Swiss Valley Farms Audit Report
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Swiss Valley Farms, Co.. P.O. Box 4493. Davenport, Iowa 52808. 319 391-3341 · Fax 319 391-7479
March 2, 1999
City Clerk
City of Dubuque
Dubuque, IA 52001
Dear Madam:
Enclosed is our audit report for our fiscal year ended September 30, 1998. Also enclosed is the
compliance certificate as required by the loan agreement.
Sincerely,
fj. SSS V V~ALLEYFARM. . S, CO.
(ZJ 1/1 J/
Rodney E~B~ (/ J..-
Vice President Finance
REB:djm
Enclosures
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COMPLIANCE CERfIFICATE
TO: City of Dubuque
United States Trust Co.
Rabobank Nederland
This Compliance Certificate is furnished pursuant to that certain Loan
Agreement (the "Agreement") as amended through the date hereof, dated as of
February 1, 1987 between the City of Dubuque, Iowa and Swiss Valley Farms,
Co., an illinois Non-Stock Cooperative corporation, (the "Company"). Unless
otherwise defmed herein, the terms used in this Compliance certificate have
the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERfIFIES THAT:
1. 1, Rodney E. Behr, am duly authorized to act, and I am currently acting as
Vice President Finance of Swiss Valley Farms, Co.
2. I have made review of the activities of the Company during the preceding
fiscal year for the purpose of determining whether or not the Company has
complied with all of the terms, provisions and conditions of the Agreement and
to the best of my knowledge the Company has kept, observed, performed and
fulfilled each and every covenant, provision and condition of the Agreement on
its part to be performed and is not in default in the performance or observance
of any of the terms, covenants, provisions or conditions thereof.
IN WITNESS ~REOF, I have executed and delivered this Compliance
Certificate this '2 " dayof MC<H_; ,19ll.
C1-~~v Z. (i2Z /
REB:njk
compli.2
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Deloitte &
Touche LLP
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Deloitte Touche
Tohmatsu
International
Swiss Valley Farms, Co.
Financial Statements for the
Years Ended September 3D, 1998 and 1997 and
Independent Auditors' Report
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SWISS VALLEY FARMS, CO.
TABLE OF CONTENTS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
Page
Independent Auditors' Report
Balance Sheets
2
3
4
5
6
Statements of Operations
Statements of Members' Equity
Statements of Cash Flows
Notes to Financial Statements
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Deloitte &
Touche
o
Oeloitte & Touche LLP
Northwest Bank Building
101 West Second Street
Davenport, Iowa 52801-1813
Telephone: (319) 322-4415
Facsimile: (319) 322-2002
Facsimile: (319) 322-1103 (Tax Dept.)
INDEPENDENT AUDITORS' REPORT
To the Members and Board of Directors of
Swiss Valley Farms, Co.:
We have audited the accompanying balance sheets of Swiss Valley Farms, Co. as of September 30, 1998
and 1997, and the related statements of operations, members' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinIon.
In our opinion, such financial statements present fairly, in all material respects, the financial position of
Swiss Valley Farms, Co. at September 30, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting principles.
~ t"-:- ~ L"./.., fJ
December 29, 1998
Deloitte Touche
Tohmatsu
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SWISS VALLEY FARMS, CO.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30,1998 AND 1997
OPERATING EXPENSES:
Distribution and marketing
General and administrative
Total
1998 1997
$ 340,095,605 $312,418,055
317,612,774 291,030,301
22,482,831 21,387,754
10,865,584 11,054,611
7,634,557 6,399,682
18,500,141 17,454,293
3,982,690 3,933,461
1,239,644 1,215,054
296,821 253,551
(1,249,835) (1,283,189)
1,175,048
79,868 121,593
1,541,546 307,009
5,524,236 4,240,470
450,000 500,000
$ 5,074,236 $ 3,740,470
NET SALES
COST OF SALES
GROSS MARGIN
SAVINGS FROM OPERA nONS
OTHER INCOME (EXPENSE):
Patronage refunds
Interest income
Interest expense
Gain on sale of fixed assets (Note 9)
Other, net
Total
SAVINGS BEFORE PROVISION FOR
INCOME TAXES
PROVISION FOR INCOME TAXES (Note 8)
NET SAVINGS
NET SAVINGS ALLOCATED TO:
Patronage refunds to members:
Payable in cash
Allocated equities
Retained earnings
Total
$ 1,375,000
2,724,000
975,236
$ 5,074,236
$ 1,090,000
1,772,000
878,470
$ 3,740,470
See notes to financial statements.
