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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, 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 1-10307
______________________________
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)
(281) 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 July 30, 1997.
14,277,082 shares.
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IMPERIAL HOLLY CORPORATION
Index
Page
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 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
______________________
The statements regarding future market prices, acreage planted,
agricultural results and operating results and other statements that are not
historical facts contained in this Quarterly Report on Form 10-Q are forward-
looking statements. The words "expect", "project", "estimate", "believe",
"anticipate", "plan", "intend", "could", "may", "predict" and similar
expressions are also intended to identify forward-looking statements. Such
statements involve risks, uncertainties and assumptions, including, without
limitation, market factors, the effect of weather and economic conditions, farm
and trade policy, the available supply of sugar, available quantity and quality
of sugarbeets and other factors detailed elsewhere in this and other Company
filings with the Securities and Exchange Commission. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated.
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PART I - FINANCIAL INFORMATION
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
(In Thousands of Dollars)
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 2,536 $ 7,719
Marketable securities 53,954 48,963
Accounts receivable 59,861 55,557
Inventories:
Finished products 121,902 119,206
Raw and in-process materials 30,983 12,428
Supplies 15,493 16,392
Manufacturing costs prior to production 26,787 20,888
Prepaid expenses 3,688 3,994
-------- --------
Total current assets 315,204 285,147
NOTE RECEIVABLE 1,289 1,168
OTHER INVESTMENTS 11,917 11,949
PROPERTY, PLANT AND EQUIPMENT - net 148,123 146,402
OTHER ASSETS 4,651 5,267
-------- --------
TOTAL $481,184 $449,933
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade $ 60,616 $ 42,492
Short-term borrowings 64,279 62,470
Current maturities of long-term debt 1,405 1,017
Other current liabilities 51,130 45,262
-------- --------
Total current liabilities 177,430 151,241
LONG-TERM DEBT 81,495 90,619
DEFERRED TAXES AND OTHER CREDITS 32,323 31,117
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 83,342 82,620
Retained earnings 88,641 81,347
Unrealized securities gains - net 17,953 12,989
-------- --------
Total shareholders' equity 189,936 176,956
-------- --------
TOTAL $481,184 $449,933
======== ========
See notes to consolidated financial statements.
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IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
June 30,
--------------------
1997 1996
--------- --------
(In Thousands of Dollars,
Except per Share Amounts)
NET SALES $ 197,758 $ 179,905
---------- ----------
COSTS AND EXPENSES:
Cost of sales 168,296 155,637
Selling, general and administrative 15,291 15,297
---------- ----------
Total 183,587 170,934
---------- ----------
OPERATING INCOME 14,171 8,971
INTEREST EXPENSE (2,782) (3,035)
REALIZED SECURITIES GAINS - 392
OTHER INCOME -- Net 185 290
---------- ----------
INCOME BEFORE INCOME TAXES 11,574 6,618
PROVISION FOR INCOME TAXES 4,280 2,469
---------- ----------
NET INCOME $ 7,294 $ 4,149
========== ==========
EARNINGS PER SHARE OF COMMON STOCK $ 0.51 $ 0.40
========== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 14,220,388 10,315,289
========== ==========
See notes to consolidated financial statements.
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IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
June 30,
--------------------------
1997 1996
---------- ----------
(In Thousands of Dollars)
OPERATING ACTIVITIES:
Net income $ 7,294 $ 4,149
Adjustments for non-cash and non-operating items:
Depreciation 4,783 3,639
Other 195 (227)
Working capital changes (excluding working capital
acquired in the Spreckels acquisition):
Receivables (4,304) (9,857)
Inventory (20,352) (30,658)
Deferred and prepaid costs (5,593) 1,246
Accounts payable 18,124 15,869
Other liabilities 4,400 7,700
---------- ----------
Operating cash flow 4,547 (8,139)
---------- ----------
INVESTMENT ACTIVITIES:
Acquisition of Spreckels - (36,283)
Capital expenditures (6,528) (1,940)
Investment in marketable securities (1,508) (1,918)
Proceeds from sales or maturities of
marketable securities 4,165 1,478
Proceeds from sales of fixed assets 24 21
Other 344 (394)
---------- ----------
Investing cash flow (3,503) (39,036)
---------- ----------
FINANCING ACTIVITIES:
Short-term debt:
Bank borrowings - net 55,579 33,359
CCC borrowings - advances - 35,079
CCC borrowings - repayments (53,770) (14,977)
Repayment of long-term debt (8,736) (388)
Other 700 27
---------- ----------
Financing cash flow (6,227) 53,100
---------- ----------
INCREASE IN CASH AND TEMPORARY INVESTMENTS (5,183) 5,925
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF PERIOD 7,719 1,930
---------- ----------
CASH AND TEMPORARY INVESTMENTS, END OF PERIOD $ 2,536 $ 7,855
========== ==========
See notes to consolidated financial statements.
