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 July 31, 1997
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 September 2, 1997.
Total number of pages 14
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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 July 31, 1997
(unaudited) and January 31, 1997 I-1
Statements of earnings and retained earnings
Six months ended July 31, 1997 and 1996
(unaudited) I-2
Statements of earnings and retained earnings
Three months ended July 31, 1997 and 1996 I-3
(unaudited)
Statements of cash flows
Six months ended July 31, 1997 and 1996 I-4
(unaudited)
Notes to condensed financial statements
Three and six months ended July 31, 1997
and 1996 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-
STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
July 31, January 31,
1997 1997
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 302,616 $ 110,332
Accounts receivable 282,808 1,890,398
Inventories 842,029 11,667,948
Expenditures for future crops (Note B) 3,752,286 148,334
Deferred income taxes 102,200 102,200
Other current assets 584,191 557,298
------------- -------------
TOTAL CURRENT ASSETS $ 5,866,130 $ 14,476,510
------------- -------------
Property, plant and equipment - net $ 21,271,082 $ 18,970,789
------------- -------------
Expenditures for future crops $ 1,389,338 $ 1,389,338
------------- -------------
Notes receivable - net of allowance $ 700,883 $ 684,529
------------- -------------
Deferred loan acquisition costs $ 57,281 $ 63,463
------------- -------------
$ 29,284,714 $ 35,584,629
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,066,825 $ 6,728,264
Short-term debt 1,105,000 2,575,000
------------- -------------
TOTAL CURRENT LIABILITIES $ 3,171,825 $ 9,303,264
------------- -------------
Long-term debt $ 9,291,174 $ 9,615,175
------------- -------------
Deferred income taxes $ 1,000,700 $ 1,000,700
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital (Note C) 40,455 40,455
Retained earnings 13,280,560 13,125,035
------------- -------------
$ 15,821,015 $ 15,665,490
------------- -------------
$ 29,284,714 $ 35,584,629
============= =============
NOTE: The balance sheet at January 31, 1997 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 JULY 31
---------------------------
1997 1996
---- ----
REVENUES:
Sugar and molasses sales $12,297,176 $14,525,872
Interest earned 9,899 36,730
Mineral leases and royalties 84,978 44,113
Loss on sale of depreciable assets (24,798) (894)
Other 107,495 162,292
------------ ------------
$12,474,750 $14,768,113
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $11,370,015 $12,015,435
General and administrative 383,641 400,763
Interest expense 470,247 200,112
------------ ------------
$12,223,903 $12,616,310
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 250,847 $ 2,151,803
INCOME TAXES 95,322 817,685
------------ ------------
NET EARNINGS $ 155,525 $ 1,334,118
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,125,035 11,088,065
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $13,280,560 $12,422,183
============ ============
NET EARNINGS PER SHARE $ .06 $ .53
============ ============
See notes to condensed financial statements
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STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED JULY 31
---------------------------
1997 1996
---- ----
REVENUES:
Sugar and molasses sales $ 2,193,774 $ 3,288,213
Interest earned 8,718 28,406
Mineral leases and royalties 19,254 22,015
Gain (loss) on sale of depreciable assets 20,207 (894)
Other 66,449 147,304
------------ ------------
$ 2,308,402 $ 3,485,044
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 2,164,374 $ 2,265,460
General and administrative 204,305 244,401
Interest expense 224,486 93,819
------------ ------------
$ 2,593,165 $ 2,603,680
------------ ------------
NET EARNINGS (LOSS) BEFORE INCOME TAXES $ (284,763) $ 881,364
INCOME TAXES (CREDIT) (108,210) 334,918
------------ ------------
NET EARNINGS (LOSS) $ (176,553) $ 546,446
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,457,113 11,875,737
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $13,280,560 $12,422,183
============ ============
NET EARNINGS (LOSS) PER SHARE $ (.07) $ .22
============ ============
See notes to condensed financial statements
I-3 -5-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JULY 31
---------------------------
1997 1996
---- ----
OPERATING ACTIVITIES:
Net earnings $ 155,525 $ 1,334,118
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Amoritization of loan costs 6,182 5,907
Depreciation 1,235,950 752,125
Loss on sale of depreciable assets 24,798 894
Changes in operating assets and liabilities:
Decrease in accounts receivable 1,607,590 1,419,907
Increase in notes receivable ( 16,354) ( 43,062)
Decrease in inventories 10,825,919 11,635,741
Increase in other current assets ( 26,893) ( 194,577)
Increase in expenditures for future crops ( 3,603,952) ( 3,131,349)
Decrease in accounts payable and accrued exp. ( 4,735,240) ( 4,270,990)
Other items - net - ( 84,046)
------------ ------------
Net cash provided by operating activities $ 5,473,525 $ 7,424,668
