-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MIxVDnxG3N21Cd/z7iGge4USS08+lrf7x/8PRiWrjL5/ftMg7TxS7mKEcS4oH5rc x0VTYkXnZjkuOA/SjyLWnw== 0000899243-99-002480.txt : 19991215 0000899243-99-002480.hdr.sgml : 19991215 ACCESSION NUMBER: 0000899243-99-002480 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMPERIAL SUGAR CO /NEW/ CENTRAL INDEX KEY: 0000831327 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 740704500 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-10307 FILM NUMBER: 99773764 BUSINESS ADDRESS: STREET 1: ONE IMPERIAL SQ STE 200 STREET 2: P O BOX 9 CITY: SUGAR LAND STATE: TX ZIP: 77487 BUSINESS PHONE: 2814919181 FORMER COMPANY: FORMER CONFORMED NAME: IMPERIAL HOLLY CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: IMPERIAL SUGAR CO /TX/ DATE OF NAME CHANGE: 19880606 10-K405 1 FORM 10-K405 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 1999 Commission File Number 1-10307 IMPERIAL SUGAR COMPANY (Exact name of registrant as specified in its charter) Texas 74-0704500 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Imperial Square P.O. Box 9 Sugar Land, Texas 77487 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (281) 491-9181 Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, without par value American Stock Exchange Rights to Purchase Preferred Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent fliers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $89 million, based upon the last reported sales price of the registrant's Common Stock on the American Stock Exchange on December 3, 1999 and (solely for this purpose) treating all directors, executive officers and 10% shareholders of the registrant as affiliates. The number of shares outstanding of each of the registrant's Common Stock, as of December 3, 1999, was 32,210,643. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the registrant's definitive Proxy Statement relating to the registrant's 2000 Annual Meeting of Shareholders are incorporated by reference in Part III hereof. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- Part I Item 1. Business...................................................... 1 Item 2. Properties.................................................... 10 Item 3. Legal Proceedings............................................. 10 Item 4. Submission of Matters to a Vote of Security Holders........... 10 Executive Officers of the Registrant.......................... 11 Part II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters.......................................... 13 Item 6. Selected Financial Data....................................... 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 14 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.... 21 Item 8. Financial Statements and Supplementary Data................... 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................... 23 Part III Item 10. Directors and Executive Officers of the Registrant............ 23 Item 11. Executive Compensation........................................ 23 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................... 23 Item 13. Certain Relationships and Related Transactions................ 23 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................................... 24
---------------- The statements regarding future market prices, operating results and Year 2000 readiness and other statements that are not historical facts contained in this report on Form 10-K are forward-looking statements. The words "expect", "project", "estimate", "believe", "anticipate", "plan", "intend", "could", "should", "may", "predict" and similar expressions are also intended to identify forward-looking statements. Such statements involve risks, uncertainties and assumptions, including, without limitation, market factors, the effect of weather and economic conditions, farm and trade policy, the ability of the Company to realize cost savings from acquisitions, the ability of the Company and third party vendors and customers to successfully remediate Year 2000 computer issues, the available supply of sugar, available quantity and quality of sugarbeets and other factors detailed elsewhere in this and other Company filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. PART I ITEM 1. Business In the past two years, Imperial Sugar Company ("Imperial") has made a number of strategic acquisitions. In December 1997, Imperial completed its two-step acquisition of Savannah Foods & Industries, Inc. ("Savannah Foods"), a Georgia-based processor and marketer of sugar and related products. In September 1998, Imperial acquired Wholesome Foods L.L.C ("Wholesome Foods"), a leading supplier of organic sweeteners. In November 1998, Imperial acquired Diamond Crystal Specialty Foods, Inc. ("Diamond Crystal"), a leading distributor of nutritional dry mixes, sauces, seasonings, drink mixes and desserts for the foodservice industry. As used herein, the terms "Imperial" and the "Company" refer to Imperial Sugar Company and its subsidiaries, including Savannah Foods, Wholesome Foods and Diamond Crystal. The Company operates in two domestic business segments--the sugar segment, which produces and sells refined sugar and related products, and the foodservice segment, which sells and distributes numerous products to foodservice customers. The segment information in Note 11 to the Company's Consolidated Financial Statements is incorporated herein by reference. The Company The Company is the largest, most geographically diverse and most balanced processor and marketer of refined sugar in the United States. The Company refines raw cane sugar at four refineries located in Texas, Georgia, Florida and Louisiana and produces beet sugar at 11 beet sugar factories located in California, Wyoming, Montana and Michigan. For the year ended September 30, 1999, the Company sold approximately 58 million hundredweight of refined sugar. The foodservice segment currently operates seven facilities in California, Georgia, Indiana, Iowa, Massachusetts and Ohio. The Company offers a broad product line and sells to a wide range of customers directly and through wholesalers and distributors. Sugar segment customers include retail grocers and industrial customers, principally food manufacturers. Foodservice segment customers include restaurants, healthcare institutions, geriatric centers, schools and other institutions. The Company's sugar products include granulated, powdered, liquid and brown sugars sold in a variety of packaging options (one pound boxes to 100-pound bags, individual packets and in bulk) under various brands (Imperial(R), Holly(R), Spreckels(R), Dixie Crystals(R), Pioneer(R) and Wholesome Sweeteners(TM)) or private labels. In addition, the Company produces selected specialty sugar products, including Savannah Gold(TM) (a premium-priced, free-flowing brown sugar), Imbrocon(TM) (a liquid flavoring), Sucanat(TM) (sugar milled from organically grown sugarcane) and specialty sugars used in confections and icings. The foodservice segment sells sugar in packages from 50-pound bags to individual packets to foodservice customers, along with complementary non- sugar products, including salt, pepper and other seasonings, non-nutritive sweeteners, non-dairy creamers, nutritional dry mixes, sauces, drink mixes, desserts, plastic cutlery and packets of plastic cutlery with seasonings and other items. Imperial was incorporated in 1924 as Imperial Sugar Company and is the successor to a cane sugar plantation and milling operation begun in Sugar Land in the early 1800s that began producing granulated sugar in 1843. In 1988, the Company purchased Holly Sugar Corporation ("Holly") and changed its name to Imperial Holly Corporation. In April 1996, the Company acquired Spreckels Sugar Company ("Spreckels"). The Company completed its acquisition of Savannah Foods in December 1997 and completed its acquisitions of Wholesome Foods and Diamond Crystal in September and November 1998, respectively. In January 1999, the Company changed its name from Imperial Holly Corporation to Imperial Sugar Company. The future results of the Company depend in part on the ability of management to continue to consolidate operations and to integrate departments, systems and procedures, and this integration may require substantial attention of management. Any inability of the Company to integrate its operations with those of the recently acquired companies in a timely and efficient manner would adversely affect the Company's ability to realize the planned benefits of the acquisitions, including potential synergies and cost savings. 1 Industry Overview Refined sugar can be produced by either processing sugar beets or processing and refining sugarcane. The profitability of cane sugar and beet sugar operations is affected by government programs designed to support the price of domestic crops of sugar beets and sugarcane, which affect cane sugar and beet sugar operations differently. See "-- Sugar Legislation and Other Market Factors". Cane Sugar Production Process. Sugarcane is grown in tropical and semi- tropical climates in the United States and some foreign countries. Sugarcane is processed by raw cane mills promptly after harvest into raw sugar, which is approximately 98% sucrose and may be stored for long periods and transported over long distances without affecting its quality. Raw cane sugar imports currently are limited by United States government programs. Cane sugar refineries like those operated by the Company purify raw sugar to produce refined sugar. Operating results of cane sugar refineries are driven primarily by the spread between raw sugar and refined sugar prices. See "--Sugar Legislation and Other Market Factors". Beet Sugar Production Process. Sugar beets can flourish wherever a five- month growing season is possible. In the United States, sugar beets are grown in California, Colorado, Idaho, Michigan, Minnesota, Montana, Nebraska, North Dakota, Ohio, Oregon, South Dakota, Washington and Wyoming. Harvest periods depend on the growing area, but are generally in the early fall, except in California, where spring and summer harvests occur. Sugar beets are highly perishable and must be processed into refined sugar quickly after harvest to avoid deterioration. Beets may be stored in piles awaiting processing where temperatures are sufficiently cool. Sugar beets are converted to refined sugar through a single continuous process at beet sugar factories. Beet sugar factories are located near the areas in which beets are grown in order to reduce freight costs and the risk of deterioration. The Company's staggered harvest seasons with respect to the sugar beet acreage supplying the Company's 11 sugar beet production facilities allows it to produce beet sugar year round even though the production campaign at any single facility generally lasts no more than 180 days. Operating results are driven primarily by the quantity and quality of sugar beets dedicated to the factory and the net sales prices received for the refined beet sugar. The beet processor shares a portion of the net sales price with growers through various participation or recovery contracts or cooperative arrangements. See "--Raw Materials and Processing Requirements--Sugar Beet Purchases". Government Regulation. Federal government programs have existed to support the price of domestic crops of sugar beets and sugarcane almost continually since 1934. The regulatory framework that currently affects the domestic sugar industry includes the Federal Agricultural Improvement and Reform Act of 1996 (the "Farm Bill"), which provides for loans on sugar inventories to first processors (i.e., raw sugar mills and beet processors) and implements a tariff rate quota which limits the amount of raw and refined sugar that can be imported into the United States. The North American Free Trade Agreement ("NAFTA"), which was adopted in 1994 and limits the amount of sugar that can be imported to and exported from Mexico, has to date had a lesser impact on the United States sugar market. See "-- Sugar Legislation and Other Market Factors." For the crop years ended September 1997 through 1999, the USDA implemented a program of increasing the tariff rate quota in known quantities at three known dates based on the level of the projected ending stocks-to-use ratio (the projected ratio of available sugar inventories to annual consumption). There was previously no target for the ending stocks-to-use ratio, and the USDA could increase or decrease the quota at will. The Company believes that this administration of the tariff rate quota for foreign sugar has caused the market to be less volatile by indicating in advance the likely changes in the quota, thus giving guidance to the market. Effective October 1999, the USDA has modified this approach. See "-- Sugar Legislation and Other Market Factors." 2 Domestic Demand. Domestic demand for refined sugar has increased each year since 1986, and the average rate of growth over the five-year period ended September 1999 was 1.6%. The trend in the food manufacturing industry toward production of "low fat" products has increased industrial demand for sugar, as food manufacturers have added sugar to enhance flavor and texture as fat is removed. Domestic Supply. Reduced demand in the early 1980s was absorbed principally by capacity reductions in the cane sugar refining sector. Approximately one- third of domestic cane sugar refining capacity was eliminated between 1981 and 1988. Cane sugar refining capacity remained relatively flat from 1988 until 1998, when the United States Sugar Corporation ("U.S. Sugar") completed construction of a refinery in Florida with a rated annual capacity of approximately 10 million cwt. Growth in refined sugar demand during the last decade has been largely satisfied through increased beet sugar production. In recent years, there have been a number of expansions to existing beet sugar factories to allow for increased acreage dedications. The Company believes that the rate of growth of beet sugar production has slowed as most of the beet factory expansions that are economic under current conditions have been completed. The Company believes that further expansion of existing beet factories would require that beets be transported over greater distances, which is often uneconomical. Accordingly, construction of new factory sites would be required for further expansion. See "--Manufacturing Facilities". Domestic Refined Sugar Prices. Given the existing domestic supply and demand situation, the increasing role of beet production and the current status of government regulation, the price of refined sugar in the United States in recent years has been driven primarily by the amount of beet sugar supply. Historically, good crop years have led to relatively soft refined sugar prices, and weak crop years have led to relatively strong refined sugar prices. Products and Sales Sugar Segment. The principal product line in the sugar segment is refined sugar, which accounted for approximately 75% of the Company's consolidated net sales for the year ended September 30, 1999. The Company has a relatively well-balanced combination of cane and beet sugar sales, with cane sugar constituting approximately 60% and beet sugar constituting 40% of the Company's refined sugar sales for the year ended September 30, 1999. Through Wholesome Foods, now doing business as Wholesome Sweeteners, the Company also sells sugar produced from organically grown sugarcane. The Company markets its sugar products to retail grocery and industrial customers by direct sales and through brokers or wholesalers. For the year ended September 30, 1999, the Company's sales of refined sugar products to retail grocery accounted for approximately 30% of sugar segment sales and sales to industrial customers accounted for 65%. Grocery Sales. The Company produces and sells granulated white, brown and powdered sugar to grocery customers in packages ranging from one-pound boxes to 25-pound bags. Retail packages are marketed under the trade names Imperial(R), Dixie Crystals(R), Holly(R), Spreckels(R), Pioneer(R) and Wholesome Sweeteners(TM), and are also sold under retailers' private labels. Private label packaged sugar, which represents a significant percentage of the Company's grocery sales, is generally sold at prices lower than those received for branded sugar. The Company seeks to capitalize on its well-known brands to seek to increase sales of higher-margin branded products as a percentage of total grocery sales. Industrial Sales. The Company produces and sells refined sugar, molasses and other ingredients to industrial customers, principally food manufacturers, in bulk, packaged or liquid form. Food manufacturers principally purchase sugar for use in the preparation of confections, baked products, frozen desserts, canned goods and various other food products. Historically, the majority of the Company's industrial sales are made to customers under fixed price, forward sales contracts with terms of one year or less. Industrial sales generally provide lower margins than grocery sales. 3 Specialty Product Sales. The Company produces and sells specialty sugar products to grocery and industrial customers. Specialty sugar products include Savannah Gold(TM), a premium-priced free flowing brown sugar marketed primarily to industrial customers; Imbrocon(TM), a liquid flavoring also marketed to industrial customers; edible molasses; syrups; Sucanat(TM), sugar produced from organically grown sugarcane; and specialty sugars used in confections, fondants and icings. The Company also markets artificial sweeteners including Sweet Thing(R), a saccharin-based sweetener, and Sweet Thing II(R), an aspartame-based sweetener. Foodservice Segment. The Company's foodservice segment sells numerous products to foodservice customers, including healthcare institutions, ranging from 50-pound bags of sugar to individual packets of sugar, salt, pepper, non- dairy creamer and plastic cutlery, nutritional dry mixes, sauces, seasonings, drink mixes, desserts and diet kits(R) (packets of plastic cutlery with seasonings and other items). During the year ended September 30, 1999, sugar products sold in the foodservice segment accounted for 13% of consolidated sales. The Company believes that the foodservice sector is one of the most rapidly growing segments of the domestic food industry. The Company believes its Savannah Foods and Diamond Crystal acquisitions have positioned the Company to participate in this growing sector. Sales and Marketing. The Company's products in both the sugar and foodservice segments are sold directly by the Company's sales force and through independent brokers. The Company maintains sales offices at its offices in Sugar Land, Texas and Savannah, Georgia and at regional locations across the United States. The Company considers its marketing and promotional activities important to its overall sales effort. The Company advertises its brand names in both print and broadcast media and distributes various promotional materials, including discount coupons and compilations of recipes. No customer accounted for 10% or more of the Company's sales for the year ended September 30, 1999. Seasonality. Sales of refined sugar are moderately seasonal, normally increasing during the summer months because of increased demand of various food manufacturers, including fruit and vegetable packers; shipments of specialty products (brown and powdered sugar) increase in the fourth calendar quarter due to holiday baking needs. Although the refining of cane sugar is not seasonal, the production of beet sugar is a seasonal activity. Each of the Company's beet sugar factories operates during sugar-making campaigns, which generally total 120 days to 180 days in length each year, depending upon the supply of sugar beets available to the factory. Because of the geographical diversity of its manufacturing facilities, the Company is generally able to produce beet sugar year-round. While the seasonal production of sugar beets requires the Company to store significant refined sugar inventory at each factory, the geographic diversity and staggered periods of production enable the Company's total investment in inventories to be reduced. Additionally, these factors reduce the likelihood that adverse weather conditions will affect all the Company's productive areas simultaneously and aid in distribution. Sales of the Company's foodservice products are not significantly seasonal. By-Products. The Company's sugar segment sells by-products from its beet sugar processing as livestock feeds to dairymen, livestock feeders and livestock feed processors. Such by-products include beet pulp and molasses. The major portion of the beet pulp and molasses produced from sugar beet operations is sold during and shortly after the sugar-making campaigns. By- products from beet sugar processing are marketed in the United States, Europe and Japan. Both the domestic and export markets are highly competitive because of the availability and pricing of by-products of other sugar beet processors and corn wet millers, as well as other livestock feeds and grains. The market price of the Company's by-products relative to the price of competitive feeds and grains is the principal competitive determinant. Among other factors, the weather and seasonal abundance of such feeds and grains may affect the market price of by-products. Beet Seed. The Company develops, produces and markets commercial seed to beet growers under contract to the Company as well as growers under contract to grow for other beet sugar processors. The Company does not authorize its growers to utilize genetically modified seed in their production program. The Company's beet seed sales program is conducted primarily in Sheridan, Wyoming and Tracy, California. The Company is also active in sugar beet disease control, as sugar beet growing areas have varying levels of diseases that affect sugar 4 beet quality and quantity as well as the cost of processing. The Company has a sugar beet plant pathology disease control research laboratory in Tracy, California that develops and implements disease control strategies for all of the Company's sugar beet growing areas. The Company has an agreement with ADVANTA SEEDS, a partnership of D. J. van der Have B.V. and Societe Europeenne de Semences, N.V., S.A. ("ADVANTA"), granting ADVANTA access to the Company's proprietary beet seed breeding material for varietal seed development in exchange for the exclusive marketing rights to ADVANTA's beet seed in certain markets in the United States, Canada and Mexico. Inulin. The Company and Cooperatie Cosun U.A., a Netherlands sugar processor ("Cosun"), own Imperial-Sensus LLC ("IS"), a 50-50 joint venture formed in 1995 to introduce and market inulin in North America. Inulin is a natural carbohydrate extracted from the chicory plant, with multifunctional properties with potential both as a nutritional additive and as a functional food ingredient. Inulin is extracted from chicory roots by a process similar to sugar extraction from sugar beets. IS has the exclusive right to market in Canada, Mexico and the United States inulin and inulin-based products produced by Cosun. The Company has also entered into various agreements to provide certain marketing and administrative services to the joint venture. Manufacturing Facilities The Company owns and operates four cane sugar refineries and 11 sugar beet factories. Each facility is served by adequate transportation and is maintained in good operating condition. The facilities operate continuously when in operation. The following table shows the location and capacity of each of the Company's refineries and processing plants:
Approximate Daily Melting Capacity Cane Sugar Refineries (Pounds of Raw Sugar) --------------------- --------------------- Port Wentworth, Georgia............................... 6,300,000 Gramercy, Louisiana................................... 4,200,000 Sugar Land, Texas..................................... 4,000,000 Clewiston, Florida.................................... 1,700,000 ---------- Total............................................. 16,200,000 ==========
Approximate Daily Slicing Capacity Beet Sugar Factories (Tons of Sugar Beets) -------------------- --------------------- Brawley, California.................................. 9,000 Mendota, California.................................. 4,200 Tracy, California.................................... 5,000 Woodland, California................................. 4,000 Caro, Michigan....................................... 4,000 Carrollton, Michigan................................. 3,400 Sebewaing, Michigan.................................. 6,000 Croswell, Michigan................................... 4,000 Sidney, Montana...................................... 7,000 Torrington, Wyoming.................................. 5,700 Worland, Wyoming..................................... 3,600 ------ Total............................................ 55,900 ======
In 1998, the Company ceased sugar beet processing at its factory in Hereford, Texas. The Company continues to operate an ion exclusion facility at the factory to separate refined sugar from molasses, and also uses the facility as a distribution center. 5 A partnership in which the Company owned a 43% limited partnership interest built a new beet sugar factory in Moses Lake, Washington, that was commissioned in September 1998. In April 1999, the Company transferred its partnership interest to its partner which operates and now owns 100% of the facility. See Note 13 to the Company's Consolidated Financial Statements. The following table shows the location and approximate square footage of the Company's foodservice manufacturing facilities, each of which is owned by the Company:
Square Foodservice Manufacturing Facilities Feet ------------------------------------ ------- Savannah, Georgia................................................... 314,500 Bondurant and Mitchellville, Iowa................................... 152,513 Bremen, Georgia..................................................... 132,400 Perrysburg, Ohio.................................................... 131,000 Moore, Oklahoma *................................................... 106,769 Visalia, California................................................. 101,500 Wilmington, Massachusetts........................................... 76,540 Indianapolis, Indiana............................................... 63,240
