-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NC0GX9vmhNT0wJzj6BmTuN32EC7Xw8e9uSg5qFMyem/bzzXy5WgpoTfY6E7oPCtU WiBDGM2LzegQ+/eiNL3+ig== 0000941158-01-000007.txt : 20010223 0000941158-01-000007.hdr.sgml : 20010223 ACCESSION NUMBER: 0000941158-01-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH PLAINS CORP CENTRAL INDEX KEY: 0000317551 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 480901658 STATE OF INCORPORATION: KS FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08680 FILM NUMBER: 1545507 BUSINESS ADDRESS: STREET 1: 200 W DOUGLAS STREET 2: STE 820 CITY: WICHITA STATE: KS ZIP: 67202 BUSINESS PHONE: 3162694310 MAIL ADDRESS: STREET 1: 200 W DOUGLAS STREET 2: STE 820 CITY: WICHITA STATE: KS ZIP: 67202 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GASOHOL REFINERS INC DATE OF NAME CHANGE: 19830807 10-Q 1 0001.txt Form 10-Q Securities and Exchange Commission Washington, D.C. 20549 [ X ] Quarterly report pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended December 31, 2000 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 1-8680 High Plains Corporation (Exact name of registrant as specified in its charter) Kansas #48-0901658 (State or other jurisdiction of incorporation or (IRS Employer organization Identification No.) 200 W Douglas 67202 Suite #820 (Zip Code) Wichita, Kansas (Address of principal executive offices) (316) 269-4310 (Registrant's telephone number) Indicate by check mark whether the 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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under plan confirmed by a court. Yes No Common Stock, Par Value $.10 per share, Outstanding at December 31, 2000 - 16,149,044 PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Balance Sheet 3 - 4 Statements of Operations 5 Statements of Comprehensive Income/(Loss) 5 Statement of Stockholders' Equity 6 Statement of Cash Flows 7 Selected Notes to Financial Statements 8 - 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 - 14 PART II OTHER INFORMATION Item 3. Legal Proceedings 14 Item 4. Other Information 14 - 15 Item 5. Exhibits and Reports on Form 8-K 15 - 16 HIGH PLAINS CORPORATION Balance Sheets (Unaudited) December 31, 2000 and June 30, 2000
Assets December 31, 2000 June 30, 2000 (Unaudited) ** Current Assets: Cash and cash equivalents $ 5,560,607 $ 4,886,011 Accounts receivable Trade (less allowance of $75,000) 11,297,530 10,026,422 Production credits and incentives (less allowance of $124,222) 2,027,420 329,829 Inventories 4,979,657 4,283,561 Notes receivable 11,349 50,000 Prepaid expenses 847,756 487,428 Refundable income tax 0 30,000 Total current assets 24,724,319 20,093,251 Property, plant and equipment, at cost: Land and land improvements 450,403 450,403 Ethanol plants 93,479,169 93,366,635 Other equipment 573,911 573,911 Office equipment 410,064 389,446 Leasehold improvements 48,002 48,002 Construction in progress 2,633,245 914,586 Sub-total 97,594,794 95,742,983 Less accumulated depreciation (33,106,712) (31,295,936) Net property, plant and equipment 64,488,082 64,447,047 Other assets: Deferred loan costs (less accumulated 741,783 849,244 amortization of $232,833 and $125,372, respectively) Other 2,904 13,054 Total other assets 744,687 862,298 $ 89,957,088 $ 85,402,596 See accompanying notes to financial statements. ** From audited financial statements.
