-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KrgahxzzsVyGCUMa1cvaAgcJLSRDOevuCWimRLWqQ5wByTwP/FOHq/btNFcncFpL DcWrNCEaY8BWsFJaZJkfkw== 0000897101-98-000817.txt : 19980814 0000897101-98-000817.hdr.sgml : 19980814 ACCESSION NUMBER: 0000897101-98-000817 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980601 ITEM INFORMATION: FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENEX HARVEST STATES COOPERATIVES CENTRAL INDEX KEY: 0000823277 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-FARM PRODUCT RAW MATERIALS [5150] IRS NUMBER: 410251095 STATE OF INCORPORATION: MN FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-17865 FILM NUMBER: 98685479 BUSINESS ADDRESS: STREET 1: 5500 CENEX DRIVE CITY: INVER GROVE HEIGHTS STATE: MN ZIP: 55077 BUSINESS PHONE: 6129469433 MAIL ADDRESS: STREET 1: 5500 CENEX DRIVE CITY: INVER GROVE HEIGHTS STATE: MN ZIP: 55077 FORMER COMPANY: FORMER CONFORMED NAME: HARVEST STATES COOPERATIVES DATE OF NAME CHANGE: 19961212 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Amendment No. 1 to Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): June 1, 1998. CENEX HARVEST STATES COOPERATIVES (Exact name of registrant as specified in its charter) Minnesota 333-17865 41-0251095 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 5500 Cenex Drive, Inver Grove Heights, Minnesota 55077 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (651) 451-5151 The undersigned registrant hereby amends Item 7 of its Current Report on Form 8-K filed with the Commission on June 10, 1998, to include the financial statement information indicated in Item 7 below: Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Audited financial statements of business acquired-CENEX, Inc. Report of Independent Accountants Consolidated Balance Sheets as of September 30, 1997 and 1996 Consolidated Statements of Equities for the years ended September 30, 1997, 1996 and 1995 Consolidated Statements of Operations for the years ended September 30, 1997, 1996 and 1995 Consolidated Statements of Cash Flows for the years ended September 30, 1997, 1996 and 1995 Notes to Consolidated Financial Statements (b) Unaudited interim financial statements of business acquired-CENEX, Inc. Consolidated Balance Sheet as of February 28, 1998 Consolidated Statements of Operations for the Five Months Ended February 28, 1998 and 1997 Consolidated Statement of Equities for the Five Months Ended February 28, 1998 Consolidated Statements of Cash Flows for the Five Months Ended February 28, 1998 and 1997 Notes to Unaudited Consolidated Financial Statements (c) Unaudited pro forma financial information Unaudited Pro Forma Consolidated Balance Sheet as of February 28, 1998 Unaudited Pro Forma Consolidated Statements of Earnings for the Nine Months Ended February 28, 1998 and for the years ended May 31, 1997, 1996 and 1995 Notes to Unaudited Pro Forma Consolidated Financial Statements Signature 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 hereunto duly authorized. CENEX HARVEST STATES COOPERATIVES By /s/ T.F. Baker --------------------------- T. F. Baker Executive Vice-President -- Finance and Administration Date: August 13, 1998 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Members and Patrons of CENEX, Inc.: We have audited the accompanying consolidated balance sheets of CENEX, Inc. and subsidiaries as of September 30, 1997 and 1996, and the related consolidated statements of operations, cash flows and equities for each of the three years in the period ended September 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CENEX, Inc. and subsidiaries as of September 30, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1997, in conformity with generally accepted accounting principles. Minneapolis, Minnesota October 27, 1997, except for note 12, as to which the date is November 17, 1997 ================================================================================ CENEX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ================================================================================
- ------------------------------------------------------------------------------------------------------------ SEPTEMBER 30 ($ IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 - ------------------------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 28,371 $ 27,063 Accounts and notes receivable, net 254,369 281,593 Inventories 323,053 320,997 Other current assets 33,470 41,086 - ------------------------------------------------------------------------------------------------------------ Total current assets 639,263 670,739 Investments 210,745 175,917 Property, plant and equipment, net 613,493 574,484 Other assets 46,455 37,986 - ------------------------------------------------------------------------------------------------------------ Total assets $ 1,509,956 $ 1,459,126 ============================================================================================================ LIABILITIES AND EQUITIES Current liabilities: Notes payable $ 15,446 $ 43,347 Current portion of long-term debt 10,410 11,902 Accounts payable 372,748 392,485 Accrued expenses 57,046 75,334 Patrons' equities payable in cash 63,020 52,085 - ------------------------------------------------------------------------------------------------------------ Total current liabilities 518,670 575,153 Long-term debt, less current portion 227,057 189,377 Other liabilities 68,144 64,701 Minority interests in subsidiaries 60,727 55,885 Commitments and contingencies Equities Common stock ($25 par value; 5,000 shares authorized, 20 21 814 and 827 shares issued and outstanding, respectively) Preferred stock ($25 par value; 30,000,000 shares authorized, 21,422,035 and 20,335,497 shares issued and outstanding, respectively) 502,588 480,133 Patronage refunds 71,960 56,000 Deferred patronage (51,899) (55,473) Unallocated reserve 112,689 93,329 - ------------------------------------------------------------------------------------------------------------ Total equities 635,358 574,010 - ------------------------------------------------------------------------------------------------------------ Total liabilities and equities $ 1,509,956 $ 1,459,126 ============================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. ================================================================================ CENEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITIES ================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEARS ENDED Common Stock Preferred Stock SEPTEMBER 30, 1997, 1996 AND 1995 --------------- ------------------- Patronage Deferred Unallocated Total ($ IN THOUSANDS) Shares Amount Shares Amount Refunds Patronage Reserve Equities - ----------------------------------------------------------------------------------------------------------------------------------- Balances, October 1, 1994 855 $22 17,583,296 $424,098 $52,990 $(62,300) $71,602 $486,412 1994 final patronage determination 22,497 213 22,710 1994 patronage distribution 2,112,179 52,837 (75,487) (22,650) 1994 final equity retirement determination 14,290 14,290 Equities retired, net (11) (1) (571,061) (13,685) (13,686) 1995 net income 62,300 (9,553) 14,078 66,825 1995 cash patronage refund provisions (18,690) (18,690) 1995 equity retirement provisions (11,380) (11,380) - ----------------------------------------------------------------------------------------------------------------------------------- Balances, September 30, 1995 844 21 19,124,414 466,160 43,610 (71,853) 85,893 523,831 1995 final patronage determination 19,047 (357) 18,690 1995 patronage distribution 1,752,981 43,855 (62,657) (18,802) 1995 final equity retirement determination 11,380 11,380 Equities retired, net (17) (541,898) (13,177) (13,177) 1996 net income 80,000 16,380 7,793 104,173 1996 cash