- -------- * Facility ceased manufacturing operations in October 1999 and was sold in December 1999. Raw Materials and Processing Requirements Raw Cane Sugar. The Company purchases raw cane sugar from both domestic and foreign sources of supply located in Louisiana, Florida and various foreign countries. The availability of foreign raw cane sugar is determined by the import quota level designated by applicable regulation. See "-- Industry Overview" and "--Sugar Legislation and Other Market Factors". The Company has not experienced difficulties in the past in contracting sufficient quantities of raw cane sugar to supply its refineries. Raw cane sugar purchase contracts can provide for the delivery of a single cargo or for multiple cargoes over a specified period or a specified percentage of the seller's production over one or more crop years. Contract terms may provide for fixed prices but generally provide for prices based on the futures market during a specified period of time. The contracts provide for a premium if the quality of the raw cane sugar is above a specified grade or a discount if the quality is below a specified grade. Contracts generally provide that the seller pays freight, insurance charges and other costs of shipping. The Company contracts to purchase raw cane sugar substantially in advance of the time it delivers the refined sugar produced from that purchase. Historically, the majority of the Company's industrial sales are under fixed price, forward sales contracts. In order to mitigate price risk in raw and refined sugar commitments, the Company manages the volume of refined sugar sales contracted for future delivery with the volume of raw cane sugar purchased for future delivery by entering into forward purchase contracts to buy raw cane sugar at fixed prices and by using other techniques to fix the price for a portion of sugar purchased. The Company uses the raw sugar futures market as a hedging and purchasing mechanism, as management deems appropriate. U.S. Sugar, which supplies approximately 14% of the Company's supply of raw cane sugar, has notified the Company that it intends to terminate its supply contract with the Company effective October 31, 2001. In addition, U.S. Sugar has completed construction of a refinery in Florida. See "Industry Overview -- Domestic Supply". The Company expects that adequate supplies of raw cane sugar from other sources will be available upon the expiration of this contract. Because the contract provides for market-based pricing, the Company expects that the expiration of the contract will not significantly affect its cost of raw sugar. However, no assurance can be given that such supplies will be available or that the Company's cost of raw sugar will not be affected. 6 The Company has access to approximately 350,000 short tons of aggregate raw sugar storage capacity, including 215,000 short tons of storage capacity at its Port Wentworth, Georgia refinery. At Port Wentworth, the Company has the ability to segregate its raw sugar inventory, which allows the Company to store bonded sugar for re-export. This capability facilitates the Company's participation in the re-export market. The Company has been active in such market in the past and expects to be active in the future when pricing and market conditions are favorable. Sugar Beet Purchases. The Company purchases sugar beets from over 2,700 independent growers, which supply the Company's factories with approximately 330,000 acres of beets. The sugar beets are purchased under contracts negotiated with associations representing growers. The Company contracts for acreage prior to the planting season based on estimated demand, marketing strategy, processing capacity and historical crop yields. The type of contract used in the western United States provides for payments to the grower based on the sugar content of the sugar beets delivered by each grower and the net selling price of refined beet sugar during the specified contract year. The type of contract used in Michigan provides for growers to share in the revenues generated by sales of pulp and molasses, as well as sales of refined sugar. Most grower contracts provide for a premium to the growers for delivering beets of superior quality. The net selling price is the gross sales price less certain marketing costs, including packaging costs, brokerage, freight expense and amortization costs for certain facilities used in connection with marketing. Use of this type of participating contract reduces the Company's exposure to price risks on its refined sugar inventory by causing the price the Company pays on its sugar beet purchases to vary with the price received for raw sugar. The Company's beet sugar operations are dependent upon the quantity, quality and proximity of sugar beets available to its factories. Sugar beet acreage varies depending on factors such as prices anticipated by growers for sugar beets versus alternative crops, prior crop quality, productivity, availability of irrigation and weather conditions. In addition, the quantity and cost of refined sugar subsequently produced from the sugar beet crop may be materially affected by the acreage harvested, disease, insects and unfavorable weather conditions during the growing, harvesting, processing and storage season. Once harvested, sugar beets are purchased by the Company and, in some locations, stored in piles until processed. Under the contracts used in Michigan and the Rocky Mountains, the beet growers continue to share the risk of deterioration of the stored sugar beets with the Company. However, the Company contractually accepts about one-half of the risk with respect to stored sugar beets in these areas and all of the risk in other areas. The Company believes that the geographic diversity of its growing areas reduces the risk that adverse conditions will occur company-wide; however, there can be no assurance that the Company's results of operations will not be adversely affected by such risks. Energy. The primary fuel used by the Company is natural gas, although certain of the Company's factories use significant amounts of coal. The Company generates a substantial portion of the electricity used at its refineries and factories. The Company can use fuel oil at certain locations both as an alternative energy source when the price is more attractive and as a backup to natural gas in the event of curtailment of gas deliveries. Natural gas and coal supplies are typically purchased under contracts for terms of one year or more, which do not contain minimum quantity requirements. Pricing of natural gas contracts is generally fixed for the term or indexed to a spot market index. The Company has also utilized financial tools such as swaps and caps to stabilize the price for gas purchases under indexed contracts. Coal is available in abundant supply domestically, and the Company is able to purchase coal competitively. The Company owns a royalty interest in a coal seam methane gas project in the Black Warrior Basin of Alabama as an additional indirect hedge against future natural gas price increases. Gas royalties received during fiscal 1999 were approximately $200,000. Other Raw Materials. Foundry coke and limestone are used in the beet sugar extraction process. The Company generally purchases coke under contracts with one to three-year terms and utilizes rail transportation 7 to deliver the coke to factories. Domestic coke supplies may become tighter due to environmental restrictions; the Company has the option of converting existing coke-fired equipment to natural gas should the availability and economics of coke so dictate. The Company owns a 50% share of a limestone quarry in Warren, Montana that supplies the Sidney, Montana and Worland, Wyoming factories with their annual limestone requirements. The Company operates a limestone quarry in Cool, California that supplies the Company's Northern California beet processing factories with limestone. These quarries do not normally supply the Company's other factories because of high freight costs. Limestone required in the other factory operations is generally purchased from independent sources under contracts with one to five-year terms. Research The Company operates research and development centers in Sugar Land, Texas and Savannah, Georgia where it conducts research relating to manufacturing process technology, factory operations, food science and new product development. In Savannah, the Company operates a "pilot plant" in connection with its research and development activities where it has developed sugar products co-crystallized with other flavors such as honey. The Company has begun to market the co-crystallized specialty products produced at the pilot plant to certain customers. Competition The Company's sugar segment competes with other cane sugar refiners and beet sugar processors and, in certain product applications, with producers of other nutritive and non-nutritive sweeteners. The Company's foodservice segment competes with other foodservice suppliers. Selling price and the ability to supply the buyer's quality and quantity requirements in a timely fashion are important competitive factors. Certain competing beet sugar processors have expanded their production capacity significantly over the past five years. The additional sugar marketed as a result of this expansion has acted to reduce refined sugar prices at times during this period. To a lesser extent, refined sugar also competes with non-nutritive or low-calorie sweeteners, principally aspartame and, to lesser extents, saccharin and acesulfam-k. The replacement of refined sugar by high fructose corn syrup ("HFCS") and non-nutritive sweeteners in the beverage market was substantially completed over a decade ago. The Company does not currently consider HFCS a significant competitive threat, as refined sugar and HFCS generally support different markets. HFCS is primarily a liquid sweetener and generally does not compete in the dry sugar market. Sugar Legislation and Other Market Factors The Company's business and results of operations are substantially affected by market factors, principally the domestic prices for refined sugar and raw cane sugar, and the quality and quantity of sugar beets available to the Company. These market factors are influenced by a variety of forces, including the number of domestic acres contracted to grow sugar beets, prices of competing crops, weather conditions and United States farm and trade policies. See "-- Industry Overview" and "-- Raw Materials and Processing Requirements". The principal legislation currently supporting the price of domestic crops of sugar beets and sugarcane is the Farm Bill, which became effective July 1, 1996 and extended the sugar price support program for sugarcane and sugar beets until June 30, 2003. CCC Loans. Pursuant to the Farm Bill, the Commodity Credit Corporation ("CCC") is obligated annually to make loans available to domestic first processors of sugar on existing sugar inventories from the current crop year production. CCC loans under the Farm Bill are recourse loans unless the tariff rate quota for imported sugar is set at a level in excess of 1.5 million short tons raw value ("STRV"). If the tariff rate quota exceeds 1.5 million STRV, CCC loans will become non-recourse and processors will be obligated to pay participating growers a predetermined minimum support price. CCC loans mature September 30 of each year and in no event more than nine months after the month in which the loan was made. Under the Farm Bill, processors may forfeit 8 sugar that secures CCC loans to the USDA in lieu of repaying the loans; if the tariff rate quota is below 1.5 million STRV and the value of the sugar forfeited as collateral for the loan is inadequate to cover the loan amount, the USDA may proceed against the processor to recover the difference between the loan amount and the proceeds from the sale of the forfeited sugar. Additionally, under the rules governing the CCC loans, a processor will be required to pay a penalty of approximately one cent per pound for each pound of sugar forfeited. Tariff Rate Quota. Under the Farm Bill, the USDA utilizes the import quota and the forfeiture penalty to affect sugar price supports and prevent forfeitures under the CCC loan program. The USDA annually implements a tariff rate quota for foreign sugar, which has the effect of limiting the total available supply of sugar in the United States. The tariff rate quota controls the supply of raw sugar by setting a punitive tariff on all sugar imported for domestic consumption that exceeds the determined permitted imported quantity and is designed to make the importation of the over-quota sugar uneconomical. To the extent a processor sells refined sugar for export from the United States, it is entitled to import an equivalent quantity of non-quota eligible foreign raw sugar. The tariff rate quota for sugar to be allowed entry into the United States during the year ended September 30, 1999 was 1.28 million STRV; for the year ending September 30, 2000 the tariff rate quota is 1.50 million STRV. The USDA currently determines the quota by targeting an ending stocks-to-use ratio. A portion of the quota will be made available immediately with other allocations available over time depending on domestic production of raw cane sugar and refined beet sugar. In November 1999, the USDA announced the raw sugar tariff rate quota at 1.50 million STRV, making 1.25 million STRV (the statutory minimum) immediately available while holding 250,000 STRV in reserve. This full quota should ensure that sugar producers receive nonrecourse loans. This reserve amount will not be automatically allocated by tranche as in prior years, and the impact of this approach is currently difficult to estimate. NAFTA. NAFTA contains provisions that allow for Mexico to increase its sugar exports to the United States if Mexico is projected to produce a net surplus of sugar. The terms of NAFTA restrict Mexico's exports, which may be in the form of raw or refined sugar, to the United States to no more than 25,000 STRV annually until the year 2000. Mexico's exports to the United States will be further increased in the event Mexico produces a sugar surplus for two consecutive years prior to the year 2000 or at any time thereafter. The Company's management believes that increased importation of raw cane sugar from Mexico could benefit the Company because the proximity of its Sugar Land, Texas refinery to Mexico could allow the Company to import raw cane sugar more economically than its competition. However, if imports are in the form of refined cane sugar, the domestic refined sugar market may be adversely affected. Employees At November 1, 1999, the Company employed approximately 3,800 year-round employees. In addition, the Company employed approximately 4,000 seasonal employees over the course of the year ended September 30, 1999. While the Company's Port Wentworth, Georgia and Clewiston, Florida refineries employ non-union labor, the Company has entered into collective bargaining agreements with union representatives with respect to the employees at the Company's other sugar segment plants. The Company's Indianapolis, Indiana and Perrysburg, Ohio foodservice facilities operate under collective bargaining agreements, while the remainder of its foodservice facilities employ non-union labor. The Company believes its employee and union relationships are good. Environmental Regulation The Company's operations are governed by various federal, state and local environmental regulations. These regulations impose effluent and emission limitations, and requirements regarding management of water resources, air resources, toxic substances, solid waste and emergency planning. The Company has obtained or is making application for the permits required under these regulations. The Company has filed Title V applications as required in California, Wyoming, Montana, Michigan, Texas, Georgia and Florida. Wastewater odor control is being addressed at the Company's facilities in Tracy and Woodland, California. The soil and ground water at the Company's Mendota, California facility have high concentrations of salts. The Company has developed a prevention plan to install a clay cap on the areas of concern and to treat the affected 9 ground water. This plan will be accomplished over a 20 to 30-year period with an expected annual cost ranging from $40,000 to $120,000. The Company has recorded a liability for the estimated costs of this project. The Company's Torrington, Wyoming facility has made significant operational modifications in order to meet more restrictive state solid waste and groundwater regulations. In November 1998, the Company, through its Diamond Crystal subsidiary, received a Request for Information Pursuant to Section 104 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and Section 3007 of Resource Conservation and Recovery Act ("RCRA") relative to the Beede Waste Oil Site in Plainstow, New Hampshire. Responses to the information request were last filed in March 1999. The Company's review has not identified any connection between Diamond Crystal and the transporters identified for this site. No further requests for information have been received. Ongoing compliance with environmental statutes and regulations has not had, and the Company does not anticipate that it will in the future have, a material adverse effect on the Company's competitive position since its competitors are subject to similar regulation. Additional testing requirements and more stringent permit limitations have resulted in increasing environmental costs, and the Company expects that the cost of compliance will continue to increase. Additional capital expenditures will be required to comply with future environmental protection standards, although the amount of any further expenditures cannot be accurately estimated. Management does not believe that compliance will have a materially adverse impact on the Company's capital resources, operating results or financial condition. ITEM 2. Properties The Company owns each of its cane sugar refineries, sugar beet processing plants and foodservice manufacturing facilities. The Company owns its corporate headquarters in Sugar Land, Texas and leases other office space and contracts for throughput and storage at warehouses and distribution stations. The Company owns additional acreage at its factories and refineries which is used primarily for settling ponds and as buffers from nearby communities or is leased as farm and pasture land. Substantially all of these assets are subject to liens securing the Company's bank debt. See "Business--Manufacturing Facilities" and "Business--Other Raw Materials". ITEM 3. Legal Proceedings The Company is a party to litigation and claims which are normal in the course of its operations; while the results of such litigation and claims cannot be predicted with certainty, the Company believes the final outcome of such matters will not have a materially adverse effect on its results of operations or consolidated financial position. ITEM 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders during the quarter ended September 30, 1999. 10 EXECUTIVE OFFICERS OF THE REGISTRANT Executive officers of Imperial are elected annually to serve for the ensuing year or until their successors have been elected. The following table sets forth certain information with respect to the executive officers of Imperial:
Name Age* Positions ---- ---- --------- James C. Kempner........ 60 President and Chief Executive Officer Douglas W. Ehrenkranz... 42 Executive Vice President William F. Schwer....... 52 Executive Vice President and General Counsel Roger W. Hill........... 60 Managing Director; President and CEO of Holly Sugar Benjamin A. Oxnard, Jr. ................... 64 Managing Director; President and CEO of Savannah Foods Peter C. Carrothers..... 60 Managing Director Mark Q. Huggins......... 50 Managing Director and Chief Financial Officer James M. Kelley......... 55 Managing Director John A. Richmond........ 53 Managing Director David Roche............. 52 Managing Director W.J. "Duffy" Smith...... 44 Managing Director Mark S. Flegenheimer.... 38 Vice President; President of Michigan Sugar Company H. P. Mechler........... 46 Vice President--Accounting Karen L. Mercer......... 37 Vice President and Treasurer Alan K. Lebsock......... 47 Controller Roy L. Cordes, Jr....... 52 Secretary
- -------- * As of December 3, 1999. Except as set forth below, executive officers have held their present offices for at least the past five years. Positions, unless specified otherwise, are with the Company. Mr. Kempner became President and Chief Executive Officer in 1993. Mr. Kempner served as Executive Vice President from 1988 to 1993 and also served as Chief Financial Officer from 1988 to April 1998. Mr. Ehrenkranz became Executive Vice President in July 1999. Mr. Ehrenkranz joined the Company in April 1995 as Director of Sales, Planning & Marketing-- Development and became Vice President--Sales and Marketing in September 1995 and Managing Director in April 1997. Prior to joining the Company, Mr. Ehrenkranz was Marketing Manager with PepsiCo's Taco Bell subsidiary from 1993 to 1994. Mr. Schwer became Executive Vice President in July 1999 and has served as Managing Director since October 1995 and General Counsel since 1989. Mr. Schwer became Assistant Secretary in 1998. He also served as Senior Vice President from 1993 to 1995. Mr. Schwer joined Holly as Assistant General Counsel in 1988. Mr. Hill became a Managing Director in October 1995. He served as Executive Vice President from 1988 to 1995. Mr. Hill also has been President of Holly since 1988. Mr. Hill joined Holly in 1963 and served in various capacities, including Vice President--Agriculture and Executive Vice President. Mr. Oxnard became a Managing Director in February 1998 and President of Savannah Foods in October 1999. Since 1996, he has served as Senior Vice President--Raw Sugar of Savannah Foods. Mr. Oxnard joined Savannah Foods in 1983 as Vice President--Raw Sugar. Mr. Carrothers became a Managing Director in October 1995. He served as Senior Vice President--Operations from March to October 1995. Mr. Carrothers joined the Company as Senior Vice President--Logistics in May 1994. 11 Mr. Huggins joined the Company as Managing Director and Chief Financial Officer in September 1999. Prior to joining the Company, Mr. Huggins was Senior Vice President--Administration, Chief Financial Officer and Treasurer with Cellstar Corporation from January 1997 to January 1999 and Chief Financial Officer--Brazil Region until June 1999. Mr. Huggins was Chief Financial Officer of Van Camp Seafood Company, Inc. ("Van Camp") from 1992 to 1997. In April 1997 Van Camp filed for protection under the federal bankruptcy laws. Mr. Kelley became a Managing Director in February 1998. Since 1995, he has served as President of Dixie Crystals(R) Brands, Inc. Mr. Kelley joined Savannah Foods in 1973 and has held various other positions with Savannah Foods since then. Mr. Richmond became a Managing Director in April 1997 and was named Vice President--Operations in October 1995. Mr. Richmond has been Senior Vice President and General Manager, Beet Sugar Operations, of Holly since 1993. Mr. Richmond joined Holly in 1973 and has held various other positions with Holly since then. Mr. Roche became a Managing Director in February 1998. Since 1996, he has served as Senior Vice President of Savannah Foods; in 1997 also became President of Savannah Foods Industrial Inc. Mr. Roche has held various other positions since he joined Savannah Foods in 1976. Mr. Smith joined the Company as a Managing Director in September 1999. Prior to joining the Company, Mr. Smith was Senior Vice President--Worldwide Product Supply at Gerber Products Company from 1995 to 1999 and was Vice President- Operations at Hostess Frito-Lay from 1993 to 1995. Mr. Flegenheimer became a Vice President of the Company and President of Michigan Sugar Company in October 1998. Mr. Flegenheimer joined Michigan Sugar in 1994 as Vice President of Administration and became Vice President and Chief Operating Officer in 1996. Mr. Mechler became Vice President--Accounting in April 1997. Mr. Mechler had been Controller since joining the Company in 1988. Ms. Mercer became Vice President in April 1997 and has served as Treasurer since 1994. She joined the Company in 1993. Mr. Lebsock became Controller in April 1997 and has been Controller for Holly since October 1990. From October 1984 to September 1990, he was Assistant Controller for Holly. Mr. Lebsock joined Holly in 1974. Mr. Cordes joined the Company as Deputy General Counsel in September 1997. He became Secretary of the Company in July 1998. Prior to joining the Company, Mr. Cordes was in private law practice from 1995 to 1997 and was a judge in Fort Bend County, Texas from 1991 to 1994. 12 PART II ITEM 5. Market for the Registrant's Common Equity and Related Shareholder Matters. The Company's Common Stock is traded on the American Stock Exchange. At December 3, 1999 there were 2,263 shareholders of record of the Common Stock. The following table sets forth the high and low sales price per share of Common Stock, as quoted by the American Stock Exchange, and cash dividends per share declared in the periods set forth below:
Sales Price ------------- Cash Three Months Ended High Low Dividend(1) ------------------ ------ ------ ----------- December 31, 1997............................... $14.38 $ 9.75 $0.03 March 31, 1998.................................. 12.13 8.31 0.03 June 30, 1998................................... 10.19 8.75 0.03 September 30, 1998.............................. 9.94 6.44 0.03 December 31, 1998............................... 8.75 6.13 0.03 March 31, 1999.................................. 9.75 6.06 0.03 June 30, 1999................................... 7.38 5.62 0.03 September 30, 1999.............................. 7.00 5.63 0.03
- -------- (1) On October 29, 1999, the Board of Directors suspended payment of the Company's quarterly cash dividend. ITEM 6. Selected Financial Data. Selected financial data for the last six fiscal periods is as follows (in thousands of dollars, except per share data):
Year Ended Six Months September 30, Ended Year Ended March 31, ---------------------- September 30, --------------------------- 1999(1) 1998(2) 1997(3) 1997(4) 1996 1995 ---------- ---------- ------------- -------- -------- -------- For The Period: Net Sales............. $1,888,630 $1,783,091 $406,682 $752,595 $616,450 $586,925 Operating Income (Loss)............... 47,904 38,939 20,359 28,423 (2,431) (2,091) Income (Loss) Before Extraordinary Item (5).................. (18,124) (5,835) 9,951 11,518 (3,218) (5,365) Net Income (Loss)..... (18,124) (7,834) 9,951 11,518 (2,614) (5,365) Per Share Data: Basic Income (Loss) Per Share: Before Extraordinary Item(5)............. $ (0.57) $ (0.24) $ 0.70 $ 0.92 $ (0.31) $ (0.52) Net Income (Loss).... (0.57) (0.32) 0.70 0.92 (0.25) (0.52) Diluted Income (Loss) Per Share: Before Extraordinary Item................ (0.57) (0.24) 0.69 0.90 (0.31) (0.52) Net Income (Loss).... (0.57) (0.32) 0.69 0.90 (0.25) (0.52) Cash Dividends Declared............. 0.12 0.12 0.03 -- 0.04 0.16 At Period End: Total Assets.......... $1,280,783 $1,179,800 $457,619 $449,933 $325,319 $374,124 Long-term Debt--Net... 553,577 525,893 81,304 90,619 89,800 100,010 Total Shareholders' Equity............... 373,424 352,907 192,959 176,956 111,043 109,977
