SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
For Annual and Transition Reports
Pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required).
For the fiscal year ended June 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from ___________to __________.
Commission File No. 1-8680
HIGH PLAINS CORPORATION
(Exact name of registrant as specified in its charter)
Kansas 48-0901658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 W. Douglas, Suite #820, Wichita, Kansas 67202
(Address and zip code of principal executive offices)
(316) 269-4310
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12 (b) of the Act:
NONE
Securities Registered Pursuant to Section 12 (g) of the Act:
Common Stock, $0.10 par value
(Title of Class)
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 twelve (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 ninety (90) days.
YES X NO
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
As of June 30, 1997, there were 15,985,444 outstanding common
shares of the Registrant. As of June 30, 1997, the aggregate
market value of voting stock of High Plains Corporation held by
nonaffiliates was approximately $63,514,287.
Documents Incorporated by Reference:
Portions of the Registrant's definitive Proxy Statement for the
1997 Annual Meeting of Stockholders (the "Proxy Statement"), which
is anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of the Registrant's
fiscal year end, are incorporated by reference in Part III.
Portions of the Registrant's 1997 Annual Report to Stockholders
for the fiscal year ended June 30, 1997 (the "Annual Report")
which is anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of the Registrant's
fiscal year end, are incorporated by reference in Parts I, II and IV.
<PAGE>
PART I
Item 1 BUSINESS
High Plains Corporation (the "Company") was incorporated under the
laws of the State of Kansas on February 28, 1980. The Company's
principal offices are located at 200 W. Douglas, Suite 820,
Wichita, Kansas 67202 and its telephone number is (316) 269-4310.
(Financial information concerning the Company's operations is
incorporated by reference from Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Management's Discussion and Analysis) and the Financial
Statements and Notes thereto in the Company's Annual Report.)
The Company manufactures and sells ethanol for blending with
gasoline as a motor fuel. The Company believes it is currently
the sixth largest ethanol producer in the United States. Ethanol
increases the oxygen level in gasoline and reduces pollutants,
including carbon monoxide and hydrocarbon particulate emissions.
Industry sources estimate that 1.1 billion gallons of ethanol were
used to oxygenate United States fuel supplies in 1996. In
addition, the Company sells distiller's grain (DDG), the primary
by-product of ethanol production. Selling prices of DDG generally
vary with sorghum and corn prices. The primary markets for the
Company's DDG continues to be manufacturers of animal and pet
foods, and direct consumers such as feedlots and dairies.
The Company operated two ethanol production facilities, one
located in Colwich, Kansas and the other in York, Nebraska. The
Company's ethanol production capacity at the Colwich plant is approximately
20 million gallons per year and production capacity at the York
facility is approximately 40 million gallons per year. Actual
ethanol production in fiscal 1996 and 1997, was below capacity due
to the temporary shutdown of the plants in May 1996 through
September 1996 for the Colwich plant and May 1996 through October
1996 for the York facility. (For information regarding the
temporary shutdown of the Company's plants see "Temporary Shutdown
of Plant Operations" discussion in Management's Discussion and
Analysis in the Company's Annual Report which is incorporated
herein by reference.)
During fiscal 1997 and in prior years, the Company has typically
maintained sufficient on-site grain storage for three to five days
of continuous production. During fiscal 1997, the Company entered
into an exclusive grain supply agreement with Centennial Trading,
LLC for the procurement of all its grain requirements. The Company
believes this agreement eliminates the need to buy and store grain
offsite. (Also see the discussion of raw materials in
Management's Discussion and Analysis in the Company's Annual
Report, which is incorporated by reference herein.)
<PAGE>
The Company's production process depends upon a substantial
uninterrupted supply of natural gas. The Company has contracted
with one natural gas provider to supply both its Colwich and York
plants and the Company believes these supplies will be sufficient
for its production needs. If this source of natural gas supply is
interrupted, the Company believes alternative supplies could be
contracted with little or no interruption to the Company's normal
operations due to the competitive nature of the natural gas
market. Other materials used in the production of ethanol are
readily available from numerous suppliers.
In addition, the Company is dependent on rail transportation to
ship its ethanol and DDG to its customers. Any interruption of
rail transportation due to a rail strike or any other circumstance
would have a significant detrimental effect on the Company's
operations. During the latter part of fiscal 1997 the Company
experienced a slow down in railcar movement as a result of a
merger between two major railroad companies. This slow down has
created some minor delays in deliveries of product. However,
these delays are believed to be temporary and symptomatic of the
railway system for all shippers, at this time.
Historically, the maximum finished ethanol inventory which the
Company has attempted to keep in stock has equaled approximately
four to five days of production. Also, typical payment terms in
the industry are "Net 10 days from delivery". These low
inventories of finished goods and quick payment terms from
customers generally help to minimize the working capital needs of
the Company. At June 30, 1997, the Company's ethanol inventory
levels met or exceeded its normal inventory maximum levels, due to
accumulation of inventory resulting from a slowdown in railcar
deliveries.
The market price of ethanol is not related to grain prices, but
has historically been determined by gasoline, octane enhancers and
oxygenates prices plus federal tax incentives. Therefore, High
Plains is generally not able to compensate for increases in the
cost of grain feedstock through upward adjustments in prices
charged for its ethanol. (For information regarding the
seasonality of the Company's business see "Seasonality" discussion
in Management's Discussion and Analysis in the Company's Annual
Report which is incorporated herein by reference.)
For the fiscal year ended June 30, 1997, the Company's sales to
three customers represented in the aggregate approximately 43.8%
of the Company's total product sales and revenues. The Company's
DDG production is brokered under an exclusive agreement with
ConAgra, Inc. This exclusive agreement automatically renews for
successive one-year terms unless written notice of termination is
issued 90 days prior to the end of a term.
The Company is in direct competition with other ethanol producers,
many of which have greater resources than the Company. The
largest ethanol producers include Archer Daniels Midland, Cargill,
Minnesota Corn Processors and New Energy Co. of Indiana which are
<PAGE>
capable of producing approximately 700 million, 100 million, 115
million and 75 million gallons of ethanol per year, respectively.
In addition, there are several other competitors of a similar
size and with similar resources to the Company. Recent estimates
place total domestic ethanol production capacity at 1.5 billion
gallons per year. Additionally, industrial grade ethanol
production has increased in recent years. This is a result of
Archer Daniels Midland, other producers, and the Company diverting
a portion of existing production capacity from fuel grade
production to industrial grade products. The Company is unable to
predict what effect these changes in production will have on the
demand and price of fuel grade or industrial grade ethanol. (Also
see the discussion of ethanol production in Management's
Discussion and Analysis in the Company's Annual Report, which is
incorporated herein by reference.)
The Company competes with the other ethanol producers on the basis
of price and, to a lesser extent, delivery and service. High
Plains believes that it is able to compete favorably with other
ethanol producers due to its proximity to ample grain supplies and
due to the efficiencies of its plants. The Company also believes
that its locations offer an advantage over other ethanol producers
in that the Company has ready access by rail to growing ethanol
markets, which reduces its cost of sales.
The Company is also in competition with producers of MTBE, a
petrochemical derived from methanol which costs less to produce
than ethanol. Many major oil companies produce MTBE, and because
it is petroleum based, its use is strongly supported by such oil
companies. These companies have significant resources to market
MTBE and to influence legislation and public perception of MTBE.
These companies also have sufficient resources to begin production
of ethanol should they choose to do so.
The Company is subject to extensive environmental regulation at
the federal, state and local levels. Air quality at the Colwich
plant is regulated by the Environmental Protection Agency and the
Division of Environment of the Kansas Department of Health and
Environment (the "KDHE"). The KDHE regulates emission of volatile
organic compounds into the air. Volatile organic compound
emissions are tested on a monthly basis at the Colwich plant, and
the Company must submit semi-annual reports to the KDHE regarding
these emissions tests. The Company is required to obtain an air
operating permit from the KDHE and must obtain KDHE approval to
make plant alterations that could change the emission levels. The
KDHE also regulates the water usage, waste water discharge and
hazardous waste at the Colwich plant under Kansas water pollution
control and hazardous waste laws. Water usage and waste water
effluent quality are tested daily. Monthly reports regarding
water usage and quality are filed with the KDHE. The Company is
also required to submit periodic reports pursuant to the Kansas
and Federal Emergency Planning Community Right-to-Know Act. At
the local level, the Company files semi-annual reports with the
Sedgwick County Community Health Department regarding air quality
at the Colwich plant.
<PAGE>
The York facility is subject to similar environmental regulations
at the federal, state and local level. Air quality at the York
plant is regulated by the Environmental Protection Agency and the
Nebraska Department of Environmental Quality (the "NDEQ"). The
Company submits various reports throughout the year concerning
emissions of volatile compounds. The Company was required to
obtain an air operating permit from the NDEQ and must obtain
approval to make any plant alterations that could change the
emission levels. The NDEQ also regulates waste water discharge at
the York Plant. Waste water effluent quality is tested daily, and
monthly reports are filed with NDEQ. The York facility is also
required to submit periodic reports pursuant to the Nebraska and
Federal Emergency Planning Community Right-to-Know Act. The
Company has air quality permits, water discharge permits, and all
other environmental permits required for operations at the York
location.
At June 30, 1997, the Company employed 104 persons. These
included 42 employees at the Colwich, Kansas plant, 55 employees
at the York, Nebraska plant, and 7 employees in the Wichita,
Kansas corporate office. The total number of employees is
significantly higher compared to the prior year due to employees
furloughed during the temporary shutdown of both of the Company's
production facilities in May, 1996. (For information regarding
the temporary shutdown of the Company's plants see "Temporary
Shutdown of Plant Operations" discussion in Management's
Discussion and Analysis in the Company's Annual Report which is
incorporated by reference herein.)
Item 2 PROPERTIES
The Company's principal executive offices at 200 W. Douglas, Suite
820, Wichita, Kansas are leased and cover approximately 2,800
square feet.
The Company presently owns the approximately 70 acres of land and
the improvements thereon which comprise its Colwich, Kansas plant.
The Company also owns approximately 142 acres of land and the
improvements thereon which comprise its York, Nebraska facility.
The Company's primary lender holds a mortgage on approximately 59
acres of land where the York facility is situated and on the
ethanol production plant itself, as security for a loan to the
Company.
Item 3 LEGAL PROCEEDINGS
Commodity Specialist Company, (CSC) is a distributor of
agricultural products which, from 1988 until April 1994, marketed
and sold DDG produced by the Company. A dispute developed between
the Company and CSC after the termination of the contract under
which CSC sold the Company's DDG. In early September 1995, the
<PAGE>
Company filed suit in the U.S. District Court for the District of
Kansas, against CSC in an attempt to collect approximately
$110,000 which the Company believes it is owed by CSC for DDG sold
but not paid for by CSC. Subsequently, CSC filed a suit in the
U.S. District Court for the District of Minnesota, Fourth
Division, against the Company claiming damages in excess of $1.2
million for lost profits, costs and expenses allegedly resulting
from the termination of the contract and from the Company's
alleged delivery of contaminated DDG to CSC for re-sale. The two
cases have now been consolidated for trial in the Minnesota Court.
