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 September 30, 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 September 30, 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 9 - 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12 - 13
<PAGE>
HIGH PLAINS CORPORATION
Balance Sheets
(Unaudited)
September 30, 1998 and June 30, 1998
<TABLE>
<CAPTION>
September 30, June 30,
Assets 1998 1998
(Unaudited) **
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 739,880 $ 674,894
Accounts Receivable
Trade (less allowance of $75,000) 6,547,627 4,500,579
Production credits and incentives 758,692 829,849
Inventories 3,692,801 6,328,232
Current portion of long-term
notes receivable 7,919 31,307
Prepaid expenses 575,014 85,168
Refundable income tax -0- 30,000
Total current assets 12,321,933 12,480,029
Property, plant and equipment, at cost:
Land and land improvements 433,496 433,496
Ethanol plants 94,044,537 92,906,633
Other equipment 631,226 473,345
Office equipment 289,280 279,278
Leasehold improvements 48,002 48,002
95,446,541 94,140,754
Less accumulated depreciation (24,747,067) (23,819,484)
Net property, plant and equipment 70,699,474 70,321,270
Other assets:
Equipment held for resale 202,321 264,554
Deferred loan costs (less accumulated
amortization of $46,796 and $38,095,
respectively) 115,923 117,890
Other 32,196 65,886
Total other assets 350,440 448,330
$83,371,847 $83,249,629
</TABLE>
[FN]
See accompanying notes to financial statements.
** From audited financial statements.
<PAGE>
HIGH PLAINS CORPORATION
Balance Sheets Continued
(Unaudited)
September 30, 1998 and June 30, 1998
<TABLE>
<CAPTION>
September 30, June 30,
Liabilities and Stockholders' Equity 1998 1998
(Unaudited) **
<S> <C> <C>
Current liabilities:
Revolving lines-of-credit $ 9,900,000 $ 9,000,000
Current maturities of capital lease
obligations 510,569 500,852
Accounts payable 8,235,048 8,364,074
Accrued interest 225,344 223,722
Accrued payroll and property taxes 910,881 822,971
Accrued income taxes payable 75,000 -0-
Total current liabilities 19,856,842 18,911,619
Revolving line-of-credit 8,850,000 9,700,000
Capital lease obligations, less
current maturities 1,871,190 2,002,623
Other 405,240 364,240
11,126,430 12,066,863
Stockholders' equity:
Common stock, $.10 par value, authorized
50,000,000 shares; issued 16,410,622
shares at September 30, 1998 and June
30, 1998, of which 411,178 shares were
held as treasury stock at September 30,
1998 and June 30, 1998 1,641,062 1,641,062
Additional paid-in capital 37,457,167 37,457,167
Retained earnings 14,300,310 14,170,697
53,398,539 53,268,926
Less:
Treasury stock - at cost (863,911) (863,911)
Deferred compensation (146,053) (133,868)
Total Stockholders' equity 52,388,575 52,271,147
$83,371,847 $83,249,629
</TABLE>
[FN]
See accompanying notes to financial statements.
** From audited financial statements.
<PAGE>
HIGH PLAINS CORPORATION
Statements of Operations
(Unaudited)
Three Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1998 1997
<S> <C> <C>
Net sales and revenues $26,389,859 $22,570,837
Cost of products sold 25,679,801 20,506,099
Gross profit 710,058 2,064,738
Selling, general and administrative
expenses 457,461 450,128
Operating income (loss) 252,597 1,614,610
Other income (expense):
Interest and other income 251,615 30,937
Interest expense (442,599) (342,588)
Gain on sale of equipment 143,000 -0-
(47,984) (311,651)
Net earnings before income
taxes 204,613 1,302,959
Income tax (expense) benefit (75,000) 67,922
Net earnings $ 129,613 $ 1,370,881
Basic and diluted earnings per share: $ .01 $ .09
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
HIGH PLAINS CORPORATION
Statement of Stockholders' Equity
(Unaudited)
Three Months Ended September 30, 1998
<TABLE>
<CAPTION>
Common Stock
Additional
Number Paid-in Retained Treasury Deferred
of Shares Amount Capital Earnings Stock Compensation Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1998 16,410,622 $ 1,641,062 $ 37,457,167 $ 14,170,697 $ (863,911) $ (133,868) $ 52,271,147
Employee Stock
purchase (23,351) (23,351)
Amortization of
deferred compensation 11,166 11,166
Net Earnings for
the Quarter 129,613 129,613
Balance,
September 30,
1998 16,410,622 $ 1,641,062 $ 37,457,167 $ 14,300,310 $ (863,911) $ (146,053) $ 52,388,575
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
HIGH PLAINS CORPORATION
Statements of Cash Flows
(Unaudited)
Three Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 129,613 $ 1,370,881
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 936,283 850,868
Amortization of deferred compensation 11,166 17,713
Gain on sale of equipment (143,000) -0-
Debt forgiveness (231,359) -0-
Compensation expense on stock options
granted -0- 39,131
Payments received on notes receivable 23,388 28,294
Changes in operating assets and liabilities:
Accounts receivable (1,975,891) (673,607)
Inventories 2,635,431 1,035,447
Refundable income tax 30,000 145,328
Prepaid expenses (489,846) (290,845)
Accounts payable 102,333 (1,121,354)
Accrued liabilities 164,532 (97,589)
Net cash provided by operating activities 1,192,650 1,304,267
Cash flows from investing activities:
Proceeds from sale of equipment 205,233 4,679
Acquisition of property, plant and equipment (1,305,787) (1,442,512)
Decrease in other non-current assets 26,957 -0-
Net cash used in investing activities (1,073,597) (1,437,833)
Cash flows from financing activities:
Proceeds from revolving lines-of-credit 900,000 -0-
Payment on revolving line-of-credit (850,000) (550,000)
Payments on capital lease obligations (121,716) (127,619)
Increase in other non-current liabilities 17,649 7,079
Net cash provided by financing activities (54,067) (670,540)
Increase in cash and cash equivalents 64,986 (804,104)
Cash and cash equivalents:
Beginning of quarter 674,894 2,389,758
End of quarter $ 739,880 $ 1,585,654
</TABLE>
[FN]
See accompanying notes to financial statements.
