Form 10-Q

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-----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, CU/UKkRaa2veA/DCwj9d4ef5PV1ok+rVAEXrqzXVf5DC9m2T9UuZyxWOVEAwg/Fj FsgxUFmh7gOjsnwNusYccg== 0001193125-10-024695.txt : 20100209 0001193125-10-024695.hdr.sgml : 20100209 20100208185944 ACCESSION NUMBER: 0001193125-10-024695 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20091231 FILED AS OF DATE: 20100209 DATE AS OF CHANGE: 20100208 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16674 FILM NUMBER: 10582090 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-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-16674

IMPERIAL SUGAR COMPANY

(Exact name of registrant as specified in its charter)

Texas

74-0704500

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

One Imperial Square, P.O. Box 9, Sugar Land, Texas 77487

(Address of principal executive offices, including Zip Code)

(281) 491-9181

(Registrant’s telephone number, including area code)

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer, see definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of January 31, 2010, there were 12,165,004 shares of common stock, without par value, of the registrant outstanding.

IMPERIAL SUGAR COMPANY

Index


		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets (Unaudited)	2
	Consolidated Statements of Operations (Unaudited)	3
	Consolidated Statements of Cash Flows (Unaudited)	4
	Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4.	Controls and Procedures	19

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 4.	Submission of Matters to a Vote of Security Holders	21

Item 6.	Exhibits	21

	Signatures	22

Forward-Looking Statements

Statements regarding future market prices and margins, refinery construction costs, timelines and operational dates, future expenses and liabilities arising from the Port Wentworth refinery incident, future costs and actions regarding the Louisiana Sugar Refining, LLC venture, future import and export levels, future government and legislative action, future operating results, future availability of raw sugar, operating efficiencies, results of future investments and initiatives, future cost savings, future product innovations, future energy costs, our liquidity and ability to finance our operations and capital investment programs, future pension plan contributions and other statements that are not historical facts contained in this report on Form 10-Q are forward-looking statements that involve certain risks, uncertainties and assumptions. These risks, uncertainties and assumptions include, but are not limited to, market factors, farm and trade policy, unforeseen engineering, construction and equipment delays, our ability to realize planned cost savings and other improvements, the available supply of sugar, energy costs, the effect of weather and economic conditions, results of actuarial assumptions, actual or threatened acts of terrorism or armed hostilities, legislative, administrative and judicial actions and other factors detailed elsewhere in this report and in our other filings with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. We identify forward-looking statements in this report by using the following words and similar expressions:


• expect	• project	• estimate
• believe	• anticipate	• likely
• plan	• intend	• could
• should	• may	• predict
• budget	• possible

Management cautions against placing undue reliance on forward-looking statements or projecting any future results based on such statements or present or future earnings levels. All forward-looking statements in this report on Form 10-Q are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this report and in our other SEC filings.

PART I - FINANCIAL INFORMATION

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	December 31, 2009			September 30, 2009
	(In Thousands of Dollars)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	66,440		$	115,584
Marketable Securities		201			56
Accounts Receivable, Net		29,715			34,601
Insurance Settlement Receivable		45,000			—
Inventories:
Finished Products		41,754			18,434
Raw and In-Process Materials		84,116			83,215
Supplies		11,976			10,626

Total Inventory		137,846			112,275
Deferred Income Taxes, Net		—			16,215
Prepaid Expenses and Other Current Assets		43,982			14,873

Total Current Assets		323,184			293,604
Other Investments		11,956			10,930
Property, Plant and Equipment, Net		277,096			252,913
Deferred Income Taxes, Net		—			55,940
Other Assets		2,717			2,553

Total	$	614,953		$	615,940


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable, Trade	$	87,163		$	87,141
Borrowing under Revolving Credit Line		60,000			60,000
Deferred Income Taxes, Net		12,374			—
Other Current Liabilities		50,334			28,390
Insurance Advances, Net		—			227,475

Total Current Liabilities		209,871			403,006
Deferred Income Taxes, Net		15,645			—
Deferred Employee Benefits and Other Liabilities		124,847			126,500
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; 12,165,004 and 12,026,354 Shares Issued and Outstanding at December 31, 2009 and September 30, 2009		128,746			128,421
Retained Earnings		205,806			27,922
Accumulated Other Comprehensive Loss		(69,962	)		(69,909	)

Total Shareholders’ Equity		264,590			86,434

Total	$	614,953		$	615,940

See notes to consolidated financial statements.

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended December 31,
	2009			2008
	(In Thousands of Dollars, Except per Share Amounts)
Net Sales	$	173,779		$	108,648
Business Interruption Insurance Recovery		84,677			—

Cost of Sales (includes depreciation of $4,594,000 and $2,291,000 for the three months ended December 31, 2009 and 2008)		(161,379	)		(111,618	)
Selling, General and Administrative Expense (includes depreciation of $335,000 and $586,000 for the three months ended December 31, 2009 and 2008)		(11,446	)		(11,582	)
Refinery Explosion Related Charges		(1,795	)		(14,930	)
Insurance Recoveries Recognized		193,796			11,677
Gain on Litigation Settlement		—			16,148

Operating Income (Loss)		277,632			(1,657	)
Interest Expense		(318	)		(421	)
Interest Income		29			253
Other Income, Net		986			1,016

Income (Loss) from Continuing Operations before Income Taxes		278,329			(809	)
Benefit (Provision) for Income Taxes		(100,213	)		229

Income (Loss) from Continuing Operations		178,116			(580	)
Income from Discontinued Operations, Net		—			644

Net Income	$	178,116		$	64


Basic Earnings (Loss) per Share of Common Stock:
Income (Loss) from Continuing Operations	$	15.11		$	(0. 05	)
Income from Discontinued Operations		—			0.06

Net Income (Loss)	$	15.11		$	0. 01


Diluted Earnings (Loss) per Share of Common Stock:
Income (Loss) from Continuing Operations	$	14.84		$	(0.05	)
Income from Discontinued Operations		—			0.06

Net Income (Loss)	$	14.84		$	0.01


Weighted Average Shares Outstanding:
Basic		11,789,897			11,683,594

Diluted		12,005,791			11,683,594

See notes to consolidated financial statements.

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended December 31,
	2009			2008
	(In Thousands of Dollars)
Operating Activities:
Net Income	$	178,116		$	64
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Insurance Recoveries Recognized		(278,473	)		(11,677	)
Advances from Insurance Carriers		—			10,000
Depreciation		4,929			2,877
Deferred Income Taxes		100,213			142
Reclassification from Accumulated Other Comprehensive (Income) Loss to Net Income		340			1,286
Cash Paid (Received) on Change in Fair Value of Derivative Instruments		(536	)		(3,432	)
Non-Cash Stock-Based Compensation		511			493
Equity Earnings in Unconsolidated Subs		(880	)		(433	)
Excess Tax Benefits from Stock-Based Compensation		24			(35	)
Income from Discontinued Operations		—			(644	)
Gain on Sale of Marketable Securities		—			(388	)
Gain on Sale of Assets		—			(76	)
Other		61			55
Changes in Operating Assets and Liabilities:
Accounts Receivable		4,886			9,844
Inventories		(25,571	)		(15,034	)
Prepaid Expenses and Other Assets		(3,445	)		3,175
Accounts Payable—Trade		8,475			(19,999	)
Other Liabilities		(5,786	)		(7,524	)

Net Cash Provided by (Used in) Continuing Operations		(17,136	)		(31,306	)
Net Cash Provided by Discontinued Operations		—			1,015

Net Cash Provided by (Used in) Operations		(17,136	)		(30,291	)

Investing Activities:
Capital Expenditures		(37,598	)		(16,503	)
Advances from Insurance Carriers		6,000			—
Proceeds from Sale of Marketable Securities		—			7,500

Proceeds from Sale of Assets		—			538
Other		16			(169	)

Investing Cash Flow		(31,582	)		(8,634	)

Financing Activities:
Issuance of Common Stock		—			79
Cash Dividends		(240	)		(830	)
Excess Tax Benefits from Stock-Based Compensation		(24	)		35
Other		(162	)		—

Financing Cash Flow		(426	)		(716	)

Increase (Decrease) in Cash and Cash Equivalents		(49,144	)		(39,641	)
Cash and Cash Equivalents, Beginning of Period		115,584			74,723

Cash and Cash Equivalents, End of Period	$	66,440		$	35,082

Supplemental Non-Cash Items:
Tax Effect of Deferred Gains and Losses	$	71		$	729

Purchase of Property, Plant and Equipment on Account	$	20,265		$	—

See notes to consolidated financial statements.

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Three Months Ended December 31, 2009

(Unaudited)


	Shares of Common Stock	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	(In Thousands of Dollars, Except Share Data)
Balance September 30, 2009	12,026,354	$	128,421	$	27,922		$	(69,909	)	$	86,434
Comprehensive Income:
Net Income					178,116						178,116
Foreign Currency Translation Adjustment (Net of Tax of $40,000)								72			72
Change in Derivative Fair Value (Net of Tax of $193,000)								(343	)		(343	)
Reclassification from Accumulated Other Comprehensive Income (Loss) to Net Income (Net of Tax of $122,000)								218			218

Total Comprehensive Income											178,063
Dividends ($0.02 per share)					(232	)					(232	)
Restricted Stock Grants	138,650		325								325

Balance December 31, 2009	12,165,004	$	128,746	$	205,806		$	(69,962	)	$	264,590

See notes to consolidated financial statements.

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)

1. ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and reflect, in the opinion of management, all adjustments, consisting only of normal recurring accruals, that are necessary for a fair presentation of financial position and results of operations for the interim periods presented. These financial statements include the accounts of Imperial Sugar Company and its majority-owned subsidiaries (the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures required by accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2009. The Company operates its business as one domestic segment—the production and sale of refined sugar and related products.

Cost of Sales

The Company’s sugar inventories, which are accounted for on a LIFO basis, are periodically reduced at interim dates to levels below that of the beginning of the fiscal year. When such interim LIFO liquidations are expected to be restored prior to fiscal year-end, the estimated replacement cost of the liquidated layers is utilized as the basis of the cost of sugar sold from beginning of the year inventory. Accordingly, the cost of sugar utilized in the determination of cost of sales for interim periods includes estimates which may require adjustment in future fiscal periods.

