UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
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Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE PERIOD ENDED FEBRUARY 28, 1999
COMMISSION FILE NUMBER: 33-83868
AMERICAN CRYSTAL SUGAR COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 84-0004720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 NORTH THIRD STREET
MOORHEAD, MINNESOTA 56560
(Address of principal executive offices)
TELEPHONE NUMBER (218) 236-4400
(Registrant's telephone number, including area code)
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
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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 6, 1999
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$10 PAR VALUE 2,872
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998
This report contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, among others, those
statements including the words "expect," "anticipate," "believe," "may" and
similar expressions. American Crystal's actual results could differ materially
from those indicated. Important factors that could cause or contribute to such
differences include, without limitation, market factors, weather and general
economic conditions, farm and trade policy, available quantity and quality of
sugarbeets, and the ability of American Crystal and third party suppliers and
customers to successfully remediate year 2000 issues.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998
Revenue for the six months ended February 28, 1999, was $376.0 million, an
increase of $42.4 million from 1998. Revenue from total sugar sales increased
11.1 percent reflecting a 12.1 percent increase in hundredweights sold partially
offset by a .9 percent decrease in the average selling price per hundredweight.
Revenue from pulp sales increased 11.6 percent due to a 60.6 percent increase in
the volume of pulp sold partially offset by a 30.5 percent decrease in the
average selling price per ton. Revenue from molasses sales increased 12.0
percent due to a 52.0 percent increase in the volume of molasses sold partially
offset by a 26.3 percent decrease in the average selling price per ton. Revenue
from the sales of Concentrated Separated By-Product (CSB), a by-product of the
molasses desugarization process, decreased 26.7 percent due to an 22.5 percent
decrease in the volume of CSB sold and a 5.4 percent decrease in the average
selling price per ton.
Cost of product sold, exclusive of payments for sugarbeets, increased $2.5
million. Direct processing costs for sugar and pulp increased 6.0 percent
primarily due to the harvesting and processing of a larger crop. Fixed and
committed expenses increased 2.0 percent reflecting higher maintenance costs.
Changes in product inventory levels between 1999 and 1998, impacted the cost of
product sold favorably by $.2 million. The cost associated with sugar purchased
to meet customer needs was down $.9 million due to the supply of our inventory.
Selling expenses increased $11.8 million due primarily to the increases in the
volume of products sold. General and Administrative expenses increased $2.6
million due to an insurance claim received last year which reduced expenses in
1998.
The increase in accrued continuing costs was due primarily to changes in sugar
sales and production, and differences in the timing of incurring processing
costs.
Interest expense increased primarily due to higher average borrowing levels for
short and long-term debt this year.
Non-member activities resulted in a gain of $3.3 million for the six months
ended February 28, 1999 as compared to the loss of $6.2 million for the same
period last year. This gain is related to the sale of beet seed assets to
Betaseed Inc., a wholly owned subsidiary of Kleinwanzlebener Saatzucht, Ag.
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COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998
Revenue for the three months ended February 28, 1999, was $180.3 million, an
increase of $25.9 million from 1998. Revenue from total sugar sales increased
14.0 percent reflecting a 12.9 percent increase in hundredweights sold and a 1.0
percent increase in the average selling price per hundredweight. Revenue from
pulp sales decreased 2.2 percent due to a 31.3 percent decrease in the average
selling price per ton partially offset by a 42.4 percent increase in volume of
pulp sold. Revenue from molasses sales increased 10.9 percent due to a 60.1
percent increase in the volume of molasses sold partially offset by a 30.7
percent decrease in the average selling price per ton. Revenue from the sales
of Concentrated Separated By-Product (CSB), a by-product of the molasses
desugarization process, decreased 38.7 percent due to a 51.7 percent decrease in
sales volume partially offset by a 27.0 percent increase in average selling
price per ton.
Cost of product sold, exclusive of payments for sugarbeets, increased $15.2
million. Direct processing costs for sugar and pulp increased 8.6 percent
primarily due to more tons sliced for this period. Fixed and committed expenses
decreased 9.2 percent this year due to lower maintenance costs. Changes in
product inventory levels between 1999 and 1998, impacted the cost of product
sold unfavorably by $11.9 million. The cost associated with sugar purchased to
meet customer needs was down $1.3 million due to the supply of our inventory.
Marketing expenses increased $6.9 million due to increases in volume this
quarter. General and Administrative expenses were $2.9 million higher in 1999
due to reduced expense from an insurance claim in 1998.
The decrease in accrued continuing costs was due primarily to changes in sugar
sales and production, differences in the timing of incurring processing costs.
Interest expense increased primarily due to higher average borrowing levels for
short and long term debt this year.
