**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

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** **

**FORM 10-Q**

** **

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

# ** **

# **For the period endedNovember 30, 2001**

 

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

 

**AMERICAN CRYSTAL SUGAR COMPANY**

(Exactname of registrant as specified in its charter)

 

 

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

 

 

**101 North Third Street**

**Moorhead, Minnesota 56560**

(Addressof principal executive offices)

 

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

(Registrant'stelephone number, including area code)

 

 

Indicate by check mark whether theregistrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months,and (2) has been subject to such filing requirements for the past 90 days.

 

                                                                YES  ý                                                                                   NO  o

 

Indicate the number of shares outstandingof each of the issuer's classes of common stock, as of the latest practicabledate.

 

|                      |   |                |
|---------------------------|--------|---------------------|
|                      |   | **Outstanding at**  |
| **Class of Common Stock** |   | **January 9, 2002** |
| **$10 Par Value**         |   | 3,131               |

 

 

** **

**AMERICAN CRYSTAL SUGAR COMPANY**

** **

**FORM 10-Q**

 

**INDEX**

 

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

 

 

**PART I. FINANCIAL INFORMATION**

 

**Item 1. Financial Statements**

 

AMERICAN CRYSTAL SUGAR COMPANY

BalanceSheets

(Unaudited)

(Dollars in Thousands)

 

ASSETS

 
|                                              |   | **November 30** |    | **August 31,  2001*** |   |
|---------------------------------------------------|--------|-----------------|---------|-----------------------|--------|
|                                              |   | **2001**        |    | **2000**              |   |   |
| Current Assets:                                   |   |            |    |                  |   |   |   |
| Cash and Cash  Equivalents                        |   | $               | 793     |                  | $      | 24 |   | $ | 5,902 |   |
| Accounts Receivable:                              |   |            |    |                  |   |   |   |
| Trade                                             |   | 47,001          |    | 53,210                |   | 67,332 |   |
| Members                                           |   | 1,988           |    | 1,902                 |   | 3,300 |   |
| Other                                             |   | 940             |    | 3,926                 |   | 1,553 |   |
| Advances to Related Parties                       |   | 4,721           |    | 80                    |   | 14,924 |   |
| Inventories                                       |   | 354,621         |    | 346,194               |   | 104,269 |   |
| Prepaid Expenses                                  |   | 18,963          |    | 21,795                |   | 5,989 |   |
|                                              |   |            |    |                  |   |   |   |
| Total Current Assets                              |   | 429,027         |    | 427,131               |   | 203,269 |   |
|                                              |   |            |    |                  |   |   |   |
|                                              |   |            |    |                  |   |   |   |
| Property and Equipment:                           |   |            |    |                  |   |   |   |
| Land                                              |   | 32,697          |    | 27,804                |   | 32,511 |   |
| Buildings and Equipment                           |   | 840,539         |    | 826,099               |   | 839,431 |   |
| Construction-in-Progress                          |   | 1,711           |    | 10,571                |   | 1,453 |   |
| Less: Accumulated Depreciation                    |   | (523,092        | )       | (490,616              | )      | (510,015 | ) |
|                                              |   |            |    |                  |   |   |   |
| Net Property and Equipment                        |   | 351,855         |    | 373,858               |   | 363,380 |   |
|                                              |   |            |    |                  |   |   |   |
| Other Assets:                                     |   |            |    |                  |   |   |   |
| Investments in CoBank, ACB                        |   | 15,676          |    | 15,135                |   | 15,676 |   |
| Investments in Marketing Cooperatives             |   | 1,654           |    | 3,267                 |   | 1,638 |   |
| Investments in ProGold Limited  Liability Company |   | 38,962          |    | 37,289                |   | 38,533 |   |
| Investments in Crystech, LLC                      |   | 1,501           |    | 1,584                 |   | 1,545 |   |
| Notes Receivable - Crystech, LLC                  |   | 13,905          |    | 13,905                |   | 13,905 |   |
| Other Assets                                      |   | 3,498           |    | 1,980                 |   | 3,499 |   |
|                                              |   |            |    |                  |   |   |   |
| Total Other Assets                                |   | 75,196          |    | 73,160                |   | 74,796 |   |
|                                              |   |            |    |                  |   |   |   |
| Total Assets                                      |   | $               | 856,078 |                  | $      | 874,149 |   | $ | 641,445 |   |

 

* Derived fromaudited financial statements.

