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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
Form 10K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 31, 1996
[ ] 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
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STERLING SUGARS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 72-0327950
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(State or other jurisdiction of (IRS employer identification number)
incorporation or organization)
P. O. Box 572, Franklin, La. 70538
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (318) 828 0620
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Securities registered pursuant to Section 12d of the Act:
Title of each class Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12(G) of the Act:
Common Stock $1 par value
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(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. /__/
The aggregate market value of the registrant's voting stock held on February
29, 1996 by non-affiliates of the registrant was $2,817,720. Such value has
been computed on the basis of the average bid and asked prices of the stock
and by excluding, from the 2,500,000 shares outstanding on that date, all
stock beneficially owned by officers and directors of the registrant and by
beneficial owners of more than five percent of its stock, even though all
such persons may not be affiliates as defined in SEC rule 405.
Page 1 of 62 pages
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The number of shares of common stock outstanding as of April 19, 1996 was
2,500,000 shares.
Documents incorporated by reference: Portion of Registrant's Proxy Statement
dated April 26, 1996 are incorporated by reference into Part III.
An exhibit index is located on page 33.
FORM 10-K
PART I
ITEM 1-BUSINESS
Sterling Sugars, Inc. is grower and processor of sugarcane from which
it produces raw sugar and blackstrap molasses, a by-product. Cane residue
(bagasse), also a by-product, is used as the primary fuel for the Company's
steam boilers. The business is highly seasonal in that the processing
season usually extends from early October to mid December or early January.
For the fiscal year ended January 31, 1996 (referred to by the Company as
"fiscal 1996"), the season began on October 9, 1995 and continued through
December 29, 1995. From the crop grown during fiscal 1996 (referred to by
the Company as the "1995 crop"), the factory processed 769,953 tons of
sugarcane. During the previous year (fiscal 1995), the Company processed
a total of 606,112 tons of cane in fiscal 1994, a total of 539,560 tons
of cane were processed by the Company. Sugar production for 1996 is
estimated at 80,696 tons. For fiscal 1995 and 1994 the Company produced
64,190 and 50,159 tons of raw sugar, respectively.
Historically, the Company has had no difficulty in selling, at
competitive prices, all of its raw sugar production to several refiners
and all of its molasses production to two molasses distributors. The
Company expects these marketing avenues to be open in the future.
The raw sugar factory operated by the Company is situated on sixty-
five acres of land outside the city of Franklin, Louisiana on Bayou Teche.
The factory is one of the largest and most modern in the state with a
grinding capacity of 10,500 tons of sugarcane per day.
Sugarcane for processing is supplied to the factory from Company
operated lands and by independent farmers in St. Mary, Iberia and surround-
ing parishes. See Item 2, "Properties," incorporated herein by reference,
for further information concerning properties owned and leased by the
Company.
The Company's farming operations produced a total of 20,509 tons of
cane for the 1995 crop. This compares to 11,611 and 38,564 tons of cane
for the 1994 and 1993 crops, respectively. During the year, the Company
maintained its policy of leasing and subleasing farm lands to independent
growers. This program has proven to be a success since being implemented
in 1988. Further information on this subject is provided under Item 2,
"Properties," incorporated herein by reference.
The United States is a net importer of raw sugar, importing about
one-fifth of its raw sugar requirements each year. In 1981, the Congress
included sugar in the Food and Agriculture Act (the Farm Bill). The Act
provided for a loan program which began in October, 1982. The loan
program provided a support price that rose incrementally from 17 cents per
pound for fiscal 1983 to 18 cents per pound for fiscal 1986, excluding
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transportation and other costs. This Farm Bill expired on December 31,
1985. However, the 18 cents per pound price support program was continued
with enactment of the Food Security Act of 1985 signed into law by the
President on December 23, 1985. This Act continued the support level on
domestically grown sugarcane through 1990. The most significant new
provision not in the previous farm bill was the requirement that the
government operate the sugar portion of the bill "at no cost to the Federal
Government by preventing the accumulation of sugar acquired by the
Commodity Credit Corportation." In order to comply with this provision,
it was necessary to reduce the amount of foreign sugar imported into this
country so that the domestic price would be more attractive than the
forfeiture of sugar to the Commodity Credit Corporation.
On November 28, 1990 President Bush signed into law the Food,
Agriculture, Conservation and Trade Act of 1990 (New Farm Bill). Major
provisions of the sugar section of this Farm Bill include (1) an 18 cents
per pound loan rate, (2) a nine month loan period, and (3) a minimum
foreign import quota of 1.25 million short tons of raw sugar with marketing
controls on domestic cane and beet production under certain conditions.
The New Farm Bill, which took affect in 1991, has not had any significant
impact on the domestic sugar industry and none is expected. Also in 1991
Congress passed the Omnibus Budget Reconciliation Act of 1990 which amended
the Agricultural Act of 1949 and requires that a marketing assessment be
imposed on sugar processed from domestically grown sugarcane at one percent
of the loan rate. The assessment, which began with the 1991 crop, is .18
cents per pound and increased to .198 cents per pound for the 1994 and 1995
crops. The Food, Agriculture, Conservation and Trade Act of 1990 expired on
December 31, 1995. On April 4, 1996 President Clinton signed the new Federal
Agricultural Improvement and Reform Act (FAIR) otherwise known as the Freedom
to Farm Bill. This seven year farm bill, starting with the 1996 crop,
includes an 18 cent loan rate with loans not to exceed nine months. The no
cost provision to the Federal Treasury is retained and marketing allotments
have been suspended through the year 2002. The marketing assessment,
currently at 1.10% of the loan rate, is increased to 1.375%. Loans become
non-recourse if the sugar import quota rises above 1.5 million short tons.
Also, a one cent per pound penalty assessment is made on sugar pledged as
collateral and forfeited to the government for non-recourse loans.
After the year 2002, the domestic sugar industry may be without a sugar
program and consequently will have to compete in a global market to produce
and sell raw sugar.
The Company does not engage in research activities itself, but
numerous experiments and research activities are conducted for the benefit
of the sugar industry as a whole by the American Sugar Cane League,
Louisiana State University and the United States Department of Agriculuture
Experiment Station in Houma, Louisiana. The Company supports these agencies
by providing land for some of the research and experimentation. The
agencies have released several improved varieties of sugarcane in recent
years which have proved beneficial to the farmers.
Over the years, despite costly remedial actions by the Company,
opacity problems at the Company's factory have not been completely resolved
resulting in citations from the Air Quality Control Division of the
Louisiana State Office of Environmental Protection (the Agency) for exceeding
opacity limits for stack emissions. The most recent notice violation was
issued in November, 1992 and resulted in the issuance of an amended
compliance order dated June 4, 1993.
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On March 10, 1994 the compliance order was amended a second time
to delay the requirements of the order by one year because of the Company's
poor financial results of fiscal 1994. The requirments of the amended
compliance order are as follows: (1) install a wet scrubber on boiler No. 2
by October 1, 1995 or the beginning of the 1995 grinding operation,
whichever comes first (2) retrofit boiler No. 5 with new Spreader-Stoker
furnaces and ash and air handling systems to include a wet scrubber, that
will be sized to service both boiler No. 4 and No. 5 by October 1, 1996,
(3) retrofit boiler No. 4 with new Spreader-Stoker furnaces and ash and air
handling systems to be connected to the wet scrubber (to be installed in
1996) by October 1, 1997, and (4) increase the No. 6 boiler induced draft
system by installing a larger fan and drive by October 1, 1998. Requirement
number one was completed prior to the 1995 grinding season. For
fiscal 1997, to comply with requirements 2 and 3, the Company began to
retrofit boiler no. 4 with new speader stoker furnaces and ash and air
handling systems including a wet scrubber. Retrofitting boiler no. 4 prior
to boiler no. 5 is more feasible since it is closest to the existing boilers.
Furthermore, the plans for retrofitting boiler no. 5 includes installation
of its own wet scrubber for better performance. This project is planned for
fiscal 1998 in accordance with the compliance order. Also for fiscal 1997,
the Company will increase the no. 6 boiler induced draft system capacity by
installing a new and larger fan and drive (compliance order no. 4) along with
a wet scrubber. Both projects are expected to be completed prior to 1996
grinding season.
Company employment for the year ended January 31, 1996 was as follows:
Factory Agriculture
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Year round employees 75 11
Seasonal and temporary employees 88 49
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163 60
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Further information respecting the Company's business is given under Item
7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," incorporated herein by reference.
ITEM 2 -PROPERTIES
Land owned by the Company by parishes and suitability of land for
cultivation is as follows:
St. Mary Iberia St. Landry Total
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Cultivable 4,684 1,560 - 6,244
Non-cultivable 3,875 1,302 121 5,298
Plant site 65 65
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8,624 2,862 121 11,607
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Of the cultivable land, approximately 270 acres are operated by the
Company. Approximately 4,414 acres in St. Mary Parish and 1,560 acres in
Iberia Parish (Peebles Plantation) are leased to tenants for the growing of
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sugarcane. Of the leases in effect, one covering 1,560 acres (Peebles
Plantation) expired in 1995 and was renewed under basically the same terms
and conditions as the previous lease. Another lease covering 818 acres
also expired in 1995 but contained an option to renew for five years. The
option on this lease was exercised by the tenant. One lease covering 169
acres will expire in 1996 and a lease covering 424 acres will expire in
1997. During 1998, one lease on 410 acres will expire but contains an
option to renew for an additional five years. In 1999 two leases covering
308 acres will expire. Also in 1999, two leases covering 2,285 acres will
expire but contain options to renew for additional five year periods. One
of the leases expiring in 1999 includes 1,870 acres formerly part of
Sterling's farm division now leased to an independent grower.
In addition to Company owned land, about 9,522 acres in St. Mary,
Iberia and surrounding parishes are leased to the Company for growing
sugarcane. The land currently leased by the Company is subleased to
independent growers. Past experience indicates that small independent
growers do a better job of farming than can be done by a very large
agricultural operation. Arrangements have been made for the Company to
process the sugarcane grown from the subleased premises.
The Company's plant site, consisting of a factory compound and main
office, is located on Bayou Teche just outside the city of Franklin,
Louisiana. The factory compound is comprised of the raw sugar mill,
warehouses, shipping and receiving facilities, truck and tractor repair
garage and large areas for the storage of sugarcane.
Of the 11,607 acres of land owned by the Company, approximately 890
acres are being held by production, primarily from the LGS Sterling No. 1
well and C. M. Cremaldi No. 2 well. The Sterling No. 1 well was completed
by the Company's lessee, LGS Exploration, Inc. during December, 1984.
During September, 1991 the well experienced production problems and in
January 1992 production was restored but at significantly reduced rates.
On July 31, 1992 the Company entered into a unitization agreement for the
Sterling No. 1 well whereby several individual units existing at the 6,800'
sand Charenton Field would operate as one unit. As part of the agreement
the Company maintained a twenty-five percent interest in the 34.5 acre unit.
Prior to unitization, oil production from the well for fiscal 1993 was only
345 barrels compared to 2,820 and 7,172 barrels of oil in fiscal 1992 and
1991, respectively. In the fourth quarter of 1993, the Company collected
$39,274 for its share of oil and gas production from November, 1991 through
November, 1992 from the new unit. During fiscal 1995, oil production from
the unit declined and was approximately 18,423 barrels compared to 30,038
barrels in fiscal 1994. In fiscal 1996, oil production from the unit was
14,881 barrels. The price received per barrel of oil for fiscal 1996, 1995
and 1994 was $17.01, $15.32 and $18.22, respectively. For fiscal 1996,
was no gas production from the unit. For fiscal 1995 and 1994, the Company
had income from gas production from the unit. In September, 1995 the
Company began receiving royalty income from the C. M. Cremaldi well.
Although some income is derived from oil production, the primary income thus
far has been from gas production. Sterling maintains approximately 274
acres in the 4,000 acre unit. The site is a re-completion unit that was
inactive since December, 1986. In February, 1995 the Company granted an oil
and gas lease for $20,528 on the 274 acres. The lease agreement has a three
year primary term.
Also in fiscal 1996, the Company entered into a geophysical option
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agreement dated April 1, 1995 for $10,166 covering 985 acres. This
agreement expired March 31, 1996. During fiscal 1995, the Company entered
into a geophysical agreement on approximately 1,200 acres of land for
$12,002 whereby the Company granted an option for one year to acquire an
oil and gas lease. On February 1, 1995, the option was exercised and a
lease granted for a one year term on approximately 555 acres for $55,461.
The lease contains a three year primary term. In February, 1996 the lease
was extended one additional year. During fiscal 1994, the Company had no
income from oil and gas lease activities.
The Company's activities with respect to oil and gas are limited to
the granting of leases and the collection of bonuses, delay rentals and
landowner royalties thereunder. Accordingly only limited information,
furnished primarily by the Company's lessees, has been included with respect
to oil and gas operations affecting Company lands. Complete information
respecting these and related matters, such as proved reserves, are unavail-
able to the Company and cannot be obtained without unreasonable effort and
expense.
See also Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," incorporated herein by reference, for
further information on mineral operations on Company lands.
ITEM 3 - LEGAL PROCEEDINGS
Although no material legal proceedings are pending or known to
comtemplated by governmental authorities, attention is invited to Item 1,
"Business," incorporated herein by reference, for information respecting
citations issued to the Company by the Air Quality Control Division of the
Louisiana State Office of Environmental Protection.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5 - MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of April 11, 1996 there were approximately 745 holders of record
of the Company's stock which is traded in the over-the-counter market. The
Company's stock transfer agent and registrar is Boatmen's Trust Company, P.
O. Box 14737, St. Louis, Missouri 63178.
The following table shows the range of high and low bid quotations for
the Company's stock for each quarterly period during the last two years, as
quoted by the National Quotation Bureau, Inc. Such quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commissions, and may not
necessarily reflect actual transactions. No dividends were declared by the
Company during the two year period.
