STERLING SUGARS, INC.
P. O. BOX 572
FRANKLIN, LOUISIANA 70538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Sterling Sugars, Inc. will be held
in the Conference Room, St. Mary Parish Library, 206 Iberia Street,
Franklin, Louisiana, on Tuesday, November 25, 2003 at 10:00 a.m. for the
following purposes:
1. Election of directors to serve for one year or until their
successors are elected and qualified.
2. Transaction of such other business as may properly come before
the meeting or any adjournments thereof.
The close of business on September 26, 2003 has been fixed as the record
date for determining stockholders entitled to notice of and to vote at
the meeting.
By order of the Board of Directors
Tim Soileau
Secretary
Franklin, Louisiana
November 14, 2003
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the meeting, please mark, date, sign
and promptly return the enclosed proxy in the accompanying envelope,
which requires no postage if mailed in the United States. You may, of
course, later revoke your proxy and vote in person.
STERLING SUGARS, INC.
P. O. BOX 572
FRANKLIN, LOUISIANA 70538
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Sterling
Sugars, Inc. ("the Company") for use at the Annual Meeting of Stockholders
to be held at 10:00 a.m. on November 25, 2003 at the St. Mary Parish
Library, 206 Iberia Street, Franklin, La. and at any adjournments thereof.
If properly and timely completed and returned, the proxy will be voted in
the manner you specify thereon. If no manner is specified, the proxy will
be voted for election of the nominees for director hereinafter named.
The proxy may be revoked at any time before it is voted and you may vote
in person if you attend the meeting.
The cost of soliciting proxies will be borne by the Company. In addition
to use of the mails, proxies may be solicited by telephone and personal
contacts.
It is expected that this proxy statement and related materials will first
be mailed to stockholders on or about November 14, 2003.
STOCKHOLDERS' PROPOSALS
In order for proposals by stockholders to be considered for inclusion in
the proxy and proxy statement relating to the year 2004 Annual Meeting of
Stockholders, such proposals must be received at the Company's principal
executive office no later than July 17, 2004.
VOTING SECURITIES
Only stockholders of record as of the close of business on September 26,
2003 are entitled to vote at the meeting. At that time, 2,500,000 shares
of the Company's Common Stock (being the Company's only class of
authorized stock) were outstanding. Each share is entitled to one vote.
2
ELECTION OF DIRECTORS
In accordance with the Company's by-laws, seven directors are to be
elected at the annual meeting to serve a term of one year from November
25, 2003 or until their successors are elected and qualified. The
election of directors shall be determined by a majority of the votes
actually cast, and the abstention or failure of any stockholder to vote
will not affect this determination. Each shareholder is entitled to one
vote per share. The Board of Directors recommends a vote for all the
director nominees listed below. Unless you specify otherwise, proxy
holders will vote for election of the management nominees named below.
Should any of the nominees become unavailable for election, which is not
anticipated, proxy holders may, in their discretion, vote for other
nominees recommended by the Board.
The following table lists the nominees for election as director.
First
Elected
Name Age Director
-----------------------------------------------------
Bernard E. Boudreaux, Jr. 66 1996
Peter V. Guarisco (1) 75 1986
Victor Guarisco, II (1) 39 1992
James R. Keys (3) 62 2003
Frank William Patout (3) 63 2003
Robert B. Patout (2) (3) 62 2003
William S. Patout, III (2) (3) (4) 71 2003
(1) Peter V. Guarisco is the father of Victor Guarisco, II.
(2) William S. Patout, III and Robert B. Patout are brothers.
(3) James R. Keys, Frank William Patout, Robert B. Patout and William S.
Patout, III are related.
(4) William S. Patout, III is the father of Rivers Patout, an executive
officer of the Company.
Business Experience of Directors
---------------------------------
The following paragraphs describe all Company offices held by nominees and
their principal occupations for the last five years.
Bernard E. Boudreaux, Jr. is Chairman of the Board and general counsel of
the Company. He was formerly District Attorney, Sixteenth Judicial
District of Louisiana. He is now Executive Counsel to the Governor of
Louisiana.
