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 July 31, 1999
[ ] 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
---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (318) 828 0620
-------------------------
Securities registered pursuant to Section 12d of the Act:
Title of each class Name of each exchange on which registered
None None
-------------------------- -----------------------------------------
Securities registered pursuant to Section 12(G) of the Act:
Common Stock $1 par value
---------------------------
(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 September
30, 1999 by non-affiliates of the registrant was $2,516,379. 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 37 pages
<PAGE>
The number of shares of common stock outstanding as of October 15, 1999 was
2,500,000 shares.
Documents incorporated by reference: Portion of Registrant's Proxy Statement
dated November 12, 1999 are incorporated by reference into Part III.
An exhibit index is located on page 31.
FORM 10-K
PART I
ITEM 1-BUSINESS
Sterling Sugars, Inc. is a 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 mid/late September to late December or early
January. For the fiscal year ended July 31, 1999 (referred to by the Company
as "fiscal 1999"), the season began on October 2, 1998 and continued
through January 9, 1999. For fiscal 1999 (referred to by the Company as
the "1998 crop"), the factory processed 1,031,144 tons of sugarcane. During
the previous year (fiscal 1998), the Company processed a total of 899,989
tons of cane. In fiscal 1997, a total of 821,184 tons of cane were processed
by the Company. Sugar production for 1999 was 99,173 tons. For fiscal 1998
and 1997 the Company produced 96,601 and 81,822 tons of raw sugar,
respectively. The Company started its fiscal 2000 grinding season on
September 20, 1999 and barring unforseen circumstances, this crop should
exceed the record tonnage set last year of 1,031,144.
Historically, the Company has had no difficulty in selling, at
competitive prices, all of its raw sugar production to a few major sugar
refiners and a candy manufacturer and all of its molasses production to a
molasses distributor under sales contracts. 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 11,000 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.
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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, is more risky to producers and 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, previously at 1.10% of the loan
rate, has been 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. Recently prices for
sugar have by approximately two cents per pound under the levels of early
summer marketing. This is a result of the U.S.D.A. administrators forecast
of domestic production along with the minimum requirement of sugar imports
being greater than the market demands. The program requires that a stock-
to-use ratio be maintained of no less than 15.5%. Current estimates
place the ratio above 18%, resulting in a basic oversupply of sugar. The
forecast for the near term has prices continuing to decline as the cane
sugar producing states begin their operations.
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.
In October, 1998, the Company completed its five year plan mandated
by the Air Quality Control Division of the Louisiana State Office of
Environmental Protection (the Agency). The mandate required the Company to
install various equipment on its boilers to minimize stack emissions.
The Company was not cited by the Agency for the 1998 crop.
Company employment for the year ended July 31, 1999 was as follows:
Factory Agriculture
--------------- -----------------
Year round employees 91 6
Seasonal and temporary employees 95 -
-------- --------
186 6
======== =======
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.
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ITEM 2 -PROPERTIES
Land owned by the Company by parishes and suitability of land for
cultivation is as follows:
LaFourche St. Mary Iberia St. Landry Total
-------------------------------------------------------
Cultivable 571 9,544 1,804 - 11,919
Non-cultivable 139 5,738 1,302 121 7,300
Plant site 65 65
--------- -------- -------- ------ --------
710 15,347 3,106 121 19,284
========= ======== ======== ====== ========
The Company no longer has a farming division as all owned cultivable
land has been leased to independent farmers. Approximately 9,188 cultivable
acres in St. Mary Parish, 1,560 cultivable acres in Iberia Parish and 571
cultivable acres in Lafourche Parish are leased to tenants for the growing
of sugarcane. Four of the leases in effect, covering approximately 2,593
cultivable acres will expire at the end of the 1999 crop. The Company
expects each of the leases to be renewed under basically the same terms and
conditions.
The Company, in June, 1998, purchased approximately 571 cultivable and
139 acres of non-cultivable land in LaFourche Parish. The Company entered
into lease agreements with two independent farmers in LaFourche Parish. The
lease agreements contain five year terms with an option to renew for an
additional five years. The orginal five year term expires on December 31,
2002.
On January 13, 1999, the Company sold 1,795.31 acres of unimproved land
to the U. S. Corps of Engineers under threat of expropriation. In order to
minimize the tax consequences of the sale, the Company purchased 414.07
acres of like-kind property in Iberia Parish which is leased to an
independent farmer for the production of sugarcane.
In addition to Company owned land, about 789 acres in St. Mary
Parish 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
property. Over the last three years the Company has made attempts to have
farmers lease land directly from landlords in an effort to minimize the
Company's liability exposures.
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.
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Of the 19,284 acres of land owned by the Company, approximately 890
acres are being held by production, primarily from the LGS Sterling No. 1
well located in St. Mary Parish. 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.
For fiscal 1999, the Company's share of royalty income from all units was
$8,730 compared to $15,951 for fiscal 1998 and $19,989 for fiscal 1997.
The Company currently has four oil and gas leases totaling
approximately 883 acres. The leases are granted solely for the purpose of
exploring for, developing and producing oil, gas and other liquid and
hydrocarbon minerals of like nature, and engaging in any activities in
reasonable connection with such operations. Lease terms are generally three
years with lease payments due annually unless drilling commences during the
year. 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.
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
The Registrant is not a party to, nor or any of its properties subject
to any material pending legal proceedings. No material legal proceedings
are pending or known to be comtemplated by governmental authorities against
the Registrant.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999.
I-4 -5-
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PART II
ITEM 5 - MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of October 4, 1999 there were approximately 500 holders of record
of the Company's stock which is traded in the over-the-counter market. The
Company acts as its own stock transfer agent and registrar. The Company's
mailing address is P. O. Box 572, Franklin, Louisiana 70538 and its
physical address is 609 Irish Bend Road, Franklin, Lousisana 70538.
