-----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, IZV2B0UMCA/gimsfORjaUwxYaEZ0HTCgg3mMe+5C94GXvYhpUELrzmFh0WPMe8Ow js+FkeDGjlWU0r+/FveQNQ== 0000897101-02-000478.txt : 20020703 0000897101-02-000478.hdr.sgml : 20020703 20020703121446 ACCESSION NUMBER: 0000897101-02-000478 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020531 FILED AS OF DATE: 20020703 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: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-17865 FILM NUMBER: 02695960 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 10-Q 1 cenex023213_10q.txt CENEX HARVEST STATES COOPERATIVES FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 10-Q ----------------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2002. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER 333-17865 ----------------- CENEX HARVEST STATES COOPERATIVES (Exact name of registrant as specified in its charter) MINNESOTA 41-0251095 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5500 CENEX DRIVE, (651) 451-5151 INVER GROVE HEIGHTS, MN 55077 (Registrant's telephone number (Address of principal executive offices including area code) and zip code) ----------------- Include by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES _X_ NO ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. (Number of shares outstanding at (Class) May 31, 2002) ------- ------------- NONE NONE ================================================================================ INDEX
PAGE NO. ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of May 31, 2002 (unaudited), August 31, 2001 and May 31, 2001 (unaudited) ........................................................... 2 Consolidated Statements of Operations for the three months and nine months ended May 31, 2002 and 2001 (unaudited) .................................................. 3 Consolidated Statements of Cash Flows for the three months and nine months ended May 31, 2002 and 2001 (unaudited) .................................................. 4 Notes to Consolidated Financial Statements (unaudited) ............................. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...................................................................... 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk ................. 19 PART II. OTHER INFORMATION Items 1 through 5 have been omitted since all items are inapplicable or answers are negative Item 6. Exhibits and Reports on Form 8-K ........................................... 20 SIGNATURE PAGE ...................................................................... 21
i PART I. FINANCIAL INFORMATION SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that may cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. These factors include those set forth in Exhibit 99, under the caption "Cautionary Statement" to this Quarterly Report on Form 10-Q for the quarter ended May 31, 2002. 1 CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
MAY 31, AUGUST 31, MAY 31, 2002 2001 2001 ------------- ------------ ------------ (DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents .................................. $ 107,324 $ 113,458 $ 84,114 Receivables ................................................ 659,994 686,140 684,086 Inventories ................................................ 596,046 510,443 495,170 Other current assets ....................................... 76,268 60,995 83,897 ---------- ---------- ---------- Total current assets ...................................... 1,439,632 1,371,036 1,347,267 INVESTMENTS ................................................. 486,411 467,953 461,428 PROPERTY, PLANT AND EQUIPMENT ............................... 1,037,138 1,023,872 1,028,481 OTHER ASSETS ................................................ 215,350 194,458 191,060 ---------- ---------- ---------- Total assets .............................................. $3,178,531 $3,057,319 $3,028,236 ========== ========== ========== LIABILITIES AND EQUITIES CURRENT LIABILITIES: Notes payable .............................................. $ 275,956 $ 97,195 $ 255,019 Current portion of long-term debt .......................... 88,676 17,754 26,517 Customer credit balances ................................... 37,975 38,486 44,550 Customer advance payments .................................. 98,177 109,135 58,929 Checks and drafts outstanding .............................. 63,314 87,808 61,058 Accounts payable ........................................... 394,609 495,198 401,854 Accrued expenses ........................................... 166,803 148,026 133,238 Patronage dividends and equity retirements payable ......... 52,343 72,154 59,530 ---------- ---------- ---------- Total current liabilities ................................. 1,177,853 1,065,756 1,040,695 LONG-TERM DEBT .............................................. 486,674 542,243 545,541 OTHER LIABILITIES ........................................... 106,916 99,906 92,481 MINORITY INTERESTS IN SUBSIDIARIES .......................... 96,127 88,261 86,776 COMMITMENTS AND CONTINGENCIES EQUITIES .................................................... 1,310,961 1,261,153 1,262,743 ---------- ---------- ---------- Total liabilities and equities ............................ $3,178,531 $3,057,319 $3,028,236 ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements (unaudited). 2 CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE FOR THE THREE MONTHS ENDED NINE MONTHS ENDED MAY 31, MAY 31, ----------------------------- ----------------------------- (DOLLARS IN THOUSANDS) 2002 2001 2002 2001 ------------- ------------- ------------- ------------- REVENUES: Net sales .............................. $1,831,289 $1,894,573 $5,563,052 $5,952,759 Patronage dividends .................... 3,028 4,373 4,937 5,621 Other revenues ......................... 26,402 25,773 82,126 90,257 ---------- ---------- ---------- ---------- 1,860,719 1,924,719 5,650,115 6,048,637 ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Cost of goods sold ..................... 1,769,736 1,799,282 5,396,502 5,736,574 Marketing, general and administrative 50,745 54,324 140,020 135,199 Interest ............................... 10,866 16,211 31,930 49,283 Equity income from investments ......... (31,915) (27,012) (33,681) (13,519) Minority interests ..................... 5,851 13,311 11,561 25,517 ---------- ---------- ---------- ---------- 1,805,283 1,856,116 5,546,332 5,933,054 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 55,436 68,603 103,783 115,583 INCOME TAXES ............................ 8,795 4,313 13,416 (34,701) ---------- ---------- ---------- ---------- NET INCOME .............................. $ 46,641 $ 64,290 $ 90,367 $ 150,284 ========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements (unaudited). 3 CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE FOR THE THREE MONTHS ENDED NINE MONTHS ENDED MAY 31, MAY 31, ------------------------- ------------------------- (DOLLARS IN THOUSANDS) 2002 2001 2002 2001 ----------- ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................. $ 46,641 $ 64,290 $ 90,367 $ 150,284 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ............................ 25,227 33,168 76,771 82,795 Noncash net income from equity investments ............... (31,915) (27,012) (33,681) (13,519) Minority interests ....................................... 5,851 13,311 11,561 25,517 Adjustment of inventories to market value ................ (6,441) Noncash portion of patronage dividends received .......... (2,014) (2,962) (3,750) (3,837) Loss (gain) on sale of property, plant and equipment ..... 5 817 (2,738) (13,599) Deferred tax benefit ..................................... (34,247) Other, net ............................................... (408) 970 (287) (968) Changes in operating assets and liabilities: Receivables ............................................. (73,885) 47,978 23,831 150,657 Inventories ............................................. 12,045 127,040 (95,592) 52,816 Other current assets and other assets ................... 30,288 48,311 (11,334) (52,674) Customer credit balances ................................ (25,269) (21,298) (511) 7,771 Customer advance payments ............................... 15,023 (83,870) (10,958) (73,006) Accounts payable and accrued expenses ................... 82,481 (43,538) (87,115) (237,390) Other liabilities ....................................... 1,196 2,133 7,010 5,045 --------- --------- --------- --------- Net cash provided by (used in) operating activities ........................................... 78,825 159,338 (36,426) 45,645 --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property, plant and equipment ............... (32,840) (24,669) (84,745) (73,205) Proceeds from disposition of property, plant and equipment ................................................. 1,822 1,460 10,468 29,181 Investments ................................................ (9) (1,768) (6,185) (13,372) Equity investments redeemed ................................ 6,767 12,632 28,141 20,836 Investments redeemed ....................................... 1,994 551 4,022 1,186 Changes in notes receivable ................................ 332 (1,251) 2,740 (1,643) Acquisition of intangibles ................................. (440) (27,971) (7,038) Distribution to minority owners ............................ (401) (583) (4,752) (13,108) Other investing activities, net ............................ 21 (1,419) 1,082 4,190 --------- --------- --------- --------- Net cash used in investing activities ................. (22,754) (15,047) (77,200) (52,973) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Changes in notes payable ................................... (22,288) (130,899) 178,761 37,093 Long-term debt borrowings .................................. 55,000 30,000 116,809 Principal payments on long-term debt ....................... (4,559) (41,425) (14,687) (55,251) Changes in checks and drafts outstanding ................... (6,222) 16,486 (24,495) (23,028) Proceeds from sale of preferred stock, net of expenses ..... 1,571 4,429 Preferred stock dividends paid ............................. (83) (93) Retirements of equities .................................... (3,153) (6,533) (26,340) (14,444) Cash patronage dividends paid .............................. (511) (154) (40,083) (26,130) --------- --------- --------- --------- Net cash (used in) provided by financing activities ........................................... (35,245) (107,525) 107,492 35,049 --------- --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................................ 20,826 36,766 (6,134) 27,721 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................................................. 86,498 47,348 113,458 56,393 --------- --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................................................... $ 107,324 $ 84,114 $ 107,324 $ 84,114 ========= ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements (unaudited). 4 CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS) NOTE 1. ACCOUNTING POLICIES The unaudited consolidated balance sheets as of May 31, 2002 and 2001, and the statements of operations and cash flows for the three months and nine months ended May 31, 2002 and 2001 reflect, in the opinion of management of Cenex Harvest States Cooperatives (the Company), all normal recurring adjustments necessary for a fair statement of the financial position and results of operations and cash flows for the interim periods presented. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full fiscal year because of, among other things, the seasonal nature of the Company's businesses. The consolidated balance sheet data as of August 31, 2001 has been derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries and limited liability companies. The effects of all significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the prior period's financial statements to conform to the current year presentation. These reclassifications relate primarily to the classification of shipping and handling costs and had no effect on previously reported net income or equities. These statements should be read in conjunction with the consolidated financial statements and footnotes for the year ended August 31, 2001, included in the Company's Annual Report on Form 10-K previously filed with the Securities and Exchange Commission on November 19, 2001. GOODWILL AND OTHER INTANGIBLE ASSETS Effective September 1, 2001 the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets". This statement discontinued the amortization of goodwill and indefinite-lived intangible assets, subject to periodic impairment testing. Goodwill (net of accumulated amortization) at August 31, 2001 was $29.2 million and was included as a component of other assets. The effect of adopting the new standard will reduce goodwill amortization expense by approximately $2.0 million annually. The Company has completed its transitional impairment testing and no material changes to the carrying value of goodwill and other intangible assets were made as a result of the adoption of SFAS No. 142. Subsequent impairment testing will take place annually as well as when a triggering event indicating impairment may have occurred. In addition, the classification of the intangible assets was reviewed, along with the remaining useful lives of intangibles being amortized, and no material changes were made. Intangible assets subject to amortization at August 31, 2001 and May 31, 2002 were $10.1 million ($14.9 million net of accumulated amortization of $4.8 million) and $35.3 million ($42.9 million net of accumulated amortization of $7.6 million), respectively. The intangible assets subject to amortization primarily include trademarks, tradenames, customer lists and non-compete agreements, and are amortized on a straight-line basis over the number of years that approximate their respective useful lives (ranging from 5 to 15 years). Total amortization expense for these intangible assets during the nine-month period ended May 31, 2002 was approximately $2.8 million. For the next five fiscal years the future estimated annual amortization expense related to intangible assets being amortized approximates $4.0 million each year. BUSINESS COMBINATIONS Effective July 2001 the Company also adopted the provisions of SFAS No. 141, "Business Combinations", which requires all future acquisitions to be accounted for under the purchase method. During the nine months ended May 31, 2002 and 2001 the Company made various acquisitions using the purchase method of accounting. Accordingly, the purchase prices were allocated to assets acquired and liabilities assumed based on their respective estimated fair values at the dates of 5 acquisition. These acquisitions individually and in aggregate are not material to the Company's operations. Operations