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Imperial Sugar Company Announces Higher Third Fiscal Quarter Earnings

Posted on: Wednesday, 2 August 2006, 09:00 CDT

Imperial Sugar Company (NASDAQ:IPSU) announced significantly higher operating results for its third fiscal quarter ended June 30, 2006. The Company reported income from continuing operations in the current quarter of $14.8 million ($1.26 per diluted share), compared to a loss from continuing operations during the third fiscal quarter of the prior year of $4.2 million ($0.39 per diluted share). Net income for the current quarter was $15.2 million ($1.30 per diluted share), compared to a net loss of $4.5 million ($0.43 per diluted share) for the same quarter of fiscal 2005.

For the quarter ended June 30, 2006, net sales increased 21.1% to $231.3 million, compared to $191.0 million in the same quarter of the prior year. Domestic sugar prices increased 23.1% while domestic sales volumes were relatively unchanged. The higher prices and margins are a result of favorable domestic sugar market conditions which was driven by a tight domestic supply caused by a smaller domestic sugarbeet crop and the impact of last year's Gulf Coast hurricanes on the cane sugar industry.

Prices for the quarter were up sharply from the prior year in each of the three domestic market channels that Imperial serves. Consumer and foodservice prices increased 16.1% and 37.5%, respectively. Industrial prices, which tend to lag market trends because of the fixed price forward sales contracts, increased 23.5% from the prior year, as many of those older contracts negotiated prior to the significant increases in market prices last summer expired. This contract driven price lag effect, which has resulted in rising quarter-over-quarter realized industrial sales prices, largely matured in the third fiscal quarter.

For the three months ended June 30, 2006, gross margin as a percentage of sales increased to 15.4% compared to 4.1% in the prior year quarter. The increase in the current year's gross margin percentage is primarily due to increased domestic sugar sales prices, partially offset by higher raw sugar, energy, freight and manufacturing costs.

Operating income was $20.8 million for the three months ended June 30, 2006, compared to a loss of $6.9 million for the three months ended June 30, 2005.

Commenting on these results as well as operations, Robert A. Peiser, Imperial Sugar's president and ceo said "we are very pleased with the results for our third fiscal quarter and the year to date profits that we have been able to generate. We have been able to sustain a margin that is well above historical levels despite some softening in spot prices in our industrial business line from the very high levels that existed earlier in the year. Accordingly, while the industrial price ramp has largely leveled off, we continue to stand by our earlier comments that we expect industrial prices and margins for the latter half of the fiscal year will be higher than those achieved during the first six months."

Peiser further commented that "our retail and foodservice margins continue to be at levels that generate a very satisfactory return to us. Furthermore, we are promoting our new consumer products very strongly in anticipation of increasing the sales of these higher margin products during the busy fall season. While this is a relatively small part of our overall business, it does position Imperial as a leading innovator in the category."

Peiser also noted that "looking into our 2007 fiscal year, we expect prices and margins to soften from current levels but should still be at levels that are higher than those achieved in recent past years. Finally, recent announcements by the USDA have helped the situation with respect to raw sugar availability. While we believe that the market will remain somewhat tight, our concerns previously voiced about obtaining an adequate supply of raw sugar in the near term have been reduced."

Selling, general and administrative expense increased $0.3 million for the quarter ended June 30, 2006, compared to the same period for 2005. The increase was due primarily to higher incentive compensation, advertising and promotion costs, offset in part by lower salary and medical costs.

For the nine months ended June 30, 2006, Imperial reported income from continuing operations of $33.0 million ($2.94 per diluted share), compared to the prior year's nine month result of a loss of $2.7 million ($0.26 per diluted share). Net income for the first nine months of fiscal 2006 improved to $34.3 million ($3.06 per diluted share) from $1.0 million ($0.09 per diluted share) in the same period of the prior year. A 22.4% increase in revenues driven by higher volumes and prices, and the impact of expanded margins, all attributed to improved industry conditions, contributed to the current year results.