- -------- (1) Includes the results of Diamond Crystal since November 2, 1998, as discussed in Note 2 to the Consolidated Financial Statements. (2) Includes the results of Savannah Foods since October 17, 1997, net of minority interest through December 22, 1997, as discussed in Note 2 to the Consolidated Financial Statements. (3) In October 1997, the Company changed its fiscal year end from March 31 to September 30. (4) Includes the results of the Spreckels Sugar Company since April 19, 1996. (5) See Note 7 to the Consolidated Financial Statements for a description of the extraordinary item in fiscal 1998. In fiscal 1996, the Company purchased and retired a portion of the 8-3/8% Senior Notes due 1999 for amounts less than book value, and the Company reported such difference, net of tax, as an extraordinary item. 13 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources The Company's primary capital requirements in fiscal 2000 are expected to include working capital, debt service and capital expenditures. The primary sources of capital are expected to be operating cash flow, borrowings under the revolving credit facility, sales of receivables under the revolving receivable purchase facility, borrowings from the Commodity Credit Corporation ("CCC"), and sales of marketable securities. Long-term debt at September 30, 1999 was $553.6 million, consisting principally of $250 million of senior subordinated notes and borrowings under senior credit facilities. The Company's Amended and Restated Credit Agreement, dated as of December 22, 1997, as most recently amended November 18, 1999, (the "Senior Credit Agreement") includes a $157 million revolving credit facility (available through December 2002) and term loans aggregating $192.1 million. At December 3, 1999, the Company had $36 million unused borrowing capacity under the revolving credit facility. Interest on borrowings under the Senior Credit Agreement is at floating rates (either a base rate plus a margin ranging from 0.75% to 3% or a Eurodollar rate plus a margin ranging from 1.75% to 4%). The Company has entered into interest rate swap agreements with major financial institutions to effectively fix the interest rate on $230 million of the amounts outstanding under the Senior Credit Agreement at a weighted average annual rate of 8.54% as of September 30, 1999. The Company will be required to make prepayments, with certain exceptions, equal to 100% of the net proceeds from certain new indebtedness, the sale of equity securities and the disposition of assets, including proceeds from the sale of stock of any subsidiaries, plus 75% of excess cash flow (as defined). The Senior Credit Agreement is secured by substantially all of the assets of the Company and its subsidiaries. Borrowings from the CCC are secured by beet sugar inventories. Under terms of the Senior Credit Agreement, seasonal CCC borrowings of up to $25 million may be made without reduction of the amounts available under the revolving credit facility. On June 30, 1999, the Company entered into a five-year receivables purchase agreement with an independent issuer of receivables-backed commercial paper. The agreement establishes a five-year, $110 million revolving receivable purchase facility, which allows the Company to sell receivables on a non- recourse basis. Receivables are sold under the agreement at discount rates of a commercial paper rate plus a margin of .44%. Initially the Company sold $95 million of accounts receivable and the proceeds were used to repay $52 million of term loans and $43 million outstanding under the revolving credit facility. The Senior Credit Agreement was amended to reduce the revolving credit facility's commitment amount to $157 million. At September 30, 1999 the Company had sold $105 million of accounts receivable under the facility. The Company expects to liquidate most of its marketable securities portfolio in fiscal 2000 and utilize the after tax proceeds to reduce long-term debt. The portfolio had a market value of $65.5 million, including unrealized gains of $32.6 million at September 30, 1999. Through December 3, 1999, the Company had sold marketable securities with proceeds of $19.9 million since September 30, 1999. In October 1999, the Board of Directors suspended payment of the Company's quarterly cash dividend and intends to use the cash savings to reduce long- term debt. The Company's debt agreements impose various restrictions that could limit the Company's ability to respond to market conditions, to provide for unanticipated capital investments, to raise additional debt or equity capital, or to take advantage of business opportunities. In particular, the Company and each of its subsidiaries is subject to negative covenants contained in the Senior Credit Agreement that restrict, subject to specified exceptions: . the incurrence of additional indebtedness and other obligations and the granting of additional liens; . mergers, acquisitions and dispositions; . investments, loans and advances; 14 . dividends, stock repurchases and redemptions; . prepayment or repurchase of other indebtedness and amendments to certain agreements governing indebtedness; . transactions with affiliates; . capital expenditures; . sales and leasebacks; . changes in fiscal periods; . changes of lines of business; and . entering into agreements that prohibit the creation of liens or limit the subsidiaries' ability to pay dividends. In addition, the Senior Credit Agreement requires the Company to maintain compliance with certain specified financial covenants, including a maximum ratio of total debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") and senior debt to EBITDA, a minimum interest coverage ratio and a minimum fixed charge coverage ratio as well as a minimum adjusted current ratio and a minimum level of net worth. The indenture governing the Company's $250 million senior subordinated notes contains covenants that limit, with certain exceptions, the ability of the Company and most of its subsidiaries to: . incur additional indebtedness or issue preferred stock; . pay dividends or make certain other restricted payments by the Company or its subsidiaries; . enter into transactions with affiliates; . make certain asset dispositions; . in the case of the Company, merge or consolidate with, or transfer substantially all of its assets to another person; . encumber assets; . issue capital stock of wholly owned subsidiaries; or . engage in certain business activities. In addition, under certain circumstances, the Company will be required to offer to repurchase the notes at par, plus accrued and unpaid interest, with the proceeds of certain asset sales. The Company's capital expenditures for fiscal 1999 were $26.8 million and included packaging and production efficiency upgrades, as well as continuation of the Company's computer system initiatives. Fiscal 2000 capital expenditures are expected to approximate $35 million for environmental, safety and obsolescence projects as well as for several profit enhancement and cost reduction projects. The Company believes that capital sources identified above will be adequate to meet anticipated capital requirements in fiscal 2000. There can be no assurance, however, that the Company will generate sufficient operating cash flow that, together with the other sources of capital, will enable the Company to meet anticipated capital requirements. If the Company is unable to generate sufficient cash from the sources identified above, it may be required to sell assets, reduce capital expenditures, refinance all or a portion of its existing indebtedness or obtain additional financing. 15 Year 2000 Issues The Company has implemented actions to address the possible exposures related to the impact on its computer systems of the year 2000 ("Y2K"). The Company's efforts have been focused in four areas: (1) technology infrastructure, including hardware and computer operating software; (2) application software for key financial, informational and operational systems; (3) process control technology at each of the Company's production facilities; and (4) third party readiness. These efforts are being coordinated with the Company's strategic initiative to replace its major management information systems with newly acquired client-server based software from PeopleSoft USA, Inc. The Company has completed its infrastructure project, which included remediation of the mainframe and mid-range computers in the Company's Savannah, Georgia and Sugar Land, Texas offices, and installation of the client-server computers for the PeopleSoft implementation. The Company's plan for Y2K compliance of application software is complete. Such plan included remediation of certain systems and replacement of others. Remediation of application software processed in Savannah, Georgia was completed in fiscal 1998; remediation of systems processed in Sugar Land, Texas was completed during fiscal 1999. The initial phase of replacement of non-Y2K compliant applications with PeopleSoft applications was implemented in fiscal 1998 and the replacement of remaining non-compliant systems, principally human resource applications, was completed in June 1999. Management at each of the Company's production facilities assessed the year 2000 impacts on hardware and software, including embedded computer chips, utilized for manufacturing process control and has completed remediation of systems which may materially affect its manufacturing operations. The Company surveyed major vendors and customers concerning their year 2000 readiness, and has evaluated their responses and developed contingency plans should such third parties not complete required system modifications. Contingency plans include designating alternate vendors for required services and materials or implementing manual procedures for automated processes, where possible. Costs to modify existing application systems were approximately $1 million, which was incurred over the two year period ended September 30, 1999. New hardware and software purchases totaled $5.5 million over a two year period. No material costs were incurred on these projects prior to fiscal 1998. The failure to correct a material year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Y2K problem, resulting in part from the uncertainty of the year 2000 readiness of third party suppliers and customers, the Company is unable to determine at this time whether the consequences of year 2000 failures will have a material impact on the Company's results of operations, liquidity or financial condition. The Company believes that the year 2000 efforts described above, including the implementation of new business systems and completion of the projects, significantly reduce the Company's level of uncertainty about the Y2K problem and reduces the possibility of significant interruptions of normal operations. Readers are cautioned that forward-looking statements contained in this year 2000 discussion should be read in conjunction with the Company's disclosures on the inside cover page of this Form 10-K. New Accounting Standards The Financial Accounting Standards Board has issued a number of new accounting standards discussed in Note 1 to the Consolidated Financial Statements. These standards, which become effective in future fiscal years, establish additional accounting and disclosure requirements. Management is evaluating what, if any, effects such requirements may have on the Company's consolidated financial statements. 16 Industry Environment The Company's results of operations are substantially dependent on market factors, including domestic prices for refined sugar and raw cane sugar, and the quantity and quality of sugarbeets available to the Company. These market factors are influenced by a variety of external forces that the Company is unable to predict, including the number of domestic acres contracted to grow sugar cane and sugarbeets, prices of competing crops, weather conditions and United States farm and trade policy. The domestic sugar industry is subject to substantial influence by legislative and regulatory actions. The current farm bill limits the importation of raw cane sugar, affecting the supply and cost of raw material available to the Company's cane refineries. See "Business-- Sugar Legislation and Other Market Factors" and "--Competition" and "--Industry Overview". Weather conditions during the growing, harvesting and processing seasons, the availability of acreage to contract for sugarbeets, as well as the effects of diseases and insects, may materially affect the quality and quantity of sugarbeets available for purchase as well as the costs of raw materials and processing. See "Business--Raw Materials and Processing Requirements". Results of Operations As more fully discussed in Note 11 to the Consolidated Financial Statements, the Company's operations are identified into two reportable segments, sugar and foodservice. Fiscal 1999 As a result of the Diamond Crystal acquisition on November 2, 1998, the Company had substantial increases in sales, costs and expenses. Additionally, the Company completed the acquisition of Savannah Foods in the first quarter of fiscal 1998. Accordingly the operating results of the fiscal year ended September 30, 1999 are not directly comparable to the results for fiscal 1998. The following unaudited pro forma financial information presents the Company's results of operations for the twelve months ended September 30, 1999 and 1998 as if the acquisition of both Diamond Crystal and Savannah Foods and the related financing transactions had occurred on October 1, 1997 (in thousands of dollars).
(Pro Forma) Twelve Months Ended September 30, ---------------------- 1999 1998 ---------- ---------- Net sales......................................... $1,899,714 $1,982,351 Costs and expenses: Cost of sales................................... 1,722,788 1,774,862 Selling, general and administrative............. 76,786 90,000 Asset impairment and other charges.............. -- 18,287 Depreciation and amortization................... 51,705 51,169 ---------- ---------- Operating income.................................. 48,435 48,033 Interest expense.................................. (59,774) (58,648) Realized securities gains......................... 4,697 2,181 Loss on investment in partnership................. (16,706) -- Other income...................................... 1,598 7,680 ---------- ---------- Income (loss) before income taxes................. (21,750) (754) Provision (benefit) for income taxes.............. (3,276) 4,635 ---------- ---------- Net income (loss)................................. $ (18,474) $ (5,389) ========== ==========
Pro forma net sales decreased $82.6 million or 4.2% for the twelve months ended September 30, 1999, primarily due to lower industrial sugar sales volumes and lower consumer private label prices, partially offset by 17 higher industrial sugar prices and increased foodservice segment sales. The sugar segment's net sales decreased 6.6% for fiscal 1999 compared to fiscal 1998 due primarily to lower industrial volumes as the Company announced higher sales prices for refined sugar for industrial contracts commencing October 1, 1998. The foodservice increase was primarily due to higher volumes (principally of sugar sold to foodservice customers), as well as increased sales of nutritional products including thickened beverages and frozen shakes. Additionally, the Company realized higher selling prices on certain nonsugar products. Market expectations of a large supply of domestic beet sugar for the USDA crop year which commenced October 1, 1999, have resulted in generally quoted market prices in the industrial sugar contract market approximately 5% below fiscal 1999 levels. The beet sugar supply projection, along with prospects of a large supply of domestic raw cane sugar, have resulted in the USDA setting the tariff rate quota at the minimum level, and domestic raw sugar prices on the commodities exchange have declined in excess of 15% from year earlier levels. A significant portion of the Company's industrial sales are made under fixed price, forward sales contracts, most of which commence October 1 or January 1, and extend for up to one year. Additionally, the Company prices a portion of its raw sugar purchases in advance of the time of delivery either through pricing provisions of its raw sugar contracts or through hedging transactions in the raw sugar futures market. Consequently, the Company's realized sales prices as well as its realized raw sugar costs tend to lag market price changes. Management is unable to predict the impact of these items on its results of operations in fiscal 2000. Pro forma cost of sales for the twelve months ended September 30, 1999 decreased $52.1 million or 2.9%, resulting in pro forma gross margin as a percent of sales of 9.3% compared to 10.5% for the prior twelve-month period. By segment, sugar pro forma gross margin as a percent of sales decreased to 7.5% in fiscal 1999 from 8.9% in fiscal 1998 and pro forma foodservice gross margin as a percent of sales decreased to 13.0% in fiscal 1999 from 14.1% in fiscal 1998. The foodservice segment's gross margin declined principally due to product mix and competitive pricing pressures. The Company decided to delay, until fiscal 2000, the realization of certain synergies related to its acquisition of Diamond Crystal, primarily in respect to closing certain plants, and to incur temporarily higher expense levels in order to maintain adequate levels of customer service and support current sales levels. The sugar segment's gross margin declined principally due to lower sugarbeet quality, higher cane processing costs, and a decline in byproduct sales prices due to competitive feed grain prices, all of which more than offset higher industrial sugar prices. Beet sugar costs increased during fiscal 1999 at the Company's Montana and Michigan factories as a result of lower sugar content in sugarbeets harvested and warmer temperatures during sugarbeet storage, which adversely affected sugar recovery. Beet sugar costs were also negatively affected in Southern California by a large beet crop which extended the harvest period, adversely impacting beet quality in the late summer and fall months. The reduced beet quality negatively affected raw material and variable manufacturing costs which was partially offset by lower unit production costs from increased production volumes. The Company purchases sugar beets under participatory contracts which provide for a percentage sharing of the net selling price realized on refined beet sugar sales between the Company and the grower. Use of this type of contract reduces the Company's exposure to inventory price risk. The increase in sales prices for beet sugar resulted in an increase in cost of sugar beets under the participatory contracts. The cane operations of the sugar segment had lower industrial volumes and poor refinery performance in fiscal 1999, resulting in lower yields, and higher processing costs. The refinery performance was affected in part by difficulty in processing low quality raw materials received from an offshore supplier. In addition, the sugar segment's gross margin was impacted by the effects of Hurricane Floyd, which shut down the Company's largest cane refinery in Savannah, Georgia for a week, and delayed product deliveries to certain of the Company's customers. Partially offsetting these factors was a slight decrease in raw sugar costs. The Company has made operational and personnel changes to address the poor refinery performance. Pro forma selling, general and administrative costs decreased $13.2 million or 14.7% for the twelve months ended September 30, 1999 compared to the same period of the prior year primarily due to reductions in volume related selling costs, as well as cost savings in general and administrative expenses. Following the Savannah 18 Foods and Diamond Crystal acquisitions the Company undertook significant cost savings initiatives and reorganized its administrative functions to remove duplication and streamline such functions. Selling, general and administrative costs include $1.8 million of discount and fees associated with the sales of receivables during the last three months of fiscal 1999. Pro forma interest expense for the twelve months ended September 30, 1999 increased $1.1 million or 1.9% over the comparable period of the prior year primarily as a result of higher revolving credit borrowings. The loss on investment in partnership resulted from the write-off of the Company's investment in Pacific Northwest Sugar Company, a partnership in which a subsidiary of the Company was a 43% limited partner. See Note 13 to the Consolidated Financial Statements. The asset impairment and other charges included in the prior year's results were primarily charges in connection with the closing of the Company's Hereford, Texas beet sugar factory and charges to record a loss the Company incurred in meeting its contractual sales obligations as a result of poor weather conditions at its Northern California factories. See Note 13 to the Consolidated Financial Statements. Realized gains on marketable securities increased $2.5 million during fiscal 1999; net unrealized gains, which have not been recognized in the Company's results of operations, but are shown, net of tax, as a component of comprehensive income within shareholders' equity, increased $2.2 million during fiscal 1999. The components of income tax expense and its relationship to statutory rates are detailed in Note 8 to the Consolidated Financial Statements. Pro forma other income decreased $6.1 million for the twelve months ended September 30, 1999 compared to the same period of the prior year primarily due to gains recognized on the sale of a former beet sugar factory site and a distribution facility in fiscal 1998. Fiscal 1998 As a result of the Savannah acquisition, the Company had substantial increases in sales, costs and expenses. Additionally, in October 1997, the Company changed its fiscal year from March 31 to September 30. Accordingly the operating results of the fiscal year ended September 30, 1998 are not directly comparable to the results for any prior fiscal year. The following unaudited pro forma financial information presents the Company's results of operations for the twelve months ended September 30, 1998 and 1997 as if the acquisition of Savannah and related financing transactions had occurred on, and as if the Company had changed its fiscal year as of, September 30, 1996 (in thousands of dollars):
(Pro Forma) Twelve Months Ended September 30, ---------------------- 1998 1997 ---------- ---------- Net sales.......................................... $1,852,637 $1,957,537 Costs and expenses: Cost of sales.................................... 1,678,519 1,717,971 Selling, general and administrative.............. 67,563 97,900 Asset impairment and other charges............... 18,287 -- Depreciation and amortization.................... 47,072 44,252 ---------- ---------- Operating income................................... 41,196 97,414 Interest expense................................... (51,689) (54,987) Realized securities gains.......................... 2,181 43 Other income....................................... 7,073 1,750 ---------- ---------- Income (loss) before income taxes.................. (1,239) 44,220 Provision for income taxes......................... 3,024 19,562 ---------- ---------- Net income (loss).................................. $ (4,263) $ 24,658 ========== ==========
19 Pro forma net sales decreased $104.9 million or 5.4% for the twelve months ended September 30, 1998, primarily due to lower market prices for refined sugar as a result of a large domestic beet crop in the fall of 1997. Sugar sales volumes were approximately 1% lower on a pro forma basis. The Company's foodservice segment partially offset the decrease in sugar pro forma net sales with an increase of $7.0 million from fiscal 1997 primarily due to an increase in volume of sales. Pro forma cost of sales for the twelve months ended September 30, 1998 decreased $39.5 million or 2.3%, resulting in gross margin before depreciation of 9.4% compared to 12.2% for the prior twelve-month period. Margins on foodservice sales were negatively affected by lower selling prices and an increase in the cost of cane sugar. Margins on the sugar segment sales were negatively affected by lower sugar prices and higher beet sugar costs. The decrease in the unit selling price of refined beet sugar resulted in decreases in the unit cost of sugarbeets purchased, mitigating the impact on beet sugar sales margins. Beet sugar costs during fiscal 1998 were adversely impacted by the unusually mild winter in the Northern Rocky Mountain Region, affecting sugarbeets in storage, reducing production yields, and increasing processing costs. Beet sugar cost continued to be adversely affected by low acreage at the Company's Torrington, Wyoming and Hereford, Texas factories. Record spring rains in Northern California delayed factory start-ups, adversely impacting beet quality in the late summer and fall months. The Company recorded a $3.8 million charge in the second fiscal quarter for the expected impact on industrial sales commitments of higher costs resulting from such abnormal weather. Partially offsetting these factors were efficient operations at the Company's Michigan and Southern California beet sugar factories and Savannah cane refineries. Raw cane sugar prices were not materially changed in fiscal 1998 compared to the pro forma prior period resulting in decreased margins as refined prices declined. In February 1998, the Company announced that it would not process sugarbeets at the Hereford factory in fall 1998. Severance and other cash closure costs related to this decision totaling $974,000 were provided for in the quarter ended March 31, 1998. Additionally, the Company recorded an impairment loss of $12,538,000 on Hereford's assets for the difference in fair value and carrying costs. Pro forma selling, general and administrative costs were $30.3 million lower for the twelve months ended September 30, 1998 compared to the same periods of the prior year due to reductions in general and administrative costs, primarily incentive compensation, relocation and corporate overhead costs. Following the Savannah acquisition the Company reorganized to eliminate duplication and streamline administrative functions and recorded a charge in its second fiscal quarter of $975,000 in connection with a 14% reduction in staff. This and other measures produced cost savings in excess of $20 million in fiscal 1998, the majority of which was in selling, general and administrative expenses. Pro forma interest expense for the twelve months ended September 30, 1998 was lower than the comparable period of the prior year as a result of both lower short-term interest rates and reduced revolving credit borrowings. Other income increased due to higher dividends, lower costs related to farm land lease operations and gains recognized on sale of a former beet sugar factory site and a distribution facility. Six Months Ended September 30, 1997 Net sales increased $12.7 million or 3.2% in the six months ended September 30, 1997 compared to the six months ended September 30, 1996, primarily as a result of higher refined sugar prices. Price increases resulted from smaller sugarbeet crops in the fall of 1995 and 1996. Sugar sales volumes increased modestly during the six months, principally due to higher beet sugar sales. Cost of sales increased $7.7 million or 2.2% which, coupled with the increase in sales, resulted in the gross margin before depreciation improving to 14.2% of sales from 13.4%. Unit sugar gross margins improved as 20 reductions in raw sugar costs and improved beet sugar operations more than offset higher sugarbeet costs resulting from high selling prices and higher cane refining costs. The increase in sales prices during the six-month period resulted in an increase in the cost of sugarbeets under the participatory purchase contracts, mitigating the improvement in gross margin. As discussed in Note 1 to the Consolidated Financial Statements, the Company utilizes LIFO inventory for sugar inventories. During the six months ended September 30, 1997, the Company liquidated beginning inventory layers at costs below current year levels, reducing cost of sales approximately $.7 million. Selling, general and administrative expenses increased $1.6 million or 5.5% during the six-month period as increases in warehousing and advertising costs more than offset reduction in general and administrative costs, principally resulting from closure of Spreckels Sugar Company's Pleasanton, California office. Interest expense declined $1.0 million during the six-month period as reduced long and short-term borrowings more than offset higher short-term interest rates. In April 1997, the Company purchased and retired $8.3 million of its senior notes due 1999. Operating cash flow allowed the reduction in average short-term borrowings by approximately $19.0 million during the period. Realized gains on marketable securities decreased $383,000; net unrealized gains which have not been recognized in the Company's results of operations increased $8.3 million to $28.3 million during the six months ended September 30, 1997. The Company's effective income tax rate was 37% for the six months ended September 30, 1997, which is higher than the statutory federal rate primarily due to state income taxes. ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk. The Company uses raw sugar futures and options in its inventory purchasing programs. Gains and losses on such transactions are matched to specific inventory purchases and charged or credited to cost of sales as such inventory is sold. The Company does not enter into futures or option transactions for trading purposes. The information below presents the Company's domestic futures positions outstanding as of September 30, 1999. The Company's world sugar futures and option positions are not material to its consolidated financial position, results of operations or cash flows.
Expected Maturity Expected Maturity Fiscal 2000 Fiscal 2001 ----------------- ----------------- Futures Contracts (net long positions): Contract Volumes (cwt.).............. 1,999,200 127,680 Weighted Average Contract Price (per cwt.)............................... $ 21.94 $ 22.08 Contract Amount...................... $43,869,000 $2,819,000 Weighted Average Fair Value (per cwt.)............................... $ 21.19 $ 21.00 Fair Value........................... $42,359,000 $2,682,000
The above information does not include either the Company's physical inventory or its fixed price purchase commitments for raw sugar. At September 30, 1998, the Company's domestic futures position was a net short position of 1,130,000 cwt. at an average contract price of $22.11. The change in the futures position during fiscal 1999 is a result of changes in the level of the Company's fixed price purchase commitments, fixed price sales commitments and the Company's expectations about future market prices. The Company has material amounts of long-term debt with interest rates that float with market rates, exposing the Company to interest rate risk. The Company has attempted to reduce this risk by entering into interest rate swap agreements for a portion of such floating rate debt. 21 The table below provides information about the Company's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based on implied forward rates in the treasury yield curve at the reporting date.