Insurance Recoveries

Insurance recoveries that are deemed to be probable and reasonably estimable are recognized to the extent of the related loss. Insurance recoveries which result in gains, including recoveries under business interruption coverage, are recognized only when realized by settlement with the insurers. Advances on insurance settlements are recorded as liabilities or offsets to accrued probable recoveries. The evaluation of insurance recoveries requires estimates and judgments about future results which affect reported amounts and certain disclosures. Actual results could differ from those estimates.

Accounting Pronouncements

The FASB has issued new authoritative guidance that once effective, establishes additional accounting and disclosure requirements. Management has evaluated the effects such requirements will have on our consolidated financial statements.

In March 2008, the FASB issued authoritative guidance intended to provide users of employers’ financial statements with more informative disclosures about the nature and valuation of postretirement benefit plan assets. The disclosures related to plan assets are effective for fiscal years ending after December 15, 2009.

In June 2009, the FASB issued authoritative guidance which amends certain requirements to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. The guidance will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The Company is currently evaluating the impact, if any, that this guidance will have on its consolidated financial statements.

2. INSURANCE RECOVERIES

The Company experienced an explosion and fire on February 7, 2008, at its sugar refinery in Port Wentworth, Georgia, which is located near Savannah, Georgia. Production at the refinery, which comprises approximately 60% of the Company’s capacity, was suspended until the summer of 2009 when limited bulk production was commenced. The installation of packaging lines was completed in December, and refined silo construction was completed in January 2010.

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)—(Continued)

The Company settled its insurance claim related to the Port Wentworth accident in December 2009 for an aggregate of $345 million, and received the remaining $45 million of insurance proceeds in early January 2010. Insurance recoveries aggregating $66.5 million which were deemed probable and reasonably estimable were recognized to the extent of the related loss in prior periods. The remaining $278.5 million of recoveries are recognized as gains in the quarter ended December 31, 2009, as follows (in millions):


	Insurance Recovery		Previously Recognized		Current Period Gains
Business interruption	$	84.7		—	$	84.7
Property replacement cost		212.4	$	23.2		189.2
Payroll and other incurred costs		47.9		43.3		4.6

Total	$	345.0	$	66.5	$	278.5

Financial reporting gains recognized for replacement cost recoveries will not be recognized for tax purposes to the extent the Company made elections under the involuntary conversion rules of the Internal Revenue Code, as the insurance proceeds have been reinvested in replacement property within the required period of time. The replacement cost expenditures establish a new basis in the assets for financial reporting purposes, which will result in higher depreciation charges in future years. The tax basis in the replaced assets will be reduced by the amount of the gain not recognized under the involuntary conversion rules.

3. CONTINGENCIES

The Company is party to a number of claims, including forty-eight lawsuits brought on behalf of thirty-nine employees or their families and thirty one, third parties or their families, for injuries and losses suffered as a result of the Port Wentworth refinery accident. None of the lawsuits demand a specific dollar amount of damages sought by the plaintiffs. The Company has workers compensation insurance which provides for coverage equal to the statutory benefits provided to workers under state law. Additionally, the Company’s general liability policy provides for coverage for damages to third parties up to a policy limit of $100 million. While the Company believes it has meritorious defenses in this litigation, and that claims by employees and certain contractors are limited to benefits provided under Georgia workers compensation law, the ultimate resolution of these matters could result in liability in excess of the amount accrued. The Company believes the likelihood of the aggregate liability exceeding the $100 million policy limit is remote.

Following the Port Wentworth accident, the U.S. Occupational Safety Health Administration (OSHA) conducted investigations at the Company’s Port Wentworth and Gramercy refineries. OSHA concluded its Port Wentworth and Gramercy investigations on July 25, 2008, and issued numerous citations with total proposed penalties of $5.1 million in Port Wentworth and $3.7 million in Gramercy. Additionally, OSHA issued requirements for certain abatement actions to be undertaken by the Company at the Port Wentworth and Gramercy facilities. The Company has contested all of the citations and proposed penalties regarding the Port Wentworth and Gramercy investigations, and these matters have been assigned to the Occupational Safety and Health Review Commission for a review of the merits of the citations, proposed penalties and abatement actions. Trial dates for administrative law hearings have been set for May and June 2010.

Discovery in the OSHA matters is on-going and the Company is unable to predict the final outcome of this matter with certainty. The Company believes that it is probable that it will incur a loss estimated to be approximately $6.0 million, and accordingly, recorded a liability in the consolidated financial statements. OSHA penalties are not covered by insurance, and are not deductible for federal income tax purposes.

On July 31, 2008, the Board of Directors received a letter from an attorney representing a stockholder of the Company requesting, among other things, that the Board cause an independent investigation to be made with respect to alleged mismanagement and breaches of fiduciary duty by the Company’s officers, directors and employees relating to the February 7, 2008 explosion at the Company’s refinery in Port Wentworth, Georgia. On October 2, 2008, the Board received a similar letter on behalf of another stockholder requesting that the Company commence legal actions against specified officers and directors. The Board of Directors established a committee of independent and disinterested directors on October 23, 2008 with full authority to investigate and address the allegations contained in the stockholder letters described above.

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)—(Continued)

Delaney v. Sheptor, et al., Cause No. 2009-03145 (Dist. Ct. Tex.), asserts a claim of breach of fiduciary duty against defendants in connection with the February 2008 explosion at the Port Wentworth facility and seeks unspecified damages on behalf of the Company. The action has been stayed pending completion of the investigation by the committee of independent and disinterested directors.

In January 2009, the Company was notified by its workers compensation liability insurance carrier that it anticipates charging the Company approximately $6.4 million as a result of certain loss-based assessments the carrier expected to receive from the state of Georgia’s Subsequent Injury Trust Fund (“SITF”). The Company’s insurance contract provides that it reimburse the carrier for such SITF assessments. The Company is currently pursuing a possible abatement. The Company is unable to determine the amount of its ultimate liability for this proposed assessment.

Additionally, 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 consolidated results of operations, financial position or cash flows. In connection with the sales of certain businesses, the Company made customary representations and warranties, and undertook indemnification obligations with regard to certain of these representations and warranties including financial statements, environmental and tax matters, and the conduct of the businesses prior to the sale. These indemnification obligations are subject to certain deductibles, caps and expiration dates.

In connection with the sale of a subsidiary in 2002, the buyer assumed $18.5 million of industrial revenue bonds, with final maturity in 2025. The Company remains contingently liable for repayment of the bonds under a guaranty arrangement and does not believe that a liability is probable. The Company has recorded a non-current liability for the fair value of the guarantee.

The Company, along with other sugar industry participants, was party to a lawsuit with McNeil Nutritional, which was settled in November 2008. The Company received $16.1 million in connection with the settlement and reported a gain on litigation settlement.

4. LSR VENTURE

In November 2009, the Company completed the formation and funding of a three-party joint venture with Sugar Growers and Refiners, Inc (“SUGAR”) and Cargill, Incorporated (“Cargill”) to construct and operate a new 3,100 ton-per-day cane sugar refinery in Gramercy, Louisiana adjacent to the Company’s existing sugar refinery.

The venture, Louisiana Sugar Refining, LLC or LSR, is owned one-third by each member, each of which agreed to contribute $30 million in cash or assets as equity to capitalize the venture. SUGAR’s contribution was $30 million cash; Cargill contributed $23.5 million cash and certain equipment and intellectual property valued at $6.5 million. The Company’s contribution, which will occur in three stages, consists of the existing refinery assets with a book value of approximately $22 million, including approximately 207 acres of land.

The Company will operate the existing refinery with sales and earnings for its own account until December 31, 2010, during which time the Company is obligated to complete certain improvements currently estimated to cost approximately $6 million. The equipment and personal property in the existing refinery will be contributed to LSR on January 1, 2011. After January 1, 2011, the Company will continue to operate the small bag packing facility in Gramercy, with 3.5 million cwt of refined bulk sugar purchased from LSR under a long term, supply agreement with market-based pricing provisions.

The Company contributed the footprint parcel of approximately 7 acres of land for the new refinery at the initial closing. Terms of the operative agreements require that LSR and Imperial jointly enroll the entire site (including the footprint) in the Voluntary Remediation Program (the “VRP”) of the Louisiana Department of Environmental Quality to conduct an environmental assessment of the site and complete remediation of any identified contamination. The Company is obligated to pay for the cost of remediation, if the VRP uncovers contamination above the applicable industrial standard. The Company will convey the remainder of the land to LSR upon completion of the VRP and be released of future environmental liabilities to state and federal authorities.

LSR has completed financing agreements aggregating $145 million to provide construction and working capital financing for the project. The financing is non-recourse to LSR’s members. The members have agreed to proportionately contribute additional capital

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)—(Continued)

to LSR if necessary to cover certain construction cost overruns and costs relating to the VRP that LSR agreed to assume. Construction costs of the new refinery are estimated at $120 million. The existing Gramercy refinery will operate during the construction and start-up phase of the new refinery, which began in December 2009 and is expected to be 18 to 24 months.

LSR’s raw cane sugar will be supplied by SUGAR through an evergreen raw sugar supply agreement. Cargill will serve as marketer of the refined sugar produced by LSR, other than refined sugar sold to Imperial.

5. STOCK-BASED COMPENSATION

During the three months ended December 31, 2009, the Company granted 133,446 shares of restricted stock to employees with a weighted average grant date fair value of $14.44 per share. Of these grants of restricted stock, 93,412 shares have performance and service conditions which must be met prior to vesting. The remaining 40,034 shares have service conditions which must be met before vesting occurs. These shares vest over a period of 34 months.

During the three months ended December 31, 2009, 16,379 shares of restricted stock vested with a fair value at vesting date of $221,000.