of the acquired companies have been included in the operations of the Company since the date of the respective acquisitions. Through Country Energy, LLC, formerly a joint venture with Farmland Industries, Inc. (Farmland), the Company marketed refined petroleum products including gasoline, diesel fuel, propane and lubricants under the Cenex brand. On November 30, 2001 the Company purchased the wholesale energy business of Farmland, as well as all interest in Country Energy, LLC. The purchase price of the acquisition was $39.0 million. Based on estimated fair values, $26.4 million of the purchase price was allocated to intangible assets, primarily trademarks, tradenames and non-compete agreements. The intangible assets have a weighted average life of approximately 12 years. The balance of the purchase price was allocated to inventory, real and personal property, and other assets and liabilities. The Company also entered into a two-year supply agreement to purchase Farmland's Coffeyville, Kansas refined fuels production at prevailing market values. On May 31, 2002 Farmland filed for protection under Chapter 11 of the United States Bankruptcy Code. While Farmland continues to perform under the supply agreement, there is no guarantee they will continue to do so. The Company believes, however, that alternate sources of supply would be available, and rejection of the supply agreement by Farmland would not have a material adverse affect on the Company. In January 2002, the Company formed a limited liability company (LLC) with Cargill, Incorporated to engage in wheat flour milling and processing. The company holds a 24% interest in the entity, which is known as Horizon Milling, LLC (Horizon). In connection with the formation of Horizon, the Company sold inventories and related contracts and received cash of $13.1 million. The Company also entered into certain leasing arrangements -- see Note 5. RECENT ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company is currently analyzing the effects of adoption of this pronouncement. The FASB also issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 retains and expands upon the fundamental provisions of existing guidance related to the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of long-lived assets to be disposed of by sale. Generally, the provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company is currently analyzing the effects of adoption of this pronouncement. NOTE 2. RECEIVABLES
MAY 31, AUGUST 31, MAY 31, 2002 2001 2001 ----------- ------------ ----------- Trade ......................................... $665,483 $682,593 $682,585 Other ......................................... 20,838 28,864 26,235 -------- -------- -------- 686,321 711,457 708,820 Less allowances for doubtful accounts ......... 26,327 25,317 24,734 -------- -------- -------- $659,994 $686,140 $684,086 ======== ======== ========
6 NOTE 3. INVENTORIES
MAY 31, AUGUST 31, MAY 31, 2002 2001 2001 ----------- ------------ ----------- Energy .............................. $245,603 $163,710 $207,149 Grain and oilseed ................... 233,496 237,498 176,656 Feed and farm supplies .............. 94,678 76,570 81,368 Processed grain and oilseed ......... 13,730 28,648 25,929 Other ............................... 8,539 4,017 4,068 -------- -------- -------- $596,046 $510,443 $495,170 ======== ======== ========
NOTE 4. INVESTMENTS The following provides summarized unaudited financial information for Ventura Foods, LLC and Agriliance, LLC, of which the Company has a 50% and 25% equity ownership, respectively, for the three-month and nine-month periods as indicated below. VENTURA FOODS, LLC
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED MAY 31, MAY 31, -------------------------- --------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ------------- Net sales ............ $253,525 $226,932 $750,144 $ 686,367 Gross profit ......... 52,536 44,165 130,634 109,697 Net income ........... 24,434 20,566 50,262 42,980
AGRILIANCE, LLC
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED MAY 31, MAY 31, -------------------------- --------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ------------- Net sales ............ $1,454,818 $1,750,489 $2,694,676 $3,079,767 Gross profit ......... 145,495 153,229 230,826 262,590 Net income ........... 70,856 53,836 17,748 5,069
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
MAY 31, AUGUST 31, MAY 31, 2002 2001 2001 ------------- ------------ ------------ Property, plant and equipment ...... $1,802,492 $1,894,511 $1,870,795 Milling leased facilities .......... 129,836 -- -- Construction in progress ........... 73,309 38,723 54,515 ---------- ---------- ---------- 2,005,637 1,933,234 1,925,310 Less accumulated depreciation ...... 968,499 909,362 896,829 ---------- ---------- ---------- $1,037,138 $1,023,872 $1,028,481 ========== ========== ==========
In connection with the formation of Horizon, the Company is leasing the majority of its wheat milling facilities and related equipment to Horizon. The related assets, pursuant to these lease arrangements, have been classified as milling leased facilities within Property, Plant and Equipment. NOTE 6. EQUITIES The Board of Directors has authorized the sale and issuance of up to 50,000,000 shares of 8% Preferred Stock at a price of $1.00 per share. The Company filed a registration statement on Form S-2 with the Securities and Exchange Commission registering the Preferred Stock. The registration statement was declared effective on October 31, 2001 and sales of the Preferred Stock were $7.0 million through May 31, 2002. Expenses related to the issuance of the Preferred Stock were $2.6 million through the same period. 7 NOTE 7. COMPREHENSIVE INCOME During the three months ended May 31, 2002 and 2001, total comprehensive income amounted to $47.0 million and $63.8 million, respectively. For the nine months ended May 31, 2002 and 2001, total comprehensive income amounted to $91.0 million and $152.2 million, respectively. Accumulated other comprehensive loss on May 31, 2002, August 31, 2001 and May 31, 2001 was $1.3 million, $1.9 million and $0.5 million, respectively. NOTE 8. NON-CASH FINANCING ACTIVITIES During the nine months ended May 31, 2002 and 2001 the Company accrued patronage dividends and equity retirements payable of $45.2 million and $56.5 million, respectively. NOTE 9. SEGMENT REPORTING Segments, which are based on products and services, include Agronomy, Energy, Grain Marketing, Country Operations and Processed Grains and Foods. Reconciling Amounts represent the elimination of intracompany sales between segments. Due to cost allocations and intersegment activity, management does not represent that these segments, if operated independently, would report the income before income taxes and other financial information as presented. Segment information for the three months and nine months ended May 31, 2002 and 2001 is as follows:
PROCESSED GRAIN COUNTRY GRAINS AND RECONCILING AGRONOMY ENERGY MARKETING OPERATIONS FOODS OTHER AMOUNTS TOTAL --------- --------- --------- ---------- ---------- --------- ----------- ---------- FOR THE THREE MONTHS ENDED MAY 31, 2002 Net sales ....................... $ 714,280 $ 741,712 $ 409,723 $ 105,021 $(139,447) $1,831,289 Patronage dividends ............. $ (64) 459 176 2,185 252 $ 20 3,028 Other revenues .................. 449 1,294 23,468 992 199 26,402 --------- --------- --------- --------- --------- --------- --------- ---------- (64) 715,188 743,182 435,376 106,265 219 (139,447) 1,860,719 Cost of goods sold .............. 668,075 737,079 408,570 95,459 (139,447) 1,769,736 Marketing, general and administrative ................. 3,921 18,844 6,179 11,358 9,424 1,019 50,745 Interest ........................ (330) 4,377 871 4,202 2,339 (593) 10,866 Equity income from investments .. (17,732) (64) (740) (83) (13,296) (31,915) Minority interests .............. 5,687 164 5,851 --------- --------- --------- --------- --------- --------- --------- ---------- Income (loss) before income taxes ................... $ 14,077 $ 18,269 $ (207) $ 11,165 $ 12,339 $ (207) $ -- $ 55,436 ========= ========= ========= ========= ========= ========= ========= ========== Capital expenditures ............ $ -- $ 11,706 $ 7,733 $ 5,478 $ 7,770 $ 153 $ 32,840 ========= ========= ========= ========= ========= ========= ========== Depreciation and amortization ... $ 312 $ 14,155 $ 1,474 $ 5,156 $ 3,361 $ 769 $ 25,227 ========= ========= ========= ========= ========= ========= ========== FOR THE THREE MONTHS ENDED MAY 31, 2001 Net sales ....................... $ 615,658 $ 828,083 $ 463,070 $ 166,421 $(178,659) $1,894,573 Patronage dividends ............. $ (72) 626 255 3,066 339 $ 159 4,373 Other revenues .................. 313 5,288 18,590 25 1,557 25,773 --------- --------- --------- --------- --------- --------- --------- ---------- (72) 616,597 833,626 484,726 166,785 1,716 (178,659) 1,924,719 Cost of goods sold .............. 534,342 830,363 457,162 156,074 (178,659) 1,799,282 Marketing, general and administrative ................. 2,565 13,211 6,381 13,285 18,085 797 54,324 Interest ........................ (1,131) 6,215 2,124 4,444 3,369 1,190 16,211 Equity (income) loss from investments .................... (18,070) (515) (594) (296) (10,085) 2,548 (27,012) Minority interests .............. 13,215 96 13,311 --------- --------- --------- --------- --------- --------- --------- ---------- Income (loss) before income taxes ................... $ 16,564 $ 50,129 $ (4,648) $ 10,035 $ (658) $ (2,819) $ -- $ 68,603 ========= ========= ========= ========= ========= ========= ========= ========== Capital expenditures ............ $ -- $ 11,049 $ 1,185 $ 7,531 $ 4,413 $ 491 $ 24,669 ========= ========= ========= ========= ========= ========= ========== Depreciation and amortization ... $ 312 $ 13,826 $ 1,340 $ 5,225 $ 11,517 $ 948 $ 33,168 ========= ========= ========= ========= ========= ========= ==========
8
PROCESSED GRAIN COUNTRY GRAINS AND RECONCILING AGRONOMY ENERGY MARKETING OPERATIONS FOODS OTHER AMOUNTS TOTAL -------- ---------- ---------- ---------- ---------- -------- ----------- ---------- FOR THE NINE MONTHS ENDED MAY 31, 2002 Net sales ...................... $1,857,086 $2,730,289 $1,096,478 $394,213 $(515,014) $5,563,052 Patronage dividends ............ $ (64) 907 528 3,193 252 $ 121 4,937 Other revenues ................. 3,888 15,584 59,750 1,555 1,349 82,126 -------- ---------- ---------- ---------- -------- -------- --------- ---------- (64) 1,861,881 2,746,401 1,159,421 396,020 1,470 (515,014) 5,650,115 Cost of goods sold ............. 1,729,198 2,722,757 1,092,377 367,184 (515,014) 5,396,502 Marketing, general and administrative ................ 6,725 49,511 17,246 35,763 27,397 3,378 140,020 Interest ....................... (1,063) 12,677 3,898 10,006 7,328 (916) 31,930 Equity (income) loss from investments ................... (6,126) 1,469 (2,705) 130 (26,449) (33,681) Minority interests ............. 11,044 517 11,561 -------- ---------- ---------- ---------- -------- -------- --------- ---------- Income (loss) before income taxes .................. $ 400 $ 57,982 $ 5,205 $ 20,628 $ 20,560 $ (992) $ -- $ 103,783 ======== ========== ========== ========== ======== ======== ========= ========== Capital expenditures ........... $ -- $ 37,356 $ 11,461 $ 16,016 $ 19,255 $ 657 $ 84,745 ======== ========== ========== ========== ======== ======== ========== Depreciation and amortization .. $ 935 $ 43,829 $ 4,165 $ 15,699 $ 9,790 $ 2,353 $ 76,771 ======== ========== ========== ========== ======== ======== ========== Total identifiable assets at May 31, 2002 .................. $235,241 $1,301,003 $ 292,199 $ 750,993 $396,376 $202,719 $3,178,531 ======== ========== ========== ========== ======== ======== ========== FOR THE NINE MONTHS ENDED MAY 31, 2001 Net sales ...................... $2,185,794 $2,684,984 $1,192,002 $481,661 $(591,682) $5,952,759 Patronage dividends ............ $ 196 666 756 3,412 339 $ 252 5,621 Other revenues ................. 1,731 16,708 63,787 35 7,996 90,257 -------- ---------- ---------- ---------- -------- -------- --------- ---------- 196 2,188,191 2,702,448 1,259,201 482,035 8,248 (591,682) 6,048,637 Cost of goods sold ............. 2,008,429 2,685,745 1,182,895 451,187 (591,682) 5,736,574 Marketing, general and administrative ................ 6,281 34,465 17,982 38,928 34,304 3,239 135,199 Interest ....................... (3,713) 20,117 6,449 12,192 10,541 3,697 49,283 Equity loss (income) from investments ................... 259 (859) (3,120) (45) (21,425) 11,671 (13,519) Minority interests ............. 25,301 216 25,517 -------- ---------- ---------- ---------- -------- -------- --------- ---------- (Loss) income before income taxes .................. $ (2,631) $ 100,738 $ (4,608) $ 25,015 $ 7,428 $(10,359) $ -- $ 115,583 ======== ========== ========== ========== ======== ======== ========= ========== Capital expenditures ........... $ -- $ 28,964 $ 2,942 $ 24,836 $ 14,951 $ 1,512 $ 73,205 ======== ========== ========== ========== ======== ======== ========== Depreciation and amortization .. $ 938 $ 41,073 $ 3,371 $ 16,077 $ 18,509 $ 2,827 $ 82,795 ======== ========== ========== ========== ======== ======== ========== Total identifiable assets at May 31, 2001 .................. $223,789 $1,194,434 $ 251,774 $ 721,028 $410,229 $226,982 $3,028,236 ======== ========== ========== ========== ======== ======== ==========
