SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________________to__________________
COMMISSION FILE NUMBER 0-1287
STERLING SUGARS, INC.
____________________________________________________________________
Exact name of registrant as specified in its charter
Delaware 72-0327950
_______________________________ ______________________________
State or other jurisdiction of IRS employer identification
incorporation or organization number
P. O. Box 572, Franklin, La. 70538
____________________________________________________________________
Address of principal executive offices Zip Code
Registrant's telephone number including area code 318 828 0620
Not Applicable
____________________________________________________________________
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirments for the past 90 days.
YES X NO
There were 2,500,000 common shares outstanding at November 30, 1998.
Total number of pages 12
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STERLING SUGARS, INC.
I N D E X
PAGE
NUMBER
PART I: FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Condensed balance sheets October 31, 1998
(unaudited) and July 31, 1998 I-1
Statements of earnings and retained earnings
Three months ended October 31, 1998
(unaudited) and 1997 (Restated) I-2
Statements of cash flows
Three months ended October 31, 1998
(unaudited) and 1997 (Restated) I-3
Notes to condensed financial statements
Three months ended October 31, 1998 and 1997 I-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-6
PART II. OTHER INFORMATION:
ITEM 5. OTHER INFORMATION II-1
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K II-1
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STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
October 31, July 31,
1998 1998
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 173,887 $ 164,152
Accounts receivable 5,785,466 376,308
Inventories 4,304,963 655,001
Expenditures for future crops - 330,760
Deferred income taxes 543,000 543,000
Other current assets 189,898 720,664
------------- -------------
TOTAL CURRENT ASSETS $ 10,997,214 $ 2,789,885
------------- -------------
Property, plant and equipment - net $ 24,192,800 $ 24,312,667
------------- -------------
Expenditures for future crops $ 1,263,373 $ 1,208,174
------------- -------------
Notes receivable - net of allowance $ 481,246 $ 497,460
------------- -------------
Other assets $ 87,583 $ 34,002
------------- -------------
$ 37,022,216 $ 28,842,188
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,544,610 $ 2,066,843
Due cane growers 2,355,248 -
Short-term debt 7,606,547 1,135,000
------------ -------------
TOTAL CURRENT LIABILITIES $ 11,506,405 $ 3,201,843
------------- -------------
Long-term debt $ 8,753,835 $ 8,777,263
------------- -------------
Deferred income taxes $ 1,183,900 $ 1,183,900
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital (Note C) 40,455 40,455
Retained earnings 13,037,621 13,138,727
------------- -------------
$ 15,578,076 $ 15,679,182
------------- -------------
$ 37,022,216 $ 28,842,188
============= ===========
NOTE: The balance sheet at July 31, 1998 has been taken from the
audited financial statements at that date, and condensed.
See notes to condensed financial statements
I-1 -3-
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STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED OCTOBER 31
-----------------------------
1998 1997
------ ------
(Unaudited) (Restated)
(Note B)
REVENUES:
Sugar and molasses sales $ 7,461,246 $ 9,935,474
Interest earned 1,929 994
Mineral leases and royalties 21,314 46,724
Loss on sale of depreciable assets - (1,123)
Other 433,277 509,802
------------ ------------
$ 7,917,766 $10,491,871
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 7,655,049 $ 9,595,917
General and administrative 165,393 184,890
Interest expense 260,398 290,630
------------ ------------
$ 8,080,840 $10,071,437
------------ ------------
NET EARNINGS (LOSS) BEFORE INCOME TAXES $ (163,074) $ 420,434
INCOME TAX EXPENSE (CREDIT) ( 61,968) 159,765
------------ ------------
NET EARNINGS (LOSS) $ (101,106) $ 260,669
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,138,727 11,217,274
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $13,037,621 $11,477,943
============ ============
NET EARNINGS (LOSS) PER SHARE $ (.04) $ .10
============ ============
See notes to condensed financial statements
I-2 -4-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31
-----------------------------
1998 1997
------ ------
(Unaudited) (Restated)
(Note B)
OPERATING ACTIVITIES:
Net earnings (Loss) $( 101,106) $ 260,669
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation 523,570 875,497
Loss on sale of depreciable assets - 1,123
Changes in operating assets and liabilities:
Increase in accounts receivable (5,409,158) (2,838,516)
Decrease in notes receivable 16,214 18,442
Increase in inventories (3,649,962) (6,481,837)
Increase (decrease) in other current assets 806,327 ( 53,946)
Decrease in expenditures for future crops - 1,200,287
Increase in accounts payable
