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, 1999 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, 1999 - 16,146,751
<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, 1999 and June 30, 1999
<TABLE>
<CAPTION>
September 30, June 30,
Assets 1999 1999
(Unaudited) **
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 354,654 $ 330,672
Accounts Receivable
Trade (less allowance of $75,000) 5,625,337 5,081,396
Production credits and incentives
(less allowance of $124,222) 510,430 917,717
Inventories 5,329,304 5,038,199
Notes receivable 0 1,000,000
Prepaid expenses 1,062,297 391,590
Total current assets 12,882,022 12,759,574
Property, plant and equipment, at cost:
Land and land improvements 450,403 450,403
Ethanol plants 93,513,662 92,994,900
Other equipment 573,911 573,911
Office equipment 311,672 308,699
Leasehold improvements 48,002 48,002
Construction in process 861,324 892,664
95,758,974 95,268,579
Less accumulated depreciation (28,507,771) (27,563,913)
Net property, plant and equipment 67,251,203 67,704,666
Other assets:
Deferred loan costs (less accumulated
amortization of $87,313 and $75,181,
respectively) 109,984 122,116
Other 26,578 26,578
Total other assets 136,562 148,694
$80,269,787 $80,612,934
</TABLE>
[FN]
See accompanying notes to financial statements.
** From audited financial statements.
<PAGE>
HIGH PLAINS CORPORATION
Balance Sheets Continued
(Unaudited)
September 30, 1999 and June 30, 1999
<TABLE>
<CAPTION>
September 30, June 30,
Liabilities and Stockholders' Equity 1999 1999
(Unaudited) **
<S> <C> <C>
Current liabilities:
Revolving lines-of-credit $ 9,550,000 $ 9,200,000
Current maturities of capital lease
obligations 529,521 520,168
Accounts payable 7,431,749 6,693,746
Accrued interest 7,857 55,342
Accrued payroll and property taxes 665,949 721,463
Accrued income taxes payable 0 10,000
Total current liabilities 18,185,076 17,200,719
Revolving line-of-credit 6,850,000 7,700,000
Capital lease obligations, less
current maturities 1,341,669 1,477,534
Deferred income tax payable 955,846 945,845
Other 327,568 426,107
9,475,083 10,549,486
Stockholders' equity:
Common stock, $.10 par value, authorized
50,000,000 shares; issued 16,428,098 and
16,410,622 shares at September 30, 1999
and June 30, 1999 respectively, of which
281,347 and 411,178 shares were held as
treasury stock at September 30, 1999 and
June 30, 1999 respectively. 1,642,810 1,641,062
Additional paid-in capital 37,678,423 37,486,655
Retained earnings 14,091,958 14,705,578
53,413,191 53,833,295
Less:
Treasury stock - at cost (755,903) (863,911)
Deferred compensation (47,660) (106,655)
Total Stockholders' equity 52,609,628 52,862,729
$80,269,787 $80,612,934
</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, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1999 1998
<S> <C> <C>
Net sales and revenues $22,703,652 $26,389,859
Cost of products sold 22,051,469 25,679,801
Gross profit 652,183 710,058
Selling, general and administrative
expenses 902,788 457,461
Operating income (loss) (250,605) 252,597
Other income (expense):
Interest and other income 14,630 251,615
Interest expense (389,646) (442,599)
Gain on sale of equipment 22,000 143,000
(353,016) (47,984)
Net earnings before income
taxes (603,621) 204,613
Income tax (expense) benefit (10,000) (75,000)
Net earnings $ (613,621) $ 129,613
Basic and diluted earnings per share: $ (.04) $ .01
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
HIGH PLAINS CORPORATION
Statement of Stockholders' Equity
(Unaudited)
Three Months Ended September 30, 1999
<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, 1999 16,410,622 $1,641,062 $37,486,654 $14,705,579 $(863,911) $(106,655) $52,862,729
Re-issuance of
Treasury stock 121,027 108,008 229,035
Exercise of
Options 17,476 1,748 70,742 72,490
Employee Stock
purchase 36,249 36,249
Amortization of
deferred compensation 22,746 22,746
Net Earnings for
the Quarter (613,621) (613,621)
Balance,
September 30,
1999 16,428,098 $1,642,810 $37,678,423 $14,091,958 $(755,903) $ (47,660) $52,609,628
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
HIGH PLAINS CORPORATION
Statements of Cash Flows
(Unaudited)
Three Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ (613,621) $ 129,613
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 955,990 936,283
Amortization of deferred compensation 22,744 11,166
Gain on sale of equipment (22,000) (143,000)
Debt forgiveness -0- (231,359)
Compensation expense on treasury stock
granted 222,802 -0-
Payments received on notes receivable 1,000,000 23,388
Deferred Income Taxes 0 75,000
Changes in operating assets and liabilities:
Accounts receivable (136,654) (1,975,891)
Inventories (291,105) 2,635,431
Refundable income tax -0- 30,000
Prepaid expenses (670,707) (995,850)
Accounts payable 853,992 102,333
Accrued liabilities (212,752) 89,532
Net cash provided by operating activities 1,108,689 686,646
Cash flows from investing activities:
Proceeds from sale of equipment 22,000 205,233
Acquisition of property, plant and equipment (490,395) (799,783)
Decrease in other non-current assets -0- 26,957
Net cash used in investing activities (468,395) (567,593)
Cash flows from financing activities:
Proceeds from revolving lines-of-credit -0- 900,000
Payment on revolving line-of-credit (500,000) (850,000)
Payments on capital lease obligations (126,512) (121,716)
Increase in other non-current liabilities 10,200 17,649
Net cash provided by financing activities (616,312) (54,067)
Increase in cash and cash equivalents 23,982 64,986
Cash and cash equivalents:
Beginning of quarter 330,672 674,894
End of quarter $ 354,654 $ 739,880
</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, unless otherwise noted. 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 result of
operations for the period ended September 30, 1999 are not necessarily
indicative of the operating results for the entire year.
