8-K 1 fin8kpork.htm FORM 8-K - FARMLAND INDUSTRIES, INC UNITED STATES

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 28, 2003

 

FARMLAND INDUSTRIES, INC.

Debtor-in-possession as of May 31, 2002

(Exact name of registrant as specified in its charter)

Kansas

001-11629

44-0209330

(State of Incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

12200 North Ambassador Drive

Kansas City, Missouri

64163-1244

(Address of principal executive offices)

(Zip Code)

 

816-713-7000

(Registrant's telephone number, including area code)

Not Changed

(Former name or former address, if changed since last report)

 

ITEM 2.            Acquisition or Disposition of Assets

Effective October 28, 2003, Farmland consummated the sale of substantially all of our pork marketing assets to KC Acquisition, Inc., a wholly owned subsidiary of Smithfield Foods, Inc.  As part of this transaction Farmland transferred and assigned to KC Acquisition The Farmland Industries, Inc. Employee Retirement Plan (the “Pension Plan”) and all the liabilities and obligations under the Pension Plan.  The sale of our pork marketing assets and transfer of the Pension Plan were in conjunction with our reorganization proceedings and were subject to approval by the bankruptcy court.  An auction was held for these assets during October 2003 and the final bid was approved by the Court on October 28, 2003.  This transaction resulted in the purchase of assets and inventories and the assumption of certain liabilities by the buyers for consideration of approximately $385.0 million.   As part of this transaction both the buyer and seller deposited $7.5 million in an escrow account until the final working capital calculation can be completed.  The sales proceeds will be held as cash reserves until such time as our plan of reorganization is consummated by the Court and distributions are made to the creditors. 

ITEM 7.            Financial Statements and Exhibits

The following pro forma condensed consolidated financial statements are presented to illustrate the effects of the sale of our pork marketing assets and the assignment of the Pension Plan (collectively the “Pork Marketing Disposition”) on the historical financial position and operating results of Farmland.  These pro forma statements are presented on a disaggregated basis to illustrate the effects of the Pork Marketing Disposition, along with the previously reported dispositions of our crop production and beef marketing assets, on the historical financial position and operating results of Farmland.

The following pro forma condensed consolidated balance sheet of Farmland at May 31, 2003 gives effect to the Pork Marketing Disposition as if it had occurred on that date.  The pro forma condensed consolidated statements of operations for the nine months ended May 31, 2002 and 2003 and for the years ended August 31, 2000, 2001 and 2002 give effect to the Pork Marketing Disposition as if it had occurred as of the beginning of the earliest period presented. 

The pro forma condensed consolidated financial statements have been derived from, and should be read in conjunction with, Farmland’s historical consolidated financial statements, including the accompanying notes.  Those financial statements are included in our Quarterly Report on Form 10-Q for the nine months ended May 31, 2003 and our Annual Report on Form 10-K for the year ended August 31, 2002.  The pro forma condensed consolidated financial statements have also been derived from, and should be read in conjunction with, Farmland’s previous pro forma condensed consolidated financial statements, including accompanying notes.  These previous pro forma statements are included in our Current Reports on Form 8-K, dated June 4, 2003 and August 15, 2003.

The pro forma condensed consolidated financial statements are presented only for informational purposes.  As a result, the accompanying pro forma condensed consolidated financial statements are also not necessarily indicative of the financial position or results of operations of Farmland that would have occurred had the Pork Marketing Disposition been consummated as of the dates indicated.

page 2
 

 

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

(Debtors-in-Possession)

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

May 31, 2003

(UNAUDITED)

ASSETS

May 31, 2003

Pro Forma


Pro Forma

Adjustment

Adjustment

Farmland

Beef Marketing

Pork Marketing

Combined

Farmland

Disposition

Disposition

Pro Forma

(a)

(b)

(c)

(Amounts in Thousands)

Current Assets:

   Cash and cash equivalents

$

0 

$

218,370 

$

356,972(5)      

$

575,342 

Accounts receivable - trade (net of
   allowance for doubtful accounts of
   $16,123  at May 31, 2003)

266,144 
 

(130,856)

(73,746)(1)      

61,542 

   Inventories

258,420 

(57,851)

(118,180)(1)      

82,389 

   Other current assets

76,345 

(33,232)

2,960(1)(2)   

46,073 

   Current assets from discontinued
      operations.

