Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

----

 

**FORM 10-Q**

 

----

 

**x**  Quarterly report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934

** **

# **For the quarterly period ended November 30,2009**

# ** **

## **Commission file number: 33-83868**

## ** **

**AMERICANCRYSTAL SUGAR COMPANY**

(Exact name ofregistrant as specified in its charter)

 
| **Minnesota**                                                   | **84-0004720**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) | (I.R.S. Employer  Identification No.) |

 

**101 NorthThird Street**

**Moorhead,Minnesota  56560**

(Address ofprincipal executive offices)

 

**TelephoneNumber (218) 236-4400**

(Registrant’stelephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months, and (2) has been subject to such filing requirements for the past90 days.  YES x NO o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  YES oNO o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,”“accelerated filer” and “smaller reporting company” in Rule 12b-2 of theExchange Act.

 

| Large  accelerated filer o                     |   | Accelerated  filer o         |
|------------------------------------------------|--------|------------------------------|
|                                           |   |                         |
| Non-accelerated  filer x                       |   | Smaller reporting  company o |
| (Do not check if  a smaller reporting company) |   |                         |

 

Indicate by check mark whether the registrant is ashell company (as defined in rule 12b-2 of the Act).  YES o NOx

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

|                            |       | **Outstanding  at**       |
|---------------------------------|------------|---------------------------|
| **Class of  Common Stock** | ** ** | **January 8,  2010** |
| **$10 Par Value**               | ** ** | **2,816**                 |

 

 

 

----

Tableof Contents

 

**AMERICAN CRYSTAL SUGAR COMPANY**

 

**FORM 10-Q**

 

**INDEX**

 
| ** **       | ** **                                                                                      | **PAGE NO.** |
|------------------|-------------------------------------------------------------------------------------------------|--------------|
|             |                                                                                            |         |
| **PART I**  | **FINANCIAL INFORMATION**                                                                       |         |
|             |                                                                                            |         |
| **ITEM 1.**      | **CONSOLIDATED FINANCIAL  STATEMENTS**                                                          |         |
|             |                                                                                            |         |
| ** **       | **CONSOLIDATED  BALANCE SHEETS**                                                                | **1**        |
|             |                                                                                            |         |
| ** **       | **CONSOLIDATED  STATEMENTS OF OPERATIONS**                                                      | **3**        |
|             |                                                                                            |         |
| ** **       | **CONSOLIDATED  STATEMENTS OF CASH FLOWS**                                                      | **4**        |
|             |                                                                                            |         |
| ** **       | **NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**                                              | **5**        |
|             |                                                                                            |         |
| **ITEM 2.**      | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** | **12**       |
| **ITEM 3.**      | **QUANTITATIVE AND  QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                 | **18**       |
| **ITEM 4T.**     | **CONTROLS AND  PROCEDURES**                                                                    | **19**       |
|             |                                                                                            |         |
| **PART II** | **OTHER INFORMATION**                                                                           |         |
|             |                                                                                            |         |
| **ITEM 1.**      | **LEGAL PROCEEDINGS**                                                                           | **19**       |
| **ITEM 1A.**     | **RISK FACTORS**                                                                                | **20**       |
| **ITEM 2.**      | **UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**                                | **20**       |
| **ITEM 3.**      | **DEFAULTS UPON  SENIOR SECURITIES**                                                            | **20**       |
| **ITEM 4.**      | **SUBMISSION OF  MATTERS TO A VOTE OF SECURITY HOLDERS**                                        | **20**       |
| **ITEM 5.**      | **OTHER INFORMATION**                                                                           | **20**       |
| **ITEM  6.**     | **EXHIBITS**                                                                                    | **21**       |
|             |                                                                                            |         |
| **SIGNATURES**   |                                                                                            | **23**       |

 

----

Table of Contents

 

**American Crystal Sugar Company**

**ConsolidatedBalance Sheets**

**(Unaudited)**

**(In Thousands)**

 

**Assets**

 
| ** **                                     | ** ** | **November 30** | ** ** | **August 31** | ** ** |
|------------------------------------------------|------------|----------------------|------------|--------------------|------------|
| ** **                                     | ** ** | **2009**             | ** ** | **2008**           | ** ** | **2009*** | ** ** |
| **Current Assets:**                            |       |                 |       |               |       |   |   |
| Cash and Cash Equivalents                      |       | $                    | 144        |               | $          | 121 |   | $ | 127 |   |
| Receivables:                                   |       |                 |       |               |       |   |   |
| Trade                                          |       | 67,253               |       | 66,740             |       | 61,665 |   |
| Members                                        |       | 3,697                |       | 3,917              |       | 4,480 |   |
| Other                                          |       | 3,018                |       | 2,471              |       | 2,565 |   |
| Advances to Related Parties                    |       | 8,988                |       | 8,538              |       | 22,744 |   |
| Inventories                                    |       | 508,556              |       | 556,775            |       | 181,311 |   |
| Prepaid Expenses                               |       | 2,423                |       | 1,875              |       | 864 |   |
|                                           |       |                 |       |               |       |   |   |
| **Total Current Assets**                       |       | 594,079              |       | 640,437            |       | 273,756 |   |
|                                           |       |                 |       |               |       |   |   |
| **Property and Equipment:**                    |       |                 |       |               |       |   |   |
| Land and Land Improvements                     |       | 66,942               |       | 60,099             |       | 67,011 |   |
| Buildings                                      |       | 119,740              |       | 113,913            |       | 116,907 |   |
| Equipment                                      |       | 898,640              |       | 878,555            |       | 892,678 |   |
| Construction in Progress                       |       | 13,324               |       | 5,798              |       | 14,522 |   |
| Less Accumulated Depreciation                  |       | (751,265             | )          | (716,749           | )          | (737,182 | ) |
|                                           |       |                 |       |               |       |   |   |
| **Net Property and Equipment**                 |       | 347,381              |       | 341,616            |       | 353,936 |   |
|                                           |       |                 |       |               |       |   |   |
| **Net Property and Equipment Held for  Lease** |       | 109,101              |       | 117,957            |       | 111,015 |   |
|                                           |       |                 |       |               |       |   |   |
| **Other Assets:**                              |       |                 |       |               |       |   |   |
| Investments in CoBank, ACB                     |       | 10,111               |       | 9,946              |       | 10,111 |   |
| Investments in Marketing Cooperatives          |       | 251                  |       | 4,184              |       | 135 |   |
| Pension Asset                                  |       | —               |       | 34,758             |       | — |   |
| Other Assets                                   |       | 12,161               |       | 10,664             |       | 12,305 |   |
|                                           |       |                 |       |               |       |   |   |
| **Total Other Assets**                         |       | 22,523               |       | 59,552             |       | 22,551 |   |
|                                           |       |                 |       |               |       |   |   |
| **Total Assets**                               |       | $                    | 1,073,084  |               | $          | 1,159,562 |   | $ | 761,258 |   |

 

The Accompanying Notes are an Integral Part of These ConsolidatedFinancial Statements.

 

----

* Derived from audited financial statements

 

1

----

Table of Contents

 

**American Crystal Sugar Company**

**Consolidated Balance Sheets**

**(Unaudited)**

**(In Thousands)**

 

**Liabilities and Members’ Investments**

 
| ** **                                                      | ** ** | **November 30** | ** ** | **August 31** | ** ** |
|-----------------------------------------------------------------|------------|----------------------|------------|--------------------|------------|
| ** **                                                      | ** ** | **2009**             | ** ** | **2008**           | ** ** | **2009*** | ** ** |
| **Current Liabilities:**                                        |       |                 |       |               |       |   |   |
| Short-Term Debt                                                 |       | $                    | 190,486    |               | $          | 225,516 |   | $ | 45,989 |   |
| Current Maturities of Long-Term Debt                            |       | 18,074               |       | 20,991             |       | 18,789 |   |
| Accounts Payable                                                |       | 27,045               |       | 27,692             |       | 35,381 |   |
| Advances Due to Related Parties                                 |       | 2,394                |       | 2,784              |       | 1,863 |   |
| Accrued Continuing Costs                                        |       | 56,162               |       | 42,366             |       | — |   |
| Other Current Liabilities                                       |       | 32,711               |       | 26,966             |       | 34,034 |   |
| Amounts Due Growers                                             |       | 205,051              |       | 225,241            |       | 87,218 |   |
|                                                            |       |                 |       |               |       |   |   |
| **Total Current Liabilities**                                   |       | 531,923              |       | 571,556            |       | 223,274 |   |
|                                                            |       |                 |       |               |       |   |   |
| **Long-Term Debt, Net of Current  Maturities**                  |       | 143,073              |       | 157,087            |       | 143,073 |   |
|                                                            |       |                 |       |               |       |   |   |
| **Accrued Employee Benefits**                                   |       | 45,352               |       | 33,550             |       | 46,458 |   |
|                                                            |       |                 |       |               |       |   |   |
| **Other Liabilities**                                           |       | 10,098               |       | 7,769              |       | 8,925 |   |
|                                                            |       |                 |       |               |       |   |   |
| **Total Liabilities**                                           |       | 730,446              |       | 769,962            |       | 421,730 |   |
|                                                            |       |                 |       |               |       |   |   |
| **Commitments and Contingencies**                               |       |                 |       |               |       |   |   |
|                                                            |       |                 |       |               |       |   |   |
| **Members’ Investments:**                                  |       |                 |       |               |       |   |   |
| Preferred Stock                                                 |       | 38,275               |       | 38,275             |       | 38,275 |   |
| Common Stock                                                    |       | 28                   |       | 28                 |       | 28 |   |
| Additional Paid-In Capital                                      |       | 152,261              |       | 152,261            |       | 152,261 |   |
| Unit Retains                                                    |       | 181,601              |       | 174,416            |       | 181,601 |   |
| Equity Retention                                                |       | —               |       | 1,153              |       | — |   |
| Accumulated Other Comprehensive Income (Loss)                   |       | (61,699              | )          | (9,010             | )          | (63,705 | ) |
| Retained Earnings (Accumulated Deficit)                         |       | (21,887              | )          | (25,912            | )          | (23,882 | ) |
|                                                            |       |                 |       |               |       |   |   |
| Total American Crystal Sugar Company Members’  Investments |       | 288,579              |       | 331,211            |       | 284,578 |   |
|                                                            |       |                 |       |               |       |   |   |
| Noncontrolling Interests                                        |       | 54,059               |       | 58,389             |       | 54,950 |   |
|                                                            |       |                 |       |               |       |   |   |
| **Total Members’ Investments**                             |       | 342,638              |       | 389,600            |       | 339,528 |   |
|                                                            |       |                 |       |               |       |   |   |
| **Total Liabilities and Members’  Investments**            |       | $                    | 1,073,084  |               | $          | 1,159,562 |   | $ | 761,258 |   |

 

The Accompanying Notes are an Integral Part of These ConsolidatedFinancial Statements.

