FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended December 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-8680
HIGH PLAINS CORPORATION
(Exact name of registrant as specified in its charter)
Kansas #48-0901658
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 W. Douglas 67202
Suite #820 (Zip Code)
Wichita, Kansas
(Address of principal
executive offices)
(316)269-4310
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
YES NO
Common Stock, Par Value $.10 per share,
Outstanding at December 31, 1996 - 15,930,111
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 4
Statements of Operations . . . . . . . . . . . . . . . . . . . . 5
Statements of Stockholders' Equity . . . . . . . . . . . . . . . 6
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . 7
Selected Notes to Financial Statements . . . . . . . . . . . . . 8 - 9
Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. . . . . . . . . . 9 - 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 13 - 14
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Balance Sheets
(Unaudited)
December 31, 1996 and June 30, 1996
<CAPTION>
December 31, June 30,
Assets 1996 1996
(Unaudited) **
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,154,381 $ 8,889,246
Trade accounts receivable (less
allowance of $100,000) 4,976,202 1,839,809
Inventories 5,111,699 1,680,843
Current portion of long-term
notes receivable 111,853 106,552
Prepaid expenses 1,972,994 545,171
Refundable income taxes 410,259 410,259
Total current assets 13,737,388 13,471,880
Property, plant and equipment, at cost:
Land and land improvements 142,283 142,283
Ethanol plants 82,124,774 77,217,199
Other equipment 368,085 417,559
Office equipment 237,085 237,085
Leasehold improvements 48,002 48,002
82,920,229 78,062,128
Less accumulated depreciation (18,911,983) (17,573,003)
Net property, plant and equipment 64,008,246 60,489,125
Other assets:
Property and equipment held for resale 420,729 451,090
Deferred loan costs (less accumulated
amortization of $232,336 and $164,644
respectively) 350,708 312,823
Long-term notes receivable 256,876 314,159
Other 57,018 57,018
Total other assets 1,085,331 1,135,090
$ 78,830,965 $ 75,096,095
<FN>
See accompanying notes to financial statements.
** From audited financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Balance Sheets Continued
(Unaudited)
December 31, 1996 and June 30, 1996
<CAPTION>
December 31, June 30,
Liabilities and Stockholders' Equity 1996 1996
(Unaudited) **
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 2,124,725 $ 4,928,618
Current maturities of capital lease
obligations 470,299 -0-
Accounts payable 5,652,543 692,135
Estimated contract commitments -0- 629,093
Accrued interest -0- 156,294
Accrued payroll and property taxes 674,788 492,590
Total current liabilities 8,922,355 6,898,730
Revolving line-of-credit 2,000,000 2,000,000
Long-term debt, less current maturities 10,086,813 12,460,274
Capital lease obligations, less
current maturities 2,694,901 -0-
Other 164,813 155,748
14,946,527 14,616,022
Stockholders' equity:
Common stock, $.10 par value, authorized
50,000,000 shares; issued 16,341,289
shares and 16,247,289 shares at December
31, 1996 and June 30, 1996, respectively,
of which 411,178 shares and 391,178 shares
were held as treasury stock at December
31, 1996 and June 30, 1996, respectively 1,634,129 1,624,729
Additional paid-in capital 37,057,561 36,752,644
Retained earnings 17,204,809 16,030,337
55,896,499 54,407,710
Less:
Treasury stock - at cost (863,910) (737,660)
Deferred compensation (70,506) (88,707)
Total stockholders' equity 54,962,083 53,581,343
$ 78,830,965 $ 75,096,095
<FN>
See accompanying notes to financial statements.
