RE:

 

 

 

We are geographically diversified throughout the Northern and Southern hemispheres. Due to the diverse locations and nature of our business, the Company does not believe that seasonality affects our business. However, the Company will add the disclosure presented in the paragraph below to its discussion in the “Geographic Scope and Operations” section of its Item 1 – Business disclosure in our annual report on Form 10-K.

In general, demand for our products is balanced throughout the year. However, demand for sweeteners in South America is greater in the first and fourth quarters (its summer season) while demand for sweeteners in North America is greater in the second and third quarters. Due to the offsetting impact of these demand trends, we do not experience material seasonal fluctuations in our business.

The table that summarizes the Equity Plan Compensation information was incorporated by reference in Item 12 of the Form 10-K because Item 12 requires the registrant to furnish the information required by Item 201 (d) of Regulation S-K.

The Company has reviewed FRR 61 ll B and will include the following additional information in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) of its annual report on Form 10-K.

We are exposed to market risk stemming from changes in interest rates, foreign currency exchange rates and commodity prices. In the normal course of business, we actively manage our exposure to these market risks by entering into various hedging transactions, authorized under established policies that place clear controls on these activities. The counterparties in these transactions are generally highly rated institutions. We establish credit limits for each counterparty. Our hedging transactions include but are not limited to a variety of derivative financial instruments such as commodity futures contracts, forward currency contracts and options, interest rate swap agreements and treasury lock agreements (T-Locks).

We use derivatives to manage price risk related to purchases of corn and natural gas used in the manufacturing process. We periodically enter into futures and option contracts for a portion of our anticipated corn and natural gas usage, generally over the following twelve months, in order to hedge price risk associated with fluctuations in market prices. These readily available marketable exchange-traded futures contracts are recognized at fair value and have effectively reduced our exposure to changes in market prices for these commodities. Unrealized gains and losses associated with marking these contracts to market are recorded as a component of other comprehensive income. At December 31, 2006, our accumulated other comprehensive loss account included $30 million of gains, net of tax of $19 million, related to these futures contracts.

Due to our global operations, we are exposed to fluctuations in foreign currency exchange rates. As a result, we have exposure to translational foreign exchange risk when our foreign operation results are translated to US dollars (USD) and to transactional foreign exchange risk when transactions not denominated in the functional currency of the operating unit are revalued. We primarily use foreign currency forward contracts, swaps and options to selectively hedge our foreign currency cash flow

The information relating to the effects of the adoption of SFAS #123R “Share-Based Payment” was included in Notes 2 and 13 to the Consolidated Financial Statements. The effect of the adoption was to reduce the diluted earnings per common share by $0.04 versus the results under APB No. 25. The 2006 full year diluted earnings per common share for the Company were $1.63.

The adoption of SFAS #123R did not impact the stock compensation philosophy of the Company. There were:

No modifications made to outstanding share options prior to adoption

No changes in the quantity or type of instruments used in the share-based payment program

No changes in the terms of share-based payment programs

The expanded disclosures have been included in our response to Comment 6.

In order to expand our management’s discussion and analysis to include additional information requested in Comment 5 and enhance our discussion pertaining to the effects of currency exchange rate fluctuations, the Company will add the following additional underlined disclosures in its annual report on Form 10-K. The Company does not believe that there were any trends in operations or liquidity that would be apparent in the functional currency that were not readily identified in the reporting currency.

Net Income. Net income for 2006 increased 38 percent to $124 million, or $1.63 per diluted common share, from 2005 net income of $90 million, or $1.19 per diluted common share.

The increase in net income for 2006 from 2005 primarily reflects a 22 percent increase in operating income driven by significantly improved results for our North American business. Additionally, lower financing costs and currency translation attributable to stronger foreign currencies relative to the US dollar contributed to the increase.

Net Sales. Net sales for 2006 increased to $2.62 billion from $2.36 billion in 2005, as sales grew in each of our regions.