6. EARNINGS PER SHARE

The following table presents information necessary to calculate basic and diluted earnings per share (in thousands of dollars, except per share amounts):


	Three Months Ended December 31,
	2009		2008 (1)
Income (Loss) from Continuing Operations	$	178,116	$	(580	)

Average Shares Outstanding		11,789,897		11,683,594
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		215,894		—

Adjusted Average Shares		12,005,791		11,683,594

Diluted EPS—Continuing Operations	$	14.84	$	(0.05	)


Income from Discontinued Operations	$	—	$	644

Average Shares Outstanding		11,789,897		11,683,594
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		215,894		—

Adjusted Average Shares		12,005,791		11,683,594

Diluted EPS—Discontinued Operations	$	0.00	$	0.06


Net Income (Loss)	$	178,116	$	64

Average Shares Outstanding		11,789,897		11,683,594
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		215,894		—

Adjusted Average Shares		12,005,791		11,683,594

Diluted EPS—Net Income (Loss)	$	14.84	$	0.01

(1)

No assumed option exercises or restricted stock share issuances were included in the computation of diluted EPS for the quarter ended December 31, 2008, because doing so would have an antidilutive effect on the computation of diluted earnings per share. Excludes 7,381 and 379,522 antidilutive securities in the quarters ended December 31, 2009 and 2008.

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)—(Continued)

7. PENSION AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic benefit costs for the three months ended December 31, 2009 and 2008 were (in thousands):


	Three Months Ended December 31,
	2009			2008
Pension Plans
Service Cost	$	291		$	262
Interest Cost		2,823			3,273
Expected Return on Plan Assets		(2,575	)		(2,908	)
Amortization of Prior Service Cost		34			31
Recognized Actuarial Loss		817			370

Total Net Periodic Benefit Costs	$	1,390		$	1,028


Postretirement Benefits Other than Pension Plans
Service Cost	$	5		$	3
Interest Cost		113			148
Amortization of Prior Service Cost		(399	)		(399	)
Recognized Actuarial Loss		161			98

Total Net Periodic Benefit Costs (Income)	$	(120	)	$	(150	)

Pension plan contributions, which are based on regulatory requirements, were $2.6 million for the three months ended December 31, 2009 and $0.3 million for the three months ended December 31, 2008. Contributions during the remainder of fiscal 2010 are expected to be approximately $11.1 million.

8. OTHER INCOME

Other income included the following (in thousands of dollars):


	Quarter Ended December 31,
	2009		2008
Equity Earnings in investment in
Comercializadora Santos Imperial S. de R.L. de C.V.	$	97	$	106
Wholesome Sweeteners, Inc.		783		327
Distributions from cost basis fuel terminal partnership		—		147
Gain on sale of securities		—		388
Other		106		48


Total	$	986	$	1,016

The Company owns a 50 percent interest in Comercializadora Santos Imperial S. de R.L. de C.V. and a 50 percent interest in Wholesome Sweetners, Inc. The Company reports its share of earnings in these investees on the equity method. Summarized financial information for each of the Company’s equity method investees for the quarters ended December 31, 2009 and 2008 includes the following (in thousands of dollars):


	Comercializadora Santos Imperial S. de R.L. de C.V.				Wholesome Sweeteners, Inc.
	2009		2008		2009		2008

Net Sales	$	41,038	$	65,149	$	24,748	$	18,851
Gross Profit	$	934	$	658	$	6,598	$	3,959
Net Income	$	195	$	213	$	2,016	$	774

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)—(Continued)

9. FAIR VALUE

The Company determines the fair value of natural gas and raw sugar futures contracts and marketable securities using quoted market prices for the individual securities. The following table presents the Company’s assets and liabilities measured and recognized at fair value on a recurring basis classified at the appropriate level of the fair value hierarchy as of December 31, 2009 and September 30, 2009 (in thousands of dollars):


	December 31, 2009
	Fair Value				Margin Requirements Settled in Cash			Balance Sheet Total
	Level 1		Level 2	Level 3
Current Assets:
Natural Gas and Raw Sugar Futures Contracts	$	30,463	—	—	$	(30,463	)		—
Marketable Securities		201	—	—		—		$	201
Current Liabilities:
Natural Gas and Raw Sugar Futures Contracts		507	—	—		(507	)		—
Non-Current Assets:
Natural Gas and Raw Sugar Futures Contracts		351	—	—		(351	)		—

	September 30, 2009
	Fair Value				Margin Requirements Settled in Cash			Balance Sheet Total
	Level 1		Level 2	Level 3
Current Assets:
Natural Gas and Raw Sugar Futures Contracts	$	21,077	—	—	$	(21,077	)		—
Marketable Securities		56	—	—		—		$	56
Current Liabilities:
Natural Gas and Raw Sugar Futures Contracts		126	—	—		(126	)		—
Non-Current Assets:
Natural Gas and Raw Sugar Futures Contracts		468	—	—		(468	)		—
Non-Current Liabilities:
Natural Gas and Raw Sugar Futures Contracts		13	—	—		(13	)		—

Fair value hierarchy levels are as follows:

•

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•

Level 2—Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;

•

Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. These inputs may be used with internally developed methodologies that are used to generate management’s best estimate of fair value.

10. DERIVATIVE INSTRUMENTS

We use raw sugar futures and options in our raw sugar purchasing programs and natural gas futures and options to hedge natural gas purchases used in our manufacturing operations. Additionally, we periodically use derivatives to manage interest rate and foreign currency exchange risk. Our objective in the use of derivative instruments is to mitigate commodity price, interest rate or foreign currency exchange risk. Our derivatives hedging activity is supervised by a senior risk management committee which monitors and reports compliance with our risk management policy to the Audit Committee of the Board of Directors.

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)—(Continued)

The majority of our industrial channel sales are made under fixed price, forward sales contracts. In order to mitigate price risk in raw and refined sugar commitments, we manage the volume of refined sugar sales contracted for future delivery in relation to 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 raw sugar futures contracts. Historically, substantially all of our purchases of domestic raw sugar and raw sugar quota imports are priced based on the New York Board of Trade (NYBOT) Sugar No. 16 futures contract. We use these futures contracts to price our physical domestic and raw sugar quota purchase commitments. Certain of these derivative instruments qualify as cash flow hedges and are designated as hedges for accounting purposes. To the extent that derivative instruments do not qualify for hedge accounting treatment, the Company records the effect of those instruments in current earnings. Non-quota imports under the re-export program, which constitutes less than 10% of our raw sugar purchases, are priced based on the NYBOT Sugar No. 11 futures contract. We use these futures contracts to price our world raw purchase commitments, however, these derivative instruments are not designated as cash flow hedges. Additionally we receive short raw sugar futures contracts from certain raw sugar suppliers that are used as pricing mechanisms which are not designated as hedges. We have purchased domestic and world raw sugar futures contracts up to 23 months in advance of the physical purchase.

The Company recognized pre-tax gains of $18.9 million in the three months ended December 31, 2009 and $27.9 million in fiscal year ended September 30, 2009 on domestic raw sugar futures contracts intended to hedge fiscal 2010 and 2011 raw sugar purchases. These derivatives did not qualify for hedge accounting treatment because of the Company’s inability to forecast raw sugar purchases as a result of the Port Wentworth start-up during fiscal 2009.

The pricing of our physical natural gas purchases generally is indexed to a spot market index and we use natural gas futures contracts traded on the New York Mercantile Exchange to hedge the cost of natural gas purchased under these physical contracts. These derivative instruments qualify as cash flow hedges and are designated as hedges for accounting purposes. Additionally, we utilize natural gas futures which are not designated as cash flow hedges to manage the remaining commodity price risk above the volume of derivatives designated as cash flow hedges. We have purchased natural gas futures contracts up to 12 months in advance of the physical purchase of natural gas.

For derivative instruments that qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative is reported as a component of other comprehensive income and reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses that result from the discontinuance of cash flow hedges because it is probable that the original forecasted transaction will not occur are recognized in current earnings. Gains and losses on derivatives representing hedge ineffectiveness are recognized in current earnings. Gains and losses on derivatives not designated as hedges are recognized in current earnings.

At December 31, 2009 we had the following net futures positions:


Hedge Designation	Domestic Sugar (cwt)	World Sugar (cwt)	Natural Gas (mmbtu)
Cash Flow	—	—	960,000
Not Designated	4,838,000	642,000	210,000

All of our futures contracts are settled in cash daily with the respective futures exchanges and therefore do not contain credit-risk-related contingent features. The Company has $11.5 million recorded on the balance sheet for cash held on deposit in margin accounts at December 31, 2009 for the futures positions above. At December 31, 2009 there were no derivative positions to mitigate the risk of interest rates or foreign currency exchange. For the three month period ended December 31, 2009, we did not engage in trading activity with derivatives. The table below shows the location and amounts in the consolidated balance for derivative instruments (in thousands):


	Hedge Designation	Fair Value		Margin Requirements Settled in Cash			Balance Sheet Total
Current Assets:
No. 16 Domestic Sugar Futures Contracts	Not Designated	$	28,002	$	(28,002	)	—
No. 11 World Sugar Futures Contracts	Not Designated		2,461		(2,461	)	—
Current Liabilities:
Natural Gas	Cash Flow		474		(474	)	—
Natural Gas	Not Designated		33		(33	)	—
Non-Current Assets:
No. 16 Domestic Sugar Futures Contracts	Not Designated		351		(351	)	—

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)—(Continued)

The impact of futures contracts on the consolidated income statement for fiscal 2010 is presented below:


Hedge Designation	Income Statement Line Item	Three Months Ended December 31, 2009
		Domestic Sugar			World Sugar			Natural Gas
Cash Flow	Cost of Sales⁽¹⁾	$	—		$	—		$	341
Cash Flow	Accumulated other comprehensive loss		—			—			536
Not Designated	Cost of Sales (credit)		(18,866	)		(52	)		73

(1)	Amounts were reclassified from accumulated other comprehensive income.

There were no gains or losses recognized on cash flow hedges for ineffectiveness, nor were there any portion of derivatives excluded from the effectiveness assessment. Approximately $0.5 million of losses on cash flow hedges for natural gas is expected to be reclassified to earnings over the next twelve months.

11. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in Accumulated Other Comprehensive Income for the quarter ended December 31, 2009 are as follows:


	Net Unrealized Gains (Losses) on Derivatives			Net Unrealized Gains (Losses) on Pension and Other Post Retirement Medical Benefits			Foreign Currency Translation Adjustments and Other			Total
Balance September 30, 2009	$	25		$	(69,820	)	$	(114	)	$	(69,909	)

Change in Derivative Fair Value (Net of Tax of $193,000)		(343	)								(343	)

Reclassification from Accumulated Other Comprehensive Income (Loss) to Net Income (Net of Tax of $122,000)		218									218
Foreign Currency Translation Adjustment (Net of Tax of $40,000)								72			72

Balance December 31, 2009	$	(100	)	$	(69,820	)	$	(42	)	$	(69,962	)

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with information contained in the Consolidated Financial Statements and the notes thereto and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2009.

Overview

We operate in a single domestic business segment, the production and sale of refined sugar and related products. Our results of operations substantially depend on market factors, including the demand for and price of refined sugar, the price of raw cane sugar and the availability and price of energy and other resources. These factors are influenced by a variety of external forces that we are unable to predict, including the number of domestic acres contracted to grow sugar cane and sugar beets, prices of competing crops, supply and price of raw cane sugar in the world, domestic dietary trends, competing sweeteners, weather conditions, production outages at key industry facilities and the United States and Mexican farm and trade policies. The domestic sugar industry is subject to substantial influence by legislative and regulatory actions. The 2008 Farm Bill limits the importation of raw cane sugar and the marketing of refined beet and raw cane sugar, potentially affecting refined sugar sales prices and volumes as well as the supply and cost of raw material available to our cane refineries.

The Company experienced an explosion and fire on February 7, 2008, at its sugar refinery in Port Wentworth, Georgia, which is located near Savannah, Georgia. Production at the refinery, which comprises approximately 60% of our capacity, was suspended after the accident until we commenced limited bulk sugar production in the summer of 2009. Packaged production on certain lines began in September 2009. Installation of the remaining packaging lines was completed during the quarter ended December 31, 2009 and the refined silo storage facilities were operational in early January 2010.

Results of Operations

Three Months Ended December 31, 2009 compared to Three Months Ended December 31, 2008

For the three months ended December 31, 2009, we reported income from continuing operations of $178.1 million or $15.11 per basic share, compared to a loss of $0.6 million or $0.05 per basic share during the first fiscal quarter of the prior year. The recognition of insurance and derivative gains has had a significant impact on our reported earnings. In December 2009 the Company settled the property insurance claim relating to the Port Wentworth accident and recorded pretax gains totaling $278.5 million ($178.2 million after tax) in the quarter. Excluding these insurance gains, loss from continuing operations was $92,000. The domestic raw sugar market rose dramatically during the second half of calendar 2009, resulting in first quarter gains of $18.9 million recognized on derivative contracts intended to hedge raw sugar purchases primarily for the balance of fiscal 2010. These gains do not qualify for hedge accounting treatment. Partially offsetting these gains were approximately $8.8 million of higher raw sugar costs resulting from derivative gains recognized in the fourth quarter of fiscal 2009 which were intended to hedge the first quarter’s raw sugar purchases. We discuss these and other factors in more detail below.

Sugar sales comprised approximately 98% of our net sales in the quarter ended December 31, 2009 and 97% in the prior year. Sugar sales volumes and prices were:


	Three Months Ended December 31,
	2009			2008
	Volume	Price		Volume	Price
	(000 cwt)	(per cwt)		(000 cwt)	(per cwt)
Sugar Sales:
Industrial	2,484	$	32.04	1,190	$	30.36
Consumer	1,264		43.66	1,170		38.34
Distributor	770		38.38	637		34.19


Domestic Sales	4,518		36.37	2,997		34.29
World Sales	185		32.30	120		24.09


Sugar Sales	4,703	$	36.21	3,117	$	33.90

Net sales increased 59.9% for the three months ended December 31, 2009, compared to the same period in the prior year. Domestic sugar volumes increased 50.8% for the quarter primarily due to the additional production from the Port Wentworth refinery partially offset by lower volumes of sugar purchased from other producers. Domestic sales prices increased 6.1% for the quarter. Sugar production from the domestic sugar beet crop harvested in the fall of 2009, which is forecasted by the USDA to be 5.6% higher than the prior year, is still significantly below recent historical levels. Additionally, imports from Mexico in fiscal 2010 are forecasted to be 7.3% of U.S. annual demand as compared to 13.2% in the prior year. The combination of these factors, as well as the influence of higher raw sugar prices, has led to higher refined prices.

The majority of industrial channel sales and a portion of distributor channel sales are made under fixed price contracts which generally extend up to a year, many of which are on a calendar year basis. As a result, realized sales prices tend to lag market trends. The Company continued to fulfill lower-priced contracts which existed at the time of the Port Wentworth accident in February 2008, dampening the effect of higher prices in the current quarter. Fulfillment of these contracts was substantially completed by December 31, 2009, and amounted to 18% of the combined sales in the industrial and distributor channels in the current quarter. Industrial and distributor sales prices are expected to continue to rise during the balance of fiscal 2010 as new contracts commence at higher price levels.

For the three months ended December 31, 2009, gross margin as a percentage of sales increased to 7.1% compared to a negative (2.7%) in the prior year quarter. The increase in gross margin percentage is primarily due to higher refined sugar prices and gains on raw sugar derivatives which were intended to hedge raw sugar purchases later in fiscal 2010.

Raw sugar production shortfalls in India and poor crop conditions in Brazil have created very tight supply in the world raw sugar market, which has driven up world raw sugar prices. Rising world raw sugar prices together with restrictions on USDA actions on imports imposed by the 2008 Farm Bill have pushed domestic raw sugar prices higher. The Company has announced price increases to attempt to offset the increase in raw sugar cost, however there can be no assurance that we will be successful in achieving sales price increases sufficient to offset these higher raw sugar costs.

Raw sugar derivative gains recognized in fiscal 2009 and the first quarter of fiscal 2010, which were intended to hedge future sugar purchases were as follows:

Raw Sugar Futures Derivative Gains

(In Millions)


Recognized In				Futures Contract Delivery Period
Year Ended September 30, 2009		Quarter Ended December 31, 2009		Quarter Ended								Year Ended September 30, 2011
Year Ended September 30, 2009		Quarter Ended December 31, 2009		December 31, 2009		March 31, 2010		June 30, 2010		September 30, 2010		Year Ended September 30, 2011
$	27.9			$	8.8	$	10.0	$	5.7	$	2.9	$	0.5
		$	18.9			$	7.0	$	7.9	$	3.4	$	0.6

The recognition of these gains will result in higher raw sugar cost in future periods.

Our cost of domestic raw cane sugar increased from $21.68 per cwt (on a raw market basis) for the prior year’s first quarter to $25.19 per cwt for the quarter ended December 31, 2009. The current quarter’s raw sugar cost reflects that $8.8 million of derivative gains recognized in fiscal 2009 was not available as originally intended to reduce cost in the current quarter. The higher domestic raw cane sugar cost decreased our gross margin percentage by 9.2% for the three months ended December 31, 2009 compared to the same quarter last year.

Cost of sales also includes $18.9 million of gains on raw sugar futures contracts recognized in the first quarter of fiscal 2010 which positively impacted gross margin by 10.9%. Absent the impact of the $18.9 million of gains recognized in this quarter, along with the $8.8 million of higher raw sugar cost from fiscal 2009 derivative gains, gross margin as a percent of sales would have been 1.4% in the current quarter. In January 2010, the Company recognized $22.6 million of derivative gains on raw sugar futures contracts that will result in higher raw sugar costs in the future. If the balance of our anticipated raw sugar purchases for fiscal 2010 were priced in the domestic sugar futures market on February 5, 2010, our raw sugar costs for fiscal 2010 would be $30.35 per cwt.

Energy costs per cwt were lower than the prior year due to a significant drop in natural gas prices and as a result gross margin improved 3.4%. The Gramercy refinery uses natural gas exclusively and the Port Wentworth refinery is expected to resume usage of coal as its primary energy source in the second quarter of fiscal 2010. Our average NYMEX basis cost of natural gas after applying gains and losses from hedging activity decreased to $4.67 per mmbtu in the current year as compared to $9.86 last year.


	Quarter Ended December 31,
	2009			2008
	Volume	Price		Volume	Price
	(000 MMBTU)	(per MMBTU)		(000 MMBTU)	(per MMBTU)
Natural Gas	1,143	$	4.67	572	$	9.86
Coal	—		—	—		—
Fuel Oil	—		—	—		—


Total	1,143	$	4.67	572	$	9.86

We have purchased or hedged approximately 76% of our expected natural gas requirements for fiscal 2010 at a price of $5.38 per mmbtu. If the balance of our anticipated natural gas purchases were priced in the futures market on February 5, 2010, our natural gas costs would be $5.44 per mmbtu, $6.4 million lower than fiscal 2009.

Transportation costs were lower than the same quarter last year as customer shipments were optimized between Gramercy and Port Wentworth as compared to the longer distances required last year without the benefit of Port Wentworth production. Gross margin improved 2.2% as a result of these lower transportation costs.

Manufacturing costs increased over the same quarter last year as the Port Wentworth refinery ramped up production volume throughout the first quarter of fiscal 2010. The lower daily production rates in Port Wentworth decreased sugar yield and increased fixed unit costs due to absorption as the refinery ran at approximately 60% of its normal production rate during the current quarter. Gross margin percentage for the quarter was reduced by 1.6% as a result of these increased costs. Following completion of the silo commissioning, the Port Wentworth refinery continues to ramp up production addressing operating challenges as they arise. Volumes and costs in the second fiscal quarter may be affected as the refinery continues to progress to normal production levels.

Selling, general and administrative expense decreased $0.1 million for the quarter ended December 31, 2009 compared to the same period in the prior year primarily due to lower computer related depreciation, offset in part by higher marketing related spending.

The Company settled the Port Wentworth property and business interruption insurance claim in late December for $345.0 million resulting in pretax gains of $278.5 million. We incurred $1.8 million of continuing legal and consulting costs related to the refinery explosion during the current quarter as compared to $14.9 million of charges consisting primarily of cleanup, repairs and continuing payroll costs in the prior year quarter. Details of the settlement of the insurance claim are provided in Note 2 to the Consolidated Financial Statements.

