<PAGE>
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 April 30, 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 May 29, 1998.
Total number of pages 13
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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 April 30, 1998
(unaudited) and January 31, 1998 I-1
Statements of earnings and retained earnings
Three months ended April 30, 1998 and 1997
(unaudited) I-2
Statements of cash flows
Three months ended April 30, 1998 and 1997 I-3
(unaudited)
Notes to condensed financial statements
Three months ended April 30, 1998 and 1997 I-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-7
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K II-1
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STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
April 30, January 31,
1998 1998
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $(1,681,867) $ 210,723
Accounts receivable 4,983,533 2,609,757
Inventories 2,463,507 13,636,301
Expenditures for future crops (Note B) 1,528,243 58,440
Deferred income taxes 253,400 253,400
Other current assets 248,059 287,751
------------- -------------
TOTAL CURRENT ASSETS $ 7,794,875 $ 17,056,372
------------- -------------
Property, plant and equipment - net $22,880,164 $ 22,710,357
------------- -------------
Expenditures for future crops $ 999,994 $ 999,994
------------- -------------
Notes receivable - net of allowance $ 523,704 $ 571,595
------------- -------------
Deferred loan acquisiton costs $ 48,006 $ 51,098
------------- -------------
$32,246,743 $ 41,389,416
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 3,569,600 $ 7,581,335
Short-term debt 1,301,000 6,776,000
------------- -------------
TOTAL CURRENT LIABILITIES $ 4,870,600 $ 14,357,335
------------- -------------
Long-term debt $ 9,173,676 $ 9,160,422
------------- -------------
Deferred income taxes $ 1,366,600 $ 1,366,600
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital (Note C) 40,455 40,455
Retained earnings 14,295,412 13,964,604
------------- -------------
$ 16,835,867 $ 16,505,059
------------- -------------
$ 32,246,743 $ 41,389,416
============= =============
NOTE: The balance sheet at January 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 APRIL 30
---------------------------
1998 1997
---- ----
REVENUES:
Sugar and molasses sales $ 12,238,562 $10,103,402
Interest earned 982 1,181
Mineral leases and royalties 31,237 65,724
Gain on sale of depreciable assets - (45,005)
Other 13,967 41,046
------------ ------------
$ 12,284,748 $10,166,348
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 11,288,871 $ 9,205,641
General and administrative 181,749 179,336
Interest expense 280,567 245,761
------------ ------------
$ 11,751,187 $ 9,630,738
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 533,561 $ 535,610
INCOME TAXES 202,753 203,532
------------ ------------
NET EARNINGS $ 330,808 $ 332,078
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,964,604 13,125,035
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $ 14,295,412 $13,457,113
============ ============
NET EARNINGS PER SHARE $ .13 $ .13
============ ============
See notes to condensed financial statements
I-2 -4-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED APRIL 30
---------------------------
1998 1997
---- ----
OPERATING ACTIVITIES:
Net earnings $ 330,808 $ 332,078
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Amortization of loan costs 3,092 3,091
Depreciation 530,125 450,000
Loss on sale of depreciable assets - 45,005
Changes in operating assets and liabilities:
Increase in accounts receivable (2,373,776) (1,734,590)
Decrease (Increase) in notes receivable 47,891 ( 44,275)
Decrease in inventories 11,172,894 8,928,428
Decrease (Increase) in current assets 39,692 107,877
Increase in expenditures for future crops (1,469,803) (1,480,084)
Decrease in accounts payable and accrued exp. (4,003,698) (2,619,617)
Other items - net - ( 128,199)
------------ ------------
Net cash provided by operating activities $ 4,277,125 $ 3,859,714
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $ (699,932) $(1,662,987)
Proceeds from sale of depreciable assets - 104,328
----------- ------------
Net cash used in investing activities $ (699,932) $(1,558,659)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term debt $ 1,945,000 $ 2,765,000
Proceeds from long-term debt 101,618 217,343
Payments on short-term debt (7,420,000) (5,340,000)
Payments on long-term debt ( 96,401) ( 43,576)
------------ ------------
Net cash used in financing activities $(5,469,783) $(2,401,233)
------------ ------------
Decrease in cash and temporary
investments $(1,892,590) $( 100,178)
Cash and temporary investments at the
beginning of the period 210,723 110,332
------------ ------------
Cash and temporary investments at the
end of the period $(1,681,867) $ 10,154
============ ============
Continued
See notes to condensed financial statements
I-3 -5-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Supplemental information:
Interest paid $ 190,404 $ 207,350
=========== ===========
Income taxes paid - -
=========== ===========
I-4 -6-
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheets as of April 30, 1998, the
statements of earnings and retained earnings for the three
months ending April 30, 1998 and 1997, and the condensed
statements of cash flows for the three month period 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 April 30, 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 1998 annual report
to stockholders. The results of operations for the period
ending April 30, 1998 are not necessarily indicative of the
operating results expected for the full year.