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
------------------------
Fiscal 1999 High Low
------------- ------ ------
First Quarter $ 7-1/8 $ 5-1/2
Second Quarter 5-1/2 5-1/2
Third Quarter 5-3/4 5-1/4
Fourth Quarter 7-3/4 5-1/8
Fiscal 1998
-------------
First Quarter $ 9 $ 7
Second Quarter 7 7
Third Quarter 8-1/4 7
Fourth Quarter 7-5/8 7-1/8
ITEM 6 - SELECTED FINANCIAL DATA
Year ended July 31 Year Ended January 31
----------------------------------- ------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
Revenues $45,125,532 $45,202,640 $37,612,326 $29,644,559 $34,250,584
Net Earnings
(Loss) $ 604,964 $ 1,957,197 $ 640,577 $ 2,119,609 $ 742,383
Net Earnings
(Loss per
Share) $ .24 $ .78 $ .26 $ .85 $ .30
Cash Dividends
Paid per
Share $ - $ - $ - $ - $ -
II-1 -6-
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AT YEAR END:
Total assets $29,411,857 $28,842,188 $26,357,728 $27,969,569 $20,879,631
Long-term
Debt $ 7,883,984 $ 8,777,263 $ 9,291,174 $ 4,017,469 $ 4,371,434
Working
Capital $(1,035,744)$ (411,958)$ (264,444) $ 5,169,044 $ 4,493,736
Stockholders'
Equity $16,284,146 $15,679,182 $13,757,729 $13,628,520 $11,346,411
ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward -Looking Information
----------------------------
This Form 10-K contains certain statements that may be deemed
"forward-looking statements." All statements, other than historical
statements, in this Form 10-K that address activities, events or
developments that the Company intends, expects, projects, believes or
anticipates will or may occur in the future, are forward-looking statements.
Such statements are based on assumptions and analysis made by management of
the Company in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors
it believes are appropriate. The forward-looking statements in the Form
10-K are also subject to a number of material risks and uncertainties,
including weather conditions in south Louisiana during the sugarcane
growing season, the success of sugarcane pest and disease abatement
procedures, the quality and quantity of the sugarcane crops, mechanical
failures at the Company's sugar mill, and prices for sugar and molasses
produced by the Company. Such forward-looking statements are not guarantees
of future performance and actual results. Development and business
decisions may differ from those envisioned by such forward-looking
statements.
Results of Operations
- ---------------------
Please note that the Company changed its fiscal year end from January 31
to July 31 in 1998 and did not file financial statements for the short six
month period from February 1, 1998 to July 31, 1998.
Net earnings for the last three fiscal years ending July 31, 1999, 1998
and 1997 (1999, 1998 and 1997, respectively) were $604,964, $1,957,197 and
$640,577 respectively. Cane ground for 1999 was 1,031,144 tons, for 1998
899,989 tons and for 1997 821,164 tons. The lower earnings for 1999 are
directly related to the sugar yield per ton of cane which was 192 pounds per
ton of cane compared to 215 pounds for 1998 and 199 pounds for 1997. Although
the Company ground 131,155 tons of cane more in 1999 than in 1998,
approximately the same total amount of sugar was produced. Sugar produced in
1999 was 99,173 tons and in 1998 it was 96,601 tons. The cost of grinding the
II-2 -7-
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additional 131,155 tons of cane and producing only 2,572 tons of sugar more
than 1998 resulted in the lower earnings for 1999. The sugar price also
continued to decline during the three years ended July 31, 1999 and
contributed to the reduction in earnings. The average price, net of
discounts, for the three years was 21.34 cents per pound for 1999, 21.41 for
1998 and 21.50 for 1997.
The Company continued its record setting grinding rates and tonnage for
the fifth consecutive year surpassing the one million ton mark for the first
time. Average daily grinding rates were 10,172, 10,112 and 9,803 tons of cane
per day for 1999, 1998 and 1997, respectively. The Company has in place a
five year plan to increase the average tons ground per day to 15,000.
The Company's agricultural division produced 16,993 tons of sugarcane
for 1999 compared to 19,872 and 20,792 for 1998 and 1997, respectively. On
February 1, 1999, the Company leased its remaining agriculture operations to
an independent farmer.
Income from mineral leases and royalties was $116,176, $167,695 and
$130,812 for 1999, 1998 and 1997, respectively. The higher amount for 1998
is the result of two seismic agreements granted on 3,160 acres in St. Mary
Parish. One agreement was for a term of six months and the other was for
eighteen months. Oil and gas royalties continue to decline and were $8,730
in 1999, $15,951 in 1998 and $19,989 in 1997.
The Company recognized gains on the disposition of property and
equipment of $369,470 in 1999, $874,446 in 1998 and $9,109 in 1997. The gain
in 1999 was primarily for the sale of unimproved land to the Corps of
Engineers which resulted in a gain of $299,795. The remainder of the gain in
1999 was for the sale of farm equipment. The gain recorded in 1998 was the
result of a sale of approximately 170 acres to the Port of Iberia under threat
of expropriation. The Company replaced the land with like-kind property
purchased in Iberia Parish to minimize the tax consequences of the sale under
expropriation.
Other revenues consist principally of miscellaneous income items and
cane land rental income. Other revenues were $1,440,493 for 1999, $1,460,261
for 1998 and $935,870 for 1997. These amounts included rental income
(substantially all from cane land) of $1,290,752, $1,285,362 and $647,889 for
1999, 1998 and 1997, respectively. The increase in cane land rentals in 1998
and 1999 over 1997 results from the purchase of approximately 8,500 acres
(4,863 cultivable acres) in December, 1996. Cane land rental income from
this purchase is derived from all of the cultivable acres which are leased to
independent farmers.
Costs of products sold for 1999, 1998 and 1997 were $42,007,037,
$40,078,743 and $34,972,424, respectively. Charges relating to the sale and
manufacture of raw sugar and blackstrap molasses are charged to this category
of accounts. The cost of products sold is relative to sales for the three
years.
General and administrative expenses were relatively consistent for
the three years ended July 31, 1999. They were $923,351 for 1999, $1,007,695
for 1998 and $848,960 for 1997.
II-3 -8-
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Interest and loan expenses were approximately the same in 1999 and
1998 at $1,162,980 and $1,187,177, respectively. Interest and loan expenses
for 1997 were $774,671. With the higher grinding rates, the Company's need
for short-term funds increases as evidenced by the average aggregate short-
term borrowings shown in Footnote 3 to the financial statements. These
amounts were $5,157,729 for 1999, $3,1121,069 for 1998 and $1,266,159 for
1997. The weighted average interest rate for those years was 7.11%, 8.42%
and 7.31%, respectively. The substantially lower interest rates in 1999
helped hold the cost of funds down to the 1998 level although the Company's
short-term requirements were much higher. To a lesser extent, earnings for
the year affect the amount of short-term borrowings.
The Company recorded income tax expense of $427,200 for 1999, $971,828
for 1998 and $375,694 for 1997. Footnote 5 to the financial statements
explains in detail the differences in actual and statutory tax rates, deferred
taxes and carryforwards.