and accrued expenses 1,833,015 3,440,662
Other items - net (53,581) -
------------ ------------
Net cash provided by operating activities $(6,034,681) $(3,577,619)
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $( 403,703) $(1,966,043)
Proceeds from sale of depreciable assets - 299
----------- ------------
Net cash used in investing activities $( 403,703) $(1,965,744)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term debt $ 8,217,047 $ 5,326,000
Payments on short-term debt (1,745,500) ( 431,000)
Proceeds from long-term debt - 274,974
Payments on long-term debt ( 23,428) ( 48,558)
------------ ------------
Net cash provided by (used in) financing
activities $ 6,448,119 $ 5,121,416)
------------ ------------
Increase (decrease) in cash and temporary
investments $ 9,735 $( 421,947)
Cash and temporary investments at the
beginning of the period 164,152 302,616
------------ ------------
Cash and temporary investments at the
end of the period $ 173,887 $( 119,331)
============ ============
Continued
See notes to condensed financial statements
I-3 -5-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(CONTINUED)
THREE MONTHS ENDED OCTOBER 31
------------------------------
1998 1997
-------- ---------
(Unaudited) (Restated)
(Note B)
Supplemental information:
Interest paid $ 174,759 $ 215,759
=========== ===========
Income taxes paid $ - $ -
=========== ===========
I-4 -6-
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997
(UNAUDITED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheets as of October 31, 1998, the
statements of earnings and retained earnings for the three
months ending October 31, 1998 and 1997, and the
condensed statements of cash flows for the three month periods
then ended have been prepared by the Company, without audit. In
the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and
cash flows at October 31, 1998 and for all periods presented
have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. It is suggested that these condensed financial
statements be read in conjunction with the July, 1998 annual
report to stockholders. The results of operations for the period
ending October 31, 1998 are not necessarily indicative of the
operating results expected for the full year.
B. CHANGE OF FISCAL YEAR
The Company changed its fiscal year from January 31 to July 31 of
each year and was audited for the six month period
ending July 31, 1998. In conjunction with the audit, a Form 10K
was filed with the Securities and Exchange Commission on October
30, 1998.
In past years the Company deferred sales and costs related
to the coming grinding season for the first three quarters of the
fiscal year in order to properly match revenues and expenses.
With the change in the fiscal year, these deferrals are no longer
necessary.
To provide comparable financial statements for the periods
ending October 31, 1998 and 1997, the Statement of earnings and
retained earnings and the Statement of cash flows for the previous
year have been restated.
I-5 -7-
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STERLING SUGARS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
General Information:
The Company began its harvesting and grinding season on October
1, 1998 and had ground 288,028 tons of sugarcane by October 31, 1998.
This tonnage yielded 24,684 tons of raw sugar or 171.4 pounds of raw
sugar per ton of sugarcane. Last season, the Company had ground
282,864 tons of sugarcane which produced 28,806 tons of raw sugar or
203.7 pounds of raw sugar per ton of sugarcane. Unseasonable warm
weather is a contributing factor to the reduction of sugar yield this
season. With higher than average temperatures, the cane continues to
grow using sugar in the process. The lower sugar yields may be offset
somewhat by higher yields of sugarcane per acre.
The Company ground a total of 899,988 tons of sugarcane last year.
This year's projected tonnage for grinding is estimated at between
1,000,000 and 1,050,000 tons or an increase of 100,000 to 150,000 tons
over last year. The increased volume should partially offset the lower
sugar yield in terms of profit and loss.
Although a loss of $101,106 is shown for the three months ended
October 31, 1998, the Company does not anticipate a loss for the year
ended July 31, 1999 and accordingly a loss provision has not been
recorded.
The raw sugar price has remained steady being approximately the
same as the previous year. The molasses price is down from $57.50 per
ton last year to $37.50 per ton this year due to the lack of demand
principally in the Far East. However, molasses is only about 3 percent
of the Company's sales.
Sugar and Molasses Sales:
Sugar and molasses sales for the three months ended October 31,
1998 and 1997 were as follows:
1998 1997
------ ------
Raw sugar sales $ 7,366,904 $ 9,673,470
Molasses sales 94,342 131,002
------------ -------------
$ 7,461,246 $ 9,804,472
============ =============
As of October 31, 1998, the Company had shipped 16,700 tons of
raw sugar compared to 22,121 tons shipped as of October 31, 1997 which
resulted in lower sales for the current period.
