**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-Q**

 

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

 

**For theperiod ended May 31, 2003**

 

**Commissionfile number:  33-83868**

 

 

| **AMERICAN  CRYSTAL SUGAR COMPANY**                             |
|-----------------------------------------------------------------|
| (Exact name of  registrant as specified in its charter)         |
|                                                            |   |   |
| **Minnesota**                                                   |   | **84-0004720** |
| (State or other  jurisdiction of incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |   |
|                                                            |   |   |
| **101 North Third Street  Moorhead, Minnesota  56560**     |
| (Address of  principal executive offices)                       |
|                                                            |   |   |
| **Telephone Number (218) 236-4400**                             |
| (Registrant’s  telephone number, including area code)      |

 

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months, and (2) has been subject to such filing requirements for the past 90days.

 

| YES         ý |   | NO          o |
|------------------------------------------------------------|--------|------------------------------------------------------------|

 

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

 

| **Class of  Common Stock** |   | **Outstanding  at  July 8, 2003** |
|----------------------------|--------|-----------------------------------|
| $10 Par Value              |   | 2,995                             |

 

 

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**AMERICAN CRYSTAL SUGAR COMPANY**

 

**FORM 10-Q**

 

**INDEX**

 
| **PART I**         | **FINANCIAL INFORMATION** |
|--------------------|---------------------------|
|               |                      |   |
|               | **ITEM 1.**               | **CONSOLIDATED FINANCIAL  STATEMENTS** |
|               |                      |   |   |   |
|               |                      | **CONSOLIDATED BALANCE SHEETS** |
|               |                      |   |   |   |
|               |                      | **CONSOLIDATED  STATEMENTS OF OPERATIONS** |
|               |                      |   |   |   |
|               |                      | **CONSOLIDATED  STATEMENTS OF CASH FLOWS** |
|               |                      |   |   |   |
|               |                      | **NOTES  TO THE CONSOLIDATED FINANCIAL STATEMENTS** |
|               |                      |   |   |   |
|               | **ITEM 2.**               | **MANAGEMENT’S DISCUSSION AND  ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION** |
|               | **ITEM 3.**               | **QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK** |
|               | **ITEM 4.**               | **DISCLOSURE CONTROLS** |   |
|               |                      |   |   |   |
| **PART II**        | **OTHER INFORMATION**     |   |   |
|               |                      |   |   |   |
|               | **ITEM 1.**               | **LEGAL PROCEEDINGS** |   |
|               | **ITEM  2.**              | **CHANGES  IN SECURITIES AND USE OF PROCEEDS** |   |
|               | **ITEM 3.**               | **DEFAULTS UPON  SENIOR SECURITIES** |   |
|               | **ITEM  4.**              | **SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS** |   |
|               | **ITEM 5.**               | **OTHER INFORMATION** |   |
|               | **ITEM 6.**               | **EXHIBITS AND  REPORTS ON FORM 8-K** |   |
|               |                      |   |
| **SIGNATURES**     |
|               |
| **CERTIFICATIONS** |

 

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**PART I.FINANCIAL INFORMATION**

** **

**Item 1.Financial Statements**

 

AMERICAN CRYSTAL SUGARCOMPANY

Consolidated Balance Sheets

(Unaudited)

(Dollars in Thousands)

 

 

ASSETS

 
|                                              |   | **May 31** |    | **August 31,** |   |
|---------------------------------------------------|--------|------------|---------|----------------|--------|
|                                              |   | **2003**   |    | **2002**       |   | **2002*** |   |
| Current  Assets:                                  |   |       |    |           |   |   |   |
| Cash  and Cash Equivalents                        |   | $          | 998     |           | $      | 21 |   | $ | 22 |   |
| Accounts  Receivable:                             |   |       |    |           |   |   |   |
| Trade                                             |   | 51,025     |    | 60,315         |   | 60,812 |   |
| Members                                           |   | 4,209      |    | 3,716          |   | 3,987 |   |
| Other                                             |   | 5,952      |    | 839            |   | 1,465 |   |
| Advances  to Related Parties                      |   | 15,450     |    | 15,786         |   | 11,336 |   |
| Inventories                                       |   | 286,488    |    | 268,692        |   | 115,656 |   |
| Prepaid  Expenses                                 |   | 5,056      |    | 3,637          |   | 5,732 |   |
|                                              |   |       |    |           |   |   |   |
| Total  Current Assets                             |   | 369,178    |    | 353,006        |   | 199,010 |   |
|                                              |   |       |    |           |   |   |   |
| Property  and Equipment:                          |   |       |    |           |   |   |   |
| Land                                              |   | 37,653     |    | 32,940         |   | 33,806 |   |
| Buildings                                         |   | 88,652     |    | 85,348         |   | 86,647 |   |
| Equipment                                         |   | 780,446    |    | 756,868        |   | 759,972 |   |
| Construction-in-Progress                          |   | 9,577      |    | 4,593          |   | 5,154 |   |
| Less:  Accumulated Depreciation                   |   | (584,482   | )       | (546,926       | )      | (546,960 | ) |
|                                              |   |       |    |           |   |   |   |
| Net  Property and Equipment                       |   | 331,846    |    | 332,823        |   | 338,619 |   |
|                                              |   |       |    |           |   |   |   |
| Net  Property and Equipment Held for Lease        |   | 173,004    |    | —         |   | — |   |
|                                              |   |       |    |           |   |   |   |
| Other  Assets:                                    |   |       |    |           |   |   |   |
| Investments  in Marketing Cooperatives            |   | 2,966      |    | 2,294          |   | 2,064 |   |
| Investments  in ProGold Limited Liability Company |   | —     |    | 37,334         |   | 38,051 |   |
| Investments  in Crystech, LLC                     |   | 1,269      |    | 1,416          |   | 1,403 |   |
| Notes  Receivable - Crystech, LLC                 |   | 13,905     |    | 13,905         |   | 13,905 |   |
| Other  Assets                                     |   | 72,324     |    | 30,893         |   | 29,641 |   |
|                                              |   |       |    |           |   |   |   |
| Total  Other Assets                               |   | 90,464     |    | 85,842         |   | 85,064 |   |
|                                              |   |       |    |           |   |   |   |
| Total  Assets                                     |   | $          | 964,492 |           | $      | 771,671 |   | $ | 622,693 |   |

 

TheAccompanying Notes are an Integral Part of These Financial Statements.

 

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* Derived from AuditedFinancial Statements.

