-----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, MYqI4fBiongoJnGE2BoCeXikVLqgwleDZvq2TQIBWVW5XNz2vX5sZXjTdxQCt35N eE/bHkMvWozUB2Ime3BmcQ== 0000941158-99-000033.txt : 19990823 0000941158-99-000033.hdr.sgml : 19990823 ACCESSION NUMBER: 0000941158-99-000033 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990820 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/A SEC ACT: SEC FILE NUMBER: 001-08680 FILM NUMBER: 99696400 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/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 March 31, 1999 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from __________ to __________. Commission file number 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, 1999 - 15,999,444 PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Balance Sheets 3 - 4 Statements of Income 5 Statements of Stockholders' Equity 6 Statements of Cash Flows 7 Selected Notes to Financial Statements 8 - 9 Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 - 14 PART II OTHER INFORMATION Item 1. Legal Proceedings 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 16
HIGH PLAINS CORPORATION Balance Sheets (Unaudited) March 31, 1999 and June 30, 1998
March 31, June 30, 1999 1998 Assets (Unaudited) ** Current Assets: Cash and cash equivalents $ 1,114,398 $ 674,894 Accounts receivable Trade (less allowance of $75,000 in 1999 and 1998) 5,612,555 4,500,579 Production credits and incentives (less allowance of $124,222 and $0 in 1999 and 1998 respectively) 945,220 829,849 Inventories 4,753,607 6,328,232 Notes receivable 1,000,000 31,307 Prepaid expenses 519,316 85,168 Refundable income tax -0- 30,000 Total current assets 13,945,096 12,480,029 Property, plant and equipment, at cost: Land and land improvements 450,403 433,496 Ethanol plants 93,692,920 92,906,633 Other equipment 565,552 473,345 Office equipment 304,913 279,278 Leasehold improvements 48,002 48,002 95,061,790 94,140,754 Less accumulated depreciation ( 26,658,234) ( 23,819,484) Net property, plant and equipment 68,403,556 70,321,270 Other assets: Equipment held for resale 123,504 264,554 Deferred loan costs (less accumulated amortization of $64,172 and $38,095, respectively) 131,879 117,890 Other 30,177 65,886 Total other assets 285,560 448,330 $ 82,634,212 $ 83,249,629 See accompanying notes to financial statements. ** From audited financial statements.
HIGH PLAINS CORPORATION Balance Sheets Continued (Unaudited) March 31, 1999 and June 30, 1998
March 31, June 30, 1999 1998 (Unaudited) ** Liabilities and Stockholders' Equity Current liabilities: Revolving lines-of-credit $ 8,850,000 $ 9,000,000 Current maturities of capital lease obligations 520,280 500,852 Accounts payable 7,088,114 8,364,074 Accrued interest 168,899 223,722 Accrued payroll and property taxes 977,164 822,971 Deferred income taxes payable 161,000 -0- Total current liabilities 17,765,457 18,911,619 Revolving line-of-credit 8,550,000 9,700,000 Capital lease obligations, less current maturities 1,611,026 2,002,623 Deferred income taxes payable 636,831 -0- Other 431,506 364,240 11,229,363 12,066,863 Stockholders' equity: Common stock, $.10 par value, authorized 50,000,000 shares; issued 16,410,622 shares at March 31, 1999 and June 30, 1998, of which 411,178 shares were held as treasury stock at March 31, 1999 and June 30, 1998 1,641,062 1,641,062 Additional paid-in capital 37,457,167 37,457,167 Retained earnings 15,531,078 14,170,697 54,629,307 53,268,926 Less: Treasury stock - at cost (863,911) (863,911) Deferred compensation (126,004) (133,868) Total stockholders' equity 53,639,392 52,271,147 $ 82,634,212 $ 83,249,629 See accompanying notes to financial statements. ** From audited financial statements.
