Trade Agreement)
agreement have resulted in the supply of sugar to greatly exceed demand.
Increased domestic supply is the result of fifteen years of flat sugar prices,
resulting in the need to reduce costs through increased yields. Also, due to the
even more depressed prices of other farm crops, farmers have been driven to
plant record or near-record acres of sugarbeets and sugarcane. Continued
over-supply of sugar to the domestic marketplace will depend upon a resolution
to the factors creating the oversupply. Resolution of these problems, in part,
will have to come from help from the Federal Congress and Administration.
Currently the sugar industry is working with Congress and the Administration on
ideas of how to remove excess sugar from the marketplace in such a manner so as
to help bolster sugar prices. However, at this time the Company cannot
determined the outcome of these efforts or whether there is a satisfactory
solution to the problems currently affecting sugar prices.
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. The
deduction of those operating costs results in a currently estimated gross beet
payment of $35.25 per ton of sugar beets or an increase of $3.8MM from the
estimate as of February 29, 2000.
<PAGE>
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
Co-Bank (the "Bank"). The Company has a short-term line of credit with the Bank
for calendar year 2000 of $45.0 million.
The Company entered into its first loan agreement after the merger of Co-Bank
and St Paul Bank during the third quarter. This agreement extends through May 1,
2001.
The new 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 $9.0 million as of the end of
each fiscal quarter.
2. Maintain a long-term debt and capitalized leases to equity ratio of not
greater than .8:1.
3. Maintain a current ratio of not less than 1.2:1.0 as of the end of each
fiscal quarter.
4. Maintain a debt service coverage ratio of not less than 1.25:1.0 as of the
end of each fiscal year end. Current Long Term Debt used to determine Debt
Service Coverage for the fiscal year ending August 31, 1999 shall be
$1.4MM.
As of May 31, 2000 the Company was in compliance with its loan agreement
covenants with the Bank.
Working Capital as of May 31, 2000 totals $34.1 million compared to $13.4
million at August 31, 1999, an increase of $20.7 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, 2000 is approximately $11.0 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, 2000 was due to the seasonal needs of the 1999/2000
sugarbeet-processing season. The cash used to provide for operations of $.4
million and for financing activities of $1.2 million was funded through cash
flow investing activities. The net cash provided through investing activities of
$1.3 million was primarily provided through proceeds from the sale of notes
receivable of $3.2 million.
Capital expenditures for the nine months ended May 31, 2000 totaled $2.0
million. Capital expenditures for fiscal year 2000 are currently estimated at
$4.8 million.
The source of funds for long-term debt payments is primarily from depreciation
resulting from normal operations.
The company has protected itself from interest rate fluctuations through the use
of tax exempt financing and a term debt portfolio that fixes rates into the
future for set amounts of debt. The current term debt portfolio is expected to
provide the company stable term debt interest rates over the next four years at
below current market rates. An increase or decrease in the interest rate market
of 100 basis points is expected to have little or no impact on the profitability
of the company.
<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: July 14, 2000 /s/ LARRY D. STEWARD
------------------- -----------------------------------------
Larry D. Steward
President and Chief Executive Officer
Date: July 14, 2000 /s/ STEVEN M. CASPERS
------------------- -----------------------------------------
Steven M. Caspers
Executive Vice President, and
Chief Financial Officer