HIGH PLAINS CORPORATION Balance Sheets (Unaudited) December 31, 2000 and June 30, 2000
Liabilities and Stockholders Equity December 31, 2000 June 30, 2000 (Unaudited) ** Current Liabilities: Current portion of long-term debt $ 2,250,000 $ 2,507,138 Current maturities of capital leases 584,703 561,518 Accounts payable 8,656,838 8,695,216 Accrued interest 295,094 295,772 Accrued payroll and property taxes 796,696 779,199 Total current liabilities 12,583,331 12,838,843 Long-term debt 15,367,860 16,492,860 Capital lease obligations, less current maturities 650,768 940,376 Deferred income tax payable 3,757,647 1,389,000 Other 279,887 273,253 Total non-current liabilities 20,056,162 19,095,489 Stockholders' Equity: Common stock, $.10 par value, authorized 50,000,000 shares; issued 16,515,291 and 16,453,798 shares at December 31, 2000 and June 30, 2000, respectively, of which 366,247 and 276,847 were held as treasury stock at December 31, 2000 and June 30, 2000, respectively. 1,651,529 1,645,380 Additional paid-in capital 37,830,614 37,695,277 Retained earnings 18,507,513 14,865,932 Accumulated other comprehensive income: Grain derivatives 306,165 0 58,295,821 54,206,589 Less: Treasury stock-at cost (957,962) (710,849) Deferred compensation (20,264) (27,476) Total stockholders' equity 57,317,595 53,468,264 $ 89,957,088 $ 85,402,596 See accompanying notes to financial statements. ** From audited financial statements.
HIGH PLAINS CORPORATION Statement of Operations (Unaudited) Three Months Ended December 31, 2000 and 1999 and Six Months Ended December 31, 2000 and 1999
Three Months Ended Six Months Ended December 31, December 31, 2000 1999 2000 1999 Net sales and revenues $36,078,563 $25,314,167 $65,260,359 $48,017,818 Cost of goods sold 31,013,216 23,280,182 56,922,558 45,331,650 Gross profit 5,065,347 2,033,985 8,337,801 2,686,168 Selling, general and administrative expenses 950,359 750,750 1,755,172 1,653,538 Operating income 4,114,988 1,283,235 6,582,629 1,032,630 Other income/(expense): Interest expense (476,897) (410,453) (966,199) (800,098) Interest and other income 112,284 19,034 210,100 33,664 Gain on sale of assets 0 (1,612) 0 20,388 (364,613) (393,031) (756,099) (746,046) Net income before income taxes 3,750,375 890,204 5,826,530 286,584 Income tax expense (1,406,391) (97,469) (2,184,949) (107,469) Net earnings $ 2,343,984 $ 792,735 $ 3,641,581 $ 179,115 Diluted earnings per share $ .14 $ .05 $ .22 $ .01
Statements of Comprehensive Income/(Loss) (Unaudited) Three Months Ended December 31, 2000 and 1999 and Six Months Ended December 31, 2000 and 1999
Three Months Ended Six Months Ended December 31, December 31, 2000 1999 2000 1999 Net earnings $ 2,343,984 $ 792,735 $ 3,641,581 $ 179,115 Other comprehensive income: Grain derivatives 169,300 0 306,165 0 Comprehensive income $ 2,513,284 $ 792,735 $ 3,947,746 $ 179,115 See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Statement of Stockholders' Equity (Unaudited) Six Months Ended December 31, 2000
Common Stock (Issued) Additional Accumulated Number of Paid-In Retained Other Comprehensive Treasury Deferred Shares Amount Capital Earnings Income Stock Compensation Total Balance, June 30, 2000 16,453,798 $1,645,380 $37,695,277 $14,865,932 $ 0 $(710,849) $(27,476) $53,468,264 Exercise of options under espp 393 39 722 761 Exercise of stock options 30,000 3,000 38,251 41,251 Amortization of deferred compensation 4,208 4,208 Grain derivatives 136,865 136,865 Net earnings for quarter 1,297,597 1,297,597 Balance, September 30, 2000 16,484,191 1,648,419 37,734,250 16,163,529 136,865 (710,849) (23,268) 54,948,946 Exercise of stock options 31,100 3,110 96,364 99,474 Amortization of deferred compensation 3,004 3,004 Grain derivatives 169,300 169,300 Acquisition of Treasury Stock (247,113) (247,113) Net earnings for quarter 2,343,984 2,343,984 Balance, December 31, 2000 16,515,291 $1,651,529 $37,830,614 $18,507,513 $ 306,165 $(957,962) $(20,264) $57,317,595 See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Statement of Cash Flows (Unaudited) Six Months Ended December 31, 2000 and 1999
2000 1999 Cash flows from operating activities: Net earnings $ 3,641,581 $ 179,115 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,953,351 2,009,511 Amortization of deferred compensation 7,212 26,735 Compensation expense on treasury stock grants 0 225,029 Unrealized grain futures market value changes (38,750) 0 Gain on sale of equipment 0 (20,388) Deferred income taxes 2,184,949 107,469 Change in operating assets and liabilities: Accounts receivable (2,429,938) (2,641,588) Notes receivable 46,940 1,000,000 Inventories (696,096) 307,911 Income tax payable/receivable 30,000 (10,000) Prepaid expenses (360,328) (280,861) Accounts payable 136,141 953,288 Accrued liabilities (157,861) 57,611 Net cash provided by operating activities 4,317,201 1,913,832 Cash flows from investing activities: Proceeds from sale of equipment 0 22,000 Acquisition of property, plant and equipment (1,877,081) (716,037) Decrease (increase) in other