================================================================================ 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: FEBRUARY 29, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE SECURITES EXCHANGE ACT OF 1934 Commission file: No. 33-94644 MINN-DAK FARMERS COOPERATIVE ---------------------------- (Exact named of registrant as specified in its charter) North Dakota 23-7222188 ------------ ---------- (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 7525 Red River Road Wahpeton, North Dakota 58075 ---------------------------- (Address of principal (Zip Code) executive offices) (701) 642-8411 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class of Common Stock April 12 , 2000 --------------------- --------------- $250 Par Value 483 MINN-DAK FARMERS COOPERATIVE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The condensed consolidated financial statements for the three month periods ended February 29, 2000 and February 28, 1999 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, 1999. The results of operations for the three months ended February 29, 2000 are not necessarily indicative of the results for the entire fiscal year ending August 31, 2000. 2. In August 1999, the company declared a revolvement of 34.1% of the 1990 crop per unit retains and allocated patronage. That amount, $2.4 million, was paid to the stockholders on October 4, 1999. MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (IN THOUSANDS) FEBRUARY 29, 2000 AUGUST 31, 1999 ASSETS (UNAUDITED) (AUDITED) - ------ ------------------ ------------------- CURRENT ASSETS: Cash $ 642 $ 546 ------------------ ------------------- Current portion of long-term note receivable 312 312 ------------------ ------------------- Receivables: Trade accounts 15,097 19,303 Growers 0 4,057 ------------------ ------------------- 15,097 23,360 ------------------ ------------------- Advances to affiliate (1,706) (375) ------------------ ------------------- Inventories: Refined sugar, pulp and molasses to be sold on a pooled basis 69,398 17,219 Nonmember refined sugar 476 1 Yeast 59 63 Materials and supplies 4,662 5,005 Beet Inventory 12,064 710 Other 0 - ------------------ ------------------- 86,659 22,998 ------------------ ------------------- Deferred charges 612 1,194 ------------------ ------------------- Prepaid expenses 181 232 ------------------ ------------------- Property and equipment available for sale 588 588 ------------------ ------------------- Total current assets 102,384 48,854 ------------------ ------------------- PROPERTY, PLANT AND EQUIPMENT: Land and land improvements 20,423 20,423 Buildings 35,466 35,378 Factory equipment 109,378 110,134 Other equipment 3,475 3,463 Construction in progress 1,021 230 ------------------ ------------------- 169,763 169,628 Less accumulated depreciation (62,824) (60,442) ------------------ ------------------- 106,939 109,186 ------------------ ------------------- LONG-TERM NOTES RECEIVABLE, NET OF CURRENT PORTION 2,946 2,915 ------------------ ------------------- OTHER ASSETS: Investments restricted for capital lease projects 0 - Investment in stock of other corporations, unconsolidated marketing subsidiaries and other cooperatives 10,125 10,043 Deferred income taxes 1,882 1,962 Other 871 960 ------------------ ------------------- 12,879 12,965 ------------------ ------------------- See Notes to Consolidated Financial Statements. $ 225,148 $ 173,921 ================== =================== MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (IN THOUSANDS) FEBRUARY 29, 2000 AUGUST 31, 1999 (UNAUDITED) (AUDITED) ---------------------- -------------------- LIABILITIES AND MEMBERS' INVESTMENT CURRENT LIABILITIES: Short-term notes payable $ 37,675 $ 17,780 ---------------------- -------------------- Current portion of long-term debt 4,788 3,743 ---------------------- -------------------- Accounts payable: Trade (2,594) 2,892 Growers 23,679 8,340 ---------------------- -------------------- 21,085 11,232 ---------------------- -------------------- Accrued liabilities 3,334 2,697 ---------------------- -------------------- Total current liabilities 66,881 35,452 LONG-TERM DEBT, NET OF CURRENT PORTION 44,167 46,173 OBLIGATION UNDER CAPITAL LEASE 10,495 11,270 OTHER 1,934 686 COMMITTMENTS AND CONTINGENCIES - 0 ---------------------- -------------------- Total liabilities 123,477 93,581 ---------------------- -------------------- MINORITY INTEREST IN EQUITY OF SUBSIDIARY 1,028 947 ---------------------- -------------------- MEMBERS' INVESTMENT: Preferred stock: Class A - 100,000 shares authorized, $105 par value; 72,200 shares issued and outstanding at February 29, 2000 and 72,200 at August 31, 1999 7,581 7,581 Class B - 100,000 shares authorized, $75 par value; 72,200 shares issued and outstanding at February 29, 2000 and 72,200 at August 31, 1999 5,415 5,415 Class C - 100,000 shares authorized, $76 par value; 72,200 shares issued and outstanding at February 29, 2000 and 72,200 at August 31, 1999 5,487 5,487 ---------------------- -------------------- 18,483 18,483 Common stock, 600 shares authorized, $250 par