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Through Country Energy, LLC, a joint venture formerly with Farmland Industries, Inc. (Farmland), the Company marketed refined petroleum products including gasoline, diesel fuel, propane and lubricants under the Cenex brand. On November 30, 2001 the Company purchased the wholesale energy business of Farmland, as well as all interest in Country Energy, LLC. The purchase price of the acquisition was $39.0 million. Based on estimated fair values, $26.4 million of the purchase price was allocated to intangible assets, primarily trademarks, tradenames and non-compete agreements. The intangible assets have a weighted average life of approximately 12 years. The balance of the purchase price was allocated to inventory, real and personal property, and other assets and liabilities. The Company also entered into a two-year supply agreement to purchase Farmland's Coffeyville, Kansas refined fuels production at prevailing market values. On May 31, 2002 Farmland filed for protection under Chapter 11 of the United States Bankruptcy Code. While Farmland continues to perform under the supply agreement, there is no guarantee they will continue to do so. The Company believes, however, that alternate sources of supply would be available, and rejection of the supply agreement by Farmland would not have a material adverse affect on the Company. In January 2002, the Company formed a limited liability company (LLC) with Cargill, Incorporated to engage in wheat flour milling and processing. The company holds a 24% interest in the entity, which is known as Horizon Milling, LLC (Horizon). In connection with the formation of Horizon, the Company sold inventories and related contracts and received cash of $13.1 million. The Company is leasing the majority of its wheat milling facilities and related equipment to Horizon. RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED MAY 31, 2002 AND 2001 Consolidated net income for the three months ended May 31, 2002 was $46.6 million compared to $64.3 million for the same three-month period in 2001, which represents a $17.7 million (27%) decrease. This decrease in profitability is primarily attributable to decreased earnings in the Company's Energy segment. Consolidated net sales of $1.8 billion for the three months ended May 31, 2002 decreased $63.3 million (3%) compared to the same three months ended in 2001. Company-wide grain and oilseed net sales of $808.8 million decreased $76.8 million (9%) during the three months ended May 31, 2002 compared to the same three months ended in 2001. Sales for the three months ended May 31, 2002 were $741.7 million and $188.5 million from Grain Marketing and Country Operations segments, respectively. Sales for the three months ended May 31, 2001 were $828.1 million and $220.1 million from Grain Marketing and Country Operations segments, respectively. The Company eliminated all intracompany sales from the Country Operations segment to the Grain Marketing segment, of $121.4 million and $162.6 million, for the three months ended May 31, 2002 and 2001, respectively. The net decrease in sales was primarily due to a decrease in grain volume of 15%, which was partially offset by an increase of $0.23 per bushel in the average sales price of all grains and oilseed marketed by the Company compared to the same three months ended in 2001. Energy net sales of $696.3 million increased $96.7 million (16%) during the three months ended May 31, 2002 compared to the same period in 2001. Sales for the three months ended May 31, 2002 and 2001 were $714.3 million and $615.6 million, respectively. The Company eliminated all intracompany sales from the Energy segment to the Country Operations segment of $18.0 million and $16.0 million, respectively. The net increase in sales is primarily attributable to a refined fuels volume increase of 51%, which was partially offset by a decrease in the average sales price of refined fuels of $0.19 per gallon compared to the same three months ended in 2001. In addition, the average sales price of propane decreased by $0.22 per gallon, which was partially offset by a volume increase of 25% compared to the same three months ended in 2001. Refined fuels and propane volume increases were primarily a result of acquisitions. Country Operations farm supply sales of $221.2 million decreased by $21.8 million (9%) during the three months ended May 31, 2002 compared to the same three months ended in 2001. The decrease is 10 primarily due to a reduction in the average retail sales price of energy and crop nutrients products compared to the same three months ended in 2001. Processed Grains and Foods sales of $105.0 million decreased $61.4 million (37%) during the three months ended May 31, 2002 compared to the same three months ended in 2001. The decrease is primarily due to the formation of Horizon, the wheat milling LLC described earlier. As of January 2002, the Company no longer recorded sales of processed wheat and accounts for operating results under the equity method of accounting. Patronage dividends of $3.0 million decreased $1.3 million (31%) during the three months ended May 31, 2002 compared to the same three months ended in 2001. Other revenues of $26.4 million increased $0.6 million (2%) during the three months ended May 31, 2002 compared to the same three months ended in 2001. The most significant change was within the Country Operations segment. Cost of goods sold of $1.8 billion decreased $29.5 million (2%) during the three months ended May 31, 2002, compared to the same three months ended in 2001. The decrease is primarily due to a 15% volume decrease of grain bushels, which was partially offset by $0.20 increase in the average cost per bushel of all grains and oilseed procured by the Company through its Grain Marketing and Country Operations segments compared to the same three months ended in 2001. Processed Grains and Foods segment cost of goods sold decreased by 39% primarily due to the formation of Horizon, the wheat milling LLC described earlier. As of January 2002, the Company no longer recorded cost of goods sold of processed wheat. Country Operations farm supply cost of goods sold decreased by 10% primarily due to the reduced cost of energy and crop nutrients products compared to the same three months ended in 2001. These decreases were partially offset by increased cost of goods sold in the Energy segment. Cost of goods sold increased 25% on refined fuels primarily due to a 51% volume increase, which was partially offset by a $0.16 per gallon decrease in the average cost of refined fuels compared to the same three months ended in 2001. In addition, the average cost of propane decreased by $0.20 per gallon, which was partially offset by a 25% volume increase compared to the same three months ended in 2001. Marketing, general and administrative expenses of $50.7 million for the three months ended May 31, 2002 decreased by $3.6 million (7%) compared to the same three months ended in 2001. This decrease is primarily due to Horizon, the wheat milling LLC described earlier, which was partially offset by additional expenses resulting from an Energy segment acquisition. Interest expense of $10.9 million for the three months ended May 31, 2002 decreased by $5.3 million (33%) compared to the same three months ended in 2001. The average level of short-term borrowings decreased by 29% and the average short-term interest rate decreased by 3.2% during the three months ended in 2002 compared to the same three months ended in 2001. Equity income from investments of $31.9 million for the three months ended May 31, 2002 increased by $4.9 million (18%) compared to the same three months ended in 2001. The increase was primarily attributable to increased earnings from a Processed Grains and Foods segment investment compared to the same three months ended in 2001. Minority interests of $5.9 million for the three months ended May 31, 2002 decreased by $7.5 million (56%) compared to the same three months ended in 2001. This net change in minority interests during the three months ended May 31, 2002 compared to the same three months ended in 2001 was primarily a result of less profitable operations within the Company's majority-owned subsidiaries. Substantially all minority interests relate to National Cooperative Refinery Association (NCRA). Income tax expense of $8.8 million and $4.3 million for the three months ended May 31, 2002 and May 31, 2001, respectively, resulted in effective tax rates of 15.9% and 6.3%, respectively. The federal and state statutory rate applied to nonpatronage business activity was 38.9% for the three months ended May 31, 2002 and 2001. Income taxes and effective tax rates vary each period based upon profitability and nonpatronage business activity during each of the comparable periods. 11 COMPARISON OF NINE MONTHS ENDED MAY 31, 2002 AND 2001 Consolidated net income for the nine months ended May 31, 2002 was $90.4 million compared to $150.3 million for the same nine months ended in 2001, which represents a $59.9 million (40%) decrease. This decrease in profitability is primarily attributable to a tax benefit of $34.2 million in the prior year and decreased earnings in the Company's Energy segment compared to the same nine months ended in 2001. Consolidated net sales of $5.6 billion for the nine months ended May 31, 2002 decreased $389.7 million (7%) compared to the same nine months ended in 2001. Company-wide grain and oilseed net sales of $2.9 billion increased $72.0 million (3%) during the nine months ended May 31, 2002 compared to the same nine months ended in 2001. Sales for the nine months ended May 31, 2002 were $2,730.3 million and $648.1 million from Grain Marketing and Country Operations segments, respectively. Sales for the nine months ended May 31, 2001 were $2,685.0 million and $691.9 million from Grain Marketing and Country Operations segments, respectively. The Company eliminated all intracompany sales from the Country Operations segment to the Grain Marketing segment, of $467.0 million and $537.5 million, for the nine months ended May 31, 2002 and 2001, respectively. The net increase in sales was primarily due to an increase of $0.42 per bushel in the average sales price of all grains and oilseed marketed by the Company which was partially offset by a decrease in grain volume of 9%, compared to the same nine months ended in 2001. Energy net sales of $1.8 billion decreased $322.5 million (15%) during the nine months ended May 31, 2002 compared to the same period in 2001. Sales for the nine months ended May 31, 2002 and 2001 were $1,857.1 million and $2,185.8 million, respectively. The Company eliminated all intracompany sales from the Energy segment to the Country Operations segment of $48.0 million and $54.2 million, respectively. The decrease in sales is primarily attributable to a net volume decrease compared to the same nine months ended in 2001 due to the dissolution of Cooperative Refining LLC (CRLLC) effective December 31, 2000. The Company owned 58% of CRLLC through its 75% ownership in NCRA and therefore consolidated CRLLC business activity up to the time of dissolution. In addition, the volume of refined fuels rack sales increased by 43%, which was partially offset by a sales price decrease of $0.25 per gallon on refined fuels rack sales compared to the same nine months ended in 2001. The average sales price of propane decreased by $0.22 per gallon, which was partially offset by a volume increase of 25% compared to the same nine months ended in 2001. Refined fuels and propane volume increases were primarily a result of acquisitions. Country Operations farm supply sales of $448.3 million decreased by $52.0 million (10%) during the nine months ended May 31, 2002 compared to the same nine months ended in 2001. The decrease is primarily due to a reduction in the average retail sales price of energy products compared to the same nine months ended in 2001. Processed Grains and Foods sales of $394.2 million decreased $87.4 million (18%) during the nine months ended May 31, 2002 compared to the same nine months ended in 2001. The decrease in sales is primarily due to the formation of Horizon, the wheat milling LLC described earlier. As of January 2002, the company no longer recorded sales of processed wheat and accounts for operating results under the equity method of accounting. Patronage dividends of $4.9 million decreased $0.7 million (12%) during the nine months ended May 31, 2002 compared to the same nine months ended in 2001. Other revenues of $82.1 million decreased $8.1 million (9%) during the nine months ended May 31, 2002 compared to the same nine months ended in 2001. The most significant changes were within the Country Operations and Other segments compared to the same nine months ended in 2001. Cost of goods sold of $5.4 billion decreased $340.1 million (6%) during the nine months ended May 31, 2002, compared to the same nine months ended in 2001. The decrease is primarily due to an Energy segment decrease in volume as a result of the dissolution of CRLLC, which was previously discussed. In addition, the volume of refined fuels increased by 43%, which was partially offset by an average cost of refined fuels rack purchases decrease of $0.22 per gallon compared to the same nine months ended in 2001. The average cost of propane decreased by $0.20 per gallon, which was partially 12 offset by a 25% volume increase compared to the same nine months ended in 2001. Country Operations farm supply cost of goods sold decreased by 11% primarily due to the reduced cost of energy products compared to the same nine months ended in 2001. The cost of all grains and oilseed procured by the Company through its Grain Marketing and Country Operations segments increased 4% compared to the same nine-month period ended in 2001 primarily due to a $0.41 average cost per bushel increase, which was partially offset by a 9% decrease in volume. Processed Grains and Foods segment cost of goods sold decreased by 19% compared to the same nine months ended in 2001, primarily due to the formation of Horizon, the wheat milling LLC described earlier. As of January 2002, the company no longer recorded cost of goods sold of processed wheat. Marketing, general and administrative expenses of $140.0 million for the nine months ended May 31, 2002 increased by $4.8 million (4%) compared to the same nine months ended in 2001. This increase is primarily due to additional expenses resulting from an Energy segment acquisition, which was partially offset by reduced expenses within the Processed Grains and Foods segment due to Horizon milling, the wheat milling LLC described earlier. Interest expense of $31.9 million for the nine months ended May 31, 2002 decreased by $17.4 million (35%) compared to the same nine months ended in 2001. The average level of short-term borrowings decreased by 39% and the average short-term interest rate decreased by 3.9% during the nine months ended in 2002 compared to the same nine months ended in 2001. These decreases in interest expense were partially offset by an increase due to an additional $80.0 million of long-term debt from a private placement, of which $25.0 million and $55.0 million were issued in January 2001 and March 2001, respectively. Equity income from investments of $33.7 million for the nine months ended May 31, 2002 increased by $20.2 million (149%) compared to the same nine months ended in 2001. The increase was primarily attributable to decreased losses compared to 2001 from Other segment investments of $11.7 million and increased 2002 earnings from Agronomy and Processed Grains and Foods segments investments of $6.4 million and $5.0 million, respectively compared to the same nine months ended in 2001. These increases were partially offset by losses within the Energy segment investments of $2.3 million compared to the same nine months ended in 2001. Minority interests of $11.6 million for the nine months ended May 31, 2002 decreased by $14.0 million (55%) compared to the same nine months ended in 2001. This net change in minority interests during the nine months ended May 31, 2002 compared to the same nine months ended in 2001 was primarily a result of the dissolution of CRLLC and less profitable operations within the Company's majority-owned subsidiaries. Substantially all minority interests relates to NCRA. Income tax expense of $13.4 million for the nine months ended May 31, 2002 compares to a tax benefit of $34.7 million for the nine months ended May 31, 2001. The federal and state statutory rate applied to nonpatronage business activity was 38.9% for the nine months ended May 31, 2002 and 2001. An income tax benefit of $34.2 million for the nine months ended May 31, 2001 resulted from a change in the tax rate applied to the Company's cumulative temporary differences between income for financial statement purposes and income used for tax reporting purposes. The Company's calculation of its patronage distribution using earnings for financial statement purposes rather than tax basis earnings prompted the rate change. The Company recorded income tax expense of $13.4 million for the nine months ended May 31, 2002, which compares to a $0.5 million tax benefit for the nine months ended February 2001, exclusive of the $34.2 million benefit related to the change in patronage determination described above. The income taxes and effective tax rate varies from period to period based upon profitability and nonpatronage business activity during each of the comparable periods. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS FROM OPERATIONS Operating activities of the Company provided net cash of $78.8 million and $159.3 million for the three months ended May 31, 2002 and 2001, respectively. For the three-month period ended in 2002, net income of $46.6 million and decreased working capital requirements of $41.9 million were partially offset by net non-cash revenue of $9.7 million. For the three-month period ended in 2001, net income of 13 $64.3 million, net non-cash expenses of $18.3 million and decreased working capital requirements of $76.7 million provided cash from operating activities. Operating activities of the Company used net cash of $36.4 million and provided cash of $45.6 million for the nine months ended May 31, 2002 and 2001, respectively. For the nine-month period ended in 2002, net income of $90.4 million and net non-cash expenses of $47.9 million were offset by increased working capital requirements of $174.7 million. For the nine-month period ended in 2001, net income of $150.3 million and net non-cash expenses of $42.1 million were partially offset by increased working capital requirements of $146.8 million. CASH FLOWS FROM INVESTING Investing activities of the Company used net cash of $22.8 million during the three-month period ended May 31, 2002. Expenditures for the acquisition of property, plant and equipment of $32.8 million, which includes $27.3 million of expenditures for the construction of an oilseed processing facility in Fairmont, Minnesota, acquisitions of intangibles of $0.4 million and distributions to minority owners of $0.4 million were the primary uses of cash for investing activities and were partially offset by investments redeemed of $8.8 million, proceeds from the disposition of property, plant and equipment of $1.8 million and changes in notes receivable of $0.3 million. For the year ended August 31, 2002 the Company expects to spend approximately $179.8 million for the acquisition of property, plant and equipment. Total expenditures related to the construction of the oilseed processing facility are projected to be approximately $90.0 million upon completion in fiscal 2003. Capital expenditures at NCRA, primarily related to the EPA low sulfur fuel regulations required by 2006, are expected to be approximately $250.0 million over the next five years. Investing activities of the Company used net cash of $15.0 million during the three-month period ended May 31, 2001. Expenditures for the acquisition of property, plant and equipment of $24.7 million, investments of $1.8 million, changes in notes receivable of $1.2 million, distributions to minority owners of $0.6 million and other investing activities of $1.4 million were partially offset by proceeds from the disposition of property, plant and equipment of $1.5 million and investments redeemed of $13.2 million. Investing activities of the Company used net cash of $77.2 million during the nine-month period ended May 31, 2002. Expenditures for the acquisition of property, plant and equipment of $84.7 million, acquisitions of intangibles of $28.0 million, investments of $6.2 million and distributions to minority owners of $4.8 million were partially offset by investments redeemed of $32.2 million, proceeds from the disposition of property, plant and equipment of $10.5 million, changes in notes receivable of $2.7 million and other investing activities. Acquisitions of intangibles during the nine-month period ended May 31, 2002, is primarily related to the purchase of Farmland's interest in a jointly owned wholesale energy business, as previously discussed, and represents trademarks, tradenames and non-compete agreements. Investing activities of the Company used net cash of $53.0 million during the nine-month period ended May 31, 2001. Expenditures for the acquisition of property, plant and equipment of $73.2 million, investments of $13.4 million, acquisitions of intangibles of $7.0 million, distributions to minority owners of $13.1 million and changes in notes receivable of $1.7 million were partially offset by proceeds from the disposition of property, plant and equipment of $29.2 million, investments redeemed of $22.0 million and other investing activities of $4.2 million. Acquisition of intangibles during the nine-month period ended May 31, 2001, is related to the asset purchase of Rodriguez Festive Foods, Inc., a manufacturer of Mexican foods. The proceeds from the disposition of property, plant and equipment were primarily from the sale of feed plants and other assets in the Country Operations segment. CASH FLOWS FROM FINANCING The Company finances its working capital needs through short-term lines of credit with a syndication of banks. In May 2002, the Company renewed its 364-day credit facility of $550.0 million committed. In addition to these lines of credit, the Company has a 364-day credit facility dedicated to NCRA, with a syndication of banks in the amount of $30.0 million committed. On May 31, 2002, August 31, 2001 and May 31, 2001, the Company had total short-term indebtedness outstanding on these various facilities and other short-term notes payable totaling $276.0 million, $97.2 million and $255.0 million, respectively. 14 In June 1998, the Company established a five-year revolving credit facility with a syndication of banks, with $200.0 million committed. On May 31, 2002, August 31, 2001 and May 31, 2001 the Company had outstanding balances on this facility of $75.0 million, $45.0 million and $45.0 million, respectively. The outstanding balance on May 31, 2002 includes $30.0 million which was drawn during the first quarter of the current fiscal year. The outstanding balance on this credit facility was categorized as long-term debt until May 2002, when it was reclassified to a current liability. The Company intends to refinance this debt within the next nine months, at which time it will be reclassified to a non-current liability. The Company has financed its long-term capital needs in the past, primarily for the acquisition of property, plant and equipment, with long-term agreements through the banks for cooperatives. In June 1998, the Company established a long-term credit agreement through the banks for cooperatives with repayments through fiscal year 2009. The amount outstanding on this credit facility was $146.0 million, $150.9 million and $152.5 million on May 31, 2002, August 31, 2001 and May 31, 2001, respectively. Repayments of approximately $1.6 million and $4.9 million were made on this facility during each of the three months and nine months ended May 31, 2002 and 2001, respectively. Also in June 1998, the Company issued a private placement with several insurance companies for long-term debt in the amount of $225.0 million. Repayments will be made in equal annual installments of $37.5 million each in the years 2008 through 2013. In January 2001, the Company entered into a note purchase and private shelf agreement with Prudential Insurance Company. The long-term note in the amount of $25.0 million will be repaid in equal annual installments of approximately $3.6 million, in the years 2005 through 2011. A subsequent note for $55.0 million was issued in March 2001, related to the private shelf facility. The $55.0 million note will be repaid in equal annual installments of approximately $7.9 million, in the years 2005 through 2011. On May 31, 2002, the Company had total long-term debt outstanding of $575.4 million, of which $259.6 million was bank financing, $305.0 million was private placement debt and $10.8 million was industrial development revenue bonds and other notes and contracts payable. Long-term debt of NCRA represented $22.0 million of the total long-term debt outstanding on May 31, 2002. On August 31, 2001 and May 31, 2001, the Company had long-term debt outstanding of $560.0 million and $572.1 million, respectively. The aggregate amount of long-term debt payable as of August 31, 2001 was as follows (dollars in thousands): 2002 $ 17,754 2003 59,083 2004 15,119 2005 34,553 2006 34,984 Thereafter 398,504 -------- $559,997 ======== During the three-month periods ended May 31, 2002 and 2001, the Company repaid long-term debt of $4.6 million and $41.4 million, respectively, and had additional long-term borrowings of $55.0 million during the three-month period ended in 2001. During the nine-month periods ended May 31, 2002 and 2001, the Company repaid long-term debt of $14.7 million and $55.3 million, respectively, and had additional long-term borrowings of $30.0 million and $116.8 million, respectively, for the same nine-month periods. In accordance with the by-laws and by action of the Board of Directors, annual net earnings from patronage sources are distributed to consenting patrons following the close of each fiscal year. Effective September 1, 2000, patronage refunds are calculated based on earnings for financial statement purposes rather than based on amounts reportable for federal income tax purposes as had been the Company's practice prior to that date. This change was authorized through a by-law amendment at the Company's annual meeting on December 1, 2000. The patronage earnings from the fiscal year ended August 31, 15 2001 were distributed during the second quarter of the current fiscal year. The cash portion of this distribution, deemed by the Board of Directors to be 100% for Equity Participation Units and 30% for other patronage earnings, was $40.1 million. During the prior fiscal year, the Company distributed cash patronage of $26.1 million from the patronage earnings of the fiscal year ended August 31, 2000. The current equity redemption policy, as authorized by the Board of Directors, allows for the redemption of capital equity certificates held by inactive direct members and patrons and active direct members and patrons at age 72 or death that were of age 61 or older on June 1, 1998. For active direct members and patrons who were of age 60 or younger on June 1, 1998, and member cooperatives, equities older than 10 years will be redeemed annually based on a prorata formula where the numerator is dollars available for such purpose as determined by the Board of Directors, and the denominator is the sum of the patronage certificates older than 10 years held by such eligible members and patrons. Total redemptions related to the year ended August 31, 2001, to be distributed in the current fiscal year, are expected to be approximately $29.0 million, of which $26.3 million was redeemed during the nine months ended May 31, 2002. During the nine months ended May 31, 2001 the Company redeemed $14.4 million of equity. Redemptions of equity by the Company during the three-month periods ended May 31, 2002 and 2001 were $3.2 million and $6.5 million, respectively. The Board of Directors has authorized the sale and issuance of up to 50,000,000 shares of 8% Preferred Stock at a price of $1.00 per share. The Company filed a registration statement on Form S-2 with the Securities and Exchange Commission registering the Preferred Stock. The registration statement was declared effective on October 31, 2001 and sales of the Preferred Stock were $7.0 million through May 31, 2002. Expenses related to the issuance of the Preferred Stock were $2.6 million through the same period. OFF BALANCE SHEET FINANCING ARRANGEMENTS LEASE COMMITMENTS: The Company has commitments under operating leases for various refinery, manufacturing and transportation equipment, rail cars, vehicles and office space. Some leases include purchase options at not less than fair market value at the end of the leases. Total rental expense for all operating leases, net of rail car mileage credits received from the railroad and sublease income for the three and nine months ended May 31, 2002 was approximately $9.0 million and $27.0 million, respectively. For the three and nine months ended May 31, 2001, total rental expense was approximately $8.5 million and $26.0 million, respectively. Minimum future lease payments, required under noncancellable operating leases as of August 31, 2001, were as follows: (DOLLARS IN MILLIONS) TOTAL --------------------- ------- 2002 $ 35.4 2003 26.3 2004 16.8 2005 7.5 2006 5.0 Thereafter 12.8 ------- Total minimum future lease payments $ 103.8 ======= GUARANTEES: The Company is a guarantor for lines of credit for related companies of which approximately $39.0 million was outstanding as of May 31, 2002. The Company's bank covenants allow maximum guarantees of $100.0 million. All outstanding loans with respective creditors are current as of May 31, 2002. DEBT: There is no material off balance sheet debt. 16 CRITICAL ACCOUNTING POLICIES The consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires the use of estimates as well as management's judgements and assumptions regarding matters that are subjective, uncertain or involve a high degree of complexity, all of which affect the results of operations and financial condition for the periods presented. The Company believes that of its significant accounting policies, the following may involve a higher degree of estimates, judgements, and complexity: ALLOWANCES FOR DOUBTFUL ACCOUNTS The allowances for doubtful accounts are maintained at a level considered appropriate by management based on analyses of credit quality for specific accounts, historical trends of charge-offs and recoveries, and current and projected economic and market conditions. Different assumptions, changes in economic circumstances or the deterioration of the financial condition of the Company's customers could result in additional provisions to the allowances for doubtful accounts and increased bad debt expense. INVENTORY VALUATION AND RESERVES Grain, processed grain, oilseed and processed oilseed are stated at net realizable values, which approximates market