10-Q/A 1 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended December 31, 1994 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 (IRS Employer incorporation or 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 PROCEEDINGS 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 a plan confirmed by a court. YES NO Common Stock, Par Value $.10 per share, Outstanding at December 31, 1994 - 14,527,549 PART I FINANCIAL INFORMATION Item 1. CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets 3-4 Consolidated Statements of Operations 5 Consolidated Statements of Stockholders' Equity 6 Consolidated Statements of Cash Flows 7 Selected Notes to Consolidated Financial Statements 8-10 Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-14 PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 15 HIGH PLAINS CORPORATION Consolidated Balance Sheets (Unaudited) December 31, 1994 and June 30, 1994
December 31, June 30, Assets 1994 1994 (Unaudited) ** Current Assets: Cash $ 358,508 $ 131,105 Trade Accounts Receivable (less allowance of $106,000 and $100,000) 5,760,004 2,067,572 Short-term investments 240,434 -0- Inventories Raw materials 867,884 584,950 Work in process 321,408 155,696 Finished goods 284,913 201,216 Total inventories 1,474,205 941,862 Equipment held for resale 310,842 310,842 Refundable income taxes -0- 107,825 Prepaid expenses 287,432 461,939 Total current assets 8,431,425 4,021,145 Property, plant and equipment, at cost: Land and land improvements 177,783 177,783 Ethanol plant 37,633,861 37,502,487 Other facilities and equipment 271,250 249,662 Office equipment 309,335 248,983 Leasehold improvements 44,606 43,798 Construction-in-progress 31,808,623 19,105,781 70,245,458 57,328,494 Less accumulated depreciation 13,606,544 12,949,388 Net property, plant and equipment 56,638,914 44,379,106 Other assets: Deferred loan costs (less amortization of $8,069) 463,869 446,819 Start up costs 217,081 -0- Cash surrender value of life insurance 44,599 44,599 Investments and other assets 16,995 23,814 Total other assets 742,544 515,232 $65,812,883 $48,915,483 See accompanying notes to financial statements. ** From audited financial statements.
HIGH PLAINS CORPORATION Consolidated Balance Sheets, Continued (Unaudited) December 31, 1994 and June 30, 1994
December 31, June 30, Liabilities and Stockholders' Equity 1994 1994 (Unaudited) ** Current liabilities: Current maturities of long-term debt $ 3,571,429 $ 2,083,333 Accounts payable 5,264,026 3,858,686 Accrued interest 173,054 79,464 Accrued payroll and property taxes 289,192 233,136 Income taxes 50,514 -0- Total current liabilities 9,348,215 6,254,619 Long-term debt, excluding current maturities 20,833,333 10,248,339 Stockholders' equity: Cumulative preferred stock -0- 150,000 Common stock, $.10 par value, authorized 50,000,000 shares; issued 14,816,989 shares and 11,031,988 shares at December 30, 1994, and June 30, 1994, respectively, of which 289,440 shares and 217,080 shares were held as treasury stock at December 31, 1994, and June 30, 1994, respectively 1,481,699 1,103,199 Additional paid-in capital 33,073,828 33,266,850 Retained earnings (Accumulated deficit) 1,320,185 (1,863,147) 35,875,712 32,656,902 Less: Treasury stock - at cost (244,377) (244,377) Total stockholders' equity 35,631,335 32,412,525 $65,812,883 $48,915,483 See accompanying notes to financial statements. ** From audited financial statements.