HIGH PLAINS CORPORATION Statements of Income (Unaudited) Three Months Ended March 31, 1999 and 1998 and Nine Months Ended March 31, 1999 and 1998
Three Months Ended Nine Months Ended March 31, March 31, 1999 1998 1999 1998 Net sales and revenues $23,920,820 $19,123,056 $73,086,754 $63,354,876 Cost of products sold 21,869,382 18,685,219 68,629,971 59,681,110 Gross profit 2,051,438 437,837 4,456,783 3,673,766 Selling, general and administrative expenses 541,818 366,580 1,514,785 1,281,920 Operating income 1,509,620 71,257 2,941,998 2,391,846 Other income (expense): Interest expense (402,180) (394,878) (1,300,587) (1,062,001) Interest and other income 15,541 31,348 283,658 93,168 Gain on sale of equipment -0- -0- 233,143 1,050 (386,639) (363,530) (783,786 (967,783) Net earnings (loss) before income taxes 1,122,981 (292,273) 2,158,212 1,424,063 Income tax (expense) benefit (415,503) ( 7,152) (797,831) 52,801 Net earnings (loss) $ 707,478 $ (299,425) $ 1,360,381 $ 1,476,864 Diluted earnings (loss) per share $ .04 $ (.02) $ .08 $ .09 See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Statements of Stockholders' Equity (Unaudited) Nine Months Ended March 31, 1999
Common Stock Additional Number Amount Paid-in Retained Treasury Deferred of Shares Capital Earnings Stock Compensation Total Balance, June 30, 1998 16,410,622 $1,641,062 $37,457,167 $14,170,697 $(863,911) $(133,868) $52,271,147 Employee Stock Purchase (23,351) (23,351) Amortization of deferred compensation 11,166 11,166 Net earnings for the quarter 129,613 129,613 Balance, September 30, 1998 16,410,622 $1,641,062 $37,457,167 $14,300,310 $(863,911) $(146,053) $52,388,575 Amortization of deferred compensation 9,743 9,743 Net earnings for the quarter 523,290 523,290 Balance, December 31, 1998 16,410,622 $1,641,062 $37,457,167 $14,823,600 $(863,911) $(136,310) $52,921,608 Amortization of deferred compensation 10,306 10,306 Net earnings for the quarter 707,478 707,478 Balance, March 31, 1999 16,410,622 $1,641,062 $37,457,167 $15,531,078 $(863,911) $(126,004) $53,639,392 See accompanying notes to financial statements.
HIGH PLAINS CORPORATION Statements of Cash Flows (Unaudited) Nine Months Ended March 31, 1999 and 1998
1999 1998 Cash Flows from operating activities: Net earnings $ 1,360,381 $ 1,476,864 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 2,866,127 2,593,785 Amortization of deferred compensation 31,215 47,856 Provision for bad debt 124,222 -0- Gain on sale of equipment (233,143) (1,050) Debt forgiveness (231,359) -0- Deferred income taxes 797,831 -0- Payments on notes receivable 31,307 86,985 Changes in operating assets and liabilities: Accounts receivable (1,351,569) (248,923) Inventories 1,574,625 (1,961,778) Refundable income tax 30,000 145,328 Prepaid expenses (434,148) (280,886) Accounts payable (1,044,602) 1,598,559 Accrued liabilities 99,370 276,027 Net cash provided by operating activities 3,620,257 3,732,767 Cash flows from investing activities: Proceeds from sale of equipment 436,545 8,590 Acquisition of property, plant and equipment (1,984,688) (7,372,287) Increase in other non-current assets (4,357) (25,582) Net cash used in investing activities (1,552,500) (7,389,279) Cash flows from financing activities: Proceeds from revolving lines-of-credit 900,000 7,700,000 Payment on revolving lines-of-credit (2,200,000) (4,050,000) Payment on capital lease obligations (372,169) (393,647) Proceeds from exercise of options -0- 60,131 Increase (decrease) in other non-current liabilities 43,916 (32,909) Net cash provided by financing activities (1,628,253) 3,283,575 Increase (decrease) in cash and cash equivalents 439,504 (372,937) Cash and cash equivalents Beginning of period 674,894 2,389,758 End of period $ 1,114,398 $ 2,016,821 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 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, 1999 are not necessarily indicative of the operating results for the entire year. (2) Financial Arrangements On March 31, 1999 the Company amended its existing loan agreement with its primary lender. The amendment provides for the extension of the $6.5 million revolving line-of-credit to September 30, 1999. This line-of-credit has an outstanding balance of $6.5 million at March 31, 1999. In addition, the amendment provides for the required decreases to the reducing revolving line- of-credit of $3.4 million per fiscal year, be lowered to $2.7 million for fiscal year 1999 and 2000. The existing financial agreement also contains various restrictions including the maintenance of certain financial ratios and fulfilling certain