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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: FEBRUARY 29, 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
----------------------------
(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
--------------
(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 April 12 , 2000
--------------------- ---------------
$250 Par Value 483
<PAGE>
MINN-DAK FARMERS COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the three month
periods ended February 29, 2000 and February 28, 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 three months ended February 29, 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.
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 29, 2000 AUGUST 31, 1999
ASSETS (UNAUDITED) (AUDITED)
- ------
------------------ -------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 642 $ 546
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Current portion of long-term note receivable 312 312
------------------ -------------------
Receivables:
Trade accounts 15,097 19,303
Growers 0 4,057
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15,097 23,360
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Advances to affiliate (1,706) (375)
------------------ -------------------
Inventories:
Refined sugar, pulp and molasses to be sold
on a pooled basis 69,398 17,219
Nonmember refined sugar 476 1
Yeast 59 63
Materials and supplies 4,662 5,005
Beet Inventory 12,064 710
Other 0 -
------------------ -------------------
86,659 22,998
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Deferred charges 612 1,194
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Prepaid expenses 181 232
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Property and equipment available for sale 588 588
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Total current assets 102,384 48,854
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PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 20,423 20,423
Buildings 35,466 35,378
Factory equipment 109,378 110,134
Other equipment 3,475 3,463
Construction in progress 1,021 230
------------------ -------------------
169,763 169,628
Less accumulated depreciation (62,824) (60,442)
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106,939 109,186
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LONG-TERM NOTES RECEIVABLE, NET OF
CURRENT PORTION 2,946 2,915
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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 10,125 10,043
Deferred income taxes 1,882 1,962
Other 871 960
------------------ -------------------
12,879 12,965
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See Notes to Consolidated Financial Statements. $ 225,148 $ 173,921
================== ===================
</TABLE>
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 29, 2000 AUGUST 31, 1999
(UNAUDITED) (AUDITED)
---------------------- --------------------
<S> <C> <C>
LIABILITIES AND MEMBERS' INVESTMENT
CURRENT LIABILITIES:
Short-term notes payable $ 37,675 $ 17,780
---------------------- --------------------
Current portion of long-term debt 4,788 3,743
---------------------- --------------------
Accounts payable:
Trade (2,594) 2,892
Growers 23,679 8,340
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21,085 11,232
---------------------- --------------------
Accrued liabilities 3,334 2,697
---------------------- --------------------
Total current liabilities 66,881 35,452
LONG-TERM DEBT, NET OF CURRENT PORTION 44,167 46,173
OBLIGATION UNDER CAPITAL LEASE 10,495 11,270
OTHER 1,934 686
COMMITTMENTS AND CONTINGENCIES - 0
---------------------- --------------------
Total liabilities 123,477 93,581
---------------------- --------------------
MINORITY INTEREST IN EQUITY OF SUBSIDIARY 1,028 947
---------------------- --------------------
MEMBERS' INVESTMENT:
Preferred stock:
Class A - 100,000 shares authorized, $105 par value; 72,200 shares
issued and outstanding at February 29, 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 February 29, 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 February 29, 2000
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, 483 shares at February 29, 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 38,589 16,822
Retained earnings (deficit) (58) 462
---------------------- --------------------
100,643 79,394
---------------------- --------------------
See Notes to Consolidated Financial Statements. $ 225,148 $ 173,921
====================== ====================
</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 SIX MONTHS ENDED
FEBRUARY 29 FEBRUARY 28 FEBRUARY 29 FEBRUARY 28
--------------------------------------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE:
From sales of sugar, by-products, and
yeast, net of discounts $ 66,425 $ 43,510 $ 132,175 $ 96,859
Other income (2) 214 114 137
------------- ------------- ------------- -------------
66,423 43,724 132,289 96,996
------------- ------------- ------------- -------------
EXPENSES:
Production costs of sugar, by-products,
and yeast sold 14,832 13,490 28,583 25,958
Marketing (includes freight and storage) 6,072 5,944 14,220 12,909
General and administrative 1,505 1,460 2,831 2,829
Interest 1,464 1,512 2,592 2,742
(Gain) loss on disposition of property and equipment 160 47 160 72
------------- ------------- ------------- -------------
24,033 22,453 48,387 44,510
------------- ------------- ------------- -------------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 42,390 $ 21,271 $ 83,902 $ 52,486
============= ============= ============= =============
DISTRIBUTION OF NET PROCEEDS:
Credited to members' investment:
Components of net income:
Income (loss) from non-member business $ 204 $ 250 $ 408 $ 491
Patronage income 10,832 1,010 21,767 6,335
------------- ------------- ------------- -------------
Net income 11,035 1,260 22,174 6,826
Unit retention capital 0 0 0 0
------------- ------------- ------------- -------------
Net credit to members' investment 11,035 1,260 22,174 6,826
