-----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, NK2We4urL1T9l+rkZj7+wVDzCxSdGQMRYkpCMZp3I4CD7X2s9FeO49DdRjiOSfgJ 9wgu+uxHGGg7+2AubZq6iw== 0000897101-97-000418.txt : 19970414 0000897101-97-000418.hdr.sgml : 19970414 ACCESSION NUMBER: 0000897101-97-000418 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970411 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MINN DAK FARMERS COOPERATIVE CENTRAL INDEX KEY: 0000948218 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 237222188 STATE OF INCORPORATION: ND FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-94644 FILM NUMBER: 97579307 BUSINESS ADDRESS: STREET 1: 7525 RED RIVER RD CITY: WAHPETON STATE: ND ZIP: 58075-9698 BUSINESS PHONE: 7016428411 MAIL ADDRESS: STREET 1: 7525 RED RIVER RD CITY: WAHPETON STATE: ND ZIP: 58075-9698 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: FEBRUARY 28, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE SECURITES EXCHANGE ACT OF 1934 Commission file: No. 33-94644 MINN-DAK FARMERS COOPERATIVE (Exact named of registrant as specified in its charter) North Dakota 23-7222188 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7525 Red River Road Wahpeton, North Dakota 58075 (Address of principal (Zip Code) executive offices) (701) 642-8411 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES __X__ NO _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class of Common Stock April 9, 1997 $250 Par Value 482 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED FEBRUARY 28, 1997 FEBRUARY 28, 1997 FEBRUARY 29, 1996 FEBRUARY 29, 1996 ---------------------- ---------------------- 1997 1996 1997 1996 --------- --------- --------- --------- REVENUE: From sales of sugar, by-products, yeast and resale commodities, net of discounts $ 52,893 $ 51,118 $ 101,555 $ 88,479 Other income (211) (50) (494) (32) --------- --------- --------- --------- 52,683 51,068 101,062 88,447 --------- --------- --------- --------- EXPENSES: Production costs of sugar, by-products, yeast and resale commodities sold 10,112 10,172 20,012 19,284 Marketing (includes freight and storage) 5,064 4,893 10,893 10,695 General and administrative 1,123 1,188 2,253 2,130 Interest 1,428 1,041 2,614 1,814 (Gain) loss on disposition of property and equipment 4 0 101 10 --------- --------- --------- --------- 17,731 17,294 35,873 33,933 --------- --------- --------- --------- NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS $ 34,952 $ 33,774 $ 65,189 $ 54,514 ========= ========= ========= ========= DISTRIBUTION OF NET PROCEEDS: Credited to members' investment: Components of net income: Income (loss) from non-member business $ (488) $ 240 $ (577) $ 379 Patronage income 6,576 10,456 11,471 10,526 --------- --------- --------- --------- Net income 6,088 10,696 10,894 10,905 Unit retention capital 225 228 753 729 --------- --------- --------- --------- Net credit to members' investment 6,313 10,924 11,647 11,634 Payments to members for sugarbeets, net of unit retention capital 28,639 22,850 53,542 42,880 --------- --------- --------- --------- NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS $ 34,952 $ 33,774 $ 65,189 $ 54,514 ========= ========= ========= ========= See Notes to Consolidated Financial Statements.
MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (IN THOUSANDS) FEBRUARY 28, AUGUST 31, 1997 1996 ASSETS (UNAUDITED) (AUDITED) --------- --------- CURRENT ASSETS: Cash $ (81) $ 853 --------- --------- Receivables: Trade accounts 12,033 10,294 Growers 1 2,840 --------- --------- 12,035 13,134 --------- --------- Advances to affiliate 2,008 780 --------- --------- Inventories: Refined sugar, pulp and molasses to be sold on a pooled basis 52,202 7,749 Nonmember refined sugar 65 468 Yeast 110 109 Materials and supplies 3,862 4,027 Beet Inventory 15,132 - Other 98 98 --------- --------- 71,469 12,450 --------- --------- Deferred charges 590 1,119 --------- --------- Prepaid expenses 2,845 1,789 --------- --------- Property and equipment available for sale 789 789 --------- --------- Total current assets 89,655 30,916 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Land and land improvements 13,975 11,956 Buildings 25,926 22,254 Factory equipment 77,178 72,463 Other equipment 2,743 2,201 Construction in progress 19,265 22,352 --------- --------- 139,086 131,226 Less accumulated depreciation (49,308) (48,551) --------- --------- 89,778 82,675 --------- --------- OTHER ASSETS: Investments restricted for capital lease projects 5,048 7,514 Investment in stock of other corporations, unconsolidated marketing subsidiaries and other cooperatives 12,907 12,663 Deferred income taxes 3,450 3,450 Other 770 1,052 --------- --------- 22,174 24,679 --------- --------- See Notes to Consolidated Financial Statements $ 201,607 $ 138,270 ========= =========
MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (IN THOUSANDS) FEBRUARY 28, AUGUST 31, 1997 1996 LIABILITIES AND MEMBERS' INVESTMENT (UNAUDITED) (AUDITED) --------- --------- CURRENT LIABILITIES: Short-term notes payable $ 45,761 $ 0 --------- --------- Current portion of long-term debt 2,513 2,513 --------- --------- Accounts payable: Trade (1,792) 6,623 Growers 20,800 6,064 --------- --------- 19,008 12,686 --------- --------- Advances from affiliate 1,199 1,202 --------- --------- Accrued liabilities 2,770 2,669 --------- --------- Total current liabilities 71,251 19,070 LONG-TERM DEBT, NET OF CURRENT PORTION 32,804 48,810 OBLIGATION UNDER CAPITAL LEASE 12,000 12,000 OTHER 728 728 COMMITTMENTS AND CONTINGENCIES 0 0 --------- --------- Total liabilities 116,783 80,609 --------- --------- MINORITY INTEREST IN EQUITY OF SUBSIDIARY 399 337 --------- --------- MEMBERS' INVESTMENT: Preferred stock: Class A - 100,000 shares authorized, $105 par value; 58,525 shares issued and outstanding at August 31, 1996 and 66,967 at February 28, 1997 7,032 6,145 Class B - 100,000 shares authorized, $75 par value; 58,525 shares issued and outstanding at August 31, 1996 and 66,967 at February 28, 1997 5,023 4,389 Class C - 100,000 shares authorized, $76 par value; 58,525 shares issued and outstanding at August 31, 1996 and 66,967 at February 28, 1997 5,089 4,448 --------- --------- 17,144 14,982 Common stock, 600 shares authorized on February 28, 1997 and 600 shares authorized on August 31, 1996, $250 par value; issued and outstanding, 483 shares at February 28, 1997 and 481 shares at August 31, 1996 121 120 Paid in capital in excess of par value 23,753 10,296 Unit retention capital 6,982 6,262 Qualified allocated patronage 3,702 3,720 Nonqualified allocated patronage 32,934 21,575 Retained earnings (deficit) (210) 367 --------- --------- 84,425 57,324 --------- --------- $ 201,607 $ 138,270 ========= ========= See Notes to Consolidated Financial Statements.
MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) SIX MONTHS ENDED FEBRUARY 28, 1997 FEBRUARY 29, 1996 -------------------- 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Income allocated to members' investment $ 10,894 $ 10,905 Add (deduct) noncash items: Depreciation and amortization 2,125 1,449 Equipment disposals - loss 101 10 Net loss allocated from unconsolidated marketing subsidiaries (209) Noncash portion of patronage capital credits (237) Retention of nonqualified unit retains 753 730 Changes in operating assets and liabilities: Accounts receivable and advances (129) 1,477 Inventory and prepaid expenses (60,075) (38,200) Deferred charges 529 360 Other assets 282 (404) Accounts payable, advances, and accrued liabilities 9,454 10,730 -------- -------- NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (36,512) (12,943) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposition of property, plant and equipment 1 3 Capital expenditures (6,748) (7,322) Investment in stock of other corporations, unconsolidated marketing subsidiaries and other cooperatives (244) (3,670) Minority interest in equity of subsidiaries 62 95 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (6,928) (10,894) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of short-term debt 45,761 16,660 Payment of long-term debt (16,006) (4,540) Payment of unit retains and allocated patronage (2,870) (2,493) Issuance of long-term debt 0 2,000 Sale and repurchase of common stock, net 1 Issuance of stock 15,619 12,106 Issuance of long term tax-exempt bonds 0 12,000 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 42,505 35,733 -------- -------- NET INCREASE (DECREASE) IN CASH (934) 11,895 CASH, BEGINNING OF YEAR 853 287 -------- -------- CASH, END OF QUARTER $ (81) $ 12,181 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for: Interest $ 2,646 $ 1,603 ======== ======== Income taxes, net of refunds $ 33 $ 28 ======== ======== See Notes to Consolidated Financial Statements
MINN-DAK FARMERS COOPERATIVE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The condensed consolidated financial statements for the three month periods ended February 28, 1997 and February 29, 1996 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim period. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Company's Annual Report to Stockholders previously submitted in the Company's Annual 10-K for the fiscal year ended August 31, 1996. The results of operations for the three months ended February 28, 1997, are not necessarily indicative of the results for the entire fiscal year ending August 31, 1997. 2. In August 1996, the company declared a revolvement of the remaining 1988 crop and 35% of the 1989 crop per unit retains and allocated patronage. That amount, $2,508,453, was paid to the stockholders on October 18, 1996. In August, 1996 the company declared a revolvement of 35% of the 1995 crop allocated patronage. On January 2, 1997, that payment was made to the stockholders in the amount of $196,700. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE THREE MONTHS ENDED AND SIX MONTHS ENDED FEBRUARY 28, 1997 AND 1996 The following discussion and analysis relates to the financial condition and results of operations of Minn-Dak Farmers Cooperative ("the Company") for the three months ended and six months ended February 28, 1997 (the second quarter of the Company's 1996-1997 fiscal year) and 1996 (the second quarter of the Company's 1995-1996 fiscal year). The Company's fiscal year runs from September 1 to August 31. RESULTS FROM OPERATIONS COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 28, 1997 AND 1996 Revenue for the three months ended February 28, 1997 increased $1.8 million from the 1996 period, an increase of 3.5%. Revenue from sales of finished goods decreased $0.2 million, while the change in finished goods inventory increased $2.0 million. Revenue from sugar sales increased $0.5 million, or 2.3%, reflecting a 2.8% decrease in sales volume, offset by a 5.2% increase in average net selling price. While there can be no assurance that the Company's estimates will be accurate, the increase in the average net selling price for sugar is expected to continue. The Company is projecting the average net selling price for sugar to increase approximately 6% for the fiscal year due mostly to price/customer mix changes and favorable market conditions. Revenue from pulp sales decreased $0.2 million or 6.1%, reflecting a 9.9% decrease in sales volume, offset by a 4.2% increase in average net selling price. The decrease in volume is attributable to the shipping plan established for fiscal year 1997, which calls for very few shipments in the first five months of the fiscal year to one of the Company's major markets. While there can be no assurance that the Company's estimates will be accurate, the increase in the average net selling price for pulp is expected to continue. The Company is projecting the average net selling price for pulp to increase 11% for the fiscal year as a result of a stronger domestic market (feed prices are up), coupled with more domestic sales volume and value added sales. Revenue from molasses decreased $0.1 million or 8.6%, reflecting a 10.9% decrease in sales volume, offset by a 2.5% increase in average net selling price. The decrease in volume can be attributable to less production of molasses to sell. This is a result of a higher quality