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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 July 31, 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 0-1287
STERLING SUGARS, INC.
____________________________________________________________________
Exact name of registrant as specified in its charter
Delaware 72-0327950
_______________________________ ______________________________
State or other jurisdiction of IRS employer identification
incorporation or organization number
P. O. Box 572, Franklin, La. 70538
____________________________________________________________________
Address of principal executive offices Zip Code
Registrant's telephone number including area code 318 828 0620
Not Applicable
____________________________________________________________________
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether 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 such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirments for the past 90 days.
YES X NO
There were 2,500,000 common shares outstanding at August 31, 1995.
Total number of pages 15
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STERLING SUGARS, INC.
I N D E X
PAGE
NUMBER
PART I: FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Condensed balance sheets July 31, 1995
(unaudited) and January 31, 1995 I-1
Statements of earnings and retained earnings
Six months ended July 31, 1995 and 1994
(unaudited) I-2
Statements of earnings and retained earnings I-3
Three months ended July 31, 1995 and 1994
(unaudited)
Statements of cash flows
Six months ended July 31, 1995 and 1994
(unaudited) I-4
Notes to condensed financial statements
Three & Six months ended July 31, 1995 and I-6
1994
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-8
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K II-1
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STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
July 31, January 31,
1995 1995
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 156,977 $ 623,237
Accounts receivable 382,174 2,276,977
Inventories 1,763,139 4,966,260
Expenditures for future crops (Note B) 2,977,763 158,147
Deferred income taxes 562,200 562,200
Other current assets 292,507 186,686
------------- -------------
TOTAL CURRENT ASSETS $ 6,134,760 $ 8,773,507
------------- -------------
Property, plant and equipment - net $ 12,046,532 $ 11,027,196
------------- -------------
Expenditures for future crops $ 485,708 $ 382,938
------------- -------------
Notes receivable - net of allowance $ 679,334 $ 614,284
------------- -------------
Deferred loan acquisition costs $ 75,799 $ 81,706
------------- -------------
$ 19,422,133 $ 20,879,631
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,157,628 $ 4,333,786
Short-term debt 1,457,493 -
------------- -------------
TOTAL CURRENT LIABILITIES $ 2,615,121 $ 4,333,786
------------- -------------
Long-term debt $ 4,135,578 $ 4,371,434
------------- -------------
Deferred income taxes $ 828,000 $ 828,000
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital (Note C) 40,455 -
Retained earnings 9,302,979 8,968,456
------------- -------------
$ 11,843,434 $ 11,468,456
Less common stock in treasury (Note C) - (122,045)
------------- -------------
$ 11,843,434 $ 11,346,411
------------- -------------
$ 19,422,133 $ 20,879,631
============= =============
NOTE: The balance sheet at January 31, 1995 has been taken from the
audited financial statements at that date, and condensed.
See notes to condensed financial statements
I-1 -3-
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STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
SIX MONTHS ENDED JULY 31
---------------------------
1995 1994
---- ----
REVENUES:
Sugar and molasses sales $ 3,707,078 $10,675,235
Interest earned 42,868 7,402
Mineral leases and royalties 58,709 17,434
Gain on sale of land - 40,588
Gain on sale of depreciable assets 120,000 499
Other 350,252 48,716
------------ ------------
$ 4,278,907 $10,789,874
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 3,179,135 $10,441,210
General and administrative 348,706 356,438
Interest expense 211,513 267,345
------------ ------------
$ 3,739,354 $11,064,993
------------ ------------
NET EARNINGS (LOSS) BEFORE INCOME TAXES $ 539,553 $( 275,119)
INCOME TAX EXPENSE (CREDIT) 205,030 ( 104,545)
------------ ------------
NET EARNINGS (LOSS) $ 334,523 $( 170,574)
RETAINED EARNINGS AT BEGINNING OF PERIOD 8,968,456 8,226,073
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $ 9,302,979 $ 8,055,499
============ ============
NET EARNINGS (LOSS) PER SHARE $ .13 $( .07)
============ ============
See notes to condensed financial statements
I-2 -4-
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STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED JULY 31
---------------------------
1995 1994
---- ----
REVENUES:
Sugar and molasses sales $ 1,787,045 $ 1,146,724
Interest earned 2,960 4,036
Mineral leases and royalties 27,214 12,083