No reserves have been made for fiscal years 1995, 1996, or 1997
for any amounts which may be payable to CSC; although for
accounting purposes, a receivable of approximately $100,000 due
from CSC to the Company was written down in fiscal 1994. The
Company's product liability insurance carrier has taken the
position that its policy does not cover the claims made by CSC.
Currently, the Company is vigorously defending the action filed by
CSC. The Company believes that the ultimate resolution of this
dispute will not have a material adverse effect on the Company's
financial condition.
On March 22, 1996, the Company filed suit against Summit Resource
Management, Inc., Commodity Trading Incorporated, and Abbott
Laboratories, in the United States District Court for the District
of Kansas, as Civil Action No. 96-1105-FGT. The suit alleges that
the defendants are liable to the Company for damages suffered as a
result of their sale to the Company of contaminated alcohol, which
was processed into the Company's DDG by-product, and which caused
damage to certain of the Company's customers who purchased this
DDG for cattle feed. All damage claims with the Company's DDG
customers have now been settled (except for the CSC litigation
described above). As a result of this incident, the Company
recorded expenses totaling $967,848 through fiscal 1995. The
current suit by the Company against the providers of the
contaminated alcohol seeks to recover these damages, as well as
other losses and expenses incurred by the Company in connection
with this incident. No affirmative claims have been made against
the Company by the defendants in this lawsuit. At June 30, 1997
the Company had reached a compromise settlement with one of the
defendants, Abbott Laboratories, who has now been dismissed as a
defendant in the suit.
The Company is also involved in one other pending lawsuit which
has arisen in the course of normal business operations, but which
is not expected to have a material adverse effect on the Company's
financial condition.
Item 4 SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the
Company during the fourth quarter of the fiscal year ended June
30, 1997.
<PAGE>
PART II
Item 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED SECURITY HOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market
System under the symbol HIPC.
The number of holders of record of the Company's common stock as
of September 22, 1997, was approximately 8,683 determined by an
examination of the Company's transfer book and through broker
search.
The Company has not declared or paid any cash dividends on its
Common Stock since its organization in 1980.
The Company has no current plans to declare or pay any cash
dividends in the foreseeable future. The payment and rate of
future cash dividends on the Company's Common Stock, if any, would
be subject to review by the Board of Directors in light of the
Company's financial condition, results of operations, capital
requirements and other factors deemed relevant at that time.
Additional information relating to this item, including
historical market prices for the Company's Common Stock, is hereby
incorporated by reference from the "Market For Registrant's Common
Equity" section of the 1997 High Plains Corporation Annual Report
to Stockholders for the year ended June 30, 1997 which is
anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal
year ended June 30, 1997.
Item 6 SELECTED FINANCIAL DATA
The information relating to this item is hereby incorporated by
reference from the "Five Year Summary of Selected Financial Data"
in the 1997 High Plains Corporation Annual Report to Stockholders
for the year ended June 30, 1997 which is anticipated to be filed
with the Securities and Exchange Commission within 120 days after
the end of the Company's fiscal year ended June 30, 1997.
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information relating to this item is hereby incorporated by
reference from the "Management's Discussion and Analysis" in the
1997 High Plains Corporation Annual Report to Stockholders for the
year ended June 30, 1997 which is anticipated to be filed with the
Securities and Exchange Commission within 120 days after the end
of the Company's fiscal year ended June 30, 1997.
<PAGE>
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HIGH PLAINS CORPORATION
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1997 AND 1996
with
INDEPENDENT AUDITORS' REPORT
<PAGE>
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Financial Statements:
Balance Sheets 2
Statements of Income 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 24
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
High Plains Corporation
We have audited the accompanying balance sheets of High Plains
Corporation as of June 30, 1997 and 1996, and the related
statements of income, stockholders' equity and cash flows for
each of the three years in the period ended June 30, 1997.
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 audits 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, the financial statements referred to above
present fairly, in all material respects, the financial position
of High Plains Corporation as of June 30, 1997 and 1996, and the
results of their operations and cash flows for each of the three
years in the period ended June 30, 1997 in conformity with
generally accepted accounting principles.
s/ ALLEN, GIBBS & HOULIK, L.C.
August 7, 1997
Wichita, Kansas
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
BALANCE SHEETS
June 30, 1997 and 1996
<CAPTION>
ASSETS
1997 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,389,758 $ 8,889,246
Accounts receivable:
Trade (less allowance of $75,000 and
$100,000 in 1997 and 1996) 4,102,173 1,266,497
Production credits and incentives 1,536,541 573,312
Inventories 4,246,783 1,680,843
Current portion of long-term notes receivable 117,417 106,552
Prepaid expenses 309,350 545,171
Refundable income tax 145,328 410,259
Total current assets 12,847,350 13,471,880
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and land improvements 323,496 142,283
Ethanol plants 85,055,215 77,217,199
Other equipment 393,683 417,559
Office equipment 202,135 237,085
Leasehold improvements 48,002 48,002
86,022,531 78,062,128
Less accumulated depreciation (20,444,381) (17,573,003)
Net property, plant and equipment 65,578,150 60,489,125
OTHER ASSETS
Equipment held for resale 427,432 451,090
Deferred loan costs (less accumulated
amortization of $10,857 and $164,644
in 1997 and 1996) 103,623 312,823
Long-term notes receivable, less
current portion 41,742 314,159
Other 76,235 57,018
Total other assets 649,032 1,135,090
$79,074,532 $75,096,095
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
<S> <C> <C>
CURRENT LIABILITIES
Revolving lines-of-credit $ 6,200,000 $ --
Current maturities of long-term debt -- 4,897,619
Current maturities of capital
lease obligations 519,384 30,999
Accounts payable 5,114,452 692,135
Estimated contract commitments -- 629,093
Accrued interest 298,551 156,294
Accrued payroll and property taxes 644,846 492,590
Total current liabilities 12,777,233 6,898,730
Revolving line-of-credit 7,700,000 2,000,000
Long-term debt, less current maturities -- 12,447,619
Capital lease obligations, less current
maturities 2,500,014 12,655
Other 441,109 155,748
10,641,123 14,616,022
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, authorized
50,000,000 shares; issued 16,396,622
shares and 16,247,289 shares at
June 30, 1997 and 1996, respectively, of
which 411,178 and 391,178 shares were
held as treasury stock at June 30, 1997
and 1996, respectively 1,639,662 1,624,729
Additional paid-in capital 37,348,072 36,752,644
Retained earnings 17,763,627 16,030,337
56,751,361 54,407,710
Less:
Treasury stock - at cost (863,911) (737,660)
Deferred compensation (231,274) (88,707)
Total stockholders' equity 55,656,176 53,581,343
$79,074,532 $75,096,095
<FN>
The accompanying notes are an integral
part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
STATEMENTS OF INCOME
Years Ended June 30, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Product sales and revenues $63,121,510 $73,920,096 $52,769,014
Revenues from forward contracts -- 14,005,313 --
Net sales and revenues 63,121,510 87,925,409 52,769,014
Cost of products sold 59,414,514 69,414,221 43,698,552
(Recovery) expense from forward
contracts (610,069) 2,524,235 --
Total costs and expenses 58,804,445 71,938,456 43,698,552
Gross profit 4,317,065 15,986,953 9,070,462
Selling, general and
administrative expenses 1,653,681 2,022,095 1,519,615
Operating income 2,663,384 13,964,858 7,550,847
Other income (expense):
Interest and other income 276,345 175,296 151,511
Interest expense (1,354,983) (2,220,427) (1,268,354)
Gain (loss) on sale of equipment 129,649 256,606 (112,024)
Non-recurring expenses -- -- (108,196)
(948,989) (1,788,525) (1,337,063)
Net earnings before
income taxes 1,714,395 12,176,333 6,213,784
Income tax benefit (expense) 18,895 (355,256) (141,377)
Net earnings $ 1,733,290 $11,821,077 $ 6,072,407
Earnings per common and dilutive
common equivalent share $ .11 $ .74 $ .39
<FN>
The accompanying notes are an integral
part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 1997, 1996 and 1995
<CAPTION>
Preferred Stock Common Stock Retained
Number Number Additional Earnings
of of Paid-In (Accumulated Treasury Deferred
Shares Amount Shares Amount Capital Deficit) Stock Compensation Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 25,000 $ 150,000 11,031,988 $1,103,199 $33,266,850 $ (1,863,147) $(244,377) $ -- $32,412,525
Exchange of preferred stock
for common stock (25,000) (150,000) 36,918 3,692 146,308 --
Exercise of stock options 615,479 61,548 1,704,258 1,765,806
Four for three stock split 3,786,562 378,656 (378,656) --
Net earnings for year 6,072,407 6,072,407
Balance, June 30, 1995 -- -- 15,470,947 1,547,095 34,738,760 4,209,260 (244,377) -- 40,250,738
Exercise of stock options 776,342 77,634 1,897,884 1,975,518
Purchase of common stock (493,283) (493,283)
Employee stock purchase (141,937) (141,937)
Amortization of deferred
compensation 53,230 53,230
Income tax benefit from the
exercise of stock options 116,000 116,000
Net earnings for year 11,821,077 11,821,077
Balance, June 30, 1996 -- -- 16,247,289 1,624,729 36,752,644 16,030,337 (737,660) (88,707) 53,581,343
Exercise of stock options 149,333 14,933 516,560 531,493
Purchase of common stock (126,251) (126,251)
Employee stock purchase (273,750) (273,750)
Amortization of deferred
compensation 131,183 131,183
Compensation expense on
stock options granted 78,868 78,868
Net earnings for year 1,733,290 1,733,290
Balance, June 30, 1997 -- $ -- 16,396,622 $1,639,662 $37,348,072 $17,763,627 $(863,911) $(231,274) $55,656,176
<FN>
The accompanying notes are an integral
part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended June 30, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,733,290 $11,821,077 $ 6,072,407
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 3,405,364 2,869,699 2,084,469
Provision for bad debt -- -- 68,487
(Gain) loss on sale of equipment (129,649) (256,606) 112,024
Amortization of deferred
compensation 107,923 53,230 --
Compensation expense on stock
options granted 78,868 -- --
Payments received on notes
receivable 236,552 96,691 37,598
Changes in operating assets
and liabilities:
Accounts receivable (3,773,905) 1,953,952 (1,949,675)
Inventories (2,565,940) 964,434 (1,703,415)
Equipment held for resale 105,794 606,353 (487,921)
Refundable income tax 264,931 (294,259) 107,825
Prepaid expenses 235,821 (160,312) 52,080
Accounts payable 4,422,317 (3,103,913) (62,638)
Estimated contract commitments (629,093) 629,093 --
Accrued liabilities 168,262 (385,670) 228,671
Net cash provided by
operating activities 3,660,535 14,793,769 4,559,912
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 43,620 54,477 586,237
Acquisition of property,
plant and equipment (4,802,664) (4,947,663) (16,519,158)
(Increase) decrease in other
non-current assets (19,217) 5,591 5,804
Net cash used in
investing activities (4,778,261) (4,887,595) (15,927,117)
Cash flows from financing activities:
Payments on long-term debt (17,345,238) (5,273,810) (2,380,952)
Proceeds from long-term debt -- -- 12,668,328
Payments on revolving
line-of-credit (3,100,000) (1,000,000) (1,000,000)
Proceeds from revolving
lines-of-credit 15,000,000 3,000,000 1,000,000
Payments on capital lease
obligations (295,330) (332,828) (186,054)
Increase in other non-current assets (207,558) -- (30,648)
Increase in other non-current
liabilities 97,996 13,811 --
Issuance of common stock 49,500 -- --
Proceeds from exercise of options 418,868 1,975,518 1,765,807
Net cash (used in)
provided by financing
activities (5,381,762) (1,617,309) 11,836,481
(Decrease) increase
in cash and
cash equivalents (6,499,488) 8,288,865 469,276
Cash and cash equivalents:
Beginning of year 8,889,246 600,381 131,105
End of year $ 2,389,758 $ 8,889,246 $ 600,381
<FN>
The accompanying notes are an integral
part of these financial statements.