 

1

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AMERICAN CRYSTAL SUGARCOMPANY

Consolidated BalanceSheets

(Unaudited)

(Dollars in Thousands)

 

 

LIABILITIES AND MEMBERS’INVESTMENTS

 
|                                                    |   | **May 31** |    | **August 31,** |   |
|---------------------------------------------------------|--------|------------|---------|----------------|--------|
|                                                    |   | **2003**   |    | **2002**       |   | **2002*** |   |
| Current  Liabilities:                                   |   |       |    |           |   |   |   |
| Short-Term  Debt                                        |   | $          | 157,242 |           | $      | 136,787 |   | $ | 7,000 |   |
| Current  Maturities of Long-Term Debt                   |   | 20,917     |    | 19,045         |   | 18,045 |   |
| Accounts  Payable                                       |   | 10,929     |    | 5,970          |   | 18,163 |   |
| Advances  Due to Related Parties                        |   | 7,191      |    | 5,762          |   | 3,092 |   |
| Accrued  Continuing Costs (see note 3)                  |   | 70,073     |    | 79,529         |   | — |   |
| Other  Current Liabilities                              |   | 19,522     |    | 17,208         |   | 15,182 |   |
| Amounts  Due Growers                                    |   | 52,141     |    | 49,947         |   | 79,246 |   |
|                                                    |   |       |    |           |   |   |   |
| Total  Current Liabilities                              |   | 338,015    |    | 314,248        |   | 140,728 |   |
|                                                    |   |       |    |           |   |   |   |
| Long-Term  Debt, Net of Current Maturities              |   | 282,240    |    | 182,372        |   | 182,371 |   |
| Other  Liabilities                                      |   | 41,475     |    | 30,058         |   | 30,927 |   |
|                                                    |   |       |    |           |   |   |   |
| Total  Liabilities                                      |   | 661,730    |    | 526,678        |   | 354,026 |   |
|                                                    |   |       |    |           |   |   |   |
| Minority  Interest in ProGold Limited Liability Company |   | 42,962     |    | —         |   | — |   |
|                                                    |   |       |    |           |   |   |   |
| Members’  Investments:                             |   |       |    |           |   |   |   |
| Preferred  Stock                                        |   | 38,275     |    | 38,275         |   | 38,275 |   |
| Common  Stock                                           |   | 30         |    | 30             |   | 30 |   |
| Additional  Paid-in Capital                             |   | 148,237    |    | 143,055        |   | 143,069 |   |
| Unit  Retains                                           |   | 108,010    |    | 100,145        |   | 124,101 |   |
| Equity  Retention                                       |   | 2,721      |    | 1,557          |   | 2,733 |   |
| Accumulated  Other Comprehensive Income/(Loss)          |   | (1,317     | )       | (436           | )      | (1,317 | ) |
| Retained  Earnings/(Deficit)                            |   | (36,156    | )       | (37,633        | )      | (38,224 | ) |
|                                                    |   |       |    |           |   |   |   |
| Total  Members’ Investments                        |   | 259,800    |    | 244,993        |   | 268,667 |   |
|                                                    |   |       |    |           |   |   |   |
| Total  Liabilities and Members’ Investments        |   | $          | 964,492 |           | $      | 771,671 |   | $ | 622,693 |   |

 

TheAccompanying Notes are an Integral Part of These Financial Statements.

 

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* Derived from AuditedFinancial Statements.

 

2

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AMERICAN CRYSTAL SUGARCOMPANY

Consolidated Statementsof Operations

(Unaudited)

(Dollars in Thousands)

 
|                                                                           |   | **For the Nine Months Ended  May 31** |    | **For the Three Months Ended  May 31** |   |
|--------------------------------------------------------------------------------|--------|---------------------------------------|---------|----------------------------------------|--------|
|                                                                           |   | **2003**                              |    | **2002**                               |   | **2003** |   | **2002** |   |
|                                                                           |   |                                  |    |                                   |   |   |   |   |   |
| Net  Revenue                                                                   |   | $                                     | 614,796 |                                   | $      | 554,841 |   | $ | 221,738 |   | $ | 208,377 |   |
| Cost  of Product Sold                                                          |   | 81,855                                |    | 11,222                                 |   | 62,360 |   | 74,272 |   |
|                                                                           |   |                                  |    |                                   |   |   |   |   |   |
| Gross  Proceeds                                                                |   | 532,941                               |    | 543,619                                |   | 159,378 |   | 134,105 |   |
|                                                                           |   |                                  |    |                                   |   |   |   |   |   |
| Selling,  General & Administrative Expenses                                |   | 119,920                               |    | 112,168                                |   | 39,944 |   | 35,863 |   |
| Accrued  Continuing Costs (see note 3)                                         |   | 70,073                                |    | 79,529                                 |   | 6,359 |   | 2,988 |   |
|                                                                           |   |                                  |    |                                   |   |   |   |   |   |
| Operating  Proceeds                                                            |   | 342,948                               |    | 351,922                                |   | 113,075 |   | 95,254 |   |
|                                                                           |   |                                  |    |                                   |   |   |   |   |   |
| Other  Income/(Expense)                                                        |   |                                  |    |                                   |   |   |   |   |   |
| Interest  Income                                                               |   | 1,128                                 |    | 1,418                                  |   | 338 |   | 399 |   |
| Interest  Expense                                                              |   | (11,440                               | )       | (11,214                                | )      | (3,856 | ) | (3,129 | ) |
| Other,  Net                                                                    |   | 2,210                                 |    | 2,437                                  |   | 731 |   | 1,549 |   |
| Other  (Expense)                                                               |   | (8,102                                | )       | (7,359                                 | )      | (2,787 | ) | (1,181 | ) |
|                                                                           |   |                                  |    |                                   |   |   |   |   |   |
| Proceeds  before Income Taxes                                                  |   | 334,846                               |    | 344,563                                |   | 110,288 |   | 94,073 |   |
| Minority  Interest Share of Proceeds                                           |   | (335                                  | )       | —                                 |   | (335 | ) | — |   |
| Income  Tax Expense                                                            |   | (8                                    | )       | (13                                    | )      | (14 | ) | (8 | ) |
| Net  Proceeds Resulting from Member and Non-Member Business                    |   | $                                     | 334,503 |                                   | $      | 344,550 |   | $ | 109,939 |   | $ | 94,065 |   |
|                                                                           |   |                                  |    |                                   |   |   |   |   |   |
| Distribution  of Net Proceeds:                                                 |   |                                  |    |                                   |   |   |   |   |   |
| Credited/(Charged)  to Members’ Investments:                              |   |                                  |    |                                   |   |   |   |   |   |
| Non-Member  Business Income/(Loss)                                             |   | $                                     | 2,068   |                                   | $      | (142 | ) | $ | 144 |   | $ | 669 |   |
| Unit  Retains Declared to Members                                              |   | —                                |    | —                                 |   | — |   | — |   |
| Equity  Retention Declared to Members                                          |   | —                                |    | —                                 |   | — |   | — |   |
| Net  Credit(Charge) to Members’ Investments                               |   | 2,068                                 |    | (142                                   | )      | 144 |   | 669 |   |
| Payments  to/due Members for Sugarbeets, Net of Unit Retains Declared          |   | 332,435                               |    | 322,172                                |   | 109,795 |   | 81,546 |   |
| Payment  to/due Members for PIK Certificates, Net of Equity Retention Declared |   | —                                |    | 22,520                                 |   | — |   | 11,850 |   |
|                                                                           |   |                                  |    |                                   |   |   |   |   |   |
| Total                                                                          |   | $                                     | 334,503 |                                   | $      | 344,550 |   | $ | 109,939 |   | $ | 94,065 |   |

 

TheAccompanying Notes are an Integral Part of These Financial Statements.

