10-Q 1 FORM 10-Q 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 March 31, 1996 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 March 31, 1996 - 15,783,736 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Balance Sheets 3 - 4 Statements of Operations 5 Statements of Stockholders' Equity 6 Statements of Cash Flows 7 Selected Notes to Financial Statements 8 Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 - 11 PART II OTHER INFORMATION Item 1. Legal Proceedings 12 Item 5. Other Information 12 - 13 Item 6. Exhibits and Reports on Form 8-K 13 HIGH PLAINS CORPORATION Balance Sheets (Unaudited) March 31, 1996 and June 30, 1995
March 31, June 30, Assets 1996 1995 (Unaudited) ** ----------- ----------- Current Assets: Cash $ 222,027 $ 600,381 Trade accounts receivable (less allowance of $100,000 and $110,000 respectively) 6,346,970 3,948,761 Inventories 3,175,588 2,645,277 Current portion of long-term notes receivable 103,996 96,691 Prepaid expenses 397,451 384,859 ----------- ----------- Total current assets 10,246,032 7,675,969 ----------- ----------- Property, plant and equipment, at cost: Land and land improvements 147,086 142,283 Ethanol plants 76,120,642 72,387,277 Other facilities and equipment 353,267 300,210 Office equipment 234,922 231,284 Leasehold improvements 48,002 48,002 ----------- ----------- 76,903,919 73,109,056 Less accumulated depreciation 16,999,288 14,806,417 ----------- ----------- Net property, plant and equipment 59,904,631 58,302,639 ----------- ----------- Other assets: Property and equipment held for resale 620,993 798,763 Deferred loan costs (less accumulated amortization of $139,947 and $65,857 respectively) 337,520 411,610 Long-term notes receivable 186,775 265,711 Other 57,360 62,609 ----------- ----------- Total other assets 1,202,648 1,538,693 ----------- ----------- $71,353,311 $67,517,301 =========== =========== **From audited financial statements. See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Balance Sheets, Continued (Unaudited) March 31, 1996 and June 30, 1995
March 31, June 30, Liabilities and Stockholders' Equity 1996 1995 (Unaudited) ** ----------- ----------- Current liabilities: Current maturities of short-term debt $ 2,000,000 $ -0- Current maturities of long-term debt 3,571,898 3,876,972 Accounts payable 3,680,128 3,796,048 Accrued interest 185,836 185,163 Accrued payroll and property taxes 611,254 356,108 ----------- ----------- Total current liabilities 10,049,116 8,214,291 ----------- ----------- Long-term debt, excluding current maturities 16,373,700 19,052,272 Other long-term liabilities: 147,758 -0- Stockholders' equity: Common stock, $.10 par value, authorized 50,000,000 shares; issued 16,175,289 shares and 15,470,947 shares at March 31, 1996, and June 30, 1995, respectively, of which 391,553 and 289,770 shares were held as treasury stock at March 31, 1996, and June 30, 1995, respectively 1,617,529 1,547,095 Additional paid-in capital 36,600,097 34,738,760 Retained earnings 7,439,977 4,209,260 ----------- ----------- 45,657,603 40,495,115 Less: Deferred compensation (137,206) -0- Treasury stock - at cost (737,660) (244,377) ----------- ----------- Total stockholders' equity 44,782,737 40,250,738 ----------- ----------- $71,353,311 $67,517,301 =========== =========== ** From audited financial statements. See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Statements of Operations (Unaudited) Three Months Ended March 31, 1996 and 1995 and Nine Months Ended March 31, 1996 and 1995
Three Months Ended Nine Months Ended March 31, March 31, 1996 1995 1996 1995 ----------- ---------- ----------- ---------- Net Sales $22,398,551 17,710,570 $66,055,183 34,810,011 Cost of sales 20,787,081 13,941,450 60,278,787 27,219,878 ----------- ---------- ----------- ---------- Gross profit (loss) 1,611,470 3,769,120 5,776,396 7,590,133 ----------- ---------- ----------- ---------- Selling, general and administrative expenses 407,641 418,455 1,122,922 1,076,755 ----------- ---------- ----------- ---------- Operating income 1,203,829 3,350,665 4,653,474 6,513,378 ----------- ---------- ----------- ---------- Other income (deductions): Interest income-and other 13,898 14,789 41,570 33,765 Interest expense (549,267) (592,847) (1,713,498) (592,927) Gain on sale of equipment and property 250,000 18,900 250,150 92,492 Other miscellaneous income 32,500 221,746 45,882 223,122 ----------- ---------- ----------- ---------- (252,869) (337,412) (1,375,896) (243,548) ----------- ---------- ----------- ---------- Net earnings before income taxes 950,960 3,013,253 3,277,578 6,269,830 Income tax expense 601 232,542 46,861 305,787 ----------- ---------- ----------- ---------- Net earnings $ 950,359 2,780,711 $ 3,230,717 5,964,043 =========== ========== =========== ========== Earnings per common and dilutive common equivalent share $ .06 .18 $ .21 .38 =========== ========== =========== ========== Weighted average shares outstanding 15,816,709 15,869,137 15,683,221 15,763,167 See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Statements of Stockholders' Equity (Unaudited) Nine Months Ended March 31, 1996
