Kansas City Star | By ERIC PALMER | July 16, 2002
Farmland Industries lost almost $190 million in its third quarter, which ended May 31, the day it filed for Chapter 11 bankruptcy protection.
The cooperative has now racked up losses of $236 million in its three quarters of operations in fiscal 2002. Farmland lost about $90 million in all of fiscal 2001.
The company reported an operating loss of $91 million for the third quarter, compared with a $35.9 million operating gain in the third quarter a year ago. "The numbers are very large, but these numbers are historical," said Robert Terry, Farmland president and chief executive. "That was the quarter before we filed for bankruptcy, and the operating loss is simply reflective of what we have been telling everybody since we hit our liquidity problem."
Farmland, the largest farmer-owned cooperative in North America, listed assets of $2.7 billion and liabilities of $1.9 billion when it filed for bankruptcy, making it the largest bankruptcy of a Kansas City-based company. With about $11.8 billion in sales in fiscal 2001, Farmland is one of Kansas City's few Fortune 500 companies, ranked at 170.
Before the bankruptcy filing, Farmland executives had said the cooperative was facing a cash crisis because its petroleum refinery had to be shut down for five weeks for repairs and because bad weather had resulted in abysmal fertilizer sales. It also had significant debt service after a decade of expansion.
Farmland's quarterly filing reflects those problems.
The company's fertilizer operations had a loss of $86.7 million, compared with a $3.9 million loss a year ago. Terry said that about $55 million of those losses resulted from writing down the value of fertilizer plants in Lawrence, Kan.; Pollock, La.; and Bartow, Fla.
Farmland's petroleum operations had a $55.1 million loss, compared with a $40 million operating gain a year ago.
"Other than the sales price for fertilizer and lack of fertilizer movement, we do not view ourselves as having a revenue problem," Terry said. "Our revenue has been what we would anticipate."
Farmland's meat business showed a loss of about $3.9 million for the quarter, compared with a net loss of $9 million in the third quarter last year. Terry said the "modest" loss was a reflection of meat prices and not a reflection on those operations, which have been growing.
"We are doing better than we have ever done in our meats business, and over time that will be reflected," Terry said.
In addition to the $55 million of losses from writing down the value of its fertilizer plants, the company had $17 million in so-called noncash losses from writing down the value of other operations it has closed or is selling.
The fertilizer plants in Lawrence and Louisiana have been closed. The plant in Florida, which is being sold to agribusiness competitor Cargill Inc., is a joint venture. Farmland expects to sell its share of that plant at a loss, Terry said.
Farmland also wrote off $17 million related to its international grain trading operations. It closed those operations after Farmland last year leased its grain handling operations to Archer Daniels Midland Co. to save money. That agreement essentially left Farmland's Tradigrain operation with nothing to market.
The deal with ADM also was reflected in Farmland's sales, which were $1.6 billion for the quarter, compared with $2.6 billion in the third quarter a year ago.
Because of the bankruptcy filing, Terry said, Farmland also had to write off an additional $50 million in finance charges, some related to loans and some related to the sale of its bonds. It otherwise would have been able to spread those costs over the life of the financing arrangements, he said.
The bankruptcy did not create havoc at any of the company's plants, somewhat to his surprise, Terry said.
"I think it is important to note that the company has achieved a great deal of stability," Terry said. "We have been able to run our plants and not faced any significant obstructions."
The company is working on its bankruptcy reorganization plan, but Terry said he did not know when it would be presented to the bankruptcy court. It will not be complete by the end of the summer, he said.
To reach Eric Palmer, regional business editor, call (816) 234-4335 or send e-mail to [email protected].Kansas City Star:
