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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, 2003
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
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(Exact named of registrant as specified in its charter)
North Dakota 23-7222188
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(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
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(Registrant's telephone number, including area code)
Not Applicable
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(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 11, 2003
--------------------- -------------
$250 Par Value 488
Minn-Dak Farmers Cooperative has previously registered securities for
offer and sale pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). As a result of that previous registration under the
Securities Act, under Sections 15(d) and 13 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Cooperative is obligated to file
quarterly reports on form 10-Q, annual reports on Form 10-K and supplemental
reports on Form 8-K. However, the Cooperative has not registered any of its
securities under Section 12(g) of the Exchange Act. The Cooperative is exempt
from any obligation to register its securities under the Exchange Act due to the
provisions of Section 12(g)(2)(E), which exempts from Exchange Act registration
any security of an issuer, such as the Cooperative, which is a "cooperative
association" as defined in the Agricultural Marketing Act of 1929. As a result,
those provisions of the Exchange Act, which are applicable only to securities
registered under Section 12 of that act, do not apply to shares issued by the
Cooperative. The provisions, which do not apply to the Cooperative's shares,
include the regulation of proxies under Section 14 of the Exchange Act and the
reporting and other obligations of directors, officers and principal
stockholders under Section 16 of the Exchange Act.
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MINN-DAK FARMERS COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the nine-month periods
ended May 31, 2003 and 2002 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,
2002. The results of operations for the nine months ended May 31, 2003 are
not necessarily indicative of the results for the entire fiscal year ending
August 31, 2003.
2. In August 2002, the company declared a revolvement of 46% of the unit
retains and allocated patronage for the 1992 crop totaling $3,333,326. That
amount was paid to the stockholders on September 27, 2002.
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
ASSETS MAY 31, 2003 AUGUST 31, 2002
- ------ (UNAUDITED) (AUDITED)
--------- ---------
CURRENT ASSETS:
Cash $ 75 $ 757
--------- ---------
Current portion of long-term note receivable 3 3
--------- ---------
Receivables:
Trade accounts 17,774 13,086
Growers 4,404 4,157
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22,178 17,243
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Advances to affiliate 1,724 135
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Inventories:
Refined sugar, pulp and molasses to be sold
on a pooled basis 59,052 19,072
Nonmember refined sugar 553 56
Yeast 170 125
Materials and supplies 4,877 5,796
Beet and Juice Inventory 0 0
Other 1,413 0
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66,066 25,049
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Deferred charges 632 1,085
--------- ---------
Prepaid expenses 1,464 1,278
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Property and equipment available for sale 200 200
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Total current assets 92,342 45,749
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PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 21,847 21,734
Buildings 36,109 36,087
Factory equipment 114,474 114,062
Other equipment 3,291 3,311
Construction in progress 6,645 2,333
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182,366 177,528
Less accumulated depreciation (81,337) (76,510)
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101,029 101,018
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LONG-TERM NOTES RECEIVABLE, NET OF
CURRENT PORTION 190 238
--------- ---------
OTHER ASSETS:
Investments restricted for capital lease projects 8,047 11,063
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 8,794 12,574
Deferred income taxes 0 0
Other 982 931
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17,823 24,569
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See Notes to Consolidated Financial Statements $ 211,384 $ 171,573
========= =========
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
MAY 31, 2003 AUGUST 31, 2002
(UNAUDITED) (AUDITED)
-------- --------
LIABILITIES AND MEMBERS' INVESTMENT
-----------------------------------
CURRENT LIABILITIES:
Short-term notes payable $ 22,674 $ 11,795
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Current portion of long-term debt 3,600 3,600
Current portion of long-term lease 905 860
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4,505 4,460
Accounts payable:
Trade 3,026 4,808
Growers 18,189 10,167
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21,215 14,975
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Accrued liabilities 5,689 2,871
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Total current liabilities 54,083 34,101
LONG-TERM DEBT, NET OF CURRENT PORTION 30,700 34,300
OBLIGATION UNDER CAPITAL LEASE 21,915 22,820
OTHER 1,211 1,951