</TABLE>
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents - High Plains Corporation, the "Company,"
considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts. The Company
believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Inventories - Inventories are stated at the lower of cost
(first-in, first-out) or market. To the extent practical, the
Company follows a policy of hedging certain commodity
transactions related to anticipated production requirements.
This is done to reduce risk due to market price fluctuations.
Readily marketable exchange-traded futures contracts are the
designated hedge instruments since there is a high correlation
between the market value changes of such contracts and the price
changes on grain commodities. Gains or losses arising from open
and closed hedging transactions are included as an adjustment to
the value of inventories and reflected in cost of sales in the
statements of income when the underlying purchase contracts are
fulfilled.
Property, Plant and Equipment - Property, plant and equipment
are recorded at cost. The cost of internally-constructed assets
includes direct and allocable indirect costs. Plant
improvements are capitalized, while maintenance and repair costs
are charged to expense as incurred. Periodically, a plant or a
portion of a plant's equipment is shut down to perform certain
maintenance projects which are expected to improve the operating
efficiency of the plant over the next year. These expenses are
generally incurred once a year and thus are capitalized and
amortized over the future 12-month period benefited. Included
in prepaid expenses at June 30, 1997 and 1996 were $220,523 and
$429,207, respectively, of these expenditures.
Provisions for depreciation of property, plant and equipment are
computed using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Ethanol plants 5 - 40 years
Other equipment 5 - 10 years
Office equipment 3 - 10 years
Leasehold improvements 5 years
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset may not be fully
recoverable, the Company reviews that asset for impairment.
Scheduled future expirations of state incentive payments and
federal fuel tax incentive programs are not considered to be
such an event or change because of the government's history of
extending the expirations of these incentives.
Equipment Held for Resale - The Company acquired ethanol
processing equipment located in New Iberia, Louisiana to be
utilized in the construction of the York, Nebraska facility.
Amounts allocated for equipment not utilized for the Nebraska
facility are recorded as equipment held for resale and these
amounts are decreased as sales occur. Management expects a gain
upon its ultimate disposition and, accordingly, no loss has been
provided for.
Deferred Loan Costs - The Company incurred certain costs in
connection with obtaining financing. The Company is amortizing
these costs over sixty months, the life of the debt.
Fair Value of Financial Instruments - The fair values of
financial instruments recorded on the balance sheet are not
significantly different from the carrying amounts.
Income Taxes - The Company uses an asset and liability approach
to financial accounting and reporting for income taxes.
Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established
when considered necessary to reduce deferred tax assets to the
estimated amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the
change during the period in deferred tax assets and liabilities.
Under FASB Statement No. 109, Accounting for Income Taxes, (FAS
109) the tax benefit from utilization of loss carryforwards is
not reflected as an extraordinary item.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Compensation - Under the Employee Stock Purchase Plan
(Note 12), compensation is recognized as an expense in the
period in which the employee performs the services, which is
generally the period over which the stock appreciation is vested
or earned. With the exception of certain officers, the
employees must continue to work for five years to acquire the
full amount of the stock. Compensation expense attributable to
future services has been recorded as deferred compensation in
the equity section of the balance sheets and is amortized over
the period of future services. Officers who have ten years of
continuous service are allowed to prepay their obligation and
receive the stock immediately and thus, the compensation
attributable to their election is recognized upon their election
to participate in the plan.
Stock-Based Compensation - The Company has chosen to continue to
account for stock-based compensation for employees using the
intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock. However,
the Company accounts for stock-based compensation for
non-employees as provided under FASB Statement No. 123,
Accounting for Stock-Based Compensation (FAS 123). The fair
value of the option grant is estimated on the date of grant
using the Black-Scholes option pricing method.
Recently Issued Accounting Standards - In February 1997, FASB
issued Statement No. 128, Earnings Per Share (FAS 128),
effective for the Company for the interim periods and years
ended after December 15, 1997. FAS 128 replaces the
presentation of primary earnings per share (EPS) with a
presentation of "basic" EPS. Basic EPS excludes the dilutive
effects of common stock equivalent shares in its calculation. A
diluted EPS will still be required, and will be computed
similarly to the current fully diluted EPS (see Note 14). Under
FAS 128, both the basic and diluted EPS amounts will be
presented in the financial statements. Also, the statement will
require restatement of all prior period EPS data presented in
the financial statements. EPS as calculated at June 30, 1997,
1996, and 1995 would not be materially different if calculated
using basic EPS.
Other pronouncements issued by the Financial Accounting
Standards Board with future effective dates are either not
applicable or not material to the financial statements of the
Company.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect: 1) the reported amounts of assets and liabilities, 2)
disclosures such as contingencies, and 3) the reported amounts
of revenues and expenses included in such financial statements.
Actual results could differ from those estimates.
Contingencies - In the normal course of business, the Company
becomes party to litigation and other contingencies that may
result in loss or gain contingencies. The Company follows
Statement of Financial Accounting Standards No. 5, Accounting
for Contingencies. Under FAS No. 5, loss contingencies are
accrued if available information indicates that it is probable
that a loss is incurred and the amount of such loss can be
reasonably estimated.
Reclassifications - Certain items have been reclassified on the
1996 balance sheet to be consistent with the classifications in
1997.
2. DESCRIPTION OF BUSINESS
Ethanol Production Business - The Company's principal business
is the operation of two plants in Kansas and Nebraska for the
distillation and production of industrial and fuel grade ethanol
for sale to customers concentrated primarily in the Western
United States for mixture with gasoline to be used as a motor
fuel. The Company's operations are dependent upon state
governmental incentive payments. Kansas production incentive
payments recorded as product sales and revenues in the
accompanying financial statements were $1,304,019 for fiscal
1995, $1,126,386 for fiscal 1996 and $1,160,141 for fiscal 1997.
The Kansas incentive program is currently scheduled to expire
July 1, 2001.
The State of Nebraska offers a transferable production tax
credit in the amount of $.20 per gallon of ethanol produced for
a period of sixty months from date of first eligibility. The
credit is only available to offset Nebraska motor fuels excise
taxes. The Company transfers these credits to a Nebraska
gasoline retailer which then reimburses the Company for the
credit amounts less a handling fee. Not less than two million
gallons and not more than twenty-five million gallons of ethanol
produced annually at the Nebraska facility are eligible for the
tax credit. The Company will no longer be eligible for this
credit after December 31, 1999. Nebraska production tax credit
amounts recorded as revenues in the accompanying financial
statements were $2,713,772 in fiscal 1995, $4,428,437 in fiscal
1996 and $4,019,584 in fiscal 1997.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. DESCRIPTION OF BUSINESS (Continued)
The market for the Company's ethanol product is affected by the
Federal government's excise tax incentive program scheduled to
expire on September 30, 2000. Under this program, gasoline
distributors who blend gasoline with ethanol receive a federal
excise tax rate reduction for each blended gallon, resulting in
an indirect pricing incentive to ethanol. This tax rate
reduction equals $.054 per blended gallon containing 10% or more
ethanol by volume. Alternatively, blenders may claim an income
tax credit of $.54 per gallon of ethanol mixed with gasoline.
The market for the Company's product is also affected through
Federal regulation by the Environmental Protection Agency under
the Clean Air Act and the Reformulated Gasoline Program.
Shut Down of Plant Operations - Due to increasing corn and
milo-feedstock prices, management temporarily suspended
operations at both its York and Colwich facilities in May 1996.
The Company had forward contracted grain purchases to insure the
availability of grain needed for its production process at a
fixed price. These contracts would have allowed continued
operations through approximately August 1997. Due to grain
prices rising to record levels in excess of the forward
contracted levels, the Company sold all of its forward grain
contracts for approximately $14 million after commissions. See
Note 8 for details on the Company's outstanding commitments at
June 30, 1996 related to undelivered contracts for the sale of
ethanol and dried distiller's grain (DDG). Expenses incurred
prior to the year ending June 30, 1996 to fill these contracts
were estimated to be approximately $2.5 million.
The Colwich facility reopened in September 1996, and the York
facility reopened in October 1996. During the shutdown period,
the Company began modifying the York facility to produce a
higher-quality industrial grade ethanol as well as the fuel
grade ethanol it already produced. In January 1997, the Company
completed construction and began initial testing of the new
industrial grade processing equipment. Modifications and test
runs of the new equipment continued into June 1997 while the
Company pursued customers for the sale of its higher quality
product.
3. NOTES RECEIVABLE
In January 1995, the Company disposed of its engineering
division, and certain property assets associated with the
division were transferred to the former officer who took over
the operations under a separate, unrelated company. This
company and former officer agreed to pay $300,000 and $100,000,
respectively, in notes, plus interest at 9.75% over 45 months.
The remaining balance on these notes receivable were $119,370
and $39,789 at June 30, 1997 and $199,283 and $66,428 at June 30,
1996, respectively. These notes are secured by the property
transferred and the former officer's personal guarantee.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
June 30,
1997 1996
<S> <C> <C>
Raw materials $ 957,894 $ 157,939
Work-in-process 396,747 --
Finished goods 2,149,904 821,481
Spare parts 664,530 701,423
Adjustment to market for
hedged grain inventory 77,708 --
$4,246,783 $1,680,843
</TABLE>
5. REVOLVING LINES-OF-CREDIT
On January 10, 1997, the Company entered into a credit agreement
with a bank to refinance the Company's existing long-term debt
and revolving line-of-credit. Under the new credit agreement,
the Company has two revolving lines-of-credit. The
lines-of-credit have an interest rate option equal to the bank's
prime rate or the LIBOR rate, whichever the Company elects. On
one credit line, the Company may borrow up to a maximum of
$4,000,000. At June 30, 1997, $2,300,000 of the outstanding
balance bears interest at a LIBOR-based rate of 8.14% through
January 8, 1998; the remaining $1,700,000 bears interest at the
prime rate of 8.5% at June 30, 1997. This revolving
line-of-credit has an initial maturity of January 10, 1998.
The Company may borrow up to a maximum of $9,900,000 on the
other revolving line-of-credit, which has a maturity of December
31, 2002. At June 30, 1997, $9,350,000 bears interest at a
LIBOR-based rate of 8.14%, expiring January 8, 1998. The
remaining balance of $550,000 bears interest at a LIBOR-based
rate of 8.02%, expiring September 30, 1997.