financial tests. At March 31, 1999 the amendment adjusted some of these covenant calculations and the lender waived the Company's compliance with certain other covenants for March 31, 1999. In addition, the Company was in compliance with the covenants not waived at March 31, 1999. (3) Notes Receivable On March 30, 1999, the Company entered into several agreements with a carbon dioxide (CO2) processing company to (1) effect the sale of the Company's CO2 equipment located at its Portales, New Mexico facility for $1 million; and (2) sell CO2 from the Colwich, Kansas plant to the processing company, who will relocate the CO2 equipment to the Colwich facility. Production and sale of CO2 by the Company is anticipated to begin in August 1, 1999. (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 the pro forma amounts below:
For the three months ending March 31, 1999 1998 Net earnings As reported $ 707,478 $(299,425) Pro forma 691,087 (299,425) Diluted earnings per share: As reported .04 .12 Pro forma .04 .12 For the nine months ending March 31, Net earnings As reported $1,360,381 $1,476,864 Pro forma 1,213,683 1,199,646 Diluted earnings per share: As reported .08 .09 Pro forma .07 .08
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 Company, as required under FASB Statement No. 128 Earnings Per Share (FAS 128) has replaced the presentation of primary earnings per share (EPS) with Basic EPS and Diluted EPS. Under FAS 128 both the basic and diluted must be presented in the financial statements. The diluted earnings per share for the three months ended March 31, 1999 and 1998 have been calculated based on 16,014,717 and 16,009,802 diluted shares outstanding respectively. The diluted earnings per share for the nine months ended March 31, 1999 and 1998 have been calculated based on 16,012,508 and 16,018,715 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. Part I MANAGEMENTS 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. Nine Months Ended March 31, 1999 and 1998 Net Sales and Operating Expenses. Net sales and revenues for the nine months ended March 31, 1999, were higher than net sales for the same period ended March 31, 1998. During the nine months ended March 31, 1999, approximately 50.2 million gallons of fuel grade ethanol were sold at an average price of $1.07 per gallon compared to 35.7 million gallons sold at an average price of $1.15 per gallon, for the same period ending March 31, 1998. In addition, approximately 1.3 million gallons of industrial grade ethanol were sold at an average price of $1.30 per gallon during the nine months ended March 31, 1999 compared to approximately 2.2 million gallons sold at an average price of $1.48 per gallon for the same period ending March 31, 1998. Fuel grade gallons sold during the nine months ended March 31, 1999 increased approximately 40.6% compared to the same period in 1998 primarily as a result of increased production available for sale due to approximately 9.5 million gallons of production from the Portales, New Mexico facility compared to .3 million gallons for the same period last year. This facility began producing in March 1998. Cost of products sold as a percentage of net sales and revenues was 93.9% and 94.2% for the nine month periods ended March 31, 1999 and 1998, respectively. The decrease in the cost of products sold as a percentage of net sales and revenues was primarily due to a decrease in average grain prices offset by the decrease in the average sale price for fuel grade ethanol. The average cost of grain declined to $2.14 per bushel for the nine months ended March 31, 1999, down from $2.44 per bushel for the same period in 1998. Selling, general and administrative expenses increased 18.1% for the nine months ended March 31, 1999, compared to the same period ended March 31, 1998. This increase is the result of an increase in administrative salary and benefit expenses resulting from an increase in staff and changes in management and an increase in investor relations expenditures. Net Earnings. Net earnings decreased 7.9% for the nine months ended March 31, 1999, compared to net earnings for the same period in 1998. Net earnings as a percentage of net sales and revenues decreased from 2.3% to 1.9%. The decrease is the result of an increase in income tax expense primarily composed of deferred income taxes of $797,831 for the nine months ended March 31, 1999 compared to an income tax benefit of $52,801 for the comparable period in 1998. Diluted earnings per share at March 31, 1999, were 11% lower than the diluted earnings per share for the same period in 