**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

 

**FORM 10-K**

 

**ý             Annual Report Pursuant to Section13 or 15(d) of the Securities Exchange Act of1934     **

** **

**Forthe fiscal year ended**

**August31, 2001**

** **

**or**

 

**o             Transition Report Pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934**

 

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**Commission File**

**Nos.****33-83868; 333-11693 and 333-32251**

 

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**AMERICAN CRYSTAL SUGAR COMPANY**

*(Exact name of registrant as specified in itscharter)*

 

| **Minnesota**                                   |   | **84-0004720**                            |
|-------------------------------------------------|--------|-------------------------------------------|
| *(State of incorporation)*                      |   | *(I.R.S. Employer Identification Number)* |
| **101 North Third  Street  Moorhead, MN 56560** |   | **(218) 236-4400**                        |
| *(Address of principal executive offices)*      |   | *(Registrant’s telephone number)*    |

 

Securitiesregistered pursuant to Section 12(b) of the Act:

NONE

Securities registeredpursuant to Section 12(g) of the Act:

NONE

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Indicate by check mark whether the Registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes  ý   No o

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Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to this Form 10-K. ý

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As of November 16, 2001, 3,133 shares of the Registrant’s CommonStock and 498,570 shares of the Registrant’s Preferred Stock wereoutstanding.  There is no establishedpublic market for the Registrant’s Common Stock or Preferred Stock.  Although there is a limited, private marketfor shares of the Registrant’s stock, the Registrant does not obtaininformation regarding the transfer price in transactions between its membersand therefore is unable to estimate the aggregate market value of theRegistrant’s shares held by non-affiliates.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

NONE

 

# **PART I**

*This report contains forward-lookingstatements and information based upon assumptions by the American Crystal SugarCompany’s management, including assumptions about risks and uncertainties facedby the Company.  These forward-lookingstatements can be identified by the use of forward-looking terminology such as“expects”, “believes”, “will” or similar verbs or expressions.  If any of management’s assumptions proveincorrect or should unanticipated circumstances arise, the Company’s actualresults could materially differ from those anticipated by such forward-lookingstatements.  The differences could becaused by a number of factors or combination of factors, including, but notlimited to, those factors influencing the Company and its business which aredescribed in this report in the “Important Factors” section below.  Readers are urged to consider these factorswhen evaluating any forward-looking statement. The Company undertakes no obligation to update any forward-lookingstatements in this report to reflect future events or developments.*

**Item 1.             BUSINESS**

**GENERAL**

The Company isa Minnesota agricultural cooperative corporation owned by approximately 3,100sugarbeet growers in the Minnesota and North Dakota portions of the Red RiverValley.  The Red River Valley is thelargest sugarbeet growing area in the United States, forming a bandapproximately 35 miles wide on either side of the North Dakota and Minnesotaborder and extending approximately 200 miles south from the border of theUnited States and Canada.  The Companywas organized in 1973 by sugarbeet growers to acquire the business and assetsof the American Crystal Sugar Company, then a publicly held New Jerseycorporation in operation since 1899. The Company currently processes sugarbeets from a base level ofapproximately 500,000 acres, subject to tolerances for overplanting andunderplanting established by the Board of Directors each year.  By owning and operating five sugarbeetprocessing facilities in the Red River Valley, the Company provides itsshareholders with the ability to process their sugarbeets into sugar andagri-products such as molasses, sugarbeet pulp and concentrated separatedby-product (“CSB”), a by-product of the molasses desugarization process.

The Company’s sugar marketing agent, UnitedSugars Corporation, is a cooperative owned by the Company, Southern MinnesotaBeet Sugar Cooperative, Minn-Dak Farmers Cooperative and United States SugarCorporation.  The Company’s agri-productsare marketed through a marketing agent, Midwest Agri-Commodities Company.  Midwest Agri-Commodities Company is acooperative whose members are the Company, Minn-Dak Farmers Cooperative andSouthern Minnesota Beet Sugar Cooperative.

The Company is also one of three members ofProGold Limited Liability Company, a joint venture which owns a cornwet-milling plant in Wahpeton, North Dakota that is currently being leased toCargill, Incorporated. The Company and Newcourt Capital USA own Crystech, LLC thatoperates the molasses desugarization facility adjacent to the Company’sprocessing facility in Hillsboro, North Dakota.

