FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-8680
HIGH PLAINS CORPORATION
(Exact name of registrant as specified in its charter)
Kansas #48-0901658
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 W. Douglas 67202
Suite #820 (Zip Code)
Wichita, Kansas
(Address of principal
executive offices)
(316)269-4310
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO
Common Stock, Par Value $.10 per share,
Outstanding at March 31, 1998 - 15,999,444
<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 10 - 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Balance Sheets
(Unaudited)
March 31, 1998 and June 30, 1997
<CAPTION>
March 31, June 30,
Assets 1998 1997
(Unaudited) **
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,016,821 $ 2,389,758
Accounts Receivable
Trade (less allowance of $75,000) 5,584,488 4,102,173
Production credits and incentives 303,149 1,536,541
Inventories 6,208,561 4,246,783
Current portion of long-term
notes receivable 72,174 117,417
Prepaid expenses 590,236 309,350
Refundable income tax -0- 145,328
Total current assets 14,775,429 12,847,350
Property, plant and equipment, at cost:
Land and land improvements 323,496 323,496
Ethanol plants 92,011,343 85,055,215
Other equipment 549,280 393,683
Office equipment 255,735 202,135
Leasehold improvements 48,428 48,002
93,188,282 86,022,531
Less accumulated depreciation (22,988,410) (20,444,381)
Net property, plant and equipment 70,199,872 65,578,150
Other assets:
Equipment held for resale 601,015 427,432
Deferred loan costs (less accumulated
amortization of $30,200 and $10,857,
respectively) 119,016 103,623
Long-term notes receivable, less current
portion -0- 41,742
Other 67,081 76,235
Total other assets 787,112 649,032
$ 85,762,413 $ 79,074,532
<FN>
See accompanying notes to financial statements.
** From audited financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Balance Sheets Continued
(Unaudited)
March 31, 1998 and June 30, 1997
<CAPTION>
March 31, June 30,
Liabilities and Stockholders' Equity 1998 1997
(Unaudited) **
<S> <C> <C>
Current liabilities:
Revolving lines-of-credit $ 7,400,000 $ 6,200,000
Current maturities of capital lease
obligations 489,970 519,384
Accounts payable 6,713,011 5,114,452
Accrued interest 287,151 298,551
Accrued payroll and property taxes 932,273 644,846
Total current liabilities 15,822,405 12,777,233
Revolving line-of-credit 10,150,000 7,700,000
Capital lease obligation, excluding current
maturities 2,140,781 2,500,014
Other 408,200 441,109
12,698,981 10,641,123
Stockholders' equity:
Common stock, $.10 par value, authorized
50,000,000 shares; issued 16,410,622
shares at March 31, 1998 and 16,396,622
shares at June 30, 1997, of which 411,178
shares were held as treasury stock at
March 31, 1998 and June 30, 1997 1,641,062 1,639,662
Additional paid-in capital 37,406,803 37,348,072
Retained earnings 19,240,491 17,763,627
58,288,356 56,751,361
Less:
Treasury stock - at cost (863,911) (863,911)
Deferred compensation (183,418) (231,274)
Total stockholders' equity 57,241,027 55,656,176
$ 85,762,413 $ 79,074,532
<FN>
See accompanying notes to financial statements.
** From audited financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Income
(Unaudited)
Three Months Ended March 31, 1998 and 1997
and Nine Months Ended March 31, 1998 and 1997
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $19,123,056 $20,570,905 $63,354,876 $38,699,005
Cost of sales 18,685,219 19,608,559 59,681,110 35,135,099
Gross Profit 437,837 962,346 3,673,766 3,563,906
Selling, general and
administrative expenses 366,580 340,815 1,281,920 1,068,360
Operating income 71,257 621,531 2,391,846 2,495,546
Other income (expense):
Interest and other
income 31,348 24,504 93,168 115,933
Interest expense (394,878) (348,910) (1,062,001) (1,116,547)
Gain on sale of
equipment and property -0- 139,488 1,050 140,063
(363,530) 184,918 (967,783) (860,551)
Net (loss) earnings
before income taxes (292,273) 436,613 1,424,063 1,634,995
Income tax expense
(benefit) 7,152 8,691 (52,801) 32,601
Net (loss) earnings $ (299,425) $ 427,922 $ 1,476,864 $ 1,602,394
Diluted (loss) earnings
per share $ (.02) $ .03 $ .09 $ .10
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Stockholders' Equity
(Unaudited)
Nine Months Ended March 31, 1998
<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, 1997 16,396,622 $ 1,639,662 $ 37,348,072 $ 17,763,627 $ (863,911) $ (231,274) $ 55,656,176
Amortization of
deferred
compensation 17,713 17,713
Compensation
expense on
stock options
granted 39,131 39,131
Net earnings for
the quarter 1,370,881 1,370,881
Balance,
September 30,
