**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

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**FORM 10-Q**

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

 

# **For the period endedFebruary 29, 2004**

 

**Commissionfile number:  33-83868**

 

**AMERICANCRYSTAL SUGAR COMPANY**

(Exact name ofregistrant as specified in its charter)

 

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

 

**101 North Third Street**

**Moorhead, Minnesota  56560**

(Address ofprincipal executive offices)

 

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

(Registrant’stelephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months, and (2) has been subject to such filing requirements for the past 90days.

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

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in rule 12b-2 of theAct).

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

 

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  April 7, 2004** |
|---------------------------|--------|-----------------------------------|
| **$10 Par Value**         |   | 2,996                             |

 

 

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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** |                                                                                            |   |

 

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**PART I. FINANCIAL INFORMATION**

** **

**Item 1. Financial Statements**

 

AMERICANCRYSTAL SUGAR COMPANY

Consolidated Balance Sheets

(Unaudited)

(Dollarsin Thousands)

 

ASSETS

 
|                                              |   | **February  29,  2004** |      | **February  28,  2003** |   | **August 31,  2003*** |   |
|---------------------------------------------------|--------|-------------------------|-----------|-------------------------|--------|-----------------------|--------|
| Current  Assets:                                  |   |                    |      |                    |   |                  |   |
| Cash  and Cash Equivalents                        |   | $                       | 629       |                    | $      | 25                    |   | $ | 859 |   |
| Accounts  Receivable:                             |   |                    |      |                    |   |                  |   |
| Trade                                             |   | 90,446                  |      | 59,102                  |   | 64,056                |   |
| Members                                           |   | —                  |      | —                  |   | 3,993                 |   |
| Other                                             |   | 2,358                   |      | 2,033                   |   | 4,403                 |   |
| Advances  to Related Parties                      |   | 3,417                   |      | 6,845                   |   | 4,891                 |   |
| Inventories                                       |   | 456,961                 |      | 376,487                 |   | 130,981               |   |
| Prepaid  Expenses                                 |   | 5,428                   |      | 4,931                   |   | 7,062                 |   |
|                                              |   |                    |      |                    |   |                  |   |
| Total  Current Assets                             |   | 559,239                 |      | 449,423                 |   | 216,245               |   |
|                                              |   |                    |      |                    |   |                  |   |
| Property  and Equipment:                          |   |                    |      |                    |   |                  |   |
| Land                                              |   | 40,105                  |      | 36,877                  |   | 39,393                |   |
| Buildings                                         |   | 91,438                  |      | 88,430                  |   | 90,181                |   |
| Equipment                                         |   | 794,676                 |      | 777,908                 |   | 794,416               |   |
| Construction-in-Progress                          |   | 5,594                   |      | 7,163                   |   | 4,989                 |   |
| Less:  Accumulated Depreciation                   |   | (607,986                | )         | (573,096                | )      | (586,167              | )      |
|                                              |   |                    |      |                    |   |                  |   |
| Net  Property and Equipment                       |   | 323,827                 |      | 337,282                 |   | 342,812               |   |
|                                              |   |                    |      |                    |   |                  |   |
| Net  Property and Equipment Held for Lease        |   | 165,478                 |      | —                  |   | 170,446               |   |
|                                              |   |                    |      |                    |   |                  |   |
| Other  Assets:                                    |   |                    |      |                    |   |                  |   |
| Investments  in CoBank, ACB                       |   | 19,552                  |      | 14,748                  |   | 21,685                |   |
| Investments  in Marketing Cooperatives            |   | 5,240                   |      | 2,674                   |   | 6,166                 |   |
| Investments  in ProGold Limited Liability Company |   | —                  |      | 42,062                  |   | —                |   |
| Investments  in Crystech, LLC                     |   | 15,863                  |      | 1,314                   |   | 15,330                |   |
| Notes  Receivable - Crystech, LLC                 |   | —                  |      | 13,905                  |   | —                |   |
| Other  Assets                                     |   | 45,740                  |      | 27,485                  |   | 37,067                |   |
|                                              |   |                    |      |                    |   |                  |   |
| Total  Other Assets                               |   | 86,395                  |      | 102,188                 |   | 80,248                |   |
|                                              |   |                    |      |                    |   |                  |   |
| Total  Assets                                     |   | $                       | 1,134,939 |                    | $      | 888,893               |   | $ | 809,751 |   |

 

The AccompanyingNotes are an Integral Part of These Consolidated Financial Statements.

 

* Derived fromAudited Financial Statements.

 

1

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AMERICAN CRYSTAL SUGARCOMPANY

ConsolidatedBalance Sheets

(Unaudited)

(Dollarsin Thousands)

 