The maximum availability under the lines-of-credit is limited so
that the amount of collateral securing the lines at all times
exceeds the outstanding balances by a ratio of at least 2 to 1.
Collateral on the lines includes all eligible receivables,
inventory, general intangibles, property and equipment located
at the York, Nebraska plant, and the Company's rights to
payments under present or future production incentive contracts
from the Ethanol Plant Production Credit Agreement with the
State of Nebraska. The maximum availability under the
$9,900,000 line-of-credit decreases each calendar quarter
by $550,000. Therefore, the Company can expect to pay at least
$2,200,000 on this line-of-credit in the next fiscal year. This
amount is included in the current maturities of the
lines-of-credit on the balance sheet.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. REVOLVING LINES-OF-CREDIT (continued)
The financing agreement contains various restrictions, including
the maintenance of certain financial ratios, fulfilling certain
net worth and indebtedness test, and capital expenditure
limitations. At June 30, 1997, the Company was in violation of
a certain covenant; however, the bank has waived its rights to
declare the debt due and payable based on this covenant
violation through June 30, 1998.
6. LONG-TERM DEBT
Long-term debt consisted of:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Term loan payable to bank in monthly
installments of $297,619 plus interest
at a two-year fixed rate equal to 1.5% above
prime rate (9.75% at June 30, 1996) with a
final payment due September 2000. $ -- $ 17,345,238
-- 17,345,238
Less current maturities -- 4,897,619
$ -- $ 12,447,619
</TABLE>
7. LEASES
Sale - Leaseback Transaction - On December 12, 1996, the Company
sold certain processing equipment for the production of
industrial grade ethanol for $3,128,676 and concurrently entered
into an agreement to lease the property back at $54,191 per
month through December 12, 2002. The sale of equipment was
recorded resulting in a gain of $87,447 which was deferred and
will be recognized over the six-year term of the lease
agreement. The lease has been classified as a capital lease.
The equipment under lease is included in ethanol plants totaling
$3,128,676, less accumulated depreciation of $7,838, for a net
book value of $3,120,838 at June 30, 1997.
Other Capital Leases - The Company also leases various
processing equipment, a forklift, and two photo copiers under
long-term agreements which have been classified as capital
leases. The leases have terms of two to three years, and
expire through September 1999. As of June 30, 1997, cost and
accumulated depreciation on equipment under capital leases
amounted to $284,068 and $29,568, for a net book value of
$254,500. At June 30, 1996, cost and accumulated depreciation
on equipment under capital leases amounted to $103,960 and
$15,725, for a net book value of $88,235.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. LEASES (Continued)
Operating Leases - The Company leases 100 railroad cars under an
operating lease expiring in fiscal year ending June 30, 1999.
Annual rentals are $618,000 for all 100 cars. The Company also
leases 32 cars under an operating lease expiring in June 30,
2002. Annual rentals are $213,120 for all 32 cars. The Company
leases an additional 52 railroad cars under various operating
leases expiring through fiscal year ending June 30, 2001. Rent
paid during the years ended June 30, 1997, 1996 and 1995 was
$977,449, $865,941, and $806,942, respectively.
Future Minimum Lease Payments - The following is a schedule of
future minimum lease payments for capital leases and operating
leases as of June 30, 1997:
<TABLE>
<CAPTION>
Capital Operating
Year Ending June 30 Leases Leases
<S> <C> <C>
1998 $ 727,674 $ 1,132,020
1999 671,194 960,040
2000 656,532 250,200
2001 650,290 225,480
2002 650,290 213,120
Thereafter 325,145 --
Total minimum lease payments 3,681,125 $ 2,780,860
Less amount representing interest 661,727
Present value of net minimum lease payments 3,019,398
Less current maturities 519,384
$ 2,500,014
</TABLE>
The Company has subleased 20 of the above railroad cars under
various short-term noncancelable operating leases. The total
minimum future rentals to be received in fiscal year ended June
30, 1998 is $94,500.
Interest Payments - Interest paid on long-term debt, the
revolving lines-of-credit and capital leases in 1997, 1996 and
1995 amounted to $1,328,310, $2,249,297 and $2,051,866,
respectively. The Company capitalized $115,585 and $889,211 in
interest in 1997 and 1995, respectively, as part of the cost of
construction at the York, Nebraska facility. No interest was
capitalized in 1996.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
8. COMMITMENTS
Forward and Futures Contracts - The Company periodically enters
into forward contracts with suppliers and customers on both the
purchase of grain and the sale of ethanol and DDG. At June 30,
1997, the Company had forward contracts to purchase
approximately 1,728,000 bushels of milo and corn at fixed prices
totaling $4,432,000 with delivery dates of July through August
1997. An additional 679,000 bushels were held under contracts
for delivery, however, at June 30, 1997, no prices had been set.
The unpriced contracts are for deliveries from July through
December 1997. At June 30, 1997, the Company had also purchased
futures contracts on approximately 1,250,000 bushels. These
contracts had been purchased at prices ranging from $2.66 to
$2.74 per bushel, while the fair market value of the futures was
approximately $2.38 per bushel at June 30, 1997, resulting in
unrealized losses at year-end. The Company had forward
contracts to sell 32,600 tons of DDG at fixed prices totaling
approximately $2,585,000. No losses were expected on these
contracts. At June 30, 1996, the Company had no forward
contracts to purchase grain. No material forward contracts for
purchases or sales existed at June 30, 1995.
The Company sells DDG and certain condensed distiller's solubles
(CDS), the by-products of its ethanol production, through
merchandisers. At June 30, 1996 one merchandiser had certain
unfilled contracts for DDG. The Company also had two unfilled
contracts to sell ethanol at June 30, 1996. Due to the shutdown
of plant operations (See Note 2), the Company was liable for the
difference in the contracted sales prices and the costs to
purchase the necessary product to fill these contracts. The
Company's liability for this difference at June 30, 1996 was
approximately $292,000 for DDG and $629,093 for ethanol. The
$292,000 was recorded as an offset to a receivable from the DDG
merchandiser and the $629,093 was recorded as a liability.
These contracts mostly extended through September 1996, and
final settlements were dependent on fluctuations in the price
the Company had to pay to fill the contracts while the plants
were not in production. Final settlements during the year ended
June 30, 1997 resulted in a $610,069 recovery of the expense
recorded at June 30, 1996.
Retirement and Consulting Agreement - On April 11, 1997, the
Company entered into an agreement with the former President and
Chairman of the Board to provide a retirement benefit package
and consulting agreement for future services. As part of the
retirement package, the Company agreed to grant (on August 1,
1997) 14,000 non-qualified options at an exercise price equal to
one-half of the lowest closing price achieved by the Company's
stock between May 1, 1997 and August 1, 1997.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
8. COMMITMENTS (continued)
In consideration for future consulting services to be provided
by the former President, the Company agreed to make payments
equal to the amounts required under his former employment
contract, which would have expired July 1, 2000. At June 30,
1997, this totaled $401,979 plus annual bonuses of 2% of net
income before taxes. The Company also agreed to grant the
former President 50,000 nonqualified stock options on each April
11, 1997, 1998 and 1999 at the then closing stock price.
9. INCOME TAXES
For Federal income tax purposes at June 30, 1997, the Company
had a net operating loss carryforward of approximately
$13,334,000 and approximately $5,857,000 of federal general
business tax credit carryforwards, which, if not used, will
expire as follows:
<TABLE>
<CAPTION>
Net
Expires in Operating General
Fiscal Year Loss Amount Business Credit
Ending Carryforward Carryforward
<S> <C> <C>
1998 $ -- $ 1,000
1999 -- 1,263,000
2000 -- 7,000
2001 -- 86,000
2002 78,000 --
2003 6,430,000 4,500,000
2004 453,000 --
2005 992,000 --
2008 3,000 --
2009 485,000 --
2012 4,893,000 --
$ 13,334,000 $ 5,857,000
</TABLE>
The general business credits expiring in fiscal 1998-2001 are
investment tax credits and the credits expiring in fiscal 2003
are small ethanol producer tax credits. In the event these
credits would expire, the Company would receive a deduction of
50% of the investment tax credit and 100% deduction of the small
ethanol producer credit in the year of expiration.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. INCOME TAXES (continued)
The Company also has a Nebraska investment credit carryforward
of $4,528,000, expiring in fiscal 2003, which may be used to
offset taxes in the State of Nebraska.
The tax net operating loss carryforward and federal tax credit
carryforwards discussed above and other matters result in
deferred tax assets under FAS 109 totaling $16,379,000 at June
30, 1997 (see below). The book basis of property, plant and
equipment in excess of its tax basis results in an offsetting
deferred tax liability of $13,318,000, and the valuation
allowance offsets an additional $3,061,000, leaving no net
deferred tax assets at June 30, 1997. Future tax expenses, if
any, may be offset, at least in part, by net increases in future
tax assets (including changes in the valuation allowance) to the
extent that such assets exceed the amounts of future deferred
tax liabilities. The Company expects to continue annually to
provide for a reasonable valuation allowance, to reduce deferred
tax assets to zero until such time as future taxable income is
generated or assured (if ever).
Income taxes consisted of:
<TABLE>
<CAPTION>
June 30,
1997 1996 1995
<S> <C> <C> <C>
Current tax (benefit) expense $ (18,895) $ 355,256 $ 141,377
Tax effect of changes in deferred
tax assets and liabilities:
Book basis of plant and
equipment in excess of tax
basis 3,354,000 2,652,000 1,216,000
Nondeductible accrued expenses 239,000 (303,000) --
(Increase) decrease in net
operating loss carryforward (2,979,000) 1,588,000 1,195,000
(Increase) decrease in tax
credits carryforward (80,000) 80,000 --
Increase in Nebraska investment
credit carryforward (931,000) (170,000) (3,427,000)
AMT credit carryforward and
other 258,000 (230,000) (179,000)
Change in asset valuation
allowance 139,000 (3,617,000) 1,195,000
Deferred tax expense -0- -0- -0-
Income tax (benefit) expense $ (18,895) $ 355,256 $ 141,377
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. INCOME TAXES (Continued)
A reconciliation between the actual income tax expense and
income taxes computed by applying the statutory Federal income
tax rate to earnings before income taxes is as follows:
<TABLE>
<CAPTION>
June 30,
1997 1996 1995
<S> <C> <C> <C>
Computed income tax expense,
at 34% $ 582,894 $ 4,139,953 $ 2,112,687
Utilization of net operating
loss carryforwards (582,894) (4,139,953) (2,112,687)
Alternative minimum tax -- 239,256 141,377
Other, net (18,895) 116,000 --
Total income tax
(benefit) expense $ (18,895) $ 355,256 $ 141,377
</TABLE>
The Company has deferred income tax liabilities and assets arising from the
following temporary differences and carryforwards:
<TABLE>
<CAPTION>
June 30,
1997 1996
<S> <C> <C>
Deferred tax liabilities:
Book basis of property, plant and
equipment in excess of tax basis $ 13,318,000 $ 9,964,000
Deferred tax assets:
Net federal and state operating loss
carryforwards $ 5,510,000 $ 2,531,000
Nebraska investment credit carryforward 4,528,000 3,597,000
General business credit carryforward 5,857,000 5,777,000
AMT credit carryforward and other 420,000 678,000
Nondeductible accrued expenses 64,000 303,000
16,379,000 12,886,000
Less: Valuation allowance 3,061,000 2,922,000
$ 13,318,000 $ 9,964,000
Net deferred income taxes $ -0- $ -0-
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
10. PREFERRED STOCK
The Company had 25,000 shares authorized of no par value
cumulative preferred stock at June 30, 1994. All 25,000 shares
were designated 11.5% cumulative preferred stock and were
outstanding. Cumulative dividends on the outstanding preferred
stock aggregating $174,200 ($6.98 per share) had not been
declared or provided for at June 30, 1994. During the fiscal
year ended June 30, 1995, the preferred stock was converted into
36,918 shares of common stock.