 

----

* Derived from audited financial statements

 

2

----

Table of Contents

 

**American Crystal Sugar Company**

**ConsolidatedStatements of Operations**

**(Unaudited)**

**(In Thousands)**

 
| ** **                                                                              | ** ** | **For  the Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                              | ** ** | **November 30**            | ** ** |
| ** **                                                                              | ** ** | **2009**                        | ** ** | **2008** | ** ** |
| **Net Revenue**                                                                         |       | $                               | 319,408    |   | $ | 323,055 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Cost of Sales**                                                                       |       | 48,609                          |       | 60,781 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Gross Proceeds**                                                                      |       | 270,799                         |       | 262,274 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Selling, General and  Administrative Expenses**                                       |       | 61,719                          |       | 68,406 |   |
| **Accrued Continuing Costs**                                                            |       | 56,162                          |       | 42,366 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Operating Proceeds**                                                                  |       | 152,918                         |       | 151,502 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Other Income (Expense):**                                                             |       |                            |       |   |   |
| Interest Income                                                                         |       | 9                               |       | 109 |   |
| Interest Expense, Net                                                                   |       | (2,022                          | )          | (2,427 | ) |
| Other, Net                                                                              |       | (107                            | )          | 4,609 |   |
|                                                                                    |       |                            |       |   |   |
| **Total Other Income (Expense)**                                                        |       | (2,120                          | )          | 2,291 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Proceeds Before Income Tax  Expense**                                                 |       | 150,798                         |       | 153,793 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Income Tax Expense**                                                                  |       | (1,386                          | )          | (194 | ) |
| ** **                                                                              |       |                            |       |   |   |
| **Consolidated Net Proceeds**                                                           |       | 149,412                         |       | 153,599 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Less: Net Proceeds Attributable  to Noncontrolling Interests**                        |       | (1,735                          | )          | (1,671 | ) |
| ** **                                                                              |       |                            |       |   |   |
| **Net Proceeds Attributable to  American Crystal Sugar Company**                        |       | $                               | 147,677    |   | $ | 151,928 |   |
| ** **                                                                              |       |                            |       |   |   |
| **Distributions of Net Proceeds  Attributable to American Crystal Sugar Company:**      |       |                            |       |   |   |
| Credited (Charged) to American Crystal Sugar  Company’s Members’ Investments: |       |                            |       |   |   |
| Non-Member Business Income                                                              |       | $                               | 1,995      |   | $ | 279 |   |
| Unit Retains Declared to Members                                                        |       | —                          |       | — |   |
| Net Credit to American Crystal Sugar Company’s  Members’ Investments          |       | 1,995                           |       | 279 |   |
| Payments To/Due Members for Sugarbeets, Net of  Unit Retains Declared                   |       | 145,682                         |       | 151,649 |   |
| **Total**                                                                               |       | $                               | 147,677    |   | $ | 151,928 |   |

 

The Accompanying Notes are an Integral Part of These ConsolidatedFinancial Statements.

 

3

----

Table of Contents

 

**American Crystal Sugar Company**

**ConsolidatedStatements of Cash Flows**

**(Unaudited)**

**(In Thousands)**

 
| ** **                                                            | ** ** | **For the Three Months Ended** | ** ** |
|-----------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                            | ** ** | **November 30**           | ** ** |
| ** **                                                            | ** ** | **2009**                       | ** ** | **2008** | ** ** |
| **Cash Provided By (Used In)  Operating Activities:**                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Net Proceeds Attributable to American Crystal  Sugar Company          |       | $                              | 147,677    |   | $ | 151,928 |   |
| Payments To/Due Members for Sugarbeets, Net of  Unit Retains Declared |       | (145,682                       | )          | (151,649 | ) |
| Add (Deduct) Non-Cash Items:                                          |       |                           |       |   |   |
| Depreciation and Amortization                                         |       | 17,566                         |       | 17,752 |   |
| (Income)/Loss from Equity Method Investees                            |       | 2                              |       | (5 | ) |
| Loss on the Disposition of Property and Equipment                     |       | 116                            |       | 267 |   |
| Deferred Gain Recognition                                             |       | (16                            | )          | (27 | ) |
| Noncontrolling Interests                                              |       | 1,735                          |       | 1,671 |   |
| Changes in Assets and Liabilities:                                    |       |                           |       |   |   |
| Receivables                                                           |       | (5,258                         | )          | (1,677 | ) |
| Inventories                                                           |       | (327,245                       | )          | (368,447 | ) |
| Prepaid Expenses                                                      |       | (1,547                         | )          | (712 | ) |
| Non Current Pension Asset/Liability                                   |       | 30                             |       | 185 |   |
| Advances To/Due to Related Parties                                    |       | 14,287                         |       | 11,294 |   |
| Accounts Payable                                                      |       | (2,650                         | )          | (3,302 | ) |
| Accrued Continuing Costs                                              |       | 56,162                         |       | 42,366 |   |
| Other Liabilities                                                     |       | 606                            |       | 210 |   |
| Amounts Due Growers                                                   |       | 117,833                        |       | 104,308 |   |
| **Net Cash Used In Operating  Activities**                            |       | (126,384                       | )          | (195,838 | ) |
|                                                                  |       |                           |       |   |   |
| **Cash Provided By (Used In)  Investing Activities:**                 |       |                           |       |   |   |
| Purchases of Property and Equipment                                   |       | (13,708                        | )          | (9,711 | ) |
| Purchases of Property and Equipment Held for Lease                    |       | (947                           | )          | (750 | ) |
| Proceeds from the Sale of Property and Equipment                      |       | —                         |       | 3 |   |
| Changes in Other Assets                                               |       | (100                           | )          | (3 | ) |
| **Net Cash Used In Investing Activities**                             |       | (14,755                        | )          | (10,461 | ) |
|                                                                  |       |                           |       |   |   |
| **Cash Provided By (Used In)  Financing Activities:**                 |       |                           |       |   |   |
| Net Proceeds from Short-Term Debt                                     |       | 144,497                        |       | 210,219 |   |
| Long-Term Debt Repayment                                              |       | (715                           | )          | (714 | ) |
| Distributions to Noncontrolling Interests                             |       | (2,626                         | )          | (3,121 | ) |
| Payment of Unit Retains and Equity Retention                          |       | —                         |       | (92 | ) |
| **Net Cash Provided By Financing  Activities**                        |       | 141,156                        |       | 206,292 |   |
| **Increase (Decrease) In Cash and  Cash Equivalents**                 |       | 17                             |       | (7 | ) |
| **Cash and Cash Equivalents,  Beginning of Year**                     |       | 127                            |       | 128 |   |
|                                                                  |       |                           |       |   |   |
| **Cash and Cash Equivalents, End of  Period**                         |       | $                              | 144        |   | $ | 121 |   |

 

**Non-Cash Investing Activities:**Purchases ofProperty and Equipment include the changes in accounts payable related to thesepurchases of ($5,686,000) and ($4,842,000) for the three months ended November 30,2009 and 2008, respectively.

 

The Accompanying Notes are an Integral Part of These ConsolidatedFinancial Statements.

 

4

----

Table of Contents

 

# **AMERICANCRYSTAL SUGAR COMPANY**

**NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED**

**November 30, 2009 and 2008**

**(Unaudited)**

 

**Note1:  Basis of Presentation**

 

Theunaudited consolidated financial statements of American Crystal Sugar Company(Company) contained herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission.  Accordingly, they do not include all theinformation and footnotes required by accounting principles generally acceptedin the United States of America. However, in the opinion of management, all adjustments, consisting ofnormal recurring accruals, considered necessary for a fair presentation havebeen included.  These financialstatements should be read in conjunction with the consolidated financialstatements and notes included in the Company’s Annual Report on Form 10-Kfor the year ended August 31, 2009.

 

TheCompany’s consolidated financial statements are comprised of: American CrystalSugar Company; its wholly-owned subsidiaries Sidney Sugars Incorporated (SidneySugars) and Crab Creek Sugar Company (Crab Creek); and ProGold LimitedLiability Company (ProGold), a limited liability company in which the Companyholds a 51 percent ownership interest. All material inter-company transactions have been eliminated.

 

Inaccordance with authoritative guidance issued by the Financial AccountingStandards Board (FASB)*,*the Companyhas, on a retrospective basis for all periods presented in this report,included the net proceeds attributable to noncontrolling interests, previouslyreferred to as minority interest, as a component of consolidated net proceedsreflected on the Consolidated Statements of Operations. In addition,noncontrolling interests on the Consolidated Balance Sheets are now reflectedas a component of Total Members’ Investments.

 

Certainother reclassifications have been made to the November 30, 2008consolidated financial statements to conform with the November 30, 2009presentation.  These reclassificationshad no effect on previously reported results of operations or Members’Investments.

 

Theoperating results for the three months ended November 30, 2009, are notnecessarily indicative of the results that may be expected for the year ended August 31,2010.  The amount paid to shareholdersfor sugarbeets (member beet payment) depends on the future selling prices ofsugar and agri-products as well as processing and other costs incurred duringthe remainder of the fiscal year associated with the 2009 Red River Valleysugarbeet crop (RRV crop).  The amountpaid to non-member growers for sugarbeets (non-member beet payment) depends onthe future selling prices of sugar and the related selling expenses associatedwith the 2009 Sidney Sugars sugarbeet crop (Sidney crop).  For the purposes of this report, the amountof the beet payments, future revenues and costs have been estimated.  Therefore, adjustments with respect to theseestimates may be necessary in the future, as additional information becomesavailable.