Liquidity and Capital Resources
- -------------------------------
The current ratio at July 31, 1999 stood at .73 to 1 compared to .87
to 1 for the previous year. The Company's continuing efforts to increase
the capacity of the factory has taken a toll on its liquidity and capital
resources as more dollars are spent on capital improvements and repairs. In
addition, the Company has increased the farmers share in each of the last
three years from 63% in 1997 to 64% in 1998 and to 65% in 1999. This was
done to attract more cane to the factory as most factories in the state pay
farmers in the range of 60-63%. As a result of the increase and a good crop,
the Company expects to grind approximately 1,200,000 tons of cane for the
coming crop. The higher tonnage, coupled with longer payment terms by
refiners, will require greater short-term borrowings. The Company has a line
of credit with a bank for $9,000,000.
Year 2000
----------
The Company has taken steps to correct computer problems relating
to the year 2000. In May, 1998, a year 2000 compliant upgrade to the
operating system of the Company's midrange computer was made at a cost of
$5,000. A review of the application programs on the midrange computer
indicates that the programs are in compliance with year 2000. The Company
may have to replace several older PC computers before December 31, 1999 for
them to be year 2000 compliant. The Company does not anticipate any
significant cost to become fully year 2000 compliant.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
II-4 -9-
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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 July 31, 1999 and 1998, and the related statements of
income and retained earnings and cash flows for each of the three
years in the period ended July 31, 1999. 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.
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 financial statements present fairly, in all
material respects, the financial position of Sterling Sugars, Inc. as of
July 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended July 31, 1999, in
conformity with generally accepted accounting principles.
/s/ Broussard, Poche', Lewis & Breaux, L.L.P.
Lafayette, Louisiana
September 9, 1999
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STERLING SUGARS, INC.
BALANCE SHEETS
JULY 31, 1999 AND 1998
ASSETS
CURRENT ASSETS:
1999 1998
------------ ------------
Cash $ 8,050 $ 70,078
Temporary cash investments 450,000 94,074
------------ ------------
Total cash and temporary cash investments 458,050 164,152
Accounts receivable, principally sugar and
molasses sales, no allowance for doubtful
accounts considered necessary 585,554 376,308
Notes receivable, no allowance for doubtful
accounts considered necessary 62,800 -
Expenditures for future crops - 330,760
Operating supplies - at cost 639,896 655,001
Deferred income taxes 377,800 543,000
Prepaid expenses and other assets 706,883 720,664
------------ ------------
TOTAL CURRENT ASSETS 2,830,983 2,789,885
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 8,115,135 8,523,496
Buildings 3,322,617 3,322,617
Machinery and equipment 39,530,537 37,485,185
------------ ------------
50,968,289 48,331,298
Less accumulated depreciation 26,077,135 24,018,631
------------ ------------
24,891,154 24,312,667
------------ ------------
INVESTMENTS AND OTHER ASSETS:
Cash value of officers' life insurance 38,511 34,002
Expenditures for future crops 1,138,963 1,208,174
Notes receivable, net of allowance for
doubtful accounts, 1999 $17,232; 1998 $17,232 512,246 497,460
------------ ------------
Total investments and other assets 1,689,720 1,739,636
------------ ------------
$29,411,857 $28,842,188
============ ============
See notes to financial statements
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STERLING SUGARS, INC.
BALANCE SHEETS
JULY 31, 1999 AND 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
-------------- -------------
CURRENT LIABILITIES:
Notes payable $ - $ 1,135,000
Accounts payable and accrued expenses 1,218,059 885,857
Due to cane growers 1,660,252 239,835
Current portion of long-term debt
and capital leases 988,416 941,151
-------------- --------------
TOTAL CURRENT LIABILITIES 3,866,727 3,201,843
-------------- --------------
LONG-TERM DEBT AND CAPITAL LEASE, less portion
due within one year included in current
liabilities 7,883,984 8,777,263
-------------- --------------
DEFERRED INCOME TAXES 1,377,000 1,183,900
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 9) - -
-------------- --------------
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 40,455
Retained earnings 13,743,691 13,138,727
------------ --------------
16,284,146 15,679,182
------------ --------------
$29,411,857 $28,842,188
============ ==============
See notes to financial statements
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STERLING SUGARS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED JULY 31,
1999 1998 1997
---------- ----------- -----------
REVENUES:
Sugar and molasses sales $43,186,396 $42,672,109 $36,519,407
Interest earned 12,997 31,953 17,128
Mineral leases and royalties 116,176 163,871 130,812
Gain (loss) on disposition of property
and equipment 369,470 874,446 9,109
Other 1,440,493 1,460,261 935,870
----------- ----------- -----------
45,125,532 45,202,640 37,612,326
----------- ----------- -----------
COST AND EXPENSES:
Cost of products sold 42,007,037 40,078,743 34,972,424
General and administrative 923,351 1,007,695 848,960
Interest and loan expenses 1,162,980 1,187,177 774,671
----------- ----------- -----------
44,093,368 42,273,615 36,596,055
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,032,164 2,929,025 1,016,271
INCOME TAXES 427,200 971,828 375,694
----------- ----------- -----------
NET INCOME 604,964 1,957,197 640,577
RETAINED EARNINGS AT BEGINNING OF YEAR 13,138,727 11,181,530 10,540,953
----------- ----------- -----------
RETAINED EARNINGS AT END OF YEAR $13,743,691 $13,138,727 $11,181,530
=========== =========== ===========
WEIGHTED AVERAGE EARNINGS PER
COMMON SHARE:
Net income $.24 $.78 $ .26
=========== ========== ===========
CASH DIVIDENDS PAID $ 0 $ 0 $ 0
=========== =========== ===========
See notes to financial statements
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STERLING SUGARS, INC.