 North America

 South America

 Asia/Africa

 

 Total

 

 North America

 South America

 Asia/Africa

 Corporate expenses

 

 Operating income

 

The Company discusses the retirement benefits in Item 7 – Critical Accounting Policies and Estimates. The net periodic pension cost was $9 million and $6 million for the years ended December 31, 2006 and 2005, respectively. The primary reason for the increased cost was the amortization of actuarial losses. The pension cost is not considered to be a significant expense to the Company. While we believe our benefit plan disclosures were adequate, the Company will supplement its disclosures to include the following additional underlined information in its annual report on Form 10-K.

We sponsor non-contributory defined benefit plans covering substantially all employees in the United States and Canada, and certain employees in other foreign countries. We also provide healthcare and life insurance benefits for retired employees in the United States and Canada. The net periodic pension cost was $9 million and $6 million for the years ended December 31, 2006 and 2005, respectively. The reason for the increase was primarily due to the amortization of actuarial losses. The Company estimates that net periodic pension expense for 2007 will include approximately $2 million relating to the amortization of its accumulated actuarial loss included in accumulated other comprehensive loss at December 31, 2006. In order to measure the expense and obligations associated with these retirement benefits, our management must make a variety of estimates and assumptions, including discount rates used to value certain liabilities, expected return on plan assets set aside to fund these costs, rate of compensation increase, employee turnover rates, retirement rates, mortality rates, and other factors. These estimates and assumptions are based on our historical experience, along with our knowledge and understanding of current facts, trends and circumstances. We use third-party specialists to assist management in evaluating our assumptions and estimates, as well as to appropriately measure the costs and obligations associated with our retirement benefit plans. Had we used different estimates and assumptions with respect to these plans, our retirement benefit obligations and related expense could vary from

While the Company provided information relating to the valuation allowance in Note 9 to the Consolidated Financial Statements, the Company will include the following additional information in the Critical Accounting Policies and Estimates section of its MD&A to be included in its annual report on Form 10-K.

The Company will include the following additional disclosure in Item 7A of its annual report on Form 10-K.

While much of the requested information can be found in the Notes to the Consolidated Financial Statements, in order to enhance the presentation of the disclosure the Company will include the following table in its Notes to the Consolidated Financial Statements in its annual report on Form 10-K that sets forth pertinent information with respect to Accumulated Other Comprehensive Income (Loss). The Company does not tax effect the currency translation adjustment because the undistributed earnings of its foreign operations are considered to be permanently reinvested.

Balance, December 31, 2003

Losses on cash flow hedges, net of income tax effect of $15

Amount of gains on cash flow hedges reclassified to earnings, net of income tax effect of $5

Currency translation adjustment

Minimum pension liability “MPL”, net of income tax effect

Balance, December 31, 2004

Gains on cash flow hedges, net of income tax effect of $7

Amount of losses on cash flow hedges reclassified to earnings, net of income tax effect of $14

Currency translation adjustment

MPL, net of income tax effect

Balance, December 31, 2005

Gains on cash flow hedges, net of income tax effect of $8

Amount of losses on cash flow hedges reclassified to earnings, net of income tax effect of $2

Currency translation adjustment

Adjustment to MPL prior to adoption of SFAS No. 158,

net of income tax effect of $1

Adoption of SFAS No. 158, net of income tax effect of $18

Balance, December 31, 2006

At December 31, 2006 and December 31, 2005, the Company had one investment that was accounted for under the equity method. The investment was $28 million at December 31, 2006 and $5 million at December 31, 2005. The increase in the investment is discussed in paragraph 2 of Note 4 to the Consolidated Financial Statements. During 2007, the Company acquired additional shares in this company increasing its ownership to 100 percent and began consolidating the subsidiary in its Consolidated Financial Statements. At the present time, the Company has no investments accounted for under the equity method. In the future, if circumstances change, the investment disclosures in Note 2 will include the information prescribed in Paragraph 20 of APB #18, “The Equity Method of Accounting for Investments in Common Stock.”

The Company generally sells its products directly to manufacturers and distributors. We sell primarily to well established companies and title normally passes FOB the Company’s plant. We do not provide any services as part of the sale of our products. The Company has reviewed the criteria for revenue recognition in SAB Topic 13.A.1 and while we believe that the disclosure was adequate, the Company will include the following additional underlined disclosure in Note 2 to the Consolidated Financial Statements to be included in its annual report on Form 10-K.