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SWISS VALLEY FARMS, CO.
STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED SEPTEMBER 30,1998 AND 1997
REVOLVING ALLOCATED RETAINED
MEMBERSHIPS FUND EQUITIES EARNINGS
BALANCE AT OCTOBER 1, 1996 $382,551 $ 8,188,901 $ 10,475,691 $ 9,051,962
NEW MEMBERSHIPS 29,787
NET SAVINGS AS ALLOCATED 1,772,000 878,470
RETAINED FROM PURCHASE OF MILK 1,005,236
REDEMPTIONS (5,283) (1,023,596) (1,331,858)
BALANCE AT SEPTEMBER 30, 1997 407,055 8,170,541 10,915,833 9,930,432
NEW MEMBERSHIPS 21,834 1,910,367
NET SAVINGS AS ALLOCATED 2,724,000 975,236
RETAINED FROM PURCHASE OF MILK 1,080,200
REDEMPTIONS (3,747) (1,331,029) (1,315,494)
BALANCE AT SEPTEMBER 30, 1998 $425,142 $ 9,830,079 $ 12,324,339 $ 10,905,668
See notes to fmancial statements.
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I SWISS VALLEY FARMS, CO.
I STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,1998 AND 1997
1998 1997
I CASH FLOWS FROM OPERATING ACTIVITIES:
Net savings $ 5,074,236 $ 3,740,470
Adjustments to reconcile net savings to
I net cash flows from operating activities:
Depreciation and amortization 4,653,798 5,126,923
Noncash patronage refunds received (807,126) (792,983)
I Deferred income taxes (215,000) 40,000
Gain on sale of fixed assets (1,175,048) (8,140)
Provision for doubtful receivables 476,685 (133,127)
Equity in loss of joint venture 53,917
I Changes in assets and liabilities:
Notes and accounts receivable (7,006,206) 74,010
Inventories (2,869,132) (2,250)
I Prepaid expenses and other current assets (1,175,487) 711,479
Accounts payable 8,202,926 (4,661,548)
Accrued and other liabilities 1,581,179 107,461
I Net cash flows from operating activities 6,794,742 4,202,295
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchased (7,803,275) (5,396,207)
I Acquisition of businesses (4,765,000)
Redemptions and other reductions of
investments in other cooperatives 412,320 343,350
I Proceeds from sale of fixed assets 2,406,907 794,536
Net cash flows from investing activities (9,749,048) (4,258,321)
I CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 6,616,563 2,850,000
Additions to members' equity for milk
I retentions and membership fees 3,012,401 1,035,023
Redemption of members' equity (2,650,270) (2,360,737)
Patronage refunds paid to members (1,090,000) (710,000)
Payments on debt (1,900,000) (2,930,000)
I Net cash flows from financing activities 3,988,694 (2,115,714)
INCREASE (DECREASE) IN CASH 1,034,388 (2,171,740)
I CASH AT BEGINNING OF YEAR 1,252,358 3,424,098
CASH AT END OF YEAR $ 2,286,746 $ 1,252,358
I See notes to financial statements.
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SWISS VALLEY FARMS, CO.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Membership - Swiss Valley Farms, Co. (the "Company") is a member-
owned cooperative organized under the provisions of "The Agricultural Cooperative Act" of the
State of Illinois. The Company is engaged in the marketing, processing, and distribution of dairy
foods and other agricultural products, and also supplies agricultural inputs and services to members.