 

 AMERICANCRYSTAL SUGAR COMPANY

Balance Sheets

(Unaudited)

(Dollars in Thousands)

 

 LIABILITIES AND MEMBERS' INVESTMENTS

 
|                                           |   | **November 30** |    | **August 31,  2001*** |   |
|------------------------------------------------|--------|-----------------|---------|-----------------------|--------|
|                                           |   | **2001**        |    | **2000**              |   |   |
| Current Liabilities:                           |   |            |    |                  |   |   |   |
| Short-Term Debt                                |   | $               | 133,087 |                  | $      | 134,486 |   | $ | 13,963 |   |
| Current Maturities of Long-Term Debt           |   | 19,070          |    | 18,925                |   | 19,070 |   |
| Accounts Payable                               |   | 19,466          |    | 25,878                |   | 19,775 |   |
| Advances Due to Related Parties                |   | 7,225           |    | 7,680                 |   | 3,568 |   |
| Accrued Continuing Costs (see note 3)          |   | 34,752          |    | 36,458                |   | - |   |
| Other Current Liabilities                      |   | 17,924          |    | 17,258                |   | 15,555 |   |
| Amounts Due Members                            |   | 135,448         |    | 142,093               |   | 82,766 |   |
|                                           |   |            |    |                  |   |   |   |
| Total Current Liabilities                      |   | 366,972         |    | 382,778               |   | 154,697 |   |
|                                           |   |            |    |                  |   |   |   |
| Long-Term Debt, Net of Current  Maturities     |   | 200,417         |    | 229,905               |   | 201,416 |   |
| Other Liabilities                              |   | 30,160          |    | 28,339                |   | 29,672 |   |
|                                           |   |            |    |                  |   |   |   |
| Total Liabilities                              |   | 597,549         |    | 641,022               |   | 385,785 |   |
|                                           |   |            |    |                  |   |   |   |
|                                           |   |            |    |                  |   |   |   |
| Members' Investments:                          |   |            |    |                  |   |   |   |
| Preferred Stock                                |   | 38,275          |    | 38,275                |   | 38,275 |   |
| Common Stock                                   |   | 31              |    | 30                    |   | 31 |   |
| Additional Paid-in Capital                     |   | 140,600         |    | 134,197               |   | 137,241 |   |
| Unit Retains                                   |   | 116,441         |    | 97,336                |   | 116,480 |   |
| Equity Retention                               |   | 1,557           |    | -                     |   | 1,560 |   |
| Accumulated Other Comprehensive  Income/(Loss) |   | (436            | )       | (655                  | )      | (436 | ) |
| Retained Earnings/(Deficit)                    |   | (37,939         | )       | (36,056               | )      | (37,491 | ) |
|                                           |   |            |    |                  |   |   |   |
| Total Members' Investments                     |   | 258,529         |    | 233,127               |   | 255,660 |   |
|                                           |   |            |    |                  |   |   |   |
| Total Liabilities and Members'  Investments    |   | $               | 856,078 |                  | $      | 874,149 |   | $ | 641,445 |   |

 

* Derived fromaudited financial statements.

 

 

AMERICAN CRYSTAL SUGAR COMPANY

Statementsof Operations

(Unaudited)

(Dollars in Thousands)

 
|                                                                           |   | **For the Three Months Ended  November 30** |    |
|--------------------------------------------------------------------------------|--------|---------------------------------------------|---------|
|                                                                           |   | **2001**                                    |    | **2000** |   |
|                                                                           |   |                                        |    |   |   |
| Net  Revenue                                                                   |   | $                                           | 172,655 |   | $ | 242,855 |   |
| Cost of  Product Sold                                                          |   | (19,837                                     | )       | 49,184 |   |
|                                                                           |   |                                        |    |   |   |
| Gross  Proceeds                                                                |   | 192,492                                     |    | 193,671 |   |
|                                                                           |   |                                        |    |   |   |
| Selling,  General & Administrative Expenses                                |   | 39,230                                      |    | 43,368 |   |
| Accrued  Continuing Costs (see note 3)                                         |   | 34,752                                      |    | 36,458 |   |
|                                                                           |   |                                        |    |   |   |
| Operating  Proceeds                                                            |   | 118,510                                     |    | 113,845 |   |
|                                                                           |   |                                        |    |   |   |
| Other  Income/(Expense)                                                        |   |                                        |    |   |   |
| Interest  Income                                                               |   | 681                                         |    | 1,324 |   |
| Interest  Expense                                                              |   | (3,252                                      | )       | (4,424 | ) |
| Other,  Net                                                                    |   | 329                                         |    | 444 |   |
| Other  (Expense)                                                               |   | (2,242                                      | )       | (2,656 | ) |
|                                                                           |   |                                        |    |   |   |
| Proceeds  before Income Taxes                                                  |   | 116,268                                     |    | 111,189 |   |
| Income  Tax Expense                                                            |   | -                                           |    | (20 | ) |
| Net  Proceeds Resulting from                                                   |   |                                        |    |   |   |
| Member  and Non-Member Business                                                |   | $                                           | 116,268 |   | $ | 111,169 |   |
|                                                                           |   |                                        |    |   |   |
|                                                                           |   |                                        |    |   |   |
| Distribution  of Net Proceeds:                                                 |   |                                        |    |   |   |
| Credited/(Charged)  to Members' Investments:                                   |   |                                        |    |   |   |
| Non-Member  Business (Loss)                                                    |   | $                                           | (448    | ) | $ | (449 | ) |
| Unit Retains Declared to Members                                               |   | -                                           |    | - |   |
| Equity Retention Declared to Members                                           |   | -                                           |    | - |   |
| Net  (Charge) to Members' Investments                                          |   | (448                                        | )       | (449 | ) |
| Payments  to/due Members for Sugarbeets, Net of Unit Retains Declared          |   | 116,716                                     |    | 111,618 |   |
| Payment to/due Members for PIK  Certificates,Net  of Equity Retention Declared |   | -                                           |    | - |   |
|                                                                           |   |                                        |    |   |   |
| Total                                                                          |   | $                                           | 116,268 |   | $ | 111,169 |   |