 

**Note 2: Recently IssuedAccounting Pronouncements**

 

In June 2009, the FASBissued authoritative guidance which establishes the Accounting Standards Codification (ASC) as the source ofauthoritative accounting principles recognized by the FASB to be applied bynongovernmental entities in the preparation of financial statements inconformity with Generally Accepted Accounting Standards (GAAP) in the UnitedStates.  Rules and interpretivereleases of the Securities and Exchange Commission (SEC) under authority offederal securities laws are also sources of authoritative GAAP for SECregistrants.  All guidance contained in the ASC carries an equal level ofauthority.  This guidance becameeffective and was adopted by the Company in the first quarter of fiscal 2010.

 

5

----

Table of Contents

 

In December 2007, the FASBissued authoritative guidance establishing new standards that govern theaccounting and reporting of noncontrolling interests in partially ownedsubsidiaries, previously referred to as minority interests. This guidance became effective andwas adopted by the Company on a retrospective basis in the first quarter offiscal 2010.

 

InDecember 2007, the FASB issued authoritative guidance pertaining toBusiness Combinations which retains the fundamental requirements that theacquisition method of accounting be used for all business combinations and foran acquirer to be identified for each business combination.  It also defines the acquirer as the entitythat obtains control of one or more businesses in the business combination andestablishes the acquisition date as the date that the acquirer achievescontrol. This guidance became effective and was adopted by the Company in thefirst quarter of fiscal 2010.

 

InApril 2008, the FASB issued authoritative guidance that amends the factorsthat should be considered in developing renewal or extension assumptions usedto determine the useful life of a recognized intangible asset.  The intent of this guidance is to improve theconsistency between the useful life of a recognized intangible asset and theperiod of expected cash flows used to measure the fair value of the asset.  This guidance became effective and wasadopted by the Company in the first quarter of fiscal 2010.

 

InDecember 2008, the FASB issued authoritative guidance which delayed forthe Company to the first quarter of fiscal 2010 the effective date of theapplication of the authoritative guidance pertaining to fair value measurementsfor all non-financial assets and non-financial liabilities that are recognizedor disclosed at fair value in the financial statements on a nonrecurringbasis.  The Company adopted this guidancein the first quarter of fiscal 2010.

 

InApril 2009, the FASB issued authoritative guidance to address some of theapplication issues with the initial recognition and measurement of an assetacquired or a liability assumed in a business combination that arises from acontingency. This guidance became effective and was adopted by the Company inthe first quarter of fiscal 2010.

 

InAugust 2009, the FASB issued an update to the authoritative guidance forthe fair value measurement of liabilities. This update contains amendments which provide for the clarification: ofthe measurement techniques required in circumstances in which a quoted price inan active market for the identical liability is not available; of therequirements related to restrictions that prevent a transfer of a liability;and of the requirements for certain Level 1 fair value measurementsituations.  The guidance provided inthis update became effective and was adopted by the Company in the firstquarter of 2010.

 

InDecember 2008, the FASB issued authoritative guidance regarding anemployer’s disclosure about plan assets of a defined benefit pension plan orother postretirement plan.  This guidancebecomes effective for the Company in the fourth quarter of fiscal 2010.  The Company does not expect that the adoptionof this guidance will have a material effect on the Company’s financialstatements.

 

In June and December 2009,the FASB issued authoritative guidance to improve the relevance,representational faithfulness, and comparability of the information that areporting entity provides in its financial reports about a transfer offinancial assets; the effects of a transfer on its financial position,financial performance, and cash flows; and a transferor’s continuinginvolvement in transferred financial assets. This guidance becomes effective for the Company in fiscal 2011.  The Company does not expect that the adoptionof this guidance will have a material effect on the Company’s financialstatements.

 

In June and December 2009,the FASB issued authoritative guidance to improve financial reporting byenterprises involved with variable interest entities and to provide morerelevant and reliable information to users of financial statements. Thisguidance becomes effective for the Company in fiscal 2011.  The Company does not expect that the adoptionof this guidance will have a material effect on the Company’s financialstatements.

 

In October 2009, theFASB issued an update to the authoritative guidance which contains amendmentsto the criteria for separating consideration in multiple-deliverablearrangements and expands

 

6

----

Tableof Contents

 

disclosures related to sucharrangements.  The guidance provided bythis update becomes effective for the Company in fiscal 2011. The Company doesnot expect that the adoption of this guidance will have a material effect onthe Company’s financial statements.

 

**Note3:  Inventories**

 

Themajor components of inventories are as follows (In Thousands):

 
| ** **                                                     | ** ** | **November 30  2009** | ** ** | **November 30  2008** | ** ** | **August 31  2009** | ** ** |
|----------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|--------------------------|------------|
| Sugar,  Pulp, Molasses, Other Agri-Products and Sugarbeet Seed |       | $                          | 204,849    |                       | $          | 211,344                  |       | $ | 138,039 |   |
| Unprocessed  Sugarbeets                                        |       | 260,497                    |       | 308,823                    |       | —                   |       |
| Maintenance  Parts and Supplies                                |       | 43,210                     |       | 36,608                     |       | 43,272                   |       |
|                                                           |       |                       |       |                       |       |                     |       |
| Total  Inventories                                             |       | $                          | 508,556    |                       | $          | 556,775                  |       | $ | 181,311 |   |

 

Sugar,pulp, molasses and other agri-products inventories are valued at estimated netrealizable value.  Unprocessed sugarbeetsare valued at the estimated gross beet payment. Maintenance parts and supplies and sugarbeet seed inventories are valuedat the lower of average cost or market.

 

# **Note 4: Short-Term Debt**

# ** **

The Company has a seasonal line of credit through July 30, 2012,with a consortium of lenders led by CoBank, ACB of $320.0 million and aline of credit with Wells Fargo Bank for $1.0 million.  The Company’s commercial paper programprovides short-term borrowings of up to $320 million.  Any borrowings under the commercial paperprogram along with outstanding short-term letters of credit will act to reducethe available credit under the CoBank, ACB seasonal line of credit by acommensurate amount.  The Company alsoutilizes the Commodity Credit Corporation (CCC) to meet its short-termborrowing needs.

 

As of November 30,2009, the Company had outstanding commercial paper of $190.5****million at average interest rates of .40% to .65% andmaturity dates between December 1, 2009 and February 26, 2010.  The Company had no outstanding short-termdebt with CoBank, ACB as of November 30, 2009.  The Company had $2.9 million of short-termletters of credit outstanding as of November 30, 2009.  The unused seasonal line of credit as of November 30,2009 was $127.6 million.

 

As of November 30,2008, the Company had outstanding commercial paper of $30.5****millionat an average interest rate of 3.35% and maturity dates between December 1,2008 and December 5, 2008.  TheCompany also had outstanding short-term debt with CoBank, ACB as of November 30,2008 of $144.0 million at an average interest rate of 2.88% and maturity datesbetween December 24, 2008 and February 19, 2009.  The Company had $2.1 million of short-termletters of credit outstanding as of November 30, 2008.  The unused seasonal line of credit as of November 30,2008 was $169.4 million.  In addition,the Company had an outstanding non-recourse loan with the CCC of $51.0 million,against which 2.2 million hundredweight of sugar was pledged ascollateral.  The CCC loan carried aninterest rate of 2.5% and a maturity date of August 31, 2009.

 

**Note5:  Long-Term Debt**

 

The Company has long-term debt availability through December 31,2011, with CoBank, ACB of****$174.6 million,of which $40.3 million in loans and $70.8 million in long-term letters ofcredit were outstanding as of November 30, 2009.  The unused long-term line of credit as of November 30, 2009, was$63.5 million.  In addition, the Companyhad long-term debt outstanding, as of November 30, 2009, of $50 millionfrom a private placement of Senior Notes that occurred in September of1998; $ .7 million from a private placement of Senior Notes that occurred in January of2003; and $70.1 million from five separate issuances of Pollution Controland Industrial Development Revenue Bonds.

 

7

----

Table of Contents

 

As of November 30, 2008, the Company had long-term debtavailability with CoBank, ACB of****$184.8 million,of which $53.3 million in loans and $70.3 million in long-term letters ofcredit were outstanding.  The unusedlong-term line of credit as of November 30, 2008, was $61.2 million.  In addition, the Company had long-term debtoutstanding, as of November 30, 2008, of $50 million from a privateplacement of Senior Notes that occurred in September of 1998; $3.6 millionfrom a private placement of Senior Notes that occurred in January of 2003;$70.4 million from seven separate issuances of Pollution Control andIndustrial Development Revenue Bonds; and a term loan with Bank of North Dakotaof $ .8 million.

 

**Note6:  Interest Paid and InterestCapitalized**

 

Interestpaid, net of amounts capitalized, was $1.2 million and $1.1 million for thethree months ended November 30, 2009 and 2008,respectively.  Interest capitalized was $..1 million and $ .2 million for the three months ended November 30, 2009 and 2008,respectively.

 

**Note7:  Accrued Continuing Costs**

 

For interimreporting, the net proceeds from member business is based on the forecastedgross beet payment and the percentage of the tons of sugarbeets processed tothe total estimated tons of sugarbeets to be processed for a given crop year.  The net proceeds from the operations ofSidney Sugars is based on the forecasted net income for the fiscal year and thepercentage of the tons of non-member sugarbeets processed to the totalestimated tons of non-member sugarbeets to be processed for a given fiscal year.

 

Accrued continuingcosts represent the difference between the net proceeds as determined above andactual member business crop year and Sidney Sugars fiscal year revenuesrealized and expenses incurred through the end of the reporting period.  Accrued continuing costs are reflected in theConsolidated Financial Statements as a cost on the Consolidated Statements ofOperations and as a current liability on the Consolidated Balance Sheets.