Any person who is engaged in the business of producing milk ("milk member") or other
agricultural products ("ag-service member") in the area in which the Company is engaged in
business may apply for membership. Net savings from operations of each division (milk and ag-
service) is subject to allocation by the Board of Directors to the respective members through
patronage refunds based upon each member's pro rata volume of business done with the Company
during the year.
Milk members are paid for raw milk delivered at the monthly pay price for milk established by the
Company based on market conditions. Equity requirements, as determined by the Board of
Directors, are retained from amounts due milk members for raw milk delivered and credited to the
revolving fund.
Use of Estimates - The preparation of the Company's financial statements in conformity with
generally accepted accounting principles necessarily requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
Inventories - Inventories are stated at the lower of first-in, first-out cost or market. Raw milk
purchased by the Company is assigned a cost based on the applicable monthly pay price for milk.
Property, Plant and Equipment - Property, plant and equipment are stated at cost. The Company
uses the straight-line method in computing depreciation and amortization over the estimated service
lives ofthe property. Leasehold improvements are amortized over the shorter of the life of the
related asset or the life ofthe lease.
Interest cost that is associated with fixed assets during the time period necessary to prepare such
assets for their intended use is capitalized and amortized over their estimated service lives. No
interest cost was capitalized for the years ended September 30, 1998 and 1997.
Intangible Assets - Intangible assets, consisting primarily of noncompete agreements, a supply
agreement and goodwill associated with business acquisitions, are amortized on a straight-line basis
over the lives of the agreements or estimated lives for goodwill.
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Financial Instruments - The Company enters into commodity futures contracts as considered
appropriate to reduce the risk of future price fluctuations in connection with the purchase of grain
and fluid milk. These forward contracts are accounted for as hedges and, accordingly, gains and
losses are deferred and recognized in cost of sales when the related products are sold. Commodity
futures contracts are recorded at fair value based on quotes obtained from brokers.
Fair Value of Financial Instruments - All financial instruments as of September 30, 1998 and
1997 are carried at amounts that approximate estimated fair value, except for investment in other
cooperatives, for which it is not practicable to provide fair value information. The fair values of
notes payable to bank and long-term debt approximate their carrying values due to their short-term
nature or floating interest rates.
Income Taxes - The Company qualifies as a nonexempt cooperative organization for income tax
purposes. The Company is allowed a deduction in computing taxable income for the amount of
qualified patronage refunds allocated to members.
Certain items of income and expense are recognized differently for financial reporting purposes
than for tax purposes. The deferred income tax provision is based on an asset and liability approach
and represents the change in deferred income tax accounts during the year.
Reclassifications - Certain 1997 amounts have been reclassified to conform with 1998
presentations.
2.
NOTES AND ACCOUNTS RECEIVABLE
Notes and accounts receivable by major classification at September 30, 1998 and 1997 are
summarized as follows:
1998
1997
Trade receivables
Other receivables
Notes receivable
Total receivables
Less allowance for doubtful accounts
Notes and accounts receivable - net
$26,311,613
686,557
2,419,940
29,418,110
(1,114,869)
$28,303,241
$19,927,516
779,439
2,014,296
22,721,251
(628,072)
$22,093,179
3.
INVENTORIES
Inventories by major classification at September 30, 1998 and 1997 are summarized as follows:
1998
1997
Dairy products
Agricultural products
Packaging and ingredients
Total
$13,976,543
3,405,569
1,244,922
$18,627,034
$11,676,061
2,697,057
1,384,784
$15,757,902
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4. INVESTMENTS IN OTHER COOPERATIVES
Changes in investments in other cooperatives for the years ended September 30, 1998 and 1997 are
summarized as follows:
Land 0' CoBank, Foremost
Lakes, Inc. ACB Cenex Fanns U.S.A Others Total
Balance at September 30, 1996 $2,363,586 $ 1,228,233 $ 696,592 $314,385 $ 847,334 $5,450,130
Noncash patronage refunds 340,064 106,572 175,298 171,049 792,983
Redemptions and other reductions (248,550) (36,166) (19,215) (39,419) (343,350)
Balance at September 30, 1997 2,455,100 1,334,805 835,724 295,170 978,964 5,899,763
Noncash patronage refunds 336,363 94,425 219,610 156,728 807,126
Redemptions and other reductions (291,317) (47,849) (25,914) (47,240) (412,320)
Balance at September 30, 1998 $2,500,146 $1,429,230 $ 1,007,485 $269,256 $1,088,452 $6,294,569
5.