** From audited financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Operations
(Unaudited)
Three Months Ended December 31, 1996 and 1995
and Six Months Ended December 31, 1996 and 1995
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales and revenues $16,788,867 $23,594,686 $18,128,100 $43,656,631
Cost of products sold 12,958,972 20,776,632 15,526,540 39,491,705
Gross Profit 3,829,895 2,818,054 2,601,560 4,164,926
Selling, general and
administrative expenses 414,367 408,490 727,544 715,281
Operating income 3,415,528 2,409,564 1,874,016 3,449,645
Other income (expense):
Interest expense (372,279) (540,593) (767,637) (1,164,231)
Interest and
other income 30,887 25,558 92,003 41,204
(341,392) (515,035) (675,634) (1,123,027)
Net earnings before
income taxes 3,074,136 1,894,529 1,198,382 2,326,618
Income tax expense (61,425) (37,757) (23,910) (46,260)
Net earnings $ 3,012,711 $ 1,856,772 $ 1,174,472 $ 2,280,358
Earnings per common and
common equivalent share:
Net earnings $ .19 $ .12 $ .08 $ .15
Weighted average shares
outstanding 16,073,460 16,022,106 16,043,765 15,715,761
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Stockholders' Equity
(Unaudited)
Six Months Ended December 31, 1996
<CAPTION>
Common
Stock
Additional
Number Amount Paid-in Retained Treasury Deferred Total
of Shares Capital Earnings Stock Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
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
Options 72,000 7,200 233,554 240,754
Amortization of
deferred compensation 5,887 5,887
Net Loss for
the Quarter (1,838,239) (1,838,239)
Balance,
September 30, 1996 16,319,289 $ 1,631,929 $ 36,986,198 $14,192,098 $ (737,660) $ (82,820) $51,989,745
Exercise of
options 22,000 2,200 71,363 73,563
Common stock
surrender (126,250) (126,250)
Amortization of
deferred compensation 12,314 12,314
Net earnings for
the quarter 3,012,711 3,012,711
Balance
December 31, 1996 16,341,289 $ 1,634,129 $ 37,057,561 $17,204,809 $ (863,910) $ (70,506) $54,962,083
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Cash Flows
(Unaudited)
Six Months Ended December 31, 1996 and 1995
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flows from operating activities:
Net earnings $ 1,174,472 $ 2,280,358
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,378,825 1,440,513
Amortization of deferred compensation 18,201
Provision for bad debt (10,000)
(Gain) on sale of equipment (576)
Payments on notes receivable 51,982 47,220
Changes in operating assets and liabilities
Trade accounts receivable (3,136,393) (1,982,602)
Inventories (3,430,856) (595,068)
Prepaid expenses (1,427,823) (21,211)
Accounts payable 4,960,408 1,435,188
Accrued liabilities (100,346) (119,428)
Estimated contract commitments (629,093)
Net cash provided by operating activities (1,141,199) 2,474,970
Cash flows from investing activities:
Proceeds from sale of equipment 3,178,592 56,500
Acquisition of property, plant and equipment (4,867,025) (2,644,877)
(Increase) decrease in other non-current assets (37,885) 5,249
Net cash used in investing activities (1,726,318) (2,583,128)
Cash flows from financing activities:
Proceeds from short-term debt 2,261,052
Payments on short-term debt (1,000,000)
Payment on long-term debt (5,133,700) (2,089,993)
Payment on capital lease obligations (57,030)
Proceeds from exercise of options 314,317 1,814,738
Increase in other non-current liabilities 9,065
Net cash provided by financing activities (4,867,348) 985,797
(Decrease) increase in cash and cash
equivalents (7,734,865) 877,639
Cash and cash equivalents:
Beginning of period 8,889,246 600,381
End of period $ 1,154,381 $ 1,478,020
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
HIGH PLAINS CORPORATION
Selected Notes to Financial Statements
(1) BASIS OF PRESENTATION
The accompanying financial statements have been prepared by High Plains
Corporation ("Company") without audit. In the opinion of management, all
adjustments (which include only normally recurring adjustments, necessary
to present fairly the financial position, results of operations and changes
in financial position for the periods presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principals have been condensed or omitted. The results of operations for
the six months ended December 31, 1996 are not necessarily indicative of
the operating results for the entire year.
CHANGE IN ACCOUNTING ESTIMATE
Effective July 1, 1994, the Company revised its estimate of the useful
lives of certain production facilities, machinery and equipment.
Previously, these assets were in one class and depreciated over 20 years.
These assets have now been componentized and assigned estimated useful
lives of 5 to 40 years. These revisions were made to more properly
reflect the true economic lives of the assets and to better align the
Company's depreciable lives with the predominant practice in the industry.
The effect of this change was to reduce depreciation and thus increase net
income by approximately $165,657 or $.01 per share for the three months
ended December 31, 1996 and 1995, and $331,314 or $.02 per share for the
six months ended December 31, 1996 and 1995.
(2) FINANCIAL ARRANGEMENTS
On January 10, 1997, the Company entered into an agreement with a new
primary lender. Under the new credit agreement a reducing, revolving
credit line, not to exceed $11,000,000, was established for a term of
five years. The new credit agreement also provided for a revolving
line-of-credit not to exceed $4,000,000 for working capital and the
issuance of standby letters of credit with an initial maturity of one year.
Both the 5 year loan and the revolving line-of-credit are secured by the
York, Nebraska plant and by the Company's inventories, receivables and cash.
