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, 2002
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 November 29, 2002.
Total number of pages 18
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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, 2002
(unaudited) and July 31, 2002 I-1
Statements of earnings and retained earnings
Three months ended October 31, 2002
(unaudited) and 2001 (unaudited) I-2
Statements of cash flows
Three months ended October 31, 2002
(unaudited) and 2001 (unaudited) I-3
Notes to condensed financial statements
Three months ended October 31, 2002 and 2001 I-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-6
ITEM 4. CONTROLS AND PROCEDURES I-9
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K II-1
-2-
STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
October 31, July 31,
2002 2002
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ (50,620) $ 3,866
Accounts receivable 6,592,559 1,281,542
Inventories at lower of cost or market 1,441,829 3,167,609
Deferred income taxes 334,000 334,000
Other current assets 415,506 380,301
------------- -------------
TOTAL CURRENT ASSETS $ 8,733,274 $ 5,167,318
------------- -------------
Property, plant and equipment - net $ 23,989,288 $ 24,041,961
------------- -------------
Expenditures for future crops $ 759,309 $ 759,309
------------- -------------
Notes receivable - No allowance for
doubtful accounts considered necessary $ 369,408 $ 376,082
------------- -------------
Other assets $ 47,463 $ 56,921
------------- -------------
$ 33,898,742 $ 30,401,591
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Notes Payable $ 6,719,000 $ 3,512,000
Accounts payable and accrued expenses 589,171 803,887
Due cane growers 2,440,050 857,425
Current portion long-term debt 550,000 628,905
------------- -------------
TOTAL CURRENT LIABILITIES $ 10,298,221 $ 5,802,217
------------- -------------
Long-term debt $ 3,899,436 $ 3,830,100
------------- -------------
Deferred income taxes $ 2,213,000 $ 2,213,000
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital 40,455 40,455
Retained earnings 14,947,630 16,015,819
------------- -------------
$ 17,488,085 $ 18,556,274
------------- -------------
$ 33,898,742 $ 30,401,591
============= =============
NOTE: The balance sheet at July 31, 2002 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
-----------------------------
2002 2001
------ ------
(Unaudited) (Unaudited)
REVENUES:
Sugar and molasses sales $ 8,440,926 $ 8,450,605
Interest earned 781 1,728
Mineral leases and royalties 86,274 126,298
Other 438,370 623,758
------------ ------------
$ 8,966,351 $ 9,202,389
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 10,348,164 $ 8,873,540
General and administrative 259,767 224,373
Interest expense 81,306 168,425
------------ ------------
$ 10,689,237 $ 9,266,338
------------ ------------
NET EARNINGSS (LOSS) BEFORE INCOME TAXES $ (1,722,886) $ (63,949)
INCOME TAX EXPENSE (CREDIT) (654,697) (23,661)
------------ ------------
NET EARNINGS (LOSS) $ (1,068,189) $ (40,288)
RETAINED EARNINGS AT BEGINNING OF PERIOD 16,015,819 15,024,027
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $ 14,947,630 $14,983,739
============ ============
NET EARNINGS (LOSS) PER SHARE $ - $ -
============ ============
See notes to condensed financial statements
I-2 -4-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31
-----------------------------
2002 2001
------ ------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net earnings (Loss) $ (1,068,189) $ (40,288)
Adjustments to reconcile net earnings to net
cash provided by (used in) operating
activities:
Depreciation 493,018 562,825
Changes in operating assets and liabilities:
Increase in accounts receivable (5,311,017) (3,988,801)
(Increase) decrease in inventories 1,725,780 (6,424,192)
Increase (decrease) in other current assets 35,205 (47,953)
Increase in accounts payable, accrued expenses
and due cane growers 1,367,909 4,081,146
Other items - net (175,073) 15,558
------------- ------------
Net cash used in operating activities $ (2,932,367) $(5,841,705)
------------- ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $ (444,551) $ (240,936)
Proceeds from sale of land 110,000 61,273
------------- ------------
Net cash used in investing activities $ (334,551) $ (179,663)
------------- ------------
FINANCING ACTIVITIES:
Proceeds from short-term debt $ 7,163,200 $10,119,000
Payments on short-term debt (3,941,200) (3,977,615)
Proceeds from long-term debt 244,140 -
Payments on long-term debt ( 253,708) ( 196,015)
------------- ------------
Net cash provided by (used in) financing
activities $ 3,212,432 $ 5,945,370
------------- ------------
Increase (decrease) in cash and temporary
investments $ (54,486) $ (75,998)
Cash and temporary investments at the
beginning of the period 3,866 33,949
------------- ------------
Cash and temporary investments at the
end of the period $ (50,620) $ (42,049)
============ ============
Continued
See notes to condensed financial statements
I-3 -5-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(CONTINUED)
THREE MONTHS ENDED OCTOBER 31
------------------------------
