Imperial Sugar Co. Reports Net Loss For Fourth Quarter

Imperial Sugar Co. reported a net loss for the fiscal fourth quarter ended Sept. 30, 2011 of $32.5 million, or $2.73 per share, compared to a net loss of $2.3 million, or $0.19 per share, for the same period in fiscal 2010. For the year, the company reported a net loss of $53.4 million, or $4.49 per share, compared to net income of $136.9 million, or $11.33 per share, for fiscal 2010. Fiscal 2010 results include pretax gains resulting from the settlement of insurance claims totaling $278.5 million ($178.9 million or $14.81 per share after tax), while fiscal 2011 results include a tax charge of $18.9 million to establish a valuation allowance for tax loss carry forwards, as well as pre-tax impairment charges related to joint venture investments totaling $7.1 million.

“Imperial’s results continue to be challenged by high raw sugar prices and competitive pricing dynamics,” stated John Sheptor, president and CEO of Imperial Sugar in a prepared statement. “Additionally, our progress on increasing production rates and reducing costs at the Port Wentworth refinery has been slower than we expected, adding to the unsatisfactory financial results. Studies completed by an outside refining consultant, as well as by our internal operating and engineering teams, identified potential improvements in processing and equipment reliability issues in the refinery. We are evaluating those findings and as part of our 2012 capital plan, have initiated projects to replace equipment in several key areas of the refinery. We continue to evaluate additional capital projects which may be required to be undertaken later in fiscal 2012 or in fiscal 2013.”

Sheptor continued, “Our operating results and the impact of high sugar prices on working capital have strained our financial resources and we are exploring opportunities to improve liquidity, including potential further asset sales. We continue to maintain compliance with the terms of our revolving credit agreement and have an open dialog with our lenders. We completed an amendment of our credit agreement in late December, which is designed to provide additional flexibility under the agreement over the next several months.”

Net sales for the fourth quarter of fiscal 2011 decreased to $231.4 million compared to $264.4 million for the same period in fiscal 2010 as a result of 27 percent lower sales volumes, offset in part by 19 percent higher refined prices. The lower sales volumes were the result of the contribution of the Gramercy refinery to Louisiana Sugar Refining LLC (LSR) in January 2011 in exchange for a one-third membership interest, which was reported on the equity method of accounting. As previously reported, in Dec. 2011 the company sold its membership interest in LSR. Gross margin as a percent of sales was a negative 3.5 percent in the current quarter compared to a positive 2.7 percent last year as higher reported raw sugar costs more than offset the higher sales prices.

Other income declined from a positive $1.0 million in the fourth quarter of fiscal 2010 to a negative $6.0 million as the company’s share of operating losses in LSR, as well as impairment charges, more than offset increased earnings from other investments. Impairment charges totaling $7.1 million were recorded during the fourth quarter of fiscal 2011, principally to reduce the carrying value of the LSR investment to the sales value realized subsequent to year end.

Net sales for fiscal 2011 were $848.0 million compared to $908.0 million in fiscal 2010, as lower sales volumes in the industrial and distributor channels more than offset higher sales prices. Gross margin as a percent of sales for fiscal 2011 improved slightly to a negative 1.6 percent from a negative 2.1 percent largely from higher sales prices.

The company reported that it had available, undrawn revolving credit availability of $44 million, at Sept. 30, 2011, after deducting $82 million of borrowings and $7 million of letters of credit outstanding under its revolving credit agreement. Undrawn availability was $36 million as of Dec. 31, 2011.

Capital expenditures during fiscal 2011 were $24.8 million, principally for safety and normal equipment replacement projects.