1998 due to the decrease in net earnings. MATERIAL CHANGES IN RESULTS AND OPERATIONS Three Months Ended March 31, 1999 and 1998 Net Sales and Operating Expenses and Results of Operations. Net sales and revenues for the three months ended March 31, 1999 increased 25% compared to the same period in 1998. During the quarter ended March 31, 1999, approximately 16.4 million gallons of fuel grade ethanol were sold at an average price of $1.07 per gallon compared to approximately 10.3 million gallons sold during the same period in 1998 at an average price of $1.10 per gallon. Fuel grade gallons sold during the three months ended March 31, 1999 increased approximately 59% compared to the same period in 1998 due to approximately 3.4 million gallons of product sold from the Portales, New Mexico facility compared to approximately .3 million gallons during the same period ending March 1998. Additionally, as a result of then low ethanol prices, the Company experienced unusually high inventory levels at March 31, 1998. During the period ended March 31, 1998 approximately 1.0 million gallons of industrial grade ethanol were sold at an average price of $1.39 per gallon in the same period. Sales of industrial grade ethanol during the quarter ended March 31, 1999 were insignificant. Cost of products sold as a percentage of net sales and revenues was 91.4% and 97.7% for the three month periods ended March 31, 1999 and 1998, respectively. The decrease in cost of products sold as a percentage of net sales and revenues is primarily due to a decrease in the cost of grain offset by a decrease in the average sale price for fuel grade ethanol. The average cost of grain decreased 13.7% to $2.14 per bushel for the three months ended March 31, 1999, down from $2.48 per bushel for the same period ended March 31, 1998. Selling, general and administrative expenses increased 47.8% for the three months ended March 31, 1999, compared to the period ended March 31, 1998. The increase was primarily due to an increase in expenditures for investor relations and an increase in administrative salary expenses and benefits resulting from an increase in staff and changes in management. Net Earnings. Net earnings increased from a loss of ($299,425) for the three months ended March 31, 1998 to net earnings of $707,478 for the three months ended March 31, 1999. The increase in net earnings was due to the increase in gross margin in the 1999 period compared to 1998 offset by approximately $416,000 in income tax expense, which primarily consists of deferred income taxes, for the three months ended March 31, 1999 compared to approximately $7,200 of income tax expense for the three months ended March 31, 1998. Diluted earnings per share for the three months ended March 31, 1999 were higher compared to diluted earnings per share for the three months ending March 31, 1998 due to an increase in net earnings. Liquidity and Capital Resources The Company's primary source of funds during the third quarter of fiscal 1999 was cash flow from operations. At March 31, 1999, the Company has negative working capital of ($3.8) million compared to a negative working capital of approximately ($6.4) million at June 30, 1998. The decrease in negative working capital was primarily the net effect of an increase in notes receivable and cash, and a decrease in inventories offset by an increase in trade accounts receivable. Capital expenditures in the first nine months of fiscal 1999 amounted to approximately $2.0 million for modifications at the Company's three plants compared with approximately $7.4 million for the same period in fiscal 1998. The fiscal 1998 expenditures included the $4 million acquisition of the Portales, New Mexico facility. In the opinion of management, the current liquidity position of the Company is dependent upon its ability to negotiate alternative financing arrangements through financial institutions including its primary lender. Should the Company be unable to obtain new financial arrangements, the Company may seek additional funds through the sale of stock, or issue of debt and/or equity securities. Funds expected to be generated from future operations will be negatively affected after December 1999 due to the scheduled expiration of the Nebraska production tax credit. The Company anticipates full utilization of this credit by the end of the third quarter of calendar 1999. While there is currently a bill pending before the Nebraska legislature to extend the production tax credit for expansion of production capacity, the extension, even if passed, would require a significant