COMMITTMENTS AND CONTINGENCIES 0 0
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Total liabilities 107,909 93,173
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MINORITY INTEREST IN EQUITY OF SUBSIDIARY 1,533 1,489
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MEMBERS' INVESTMENT:
Preferred stock:
Class A - 100,000 shares authorized, $105 par value;
72,200 shares issued and outstanding 7,581 7,581
Class B - 100,000 shares authorized, $75 par value;
72,200 shares issued and outstanding 5,415 5,415
Class C - 100,000 shares authorized, $76 par value;
72,200 shares issued and outstanding 5,487 5,487
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18,483 18,483
Common stock, 600 shares authorized, $250 par value; issued and
outstanding, 488 shares at May 31,
2003 and 488 shares at August 31, 2002 122 122
Paid in capital in excess of par value 32,094 32,094
Unit retention capital 5,809 5,868
Qualified allocated patronage 2,884 2,911
Nonqualified allocated patronage 36,482 15,858
Retained earnings (deficit) 6,068 1,576
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101,942 76,912
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See Notes to Consolidated Financial Statements $211,384 $171,573
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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 NINE MONTHS ENDED
MAY 31, MAY 31,
--------------------- ---------------------
2003 2002 2003 2002
--------- --------- --------- ---------
REVENUE:
From sales of sugar, co-products, and
yeast, net of discounts $ 51,856 $ 25,019 $ 182,651 $ 147,046
Other income 4,155 1,415 4,555 1,735
--------- --------- --------- ---------
56,011 26,433 187,206 148,781
--------- --------- --------- ---------
EXPENSES:
Production costs of sugar, co-products,
and yeast sold 11,689 7,507 41,259 34,309
Marketing (includes freight and storage) 5,560 4,233 22,101 16,029
General and administrative 1,718 1,589 4,656 4,324
Interest 965 1,070 2,934 3,028
(Gain) loss on disposition of property and equipment 0 24 67 35
--------- --------- --------- ---------
19,932 14,423 71,017 57,724
--------- --------- --------- ---------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 36,079 $ 12,010 $ 116,189 $ 91,057
========= ========= ========= =========
DISTRIBUTION OF NET PROCEEDS:
Credited to members' investment:
Components of net income:
Income (loss) from non-member business $ 3,997 $ 384 $ 4,492 $ 943
Patronage income 8,167 (7,201) 20,750 13,267
--------- --------- --------- ---------
Net income 12,164 (6,817) 25,242 14,210
Unit retention capital 0 0 0 0
--------- --------- --------- ---------
Net credit to members' investment 12,164 (6,817) 25,242 14,210
Payments to members for sugarbeets, net of unit
retention capital 23,915 18,826 90,947 76,846
--------- --------- --------- ---------
NET PROCEEDS RESULTING FROM MEMBER AND
NONMEMBER BUSINESS $ 36,079 $ 12,010 $ 116,189 $ 91,057
========= ========= ========= =========
See Notes to Consolidated Financial Statements.
MINN-DAK FARMERS COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
MAY 31,
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Income allocated to members' investment $ 25,242 $ 14,210
Add (deduct) noncash items:
Depreciation and amortization 5,318 5,148
Equipment disposals - loss 71 35
Net income allocated from unconsolidated marketing subsidiaries (236) (245)
Noncash portion of patronage capital credits (396) (1,304)
Retention of nonqualified unit retains 0 0
Changes in operating assets and liabilities:
Accounts receivable and advances (6,524) 810
Inventory, prepaid expenses, and equipment held for resale (41,203) (35,981)
Deferred charges and other assets 116 454
Deferred income taxes 0 0
Accounts payable, advances, and accrued liabilities 8,318 2,749
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NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (9,294) (14,123)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of property, plant and equipment 9 4
Capital expenditures (5,123) (2,106)
Investment in stock of other corporations, unconsolidated
marketing subsidiaries and other cooperatives 4,227 0
Net proceeds from patronage refunds and equity revolvements 186 106
Issuance of notes receivable 0 (261)
Proceeds on notes receivable 48 35
Restricted bond/lease fund investment 3,016 (13,036)
Minority interest in equity of subsidiaries 44 175
-------- --------
NET CASH USED IN INVESTING ACTIVITIES 2,406 (15,082)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 10,879 19,865
Payment of long-term debt (4,460) (4,424)
Payment of financing fees 0 (605)
Payment of unit retains and allocated patronage (212) 0
Issuance of long-term lease 0 13,955
Provision for long-term tax 0 0
Sale and repurchase of common stock, net 0 (2)
Issuance of stock (0) 0
Issuance of long term tax-exempt bonds 0 0
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,207 28,789
-------- --------
NET INCREASE (DECREASE) IN CASH (681) (417)
CASH, BEGINNING OF YEAR 757 459
-------- --------
CASH, END OF QUARTER $ 75 $ 42
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 2,709 $ 2,809
======== ========
Income taxes, net of refunds $ 337 $ 8
======== ========
See Notes to Consolidated Financial Statements
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED MAY 31, 2003 AND MAY 31, 2002
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 May 31, 2003 (the third quarter of the Company's 2002-2003
fiscal year) and May 31, 2002 (the third quarter of the Company's 2001-2002
fiscal year). The Company's fiscal year runs from September 1 to August 31.
