IPSU reports:
Imperial Sugar Company Announces Financial Results For Its 2003 Fiscal Second Quarter
Thursday May 15, 8:21 am ET
SUGAR LAND, Texas--(BUSINESS WIRE)--May 15, 2003--Imperial Sugar Company (Nasdaq:IPSU - News) today announced results for its 2003 fiscal second quarter ended March 31, 2003. The company reported a net loss for the quarter of $0.3 million or $0.03 per diluted share compared to net income during last year's second fiscal quarter of $14.3 million or $1.43 per share. The loss from continuing operations was $6.0 million or $0.60 per diluted share compared to income from continuing operations during last year's second fiscal quarter of $11.3 million or $1.13 per share.
These results have been influenced by the closure of Imperial's refining activities at its Sugar Land plant and the anticipated closing of all packaging and distribution activities at that plant which will occur during the third fiscal quarter, as well as other actions taken to reduce administrative costs. Also, last year's results were heavily influenced by a $13.9 million gain on the sale of certain assets, primarily its Michigan Sugar subsidiary.
Revenues from continuing operations for the quarter were $239.7 million, compared to $244.8 million for the second fiscal quarter of the previous year. This decrease was primarily due to volume reductions from the closure of the Sugar Land refinery and the related rationalization of the business served from that facility, as well as the timing of the Easter holiday (in the third fiscal quarter this year, versus second fiscal quarter last year), partially offset by a 3% increase in sugar prices. Gross margin as a percent of revenue decreased to 5.5% in this fiscal quarter from 7.8% in the second fiscal quarter of the previous year due to higher raw sugar costs and higher energy costs, and includes inefficient operations at the Sugar Land facility during the transition period prior to its full closure that will occur during the third fiscal quarter.
Included in reported results from continuing operations for the quarter were the following:
* Severance payments of approximately $1.1 million related to a reduction in force at the company's headquarters and for the remaining packaging and warehousing non-union employees at the Sugar Land facility.
* Inventory impairment charges of approximately $0.5 million related to the closure of the Sugar Land facility.
* Depreciation of $2.0 million related to the partial closing and the reduced asset life of the Sugar Land facility. A similar depreciation charge will be incurred in the 2003 fiscal third quarter when remaining operations cease at the facility.
* Post-closing expenses of approximately $0.6 million related to the company's first quarter restructuring initiatives.
* A credit of approximately $0.8 million related to the impact on lease reserves for a final settlement on certain claims from the company's prior bankruptcy proceedings.
For the six-month period, revenues from continuing operations increased to $516.9 million from $490.4 million last year on the strength of higher domestic sales prices, offset in part by the volume effect of the closure of the Sugar Land refinery and the timing of the Easter holiday. Net income for the six-month period was $63.1 million or $6.31 per diluted share compared to net income in the first six months of last year of $13.5 million or $1.35 per share. Results from continuing operations for the six-month period were a loss of $11.6 million or $1.16 per diluted share compared to income from continuing operations during the first six months of last year of $2.2 million or $0.23 per share.
The six-month results have been heavily influenced by several events and transactions that occurred during the first fiscal quarter, including the sale of three beet factories in October, the closing of the refining activities at its Sugar Land facility in December, the sale of Imperial's Diamond Crystal Brands ("DCB") foodservice subsidiary in December and the refinancing of its bank agreements in December, as well as those items affecting the second fiscal quarter. Income from discontinued operations for the six-month period of 2003 was $74.7 million, compared to $11.2 million in the prior period.
Included in reported results from continuing operations for the six-month period were the following:
* Charges totaling $2.7 million associated with the discontinuance of refining operations at its Sugar Land refinery, including impairment of inventory and environmental costs. There were no comparable charges in last year's first six months.
* Severance costs of $1.7 million for both the Sugar Land facility and headquarter staff reductions. There was no comparable charge in last year's first six months.
* A credit of approximately $0.8 million related to the impact on lease reserves for a final settlement on certain claims from the company's prior bankruptcy proceedings.
* Charges totaling $2.8 million for professional fees and other costs incurred in connection with the company's restructuring initiatives versus $1.4 million in similar charges in last year's first six months.
* Charges totaling $4.6 million for costs related to the write-off of prior deferred debt costs and restructuring advisory fees as a result of negotiations with its former bank group and the refinancing of the bank agreements. There were no comparable charges in last year's first six months.
* A credit of $2.1 million related to the forgiveness of PIK interest accrued during fiscal 2003 as a result of repaying the senior bank debt in December. There was no comparable credit in last year's first six months.
* A $1.6 million gain on the sale of assets, primarily surplus real estate. There was a gain on sale of $13.8 million related to the sale of the company's Michigan sugar beet operations during last year's first six months.
"The March quarter saw further achievements toward the goal of rationalizing the business of the company as we downsized capacity and reduced certain other administrative costs," said Robert Peiser, president and CEO of Imperial Sugar. "However, we all recognize that this is not a process of immediate gratification, but is one that will continue to require a lot of work by many dedicated people. While we have clearly transformed the company's balance sheet into one of the strongest, if not the strongest in the industry, we recognize there is more work to be done to reduce our costs, improve our internal processes and increase our attention on creating a value added sales and marketing strategy."
"Unfortunately, there are certain costs that inevitably accompany such rationalization efforts prior to our being able to demonstrate our successes in a tangible fashion," added Peiser. "Nevertheless, we are confident that we are on the right path and are making good progress toward our ultimate objective of creating a strong company with efficient facilities, closely aligned grower suppliers and a go-to-market approach, unique within our industry, that relies on logistics initiatives and collaborative partnering with our customers to create value to them and our shareholders."
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the three and six months ended March 31, 2003 were $0.5 million and $1.5 million. EBITDA has not been adjusted to exclude the effects of any of the charges and credits associated with the company's restructuring activities described above, many of which would be excluded from EBITDA for covenant compliance purposes under the company's bank credit agreement. The following table presents a reconciliation of EBITDA to operating income, which we believe is the most directly comparable financial measure calculated in accordance with generally accepted accounting principles (in millions of dollars):
-0-
Three Months Six Months
Ended Ended
March 31, 2003 March 31, 2003
Operating Income $(4.8) $(7.2)
Depreciation and Amortization 5.3 8.7
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EBITDA $0.5 $1.5
EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of liquidity. Additionally, EBITDA may not be comparable to other similarly titled measures of other companies. We have included EBITDA as a supplemental disclosure because our management believes that it provides useful information regarding our ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing our operating performance with the performance of other companies that have different financing and capital structures or tax rates. In addition, our bank credit agreement contains covenants depending on EBITDA, adjusted to exclude the effect of certain charges and credits as noted above.
About Imperial Sugar
The Imperial Sugar Company is one of the largest processors and marketers of refined sugar in the United States and a major distributor to the foodservice market. Imperial Sugar has been recognized and trusted in the food industry for more than 150 years, as the company's history dates back to the mid-1800s. With packaging and refining facilities across the nation, the Company markets products nationally under the Imperial®, Dixie Crystals®, Spreckels®, Pioneer®, Holly® and Wholesome Sweeteners(TM) brands. Additional information about Imperial Sugar may be found on its Web site at www.imperialsugar.com.
Statements regarding future market prices and margins, future operating results, the benefits of our rationalization initiatives, sugarbeet acreage, future operating efficiencies, future government and legislative action, cost savings, liquidity and ability to finance our operations and other statements which 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, the ability of the company to realize planned cost savings, the available supply of sugar, available quantity and quality of sugarbeets, 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.
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Source: Imperial Sugar Company |
