UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 20, 2003
FARMLAND INDUSTRIES, INC.
Debtor-in-possession as of May 31, 2002
(Exact name of registrant as specified in its charter)
Kansas | 001-11629 | 44-0209330 |
(State of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
12200 North Ambassador Drive | |
Kansas City, Missouri | 64163-1244 |
(Address of principal executive offices) | (Zip Code) |
816-713-7000
(Registrant's telephone number, including area code)
Not Changed
(Former name or former address, if changed since last report)
Effective May 20, 2003, Farmland consummated the sale of a significant portion of our domestic crop production nitrogen assets, which included the majority of our anhydrous ammonia production and terminal facilities that we either owned or leased, primarily to Koch Nitrogen Company ("Koch"). During May, Farmland also consummated the sale of our foreign nitrogen assets, consisting primarily of our 50% ownership interest in Farmland MissChem Limited and related assets, to Koch. Farmland MissChem Limited owns an anhydrous ammonia production facility in The Republic of Trinidad and Tobago. The sale of our domestic and foreign nitrogen assets were in conjunction with our reorganization proceedings and were subject to approval by the bankruptcy court. An auction was held for these assets during March 2003 and the final bids were approved by the Court on April 1, 2003. These series of related transactions resulted in the purchase of assets and inventories and the assumption of certain liabilities by the buyers for consideration, in aggregate, of approximately $201 million in cash, of which $7 million is held in escrow. The sales proceeds were used to reduce outstanding bank debt as required under the terms of both our DIP Credit Facility and our Pre-petition Credit Facility. Subsequent to this sale, our crop production business consists primarily of our fertilizer manufacturing facility located in Coffeyville, Kansas and our ownership interest in two joint ventures, SF Phosphates Limited Company and Agriliance LLC.
The following pro forma condensed consolidated financial statements are presented to illustrate the effects of the sale of our domestic and foreign nitrogen assets (collectively, the "Dispositions") on the historical financial position and operating results of Farmland.
The following pro forma condensed consolidated balance sheet of Farmland at February 28, 2003 gives effect to the Dispositions as if they had occurred on that date. The pro forma condensed consolidated statements of operations for the six months ended February 28, 2002 and 2003 and for the years ended August 31, 2000, 2001 and 2002 give effect to the Dispositions as if they had occurred as of the beginning of the earliest period presented.
The pro forma condensed consolidated financial statements have been derived from, and should be read in conjunction with, Farmland's historical consolidated financial statements, including the accompanying notes. Those financial statements are included in our Quarterly Report on Form 10-Q for the six months ended February 28, 2003 and our Annual Report on Form 10-K for the year ended August 31, 2002.
The pro forma condensed consolidated financial statements are presented only for informational purposes. As a result, the accompanying pro forma condensed consolidated financial statements are also not necessarily indicative of the financial position or results of operations of Farmland that would have occurred had the Dispositions been consummated as of the dates indicated.
page 2
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
February 28, 2003
(UNAUDITED)
ASSETS
February 28, 2003 | ||||||||||
Farmland | Pro Forma | Farmland | ||||||||
Adjustments | Pro Forma | |||||||||
(a) | (b) | (c) | ||||||||
(Amounts in Thousands) | ||||||||||
Current Assets: | ||||||||||
Accounts receivable - trade (net of |
$ |
|
$ |
-0- |
$ |
| ||||
Inventories | 329,463 | (85,966)(1) | 243,497 | |||||||
Deferred income taxes | 51,075 | (765)(2) | 50,310 | |||||||
Other current assets | 85,706 | 4,598(1) | 90,304 | |||||||
Current assets from discontinued operations | 43,263 | -0- | 43,263 | |||||||
Total Current Assets | $ | 821,245 | $ | (82,133) | $ | 739,112 | ||||
Investments and Long-term Receivables | $ | 303,683 | $ | (98,728)(1) | $ | 204,955 | ||||
Property, Plant & Equipment: | ||||||||||