The Company along with other sugar industry participants was party to a lawsuit with McNeil Nutritional, which was settled in November 2008. The Company received $16.1 million in connection with the settlement which was recorded as a gain on litigation settlement in the quarter ended December 31, 2008.

As a result of the foregoing, operating income was $277.6 million in the first fiscal quarter compared to an operating loss of $(1.7) million in the first fiscal quarter of the prior year.

Other income, which includes equity investment earnings and distributions from cost basis investments, was virtually unchanged in the three-month period ended December 31, 2009 compared to the same period in the prior year as a significant improvement in Wholesome Sweeteners, Inc. earnings was offset by lower gains on sales of securities. Other income included the following (in thousands of dollars):


	Quarter Ended December 31,
	2009		2008
Equity Earnings in investment in
Mexican marketing Joint Venture	$	97	$	106
Wholesome Sweeteners, Inc.		783		327
Distributions from cost basis fuel terminal partnership		—		147
Gain on sale of securities		—		388
Other		106		48


Total	$	986	$	1,016

We have estimated a combined federal and state income tax rate of 36.0% for the three months ended December 31, 2009 compared to 28.3% in the same period last year. The increase in the effective tax rate is primarily attributable to a change in the accrual for tax uncertainties in fiscal 2009.

Income from discontinued operations in fiscal 2009 is a result of the resolution of pre-disposal contingencies.

Liquidity and Capital Resources

We have rebuilt the portions of the Port Wentworth refinery and packaging operations that were damaged or destroyed in the industrial accident in February 2008. The start up of the refined sugar silos, completed in early January 2010, was the last significant construction component of the rebuild effort. The replacement cost of the damaged facilities at the Port Wentworth refinery is estimated at $230 million and we had spent $196 million on the project through December 31, 2009. The remaining balance of $34 million is expected to be expended over the second and third quarter of fiscal 2010 as final contract retainage is paid to vendors upon completion of performance obligations. Through December 31, 2009, we have received advances on our property insurance claims totaling $300 million and received an additional $45 million in January 2010 in the final claim settlement.

At December 31, 2009, the Company had cash and cash equivalents of $66.4 million. Additionally, as more fully described below, the Company has a revolving credit agreement with Bank of America, N.A. (the “Revolver”) which provides for up to $100 million (subject to a borrowing base) of senior secured revolving credit loans. At December 31, 2009, we had $60 million of outstanding borrowings and had the capacity under the borrowing base formula to borrow $32.6 million against inventory and receivables, after deducting outstanding letters of credit totaling $7.4 million.

We believe that our available liquidity and capital resources including cash from operations, insurance recoveries, cash balances and existing revolving credit agreement, are sufficient to meet our operating and capital needs, including remaining estimated reconstruction costs and ongoing capital improvements, through fiscal 2010. The recent credit crisis and related turmoil in the global financial system could make the availability of borrowings available to finance any insurance shortfall or other liquidity needs difficult, and the cost of such borrowings expensive.

The Revolver, which expires December 31, 2011, is secured by substantially all of our current assets, certain investments and certain property, plant and equipment. Each of our subsidiaries is either a borrower or a guarantor under the facility. Interest on borrowings under the Revolver is at LIBOR plus a margin that varies (with liquidity, as defined) from 1.00% to 1.75%, or the base rate (Bank of America prime rate) plus a margin of negative 0.25% to positive 0.25%.

The agreement contains covenants limiting our ability to, among other things:

•

incur other indebtedness;

•

incur other liens;

•

undergo any fundamental changes;

•

engage in transactions with affiliates;

•

enter into sale and leaseback transactions;

•

change our fiscal periods;

•

enter into mergers or consolidations;

•

sell assets; and

•

prepay other debt.

In addition, in the event that our average total liquidity (defined as the average of the borrowing base, less average actual borrowings and letters of credit) falls below $20 million, the Revolver requires that we comply with a quarterly covenant which establishes a minimum level of earnings before interest, taxes, depreciation and amortization, as defined (EBITDA). The Revolver limits our ability to pay dividends or repurchase stock if our average total liquidity, after adjustment on a pro forma basis for such transaction, is less than $20 million. Average total liquidity for the quarter ended December 31, 2009 was $98 million.

The Revolver also includes customary events of default, including a change of control. Borrowings will generally be available subject to a borrowing base and to the accuracy of all representations and warranties, including the absence of a material adverse change and the absence of any default or event of default. Although the facility has a final maturity date of December 31, 2011, we classify debt under the Revolver as current, as the agreement contains a subjective acceleration clause if in the opinion of the lenders there is a material adverse effect, and provides the lenders direct access to our cash receipts.

Our capital expenditures for the three months ended December 31, 2009 were $37.6 million including $34.5 million relating to the Port Wentworth rebuild. We expect to spend an additional $34 million in the second and third quarters of this year to complete the Port Wentworth rebuild. Capital expenditures in fiscal 2010, excluding the Port Wentworth rebuild project, are expected to total between $15 million and $20 million, related primarily to safety improvements and normal equipment replacement, and includes approximately $6.0 million of improvements we are obligated to complete in connect with the LSR joint venture agreements.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimate methodologies since the filing of our Annual Report on Form 10-K for the year ended September 30, 2009.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We use raw sugar futures and options in our raw sugar purchasing programs and natural gas futures and options to hedge natural gas purchases used in our manufacturing operations. Our derivatives hedging activity is supervised by a senior risk management committee which monitors and reports compliance with our risk management policy to the Audit Committee of the Board of Directors.

The information in the table below presents our domestic and world raw sugar futures positions outstanding as of December 31, 2009.


	Expected Maturity Fiscal 2010		Expected Maturity Fiscal 2011		Expected Maturity Fiscal 2012
Domestic Futures Contracts (net long positions):
Contract Volumes (cwt)		4,334,000		498,000		6,000
Weighted Average Contract Price (per cwt)	$	27.09	$	26.07	$	26.20
Contract Amount	$	117,397,000	$	12,994,000	$	147,000
Weighted Average Fair Value (per cwt)	$	33.38	$	28.19	$	26.43
Fair Value	$	144,694,000	$	14,049,000	$	148,000


	Expected Maturity Fiscal 2010
World Futures Contracts (net long positions):
Contract Volumes (cwt)		642,000
Weighted Average Contract Price (per cwt)	$	23.12
Contract Amount	$	14,835,000
Weighted Average Fair Value (per cwt)	$	26.95
Fair Value	$	17,295,000

The above information does not include either our physical inventory or our fixed price purchase commitments for raw sugar. At December 31, 2008, our domestic futures position was a net long position of 336,000 cwt at an average contract price of $20.58 and an average fair value price of $18.77. Our world futures position at December 31, 2008 was a net long position of 676,480 cwt at an average contract price of $14.07 and an average fair value price of $11.81.

The information in the table below presents our natural gas futures positions outstanding as of December 31, 2009.


	Expected Maturity Fiscal 2010		Expected Maturity Fiscal 2011
Futures Contracts (long positions):
Contract Volumes (mmbtu)		1,110,000		60,000
Weighted Average Contract Price (per mmbtu)	$	6.03	$	6.95
Contract Amount	$	6,692,000	$	417,000
Weighted Average Fair Value (per mmbtu)	$	5.61	$	6.22
Fair Value	$	6,229,000	$	373,000

At December 31, 2008, our natural gas futures position was a long position of 970,000 mmbtu with an average contract price of $9.37 and an average fair value price of $5.85.

At December 31, 2009 and 2008, we had no interest rate derivatives which were sensitive to interest rate changes.

Item 4.

CONTROLS AND PROCEDURES

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2009, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal controls over financial reporting that occurred during the three months ended December 31, 2009, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

On January 16, 2009, one of such stockholders filed a derivative action in the District Court of Harris County, Texas against twelve current and former directors and officers of the Company and named the Company as a nominal defendant. The action, entitled Delaney v. Sheptor, et al., Cause No. 2009-03145 (Dist. Ct. Tex.), asserts a claim of breach of fiduciary duty against defendants in connection with the February 2008 explosion at the Port Wentworth facility and seeks unspecified damages on behalf of the Company. The action has been stayed pending completion of the investigation by the committee of independent and disinterested directors.

Item 1A.

Risk Factors

There have been no material changes from the risk factors disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended September 30, 2009.

Item 4.

Submission of Matters to a Vote of Security Holders

On January 29, 2010, the Company held its annual meeting of shareholders and voted on two proposals.

(1) Three directors were elected with votes cast as follows:


Nominee	Votes for	Votes against	Abstentions
Directors in Class II – Terms expiring at the 2013 Annual Meeting of Shareholders:
James J. Gaffney	7,104,692	759,169	12,288
Yves-Andre Istel	6,987,064	875,372	13,713
Ronald C. Kesselman	7,591,861	270,881	13,406

The following five directors of the Company whose terms of office are scheduled to continue until 2011 or 2012 are as follows:

Gaylord O. Coan

David C. Moran

John C. Sheptor

John E. Stokely

John K. Sweeney

(2) The shareholders ratified the appointment of Deloitte & Touche L.L.P. as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2010, with votes cast as follows:


Votes for	Votes against	Abstentions
10,002,390	34,051	22,641

Item 6.

Exhibits

(a) Exhibits



10		Amended and Restated Imperial Sugar Company Long Term Incentive Plan dated as of January 28, 2010.

31.1		Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.

31.2		Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.

32		Certifications required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

SIGNATURES

Pursuant to the requirements 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.


	IMPERIAL SUGAR COMPANY
	(Registrant)

Dated: February 8, 2010	By:	/s/ H. P. Mechler
		H. P. Mechler
		Senior Vice President and Chief Financial Officer

Exhibit Index


Exhibit No.		Document

10		Amended and Restated Imperial Sugar Company Long Term Incentive Plan dated as of January 28, 2010.

31.1		Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.

31.2		Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.