non-current assets 0 (900,430) Net cash used in investing activities (1,877,081) (1,594,467) Cash flows from financing activities: Proceeds from long-term debt 0 20,000,000 Payments on long-term debt (1,382,138) 0 Payments on revolving lines-of-credit 0 (16,900,000) Payments on capital lease obligations (276,265) (256,119) Acquisition of Treasury Stock (247,114) 0 Proceeds from exercise of stock options 132,599 0 Increase (decrease) in other non-current liabilities 7,394 14,251 Net cash (used) provided by financing activities (1,765,524) 2,858,132 Increase in cash and cash equivalents 674,596 3,177,497 Cash and cash equivalents: Beginning of period 4,886,011 330,672 End of period $ 5,560,607 $3,508,169 See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Selected Notes to Financial Statements 1) Basis of Presentation The accompanying financial statements have been prepared by High Plains Corporation ("Company") without audit. In the opinion of management, all adjustments (which include only normally occurring adjustments) necessary to present fairly the financial position, results of operations and changes in financial position for the periods presented, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principals have been condensed or omitted. The results of operations for the period ended December 31, 2000 are not necessarily indicative of the operating results for the entire year. 2) Financial Arrangements On December 3, 1999, the Company was able to obtain a $28 million credit facility through Bank of America. The credit facility consisted of a $20 million term loan and a $8 million revolving line-of-credit. The credit facility is for a five-year period, which may be extended for a series of one-year renewals. As of December 31, 2000, the revolving line-of-credit had $8 million of credit available and undrawn. 3) Stock Options On November 28, 2000, shareholders approved the granting of 1,200,000 options to the Directors and president. The options were priced at the September 7, 2000 closing price of $2.75 per share, per the approved amendment. On November 28, 2000, 150,000 options were granted at $2.75 per share to the newly elected director and priced at the closing market price on such date. On October 18, 2000, 5,000 options were granted at $2.84 per share to executive management under the reload provisions of the original option grant. All the aforementioned option grants were made at the fair market value of the stock on the date of grant, with the exception on the 1,200,000 options that were priced per the approved amendment. During the quarter ended December 31, 2000, 31,100 options were exercised by former employees and directors. 4) Stock-Based Compensation The Company continues to account for stock-based compensation for employees using the intrinsic value method prescribed in APB No. 25. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Had compensation cost for the stock-based compensation been determined based on the fair value grant date, consistent with the provisions of FAS 123, the Company's net earnings and diluted earnings per share above would have been reduced to pro forma amounts below:
For the three months ending December 31, 2000 1999 Net earnings As reported $ 2,343,984 $ 792,735 Pro forma 2,331,425 738,598 Diluted earnings per share As reported $ .14 $ .05 Pro forma .14 .05 For the six months ending December 31, Net earnings As reported $ 3,641,581 $ 179,115 Pro forma 3,589,333 (3,641) Diluted earnings per share As reported $ .22 $ .01 Pro forma .22 (.00)
The Company's basic earnings per share for the pro forma information noted above is the same as the Company's diluted earnings per share for all the periods disclosed. 5) Earnings Per Share The diluted earnings per share for the three months ended December 31, 2000 and 1999 have been calculated based on 16,423,821 and 16,149,681 diluted shares outstanding, respectively. The diluted earnings per share for the six months ended December 31, 2000 and 1999 have been calculated based on 16,375,484 and 16,125,326, respectively. The Company's diluted earnings per share in the financial statements above are the same as the basic earnings per share for each of the periods disclosed. 6) Inventories
December 31, 2000 June 30, 2000 Inventories consisted of the following components: Raw Materials $ 675,672 $ 1,276,938 Work in progress 488,746 493,064 Finished goods 2,622,300 1,469,053 Spare parts 1,192,939 1,044,506 Total $4,979,657 $ 4,283,561
7) Other comprehensive income Under FASB Statement No. 130, Reporting Comprehensive Income, the Company is required to report the total of other comprehensive income as a component of equity that is displayed separately from retained earnings and additional paid-in capital whenever such items exist at the end of the accounting period. In addition, the Company must also present a Statement of Comprehensive Income that presents other comprehensive income items as adjustments to the Company's net income after tax results, net of tax.