LIABILITIESAND MEMBERS’ INVESTMENTS

 
|                                                    |   | **February  29,  2004** |      | **February  28,  2003** |   | **August 31,  2003*** |   |
|---------------------------------------------------------|--------|-------------------------|-----------|-------------------------|--------|-----------------------|--------|
| Current  Liabilities:                                   |   |                    |      |                    |   |                  |   |
| Short-Term  Debt                                        |   | $                       | 217,855   |                    | $      | 143,230               |   | $ | 49,989 |   |
| Current  Maturities of Long-Term Debt                   |   | 21,067                  |      | 20,664                  |   | 11,282                |   |
| Accounts  Payable                                       |   | 20,320                  |      | 20,903                  |   | 23,192                |   |
| Advances  Due to Related Parties                        |   | 9,577                   |      | 9,264                   |   | 4,604                 |   |
| Accrued  Continuing Costs (see note 3)                  |   | 59,195                  |      | 63,714                  |   | —                |   |
| Other  Current Liabilities                              |   | 20,855                  |      | 17,343                  |   | 18,710                |   |
| Amounts  Due Growers                                    |   | 175,771                 |      | 128,733                 |   | 58,896                |   |
|                                                    |   |                    |      |                    |   |                  |   |
| Total  Current Liabilities                              |   | 524,640                 |      | 403,851                 |   | 166,673               |   |
|                                                    |   |                    |      |                    |   |                  |   |
| Long-Term  Debt, Net of Current Maturities              |   | 261,144                 |      | 192,714                 |   | 286,922               |   |
|                                                    |   |                    |      |                    |   |                  |   |
| Accrued  Employee Benefits                              |   | 32,916                  |      | 29,330                  |   | 31,053                |   |
|                                                    |   |                    |      |                    |   |                  |   |
| Other  Liabilities                                      |   | 10,206                  |      | 3,478                   |   | 10,988                |   |
|                                                    |   |                    |      |                    |   |                  |   |
| Total  Liabilities                                      |   | 828,906                 |      | 629,373                 |   | 495,636               |   |
|                                                    |   |                    |      |                    |   |                  |   |
| Minority  Interest in ProGold Limited Liability Company |   | 45,427                  |      | —                  |   | 43,769                |   |
|                                                    |   |                    |      |                    |   |                  |   |
| Members’  Investments:                             |   |                    |      |                    |   |                  |   |
| Preferred  Stock                                        |   | 38,275                  |      | 38,275                  |   | 38,275                |   |
| Common  Stock                                           |   | 30                      |      | 30                      |   | 30                    |   |
| Additional  Paid-in Capital                             |   | 152,261                 |      | 147,960                 |   | 148,238               |   |
| Unit  Retains                                           |   | 109,022                 |      | 108,149                 |   | 125,409               |   |
| Equity  Retention                                       |   | 2,717                   |      | 2,723                   |   | 2,719                 |   |
| Accumulated  Other Comprehensive Income/(Loss)          |   | (11,900                 | )         | (1,317                  | )      | (11,900               | )      |
| Retained  Earnings/(Deficit)                            |   | (29,799                 | )         | (36,300                 | )      | (32,425               | )      |
|                                                    |   |                    |      |                    |   |                  |   |
| Total  Members’ Investments                        |   | 260,606                 |      | 259,520                 |   | 270,346               |   |
|                                                    |   |                    |      |                    |   |                  |   |
| Total  Liabilities and Members’ Investments        |   | $                       | 1,134,939 |                    | $      | 888,893               |   | $ | 809,751 |   |

 

The AccompanyingNotes are an Integral Part of These Consolidated Financial Statements.

 

* Derived fromAudited Financial Statements.

 

2

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AMERICANCRYSTAL SUGAR COMPANY

Consolidated Statements ofOperations

(Unaudited)

(Dollarsin Thousands)

 
|                                                                  |   | **For the  Six Months Ended** |    | **For the  Three Months Ended** |   |
|-----------------------------------------------------------------------|--------|-------------------------------|---------|---------------------------------|--------|
|                                                                  |   | **February  29,  2004**       |    | **February  28,  2003**         |   | **February  29,  2004** |   | **February  28,  2003** |   |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Net  Revenue                                                          |   | $                             | 472,076 |                            | $      | 393,058 |   | $ | 241,872 |   | $ | 191,847 |   |
| Cost  of Product Sold                                                 |   | 5,322                         |    | 19,495                          |   | 12,336 |   | (19,964 | ) |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Gross  Proceeds                                                       |   | 466,754                       |    | 373,563                         |   | 229,536 |   | 211,811 |   |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Selling,  General & Administrative Expenses                       |   | 90,667                        |    | 79,976                          |   | 47,768 |   | 40,185 |   |
| Accrued  Continuing Costs (see note 3)                                |   | 59,195                        |    | 63,714                          |   | 17,064 |   | 37,873 |   |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Operating  Proceeds                                                   |   | 316,892                       |    | 229,873                         |   | 164,704 |   | 133,753 |   |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Other  Income/(Expense)                                               |   |                          |    |                            |   |   |   |   |   |
| Interest  Income                                                      |   | 125                           |    | 790                             |   | 8 |   | 360 |   |
| Interest  Expense                                                     |   | (10,333                       | )       | (7,584                          | )      | (5,423 | ) | (4,102 | ) |
| Other,  Net                                                           |   | 641                           |    | 1,479                           |   | 545 |   | 761 |   |
| Other  (Expense)                                                      |   | (9,567                        | )       | (5,315                          | )      | (4,870 | ) | (2,981 | ) |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Proceeds  before Minority Interest and Income Tax Expense             |   | 307,325                       |    | 224,558                         |   | 159,834 |   | 130,772 |   |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Minority  Interest                                                    |   | (1,658                        | )       | —                          |   | (846 | ) | — |   |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Income  Tax (Expense)/Benefit                                         |   | (5                            | )       | 6                               |   | (5 | ) | 6 |   |
| Net  Proceeds Resulting from Member and Non-Member Business           |   | $                             | 305,662 |                            | $      | 224,564 |   | 158,983 |   | 130,778 |   |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Distribution  of Net Proceeds:                                        |   |                          |    |                            |   |   |   |   |   |
| Credited/(Charged)  to Members’ Investments:                     |   |                          |    |                            |   |   |   |   |   |
| Non-Member  Business Income                                           |   | $                             | 2,626   |                            | $      | 1,924 |   | $ | 1,360 |   | $ | 1,125 |   |
| Unit  Retains Declared to Members                                     |   | —                        |    | —                          |   | — |   | — |   |
| Net  Credit to Members’ Investments                              |   | 2,626                         |    | 1,924                           |   | 1,360 |   | 1,125 |   |
| Payments  to/due Members for Sugarbeets, Net of Unit Retains Declared |   | 303,036                       |    | 222,640                         |   | 157,623 |   | 129,653 |   |
|                                                                  |   |                          |    |                            |   |   |   |   |   |
| Total                                                                 |   | $                             | 305,662 |                            | $      | 224,564 |   | $ | 158,983 |   | $ | 130,778 |   |

 

The AccompanyingNotes are an Integral Part of These Consolidated Financial Statements.

