Westway Group, Inc.

CIK:0001361872|SEC Filings

EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2012

3. EARNINGS PER SHARE

The Company calculated earnings per common share in accordance with U.S. GAAP under the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. This method determines basic earnings per share for common stock and participating securities by adjusting for dividends declared (or accumulated) and participation rights in undistributed earnings. The Company’s participating securities are the Series A Convertible Preferred Stock and unvested restricted shares. Unvested restricted shares are considered participating securities because they receive non-forfeitable rights to dividends before vesting at the same rate as common stock.

The numerator was adjusted for dividends declared on participating securities, as well as for the undistributed earnings (loss) allocated to participating securities, for the three and nine months ended September 30, 2012 and 2011, in order to calculate net income applicable to common stockholders.

In calculating the basic weighted average number of common shares outstanding, the Series A Convertible Preferred Stock and unvested restricted shares were excluded, as they are participating securities and not included in calculating the earnings per common share under the two-class method. In calculating the diluted weighted average number of common shares outstanding for the three and nine months ended September 30, 2012 and 2011, the Company did not include these additional securities in the denominator as this would result in an anti-dilutive impact because of the greater income attributable to the Series A Convertible Preferred Stock.

The Company’s 3,476,189 founder warrants with an exercise price of $5.00 and a non-qualified stock option, granted in April 2012, to purchase 250,000 shares of Class A common stock with an exercise price of $5.55 could potentially dilute earnings per common share. Both of these securities were included as dilutive for the three and nine months ended September 30, 2012 because the average stock price of each period was in excess of the exercise prices. However, the founder warrants were excluded for the three and nine months ended September 30, 2011 since the average market price of our common stock during the period was below the exercise prices. Additionally, the founder warrants and stock option could have a potentially less dilutive effect because they have a cashless exercise provision.

Also included in dilutive shares are Class B common stock that are accrued to be issued, as a result of the Company’s common dividends on Series A Preferred shares held in escrow, for the three and nine months ended September 30, 2012. Under the articles of incorporation, the Company is unable to pay a common dividend on shares held in escrow and such dividends have therefore been accrued for the issuance of these shares. Since no common dividend had been paid on escrowed shares prior to September 30, 2011, additional dilutive shares have not been included in the three and nine months ended September 30, 2011 for purposes of this calculation.

The calculation of basic and diluted earnings per common share is as follows (in thousands except share amounts):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Numerator
Net income attributable to Westway Group, Inc.	$	3,676		$	3,030		$	7,889		$	6,846
Preferred dividends accrued		(1,146	)		(1,114	)		(3,419	)		(3,332	)
Dividends to participating securities (1)		—			(1,306	)		(2,664	)		(1,306	)
Undistributed (earnings) loss allocated to participating securities (2)		(1,389	)		5			3			(637	)

Net income applicable to common stockholders—Basic & Diluted		1,141			615			1,809			1,571

Denominator
Weighted average number of common shares outstanding—Basic		27,595,537			26,370,278			27,307,238			26,481,455
Dilutive shares (3)		935,800			—			678,434			—

Weighted average number of common shares outstanding—Diluted		28,531,337			26,370,278			27,985,672			26,481,455

Basic and Diluted Earnings Per Common Share
Earnings per common share—Basic	$	0.04		$	0.02		$	0.07		$	0.06
Earnings per common share—Diluted	$	0.04		$	0.02		$	0.07		$	0.06

Dividends declared per share	$	—		$	0.04		$	0.08		$	0.04

(1)

For the three month period ending September 31, 2012 there was no participating dividend declared. For the nine month period ending September 30, 2012, participating dividends related to the Series A Convertible Preferred Stock and the unvested restricted shares amounted to $2,642,000 and $22,000 respectively, totaling $2,664,000. Participating dividends related to the Series A Convertible Preferred Stock and the unvested restricted shares were $1,295,000 and $11,000 respectively for the three and nine month periods ending September 30, 2011, which amounts to $1,306,000.

(2)

Undistributed earnings allocated to the unvested restricted shares were $11,000 and undistributed earnings allocated to preferred shares net income was $1,378,000 for the three months ended September 30, 2012, totaling $1,389,000. Undistributed losses allocated to the unvested restricted shares for the three months ended September 30, 2011 were $5,000. Undistributed losses allocated to the unvested restricted shares for the nine months ended September 30, 2012 were $3,000. Undistributed earnings allocated to the unvested restricted shares and the Series A Convertible Preferred Stock for the nine months ended September 30, 2011 were $6,000 and $631,000, respectively, totaling $637,000.