 

American Crystal Sugar Company

Statementsof Cash Flows

(Unaudited)

(Dollars In Thousands)

 
|                                                                                                                                                                    |   | **For the Three Months Ended  November 30** |          |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|---------------|
|                                                                                                                                                                    |   | **2001**                                    |          | **2000** |   |
|                                                                                                                                                                    |   |                                        |          |   |   |
| Cash Provided By (Used In) Operations:                                                                                                                                  |   |                                        |          |   |   |
| Net Proceeds Resulting from Member and  Non-Member Business                                                                                                             |   | $                                           | 116,268       |   | $ | 111,169 |   |
| Payments to Members for Sugarbeets, Net  of Unit Retains Declared                                                                                                       |   | (116,716                                    | )             | (111,618 | ) |
| Payments to Members for PIK  Certificates, Net of Equity Rentention Declared                                                                                            |   | -                                           |          | - |   |
| Add (Deduct) Non-Cash Items:                                                                                                                                            |   |                                        |          |   |   |
| Depreciation and Amortization                                                                                                                                           |   | 13,586                                      |          | 13,147 |   |
| (Income) from Equity Method Investees                                                                                                                                   |   | (419                                        | )             | (441 | ) |
| Loss on the Disposition of Property and  Equipment                                                                                                                      |   | 162                                         |          | 286 |   |
| Non-Cash Portion of Patronage Dividend  from CoBank, ACB                                                                                                                |   | -                                           |          | - |   |
| Deferred Gain Recognition                                                                                                                                               |   | (49                                         | )             | (49 | ) |
| Changes in Assets and Liabilities:                                                                                                                                      |   |                                        |          |   |   |
| Receivables                                                                                                                                                             |   | 22,256                                      |          | (5,256 | ) |
| Inventories                                                                                                                                                             |   | (250,352                                    | )             | (303,304 | ) |
| Prepaid Expenses                                                                                                                                                        |   | (12,974                                     | )             | (17,431 | ) |
| Advances To/Due to Related Parties                                                                                                                                      |   | 13,860                                      |          | 7,974 |   |
| Accounts Payable                                                                                                                                                        |   | (309                                        | )             | (412 | ) |
| Accrued Continuing Costs                                                                                                                                                |   | 34,752                                      |          | 36,458 |   |
| Other Liabilities                                                                                                                                                       |   | 2,857                                       |          | 753 |   |
| Amounts Due Members                                                                                                                                                     |   | 52,682                                      |          | 88,427 |   |
| Net Cash (Used In) Operations                                                                                                                                           |   | (124,396                                    | )             | (180,297 | ) |
|                                                                                                                                                                    |   |                                        |          |   |   |
| Cash Provided By (Used In) Investing  Activities:                                                                                                                       |   |                                        |          |   |   |
| Purchases of Property and Equipment                                                                                                                                     |   | (2,253                                      | )             | (5,736 | ) |
| Proceeds from the Sale of Property and  Equipment                                                                                                                       |   | 117                                         |          | 1 |   |
| Changes in Other Assets                                                                                                                                                 |   | (19                                         | )             | 68 |   |
| Net Cash (Used In) Investing Activities                                                                                                                                 |   | (2,155                                      | )             | (5,667 | ) |
|                                                                                                                                                                    |   |                                        |          |   |   |
| Cash Provided By (Used In) Financing  Activities:                                                                                                                       |   |                                        |          |   |   |
| Proceeds (Payments) on Short-Term Debt,  Net                                                                                                                            |   | 119,124                                     |          | 132,618 |   |
| Proceeds from Long-Term Debt                                                                                                                                            |   | 1                                           |          | - |   |
| Long-Term Debt Repayment                                                                                                                                                |   | (1,000                                      | )             | (1,000 | ) |
| Proceeds from Sale of Stock                                                                                                                                             |   | 3,359                                       |          | 3,126 |   |
| Payment of Unit Retains                                                                                                                                                 |   | (42                                         | )             | (18,880 | ) |
| Net Cash Provided by Financing  Activities                                                                                                                              |   | 121,442                                     |          | 115,864 |   |
|                                                                                                                                                                    |   |                                        |          |   |   |
| (Decrease) In Cash and Cash Equivalents                                                                                                                                 |   | (5,109                                      | )             | (70,100 | ) |
| Cash and Cash Equivalents, Beginning of  Year                                                                                                                           |   | 5,902                                       |          | 70,124 |   |
|                                                                                                                                                                    |   |                                        |          |   |   |
| Cash and Cash Equivalents, End of  Period                                                                                                                               |   | $                                           | 793           |   | $ | 24 |   |
|                                                                                                                                                                    |   |                                        |          |   |   |
| **Supplemental Schedule  of Non-Cash Financing Activities:**                                                                                                            |   |                                        |          |   |   |
| On September 30, 2000, the Company  forfeited sugar in satisfaction of Commodity CreditCorporation loans of $105.3 million including  accrued interest of $3.8 million. |   |                                        |     |   |     |