 

3

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AMERICANCRYSTAL SUGAR COMPANY

Consolidated Statements ofCash Flows

(Unaudited)

(DollarsIn Thousands)

 
|                                                                  |   | **For the  Six Months Ended** |    |
|-----------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                  |   | **February  29,  2004**       |    | **February  28,  2003** |   |
|                                                                  |   |                          |    |   |   |
| Cash  Provided By/(Used In) Operations:                               |   |                          |    |   |   |
| Net  Proceeds Resulting from Member and Non-Member Business           |   | $                             | 305,662 |   | $ | 224,564 |   |
| Payments  to/due Members for Sugarbeets, Net of Unit Retains Declared |   | (303,036                      | )       | (222,640 | ) |
| Add/(Deduct)  Non-Cash Items:                                         |   |                          |    |   |   |
| Depreciation  and Amortization                                        |   | 35,430                        |    | 28,996 |   |
| (Income)  from Equity Method Investees                                |   | (571                          | )       | (1,149 | ) |
| Loss  on the Disposition of Property and Equipment                    |   | 390                           |    | 159 |   |
| Deferred  Gain Recognition                                            |   | (99                           | )       | (99 | ) |
| Minority  Interest in ProGold Limited Liability Company               |   | 1,658                         |    | — |   |
| Changes  in Assets and Liabilities:                                   |   |                          |    |   |   |
| Receivables                                                           |   | (20,351                       | )       | 5,236 |   |
| Inventories                                                           |   | (325,980                      | )       | (259,993 | ) |
| Prepaid  Expenses                                                     |   | 1,634                         |    | 801 |   |
| Long-Term  Prepaid Pension Expense                                    |   | (8,712                        | )       | 1,617 |   |
| Advances  To/Due to Related Parties                                   |   | 6,446                         |    | 10,663 |   |
| Accounts  Payable                                                     |   | (2,872                        | )       | 2,741 |   |
| Accrued  Continuing Costs                                             |   | 59,195                        |    | 63,714 |   |
| Other  Liabilities                                                    |   | 3,260                         |    | 3,312 |   |
| Amounts  Due Growers                                                  |   | 116,875                       |    | 49,487 |   |
| Net  Cash (Used In) Operations                                        |   | (131,071                      | )       | (92,591 | ) |
|                                                                  |   |                          |    |   |   |
| Cash  Provided By/(Used In) Investing Activities:                     |   |                          |    |   |   |
| Purchases  of Property and Equipment                                  |   | (9,115                        | )       | (10,593 | ) |
| Purchases  of Property and Equipment Held for Lease                   |   | (550                          | )       | — |   |
| Proceeds  from the Sale of Property and Equipment                     |   | 39                            |    | 91 |   |
| Equity  Refund from CoBank, ACB                                       |   | 2,133                         |    | 682 |   |
| Investments  in Marketing Cooperatives                                |   | 1,049                         |    | (463 | ) |
| Acquistion  by Sidney Sugars Incorporated                             |   | —                        |    | (35,184 | ) |
| Acquisition  by Crab Creek Sugar Company                              |   | (5,763                        | )       | — |   |
| Changes  in Other Assets                                              |   | 4,545                         |    | (60 | ) |
| Net  Cash (Used In) Investing Activities                              |   | (7,662                        | )       | (45,527 | ) |
|                                                                  |   |                          |    |   |   |
| Cash  Provided By/(Used In) Financing Activities:                     |   |                          |    |   |   |
| Net  Proceeds from/(Payments on) Short-Term Debt                      |   | 167,866                       |    | 136,230 |   |
| Proceeds  from Issuance of Long-Term Debt                             |   | —                        |    | 31,000 |   |
| Long-Term  Debt Repayment                                             |   | (16,997                       | )       | (18,038 | ) |
| Proceeds  from Issuance of Stock                                      |   | 4,023                         |    | 4,891 |   |
| Payment  of Unit Retains & Equity Retention                       |   | (16,389                       | )       | (15,962 | ) |
| Net Cash  Provided by Financing Activities                            |   | 138,503                       |    | 138,121 |   |
|                                                                  |   |                          |    |   |   |
| Increase  (Decrease) In Cash and Cash Equivalents                     |   | (230                          | )       | 3 |   |
| Cash  and Cash Equivalents, Beginning of Year                         |   | 859                           |    | 22 |   |
|                                                                  |   |                          |    |   |   |
| Cash  and Cash Equivalents, End of Period                             |   | $                             | 629     |   | $ | 25 |   |

 

**Non-Cash Investing and Financing Activities:**InSeptember 2003, a note payable in the amount of $969,000 was issued inconnection with the acquisition by Crab Creek Sugar Company.

 

The AccompanyingNotes are an Integral Part of These Consolidated Financial Statements.

 

4

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# **AMERICAN CRYSTAL SUGARCOMPANY**

**NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS**

**FOR THE SIX MONTHS AND THREE MONTHSENDED**

**FEBRUARY 29, 2004 AND FEBRUARY 28,2003**

 

**Note 1:****   Basis of Presentation**

 

The unauditedconsolidated financial statements of American Crystal Sugar Company (theCompany) contained herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission.  Accordingly, they do not include all theinformation and footnotes required by accounting principles generally acceptedin the United States of America. However, in the opinion of management, all adjustments, consisting ofnormal recurring accruals, considered necessary for a fair presentation havebeen included.

 

The Company’s consolidatedfinancial statements are comprised of American Crystal Sugar Company, itswholly-owned subsidiaries Sidney Sugars Incorporated (Sidney Sugars) and CrabCreek Sugar Company (Crab Creek), and ProGold Limited Liability Company(ProGold), a limited liability company in which the Company holds a 51 percentownership interest.

 

Sidney Sugars was formed infiscal 2003 under the laws of the State of Minnesota, and on October 7, 2002,acquired three sugarbeet processing facilities and the related marketingallocations associated with such facilities. Activities associated with Sidney Sugars are considered non-memberbusiness.

 

Crab Creek was formed infiscal 2003 under the laws of the State of Minnesota, and on September 8, 2003,acquired the control of a sugarbeet processing facility and the relatedmarketing allocations associated with such facility (See Note 7).

 

Effective May 1, 2003, theCompany acquired an additional five percent ownership interest in ProGold, resultingin an increase in the Company’s ownership in ProGold to 51 percent.  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 financial statements for prior periodshave not been restated and therefore do not include consolidated datapertaining to ProGold prior to May 1, 2003.

 

Allmaterial inter-company transactions have been eliminated.

 

The operating results forthe six month period ended February 29, 2004 are not necessarily indicative ofthe results that may be expected for the year ended August 31, 2004.

 

The amount paid toshareholders for sugarbeets (member beet payment) depends on the future sellingprices of sugar and agri-products as well as processing and other costsincurred during the remainder of the fiscal year associated with the 2003 RedRiver Valley sugarbeet crop (RRV crop). 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 2003 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 theseestimates may be necessary in the future, as additional information becomesavailable.

