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Imperial Sugar Company Announces Third Fiscal Quarter Earnings And Extends Credit Agreement

Posted on: Tuesday, 31 July 2007, 09:08 CDT

Imperial Sugar Company (NASDAQ:IPSU) announced financial results for its third fiscal quarter ended June 30, 2007. The Company reported income from continuing operations in the current quarter of $11.4 million ($0.95 per diluted share), compared to $14.8 million ($1.26 per diluted share) for the third fiscal quarter of the prior year. The current quarter's pre-tax income was $15.6 million (including a pre-tax gain from an arbitration settlement of $6.8 million), compared to pre-tax income of $21.7 million in last year's third quarter. Cash and marketable securities for the nine months ended June 30, 2007 increased $43.8 million to $100.4 million, and the Company had no borrowings under its revolving credit agreement.

The Company also announced that its $100 million senior secured revolving credit agreement led by Bank of America, N.A. has been amended to extend its maturity to December 31, 2011, and improve pricing on revolving credit loans. All other major terms of the agreement, which was scheduled to expire in December 2008, remain unchanged.

For the quarter ended June 30, 2007, net sales decreased 6.5% to $216.4 million, compared to $231.3 million in the same quarter of the prior year, as a result of lower sales prices on a small increase (0.6%) in volumes. Domestic sugar prices decreased 10.3% from high price levels experienced last year due to hurricane disruptions of competitors' operations in Louisiana and Florida in the fall of 2005. In addition, as previously reported, a historically high beet crop has increased pressure on volumes and price, particularly in the industrial and foodservice channels.

Lower domestic raw sugar prices and lower natural gas costs offset in part the effect of lower sugar prices. The resulting gross margin as a percentage of sales decreased to 10.3% for the third quarter compared to 15.4% in the prior year quarter.

Robert A. Peiser, Imperial Sugar's president and ceo, commented: "Our third fiscal quarter results remain at an acceptable level in the face of current domestic supply conditions. We are pleased to have been able to sustain margins and operating profits at above average levels in spite of weaker market pricing, aided in part by lower raw sugar and energy costs.

"Fiscal 2008 is shaping up to be a challenging year in the domestic sugar market. However, we have seen these cycles before and are well positioned to work through it while continuing to make investments in the Company which are expected to improve future performance."

Arbitration proceedings concerning the sale of a subsidiary in 2005 were concluded during the current quarter. The Company recognized a $6.8 million gain related to its breach of contract claim under a five year supply option agreement negotiated in connection with the sale. Additionally, the Company recorded a $3.8 million charge in discontinued operations for indemnity claims by the purchaser of that business.

Selling, general and administrative expenses remained relatively flat as lower spending for corporate development costs and advertising were largely offset by higher employee benefit costs.

Operating income was $14.3 million for the three months ended June 30, 2007, compared with $20.8 million in the prior year's third fiscal quarter. Net income for the current quarter was $7.6 million ($0.64 per diluted share) after deducting a loss from discontinued operations of $3.8 million, compared to last year's third quarter net income of $15.2 million ($1.30 per diluted share), which included $0.4 million of income from discontinued operations.

For the nine months ended June 30, 2007, Imperial reported income from continuing operations of $35.8 million or $3.06 per diluted share, compared to income from continuing operations for the prior year's nine month period of $33.0 million or $2.94 per diluted share. In addition to the arbitration gain, the current year to date results include a $3.7 million pre-tax gain on its commodity exchange seats.

Subsequent to the close of the quarter, the Company sold the site of its former refinery in Sugar Land, Texas, which was closed in 2003, for proceeds of $6.5 million and expects to recognize a gain of approximately $1.9 million in the fourth fiscal quarter. The property is reflected in Assets Held for Sale at June 30, 2007.

Commenting on the amendment of Imperial's revolving credit agreement and the site sale, Mr. Peiser said: "The extension of our bank credit line to a date that is four and a half years from now is a strong vote of confidence by Bank of America. While our usage of this line has been limited in recent periods, such ample liquidity is always comforting. We are also pleased to have completed the sale of our former Sugar Land refinery site in July. Not only does this increase our cash balances, but also eliminates the small cost of carrying that facility."

As previously announced, Company officials will discuss Imperial Sugar's operating results for the quarter ended June 30, 2007, its current financial position and business strategies on a call and Web cast to be held at 3:00 p.m. Eastern Daylight Time on July 31, 2007. Participants wishing to listen and participate in a brief question-and-answer session after the presentation can dial 1-866-700-6979 and enter the Participant Passcode: 45444525. The conference call can also be accessed via live audio webcast by visiting Imperial Sugar's web site at http://www.imperialsugar.com and clicking on the "Q3 2007 Imperial Sugar Earnings Conference Call" icon under "Investor Relations". For those who are unable to listen to the call during its live broadcast, a replay of the entire presentation will be available on the Company's web site beginning one hour following the conclusion of the call. In addition to the webcast replay, a telephone replay will also be available beginning one hour following the conclusion of the call that can be accessed by dialing 1-888-286-8010 and entering the Passcode: 26077277.

