<PAGE>
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 1-10307
______________________________
IMPERIAL HOLLY CORPORATION
(Exact name of registrant as specified in its charter)
Texas 74-0704500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Imperial Square, Suite 200, P.O. Box 9, Sugar Land, Texas 77487
(Address of principal executive offices, including Zip Code)
(713) 491-9181
(Registrant's telephone number, including area code)
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of November 9, 1995.
10,306,590 shares.
Exhibit Index Appears on Page 13
Page 1 of 14 Pages
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1
<PAGE>
IMPERIAL HOLLY CORPORATION
Index
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Consolidated Statement of Changes in
Shareholders' Equity 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1995 March 31, 1995
------------------- --------------------------
ASSETS (In Thousands of Dollars)
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $ 1,868 $ 1,686
Marketable securities 36,971 35,079
Accounts receivable 51,620 38,234
Inventories:
Finished products 38,911 100,540
Raw and in-process materials 19,882 22,633
Supplies 13,193 11,990
Manufacturing costs prior to production 22,554 11,969
Prepaid expenses 4,422 4,394
-------- --------
Total current assets 189,421 226,525
NOTES RECEIVABLE 2,396 2,445
OTHER INVESTMENTS 6,848 6,450
PROPERTY, PLANT AND EQUIPMENT - net 127,619 128,952
OTHER ASSETS 6,817 9,752
-------- --------
TOTAL $333,101 $374,124
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade $ 41,400 $ 44,756
Short-term borrowings 29,851 61,092
Current maturities of long-term debt 17 51
Other current liabilities 30,991 33,421
-------- --------
Total current liabilities 102,259 139,320
LONG-TERM DEBT 95,300 100,010
DEFERRED TAXES AND OTHER CREDITS 24,705 24,817
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 32,183 32,046
Retained earnings 72,059 72,854
Unrealized securities gains - net 7,153 5,635
Pension liability adjustment (558) (558)
-------- --------
Total shareholders' equity 110,837 109,977
-------- --------
TOTAL $333,101 $374,124
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
----------------------------------- ------------------------
1995 1994 1995 1994
--------------- ----------- ---------- ----------
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
NET SALES $ 165,786 $ 162,072 $ 314,610 $ 311,396
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 151,828 148,320 286,135 283,052
Selling, general and administrative 14,699 14,027 28,605 27,648
----------- ----------- ----------- -----------
Total 166,527 162,347 314,740 310,700
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (741) (275) (130) 696
INTEREST EXPENSE (2,821) (2,554) (5,722) (5,187)
REALIZED SECURITIES GAINS -- NET 705 116 3,162 1,738
OTHER INCOME -- Net 729 889 1,854 2,507
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (2,128) (1,824) (836) (246)
PROVISION (CREDIT) FOR INCOME TAXES (598) (684) (72) (102)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (1,530) (1,140) (764) (144)
EXTRAORDINARY ITEM - NET OF TAX - - 380 -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (1,530) $ (1,140) $ (384) $ (144)
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $(0.15) $(0.11) $(0.08) $(0.01)
EXTRAORDINARY ITEM - NET OF TAX - - 0.04 -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $(0.15) $(0.11) $(0.04) $(0.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 10,298,298 10,262,336 10,292,725 10,259,350
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September 30
--------------------
1995 1994
--------- --------
(In Thousands of Dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ (384) $ (144)
Adjustments for non-cash and non-operating items:
Extraordinary item - net (380) -
Depreciation 6,319 6,863
Other (3,550) (2,875)
Working capital changes:
Receivables (13,386) (7,219)
Inventory 63,177 59,486
Deferred and prepaid costs (10,613) (9,691)
Accounts payable (3,356) 10,402
Other liabilities (3,567) 595
--------- --------
Operating cash flow 34,260 57,417
--------- --------
INVESTMENT ACTIVITIES:
Capital expenditures (5,175) (5,311)
Investment in marketable securities (4,367) (3,901)
Proceeds from sale of marketable securities 7,945 3,766
Proceeds from sale of fixed assets 838 2,800
Other 2,369 101
--------- --------
Investing cash flow 1,610 (2,545)
--------- --------
FINANCING ACTIVITIES:
Short-term debt:
Bank borrowings - net 19,900 (1,582)
CCC borrowings - advancements 81,674 16,928
CCC borrowings - repayments (132,815) (68,042)
Repayment of long-term debt (4,160) (25)
Dividends paid (411) (821)
Other 124 88