Property, plant and equipment, at cost | $ | 1,498,848 | $ | (325,924)(1) | $ | 1,172,924 | ||||
Less accumulated depreciation and | ||||||||||
amortization | 1,021,971 | (258,818)(1) | 763,153 | |||||||
Net Property, Plant & Equipment | $ | 476,877 | $ | (67,106) | $ | 409,771 | ||||
Other Assets: | ||||||||||
Goodwill | $ | 28,575 | $ | -0- | $ | 28,575 | ||||
Intangible assets | 24,853 | -0- | 24,853 | |||||||
Other long-term assets | 55,689 | (8,752)(1) | 46,937 | |||||||
Long-term assets from discontinued | ||||||||||
operations | 741 | -0- | 741 | |||||||
Total Other Assets | $ | 109,858 | $ | (8,752) | $ | 101,106 | ||||
Total Assets | $ | 1,711,663 | $ | (256,719) | $ | 1,454,944 | ||||
----------------------------------------------
See accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
February 28, 2003
(UNAUDITED)
LIABILITIES AND EQUITIES
February 28, 2003 | |||||||||
Pro Forma | Farmland | ||||||||
Farmland | Adjustment | Pro Forma | |||||||
(a) | (b) | (c) | |||||||
(Amounts in Thousands) | |||||||||
Current Liabilities: | |||||||||
Checks and drafts outstanding | $ | 39,140 | $ | -0- | $ | 39,140 | |||
Current maturities of long-term debt | 251,592 | (187,047)(3)(5) | 64,545 | ||||||
Accounts payable - trade | 71,039 | -0- | 71,039 | ||||||
Other current liabilities | 123,501 | (2,452)(1) | 121,049 | ||||||
Current liabilities from discontinued | |||||||||
operations | 20,006 | -0- | 20,006 | ||||||
Total Current Liabilities | $ | 505,278 | $ | (189,499) | $ | 315,779 | |||
Liabilities Subject to Compromise | $ | 878,976 | $ | (12,620)(1) | $ | 866,356 | |||
Long-Term Liabilities: | |||||||||
Long-term borrowings (excluding | |||||||||
current maturities) | $ | 160,981 | $ | (2,000)(1) | $ | 158,981 | |||
Other long-term liabilities | 19,907 | (374)(1) | 19,533 | ||||||
Total Long-Term Liabilities | $ | 180,888 | $ | (2,374) | $ | 178,514 | |||
Deferred Income Taxes | $ | 57,444 | $ | (765)(2) | $ | 56,679 | |||
Minority Owners' Equity in Subsidiaries | $ | 47,665 | $ | -0- | $ | 47,665 | |||
Net Loss | $ | (388,180) | $ | -0- | $ | (388,180) | |||
Capital Shares and Equities: | |||||||||
Preferred shares, authorized 8,000,000 shares, 8% Series A | |||||||||
cumulative redeemable preferred shares, | |||||||||
stated at redemption value, $50 | |||||||||
per share | $ | 100,000 | $ | -0- | $ | 100,000 | |||
Common shares authorized | |||||||||
50,000,000 shares, $25 par value | 526,014 | -0- | 526,014 | ||||||
Accumulated other comprehensive income | 1,106 | -0- | 1,106 | ||||||
Earned surplus and other equities | (197,528) | (51,461)(4) | (248,989) | ||||||
Total Capital Shares and Equities | $ | 429,592 | $ | (51,461) | $ | 378,131 | |||
Total Liabilities and Equities | $ | 1,711,663 | $ | (256,719) | $ | 1,454,944 | |||
-----------------------------------------
See accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) | Reflects Farmland's historical financial position at February 28, 2003. | |
(b) | Pro forma adjustments to record the Dispositions as of February 28, 2003 reflect: | |
1) | The sale of certain assets and inventories to Koch for cash and the assumption of certain liabilities by Koch; | |
2) | Reversal of book/tax timing differences related to assets sold to and liabilities assumed by the buyers, largely offset by an increase in the valuation allowance for our deferred tax assets; | |
3) | Under terms of our DIP and Pre-petition Credit Facilities, we are required to use the net sales proceeds to reduce outstanding borrowings under these facilities; | |
4) | The decrease in equity represents the loss we recognized on consummation of these transactions; and | |
5) | As a part of our disposition of crop production assets, a warehouse and other small support facilities were sold prior to February 28, 2003. The approximately $7 million of cash proceeds from these sales reduced debt outstanding at February 28, 2003 and, accordingly, is excluded from this pro forma adjustment. | |
(c) | Although not recognized in this pro forma balance sheet we anticipate that, as we collect trade receivables from sold facilities, our aggregate trade receivables will be reduced by approximately $43 million. These proceeds will be applied to reduce borrowings outstanding under our Pre-petition Credit Facility | |
page 5
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Year Ended August 31, 2000 | ||||||||||||
Pro Forma | Farmland | |||||||||||