STATEMENTS OF CASH FLOWS
Years Ended July 31,
1999 1998 1997
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 604,964 $ 1,957,197 $ 640,577
Adjustments to reconcile net income
to net cash provided by (used
in) operating activities:
Depreciation 2,311,398 1,673,931 2,276,837
Deferred income taxes 358,300 (257,599) 445,145
(Gain) loss on dispositions of property
and equipment (369,470) (874,446) 9,110
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable (209,246) (14,025) (65,140)
(Increase) decrease in inventories 15,105 461,941 (853,457)
Decrease in expenditures for future
crops 399,791 - -
(Increase) decrease in prepaid expenses 13,781 1,020,310 (907,879)
Increase in accounts payable and
accrued expenses and due to cane
growers 1,742,611 (169,638) 310,290
Other items - net 175,525 199,758 (269,041)
----------- ------------ -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 5,042,759 3,997,429 1,586,442
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (77,586) (4,757) (145,955)
Collection on notes receivable 62,840 228,947 165,613
Purchases of property, plant and
equipment (3,052,896) (4,862,308) (10,264,099)
Proceeds from dispositions of
property and equipment 299,795 1,021,079 196,481
------------ ----------- -----------
NET CASH (USED IN)
INVESTING ACTIVITIES (2,767,847) (3,617,039) (10,047,960)
------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term notes
payable and long-term debt 117,685 550,067 7,486,891
Payments on short-term notes
payable and long-term debt (2,098,699) (1,068,921) (467,543)
------------ ------------ -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES (1,981,014) (518,854) 7,019,348
------------ ------------ -----------
INCREASE (DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS 293,898 (138,464) (1,442,170)
CASH AND TEMPORARY CASH INVESTMENTS
AT BEGINNING OF YEAR 164,152 302,616 1,744,786
----------- ----------- -----------
(Continued)
II-9 -14-
<PAGE>
STERLING SUGARS, INC.
STATEMENTS OF CASH FLOWS
Years Ended July 31,
------------------------------------
1999 1998 1997
------------ ----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS
AT END OF YEAR $ 458,050 $ 164,152 $ 302,616
============ =========== ===========
SUPPLEMENTAL INFORMATION REGARDING
CASH FLOWS:
INTEREST PAID $1,153,036 $1,160,163 $ 712,332
============ ============ ==========
INCOME TAXES PAID $ 65,000 $ 225,000 $ 690,000
============ ============ ===========
See notes to financial statements
II-10 -15-
<PAGE>
STERLING SUGARS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Sales are recognized when deliveries are made.
Cash equivalents include all highly liquid temporary cash investments
with a maturity of three months or less at the date of purchase.
2. NATURE OF OPERATIONS, RISK AND UNCERTAINTIES
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 and
candy manufacturers under sales contracts. Molasses is sold to a major
molasses distributor under sales contracts.
The cane supply, which the Company processes into raw sugar and
blackstrap molasses, is provided by approximately fifty growers located
primarily in St. Mary and Iberia Parishes, some of which are on Company
owned land.
The Company maintains, at a regional financial instituion, 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.
II-11 -16-
<PAGE>
3. NOTES PAYABLE
The Company had no current outstanding notes payable at July 31, 1999.
Notes payable at July 31, 1998 consisted of $1,135,000 of short-term
unsecured notes payable to a bank with interest at 8.50%.
The maximum aggregate short-term borrowings outstanding were $31,182,200
in 1999, $20,106,000 in 1998 and $24,796,000 in 1997. The average aggregate
amount of short-term borrowings and the weighted average interest rate was
approximately $5,157,729 and 7.11% in 1999, $3,121,069 and 8.42% in 1998,
and $1,266,159 and 7.31% in 1997. Short-term borrowings occur primarily during
the months of September through December.
4. LONG-TERM DEBT AND CAPITAL LEASE
Long-term debt and capital lease at July 31, 1999 and 1998 consisted
of the following:
1999 1998
----------- -----------
8.50% mortgage note collateralized by first
mortgage on approximately 10,186 acres of
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. $ 3,548,920 $ 3,630,505
8.00% mortgage note collateralized by a first
mortgage on 8,519 acres of land and a second
mortgage on 10,186 acres of land owned by the
Company; payable in semi-annual payments of
$325,000, interest payable quarterly, with a
final payment due October, 31, 2006. This mortgage
note provides for additional principal payments
equal to fifty percent of the net income before
depreciation reduced by capital expenditures.
There were no required additional payments of
principal at July 31, 1999 and 1998. An
additional covenant of the loan is that no
dividends are to be paid. 4,875,000 5,525,000
8.9% note collateralized by equipment, payable
in twenty-four monthly installments of $10,345
including interest, beginning May 1, 1997 58,693 131,513
8.5% note collateralized by equipment, payable
in four annual installments of $18,760,
including interest, and one installment for
balance of $61,142, beginning February 2, 1998 131,742 115,678
10% capital lease collateralized by equipment,
payable in thirty-six monthly payments of
$7,782, including imputed interest, beginning
November 1, 1997 with a final payment of
$42,500 due October 1, 2000 146,829 221,429
II-12 -17-
<PAGE>
6.92% note collateralized by equipment payable
in three annual installments of $33,816 including
interest, beginning March 10, 1999. 61,208 88,874
9.5% note payable collateralized by vehicle and
equipment, interest payable annually, with
final payment of interest and principal due
May 8, 2000. 50,008 -
9.56% capital lease payable in twelve monthly
installments of $1,109 including imputed
interest beginning February 5,1998 with the
final payment due January 5, 1999 - 5,415
------------ ------------
8,872,400 9,718,414
Less portion due within one year (988,416) (941,151)
------------ -------------
$ 7,883,984 $ 8,777,263
============ =============
The aggregate annual principal payments applicable to these notes and
capital leases are payable as follows:
Year ended July 31, 2000 $ 988,416
Year ended July 31, 2001 871,147
Year ended July 31, 2002 4,092,004
Year ended July 31, 2003 680,900
Year ended July 31, 2004 650,000
Thereafter 601,517
-------------
$ 7,883,984
=============
The Company has a line of credit of $9,000,000 with a bank.
At July 31, 1999, the Company was in compliance with all debt covenants
relating to the line of credit with the exception of the covenant
requiring that the line of credit be repaid in full for a minimum of
thirty days in each fiscal year and failure to meet the current ratio
covenant of 1:1. The bank reduced the thirty day requirment to ten days
for the current fiscal year and waived the current ratio covenant.
5. INCOME TAXES
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 July 31, 1999 and 1998 are as follows:
II-13 -18-
<PAGE>
1999 1998
------------ ------------
Deferred tax assets:
Tax credit carryforwards $ 189,400 $ 189,400
Operating loss carryovers 911,800 1,160,200
Other 95,200 76,900
------------ -------------
Total 1,196,400 1,426,500
------------ -------------
Deferred tax liabilities:
Differences between book and tax basis of
property (2,195,600) (2,060,500)
Other - (6,900)
------------ -------------
Total (2,195,600) (2,067,400)
------------ -------------
Net $( 999,200) $ (640,900)
============ =============
The foregoing net amounts were included in the accompanying balance sheet
as follows:
1999 1998
--------- -----------
Deferred tax assets - Current $ 377,800 $ 543,000
Deferred tax liability - Non-current (1,377,000) (1,183,900)
------------ -----------
Net $( 999,200) $( 640,900)
============ ===========
There was no valuation allowance required at July 31, 1999 and 1998.