 

3

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AmericanCrystal Sugar Company

Consolidated Statements of CashFlows

(Unaudited)

(Dollarsin Thousands)

 
|                                                                                       |   | **For the Nine Months Ended  May 31** |    |
|--------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                                                       |   | **2003**                              |    | **2002** |   |
| Cash  Provided By (Used In) Operations:                                                    |   |                                  |    |   |   |
| Net  Proceeds Resulting from Member and Non-Member Business                                |   | $                                     | 334,503 |   | $ | 344,550 |   |
| Payments  To/Due Members for Sugarbeets, Net of Unit Retains Declared                      |   | (332,435                              | )       | (322,172 | ) |
| Payments  To/Due Members for PIK Certificates, Net of Equity Retention Declared            |   | —                                |    | (22,520 | ) |
| Add  (Deduct) Non-Cash Items:                                                              |   |                                  |    |   |   |
| Depreciation  and Amortization                                                             |   | 42,596                                |    | 38,661 |   |
| (Income)  from Equity Method Investees                                                     |   | (1,942                                | )       | (2,397 | ) |
| Loss  on the Disposition of Property and Equipment                                         |   | 312                                   |    | 208 |   |
| Non-Cash  Portion of Patronage Dividend from CoBank, ACB                                   |   | (276                                  | )       | (437 | ) |
| Deferred  Gain Recognition                                                                 |   | (148                                  | )       | (148 | ) |
| Minority  Interest in ProGold Limited Liability Company                                    |   | 335                                   |    | — |   |
| Changes  in Assets and Liabilities:                                                        |   |                                  |    |   |   |
| Receivables                                                                                |   | 7,137                                 |    | 7,315 |   |
| Inventories                                                                                |   | (169,925                              | )       | (164,423 | ) |
| Prepaid  Expenses                                                                          |   | 773                                   |    | (879 | ) |
| Long-Term  Prepaid Pension Expense                                                         |   | (12,175                               | )       | (4,925 | ) |
| Advances  To/Due to Related Parties                                                        |   | (14                                   | )       | 1,332 |   |
| Accounts  Payable                                                                          |   | (7,232                                | )       | (13,805 | ) |
| Accrued  Continuing Costs                                                                  |   | 70,073                                |    | 79,529 |   |
| Other  Liabilities                                                                         |   | 7,062                                 |    | 2,038 |   |
| Amounts  Due Growers                                                                       |   | (27,105                               | )       | (32,819 | ) |
| Net  Cash (Used In) Operations                                                             |   | (88,461                               | )       | (90,892 | ) |
|                                                                                       |   |                                  |    |   |   |
| Cash  Provided By (Used In) Investing Activities:                                          |   |                                  |    |   |   |
| Purchases  of Property and Equipment                                                       |   | (17,201                               | )       | (8,228 | ) |
| Purchases  of Assets Held for Lease                                                        |   | (215                                  | )       | — |   |
| Acquisition  from Imperial Sugar Company                                                   |   | (35,185                               | )       | — |   |
| Proceeds  from the Sale of Property and Equipment                                          |   | 130                                   |    | 177 |   |
| Equity  Refund from CoBank, ACB                                                            |   | 1,749                                 |    | 341 |   |
| Investments  in Marketing Cooperatives                                                     |   | (666                                  | )       | — |   |
| Acquisition  of Equity Interest in ProGold Limited Liability Company, Net of Cash Acquired |   | (9,766                                | )       | — |   |
| Changes  in Other Assets                                                                   |   | 43                                    |    | (509 | ) |
| Net  Cash (Used In) Investing Activities                                                   |   | (61,111                               | )       | (8,219 | ) |
|                                                                                       |   |                                  |    |   |   |
| Cash  Provided By (Used In) Financing Activities:                                          |   |                                  |    |   |   |
| Proceeds  from (Payments) on Short-Term Debt, Net                                          |   | 150,242                               |    | 122,824 |   |
| Proceeds  from Issuance of Long-Term Debt                                                  |   | 31,000                                |    | — |   |
| Long-Term  Debt Repayment                                                                  |   | (19,759                               | )       | (19,069 | ) |
| Proceeds  from Issuance of Stock                                                           |   | 5,168                                 |    | 5,813 |   |
| Payment  of Unit Retains & Equity Retention                                            |   | (16,103                               | )       | (16,338 | ) |
| Net  Cash Provided by Financing Activities                                                 |   | 150,548                               |    | 93,230 |   |
|                                                                                       |   |                                  |    |   |   |
| Increase  (Decrease) In Cash and Cash Equivalents                                          |   | 976                                   |    | (5,881 | ) |
| Cash  and Cash Equivalents, Beginning of Year                                              |   | 22                                    |    | 5,902 |   |
|                                                                                       |   |                                  |    |   |   |
| Cash  and Cash Equivalents, End of Period                                                  |   | $                                     | 998     |   | $ | 21 |   |

 

TheAccompanying Notes are an Integral Part of These Financial Statements.

 

4

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# **AMERICAN CRYSTAL SUGARCOMPANY**

**NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS**

**FOR THE NINE MONTHS AND THREE MONTHSENDED MAY 31, 2003 AND 2002**

 

 

**Note 1:  Basis ofPresentation**

 

The unaudited consolidated financial statements ofAmerican Crystal Sugar Company (the Company) contained herein have beenprepared pursuant to the rules and regulations of the Securities and ExchangeCommission.  Accordingly, they do notinclude all the information and footnotes required by generally acceptedaccounting principles.  However, in theopinion of management, all adjustments, consisting of normal recurringaccruals, considered necessary for a fair presentation have been included.

 

The Company’s unaudited consolidated financialstatements are comprised of American Crystal Sugar Company, its wholly-ownedsubsidiary, Sidney Sugars Incorporated (SSI) and ProGold Limited LiabilityCompany (ProGold), a limited liability company in which the company holds a 51percent ownership interest.  On October7, 2002, SSI, which was formed on September 17, 2002 under the laws of thestate of Minnesota, acquired certain assets from Holly Sugar Corporation, awholly-owned subsidiary of Imperial Sugar Company (Imperial).  On April 24, 2003, the Company acquired anadditional five percent ownership interest in ProGold, effective May 1, 2003,resulting in an increase in the Company’s ownership in ProGold to 51percent.  Due to the Company’s resulting controllingownership interest in ProGold, effective May 1, 2003, the Company began toinclude ProGold in its consolidated financial statements.  The consolidated financial statements forprior periods have not been restated and therefore do not include consolidateddata pertaining to ProGold prior to May 1, 2003.  All material inter-company transactions have beeneliminated.

 

The operating results for the nine month and threemonth periods ended May 31, 2003 are not necessarily indicative of the resultsthat may be expected for the year ended August 31, 2003.

 

The amount paid to shareholders for sugarbeets (memberbeet payment) depends on the future selling prices of sugar and agri-productsas well as processing and other costs to be incurred during the remainder ofthe fiscal year associated with the 2002 Red River Valley sugarbeet crop (RRVcrop). The amount paid to non-member growers for sugarbeets (non-member beetpayment) depends on the future selling prices of sugar and the related sellingexpenses associated with the 2002 Sidney 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 these estimates may be necessary in the future, asadditional information becomes available.

 

These financial statements should be read inconjunction with the financial statements and notes included in the Company’sannual report for the year ended August 31, 2002.

 

Certain reclassifications have been made to the May31, 2002 financial statements to conform with the May 31, 2003 presentation.