Range of Prices
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Fiscal 1996 High Low
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First Quarter 5-1/2 4-3/4
Second Quarter 6 5
Third Quarter 5-3/4 5-1/8
Fourth Quarter 6-1/8 5-1/8
Fiscal 1995
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First Quarter $4-7/8 $3-7/8
Second Quarter 4-3/4 4-1/8
Third Quarter 4-1/2 4-1/8
Fourth Quarter 5-5/8 4-1/4
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ITEM 6 - SELECTED FINANCIAL DATA
Year ended January 31
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1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
Revenues $29,644,559 $34,250,584 $13,932,753 $19,006,667 $22,444,917
Net Earnings
(Loss) $ 2,119,609 $ 742,783 $ (983,319) $ (552,812) $ 262,413
Net Earnings
(Loss per
Share) $ .85 $ .30 $ (.40) $ (.23) $ .11
Cash Dividends
Paid per
Share $ - $ - $ - $ - $ -
AT YEAR END:
Total assets $27,969,569 $20,879,631 $26,513,324 $20,887,211 $17,517,019
Long-term
Debt $ 4,017,469 $ 4,371,434 $ 4,694,236 $ 4,390,691 $ 816,970
Working
Capital $ 5,169,044 $ 4,493,736 $ 3,121,514 $ 5,840,963 $ 2,692,207
Stockholders'
Equity $13,628,520 $11,346,411 $10,604,028 $11,587,347 $12,140,159
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ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Fiscal 1996 (1995 crop) was a very good one for the Company with net
earnings of $2,119,609 or $.85 per share. Net earnings for the fiscal year
ending January 31, 1995 (1994 crop) were $742,383 or $.30 per share. The
Company for fiscal 1994 (1993 crop) had a net loss of $983,319 or $.40 cents
per share. The net earnings for fiscal 1996 are the highest since the fiscal
year ending January 31, 1981 (1980 crop) when the Company had net earnings of
$3,366,192 or $1.37 per share. The earnings in fiscal 1981 were primarily
the result of a significant increase in the selling price for raw sugar
marketed which averaged 33.30 cents per pound.
The success of the Company over the past year is attributable to several
factors. The Company's management team continues to build a good working
relationship with its' employees and growers. Good relations with employees
translates into good performance in the factory. Also, improved grower
relations has led to increases in cane deliveries to the mill. For fiscal
1996, the Company set a new record for tons of cane processed in one grinding
season. In addition, a new daily grinding rate record was set. The 1995 crop
was also one of the best years in recent history as far as yield of sugarcane
per acre. It is estimated that on average growers yielded approximately 28
tons of cane per acre compared to normal yields of 25 tons per acre. This
past year was one of the best growing seasons in many years due to favorable
weather and improved seed varieties through an industry supported breeding
program.
For the 1995 crop, the Company processed 769,953 tons of cane. This was
a new record for tons processed and exceeded the record set for the 1994 crop
when 606,112 tons of cane were processed. For the 1993 crop, the Company
processed a total of 539,560 tons of cane.
For the 1995 crop, the Company increased its grinding rate to an average
of 9,457 tons of cane per day. This is an increase over the previous year
(1994 crop) when the average grinding rate was 8,159 tons of cane per day.
For the 1993 crop, the average grinding rate was 7,291 tons of cane per day.
The 1995 crop was processed in 81 days compared to 74 days for the 1994 and
1993 crops. The capital additions placed in service since the 1994 crop and
future additions will continue to focus mainly on increasing the daily
grinding capacity of the factory in an effort to create more efficiencies
thereby reducing costs while matching the total cane supply.
Sugar yields per ton of cane for the 1995 crop are estimated at 210
pounds per ton of cane. This yield is slightly less than the 212 pound yield
for the 1994 crop. For the 1993 crop, the sugar yield per ton of cane was
186 pounds. Sugar yields per ton of cane for 1995 and 1994 remained
relatively high. For the four years prior to 1994, the sugar yield averaged
196 pounds per ton of cane.
With the increase in tons of sugarcane processed for the 1995 crop at a
relatively high yield, the Company expects to produce approximately 80,696
tons of raw sugar. This compares to 64,190 and 50,159 tons of raw sugar for
the 1994 and 1993 crops, respectively.
For the 1995 crop, the Company's agricultural division produced 20,509
tons of sugarcane on 798 mill acres compared to 11,611 tons of sugarcane for
the 1994 crop on 681 mill acres. For the 1993 crop, the agricultural division
produced a total of 38,564 tons of sugarcane on 1,852 mill acres. In
February, 1994, the Company leased 1,870 cultivable acres to an independent
farmer which resulted in the reduction in tons of sugarcane produced for the
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1995 and 1994 crops compared to the 1993 crop. It is Company policy to lease
agricultural lands to independent farmers, where possible, thereby reducing
capital requirements and the risks inherent in farming. Despite the
reduction, the Company still farms approximately 1,192 cultivable acres
consisting primarily of marginal lands. Since 1994, the Company has
continued to incur costs to improve sugarcane yields on these marginal lands.
For the 1995 crop, the sugarcane yield was 25.7 tons per acre compared to 17.0
tons per acre for the 1994 crop. Management continues to negotiate with
possible grower tenants to farm these acres thereby further reducing the
number of acres farmed by the Company.
The Statement of Earnings for the three years ended January 31, 1996,
1995 and 1994 reflect sales of raw sugar and molasses of $28,495,085,
$33,768,134 and $13,435,714, respectively. Sugar marketed for fiscal 1996 was
61,278 tons. This compares to 77,294 and 30,046 tons of sugar marketed during
fiscal 1995 and 1994, respectively. The decrease in sugar marketed for fiscal
1996 is primarily the result of a reduced amount of raw sugar inventory
available for marketing because of the small ending inventory for fiscal 1995.
Inventories for fiscal 1996, 1995 and 1994 were 30,250, 10,238 and 24,209,
respectively. Average prices received for sugar marketed have increased over
the past three years which is attributable, in part, to management's
aggressive marketing policies. Average prices of sugar for the 1995, 1994
and 1993 crops were $22.47, $22.00 and $21.73 cwt., respectively.
Interest earned has continued to increase over the past three years and
was $45,864, $29,350 and $26,198 for fiscal 1996, 1995 and 1994, respectively.
The increases are primarily the result of the Company having more funds
available for short-term investments because of increases in net earnings and
working capital.
Income from mineral leases and royalties was $114,926, $37,393 and
$49,988 for fiscal 1996, 1995 and 1994, respectively. The increase in income
for the current fiscal year is attributable to an option executed on February
1, 1995 whereby an oil and gas lease was granted on 555 acres for $55,461.
Also in February, 1995, an oil and gas lease was granted for $20,528 on 274
acres. Both of these leases have a three year primary term. Also in fiscal
1996, the Company entered into a geophysical option agreement dated April 1,
1995 for $10,166 covering 985 acres. This agreement expired March 31, 1996.
During fiscal 1995, the Company had entered into a geophysical option
agreement covering approximately 1,200 acres of land and received $12,002
for the option.
For fiscal 1996, the Company recognized a gain on the disposition of
property and equipment of $145,076. This compared to gains recognized in
fiscal 1995 and 1994 of $11,331 and $80,820, respectively. These gains are
primarily attributable to sales of obsolete machinery and equipment.
Other revenues consist primarily of amounts received from cane land
rentals and permitting seismic surveys conducted for oil and gas exploration.
For the current fiscal year, other revenues were $843,608. For the two
previous fiscal years, other revenues totaled $404,376 and $340,033,
respectively. For the last two fiscal years, other revenues have increased
primarily because of cane land rental income. For fiscal 1996, 1995 and
1994, cane land rental income was $602,185, $368,848 and $249,748,
respectively. During fiscal 1996 and 1995, the Company had no seismic
permitting income. Seismic permitting income was $9,800 for fiscal 1994.
Cost of products sold for each of the three years ending in 1996, 1995
and 1994 were $24,952,455, $31,558,282 and $13,923,827, respectively. The
cost of products sold in each of these years are relative to the sale of
sugar and molasses for the three years.
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General and administrative expenses for fiscal 1996 totaled $954,809.
These expenses in fiscal 1995 were $802,768 and in fiscal 1994 were
$1,372,865. Although the Company has taken measures to reduce these expenses
over the last two years, the current fiscal year's expenses increased
primarily because of incentive payments to employees and key management
personnel. The increase in fiscal 1994 was the result of an accrual, for
financial reporting purposes, the present value of all future payments
required under an amended employment agreement with a retired executive
officer of the Company. Also in fiscal 1994, the Company recorded a reserve
of $84,911 for amounts due from growers under cane purchase agreements.
Interest and loan expenses for each of the three fiscal years ending in
1996, 1995 and 1994 totaled $522,667, $591,650 and $534,380, respectively.
For each of these years, the majority of these expenses were for interest
incurred on a $4,000,000 long-term loan made in April, 1992. These amounts
also include interest on short-term borrowings each year to cover working
capital requirements. The increase for fiscal 1995 resulted from $37,721 of
interest expense incurred on $7,529,003 short-term debt outstanding at January
31, 1994 but retired in fiscal 1995.
For fiscal 1996 and 1995, the Company recognized income tax expenses
of $1,095,019 and $555,501, respectively. For fiscal 1994, the Company
recognized an income tax credit of $715,000. The income tax expense and
credit are explained in Footnote 4, Notes to Financial Statements, on pages
22 and 23 of this report.
During fiscal 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes, effective February,
1993. This statement supersedes Accounting Principles Board Opinion No. 11.
The cumulative effect of adopting SFAS No. 109 was to decrease the fiscal 1994
loss by $200,000 or $.08 per share.
Over the last two years, the liquidity of the Company has continued to
improve. The current ratio at January 31, 1996 was 1.5 to 1 compared to 2.0
to 1 and 1.3 to 1 at January 31, 1995 and 1994, respectively. The decline in
the current ratio for the current fiscal year is primarily the result of
maintaining short-term debt of $3,658,334 at January 31, 1996 because of an
increase in the amounts paid to growers for the additional volume of sugarcane
processed for the 1995 crop. Subsequent to January 31, 1996, the short-term
debt was paid as the raw sugar inventory was sold.
The Company, in keeping with its pledge to be cost efficient and prepare
itself for business in a global economy, has budgeted $2,525,000 in capital
additions to the factory for fiscal 1997. These additions are expected to
increase the average daily grinding rate to in excess to 10,000 tons. These
additions include expansion to the raw house on the pan floor and centrifugal
stations areas. Also improvements are being made to steam boilers No. 4 and
No. 6 including installation of wet scrubbers to improve air emissions. The
Company expects to fund the cost of the capital additions from working capital
and short-term borrowings through lines of credit available to the Company.
On April 4, 1996, President Clinton signed the new Federal Improvement
and Reform Act (FAIR) otherwise known as the Freedom to Farm Bill. This seven
year farm bill, starting with the 1996 crop, includes an 18 cent loan rate
with loans not to exceed nine months. The no cost provision to the Federal
Treasury is retained and marketing allotments have been suspended through the
year 2002. The marketing assessment, currently at 1.10% of the loan rate, is
increased to 1.375%. Sugar industry officials believe the legislation is
satisfactory. However after the year 2002, the domestic sugar industry may be
without a sugar program and consequently will have to compete in a global
market to produce and sell sugar.
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For the future, it is very important for the Company to continue to
expand the size of the factory and increase its volume of cane supply. In
addition, the Company must strive to become more efficient in order to become
competitive in a global market place.
II-6 -12-
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March 8, 1996
To the Stockholders and Board of Directors
Sterling Sugars, Inc.
Franklin, Louisiana
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Sterling Sugars,
Inc. as of January 31, 1996 and 1995, and the related statements of
operations and retained earnings and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements of Sterling Sugars,
Inc. as of January 31, 1994 were audited by other auditors whose report,
dated March 11, 1994, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 1996 and 1995 financial statements present
fairly, in all material respects, the financial position of Sterling Sugars,
Inc. as of January 31, 1996 and 1995, and the results of its operations and
its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
As discussed in Note 4 to the financial statements, on February 1,
1993 the Company changed its method of accounting for income taxes to
conform to Statement of Financial Accounting Standards No. 109.
Respectfully submitted,
/s/ LeGlue & Company
(A Professional Corporation)
II-7 -13-
<PAGE>
To the Stockholders and Board of Directors
Sterling Sugars, Inc.
Franklin, Louisiana
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying statements of operations
and retained earnings and cash flows of Sterling Sugars Inc. for the year
ended January 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such 1994 financial statements present fairly, in all
material respects, the results of operations and cash flows of Sterling
Sugars, Inc. for the year ended January 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 4 to the financial statements, on February 1,
1993 the Company changed its method of accounting for income taxes to
conform to Statement of Financial Accounting Standards No. 109.
Respectfully submitted,
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 11, 1994
II-8 -14-
<PAGE>
STERLING SUGARS, INC.
BALANCE SHEETS
JANUARY 31, 1996 AND 1995
ASSETS
CURRENT ASSETS:
1996 1995
------------ ------------
Cash $ 30,169 $ 184,896
Temporary cash investments 103,883 438,341
------------ ------------
Total cash and temporary cash investments 134,052 623,237
Accounts receivable, principally sugar and
molasses sales, no allowance for doubtful
accounts considered necessary 1,717,048 2,276,977
Sugar inventory - at cost 11,361,574 3,975,144
Molasses inventory - at market 300,548 228,809
Expenditures for future crops 216,967 158,147
Operating supplies - at cost 697,744 762,307
Deferred income taxes 160,600 562,200
Prepaid expenses and other assets 206,091 240,701
------------ ------------
TOTAL CURRENT ASSETS 14,794,624 8,827,522
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 1,815,620 1,815,620
Buildings 2,621,179 2,621,179
Machinery and equipment 27,937,538 25,739,778
------------ ------------
32,374,337 30,176,577
Less accumulated depreciation (20,393,879) (19,149,381)
------------ ------------
11,980,458 11,027,196
------------ ------------
INVESTMENTS AND OTHER ASSETS:
Cash value of officers' life insurance 29,670 27,691
Expenditures for future crops 487,338 382,938
Notes receivable, net of allowance for
doubtful accounts, 1996 $38,000; 1995 $84,911 677,479 614,284
------------ ------------
1,194,487 1,024,913
------------ ------------
$27,969,569 $20,879,631
============ ============
See notes to financial statements
II-9 -15-
<PAGE>
STERLING SUGARS, INC.