value; issued and outstanding, 483 shares at February 29, 2000 and 473 shares at August 31, 1999 121 118 Paid in capital in excess of par value 32,094 32,094 Unit retention capital 7,560 7,560 Qualified allocated patronage 3,855 3,855 Nonqualified allocated patronage 38,589 16,822 Retained earnings (deficit) (58) 462 ---------------------- -------------------- 100,643 79,394 ---------------------- -------------------- See Notes to Consolidated Financial Statements. $ 225,148 $ 173,921 ====================== ==================== PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED FEBRUARY 29 FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 -------------------------------------------------------------- 2000 1999 2000 1999 ------------- ------------- ------------- ------------- REVENUE: From sales of sugar, by-products, and yeast, net of discounts $ 66,425 $ 43,510 $ 132,175 $ 96,859 Other income (2) 214 114 137 ------------- ------------- ------------- ------------- 66,423 43,724 132,289 96,996 ------------- ------------- ------------- ------------- EXPENSES: Production costs of sugar, by-products, and yeast sold 14,832 13,490 28,583 25,958 Marketing (includes freight and storage) 6,072 5,944 14,220 12,909 General and administrative 1,505 1,460 2,831 2,829 Interest 1,464 1,512 2,592 2,742 (Gain) loss on disposition of property and equipment 160 47 160 72 ------------- ------------- ------------- ------------- 24,033 22,453 48,387 44,510 ------------- ------------- ------------- ------------- NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS $ 42,390 $ 21,271 $ 83,902 $ 52,486 ============= ============= ============= ============= DISTRIBUTION OF NET PROCEEDS: Credited to members' investment: Components of net income: Income (loss) from non-member business $ 204 $ 250 $ 408 $ 491 Patronage income 10,832 1,010 21,767 6,335 ------------- ------------- ------------- ------------- Net income 11,035 1,260 22,174 6,826 Unit retention capital 0 0 0 0 ------------- ------------- ------------- ------------- Net credit to members' investment 11,035 1,260 22,174 6,826 Payments to members for sugarbeets, net of unit retention capital 31,355 20,011 61,728 45,660 ------------- ------------- ------------- ------------- NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS $ 42,390 $ 21,271 $ 83,902 $ 52,486 ============= ============= ============= ============= See Notes to Consolidated Financial Statements. MINN-DAK FARMERS COOPERATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) SIX MONTHS ENDED FEBRUARY 29 FEBRUARY 28 2000 1999 ------------------ -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Income allocated to members' investment $ 21,328 $ 6,501 Add (deduct) noncash items: Depreciation and amortization 3,278 3,165 Equipment disposals - loss 160 72 Discount on estate payout 0 27 Net income allocated from unconsolidated marketing subsidiaries (82) (24) Noncash portion of patronage capital credits 0 (228) Retention of nonqualified unit retains 0 0 Changes in operating assets and liabilities: Accounts receivable and advances 9,594 2,704 Inventory and prepaid expenses (63,610) (43,743) Deferred charges 582 691 Other assets 89 (52) Accounts payable, advances, and accrued liabilities 14,112 7,318 ------------------ -------------- NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (14,549) (23,569) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposition of property, plant and equipment 58 2 Capital expenditures (1,248) (3,021) Investment in stock of other corporations, unconsolidated marketing subsidiaries and other cooperatives (31) (277) Minority interest in equity of subsidiaries 81 117 ------------------ -------------- NET CASH USED IN INVESTING ACTIVITIES (1,140) (3,179) ------------------ -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of short-term debt 19,895 26,224 Payment of long-term debt (1,006) (1,406) Payment of unit retains and allocated patronage (2,377) (2,460) Issuance of long-term debt (730) 2,800 Provision for long-term tax 0 0 Sale and repurchase of common stock, net 3 (2) Issuance of stock 0 0 Issuance of long term tax-exempt bonds 0 0 ------------------ -------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 15,784 25,155 ------------------ -------------- NET INCREASE (DECREASE) IN CASH 96 (1,592) CASH, BEGINNING OF YEAR 546 1,849 ------------------ -------------- CASH, END OF QUARTER $ 642 $ 257 ================== ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for: Interest $ 2,286 $ 2,713 ================== ============== Income taxes, net of refunds $ 6 $ 10 ================== ============== 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 SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 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 February 29, 2000 (the second quarter of the Company's 1999-2000 fiscal year) and February 28, 1999 (the second quarter of the Company's 1998-1999 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 FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 Revenue for the three months ended February 29, 2000 increased $22.7 million from the 1999 period, an increase of 52%. Revenue from the sale of finished goods increased $2.2 million, while finished goods inventory increased $20.7 million. Other income decreased $0.2 million. Revenue from the sales of sugar increased $2.2 million, or 8%, reflecting a 6% increase in volume and a 2% increase in the price for sugar. The increase in volume is the result of a higher estimate of sugar to be produced in fiscal year 2000, and thus more sugar to ship. Revenue from pulp sales increased $0.4 million or 18%, reflecting a 4% increase in sales volume and a 14% increase in the average gross selling price. 