11. COMMON STOCK SPLIT
On February 22, 1995, the Company issued 3,786,562 additional
shares of common stock necessary to effect a 4-for-3 common
stock split. The earnings per common share for the year ended
June 30, 1995 has been retroactively adjusted for the above
splits as if they had occurred on July 1, 1994.
12. STOCK-BASED COMPENSATION
The Company has three stock-based compensation plans which are
described below. Grants to employees under those plans are
accounted for following APB Opinion No. 25. Accordingly, no
compensation cost has been recognized for options granted to
employees in the financial statements, except under the employee
stock purchase plan where compensation expense equals the excess
of the fair market value of the shares over the exercise price
on the grant date. Grants to non-employees under the plans are
accounted for under FAS 123. For the 50,000 options granted to
non-employees in the year ended June 30, 1997, $78,868 was
recognized as compensation expense. Had compensation cost for
all the stock-based compensation plans been determined based on
the fair value grant date, consistent with the provisions of FAS
123, the Company's net earnings and earnings per share would
have been reduced to the proforma amounts below:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net earnings:
As reported $ 1,733,290 $ 11,821,077
Pro forma 1,381,750 10,302,658
Earnings per share:
As reported $ .11 $ .74
Pro forma .09 .65
</TABLE>
The pro forma requirements of FAS 123 have been applied only to
options granted after June 30, 1995.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
12. STOCK-BASED COMPENSATION (Continued)
Fixed Stock Option Plans - The Company has two fixed option
plans under which it may grant options to key employees,
officers and directors to purchase common stock, with a maximum
term of 10 years, at the market price on the date of grant.
Options up to 1,200,000 shares may be granted under the 1990
plan and options up to 3,000,000 shares may be granted under the
1992 plan. All options are 100% vested at the date of grant.
The fair value under FAS 123 of each option granted is estimated
on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions for 1997
and 1996: dividend rate of 0% for all years; price volatility
of 51.47% and 51.49%; risk-free interest rates of 6.6% and
6.26%; and expected lives of 5 years and 4 years.
A summary of the status of the two fixed plans at June 30, 1997,
1996, and 1995 and changes during the years then ended is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
Weighted- Weighted- Weighted-
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding and
exercisable
at beginning
of year 2,175,154 $5.7334 1,964,675 $4.7652 1,495,800 $3.8410
Granted 204,333 3.9377 986,821 5.1525 522,000 7.8381
Net effect of
stock split -- -- 562,354 n/a
Exercised:
Prior to stock
split -- -- 290,600 2.9219
After stock
split 124,333 3.3689 776,342 2.5447 324,879 2.8200
Expired or
surrendered 436,961 5.8665 -- --
Outstanding and
exercisable at
end of year 1,818,193 5.6612 2,175,154 5.7334 1,964,675 4.7652
Weighted-average
fair value per
option of
options granted
during the year
under FAS 123 $2.04 $2.38 n/a
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
12. STOCK-BASED COMPENSATION (Continued)
The following table summarizes information about the outstanding
options at June 30, 1997:
<TABLE>
<CAPTION>
Weighted- Weighted
Average Average
Number Remaining Remaining
Range of Exercise Prices Outstanding Life Life
<S> <C> <C> <C>
$3.19 to $5.00 443,000 6.1 years $ 3.6480
$5.12 to $6.12 943,193 5.1 years 5.3779
$8.34 432,000 7.4 years 8.3440
1,818,193
</TABLE>
The Company's 1990 and 1992 Stock Option Plans were approved for
modification at the Company's November 1994 annual meeting of
stockholders. The approved amendments provide that when
optionees exercise their options, above, and remit the exercise
payment to the Company, they may be granted a one-time option to
purchase a like quantity of Common Shares as those options
exercised (Reload Options). The Reload Options shall have an
exercise price equal to the closing sales price of the Company's
Common Stock on the day in which the original options were
exercised, and shall have an exercise period that extends to the
later of one year from the date of grant of the Reload Option or
the expiration date of the originally exercised option. Options
subject to reload included in total outstanding options at June
30, 1997 totaled 975,000 shares. These have a weighted-average
exercise price of $6.31.
The implementation of the above amendments to the 1990 and 1992
plans was delayed by the Directors until August 2, 1995. On
that date, 366,746 options were granted to optionees who had
exercised their options prior to August 2, but after November,
1994, as compensation for the delay in implementation of the
"Reload" amendments. The exercise price of these options was
$5.25, the closing sales price on August 2, 1995. Further, on
August 4, 1995, options totaling 264,675 were exercised;
accordingly, Reload Options in the same amount were granted at
that day's closing price, also $5.25 per share. These 631,421
options are not subject to further "Reload" provisions.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
12. STOCK-BASED COMPENSATION (Continued)
Employee Stock Purchase Plan - In August, 1995 the Company
adopted a compensatory Employee Stock Purchase Plan, effective
for a 3-year period, to provide employees of the Company with an
incentive to remain with the Company and an opportunity to
participate in the growth of the Company. The plan is
administered by the Company's Board of Directors. Employees
with one year of service are able to elect annually to purchase
shares of the Company's common stock at a price equal to 50% of
its lowest market value recorded between May 1 and August 1 of
each calendar year. The aggregate number of shares which may be
purchased under the plan shall not exceed 80,000 as adjusted for
stock splits or stock dividends.
Employees must elect to purchase a designated number of shares
on or before May 15 of each calendar year, except that the
election for the first year may be made on or before January 31,
1996. The number of shares that may be purchased by each
employee is limited to 100 shares per year of service. The
shares are paid for by the participating employees through
payroll deductions ratably over a five-year period and
prepayment is not permitted. The employee vests in the shares
over the same five-year period based on the amounts paid.
Shares are transferred to the employee only at the end of the
five-year period. Compensation cost is measured on August 1 of
each year, which is the first date that both the purchase price
and the number of shares are known. The amount of compensation
measured on the measurement date is recorded as deferred
compensation and charged to expense over the periods in which
the employee performs the related services, which is the same as
the vesting period.
The Company also adopted a stock purchase plan for certain key
management personnel, which is similar to the above plan, except
that the aggregate number of shares available shall not exceed
250,000 and the employee is limited to 1,000 shares plus an
additional 1,000 shares for each year of service. Vesting is
the same as above except that any employee who is also an
officer of the Company and who has achieved at least ten
continuous years of employment shall have the option to prepay
any balance due for shares purchased under the plan. At that
time, the Company will immediately transfer said shares to the
employee. The amount of compensation measured for this key
management employee plan is on the same measurement date as set
forth above for the employee plan. Deferred compensation is
recorded and charged to expense over the five-year vesting
period except for those officers eligible to prepay. For those
officers, the expense is recognized immediately upon the
measurement date.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
12. STOCK-BASED COMPENSATION (Continued)
Employees and key management personnel elected to purchase
shares through the stock purchase plan as noted below:
<TABLE>
<CAPTION>
Number
of Exercise Deferred
Year Shares Per Share Compensation
<S> <C> <C> <C>
1997 87,600 $ 1.50 $ 273,750
1996 75,700 2.50 141,937
</TABLE>
Amortization of the deferred compensation recognized in the
income statement was $107,923 and $53,230 for the period ending
June 30, 1997 and 1996, respectively. Forfeitures of shares in
1997 from employee terminations totaled 13,539 shares under the
1996 year purchase. The fair value under FAS 123 of each
purchased share is estimated on the date of grant using the
Black-Scholes option pricing model with the following
assumptions: expected life of 5 years for all years; dividend
rate of 0% for all years; risk-free interest rates of 6.8% and
5.6% in 1997 and 1996, and price volatility of 53% in 1997 and
1996. The weighted average fair value per share granted would
be $3.09 in 1997 and $2.91 in 1996.
13. MAJOR CUSTOMERS
Sales to individual customers of 10% or more of net sales and
revenues are as follows:
<TABLE>
<CAPTION>
Sales During the Year Trade Accounts Receivable
Ended June 30, Balance at June 30,
Customer 1997 1996 1995 1997 1996
<S> <C> <C> <C> <C> <C>
A $12,532,761 $ -- $ -- $ 421,759 $ --
B 8,653,840 11,356,458 8,871,672 594,879 568,016
C 6,460,989 8,553,353 8,384,212 425,999 587,508
D -- -- 9,345,425 -- --
E -- 13,917,311 -- -- --
$27,647,590 $33,827,122 $26,601,309 $ 1,442,637 $1,155,524
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
14. EARNINGS PER SHARE
Earnings per common and dilutive common equivalent share
(primary earnings per share) are computed by dividing net
earnings by the weighted average number of common stock and
common stock equivalent shares with a dilutive effect.
Share and per share information have been adjusted to give
effect to stock splits in the three years ended June 30, 1997.
Earnings per common share assuming full dilution assume, in
addition to the above, the additional dilutive effect of stock
options whenever the period end stock price of the Company is
higher than the average stock price of the Company during the
period. Such per share amounts are not separately presented
since they are equal to earnings per common and dilutive common
equivalent share.
The weighted average number of common stock and common stock
equivalent shares used in the computation of net earnings per
share of common stock is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Earnings per common
and dilutive common
equivalent share:
Weighted average
common shares 15,933,157 15,736,310 14,760,967
Stock options 90,323 192,095 908,134
Average common and
common dilutive
shares outstanding 16,023,480 15,928,405 15,669,101
Earnings per common share
assuming full dilution:
Additional dilutive
effect of
stock options -- -- --
Common stock outstanding
assuming full
dilution 16,023,480 15,928,405 15,669,101
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
15. ADDITIONAL INFORMATION FOR STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Interest paid $ 1,328,310 $ 2,249,297 $ 2,051,866
Income taxes paid -- 645,000 145,813
</TABLE>
The Company had the following non-cash transactions:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Purchase of plant and equipment
in exchange for debt $ 3,271,074 $ 66,286 $ 496,250
Increase in accrued compensation
costs at implementation of
employee stock purchase plan 273,750 141,937 --
Surrender of common stock in
lieu of employee payroll tax
obligations 126,251 493,283 --
Increase in additional
paid-in-capital from tax
benefit of exercise of
stock options -- 116,000 --
Decrease in deferred
compensation from
employee terminations 23,260 -- --
Acceptance of notes receivable
in exchange for sale of property,
plant and equipment -- -- 400,000
Exchange of preferred stock for
common stock -- -- 150,000
</TABLE>
16. 401(k) PLAN
The Company adopted a 401(k) Plan on June 1, 1991. All
employees who are over the age of 19 and have one year (1,000
hours) of service are eligible to participate. Employees may
contribute from 1% to 12% of their pay. The Company matches
100% of the first 1% of employee salary deferrals and 50% of the
next 5% of employee salary deferrals. The Company contributions
to the Plan for the years ended June 30, 1997, 1996 and 1995
were $27,822, $27,100 and $29,165, respectively.
