Imperial Sugar Co. reported a net income of $4.2 million, or $0.34 per diluted share, for the second fiscal quarter ended March 31, 2011, compared to a net loss of $33.3 million, or $2.82 per diluted share, for the second fiscal quarter of 2010. The current quarter results include a $3.6 million pretax gain related to the contribution of the Gramercy, La. refinery to Louisiana Sugar Refining, LLC, a previously formed joint venture in which the company has a one-third interest.
"We are pleased with the progress made in a number of areas during the second quarter," commented John Sheptor, president and CEO of Imperial Sugar in a prepared statement. "We achieved sales price increases during the second quarter and successfully managed raw costs in a volatile price environment, so as to expand margins significantly."
Sheptor continued, "After a challenging re-start early in the quarter, LSR's operation of the existing Gramercy refinery is providing a steady flow of bulk sugar for our grocery packaging operation. The reconnection of the silos in Port Wentworth, which was deferred until the first week of April, went smoothly, and the refinery has begun to ramp up production rates again."
Net sales for the second fiscal quarter were $192.2 million, compared to $208.9 million for the same period last year. The reduction in quarterly sales was principally due to the loss of direct sales volumes from the Gramercy refinery, which commencing Jan. 1, 2011, was operated by LSR. Offsetting these lower volumes, domestic sugar prices in the current quarter increased 20 percent compared to second fiscal quarter 2010.
Raw sugar costs during the second quarter benefited from the liquidation of LIFO basis inventory at a cost which was $14.3 million lower than current raw sugar costs. Offsetting this benefit was the impact on raw sugar costs of derivative gains totaling $19.1 million recognized in prior years which were intended to hedge current period purchases. Lower manufacturing costs and improved yields at the Port Wentworth refinery contributed to the improved operating results.
For the three months ended March 31, 2011, gross margin as a percent of sales increased to a positive 5.4 percent compared to a negative 19.6 percent in the prior year quarter. The prior year's gross margin percentage was negatively impacted by the timing of the recognition of raw sugar derivative activity; absent the impact of this derivative activity, gross margin as a percent of sales for the quarter ended March 31, 2010 would have been 0.4 percent.
Other income, which includes equity investment earnings, decreased in the current quarter to $1.3 million as compared to $2.2 million during the same period last year due primarily to a loss from equity earnings in LSR in the current period, which offset gains in the company's Wholesome Sweetener and Mexican marketing joint ventures.
Cash and cash equivalents at March 31, 2011 were $2.9 million and the company had $23 million of outstanding borrowings under its $100 million revolving line of credit.
For the six-month period ended March 31, 2011 the company reported a net loss of $4.8 million, or $0.40 per diluted share, compared to net income of $144.9 million, or $12.01 per diluted share, for the same period last year. Included in the prior year's six-month results are $278.5 million of pre-tax gains associated with the settlement of insurance claims related to the February 2008 Port Wentworth accident, $12.9 million of pre-tax losses on derivatives and $6.9 million of pre-tax charges related to the refinery accident.
Net sales for the current six-month period were $419.6 million compared to $382.6 million during the same period last year primarily due to higher domestic sugar prices. A reduction in sales volumes from the contribution of the Gramercy refinery was substantially offset by the ramp up in volumes at the Port Wentworth refinery.
Gross margin as a percent of sales for the six months ended March 31, 2011 improved to 1.6 percent compared to a negative 7.4 percent for the same period last year primarily due to higher refined sugar prices.
