Net income for the six month period ended December 31, 2011, includes a $13 million purchase gain and an $8.3 million tax benefit associated with the acquisition of LDI's Distillery Business, partially offset by operating losses in distillery products, ingredients solutions and other segments, including an impairment charge on long-lived assets and a loss related to joint venture operations.
Subsequent to the end of the transition period, the company completed several actions designed to accommodate future growth by creating a tighter focus within operating units while enhancing commercial activities and financing options. This includes the sale of 20% of the company's interest in the ICP joint venture for approximately $9.1 million, with proceeds used mainly for debt reduction. The company expects a before tax gain on the sale of approximately $4.0 million in the current fiscal year's first quarter. The company also entered into a new supply agreement for lower cost sourcing and improved hedging of corn, one of its major raw materials. Also in the current quarter, the company brought the distillery in Lawrenceburg, Ind., closer to full production capacity. Further improvements in operating costs at the facility are planned during the first half of this year.
"We faced some big challenges over the past six months, complicating the task of putting the right business foundation in place," said Tim Newkirk, president and chief executive officer. "We've made solid progress in terms of lowering our fixed costs and increasing our flexibility. We now have the right strategic partners in place in the areas of raw materials, transportation logistics, and supply chain management. Our long-term goal is to generate sustainable cost and capital savings, improve our hedging, and generate higher cash flows on growing sales."
For the second quarter ended December 31, 2011, the company reported net income of $16.1 million, or $0.89 per diluted share, compared with net income of $3.2 million, or $0.18 per diluted share, in the year-ago period. Income from operations for the second quarter includes the previously mentioned purchase gains and a $1.3 million impairment charge for long-lived assets. Gross profit in the second fiscal quarter was $ 0.1 million on sales of $70.3 million compared with gross profit of $8.7 million in the prior-year period on sales of $57.9 million. While pricing increased across the distillery products and ingredient solutions segments, these increases were outpaced by higher costs for corn and flour. Increased raw material costs had the most significant impact in the distillery products segment. Factors impacting ingredients included a 10-day production shutdown of protein and starch products during the month of December to accommodate special customer requirements, and the unfavorable impact of losses on open derivative commodity contracts not designated as cash flow hedges.
Net income for the six-month transition period ended December 31, 2011, increased 29.0% to $10.6 million, or $0.59 per diluted share, compared with $8.2 million, or $0.46 per share, for the same period a year ago. Total sales of $146.5 million increased 27.5% over the prior year.
From the March 14, 2012, Prepared Foods' Daily News.