 

**AMERICAN CRYSTAL SUGAR COMPANY**

**NOTES TO THE FINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED NOVEMBER 30, 2001 AND 2000**

 

 

**Note 1:  Basis ofPresentation**

 

Theunaudited financial statements contained herein have been prepared pursuant tothe rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all theinformation and footnotes required by generally accepted accountingprinciples.  However, in the opinion ofmanagement, all adjustments, consisting of normal recurring accruals,considered necessary for a fair presentation have been included.

 

Theoperating results for the three month period ended November 30, 2001 are notnecessarily indicative of the results that may be expected for the year endedAugust 31, 2002.

 

Theamount paid to growers for sugarbeets (beet payment) depends on the futureselling prices of sugar and agri-products as well as processing and other coststo be incurred during the remainder of the fiscal year.  For the purposes of this report, the amountof the beet payment, future revenues and costs have been estimated.  Therefore, adjustments with respect to theseestimates may be necessary in the future as additional information becomesavailable.

 

Thesefinancial statements should be read in conjunction with the financialstatements and notes included in the Company's annual report for the year endedAugust 31, 2001.

 

Certainreclassifications have been made to the November 30, 2000 financial statementsto conform with the November 30, 2001 presentation.

 

 

**Note 2:  Inventories**

 

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

 
|                                                                    |   | **11/30/01** |    | **11/30/00**  |   | **8/31/01** |          |
|-------------------------------------------------------------------------|--------|--------------|---------|---------------|--------|-------------|---------------|
| Refined  Sugar, Pulp, Molasses, Other Agri-Products and Sugar Beet Seed |   | $            | 163,636 |     | $      | 137,165     |     | $ | 86,367 |     |
| Unprocessed  Sugarbeets                                                 |   | 173,239      |    | 191,572       |   | -           |          |
| Maintenance  Parts & Supplies                                       |   | 17,746       |    | 17,457        |   | 17,902      |          |
|                                                                    |   |         |    |          |   |        |          |
| Total  Inventories                                                      |   | $            | 354,621 |          | $      | 346,194     |          | $ | 104,269 |   |

 

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

 

**Note 3: Accrued Continuing Costs**

 

Forinterim reporting, the Net Proceeds from Member Business is based on theforecasted beet payment and the percentage of the tons of sugarbeets processedto the total estimated tons of sugarbeets to process for a given cropyear.  Accrued continuing costsrepresent the difference between the Net Proceeds from Member Business asdetermined above and actual member business crop year revenues realized andexpenses incurred through the end of the reporting period.  Accrued continuing costs are reflected inthe Financial Statements as a cost on the Statements of Operations and as acurrent liability on the Balance Sheets.