Income taxes (benefits) consist of the following components:
1999 1998 1997
---------- ---------- -----------
Current tax liability (benefit) $ 68,900 $ 714,228 $ (69,451)
Deferred 358,300 257,600 445,145
---------- ---------- -----------
$ 427,200 $ 971,828 $ 375,694
========== ========== ===========
State income taxes included in income tax expense amounted to approximately
$22,900 in 1999, $64,900 in 1998 and $20,325 in 1997.
Deferred income taxes relate primarily to the following items:
1999 1998 1997
----------- ---------- -----------
Alternative minimum tax carrover $ - $ - $ 311,000
Depreciation 135,100 172,800 (8,200)
Gain on sale of land - 380,400 -
Net operating loss carryforward 182,300 (1,160,200) -
Other 40,900 132,100 142,345
----------- ---------- ------------
$ 358,300 $ (474,900) $ 445,145
=========== ========== ============
II-14 -19-
<PAGE>
Income taxes as a percentage of pretax earnings vary from the effective
Federal statutory rate of 34%. The reasons for these differences are shown
below:
1999 1998 1997
------------ ------------ ---------------
Amount % Amount % Amount %
------------- ------------ ---------------
Income taxes at statutory
rate of pretax earnings $ 401,936 34 $ 995,869 34$ 345,532 34
Increase (decrease) in taxes
resulting from:
State income taxes 22,900 8 64,900 8 20,325 8
Other items - net 2,364 1 ( 88,941)(3) 9,837 0
------------- ------------- --------------
Actual income taxes $ 427,200 37 $ 971,828 33 $ 375,694 37
============= ============= =============
At July 31, 1999 the Company had alternative minimum tax credit
carryforwards of approximately $188,593 available to reduce future income
taxes payable under certain circumstances. The alternative minimum tax
credit carryover period is unlimited. The Company had a net operating loss
carryover of approximately $2,431,000 which can be utilized ratably over
the next five years and provides for a maximum carryover period of fifteen
years.
6. 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 for the years ended July 31,
1999, 1998 and 1997 was $53,000, $53,888 and $39,000, respectively.
Data relative to the Plan were as follows (in thousands):
July 31,
---------------------
1999 1998
--------- ---------
Actuarial present value of benefit obligations:
Vested benefit obligation $ 1,288 $ 1,268
========== ========
Accumulated benefit obligation $ 1,320 $ 1,292
========== ========
Projected benefit obligation for service rendered
to date $ (1,609) $ (1,480)
Plan assets at fair value 1,505 1,441
---------- --------
II-15 -20-
<PAGE>
Plan assets in excess of projected benefit
obligation (104) (39)
Remaining unrecognized portion of net assets at
February 1, 1987 4 (82)
Unrecognized net loss from past experience
different from that assumed 128 139
---------- --------
Prepaid pension cost included in other assets $ 28 $ 18
========== ========
The net pension expense for 1999, 1998 and 1997 included the
following (income) expense components:
1999 1998 1997
------- ------- -------
Service cost - benefits earned during the period $ 61 $ 54 $ 52
Interest cost on projected benefit obligation 107 104 97
Actual return on plan assets (113) (109) (105)
Net amortization and deferrals (10) (10) (10)
--------- ------- -------
NET PENSION EXPENSE $ 45 $ 39 $ 34
========= ======= =======
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.1% in 1999, 7.5% in 1998 and 1997.
The projected rate of increase in future compensation levels used was 5.5%
in 1999, 1998 and 1997. The expected rate of return on plan assets was 8%
in 1999, 1998 and 1997. The plan's assets consist primarily of deposits in
the general funds of an insurance company.
7. 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 for the years ended July 31, 1999, 1998 and 1997
$42,000, $45,000 and $42,000, respectively.
8. REVENUES
Sugar and molasses sales are comprised of the following:
1999 1998 1997
----------- ----------- -----------
Sugar $42,330,940 $41,356,938 $35,181,074
Molasses 855,456 1,315,171 1,338,333
----------- ----------- -----------
$43,186,396 $42,672,109 $36,519,407
============ =========== ===========
Sugar sales to individual major customers amounted to $18,201,861,
$11,409,308, $6,102,583, and $6,616,917 in 1999, $19,279,567, $6,323,505,
and $11,377,808 in 1998, $13,773,452, $11.236,965 and $7,794,365 in 1997.
II-16 -21-
<PAGE>
Income from mineral leases and royalties is comprised of the following:
1999 1998 1997
--------- -------- ---------
Oil and gas royalties $ 8,730 $ 15,951 $ 19,989
Mineral leases 107,446 147,920 110,823
--------- -------- ---------
$116,176 $163,871 $130,812
========= ======== =========
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:
1999 1998 1997
--------- --------- ---------
Rental property $1,290,752 $1,285,362 $ 647,889
Other 149,741 174,899 287,981
--------- ---------- ---------
$1,440,493 $1,460,261 $ 935,870
========= ========== =========
9. COMMITMENTS AND CONTINGENCIES
The Company has certain lease obligations under which a total of
approximately 789 acres of agricultural land are being leased. At the
present time, substantially all of these properties are being subleased
and resulted in net payments of zero in all years. The subleases have
the same payment and option terms as the Company's leases.
The Company is contingently liable or co-maker of a collateralized
note in the amount of $900,000 and $1,150,000 for Patout Equipment Co.,
at July 31, 1999 and 1998, respectively. The outstanding balance on
these notes was $333,218 at July 31, 1999 and $250,000 at July 31, 1998.
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. The agreement was to expire on January 31, 1999 but because of
the change in the Company's year end from January 31 to July 31 the
contract was extended to July 31, 1999. There was no fee due M. A. Patout
& Son, Ltd. at July 31, 1999. The Company paid M. A. Patout & Son, Ltd.
a fee of $219,305 due under the contract for the year ended January 31,
1997. There were no fees due for the year ended January 31, 1998 nor for
the six months ended July 31, 1998.
II-18 -22-
<PAGE>
The Company has guaranteed a $395,000 collateralized note for a harvesting
company.
The Company has an option to purchase approximately 238 acres of
agricultural land in St. Mary Parish for approximately $357,000. As
consideration for this option the Company pledged a certificate of
deposit in the amount of $82,160.