Peter V. Guarisco is Chairman of the Board and President of Hellenic,
Inc., a privately owned company having diverse business interests, Morgan
City, Louisiana.
Victor Guarisco, II is President of Cottonwood, Inc., a privately owned
real estate management and development company, Morgan City, Louisiana.
James R. Keys, prior to his retirement, was executive director of
government operations for Tenneco, Inc.
3
Frank William Patout is a Texas Architect working in commercial and
medical real estate development in Houston, Texas for Medistar
Corporation.
Robert B. Patout - Land Management, Jeanerette, Louisiana.
William S. Patout, III, prior to his retirement, was President and CEO
of M. A. Patout & Son, Ltd., Jeanerette, Louisiana.
Directors' Compensation
-----------------------
Directors receive an attendance fee of $500 per meeting and reimbursement
for travel and related expenses incurred in attending board and committee
meetings.
Board Compensation Committee Report on Executive Compensation
--------------------------------------------------------------
The Board of Directors does not have a compensation committee and
executive compensation determinations are made by the entire Board. Mr.
Rivers Patout's compensation is based on his performance and the overall
profitability of the Company, as well as the Board's forecasted future
performance as determined in the best judgment of the Board. Mr. Patout's
compensation is not directly tied to one specific factor such as an
increase in the price of the Company's stock, return on equity or net
profit and there are no specific formulas used in the calculation of
compensation. Mr. Craig Caillier, President, does not receive any
compensation from the Company.
COMMITTEES OF THE BOARD
Nominating or Compensation
--------------------------
The Company has no standing nominating or compensation committees or
committees performing similar functions.
Audit Committee
---------------
The Company does not have a separate Audit Committee. Accordingly, the
Company's full Board of Directors is empowered to engage and evaluate the
performance of the Company's public accountants and fulfill its
responsibility regarding the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. The Board has
not adopted a written charter.
The Company currently does not have a Board member that would qualify as a
financial expert as defined under the Sarbanes-Oxley Act of 2002 due to the
significant costs involved in finding a candidate that is suitable and
willing to serve in such capacity.
4
The Company had not yet adopted a code of ethics that applies to its
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions.
Due to the significant costs involved, administrative burden, and the
small number of executive officers involved with the Company, the Company
did not believe this was an immediate priority. The Company's Board of
Directors will continue to consider from time to time whether a code of
ethics should be developed and adopted.
Audit Committee Report
----------------------
The Audit Committee has not met in fiscal year 2003 to review and discuss
the audited financial statements with management and discuss material
required by the Statement on Auditing Standards No. 61 with the
independent auditors. The Audit Committee has not in fiscal year 2003
reviewed the written disclosure letter from the independent accountant
required by the Independence Standard Boards Standard No. 1 and discussed
with the independent accountant the independent accountant's independence.
Since the Audit Committee has not met for the review and discussions
referred to above, the Audit Committee has not made an actual
recommendation to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 2003 as filed with the Securities and
Exchange Commission.
Submitted by the Board of Directors:
------------------------------------
Bernard E. Boudreaux, Jr. Frank William Patout Peter V. Guarisco
Robert B. Patout Victor Guarisco, II William S. Patout, III
James R. Keys
The information contained in the foregoing report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into
any future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference in such filing.
Meetings of the Board of Directors
----------------------------------
Four meetings of the Board of Directors were held during the last fiscal
year. Directors attended all meetings with the exception of one meeting
missed by Mr. Victor Guarisco.
Compensation Committee Interlocks and Insider Participation in Compensation
---------------------------------------------------------------------------
Decisions
---------
The Board of Directors does not have a compensation committee and executive
compensation determinations are made by the entire Board. None of the
directors had any relationship requiring disclosure under the caption
"Compensation Committee Interlocks and Insider Participation". No officer,
former officer or employee of the Company participated in the determination
of executive officer compensation during the Company's last fiscal year.
