-----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, Pu+uISyTXFwYph0I7YAQLP+aA+pFSOwcnr0ykUzlTl4l0EgwXtbae6H+VrqYVjvg YrEl2dnc0AdYgoIQWeb+ZA== 0000897101-99-000703.txt : 19990714 0000897101-99-000703.hdr.sgml : 19990714 ACCESSION NUMBER: 0000897101-99-000703 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990531 FILED AS OF DATE: 19990713 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: SEC FILE NUMBER: 033-94644 FILM NUMBER: 99663263 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(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: MAY 31, 1999 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 July 6, 1999 --------------------- -------------- $250 Par Value 473 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (IN THOUSANDS)
MAY 31, 1999 AUGUST 31, 1998 ASSETS (UNAUDITED) (AUDITED) - ------ ------------ --------------- CURRENT ASSETS: Cash $ 25 $ 1,849 ------------ ------------ Current portion of long-term note receivable 288 288 ------------ ------------ Receivables: Trade accounts 16,632 14,045 Growers 4,095 3,540 ------------ ------------ 20,726 17,585 ------------ ------------ Advances to affiliate (30) 2,898 ------------ ------------ Inventories: Refined sugar, pulp and molasses to be sold on a pooled basis 53,037 27,804 Nonmember refined sugar 461 326 Yeast 79 79 Materials and supplies 3,767 5,211 Beet Inventory 0 -- Other 1,233 72 ------------ ------------ 58,576 33,492 ------------ ------------ Deferred charges 521 1,273 ------------ ------------ Prepaid expenses 376 246 ------------ ------------ Property and equipment available for sale 588 588 ------------ ------------ Total current assets 81,069 58,218 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT: Land and land improvements 20,161 20,133 Buildings 35,300 34,736 Factory equipment 107,215 103,922 Other equipment 3,459 3,700 Construction in progress 2,230 4,176 ------------ ------------ 168,364 166,667 Less accumulated depreciation (58,874) (56,098) ------------ ------------ 109,490 110,569 ------------ ------------ LONG-TERM NOTES RECEIVABLE, NET OF CURRENT PORTION 3,293 2,944 ------------ ------------ OTHER ASSETS: Investments restricted for capital lease projects 0 -- Investment in stock of other corporations, unconsolidated marketing subsidiaries and other cooperatives 9,921 9,602 Deferred income taxes 2,576 2,652 Other 853 845 ------------ ------------ 13,350 13,099 ------------ ------------ See Notes to Consolidated Financial Statements $ 207,202 $ 184,830 ============ ============
MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (IN THOUSANDS)
MAY 31, 1999 AUGUST 31, 1998 LIABILITIES AND MEMBERS' INVESTMENT (UNAUDITED) (AUDITED) - ----------------------------------- ------------ --------------- CURRENT LIABILITIES: Short-term notes payable $ 35,840 $ 26,855 ------------ ------------ Current portion of long-term debt 2,143 5,613 ------------ ------------ Accounts payable: Trade 3,222 5,124 Growers 9,635 5,971 ------------ ------------ 12,857 11,094 ------------ ------------ Accrued liabilities 2,561 3,486 ------------ ------------ Total current liabilities 53,401 47,048 LONG-TERM DEBT, NET OF CURRENT PORTION 47,776 42,185 OBLIGATION UNDER CAPITAL LEASE 11,270 12,000 OTHER 1,620 748 COMMITTMENTS AND CONTINGENCIES -- 0 ------------ ------------ Total liabilities 114,067 101,981 ------------ ------------ MINORITY INTEREST IN EQUITY OF SUBSIDIARY 924 767 ------------ ------------ MEMBERS' INVESTMENT: Preferred stock: Class A - 100,000 shares authorized, $105 par value; 72,200 shares issued and outstanding at May 31, 1999 and 66,967 at August 31, 1998 7,581 7,581 Class B - 100,000 shares authorized, $75 par value; 72,200 shares issued and outstanding at May 31, 1999 and 66,967 at August 31, 1998 5,415 5,415 Class C - 100,000 shares authorized, $76 par value; 72,200 shares issued and outstanding at May 31, 1999 and 66,967 at August 31, 1998 5,487 5,487 ------------ ------------ 18,483 18,483 Common stock, 600 shares authorized, $250 par value; issued and outstanding, 473 shares at May 31, 1999 and 481 shares at August 31, 1998 118 121 Paid in capital in excess of par value 32,094 32,094 Unit retention capital 7,563 7,584 Qualified allocated patronage 3,971 3,981 Nonqualified allocated patronage 29,881 20,072 Retained earnings (deficit) 99 (254) ------------ ------------ 92,211 82,082 ------------ ------------ See Notes to Consolidated Financial Statements $ 207,202 $ 184,830 ============ ============
MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED MAY 31, MAY 31, --------------------------- -------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- REVENUE: From sales of sugar, by-products, and yeast, net of discounts $ 45,723 $ 39,972 $ 142,582 $ 141,912 Other income (36) 764 101 111 ----------- ----------- ----------- ----------- 45,687 40,736 142,683 142,023 ----------- ----------- ----------- ----------- EXPENSES: Production costs of sugar, by-products, and yeast sold 10,680 9,483 36,638 34,568 Marketing (includes freight and storage) 7,483 5,717 20,393 16,422 General and administrative 1,398 1,455 4,227 3,732 Interest 1,520 1,602 4,262 4,186 (Gain) loss on disposition of property and equipment 28 41 100 140 ----------- ----------- ----------- ----------- 21,109 18,298 65,620 59,048 ----------- ----------- ----------- ----------- NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS $ 24,578 $ 22,438 $ 77,063 $ 82,975 =========== =========== =========== =========== DISTRIBUTION OF NET PROCEEDS: Credited to members' investment: Components of net income: Income (loss) from non-member business $ 211 $ 143 $ 701 $ 93 Patronage income 3,540 2,625 9,875 11,134 ----------- ----------- ----------- ----------- Net income 3,751 2,767 10,577 11,226 Unit retention capital 0 0 0 861 ----------- ----------- ----------- ----------- Net credit to members' investment 3,751 2,767 10,577 12,087 Payments to members for sugarbeets, net of unit retention capital 20,827 19,670 66,487 70,887 ----------- ----------- ----------- ----------- NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS $ 24,578 $ 22,438 $ 77,063 $ 82,975 =========== =========== =========== ===========
See Notes to Consolidated Financial Statements. MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED MAY 31, --------------------------- 1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Income allocated to members' investment $ 10,300 $ 10,668 Add (deduct) noncash items: Depreciation and amortization 4,780 4,326 Equipment disposals - loss 100 140 Discount on estate payout 36 (23) Net income allocated from unconsolidated marketing subsidiaries (72) 559 Noncash portion of patronage capital credits (311) (732) Retention of nonqualified unit retains 0 861 Changes in operating assets and liabilities: Accounts receivable and advances (214) (3,990) Inventory and prepaid expenses (25,214) (34,289) Deferred charges 752 400 Other assets (8) (29) Accounts payable, advances, and accrued liabilities 4,142 6,207 ----------- ----------- NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (5,707) (15,901) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposition of property, plant and equipment 3 16 Capital expenditures (3,817) (4,848) Investment in stock of other corporations, unconsolidated marketing subsidiaries and other cooperatives (349) 299 Minority interest in equity of subsidiaries 157 164 ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (4,006) (4,369) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of short-term debt 8,985 15,040 Payment of long-term debt (1,409) (2,010) Payment of unit retains and allocated patronage (2,483) (3,440) Issuance of long-term debt 2,800 0 Provision for long-term tax 0 272 Sale and repurchase of common stock, net (3) 1 Issuance of stock 0 9,681 Issuance of long term tax-exempt bonds 0 0 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 7,889 19,543 ----------- ----------- NET INCREASE (DECREASE) IN CASH (1,824) (727) CASH, BEGINNING OF YEAR 1,849 1,235 ----------- ----------- CASH, END OF QUARTER $ 25 $ 507 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for: Interest $ 4,226 $ 4,620 =========== =========== Income taxes, net of refunds $ 10 $ 12 =========== ===========
See Notes to Consolidated Financial Statements. ================================================================================ MINN-DAK FARMERS COOPERATIVE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The condensed consolidated financial statements for the nine month periods ended May 31, 1999 and May 31, 1998 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, 1998. The results of operations for the nine months ended May 31, 1999 are not necessarily indicative of the results for the entire fiscal year ending August 31, 1999. 2. In August 1998, the company declared a revolvement of 35% of the 1990 crop per unit retains and allocated patronage. That amount, $2.4 million, was paid to the stockholders on October 17, 1998. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED MAY 31, 1999 AND 1998 The following discussion and analysis relates to the financial condition and results of operations of Minn-Dak Farmers Cooperative ("the Company") for the nine months ended May 31, 1999 (the third quarter of the Company's 1998-1999 fiscal year) and 1998 (the third quarter of the Company's 1997-1998 fiscal year). The Company's fiscal year runs from September 1 to August 31. This discussion contains forward-looking statements that involve risks and uncertainties. These forward -looking statements include, among others, those statements that include the words "estimate," "current estimate," "expected," "believes," and similar expressions. The actual results experienced by the Company could differ materially from the forward-looking statements contained herein. Important factors that could cause or contribute to such differences include, without limitation, quality and quantity of sugar beets, weather, market factors, farm and trade policy and general economic