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, 1996
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 May 31, 1996.
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 April 30, 1996
(unaudited) and January 31, 1996 I-1
Statements of earnings and retained earnings
Three months ended April 30, 1996 and 1995
(unaudited) I-2
Statements of cash flows
Three months ended April 30, 1996 and 1995 I-3
(unaudited)
Notes to condensed financial statements
Three months ended April 30, 1996 and 1995 I-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-7
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K II-1
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STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
April 30, January 31,
1996 1996
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 3,186,145 $ 134,052
Accounts receivable 1,738,179 1,717,048
Inventories 2,834,863 12,359,866
Expenditures for future crops (Note B) 1,380,719 216,967
Deferred income taxes 244,646 160,600
Other current assets 364,068 165,868
------------- -------------
TOTAL CURRENT ASSETS $ 9,748,620 $ 14,754,401
------------- -------------
Property, plant and equipment - net $ 12,188,151 $ 11,980,458
------------- -------------
Expenditures for future crops $ 536,523 $ 487,338
------------- -------------
Notes receivable - net of allowance $ 741,531 $ 677,479
------------- -------------
Deferred loan acquisition costs $ 66,940 $ 69,893
------------- -------------
$ 23,281,765 $ 27,969,569
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 4,193,680 $ 5,967,246
Short-term debt - 3,658,334
------------- -------------
TOTAL CURRENT LIABILITIES $ 4,193,680 $ 9,625,580
------------- -------------
Long-term debt $ 3,973,893 $ 4,017,469
------------- -------------
Deferred income taxes $ 698,000 $ 698,000
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital (Note C) 40,455 40,455
Retained earnings 11,875,737 11,088,065
------------- -------------
$ 14,416,192 $ 13,628,520
------------- -------------
$ 23,281,765 $ 27,969,569
============= =============
NOTE: The balance sheet at January 31, 1996 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)
THREE MONTHS ENDED APRIL 30
---------------------------
1996 1995
---- ----
REVENUES:
Sugar and molasses sales $11,237,659 $ 1,920,033
Interest earned 8,324 39,908
Mineral leases and royalties 22,098 31,495
Gain on sale of depreciable assets - 120,000
Other 14,988 330,839
------------ ------------
$11,283,069 $ 2,442,275
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 9,749,975 $ 1,672,672
General and administrative 156,362 146,506
Interest expense 106,293 101,225
------------ ------------
$10,012,630 $ 1,920,403
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 1,270,439 $ 521,872
INCOME TAXES 482,767 198,311
------------ ------------
NET EARNINGS $ 787,672 $ 323,561
RETAINED EARNINGS AT BEGINNING OF PERIOD 11,088,065 8,968,456
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $11,875,737 $ 9,292,017
============ ============
NET EARNINGS PER SHARE $ .32 $ .13
============ ============
See notes to condensed financial statements
I-2 -4-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED APRIL 30
---------------------------
1996 1995
---- ----
OPERATING ACTIVITIES:
Net earnings $ 787,672 $ 323,561
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Amoritization of loan costs 2,954 2,954
Depreciation 380,523 356,397
Gain on sale of depreciable assets - ( 120,000)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ( 21,131) 1,920,071
Increase in notes receivable ( 64,052) ( 96,845)
Decrease in inventories 9,525,003 1,696,603
Increase in other current assets ( 198,200) ( 209,933)
Increase in expenditures for future crops (1,163,752) (1,256,908)
Decrease in accounts payable and accrued exp. (1,773,566) (1,272,587)
Other items - net ( 133,231) ( 102,770)
------------ ------------
Net cash provided by operating activities $ 7,342,220 $ 1,240,543
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $( 588,217) $( 544,975)
Proceeds from sale of depreciable assets - 120,000
----------- ------------
Net cash used in investing activities $( 588,217) $( 424,975)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term debt $ 855,000 $ -
Payments on short-term debt (4,513,334) -
Payments on long-term debt ( 43,576) ( 409,465)
Proceeds from sale of treasury stock - 111,865
------------ ------------
Net cash used in financing activities $(3,701,910) $( 297,600)
------------ ------------
Increase in cash and temporary investments $ 3,052,093 $ 517,968
Cash and temporary investments at the
beginning of the period 134,052 623,237
------------ ------------
Cash and temporary investments at the
end of the period $ 3,186,145 $ 1,141,205
============ ============
Continued
See notes to condensed financial statements
I-3 -5-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Supplemental information:
Interest paid $ 37,151 $ 33,293
=========== ===========
Income taxes paid $ 103,500 $ 350,000
=========== ===========
Non-cash item:
Accrued management fee paid by
issuance of treasury stock $ - $ 50,635
=========== ===========
I-4 -6-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 30, 1996 AND 1995
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheets as of April 30, 1996, the
statements of earnings and retained earnings for the three
months ending April 30, 1996 and 1995, and the condensed
statements of cash flows for the three month period 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, 1996 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 1996 annual report
to stockholders. The results of operations for the period
ending April 30, 1996 are not necessarily indicative of the
operating results expected for the full year.
