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, 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 June 5, 2000.
Total number of pages 15
-1-
<PAGE>
STERLING SUGARS, INC.
I N D E X
PAGE
NUMBER
PART I: FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Condensed balance sheets April 30, 2000
(unaudited) and July 31, 1999 I-1
Statements of earnings and retained earnings
Nine months ended April 30, 2000 (unaudited)
and 1999 (unaudited) I-2
Statements of earnings and retained earnings
Three months ended April 30, 2000 (unaudited)
and 1999 (unaudited) I-3
Statements of cash flows
Nine months ended April 30, 2000 (unaudited)
and 1999 (unaudited) I-4
Notes to condensed financial statements
Three and nine months ended April 30, 2000
and 1999 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
-2-
<PAGE>
STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
April 30, July 31,
2000 1999
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 170,999 $ 458,050
Accounts receivable 3,986,620 648,354
Raw sugar and molasses inventories
(at market) 7,780,024 -
Operating supplies - at cost 690,143 639,896
Deferred income taxes 377,800 377,800
Other current assets 442,281 706,883
------------- -------------
TOTAL CURRENT ASSETS $ 13,447,867 $ 2,830,983
------------- -------------
Property, plant and equipment - net $ 24,271,181 $ 24,891,154
------------- -------------
Expenditures for future crops $ 1,138,963 $ 1,138,963
------------- -------------
Notes receivable - net of allowance $ 609,539 $ 512,246
------------- -------------
Other assets $ 61,789 $ 38,511
------------- -------------
$ 39,529,339 $ 29,411,857
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Notes Payable $ 6,440,652 $ -
Accounts payable and accrued expenses 2,183,790 1,218,059
Due cane growers 2,416,149 1,660,252
Current portion long-term debt 990,557 988,416
------------- -------------
TOTAL CURRENT LIABILITIES $ 12,031,148 $ 3,866,727
------------- -------------
Long-term debt $ 7,462,961 $ 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 16,117,775 13,743,691
------------- -------------
$ 18,658,230 $ 16,284,146
------------- -------------
$ 39,529,339 $ 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-
<PAGE>
STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
NINE MONTHS ENDED APRIL 30
---------------------------
2000 1999
---- ----
REVENUES:
Sugar and molasses sales $39,155,009 $37,658,969
Interest earned 3,488 3,800
Mineral leases and royalties 69,805 81,882
Gain on sale of land - 299,495
Other 1,615,481 1,422,816
------------ ------------
$40,843,783 $39,466,962
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $35,232,013 $35,515,072
General and administrative 795,317 709,281
Interest expense 987,286 929,171
------------ ------------
$37,014,616 $37,153,524
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 3,829,167 $ 2,313,438
INCOME TAXES 1,455,083 879,106
------------ ------------
NET EARNINGS $ 2,374,084 $ 1,434,332
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,743,691 13,138,727
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $16,117,775 $14,573,059
============ ============
NET EARNINGS PER SHARE $ .95 $ .57
============ ============
See notes to condensed financial statements
I-2 -4-
<PAGE>
STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED APRIL 30
-----------------------------
2000 1999
---- ----
REVENUES:
Sugar and molasses sales $ 6,595,060 $ 8,509,408
Interest earned 1,765 1,820
Mineral leases and royalties 18,242 40,290
Gain on sale of land - 299,495
Other (10,727) 104,553
------------ ------------
$ 6,604,340 $ 8,955,566
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 7,978,782 $ 9,493,240
General and administrative 263,222 309,763
Interest expense 287,992 238,563
------------ ------------
$ 8,530,096 $10,041,566
------------ ------------
NET LOSS BEFORE INCOME TAXES $(1,925,756) $(1,086,000)
INCOME TAXES (CREDIT) (731,788) (412,680)
------------ ------------
NET LOSS $(1,193,968) $ (673,320)
RETAINED EARNINGS AT BEGINNING OF PERIOD 17,311,743 13,138,727
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $16,117,775 $12,465,407
============ ============
NET LOSS PER SHARE $ ( .48) $ ( .27)
============ ============
See notes to condensed financial statements
I-3 -5-
<PAGE>
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED APRIL 30
---------------------------
2000 1999
---- ----
OPERATING ACTIVITIES:
Net earnings $ 2,374,084 $ 1,434,332
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 1,842,630 1,650,464
Gain on sale of land - (299,495)
Changes in operating assets and liabilities:
Increase in accounts receivable ( 3,338,266) (5,302,541)
Increase in inventories ( 7,830,271) (4,169,614)
Increase in accounts payable accrued
expenses and due cane growers 1,721,628 4,629,125
Other items - net 385,213 88,911
------------ ------------
Net cash provided by operating activities $ (4,844,982) $(1,968,818)
------------ ------------
INVESTING ACTIVITIES:
Collection on notes receivable 33,139 78,774
Issuance of notes receivable (67,631) ( 38,026)
Purchase of property, plant and equipment $( 1,419,339) $( 1,078,763)