HIGH PLAINS CORPORATION Consolidated Statements of Operations (Unaudited) Three Months Ended December 31, 1994 and 1993 and Six Months Ended December 31, 1994 and 1993
Three Months Ended Six Months Ended December 31, December 31, 1994 1993 1994 1993 Net Sales $9,028,515 $9,125,378 $17,099,441 $17,335,608 Cost of sales 6,195,835 7,343,515 13,208,945 14,650,769 Gross profit 2,832,680 1,781,863 3,890,496 2,684,839 Selling, general and administrative expenses 338,908 418,895 727,783 766,940 Operating income 2,493,772 1,362,968 3,162,713 1,917,899 Other income (deductions): Gain (loss) on sale of equipment -0- -0- 73,592 -0- Interest and other income 18,908 144 20,273 10,480 18,908 144 93,865 10,480 Net earnings before income taxes 2,512,680 1,363,112 3,256,578 1,928,379 Income tax expense 58,367 33,784 73,246 45,088 Net earnings $2,454,313 $1,329,328 $ 3,183,332 $ 1,883,291 Earnings per common and dilutive common equivalent share $ .16 $ .09* $ .21 $ .13* Weighted average shares outstanding 15,884,127 14,770,311* 15,489,338 14,486,853* See accompanying notes to financial statements. * Restated for comparative purposes.
HIGH PLAINS CORPORATION AND SUBSIDIARY Consolidated Statements of Stockholders' Equity (Unaudited) Six Months Ended December 31, 1994
Preferred Common Stock Stock Additional Retained Number Amount Number Amount Paid -in Earnings Treasury Total of Shares of Shares Capital (Deficit) Stock Balance, June 30, 1994 25,000 $ 150,000 11,031,988 $1,103,199 $ 33,266,850 $ (1,863,147) $ (244,377) $ 32,412,525 Net earnings for quarter 729,019 729,019 Balance, September 30, 1994 25,000 $ 150,000 11,031,988 $1,103,199 $ 33,266,850 $ (1,134,128) $ (244,377) $ 33,141,544 Exchange of preferred stock for common stock (25,000) (150,000) 36,918 3,692 146,308 Exercise of options 43,800 4,380 31,098 35,478 Four for three split 3,704,283 370,428 (370,428) Net earnings for quarter 2,454,313 2,454,313 Balance, December 31, 1994 -0- -0- 14,816,989 $1,481,699 $ 33,073,828 $ 1,320,185 $ (244,377) $ 35,631,335 See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Consolidated Statements of Cash Flow (Unaudited) Six Months Ended December 31, 1994 and 1993
1994 1993 Operating activities: Net income $ 3,183,332 $ 1,883,291 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and Amortization 657,156 1,270,254 Gain on sale of equipment (73,592) (10,000) Amortization of deferred compensation -0- 243,750 Changes in operating assets and liabilities: Trade accounts receivable (3,692,432) (1,078,438) Short-term investments (240,434) -0- Inventories (532,343) (1,333,453) Refundable income taxes 107,825 -0- Prepaid expenses 174,507 (664,974) Accounts payable 1,405,340 3,291,995 Accrued liabilities 200,160 1,835 Net cash provided by operating activities 1,189,519 3,604,260 Investing activities: Proceeds from sale of equipment 144,685 10,000 Acquisition of property, plant and equipment (12,988,057) (8,510,016) (Increase) decrease in other non-current assets (227,312) 31,908 Net cash used in investing activities (13,070,684) (8,468,108) Financing activities: Payments on long-term debt (595,238) -0- Increase in long-term debt 12,668,328 5,510,010 Funds received by exercise of stock options 35,478 -0- Net cash provided by financing activities 12,108,568 5,510,010 Increase in cash and cash equivalents 227,403 646,162 Cash and cash equivalents at beginning of period 131,105 230,773 Cash and cash equivalents at end of quarter $ 358,508 $ 876,935 See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Selected Notes to Consolidated 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 recurring 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, 1994 are not necessarily indicative of the operating results for the entire year. CHANGE IN ACCOUNTING ESTIMATE Effective July 1, 1994, the Company revised its estimate of the useful lives of certain production facilities, machinery and equipment. Previously, these assets were in one class and depreciated over 20 years. These assets have now been componentized and assigned estimated useful lives of 5 to 40 years. These revisions were made to more properly reflect the true economic lives of the assets and to better align the Company's depreciable lives with the predominant practice in the industry. The effect of this change was to reduce depreciation and thus increase net income by approximately $165,657 or $.01 per share for the three months ended December 31, 1994, and $331,314 or $.02 per