Simultaneously the Company refinanced its existing debt by advancing $11,000,000
on the reducing revolving loan and $2,300,000 on the revolving line-of-credit.
Principal payments of $550,000 plus interest are payable quarterly beginning
March 31, 1997 on the reducing revolving loan. In addition, an initial
one-year, blended interest rate of approximately 8.11% was secured. Interest
of 8.14% was locked-in on the initial advance on the line of credit, for a
period of 12 months.
<PAGE>
(3) SALE - LEASEBACK
On December 12, 1996 the Company contracted with a leasing company for the
sale and subsequent lease back of certain items of core process equipment
constructed for the manufacture of industrial grade ethanol, at the York,
Nebraska facility. The equipment costs and subsequent sale price totaled
approximately $3,128,676, with no material gain or loss anticipated on the
transaction. The Company simultaneously entered into a capital lease for
the purchase of the same equipment over a period of six years, with
interest at a nominal annual rate of 7.6%.
(4) STOCK OPTIONS
On December 6, 1996, 22,000 options were exercised at $3.344 per share,
with a corresponding reload granted for 22,000 options at $5.125 per share.
(5) STOCK SURRENDER
On November 7, 1996, 20,000 shares of common stock were surrendered to the
Company at the then fair market value of $6.3125 per share. These shares
were accepted in lieu of cash in satisfaction of certain employee
withholding tax obligations.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.
Six Months Ended December 31, 1996 and 1995
Net Sales and Operating Expenses.
Net sales and revenues for the six months ended December 31, 1996, were lower
than net sales for the same period ended December 31, 1995. During the six
months ended December 31, 1996, 8,912,376 gallons of ethanol were sold at an
average price of $1.40 per gallon compared to 26,754,314 gallons sold at an
average price of $1.18, for the same period ending December 31, 1995. Gallons
sold decreased 66.7% due to the decrease in production resulting from a late
October start-up at the York facility.
Cost of sales as a percentage of net sales was 85.6% and 90.5% for the six
month periods ended December 31, 1996 and 1995, respectively. The decrease in
the cost of sales as a percentage of net sales was primarily due to the decrease
in average grain prices and the increase in the average sale price for ethanol.
Average cost of grain declined to $2.67 per bushel for the six months ended
December 31, 1996, down from $2.73 per bushel for the same period in 1995.
<PAGE>
Selling, general and administrative expenses increased slightly for the six
months ended December 31, 1996, compared to the same period ended
December 31, 1995. This increase is the result of a net increase in
administrative costs related to the temporary shutdown and subsequent
re-opening of the Company's plants.
Net Earnings.
Net earnings decreased 48.5% for the six months ended December 31, 1996,
compared to the same period in 1995. Net earnings as a percentage of net sales
and revenues increased from 5.2% to 6.5%, due to the decrease in cost of sales,
combined with an increase in the average sale price for ethanol in the 1996
period compared to the same period in 1995. Earnings per share at
December 31, 1996, were 46.7% lower than earnings per share for the same period
in 1995 due to the decline in net earnings.
MATERIAL CHANGES IN RESULTS AND OPERATIONS
Three Months Ended December 31, 1996 and 1995
Net Sales and Operating Expenses and Results of Operations.
Net sales and revenues for the three months ended December 31, 1996, decreased
compared to the same period in 1995. During the quarter ended
December 31, 1996, 7,907,734 gallons of ethanol were sold at average price of
$1.42 per gallon compared to 17,520,259 gallons sold during the same period in
1995 at an average price of $1.21 per gallon. Gallons sold decreased 54.9%
due to the limited production at the York, Nebraska plant, resulting from a
late October start-up.
Cost of sales as a percentage of net sales and revenues was 77.2% and 88.1%
for the three month periods ended December 31, 1996 and 1995, respectively.
The decrease in cost of sales as a percentage of sales is primarily due to
a decrease in the cost of grain and an increase in the average sale price
for ethanol. The average cost of grain decreased 5.0% to $2.65 per bushel
for the three months ended December 31, 1996, down from $2.79 per bushel for
the same period ended December 31,1995.
Selling, general and administrative expenses increased slightly for the three
months ended December 31, 1996, compared to the period ended December 31, 1995.
The increase was primarily the effect of an increase in administrative costs
related to re-opening of the Company's plants.
Net Earnings.
Net earnings increased 62.3% for the three months ended December 31, 1996 from
the prior period in 1995. Net earnings increased from 7.9% to 17.9%, due to the
decline in cost of sales, combined with an increase in the average sale price
for ethanol in the 1996 period compared to 1995. Earnings per share for the
three months ended December 31, 1996 increased 58.3% compared to earnings per
share for the three months ending December 31, 1995, as a result of the increase
in net earnings.
