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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 June 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 August 7, 1995.
10,298,115 shares.
Exhibit Index Appears on Page 12
Page 1 of 13 Pages
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<PAGE>
IMPERIAL HOLLY CORPORATION
Index
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
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 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
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PART I - FINANCIAL INFORMATION
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1995 March 31, 1995
------------- ----------------
ASSETS (In Thousands of Dollars)
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $ 1,844 $ 1,686
Marketable securities 35,947 35,079
Accounts receivable 52,658 38,234
Inventories:
Finished products 92,865 100,540
Raw and in-process materials 20,078 22,633
Supplies 11,396 11,990
Manufacturing costs prior to production 15,865 11,969
Prepaid expenses 3,520 4,394
-------- --------
Total current assets 234,173 226,525
NOTES RECEIVABLE 2,422 2,445
OTHER INVESTMENTS 6,506 6,450
PROPERTY, PLANT AND EQUIPMENT - net 128,307 128,952
OTHER ASSETS 6,986 9,752
-------- --------
TOTAL $378,394 $374,124
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade $ 63,209 $ 44,756
Short-term borrowings 55,300 61,092
Current maturities of long-term debt 18 51
Other current liabilities 28,956 33,421
-------- --------
Total current liabilities 147,483 139,320
LONG-TERM DEBT 95,303 100,010
DEFERRED TAXES AND OTHER CREDITS 24,488 24,817
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 32,142 32,046
Retained earnings 73,589 72,854
Unrealized securities gains - net 5,947 5,635
Pension liability adjustment (558) (558)
-------- --------
Total shareholders' equity 111,120 109,977
-------- --------
TOTAL $378,394 $374,124
======== ========
</TABLE>
See notes to consolidated financial statements.
- 3 -
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IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------
1995 1994
----------- ----------
(In Thousands of Dollars)
<S> <C> <C>
NET SALES $ 148,824 $ 149,324
---------- ----------
COSTS AND EXPENSES:
Cost of sales 134,307 134,732
Selling, general and administrative 13,906 13,621
---------- ----------
Total 148,213 148,353
---------- ----------
OPERATING INCOME 611 971
INTEREST EXPENSE (2,901) (2,633)
REALIZED SECURITIES GAINS 2,457 1,622
OTHER INCOME -- Net 1,125 1,618
---------- ----------
INCOME BEFORE INCOME TAXES 1,292 1,578
PROVISION FOR INCOME TAXES 526 582
---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 766 996
EXTRAORDINARY ITEM -- NET OF TAX 380 --
---------- ----------
NET INCOME $ 1,146 $ 996
========== ==========
EARNINGS PER SHARE OF COMMON STOCK:
INCOME BEFORE EXTRAORDINARY ITEM $0.07 $0.10
EXTRAORDINARY ITEM -- NET OF TAX 0.04 --
---------- ----------
NET INCOME $0.11 $0.10
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 10,287,090 10,256,331
========== ==========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------
1995 1994
------------- ------------
(In Thousands of Dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,146 $ 996
Adjustments for non-cash and non-operating items:
Extraordinary item - net (380) -
Depreciation 3,146 3,640
Other (2,942) (2,877)
Working capital changes:
Receivables (14,424) (3,365)
Advances on raw sugar cargos - (7,112)
Inventory 10,824 22,589
Deferred and prepaid costs (3,022) (2,817)
Accounts payable 18,453 11,790
Other liabilities (5,168) (1,299)
-------- --------
Operating cash flow 7,633 21,545
-------- --------
INVESTMENT ACTIVITIES:
Capital expenditures (2,690) (1,790)
Investment in marketable securities (3,475) (3,348)
Proceeds from sale of marketable securities 5,528 3,191
Proceeds from sale of fixed assets 827 2,783
Other 2,604 6
-------- --------
Investing cash flow 2,794 842
-------- --------
FINANCING ACTIVITIES:
Short-term debt:
Bank borrowings - net (3,747) (9,941)
CCC borrowings - advances 59,256 16,928
CCC borrowings - repayments (61,301) (27,708)
Repayment of long-term debt (4,156) (5)
Dividends paid (411) (410)
Other 90 45
-------- --------
Financing cash flow (10,269) (21,091)
-------- --------
INCREASE IN CASH AND TEMPORARY INVESTMENTS 158 1,296
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF PERIOD 1,686 555
-------- --------
CASH AND TEMPORARY INVESTMENTS, END OF PERIOD $ 1,844 $ 1,851
======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Months Ended June 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 1,146 1,146
Cash dividend (411) (411)
Employee stock purchase
plan and stock option
exercises 12,336 96 96
Change in unrealized
securities
gains -- net 312 312
---------- ------- ------- ------ ----- --------
BALANCE, JUNE 30, 1995 10,295,781 $32,142 $73,589 $5,947 $(558) $111,120
========== ======= ======= ====== ===== ========
</TABLE>
See notes to consolidated financial statements.
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IMPERIAL HOLLY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 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 June 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 June 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.
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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 outstanding at June 30,
1995 totaled $49.1 million.
The increase in accounts receivable for the three months ended June 30,
1995 results from higher sales volumes 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 three months ended June 30,
1995 was primarily due to the seasonal production schedule of the Company's beet
sugar operations. The increase in accounts payable, principally amounts due
growers, result from the timing of the purchase of and payments for sugarbeets.
Operating cash flow of $7.6 million as well as cash flow from investing
activities totaling $2.8 million for the three months ended March 31, 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's marketable securities portfolio is reported at its market
value of $35.9 million at June 30, 1995, $9.1 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
Net sales declined $.5 million or .3% for the three months ended June 30,
1995, compared to the same period of the prior year, as a 5% decrease in sugar
volume sold was substantially offset by somewhat higher sales prices, as well as
increases in beet pulp and molasses volumes. The lack of profitable sales
opportunities, particularly in light of rising raw cane sugar costs was the
primary factor in the volume reductions. Average sugar sales prices increased
3.4% from the year earlier period in part due to a shift in product mix, and
increased only slightly from the immediately preceding fiscal quarter.