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IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Months Ended June 30, 1997
(UNAUDITED)
Common Stock
__________________ Unrealized
Retained Securities
Shares Amount Earnings Gains Total
---------- -------- -------- ---------- --------
( In Thousands of Dollars)
BALANCE, MARCH 31, 1997 14,158,195 $ 82,620 $ 81,347 $ 12,989 $176,956
Net income 7,294 7,294
Restricted stock issued 86,811 640 640
Employee stock
purchase plan and
stock option exercises 6,559 82 82
Change in unrealized
securities gains - net 4,964 4,964
---------- -------- -------- --------- --------
BALANCE, JUNE 30, 1997 14,251,565 $ 83,342 $ 88,641 $ 17,953 $189,936
========== ======== ======== ========= ========
See notes to consolidated financial statements.
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IMPERIAL HOLLY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
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. The results of operations
of Spreckels Sugar Company are included since April 19, 1996. 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, 1997.
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.
Accounting Pronouncements -- Effective April 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123 "Accounting of Stock-based
Compensation" ("SFAS No. 123"), and elected to continue to following Accounting
Principles Board Opinion No. 25 to measure employee stock compensation cost.
The impact of SFAS No. 123 on proforma earnings per share for the three months
ended June 30, 1997 and 1996 was not significant.
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In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
This new standard requires dual presentation of basic and diluted earnings per
share ("EPS") on the face of the earnings statement and requires a
reconciliation of the numerators and denominators of basic and diluted EPS
calculations. This statement will be effective for both interim and annual
periods ending after December 15, 1997. The Company's current EPS calculation
conforms to basic EPS. Diluted EPS as defined by SFAS No. 128 is not expected
to be materially different from basic EPS.
Recently, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", and
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise and Related Information". These statements, which are
effective for the Company's fisal year ending March 31, 1999, establish
additional disclosure requirements but do not affect the measurement of results
of operation. Management is evaluating what, if any, additional disclosures may
be required when these statements are implemented.
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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 borrowings from the
Commodity Credit Corporation ("CCC"). There were no CCC loans outstanding at
June 30, 1997.
The increase in accounts receivable for the three months ended June 30,
1997 results from higher sales compared to the quarter ended March 31, 1997.
Increases in raw and in-process inventory and accounts payable during the three
months ended June 30, 1997 were primarily due to the seasonal production
schedule of the Company's beet sugar operations and timing of the purchase of
and payments for sugarbeets.
In April 1997, the Company purchased and retired $8.3 million principal
amount of its 8-3/8% senior notes due 1999 at par value, reducing the
outstanding balance to $81.1 million. Fiscal 1998 capital expenditures are
expected to be approximately $30.0 million, and include projects to expand
production capacity at the Company's Sidney, Montana beet sugar factory, and to
add storage and high speed packaging at its Sugar Land, Texas cane sugar
refinery. The Company's marketable securities portfolio is reported at its
market value of $54.0 million at June 30, 1997, $27.6 million in excess of its
cost basis. Management believes that existing internal and external sources of
liquidity are adequate to meet its financing requirements.
RESULTS OF OPERATIONS
Net sales increased $17.9 million or 10.0% for the three months ended
June 30, 1997, compared to the same period of the prior year, as a result of
increased sugar sales volumes as well as increases in sugar and pulp prices.
Sugar sales prices increased from the year earlier period as a smaller domestic
sugarbeet crop for the last two fall harvests put upward pressure on refined
sugar prices. A significant portion of the Company's industrial sales are made
under forward sales contracts, most of which commence October 1 and extend for
up to a year, resulting in a lagging effect of market price changes on the
Company's sugar sales. Prospects of a larger beet crop in the upcoming fall, as
well as increased production by cane sugar refiners, has resulted in spot
selling prices retreating somewhat from their earlier high levels. To mitigate
its exposure to future price changes, the Company purchases raw cane sugar under
forward purchase contracts and attempts to match refined sugar sales contracted
for future delivery with the purchase or pricing of raw sugar when feasible.