Payments to members for sugarbeets, net of unit
retention capital 31,355 20,011 61,728 45,660
------------- ------------- ------------- -------------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 42,390 $ 21,271 $ 83,902 $ 52,486
============= ============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 29 FEBRUARY 28
2000 1999
------------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income allocated to members' investment $ 21,328 $ 6,501
Add (deduct) noncash items:
Depreciation and amortization 3,278 3,165
Equipment disposals - loss 160 72
Discount on estate payout 0 27
Net income allocated from unconsolidated marketing subsidiaries (82) (24)
Noncash portion of patronage capital credits 0 (228)
Retention of nonqualified unit retains 0 0
Changes in operating assets and liabilities:
Accounts receivable and advances 9,594 2,704
Inventory and prepaid expenses (63,610) (43,743)
Deferred charges 582 691
Other assets 89 (52)
Accounts payable, advances, and accrued liabilities 14,112 7,318
------------------ --------------
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (14,549) (23,569)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of property, plant and equipment 58 2
Capital expenditures (1,248) (3,021)
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives (31) (277)
Minority interest in equity of subsidiaries 81 117
------------------ --------------
NET CASH USED IN INVESTING ACTIVITIES (1,140) (3,179)
------------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 19,895 26,224
Payment of long-term debt (1,006) (1,406)
Payment of unit retains and allocated patronage (2,377) (2,460)
Issuance of long-term debt (730) 2,800
Provision for long-term tax 0 0
Sale and repurchase of common stock, net 3 (2)
Issuance of stock 0 0
Issuance of long term tax-exempt bonds 0 0
------------------ --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,784 25,155
------------------ --------------
NET INCREASE (DECREASE) IN CASH 96 (1,592)
CASH, BEGINNING OF YEAR 546 1,849
------------------ --------------
CASH, END OF QUARTER $ 642 $ 257
================== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 2,286 $ 2,713
================== ==============
Income taxes, net of refunds $ 6 $ 10
================== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED AND SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
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 February 29, 2000 (the second quarter of the Company's
1999-2000 fiscal year) and February 28, 1999 (the second 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 FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
Revenue for the three months ended February 29, 2000 increased $22.7 million
from the 1999 period, an increase of 52%. Revenue from the sale of finished
goods increased $2.2 million, while finished goods inventory increased $20.7
million. Other income decreased $0.2 million.
Revenue from the sales of sugar increased $2.2 million, or 8%, reflecting a 6%
increase in volume and a 2% 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 increased $0.4 million or 18%, reflecting a 4% increase
in sales volume and a 14% increase in the average gross selling price. 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 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 17%, reflecting a 12% decrease in sales volume,
and a 4% decrease in the average gross selling price. The decrease in molasses
sales volume is due to decreased molasses production in fiscal year 2000 versus
the prior year. The lower current year reporting period selling price is due to
stronger prices in the marketplace in the prior year (more balanced
supply/demand for molasses markets). 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 23% higher than the prior year.
The expected increase in beet molasses prices is attributable to overall lower
domestic production of beet molasses.
Revenues from yeast sales decreased $0.2 million or 12%, reflecting a 5%
increase in sales volume and a 17% decrease in the average selling price.
Selling 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 February 29, 2000 amounted
to $29.9 million or $20.7 million more than the increase in the value of
finished goods inventories for February 28, 1999. For February 29, 2000 the
increase in the value of sugar inventories was $18.8 million more than the
increase of that of the prior year, and for pulp $1.8
<PAGE>
million more. The increase in sugar and pulp inventory values is the result of a
greater volume of sugar and pulp on hand versus the prior period. Higher volumes
are a result of the timing of production versus customer shipments.
In the consolidated statements of operations, Expenses section, production costs
of sugar, by-products and yeast totaled $14.8 million, $1.3 million or 10% more
than the prior year. The increase is mainly attributable to 31% more beets being
processed in the three month period ending February 29, 2000 versus the prior
period. Marketing costs totaled $6.1 million, $1.3 million or 2% more than the
prior year. Current year sales volume for sugar, the Company's main revenue
source, increased 6% versus the prior year. Interest expense totaled $1.5
million, down 3% 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 and unprocessed sugarbeet inventory increased
$11.3 million or 57% from the fiscal year 1999 period. For fiscal year 2000 the
Company is projecting a payment to growers for sugarbeets totaling $73.8
million, which is $11.2 million or 18% more than the prior fiscal year. The
increased payment is due to increased harvested tons (+24%), but offset some by
lower per unit payments. 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.
COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
Revenue for the six months ended February 29, 2000 increased $35.3 million from
the 1999 period, an increase of 36%. Revenue from the sale of finished goods
increased $4.2 million, while the change in the value of finished goods
inventory increased $31.1 million.
