**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-Q**

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**ý**  Quarterlyreport pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

# **For the period endedFebruary 28, 2002**

 

## **Commission filenumber:  33-83868**

 

**AMERICAN CRYSTAL SUGAR COMPANY**

(Exact name of registrantas specified in its charter)

 

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

 

**101 North Third Street**

**Moorhead, Minnesota 56560**

(Address of principalexecutive offices)

 

**Telephone Number (218) 236-4400**

(Registrant’s telephonenumber, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months, and (2) has been subject to such filingrequirements for the past 90 days.

 

                                YES  ý                                                                   NO  o

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date.

|                       |   | **Outstanding  at** |
|----------------------------|--------|---------------------|
| **Class of  Common Stock** |   | **April 8,  2002**  |
| $10 Par Value              |   | 3,062               |

 

 

 

 

**AMERICAN CRYSTAL SUGAR COMPANY**

 

**FORM 10-Q**

 

**INDEX**

 

 

 
|           |                                           |                                    |   |
|----------------|------------------------------------------------|-----------------------------------------|--------|
| **PART I**     | **FINANCIAL  INFORMATION**                     |                                    |
|           |                                           |                                    |   |
| **ITEM 1.**    | **FINANCIAL STATEMENTS**                       |                                    |
|           |                                           |                                    |   |
|           |                                           | **BALANCE SHEETS**                      |   |
|           |                                           |                                    |   |
|           |                                           | **STATEMENTS  OF OPERATIONS**           |   |
|           |                                           |                                    |   |
|           |                                           | **STATEMENTS  OF CASH FLOWS**           |   |
|           |                                           |                                    |   |
|           |                                           | **NOTES TO THE  FINANCIAL STATEMENTS**  |   |
|           |                                           |                                    |   |
| **ITEM 2.**    | **MANAGEMENT’S  DISCUSSION AND ANALYSIS** |                                    |
|           |                                           | **  OF RESULTS OF OPERATIONS AND** |   |
|           |                                           | **  FINANCIAL CONDITION**          |   |
|           |                                           |                                    |   |
| **PART II**    | **OTHER INFORMATION**                          |                                    |
|           |                                           |                                    |   |
| **ITEM 1.**    | **LEGAL PROCEEDINGS**                          |                                    |
|           |                                           |                                    |   |
| **ITEM 4.**    | **SUBMISSION OF MATTERS  TO A VOTE**           |                                    |
|           |                                           | **OF SECURITY HOLDERS**                 |   |
|           |                                           |                                    |   |
| **ITEM 6.**    | **EXHIBITS AND  REPORTS ON FORM 8-K**          |                                    |
|           |                                           |                                    |   |
| **SIGNATURES** |                                           |

 

 

2

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**PART I.FINANCIAL****INFORMATION**

 

**Item 1.Financial Statements**

 

AMERICAN CRYSTAL SUGAR COMPANY

Balance Sheets

(Unaudited)

(Dollars in Thousands)

 

 

ASSETS
|                                             |   | **February  28** |    | **August 31,** |   |
|--------------------------------------------------|--------|------------------|---------|----------------|--------|
|                                             |   | **2002**         |    | **2001**       |   | **2001*** |   |
| Current Assets:                                  |   |             |    |           |   |   |   |
| Cash and Cash Equivalents                        |   | $                | 26      |           | $      | 1,039 |   | $ | 5,902 |   |
| Accounts Receivable:                             |   |             |    |           |   |   |   |
| Trade                                            |   | 57,620           |    | 58,562         |   | 67,332 |   |
| Members                                          |   | —           |    | 3              |   | 3,300 |   |
| Other                                            |   | 954              |    | 1,008          |   | 1,553 |   |
| Advances to Related Parties                      |   | 8,987            |    | 8,687          |   | 14,924 |   |
| Inventories                                      |   | 341,295          |    | 346,944        |   | 104,269 |   |
| Prepaid Expenses                                 |   | 8,342            |    | 4,829          |   | 5,989 |   |
| Total Current Assets                             |   | 417,224          |    | 421,072        |   | 203,269 |   |
|                                             |   |             |    |           |   |   |   |
| Property and Equipment:                          |   |             |    |           |   |   |   |
| Land                                             |   | 32,935           |    | 31,035         |   | 32,511 |   |
| Buildings and Equipment                          |   | 841,157          |    | 825,785        |   | 839,431 |   |
| Construction-in-Progress                         |   | 3,152            |    | 11,490         |   | 1,453 |   |
| Less: Accumulated Depreciation                   |   | (535,846         | )       | (501,299       | )      | (510,015 | ) |
| Net Property and Equipment                       |   | 341,398          |    | 367,011        |   | 363,380 |   |
|                                             |   |             |    |           |   |   |   |
| Other Assets:                                    |   |             |    |           |   |   |   |
| Investments in CoBank, ACB                       |   | 15,676           |    | 15,135         |   | 15,676 |   |
| Investments in Marketing Cooperatives            |   | 1,630            |    | 3,346          |   | 1,638 |   |
| Investments in ProGold Limited Liability Company |   | 39,504           |    | 37,745         |   | 38,533 |   |
| Investments in Crystech, LLC                     |   | 1,456            |    | 1,538          |   | 1,545 |   |
| Notes Receivable — Crystech, LLC            |   | 13,905           |    | 13,905         |   | 13,905 |   |
| Other Assets                                     |   | 4,504            |    | 2,012          |   | 3,499 |   |
| Total Other Assets                               |   | 76,675           |    | 73,681         |   | 74,796 |   |
| Total Assets                                     |   | $                | 835,297 |           | $      | 861,764 |   | $ | 641,445 |   |

