**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**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 of1934

 

# **For the period ended November 30,2004**

 

**Commissionfile number:  33-83868**

 

**AMERICAN CRYSTAL SUGAR COMPANY**

(Exact name of registrant as specified in its charter)

 

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

 

**101 North Third Street**

**Moorhead, Minnesota  56560**

(Address of principal executive offices)

 

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

(Registrant’s telephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(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 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.

 

| ** **                | ** ** | **Outstanding at**       |
|---------------------------|------------|--------------------------|
| **Class of Common Stock** | ** ** | **January 6, 2005** |
| **$10 Par Value**         |       | 2,877                    |

 

 

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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.**                | **CONTROLS AND  PROCEDURES**                                                                    |   |
|           |                       |
| **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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**AMERICAN CRYSTAL SUGAR COMPANY**

**ConsolidatedBalance Sheets**

**(Unaudited)**

**(Dollars in Thousands)**

 

**ASSETS**

 
| ** **                                    | ** ** | **November 30** | ** ** | **August 31,** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|---------------------|------------|
| ** **                                    | ** ** | **2004**             | ** ** | **2003**            | ** ** | **2004*** | ** ** |
| **Current Assets:**                           | ** ** | ** **           | ** ** | ** **          | ** ** | ** ** | ** ** |
| Cash and Cash Equivalents                     |       | $                    | 758        |                | $          | 846 |   | $ | 184 |   |
| Accounts Receivable:                          |       |                 |       |                |       |   |   |
| Trade                                         |       | 72,877               |       | 65,662              |       | 79,185 |   |
| Members                                       |       | 2,650                |       | 2,582               |       | 5,105 |   |
| Other                                         |       | 3,613                |       | 3,330               |       | 3,605 |   |
| Advances to Related Parties                   |       | 2,823                |       | 8,875               |       | 13,508 |   |
| Inventories                                   |       | 447,631              |       | 530,179             |       | 129,285 |   |
| Prepaid Expenses                              |       | 5,809                |       | 6,133               |       | 4,846 |   |
|                                          |       |                 |       |                |       |   |   |
| Total Current Assets                          |       | 536,161              |       | 617,607             |       | 235,718 |   |
|                                          |       |                 |       |                |       |   |   |
| **Property and Equipment:**                   | ** ** | ** **           | ** ** | ** **          | ** ** | ** ** | ** ** |
| Land                                          |       | 43,209               |       | 39,518              |       | 43,195 |   |
| Buildings                                     |       | 94,582               |       | 90,206              |       | 93,988 |   |
| Equipment                                     |       | 809,951              |       | 795,917             |       | 809,775 |   |
| Construction-in-Progress                      |       | 6,134                |       | 4,646               |       | 3,118 |   |
| Less: Accumulated Depreciation                |       | (632,149             | )          | (596,521            | )          | (619,534 | ) |
|                                          |       |                 |       |                |       |   |   |
| Net Property and Equipment                    |       | 321,727              |       | 333,766             |       | 330,542 |   |
|                                          |       |                 |       |                |       |   |   |
| **Net Property and Equipment Held for Lease** |       | 158,156              |       | 168,136             |       | 160,643 |   |
|                                          |       |                 |       |                |       |   |   |
| **Other Assets:**                             | ** ** | ** **           | ** ** | ** **          | ** ** | ** ** | ** ** |
| Investments in CoBank, ACB                    |       | 18,557               |       | 20,618              |       | 19,069 |   |
| Investments in Marketing Cooperatives         |       | 4,538                |       | 5,186               |       | 4,487 |   |
| Investments in Crystech, LLC                  |       | 15,620               |       | 15,597              |       | 15,353 |   |
| Other Assets                                  |       | 55,704               |       | 47,905              |       | 56,343 |   |
|                                          |       |                 |       |                |       |   |   |
| Total Other Assets                            |       | 94,419               |       | 89,306              |       | 95,252 |   |
|                                          |       |                 |       |                |       |   |   |
| Total Assets                                  |       | $                    | 1,110,463  |                | $          | 1,208,815 |   | $ | 822,155 |   |

 

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

 

*Derived from audited financial statements.

 

1

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**AMERICANCRYSTAL SUGAR COMPANY**

**Consolidated Balance Sheets**

**(Unaudited)**

**(Dollars in Thousands)**

 

