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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: NOVEMBER 30, 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
----------------------------
(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
---------------------- -----
(Address of principal (Zip Code)
executive offices)
(701) 642-8411
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(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 10, 2000
--------------------- ----------------
$250 Par Value 477
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, 1999 AUGUST 31, 1999
ASSETS (UNAUDITED) (AUDITED)
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 135 $ 546
----------------- -----------------
Current portion of long-term note receivable 312 312
----------------- -----------------
Receivables:
Trade accounts 17,140 19,303
Growers 289 4,057
----------------- -----------------
17,429 23,360
----------------- -----------------
Advances to affiliate (2,087) (375)
----------------- -----------------
Inventories:
Refined sugar, pulp and molasses to be sold
on a pooled basis 39,475 17,219
Nonmember refined sugar 461 1
Yeast 64 63
Materials and supplies 4,761 5,005
Beet Inventory 41,217 710
Other 0 --
----------------- -----------------
85,978 22,998
----------------- -----------------
Deferred charges 348 1,194
----------------- -----------------
Prepaid expenses 106 232
----------------- -----------------
Property and equipment available for sale 588 588
----------------- -----------------
Total current assets 102,809 48,854
----------------- -----------------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 20,423 20,423
Buildings 35,438 35,378
Factory equipment 109,498 110,134
Other equipment 3,463 3,463
Construction in progress 532 230
----------------- -----------------
169,354 169,628
Less accumulated depreciation (61,212) (60,442)
----------------- -----------------
108,141 109,186
----------------- -----------------
LONG-TERM NOTES RECEIVABLE, NET OF
CURRENT PORTION 2,938 2,915
----------------- -----------------
OTHER ASSETS:
Investments restricted for capital lease projects 0 --
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 10,098 10,043
Deferred income taxes 1,882 1,962
Other 915 960
----------------- -----------------
12,895 12,965
----------------- -----------------
$ 226,784 $ 173,921
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, 1999 AUGUST 31, 1999
(UNAUDITED) (AUDITED)
----------------- -----------------
<S> <C> <C>
LIABILITIES AND MEMBERS' INVESTMENT
- -----------------------------------
CURRENT LIABILITIES:
Short-term notes payable $ 33,230 $ 17,780
----------------- -----------------
Current portion of long-term debt 4,743 3,743
----------------- -----------------
Accounts payable:
Trade 1,217 2,892
Growers 35,698 8,340
----------------- -----------------
36,914 11,232
----------------- -----------------
Accrued liabilities 3,105 2,697
----------------- -----------------
Total current liabilities 77,992 35,452
LONG-TERM DEBT, NET OF CURRENT PORTION 45,170 46,173
OBLIGATION UNDER CAPITAL LEASE 11,270 11,270
OTHER 1,761 686
COMMITTMENTS AND CONTINGENCIES -- 0
----------------- -----------------
Total liabilities 136,193 93,581
----------------- -----------------
MINORITY INTEREST IN EQUITY OF SUBSIDIARY 984 947
----------------- -----------------
MEMBERS' INVESTMENT:
Preferred stock:
Class A - 100,000 shares authorized, $105 par value;
72,200 shares issued and outstanding at November 30, 1999
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 November 30, 1999
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 November 30, 1999
and 72,200 at August 31, 1999 5,487 5,487
----------------- -----------------
18,483 18,483
Common stock, 600 shares authorized, $250 par value;
issued and outstanding, 477 shares at November 30, 1999
and 473 shares at August 31, 1999 119 118
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 27,757 16,822
Retained earnings (deficit) (262) 462
----------------- -----------------
89,607 79,394
----------------- -----------------
$ 226,784 $ 173,921
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUE:
From sales of sugar, by-products, and
yeast, net of discounts $ 65,750 $ 53,349
Other income 116 (77)
------------ ------------
65,866 53,273
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EXPENSES:
Production costs of sugar, by-products,
and yeast sold 13,751 12,468
Marketing (includes freight and storage) 8,148 6,965
General and administrative 1,326 1,369
Interest 1,128 1,230
(Gain) loss on disposition of property and equipment 0 25
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24,353 22,058
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NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 41,513 $ 31,215
============ ============
DISTRIBUTION OF NET PROCEEDS:
Credited to members' investment:
Components of net income:
Income (loss) from non-member business $ 204 $ 241
Patronage income 10,935 5,325
------------ ------------
Net income 11,140 5,566
Unit retention capital 0 0