Any statements regarding future market prices, anticipated costs, agricultural
results, operating results and other statements that are not historical facts
contained in this Quarterly Report on Form 10-Q are forward-looking statements.
The words "expect", "project", "estimate", "believe", "anticipate", "plan",
"intend", "could", "may", "predict" and similar expressions are also intended to
identify forward-looking statements. Such statements involve risks,
uncertainties and assumptions, including, without limitation, market factors,
the effect of weather and economic conditions, farm and trade policy, the
available supply of sugar, available quantity and quality of sugarbeets and
other factors detailed elsewhere in this and other Company filings with the
Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
RESULTS FROM OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MAY 31, 2003 AND 2002
Revenue from sales of sugar, co-products, and yeast, net of discounts for the
three months ended May 31, 2003 increased $26.8 million from the 2002 period, an
increase of 107%. Revenue from the sale of finished goods increased $11.8
million and Change in Inventories increased $15.0 million.
Revenue from the sales of sugar increased $11.1 million, or 30.7%, reflecting a
32.6% increase in volume and a 1.8% decrease in the price for sugar. The
increase in volume was primarily due to 28.3% of sales being to a single
customer without allocations fob Company at net prices similar to net prices for
other sales. Excluding the sales without allocations fob Company, sugar sales
increased in pricing 2.1%.
Revenue from pulp and molasses sales increased $.2 million or 8.2%, reflecting a
28.9% increase in sales volume and a 20.7% decrease in the average gross selling
price. The increase in sales volume was primarily due to 19% of the volume being
in the form of pressed pulp vs dried pulp. The Company is establishing a market
for pressed pulp, which will sell at a significantly lower price than dried
pulp, but will also have significantly reduced production costs. Excluding the
pressed pulp sales volume and pricing, the pulp and molasses sales were slightly
higher in volume and slightly higher in selling price for the three months ended
May 31, 2003 vs May 31, 2002.
Revenues from the Company's subsidiary yeast production facility, Minn-Dak Yeast
Company, increased $0.4 million or 28.9%, reflecting a 29.7% increase in sales
volume and a 0.8% decrease in the average selling price. Selling prices are down
due to the competitive nature of the current yeast market, while volume is up
due to added customers and volume from existing customers.
The other contributing factor to the change in revenues results from the
decrease in finished goods inventories. The decrease in the value of finished
goods inventories for the three months ended May 31, 2003 amounted to $.3
million or $15.0 million less than the decrease in the value of finished goods
inventories for May 31, 2002. For May 31, 2003 the decrease in the value of
sugar inventories was $14.2 million less than the decrease of that of the prior
year, and for pulp and molasses $0.9 million less.
During the three months ended May 31, 2003, the Company sold its interest in
ProGold LLP to American Crystal Sugar Company for $10.3 MM cash. The after-tax
gain on sale is anticipated to be approximately $3.7MM. This was a non-member
transaction and as such the bylaws of the company direct the company to place
any gains or losses into retained earnings. The Company considers this a
non-recurring activity.
In the consolidated statements of operations, Expenses section, production costs
of sugar, co-products and yeast totaled $11.7 million, $4.3 million or 57% more
than the prior year. The increase is mainly attributable to a longer processing
season for the 2002 crop when comparing the three-month period ending May 31,
2003. Marketing costs totaled $5.6 million, $1.3million or 31.3% more than the
prior year. This increase over the prior year is attributed to differences in
the timing of sales locations, quantity and type. In the section Distribution of
Net Proceeds, payments to members for sugarbeets, net of unit retention capital
and unprocessed sugarbeet inventory increased $5.1 million or 27.1% from the
fiscal year 2002 period. This increase is attributable to a larger crop. For
fiscal year 2003 the Company is projecting a payment to growers for sugarbeets
totaling $95.4 million, which is $22.0 million or 30% more than the prior fiscal
year. The increase in payments to members is due to: (1) the result of a 43%
increase in tons of beets delivered by members versus the prior year, and (2) 9%
less sugar per ton of the beets delivered versus the prior year. The payment is
based upon (i) an average delivered sugar content of 16.94%, (ii) a total
sugarbeet crop to process of 2.4 million tons and (iii) the Company's projected
selling price for its sugar, which is currently estimated to be slightly higher
than the previous year.