1997 16,396,622 $ 1,639,662 $ 37,387,203 $ 19,134,508 $ (863,911) $ (213,561) $ 57,083,901
Amortization of
deferred
compensation 15,235 15,235
Net earnings for
the quarter 405,408 405,408
Balance
December 31,
1997 16,396,622 $ 1,639,662 $ 37,387,203 $ 19,539,916 $ (863,911) $ (198,326) $ 57,504,544
Amortization of
deferred
compensation 14,908 14,908
Exercise of
options 14,000 1,400 19,600 21,000
Net loss for
the quarter (299,425) (299,425)
Balance
March 31,
1998 16,410,622 $ 1,641,062 $ 37,406,803 $ 19,240,491 $ (863,911) $ (183,418) $ 57,241,027
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Cash Flows
(Unaudited)
Nine Months Ended March 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
Cash Flows from operating activities:
Net earnings $ 1,476,864 $ 1,602,394
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 2,593,785 2,308,844
Amortization of deferred compensation 47,856 32,264
Gain on sale of equipment (1,050) (140,063)
Payments on notes receivable 86,985 133,936
Changes in operating assets and liabilities:
Accounts receivable (248,923) (5,978,504)
Inventories (1,961,778) (2,162,879)
Refundable income tax 145,328 -0-
Prepaid expenses (280,886) (271,892)
Accounts payable 1,598,559 4,587,825
Accrued liabilities 276,027 414,934
Estimated contract commitments -0- (629,093)
Net cash provided by operating activities 3,732,767 (102,234)
Cash flows from investing activities:
Proceeds from sale of equipment 8,590 3,318,345
Acquisition of property, plant and equipment (7,372,287) (6,553,264)
Increase in other non-current assets (25,582) (43,115)
Net cash used in investing activities (7,389,279) (3,278,034)
Cash flows from financing activities:
Proceeds from short-term debt -0- 4,000,000
Proceeds from long-term debt -0- 11,000,000
Proceeds from revolving lines-of-credit 7,700,000 -0-
Payment on long-term debt -0- (19,895,238)
Payment on capital lease obligations (393,647) (174,812)
Payment on revolving lines-of-credit (4,050,000) -0-
Proceeds from exercise of options 60,131 418,869
(Decrease) increase in other non-current
liabilities (32,909) 18,693
Net cash provided by financing activities 3,283,575 (4,632,488)
Decrease in cash and cash equivalents (372,937) (8,012,756)
Cash and cash equivalents
Beginning of period 2,389,758 8,889,246
End of period $ 2,016,821 $ 876,490
<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 period ended
March 31, 1998 are not necessarily indicative of the operating results for the
entire year.
(2) Ethanol Production Business
In December 1997, the Company acquired its third fuel grade ethanol facility
located in Portales, New Mexico. The plant was refurbished and test runs
performed during January and February of 1998 due to the extended shutdown of
approximately two years by the previous owners. In March 1998 full production
was initiated and approximately 1.0 million gallons were produced. The plant
has a rated capacity of about 13 million gallons per year.
(3) Stock Options
On February 20, 1998, 14,000 options were exercised at $1.50 per share. These
options did not contain any reload features.
(4) Stock-Based Compensation
The Company continues to account for stock-based compensation for employees
using the intrinsic value method prescribed in APB No. 25. 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.
Had compensation cost for the stock-based compensation been determined based on
the fair value grant date, consistent with the provisions of FAS 123, the
Company's net earnings and diluted earnings per share above would have been
reduced to the pro forma amounts below:
<PAGE>
<TABLE>
<CAPTION>
For the three months ending
March 31, 1998 1997
<S> <C> <C>
Net (loss) earnings
As reported $ (299,425) $ 427,922
Pro forma (299,425) 346,736
Diluted (loss) earnings per share:
As reported $ (.02) $ .03
Pro forma (.02) .02
For the nine months ending
March 31,
Net earnings
As reported $ 1,476,864 $ 1,602,394
Pro forma 1,199,646 1,316,802
Diluted earnings per share:
As reported $ .09 $ .10
Pro forma .08 .08
</TABLE>
The Company's basic earnings per share for the pro forma information noted
above are the same as the Company's diluted earnings per share for all the
periods disclosed.
(5) Earnings Per Share
The Company, as required under FASB Statement No. 128 Earnings Per Share (FAS
128) has replaced the presentation of primary earnings per share (EPS) with
Basic EPS and Diluted EPS. Under FAS 128 both the basic and diluted must be
presented in the financial statements. Also, under the FAS 128 all prior
period EPS data presented in the financial statements must be restated for
comparative purposes.
