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Imperial Sugar Company

FOUNDED: 1905

Contact Information:

HEADQUARTERS: 1 Imperial Square, 8016 Highway 90-A Sugar Land, TX 77487-0009
PHONE: (281)491-9181
FAX: (281)490-9530
TOLL FREE: (800)727-8427
URL: http://www.imperialsugar.com

OVERVIEW

Imperial Sugar is the largest processor and marketer of refined sugar in the United States. The company is also a leading distributor of sugar, sauces, seasonings, desserts, and drink mixes to the food services industry. Approximately 77 percent of the company's sales were in the sugar segment, and 23 percent were in the food service segment in 2001. Imperial Sugar also has a small market in beet sugar processing by-products, which are used as livestock feed, and beet seed. Brands include Imperial, Holly, Spreckels, Dixie Crystals, and Pioneer. Its subsidiaries include Wholesome Sweeteners L.L.C., Diamond Crystal Specialty Foods Inc., and Savannah Foods & Industries.

ANALYSTS' OPINIONS

Although Imperial Sugar drastically reduced its debts in 2001 while under bankruptcy protection, Standard & Poors remained somewhat pessimistic about a speedy recovery for the company and lowered its rating twice during 2001. Months after Imperial emerged from bankruptcy, it had an S&P rating of "D". The unfavorable rating was in part due to the volatile nature of commodities, according to S&P analysts. Five years in a row, favorable growing conditions eventually created a glut of sugar stockpiles, which kept prices low and the agribusiness industry depressed. Adding to the volatility of the sugar market, Mexico, and its potential for sugar trading in the United States under NAFTA, posed a threat to a highly governmentally protected American sugar market.

HISTORY

Imperial Sugar traces its roots back to a Texas sugar cane plantation in the early 1800s. The Samuel May Williams plantation in Sugar Land, Texas, began producing granulated sugar in 1843. The processing portion of the plantation became Imperial Sugar Company. Founded in 1905, and incorporated in 1924, Imperial Sugar remains one of the longest-surviving businesses in its home state of Texas. Imperial Sugar was a privately-owned cane sugar refinery with just one facility for more than 80 years.

In 1988 the company acquired publicly-held Colorado-based Holly Sugar Corp., doubling the newly-named Imperial Holly Corp.'s size and adding beet sugar production to its business. In 1996 Imperial Holly bought California-based beet sugar company, Spreckels Sugar Company. The following year Imperial Holly acquired the then-largest sugar refiner in the country, Georgia-based Savannah Foods & Industries, which again doubled the company's size. Savannah Foods owned Michigan Sugar and Great Lakes Sugar, as well as Louisiana company Colonial Sugar Refinery, which expanded Imperial's nationwide scope further.

The company grew quickly again when it acquired healthcare and food service business, Diamond Crystal Specialty Foods, and Wholesome Sweeteners, which led the natural and organic foods industries, in 1998. The acquisition expanded Imperial's market in the industrial and food service markets. The Imperial acquisitions have made the company the first truly national sugar company in the United States. Imperial Holly changed its name in 1999 to Imperial Sugar Company, after the Diamond Crystal and Wholesome Sweeteners acquisitions.

Despite its longevity and growth, the company experienced financial difficulties. In 2001 the company made __BODY__.55 billion in net sales, but had $322.8 million in net losses, and filed for bankruptcy in part to avert a default on $230 million of its total $600 million in debt. The filing was also designed to deal with longtime financial problems such as decreasing prices due to excess sugar supply, rising energy costs, and lower prices in the retail market, which accounts for nearly 80 percent of the company's sales. The company emerged from Chapter 11 bankruptcy protection in August 2001. During the bankruptcy period and extensive restructuring, Imperial Sugar sold its nutritional products business, which netted about 15 percent of its annually sales, and in December, 2001, the company sold King Packaging, its packaged disposable meal kits business, which made up 7.6 percent of its sales.