capital expenditure, and would be in effect for a short period of time, and only at a substantially reduced per gallon rate. With the expiration of the incentive, the Company's future operations in Nebraska and its liquidity position could be substantially and negatively affected. However, the Company continues to improve efficiencies, to implement cost reduction plans, and is working to expand into more profitable industrial grade markets to assist in improving the Company's liquidity and earnings. Seasonality Fuel ethanol prices are historically stronger during the winter months due to the mandated markets of the Federal Oxygen Program. Prices typically increase in the weeks before September, and decrease by March due to shipping schedules. These seasonal price increases again occurred in the fall and winter of fiscal 1999, although climbing to a lower peak than in fiscal 1998. The seasonal summer decline also started earlier than usual and continued into March with price levels below those seen in the summer of 1998. The Company believes this decline is mostly due to low prices for gasoline. Until a recent rebound, gasoline prices were at twenty-year record lows. Since fuel ethanol replaces gasoline, changes in gasoline prices have historically resulted in corresponding changes in the price paid for ethanol. The Company anticipates some increase in spot prices over the summer months from recent increases in prices for crude oil and gasoline, however most of the production from all three plants through August is already contracted for sale. The Company is currently exploring ways to reduce the impact of these seasonal price changes, and to that end has contracted almost 25% of its annual production capacity in 12 month, flat price sales agreements. Other forward contracts also exist on variable pricing terms. The Company is also emphasizing the marketing of its higher quality, industrial grade ethanol, with some recent success. This market tends to be somewhat less seasonal in pricing than fuel ethanol, and typically provides higher margins. Another factor, which could affect demand, and to some extent reduce seasonal price fluctuations in the industry, is the continuing effort to open the California market to ethanol. In March of 1999, California Governor Gray Davis announced a decision to ban MTBE (the oxygenate which is ethanol's primary competitor) from California gasoline by December 31, 2001. California is the largest state gasoline market, but currently blends very little ethanol due to a state imposed oxygen cap. At the same time, oxygenated fuel is required by Federal law in certain areas of air quality "non-attainment." If the ethanol industry is successful in replacing a substantial portion of the California MTBE market, demand for ethanol would be significantly increased, and corresponding price increases would be expected. Grain feedstock prices continue to be very favorable for the ethanol industry as compared to prior years. Corn prices achieved ten-year record low levels in the early fall of 1998 but have experienced modest price fluctuations since that time. Recent crop reports still project another large corn crop, as well as a large carryout for the next crop year, and the Company still anticipates some softening of the corn market into July of 1999. As always, weather, exports, and competing feeds all have potentially major effects on the ultimate grain price, and any unexpected change in those factors could adversely affect the price which the Company pays for its feedstock. Pursuant to its risk management program, the Company has contracted grain deliveries for all three plants for a substantial portion of calendar 1999, and has priced most of its grain requirements through June 1999. Prices for the Company's distillers' grain by-products (DDGS), which historically fluctuate with the price of corn, are currently substantially lower than prices received during fiscal 1998. While the Company has some forward contracts for its DDGS, most is sold seasonally, and it is expected that feed proteins will again show a traditional price decline into the summer season as cattle leave the feedyards for pasture. Prices for DDGS traditionally increase again in the late fall and winter, and the Company anticipates that to occur again this year. Fluctuations in the price of DDGS have historically provided some hedge for the Company against the possibility of an increase in grain prices, although the correlation between the two has not been as direct as in previous years. Year 2000 Issues The Company continues to