The Company’scorporate headquarters are located at 101 North Third Street, Moorhead,Minnesota 56560, telephone number (218) 236-4400.  Its fiscal year ends August 31.

**Products and Production**

The Company is engaged primarily in theproduction and marketing of sugar from sugarbeets.  The Company also sells agri-products and sugarbeet seed.  The Company’s total annual sugar and agri-productproduction is influenced by the amount and quality of sugarbeets grown by itsmembers, the processing capacity of the Company’s plants and by its ability tostore harvested sugarbeets.

The Company processes sugarbeets grown by itsmembers in five factories located in the Red River Valley area of Minnesota andNorth Dakota.  The growing area isdivided into five factory districts, each containing one sugarbeet processingplant.  The period during which theCompany’s plants are in operation to process sugarbeets into sugar andagri-products is referred to as the “campaign.”  During the campaign, each of the Company’s factories is operatedtwenty-four hours per day, seven days per week.  The campaign typically begins in September and continues untilthe available supply of sugarbeets has been depleted, which generally occurs inMay of the following year.  Basedon current processing capacity, an average campaign lasts approximately 250days, assuming normal crop yields.

Once thesugarbeets are harvested, members transport their crop by truck to receivingstations designated by the Company.  Thesugarbeets are then stored in factory yards and at outlying piling stationsuntil processed.  Most of the sugarbeetsare stored outside in piles.  Frozensugarbeets may be stored outside for extended periods, but sugarbeets stored inunprotected piles at temperatures above freezing must be processed within ashorter period of time than those sugarbeets stored consistently belowfreezing.  In most years, the cold weatherin North Dakota and Minnesota offers an advantage to the Company as it permitsthe outdoor storage of sugarbeets in below-freezing weather conditions.

In milderclimates or years, unprotected piles of sugarbeets experience cycles offreezing and thawing and are subject to some deterioration.  When subject to such freeze and thaw cycles,sugarbeets on the exterior of piles freeze naturally.  Sugarbeets near the center of the piles, however, may not freezeand thus may be subject to spoilage.  Inorder to avoid spoilage the Company utilizes a process called “split pilestorage” in which sugarbeets from the center of the piles are removed forprocessing first.  Split pile storagepermits more of the stored sugarbeets to freeze naturally.  The Company also utilizes a ventilationtechnique to further reduce spoilage. In this process, fans circulate air through ventilation channelsconstructed within sugarbeet piles in order to pre-cool and then deep freezethe sugarbeets.  Approximately 24percent of an average crop may be stored in ventilated storage sites.  Enclosed cold storage facilities are alsoused to extend the sugarbeet storage period at each of the Company’s factorylocations.  Enclosed cold storage sitespresently have the capacity to cover approximately 8 percent of an averagecrop.

The basicprocess for producing sugar from sugarbeets involves: washing the sugarbeets;slicing the sugarbeets into thin strips called “cossettes”; extracting thesugar from the cossettes in a diffuser; purifying the resulting “raw juice” andboiling it, first in an evaporator to thicken it and then in vacuum pans tocrystallize the sugar; separating the sugar crystals from the molasses in acentrifuge; drying the sugar; storing sugar in bulk form and grading andscreening the crystals for packaging and bulk shipping.

Molasses thatremains after the sugar crystals are initially separated can be furtherprocessed to remove more sugar. Prior to fiscal 2000, the Company processedapproximately one-half of its molasses through its East Grand Forks molassesdesugarization facility to extract additional sugar.  In February, 2000, the Hillsboro, North Dakota desugarizationfacility became operational and, as a result, the Company processes substantiallyall of its molasses to extract additional sugar.

The Company’ssugar is pooled and then marketed through the services of a marketing agentunder contract with the Company.  Thesugar marketing agent, United Sugars Corporation, is a cooperative owned by theCompany, Southern Minnesota Beet Sugar Cooperative, Minn-Dak FarmersCooperative and United States Sugar Corporation.

The sugar production process results in avariety of agri-products.  After theextraction of raw juice from the cossettes, the remaining pulp is dried andprocessed into animal feed.  Theremaining molasses and CSB from the molasses desugarization process aremarketed primarily to yeast manufacturers and for use in animal feed.  The Company’s agri-products are marketedthrough a marketing agent, Midwest Agri-Commodities Company.  Midwest Agri-Commodities Company is acooperative whose members are the Company, Minn-Dak Farmers Cooperative andSouthern Minnesota Beet Sugar Cooperative.

