FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X]Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended March 31, 1996 or
[ ]Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-8680
HIGH PLAINS CORPORATION
(Exact name of registrant as specified in its charter)
Kansas #48-0901658
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 W. Douglas 67202
Suite #820 (Zip Code)
Wichita, Kansas
(Address of principal
executive offices)
(316)269-4310
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
YES NO
Common Stock, Par Value $.10 per share,
Outstanding at March 31, 1996 - 15,783,736
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets 3 - 4
Statements of Operations 5
Statements of Stockholders' Equity 6
Statements of Cash Flows 7
Selected Notes to Financial Statements 8
Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 9 - 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 5. Other Information 12 - 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Balance Sheets
(Unaudited)
March 31, 1996 and June 30, 1995
<CAPTION>
March 31, June 30,
Assets 1996 1995
(Unaudited) ** ----------- -----------
<S> <C> <C>
Current Assets:
Cash $ 222,027 $ 600,381
Trade accounts receivable (less
allowance of $100,000 and $110,000
respectively) 6,346,970 3,948,761
Inventories 3,175,588 2,645,277
Current portion of long-term
notes receivable 103,996 96,691
Prepaid expenses 397,451 384,859
----------- -----------
Total current assets 10,246,032 7,675,969
----------- -----------
Property, plant and equipment, at cost:
Land and land improvements 147,086 142,283
Ethanol plants 76,120,642 72,387,277
Other facilities and equipment 353,267 300,210
Office equipment 234,922 231,284
Leasehold improvements 48,002 48,002
----------- -----------
76,903,919 73,109,056
Less accumulated depreciation 16,999,288 14,806,417
----------- -----------
Net property, plant and equipment 59,904,631 58,302,639
----------- -----------
Other assets:
Property and equipment held for resale 620,993 798,763
Deferred loan costs (less accumulated
amortization of $139,947 and $65,857
respectively) 337,520 411,610
Long-term notes receivable 186,775 265,711
Other 57,360 62,609
----------- -----------
Total other assets 1,202,648 1,538,693
----------- -----------
$71,353,311 $67,517,301
=========== ===========
<FN>
**From audited financial statements.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Balance Sheets, Continued
(Unaudited)
March 31, 1996 and June 30, 1995
<CAPTION>
March 31, June 30,
Liabilities and Stockholders' Equity 1996 1995
(Unaudited) ** ----------- -----------
<S> <C> <C>
Current liabilities:
Current maturities of short-term debt $ 2,000,000 $ -0-
Current maturities of long-term debt 3,571,898 3,876,972
Accounts payable 3,680,128 3,796,048
Accrued interest 185,836 185,163
Accrued payroll and property taxes 611,254 356,108
----------- -----------
Total current liabilities 10,049,116 8,214,291
----------- -----------
Long-term debt, excluding current
maturities 16,373,700 19,052,272
Other long-term liabilities: 147,758 -0-
Stockholders' equity:
Common stock, $.10 par value, authorized
50,000,000 shares; issued 16,175,289 shares
and 15,470,947 shares at March 31, 1996, and
June 30, 1995, respectively, of which
391,553 and 289,770 shares were held
as treasury stock at March 31, 1996, and
June 30, 1995, respectively 1,617,529 1,547,095
Additional paid-in capital 36,600,097 34,738,760
Retained earnings 7,439,977 4,209,260
----------- -----------
45,657,603 40,495,115
Less:
Deferred compensation (137,206) -0-
Treasury stock - at cost (737,660) (244,377)
----------- -----------
Total stockholders' equity 44,782,737 40,250,738
----------- -----------
$71,353,311 $67,517,301
=========== ===========
<FN>
** From audited financial statements.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Operations
(Unaudited)
Three Months Ended March 31, 1996 and 1995
and Nine Months Ended March 31, 1996 and 1995
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net Sales $22,398,551 17,710,570 $66,055,183 34,810,011
Cost of sales 20,787,081 13,941,450 60,278,787 27,219,878
----------- ---------- ----------- ----------
Gross profit (loss) 1,611,470 3,769,120 5,776,396 7,590,133
----------- ---------- ----------- ----------
Selling, general and
administrative expenses 407,641 418,455 1,122,922 1,076,755
----------- ---------- ----------- ----------
Operating income 1,203,829 3,350,665 4,653,474 6,513,378
----------- ---------- ----------- ----------
Other income (deductions):
Interest income-and other 13,898 14,789 41,570 33,765
Interest expense (549,267) (592,847) (1,713,498) (592,927)
Gain on sale of
equipment and property 250,000 18,900 250,150 92,492
Other miscellaneous
income 32,500 221,746 45,882 223,122
----------- ---------- ----------- ----------
(252,869) (337,412) (1,375,896) (243,548)
----------- ---------- ----------- ----------
Net earnings
before income taxes 950,960 3,013,253 3,277,578 6,269,830
Income tax expense 601 232,542 46,861 305,787