Expected Maturity Date Fiscal Year Ending September 30, ---------------------------------------------------------- There- Fair 2000 2001 2002 2003 2004 after Total Value ----- ----- ----- ------ ----- ------ ------ ------ (In millions of dollars) Liabilities Long-term debt: Fixed rate debt....... $ 6.4 $ 0.5 -- -- -- $270.0 $276.9 $246.9 Average interest rate................. 8.3% 7.4% -- -- -- 9.5% 9.5% Variable rate debt.... $ 5.7 $ 7.4 $ 7.8 $175.2 $38.9 $ 53.8 $288.8 $288.8 Average interest rate................. 9.3% 9.4% 9.5% 10.0% 10.7% 10.9% 10.2% Interest Rate Derivatives Interest rate swaps: Variable to fixed..... $15.6 $16.8 $17.1 $ 83.0 $48.2 $ 49.3 $230.1 $ 2.9 Average pay rate...... 6.0% 6.0% 6.0% 6.0% 5.7% 6.0% 6.0% Average receive rate.. 6.4% 6.8% 7.0% 7.0% 7.0% 7.2% 7.0%
At September 30, 1998, the Company had outstanding fixed rate debt totaling $257.7 million with an average interest rate of 9.7%, variable rate debt totaling $275.7 million with an average interest rate of 7.2% and variable to fixed rate interest rate swaps totaling of $175.8 million. The interest rate swaps had an average pay rate of 6.1% and an average receive rate of 5.2%. ITEM 8. Financial Statements and Supplementary Data. See the index of financial statements and financial statement schedules under "Exhibits, Financial Statement Schedules and Reports on Form 8-K." Unaudited quarterly financial data for the last eight fiscal quarters is as follows (in thousands of dollars, except per share amounts):
Basic Earnings Income (Loss) (Loss) Per Share --------------------- -------------------- Before Net Before Net Cash Net Gross Extraordinary Income Extraordinary Income Dividends Sales Margin Item (Loss) Item (Loss) Per Share -------- ------- ------------- ------- ------------- ------ --------- Fiscal Year Ended September 30, 1998(1): December 31, 1997(2).. $434,867 $39,131 $ (142) $(2,141) $(0.01) $(0.14) $0.03 March 31, 1998(3)..... 414,967 31,132 (17,217) (17,217) (0.64) (0.64) 0.03 June 30, 1998......... 456,087 48,751 5,275 5,275 0.19 0.19 0.03 September 30, 1998.... 477,170 49,325 6,249 6,249 0.23 0.23 0.03 Fiscal Year Ended September 30, 1999(4): December 31, 1998..... $471,761 $47,779 $ 2,365 $ 2,365 $ 0.08 $ 0.08 $0.03 March 31, 1999(5)..... 428,997 33,362 (18,559) (18,559) (0.58) (0.58) 0.03 June 30, 1999......... 499,977 56,102 6,654 6,654 0.21 0.21 0.03 September 30, 1999.... 487,895 37,367 (8,584) (8,584) (0.27) (0.27) 0.03
- -------- (1) Includes the results of Savannah Foods since October 17, 1997, net of minority interest through December 22, 1997, as discussed in Note 2 to the Consolidated Financial Statements. 22 (2) Net loss for the first quarter of fiscal 1998 included an extraordinary loss of $1,999,000 from the purchase of senior notes as discussed in Note 7 to the Consolidated Financial Statements. (3) Results of operations for the second quarter of fiscal 1998 include pre- tax charges of $975,000 related to costs of a workforce reduction, $3,800,000 related to expected losses on industrial sales commitments and $13,512,000 for costs associated with the closure of the Company's Hereford, Texas factory as discussed in Note 13 to the Consolidated Financial Statements. (4) Includes the results of Diamond Crystal since November 2, 1998 as discussed in Note 2 to the Consolidated Financial Statements. (5) Net loss for the second quarter of fiscal 1999 includes a $16.7 million charge to write-off the Company's investment in a partnership as discussed in Note 13 to the Consolidated Financial Statements. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III ITEM 10. Director and Executive Officers of the Registrant The information set forth under the captions "Election of Directors-- Nominees", "--Continuing Directors" and "--Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Proxy Statement"), is incorporated herein by reference. See also "Executive Officers of the Registrant" included in Part I hereof. ITEM 11. Executive Compensation The information set forth under the captions "Election of Directors-- Director Remuneration", "--Executive Compensation" and "--Compensation Committee Interlocks and Insider Participation" in the Proxy Statement is incorporated herein by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management The information set forth under the caption "Election of Directors--Security Ownership" in the Proxy Statement is incorporated herein by reference. ITEM 13. Certain Relationships and Related Transactions The information set forth under the caption "Election of Directors-- Compensation Committee Interlocks and Insider Participation" and "--Other Information" in the Proxy Statement is incorporated herein by reference. 23 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)(1) Financial Statements.
Item Page ---- ---- Independent Auditors' Report........................................... F-1 Consolidated Balance Sheets at September 30, 1999 and 1998............. F-2 Consolidated Statements of Operations for the years ended September 30, 1999 and 1998, the six months ended September 30, 1997, and the year ended March 31, 1997.................................................. F-3 Consolidated Statements of Changes in Shareholders' Equity for the years ended September 30, 1999 and 1998, the six months ended September 30, 1997 and the year ended March 31, 1997.................. F-4 Consolidated Statements of Cash Flow for the years ended September 30, 1999 and 1998, six months ended September 30, 1997, and the year ended March 31, 1997........................................................ F-5 Notes to Consolidated Financial Statements............................. F-6
(a)(2) Financial Statement Schedules. All schedules and other statements for which provision is made in the applicable regulations of the Commission have been omitted because they are not required under the relevant instructions or are inapplicable. (a)(3) Exhibits. Asterisk indicates exhibit previously filed with the Commission and incorporated herein by reference as indicated. *3(a) --Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3(b) to the Company's Registration Statement on Form S-4 (Registration No. 33-20959)). *3(b) --Articles of Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998 (File No. 1-10307)). *3(c) --Statement of Resolution establishing Series of Shares designated Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 (File No. 1-10307) (the "1990 Form 10-K")). *3(d) --Statement of Resolution increasing number of shares designated Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1990 (File No. 1-10307)). *3(e)(1) --Rights Agreement dated as of September 14, 1989 between the Company and The Bank of New York, as Rights Agent (incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated September 21, 1989 (File No. 1-10307)). *3(e)(2) --Amendment to Rights Agreement dated as of January 27, 1995 (incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated January 27, 1995 (File No. 1-10307)). *3(e)(3) --Amendment to Rights Agreement dated December 11, 1998 (incorporated by reference to Exhibit 3(e)(3) to the Company's Annual Report on Form 10-K for the year ended September 30, 1998 (the "1998 Form 10-K")). *3(f) --By-Laws of the Company (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended March 31, 1989 (File No. 0-16674) (the "1989 Form 10-K")). *3(g)(1) --Investor Agreement dated August 29, 1996 by and among the Company, Greencore Group plc and Earlsfort Holdings B.V. (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated September 5, 1996 (File No. 1-10307) (the "September 5, 1996 Form 8-K")).
24 *3(g)(2) --Registration Rights Agreement dated August 29, 1996 by and among the Company, Greencore Group plc and Earlsfort Holdings B.V. (incorporated by reference to Exhibit 4.2 to the September 5, 1996 Form 8-K). *3(g)(3) --Amendment to Investor Agreement and Registration Rights Agreement dated November 19, 1998 by and among the Company, Greencore Group plc and Earlsfort Holdings B.V. (incorporated by reference to Exhibit 3(g)(3) to the 1998 Form 10-K). *3(h)(1) --Agreement and Plan of Merger, dated September 12, 1997, among Imperial Holly Corporation, IHK Merger Sub Corporation and Savannah Foods & Industries, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-4 (Registration No. 333-40445) (the "Savannah S-4")). *3(h)(2) --Agreement and Plan of Merger, dated September 4, 1998, as amended by amendment dated as of October 22, 1998, among Imperial Holly Corporation, IHK Acquisition Corp. and DSLT Inc. (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K dated November 2, 1998). *4(a)(1) --Amended and Restated Credit Agreement dated as of December 22, 1997 among Imperial Holly Corporation, as Borrower, the Several Lenders from time to time Parties thereto, Lehman Brothers, Inc., as Arranger, Lehman Brothers Commercial Paper, Inc., as Syndication Agent and Harris Trust and Savings Bank, as Administrative and Collateral Agent (incorporated by reference to Exhibit 4(a)(2) to the Company's Registration Statement on Form S-4 (Registration No. 333-44955)(the "Exchange Offer S-4")). *4(a)(2) --First Amendment to the Company's Amended and Restated Credit Agreement dated March 31, 1998 (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1999 (File No 1-10307) (the "June 1999 Form 10-Q")). *4(a)(3) --Second Amendment to the Company's Amended and Restated Credit Agreement dated September 28, 1998 (incorporated by reference to Exhibit 4.2 to the June 1999 Form 10-Q). *4(a)(4) --Third Amendment to the Company's Amended and Restated Credit Agreement dated June 30, 1999 (incorporated by reference to the Company's Current Report on Form 8-K dated June 30, 1999 (File No 1-10307) (the "June 1999 Form 8-K")). 4(a)(5) --Fourth Amendment to the Company's Amended and Restated Credit Agreement dated November 18, 1999. *4(a)(6) --Amended and Restated Guarantee and Collateral Agreement dated, as of December 22, 1997, made by Imperial Holly Corporation and certain of its Subsidiaries in favor of Harris Trust and Savings Bank, as Collateral Agent (incorporated by reference to Exhibit 4(a)(2) to the Exchange Offer S-4). *4(b)(1) --Indenture dated as of December 22, 1997 between the Company, certain subsidiaries of the Company and The Bank of New York, as Trustee, relating to the Company's 9-3/4% Senior Subordinated Notes due 2007 (including form of 9-3/4% Senior Subordinated Note due 2007 and form of Subsidiary Guarantee) (incorporated by reference to Exhibit 4(b) to the Exchange Offer S-4)). The Company is a party to several debt instruments under which the total amount of securities authorized does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, the Company agrees to furnish a copy of such instruments to the Commission upon request. Exhibits 10(a) through 10(l) relate to management contracts or compensatory plans. *10(a) --Imperial Holly Corporation Stock Incentive Plan (as amended and restated effective May 1, 1997) (incorporated by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 1-10307) (the "1997 Form 10-K")).
25 *10(b)(1) --Specimen of the Company's Employment Agreement for certain of its officers (incorporated by reference to exhibit 10(b)(1) to the 1998 Form 10-K). 10(b)(2) --Schedule of Employment Agreements. *10(b)(3) --Employment Agreement with W. W. Sprague III dated as of December 23, 1997 (incorporated by reference to exhibit 10(b)(3) to the 1998 Form 10-K). *10(c)(1) --Specimen of the Company's Severance Pay Agreements for certain of its officers (incorporated by reference to Exhibit 10.2 to the September 1990 Form 10-Q). 10(c)(2) --First Amendment to Severance Pay Agreements. 10(c)(3) --Schedule of Severance Pay Agreements. *10(d)(1) --Imperial Holly Corporation Salary Continuation Plan (as amended and restated effective August 1, 1994) (incorporated by reference to Exhibit 10(b)(1) to the September 1994 Form 10-Q). 10(d)(2) --First Amendment to the Imperial Holly Corporation Salary Continuation Agreement. *10(d)(3) --Specimen of the Company's Salary Continuation Agreement (Fully Vested) (incorporated by reference to Exhibit 10(b)(2) to the September 1994 Form 10-Q). *10(d)(4) --Specimen of the Company's Salary Continuation Agreement (Graduated Vesting) (incorporated by reference to Exhibit 10(b)(3) to the September 1994 Form 10-Q). *10(d)(5) --Schedule of Salary Continuation Agreements (incorporated by reference to Exhibit 10(d)(4) to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 (File No. 1-10307) (the "1996 Form 10-K")). *10(e)(1) --Imperial Holly Corporation Benefit Restoration Plan (as amended and restated effective August 1, 1994) (incorporated by reference to Exhibit 10(c)(1) to the September 1994 Form 10-Q). *10(e)(2) --Specimen of the Company's Benefit Restoration Agreement (Fully Vested) (incorporated by reference to Exhibit 10(c)(2) to the September 1994 Form 10-Q). *10(e)(3) --Specimen of the Company's Benefit Restoration Agreement (Graduated Vesting) (incorporated by reference to Exhibit 10(c)(3) to the September 1994 Form 10-Q). *10(e)(4) --Schedule of Benefit Restoration Agreements (incorporated by reference to Exhibit 10(e)(4) to the 1996 Form 10-K). *10(f)(1) --Imperial Holly Corporation Executive Benefits Trust (incorporated by reference to Exhibit 10.5 to the September 1990 Form 10-Q). *10(f)(2) --First Amendment to the Company's Executive Benefits Trust dated June 4, 1991 (incorporated by reference to Exhibit 10(g)(2) to the 1994 Form 10-K). *10(g) --Imperial Holly Corporation 1989 Nonemployee Director Stock Option Plan (incorporated by reference to Exhibit A to the Company's Proxy Statement dated June 16, 1989 for the 1989 Annual Meeting of Shareholders, File No. 0-16674). *10(h) --Imperial Holly Corporation Retirement Plan For Nonemployee Directors (incorporated by reference to Exhibit 10(j) to the 1994 Form 10-K). *10(i)(1) --Specimen of the Company's Change of Control Agreement (incorporated by reference to Exhibit 10(d)(1) to the September 1994 Form 10-Q). 10(i)(2) --Schedule of Change of Control Agreements. *10(j) --Independent Consultant Agreement between I. H. Kempner III and the Company (incorporated by reference to Exhibit 10(k) to the 1996 Form 10-K). *10(k) --Specimen of the Company's Restricted Stock Agreement with certain of its officers (incorporated by reference to Exhibit 10(k) to the 1997 Form 10-K).
26 *10(l) --Schedule of Restricted Stock Agreements (incorporated by reference to Exhibit 10(l) to the 1997 Form 10-K). *10(m) --Agreement of Limited Partnership of ChartCo Terminal, L.P. (incorporated by reference to Exhibit 10(j) to the 1990 Form 10-K). *10(n)(1) --Receivables Purchase Agreement dated as of June 30, 1999 between the Company, Imperial Securitization Corporation, Imperial Distributing, Inc., Fairway Finance Corporation and Nesbitt Burns Securities, Inc. (incorporated by reference to Exhibit 10.1 to the June 1999 Form 8-K). 10(n)(2) --First Amendment to Receivables Purchase Agreement. *10(o) --Purchase and Contribution Agreement dated as of June 30, 1999 between the Originators named therein, Imperial Securitization Corporation and Imperial Distributing, Inc. (incorporated by reference to Exhibit 10.2 to the June 1999 Form 8-K). 21 --Subsidiaries of the Company. 23 --Independent Auditors' Consent. 27 --Financial Data Schedule.
(b) Reports on Form 8-K. On July 16, 1999, the Company filed a Current Report on Form 8-K dated as of June 30, 1999. 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on December 13, 1999. Imperial Sugar Company /s/ James C. Kempner By___________________________________ James C. Kempner President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on December 13, 1999.
Signature Capacity --------- -------- /s/ James C. Kempner President, Chief Executive Officer, and - ------------------------------------ Director (Principal Executive Officer) James C. Kempner /s/ Mark Q. Huggins Managing Director and Chief Financial - ------------------------------------ Officer (Principal Financial Officer) Mark Q. Huggins /s/ H. P. Mechler Vice President, Accounting - ------------------------------------ (Principal Accounting Officer) H. P. Mechler /s/ I. H. Kempner, III Chairman of the Board of Directors - ------------------------------------ I. H. Kempner, III /s/ John D. Curtin, Jr. Director - ------------------------------------ John D. Curtin, Jr. /s/ David J. Dilger Director - ------------------------------------ David J. Dilger /s/ Edward O. Gaylord Director - ------------------------------------ Edward O. Gaylord /s/ Gerald Grinstein Director - ------------------------------------ Gerald Grinstein /s/ Ann O. Hamilton Director - ------------------------------------ Ann O. Hamilton
28
Signature Capacity --------- -------- /s/ Robert L. Harrison Director - ------------------------------------ Robert L. Harrison /s/ Harris L. Kempner, Jr. Director - ------------------------------------ Harris L. Kempner, Jr. /s/ Henry E. Lentz Director - ------------------------------------ Henry E. Lentz /s/ Kevin C. O'Sullivan Director - ------------------------------------ Kevin C. O'Sullivan /s/ Fayez Sarofim Director - ------------------------------------ Fayez Sarofim /s/ Daniel K. Thorne Director - ------------------------------------ Daniel K. Thorne
29 INDEPENDENT AUDITORS' REPORT Imperial Sugar Company: We have audited the accompanying consolidated financial statements of Imperial Sugar Company and subsidiaries (the "Company"), listed in Item 14(a)(1). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at September 30, 1999 and 1998 and the results of its operations and its cash flows for the years ended September 30, 1999 and 1998, the six-month transition period ended September 30, 1997 and for the year ended March 31, 1997 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Houston, Texas November 30, 1999 F-1 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 1999 ---------------------- 1999 1998 ---------- ---------- (In Thousands of Dollars) ASSETS CURRENT ASSETS: Cash and temporary investments............................ $ 7,925 $ 2,877 Marketable securities..................................... 65,496 59,478 Accounts receivable--trade................................ 64,458 139,870 Inventories: Finished products....................................... 157,869 142,886 Raw and in-process materials............................ 61,299 25,869 Supplies................................................ 39,896 36,174 Deferred costs & prepaid expenses......................... 43,461 39,135 ---------- ---------- Total current assets.................................. 440,404 446,289 OTHER INVESTMENTS........................................... 5,009 20,872 PROPERTY, PLANT AND EQUIPMENT--Net.......................... 402,364 398,193 GOODWILL AND OTHER INTANGIBLES--Net of accumulated amortization of $18,319,000 in 1999 and $7,327,000 in 1998....................................................... 402,459 279,410 OTHER ASSETS................................................ 30,547 35,036 ---------- ---------- TOTAL................................................. $1,280,783 $1,179,800 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable--trade................................... $ 141,428 $ 106,041 Short-term borrowings..................................... 1,611 1,161 Current maturities of long-term debt...................... 12,114 7,555 Deferred income taxes--net................................ 21,347 27,586 Other current liabilities................................. 61,815 43,717 ---------- ---------- Total current liabilities............................. 238,315 186,060 ---------- ---------- LONG-TERM DEBT--Net of current maturities................... 553,577 525,893 DEFERRED INCOME TAXES--Net.................................. 32,481 33,781 DEFERRED EMPLOYEE BENEFITS AND OTHER CREDITS................ 82,986 81,159 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, without par value, issuable in series; 5,000,000 shares authorized, none issued................. -- -- Common stock, without par value; 50,000,000 shares authorized............................................... 309,847 268,804 Stock held by benefit trust............................... (8,208) (14,367) Treasury stock............................................ (7,611) (1,452) Retained earnings......................................... 58,191 80,150 Unrealized securities gains--net of income taxes.......... 21,205 19,772 ---------- ---------- Total shareholders' equity............................ 373,424 352,907 ---------- ---------- TOTAL................................................. $1,280,783 $1,179,800 ========== ==========
See notes to consolidated financial statements. F-2 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended September 30, Six Months Ended Year Ended ---------------------- September 30, March 31, 1999 1998 1997 1997 ---------- ---------- ---------------- ---------- (In Thousands of Dollars, Except Share and Per Share Amounts) NET SALES................ $1,888,630 $1,783,091 $ 406,682 $ 752,595 ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Cost of sales.......... 1,714,020 1,614,752 348,869 651,677 Selling, general and administrative........ 75,434 65,358 30,668 57,722 Asset impairment and other charges (Note 13)............. -- 18,287 -- -- Depreciation and amortization.......... 51,272 45,755 6,786 14,773 ---------- ---------- ---------- ---------- Total................ 1,840,726 1,744,152 386,323 724,172 ---------- ---------- ---------- ---------- OPERATING INCOME......... 47,904 38,939 20,359 28,423 INTEREST EXPENSE--Net.... (59,071) (48,718) (5,301) (12,430) REALIZED SECURITIES GAINS--Net.............. 4,697 2,181 11 426 LOSS ON EQUITY INVESTMENT IN PARTNERSHIP (Note 13)..................... (16,706) -- -- -- OTHER INCOME--Net........ 1,598 6,386 724 1,269 ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST....... (21,578) (1,212) 15,793 17,688 PROVISION (CREDIT) FOR INCOME TAXES............ (3,454) 2,857 5,842 6,170 MINORITY INTEREST IN EARNINGS OF SAVANNAH.... -- 1,766 -- -- ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM...... (18,124) (5,835) 9,951 11,518 EXTRAORDINARY ITEM--Net of tax.................. -- (1,999) -- -- ---------- ---------- ---------- ---------- NET INCOME (LOSS)........ $ (18,124) $ (7,834) $ 9,951 $ 11,518 ========== ========== ========== ========== BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK: Income (loss) before extraordinary item.... $ (0.57) $ (0.24) $ 0.70 $ 0.92 Net income (loss)...... $ (0.57) $ (0.32) $ 0.70 $ 0.92 DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK: Income (loss) before extraordinary item.... $ (0.57) $ (0.24) $ 0.69 $ 0.90 Net income (loss)...... $ (0.57) $ (0.32) $ 0.69 $ 0.90 WEIGHTED AVERAGE SHARES OUTSTANDING............. 31,712,602 24,177,762 14,247,193 12,576,489 ========== ========== ========== ==========
See notes to consolidated financial statements. F-3 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Shares of Common Stock Common Stock ------------------------------- --------------------------- Accumulated Held by Held by Other Benefit Treasury Benefit Treasury Retained Comprehensive Issued Trust Stock Amount Trust Stock Earnings Income Total ---------- ---------- -------- -------- -------- -------- -------- ------------- -------- (In Thousands of Dollars) BALANCE MARCH 31, 1996.. 10,312,507 -- -- $ 32,276 -- -- $69,829 $ 8,938 $111,043 Comprehensive income: Net income............. -- -- -- -- -- -- 11,518 -- 11,518 Change in unrealized securities gains--net of $2,181,000 tax..... -- -- -- -- -- -- -- 4,051 4,051 -------- Total comprehensive income................ 15,569 Employee stock plans... 23,928 -- -- 262 -- -- -- -- 262 Nonemployee director compensation plan..... 21,760 -- -- 301 -- -- -- -- 301 Sale of common stock... 3,800,000 -- -- 49,781 -- -- -- -- 49,781 ---------- ---------- -------- -------- -------- ------- ------- ------- -------- BALANCE MARCH 31, 1997.. 14,158,195 -- -- 82,620 -- -- 81,347 12,989 176,956 Comprehensive income: Net income............. -- -- -- -- -- -- 9,951 -- 9,951 Change in unrealized securities gains--net of $2,904,000 tax..... -- -- -- -- -- -- -- 5,393 5,393 -------- Total comprehensive income................ 15,344 Cash dividends ($0.03 per share)............ -- -- -- -- -- -- (428) -- (428) Employee stock plans... 100,920 -- -- 786 -- -- -- -- 786 Nonemployee director compensation plan..... 24,660 -- -- 301 -- -- -- -- 301 ---------- ---------- -------- -------- -------- ------- ------- ------- -------- BALANCE SEPTEMBER 30, 1997................... 14,283,775 -- -- 83,707 -- -- 90,870 18,382 192,959 Comprehensive income: Net loss............... -- -- -- -- -- -- (7,834) -- (7,834) Change in unrealized securities gains--net of $748,000 tax....... -- -- -- -- -- -- -- 1,390 1,390 -------- Total comprehensive income................ (6,444) Cash dividends ($0.12 per share)............ -- -- -- -- -- -- (2,886) -- (2,886) Stock issued in acquisition........... 13,176,193 (814,810) -- 174,584 $(10,796) -- -- -- 163,788 Sale of common stock... 377,358 -- -- 5,000 -- -- -- -- 5,000 Stock sold to benefit trust................. 505,440 (505,440) -- 5,023 (5,023) -- -- -- -- Stock transferred from benefit trust......... -- 121,197 (121,197) -- 1,452 $(1,452) -- -- -- Employee stock plans... 25,938 -- -- 325 -- -- -- -- 325 Nonemployee director compensation plan..... 17,287 -- -- 165 -- -- -- -- 165 ---------- ---------- -------- -------- -------- ------- ------- ------- -------- BALANCE September 30, 1998................... 28,385,991 (1,199,053) (121,197) 268,804 (14,367) (1,452) 80,150 19,772 352,907 Comprehensive income: Net loss............... -- -- -- -- -- -- (18,124) -- (18,124) Change in unrealized securities gains--net of $769,000 tax....... -- -- -- -- -- -- -- 1,433 1,433 -------- Total comprehensive income................ (16,691) Cash dividends ($0.12 per share)............ -- -- -- -- -- -- (3,835) -- (3,835) Stock issued in acquisition........... 5,006,770 -- -- 40,054 -- -- -- -- 40,054 Stock transferred from benefit trust......... -- 514,082 (514,082) -- 6,159 (6,159) -- -- -- Employee stock plans... 91,629 -- -- 658 -- -- -- -- 658 Nonemployee director compensation plan..... 39,776 -- -- 331 -- -- -- 331 ---------- ---------- -------- -------- -------- ------- ------- ------- -------- BALANCE September 30, 1999................... 33,524,166 (684,971) (635,279) $309,847 $ (8,208) $(7,611) $58,191 $21,205 $373,424 ========== ========== ======== ======== ======== ======= ======= ======= ========
