EXHIBIT 20, LETTER TO STOCKHOLDERS
Published on
Exhibit 20
February 11, 1998
Dear Stockholder:
A recently announced decision by the United States International Trade
Commission (ITC) has taken us a big step forward in our quest to alleviate
unfair competitive pressures from foreign wheat gluten producers. However,
imports of artificially priced wheat gluten from the European Union (E.U.)
continued to adversely affect our results during the second quarter of fiscal
1998.
Our net income for the quarter was $107,000, or $0.01 per share, on sales of
$55,847,000. In the second quarter of fiscal 1997, we had net income of
$1,205,000, or $0.12 per share, on sales of $55,249,000.
For the first six months of fiscal 1998, we incurred a net loss of $128,000, or
$0.01 per share, on sales of $113,470,000, compared to net income of $859,000,
or $0.09 per share, on sales of $108,422,000 for the first six months of fiscal
1997.
I am pleased and encouraged by the ITC's 3-0 vote on January 15 affirming that
the U.S. wheat gluten industry has been seriously injured by wheat gluten
imports from foreign countries. This decision officially confirms the reason for
the negative trend in sales of U.S.-made wheat gluten, and strengthens the
probability of relief. Upon making the injury determination, the ITC immediately
began a remedy phase, which is scheduled to conclude on March 18. At that time,
the ITC will forward its recommendation to the President, who then will have up
to two months to take final action.
The process leading up to the injury determination was initiated by a petition
that was filed by the Wheat Gluten Industry Council of the U.S. on September 19.
The petition was filed under Section 201 of the Trade Act of 1974 and seeks the
establishment of quotas during a four-year period for countries exporting wheat
gluten to the U.S.
Such a measure would help to ensure that fairness and stability are brought back
to the marketplace. It would give U.S. producers time to pursue a more lasting
solution through future negotiations. It also would allow us to more effectively
develop and market value added wheat gluten products, goals which have been
hindered by the massive onslaught of imports from the E.U. Basically, as I have
emphasized in the past, all that we truly are seeking through this process is
the opportunity to compete on equal footing in a fair market environment.
Our sales of alcohol products in the second quarter increased over the same
period a year ago, principally as the result of an expanded presence in the fuel
grade alcohol market. Prices for our food grade alcohol for beverage and
industrial applications declined substantially compared to the second quarter of
fiscal 1997. This was due to a combination of seasonal factors, lower raw
material costs for corn and milo, and increased supplies throughout the
industry. Prices for fuel grade alcohol dropped also, tracking a recent downturn
in gasoline prices. Lower selling prices for our premium wheat starch offset
increased volume sales of this product in the second quarter. The reduced
selling prices primarily were due to a change in our sales mix of non-modified
and modified specialty wheat starches.
Looking ahead, we plan to continue working toward the optimization of our
alcohol and wheat starch production capabilities as conditions warrant. The
utilization of our wheat gluten capacity remains strategically regulated at this
time to minimize the adverse effects of imports from the E.U. Be assured,
however, that we are prepared to significantly increase production with a return
to more equitable competitive conditions in the marketplace.
Sincerely,
s/Ladd M. Seaberg
Ladd M. Seaberg
President and CEO