 

**Note8: ****Net Periodic Pension and Post-Retirement Costs**

 

The following schedules provide the components of theNet Periodic Pension and Post-Retirement Costs for the three months ended November 30, 2009 and 2008:

 

8

----

Tableof Contents

 

***Components of Net Periodic PensionCost***

(In Thousands)

 
| ** **                          | ** ** | **For the Three Months Ended** | ** ** |
|-------------------------------------|------------|--------------------------------|------------|
| ** **                          | ** ** | **November 30**           | ** ** |
| ** **                          | ** ** | **2009**                       | ** ** | **2008** | ** ** |
| Service Cost                        |       | $                              | 908        |   | $ | 1,049 |   |
| Interest Cost                       |       | 2,282                          |       | 2,668 |   |
| Expected Return on Plan Assets      |       | (2,481                         | )          | (3,864 | ) |
| Amortization of Prior Service Costs |       | 329                            |       | 411 |   |
| Amortization of Net Actuarial Loss  |       | 1,735                          |       | 18 |   |
| FAS 158 Measurement Date Adjustment |       | —                         |       | (56 | ) |
| Net Periodic Pension Cost           |       | $                              | 2,773      |   | $ | 226 |   |

 

***Components of Net PeriodicPost-Retirement Cost***

(In Thousands)

 
| ** **                         | ** ** | **For the Three Months Ended** | ** ** |
|------------------------------------|------------|--------------------------------|------------|
| ** **                         | ** ** | **November 30**           | ** ** |
| ** **                         | ** ** | **2009**                       | ** ** | **2008** | ** ** |
| Service Cost                       |       | $                              | 242        |   | $ | 242 |   |
| Interest Cost                      |       | 464                            |       | 472 |   |
| Amortization of Net Actuarial Gain |       | (172                           | )          | (169 | ) |
| Net Periodic Post-Retirement Cost  |       | $                              | 534        |   | $ | 545 |   |

 

TheCompany has made contributions to the pension plans of approximately $2.5million during the three months ended November 30, 2009 and is anticipatingmaking total contributions of approximately $4.3 million to the pension plansduring this fiscal year.  The Company hascontributed and made benefit payments of approximately $17,000 related to theSupplemental Executive Retirement Plans during the three months ended November 30, 2009.  The Company expects to contribute and makebenefit payments totaling approximately $99,000 this fiscal year related to theSupplemental Executive Retirement Plans.

 

TheCompany has contributed and made benefit payments of approximately $349,000 related to the post-retirement plans duringthe three months ended November 30, 2009. The Company expects to contributeand make benefit payments of approximately $1.0 million related to thepost-retirement plans during the current fiscal year.

 

**Note9:  Members’ Investments**

 
| ** **              | ** ** | ** **    | ** ** | **Shares**     | ** ** | **Shares Issued**     | ** ** |
|-------------------------|------------|---------------|------------|----------------|------------|-----------------------|------------|
| ** **              | ** ** | **Par Value** | ** ** | **Authorized** | ** ** | **& Outstanding** | ** ** |
| Preferred  Stock:       |       |          |       |           |       |                  |       |
| January 8,  2010   |       | $             | 76.77      |           | 600,000    |                  | 498,570    |   |
| November 30,  2009 |       | $             | 76.77      |           | 600,000    |                  | 498,570    |   |
| August 31,  2009   |       | $             | 76.77      |           | 600,000    |                  | 498,570    |   |
| November 30,  2008 |       | $             | 76.77      |           | 600,000    |                  | 498,570    |   |
|                    |       |          |       |           |       |                  |       |
| Common  Stock:          |       |          |       |           |       |                  |       |
| January 8,  2010   |       | $             | 10.00      |           | 4,000      |                  | 2,816      |   |
| November 30,  2009 |       | $             | 10.00      |           | 4,000      |                  | 2,812      |   |
| August 31,  2009   |       | $             | 10.00      |           | 4,000      |                  | 2,812      |   |
| November 30,  2008 |       | $             | 10.00      |           | 4,000      |                  | 2,839      |   |

 

9

----

Table of Contents

 

**Note 10:Shipping and Handling Costs**

 

The costs incurred for the shipping and handling of products sold areclassified in the financial statements as a selling expense on the Statementsof Operations.  Shipping and handlingcosts were $40.5 million and $47.5 million for the three months ended November 30, 2009 and 2008,respectively.

 

**Note 11:Segment Reporting**

 

The Company hasidentified two reportable segments: Sugar and Leasing.  The sugar segment is engaged primarily in theproduction and marketing of sugar from sugarbeets.  It also sells agri-products and sugarbeetseed.  The leasing segment is engaged inthe leasing of a corn wet-milling plant used in the production of high-fructosecorn syrup sweetener.  The segments aremanaged separately.  There are nointer-segment sales.  The leasing segmenthas a major customer that accounts for all of that segment’s revenue.

 

Summarizedfinancial information concerning the Company’s reportable segments for the threemonths ended November 30, 2009 and 2008,is shown below:

 
| ** **                          | ** ** | **For the Three Months Ended November 30, 2009** | ** ** |
|-------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                          | ** ** | **(Dollars In Thousands)**                            | ** ** |
| ** **                          | ** ** | **Sugar**                                             | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Net Revenue from External Customers |       | $                                                     | 312,986    |   | $ | 6,422 |   | $ | 319,408 |   |
| Gross Proceeds                      |       | $                                                     | 267,180    |   | $ | 3,619 |   | $ | 270,799 |   |
| Depreciation and Amortization       |       | $                                                     | 14,763     |   | $ | 2,803 |   | $ | 17,566 |   |
| Interest Income                     |       | $                                                     | 9          |   | $ | — |   | $ | 9 |   |
| Interest Expense                    |       | $                                                     | 2,022      |   | $ | — |   | $ | 2,022 |   |
| Loss from Equity Method Investees   |       | $                                                     | (1         | ) | $ | — |   | $ | (1 | ) |
| Other Expense, Net                  |       | $                                                     | (49        | ) | $ | (57 | ) | $ | (106 | ) |
| Consolidated Net Proceeds           |       | $                                                     | 145,871    |   | $ | 3,541 |   | $ | 149,412 |   |
|                                |       |                                                  |       |   |   |   |   |
| Capital Additions                   |       | $                                                     | 8,022      |   | $ | 947 |   | $ | 8,969 |   |

** **
| ** **                          | ** ** | **For the Three Months Ended November 30, 2008** | ** ** |
|-------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                          | ** ** | **(Dollars In Thousands)**                            | ** ** |
| ** **                          | ** ** | **Sugar**                                             | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Net Revenue from External Customers |       | $                                                     | 316,830    |   | $ | 6,225 |   | $ | 323,055 |   |
| Gross Proceeds                      |       | $                                                     | 258,843    |   | $ | 3,431 |   | $ | 262,274 |   |
| Depreciation and Amortization       |       | $                                                     | 14,958     |   | $ | 2,794 |   | $ | 17,752 |   |
| Interest Income                     |       | $                                                     | 108        |   | $ | 1 |   | $ | 109 |   |
| Interest Expense                    |       | $                                                     | 2,427      |   | $ | — |   | $ | 2,427 |   |
| Income from Equity Method Investees |       | $                                                     | 5          |   | $ | — |   | $ | 5 |   |
| Other Income, Net                   |       | $                                                     | 4,604      |   | $ | — |   | $ | 4,604 |   |
| Consolidated Net Proceeds           |       | $                                                     | 150,189    |   | $ | 3,410 |   | $ | 153,599 |   |
|                                |       |                                                  |       |   |   |   |   |
| Capital Additions                   |       | $                                                     | 4,869      |   | $ | 750 |   | $ | 5,619 |   |

 

10

----

Table of Contents

 
| ** **                  | ** ** | **As of November 30, 2009** | ** ** |
|-----------------------------|------------|----------------------------------|------------|
| ** **                  | ** ** | **(Dollars In Thousands)**       | ** ** |
| ** **                  | ** ** | **Sugar**                        | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Property and Equipment, Net |       | $                                | 347,381    |   | $ | — |   | $ | 347,381 |   |
| Assets Held for Lease, Net  |       | $                                | —     |   | $ | 109,101 |   | $ | 109,101 |   |
| Segment Assets              |       | $                                | 959,526    |   | $ | 113,558 |   | $ | 1,073,084 |   |

 
| ** **                  | ** ** | **As of November 30, 2008** | ** ** |
|-----------------------------|------------|----------------------------------|------------|
| ** **                  | ** ** | **(Dollars In Thousands)**       | ** ** |
| ** **                  | ** ** | **Sugar**                        | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Property and Equipment, Net |       | $                                | 341,616    |   | $ | — |   | $ | 341,616 |   |
| Assets Held for Lease, Net  |       | $                                | —     |   | $ | 117,957 |   | $ | 117,957 |   |
| Segment Assets              |       | $                                | 1,037,101  |   | $ | 122,461 |   | $ | 1,159,562 |   |

 

**Note 12:Fair Value of Financial Instruments**

 

Fairvalue is defined as the price that would be received for an asset or paid totransfer a liability (an exit price) in the principal or most advantageous marketfor the asset or liability in an orderly transaction between marketparticipants on the measurement date. Quoted market prices are generally not available for the Company’sfinancial instruments.  Fair values arebased on judgments regarding anticipated cash flows, future expected lossexperience, current economic conditions, risk characteristics of variousfinancial instruments and other factors. These estimates involve uncertainties and matters of judgment, andtherefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

 

*Long-Term Debt, Inclusiveof Current Maturities* - Based upon current borrowing rates withsimilar maturities, the fair value of the long-term debt as of November 30,2009, was approximately $161.2 million in comparison to the carrying value of$161.1 million.

 

*Investments in CoBank, ACB and Investments in Marketing Cooperatives* - The Companybelieves it is not practical to estimate the fair value of these investmentswithout incurring excessive costs because there is no established market forthese securities and equity interests, and it is inappropriate to estimatefuture cash flows which are largely dependent on future earnings of theseorganizations.