Item 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT
Under the securities laws of the United States, the Company's
directors, executive officers, and any persons holding more than
ten percent of the Company's securities are required to report to
the Securities and Exchange Commission and to the NASDAQ National
Market System by a specified date his or her ownership of or
transactions in the Company's securities. To the Company's
knowledge, based solely on information filed with the Company, all
of these requirements have been satisfied, except as noted below:
Ronald D. Offutt and Arthur Greenberg each failed to timely file
one Form 3 and one Form 4 each, with a total of one transaction for
each Form 4, for the month of June 1997. The transactions involved
the issuance of stock options to each of the individuals as new
directors of the Company. The Form 3 and Form 4's reflecting these
transactions were filed in October, 1997. Also, Gregory Heuer and
Daniel Allison, management personnel of the Company, failed to file
one Form 4 each reflecting a total of two transactions each for the
month of January 1997. The transactions involved the purchase of stock
through an employee stock purchase plan. The Form 4's listing
these transactions were filed in March 1997.
The balance of information relating to this item is hereby
incorporated by reference from the "Directors and Executive
Officers" section of the High Plains Corporation definitive Proxy
Statement for the 1997 Annual Meeting of Stockholders, which is
anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal
year ended June 30, 1997.
Item 11 EXECUTIVE COMPENSATION
The information relating to this item is hereby incorporated by
reference from the "Executive Compensation" section of the High
Plains Corporation definitive Proxy Statement for the 1997 Annual
Meeting of Stockholders, which is anticipated to be filed with the
Securities and Exchange Commission within 120 days after the end
of the Company's fiscal year ended June 30, 1997.
<PAGE>
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information relating to this item is hereby incorporated by
reference from the "Security Ownership of Certain Beneficial
Owners and Management" section of the High Plains Corporation
definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders, which is anticipated to be filed with the Securities
and Exchange Commission within 120 days after the end of the
Company's fiscal year ended June 30, 1997.
Item 13 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information relating to this item is hereby incorporated by
reference from the "Certain Relationships and Related
Transactions" section of the High Plains Corporation definitive
Proxy Statement for the 1997 Annual Meeting of Stockholders, which
is anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal
year ended June 30, 1997.
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Documents Filed as a Part of This Report
(1) Financial Statements
The financial statements, notes and independent auditors' reports
described in Item 8, to which reference is hereby made.
<PAGE>
(2) Financial Statement Schedules
None.
(3) Exhibits
See Index to Exhibits attached hereto and incorporated by
reference herein.
(b) Reports on Form 8-K
During the quarter for which this report is filed, these
reports on Form 8-K have been filed.
May 14, 1997 Disclosure of delay in production of
industrial grade ethanol and extension of
time granted to meet sales contract for
same.
May 14, 1997 Company disclosed appointment of Raymond
G. Friend, President to the Board of
Directors, along with two new outside
directors, Ronald D. Offutt and Arthur
Greenberg.
May 15, 1997 Announced the retirement of then Chairman
and President Stanley E. Larson, election
of Daniel O. Skolness as Chairman of the
Board and promotion of Raymond G. Friend
as President. Additionally, Company
announces cancellation of industrial grade
contract by customer for reasons of force
majeure.
May 22, 1997 Disclosure of earnings per share for the
quarter ending March 31, 1997.
(c) Exhibits
Exhibits are listed in Item 14(a)(3) and filed as part of
this report.
All forward-looking statements made in these materials and materials
incorporated herein by reference are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve
risks and uncertainty. Among the factors that could cause actual
results to differ materially from those anticipated by certain of the
above statements are the following: 1) legislative changes regarding
air quality, fuel specifications or incentive programs; 2) changes in
cost of grain feedstock; 3) changes in market prices or demand for
motor fuels and ethanol. Additional information concerning those and
other factors is contained in the Company's Securities and Exchange
Commission filings, including but not limited to, its Proxy Statement,
Annual Report, quarterly 10Q filings and press releases, copies of
which are available from the Company without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized in Wichita, Kansas on the 10th day of
October, 1997.
HIGH PLAINS CORPORATION
By:/Raymond G. Friend/
Director/President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on the behalf of the Registrant and in the capacities
and on the date indicated.
Signature Title Date
Chairman of the
Board and a
/ Daniel O. Skolness / Director October 10, 1997
/ Raymond G. Friend / Director/President October 10, 1997
/ H.T. Ritchie / Director/Secretary October 10, 1997
/ Donald Schroeder / Director/Treasurer October 10, 1997
/ John F. Chivers / Director October 10, 1997
/ Donald M. Wright / Director October 10, 1997
/ Arthur Greenberg / Director October 10, 1997
/ Ronald Offutt / Director October 10, 1997
<PAGE>
Page 1 of 3
Index to Exhibits
3-1 Articles of Incorporation, as amended, of the Company,
(incorporated herein by reference to Exhibits 3.1
through 3.10 to the Company's Registration Statement on
Form S-1, dated February 9, 1993).
3-2 Bylaws of the Company, as amended, of the Company
(incorporated herein by reference to Exhibits 3.5 and 3.6 to
the Company's Registration Statement on Form S-1, dated
April 18, 1988).
3-3 Certificate of Amendment to Articles of Incorporation
of the Company, dated October 14, 1994 (incorporated herein
by reference to Exhibit 3-7 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995).
3-4 Certificate of Amendment of Articles of Incorporation
of the Company, dated November 22, 1994 (incorporated herein
by reference to Exhibit 3-8 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995).
3-5 Certificate of Correction of Certificate of Amendment
to Articles of Incorporation of the Company, dated March 22,
1993, (incorporated herein by reference from Exhibit 4-2 to
the Company's Registration Statement on Form S-8, dated
January 16, 1996).
4-1 Form of Common Stock Certificate (incorporated herein
by reference from Exhibit 4-1 to the Company's Registration
Statement on Form S-1, dated April 18, 1988).
10-1 Ethanol production credit agreement with the State of
Nebraska Department of Revenue dated October 9, 1992
(incorporated by reference from Exhibit 10-7 to the
Company's annual filing on Form 10-K, dated June 30, 1994).
<PAGE>
Page 2 of 3
10-2 High Plains Corporation 1990 Stock Option Plan
(incorporated by reference from Exhibit 10-8 to the
Company's Registration Statement on Form S-1, dated February
9, 1993).
10-3 High Plains Corporation 1992 Stock Option Plan
(incorporated by reference from Exhibit 10-14 to the
Company's Registration Statement on Form S-1, dated February
9, 1993).
10-4 Lease dated April 12, 1993 between High Plains
Corporation and Garvey Center L.C. (incorporated by
reference from Exhibit 10-8 to the Company's annual filing
on Form 10-K, dated June 30, 1994).
10-5 Exchange and Release Agreements dated October 18,
1994, providing conversion rights for the 11 1/2% Cumulative
Preferred Stock to Common Stock (incorporated by reference
from Exhibit 10-2 to the Company's quarterly filing on Form
10-Q, dated September 30, 1994).
10-6 Amendment to the Company's 1990 Stock Option Plan, dated
November 18, 1994, increasing the number of shares
available under the plan and granting of additional
options to replace certain options when exercised
(incorporated by reference from Exhibit 10-11 to the
Company's annual filing on Form 10-K dated June 30,
1995).
10-7 Amendment to the Company's 1992 Stock Option Plan,
dated November 18, 1994, increasing the number of shares
available under the plan and granting of additional options
to replace certain options when exercised (incorporated by
reference from Exhibit 10-12 to the Company's annual filing
on Form 10-K dated June 30, 1995).
10-8 Real Estate Installment Agreement dated January 19,
1995, between David J. Vander Griend and the Company,
regarding sale of certain real estate (incorporated by
reference from Exhibit 10-5 to the Company's filing on Form
8-K dated January 19, 1995).
<PAGE>
Page 3 of 3
10-9 Asset Purchase Agreement dated January 19, 1995, between
ICM, Inc. and the Company, regarding sale of various
tangible and intangible property (incorporated by
reference from Exhibit 10-6 to the Company's filing on
Form 8-K dated January 19, 1995).
10-10 Employment Agreement dated April 1, 1995, between the
Company and Raymond G. Friend, for the continuation of
employment through July 1, 2000 (incorporated by reference
from Exhibit 10-18 to the Company's annual filing on Form 10-K
dated June 30, 1995).
10-11 High Plains Corporation 1995 Employee Stock Purchase Plan
(incorporated herein by reference from Exhibit 4-14 to the
Company's Registration statement on Form S-8, dated January
22, 1996).
10-12 High Plains Corporation 1995 Key Management Employee
Stock Purchase Plan (incorporated herein by reference from
Exhibit 4-15 to the Company's Registration Statement on Form
S-8, dated January 22, 1996).
10-13 Agreement between the Company and ConAgra, Inc., for sale
of Dried Distiller's Grains and Wet Distiller's Grains
(incorporated herein by reference from Exhibit 10-14 to
the Company's annual filing on Form 10-K dated June 30,
1996).
10-14 Stanley E. Larson Retirement and Consulting Agreement,
dated April 11, 1997 attached hereto.
10-15 Agreement between Centennial Trading, LLC, Michael Rowan
and the Company, dated January 7, 1997, for the
exclusive supply of grain to the Company, attached
hereto.
11-1 Statement on Computation of Per Share Earnings
(incorporated herein by reference from the Company's 1997
Annual Report to Stockholders for the fiscal year ended June
30, 1997 which is anticipated to be filed with the
Securities and Exchange Commission within 120 days after the
end of the Company's fiscal year ended June 30, 1997).
24-1 Consent of Allen, Gibbs, and Houlik, L.C., independent
certified public accountants.
27-1 Financial Data Schedule.
<PAGE>
Exhibt 10.14
AGREEMENT
This Agreement is made this 11th day of April, 1997 by and
between High Plains Corporation (High Plains or HPC), a Kansas
corporation, and Stanley E. Larson (Larson), an individual
resident of Tucson, Arizona.
Whereas, Larson is currently the President and Chairman of the
Board of High Plains pursuant to that certain Employment Agreement
dated April 1, 1995; and,
Whereas, Larson and the Board of Directors of High Plains have
reached an agreement pursuant to which Larson will resign as an
officer and director, and agree to the termination of his
Employment Contract, in return for the consideration set forth
herein.