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $( 3,686,220) $( 2,045,046)
Proceeds from sale of depreciable assets 125,179 2,500
----------- ------------
Net cash used in investing activities $( 3,561,041) $( 2,042,546)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term debt $ 4,842,000 $ 855,000
Proceeds from long-term debt 217,343 -
Payments on short-term debt ( 6,312,000) ( 4,513,334)
Payments on long-term debt ( 467,543) ( 113,054)
------------ ------------
Net cash used in financing activities $( 1,720,200) $( 3,771,388)
------------ ------------
Increase in cash and temporary investments $ 192,284 $ 1,610,734
Cash and temporary investments at the
beginning of the period 110,332 134,052
------------ ------------
Cash and temporary investments at the
end of the period $ 302,616 $ 1,744,786
============ ============
Continued
See notes to condensed financial statements
I-4 -6-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Supplemental information:
Interest paid $ 509,581 $ 207,643
=========== ===========
Income taxes paid $ -0- $ 373,500
=========== ===========
I-5 -7-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JULY 31, 1997 AND 1996
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheets as of July 31, 1997, the
statements of earnings and retained earnings for the three and
six months ending July 31, 1997 and 1996, 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 July 31, 1997 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 1997 annual report
to stockholders. The results of operations for the period
ending July 31, 1997 are not necessarily indicative of the
operating results expected for the full year.
I-6 -8-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JULY 31, 1997 AND 1996
(UNAUDITED)
B. EXPENDITURES FOR FUTURE CROPS:
Expenditures incurred and income earned from sugar
operations for the 1997 and 1996 crops have been deferred
in order to properly match revenues and expenses. The
deferred items are as follows:
SIX MONTHS ENDED JULY 31
---------------------------
1997 1996
---- ----
DEFERRED COSTS: (1997 AND 1996 CROPS)
Factory $ 3,327,776 $ 2,806,543
Plantations 414,548 519,484
------------ ------------
$ 3,742,324 $ 3,326,027
Land preparation and planting costs
1998 and 1997 crops respectively 9,962 22,289
------------ ------------
$ 3,752,286 $ 3,348,316
============ ============
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-7 -9-
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 six months ended July 31, 1997
and 1996 were as follows:
1997 1996
------ ------
Raw sugar sales $12,089,791 $14,183,180
Molasses sales 207,385 342,692
------------ ------------
$12,297,176 $14,525,872
============ ============
For the first six months of the Company's fiscal year ending January
31, 1998 (fiscal 1998), sales of raw sugar (1996 crop) decreased com-
pared to the same period ending in fiscal 1997 (1995 crop). This de-
crease is the result of the Company having less sugar available to
market during the current period. At January 31, 1997, the Company had
on hand approximately 27,713 tons of raw sugar available for sale to
refiners as compared to 31,545 tons of raw sugar at January 31, 1996.
As of July 31st of both years, the Company had sold and shipped its'
raw sugar held in inventory. For the three month periods ending July 31,
1997 and 1996, the Company sold and shipped to refiners 5,200 and 6,921
tons of raw sugar, respectively. The sugar price for the 1996 crop
decreased and was $22.15 cwt. For the 1995 crop, the average price was
$22.52 cwt.
As of January 31, 1997, the Company had on hand approximately
767,096 gallons of molasses all of which had been sold as of April 30,
1997. At January 31, 1996, the Company had approximately 714,343
gallons of molasses on hand all of which had been sold as of April 30,
1996. Although slightly more molasses was sold in the 1997 period, the
price per gallon decreased for the 1996 molasses crop. The Company
received $.40 per gallon from the sale of the 1995 molasses crop
compared to $.32 per gallon for the sale of the 1996 molasses crop.
There were no molasses sales in the quarters ending July 31, 1997 and
July 31, 1996.
Interest Earned:
Interest earned for the quarter and six month periods ending July 31,
1997 decreased compared to the same periods ending on July 31, 1996.
Interest earned for the six month period ending July 31, 1997 was $9,899.
For the six month period ending July 31, 1996, interest earned was
$36,730. The decrease for the current periods is primarily attributable
to the decrease in short-term investments. At January 31, 1997, the
Company had cash and short-term investments of $10,154 compared to
$3,186,145 at January 31, 1996.
Mineral Leases and Royalties:
For the six month period ended July 31, 1997, income from mineral
leases and royalties increased to $84,978 compared to $44,113 for the
period ending in 1996. The increase is attributable to the Company
I-8 -10-
entering into two seismic agreements in the first quarter of fiscal
1998. One agreement is for six months, covers approximately 710 acres
in St. Mary Parish for $31,625. The second agreement contains an
eighteen month term, covers 2,396 acres in St. Mary Parish for $71,891.