 

**Note 4:  Members'Investments**

 
|               |   | **Par  Value** |   | **Shares  Authorized** |   | **Shares  Issued & Outstanding** |   |
|--------------------|--------|----------------|--------|------------------------|--------|--------------------------------------|--------|
| Preferred  Stock:  |   |           |   |                   |   |                                 |   |
| January  9, 2002   |   | $76.77         |   | 600,000                |   | 498,570                              |   |
| November  30, 2001 |   | $76.77         |   | 600,000                |   | 498,570                              |   |
| August  31, 2001   |   | $76.77         |   | 600,000                |   | 498,570                              |   |
| November  30, 2000 |   | $76.77         |   | 600,000                |   | 498,570                              |   |
|               |   |           |   |                   |   |                                 |   |
| Common  Stock:     |   |           |   |                   |   |                                 |   |
| January  9, 2002   |   | $10.00         |   | 4,000                  |   | 3,131                                |   |
| November  30, 2001 |   | $10.00         |   | 4,000                  |   | 3,133                                |   |
| August  31, 2001   |   | $10.00         |   | 4,000                  |   | 3,134                                |   |
| November  30, 2000 |   | $10.00         |   | 4,000                  |   | 3,006                                |   |

 

**Note 5:  Interest Paid**

 

Interestpaid, net of amounts capitalized, was $2.1 million and $3.6 million for thethree months ended November 30, 2001 and 2000, respectively.

 

**Note 6: Short-Term Debt**

 

Asof November 30, 2001, the Company had outstanding commercial paper of $103.1 million at an average interestrate of 3.06% and maturity dates between December 3, 2001 and April 30, 2002.The Company also had $30.0 million of outstanding short-term debt with CoBank,ACB with an average interest rate of 2.83% and maturity dates between February21, 2002 and February 28, 2002.

 

Asof November 30, 2000, the Company had outstanding commercial paper of $111.5 million at an average interestrate of 6.93% and maturity dates between December 1, 2000 and April 30, 2001.The Company also had $23.0 million of outstanding short-term debt with CoBank,ACB with an average interest rate of 7.32% and maturity dates between December1, 2000 and December 21, 2000.

 

 

**Item2.   Management's Discussion and Analysisof Results of Operations and Financial Condition for the Three Months EndedNovember 30, 2001 and 2000**

 

Thisreport contains forward-looking statements that involve risks anduncertainties.  Such forward-lookingstatements include, among others, those statements including the words“expect”, “anticipate”, “believe”, “may” and similar expressions.  The Company’s actual results could differmaterially from those indicated. Important factors that could cause or contribute to such differencesinclude, without limitation, market factors, weather and general economicconditions, farm and trade policy, available quantity and quality ofsugarbeets.  For a more completediscussion of “Important Factors”, please refer to the Company’s 2001 Form10-K.

 

**Comparison of the Three Months Ended November 30, 2001 and2000**

 

Revenue for the three months ended November 30, 2001, was $172.7million, a decrease of $70.2 million as compared to the same period last year.Revenue from total sugar sales decreased 31.4 percent which reflects the proceeds from the forfeiture of sugar tothe Commodity Credit Corporation (CCC) last year, a 2.3 percent decrease in theaverage selling price per hundredweight partially offset by a 0.6 percentincrease in hundredweight sold. Revenue from pulp sales increased 38.7 percentdue to a 44.3 percent increase in the volume of pulp sold partially offset by a3.9 percent decrease in the average selling price per ton.  Revenue from molasses sales decreased 50.7percent due to a 64.5 percent decrease in the volume of molasses sold partiallyoffset by a 38.8 percent increase in the average selling price per ton.  Revenue from the sales of ConcentratedSeparated By-Product (CSB), a by-product of the molasses desugarizationprocess, increased 6.4 percent due to a 17.6 percent increase in the averageselling price per ton partially offset by a 9.5 percent decrease in salesvolume.

 

Cost of product sold, for the threemonths ended November 30, 2001, exclusive of payments for sugarbeets, decreased$69.0 million as compared to the same period last year. Direct processing costsfor sugar and pulp decreased 12.0 percent due to harvesting 16.3 percent fewersugarbeets and processing 7.0 percent less sugarbeets. Fixed and committedexpenses increased 2.0 percent reflecting higher maintenance costs. The changein product inventories impacted the cost of product sold favorably by $66.0million. This was primarily due to two factors. First, The value of thecarryover sugar inventory as of August 31, 2000, which was sold during thefirst quarter of fiscal 2001, was approximately $43.0 million higher than thevalue of the carryover sugar inventory as of August 31, 2001, which was soldduring the first quarter of fiscal 2002. The higher inventory level as ofAugust 31, 2000 consisted largely of sugar pledged to the CCC, which wasforfeited during the first quarter of fiscal 2001. Second, the value of thesugar inventory as of November 30, 2001 was approximately $23.0 million morethan the value of the sugar inventory as of November 30, 2000 due primarily toa higher sugar inventory level.