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 increase approximately 16% from the prior year. The expected increase in pulp prices is mostly a result of improved economic conditions, improved dairy consumption and less pulp production from a major competitor in certain of the Company's markets. Revenue from beet molasses sales decreased $0.2 million or 17%, reflecting a 12% decrease in sales volume, and a 4% decrease in the average gross selling price. The decrease in molasses sales volume is due to decreased molasses production in fiscal year 2000 versus the prior year. The lower current year reporting period selling price is due to stronger prices in the marketplace in the prior year (more balanced supply/demand for molasses markets). 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 23% higher than the prior year. The expected increase in beet molasses prices is attributable to overall lower domestic production of beet molasses. Revenues from yeast sales decreased $0.2 million or 12%, reflecting a 5% increase in sales volume and a 17% decrease in the average selling price. Selling prices are down due to competitive pressures that currently exist in the marketplace. 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 February 29, 2000 amounted to $29.9 million or $20.7 million more than the increase in the value of finished goods inventories for February 28, 1999. For February 29, 2000 the increase in the value of sugar inventories was $18.8 million more than the increase of that of the prior year, and for pulp $1.8 million more. The increase in sugar and pulp inventory values is the result of a greater volume of sugar and pulp on hand versus the prior period. Higher volumes are a result of the timing of production versus customer shipments. In the consolidated statements of operations, Expenses section, production costs of sugar, by-products and yeast totaled $14.8 million, $1.3 million or 10% more than the prior year. The increase is mainly attributable to 31% more beets being processed in the three month period ending February 29, 2000 versus the prior period. Marketing costs totaled $6.1 million, $1.3 million or 2% more than the prior year. Current year sales volume for sugar, the Company's main revenue source, increased 6% versus the prior year. Interest expense totaled $1.5 million, down 3% from the prior year. Interest costs are lower due to better cash flow from increased sales volume, offset by somewhat higher seasonal interest rates. In the section Distribution of Net Proceeds, payments to members for sugarbeets, net of unit retention capital and unprocessed sugarbeet inventory increased $11.3 million or 57% from the fiscal year 1999 period. For fiscal year 2000 the Company is projecting a payment to growers for sugarbeets totaling $73.8 million, which is $11.2 million or 18% more than the prior fiscal year. The increased payment is due to increased harvested tons (+24%), but offset some by lower per unit payments. The payment is based upon (i) an average delivered sugar content of 16.89%, (ii) a total sugarbeet crop to process of 2.2 million tons and (iii) the Company's projected selling price for its sugar, which is currently estimated to be lower than the previous year. COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 Revenue for the six months ended February 29, 2000 increased $35.3 million from the 1999 period, an increase of 36%. Revenue from the sale of finished goods increased $4.2 million, while the change in the value of finished goods inventory increased $31.1 million. Revenue from the sales of sugar increased $5.0 million or 8%, reflecting a 7% increase in volume and a 1% increase in the price for sugar. The increase in volume is the result of higher estimated sugar to be produced in fiscal year 2000 (and thus more sugar to ship). 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 decrease approximately 7% from the prior year, which is the result of the volume available for sale (domestic & foreign imports) relative to the estimated domestic consumption. Revenue from pulp sales decreased $0.4 million or 10%, reflecting a 23% decrease in sales volume, offset by a 12% increase in the average gross selling price. The decrease in pulp sales volume for this period is the result of a large carry-in of pulp. Because of the large carry-in of prior year pulp inventory, new crop sales began later in the selling year. 