Pre-tax Tax Expense Net-of-Tax Amount (Benefit) Amount Other comprehensive income consisted of the following components: Grain derivatives $ 489,863 $ 183,698 $ 306,165 Grain derivatives Balance, beginning $ 136,865 Current period change 169,300 Balance, ending $ 306,165
8) Derivatives and hedging activities During the first quarter of fiscal 2000, the Company adopted the provisions of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). The adoption of this pronouncement did not have a material effect on the financial statements at December 31, 2000. SFAS 133 requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivatives qualify as hedges of recognized assets, liabilities or firm commitments under SFAS 133, changes in the fair value of derivatives are offset against the changes in fair value of assets, liabilities, or firm commitments through earnings. If the derivatives qualify as cash flow hedges of forecasted transactions, then changes in the fair value of the derivatives are recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of the derivative's change in fair value, if any , will be immediately recognized in earnings. The Company also routinely enters into forward contracts for grain purchase requirements. Some of these forward contracts are unpriced, subject to market fluctuations, and some of them are priced. The Company's fixed priced forward contracts for purchases of normal grain requirements are not considered derivatives and, accordingly, changes in the market value of such contracts are not recognized; instead, the fixed price cost of the grain is included in cost of goods sold at the time the grain is consumed in the conversion process. As of and during the quarter ended December 31, 2000, the Company held derivative positions accounted for as cash flow hedges of its forecasted grain purchase requirements, under SFAS 133. The resulting net gain or loss from such derivatives is reported in cost of goods sold when the related grain purchase transaction occurs. The grain derivative gains or losses reflected in other comprehensive income at December 31, 2000, will be recognized in earnings during the subsequent time period when the related forecasted grain transaction occurs, generally during the subsequent quarter. The Company does not hedge all of its forecasted grain transactions. Currently, the maximum length of time over which the Company is hedging forecasted grain purchase transactions with derivative positions is one quarter. 9) Nonrecurring Items Net sales and revenues reported for the quarter ended December 31, 2000, included $1,814,628 of proceeds from the state of Nebraska's ethanol producer incentives program. These funds were received pursuant to the Company's amended agreement with the state of Nebraska; no further incentive payments are available under the Company's amended agreement. Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 2. Forward-looking Statements Forward-looking statements in this Form 10-Q, future filings including but not limited to, the Company's annual 10K, Proxy Statement, and 8K filings by the Company with the Securities and Exchange commission, the Company's press releases and oral statements by authorized officers of the Company are intended to be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the risk of a significant natural disaster, the inability of the Company to ensure against certain risks, the adequacy of its loss reserves, fluctuations in commodity prices, change in market prices or demand for motor fuels and ethanol, legislative changes regarding air quality, fuel specifications or incentive programs, as well as general market conditions, competition and pricing. The Company believes that forward-looking statements made by it are based upon reasonable expectations. However, no assurances can be given that actual results will not differ materially from those contained in such forward- looking statements. The words "estimate", "anticipate", "expect", "predict", "believe" and similar expressions are intended to identify forward-looking statements. Six Months Ended December 31, 2000 and 1999 Net Sales and Operating Expenses. Net sales and revenues for the six months ended December 31, 2000, were 35.9% higher than net sales for the same period ended December 31, 1999. During the six months ended December 31, 2000, approximately 36.6 million gallons of fuel grade ethanol were sold at an average price of $1.29 per gallon compared to 34.1 million gallons sold at an average price of $0.99 per gallon, for the same period ending December 31, 1999. Fuel grade ethanol sales included 6.5 million gallons of brokered fuel grade ethanol (marketed on behalf of other producers) for the six months ended December 31, 2000 compared to 1.6 million gallons of brokered fuel grade ethanol for the same period ended December 31, 1999. In addition, approximately 4.6 million gallons of