Therefore, in consideration of the mutual covenants and
conditions set forth herein, the parties agree as follows:
1. By his signature below, Larson hereby resigns, effective
immediately, his positions as an officer, board member, and
Chairman of the Board, of High Plains. Larson further agrees that
his Employment Contract with High Plains is terminated,
effectively immediately; that neither he nor High Plains shall be
under any further obligation to each other pursuant to the terms
of said Employment Contract except for the provisions of
paragraphs 9, 10, 11, 12, and 13, which specifically survive the
termination of that contract, and which the parties agree shall be
effective and in force until July 1, 2000; and that each party
hereby waives any and all claims against the other arising out of
the Employment Contract, the employment relationship, or the
termination thereof.
2. Larson agrees to terminate the Vehicle Lease Agreement dated
May 29, 1996 with High Plains in accordance with its terms, by
paying to High Plains the sum of $24,048, representing the
unearned portion of the lease prepayment made on the vehicle by
High Plains. Upon receipt of this amount, High Plains will
release to Larson any right title or interest it may have in the
vehicle covered by said lease.
3. Larson agrees to immediately surrender for cancellation
388,761 options to purchase common stock of High Plains previously
granted to him by the company. He may retain the 10,000 options
that were granted on May 8, 1996 with an exercise price of $3.50,
under the terms of the High Plains Corporation Stock Option Plan,
and the Stock Option Agreement, which require these options to be
exercised within 90 days of termination of employment, or they
will expire. The parties acknowledge that the options previously
issued to Larson pursuant to the High Plains Corporation Employee
Stock Purchase Plan (ESPP) were exercised by Larson on April 10,
1997.
<PAGE>
4. In consideration of the termination of Larson's employment
contract, High Plains agrees to pay to Larson an amount equal to
the payments High Plains would have made for bonus payments
(pursuant to paragraph 5(b) of the Employment Contract) over the
remaining term of the contract (expiring July 1, 2000), even
though Larson will no longer be an employee of High Plains.
Larson specifically waives any additional benefits which would
have been due and payable under the Employment Contract, except as
otherwise specifically set forth below. Payments shall be made
quarterly for these bonus amounts, in accordance with the payment
terms which were set forth in the contract. Additionaly, High
Plains agrees to grant to Larson the following options to purchase
High Plains' common stock:
14,000 non-qualified options to be granted on August 1, 1997,
under the terms of the company's 1992 Stock Option Plan, at
an exercise price equal to one-half of the lowest closing
price achieved by the company's stock between May 1, 1997 and
August 1, 1997 (in replacement of the options Larson would
have received under the ESPP if he were still an employee as
of August 1, 1997). These options will terminate if not
exercised on or before April 10, 2001, or in the event of
Larson's death prior to that time, within 12 months after the
date of his death, but not later than April 10, 2001.
5. The parties further agree to enter into a consulting
arrangement whereby Larson will consult for High Plains on an as
needed basis at the request of High Plains and in the areas of his
expertise. The parties currently contemplate these services to
include areas such as legislative initiatives, public relations,
and assistance in reviewing and evaluating merger and acquisition
opportunities. Larson also agrees to cooperate with High Plains
in the prosecution or defense of pending or future litigation
involving the company. This consulting agreement shall continue
until July 1, 2000, and Larson agrees to use his best efforts to
make himself available to perform these services as reasonably
requested by High Plains. However, both parties agree that Larson
is no longer an employee of High Plains, and that his status as a
consultant will be on individual matters specifically requested by
the High Plains Corporation Board of Directors. Larson shall have
no authority to contract on behalf of High Plains, or to commit
High Plains to any obligation or agreement, but only to advise the
Board regarding requested matters. Any expenses incurred by
Larson in this consulting capacity on requested matters shall be
subject to reimbursement by High Plains.
6. In consideration of this consulting agreement High Plains
agrees to pay to Larson payments equal to those that High Plains
would have made as salary pursuant to paragraph 5(a) of the
Employment Contract over the remaining term of the contract
(expiring July 1, 2000). These payments shall be made at least
monthly, however, the parties agree that these salary amounts may
<PAGE>
be prepaid at any time if High Plains determines in its discretion
that it can do so without impairing its cash flow requirements.
In the event of either the termination of this consulting
agreement or the death of Larson prior to full payment of the
amounts due under this paragraph 6, the amounts payable in
replacement of the salary portion of the Employment Contract shall
continue to be paid to Larson or his estate until paid in full,
but all other payments or benefits provided for in this paragraph
6 shall terminate immediately. Any options already granted shall
be retained by Larson, but no additional options shall be granted
after Larson's death or termination of the Consulting Agreement.
The consulting agreement may be terminated at any time by Larson
upon written notice to High Plains, and shall be considered
terminated automatically upon Larson's death. As additional
consideration for the services to be provided by Larson pursuant
to this consulting agreement, High Plains agrees to grant to
Larson the following options to purchase High Plains common stock:
a. 50,000 non-qualified options to be granted on April 11,
1997, under the terms of the company's 1992 Stock
Option Plan, at an exercise price equal to the closing
price of the stock on April 11, 1997.
b. 50,000 non-qualified options to be granted on April 11,
1998, under the terms of the company's 1992 Stock
Option Plan, at an exercise price equal to the closing
price of the stock on April 13, 1998.
c. 50,000 non-qualified options to be granted on April 11,
1999, under the terms of the company's 1992 Stock
Option Plan, at an exercise price equal to the closing
price of the stock on April 12, 1999.
All of these options shall expire if not exercised on or before
the earlier of either April 10, 2001, or 12 months following the
termination of the consulting agreement as described above.
In witness whereof, the parties have executed this agreement
as of the day and year first written above.
HIGH PLAINS CORPORATION LARSON
By_s/H.T. Ritchie____________ s/Stanley E. Larson______
H.T. Ritchie Stanley E. Larson
Chairman,
Compensation Committee
Exhibit 10.15
EXCLUSIVE GRAIN SUPPLY AGREEMENT
AGREEMENT made this 1st day of January, 1997, by and between
Mike Rowan, an individual resident of 1620 Magnolia, Liberty,
Missouri, 64068 "Rowan" and High Plains Corporation, a Kansas corporation
with its principal offices at 200 W. Douglas, Suite 820, Wichita,
Kansas 67202, "High Plains".
WHEREAS, High Plains is a purchaser of grain for use at its
Colwich, Kansas and York, Nebraska plants, and Rowan has expertise
in the grain and feed business; and
WHEREAS, both Rowan and High Plains desire to enter into an
exclusive supply agreement for the procurement of grain by Rowan
for High Plains for use at High Plains' Colwich, Kansas and York,
Nebraska, plants.
NOW, THEREFORE, in consideration of the mutual agreements and
other good and valuable consideration hereinafter set forth, the
parties agree as follows:
1. SALE OF PRODUCTS. This Agreement applies to all grain
purchased by High Plains for use at its Colwich, Kansas and York,
Nebraska, plants (the "Grain"). High Plains agrees to buy all of
its requirements of Grain through Rowan, who will contract for
High Plains as an independent contractor, during the term of this
Agreement. Rowan agrees to sell or acquire for the benefit of
High Plains, subject to availability, such Grain to High Plains
for the term of this Agreement. Rowan and High Plains agree that
such purchases will be at terms, conditions and price as agreed
upon. Title and risk of loss for grain shall pass to High Plains
upon unloading of the grain at High Plains plant. Rowan shall
provide grain in quantities as necessary to permit High Plains to
maintain its usual production schedule.
2. FORECAST INFORMATION. Rowan agrees to provide High Plains
with regular feedgrain analyses and other forecast information
available from third-parties to assist High Plains in its purchase
decisions. However, regardless of any price or purchase
recommendations or forecasts provided by Rowan, High Plains
remains solely responsible for its purchasing decisions and any
gains or losses resulting from those decision. Rowan PROVIDES NO
WARRANTY AS TO ANY PRICING PROJECTIONS, FORECASTS OR PURCHASE
RECOMMENDATIONS. Rowan further agrees to provide the following
additional services to High Plains during the term of this
agreement at his own cost and expense: a) continually monitor,
arrange and adjust scheduling of grain shipments to meet High
Plains needs; b) responsibility for truck and rail transportation
needs, including price management techniques such as back-hauls
and arbitrage arrangements; c) sourcing of alliances with third
parties for storage and execution backstops as needed; d)
accounting and auditing for transportation, grain taxes, cash flow
management, etc.; e) assist High Plains in lobbying efforts in
<PAGE>
grain and feed areas; f) assist in implementation and monitoring
of appropriate risk management procedures relating to High Plains
grain needs; and g) communicate and cooperate with designated High
Plains personnel in determining grain needs, sourcing, scheduling
and pricing grain, and coordinating the other services Rowan
agrees to perform for High Plains pursuant to this agreement.
3. PRICE. Rowan agrees to supply grain to High Plains at a
fixed price, F.O.B. Colwich, Kansas or York, Nebraska. Rowan will
absorb the costs of all freight, transportation, inventory carry
charges, and all state or other grain taxes prior to delivery of
grain. Rowan will use his best efforts to obtain the lowest
possible total grain cost for High Plains under prevailing market
conditions. High Plains shall pay Rowan the amount actually paid
by Rowan to his supplier for the grain, plus actual freight
incurred (crediting reductions for backhaul or arbitrage
arrangements), plus grain taxes paid , plus a fee in the amount of
$.0175 per bushel. The parties may also agree to enter into
certain hedging, or other futures agreements from time to time, in
which event all costs of such hedging, including margin calls and
commissions, will be the responsibility of High Plains. Rowan
agrees to back up all contracts for delivery of grain to High
Plains with either futures or trades on the Chicago Board of
Trade, or with individual supply contracts from farmers, local
elevators, or other legitimate sources, and shall provide evidence
of this backup to High Plains upon request. All such futures or
contracts shall be executed on behalf of, and transacted in the
name of High Plains by Rowan, upon approval of High Plains. Rowan
shall keep complete and accurate records of all transactions made
for the benefit of High Plains, and High Plains shall have the
right to audit and copy all records in any way relating to grain
or futures contracts purchased, or to expenses incurred in
connection with said transactions, upon reasonable notice to
Rowan, and at the sole expense of High Plains. The parties agree
that after the first 90 days of the term of this agreement has
passed, they will cooperate in attempting to establish a mutually
agreeable method for measuring Rowan's effectiveness as a grain
purchasing agent, with the idea that if Rowan's performance under
this contract can be effectively measured, and his efforts have
resulted in significant savings to High Plains, then Rowan's fee
arrangement may be restructured to include a performance bonus
provision agreeable to both parties.
4. PAYMENT. Payment for purchases under this Agreement are
due daily, and shall be made by drafting an account of High
Plains' choice on the first business day following delivery to
High Plains. The weight of Raw Grains delivered by Rowan to High
Plains shall be established by weight certificates. High Plains
shall obtain truck weights on the scales at the High Plains
Plants, which shall be maintained by High Plains as required by
applicable laws, rules and regulations, and rail weights will be
obtained on any certified railroad scales. Whenever High Plains
<PAGE>
truck scales are unavailable or inoperable, any certified scales
may be used, at High Plains expense, until High Plains scales are
restored. The inbound weight certificates shall be determinative
of the quantity of Raw Grains for which High Plains is obligated
to pay pursuant to Section 3 hereof.