conditions. RESULTS FROM OPERATIONS COMPARISON OF THE THREE MONTHS ENDED MAY 31, 1999 AND 1998 Revenue for the three months ended May 31, 1999 increased $5.0 million from the 1998 period, an increase of 12%. Revenue from the sale of finished goods increased $2.2 million, while the change in the value of finished goods inventory increased $3.6 million. Other income decreased $0.8 million. Revenue from the sales of sugar increased $2.0million or 6%, reflecting a 4% increase in volume, and a 2% increase in the price for sugar. The increase in volume is the result of generally more customer orders for the current period versus the last. For the fiscal year 1998-1999 period, inventories of sugar ended below recent historical levels, but at levels desirable for this time of year. Based upon marketing information developed by United Sugars Corporation, the Company's marketing agent, the current estimate is that the average net selling price of the Company's sugar will increase less than 2% from the prior year. Revenue from pulp (wet and dry pelleted) sales increased $0.2 million or 7%, reflecting a 5% increase in sales volume, and a 2% increase in the average gross selling price. The larger volume of wet and pelleted pulp sales for this period is the result of the larger volume 1998 beet crop delivered for processing. Based upon marketing information developed by Midwest Agri-Commodities Company, the Company's marketing agent, the Company's current estimate is that the average net selling price of the Company's pulp will decrease 23% from the prior year. The expected decrease in pulp prices is attributable to a combination of tremendous excess supply of competing products, lower demand in Europe because of reduced cattle and swine herds, poor economic conditions in Japan and a stronger US dollar. Revenue from beet molasses sales increased $0.2 million or 12%, reflecting an 87% increase in sales volume, offset by a 40% decrease in the average gross selling price. The increase in molasses sales volume is due to an estimated 33% more production of beet molasses for fiscal year 1998-1999 versus the previous year and the timing of customer shipments that allow for the clearing of storage at the plant site. The larger volume of beet molasses is the result of the larger volume, lower quality 1998 beet crop delivered for processing. Based upon marketing information developed by Midwest Agri-Commodities Company, the Company's marketing agent, the Company's current estimate is that the average net selling price of the Company's beet molasses will be approximately 48% less than the prior year. The expected decrease in beet molasses prices is attributable to abundant, low-priced competing product - both domestic and international, lower priced corn markets and soft feed market conditions in the beet molasses marketplace. Revenues from yeast sales from the Company's subsidiary yeast production facility, Minn-Dak Yeast Company ("MDYC"), decreased $0.2 million or 11%, reflecting a 10% decrease in sales volume and a 1% decrease in the average selling price. Sales volume is down because of an unusually strong demand for yeast from customers in the prior year. The other contributing factor to the change in revenues results from the increase or decrease in finished goods inventories. The increase in the value of finished goods inventories for the three months ended May 31, 1999 amounted to $4.2 million or $3.6 million more than the increase in the value of finished goods inventories for May 31, 1998. The increase in finished goods inventory mainly results from the level of the inventory of sugar on hand at the end of this period versus last. In the consolidated statements of operations, Expenses section, Production costs of sugar, by-products and yeast sold increased $1.2 million, or 13%. The increase in production costs is due to 40% more sugar beets being processed for this period versus last. Marketing costs (which include freight and storage) are $1.8 million or 31% more than the prior period because of the increase in sales volume for sugar and by-products. Depreciation and interest expenses for fiscal year 1998-1999 are expected to be higher than fiscal year 1997-1998 due to the Company's large capital expansion program that was basically competed at the end of fiscal year 1998. The Company's plant Depreciation expense is expected to increase approximately $0.6 million or 12% in fiscal year 1998-1999 versus the prior year, while Interest expense is expected to increase approximately $0.7 million or 14%. In the section Distribution of Net Proceeds, payments to members for sugarbeets (net of unit retention capital and unprocessed sugarbeet inventory) increased $1.2 million or 6% from the 1997-1998 period. However, for fiscal year 1998-1999 the Company is projecting a payment to growers for sugarbeets totaling $60.4 million, which is $11.3 million or 16% less than the prior fiscal year. The payment is based upon (i) an average delivered sugar