(3)

The dilutive shares for the three months ended September 30, 2012 amounted to 935,800 which are comprised of 32,896 incremental shares related to the non-qualified stock options, 756,572 incremental shares related to the founder warrants, and 146,332 shares of accrued stock dividends. The dilutive shares for the nine months ended September 30, 2012 amounted to 678,434 which are comprised of 19,390 incremental shares related to the non-qualified stock options, 587,381 incremental shares related to the founder warrants, and 71,663 shares of accrued stock dividends.

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net income	$ 7,873	$ 6,899
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	2,935	3,952
Provision for doubtful accounts receivable	995	448
Depreciation and amortization	20,560	19,134
Amortization of deferred financing costs	672	928
Equity in loss of unconsolidated investments	447	676
Loss on sale of investment	36
Loss on disposal of property, plant & equipment	109	771
Stock compensation	1,037	848
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	3,533	(1,888)
Inventory	(1,199)	(2,806)
Other current assets	(1,464)	(2,182)
Accounts payable	(8,411)	(4,388)
Accrued expenses and other current liabilities	(3,389)	187
Net cash provided by operating activities	23,734	22,579
Cash flows from investing activities
Capital expenditures for property, plant and equipment, net of sales proceeds	(25,653)	(26,572)
Sale of investment	850
Net cash used in investing activities	(24,803)	(26,572)
Cash flows from financing activities:
Proceeds from credit facility	35,844	67,158
Payments on credit facility	(38,844)	(63,073)
Purchase and cancellation of Class A common stock		(1,424)
Payment of cash dividends	(1,620)
Purchase of founder warrants	(1,193)
Payment of deferred financing costs		(1,572)
Net cash provided by (used in) financing activities	(5,813)	1,089
Effects of exchange rate changes on cash and cash equivalents	533	(235)
Net decrease in cash and cash equivalents	(6,349)	(3,139)
Cash and cash equivalents, beginning of period	13,479	12,652
Cash and cash equivalents, end of period	7,130	9,513
Non-cash financing and investing activities:
Preferred dividends accrued	3,419	3,332
Series A Convertible Preferred stock issued to ED&F Man group	3,399	8,239
Common stock issued or accrued as dividend	$ 5,492

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 7,130	$ 13,479
Trade accounts receivable from third parties, net	40,533	45,579
Trade accounts receivable from related parties	1,742	1,752
Inventories	20,582	19,789
Other current assets	7,563	6,495
Total current assets	77,550	87,094
Investment in unconsolidated subsidiary	3,056	3,449
Property, plant and equipment, net	328,771	323,458
Goodwill	86,244	85,883
Other intangibles, net	7,836	7,912
Other non-current assets	3,696	4,235
Total assets	507,153	512,031
Current liabilities:
Trade accounts payable to third parties	8,536	14,134
Trade accounts payable to related parties	4,574	7,568
Accrued expenses and other current liabilities	21,971	28,395
Total current liabilities	35,081	50,097
Borrowings under credit facilities	90,534	93,534
Deferred income taxes	74,640	71,565
Other long-term liabilities	2,132	702
Total liabilities	202,387	215,898
Stockholders' equity:
Common Stock: $0.0001 par value; 235,000,000 shares authorized; 27,974,426 outstanding at September 30, 2012 represented by 14,321,663 Class A and 13,652,763 Class B shares. (December 31, 2011: $0.0001 par value; 235,000,000 shares authorized; 26,892,179 shares outstanding represented by 13,993,369 Class A and 12,898,810 Class B shares)	3	3
Additional paid-in capital	126,656	127,026
Accumulated other comprehensive income (loss)	(536)	(2,538)
Retained earnings (accumulated deficit)	1,870	(2,600)
Treasury stock at cost - 2,335,569 shares at September 30, 2012. (December 31, 2011: 2,335,569 shares)	(14,013)	(14,013)
Total Westway Group, Inc. stockholders' equity	304,766	295,265
Non-controlling interest		868
Total stockholders' equity	304,766	296,133
Total liabilities and stockholders' equity	507,153	512,031
Series A Convertible Preferred Stock
Stockholders' equity:
Series A Convertible Preferred stock: $0.0001 par value; 40,000,000 authorized; 33,321,892 outstanding at September 30, 2012. (December 31, 2011: $0.0001 par value; 40,000,000 authorized; 32,724,874 outstanding)	$ 190,786	$ 187,387