 

These financialstatements should be read in conjunction with the consolidated financialstatements and notes included in the Company’s annual report for the year endedAugust 31, 2003.

 

Certain reclassificationshave been made to the February 28, 2003 consolidated financial statements toconform with the February 29, 2004 presentation.

 

5

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**Note 2:****   Inventories**

 

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

 
|                                                                    |   | **02/29/04** |    | **02/28/03** |   | **8/31/03** |   |
|-------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|-------------|--------|
| Refined  Sugar, Pulp, Molasses, Other Agri-Products and Sugar Beet Seed |   | $            | 312,836 |         | $      | 258,079     |   | $ | 111,259 |   |
| Unprocessed  Sugarbeets                                                 |   | 126,603      |    | 101,047      |   | —      |   |
| Maintenance  Parts & Supplies                                       |   | 17,522       |    | 17,361       |   | 19,722      |   |
|                                                                    |   |         |    |         |   |        |   |
| Total  Inventories                                                      |   | $            | 456,961 |         | $      | 376,487     |   | $ | 130,981 |   |

 

Sugar, pulp, molasses andother agri-products inventories are valued at estimated net realizable value.  Unprocessed sugarbeets are valued at theestimated gross beet payment. Maintenance parts & supplies and beet seed inventories are valued atthe lower of average cost or market.

 

**Note 3:****   Accrued Continuing Costs**

 

For interim reporting,the Net Proceeds from Member Business is based on the forecasted gross beetpayment and the percentage of the tons of sugarbeets processed to the totalestimated tons of sugarbeets to process for a given crop year.  The Net Proceeds from the operations ofSidney Sugars is based on the forecasted net income for the fiscal year and thepercentage of the tons of non-member sugarbeets processed to the totalestimated tons of non-member sugarbeets to process for a given fiscal year.

 

Accrued continuing costsrepresent the difference between the Net Proceeds as determined above andactual member business crop year and Sidney Sugars fiscal year revenuesrealized and expenses incurred through the end of the reporting period.  Accrued continuing costs are reflected inthe Consolidated Financial Statements as a cost on the Consolidated Statementsof Operations and as a current liability on the Consolidated Balance Sheets.

 

**Note 4:****   Members’ Investments**

 
|               |   | **Par Value** |   | **Shares  Authorized** |    | **Shares  Issued  & Outstanding** |    |
|--------------------|--------|---------------|--------|------------------------|---------|---------------------------------------|---------|
| Preferred  Stock:  |   |          |   |                   |    |                                  |    |
| April  7, 2004     |   | $             | 76.77  |                   | 600,000 |                                  | 498,570 |   |
| February  29, 2004 |   | $             | 76.77  |                   | 600,000 |                                  | 498,570 |   |
| August  31, 2003   |   | $             | 76.77  |                   | 600,000 |                                  | 498,570 |   |
| February  28, 2003 |   | $             | 76.77  |                   | 600,000 |                                  | 498,570 |   |
|               |   |          |   |                   |    |                                  |    |
| Common  Stock:     |   |          |   |                   |    |                                  |    |
| April  7, 2004     |   | $             | 10.00  |                   | 4,000   |                                  | 2,996   |   |
| February  29, 2004 |   | $             | 10.00  |                   | 4,000   |                                  | 2,971   |   |
| August  31, 2003   |   | $             | 10.00  |                   | 4,000   |                                  | 2,995   |   |
| February  28, 2003 |   | $             | 10.00  |                   | 4,000   |                                  | 3,008   |   |

 

**Note 5:****   Interest Paid**

 

Interest paid, net ofamounts capitalized, was $8.9 million and $8.8 million for the six months endedFebruary 29, 2004 and February 28, 2003, respectively.

 

6

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# **Note6:**   Short-TermDebt

# ** **

TheCompany has a seasonal line of credit with a consortium of lenders led byCoBank, ACB of $280 million and a line of credit with Wells Fargo Bank for$1 million.  The Company’scommercial paper program provides short-term borrowings of up to $225million.  Any borrowings under the commercial paper program will act toreduce the available credit under the CoBank, ACB seasonal line of credit by acommensurate amount.  The Company alsoutilizes the Commodity Credit Corporation (CCC) to meet its short-termborrowing needs.

 

As of February 29, 2004,the Company had outstanding commercial paper of $194.9****million at an averageinterest rate of 1.34% and maturity dates between March 1, 2004 and May 28,2004.  In addition, the Company had anoutstanding non-recourse loan with the CCC of $23.0 million, against which onemillion hundredweight of sugar was pledged as collateral.  The CCC loan carried an interest rate of1.99% and a maturity date of August 31, 2004. The Company had no outstanding short-term debt with CoBank, ACB as ofFebruary 29, 2004.

 

As of February 28, 2003,the Company had outstanding commercial paper of $143.2****million at an averageinterest rate of 2.02% and maturity dates between March 3, 2003 and June 9,2003.  The Company had no outstandingshort-term debt with CoBank, ACB or the CCC as of February 28, 2003.

 

**Note 7:****   Crab Creek Sugar Company**

 

OnSeptember 8, 2003, the Company, through its wholly-owned subsidiary Crab CreekSugar Company (Crab Creek), acquired all of the assets of Pacific NorthwestSugar Company, LLC (PNSC), certain assets of Central Leasing of Washington, LLC(Central Leasing) that were associated with PNSC and the Moses Lake, Washingtonsugarbeet factory previously operated by PNSC and control of the sugarproduction assets owned by Central Leasing associated with the Moses Lake,Washington sugarbeet factory for a purchase price of approximately $6.7million.  To accomplish this outcome,Crab Creek entered into various arrangements with Central Leasing such thatCrab Creek controls the long-term production of sugar at the Moses Lakefacility.  In connection with this acquisition,the USDA transferred to the Company the sugar marketing allocations formerlyallocated to PNSC.  Neither Crab Creeknor the Company intends to operate the Moses Lake facility.

