Aug 10 2010 --- Imperial Sugar Company has reported a net loss for the third fiscal quarter ended June 30, 2010, of $5.7 million, or $0.48 per share, compared to a net loss of $10.5 million, or $0.89 per share, for the same period last year.

"Production at the Port Wentworth refinery and resulting sales volumes continued to increase during the quarter but more work is needed to achieve capacity operations," stated John Sheptor, president and CEO of Imperial Sugar. "Equipment and process improvements led to better production volumes in the quarter, but the average production rate remains below our potential. To meet customer requirements, refining days were added, which increased the cost of production and reduced margin. As production rate is further increased, variable costs such as labor, maintenance and energy are expected to improve."

"Actions were taken toward quarter-end as an initial adjustment to company-wide staffing to align with future requirements after LSR assumes operation of the Gramercy refinery in January 2011. A severance charge of $1.2 million was recorded in the current quarter."

During the third quarter Port Wentworth's total production was in excess of 90% of normal operating periods. These higher production volumes and a 17% increase in sales prices resulted in an 83% increase in third quarter net sales to $261 million, compared to $142 million for the same period last year. Added production days to compensate for rate, higher depreciation and increased manufacturing costs, including maintenance focused on rate and reliability, negatively affected margin.

The cost of raw sugar purchased during the current quarter increased faster than the increase in sales pricing. This combined with suboptimal cost of production led to a lower gross margin. Gross margin as a percentage of sales was 0.7% compared to 0.2% in the prior year quarter. The current quarter's margin includes $10.7 million of gains on raw sugar derivatives which were entered into to hedge raw sugar purchases in later periods and, consequently, will result in higher raw sugar costs in future periods. These gains did not qualify for hedge accounting treatment and accordingly, are included in current operating results.

SG&A costs declined $0.5 million and refinery explosion related charges were lower at $0.9 million compared to $6.2 million for the same period last year. These items helped reduce the operating loss to $9.5 million from $16.8 million in the fiscal third quarter of last year.

At June 30, 2010, the Company had cash and cash equivalents of $19.7 million and $33 million of outstanding borrowings under the $100 million revolving credit agreement. At June 30, 2010, unused capacity under the borrowing base formula allowed for borrowings of $61.1 million against inventory and receivables, after deducting outstanding letters of credit totaling $5.9 million.

"Improving Port Wentworth operations remains our priority," Sheptor added. "Further equipment and process improvements are underway that should raise throughput. A higher production rate will dilute fixed costs and require less unit variable inputs. Tight industry supply conditions are leading to spot sales opportunities, and any added production above current sales commitments can be sold at attractive prices. Our target is to return margins to more normal levels through these efforts."