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, 2001
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 337 828 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 6, 2001.
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, 2001
(unaudited) and July 31, 2000 I-1
Statements of earnings and retained earnings
Six months ended January 31, 2001 (unaudited)
and 2000 (unaudited) I-2
Statements of earnings and retained earnings
Three months ended January 31, 2001 (unaudited)
and 2000 (unaudited) I-3
Statements of cash flows
Six months ended January 31, 2001 (unaudited)
and 2000 (unaudited) I-4
Notes to condensed financial statements
Three and six months ended January 31, 2001
and 2000 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,
2001 2000
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 67,928 $ 11,500
Accounts receivable 11,929,613 1,305,409
Raw sugar and molasses inventories
(at market) 9,620,777 -
Operating supplies - at cost 752,738 729,213
Deferred income taxes 365,000 365,000
Other current assets 418,590 577,142
------------- -------------
TOTAL CURRENT ASSETS $ 23,154,646 $ 2,988,264
------------- -------------
Property, plant and equipment - net $ 24,613,372 $ 24,953,785
------------- -------------
Expenditures for future crops $ 1,138,963 $ 1,138,963
------------- -------------
Notes receivable - net of allowance $ 480,023 $ 488,162
------------- -------------
Other assets $ 41,206 $ 41,206
------------- -------------
$ 49,428,210 $ 29,610,380
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Notes Payable $ 10,465,000 $ 679,531
Accounts payable and accrued expenses 3,111,338 1,390,249
Due cane growers 7,056,224 648,883
Current portion long-term debt 4,172,032 932,680
------------- -------------
TOTAL CURRENT LIABILITIES $ 24,804,594 $ 3,651,343
------------- -------------
Long-term debt $ 2,854,098 $ 7,013,888
------------- -------------
Deferred income taxes $ 1,745,000 $ 1,745,000
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital 40,455 40,455
Retained earnings 17,484,063 14,659,694
------------- -------------
$ 20,024,518 $ 17,200,149
------------- -------------
$ 49,428,210 $ 29,610,380
============= =============
NOTE: The balance sheet at July 31, 2000 has been taken from the
audited financial statements at that date, and condensed.
See notes to condensed financial statements
I-1 -3-
STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
SIX MONTHS ENDED JANUARY 31
---------------------------
2001 2000
-------- ----------
REVENUES:
Sugar and molasses sales $30,593,610 $32,559,949
Interest earned 1,765 1,723
Mineral leases and royalties 511,126 51,563
Other 1,461,948 1,626,208
------------ ------------
$32,568,449 $34,239,443
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $26,964,374 $27,253,131
General and administrative 533,125 532,095
Interest expense 515,516 699,294
------------ ------------
$28,013,015 $28,484,520
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 4,555,434 $ 5,754,923
INCOME TAXES 1,731,065 2,186,871
------------ ------------
NET EARNINGS $ 2,824,369 $ 3,568,052
RETAINED EARNINGS AT BEGINNING OF PERIOD 14,659,694 13,743,691
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $17,484,063 $17,311,743
============ ============
NET EARNINGS PER SHARE $ 1.13 $ 1.43
============ ============
See notes to condensed financial statements
I-2 -4-
STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31
-----------------------------
2001 2000
--------- ---------
REVENUES:
Sugar and molasses sales $19,917,748 $23,380,224
Interest earned - 1,661
Mineral leases and royalties 320,992 24,012
Other 904,852 1,115,225
------------ ------------
$21,143,592 $24,521,122
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $16,263,013 $18,430,247
General and administrative 277,246 306,078
Interest expense 279,815 430,363
------------ ------------
$16,820,074 $19,166,688
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 4,323,518 $ 5,354,434
INCOME TAXES 1,642,937 2,034,685
------------ ------------
NET EARNINGS $ 2,680,581 $ 3,319,749
RETAINED EARNINGS AT BEGINNING OF PERIOD 14,803,482 13,991,994
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $17,484,063 $17,311,743
============ ============
NET EARNINGS (LOSS) PER SHARE $ 1.07 $ 1.33
============ ============
See notes to condensed financial statements
I-3 -5-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JANUARY 31
---------------------------
2001 2000
--------- -----------
OPERATING ACTIVITIES:
Net earnings $ 2,824,369 $ 3,568,052