content of 17.43%, (ii) a total sugarbeet crop to process of 1.971 million tons and (iii) the Company's projected selling price for its sugar, which is currently estimated to increase less than 2% from the prior year. This forward-looking material is based on the Company's expectations regarding the processing of the 1998 sugar beet crop and resulting sales and expenses therefrom. The actual operating results obtained by processing the sugar beets and selling the finished goods could differ materially from the Company's current estimate. COMPARISON OF THE NINE MONTHS ENDED MAY 31, 1999 AND 1998 Revenue for the nine months ended May 31, 1999 increased $0.7 million from the 1998 period, an increase of less than 1%. Revenue from the sale of finished goods increased $11.2 million, while the change in the value of finished goods inventory decreased $10.5 million. Other income had no change. Revenue from the sales of sugar increased $10.0 million or 11%, reflecting an 11% increase in volume. The increase in volume is the result of generally more customer orders for the current period versus the last. Based upon marketing information developed by United Sugars Corporation, the Company's marketing agent, the current estimate is that the average net selling price of the Company's sugar will increase less than 2% from the prior year. Revenue from pulp (wet and dry pelleted) sales increased $0.7 million or 12%, reflecting a 23% increase in sales volume, offset by an 8% decrease in the average gross selling price. The larger volume of wet and pelleted pulp sales for this period is the result of the larger volume 1998 beet crop delivered for processing. Based upon marketing information developed by Midwest Agri-Commodities Company, the Company's marketing agent, the Company's current estimate is that the average net selling price of the Company's pulp will decrease 23% from the prior year. The expected decrease in pulp prices is attributable to a combination of tremendous excess supply of competing products, lower demand in Europe because of reduced cattle and swine herds, poor economic conditions in Japan and a stronger US dollar. Revenue from beet molasses sales increased $0.4 million or 12%, reflecting a 66% increase in sales volume, but offset by a 32% decrease in the average gross selling price. The larger volume of beet molasses is the result of the larger volume, lower quality 1998 beet crop delivered for processing. Based upon marketing information developed by Midwest Agri-Commodities Company, the Company's marketing agent, the Company's current estimate is that the average net selling price of the Company's beet molasses will be approximately 48% less than the prior year. The expected decrease in beet molasses prices is attributable to abundant, low-priced competing product - both domestic and international, lower priced corn markets and soft feed market conditions in the beet molasses marketplace. Revenues from yeast sales from the Company's subsidiary yeast production facility, Minn-Dak Yeast Company ("MDYC"), increased less than $0.1 million or 1%, reflecting a 3% increase in sales volume, but offset by a 2% decrease in the average selling price. Sales volume is up because of continued strong demand of bagged fresh yeast from Red Star Yeast & Products, the company that is contractually obligated annually to purchase minimum levels of fresh yeast produced by the yeast company. The other contributing factor to the change in revenues results from the increase or decrease in finished goods inventories. The increase in the value of finished goods inventories for the nine months ended May 31, 1999 amounted to $25.2 million or $10.5 million less than the increase in the value of finished goods inventories for May 31, 1998. The reduction in the increase in finished goods inventory mainly results from the level of the inventory of sugar on hand at the end of the period. Lower inventories of sugar are the result of a greater level of sugar orders for the current reporting period versus last. In the consolidated statements of operations, Expenses section, Production costs of sugar, by-products and yeast sold increased $2.1 million or 6%. The increase in production costs for the nine months ended May 31, 1999 is mainly due to the additional slicing days (+20 days) for the current period ending versus the same period last year. Marketing costs (which include freight and storage) are $4.0 million or 24% more than the prior period because of the increase in sales volume for sugar and by-products. Depreciation and interest expenses for fiscal year 1998-1999 are expected to be higher than fiscal year 1997-1998 due to the Company's large capital expansion program that was basically competed at the end of fiscal year 1998. The Company's plant Depreciation expense is expected to increase approximately $0.6 million or 12% in fiscal year 1998-1999 versus the prior year, while Interest expense is expected to increase approximately $0.7 million or 