industrial/beverage grade ethanol were sold at an average price of $1.48 per gallon during the six months ended December 31, 2000 compared to approximately 2.7 million gallons sold at $1.40 per gallon for the same period ended December 31, 1999. Industrial/beverage grade ethanol sales included .8 million gallons of brokered industrial/beverage grade ethanol (marketed on behalf of other producers) for the six months ended December 31, 2000 compared to .8 million gallons of brokered industrial/beverage grade ethanol for the same period ended December 31, 1999. Fuel grade gallons sold during the six months ended December 31, 2000 increased by approximately 7% compared to the same period ended December 31, 1999, while industrial/beverage grade gallons sold during the similar period increased 70% compared to the same period ended December 31, 1999. The increase in industrial/beverage grade gallons was primarily due to increased marketing efforts in that segment of the Company's business. Whereas, the increase in fuel grade ethanol volume was the direct result of the 306% increase in brokered fuel grade ethanol. The increase in net sales revenue primarily resulted from a 30% increase in the sales price of fuel grade ethanol, which stemmed from favorable blending economics and mandated oxygenate market demand in the second half of the period. Included in the Company's net sales and revenues were $2,244,441 and $2,134,116 of state producer incentive payments from Kansas and Nebraska for the six-month period ended December 31, 2000 and 1999, respectively. Current year incentives include a one- time $1,814,668 incentive from the state of Nebraska for increased production capacity, which expired as of December 28, 2000. The Company's Portales, New Mexico facility contributed $10,906,586 and $8,372,598 of net sales and revenues for the six-month period ended December 31, 2000 and 1999, respectively. Cost of products sold as a percentage of net sales and revenues was 87.2% and 94.4% for the six months ended December 31, 2000 and 1999, respectively. The decrease in the cost of products sold as a percentage of net sales and revenues was due to higher fuel grade and industrial beverage grade ethanol net-backs (sales price less freight) together with decreased average grain prices. Current fiscal year average net-backs increased $0.27 and $0.11 per gallon on fuel grade and industrial/beverage grade ethanol, respectively, compared to prior fiscal year. Average per bushel grain costs declined to $1.84 for the six months ended December 31, 2000, down from $1.94 for the same period ended December 31, 1999. These gains were offset by significantly higher natural gas costs compared to the same period a year ago. Natural gas prices averaged $4.65 per MMBTU (million British Thermal Units) during the six months ended December 31, 2000, up from $2.41 per MMBTU for the same period ended December 31, 1999. The Company's Portales, New Mexico facility contributed $9,595,558 and $8,949,369 of cost of products sold for the six-month period ended December 31, 2000 and 1999, respectively. Selling, general and administrative (SG&A) expenses increased 6.1% for the six months ended December 31, 2000, compared to the same period ended December 31, 1999. This increase is the result of an increase in administrative salary and benefit expenses resulting from an increase in staff and increased professional fees resulting from glycerol side-stream research. Net Earnings. Net earnings increased $3.5 million for the six months ended December 31, 2000, compared to net earnings for the same period in 1999. Net earnings as a percentage of net sales and revenues increased from .4% to 5.6%. The increase is due to an increase in the Company's gross profit, from higher net-backs and lower grain costs, net of higher deferred tax expenses for the period ended December 31, 2000 compared to the same period ended December 31, 1999. Diluted earnings per share at December 31, 2000, were $0.21 per share higher than diluted earnings per share for the same period in 1999 due to the increased earnings. The Company's Portales, New Mexico facility contributed $1,311,028 and ($576,771) of plant operating margin before taxes, allocated overhead and interest expense for the six-month period ended December 31, 2000 and 1999, respectively. Three Months Ended December 31, 2000 and 1999 Net Sales and Operating Expenses. Net sales and revenues for the three months ended December 31, 2000, increased 42.5% compared to the same period ended December 31, 1999. During the quarter ended December 31, 2000, approximately 18.5 million gallons of fuel grade ethanol were sold at an average price of $1.32 per gallon compared to approximately 17.8 million gallons sold at an average price of $1.00 per gallon, for the same period ending December 31, 1999. Fuel grade ethanol sales included 3.8 million gallons of brokered fuel grade