INVESTMENT IN JOINT VENTURE
On July 1, 1998, the Company and Cenex Harvest States Cooperatives ("CHS") entered into a joint
venture called Cenex - Swiss Valley Energy, LLC in the form of a limited liability company. The
Company transferred equipment and nonmonetary assets of$I,349,283 for a financial interest of
39.57% in the joint venture. The Company's investment and net loss from the joint venture for
fiscal 1998 was recorded using the equity method of accounting.
The following (unaudited) information summarizes the results of the joint venture since inception
through September 30, 1998:
Operations:
Net sales
Cost of sales
Gross margin
Distribution expense
General, administrative and other
Net loss
$1,538,285
1,103,011
435,274
296,887
287,452
(149,065)
Balance sheet:
Current assets
Total assets
Current liabilities
Equity
$1,122,480
5,996,366
1,293,252
4,703,114
The joint venture recorded the assets contributed by the partners at fair value. The Company's
share of the excess of fair value over historical cost will be recognized on a straight-line basis over
the estimated economic useful life of the assets invested often years.
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6.
NOTES PAYABLE TO BANK
At September 30, 1997, the Company had a seasonal borrowing agreement with CoBank, ACB
totaling $25,000,000, of which $11,790,000 was in use. See Note 7 for a description ofthe
collateral and restrictive covenants applicable to the seasonal borrowing agreement with CoBank,
ACB.
Average and maximum balances and rates on aggregate short-term borrowings outstanding during
1998 and 1997 are as follows:
1998
1997
Maximum month-end balance
Average month-end balance
Weighted average interest rate for the year
Interest rate at September 30
$9,832,938
$ 8,682,917
6.6 %
6.53 %
$ 10,930,000
$ 7,613,333
6.6 %
6.8 %
7.
LONG-TERM DEBT
Long-term debt at September 30, 1998 and 1997 is summarized as follows:
1998
1997
Noncompete agreement (noninterest bearing note due in
installments to 2008)
CoBank, ACB term loan, variable interest rate
(6.6% and 7.0% at September 30, 1998 and 1997,
respectively), due in installments to 2003
Industrial development revenue bonds - City of Dubuque,
Iowa, variable interest rate (6.2% and 6.3%, including
amortization of issuance costs, at September 30, 1998
and 1997, respectively), due on earlier of demand
or in installments to 2001
Purchase agreement, fixed interest rate of 7%,
due on demand
Total
Current portion of long-term debt
Total long-term debt
$ 500,000
13,335,000
$7,835,000
1,700,000
16,563
15,551,563
(1,966,563)
$13,585,000
2,100,000
9,935,000
(1,900,000)
$ 8,035,000
The Company's indebtedness to CoBank, ACB at September 30, 1998 is due in monthly principal
installments of$125,000. Demand for payment may be made at an earlier date by CoBank, ACB if
the bank reasonably determines that a material adverse change to the Company has occurred.
The industrial development revenue bonds were issued by the City of Dubuque, Iowa and are due
on the earlier of demand or in installments, under mandatory redemption requirements of $400,000
to $500,000 annually to 2000. The interest rate on the bonds is a variable interest rate (15%
maximum) which is determined by the remarketing agent for the bonds on a weekly basis based on
market rates for similar issues. The Company has the option, subject to approval by the letter of
credit bank referred to below, of converting to a fixed rate of interest at any time on a one-time
basis. The bonds have been classified as long-term since it is the Company's intention to refinance
on a long-term basis, with the irrevocable letter of credit agreement referred to below, any bonds
redeemed and not remarketed prior to their mandatory redemption dates.