Gain on sale of land - 40,588
Gain on sale of depreciable assets - 499
Other 19,413 11,237
------------ ------------
$ 1,836,632 $ 1,215,167
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 1,506,463 $ 1,236,225
General and administrative 202,200 196,916
Interest expense 110,288 132,476
------------ ------------
$ 1,818,951 $ 1,565,617
------------ ------------
NET EARNINGS (LOSS) BEFORE INCOME TAXES $ 17,681 $( 350,450)
INCOME TAX EXPENSE (CREDIT) 6,719 ( 133,171)
------------ ------------
NET EARNINGS (LOSS) $ 10,962 $( 217,279)
RETAINED EARNINGS AT BEGINNING OF PERIOD 9,292,017 8,272,778
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $ 9,302,979 $ 8,055,499
============ ============
NET EARNINGS (LOSS) PER SHARE $ .00 $( .09)
============ ============
See notes to condensed financial statements
I-3 -5-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JULY 31
---------------------------
1995 1994
---- ----
OPERATING ACTIVITIES:
Net earnings $ 334,523 $( 170,574)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Amoritization of loan costs 5,907 5,906
Depreciation 712,795 695,788
Gain on sale of land - ( 40,588)
Gain on sale of depreciable assets ( 120,000) ( 499)
Changes in operating assets and liabilities:
Decrease in accounts receivable 1,894,803 1,083,798
Increase in notes receivable ( 65,050) ( 50,553)
Decrease in inventories 3,203,121 10,554,120
(Increase) decrease in other current assets ( 105,821) 33,790
Increase in expenditures for future crops (2,819,616) (2,744,350)
Decrease in accounts payable and accrued exp. (2,884,798) (2,893,014)
Other items - net ( 102,770) ( 9,529)
------------ ------------
Net cash provided by operating activities $ 53,094 $ 6,464,295
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $(1,732,119) $( 455,644)
Proceeds from sale of land - 40,588
Proceeds from sale of depreciable assets 120,000 499
----------- ------------
Net cash used in investing activities $(1,612,119) $( 414,557)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term debt $ 2,103,398 $ 1,382,050
Proceeds from long-term debt - 82,157
Payments on short-term debt ( 645,905) (7,529,003)
Payments on long-term debt ( 476,593) ( 249,312)
Proceeds from sale of treasury stock 111,865 -
------------ ------------
Net cash provided by (used in) financing
activities $ 1,092,765 $(6,314,108)
------------ ------------
Decrease in cash and temporary investments $( 466,260) $( 264,370)
Cash and temporary investments at the
beginning of the period 623,237 543,963
------------ ------------
Cash and temporary investments at the
end of the period $ 156,977 $ 279,593
============ ============
Continued
See notes to condensed financial statements
I-4 -6-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Supplemental information:
Interest paid $ 220,782 $ 308,130
=========== ===========
Income taxes paid $ 442,704 $ -
=========== ===========
Non-cash item:
Accrued management fee paid by
issuance of treasury stock $ 50,635 $ -
=========== ===========
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JULY 31, 1995 AND 1994
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheets as of July 31, 1995, the
statements of earnings and retained earnings for the three
and six months ending July 31, 1995 and 1994, and the condensed
statements of cash flows for the six month periods then
ended have been prepared by the Company, without audit. In
the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and
cash flows at July 31, 1995 and for all periods presented
have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. It is suggested that these condensed financial
statements be read in conjunction with the 1995 annual report
to stockholders. The results of operations for the period
ending July 31, 1995 are not necessarily indicative of the
operating results expected for the full year.
I-6 -8-
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JULY 31, 1995 AND 1994
(UNAUDITED)
B. EXPENDITURES FOR FUTURE CROPS:
Expenditures incurred and income earned from sugar
operations for the 1995 and 1994 crops have been deferred
in order to properly match revenues and expenses. The
deferred items are as follows:
SIX MONTHS ENDED JULY 31
---------------------------
1995 1994
---- ----
DEFERRED COSTS: (1995 AND 1994 CROPS)
Factory $ 2,401,730 $ 2,480,451
Plantations 530,865 500,899
------------ ------------
$ 2,932,595 $ 2,981,350
Land preparation and planting costs
1996 and 1995 crops respectively 45,168 20,337
------------ ------------
$ 2,977,763 $ 3,001,687
============ ============
C. ADDITIONAL PAID IN CAPITAL:
As discussed in Form 10-K, filed for the year ended January 31,
1995, the Company entered into a technical service agreement with
M. A. Patout & Son, Ltd. (Patout). The agreement provided an
option for Patout to purchase 50,000 shares of the Company's
treasury stock at a price of $3.25 per share. In April, 1995
Patout exercised its option. For the 1994 period, there were no
transactions involving treasury stock.