share for the six months ended December 31, 1994. (2) FINANCIAL ARRANGEMENTS On December 30, 1993, the Company entered into a credit agreement with Bank One, Indianapolis, N.A. ("Bank") for a construction loan to pay costs of constructing and equipping an ethanol production facility in York, Nebraska. On August 31, 1994, the Company entered into a First Amendment to Credit Agreement with Bank One, Indianapolis, N.A. which amended the December 30, 1993, agreement and restated certain provisions including the extension of the construction period to no later than October 31, 1994, or such later date to which the Bank may extend the construction period. During the three months ended December 31, 1994, the Company made monthly draws totaling $6,843,260, bringing the construction loan advances to a total of $25 million. The Company converted the construction loan into a term loan on October 31, 1994, with the Bank. The term loan provides for principal payments of $297,619 for a period of 57 months beginning on the last banking day of November, 1994 through August 31, 1999, at which time the balance of the note is due. Interest accrues and is payable monthly at a fixed rate of 9.7% for the initial two year period of the term loan. For the three months ended December 31, 1994, the Company capitalized $535,439 of interest expense. (3) STOCK SPLIT On December 21, 1994, the Company's Board of Directors announced a forward stock split effected as a dividend payable February 22, 1995. The stock split is a 4:3 split, increasing common stock issued by 3,704,283 shares. The consolidated balance sheets at December 31, 1994, consolidated statements of stockholders' equity for the six months ended December 31, 1994, and all earnings per share calculations contained herein, have been restated to reflect this forward stock split. The stock split effected as a dividend is accounted for as a reduction to additional paid in capital for an amount equal to the total par value of the newly issued stock, and capitalization of a like amount in the common stock account thus avoiding any decrease in the par value per share. (4) STOCK OPTIONS On December 9, 1994, options to purchase 432,000 shares of the Company's common stock were granted to directors and officers at the exercise price of $11.125 per share, a price equal to the fair market value on the date of grant. These options were granted pursuant to the 1992 Stock Option plan which was approved by shareholders at the 1992 Annual Meeting. Due to the fact that these options are priced at market, no compensation expense is recorded. Options to purchase common stock at December 31, 1994, restated for the antidilutive treatment and effecting the stock split announced December 21, 1994, are set forth below: DATE OF SHARES EXERCISE ISSUE UNDER OPTION PRICE July 1990 71,200 $ .608 February 1992 86,400 1.889 May 1992 86,400 .608 May 1992 115,200 1.465 May 1992 43,200 .608 July 1992 115,200 2.083 December 1992 302,400 .608 December 1992 504,000 5.382 December 1993 36,000 5.382 December 1993 576,000 3.342 September 1994 66,667 5.348 December 1994 576,000 8.344 2,578,667 At December 31, 1994, 2,002,667 of the above options were exercisable. During the quarter ended December 31, 1994, options to purchase 43,800 shares of common stock were exercised at an option price of $.81 per share. (5) PREFERRED STOCK On October 18, 1994, the Company entered into an agreement to allow holders of the Company's 25,000 shares of outstanding 11 1/2% Cumulative Preferred Stock to exchange those shares for 36,918 shares of Common Stock. The Preferred Stock was surrendered on October 31, 1994, and the appropriate number of shares of Common Stock were issued. Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Six Months Ended December 31, 1994 and 1993 Net Sales and Operating Expenses. Net sales for the six months ended December 31, 1994, were slightly lower than net sales for the same period ended December 31, 1993. During the six months ended December 31, 1994, 9,415,324 gallons of ethanol were sold at an average price of $1.34 per gallon compared to 9,512,068 gallons sold at an average price of $1.33, for the same period ending December 31, 1993. Cost of sales as a percentage of net sales was 77.2% and 84.5% for the six month periods ended December 31, 1994, and 1993, respectively. The decline in the cost of sales as a percentage of net sales was a result of several factors including a 34% decrease in