2002 2001
-------- ---------
(Unaudited) (Unaudited)
Supplemental information:
Interest paid $ 30,724 $ 107,515
=========== ===========
Income taxes paid $ - $ 4,170
=========== ===========
I-4 -6-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED OCTOBER 31, 2002 AND 2001
(UNAUDITED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheet as of October 31, 2002, the
statements of earnings and retained earnings for the three
months ending October 31, 2002 and 2001, 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, 2002 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, 2002 annual
report to stockholders and the Form 10-K filed with the Securities
and Exchange Commission on October 28, 2002. The results of
operations for the period ending October 31, 2002 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:
--------------------
Tropical Storm Isidore and Hurricane Lili passed through this area
in late September and early October, respectively. The resulting damage
to the cane crop delayed the start of harvesting and grinding until
October 10, 2002. Additionally, this area has experienced above average
rainfall since the crop started. These factors have reduced sugar yields
to 166.4 pounds of raw sugar per ton of cane on October 31, 2002 compared
to yields of 194.3 and 196.9 pounds for the periods ended October 31,
2001 and 2000, respectively. As of December 4, 2002, yields had
increased to 177.2 pounds per ton but still well below the previous two
years. Assuming the pounds of raw sugar per ton of cane stays at the
current level of 177.2, such a reduction in yields would have a
substantial negative impact on the Company's bottom line. The Company
expects to grind approximately 1,000,000 tons of sugarcane compared to
1,027,182 and 1,063,646 for the previous two years. The inclement
weather has increased lost time percent and average tons ground for the
current crop. Lost time percent is 8.86 percent for the current crop
compared to 4.72 percent and 5.91 percent for the previous two years.
Average tons ground per crop day was 9,392 at October 31, 2002 compared
to 10,617 and 10,299 for the previous two years.
The raw sugar price has increased compared to the previous two
years. The basis price paid to farmers for the 2001, 2000 and 1999
$20.24 cents per pound, $18.40, $18.65, respectively. The price
for the current year (2002 crop) is expected to be approximately the same
as paid for the 2001 crop.
I-6 -8-
Sugar and Molasses Sales:
-------------------------
Sugar and molasses sales for the three months ended October 31,
2002 and 2001 were as follows:
2002 2001
------ ------
Raw sugar sales $ 8,281,411 $ 7,770,259
Molasses sales 159,515 680,346
------------ -------------
$ 8,440,926 $ 8,450,605
============ =============
As of October 31, 2002, the Company had shipped 15,333 tons of
raw sugar compared to 18,886 tons shipped as of October 31, 2001. It
should be noted that 9,079 tons of raw sugar was shipped in August, 2002,
from the 2001 crop which explains the increased sales over last year for
the same period. Shipments of raw sugar are dictated by the refiners
based on their needs and production schedules.
Molasses production is down to 4.99 gallons per ton of sugarcane
ground for the quarter ended October 31, 2002 compared to 5.92 gallons
per ton for the same period last year. The price of molasses decreased
to $60 per ton compared to $68.50 per ton in 2001. Shipments of molasses
as of October 31, 2002 were 3,057 tons compared to 9,932 tons for the
same period last year. The late grinding start and lower yields
contributed to the lesser sales and tonnage shipped as of October 31,
2002.
Interest Earned:
----------------
Interest earned was $781 for the three months ending October 31,
2002 compared to $1,728 for the same period last year.
Mineral Leases and Royalties:
-----------------------------
Mineral leases and royalties were $86,274 for the three months
ended October 31, 2002 compared to $126,298 for the three months ended
October 31, 2001. There were no new oil and gas leases granted for
the three month period ended October 31, 2001. In May, 2000, a well was
completed on Company property and at that time was producing
approximately 265 barrels of oil per day and 18,500 MCF of gas.
Production from the well has been fairly steady but the price of oil and
gas has decreased which resulted in the lower royalties for the current
three month period. Proceeds from this well are being used to pay down
the Company's long-term debt.
Other Revenues:
---------------
Other revenues consist mainly of miscellaneous income and cane
land rentals. Cane land rentals for the three months ended October 31,
2002 were $315,121 compared to $511,013 for the same period in the
prior year. The decrease in cane rental income is primarily because of
I-7 -9-
the lower tonnage processed and lower sugar yields as of October 31,
2002 compared to the same period last year. Also included in other
revenues is a gain on the sale of 1.955 acres of land in LaFourche
Parish on October 24, 2002. The land was sold for $110,000 and
resulted in a gain of $107,383.