 

**Note 13:Environmental Matters**

 

The Company is subject toextensive federal and state environmental laws and regulations with respect towater and air quality, solid waste disposal and odor and noise control.  The Company conducts an ongoing complianceprogram designed to meet these environmental laws and regulations.  The Company believes that it is insubstantial compliance with applicable environmental laws and regulations.  From time to time, however, the Company maybe involved in investigations or determinations regarding matters that mayarise in the ordinary course of business. The Company works closely with all affected government agencies toresolve environmental issues that have arisen and believes such issues will beresolved without any adverse effect on the Company.

 

TheCompany’s sugar manufacturing process is energy intensive and generates carbondioxide and other “Greenhouse Gases” (GHGs). Several bills have been passed or introduced in the United States Senateand House of Representatives that would regulate GHGs and carbon dioxideemissions to reduce the impact of global climate change.  The Company believes it is likely thatindustries generating GHGs, including the Company, will be subject to eitherfederal or state regulation relating to climate change policies in therelatively near future.  These policies,if adopted, will increase the Company’s energy and other operating costs.  Depending on how these policies addressimports, the domestic sugar market may have a competitive disadvantage comparedwith imported sugar.  These policiescould have a significant negative impact on the Company’s beet payment toshareholders if the Company is not able to pass the increased costs on to theCompany’s customers****.****

 

11

----

Tableof Contents

 

On June 26th,2009, the House of Representatives passed H.R. 2454, the American Clean Energyand Security Act (ACES), a bill that will place a cap on GHG emissions.  Similar legislation isbeing considered in the U.S. Senate.  Separately, the EnvironmentalProtection Agency (EPA) finalized findings that GHG emissions endanger publichealth and welfare through their impact on climate change, and that motorvehicles “cause or contribute” to dangerous GHG pollution.  The findings,which respond to the Supreme Court’s 2007 decision in *Massachusetts v. EPA*, legally obligatesthe EPA to issue GHG standards for motor vehicles under the Clean Air Act andsupports the EPA’s effort to use existing legal authority to regulateGHGs.  As an emitter of GHGs covered by ACES, the Company is watchinglegislative developments carefully yet cannot predict whether new proposedregulations will have an impact on the Company.

 

OnNovember 25, 2008, the Company entered into a stipulation agreement withthe Minnesota Pollution Control Agency (MPCA) related to hydrogen sulfideemissions from its Crookston, East Grand Forks and Moorhead, Minnesotafactories.  As part of the stipulationagreement, the Company has agreed to make certain capital expenditures over thenext three years and implement specified changes in operating procedures tocontain hydrogen sulfide emissions at the Minnesota factories.

 

Includingthe expenditures related to the MPCA stipulation agreement, the Company hasidentified capital expenditures for environmental related projects over thenext three years at the Company’s factory locations of approximately $15.1million.

 

**Note 14:Legal Matters**

 

OnSeptember 21, 2009 the U.S. District Court (District Court) ruled againstthe U.S. Department of Agriculture (USDA) finding that the USDA violatedfederal law by failing to prepare an Environmental Impact Statement beforederegulating Roundup Ready® sugarbeets.  The District Court determined that the USDAneeds to prepare a full Environmental Impact Statement.  On December 4, 2009 the District Court,in connection with the USDA Roundup Ready® sugarbeetcase, decided how the District Court will proceed with the next phase oflitigation concerning the approval of Roundup Ready® sugarbeets. The District Court scheduled a hearing regarding remedies for June of2010, with the timing of such hearing subject to change by the DistrictCourt.  It is at this hearing that theactual direct impact of the decision on sugarbeet producers and the Companywill become more defined.  There is noway to predict how the District Court will rule in the remedy phase.  The District Court took no action on December 4ththat would restrict growers’ choice or ability to plant Roundup Ready® sugarbeets in 2010. While there is always somepossibility of interim developments, the Company believes it is unlikely thatthere will be any interference with the 2010 commercial root crop.

 

**Note15: Subsequent Events**

 

TheCompany has evaluated events through January 14, 2010, the date that thefinancial statements were issued, for potential recognition or disclosure inthe November 30, 2009 financial statements.

 

On January 4, 2010, theCompany’s Board of Directors authorized the revolvement of $17.2 million ofunit retains for distribution on January 8, 2010.

 

**Item 2.   Management’s Discussion and Analysis ofFinancial Condition andResults of Operations for the Three Months Ended November 30, 2009 and2008**

** **

This reportcontains forward-looking statements that involve risks and uncertainties.  Such forward-looking statements include,among others, those statements including the words “expect”, “anticipate”, “believe”,“may” and similar expressions.  TheCompany’s actual results could differ materially from those indicated.  Risk factors that could cause or contributeto such differences include, without limitation, market factors, weather andgeneral economic conditions, farm and trade policy, and available quantity andquality of sugarbeets.  For a morecomplete discussion of “Risk Factors”, please refer to the Company’s 2009 Form 10-K.

 

12

----

Table ofContents

 

**OVERVIEW**

 

The harvest of the Red River Valley and Sidney sugarbeet crops grownduring 2009 and to be processed during fiscal 2010 produced a total of10.5 million tons of sugarbeets, or approximately 22.5 tons of sugarbeetsper acre from approximately 467,000 acres. This represents a decrease in total tons harvested of approximately 1.9percent compared to the 2008 crop.  Thesugar content of the 2009 crop is 16.7 percent as compared to the 17.6 percentsugar content of the 2008 crop.  TheCompany expects to produce a total of approximately 28.6 millionhundredweight of sugar from the 2009 crop, a decrease of approximately 6.9percent compared to the 2008 crop.

 

Net proceeds attributable to American Crystal Sugar Company for fiscal2010 is expected to be approximately 27 percent lower than in fiscal 2009.  This expected decrease is primarily due tofewer tons harvested and a decline in the sugar content of the sugarbeetsresulting in the decreased production of sugar and agri-products. Alsocontributing to this expected decrease are lower anticipated net selling pricesfor agri-products and increased operating costs. These anticipated decreaseswill be more than likely partially offset by anticipated higher net sellingprices for sugar.

 

**RESULTSOF OPERATIONS**

 

**Comparisonof the Three Months Ended November 30, 2009 and 2008**

 

Revenuefor the three months ended November 30, 2009, was $319.4 million, a decrease of $3.6million from the three months ended November 30, 2008.  The table below reflects the percentagechanges in product revenues, prices and volumes for the three months ended November 30, 2009, ascompared to the three months ended November 30, 2008.

 
| **Product** | ** ** | **Revenue** | ** ** | **Selling Price** | ** ** | **Volume** | ** ** |
|-------------|------------|-------------|------------|-------------------|------------|------------|------------|
| Sugar       |       | -1.1        | %          | 7.4               | %          | -7.9       | %          |
| Pulp        |       | 9.4         | %          | -12.0             | %          | 24.4       | %          |
| Molasses    |       | -36.9       | %          | 25.5              | %          | -49.7      | %          |
| CSB         |       | -26.1       | %          | -6.8              | %          | -20.7      | %          |
| Betaine     |       | 12.2        | %          | 41.2              | %          | -20.5      | %          |

 

Theincreases in selling prices for sugar, molasses and betaine reflect strongmarkets due to supply and demand factors. The decrease in the selling price ofpulp is the result of lower prices for competing alternative products in themarketplace.  The decreases in thevolumes of sugar and molasses sold reflects the impact of less productavailability due to lower beginning inventories this year as compared to theprevious year.  The increase in thevolume of pulp sold reflects the impact of more product availability due tohigher beginning inventories of pulp this year as compared to the previousyear.  The decline in the volumes of CSBand Betaine are primarily due to lower production this year.

 

Rentalrevenue on the ProGold operating lease was $6.4 million and $6.2 million forthe three months ended November 30, 2009 and 2008,respectively.

 

Costof sales for the three months ended November 30, 2009, exclusive of paymentsto members for sugarbeets, decreased $12.2 million as compared to the threemonths ended November 30, 2008.  This decrease was primarily related to thefollowing:

·                  At the end of each reporting period, productinventories are recorded at their net realizable value.  The change in the net realizable value of theproduct inventories from the beginning of the reporting period is recorded onthe balance sheet as either an increase or decrease to inventories with acorresponding dollar for dollar adjustment to cost of sales on the statement ofoperations.  The increase in the netrealizable value of product inventories for the three months ended November 30, 2009 was $65.5million as compared to an increase of $58.0 million for the previous year’sthree month period ended November 30, 2008 resulting in a $ 7.5 million favorable changein the cost of sales between the two years as shown in the table below:

 

13

----

Tableof Contents

 

**Change in the Net Realizable Value ofProduct Inventories**

 
| ** **                                                   | ** ** | **For the Three Months Ended November 30** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------------|------------|
| **(In  Millions)**                                           | ** ** | **2009**                                        | ** ** | **2008** | ** ** | **Change** | ** ** |
| Beginning Product Inventories at Net Realizable  Value       |       | $                                               | (137.6     | ) | $ | (150.6 | ) | $ | 13.0 | (1) |
| Ending Product Inventories at Net Realizable Value           |       | 203.1                                           |       | 208.6 |   | (5.5 | )(2) |
| Increase in the Net Realizable Value of Product  Inventories |       | $                                               | 65.5       |   | $ | 58.0 |   | $ | 7.5 |   |

 

----

(1) The change is primarily due to a 26percent decrease in the hundredweight of sugar inventory as of August 31,2009 as compared to August 31, 2008 partially offset by a 14 percentincrease in the per hundredweight net realizable value of sugar inventory as ofAugust 31, 2009 as compared to August 31, 2008, a 172 percentincrease in the tons of pulp inventory as of August 31, 2009 as comparedto August 31, 2008 and a 68 percent increase in the per ton net realizablevalue of pulp inventory as of August 31, 2009 as compared to August 31,2008.

(2) The change isprimarily due to a 7.8 percent decrease in the hundredweight of sugar inventoryas of November 30, 2009 as compared to November 30, 2008 partiallyoffset by a 5.7 percent increase in the per hundredweight net realizable valueof sugar inventory.