 

 

**Note 2:  Inventories**

 

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

 
|                                                                    |   | **5/31/03** |    | **5/31/02** |   | **8/31/02** |   |
|-------------------------------------------------------------------------|--------|-------------|---------|-------------|--------|-------------|--------|
| Refined  Sugar, Pulp, Molasses, Other Agri-Products and Sugar Beet Seed |   | $           | 268,283 |        | $      | 250,673     |   | $ | 97,693 |   |
| Unprocessed  Sugarbeets                                                 |   | —      |    | —      |   | —      |   |
| Maintenance  Parts & Supplies                                       |   | 18,205      |    | 18,019      |   | 17,963      |   |
|                                                                    |   |        |    |        |   |        |   |
| Total  Inventories                                                      |   | $           | 286,488 |        | $      | 268,692     |   | $ | 115,656 |   |

 

5

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Sugar, pulp, molasses and other agri-productsinventories are valued at estimated net realizable value.  Unprocessed sugarbeets are valued at theestimated gross beet payment. Maintenance parts & supplies and beet seedinventories are valued at the lower of average cost or market.

 

 

**Note 3:  AccruedContinuing Costs**

 

For interim reporting, the Net Proceeds from MemberBusiness is based on (i) the forecasted member gross beet payment and thepercentage of the tons of RRV crop processed to the total estimated tons of theRRV crop to process for a given crop year and (ii) on the forecasted gross PIKpayment and the percentage of the hundredweight of sugar received to the totalhundredweight of sugar to be received. The Net Proceeds from the operations of SSI is based on the forecastednet income for the fiscal year and the percentage of the tons of Sidney cropprocessed to the total estimated tons of the Sidney crop to be processed for agiven fiscal year.

 

Accrued continuing costs represent the differencebetween (i) the Net Proceeds as determined above and (ii) actual memberbusiness crop year revenues realized and expenses incurred through the end ofthe reporting period plus the SSI fiscal year revenues realized and expensesincurred through the end of the reporting period.  Accrued continuing costs are reflected in the FinancialStatements as a cost on the Statements of Operations and as a current liabilityon the Balance Sheets.

 

 

**Note 4:  Members’Investments**

 
|              |   | **Par Value** |   | **Shares  Authorized** |    | **Shares  Issued  & Outstanding** |    |
|-------------------|--------|---------------|--------|------------------------|---------|---------------------------------------|---------|
| Preferred  Stock: |   |          |   |                   |    |                                  |    |
| July  8, 2003     |   | $             | 76.77  |                   | 600,000 |                                  | 498,570 |   |
| May  31, 2003     |   | $             | 76.77  |                   | 600,000 |                                  | 498,570 |   |
| August  31, 2002  |   | $             | 76.77  |                   | 600,000 |                                  | 498,570 |   |
| May  31, 2002     |   | $             | 76.77  |                   | 600,000 |                                  | 498,570 |   |
|              |   |          |   |                   |    |                                  |    |
| Common  Stock:    |   |          |   |                   |    |                                  |    |
| July  8, 2003     |   | $             | 10.00  |                   | 4,000   |                                  | 2,995   |   |
| May  31, 2003     |   | $             | 10.00  |                   | 4,000   |                                  | 2,995   |   |
| August  31, 2002  |   | $             | 10.00  |                   | 4,000   |                                  | 3,035   |   |
| May  31, 2002     |   | $             | 10.00  |                   | 4,000   |                                  | 3,025   |   |

 

 

**Note 5:  Interest Paid**

 

Interest paid, net of amounts capitalized, was $10.3million and $10.7 million for the nine months ended May 31, 2003 and 2002,respectively.

 

 

# **Note6: Short-Term Debt**

 

The Company has a seasonal line of credit with aconsortium of lenders led by CoBank, ACB of $265 million and a line ofcredit with Wells Fargo Bank for $1 million, of which there is currentlyno debt outstanding. The Company’s commercial paper program has been increasedfrom $150 million to provide short-term borrowings of up to $225 millionof which approximately $157.2 million 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 acquisition from Imperial wasinitially financed utilizing available short-term debt.

 

As of May 31, 2003, the Company had outstandingcommercial paper of $157.2****million at an average interest rate of1.54% and maturity dates between June 2, 2003 and July 31, 2003.  The Company had no outstanding short-termdebt with CoBank, ACB as of May 31, 2003.

 

6

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As of May 31, 2002, the Company had outstandingcommercial paper of $136.8****million at an average interest rate of2.86% and maturity dates between June 18, 2002****and August 23, 2002. TheCompany had no outstanding short-term debt with CoBank, ACB as of May 31, 2002.

 

 

**Note 7: Sidney Sugars Incorporated**

 

On October 7, 2002, theCompany, through SSI, acquired three sugarbeet processing facilities and therelated marketing allocations associated with such facilities from Imperial fora purchase price of approximately $35.2 million.

 

The facility located inHereford, Texas was idle at the time of the acquisition and will remain idlefor the foreseeable future.  Thefacility located in Torrington, Wyoming has been leased, on a long-term basis,to Western Sugar Cooperative, who will continue to operate the facility toprocess sugarbeets delivered by growers supplying the facility prior to theacquisition and from its own growers. The lease payments due under the long-term lease are nominal.

 

SSI will operate thefacility located at Sidney, Montana. The campaign for the 2002 Sidney crop commenced on September 25, 2002and was completed on February 28, 2003. A total of 863,000 tons of sugarbeetswere harvested, with a total production of approximately****2.5 million hundredweight ofsugar produced from the 2002 Sidney crop. Approximately 127,000 tons of beetsfrom the 2002 Sidney crop had been harvested prior to October 7, 2002. Thisportion of the crop and the resulting sugar produced from those beets remainedthe property of Imperial.

 

As part of the entiretransaction with Imperial, the Company acquired the rights to marketingallocations equal to an estimated 4.8% of the total allocation for the domesticsugarbeet segment.  A portion of thesemarketing allocations will be used to market the sugar produced at the Sidney,Montana facility.  Any excessallocations will be available to the Company. The sugar produced by SSI will be marketed through United Sugars Corporationwhile the agri-products produced will be marketed through MidwestAgri-Commodities Company.

 

 

**Note 8: ProGold Limited Liability Company**

 

On April 24, 2003, the Company acquired Minn-DakFarmer Cooperative’s (Minn-Dak) five percent ownership interest in ProGoldLimited Liability Company (ProGold) for $10.3 million, effective May 1,2003.  This acquisition results in an increase in the Company’s ownershipin ProGold to 51 percent, while Golden Growers Cooperative continues to own 49percent.

 

Due to the Company’s resulting controlling ownershipinterest in ProGold, effective May 1, 2003, the Company began to includeProGold in its consolidated financial statements.

 

ProGold was formed in 1994 by American Crystal SugarCompany, Golden Growers Cooperative and Minn-Dak Farmers Cooperative toconstruct and operate a corn wet-milling plant for the production ofhigh-fructose corn syrup sweetener.  In November 1997, ProGold enteredinto an agreement with Cargill, Incorporated (Cargill) to lease substantiallyall of its assets to Cargill.  Under the terms of the operating lease,Cargill manages all aspects of the operations of the ProGold corn wet-millingplant.

 

 

**Note 9: Net Property and Equipment Held for Lease**

 

ProGold owns a corn wet milling facility that it leasesto Cargill, Incorporated under an operating lease which runs through December31, 2007.