The diluted earnings per share for the three months ended March 31, 1998 and
1997 have been calculated based on 16,009,802 and 15,996,437 diluted shares
outstanding, respectively. The diluted earnings per share for the nine months
ended March 31, 1998 and 1997 have been calculated based on 16,018,715 and
16,065,434, respectively. The Company's diluted (loss) earnings per share in
the financial statements contained herein are the same as the basic (loss)
earnings per share for each of the periods disclosed.
<PAGE>
Part I MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.
Forward-looking Statements
Forward-looking statements in this Form 10-Q, future filings including but not
limited to, the Company's annual 10K, Proxy Statement, and 8K filings by the
Company with the Securities and Exchange Commission, the Company's press
releases and oral statements by authorized officers of the Company are intended
to be subject 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, including without limitation,
the risk of a significant natural disaster, the inability of the Company to
ensure against certain risks, the adequacy of its loss reserves, fluctuations
in commodity prices, change in market prices or demand for motor fuels and
ethanol, legislative changes regarding air quality, fuel specifications or
incentive programs, as well as general market conditions, competition and
pricing. The Company believes that forward-looking statements made by it are
based upon reasonable expectations. However, no assurances can be given that
actual results will not differ materially from those contained in such forward-
looking statements. The words "estimate", "anticipate", "expect", "predict",
"believe" and similar expressions are intended to identify forward-looking
statements.
Nine Months Ended March 31, 1998 and 1997
Net Sales and Operating Expenses.
Net sales and revenues for the nine months ended March 31, 1998, were higher
than net sales for the same period ended March 31, 1997. During the nine
months ended March 31, 1998, approximately 35.7 million gallons of fuel grade
ethanol were sold at an average price of $1.15 per gallon compared to 20.8
million gallons sold at an average price of $1.29 per gallon, for the same
period ending March 31, 1997. In addition, approximately 2.2 million gallons
of industrial grade ethanol were sold at an average price of $1.48 per gallon
during the nine months ended March 31, 1998. Industrial grade ethanol
production capabilities and sales were not significant during the same period
ending March 31, 1997. Fuel grade gallons sold increased 72% due to the
increased production available for sale compared to reduced production
resulting from the temporary shutdown of the Colwich and York facilities during
fiscal 1997. In addition, the Company's Portales facility sold .3 million
gallons of fuel grade ethanol during it's startup and operations which began in
March, 1998.
Cost of sales as a percentage of net sales was 94.2% and 90.8% for the nine
month periods ended March 31, 1998 and 1997, respectively. The slight increase
in the cost of sales as a percentage of net sales was primarily due to the
decrease in the average sale price for fuel grade ethanol offset by a decrease
in average grain prices. The average cost of grain declined to $2.44 per
bushel for the nine months ended March 31, 1998, down from $2.59 per bushel for
the same period in 1997.
<PAGE>
Selling, general and administrative expenses increased 19.9% for the nine
months ended March 31, 1998, compared to the same period ended March 31, 1997.
This increase is primarily due to administrative costs in the prior fiscal
year being below typical levels as a result of the temporary shutdown of the
Company's plants during the prior fiscal year.
Net Earnings.
Net earnings decreased 7.8% for the nine months ended March 31, 1998, compared
to earnings for the same period in 1997. Net earnings as a percentage of net
sales and revenues decreased from 4.1% to 2.3%, due to an increase in cost of
sales combined with a decrease in the average sale price for ethanol in the
1998 period compared to the same period in 1997. Diluted earnings per share at
March 31, 1998 were 10% lower than diluted earnings per share at March 31, 1997
due to a decline in net earnings.
MATERIAL CHANGES IN RESULTS AND OPERATIONS
Three Months Ended March 31, 1998 and 1997
Net Sales and Operating Expenses and Results of Operations.
Net sales and revenues for the three months ended March 31, 1998, decreased
6.7% compared to the same period in 1997. During the quarter ended March 31,
1998, approximately 10.3 million gallons of fuel grade ethanol were sold at an
average price of $1.10 per gallon compared to approximately 11.9 million
gallons sold during the same period in 1997 at an average price of $1.22 per
gallon. The average sale price declined for the three months ended March 31,
1998, compared to the same period in 1997 in response to decreasing spot market
prices for fuel grade ethanol. Fuel grade gallons sold during the three months
ended March 31, 1998 decreased 13.3% compared to the same period in 1997 due to
reduced fuel grade production in response to lower prices. In addition,
approximately 1.0 million gallons of industrial grade ethanol was sold at an
average price of $1.39 per gallon during the three months ended March 31, 1998,
compared to zero sales in the same period in 1997.
Cost of sales as a percentage of net sales and revenues was 97.7% and 95.3% for
the three month periods ended March 31, 1998 and 1997, respectively. The
slight increase in cost of sales as a percentage of sales is primarily due to a
decrease in the average sale price for fuel grade ethanol. The average cost of
grain decreased slightly to $2.48 per bushel for the three months ended
March 31, 1998, down from $2.51 per bushel for the same period ended
March 31, 1997.