**LIABILITIESAND MEMBERS’ INVESTMENTS**

 
| ** **                                                  | ** ** | **November 30** | ** ** | **August 31,** | ** ** |
|-------------------------------------------------------------|------------|----------------------|------------|---------------------|------------|
| ** **                                                  | ** ** | **2004**             | ** ** | **2003**            | ** ** | **2004*** | ** ** |
| **Current Liabilities:**                                    | ** ** | ** **           | ** ** | ** **          | ** ** | ** ** | ** ** |
| Short-Term Debt                                             |       | $                    | 181,246    |                | $          | 247,182 |   | $ | 30,199 |   |
| Current Maturities of Long-Term Debt                        |       | 20,932               |       | 20,917              |       | 20,932 |   |
| Accounts Payable                                            |       | 28,243               |       | 26,216              |       | 27,063 |   |
| Advances Due to Related Parties                             |       | 11,211               |       | 8,354               |       | 7,864 |   |
| Accrued Continuing Costs (see note 6)                       |       | 20,621               |       | 42,131              |       | — |   |
| Other Current Liabilities                                   |       | 23,355               |       | 21,520              |       | 20,500 |   |
| Amounts Due Growers                                         |       | 181,800              |       | 207,851             |       | 70,487 |   |
|                                                        |       |                 |       |                |       |   |   |
| Total Current Liabilities                                   |       | 467,408              |       | 574,171             |       | 177,045 |   |
|                                                        |       |                 |       |                |       |   |   |
| **Long-Term Debt, Net of Current Maturities**               |       | 245,872              |       | 272,811             |       | 250,086 |   |
|                                                        |       |                 |       |                |       |   |   |
| **Accrued Employee Benefits**                               |       | 34,999               |       | 32,165              |       | 33,939 |   |
|                                                        |       |                 |       |                |       |   |   |
| **Other Liabilities**                                       |       | 9,919                |       | 11,431              |       | 10,297 |   |
|                                                        |       |                 |       |                |       |   |   |
| Total Liabilities                                           |       | 758,198              |       | 890,578             |       | 471,367 |   |
|                                                        |       |                 |       |                |       |   |   |
| **Minority Interest in ProGold Limited Liability  Company** |       | 48,284               |       | 44,581              |       | 47,362 |   |
|                                                        |       |                 |       |                |       |   |   |
| **Members’ Investments:**                              | ** ** | ** **           | ** ** | ** **          | ** ** | ** ** | ** ** |
| Preferred Stock                                             |       | 38,275               |       | 38,275              |       | 38,275 |   |
| Common Stock                                                |       | 29                   |       | 30                  |       | 29 |   |
| Additional Paid-in Capital                                  |       | 152,261              |       | 150,446             |       | 152,261 |   |
| Unit Retains                                                |       | 138,714              |       | 125,246             |       | 138,714 |   |
| Equity Retention                                            |       | 2,708                |       | 2,718               |       | 2,708 |   |
| Accumulated Other Comprehensive Income/(Loss)               |       | (376                 | )          | (11,900             | )          | (376 | ) |
| Retained Earnings/(Deficit)                                 |       | (27,630              | )          | (31,159             | )          | (28,185 | ) |
|                                                        |       |                 |       |                |       |   |   |
| Total Members’ Investments                             |       | 303,981              |       | 273,656             |       | 303,426 |   |
|                                                        |       |                 |       |                |       |   |   |
| Total Liabilities and Members’ Investments             |       | $                    | 1,110,463  |                | $          | 1,208,815 |   | $ | 822,155 |   |

 

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

 

*Derived from audited financial statements.

 

2

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**AMERICANCRYSTAL SUGAR COMPANY**

**ConsolidatedStatements of Operations**

**(Unaudited)**

**(Dollars in Thousands)**

 
| ** **                                                            | ** ** | **For the Three Months Ended  November 30** | ** ** |
|-----------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                            | ** ** | **2004**                                         | ** ** | **2003** | ** ** |
|                                                                  |       |                                             |       |   |   |
| **Net Revenue**                                                       |       | $                                                | 247,336    |   | $ | 230,204 |   |
| **Cost of Sales**                                                     |       | 58,117                                           |       | (7,014 | ) |
|                                                                  |       |                                             |       |   |   |
| **Gross Proceeds**                                                    |       | 189,219                                          |       | 237,218 |   |
|                                                                  |       |                                             |       |   |   |
| **Selling, General and Administrative Expenses**                      |       | 51,417                                           |       | 42,899 |   |
| **Accrued Continuing Costs (see note 6)**                             |       | 20,621                                           |       | 42,131 |   |
|                                                                  |       |                                             |       |   |   |
| **Operating Proceeds**                                                |       | 117,181                                          |       | 152,188 |   |
|                                                                  |       |                                             |       |   |   |
| **Other Income/(Expense)**                                            | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Interest Income                                                       |       | 132                                              |       | 117 |   |
| Interest Expense                                                      |       | (4,432                                           | )          | (4,910 | ) |
| Other, Net                                                            |       | (111                                             | )          | 96 |   |
| Total Other (Expense)                                                 |       | (4,411                                           | )          | (4,697 | ) |
|                                                                  |       |                                             |       |   |   |
| **Proceeds before Minority Interest and Income Tax  Expense**         |       | 112,770                                          |       | 147,491 |   |
|                                                                  |       |                                             |       |   |   |
| **Minority Interest**                                                 |       | (922                                             | )          | (812 | ) |
|                                                                  |       |                                             |       |   |   |
| **Income Tax Expense**                                                |       | —                                           |       | — |   |
| **Net Proceeds Resulting from Member and  Non-Member Business**       |       | $                                                | 111,848    |   | $ | 146,679 |   |
|                                                                  |       |                                             |       |   |   |
| **Distribution of Net Proceeds:**                                     | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Credited/(Charged) to Members’ Investments:                      |       |                                             |       |   |   |
| Non-Member Business Income                                            |       | $                                                | 555        |   | $ | 1,266 |   |
| Unit Retains Declared to Members                                      |       | —                                           |       | — |   |
| Net Credit to Members’ Investments                               |       | 555                                              |       | 1,266 |   |
| Payments to/due Members for Sugarbeets, Net of Unit  Retains Declared |       | 111,293                                          |       | 145,413 |   |
|                                                                  |       |                                             |       |   |   |
| **Total**                                                             |       | $                                                | 111,848    |   | $ | 146,679 |   |

 

The Accompanying Notes arean Integral Part of These Consolidated Financial Statements.

 

3

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**American Crystal Sugar Company**