The Company also utilizes a participatory sugar beet purchase contract described
below.
Cost of sales as a percent of sales declined from 86.5% to 85.1% for the
three months ended June 30, 1997 as sales price increases together with
reductions in factory operating costs increased unit margins, particularly on
beet sugar sales. Factory operating costs were lower as a result of higher
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throughput from increased acreage in California; closure of the Company's
Hamilton City, California factory in June 1996 also contributed to the lower
costs. 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. Consequently, the
increase in the unit selling price of refined beet sugar resulted in increases
in the unit cost of sugarbeets purchased, mitigating the improvement in beet
sugar sales margins.
Selling, general and administrative costs were virtually unchanged for the
three months ended June 30, 1997 compared to the same period of the prior year,
as increases in advertising and volume related selling and warehousing costs
offset reductions in general and administrative costs.
Interest expense for the three months ended June 30, 1997 was lower than
the comparable period of the prior year as a result of lower long-term debt
outstanding offset by somewhat higher short-term interest rates.
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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 held on July 25, 1997 the following
proposals were acted upon:
Proposal 1 - Nominees for Directors were elected to serve for terms of
office expiring in 2000 in the case of Class III Directors and in 1999 in the
case of Class II Directors by the vote totals as follow:
NUMBER OF VOTES
FOR WITHHELD CLASS
Ann O. Hamilton 12,985,998 31,480 III
Harris L. Kempner, Jr. 12,986,376 31,112 III
H. E. Lentz 12,986,476 31,012 III
Kevin O'Sullivan 12,985,998 31,490 III
Fayez Sarofim 12,984,976 32,512 III
Gerald Grinstein 12,985,722 31,766 II
Class I Directors, whose terms of office continue until 1998 are John D.
Curtin, Jr., I. H. Kempner, III, James C. Kempner and Daniel K. Thorne. Class
II Directors, whose terms of office continue until 1999 are David J. Dilger,
Edward O. Gaylord, Roger W. Hill and Robert L. K. Lynch.
Proposal 2 - The appointment of Deloitte & Touche LLP as auditors of the
Company for the fiscal year ending March 31, 1998 was ratified by a vote of
12,740,343 for and 220,187 against with 56,958 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits required to be filed with this report are listed below:
Exhibit 11 Computation of Income Per Common Share
Exhibit 27 Financial Data Schedules
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 three months ended
June 30, 1997.
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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: July 30, 1997 By: /s/ James C. Kempner
_______________________________
James C. Kempner
President,
Chief Executive Officer
and Chief Financial Officer
(Principal Financial Officer)
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EXHIBIT 11
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON SHARE
(UNAUDITED)
Three Months Ended
June 30, 1997
_________________________
(In Thousands of Dollars)
INCOME FOR PRIMARY AND FULLY DILUTED COMPUTATION:
Net Income:
As reported $ 7,294
Adjustments - none -
-----------
As adjusted $ 7,294
===========
PRIMARY EARNINGS PER SHARE:
Weighted average shares of common stock outstanding 14,220,388
Incremental shares issuable from assumed exercise of
stock options under the treasury stock method 115,311
-----------
Weighted average shares of common stock outstanding,
as adjusted 14,335,699
===========
Primary earnings per share:
Net income 0.51
===========
FULLY DILUTED EARNINGS PER SHARE:
Weighted average shares of common stock outstanding 14,220,388
Incremental shares issuable from assumed exercise of
stock options under the treasury stock method 125,175
-----------
Weighted average shares of common stock outstanding,
as adjusted 14,345,563
===========
Fully diluted earnings per share:
Net income 0.51
===========
_____________________
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 three
months ended June 30, 1997 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-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,536
<SECURITIES> 53,954
<RECEIVABLES> 59,861
<ALLOWANCES> 0
<INVENTORY> 168,378
<CURRENT-ASSETS> 315,204
<PP&E> 302,349
<DEPRECIATION> 154,226
<TOTAL-ASSETS> 481,184
<CURRENT-LIABILITIES> 177,430
<BONDS> 81,495
0
0
<COMMON> 83,342
<OTHER-SE> 106,594
<TOTAL-LIABILITY-AND-EQUITY> 481,184
<SALES> 197,758
<TOTAL-REVENUES> 197,758
<CGS> 168,296
<TOTAL-COSTS> 168,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,782
<INCOME-PRETAX> 11,574
<INCOME-TAX> 4,280
<INCOME-CONTINUING> 7,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,294
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