 

The Property and Equipment Held for Lease are statedat cost, net of accumulated depreciation. The components of Property andEquipment Held for Lease as of May 31, 2003 are shown below:

 

7

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|                                       |   | **(In Thousands)** |    |
|--------------------------------------------|--------|--------------------|---------|
| Land  and Land Improvements                |   | $                  | 7,762   |   |
| Buildings                                  |   | 40,855             |    |
| Equipment                                  |   | 197,828            |    |
| Construction  in Progress                  |   | 339                |    |
| Less  Accumulated Depreciation             |   | (73,780            | )       |
|                                       |   |               |    |
| Net  Property and Equipment Held for Lease |   | $                  | 173,004 |   |

 

Future minimum paymentsto be received under the lease are as follows:

 

Fiscal year ending August 31, (In Thousands)

 
| 2003   |   | $      | 5,863   |   |
|--------|--------|--------|---------|--------|
| 2004   |   | 23,452 |    |
| 2005   |   | 23,452 |    |
| 2006   |   | 23,452 |    |
| 2007   |   | 23,452 |    |
| 2008   |   | 8,093  |    |
|   |   |   |    |
|   |   | $      | 107,764 |   |

 

 

**Note 10: Segment Reporting**

 

The Company has identified two reportable segments:Sugar and Leasing.  The sugar segment isengaged primarily in the production and marketing of sugar fromsugarbeets.  It also sells agri-productsand sugarbeet seed.  The leasing segmentis engaged in the leasing of a corn wet milling plant used in the production ofhigh-fructose corn syrup sweetener.  Thesegments are managed separately.  Thereare no intersegment sales.  The leasingsegment has a major customer, Cargill, who accounts for all of that segment’srevenue.

 

Summarized financial information concerning theCompany’s reportable segments for the nine months and three months ended May31, 2003 is shown below:

 

8

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|                                 |   | **For the Nine Months Ended May 31,  2003  (Dollars In Thousands)** |    |
|--------------------------------------|--------|---------------------------------------------------------------------|---------|
|                                 |   | **Sugar**                                                           |    | **Leasing** |   | **Eliminations** |   | **Consolidated** |   |
| Net  Revenue from External Customers |   | $                                                                   | 612,521 |   | $ | 2,275 |   | $ | — |   | $ | 614,796 |   |
| Gross  Proceeds                      |   | 531,662                                                             |    | 1,279 |   | — |   | 532,941 |   |
| Depreciation  and Amortization       |   | 41,679                                                              |    | 917 |   | — |   | 42,596 |   |
| Interest  Income                     |   | 1,128                                                               |    | — |   | — |   | 1,128 |   |
| Interest  Expense                    |   | 10,852                                                              |    | 588 |   | — |   | 11,440 |   |
| Income  from Equity Method Investees |   | 2,291                                                               |    | — |   | (349 | ) | 1,942 |   |
| Other  Income/(Expense), Net         |   | 2,559                                                               |    | — |   | (349 | ) | 2,210 |   |
| Net  Proceeds                        |   | 334,503                                                             |    | 684 |   | (684 | ) | 334,503 |   |
|                                 |   |                                                                |    |   |   |   |   |   |   |
| Capital  Expenditures                |   | 52,386                                                              |    | 215 |   | — |   | 52,601 |   |
|                                      |        |                                                                     |         |  |  |  |  |  |  |  |  |  |  |

 
|                                 |   | **For the Three Months Ended May  31, 2003  (Dollars In Thousands)** |    |
|--------------------------------------|--------|----------------------------------------------------------------------|---------|
|                                 |   | **Sugar**                                                            |    | **Leasing** |   | **Eliminations** |   | **Consolidated** |   |
| Net  Revenue from External Customers |   | $                                                                    | 219,463 |   | $ | 2,275 |   | $ | — |   | $ | 221,738 |   |
| Gross  Proceeds                      |   | 158,099                                                              |    | 1,279 |   | — |   | 159,378 |   |
| Depreciation  and Amortization       |   | 12,683                                                               |    | 917 |   | — |   | 13,600 |   |
| Interest  Income                     |   | 338                                                                  |    | — |   | — |   | 338 |   |
| Interest  Expense                    |   | 3,268                                                                |    | 588 |   | — |   | 3,856 |   |
| Income  from Equity Method Investees |   | 1,142                                                                |    | — |   | (349 | ) | 793 |   |
| Other  Income/(Expense), Net         |   | 1,080                                                                |    | — |   | (349 | ) | 731 |   |
| Net  Proceeds                        |   | 109,939                                                              |    | 684 |   | (684 | ) | 109,939 |   |
|                                 |   |                                                                 |    |   |   |   |   |   |   |
| Capital  Expenditures                |   | 6,609                                                                |    | 215 |   | — |   | 6,824 |   |
|                                      |        |                                                                      |         |  |  |  |  |  |  |  |  |  |  |

 
|                         |   | **As of May 31, 2003  (Dollars In Thousands)** |    |
|------------------------------|--------|------------------------------------------------|---------|
|                         |   | **Sugar**                                      |    | **Leasing** |   | **Eliminations** |   | **Consolidated** |   |
| Property  and Equipment, Net |   | $                                              | 331,839 |   | $ | 7 |   | $ | — |   | $ | 331,846 |   |
| Assets  Held for Lease, Net  |   | —                                         |    | 173,004 |   | — |   | 173,004 |   |
| Identifiable  Assets         |   | 823,962                                        |    | 185,246 |   | (44,716 | ) | 964,492 |   |
|                              |        |                                                |         |  |  |  |  |  |  |  |  |  |  |

 

 

**Note 11: Recently Issued Accounting Pronouncements**

 

The Financial Accounting Standards Board has recentlyissued Interpretation No. 46 regarding the Consolidation of Variable InterestEntities. This interpretation becomes effective for the Company in the firstquarter of fiscal 2004.  Management doesnot expect that the implementation of this interpretation will have a materialeffect on the Company’s financial statements.

 

The Financial Accounting Standards Board has alsorecently issued Statement No. 150 regarding Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity. Thisinterpretation becomes effective for the Company in the first quarter of fiscal2004. Management does not expect that the implementation of this interpretationwill have a material effect on the Company’s financial statements.

 

 

**Item2**.   Management’s Discussion and Analysis ofResults of Operations and Financial Condition for the Nine Months and ThreeMonths Ended May 31, 2003 and 2002

 

This report contains forward-looking statements thatinvolve risks and uncertainties.  Suchforward-looking statements include, among others, those statements includingthe words “expect”, “anticipate”, “believe”, “may” and similarexpressions.  The Company’s actualresults could differ

 

9

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materially from those indicated. Important factors that could cause or contribute to such differencesinclude, without limitation, market factors, weather and general economicconditions, farm and trade policy, available quantity and quality ofsugarbeets.  For a more completediscussion of “Important Factors”, please refer to the Company’s 2002 Form10-K.