10. RELATED PARTIES
During the years ended July 31, 1999 and 1998, the Company was involved
in the following related party transactions:
The Company reimbursed M. A. Patout & Son, Ltd. certain expenses paid by
them on behalf of the Company. Reimbursements were $175,008 in 1999 and
$118,701 in 1998. The Company reimbursed Raceland Sugars, Inc., a wholly
owned subsidiary of M. A. Patout & Son, Ltd., certain expenses paid by
them on behalf of the Company. These reimbursements were $1,199 for 1999
and $92 for 1998.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair value of the Company's financial instruments were as
follows (in thousands):
July 31, 1999 July 31, 1998
--------------- ---------------
Carrying Fair Carrying Fair
value value value value
--------- ----- -------- ------
Cash and cash equivalents $ 458 $ 458 $ 164 $ 164
Accounts receivable 586 586 376 376
Notes receivable 512 357 497 369
Short-term debt - - 1,135 1,135
Accounts payable 1,218 1,218 886 886
Due to growers 1,660 1,660 240 240
Long-term debt (including current
portion) 8,872 8,872 9,718 9,718
The carrying value of cash and cash equivalents, accounts receivable,
short-term debt, accounts payable and due to growers approximate fair
value due to short-term maturities of these assets and liabilities.
The fair value of the Company's notes receivable was estimated based on
discounting the future cash flows using current interest rates at which
similar loans would be made.
The fair value of the Company's long-term debt (including current
maturities) was based on current rates at which the Company could borrow
funds with similar remaining maturities.
II-19 -23-
<PAGE>
9. ITEM 9 -CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
It is anticipated that Broussard, Poche, Lewis & Breaux, will be asked to
serve as the Company's independent public accountants for the fiscal year
ending July 31, 2000. A representative of the firm is expected to be
present at the annual meeting and to be available to respond to appropriate
questions. He will have the opportunity to make a statement if he desires.
At the Company's Board of Directors meeting on February 8, 1999 the Board
appointed the accounting firm of Broussard, Poche', Lewis & Breaux, LLP as
independent accountants for the Registrant for 1999. The work of LeGlue &
Company was terminated at that time.
During the two most recent fiscal years and the interim periods subsequent
to July 31, 1998, there have been no disagreements with LeGlue & Company on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure or any reportable events.
LeGlue's report on the financial statements for the past two years
contained no adverse opinion or disclaimer and was not qualified or modified
as to uncertainty, audit scope or accounting principles.
PART III
ITEM 10-DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As respects directors information required under this item is contained
in the registrant's Proxy Statement dated November 12, 1999 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 21, 1998, expires on November 12, 1999, 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. 37
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. 64
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 November 12, 1999 under the caption "Information
Concerning Management-Certain Transactions," incorporated herein by
reference.
III-1 -24-
<PAGE>
ITEM 11-EXECUTIVE COMPENSATION
Information required under this item is contained in the registrant's Proxy
Statement dated November 12, 1999 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 November 12, 1999 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 November 12, 1999 under the caption "Information Concerning
Management-Certain Transactions," incorporated herein by reference.
III-2 -25-
<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 1999 and 1998)
Balance Sheets as of July 31, 1999 and 1998
Statements of Income and Retained Earnings for years ended
July 31, 1999, 1998 and 1997
Statements of Cash Flows for years ended July 31, 1999,
1998 and 1997
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 -26-
<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 (p)
(4) (a) Specimen Stock Certificate (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)
(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)
(n) Employment contract (Stanley H. Pipes) (k)
(o) Addendum to employment contract dated January
31, 1987 (Fred Y. Clark) (k)
(q) Lease-Calumet Plantation (Frank Martin Farms) (k)
(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 -27-
<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)
(ss) Agricultural agreement-Advanced Agriculture, Inc. (p)
(tt) Amendment to agriculture agreement-Advanced Ag. (p)
(uu) Agricultural lease renewal-Daniel Gonsoulin (q)
(vv) Agricultural lease renewal-Baker Plantation, Inc. (q)
(ww) Agricultural lease renewal-Bolton Cane Company (r)
(xx) Agricultural lease-Northside Planting (r)
(yy) Agricultural lease-S & S Farms (r)
(zz) Agricultural lease-Breaux Bros. Farms, Inc. (r)
(aaa) Lease Agreement-Myette Point Boat Landing (r)
(bbb) Lease Agreement-Myette Point Dock (r)
(ccc) Agricultural lease - Ellender Farms (s)
(ddd) Agricultural lease - Gravois Farms (s)
(11) Computation of earnings per share (37)
(b) Reports on Form 8-K
Incorporated by refernce from registrant's Form 8-K filed on March
8, 1999.
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.*
(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.*
IV-3 -28-
<PAGE>
FORM 10-K
PART IV
(Continued)
(k) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1991.*
(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*
(p) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1996*
(q) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1997*
(r) Incorporated by reference from registrant's Form 10-K for the fiscal year
ended January 31, 1998*
(s) Incorporated by reference from registrant's Transition Form 10-K for the
six months ended July 31, 1998*
* Commission File Number 0-1287
IV-4 -29-
<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 October 22, 1999 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 October 22, 1999
--------------------- Director
Craig P. Callier
/s/ Stanley H. Pipes Vice President & Treasurer
---------------------- (Principal Financial and
Stanley H. Pipes Accounting Officer) October 22, 1999
/s/ William S. Patout III Director October 22, 1999
------------------------
William S. Patout III
/s/ Peter V. Guarisco Director October 22, 1999
------------------------
Peter V. Guarisco
/s/ J. Patout Burns, Jr. Director October 22, 1999
----------------------
J. Patout Burns, Jr.
/s/ Rivers Patout Director October 22, 1999
----------------------
Rivers Patout
/s/ Victor Guarisco, II Director October 22, 1999
-----------------------
Victor Guarisco, II
IV-5 -30-
<PAGE>
INDEX TO EXHIBITS
(10) Material Contracts
Agricultural lease - Judd Anderson (32)
(11) Computation of Earnings per Common Share (37)
IV-6 -31-
<PAGE>
STATE OF LOUISIANA
PARISH OF ST.MARY
ARGICULTURAL LEASE
An agreement of lease made and entered into and effective as of January 1,
1999, by and between:
STERLING SUGARS, INC., A Delaware corporation domiciled in St. Mary
Parish, Louisiana, herein represented by and acting through Craig P.