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The Company, in connection with the industrial development revenue bond issuance, entered into a
long-term irrevocable letter of credit agreement with another bank. The amount available under the
agreement at September 30, 1998 was $1,731,438. The letter of credit amount available is reduced
by $300,000 to $700,000 annually and has an expiration date of March 3, 2002. The agreement
provides for a fee on the average daily unused portion of the available amount of 1.25% per annum.
Any advances under the agreement will bear interest at rates set by the bank for the interest period
selected by the Company and will be due at the expiration date of the agreement except that the
total amount of advances outstanding plus the principal amount of the industrial development bonds
outstanding cannot exceed the available credit limit. At September 30, 1998 and 1997, there were
no amounts outstanding under the agreement.
The various borrowing agreements contain restrictive covenants which, among other things,
provide that the Company will not: (1) reduce the 8 cents per hundredweight revolving fund
deduction from members on milk purchased, (2) enter into significant acquisitions without prior
consent of the lenders, (3) obtain loans from or incur liabilities to other lenders or place additional
mortgages on its properties without prior consent of the lenders, (4) permit the ratio of long-term
liabilities to equity to exceed. 7 to 1.0, or (5) permit the current ratio to fall below 1.25 to 1 at fiscal
year end. The agreements also require the Company to invest in stock of CoBank, ACB in amounts
determined by the bank. The Company's investment in stock and allocated surplus of the bank,
which is also pledged to the bank as collateral for these borrowings, is included in investments in
other cooperatives in the accompanying consolidated balance sheets.
Substantially all of the Company's assets are pledged as collateral for any borrowings associated
with CoBank, ACB, the industrial development revenue bonds, and the related letter of credit.
Such parties have entered into an intercreditor agreement which specifies the collateral rights of
each party. In addition, the various other loans, notes, purchase agreements and contracts are
generally collateralized by the specific assets acquired in connection with the debt.
The maturities of the Company's long-term debt at September 30, 1998 are as follows:
1999
2000
2001
2002
2003
Thereafter
Total
$ 1,966,563
2,250,000
2,150,000
1,550,000
1,550,000
6,085,000
$15,551,563
8.
INCOME TAXES
Current and deferred components of the provision (credit) for income taxes for the years ended
September 30, 1998 and 1997 are summarized as follows:
1998 1997
Current provision
Deferred provision (credit)
Provision for income taxes
$ 665,000
(215,000)
$ 450,000
$ 460,000
40,000
$ 500,000
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The provision for income taxes for the years ended September 30, 1998 and 1997 are less than the
amounts computed by applying the statutory federal income tax rate to savings before provision for
income taxes due to the following items:
1998
Computed expected tax provision
Patronage refunds allocated to members
State income taxes
Other, net
Provision for income taxes
$1,933,000
(1,435,000)
66,000
(114,000)
$ 450,000
The components of the net deferred income tax asset as of September 30, 1998 and 1997 are
summarized as follows:
1997
$1,484,000
(1,002,000)
45,000
(27,000)
$ 500,000
1998 1997
Pension
Depreciation
Allowance for doubtful accounts
Alternative minimum tax credit carryforward
Vacation accrual
Reserve for closed plants
Other accruals
Total
$ (190,000)
(780,000)
440,000
270,000
105,000
505,093
$ 350,093
$ (77,000)
(673,000)
253,000
83,000
256,000
114,000
150,685
$ 106,685
The current and long-term portion of the net deferred income tax asset at September 30, 1998 and
1997 are summarized as follows:
1998 1997
Current asset
Long-term liability
Net deferred income tax asset
$1,015,217
(665,124)
$ 350,093
9. SALE OF PLANT
$583,217
(476,532)
$ 106,685
On November I, 1997, the Company sold it's Maquoketa Plant to Farmland Industries, Inc. for
$1,400,000. The Company recorded a gain of$I,087,276 from the sale of the plant.