patronage refund provisions (24,000) (24,000) 1996 equity retirement provisions (28,085) (28,085) - ----------------------------------------------------------------------------------------------------------------------------------- Balances, September 30, 1996 827 21 20,335,497 480,133 56,000 (55,473) 93,329 574,010 1996 final patronage determination 24,309 (309) 24,000 1996 patronage distribution 2,247,410 56,210 (80,309) (24,099) 1996 final equity retirement determination 28,085 28,085 Equities retired, net (13) (1) (1,160,872) (29,660) (29,661) 1997 net income 102,800 3,574 19,669 126,043 1997 cash patronage refund provisions (30,840) (30,840) 1997 equity retirement provisions (32,180) (32,180) - ----------------------------------------------------------------------------------------------------------------------------------- Balances, September 30, 1997 814 $20 21,422,035 $502,588 $71,960 $(51,899) $112,689 $635,358 ===================================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. ================================================================================ CENEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ================================================================================
- ------------------------------------------------------------------------------------------------------------------- FOR THE YEARS ENDED SEPTEMBER 30 ($ IN THOUSANDS) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- NET SALES: Petroleum $ 1,930,227 $ 1,737,752 $ 1,456,971 Agronomy 810,551 779,804 652,601 Other 177,016 165,458 134,718 - ------------------------------------------------------------------------------------------------------------------- 2,917,794 2,683,014 2,244,290 Cost of sales 2,709,705 2,500,250 2,112,844 - ------------------------------------------------------------------------------------------------------------------- Gross margin 208,089 182,764 131,446 - ------------------------------------------------------------------------------------------------------------------- Distribution, marketing and administrative expenses 47,391 48,236 46,218 Interest expense, net 13,179 8,987 8,869 Minority interests in earnings (losses) of subsidiaries 6,880 7,985 (148) Other, net 1,381 303 3,147 - ------------------------------------------------------------------------------------------------------------------- 68,831 65,511 58,086 - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 139,258 117,253 73,360 Income taxes 13,215 13,080 6,239 - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations 126,043 104,173 67,121 Loss from discontinued operations, net of income tax benefit of $1,439 -- -- 296 - ------------------------------------------------------------------------------------------------------------------- NET INCOME $ 126,043 $ 104,173 $ 66,825 =================================================================================================================== DISTRIBUTION OF NET INCOME: Patronage refunds $ 102,800 $ 80,000 $ 62,300 Changes in deferred patronage 3,574 16,380 (9,553) Changes in unallocated reserve 19,669 7,793 14,078 - ------------------------------------------------------------------------------------------------------------------- NET INCOME $ 126,043 $ 104,173 $ 66,825 ===================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. ================================================================================ CENEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ================================================================================
- ------------------------------------------------------------------------------------------------------------ FOR THE YEARS ENDED SEPTEMBER 30 ($ IN THOUSANDS) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 126,043 $ 104,173 $ 66,825 Loss from discontinued operations, net of taxes -- -- 296 - ------------------------------------------------------------------------------------------------------------ Income from continuing operations 126,043 104,173 67,121 - ------------------------------------------------------------------------------------------------------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 48,264 42,906 40,676 Adjustment of inventories to market value 10,153 (24,385) (3,182) Noncash patronage refunds received (55,491) (31,116) (21,182) Other, net (3,708) (6,492) (2,687) Changes in operating assets and liabilities: Accounts receivable 26,456 (47,358) (5,948) Inventories (11,725) 7,968 (12,004) Other current assets 7,616 (17,271) (1,477) Other assets (2,531) 124 (3,192) Accounts payable and accrued expenses (38,025) 93,831 10,895 Other liabilities 3,512 2,646 11,913 - ------------------------------------------------------------------------------------------------------------ Total adjustments (15,479) 20,853 13,812 - ------------------------------------------------------------------------------------------------------------ Net cash provided by continuing operations 110,564 125,026 80,933 Net cash (used in) provided by discontinued operations -- (6,630) 4,642 - ------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 110,564 118,396 85,575 - ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (92,888) (157,896) (89,381) Disposals of assets 9,046 26,683 8,020 Discontinued operations investing activities, net -- 33,164 (7,048) Investments in other cooperatives 4,651 6,950 (6,997) Investments redeemed by other cooperatives 18,959 3,351 2,236 Changes in notes receivable (4,239) (1,983) 5,194 Other investing activities, net (1,038) (4,868) (871) - ------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (65,509) (94,599) (88,847) - ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Changes in notes payable (27,901) 1,169 10,618 Proceeds from long-term debt 58,915 56,110 42,000 Payments on long-term debt (22,727) (38,188) (34,155) Patronage refunds paid and patrons' equities retired (52,034) (30,051) (36,926) - ------------------------------------------------------------------------------------------------------------ Net cash used in financing activities (43,747) (10,960) (18,463) - ------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents 1,308 12,837 (21,735) Cash and cash equivalents at beginning of year 27,063 14,226 35,961 - ------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 28,371 $ 27,063 $ 14,226 ============================================================================================================ Cash flow information: Cash paid during the year for: Interest $ 18,753 $ 15,546 $ 15,570 Income taxes 16,600 11,991 10,713 - ------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION: CENEX, Inc. (Cenex) is organized and operated on a cooperative basis as a supplier of agronomy and petroleum products and other farm supplies for its 799 member cooperatives and 689 other patron cooperatives located primarily throughout the Midwest and Northwest states. In accordance with the By-Laws and by action of the Board of Directors, annual net savings from patronage sources is distributed to the patrons following the close of each year, and is based on amounts reportable for federal income tax purposes as adjusted in accordance with the By-Laws. A minimum of 20 percent of the patronage refund is paid in cash with the balance distributed in the form of preferred stock. The By-Laws require that annual net savings from sources other than patronage be added to the unallocated reserve. The By-Laws also provide that an amount equal to 10 percent of the distributable annual net savings from patronage sources be added to the unallocated reserve, until the total unallocated reserve reaches 25 percent of the total equities. CONSOLIDATION: The consolidated financial statements include the accounts of Cenex and all of its wholly-owned and majority-owned subsidiaries, including National Cooperative Refinery Association (NCRA), collectively referred to herein as "the Company." The effects of all intercompany transactions have been eliminated. The Company is currently evaluating the consolidation of NCRA in light of EITF 96-16, which provides new guidance on accounting for investments in which minority shareholders have certain approval or veto rights. This guidance will be effective for the Company's investment in NCRA for its fisal year ending after December 15, 1998. CASH EQUIVALENTS: Cash equivalents include short-term highly liquid investments with original maturities of three months or less at date of acquisition. INVENTORIES AND HEDGING: Inventories are valued at the lower of cost or market. The cost of certain petroleum inventories (refined products, crude oil and asphalt) is determined on the last-in, first-out (LIFO) method; all other inventories are valued on the first-in, first-out (FIFO) and average cost methods. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ INVENTORIES AND HEDGING, CONTINUED: The Company enters into exchange-traded commodity futures and options contracts to hedge its exposure to price fluctuations on anticipated crude oil, propane and refined products transactions. Commodity trading in petroleum futures and options contracts is a natural extension of cash market trading. The commodity futures and options markets have underlying principles of increased liquidity and longer trading periods than the cash market, and hedging is one method of reducing exposure to the price risk inherent in the petroleum business. Typically, trading is conducted to manage price risk for near-term supply requirements. The Company's use of futures and options contracts reduces the effects of price volatility, thereby protecting against adverse short-term price movements while somewhat limiting the benefits of short-term price movements. Open hedge positions and deferred gains and losses for petroleum futures and options contracts were not significant at September 30, 1997 and 1996. Gains and losses on futures transactions related to inventories are credited or charged to cost of sales as such inventories are sold. Gains and losses on hedge contracts not yet closed are accounted for as unrealized gains and losses, and accordingly, are deferred in the consolidated balance sheet as part of inventories. INVESTMENTS: Investments in cooperatives are stated at cost, plus patronage refunds received in the form of capital stock and other equities. Other investments in which the Company has significant ownership and influence, but not control, are included in the consolidated financial statements under the equity method of accounting. The consolidated statement of operations includes patronage refunds from the St. Paul Bank for Cooperatives (St. Paul Bank) and the National Bank for Cooperatives (CoBank) as reductions of interest expense, net, and patronage refunds from other cooperative investees as reductions of cost of sales. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. Expenditures for maintenance and repairs and minor renewals are expensed, while costs of major renewals and betterments are capitalized. Depreciation and amortization are provided on the straight-line method by charges to operations at rates based upon the expected useful lives of individual or groups of assets. The cost and related accumulated depreciation and amortization of assets sold or otherwise disposed of are removed from the related accounts and resulting gains or losses are reflected in operations. The Company periodically reviews property, plant and equipment and other long-lived assets in order to assess recoverability based on projected income and related cash flows on an undiscounted basis. Should the sum of the related, expected future net cash flows be less than the carrying value, an impairment loss would be recognized. An impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. REVENUE RECOGNITION: Sales are recognized upon shipment to customers, net of freight charges. ENVIRONMENTAL EXPENDITURES: Liabilities related to remediation of contaminated properties are recognized when the related costs are considered probable and can be reasonably estimated. Estimates of these costs are based upon currently available facts, existing technology, undiscounted site specific costs and currently enacted laws and regulations. In reporting environmental liabilities, no offset is made for potential recoveries. All liabilities are monitored and adjusted as new facts or changes in law or technology occur. Environmental expenditures are capitalized when such costs provide future economic benefits. INCOME TAXES: The Company is a nonexempt agricultural cooperative and files a consolidated federal income tax return with its subsidiaries, except for NCRA. The Company is subject to tax on net income from nonpatronage sources and undistributed patronage-sourced income. Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, at each year-end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant management estimates relate to the determination of doubtful accounts, assessment of the recoverability of long-lived assets, inventory valuation, reserves for environmental and self-insured insurance claims, and determination of benefit plan actuarial assumptions. SEGMENT INFORMATION: In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 131, a new standard for reporting information about operating or business segments in financial statements. This new standard will be effective for fiscal years beginning after December 15, 1997. Management is in the process of evaluating the new standard and has not yet determined its impact on the Company's financial statements. 2. ACCOUNTS AND NOTES RECEIVABLE: The Company's net sales are primarily to member cooperatives who are stockholders of the Company. Accordingly, accounts receivable are comprised primarily of amounts due from these member cooperatives. Accounts and notes receivable are stated net of allowances for doubtful accounts of approximately $12.9 million and $12.1 million at September 30, 1997 and 1996, respectively. 3. INVENTORIES: Inventories at September 30, 1997 and 1996 are as follows: --------------------------- 1997 1996 --------------------------- ($ IN THOUSANDS) Petroleum $233,169 $230,292 Agronomy 74,064 71,251 Other 15,820 19,454 --------------------------- $323,053 $320,997 =========================== ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 3. INVENTORIES: continued At September 30, 1997, the Company valued approximately 58 percent of petroleum inventories using the lower of cost, determined on the LIFO method, or market (65 percent at September 30, 1996). At September 30, 1997 and 1996, reserves amounting to $24.6 million and $14.4 million, respectively, have been established to reduce these petroleum inventories to estimated market value. 