After Imperial emerged from bankruptcy, the company sold subsidiaries Michigan Sugar Company and Great Lakes Sugar Company to the Michigan Sugar Beet Growers Inc. growers' cooperative for $45 million. Michigan had been one of Imperial Sugar's leading producers of beet sugar and represented $162 million in net sales in 2001. The transaction was comprised of $29.0 million in cash, with the remaining $16.0 million to be financed by Imperial. The growers also assumed the $18.5 million in bond debt from Imperial Sugar. For nearly two years the cooperative tried to work out a deal with Imperial Sugar to buy four Michigan plants immediately before the bankruptcy filing, made a final offer of $75 million, but Imperial Sugar refused the offer.

When the company emerged from bankruptcy in August 2001, it moved forward in its restructuring plans, and in October 2001, distributed 0.0062 shares of new common stock for every share previously held by shareholders. The company began trading under the symbol ISPU in September 2001 and began trading on the OTC Bulletin Board shares of the new common stock in March 2002, under the symbol ISPUZ.

INFLUENCES

The sugar growth and processing industry, including Imperial Sugar, is constantly affected by external influences, many of which are unpredictable. Abnormal weather patterns' affect on crop yields, sugarbeet quality, and energy costs pose a constant question mark for the sugar industry. While no one can argue with the weather, one influence that is debated regularly is the government regulation and subsidy of the sugar processing industry. Federal programs to support and stabilize the price of domestic crops have existed since 1934, and most recently, the Federal Agricultural Improvement and Reform Act of 1996, or the Farm Bill, has played an instrumental part in keeping the sugar processors afloat. The bill implemented a tariff rate quota that limits the amount of raw and refined sugar imported into the United States. Despite the federal protections under the Farm Bill, the sugar industry struggled through two consecutive years in which sugar was plentiful. The government intervened in 2000, and purchased 132,000 short tons of refined sugar from Imperial. In the fall of the same year, the government gave growers 277,000 short tons of refined sugar in exchange for not harvesting 102,000 acres of already-planted sugarbeets.

Although the North American Free Trade Agreement (NAFTA) adopted in 1994, had the potential to adversely affect the sugar industry, it has had less influence on Imperial Sugar than the Farm Bill has because NAFTA limits the amount of sugar that can be imported to and exported from Mexico.

PRODUCTS

Imperial Sugar Company is known by several of its subsidiary names including Imperial Pure Cane Sugar, Savannah Foods & Industries Inc., Holly Sugar Company, Spreckels Sugar Company, and Pioneer Sugar. In addition to sugar products, Imperial Sugar produces molasses and syrups under its Savannah Molasses and Specialty group; glaze, fondant, icing, and free flowing brown or granulated sugars are produced by its Spreckles Specialty Sugars subsidiary.

EMPLOYMENT

Imperial Sugar employs approximately 3,250 year-round employees. Approximately 250 worked at the King Packaging factory, which the company sold in December 2001. Imperial also hires approximately 2,200 seasonal employees during the year. Imperial's Indianapolis and Perrysburg, Ohio, foodservice facilities operate under union contracts, and its Port Wentworth, Georgia, refinery employs non-union workers. The company entered into collective bargaining agreements with union representatives to discuss other sugar segment plants.

SOURCES OF INFORMATION

Bibliography

"Economic Difficulties Continue to Take a Toll on Global Agribusiness." Standard & Poor's,, 19 October 2001.

Gallagher, Sean. "Imperial Sugar Rebuilds on Web Services." Baseline, 18 March 2002.

"Imperial Sugar Company Sells Michigan Sugar Company to Michigan Sugar Beet Growers Inc." Hoovers Online, 13 February 2002.

"Imperial Sugar Files Chapter 11 Bankruptcy." Food News, January 2001.

"Sugar Industry Faces Big Test with Free Trade." St. Petersburg Times, 6 May 2001.

For an annual report:

on the Internet at: http:\www.imperialsugar.com

For additional industry research:

Investigate companies by their Standard Industrial Classification codes, also known as SICs. Imperial Sugar Company's primary SICs are:

2062 Cane Sugar Refining

2063 Beet Sugar

Also investigate companies by their North American Industry Classification System codes, also known as NAICS codes. Imperial Sugar Company's primary NAICS codes are:

311312 Cane Sugar Refining

311313 Beet Sugar Manufacturing