<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 September 30, 1998 are not
necessarily indicative of the operating results for the entire
year.
(2) Debt Forgiveness
The Company recorded $231,359 in debt forgiveness related to funds
advanced by a customer to the Company for the acquisition and
installation of certain process equipment. The debt forgiveness
results from the renegotiation of an existing supply agreement
between the Company and the customer.
(3) Revolving-lines-of-credit
At September 30, 1998 the Company failed to meet certain financial
covenant ratios as required under the Company's existing lending
agreement. However, on November 10, 1998 the lender waived its rights
to declare the debt due and payable based on these covenant violations
at September 30, 1998. The Company is currently negotiating with the
lender for the expansion of the Company's existing lines-of-credit and
reset certain covenant requirements to potentially avoid future
violations.
(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 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 earnings per share above would
have been reduced to the proforma amounts below:
<PAGE>
<TABLE>
<CAPTION>
For the quarters ending
September 30, 1998 1997
<S> <C> <C>
Net earnings
As reported $129,613 $1,370,881
Pro forma 129,613 1,240,957
Diluted earnings per share:
As reported $ .01 $ .09
Pro forma .01 .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 September 30,
1998 and 1997 have been calculated based on 16,181,721 and 16,009,802
diluted shares outstanding, respectively, The Company's diluted earnings
per share in the financial statements contained herein are the same as the
basic earnings per share for each of the periods disclosed.
Part I
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.
Forward-looking Statements
Forward-looking statements in this Form 10Q, 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
<PAGE>
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.
THREE MONTHS ENDED SEPTEMBER 30, 1998 and 1997
Net Sales and Revenues and Operating Expenses and Results of
Operations.
During the three months ended September 30, 1998, approximately 17.1 million
gallons of fuel grade ethanol were sold at an average price of $1.05 per
gallon, compared to approximately 12.6 million gallons sold during the
same period ended September 30, 1997, at an average price of $1.13 per
gallon. Industrial grade ethanol sold during the three months ended
September 30, 1998 totaled approximately .8 million gallons at an average
price of $1.38 per gallon, compared to approximately .84 million gallons
sold during the same period ended at September 30, 1997 at an average
price of $1.31 per gallon. Additionally, the Company purchased and sold
approximately 1.0 million gallons of fuel grade ethanol with no
significant gain or loss on the transactions. Higher net sales and
revenues for the three months ended September 30, 1998 compared to the
same period ended September 30, 1997 were primarily due to the 2.9
million gallons of fuel ethanol sold at the Portales, Mew Mexico plant
during the three months ended September 30, 1998. The Portales facility
was acquired in December, 1997 and became operational in March, 1998.
The increased net sales and revenues for the period ending September 30,
1998 were off set by a 7% decline in the average sale price for fuel
grade ethanol experienced in the Company's fiscal 1999 first quarter
compared to the average sale price for fuel grade ethanol in same period
in fiscal 1998.
Cost of products sold as a percentage of net sales and revenues was 97.3% and
90.9% for the three month periods ended September 30, 1998 and 1997,
respectively. The increase in cost of products sold as a percentage of
net sales and revenues was due to decreased per gallon revenues as
described above, offset by lower average costs per bushel of grain.
Average grain costs for the period ended September 30, 1998 were $2.29
per bushel compared to an average cost of $2.44 per bushel for the period
ended September 30, 1997.