4. INVESTMENTS: Investments at September 30, 1997 and 1996 are as follows: -------------------------- 1997 1996 -------------------------- ($ IN THOUSANDS) CF Industries, Inc. $136,125 $107,406 Cenex/Land O'Lakes Agronomy Company 29,202 23,633 St. Paul Bank 13,288 12,814 CoBank 9,280 8,949 Other 22,850 23,115 -------------------------- $210,745 $175,917 ========================== Investments, principally investments in other cooperatives, have no quoted market prices, and as such, it is not practicable to estimate their fair value. Various agreements with other owners of investee companies and a majority-owned subsidiary set out parameters whereby Cenex may buy and sell additional interests in those companies, upon the occurrence of certain events, at fair values determinable as set forth in the specific agreements. Cenex purchases of plant food, commission expense and the Company's interest expense related to cooperative investees, are as follows: ---------------------------- 1997 1996 1995 ---------------------------- ($ IN MILLIONS) CF Industries, Inc. $240 $275 $204 Cenex/Land O'Lakes Agronomy Company 38 35 30 St. Paul Bank 14 9 7 CoBank 2 6 8 ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 5. PROPERTY, PLANT AND EQUIPMENT: Major classes of property, plant and equipment at September 30, 1997 and 1996 are as follows: ----------------------------- Estimated 1997 1996 Useful Life ----------------------------- in Years ($ IN THOUSANDS) Petroleum refineries 3-40 $ 601,899 $ 533,820 Distribution and general 3-40 220,267 201,320 Petroleum pipelines and terminals 3-40 211,207 209,513 Construction in progress 35,722 47,074 ----------------------------- 1,069,095 991,727 Less accumulated depreciation and amortization 455,602 417,243 ----------------------------- $ 613,493 $ 574,484 ============================= 6. DISCONTINUED OPERATIONS In May 1995, the Cenex Board of Directors approved a plan to dispose of its exploration and production (E&P) operations. A purchase and sale agreement was signed, and the transaction recorded in early fiscal year 1996. The E&P operations have been accounted for as discontinued operations. 7. NOTES PAYABLE AND LONG-TERM DEBT: Notes payable and long-term debt at September 30, 1997 and 1996 consisted of the following: --------------------------------------------- Interest rates at Sept. 30, 1997 1997 1996 --------------------------------------------- ($ IN THOUSANDS) Notes payable (a),(e) 5.73% to 6.38% $ 15,446 $ 43,347 ======================= Long-term debt Revolving term loans from St. Paul Bank, payable in installments through 2010, when the balance is due (b),(e) 6.65% to 7.63% $178,500 $130,500 ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 7. NOTES PAYABLE AND LONG-TERM DEBT: continued ---------------------------------------------- Interest rates at Sept. 30, 1997 1997 1996 ---------------------------------------------- ($ IN THOUSANDS) Industrial Revenue Bonds payable in installments through 2010 (c) 5.23% to 9.26% 40,815 50,000 Revolving term loans from CoBank, payable in installments through 2004, when the balance is due (d),(e) 7.15% to 14.32% 17,596 20,246 Other notes and contracts 4.00% to 10.21% 556 533 -------------------------- Total long-term debt 237,467 201,279 Less current portion 10,410 11,902 -------------------------- Long-term portion $227,057 $189,377 ========================== (a) Amounts represent funds borrowed under seasonal short-term lines of credit and other notes payable, and are collateralized by substantially all receivables and inventories of Cenex, and NCRA's investment in CoBank. There were approximately $124.8 million of unused lines of credit and other short-term borrowings available at September 30, 1997 ($65 million at September 30, 1996). (b) Term loans are collateralized by substantially all receivables and inventories of Cenex. Under the revolving term loan agreement, there was an additional $47.6 million of committed credit available at September 30, 1997 ($65 million at September 30, 1996). (c) Industrial Revenue Bonds are collateralized by property, plant and equipment, primarily refinery equipment, with a cost of approximately $156.1 million and $156.3 million, less accumulated depreciation of approximately $85.7 million and $79.6 million at September 30, 1997 and 1996, respectively. (d) Term loans collateralized by NCRA's investment in CoBank. (e) Restrictive covenants under various note agreements have requirements for maintenance of minimum working capital levels and other financial ratios. During the year ended September 30, 1997, the Company violated the minimum working capital covenant under one of its note agreements. The Company has obtained a waiver for this violation. Based on quoted market prices for the same or similar issues, the fair value of long-term debt approximates book value at September 30, 1997 and 1996. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 7. NOTES PAYABLE AND LONG-TERM DEBT: continued Interest expense was $17.2 million, $14.0 million and $14.1 million, and is net of interest capitalized on construction in progress of $1.5 million, $3.1 million and $1.3 million for 1997, 1996 and 1995, respectively. The aggregate amount of long-term debt payable is as follows ($ in thousands): 1998 $ 10,410 1999 31,012 2000 24,015 2001 32,130 2002 20,141 Thereafter 119,759 8. INCOME TAXES: The provisions for income taxes for the years ended September 30 are as follows: ----------------------------------------- 1997 1996 1995 ----------------------------------------- ($ IN THOUSANDS) Continuing operations: Current $11,586 $14,929 $ 7,318 Deferred 1,629 (1,849) (1,079) ----------------------------------------- Income taxes related to continuing operations 13,215 13,080 6,239 Income tax benefit from discontinued operations (1,439) ----------------------------------------- Income taxes $13,215 $13,080 $ 4,800 ========================================= ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 8. INCOME TAXES: continued The tax effect of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at September 30, are as follows: --------------------------------- 1997 1996 --------------------------------- Deferred tax assets: Accrued expenses and valuation reserves $11,655 $ 8,725 Postretirement health care and pension liabilities 2,645 2,036 AMT credit carryforward 1,013 1,131 Other 3,553 3,168 --------------------------------- Total deferred tax assets 18,866 15,060 --------------------------------- Deferred tax liabilities: Property, plant and equipment 5,578 2,731 Equity method investments 4,266 2,612 Other 1,564 630 --------------------------------- Total deferred tax liabilities 11,408 5,973 --------------------------------- Net deferred tax asset $ 7,458 $ 9,087 ================================= A reconciliation of the statutory federal income tax rate to the effective rate for continuing operations for each of the three years ended September 30, is as follows: ------------------------------ 1997 1996 1995 ------------------------------ Statutory federal income tax rate 35.0% 35.0% 35.0% State and local income taxes, net of federal income tax benefit 3.9 3.9 3.9 Patronage earnings (28.7) (26.5) (33.1) Tax effect of changes in deferred patronage (1.0) (5.4) 5.1 Other 0.3 4.2 (2.4) ------------------------------ Effective rate, continuing operations 9.5% 11.2% 8.5% ============================== ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 8. INCOME TAXES, continued The principal differences between financial statement income and taxable income for the years ended September 30 are as follows: --------------------------------------- 1997 1996 1995 --------------------------------------- ($ IN THOUSANDS) Income from continuing operations before income taxes $139,258 $117,253 $ 73,360 Loss from discontinued operations, net of taxes -- -- (296) Income tax benefit from discontinued operations -- -- (1,439) --------------------------------------- 139,258 117,253 71,625 Financial reporting/tax differences: Environmental reserves 1,916 (776) (1,732) Oil and gas activities, net (405) (13,851) 8,707 Petroleum inventory market reserves (9,279) (21,064) (3,684) Other, net 2,582 25,241 10,347 Patronage refund provisions (102,800) (80,000) (62,300) --------------------------------------- Taxable income $ 31,272 $ 26,803 $ 22,963 ======================================= 9. EQUITIES: PREFERRED AND COMMON STOCK: The authorized preferred stock consists of 30,000,000 shares at a par value of $25 each, of which 21,422,035 shares were issued and outstanding at September 30, 1997 including 31,355 shares pending stock retirement offset (20,335,497 and 6,792 shares at September 30, 1996, respectively). The preferred stock is nonvoting and is not subject to the payment of dividends. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 9. EQUITIES, continued The Articles of Incorporation provide that the preferred stock may be retired at any time and in any order as determined by the Board of Directors. In September 1997 the Board of Directors authorized total cash distributions during 1998, in the form of cash patronage and preferred stock retirements, equal to 50 percent of 1997 net income. The authorized common stock consists of 5,000 shares at a par value of $25 each, of which 814 shares were issued and outstanding at September 30, 1997 (827 shares at September 30, 1996). Common stock is not subject to the payment of dividends. Voting rights are limited to holders of common stock, with cooperative associations entitled to one vote for each of their registered producer members, plus one additional vote for each $1,000, or major fraction thereof, of preferred stock or equity issued as patronage. DEFERRED PATRONAGE: The Company follows the practice of accounting for deferred patronage charges and credits in a separate equity account instead of including such amounts in the unallocated reserve. Deferred patronage results from the fact that patronage distributions are primarily determined on the basis of taxable income rather than net income as reported in the consolidated financial statements. Deferred patronage consists of items which have been included in the computation of net income for financial statement purposes but not for income tax or patronage purposes. As the items reverse, patronage refunds and deferred patronage are affected. 10. RETIREMENT PLANS: The Company has several defined benefit pension plans covering substantially all employees. Benefits are based on years of service. Assets of the plans consist principally of equity and fixed income securities. The Cenex policy is to annually fund pension cost accrued. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 10. RETIREMENT PLANS continued Components of net periodic pension cost, funded status and other information, computed for the years ended September 30 are as follows: ------------------------------------------- 1997 1996 1995 ------------------------------------------- ($ IN THOUSANDS) Service cost for benefits earned during the period $ 4,571 $ 4,590 $ 4,007 Interest cost 10,472 10,302 10,022 Net amortization and deferral 20,378 2,430 7,882 Income on plan assets (33,139) (14,492) (18,820) ------------------------------------------- Net periodic pension cost $ 2,282 $ 2,830 $ 3,091 =========================================== Funded status at September 30, 1997 and 1996 is as follows: ------------------------------------------------- 1997 1996 ------------------------------------------------- NCRA CENEX NCRA Cenex ------------------------------------------------- ($ IN THOUSANDS) Actuarial present value of benefit obligations: Vested $ 50,684 $ 72,904 $ 46,914 $ 67,388 Nonvested 1,884 1,268 1,570 1,261 ------------------------------------------------- Accumulated benefit obligations $ 52,568 $ 74,172 $ 48,484 $ 68,649 ================================================= Projected benefit obligations $ 61,874 $ 89,496 $ 58,994 $ 82,215 Plan assets at fair value 77,106 92,000 64,933 75,272 ------------------------------------------------- Plan assets in excess of (less than) projected benefit obligations 15,232 2,504 5,939 (6,943) Add: Unrecognized net (gain) loss (2,461) 6,932 Unrecognized prior service cost 1,051 923 Unrecognized net transition asset (540) (826) Additional liabilities (433) (118) ------------------------------------------------- Net pension asset (liability) $ 15,232 $ 121 $ 5,939 $ (32) ================================================= ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 10. RETIREMENT PLANS continued Weighted average percent assumptions used in the actuarial determination of the above amounts are as follows: ------------------------------------ 1997 1996 1995 ------------------------------------ Discount rate 7.4% 7.7% 7.8% Rates of increase in compensation levels 5.2 5.2 5.3 Expected long-term rate of return on assets 8.4 8.5 8.7 The Company has other contributory defined contribution plans covering substantially all employees. Total contributions by the Company to these plans were approximately $3.0 million, $2.9 million and $2.7 million, for the years ended September 30, 1997, 1996 and 1995, respectively. In addition to providing pension and contributory benefits, the Company provides defined life and health care benefits for certain retired employees. The plan is contributory based on years of service and family status, with retiree contributions adjusted annually. The Company adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions, effective October 1, 1993. The Company elected to recognize the transition obligation of $8.1 million over 20 years as a component of net periodic postretirement benefit cost. The Company previously recognized the estimated costs of these benefits on a different accrual method. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 10. RETIREMENT PLANS continued Components of net periodic postretirement benefit cost, funded status reconciled to the accrued postretirement benefit cost and other information computed for the years ended September 30 are as follows: ------------------------------------- 1997 1996 1995 ------------------------------------- ($ IN THOUSANDS) Service cost for benefits earned during the period $ 253 $ 237 $ 270 Interest cost 868 955 1,070 Amortization of transition obligation 153 284 327 ------------------------------------- Net periodic postretirement benefit cost $ 1,274 $ 1,476 $1,667 ===================================== Actuarial present value of accumulated postretirement benefit obligations for: Retirees $ 5,743 $ 6,629 Fully eligible active participants 3,212 3,880 Other active participants 2,995 2,609 ------------------------ 11,950 13,118 Unrecognized transition obligation 6,477 6,882 Unrecognized net gain (5,638) (4,290) ------------------------ Accrued postretirement benefit obligations $ 11,111 $10,526 ======================== For measurement purposes, 9.1 percent (for pre-age 65 retirees) and 7.4 percent (for post-age 65 retirees) annual rates of increase in the per capita cost of covered health care were assumed for the year ended September 30, 1997 (10 percent and 8 percent for the year ended September 30, 1996, respectively). The rates were assumed to decrease gradually to 6 percent over 20 years and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 10. RETIREMENT PLANS continued postretirement benefit obligation as of September 30, 1997 by approximately $0.8 million and 1997 expense by approximately $0.1 million. The discount rate used in determining the accumulated postretirement benefit obligation was 7.6 percent and 7.7 percent at September 30, 1997 and 1996, respectively. 