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, 1997 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, 1997 - 15,985,444
<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 15
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Balance Sheets
(Unaudited)
December 31, 1997 and June 30, 1997
<CAPTION>
December 31, June 30,
Assets 1997 1997
(Unaudited) **
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,270,262 $ 2,389,758
Accounts Receivable
Trade (less allowance of $75,000) 7,560,546 4,102,173
Production credits and incentives 305,324 1,536,541
Inventories 3,158,442 4,246,783
Current portion of long-term
notes receivable 101,876 117,417
Prepaid expenses 853,936 309,350
Refundable income tax -0- 145,328
Total current assets 14,250,386 12,847,350
Property, plant and equipment, at cost:
Land and land improvements 323,496 323,496
Ethanol plants 90,842,139 85,055,215
Other equipment 500,248 393,683
Office equipment 217,011 202,135
Leasehold improvements 48,002 48,002
91,930,896 86,022,531
Less accumulated depreciation (22,111,070) (20,444,381)
Net property, plant and equipment 69,819,826 65,578,150
Other assets:
Equipment held for resale 416,512 427,432
Deferred loan costs (less accumulated
amortization of $22,305 and $10,857,
respectively) 111,911 103,623
Long-term notes receivable, less current
portion -0- 41,742
Other 76,235 76,235
Total other assets 604,658 649,032
$ 84,674,870 $ 79,074,532
<FN>
See accompanying notes to financial statements.
** From audited financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Balance Sheets Continued
(Unaudited)
December 31, 1997 and June 30, 1997
<CAPTION>
December 31, June 30,
Liabilities and Stockholders' Equity 1997 1997
(Unaudited) **
<S> <C> <C>
Current liabilities:
Revolving lines-of-credit $ 5,700,000 $ 6,200,000
Current maturities of capital lease
obligations 507,512 519,384
Accounts payable 6,250,289 5,114,452
Accrued interest 288,841 298,551
Accrued payroll and property taxes 617,486 644,846
Total current liabilities 13,364,128 12,777,233
Revolving line-of-credit 11,100,000 7,700,000
Long-term debt, excluding current
maturities 2,252,870 2,500,014
Other 453,328 441,109
13,806,198 10,641,123
Stockholders' equity:
Common stock, $.10 par value, authorized
50,000,000 shares; issued 16,396,622
shares at December 31, 1997 and June
30, 1997, of which 411,178 shares were
held as treasury stock at December 31,
1997 and June 30, 1997 1,639,662 1,639,662
Additional paid-in capital 37,387,203 37,348,072
Retained earnings 19,539,916 17,763,627
58,566,781 56,751,361
Less:
Treasury stock - at cost (863,911) (863,911)
Deferred compensation (198,326) (231,274)
Total stockholders' equity 57,504,544 55,656,176
$ 84,674,870 $ 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 December 31, 1997 and 1996
and Six Months Ended December 31, 1997 and 1996
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales and revenues $21,660,983 $16,788,867 $44,231,820 $18,128,100
Cost of products sold 20,489,792 12,958,972 40,995,891 15,526,540
Gross Profit 1,171,191 3,829,895 3,235,929 2,601,560
Selling, general and
administrative expenses 465,213 414,367 915,342 727,544
Operating income 705,978 3,415,528 2,320,587 1,874,016
Other income (expense):
Interest expense (324,534) (372,279) (667,122) (767,637)
Interest and
other income 31,932 30,887 62,871 92,003
(292,602) (341,392) (604,251) (675,634)
Net earnings before
income taxes 413,376 3,074,136 1,716,336 1,198,382
Income tax expense
(benefit) 7,968 61,425 (59,953) 23,910
Net earnings $ 405,408 $ 3,012,711 $ 1,776,289 $ 1,174,472
Diluted earnings per
share:
Net earnings $ .03 $ .19 $ .11 $ .07
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Stockholders' Equity
(Unaudited)
Six Months Ended December 31, 1997
<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
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HIGH PLAINS CORPORATION
Statements of Cash Flows
(Unaudited)
Six Months Ended December 31, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Cash Flows from operating activities:
Net earnings $ 1,776,289 $ 1,174,472
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,682,192 1,378,825
Amortization of deferred compensation 32,948 18,201
Compensation expense on stock options granted 39,131 -0-
(Gain) on sale of equipment (1,050) (576)
