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Non-Tech : Imperial Sugar (IPSU) -- Ignore unavailable to you. Want to Upgrade?

To: Patentlawmeister who wrote (111)	2/15/2003 4:54:18 AM
From: Crossy	Respond to of 121

Cuda, what I like best here is the mere fact that there are new insiders buying into as the word seems to spread like METLIFE. Imagine that IPSU was able to reduce interest paymetns to 1/10 of its historic exposure by merely getting principal outstanding down to less than 1/5 from $180m to $38m. The real trick was the refinancing in fact locking in 5%-5.5% interst payements for the next 2 years. (LIBOR+250/300bp and Interest swap they signed on exchanging LIBOR for 2.5% fix) Once they are at book value I can think about them acquiring other companies´, espcially small outfits downstream - users of sugar like bakeries, sweets etc.. best rgrds CROSSY

To: Patentlawmeister who wrote (111)	2/15/2003 8:17:39 PM
From: Crossy	Read Replies (1) \| Respond to of 121

Cuda, I re-read the 10Q filing that sort of entered the wall street world thru the back door (no Press Release). I wonder why this lowballing ? Does the company want to aid insitutions wanting to get in cheap ? MetLife already took up this chance. Maybe others will follow. Now to the real meat in the 10Q.. While the 10Q gives the impression of a break-even business, this is not the case. Given current market environments wrt. to refining and raw materials, the company would have made $4.1m this quarter and that was BEFORE CLOSING their most inefficient refinery asset in Texas. How do I arrive at this ? 1)First of all it is worth noting that the GROSS MARGIN (Net sales - COG Sold) / NET SALES increased to $21m or 7.5% (750BP) from 5.3% (530BP). And this was before sugar prices and the sugar margin rose further and before IPSU closed the worst performing refinery. and before furhter downstream opportunities with bigger margins are tackled. How much could this grow to ? My gut feeling is about 10% Gross Margin should be possible. That would be $27m with current revenue levels. 2) The $14.1m in SG&A has a $2.1m in one-time consulting fees (professional fees for restructuring and refinancing) embedded. Going forward this should reduce to $12m per quarter 3) The asset impairment charge of $2.8m is also not recurring becuause it's related to the closure of their Sugar-Land refinining facility. 4) There's still a discount to receivables sold to securitization affiliate of around $2m on the operations statement. The company bought back this A/R line in their refinancing operation, so this cost item is essentially no longer recurring. Summing up, if we take out this extraordinary charges plus use the NEW financing obligations of $0.5m per quarter instead of the old $5.0 per quarter, then we would have ended with a GAAP profit wrt. to ordinary operations of $4.1m or $0.41 per share pretax. Going forward what could be expected of Imperial Sugar as to earnings potential ?? My best case scenario is as follows: Sales $275m - COG Sold $247m GROSS Margin $ 28m (or 10% of Net Sales) - SG&A $ 12m EBITDA $ 16m - D&A § 3.5m EBIT $ 12.5m - Interest $ 0.5m PRETAX INCOME $ 12m That's huge - $1.20 per share quarterly pretax EPS going forward on 10% Gross Margin assumption (which looks attainable this year if refining margin trends continue and the company optimizes operations as it has been doing recently) Now again let's look at "elasticities". How much would 1 BP of margins add to the bottom line ? Answer is 1BP of gross margin improvement would net $27.5k to pretax earnings. 10 BP would provide around $0.275m or around 2.75 cents per share per quarter pretax. So each 100BP of gross margin improvement would unlock another $0.275 quarterly pretax earnings. This looks good, for sure.. If this trend goes on I see 2 things coming: 1) Share buyback 2) Dividend (assured if double tax is eliminated) 3) Acquisitions using company stock as currency if Book value is above 1 rgrds CROSSY