As previously announced, Company officials will discuss Imperial Sugar's operating results for the quarter ended June 30, 2006, its current financial position and business strategies on a call and Web cast to be held at 11:00 a.m. EST on August 2, 2006. Participants wishing to listen and participate in a brief question-and-answer session after the presentation can dial 1-800-798-2801 and enter the Participant Passcode: 20978043. 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 2006 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: 58300725.

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. With packaging and refining facilities across the U.S., the Company markets products nationally under the Imperial(R), Dixie Crystals(R) and Holly(R) 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, future government and legislative action, 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, the available supply of sugar, 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 SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended Nine Months Ended June 30, June 30, 2006 2005 2006 2005 --------- --------- --------- --------- Net Sales $231,294 $191,025 $706,544 $577,223 Cost of Sales 195,638 183,143 613,271 545,731 --------- --------- --------- --------- Gross Margin 35,656 7,882 93,273 31,492 Selling, General and Administrative Expense 11,506 11,246 33,417 31,062 Depreciation and Amortization 3,370 3,280 10,683 9,464 Loss (Gain) on Operating Asset Dispositions - 248 116 (3,372) --------- --------- --------- --------- Operating Income (Loss) 20,780 (6,892) 49,057 (5,662) Interest Expense (513) (589) (1,626) (2,210) Gain on Non-Operating Asset Dispositions - - - 1,854 Other Income, Net 1,438 902 2,976 2,191 --------- --------- --------- --------- Income (Loss) From Continuing Operations Before Income Taxes 21,705 (6,579) 50,407 (3,827) Provision (Benefit) for Income Taxes 6,932 (2,426) 17,451 (1,140) --------- --------- --------- --------- Income (Loss) from Continuing Operations 14,773 (4,153) 32,956 (2,687) Income (Loss) from Discontinued Operations 437 (342) 1,372 3,661 --------- --------- --------- --------- Net Income (Loss) $15,210 $(4,495) $34,328 $974 ========= ========= ========= ========= Basic Earnings Per Share of Common Stock: Income (Loss) from Continuing Operations $1.31 $(0.39) $3.01 $(0.26) Income (Loss) from Discontinued Operations 0.04 (0.04) 0.13 0.35 --------- --------- --------- --------- Net Income (Loss) $1.35 $(0.43) $3.14 $0.09 ========= ========= ========= ========= Diluted Earnings Per Share of Common Stock: Income (Loss) from Continuing Operations $1.26 $(0.39) $2.94 $(0.26) Income (Loss) from Discontinued Operations 0.04 (0.04) 0.12 0.35 --------- --------- --------- --------- Net Income (Loss) $1.30 $(0.43) $3.06 $0.09 ========= ========= ========= ========= IMPERIAL SUGAR COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands of Dollars) (Unaudited) June 30, September 30, 2006 2005 ------------- ------------- Cash and temporary investments $50,115 $49,179 Accounts Receivable, Net 48,907 52,233 Inventory 125,118 95,647 Other Current Assets 9,966 16,972 ------------- ------------- Current Assets 234,106 214,031 Property, Plant & Equipment, Net 90,541 96,818 Deferred Income Taxes, Net 29,049 40,338 Other Assets 9,507 8,604 ------------- ------------- Total $363,203 $359,791 ============= ============= Accounts Payable, Trade $62,451 $69,142 Current Maturities of Long Term Debt 2,587 2,346 Other Current Liabilities 27,161 23,386 ------------- ------------- Current Liabilities 92,199 94,874 Long-Term Debt 4,784 6,707 Current Maturities of Long-Term Debt (2,587) (2,346) ------------- ------------- Long-Term Debt, Net of Current Maturities 2,197 4,361 Other Liabilities 110,879 111,084 Shareholders' Equity 157,928 149,472 ------------- ------------- Total $363,203 $359,791 ============= ============= Shares of Common Stock Outstanding 11,297,792 10,561,017

Source: Business Wire

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