 

·                  Due to lower than anticipated sugarproduction and inventory levels during the first quarter of last year, theCompany’s sugar marketing agent, United Sugars Corporation, purchased and soldadditional sugar to meet our customers’ needs. As a result, the costs associated with purchased sugar were $9.3 millionhigher for the three months ended November 30, 2008, as compared to thethree months ended November 30, 2009.

·                  Factory operating costs increased $3.1million for the three months ended November 30, 2009, as compared to thethree months ended November 30, 2008,primarily due to increased costs associated with lower grower freightreimbursements due primarily to fewer tons harvested, chemicals, coke andpurchased power as well as an increase in pension plan expense partially offsetby decreased natural gas costs.

·                  The cost recognized associated with thenon-member sugarbeets increased $1.3 million for the three months ended November 30,2009, when compared to the three months ended November 30, 2008.  This increase was primarily due to anincrease in tons of sugarbeets harvested this year.

 

Selling,general and administrative expenses decreased $6.7 million for the three monthsended November 30, 2009, ascompared to the three months ended November 30, 2008.  Selling expenses decreased $7.0 millionprimarily due to the decreased freight costs resulting from lower salesvolumes.  General and administrativeexpenses increased $ .3 million due to general cost increases.

 

Interestexpense decreased $ .4 million for the three months ended November 30, 2009, ascompared to the three months ended November 30, 2008.  This was primarily due to decreased long termaverage borrowing levels and lower short term and long term average interestrates partially offset by a slightly higher short term average borrowing level.

 

Netproceeds attributable to American Crystal Sugar Company decreased $4.3 millionfor the three months ended November 30, 2009, as compared to the three months ended November 30, 2008.  Payments to/due members for sugarbeetsdecreased $6.0 million due to a lower forecasted gross beet payment for the2009 crop as compared to that forecasted for the 2008 crop at this time lastyear.  Non-member business activitiesresulted in a gain of $2.0 million for the three months ended November 30, 2009 ascompared to a gain of $ .3 million for the three months ended November 30, 2008.  The increase was primarily related to theactivities of Sidney Sugars.

 

**LIQUIDITYAND CAPITAL RESOURCES**

 

Underthe Company’s Bylaws and Member Grower Contracts, payments for member-deliveredsugarbeets, the principal raw material used in producing the sugar andagri-products it sells, are subordinated to all member business expenses.  In addition, the beet payments made to membergrowers and non-member growers are paid in three payments over the course of ayear, and the member payments are made net of any anticipated unit retain forthe crop.  These procedures have theeffect of providing the Company with an additional source of short-termfinancing.

 

14

----

Tableof Contents

 

Becausesugar is sold throughout the year (while sugarbeets are processed primarily inthe fall, winter and spring) and because substantial amounts of equipment arerequired for its operations, the Company has utilized substantial outsidefinancing on both a seasonal and long-term basis to fund its operations.  The majority of such financing has beenprovided by a consortium of lenders led by CoBank, ACB.

 

Duringthe current national economic downturn and financial market instability, theCompany, due to its strong financial position and relationships with itslenders, has continued to secure the necessary financing for its workingcapital requirements and capital expenditures.

 

TheCompany has a seasonal line of credit through July 30, 2012, with aconsortium of lenders led by CoBank, ACB of $320.0 million, against whichthere was no outstanding balance as of November 30, 2009 and a line of creditwith Wells Fargo Bank for $1.0 million, against which there was nooutstanding balance as of November 30, 2009.  TheCompany’s commercial paper program provides short-term borrowings of up to $320million of which approximately $190.5 million was outstanding as of November 30, 2009.  The Company had $2.9 million of short-termletters of credit outstanding as of November 30, 2009.  Any borrowings under the commercial paperprogram along with outstanding short-term letters of credit will act to reducethe available credit under the CoBank, ACB seasonal line of credit by acommensurate amount.  The unusedshort-term line of credit as of November 30, 2009, was $127.6 million.

 

TheCompany also has long-term debt availability through December 31, 2011,with CoBank, ACB of****$174.6 million,of which $40.3 million in loans and $70.8 million in long-term letters ofcredit were outstanding as of November 30, 2009.  The unused long-term line of credit as of November 30, 2009, was$63.5 million.  In addition, the Companyhad long-term debt outstanding, as of November 30, 2009, of $50 millionfrom a private placement of Senior Notes that occurred in September of1998; $ .7 million from a private placement of Senior Notes that occurred in January of2003; and $70.1 million from five separate issuances of Pollution Controland Industrial Development Revenue Bonds.

 

TheCompany had outstanding purchase commitments totaling $7.3 million as of November 30, 2009, forequipment and construction contracts related to various capital projects.

 

Theliquidity changes that have occurred in the Company’s financial statements fromAugust 31, 2009, to November 30, 2009, were primarily due to normalbusiness seasonality.  The first threemonths of the Company’s fiscal year includes: the completion of the sugarbeetharvest; the startup of the processing campaign; the final payments to growersfor sugarbeets delivered from the previous year’s crop; and the initialpayments to growers for sugarbeets delivered from the current year’s crop.

 

Thenet cash used by operations was $126.4 million for the three months ended November 30, 2009, ascompared to $195.9 million for the three months ended November 30, 2008.  This decrease in the use of cash of $69.5million was primarily the result of the following:

·                  Reflected in the change in the net cashprovided by operating activities is a net cash increase of $1.5 million fromthe prior year which was the result of a decrease in the forecasted membergross beet payment of $6.0 million partially offset by a decrease in revenue of$3.6 million and increased costs of $ .9 million.

·                  There was a net favorable change in assetsand liabilities of $68.0 million primarily comprised of the following:

·                  The decrease in cash used related to theAmount Due Growers of $13.5 million was due to a reduction in the current year’stotal estimated grower payment based on a reduction in tons harvested and alower estimated per ton member grower payment this year as compared to thistime last year.

·                  The decrease in cash used related to thechange in inventories of $41.2 million was primarily due to a $48.3 milliondecrease in the value of unprocessed sugarbeets, a result of a lower estimatedper ton member grower payment this year as compared to this time last year.This decrease was partially offset by a $7.2 million increase in finishedproduct inventories.

 

15

----

Tableof Contents

 

·                  The decrease in cash used related to changesin advances to related parties of $3.0 million was primarily due to the timingof the cash requirements of our marketing agents

·                  The decrease in cash used related to changesin accrued continuing costs of $13.8 million was the result of a difference inthe timing of revenues and expenses between the two years.

·                  These decreases were partially offset by anincrease in receivables of $3.6 million due to the timing of collections.

 

Thenet cash used in investing activities was $14.8 million for the three monthsended November 30, 2009, ascompared to $10.5 million for the three months ended November 30, 2008.  The increase of $4.3 million was primarilydue to increased purchases of property and equipment.

 

Thenet cash provided by financing activities was $141.2 million for the threemonths ended November 30, 2009, ascompared to $206.3 million for the three months ended November 30, 2008.  This decrease of $65.1 million was primarilydue to decreased net proceeds from short-term debt of $65.7 million partiallyoffset by decreased distributions to Noncontrolling Interests of $ .5 million.

 

TheCompany anticipates that the funds necessary for working capital requirementsand future capital expenditures will be derived from operations and unitretains along with short-term and long-term borrowings.

 

**OTHER**

 

**Food,Conservation and Energy Act of 2008**

 

TheFood, Conservation and Energy Act of 2008 (the Farm Bill) enacted in May, 2008,contains several provisions related to the domestic sugar industry aimed atachieving balance and stability in the U.S. sugar market while minimizing thecost to the Federal government.  The FarmBill applies to the 2008 through 2012 crop years.  Generally, the Farm Bill:

 

·                  maintains a non-recourse loan program,

·                  sets a minimum overall allotment quantity forU.S. producers at no less than 85% of domestic consumption,

·                  maintains a system of marketing allocationsfor sugarbeet and sugar cane producers,

·                  restricts imports of foreign sugar and

·                  provides a new market balancing mechanism todivert any oversupply of sugar from sugar producers to ethanol producers.

 

Underthe Farm Bill, sugar processors can borrow funds on a non-recourse basis fromthe CCC, with repayment of such funds secured by sugar.  If the price of sugar drops below theforfeiture price, the processors can forfeit the sugar securing the loans tothe CCC in lieu of repayment.  Processorsmay also obtain CCC loans for “in-process” sugar or syrups at 80 percent of theloan rate.

 

TheFarm Bill incorporates gradual loan rate increases for raw and refinedsugar.  For raw sugar, the loan rate willincrease three-quarters of a cent per pound, raw value, phased-in inquarter-cent increments over crop years 2009-2011.  Raw cane loan rates remained at 18.00cents/lb in 2008 and will gradually rise to 18.75 cents by 2011, and they willremain at 18.75 cents/lb for the 2012 crop year.  Refined beet sugar loan rates were set at22.90 cents/lb for the 2008 crop and thereafter are set at a rate equal to128.5 percent of the loan rate per pound for raw cane sugar for each of the2009 through 2012 crop years.

 

TheUSDA has historically maintained raw and refined sugar prices above theforfeiture price without cost to the U.S. Treasury by regulating the supply ofsugar in the U.S. market through management of a tariff rate quota system.  Currently, forty exporting countries retainguaranteed preferential access to the U.S. market under World TradeOrganization (WTO) and Free Trade Agreement (FTA) rules.  Mexico’s access has been unlimited since January 1,2008.  The Farm Bill sets a minimumoverall allotment quantity for U.S. producers at no less than 85% of domesticconsumption and provides a 

 

16

----

Tableof Contents

 

marketbalancing mechanism if there is an oversupply in the domestic sugarmarket.  If the Secretary of Agriculturedetermines there is an oversupply of sugar, the new market balancing mechanismrequires the Secretary to divert the excess sugar from sugar producers toethanol producers while minimizing the cost to the U.S Treasury.  Although the market balancing mechanism willprovide sustainability to the sugar industry in the short term, there is noassurance that the sugar-to-ethanol program will be in place after the FarmBill expires.

