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SEC Filings, Earing Reports, Press Releases
Imperial Sugar Company Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 9, 2010 07:11AM
Imperial Sugar Company (IPSU) filed Quarterly Report for the period ended 2009-12-31.
Highlight of Business Operations:
For the three months ended December 31, 2009, we reported income from continuing operations of $178.1 million or $15.11 per basic share, compared to a loss of $0.6 million or $0.05 per basic share during the first fiscal quarter of the prior year. The recognition of insurance and derivative gains has had a significant impact on our reported earnings. In December 2009 the Company settled the property insurance claim relating to the Port Wentworth accident and recorded pretax gains totaling $278.5 million ($178.2 million after tax) in the quarter. Excluding these insurance gains, loss from continuing operations was $92,000. The domestic raw sugar market rose dramatically during the second half of calendar 2009, resulting in first quarter gains of $18.9 million recognized on derivative contracts intended to hedge raw sugar purchases primarily for the balance of fiscal 2010. These gains do not qualify for hedge accounting treatment. Partially offsetting these gains were approximately $8.8 million of higher raw sugar costs resulting from derivative gains recognized in the fourth quarter of fiscal 2009 which were intended to hedge the first quarters raw sugar purchases. We discuss these and other factors in more detail below.
Cost of sales also includes $18.9 million of gains on raw sugar futures contracts recognized in the first quarter of fiscal 2010 which positively impacted gross margin by 10.9%. Absent the impact of the $18.9 million of gains recognized in this quarter, along with the $8.8 million of higher raw sugar cost from fiscal 2009 derivative gains, gross margin as a percent of sales would have been 1.4% in the current quarter. In January 2010, the Company recognized $22.6 million of derivative gains on raw sugar futures contracts that will result in higher raw sugar costs in the future. If the balance of our anticipated raw sugar purchases for fiscal 2010 were priced in the domestic sugar futures market on February 5, 2010, our raw sugar costs for fiscal 2010 would be $30.35 per cwt.
The Company settled the Port Wentworth property and business interruption insurance claim in late December for $345.0 million resulting in pretax gains of $278.5 million. We incurred $1.8 million of continuing legal and consulting costs related to the refinery explosion during the current quarter as compared to $14.9 million of charges consisting primarily of cleanup, repairs and continuing payroll costs in the prior year quarter. Details of the settlement of the insurance claim are provided in Note 2 to the Consolidated Financial Statements.
We have rebuilt the portions of the Port Wentworth refinery and packaging operations that were damaged or destroyed in the industrial accident in February 2008. The start up of the refined sugar silos, completed in early January 2010, was the last significant construction component of the rebuild effort. The replacement cost of the damaged facilities at the Port Wentworth refinery is estimated at $230 million and we had spent $196 million on the project through December 31, 2009. The remaining balance of $34 million is expected to be expended over the second and third quarter of fiscal 2010 as final contract retainage is paid to vendors upon completion of performance obligations. Through December 31, 2009, we have received advances on our property insurance claims totaling $300 million and received an additional $45 million in January 2010 in the final claim settlement.
At December 31, 2009, the Company had cash and cash equivalents of $66.4 million. Additionally, as more fully described below, the Company has a revolving credit agreement with Bank of America, N.A. (the Revolver) which provides for up to $100 million (subject to a borrowing base) of senior secured revolving credit loans. At December 31, 2009, we had $60 million of outstanding borrowings and had the capacity under the borrowing base formula to borrow $32.6 million against inventory and receivables, after deducting outstanding letters of credit totaling $7.4 million.
Our capital expenditures for the three months ended December 31, 2009 were $37.6 million including $34.5 million relating to the Port Wentworth rebuild. We expect to spend an additional $34 million in the second and third quarters of this year to complete the Port Wentworth rebuild. Capital expenditures in fiscal 2010, excluding the Port Wentworth rebuild project, are expected to total between $15 million and $20 million, related primarily to safety improvements and normal equipment replacement, and includes approximately $6.0 million of improvements we are obligated to complete in connect with the LSR joint venture agreements.