**Consolidated Statements of Cash Flows**

**(Unaudited)**

**(Dollars In Thousands)**

 
| ** **                                                            | ** ** | **For the Three Months Ended  November 30** | ** ** |
|-----------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                            | ** ** | **2004**                                         | ** ** | **2003** | ** ** |
| **Cash Provided By/(Used In) Operations:**                            | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Net Proceeds Resulting from Member and Non-Member  Business           |       | $                                                | 111,848    |   | $ | 146,679 |   |
| Payments to/due Members for Sugarbeets, Net of Unit  Retains Declared |       | (111,293                                         | )          | (145,413 | ) |
| Add/(Deduct) Non-Cash Items:                                          |       |                                             |       |   |   |
| Depreciation and Amortization                                         |       | 17,422                                           |       | 17,789 |   |
| (Income) from Equity Method Investees                                 |       | (275                                             | )          | (293 | ) |
| Loss on the Disposition of Property and Equipment                     |       | 599                                              |       | 294 |   |
| Deferred Gain Recognition                                             |       | (49                                              | )          | (49 | ) |
| Minority Interest in ProGold Limited Liability  Company               |       | 922                                              |       | 812 |   |
| Changes in Assets and Liabilities:                                    |       |                                             |       |   |   |
| Receivables                                                           |       | 8,755                                            |       | 205 |   |
| Inventories                                                           |       | (318,346                                         | )          | (399,198 | ) |
| Prepaid Expenses                                                      |       | (963                                             | )          | 929 |   |
| Long-Term Prepaid Pension Expense                                     |       | (362                                             | )          | (5,431 | ) |
| Advances To/Due to Related Parties                                    |       | 14,032                                           |       | 440 |   |
| Accounts Payable                                                      |       | 1,180                                            |       | 2,996 |   |
| Accrued Continuing Costs                                              |       | 20,621                                           |       | 42,131 |   |
| Other Liabilities                                                     |       | 3,536                                            |       | 3,255 |   |
| Amounts Due Growers                                                   |       | 111,313                                          |       | 148,956 |   |
| Net Cash (Used In) Operations                                         |       | (141,060                                         | )          | (185,898 | ) |
|                                                                  |       |                                             |       |   |   |
| **Cash Provided By/(Used In) Investing Activities:**                  | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Purchases of Property and Equipment                                   |       | (5,785                                           | )          | (5,049 | ) |
| Purchases of Property and Equipment Held for Lease                    |       | (277                                             | )          | (256 | ) |
| Proceeds from the Sale of Property and Equipment                      |       | —                                           |       | 21 |   |
| Equity Refund from CoBank, ACB                                        |       | 512                                              |       | 1,067 |   |
| Investments in Marketing Cooperatives                                 |       | —                                           |       | 1,049 |   |
| Acquisition by Crab Creek Sugar Company                               |       | —                                           |       | (5,763 | ) |
| Changes in Other Assets                                               |       | 351                                              |       | (96 | ) |
| Net Cash (Used In) Investing Activities                               |       | (5,199                                           | )          | (9,027 | ) |
|                                                                  |       |                                             |       |   |   |
| **Cash Provided By/(Used In) Financing Activities:**                  | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Net Proceeds from Short-Term Debt                                     |       | 151,047                                          |       | 197,343 |   |
| Long-Term Debt Repayment                                              |       | (4,214                                           | )          | (4,476 | ) |
| Proceeds from Issuance of Stock                                       |       | —                                           |       | 2,209 |   |
| Payment of Unit Retains & Equity Retention                        |       | —                                           |       | (164 | ) |
| Net Cash Provided By Financing Activities                             |       | 146,833                                          |       | 194,912 |   |
| Increase/(Decrease) In Cash and Cash Equivalents                      |       | 574                                              |       | (13 | ) |
| Cash and Cash Equivalents, Beginning of Year                          |       | 184                                              |       | 859 |   |
|                                                                  |       |                                             |       |   |   |
| Cash and Cash Equivalents, End of Period                              |       | $                                                | 758        |   | $ | 846 |   |

 

**Non-Cash Investing and FinancingActivities:**In September 2003, a note payable in theamount of $969,000 was issued in connection with the acquisition by Crab CreekSugar Company.

 

TheAccompanying Notes are an Integral Part of These Consolidated FinancialStatements.

 

4

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# **AMERICAN CRYSTAL SUGARCOMPANY**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED**

**NOVEMBER 30, 2004 AND 2003**

**(Unaudited)**

 

**Note 1: Basis of Presentation**

 

The unaudited consolidated financial statements ofAmerican Crystal Sugar Company (the Company) contained herein have beenprepared pursuant to the rules and regulations of the Securities and ExchangeCommission.  Accordingly, they do notinclude all the information and footnotes required by accounting principlesgenerally accepted in the United States of America.  However, in the opinion of management, alladjustments, consisting of normal recurring accruals, considered necessary fora fair presentation have been included.

 

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

 

CrabCreek was formed in fiscal 2003 under the laws of the State of Minnesota, andon September 8, 2003, acquired the control of a sugarbeet processingfacility and the related marketing allocations associated with such facility.

 

All material inter-company transactions have been eliminated.

 

The operating results for the three month period endedNovember 30, 2004 are not necessarily indicative of the results that maybe expected for the year ended August 31, 2005.

 

The amount paid to shareholders for sugarbeets (memberbeet payment) depends on the future selling prices of sugar and agri-productsas well as processing and other costs incurred during the remainder of thefiscal year associated with the 2004 Red River Valley sugarbeet crop (RRVcrop).  The amount paid to non-membergrowers for sugarbeets (non-member beet payment) depends on the future sellingprices of sugar and the related selling expenses associated with the 2004Sidney sugarbeet crop (Sidney crop).  Forthe purposes of this report, the amount of the beet payments, future revenuesand costs have been estimated.  Therefore,adjustments with respect to these estimates may be necessary in the future, asadditional information becomes available.

 

These financial statements should be read in conjunctionwith the consolidated financial statements and notes included in the Company’s AnnualReport on Form 10-K for the year ended August 31, 2004.

 

Certain reclassifications have been made to the November 30,2003 and the August 31, 2004 consolidated financial statements to conformwith the November 30, 2004 presentation.  These reclassifications had no effect onpreviously reported results of operations or Members’ Investments.

 

**Note 2:  Recently Issued Accounting Pronouncements**

 

TheFinancial Accounting Standards Board (FASB) has issued FASB Staff Position(FSP) FAS-106-2, which provides accounting guidance related to the MedicarePrescription Drug, Improvement, and Modernization Act of 2003.  This FSP became effective for the Company on September 1,2004.  The Company has a post-retirementplan for certain non-union employees that currently coordinates with Medicare’smedical coverage and provides tiered prescription drug coverage.  The Company has initially determined that theplan is not actuarially equivalent to Medicare Part D and therefore expectsthat the application of this FSP will have no material effect on the amountsrecorded for post-retirement benefits.