values. All other inventories are stated at the lower of cost or market. The cost of certain energy inventories (wholesale refined products, crude oil and asphalt) are determined on the last-in, first-out (LIFO) method; all other energy inventories are valued on the first-in, first-out (FIFO) and average cost methods. Estimates are used in determining the net realizable value of grain and oilseed and processed grain and oilseed inventories. These estimates include the measurement of grain in bins and other storage facilities, which use formulas in addition to actual measurements taken to arrive at appropriate quantity. Other determinations made by management include quality of the inventory and estimates for freight. Grain shrink reserves and other reserves that account for spoilage also affect inventory valuation. If estimates regarding the valuation of inventory or the adequacy of reserves are less favorable than management's assumptions, then additional reserves or write-downs of inventory may be required. DERIVATIVE FINANCIAL INSTRUMENTS The Company enters into exchange-traded commodity futures and options contracts to hedge its exposure to price fluctuations on energy, grain and oilseed transactions to the extent considered practicable for minimizing risk. The Company does not use derivatives for speculative purposes. Futures and options contracts used for hedging are purchased and sold through regulated commodity exchanges. Fluctuations in inventory valuations, however, may not be completely hedged, due in part to the absence of satisfactory hedging facilities for certain commodities and geographical areas and in part to the Company's assessment of its exposure from expected price fluctuations. The Company also manages its risks by entering into fixed price purchase contracts with pre-approved producers and establishing appropriate limits for individual suppliers. Fixed price sales contracts are entered into with customers of acceptable creditworthiness, as internally evaluated. The Company is exposed to loss in the event of nonperformance by the counterparties to the contracts. However, the Company does not anticipate nonperformance by counterparties. The fair value of futures and options contracts are determined primarily from quotes listed on regulated commodity exchanges. Fixed price purchase and sales contracts are with various counterparties, and the fair values of such contracts are determined from the market price of the underlying product. The Company adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 133, as amended, a standard related to the accounting for derivative transactions and hedging activities, effective September 1, 2000. Such accounting is complex, evidenced by significant interpretations of the primary accounting standard, which continues to evolve. PENSION AND POSTRETIREMENT BENEFITS Pension and other postretirement benefits costs and obligations are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, health care cost trend rates, benefits earned, interest cost, expected return on plan assets, mortality rates, and other factors. In 17 accordance with accounting principles generally accepted in the United States of America, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company's pension and other postretirement obligations and future expense. DEFERRED TAX ASSETS The Company assesses whether a valuation allowance is necessary to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. While the Company has considered future taxable income as well as other factors in assessing the need for the valuation allowance, in the event that the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. LONG-LIVED ASSETS Depreciation and amortization of the Company's property, plant and equipment is provided on the straight-line method by charges to operations at rates based upon the expected useful lives of individual or groups of assets. Economic circumstances or other factors may cause management's estimates of expected useful lives to differ from actual. All long-lived assets, including property plant and equipment, goodwill, investments in unconsolidated affiliates and other identifiable intangibles, are evaluated for impairment on the basis of undiscounted cash flows at least annually for goodwill, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair market value based on the best information available. Estimated fair market value is generally measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows and may differ from actual. ENVIRONMENTAL LIABILITIES 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 on current available facts, existing technology, undiscounted site-specific costs and currently enacted laws and regulations. Recoveries, if any, are recorded in the period in which recovery is considered probable. It is often difficult to estimate the cost of environmental compliance, remediation and potential claims given the uncertainties regarding the interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination and the existence of alternate cleanup methods. All liabilities are monitored and adjusted as new facts or changes in law or technology occur and management believes adequate provisions have been made for environmental liabilities. Changes in facts or circumstances may have an adverse impact on the Company's financial results. EFFECT OF INFLATION AND FOREIGN CURRENCY TRANSACTIONS The Company's management believes that inflation and foreign currency fluctuations have not had a significant effect on its operations. RECENT ACCOUNTING PRONOUNCEMENTS Effective September 1, 2001 the Company adopted the provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets". The adoption of this pronouncement did not have a material impact on the Company's consolidated financial statements. The FASB recently issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company is currently analyzing the effects of adoption of this pronouncement. 18 The FASB also recently issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 retains and expands upon the fundamental provisions of existing guidance related to the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of long-lived asset to be disposed of by sale. Generally, the provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company is currently analyzing the effects of adoption of this pronouncement. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For the period ended May 31, 2002 the Company did not experience any adverse changes in market risk exposures that materially affect the quantitative and qualitative disclosures presented in the Company's Annual Report on Form 10-K for the year ended August 31, 2001. 19 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT DESCRIPTION ------- ----------- 10.1 Fourth Amendment to Credit Agreement (Revolving Loan) dated May 22, 2002 among Cenex Harvest States Cooperatives, CoBank, ACB, Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., SunTrust Bank, Deere Credit, Inc., Credit Lyonnais Chicago Branch and the Syndication Parties 10.2 Fourth Amendment to Credit Agreement (Term Loan) dated May 22, 2002 among Cenex Harvest States Cooperatives, CoBank, ACB and the Syndication Parties 10.3 Syndication Adoption Agreement dated May 22, 2002 between CoBank, ACB and the Adopting Parties 99 Cautionary Statement (b) Reports on Form 8-K None. 20 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. CENEX HARVEST STATES COOPERATIVES --------------------------------- (Registrant) DATE SIGNATURE ---- --------- July 3, 2002 /s/ JOHN SCHMITZ ------------------------- ------------------------------------- (Date) John Schmitz Executive Vice President and Chief Financial Officer 21 (This page has been left blank intentionally.) EX-10.1 3 cenex023213_ex10-1.txt 4TH AMENDMENT TO CREDIT AGRMNT (REVOLVING LOAN) EXHIBIT 10.1 FOURTH AMENDMENT TO CREDIT AGREEMENT (REVOLVING LOAN) THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (Revolving Loan) ("AMENDMENT AGREEMENT") is made May 22, 2002 to be effective as of the Effective Date, by and among Cenex Harvest States Cooperatives, a Minnesota cooperative corporation ("BORROWER"), CoBank, ACB ("COBANK") as the Bid Agent, Lead Arranger, and as the Administrative Agent for the benefit of the present and future Syndication Parties (in that latter capacity "ADMINISTRATIVE AGENT"), Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank International", New York Branch ("RABOBANK"), SunTrust Bank ("SUNTRUST"), Deere Credit, Inc. ("DEERE"), and Credit Lyonnais New York Branch ("CREDIT Lyonnais"), as Syndication Agents, and the Syndication Parties signatory hereto, including CoBank, Rabobank, SunTrust, Deere, and Credit Lyonnais, in such capacity, (each a "SYNDICATION PARTY" and collectively, the "SYNDICATION PARTIES"). RECITALS A. Borrower, CoBank, St. Paul Bank for Cooperatives, and certain of the present Syndication Parties entered into a Credit Agreement (Revolving Loan) (as amended "CREDIT AGREEMENT") dated as of June 1, 1998. The Credit Agreement provided for a 364-Day Facility and a 5-Year Facility. B. The Credit Agreement was amended by the First Amendment to Credit Agreement (Revolving Loan) effective as of May 28, 1999 ("FIRST AMENDMENT"), by the Second Amendment to Credit Agreement (Revolving Loan) dated as of May 23, 2000 ("SECOND AMENDMENT"), and by the Third Amendment to Credit Agreement (Revolving Loan) dated as of May 23, 2001 ("THIRD AMENDMENT"). C. CoBank, as Administrative Agent, gave written notification ("RENEWAL NOTICE") to those Syndication Parties which had an Individual 364-Day Commitment seeking (i) a renewal of their respective Individual 364-Day Commitments and (ii) consent to an extension of the 364-Day Maturity Date pursuant to the provisions of Section 16.9 of the Credit Agreement. D. Certain of the Syndication Parties have provided the Administrative Agent with written notice of their agreement to continue to maintain Individual 364-Day Commitments, and one or more institutions, which were not Syndication Parties prior to the date hereof, have agreed to become Syndication Parties as indicated on Schedule A hereto and by their execution of this Amendment Agreement and by their execution of a Syndication Adoption Agreement. E. The parties hereto desire to amend the Credit Agreement to renew the 364-Day Facility and to make certain other changes to the Credit Agreement as hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, including the mutual promises and agreements contained herein, the parties hereto hereby agree as follows: 1. DEFINITIONS. Capitalized terms used herein without definition shall have the definition given to them in the Credit Agreement if defined therein. 2. RENEWAL OF INDIVIDUAL 364-DAY COMMITMENTS. The Syndication Parties hereby agree to renew or agree to acquire their respective Individual 364-Day Commitments in the amounts set forth beneath their names and signatures on the signature pages hereto and as set forth in Schedule 1 hereto. 3. AMENDMENTS TO CREDIT AGREEMENT. The parties hereto agree that the Credit Agreement shall be amended as follows as of the Effective Date: 3.1 Subsection 1.42 shall be amended in its entirety to read as follows: 1.42 CONSOLIDATED CURRENT ASSETS: the total current assets of Borrower and its Consolidated Subsidiaries as measured in accordance with GAAP. 3.2 Subsection 1.43 shall be amended in its entirety to read as follows: 1.43 CONSOLIDATED CURRENT LIABILITIES: the total current liabilities of Borrower and its Consolidated Subsidiaries as measured in accordance with GAAP. 3.3 Subsection 1.44 shall be amended in its entirety to read as follows: 1.44 CONSOLIDATED FUNDED DEBT: all indebtedness for borrowed money of the Borrower and its Consolidated Subsidiaries, in each case maturing by its terms more than one year after, or which is renewable or extendible for a period ending one year or more after, the date of determination, and shall include Debt of such maturity created or assumed by the Borrower or any Consolidated Subsidiary either directly or indirectly, including obligations of such maturity secured by liens upon property of the Borrower or its Consolidated Subsidiaries and upon which such entity customarily pays the interest, and all rental payments under capitalized leases of such maturity. 3.4 Subsection 1.156 shall be amended in its entirety to read as follows: 1.156 364-DAY MATURITY DATE: May 21, 2003. 2 3.5 Section 13.6 is amended in its entirety to read as follows: 13.6 LOANS. Borrower shall not (nor shall it permit any of its Restricted Subsidiaries to) lend or advance money, credit, or property to any Person, except for (a) loans to Restricted Subsidiaries; (b) trade credit extended in the ordinary course of business; (c) loans made by Borrower to its members on open account maintained by such members with Borrower or made by Borrower to its members pursuant to its Affiliate Financing CoBank Participation Program; provided that (i) the aggregate principal amount of all such loans outstanding at any time shall not exceed $200,000,000.00, and (ii) the aggregate outstanding principal amount of all such loans retained by Borrower shall not exceed $50,000,000.00; (d) loans made by Fin-Ag, Inc. to agricultural producers, provided that (i) the aggregate outstanding principal amount of all such loans at any time shall not exceed $125,000,000.00, (ii) at all times prior to December 1, 2001, the aggregate outstanding principal amount of all such loans retained by Fin-Ag, Inc. shall not exceed $38,000,000.00, and (iii) at all times on and after December 1, 2001, the aggregate outstanding principal amount of all such loans retained by Fin-Ag, Inc. shall not exceed $25,000,000.00. 3.6 Section 13.7 is amended in its entirety to read as follows: 13.7 MERGER; ACQUISITIONS; BUSINESS FORM; ETC. Borrower shall not merge (nor shall it permit any of its Restricted Subsidiaries to) or consolidate with any entity, or acquire all or substantially all of the assets of any person or entity, or form or create any new subsidiary (other than a Restricted Subsidiary formed by Borrower) or affiliate, change its business form from a cooperative corporation, or commence operations under any other name, organization, or entity, including any joint venture; provided, however, (a) The foregoing shall not prevent any consolidation, acquisition, or merger if after giving effect thereto: (i) The book value of Borrower and its subsidiaries does not increase due to all such mergers, consolidations or acquisitions by an aggregate amount in excess of $50,000,000 in any fiscal year of Borrower; (ii) Borrower is the surviving entity; and (iii) No Event of Default or Potential Default shall have occurred and be continuing. (b) The foregoing shall not prevent Borrower from forming or creating any new subsidiary or affiliate provided: (i) The Investment in such subsidiary or affiliate does not violate any provision of Section 13.8 hereof; and 3 (ii) Such subsidiary or affiliate shall not acquire all or substantially all of the assets of any Person except through an acquisition, consolidation, or merger satisfying the requirements of clause (a) of this Section. 