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Archive for Wednesday, September 4, 2002

Farmland plant up for sale

September 4, 2002

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Farmland Industries Inc. said Tuesday that its wants to sell its Lawrence fertilizer plant and six others as the agribusiness giant struggles to emerge from bankruptcy.

The sale of the Lawrence plant would end nearly 50 years of Farmland history in Lawrence and signal the departure from a major business for the Kansas City, Mo.-based cooperative, which has been hit hard by the effects of recession on farming and drought in the nation's midsection.

Farmland President and CEO Bob Terry said the company was looking for a way to exit the financially volatile fertilizer business after it produced $42 million in losses before the company filed for Chapter 11 bankruptcy protection in late May. At that time, Terry called the company's fertilizer operations a core part of the business.

In a statement issued late Tuesday afternoon, he said, "Selling or repositioning our fertilizer business will allow us to significantly reduce outstanding debt and reduce or eliminate the cyclical business risk inherent in the fertilizer industry."

Terry said Farmland, the nation's largest farmer-owned cooperative, also would consider repositioning its fertilizer business through a "strategic alliance" if an appropriate buyer could not be found. No timeline was announced for when the company expected a sale or alliance to be completed.

How the moves would affect the Lawrence plant, located on Kansas Highway 10 east of town, was not known. Neither Terry nor other Farmland officials were available for further comment Tuesday afternoon or evening.

The future of the approximately 500-acre Lawrence plant has been in question since Farmland idled the facility in May 2001 and released most of the plant's 150 employees. It kept a maintenance crew of 14 workers on the payroll.

In Tuesday's statement, company officials said the plants would continue to operate as they have been while a buyer was being sought. The release made no mention that any remaining Lawrence workers would be laid off as a result of the announcement.

In addition to the Lawrence plant, other Farmland fertilizer plants for sale are in Fort Dodge, Iowa; Coffeyville; Dodge City; Pollock, La.; Beatrice, Neb.; and Enid, Okla. Farmland also has 19 fertilizer distribution terminals throughout the nation, including one in North Lawrence.

Farmland said proceeds from the sale would be used to pay down debt, but did not say how much debt could be eliminated.

The fertilizer business had sales of $745 million in fiscal year 2001. When Farmland filed for bankruptcy May 31, it listed assets of $2 billion and liabilities of $1.5 billion for the Farmland businesses involved in the bankruptcy.

Terry said the decision to dump the facilities already had been approved by the cooperative's 21-member board of directors, but it still must be reviewed by the court-appointed committees overseeing Farmland's reorganization.

Terry said the company would continue to pursue its previously announced intentions to sell its petroleum refinery in Coffeyville. Last week, the company also received permission to sell assets valued near $11 million, including a petroleum pipeline in southeast Kansas.

After the company sheds its fertilizer and petroleum businesses, the cooperative would be left with its Farmland Foods division, which markets a variety of beef and pork products. Terry said the new strategy would allow the company to "place a stronger focus on growing and improving" that part of the business.

The Lawrence plant, opened in 1954, is the company's oldest fertilizer facility. It has been closed temporarily several times in recent years, both in response to economic pressures and after explosions and other malfunctions at the aging facility.

It was shut down in 2001 after a continued lull in demand for fertilizer and high natural gas prices made it unprofitable for Farmland to continue production at the facility. The plant was Farmland's only fertilizer plant whose workers had union representation.

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