----------- ---------- ----------- ----------
Net earnings $ 950,359 2,780,711 $ 3,230,717 5,964,043
=========== ========== =========== ==========
Earnings per common and
dilutive common equivalent
share $ .06 .18 $ .21 .38
=========== ========== =========== ==========
Weighted average
shares outstanding 15,816,709 15,869,137 15,683,221 15,763,167
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Stockholders' Equity
(Unaudited)
Nine Months Ended March 31, 1996
<CAPTION>
Common Stock
Additional
Number Amount Paid-in Retained Deferred Treasury Total
of Shares Capital Earnings Compensation Stock
---------- ----------- ------------ ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1995 15,470,947 $ 1,547,095 $ 34,738,760 $ 4,209,260 $(244,377) $40,250,738
Exercise of
options 525,342 52,534 1,589,717 1,642,251
Net earnings for
the quarter 423,586 423,586
---------- ----------- ------------ ----------- ----------- --------- -----------
Balance,
September 30, 1995 15,996,289 $ 1,599,629 $ 36,328,477 $ 4,632,846 $(244,377) $42,316,575
========== =========== ============ =========== =========== ========= ===========
Exercise of
options 144,000 14,400 158,087 172,487
Common stock
surrender (376,250) (376,250)
Net earnings for
the quarter 1,856,772 1,856,772
---------- ----------- ------------ ----------- ----------- --------- -----------
Balance,
December 31, 1995 16,140,289 $ 1,614,029 $ 36,486,564 $ 6,489,618 $(620,627) $43,969,584
========== =========== ============ =========== =========== ========= ===========
Exercise of
options 35,000 3,500 113,533 117,033
Employee stock
purchase plan
initation (139,572) (139,572)
Common stock
surrender (117,033) (117,033)
Amortization of
deferred
compensation 2,366 2,366
Net earnings for
the quarter 950,359 950,359
---------- ----------- ------------ ----------- ----------- --------- -----------
Balance,
March 31, 1996 16,175,289 $ 1,617,529 $ 36,600,097 $ 7,439,977 $ (137,206) $(737,660) $44,782,737
========== =========== ============ =========== =========== ========= ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Cash Flows
(Unaudited)
Nine Months Ended March 31, 1996 and 1995
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,230,717 $ 5,964,043
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,255,592 1,273,852
Provision for bad debt (10,000) -0-
(Gain) on sale of equipment (250,150)
Payments received on notes receivables 71,631
Changes in operating assets and liabilities:
Trade accounts receivable (2,398,209) (4,737,430)
Inventories (530,311) (2,106,578)
Refundable income taxes -0- 107,825
Prepaid expenses (12,592) 76,218
Accounts payable (115,920) 198,797
Accrued liabilities 255,819 556,871
---------- -----------
Net cash provided by operating activities 2,496,577 1,333,598
---------- -----------
Cash flows from investing activities:
Proceeds from sale of equipment 71,098 171,780
Acquisition of property, plant and equipment (3,788,191) (14,719,972)
(Increase) decrease in other non-current
assets 5,249 (410,529)
---------- -----------
Net cash used in investing activities (3,711,844) (14,958,721)
---------- -----------
Cash flows from financing activities:
Proceeds from short-term debt 3,000,000 1,000,000
Payments on short-term debt (1,000,000) 12,668,328
Payments on long-term debt (2,983,646) (1,488,095)
Proceeds from exercise of stock options 1,814,738 1,408,836
Proceeds from employee stock purchase plan 5,821 -0-
---------- -----------
Net cash provided by financing activities 836,913 13,589,069
---------- -----------
Increase (decrease) in cash and
cash equivalents (378,354) (36,054)
Cash and cash equivalents:
Beginning of period 600,381 131,105
End of period $ 222,027 $ 95,051
========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
HIGH PLAINS CORPORATION
Selected Notes to Financial Statements
(1) BASIS OF PRESENTATION
The accompanying financial statements have been prepared by High
Plains Corporation ("Company") without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and changes in financial position for the
periods presented, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted. The results of
operations for the period ended March 31, 1996 are not necessarily
indicative of the operating results for the entire year.
CHANGE IN ACCOUNTING ESTIMATE
Effective July 1, 1994, the Company revised its estimate of the
useful lives of certain production facilities, machinery and
equipment. Previously, these assets were in one class and
depreciated over 20 years. These assets have now been componentized
and assigned estimated useful lives of 5 to 40 years. These
revisions were made to more properly reflect the true economic lives
of the assets and to better align the Company's depreciable lives
with the predominant practice in the industry. The effect of this
change was to reduce depreciation and thus increase net income by
approximately $165,657 or $.01 per share for the three months ended
March 31, 1996, and $496,971 or $.03 per share for the nine months
ended March 31, 1996.