--------- --------
Financing cash flow (35,688) (53,454)
--------- --------
INCREASE IN CASH AND TEMPORARY INVESTMENTS 182 1,418
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF PERIOD 1,686 555
--------- --------
CASH AND TEMPORARY INVESTMENTS, END OF PERIOD $ 1,868 $ 1,973
========= ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Six Months Ended September 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Unrealized Pension
--------------------- Retained Securities Liability
Shares Amount Earnings Gains Adjustment Total
----------- -------- -------- ----- ----------- -----
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1995 10,283,445 $32,046 $72,854 $5,635 $ (558) $109,977
Net income (loss) (384) (384)
Cash dividend (411) (411)
Employee stock
purchase plan and
stock option exercises 16,974 137 137
Change in unrealized
securities gains - net 1,518 1,518
----------- ------- ------ ------ ----- ---------
BALANCE, SEPTEMBER 30, 1995 10,300,419 $32,183 $72,059 $ 7,153 $ (558) $110,837
=========== ======= ======= ======= ====== ========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
IMPERIAL HOLLY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Basis of Presentation -- The unaudited condensed consolidated financial
statements included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect in the opinion
of management, all adjustments, consisting only of normal recurring accruals,
that are necessary for a fair presentation of financial position and results of
operations for the interim periods presented. These financial statements
include the accounts of Imperial Holly Corporation and its majority owned
subsidiaries (the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation. Certain information and
footnote disclosures required by generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations. The financial
statements included herein should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended March 31, 1995.
Cost of Sales -- Payments to growers for sugarbeets are based in part upon the
Company's average net return for sugar sold (as defined in the participating
contracts with growers) during the grower contract years, some of which extend
beyond September 30. The contracts provide for the sharing of the net selling
price (gross sales price less certain marketing costs, including packaging
costs, brokerage, freight expense and amortization of costs for certain
facilities used in connection with marketing) with growers. Cost of sales
includes an accrual for estimated additional amounts to be paid to growers based
on the average net return realized for sugar sold in each of the contract years
through September 30. The final cost of sugarbeets cannot be determined until
the end of the contract year for each growing area. Manufacturing costs prior to
production are deferred and allocated to production costs based on estimated
total units of production for each sugar manufacturing campaign. Additionally,
the Company's sugar inventories, which are accounted for on a LIFO basis, are
periodically reduced at interim dates to levels below that of the beginning of
the fiscal year. When such interim LIFO liquidations are expected to be restored
prior to fiscal year-end, the estimated replacement cost of the liquidated
layers is utilized as the basis of the cost of sugar sold from beginning of the
year inventory. Accordingly, the cost of sugar utilized in the determination of
cost of sales for interim periods includes estimates which may require
adjustment in future fiscal periods.
Extraordinary Item -- In June 1995, the Company purchased and retired
$4,700,000 principal amount of its 8-3/8% senior notes due in 1999, resulting in
a gain which is reported, net of related income tax expense of $204,000, as an
extraordinary item.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company finances its working capital and capital expenditure requirements
from a combination of funds generated by operations and short-term borrowing
arrangements, including short-term, secured, non-recourse borrowings from the
Commodity Credit Corporation ("CCC"). CCC loans mature each September 30, and,
accordingly, no CCC loans were outstanding at September 30, 1995.
The increase in accounts receivable for the six months ended September 30,
1995 results from higher sales volumes in the current quarter as compared to the
quarter ended March 31, 1995, as well as the proceeds due from brokers for
securities transactions. The decrease in finished product inventory during the
six months ended September 30, 1995 was primarily due to the seasonal production
schedule of the Company's beet sugar operations.