sugarbeet crop, which in turns results in less molasses production per unit of sugarbeets processed. While there can be no assurance that the Company's estimates will be accurate, the increase in average net selling price for molasses is expected to continue and will increase approximately 8% for the fiscal year. Revenues from yeast sales decreased $0.4 million or 28%, reflecting a 34.1% decrease in sales volume, offset by a 9.3% increase in average net selling price. The reduction in sales volume is attributable to reduced production of yeast, which was due to the inability of the plant to produce quality fresh yeast. The yeast quality problem was due to the poor quality of the growth medium for the yeast - beet molasses. The problem was resolved by the end of January but actual sales were limited in January and February to approximately 50% of budget. Steps have been taken to insure this type of problem is minimized or eliminated in the future. The other factor contributing to the change in revenues results from the increase or decrease in finished goods inventories. The increase in the value of all finished goods inventories for the three months ended February 28, 1997 was $2.0 million, or 8.1% more than the increase in the value of the finished goods inventories for the prior year. The increase in the value of the finished goods inventories was mostly a result of the amount of sugar available during that period. Production of sugar was 282,000 cwt. more for the period, while the sugar sales volume change was 34,000 cwt. less, thus resulting in a greater increase in the value of sugar inventory for the three months ended. Depreciation and Interest expenses for fiscal year 1996-1997 are expected to be higher than fiscal year 1995-1996 due to more fixed asset purchases and more long term debt, both associated with the Company's plant expansion plan activities (see the Liquidity and Capital Resources section). Depreciation expense is expected to increase approximately $1.0 million to $1.5 million, while Interest expense is expected to increase approximately $1.5 million to $2.0 million. For the three months ended February 28, 1997 depreciation expense was $0.20 million, or 29.2% higher than the same period in 1996. Interest expense was $0.39 million, or 37.2% higher than the same period in 1996. In the section Distribution of Net Proceeds, payments to members for sugarbeets, net of unit retention capital and unprocessed sugarbeet inventory, for the three months ended February 28, 1997 increased $5.8 million, or 25.3% from the 1996 period. For fiscal year 1996-1997 the Company is projecting a payment to growers for sugarbeets totaling $69.4 million, which is $15.1 million, or 28% more than the prior fiscal year. The payment is based upon (i) an average delivered sugar content of 18.61%, (ii) a total sugarbeet crop of 1,506,646 tons and (iii) the Company's projected selling price for its sugar. The projected increase is the result of higher selling prices for all products, and greater production of products as a result of increased tons of beets harvested and increased quality of the beets delivered (higher sugar content). COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 28, 1997 AND 1996 Revenue for the six months ended February 28, 1997 increased $13.1 million from the 1996 period, an increase of 14.8%. Revenue from sales of finished goods decreased $3.4 million, while the change in finished goods inventory increased $16.5 million. Revenue from sugar sales decreased $2.7 million, or 5.3%, reflecting a 10.5% decrease in sales volume, offset by a 5.8% increase in average net selling price. While there can be no assurance that the Company's estimates will be accurate, the increase in the average net selling price for sugar is expected to continue. The Company is projecting the average net selling price for sugar to increase approximately 6% for the fiscal year due mostly to price/customer mix changes and favorable market conditions. Revenue from pulp sales decreased $0.2 million or 5.4%, reflecting a 12.4% decrease in sales volume, offset by an 8% increase in average net selling price. The decrease in volume is attributable to the shipping plan established for fiscal year 1997, which calls for very few shipments in the first five months of the fiscal year to one of the Company's major markets. While there can be no assurance that the Company's estimates will be accurate, the increase in the average net selling price for pulp is expected to continue. The Company is projecting the average net selling price for pulp to increase 11% for the fiscal year as a result of a stronger domestic market (feed prices are up), coupled with more domestic sales volume and value added sales. Revenue from molasses decreased $0.1 million or 2.1%, reflecting a 5% decrease in sales volume, offset by a 3% increase in average net selling price. The decrease in volume can be attributable to less production of molasses to sell. This is a result of a higher quality sugarbeet crop, which in turns results in less molasses production per unit of sugarbeets processed. While there can be no assurance that the Company's estimates will be accurate, the increase in average net selling price for molasses is expected to continue and will increase approximately 8% for the fiscal year. Revenues from yeast sales decreased $0.4 million or 12.4%, reflecting a 16.7% decrease