------------ ------------
Net credit to members' investment 11,140 5,566
Payments to members for sugarbeets, net of unit
retention capital 30,373 25,649
------------ ------------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 41,513 $ 31,215
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income allocated to members' investment $ 10,267 $ 5,566
Add (deduct) noncash items:
Depreciation and amortization 1,638 1,573
Equipment disposals - loss 0 25
Discount on estate payout 0 0
Net income allocated from unconsolidated marketing subsidiaries (55) 0
Noncash portion of patronage capital credits 0 0
Retention of nonqualified unit retains 0 0
Changes in operating assets and liabilities:
Accounts receivable and advances 7,643 5,869
Inventory and prepaid expenses (62,854) (49,096)
Deferred charges 846 926
Other assets 45 (1)
Accounts payable, advances, and accrued liabilities 29,569 24,225
------------ ------------
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (12,903) (10,912)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of property, plant and equipment 0 0
Capital expenditures (593) (1,989)
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives (23) 207
Minority interest in equity of subsidiaries 37 60
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NET CASH USED IN INVESTING ACTIVITIES (579) (1,722)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 15,450 15,565
Payment of long-term debt (3) (1,403)
Payment of unit retains and allocated patronage (2,377) (2,383)
Issuance of long-term debt 0 0
Provision for long-term tax 0 0
Sale and repurchase of common stock, net 1 (1)
Issuance of stock (0) 0
Issuance of long term tax-exempt bonds 0 0
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NET CASH PROVIDED BY FINANCING ACTIVITIES 13,070 11,777
------------ ------------
NET INCREASE (DECREASE) IN CASH (411) (857)
CASH, BEGINNING OF YEAR 546 1,849
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CASH, END OF QUARTER $ 135 $ 992
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 1,089 $ 1,390
============ ============
Income taxes, net of refunds $ 0 $ 0
============ ============
</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, 1999 and November 30, 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, 1999. The results of operations for the three
months ended November 30, 1999 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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED NOVEMBER 30, 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
three months ended November 30, 1999 (the first quarter of the Company's
1999-2000 fiscal year) and 1998 (the first 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 Year 2000 readiness 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 NOVEMBER 30, 1999 AND 1998
Revenue for the three months ended November 30, 1999 increased $12.6 million
from the 1998 period, an increase of 24%. Revenue from the sale of finished
goods increased $12.4 million, while Other income increased $0.2 million.
Revenue from the sales of sugar increased $2.8 million, or 8%, reflecting a 7%
increase in volume and a 1% increase 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.
Revenue from pulp sales decreased $0.8 million or 37%, reflecting a 43% decrease
in sales volume and a 5% increase in the average gross selling price. This
year's sales volume is less than the prior year due to lower beginning pulp
inventories versus the prior year. Revenue from beet molasses sales increased
$0.4 million or 46%, reflecting a 58% increase in sales volume, offset by a 12%
decrease in the average gross selling price. The increase in molasses sales
volume is due to increased customer demand versus the prior year.
Revenues from yeast sales decreased $0.4 million or 22%, reflecting a 17%
decrease in sales volume and a 5% decrease in the average selling price. Sales
volume and prices are down due to competitive pressures that currently exist in
the marketplace.
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, 1999 amounted
to $22.3 million or $10.4 million more than the increase in the value of
finished goods inventories for November 30, 1998. For November 30, 1999 the
increase in the value of sugar inventories was $9.2 million more than the
increase of that of the prior year, and for pulp $1.0 million more. The increase
in sugar and pulp inventory values is the result of more sugar and pulp on hand
versus the prior period.
In the consolidated statements of operations, Expenses section, production costs
of sugar, by-products and yeast totaled $13.8 million, $1.3 million or 10% more
than the prior year. The increase is mainly attributable to 29% more beets being
processed in the three month period ending November 30, 1999 versus the prior
period. Marketing costs totaled $8.1 million,
<PAGE>
$1.2 million or 17% more than the prior year. A majority of the difference
between the marketing costs for the current year versus the prior year involves
sugar purchased from non-members in the current year totaling $1.1 million.