14%. In the section Distribution of Net Proceeds, payments to members for sugarbeets (net of unit retention capital and unprocessed sugarbeet inventory) decreased $4.4 million or 6% from the 1997-1998 period. For fiscal year 1998-1999 the Company is projecting a payment to growers for sugarbeets totaling $60.4 million, which is $11.3 million or 16% less than the prior fiscal year. The payment is based upon (i) an average delivered sugar content of 17.43%, (ii) a total sugarbeet crop to process of 1.971 million tons and (iii) the Company's projected selling price for its sugar, which is currently estimated to increase less than 2% from the prior year. This forward-looking material is based on the Company's expectations regarding the processing of the 1998 sugar beet crop and resulting sales and expenses therefrom. The actual operating results obtained by processing the sugar beets and selling the finished goods could differ materially from the Company's current estimate. ESTIMATED FISCAL YEAR 1999 INFORMATION The agreements between the Company and its members regarding the delivery of sugar beets to the Company require payment for members' sugar beets in several installments throughout the year. As only the final payment is made after the close of the fiscal year, the first payments to members for their sugar- beets are based upon the Company's then-current estimates of the financial results to be obtained from processing the crop and the subsequent sale of the products produced from the processing the crop. This discussion contains a summary of the Company's current estimates of the financial results to be obtained from the Company's processing of the 1998 sugarbeet crop. Given the nature of the estimates required in connection with the payments to members for their sugarbeets, this discussion includes forward-looking statements regarding the net selling price for the sugar and by-products produced by the Company and the Company's operating costs. These forward-looking statements are based largely upon the Company's expectations and estimates of future events; as a result, they are subject to a variety of risks and uncertainties. The actual results experienced by the Company could differ materially from the forward-looking statements contained herein. The completed harvest of the sugar beet crop grown during 1998 produced a total of 1,772,648 tons of sugarbeets. The sugar content on the 1998 crop is 17.43%. The Company also purchased approximately 200,000 tons of sugarbeets from another sugarbeet processor in the area. The 1.971 million tons of sugarbeets to process took approximately 259 days of plant operations. While unseasonably warm temperatures have occurred from time to time in the months of November through March, the amount of deterioration of the sugar beets (defined as shrink) appears to be normal to slightly better than normal. However the quality of the sugar beets deteriorated more than normal from the unseasonably warm winter weather. The Company produced 1% less sugar from the 1998 sugar beet crop (including sugarbeets purchased from another sugarbeet processing company) than the prior year, even though it sliced 13% more sugar beets. Less sugar production is due to lower quality of the 1998 crop. From the revenues generated from the sale of products produced from each ton of sugarbeets, the Company's operating and fixed costs must be deducted, which when done, results in an estimated gross beet payment of $34.08 per ton of sugar beets. In preparation for the Year 2000, the Company has developed plans to address the possible exposures related to the impact on its information systems and the company as a whole of the Year 2000 issue. Such plans include identification of software and hardware systems, and equipment and processing machinery with imbedded technology that may be affected by the Year 2000 problem; determination of the existence of problems; remediation of problems identified; testing of systems and machinery and equipment where remediation will be required; and identification of risks of the Year 2000 issue relative to third parties which have a material relationship with the Company. The Company expects to complete its plan to deal with the Year 2000 issue before the end of calendar year 1999. To date the Company has tested and upgraded its information system and has started testing its operations systems, which is expected to also be ready for the Year 2000. Key customers and suppliers have been contacted, and to date the Company has identified no significant concerns. However, the Company continues to bear some risk related to the Year 2000 issue if other entities not directly affiliated with the Company do not appropriately address their own Year 2000 compliance issues. A contingency plan will be developed to deal with material vendors and suppliers who are identified as not being Year 2000 compliant. Based upon its assessment to date, the Company's management presently believes that problems