LIABILITIES AND MEMBERS’ INVESTMENTS
| Current Liabilities:                            |   |    |    |    |   |    |   |
|-------------------------------------------------|--------|---------|---------|---------|--------|---------|--------|
| Short-Term Debt                                 |   | $       | 132,129 |    | $      | 128,335 |   | $ | 13,963 |   |
| Current Maturities of Long-Term Debt            |   | 19,070  |    | 18,925  |   | 19,070  |   |
| Accounts Payable                                |   | 17,125  |    | 15,384  |   | 19,775  |   |
| Advances Due to Related Parties                 |   | 5,768   |    | 5,801   |   | 3,568   |   |
| Accrued Continuing Costs (see note 3)           |   | 76,541  |    | 64,755  |   | —  |   |
| Other Current Liabilities                       |   | 16,677  |    | 18,076  |   | 15,555  |   |
| Amounts Due Members                             |   | 110,946 |    | 127,406 |   | 82,766  |   |
| Total Current Liabilities                       |   | 378,256 |    | 378,682 |   | 154,697 |   |
|                                            |   |    |    |    |   |    |   |
| Long-Term Debt, Net of Current Maturities       |   | 182,617 |    | 220,520 |   | 201,416 |   |
| Other Liabilities                               |   | 30,435  |    | 27,253  |   | 29,672  |   |
| Total Liabilities                               |   | 591,308 |    | 626,455 |   | 385,785 |   |
|                                            |   |    |    |    |   |    |   |
| Members’ Investments:                      |   |    |    |    |   |    |   |
| Preferred Stock                                 |   | 38,275  |    | 38,275  |   | 38,275  |   |
| Common Stock                                    |   | 31      |    | 30      |   | 31      |   |
| Additional Paid-in Capital                      |   | 142,694 |    | 136,655 |   | 137,241 |   |
| Unit Retains                                    |   | 100,170 |    | 97,309  |   | 116,480 |   |
| Equity Retention                                |   | 1,557   |    | —  |   | 1,560   |   |
| Accumulated Other Comprehensive Income/(Loss)   |   | (436    | )       | (655    | )      | (436    | )      |
| Retained Earnings/(Deficit)                     |   | (38,302 | )       | (36,305 | )      | (37,491 | )      |
| Total Members’ Investments                 |   | 243,989 |    | 235,309 |   | 255,660 |   |
| Total Liabilities and Members’ Investments |   | $       | 835,297 |    | $      | 861,764 |   | $ | 641,445 |   |

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* Derived from audited financial statements.

 

3

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AMERICAN CRYSTAL SUGAR COMPANY

Statementsof Operations

(Unaudited)

(Dollars in Thousands)

 
|                                                                           |   | **For the  Six Months Ended** |    | **For the  Three Months Ended** |   |
|--------------------------------------------------------------------------------|--------|-------------------------------|---------|---------------------------------|--------|
|                                                                           |   | **February  28**              |    | **February  28**                |   |
|                                                                           |   | **2002**                      |    | **2001**                        |   | **2002** |   | **2001** |   |
| Net Revenue                                                                    |   | $                             | 346,464 |                            | $      | 416,242 |   | $ | 173,809 |   | $ | 173,387 |   |
| Cost of Product Sold                                                           |   | (63,050                       | )       | 13,484                          |   | (43,213 | ) | (35,700 | ) |
|                                                                           |   |                          |    |                            |   |   |   |   |   |
| Gross Proceeds                                                                 |   | 409,514                       |    | 402,758                         |   | 217,022 |   | 209,087 |   |
|                                                                           |   |                          |    |                            |   |   |   |   |   |
| Selling, General & Administrative Expenses                                 |   | 76,305                        |    | 82,593                          |   | 37,075 |   | 39,225 |   |
| Accrued Continuing Costs (see note 3)                                          |   | 76,541                        |    | 64,755                          |   | 41,789 |   | 28,297 |   |
|                                                                           |   |                          |    |                            |   |   |   |   |   |
| Operating Proceeds                                                             |   | 256,668                       |    | 255,410                         |   | 138,158 |   | 141,565 |   |
|                                                                           |   |                          |    |                            |   |   |   |   |   |
| Other Income/(Expense)                                                         |   |                          |    |                            |   |   |   |   |   |
| Interest Income                                                                |   | 1,019                         |    | 1,888                           |   | 338 |   | 564 |   |
| Interest Expense                                                               |   | (8,085                        | )       | (10,932                         | )      | (4,833 | ) | (6,508 | ) |
| Other, Net                                                                     |   | 888                           |    | 667                             |   | 559 |   | 223 |   |
| Other (Expense)                                                                |   | (6,178                        | )       | (8,377                          | )      | (3,936 | ) | (5,721 | ) |
|                                                                           |   |                          |    |                            |   |   |   |   |   |
| Proceeds before Income Taxes                                                   |   | 250,490                       |    | 247,033                         |   | 134,222 |   | 135,844 |   |
| Income Tax Expense                                                             |   | (5                            | )       | (39                             | )      | (5 | ) | (19 | ) |
| Net Proceeds Resulting from Member and Non-Member Business                     |   | $                             | 250,485 |                            | $      | 246,994 |   | $ | 134,217 |   | $ | 135,825 |   |
|                                                                           |   |                          |    |                            |   |   |   |   |   |
| Distribution of Net Proceeds:                                                  |   |                          |    |                            |   |   |   |   |   |
| Credited/(Charged) to Members’ Investments:                               |   |                          |    |                            |   |   |   |   |   |
| Non-Member Business (Loss)                                                     |   | $                             | (811    | )                               | $      | (698 | ) | $ | (363 | ) | $ | (249 | ) |
| Unit Retains Declared to Members                                               |   | —                        |    | —                          |   | — |   | — |   |
| Equity Retention Declared to Members                                           |   | —                        |    | —                          |   | — |   | — |   |
| Net (Charge) to Members’ Investments                                      |   | (811                          | )       | (698                            | )      | (363 | ) | (249 | ) |
| Payments to/due Members for Sugarbeets, Net of Unit Retains Declared           |   | 240,626                       |    | 220,209                         |   | 123,910 |   | 108,591 |   |
| Payment to/due Members for PIK Certificates, Net of Equity Retention  Declared |   | 10,670                        |    | 27,483                          |   | 10,670 |   | 27,483 |   |
|                                                                           |   |                          |    |                            |   |   |   |   |   |
| Total                                                                          |   | $                             | 250,485 |                            | $      | 246,994 |   | $ | 134,217 |   | $ | 135,825 |   |