See notes to consolidated financial statements. F-4 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW
Year Ended September 30, Six Months Ended Year Ended ------------------ September 30, March 31, 1999 1998 1997 1997 -------- -------- ---------------- ---------- (In Thousands of Dollars) OPERATING ACTIVITIES: Net income (loss)............ $(18,124) $ (7,834) $ 9,951 $11,518 Adjustments for noncash and nonoperating items: Loss on equity investment in partnership................ 16,706 -- Extraordinary item--net..... -- 1,999 -- -- Minority interest in earnings of Savannah....... -- 1,766 -- -- Impairment loss............. -- 12,538 -- -- Depreciation & amortization............... 51,272 45,755 6,786 14,773 Deferred income taxes....... (727) (2,579) 5,155 5,760 Other....................... (2,706) 470 369 1,164 Changes in operating assets and liabilities (excluding operating assets and liabilities acquired in the purchase acquisitions): Accounts receivables-- trade...................... 84,619 (9,077) (6,601) (10,172) Inventories................. (40,245) 21,278 20,651 (22,564) Deferred costs and prepaid expenses................... (3,255) 8,814 (2,923) (1,105) Accounts payable--trade..... 28,387 (3,638) 11,431 (6,997) Other current liabilities... (9,736) (23,501) 1,011 (1,285) -------- -------- ------- ------- Operating cash flow.......... 106,191 45,991 45,830 (8,908) -------- -------- ------- ------- INVESTING ACTIVITIES: Acquisitions, net of cash acquired.................... (112,455) (361,218) -- (36,287) Capital expenditures......... (26,805) (42,419) (15,214) (12,322) Investment in marketable securities.................. (14,141) (10,837) (5,395) (7,044) Proceeds from sale of marketable securities....... 15,300 4,337 492 1,172 Proceeds from maturity of marketable securities....... 5,881 7,189 6,306 967 Proceeds from sale of fixed assets...................... 2,589 4,989 205 109 Other........................ 1,617 (6,108) (2,657) 1,335 -------- -------- ------- ------- Investing cash flow.......... (128,014) (404,067) (16,263) (52,070) -------- -------- ------- ------- FINANCING ACTIVITIES: Sale of common stock......... -- 5,000 -- 49,781 Short-term borrowings: Bank borrowings--net........ 450 (44,330) 34,391 4,180 CCC borrowings--advances.... 60,112 37,037 -- 93,014 CCC borrowings--repayments.. (60,112) (37,037) (53,770) (79,125) Revolving credit borrowings-- net......................... 89,100 2,400 -- -- Long-term debt: Proceeds.................... -- 523,274 -- -- Repayment................... (59,681) (132,229) (9,159) (1,595) Dividends paid............... (3,835) (2,886) (428) -- Stock option proceeds and other....................... 837 370 1,034 512 -------- -------- ------- ------- Financing cash flow.......... 26,871 351,599 (27,932) 66,767 -------- -------- ------- ------- INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS......... 5,048 (6,477) 1,635 5,789 CASH AND TEMPORARY INVESTMENTS, BEGINNING OF YEAR............. 2,877 9,354 7,719 1,930 -------- -------- ------- ------- CASH AND TEMPORARY INVESTMENTS, END OF YEAR................... $ 7,925 $ 2,877 $ 9,354 $ 7,719 ======== ======== ======= =======
See notes to consolidated financial statements. F-5 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1999, 1998 and 1997, and March 31, 1997 1. ACCOUNTING POLICIES The Company The consolidated financial statements include the accounts of Imperial Sugar Company (formerly Imperial Holly Corporation) and its majority owned subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated. The Company operates in two domestic business segments--the production and sale of refined sugar and the sale and distribution of products for the foodservice industry. The Company is significantly affected by market factors, including domestic prices for refined sugar and raw cane sugar. These market factors are influenced by a variety of external forces, including the number of domestic acres contracted to grow sugar cane and sugarbeets, prices of competing crops, weather conditions and United States farm and trade policy. Federal legislation and regulations provide for mechanisms designed to support the price of domestic sugar crops, principally through the limitations on importation of raw cane sugar for domestic consumption. In addition, agricultural conditions in the Company's growing areas may materially affect the quality and quantity of sugar beets available for purchase as well as the unit costs of raw materials and processing. A significant portion of the Company's industrial sales are made under fixed price, forward sales contracts, which extend for up to one year. The Company also contracts to purchase raw cane sugar substantially in advance of the time it delivers the refined sugar produced from the purchase. To mitigate its exposure to future price changes, the Company attempts to manage the volume of refined sugar sales contracted for future delivery and the volume of raw cane sugar contracted for future delivery, when feasible. Additionally, the Company utilizes a participatory sugarbeet purchase contract, described below, which relates the cost of sugarbeets to the net selling price realized on refined beet sugar sales. Change in Fiscal Year In October 1997, the Company changed its fiscal year end from March 31 to September 30. As used herein, the terms fiscal 1999 and fiscal 1998 refer to the twelve months ended September 30, 1999 and 1998, respectively; fiscal 1997 refers to the twelve months ended March 31, 1997. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts as well as certain disclosures. The Company's financial statements include amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates. Cash and Temporary Investments Temporary investments consist of short-term, highly liquid investments with maturities of 90 days or less at the time of purchase. Marketable Securities All of the Company's marketable securities are classified as "available for sale", and accordingly are reflected in the Consolidated Balance Sheet at fair market value, with the aggregate unrealized gain, net of related deferred tax liability, included as a separate component of comprehensive income within shareholders' equity. Cost for determining gains and losses on sales of marketable securities is determined on the FIFO method. F-6 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 Inventories Inventories are stated at the lower of cost or market. Cost of sugar is determined under the last-in, first-out ("LIFO") method. All other costs are determined under the first-in, first-out ("FIFO") method. If only the FIFO cost method had been used, inventories would have been higher by $15.7 million at September 30, 1999, $16.7 million at September 30, 1998, and $18.9 million at September 30, 1997. Reductions in inventory quantities in the six month period ended September 30, 1997 resulted in liquidations of LIFO inventory layers carried at costs prevailing in prior years. The effect of this liquidation was to increase net income by about $468,000 ($0.03 per share) in the six month period ended September 30, 1997. Sugarbeets Purchased Payments to growers for sugarbeets are based in part upon the Company's average net return for sugar sold (as defined in the participating contracts with the growers) during the grower contract years, some of which extend beyond the fiscal year end. The contracts provide for the sharing of the net selling price (gross sales price less certain marketing costs, including packaging costs, brokerage, freight expense and amortization of costs for certain facilities used in connection with marketing) with growers. Cost of sales includes an accrual for estimated additional amounts to be paid to growers based on the average net return realized to date for sugar sold in each of the contract years through the end of the fiscal year. The final cost of sugarbeets cannot be determined until the end of the contract year for each growing area. Manufacturing Costs Prior to Production Certain manufacturing costs incurred between processing periods which are necessary to prepare each factory for the next processing campaign are deferred and allocated to the cost of sugar produced in the subsequent campaign. Such amounts are included in deferred costs and prepaid expenses. Property and Depreciation Property is stated at cost and includes expenditures for renewals and improvements and capitalized interest. Maintenance and repairs are charged to current operations. When property is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts, and any gain or loss on disposition is included in income. Depreciation is provided principally on the straight-line or sum-of-the- years' digits methods over the estimated service lives of the assets. Capitalization of Computer Software The American Institute of Certified Public Accountants' Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", requires capitalization of certain internal-use computer software costs. SOP 98-1 was adopted by the Company in fiscal 1998. Interest Rate Swap Agreements The differential to be paid or received on interest rate swap agreements is accrued as interest rates change and is recognized over the life of the agreements as an increase or decrease in interest expense. The Company does not use these instruments for trading purposes, rather it uses them to hedge the impact of interest rate fluctuations on floating rate debt. F-7 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 Fair Value of Financial Instruments The fair value of financial instruments is estimated based upon market trading information, where available. Absent published market values for an instrument, management estimates fair values based upon quotations from broker/dealers or interest rate information for similar instruments. The carrying amount of cash and temporary investments, accounts receivable, accounts payable, short-term borrowings and other current liabilities approximates fair value because of the short maturity and/or frequent repricing of those instruments. Federal Income Taxes Federal income tax expense includes the current tax obligation and the change in deferred income tax liability for the period. Deferred income taxes result from temporary differences between financial and tax bases of certain assets and liabilities. Accounting Pronouncements In Fiscal 1999, the Company adopted the following new accounting pronouncements: . SFAS No. 130, "Reporting Comprehensive Income," establishes standards for reporting and display of comprehensive income. Comprehensive Income is reported in the Consolidated Statements of Changes in Shareholders' Equity. . SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," redefines how operating segments are determined and requires disclosure of certain financial and descriptive information. See Note 11. . SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," modifies the required disclosures related to pensions and other postretirement benefits. See Note 9. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which is effective for the Company's fiscal year ending September 30, 2001, requires recognition of the fair value of all derivatives as either assets or liabilities in the consolidated balance sheet. The Company will adopt this standard on October 1, 2000, and has not yet determined the impact of adoption on its consolidated financial statements. Reclassifications Certain amounts in prior years have been reclassified to be consistent with the 1999 presentation. 2. ACQUISITIONS Diamond Crystal On November 2, 1998 the Company acquired all the outstanding common stock of DSLT Inc. ("Diamond Crystal") in a merger of a wholly-owned subsidiary of the Company, with and into Diamond Crystal. Consideration for the acquisition paid at closing consisted of $79.6 million cash, 5.0 million shares of common stock and the repayment of $28.3 million of Diamond Crystal debt. The merger consideration was subject to adjustments based on an acquisition date balance sheet of Diamond Crystal and other factors. In April 1999, additional consideration of $0.6 million cash and 34,710 shares of the Company's common stock was paid based on the resolution of certain factors. The cash portion of the merger consideration was funded by borrowing under the Company's existing revolving credit agreement. F-8 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 Diamond Crystal produces nutritional dry mixes, sauces, seasonings, drink mixes and desserts for distribution to the healthcare and foodservice industries. The purchase method was used to account for the acquisition and Diamond Crystal's results of operations are included in the Company's consolidated financial statements commencing November 2, 1998. The excess of purchase price over the book value of net assets acquired ("goodwill") is being amortized over 40 years. An allocation of the aggregate purchase price of $184.6 million, including $31.9 million of liabilities assumed, has been made to current assets ($33.3 million), plant, property and equipment ($18.8 million) and goodwill ($132.0 million). Liabilities assumed include $2.7 million for the estimated costs to close two Diamond Crystal production facilities, as well as cost related to the involuntary termination of certain administrative employees. Savannah Foods During fiscal 1998, the Company acquired Savannah Foods and Industries, Inc. a Georgia based producer and marketer of sugar and related products ("Savannah Foods"), in a two step transaction. The Company completed the first step on October 17, 1997, when it accepted for payment pursuant to a tender offer shares representing 50.1% of Savannah Foods outstanding common stock for aggregate consideration of $261 million cash (the "Equity Tender"). The second step was completed December 22, 1997, when Savannah Foods was merged with a subsidiary of the Company (the "Merger"). As a result of the two step acquisition, the consolidated financial statements include a minority interest in the earnings of Savannah Foods through December 22, 1997. In consideration for the Merger, Savannah Foods' stockholders received $106 million cash and 12.4 million shares of the Company's common stock. The purchase method was used to account for the acquisition and Savannah Foods' results of operations are included in the Company's consolidated financial statements commencing October 17, 1997, net of minority interest through December 22, 1997. Purchased intangibles, which include brand related intangibles and the excess of purchase price over the book value of net assets acquired ("goodwill") are being amortized over 40 years. An allocation of the aggregate purchase price of $749.9 million, including $215.8 million of liabilities assumed, has been made to current assets ($201.8 million), plant, property and equipment ($253.0 million), other assets ($11.1 million) and intangible assets ($284.1 million). Liabilities assumed include $4.5 million for the estimated cost related to the involuntary termination of certain administrative employees. F-9 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 The following table presents unaudited, summarized pro forma operating results as if the acquisition of both Diamond Crystal and Savannah Foods and the related financing transactions had occurred on April 1, 1996, assuming effective income tax rates of 35% to 38%.
Year Ended September 30, Six Months Ended Year Ended ---------------------- September 30, March 31, 1999 1998 1997 1997 ---------- ---------- ---------------- ---------- (In Thousands of Dollars, Except Per Share Amounts) Net sales................ $1,899,714 $1,982,351 $1,080,705 $2,026,099 ---------- ---------- ---------- ---------- Cost of sales............ 1,722,788 1,774,862 925,355 1,758,597 Selling, General and Administrative.......... 76,786 90,000 71,981 134,009 Depreciation and amortization............ 51,705 51,169 25,372 50,470 Nonrecurring charges..... -- 18,287 -- 11,003 ---------- ---------- ---------- ---------- Operating income......... 48,435 48,033 57,997 72,020 Interest expense......... (59,774) (58,648) (30,299) (63,704) Loss on investment in partnership............. (16,706) -- -- -- Other income............. 6,295 9,861 671 92 ---------- ---------- ---------- ---------- Income (Loss) before income taxes............ (21,750) (754) 28,369 8,408 Provision (Benefit) for income taxes............ (3,276) 4,635 12,577 6,909 ---------- ---------- ---------- ---------- Income (Loss) before extraordinary item...... $ (18,474) $ (5,389) $ 15,792 $ 1,499 ========== ========== ========== ========== Basic earnings (loss) per share................... $ (0.57) $ (0.17) $ 0.50 $ 0.05 ========== ========== ========== ==========
Wholesome Foods In September 1998, the Company acquired Wholesome Foods, LLC for cash of $5.1 million. Wholesome is a leading supplier of organic sweeteners to the U.S. consumer and industrial markets. The purchase method was used to account for the acquisition. Pro forma effects of the acquisition are not material to the Company's consolidated results of operations. 3. INVESTMENTS Marketable securities consisted of the following (in thousands of dollars):
September 30, 1999 ------------------------------------ Gross Unrealized Fair Holding Amortized Market ------------------ Cost Value Gains Losses --------- ------- --------- -------- US Government securities maturing in 2000.................................... $ 4,273 $ 4,253 -- $ (20) Common stocks............................ 28,601 61,243 $ 33,164 (522) ------- ------- --------- ------- Total.................................. $32,874 $65,496 $ 33,164 $ (542) ======= ======= ========= =======
September 30, 1998 ------------------------------------ Gross Unrealized Fair Holding Amortized Market ------------------ Cost Value Gains Losses --------- ------- --------- -------- US Government securities maturing in 1999.................................... $ 5,906 $ 5,942 $ 36 -- Common stocks............................ 23,155 53,536 30,832 $ (451) ------- ------- --------- ------- Total.................................. $29,061 $59,478 $ 30,868 $ (451) ======= ======= ========= =======
F-10 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 Realized securities gains are reported net of realized losses of $28,000, in fiscal 1997. There were no realized securities losses during fiscal 1999, 1998 or the six months ended September 30, 1997. Other investments include the Company's royalty interest in a coal seam methane gas project, which is accounted for at amortized cost and, in 1998, its investment in Pacific Northwest Sugar Company. See Note 13. 4. SALE OF ACCOUNTS RECEIVABLE On June 30, 1999, the Company entered into a five-year receivables purchase agreement with an independent issuer of receivables-backed commercial paper. Through a wholly-owned special purpose subsidiary, Imperial Securitization Corporation ("Imperial Securitization"), the Company agreed to sell on an ongoing basis and without recourse, an undivided percentage ownership interest in designated pools of accounts receivable. To maintain the balance in the designated pools of accounts receivable sold, the Company is obligated to sell undivided percentage interests in new receivables as existing receivables are collected. The agreement permits the sale of up to $110.0 million of undivided interests in accounts receivable through June 2004. The Company records such transfers as sales of the related accounts receivable as it has surrendered control of such receivables under the provisions of SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". At September 30, 1999, the Company had sold an undivided interest in its accounts receivable to the purchaser for $105.0 million. The Company used these proceeds to pay down debt under its senior secured credit facilities. The Company's retained interest was $43.0 million; the fair value of the retained interest approximated its book value. The discount and fees under this agreement are variable based on the general level of interest rates on commercial paper and ranged from 5.03% to 5.95% during 1999 plus administrative fees typical in such transactions. These costs were approximately $1.8 million for fiscal 1999 and were included in selling, general and administrative in the accompanying Consolidated Statement of Operations. The Company receives compensation for servicing the accounts receivables that approximates its cost to provide such services. Accordingly, no servicing assets or liability is recorded. 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following (in thousands of dollars):
September 30, ----------------- 1999 1998 -------- -------- Land......................................................... $ 19,702 $ 52,355 Buildings, machinery and equipment........................... 570,527 509,412 Construction in progress..................................... 29,577 20,345 -------- -------- Total...................................................... 619,806 582,112 Less accumulated depreciation................................ 217,442 183,919 -------- -------- Property, Plant and Equipment--Net........................... $402,364 $398,193 ======== ========
F-11 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 6. SHORT-TERM BORROWINGS The Company borrows short-term from banks under various unsecured lines of credit and from the Commodity Credit Corporation ("CCC") under the USDA's price support loan program. CCC borrowings, which mature September 30 each year, are secured by refined beet sugar inventory and are recourse or nonrecourse to the Company depending upon certain regulatory conditions. CCC borrowings of up to $25 million seasonally may be made without reducing the availability of borrowings under the senior secured revolving credit facility (Note 7). Outstanding short-term borrowings at September 30, 1999 and 1998 were $1.6 million and $1.2 million, respectively. The weighted-average interest rate for the outstanding short-term borrowings was 6.35% and 6.98% for fiscal 1999 and 1998, respectively. 7. LONG-TERM DEBT Long-term debt was as follows (in thousands of dollars):
September 30, ----------------- 1999 1998 -------- -------- Senior Credit Agreement: Revolving credit facility.................................. $ 91,500 $ 2,400 Term loans................................................. 192,068 250,800 9 3/4% Senior Subordinated Notes due 2007.................... 250,000 250,000 Industrial revenue bonds..................................... 25,204 22,500 8 3/8% Senior Notes due 1999................................. 5,801 5,801 Other........................................................ 1,118 1,947 -------- -------- Total long-term debt....................................... 565,691 533,448 Less current maturities...................................... 12,114 7,555 -------- -------- Long-term debt, net.......................................... $553,577 $525,893 ======== ========
To finance the Savannah Foods acquisition, finance a tender offer for the Company's 8 3/8 Senior Notes due 1999 (the "Debt Tender") and replace the Company's existing credit facilities, the Company entered into new financing agreements consisting of an Amended and Restated Credit Agreement, dated as of December 22, 1997, most recently amended November 18, 1999, (the "Senior Credit Agreement") and issued $250 million of 9 3/4% Senior Subordinated Notes due 2007. The $95 million proceeds from the initial sale of accounts receivable during fiscal 1999 were used to repay $52 million of term loans and $43 million outstanding under the revolving credit facility, and the Senior Credit Agreement was amended to reduce the revolving credit facility's commitment amount to $157 million. The industrial revenue bonds consist of various issues at fixed and variable interest rates, ranging from 3.95% to 6.55% and have maturity dates ranging from 2005 to 2025. Except for the 9 3/4% Senior Subordinated Notes due 2007, the carrying amount of the Company's long term debt approximates fair value. The fair value of the 9 3/4% Senior Subordinated Notes at September 30, 1999 was approximately $220 million. The Senior Credit Agreement is secured by substantially all of the Company's assets. The Senior Credit Agreement and the indenture for the 9 3/4% Senior Subordinated Notes due 2007 contain restrictive covenants which may limit, among other things, the Company's ability to incur additional indebtedness, make capital expenditures and investments or pay dividends. The Company had the ability under the most restrictive of such covenants to pay $3 million of dividends as of September 30, 1999. F-12 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 Interest on borrowings under the Senior Credit Agreement is at floating rates (either a base rate plus a margin from 0.75% to 3% or a Eurodollar rate plus a margin from 1.75% to 4%). The Company has entered into interest rate swap agreements with major financial institutions to effectively fix the interest rate on $230 million under the Senior Credit Agreement at a weighted average annual rate of 8.54% as of September 30, 1999. If the Company had been required to settle the interest rate swap agreements as of September 30, 1999, the Company would receive $2.9 million. The Company is exposed to credit risk in the event of nonperformance by counterparties to its interest rate swap agreements. The Company anticipates that its counterparties will fully perform their obligations under the agreements. Aggregate maturities of long-term debt at September 30, 1999 are as follows (in thousands of dollars): Year Ending September 30: 2000.......................................................... $ 12,114 2001.......................................................... 7,865 2002.......................................................... 7,820 2003.......................................................... 175,161 2004.......................................................... 38,866 Thereafter.................................................... 323,865