Non-member activities resulted in a loss of $.7 million for the three months
ended February 28, 1999 as compared to the loss of $.4 million for the same
period last year.
Net payments to/due members for sugarbeets decreased by $14.4 million from
$139.0 million for the second quarter of 1998, to $124.6 million for the same
period in 1999. This decrease was due to a lower projected per ton beet payment
this year partially offset by more tons harvested.
LIQUIDITY AND CAPITAL RESOURCES
Because American Crystal 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 their sugarbeet crops to American
Crystal and are net of unit retains allocated to them. Unit retains remain
available to meet American Crystal'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.
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However, because sugar is sold throughout the year (while sugarbeets are
processed primarily in the fall and winter) and because substantial amounts of
equipment are required for its operations, American Crystal has utilized
substantial outside financing on both a seasonal and long-term basis to fund
such operations. The majority of such financing has been provided by the St.
Paul Bank for Cooperatives ("Bank"). American Crystal has a short-term line of
credit with the Bank in 1999 of $280 million.
The various loan agreements between the Bank and American Crystal obligate
American Crystal to maintain or achieve certain amounts of working capital and
certain financial ratios and impose restrictions on American Crystal. As of
February 28, 1999, American Crystal was in compliance with its loan agreements.
The primary factor for the changes in American Crystal's cash position for the
six months ended February 28, 1999 was due to the 1998/1999 sugarbeet processing
campaign. The cash used in operations of $112.6 million and investing
activities of $31.4 million, was funded through the cash provided by financing
activities. The net cash provided by financing activities was primarily
comprised of the net proceeds from short-term debt of $108.7 million, proceeds
from long-term debt of $57.0 million and proceeds from the sale of stock of $6.5
million, partially offset by the payment of long-term debt of $17.9 million and
the payment of the unit retains of $10.2 million.
Working capital has increased $22.5 million from $30.3 million at the beginning
of the year to $52.8 million as of February 28, 1999 primarily due to increased
inventories partially offset by higher short term debt and higher amounts due
growers.
Capital expenditures for the six months ended February 28, 1999 were $26.6
million. These capital expenditures are a continuation of American Crystal's
strategy of expanding capacity and improving operating efficiencies.
American Crystal anticipates that the funds necessary for the Bank's working
capital requirements and future capital expenditures will be derived from
depreciation, unit retains and long-term borrowing.
YEAR 2000 COMPUTER ISSUES
American Crystal has made extensive efforts to become year 2000 compliant. In
February, 1996, a new computer software package (SAP) was installed which made
most of the company-wide computer systems and its hardware compliant for the
year 2000. This includes software for the financial applications such as
accounts payable, accounts receivable and general ledger as well as costing,
project accounting, sales and distribution, plant maintenance, and production
planning. The payroll and human resources software has also been upgraded to be
year 2000 compliant and running on hardware that is also year 2000 compliant.
Work has also been completed at the factories to ensure the systems and controls
used in the day-to-day production of sugar will not be adversely effected by
year 2000 problems.
A Year 2000 Assessment Team has been formed with representation from various
locations and departments, information services functions as well as two of
American Crystal's associated companies, United Sugars Corporation and Midwest
Agri-Commodities Company. This committee is in the process of assessing what
additional systems the Company uses and if there are any year 2000 compliance
problems. The systems that are determined to be non-compliant will then be
examined, risk assessed and action will be taken as deemed appropriate and
necessary.
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Year 2000 compliance may also adversely affect the operations and financial
performance of the Company indirectly by causing complications of, or otherwise
affecting, the operations of any one or more of the Company's suppliers and
customers. The Company has begun contacting its significant
suppliers and customers as part of its year 2000 compliance plan. The Company's
goal is to identify any potential year 2000 compliance issues with the
enterprises with whom the Company does business. Although the results of this
effort indicate that many of the Company's customers and suppliers will be year
2000 compliant, the Company is currently unable to predict the magnitude of the
operational and financial impact on the Company of year 2000 compliance issues
with the Company's suppliers and customers. In the ordinary course of business,
the Company keeps a supply of maintenance parts and supplies and stockpiles of
coal, coke and limerock.
The Company expects to incur (and expense) up to $60,000 during the fiscal year
which began on September 1, 1998 to resolve the remaining year 2000 compliance
issues. The Company also expects to incur up to $148,000 during the current
fiscal year for new software and hardware; those amounts will be capitalized.
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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.
AMERICAN CRYSTAL SUGAR COMPANY
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(REGISTRANT)
Date: APRIL 21, 1999 /s/ SAMUEL S.M. WAI
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SAMUEL S.M. WAI
CORPORATE CONTROLLER
(DULY AUTHORIZED OFFICER AND
PRINCIPAL FINANCIAL OFFICER)
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