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, 2000
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
Louisiana 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, 2000.
Total number of pages 13
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STERLING SUGARS, INC.
I N D E X
PAGE
NUMBER
PART I: FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Condensed balance sheets January 31, 2000
(unaudited) and July 31, 1999 I-1
Statements of earnings and retained earnings
Six months ended January 31, 2000 (unaudited)
and 1999 (unaudited) I-2
Statements of earnings and retained earnings
Three months ended January 31, 2000 (unaudited)
and 1999 (unaudited) I-3
Statements of cash flows
Six months ended January 31, 2000 (unaudited)
and 1999 (unaudited) I-4
Notes to condensed financial statements
Three and six months ended January 31, 2000
and 1999 I-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-6
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,
2000 1999
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $( 6,176) $ 458,050
Accounts receivable 14,704,962 648,354
Raw sugar and molasses inventories
(at market) 13,340,306 -
Operating supplies - at cost 692,068 639,896
Deferred income taxes 377,800 377,800
Other current assets 254,561 706,883
------------- -------------
TOTAL CURRENT ASSETS $ 29,363,521 $ 2,830,983
------------- -------------
Property, plant and equipment - net $ 24,186,948 $ 24,891,154
------------- -------------
Expenditures for future crops $ 1,138,963 $ 1,138,963
------------- -------------
Notes receivable - net of allowance $ 582,945 $ 512,246
------------- -------------
Other assets $ 56,108 $ 38,511
------------- -------------
$ 55,328,485 $ 29,411,857
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Notes Payable $ 16,588,293 $ -
Accounts payable and accrued expenses 3,393,669 1,218,059
Due cane growers 5,602,030 1,660,252
Current portion long-term debt 1,050,397 988,416
------------- -------------
TOTAL CURRENT LIABILITIES $ 26,634,389 $ 3,866,727
------------- -------------
Long-term debt $ 7,464,898 $ 7,883,984
------------- -------------
Deferred income taxes $ 1,377,000 $ 1,377,000
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital 40,455 40,455
Retained earnings 17,311,743 13,743,691
------------- -------------
$ 19,852,198 $ 16,284,146
------------- -------------
$ 55,328,485 $ 29,411,857
============= =============
NOTE: The balance sheet at July 31, 1999 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
---------------------------
2000 1999
-------- ----------
REVENUES:
Sugar and molasses sales $32,559,949 $29,149,561
Interest earned 1,723 1,980
Mineral leases and royalties 51,563 41,592
Other 1,626,208 1,318,263
------------ ------------
$34,239,443 $30,511,396
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $27,253,131 $26,021,795
General and administrative 532,095 399,518
Interest expense 699,294 610,686
------------ ------------
$28,484,520 $27,031,999
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 5,754,923 $ 3,479,397
INCOME TAXES 2,186,871 1,322,170
------------ ------------
NET EARNINGS $ 3,568,052 $ 2,157,227
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,743,691 13,138,727
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $17,311,743 $15,295,954
============ ============
NET EARNINGS PER SHARE $ 1.43 $ .86
============ ============
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
-----------------------------
2000 1999
--------- ---------
REVENUES:
Sugar and molasses sales $23,380,224 $22,027,084
Interest earned 1,661 51
Mineral leases and royalties 24,012 20,278
Other 1,115,225 884,986
------------ ------------
$24,521,122 $22,932,399
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $18,430,247 $18,705,515
General and administrative 306,078 234,125
Interest expense 430,363 350,288
------------ ------------
$19,166,688 $19,289,928
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 5,354,434 $ 3,642,471
INCOME TAXES 2,034,685 1,384,138
------------ ------------
NET EARNINGS $ 3,319,749 $ 2,258,333
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,991,994 13,037,621
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $17,311,743 $15,295,954
============ ============
NET EARNINGS (LOSS) PER SHARE $ 1.33 $ .90
============ ============
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
---------------------------
2000 1999
--------- ---------
OPERATING ACTIVITIES:
Net earnings $ 3,568,052 $ 2,157,227
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 1,142,034 1,109,744
Changes in operating assets and liabilities:
Increase in accounts receivable (14,056,608) (9,714,950)
Increase in inventories (13,392,479) (11,363,445)
Increase in accounts payable accrued
expenses and due cane growers 6,117,388 8,995,402
Other items - net 345,964 724,284
------------ ------------
Net cash provided by operating activities $(16,275,649) $(8,091,738)
------------ ------------
INVESTING ACTIVITIES:
Collection on notes receivable 8,363 44,232
Purchase of property, plant and equipment $( 420,591) $( 582,808)
----------- ------------
Net cash used in investing activities $( 412,228) $( 538,576)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term notes payable
and long-term debt $ 32,206,526 $ 22,303,200
Payments on short-term notes payable
and long-term debt (15,982,875) (13,832,774)
------------ ------------
Net cash provided by financing activities $ 16,223,651 $ 8,470,426
------------ ------------
Decrease in cash and temporary investments $( 464,226) $( 159,888)
Cash and temporary investments at the
beginning of the period 458,050 164,152
------------ ------------
Cash and temporary investments at the
end of the period $( 6,176) $ 4,264
============ ============
Supplemental information:
Interest paid $ 622,976 $ 610,686
=========== ============
Income taxes paid $ 60,470 $ -0-
=========== ============
See notes to condensed financial statements
I-4 -6-
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STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JANUARY 31, 2000 AND 1999
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheet as of January 31, 2000,
the statements of earnings and retained earnings for the three
and six months ending January 31, 2000 and 1999, 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, 2000 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, 1999
report to stockholders. The results of operations for the period
ending January 31, 2000 are not necessarily indicative of the
operating results expected for the full year.