5
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
-----------------------------------------------
Beneficial Owners of More Than 5% of the Company's Outstanding Stock
--------------------------------------------------------------------
The following table provides information as of September 19, 2003 concerning
each stockholder known by the Company to be the beneficial owner (as
determined by Rule 13d-3 of the Securities and Exchange Commission) of more
than five percent (5%) of its outstanding stock:
Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned (1) Class
--------------------------------------------------------------------------
M. A. Patout & Son, Ltd. 1,577,630 63.11%
3512 J. Patout Burns Road
Jeanerette, Louisiana 70544
Peter V. Guarisco 511,531(2) (3) 20.46%
P. O. Box 2588
Morgan City, Louisiana 70380
Capital Management Consultants, Inc. 204,431(3) 8.18%
P. O. Box 2588
Morgan City, Louisiana 70380
Hellenic, Inc. 143,100(3) 5.72%
P. O. Box 2588
Morgan City, Louisiana 70380
(1) Based on information furnished by beneficial owners. Includes direct
and indirect ownership and, unless otherwise indicated, also includes
sole voting and investment power with respect to reported holdings.
(2) Includes 143,100 shares owned by Hellenic, Inc. and 204,431 shares
owned by Capital Management Consultants, Inc.
(3) Mr. Guarisco shares voting and investment power with respect to
shares owned by Hellenic, Inc. and Capital Management Consultants,
Inc. Mr. Guarisco disclaims beneficial ownership of these shares.
Security Ownership of Management
--------------------------------
The following table lists the nominees for election as director and the
Company's executive officers and shows as of September 19, 2003, the
beneficial ownership (as determined in accordance with Rule 13d-3 of
the Securities and Exchange Commission) of the Company's outstanding
common stock by each nominee, executive officer and by all directors
and executive officers as a group:
6
Shares
benefcially Percent of
Name Position Owned (1) Class
--------------------------------------------------------------------
Bernard E. Boudreaux, Jr. Chairman of the
Board 1,000 *
Peter V. Guarisco Director 511,531(2) 20.46%
Victor Guarisco, II Director 18,990 *
James R. Keys Director 0 *
Frank William Patout Director 1,577,630(3) 63.11%
Robert B. Patout Director 0 *
William S. Patout, III Director 100 *
Craig P. Caillier President and
CEO 100 *
Rivers M. Patout Vice President
and General
Manager 120 *
All directors and named
executive officers as a group 2,109,471 84.38%
--------------------------------------------------------------------
* Less than 1%
(1) Based on information furnished by nominees. Includes direct and
indirect ownership and, unless otherwise indicated,
includes sole voting and investment power with respect to reported
holdings.
(2) Mr. Guarisco's reported holdings reflect shared voting and investment
power with respect to 143,100 shares owned by Hellenic, Inc. and
204,431 shares owned by Capital Management Consultants, Inc. Mr.
Guarisco disclaims ownership of such shares.
(3) Includes shared voting and investment power with respect to 1,577,630
shares owned by M. A. Patout & Son, Ltd.
The Company does not have any equity compensation plans, agreements or
arrangements with any of the Company's Directors, Executive Officers or
Employees.
INFORMATION CONCERNING MANAGEMENT
---------------------------------
Business Experience of Executive Officers
-----------------------------------------
The following information concerning the Company's executive officers,
including their principal occupation for the past five years and all
positions and offices held with the Company by such executive officers.
The term of each of the below named executive officers, elected November
21, 2002, expires on November 25, 2003, or when their successors have been
chosen.
Craig P. Caillier, age 41, has been President and CEO of the Company since
February 2, 1996. Mr. Caillier was Senior Vice President and General
Manager of the Company from January 1994 until February 1, 1996.
Rivers M. Patout*, age 38, for five years prior to his association with the
Company, was Assistant General Manager of M. A. Patout & Son, Ltd.,
Jeanerette, La.
7
Stanley H. Pipes, age 68, has been Vice President and Treasurer of the
Company since January 1994. Prior to that date, Mr. Pipes was Senior
Vice President of the Company from August 1989 until January 1994, and
Vice President from 1977 until August 1989, and Treasurer since 1971.