BALANCE SHEETS
JANUARY 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
-------------- -------------
CURRENT LIABILITIES:
Notes payable $ 3,658,334 $ -
Accounts payable 1,402,683 808,911
Due to cane growers 4,316,481 2,719,407
Income taxes payable 16,919 343,460
Current portion of long-term debt
and capital leases 231,163 462,008
-------------- --------------
CURRENT LIABILITIES 9,625,580 4,333,786
-------------- --------------
LONG-TERM DEBT AND CAPITAL LEASE, less portion
due within one year included in current
liabilities 4,017,469 4,371,434
-------------- --------------
DEFERRED INCOME TAXES 698,000 828,000
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 8) - -
-------------- --------------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share:
Authorized and issued 2,500,000 shares 2,500,000 2,500,000
Additional paid-in capital 40,455 -
Retained earnings 11,088,065 8,968,456
------------ --------------
13,628,520 11,468,456
Less common stock in treasury,
at cost (50,000 shares) - 122,045
------------ --------------
13,628,520 11,346,411
------------ --------------
$27,969,569 $20,879,631
============ ==============
See notes to financial statements
II-10 -16-
<PAGE>
STERLING SUGARS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED JANUARY 31,
1996 1995 1994
----------- ----------- -----------
REVENUES:
Sugar and molasses sales $28,495,085 $33,768,134 $13,435,714
Interest earned 45,864 29,350 26,198
Mineral leases and royalties 114,926 37,393 49,988
Gain on dispositions of property
and equipment 145,076 11,331 80,820
Other 843,608 404,376 340,033
------------ ----------- -----------
29,644,559 34,250,584 13,932,753
------------ ----------- -----------
COST AND EXPENSES:
Cost of products sold 24,952,455 31,558,282 13,923,827
General and administrative 954,809 802,768 1,372,865
Interest and loan expenses 522,667 591,650 534,380
------------ ----------- -----------
26,429,931 32,952,700 15,831,072
------------ ----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 3,214,628 1,297,884 (1,898,319)
INCOME TAXES (CREDIT) 1,095,019 555,501 (715,000)
------------ ----------- -----------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 2,119,609 742,383 (1,183,319)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - - 200,000
------------ ----------- -----------
NET EARNINGS (LOSS) 2,119,609 742,383 (983,319)
RETAINED EARNINGS AT BEGINNING OF YEAR 8,968,456 8,226,073 9,209,392
------------ ----------- -----------
RETAINED EARNINGS AT END OF YEAR $11,088,065 $ 8,968,456 $ 8,226,073
=========== =========== ============
WEIGHTED AVERAGE EARNINGS (LOSS) PER
COMMON SHARE:
Before cumulative effect of change
in accounting principle $.85 $.30 $ (.48)
Cumulative effect of change in
accounting principle - - .08
----------- ----------- -----------
Net earnings (loss) $.85 $.30 $ (.40)
=========== =========== ===========
CASH DIVIDENDS PAID $ 0 $ 0 $ 0
=========== =========== ===========
See notes to financial statements
II-11 -17-
<PAGE>
STERLING SUGARS, INC.
STATEMENTS OF CASH FLOWS
Years Ended January 31,
1996 1995 1994
----------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 2,119,609 $ 742,383 $ (983,319)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used
in) operating activities:
Depreciation 1,533,946 1,517,693 1,543,875
Deferred income taxes 271,600 219,684 (743,884)
Gain on dispositions of property and
equipment (145,076) (11,331) (80,820)
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable 559,929 (1,035,279) 4,176,658
(Increase) decrease in sugar and
molasses inventories (7,458,169) 6,341,971 (8,485,867)
Increase in accounts payable and
accrued expenses and due to cane
growers 2,190,846 271,436 551,497
Increase (decrease) in interest
and income taxes payable (326,541) 308,866 -
Other items - net 117,908 153,325 192,477
----------- ------------ -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,135,948) 8,508,748 (3,829,383)
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection/Issuance of notes
receivable - Net (16,554) (264,702) -
Purchases of property, plant and
equipment (2,739,294) (482,307) (2,145,039)
Proceeds from dispositions of
property and equipment 217,462 195,003 142,822
------------ ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (2,538,386) (552,006) (2,002,217)
------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term notes
payable and long-term debt 20,568,778 6,649,300 9,529,003
Sale of treasury stock 111,625 - -
Payments on short-term notes
payable and long-term debt (17,495,254) (14,526,768) (3,531,221)
------------ ------------ -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 3,185,149 (7,877,468) 5,997,782
------------ ------------ -----------
INCREASE (DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS (489,185) 79,274 166,182
CASH AND TEMPORARY CASH INVESTMENTS
AT BEGINNING OF YEAR 623,237 543,963 377,781
----------- ----------- -----------
(Continued)
II-12 -18-
<PAGE>
STERLING SUGARS, INC.
STATEMENTS OF CASH FLOWS
Years Ended January 31,
------------------------------------
1996 1995 1994
------------ ----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS
AT END OF YEAR $ 134,052 $ 623,237 $ 543,963
============ =========== ===========
SUPPLEMENTAL INFORMATION REGARDING
CASH FLOWS:
INTEREST PAID $ 509,421 $ 589,869 $ 497,807
============ ============ ==========
INCOME TAXES PAID (RECEIVED) $ 1,152,704 $ (147,643) $ (329,000)
============ ============ ===========
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Purchase of equipment financed by
notes payable and capital lease $ - $ 139,206 $ 806,641
============= =========== ===========
Corporation issued common stock for
the payment of management fee due
to M. A. Patout & Son, Ltd. $ 50,875 $ - $ -
============= =========== ===========
See notes to financial statements
II-13 -19-
<PAGE>
STERLING SUGARS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Sterling Sugars, Inc. is a grower and processor of sugarcane from which
it produces raw sugar and blackstrap molasses in St. Mary Parish, Louisiana.
All sugar produced by the Company is sold to a few major sugar refiners under
sales contracts and the portion which is not shipped is included in inventory
at the lower of cost or market. Molasses is sold to two major molasses
distributors and the amounts on hand are recorded at an average of the
estimated weekly market price during the pricing period as specified in the
sales contracts. Sales are recognized when deliveries are made.
Allowance for doubtful accounts was based on management's evaluation of
the individual accounts and notes receivable.
Property, plant and equipment are recorded at cost. Depreciation is
computed principally by the declining balance method, and is primarily on
average lives of 40 years for buildings, 15 years for machinery and
equipment, 10 years for furniture and fixtures and 6 years for vehicles.
Income taxes were accounted for using the liability method.
Expenditures for future crops relate to subsequent years' crops and have
been deferred. These costs will be charged against earnings as the income is
received from these crops. The amounts related to land leased to others on
which the leases do not expire within one year of the balance sheet date have
been classified as non-current assets.
Cash equivalents include all highly liquid temporary cash investments
with a maturity of three months or less at the date of purchase. The
Company maintains, at a regional financial institution, cash which may
exceed federally insured amounts at times.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. NOTES PAYABLE
Notes payable at January 31, 1996 included $3,078,334 of short-term
notes which were payable to a government agency and were collateralized by
inventory. The notes had interest rates of 5.75% and 5.50%. Notes payable at
January 31, 1996 also included $580,000 of unsecured notes payable to a bank
with interest at 8.50%.
The maximum aggregate short-term borrowings outstanding were $20,568,800
in 1995, $10,780,000 in 1994. The average aggregate amount of short-term
borrowings and the weighted average interest rate was approximately $1,640,200
and 6.97% in 1996, $2,724,300 and 5.17% in 1995 and $2,576,000 and 5.21% in
1994. Short-term borrowings occur primarily during the months of September
through December.
II-14 -20-
<PAGE>
3. LONG-TERM DEBT AND CAPITAL LEASE
Long-term debt and capital lease at January 31, 1996 and 1995 consisted
of the following:
1996 1995
----------- -----------
8.50% mortgage note collateralized by first
mortgage on substantially all land owned by
the Company; payable in semi-annual payments
of $194,240, including interest with the
balance of $3,360,000 due January 1, 2002. $ 3,807,085 $ 3,868,050
8.95% capital lease collateralized by equipment,
payable in monthly payments of $16,500 including
imputed interest beginning October 1, 1994 with
a final payment of $16,500 due October 1, 1998. 441,547 592,385
Unsecured note payable in annual principal
installments of $100,000 beginning February 15,
1991 with a final payment of $125,000 due
February 15, 1995. Interest at the bank's prime
rate is payable quarterly. - 125,000
6.25% unsecured note payable in annual principal
installments of $54,400 beginning April 24, 1992,
with a final payment of $54,400 due April 24,
1996. Interest payments are due annually. - 108,800
8.90% capital lease collateralized by equipment,
payable in annual payments of $21,067 including
imputed interest beginning April 1, 1995 with a
final payment of $21,067 due April 1, 1999. - 82,157
Non-interest bearing, unsecured note payable in
one principal installment of $57,050 due March
15, 1995. - 57,050
------------ -------------
4,248,632 4,833,442
Less portion due within one year (231,163) (462,008)
------------ -------------
$ 4,017,469 $ 4,371,434
============ =============
The aggregate annual principal payments applicable to these notes and
capital leases are payable as follows:
Year ended January 31, 1998 $ 252,295
Year ended January 31, 1999 174,614
Year ended January 31, 2000 85,052
Year ended January 31, 2001 92,436
Thereafter 3,413,072
-------------
$ 4,017,469
=============
The Company had a line of credit with a bank at January 31, 1996 in the
amount of $3,500,000. There was $580,000 borrowed against this line of
credit as of January 31, 1996.
II-15 -21-
<PAGE>
4. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," effective February 1, 1993. This
statement supersedes Accounting Principles Board Opinion No. 11. The
cumulative effect of adopting SFAS No. 109 on the Company's financial
statements was to decrease the loss by $200,000 ($.08 per share) for the
year ended January 31, 1994.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss and tax credit carryforwards. The tax
effects of significant items comprising the Company's net deferred tax
liability as of January 31, 1996 and 1995 are as follows:
1996 1995
------------ ------------
Deferred tax assets:
Operating loss carryforwards $ - $ 412,400
Tax credit carryforwards 715,800 548,300
Other 190,000 192,300
------------ -------------
Totals 905,800 1,153,000
------------ -------------
Deferred tax liabilities:
Differences between book and tax basis of
property (1,413,800) (1,376,300)
Other (29,400) (42,500)
------------ -------------
Total (1,443,200) (1,418,800)
------------ -------------
Net $ (537,400) $ (265,800)
============ =============
The foregoing net amounts were included in the accompanying balance sheet
as follows:
1996 1995
--------- -----------
Deferred tax assets - Current $ 160,600 $ 562,200
Deferred tax liability - Non-current (698,000) (828,000)
----------- -----------
Net $ (537,400) $ (265,800)
=========== ===========
There was no valuation allowance required at January 31, 1996 and 1995.
Income taxes (credit) consist of the following components:
1996 1995 1994
---------- ---------- -----------
Currently payable (refundable) $ 823,419 $ 343,460 $ (171,116)
Deferred 271,600 212,041 (543,884)
---------- ---------- -----------
$1,095,019 $ 555,501 $ (715,000)
========== ========== ===========
State income taxes (credit) included in income tax expense (credit) amounted
to approximately $83,600, $-0-, and $(110,000) in 1996, 1995 and 1994,
respectively.
II-16 -22-
<PAGE>
Deferred income taxes relate primarily to the following items:
1996 1995 1994
----------- ---------- -----------
Depreciation $ 37,500 $ (2,000) $ 27,000
Alternative minimum tax carryover (167,500) (335,000) 140,000
Deferred compensation (40,900) (38,000) (133,000)
Net operating loss carryforward 412,400 553,000 (602,000)
Other 30,100 34,041 24,116
----------- ---------- ------------
$ 271,600 $ 212,041 $ (543,884)
=========== ========== ============
Income taxes (credit) as a percentage of pretax earnings (loss) vary from
the effective Federal statutory rate of 34%. The reasons for these
differences are shown below:
1996 1995 1994
------------ ----------- --------------
Amount % Amount % Amount %
------------ ----------- --------------
Income taxes (credit) at statutory
rate of pretax earnings (loss) $1,093,000 34 $441,000 34 $(645,000)(34)
Increase (decrease) in taxes
resulting from:
state income taxes 257,200 8 104,000 8 (75,000)( 4)
other items - net (255,181)(8) 10,501 1 5,000 -
------------- ----------- ---------------
Actual income taxes (credit) $1,095,019 34 $555,501 43 $ (715,000)(38)
============= =========== ===============
At January 31, 1996 the Company had alternative minimum tax credit
carryforwards of approximately $715,800 available to reduce future income
taxes payable under certain circumstances. The alternative minimum tax
credit carryover period is unlimited.
5. RETIREMENT PLAN
The Company has a defined benefit non-contributory retirement plan in
force covering eligible salaried and factory hourly employees.
The Company's current policy is to contribute annually the amount that can
be deducted for federal income tax purposes. The benefits are based upon
years of service and employee's compensation during the best five years of
employment. The total pension expense (credit) for the years ended January
31, 1996, 1995 and 1994 was $35,000, $34,000 and $4,000, respectively.
Data relative to the Plan were as follows (in thousands):
January 31,
---------------------
1996 1995
--------- ---------
Actuarial present value of benefit obligations:
Vested benefit obligation $ 1,162 $ 1,145
========== ========
Accumulated benefit obligation $ 1,170 $ 1,154
========== ========
II-17 -23-
<PAGE>
Projected benefit obligation for service rendered
to date $ (1,289) $(1,329)
Plan assets at fair value 1,287 1,243
---------- --------
Plan assets in excess of projected benefit
obligation (2) (86)
Remaining unrecognized portion of net assets at
February 1, 1987 (114) (130)
Unrecognized net loss from past experience
different from that assumed 193 283
---------- --------
Prepaid pension cost included in other assets $ 77 $ 67
========== ========
The net pension expense for 1996, 1995 and 1994 included the
following (income) expense components:
1996 1995 1994
------- ------- -------
Service cost - benefits earned during the period $ 51 $ 61 $ 47
Interest cost on projected benefit obligation 90 86 83
Actual return on plan assets (96) (105) (117)
Net amortization and deferrals (10) (8) (9)
--------- ------- -------
NET PENSION EXPENSE $ 35 $ 34 $ 4
========= ======= =======
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% in 1996 and 1995 and 6.5% in 1994.
The projected rate of increase in future compensation levels used was 5.5%
in 1996, 1995 and 1994. The expected rate of return on plan assets was 8%
in 1996 and 1995 and 9% in 1994. The plan's assets consist primarily of
deposits in the general funds of an insurance company.