 

 

4

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AmericanCrystal Sugar Company

Statements of Cash Flows

(Unaudited)

(InThousands)
|                                                                                                                                                                        |   | **For the  Six Months Ended** |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                                                                                                        |   | **February  28**              |    |
|                                                                                                                                                                        |   | **2002**                      |    | **2001** |   |
| Cash Provided By (Used In) Operations:                                                                                                                                      |   |                          |    |   |   |
| Net Proceeds Resulting from Member and Non-Member Business                                                                                                                  |   | $                             | 250,485 |   | $ | 246,994 |   |
| Payments To/Due Members for Sugarbeets, Net of Unit Retains Declared                                                                                                        |   | (240,626                      | )       | (220,209 | ) |
| Payments To/Due Members for PIK Certificates, Net of Equity Rentention  Declared                                                                                            |   | (10,670                       | )       | (27,483 | ) |
| Add (Deduct) Non-Cash Items:                                                                                                                                                |   |                          |    |   |   |
| Depreciation and Amortization                                                                                                                                               |   | 27,178                        |    | 26,406 |   |
| (Income) from Equity Method Investees                                                                                                                                       |   | (910                          | )       | (947 | ) |
| Loss on the Disposition of Property and Equipment                                                                                                                           |   | 229                           |    | 614 |   |
| Deferred Gain Recognition                                                                                                                                                   |   | (99                           | )       | (99 | ) |
| Changes in Assets and Liabilities:                                                                                                                                          |   |                          |    |   |   |
| Receivables                                                                                                                                                                 |   | 13,611                        |    | (5,791 | ) |
| Inventories                                                                                                                                                                 |   | (237,026                      | )       | (304,054 | ) |
| Prepaid Expenses                                                                                                                                                            |   | (2,353                        | )       | (466 | ) |
| Advances To/Due to Related Parties                                                                                                                                          |   | 8,137                         |    | (2,512 | ) |
| Accounts Payable                                                                                                                                                            |   | (2,650                        | )       | (10,907 | ) |
| Accrued Continuing Costs                                                                                                                                                    |   | 76,541                        |    | 64,755 |   |
| Other Liabilities                                                                                                                                                           |   | 1,885                         |    | 485 |   |
| Amounts Due Members                                                                                                                                                         |   | 28,180                        |    | 73,740 |   |
| Net Cash (Used In) Operations                                                                                                                                               |   | (88,088                       | )       | (159,474 | ) |
|                                                                                                                                                                        |   |                          |    |   |   |
| Cash Provided By (Used In) Investing Activities:                                                                                                                            |   |                          |    |   |   |
| Purchases of Property and Equipment                                                                                                                                         |   | (5,370                        | )       | (12,392 | ) |
| Proceeds from the Sale of Property and Equipment                                                                                                                            |   | 119                           |    | 3 |   |
| Changes in Other Assets                                                                                                                                                     |   | (1,044                        | )       | 19 |   |
| Net Cash (Used In) Investing Activities                                                                                                                                     |   | (6,295                        | )       | (12,370 | ) |
|                                                                                                                                                                        |   |                          |    |   |   |
| Cash Provided By (Used In) Financing Activities:                                                                                                                            |   |                          |    |   |   |
| Proceeds (Payments) on Short-Term Debt, Net                                                                                                                                 |   | 118,166                       |    | 126,467 |   |
| Proceeds from Long-Term Debt                                                                                                                                                |   | 1                             |    | 8,415 |   |
| Long-Term Debt Repayment                                                                                                                                                    |   | (18,800                       | )       | (18,800 | ) |
| Issuance of Stock                                                                                                                                                           |   | 5,453                         |    | 5,584 |   |
| Payment of Unit Retains                                                                                                                                                     |   | (16,313                       | )       | (18,907 | ) |
| Net Cash Provided by Financing Activities                                                                                                                                   |   | 88,507                        |    | 102,759 |   |
|                                                                                                                                                                        |   |                          |    |   |   |
| (Decrease) In Cash and Cash Equivalents                                                                                                                                     |   | (5,876                        | )       | (69,085 | ) |
| Cash and Cash Equivalents, Beginning of Year                                                                                                                                |   | 5,902                         |    | 70,124 |   |
|                                                                                                                                                                        |   |                          |    |   |   |
| Cash and Cash Equivalents, End of Period                                                                                                                                    |   | $                             | 26      |   | $ | 1,039 |   |
|                                                                                                                                                                        |   |                          |    |   |   |
| **Supplemental Schedule of Non-Cash Financing  Activities:**                                                                                                                |   |                          |    |   |   |
| On September 30, 2000, the Company forfeited sugar in satisfaction of  the Commodity Credit Corporation loans of $105.3 million including accrued  interest of $3.8 million |   |                          |    |   |   |
| .                                                                                                                                                                           |   |                          |    |   |   |

 

 

5

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# **AMERICAN CRYSTAL SUGARCOMPANY**

**NOTES TO THE FINANCIAL STATEMENTS**

**FOR THE SIX MONTHS ENDED FEBRUARY 28,2002 AND 2001**

 

 

**Note 1:  Basis ofPresentation**

 

The unaudited financialstatements 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 generally accepted accountingprinciples.  However, in the opinion ofmanagement, all adjustments, consisting of normal recurring accruals,considered necessary for a fair presentation have been included.