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 2003 AND MAY 31, 2002
Revenue from sales of sugar, co-products, and yeast, net of discounts for the
nine months ended May 31, 2003 increased $35.6 million from the 2002 period, an
increase of 24.2%. Revenue from the sale of finished goods increased $29.9
million, while the change in the value of finished goods inventory increased
$5.7 million.
Revenue from the sales of sugar increased $26.6 million or 27.1%, reflecting a
23.8% increase in volume and a 3.3% increase in the price for sugar. The
increase in volume and revenue is the result of a large 2002 crop, the stronger
demand for sugar resulting from the improved sugar market conditions, and the
absence of a USDA Payment In Kind (PIK) program for the 2002 crop vs. the 2000
and 2001 crops.
Revenue from pulp and molasses sales increased $2.1 million or 20.3%, reflecting
a 24.1% increase in sales volume and a 3.8% decrease in the average gross
selling price. The increase in sales volume was primarily due to 5.8% of the
volume being in the form of pressed pulp vs dried pulp. The Company is
establishing a market for pressed pulp, which will sell at a significantly lower
price than dried pulp, but will also have significantly reduced production
costs.
Revenues from yeast sales from the Company's subsidiary yeast production
facility, Minn-Dak Yeast Company ("MDYC") increased $1.1 million or 28.3%,
reflecting a 25.9% increase in sales volume and a 2.5% increase in the average
selling price. Sensient, the Company's partner in the MDYC operation, and who
supplies the marketing function for the yeast produced by MDYC, anticipated this
increase in volume in their marketing plan, which targeted new customer volumes.
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, 2003 amounted to
$40.0 million or $5.7 million more than the increase in the value of finished
goods inventories for the nine months ended May 31, 2002. This increase was a
combination of more sales, more production and the lack of a PIK Program impact.
The 2001 PIK Program contributed $2.9 MM to the nine months ending May 31, 2002
increase in sugar inventory.
During the nine months ended May 31, 2003, the Company sold its interest in
ProGold LLP to American Crystal Sugar Company for $10.3 MM cash. The after tax
gain on sale is anticipated to be approximately $3.7MM. This was a non-member
transaction and as such the bylaws of the company direct the company to place
any gains or losses into retained earnings. The Company considers this a
non-recurring activity.
In the consolidated statements of operations, Expenses section, Production costs
of sugar, by-products and yeast sold increased $7.0 million or 20.4%. The
increase in production costs for the nine months ended May 31, 2003 is mainly
due to a larger crop and more sugar marketed to date.
In the section Distribution of Net Proceeds, payments to members for sugarbeets
(net of unit retention capital and unprocessed sugarbeet inventory) increased
$23.9 million or 35.7% from the prior period. For fiscal year 2003 the Company
is projecting a payment to growers for sugarbeets totaling $95.4 million, which
is $22.0 million or 30% more than the prior fiscal year. The
increase in payments to members is due to: (1) the result of a 43% increase in
tons of beets delivered by members versus the prior year, and (2) 9% less sugar
per ton of the beets delivered versus the prior year. The payment is based upon
(i) an average delivered sugar content of 16.94%, (ii) a total sugarbeet crop to
process of 2.4 million tons and (iii) the Company's projected selling price for
its sugar, which is currently estimated to be slightly higher than the previous
year. In addition to payments for sugarbeets, growers were paid $6.8 million in
December 2001 and January 2002 as a result of acres of sugarbeets destroyed as
part of the 2001 Sugar PIK program.
ESTIMATED FISCAL YEAR 2003 INFORMATION
The agreements between the Company and its members regarding the delivery of
sugarbeets to the Company require payment for members' sugarbeets 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 sugarbeets are
based upon the Company's then-current estimates of the financial results to be
obtained from processing the crop and the sale of finished products. 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 2002 sugar
beet crop. Given the nature of the estimates required in connection with the
payments to members for their sugarbeets, this discussion includes
forward-looking statements. 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. Some of those
estimates, such as the selling price for the Company's products and the quantity
of sugar produced from the sugar beet crop are beyond the Company's control. The
actual results experienced by the Company may differ materially from the
forward-looking statements contained herein.