* Rivers Patout is the son of William S. Patout, III, director of the
Company.
Executive Compensation
----------------------
The following table sets forth information concerning compensation for the
Company's executive officers who served as executive officers during the
Company's last fiscal year and whose annual compensation and bonus was
$100,000 or more during the Company's last fiscal year.
ANNUAL COMPENSATION
Name and Principal Other Annual
Position Year Salary Bonus Compensation (1)
----------------------------------------------------------------------
Craig P. Caillier 2003 $ 0 $ 0 $ 0
President & CEO 2002 25,000 0 750
2001 72,500 49,716 2,536
Rivers M. Patout (2) 2003 77,412 25,000 2,572
Vice President and
General Manager
---------------------------------------------------------------------
(1) Company contributions to 401(k) savings plan.
(2) Mr. Patout, the Company's Vice President and General Manager,
became an executive officer of the Company in fiscal year 2003.
As amended in 1986, the Company's Retirement Plan provides benefits at
retirement to full-time salaried and hourly factory employees and to
full-time agricultural employees who are at least 21 years of age and have
at least one year of service. Contributions to the plan, which are funded
entirely by the Company, are computed on an actuarial basis. The plan
classifies employees as agricultural and factory employees. Benefits for
factory employees (a classification that includes the Company's executive
officers) are determined by multiplying the employee's years of service by
the sum of (i) .60 percent times Final Average Earnings up to Covered
Compensation and (ii) 1.20 percent times Final Average Earnings in excess
of Covered Compensation. The term "Covered Compensation" means the average
annual earnings used to calculate the participant's social security benefit.
This average covers his entire employment history (including employment
prior to employment by Sterling Sugars, if any), and assumes continued
employment to age 65. It also assumes that, during each year of employment,
the participant always earned the maximum amount subject to social security
withholding (the Taxable Wage Base). Each year, the Plan's actuaries
provide a table that determines the Covered Compensation level for
participants reaching age 65 in each of the succeeding years. The Covered
Compensation level increases over time (generally every year) as the Taxable
Wage Base itself increases. As a result, Covered Compensation is relatively
low for participants nearing the average retirement age of 65 and increases
for younger participants. The actual final determination of a Participant's
Covered Compensation amount is therefore made at the time of termination of
employment or retirement.
8
Mr. Patout is 38 years old and has approximately three years of credited
service. Mr. Caillier is 41 years old and has approximately nine years of
credited service. Set out below is a table that shows the estimated annual
pension benefits for employees retiring at age 65 with varying years of
credited service and final earnings.
PENSION TABLE
Years of Service
-------------------------------------------------------
Final Earnings 10 15 20 25
-----------------------------------------------------------------------
$ 50,000 $ 4,632 $ 6,948 $ 9,264 $11,580
75,000 7,632 11,448 15,264 19,080
100,000 11,632 15,948 21,264 26,580
-----------------------------------------------------------------------
Effective February 1, 1992 the Company established the Sterling Sugars, Inc.
Employee's Savings Plan and Trust for the benefit of all eligible full-time
salaried and hourly employees and full-time salaried agricultural employees
who are at least 21 years old and have completed at least one year of
service with the Company. The Plan is referred to as a 401(k) retirement
plan, a form of a defined contribution plan. Through elective deferrals,
employees may contribute from one to six percent of their annual gross
compensation into the Plan. The Company is obligated to match
contributions to the extent of fifty percent of the first six percent of an
employee's elective deferrals. Any additional Company contributions are
discretionary. The Plan was amended effective February 1, 1994 to change
eligibility requirements and investment election dates and to credit service
for a related employer. Newly hired employees are now eligible to
participate on the first day of the calendar month following completion of
age and service requirements. Investment changes will be made effective
April 1 instead of February 1 and October 1 instead of August 1 of each
year. Credited service was also amended to include service with M. A.
Patout & Son, Ltd., a related employer.
On August 1, 2000, the Company established a nonqualified deferred
compensation plan for a select group of management and highly compensated
employees. An employee is eligible to become a participant in the plan if
such employee is designated as a participant by the Board of Directors or
the Plan Administrator in writing. Employees so designated can elect to
defer up to 100% of their compensation from the Company including bonuses.
