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, 1999
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 June 2, 1999.
Total number of pages 15
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STERLING SUGARS, INC.
I N D E X
PAGE
NUMBER
PART I: FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Condensed balance sheets April 30, 1999
(unaudited) and July 31, 1998 I-1
Statements of earnings and retained earnings
Nine months ended April 30, 1999 (unaudited)
and 1998 (unaudited) (restated)
and 1998 (unaudited) (restated) I-2
Statements of earnings and retained earnings
Three months ended April 30, 1999 (unaudited)
and 1998 (unaudited) (restated) I-3
Statements of cash flows
Nine months ended April 30, 1999 (unaudited)
and 1998 (unaudited) (restated) I-4
Notes to condensed financial statements
Three and nine months ended April 30, 1999
and 1998 I-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-8
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K II-1
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STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
April 30, July 31,
1999 1998
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 2,361 $ 164,152
Accounts receivable 5,678,849 376,308
Inventories 4,824,615 655,001
Expenditures for future crops 125,705 330,760
Deferred income taxes 543,000 543,000
Other current assets 526,567 720,664
------------- -------------
TOTAL CURRENT ASSETS $ 11,701,097 $ 2,789,885
------------- -------------
Property, plant and equipment - net $ 24,040,411 $ 24,312,667
------------- -------------
Expenditures for future crops $ 1,208,174 $ 1,208,174
------------- -------------
Notes receivable - net of allowance $ 456,712 $ 497,460
------------- -------------
Other assets $ 42,588 $ 34,002
------------- -------------
$ 37,448,982 $ 28,842,188
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Notes Payable $ 4,188,030 $ 1,135,000
Accounts payable and accrued expenses 1,479,193 885,857
Due cane growers 4,275,624 239,835
Current portion long-term debt 950,877 941,151
------------- -------------
TOTAL CURRENT LIABILITIES $10,893,724 $ 3,201,843
------------- -------------
Long-term debt $ 8,260,054 $ 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 38,245 40,455
Retained earnings 14,573,059 13,138,727
------------- -------------
$ 17,111,304 $ 15,679,182
------------- -------------
$ 37,448,982 $ 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)
NINE MONTHS ENDED APRIL 30
---------------------------
1999 1998
---- (Restated)
NOTE B
----------
REVENUES:
Sugar and molasses sales $37,658,969 $39,687,828
Interest earned 3,800 16,237
Mineral leases and royalties 81,882 113,954
Loss on sale of depreciable assets - (139,902)
Gain on sale of land 299,495 -
Other 1,422,816 848,931
------------ ------------
$39,466,962 $40,527,048
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $35,515,072 $34,885,123
General and administrative 709,281 741,004
Interest expense 929,171 952,568
------------ ------------
$37,153,524 $36,578,695
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 2,313,438 $ 3,948,353
INCOME TAXES 879,106 1,500,374
------------ ------------
NET EARNINGS $ 1,434,332 $ 2,447,979
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,138,727 11,847,433
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $14,573,059 $14,295,412
============ ============
NET EARNINGS PER SHARE $ .57 $ .98
============ ============
See notes to condensed financial statements
I-2 -4-
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STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED APRIL 30
-----------------------------
1999 1998
---- (Restated)
NOTE B
----------
REVENUES:
Sugar and molasses sales $ 8,509,408 $12,238,562
Interest earned 1,820 982
Mineral leases and royalties 40,290 31,237
Gain on sale of land 299,495 -
Other 104,553 13,967
------------ ------------
$ 8,955,566 $12,284,748
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 9,493,240 $12,730,143
General and administrative 309,763 264,896
Interest expense 238,563 280,567
------------ ------------
$10,041,566 $13,275,606
------------ ------------
NET LOSS BEFORE INCOME TAXES $(1,086,000) $ (990,858)
INCOME TAXES (CREDIT) (412,680) (376,526)
------------ ------------
NET LOSS $ (673,320) $ (614,332)
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,138,727 14,279,585
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $12,465,407 $13,665,253
============ ============
NET LOSS PER SHARE $ ( .27) $ ( .25)
============ ============
See notes to condensed financial statements
I-3 -5-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED APRIL 30
---------------------------
1999 1998
---- (Restated)
NOTE B
----------
OPERATING ACTIVITIES:
Net earnings $ 1,434,332 $ 2,447,979
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 1,650,464 1,414,618
Loss on sale of depreciable assets - 139,902
Gain on sale of land (299,495) -
Changes in operating assets and liabilities:
Increase in accounts receivable ( 5,302,541) (4,700,725)
Increase in inventories ( 4,169,614) (1,621,478)
Increase in accounts payable accrued
expenses and due cane growers 4,629,125 1,502,775
Other items - net 88,911 799,106
------------ ------------
Net cash provided by operating activities $ (1,968,818) $( 17,823)
------------ ------------
INVESTING ACTIVITIES:
Collection on notes receivable 78,774 129,288
Issuance of notes receivable 38,026 -
Purchase of property, plant and equipment $( 1,078,763) $( 2,528,109)
Proceeds from sale of depreciable assets - 299