Payments on notes receivable 57,283 51,982
Changes in operating assets and liabilities:
Accounts receivable (2,227,156) (3,136,393)
Inventories 1,088,341 (3,430,856)
Refundable income tax 145,328 -0-
Prepaid expenses (544,586) (1,427,823)
Accounts payable 1,135,837 4,960,408
Estimated contract commitments -0- (629,093)
Accrued liabilities (37,070) (100,346)
Net cash provided by operating activities 3,147,487 (1,141,199)
Cash flows from investing activities:
Proceeds from sale of equipment 8,590 3,178,592
Acquisition of property, plant and equipment (5,904,041) (4,867,025)
Increase in other non-current assets (19,735) (37,885)
Net cash used in investing activities (5,915,186) (1,726,318)
Cash flows from financing activities:
Proceeds from revolving line-of-credit 5,700,000 -0-
Payments on revolving lines-of-credit (2,800,000) -0-
Payments on capital lease obligations (264,016) (57,030)
Payment on long-term debt -0- (5,133,700)
Proceeds from exercise of options -0- 314,317
Increase in other non-current liabilities 12,219 9,065
Net cash provided by financing activities 2,648,203 (4,867,348)
Decrease in cash and cash equivalents (119,496) (7,734,865)
Cash and cash equivalents:
Beginning of period 2,389,758 8,889,246
End of period $ 2,270,262 $ 1,154,381
<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
December 31, 1997 are not necessarily indicative of the operating results for
the entire year.
(2) Financial Arrangements
On December 11, 1997 the Company amended its existing loan agreement with its
primary lender, which provided for the expansion of the revolving credit note
limit to $6.5 million with a maturity date of January 10, 1999. The existing
reducing revolving credit line was also increased to approximately $15.4
million, with quarterly principal payments increasing to $850,000 beginning
March 31, 1998. The amended agreement also provides for a lien on the
Company's real property located at Colwich, Kansas in the amount of $6 million
plus an additional lien on all property and equipment located at the Company's
new facility in Portales, New Mexico.
(3) Stock Options
On December 16, 1997, 60,000 options were granted at $3.125 per share to
certain directors in lieu of compensation. The options were issued at the fair
market value of the stock on that date.
(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
December 31, 1997 1996
<S> <C> <C>
Net earnings
As reported $ 405,408 $3,012,711
Pro forma 236,744 2,702,615
Diluted earnings per share:
As reported $ .03 $ .19
Pro forma .01 .17
For the six months ending
December 31,
Net earnings
As reported $1,776,289 $1,174,472
Pro forma 1,466,193 947,090
Diluted earnings per share:
As reported $ .11 $ .07
Pro forma .09 .06
</TABLE>
The Company's basic earnings per share for the pro forma information noted
above is 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 December 31, 1997 and
1996 have been calculated based on 16,020,735 and 16,118,299 diluted shares
outstanding, respectively. The diluted earnings per share for the six months
ended December 31, 1997 and 1996 have been calculated based on 16,033,290 and
16,098,487, respectively. The Company's diluted earnings per share in the
financial statements above are the same as the basic 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.
Six Months Ended December 31, 1997 and 1996
Net Sales and Operating Expenses.
Net sales and revenues for the six months ended December 31, 1997, were higher
than net sales for the same period ended December 31, 1996. During the six
months ended December 31, 1997, approximately 25.5 million gallons of fuel
grade ethanol were sold at an average price of $1.13 per gallon compared to 8.9
million gallons sold at an average price of $1.40 per gallon, for the same
period ending December 31, 1996. In addition, approximately 1.5 million
gallons of industrial grade ethanol were sold at an average price of $1.34 per
gallon during the six months ended December 31, 1997. Industrial grade ethanol
production capabilities were not available during the same period ending
December 31, 1996. Fuel grade gallons sold increased 186% 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. The
Colwich facility began producing in September, 1996 and the York facility re-
opened in October, 1996.