in sales volume, offset by a 5.1% increase in average net selling price. The reduction in sales volume is attributable to reduced production of yeast, which was due to the inability of the plant to produce quality fresh yeast. The yeast quality problem was due to the poor quality of the growth medium for the yeast - beet molasses. The problem was resolved by the end of January but actual sales were limited in January and February to approximately 50% of budget. Steps have been taken to insure this type of problem is minimized or eliminated in the future. The other factor contributing to the change in revenues results from the increase or decrease in finished goods inventories. The increase in the value of all finished goods inventories for the six months ended February 28, 1997 was $16.5 million, or 58.6% more than the increase in the value of the finished goods inventories for the prior year. The increase in the value of the finished goods inventories was mostly a result of the amount of sugar available during that period. Production of sugar was 517,000 cwt. more for the period, while the sugar sales volume change was 270,000 cwt. less, thus resulting in a greater increase in the value of sugar inventory for the six months ended. Depreciation and Interest expenses for fiscal year 1996-1997 are expected to be higher than fiscal year 1995-1996 due to more fixed asset purchases and more long term debt, both associated with the Company's plant expansion plan activities (see the Liquidity and Capital Resources section). Depreciation expense is expected to increase approximately $1.0 million to $1.5 million, while Interest expense is expected to increase approximately $1.5 million to $2.0 million. For the six months ended February 28, 1997 depreciation expense was $0.52 million, or 38% higher than the same period in 1996. Interest expense was $0.80 million, or 44.1% higher than the same period in 1996. In the section Distribution of Net Proceeds, payments to members for sugarbeets, net of unit retention capital and unprocessed sugarbeet inventory, for the six months ended February 28, 1997 increased $22.9 million, or 24.9% from the 1996 period. For fiscal year 1996-1997 the Company is projecting a payment to growers for sugarbeets totaling $69.4 million, which is $15.1 million, or 28% more than the prior fiscal year. The payment is based upon (i) an average delivered sugar content of 18.61%, (ii) a total sugarbeet crop of 1,506,646 tons and (iii) the Company's projected selling price for its sugar. The projected increase is the result of higher selling prices for all products, and greater production of products as a result of increased tons of beets harvested and increased quality of the beets delivered (higher sugar content). LIQUIDITY AND CAPITAL RESOURCES Because the Company operates as a cooperative, payments for member-delivered sugar beets, the principal raw material used in producing the sugar and agri-products it sells, are subordinated to all member business expenses. In addition, actual cash payments to members are spread over a period of approximately one year following delivery of sugar beet crops to the Company and are net of unit retains and patronage allocated to them, all three of which remain available to meet the Company's capital requirements. This member financing arrangement may result in an additional source of liquidity and reduced outside financing requirements in comparison to a similar business operated on a non-cooperative basis. However, because sugar is sold throughout the year (while sugar beets are processed primarily between September and April) and because substantial amounts of equipment are required for its operations, the Company has utilized substantial outside financing on both a seasonal and long-term basis to fund such operations. The financing has been provided by the St. Paul Bank for Cooperatives (the "Bank"). The Company had a short-term line of credit with the Bank for calendar 1996 of $35.0 million and has a short-term line of credit with the Bank for calendar 1997 of $50.0 million. The various loan agreements between the Bank and the Company obligate the Company to maintain or achieve certain amounts of working capital and certain financial ratios, as well as imposing other restrictions. As of February 28, 1997 the Company was in compliance with its loan agreements with the bank. Working capital increased $6.6 million for the six months ended 2-28-97. Increased working capital is a result of normal financing, operational and capital expenditure activities of the Company. The targeted working capital for 8-31-97 is approximately $7.0 million dollars and, in the Company's opinion, is the most accurate expectation. The primary factor for the changes in the Company's financial condition for the six months ended February 28, 1997 was due to the commencement of the 1996/1997 sugarbeet processing season. The cash used to provide for operations of $36.5 million and for investing activities of $6.9 million was funded through cash flow financing activities and a reduction in cash. The net cash provided through financing activities was primarily provided through proceeds from the issuance of short term debt of $45.8 million, repayment of long term debt of $16.0 million, payment of remaining 1988 crop and 35% of 1989 crop unit retains and allocated patronage of $2.5 million, payment of 1995 crop qualified