32		Certifications required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

EX-10 2 dex10.htm AMENDED AND RESTATED LONG TERM INCENTIVE PLAN Amended and Restated Long Term Incentive Plan

Exhibit 10

IMPERIAL SUGAR COMPANY LONG TERM INCENTIVE PLAN

(As Amended and Restated Effective January 28, 2010)

Article One

SCOPE AND PURPOSE OF THE PLAN

1.1 Plan. This Imperial Sugar Company Long Term Incentive Plan (“Plan”) was adopted by Imperial Sugar Company (the “Company”) in accordance with and subject to the terms and conditions of the Company’s Second Amended and Restated Joint Plan of Reorganization (the “Plan of Reorganization”) in Case No. 01-00140-01-00176 before the United States Bankruptcy Court for the District of Delaware to reward certain key employees, who provide services to or for the Company or its Subsidiaries and Nonemployee Directors of the Company. Thereafter, on January 10, 2003, the Executive Compensation Committee of the Board of Directors of the Company approved a proposed amendment of the Plan to increase the number of shares of Common Stock of the Company available for issuance to certain key employees and Nonemployee Directors under the Plan by 450,000 shares, subject to shareholder approval. The Company’s shareholders approved such increase in the aggregate number of shares of Common Stock of the Company available for issuance under the Plan at the Company’s Annual Meeting of Shareholders held on February 28, 2003. On December 6, 2004, the Executive Compensation Committee of the Board of Directors of the Company approved a proposed amendment of the Plan to increase the number of shares of Common Stock of the Company available for issuance to certain key employees and Nonemployee Directors under the Plan by 600,000 shares, subject to shareholder approval. The Company’s shareholders approved such increase in the aggregate number of shares of Common Stock of the Company available for issuance under the Plan at the Company’s Annual Meeting of Shareholders held on February 1, 2005. On December 5, 2007, the Executive Compensation Committee of the Board of Directors of the Company approved a proposed amendment of the Plan to increase the number of shares of Common Stock of the Company available for issuance to certain key employees and Nonemployee Directors under the Plan by 250,000 shares, subject to shareholder approval. The Company’s shareholders approved such increase in the aggregate number of shares of Common Stock of the Company available for issuance under the Plan at the Company’s Annual Meeting of Shareholders held on January 29, 2008.

1.2 Objectives. This Plan is designed to attract and retain key employees and Nonemployee Directors of the Company or any Subsidiaries which may later be created or acquired and is maintained in order to encourage a sense of proprietorship and to stimulate the active interest of such persons in the development and financial success of the Company and such Subsidiaries. These objectives are to be accomplished by making Awards under this Plan.

Article Two

GENERAL DEFINITIONS

2.1 General Definitions. As used herein, the terms set forth below shall have the following respective meanings:

(a) “Authorized Officer” means the Chairman of the Board or the Chief Executive Officer of the Company (or any other senior officer of the Company to whom either the Chairman or the Chief Executive Officer shall delegate the authority to execute any Award Agreement).

(b) “Award” means an Employee Award or a Nonemployee Director Award.

(d) “Board” means the Board of Directors of the Company.

(e) “Cash Award” means an Award denominated in cash.

(f) “Change of Control” means the occurrence of one or more of the following events:

(i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than (1) the Company or any of its affiliates or Subsidiaries; (2) an employee benefit plan of the Company or trustee or other fiduciary holding securities under an employee benefit plan of the Company or person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan; (3) an underwriter temporarily holding securities pursuant to an offering of such securities; or (4) an entity owned, directly or indirectly, by the Company’s stockholders in substantially the same proportions as their ownership of the Company’s common stock; is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing forty percent (40%) or more of the combined voting power of the Company’s then outstanding securities;

(ii) the Company has sold substantially all of its assets to an unrelated third party; or

(iii) following the election or removal of directors, a majority of the Board consists of individuals who were neither members of the Board one (1) year before such election or removal nor approved in advance by directors representing at least a majority of the directors then in office who were directors at the beginning of the one-year period or were similarly approved.

Notwithstanding the foregoing, (i) with respect to any Award that is outstanding as of January 28, 2010, “Change of Control” shall also mean a “Change of Control” as defined in the Plan as in effect on the date of such Award, if such definition is more favorable for the Participant and (ii) for purposes of any Award hereunder that is deferred compensation pursuant to Section 409A of the Code and is payable on account of a Change of Control, the event must also constitute a change in the ownership or effective control of a corporation or a change in the ownership of a substantial portion of the assets of a corporation under Treasury Regulation Section 1.409A-3(i)(5).

(g) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(h) “Committee” means the Compensation Committee of the Board or a committee designated by the Board to administer the Plan.

(i) “Common Stock” means the Common Stock of the Company.

(j) “Company” means the Imperial Sugar Company, a Texas corporation.

(k) “Nonemployee Director” means an individual serving as a member of the Board who is not an Employee of the Company or any of its Subsidiaries.

(l) “Disability” means permanent and total disability as defined in Code Section 22(e)(3).

(m) “Dividend Equivalents” means, with respect to shares of Restricted Stock that are to be issued at the end of the Restriction Period (including conditional stock), an amount equal to all dividends and other distributions (or the economic equivalent thereof) that are payable to stockholders of record during the Restriction Period on a like number of shares of Common Stock.

(n) “Effective Date” means August 29, 2001.

(o) “Employee” means an employee of the Company or a Subsidiary (if any).

(p) “Employee Award” means the grant of any Option, SAR Stock Award, Cash Award or Performance Award, whether granted singly, in combination or in tandem, to an Employee (or an individual expected to become an Employee within six months of the date of the Award) pursuant to such applicable terms, conditions and limitations as the Committee may establish in order to fulfill the objectives of the Plan.

(q) “Employee Award Agreement” means a written agreement between the Company and an Employee setting forth the terms, conditions and limitations applicable to an Employee Award.

(r) “Exchange Act” means the Securities and Exchange Act of 1934, as amended.

(s) “Fair Market Value” of a share of Common Stock means, as of a particular date, (i) if shares of Common Stock are listed on a national securities exchange, the closing sales price per share of Common Stock reported on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date,

or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, or (ii) if shares of Common Stock are not so listed but are quoted by the NASDAQ Stock Market, Inc., the closing sales price per share of Common Stock reported by the NASDAQ Stock Market, Inc. on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, or (iii) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations are available, as reported by the NASDAQ Stock Market, Inc., or, if not reported by the NASDAQ Stock Market, Inc., by the National Quotation Bureau Incorporated, or (iv) if shares of Common Stock are not publicly traded, the most recent value determined by an independent appraiser appointed by the Company for such purpose, in a manner consistent with Treasury Regulation Section 1.401A-l(b)(5)(iv).

(t) “Incentive Option” means an Option that is intended to comply with the requirements set forth in Section 422 of the Code.

(u) “Nonemployee Director” means an individual serving as a member of the Board who is not an Employee of the Company or any of its Subsidiaries,

(v) “Nonemployee Director Award” means any Stock Award or Performance Award granted, whether singly, in combination, or in tandem, to a Participant who is a Nonemployee Director pursuant to such applicable terms, conditions and limitations (including treatment as a Performance Award) as a Board may establish in order to fulfill the objectives of the Plan.

(w) “Nonemployee Director Award Agreement” means a written agreement between the Company and a Nonemployee Director setting forth the terms, conditions and limitations to a Nonemployee Director Award, to the extent the Board determines such an agreement is necessary.

(x) “Nonqualified Stock Option” means an Option that is not an Incentive Option.

(y) “Option” means a right to purchase a specified number of shares of Common Stock at a specified price, which may be an Incentive Option or a Nonqualified Stock Option.

(z) “Participant” means an Employee or Nonemployee Director to whom an Award has been made under this Plan.

(aa) “Performance Award” means an Award made to an Employee or a Nonemployee Director pursuant to this Plan that is subject to the attainment of one or more Performance Goals.

(bb) “Performance Goal” means a standard established by the Committee to determine in whole or in part whether a Performance Award shall be earned.

(cc) “Plan” means Imperial Sugar Company Long Term Incentive Plan, as amended from time to time.

(dd) “Restricted Stock” means any Common Stock that is restricted or subject to forfeiture provisions.

(ee) “Restriction Period” means a period of time beginning as of the date upon which an Award of Restricted Stock is made pursuant to this Plan and ending as of the date upon which the Common stock subject to such Award is no longer restricted or subject to forfeiture provisions.

(ff) “SAR” means a right to receive a payment, in cash or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock on the date the right is exercised over a specified strike price, in each case, as determined by the Committee; provided, the specified strike price shall not be less than the Fair Market Value of the underlying shares of Common Stock on the date the right is granted; provided, further, the specified number of shares shall be fixed on or before the date of grant of the right.

(gg) “Stock Award” means an award in the form of shares of Common Stock or units denominated in shares of Common Stock, including an award of Restricted Stock.

(hh) “Stock Based Awards Limitations” shall have the meaning set forth in Article Seven.

(ii) “Subsidiary” means (i) in the case of a corporation, any corporation of which the Company directly or indirectly owns shares representing more than 50% of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the stockholders of such corporation and (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns more than 50% of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise).

(jj) “Short-Term Deferral Period” shall mean the period ending on the later of (i) the 15th day of the third month following the end of the calendar year in which the right to an Award is no longer subject to a substantial risk of forfeiture, or (ii) the 15th day of the third month following the end of the Company’s first fiscal year in which the right to the Award is no longer subject to a substantial risk of forfeiture. A payment or delivery (as applicable) shall be considered made within the Short-Term Deferral Period in the event the rules of Treasury Regulation Section 1.409A-l(b)(4)(ii) apply.

Article Three

ELIGIBILITY

3.1 Eligibility for Awards.

(a) Employees. Individuals eligible for Employee Awards under this Plan are (i) those key Employees who hold positions of responsibility and whose performance, in the judgment of the Committee, can have a significant effect on the success of the Company and its Subsidiaries and (ii) individuals who are expected to become such Employees within six months of the date of the Award.

(b) Nonemployee Directors. Members of the Board who are Nonemployee Directors are eligible for Nonemployee Director Awards under this Plan.