Operating cash flow of $34.3 million as well as cash flow from investing
activities totaling $1.6 million for the six months ended September 30, 1995 was
used to reduce long and short-term debt. In June 1995, the Company purchased
and retired $4,700,000 principal amount of its 8-3/8% senior notes due 1999; the
remaining notes, with an aggregate principal amount of $95.3 million, require
semi-annual interest-only payments prior to maturity. Management believes that
existing internal and external sources are adequate to meet its financing
requirements, including fiscal 1996 capital expenditures, estimated at $8.0
million. The Company has entered into a limited partnership agreement with a
sugarbeet growers' cooperative in Washington state to build and operate a new
sugarbeet factory. The Company's capital commitment primarily consists of
certain production equipment which is not presently in use. The Company's
marketable securities portfolio is reported at its market value of $36.9 million
at September 30, 1995, $11.0 million in excess of its cost basis. In July 1995,
the Board of Directors discontinued payment of dividends on the Company's common
stock.
RESULTS OF OPERATIONS
The Company's results of operations continue to be adversely affected by a
combination of low refined sugar prices and historically high raw cane sugar
prices. Selling prices, which have been depressed by an oversupply of refined
sugar from expanded beet sugar production in recent years, have increased
modestly in the current fiscal year, but substantially less than the significant
increases in raw sugar costs due to an overly restrictive import quota.
Although reduced from the peak levels established during the summer months,
domestic raw sugar prices continue well above previous years' levels. A
significant portion of the Company's industrial sales are made under forward
sales contracts; the Company enters into forward purchase contracts for raw cane
sugar to reduce its exposure to future price changes.
8
<PAGE>
The domestic sugar industry operated under marketing allotments imposed by the
USDA for the year ended September 30, 1995. The Company is unable to predict if
marketing allotments which expired September 30, 1995 will be re-imposed, or, if
re-imposed, what the allotment level for the total market or the Company's share
thereof would be, nor the effect of any such action on raw and refined sugar
prices, margins and the Company's results of operations. Congress is currently
formulating the 1995 Farm Bill which would be effective in October 1996. The
Company is unable to predict whether the 1995 Farm Bill will include a sugar
section, whether the sugar program under such a section, if any, would be
similar to the current sugar program or the effects of such legislation on
market prices for refined and raw sugar, the margins received by the Company on
the sugar it sells or the results of operations of the Company.
Net sales increased $3.7 million or 2.9% for the three months ended September
30, 1995, compared to the same period of the prior year, as an increase in sugar
volume sold was combined with higher sales prices. Sugar sales volume increased
somewhat as increases in beet sugar sales more than offset reductions in cane
sugar sales. Average sugar sales prices increased from the year earlier period
in part due to a shift in product mix and modest increases in selling prices.
Average sugar sales prices decreased from the immediately preceding quarter.
For the six month period ended September 30, 1995, net sales increased $3.2
million or 1.0% as an increase in average sugar sales price more than offset a
decrease in sugar sales volume.
Cost of sales as a percent of sales was virtually unchanged at 91.6% for the
three months and 90.9% for the six months ended September 30, 1995. The unit
cost of raw cane sugar purchased increased more than the average sales price
resulting in a decrease in unit margins on cane sugar sales. Domestic raw cane
market prices remain higher than the previous year, and absent similar increases
in refined sugar prices, will continue to negatively impact the Company's
results of operations for the remainder of the current fiscal year. The Company
purchases sugar beets under participatory contracts which provide for a
percentage sharing of the net selling price realized on refined beet sugar sales
between the Company and the grower. Use of this type of contract reduces the
Company's exposure to inventory price risk on sugarbeet purchases so long as the
contract net selling price does not fall below the regional minimum support
prices established by the USDA. Low refined sugar selling prices resulted in
net selling prices falling below such minimum support levels in some contract
areas during previous years, however net selling prices are currently above such
minimum levels. Consequently, the increase in the unit selling price of refined
beet sugar resulted in a modest increase in the unit cost of sugarbeets
purchased. Improved manufacturing performances especially in the Company's
Brawley, California factory, resulted in a slight decrease in the cost of beet
sugar sold from the already low levels of the previous fiscal period.
Selling, general and administrative expenses increased by $672,000 or 4.8% for
the three months and $957,000 or 3.5% for the six months ended September 30,
1995 compared to the same period of the prior year, as increases
9
<PAGE>
in advertising and warehousing costs were largely offset by reductions in
general and administrative costs. In October 1995, the Company announced a cost
reduction program in the sales, administrative and manufacturing overhead areas,
including a reduction in force, which is expected to yield annual cost savings
of $8,000,000. In connection with the reductions, which are expected to be
substantially complete by March 31, 1996, the Company expects to record a charge
to pre-tax earnings of $475,000 in the quarter ending December 31, 1995.