 

Themarketing allotments and allocations set forth under the Farm Bill affect thesugar produced from the 2008 crop through the 2012 crop.  On an annual basis, the marketing allotmentsand the corresponding allocation to the Company will dictate the amount ofsugar the Company can sell into the domestic market.  The Company’s marketing allocation for the2009 crop is currently set at approximately 35 million hundredweight.  The Company’s allocation may reduce orincrease the amount of sugar the Company can market for a given year, thusaffecting the number of acres of sugarbeets required for processing to producethat amount of sugar.

 

### **North American Free Trade Agreement**

### ** **

TheNorth American Free Trade Agreement (NAFTA) governs sweetener trade between theUnited States and Mexico.  Under the NAFTA, tariffs on over-quota importsof sugar from and exports of sugar to Mexico expired on January 1,2008.  Imports of Mexican sugar could cause material harm to theUnited States sugar market.  During the year ended September 30,2008, Mexico exported approximately 13 million hundredweight of sugar into theUnited States.  During the year ended September 30,2009, Mexico exported approximately 26 million hundredweight of sugar into theUnited States.  The Company has no way topredict the extent to which Mexico will take advantage of its exportopportunities**.**

 

### **Regional and Bilateral Free Trade Agreements**

### ** **

TheUnited States government may continue to pursue international tradeagreements.  The Company monitors theU.S. government’s international trade policy because it may lead to additionalcommitments to import sugar into the U.S. market.  Some of the countries who have eitherparticipated in trade agreements or are contemplated for new negotiations aremajor producers of sugar.  The primaryagreements affecting sugar that are completed or are being negotiated, to theCompany’s knowledge, include the Colombian Free Trade Agreement, Panama FreeTrade Agreement, the Trans-Pacific Free Trade Agreement, the Association ofSoutheast Asian Nations, South Africa, Thailand, and others.  The Company believes these agreements, ifthey reach fruition, could negatively impact the Company’s profitability.  If increases in guaranteed access orreductions in sugar tariffs are included in these agreements, excess sugar fromthese regions could enter the U.S. market and reduce domestic sugar prices.

 

ThePeru Free Trade Agreement became effective on February 1, 2009.  Under this agreement, sugar trade with Peruis subject to a net surplus producer requirement.  Peru, typically a net importer, is unlikelyto meet that requirement most years.

 

Negotiationshave been completed on the U.S.-Colombian Free Trade Agreement and theU.S.-Panama Free Trade Agreement but they have not been ratified by the U.S.Congress.  The U.S.-Colombian Free TradeAgreement would allow Colombia to export into the U.S. an additional 1.0million cwt of sugar above its traditional WTO level of 521,000 cwt.  The U.S.-Panama Free Trade Agreement wouldallow Panama to export into the U.S. an additional 144,000 cwt of sugar aboveits traditional WTO level of 629,000 cwt. The Company does not know when thesetrade agreements will be brought before Congress for a vote.

 

TheDoha Round negotiations of the WTO may be pursued by the U.S. Administrationand some of its international counterparts. It is unclear at this time whether negotiations will be completed.  If the negotiations are completed, theoutcome of any negotiated arrangement could have significant adverseconsequences for the Company.

 

TheU.S. sugar industry and the Company, as an influential member of such industry,recognize the potential negative impact that could result if these agreementsare entered into by the United States 

 

17

----

Tableof Contents

 

andare taking steps to attempt to positively influence the outcome.  The Company and the sugar industry intend tocontinue to focus significant attention on trade issues in the future.

 

Theimpact of the various trade agreements on the Company cannot be assessed atthis time due to the uncertainty concerning the terms of the agreements andwhether they will ultimately be implemented. It is possible, however, that the passage of various trade agreementscould have a material adverse effect on the Company through a reduction insugar selling prices, and a corresponding reduction in the beet payment to itsshareholders.

 

**Environmental**

 

The Company is subject toextensive federal and state environmental laws and regulations with respect towater and air quality, solid waste disposal and odor and noise control.  The Company conducts an ongoing complianceprogram designed to meet these environmental laws and regulations.  The Company believes that it is insubstantial compliance with applicable environmental laws and regulations.  From time to time, however, the Company maybe involved in investigations or determinations regarding matters that mayarise in the ordinary course of business. The Company works closely with all affected government agencies toresolve environmental issues that have arisen and believes such issues will beresolved without any adverse effect on the Company.

 

TheCompany’s sugar manufacturing process is energy intensive and generates carbondioxide and other “Greenhouse Gases” (GHGs). Several bills have been passed or introduced in the United States Senateand House of Representatives that would regulate GHGs and carbon dioxideemissions to reduce the impact of global climate change.  The Company believes it is likely thatindustries generating GHGs, including the Company, will be subject to eitherfederal or state regulation relating to climate change policies in therelatively near future.  These policies,if adopted, will increase the Company’s energy and other operating costs.  Depending on how these policies addressimports, the domestic sugar market may have a competitive disadvantage comparedwith imported sugar.  These policiescould have a significant negative impact on the Company’s beet payment toshareholders if the Company is not able to pass the increased costs on to theCompany’s customers****.****

 

On June 26th,2009, the House of Representatives passed H.R. 2454, the American Clean Energyand Security Act (ACES), a bill that will place a cap on GHG emissions.  Similar legislation isbeing considered in the U.S. Senate.  Separately, the EnvironmentalProtection Agency (EPA) finalized findings that GHG emissions endanger publichealth and welfare through their impact on climate change, and that motorvehicles “cause or contribute” to dangerous GHG pollution.  The findings,which respond to the Supreme Court’s 2007 decision in *Massachusetts v. EPA*, legally obligatesthe EPA to issue GHG standards for motor vehicles under the Clean Air Act andsupports the EPA’s effort to use existing legal authority to regulateGHGs.  As an emitter of GHGs covered by ACES, the Company is watchinglegislative developments carefully yet cannot predict whether new proposedregulations will have an impact on the Company.

 

OnNovember 25, 2008, the Company entered into a stipulation agreement withthe Minnesota Pollution Control Agency (MPCA) related to hydrogen sulfideemissions from its Crookston, East Grand Forks and Moorhead, Minnesotafactories.  As part of the stipulationagreement, the Company has agreed to make certain capital expenditures over thenext three years and implement specified changes in operating procedures tocontain hydrogen sulfide emissions at the Minnesota factories.

 

Includingthe expenditures related to the MPCA stipulation agreement, the Company hasidentified capital expenditures for environmental related projects over thenext three years at the Company’s factory locations of approximately $15.1million.

 

**Item 3.  Quantitative andQualitative Disclosures about Market Risk**

 

Marketrisk is the risk of loss to future earnings, to fair values or to future cashflows that may result from changes in the price of a financial instrument.  The value of a financial instrument maychange as a result of changes in the interest rates, exchange rates, commodityprices, equity prices and other 

 

18

----

Tableof Contents

 

marketchanges.  Market risk is attributed toall market-risk sensitive financial instruments, including long-term debt.

 

TheCompany does not believe that there is any material market risk exposure withrespect to interest rates, exchange rates, commodity prices, equity prices andother market changes that would require disclosure under this item.

 

**Item 4T.  Controls and Procedures**

 

TheCompany’s chief executive officer and chief financial officer have reviewed andevaluated the effectiveness of the Company’s disclosure controls and procedures(as defined in Rules 240.13a-15(e) and 15d-15(e) promulgatedunder the Securities Exchange Act of 1934) as of November 30, 2009.  Based on that review and evaluation, whichincluded inquiries made to certain other employees of the Company, the chiefexecutive officer and chief financial officer have concluded that the Company’scurrent disclosure controls and procedures, as designed and implemented, areeffective in ensuring that information relating to the Company required to bedisclosed in the reports the Company files or submits under the SecuritiesExchange Act of 1934 is recorded, processed, summarized and reported within thetime periods specified in the Securities and Exchange Commission’s rules andforms, including ensuring that such information is accumulated and communicatedto the Company’s management, including the chief executive officer and thechief financial officer, as appropriate to allow timely decisions regardingrequired disclosure.  There were nochanges in the Company’s internal controls over financial reporting thatoccurred during the Company’s most recent fiscal quarter that may havematerially affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting.

 

## **PART II. OTHER INFORMATION**

## ** **

#### **Item 1. Legal Proceedings**

#### ** **

Fromtime to time and in the ordinary course of its business, the Company is namedas a defendant in legal proceedings related to various issues, including worker’scompensation claims, tort claims and contractual disputes.  The Company is currently involved in certain legalproceedings, which have arisen in the ordinary course of the Company’sbusiness.  The Company is also aware ofcertain other potential claims, which could result in the commencement of legalproceedings.  The Company carriesinsurance, which provides protection against certain types of claims.  With respect to current litigation andpotential claims of which the Company is aware, the Company’s managementbelieves that (i) the Company has insurance protection to cover all or aportion of any judgments which may be rendered against the Company with respectto certain claims or actions and (ii) any judgments which may be enteredagainst the Company and which may exceed such insurance coverage or which mayarise in actions involving potential liabilities not covered by insurancepolicies are not likely to have a material adverse effect upon the Company, orits assets or operations.

 

OnSeptember 21, 2009 the U.S. District Court (District Court) ruled againstthe U.S. Department of Agriculture (USDA) finding that the USDA violatedfederal law by failing to prepare an Environmental Impact Statement beforederegulating Roundup Ready® sugarbeets.  The District Court determined that the USDAneeds to prepare a full Environmental Impact Statement.  On December 4, 2009 the District Court,in connection with the USDA Roundup Ready® sugarbeetcase, decided how the District Court will proceed with the next phase oflitigation concerning the approval of Roundup Ready® sugarbeets. The District Court scheduled a hearing regarding remedies for June of2010, with the timing of such hearing subject to change by the DistrictCourt.  It is at this hearing that theactual direct impact of the decision on sugarbeet producers and the Companywill become more defined.  There is noway to predict how the District Court will rule in the remedy phase.  The District Court took no action on December 4ththat would restrict growers’ choice or ability to plant Roundup Ready® sugarbeets in 2010. While there is always somepossibility of interim developments, the Company believes it is unlikely thatthere will be any interference with the 2010 commercial root crop.