(2) Debt Forgiveness
For the period ended September 30, 1998, 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, 1999 the Company failed to meet certain financial
covenant ratios as required under the Company's existing lending
agreement. However, on November 09, 1999 the lender waived its rights to
declare the debt due and payable based on these covenant violations at
September 30, 1999. The Company is currently seeking to refinance the
company's existing lines-of-credit.
(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:
<TABLE>
<CAPTION>
For the quarters ending
September 30, 1999 1998
<S> <C> <C>
Net earnings
As reported $(613,621) $ 129,613
Pro forma (740,957) 113,242
Diluted earnings per share:
As reported $ (.04) $ .01
Pro forma (.05) .01
</TABLE>
(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,
1999 and 1998 have been calculated based on 16,104,340 and 16,181,721
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.
<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 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 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. Forward looking
statements are identified as including terms such as "may", "will", "should",
"expects", "plans", or similar language.
THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998
Net Sales and Revenues and Operating Expenses and Results of Operations.
During the three months ended September 30, 1999, approximately 15.1 million
gallons of fuel grade ethanol were sold at an average price of $0.97 per
gallon, compared to approximately 17.1 million gallons sold during the
same period ended September 30, 1998, at an average price of $1.05 per gallon.
Industrial grade ethanol sold during the three months ended September 30, 1999
totaled approximately .5 million gallons at an average price of $1.44 per
gallon, compared to approximately .8 million gallons sold during the same
period ended at September 30, 1998 at an average price of $1.38 per gallon.
Additionally, the Company purchased and sold approximately 1.0 million gallons
of fuel and industrial grade ethanol with no significant gain or loss on the
transactions for each of the three month periods ended September 30, 1999 and
1998. Lower net sales and revenues for the three months ended September 30,
1999 compared to the same period ended September 30, 1998 resulted from
reduced sales volume and lower average sale price for fuel grade ethanol.
Fuel grade ethanol sales volume dropped off approximately 2.0 million gallons
compared to the same period a year ago. The lower sales volumes were primarily
a result of planned inventory build at the Portales, New Mexico facility
necessary to fulfil contractual obligations in the event of a potential Portales
plant closure or other similar course of action. Management is continuing to
monitor the situation at Portales very closely due to continued losses at the
facility. At this time management has not made a definitive decision on the
future of the facility and is currently considering pursuing local or state
production incentives; the use of less costly feedstock; and diversification
into additional product lines. Other options for the facility include sale or
closure of the facility, or the relocation of the facility to another site
with better access to feedstock. Revenues were further affected by an 8%
decline in the average sale price of fuel grade ethanol experienced in the
Company's fiscal 2000 first quarter compared to the average sale price for
fuel grade ethanol for the same period in fiscal 1999.
Cost of products sold as a percentage of net sales and revenues was 97.1% and
97.3% for the three month periods ended September 30, 1999 and 1998,
respectively. The cost of products sold, as a percent of net sales revenue,
remained relatively flat compared to the same period a year ago, as the
average cost per bushel of grain trended down offsetting the decrease in
average sales prices, as discussed above. Average grain costs for the period
ended September 30, 1999 were $2.02 per bushel compared to an average cost of
$2.29 per bushel for the period ended September 30, 1998.
Selling, general and administrative expenses increased approximately $.4
million for the three months ended September 30, 1999, compared to the same
period ended September 30, 1998. The increase is a result of increased
staffing, raises, and stock grants to key management personnel.
Net earnings decreased from .5% as a percentage of net sales and revenues for
the three months ended September 30, 1998 to a net loss of (2.7%) as a
percentage of net sales and revenues for the same period ended September 30,
1999. The decrease in net earnings as a percentage of net sales and revenues
results from a slight decrease in gross profits, increased selling, general
and administrative expenses, and a decrease in other income (primarily related
to debt forgiveness in the first quarter of fiscal 1998) for the 1999 period
compared to the same period in 1998.
Liquidity and Capital Resources
The Company's primary source of funds during the first fiscal quarter of 2000
was cash flow from operations. At September 30, 1999, the Company had
negative working capital of approximately ($5.3) million. Working capital
decreased compared to the June 30, 1999 negative working capital of ($4.4)
million. This decrease is the result of increased inventories and prepaid
expenses netted against a decrease in notes receivable and increases in
accounts payable and revolving lines-of-credit.