11. COMMITMENTS AND CONTINGENCIES: ENVIRONMENTAL: The Company is required to comply with various environmental laws and regulations incident to its normal business operations. In order to meet its compliance requirements, the Company establishes reserves for the future costs of remediation of identified issues, which are included in cost of sales in the consolidated statement of operations. Additional costs for matters which may be identified in the future cannot be presently determined; while the resolution of any such matters may have an impact on the Company's consolidated financial results for a particular reporting period, management believes any such matters will not have a material adverse effect on the consolidated financial position of the Company. OTHER LITIGATION AND CLAIMS: The Company is involved as a defendant in various lawsuits, claims and disputes which are in the normal course of the Company's business. The resolution of any such matters may have an impact on the Company's consolidated financial results for a particular reporting period; however, management believes any resulting liability will not have a material adverse effect on the consolidated financial position of the Company. INTERNAL REVENUE SERVICE: The Cenex 1994 and 1995 returns are currently being reviewed; while the outcome of any such reviews may have an impact on the Company's consolidated financial results for a particular reporting period, management believes that any tax assessment which may result from proposed adjustments or reviews in process will not have a material adverse effect on the consolidated financial position of the Company. ================================================================================ CENEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 11. COMMITMENTS AND CONTINGENCIES, continued LEASE COMMITMENTS: Total rental expense for all operating leases for the years ended September 30, 1997, 1996 and 1995 was $15.3 million, $16.4 million and $18.3 million, respectively. Cenex leases the Inver Grove Heights office building under a noncancellable lease with increasing lease payments, expiring in 2009, and has options to renew this lease for six additional five-year terms and to purchase the building at the greater of the amount specified in the lease or the fair market value at various times during the lease. The lease payments are collateralized by a second lien on $10.0 million of inventories and receivables. The Company also has commitments under other operating leases for refinery and transportation equipment, rail tank cars and office space. Some leases include purchase options at not less than fair market value at the end of the leases. Minimum future payments required under noncancellable operating leases at September 30, 1997 are as follows: ------------------------------------------- Office Building Other Total ------------------------------------------- ($ IN THOUSANDS) 1998 $ 3,447 $ 8,373 $ 11,820 1999 3,447 7,785 11,232 2000 3,447 7,329 10,776 2001 3,447 7,101 10,548 2002 3,447 7,043 10,490 Thereafter 37,059 12,783 49,842 ------------------------------------------- Total minimum future lease payments $ 54,294 $ 50,414 $104,708 ========================================== 12. SUBSEQUENT EVENT: During November 1997, the Boards of Directors of Cenex and Harvest States Cooperatives approved a memorandum of intent to explore unification of these two cooperatives. CENEX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET FEBRUARY 28, 1998 (UNAUDITED) 1998 ASSETS CURRENT ASSETS: CASH AND CASH EQUIVALENTS $ 57,590,187 ACCOUNTS AND NOTES RECEIVABLE, NET 202,337,698 INVENTORIES 313,266,042 OTHER CURRENT ASSETS 92,584,199 -------------- TOTAL CURRENT ASSETS 665,778,126 INVESTMENTS 226,880,106 PROPERTY, PLANT AND EQUIPMENT, NET 622,125,790 OTHER ASSETS 43,682,638 -------------- TOTAL ASSETS $1,558,466,660 ============== LIABILITIES AND EQUITIES CURRENT LIABILITIES: NOTES PAYABLE $ 52,510,040 CURRENT PORTION OF LONG-TERM DEBT 13,670,904 PATRON CREDIT BALANCES 85,022,442 ACCOUNTS PAYABLE 304,873,858 ACCRUED EXPENSES 51,955,150 PATRONS' EQUITIES PAYABLE IN CASH 48,071,498 -------------- TOTAL CURRENT LIABILITIES 556,103,892 LONG-TERM DEBT, LESS CURRENT PORTION 220,232,061 OTHER LIABILITIES 71,999,269 MINORITY INTERESTS IN SUBSIDIARIES 55,281,887 COMMITMENTS AND CONTINGENCIES EQUITIES 654,849,551 -------------- TOTAL LIABILITIES AND EQUITIES $1,558,466,660 ============== See notes to unaudited consolidated financial statements CENEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FIVE MONTHS ENDED FEBRUARY 28 (UNAUDITED)
1998 1997 NET SALES: PETROLEUM PRODUCTS $ 663,812,586 $ 873,651,891 AGRONOMY 223,683,120 199,954,657 FEED AND FARM SUPPLIES 105,156,169 112,952,111 --------------- --------------- 992,651,875 1,186,558,659 COST OF SALES 935,999,580 1,097,365,444 --------------- --------------- GROSS MARGIN ON SALES 56,652,295 89,193,215 --------------- --------------- OPERATING EXPENSES AND OTHER: DISTRIBUTION, MARKETING AND ADMINISTRATIVE EXPENSES 29,060,185 24,216,737 INTEREST EXPENSE, NET 6,778,239 5,851,036 MINORITY INTERESTS IN EARNINGS (LOSSES) OF SUBSIDIARIES (4,309,000) (1,875,139) --------------- --------------- 31,529,424 28,192,634 --------------- --------------- INCOME BEFORE INCOME TAXES 25,122,871 61,000,581 INCOME TAXES 5,650,000 4,470,000 --------------- --------------- NET INCOME $ 19,472,871 $ 56,530,581 =============== ===============
See notes to unaudited consolidated financial statements CENEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EQUITIES
-------------------------------------------------------------------------------------- COMMON PREFERRED PATRONAGE DEFERRED UNALLOCATED TOTAL STOCK STOCK REFUNDS PATRONAGE RESERVES EQUITIES -------------------------------------------------------------------------------------- BALANCES, SEPTEMBER 30, 1997 $20,350 $502,586,993 $71,960,000 ($51,899,495) $112,689,784 $635,357,632 1997 FINAL EQUITY RETIREMENT DETERMINATION (UNAUDITED) 14,968,050 14,968,050 EQUITIES RETIRED, NET (UNAUDITED) (500) (14,948,502) (14,949,002) 1998 NET INCOME (UNAUDITED) 18,840,000 632,871 19,472,871 -------------------------------------------------------------------------------------- BALANCES, FEBRUARY 28, 1998 (UNAUDITED) $19,850 $502,606,541 $90,800,000 ($51,899,495) $113,322,655 $654,849,551 ======================================================================================
See notes to unaudited consolidated financial statements CENEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FIVE MONTHS ENDED FEBRUARY 28 (UNAUDITED)
1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 19,472,871 $ 56,530,581 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,493,771 19,141,487 Adjustment of inventories to market value 17,794,000 8,611,000 Noncash patronage refunds received (17,875,712) (45,707,389) Other, net (618,627) 133,032 Changes in operating assets and liabilities: Accounts receivable 53,666,585 91,324,932 Inventories (8,006,806) (7,355,621) Other current assets (59,114,209) (99,722,141) Other assets 2,946,423 Accounts payable and accrued expenses 12,058,821 9,806,331 Other liabilities 3,855,182 (421,246) ------------ ------------ Total adjustments 26,199,428 (24,189,615) ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 45,672,299 32,340,966 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (31,804,049) (41,059,852) Disposals of assets 3,905,120 3,048,177 Investments in other cooperatives (6,765,551) (3,030,472) Investments redeemed by other cooperatives 1,496,060 844,931 Changes in notes receivable 1,164,972 3,469,452 Other investing activities, net (2,995,294) 1,412,665 ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (34,998,742) (35,315,099) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Increase in notes payable 36,441,926 5,480,513 Proceeds from long-term debt 415,359 Payments on long-term debt (3,564,884) (3,957,851) Patronage refunds paid and patrons' equities retired (14,331,250) (11,451,539) ------------ ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 18,545,792 (9,513,518) ------------ ------------ Net increase (decrease) in cash and cash equivalents 29,219,349 (12,487,651) Cash and cash equivalents at beginning of year 28,370,838 27,062,536 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 57,590,187 $ 14,574,885 ============ ============