Common Stock Additional Number Amount Paid-in Retained Deferred Treasury Total of Shares Capital Earnings Compensation Stock ---------- ----------- ------------ ----------- ----------- --------- ----------- Balance, June 30, 1995 15,470,947 $ 1,547,095 $ 34,738,760 $ 4,209,260 $(244,377) $40,250,738 Exercise of options 525,342 52,534 1,589,717 1,642,251 Net earnings for the quarter 423,586 423,586 ---------- ----------- ------------ ----------- ----------- --------- ----------- Balance, September 30, 1995 15,996,289 $ 1,599,629 $ 36,328,477 $ 4,632,846 $(244,377) $42,316,575 ========== =========== ============ =========== =========== ========= =========== Exercise of options 144,000 14,400 158,087 172,487 Common stock surrender (376,250) (376,250) Net earnings for the quarter 1,856,772 1,856,772 ---------- ----------- ------------ ----------- ----------- --------- ----------- Balance, December 31, 1995 16,140,289 $ 1,614,029 $ 36,486,564 $ 6,489,618 $(620,627) $43,969,584 ========== =========== ============ =========== =========== ========= =========== Exercise of options 35,000 3,500 113,533 117,033 Employee stock purchase plan initation (139,572) (139,572) Common stock surrender (117,033) (117,033) Amortization of deferred compensation 2,366 2,366 Net earnings for the quarter 950,359 950,359 ---------- ----------- ------------ ----------- ----------- --------- ----------- Balance, March 31, 1996 16,175,289 $ 1,617,529 $ 36,600,097 $ 7,439,977 $ (137,206) $(737,660) $44,782,737 ========== =========== ============ =========== =========== ========= =========== See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Statements of Cash Flows (Unaudited) Nine Months Ended March 31, 1996 and 1995
1996 1995 ---------- ----------- Cash flows from operating activities: Net earnings $ 3,230,717 $ 5,964,043 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,255,592 1,273,852 Provision for bad debt (10,000) -0- (Gain) on sale of equipment (250,150) Payments received on notes receivables 71,631 Changes in operating assets and liabilities: Trade accounts receivable (2,398,209) (4,737,430) Inventories (530,311) (2,106,578) Refundable income taxes -0- 107,825 Prepaid expenses (12,592) 76,218 Accounts payable (115,920) 198,797 Accrued liabilities 255,819 556,871 ---------- ----------- Net cash provided by operating activities 2,496,577 1,333,598 ---------- ----------- Cash flows from investing activities: Proceeds from sale of equipment 71,098 171,780 Acquisition of property, plant and equipment (3,788,191) (14,719,972) (Increase) decrease in other non-current assets 5,249 (410,529) ---------- ----------- Net cash used in investing activities (3,711,844) (14,958,721) ---------- ----------- Cash flows from financing activities: Proceeds from short-term debt 3,000,000 1,000,000 Payments on short-term debt (1,000,000) 12,668,328 Payments on long-term debt (2,983,646) (1,488,095) Proceeds from exercise of stock options 1,814,738 1,408,836 Proceeds from employee stock purchase plan 5,821 -0- ---------- ----------- Net cash provided by financing activities 836,913 13,589,069 ---------- ----------- Increase (decrease) in cash and cash equivalents (378,354) (36,054) Cash and cash equivalents: Beginning of period 600,381 131,105 End of period $ 222,027 $ 95,051 ========== =========== 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 normal 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 March 31, 1996 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 March 31, 1996, and $496,971 or $.03 per share for the nine months ended March 31, 1996. (2) STOCK OPTIONS During the quarter ended March 31, 1996, 35,000 options to purchase shares of common stock were exercised at $3.3438 per share, with corresponding reloads granted for 35,000 options at $4.375 per share. In lieu of a cash payment for the options acted above, the Company accepted 31,738 shares of common stock which were surrendered at a then fair market value of $3.6875 per share. Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Nine Months Ended March 31, 1996 and 1995 Net Sales and Operating Expenses. Net sales for the nine months ended March 31, 1996, were 89.8% higher than net sales for the same period in 1995 due to an increase of 101.4% in ethanol production. During the nine months ended March 31, 1996, 38,978,478 gallons of ethanol were sold at an average price of $1.19 per gallon compared to 19,583,060 gallons from production sold during the nine months ended March 31, 1995, at an average price of $1.36 per gallon. Additionally, distillers grains sales during the nine months ended March 31, 1996, increased 77.2% compared to the same period in 1995. Sales of ethanol and distillers grains were significantly higher for the nine months ended March 31, 1996, compared to the same period in 1995 due to the production contribution of the York, Nebraska plant which began operations in November, 1994. Cost of sales as a percentage of net sales was 91.3% and 78.2% for the nine month periods ended March 31, 1996, and 1995, respectively. The increase in cost of sales as a percent of sales was due primarily to higher grain costs. The Company's average cost of grain increased to $3.15 per bushel for the nine months ended March 31, 1996, up from $2.21 per bushel for the same period in 1995, due to higher cash grain prices. Selling, general and administrative expenses for the nine months ended March 31, 1996, increased slightly compared to the same period ended March 31, 1995. This increase is a result of an increase in administrative costs related to operations at the new production facility at York, Nebraska. Net Earnings. Net earnings decreased 45.8% for the nine months ended March 31, 1996, from the same period in 1995. Net earnings decreased from 17.1% to 4.9% of net sales due to the decrease in gross profit in the 1996 period compared to the same period in 1995. Earnings per share at March 31, 1996, were 44.7% lower than earnings per share for the same period in 1995 due to the decrease in net earnings. THREE MONTHS ENDED MARCH 31, 1996 AND 1995 Net Sales and Operating Expenses and Results of Operations. Net sales for the three months ended March 31, 1996, increased 26.5% over the same period in 1995 due primarily to an increase in ethanol production of 21.3% offset by 11.6% decline in ethanol prices. During the quarter ended March 31, 1996, 12,224,164 gallons of ethanol were sold at an average price of $1.22, compared to 10,380,288 gallons sold during the same period in 1995 at an average price of $1.38 per gallon. The average sale price declined for the three months ended March 31, 1996, compared to the same period in 1995 as a result of decreases in market prices for ethanol and increases in freight ranging from $.01 - $.04 per gallon due to increased shipping distances from the York, Nebraska plant. For the three months ended March 31, 1996 distillers grain sales increased 47.1% from the prior period in 1995, primarily due to increased production. Cost of sales as a percentage of net sales was 92.8% and 78.7% for the three month periods ended March 31, 1996, and 1995, respectively. The increase in cost of sales as a percentage of net sales was due primarily to the average cost of grain per bushel increasing 52.4% to $3.14 per bushel for the three months ended March 31, 1996, from $2.06 per bushel for the same period ended March 31, 1995. Grain costs were higher as a result of higher cash grain prices. Selling, general and administrative expenses declined slightly for the three months ended March 31, 1996, compared to the period ended March 31, 1995. Net Earnings. Net earnings decreased 65.8% for the three months ended March 31, 1996, from the prior period in 1995. Net earnings declined to 4.2% of net sales compared to 15.7% in the prior period in 1995. The decrease in net earnings results from an decrease in gross profit for the 1996 period from 1995. Earnings per share for the period ended March 31, 1996, decreased from the same period in 1995 due to an decrease in net earnings. Liquidity and Capital Resources The Company's primary sources of funds during the third fiscal quarter were cash flow from operations, and a temporary advance on a short-term loan from Bank One, Indianapolis, N.A. for $2,000,000 for working capital needs. At March 31, 1996, the Company had a working capital surplus of $196,916 compared to a working capital deficit of ($538,222) at June 30, 1995. Cash flow from operating activities amounted to $2,496,577 for the first nine months of fiscal 1996 compared to $1,281,110 for the same period in fiscal 1995. The increase in cash flow from operations in fiscal 1996 was attributable to decreases in trade receivables created by sales of inventory from the new plant. Capital expenditures in the first nine months of fiscal 1996 amounted to $3,788,191 compared to $14,719,972 for the same period in fiscal 1995. These expenditures were primarily made on the facility in York, Nebraska. The Company, in anticipation of an additional loan payment based on 75% of cash flow and due during the first quarter of fiscal 1996, to Bank