 

19

----

Tableof Contents

 

**Item1A.  Risk Factors.**

 

Fora detailed discussion of certain risk factors that could affect the Company’soperations, financial condition or results for future periods, see Item 1A,Risk factors, in the Company’s 2009 Annual Report on Form 10-K.

 

**Item2.  Unregistered Sales of EquitySecurities and Use of Proceeds.**

 

None

 

**Item3.  Defaults Upon Senior Securities**

 

None

 

**Item 4.  Submission of Matters toa Vote of Security Holders**

 

The Company held meetingsin November and December 2009 with its shareholders from the fivegeographical districts where the Company’s Red River Valley factories arelocated.

 

Atthe Drayton Factory District Meeting held on November 9, 2009, theshareholders re-elected Neil C. Widner as a director. He received all of the 68votes cast with oneabstention.  His new three-year term beginson December 3, 2009 and expires in December 2012.  William Baldwin and Robert M. Green willcontinue as directors for the Drayton Factory District.

 

At the East Grand ForksFactory District Meeting held on November 10, 2009, theshareholders re-electedJohn F. Gudajtes as a director. He received all of the 57 votes cast with fourabstentions.  His new three-year termbegins on December 3, 2009 and expires in December 2012.  Brian R. Erickson and Curtis E. Haugen will continueas directors for the East Grand Forks Factory District.

 

At the Crookston FactoryDistrict Meeting held on November 11, 2009, the shareholders re-elected Steve Williams as a director. He receivedall of the 31 votes cast.  His newthree-year term begins on December 3, 2009 and expires in December 2012.  Donald Andringa and Curtis Knutson and will continue asdirectors for the Crookston Factory District.

 

At the HillsboroFactory Districtmeeting held on December 3, 2009, the shareholders elected David Mueller as a director.  He received 41 of the 42 votes cast.  His three-year term begins December 3,2009 and expires in December 2012.  Mr. Muellerhas been a sugarbeet farmer near Cummings, North Dakota since 1985.  Mr. Mueller previously served on the RedRiver Valley Sugarbeet Growers Association Boards’ Executive Committee and astreasurer of its Research and Education Board. Mr. Mueller replaces Francis L. Kritzberger who was unableto stand for re-election due to the provisions of the Company Bylaws whichprohibit a person from serving more than four consecutive three year terms as adirector.  John Brainard and Jeff D. McInnes will continue asdirectors for the Hillsboro Factory District.

 

At the Moorhead FactoryDistrict meeting held on December 3,2009, the shareholders elected Wayne Tang as a director. He received 66 of the 76 votes cast with one abstention.  His three-year term begins December 3,2009 and expires in December 2012.  Mr. Tanghas been a farmer since 1972.  Mr. Tangcurrently serves on the American Sugarbeets Growers Association Board ofDirectors and was most recently Vice Chairman of the Red River Valley SugarbeetGrowers Association’s Executive Committee. Mr. Tang replaces Richard Borgen who was unable to stand forre-election due to the provisions of the Company Bylaws which prohibit a personfrom serving more than four consecutive three year terms as a director. William A. Hejl and Dale Kuehl will continue as directors for theMoorhead Factory District.

 

**Item5.  Other Information.**

 

None.

 

20

----

Tableof Contents

 

### **Item6.  Exhibits**

 
| **Item  No.** | ** ** | ** **                                                                                 | ** ** | **Method of Filing**                                                                                                                                                                          |
|---------------|------------|--------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 3.1           |       | Restated Articles of  Incorporation of American Crystal Sugar Company                      |       | Incorporated by  reference to Exhibit 3(i) from the Company’s Registration Statement  on Form S-1 (File No. 33-83868), declared effective  November 23, 1994.   |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 3.2           |       | Restated By-laws of  American Crystal Sugar Company                                        |       | Incorporated by  reference to Exhibit 3(ii) from the Company’s Registration  Statement on Form S-1 (File No. 333-11693), declared effective  November 13, 1996. |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 4.1           |       | Restated Articles of  Incorporation of American Crystal Sugar Company                      |       | See Exhibit 3.1                                                                                                                                                                          |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 4.2           |       | Restated By-laws of  American Crystal Sugar Company                                        |       | See Exhibit 3.2                                                                                                                                                                          |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 10.1          |       | Form of Operating  Agreement between Registrant and ProGold Limited Liability Company |       | Incorporated by  reference to Exhibit 10(u) from the Company’s Registration  Statement on Form S-1 (File No. 33-83868), declared effective  November 23, 1994.  |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 10.2          |       | Registrant’s  Senior Note Purchase Agreement                                          |       | Incorporated by  reference to Exhibit 10.24 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 1999                                             |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 10.3          |       | Registrant’s  Senior Note Inter-creditor and Collateral Agency Agreement              |       | Incorporated by  reference to Exhibit 10.25 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 1999                                             |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 10.4          |       | Registrant’s  Senior Note Restated Mortgage and Security Agreement                    |       | Incorporated by  reference to Exhibit 10.26 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 1999                                             |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| ++10.5        |       | Long Term Incentive  Plan, dated June 23, 1999                                        |       | Incorporated by  reference to Exhibit 10.31 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2000                                             |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| 10.6          |       | Registrant’s  Senior Note Purchase Agreement dated January 15, 2003              |       | Incorporated by  reference to Exhibit 10.29 from the Company’s Form 10-Q for the  quarter ended February 28, 2003                                                         |
|          |       |                                                                                       |       |                                                                                                                                                                                          |
| ++10.7        |       | Long Term Incentive  Plan, dated August 24, 2005                                      |       | Incorporated by  reference to Exhibit 10.25 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2005                                             |

 

21

----

Tableof Contents

 
| ++10.8  |   | Employment Agreement dated March 21, 2007 between the Registrant  and David A. Berg.                                                           |   | Incorporated by reference  to Exhibit 10.26 from the Company’s Form 10-Q for the quarter ended  February 28, 2007.            |
|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.9    |   | Growers’ Contract  (5-year Agreement) for the crop years 2008 through 2012                                                                     |   | Incorporated by  reference to Exhibit 10.24 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2007 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.10   |   | Amended and Restated  Uniform Member Sugar Marketing Agreement between the Registrant and United  Sugars Corporation dated September 20, 2007. |   | Incorporated by  reference to Exhibit 10.22 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2008 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.11   |   | Stipulation Agreement  between Registrant and State of Minnesota Pollution Control Agency, dated  November 25, 2008                            |   | Incorporated by  reference to Exhibit 10.19 from the Company’s Form 10-Q for the  quarter ended November 30, 2008             |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.12 |   | Restated Supplemental  Executive Retirement Plan, dated December 5, 2008                                                                       |   | Incorporated by  reference to Exhibit 10.20 from the Company’s Form 10-Q for the  quarter ended November 30, 2008             |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.13 |   | Restated Board of  Directors Deferred Compensation Plan, dated December 8, 2008                                                                |   | Incorporated by  reference to Exhibit 10.21 from the Company’s Form 10-Q for the  quarter ended November 30, 2008             |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.14 |   | First Amendment to 2005  Long-Term Incentive Plan, dated December 20, 2006.                                                                    |   | Incorporated by  reference to Exhibit 10.22 from the Company’s Form 10-Q for the  quarter ended February 28, 2009             |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.15 |   | Second Amendment to  2005 Long-Term Incentive Plan, dated November 5, 2007.                                                                    |   | Incorporated by  reference to Exhibit 10.23 from the Company’s Form 10-Q for the  quarter ended February 28, 2009             |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.16 |   | Third Amendment to 2005  Long-Term Incentive Plan, dated December 11, 2008.                                                                    |   | Incorporated by  reference to Exhibit 10.24 from the Company’s Form 10-Q for the  quarter ended February 28, 2009             |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.17   |   | Amended and Restated Credit Agreement between the Registrant and  CoBank, ACB dated July 30, 2009.                                             |   | Incorporated by  reference to Exhibit 10.17 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2009 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.18   |   | Amended and Restated  Uniform Member Marketing Agreement between the Registrant and Midwest  Agri-Commodities Company dated September 1, 2009. |   | Incorporated by  reference to Exhibit 10.18 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2009 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.19   |   | Amended and Restated  Member Control Agreement between Registrant and Golden Growers Cooperative  dated September 1, 2009.                     |   | Incorporated by  reference to Exhibit 10.19 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2009 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 21.1    |   | List of Subsidiaries of  the Registrant                                                                                                             |   | Incorporated by  reference to Exhibit 21.1 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2009  |

 

22

----

Tableof Contents

 
| 31.1   |   | Rule 13a-14(a)/15(d)-14(a) Certification  of the Chief Executive Officer |   | Accompanying herewith  electronically |
|--------|--------|------------------------------------------------------------------------------------|--------|---------------------------------------|
|   |   |                                                                               |   |                                  |
| 31.2   |   | Rule 13a-14(a)/15(d)-14(a) Certification  of the Chief Financial Officer |   | Accompanying herewith  electronically |
|   |   |                                                                               |   |                                  |
| 32.1   |   | Section 1350  Certification of the Chief Executive Officer                    |   | Accompanying herewith  electronically |
|   |   |                                                                               |   |                                  |
| 32.2   |   | Section 1350  Certification of the Chief Financial Officer                    |   | Accompanying herewith  electronically |

 

----

+              Confidential treatment under Rule 24b-2 of theSecurities and Exchange Act of 1934, as amended, has been granted with respectto designated portions of this document.

 

++           A management contract or compensatory plan required to befiled with this report.

 

SIGNATURES

 

**Pursuantto the requirement of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.**

 

 
|      |                      | **AMERICAN CRYSTAL SUGAR COMPANY** |
|-----------|---------------------------|------------------------------------|
|      |                      | **(Registrant)**                   |
|      |                      |                               |
|      |                      |                               |
| **Date:** | **January 14, 2010** | ** **                         |   | **/s/ Teresa Warne** |
|      |                      |                               | **Teresa Warne** |
|      |                      |                               | **Corporate Controller,** |
|      |                      |                               | **Chief Accounting Officer** |
|      |                      |                               | **Duly  Authorized Officer** |
|           |                           |                                    |  |  |

 

23

----