Since October 1, 1994, the domestic sugar industry has been operating under
marketing allotments imposed by the USDA, which are scheduled to expire
September 30, 1995. The Company's current allotment has not had, and management
does not expect that it will have, a significant restrictive effect on the
Company's marketing plans. The Company is unable to predict if marketing
allotments will be extended beyond September 30, 1995, or, if
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extended, what the allotment level for the total market or the Company's share
thereof would be, nor the effect of any such extension 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.
Cost of sales as a percent of sales increased from 90.0% to 90.3% for the
three months ended June 30, 1995. The unit cost of raw cane sugar purchased
increased approximately 2.6% for the three month period and as a result, the
Company experienced a decrease in its unit margins on cane sugar sales. A
shortage of raw cane sugar available for delivery for the remainder of the
import quota year which ends September 30, 1995, has caused increases in the
domestic raw sugar market which will continue to adversely impact the Company's
results of operations through at least the end of its second fiscal quarter. The
Company believes it has adequate supplies of raw sugar committed under forward
purchase contracts for delivery through this period. The Company purchases sugar
beets under participatory contracts which provide for a percentage of 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. Depressed refined sugar selling prices have resulted in net selling prices
falling below such minimum support levels in some contract areas. Consequently,
the increase in the unit selling price of refined beet sugar resulted in a
modest increase in the unit cost of sugarbeets purchased. Additionally, higher
sugarbeet freight costs offset improved manufacturing performances especially in
the Company's Brawley, California factory, resulting in an increase in the cost
of beet sugar sold of 1.6%.
Selling, general and administrative expenses increased by $285,000 or 2.1%
for the three months ended June 30, 1995 compared to the same period of the
prior year, as increases in advertising and warehousing costs were largely
offset by reductions in general and administrative costs.
Interest expense for the three months ended June 30, 1995 was higher than
the comparable period of the prior year as a result of higher short-term
interest rates on somewhat lower average short-term borrowings. Other income --
net for the three months ended June 30, 1995 includes gains on the sale of
assets of $.6 million compared to $1.4 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.
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PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Shareholders on July 28, 1995, nominees for Class
I Directors were elected to serve for terms of office expiring in 1998 by the
vote totals as follows:
<TABLE>
<CAPTION>
NUMBER OF VOTES
BROKER
FOR WITHHELD NON-VOTES
<S> <C> <C> <C>
John D. Curtin, Jr. 9,138,407 61,681 --
I. H. Kempner, II 9,137,103 62,985 --
James C. Kempner 9,138,564 61,524 --
Daniel K. Thorne 9,138,914 61,174 --
</TABLE>
Class II Directors, whose terms of office continue until 1996 are Edward O.
Gaylord, Robert C. Hanna, Roger W. Hill and Robert L. K. Lynch. Class III
Directors, whose terms of office continue until 1997 are A. M. Bartolo, Ann O.
Hamilton, Harris L. Kempner, Jr., H. E. Lentz and Fayez Sarofim.
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 June 30,
1995.
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<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: August 8, 1995 By: /s/ James C. Kempner
-------------------------
James C. Kempner
President,
Chief Executive Officer
and Chief Financial Officer
(Principal Financial Officer)
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IMPERIAL HOLLY CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
Exhibit Index
Exhibit Sequential Page Number
11 Computation of Income Per Common Share. Page 13
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EXHIBIT 11
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1995
_________________________
(In Thousands of Dollars)
<S> <C>
INCOME FOR PRIMARY AND FULLY DILUTED COMPUTATION:
Income before Extraordinary Item:
As reported $ 766
Adjustments - none -
-----------
As adjusted 766
===========
Net Income:
As reported $ 1,146
Adjustments - none -
-----------
As adjusted $ 1,146
===========
PRIMARY EARNINGS PER SHARE:
Weighted average shares of common stock outstanding 10,287,090
Incremental shares issuable from assumed exercise of
stock options under the treasury stock method 39,838
-----------
Weighted average shares of common stock outstanding,
as adjusted 10,326,928
===========
Primary earnings per share:
Before extraordinary item $ 0.07
Net income 0.11
===========
FULLY DILUTED EARNINGS PER SHARE:
Weighted average shares of common stock outstanding 10,287,090
Incremental shares issuable from assumed exercise of
stock options under the treasury stock method 44,944
-----------
Weighted average shares of common stock outstanding,
as adjusted 10,332,034
===========
Fully diluted earnings per share:
Before extraordinary item $ 0.07
Net income 0.11
===========
</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.
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<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 three
months ended June 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,844
<SECURITIES> 35,947
<RECEIVABLES> 52,658
<ALLOWANCES> 0
<INVENTORY> 124,339
<CURRENT-ASSETS> 234,173
<PP&E> 263,207
<DEPRECIATION> 134,900
<TOTAL-ASSETS> 378,394
<CURRENT-LIABILITIES> 147,483
<BONDS> 95,303
<COMMON> 32,142
0
0
<OTHER-SE> 78,978
<TOTAL-LIABILITY-AND-EQUITY> 378,394
<SALES> 148,824
<TOTAL-REVENUES> 148,824
<CGS> 134,307
<TOTAL-COSTS> 134,307
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,901
<INCOME-PRETAX> 1,292
<INCOME-TAX> 526
<INCOME-CONTINUING> 766
<DISCONTINUED> 0
<EXTRAORDINARY> 380
<CHANGES> 0
<NET-INCOME> 1,146
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