 

 

### **Comparisonof the Nine Months Ended May 31, 2003 and 2002**

 

Revenue for the nine months ended May 31, 2003, was$614.8 million, an increase of $60.0 million as compared to the same periodlast year.  Revenue from total sugarsales increased 8.8 percent reflecting a 5.6 percent increase in thehundredweight sold and a 3.0 percent increase in the average selling price perhundredweight.  Revenue from pulp salesincreased 6.4 percent due to a 10.6 percent increase in the average sellingprice per ton partially offset by a 3.8 percent decrease in the volume of pulp sold.  Revenue from molasses sales increased 89.1percent due to a 103.7 percent increase in the volume of molasses soldpartially offset by a 7.2 percent decrease in the average selling price perton.  Revenue from the sales ofConcentrated Separated By-Product (CSB), a by-product of the molassesdesugarization process, increased 3.8 percent due to an 11.0 percent increasein the average selling price per ton partially offset by a 6.5 percent decreasein the volume of CSB sold.  Rentalrevenue on the ProGold operating lease was $2.3 million.

 

Cost of product sold, for the nine months ended May31, 2003, exclusive of payments for member sugarbeets, increased $70.6 millionas compared to the same period last year. The cost associated with the cost of non-member sugar beets (SidneyCrop) was $31.2 million for the nine months ended May 31, 2003.  Direct processing costs for sugar and pulpincreased 21.4 percent. This was due to harvesting 17.8 percent more sugarbeets(9.2 percent of the increase was attributable to the Sidney Crop) andprocessing 16.4 percent more sugarbeets (10.2 percent of the increase wasattributable to the Sidney crop). Higher natural gas prices also added to this increase.  Fixed and committed expenses increased 7.5percent reflecting higher purchased power costs, insurance costs, and costsrelated to the operations of SSI.  The change in product inventories impacted thecost of product sold favorably by $7.0 million primarily due to an increase inthe net realizable value for sugar.  Thecost associated with sugar purchased to meet customer needs was up $14.1million due to a delay in the commencement of the 2002 RRV crop campaign.  The 2002 RRV crop campaign start-up wasdelayed because of adverse planting and growing conditions which slowed thematurity of the crop. As a result, additional sugar was required to bepurchased to service customers during this delay. Costs related to ProGold were$1.0 million.

 

Selling, general and administrative expenses for thenine months ended May 31, 2003 increased $7.8 million from 2002.  Selling expenses increased $7.9 millionprimarily due to the increase in the volume of sugar sold along with increasedfreight costs.  General andAdministrative expenses decreased $ .1 million due to general cost decreases.

 

During the nine months ended May 31, 2003, 100 percentof the 2002 RRV crop was processed resulting in the recognition of net proceedsfrom member business of $332.4 million. This represented 100 percent of the $332.4 million projected membergross beet payment for the 2002 RRV crop. The actual net proceeds from member business, for the nine months endedMay 31, 2003, were $396.8 million. During the nine months ended May 31, 2003, 100.0 percent of the 2002Sidney crop was processed resulting in the recognition of net proceeds from SSIof $2.7 million.  This represented 100.0percent of the $2.7 million projected SSI net income for fiscal 2003.  The actual net proceeds from SSI, for thenine months ended May 31, 2003, was $8.4 million.  The difference between the actual net proceeds from memberbusiness and SSI and the amounts recognized for the nine months ended May 31,2003, resulted in the recognition of $70.1 million of accrued continuingcosts.  In comparison, during the ninemonths ended May 31, 2002, 100 percent of the 2001 RRV crop was processedresulting in the recognition of net proceeds from member business of $322.2million.  This represented 100 percentof the $322.2 million projected member gross beet payment for the 2001 RRVcrop. In addition, $22.5 million, representing 100 percent of the $22.5 millionprojected gross PIK payment, had also been recognized as net proceeds frommember business.  The actual netproceeds from member business, for the nine months ended May 31, 2002, were $424.2million.  The difference between theactual net proceeds from member

 

10

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business and the amounts recognized for the nine months ended May 31,2002, resulted in the recognition of $79.5 million of accrued continuing costs.

 

Interest income for the nine months ended May 31, 2003decreased slightly compared to the same period last year primarily due to alower average balance of investments.

 

Interest expense increased from last year primarilydue to the addition of $ .6 million of interest resulting from theconsolidation of ProGold partially offset by lower average borrowing levels forlong-term debt and lower average borrowing rates on short-term debt.

 

Non-member activities resulted in income of $2.1 millionfor the nine months ended May 31, 2003 compared to a loss of $ .1 million forthe same period last year. The non-member income in fiscal 2003 is primarilythe result of activities related to SSI. The non-member loss in fiscal 2002 was primarily the result ofactivities related to the investment in ProGold Limited Liability Company.

 

### **Comparisonof the Three Months Ended May 31, 2003 and 2002**

 

Revenue for the threemonths ended May 31, 2003, was $221.7 million, an increase of $13.4 million ascompared to the same period last year. Revenue from total sugar sales increased 3.1 percent reflecting a 4.5percent increase in the hundredweight sold partially offset by a 1.4 percentdecrease in the average selling price per hundredweight.  Revenue from pulp sales decreased 27.6percent due to a 33.9 percent decrease in the volume of pulp sold partiallyoffset by a 9.6 percent increase in the average selling price per ton.  Revenue from molasses sales increased 196.5percent due to a 240.0 percent increase in the volume of molasses soldpartially offset by a 12.8 percent decrease in the average selling price perton.  Revenue from the sales ofConcentrated Separated By-Product (CSB), a by-product of the molassesdesugarization process, decreased 4.6 percent due to a 14.6 percent decrease inthe volume of CSB sold partially offset by an 11.7 percent increase in averageselling price per ton.  Rental revenueon the ProGold operating lease was $2.3 million.

 

Cost of product sold, for the three months ended May31, 2003, exclusive of payments for member sugarbeets, decreased $11.9 millionas compared to the same period last year. Direct processing costs for sugar and pulp increased 52.9 percent. Thiswas due to processing 83.2 percent more sugarbeets due to the longer runningRRV crop processing campaign this year resulting from the delay of the campaignstart-up last fall and the increase in the tons of sugarbeets harvested.  Higher natural gas prices and beettransportation costs also added to the increase.  Fixed and committed expenses increased 7.3 percent reflectinghigher purchased power costs, insurance costs and costs related to theoperations of SSI.  The change in product inventories impacted thecost of product sold favorably by $33.4 million primarily due to the increasednet realizable value for sugar partially offset by lower sugar inventorylevels.  Costs related to ProGold were$1.0 million.

 

Selling, general and administrative expenses for thethree months ended May 31, 2003 increased $4.1 million from 2002.  Selling expenses increased $4.3 millionprimarily due to the increase in the volume of products sold and higher freightand warehousing costs.  General andAdministrative expenses decreased $ .2 million due to general cost decreases.

 

During the three months ended May 31, 2003, 33.0percent of the 2002 RRV crop was processed resulting in the recognition of netproceeds from member business of $109.8 million.  This represented 33.0 percent of the $332.4 million projectedmember gross beet payment for the 2002 RRV crop.  The actual net proceeds from member business, for the threemonths ended May 31, 2003, were $120.6 million.  An increase of $ .1 million in the projected net income from SSIwas recognized during the three months ended May 31, 2003.  SSI incurred $4.3 million of net costs forthe three months ended May 31, 2003. The difference between the actual net proceeds from member business andSSI and the amounts recognized for the three months ended May 31, 2003,resulted in the recognition of $6.4 million of accrued continuing costs.  In comparison, during the three months endedMay 31, 2002, 25.3 percent of the 2001 RRV crop was processed resulting in therecognition of net proceeds from member business of $81.5 million.  This represented 25.3 percent of the $322.2million projected member gross beet payment

 

11

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for the 2001 RRV crop. In addition, $11.9 million, representing 52.4percent of the $22.5 million projected gross PIK payment, had also beenrecognized as net proceeds from member business.  The actual net proceeds from member business, for the threemonths ended May 31, 2002, were $96.3 million. The difference between the actual net proceeds from member business andthe amounts recognized for the three months ended May 31, 2002, resulted in therecognition of $3.0 million of accrued continuing costs.