Farmland | Adjustment | Pro Forma | ||||||||||
(a) | (b) |
| ||||||||||
(Amounts in Thousands) | ||||||||||||
Sales | $ | 9,794,575 | $ | (889,238)(1) | $ | 8,905,337 | ||||||
Cost of sales | 9,332,978 | (887,139)(1) | 8,445,839 | |||||||||
Gross income | $ | 461,597 | $ | (2,099)(1) | $ | 459,498 | ||||||
Selling, general and administrative expenses | (449,601) | 27,325(1) | (422,276) | |||||||||
Interest expense | (107,980) | 16,782(1) | (91,198) | |||||||||
Interest income | 9,877 | (52)(1) | 9,825 | |||||||||
Other income (expense) | 26,695 | (25,829)(1) | 866 | |||||||||
Equity in net income of investees | 56,891 | (10,016)(2) | 46,875 | |||||||||
Minority owners' interest in net income | ||||||||||||
of subsidiaries | (24,996) | -0- | (24,996) | |||||||||
Loss from continuing operations before | ||||||||||||
income tax benefit | $ | (27,517) | $ | 6,111 | $ | (21,406) | ||||||
Income tax benefit | 18,136 | -0- | 18,136 | |||||||||
Loss from continuing operations | $ | (9,381) | $ | 6,111 | $ | (3,270) | ||||||
------------------------------------------
See accompanying Notes to Pro Forma Condensed Consolidated Statements of Operations
page 6
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Year Ended August 31, 2001 | ||||||||||||
Pro Forma | Farmland | |||||||||||
Farmland | Adjustment | Pro Forma | ||||||||||
(a) | (b) |
| ||||||||||
(Amounts in Thousands) | ||||||||||||
Sales | $ | 9,197,314 | $ | (637,492)(1) | $ | 8,559,822 | ||||||
Cost of sales | 8,803,451 | (618,230)(1) | 8,185,221 | |||||||||
Gross income | $ | 393,863 | $ | (19,262)(1) | $ | 374,601 | ||||||
Selling, general and administrative expenses | (363,210) | 19,256(1) | (343,954) | |||||||||
Restructuring and other charges | (80,325) | -0- | (80,325) | |||||||||
Interest expense | (118,237) | 24,476(1) | (93,761) | |||||||||
Interest income | 12,535 | (494)(1) | 12,041 | |||||||||
Other income (expense) | 19,677 | (31,267)(1) | (11,590) | |||||||||
Equity in net income of investees | 27,457 | (7,136)(2) | 20,321 | |||||||||
Minority owners' interest in net income | ||||||||||||
of subsidiaries | (23,164) | 39(1) | (23,125) | |||||||||
Loss from continuing operations before | ||||||||||||
income tax benefit | $ | (131,404) | $ | (14,388) | (145,792) | |||||||
Income tax benefit | 27,619 | -0- | 27,619 | |||||||||
Loss from continuing operations | $ | (103,785) | $ | (14,388) | $ | (118,173) | ||||||
--------------------------------------
See accompanying Notes to Pro Forma Condensed Consolidated Statements of Operations
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Year Ended August 31, 2002 | ||||||||||||
Pro Forma | Farmland | |||||||||||
Farmland | Adjustment | Pro Forma | ||||||||||
(a) | (b) |
| ||||||||||
(Amounts in Thousands) | ||||||||||||
Sales | $ | 6,574,004 | $ | (450,533)(1) | $ | 6,123,471 | ||||||
Cost of sales | 6,330,287 | (459,605)(1) | 5,870,682 | |||||||||
Gross income | $ | 243,717 | $ | 9,072(1) | $ | 252,789 | ||||||
Selling, general and administrative expenses | (339,599) | 20,346(1) | (319,253) | |||||||||
Restructuring and other charges | (51,876) | 2,639(1) | (49,237) | |||||||||
Interest expense | (82,886) | 18,023(1) | (64,863) | |||||||||
Interest income | 251 | 25(1) | 276 | |||||||||
Other income (expense) | (15,804) | 5,828(1) | (9,976) | |||||||||
Equity in net income of investees | 34,124 | (11,829)(2) | 22,295 | |||||||||
Minority owners' interest in net income | ||||||||||||
of subsidiaries | (22,404) | -0- | (22,404) | |||||||||
Reorganization expense | (69,114) | 9,368(1) | (59,746) | |||||||||
Loss from continuing operations before | ||||||||||||
income tax expense | $ | (303,591) | $ | 53,472 | $ | (250,119) | ||||||
Income tax expense | (5,521) | -0- | (5,521) | |||||||||
Loss from continuing operations | $ | (309,112) | $ | 53,472 | $ | (255,640) | ||||||
-----------------------------------
See accompanying Notes to Pro Forma Condensed Consolidated Statements of Operations
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended February 28, 2002 | ||||||||||||
Pro Forma | Farmland | |||||||||||
Farmland | Adjustment | Pro Forma | ||||||||||
(a) | (b) |
| ||||||||||
(Amounts in Thousands) | ||||||||||||
Sales | $ | 3,391,972 | $ | (218,777)(1) | $ | 3,173,195 | ||||||
Cost of sales | 3,256,095 | (227,976)(1) | 3,028,119 | |||||||||
Gross income | $ | 135,877 | $ | 9,199(1) | $ | 145,076 | ||||||