6. EMPLOYEE SAVINGS PLAN
The Company established, effective February 1, 1992, an Employee Savings
Plan under Section 401(k) of the Internal Revenue Code. The Plan, which
covers eligible salaried and factory hourly employees, provides that the
Company match up to 50% of the first 6% of employee contributions. The
Company's contribution was $39,000 for the year ended January 31, 1996 and
$31,000 for the year ended January 31, 1995 and $26,000 for the year ended
January 31, 1994.
7. REVENUES
Sugar and molasses sales are comprised of the following:
1996 1995 1994
----------- ----------- -----------
Sugar $26,896,616 $32,801,189 $12,568,323
Molasses 1,598,469 966,945 867,391
----------- ----------- -----------
$28,495,085 $33,768,134 $13,435,714
=========== =========== ===========
Sugar sales to individual major customers amounted to $9,934,094,
$7,916,007, $4,189,733 and $3,427,134 in 1996, $15,533,226, $13,466,455,
$2,545,286 and $1,250,333 in 1995 and $6,782,661, $2,078,953, $2,454,273
and $1,252,436 in 1994.
II-18 -24-
<PAGE>
Income from mineral leases and royalties is comprised of the following:
1996 1995 1994
--------- -------- ---------
Oil and gas royalties $ 30,188 $ 25,140 $ 42,813
Mineral leases 84,739 12,253 7,175
--------- -------- ---------
$114,927 $ 37,393 $ 49,988
========= ======== =========
Oil and gas royalties consist entirely of landowners overrides which
management considers incidental to the operations of the Company. Reserve
information relating to this production has not been made available to the
Company.
Other income is comprised of the following:
1996 1995 1994
-------- -------- --------
Rental property $607,672 $374,337 $260,514
Other 235,963 30,039 79,519
-------- --------- --------
$843,635 $404,376 $340,033
======== ======== =========
8. COMMITMENTS AND CONTINGENCIES
The Company has certain lease obligations under which a total of 10,000
acres of agricultural land are being leased. At the present time,
substantially all of these properties are being subleased which resulted
in net payments of approximately zero in all years. The subleases have
the same payment and option terms as the Company's leases.
The Company has employment agreements with two executive officers with one
of the agreements expiring in 1996. During the year ended January 31,
1994, the Company amended the terms of the second agreement due to the
retirement of one of the executive officers. The Company accrued the
present value of all future payments required under the amended agreement
.
At January 31, 1996 the Company had guaranteed a $202,000 collateralized
note of a cane grower.
The Company entered into a technical service contract which provides for a
fee payable to M. A. Patout & Son, Ltd. equal to ten percent of net income
before income taxes from the manufacture, production and sale of raw sugar
and molasses each year provided that net income from the foregoing exceeds
$500,000. This agreement expires January 31, 1999.
The Company has an option to purchase approximately 238 acres of
agricultural land in St. Mary Parish for approximately $357,000. As a
consideration for this option the Company pledged a certificate of
deposit in the amount of $82,160.
9. RELATED PARTIES
During the year ended January 31, 1996 and 1995, the Company was involved
in the following related party transactions: The Company entered into a
cane swap agreement with M. A. Patout & Son Ltd. whereby some shippers of
sugarcane to M. A. Patout & Son, Ltd. would deliver their cane to Sterling
Sugars, Inc. because of their proximity to the Sterling Sugars, Inc.'s
factory. The agreement was reciprocal for some shippers normally having
II-19 -25-
<PAGE>
their cane processed by Sterling Sugars, Inc. The net effect of this cane
swap agreement was that Sterling Sugars, Inc. ground an additional 33,275
and 27,420 tons of cane for the years ended January 31, 1996 and 1995,
respectively. The reimbursement due M. A. Patout & Son, Ltd. for the
years ended January 31, 1996 and 1995 for payments made by them to
shippers under this agreement was $976,962 and $820,439, respectively.
Amounts payable at January 31, 1996 and 1995 were $62,196 and $88,458,
respectively.
The Company entered into a technical service agreement with M. A.
Patout & Son, Ltd. This agreement provides for an option to acquire
50,000 shares of treasury stock owned by the Company on or before December
31, 1998, at a price of $3.25 per share. M. A. Patout & Son, Ltd.
exercised its option on April 12, 1995 and acquired the 50,000 shares of
treasury stock for $162,500. Additionally, the amounts due by the Company
to M. A. Patout & Son, Ltd. under the technical service agreement were
$187,350 and $50,635 for the years ended January 31, 1996 and 1995,
respectively.
The Company leased approximately 3,000 acres of agricultural land
from related parties, substantially all of which were sub-leased
resulting in net payments of $32,024 and $18,170 for the years ended
January 31, 1996 and 1995, respectively.
9. ITEM 9 -DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
II-20 -26-
<PAGE>
PART III
ITEM 10-DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As repects directors information required under this item is contained
in the registrant's Proxy Statement dated April 26, 1996 under the captions
"Election of Directors" and "Information Concerning Management-Business
Experience of Directors," incorporated herein by reference.
The following table sets forth information concerning the Company's
executive officers, including their principal occupation for the the past
five years and all positions and offices held with the Company by such
executive officers. The term of each of the below named executive officers,
elected May 18, 1995, expires on May 16, 1996, or when their successors have
been chosen.
NAME CAPACITY AGE
----------------------------------------------------------------------
Craig P. Caillier President and CEO February 2,
1996 to present; Senior Vice
President and General Manager
January 1994 - February 1, 1996.
For five years prior to his
association with the Company, was
assistant General Manager and
Secretary/Treasurer of M. A. Patout
& Son, Ltd., Jeanerette, La. 34
Stanley H. Pipes Vice President from 1977 until August
1989; Senior Vice President from
August 1989 until January 1994; Vice
President since that date; Treasurer
since 1971. 61
Information required under this item as respects compliance with Section 16
(a) of the Securities Exchange Act of 1934 is contained in the registrant's
Proxy Statement dated April 26, 1996 under the caption "Information
Concerning Management-Certain Transactions," incorporated herein by
reference.
ITEM 11-EXECUTIVE COMPENSATION
Information required under this item is contained in the registrant's Proxy
Statement dated April 26, 1996 under the caption "Information Concerning
Management-Executive Compensation," incorporated herein by reference.
ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this item is contained in the registrant's Proxy
Statement dated April 26, 1996 under the captions "Voting Securities and
Principal Holders Thereof" and "Election of Directors," incorporated herein
by reference.
ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this item is contained in the registrant's Proxy
Statement dated April 26, 1996 under the caption "Information Concerning
Management-Certain Transactions," incorporated herein by reference.
III-1 -27-
<PAGE>
FORM 10-K
PART IV
ITEM 14-EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8K
(a) 1. Financial Statements
The following financial statements of Sterling Sugars, Inc. are
included in Part II, Item 8:
Independent Auditors Report (Fiscal Years 1996 and 1995)
Independent Auditors Report (Fiscal Year 1994)
Balance Sheets as of January 31, 1996 and 1995
Statements of Operations and Retained Earnings for years ended
January 31, 1996, 1995 and 1994
Statements of Cash Flows for years ended January 31, 1996,
1995 and 1994
Notes to Financial Statements
(a) 2. Financial Statement Schedules
Not Applicable
All schedules are omitted for the reason that they are not required or are
not applicable, or the required information is shown in the financial
statements or notes thereto.
IV-1 -28-
<PAGE>
FORM 10-K
PART IV
(Continued)
(a) 3. Exhibits
(3) Page
(a) Articles of Incorporation (a)
(b) By-laws (a)
(c) Amendments to By-laws (b)
(d) Amendments to By-laws (e)
(e) Amended By-laws (e)
(f) Amendment to Certificate of Incorporation (j)
(g) Amended by-laws (54)
(4) (a) Specimen Stock Certificate (b)
(a) Katy Plantation lease (b)
(b) Maryland Plantation lease (b)
(c) Rosebud Plantatin lease (b)
(d) Pension Plan (b)
(e) Income Sharing Plan (b)
(f) 1987 employment contract (Fred Y. Clark) (c)
(g) 1986 Peebles lease (f)
(h) Employment contract (Fred Y. Clark) (g)
(i) Sublease-portions of Maryland Plantation (h)
(j) Lease-West Camperdown (Bolton Cane Company) (i)
(k) Sublease-Katy Plantation (Bolton Cane Company) (i)
(l) Lease-portions of Sterling Plantation
(Baker Plantation, Inc.) (i)
(m) Employment contract (J. Adalberto Roig, Sr.) (k)
(n) Employment contract (Stanley H. Pipes) (k)
(o) Addendum to employment contract dated January
31, 1987 (Fred Y. Clark) (k)
(p) Sublease-portions of Maryland Plantation
(Pontiff Farms, Inc.) (k)
(q) Lease-Calumet Plantation (Frank Martin Farms) (k)
(r) Sublease-Rosebud Plantation (l)
(s) Sublease-Maryland Plantation (l)
(t) Lease-Belleview Golf and Country Club (m)
(u) Agricultural lease with option to purchase
(Adeline Plantation) (m)
(v) Amendment to agricultural lease (Adeline Plt.) (m)
(w) Sublease-(Adeline Plantation) (m)
(x) Agricultural lease (Shadyside Plantation) (n)
(y) Sublease-Shadyside (C.J. Hebert) (n)
(z) Sublease-Shadyside (Frank Martin Farms) (n)
(aa) Agriculture lease-Shaffer Plantatin (Teche
Planting Company) (n)
(bb) Agriculture lease-West Belleview (Teche
Planting Company) (n)
(cc) Amendment to employment contract of January 31,
1987 (Fred Y. Clark) (n)
(dd) Techincal Services Agreement-M.A. Patout & Son (o)
(ee) Sublease-Teche Planting Company (o)
(ff) Lease extension-Franklin Realty (o)
(gg) Agricultural lease-Theodore Broussard (o)
(hh) Agricultural lease-Kevin Breaux (o)
(ii) Agricultural lease-Sun Operating Limited P. (o)
IV-2 -29-
<PAGE>
FORM 10-K
PART IV
(Continued)
(jj) Agricultural lease - Mildred Buckner (o)
(kk) Sublease - C. J. Hebert (o)
(ll) Sublease - Merrill Smith (o)
(nn) Lease Purchase Agreement-Michael Champagne (o)
(oo) Hunting lease - Richard McGoff (o)
(pp) Sublease cancellation-Leroy & Wayne LeBlanc (o)
(qq) Agricultural lease cancellation-Jed Robison (o)
(rr) Agricultural lease cancellation-L.J. Grezaffi (o)
(ss) Agricultural agreement-Advanced Agriculture, Inc. (34)
(tt) Amendment to agriculture agreement-Advanced Ag. (51)
(uu) Agricultural lease renewal-Daniel Gonsoulin (53)
(11) Computation of earnings per share (62)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the year ended January 31,
1996.
Footnotes
(a) Incorporated by reference from registrant's Form 10-K filed May 21,
1965.*
(b) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1981.*
(c) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1982.*
(e) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1984.*
(f) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1986.*
(g) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1987.*
(h) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1988.*
(i) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1989.*
(j) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1990.*
(k) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1991.*
IV-4 -30-
<PAGE>
FORM 10-K
PART IV
(Continued)
(l) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1992.*
(m) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1993.*
(n) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1994.*
(o) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1995*
* Commission File Number 0-1287
IV-4 -31-
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
STERLING SUGARS, INC.
Date April 19, 1996 BY /s/ Craig P. Caillier
---------------- ------------------------
Craig P. Caillier
President & CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, which includes the
Chief Executive Officer, the Chief Financial and Accounting Officer and a
majority of the Board of Directors, on behalf of the Registrant and in the
capacities and on the dates indicated:
/s/ Craig P. Caillier President & CEO and April 19, 1996
--------------------- Director
Craig P. Callier
/s/ Stanley H. Pipes Vice President & Treasurer
---------------------- (Principal Financial and
Stanley H. Pipes Accounting Officer) April 19, 1996
/s/ Carl W. Bauer Director April 19, 1996
------------------------
Carl W. Bauer
/s/ John R. Browne Director April 19, 1996
----------------------
John R. Browne
/s/ Peter V. Guarisco Director April 19, 1996
------------------------
Peter V. Guarisco
/s/ J. Patout Burns, Jr. Director April 19, 1996
----------------------
J. Patout Burns, Jr.
/s/ Rivers Patout Director April 19, 1996
----------------------
Rivers Patout
/s/ Victor Guarisco, II Director April 19, 1996
-----------------------
Victor Guarisco, II
IV-5 -32-
<PAGE>
INDEX TO EXHIBITS
(10) Material Contracts
(ss) Agricultural agreement-Advanced Agriculture, Inc. (34)
(tt) Amendment to agriculture agreement-Advanced
Agriculture, Inc. (51)
(uu) Agriculture lease renewal-Daniel Gonsoulin (53)
(11) Computation of Earnings per Common Share (62)
IV-6 -33-
<PAGE>
AGREEMENT
This agreement is entered into by and between the following corporations:
Advanced Agriculture, Inc. (Ag. Inc.) a Louisiana corporation,
represented herein by Karl G. Guidry, its Secretary-Treasurer, duly
authorized, and whose mailing address is P. O. Box 30568, Lafayette,
Louisiana, 70593, and
M. A. Patout & Son, Ltd. (Patout) a Louisiana corporation,
represented by William S. Patout, III, its President, duly authorized,
and whose mailing address is 3512 J. Patout Burns Road, Jeanerette,
Louisiana, 70544, and
Sterling Sugars, Inc. (Sterling) a Delaware corporation, represented
herein by Craig P. Caillier, its Senior Vice President and General
Manager, duly authorized, and whose mailing address is P. O Box 572,
Franklin, Louisiana, and
St. Mary Sugar Cooperative, Inc. (St. Marys) a Louisiana cooperative
association, represented herein by Raphael E. Rodriguez, Jr., its
President, duly authorized, and whose mailing address is P. O. Box 269,
Jeanerette, Louisiana, 70544, and
Raceland Sugars, Inc. (Raceland) a Delaware corporation, represented
herein by Daniel W. Duplantis, its Executive Vice President and General
Manager, duly authorized, and whose mailing address is P. O. Box 159,
Raceland, Louisiana, 70394.
1.
Ag. Inc. is in the business of farming, growing and harvesting sugar cane
for the production of raw sugar in accordance with the custom of the trade in
the Louisiana raw sugar industry, and is desirous of expanding its farming
operations in the Calcasieu Parish area of Louisiana. In order to expand its
operations, it will require additional capital investment.