 

The operating results forthe six month period ended February 28, 2002 are not necessarily indicative ofthe results that may be expected for the year ended August 31, 2002.

 

The amount paid togrowers for sugarbeets (beet payment) and PIK certificates depends on thefuture selling prices of sugar and agri-products as well as processing andother costs to be incurred during the remainder of the fiscal year. For thepurposes of this report, the amount of the beet payment, the PIK payment,future revenues and costs have been estimated. Therefore, adjustments withrespect to these estimates may be necessary in the future, as additionalinformation becomes available.

 

These financialstatements should be read in conjunction with the financial statements andnotes included in the Company’s annual report as amended for the year endedAugust 31, 2001.

 

Certain reclassificationshave been made to the February 28, 2001 financial statements to conform withthe February 28, 2002 presentation.

 

 

**Note 2:  Inventories**

 

The major components ofinventories are as follows (In Thousands):

 

|                                                                   |   | **02/28/02** |     | **02/28/01** |   | **8/31/01** |   |
|------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|-------------|--------|
| Refined Sugar,  Pulp, Molasses, OtherAgri-Products and Sugar Beet Seed |   | $            | 273 ,955 |         | $      | 246,618     |   | $ | 86,367 |   |
| Unprocessed  Sugarbeets                                                |   | 49,329       |     | 82,980       |   | —      |   |
| Maintenance  Parts & Supplies                                      |   | 18,011       |     | 17,346       |   | 17,902      |   |
|                                                                   |   |         |     |         |   |        |   |
| Total  Inventories                                                     |   | $            | 341,295  |         | $      | 346,944     |   | $ | 104,269 |   |

 

Sugar, pulp,molasses and other agri-products inventories are valued at estimated netrealizable value.  Unprocessedsugarbeets are valued at the estimated gross beet payment. Maintenance parts& supplies and beet seed inventories are valued at the lower of averagecost or market.

 

**Note 3: Accrued Continuing Costs**

 

For interimreporting, the Net Proceeds from Member Business is based on (i) the forecastedgross beet payment and the percentage of the tons of sugarbeets processed tothe total estimated tons of sugarbeets to process for a given crop year and(ii) on the forecasted gross PIK payment and the percentage of thehundredweight of sugar received to the total hundredweight of sugar to bereceived. Accrued continuing costs represent the difference between the NetProceeds from Member Business as determined above and actual member businesscrop year revenues realized and expenses incurred through the end of thereporting period.  Accrued continuing costsare reflected in the Financial Statements as a cost on the Statements ofOperations and as a current liability on the Balance Sheets.

 

6

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**Note 4:  Members’ Investments**

|               |   |          |   | **Shares**     |    | **Shares  Issued**     |    |
|--------------------|--------|---------------|--------|----------------|---------|------------------------|---------|
|               |   | **Par Value** |   | **Authorized** |    | **&  Outstanding** |    |
| Preferred Stock:   |   |          |   |           |    |                   |    |
| April 8, 2002      |   | $             | 76.77  |           | 600,000 |                   | 498,570 |   |
| February 28,  2002 |   | $             | 76.77  |           | 600,000 |                   | 498,570 |   |
| August 31, 2001    |   | $             | 76.77  |           | 600,000 |                   | 498,570 |   |
| February 28,  2001 |   | $             | 76.77  |           | 600,000 |                   | 498,570 |   |
|               |   |          |   |           |    |                   |    |
| Common Stock:      |   |          |   |           |    |                   |    |
| April 8, 2002      |   | $             | 10.00  |           | 4,000   |                   | 3,062   |   |
| February 28,  2002 |   | $             | 10.00  |           | 4,000   |                   | 3,115   |   |
| August 31, 2001    |   | $             | 10.00  |           | 4,000   |                   | 3,134   |   |
| February 28,  2001 |   | $             | 10.00  |           | 4,000   |                   | 3,004   |   |

 

 

**Note 5:  Interest Paid**

 

Interest paid, netof amounts capitalized, was $8.2 million and $11.0 million for the six monthsended February 28, 2002 and 2001, respectively.

 

 

# **Note6: Short-Term Debt**

 

As of February 28,2002, the Company had outstanding commercial paper of $117.1****millionat an average interest rate of 2.56% and maturity dates between March 1, 2002****andMay 31, 2002. The Company also had $15.0 million of outstanding short-term debtwith CoBank, ACB with an average interest rate of 2.61% and a maturity of March27, 2002.

 

As of February 28,2001, the Company had outstanding commercial paper of $94.1****million at an averageinterest rate of 6.52% and maturity dates between March 1, 2001****andAugust 31, 2001. The Company also had a non-recourse loan with the CCC of $34.2million, against which 1.5 million hundredweight of sugar was pledged ascollateral.  The loan carried aninterest rate of 6.0% with a maturity date of September 30, 2001.