 

Interest income for the three months ended May 31,2003 decreased marginally compared to the same period last year primarily dueto a lower average balance of investments.

 

Interest expense increased $ .7 million for the threemonths ended May 31, 2003 as compared to the same period last year primarilydue to the addition of $ .6 million of interest resulting from theconsolidation of ProGold, higher average borrowing levels for short-term debtand higher average interest rates for long-term debt.

 

Non-member activities resulted in income of $ .1million for the three months ended May 31, 2003 compared to income of $ .7million for the same period last year. This non-member income in fiscal 2003 isprimarily the result of activities related to SSI.  The non-member income in fiscal 2002 was the result of activitiesrelated to Midwest Agri-Commodities Company, partially offset by activitiesrelated to the investment in ProGold Limited Liability Company.

 

**Environmental Matters**

 

On May 21, 2003, SSI received an Enforcement Actionfor Air Quality Violation letter from the Montana Department of EnvironmentalQuality for alleged violations of allowed particulate emissions at the Sidney,Montana facility. SSI is currently involved in negotiations with the MontanaDepartment of Environmental Quality with the intent of concluding a stipulationagreement with regard to the alleged violation and the related penalties ofapproximately $84,000. Management believes it will negotiate a satisfactoryresolution and that the outcome should not have a material adverse effect onSSI’s or the Company’s financial position.

 

**Liquidity and Capital Resources**

 

Under the Company’s Bylaws and Member GrowerContracts, payments for member delivered sugarbeets, the principal raw materialused in producing the sugar and agri-products it sells, are subordinated to allmember business expenses.  In addition,the beet payments made to member growers and non-member growers are paid inthree payments over the course of a year, and the member payments are made netof any anticipated unit retain for the crop. These procedures have the effectof providing the Company with an additional source of short-termfinancing.  This member financingarrangement may result in an additional source of liquidity and reduced needfor outside financing in comparison to a similar business operated on anon-cooperative basis.

 

Because sugar is sold throughout the year (whilesugarbeets are processed primarily in the fall, winter and spring) and becausesubstantial amounts of equipment are required for its operations, the Companyhas utilized substantial outside financing on both a seasonal and long-termbasis to fund such operations. The majority of such financing has been providedby a consortium of lenders lead by CoBank, ACB. The Company has a long-termdebt commitment with CoBank, ACB of****$227.9 million, of which $185.8million is currently outstanding.  In addition,the Company has long-term debt outstanding of $50 million from a privateplacement of Senior Notes that occurred in September of 1998;$19.3 million from a private placement of Senior Notes that occurred inJanuary of 2003; $43.3 million from nine separate issuances of Pollution Control and Industrial DevelopmentRevenue Bonds and a term loan with Bank of North Dakota of $4.8 million.  The Company also has a seasonal line ofcredit with a consortium of lenders led by CoBank, ACB of $265 million, ofwhich there is no current balance outstanding, and a line of credit with WellsFargo Bank for $1 million. The Company’s commercial paper program has beenincreased from $150 million to provide short-term borrowings of up to$225 million of which approximately $157.2 million is currentlyoutstanding.  Any borrowings under thecommercial paper 

 

12

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program will act to reduce the available credit under the CoBank, ACBseasonal line of credit by a commensurate amount.

 

The changes that occurred in the Company’s financialstatements from August 31, 2002 to May 31, 2003 were primarily due to normalbusiness seasonality, the acquisition activities related to SSI and theconsolidation impact of ProGold.  Thefirst nine months of the Company’s fiscal year includes the completion of thesugarbeet harvest, the processing campaign, and the initial payments to growersfor delivered sugarbeets.  The cash usedin operations of $88.3 million and investing activities of $61.3 million wasfunded primarily through the cash provided by the net proceeds from short-termdebt of $150.2 million, proceeds from long-term debt of $31.0 million, andproceeds from the installment sale of stock of $5.2 million. This was partiallyoffset by the payment of unit retains of $16.1 million and long-term debtrepayment of $19.8 million.

 

Working capital decreased $27.1 million from $58.3million at the beginning of the year to $31.2 million as of May 31, 2003primarily due to additional short-term debt, increases in payables and anincrease in receivables partially offset by increased inventories and amountsdue growers.  Working capital as of May31, 2003 was $31.2 million, a decrease of $7.6 million when compared to $38.8million of working capital as of May 31, 2002.

 

Capital expenditures for the Nine months ended May 31,2003 were $52.6 million, which included $35.2 related to the acquisitionactivities of SSI.  Capital expendituresfor the same period in 2002 were $8.2 million. The Company had outstanding commitments totaling $10.0 million as of May31, 2003 for equipment and construction contracts related to various capitalprojects.

 

The Company anticipates that the funds necessary forworking capital requirements and future capital expenditures will be derivedfrom operations, short-term borrowings, depreciation, unit retains andlong-term borrowings.

 

**Item3.****  Quantitative and Qualitative Disclosuresabout Market Risk**

 

Market risk is the risk of loss to future earnings, tofair values or to future cash flows that may result from changes in the priceof a financial instrument.  The value ofa financial instrument may change as a result of changes in the interest rates,exchange rates, commodity prices, equity prices and other market changes.  Market risk is attributed to all market-risksensitive financial instruments, including long term debt.

 

The Company does not believe that there is anymaterial market risk exposure with respect to interest rates, exchange rates,commodity prices, equity prices and other market changes that would requiredisclosure under this item.

 

**Item 4.**  Controls and Procedures

 

The Company’s chief executive officer and chieffinancial officer have reviewed and evaluated the effectiveness of theCompany’s disclosure controls and procedures (as defined in Rules 240.13a-14(c)and 15d-14(c) promulgated under the Securities Exchange Act of 1934) as of May31, 2003.  Based on that review andevaluation, which included inquiries made to certain other employees of theCompany, the chief executive officer and chief financial officer have concludedthat the Company’s current disclosure controls and procedures, as designed andimplemented, are reasonably adequate to ensure that they are provided withmaterial information relating to the Company required to be disclosed in thereports the Company files or submits under the Securities Exchange Act of 1934.

 

There have been no significant changes in theCompany’s internal controls or in other factors that could significantly affectthese controls subsequent to the date of their evaluation.  There were no significant deficiencies ormaterial weaknesses identified, and therefore no corrective actions were taken.

 

13

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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 legalproceedings, which have arisen in the ordinary course of the Company’sbusiness. The Company is also aware of certain other potential claims, whichcould result in the commencement of legal proceedings. The Company carriesinsurance, which provides protection against certain types of claims. Withrespect to current litigation and potential claims of which the Company isaware, the Company’s management believes that (i) the Company hasinsurance protection to cover all or a portion of any judgments which may berendered against the Company with respect to certain claims or actions and(ii) any judgments which may be entered against the Company and which mayexceed such insurance coverage or which may arise in actions involvingpotential liabilities not covered by insurance policies are not likely to havea material adverse effect upon the Company, or its assets or operations.

