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 January 31, 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 March 2, 1999.
Total number of pages 14
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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 January 31, 1999
(unaudited) and July 31, 1998 I-1
Statements of earnings and retained earnings
Six months ended January 31, 1999 (unaudited)
and 1998 (unaudited) (restated) I-2
Statements of earnings and retained earnings
Three months ended January 31, 1999 (unaudited)
and 1998 (unaudited) (restated) I-3
Statements of cash flows
Six months ended January 31, 1999 (unaudited)
and 1998 (unaudited) (restated) I-4
Notes to condensed financial statements
Three and six months ended January 31, 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
January 31, July 31,
1999 1998
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 4,264 $ 164,152
Accounts receivable 10,091,258 376,308
Inventories 12,018,446 655,001
Expenditures for future crops 94,291 330,760
Deferred income taxes 543,000 543,000
Other current assets 341,624 720,664
------------- -------------
TOTAL CURRENT ASSETS $ 23,092,883 $ 2,789,885
------------- -------------
Property, plant and equipment - net $ 23,670,014 $ 24,312,667
------------- -------------
Expenditures for future crops $ 1,208,174 $ 1,208,174
------------- -------------
Notes receivable - net of allowance $ 453,228 $ 497,460
------------- -------------
Other assets $ 38,734 $ 34,002
------------- -------------
$ 48,463,033 $ 28,842,188
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Notes Payable $10,030,000 $ 1,135,000
Accounts payable and accrued expenses 2,839,088 885,857
Due cane growers 7,282,006 239,835
Current portion long-term debt 939,122 941,151
------------- -------------
TOTAL CURRENT LIABILITIES $21,090,216 $ 3,201,843
------------- -------------
Long-term debt $ 8,354,718 $ 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 15,295,954 13,138,727
------------- -------------
$ 17,834,199 $ 15,679,182
------------- -------------
$ 48,463,033 $ 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)
SIX MONTHS ENDED JANUARY 31
---------------------------
1999 1998
---- (Restated)
NOTE B
----------
REVENUES:
Sugar and molasses sales $29,149,561 $27,449,266
Interest earned 1,980 15,255
Mineral leases and royalties 41,592 82,717
Loss on sale of depreciable assets - (139,902)
Other 1,318,263 834,964
------------ ------------
$30,511,396 $28,242,300
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $26,021,795 $22,154,980
General and administrative 399,518 476,108
Interest expense 610,686 672,001
------------ ------------
$27,031,999 $23,303,089
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 3,479,397 $ 4,939,211
INCOME TAXES 1,322,170 1,876,900
------------ ------------
NET EARNINGS $ 2,157,227 $ 3,062,311
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,138,727 11,217,274
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $15,295,954 $14,279,585
============ ============
NET EARNINGS PER SHARE $ .86 $ 1.22
============ ============
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 JANUARY 31
-----------------------------
1999 1998
---- (Restated)
NOTE B
----------
REVENUES:
Sugar and molasses sales $22,027,084 $17,513,792
Interest earned 51 14,261
Mineral leases and royalties 20,278 35,993
Gain (loss) on sale of depreciable assets (138,779)
Other 884,986 325,162
------------ ------------
$22,932,399 $17,750,429
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $18,705,515 $12,475,916
General and administrative 234,125 374,365
Interest expense 350,288 381,371
------------ ------------
$19,289,928 $13,231,652
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 3,642,471 $ 4,518,777
INCOME TAXES 1,384,138 1,717,135
------------ ------------
NET EARNINGS $ 2,258,333 $ 2,801,642
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,037,621 11,477,943
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $15,295,954 $14,279,585
============ ============
NET EARNINGS (LOSS) PER SHARE $ .90 $ 1.12
============ ============
See notes to condensed financial statements
I-3 -5-
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STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JANUARY 31
---------------------------
1999 1998
---- (Restated)
NOTE B
----------
OPERATING ACTIVITIES:
Net earnings $ 2,157,227 $ 3,062,311
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 1,109,744 884,493
Loss on sale of depreciable assets - 139,902
Changes in operating assets and liabilities:
Increase in accounts receivable ( 9,714,950) (2,326,949)
Increase in inventories (11,363,445) (12,794,272)
Increase in accounts payable accrued
expenses and due cane growers 8,995,402 6,878,567
Other items - net 724,284 276,751
------------ ------------
Net cash provided by operating activities $ (8,091,738) $(3,879,197)
------------ ------------
INVESTING ACTIVITIES:
Collection on notes receivable 44,232 147,596
Issuance of notes receivable - ( 72,662)
Purchase of property, plant and equipment $( 582,808) $( 1,828,177)
Proceeds from sale of depreciable assets - 299
----------- ------------
Net cash used in investing activities $( 538,576) $( 1,752,944)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term notes payable
and long-term debt $ 22,303,200 $ 15,402,657
Payments on short-term notes payable
and long-term debt (13,832,774) (9,862,409)
------------ ------------
Net cash provided by financing activities $ 8,470,426 $ 5,540,248
------------ ------------
Decrease in cash and temporary investments $( 159,888) $ (91,893)
Cash and temporary investments at the
beginning of the period 164,152 302,616
------------ ------------
Cash and temporary investments at the
end of the period $ 4,264 $ 210,723
============ ============
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 $ 610,686 $ 672,001
=========== ===========
Income taxes paid $ -0- $ 225,000
=========== ===========
I-5 -7-
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JANUARY 31, 1999 AND 1998
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheet as of January 31, 1999,
the statements of earnings and retained earnings for the three
and six months ending January 31, 1999 and 1998, and the condensed
statements of cash flows for the six 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 January 31, 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 January 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 January 31, 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 SIX MONTHS ENDED JANUARY 31, 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 January 31, 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
$35.00 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 six months ended January 31, 1999
and 1998 were as follows:
1999 1998
----------------------------
Raw sugar sales $28,488,330 $26,793,724
Blackstrap molasses 661,231 655,542
------------ ------------
$29,149,561 $27,449,266
============ ============
Sugar and molasses sales remained steady for the two periods.