 

**Item2.   Management’s Discussion**andAnalysis of Results of Operations and Financial Condition for the Six MonthsEnded February 28, 2002 and 2001

 

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. The Company’s actual results could differ materially from thoseindicated.  Important factors that couldcause or contribute to such differences include, without limitation, marketfactors, weather and general economic conditions, farm and trade policy, availablequantity and quality of sugarbeets.  Fora more complete discussion of “Important Factors”, please refer to theCompany’s 2001 Form 10-K annual report as amended.

 

### **Comparison of the Six Months Ended February 28, 2002and 2001**

 

Revenue for thesix months ended February 28, 2002, was $346.5 million, a decrease of $69.8million as compared to the same period last year. Revenue from total sugarsales decreased 19.2 percent which reflects the proceeds from the forfeiture ofsugar to the Commodity Credit Corporation (CCC) last year and a 4.1 percentdecrease in hundredweight sold partially offset by a 2.6 percent increase inthe average selling price per hundredweight. Revenue from pulp sales increased 31.7 percent due to a 40.1 percentincrease in the volume of pulp sold partially offset by a 6.0 percent decreasein the average selling price per ton. Revenue from molasses sales decreased 14.7 percent due to a 42.0 percentdecrease in the volume of molasses sold partially offset by a 47.2 percentincrease in the average selling price per ton. Revenue from the sales of Concentrated Separated By-Product (CSB), aby-product of the molasses 

 

7

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desugarizationprocess, increased 15.1 percent due to a 21.6 percent increase in the averageselling price per ton partially offset by a 5.3 percent decrease in salesvolume.

 

Cost of productsold, for the six months ended February 28, 2002, exclusive of payments forsugarbeets and PIK certificates, decreased $76.5 million as compared to thesame period last year. Direct processing costs for sugar and pulp decreased13.2 percent due to harvesting 16.3 percent fewer sugarbeets and processing 2.8percent less sugarbeets. Fixed and committed expenses decreased 2.5 percentreflecting lower maintenance costs. Thechange in product inventories impacted the cost of product sold favorably by$66.3 million. This was primarily due to two factors. First, the value of thecarryover product inventories as of August 31, 2000, which were sold in firstquarter of fiscal 2001, was approximately $40.0 million higher than the valueof the carryover product inventories as of August 31, 2001, which were sold inthe first quarter of fiscal 2002. The higher inventory level as of August 31,2000 consisted largely of sugar pledged to the CCC, which was forfeited duringthe first quarter of fiscal 2001. Secondly, the value of product inventories asof February 28, 2002 was approximately $26.3 million more than the value of theproduct inventories as of February 28, 2001 due primarily to a higher sugarinventory level and a slight increase in the net realizable value perhundredweight of sugar.

 

Selling, generaland administrative expenses for the six months ended February 28, 2002decreased $6.3 million from 2001. Selling expenses decreased $5.3 millionprimarily due to lower sugar storage costs partially offset by thereinstatement of the marketing assessment fee this year. General andAdministrative expenses decreased $1.0 million due to lower personnel costs andother general cost reductions.

 

As of February 28,2002, 83.2 percent of the 2001 crop had been processed resulting in therecognition of net proceeds from member business of $240.6 million. Thisrepresented 83.2 percent of the $289.2 million projected gross beet payment forthe 2001 crop. In addition, $10.7 million, representing 50 percent of the $21.3million projected gross PIK payment, had also been recognized as net proceedsfrom member business. The actual net proceeds from member business, for the sixmonths ended February 28, 2002, were $327.8 million. The difference between theactual net proceeds from member business and the amounts recognized as ofFebruary 28, 2002, resulted in the recognition of $76.5 million of accruedcontinuing costs. In comparison, as of February 28, 2001, 72.8 percent of the2000 crop had been processed resulting in the recognition of net proceeds frommember business of $220.2 million. This represented 72.8 percent of the $302.4million projected gross beet payment for the 2000 crop. In addition, $27.5million, representing 100 percent of the projected gross PIK payment, had alsobeen recognized as net proceeds from member business. The actual net proceedsfrom member business, for the six months ended February 28, 2001, were $312.4million. The difference between the actual net proceeds from member businessand the amounts recognized as of February 28, 2001, resulted in the recognitionof $64.8 million of accrued continuing costs.

 

Interest incomedecreased $ .9 million for the six months ended February 28, 2002 as comparedto the same period last year primarily due to a lower average balance ofinvestments and slightly lower interest rates.

 

Interest expensedecreased $2.8 million from last year primarily due to lower long-term andshort-term interest rates and lower average borrowing levels.

 

Non-memberactivities resulted in a loss of $ .8 million for the six months ended February28, 2002 as compared to a loss of $.7 million for the same period lastyear.  The losses in both fiscal yearswere comprised mainly of activities related to the investment in ProGoldLimited Liability Company.

 

 

### **Comparison of the Three Months Ended February 28, 2002and 2001**

 

Revenue for thethree months ended February 28, 2002, was $173.8 million, an increase of $ .4million as compared to the same period last year. Revenue from total sugarsales decreased 1.5 percent reflecting an 8.6 percent decrease in thehundredweight sold partially offset by a 7.7 percent increase in the average sellingprice per hundredweight. Revenue from pulp sales increased 26.4 percent due toa 36.9 percent increase in the volume of pulp sold partially offset by a 7.7percent decrease in the average selling price 

 

8

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per ton. Revenuefrom molasses sales increased 141.2 percent due to a 44.4 percent increase inthe volume of molasses sold and a 67.1 percent increase in the average sellingprice per ton.  Revenue from the salesof Concentrated Separated By-Product (CSB), a by-product of the molassesdesugarization process, increased 26.1 percent due to a 26.2 percent increasein the average selling price per ton partially offset by a .1 percent decreasein sales volume.