Current year sales volume also increased 7% versus the prior year.
In the section Distribution of Net Proceeds, payments to members for sugarbeets,
net of unit retention capital and unprocessed sugarbeet inventory increased $4.7
million or 18% from the fiscal year 1999 period. For fiscal year 2000 the
Company is projecting a payment to growers for sugarbeets totaling $71.6
million, which is $9.0 million or 14% more than the prior fiscal year. The
payment is based upon (i) an average delivered sugar content of 16.89%, (ii) a
total sugarbeet 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 recently completed 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, no
significant sugarbeet storage problems have been encountered. While unseasonably
warm temperatures occurred in the months of November and most of December, the
Company has not been able to ascertain any significant detrimental effects to
the operations of the factory due to the unusual weather.
The Company expects to produce a record volume of sugar from the 1999 sugar beet
crop because of the record tons of beets delivered. Currently, the factory is
averaging a sugarbeet slice rate of 9,600 tons per day; well above the planned
slice for the processing season of 8,500 tons per day.
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 less than that of the prior year because of the volume
available for sale (domestic & foreign imports) relative to the estimated
domestic consumption.
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 an estimated gross beet payment of
$32.50 per ton of sugar beets.
In preparation for the Year 2000, the Company 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 included identification of
software and hardware systems, and equipment and processing machinery with
imbedded technology that may be affected by the Year 2000 problem. Through this
plan, the Company determined the existence of problems; remedied the problems
identified; tested the systems and machinery and equipment where remediation was
required; and identified the risks of the Year 2000 issue relative to third
parties which have a material relationship with the Company.
To that end the Company upgraded its information system and its operations
systems as needed. Key customers and suppliers were contacted, and to date the
Company has identified no significant concerns relative to the Year 2000 issue.
Based upon
<PAGE>
its assessment to date, the Company's management presently believes that
problems related to the Year 2000 issue, if any, 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
Co-Bank (the "Bank"). The Company has a short-term line of credit with the Bank
for calendar years 1999 and 2000 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 $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 November 30, 1999 the Company was in compliance with its loan agreement
covenants with the Bank.
Working Capital as of November 30, 1999 totals $24.8 million compared to $13.4
million at August 31, 1999, an increase of $11.4 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 $12.0 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, 1999 was due to the seasonal needs of the
1999/2000 sugarbeet-processing season. The cash used to provide for operations
of $12.9 million and for investing activities of $.6 million was funded through
cash flow financing activities, and a reduction in cash. The net cash provided
through financing activities of $13.1 million was primarily provided through
proceeds from the issuance of short term debt of $15.4 million; offset by 34.1%
payment of the 1990 crop unit retains and allocated patronage payment of $2.4
million.
Capital expenditures for the three months ended November 30, 1999 totaled $.6
million. Capital expenditures for fiscal year 2000 are currently estimated at
$3.9 million.
<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: November 13, 1999 /s/ LARRY D. STEWARD
------------------- -----------------------------------------
Larry D. Steward
President and Chief Executive Officer
Date: November 13, 1999 /s/ STEVEN M. CASPERS
------------------- -----------------------------------------
Steven M. Caspers
Executive Vice President, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 135
<SECURITIES> 0
<RECEIVABLES> 17,429
<ALLOWANCES> 0
<INVENTORY> 85,978
<CURRENT-ASSETS> 102,809
<PP&E> 169,354
<DEPRECIATION> 61,212
<TOTAL-ASSETS> 226,784
<CURRENT-LIABILITIES> 77,992
<BONDS> 11,270
0
18,483
<COMMON> 119
<OTHER-SE> 71,004
<TOTAL-LIABILITY-AND-EQUITY> 226,784
<SALES> 65,750
<TOTAL-REVENUES> 65,866
<CGS> 21,899
<TOTAL-COSTS> 21,899
<OTHER-EXPENSES> 1,326
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,128
<INCOME-PRETAX> 11,140
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,140
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