Cost of sales as a percentage of net sales was 92.7% and 85.6% for the six
month periods ended December 31, 1997 and 1996, respectively. The 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 $2.43 per
bushel for the six months ended December 31, 1997, down from $2.67 per bushel
for the same period in 1996.
Selling, general and administrative expenses increased 25.8% for the six months
ended December 31, 1997, compared to the same period ended December 31, 1996.
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
during fiscal 1997.
<PAGE>
Net Earnings.
Net earnings increased 51.2% for the six months ended December 31, 1997,
compared to earnings for the same period in 1996. Net earnings as a percentage
of net sales and revenues decreased from 6.5% to 4.0%, due to an increase in
cost of sales combined with a decrease in the average sale price for ethanol in
the 1997 period compared to the same period in 1996. Diluted earnings per
share at December 31, 1997, were 57.1% higher than diluted earnings per share
for the same period in 1996 due to the increase in net earnings.
MATERIAL CHANGES IN RESULTS AND OPERATIONS
Three Months Ended December 31, 1997 and 1996
Net Sales and Operating Expenses and Results of Operations.
Net sales and revenues for the three months ended December 31, 1997, increased
compared to the same period in 1996. During the quarter ended December 31,
1997, approximately 12.9 million gallons of fuel grade ethanol were sold at an
average price of $1.13 per gallon compared to approximately 7.9 million gallons
sold during the same period in 1996 at an average price of $1.42 per gallon.
Fuel grade gallons sold during the three months ended December 31, 1997
increased 63.3% compared to the same period in 1996 due to the limited
production at the York, Nebraska plant from the late October 1996 start-up. In
addition, approximately .7 million gallons of industrial grade ethanol was sold
at an average price of $1.36 per gallon during the three months ended December
31, 1997, compared to zero production or sales in the same period in 1996.
Cost of sales as a percentage of net sales and revenues was 94.6% and 77.2% for
the three month periods ended December 31, 1997 and 1996, respectively. The
increase in cost of sales as a percentage of sales is primarily due to a
decrease in the cost of grain offset by a decrease in the average sale price
for fuel grade ethanol. The average cost of grain decreased 10.4% to $2.40 per
bushel for the three months ended December 31, 1997, down from $2.65 per bushel
for the same period ended December 31, 1996.
Selling, general and administrative expenses increased 12.3% for the three
months ended December 31, 1997, compared to the period ended December 31, 1996.
The increase was primarily due to administrative costs in the prior fiscal
year being below typical levels as a result of the temporary shut down of the
Company's plants during the prior fiscal year.
Net Earnings.
Net earnings decreased 86.5% for the three months ended December 31, 1997 from
the prior period in 1996. The decline in net earnings was due to the increase
in cost of sales in the 1997 period compared to 1996. Diluted earnings per
share for the three months ended December 31, 1997 decreased 84.2% compared to
diluted earnings per share for the three months ending December 31, 1996, as a
result of the decrease in net earnings.
<PAGE>
Liquidity and Capital Resources
The Company's primary source of funds during the second quarter of fiscal 1998
was cash flow from operations. At December 31, 1997, the Company had working
capital of $.9 million compared to working capital of approximately $70,000 at
June 30, 1997. The increase in the working capital was primarily as a result
of an increase in trade accounts receivable.
Cash flow from operating activities amounted to $3,147,487 in the first six
months of fiscal 1997 compared to $(1,141,199) for the same period in fiscal
1996. The increase in cash flow was a result of six months of operations
during the period ending December 31, 1997 compared to the temporary shut down
of the Company's production facilities for more than 50% of that same period in
fiscal 1996.