 

Selling, general and administrativeexpenses for the three months ended November 30, 2001 decreased $4.1 millionfrom 2001. Selling expenses decreased $2.7 million primarily due to lower sugarstorage costs partially offset by the reinstatement of the marketing assessmentfee this year. General and Administrative expenses decreased $1.5 million dueto lower personnel costs and other general cost reductions.

 

The decrease in accrued continuing costsfrom last year was due primarily to changes in the volume of sugar sales andproduction, differences in the timing of incurring processing costs and theamount of unsold inventory on hand.

 

Interest income decreased $.6 million forthe three months ended November 30, 2001 as compared to the same period lastyear primarily due to a lower average balance of investments and slightly lowerinterest rates.

 

Interestexpense decreased $ 1.2 million from last year primarily due to lower long-termand short-term interest rates and lower average borrowing levels.

 

Non-memberactivities resulted in a loss of $ .4 million in each of the three months endedNovember 30 2001 and 2000. The losses in both fiscal years were comprisedmainly of activities related to the investment in ProGold Limited LiabilityCompany.

 

 

**2001 Payment-In-Kind Program**

 

InSeptember 2001, the United States Department of Agriculture (USDA) announced aPayment-In-Kind (PIK) program for the 2001 crop year. Under this program, theCompany’s shareholders were paid to destroy a portion of their 2001 sugarbeetcrop.  Payments to the Company’sshareholders were made by the USDA in the form of certificates to be exchangedfor sugar held by the USDA.  The Companyhas entered into contracts with its shareholders to purchase the sugarcertificates they received from the USDA and reduce the shareholders’ deliveryobligation to the Company to the extent sugarbeets were destroyed. As a resultof the PIK program, the number of acres of the 2001 sugarbeet crop harvested bythe shareholders was reduced by approximately 29,000 acres. At this time, theCompany does not believe that the reduction in sugarbeets available to processas a result of the PIK program will materially affect the results of operationsfor fiscal 2002. On December 3, 2001, the CCC finalized the amount of sugar tobe exchanged for the PIK certificates. As a result, the Company receivedapproximately 588,673 hundredweight of sugar in exchange for the PIKcertificates on December 3, 2001 and will receive an additional 588,673hundredweight of sugar on March 1, 2002.

 

**Liquidity and Capital Resources**

 

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

 

Because sugar issold throughout the year (while sugarbeets are processed primarily in the falland winter) and because substantial amounts of equipment are required for itsoperations, the Company has utilized substantial outside financing on both aseasonal and long-term basis to fund such operations. The majority of suchfinancing has been provided by a consortium of lenders lead by CoBank, ACB. TheCompany has a long-term debt commitment with CoBank, ACB of$158.3 million, of which $118.3 million is currently outstanding.  In addition, the Company has long-term debtoutstanding of $50 million from a private placement of Senior Notes thatoccurred in September of 1998; $43.8 million from nine separate issuancesof Pollution Control and IndustrialDevelopment Revenue Bonds; a term loan with Bank of North Dakota of $6.4million; and $1 million from US Bank. The Company also has a seasonal line of credit with a consortium oflenders lead by CoBank, ACB of $180 million, of which $30.0 million iscurrently outstanding, and a line of credit with Wells Fargo Bank for$3 million. The Company’s commercial paper program provides short-termborrowings of up to $150 million of which approximately $103.1 million iscurrently outstanding.  Any borrowingsunder the commercial paper program will act to reduce the available creditunder the CoBank, ACB seasonal line of credit by a commensurate amount.

 

The change in the Company’s financial condition fromAugust 31, 2001 to November 30, 2001 is primarily due to normal businessseasonality.  The first three months ofthe Company’s fiscal year includes the completion of the sugarbeet harvest,start of the processing campaign, and the initial payments to members fordelivered sugarbeets.  The cash used inoperations of $124.4 million and investing activities of $2.2 million wasfunded primarily through the cash provided by financing activities. The netcash provided by financing activities was primarily comprised of the net proceedsfrom short-term debt of $119.1 million, and proceeds from the installment saleof stock of $3.4 million.

 

Working capital has increased $13.5 million from $48.6million at the beginning of the year to $62.1 million as of November 30, 2001primarily due to increased inventories partially offset by additionalshort-term debt, increases in payables and the amounts due growers and adecrease in receivables.  Workingcapital as of November 30, 2001 was $62.1 million, an increase of $17.7 millionwhen compared to $44.4 million of working capital as of November 30, 2000.