10. LEASES
The Company leases various types of equipment under operating leases of which a majority are
cancelable or are month-to-month. Rent expense related to operating leases for the years ended
September 30, 1998 and 1997 was $1,836,406 and $2,123,422, respectively.
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Future minimum lease payments under operating leases as of September 30, 1998 are as follows:
1999
2000
2001
2002
2003
Thereafter
$ 66,587
58,453
52,642
52,642
52,642
61,416
$ 344,382
11. PENSION PLANS
Company Sponsored Defined Benefit Plan
Substantially all nonunion employees are covered by the Company's defined benefit plan. The plan
is contributory and benefits are primarily based on an employee's years of service and average
earnings over the first five of the last six years of participation in the plan. Employees are vested in
the plan after five years of service. The Company's funding policy is to make the minimum
contribution required to be made under the funding requirements of ERISA.
The following table sets forth the funding status of the plan and amounts recognized in the
Company's consolidated balance sheets at September 30, 1998 and 1997:
Actuarial present value of benefit obligations:
Vested benefits
Nonvested benefits
Accumulated benefit obligation
Effect of projected future salary increases
Projected benefit obligation
Plan assets at fair value, primarily
unallocated insurance contracts
Projected benefit obligation greater than plan assets
Unrecognized net loss
Unrecognized net asset at October I, 1987
being recognized over 15 years
Accrued current pension liability
1998 1997
$ (8,878,893) $ (7,566,995)
(323,857) (283,019)
(9,202,750) (7,850,014)
(2,248,592) (1,864,328)
(11,451,342) (9,714,342)
8,729,958 8,020,182
(2,721,384) (1,694,160)
2,775,527 1,835,358
(425,064) (531,331)
$ (370,921) $ (390,133)
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Net pension cost for the years ended September 30, 1998 and 1997 includes the following
components:
1998 1997
Service cost on benefits earned during the period
Interest cost on projected benefit obligation
Actual return on plan assets
Net amortization and deferral
Net pension cost
$ 374,666
691,998
(944,808)
273,320
$395,176
$315,209
645,60 I
(494,814)
( 184,529)
$281,467
Actuarial assumptions used in determining the projected benefit obligation at September 30, 1998
and 1997 include the following:
1998 1997
Discount rate
Long-term rate of return on plan assets
Rate of increase in future compensation levels
6.50 %
8.00 %
4.00 %
7.25 %
8.00 %
4.00 %
Union Sponsored Defined Benefit Plan
Substantially all of the Company's union employees are covered under a union sponsored
multiemployer defined benefit plan. The plan provides for a fixed monthly benefit upon retirement.
The Company recognizes as net pension cost the required contribution for the year under such plan.
Net pension cost for the union sponsored plan for the years ended September 30, 1998 and 1997
was $758,843 and $797,128, respectively.
401(k) Plan
The Company participates in a multi cooperative 401(k) plan in which substantially all regular
nonunion employees who work at least 1,000 hours per year may participate. The exception is the
Dubuque union employees, who are also eligible based on their labor contract. The plan allows non
highly compensated employees to contribute up to 15% of their compensation. The Company did
not make any contributions to the plan through September 30, 1998. Effective October I, 1998 the
plan was amended, which allows the Company to contribute 50% of the employees first 6%
contribution of their compensation.
12. SELF-INSURANCE
The Company has established a self-insurance plan for all full-time nonunion employees' health
and dental insurance coverage. The plan is funded through employer and employee contributions.
Self-insurance is in effect up to an individual stop loss amount of $70,000 and an annual aggregate
stop loss of approximately $1,200,000.
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13. IOWA DEPARTMENT OF AGRICULTURE AND LAND STEWARDSHIP
The following disclosures are in accordance with the Iowa Department of Agriculture and Land
Stewardship regulations applicable to licensed warehouse operators and grain dealers:
There were no differences between grain obligations as listed on the financial statements and
on the monthly grain report for September 30, 1998 and 1997.