 

**Note 8:****   Segment Reporting**

 

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

 

7

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Summarized financialinformation concerning the Company’s reportable segments for the six months andthree months ended February 29, 2004 is shown below:

 
|                                 |   | **For the  Six Months Ended February 29, 2004** |    |
|--------------------------------------|--------|-------------------------------------------------|---------|
|                                 |   | **(Dollars  In Thousands)**                     |    |
|                                 |   | **Sugar**                                       |    | **Leasing** |   | **Eliminations** |   | **Consolidated** |   |
| Net  Revenue from External Customers |   | $                                               | 459,167 |   | $ | 12,909 |   | $ | — |   | $ | 472,076 |   |
| Gross  Proceeds                      |   | $                                               | 459,825 |   | $ | 6,929 |   | $ | — |   | $ | 466,754 |   |
| Depreciation  and Amortization       |   | $                                               | 29,922  |   | $ | 5,508 |   | $ | — |   | $ | 35,430 |   |
| Interest  Income                     |   | $                                               | 122     |   | $ | 3 |   | $ | — |   | $ | 125 |   |
| Interest  Expense                    |   | $                                               | 6,855   |   | $ | 3,478 |   | $ | — |   | $ | 10,333 |   |
| Income  from Equity Method Investees |   | $                                               | 2,296   |   | $ | — |   | $ | (1,725 | ) | $ | 571 |   |
| Other  Income/(Expense), Net         |   | $                                               | 2,391   |   | $ | (25 | ) | $ | (1,725 | ) | $ | 641 |   |
| Net  Proceeds                        |   | $                                               | 305,662 |   | $ | 3,383 |   | $ | (3,383 | ) | $ | 305,662 |   |
|                                 |   |                                            |    |   |   |   |   |   |   |
| Capital  Expenditures                |   | $                                               | 9,115   |   | $ | 550 |   | $ | — |   | $ | 9,665 |   |

 
|                                 |   | **For the  Three Months Ended February 29, 2004** |    |
|--------------------------------------|--------|---------------------------------------------------|---------|
|                                 |   | **(Dollars  In Thousands)**                       |    |
|                                 |   | **Sugar**                                         |    | **Leasing** |   | **Eliminations** |   | **Consolidated** |   |
| Net  Revenue from External Customers |   | $                                                 | 235,398 |   | $ | 6,474 |   | $ | — |   | $ | 241,872 |   |
| Gross  Proceeds                      |   | $                                                 | 226,054 |   | $ | 3,482 |   | $ | — |   | $ | 229,536 |   |
| Depreciation  and Amortization       |   | $                                                 | 14,884  |   | $ | 2,757 |   | $ | — |   | $ | 17,641 |   |
| Interest  Income                     |   | $                                                 | 7       |   | $ | 1 |   | $ | — |   | $ | 8 |   |
| Interest  Expense                    |   | $                                                 | 3,688   |   | $ | 1,735 |   | $ | — |   | $ | 5,423 |   |
| Income  from Equity Method Investees |   | $                                                 | 1,158   |   | $ | — |   | $ | (880 | ) | $ | 278 |   |
| Other  Income/(Expense), Net         |   | $                                                 | 1,425   |   | $ | — |   | $ | (880 | ) | $ | 545 |   |
| Net  Proceeds                        |   | $                                                 | 158,983 |   | $ | 1,726 |   | $ | (1,726 | ) | $ | 158,983 |   |
|                                 |   |                                              |    |   |   |   |   |   |   |
| Capital  Expenditures                |   | $                                                 | 4,066   |   | $ | 294 |   | $ | — |   | $ | 4,360 |   |

 
|                         |   | **As of  February 29, 2004** |      |
|------------------------------|--------|------------------------------|-----------|
|                         |   | **(Dollars  In Thousands)**  |      |
|                         |   | **Sugar**                    |      | **Leasing** |   | **Eliminations** |   | **Consolidated** |   |
| Property  and Equipment, Net |   | $                            | 323,824   |   | $ | 3 |   | $ | — |   | $ | 323,827 |   |
| Assets  Held for Lease, Net  |   | $                            | —    |   | $ | 165,478 |   | $ | — |   | $ | 165,478 |   |
| Identifiable  Assets         |   | $                            | 1,004,930 |   | $ | 177,290 |   | $ | (47,281 | ) | $ | 1,134,939 |   |

 

TheCompany had only one reportable segment, Sugar, for the six months and threemonths ended February 28, 2003.

 

**Note 9:****   Recently Issued AccountingPronouncements**

 

The Financial AccountingStandards Board has issued an amendment to Financial Accounting Standards No.132, Employer’s Disclosure about Pensions and Other PostretirementBenefits.  Such amendment requiresadditional disclosures to interim and annual financial statements which areeffective for the interim period ending May 31, 2004, but does not change therecognition requirements related to pensions and postretirement benefits.  Management is reviewing this pronouncement todetermine its impact on the disclosures in the interim and annual financialstatements, but does not expect the implementation of this pronouncement tohave a significant impact on the interim or annual financial statements.

 

8

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**Item 2.  Management’s Discussion and Analysis ofResults of Operations and Financial Condition for the Six Months and ThreeMonths Ended February 29, 2004 and February 28, 2003**

** **

This report containsforward-looking statements that involve risks and uncertainties.  Such forward-looking statements include,among others, those statements including the words “expect”, “anticipate”,“believe”, “may” and similar expressions. The Company’s actual results could differ materially from those indicated.  Important factors that could cause orcontribute to such differences include, without limitation, market factors,weather and general economic conditions, farm and trade policy, availablequantity and quality of sugarbeets.  Fora more complete discussion of “Important Factors”, please refer to theCompany’s 2003 Form 10-K.

 

**Comparison of the Six Months Ended February 29, 2004and February 28, 2003**

 

Revenuefor the six months ended February 29, 2004, was $472.1 million, an increase of$79.0 million from the same period last year. Revenue from total sugar sales increased 18.1 percent due to a 18.6percent increase in the hundredweight sold partially offset by a .4 percentdecrease in the average selling price per hundredweight.  Revenue from pulp sales decreased 4.7percent due to a 7.4 percent decrease in the volume of pulp tons sold partiallyoffset by a 3.0 percent increase in the average selling price per ton.  Revenue from molasses sales increased 118.3percent due to a 135.0 percent increase in the volume of molasses sold,partially offset by a 7.1 percent decrease in the average selling price perton.  The increase in the volume ofproducts sold was due primarily to the additional sales associated with thelarger crop in the Red River Valley and production at the Sidney, Montana factory.  Revenue from sales of Concentrated SeparatedBy-Product (CSB), a by-product of the molasses desugarization process,decreased 12.9 percent due to a 16.0 percent decrease in the average sellingprice per ton partially offset by a 3.7 percent increase in the volume of CSBsold.  Rental revenue on the ProGoldoperating lease was $12.9 million.