 

5

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**Note 3: Inventories**

 

The major components of inventories are as follows (InThousands):

 
| ** **                                                             | ** ** | **11/30/04** | ** ** | **11/30/03** | ** ** | **8/31/04** | ** ** |
|------------------------------------------------------------------------|------------|--------------|------------|--------------|------------|-------------|------------|
| Refined Sugar, Pulp, Molasses, Other Agri-Products  and Sugarbeet Seed |       | $            | 151,576    |         | $          | 214,986     |       | $ | 107,812 |   |
| Unprocessed Sugarbeets                                                 |       | 274,500      |       | 296,611      |       | —      |       |
| Maintenance Parts & Supplies                                       |       | 21,555       |       | 18,582       |       | 21,473      |       |
|                                                                   |       |         |       |         |       |        |       |
| Total Inventories                                                      |       | $            | 447,631    |         | $          | 530,179     |       | $ | 129,285 |   |

 

Sugar, pulp, molasses andother agri-products inventories are valued at estimated net realizablevalue.  Unprocessed sugarbeets are valuedat the estimated gross beet payment.  Maintenanceparts & supplies and sugarbeet seed inventories are valued at the lower ofaverage cost or market.

 

# **Note4:  Short-Term Debt**

 

The Company has a seasonal line of credit with a consortium of lendersled by CoBank, ACB of $265 million and a line of credit with Wells FargoBank for $1 million.  The Company’scommercial paper program provides short-term borrowings of up to $225million.  Any borrowings under the commercial paper program along withoutstanding short-term letters of credit will act to reduce the availablecredit under the CoBank, ACB seasonal line of credit by a commensurateamount.  The Company also utilizes theCommodity Credit Corporation (CCC) to meet its short-term borrowing needs.

 

As of November 30,2004, the Company had outstanding commercial paper of $181.2****million at an average interest rate of 2.6% and maturitydates between December 1, 2004 and May 31, 2005.  The Company had no outstanding short-termdebt with CoBank, ACB or the CCC as of November 30, 2004. The Company had$6.0 million of short-term letters of credit outstanding as of November 30,2004.

 

As of November 30,2003, the Company had outstanding commercial paper of $197.3****million at an average interest rate of 1.26% and maturitydates between December 1, 2003 and May 20, 2004.  The Company also had $40.0 million ofoutstanding short-term debt with CoBank, ACB at an average interest rate of2.12% with a maturity date of December 5, 2003.  In addition, the Company had an outstandingnon-recourse loan with the CCC of $10.0 million, against which 438,000hundredweight of sugar was pledged as collateral.  The CCC loan carried an interest rate of2.25% and a maturity date of August 31, 2004.

 

**Note 5:  Interest Paid**

 

Interest paid, netof amounts capitalized, was $3.4 million in each of the three months ended November 30,2004 and 2003.

 

**Note 6:  AccruedContinuing 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 of SidneySugars 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 in theConsolidated Financial Statements as a cost on the Consolidated Statements ofOperations and as a current liability on the Consolidated Balance Sheets.

 

6

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**Note 7: ****Net Periodic Pension andPost-Retirement Costs**

# ** **

Thefollowing schedules provide the components of the Net Periodic Pension andPost-Retirement Costs for the Three Months ended November 30, 2004 and 2003:

 

***Components of NetPeriodic Pension Cost***

(In Thousands)

 
| ** **                            | ** ** | **For the Three Months Ended** | ** ** |
|---------------------------------------|------------|--------------------------------|------------|
| ** **                            | ** ** | **November 30,**          | ** ** |
| ** **                            | ** ** | **2004**                       | ** ** | **2003** | ** ** |
| Service Cost                          |       | $                              | 817        |   | $ | 693 |   |
| Interest Cost                         |       | 1,771                          |       | 1,504 |   |
| Expected Return on Plan Assets        |       | (2,016                         | )          | (1,490 | ) |
| Multiple Employer Adjustment          |       | (40                            | )          | (86 | ) |
| Amortization of Net Transition Assets |       | (5                             | )          | (31 | ) |
| Amortization of Prior Service Costs   |       | 256                            |       | 136 |   |
| Amortization of Net (Gain) Loss       |       | 333                            |       | 500 |   |
| Net Periodic Pension Cost             |       | $                              | 1,116      |   | $ | 1,226 |   |

 

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

(In Thousands)

 
| ** **                        | ** ** | **For the Three Months Ended** | ** ** |
|-----------------------------------|------------|--------------------------------|------------|
| ** **                        | ** ** | **November 30,**          | ** ** |
| ** **                        | ** ** | **2004**                       | ** ** | **2003** | ** ** |
| Service Cost                      |       | $                              | 275        |   | $ | 280 |   |
| Interest Cost                     |       | 543                            |       | 441 |   |
| Amortization of Net (Gain) Loss   |       | 72                             |       | 114 |   |
| Net Periodic Post-Retirement Cost |       | $                              | 890        |   | $ | 835 |   |

 

For the three months ended November 30, 2004, theCompany had made contributions of approximately $1.3 million related topensions.  An additional $4.7 million isexpected to be contributed prior to the end of the current fiscal year.  The Company has made payments forPost-Retirement benefits of approximately $ .4 million for the three monthsended November 30, 2004, and expects total payments for the current fiscalyear to be approximately $1.6 million.

 

**Note 8: Members’ Investments**

 
| ** **             | ** ** | **Par Value** | ** ** | **Shares  Authorized** | ** ** | **Shares Issued  & Outstanding** | ** ** |
|------------------------|------------|---------------|------------|------------------------|------------|--------------------------------------|------------|
| Preferred Stock:       |       |          |       |                   |       |                                 |       |
| January 6, 2005   |       | $             | 76.77      |                   | 600,000    |                                 | 498,570    |   |
| November 30, 2004 |       | $             | 76.77      |                   | 600,000    |                                 | 498,570    |   |
| August 31, 2004   |       | $             | 76.77      |                   | 600,000    |                                 | 498,570    |   |
| November 30, 2003 |       | $             | 76.77      |                   | 600,000    |                                 | 498,570    |   |
|                   |       |          |       |                   |       |                                 |       |
| Common Stock:          |       |          |       |                   |       |                                 |       |
| January 6, 2005   |       | $             | 10.00      |                   | 4,000      |                                 | 2,877      |   |
| November 30, 2004 |       | $             | 10.00      |                   | 4,000      |                                 | 2,873      |   |
| August 31, 2004   |       | $             | 10.00      |                   | 4,000      |                                 | 2,873      |   |
| November 30, 2003 |       | $             | 10.00      |                   | 4,000      |                                 | 2,995      |   |

 

7

----

 

**Note 9: Shipping and HandlingCosts**

 

The costs incurred for the shipping and handling of products sold areclassified in the financial statements as a selling expense on the Statementsof Operations. Shipping and handling costs were $31.7 million and $26.9 millionfor the three months ended November 30, 2004 and 2003, respectively.

