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Farmland Industries Inc – ‘8-K’ for 5/20/03

On:  Wednesday, 6/4/03, at 3:09pm ET   ·   For:  5/20/03   ·   Accession #:  34616-3-19   ·   File #:  1-11629

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  As Of                Filer                Filing    For·On·As Docs:Size

 6/04/03  Farmland Industries Inc           8-K:2,7     5/20/03    3:773K

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         8-K 6/04/2003                                       HTML    124K 
 2: EX-2        Ex 2.A Domestic Nitroben Purchase Agreement         HTML    243K 
 3: EX-2        Ex. 2. B Foreign Nitrogen Purchase Agreement        HTML    258K 


8-K   —   8-K 6/04/2003


This is an HTML Document rendered as filed.  [ Alternative Formats ]



  UNITED STATES  

 

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)

 


ITEM 2.     Acquisition or Disposition of Assets

 

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.

 

 

ITEM 7      Financial Statements and Exhibits

 

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
      allowance for doubtful accounts of
       $19,774  at February 28, 2003)

 

$



311,738

 

$

 

-0-   

 

$



311,738

   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

page 3

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

page 4

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

page 7

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

page 8

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

page 9

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.

SIGNATURES

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

page 12

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K’ Filing    Date    Other Filings
Filed on:6/4/03
5/31/0310-Q
For Period End:5/20/03
4/1/03
2/28/0310-Q,  10-Q/A
2/17/03
8/31/0210-K
5/31/0210-Q
2/28/0210-Q
8/31/0110-K
8/31/0010-K
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