Revenue Recognition. The Company recognizes operating revenues at the time title to the goods and all risks of ownership transfer to the customers. This transfer is considered complete when a sales agreement is in place, delivery has occurred, pricing is fixed or determinable and collection is reasonably assured. In the case of

The Company has reviewed paragraph 19 of EITF Topic D-98 and paragraph 60 (b) of FAS 128. We believe that the 20 trading day average approximates the fair value of the stock and therefore, the two class method of calculating earnings per share is not applicable.

The Company has an agreement with certain common stockholders (the holder) stemming from an acquisition in 1998 relating to shares of the Company’s common stock, that provides the holder with the right to require the Company to repurchase those common shares for cash at a price equal to the average of the closing per share market price of the Company’s common stock for the 20 trading days immediately preceding the date that the holder exercises the put option. The agreement was negotiated between the parties and the 20 trading day average was evaluated to be a fair value strike price for the Company stock. There have been no changes or modifications to the agreement since the issuance date. The original amount of shares issued relating to this agreement were 3,827,000 shares (adjusted for a 2 for 1 stock split on January 25, 2005). As of December 31, 2006, the holder had sold 2.6 million shares in the open market, with no shares being put to the Company. The total amount of common shares outstanding (including 1,227,000 redeemable shares) at December 31, 2006 was approximately 74.3 million shares. Furthermore, in 2007 the holder sold an additional 727,000 shares in the open market leaving 500,000 shares currently subject to the agreement. At December 31, 2006, the 20 trading day average price was $35.86, while the closing price was $34.54. At December 31, 2005, the 20 trading day average price was $23.63 while the closing price was $23.89. We therefore believe that the 20 trading day average price approximated fair value at December 31, 2006 and 2005.

The Company will include the table below that presents the carrying amounts and fair values of its long-term debt in its Notes to the Consolidated Financial Statements of its annual report on Form 10-K. The fair value of the Company’s long-term debt is estimated based on quotations of major securities dealers who are market makers in the securities.

 

8.25% senior notes, due 2007

8.45% senior notes, due 2009

Mexican term loan, due 2008

Canadian revolving credit facility, due 2011

Korean loans, due 2007 and 2006

Sub-total

Less: current maturities of long-term debt

Total long-term debt

The Company’s wholly-owned Canadian subsidiary has a $6 million investment in a Canadian company representing approximately 9 percent of the equity ownership of that company. We do not deem this investment to be material and therefore no disclosure is required. However, the Company will include the following additional underlined information in the first and second paragraphs of its Notes to the Consolidated Financial Statements regarding Financial Instruments, Derivatives and Hedging Activities in its annual report on Form 10-K.

Fair value of financial instruments:

The carrying value of cash equivalents, accounts receivable, accounts payable and short-term borrowings approximate fair values. Futures contracts, which are designated as hedges of specific volumes of commodities are recognized at fair value. Foreign currency forward contracts, swaps and options hedge transactional foreign exchange risk related to assets and liabilities denominated in currencies other than the functional currency and are recognized at fair value. The Company’s treasury lock agreements, which lock the benchmark rate for an anticipated fixed rate borrowing, are recognized at fair value. The fair

Please see our response to Comment 10. We will provide this disclosure in our Notes to the Consolidated Financial Statements to be included in our annual report on Form 10-K.

As noted in the response to Comment 13, the Company believes that the 20 trading day average price for the redeemable common stock approximates fair value. The Company does not believe that the redeemable common shareholders have received, in substance, a distribution or dividend that differs from what its other common shareholders are entitled to. Therefore, the Company does not believe that the resulting increases or decreases in the carrying amount of the redeemable common stock should be treated in the same manner as dividends on nonredeemable stock. Accordingly, the Company believes that the fair value adjustments to its redeemable common stock are appropriately made against additional paid-in capital.

Exhibit 31 in Item 601 of Regulation S-K requires the certifications to state: “I have reviewed this [specify report] of [identify registrant]”. We believe that identifying the report as an annual report on Form 10-K is an appropriate response to the requirement to specify the report with respect to which the certification relates since it is in fact an annual report pursuant to Section 13 of the Exchange and not a transition report pursuant to that section.

it is responsible for the adequacy and accuracy of the disclosure in the filings;

staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and

the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.