One, Indianapolis, N.A., is currently pursuing several alternatives to build sufficient cash reserves to meet this obligation. These alternatives include the segregation of funds from operations, seeking the exercise of options held by directors and officers, establishment of an open line-of-credit, or issuance of debt or equity securities. In the opinion of management adequate liquidity will be provided by operations or a combination of the alternatives noted above, for the foreseeable future. Seasonality Ethanol prices on product sold in mandated oxygen markets increased during the months of September through March, due to the Federal Oxygen Program. With the end of the Federal Oxygen Program for this wintertime period occurring in March, the Company's ethanol prices were once again negatively affected, with sales orders declining as customers worked off current inventories. Wholesale gasoline prices remained soft for the majority of the quarter but were increasing at the end of the quarter. However, the Company's ethanol prices were not materially affected by the movement of spot gasoline prices, since most of the Company's ethanol production was sold at fixed prices determined early in the quarter and were not based off of spot wholesale gasoline prices. Since the end of the last quarter and due to low stocks, grain prices have continued their increase, resulting in record feedstock costs. As a result, current ethanol production nationwide has decreased to approximately one-half of production capacity. Due to reduced supplies of ethanol, it is anticipated that ethanol prices will not be as negatively impacted as seen in prior summer seasons. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS No legal proceedings were instigated during the quarter ended March 31, 1996 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 SECURITIES Not applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. Item 5. OTHER INFORMATION Subsequent Events. Subsequent to the end of this fiscal third quarter the company has sold all of its forward grain contracts. These contracts were originally acquired to insure that the company would have grain available for its production process at a fixed price (averaging about $3.00 per bushel, excluding basis adjustment) which would allow continued operations through approximately August, 1997. As grain costs rose above the forward contracted levels, the company began to consider alternative ethanol markets which might allow continued profitable operations even at somewhat higher prices. Management has since been pursuing contracts to produce and sell industrial grade ethanol, and has done preliminary work on plant design, cost and specifications which would allow a conversion of most of the company's production to industrial grade. In order to finance these anticipated plant improvements, and to take advantage of the time that the plant would have to be shut down to complete the improvements, the company sold, in early April, its grain contracts for June and July deliveries. Approximately three million dollars was realized on this transaction. When grain costs continued to soar to record highs, the company elected to also sell its May delivery grain contracts, raising an additional $2.3 million in late April. Finally on May 8, due to continuing high grain prices and concerns about adequate local corn supplies, the company made a decision to sell all of its remaining forward grain contracts, realizing an additional $8.7 million. Both the Colwich, Kansas and the York, Nebraska plants were idled for the summer, and plant employees have been temporarily furloughed. The company is continuing to provide normal health insurance and other employee benefits until the exact date to resume plant operations is determined. The company still intends to resume operations in late summer or early fall, depending on our ability to complete negotiation of an industrial grade ethanol supply agreement and on the price of grain at the time. Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 27-1 Financial Data Schedule b). Reports on Form 8-K. During the quarter for which this report is filed, one Form 8-K was filed on March 1, 1996, concerning the agreement between ConAgra, Inc., and the Company for the sale of its dried distiller's grains. 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. HIGH PLAINS CORPORATION Date May 17, 1996 Raymond G. Friend Executive Vice President Chief Financial Officer EX-27 2
5 3-MOS JUN-30-1996 MAR-31-1996 222,027 0 6,550,966 100,000 3,175,588 10,246,032 76,903,919 16,999,288 71,353,311 10,049,116 16,373,700 0 0 1,617,529 43,165,208 71,353,311 22,398,551 22,398,551 20,787,081 20,787,081 407,641 0 549,267 950,960 601 950,359 0 0 0 950,359 .06 .00