 

Capitalexpenditures for the three months ended November 30, 2001 were $2.3 million ascompared to $5.7 million for the same period in 2000. The Company hadoutstanding commitments totaling $1.8 million as of November 30, 2001, forequipment and construction contracts related to various capital projects.

 

TheCompany anticipates that the funds necessary for working capital requirementsand future capital expenditures will be derived from operations, short-termborrowings, depreciation, unit retains and long-term borrowings.

 

**PARTII. OTHER INFORMATION**

** **

**Item 1.  Legal Proceedings**

 

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

 

 

**Item4.  Submission of Matters to a Vote ofSecurity Holders**

 

The Company held meetings in November2001 with its shareholders from the five geographical districts where theCompany’s factories are located.

 

At the Moorhead Factory District Meetingheld on November 12, 2001, David J. Kragnes was re-elected as a Director,receiving 83 of the 85 votes cast with 4 abstentions. His three-year termexpires in December 2004. Michael A. Astrup and Richard Borgen will continue asDirectors for the Moorhead Factory District.

 

At the Hillsboro Factory District Meetingheld on November 13, 2001, Jeff McInnes was elected as a Director, receiving 48of the 89 votes cast with 1 abstention. His three-year term expires in December2004. Jerry D. Bitker and Francis L. Kritzberger will continue as Directors forthe Hillsboro Factory District. Court G. Hanson did not seek re-election as aDirector at the end of his term for reasons unrelated to the company.

 

At the East Grand Forks Factory DistrictMeeting held on November 14, 2001, Curtis Haugen was elected as a Director,receiving 122 of the 177 votes cast with 2 spoiled ballots. His three-year termexpires in December 2004. Paul Driscoll and G. Terry Stadstad will continue asDirectors for the East Grand Forks Factory District. Steven M. Goodwin did notseek re-election as a Director at the end of his term for reasons unrelated tothe company.

 

At the Drayton Factory District Meeting held onNovember 15, 2001, Robert Vivatson was re-elected as a Director, receiving 114of the 114 votes cast with 2 abstentions. His three-year term expires inDecember 2004. Patrick D. Mahar and Neil Widner will continue as Directors forthe Drayton Factory District.

 

At the Crookston Factory District Meetingheld on November 16, 2001, Jim A. Ross was re-elected as a Director, receiving64 of the 65 votes cast with 2 abstentions. His three-year term expires inDecember 2004. Lonn M. Kiel  and RonaldE. Reitmeier will continue as Directors for the Crookston Factory District.

 

**Item 6. Exhibits and Reports on Form8-K**

 

(a)   Exhibits

 
| **Item No.** |   |                                                                                                                                         |   | **Method of Filing**                                                                                                                                                    |
|--------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1          |   | Restated Articles of  Incorporation of American Crystal Sugar Company                                                                        |   | Incorporated by  reference to Exhibit 3.1 from the Company’s Form 10-Q for the quarter ended  May 31, 1998.                                                        |
| 3.2          |   | Restated By-laws of  American Crystal Sugar Company                                                                                          |   | Incorporated by  reference to Exhibit 3.1 from the Company’s Form 10-Q for the quarter ended  May 31, 1998.                                                        |
| 4.1          |   | Restated Articles of  Incorporation of American Crystal Sugar Company                                                                        |   | See Exhibit 3.1                                                                                                                                                         |
| 4.2          |   | Restated By-laws of  American Crystal Sugar Company                                                                                          |   | See Exhibit 3.2                                                                                                                                                         |
| 10.1         |   | Trademark License  Agreement between Registrant and United Sugars Corporation, dated  November 1, 1993                                  |   | Incorporated by  reference to Exhibit 10(l) from the Company’s Registration Statement on Form  S-1 (File No. 33-83868), declared effective November 23, 1994. |
| 10.2         |   | Amended and Restated  Loan Agreement between Registrant and US Bank, formerly First Bank National  Association, dated November 22, 1993 |   | Incorporated by reference  to Exhibit 10(q) from the Company’s Registration Statement on Form S-1 (File  No. 33-83868), declared effective November 23, 1994. |
| 10.3         |   | Pension Contract and  Amendments                                                                                                             |   | Incorporated by  reference to Exhibit 10(r) from the Company’s Registration Statement on Form  S-1 (File No. 33-83868), declared effective November 23, 1994. |
| 10.4         |   | Form of Operating  Agreement between Registrant and ProGold Limited Liability Company                                                        |   | Incorporated by  reference to Exhibit 10(u) from the Company’s Registration Statement on Form  S-1 (File No. 33-83868), declared effective November 23, 1994. |
| 10.5         |   | Form of Member Control  Agreement between Registrant and ProGold Limited Liability Company                                                   |   | Incorporated by  reference to Exhibit 10(v) from the Company’s Registration Statement on Form  S-1 (File No. 33-83868), declared effective November 23, 1994. |
| 10.6         |   | Administrative  Services Agreement between Registrant and ProGold Limited Liability  Company                                            |   | Incorporated by  reference to Exhibit 10(w) from the Company’s Registration Statement on Form  S-1 (File No. 33-83868), declared effective November 23, 1994. |