I-5 -7-
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STERLING SUGARS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward -Looking Information:
This Form 10-Q contains certain statements that may be deemed
"forward-looking statements." All statements, other than historical
statements, in this Form 10-Q 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-Q 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:
General Information:
The Company's grinding season commenced on September 20, 1999 and
ended January 9, 2000. A total of 1,139,296 tons of sugarcane were
processed which was a company record. The Company processed 1,031,144
tons last year also a company record at that time.
Sugar yield was up this year and is estimated at 209 pounds of sugar
per ton of sugarcane compared to 192 pounds the previous year. The
higher yield for the current year was most likely caused by the weather
patterns experienced during the spring and summer growing season which
were favorable for cane growth and maturity.
The price the Company receives for its raw sugar has declined
subtantially compared to the previous year. Last year, the Company's
average price for raw sugar was approximately 21.15 cents per pound.
The average price for the six months ended January 31, 2000 was 20.56
cents per pound and is expected to go lower. The Company systematically
sells on the futures market throughout the year which cushioned the
substantial price decline. As an example of the price decline, the
March, 2000 futures price was quoted at 22.16 cents per pound on June 16,
1999 and had steadily declined to 16.70 cents per pound on February 8,
2000. Similar declines were noted in the other futures months.
I-6 -8-
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As a consequence of the low price, the raw sugar inventory was
recorded at market since market was below the cost of production. Under
the Federal Agriculture Improvement and Reform Act, the Company has the
right to place the raw sugar inventory under loan at the rate of 18.35
cents per pound. The Company also has the right to forfeit the sugar
under loan passing the title to the Commodity Credit Corporation at the
rate of 17.35 cents per pound which is the 18.35 loan rate less a 1 cent
penalty for the forfeiture. Of the approximately 76,000,000 pounds of
raw sugar in inventory at January 31, 2000, the Company has placed
35,000,000 pounds under loan. Forfeiture of this sugar and the
remaining unsold sugar in inventory will be considered depending on the
price quoted in the open market at the time of sale.
Blackstrap molasses production is estimated at 5.03 gallons per ton
this year compared to 5.49 gallons per ton of cane last year. Total
production of molasses was 5,729,922 gallons this year compared to
5,659,536 gallons for the previous year. However, the price for
blackstrap molasses continues depressed being quoted at $35.00 per ton
on February 28, 2000. This is approximately the same price as last year
but down from the price of $57.50 per ton two years ago.
Sugar and Molasses Sales:
Sugar and molasses sales for the six months ended January 31, 2000
and 1999 were as follows:
1999 1998
----------------------------
Raw sugar sales $31,993,164 $28,488,330
Blackstrap molasses 566,785 661,231
------------ ------------
$32,559,949 $29,149,561
============ ============
Sugar sales were up by $3,504,834 principally because of the greater
tonnage ground and the increased yield of raw sugar. Molasses sales
were down by $94,446 due to lesser demand for the product. Raw sugar
on hand at January 31, 2000 was approximately 38,000 tons compared to
29,535 tons last year. The larger inventory at January 31, 2000
reflects the record production of the Company for the 1999 crop. The
Company produced approximately 119,170 tons of raw sugar for the 1999
crop compared to 99,173 tons for the 1998 crop.
Interest Earned:
Interest earned for the six month period ending January 31,
2000 was $1,723 compared to $1,980 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, 2000 and 1999. They were $1,661 and $51
respectively.
I-7 -9-
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Mineral Leases and Royalties:
Mineral leases and royalties were up slightly for the six months
ended January 31, 2000 at $51,563 compared to $41,592 for the same period
last year. A similar increase was registered in mineral leases and
royalties for the three month periods ending January 31, 2000 and 1999.
These figures were $24,012 and $20,278, respectively.
Other Revenues:
Other revenues, which consist mainly of miscellaneous income items
and cane land rentals, were $1,626,208 for the six months ended January
31, 2000 and $1,318,263 for the six months ended January 31, 1999. Cane
land rentals for the current period were $1,549,948 compared to
$1,250,422 last year. The higher cane land rentals is a direct result of
the purchase of 710 acres in LaFourche Parish and 414 acres in Iberia
Parish. Both tracts of land are leased to area farmers under rental
agreements.
Cost of Products Sold:
Cost of products sold totaled $27,253,131 for the six months ended
January 31, 2000 and $26,021,795 for the six months ended January 31,
1999. 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 $532,095 for the six
months ended January 31, 2000 and $399,518 for the same period last
year. The principal difference in two amounts is increases in legal
expenses in conjunction with the reincorporation of the Company, higher
hospitalization costs and small increases in numerous items in this
category.
Interest Expense:
Interest expense was $699,294 compared to $610,686 for the six
months ended January 31, 2000 and 1999, respectively. The higher
interest reflects the greater outstanding loan balance and to a lesser
extent higher interest rates.
Income Taxes:
The income tax expense for the three and six month periods
ending January 31, 2000 and 1999 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, 2000, the Company had working capital of $2,729,132
compared to a negative working capital of $1,035,744 at July 31, 1999.
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-8 -10-
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For the six month period ending July 31, 2000, the Company has
budgeted $3,986,900 for capital improvements and repairs to the factory
and $20,261,003 (which includes short-term debt repayment) for general
and administrative and other 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 $12,000,000 line
of credit.
I-9 -11-
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K
There were no reports filed on Form 8K for the period.
II-1 -12-
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
STERLING SUGARS, INC.
---------------------
(REGISTRANT)
DATE March 13, 2000 By /s/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE March 13, 2000 By /s/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -13-
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<PERIOD-END> JAN-31-2000
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<SECURITIES> 0
<RECEIVABLES> 14704962
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<COMMON> 2500000
0
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<OTHER-SE> 17352198
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