 

Costof product sold for the six months ended February 29, 2004, exclusive ofpayments to members for sugarbeets, decreased $14.2 million as compared to thesame period last year.  The costrecognized associated with the non-member sugarbeets (Sidney crop) was $43.8million for the six months ended February 29, 2004, an increase of $12.4million when compared to the same period last year.  Direct processing costs for sugar and pulp increased 22.5percent.  This was primarily due toharvesting 15.7 percent more sugarbeets and processing 18.0 percent moresugarbeets than in fiscal 2003.  Theincrease in sugarbeets processed this year was primarily due to the delay lastyear of the 2002 Red River Valley crop processing campaign startup because ofadverse planting and growing conditions which slowed the maturity of thecrop.  Increased processing costsresulted from higher prices for natural gas and major supplies, increased majorsupplies usage and higher labor costs. Fixed and committed expenses increased 8.4 percent reflecting highercosts for wastewater treatment and increased costs related to the operations ofSidney Sugars.  The change in productinventories impacted the cost of product sold favorably by $40.7 million. Thevalue for sugar inventories as of February 29, 2004 increased compared to theprior year due to a higher inventory level partially offset by a lower netrealizable value per hundredweight. The cost associated with purchased sugardecreased by $13.7 million due to no delay in the startup of the 2003 cropcampaign.  The delayed startup last yearresulted in the requirement to purchase additional sugar to service customersduring the delay.  Costs related toProGold were $6.0 million.  Costsrelated to Crab Creek Sugar were $ .7 million.

 

Selling,general and administrative expenses for the six months ended February 29, 2004,increased $10.7 million as compared to the same period last year.  Selling expenses increased $8.8 millionprimarily due to the increase in the volume of sugar sold along with higherwarehousing costs and additional costs related to Sidney Sugars.  General and Administrative costs increased$1.9 million due in part to higher employee benefit costs along with othergeneral cost increases.

 

Interestincome for the six months ended February 29, 2004, decreased $ .7 million whencompared to the same period last year. This was primarily due to a loweraverage balance of investments and slightly lower interest rates.

 

9

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Interestexpense for the six months ended February 29, 2004, increased $2.7 million ascompared to the same period last year. This was the result of the consolidationof ProGold along with increased average borrowing levels for short-term andlong-term debt, partially offset by lower long-term and short-term interestrates.

 

Non-memberbusiness activities resulted in a gain of $2.6 million for the six months endedFebruary 29, 2004, as compared to a gain of $1.9 million for the same periodlast year.  The gain in both periods wasdue primarily to activities related to Sidney Sugars partially offset by theactivities related to the investment in ProGold.

 

**Comparison of the Three Months Ended February 29, 2004and February 28, 2003**

 

Revenuefor the three months ended February 29, 2004, was $241.9 million, an increaseof $50.0 million from the same period last year.  Revenue from total sugar sales increased 26.9 percent due to a29.0 percent increase in the hundredweight sold partially offset by a 1.7percent decrease in the average selling price per hundredweight.  Revenue from pulp sales decreased 21.3percent due to a 24.6 percent decrease in the volume of pulp tons sold partiallyoffset by a 4.3 percent increase in the average selling price per ton.  Revenue from molasses sales increased 103.3percent due to a 117.4 percent increase in the volume of molasses sold,partially offset by a 6.5 percent decrease in the average selling price perton.  The increase in the volume ofproducts sold was due primarily to the additional sales associated with thelarger crop in the Red River Valley and the production at the Sidney, Montanafactory.  Revenue from sales ofConcentrated Separated By-Product (CSB), a by-product of the molassesdesugarization process, decreased 7.2 percent due to a 14.8 percent decrease inthe average selling price per ton partially offset by an 8.9 percent increasein the volume of CSB sold.  Rentalrevenue on the ProGold operating lease was $6.5 million for the three monthsended February 29, 2004.

 

Costof product sold for the three months ended February 29, 2004, exclusive ofpayments to members for sugarbeets, increased $32.3 million as compared to thesame period last year.  The costrecognized associated with the non-member sugarbeets (Sidney crop) was $22.4million for the three months ended February 29, 2004 an increase of $4.2million when compared to the same period last year.  Direct processing costs for sugar and pulp increased 10.7percent.  Increased processing costsresulted form higher prices for natural gas and major supplies, increased majorsupplies usage and higher labor costs. Costs also increased due to processing 1.3 percent more sugarbeets inthe three months ended February 29, 2004, than for the same period lastyear.  Fixed and committed expensesincreased 6.9 percent reflecting higher chemical, coal and limerock costs forwastewater treatment.  The change inproduct inventories impacted the cost of product sold unfavorably by $21.2million due primarily to a decrease in sugar inventories. The cost associatedwith purchased sugar decreased by $ .5 million due primarily to lower salesvolume.  Costs related to ProGold were$3.0 million.  Costs related to CrabCreek Sugar were $ .4 million.

 

Selling,general and administrative expenses for the three months ended February 29,2004 increased $7.6 million as compared to the same period last year.  Selling expenses increased $5.8 millionprimarily due to the increase in the volume of sugar sold along with increasedwarehousing costs.  General andAdministrative costs increased $1.8 million due in part to higher employeebenefit costs along with other general cost increases.

 

Interestincome for the three months ended February 29, 2004 decreased $ .4 million whencompared to the same period last year. This was primarily due to a loweraverage balance of investments and slightly lower interest rates.

 

Interestexpense increased $1.3 million for the three months ended February 29, 2004, ascompared to the same period last year. This was the result of the consolidationof ProGold and increased average borrowing levels for short-term and long-termdebt, partially offset by lower long-term and short-term interest rates.

 

Non-memberbusiness activities resulted in a gain of $1.4 million for the three monthsended February 29, 2004, as compared to a gain of $1.1 million for the sameperiod last year.  The gain in both

 

10

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periods was due primarily toactivities related to Sidney Sugars partially offset by the activities relatedto the investment in ProGold.