I-5 -7-
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
B. EXPENDITURES FOR FUTURE CROPS:
Expenditures incurred and income earned from sugar
operations for the 1998 and 1997 crops have been deferred
in order to properly match revenues and expenses. The
deferred items are as follows:
THREE MONTHS ENDED APRIL 30
---------------------------
1998 1997
---- ----
DEFERRED COSTS: (1998 AND 1997 CROPS)
Factory $ 1,364,484 $ 1,370,108
Plantations 159,935 257,158
------------ ------------
$ 1,524,419 $ 1,627,266
Land preparation and planting costs
1999 and 1998 crops respectively 3,824 1,152
------------ ------------
$ 1,528,243 $ 1,628,418
============ ============
C. ADDITIONAL PAID IN CAPITAL:
As discussed in Form 10-K, filed for the year ended January 31,
1996, the Company entered into a technical service agreement with
M. A. Patout & Son, Ltd. (Patout). The agreement provided an
option for Patout to purchase 50,000 shares of the Company's
treasury stock at a price of $3.25 per share. In April, 1995
Patout exercised its option.
I-6 -8-
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STERLING SUGARS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Sugar and Molasses Sales:
Sugar and molasses sales for the three months ended April 30, 1998
and 1997 were as follows:
1998 1997
------ ------
Raw sugar sales $12,109,439 $ 9,896,017
Molasses sales 129,123 207,385
------------ ------------
$12,238,562 $10,103,402
============ ============
For the first quarter of the Company's fiscal year ending January
31, 1999 (fiscal 1999), sales of raw sugar (1997 crop) increased com-
pared to the same quarter ending in fiscal 1998 (1996 crop). This in-
crease is the result of the Company having marketed more sugar during
the current quarter. At January 31, 1998, the Company had on hand
approximately 31,933 tons of raw sugar available for sale to refiners
as compared to 26,812 tons of raw sugar at January 31, 1997. As of
April 30, 1998, the Company had sold and shipped 27,627 tons of raw
sugar and had on hand 4,306 tons. For the quarter ending April 30,
1997, the Company had sold and shipped 22,513 tons of raw sugar and had
on hand approximately 4,299 tons held in inventory. The remaining 4,306
tons of raw sugar from the 1997 crop is expected to be sold and shipped
by June, 1998. The sugar price for the 1997 crop decreased and is
estimated at $21.99 cwt. For the 1996 crop, the average price was
$22.15 cwt.
With regards to molasses sales, the Company sold more molasses in
the 1997 period compared to the 1998 period. As of January 31, 1998,
the Company had on hand approximately 949,698 gallons of molasses of
which 509,671 gallons were sold and 440,027 gallons remained on hand at
of April 30, 1998. At January 31, 1997, the Company had approximately
767,096 gallons of molasses on hand all of which had been sold as of
April 30, 1997. The Company received $.26 per gallon from the sale of
the 1997 molasses crop compared to $.32 per gallon for the sale of the
1996 molasses crop.
Interest Earned:
Interest earned for the quarter ended April 30, 1998 was $982
compared to $1,181 for the same quarter ended April 30, 1997. The
decrease for the current period is primarily attributable to the
decrease in earnings from short-term investments. During the 1997
period, the Company recognized $210 in interest income on investments
in U. S. Treasury obligations.
Mineral Leases and Royalties:
For the quarter ended April 30, 1998, income from mineral leases
and royalties decreased to $31,237 compared to $65,724 for the period
I-7 -9-
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ending in 1997. The decrease is attributable to the Company entering
into two seismic agreements in the first quarter of fiscal 1998 not
renewed for a second term. One agreement was for six months, covered
approximately 710 acres in St. Mary Parish for $31,625. The second
agreement contains an eighteen month term, covered 2,396 acres in St.