In connection with the Debt Tender, 8 3/8% Senior Notes due 1999 with a principal amount of $75.4 million were purchased in October 1997, and the indenture relating to the Senior Notes was amended to, among other things, remove restrictions on the Company's ability to create liens on certain properties. The Company reported as an extraordinary item a loss of $2.0 million on such purchase, net of tax of $1.1 million. Cash paid for interest on short and long-term debt was $57.2 million for fiscal 1999, $45.2 million for fiscal 1998, $7.0 million for the six months ended September 30, 1997, and $12.0 million for fiscal year ended March 31, 1997. Interest capitalized as part of the cost of constructing assets was $.4 million for fiscal 1999, $1.2 million for fiscal 1998, and $.3 million for the six months ended September 30, 1997. Such amount was not significant in fiscal 1997. 8. INCOME TAXES The components of the consolidated income tax provision (credit), including amounts reported as an extraordinary item, were as follows (in thousands of dollars):
Year Ended September 30, Six Months Ended Year Ended ---------------- September 30, March 31, 1999 1998 1997 1997 ------- ------- ---------------- ---------- Federal: Current........................ $(3,116) $ 2,419 -- $ 20 Tax benefit of operating loss carryforward utilized (generated)................... (8,699) 3,332 $1,551 (1,762) Deferred....................... 7,972 (4,663) 3,604 7,522 State............................ 389 694 687 390 ------- ------- ------ ------- Total.......................... $(3,454) $ 1,782 $5,842 $ 6,170 ======= ======= ====== =======
F-13 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 The tax effects of temporary differences which give rise to the Company's deferred tax assets and liabilities were as follows (in thousands of dollars):
September 30, ---------------------------------------------------------- 1999 1998 ---------------------------- ---------------------------- Assets Liabilities Total Assets Liabilities Total ------- ----------- -------- ------- ----------- -------- Current: Marketable securities valuation differences.......... -- $ (11,418) $(11,418) -- $ (10,676) $(10,676) Inventory valuation differences, principally purchase accounting........... -- (13,973) (13,973) -- (15,367) (15,367) Manufacturing costs prior to production deducted currently... -- (12,004) (12,004) -- (11,361) (11,361) Accruals not currently deductible........... $ 5,437 -- 5,437 $ 6,802 -- 6,802 Alternate minimum tax differences.......... 902 -- 902 902 -- 902 Operating loss carryforward......... 8,699 -- 8,699 -- -- -- Other................. 1,010 -- 1,010 2,114 -- 2,114 ------- --------- -------- ------- --------- -------- Total current....... 16,048 (37,395) (21,347) 9,818 (37,404) (27,586) ------- --------- -------- ------- --------- -------- Noncurrent: Depreciation differences, including purchase accounting........... -- (63,268) (63,268) -- (65,678) (65,678) Accruals not currently deductible........... 24,022 -- 24,022 29,332 -- 29,332 Other................. 6,765 -- 6,765 2,565 -- 2,565 ------- --------- -------- ------- --------- -------- Total noncurrent.... 30,787 (63,268) (32,481) 31,897 (65,678) (33,781) ------- --------- -------- ------- --------- -------- Total............. $46,835 $(100,663) $(53,828) $41,715 $(103,082) $(61,367) ======= ========= ======== ======= ========= ========
The consolidated income tax provision is different from the amount which would be provided by applying the statutory federal income tax rate of 35% to the Company's income before taxes (including extraordinary item). The reasons for the differences from the statutory rate are as follows (in thousands of dollars):
Year Ended September 30, Six Months Ended Year Ended ---------------- September 30, March 31, 1999 1998 1997 1997 ------- ------- ---------------- ---------- Income taxes computed at the statutory federal rate......... $(7,552) $(1,501) $5,527 $6,191 Non deductible goodwill amortization................. 3,847 2,424 -- -- Non taxable interest and dividends.................... (291) (316) (121) (217) State income taxes............ 253 451 447 253 Other......................... 289 724 (11) (57) ------- ------- ------ ------ Total....................... $(3,454) $ 1,782 $5,842 $6,170 ======= ======= ====== ======
Income taxes paid were $1.0 million in fiscal 1999, $4.0 million in fiscal 1998, $1.9 million in the six months ended September 30, 1997 and $2.3 million in fiscal 1997. F-14 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 9. EMPLOYEE BENEFITS Defined Benefit Pension Plans and Postretirement Benefits Other Than Pensions Substantially all of the Company's nonseasonal employees are covered by retirement plans. Certain unionized employees are covered by an industry-wide plan, and other employees are covered by Company-sponsored defined benefit plans. Under the Company-sponsored defined benefit plans, retirement benefits are primarily a function of years of service and the employee's compensation for a defined period of employment. The Company funds pension costs at an actuarially determined amount based on normal cost and the amortization of prior service costs, gains, and losses over the remaining service periods. Additionally, the Company provides a supplemental non-qualified, unfunded pension plan for certain officers whose benefits under the qualified plan are limited by federal tax law. The Company provides a non-qualified retirement plan for non-employee directors, which provides benefits based upon years of service as a director and the retainer in effect at the date of a director's retirement. Certain of the Company's subsidiaries sponsor benefit plans that provide postretirement health care and life insurance benefits to certain employees who meet the applicable eligibility requirements. The following table presents the benefit obligation, changes in plan assets, the funded status of the pension plans and the assumptions used (in thousands of dollars):
Postretirement Benefits Pension Benefits Other Than Pensions ------------------ ------------------------ Year Ended Year Ended September 30, September 30, ------------------ ------------------------ 1999 1998 1999 1998 -------- -------- ----------- ----------- Change in benefit obligation: Benefit obligation at beginning of year....................... $220,998 $ 82,880 $ 37,029 Acquisition.................... 8,342 113,062 3,712 $ 29,474 Service cost................... 5,956 4,899 370 149 Interest cost.................. 15,034 14,304 2,642 2,127 Amendments..................... 3,382 1,152 Actuarial (gain)/loss.......... (16,463) 15,352 (3,679) 7,365 Curtailment loss............... (89) Expenses paid.................. (1,527) (1,333) Benefits paid.................. (14,182) (9,229) (1,948) (2,086) -------- -------- ----------- ----------- Benefits obligation at end of year.......................... 221,540 220,998 38,126 37,029 ======== ======== =========== =========== Change in plan assets: Fair value of plan assets at beginning of year............. 230,000 104,153 Acquisition.................... 7,443 100,537 Actual return on plan assets... 24,297 33,566 Employer contribution.......... 2,405 2,306 1,948 2,086 Expenses paid.................. (1,580) (1,333) Benefits paid.................. (14,182) (9,229) (1,948) (2,086) -------- -------- ----------- ----------- Fair value of plan assets at end of year................... 248,383 230,000 ======== ======== =========== =========== Funded status.................... 26,843 9,002 (38,128) (37,029) Unrecognized actuarial (gain)/loss..................... (47,739) (30,946) 4,689 7,365 Unrecognized prior service cost.. 7,280 4,574 Unrecognized net transition obligation (asset).............. (1,113) 105 Amount contributed............... 518 1,500 571 -------- -------- ----------- ----------- Net amount recognized............ $(14,211) $(15,765) $ (32,868) $ (29,664) ======== ======== =========== ===========
F-15 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997
Postretirement Benefits Pension Benefits Other Than Pensions ------------------ ------------------------ September 30, September 30, ------------------ ------------------------ 1999 1998 1999 1998 -------- -------- ----------- ----------- Amounts recognized in the statement of financial position consist of: Accrued benefit liability..... $(16,074) $(17,941) $ (32,868) $ (29,664) Intangible asset.............. 1,863 2,176 -- -- -------- -------- ----------- ----------- Net amount recognized........... $(14,211) $(15,765) $ (32,868) $ (29,664) ======== ======== =========== ===========
The assumptions used and the annual cost related to these plans consist of the following:
Year Ended September 30, Six Months Ended Year Ended ------------------ September 30, March 31, Pension Benefits 1999 1998 1997 1997 - ---------------- -------- -------- ---------------- ---------- Weighted-average assumptions: Discount rate................ 7.5% 6.75% 7.5% 8.0% Expected return on plan assets...................... 9.0% 9.0% 8.0% 8.0% Rate of compensation increase.................... 4.5-5.0% 4.5-5.0% 5.0% 5.0% Components of net periodic benefit cost: Service Cost................. $ 5,956 $ 4,899 $ 1,359 $ 2,756 Interest cost................ 15,034 14,304 2,927 5,883 Expected return on plan assets...................... (20,827) (18,070) (3,408) (5,842) Amortization of prior service cost........................ 580 499 118 313 Amortization of transition (asset)/obligation.......... 103 236 (266) 236 Recognized actuarial (gain)/loss................. (1,972) (1,691) 250 (27) -------- -------- ------- ------- Net periodic benefit cost...... (1,126) 177 980 3,319 Curtailment effect recognized.. 96 20 -- -- -------- -------- ------- ------- Total net periodic benefit cost-- Company-sponsored plans....... (1,030) 197 980 3,319 Industry-wide plan for certain unionized employees........... 467 479 212 432 -------- -------- ------- ------- Total pension cost........... $ (563) $ 676 $ 1,192 $ 3,751 ======== ======== ======= ======= Year Ended September 30, ------------------ Postretirement Benefits Other Than Pensions 1999 1998 - ----------------------------- -------- -------- Weighted-average assumptions: Discount rate................ 7.5% 6.75% Components of net periodic benefit cost: Service Cost................. $ 370 $ 149 Interest cost................ 2,642 2,127 Recognized actuarial (gain)/loss................. 229 Amortization of net transition obligation (asset)..................... 65 -------- -------- Net periodic benefit cost...... $ 3,306 $ 2,276 ======== ========
F-16 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $21.4 million, $19.1 million, and $.6 million as of September 30, 1999 and $33.5 million, $30.1 million, and $14.3 million as of September 30, 1998. The assumed health care cost trend rate used in measuring the accumulated benefit obligation for postretirement benefits other than pensions as of September 30, 1999 was 6.0% to 10.9% for 2000. The rate was assumed to decrease gradually to 5.0% to 6.0% for 2008 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
1-Percentage 1-Percentage Point Increase Point Decrease -------------- -------------- (in thousands of dollars) Effect on total service and interest Cost components..................................... $ 165 $ (155) Effect on postretirement benefit Obligation..... 4,536 (3,791)
401(k) Plans Substantially all of the employees may elect to defer up to 15% of their annual compensation in the Company sponsored 401(k) tax deferred savings plans. The Company makes matching contributions in some of these plans. The amounts charged to expense for each of the periods presented for these plans were not significant. Employee Stock Purchase Plan In July 1993, the shareholders approved an amended and restated employee stock purchase plan and reserved 1.0 million shares of common stock. The plan provides substantially all year-round employees the option to purchase shares of common stock either through open market purchases at market value or directly from the Company at 85% of market value. The amounts charged to compensation expense for each of the periods presented for the discount on shares purchased under the latter alternative were not significant. F-17 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 10. SHAREHOLDERS' EQUITY Earnings per Share The following table presents information necessary to calculate basic and diluted earnings per share.
Year Ended September 30, Six Months Ended Year Ended ---------------------- September 30, March 31, 1999 1998 1997 1997 ---------- ---------- ---------------- ---------- (In Thousands of Dollars, Except per Share Amounts) Earnings for basic and diluted computation: Income (loss) before extraordinary item...... $ (18,124) $ (5,835) $ 9,951 $ 11,518 Adjustments--None...... -- -- -- -- ---------- ---------- ---------- ---------- Adjusted income (loss) before extraordinary item.................... $ (18,124) $ (5,835) $ 9,951 $ 11,518 ========== ========== ========== ========== Net income (loss)........ $ (18,124) $ (7,834) $ 9,951 $ 11,518 Adjustments--None...... -- -- -- -- ---------- ---------- ---------- ---------- Adjusted net income (loss).................. $ (18,124) $ (7,834) $ 9,951 $ 11,518 ========== ========== ========== ========== Basic earnings per share: Weighted average shares outstanding............. 31,712,602 24,177,762 14,247,193 12,576,489 ========== ========== ========== ========== Income (loss) per share before extraordinary item.................... $ (0.57) $ (0.24) $ 0.70 $ 0.92 ========== ========== ========== ========== Net income (loss) per share................... $ (0.57) $ (0.32) $ 0.70 $ 0.92 ========== ========== ========== ========== Diluted earnings per share: Weighted average shares outstanding............. 31,712,602 24,177,762 14,247,193 12,576,489 Incremental shares issuable from assumed exercise of stock options under the treasury stock method (1)..................... -- -- 137,896 151,013 ---------- ---------- ---------- ---------- Weighed average shares outstanding --as adjusted................ 31,712,602 24,177,762 14,385,089 12,727,502 ========== ========== ========== ========== Income (loss) per share before extraordinary item.................... $ (0.57) $ (0.24) $ 0.69 $ 0.90 ========== ========== ========== ========== Net income (loss) per share................... $ (0.57) $ (0.32) $ 0.69 $ 0.90 ========== ========== ========== ==========
- -------- (1) Since the Company incurred a loss for fiscal 1999 and 1998, certain dilutive securities were excluded as they would be anti-dilutive to basic EPS. Securities excluded from the computation of diluted EPS for the year ended September 30, 1999 that could potentially dilute basic EPS in the future were options to purchase 1,854,000 shares to be issued under the Company's employee stock incentive plan and 3,000 shares to be issued under the nonemployee director stock option plan. The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation" in fiscal 1997. As permitted by SFAS No. 123, the Company measures compensation cost using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." F-18 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 The Company's reported net income and earnings per share would have been reduced had compensation cost for the Company's stock-based compensation plans been determined using the fair value method of accounting as set forth in SFAS No. 123. For purposes of estimating the fair value disclosures below, the fair value of each stock option has been estimated on the grant date with a Black- Scholes option-pricing model using the following weighted-average assumptions: expected volatility of 38% to 42%; risk-free interest rate of 5.49% to 7.06%; and expected lives of 7 to 10 years. The effects of using the fair value method of accounting on net income and earnings per share are indicated in the unaudited pro forma amounts below (in thousands of dollars, except per share amounts):
Year Ended Six Months September 30, Ended Year Ended ----------------- September 30, March 31, 1999 1998 1997 1997 -------- ------- ------------- ---------- Income (loss) before extraordinary item As reported..................... $(18,124) $(5,835) $9,951 $11,518 Pro forma....................... (19,265) (6,725) 9,839 11,351 Net income (loss) As reported..................... (18,124) (7,834) $9,951 $11,518 Pro forma....................... (19,265) (8,724) 9,839 11,351 Basic earnings per share: Income (loss) before extraordinary item As reported..................... $ (0.57) $ (0.24) $ 0.70 $ 0.92 Pro forma....................... (0.61) (0.28) 0.69 0.90 Net Income (loss) As reported..................... $ (0.57) $ (0.32) $ 0.70 $ 0.92 Pro forma....................... (0.61) (0.36) 0.69 0.90
Shareholder Rights Plan In 1989, the Board of Directors declared a dividend of one Right for each outstanding share of the Company's common stock. Certain terms of the rights were amended in January 1995. Each of the Rights, which are currently attached to the common stock, entitle the holder to purchase two three-hundredths of a share of a new series of Junior Participating Preferred Stock (219,259 in total as of September 30, 1999) at a price of $60 (subject to adjustment). The Rights are not exercisable until the earlier of ten days after the public announcement that a person or group has acquired 15% or more (25% or more for persons who were 10% shareholders on January 27, 1995) of the Company's outstanding common stock (an "Acquiring Person") or ten business days after the commencement of a tender offer to acquire such an interest. Under certain circumstances, the Rights, other than the Rights held by the Acquiring Person, will become exercisable for common stock of the Company (or an acquirer) with a market value equal to two times the exercise price of the Right. The Rights are redeemable, at 2/3 cents per Right, at any time prior to a person becoming an Acquiring Person. The Rights will expire on October 31, 2007. In connection with the sale of common stock to Greencore Group plc ("Greencore") in 1996, the Board of Directors took action under the Shareholder Rights Plan to increase the ownership percentage that would trigger the plan with respect to Greencore to 30% during the term of the Investor Agreement between Greencore and the Company (not more than 5 years). Thereafter, the trigger level would be increased to 35%, until such time as Greencore's investment falls below 15%, at which time the trigger level becomes 15%. Greencore had the right to designate two nominees for election as directors of the Company. During the term of the Investor Agreement, F-19 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 Greencore will be required to vote for the director nominees recommended by the Board of Directors. During the term of the Investor Agreement, Greencore is also subject to restrictions relative to certain actions regarding the Company. Stock Incentive Plan The shareholders have approved the Imperial Holly Corporation Stock Incentive Plan, and have reserved for issuance 3.6 million shares of common stock. The plan provides for the granting of incentive awards in the form of stock options, stock appreciation rights (SARs), restricted stock, performance units and performance shares at the discretion of the Executive Compensation Committee of the Board of Directors. Stock options have an exercise price equal to the fair market value of the shares of common stock at date of grant, become exercisable in annual increments for up to five years commencing one year after date of grant, and expire not more than ten years from date of grant. Stock option activity in the plan was as follows:
Year Ended Year Ended September 30, 1999 September 30, 1999 ------------------------- ------------------------- Weighted- Weighted- Average Average Exercise Price Exercise Price Options per Share Options per Share --------- -------------- --------- -------------- Beginning Balance......... 1,980,504 $ 9.63 582,895 $10.33 Granted................... 256,500 6.49 1,492,827 9.40 Expired................... (293,644) 11.47 (80,049) 11.25 Exercised................. (89,225) 6.44 (15,169) 7.60 --------- --------- Balance, September 30..... 1,854,135 9.04 1,980,504 9.63 ========= ========= Exercisable as of September 30............. 613,034 9.44 435,726 10.09 ========= ========= Six Months Ended Year Ended March 31, September 30, 1997 1997 ------------------------- ------------------------- Weighted- Weighted- Average Average Exercise Price Exercise Price Options per Share Options per Share --------- -------------- --------- -------------- Beginning Balance......... 614,327 $10.39 528,589 $10.03 Granted................... 9,000 11.33 141,700 12.90 Expired................... (30,800) 12.84 (41,551) 15.22 Exercised................. (9,632) 6.99 (14,411) 7.97 --------- --------- Balance, March 31......... 582,895 10.33 614,327 10.39 ========= ========= Exercisable as of March 31....................... 367,020 10.31 364,964 10.23 ========= =========
F-20 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 Options outstanding at September 30, 1999 consisted of the following:
Exercisable Options ------------------------ Weighted- Weighted- Range of Average Weighted-Average Average Exercise Prices Number of Exercise Price Remaining Number of Exercise Price per Share Options per Share Contractual Life Options per Share --------------- --------- -------------- ---------------- --------- -------------- $6.00- $8.87 507,125 $7.43 7.4 years 226,375 $8.45 $9.12- $12.25 1,266,985 9.42 8.3 years 326,890 9.44 $13.19- $15.50 80,025 13.22 6.9 years 59,769 13.21
Nonemployee Director Stock Option Plan The shareholders have approved the Nonemployee Director Stock Option Plan and have reserved 30,000 shares of common stock for issuance. The plan provides for the automatic granting to each nonemployee director of options to purchase 1,500 shares of common stock at a price equal to 50% of the fair market value at date of grant. The options become exercisable upon the completion of three years of service as a director, and expire over a two-year period from the date first exercisable. Stock option activity in the plan was as follows:
Year Ended September 30, Six Months Ended ----------------------------------- September 30, Year Ended 1999 1998 1997 March 31, 1997 ----------------- ----------------- ------------------ ----------------- Price Price Price Price Options per Share Options per Share Options per Share Options per Share ------- --------- ------- --------- ------- --------- ------- --------- Beginning Balance....... 3,000 $6.61 2,250 $7.56 4,500 $6.53 3,000 $5.88 Granted................. -- 1,500 5.38 -- -- 1,500 7.84 Expired................. -- (750) 7.00 -- -- -- Exercised............... -- -- (2,250) 5.50 -- ----- ----- ------ ----- Ending Balance.......... 3,000 6.61 3,000 6.61 2,250 7.56 4,500 6.53 ===== ===== ====== ===== Exercisable at Period End.................... -- -- 750 7.00 3,000 5.88 ===== ===== ====== =====
Options outstanding at September 30, 1999 have a range of exercise prices of $5.38 to $7.84, and a weighted-average remaining contractual life of 2.2 years. Nonemployee Director Compensation Plan In fiscal 1997, the shareholders approved the Nonemployee Director Compensation Plan which provides for the annual award of common stock to directors in lieu of their cash retainer. Shares of common stock awarded pursuant to this plan totaled 39,776 in fiscal 1999, 17,287 in fiscal 1998 and 21,760 in both the six months ended September 30, 1997 and in fiscal 1997. 11. REPORTABLE SEGMENTS The Company has identified two reportable segments: sugar and foodservice. The segments are strategic business units that offer different products to different customers. The segments are managed separately because each business requires different production technology and marketing strategies. The accounting policies of the segments are generally the same as those described in the summary of significant accounting policies. The Company accounts for intersegment sales as if the sales were to third parties, that is, at current market prices. The Company evaluates performance based on operating income of the respective business units. F-21 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 The sugar segment produces and sells refined sugar and related products. The segment's products include granulated, powdered, liquid, liquid blends and brown sugars, which are primarily sold to grocery and industrial customers and by-products from the production of refined sugar. The foodservice segment sells numerous products to foodservice customers, including healthcare institutions, ranging from 50-pound bags of sugar to individual packets of sugar, salt, pepper, non-dairy creamer and plastic cutlery, nutritional dry mixes, frozen nutritional products, sauces, seasonings, drink mixes, desserts and diet kits. Summarized financial information concerning the Company's reportable segments for the years ended 1999 and 1998 is shown in the following table. The "Corporate and Other" column includes corporate-related items and Imperial Securitization. The Company had limited activity in the foodservice segment prior to the acquisitions of Savannah Foods and Diamond Crystal in October 1997 and November 1998, respectively; the Company did not identify foodservice as a segment before fiscal 1998. It is impracticable to disclose the foodservice segment data for the six months ended September 30, 1997 and year ended March 31, 1997 on a restated segment basis.