 

Cost of productsold, for the three months ended February 28, 2002, exclusive of payments forsugarbeets and PIK certificates, decreased $7.5 million as compared to the sameperiod last year. Direct processing costs for sugar and pulp decreased 14.4percent due to lower coal, coke, limerock and natural gas expense.  Fixed and committed expenses decreased 6.6percent reflecting lower maintenance costs. Thechange in product inventories impacted the cost of product sold favorably by $..3 million.

 

Selling, generaland administrative expenses for the three months ended February 28, 2002decreased $2.2 million from 2001. Selling expenses decreased $2.6 millionprimarily due to lower sugar storage costs partially offset by thereinstatement of the marketing assessment fee this year. General andAdministrative expenses increased $ .4 million due to general cost increases.

 

During the threemonths ended February 28, 2002, 42.8 percent of the 2001 crop was processedresulting in the recognition of net proceeds from member business of $123.9million. This represented 42.8 percent of the $289.2 million projected grossbeet payment for the 2001 crop. In addition, $10.7 million, representing 50percent of the $21.3 million projected gross PIK payment, had also beenrecognized as net proceeds from member business. The actual net proceeds frommember business, for the three months ended February 28, 2002, were $176.4million. The difference between the actual net proceeds from member businessand the amounts recognized for the three months ended February 28, 2002, resultedin the recognition of $41.8 million of accrued continuing costs. In comparison,during the three months ended February 28, 2001, 36 percent of the 2000 crophad been processed resulting in the recognition of net proceeds from memberbusiness of $108.6 million. This represented 36 percent of the $302.4 millionprojected gross beet payment for the 2000 crop. In addition, $27.5 million,representing 100 percent of the projected gross PIK payment, had also beenrecognized as net proceeds from member business. The actual net proceeds frommember business, for the three months ended February 28, 2001, were $164.4million. The difference between the actual net proceeds from member businessand the amounts recognized for the three months ended February 28, 2001,resulted in the recognition of $28.3 million of accrued continuing costs.

 

Interest incomedecreased $ .2 million for the three months ended February 28, 2002 as comparedto the same period last year primarily due to a lower average balance ofinvestments and slightly lower interest rates.

 

Interest expensedecreased $1.7 million from last year primarily due to lower long-term andshort-term interest rates and lower average borrowing levels.

 

Non-memberactivities resulted in a loss of $ .4 million in the three months endedFebruary 28, 2002 compared to a loss of $ .2 million for the same period lastyear. The losses in both fiscal years were comprised mainly of activitiesrelated to the investment in ProGold Limited Liability Company.

 

### **2001 Payment-In-Kind Program**

 

In September 2001,the United States Department of Agriculture (USDA) announced a Payment-In-Kind(PIK) program for the 2001 crop year. Under this program, the Company’sshareholders were paid to destroy a portion of their 2001 sugarbeet crop.  Payments to the Company’s shareholders weremade by the USDA in the form of certificates to be exchanged for sugar held bythe USDA.  The Company has entered intocontracts with its shareholders to purchase the sugar certificates theyreceived from the USDA and reduce the shareholders’ delivery obligation to theCompany to the extent sugarbeets were destroyed. As a result of the PIKprogram, the number of acres of the 2001 sugarbeet crop harvested by theshareholders was reduced by approximately 29,000 acres. At this time, theCompany does not believe that the reduction in sugarbeets available to processas a result of the PIK program will materially affect the results of operationsfor fiscal 2002. On December 3, 2001, the CCC finalized the amount of sugar to 

 

 

9

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be exchanged forthe PIK certificates. As a result, the Company received 588,673 hundredweightof sugar in exchange for the PIK certificates on December 3, 2001 and receivedan additional 588,802 hundredweight of sugar on March 1, 2002.

 

 

**Liquidity and Capital Resources**

 

Under the Company’s Bylaws and Grower Contracts,payments for member delivered sugarbeets, the principal raw material used inproducing the sugar and agri-products it sells, are subordinated to all memberbusiness expenses.  In addition, thebeet payments made to members are paid in three payments over the course of ayear, and the payments are made net of any anticipated unit retain for the crop.These procedures have the effect of providing the Company with an additionalsource of short-term financing.  Thismember financing arrangement may result in an additional source of liquidityand reduced need for outside financing in comparison to a similar businessoperated on a non-cooperative basis.

 

Because sugar issold throughout the year (while sugarbeets are processed primarily in the falland winter) and because substantial amounts of equipment are required for itsoperations, the Company has utilized substantial outside financing on both aseasonal and long-term basis to fund such operations. The majority of suchfinancing has been provided by a consortium of lenders lead by CoBank, ACB. TheCompany has a long-term debt commitment with CoBank, ACB of****$158.3 million, ofwhich $101.3 million is currently outstanding. In addition, the Company has long-term debt outstanding of$50 million from a private placement of Senior Notes that occurred inSeptember of 1998; $43.8 million from nine separate issuances of Pollution Control and Industrial DevelopmentRevenue Bonds; a term loan with Bank of North Dakota of $5.6 million; and $1million from US Bank. The Company also has a seasonal line of creditwith a consortium of lenders lead by CoBank, ACB of $180 million, of which$15.0 million is currently outstanding, and a line of credit with Wells FargoBank for $3 million. The Company’s commercial paper program providesshort-term borrowings of up to $150 million of which approximately $117.1million is currently outstanding. Any borrowings under the commercial paperprogram will act to reduce the available credit under the CoBank, ACB seasonalline of credit by a commensurate amount.