See notes to unaudited consolidated financial statements CENEX, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements as of February 28, 1998 and for the five months ended February 28, 1998 and 1997, reflect, in the opinion of management of CENEX, Inc. (Cenex), all normal, recurring adjustments necessary for a fair statement of the results of operations for the interim periods. The results of operations for any interim period are not necessarily indicative of results for the full year. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of Cenex for the year ended September 30, 1996, included elsewhere in this Form 8-K/A. 2. RECEIVABLES February 28, 1998 -------------- Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . $214,983,662 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 548,446 -------------- 215,532,108 Less allowance for doubtful accounts (13,194,410) -------------- $202,337,698 ============== 3. INVENTORIES February 28, 1998 -------------- Petroleum.................................................. $202,277,904 Agronomy................................................... 88,172,860 Feed and Seed.............................................. 4,655,788 Other...................................................... 18,159,490 -------------- $313,266,042 ============== At February 28, 1998, reserves amounting to $42.3 million have been established to reduce petroleum inventories to estimated market value. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, a new standard related to the accounting for derivative transactions and hedging activities. This new standard will be effective for fiscal years beginning after June 15, 1999. Management is in the process of evaluating this new standard and has not yet determined its impact on the Company's financial statements. 4. SUBSEQUENT EVENT Effective June 1, 1998, the Company merged with Harvest States Cooperatives. The merger will be accounted for as a pooling of interest. As a result of the merger, each share of common stock and preferred stock of the Company was exchanged for one capital equity certificate of Cenex Harvest States Cooperatives with a face value of $25. CENEX HARVEST STATES COOPERATIVES UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma consolidated financial statements give effect to the June 1, 1998 merger of Harvest States Cooperatives (the Company) and CENEX, Inc. (Cenex). Cenex was a cooperative with operations centering on providing supplies and services to its members, including refined fuels, propane, lubricants, tires and accessories, plant food and crop protection products. The Company was Cenex's largest customer for agronomy products, and had a similar membership area. The unaudited pro forma consolidated balance sheets as of February 28, 1998 combine the historical consolidated balance sheets of Harvest States Cooperatives and Cenex as if the merger had been effective on February 28, 1998 after giving effect to certain adjustments described in the accompanying notes to the unaudited pro forma consolidated financial statements. The unaudited pro forma consolidated statements of earnings for the nine months ended February 28, 1998 and for each of the three years ended May 31, 1997, 1996 and 1995, present the combined results of operations of Harvest States Cooperatives and Cenex as if the merger had been effective at the beginning of each respective period after giving effect to certain adjustments described in the accompanying notes to the unaudited pro forma consolidated financial statements. The unaudited pro forma consolidated financial statements reflect the application of the pooling of interests method of accounting for the merger. Under this method of accounting, the recorded assets, liabilities, capital, income and expenses of Harvest States Cooperatives and Cenex are combined and reflected at their historical amounts. The unaudited pro forma consolidated financial statements are not necessarily indicative of the financial position or results of operations of Cenex Harvest States Cooperatives as they may be in the future or as they might have been for the periods presented had the merger been effective as of June 1, 1996, 1995 and 1994, or as of the date of the unaudited pro forma balance sheet. The unaudited pro forma consolidated financial statements and accompanying notes should be read in conjunction with the historical financial statements of Harvest States Cooperatives, as filed on Form 10-K for the year ended May 31, 1997, and the historical financial statements of Cenex, including the notes to such financial statements, for the year ended September 30 and the five months ended February 28, 1998, as set forth in this Form 8-K/A. The pro forma adjustments are based upon information available at this time and upon certain assumptions that Cenex Harvest States Cooperatives' management believes are reasonable in the circumstances. CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 28, 1998
ASSETS Historical Pro Forma Harvest States Historical Pro Forma Cenex Harvest Cooperatives Cenex, Inc. Adjustments States Cooperatives --------------------------------------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 4,600,425 $ 57,590,187 $ 62,190,612 Receivables 366,655,486 202,337,698 $ (2,547,539)(1) 566,445,645 Inventories 156,050,736 313,266,042 469,316,778 Other current assets 58,229,994 92,584,199 (10,140,118)(2) 140,674,075 --------------------------------------------------------------------------------- Total current assets 585,536,641 665,778,126 (12,687,657) 1,238,627,110 OTHER ASSETS: Investments 142,076,842 226,880,106 (15,169,985)(3) 353,786,963 Other 45,386,033 43,682,638 89,068,671 --------------------------------------------------------------------------------- Total other assets 187,462,875 270,562,744 (15,169,985) 442,855,634 PROPERTY PLANT AND EQUIPMENT 238,879,780 622,125,790 861,005,570 --------------------------------------------------------------------------------- $ 1,011,879,296 $ 1,558,466,660 $ (27,857,642) $ 2,542,488,314 ================================================================================= LIABILITIES AND CAPITAL CURRENT LIABILITIES: Notes payable $ 112,000,000 $ 52,510,040 $ 164,510,040 Patron credit balances 112,166,457 85,022,442 $ (10,140,118)(2) 187,048,781 Advances received on grain sales 108,992,354 108,992,354 Drafts outstanding 22,745,473 22,745,473 Accounts payable and accrued expenses 97,310,529 356,829,008 (2,547,539)(1) 451,591,998 Patronage dividends and retirements payable 10,000,000 48,071,498 (2,281,545)(4) 55,789,953 Current portion of long-term debt 16,505,486 13,670,904 30,176,390 --------------------------------------------------------------------------------- Total current liabilities 479,720,299 556,103,892 (14,969,202) 1,020,854,989 LONG-TERM DEBT 102,347,552 220,232,061 322,579,613 OTHER LIABILITIES 11,537,156 71,999,269 83,536,425 MINORITY INTERESTS IN SUBSIDIARIES 55,281,887 55,281,887 COMMITMENTS AND CONTINGENCIES CAPITAL 418,274,289 654,849,551 (12,888,440)(3,4) 1,060,235,400 --------------------------------------------------------------------------------- $ 1,011,879,296 $ 1,558,466,660 $ (27,857,642) $ 2,542,488,314 =================================================================================
See notes to unaudited pro forma consolidated financial statements CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED FEBRUARY 28, 1998