Proceeds from sale of land - 299,495
----------- ------------
Net cash used in investing activities $( 1,453,831) $( 738,520)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term notes payable
and long-term debt $ 36,529,428 $ 27,568,607
Payments on short-term notes payable
and long-term debt (30,517,666) (25,023,060)
------------ ------------
Net cash provided by financing activities $ 6,011,762 $ 2,545,547
------------ ------------
Decrease in cash and temporary investments $( 287,051) $( 161,791)
Cash and temporary investments at the
beginning of the period 458,050 164,152
------------ ------------
Cash and temporary investments at the
end of the period $ 170,999 $ 2,361
============ ============
Continued
See notes to condensed financial statements
I-4 -6-
<PAGE>
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Supplemental information:
Interest paid $ 909,518 $ 843,539
=========== ===========
Income taxes paid $ 20,983 $ 225,000
=========== ===========
I-5 -7-
<PAGE>
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED APRIL 30, 2000 AND 1999
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheet as of April 30, 2000,
the statements of earnings and retained earnings for the three
and nine months ending April 30, 2000 and 1999, 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, 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 and/or the Form 10-K filed with
the Securities and Exchange Commission on October 30, 1999.
The results of operations for the period ending April 30, 2000
are not necessarily indicative of the operating results expected
for the full year.
I-6 -8-
<PAGE>
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 nine months ended April 30, 2000 was 20.15
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.
I-6 -8-
<PAGE>
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 42,000,000 pounds of
raw sugar in inventory at April 30, 2000, the Company has approximately
20,000,000 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 is estimated at 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 May 30, 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 nine months ended April 30, 2000
and 1999 were as follows:
2000 1999
----------------------------
Raw sugar sales $38,508,947 $36,834,532
Blackstrap molasses 646,062 824,437
------------ ------------
$39,155,009 $37,658,969
============ ============
Raw sugar sales were up by $1,674,415 principally because of the
greater tonnage ground and the increased yield of raw sugar. Molasses
sales were down by $178,375 due to lesser demand for the product.
Raw sugar on hand at April 30, 2000 was approximately 21,000 tons
compared to 29,535 tons last year. 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 nine month period ending April 30,
2000 was $3,488 compared to $3,800 for the same period last year. The
interest income for the current period reflects the smaller amount of
funds available for short-term investment. Comparable figures were
recorded for the three month periods ending April 30, 2000 and 1999.
They were $1,765 and $1,820 respectively.
I-7 -9-
<PAGE>
Mineral Leases and Royalties:
Mineral leases and royalties were down slightly for the nine months
ended April 30, 2000 at $69,805 compared to $81,882 for the same period
last year. A similar decrease was registered in mineral leases and
royalties for the three month periods ending April 30, 2000 and 1999.
These figures were $18,242 and $40,290, respectively.
Other Revenues:
Other revenues, which consist mainly of miscellaneous income items
and cane land rentals, were $1,615,481 for the nine months ended April
30, 2000 and $1,422,816 for the nine months ended April 30, 1999. Cane
land rentals for the current period were $1,517,161 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. Higher tonnage and sugar yields also contributed to the
greater rentals from cane lands.
Cost of Products Sold:
Cost of products sold totaled $35,232,013 for the nine months ended
April 30, 2000 and $35,515,072 for the nine months ended April 30,
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 $795,317 for the nine
months ended April 30, 2000 and $709,281 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 $987,286 compared to $929,171 for the nine
months ended April 30, 2000 and 1999, respectively. The higher
interest reflects the greater outstanding loan balances and to a lesser
extent higher interest rates.
Income Taxes:
The income tax expense for the three and six month periods
ending April 30, 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 April 30, 2000, the Company had working capital of $1,416,719
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-
<PAGE>
At Feburary 1, 2000 the Company budgeted $4,868,300 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-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K - None
II-1 -14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
STERLING SUGARS, INC.
---------------------
(REGISTRANT)
DATE June 12, 2000 By /s/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE June 12, 2000 By /s/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -15-