 

**Note 10: Crab Creek Sugar Company**

 

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.  Inaddition, Crab Creek entered into various contracts with Central Leasing suchthat Crab Creek controls the long-term production of sugar at the Moses Lake,Washington, facility.  In connection withthis acquisition, the USDA transferred to the Company the sugar marketingallocations formerly allocated to PNSC. Neither Crab Creek nor the Company intends to operate the Moses Lake,Washington, facility.

 

**Note 11: Segment Reporting**

 

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

 

Summarizedfinancial information concerning the Company’s reportable segments for threemonths ended November 30, 2004 and 2003 is shown below:

 

8

----

 
| ** **                          | ** ** | **For the Three Months Ended November 30,  2004** | ** ** |
|-------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                          | ** ** | **(Dollars In Thousands)**                             | ** ** |
| ** **                          | ** ** | **Sugar**                                              | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Net Revenue from External Customers |       | $                                                      | 240,879    |   | $ | 6,457 |   | $ | 247,336 |   |
| Gross Proceeds                      |       | $                                                      | 185,762    |   | $ | 3,457 |   | $ | 189,219 |   |
| Depreciation and Amortization       |       | $                                                      | 14,658     |   | $ | 2,764 |   | $ | 17,422 |   |
| Interest Income                     |       | $                                                      | 129        |   | $ | 3 |   | $ | 132 |   |
| Interest Expense                    |       | $                                                      | 2,879      |   | $ | 1,553 |   | $ | 4,432 |   |
| Income from Equity Method Investees |       | $                                                      | 275        |   | $ | — |   | $ | 275 |   |
| Other Income/(Expense), Net         |       | $                                                      | (111       | ) | $ | — |   | $ | (111 | ) |
| Net Proceeds                        |       | $                                                      | 110,889    |   | $ | 959 |   | $ | 111,848 |   |
|                                |       |                                                   |       |   |   |   |   |
| Capital Expenditures                |       | $                                                      | 5,785      |   | $ | 277 |   | $ | 6,062 |   |

 
| ** **                          | ** ** | **For the Three Months Ended November 30,  2003** | ** ** |
|-------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                          | ** ** | **(Dollars In Thousands)**                             | ** ** |
| ** **                          | ** ** | **Sugar**                                              | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Net Revenue from External Customers |       | $                                                      | 223,769    |   | $ | 6,435 |   | $ | 230,204 |   |
| Gross Proceeds                      |       | $                                                      | 233,771    |   | $ | 3,447 |   | $ | 237,218 |   |
| Depreciation and Amortization       |       | $                                                      | 15,038     |   | $ | 2,751 |   | $ | 17,789 |   |
| Interest Income                     |       | $                                                      | 115        |   | $ | 2 |   | $ | 117 |   |
| Interest Expense                    |       | $                                                      | 3,167      |   | $ | 1,743 |   | $ | 4,910 |   |
| Income from Equity Method Investees |       | $                                                      | 293        |   | $ | — |   | $ | 293 |   |
| Other Income/(Expense), Net         |       | $                                                      | 121        |   | $ | (25 | ) | $ | 96 |   |
| Net Proceeds                        |       | $                                                      | 145,834    |   | $ | 845 |   | $ | 146,679 |   |
|                                |       |                                                   |       |   |   |   |   |
| Capital Expenditures                |       | $                                                      | 5,049      |   | $ | 256 |   | $ | 5,305 |   |

 
| ** **                  | ** ** | **As of November 30, 2004** | ** ** |
|-----------------------------|------------|----------------------------------|------------|
| ** **                  | ** ** | **(Dollars In Thousands)**       | ** ** |
| ** **                  | ** ** | **Sugar**                        | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Property and Equipment, Net |       | $                                | 321,725    |   | $ | 2 |   | $ | 321,727 |   |
| Assets Held for Lease, Net  |       | $                                | —     |   | $ | 158,156 |   | $ | 158,156 |   |
| Segment Assets              |       | $                                | 940,284    |   | $ | 170,179 |   | $ | 1,110,463 |   |

 
| ** **                  | ** ** | **As of November 30, 2003** | ** ** |
|-----------------------------|------------|----------------------------------|------------|
| ** **                  | ** ** | **(Dollars In Thousands)**       | ** ** |
| ** **                  | ** ** | **Sugar**                        | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Property and Equipment, Net |       | $                                | 333,762    |   | $ | 4 |   | $ | 333,766 |   |
| Assets Held for Lease, Net  |       | $                                | —     |   | $ | 168,136 |   | $ | 168,136 |   |
| Segment Assets              |       | $                                | 1,028,783  |   | $ | 180,032 |   | $ | 1,208,815 |   |

 

9

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**Item 2.   Management’s Discussion and Analysis ofResults of Operations and Financial Condition for the Three Months Ended November 30,2004 and 2003**

 

This reportcontains forward-looking statements that involve risks and uncertainties.  Such forward-looking statements include,among others, those statements including the words “expect”, “anticipate”, “believe”,“may” and similar expressions.  The Company’sactual 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 the Company’s2004 Form 10-K.