Selling, general and administrative expenses were slightly higher for the
three months ended September 30, 1998, compared to the same period ended
September 30, 1997. The slight increase is a result of increased
staffing for the period ended September 30, 1998 compared to staffing for
the period ended September 30, 1997.
<PAGE>
Net earnings decreased from 6.1% as a percentage of net sales and revenues
for the three months ended September 30, 1997 to net earnings of 0.5% as
a percentage of net sales and revenues for the same period ended
September 30, 1998. The decrease in net earnings as a percentage of net
sales and revenues results primarily from a decrease in gross profits for
the 1999 period from 1998.
Liquidity and Capital Resources
The Company's primary source of funds during the first fiscal quarter of 1999
was cash flow from operations and advances from revolving lines-of-
credit. At September 30, 1998, the Company had negative working capital
of approximately ($7.5) million. Working capital decreased compared to
the June 30, 1998 negative working capital of ($6.4) million. This
decrease is the net effect of a decrease in inventories, increase in
accounts receivables and the increase in borrowings on the Company's
revolving lines-of-credit.
Capital expenditures in the first three months of fiscal 1999 amounted to
$1.3 million compared to $1.4 million, for the same period in fiscal
1998. These expenditures were primarily for modifications at the three
plants.
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, seek additional funding through sale of stock,
exercise of options held by directors and officers, or issue debt and/or
equity securities as additional sources of financing are needed.
Seasonality
Ethanol prices increased as expected towards the end of the first fiscal
quarter for 1999. Prices for ethanol sold in mandated oxygen markets
historically increase during the months September through March due to
the Federal Oxygen Program. Although these seasonal price increases have
occurred, both gasoline and ethanol prices are somewhat lower than those
experienced in the summer and fall of 1997. Since ethanol replaces
gasoline, changes in gasoline have historically resulted in similar
changes in the price paid for ethanol. Gasoline prices have recently
trended lower, and levels of on-hand finished ethanol inventory appear to
be slightly higher than normal, which could lead to some softening of the
ethanol market during the third fiscal quarter for 1999. The Company has
contracted to sell virtually all of the Company's ethanol production
volume into January 1999, and substantial amounts thereafter, at prices
which management believes to be favorable.
The Company's feedstock prices continued to decline significantly from fiscal
1998, as the corn markets reached a ten year low near the end of this
first fiscal quarter for 1999. After a slight rebound in October, grain
prices again declined and are expected to weaken further as harvest
continues due to the anticipated near record harvest. While weather,
carryouts, exports and other factors can still significantly affect grain
prices, the U.S. Department of Agriculture crop reports predict the
second largest corn crop in the last ten years along with a large
carryout. As part of a risk management program, the Company has
<PAGE>
contracted grain deliveries for all three plants for a substantial
portion of fiscal year 1999. The Company locked in prices for virtually
all grain deliveries into January 1999. However, the Company has reserved
the right to price most of the remainder of the contracted purchases in
anticipation of potentially lower prices.
Prices for the Company's distillers grain by-products (DDGS), which
historically fluctuate with the price of corn, are also currently lower
than prices received during fiscal 1998. These fluctuations in the price
of DDGS are expected to provide some hedge for the Company against the
possibility of an increase in grain prices. However, an oversupply of
competing feed ingredients currently exists in the marketplace, and if
this oversupply continues, it could lessen the ability of DDGS to offset
the impact of higher corn prices.
<PAGE>
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No new legal proceedings were instigated during the quarter ended September 30,
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. SUBSEQUENT EVENTS.
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a). Exhibit 27-1 Financial Data Schedule
b). Reports on Form 8-K and 8-KA. During the quarter for which this
report is filed, the Company filed the following Form 8-K's:
July 1, 1997 Announcement of formation of a new four-
person senior management team.
August 14, 1998 Company announced fiscal year end earnings
and earnings per share at June 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report be signed on its behalf by the
undersigned thereunto duly authorized.
HIGH PLAINS CORPORATION
Date November 13, 1998 /s/Gary R. Smith
President
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 739,880
<SECURITIES> 0
<RECEIVABLES> 7,389,238
<ALLOWANCES> 75,000
<INVENTORY> 3,692,801
<CURRENT-ASSETS> 12,321,933
<PP&E> 95,446,541
<DEPRECIATION> 24,747,067
<TOTAL-ASSETS> 83,371,847
<CURRENT-LIABILITIES> 19,856,842
<BONDS> 18,750,000
0
0
<COMMON> 1,641,062
<OTHER-SE> 50,747,513
<TOTAL-LIABILITY-AND-EQUITY> 83,371,847
<SALES> 26,389,859
<TOTAL-REVENUES> 26,389,859
<CGS> 25,679,801
<TOTAL-COSTS> 25,679,801
<OTHER-EXPENSES> 457,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 442,599
<INCOME-PRETAX> 204,613
<INCOME-TAX> 75,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129,613
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