Raw sugar inventories also remained steady at $12,018,446 for the six
months ended January 31, 1999 and $12,617,812 for the same period last
year.
I-8 -10-
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Interest Earned:
Interest earned for the six month period ending January 31,
1999 was $1,980 compared to $15,255 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. Comparable figures were recorded for the three month
periods ending January 31, 1999 and 1998. They were $51 and $14,261
respectively.
Mineral Leases and Royalties:
Mineral leases and royalties were down for the six months ended
January 31, 1999 at $41,592 compared to $82,217 for the same period
last year. With the decline in oil prices, seismic activity has also
declined resulting in less income from that source. A similar decline
was registered in mineral leases and royalties for the three month
periods ending January 31, 1999 and 1998. These figures were $20,278
and $35,993, respectively.
Loss on the Sale of Depreciable Assets:
There was no loss from the sale of depreciable assets for the
six months ended January 31, 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.
Other Revenues:
Other revenues, which consist mainly of miscellaneous income items
and cane land rentals, were $1,318,263 for the six months ended January
31, 1999 and $834,964 for the six months ended January 31, 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. Cane land
rentals for that period without the charge was $1,214,077 compared to
$1,250,422 for the current year.
Cost of Products Sold:
Cost of products sold totaled $26,021,795 for the six months ended
January 31, 1999 and $22,154,980 for the six months ended January 31,
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 $399,518 for the six
months ended January 31, 1999 and $476,108 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 six months ending January 31, 1999 whereas such charges
were included in the six months ending January 31, 1998.
I-9 -11-
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Interest Expense:
Interest expense declined slightly from $672,001 for the six months
ended January 31, 1998 to $610,686 for the six months ended January 31,
1999. The decline resulted from lower interest rates. For the period
ended January 31, 1998, the short-term interest rate was 8.50 percent.
After January 31, 1998 and 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 six month periods
ending January 31, 1999 and 1998 were recorded at the statutory rate
of 38 percent which reflects the 34 percent federal corporate rate plus
4 percent state income taxes.
Liquidity and Capital Resources:
At January 31, 1999, the Company had working capital of $2,002,667
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.
For the six month period ending July 31, 1999, the Company has
budgeted $3,091,566 for capital improvements and repairs to the factory
and $12,925,748 (which includes short-term debt repayment) for general
and administrative expenses. The Company expects to finance the
majority of these expenditures internally with any excess financed
short-term through a bank with which the Company has a $9,000,000 line
of credit.
I-10 -12-
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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 August 25, 1998, the Company filed Form 8K
notifying the Securities and Exchange Commission
that the Company had changed its fiscal year from
January 31 to July 31. The Form 8K is incorporated
herein by reference.
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 -13-
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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 March 15, 1999 By /s/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE March 15, 1999 By /s/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -14-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 4264
<SECURITIES> 0
<RECEIVABLES> 10091258
<ALLOWANCES> 0
<INVENTORY> 12018446
<CURRENT-ASSETS> 23092883
<PP&E> 23670014
<DEPRECIATION> 1109744
<TOTAL-ASSETS> 48463033
<CURRENT-LIABILITIES> 21090216
<BONDS> 0
<COMMON> 2500000
0
0
<OTHER-SE> 15334199
<TOTAL-LIABILITY-AND-EQUITY> 48463033
<SALES> 29149561
<TOTAL-REVENUES> 30511396
<CGS> 26021795
<TOTAL-COSTS> 27031999
<OTHER-EXPENSES> 399518
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 610686
<INCOME-PRETAX> 3479397
<INCOME-TAX> 1322170
<INCOME-CONTINUING> 2157227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2157227
<EPS-PRIMARY> .86
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