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The results of operations would therefore need to be adjusted by the following:
--------------------------------------------------------------------------------------------------------------------------------------------------------Income (loss) For the three months ended December 29, December 31, 2012 2011(In thousands) (Unaudited) (Unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------------Mark-to-market adjustment (excluding interest rate swap) $ (3,262) $ (7,819)Cumulative timing differences 4,334 (6,316)----------------------------------------------------------------------------Total adjustment to cost of sales $ 1,072 $ (14,135)--------------------------------------------------------------------------------------------------------------------------------------------------------
A significant part of the above mark-to-market adjustment relates to the movement in the price of raw sugar, which decreased during the quarter. As a result, a $3.9 million loss was recorded as compared to a $3.8 million loss in the comparable quarter of last year. For natural gas, a mark-to-market loss of $0.3 million was recorded in the first quarter, versus a loss of $2.6 million in the comparable quarter of last year as there was limited movement in the price of natural gas during the quarter. Foreign exchange forward contracts and embedded derivatives, on which foreign exchange movements have an impact, had a combined mark-to-market gain of $1.0 million for the quarter as compared to a mark-to-market loss of $1.4 million in the comparable quarter last year.
The cumulative timing differences are as a result that mark-to-market gains or losses are recognized by the Company only when sugar is sold to a customer and when natural gas is used. The gains or losses on the sugar and related foreign exchange paper transactions are largely offset by corresponding gains or losses from the physical transactions being the sale and purchase contracts with customers and suppliers. This adjustment is added to the mark-to-market results to arrive at the total adjustment to cost of sales. For the first quarter the total cost of sales adjustment is a gain of $1.1 million to be deducted from the consolidated operating results while a total cost of sales loss of $14.1 million was added to the consolidated operating results in fiscal 2012 comparable quarter.
In addition, the Company recorded a mark-to-market gain of $0.5 million for the quarter, as compared to a gain of $0.8 million last year, on the mark-to-market of an interest rate swap under short-term interest expense, as losses recorded in previous quarters are being reversed from the passage of time of the swap.
The following is a table showing the adjusted consolidated results (non-GAAP) without the above mark-to-market results:
--------------------------------------------------------------------------------------------------------------------------------------------------------Consolidated Results For the three months ended December 29, December 31, 2012 2011(in thousands except per share information) (Unaudited) (Unaudited)----------------------------------------------------------------------------Gross margin as per financial statements $ 30,639 $ 23,654Adjustment as per above (1,072) 14,135----------------------------------------------------------------------------Adjusted gross margin 29,567 37,789----------------------------------------------------------------------------EBIT as per financial statements 23,698 16,769Adjustment as per above (1,072) 14,135----------------------------------------------------------------------------Adjusted EBIT 22,626 30,904----------------------------------------------------------------------------Net earnings as per financial statements 16,133 9,880Adjustment to cost of sales as per above (1,072) 14,135Adjustment for mark-to-market of finance costs (478) (785)Deferred taxes on above adjustments 304 (3,469)----------------------------------------------------------------------------Adjusted net earnings $ 14,887 $ 19,761----------------------------------------------------------------------------Net earnings per share basic, as per financial statements $ 0.17 $ 0.11Adjustment for the above 0.01 0.11----------------------------------------------------------------------------Adjusted net earnings per share basic $ 0.16 $ 0.22--------------------------------------------------------------------------------------------------------------------------------------------------------