The Company's members harvested 2.4 million tons of sugarbeets from the 2002
crop, the largest crop ever delivered to the Company. Sugar content of the 2002
crop at harvest was 4% below the average of the five most recent years. Because
of the record size of the crop delivered, the production of sugar from the 2002
crop sugarbeets is the most sugar ever produced by the Company.
The factory completed its 2002 crop sugar production with an estimated 6,110,000
cwt produced, slightly higher than the original projections. The average slice
rate was 9,414 per day, slightly lower than the original projections.
Based upon marketing information developed by United Sugars Corporation (the
Company's sales agent), the Company currently estimates the average net selling
price of the sugar will be more than that of the prior year and current year
estimates because of the domestic volume available for sale (domestic production
& foreign imports) relative to the estimated domestic consumption.
The 2002 Farm Bill contains provisions for marketing allotments, which can
potentially restrict the company's ability to market all the sugar it produces.
The Company has obtained all the allocations necessary for the marketing of its
entire 2002 crop.
The Company's initial beet payment estimate has been increased to $40.00 or
$.1376762 per harvested/bonus pound of sugar, an increase of 4.8%. The final
beet payment will be determined in October of 2003, after the completion of the
Company's fiscal year.
ESTIMATED FISCAL YEAR 2004 INFORMATION
The 2003 crop currently has 113,500 acres planted. The current condition of the
crop is considered to be slightly better than the 2002 crop. However, it is
still early in the growing season and crop quality will be impacted by weather
conditions between the date of this report and the harvest of the crop.
The 2002 Farm Bill contains provisions for marketing allotments, which can
potentially restrict the company's ability to market all the sugar it produces.
MDFC has a marketing plan in place for the 2003 crop that it feels will allow
for the marketing of the entire 2003 crop to be marketed within the framework of
the 2002 Farm Bill. The 2002 Farm Bill does not restrict sugar sales for
non-human consumption uses and for export consumption. If there are material
reductions in the 2002 Farm Bill allocations for the 2003 crop, or if the 2003
crop produces significantly more sugar than the 2002 crop, the Company may need
to make modifications to its marketing plan.
LIQUIDITY AND CAPITAL RESOURCES
Because the Company operates as a cooperative, payment 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
Co-Bank (the "Bank"). The Company has a short-term line of credit with the Bank
for calendar years 2003 and 2004 of $45.0 million, of which $1.0 million is
available for a letter of credit. The seasonal line of credit was renewed in May
2003 with the removal of the current ratio covenant being the only significant
change.
The loan agreements between the Bank and the Company obligate the company to
maintain the following financial covenants, and in accordance with GAAP:
o Maintain working capital of not less than $9.0 million as of August 31, 2003.
o Maintain a long-term debt and capitalized leases to equity ratio of not
greater than .8:1.
o Maintain available cash to current long-term debt ratio as
defined in the agreement of not less than 1.25:1.
As of May 31, 2003 the Company was in compliance with its loan agreement
covenants with the Bank.
Working Capital as of May 31, 2003 totals $38.3 million compared to $11.6
million at August 31, 2002, an increase of $26.7 million for the period.
Increased working capital is a result of normal financing, operational and
capital expenditure activities of the Company with the exception of
approximately $7.0 million being generated by the sale of the ProGold LLP
interest.
The targeted working capital for August 31, 2003 is approximately $9.5 million
dollars as a result of normal operations with an additional $7.0 million being
available as the result of the ProGold LLP sale. A Company strategic planning
process that will be concluded this fiscal year will decide the future use of
the additional $7.0 million dollars.
The primary factor for the changes in the Company's financial condition for the
nine months ended May 31, 2003, was due to the seasonal needs of the 2002/2003
sugarbeet-processing season and the addition of $7.0 million from the sale of
ProGold LLP. The cash used to provide for operations totaled $9.3 million. The
net cash provided from investing activities of $2.4 million and financing
activities of $6.2 million was primarily provided through proceeds from the
issuance of short-term debt of $10.9 million; offset by payment of long-term
debt of $4.5 million.