Article Four

SHARES OF COMMON STOCK SUBJECT TO THE PLAN

4.1 Maximum Number of Shares Available for Awards. Subject to the provisions of Article Fifteen, there shall be available for Awards under this Plan granted wholly or partly in Common Stock (including rights or options that may be exercised for or settled in Common Stock) an aggregate of 2,534,568 shares of Common Stock. The number of shares of Common Stock that are the subject of Awards under this Plan, if forfeited or terminated, unexercised upon expiration, are settled in cash in lieu of Common Stock or in a manner such that all or some of the shares covered by an Award are not issued to a Participant, or if exchanged for Awards that do not involve Common Stock, shall again immediately become available for Awards hereunder. The Committee may from time to time adopt and observe such procedures concerning the counting of shares against the Plan maximum as it may deem appropriate. The Board and the appropriate officers of the Company shall from time to time take whatever actions are necessary to file any required documents with governmental authorities, stock exchanges and transaction reporting systems to ensure that shares of Common Stock are available for issuance pursuant to Awards.

Article Five

ADMINISTRATION OF THE PLAN

5.1 The Committee.

(a) This Plan shall be administered by the Committee, except as otherwise provided herein. The Committee shall consist of at least two Nonemployee Directors. Subject to the provisions hereof, the Committee shall have full and exclusive power and authority to administer this Plan and to take all actions that are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. The Committee shall also have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of this Plan. The Committee may, in its discretion, subject only to the legal requirements or restrictions which relate to Awards, accelerate the vesting or exercisability of an Award, eliminate or make less restrictive any restrictions contained in an Award, waive any restriction or other provision of this Plan or an Award, or otherwise amend or modify an Award in any manner that is either (i) not adverse to the Participant to whom the Award was granted, or (ii) consented to by such Participant. In the event the Committee modifies or amends an Award, the new Award shall be compliant with the terms of this Plan. The Committee, in its discretion, may also provide for the extension of the exercisability of an Award; provided, that with respect to Awards relating to SARs and Nonqualified Stock Options, the exercise period shall not be extended to a date later than the earlier of (i) the latest date upon which the Award could have expired by its original terms under any circumstances, or (ii) the tenth anniversary of the original date of the grant of

the Award. The Committee may make an Award to an individual whom it expects to become an Employee within the next six months, provided that such award shall be subject to the individual actually becoming an Employee within such time period. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to further the Plan purposes. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. Notwithstanding the foregoing, the Committee shall not make any revision, correction, or other modification to an Award granted under this Plan if such revision, correction, or modification would result in the deferral of compensation subject to Code Section 409A.

(b) The Board shall have the same powers, duties and authority to administer the Plan with respect to Nonemployee Director Awards as the Committee retains with respect to other Awards as described above.

5.2 Liability of Committee Members. No member of the Committee or officer of the Company to whom the Committee has delegated authority in accordance with the provisions of Section 5.3 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute.

5.3 Delegation of Authority. The Committee may delegate to the Chief Executive Officer and to other senior officers of the Company its duties under this Plan pursuant to such conditions or limitations as the Committee may establish.

Article Six

AWARDS

6.1 Employee Awards.

(a) The Committee shall determine the type or types of Employee Awards to be made under this Plan and shall designate from time to time the individuals who are to be the recipients of such Awards. Each Employee Award shall be embodied in an Employee Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion and shall be signed by the individual to whom the Award is made and by an Authorized Officer for and on behalf of the Company. Employee Awards may consist of those reflected in Section 6.1(a) and may be granted singly, in combination or in tandem. Employee Awards may also be made in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under this Plan or any other employee plan of the Company or any of its Subsidiaries, including the plan of any acquired entity. An Employee Award may provide for the grant or issuance of additional, replacement or alternative Awards upon the occurrence of specified events, including the exercise of the original Employee Award granted to a Participant. All or part of an Employee Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service with the Company and its Subsidiaries, achievement of specific business objectives, increases in

specified indices, attainment of specified growth rates and other comparable measurements of performance. Upon the termination of employment by a Participant who is an Employee any unexercised, deferred, unvested or unpaid Awards shall be treated as set forth in the applicable Employee Award Agreement.

(i) Option. An Employee Award may be in the form of an Option. An Option awarded pursuant to this Plan may consist of an Incentive Option or a Nonqualified Stock Option. The price at which shares of Common Stock may be purchased upon the exercise of an Option shall not be less than the Fair Market Value of the Common Stock on the date of grant. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Option awarded pursuant to this Plan, including the term of any Option and the date or dates upon which it becomes exercisable, shall be determined by the Committee. The number of shares of Common Stock subject to an Option awarded pursuant to this Paragraph (i) shall be fixed on or before the date of grant. Further, no Nonqualified Stock Option awarded pursuant to this Paragraph (i) shall include any feature for the deferral of compensation other than the deferral of recognition of income until the later of (i) the exercise or disposition of the option under Treasury Regulation Section 1.83-7 or (ii) the time the Common Stock acquired pursuant to the exercise of the option first becomes substantially vested (as defined in Treasury Regulation Section 1.83-3(b)).

(ii) SAR. An Employee Award may be in the form of an SAR. The terms, conditions and limitations applicable to any SAR awarded pursuant to this Plan, including the term of any SAR and the date or dates upon which it becomes exercisable, shall be determined by the Committee. Notwithstanding the foregoing, in no event shall a SAR granted pursuant to this Paragraph (ii) include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the SAR.

(iii) Stock Award. An Employee Award may be in the form of a Stock Award, including the award of Restricted Stock or conditional stock units. The terms, conditions and limitations applicable to any Stock Award granted pursuant to this Plan shall be determined by the Committee.

(iv) Cash Award. An Employee Award may be in the form of a Cash Award. The terms, conditions and limitations applicable to any Cash Award granted pursuant to this Plan shall be determined by the Committee.

(v) Performance Award. Without limiting the type or number of Employee Awards that may be made under the other provisions of this Plan, an Employee Award may be in the form of a Performance Award. A Performance Award shall be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective Performance Goals established by the Committee prior to the earlier to occur of (i) 90 days after the commencement of such period of service to which the Performance Goal relates and (ii) the lapse of 25% of such period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A Performance Goal is objective if a third party

having knowledge of the relevant facts could determine whether the goal is met. Such a Performance Goal may be based on one or more business criteria that apply to the individual, one or more business units of the Company, or the Company as a whole, and may include one or more of the following: increased revenue; net income; earnings before interest, taxes, depreciation and amortization; other earnings measures; economic value added; cash flow measures; stock price; market share; return on equity or capital; return on revenue measures; costs; and safety and environmental performance measures. Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to Performance Goals and Performance Awards, it is the intent of the Plan to conform with the standards of Section 162(m) of the Code and Treasury Regulation § 1.162-27(e)(2), and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of Performance Goals, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Performance Awards made pursuant to this Plan shall be determined by the Committee.

6.2 Nonemployee Director Awards.

(a) The Board may grant Nonemployee Director Awards to the Nonemployee Directors of the Company from time to time in accordance with Section 6.2. Nonemployee Director Awards may consist of those listed in Section 6.2(a) and may be granted singly, in combination or in tandem. Each Nonemployee Director Award may, in the discretion of the Board, be embodied in a Nonemployee Director Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Board in its sole discretion and, if required by the Board, shall be accepted by the Participant to whom the Nonemployee Director Award is granted and signed by an Authorized Officer for and on behalf of the Company.

(i) Stock Awards. A Nonemployee Director Award may be in the form of a Stock Award. A Nonemployee Director may not sell, transfer, assign, pledge or otherwise encumber or dispose of any portion of a Stock Award until he or she terminates service as a Nonemployee Director, and any attempt to sell, transfer, assign, pledge or encumber any portion of the Stock Award prior to such time shall have no effect. Any additional terms, conditions and limitations applicable to any Stock Awards granted to a Nonemployee Director pursuant to this Plan shall be determined by the Board.

(ii) Performance Awards. Without limiting the type or number of Nonemployee Director Awards that may be made under the other provisions of this Plan, a Nonemployee Director Award may be in the form of a Performance Award. A Nonemployee Director may not sell, transfer, assign, pledge or otherwise encumber or dispose of any portion of the Performance Award until he or she terminates service as a Nonemployee Director, and any attempt to sell, transfer, assign, pledge or encumber any portion of the Performance Award prior to such time shall have no effect. Any additional terms, conditions and limitations applicable to any Performance Awards granted to a

Nonemployee Director pursuant to this Plan shall be determined by the Board. The Board shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or amount of Performance Awards that will be paid out to the Nonemployee Director.

(b) Notwithstanding anything to the contrary contained in this Plan, no Participant may be granted, during any calendar year, Nonemployee Director Awards consisting of Stock Awards (including Stock Awards that are granted as Performance Awards) covering or relating to more than 10,000 shares of Common Stock (the limitation set forth in this Section 6.2(b) being hereinafter referred to as a “Stock Based Awards Limitation”).

Article Seven

EMPLOYEE AWARD LIMITATIONS

The following limitations shall apply to any Employee Award made hereunder:

(1) no Participant may be granted, during any one calendar year period, Employee Awards consisting of Options or SARs that are exercisable for more than 300,000 shares of Common Stock;

(2) no Participant may be granted, during any one calendar year period, Stock Awards covering or relating to more than 300,000 shares of Common Stock (the limitation set forth in this clause (2), together with the limitation set forth in clause (1) above and the limitation set forth in Section 6.2(b) of this Plan, being hereinafter collectively referred to as the “Stock Based Awards Limitations”); and

(3) no Participant may be granted Employee Awards consisting of cash or in any other form permitted under this Plan (other than Employee Awards consisting of Options or SARs or otherwise consisting of shares of Common Stock or units denominated in such shares) in respect of any one calendar year period having a value determined on the date of grant in excess of $3,000,000.

Article Eight

PAYMENT OF AWARDS

8.1 Payment of Awards Generally. Payment of Awards may be made in the form of cash or Common Stock, or a combination thereof, and may include such restrictions as the Committee shall determine, including, in the case of Common Stock, restrictions on transfer and forfeiture provisions. If payment of an Award is made in the form of Restricted Stock, the applicable Award Agreement relating to such shares shall specify whether they are to be issued at the beginning or end of the Restriction Period. In the event that shares of Restricted Stock are to be issued at the beginning of the Restriction Period, the certificates evidencing such shares (to the extent that such shares are so evidenced) shall contain appropriate legends and restrictions that describe the terms and conditions of the restrictions applicable thereto. In the event that shares of Restricted Stock are to be issued at the end of the Restricted Period, the right to receive such shares shall be evidenced by book entry registration or in such other manner as the Committee may determine.