Molasses production was up slightly at 6.00 gallons per ton of
sugarcane ground compared to 5.86 gallons per ton last year.
I-6 -8-
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Interest Earned:
Interest earned was $1,929 for the three months ending October 31,
1998 compared to $994 for the same period last year.
Mineral Leases and Royalties:
Mineral leases and royalties were $21,314 for the three months
ended October 31, 1998 compared to $46,724 for the three months ended
October 31, 1997. There were no new oil and gas leases granted for
the three month period ended October 31, 1998. The Company currently
has five leases outstanding. The proceeds from these leases are
amortized over the life of the lease. Lease income was $18,974 and
royalties were $2,340 for the three month period ended October 31, 1998.
Loss on the Sale of Depreciable Assets:
The Company recognized a loss on the sale of obsolete machinery
and equipment for the three month period ending October 31, 1997 of
$1,123. No gain or loss was recognized for the three months ended
October 31, 1998.
Other Revenues:
Other revenues consist mainly of miscellaneous income and cane
land rentals. Cane land rentals for the three months ended October 31,
1998 were $354,870 compared to $440,371 for the same period in the
prior year. The reduced rental income is a direct result of the lower
yields of sugar per ton of sugarcane on those Company owned lands
leased to farmers.
Cost of Products Sold:
Cost of products sold decreased to $7,655,049 for the three month
period ending October 31, 1998 from $9,595,917 for the three months
ended October 31, 1997. Costs relating to sales are charged to cost of
products sold. Accordingly, costs have decreased relative to the lower
sales for the current period.
General and Administrative Expenses:
General and administrative expenses were $165,393 for the current
period and $184,890 for the same period last year. The reduction in
expense is primarily due to the accrual of pension plan expense for the
period ended October 31, 1997. Pension plan expense for this year was
accrued and expensed for the six month period ended July 31, 1998.
I-7 -9-
<Page 10>
Interest Expense:
Interest expense decreased to $260,398 for the three months ended
October 31, 1998 from $290,630 for the three months ended October 31,
1997. Short-term debt outstanding was $7,606,547 on October 31, 1998
and $6,000,000 on October 31, 1997. The reduction in interest costs
is a result of lower short-term interest rates (7.00% on October 31,
1998 and 8.50% on October 31, 1997) and a reduction in long-term debt.
Income Taxes:
The income tax expense (credit) for the three month periods
ending October 31, 1998 and 1997 were recorded at the statutory rate of
38 percent which reflects the 34 percent federal corporate rate plus 4
percent state income taxes.
Liquidity and Capital Resources:
At October 31, 1998, the Company had negative working capital of
$509,191 compared to negative working capital of $411,958 at October
31, 1997. Working capital ratios were .96:1 and .87:1 respectively.
The negative working capital results from the change in fiscal year and
management expects working capital to be positive for the two remaining
quarters and the year ended July 31, 1999.
Typically, the Company begins short-term borrowing during the idle
season to finance company operations and capital additions. At July 31,
1998, short-term debt outstanding was $1,135,000 and at September 30,
1998 short-term debt had increased to $2,800,000. On October 31, 1998,
short-term debt had increased to $7,606,547 and at November 30, 1998
this amount had decreased to $5,676,948. The short-term interest rate
had also declined from 7.00% on October 31, 1998 to 6.75% on November
30, 1998. The Company has a $9,000,000 line of credit with a bank.
I-8 -10-
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PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K
On August 25, 1998, the Company filed Form 8K
notifying the Securities and Exchange Commission
that the Company had changed its fiscal year from
January 31 to July 31. The Form 8K is incorporated
herein by reference.
II-1 -11-
<Page 12>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
STERLING SUGARS, INC.
---------------------
(REGISTRANT)
DATE December 14, 1998 By /s/ Craig P. Caillier
--------------------------- ------------------------
CRAIG P. CAILLIER
PRESIDENT AND CEO
DATE December 14, 1998 By /s/ Stanley H. Pipes
---------------------------- -------------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -12-
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<ALLOWANCES> 0
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<PP&E> 24192800
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<COMMON> 2500000
0
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<OTHER-SE> 13078076
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<CGS> 7655049
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<INCOME-PRETAX> (163074)
<INCOME-TAX> ( 61968)
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