Caillier, its President and Chief Executive Officer whose mailing address
is P. O. Box 572 Franklin, Louisiana 70538, hereinafter referred to as
"Lessor",
and
Judd Anderson, an individual, domiciled in the Parish of St. Mary, State
of Louisiana, herein appearing through and being represented by Judd
Anderson, and whose mailing address is P. O. Box 241, Franklin, Louisiana
70538, hereinafter referred to as "Lessee".
For the consideration and upon the terms and conditions hereinafter
expressed, Lessor does lease, let and hire unto and in favor of Lessee, the
properties in St. Mary Parish, Louisiana, known as a portion of Sterling
Plantation, described in Exhibit "A" attached hereto and made part hereof.
1. This lease is made for the purpose of Lessee's usage of the leased
premises for the production of sugar cane and related agricultural
endeavors. Lessee agrees neither to commit nor permit others to
commit waste upon the property leased; to operate the premises as a
good and prudent husband; and to properly care for and cultivate the
property.
2. It is understood and agreed that material consideration for this
lease is Lessors confidence in the ability and proficiency of Lessee.
Further, this lease shall terminate upon the adjudication of Lessee
in bankruptcy, the appointment of a receiver for Lessee, or the
filing of a bankruptcy, receivership of respite petition by Lessee or
upon Lessee's supervision, failure or insolvency.
3. During the term of this lease, Lessee shall keep at least two-thirds
(2/3rds) of the cultivable land suitable to sugar cane, in cane, and
in the ratio of not less than one-third (1/3rd) of said two-thirds
(2/3rds) in plant cane and the balance in stubble cane, subject to
quota or other regulations of the United States Department of
Agriculture or other Federal or State Governmental agency, and unless
prevented by weather or other conditions beyond the control of Lessee.
4. (A) This lease is made for a period of FIVE (5) years hereafter called
the "primary term", commencing on January 1, 1999 and ending on
December 31, 2004.
IV-7 -32-
<PAGE>
(B) At the end of the primary term hereof, Lessee or Lessor may
terminate the lease by written notice, delivered no less than
ninety (90) days prior to the expiration date of the primary term
or any subsequent term. In the absence of notification for
termination, the lease will automatically be extended under the
same terms and conditions and for the same consideration as during
the primary term, for an additional five year term.
5. (A) This lease is made in consideration of the stipulations and
agreements herein expressed, all of which are material and without
which the same would not be made, and the payment of rental by
Lessee of:
1) In any year during which the average yield of tons of cane per
acre is less than twenty five (25), except such years as the
reduction in tonnage is caused by freeze or hurricane, the rental
shall be one fifth (1/5th) of all sugar cane harvested and
delivered to mills together with all subsidy, incentive or benefit
payments (excluding Agricultural Conservation Payments) accruing
to the said one fifth (1/5th) share of Lessor from the United
States Government or any of its departments or agencies.
-OR-
2) In any year during which the average yield of tons of cane per
acre is more than or equal to twenty five (25), the rental shall
be one sixth (1/6th) of all sugar cane harvested and delivered to
mills together with all subsidy, incentive or benefit payments
(excluding Agricultural Conservation Payments) accruing to the
said one sixth (1/6th) share of Lessor from the United States
Government or any of its departments or agencies.
(A) As a further consideration of this lease all harvested cane
shall be delivered to Sterling Sugars Inc. for grinding, except
seed cane used in Lessee's operation under this lease.
(B) In the event that crops other than sugar cane are grown on the
leased premises, Lessor shall receive one fifth (1/5th) of any
value received for crops harvested from the property herein leased
together with all subsidy, incentive or benefit payments accruing
to the said one fifth (1/5th) share of Lessors from the United
States Government or any of its departments or agencies.
6. As an additional requirement of this lease, Lessee is required to
submit to Lessor, on or before October 31 of each year, a map showing
all crops by age and variety, all seed used and all land planted. Also
on or before January 31 of each year Lessee is required to submit to
Lessor a written report of acreage harvested, tons of cane produced
and pounds of sugar produced (TRS) on the properties covered by this
lease.
IV-8 -33-
<PAGE>
7. LESSOR AND LESSEE mutually agree that at the inception of this lease,
the cultivable land acreage's for that portion of Sterling Plantation
are broken out as follows:
Fallow Land 9.4 Acres
Plant Sugarcane 78.7 Acres
First Year Stubble Sugarcane 0 Acres
Second Year Stubble Sugarcane 70.6 Acres
Third Year Stubble Sugarcane 69.3 Acres
Total 228.0 Acres
The parties agree that LESSOR is the sole owner of all of the
sugarcane crops growing on the leased premises known as Sterling
Plantation, shown on the exhibit "A" and colored yellow. At the
expiration or termination of this lease, in whole or in part, for any
cause, LESSOR, at its option, shall either purchase from LESSEE all
cane remaining in excess of lessors ownership on the leased premises
at the then fair market value, or allow LESSEE to farm off all cane in
excess of lessors ownership through its second year stubble growth.
LESSOR will be compensated for, by LESSEE, the full market value for
seed cane at the time of termination, for any deficiencies in return
of seed acres. In the event LESSOR and LESSEE are unable to agree on
the fair market value of seed cane, then both LESSEE and LESSOR will
accept the value as determined by an independent third party as agreed
to by LESSOR and LESSEE.
8. This lease is made and accepted by Lessee subject to all mineral
leases, and servitudes now existing on the leased premises, and all
other valid and existing servitudes and rights-of-way, recorded or
unrecorded, apparent or non-apparent. Lessor shall have the right
hereafter to grant other and further oil, gas, mineral leases,
servitudes, and rights of way upon the leased property, providing that
the lessee or lessees in such oil, gas or minerals lease, servitudes
and rights of way shall have the right to enter upon the premises for
the purpose of prospecting and exploring for oil, gas and other
minerals and to construct, maintain and operate thereon all buildings,
derricks, machinery, equipment, pipelines, storage tanks and
facilities for the purpose of housing their employees and any
equipment of any nature or description necessary in drilling for,
producing, storing, treating and transporting oil, gas and or other
minerals, and to do all things incidental to the exercise of its or
their rights under such lease or leases. Lessor herein shall not be
responsible or liable to Lessee for any damage that may result to
Lessor or any of its mineral and servitude lessees for any of the
purposes referred to in this paragraph, Lessee hereby expressly
waiving and renouncing any and all rights to claim damages from
Lessor herein on account of actions of any mineral or servitude lessee
of the property, for the destruction of or injury to growing crops on
said property, or damage to the leased premises, which injury or
destruction shall have been caused by the operations of such mineral
or servitude lessee; however shall have the right to assert against
IV-9 -34-
<PAGE>
such mineral or servitude lessee or lessees or third parties, a claim
for damages to the crops or leased premises to the extent of Lessee's
interest therein. Lessor further agrees that in the event it grants
any oil, gas or mineral leases, servitudes or rights of way on said
property, that the said lease or leases will contain a provision that
the mineral or servitude lessee will pay for all damages or injury to
growing crops and that the Lessee herein shall be entitled to the
benefit of such provision, to the extent of Lessee's loss. Lessee
shall to the extent possible join with Lessor in the negotiations
relative to any loss so incurred.