About Imperial Sugar

Imperial Sugar Company is one of the largest processors and marketers of refined sugar in the United States to food manufacturers, retail grocers and foodservice distributors. The Company markets products nationally under the Imperial®, Dixie Crystals® and Holly® brands. For more information about Imperial Sugar, visit www.imperialsugar.com.

Statements regarding future market prices and margins, future energy costs, future operating results, future availability of raw sugar, operating efficiencies, results of future investments, future government and legislative actions, future outcomes of legal proceedings, future cost savings, future benefit costs, our liquidity and ability to finance our operations, and other statements that are not historical facts contained in this release are forward-looking statements that involve certain risks, uncertainties and assumptions. These include, but are not limited to, market factors, energy costs, the effect of weather and economic conditions, farm and trade policy, our ability to realize planned cost savings and other improvements, the available supply of sugar, results of actuarial assumptions, strategic initiatives, actual or threatened acts of terrorism or armed hostilities, legislative, administrative and judicial actions and other factors detailed in the Company's Securities and Exchange Commission filings. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

IMPERIAL SUGAR COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In Thousands, Except Per Share Data)(Unaudited)

Three Months Ended June 30,

Nine Months Ended June 30,

2007

2006

2007

2006

Net Sales

$

216,356

$

231,294

$

655,964

$

706,544

Cost of Sales

194,107

195,638

570,199

613,271

Gross Margin

22,249

35,656

85,765

93,273

Selling, General and Administrative Expense

11,168

11,506

37,320

33,417

Depreciation

3,497

3,370

10,419

10,683

Loss (Gain) on:

Arbitration Settlement

(6,752

)

-

(6,752

)

-

Commodity Exchange Seats

-

-

(3,654

)

-

Operating Asset Dispositions

-

-

(659

)

116

Operating Income

14,336

20,780

49,091

49,057

Interest Expense

(595

)

(513

)

(1,538

)

(1,626

)

Interest Income

1,283

967

2,955

1,529

Other Income, Net

579

471

1,498

1,447

Income From Continuing Operations Before Income Taxes

15,603

21,705

52,006

50,407

Provision for Income Taxes

4,224

6,932

16,225

17,451

Income from Continuing Operations

11,379

14,773

35,781

32,956

Income (Loss) from Discontinued Operations

(3,776

)

437

(3,776

)

1,372

Net Income

$

7,603

$

15,210

$

32,005

$

34,328

Basic Earnings

Per Share of Common Stock:

Income from Continuing Operations

$

0.98

$

1.31

$

3.14

$

3.01

Income (Loss) from Discontinued Operations

(0.32

)

0.04

(0.33

)

0.13

Net Income

$

0.66

$

1.35

$

2.81

$

3.14

Diluted Earnings

Per Share of Common Stock:

Income from Continuing Operations

$

0.95

$

1.26

$

3.06

$

2.94

Income (Loss) from Discontinued Operations

(0.31

)

0.04

(0.32

)

0.12

Net Income

$

0.64

$

1.30

$

2.74

$

3.06

IMPERIAL SUGAR COMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In Thousands of Dollars)(Unaudited)

June 30,

September 30,

2007

2006

Cash and Cash Equivalents

$

28,127

$

56,250

Marketable Securities

72,229

308

Accounts Receivable, Net

51,350

54,192

Inventory

85,100

136,999

Other Current Assets

11,288

12,317

Current Assets

248,094

260,066

Property, Plant & Equipment, Net

87,644

90,449

Deferred Income Taxes, Net

13,168

15,073

Other Assets

7,291

5,555

Total

$

356,197

$

371,143

Accounts Payable, Trade

$

56,899

$

67,574

Current Maturities of Long-Term Debt

696

2,665

Other Current Liabilities

23,196

30,214

Current Liabilities

80,791

100,453

Long-Term Debt

2,196

4,165

Current Maturities of Long-Term Debt

(696

)

(2,665

)

Long-Term Debt, Net of Current Maturities

1,500

1,500

Other Liabilities

84,142

83,305

Shareholders' Equity

189,764

185,885

Total

$

356,197

$

371,143

Shares of Common Stock Outstanding

11,798,849

11,292,449

Source: Business Wire

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