ethanol (marketed on behalf of other producers) for the quarter ended December 31, 2000 compared to 1.0 million gallons of brokered fuel grade ethanol for the same period ending December 31, 1999. In addition, approximately 3.2 million gallons of industrial/beverage grade ethanol were sold at an average price of $1.48 per gallon during the quarter ended December 31, 2000 compared to approximately 2.1 million gallons sold at $1.38 per gallon for the same period ending December 31, 1999. Industrial/beverage grade ethanol sales included .4 million gallons of brokered industrial/beverage grade ethanol for the quarter ended December 31, 2000 compared to .5 million gallons of brokered fuel grade ethanol for the same period ending December 31, 1999. Fuel grade gallons sold during the quarter ended December 31, 2000 increased approximately 3% compared to the same period in 1999. Industrial/beverage grade gallons sold during the quarter ended December 31, 2000 increased approximately 52% compared to the same period in 1999. The fuel grade ethanol market demand was very strong for the quarter ended December 31, 2000, due to favorable blending economics and mandated oxygenate market demand. The Company's fuel grade ethanol sales volume increases were primarily driven by the increased brokered volume for the comparable periods. Industrial/beverage grade gallons increased primarily in response to increased marketing efforts in that segment of the Company's business. The higher net sales were the result of increased volumes in both grades of ethanol and a 32% increased in the average delivered price of fuel grade ethanol. Included in the Company's net sales and revenues were $2,082,787 and $378,097 of state producer incentive payments from Kansas and Nebraska for the quarter ended December 31, 2000 and 1999, respectively. Current quarter incentives include a one-time $1,814,668 incentive from the state of Nebraska for increased production capacity, which expired as of December 28, 2000. The Company's Portales, New Mexico facility contributed $5,680,391 and $4,639,139 of net sales and revenues for the periods ended December 31, 2000 and 1999, respectively. Cost of products sold as a percentage of net sales and revenues was 86% and 92% for the three months ended December 31, 2000 and 1999, respectively. The cost of products sold as a percentage of net sales and revenues for the quarter ended December 31, 2000 decreased dramatically compared to the same period in 1999. The decrease was due to higher fuel grade and industrial beverage grade ethanol net-backs (sales price less freight) together with the one-time $1,814,668 Nebraska state producer incentive payment. Current quarter average net-backs increased $0.31 and $0.12 per gallon on fuel grade and industrial/beverage grade ethanol, respectively, compared to prior fiscal year. The favorable net-backs were offset by much higher natural gas costs for the comparable periods. Natural gas prices averaged $5.17 per MMBTU (million British Thermal Units) during the three months ended December 31, 2000, up from $2.42 per MMBTU for the same period ended December 31, 1999. The average cost of grain remained flat at $1.85 per bushel for the quarter ended December 31, 2000, compared to $1.86 per bushel for the same quarter in 1999. The Company's Portales, New Mexico facility contributed $5,014,065 and $4,530,817of cost of goods sold for the periods ended December 31, 2000 and 1999, respectively. Selling, general and administrative (SG&A) expenses increased 26.6% for the quarter ended December 31, 2000, compared to the same period ended December 31, 1999. This increase is the result of an increase in administrative salary and benefit expenses resulting from an increase in staff, increased travel expenses, and increased research and development expenses resulting from the glycerol side-stream research. Net Earnings. Net earnings increased $1.6 million for the three months ended December 31, 2000, compared to net earnings for the same period ended December 31, 1999. Net earnings as a percentage of net sales and revenues increased from 3.1% to 6.5% for the comparable periods. The increase is due to an increase in the Company's gross profit, from higher net-backs and a one- time $1,814,668 producer incentive from the state of Nebraska, net of higher deferred tax expenses for the period ended December 31, 2000 compared to the same period ended December 31, 1999. Diluted earnings per share at December 31, 2000, were $0.09 per share higher than diluted earnings per share for the same period in 1999 due to the increased earnings. The Company's Portales, New Mexico facility contributed $666,326 and $108,322 of operating margin before taxes, allocated overhead and interest for the periods ended December 31, 2000 and 1999, respectively. Liquidity and Capital Resources The Company's primary source of funds during the quarter ended