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 1,120,445 1,142,034
Changes in operating assets and liabilities:
Increase in accounts receivable (10,624,204) (14,056,608)
Increase in inventories ( 9,620,777) (13,392,479)
Increase in accounts payable accrued
expenses and due cane growers 8,128,430 6,117,388
Other items - net ( 80,310) 345,964
------------ ------------
Net cash provided by operating activities $( 8,252,047) $(16,275,649)
------------ ------------
INVESTING ACTIVITIES:
Collection on notes receivable 8,139 8,363
Purchase of property, plant and equipment ( 816,241) ( 420,591)
----------- ------------
Net cash used in investing activities $( 808,102) $( 412,228)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term notes payable
and long-term debt $ 25,981,809 $ 32,206,526
Payments on short-term notes payable
and long-term debt (16,847,556) (15,982,875)
------------ ------------
Net cash provided by financing activities $ 9,134,253 $ 16,223,651
------------ ------------
Decrease in cash and temporary investments $ 74,104 $( 464,226)
Cash and temporary investments at the
beginning of the period ( 6,176) 458,050
------------ ------------
Cash and temporary investments at the
end of the period $ 67,928 $( 6,176)
============ ============
Supplemental information:
Interest paid $ 493,478 $ 622,976
=========== ============
Income taxes paid $ 275,685 $ 60,470
=========== ============
See notes to condensed financial statements
I-4 -6-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JANUARY 31, 2001 AND 2000
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheet as of January 31, 2001,
the statements of earnings and retained earnings for the three
and six months ending January 31, 2001 and 2000, 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, 2001 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, 2000
report to stockholders. The results of operations for the period
ending January 31, 2001 are not necessarily indicative of the
operating results expected for the full year.
I-5 -7-
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, 2000 and
ended December 30, 2000. A total of 1,063,646 tons of sugarcane were
processed compared to 1,139,296 tons last year which was a record for
the Company.
Sugar yield was down this year to an estimated 197 pounds per ton
of cane compared to the 207 pounds per ton of cane last year. The
lower yield this year can be attributed to a drought which occurred
during the spring and summer growing season. The drought also caused
lower yields of sugarcane per acre resulting in less tons available
for processing.
The price the Company receives for its raw sugar has rebounded
somewhat from the lows experienced last year although still below the
averages received in the previous two years. The Company received an
average of 18.93 cents per pound for the six months ended January 31,
2001 compared to 20.56 cents per pound for the same period last year.
For the year ended July 31, 2000, the Company received 19.38 cents per
pound and for the year ended July 31, 1999 the Company received 21.15
cents per pound. The Company systematically sells on the futures market
throughout the year which tends to average out the highs and lows over
a period of time. At March 1, 2001, the November, 2001 price was
quoted at 21.04 cents per pound.
I-6 -8-
As a consequence of the low price, the raw sugar inventory was
recorded at market since market was below the cost of production.
Blackstrap molasses production is estimated at 5.63 gallons per ton
this year compared to 5.03 gallons per ton of cane last year. Total
production of molasses was 5,983,151 gallons this year compared to
5,729,922 gallons for the previous year. The price for blackstrap
molasses is currently quoted at $57.50 per ton compared to $35.00 per
at the same time last year.
Sugar and Molasses Sales:
Sugar and molasses sales for the six months ended January 31, 2001
and 2000 were as follows:
2001 1999
----------------------------
Raw sugar sales $29,216,426 $31,993,164
Blackstrap molasses 1,377,184 566,785
------------ ------------
$30,593,610 $32,559,949
============ ============
Sugar sales were down by $2,776,738 principally because of the lesser
tonnage ground and the decreased yield of raw sugar. Molasses sales
were up substantially because of the sharply higher price mentioned
above. Raw sugar on hand at January 31, 2001 was approximately 25,000
tons compared to 38,000 tons last year. The smaller inventory at
January 31, 2001 is generally a result of the lower yield of sugar and
the lesser tons of cane processed.