 

**Comparisonof the Three Months Ended November 30, 2004 and 2003**

 

Revenue for the three months ended November 30, 2004, was $247.3million, an increase of $17.1 million from the same period last year.  Revenue from total sugar sales increased 8.6percent due to a 10.0 percent increase in the hundredweight sold partiallyoffset by a 1.3 percent decrease in the average selling price perhundredweight.  Revenue from pulp sales decreased5.6 percent due to an 8.3 percent decrease in the volume of pulp tons soldpartially offset by a 3.0 percent increase in the average selling price perton.  Revenue from molasses sales decreased34.6 percent due to a 34.1 percent decrease in the volume of molasses sold and a0.8 percent decrease in the average selling price per ton.  Revenue from sales of CSB increased 29.7percent due to a 48.6 percent increase in the volume of CSB sold partiallyoffset by a 12.7 percent decrease in the average selling price per ton.  Rental revenue on the ProGold operating leasewas $6.5 million and $6.4 million for the three months ended November 30,2004 and 2003, respectively.

 

Cost of sales for the three months ended November 30, 2004,exclusive of payments to members for sugarbeets, increased $65.1 million ascompared to the same period last year.  Thechange in product inventories impacted the cost of sales unfavorably by $60.6million primarily due to lower sugar inventories resulting from a latercampaign start-up this year.  The costsassociated with sugar purchased to meet customer needs increased by $11.6million also due to the later campaign start-up this year.  The cost recognized associated with thenon-member sugarbeets (Sidney crop) decreased 20.3 percent for the three monthsended November 30, 2004 when compared to the same period last year.  This decrease was due to a combination of alater campaign start-up and a lower projected grower payment resulting from alower quality crop and lower projected sugar net selling prices.  Direct processing costs for sugar and pulp decreased3.2 percent.  This was due to harvesting6.9 percent fewer sugarbeets and processing 18.7 percent less sugarbeets thanlast year.  The decrease in sugarbeetsprocessed was due to the later campaign start-up this year.  The reduction in direct processing costs was partiallyoffset by higher prices for natural gas and major supplies.  Fixed and committed expenses increased 4.7percent reflecting general cost increases.

 

Selling, general and administrative expenses for the three months endedNovember 30, 2004 increased $8.5 million as compared to the same periodlast year.  Selling expenses increased $6.9million primarily due to the increase in the volume of sugar sold along withhigher freight and packaging costs. General and Administrative costs increased $1.6 million due in part to increasedfunding for sugar industry and association activities.

 

Interest expense decreased $ .5 million for the three months ended November 30,2004, as compared to the same period last year.  This was the result of decreased averageborrowings levels for short-term and long-term debt, partially offset by highershort-term interest rates.

 

Non-member business activities resulted in a gain of $ .6 million forthe three months ended November 30, 2004, as compared to a gain of $1.3million for the same period last year. The gain in both periods was due primarily to activities related toSidney Sugars partially offset by the activities related to ProGold.  The Company expects lower earnings from theoperations of Sidney Sugars this fiscal year due to the lower quality of thecurrent year sugarbeet crop and reduced selling prices for sugar.

 

10

----

 

**Regional and Bilateral Free Trade Agreements**

 

The United States government is pursuing anaggressive agenda on international trade. It is seeking to negotiate new free trade agreements with a number ofcountries and regions that are major producers of sugar.  The Company believes these agreements, ifthey reach fruition, could negatively impact the Company’s profitability.  The primary agreements under consideration,to the Company’s knowledge, are the Free Trade Area of the Americas; theCentral American Free Trade Agreement; the Andean Free Trade Agreement; theThailand Free Trade Agreement; the U.S.-Panama Free Trade Agreement; and theSouth African Customs Union Free Trade Agreement.  Many of the countries included in theseagreements are major sugar producers and exporters.  If increases in guaranteed access orreductions in sugar tariffs are included in these agreements, excess sugar fromthese regions could enter the U.S. market and put pressure on domestic sugarprices.  The U.S. sugar industry and theCompany, as an influential member of such industry, recognize the potentialnegative impact that would result if these agreements are entered into by theUnited States and are taking steps to attempt to manage the situation.  The Company and the sugar industry intend tocontinue to focus significant attention on trade issues in the future.

 

Theimpact of the various trade agreements on the Company 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.

 

**Energy Prices**

 

The prices paid bythe Company for energy related products, such as natural gas and coke, have recentlyincreased significantly due to supply and demand imbalances.  The Company uses substantial amounts of theseproducts in its manufacturing process. The Company believes that the prices for energy related products willremain high and will very likely increase.  These higher prices may materially increasethe cost of production of the Company thus impact the financial results of theCompany.

 

**Liquidity and Capital Resources**

 

Underthe Company’s Bylaws and Member Grower Contracts, payments for member deliveredsugarbeets, the principal raw material used in producing the sugar andagri-products it sells, are subordinated to all member business expenses.  In addition, the beet payments made to membergrowers and non-member growers are paid in three payments over the course of ayear, and the member payments are made net of any anticipated unit retain forthe crop.  These procedures have theeffect of providing the Company with an additional source of short-termfinancing.  This member financingarrangement may result in an additional source of liquidity and reduced needfor outside financing in comparison to a similar business operated on anon-cooperative basis.

 

Because sugar issold throughout 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****$238.9 million,of which $154.8 million in loans and $41.2 million in long-term letters ofcredit were outstanding as of November 30, 2004.  In addition, the Company had long-term debtoutstanding, as of November 30, 2004, of $50 million from a privateplacement of Senior Notes that occurred in September of 1998; $15.0 millionfrom a private placement of Senior Notes that occurred in January of 2003;$43.0 million from nine separate issuances of Pollution Control andIndustrial Development Revenue Bonds, and a term loan with Bank of North Dakotaof $4.0 million.  The Company also has aseasonal line of credit with a

 

11

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consortium of lenders ledby CoBank, ACB of $265 million and a line of credit with Wells Fargo Bankfor $1.0 million, of which there were no outstanding balances as of November 30,2004.  The Company’s commercial paperprogram provides short-term borrowings of up to $225 million of whichapproximately $181.2 million was outstanding as of November 30, 2004.  The Company had $6.0 million of short-termletters of credit outstanding as of November 30, 2004.  Any borrowings under the commercial paperprogram along with outstanding short-term letters of credit will act to reduce the available creditunder the CoBank, ACB seasonal line of credit by a commensurate amount.  The Company had no outstanding loans with theCCC, as of November 30, 2004.