<PAGE>
Capital expenditures in the first three months of fiscal 2000 amounted to $.5
million compared to $.8 million, for the same period in fiscal 1999. 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, or
sale of assets as additional sources of financing are needed.
Seasonality
Ethanol prices remained relatively flat through the first fiscal quarter for
2000, and into October. Prices for ethanol sold in mandated oxygen markets
historically increase during the months September through March due to the
Federal Oxygenate Program. This historical increase has not been as
significant this season due to a continued ethanol surplus, which the Company
believes to be a result of excess inventory liquidation by major producers,
and early contracting for winter season needs by customers. While some
improvement in the ethanol spot market has been observed, it is not as
significant as in prior years. Additionally, the Company has contracted for
the sale of most of its ethanol production through March (the end of the
wintertime oxygenate season) so even if ethanol prices do rise they will not
effect the majority of the Company's production gallons until after that
time. Unless progress is made in the political issues affecting demand for
ethanol (the replacement of certain MTBE gallons with ethanol, or the
modification of the RFG II vapor pressure requirements discussed in the
Company's most recent 10K filing) the Company expects to see only modest
ethanol price increases over the next fiscal quarter.
Fortunately, grain prices continue to be very favorable for the ethanol
industry. Corn and milo prices have continued to decline to 10 year low
levels based on projections for a good harvest, and many experts are
predicting comparatively low grain prices for another year (subject as always
to risks of weather, carryouts, exports, foreign production and consumption,
and other similar factors). The Company has forward contracted most of its
grain requirements through December, and a significant portion of its needs
into March of 2000.
Prices for the Company's distillers grain by-products (DDGS), which
historically fluctuate with the price of corn and provide the company with
some hedge against the possibility of higher grain prices, have actually
improved over the last fiscal quarter. While July, August and September DDGS
prices were still lower than prices received in the first fiscal quarter of
1999, October 1999 prices were higher than October 1998, and prices are
expected to strengthen further into the second fiscal quarter of 2000. This
year appears to be more typical than last year for DDGS prices, as early
wintertime demand increases have brought a corresponding increase in market
prices.
Year 2000 Issues
The Year 2000 "Y2K" issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year.
Certain computer systems will be unable to properly recognize dates beyond
the year 1999. This could result in a system failure or miscalculations
causing disruptions of operations. In fiscal 1998, the Company developed a
three-phase compliance program: (1) identify major areas of exposure to
ensure compliance, (2) development and implementation of action plans to be
Y2K compliant in all systems by mid-1999, and (3) final testing of each major
area of exposure to ensure compliance by the end of 1999.
Under Phase 1 a number of applications were identified as being Y2K compliant
due to recent upgrades. The Company incurred less than $10,000 in costs to
upgrade these systems. Under phase 2, the Company conducted tests and
diagnostic procedures to verify compliance with regards to its core systems.
The Company incurred approximately $10,000 in costs for the upgrading of the
core software to be Year 2000 compliant.
The Company is continuing the process of making inquiries and gathering
information regarding Y2K compliance exposures faced by its vendors.
Management has insufficient information at this time to assess the degree to
which such vendors and suppliers have addressed or are addressing Y2K
compliance issues, and to fully evaluate the risk of disruption to operations
that those businesses might face relating to Year 2000 compliance issues.
However, no major part or critical operation of any segment of the Company's
business is reliant on a single source for raw materials, supplies, or
services. Nonetheless, there can be no assurance that the Company will be
able to identify all Y2K compliance risks, or, that all contingency plans
will assure uninterrupted business operations across the millennium.
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No new legal proceedings were instigated during the quarter ended September
30, 1999 which would be considered other than in the ordinary course of the
Company's business.
Item 2. CHANGES IN SECURITIES
Not applicable.
<PAGE>
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 26, 1999 Company announced fiscal 1999 fourth quarter
earnings and earnings per share at June 30, 1999.
August 03, 1999 Company announced board restructuring.
August 16, 1999 Company announced fiscal 1999 year-end earning
and earnings per share at June 30, 1999.
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 15, 1999 /s/Gary R. Smith
President
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 354,654
<SECURITIES> 0
<RECEIVABLES> 6,334,989
<ALLOWANCES> 199,222
<INVENTORY> 5,329,304
<CURRENT-ASSETS> 12,882,022
<PP&E> 95,758,974
<DEPRECIATION> 28,507,771
<TOTAL-ASSETS> 80,269,787
<CURRENT-LIABILITIES> 18,185,076
<BONDS> 16,400,000
0
0
<COMMON> 1,642,810
<OTHER-SE> 50,966,818
<TOTAL-LIABILITY-AND-EQUITY> 80,269,787
<SALES> 22,703,652
<TOTAL-REVENUES> 22,703,652
<CGS> 22,051,469
<TOTAL-COSTS> 22,051,469
<OTHER-EXPENSES> 902,788
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 389,646
<INCOME-PRETAX> (603,621)
<INCOME-TAX> 10,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (613,621)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