Proceeds from sale of land 299,495 -
----------- ------------
Net cash used in investing activities $( 738,520) $( 2,398,522)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term notes payable
and long-term debt $ 27,568,607 $ 17,155,275
Payments on short-term notes payable
and long-term debt (25,023,060) (16,723,413)
------------ ------------
Net cash provided by financing activities $ 2,545,547 $ 431,862
------------ ------------
Decrease in cash and temporary investments $( 161,791) $( 1,984,483)
Cash and temporary investments at the
beginning of the period 164,152 302,616
------------ ------------
Cash and temporary investments at the
end of the period $ 2,361 $( 1,681,867)
============ ============
Continued
See notes to condensed financial statements
I-4 -6-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Supplemental information:
Interest paid $ 838,088 $ 843,539
=========== ===========
Income taxes paid $ -0- $ 225,000
=========== ===========
I-5 -7-
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheet as of April 30, 1999,
the statements of earnings and retained earnings for the three
and nine months ending April 30, 1999 and 1998, and the condensed
statements of cash flows for the nine 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 April 30, 1999 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 31, 1998
report to stockholders and/or the transition Form 10-K filed with
the Securities and Exchange Commission on October 30, 1998.
The results of operations for the period ending April 30, 1999
are not necessarily indicative of the operating results expected
for the full year.
I-6 -8-
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
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 transition
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 April 30, 1999 and 1998, the Statement of earnings and
retained earnings and the Statement of cash flows for the previous
year have been restated.
I-7 -9-
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STERLING SUGARS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
General Information:
The Company's grinding season commenced on October 1, 1998 and
ended January 9, 1999. A total of 1,031,144 tons of sugarcane were
processed which was a company record. The Company processed 899,989
tons last year also a company record at that time.
Sugar yield was down this year at 187.87 pounds of sugar per ton
of sugarcane compared to 210.31 pounds the previous year. The lower
yield for the current year was most likely caused by the unusually
warm weather experienced throughout the harvesting season. This caused
the cane to continue its growth. Sugarcane uses sugar for
growth thereby causing a decrease in sugar yield while at the same time
increasing the yield of sugarcane per acre. Even though the Company
ground 131,155 tons of cane more than last year, only slightly more
sugar was produced. For the current crop, the Company produced
193,724,015 pounds of raw sugar compared to 189,284,124 pounds the
previous year. The price of raw sugar remained approximately the same
for both years.
Blackstrap molasses production increased from 4.86 gallons per ton
the previous year to 5.20 gallons per ton of cane for the current year.
Total production of molasses was 4,376,292 gallons last
year compared to 5,356,924 gallons this year. However, the increased
production was offset by a decline in price for blackstrap molasses.
The price last year was quoted at $57.50 per ton of molasses (there are
171 gallons of molasses per ton) compared to the current price of
$32.50 per ton. Lower demand worldwide, particularly in the Asian
sector, has caused the price to drop.
Sugar and Molasses Sales:
Sugar and molasses sales for the nine months ended April 30, 1999
and 1998 were as follows:
1999 1998
----------------------------
Raw sugar sales $36,834,532 $38,641,894
Blackstrap molasses 824,437 1,045,934
------------ ------------
$37,658,969 $39,687,828
============ ============
I-8 -10-
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Sugar and molasses sales remained steady for the two periods.
Raw sugar inventories were $4,168,485 for the nine months ended April
30, 1999 and $1,816,416 for the same period last year. The difference
in inventories is reflected in the raw sugar sales above given that
the quantity of sugar produced and the price were approximatley the
same. Although the Company produced more molasses in the current year,
sales are down due to a drop in price. The current price for molasses
is $32.50 per ton compared to $57.50 at the same time last year. The
price drop is a result of an over supply of molasses worldwide coupled
with lesser demand.
Interest Earned:
Interest earned for the nine month period ending April 30,
1999 was $3,800 compared to $16,237 for the same period last year. The
interest income for the current period reflects the smaller amount of
funds available for short-term investment and to a lesser extent lower
interest rates.
Mineral Leases and Royalties:
Mineral leases and royalties were down for the nine months ended
April 30, 1999 at $81,882 compared to $113,957 for the same period
last year. With the decline in oil prices, seismic activity has also
declined resulting in less income from that source. Mineral leases and
royalties increased for the three month periods ending April 30, 1999
and 1998. These figures were $40,290 and $31,237, respectively. The
increase resulted from the renewal of an oil and gas lease on 321 acres
in St. Mary Parish during the quarter ended April 30, 1999.