Interest expense for the three and six month periods ended September 30, 1995
was higher than the comparable period of the prior year as a result of higher
short-term interest rates on higher average short-term borrowings. Other income
- - -- net for the six months ended September 30, 1995 includes gains on the sale of
assets of $.6 million compared to $1.7 million of such gains in the prior year
period. The extraordinary gain resulted from the purchase and retirement of
$4.7 million principal amount of 8-3/8% senior notes in June 1995.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits required to be filed with this report are listed in the
Exhibit Index which immediately follows the signatures page of this report.
Registrant is a party to several long-term debt instruments under which in
each case the total amount of securities authorized does not exceed 10% of the
total assets of Registrant and its subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii) (A) of Item 601(b) of Regulation S-K, Registrant
agrees to furnish a copy of such instruments to the Securities and Exchange
Commission upon request.
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1995.
11
<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.
IMPERIAL HOLLY CORPORATION
(Registrant)
Dated: November 10, 1995 By: /s/ James C. Kempner
----------------------------
James C. Kempner
President,
Chief Executive Officer
and Chief Financial Officer
(Principal Financial Officer)
12
<PAGE>
IMPERIAL HOLLY CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Exhibit Index
Exhibit
11 Computation of Income Per
Common Share.
27 Financial Data Schedule
<PAGE>
EXHIBIT 11
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, September 30,
1995 1995
------------------------------
(In Thousands of Dollars)
<S> <C> <C>
INCOME (LOSS) FOR PRIMARY AND FULLY DILUTED COMPUTATION:
Income (loss) before Extraordinary Item:
As reported $ (1,530) $ (764)
Adjustments - none - -
----------- -----------
As adjusted (1,530) (764)
=========== ===========
Net Income (Loss):
As reported $ (1,530) $ (384)
Adjustments - none - -
----------- -----------
As adjusted $ (1,530) $ (384)
=========== ===========
PRIMARY EARNINGS (LOSS) PER SHARE:
Weighted average shares of common stock outstanding 10,298,298 10,292,725
Incremental shares issuable from assumed exercise of
stock options under the treasury stock method 28,320 32,378
----------- -----------
Weighted average shares of common stock outstanding,
as adjusted 10,326,618 10,325,103
=========== ===========
Primary earnings (loss) per share:
Before extraordinary item $ (0.15) $ (0.07)
Net income (loss) (0.15) (0.04)
=========== ===========
FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Weighted average shares of common stock outstanding 10,298,298 10,292,725
Incremental shares issuable from assumed exercise of
stock options under the treasury stock method 28,320 32,378
----------- -----------
Weighted average shares of common stock outstanding,
as adjusted 10,326,618 10,325,103
=========== ===========
Fully diluted earnings (loss) per share:
Before extraordinary item $ (0.15) $ (0.07)
Net income (loss) (0.15) (0.04)
=========== ===========
</TABLE>
_______________________________________
This calculation is submitted in accordance with Item 601(b)(11) of
Regulation S-K; the amount of dilution illustrated in this calculation
is not required to be disclosed pursuant to paragraph 14 of Accounting
Principles Board Opinion No. 15.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,868
<SECURITIES> 36,971
<RECEIVABLES> 51,620
<ALLOWANCES> 0
<INVENTORY> 71,986
<CURRENT-ASSETS> 189,421
<PP&E> 265,602
<DEPRECIATION> 137,983
<TOTAL-ASSETS> 333,101
<CURRENT-LIABILITIES> 102,259
<BONDS> 95,300
<COMMON> 32,183
0
0
<OTHER-SE> 78,654
<TOTAL-LIABILITY-AND-EQUITY> 333,101
<SALES> 314,610
<TOTAL-REVENUES> 314,610
<CGS> 286,135
<TOTAL-COSTS> 286,135
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,722
<INCOME-PRETAX> (836)
<INCOME-TAX> (72)
<INCOME-CONTINUING> (764)
<DISCONTINUED> 0
<EXTRAORDINARY> 380
<CHANGES> 0
<NET-INCOME> (384)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