8.2 Deferral. With the approval of the Committee, amounts payable in respect of Awards may be deferred and paid either in the form of installments or as a lump sum payment. The Committee may permit selected Participants to elect to defer payments of some or all types of Awards in accordance with procedures established by the Committee. Any deferred payment of an Award, whether elected by the Participant or specified by the Award Agreement or by the Committee, may be forfeited if and to the extent that the Award Agreement so provides. Any deferral of an Award, whether by Participant election or otherwise, and any payment or settlement of a deferred Award shall be made in a manner that complies with the requirements of Code Section 409A.

8.3 Dividends, Earnings and Interest. Rights to dividends or Dividend Equivalents may be extended to and made part of any Award consisting of shares of Common Stock or units denominated in shares of Common Stock, subject to such terms, conditions and restrictions as the Committee may establish; provided, however, that dividends and Dividend Equivalents may not be paid with respect to unvested Performance Awards. The Committee may also establish rules and procedures for the crediting of interest and other earnings on deferred cash payments and on Dividend Equivalents for Awards consisting of shares of Common Stock or units denominated in shares of Common Stock. Notwithstanding the foregoing, unless specifically set forth in an Award Agreement in a manner compliant with Code Section 409A, in no event shall any rights granted or interest or other earnings credited under this Section 8.3 be paid to the Participant later than the last day of the Short-Term Deferral Period.

8.4 Substitution of Awards. Subject to the limitations of Section 5.1 and Article Seven, at the discretion of the Committee, a Participant who has been granted an Award may be offered an election to substitute an Award received for another Award or Awards of the same or different type; provided, however, no such substitution shall be made without prior shareholder approval if it would result in the reduction of the exercise price of an outstanding Option or issuance of an Option in exchange for the cancellation of an Option with a higher exercise price. Shareholder approval shall not be required for actions taken by the Board or the Compensation Committee pursuant to Article 14.2 of the Plan.

8.5 Cash-out of Awards. At the discretion of the Committee, an Award that is an Option or SAR may be settled by a cash payment equal to the difference between the Fair Market Value per share of Common Stock on the date of exercise and the exercise price of the Award, multiplied by the number of shares with respect to which the Award is exercised.

Article Nine

OPTION EXERCISE

The price at which shares of Common Stock may be purchased under an Option shall be paid in full at the time of exercise in cash or, if elected by the optionee, the optionee may purchase such shares by means of tendering Common Stock or surrendering another Award, including Restricted Stock, valued at Fair Market Value on the date of exercise, or any

combination thereof. The Committee shall determine acceptable methods for Participants to tender Common Stock or other Awards. The Committee may provide for procedures to permit the exercise or purchase of such Awards by use of the proceeds to be received from the sale of Common Stock issuable pursuant to an Award. Unless otherwise provided in the applicable Award Agreement, in the event shares of Restricted Stock are tendered as consideration for the exercise of an Option, a number of the shares issued upon the exercise of the Option, equal to the number of shares of Restricted Stock used as consideration therefor, shall be subject to the same restrictions as the Restricted Stock so submitted as well as any additional restrictions that may be imposed by the Committee. The Committee may adopt additional rules and procedures regarding the exercise of Options from time to time, provided that such rules and procedures are not inconsistent with the provisions of this paragraph.

Article Ten

CHANGE OF CONTROL

10.1 Change of Control. In the event of a “Change of Control” of the Company, the Committee may, in its discretion, without obtaining shareholder approval, take any one or more of the following actions, with respect to any Participant:

(a) Accelerate the exercise dates of any or all SARs or Options or make some or all such SARs or Options immediately fully vested and exercisable;

(b) Accelerate the restriction (lapse of forfeiture provision) period of any Restricted Stock subject to restrictions;

(d) Pay cash to any or all holders of Options in exchange for the cancellation of their outstanding Options;

(e) Make payment for any outstanding Performance Awards based on such amounts as the Committee may determine;

(f) Grant new Awards to any Participants; or

(g) Make any other adjustments or amendments to outstanding Awards and substitute new Awards for outstanding Awards; provided, all adjustments, amendments, and/or substitutions shall be made in accordance with the requirements of Code Section 409A, to the extent applicable.

Article Eleven

TAXES

The Company shall have the right to deduct applicable taxes from any Employee Award payment and withhold, at the time of delivery or vesting of cash or shares of Common Stock under this Plan, an appropriate amount of cash or number of shares of Common Stock or a

combination thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by the transfer to the Company of shares of Common Stock theretofore owned by the holder of the Employee Award with respect to which withholding is required. If shares of Common Stock are used to satisfy tax withholding, such shares shall be valued based on the Fair Market Value when the tax withholding is required to be made. The Committee may provide for loans, on either a short term or demand basis, from the Company to a Participant to permit the payment of taxes required by law.

Article Twelve

AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION

The Board may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would adversely affect the rights of any Participant under any Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the stockholders of the Company to the extent such approval is required by applicable legal requirements.

Article Thirteen

ASSIGNABILITY

Unless otherwise determined by the Committee and provided in the Award Agreement, no Award or any other benefit under this Plan shall be assignable or otherwise transferable, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. The Committee may prescribe and include in applicable Award Agreements other restrictions on transfer. Any attempted assignment of an Award or any other benefit under this Plan in violation of this Article Thirteen shall be null and void.

Article Fourteen

ADJUSTMENTS

14.1 General. The existence of outstanding Awards shall not affect in any manner the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above.

14.2 Following Subdivision of Consolidation. In the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares of Common Stock or other stock split, then (i) the number of shares of Common Stock reserved under this Plan, (ii) the number of shares of Common Stock covered by outstanding Awards in the form of Common Stock or units denominated in Common Stock, (iii) the exercise or other price in respect of such Awards, (iv) the appropriate Fair Market Value and other price determinations for such Awards and (v) the Stock Based Awards Limitations shall each be proportionately adjusted by the Board to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), then (i) the number of shares of Common Stock covered by outstanding Awards in the form of Common Stock or units denominated in Common Stock, (ii) the exercise or other price in respect of such Awards. (iii) the appropriate Fair Market Value and other price determinations for such Awards and (iv) the Stock Based Awards Limitations shall each be proportionately adjusted by the Board to reflect such transaction; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value of such Awards. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board shall be authorized to make such adjustments to Awards or other provisions for disposition of Awards as it deems equitable, and shall be authorized, in its discretion, (x) to issue or assume Awards by means of substitution of new substitute Awards, as appropriate, for previously issued Awards or to assume previously issued Awards as part of such adjustment, (y) to provide, prior to the transaction, for the acceleration of the vesting and exercisability of, or the lapse of restrictions with respect to, an award and, if the transaction is a cash merger, provide for the termination of any portion of the Award that remains unexercised at the time of such transaction or (z) to cancel the Awards (including, with respect to Options or SARs, a notice and an opportunity to exercise such Awards during a certain period of time prior to such cancellation) and deliver to the Participants cash in an amount that the Board shall determine in its sole discretion is equal to the fair market value of such Awards on the date of such event. Any substitute Awards shall not be subject to the limitations on Common Stock available for Awards under Section 4.1 or the limitations of Article Seven. Notwithstanding the foregoing, all adjustments made pursuant to this Section 14.2 shall be made in accordance with the requirements of Code Section 409A, to the extent applicable.

Article Fifteen

RESTRICTIONS

No Common Stock or other form of payment shall be issued with respect to any Award unless the Company shall be satisfied based on the advice of its counsel that such issuance will be in compliance with applicable federal and state securities laws. Certificates evidencing shares of Common Stock delivered under this Plan (to the extent that such shares are so evidenced) may be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or transaction reporting system upon which the Common Stock is then listed or to which it is admitted for quotation and any applicable federal or state securities law. The Committee may cause a legend or legends to be placed upon such certificates (if any) to make appropriate reference to such restrictions.

Article Sixteen

MISCELLANEOUS PROVISIONS

16.1 Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, Common Stock or rights thereto under this Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash, Common Stock or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash, Common Stock or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to an Award of cash, Common Stock or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.

16.2 Governing Law. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Texas.

16.3 Effective Date. This Plan shall be effective without need for further action, including shareholder approval, on the date on which the Second Amended and Restated Joint Plan for Reorganization in Case No. 01-00140 before the United States Bankruptcy Court for the District of Delaware becomes effective.

16.4 Code Section 409A. It is intended that any Awards under the Plan satisfy the requirements of Code Section 409A to avoid imposition of applicable taxes thereunder, and any ambiguous provision will be construed in a manner that is compliant with or exempt from the application of Code Section 409A.

EX-31.1 3 dex311.htm SECTION 302 CEO CERTIFICATION Section 302 CEO Certification

Exhibit 31.1

CERTIFICATION

I, John C. Sheptor, certify that:

I have reviewed this quarterly report on Form 10-Q of Imperial Sugar Company;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 8, 2010	By:	/s/ John C. Sheptor
		John C. Sheptor
		President and Chief Executive Officer

EX-31.2 4 dex312.htm SECTION 302 CFO CERTIFICATION Section 302 CFO Certification

Exhibit 31.2

CERTIFICATION

I, H.P. Mechler, certify that:

I have reviewed this quarterly report on Form 10-Q of Imperial Sugar Company;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 8, 2010	By:	/s/ H. P. Mechler
		H. P. Mechler
		Senior Vice President and Chief Financial Officer

EX-32 5 dex32.htm SECTION 906 CEO AND CFO CERTIFICATION Section 906 CEO and CFO Certification

Exhibit 32

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,

United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), John C. Sheptor, President and Chief Executive Officer, and H.P. Mechler, Senior Vice President and Chief Financial Officer, of Imperial Sugar Company, a Texas corporation (the “Company”), each hereby certifies that, to the best of his knowledge:

(1)

the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: February 8, 2010		/s/ John C. Sheptor
		John C. Sheptor
		President and Chief Executive Officer

		/s/ H. P. Mechler
		H. P. Mechler
		Senior Vice President and Chief Financial Officer

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