I-7 -9-
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STERLING SUGARS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Sugar and Molasses Sales:
Sugar and molasses sales for the six months ended July 31, 1995
and 1994 were as follows:
1995 1994
------ ------
Raw sugar sales $ 3,451,739 $10,538,915
Molasses sales 255,339 136,320
------------ ------------
$ 3,707,078 $10,675,235
============ ============
For the first six months of the Company's fiscal year ending January
31, 1996 (fiscal 1996), sales of raw sugar (1994 crop) decreased com-
pared to the same period ending in fiscal 1995 (1993 crop). This de-
crease is the result of the Company having marketed less sugar during
the current period. At January 31, 1995, the Company had on hand
approximately 10,238 tons of raw sugar available for sale to refiners
as compared to 24,209 tons of raw sugar at January 31, 1994. As of
July 31, 1994, the Company had sold and shipped 24,209 tons of raw
sugar. For the six month period ending July 31, 1995, the Company
had sold and shipped 7,542 tons of raw sugar of which 3,892 were sold
and shipped during the second quarter. At July 31, 1995 2,696 tons of
raw sugar were held in inventory. Although the Company has far less
sugar to market in fiscal 1996, the remaining 2,696 tons of sugar from
the 1994 crop is to be sold during October, 1995. The inability to
market the sugar is the result of the United States Department of
Agriculture (USDA) imposing marketing allotments whereby producers are
limited on the amount of sugar marketed during a fiscal quarter. The
sugar price for the 1994 crop increased slightly and is estimated at
$21.89 cwt. For the 1993 crop the average raw sugar price was $21.73
cwt.
As of January 31, 1995, the Company had on hand approximately
691,383 gallons of molasses all of which had been sold as of April 30,
1995. At January 31, 1994, the Company had approximately 394,726
gallons of molasses on hand all of which had been sold as of April 30,
1994. For the 1994 molasses crop, the Company received $.35 per gallon
compared to $.29 per gallon for the sale of the 1993 molasses crop.
Interest Earned:
Interest earned increased to $42,868 for the six month period ended
July 31, 1995 compared to $7,402 for the same period in 1994. The
increase for the current period is primarily attributable to the Company
receiving $25,528 in April, 1995 from the Sugarcane Safety Group for its
share of interest earned on workers compensation reserve funds held by
the group. The increase is also attributable to increases in short-term
investments.
I-8 -10-
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At January 31, 1995, the Company had short-term investments of
$437,303 compared to only $155,151 at January 31, 1994. Interest
earned for the quarter ended July 31, 1995 decreased and was $2,960
compared to $4,036 for the same period ending in 1994. The decrease
is primarily attributable to a decrease in interest recognized on
outstanding notes receivable.
Mineral Leases and Royalties:
For the quarter and six month period ended July 31, 1995, income
from mineral leases and royalties was $27,214 and $58,709, respectively.
For the same quarter and six month period ending in 1994, income from
mineral leases and royalties was $12,083 and $17,434, respectively. The
increases in income for the 1995 periods is attributable to an option
executed on February 1, 1995 whereby an oil and gas lease was granted on
555 acres for $55,461. The lease contains a three year primary term.
The increase in the 1995 period is also attributable to the Company
granting another oil and gas lease in February, 1995 on 274 acres for
$20,528. This lease also has a three year primary term. The Company
also entered into a geophysical option agreement on April 1, 1995 for
$10,166 covering 985 acres. The agreement expires March 31, 1996.
Royalty income remained consistent for the 1995 and 1994 periods.
Gain on sale of Land:
The Company for the three and six month periods ending July 31,
1994, recognized a gain of $40,588 on the sale of 2.6 acres of bayou
front property. This property, located in St. Mary Parish, was not
suitable for growing sugarcane. For the three and six month periods
ending July 31, 1995, the Company did not incur transactions involving
the sale of land.
Gain on the Sale of Depreciable Assets:
The Company recognized a gain on the sale of obsolete machinery and
equipment for the six month period ending July 31, 1995 of $120,000.
For the quarter ending July 31, 1995 the Company had no gains from the
sale of depreciable assets. For the three and six month period ending
July 31, 1994, the Company recognized a gain of $499 from the sale of
obselete machinery and equipment.
