Milling & Baking News - January 13, 2004 - 18

F I N A N C I A L

R E S U L T S

and negative returns in CHS wheat milling in fiscal 2003," the cooperative said.
"Per capita U.S. flour consumption declined to levels not seen since the 1980s.
Industry-wide emphasis on optimizing
production efficiency and improving
productivity will continue as CHS and
its milling joint venture, Horizon Milling, L.L.C., reposition for improved
results in 2004."
In the financial overview section
of the annual report, CHS observed
that "the final months of fiscal 2003
showed signs of a return to profitability for this business."
While disappointed with results of
CHS Foods in fiscal 2003, the division
"gained significant ground in positioning" for improved results going
forward, CHS said. "Reorganization
of the Mexican foods operations was
required to streamline and standardize processes demanded by key customers of tortillas, tortilla chips and
other Mexican foods products," the
annual report said. "The first in CHS
to fully incorporate JD Edwards process controls, the group implemented
detailed tracking mechanisms that allow linking a retail food package to its
origination facility, enhancing customer
service and ensuring impeccable quality control. Uniting the processes used
by all the CHS Foods locations offered
more effective inventory management
and distribution control."
Operational rationalizations were
included in activities during fiscal 2003,
with the discontinuation of operations
at the company's Newton, N.C., facility
in July. "CHS Foods is focused on simplifying our product offerings by reducing complexities, improving compli-

ance with quality control standards and
increase overall product consistency,
maintaining CHS as a quality supplier
of grain-based foods," the cooperative
said. "Food service clients rewarded

our emphasis on improved quality and
cost control from this portion of our
foods business with volume growth in
fiscal 2003.
"Demonstrating the value of being
part of an integrated system, ingredient
supply and food manufacturing were
more completely linked in 2003. The
majority of CHS Foods oil needs are
supplied by Ventura Foods, and CHS
oilseed processing and most flour needs
are provided through its CHS processing
partners."
Ventura Foods, a leading maker and
packer of vegetable oil-based foods, was
a significant contributor of earnings to
CHS in fiscal 2003, "but performance
was below record levels due to economy-driven softness in the food service

Lenders again grant New World Pasta
extension to file financial results
HARRISBURG, PA. - New World Pasta
Co. announced Dec. 31 that a majority
of the lenders under its senior secured
credit facility have approved an extension and amendment to its existing
amended credit agreement that permits
the company to file its annual report for
the fiscal year ended Dec. 31, 2002, by
Feb. 10, 2004, and to file its 2003 quarterly reports by April 1, 2004.
Previously, New World's amended
credit agreement required the company
to file these reports by Dec. 31, 2003 (see
Milling & Baking News of Aug. 19, Page
14).
The extension and amendment are
the latest in a string of similar actions
dating to November 2002, when the
company discovered it had overstated
18 / Milling & Baking News, January 13, 2004

certain internal financial documents,
primarily relating to inventory balances
and accounts receivable. At that point,
the company told investors they could
not rely on any of its financial statements dating to 2001, and it has not
filed a quarterly financial statement
since.
"We are appreciative of the continued
support we have received from our
bank group," said Wynn Willard, chief
executive officer of New World. "We
have made excellent progress toward
finalizing our financial statements, and
this timetable reflects that. We are also
appreciative of the support we have
received from all of our stakeholders,
including our suppliers and customers,
that allows us to continue our focus on

marketplace," CHS said.
Record results were achieved in fiscal
2003 in the CHS Country Operations
and Services segment. The business had
pre-tax income of $32,845,000, up 36%
from $24,143,000 in fiscal 2002. Sales
were $1,885,825,000, up 28% from
$1,474,553,000.
During the year, the segment acquired Agway sunflower operations,
which CHS said would give the cooperative access to the confectionery
sunflower market. "And unprecedented loan volumes attested to the ability
of CHS to serve as a financial partner,
in addition to providing products and
services," the annual report said. "The
company's own local operations tallied record success through strong
inputs and grain marketing, as well
as repositioning underperforming
assets."
Over-the-counter risk management
products for energy and grain were
introduced during the year and CHS
said improvements were made to the
electronic order entry system.
Pre-tax income for the CHS Agronomy
segment was $13,525,000, up 133% from
$5,782,000 in fiscal 2002.
The division expanded in fiscal 2003
through joint ventures. Agriliance (an
agronomy marketing j.v. owned by
CHS, Land O'Lakes, Inc., and Farmland
Industries) and Alabama Farmers Cooperative formed Agriliance-AFC, L.L.C.
With sales of $140 million, the new business will offer crop protection products,
crop nutrients, seed and agronomy services to Alabama growers. Also during
the year, CHS expanded its ownership
of Agriliance, purchasing the economic
interest of Wilbur-Ellis Co. MBN

improving and building our business
and our brands."
Ed Lyons, senior vice-president
and chief financial officer, added, "We
recognize that there is a great deal of
interest in our company as a result of
the delayed filings of our financial statements, and the issues that our company
has faced throughout the past year or
so. We look forward to addressing these
matters and issues over the next several
months. We appreciate the patience that
our lenders, customers, suppliers and
others have shown over the past year,
and we look forward to continuing our
efforts to work closely with all of our
stakeholders to improve our business
and overcome the obstacles that we
face.
"Going forward, we will endeavor to
provide as much information as we reasonably can, when we can." MBN
bakingbusiness.com/world-grain.com

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Milling & Baking News - January 13, 2004

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