 

The Company hadoutstanding commitments totaling $2.7 million as of November 30, 2004 for equipment and constructioncontracts related to various capital and maintenance projects.

 

Thechanges that have occurred in the Company’s financial statements from August 31,2004 to November 30,2004 were primarily due to normal business seasonality.  The first three months of the Company’sfiscal year includes: the completion of the sugarbeet harvest; start of theprocessing campaign; the final payments to growers for sugarbeets deliveredfrom the previous year’s crop; and the initial payments to growers forsugarbeets delivered from the current year’s crop.

 

The netcash used in operations was $141.1 million for the three months ended November 30,2004 as compared to $185.9 million for the same period last year.  The decrease of $44.8 million was primarilydue to lower inventories of $80.9 million resulting from the later campaign start-upthis year. This was partially offset by a decrease in the amount due growers of$37.6 million which was caused by smaller crops and lower projected growerpayments this year.

 

Thenet cash used in investing activities was $5.2 million for the three monthsended November 30, 2004 as compared to $9.0 million for the same periodlast year.  The decrease of $3.8 million wasprimarily related to the acquisition in September 2003 by Crab Creek SugarCompany in the amount of $5.8 million. Capital expenditures for the threemonths ended November 30, 2004 were $6.1 million as compared to $5.3 million for thesame period in 2003.

 

Thenet cash provided by financing activities was $146.8 million for the threemonths ended November 30, 2004 as compared to $194.9 million for the sameperiod last year.  This decrease of $48.1million was primarily due to lower net proceeds from short-term debt of $46.3million. The requirement for short-term debt was lower this year due to thedelayed campaign start-up and the lower grower payments for the current year’scrop.

 

Workingcapital increased $10.1 million from $58.7 million at the beginning of the yearto $68.8 million as of November 30, 2004 primarily due to increasedinventories partially offset by increased short-term debt and amounts duegrowers, most of which are primarily due to normal business seasonality.  Working capital as of November 30, 2004 increased$25.4 million when compared to $43.4 million of working capital as of November 30,2003.  The higher level of workingcapital as of November 30, 2004 was primarily due to less short-term debt,amounts due growers and accrued continuing costs partially offset by lower inventories.These changes were primarily due to the smaller crop and the delayed campaignstart-up this year and the resulting lower sugar production and forecasted growerbeet payments.

 

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

 

12

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**Item 3.  Quantitative and Qualitative Disclosuresabout Market Risk**

 

Market risk is the riskof loss to future earnings, to fair values or to future cash flows that mayresult from changes in the price of a financial instrument.  The value of a financial instrument maychange as a result of changes in the interest rates, exchange rates, commodityprices, equity prices and other market changes. Market risk is attributed to all market-risk sensitive financialinstruments, including long term debt.

 

The Company does notbelieve that there is any material market risk exposure with respect tointerest rates, exchange rates, commodity prices, equity prices and othermarket changes that would require disclosure under this item.

** **

**Item 4.  Controls and Procedures**

 

The Company’s chief executive officer and chieffinancial officer have reviewed and evaluated the effectiveness of the Company’sdisclosure controls and procedures (as defined in Rules 240.13a-15e and 15d-15epromulgated under the Securities Exchange Act of 1934) as of November 30,2004.  Based on that review andevaluation, which included inquiries made to certain other employees of theCompany, the chief executive officer and chief financial officer have concludedthat the Company’s current disclosure controls and procedures, as designed andimplemented, are effective in ensuring that they are provided with materialinformation relating to the Company required to be disclosed in the reports theCompany files or submits under the Securities Exchange Act of 1934.

 

There have been no significant changes in theCompany’s internal controls over financial reporting 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 timeto time and in the ordinary course of its business, the Company is named as adefendant in legal proceedings related to various issues, including worker’scompensation claims, tort claims and contractual disputes.  The Company is currently involved in certainlegal proceedings, which have arisen in the ordinary course of the Company’sbusiness.  The Company is also aware ofcertain other potential claims, which could result in the commencement of legalproceedings.  The Company carriesinsurance, which provides protection against certain types of claims.  With respect to current litigation andpotential claims of which the Company is aware, the Company’s managementbelieves that (i) the Company has insurance protection to cover all or aportion of any judgments which may be rendered against the Company with respectto certain claims or actions and (ii) any judgments which may be enteredagainst the Company and which may exceed such insurance coverage or which mayarise in actions involving potential liabilities not covered by insurancepolicies are not likely to have a material adverse effect upon the Company, orits assets or operations.

 

As of the date of this report, four administrativeproceedings have been brought against the United States Department ofAgriculture (USDA) seeking reversal of prior decisions regarding thedetermination and transfer of sugar marketing allocations made by the USDA oran agency under the USDA.  Theseproceedings are in various stages of the applicable administrative process.  While the Company is not a party to any ofthese administrative proceedings, it is, solely or in coordination with othersugar processors, an intervenor in these administrative proceedings.  The Company does not anticipate that thedecisions in these proceedings will result in the USDA reversing its currentdecisions

 

13

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onsugar marketing allocations and its past transfers of such sugar marketingallocations.  The outcome of anycontested matter, however, is never certain and the eventual decision mayresult in a change in the current sugar marketing allocations.  In the event these proceedings are decided ina manner that reduces the Company’s sugar allocations, the amount of sugar theCompany can produce and market may be adversely impacted.

 

**Item 2.  Changes in Securities and Use of Proceeds.**

 

None

 

**Item 3.  Default Upon Senior Securities**

 

None

### ** **

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

 

TheCompany held meetings in November 2004 with its shareholders from the fivegeographical districts where the Company’s factories are located.