49,289 

0 

0          

49,289 

      Total Current Assets

$

650,198 

$

(3,569)

$

168,006            

$

814,635 

Investments and Long-term receivables

$

213,933 

$

(696)

$

0          

$

213,237 

Property, Plant & Equipment:

   Property, plant and equipment, at cost

$

1,152,349 

$

(292,626)

$

(354,017)(1)     

$

505,706 

      Less accumulated depreciation and

         amortization

748,244 

(132,628)

(202,397)(1)     

413,219 

Net Property, Plant & Equipment

$

404,105 

$

(159,998)

$

(151,620)         

$

92,487 

Other Assets:

   Goodwill

$

28,289 

$

(15,787)

$

(2,786)(1)      

$

9,716 

   Intangible assets

23,688 

0 

(22,642)(1)(7)   

1,046 

   Other long-term assets

39,769 

(2,114)

(34,200)(1)(3)(6)

3,455 

   Long-term assets from discontinued

      operations

5,459 

0 

0      

5,459 

      Total Other Assets

$

97,205 

$

(17,901)

$

(59,628)         

$

19,676 

Total Assets

$

1,365,441 

$

(182,164)

$

(43,242)         

$

1,140,035 

__      

See accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet

page 3

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

May 31, 2003

(UNAUDITED)

LIABILITIES AND EQUITIES

May 31, 2003

Pro Forma

Pro Forma

Adjustment

Adjustment

Farmland

Beef Marketing

Pork Marketing

Combined

Farmland

Disposition

Disposition

Pro Forma

(a)

(b)

(c)

(Amounts in Thousands)

Current Liabilities:

   Checks and drafts outstanding         

$

22,125 

$

(22,125)

$

0 

$

0 

   Current maturities of long-term debt 

40,676 

(38,139)

0 

2,537 

   Accounts payable - trade                  

60,068 

(22,539)

(11,210)(1)

26,319 

   Other current liabilities                       

125,936 

(51,279)

(24,785)(1)

49,872 

   Current liabilities from discontinued

      operations                                       

12,251 

0 

0 

12,251 

      Total Current Liabilities                                 

$

261,056 

$

(134,082)

$

(35,995)

$

90,979 

Liabilities Subject to Compromise:

   Liabilities subject to compromise      

$

814,514 

$

0 

$

0 

$

814,514 

   Liabilities subject to compromise from   

     discontinued operations                       

57,229 

0 

0 

57,229 

     Total Liabilities Subject to Compromise

$

871,743 

$

0 

$

0 

$

871,743 

Long-Term Liabilities:

   Long-term borrowings (excluding

      current maturities)                                   

$

146,614 

$

(126,949)

$

(3,939)(1)

$

15,726 

   Other long-term liabilities                           

41,821 

(2,230)

1,495(1) 

41,086 

      Total Long-Term Liabilities                   

$

188,435 

$

(129,179)

$

(2,444)   

$

56,812 

Minority Owners' Equity in Subsidiaries    

$

51,028 

$

(47,506)

$

0    

$

3,522 

Net Loss                                                     

$

(435,415)

$

0 

$

0    

$

(435,415)

Capital Shares and Equities:

   Preferred shares, authorized 8,000,000 shares, 8% Series A

      cumulative redeemable preferred shares,

      stated at redemption value, $50

      per share                                       

$

100,000 

$

0 

$

0    

$

100,000 

   Common shares authorized

      50,000,000 shares, $25 par value   

526,075 

0 

0    

526,075 

   Accumulated other comprehensive income

106 

0 

0    

106 

   Earned surplus and other equities       

(197,587)

128,603

(4,803)(4) 

(73,787)

      Total Capital Shares and Equities    

$

428,594 

$

128,603

$

(4,803)    

552,394 

Total Liabilities and Equities                   

$

1,365,441 

$

(182,164)

$

(43,242)   

$

1,140,035 

        

See accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet

page 4

Farmland Industries, Inc. AND SUBSIDIARIES

(Debtors-In-Possession)

Notes to Pro Forma CONDENSED CONSOLIDATED Balance Sheet

 

(a)

Reflects Farmland's historical financial position at May 31, 2003.