5. TERM. This Agreement shall commence on January 31, 1997
and continue for one year. After the first year, the Agreement
shall automatically renew for one-year terms. However, either
party may terminate this Agreement at any time upon giving the
other party thirty (30) days notice of termination in writing.
This Agreement may be terminated immediately by either party if
(i) the other party's financial responsibility becomes impaired,
(ii) the other party makes an assignment or arrangement for
benefit of creditors or (iii) files a petition in bankruptcy or
has such petition filed against it.
Upon expiration, termination, or cancellation of this Agreement,
neither party shall have any rights or obligations or liability to
the other party with respect to this Agreement except for (a) the
obligation to make full payment of any outstanding monetary
obligations owed to the other party which monetary obligation was
incurred prior to the date of such expiration, termination or
cancellation, and (b) obligations under any Grain or futures
contract which existed prior to such expiration, termination or
cancellation of this Agreement.
6. EMPLOYEES. The parties agree that Rowan is not an employee
of High Plains, and that his relationship is that of an
Independent contractor only. Each party shall be solely
responsible for the acts and inactions of its own employees acting
within the course and scope of their employment by such party and
each party shall be solely responsible for the salary, wages and
payroll taxes for its employees and shall maintain Workers'
Compensation Insurance on its employees as required by applicable
state law. The parties shall have no joint employees as a result
of this Agreement and neither party shall incur any responsibility
or liability whatsoever with respect to, or for the acts or
inactions of, the employees of the other party as a result of this
Agreement.
7. INDEMNIFICATION. Rowan shall indemnify and hold High
Plains, and its affiliates, subsidiaries, parents, directors,
officers, employees and agents harmless from and against any and
all claims, losses, awards, judgements, settlements, fines,
penalties, liabilities, damages, costs or expenses (including
attorneys' fees) alleged or incurred on account of any injury or
death of persons or damages to property or any other claim to the
extent caused by or arising out of the negligent acts or omissions
of Rowan, its officers, agents or employees, or any breach by
Rowan, its officers, agents or employees, of any of the terms of
this Agreement, or any representations by Rowan which are not
<PAGE>
authorized pursuant to the Agreement or pursuant to specific
instructions given to Rowan by High Plains.
High Plains shall indemnify and hold Rowan, and its affiliates,
subsidiaries, parents, directors, officers, employees and agents
harmless from and against any and all claims, losses, awards,
judgements, settlements, fines, penalties, liabilities, damages,
costs or expenses (including attorneys' fees) alleged or incurred
on account of any injury or death of persons or damages to
property or any other claim to the extent caused by or arising out
of the negligent acts or omissions of High Plains, its officers,
agents or employees, or any breach by High Plains, its officers
agents, or employees, of any of the terms of this Agreement, or
any representations by High Plains which are not authorized
pursuant to this Agreement or pursuant to specific instructions
given to High Plains by Rowan.
8. FORCE MAJEURE. Neither party shall be liable for failure
to perform or for delay in performing this Agreement, other than
for an existing debt, where such failure or delay is occasioned by
(a) fire, explosion, breakdown of plant, failure of machinery,
strike, lock-out, labor dispute, casualty or accident, or lack or
failure in whole or in part of transportation facilities, (b)
storm, flood or drought, (c) lack or failure in whole or in part
of the sources of supply (other than Grain), labor, or power or
other utilities, (d) acts of God or the public enemy, war, riots,
police action, or civil commotion, (e) any law, regulation,
ordinance, demand, judgment, injunction, arbitral award, or other
requirement or regulation of any government or government agency
or instrumentality or (f) any other act whatsoever, whether
similar or dissimilar to those above-enumerated, beyond the
reasonable control of the party suffering such event of force
majeure. The party asserting that an event of force majeure has
occurred shall send the other party notice thereof by cable,
telecopy or telex no later than three (3) days after the beginning
of such claimed event setting forth a description of the event of
force majeure, an estimate of its effect upon the party's ability
to perform its obligations under this Agreement and the duration
thereof. The notice shall be supplemented by such other
information or documentation as the party receiving the notice may
reasonably request. As soon as possible after the cessation of
any event of force majeure, the party which asserted such event
shall give the other party written notice os such cessation.
Whenever possible, each party shall give the other party notice of
any threatened or impending event of force majeure.
9. ALTERNATE DISPUTE RESOLUTION. This contract is subject to
the National Grain and Feed Association Grain Trade Rules and
Arbitration Rules. Any controversy arising out of, or relating
to, the Agreement between the parties or any modification or
extension thereof, including any claim for damages or rescission,
or both, shall be settled by arbitration in accordance with those
<PAGE>
rules unless the parties should agree otherwise in writing. The
parties further agree that arbitration proceedings must be
instituted within one year after the occurrence of the claimed
breach, and that the failure to institute arbitration proceedings
within such time period shall constitute an absolute bar to the
institution of any proceedings and a waiver of all claims. All
fees for such arbitration will be divided equally between the
parties except that each party shall pay its own attorney's fees
and the costs associated with producing documents and other
information.
10. NOTICES. All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person or deposited in the
United States mail (registered or certified), postage prepaid or
deposited with a reputable overnight delivery service, with
delivery charges prepaid, in each case addressed or transmitted to
the appropriate address as follows (or as otherwise designated by
a party as to itself by notice to the other party given in
accordance with this section):
If to Rowan: Mr. Mike Rowan
1620 Magnolia
Liberty, Missouri 64068
If to High Plains: High Plains Corporation
200 W. Douglas
Suite 820
Wichita, Kansas 67202
Attn: Raymond G. Friend
11. INSURANCE. During the term of this Agreement, Rowan shall,
at his sole cost and expense, maintain in force Statutory Worker's
Compensation and Employer's Liability Insurance in compliance with
the laws of the states where the work is being performed;
comprehensive General Liability Insurance, which shall include
property damage and personal liability insurance under which Rowan
and High Plains shall be named as coinsureds; and coverage for
contractual liability under this agreement. Such insurance policy
or policies shall be maintained in a minimum amount of One Million
Dollars per occurrence, and Rowan shall deliver to High Plains a
copy of each insurance policy, showing High Plains as a named
insured thereon. The insurance requirements set forth herein are
minimum coverage requirements and are not to be construed in any
was as a limitation on liability under this agreement.
12. WARRANTIES.
Rowan understands that High Plains intends to utilize the Raw
Grains purchased from Rowan as primary base stock for ethanol
<PAGE>
production and for production of a dried distillers grain cattle
feed, and that said Raw Grains are subject to minimum quality
standards for such use. Rowan agrees and warrants that all grain
contracts and deliveries negotiated by Rowan for High Plains shall
contain provisions requiring, and Rowan shall use his best efforts
to insure that:
a. Raw Grains delivered to High Plains shall not be adulterated
or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act and that said Raw Grains may lawfully be introduced
into interstate commerce pursuant to the provisions of the Act.
Raw Grains shall fully comply with any applicable state laws
governing quality, naming and labeling of Raw Grains.
b. Raw Grains delivered to High Plains shall be free and clear
of liens and encumbrances.
c. Rowan agrees and warrants that Raw Grains delivered to the
Plants shall be acceptable in the feed trade under current
industry standards and shall be of merchantable quality.
c. Raw Grains that are deemed to be of non-merchantable quality
shall not be delivered to either plant unless both parties agree
in writing in advance of delivery that the quality of the grain
will not effect the quality of the cattle feed or other by-
products of High Plains' plants.
13. ASSIGNMENT. This Agreement shall not be assigned by either
party without the written consent of the other party, and any
attempted assignment without such consent shall be ineffective.
14. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties and supersedes all previous
agreements either oral or written, between the parties hereto, and
no modifications hereof shall be valid unless made in writing and
signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and
seals the day and year above written.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY
BE ENFORCED BY THE PARTIES.
HIGH PLAINS CORPORATION Mike Rowan
By:s/Raymond G. Friend s/ Michael L. Rowan
Title: Executive Vice President
<PAGE>
ADDENDUM TO EXCLUSIVE
GRAIN SUPPLY AGREEMENT
This Addendum to Exclusive Grain Supply Agreement is made this
7th day of January, 1997, by and between Mike Rowan, an individual
resident of 1620 Magnolia, Liberty, Missouri, 64068 "Rowan"; High
Plains Corporation, a Kansas corporation with its principal
offices at 200 W. Douglas, Suite 820, Wichita, Kansas 67202, "High
Plains"; and Centennial Trading, LLC, a Limited Liability Company
with its principal offices at Kansas City Board of Trade, 4800
Main Street, Suite 502, Kansas City, MO 64112, "Centennial".
WHEREAS, High Plains and Rowan entered into an Exclusive Grain
Supply Agreement (the "Agreement") dated and effective January 1,
1997; and,
WHEREAS, all parties hereto wish to amend said Agreement so that
Centennial assumes all of the rights and responsibilities of Rowan
thereunder.
NOW, THEREFORE, in consideration of the mutual agreements of the
parties and other good and valuable consideration hereinafter set
forth, the parties agree as follows:
1. Rowan hereby assigns, and Centennial accepts and assumes,
all of the rights and responsibilities of Rowan under the
Agreement referenced above, effective immediately. Rowan shall
continue to be personally responsible for the performance by
Centennial of its obligations under the agreement.
2. By its signature below, High Plains consents to the above
assignment to Centennial on the terms set forth herein.
IN WITNESS WHEREOF, the parties hereto have set their hands and
seals effective as of the day and year above written.
HIGH PLAINS CORPORATION Mike Rowan
By:s/ Christopher G. Standlee s/ Michael L. Rowan
Title: Vice President
CENTENNIAL TRADING, LLC
By:s/ Michael L. Rowan
Michael L. Rowan, Member
By:s/ Bryce Wells
Bryce Wells, Member
Exhibit 24.1
REPORT AND CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders and Board of Directors
High Plains Corporation
We hereby consent to the incorporation in this Form 10-K/A of our report dated
August 7, 1997 relating to the financial statements of High Plains
Corporation for the year ended June 30, 1997.
s/ ALLEN, GIBBS & HOULIK, L.C.
Wichita, Kansas
October 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,389,758
<SECURITIES> 0
<RECEIVABLES> 5,756,131
<ALLOWANCES> 75,000
<INVENTORY> 4,246,783
<CURRENT-ASSETS> 12,847,350
<PP&E> 86,022,531
<DEPRECIATION> 20,444,381
<TOTAL-ASSETS> 79,074,532
<CURRENT-LIABILITIES> 12,777,233
<BONDS> 10,200,014
0
0
<COMMON> 1,639,662
<OTHER-SE> 54,016,514
<TOTAL-LIABILITY-AND-EQUITY> 79,074,532
<SALES> 57,941,785
<TOTAL-REVENUES> 63,121,510
<CGS> 59,414,514
<TOTAL-COSTS> 58,804,445
<OTHER-EXPENSES> 1,653,681
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,354,983
<INCOME-PRETAX> 1,714,395
<INCOME-TAX> 18,895
<INCOME-CONTINUING> 1,733,290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,733,290
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