Corporate Reconciling Sugar Foodservice and other Eliminations Consolidated ---------- ----------- --------- ------------ ------------ (Thousands of Dollars) As of and for the Year Ended September 30, 1999 - ---------------------- Revenues from external customers............ $1,490,981 $397,649 -- -- $1,888,630 Intersegment revenues............. 92,493 7,234 -- $(99,727) -- Gross margin.......... 122,327 52,283 -- -- 174,610 Depreciation and amortization......... 38,849 9,782 $ 2,641 -- 51,272 Operating income...... 35,661 14,037 (1,794) -- 47,904 Total assets.......... 870,894 247,834 162,055 -- 1,280,783 Capital expenditures.. 17,569 3,723 5,513 -- 26,805 As of and for the Year Ended September 30, 1998 - ---------------------- Revenues from external customers............ $1,529,189 $253,902 -- -- $1,783,091 Intersegment revenues............. 37,532 7,252 -- $(44,784) -- Gross margin.......... 146,931 21,408 -- -- 168,339 Depreciation and amortization......... 37,532 6,268 $ 1,955 -- 45,755 Operating income...... 33,533 5,406 -- -- 38,939 Total assets.......... 968,312 116,642 94,846 -- 1,179,800 Capital expenditures.. 35,489 872 6,058 -- 42,419
Reconciliation of operating income to net loss before income taxes, minority interest and extraordinary item (in thousands):
Year Ended September 30, -------------------------- 1999 1998 ------------ ------------ Operating income................................. $ 47,904 $ 38,939 Interest expense--net............................ (59,071) (48,718) Realized securities gains--net................... 4,697 2,181 Loss on partnership investment................... (16,706) -- Other income--net................................ 1,598 6,386 ------------ ------------ Loss before income taxes, minority interest and extraordinary item.............................. $ (21,578) $ (1,212) ============ ============
F-22 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 12. COMMITMENTS AND CONTINGENCIES The Company is party to litigation and claims which are normal in the course of its operations; while the results of such litigation and claims cannot be predicted with certainty, the Company believes the final outcome of such matters will not have a materially adverse effect on its results of operations or consolidated financial position. The Company was obligated under $26.4 million in outstanding letters of credit at September 30, 1999. The Company leases certain facilities and equipment under cancelable and noncancelable operating leases. Total rental expenses for all operating leases amounted to $6.5 million in fiscal 1999, $7.8 million in fiscal 1998, $3.6 million for the six month period ended September 30, 1997 and $5.8 million in fiscal 1997. The aggregate future minimum lease commitments under noncancelable operating leases at September 30, 1999 are summarized as follows (in thousands of dollars):
Operating Fiscal Year Ending September 30, Leases -------------------------------- --------- 2000.......................................................... $2,734 2001.......................................................... 2,365 2002.......................................................... 2,010 2003.......................................................... 1,638 2004.......................................................... 1,123 Thereafter.................................................... 3,447
The aggregate future minimum amount to be received under sub-leases was $2.0 million at September 30, 1999. 13. SUPPLEMENTARY INCOME STATEMENT INFORMATION In fiscal 1999, the Company recorded charges totaling $16.7 million to write-off its investment in Pacific Northwest Sugar Company, a partnership in which a subsidiary of the Company was a 43% limited partner. In connection with the restructuring of the partnership's debt, the Company transferred its limited partnership interest to an affiliate of the general partner. An agreement dated April 26, 1999 terminated the Company's involvement with the project and includes mutual releases among the parties. As a result of the agreement, the general partner became the sole owner of the partnership, which constructed, owns and operates a beet sugar processing facility in Moses Lake, Washington. The facility experienced substantial operating losses in its first year of operation due principally to critical equipment failures, exacerbated by warmer than normal weather during the processing campaign. The Company's share of such losses on the equity accounting method totaled approximately $10.5 million and is included in the above mentioned charge. In fiscal 1998, the Company incurred a $1.0 million charge for severance and related costs in connection with the reorganization of administrative functions after the acquisition of Savannah Foods. Substantially all such amounts were paid by September 30, 1999. Additionally, a charge of $3.8 million was recorded for the loss the Company expected to incur in fulfilling its industrial sales commitments in California at higher costs as a result of the abnormal weather experienced there during the spring months. In fiscal 1998, the Company ceased sugarbeet processing at its Hereford, Texas factory, and provided $1.0 million for the estimated cash closure costs, principally severance costs in connection with the layoff of approximately 60 employees. Substantially all such amounts were paid by September 30, 1999. The Company F-23 IMPERIAL SUGAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) September 30, 1999, 1998 and 1997, and March 31, 1997 continues to operate a molasses desugarization plant at the Hereford facility by processing molasses from other beet sugar factories. The Company recorded a $12.5 million asset impairment loss to reduce the carrying value of the sugarbeet processing plant to its estimated fair value and to reduce the carrying value of the molasses desugarization plant to its fair value, which was based on the present value of the projected future cash flows. Other income--net includes interest and dividends totaling $1.7 million for fiscal 1999, $2.7 million for fiscal 1998, $1.2 million for the six months ended September 30, 1997, and $1.8 million for fiscal 1997. Substantially all of the Company's consolidated subsidiaries fully and unconditionally guarantee the Company's 9 3/4% senior subordinated notes due 2007. The Company does not publish separate financial statements for such guarantor subsidiaries because management has determined that such information is not material to investors. Condensed, combined financial information for such guarantor subsidiaries was as follows (in thousands of dollars):
Year Ended September 30, Six Months Ended Year Ended --------------------- September 20, March 31, 1999 1998 1997 1997 ---------- ---------- ---------------- ---------- Income Statement Data - --------------------- Net sales................... $1,626,147 $1,498,842 $253,543 $443,699 Operating income............ 35,520 50,414 16,993 16,606 Net income.................. 7,559 24,875 8,324 3,726 September 30, Balance Sheet Data 1999 - ------------------ ---------------- Current assets.................................... $361,218 Plant, property and equipment--net................ 345,337 Goodwill--net..................................... 402,459 Current liabilities............................... 184,866 Long-term debt.................................... 22,100
F-24 EX-4.A.5 2 FOURTH AMENDMENT DATED NOV. 18, 1999 EXHIBIT 4(a)(5) FOURTH AMENDMENT Fourth Amendment, dated as of November 18, 1999 (this "Amendment"), to the Amended and Restated Credit Agreement, dated as of December 22, 1997 (as heretofore and hereafter amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Imperial Sugar Company, formerly known as Imperial Holly Corporation (the "Borrower"), the several Lenders ("Lenders") from time to time parties thereto, Lehman Commercial Paper, Inc., as Syndication Agent, Lehman Brothers Inc., as Arranger and Harris Trust and Savings Bank, as Administrative Agent and Collateral Agent. WITNESSETH Whereas, the Borrower has requested that the Lenders amend certain provisions of the Credit Agreement; Whereas, the Lenders have agreed to such amendments only upon the terms and subject to the conditions set forth herein; Now, Therefore, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: Section 1. Defined Terms. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as therein defined. Section 2. Amendments to the Credit Agreement. (a) The definition of the term "Consolidated Fixed Charges" appearing in Section 1.1 of the Credit Agreement shall be amended to read as follows: " "Consolidated Fixed Charges": for any period, the sum (without duplication) of (a) Consolidated Interest Expense for such period, (b) provision for cash income taxes made by the Borrower or any of its Subsidiaries on a consolidated basis in respect of such period, (c) regularly scheduled payments made in cash during such period on account of principal of Indebtedness of the Borrower or any of its Subsidiaries (including scheduled principal payments in respect of the Term Loans) other than (i) the repayment of principal outstanding under the Tender Facilities at the final maturity thereof, (ii) any repayment of the Loans made pursuant to Section 2.12(b) hereof, and (iii) any repayments of the Loans made pursuant to Section 2.12(c) hereof and (d) dividends paid in cash during such period by the Borrower or any of its Subsidiaries." (b) Clause (b) of the definition of the term "Excess Cash Flow" contained in Section 1.1 of the Credit Agreement shall be amended by adding the following provision as clause (viii) thereof: ", and (viii) the aggregate amount of all prepayments of Loans made with the proceeds of any Receivables Securitization Program or of any sale of marketable securities." (c) Clause (ii) of Section 2.12(b) of the Credit Agreement shall be amended to read as follows: "(ii) the Net Cash Proceeds of the sale or other disposition by the Borrower of marketable securities owned by it shall not be required to be applied to prepayments pursuant to this Section 2.12(b) to the extent that such Net Cash Proceeds are applied (A) with respect to proceeds of any such sale in an aggregate amount not to exceed $15,000,000, to the repayment of Revolving Credit Loans no later than the date that is 60 days after the date the Borrower receives such proceeds, and (B) in all other cases, reasonably promptly after such sale, to the reinvestment by the Borrower in other marketable securities of the same general type and quality and such replacement securities are pledged pursuant to the Guarantee and Collateral Agreement and the Control Agreement; and". (d) The last sentence of Section 2.18(d) is hereby amended to read as follows: Notwithstanding the foregoing, no Tranche B Term Loan Lender shall have the right to decline any mandatory prepayment of the Tranche B Term Loans of such Lender required by Section 2.12(a) with respect to any issuance of Capital Stock or Subordinated Debt, by Section 2.12(b) in connection with a sale of marketable securities the proceeds of which are used to repay Indebtedness (other than a prepayment of Revolving Credit Loans required by Section 2.12(b)(ii)) or by Section 2.12(b)(iii). (e) Sections 7.1(a), 7.1(b), 7.1(c) and 7.1(d) of the Credit Agreement shall be amended to read as follows: "(a) Consolidated Total Leverage Ratio. Permit the Consolidated Total Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter: 2
Consolidated Total Fiscal Quarter Leverage Ratio December 31, 1999 6.00 to 1.00 March 31, 2000 5.75 to 1.00 June 30, 2000 6.00 to 1.00 September 30, 2000 5.25 to 1.00 December 31, 2000 5.50 to 1.00 March 31, 2001 5.50 to 1.00 June 30, 2001 5.20 to 1.00 September 30, 2001 4.60 to 1.00 December 31, 2001 4.60 to 1.00 Thereafter 4.40 to 1.00
(b) Consolidated Senior Leverage Ratio. Permit the Consolidated Senior Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter:
Consolidated Senior Fiscal Quarter Leverage Ratio December 31, 1999 3.35 to 1.00 March 31, 2000 3.35 to 1.00 June 30, 2000 3.35 to 1.00 September 30, 2000 2.75 to 1.00 December 31, 2000 3.20 to 1.00 March 31, 2001 3.00 to 1.00 June 30, 2001 2.80 to 1.00 September 30, 2001 2.40 to 1.00 December 31, 2001 2.40 to 1.00 Thereafter 2.30 to 1.00
3 (c) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter:
Consolidated Interest Fiscal Quarter Coverage Ratio December 31, 1999 Not Applicable March 31, 2000 Not Applicable June 30, 2000 Not Applicable September 30, 2000 Not Applicable December 31, 2000 1.50 to 1.00 March 31, 2001 1.60 to 1.00 June 30, 2001 1.70 to 1.00 September 30, 2001 1.80 to 1.00 December 31, 2001 1.90 to 1.00 Thereafter 2.00 to 1.00
(d) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending on or after December 31, 2000 to be less than 1.0 to 1. (f) Section 7.2 of the Credit Agreement shall be amended by inserting therein the following new Section (p): "(p) In addition to Indebtedness permitted by Section 7.2(k) hereof, Indebtedness of the Borrower and its Subsidiaries to Commodity Credit Corporation in an aggregate principal amount not to exceed $25,000,000, provided all of such Indebtedness is incurred between November 15 of any year and March 14 of the year immediately following and is paid in full no later than March 15 of the year immediately following." (g) Section 7.3 of the Credit Agreement shall be amended by inserting therein the following new Section (q): "(q) Liens securing Indebtedness of the Borrower and any of its Subsidiaries incurred pursuant to Section 7.2(p); provided that such Liens do not at any time encumber any Property other than the specific sugar or sugar-related products financed by such Indebtedness." (h) Section 7.5(i) of the Credit Agreement shall be amended to read as follows: "(i) additional Dispositions not to exceed an amount (calculated on the date of any Disposition) equal t 5% of the Borrower's Consolidated Tangible Assets (determined as of the last day of the most recently ended fiscal year of the 4 Borrower) in the aggregate on a cumulative basis after the Closing Date, provided that no Default or Event of Default shall occur hereunder solely as a result of a reduction in the amount of the Borrower's Consolidated Tangible Assets after the date of a Disposition that otherwise complied with this Agreement at the time it was made." (i) Sections 7.6 and 7.7 of the Credit Agreement shall be amended to read as follows: "7.6 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any Subsidiary or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (collectively, "Restricted Payments"), except that (a) any Subsidiary may make Restricted Payments to the Borrower or any Wholly Owned Subsidiary Guarantor, (b) so long as no Event of Default has occurred and is continuing the Borrower may pay dividends on any class of its preferred stock so long as such dividends are paid solely in the Borrower's preferred stock of the same class, and (c) so long as no Event of Default has occurred and is continuing, the Borrower may (i) pay dividends on its common stock in an aggregate amount not to exceed $3,000,000 during its fiscal year ending September 30, 2000, and (ii) in any fiscal year thereafter continue to pay dividends on its common stock in accordance with past practice during and before the fiscal year ended September 30, 1999 and in amounts per share not in excess of recent such amounts. 7.7 Limitation on Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any Capital Expenditure or Capitalized Refurbishment Expenditure, except (i) Capitalized Refurbishment Expenditures of the Borrower and its Subsidiaries in the ordinary course of business not to exceed $50,000,000 in any fiscal year, (ii) other Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business not to exceed (a) $35,000,000 in the fiscal year ending September 30, 2000, or (b) $45,000,000 in any fiscal year thereafter; provided that any portion of the amount specified in clause (ii) for any fiscal year that is not expended in such fiscal year may be carried over to increase the amount of Capital Expenditures permitted under clause (ii) for the 5 immediately succeeding fiscal year and (iii) to the extent the payment of such purchase prices constitute a Capital Expenditure, Capital Expenditures in the amount of the purchase prices paid in connection with the acquisition of DSLT Inc. and WF." (j) Section 7.8(k) of the Credit Agreement shall be amended by adding the following provision at the end thereof; "; and provided further that the aggregate amount of all such contributions consisting of cash and Cash Equivalents may not exceed $15,000,000 during the term of this Agreement;". (k) Section 10.15 of the Credit Agreement shall be amended by adding the following provision thereto as clause (j): "or (j) to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty's professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 10.15)." (l) Annex A to the Credit Agreement is hereby replaced by Annex A attached to this Amendment. (m) The Required Lenders hereby waive compliance with the requirements of Sections 7.1(a), 7.1(b) and 7.1(c) of the Credit Agreement for the period of four consecutive fiscal quarters of the Borrower ended September 30, 1999. This waiver is limited to the matters set forth herein, and the Borrower remains obligated to comply with the terms of the Credit Agreement and the other Loan Documents, including Sections 7.1(a), 7.1(b) and 7.1(c) of the Credit Agreement as amended by this Amendment, as though this waiver had never been granted. Section 3. Conditions to Effectiveness. This Amendment (except Section 2(l) hereof, which shall become effective as of November 18, 1999) shall become effective as of September 30, 1999 (the "Effective Date") upon satisfaction of the following conditions precedent: (a) The execution and delivery of this Amendment by a duly authorized officer of each of the Borrower, the Agents and the Required Lenders. (b) Payment of an amendment fee of one-half of one percent (0.5%) of each Lender's existing Commitment or, with respect to the Term Lenders, the outstanding principal amount of their Term Loans, to those Lenders that have executed this Amendment on or prior to November 18, 1999. Section 4. Representation and Warranties. The Borrower represents and warrants to each Agent and each Lender that as of the Effective Date, before and after giving effect to this 6 Amendment and after giving effect to the waiver contained in Section 2(m) hereof: (i) no Default or Event of Default has occurred and is continuing; (ii) the representations and warranties made by the Borrower in or pursuant to the Credit Agreement or any Loan Documents are true and correct in all material respects on and as of the Effective Date as if made on such date (except to the extent that any such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date); and (iii) this Amendment constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). Section 5. Continuing Effect of Credit Agreement. This Amendment shall not constitute an amendment or waiver of or consent to any provision of the Credit Agreement not expressly referred to herein and shall not be construed as an amendment, waiver or consent to any action on the part of the Borrower that would require an amendment, waiver or consent of the Agents or the Lenders except as expressly stated herein. Except as expressly consented to hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. Section 6. Expenses. The Borrower agrees to pay and reimburse the Agents for all of their reasonable costs and out-of-pocket expenses incurred in connection with the preparation, execution and delivery of this Amendment and ancillary documents, including, without limitation, the reasonable fees and disbursements of counsel to the Agents. Section 7. Counterparts. This Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. Section 8. Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 7 In Witness Whereof, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written. Imperial Sugar Company By: /s/ Mark O. Huggins ----------------------------- Name: Mark O. Huggins --------------------------- Title: Chief Financial Officer -------------------------- Lehman Commercial Paper, Inc., as Syndication Agent and as a Lender By: /s/ Michele Swanson ----------------------------- Name: Michele Swanson --------------------------- Title: __________________________ Harris Trust and Savings Bank, as Administrative Agent, Collateral Agent, Issuing Lender and as a Lender By: /s/ Dianna D. Carr ----------------------------- Name: Dianna D. Carr --------------------------- Title: Vice President -------------------------- Wachovia Bank, N.A. By: /s/ W. Thompkins Rison, Jr. ----------------------------- Name: W. Thompkins Rison, Jr. --------------------------- Title: Vice President -------------------------- Union Bank of California, N.A. By: /s/ Hagop V. Jazmadarian ----------------------------- Name: HAGOP V. JAZMADARIAN --------------------------- Title: Vice President -------------------------- 8 US Bancorp AG Credit, Inc. By: /s/ S. A. Sauer --------------------------- Name: Sandra A Sauer ------------------------- Title: Vice President ------------------------ The Bank of New York By: /s/ R. R. Reedy --------------------------- Name: RONALD R. REEDY ------------------------- Title: Vice President ------------------------ Cooperatieve Centrale Raiffeisen- Boerenleenbank B.A., "Rabobank Nederland" New York Branch By: /s/ M. J. Fabiano --------------------------- Name: Michael J. Fabiano ------------------------- Title: Vice President ------------------------ By: /s/ --------------------------- Name: ------------------------- Title: Senior Vice President ------------------------ CoBank, ACB By: /s/ ___________________________ Name: _________________________ Title: V. P. ------------------------ Frost National Bank By: /s/ W. G. Thomas --------------------------- Name: W. Glenn Thomas ------------------------- Title: Senior Vice President ------------------------ 9 Credit Agricole Indosuez By: /s/ Katherine L. Abbott ---------------------------------------- Name: Katherine L. Abbott -------------------------------------- Title: First Vice President ------------------------------------- By: /s/ Bradley C. Peterson ---------------------------------------- Name: Bradley C. Peterson -------------------------------------- Title: Vice President, Manager ------------------------------------- Wells Fargo Bank (Texas), N.A. By: /s/ Susan L. Coulter ---------------------------------------- Name: Susan L. Coulter -------------------------------------- Title: Vice President ------------------------------------- Balanced High Yield Fund I Ltd., By: BHF (USA) Capital Corporation acting as attorney-in-fact By: /s/ Dana L. McDougall ---------------------------------------- Name: Dana L. McDougall -------------------------------------- Title: Vice President ------------------------------------- By: /s/ ---------------------------------------- Name: -------------------------------------- Title: Associate ------------------------------------- Metropolitan Life Insurance Company By: /s/ James A. Dingler ---------------------------------------- Name: James A. Dingler -------------------------------------- Title: Director ------------------------------------- 10 Monument Capital Ltd. By: Alliance Capital Management L.P., as Investment Manager By: Alliance Capital Management Corporation, as General Partner By: /s/ Joel Serebransky ---------------------------- Name: JOEL SEREBRANSKY -------------------------- Title: SENIOR VICE PRESIDENT ------------------------- Oak Mountain Limited By: Alliance Capital Management L.P., as Investment Manager By: Alliance Capital Management Corporation, as General Partner By: /s/ Joel Serebransky ---------------------------- Name: JOEL SEREBRANSKY -------------------------- Title: SENIOR VICE PRESIDENT ------------------------- Putnam Diversified Income Trust By: /s/ John R Verani ---------------------------- Name: John R Verani -------------------------- Title: Vice President ------------------------- Putnam Variable Trust - Putnam High Yield Fund By: /s/ John R Verani ---------------------------- Name: John R Verani -------------------------- Title: Vice President ------------------------- 11 Van Kampen CLO I, Ltd. By: Van Kampen Management Inc., as Collateral Manager By: /s/ Dennis J. McDonnell ---------------------------- Name: Dennis J. McDonnell -------------------------- Title: President ------------------------- Van Kampen CLO II, Ltd. By: Van Kampen Management Inc., as Collateral Manager By: /s/ Dennis J. McDonnell ---------------------------- Name: Dennis J. McDonnell -------------------------- Title: President ------------------------- Van Kampen Senior Income Trust By: /s/ Dennis J. McDonnell ---------------------------- Name: Dennis J. McDonnell -------------------------- Title: President ------------------------- Black Diamond CLO 1998 - 1 Ltd. By: /s/ John H. Cullihane ---------------------------- Name: JOHN H. CULLIHANE -------------------------- Title: DIRECTOR ------------------------- Black Diamond International Funding Ltd. By: /s/ David Dyer ---------------------------- Name: DAVID DYER -------------------------- Title: Director ------------------------- 12 KZH Sterling LLC By: /s/ Peter Chin ---------------------------- Name: Peter Chin -------------------------- Title: Authorized Agent ------------------------- PAMCO CAYMAN Ltd. By: Highland Capital Management, L.P. as collateral Manager By: /s/ Todd Travers ---------------------------- Name: Todd Travers -------------------------- Title: Senior Portfolio Manager ------------------------- First Union National Bank By: /s/ ---------------------------- Name: -------------------------- Title: VP -------------------------- The Pilgrim Prime Rate Trust By: Pilgrim Investments Inc. as its Investment Manager By: /s/ Michel Prince, CFA ---------------------------- Name: MICHEL PRINCE, CFA -------------------------- Title: VICE PRESIDENT ------------------------- Pilgrim America High Income Investments, Ltd. (as Assignee) By: Pilgrim Investments Inc. as its Investment Manager By: /s/ Michel Prince, CFA ---------------------------- Name: MICHEL PRINCE, CFA -------------------------- Title: VICE PRESIDENT ------------------------- 13 Sequils-Pilgrim I Limited By: Pilgrim Investments Inc. as its Investment Manager By: /s/ Michel Prince ---------------------------- Name: MICHEL PRINCE, CFA -------------------------- Title: VICE PRESIDENT ------------------------- Pilgrim CLO 1999 - I Limited By: Pilgrim Investments Inc. as its Investment Manager By: /s/ Michel Prince ---------------------------- Name: MICHEL PRINCE, CFA -------------------------- Title: VICE PRESIDENT ------------------------- 14 Annex A PRICING GRID FOR REVOLVING CREDIT LOANS, SWING LINE LOANS, TERM LOANS A AND COMMITMENT FEES