2.
Patout, St. Mary, Sterling and Raceland (the Mills) each own and operate
raw sugar factories and are in the business of purchasing sugar cane for
processing into raw sugar in accordance with the custom of the trade in the
Louisiana raw sugar industry, and are desirous of expanding their respective
raw sugar processing operations. In order to expand their operations the
Mills require additional quantities of sugar cane.
3.
The parties to this agreement (the Agreement) mutually agree that in
order to accomplish the aims and purposes set forth above, it will be
necessary and proper to introduce the business of growing and cultivating
sugar cane into the Calcasieu Parish area of Louisiana, and in order to do so
they agree to contract and covenant with each other as set forth hereinafter
in this Agreement.
IV-7 -34-
<PAGE>
4.
In order that Ag. Inc. may expand its sugar farming operations, and in
order that the Mills may expand their respective sugar cane processing
operations, each of the parties enter into this Agreement, do hereby agree
and covenant, each with the other, for the foregoing consideration and
purposes and for the further mutual considerations recited herein, and they
do hereby bond and obligate themselves, their successors and assigns, to
perform all of the duties and obligations imposed upon them by this Agreement.
5.
Each of the Mills does by these presents lend and agree to lend unto Ag.
Inc. the sum of One Hundred Fifty Thousand ($150,000) Dollars, which loan(s)
shall be made in three (3) installments of Fifty Thousand ($50,000) Dollars
each, the first installment of Fifty Thousand ($50,000) Dollars being paid to
Ag. Inc. by each of the mills simultaneously with the execution of this
agreement, with the second installment of Fifty Thousand ($50,000) Dollars by
each mill being due and extended on or before August 1, 1995, and the third
installment of Fifty Thousand ($50,000) Dollars by each mill being due and
extended on or before February 1, 1996. In order to evidence the said
indebtedness due and to become due to the Mills, Ag. Inc. has executed one
promissory note payable to each of the mills in the full sum of One Hundred
Fifty Thousand ($150,000) Dollars, bearing no interest, with the principal of
each of the said notes payable pursuant to the terms and conditions set forth
hereinafter in this Agreement. Each of the said notes has been paraphed
"Ne Varietur" for identification with this Agreement, which paraph shall
provide as follows:
"For identification with an agreement by the maker hereof to
perform certain obligations as set forth in the Agreement,
which agreement sets forth the terms and conditions which
satisfy the obligation to pay this promissory note."
Ag. Inc. does by these presents acknowledge receipt of the first of the
three (3) installment loan extensions of $50,000 loaned by each of the Mills
to Ag. Inc., and each of the Mills does by these presents acknowledge receipt
of the promissory note made payable to it as described above, and does by
these presents bind and obligate itself to extend and pay to Ag. Inc. the two
(2) remaining installment loan extensions of $50,000 by each mill on or before
the dates set forth hereinabove for the extensions of such loans, to wit:
August 1, 1995 and February 1, 1996.
6.
In order to induce the Mills to make the loans described in this
agreement and in consideration for same, Ag. Inc. represents, covenants and
agrees that it:
a) shall utilize the proceeds of the loans made to it by the Mills
for the sole purpose and only to accomplish the objectives and to
carry out the purposes of this Agreement and for no other purposes
whatsoever, which objective and purposes are set forth with
particularity and exclusively hereinafter.
b) has entered into an agricultural lease, as lessee, of farm land
(the Farm) containing at least one thousand (1,000) acres of
cultivable land, exclusive of headlands, roads, ditches, and land
IV-8 -35-
<PAGE>
necessary for any purpose other than field rows, which farm land is
suitable for the cultivation, growing and harvesting of sugar cane,
in Calcasieu Parish, Louisiana, a copy of which agricultural lease is
attached as Exhibit A,
c) shall perform and fulfill all of the terms and conditions of the
aforesaid agricultural lease and shall maintain same in full force
and effect through the 31st day of January, 1997,
d) shall prepare the Farm for the proper operation of the sugar
plantation in accordance with good farming practices generally
accepted in the custom of the trade in the Louisiana sugar cane
industry, (the Standard) including the drawing of rows and the
installation of drains, pipe drops, drainage pumps, bridges,
headlands, roads and any other alterations or improvements to the
leased premises necessary and proper for the efficient and economic
operation of a sugar cane plantation, all in accordance with the
Standard,
e) shall plant the entirety of one thousand (1,000) acres on the Farm
in sugar cane in a good and husbandlike manner in accordance with
farming practices generally within the Standard, which planting shall
be started and completed during the Louisiana sugar cane planting
season for the year 1995, which planting shall be performed with
sugarcane furnished by the Mills in sufficient quantity and of good
quality, as required by paragraph 17 hereinafter,
f) shall properly cultivate and farm the plant sugar cane on the Farm
in a good and husbandlike manner within the Standard, including but
not limited to the application of proper fertilizers, herbicides and
pesticides, and generally doing all things necessary and proper, in a
timely manner and pursuant to the Standard through the 31st day of
January, 1997.
g) shall cause the sugar cane on the Farm to be cut and harvested
properly, timely and within the Standard so as to make all of said
sugar cane available for distribution as provided hereinafter through
the 31st day of January, 1997,
h) shall purchase crop insurance from Commodity Credit Corporation as
long as said crop insurance is available and necessary in order to
obtain any government benefit whatsoever through the 31st day of
January, 1997.
7.
All of the duties and obligations necessary to carry out the farming
operations described hereinabove shall be performed at the sole expense of
Ag. Inc., only, and none of the Mills shall have any duty or obligation to
pay any cost or expense whatsoever in connection with the farming operations
described hereinabove, and Ag. Inc. does by these presents covenant and agree
to hold the Mills harmless from any claims by third parties for same.
8.
At the beginning of the 1996 Louisiana sugar cane planting season Ag.
Inc. shall cause all of the sugar cane cultivated and grown on the aforesaid
one thousand (1,000) acres of the Farm to be cut and harvested in a timely and
orderly manner in accordance with the Standard.
IV-9 -36-
<PAGE>
9.
Ag. Inc. shall make available to each of the Mills during the 1996
Louisiana sugar cane planting season one fifth (1/5) of all of the sugar cane
cut and harvested from the Farm and shall deliver same to each of the Mills
by causing same to be loaded onto the carts and wagons provided by the Mills,
or their agents, in the sugar cane fields of the Farm as such sugar cane is
cut and harvested. The Mills shall consult among themselves as to the times
and as to the specific areas of the Farm from which each of them shall take
and receive such harvested sugar cane, and the Mills shall give timely notice
to Ag. Inc. as to which of the Mills shall take and receive sugar cane at
specific times and places on the Farm, and the Mills covenant and agree that
the taking and receiving of such sugar cane by them shall be in an orderly
manner in keeping with the Standard so as not to cause delay to Ag. Inc. In
consideration for the harvesting and loading of the sugar cane as provided in
this paragraph Ag. Inc. shall be paid the sum of Eighty ($80.00) Dollars per
acre by the Mills or their agents or assigns, for each acre of sugar cane
harvested and loaded. In the alternative, the Mills, or their agents or
assigns, shall have the right to enter onto the Farm in order to harvest and
load their respective shares of sugar cane to which they are entitled pursuant
to this Agreement, using their own labor and machinery to accomplish said
task, and Ag. Inc. does hereby agree to give the Mills, or their agents or
assigns, such access to the Farm as is reasonable and necessary so as to
accomplish the planting of the sugar cane during the 1996 sugar cane planting
season. The delivery of the harvested sugar cane by Ag. Inc. to the Mills as
provided in this paragraph shall be in full title and free of any charge,
lien, mortgages or expense whatsoever to the Mills, or any of them, and the
delivery of such sugar cane, free and clear of any and all claims, shall be
in further consideration of the loans made by each of the Mills to Ag. Inc.
After all of the Mills have selected and taken their respective shares of the
plant sugar cane to which each is entitled, the remaining one-fifth (1/5) of
the plant sugar cane, and all of the stubble sugar cane on the Farm, shall
belong to Ag. Inc., free of any charge whatsoever.
10.
In the event that Ag. Inc. performs all of the duties and obligations
imposed upon it pursuant to the terms and conditions of paragraphs 6 through
9, inclusive of this agreement, then in such event all of the promissory notes
executed by it and described in paragraph 5 above shall be satisfied and paid
in full by such performance, and shall be marked paid and returned by the
holders to Ag. Inc., otherwise said notes shall be due and payable in full
upon any default in the performance of the duties and obligations set forth
in paragraphs 6 through 9, inclusive of this Agreement upon demand by a
holder or holders.
11.
The Mills reserve the right to specific performance by Ag. Inc. and/or
to initiate legal proceedings for such specific performance, and, in addition
thereto, to recover any damages which they or any one of them may suffer as a
result of any default under this entire Agreement by Ag. Inc. or an Affiliate.
In addition, in the event that Ag. Inc. shall fail to perform any of the
duties and obligations imposed on it by the terms and conditions set forth in
paragraphs 6 through 9, inclusive, of this Agreement the Mills shall have the
right to perform any such defaulted duties and obligations and in order so to
do the Mills shall have the right to enter onto the premises of the Farm and
perform any such defaulted duties and/or obligations in the place and stead of
IV-10 -37-
<PAGE>
Ag. Inc. Any and all duties and obligations so performed by the Mills on
behalf of Ag. Inc. shall be performed at the sole expense and for the account
of Ag. Inc. Such rights of entry in favor of the Mills shall be without the
necessity of any notice of putting in default or other formal or legal actions
whatsoever. Nothing in this paragraph shall be construed to obligate or
require the Mills, or any of them, to do any act whatsoever in the event of
default of Ag. Inc., and the Mills may instead rely solely on any remedy
available at law under this Agreement, or, the Mills may take any appropriate
action they may deem necessary in order to remedy a default together with and
in addition to any legal action for specific performance, as provided herein,
and for damages, or both.
12.
Ag. Inc. does hereby agree to maintain in full force and effect the
lease agreement attached hereto as Exhibit A during the full term of the said
lease.
13.
Ag. Inc. shall now begin immediately to make its best effort to lease
and/or to secure options to lease other farm land in the Calcasieu Parish
area of Louisiana for the purpose of operating a sugar cane plantation or
plantations thereon, and immediately upon securing the lease or leases or
option or options for the lease of such farm land, Ag. Inc. shall notify the
Mills of such fact. Ag. Inc., shall, after securing the lease(s) or option(s)
for the lease of additional farm land, timely exercise the option(s) to lease,
if applicable, and begin to prepare such farmland for the planting of sugar
cane thereon during the 1996 Louisiana sugar cane planting season, in the same
manner as provided herein for the planting of sugar cane on the Farm. Ag.
Inc. shall utilize its one-fifth (1/5) share of the sugar cane harvested from
the Farm during the 1996 Louisiana sugar cane planting season in the planting
of additional farm land secured by lease as set forth in this paragraph, and
such planting shall be performed and accomplished in accordance with the
Standard.
14.
In addition to the obligation to seek other farmland for use as set forth
in paragraph 1 above, Ag. Inc. shall also make its best effort, in good faith,
to obtain the availability of other farmland in the Calcasieu Parish area of
Louisiana which is suitable for the growing of sugar cane, which availability
shall be by lease or option to lease. Immediately upon so obtaining such
additional farm land, Ag. Inc. shall so notify the Mills and shall cooperate
with and assist the Mills in securing farmers capable of operating a sugar
cane plantation on said farm land. Ag. Inc. shall make its best effort to
obtain sources of finance for such farmers as are secured to farm the
additional farm land as is contemplated by this paragraph which financing
shall be in the form of crop loans, mortgages, lines of credit, or such other
credit financing as may be available and necessary for such farmers to
purchase farming equipment, plant sugar cane, chemicals, and all other things
necessary to operate a sugar cane plantation, and to pay for labor and
services in connection with such operation.
It is the declared purpose of the parties to this Agreement that it is
their intention, by the terms of this Agreement, to introduce the sugar cane
industry into the Calcasieu Parish area of Louisiana, and to expand same so
as to produce as much sugar cane as the Mills can economically and feasibly
process in their raw sugar factories as they now exist, or as they may be
expanded.
IV-11 -38-
<PAGE>
15.
Ag. Inc. does by these presents covenant and agree and does by these
presents fully obligate itself, and/or any other corporation, partnership or
other entity in which it has an interest (an Affiliate), to deliver or cause
to be delivered to the Mills all of the sugar cane planted, cultivated and
harvested by it or an Affiliate from the Farm and any and all other sugar cane
farmland operated by Ag. Inc. or an Affiliate lying and being situated west of
the Parishes of Acadia and Vermillion, and north of the Parishes of Lafayette
and St. Martin, less and except only such sugar cane as may be used for
planting sugar cane on farm land operated as a sugar cane plantation by Ag.
Inc. or an Affiliate, including their successor corporations, partnerships or
assigns, for a period beginning with the 1997 Louisiana sugar cane harvesting
season and continuing annually through and including the 2011 Louisiana
harvesting season.
16.
Ag. Inc. acknowledges and agrees that it is undertaking the duties,
responsibilities and obligations imposed upon it by this Agreement as an
independent contractor, that it is not an agent or subcontractor of the Mills,
nor any of them, and that it shall not hold itself out nor represent itself at
any time to be the agent or subcontractor of the Mills or any of them. Ag.
Inc. further convenants and agrees that it will hold the Mills, or any one of
them harmless and shall indemnify them against claims which may be made by any
person alleging an agency or subcontractor relationship between Ag. Inc. and
the Mills, including reasonable attorney fees. Notwithstanding the foregoing,
Ag. Inc. does hereby convenant and agree that it will purchase and carry (a)
general liability insurance in the minimum amount of One Million ($1,000,000)
Dollars protecting against claims for damages as a result of the negligence
of Ag. Inc., which policy of insurance shall name each of the Mills as an
additional insured, and (b) worker's compensation insurance in amounts
required by Louisiana law, and further, such insurance policies shall provide
that they shall not be canceled without notice to each of the Mills. The
parties agree that the insurance requirement provided by this paragraph is to
protect the interests and property rights of the Mills as such interests and
rights accrue under this agreement.
17.