Selling, general and administrative expenses increased 7.0% for the three
months ended March 31, 1998, compared to the period ended March 31, 1997. The
increase was primarily due to administrative costs related to the startup of
the Company's production facility in Portales, New Mexico.
<PAGE>
Net Earnings.
Net earnings decreased 170% for the three months ended March 31, 1998 from the
prior period in 1997. The decline in net earnings was due to the decrease in
sales in the 1998 period compared to 1997. Diluted earnings per share for the
three months ended March 31, 1998 decreased 166% compared to diluted earnings
per share for the three months ending March 31, 1997, as a result of the
decrease in net earnings.
Liquidity and Capital Resources
The Company's primary sources of funds during the third fiscal quarter for 1998
were cash flow from operations, and advances on a revolving line of credit from
the Company's primary lender for $2,000,000, for working capital needs. At
March 31, 1998, the Company had negative working capital of $(1,046,976)
compared to a working capital surplus of $70,117 at June 30, 1997. Cash flow
from operating activities amounted to $(3,732,767) for the first nine months of
fiscal 1998 compared to $(102,234) for the same period in fiscal 1997. The
increase in cash flow from operations in fiscal 1998 was attributable to the
1997 temporary shutdown of the Company's production facilities.
Capital expenditures in the first nine months of fiscal 1998 amounted to $7.4
million compared to $6.6 million for the same period in fiscal 1997. These
expenditures were a result of the Portales, New Mexico purchase and
refurbishment totaling approximately $4.7 million with the remaining balance
primarily expended on 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
Ethanol prices on product sold in mandated oxygen markets generally increase
during the months of September through March, and decrease during the summer
months, due to the Federal Oxygen Program. However, during the latter part of
this program season, ethanol prices softened as a result of the significant
decline in the wholesale price of gasoline. Since ethanol replaces gasoline,
changes in gasoline prices have historically resulted in similar changes in the
price paid for ethanol. Currently, both gasoline and ethanol prices are lower
than those experienced in the spring and summer of 1997. However, the Energy
Information Administration predicts that there will be a significant increase
in highway travel by American motorists this summer, generating an increase in
gasoline demand by an expected 2.8%. If this increase in demand occurs,
summertime ethanol prices could benefit.
<PAGE>
Average grain prices were flat for most of the quarter ended March 31, 1998.
However, during the latter part of March, prices began to trend lower and have
continued to decline. The USDA's latest acreage and stocks reports predict
planting of this year's corn crop to be the largest in 13 years. An increase
in planted acres of 1% over the previous year is anticipated. Although weather,
carryouts, exports and other factors can significantly affect grain prices,
prices in good crop years have typically declined into and during the harvest
period. As part of the Company's risk management program, the Company has
forward contracted grain deliveries and acquired tradable board positions. In
total, these provide protection against grain price increases for approximately
41% of the Company's feedstock requirements through December, 1998. Should
feedstock prices decline, the Company would benefit from lower prices on the
remaining 59% of uncovered grain needs. The Company also anticipates that the
sale of its distiller's grain by-products, which historically fluctuates with
the price of corn, will continue to provide an additional hedge against adverse
fluctuations in grain prices.
<PAGE>
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No new legal proceedings were instigated during the quarter ended March 31,
1998 which would be considered other than in the ordinary course of the
Company's business.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
The Company is in the process of finalizing an agreement with ICM, Inc. to
assume responsibility for purchasing and merchandising all of the Company's
cattle feed by-products, dried distillers grains (DDG). This function is
currently being performed by ConAgra, Inc., but was previously performed by
ICM, Inc. prior to the assumption of those duties by ConAgra.
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 one Form 8-K on January
26, 1998 concerning the Company's second quarter earnings
and earnings per share for the period ending December 31, 1997.
<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 authorized:
HIGH PLAINS CORPORATION
Date May 7, 1998 /s/ Gary R. Smith
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,016,821
<SECURITIES> 0
<RECEIVABLES> 5,731,662
<ALLOWANCES> 75,000
<INVENTORY> 6,208,561
<CURRENT-ASSETS> 14,775,429
<PP&E> 93,188,282
<DEPRECIATION> (22,988,410)
<TOTAL-ASSETS> 85,762,413
<CURRENT-LIABILITIES> 15,822,405
<BONDS> 19,690,781
0
0
<COMMON> 1,641,062
<OTHER-SE> 55,599,965
<TOTAL-LIABILITY-AND-EQUITY> 85,762,413
<SALES> 19,123,056
<TOTAL-REVENUES> 19,123,056
<CGS> 18,685,219
<TOTAL-COSTS> 18,685,219
<OTHER-EXPENSES> 366,580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394,878
<INCOME-PRETAX> (292,273)
<INCOME-TAX> 7,152
<INCOME-CONTINUING> (299,425)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (299,425)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