Selling, general and administrative expenses | (154,103) | 9,910(1) | (144,193) | |||||||||
Restructuring and other credits | 6,340 | -0- | 6,340 | |||||||||
Interest expense | (44,484) | 10,465(1) | (34,019) | |||||||||
Other income (expense) | 20,451 | (4,142)(1) | (13,951) | |||||||||
Equity in net income (loss) of investees | 1,319 | (5,899)(2) | (4,580) | |||||||||
Minority owners' interest in net income of subsidiaries | (9,588) | -0- | (9,588) | |||||||||
Loss from continuing operations before | ||||||||||||
income tax benefit | $ | (44,188) | $ | 19,533 | $ | (24,655) | ||||||
Income tax benefit | 11,856 | -0- | 11,856 | |||||||||
Loss from continuing operations | $ | (32,332) | $ | 19,533 | $ | (12,799) | ||||||
----------------------------------------
See accompanying Notes to Pro Forma Condensed Consolidated Statements of Operations
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended February 28, 2003 | ||||||||||||
Pro Forma | Farmland | |||||||||||
Farmland | Adjustment | Pro Forma | ||||||||||
(a) | (b) | (c) | ||||||||||
(Amounts in Thousands) | ||||||||||||
Sales | $ | 3,288,502 | $ | (201,021)(1) | $ | 3,087,481 | ||||||
Cost of sales | 3,149,653 | (191,850)(1) | 2,957,803 | |||||||||
Gross income | $ | 138,849 | $ | (9,171)(1) | $ | 129,678 | ||||||
Selling, general and administrative expenses | (116,545) | 7,399(1) | (109,146) | |||||||||
Restructuring and other credits | 2,311 | -0- | 2,311 | |||||||||
Interest expense | (15,865) | 8,028(1) | (7,837) | |||||||||
Other income (expense) | 54,668 | (1,756)(1) | 52,912 | |||||||||
Equity in net income (loss) of investees | (808) | (3,970)(2) | (4,778) | |||||||||
Minority owners' interest in net income of subsidiaries | (7,378) | -0- | (7,378) | |||||||||
Reorganization expense | (443,308) | 45,659(1) | (397,649) | |||||||||
Loss from continuing operations before | ||||||||||||
income tax benefit (expense) | $ | (388,076) | $ | 46,189 | $ | (341,887) | ||||||
Income tax benefit (expense) | 0 | -0- | -0- | |||||||||
Loss from continuing operations | $ | (388,076) | $ | 46,189 | $ | (341,887) | ||||||
------------------------------------
See accompanying Notes to Pro Forma Condensed Consolidated Statements of Operations
page 10
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
(Debtors-in-Possession)
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 2002 AND 2003 AND
YEARS ENDED AUGUST 31, 2000, 2001 AND 2002
| (a) | Reflects Farmland's historical operating results for the six months ended February 28, 2002 and 2003 and for the years ended August 31, 2000, 2001 and 2002. | |
| (b) | Pro forma adjustments to record the Dispositions for the six months ended February 28, 2002 and 2003, and for the years ended August 31, 2000, 2001 and 2002 reflect the following directly identifiable items: | |
| 1) | The effect of excluding sales, cost of sales, selling, general and administrative expenses (selling, general and administrative expenses previously allocated to crop production were added back to unallocated corporate expense), reorganization expense and interest expense associated with the assets sold to Koch; and | |
| 2) | The effect of excluding earnings from our equity interest in Farmland MissChem Limited sold primarily to Koch. | |
| (c) | Based on information currently available, Management estimates that the transactions described in this filing will result in a nonrecurring loss, net of taxes, of approximately $51 million. This loss is not reflected in these pro forma income statements. We believe this additional loss, which will be recognized in the quarter ending May 31, 2003, is principally attributable to certain bidders' decisions to not participate in the auction due to uncertainties attributable to the effects of the commencement of the war with Iraq. This additional loss has not been considered in these pro forma statements of operations. | |
page 11
Exhibits
2.A | Domestic Nitrogen Purchase Agreement between Farmland Industries, Inc. and Koch Nitrogen Company dated February 17, 2003. |
2.B | Foreign Nitrogen Purchase Agreement between Farmland Industries, Inc. and Koch Nitrogen Company, dated February 17, 2003. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FARMLAND INDUSTRIES, INC. | |
(Registrant) | |
| By: | /s/ STEVEN R. RHODES |
Steven R. Rhodes | |
Executive Vice President | |
and Chief Financial Officer |
Date: June 4, 2003