 

At theCrookston Factory District Meeting held on November 8, 2004, Jim A. Ross wasre-elected as a Director, receiving 50 of the 50 votes cast.  His three-year term expires in December 2007.  Lonn M. Kiel and Ronald E. Reitmeier willcontinue as Directors for the Crookston Factory District.

 

At theEast Grand Forks Factory District Meeting held on November 8, 2004, CurtisHaugen was re-elected as a Director, receiving 73 of the 74 votes cast.  His three-year term expires in December 2007.  John Gudajtes and G. Terry Stadstad willcontinue as Directors for the East Grand Forks Factory District.

 

At the Drayton Factory District Meeting heldon November 9, 2004, William Baldwin was elected as a Director, receiving 147of the 195 votes cast.  His three-yearterm expires in December 2007.

Mr. Baldwin has been farming in the Drayton FactoryDistrict since 1966 and is the President of Baldwin Farms Incorporated.  Mr. Baldwin is the past President of the RedRiver Valley Sugarbeet Growers Association, served on the American SugarbeetGrowers Executive Committee and is currently serving on the Farm ServiceAgency, State Committee.  Mr. Baldwinreplaces Robert Vivatson who was unable to stand for re-election due to theprovisions of the Company By-Laws which prohibit a person from serving morethan four consecutive terms as a Director. Patrick D. Mahar and Neil Widner will continue as Directors for theDrayton Factory District.

 

At theHillsboro Factory District Meeting held on November 10, 2004, Jeff McInneswas re-elected as a Director, receiving 45 of the 45 votes cast with one abstention.  His three-year term expires in December 2007.  Jerry D. Bitker and Francis L. Kritzberger willcontinue as Directors for the Hillsboro Factory District.

 

At theMoorhead Factory District Meeting held on November 10, 2004, David J.Kragnes was re-elected as a Director, receiving 46 of the 46 votes cast.  His three-year term expires in December 2007.  Michael A. Astrup and Richard Borgen willcontinue as Directors for the Moorhead Factory District.

 

**Item 5. Other Information.**

 

None.

 

14

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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         |       | Form of  Operating Agreement between Registrant and ProGold Limited Liability Company                                   |       | Incorporated by  reference to Exhibit 10(u) from the Company’s Registration Statement on Form  S-1 (File No. 33-83868), declared effective November 23, 1994.  |
|         |       |                                                                                                                    |       |                                                                                                                                                                     |
| 10.2         |       | 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.  |
|         |       |                                                                                                                    |       |                                                                                                                                                                     |
| +10.3        |       | 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. |
|         |       |                                                                                                                    |       |                                                                                                                                                                     |
| +10.4        |       | 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. |
|         |       |                                                                                                                    |       |                                                                                                                                                                     |
| 10.5         |       | 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.                                |
|         |       |                                                                                                                    |       |                                                                                                                                                                     |
| 10.6         |       | 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.                                |

 

15

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| 10.7   |   | 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. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.8   |   | 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. |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| +10.9  |   | 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. |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.10  |   | 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   |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.11  |   | 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   |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.12  |   | 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   |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.13  |   | 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  |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.14  |   | 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                         |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.15  |   | 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   |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.16  |   | 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   |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.17  |   | 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               |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.18  |   | 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               |
|   |   |                                                                                                                           |   |                                                                                                                                      |
| 10.19  |   | 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               |

 

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| 10.20  |   | 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             |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                        |   |                                                                                                                                    |
| +10.21 |   | 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                       |
|   |   |                                                                                                                                        |   |                                                                                                                                    |
| 10.22  |   | 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 |
|   |   |                                                                                                                                        |   |                                                                                                                                    |
| 10.23  |   | 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 |
|   |   |                                                                                                                                        |   |                                                                                                                                    |
| 10.24  |   | Supplements to  Term and Seasonal Loan Agreements between the Registrant and CoBank, ACB  dated July 20, 2004 and August 13, 2004 |   | Incorporated by  reference to Exhibit 10.25 from the Company’s Annual Report on Form 10-K for  the year ended August 31, 2004 |
|   |   |                                                                                                                                        |   |                                                                                                                                    |
| 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, 2004  |
|   |   |                                                                                                                                        |   |                                                                                                                                    |
| 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 Form 8-K**

 

The Company filed thefollowing Current Reports on Form 8-K during this quarter.

 

(i)    Current Report on Form 8-K, dated October 14,2004, under item 7.01 stating that the Company announced to its shareholders thatthe projected gross beet payment for the 2003 crop is currently estimated at$46.86 per ton of average sugarbeets.

 

The Company also announced that the Board of Directorshad approved a $3.00 per ton unit retain for the 2003 Crop.

 

(2)   Current Report on Form 8-K, dated November 3,2004, under item 7.01 stating that the Company announced to its shareholdersthat the projected gross beet payment for the 2004 crop is currently estimatedat $39.00 per ton of average sugarbeets.

 

The Company also announced that the final actualaverage gross beet payment for the 2003 crop was $46.86 per ton.

 

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(3)   Current Report on Form 8-K, dated November 10,2004, under item 7.01 stating that the Company would announce at shareholders’meetings that it is anticipated that the Company shareholders will beauthorized to plant approximately 100% of stock acres in 2005.

 

SIGNATURES

 

 

**Pursuant to the requirement ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned thereunto duly authorized.**

 

 
|       | **AMERICAN CRYSTAL SUGAR COMPANY** |       |
|------------|------------------------------------|------------|
| ** ** | **(Registrant)**                   | ** ** |
|       |                               |
|       |                               |
| **Date:**  | **January 14,  2005**         | ** ** | **/s/  Mark Kalvoda** |   |
| ** ** | **Mark  Kalvoda**                  |       |
| ** ** | **Corporate  Controller,**         |       |
| ** ** | **Chief  Accounting Officer**      |       |
| ** ** | **Duly Authorized Officer**        |       |
|            |                                    |            |  |  |  |  |

 

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