 

**Regional and Bilateral Free TradeAgreements**

 

The United StatesGovernment is pursuing an aggressive agenda on international trade.  It has negotiated the terms of the CentralAmerican Free Trade Agreement and the Australian Free Trade Agreement.  Both countries and/or regions are majorproducers of sugar.  Several otherbilateral and regional trade agreements are being negotiated or considered bythe Bush Administration.  Many of the countries included in theseagreements are major sugar producers and exporters.  If reductions in sugar tariffs are included in these agreements,eventually excess sugar from these regions could enter the U.S. market and putpressure on domestic sugar prices.  Theimpact of the various trade agreements on the Company can not be assessed atthis time due to the uncertainty concerning the terms of the agreements andwhether they will ultimately be implemented.  It is possible, however,that the passage of various trade agreements could have a material adverseeffect on the Company through a reduction in acreage that can be planted by theCompany’s shareholders, and/or a reduction in sugar selling prices, and acorresponding reduction in the beet payment to the shareholders.  Themagnitude of the impact can not be determined at this time.

 

**Environmental Matters**

 

OnMay 21, 2003, Sidney Sugars received an Enforcement Action for Air QualityViolation letter from the Montana Department of Environmental Quality foralleged violations of allowed particulate emissions at the Sidney, Montanafacility.  On December 5, 2003, theMontana Department of Environmental Quality and Sidney Sugars entered into anAdministrative Order on Consent (Consent Order) resolving this matter.  The Consent Order, among of matters,required Sidney Sugars to pay an administrative civil penalty of $52,104.  The seller of the Sidney, Montana factoryhas indemnified Sidney Sugars for the amounts that were payable for thisaction.

 

**Liquidity and Capital Resources**

 

Under the Company’sBylaws and Member Grower Contracts, payments for member delivered sugarbeets,the principal raw material used in producing the sugar and agri-products itsells, are subordinated to all member business expenses.  In addition, the beet payments made tomember growers and non-member growers are paid in three payments over thecourse of a year, and the member payments are made net of any anticipated unitretain for the crop.  These procedureshave the effect of providing the Company with an additional source ofshort-term financing.  This memberfinancing arrangement may result in an additional source of liquidity andreduced need for outside financing in comparison to a similar business operatedon a non-cooperative basis.

 

Because sugar is soldthroughout the year (while sugarbeets are processed primarily in the fall,winter and spring) and because substantial amounts of equipment are requiredfor its operations, the Company has utilized substantial outside financing onboth a seasonal and long-term basis to fund such operations.  The majority of such financing has beenprovided by a consortium of lenders lead by CoBank, ACB.  The Company has a long-term debt commitmentwith CoBank, ACB of****$204.4 million, of which $166.8million was outstanding as of February 29, 2004.  In addition, the Company had long-term debt outstanding, as ofFebruary 29, 2004, of $50 million from a private placement of Senior Notesthat occurred in September of 1998; $17.1 million from a private placementof Senior Notes that occurred in January of 2003; $43.3 million from nineseparate issuances of Pollution Control and Industrial Development RevenueBonds, a term loan with Bank of North Dakota of $4.0 million and note payableof $1.0 million.  The Company also has aseasonal line of credit with a consortium of lenders led by CoBank, ACB of$280 million, of which there was no outstanding balance as of February 29,2004, and a line of credit with Wells Fargo Bank for $1.0 million.  The Company’s commercial paper programprovides short-term borrowings of up to $225 million of whichapproximately $194.9 million was outstanding as of

 

11

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February 29, 2004.  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 Company also had an outstanding non-recourse loan with the CCC, asof February 29, 2004, of $23.0 million, against which one million hundredweightof sugar was pledged as collateral.

 

The changes that haveoccurred in the Company’s financial statements from August 31, 2003 to February29, 2004 were primarily due to normal business seasonality and the acquisitionactivities related to Crab Creek.  Thefirst six months of the Company’s fiscal year includes the completion of thesugarbeet harvest, start of the processing campaign, the final payments togrowers for sugarbeets delivered from the previous year’s crop and the initialpayments to growers for sugarbeets delivered from the current year’s crop.  The cash used in operations of $131.1million and investing activities of $7.7 million was funded primarily throughthe cash provided by the proceeds from short-term debt.  The net cash provided by financingactivities of $138.5 million was primarily comprised of the net proceeds fromshort-term debt of $167.9 million and proceeds from the installment sale ofstock of $4.0 million partially offset by the repayment of long-term debt of$17.0 million and the payment of unit retains of $16.4 million.

 

Working capital hasdecreased $15.0 million from $49.6 million at the beginning of the year to$34.6 million as of February 29, 2004 primarily due to additional short-termdebt, increases in payables and an increase in amounts due growers partiallyoffset by increased inventories.  All ofwhich are primarily related to the commencement of the processingcampaign.  Working capital as ofFebruary 29, 2004 was $34.6 million, a decrease of $11.0 million when comparedto $45.6 million of working capital as of February 28, 2003.  The lower level of working capital as ofFebruary 29, 2004 was primarily due to increased amounts due growers and highershort-term debt partially offset by increased inventories and accountsreceivable.

 

Capital expenditures forthe six months ended February29, 2004 were $9.7 million. Capital expenditures for the same period in 2003 were $26.4 millionwhich included $15.8 million related to the acquisition of property andequipment by Sidney Sugars.  The Companyhad outstanding commitments totaling $5.0 million as of February 29, 2004 for equipment and construction contractsrelated to various capital projects.

 

The Company anticipatesthat the funds necessary for working capital requirements and future capitalexpenditures will be derived from operations, short-term borrowings,depreciation, unit retains and long-term borrowings.

 

On September 8, 2003, the Company, through itswholly-owned subsidiary Crab Creek Sugar Company (Crab Creek), acquired all ofthe assets of Pacific Northwest Sugar Company, LLC (PNSC), certain assets ofCentral Leasing of Washington, LLC (Central Leasing) that were associated withPNSC and the Moses Lake, Washington sugarbeet factory previously operated byPNSC and control of the sugar production assets owned by Central Leasingassociated with the Moses Lake, Washington sugarbeet factory for a purchaseprice of approximately $6.7 million.  Toaccomplish this outcome, Crab Creek entered into various arrangements withCentral Leasing such that Crab Creek controls the long-term production of sugarat the Moses Lake facility.  Inconnection with this acquisition, the USDA transferred to the Company the sugarmarketing allocations formerly allocated to PNSC.  Neither Crab Creek nor the Company intends to operate the MosesLake facility.