Consolidated Total Applicable Margin for Applicable Margin for Commitment Fee Level Leverage Ratio Eurodollar Loans Base Rate Loans Rate - ---------------------------------------------------------------------------------------------------------------- V Greater than or equal 3.00% 2.00% 0.5% to 5.00 to 1.00 - ---------------------------------------------------------------------------------------------------------------- IV Less than 5.00 to 1.00 2.75% 1.75% 0.5% but greater than or equal to 4.50 to 1.00 - ---------------------------------------------------------------------------------------------------------------- III Less than 4.50 to 1.00 2.50% 1.50% 0.375% but greater than or equal to 4.00 to 1.00 - ---------------------------------------------------------------------------------------------------------------- II Less than 4.00 to 1.00 2.25% 1.25% 0.375% but greater than or equal to 3.50 to 1.00 - ---------------------------------------------------------------------------------------------------------------- I Less than 3.50 to 1.00 1.75% 0.75% 0.25% - ----------------------------------------------------------------------------------------------------------------
PRICING GRID FOR TRANCHE B TERM LOANS
Consolidated Total Applicable Margin for Applicable Margin for Base Level Leverage Ratio Eurodollar Loans Rate Loans ------------------------------------------------------------------------------------------------------ II Greater than or equal to 4.0% 3.00% 4.75 to 1.00 - ------------------------------------------------------------------------------------------------------- I Less than 4.75 to 1.00 3.50% 2.50% - -------------------------------------------------------------------------------------------------------
During the period commencing on November 18, 1999 and ending June 30, 2000 the Applicable Margins on Revolving Credit Loans, Swingline Loans, Term Loans A and the Commitment Fee Rate shall be those set forth in Level V and the Applicable Margins for Tranche B Term Loans shall be those set forth in Level II. Changes in the Applicable Margin with respect to Tranche A Term Loans, Tranche B Term Loans, Revolving Credit Loans, Swing Line Loans or in the Commitment Fee Rate resulting from changes in the Consolidated Total Leverage Ratio shall become effective on the date (the "Adjustment Date") on which financial statements are delivered to the Lenders pursuant to Section 6.1 (but in any event not later than the 50th day after the end of each of the first three quarterly periods of each fiscal year or the 100th day after the end of each fiscal year, as the case may be) and shall remain in effect until the next change to be effected pursuant to this paragraph. If any financial statements referred to above are not delivered within the time periods specified above, then, until such financial statements are delivered, the Consolidated Total Leverage Ratio as at the end of the fiscal period that would have been covered thereby shall for the purposes of this definition be deemed to be greater than 5.00 to 1.00. In addition, at all times while an Event of Default shall have occurred and be continuing, the Consolidated Total Leverage Ratio shall for the purposes of this definition be deemed to be greater than 5.00 to 1.00. Each determination of the Consolidated Total Leverage Ratio pursuant to this definition shall be made with respect to the period of four consecutive fiscal quarters of the Borrower ending at the end of the period covered by the relevant financial statements. 2 EX-10.B.2 3 SCHEDULE OF EMPLOYMENT AGREEMENTS EXHIBIT 10(b)(2) SCHEDULE OF EMPLOYMENT AGREEMENTS: P. C. Carrothers M. S. Flegenheimer R. W. Hill M. Q. Huggins J. M. Kelley J. C. Kempner B. A. Oxnard, Jr. D. H. Roche W. F. Schwer W. J. Smith EX-10.C.2 4 FIRST AMENDMENT TO SEVERANCE PAY AGREEMENT EXHIBIT 10(c)(2) FIRST AMENDMENT TO SEVERANCE PAY AGREEMENT This First Amendment to Severance Pay Agreement is made and entered into as of the 1st day of November, 1998, by and between IMPERIAL HOLLY CORPORATION, a Texas corporation, (the "Company") and ____________ ("Employee"), an employee of the Company; WITNESSETH: WHEREAS, the parties entered into a Severance Pay Agreement (the "Agreement") effective as of July 26, 1990 in order to provide a severance benefit to Employee in the event of Employee's involuntary termination after a Change in Control (as defined in the Agreement) of the Company; and WHEREAS, Section 12 of the Agreement provides that the Agreement may be modified only by a written instrument executed by both parties to the Agreement; and WHEREAS, the parties now desire to amend the Agreement; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto amend the Agreement as follows: Section 4 of the Agreement is hereby amended in its entirety to read as follows: 4. Parachute Payments. The Company and Employee understand and agree that the severance pay benefits under this Agreement may constitute "parachute payments" under Section 280G or any successor provision of the Internal Revenue Code of 1986, as amended (the "Code"). Notwithstanding any other provision of this Agreement to the contrary, the aggregate "present value" of all "parachute payments" payable to or for the benefit of Employee, whether payable pursuant to this Agreement or otherwise, shall not be limited to three times the Employee's "base amount" in order to avoid excise taxes to the Participant under Section 4999 or any successor provision of the Code or the disallowance of a deduction to the Company pursuant to Section 280G or any successor provision of the Code. Any "parachute payment" made to Employee under this Agreement may be considered an "excess parachute payment". For purposes of this Section 4, the terms "present value", "parachute payment", "base amount", and "excess parachute payment" shall have the meanings assigned thereto under Section 280G or any successor provision of the Code. Except as amended hereby, the terms and provisions of the Agreement shall continue in full force and effect. IN WITNESS WHEREOF, the Company has caused this First Amendment to Severance Pay Agreement to be executed by its duly authorized officer, and Employee has executed this First Amendment, to be effective as of the date first above written. Imperial Holly Corporation ATTEST: By: _________________________________ By : ________________________________ Name: Roy L. Cordes, Jr. James C. Kempner Title: Corp. Secretary President and Chief Executive Officer _____________________________________ Signature EX-10.C.3 5 SCHEDULE OF SEVERANCE PAY AGREEMENT EXHIBIT 10(c)(3) SCHEDULE OF SEVERANCE PAY AGREEMENTS: P. C. Carrothers R. W. Hill J. C. Kempner W. F. Schwer EX-10.D.2 6 1ST AMENDMENT TO THE SALARY CONTINUATION PLAN EXHIBIT 10(d)(2) FIRST AMENDMENT TO THE IMPERIAL HOLLY CORPORATION SALARY CONTINUATION PLAN This First Amendment to the Imperial Holly Corporation Salary Continuation Plan is effective as of November 1, 1998. WITNESSETH: WHEREAS, Imperial Holly Corporation (the "Company") adopted the Imperial Holly Corporation Salary Continuation Plan, which was amended and restated effective August 1, 1990 and again amended and restated effective August 1, 1994 (the "Plan"); and WHEREAS, pursuant to Section 7.01 of the Plan, the Board of Directors of the Company (the "Board") retained the right to amend the Plan, and the Board now desires to (i) amend the Plan and (ii) continue the Plan without a gap or lapse in coverage; NOW, THEREFORE, the Plan is hereby amended as follows: Section 4.04 of the Plan is amended to delete the second paragraph thereof in its entirety and to replace it with the following new second paragraph: Notwithstanding any other provision of this Plan to the contrary, the aggregate "present value" of all "parachute payments" payable to or for the benefit of a Participant in the Plan, whether payable pursuant to the Plan or otherwise, shall not be limited to three times the Participant's "base amount" in order to avoid excise taxes to the Participant under Section 4999 or any successor provision of the Internal Revenue Code of 1986, as amended (the "Code") or the disallowance of a deduction to the Company pursuant to Section 280G or any successor provision of the Code. Any "parachute payment" made to a Participant under the Plan may thus be considered an "excess parachute payment". For purposes of this Section 4.04, the terms "present value", "parachute payment", "base amount" and "excess parachute payment" shall have the meanings assigned thereto under Section 280G or any successor provision of the Code. This First Amendment to the Plan is executed is 1st day of November, 1998, to be effective as of the date specified above subject to approval or ratification by the Board. Except as amended hereby, the Plan shall continue in full force and effect in accordance with its provisions. Imperial Holly Corporation ATTEST: /s/ W. F. Schwer /s/ James C. Kempner By: _________________________________ By: _________________________________ Name: William Schwer James C. Kempner Title: Assistant Secretary President and Chief Executive Officer EX-10.I.2 7 SCHEDULE OF CHANGE OF CONTROL AGREEMENT EXHIBIT 10(i)(2) SCHEDULE OF CHANGE OF CONTROL AGREEMENTS: P. C. Carrothers D. W. Ehrnkranz H. P. Mechler K. L. Mercer EX-10.N.2 8 FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT EXHIBIT 10(N)(2) AMENDMENT NO. 1 Dated as of December 13, 1999 to RECEIVABLES PURCHASE AGREEMENT Dated as of June 30, 1999 This AMENDMENT NO. 1 (this "Amendment") dated as of December 13, 1999 is --------- entered into among IMPERIAL SECURITIZATION CORPORATION (the "Seller"), IMPERIAL ------ DISTRIBUTING, INC.("Imperial"), as Servicer, IMPERIAL SUGAR COMPANY (the -------- "Performance Guarantor"), FAIRWAY FINANCE CORPORATION (the "Purchaser"), and --------------------- --------- NESBITT BURNS SECURITIES INC.("Nesbitt Burns"), as agent for Purchaser (in such ------------- capacity, together with its successors and assigns, the "Agent"). ----- RECITALS -------- WHEREAS, the parties hereto have entered into a certain Receivables Purchase Agreement dated as of June 30, 1999 (the "Agreement"); --------- WHEREAS, the parties hereto wish to make certain changes to the Agreement as herein provided; NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein and in the Agreement, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined ----------- herein are used as defined in the Agreement. SECTION 2. Amendments to Agreement. The Agreement is hereby amended as ----------------------- follows: 2.1. The first sentence of Section 3.1(a) of the Agreement is hereby -------------- amended by inserting the phrase ", each Program Support Provider" after the term "Agent." 2.2. Section 4.3(d) of the Agreement is hereby amended in its entirety to -------------- read as follows: "(d) Permitted Investments. Any amounts in the Liquidation Account or the --------------------- Collection Account, as the case may be, may be invested by the Liquidation Account Bank or Collection Account Bank, respectively, at Servicer's direction, in Permitted Investments, so long as Purchaser's interest in such Permitted Investments is perfected and such Permitted Investments are subject to no Adverse Claims other than those of the Purchaser provided hereunder; provided, -------- however, that such investments shall mature not later than one Business Day next - ------- preceding the last day of any Settlement Period for any Portion of Investment next succeeding the date of such investment." 2.3. Section 5.3(b) of the Agreement is hereby amended by adding the -------------- following after the word "Participation" in the first sentence: "with the prior written consent of the Seller; provided, however, that such -------- ------- consent shall not be unreasonably withheld; provided, further, that no such -------- ------- consent shall be required if the participating interests or security interests in the Participation are granted to the Bank of Montreal, a Canadian chartered bank acting through its Chicago Branch, any Affiliate of the Purchaser or any existing Liquidity Bank as of the date of this Amendment." 2.4. Section 5.4(a) of the Agreement is hereby amended in its entirety to -------------- read as follows: "Section 5.4. Costs, Expenses and Taxes. (1) In addition to the rights of ------------------------- indemnification granted under Section 3.1 hereof, the Seller agrees to pay on ----------- demand all reasonable costs and expenses in connection with the preparation, execution, delivery and administration (including periodic auditing of Pool Receivables) of this Agreement, the Liquidity Agreement, and the other documents and agreements to be delivered hereunder, including all reasonable costs and expenses relating to the amending, amending and restating, modifying or supplementing of this Agreement, the Liquidity Agreement and the other documents and agreements to be delivered hereunder and the waiving of any provisions thereof, and including in all cases, without limitation, Attorney Costs for the Agent, the Purchaser, each Program Support Provider and their respective Affiliates and agents with respect thereto and with respect to advising the Agent, the Purchaser, each Program Support Provider and their respective Affiliates and agents as to their rights and remedies under this Agreement and the other Transaction Documents, and all reasonable costs and expenses, if any (including Attorney Costs), of the Agent, the Purchaser, each Program Support Provider and their respective Affiliates and agents, in connection with the enforcement of this Agreement and the other Transaction Documents." 2.5. Section 5.6 of the Agreement is hereby amended in its entirety to read ----------- as follows: "Section 5.6 Confidentiality. Unless otherwise required by applicable law --------------- (including the disclosure requirement of applicable securities laws), the Seller agrees to maintain the confidentiality of this Agreement and the other Transaction Documents (and all drafts thereof) in communications with third parties and otherwise; provided -------- that this Agreement may be disclosed to (a) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Agent, (b) any Program Support Provider and (c) the Seller's legal counsel and auditors if they agree to hold it confidential; provided that only the terms and conditions of this agreement -------- may be revealed to such parties and not the details of any fees, pricing or interest rates." 2.6 The definition of "Attorney Costs" as set forth in the Exhibit I of --------- the Agreement is hereby amended in its entirety as follows: "'Attorney Costs' means and includes all fees and disbursements of any law -------------- firm or other external counsel, the allocated costs of internal legal services and all disbursements of internal counsel, to be paid as set forth in the Fee Letter or otherwise in the case of any Program Support Provider, as provided in Section 5.4." - ----------- 2.7 The definition of "Defaulted Receivable" as set forth in the Exhibit I --------- of the Agreement is hereby amended in its entirety as follows: "'Defaulted Receivable' means a Receivable: -------------------- (i) as to which any payment, or part thereof, remains unpaid for more than 60 days from the due date for such Receivable or such other number of days from the due date for such Receivable approved by the Agent subject to the satisfaction of the Rating Agency Condition; (ii) as to which the Obligor thereof or any other Person obligated thereon or owning any Related Security in respect thereof becomes the subject of any Insolvency Proceeding; or (iii) which, consistent with the Credit and Collection Policy, would be written off the Seller's books as uncollectible." 2.8. Clause (i) of the definition of "Delinquent Receivable" as set forth in the Exhibit I of the Agreement is hereby amended in its entirety as follows: --------- "(i) as to which any payment, or part thereof, remains unpaid for more than 30 days from the due date for such Receivable or such other number of days from the due date for such Receivable approved by the Agent subject to the satisfaction of the Rating Agency Condition; or". 2.9. Clause (i) of the definition of "Eligible Receivables" as set forth in Exhibit I of the Agreement is hereby amended in its entirety as follows: - --------- "(i) the Obligor of which is (i) a United States resident or OECD resident; provided, however, if the Obligor of such Receivable is a resident of a - -------- ------- jurisdiction other than the United States or OECD, such Obligor's obligations with respect to such Receivables are supported by a letter of credit or guaranty from an entity with a rating of at least (a) A by Standard & Poor's and (b) A2 by Moody's, (ii) not a government or a governmental subdivision, affiliate or agency; provided, however, if the Obligor of such Receivable is a government or -------- ------- a governmental subdivision, affiliate or agency, the aggregate Outstanding Balance of all Pool Receivables of such Obligor that are Eligible Receivables when added to the aggregate Outstanding Balance of all other Eligible Receivables of Obligors that are governments or governmental subdivisions, affiliates or agencies shall not exceed 3% of the Net Receivables Pool Balance, (iii) not an Affiliate of Imperial or any Affiliate of Imperial, (iv) not subject to an exchange agreement with any Originator, and (v) not deemed unacceptable by the Agent, and;" 2.10. The definition of "Investment Grade" as set forth in the Exhibit I --------- of the Agreement is hereby amended by deleting the word "or" immediately following the reference to "Standard & Poor's" in the second line thereof, and substituting therefor the word "and". 2.11. The definition of "Normal Concentration Percentage" as set forth in the Exhibit I of the Agreement is hereby amended in its entirety as follows: --------- "'Normal Concentration Percentage' for any Obligor means at any time 2.5% ------------------------------- if such Obligor is not a Special Obligor, or if such Obligor is a Special Obligor, 8% if such Special Obligor is rated A or better by S&P and A2 or better by Moody's, 6% if such Special Obligor is rated BBB+ or better by S&P and Baa1 or better by Moody's and 4% if such Special Obligor is not so rated but is rated at least BBB- by S&P and Baa3 by Moody's." 2.12. The definition of "Total Reserves" as set forth in Exhibit I of the --------- Agreement is amended in its entirety as follows: "'Total Reserves' means the sum of the Discount Reserve, the Loss Reserve -------------- and the Servicing Fee Reserve." 2.13 Exhibit IV of the Agreement is hereby amended to add the following at ---------- the end thereof: "(s) Credit Agreement. Imperial will provide to the Agent (in multiple ---------------- copies, if requested by the Agent) the following: (i) as soon as possible and in any event within 5 Business Days after a Responsible Officer of Imperial obtains knowledge thereof, notice of any amendment, modification or waiver in any of the financial covenants set forth in Section 7 of the Credit Agreement. --------- (ii) as soon as possible and in any event within 50 days after the end of each of the first three quarters of each fiscal year of Imperial and 100 days after the last fiscal quarter of each fiscal year of Imperial, a copy of the certificate provided to the lenders under the Credit Agreement with respect to the financial covenants contained in Section 7 of --------- the Credit Agreement." 2.14 Paragraph (h) of Exhibit V of the Agreement is hereby amended in its --------- entirety as follows: "; or (h) As of the last day of any Fiscal Month (i) the arithmetic average for the most recent three Fiscal Months of (A) the Default Ratios from November 30, 1999 until May 31, 2000 shall exceed 7% and thereafter shall exceed 6%, or (B) the Delinquency Ratios from November 30, 1999 until May 31, 2000 shall exceed 12.5% and thereafter shall exceed 10%, or (C) the Dilution Ratio shall exceed 2.5% or (ii) the arithmetic average of the Loss-to-Liquidation Ratios for the most recent twelve Fiscal Months shall exceed 1%; or" 2.15 Paragraph (m) of Exhibit V of the Agreement is hereby amended in its --------- entirety as follows: "; or (m) Imperial shall fail to perform and comply with each of the financial covenants set forth in Section 7 of the Credit Agreement as in --------- effect on the date hereof, (but without giving effect to any other amendment, ----------- modification or waiver to such financial covenants from time to time under the Credit Agreement, except as set forth below), each of which covenants and agreements, together with all related definitions, exhibits and ancillary provisions, are hereby incorporated in this Agreement by reference as though specifically set forth in this paragraph (m) and shall survive the termination and/or expiration of the Credit Agreement; provided, however, that if at least ----------------- 50% of the Lenders (as such term is defined in the Credit Agreement) including Harris, and the Bank of Montreal, a Canadian chartered bank acting through its Chicago Branch (but not any Person to whom the Bank of Montreal may grant, sell or assign all or any part of its rights under this Agreement, the Participation or any liquidity agreement related to this Agreement) approves any amendment, modification or waiver of any financial covenant set forth in Section 7 of the --------- Credit Agreement, then a Termination Event shall occur with respect to a failure to comply with such financial covenant only if Imperial shall fail to comply with the financial covenant set forth in Section 7, of the Credit Agreement as --------- so amended, modified or waived; or" 2.16 Exhibit V of the Agreement is hereby amended to add the following at --------- the end thereof: "; or (n) the occurrence of an event of default set forth in Section 8 of the Credit Agreement as in effect on the date hereof, (regardless - --------- of whether such event of default may be amended, modified or waived from time to time in accordance with the Credit Agreement), each of which events of default and agreements, together with all related definitions, exhibits and ancillary provisions, are hereby incorporated in this Agreement by reference as though specifically set forth in this paragraph (n) and shall survive the termination and/or expiration of the Credit Agreement; provided, however, that if at least 50% of the Lenders (as ----------------- such term is defined in the Credit Agreement) including Harris approves any amendment, modification or waiver of any event of default set forth in Section 8 --------- of the Credit Agreement, then a Termination Event shall occur with respect to a failure to comply with such event of default only if Imperial shall fail to comply with the event of default set forth in Section 8, of the Credit Agreement --------- as so amended, modified or waived." SECTION 3. Miscellaneous. ------------- 3.1. Effectiveness. This Amendment shall become effective on the date when ------------- the Agent shall have received an original counterpart (or counterparts) of this Amendment, executed and delivered by each of the parties hereto, or other evidence satisfactory to the Agent of the execution and delivery of this Amendment by such parties. 3.2. References to Agreement. Upon the effectiveness of this Amendment, ----------------------- each reference in the Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of like import shall mean and be a reference to the Agreement as amended hereby, and each reference to the Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Agreement shall mean and be a reference to the Agreement as amended hereby. 3.3. Effect on the Agreement. Except as specifically amended above, the ----------------------- Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. 3.4. No Waiver. The execution, delivery and effectiveness of this --------- Amendment shall not operate as a waiver of any right, power or remedy of any party under the Agreement or any other document, instrument or agreement executed in connection therewith, nor constitute a waiver of any provision contained therein, except as specifically set forth herein. 3.5. Governing Law. This Amendment, including the rights and duties of the ------------- parties hereto, shall be governed by, and construed in accordance with, the laws of the State of Texas (without giving effect to the conflict of laws principles thereof). 3.6. Successors and Assigns. This Amendment shall be binding upon and ---------------------- shall inure to the benefit of the parties hereto and their respective successors and assigns. 3.7. Headings. The Section headings in this Amendment are inserted for -------- convenience of reference only and shall not affect the meaning or interpretation of this Amendment or any provision hereof. 3.8. Counterparts. This Amendment may be executed by the parties hereto in ------------- several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. IMPERIAL SECURITIZATION CORPORATION ----------------------------------- By: /s/ W.F. SCHWER ------------------------------------- Name: W.F. Schwer Title: President IMPERIAL DISTRIBUTING, INC., as Servicer By: /s/ W.F. SCHWER ----------------------------------- Name: W.F. Schwer Title: Sr. Vice President IMPERIAL SUGAR COMPANY, as Performance Guarantor By: /s/ MARK Q. HUGGINS ----------------------------------- Name: Mark Q. Huggins Title: Managing Director and Chief Financial Officer FAIRWAY FINANCE CORPORATION, as Purchaser By: /s/ DWIGHT JENKINS ------------------------------------------ Name: Dwight Jenkins Title: Vice President NESBITT BURNS SECURITIES INC., as Agent By: /s/ DAVID J. KUCERA ------------------------------------------ Name: David J. Kucera Title: Managing Director By: /s/ JAMES P. WALSH ------------------------------------------ Name: James P. Walsh Title: Managing Director EX-21 9 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF THE COMPANY
Jurisdiction of Subsidiary Incorporation ---------- --------------- Holly Sugar Corporation...................................... New York Diamond Crystal Brands, Inc.................................. Delaware Michigan Sugar Company....................................... Michigan Imperial Savannah LP......................................... Delaware Diamond Crystal Specialty Foods, Inc. ....................... Michigan
EX-23 10 INDEPENDENT AUDITORS REPORT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-30328, 33-41769 and 33-68896, each on Form S-8, and in Registration Statement No. 333-69059 on Form S-3 of Imperial Sugar Company of our report dated November 30, 1999, appearing in this Form 10-K of Imperial Sugar Company for the year ended September 30, 1999. Houston, Texas December 13, 1999 EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE IMPERIAL SUGAR COMPANY'S ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS SEP-30-1999 OCT-01-1998 SEP-30-1999 7,925 65,496 64,458 0 259,064 440,404 619,806 217,442 1,280,783 238,315 553,577 0 0 309,847 63,577 1,280,783 1,888,630 1,888,630 1,714,020 1,714,020 51,272 0 59,071 (21,578) (3,454) (18,124) 0 0 0 (18,124) (0.57) (0.57)
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