3.7 Clause (j) of Section 13.8 (and only that clause), is amended in its entirety to read as follows: (j) Investments, in addition to those permitted by clauses (a) through (i) above, in an aggregate amount not exceeding $140,000,000.00. 3.8 Schedule 1 is replaced in its entirety by the Schedule 1 attached hereto. 3.9 Schedule 2 is replaced in its entirety by the Schedule 2 attached hereto. 4. BORROWER'S REPRESENTATIONS. Borrower hereby represents and warrants that, after giving effect to this Amendment Agreement and the transactions contemplated hereby, no Potential Default or Event of Default has occurred and is continuing under the Credit Agreement or other Loan Documents. 5. EFFECTIVE DATE. This Amendment Agreement shall become effective on May 22, 2002 ("EFFECTIVE DATE"), so long as on or before that date the Administrative Agent receives (a) an original copy of this Amendment Agreement (or original counterparts thereof) duly executed by each party hereto, (b) a Syndication Adoption Agreement (or original counterparts thereof) duly executed by each party identified on Schedule A hereto, (c) each required new or replacement Promissory Note, (d) a copy of a resolution of Borrower's board of directors, certified to by Borrower's corporate secretary, which authorizes execution of this Amendment Agreement; (e) an opinion of Borrower's counsel in all respects acceptable to the Administrative Agent; and (f) payment by wire transfer of (i) the fees described in Section 6 hereof and (ii) reimbursement for each of the costs, expenses described in Section 7 hereof. Upon the satisfaction of all conditions precedent hereto, the Administrative Agent will notify each party hereto in writing and will provide copies of all appropriate documentation in connection herewith. 6. UP-FRONT FEE. Borrower agrees to pay to the Administrative Agent, for distribution among the Syndication Parties, the Up-Front Fee calculated in the manner previously disclosed to Borrower by the Administrative Agent, based on Individual 364-Day Commitments and the Individual 5-Year Commitments, as both are shown on the signature pages hereto. 7. COSTS; EXPENSES AND TAXES. Borrower agrees to reimburse the Administrative Agent on demand for all out-of-pocket costs, expenses and charges (including, without limitation, all fees and charges of external legal counsel for the Administrative Agent) incurred by the Administrative Agent in connection with the preparation, reproduction, execution and delivery of this Amendment Agreement and any other instruments and documents to be delivered hereunder. 4 8. GENERAL PROVISIONS. 8.1 The Credit Agreement, except as expressly modified herein, shall continue in full force and effect and be binding upon the parties thereto. 8.2 Borrower agrees to execute such additional documents as the Administrative Agent may require, including, without limitation, new and/or replacement Notes, to carry out or evidence the purposes of this Amendment Agreement. 8.3 The execution, delivery and effectiveness of this Amendment Agreement shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Syndication Party under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents, and the Credit Agreement, as expressly modified hereby, and each of the other Loan Documents, are hereby ratified and confirmed and shall continue in full force and effect and be binding upon the parties thereto. Any direct or indirect reference in the Loan Documents to the "Credit Agreement" shall be deemed to be a reference to the Credit Agreement as amended by this Amendment Agreement. Any direct or indirect reference in the Loan Documents to a "Syndication Party" or to the "Syndication Parties" shall be deemed to be a reference to the Syndication Parties shown on Schedule 1 to this Amendment Agreement. 9. GOVERNING LAW. This Amendment Agreement shall be governed by and construed in accordance with the laws of the State of Colorado. 10. COUNTERPARTS. This Amendment Agreement may be executed in any number of counterparts and by different parties to this Amendment Agreement in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Telefax copies of documents or signature pages bearing original signatures, and executed documents or signature pages delivered by telefax, shall, in each such instance, be deemed to be, and shall constitute and be treated as, an original signed document or counterpart, as applicable. [EXECUTION PAGES BEGIN ON THE NEXT PAGE] 5 IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to Credit Agreement (Revolving Loan) to be executed by their duly authorized officers as of the Effective Date. BORROWER: CENEX HARVEST STATES COOPERATIVES, a cooperative corporation formed under the laws of the State of Minnesota By: --------------------------------------- Name: John Schmitz Title: Chief Financial Officer ADMINISTRATIVE AGENT, LEAD ARRANGER, AND BID AGENT: COBANK, ACB By: --------------------------------------- Name: Title: Vice President SYNDICATION AGENT: COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ SYNDICATION AGENT: SUNTRUST BANK By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 6 SYNDICATION AGENT: DEERE CREDIT, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ SYNDICATION AGENT: CREDIT LYONNAIS NEW YORK BRANCH By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 7 SYNDICATION PARTIES: COBANK, ACB By: --------------------------------------- Name: ------------------------------------- Title: Vice President Contact Name: __________ Title: Vice President Address: 5500 So. Quebec Street Greenwood Village, CO 80111 Phone No.: 303/694-5838 Fax No.: 303/694-5830 Individual 364-Day Commitment: $177,000,000.00 Individual 5-Year Commitment: $61,666,667.00 Payment Instructions: CoBank, ACB ABA #: 307088754 Acct. Name: CoBank, ACB Account No.: 22274433 Attn: Marshall Allen Reference: Cenex Harvest States 8 SYNDICATION PARTIES: INTESABCI, NEW YORK BRANCH By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: Antonio Di Maggio Title: Vice President Address: One William Street New York, NY 10004 Phone No.: 212/607-3862 Fax No.: 212/527-8777 Individual 364-Day Commitment: $10,000,000.00 Individual 5-Year Commitment: $8,333,333.00 Payment Instructions: Pay by FED WIRE ABA# - 026005319 For account of IntesaBci New York Branch Attn: Loan Dept./Ms. Castrogiovanni Ref: CHS Cooperatives 9 SYNDICATION PARTIES: CREDIT AGRICOLE INDOSUEZ By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: Theodore D. Tice Title: Vice President Address: 55 E. Monroe Street Chicago, IL 60603-5702 Phone No.: 312/917-7463 Fax No.: 312/372-3455 Individual 364-Day Commitment: $0.00 Individual 5-Year Commitment: $16,666,667.00 Payment Instructions: Citibank - New York, New York ABA# - 021-000-089 Acct. Name: Credit Agricole Indoseuz Chgo Branch Account No.: 36023853 Swift Code: CITIUS33 Ref: Cenex Harvest States 10 SYNDICATION PARTIES: SUNTRUST BANK By: --------------------------------------- Name: ------------------------------------- Title: Director By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: Kurt Morris Title: Director Address: 303 Peachtree Street N.E. Third Floor Atlanta, GA 30308 Phone No.: 404/658-4807 Fax No.: 404/230-5305 Individual 364-Day Commitment: $38,000,000.00 Individual 5-Year Commitment: $8,333,333.00 Payment Instructions: SunTrust Bank ABA# - 061000104 Acct. Name: Corporate Banking Operations General Ledger Account Account No.: 9088000112 Ref: Cenex Harvest States Cooperatives 11 SYNDICATION PARTIES: BNP PARIBAS By: --------------------------------------- Name: Guillaume de la Ville Title: Vice President By: --------------------------------------- Name: Marcie Weiss Title: Managing Director Contact Name: Guillaume de la Ville Title: Vice President Address: 919 Third Avenue New York, NY 10022 Phone No.: 212/841-2067 Fax No.: 212/841-2536 Individual 364-Day Commitment: $38,000,000.00 Individual 5-Year Commitment: $13,333,333.00 Payment Instructions: BNP Paribas - New York ABA# - 026-007-689 Acct. Name: Loan Servicing Clearing Account Account No.: 1 03 13 000 103 Reference: Cenex Harvest States Operations Contact: Pedro Rivera Phone: 212/471-6631 Fax: 212/471-6695 12 SYNDICATION PARTIES: COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: Tom Kelly Title: Vice President Address: 300 South Wacker Drive Suite 3500 Chicago, IL 60606-6610 Phone No.: 312/408-8222 Fax No.: 312/408-8240 Individual 364-Day Commitment: $38,000,000.00 Individual 5-Year Commitment: $13,333,333.00 Payment Instructions: The Bank of New York (New York, NY 10167) ABA# - 021 000 018 Acct. Name: Rabobank Nederland Account No.: 802 6002 533 Attn: Clemencia Stewart Ref: Cenex Harvest States 13 SYNDICATION PARTIES: THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH By: --------------------------------------- Name: Patrick McCue Title: Vice President & Manager Contact Name: Patrick McCue Title: Vice President & Manager Address: 601 Carlson Parkway, Suite 370 Minnetonka, MN 55305 Phone No.: 952/473-5090 Fax No.: 952/473-5152 Loan Administration Contact Name: Janice Hennig Address: 227 West Monroe Street Suite 2300 Chicago, Illinois 60606 Phone No.: 312/696-4710 Fax No.: 312/696-4532 Individual 364-Day Commitment: $22,000,000.00 Individual 5-Year Commitment: $8,333,333.00 Payment Instructions: The Federal Reserve Bank of Chicago ABA# - 071002341 Acct. Name: The Bank of Tokyo- Mitsubishi, Ltd. Attention: Loan Administration Ref: Cenex Harvest States Cooperatives 14 SYNDICATION PARTIES: CREDIT LYONNAIS NEW YORK BRANCH By: --------------------------------------- Name: Attila Koc Title: Senior Vice President Contact Name: Julie T. Kanak Title: Vice President Address: 227 W. Monroe Street Suite 3800 Chicago, IL 60606 Phone No.: 312/220-7302 Fax No.: 312/641-0527 Individual 364-Day Commitment: $38,000,000.00 Individual 5-Year Commitment: $0.00 Payment Instructions: Credit Lyonnais New York ABA# - 0260-0807-3 A/C #: 01.881793701 Acct. Name: Attention: Ref: 15 SYNDICATION PARTIES: WELLS FARGO BANK, NATIONAL ASSOCIATION By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: Allison Gelfman Title: Vice President Address: Sixth and Marquette MAC-N9305-031 Minneapolis, MN 55479-0085 Phone No.: 612/316-1402 Fax No.: 612/667-2276 Individual 364-Day Commitment: $25,000,000.00 Individual 5-Year Commitment: $8,333,333.00 Payment Instructions: Wells Fargo Bank National Association ABA# - 091000019 Acct. Name: Commercial Loan Clearing Account Account No.: 840165 Ref: Cenex Harvest States 16 SYNDICATION PARTIES: DZ BANK AG DEUTSCHE ZENTRAL- GENOSSNESCHAFTSBANK, FRANKFURT AM MAIN, (FORMERLY DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG) By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: James A. Kyprios Title: Vice President Address: 609 Fifth Avenue New York, NY 10017 Phone No.: 212/745-1562 Fax No.: 212/745-1556 Individual 364-Day Commitment: $0.00 Individual 5-Year Commitment: $13,333,333.00 Payment Instructions: (1) CHIPS Payments: Bank of New York for Account of DG Bank, NY Account No. 8900433876 Ref: Cenex Harvest States (2) Federal Reserve Payments: Bank of New York ABA #021000018 Account Name: DG Bank, NY Account No. 8900433876 Ref: Cenex Harvest States 17 SYNDICATION PARTIES: U.S. BANK NATIONAL ASSOCIATION By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: Kathi L. Hatch Title: Commercial Banking Associate Address: %U.S. Bancorp Ag Credit, Inc. 950 17th Street, #330 Denver, CO 80202 Phone No.: 303/585-4926 Fax No.: 303/585-4732 Individual 364-Day Commitment: $18,000,000.00 Individual 5-Year Commitment: $8,333,333.00 Payment Instructions: U.S. Bank National Association Portland, OR. ABA# - 123000220 Acct. Name: U.S. Bancorp Ag Credit, Inc. Account No.: 00340012160600 PL-7 Commercial Loan Servicing West Attn: Participation Specialist Ref: Cenex Harvest States #63490-61459 18 SYNDICATION PARTIES: AGFIRST, FCB By: --------------------------------------- Name: Bruce B. Fortner Title: Vice President Contact Name: Bruce B. Fortner Title: Vice President Address: 1401 Hampton Street, P.O. Box 1499 Columbia, SC 29201 Phone No.: 803/799-5000 x457 Fax No.: 803/254-4219 Individual 364-Day Commitment: $38,000,000.00 Individual 5-Year Commitment: $8,333,333.00 Payment Instructions: AgFirst Farm Credit Bank ABA# - 053905974 Acct. Name: AgFirst FCB Account No.: N/A Attn: N/A Ref: Cenex Harvest States Coop 19 SYNDICATION PARTIES: NATEXIS BANQUES POPULAIRES, NEW YORK BRANCH By: --------------------------------------- Name: Cliff A. Niebling Title: Vice President, Commodities Group Contact Name: Cliff A. Niebling Title: Vice President, Commodities Group Address: 1251 Avenue of the Americas New York, NY 10020 Phone No.: 212/872-5133 Fax No.: 212/872-5162 Individual 364-Day Commitment: $28,000,000.00 Individual 5-Year Commitment: $0.00 Payment Instructions: Chase Manhattan Bank, NY, NY ABA# - 021-000-021 Acct. Name: Natexis Banques Populaires, New York Branch Account No.: 544-7-75330 Attn: Lordes Nieves Ref: Cenex Harvest States Cooperatives 20 SYNDICATION PARTIES: BANK OF AMERICA, N.A., FORMERLY BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: --------------------------------------- Name: David L. Catherall Title: Vice President Contact Name: David L. Catherall Title: Vice President Address: 231 South La Salle Street, 10th Floor Chicago, IL 60697 Phone No.: 312/828-7169 Fax No.: 312/987-1276 Individual 364-Day Commitment: $0.00 Individual 5-Year Commitment: $31,666,667.00 Payment Instructions: Bank of America, N.A. ABA - 111000012 Acct. Name: Credit Services Attention: Karen Dumond Ref: Cenex Harvest States Cooperatives 21 SYNDICATION PARTIES: NATIONAL CITY BANK OF INDIANA By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: Title: Address: Phone No.: Fax No.: Individual 364-Day Commitment: $13,000,000.00 Individual 5-Year Commitment: $0.00 Payment Instructions: Bank _____ ABA - Acct. Name: Attention: Ref: Cenex Harvest States Cooperatives 22 SYNDICATION PARTIES: DEERE CREDIT, INC. By: --------------------------------------- Name: Jack W. Harris Title: Manager Credit Operations/Administration Contact Name: Jack W. Harris Title: Manager Credit Operations/Administration Address: 6400 NW 86th Street P.O. Box 6650-Dept 140 Johnston, IA 50131-6650 Phone No.: 515/267-4349 Fax No.: 515/267-4020 Individual 364-Day Commitment: $38,000,000.00 Individual 5-Year Commitment: $0.00 Payment Instructions: Bank: Bank One Bank Address: Chicago, IL ABA - 071000013 Acct. Name: Deere Credit Services Account Number - 51-52135 Ref: Cenex Harvest States Cooperatives 23 SYNDICATION PARTIES: HARRIS TRUST AND SAVINGS BANK By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Contact Name: Robert H. Wolohan Title: Vice President Address: 111 W. Monroe Street 20th Floor West Chicago, IL 60603 Phone No.: 312/461-6049 Fax No.: 312/293-4280 Individual 364-Day Commitment: $29,000,000.00 Individual 5-Year Commitment: $0.00 Payment Instructions: Bank: Harris Trust and Savings Bank, Chicago, IL ABA#: 071000288 Credit Account #1092154 Credit Services Notify: Robert Nelson 461-3118 Ref: Cenex Harvest States Cooperatives 24 EX-10.2 4 cenex023213_ex10-2.txt 4TH AMENDMENT TO CREDIT AGRMNT (TERM LOAN) EXHIBIT 10.2 FOURTH AMENDMENT TO CREDIT AGREEMENT (TERM LOAN) THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (Term Loan) ("AMENDMENT AGREEMENT") is made May 22, 2002, to be effective as of the Effective Date, by and among Cenex Harvest States Cooperatives, a Minnesota cooperative corporation ("BORROWER"), CoBank, ACB ("COBANK") as Lead Arranger, and as the Administrative Agent for the benefit of the present and future Syndication Parties (in that capacity "ADMINISTRATIVE AGENT"), and the Syndication Parties signatory hereto, including CoBank in such capacity (each a "SYNDICATION PARTY" and collectively, the "SYNDICATION PARTIES"). RECITALS A. Borrower, CoBank, St. Paul Bank for Cooperatives ("ST. PAUL BANK"), and the Syndication Parties entered into a Credit Agreement (Term Loan) (as amended, the "CREDIT AGREEMENT") dated as of June 1, 1998. B. The Credit Agreement was amended by the First Amendment to Credit Agreement (Term Loan) effective as of May 31, 1999 ("FIRST AMENDMENT") and by the Second Amendment to Credit Agreement (Term Loan) effective as of May 23, 2000 ("SECOND AMENDMENT") , and by the Third Amendment to Credit Agreement (Revolving Loan) dated as of May 23, 2001 ("THIRD AMENDMENT"). C. CoBank is the successor by merger to the interests and obligations of St. Paul Bank under the Credit Agreement. D. The parties hereto desire to amend the Credit Agreement as hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, including the mutual promises and agreements contained herein, the parties hereto hereby agree as follows: 1. DEFINITIONS. Capitalized terms used herein without definition shall have the definition given to them in the Credit Agreement if defined therein. 