 

**Item 3. Quantitative and Qualitative Disclosures about 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.

 

12

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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-15eand 15d-15e promulgated under the Securities Exchange Act of 1934) as ofFebruary 29, 2004.  Based on that reviewand evaluation, 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 nosignificant changes in the Company’s internal controls or in other factors thatcould significantly affect these controls subsequent to the date of theirevaluation.  There were no significantdeficiencies or material weaknesses identified, and therefore no correctiveactions were taken.

 

## **PARTII. OTHER INFORMATION**

 

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

#### ** **

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

 

**Item2.  Changes in Securities and Use of Proceeds.**

 

None

 

**Item3.  Default Upon Senior Securities**

 

None

 

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

### ** **

None

 

**Item5.  Other Information.**

 

None.

 

13

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### **Item 6. Exhibitsand Reports on Form 8-K**

 

(a)   Exhibits

 
| **Item No.** |   |                                                                                                        |   | **Method of  Filing**                                                                                                                                                    |
|--------------|--------|-------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |   |                                                                                                        |   |                                                                                                                                                                     |
| 3.1          |   | Restated Articles of  Incorporation of American Crystal Sugar Company                                       |   | Incorporated by  reference to Exhibit 3(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. |

 

14

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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   |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.8   |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.9   |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.10  |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| +10.11 |   | 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.                                     |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.12  |   | 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                                       |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.13  |   | 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                                       |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.14  |   | Registrant’s  Senior Note Inter-creditor and Collateral Agency Agreement                                           |   | Incorporated by  reference to Exhibit 10.25 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 1999                                       |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.15  |   | 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                                       |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.16  |   | Employment Agreement  between the Registrant and James J. Horvath                                                       |   | Incorporated by  reference to Exhibit 10.28 from the Company’s Annual Report on Form 10-K form  the year ended August 31, 1999                                      |
|   |   |                                                                                                                    |   |                                                                                                                                                                     |
| 10.17  |   | 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                                                        |

 

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| 10.18  |   | 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 10-K for  the year ended August 31, 2000 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.19  |   | Long Term Incentive  Plan, dated June 23, 1999                                                                                                        |   | Incorporated by  reference to Exhibit 10.31 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 2000 |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.20  |   | 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 10-K for  the year ended August 31, 2001 |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.21  |   | 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             |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.22  |   | 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             |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.23  |   | Retirement Plan A  Restatement                                                                                                                        |   | Incorporated by  reference to Exhibit 10.28 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 2002 |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.24  |   | Retirement Plan B  Restatement                                                                                                                        |   | Incorporated by reference  to Exhibit 10.29 from the Company’s Annual Report on Form 10-K for the year  ended August 31, 2002 |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.25  |   | 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             |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.26  |   | 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             |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.27  |   | 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             |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| +10.28 |   | Beet Loading and  Hauling Agreement between the Registrant and Transystems LLC for the crop  years 2003 through 2007                                  |   | Incorporated by  reference to Exhibit 10.31 from the Company’s Form 10-Q for the quarter ended  May 31, 2003                  |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| +10.29 |   | 2003 Sugarbeet Delivery  Agreement between Sidney Sugars Incorporated and Growers                                                                     |   | Incorporated by  reference to Exhibit 10.32 from the Company’s Form 10-Q for the quarter ended  May 31, 2003                  |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.30  |   | Stipulation Agreement  between Registrant and State of Minnesota Pollution Control Agency, dated  August 5, 2003                                      |   | Incorporated by  reference to Exhibit 10.30 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 2003 |
|   |   |                                                                                                                                                  |   |                                                                                                                               |
| 10.31  |   | Term and Seasonal Loan  Agreements between the Registrant and CoBank, ACB dated July 21, 2003                                                         |   | Incorporated by  reference to Exhibit 10.31 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 2003 |

 

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| 10.32  |   | Seasonal Loan Agreement  between the Registrant and CoBank, ACB dated November 7, 2003   |   | Incorporated by  reference to Exhibit 10.32 from the Company’s Form 10-Q for the quarter ended  November 30, 2003            |
|--------|--------|------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                     |   |                                                                                                                              |
| 10.33  |   | Amendments  to Registrant’s Senior Note Purchase Agreements dated November 26, 2003 |   | Incorporated by  reference to Exhibit 10.33 from the Company’s Form 10-Q for the quarter ended  November 30, 2003            |
|   |   |                                                                                     |   |                                                                                                                              |
| 21.1   |   | List of Subsidiaries of  the Registrant                                                  |   | Incorporated by  reference to Exhibit 21.1 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 2003 |
|   |   |                                                                                     |   |                                                                                                                              |
| 31.1   |   | Rule  13a-14(a)/15(d)-14(a) Certification of the Chief Executive Officer                 |   | Accompanying herewith  electronically                                                                                             |
|   |   |                                                                                     |   |                                                                                                                              |
| 31.2   |   | Rule  13a-14(a)/15(d)-14(a) Certification of the Chief Financial Officer                 |   | Accompanying herewith  electronically                                                                                             |
|   |   |                                                                                     |   |                                                                                                                              |
| 32.1   |   | Section 1350  Certification of the Chief Executive Officer                               |   | Accompanying herewith  electronically                                                                                             |
|   |   |                                                                                     |   |                                                                                                                              |
| 32.2   |   | Section 1350  Certification of the Chief Financial Officer                               |   | Accompanying herewith  electronically                                                                                             |

 

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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.

 

** (b) Reports on Form8-K**

 

None

 

 

SIGNATURES

 

**Pursuant to the requirement of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned thereunto duly authorized.**

 

 
|      | **AMERICAN CRYSTAL SUGAR COMPANY** |   |
|-----------|------------------------------------|--------|
|      | **(Registrant)**                   |   |
|      |                               |
|      |                               |
| **Date:** | **April 14, 2004**                 |   | **/s/ Joseph Talley** |   |
|      | **Joseph Talley**                  |
|      | **Vice President - Finance,**      |
|      | **Chief Financial Officer**        |
|      | **Duly Authorized Officer**        |
|           |                                    |        |  |  |  |  |  |

 

17

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