Mary Parish for $71,891. This agreement contains an option agreement
to lease the subject property to acquire an oil and gas lease. The
Company also on February 3, 1997 had entered into a seismic agreement
covering approximately 1,395 acres for $28,184. The sole purpose of
the agreement was to allow seismic exploration activities. Royalty
income declined in the first quarter of fiscal 1999 and was $2,065
compared to $5,574 for the same period in fiscal 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 April 30, 1997 of $45,005.
For the same period ending in 1998, the Company had no gains or losses
from the sale of depreciable assets.
Other Revenues:
Other revenues, which consist mainly of miscellaneous income items,
were $41,046 for the three month period ending April 30, 1997 and
$13,967 for the same period ending in 1998. These revenues, which can
vary considerably from year to year, generally include amounts received
for the sale of scrap and other miscellaneous items.
Cost of Products Sold:
Cost of products sold for the three month periods ended April 30,
1998 and 1997 were $11,288,871 and $9,205,641, respectively. Costs
relating to sales are charged to cost of products sold. Accordingly,
costs have increased for 1998 as would be expected with the increase
in sales.
General and Administrative Expenses:
General and administrative expenses for the three months ended
April 30, 1998 were $181,749 compared to $179,336 for the same period
in 1997. The slight increase in these expenses during the current
period is primarily the result of increases in miscellaneous expense
items.
Interest Expense:
Interest expense increased to $280,567 for the period ending
April 30, 1998 from $245,761 for the same period ending in 1997.
The increase in interest expense is primarily the result of increases
in short-term debt. At January 31, 1998 the Company had outstanding
short-term debt of $6,776,000 compared to $2,575,000 outstanding at
January 31, 1997.
Income Taxes:
The income taxes for the three month period ending April 30,
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.
I-8 -10-
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Liquidity and Capital Resources:
At April 30, 1998, the Company had working capital of $2,924,275
compared to $2,699,037 at January 31, 1998. The working capital ratios
were 1.6 to 1 and 1.2 to 1, respectively.
For the coming year, with a good growing season, it is very possible
the Company's volume of cane to grind will increase. The Company's
capital budget for the 1998 season is approximately $1,522,000 and is
directed to improve existing areas of plant operations. The capital
budget items consist of upgrading the mud filter station, rebuilding the
water cooling towers, installing a wet scrubber for steam boiler #1,
improvements to the bearing cooling water system and upgrading the mill
control station. The Company's main objective this year is to focus on
a good repair season in an effort to reduce lost time during grinding
and become more efficient in handling and processing billet cane. The
Company expects to fund the capital additions from working capital and
short-term borrowings through available lines of credit.
Expenditures for Future Crops - Note B:
Factory Deferred Costs:
Factory deferred costs for the three month period ended April 30,
1998 were $1,364,484. Such costs for the same period in 1997 were
$1,370,108. The costs for both quarters are fairly consistent and
consist primarily of idle season maintenance and repairs. The Company
for the 1998 idle season has budgeted $2,550,000 for idle season repair
and maintenance. For the 1997 idle season the Company had budgeted
$2,250,210 for idle season repairs and maintenance.
Plantation Deferred Costs:
Plantation deferred costs decreased to $159,935 for the three
month period ending April 30, 1998 from $257,158 for the same period
in 1997. The decrease in plantation deferred costs is primarily
attributable to the Company in February 1997 leasing to an independent
farmer approximately 383 acres of its' agricultural division. The
Company's farm division now consists of 818 acres.
I-9 -11-
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K
No reports on Form 8K have been filed during the
quarter for which this report is filed.
II-1 -12-
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
STERLING SUGARS, INC.
---------------------
(REGISTRANT)
DATE June 12, 1998 By /S/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE June 12, 1998 By /S/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -13-
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<PERIOD-TYPE> 3-MOS
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<PERIOD-END> APR-30-1998
<CASH> (1681867)
<SECURITIES> 0
<RECEIVABLES> 4983533
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<OTHER-SE> 14335867
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<CGS> 11288871
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