(2) STOCK OPTIONS
During the quarter ended March 31, 1996, 35,000 options to purchase
shares of common stock were exercised at $3.3438 per share, with
corresponding reloads granted for 35,000 options at $4.375 per share.
In lieu of a cash payment for the options acted above, the Company
accepted 31,738 shares of common stock which were surrendered at a
then fair market value of $3.6875 per share.
<PAGE>
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended March 31, 1996 and 1995
Net Sales and Operating Expenses.
Net sales for the nine months ended March 31, 1996, were 89.8% higher
than net sales for the same period in 1995 due to an increase of
101.4% in ethanol production. During the nine months ended March 31,
1996, 38,978,478 gallons of ethanol were sold at an average price of
$1.19 per gallon compared to 19,583,060 gallons from production sold
during the nine months ended March 31, 1995, at an average price of
$1.36 per gallon. Additionally, distillers grains sales during the
nine months ended March 31, 1996, increased 77.2% compared to the
same period in 1995. Sales of ethanol and distillers grains were
significantly higher for the nine months ended March 31, 1996,
compared to the same period in 1995 due to the production
contribution of the York, Nebraska plant which began operations in
November, 1994.
Cost of sales as a percentage of net sales was 91.3% and 78.2% for
the nine month periods ended March 31, 1996, and 1995, respectively.
The increase in cost of sales as a percent of sales was due primarily
to higher grain costs. The Company's average cost of grain increased
to $3.15 per bushel for the nine months ended March 31, 1996, up from
$2.21 per bushel for the same period in 1995, due to higher cash
grain prices.
Selling, general and administrative expenses for the nine months
ended March 31, 1996, increased slightly compared to the same period
ended March 31, 1995. This increase is a result of an increase in
administrative costs related to operations at the new production
facility at York, Nebraska.
Net Earnings.
Net earnings decreased 45.8% for the nine months ended March 31,
1996, from the same period in 1995. Net earnings decreased from
17.1% to 4.9% of net sales due to the decrease in gross profit in the
1996 period compared to the same period in 1995. Earnings per share
at March 31, 1996, were 44.7% lower than earnings per share for the
same period in 1995 due to the decrease in net earnings.
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net Sales and Operating Expenses and Results of Operations.
Net sales for the three months ended March 31, 1996, increased 26.5%
over the same period in 1995 due primarily to an increase in ethanol
production of 21.3% offset by 11.6% decline in ethanol prices.
During the quarter ended March 31, 1996, 12,224,164 gallons of
ethanol were sold at an average price of $1.22, compared to
10,380,288 gallons sold during the same period in 1995 at an average
price of $1.38 per gallon. The average sale price declined for the
three months ended March 31, 1996, compared to the same period in
1995 as a result of decreases in market prices for ethanol and
increases in freight ranging from $.01 - $.04 per gallon due to
increased shipping distances from the York, Nebraska plant.
For the three months ended March 31, 1996 distillers grain sales
increased 47.1% from the prior period in 1995, primarily due to
increased production.
Cost of sales as a percentage of net sales was 92.8% and 78.7% for
the three month periods ended March 31, 1996, and 1995, respectively.
The increase in cost of sales as a percentage of net sales was due
primarily to the average cost of grain per bushel increasing 52.4% to
$3.14 per bushel for the three months ended March 31, 1996, from
$2.06 per bushel for the same period ended March 31, 1995. Grain
costs were higher as a result of higher cash grain prices.
Selling, general and administrative expenses declined slightly for
the three months ended March 31, 1996, compared to the period ended
March 31, 1995.
Net Earnings.
Net earnings decreased 65.8% for the three months ended March 31,
1996, from the prior period in 1995. Net earnings declined to 4.2%
of net sales compared to 15.7% in the prior period in 1995. The
decrease in net earnings results from an decrease in gross profit for
the 1996 period from 1995. Earnings per share for the period ended
March 31, 1996, decreased from the same period in 1995 due to an
decrease in net earnings.
Liquidity and Capital Resources
The Company's primary sources of funds during the third fiscal
quarter were cash flow from operations, and a temporary advance on a
short-term loan from Bank One, Indianapolis, N.A. for $2,000,000 for
working capital needs. At March 31, 1996, the Company had a working
capital surplus of $196,916 compared to a working capital deficit of
($538,222) at June 30, 1995. Cash flow from operating activities
amounted to $2,496,577 for the first nine months of fiscal 1996
compared to $1,281,110 for the same period in fiscal 1995. The
increase in cash flow from operations in fiscal 1996 was attributable
<PAGE>
to decreases in trade receivables created by sales of inventory from
the new plant.