 

The change in the Company’s financial condition fromAugust 31, 2001 to February 28, 2002 is primarily due to normal businessseasonality.  The first six months ofthe Company’s fiscal year includes the completion of the sugarbeet harvest,start of the processing campaign, and the initial payments to members fordelivered sugarbeets.  The cash used inoperations of $88.1 million and investing activities of $6.3 million was fundedprimarily through the cash provided by financing activities. The net cashprovided by financing activities was primarily comprised of the net proceedsfrom short-term debt of $118.2 million, and proceeds from the installment saleof stock of $5.5 million partially offset by the payment of unit retains of$16.3 million and long-term debt repayment of $18.8 million.

 

Working capital decreased $9.6 million from $48.6million at the beginning of the year to $39.0 million as of February 28, 2002primarily due to additional short-term debt, increases in payables and theamounts due growers and a decrease in receivables partially offset by increasedinventories.  Working capital as ofFebruary 28, 2002 decreased $3.4 million when compared to the $42.4 million ofworking capital as of February 28, 2001.

 

Capitalexpenditures for the six months ended February 28, 2002 were $5.4 million ascompared to $12.4 million for the same period in 2001. The Company hadoutstanding commitments totaling $1.5 million as of February 28, 2002, forequipment and construction contracts related to various capital projects.

 

The Companyanticipates that the funds necessary for working capital requirements andfuture capital expenditures will be derived from operations, short-termborrowings, depreciation, unit retains and long-term borrowings.

## ** **

10

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## **PARTII. OTHER INFORMATION**

 

#### **Item1.  Legal**Proceedings

 

From time to time and in the ordinary course of itsbusiness, the Company is named as a defendant in legal proceedings related tovarious issues, including worker’s compensation claims, tort claims andcontractual disputes. The Company is currently involved in certain legal proceedings,which have arisen in the ordinary course of the Company’s business. The Companyis also aware of certain other potential claims, which could result in thecommencement of legal proceedings. The Company carries insurance, whichprovides protection against certain types of claims. With respect to currentlitigation and potential claims of which the Company is aware, the Company’smanagement believes that (i) the Company has insurance protection to coverall or a portion of any judgments which may be rendered against the Companywith respect to certain claims or actions and (ii) any judgments which maybe entered against the Company and which may exceed such insurance coverage orwhich may arise 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.

 

 

### **Item 4.  Submission of Matters**to a Vote of Security Holders

 

None

 

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### **Item 6. Exhibits**and Reports on Form 8-K

 

 

 

(a)          Exhibits

 
| **Item  No.** |   |                                                                                                                                         |   | **Method of Filing**                                                                                                                                                    |
|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1           |   | Restated Articles of Incorporation of American  Crystal Sugar Company                                                                        |   | Incorporated by reference to Exhibit 3.1 from the  Company’s Form 10-Q for the quarter ended May 31, 1998.                                                         |
| 3.2           |   | Restated By-laws of American Crystal Sugar Company                                                                                           |   | Incorporated by reference to Exhibit 3.1 from the  Company’s Form 10-Q for the quarter ended May 31, 1998.                                                         |
| 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          |   | Trademark License Agreement between Registrant and  United Sugars Corporation, dated November 1, 1993                                   |   | Incorporated by reference to Exhibit 10(l) from the  Company’s Registration Statement on Form S-1 (File No. 33-83868), declared  effective November 23, 1994. |
| 10.2          |   | Amended and Restated Loan Agreement between  Registrant and US Bank, formerly First Bank National Association, dated  November 22, 1993 |   | Incorporated by reference to Exhibit 10(q) from the  Company’s Registration Statement on Form S-1 (File No. 33-83868), declared  effective November 23, 1994. |
| 10.3          |   | Pension Contract and Amendments                                                                                                              |   | Incorporated by reference to Exhibit 10(r) from the  Company’s Registration Statement on Form S-1 (File No. 33-83868), declared  effective November 23, 1994. |
| 10.4          |   | 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. |
| 10.5          |   | Form of Member Control Agreement between Registrant  and ProGold Limited Liability Company                                                   |   | Incorporated by reference to Exhibit 10(v) from the  Company’s Registration Statement on Form S-1 (File No. 33-83868), declared  effective November 23, 1994. |
| 10.6          |   | Administrative Services Agreement between Registrant  and ProGold Limited Liability  Company                                            |   | Incorporated by reference to Exhibit 10(w) from the  Company’s Registration Statement on Form S-1 (File No. 33-83868), declared  effective November 23, 1994. |

 

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| +10.7   |   | Coal Supply Agreement between Registrant and Spring  Creek Coal Company, dated August 25, 1995                    |   | Incorporated by reference to Exhibit 10(y) from the  Company’s Registration Statement on Form S-1 (File No. 333-11693), declared  effective November 13, 1996. |
|---------|--------|------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| +10.8   |   | Coal Transportation Agreement between Registrant and  Northern Coal Transportation Company, dated August 25, 1995 |   | Incorporated by reference to Exhibit 10(z) from the  Company’s Registration Statement on Form S-1 (File No. 333-11693), declared  effective November 13, 1996. |
| +10.9   |   | Trademark License Agreement between Registrant and  The Pillsbury Company, dated as of April 9, 1997              |   | Incorporated by reference to Exhibit 10(dd) from the  Company’s Registration Statement on Form S-1 (File No. 333-32251), declared  effective October 24, 1997. |
| 10.10   |   | Pledge Agreement between Registrant and First Union  Trust Company, NA                                                 |   | Incorporated by reference to Exhibit 10(ee) from the  Company’s Annual Report on Form 10-K for the year ended August 31, 1998.                                      |
| 10.11   |   | Indemnity Agreement between Registrant, Newcourt  Capital USA Inc., Crystech, LLC and Crystech Senior Lender Trust     |   | Incorporated by reference to Exhibit 10(ff) from the  Company’s Annual Report on Form 10-K for the year ended August 31, 1998.                                      |
| 10.12   |   | Tolling Services Agreement between Crystech, LLC and  Registrant                                                       |   | Incorporated by reference to Exhibit 10(gg) from the  Company’s Annual Report on Form 10-K for the year ended August 31, 1998.                                      |
| 10.13   |   | Operations and Maintenance Agreement between  Crystech, LLC and Registrant                                             |   | Incorporated by reference to Exhibit 10(hh) from the  Company’s Annual Report on Form 10-K for the year ended August 31, 1998.                                      |
| ++10.14 |   | Limited Liability Company Agreement of Crystech, LLC                                                                   |   | Incorporated by reference to Exhibit 10(ii) from the  Company’s Annual Report on Form 10-K for the year ended August 31, 1998.                                      |
| 10.15   |   | Master Agreement between the Registrant and Bakery,  Confectionery, Tobacco Workers & Grain Millers AFL-CIO, CLC   |   | Incorporated by reference to Exhibit 10.22 from the  Company’s Annual Report on Form 10-K for the year ended August 31, 1999                                        |
| 10.16   |   | 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                                        |