9. Lessee shall fully pay, indemnify and hold harmless Lessor from,
against and in connection with any and all loss, damage, liability and
expense of every nature and kind, including court cost and attorney's
fees, however caused or occurring, including injuries or death to
persons and damage to property, either belonging to Lessor or others,
either directly or indirectly arising from and out of any activities
hereunder. Lessee shall maintain workmen's compensation insurance in
the statutory amount and liability insurance coverage in the total
aggregate amount of One Million Dollars ($1,000,000.00) per
occurrence, on which policy Lessor shall be named as an additional
insured. A certificate of insurance shall be furnished Lessor and
provision shall be made that the policy or policies shall not be
canceled without notice to Lessor.
10. Lessee shall have the right to construct such buildings and
improvements on the leased premises at Lessee's sole expense, as may
be necessary or desirable in connection with Lessee's agricultural
operations, subject to approval of Lessor. All buildings and other
improvements constructed on the leased premises during the term of
this lease shall become the property of Lessor, if Lessor so desires
and is willing to purchase same at fair appraised market value. In the
event Lessor is unwilling to purchase buildings or other improvements
constructed by Lessee upon termination of this lease, then Lessee
shall remove same at Lessee's cost and expense, within Ninety (90)
days of termination of this lease, after which same shall become the
property of Lessor.
11. Lessor or its agents shall have the right to enter upon the leased
premises at all times for any and all purposes, except that Lessee's
agricultural operations shall not be interfered with.
12. This lease shall be terminated prior to the expiration of the term
herein provided, at the option of Lessor in the event of default upon
the part of Lessee in keeping or performing any of the obligations of
Lessee under this lease for thirty (30) days after notice in writing
from Lessor to Lessee specifying such default, provided Lessee has not
commenced within said thirty (30) day period action to correct such
default and thereafter diligently proceeded to actually correct such
default.
IV-10 -35-
<PAGE>
13. In the event of an expropriation or of a sale under threat of
expropriation of any portion of the premises (cultivable land) or in
the event of any mineral lease or servitude affecting the premises,
the full amount paid for the land or servitude taken as well as the
full amount paid for severance damages to any remaining land, shall
belong to Lessor. With regard to all other amounts paid for crop
damages, Lessor shall be entitled to one sixth (1/6th) thereof, with
Lessee's claim being against the expropriating authority or lease or
servitude holder for five sixth (5/6ths) of the value of any crop
damaged or destroyed. Lessee reserves and shall have the right to
claim damages from the purchaser of such acreage, whether said
purchase is made by expropriation or under threat of expropriation for
any damages directly related to Lessee's agricultural operations on
the premise, sustained by it through or as a result of such taking or
sale. In the event of any sale, Lessor shall not be responsible or
liable to Lessee for any damages that Lessee may sustain as a result
thereof and Lessee expressly waives and renounces any and all rights
to claims damages whatsoever from Lessor. For the purpose of this
paragraph "crop value" is hereby defined as the total value of the
crop including the mill share as well as the farmer's share.
14. Lessee acknowledges that he will use the aforedescribed property for
agricultural purposes and for this reason, Lessee acknowledges that
there may be on the leased premises what is determined to be by the
Environmental Protection Agency or any other state or governmental
agency regulated hazardous and/or toxic substances. Lessee shall be
responsible for all litigation or claims arising out of its use of
said substances on the leased premises and that Lessee agrees to
indemnify and hold Lessor harmless from any and all losses, costs,
liability and expenses including without limitation, reasonable
attorney's fees incurred in connection with litigation arising out of
its use of the leased premises.
15. It is distinctly agreed and understood that during the period of this
lease, Lessee shall at all times be a member in good standing of the
American Sugar League.
16. All notices herein provided for shall be effective upon placing same
in the mail, addressed to Lessee or Lessor at the above mentioned
addresses unless such addresses be changed in writing.
THUS DONE AND SIGNED at Sterling Sugars Inc., St. Mary Parish, Louisiana,
this 30 day of July, 1999, in the presence of the undersigned competent
witnesses.
WITNESS:
STERLING SUGARS, INC.
/s/ Desiree Wimberly Craig P. Caillier, President
--------------------
/s/ Craig P. Caillier
/s/ Denette Champagne ----------------------
---------------------
Judd Anderson
/s/ Desiree Wimberly
--------------------- /s/ Judd Anderson
-----------------
IV-11 -36-
<PAGE>
STERLING SUGARS, INC.
COMPUTATION OF EARNINGS PER SHARE
Year Ended July 31,
1999 1998 1997
---------------------------------
Primary
Income $ 604,964 $ 1,957,197 $ 640,577
========== =========== ==========
Shares
Weighted average number of common
shares outstanding 2,500,000 2,500,000 2,500,000
---------- ----------- ----------
Primary earnings per share $.24 $.78 $.26
========== =========== ==========
IV-12 -37-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 8050
<SECURITIES> 450000
<RECEIVABLES> 648354
<ALLOWANCES> 0
<INVENTORY> 639896
<CURRENT-ASSETS> 2830983
<PP&E> 50968289
<DEPRECIATION> 26077135
<TOTAL-ASSETS> 29411857
<CURRENT-LIABILITIES> 3866727
<BONDS> 7883984
<COMMON> 2500000
0
0
<OTHER-SE> 13784146
<TOTAL-LIABILITY-AND-EQUITY> 29411857
<SALES> 43186396
<TOTAL-REVENUES> 45125532
<CGS> 42007037
<TOTAL-COSTS> 44093368
<OTHER-EXPENSES> 923351
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1162980
<INCOME-PRETAX> 1032164
<INCOME-TAX> 427200
<INCOME-CONTINUING> 604964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 604964
<EPS-BASIC> .24
<EPS-DILUTED> .24
</TABLE>