(b)

 Reflects pro forma adjustment to record the disposition of our beef marketing assets as reported in our Current Report on Form 8-K, dated August 15, 2003.

(c)

 Pro forma adjustments to record the Pork Marketing Disposition as of May 31, 2003 reflect:

1)

The sale of certain assets and inventories and the assumption of certain liabilities to KC Acquisition, Inc. for cash;

2)

An escrow deposit for $7.5 million to be held until the final working capital calculation can be completed;

3)

Reversal of book/tax timing differences related to assets sold to and liabilities assumed by the buyers, largely offset by an increase in the valuation allowance for our deferred tax assets;

4)

The decrease in equity represents the loss we recognized on consummation of this transaction;

5)

The proceeds from disposition of $385.0 million, net of $7.5 million escrow deposit and $20.5 million in lower proceeds from the sale of working capital had the sale been consummated on May 31, 2003;

6)

The prepaid pension cost of $33.2 million was eliminated as a result of the transfer and assignment of the Pension Plan; and

7)

The remaining $15.3 million in deferred costs associated with our enterprise-wide integrated software system was written off as it pertained entirely to our pork marketing operations being sold.

page 5

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

(Debtors-in-Possession)

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

Year Ended August 31, 2000

Pro Forma

Pro Forma

Pro Forma

Adjustment

Adjustment

Adjustment

Farmland

Crop Production

Beef Marketing

Pork Marketing

Combined

Farmland

Disposition

Disposition

Disposition

Pro Forma

(a)

(b)

(c)

(d)

(e)

(Amounts in Thousands)

Sales                                            

$

9,794,575 

$

(889,238)

$

(2,818,631)

$

(1,676,540)

$

4,410,166 

Cost of sales                                 

9,332,978 

(887,139)

(2,704,629)

(1,496,014)

4,245,196 

Gross income                                

$

461,597 

$

(2,099)

$

(114,002)

$

(180,526)

$

164,970 

Selling, general and administrative
expenses                                       


(449,601)


27,325 


21,864 


164,677 

 

(235,735)

Interest expense                                  

(107,980)

16,782 

3,612 

31,211 

(56,375)

Interest income                                                

9,877 

(52)

(496)

(142)

9,187 

Other income (expense)                       

26,695 

(25,829)

(580)

3,848 

4,134 

Equity in net income of investees           

56,891 

(10,016)

0 

0 

46,875 

Minority owners' interest in net income

   of subsidiaries                                    

(24,996)

0 

25,554 

0 

558 

Loss from continuing operations before

   income tax benefit                              

$

(27,517)

$

6,111 

$

(64,048)

$

19,068 

$

(66,386)

Income tax benefit                               

18,136 

0 

1,100 

0 

19,236 

Loss from continuing operations          

$

(9,381)

$

6,111 

$

62,948 

$

19,068 

$

(47,150)

        

See accompanying Notes to Pro Forma Condensed Consolidated Statement of Operations

page 6

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

(Debtors-in-Possession)

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

Year Ended August 31, 2001

Pro Forma

Pro Forma

Pro Forma

Adjustment

Adjustment

Adjustment

Farmland

Crop Production

Beef Marketing

Pork Marketing

Combined

Farmland

Disposition

Disposition

Disposition

Pro Forma

(a)

(b)

(c)

(d)

(e)

(Amounts in Thousands)

Sales                                                

$

9,197,314 

$

(637,492)

$

(3,052,726)

$

(1,657,938)

$

3,849,158 

Cost of sales                              

8,803,451 

(618,230)

(2,944,519)

(1,492,929)

3,747,773 

Gross income                              

$

393,863 

$

(19,262)

$

(108,207)

$

(165,009)

$

101,385 

Selling, general and administrative expenses                                   


(363,210)


19,256 

25,210 


158,143 


(160,601)