The Mills bind and obligate themselves to furnish free of any charge to
Ag. Inc. at the Farm plant sugar cane in sufficient quantities and of good
quality so that Ag. Inc. may perform the duty and obligation to plant sugar
cane imposed upon it in paragraph 6(c) hereinabove. The Mills agree that they
will confer with each other so that each Mill will supply one-fourth (1/4) of
that quantity of plant sugar cane necessary to properly plant the one-thousand
acres on the Farm as provided herein. The Mills bind and obligate themselves
to deliver or cause said plant cane to be delivered to Ag. Inc. at the Farm in
an orderly and timely manner so that the planting contemplated may be
performed without undue delay to Ag. Inc.
18.
The Mills do by these presents bind and obligate themselves to accept and
purchase all of the sugar cane grown and harvested by Ag. Inc. and/or any
Affiliate from the Farm, and also from any farm land which produces sugar cane
planted with that sugar cane produced from the Farm during the 1996 Louisiana
IV-12 -39-
<PAGE>
sugar cane planting season, with such acceptance and purchase beginning with
the 1997 Louisiana sugar cane harvesting season and continuing annually
through and including the 2011 Louisiana sugar cane harvesting season.
The Mills further bind and obligate themselves to accept and purchase all of
the other harvested sugar cane as contemplated by paragraph 14 above (the
Extra Cane) unless the Mills or any one or more of them shall notify Ag. Inc.
and/or an Affiliate that they, or any one or more of them, will not accept and
purchase such Extra Cane beginning with any Louisiana sugar cane harvesting
season after the 2000 Louisiana sugar cane harvesting season provided, however,
that such notice of refusal shall be delivered to Ag. Inc. and/or an Affiliate
in writing at least twenty-six months prior to the beginning of the Louisiana
harvesting season during which such sugar cane will not be accepted by the
Mills or any one or more of them. Upon delivery of such timely notice, the
Mill or Mills giving such notice shall not be obligated to accept and purchase
the Extra Cane pursuant to the contents of the written notice. Upon receipt
of such notice, Ag. Inc. and/or an Affiliate to whom such notice shall have
been delivered shall thereafter be relieved of the duty and obligation of
delivering to the Mill or Mills from which it received such notice any of the
sugar cane (Excess Cane) for which it has received such notice. Ag. Inc.
shall then offer the Excess Cane to the other Mills which are parties to this
Agreement in equal proportions, and upon acceptance of the Excess Cane by the
remaining Mills, same shall be accepted under the same terms and conditions as
is the other cane accepted by the mills under this Agreement. The offer of
the Excess Cane shall be in writing and made within ten (10) days of receipt
of the notice of refusal. The remaining Mills shall confer and notify Ag.
Inc. within ten (10) days of receipt of notice of availability of the Excess
Cane which is not accepted by any of the Mills, then Ag. Inc. and/or an
Affiliate shall be free thereafter to contract with any other raw sugar
factory for the sale of such Excess Cane and none of the Mills shall
thereafter have any claim on the Excess Cane under this agreement. It is
understood and agreed that all Excess Cane shall first be offered to the Mills
which are parties to this Agreement before same is sold to other raw sugar
factories. Further, the Mills or any of them shall not be obligated to
accept and purchase any sugar cane contemplated by this Agreement should they
or any of them be prevented from doing so by cessation of business for any
reason, strike, mechanical breakdown, governmental regulation, civil disorder
or Act of God, provided, however, that should such an event prevent one or
more of the Mills from accepting and purchasing the sugar cane contemplated
herein, then the other Mills shall make their best effort to accept and
purchase the sugar cane pursuant to the terms and conditions set forth herein.
Ag. Inc. and the Mills agree that sugar cane not accepted because of the
occurrence of any listed event, except cessation of business, has been only
temporarily refused, and as soon as is possible after the end of the listed
event such sugar cane shall again be delivered to and accepted by the Mill
which has refused it. In the event of cessation of business, the refused
sugar cane shall be considered Excess Cane and shall be controlled and
delivered as such.
19.
Each of the Mills, individually and for their separate accounts, shall
accept and purchase annually the sugar cane contemplated by this agreement
under such terms and conditions as each of the Mills accepts and purchases
sugar cane during each specific year of this Agreement from other producers
of sugar cane who deliver sugar cane to the individual respective Mill
accepting and purchasing sugar cane during the same year. Each of the Mills
shall in their individual operations process the sugar cane into raw sugar in
the same manner as each of them process the other sugar cane delivered to
IV-13 -40-
<PAGE>
them. The Mill shall, individually and for their separate accounts, accept
and purchase sugar cane contemplated in this Agreement, and pursuant to its
terms and conditions, shall pay for same after deducting the mill's share in
accordance with the custom of the trade in the Louisiana sugar cane industry,
and shall process said sugar cane into raw sugar for sale to others, all in
accordance with the custom of the trade in the Louisiana raw sugar industry,
including but limited to the right to refuse to accept and purchase any sugar
cane, even after delivery, because of poor quality and/or unacceptable levels
of dextran or starch.
Nothing in this paragraph shall prohibit any of the Mills from
purchasing sugar cane at any price and pursuant to any terms and conditions
which it may deem appropriate, each Mill reserving unto itself the right to
establish a market price for sugar cane purchases at its raw sugar factory
which it in its sole business discretion deems necessary and appropriate.
Ag. Inc. understands that nothing in this paragraph or Agreement shall
entitle Ag. Inc. to membership in St. Mary, and that such membership is and
shall be limited to those persons or entities as are admitted to membership
pursuant to the Articles of Association and by-laws of St. Mary.
20.
All of the parties understand and agree that costs and expenses of
transporting the sugar cane to be cultivated and harvested by Ag. Inc. have
not been determined at the time of execution of this Agreement and accordingly
exact costs and expenses for such transportation cannot be agreed upon in this
Agreement. The parties agree that at the time such costs and expenses have
been determined, they will negotiate in good faith, so as to agree upon the
portion of the costs and expenses each of the parties shall bear and pay.
21.
And now unto these presents comes Karl G. Guidry, who declares that he
is a principal owner of Ag. Inc. and in order to further induce the Mills to
enter into this Agreement, he does by these presents personally guarantee the
performance of all of the duties and obligations of Ag. Inc. under this
agreement, and does hereby agree to be personally liable for any default by
Ag. Inc. of any terms and conditions of this Agreement.
22.
The Mills acknowledge and agree among themselves, and each with the
other, that they have entered into this Agreement with Ag. Inc. and each other
by entering into and each making a loan of money, each in an equal amount, to
Ag. Inc., and by so doing each has an equal and mutual interest in this
Agreement. The Mills agree that each is entitled to one-fourth (1/4) of all
of the benefits to be divided from this Agreement specifically including the
right to receive for processing into raw sugar one-fourth (1/4) of any and all
sugar cane which may be produced as a result of this Agreement. Accordingly,
the Mills agree that each Mill shall be entitled to receive one-fourth (1/4)
of the sugar cane produced as a result of this Agreement at its raw sugar
factory in order to process same into raw sugar, or it may direct its portion
of the sugar cane, or any part thereof, to such other raw sugar factory,
including one of the Mills, under such terms and conditions as it in its sole
discretion may deem advisable or appropriate.
IV-14 -41-
<PAGE>
23.
The Mills agree that they will confer in good faith as often as necessary
in order to make such decisions and/or selections as are contemplated and
required by this agreement.
24.
The parties to this Agreement, Ag. Inc., Patout, St. Mary, Sterling and
Raceland agree that any and all notices contemplated and/or required by this
Agreement shall be delivered to the appropriate party at the address provided
hereinafter, or at such other address as may be provided by a party after
notice is given pursuant to this Agreement, which addresses are as follows:
Ag. Inc.: Advance Agriculture, Inc.
P. O. Box 30568
Lafayette, Louisiana 70593
Patout: M. A. Patout & Son, Ltd.
3512 J. Patout Burns Road
Jeanerette, Louisiana 70544
St. Mary: St. Mary Sugar Cooperative
P. O. Box 269
Jeanerette, Louisiana 70544
Sterling: Sterling Sugars, Inc.
P. O. Box 572
Franklin, Louisiana 70538
Raceland: Raceland Sugars, Inc.
P. O. Box 159
Raceland, Louisiana 70394
Thus done and signed by the parties to this Agreement on the 2nd day of
May, 1995 at Franklin, Louisiana, in the presence of the undersigned Notary
and witnesses.
Witnesses Advanced Agriculture, Inc. (Ag. Inc.)
/s/ Amber Soprano By: /s/ Karl Guidry
------------------------ -----------------------------
/s/ Randall K. Romero M. A. Patout & Son, Ltd. (Patout)
-------------------------
By: /s/ William Patout, III
-----------------------------
St. Mary Sugar Cooperative, Inc.
By: /s/ Brannan Beyt
-----------------------------
Sterling Sugars, Inc. (Sterling)
By: /s/ Craig Caillier
-----------------------------
IV-15 -42-
<PAGE>
Raceland Sugars, Inc. (Raceland)
By: /s/ Daniels W. Duplantis
-----------------------------
/s/ Roni L. May
-----------------
Notary
EXHIBIT "A"
EXTRACT OF LEASE
Be it known that PRAIRIE LAND COMPANY, a Louisiana corporation, P. O.
Box 1048, (1135 Lakeshore Drive) LAKE CHARLES, LOUISIANA 70602 (Lessor) and
ADVANCED AGRICULTURE, INC. (Lessee) a Louisiana corporation, 119 Breckenridge
Loop, P. O. Box 30586, Lafayette, Louisiana 70593 have entered into an
agricultural lease bearing upon and affecting real property in Calcasieu
Parish, Louisiana described as follows:
Calcasieu Parish, Louisiana
TOWNSHIP 11 SOUTH, RANGE 8 WEST,
Section 21, northeast quarter, containing 152 acres more or less;
Section 30, northeast quarter, north half of the south half and
southwest quarter of the southwest quarter, containing
269.7 acres more or less;
Section 31, west half and the north half of the southeast
quarter containing 433.9 acres more or less;
Section 36, southwest quarter containing 143
acres more or less
TOWNSHIP 11 SOUTH, RANGE 9 WEST,
Section 24, south half of the north half and the east half
of the southeast quarter containing 190 acres
more or less.
TERM OF LEASE: Fifteen (15) years
The lease contains a renewal provision for an additional term of up to 15
years, together with other terms and conditions.
DATE OF LEASE: May 1, 1995
Date: May 1, 1995 Date May 1, 1995
LESSOR LESSEE
PRAIRIE LAND COMPANY ADVANCED AGRICULTURE, INC.
/s/ Carl G. Patton /s/ Karl G. Guidry
------------------------ ---------------------------
Carl G. Patton Karl G. Guidry
Vice President and General Manager Vice President
IV-16 -43-
<PAGE>
FARM LEASE
This lease is entered into this 1st day of May, 1995 between PRAIRIE LAND
COMPANY, a Louisiana corporation, P. O. Box 1048, Lake Charles, Louisiana
70602 (known herein as Lessor), and ADVANCED AGRICULTURE, INC., a Louisiana
corporation appearing herein through its authorized representative, whose
address is 119 Breckenridge Loop, P. O. Box 30586, Lafayette, La. 70593
(known herein as Lessee).
Lessor does by these presents lease, grant and hire unto lessee, to
occupy and use for planting, growing and harvesting sugarcane, the following
described property to wit:
Calcasieu Parish, Louisiana
TOWNSHIP 11 SOUTH, RANGE 8 WEST,
Section 21, northeast quarter, containing 152 acres more or less;
Section 30, northeast quarter, north half of the south half and
southwest quarter of the southwest quarter, containing
269.7 acres more or less;
Section 31, west half and the north half of the southeast
quarter containing 433.9 acres more or less;
Section 36, southwest quarter containing 143
acres more or less.
TOWNSHIP 11 SOUTH, RANGE 9 WEST,
Section 24, south half of the north half and the east half of the
southeast quarter containing 190 acres more or less.
I.
TERM
This lease shall be in effect for a period of fifteen (15) years,
beginning on the 1st day of May, 1995. Either party may request a renewal of
this lease for an additional term up to fifteen (15) years by giving the other
party written notice of such request during the 12th year of the original 15
year term. Such written notice shall be given by either party and delivered
in person or by certified or registered mail. Both parties agree hereby to
negotiate, in good faith, the terms and provisions of the lease for the
renewal term. If the parties cannot agree, there will be no renewal.
II.
RENTAL RATE
The consideration for this lease shall be a cash rent of $50.00 per
harvested cane acre due or payable on or before January 31st, after
harvesting. The payment shall be based upon acreage actually harvested for
seed or for delivery to the mill, and will be payable after delivery to the
mill. Acreage actually harvested shall mean those acres with growing cane
cut for seed or sent to the mills, and any growing cane acres that go through
the cultural practices in accordance with the custom of the trade in the
Louisiana sugarcane industry.
III.
RATE ADJUSTMENT
Beginning with the fifth year of this lease, the rental amount due
hereunder shall increase pursuant to the following terms and conditions, to
wit:
IV-17 -44-
<PAGE>
a) In the event that the acreage price of sugar received by Lessee for
any crop year during the term of this lease or any extension hereof shall
be above the price of Twenty-one ($21.00) Dollars per one hundred (100)
pounds of sugar ($21.00cwt), then the rent due for said crop year
(Increased Rent Year) shall increase by the sum of One ($1.00) Dollar per
acre for each ten (10) cents that the price of sugar exceeds $21cwt. For
example, at $21/cwt the rental shall be $50.00 per acre for that crop
year; at $21.30/cwt shall be $53.00 per acre for that crop year; at
$24.00/cwt the rental shall be $80.00 per acre that crop year.
b) It is agreed that for the Increased Rent Year, the base rental
required by paragraph II of this lease shall be paid by the date
specified herein, and the additional rental required under this
paragraph shall be paid within thirty (30) days after the average
price received by Lessee during the Increased Rent Year shall have been
established.
c) The increased rent required by this paragraph shall not be due and
payable, regardless of the price of sugar, if, during the Increased Rent
Year there shall have been a natural disaster of any kind which results
in a yield to Lessee, on average from the described properties, of less
than twenty (20) tons produced per acre of sugarcane harvested for
delivery to a raw sugar factory for processing into raw sugar, or there
is a recovery of sugar, on average from the described properties, of
less than four thousand (4,000) pounds of sugar per acre.
d) All calculations required by this paragraph shall be made in
accordance with the custom of the trade in the Louisiana sugar cane
industry.
IV.