Capital expenditures in the first six months of fiscal 1997 amounted to
$5,913,421 compared with $4,867,025 for the same period in fiscal 1996. These
expenditures were primarily made as part of the acquisition of the Portales,
New Mexico 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
Grain prices typically decline into and during harvest, due to expected and
eventual accumulation of grain inventories. The United States and several
other grain producing areas are believed to be experiencing near record crop
sizes this calendar year. In the U.S. where the elevators have been full,
where corn and milo was stored on the ground during harvest, where the
expectations for the excellent wintertime moisture providing for a good winter
wheat crop seem very valid, and where corn and milo exports are believed to be
below five year lows, one could normally project lower grain prices. However,
the fear of projected El Nino induced weather patterns which could cause
growing season droughts is modifying normal seasonal trends and causing
monetary funds to invest in grain positions, thereby keeping the price of grain
high. While the effects of El Nino events are unpredictable, many experts
agree that the likelihood of grain prices following normal seasonal trends will
be small until the 1998 corn crop reaches a maturity level that will guarantee
a good crop and sufficient inventories for the next year. That maturity level
of the corn crop is expected to be reached no sooner than July of 1998.
The Company believes that on hand inventory levels of finished ethanol are at
historically typical levels. Ethanol sales prices for the wintertime have
increased by approximately $.10 per gallon compared to summertime prices to
reflect the additional demand that is experienced as a result of the wintertime
Federal Oxygen Program, that requires oxygenate levels in fuel in approximately
forty metropolitan areas over various periods ranging from September through
March. Orders for ethanol for the wintertime period have been received and are
being filled. The Company expects orders covering the summertime periods to be
received
<PAGE>
by late February and that those summertime gallons will be sold at seasonally
expected lower prices compared to wintertime prices.
Several other factors that may cause the ethanol business to reflect other than
normal seasonal trends are legislative initiatives currently underway in
California and a scientific study which is in process and is examining issues
concerning ethanol's volatility. If these initiatives are implemented or the
scientific findings favor ethanol the Company may experience a significant
increase in year round demand.
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No new legal proceedings were instigated during the quarter ended December 31,
1997 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 December 16, 1997. The
meeting involved the election of two directors, Raymond G. Friend and Donald D.
Schroeder.
<TABLE>
Voting results:
<CAPTION>
BROKER
FOR AGAINST ABSTENTIONS NONVOTES
<S> <C> <C> <C> <C>
Raymond G. Friend 12,897,406 -0- 256,037 -0-
Donald D. Schroeder 12,896,401 -0- 257,042 -0-
</TABLE>
The following details the issues which were presented to stockholders for vote
and the results of that vote:
(1) Ratify the appointment of Allen, Gibbs & Houlik, LC as the Company's
independent public accountants.
(2) To modify the Company's 1992 Stock Option Plan.
<TABLE>
<CAPTION>
BROKER
RESULTS FOR AGAINST ABSTENTIONS NONVOTES
<C> <C> <C> <C> <C>
(1) 12,939,841 125,921 87,681 -0-
(2) 5,643,555 1,196,564 215,144 -0-
</TABLE>
<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 the following Form 8-K's:
October 16, 1997 Company announced first quarter earnings and earnings
per share for the period ending September 30, 1997.
November 13, 1997 Announcement of long-term contract for the sale of CO2
at York, Nebraska facility.
December 17, 1997 Announcement of acquisition of ethanol plant located
in Portales, New Mexico.
<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 February 11, 1998 Raymond G. Friend
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 2,270,262
<SECURITIES> 0
<RECEIVABLES> 7,967,746
<ALLOWANCES> 75,000
<INVENTORY> 3,158,442
<CURRENT-ASSETS> 14,250,386
<PP&E> 91,930,896
<DEPRECIATION> 22,111,070
<TOTAL-ASSETS> 84,674,870
<CURRENT-LIABILITIES> 13,364,128
<BONDS> 19,560,382
0
0
<COMMON> 1,639,662
<OTHER-SE> 55,864,882
<TOTAL-LIABILITY-AND-EQUITY> 84,674,870
<SALES> 21,660,983
<TOTAL-REVENUES> 21,660,983
<CGS> 20,489,792
<TOTAL-COSTS> 20,489,792
<OTHER-EXPENSES> 465,213
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 324,534
<INCOME-PRETAX> 413,376
<INCOME-TAX> 7,968
<INCOME-CONTINUING> 405,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 405,408
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