Loss on the Sale of Depreciable Assets:
There was no loss from the sale of depreciable assets for the
nine months ended April 30, 1999. A loss of $139,902 was recorded
for the same period last year. This loss resulted from the sale or
scrapping of obsolete machinery and equipment.
Gain on the Sale of Land:
In February, 1999, the Company sold 1,795.31 acres to the U. S.
Corps of Engineers under threat of expropriation. The sale resulted
in a gain of $299,495. The land sold consisted entirely of low lands
and wet lands. The Company retained mineral rights to the land. To
avoid tax consequences, the Company purchased 416.07 acres of like-kind
property for $503,940. This purchased property is principally cane land.
I-9 -11-
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Other Revenues:
Other revenues, which consist mainly of miscellaneous income items
and cane land rentals, were $1,422,816 for the nine months ended April
30, 1999 and $848,931 for the nine months ended April 30, 1998. The
1998 other revenues amount includes a one time charge of $440,000 against
cane rental income of Oaklawn Plantation made in conjunction with the
purchase of approximatley 8,500 acres in December, 1996. For the three
months ended April 30, 1999 and 1998, other revenues were $104,553 and
$13,967, respectively. The 1999 amount included for the first time cane
land rentals for land that had been purchased in LaFourche Parish
the previous year.
Cost of Products Sold:
Cost of products sold totaled $35,515,072 for the nine months ended
April 30, 1999 and $34,885,123 for the nine months ended April 30,
1998. The costs charged to this account are relative to the sales of
raw sugar and molasses.
General and Administrative Expenses:
General and administrative expenses were $709,281 for the nine
months ended April 30, 1999 and $741,004 for the same period last
year. The principal difference in two amounts is auditing expense.
Because of the change in fiscal year, the Company incurred no auditing
expense for the nine months ending April 30, 1999 whereas such charges
were included in the nine months ending April 30, 1998.
Interest Expense:
Interest expense decreased slightly from $952,568 for the nine
ended April 30, 1998 to $929,171 for the nine months ended April 30,
1999. The decline resulted from lower interest rates. For the period
ended April 30, 1998, the short-term interest rate was 8.50 percent.
Beginning in August, 1998, the rate declined steadily with the rate
stabilizing at 6.75 percent in November, 1998. The Company also
renegotiated the terms of a long-term loan with a bank from a rate of
8.25 percent to 8.00 percent effective October 1, 1998.
Income Taxes:
The income tax expense for the three and nine month periods
ending April 30, 1999 and 1998 was 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 April 30, 1999, the Company had working capital of $807,373
compared to a negative working capital of $411,958 at July 31, 1998.
Due to the seasonal nature of the industry, it is not uncommon to have
a negative working capital balance just before the start of the new
season.
I-10 -12-
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For the six month period ending July 31, 1999, the Company has
budgeted $4,275,950 for capital improvements and repairs to the factory
and $14,194,473 (which includes short-term debt repayment) for general
and administrative expenses. At April 30, 1999, short-term debt was
$4,188,030 and the Company expects to substantially pay off the debt by
the year ended July 31, 1999. The remainder of the budgeted expenditures
will be financed internally with any excess financed short-term through
a bank with which the Company has a $9,000,000 line of credit.
I-11 -13-
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K
On March 8, 1999, the Company filed Form 8K
notifying the Securities and Exchange Commission
that the Company had changed auditors. The Form 8K
is incorporated herein by reference.
II-1 -14-
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
STERLING SUGARS, INC.
---------------------
(REGISTRANT)
DATE June 11, 1999 By /s/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE June 11, 1999 By /s/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -15-
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<PERIOD-END> APR-30-1999
<CASH> 2361
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<RECEIVABLES> 5678849
<ALLOWANCES> 0
<INVENTORY> 4824615
<CURRENT-ASSETS> 11701097
<PP&E> 24040411
<DEPRECIATION> 1650464
<TOTAL-ASSETS> 37448982
<CURRENT-LIABILITIES> 10893724
<BONDS> 0
<COMMON> 2500000
0
0
<OTHER-SE> 14611304
<TOTAL-LIABILITY-AND-EQUITY> 37448982
<SALES> 37658969
<TOTAL-REVENUES> 39466962
<CGS> 35515072
<TOTAL-COSTS> 37153524
<OTHER-EXPENSES> 709281
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 929171
<INCOME-PRETAX> 2313438
<INCOME-TAX> 879106
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<DISCONTINUED> 0
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<NET-INCOME> 1434332
<EPS-BASIC> .57
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