PROPERTY RIGHTS
The lessee has all rights to use the described property, buildings and
roadways that may exist thereon for sugarcane production, except as specified
below. Lessee agrees to maintain the buildings and roads Lessee used during
the term of this lease: The following buildings and acres are excepted from
the lease:
V.
RIGHT OF ENTRY
The lessor reserves the right of himself, his agents, his employees, or
his assigns to enter the described properties at any time but Lessor's
presence will not unreasonably interfere with the Lessee's farm operations.
The lessor reserves the right to lease the described properties, or any
portion thereof, for mineral exploration or production and to grant rights of
way for roads, pipelines, power lines, etc. In the event there are any
damages to growing crops or to the land because of rights of way for roads,
pipelines, power lines, etc. or for any other reason, Lessee will be paid by
the party causing the damage, other than Lessor, for any damages to the crop
and for all costs and expenses necessary to return the described properties
to the condition of which it was before the damage occurred. In the event
that there are damages to anything other than growing crops, such as to the
actual land or any immovable property located on the premises that belong to
Lessor, any damages will be the property of and belong entirely to the Lessor.
IV-18 -45-
<PAGE>
VI.
TRANSFER OF FARM
If the Lessor should sell or otherwise transfer title to the described
properties, he will do so subject to the provisions of this lease.
VII.
HEIRS AND SUCCESSORS
The term of this lease shall be binding upon the heirs, executors,
administrators and successors of both Lessor and Lessee in like manner as
upon the original parties. It is contemplated by the parties that Lessee will
sublease the described properties. Prior written consent of the Lessor will
be required for any sublease or transfer of this lease, which consent will not
be unreasonably refused.
VIII.
RIGHT TO LEASE
The Lessor warrants that he has the right to lease the described
properties, and will defend the Lessee's possession against any and all
persons claiming possession or ownership through Lessor, at the Lessor's
expense. This lease is granted subject to all existing servitudes for
highways, railroads, pipelines, roads, drainage, power, utilities and
communications.
IX.
LAND USE
Except when mutually agreed otherwise, described properties suitable for
sugarcane production shall be used for that purpose. If the described
properties, or any portion thereof, are not planted with sugarcane and
cultivated in accordance with the customary practices of the Louisiana
sugarcane industry for more than two consecutive year, Lessor shall have the
option of terminating this lease.
The crop acreage planted shall be reported by the Lessee to the Lessor
in writing when planting is complete.
X.
GOOD HUSBANDRY
The Lessee will operate the farm in an efficient and husbandlike way,
will do the plowing, seeding, cultivating, application of pesticide and
harvesting in a manner that will conserve the Lessor's property. The Lessee
will control soil erosion as completely as practicable. Lessee will actively
apply an approved conservation plan on that land which has been determined to
be highly erodible prior to 1990 or two years after the Consolidated Farm
Services Agency has completed a soil survey for that land, whichever is later.
"there will be no conversion of wetlands for the production of a crop. The
Lessee will also turn under crop residue in keeping with good cultivating
procedures in accordance with the custom of the trade in the Louisiana
sugarcane industry. Lessee further agrees that all pesticides applications
will be made in compliance with the current Environmental Protection Agency
label and regulations. Pesticides, fuel, waste oil, other potentially toxic
substances will be handled in a reasonable manner to avoid concentrated areas
of residual soil contamination.
IV-19 -46-
<PAGE>
XI.
DAMAGE AND WASTE
Lessee will not commit waste on or damage to the described properties and
will prevent others from so doing, to the best of Lessee's ability.
XII.
IMPROVEMENTS
Lessee will not, without prior written consent of Lessor, (a) erect or
permit to be erected on the described properties any structure or building, or
(b) incur any expense to the Lessor for such purpose, or (c) add electrical
wiring, plumbing or heating to any buildings, and if consent is given, Lessee
will make such additions meet standards and requirements of power, insurance
companies, local ordinances and state statutes, if applicable, at Lessee's
expense.
XIII.
CONSERVATION STRUCTURES
Lessee will keep in good repair all open ditches, and inlets and outlets
of the drains, preserve all established water courses or ditches and refrain
from any operation or practice that will injure them in accordance with the
custom of the trade of the Louisiana sugarcane industry.
XIV.
NON-PARTNERSHIP
Each party agrees that this lease shall not be deemed to give rise to a
partnership relation, and neither party shall have authority to obligate the
other without written consent. Each party agrees that the other party shall
in no way be responsible for the debts of, or liabilities for, accidents or
damage caused by the other party in exercise of the rights herein granted.
XV.
RETURN OF PROPERTY
Lessee shall return the described property of Lessor at the termination
of this lease, in equal good order as received, the usual wear and tear
excepted, and Lessee shall have thirty (30) days from the termination of the
lease to remove his equipment and machinery.
XVI.
MOVABLE IMPROVEMENTS
Minor improvements of a temporary or removable nature which do not mar
the condition or appearance of the described properties and which serve the
cultivation of sugarcane may be made by the Lessee at Lessee's expense.
Lessee may, at any time this lease is in effect, or within thirty (30) days
after the termination of this lease, remove such improvements, provided the
Lessee leaves in good condition that part of the described property from which
they are removed.
IV-20 -47-
<PAGE>
XVII.
TERMINATION
The Lessee hereby agrees that the failure to pay rent in any one year
during the existence of this lease shall automatically render the lease null
and void and Lessee peaceably shall turn over and deliver possession of the
described property to Lessor without the necessity of any judicial proceeding.
XVIII.
REMOVAL OF ACREAGE
Lessor shall have the right to remove acreage from this agreement if the
acreage is needed for use for any commercial purpose other than for farming.
Lessee's prior written consent will be necessary if the acreage is to be
removed for use for other farming purposes.
Should the Lessor desire to remove acreage from this agreement and if
said acreage does not have growing, cultivated sugarcane, Lessor will have the
right to replace or substitute a like amount of cultivable acreage located
within a five mile radius of the acreage removed from this lease. It is not
a requirement of this lease that the substituted acreage be owned by the
Lessor. If Lessee does not want to farm this acreage, he may decline the
acreage. In such case, Lessor's right to replace substitute cultivable
acreage has been fulfilled.
If the Lessor desires to remove acreage from this lease agreement and
said acreage has growing, cultivated sugarcane, then said acreage will be
removed from this agreement upon the completion of the complete harvest of the
sugarcane planted. Should Lessor not desire to wait
for Lessee to harvest the
current year crop and future year stubble crops, then Lessor shall pay to
Lessee the market value of the crop.
XIX.
HOLD HARMLESS
This lease is made upon the express condition that Lessor shall be free
from all liabilities and claims for damages and/or suits for or by reason of
any injury or injuries to any persons or damage to property of any kind
whatsoever, whether the person or property of the Lessee, its agents or
employees, or the third person, from any cause or causes (including hazardous
material), whatsoever while in or upon the described properties or any part
thereof during the term of this lease, or any renewal thereof, or occasioned
by any occupancy or use of the described properties, or any activity by
Lessee in connection therewith, and Lessee hereby convenants and agrees to
indemnify and save harmless the Lessor from all losses, damages, liabilities,
charges, expenses, fines, penalties, attorney fees and costs on account of or
by reason of any such injuries, liabilities, claims, suits or losses however
occurring, or damages growing out of any activity by Lessee. This indemnity
shall inure, by stipulation pour autrui, to the benefit of agents, directors,
officers and employees of Lessor, and any one of them may exercise this right
of indemnity against Lessee independently of Lessor or of others.
"Hazardous Material" shall mean all materials or substances which have
been determined to be, or may be, hazardous to health or environment,
including, but not limited to, (a) solid or hazardous waste as defined in the
Resource Conservation and Recover Act or in any other applicable Federal,
State or local law, rule or regulations; (b) hazardous substances as defined
in the Comprehensive Environmental Response, Compensation and Liability Act,
as amended by the Superfund Amendments and Reauthorizations Act, or in any
other applicable Federal, State or local law, rule or regulation; (c)
IV-21 -48-
<PAGE>
gasoline, or another petroleum product or byproduct, or other hydrocarbon
derivative; (d) toxic substances regulated by the Toxic Substance Control Act
or by other applicable State, Federal or local laws, regulations or
ordinances; (e) insecticides, rodenticides and fungicides and other
substances regulated by the Federal insecticide, fungicide and rodenticide act
or by other applicable State, Federal or local laws, regulations or
ordinances; (f) asbestos; (g) radon. Reference to act, statute, regulation
or rule shall include amendments as that are made from time to time.
Lessee shall maintain public liability insurance which shall insure
against all such claims, which policy shall name Lessor as an additional
insured, and which policy shall provide that it shall not be canceled without
notice to Lessor. Lessee shall also maintain workers compensation insurance
in an amount required by law. Lessee shall provide Lessor with copies of the
aforesaid policies of insurance.
XX.
GOVERNMENTAL
In the event that Lessee shall be prohibited from operating any portion
of the described properties as a sugarcane plantation because of any
governmental rules or regulations; or in the event that such governmental
rules or regulations impose upon Lessee any requirements or impediments so as
to render the operation of any portion of the described properties as a
sugarcane plantation economically unfeasible, then in either of such events
Lessee shall have the right and option to cancel this lease as to that
portion of the described properties so affected, provided however, that in the
event that such governmental action shall reduce the remaining property not so
affected to an area of less than 500 acres, then Lessee shall have the right
and option to cancel this entire lease agreement.
XXI.
EMINENT DOMAIN
In the event any portion of the described property is taken from Lessee
under eminent domain proceedings, Lessee shall have no action against Lessor;
Lessee's sole action will be against entity seeking to enforce its rights of
eminent domain.
XXII.
OTHER ACTIVITIES
Lessee shall have no rights to hunting, fishing, trapping, raising
wildlife or livestock on the described property.
In witness whereof, the parties have signed this lease on the date first
above written.
WITNESSES LESSEE
PRAIRIE LAND COMPANY
/s/Virginia Crow /s/ Carl G. Patton
--------------------------- -------------------------
/s/ Gloria Gardner Carl G. Patton
--------------------------- Vice President and
General Manager
IV-22 -49-
<PAGE>
LESSOR
ADVANCED AGRICULTURE, INC.
/s/ Karl G. Guidry
--------------------------
Karl G. Guidry
Vice President
IV-23 -50-
<PAGE>
AMENDMENT TO AGREEMENT
This amendment to an agreement is entered into by and between the
following corporations:
Advanced Agriculture, Inc. (Ag. Inc.) a Louisiana corporation,
represented by Karl G. Guidry, its Secretary-Treasurer, duly authorized
and whose mailing address is P. O. Box 30568, Lafayette, Louisiana,
70593, and
M. A. Patout & Son, Ltd. (Patout) a Louisiana corporation, represented
by William S. Patout, III, its President, duly authorized, and whose
mailing address is 3512 J. Patout Burns Road, Jeanerette, Louisiana,
70544, and
Sterling Sugars, Inc. (Sterling) a Delaware corporation, represented
herein by Craig P. Caillier, its Senior Vice President and General
Manager, duly authorized, and whose mailing address is P. O. Box 572,
Franklin, Louisiana, 70538, and
St. Mary Sugar Cooperative, Inc. (St. Mary) a Louisiana cooperative
association, represented herein by Raphael E. Rodriguez, Jr., its
President, duly authorized, and whose mailing address is P. O. 269,
Jeanerette, Louisiana, 70544, and
Raceland Sugars, Inc., (Raceland) a Delaware corporation, represented
herein by Daniels W. Duplantis, it Executive Vice President and General
Manager, duly authorized, and whose mailing address is P. O. Box 159,
Raceland, Louisiana, 70394.
Ag. Inc. and Patout, Sterling, St. Mary, and Raceland (the Mills) entered
into an agreement on May 2, 1995, (the Agreement) whereby Ag. Inc. will
produce sugar cane in the Calcasieu Parish area of Louisiana and cause same
to be harvested and delivered to the Mills for processing into raw sugar, a
copy of which Agreement is page xx.
The parties to the Agreement now wish to amend the Agreement so as to
add thereto the following paragraph, to wit:
25.
Ag. Inc. shall operate the Farm, and any other farmland under its
direction in compliance with all federal, state, county and local laws, and
regulations enacted pursuant thereto, to include without limitation the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
42 U.S.C. 9601 et seq; The Resource Conservation and Recovery Act (RCRA), 42
U.S.C. 6901 et seq; The Federal Water Pollution Control Act, 22 U.S.C. 1251
et seq; The Clean Air Act 42 U.S.C. 7401 et seq; The Toxic Substances Control
Act, 59 U.S.C. 2601-2629; The Safe Drinking Water Act, 42 U.S.C. 300f-300j;
The Occupational Safety and Health Act (OSHA) 29 U.S.C. 651 et seq; The
Equal Employment Opportunity Act 42 U.S.C. 2000e et seq; as the same have
been amended from time to time, and any similar state, county and local laws
and ordinances, and the regulations implementing such statutes. Ag. Inc.
further convenants and agrees that it will hold the Mills or any one of them
harmless and shall indemnify them against any and all damages, losses,
obligations, liabilities of any nature (whether accrued, absolute, contingent,
matured or unmatured, known or unknown, or otherwise) judgments, penalties,
interests, encumbrances, and reasonable costs and expenses (including, without
IV-24 -51-
<PAGE>
limitation, reasonable attorney's fees and disbursements) suffered, sustained,
incurred or required to be paid because of any violation by Ag. Inc. of its
obligations pursuant to this paragraph. The parties agree that all other
terms and conditions of the Agreement shall remain in full force and effect
and that this amendment shall include in the Agreement the foregoing
paragraph, only, otherwise, the Agreement shall be unchanged.
Thus done and signed by the parties to this Amendment of Agreement on the
31 day of May, 1995 at Franklin, Louisiana, in the presence of the undersigned
Notary and witnesses.
Witnesses Advanced Agriculture, Inc. (Ag. Inc.)
/s/ Randall K. Romero By: /s/ Karl G. Guidry
--------------------------- -----------------------------------
/s/ Merl D. Burley
--------------------------- M. A. Patout & Son, Ltd. (Patout)
By: /s/ William S. Patout, III
-----------------------------------
St. Mary Sugar Cooperative, Inc.
By: /s/ Raphael Rodriguez, Jr.
-----------------------------------
Sterling Sugars, Inc. (Sterling)
By: /s/ Craig P. Caillier
-----------------------------------
Raceland Sugars, Inc. (Raceland)
By: /s/ Daniels W. Duplantis
-----------------------------------
/s/ Roni L. May
----------------
Notary
IV-25 -52-
<PAGE>
Sterling Sugars, Inc.
