The Imperial Sugar Company (IPSU) reported income from continuing operations for the fiscal first quarter ending December 31, 2009 of $178.1 million, or $14.84 per diluted share, compared to a loss from continuing operations of $0.6 million, or $0.05 per diluted share, for the same period last year.

The recent quarter’s results were impacted by several important items, most significantly pre-tax gains totaling $278.5 million associated with the settlement of insurance claims related to the February 2008 Port Wentworth accident. As previously announced, the Company and its insurers agreed to a final claims settlement of $345 million under the $350 million policy which covered property damage and business interruption losses.

In addition, during the first quarter the Company recognized $18.9 million of gains on derivative contracts intended to hedge future raw sugar purchases. These gains did 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 Company’s first quarter’s raw sugar purchases. Absent the impact of the insurance and derivative gains, income from continuing operations for the quarter would have been a loss of $6.5 million, or $0.55 per diluted share.

“The finalization of our property and business interruption insurance claim is a major milestone in our recovery from the Port Wentworth tragedy,” stated John Sheptor, president and CEO. “The claims negotiation was well managed by our financial team, insurance broker and the insurance carriers, minimizing interference with rebuild activities and reaching an amicable settlement rapidly. We continue to make important progress in the Port Wentworth reconstruction, with the start up of the conditioning silos in January. We continue efforts to improve the refinery production rate, with a target to return to normal operations within the quarter. Packaging plant start up activities are focused on the new brown sugar and powdered sugar lines in anticipation of supplying customer Easter holiday requirements.”

The recent quarter’s results included pre-tax charges of $1.8 million for legal and consulting charges related to the Port Wentworth accident, while last year’s first quarter included a pre-tax charge of $14.9 million, primarily for cleanup and repairs, continuing refinery payroll and legal related costs. The prior year’s charges were offset by $11.7 million of insurance recoveries recognized under the Company’s property insurance coverage as well as an unrelated gain on a litigation settlement of $16.1 million.

“Raw sugar prices continue to escalate, compressing refined white sugar margins and creating a challenging environment for our industry and our customers,” added Sheptor. “Prices have risen in response to the imbalance between international supply and demand, depleted domestic and Mexican stock positions and moderate 2009 domestic sugar production. We are encouraging the USDA to announce an increase in the domestic raw sugar import quota prior to April 1, 2010 to ensure an adequate production of refined sugar between now and the 2010 domestic harvest.”

“We are excited about the initiation of construction of the new LSR refinery which will create over 500 new construction jobs in the Gramercy, Louisiana area. The February 3, 2010 ground breaking ceremony was an historic event for the Louisiana agribusiness community.”

Net sales and gross margin for the fiscal first quarter increased to $173.8 million and 7.1% compared to $108.6 million and a negative 2.7%, respectively, for the same period last year. Higher domestic sugar volumes primarily due to the result of additional production from the Port Wentworth refinery and higher domestic prices contributed to the 60% increase in sales. The increased gross margin was due to higher refined sugar prices as well as the gains on the raw sugar derivatives. In addition, higher raw sugar costs and higher manufacturing costs due to the ramp up of production volume at the Port Wentworth refinery were offset by lower energy and transportation costs.

Because of these factors, operating income rose to $277.6 million compared to an operating loss of $1.7 million for the same period last year.

The Company reported cash and cash equivalents of $66.4 million at quarter-end after capital expenditures of $37.6 million. Available capacity under the borrowing base formula for the bank credit facility was $32.6 million, after outstanding borrowings of $60 million. The Company received the final $45 million payment from the insurance settlement in early January 2010. It is anticipated that available liquidity and capital resources should be sufficient to meet operating and capital needs which includes an additional $34 million of capital expenditures to complete the Port Wentworth rebuild project.

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