related to the Year 2000 issue will be not have a material effect on operations and financial results. LIQUIDITY AND CAPITAL RESOURCES Because the Company operates as a cooperative, payments for member-delivered sugarbeets, the principal raw material used in producing the sugar and agri-products it sells, are subordinated to all member business expenses. In addition, actual cash payments to members are spread over a period of approximately one year following delivery of sugarbeet crops to the Company and are net of unit retains and patronage allocated to them, all three of which remain available to meet the Company's capital requirements. This member financing arrangement may result in an additional source of liquidity and reduced outside financing requirements in comparison to a similar business operated on a non-cooperative basis. However, because sugar is sold throughout the year (while sugarbeets are processed primarily between September and April) and because substantial amounts of equipment are required for its operations, the Company has utilized substantial outside financing on both a seasonal and long-term basis to fund such operations. The financing has been provided by the St. Paul Bank for Cooperatives (the "Bank"). The Company has a short-term line of credit with the Bank for calendar years 1998 and 1999 of $55.0 million. The loan agreements between the Bank and the Company obligate the company to maintain the following financial covenants, and in accordance with GAAP: 1. Maintain working capital of not less than $8.0 million as of August 31, 1999 and $9.0 million as of August 31, 2000. 2. Maintain a long-term debt and capitalized leases to equity ratio of not greater than 1.05:1. 3. Maintain a current ratio of not less than 1.0:1.0 based on monthly financial statements and attain a current ratio of not less than 1.2:1.0 based on fiscal year end audits. As of May 31, 1999 the Company was in compliance with its loan agreement covenants with the Bank. Working Capital as of May 31, 1999 totals $27.7 million compared to $11.2 million at August 31, 1998, an increase of $16.5 million for the period. Increased working capital is a result of normal financing, operational and capital expenditure activities of the Company. The targeted working capital for August 31, 1999 is approximately $12.0 million dollars and, in the Company's opinion, will be attained. The August 31, 1999 working capital estimate is substantially higher than historical fiscal year end working capital targets. The working capital increases are the result of the January 1999 loan agreement with the Company's primary lender, the St. Paul Bank for Cooperatives, in which lower interest rate incentives were provided in return for a higher working capital position. The funding for increased working capital was generated by shifting approximately $4.5 million in seasonal debt to long term debt. The net result for the Company will be savings in annual interest costs, without incurring added overall debt. The St Paul Bank for Cooperatives and Co-Bank, Denver, Colorado have voted to merge. The banks are completing a July 1, 1999 merger date. The Company does not expect to encounter any material impact in its ability to borrow from the merged bank nor in its cost of funds. The primary factor for the changes in the Company's financial condition for the nine months ended May 31, 1999 was due to the seasonal needs of the 1998/1999 sugarbeet-processing season. The cash used to provide for operations of $5.7 million and for investing activities of $4.0 million was funded through cash flow financing activities, and a reduction in cash. The net cash provided through financing activities of $7.9 million was primarily provided through proceeds from the issuance of short term debt of $9.0 million; net long term debt borrowings of $1.4 million; 35% payment of the 1990 crop unit retains and allocated patronage payment of $2.4 million and estate equity buy outs of $0.1 million. Capital expenditures for the nine months ended May 31, 1999 totaled $3.8 million. Capital expenditures for fiscal year 1999 are currently estimated at $6.2 million, $2.0 million resulting from the carryover of fiscal 1998 projects. 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 None 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: July 13, 1999 /s/ LARRY D. STEWARD ------------------ ------------------------------------- Larry D. Steward President and Chief Executive Officer Date: July 13, 1999 /s/ STEVEN M. CASPERS ------------------ ------------------------------------- Steven M. Caspers Executive Vice President, and Chief Financial Officer EX-27 2 ARTICLE 5 - FINANCIAL DATA SCHEDULE
5 0000948218 MINN DAK FARMERS COOPERATIVE 1,000 3-MOS AUG-31-1999 MAR-01-1999 MAY-31-1999 25 0 20,726 0 58,576 81,069 168,364 58,874 207,202 53,401 11,270 0 18,483 118 73,610 207,202 142,582 142,683 57,031 57,031 4,327 0 4,262 10,577 0 10,577 0 0 0 10,577 0 0
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