P. O. Box 572
Franklin, La. 70538
February 14, 1996
Mr. Daniel Gonsoulin
Gonsoulin Farms
2513 E. Admiral Doyle
New Iberia, La. 70560
Dear Daniel:
By mutual agreement, the two agricultural leases dated January 1, 1986
expired December 31, 1995 are extended for an additional five years with a
five year renewal option by written agreement of both parties by December 31,
1999, one year before expiration of the first five year period. All terms
remain the same, except Section 6 to be revised as follows:
All rental payments shall be 1/6th of gross income after the
traditional Louisiana standard mill/grower split, payable to
Sterling Sugars, Inc.
Other terms of Section 6 will remain the same as outlined in the original
lease agreements dated January 1, 1986.
This agreement is open to review and revision only by mutual consent.
AGREED /s/ Craig P. Caillier DATE 3/22/96
---------------------------- ----------------
AGREED /s/ Daniel Gonsoulin DATE 3/22/96
----------------------------- ----------------
IV-26 -53-
<PAGE>
BY - LAWS
OF
STERLING SUGARS, INC.
a Delaware Corporation
AS AMENDED
February 2, 1996
Offices
1. The principal office shall be in the city of Wilmington, County of New
Castle, State of Delaware, and the name of the resident agent in charge
thereof is the Corporation Trust Company.
2. The Corporation may also have offices in the City of New Orleans, State
of Louisiana, and at Franklin, St. Mary Parish, Louisiana, and also offices
at such other places as the board of directors may from time to time
appoint or the business of the corporation may require.
Seal
3. The Corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
Stockholders' Meetings
4. All meetings of the stockholders for the election of directors shall be
held at the office of the corporation in Franklin, Louisiana. Special
meetings of stockholders for any other purpose may be held at such place and
time as shall be stated in the notice of the meeting.
5. An annual meeting of the stockholders for the election of directors
shall be held at the office of the corporation in Franklin, Louisiana.
Special meetings of stockholders for any other purpose may be held at such
place and time as shall be stated in the notice of the meeting.
6. The holders of a majority of the stock issued and outstanding, and
entitled to vote thereat, present in person, or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute, by the certificate of incorporation or by these by-laws. If,
however, such quorum shall not be present or represented at any meeting of
the stockholders, the stockholders entitled to vote thereat, present in
person, or by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. At such adjourned meeting at which a quorum shall be
present any business may be transacted which might have been transacted at
the meeting as originally notified.
IV-27 -54-
<PAGE>
7. At any meeting of the stockholders every stockholder having the right to
vote shall be entitled to vote in person, or by proxy appointed by an
instrument in writing subscribed by such stockholder and bearing a date not
more than three years prior to said meeting, unless said instrument provides
for a longer period. Each stockholder shall have one vote for each share of
stock having voting power, registered in his name on the books of the
corporation, and except where the transfer books of the corporation shall
have been closed or a date shall have been fixed as a record date for the
determination of its stockholders entitled to vote, no share of stock shall
be voted on at any election of directors which shall have been transferred
on the books of the corporation within twenty days next preceding such
election of directors.
8. Written notice of the annual meeting shall be mailed to each stockholder
entitled to vote thereat at such address as appears on the stock ledger of
the corporation at least ten (10) days prior to the meeting.
9. A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetic order, with the residence of each and the
number of voting shares held by each, shall be prepared by the secretary
and filed in the office where the election is to be held, at least ten days
before every election is to be held, at least ten days before every election
, and shall at all times, during the usual hours of business and during the
whole time of said election, be open to the examination of any stockholder.
10. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the president and
shall be called by the president or secretary at the request in writing of
a majority of the board of directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding, and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.
11. Business transacted at all special meetings shall be confined to the
objects stated in the call.
12. Written notice of a special meeting of stockholders, stating the time
and place and object thereof, shall be mailed, postage prepaid at least ten
(10) days before such meeting, to each stockholder entitled to vote thereat
at such address as appears on the books of the corporation.
Directors
13. The number of directors which shall constitute the whole board shall
be seven (7). Directors need not be stockholders. They shall be elected
at the annual meeting of the stockholders, and each director shall be
elected to serve until his successor shall be elected and shall qualify.
14. The directors may hold their meetings and keep the books of the
corporation, except the original or duplicate stock ledger, outside of
Delaware, at the office of the corporation in the City of New Orleans,
La., or at such other places as they may from time to time determine.
15. If the office of any director or directors becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office,
or otherwise, a majority of the remaining directors, through less that a
quorum, shall choose a successor or successors, who shall hold office for
IV-28 -55-
<PAGE>
the unexpired term in respect to which such vacancy occurred or until the
next election of directors.
16. The property and business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
Committee of Directors
17. The board of directors may, by resolution or resolutions passed by a
majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation,
which, to the extent provided in said resolution or resolutions, shall have
and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, and may have power to
authorize the seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors.
18. The committees shall keep regular minutes of their proceedings and
report the same to the board when required.
Compensation of Directors
19. Directors, as such, shall not receive any stated salary for their
services, but by resolution of the board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or
special meeting of the board, provided that nothing herein contained shall
be construed to preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
20. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Meetings of the Board
21. The first meeting of each newly elected board shall be held at such
time and place either within or without the State of Delaware as shall be
fixed by the vote of the stockholders at the annual meeting, and no notice
of such meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting; provided a majority of the whole board
shall be present; or they may meet at such place and time as shall be fixed
by the consent in writing of all the directors.
22. Regular meeting of the board may be held without notice at such time
and place either within or within the State of Delaware as shall from time
to time be determined by the board.
23. Special meetings of the board may be called by the president on
one(1) day's notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of two directors.
IV-29 -56-
<PAGE>
24. At all meetings of the board not less than four (4) directors shall be
necessary and sufficient to constitute a quorum for the transaction of
business and the act of a majority of the directors present an any meeting
at which there is a quorum shall be the act of the board of directors,
except as may be otherwise specifically provided by statute or by the
certificate of incorporation or by these by-laws.
Officers
25. The officers of the corporation shall be chosen by the directors and
shall be a chairman of the board, a president, a vice president, a
secretary, a treasurer and a general manager. The board of directors may
also choose additional vice presidents, assistant secretaries and assistant
treasurers. The chairman of the board may hold at the same time any other
office. The secretary and treasurer may be the same person, or the vice
president may hold at the same time the office of secretary or treasurer.
The office of general manager may be combined with any other office.
26. The board of directors, at its first meeting after each annual meeting
of stockholders shall choose a chairman of the board and a president from
its members, and one or more vice presidents, a secretary and a treasurer,
none of whom need be a member of the board.
27. The board may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to
time by the board.
28. The salaries of all officers and agents of the corporation shall be
fixed by the board of directors.
29. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the whole board of directors. If the
office of any officer becomes vacant for any reason, the vacancy shall be
filled by the board of directors.
The Chairman of the Board
30A. The chairman of the board shall president at all meetings of all
stockholders and directors, shall be ex officio a member of all standing
committees, and shall perform such other duties as may be designated by the
board of directors.
The President
30. The president shall be the chief executive officer of the corporation,
he shall be ex officio a member of all standing committees and shall see
that all orders and resolutions of the board are carried into effect.
31. He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the board of directors to some other
officer or agent of the corporation.
IV-30 -57-
<PAGE>
Vice President
32. The vice presidents in the order of their seniority shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties as the board of
directors shall prescribe.
The Secretary and Assistant Secretaries
33. The secretary shall attend all sessions of the board and all meetings
of the stockholders and record all votes and the minutes of all proceedings
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board
of directors, and shall perform such other duties as may be prescribed by
the board of directors or president, under whose supervision he shall be.
He shall keep in safe custody the seal of the corporation and, when
authorized by the board, affix the same to any instrument requiring it and,
when so affixed, it shall be attested by his signature or by the signature
of the treasurer or an assistant secretary.
34. The assistant secretaries in order of their seniority shall in the
absence or disability of the secretary, perform the duties and exercise the
powers of the secretary and shall perform such other duties as the board of
directors shall prescribe.
The Treasurer and Assistant Treasurers
35. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors.
36. He shall disburse the funds of the corporation as may be ordered by
the board, taking proper vouchers for such disbursements, and shall render
to the president and directors, at the regular meetings of the board, or
whenever they may require it, an account of all his transactions as
treasurer and of the financial condition of the corporation.
37. If required by the board of directors, he shall give the corporation
a bond (which shall be renewed every six years) in such sum and with such
surety or sureties as shall be satisfactory to the board for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
38. The assistant treasurers in the order of their seniority shall, in the
absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer and shall perform such other duties as the board of
directors shall prescribe.
The General Manager
IV-31 -58-
<PAGE>
39. The general manager shall be the operating officer, having direct
supervision and control of all of the properties of the corporation and
direct management of same. He shall have the power to employ and discharge
all workmen for the corporation and shall generally supervise and manage
the properties and operating business of the corporation.
Certificates of Stock
40. The certificates of stock of the corporation shall be numbered and
shall be entered in the books of the corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed
by the president or a vice president and the secretary or an assistant
secretary. If the corporation has a transfer agent or an assistant
transfer agent or a transfer clerk acting on its behalf and a registrar,
the signature of any such officer may be facsimile.
Transfer of Stock
41. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Closing of Transfer Books
42. The board of directors shall have power to close the stock transfer
books of the corporation for a period not exceeding fifty days preceding
the date of any meeting of stockholders or the date for payment of any
dividend or the date for the allotment of rights or the date when any
change or conversation or exchange of capital stock shall go into effect
or for a period of not exceeding fifty days in connection with obtaining
the consent of stockholders for any purpose, provided, however, that in
lieu of closing the stock transfer books as aforesaid, the board of
directors may fix in advance a date, not exceeding fifty days preceding
the date of any meeting of stockholders or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, or
a date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at,
any such meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange
of capital stock, or to give such consent, and in such case such
stockholders, and only such stockholders as shall stockholders of record
on the date so fixed, shall be entitled to such notice of, and to vote at,
such meeting and any adjournment thereof, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case
may be, notwithstanding any transfer of any stock on the books of the
corporation after such record date fixed as aforesaid.
Registered Stockholders
43. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof, and,
IV-32 -59-
<PAGE>
accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise
provided by the laws of Delaware.
Lost Certificates
44. The board of directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates heretofore issued
by the corporation alleged to have been lost or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of
stock to be lost, and the board of directors, when authorizing such issue
of a new certificate or certificates, may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative,
to advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the corporation.
45. All checks or demands for money and notes of the corporation shall be
signed by such officer or officers or such other persons as the board of
directors may from time to time designate.
Fiscal Year
46. The fiscal year shall begin the first day of February in each year,
and shall end on the 31st day of January in each year.
Dividends
47. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital
stock.
48. Before payment of any dividend there may be set aside out of any funds
of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as
a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may abolish any such reserve in the manner
in which it was created.
Directors' Annual Statement
49. The board of directors shall present at each annual meeting and when
called for by vote of the stockholders at any special meeting of the
stockholders, a full and clear statement of the business and condition of
the corporation.
Notices
50. Whenever under the provisions of these by-laws notice is required to
IV-33 -60-
<PAGE>
be given to any director of stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, by
notice, but such notice may be given in writing, by mail, by depositing the
same in the post office or letter box, in a postpaid sealed wrapper,
addressed to such director or stockholder at such address as appears on the
books of the corporation, or, in default of other address, to such director
or stockholder at the General Post Office in the City of Wilmington,
Delaware, and such notice shall be deemed to be given at the time when the
same shall be thus mailed.
51. Any notice required to be given under these by laws may be waived in
writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein.
Amendment
52. These by-laws may be altered or repealed by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat,
at any regular meeting of the stockholders or at any special meeting of the
stockholders if notice of the proposed alteration or repeal be contained in
the notice of such special meeting, or by the affirmative vote of a
majority of the board of directors at any regular meeting of the board or
at any special meeting of the board if notice of the proposed alteration or
repeal be contained in the notice of such special meeting; provided,
however, that no change of the time or place for the election of directors
shall be made within sixty days next before the day on which such election
is to be held, and that in case of any change of such time or place, notice
thereof shall be given to each stockholder in person or by letter mailed to
his last known post office address at least twenty days before the election
is held.
IV-34 -61-
<PAGE>
STERLING SUGARS, INC.
COMPUTATION OF EARNINGS PER SHARE (1)
Year Ended January 31,
1996 1995 1994
----------------------------------
Primary
Earnings (loss)
Earnings (loss) before cumulative
effect of change in accounting
principle $ 2,119,609 $ 742,383 $(1,183,319)
Cumulative effect of change in
accounting principle
Earnings (loss) applicable to
common stock - - 200,000
----------- ----------- -----------
$ 2,119,609 $ 742,383 $( 983,319)
====================================
Shares
Weighted average number of common
shares outstanding 2,500,000 2,450,000 2,450,000
Assuming exercise of option to purchase
50,000 shares of treasury stock - 10,685 -
---------- ---------- -----------
Weighted average number of common shares
outstanding as adjusted 2,500,000 2,460,685 2,450,000
=========== ========== ===========
Primary earnings (loss) per common share
Before cumulative effect of change in
accounting principle $.85 $.30 $(.48)
Cumulative effect of change in accounting
principle - - .08
------- -------- -----------
$.85 $.30 $(.40)
======= ======== ===========
(1) See Note 9 of the Notes to Financial Statements
IV-35 -62-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 134052
<SECURITIES> 0
<RECEIVABLES> 1717048
<ALLOWANCES> 0
<INVENTORY> 12359866
<CURRENT-ASSETS> 14794624
<PP&E> 32374337
<DEPRECIATION> 20393879
<TOTAL-ASSETS> 27969569
<CURRENT-LIABILITIES> 9625580
<BONDS> 4017469
<COMMON> 2500000
0
0
<OTHER-SE> 11128520
<TOTAL-LIABILITY-AND-EQUITY> 27969569
<SALES> 28495085
<TOTAL-REVENUES> 29644559
<CGS> 24952455
<TOTAL-COSTS> 26429931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 522667
<INCOME-PRETAX> 3214628
<INCOME-TAX> 1095019
<INCOME-CONTINUING> 2119609
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2119609
<EPS-PRIMARY> .85
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