December 31, 2000 was cash flow from operating activities. At December 31, 2000, the Company had working capital of approximately $12.1 million compared to working capital of approximately $7.3 million for the period ended June 30, 2000. The increase in working capital was primarily due to increases in cash and cash equivalents, trade and production credit receivables and inventories. The Company's inventory increase is due to reduced shipments caused by severe winter storm conditions at its York, Nebraska and Portales, New Mexico facilities. Capital expenditures through December 31, 2001 amounted to approximately $1.9 million for modifications to the Company's three plants compared to approximately $.7 million for the same period in fiscal 2000. The majority of the current fiscal year's expenditures relate to modifications to the Company's Colwich, Kansas facility, which is in the process of receiving modification to its dryers for increased output and more reliable operations. The Company was able to refinance its revolving-lines-of credit into term debt December 3, 1999. The Company obtained a $28 million credit facility, which consisted of $20 million term loan and $ 8 million revolving line-of-credit. The $8 million revolving line-of-credit was available and undrawn, as of December 31, 2000. The Company believes it has adequate short-term working capital and borrowing availability under its new financing arrangement to meet its operating cash needs. However, in the event the Company encounters unforeseen changes in market conditions that adversely affect its ability to generate cash flow from operations, the Company could seek to raise additional funds through the sale of stock, or issuance of debt and/or equity securities. The Company received its last production incentive payment under its amended agreement with the state of Nebraska in the second quarter of fiscal 2001. The Company received $1,814,628 under the amended agreement. The impact of the loss of the Nebraska incentive on the Company's liquidity was mitigated by increased profitability and continued emphasis on diversifying the Company's York, Nebraska facility's products. However, in the future the lack of the incentive could substantially and negatively impact the Company's liquidity position. The Company continues to improve efficiencies, to implement cost controls, and focus efforts on expanding its presence in the higher margin industrial/beverage grade markets to assist in improving the Company's liquidity and earnings. Seasonality Fuel grade ethanol prices are historically soft during the non-oxygenate period, which coincides with the Company's first and fourth fiscal quarters. Typically fuel grade ethanol prices firm up during the winter months, which coincide with the Company's second and third fiscal quarters, due to the mandated markets of the Federal Oxygen Program. Prices generally increase in the weeks before September, and decrease by March due to shipping schedules. Additionally, fuel grade ethanol prices historically have been influenced by the price of unleaded gasoline, which remained strong during the first half of fiscal 2001. Due to the continued strength of the unleaded gasoline market, fuel grade ethanol pricing remained strong throughout the first half of fiscal 2001. Now with the Company in the oxygenate season and with many analysts projecting continued strength in the oil markets, management believes fuel ethanol pricing will remain at the current levels throughout the Company's third fiscal quarter. Furthermore, the Company has contracted approximately three quarters of its fuel grade ethanol production through September 2001 at fixed prices, thus minimizing the Company's exposure in the event of an unforeseen downturn in the market, but conversely limiting the Company's ability to gain from additional market increases. Currently, there is legislation pending which could significantly affect the demand for fuel grade ethanol either positively or negatively. Current legislation is attempting to deal with the perceived problems surrounding the MTBE environmental contamination issues by phasing out MTBE over the next several years, eliminating the oxygenate requirement, and implementing a minimum renewable fuels content for all fuel consumed, excluding diesel. As of December 31, 2000, no such legislation had been enacted. Grain prices also continue to be favorable for the ethanol industry. Although corn and milo feedstock prices have increased somewhat from harvest lows, market fundamentals (projected crop size, carryouts, export and demand numbers) appear to favor continued low grain prices through the next crop year. As always, grain prices are subject to significant changes due to weather patterns, or in the event of changes in the fundamental market factors described above. The Company has currently contracted approximately 10 million bushels