There were no collateral warehouse receipts at September 30, 1998 and 1997.
The Company owned no grain which was being stored in unlicensed facilities or which was
transferred to another warehouse at September 30, 1998 and 1997.
Unpaid Company owned grain at September 30, 1998 and 1997 are as follows:
1998 1997
Advance Advance
Bushels Value Payments Bushels Value Payments
Com:
Priced later 845,803 86,120
Deferred contracts 39,512 $ 86,210 24,324 $ 61,131
Minimum price 106,124 $ 154,167 31,979 $ 78,442
Priced not paid 135,128 321,946 22,706 56,040
Basis 40,000 70,735
Total 1,166,567 $ 408,156 $ 224,902 165,129 $ 117,171 $ 78,422
Soybeans:
Priced later 52,507 4,858
Deferred contracts 9,966 $ 61,048 9,582 $ 69,133
Minimum price 3,000 $ 14,422 1,000 $ 7,000
Priced not paid 44,564 244,393 37,226 238,359
Basis 7,000 35,012
Total 117,037 $ 305,441 $ 49,434 52,666 $ 307,492 $ 7,000
Hi Oil Com:
Price later 5,221
Basis 1,000 $ 2,165
6,221 $ 2,165
Total bushels of grain purchased under the Company's Iowa grain dealers license for the years
ended September 30, 1998 and 1997 was 7,998,801 and 8,297,055, respectively.
Grain sales for the years ended September 30, 1998 and 1997 was $28,602,981 and $29,503,159,
respectively.
Non-grain sales for the years ended September 30, 1998 and 1997 was $311,492,624 and
$282,914,896, respectively.
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14. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the years ended September 30, 1998 and 1997 for interest was $1,240,227 and
$1,273,743, and for income taxes was $571,588 and $427,750, respectively.
The Company converted $7,000,000 and $100,000 of short-term borrowings to long-term debt
during 1998 and 1997, respectively.
During 1998, the Company contributed certain assets to a joint venture with Cenex Harvest States
Cooperatives (see Note 5).
15. ACQUISITIONS
Effective October 1, 1997, the Company purchased substantially all assets of Old Wisconsin
Cheese, a division of Carl Buddig and Company, which was engaged in the manufacturing of dairy
products and the distribution of such dairy products at Platteville, Wisconsin. The approximate
costs of the acquisition, including inventory was $2,400,000. Also effective October 1, 1997, the
Company acquired the members of Tri-State Milk Cooperative, West Salem, Wisconsin through the
assumption of all assets, liabilities and revolving fund equities ($1,932,000) and the payment of
certain premiums on milk purchases over the next year. On October 21, 1998, the Company
purchased H. Halford & Sons, Inc. for $2,365,000 plus a noncompete agreement for $50,000 a year
for the next ten years. Halford was in the business of operating a grain elevator and related farm
service business having physical facilities located in Winthrop and Independence, Iowa. The
Company purchased all agreed upon real estate, equipment, grain inventory and customer lists.
Excluded from the purchase were Halford's accounts receivable and accounts payable.
In accordance with APB # 16, the purchase price of the above acquisitions was allocated to acquired
assets and assumed liabilities based upon fair market values.
16. PURCHASE COMMITMENT
In 1997, the Company entered into a ten year commitment to purchase merchantable feeder pigs.
The Company's obligation is measured in twenty week intervals, and the Company is obligated to
purchase nine lots (925 to 1,000 pigs per lot) during each twenty week interval. The Company is
initially obligated to pay a base rate of $29.25 for each pig, plus feed costs.
17. SUBSEQUENT EVENTS
Effective December 16, 1998, the Company entered into two sale lease back agreements with Farm
Credit Leasing Services Corporation totaling $5,213,706. These leases are classified as operating
and their minimum lease terms are 84 months.
* * * * *
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