Capital expenditures in the first nine months of fiscal 1996 amounted
to $3,788,191 compared to $14,719,972 for the same period in fiscal
1995. These expenditures were primarily made on the facility in
York, Nebraska.
The Company, in anticipation of an additional loan payment based on
75% of cash flow and due during the first quarter of fiscal 1996, to
Bank One, Indianapolis, N.A., is currently pursuing several
alternatives to build sufficient cash reserves to meet this
obligation. These alternatives include the segregation of funds from
operations, seeking the exercise of options held by directors and
officers, establishment of an open line-of-credit, or issuance of
debt or equity securities. In the opinion of management adequate
liquidity will be provided by operations or a combination of the
alternatives noted above, for the foreseeable future.
Seasonality
Ethanol prices on product sold in mandated oxygen markets increased
during the months of September through March, due to the Federal
Oxygen Program. With the end of the Federal Oxygen Program for this
wintertime period occurring in March, the Company's ethanol prices
were once again negatively affected, with sales orders declining as
customers worked off current inventories. Wholesale gasoline prices
remained soft for the majority of the quarter but were increasing at
the end of the quarter. However, the Company's ethanol prices were
not materially affected by the movement of spot gasoline prices,
since most of the Company's ethanol production was sold at fixed
prices determined early in the quarter and were not based off of spot
wholesale gasoline prices.
Since the end of the last quarter and due to low stocks, grain prices
have continued their increase, resulting in record feedstock costs.
As a result, current ethanol production nationwide has decreased to
approximately one-half of production capacity. Due to reduced
supplies of ethanol, it is anticipated that ethanol prices will not
be as negatively impacted as seen in prior summer seasons.
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No legal proceedings were instigated during the quarter ended March
31, 1996 which would be considered other than in the ordinary course of the
Company's business.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Subsequent Events.
Subsequent to the end of this fiscal third quarter the company has
sold all of its forward grain contracts. These contracts were
originally acquired to insure that the company would have grain
available for its production process at a fixed price (averaging
about $3.00 per bushel, excluding basis adjustment) which would allow
continued operations through approximately August, 1997.
As grain costs rose above the forward contracted levels, the company
began to consider alternative ethanol markets which might allow
continued profitable operations even at somewhat higher prices.
Management has since been pursuing contracts to produce and sell
industrial grade ethanol, and has done preliminary work on plant
design, cost and specifications which would allow a conversion of
most of the company's production to industrial grade.
In order to finance these anticipated plant improvements, and to take
advantage of the time that the plant would have to be shut down to
complete the improvements, the company sold, in early April, its
grain contracts for June and July deliveries. Approximately three
million dollars was realized on this transaction.
When grain costs continued to soar to record highs, the company
elected to also sell its May delivery grain contracts, raising an
additional $2.3 million in late April. Finally on May 8, due to
<PAGE>
continuing high grain prices and concerns about adequate local corn
supplies, the company made a decision to sell all of its remaining
forward grain contracts, realizing an additional $8.7 million. Both
the Colwich, Kansas and the York, Nebraska plants were idled for the
summer, and plant employees have been temporarily furloughed. The
company is continuing to provide normal health insurance and other
employee benefits until the exact date to resume plant operations is
determined. The company still intends to resume operations in late
summer or early fall, depending on our ability to complete
negotiation of an industrial grade ethanol supply agreement and on
the price of grain at the time.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits 27-1 Financial Data Schedule
b). Reports on Form 8-K. During the quarter for which this report is
filed, one Form 8-K was filed on March 1, 1996, concerning the
agreement between ConAgra, Inc., and the Company for the sale of its
dried distiller's grains.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report be signed on its behalf by the
undersigned thereunto duly authorized.
HIGH PLAINS CORPORATION
Date May 17, 1996 Raymond G. Friend
Executive Vice President
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 222,027
<SECURITIES> 0
<RECEIVABLES> 6,550,966
<ALLOWANCES> 100,000
<INVENTORY> 3,175,588
<CURRENT-ASSETS> 10,246,032
<PP&E> 76,903,919
<DEPRECIATION> 16,999,288
<TOTAL-ASSETS> 71,353,311
<CURRENT-LIABILITIES> 10,049,116
<BONDS> 16,373,700
0
0
<COMMON> 1,617,529
<OTHER-SE> 43,165,208
<TOTAL-LIABILITY-AND-EQUITY> 71,353,311
<SALES> 22,398,551
<TOTAL-REVENUES> 22,398,551
<CGS> 20,787,081
<TOTAL-COSTS> 20,787,081
<OTHER-EXPENSES> 407,641
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 549,267
<INCOME-PRETAX> 950,960
<INCOME-TAX> 601
<INCOME-CONTINUING> 950,359
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 950,359
<EPS-PRIMARY> .06
<EPS-DILUTED> .00
</TABLE>