Restructuring and other charges    

(80,325)

0 

0 

17,396 

(62,929)

Interest expense                             

(118,237)

24,476 

2,742 

31,545 

(59,474)

Interest income                               

12,535 

(494)

(588)

5 

11,458 

Other income (expense)                 

19,677 

(31,267)

(293)

9,069 

(2,814)

Equity in net income of investees     

27,457 

(7,136)

0 

0 

20,321 

Minority owners' interest in net income

   of subsidiaries                            

(23,164)

39 

23,120 

0 

(5)

Loss from continuing operations before income tax benefit               


$


(131,404)


$


(14,388)


$

(58,016)


$


51,149 


$


(152,659)

Income tax benefit                        

27,619 

0 

913 

0 

28,532 

Loss from continuing operations    

$

(103,785)

$

(14,388)

$

(57,103)

$

51,149 

$

(124,127)

        

See accompanying Notes to Pro Forma Condensed Consolidated Statement of Operations

page 7

 

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

(Debtors-in-Possession)

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

Year Ended August 31, 2002

Pro Forma

Pro Forma

Pro Forma

Adjustment

Adjustment

Adjustment

Farmland

Crop Production

Beef Marketing

Pork Marketing

Combined

Farmland

Disposition

Disposition

Disposition

Pro Forma

(a)

(b)

(c)

(d)

(e)

(Amounts in Thousands)

Sales                                            

$

6,574,004 

$

(450,533)

$

(3,217,359)

$

(1,622,362)

$

1,283,750 

Cost of sales                                 

6,330,287 

(459,605)

(3,114,062)

(1,422,724)

1,333,896 

Gross income                                

$

243,717 

$

9,072 

$

(103,297)

$

(199,638)

$

(50,146)

Selling, general and administrative
expenses              


(339,599)


20,346 


23,506 


163,176 


(132,571)

Restructuring and other charges   

(51,876)

2,639 

0 

0 

(49,237)

Interest expense                        

(82,886)

18,023 

6,332 

9,678 

(48,853)

Interest income                           

251 

25 

(271)

64 

69 

Other income (expense)              

(15,804)

5,828 

(3,693)

12,330 

(1,339)

Equity in net income of investees  

34,124 

(11,829)

943 

0 

23,238 

Minority owners' interest in net income

   of subsidiaries                              

(22,404)

0 

22,527 

0 

123 

Reorganization expense                    

(69,114)

9,368 

0 

(751)

(60,497)

Loss from continuing operations before

   income tax expense                        

$

(303,591)

$

53,472 

$

(53,953)

$

(15,141)

$

(319,213)

Income tax expense                         

(5,521)

0 

(1,053)

0 

(6,574)

Loss from continuing operations       

$

(309,112)

$

53,472 

$

(55,006)

$

(15,141)

$

(325,787)

        

See accompanying Notes to Pro Forma Condensed Consolidated Statement of Operations

 

 

page 8

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

(Debtors-in-Possession)

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

Nine Months Ended May 31, 2002

Pro Forma

Pro Forma

Adjustment

Adjustment

Farmland

Beef Marketing

Pork Marketing

Combined

Farmland

Disposition

Disposition

Pro Forma

(a)

(c)

(d)

(e)

(Amounts in Thousands)

Sales                                                          

$

4,644,583 

$

(2,385,948)

$

(1,243,141)

$

1,015,494 

Cost of sales                                              

4,486,546 

(2,326,592)

(1,104,409)

1,055,545 

Gross income                                             

$

158,037 

$

(59,356)

$

(138,732)

$

(40,051)

Selling, general and administrative
   expenses                                                


(236,937)


17,191


120,574 


(99,172)

Restructuring and other credits                   

(49,237)

0 

0 

(49,237)

Interest expense                                        

(58,997)

4,895

8,218 

(45,884)

Interest income                                         

1,662 

(95)

52 

1,619 

Other income (expense)                             

(1,368)

(4,128)

2,572 

(2,924)

Equity in net income of investees                 

22,572 

719

0 

23,291 

Minority owners' interest in net income of subsidiaries                                            


(11,870)


11,859


0 


(11)