- -------------------------------------------------------------------------------------------------------------------------------
Contractual Less
Obligations Total Than 1 1 - 3 4 -5 After 5
Year Years Years Years
- -------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt $34.3MM $ 3.6MM $ 14.4MM $ 9.6MM $ 6.7MM
- -------------------------------------------------------------------------------------------------------------------------------
Capital Lease Obligations $22.8MM $ .9MM $ 3.6MM $ 3.7MM $ 14.6MM
- -------------------------------------------------------------------------------------------------------------------------------
Operating Leases $ 2.4MM $ .9MM $ 1.0MM $ .2MM $ .3MM
- -------------------------------------------------------------------------------------------------------------------------------
Unconditional
Purchase Obligations $ 3.5MM $ 3.5MM 0 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Other Long-Term
Obligations 0 0 0 0 0
- -------------------------------------------------------------------------------------------------------------------------------
otal Contractual Cash
Obligations $63.0MM $ 8.9MM $ 19.0MM $ 13.5MM $ 21.6MM
- -------------------------------------------------------------------------------------------------------------------------------
Capital expenditures for the nine months ended May 31, 2003 totaled $5.1
million. $3.0 million of the capital expenditures qualified for tax-exempt bond
financing and as such were drawn down against investments restricted for capital
lease projects. Capital expenditures for fiscal year 2003 are currently
estimated at $3.5 million excluding a multi-year steam dryer addition listed
below.
The board of directors has approved a $9.3 million capital expenditure project
for the installation of a pulp steam dryer. The company obtained tax-exempt
bonds to finance this project. The projected physical completion date of this
project is August 31, 2003 and the project is currently considered slightly
ahead of schedule and under budget. As a result of this project, current bank
covenant requirements have been reviewed and the Company projects that during
and after the completion of the pulp steam dryer project these bank covenants
will be in compliance without needing to be modified.
PART I
Item 4. OTHER INFORMATION
The Company's Audit Committee and Management are working toward a goal of
meeting all required SEC documentation, certification and best business
practices. As the SEC adopts new rules and proposes future rules, the Company is
positioning itself to continue being in compliance. The Company's Audit
Committee and Management have been seeking guidance from the SEC and experts in
the appropriate areas as needed.
The Company considers its Chief Executive Officer, Chief Financial Officer and
Chief Accounting Officer to be its disclosure committee, responsible to the
Audit Committee for presenting material facts relative to the financial
statements and how they are to be disclosed in the SEC filings prior to those
filings.
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information required to be included in the
Company's periodic SEC filings relating to the Company (including its
consolidated subsidiary).
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these internal controls subsequent to
the date of our most recent evaluation.
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
a) Exhibits Item #99.1 Section 1350 Certification of the
President & Chief Executive Officer
Item #99.2 Section 1350 Certification of the Executive Vice
President & Chief Financial Officer
Item #99.3 Section 1350 Certification of the Controller & Chief
Accounting Officer
Item #99.4 906 Certification of the Chief Executive Officer
Item #99.5 906 Certification of the Chief Financial Officer
b) Reports on Form 8-K
The Company filed the following Current Report on Form 8-K during this
quarter: On Form 8-K, dated April 28th, 2003, the Company announced
that on April 22, 2003, the Board of Directors of Minn-Dak Farmers
Cooperative (the "Cooperative") approved the sale of the Cooperative's
5% ownership interest in ProGold Limited Liability Company ("ProGold")
to American Crystal Sugar Company for $10,300,000.
================================================================================
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 15, 2003 /s/ DAVID H. ROCHE
--------------- -----------------------------------
David H. Roche
President and Chief Executive Officer
Date: July 15, 2003 /s/ STEVEN M. CASPERS
-------------------- -----------------------------------
Steven M. Caspers
Executive Vice President and Chief
Financial Officer
CERTIFICATION
- -------------
I, David H. Roche, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Minn Dak Farmers
Cooperative;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: July 15, 2003 \s\ David H. Roche
----------------------- ------------------------------------
President and Chief Executive Officer
CERTIFICATION
- -------------
I, Steven M. Caspers, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Minn Dak Farmers
Cooperative;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: July 15, 2003 \s\ Steven M. Caspers
---------------------- ------------------------------------
Executive Vice President and Chief
Financial Officer
CERTIFICATION
- -------------
I, Allen E. Larson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Minn Dak Farmers
Cooperative;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: July 15, 2003 \s\ Allen E. Larson
-------------------------- ------------------------------------
Controller and Chief Accounting
Officer