the average cost of natural gas consumed per gallon produced, and a reduction of 44% in depreciation expense offset by a 5% increase in the cost of grain. The Company's average cost of grain increased to $2.24 per bushel for the six months ended December 31, 1994, up from $2.13 per bushel for the same period in 1993, primarily due to effective grain trading activities utilized during fiscal 1993 to reduce the impact of fluctuating grain prices. Selling, general and administrative expenses decreased 5% for the six months ended December 31, 1994, compared to the same period ended December 31, 1993. This decrease is a net effect of reduction in deferred compensation expense and an increase in selling expenses related to the Company's in-house marketing of its by-products. Net Earnings. Net earnings increased 69% for the six months ended December 31, 1994, compared to the same period in 1993. Net earnings increased from 10.9% to 18.6% of net sales, due to the increase in gross profit in the 1994 period compared to the same period in 1993. Earnings per share at December 31, 1994, were 62% higher than earnings per share for the same period in 1993 due to the increase in net earnings. MATERIAL CHANGES IN RESULTS AND OPERATIONS Three Months Ended December 31, 1994 and 1993 Net Sales and Operating Expenses and Results of Operations. Net sales for the three months ended December 31, 1994, decreased slightly compared to the same period in 1993. During the quarter ended December 31, 1994, 4,842,576 gallons of ethanol were sold at average price of $1.38 per gallon compared to 4,891,096 gallons sold during the same period in 1993 at an average price of $1.36 per gallon. During the three months ended December 31, 1994, the York facility produced 1,813,339 gallons of ethanol from trial production runs, as part of the final construction phase. Revenues generated by the sale of these gallons of ethanol have been recorded as an offset to expenses incurred during the trial runs. To the extent that expenses exceeded revenues during this start-up phase, the Company capitalized those expenditures as Start-up costs. For the three months ended December 31, 1994, Start-up costs capitalized totaled $217,081. Cost of sales as a percentage of net sales was 68.6% and 80.4% for the three month periods ended December 31, 1994 and 1993, respectively. The decrease in cost of sales as a percentage of sales is due to several factors including a decrease in the cost of natural gas per gallon produced and a reduction in depreciation expense. The average cost of grain increased 4% to $2.08 per bushel for the three months ended December 31, 1994, up from $1.99 per bushel for the same period ended December 31, 1993, as a result of effective grain trading activities during fiscal 1993, to reduce the impact of fluctuating grain prices. Selling, general and administrative expenses decreased 19% for the three months ended December 31, 1994, compared to the period ended December 31, 1993. The decrease was primarily the result of a decrease in employee compensation from the vesting of stock options, offset by increased selling expenses related to the Company's in-house marketing of its DDG's and solubles. Net Earnings. Net earnings increased 84.6% for the three months ended December 31, 1994 from the prior period in 1993. Net earnings increased from 14.6% to 27.2% of net sales, due to the gross profit increase in the 1994 period from 1993 levels. Earnings per share for the three months ended December 31, 1994 increased 77.8% compared to earnings per share for the three months ending December 31, 1993, as a result of the increase in net earnings. Liquidity and Capital Resources The Company's primary sources of funds during the last fiscal quarter were $12,668,328 of long-term debt advanced on a construction loan with Bank One, Indianapolis, N.A. and cash flow from operations. At December 31, 1994, the Company had a working capital deficit of $(916,790) compared to a working capital deficit of $(2,233,474) at June 30, 1994. The decrease in the working capital deficit was primarily as a result of an increase in trade accounts receivables. Cash flow from operating activities amounted to $1,189,519 in the first six months of fiscal 1995 compared to $3,604,260 for the same period in fiscal 1994. The decrease in cash flow was a result of the increase in trade accounts receivables. Capital expenditures in the first six months of fiscal 1995 amounted to $12,988,057 compared with $8,510,016 for the same period in fiscal 1994. These expenditures were primarily made for the construction of the facility in York, Nebraska. This facility was virtually complete and operational at December 31, 1994. The cost of the plant construction to date has been funded by long-term debt and by cash generated from operations. In the opinion of management, funds expected to be generated from future operations including the recently completed York facility, and the Company's ability to rely upon future secured borrowings will provide adequate liquidity for the foreseeable future. The Company may, however, issue debt and equity securities as additional sources of financing as needed. Significant Changes in Account Balances Trade accounts receivables at December 31, 1994, increased 178.6% compared to June 30, 1994, as a result of sales of ethanol and DDG from the York facility's trial production runs. At December 31, 1994, trade accounts payable increased 36.4% compared to June 30, 1994, as a result of expenditures incurred in preparation for full production at the York Plant. Seasonality The recurring wintertime Federal Oxygen Program, maintained higher ethanol prices on products sold into mandated oxygen markets for the six months ended December 31, 1994. Additionally, demand has increased due to the January 1, 1995 start up date of the Reformulated Gasoline (RFG) Program. The Company believes this year-round program will also result in more year- round demand resulting in less seasonality and higher ethanol prices. Seasonality Continued In the summertime periods, vapor pressure limits are reduced. Gasoline refiners normally include all the butanes and other inexpensive volatiles that they are allowed to, bringing the gasoline's vapor pressure up to the legal limit. Since the addition of ethanol increases the gasoline blend's vapor pressure to a small degree and would therefore cause the vapor pressure to exceed the legal limit, ethanol blending is not expected to occur as much during summer months within the RFG program areas. Outside of RFG areas, ethanol blending occurs regularly due to a volatility waiver. ETBE is an ether fuel additive. As ETBE production increases, the demand for and use of ethanol within the RFG areas will increase, since ETBE actually lowers the vapor pressure of the ETBE blended fuel. The Renewable Oxygenate Requirement (ROR), which has been temporarily halted by Court injunction, would reduce seasonality by creating an increased year-round and summertime demand for ethanol, immediately upon its implementation. This is due to the fact that ethanol is the most effective and competitive renewable oxygenate, and the requirement for a renewable would force refiners to either lower the vapor pressure of their base gasoline to allow ethanol blending or force them to use ETBE. Oral arguments on the ROR are to be heard on February 16, 1995. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Not applicable. Item 2. CHANGES IN SECURITIES Not applicable. Item 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Stockholders on November 18, 1994. The meeting involved the election of two directors, Stanley E. Larson, and Roger D. Skaer. Voting results: BROKER FOR AGAINST ABSTENTIONS NONVOTES S.E. Larson 9,407,324 191,066 -0- -0- R.D. Skaer 9,407,324 191,066 -0- -0- The following details the issues which were presented to stockholders for vote and the results of that vote at the aforementioned annual meeting: (1) Proposed amendment to increase the number of authorized shares of the Company's Common Stock, and establish a new class of Preferred Stock. (2) Proposed amendments to the 1990 and 1992 Stock Option Plans. (3) Selection of Allen, Gibbs & Houlik, LLC as the Company's independent auditors. BROKER RESULTS FOR AGAINST ABSTENTIONS NONVOTES (1) 6,020,151 1,027,784 52,947 2,497,292 (2) 5,824,813 1,186,584 89,611 2,497,382 (3) 9,529,825 34,459 34,106 -0- Item 5. OTHER INFORMATION Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: No new exhibits filed herein. b) Reports on Form 8-K. During the quarter for which this report is filed, no reports of the Company on Form 8-K have been filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report be signed on its behalf by the undersigned thereunto duly authorized. Date May 15, 1995 HIGH PLAINS CORPORATION Raymond G. Friend Raymond G. Friend Vice President Finance/Marketing (Principal Financial Accounting Officer)