 

**Item2.  Changes in Securities and Use ofProceeds.**

 

None

 

**Item3.  Default Upon Senior Securities**

 

None

 

### **Item 4.  Submission of Matters to a Vote of SecurityHolders**

 

None

 

**Item5.  Other Information.**

 

None.

 

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**Item 6. Exhibits and Reports on Form8-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(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         |   | 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         |   | 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.  |
|         |   |                                                                                                        |   |                                                                                                                                                                     |
| 10.3         |   | 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.  |
|         |   |                                                                                                        |   |                                                                                                                                                                     |
| 10.4         |   | 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.  |
|         |   |                                                                                                        |   |                                                                                                                                                                     |
| +10.5        |   | 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. |

 

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| +10.6  |   | 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. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| +10.7  |   | 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. |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.8   |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.9   |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.10  |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.11  |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| +10.12 |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.13  |   | 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                                       |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.14  |   | 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                                       |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.15  |   | 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                                       |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.16  |   | 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                                       |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.17  |   | 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                                      |

 

16

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| 10.18   |   | 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                 |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.19   |   | 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 |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.20   |   | 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 |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.21   |   | 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 |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.22   |   | 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            |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.23   |   | 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            |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.24   |   | Term and Seasonal Loan  Agreements between the Registrant and CoBank, ACB dated March 27, 2002                                                        |   | Incorporated by  reference to Exhibit 10.27 from the Company’s Form 10-Q for the quarter ended  May 31, 2002                 |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.25   |   | Retirement Plan A  Restatement                                                                                                                        |   | Incorporated by  reference to Exhibit 10.28 from the Company’s Annual Report on Form 10K for  the year ended August 31, 2002 |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.26   |   | Retirement Plan B  Restatement                                                                                                                        |   | Incorporated by  reference to Exhibit 10.29 from the Company’s Annual Report on Form 10K for  the year ended August 31, 2002 |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.27   |   | Amendments to Term and  Seasonal Loan Agreements between the Registrant and CoBank, ACB dated  November 6, 2002                                       |   | Incorporated by  reference to Exhibit 10.30 from the Company’s Form 10-Q for the quarter ended  November 30, 2002            |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.28   |   | 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            |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.29   |   | Growers’ Contract  (5-year Agreement) for the crop years 2003 through 2007                                                                       |   | Incorporated by  reference to Exhibit 10.30 from the Company’s Form 10-Q for the quarter ended  February 28, 2003            |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| 10.30   |   | Growers’ Contract  (Annual Contract) for crop year 2003.                                                                                         |   | Incorporated by  reference to Exhibit 10.31 from the Company’s Form 10-Q for the quarter ended  February 28, 2003            |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| ++10.31 |   | Beet Loading and  Hauling Agreement between the Registrant and Transystems LLC for the crop  years 2003 through 2007                                  |   | Filed herewith  electronically                                                                                                    |
|    |   |                                                                                                                                                  |   |                                                                                                                              |
| ++10.32 |   | 2003 Sugarbeet Delivery  Agreement between Sidney Sugars Incorporated and Growers                                                                     |   | Filed herewith  electronically                                                                                                    |

 

17

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| 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, 2002 |
|--------|--------|------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                       |   |                                                                                                                             |
| 99.1   |   | Section 1350  Certification of the Chief Executive Officer |   | Accompanying herewith  electronically                                                                                            |
|   |   |                                                       |   |                                                                                                                             |
| 99.2   |   | Section 1350  Certification of the Chief Financial Officer |   | Accompanying herewith  electronically                                                                                            |

 

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+                                    Confidentialtreatment under Rule 24b-2 of the Securities and Exchange Act of 1934, asamended, has been granted with respect to designated portions of this document.

++                             Confidentialtreatment has been requested with respect to designated portions of thisdocument.  Such portions have beenomitted and filed separately with the Secretary of the Securities and ExchangeCommission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934,as amended.

 

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

 

The Company filed the following Current Reports onForm 8-K during this quarter.

 

(i)                                     Current Report on Form 8-K, dated March26, 2003, under item 9, the Company stated that it had announced to itsshareholders on March 26, 2003, that the projected gross beet payment for the2002 Red River Valley crop is $38.00 per average ton of sugarbeets.

 

(ii)                                  Current Report on Form 8-K, dated April4, 2003, under item 9, the Company stated that it had announced at variousmeetings with shareholders that the imposition of sugar marketing allocationsunder the 2002 Farm Bill will likely result in significant sugarbeet acreagefluctuations from year to year for the Company’s shareholders.

 

(iii)                               Current Report on Form 8-K, dated April24, 2003, under item 5, the Company announced to its shareholders on April 24,2003, that the Company had acquired Minn-Dak Farmer Cooperative’s five percentownership interest in ProGold Limited Liability Company (ProGold) for $10.3million, effective May 1, 2003, resulting in an increase in the Company’sownership in ProGold to 51 percent.

 

 

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: ** | **July 15, 2003**                  |   |   |   | **/s/ Brian Ingulsrud** |   |
|            |                               |   | **Brian Ingulsrud** |
|            |                               |   | **Corporate Controller,** |
|            |                               |   | **Chief Accounting Officer** |
|            |                               |   | **Duly Authorized Officer** |
|                 |                                    |        |  |  |  |  |  |

 

18

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**CERTIFICATIONS**

 

I, James J. Horvath, President and Chief Executive Officer of AmericanCrystal Sugar Company, certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of American Crystal SugarCompany (the registrant);

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officer and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (theEvaluation Date); and

 

c)                                      presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                                       Theregistrant’s other certifying officer and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors:

 

a)                                      allsignificant deficiencies in the design or operation of the internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls.

 

6.                                       Theregistrant’s other certifying officer and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| July 15, 2003                          |   |   |
|----------------------------------------|--------|--------|
|                                   |   |   |
|                                   |
| /s/ James J. Horvath                   |   |
|                                   |
| James J. Horvath                       |   |   |
| President and Chief  Executive Officer |   |   |
|                                        |        |        |  |

 

19

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**CERTIFICATIONS**

 

I, Joseph J. Talley, Vice President-Finance and Chief Financial Officerof American Crystal Sugar Company, certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of American Crystal SugarCompany (the registrant);

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officer and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (theEvaluation Date); and

 

c)                                      presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                                       Theregistrant’s other certifying officer and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors:

 

a)                                      allsignificant deficiencies in the design or operation of the internal controlswhich could adversely affect the registrant’s ability to record, process,summarize and report financial data and have identified for the registrant’sauditors any material weaknesses in internal controls; and

 

b)                                     anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls.

 

6.                                       Theregistrant’s other certifying officer and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| July 15, 2003                                       |   |
|-----------------------------------------------------|--------|
|                                                |   |
| /s/ Joseph J. Talley                                |   |   |
|                                                |   |
| Joseph J. Talley                                    |   |
| Vice President-Finance  and Chief Financial Officer |   |
|                                                     |        |  |

 

20

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