This agreement contains an option agreement to lease the subject property
to acquire an oil and gas lease. Mineral leases and royalty income
remained relatively constant for each of the three and six month periods
ending July 31, 1997 and July 31, 1996.
Loss on the Sale of Depreciable Assets:
The Company recognized a loss on the sale of obsolete machinery
equipment for the six month period ending July 31, 1997 of $$24,798.
For the same period ending in 1996, the Company recognized a loss of
$894. The loss in the current year, however, is offset by a gain of
$20,207 recognized for the three month period ending July 31, 1997.
For the three month period ending July 31, 1996, a loss of $894 was
recognized from the sale of obsolete equipment.
Other Revenues:
Other revenues, which consist mainly of miscellaneous income items,
were $66,449 and $107,495 for the three and six month periods ending
July 31, 1997, respectively. For the three and six month periods ending
July 31, 1996, other revenues were $147,304 and $162,292, respectively.
These revenues, which can vary considerably from year to year, generally
include amounts received for the sale of scrap and other miscellaneous
items.
Cost of Products Sold:
Cost of products sold decreased for the three and six month periods
ending July 31, 1997 and were $2,164,374 and $11,370,015, respectively.
For the same three and six month periods in 1996, cost of products sold
were $2,265,460 and $12,015,435, respectively. Costs relating to sales
are charged to cost of products sold. Accordingly, costs have decreased
for 1997 as would be expected with the decrease in sales.
General and Administrative Expenses:
General and administrative expenses for the three and six month
periods ended July 31, 1997 have decreased compared to the same periods
ending in 1996. These expenses were $383,641 and $400,763 for the six
month periods ending July 31, 1997 and 1996, respectively. The decrease
is primarily attributable to decreases in miscellaneous expense items.
Interest Expense:
Interest expense increased for the three and six month periods
ending July 31, 1997 compared to the same periods in 1996. The increase
in interest expense is primarily the result of the interest expense
incurred on long-term debt of $6,500,000. The Company, in December,
1996, made a long-term loan to finance the purchase of approximately
8,519 acres of land in St. Mary Parish of which 4,863 acres is cultivable
cane land. The acquistion is viewed as good for the Company in that it
will secure and maintain the Company's current cane supply. The loan
agreement contains a ten year payout with all annual cane land rental
I-9 -11-
income derived from the land applied to the loan. Interest incurred is
paid quarterly.
Income Taxes:
The income tax expense (credit) for the three and six month periods
ending July 31, 1997 and 1996 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 July 31, 1997, the Company had working capital of $2,694,305
compared to $5,173,246 at January 31, 1997. The working capital ratios
were 1.8 to 1 and 1.6 to 1, respectively.
For the upcoming 1997 grinding season, crop estimates thus far show
an increase in cane supply primarily because of an excellent growing
season. Along with this increase is a trend among sugarcane farmers
in Louisiana, including our area, to convert harvesting practices from
whole stalk to billet combines. Most factory managers would agree the
combine system at this time is more favorable to farmers than factories.
Despite this fact, it is important the Company accomodate its' farmers
and as a result, the Company has budgeted $750,000 in capital additions
for handling billet cane on the cane yard. The Company has also budgeted
$2,700,000 in other capital additions which include improvements to
steam boiler No. 5, various improvements to steam boilers Nos. 1, 2, 4
and 6, installation of two 1,500 KW generators, a cane wash table and
installation of one vacuum pan for the raw house. The improvements for
the coming year other than the billet cane handling improvements, will
aid the Company in becoming more efficient in operating the factory.
The additions for handling billet cane is expected to increase the
factory cost of cane yard operations. As in the past, the Company 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 six month period ended July 31,
1997 were $3,327,776. Such costs for the same period in 1996 were
$2,806,543. The increase for the current period is primarily
attributable to an increase in expenses incurred for idle season
maintenance and repairs compared to the same period ending July 31,
1996. The Company for the 1997 idle season has budgeted $2,250,210
for idle season repair and maintenance. For the 1996 idle season the
Company had budgeted $2,161,000 for idle season repairs and maintenance.
Plantation Deferred Costs:
Plantation deferred costs decreased to $414,548 for the six
month period ending July 31, 1997 from $519,484 for the same period
in 1996. The decrease in plantation deferred costs is primarily
attributable to the Company in February 1997 leasing to an independent
farmer approximately 383 acres of its' agricultural division. The
Company's farm division now consist of 1,584 acres.
I-10 -12-
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 -13-
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 September 12, 1997 By /S/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE September 12, 1997 By /S/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -14-