 

13

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| 10.17 |   | Registrant’s  Senior Note Intercreditor 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                               |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.18 |   | 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                               |
| 10.19 |   | Employment Agreement between the Registrant and  James J. Horvath                                                                                      |   | Incorporated by reference to Exhibit 10.28 from the  Company’s Annual Report on Form 10-K form the year ended August 31, 1999                              |
| 10.20 |   | Stipulation Agreement between Registrant and State  of Minnesota Pollution Control Agency, dated April 4, 2000                                         |   | Incorporated by reference to Exhibit 10.28 from the  Company’s Form 10-Q for the quarter ended May 31, 2000                                                |
| 10.21 |   | Board of Directors Deferred Compensation Plan, dated  June 30, 1994                                                                                    |   | Incorporated by reference to Exhibit 10.29 from the  Company’s Annual Report on Form 10K for the year ended August 31, 2000                                |
| 10.22 |   | Long Term Incentive Plan, dated June 23, 1999                                                                                                          |   | Incorporated by reference to Exhibit 10.31 from the  Company’s Annual Report on Form 10K for the year ended August 31, 2000                                |
| 10.23 |   | Growers’ Contract (5-year Agreement) for the crop  years 1998 through 2002.                                                                       |   | Incorporated by reference to Exhibit 10.29 from the  Company’s Form 10-Q for the quarter ended February 28, 2001                                           |
| 10.24 |   | Growers’ Contract (Annual Contract) for crop year  2001.                                                                                          |   | Incorporated by reference to Exhibit 10.30 from the  Company’s Form 10-Q for the quarter ended February 28, 2001                                           |
| 10.25 |   | Term and Seasonal Loan Agreements between the  Registrant and CoBank, ACB dated March 31, 2001                                                         |   | Incorporated by reference to Exhibit 10.30 from the  Company’s Form 10-Q for the quarter ended May 31, 2001                                                |
| 10.26 |   | Addendum to Master Agreement between the Registrant  and Bakery, Confectionery, Tobacco Workers & Grain Millers AFL-CIO, CLC  dated July 10, 2001. |   | Incorporated by reference to Exhibit 10.30 from the  Company’s Annual Report on Form 10K for the year ended August 31, 2001 as  filed on November 21, 2001 |
| 10.27 |   | Uniform Member Sugar Marketing Agreement between the  Registrant and United Sugars Corporation dated September 1, 2001.                                |   | Incorporated by reference to Exhibit 10.27 from the  Company’s Form 10-Q for the quarter ended November 30, 2001 as filed on  January 10, 2002             |

 

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| 10.28 |   | Uniform Member Marketing Agreement between the  Registrant and Midwest Agri-Commodities Company dated September 1, 2001. |   | Incorporated by reference to Exhibit 10.28 from the  Company’s Form 10-Q for the quarter ended November 30, 2001 as filed on  January 10, 2002            |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 21.1  |   | List of Subsidiaries of the Registrant                                                                                   |   | Incorporated by reference to Exhibit 21.1 from the  Company’s Annual Report on Form 10K for the year ended August 31, 1999                                |
| 23.1  |   | Consent of Eide Bailly LLP                                                                                               |   | Incorporated by reference to Exhibit 23.1 from the  Company’s Annual Report on Form 10K for the year ended August 31, 2001 as  filed on November 21, 2001 |

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+              Portions of theExhibit have been granted confidential treatment by the Commission. The omittedportions have been filed separately with the Commission.

++           Portionsof the Exhibit have been deleted from the publicly filed document and have beenfiled separately with the Commission pursuant to a request for confidentialtreatment.

 

 

 

**(b)Reports on Form 8-K**

 

The Company filedthe following Current Report on Form 8-K during this quarter.

 

(i)                                     Current Report on Form 8-K, datedDecember 7, 2001, under item 9 reporting positive trends in the selling priceof sugar and the resultant positive impact on the projected gross beet paymentfor the 2001 crop.

 

 

 

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**SIGNATURES**

 

 

**Pursuant to the requirement of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.**

 

 

 
|                          | **AMERICAN  CRYSTAL SUGAR COMPANY** |
|-------------------------------|-------------------------------------|
|                          | **(Registrant)**                    |
|                          |                                |   |   |
| **Date:  April 8, 2002** | **/s/  Brian Ingulsrud**            |
|                          | **Brian  Ingulsrud**                |
|                          | **Corporate  Controller,**          |
|                          | **Chief  Accounting Officer**       |
|                          | **Duly  Authorized Officer**        |