Interest Earned:
Interest earned for the six month period ending January 31,
2001 was $1,765 compared to $1,723 for the same period last year.
Comparable figures were recorded for the three month periods ending
January 31, 2001 and 2000. They were $0 and $1,661 respectively.
Mineral Leases and Royalties:
Mineral leases and royalties were up considerably for the six
months ended January 31, 2001 at $511,126 compared to $51,563 for the
same period last year. Royalties for the two periods were $484,539 and
$27,551, respectively. Mineral leases for the same periods were
$26,587 and $24,012, respectively. In November, 2000, the Company
began receiving royalty payments from a new well named Zenor A16
located near Patterson, La. Payments received from the Zenor A16 well
have been used to reduce the Company's long-term debt. Such payments
totaled $476,379.67 as of January 31, 2001.
I-7 -9-
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. Accordingly only limited information,
furnished primarily by the Company's lessees, has been included with
respect to oil and gas operations affecting Company lands. Complete
information respecting these and related matters, such as proved
reserves, are unavailable to the Company and cannot be obtained without
unreasonable effort and expense.
Other Revenues:
Other revenues, which consist mainly of miscellaneous income items
and cane land rentals, were $1,461,948 for the six months ended January
31, 2001 and $1,626,208 for the six months ended January 31, 2000. Cane
land rentals for the current period were $1,314,060 compared to
$1,549,948 last year. The lower cane land rentals are a direct result of
the decreased yield of sugar and sugarcane. The lower price for sugar
also contributed to the decline.
Cost of Products Sold:
Cost of products sold totaled $26,964,374 for the six months ended
January 31, 2001 and $27,253,131 for the six months ended January 31,
2000. 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 $533,125 for the six
months ended January 31, 2001 and $532,095 for the same period last
year. Expenses were comparable for the two years.
Interest Expense:
Interest expense was $515,516 compared to $699,294 for the six
months ended January 31, 2001 and 2000, respectively. The reduced
interest cost resulted from lower overall interest rates and smaller
capital requirments for the processing season. Short-term debt
outstanding at January 31, 2001 was $10,465,000 compared to
$16,588,293 at January 31, 2000. The lower capital requirments for the
six months ended January 31, 2001 is primarily the result of the lower
sugar price and lower proforma payments to farmers during the crop.
Income Taxes:
The income tax expense for the three and six month periods
ending January 31, 2001 and 2000 were recorded at the statutory rate
of 38 percent which reflects the 34 percent federal corporate rate plus
4 percent state income taxes.
I-8 -10-
Liquidity and Capital Resources:
At January 31, 2001, the Company had negative working capital of
$1,649,948 compared to a negative working capital of $663,079 at July
31, 2000. Due to the seasonal nature of the industry, it is not
uncommon to have a negative working capital balance at July 31 of
each year or just before the start of the new season. Normally, working
capital for the six month period ending in January would be positive but
is negative at January 31, 2001 because of long-term debt due in
January, 2002 of $3,413,073 which has been included in the current
portion long-term debt account. The balance in that account at January
31, 2001 is $4,172,032 compared to a balance of $932,680 at July 31,
2000. This is an increase of $3,239,352 in current liabilities which
accounts for the negative working capital. As mentioned earlier, the
Company is paying down its' long-term debt with the proceeds from oil
and gas royalties in anticipation of the large payment due in
January, 2002.
For the period February 1, 2001 to September 30, 2001, the Company
has budgeted $3,290,600 for repairs and $1,250,000 for capital
improvements to the factory. 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-
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-
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, 2001 By /s/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE March 13, 2001 By /s/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -13-