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 October 31, 1999
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 November 30, 1999.
Total number of pages 12
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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 October 31, 1999
(unaudited) and July 31, 1999 I-1
Statements of earnings and retained earnings
Three months ended October 31, 1999
(unaudited) and 1998 (unaudited) I-2
Statements of cash flows
Three months ended October 31, 1999
(unaudited) and 1998 (unaudited) I-3
Notes to condensed financial statements
Three months ended October 31, 1999 and 1998 I-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-6
PART II. OTHER INFORMATION:
ITEM 5. OTHER INFORMATION II-1
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K II-1
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STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
October 31, July 31,
1999 1999
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 163,710 $ 458,050
Accounts receivable 7,342,177 585,554
Notes receivable 60,017 62,800
Inventories 6,488,116 639,896
Deferred income taxes 377,800 377,800
Other current assets 497,674 706,883
------------- -------------
TOTAL CURRENT ASSETS $ 14,929,494 $ 2,830,983
------------- -------------
Property, plant and equipment - net $ 24,629,317 $ 24,891,154
------------- -------------
Expenditures for future crops $ 1,138,963 $ 1,138,963
------------- -------------
Notes receivable - net of allowance $ 589,734 $ 512,246
------------- -------------
Other assets $ 67,970 $ 38,511
------------- -------------
$ 41,355,478 $ 29,411,857
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,426,379 $ 1,218,059
Due cane growers 2,973,466 1,660,252
Short-term debt 10,086,009 -
Current portion long-term debt 1,067,454 988,416
------------ -------------
TOTAL CURRENT LIABILITIES $ 15,553,308 $ 3,866,727
------------- -------------
Long-term debt $ 7,892,721 $ 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 (Note C) 40,455 40,455
Retained earnings 13,991,994 13,743,691
------------- -------------
$ 16,532,449 $ 16,284,146
------------- -------------
$ 41,355,478 $ 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-
STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED OCTOBER 31
-----------------------------
1999 1998
------ ------
(Unaudited) (Unaudited)
REVENUES:
Sugar and molasses sales $ 9,179,725 $ 7,461,246
Interest earned 62 1,929
Mineral leases and royalties 27,551 21,314
Other 510,983 433,277
------------ ------------
$ 9,718,321 $ 7,917,766
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 8,822,884 $ 7,655,049
General and administrative 226,017 165,393
Interest expense 268,931 260,398
------------ ------------
$ 9,317,832 $ 8,080,840
------------ ------------
NET EARNINGS (LOSS) BEFORE INCOME TAXES $ 400,489 $ (163,074)
INCOME TAX EXPENSE (CREDIT) 152,186 (61,968)
------------ ------------
NET EARNINGS (LOSS) $ 248,303 $ (101,106)
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,743,691 13,138,727
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $13,991,994 $13,037,621
============ ============
NET EARNINGS (LOSS) PER SHARE $ .10 $ (.04)
============ ============
See notes to condensed financial statements
I-2 -4-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31
-----------------------------
1999 1998
------ ------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net earnings (Loss) $ 248,303 $ (101,106)
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation 571,017 523,570
Changes in operating assets and liabilities:
Increase in accounts receivable (6,756,623) (5,409,158)
Decrease in notes receivable 2,783 16,214
Increase in inventories (5,848,220) (3,649,962)
Increase (decrease) in other current assets (209,209) 806,327
Increase in accounts payable, accrued expenses
and due cane growers 1,600,572 1,833,015
Other items - net 215,195 (53,581)
------------ ------------
Net cash provided by operating activities $(10,176,182)$(6,034,681)
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $( 291,943) $ (403,703)
Proceeds from sale of depreciable assets - -
----------- ------------
Net cash used in investing activities $( 291,943) $ (403,703)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term debt $12,028,009 $ 8,217,047
Payments on short-term debt (1,942,000) (1,745,500)
Proceeds from long-term debt 160,008 -
Payments on long-term debt ( 72,232) ( 23,428)
------------ ------------
Net cash provided by (used in) financing
activities $10,173,785 $ 6,448,119
------------ ------------
Increase (decrease) in cash and temporary
investments $ (294,340) $ 9,735
Cash and temporary investments at the
beginning of the period 458,050 164,152
------------ ------------
Cash and temporary investments at the
end of the period $ 163,710 $ 173,887
============ ============
Continued
See notes to condensed financial statements
I-3 -5-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(CONTINUED)
THREE MONTHS ENDED OCTOBER 31
------------------------------
1999 1998
-------- ---------
(Unaudited) (Unaudited)
Supplemental information:
Interest paid $ 169,233 $ 174,759
=========== ===========
Income taxes paid $ 20,000 $ -
=========== ===========
I-4 -6-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED OCTOBER 31, 1999 AND 1998
(UNAUDITED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheet as of October 31, 1999, the
statements of earnings and retained earnings for the three
months ending October 31, 1999 and 1998, and the
condensed statements of cash flows for the three 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 October 31, 1999 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 annual
report to stockholders. The results of operations for the period
ending October 31, 1999 are not necessarily indicative of the
operating results 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 began its harvesting and grinding season on September
20, 1999 and had ground 378,858 tons of sugarcane by October 31, 1999.