The Board of Directors has designated Craig Caillier, President & CEO of
the Company and Rivers Patout, Vice President and General Manager, as
participants in the plan. As of July 31, 2003, Mr. Caillier had deferred
compensation of $29,800 and Mr. Patout had deferred $6,600. At retirement,
benefits are paid to participants from general corporate assets and the
corporation's obligation under the plan shall be an unfunded and unsecured
promise to pay.
8
Stock Performance Graph
-----------------------
The following graph presents the cumulative total return on the Company's
common stock for the five year period ended July 31, 2003 compared to the
cumulative total return assuming reinvestment of dividends for all stocks
quoted on the NASDAQ Market Value Index. Because there is no published
industry or line of business index comparable to the Company, a peer group
was selected based on similar publicly traded companies with market
capitalization of approximately $15 million as of July 31, 2003.
Year Sterling NASDAQ Peer Group
-------------------------------------------------------------------------
1998 $100 $100 $100
1999 97 141 82
2000 85 206 48
2001 86 113 17
2002 83 76 10
2003 81 99 7
-------------------------------------------------------------------------
Certain Transactions
--------------------
The Company reimbursed M. A. Patout & Son, Ltd., which is the beneficial
owner of approximately 63.11% of the Company's outstanding stock, certain
expenses paid by them on behalf of the Company. Reimbursements were
$900,743 in 2003. The majority of the reimbursements for 2003 were for
differences in swapped raw sugar sales whereby M. A. Patout & Son, Ltd.
sold and delivered sugar for the Company and vice versa.
The Company also purchased 589.85 acres of land from M. A. Patout & Son,
Ltd. for $457,425 which amount was the cost at which M. A. Patout & Son,
Ltd. bought the land.
Mr. Bernard E. Boudreaux, Jr., Chairman of the Board of the Company, served
in fiscal 2003 and will serve in fiscal 2004, as general counsel for the
Company on a retainer basis.
There are no personal loans or other extensions of credit outstanding for
any Director or Executive Officer of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance- Persons who are
directors or executive officers of the Company, and persons who beneficially
own more than 10% of the Company's common stock, are required to file with
the Securities and Exchange Commission periodic reports of changes in their
ownership of the Company's stock. Based solely on a review of the forms
furnished to the Company pursuant to the rules of the Securities and
Exchange Commission, such persons complied with the filing requirements
during the most recent fiscal year of the Company.
9
INDEPENDENT ACCOUNTANTS
Independent Accountants
-----------------------
It is anticipated that Broussard, Poche', Lewis & Breaux, LLP will be asked
to serve as the Company's independent public accountants for the fiscal year
ending July 31, 2004. A representative of the firm is expected to be
present at the annual meeting and to be available to respond to appropriate
questions. He will have the opportunity to make a statement if he desires.
Audit Fees and Related Matters
------------------------------
Broussard, Poche', Lewis & Breaux, LLP was paid $11,800 for the audit of the
Company's financial statements for the fiscal year ended July 31, 2003.
The independent accountants did not render professional services to the
Company relating to financial information systems design and implementation
during the fiscal year ended July 31, 2003.
The Company was billed $5,050 by Broussard, Poche', Lewis & Breaux, LLP for
review of quarterly reports filed with the Securities and Exchange
Commission and $4,333 for preparation of the Company's federal and state
income tax returns and tax research. The Audit Committee has considered
whether these non-audit services are compatible with maintaining the
independence of the Company's independent auditors, Broussard, Poche',
Lewis & Breaux, LLP.
OTHER MATTERS
The matters to be acted upon at the Annual Meeting of Stockholders are set
forth in the accompanying notice. The Board knows of no other business to
come before the meeting, but if other matters requiring a vote are properly
presented to the meeting or any adjournments thereof, proxy holders will
vote, or abstain from voting hereon in accordance with their best judgment.
By Order of the Board of Directors
Tim Soileau
Secretary
10