<PAGE>
Liquidity and Capital Resources
The Company's primary source of funds during the second fiscal quarter was cash
flow from operations and the proceeds from the sale of equipment. At
December 31, 1996, the Company had working capital of $4,815,033 compared to
working capital of $6,573,150 at June 30, 1996. The decrease in the working
capital was primarily as a result of an increase in trade accounts payable,
resulting from the re-opening of both production facilities since June 30, 1996.
Cash flow from operating activities amounted to $(1,141,199) in the first six
months of fiscal 1996 compared to $2,474,970 for the same period in fiscal 1995.
The decrease in cash flow was a result of the temporary shut down of the
Company's production facilities.
Capital expenditures in the first six months of fiscal 1996 amounted to
$4,867,025 compared with $2,644,877 for the same period in fiscal 1995.
These expenditures were primarily made for modifications at the York, Nebraska
facility.
In the opinion of management, funds expected to be generated from future
operations and the Company's ability to rely upon future secured borrowings
will provide adequate liquidity for the foreseeable future. The Company may,
however, issue debt and equity securities as additional sources of financing
as needed.
Seasonality
For the majority of the six month period ending December 31, 1996, ethanol
prices remained above normal, due to the low inventories produced during this
past summer of high grain costs. However, toward the end of December, 1996,
and primarily due to lower overall grain costs, ethanol prices were moving
downward to levels comparable with prior Federal Oxygen Program seasons. The
Company believes ethanol prices have now stabilized, and prices will continue
to be supported through the remaining wintertime program season, which normally
produces the highest demand period of the year.
Additionally, due to harvest schedules, grain prices are traditionally at their
lowest point during this same wintertime period. The Company believes this
trend will continue for the 1996 wintertime season and grain will continue to
be available at lower costs than were experienced in the spring and summer
of 1996.
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No new legal proceedings were instigated during the quarter ended December 31,
1996 which would be considered other than in the ordinary course of the
Company's business.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on November 15, 1996. The
meeting was adjourned until November 22, 1996 at which time a quorum was
determined to exist. The meeting involved the election of two directors,
John Chivers and Donald M. Wright.
<TABLE>
Voting results:
<CAPTION>
BROKER
FOR AGAINST ABSTENTIONS NONVOTES
<S> <C> <C> <C> <C>
John F. Chivers 10,877,654 -0- 79,103 -0-
Donald M. Wright 10,908,788 -0- 62,536 -0-
</TABLE>
The following details the only issue which was presented to stockholders for
vote and the results of that vote:
<TABLE>
(1) Ratify the appointment of Allen, Gibbs & Houlik, LC as the Company's
independent public accountants.
<CAPTION>
BROKER
RESULTS FOR AGAINST ABSTENTIONS NONVOTES
<S> <C> <C> <C> <C>
(1) 10,915,491 33,742 25,765 -0-
</TABLE>
Item 5. OTHER INFORMATION
Subsequent to December 31, 1996 the Company entered into a contract with
Centennial Trading LLC to source and purchase grain for 100% of its production
needs. Centennial replaces Farmland's Grain Division as the primary grain
strategist and purchasing agent for High Plains Corporation.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a). Exhibit 27-1 Financial Data Schedule
b). Reports on Form 8-K. During the quarter for which this
report is filed, the Company filed Form 8-K's on October
10, 1996 and November 1, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements 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 aurthorized:
HIGH PLAINS CORPORATION
Date February 13, 1997 Raymond G. Friend
Executive Vice President
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,154,381
<SECURITIES> 0
<RECEIVABLES> 5,088,055
<ALLOWANCES> 100,000
<INVENTORY> 5,111,699
<CURRENT-ASSETS> 13,737,388
<PP&E> 82,920,229
<DEPRECIATION> 18,911,983
<TOTAL-ASSETS> 78,830,965
<CURRENT-LIABILITIES> 8,922,355
<BONDS> 12,781,714
0
0
<COMMON> 1,634,129
<OTHER-SE> 53,327,954
<TOTAL-LIABILITY-AND-EQUITY> 78,830,965
<SALES> 16,788,867
<TOTAL-REVENUES> 16,788,867
<CGS> 12,958,972
<TOTAL-COSTS> 12,958,972
<OTHER-EXPENSES> 414,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 372,279
<INCOME-PRETAX> 3,074,136
<INCOME-TAX> 61,425
<INCOME-CONTINUING> 3,012,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,012,711
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