2. AMENDMENTS TO CREDIT AGREEMENT. The parties hereto agree that the Credit Agreement shall be amended as follows as of the Effective Date: 2.1 Sections 1.26, 1.27, and 1.28 are amended in their entirety to read as follows: 1.26 CONSOLIDATED CURRENT ASSETS: the total current assets of Borrower and its Consolidated Subsidiaries as measured in accordance with GAAP. 1.27 CONSOLIDATED CURRENT LIABILITIES: the total current liabilities of Borrower and its Consolidated Subsidiaries as measured in accordance with GAAP. 1.28 CONSOLIDATED FUNDED DEBT: all indebtedness for borrowed money of the Borrower and its Consolidated Subsidiaries, in each case maturing by its terms more than one year after, or which is renewable or extendible for a period ending one year or more after, the date of determination, and shall include Debt of such maturity created or assumed by the Borrower or any Consolidated Subsidiary either directly or indirectly, including obligations of such maturity secured by liens upon property of the Borrower or its Consolidated Subsidiaries and upon which such entity customarily pays the interest, and all rental payments under capitalized leases of such maturity. 2.2 Section 10.6 is amended in its entirety to read as follows: 10.6 LOANS. Borrower shall not (nor shall it permit any of its Restricted Subsidiaries to) lend or advance money, credit, or property to any Person, except for (a) loans to Restricted Subsidiaries; (b) trade credit extended in the ordinary course of business; (c) loans made by Borrower to its members on open account maintained by such members with Borrower or made by Borrower to its members pursuant to its Affiliate Financing CoBank Participation Program; provided that (i) the aggregate principal amount of all such loans outstanding at any time shall not exceed $200,000,000.00, and (ii) the aggregate outstanding principal amount of all such loans retained by Borrower shall not exceed $50,000,000.00; (d) loans made by Fin-Ag, Inc. to agricultural producers, provided that (i) the aggregate outstanding principal amount of all such loans at any time shall not exceed $125,000,000.00, (ii) at all times prior to December 1, 2001, the aggregate outstanding principal amount of all such loans retained by Fin-Ag, Inc. shall not exceed $38,000,000.00, and (iii) at all times on and after December 1, 2001, the aggregate outstanding principal amount of all such loans retained by Fin-Ag, Inc. shall not exceed $25,000,000.00. 2.3 Section 10.7 is amended in its entirety to read as follows: 10.7 MERGER; ACQUISITIONS; BUSINESS FORM; ETC. Borrower shall not merge (nor shall it permit any of its Restricted Subsidiaries to) or consolidate with any entity, or acquire all or substantially all of the assets of any person or entity, or form or create any new subsidiary (other than a Restricted Subsidiary formed by Borrower) or affiliate, change its business form from a cooperative corporation, or commence operations under any other name, organization, or entity, including any joint venture; provided, however, 2 (a) The foregoing shall not prevent any acquisition, consolidation, or merger if after giving effect thereto: (i) The book value of Borrower and its subsidiaries does not increase due to all such mergers, consolidations or acquisitions by an aggregate amount in excess of $50,000,000 in any fiscal year of Borrower; (ii) Borrower is the surviving entity; and (iii) No Event of Default or Potential Default shall have occurred and be continuing. (b) The foregoing shall not prevent Borrower from forming or creating any new subsidiary or affiliate provided: (i) The Investment in such subsidiary or affiliate does not violate any provision of Section 10.8 hereof; and (ii) Such subsidiary or affiliate shall not acquire all or substantially all of the assets of any Person except through an acquisition, consolidation, or merger satisfying the requirements of clause (a) of this Section. 2.4 Clause (j) of Section 10.8 (and only that clause), is amended in its entirety to read as follows: (j) Investments, in addition to those permitted by clauses (a) through (i) above, in an aggregate amount not exceeding $140,000,000.00. 3. BORROWER'S REPRESENTATIONS. Borrower hereby represents and warrants that, after giving effect to this Amendment Agreement and the transactions contemplated hereby, no Potential Default or Event of Default has occurred and is continuing under the Credit Agreement or other Loan Documents. 4. EFFECTIVE DATE. This Amendment Agreement shall become effective on May 22, 2002 ("EFFECTIVE DATE"), so long as on or before that date the Administrative Agent receives (a) an original copy of this Amendment Agreement (or original counterparts thereof) duly executed by each party hereto, (b) a copy of a resolution of Borrower's board of directors, certified to by Borrower's corporate secretary, which authorizes execution of this Amendment Agreement; (c) an opinion of Borrower's counsel in all respects acceptable to the Administrative Agent; and (d) payment by wire transfer of each of the costs, expenses described in Section 6 hereof. Upon the satisfaction of all conditions precedent hereto, the Administrative Agent will notify each party hereto in writing and will provide copies of all appropriate documentation in connection herewith. 3 5. COSTS; EXPENSES AND TAXES. Borrower agrees to reimburse the Administrative Agent on demand for all out-of-pocket costs, expenses and charges (including, without limitation, all fees and charges of external legal counsel for the Administrative Agent) incurred by the Administrative Agent in connection with the preparation, reproduction, execution and delivery of this Amendment Agreement and any other instruments and documents to be delivered hereunder. 6. GENERAL PROVISIONS. 6.1 The Credit Agreement, except as expressly modified herein, shall continue in full force and effect and be binding upon the parties thereto. 6.2 Borrower agrees to execute such additional documents as the Administrative Agent may require to carry out or evidence the purposes of this Amendment Agreement. 6.3 The execution, delivery and effectiveness of this Amendment Agreement shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Syndication Party under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents, and the Credit Agreement, as expressly modified hereby, and each other Loan Document are hereby ratified and confirmed and shall continue in full force and effect and be binding upon the parties thereto. Any direct or indirect reference in the Loan Documents to the "Credit Agreement" shall be deemed to be a reference to the Credit Agreement as amended by this Amendment Agreement. 7. GOVERNING LAW. This Amendment Agreement shall be governed by and construed in accordance with the laws of the State of Colorado. 8. COUNTERPARTS. This Amendment Agreement may be executed in any number of counterparts and by different parties to this Amendment Agreement in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Telefax copies of documents or signature pages bearing original signatures, and executed documents or signature pages delivered by telefax, shall, in each such instance, be deemed to be, and shall constitute and be treated as, an original signed document or counterpart, as applicable. [EXECUTION PAGES BEGIN ON THE NEXT PAGE]. 4 IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to Credit Agreement (Term Loan) to be executed by their duly authorized officers as of the Effective Date. BORROWER: CENEX HARVEST STATES COOPERATIVES, a cooperative corporation formed under the laws of the State of Minnesota By: -------------------------------------- Name: John Schmitz Title: Chief Financial Officer ADMINISTRATIVE AGENT: COBANK, ACB By: -------------------------------------- Name: Title: Vice President SYNDICATION PARTY: COBANK, ACB By: -------------------------------------- Name: Title: Vice President 5 EX-10.3 5 cenex023213_ex10-3.txt SYNDICATION ADOPTION AGREEMENT EXHIBIT 10.3 SYNDICATION ADOPTION AGREEMENT This Syndication Adoption Agreement entered into this 22nd day of May, 2002 ("EFFECTIVE DATE") by and between CoBank, ACB, in its capacity as the Administrative Agent under the Credit Agreement (as defined below) (in such role, "ADMINISTRATIVE AGENT"), and each of the other parties signatory hereto (each an "ADOPTING PARTY", and collectively, the "ADOPTING PARTIES"). RECITALS A. Pursuant to the Credit Agreement (Revolving Loan) by and between Administrative Agent, St. Paul Bank for Cooperatives, the Syndication Parties named therein, and Cenex Harvest States Cooperatives ("BORROWER"), dated June 1, 1998, and amended by the First Amendment to Credit Agreement (Revolving Loan) effective as of May 28, 1999, the Second Amendment to Credit Agreement (Revolving Loan) dated May 23, 2000, the Third Amendment to Credit Agreement (Revolving Loan) dated May 22, 2001, and the Fourth Amendment to Credit Agreement (Revolving Loan) dated May 22, 2002 (as amended, and as it may be amended in the future, the "CREDIT AGREEMENT"), the Syndication Parties thereto have agreed to provide, limited to their respective Individual Commitments and Pro Rata Shares, financing to Borrower in the maximum aggregate amount of $550,000,000.00 through the 364-Day Facility and $200,000,000.00 through the 5-Year Facility, to be used for the purposes set forth in the Credit Agreement. B. The Adopting Parties wish to become Syndication Parties under the Credit Agreement with respect to the Individual 364-Day Commitment amounts set forth beneath their signatures on this Syndication Adoption Agreement ("SYNDICATION INTEREST"). AGREEMENT For good and valuable consideration, the receipt and sufficiency of which the parties hereto hereby acknowledge, and each to induce the others to enter into this Syndication Adoption Agreement ("AGREEMENT"), the parties hereto hereby agree as follows: DEFINITIONS Capitalized terms used herein without definition shall have the meaning given them in the Credit Agreement, if defined therein. 1. ACQUISITION OF SYNDICATION INTEREST. 1.1. Each Adopting Party agrees to, as of the Effective Date, and at all times thereafter, comply with all of the obligations of a Syndication Party holding an Individual 364-Day Commitment in the amount shown beneath its signature below, as such obligations are set forth in the Credit Agreement. 2. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. 2.1. Each Adopting Party represents and warrants that: (a) the making and performance of this Agreement including its agreement to be bound by the Credit Agreement is within its power and has been duly authorized by all necessary corporate and other action by it; (b) entering into this Agreement and performance of its obligations hereunder and under the Credit Agreement will not conflict with nor constitute a breach of its charter or by-laws nor any agreements by which it is bound, and will not violate any judgment, decree or governmental or administrative order, rule, law, or regulation applicable to it; (c) no approval, authorization or other action by, or declaration to or filing with, any governmental or administrative authority or any other Person is required to be obtained or made by it in connection with the execution, delivery and performance of its duties under this Agreement and the Credit Agreement; (d) this Agreement has been duly executed by it, and, this Agreement and the Credit Agreement, constitute its legal, valid, and binding obligation, enforceable in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity); and (e) the act of entering into and performing its obligations under this Agreement and the Credit Agreement have been approved by its credit committee at an authorized meeting thereof (or by written consent in lieu of a meeting) and such action was duly noted in the written minutes of such meeting, and it will, if requested by Administrative Agent, furnish Administrative Agent with a certified copy of such minutes or an excerpt therefrom reflecting such approval. 2.2. Each Adopting Party further represents that under the applicable law in effect as of the date hereof, it is entitled to receive any payments to be made to it under the Credit Agreement without the withholding of any tax and will furnish to Administrative Agent and to Borrower such forms, certifications, statements and other documents as Administrative Agent or Borrower may request from time to time to evidence such Adopting Party's exemption from the withholding of any tax imposed by any jurisdiction or to enable Administrative Agent or Borrower, as the case may be, to comply with any applicable laws or regulations relating thereto. Without limiting the effect of the foregoing, if such Adopting Party is not created or organized under the laws of the United States of America or any state thereof, such Adopting Party will furnish to Administrative Agent and Borrower IRS Form 4224 or Form 1001, or such other forms, certifications, statements or documents, duly executed and completed by Adopting Party, as evidence of such Adopting Party's exemption from the withholding of United States tax with respect thereto. Notwithstanding anything herein to the contrary, Borrower shall not be obligated to make any payments to or for the benefit of Adopting Party until Adopting Party shall have furnished to Administrative Agent and Borrower the requested form, certification, statement or document. 