assess its exposure to year 2000 (Y2K) compliance issues. In the manufacturing process, preliminary tests have demonstrated that the main computer process systems continue to operate without interruption and with no identifiable disruption to processing controls. The cost of purchasing Y2K upgrades for this software, which the Company may acquire as part of its routine upgrades and maintenance contracts is approximately $11,000. In addition, diagnostic procedures are on going at the plant level to identify and test any imbedded technologies, which may also require some type of upgrade or replacement due to the Y2K issue. This phase of the Company's Y2K compliance program is expected to be completed during the second quarter of calendar 1999. Due to insufficient information, the Company is currently unable to estimate the impact on operations, if any, or estimate the cost for potential Year 2000 issues related to imbedded chips and similar technologies. During fiscal 1998, the Company upgraded its existing financial reporting software to a Y2K compliant version, at a cost of approximately $5,000. Upgrades to other existing financial software packages and PC hardware for compliance with Year 2000 are estimated not to exceed approximately $10,000. The Company has also begun the process of making inquiries and gathering information regarding Y2K compliance exposures faced by its vendors and customers. Management has insufficient information at this time to assess the degree to which vendors and customers have addressed or are addressing Y2K compliance issues, and to fully evaluate the risk of disruption to operations that those businesses might face as a result of Year 2000 issues. At March 31, 1999, the Company is in the process of developing contingency plans to handle the most reasonably likely "worst case" scenarios. Due to the risk of loss of certain utilities and the currently unknown status of the ability of the utility companies to continue to supply needed services, the Company expects to finalize the development of a contingency plan by mid- 1999. Except for the services previously noted, no major part or critical operation of any segment of the Company's business is reliant on a single source for raw materials, supplies, or services. Nonetheless, there can be no assurance that the Company will be able to identify all Y2K compliance risks, or, that all contingency plans will assure uninterrupted business operations across the millennium. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS During the quarter ended March 31, 1999, no new legal proceedings were instigated against the Company which would be considered other than in the ordinary course of the Company's business. However, on April 7, 1999 a lawsuit was filed by Craig J. Wedde against approximately 34 separate defendants, most of which are involved in the liquor industry, either as manufacturers or distributors. The case is filed in the circuit court of Fond Du Lac County, Wisconsin, as Case No. 99-CV136, and is captioned Craig J. Wedde vs. Valley Warehousing, Inc., et al. High Plains Corporation is named as one of the defendants in this case as an alcohol manufacturer, and the basic premise of the complaint appears to be that alcohol products have negatively impacted the health and welfare of the residents of the state of Wisconsin. This lawsuit was filed by Mr. Wedde without the benefit of legal counsel, and requests $1 billion in monetary damages, together with additional civil penalties, declaratory and injunctive relief. High Plains has conferred with many of the other defendants named in this lawsuit, and a joint response to the complaint is being prepared. Virtually all the defendants agree that the complaint is completely without merit, and will be vigorously contested on both procedural and substantive issues. The Company believes that the ultimate resolution of this suit will not have a material adverse effect on the Company's financial condition. 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 None. 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: January 20, 1999 Company announced second quarter earnings and earnings per share. March 18, 1999 Company announced Department of Energy research grants. EX-27 2
5 9-MOS JUN-30-1999 MAR-31-1999 1,114,398 0 7,756,997 199,222 4,753,607 13,945,096 95,061,790 26,658,234 82,634,212 17,765,457 10,161,026 0 0 1,641,062 51,998,330 82,634,212 23,920,820 23,920,820 21,869,382 21,869,382 541,818 0 402,180 1,122,981 415,503 707,478 0 0 0 707,478 .04 .04
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