Cost of Products Sold:
----------------------
Cost of products sold increased to $10,148,364 for the three month
period ending October 31, 2002 from $8,873,540 for the three months
ended October 31, 2001. Costs relating to sales are charged to cost of
products sold. Although sugar and molasses sales are about the same for
the quarter ended October 31, 2002 and 2001, cost of products sold
increased by $1,474,624 principally because of the two storms noted
previously under "General Information" and above average rainfall
experienced since the start of the 2002 crop.
General and Administrative Expenses:
------------------------------------
General and administrative expenses were $259,767 for the current
period and $224,373 for the same period last year.
Interest Expense:
-----------------
Interest expense decreased to $81,306 for the three months ended
October 31, 2002 from $168,425 for the three months ended October 31,
2001. The decrease is mostly attributable to lower interest rates.
The interest rate for short-term borrowings at October 31, 2002 was 4%
compared to 4.50% at October 31, 2001.
Income Taxes:
-------------
The income tax credit for the three month periods ending October
31, 2002 and 2001 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, 2002, the Company had negative working capital of
$1,564,947 compared to negative working capital of $4,765,664 at October
31, 2001. Working capital ratios were .85:1 and .73:1 respectively.
The calculation of the current ratio for October 31, 2001 includes
$3,363,888 in the current portion of long-term debt due in January
2002. In anticipation of this payment, the Company used the proceeds
from oil royalties to pay down its long-term debt. In January 2002,
the Company paid off the balance of the note by refinancing the remaining
balance with a bank. The Company continues to use the proceeds from its
oil and gas royalties to pay down long-term debt.
I-8 -10-
Typically, the Company begins short-term borrowing during the idle
season to finance company operations and capital additions. At July 31,
2002, short-term debt outstanding was $3,512,000 and at October 31, 2002
short-term debt had increased to $6,719,000. At July 31, 2001, short-term
debt was $2,446,615 and had increased to $8,588,000 by October 31, 2001.
The Company has a $12,000,000 line of credit with a bank.
Item 4. Disclosure Controls
Our principal executive officer and principal accounting officer
have evaluated our disclosure controls and procedures within 90 days
prior to the date of filing of this Quarterly Report on Form 10-Q for
the period ending October 31, 2002. They believe that our current
internal controls and procedures are effective and designed to ensure
that information required to be disclosed by us in our periodic reports
is recorded, processed, summarized and reported, within the appropriate
time periods specified by the SEC, and that such information is
accumulated and communicated to our principal executive officer and
principal accounting officer as appropriate to allow timely decisions to
be made regarding required disclosure. Subsequent to the date of the
evaluation, there were no significant corrective actions taken by us or
other changes made to these internal controls. Management does not
believe there were changes in other factors that could significantly
affect these controls subsequent to the date of the evaluation.
I-9 -11-
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
Exhibit Description Page
----------------------------------------------------
99.1 Section 906 Certification of Chief 18
Executive Officer
99.2 Section 906 Certification of Chief 18
Financial Officer
(b) Reports on Form 8K
No reports on Form 8-K have been filed 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 December 13, 2002 By /s/ Craig P. Caillier
--------------------------- ------------------------
CRAIG P. CAILLIER
PRESIDENT AND CEO
DATE December 13, 2002 By /s/ Stanley H. Pipes
---------------------------- -------------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -13-
CERTIFICATIONS
I, Craig P. Caillier, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sterling Sugars,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
II-3 -14-
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: December 13, 2002
-----------------
/s/ Craig P. Caillier
-----------------------
Craig P. Caillier
President
II-4 -15-
CERTIFICATIONS
I, Stanley H. Pipes, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sterling Sugars,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
II-5 -16-
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: December 13, 2002
-----------------
/s/ Stanley H. Pipes
--------------------
Stanley H. Pipes
Vice President & Treasurer
II-6 -17-
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sterling Sugars, Inc.
(the "Company") on Form 10-Q for the three months ending October 31, 2002
as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Craig P. Caillier, President and Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge
that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Craig P. Caillier
Date: December 13, 2002 ---------------------
----------------- Craig P. Caillier
President and Chief Executive Officer
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sterling Sugars, Inc.
(the "Company") on Form 10-Q for the three months ending October 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Stanley H. Pipes, Vice President & Treasurer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of
operations of the Company.
Date: December 13, 2002 /s/ Stanley H. Pipes
----------------- -----------------
Stanley H. Pipes
Vice President & Treasurer
II-4 -18-