Reorganization expense                         

(54,719)

0 

0 

(54,719)

Loss from continuing operations before

   income tax benefit                             

$

(230,857)

$

(28,915) 

$

(7,316)

$

(267,088)

Income tax benefit                                 

54,764 

0 

0 

54,764 

Loss from continuing operations              

$

(176,093)

$

(28,915)

$

(7,316)

$

(212,324)

 

        

See accompanying Notes to Pro Forma Condensed Consolidated Statement of Operations

page 9

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

(Debtors-in-Possession)

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

 

Nine Months Ended May 31, 2003

Pro Forma

Pro Forma

Adjustment

Adjustment

Farmland

Beef Marketing

Pork Marketing

Combined

Farmland

Disposition

Disposition

Pro Forma

(a)

(c)

(d)

(e)

(Amounts in Thousands)

Sales                                                 

$

4,834,785 

$

(2,621,845)

$

(1,207,402)

$

1,005,538 

Cost of sales                                     

4,610,713 

(2,560,021)

(1,065,486)

985,206 

Gross income                                    

$

224,072 

$

(61,824)

$

(141,916)

$

20,332 

Selling, general and administrative expenses                                        

(167,510)

18,747 

110,741 

(38,022)

Restructuring and other credits        

557 

0 

0

557 

Interest expense                               

(20,906)

3,707 

3,788 

(13,411)

Interest income                              

1,139 

(437)

3 

705 

Other income (expense)                   

53,473 

(2,778)

1,004 

51,699 

Equity in net income of investees      

17,410 

978 

0 

18,388 

Minority owners' interest in net income of subsidiaries                                  


(12,146)


12,027 


0 


(119)

Reorganization expense                   

(453,871)

0 

18,029 

(435,842)

Loss from continuing operations before

   income tax benefit (expense)         

$

(357,782)

$

(29,580)

$

(8,351)

$

(395,713)

Income tax benefit (expense)            

0 

0 

0 

0 

Loss from continuing operations       

$

(357,782)

$

(29,580)

$

(8,351)

$

(395,713)

        

See accompanying Notes to Pro Forma Condensed Consolidated Statement of Operations

page 10

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

(Debtors-in-Possession)

NOTES TO PRO FORMA CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

NINE MONTHS ENDED MAY 31, 2002 AND 2003 AND

YEARS ENDED AUGUST 31, 2000, 2001 AND 2002

(a) Reflects Farmland's historical operating results for the nine months ended May 31, 2002 and 2003 and for the years ended August 31, 2000, 2001 and 2002.
(b) Reflects pro forma adjustment to record the disposition of a significant portion of our domestic and foreign nitrogen assets as reported in our Current Report on Form 8-K, dated June 4, 2003.
(c) Reflects pro forma adjustment to record the disposition of our beef marketing assets as reported in our Current Report on Form 8-K, dated August 15, 2003.
(d) Pro forma adjustments to record the Pork Marketing Disposition for the nine months ended May 31, 2002 and 2003, and for the years ended August 31, 2000, 2001 and 2002 reflect the following directly identifiable items:
1) The effect of excluding sales, cost of sales, selling, general and administrative expenses, interest expense and other expenses associated with the Pork Marketing Disposition.
(e) Based on information currently available, Management estimates that the transactions described in this filing will result in a loss, net of taxes, of approximately $4 million.  This loss is not reflected in these pro forma statements of operations.  This loss will be recognized in the first quarter ending November 30, 2003. 

page 11

 

Exhibits

2.A

Amended and Restated Asset Sale and Purchase Agreement between Farmland Industries, Inc. and KC Acquisition, Inc., dated October 12, 2003.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements 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.

 

FARMLAND INDUSTRIES, INC.

(Registrant)
By:

/s/ STEVEN R. RHODES

Steven R. Rhodes

Executive Vice President

and Chief Financial Officer

 

 

Date:  November 12, 2003

 

EXHIBIT INDEX

 

2.A

Amended and Restated Asset Sale and Purchase Agreement between Farmland Industries, Inc. and KC Acquisition, Inc., dated October 12, 2003.

 

page 12