 
| +10.7   |   | Coal Supply Agreement  between Registrant and Spring Creek Coal Company, dated August 25, 1995                     |   | Incorporated by  reference to Exhibit 10(y) from the Company’s Registration Statement on Form  S-1 (File No. 333-11693), declared effective November 13, 1996. |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| +10.8   |   | Coal Transportation  Agreement between Registrant and Northern Coal Transportation Company, dated  August 25, 1995 |   | Incorporated by  reference to Exhibit 10(z) from the Company’s Registration Statement on Form  S-1 (File No. 333-11693), declared effective November 13, 1996. |
| +10.9   |   | Trademark License  Agreement between Registrant and The Pillsbury Company, dated as of  April 9, 1997              |   | Incorporated by  reference to Exhibit 10(dd) from the Company’s Registration Statement on Form  S-1 (File No. 333-32251), declared effective October 24, 1997. |
| 10.10   |   | Pledge Agreement  between Registrant and First Union Trust Company, NA                                                  |   | Incorporated by  reference to Exhibit 10(ee) from the Company’s Annual Report on Form 10-K for  the year ended August 31, 1998.                                     |
| 10.11   |   | Indemnity Agreement  between Registrant, Newcourt Capital USA Inc., Crystech, LLC and Crystech  Senior Lender Trust     |   | Incorporated by  reference to Exhibit 10(ff) from the Company’s Annual Report on Form 10-K for  the year ended August 31, 1998.                                     |
| 10.12   |   | Tolling Services  Agreement between Crystech, LLC and Registrant                                                        |   | Incorporated by  reference to Exhibit 10(gg) from the Company’s Annual Report on Form 10-K for  the year ended August 31, 1998.                                     |
| 10.13   |   | Operations and  Maintenance Agreement between Crystech, LLC and Registrant                                              |   | Incorporated by  reference to Exhibit 10(hh) from the Company’s Annual Report on Form 10-K for  the year ended August 31, 1998.                                     |
| ++10.14 |   | Limited Liability  Company Agreement of Crystech, LLC                                                                   |   | Incorporated by  reference to Exhibit 10(ii) from the Company’s Annual Report on Form 10-K for  the year ended August 31, 1998.                                     |
| 10.15   |   | Master Agreement  between the Registrant and Bakery, Confectionery, Tobacco Workers & Grain  Millers AFL-CIO, CLC   |   | Incorporated by  reference to Exhibit 10.22 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 1999                                       |
| 10.16   |   | Registrant’s  Senior Note Purchase Agreement                                                                       |   | Incorporated by  reference to Exhibit 10.24 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 1999                                       |

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

 
| 21.1 |   | List of Subsidiaries  of the Registrant |   | Incorporated by  reference to Exhibit 21.1 from the Company’s Annual Report on Form 10K for  the year ended August 31, 1999 |
|------|--------|-----------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
| 23.1 |   | Consent of Eide Bailly  LLP             |   | Incorporated by  reference to Exhibit 23.1 from the Company’s Annual Report on Form 10K for  the year ended August 31, 2001 |

 

----

 

+              Portionsof the Exhibit have been granted confidential treatment by the Commission. Theomitted portions have been filed separately with the Commission.

 

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

 

 

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

 

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

 

 
| (i)    |   | Current Report on Form 8-K, dated October 2, 2001,  under item 9 reporting projected gross beet payment increase for the 2000  crop.                                               |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                               |
| (ii)   |   | Current Report on Form 8-K, dated November 8, 2001,  under item 9 reporting the final gross beet payment for the 2000 crop and the  projected gross beet payment for the 2001 crop |
|   |   |                                                                                                                                                                               |

 

 

**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:  January 9, 2002** |                                               |   | **/s/  Brian Ingulsrud** |   |
|                            |                                               |   | **Brian  Ingulsrud** |   |   |
|                            |                                               |   | **Corporate  Controller,** |   |   |
|                            |                                               |   | **Chief  Accounting Officer** |   |   |
|                            |                                               |   | **Duly  Authorized Officer** |   |   |