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 increase approximately 16% from the prior year. The expected increase in pulp prices is mostly a result of improved economic conditions, improved dairy consumption and less pulp production from a major competitor in certain of the Company's markets. Revenue from beet molasses sales increased $0.2 million or 10%, reflecting a 16% increase in sales volume, but offset by a 6% decrease in the average gross selling price. The larger volume of beet molasses is the result of timing of customer orders. The lower current year reporting period selling price is due to stronger prices in the marketplace in the prior year (more balanced supply/demand for molasses markets). 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 23% higher than the prior year. The expected increase in beet molasses prices is attributable to overall lower domestic production of beet molasses. Revenues from yeast sales from the Company's subsidiary yeast production facility, Minn-Dak Yeast Company ("MDYC") decreased $0.6 million or 17%, reflecting a 6% decrease in sales volume and a 10% decrease in the average selling price. Sales volume is down because of strong customer demand for bagged fresh yeast in the prior year. Selling prices are down due to strong competitive pricing, resulting from efforts to gain / retain market-share. 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 six months ended February 29, 2000 amounted to $52.1 million or $31.1 million more than the increase in the value of finished goods inventories for February 28, 1999. The increase in finished goods inventory mainly results from the level of the inventory of sugar on hand at the end of the period. Higher inventories of sugar are the result of a greater level of sugar produced versus the prior period (42% more sugar produced). The large increase in sugar produced for the period is due to a high slice rate and higher quality in the beets that were processed. In the consolidated statements of operations, Expenses section, Production costs of sugar, by-products and yeast sold increased $2.6 million or 10%. The increase in production costs for the six months ended February 29, 2000 is mainly due to the increased volume of beets sliced (+30%) versus the same period last year. Marketing costs (which include freight and storage) are $1.3 million or 10% more than the prior period because of the increase in sales volume for sugar. Interest expense totaled $2.6 million, down 5% from the prior year. Interest costs are lower due to better cash flow from increased sales volume, offset by somewhat higher seasonal interest rates. In the section Distribution of Net Proceeds, payments to members for sugarbeets (net of unit retention capital and unprocessed sugarbeet inventory) increased $16.1million or 35% from the prior period. For fiscal year 2000 the Company is projecting a payment to growers for sugar beets totaling $73.8 million, which is $11.2 million or 18% more than the prior fiscal year. The increased payment is due to increased harvested tons (+24%), but offset some by lower per unit payments. The payment is based upon (i) an average delivered sugar content of 16.89%, (ii) a total sugar beet crop to process of 2.2 million tons and (iii) the Company's projected selling price for its sugar, which is currently estimated to be lower than the previous year. ESTIMATED FISCAL YEAR 2000 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 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 1999 sugar beet crop. Given the nature of the estimates required in connection with the payments to members for their sugar beets, 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 recently completed harvest of the sugar beet crop grown during 1999 produced a total of 2.2 million tons of sugar beets. The sugar content on the 1999 crop was below long-term averages but purity was average. As of this filing completion of the processing season is nearing an end. No significant sugarbeet storage problems were encountered during the processing season. While unseasonably warm temperatures occurred in the months of November and most of December, the Company has not been able to ascertain any significant detrimental effects to the operations of the factory due to the unusual weather. In fact, other factors that can affect long-term storageability of the beets (such as freeze/thaw kind of weather, condition of the beets going into the piles, etc.) were favorable to the Company. The Company expects to produce a record volume of sugar from the 1999 sugar beet crop because of the record tons of beets delivered. The factory average sugarbeet slice rate was in excess of 9,600 tons per day; well above the planned slice for the processing season of 8,500 tons per day. Processing of the Company's sugar juice remains to be done before the processing season is complete. The high slice rate resulted from better than planned quality from the sugarbeets that were sliced. The better than planned quality is expected to produce better than planned sugar production, and overall lower operating costs. Based upon marketing information developed by United Sugars Corporation, the