allocated patronage of $.2 million and issuance of stock of $15.6 million Capital expenditures for the six months ended February 28, 1997 totaled $6.7 million. Capital expenditures for fiscal year 1997 are currently estimated at $35.9 million, $33.9 million resulting from the Company's strategy of expanding capacity and improving operating efficiencies. These capital expenditures are a continuation of the strategy to improve operating efficiencies and the Company's announced plan to expand the capacity of its manufacturing and agricultural receiving facilities. The funds necessary to finance the Company's expansion plan, environmental and general capital expenditures for the prior, current and next fiscal year, which is estimated to total $86.2 million, are expected to be derived from the sale of its common and preferred stock (net of stock offering costs of $0.1 million) totaling $37.3 million and the balance, or $50.0 million, from long-term debt secured from the St. Paul Bank for Cooperatives and/or through the use of a lease (through Richland County, North Dakota) financed by the issuance of solid waste disposal revenue and industrial development revenue bonds. As of February 28, 1997, the expansion plan was on schedule and projected to be within budget. The company anticipates that the funds necessary for compliance with the Bank's working capital requirements and future capital expenditures will be derived from the net proceeds of a stock offering that was completed in 1996, Company depreciation, unit retains, non-patronage income, and long-term borrowing. Those costs not covered through the stock offering will be funded through a long-term debt agreement, with the Bank who is the principal lender. The long-term debt created by this expansion will be repaid with funds generated through depreciation, income tax savings, and reduced costs per cwt of production. (Depreciation expense is a non-cash expense that under the Company's accounting procedures reduces the amounts available for payments to the Company's members. The resources represented by such non-cash expenses are available as a source of working capital for the Company, which may be used for payment of long-term debt.) The strategic plan of the Company calls for the economics of scale generated by the expansion project to first be applied to the long-term debt associated with the project. The initial operational savings and working capital considerations will be used to pay off the incremental debt for the project. After the incremental long term debt has been satisfied, the Company believes that the shareholders will see the savings through operations and other working capital considerations being reflected in higher per ton beet payments, all other factors affecting the per ton payments being equal. In fiscal 1996, the company was able to secure a lease from Richland County, North Dakota funded by low interest, fifteen year tax exempt solid waste disposal bonds in the amount of $12.0 million with zero principle amortization for the first three years, and $1.0 million per year of principle amortization for the next 12 years. These bonds were required to be secured by a Letter of Credit from a non-government agency bank (Norwest Bank North Dakota) who in turn was secured by a Letter of Credit from the St. Paul Bank for Cooperatives, the Company's primary lender. Solid waste disposal bonds are available under certain conditions where a by-product of manufacturing must be further manufactured or refined to produce a salable product. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the annual meeting of the shareholders which was held on December 10, 1996 a proposed change to the Cooperative's by-laws was voted upon by the shareholders. The by-law change dealt with Article XVII - MEMBERS which defines membership in the association. The change establishes specific geographical definition to areas of residency and production area, relative to the location of the association, in order to qualify as a shareholder. The by-law change proposal passed upon a vote of 188 shareholders for the change and 6 shareholders against. The Cooperative also held election of directors. Elected to three year terms by voice vote and unanimous consent were the following directors: Michael Hasbargen, district four; Jack Lacey, district five; and Paul Summer, district seven. In addition, the following directors (including current expiration date of term) continue on following the Cooperative's annual meeting: Jerry Meyer, district one (1997); Robert Breuer, district two (1998); Edward Moen, Jr., district three (1998); John Hought, district six (1997); Lawrence Deal, district eight (1997); and Victor Krabbenhoft, district nine (1998). ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MINN-DAK FARMERS COOPERATIVE (Registrant) Date: April 10, 1997 /s/ LARRY D. STEWARD -------------------- -------------------- Larry D. Steward President and Chief Executive Officer Date: April 10, 1997 /s/ STEVEN M. CASPERS -------------------- --------------------- Steven M. Caspers Executive Vice President, and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS AUG-31-1997 FEB-28-1997 (81) 0 12,035 0 71,469 89,655 139,086 (49,308) 201,607 71,251 12,000 0 17,144 121 67,160 201,607 101,555 101,062 30,905 30,905 2,354 0 2,614 11,647 0 11,647 0 0 0 11,647 0 0
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