This tonnage yielded 38,261 tons of raw sugar or 202.0 pounds of raw
sugar per ton of sugarcane. Last season, the Company had ground
288,028 tons of sugarcane which produced 24,684 tons of raw sugar or
171.4 pounds of raw sugar per ton of sugarcane. The Company had
unusually good growing weather this year which has resulted in what
appears to be a record crop. The Company expects to grind approximately
1,100,000 tons of sugarcane this season compared to 1,031,144 tons last
season. Additionally, sugar yields are up considerably as noted above.
Unseasonable warm weather after the crop started contributed to the low
yield of sugar last season. Sugar yields are typically lower at the
beginning of harvest as the cane has not fully matured at that time.
Because of the expected large crop, the Company started the season
earlier than normal which accounts for the higher tonnage ground at
October 31, 1999. Last year the Company started on October 1, 1998.
The raw sugar price has declined substantially in the last several
months with nearby futures quoted at around 17 cents per pound. Last
year the Company received a basis price of 20.80 cents per pound average
for the 1998 crop and 21.02 cents for the 1997 crop. As of October 31,
1999, the Company had received an average of 20.74 cents for sugar.
However, this price includes forward sales of sugar made before the price
decline and it appears at this point that the average will continue to
decline throughout the crop. The record crop and better than average
sugar yield should help offset the decline in price.
I-6 -8-
Sugar and Molasses Sales:
-------------------------
Sugar and molasses sales for the three months ended October 31,
1999 and 1998 were as follows:
1999 1998
------ ------
Raw sugar sales $ 9,031,764 $ 7,366,904
Molasses sales 147,961 94,342
------------ -------------
$ 9,179,725 $ 7,461,246
============ =============
As of October 31, 1999, the Company had shipped 22,186 tons of
raw sugar compared to 16,700 tons shipped as of October 31, 1998. The
higher sales for the current period reflect the early start and the
shipment of 5,486 tons of raw sugar more than the previous year.
Molasses production was down slightly at 5.72 gallons per ton of
sugarcane ground compared to 6.00 gallons per ton last year. The price
of molasses continues to be depressed as a result of oversupply
worldwide. Last year, molasses sales were two percent of total sales.
Interest Earned:
----------------
Interest earned was $62 for the three months ending October 31,
1999 compared to $1,929 for the same period last year.
Mineral Leases and Royalties:
-----------------------------
Mineral leases and royalties were $27,551 for the three months
ended October 31, 1999 compared to $21,314 for the three months ended
October 31, 1998. There were no new oil and gas leases granted for
the three month period ended October 31, 1999. The Company currently
has four leases outstanding. The proceeds from these leases are
amortized over the life of the lease. Lease income was $27,100 and
royalties were $451 for the current period and $18,974 and $2,340,
respectively for the three month period ended October 31, 1998.
Other Revenues:
---------------
Other revenues consist mainly of miscellaneous income and cane
land rentals. Cane land rentals for the three months ended October 31,
1999 were $478,823 compared to $354,870 for the same period in the
prior year. The higher cane rental income is primarily because of the
higher tonnage ground and to a lesser extent the leasing of approximately
228 acres of Company owned land to an area farmer.
I-7 -9-
Cost of Products Sold:
----------------------
Cost of products sold increased to $8,822,884 for the three month
period ending October 31, 1999 from $7,655,049 for the three months
ended October 31, 1998. Costs relating to sales are charged to cost of
products sold. Accordingly, costs have increased relative to the higher
sales for the current period.
General and Administrative Expenses:
------------------------------------
General and administrative expenses were $226,017 for the current
period and $165,393 for the same period last year. The increase
reflects higher costs for pension, hospitalization and miscellaneous
expenses.
Interest Expense:
-----------------
Interest expense increased slightly to $268,931 for the three
months ended October 31, 1999 from $260,398 for the three months ended
October 31, 1998. Short-term debt outstanding was $10,086,009 on
October 31, 1999 and $7,606,547 on October 31, 1998. The interest rate
on October 31, 1999 was 7.25% compared to 7.00% on October 31, 1998.
Income Taxes:
-------------
The income tax expense (credit) for the three month periods
ending October 31, 1999 and 1998 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 October 31, 1999, the Company had negative working capital of
$623,814 compared to negative working capital of $509,191 at October
31, 1998. Working capital ratios were .96:1 and .96:1 respectively.
Typically, the Company begins short-term borrowing during the idle
season to finance company operations and capital additions. At July 31,
1999, short-term debt outstanding was $0 and at October 31, 1999
short-term debt had increased to $10,086,009 which included $2,228,172
borrowed on the last day of the period. On October 31, 1998,
short-term debt was $7,606,547. The short-term interest rate
increased from 7.00% on October 31, 1998 to 7.25% on October 31, 1999.
The Company has a $12,000,000 line of credit with a bank.
I-8 -10-
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K
No reports on Form 8-K have been filed for the period.
II-1 -11-
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 December 14, 1999 By /s/ Craig P. Caillier
--------------------------- ------------------------
CRAIG P. CAILLIER
PRESIDENT AND CEO
DATE December 14, 1999 By /s/ Stanley H. Pipes
---------------------------- -------------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -12-