Company's current estimate is that the average net selling price of the Company's sugar will be 7% less than that of the prior year because of the volume available for sale (domestic & foreign imports) relative to the estimated domestic consumption. In fact, selling prices for sugar in the past three months have decreased significantly due to an oversupply of sugar that is available for sale to the domestic marketplace. Significantly lower sugar prices currently will result in lower than planned sugar prices for the year. Lower sugar prices will have an offsetting effect on the grower payment relative to the higher sugar production and lower production costs. Record domestic production of both beet and cane sugar along with required minimum levels of sugar imported under the GATT (General Agreement on Tariffs and Trade) agreement and the NAFTA (North American Free Trade Agreement) agreement have resulted in the supply of sugar to greatly exceed demand. Increased domestic supply is the result of fifteen years of flat sugar prices, resulting in the need to reduce costs through increased yields. Also, due to the even more depressed prices of other farm crops, farmers have been driven to plant record or near-record acres of sugarbeets and sugarcane. Continued over-supply of sugar to the domestic marketplace will depend upon a resolution to the factors creating the oversupply. Resolution of these problems, in part, will have to come from help from the Federal Congress and Administration. Currently the sugar industry is working with Congress and the Administration on ideas of how to remove excess sugar from the marketplace in such a manner so as to help bolster sugar prices. However, at this time the Company cannot determined the outcome of these efforts or whether there is a satisfactory solution to the problems currently affecting sugar prices. From the revenues generated from the sale of products produced from each ton of sugar beets, the Company's operating and fixed costs must be deducted. The deduction of those operating costs results in a currently estimated gross beet payment of $33.50 per ton of sugar beets. 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 Co-Bank (the "Bank"). The Company has a short-term line of credit with the Bank for calendar years 1999 and 2000 of $55.0 million. The Company's $55,000,000 operating loan has been extended from January 31, 2000 to May 31, 2000 to provide continued availability of funding while new loan documents are completed, reviewed and executed. It is expected that renewed financing agreements will be in place by not later than May 1, 2000. 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 $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 February 29, 2000 the Company was in compliance with its loan agreement covenants with the Bank. Working Capital as of February 29, 2000 totals $35.5 million compared to $13.4 million at August 31, 1999, an increase of $22.1 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, 2000 is approximately $11.0 million dollars and, in the Company's opinion, will be attained. The primary factor for the changes in the Company's financial condition for the six months ended February 29, 2000 was due to the seasonal needs of the 1999/2000 sugarbeet-processing season. The cash used to provide for operations of $11.5 million and for investing activities of $1.1 million was funded through cash flow financing activities. The net cash provided through financing activities of $15.8 million was primarily provided through proceeds from the issuance of short term debt of $19.9 million; and allocated patronage payment of $2.4 million. Capital expenditures for the six months ended February 29, 2000 totaled $1.2 million. Capital expenditures for fiscal year 2000 are currently estimated at $4.8 million. 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 The annual meeting of the shareholders which was held on December 7, 1999. At the meeting the Cooperative held election of directors. Elected to three year terms by voice vote and unanimous consent were the following directors: Mike Hasbargen, district four; Jack Lacey, district five and Paul Summer, district seven. In addition, the following directors (including current expiration of term) continued on following the Cooperative's annual meeting: Jerry Meyer, district one (2000); Russell Mauch, district two (2001); Ed Moen, Jr., district three (2001); John Hought, district six (2000); Doug Etten, district eight (2000) and Victor Krabbenhoft, district nine (2001). ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None ================================================================================ SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MINN-DAK FARMERS COOPERATIVE ---------------------------- (Registrant) Date: April 14, 2000 /s/ LARRY D. STEWARD -------------------- -------------------- Larry D. Steward President and Chief Executive Officer Date: April 14, 2000 /s/ STEVEN M. CASPERS -------------------- --------------------- Steven M. Caspers Executive Vice President, and Chief Financial Officer