Other Revenues:
Other revenues increased for the three and six month periods ended
July 31, 1995 compared to the same periods in 1994 and were $350,252
for the six month period ending July 31, 1995 and $48,716 for the period
ending July 31, 1994. These revenues, which can vary considerably from
year to year, generally include amounts received for the sale of scrap,
permitting seismic surveys conducted for oil and gas exploration on
Company owned land and other miscellaneous items. The sharp increase
for the current period is the result of the Company receiving $318,032
in April, 1995 from the Sugarcane Safety Group representing a return of
capital from workers compensation reserve funds for years that had been
closed out.
I-9 -11-
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Cost of Products Sold:
Cost of products sold decreased for the three and six month periods
ending July 31, 1995 and were $1,506,463 and $3,179,135, respectively.
For the three and six month periods in 1994, cost of products sold were
$1,236,225 and $10,441,210, respectively. Generally, cost of products
sold are relative to decreases in sales for the period. However for the
1994 period, costs included adjustments for variations in market prices
and estimated quantities.
General and Administrative Expenses:
General and administrative expenses for the six month period ended
July 31, 1995 were $348,706 compared to $356,438 for the same period
in 1994. The decrease in these expenses during the current period is
primarily the result of reductions in miscellaneous expense items.
Although the expenses have decreased for the six month period, for the
quarter ended July 31, 1995 these expenses increased slightly from the
same quarter ending in 1994 and were $202,200 for 1995 and 196,916 for
1994.
Interest Expense:
Interest expense decreased for the three and six month periods
ending July 31, 1995 compared to the same periods in 1994 and were
$211,513 for the six month period ending in 1995 and $267,345 for the
six month period ending July 31, 1994. Although the Company retired
$409,465 of long-term debt during the current six month period, the
decrease in interest expense is primarily the result of decreases in
short-term debt. At January 31, 1994, short- term debt outstanding
totaled $7,529,003 whereas at January 31, 1995 the Company had no
outstanding short-term debt.
Income Taxes:
The income tax expense (credit) for the three and six month period
ending July 31, 1995 and 1994 were recorded at the statutory rate of 38
percent which reflects the 34 percent federal corporate rate plus 4
percent state income taxes.
Liquidity and Capital Resources:
At July 31, 1995, the Company had working capital of $3,519,639
compared to $4,439,721 at January 31, 1995. The working capital ratios
were 2.3 to 1 and 2.0 to 1, respectively.
For the 1995 crop, the Company budgeted $1,822,000 for capital
additions of which $1,722,000 is allocated for expansion of the raw
house and an electrical substation. This expansion project is expected
to increase the average daily grinding rate for the 1995 crop from
8,000 tons to an excess of 9,000 tons of cane per day. The expansion
will also decrease lost time during grinding attributable to cleaning.
Management expects to fund the cost of the capital additions from
working capital and short-term borrowings through lines of credit
available to the Company. For the 1995 idle season, the Company
anticipates making short-term loans earlier than normal because of the
imposition of marketing allotments by the USDA effective October 1, 1994.
I-10 -12-
<Page 13>
The allotments require the Company to hold approximately 2,696
tons of raw sugar in inventory until a reassignment of allotments is
made by the USDA which is expected before October 1, 1995.
Expenditures for Future Crops - Note B:
Factory Deferred Costs:
Factory deferred costs for the six month period ended July 31,
1995 was $2,401,730. Such costs for the same period in 1994 were
$2,480,451. The decrease for 1995 was primarily the result of the
Company budgeting less for maintenance and repairs in 1995 than it did
for 1994. The budgeted amount for 1995 is $1,534,201 and for 1994 was
$1,649,145.
Plantation Deferred Costs:
Plantation deferred costs increased to $530,865 for the six
month period ending July 31, 1995 from $500,899 for the same period
in 1994. The increase in the current period is primarily the result
of the Company incurring an increase in cultivation costs to improve the
cane crop on 1,192 acres of land farmed by the Company.
I-11 -13-
<Page 14>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K
No reports on Form 8K have been filed during the
quarter for which this report is filed.
II-1 -14-
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
STERLING SUGARS, INC.
---------------------
(REGISTRANT)
DATE September 12, 1995 By /S/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
SENIOR VICE PRESIDENT
AND GENERAL MANAGER
DATE September 12, 1995 By /S/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -15-
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