I-5 -7-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 30, 1996 AND 1995
(UNAUDITED)
B. EXPENDITURES FOR FUTURE CROPS:
Expenditures incurred and income earned from sugar
operations for the 1996 and 1995 crops have been deferred
in order to properly match revenues and expenses. The
deferred items are as follows:
THREE MONTHS ENDED APRIL 30
---------------------------
1996 1995
---- ----
DEFERRED COSTS: (1996 AND 1995 CROPS)
Factory $ 1,037,521 $ 1,068,840
Plantations 330,629 329,157
------------ ------------
$ 1,368,150 $ 1,397,997
Land preparation and planting costs
1997 and 1996 crops respectively 12,569 17,058
------------ ------------
$ 1,380,719 $ 1,415,055
============ ============
C. ADDITIONAL PAID IN CAPITAL:
As discussed in Form 10-K, filed for the year ended January 31,
1996, the Company entered into a technical service agreement with
M. A. Patout & Son, Ltd. (Patout). The agreement provided an
option for Patout to purchase 50,000 shares of the Company's
treasury stock at a price of $3.25 per share. In April, 1995
Patout exercised its option.
I-6 -8-
STERLING SUGARS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Sugar and Molasses Sales:
Sugar and molasses sales for the three months ended April 30, 1996
and 1995 were as follows:
1996 1995
------ ------
Raw sugar sales $10,947,640 $ 1,655,343
Molasses sales 290,019 264,690
------------ ------------
$11,237,659 $ 1,920,033
============ ============
For the first quarter of the Company's fiscal year ending January
31, 1997 (fiscal 1997), sales of raw sugar (1995 crop) increased com-
pared to the same quarter ending in fiscal 1996 (1994 crop). This in-
crease is the result of the Company having marketed more sugar during
the current quarter. At January 31, 1996, the Company had on hand
approximately 30,250 tons of raw sugar available for sale to refiners
as compared to 10,238 tons of raw sugar at January 31, 1995. As of
April 30, 1996, the Company had sold and shipped 24,624 tons of raw
sugar and had on hand 5,626 tons. For the quarter ending April 30,
1995, the Company had sold and shipped 3,650 tons of raw sugar and had
on hand approximately 6,588 tons held in inventory. The remaining 5,626
tons of raw sugar from the 1995 crop is expected to be sold and shipped
by July, 1996. The sugar price for the 1995 crop increased slightly
and is estimated at $22.40 cwt. For the 1994 crop, the average price
was $22.00 cwt.
As of January 31, 1996, the Company had on hand approximately
714,343 gallons of molasses all of which had been sold as of April 30,
1996. At January 31, 1995, the Company had approximately 691,383
gallons of molasses on hand all of which had been sold as of April 30,
1995. For the 1995 molasses crop, the Company received $.40 per gallon
compared to $.35 per gallon for the sale of the 1994 molasses crop.
Interest Earned:
Interest earned for the quarter ended April 30, 1996 was $8,324
compared to $39,908 for the same quarter ended April 30, 1995. The
decrease for the current period is primarily attributable to the Company
receiving $25,528 in April, 1995 from the Sugarcane Safety Group for its
share of interest earned on workers compensation reserve funds held by
the group. The decrease in the current period is also attributable to a
decrease in short-term investments. At January 31, 1996, the Company
had short-term investments of $103,383 compared to $438,341 at January
31, 1995.