under either fixed priced forward contracts, or unpriced basis differential forward contracts which will be priced at a later date. The Company continues to utilize grain futures contracts to hedge against price fluctuations related to its grain feedstock requirements. Current market conditions and carry from previously contracted grain indicates the Company may have slightly higher grain cost during the third quarter of fiscal 2001 compared to the same period in fiscal 2000. Natural gas spot market prices have tripled from year ago levels. Industry analysts believe this is a complicated situation that has been in progress for several years. Currently, demand for natural gas is outpacing the supply and current inventories are near all time lows, and there appears to be no short-term solutions to the supply imbalance. The problem stems from demand incentives that were built into the market, to encourage use of the clean burning fuel, without any true supply incentives to induce additional exploration for new supply. Now, existing domestic wells are thought to be producing at approximately fifty percent of their original capacity and the U.S. is now importing natural gas from Canada to meet its growing needs. Some analyst believe these current conditions could persist for the next several years until new production comes on-line. It is the Company's belief that natural gas will trade in the $4.50 per MMBTU to $5.50 per MMBTU range for the next several years. The Company believes that through forward contracting its natural gas needs it can mitigate the price risk associated with the volatile spot market price moves caused by demand surges from inclimate weather or supply disruptions that have affected the spot market prices so dramatically in the first half of fiscal 2001. Prices for the Company's distillers grain by-products, as known as distillers grain solubles (DGS), historically fluctuate with the price of corn, and provide the Company with some hedge against the possibility of higher grain prices. With grain prices remaining low, DGS prices (also at historically low levels overall) softened in the second quarter of fiscal 2001. The Company has emphasized production of a wet distillers grain product at its Nebraska and New Mexico facilities in an effort to strengthen and stabilize its feed markets. However, anticipated softness in grain prices should also result in some decline in prices for the Company's DGS products. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS No new legal proceedings were instigated during the quarter ended December 31, 2000 which would be considered other than in the ordinary course of the Company's business. Item 2. CHANGES IN SECURITIES Not Applicable Item 3. DEFAULTS UPON SENIOR SECURITES Not Applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Stockholders on November 28, 2000. The meeting involved the election of two directors, H.T. Ritchie and Gilbert B. Eckhoff.
Voting results: BROKER FOR AGAINST ABSTENTIONS NONVOTERS H.T. Ritchie 13,646,132 1,504,453 -0- -0- Gilbert B. Eckhoff 13,646,508 1,504,077 -0- -0-
The following details the issues which were presented to stockholders for vote and the results of that vote: (1) Ratify the appointment of Allen, Gibbs, & Houlik, LC as the Company's independent public accountants. (2) Ratify modification of the Company's 1992 stock option plan and grant options to the Company's directors and non-executive director group, as outlined in the Company's Proxy Statement for the November 28, 2000 annual meeting of shareholders.
BROKER RESULTS FOR AGAINST ABSTENTIONS NONVOTERS (1) 14,966,212 75,885 108,488 -0- (2) 5,831,971 3,133,547 181,402 -0-
Item 6. EXHIBITS AND REPORTS ON FORM 8-K a). Exhibit 27-1 Financial Data Schedule b). Reports on Form 8-K. During the quarter for which this report is filed, the Company filed the following Form 8-K's: October 17, 2000 Company announced first quarter earnings and earnings per share for the period ending September 30, 2000. November 14, 2000 Company announced it had been named one of the fifty fastest growing technology companies by Deloitte and Touche. November 28, 2000 Company announced continued operation of the Portales facility through March 2001 and glycerol project update. December 8, 2000 Company announced board approval of $1 million stock repurchase program. December 29, 2000 Company announced proposed expansion of its York, Nebraska facility. January 18, 2001 Company announced second quarter earnings and earnings per share for the period ending December 31, 2001. EX-27 2 0002.txt
5 3-MOS JUN-30-2001 DEC-31-2000 5,560,607 0 13,535,521 199,222 4,979,657 24,724,319 97,594,794 33,106,712 89,957,088 12,583,331 18,853,331 0 0 1,651,529 55,666,066 89,957,088 36,078,563 36,078,563 31,013,216 31,013,216 950,359 0 476,897 3,750,375 1,406,391 2,343,984 0 0 0 2,343,984 .14 .14
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