Revenue from the sales of sugar increased $5.0 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 higher estimated 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 current
estimate is that the average net selling price of the Company's sugar will
decrease approximately 7% from the prior year, which is the result of the volume
available for sale (domestic & foreign imports) relative to the estimated
domestic consumption.
Revenue from pulp sales decreased $0.4 million or 10%, reflecting a 23% decrease
in sales volume, offset by a 12% increase in the average gross selling price.
The decrease in pulp sales volume for this period is the result of a large
carry-in of pulp. Because of the large carry-in of prior year pulp inventory,
new crop sales began later in the selling year. 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 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 increased $0.2 million or 10%, reflecting a 16%
increase in sales volume, but offset by a 6% decrease in the average gross
selling price. The larger volume of beet molasses is the result of timing of
customer orders. The lower current year reporting period selling price is due to
stronger prices in the marketplace in the prior year (more balanced
supply/demand for molasses markets). 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 23% higher than 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 $0.6 million or 17%,
reflecting a 6% decrease in sales volume and a 10% decrease in the average
selling price. Sales volume is down because of strong customer demand for bagged
fresh yeast in the prior year. Selling prices are down due to strong competitive
pricing, resulting from efforts to gain / retain market-share.
<PAGE>
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 six months ended February 29, 2000 amounted
to $52.1 million or $31.1 million more than the increase in the value of
finished goods inventories for February 28, 1999. The increase in finished goods
inventory mainly results from the level of the inventory of sugar on hand at the
end of the period. Higher inventories of sugar are the result of a greater level
of sugar produced versus the prior period (42% more sugar produced). The large
increase in sugar produced for the period is due to a high slice rate and higher
quality in the beets that were processed.
In the consolidated statements of operations, Expenses section, Production costs
of sugar, by-products and yeast sold increased $2.6 million or 10%. The increase
in production costs for the six months ended February 29, 2000 is mainly due to
the increased volume of beets sliced (+30%) versus the same period last year.
Marketing costs (which include freight and storage) are $1.3 million or 10% more
than the prior period because of the increase in sales volume for sugar.
Interest expense totaled $2.6 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 and unprocessed sugarbeet inventory) increased
$16.1million or 35% from the prior period. For fiscal year 2000 the Company is
projecting a payment to growers for sugar beets totaling $73.8 million, which is
$11.2 million or 18% more than the prior fiscal year. The increased payment is
due to increased harvested tons (+24%), but offset some 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 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
completion of the processing season is nearing an end. 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 has not been able to 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 expects to produce 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. Processing of the
Company's sugar juice remains to be done before the processing season is
complete. The high slice rate resulted from better than planned quality from the
sugarbeets that were sliced. The better than planned quality is expected to
produce better than planned sugar production, and overall lower operating costs.
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 & foreign imports) relative to the estimated
domestic consumption. In fact, selling prices for sugar in the past three
<PAGE>
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 $33.50 per ton of sugar beets.
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 Company's $55,000,000 operating loan has been extended from January 31, 2000
to May 31, 2000 to provide continued availability of funding while new loan
documents are completed, reviewed and executed. It is expected that renewed
financing agreements will be in place by not later than May 1, 2000.
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 February 29, 2000 the Company was in compliance with its loan agreement
covenants with the Bank.
Working Capital as of February 29, 2000 totals $35.5 million compared to $13.4
million at August 31, 1999, an increase of $22.1 million for the period.
Increased working capital is a result of normal financing, operational and
capital expenditure activities of the Company.
<PAGE>
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
six months ended February 29, 2000 was due to the seasonal needs of the
1999/2000 sugarbeet-processing season. The cash used to provide for operations
of $11.5 million and for investing activities of $1.1 million was funded through
cash flow financing activities. The net cash provided through financing
activities of $15.8 million was primarily provided through proceeds from the
issuance of short term debt of $19.9 million; and allocated patronage payment of
$2.4 million.
Capital expenditures for the six months ended February 29, 2000 totaled $1.2
million. Capital expenditures for fiscal year 2000 are currently estimated at
$4.8 million.
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
The annual meeting of the shareholders which was held on December 7, 1999. At
the meeting the Cooperative held election of directors. Elected to three year
terms by voice vote and unanimous consent were the following directors: Mike
Hasbargen, district four; Jack Lacey, district five and Paul Summer, district
seven. In addition, the following directors (including current expiration of
term) continued on following the Cooperative's annual meeting: Jerry Meyer,
district one (2000); Russell Mauch, district two (2001); Ed Moen, Jr., district
three (2001); John Hought, district six (2000); Doug Etten, district eight
(2000) and Victor Krabbenhoft, district nine (2001).
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: April 14, 2000 /s/ LARRY D. STEWARD
-------------------- --------------------
Larry D. Steward
President and Chief Executive Officer
Date: April 14, 2000 /s/ STEVEN M. CASPERS
-------------------- ---------------------
Steven M. Caspers
Executive Vice President, and
Chief Financial Officer
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