Mineral Leases and Royalties:
For the quarter ended April 30, 1996, income from mineral leases
and royalties decreased to $22,098 compared to $31,495 for the period
I-7 -9-
ending in 1995. The decrease is attributable to an oil and gas lease
orginally granted in February, 1995 on 274 acres for $20,528 and not
renewed for a second year. Royalty income remained consistent for the
first quarters of 1996 and 1995.
Gain on the Sale of Depreciable Assets:
The Company recognized a gain on the sale of obsolete machinery and
equipment for the three month period ending April 30, 1995 of $120,000.
For the same period ending in 1996, the Company had no gains from the
sale of depreciable assets.
Other Revenues:
Other revenues, which consist mainly of miscellaneous income items,
were $14,988 for the three month period ending April 30, 1996 and
$330,839 for the same period ending in 1995. These revenues, which can
vary considerably from year to year, generally include amounts received
for the sale of scrap, permitting seismic surveys conducted for oil and
gas exploration on Company owned land and other miscellaneous items.
The sharp decrease for the current quarter is the result of the Company
receiving $318,032 in April, 1995 from the Sugarcane Safety Group repre-
senting a return of capital from workers compensation reserve funds for
years that had been closed out.
Cost of Products Sold:
Cost of products sold for the three month periods ended April 30,
1996 and 1995 were $9,749,975 and $1,672,672, respectively. Costs
relating to sales are charged to cost of products sold. Accordingly,
costs have increased for 1996 as would be expected with the increase
in sales.
General and Administrative Expenses:
General and administrative expenses for the three months ended
April 30, 1996 were $156,362 compared to $146,506 for the same period
in 1995. The increase in these expenses during the current period is
primarily the result of increases in miscellaneous expense items.
Interest Expense:
Interest expense increased to $106,293 for the period ending
April 30, 1996 from $101,225 for the same period ending in 1995.
The increase in interest expense is primarily the result of an increase
in short-term debt at year end. At January 31, 1996, short-term debt
outstanding totaled $3,658,334 whereas at January 31, 1995 the Company
had no outstanding short-term debt.
Income Taxes:
The income taxes for the three month period ending April 30,
1996 and 1995 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 April 30, 1996, the Company had working capital of $5,554,940
compared to $5,128,821 at January 31, 1996. The working capital ratios
were 2.3 to 1 and 1.5 to 1, respectively.
For the 1996 crop, the Company budgeted $2,525,000 for capital
additions. These additions are expected to increase the average daily
grinding rate to in excess of 10,000 tons. These additions include
expansion of the raw house on the pan floor and centrifugal stations.
Also, improvements are being made to steam boilers #4 and #6
including installation of wet scrubbers to improve air emissions.
Management expects to fund the cost of the capital additions from
working capital and short-term borrowings through lines of credit
available to the Company.
Expenditures for Future Crops - Note B:
Factory Deferred Costs:
Factory deferred costs for the three month period ended April 30,
1996 were $1,037,521. Such costs for the same period in 1995 were
$1,068,840. Although the current quarter factory deferred costs have
declined, the Company has increased its idle season maintenance and
repair budget for 1996 to $2,161,000. This is compared to $1,534,201
for the 1995 period. The increase is primarily the result of increased
maintenance and repair from processing larger volumes of cane last crop
year.
Plantation Deferred Costs:
Plantation deferred costs increased to $330,629 for the three
month period ending April 30, 1996 from $329,157 for the same period
in 1995. For both periods plantation deferred costs have remained
consistent. However for the 1996 season, the total costs budgeted
for the plantations have been reduced. The amount budgeted for the
1996 period was $398,154. The budgeted amount for the 1995 period was
$496,033. The increased budgeted costs for the 1995 period were
primarily costs to improve sugarcane yields on marginal lands.
I-9 -11-
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K
No reports on Form 8K have been filed during the
quarter for which this report is filed.
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 June 13, 1996 By /S/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE June 13, 1996 By /S/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -13-