2.3. Each Adopting Party acknowledges receipt of true and correct copies of all Loan Documents and agrees and represents that: (a) it has relied upon its independent review of (i) the Loan Documents, and (ii) any information independently acquired by it from Borrower or otherwise in making its decision to acquire an interest in the Loan independently and without reliance on any Syndication Party or Administrative Agent; (b) it has obtained such information as it deems necessary (including any information it independently obtained from 2 Borrower or others) prior to making its decision to acquire the Syndication Interest; (c) it has made its own independent analysis and appraisal of and investigation into Borrower's authority, business, operations, financial and other condition, creditworthiness, and ability to perform its obligations under the Loan Documents and has relied on such review in making its decision to acquire the Syndication Interest, and will continue to rely solely upon its independent review of the facts and circumstances related to Borrower, and without reliance upon any Syndication Party or Administrative Agent, in making future decisions with respect to all matters under or in connection with the Loan Documents and its participation in the Loan as a Syndication Party. 2.4. Each Adopting Party acknowledges and agrees that: (a) neither Administrative Agent nor any Syndication Agent nor any Syndication Party has made any representation or warranty, except as expressly stated in this Agreement or the Credit Agreement, nor do they assume any responsibility with respect to the due execution, validity, sufficiency, enforceability or collectibility of the Loan, the Loan Documents or the Notes or with respect to the accuracy and completeness of matters disclosed, represented or warranted in the Loan Documents by Borrower (including financial matters); (b) neither Administrative Agent nor any Syndication Party assumes any responsibility for the financial condition of Borrower or for the performance of Borrower's obligations under the Loan Documents; (c) except as otherwise expressly provided in this Agreement or the Credit Agreement, neither any Syndication Agent nor the Administrative Agent nor any other Syndication Party shall have any duty or responsibility to furnish to any other Syndication Parties any credit or other information concerning Borrower which may come into its or their possession. 2.5. Each Adopting Party: (a) represents that it has acquired and is retaining the Syndication Interest it is acquiring in the Loan for its own account in the ordinary course of its banking or financing business; (b) agrees that it will not sell, assign, convey or otherwise dispose of ("TRANSFER"), or create or permit to exist any lien or security interest on, all or any part of its Syndication Interest in the Loan without compliance with all of the terms and conditions of the Credit Agreement, including Section 16.27 thereof. 2.6. Each Adopting Party: 2.6.1 Irrevocably consents and submits to the non-exclusive jurisdiction of the courts of the State of Colorado and the United States District Court for the District of Colorado and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or the Credit Agreement or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or the Credit Agreement or the transactions related hereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute with respect to any such matters shall be heard only in the courts described above. 2.6.2 Agrees that, with respect to litigation concerning this Agreement or the Credit Agreement within the jurisdiction of the courts of the State of Colorado or the United States 3 District Court for the District of Colorado: (a) in the event it shall not maintain a duly appointed agent for service of summons in Colorado, it hereby waives personal service of any and all process upon it and consents that all such service or process may be made by certified mail (return receipt requested) directed to its address set forth in Section 17.4 of the Credit Agreement (as provided herein) and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at the option of the party making such service, by service in any other manner provided under the rules of any such courts; and (b) within thirty (30) days after such service, Adopting Party shall appear in answer to such process, failing which it shall be deemed in default and judgment may be entered against it for the amount of the claim and other relief requested. 2.6.3 HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR THE CREDIT AGREEMENT OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR THE CREDIT AGREEMENT OR THE TRANSACTIONS RELATED THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH ADOPTING PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ADMINISTRATIVE AGENT OR ANY SYNDICATION PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ADOPTING PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. 3. GENERAL. 3.1. Each Adopting Party's address for notice under Section 17.4 of the Credit Agreement shall be as set forth beneath its signature below as "Contact Name". IN WITNESS HEREOF, the parties hereto have caused this Syndication Adoption Agreement to be executed as of the Effective Date by their duly authorized representatives. Administrative Agent (as Administrative Agent): COBANK, ACB By ------------------------------ Name: Title: Vice President 4 ADOPTING PARTY: NATIONAL CITY BANK OF INDIANA By ------------------------------ Name: Title: Contact Name: Title: Address: Phone No.: Fax No.: Individual 364-Day Commitment: $13,000,000.00 Individual 5-Year Commitment: $0.00 Payment Instructions: Bank _____ ABA - Acct. Name: Attention: Ref: Cenex Harvest States Cooperatives 5 ADOPTING PARTY: DEERE CREDIT, INC. By ------------------------------ Name: Jack W. Harris Title: Manager Credit Operations/Administration Contact Name: Jack W. Harris Title: Manager Credit Operations/Administration Address: 6400 NW 86th Street P.O. Box 6650-Dept 140 Johnston, IA 50131-6650 Phone No.: 515/267-4349 Fax No.: 515/267-4020 Individual 364-Day Commitment: $38,000,000.00 Individual 5-Year Commitment: $0.00 Payment Instructions: Bank: Bank One Bank Address: Chicago, IL ABA - 071000013 Acct. Name: Deere Credit Services Account Number - 51-52135 Ref: Cenex Harvest States Cooperatives 6 ADOPTING PARTY: HARRIS TRUST AND SAVINGS BANK By ------------------------------ Name: Title: Contact Name: Robert H. Wolohan Title: Vice President Address: 111 W. Monroe Street 20th Floor West Chicago, IL 60603 Phone No.: 312/461-6049 Fax No.: 312/293-4280 Individual 364-Day Commitment: $29,000,000.00 Individual 5-Year Commitment: $0.00 Payment Instructions: Bank: Harris Trust and Savings Bank, Chicago, IL ABA#: 071000288 Credit Account #1092154 Credit Services Notify: Robert Nelson 461-3118 Ref: Cenex Harvest States Cooperatives 7 BORROWER'S CONSENT Borrower hereby signifies its consent to acquisition of Individual 364-Day Commitment by each Adopting Party as described above. CENEX HARVEST STATES COOPERATIVES By ------------------------------ Name John Schmitz Title Chief Financial Officer 8 EX-99 6 cenex023213_ex-99.txt CAUTIONARY STATEMENT EXHIBIT 99 CAUTIONARY STATEMENT Cenex Harvest States Cooperatives (the Company), or persons acting on behalf of the Company, or outside reviewers retained by the Company making statements on behalf of the Company, or underwriters, from time to time, may make, in writing or orally, "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995 (the Act). This Cautionary Statement is for the purpose of qualifying for the "safe harbor" provisions of the Act and is intended to be a readily available written document that contains factors which could cause results to differ materially from those projected in such forward-looking statements. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement. The following matters, among others, may have a material adverse effect on the business, financial condition, liquidity, results of operations or prospects, financial or otherwise, of the Company. Reference to this Cautionary Statement in the context of a forward-looking statement shall be deemed to be a statement that any one or more of the following factors may cause actual results to differ materially from those which might be projected, forecasted, estimated or budgeted by the Company in such forward-looking statement or statements: COMPANY SUBJECT TO SUPPLY AND DEMAND FORCES. The Company may be adversely affected by supply and demand relationships, both domestic and international. Supply is affected by weather conditions, disease, insect damage, acreage planted, government regulation and policies and commodity price levels. The business is also affected by transportation conditions, including rail, vessel, barge and truck. Demand may be affected by foreign governments and their programs, relationships of foreign countries with the United States, the affluence of foreign countries, acts of war, currency exchange fluctuations and substitutions of commodities. Demand may also be affected by changes in eating habits, by population growth and increased or decreased per capita consumption of some products. Improved technological advances in agriculture could decrease the demand for crop input products and services. Genetically engineered seeds that resist disease and insects or meet certain nutritional requirements could affect the demand for crop nutrient and crop protection products, as well as the demand for fuel to operate application equipment and vehicles. The Farm Security and Rural Investment Act (2002 Farm Bill) that will govern federal farm programs for the next six years, may negatively affect crop production and agricultural trade. The 2002 Farm Bill increases the number of acres involved in the Conservation Reserve Program (CRP), which may result in a decrease in planted acres and therefore reduce input demand and grain volume. Other conservation programs may also decrease the demand for inputs and grain volume, even though they are directed to working land. Challenges will persist in the global marketplace for grain and food. Reduced demand for U.S. agricultural products may also adversely affect the demand for fertilizer, chemicals and petroleum sold by the Company and used to produce crops. COMPANY SUBJECT TO PRICE RISKS. Upon purchase, the Company has risks of carrying grain and petroleum, including price changes and performance risks (including delivery, quality, quantity and shipment period), depending upon the type of purchase contract entered into. The Company is exposed to risks of loss in the market value of positions held, consisting of grain and petroleum inventories and purchase contracts at a fixed or partially fixed price, in the event market prices decrease. The Company is also exposed to risk of loss on its fixed price or partially fixed price sales contracts in the event market prices increase. To reduce the price change risks associated with holding fixed price positions, the Company generally takes opposite and offsetting positions by entering into commodity futures contracts (either a straight futures contract or an options futures contract) on regulated commodity futures exchanges. While hedging activities reduce the risk of loss from changing market values, such activities also limit the gain potential which otherwise could result from changes in market prices. Hedging arrangements do not protect against nonperformance of a contract. The Company's policy is to generally maintain hedged positions in grain and petroleum, which are hedgeable, but the Company can be long or short at any time. The Company's profitability is primarily derived from margins on products merchandised and processed, not from hedging transactions. At any one time, the Company's inventory and purchase contracts for delivery to the Company may be substantial. COMPETITION. Some of our competitors are larger, better known and have substantially greater marketing, financial, personnel and other resources, including established reputations and working relationships than the Company. TAXATION OF COOPERATIVES COULD CHANGE. Although under Subchapter T of the Internal Revenue Code patronage refunds are excluded in determining taxable income of a cooperative and patronage refunds are taxable to the recipient, current income tax laws, regulations and interpretations pertaining to the receipt of patronage refunds could be changed. ENVIRONMENTAL LAWS MAY EXPOSE THE COMPANY TO FINANCIAL LIABILITY. The Company is subject to federal, state and local provisions regulating the use, storage, discharge and disposal of hazardous material into the environment. Although our current operations have not been significantly affected by compliance with environmental laws or regulations, government entities are becoming increasingly sensitive to environmental issues, and we cannot predict what impact future laws or regulations may have on potential environmental liabilities to the Company. CONCERNS WITH THE SAFETY AND QUALITY OF FOOD PRODUCTS. The Company could be adversely affected if consumers lose confidence in the safety and quality of certain food products. Adverse publicity about these types of concerns, such as the recent publicity about genetically modified organisms and "mad cow disease" in Europe may discourage consumers from buying certain products. If the Company's food products become adulterated or misbranded, the Company would need to recall those items and may experience product liability claims if consumers are injured as a result. A widespread product recall or a significant product liability judgement could cause products to be unavailable for a period of time and a loss of consumer confidence in food products, and could have a material adverse effect. OIL AND NATURAL GAS PRICES ARE VOLATILE. Revenues and profitability in the Company's energy segment and manufacturing operations depend on prevailing prices for oil and natural gas. Historically, prices for oil and natural gas have been volatile and are likely to continue to be volatile in the future. The foregoing review of factors pursuant to the Act should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Company prior to the effective date of the Act. (This page has been left blank intentionally.) -----END PRIVACY-ENHANCED MESSAGE-----