Historical Pro Forma Harvest States Historical Pro Forma Cenex Harvest Cooperatives Cenex, Inc. Adjustments States Cooperatives ---------------------------------------------------------------------------------- REVENUES: Sales: Grain and oilseed $ 3,813,583,403 $ 3,813,583,403 Petroleum products $ 1,240,565,560 $ (7,579,128) 1,232,986,432 Agronomy 421,995,391 (31,263,418) 390,731,973 Processed grain and oilseed 457,430,021 457,430,021 Feed and farm supplies 146,242,394 209,608,914 355,851,308 ---------------------------------------------------------------------------------- 4,417,255,818 1,872,169,865 (38,842,546)(5) 6,250,583,137 Patronage dividends 7,396,271 44,246,727 51,642,998 Other revenues 65,537,310 1,063,801 66,601,111 ---------------------------------------------------------------------------------- 4,490,189,399 1,917,480,393 (38,842,546) 6,368,827,246 COSTS AND EXPENSES: Cost of good sold 4,376,526,323 1,797,038,838 (38,842,546)(5) 6,134,722,615 Marketing, general and administrative 53,824,262 37,358,763 91,183,025 Interest 12,209,300 14,125,923 26,335,223 Minority Interests 2,282,963 2,282,963 ---------------------------------------------------------------------------------- 4,442,559,885 1,850,806,487 (38,842,546) 6,254,523,826 ---------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 47,629,514 66,673,906 114,303,420 INCOME TAXES 5,300,000 11,590,000 16,890,000 ---------------------------------------------------------------------------------- NET EARNINGS $ 42,329,514 $ 55,083,906 $ -- $ 97,413,420 ==================================================================================
See notes to unaudited pro forma consolidated financial statements CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED MAY 31, 1997
Historical Pro Forma Harvest States Historical Pro Forma Cenex Harvest Cooperatives Cenex, Inc. Adjustments States Cooperatives -------------------------------------------------------------------------------------- REVENUES: Sales: Grain and oilseed $ 6,036,502,624 $ 6,036,502,624 Petroleum products $ 1,892,628,306 $ (8,914,833) 1,883,713,473 Agronomy 757,995,278 (36,487,031) 721,508,247 Processed grain and oilseed 730,101,124 730,101,124 Feed and farm supplies 258,235,512 306,989,039 565,224,551 -------------------------------------------------------------------------------------- 7,024,839,260 2,957,612,623 (45,401,864)(5) 9,937,050,019 Patronage dividends 15,947,049 67,941,261 (4,828,210)(6) 79,060,100 Other revenues 68,627,552 1,529,849 70,157,401 -------------------------------------------------------------------------------------- 7,109,413,861 3,027,083,733 (50,230,074) 10,086,267,520 COSTS AND EXPENSES: Cost of good sold 6,967,937,476 2,850,447,907 (45,401,864)(5) 9,772,983,519 Marketing, general and administrative 63,341,552 49,792,825 113,134,377 Interest 19,378,833 15,626,457 35,005,290 Minority Interest 2,276,055 2,276,055 -------------------------------------------------------------------------------------- 7,050,657,861 2,918,143,244 (45,401,864) 9,923,399,241 -------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 58,756,000 108,940,489 (4,828,210) 162,868,279 INCOME TAXES 6,200,000 12,390,000 18,590,000 -------------------------------------------------------------------------------------- NET EARNINGS $ 52,556,000 $ 96,550,489 $ (4,828,210) $ 144,278,279 ======================================================================================
See notes to unaudited pro forma consolidated financial statements CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED MAY 31, 1996
Historical Pro Forma Harvest States Historical Pro Forma Cenex Harvest Cooperatives Cenex, Inc. Adjustments States Cooperatives -------------------------------------------------------------------------------------- REVENUES: Sales: Grain and oilseed $ 7,127,223,407 $ 7,127,223,407 Petroleum products $ 1,582,680,204 $ (5,108,549) 1,577,571,655 Agronomy 664,552,080 (25,713,694) 638,838,386 Processed grain and oilseed 819,863,541 819,863,541 Feed and farm supplies 207,252,696 276,003,438 483,256,134 -------------------------------------------------------------------------------------- 8,154,339,644 2,523,235,722 (30,822,243)(5) 10,646,753,123 Patronage dividends 13,278,997 67,644,567 (2,629,044)(6) 78,294,520 Other revenues 68,339,523 1,229,413 69,568,936 -------------------------------------------------------------------------------------- 8,235,958,164 2,592,109,702 (33,451,287) 10,794,616,579 COSTS AND EXPENSES: Cost of good sold 8,076,073,326 2,395,877,932 (30,822,243)(5) 10,441,129,015 Marketing, general and administrative 70,054,248 42,047,928 112,102,176 Interest 31,921,936 14,205,354 46,127,290 Minority Interest 6,472,514 6,472,514 -------------------------------------------------------------------------------------- 8,178,049,510 2,458,603,728 (30,822,243) 10,605,830,995 -------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS 57,908,654 133,505,974 (2,629,044) 188,785,584 INCOME TAXES 6,900,000 5,023,575 11,923,575 -------------------------------------------------------------------------------------- EARNINGS BEFORE DISCONTINUED OPERATIONS 51,008,654 128,482,399 (2,629,044) 176,862,009 DISCONTINUED OPERATIONS 296,146 296,146 -------------------------------------------------------------------------------------- NET EARNINGS $ 51,008,654 $ 128,186,253 $ (2,629,044) $ 176,565,863 ======================================================================================
See notes to unaudited pro forma consolidated financial statements CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED MAY 31, 1995
Historical Pro Forma Harvest States Historical Pro Forma Cenex Harvest Cooperatives Cenex, Inc. Adjustments States Cooperatives ---------------------------------------------------------------------------------- REVENUES: Sales: Grain and oilseed $ 4,191,665,535 $ 4,191,665,535 Petroleum products $ 1,393,096,528 $ (2,258,664) 1,390,837,864 Agronomy 548,449,444 (24,957,126) 523,492,318 Processed grain and oilseed 708,219,307 708,219,307 Feed and farm supplies 156,699,068 244,846,204 401,545,272 ---------------------------------------------------------------------------------- 5,056,583,910 2,186,392,176 (27,215,790)(5) 7,215,760,296 Patronage dividends 6,512,481 40,824,437 (604,671)(6) 46,732,247 Other revenues 57,556,984 3,000,415 60,557,399 ---------------------------------------------------------------------------------- 5,120,653,375 2,230,217,028 (27,820,461) 7,323,049,942 COSTS AND EXPENSES: Cost of good sold 4,981,820,272 2,085,818,910 (27,215,790)(5) 7,040,423,392 Marketing, general and administrative 69,509,491 54,542,394 124,051,885 Interest 19,268,575 15,016,317 34,284,892 Minority Interest 2,381,087 2,381,087 ---------------------------------------------------------------------------------- 5,070,598,338 2,157,758,708 (27,215,790) 7,201,141,256 ---------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 50,055,037 72,458,320 (604,671) 121,908,686 AND CUMULATIVE EFFECT INCOME TAXES 5,100,000 15,925,000 21,025,000 ---------------------------------------------------------------------------------- EARNINGS BEFORE CUMULATIVE EFFECT 44,955,037 56,533,320 (604,671) 100,883,686 CUMULATIVE EFFECT 6,480,000 6,480,000 ---------------------------------------------------------------------------------- NET EARNINGS $ 44,955,037 $ 63,013,320 $ (604,671) $ 107,363,686 ==================================================================================
See notes to unaudited pro forma consolidated financial statements NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of items and adjustments reflected in the unaudited pro forma consolidated financial statements: 1) The payable to Cenex for products sold to the Company has been eliminated as well as the related receivable. 2) The Company prepaid Cenex for products not yet received. This prepaid amount and the related patron credit balance have been eliminated. 3) The Company received patronage dividends each year from Cenex in the form of cash and equity, as well as cash retirements of previous years' equity. This investment has been eliminated along with the related Cenex equity. 4) Cenex had recorded patronage dividends and retirements payable to the Company which has been reclassified to capital. 5) The sales to the Company from Cenex, and the related cost of goods sold have been eliminated. 6) Patronage dividends received by the Company from Cenex have been eliminated. -----END PRIVACY-ENHANCED MESSAGE-----