The Company develops and markets sugarbeetseeds with Betaseed, Inc., a Minnesota corporation that is a wholly ownedsubsidiary of KWS Kleinwanzlebener Saatzucht, AG, a German seed company that isone of the three largest seed companies in the world.  Through the Betaseed arrangement, the Company has the right tomarket its branded seed to its own members. Betaseed has the right to market Betaseed branded seed to the Company’smembers and also to market both the Company’s branded seed and its Betaseedbranded seed in all other markets.

The Company isalso one of three members of ProGold Limited Liability Company, a joint venturewhich owns a corn wet-milling plant in Wahpeton, North Dakota that is currentlybeing leased to Cargill, Incorporated. The Company and Newcourt Capital USA own Crystech, LLC that operates themolasses desugarization facility adjacent to the Company’s processing facilityin Hillsboro, North Dakota.

**RecentCrops**

The sugarbeetcrop grown during 2001 that will be processed during fiscal 2002, produced atotal of approximately 17.8 tons of sugarbeets per acre from approximately452,000 acres. The number of acres harvested was reduced by approximately29,000 as a result of member participation in the United States Department ofAgriculture (“USDA”) Payment-In-Kind (“PIK”) program. This production was lessthan the ten-year average of 19.1 tons per acre for the crops grown in theyears 1991 through 2000.  The sugarcontent of the 2001 crop was 18.0 percent, in comparison to a ten-year averagefor the applicable period of 17.35 percent. The Company has begun processing the sugarbeets produced from the 2001crop and expects to produce a total of approximately 24.3 million hundredweightof sugar from the crop.

The sugarbeetcrop grown during 2000 and processed during fiscal 2001, produced a total ofapproximately 21.8 tons of sugarbeets per acre from approximately 442,000acres.  The number of acres harvestedwas reduced by approximately 33,000 as a result of member participation in thePIK program. That production exceeded the ten-year average of 18.3 tons peracre for the crops grown in the years 1990 through 1999.  The sugar content of the 2000 crop was 17.81percent, in comparison to a ten-year average for the applicable period of 17.43percent. The Company produced a total of approximately 29.0 millionhundredweight of sugar from the 2000 sugarbeet crop.

The sugarbeetcrop grown during 1999 and processed during fiscal 2000, produced a total ofapproximately 19.9 tons of sugarbeets per acre from approximately 486,000acres.  That production exceeded theten-year average of 17.8 tons per acre for the crops grown in the years 1989through 1998.  The sugar content of the1999 crop was 17.37 percent, in comparison to a ten-year average for theapplicable period of 17.36 percent. The Company produced a total ofapproximately 26.6 million hundredweight of sugar from the 1999 sugarbeet crop.

For adiscussion of the 2000, 1999 and 1998 crops and results of operations forfiscal years 2001, 2000 and 1999, see “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations”.

**Marketand Competition**

Current United States government statisticsestimate total United States sugar consumption at 195.1 millionhundredweight for the year beginning October 1, 2001 and endingSeptember 30, 2002. For the same period starting October 2000, totalconsumption was 193.4 million hundredweight.  Comparing the two years shows demand growth of approximately 1percent.

The United States refined sugar market hasgrown over the past twenty years, despite the demand lost to the substitutionof high fructose corn syrups for sugar in beverages and certain foodproducts.  Non-nutritive sweeteners suchas aspartame have also been developed to substitute for sugar.  While corn and non-nutritive sweetenersconstitute a large portion of the overall sweetener market, the Companybelieves that the United States market for sugar will continue to grow between1 and 2 percent per year mainly due to population growth.

The United States sugar industry has beensubject to industry consolidation. Today there are less than 10 sugar sellers,withover 70 percent of United States sugar market share concentrated in the topthree sellers, all of which are fully integrated sugarbeet and canesuppliers.  The Company’s sugarproduction and sales represented approximately 15 percent of the total domesticmarket for refined sugar in 2000/2001. Sugar sales by United Sugars Corporation, the Company’s marketing agent,represent approximately 27 percent of the United States sugar market.

The Company’s main competitors in thedomestic market are Imperial Sugar Company (“Imperial”), Tate & LyleNorth America (“Tate & Lyle”), Amalgamated Sugar Company,California & Hawaiian Sugar Company and Florida Crystals Incorporated.   Because sugar is a fungible commodity,competition in the United States industry is primarily based upon price,customer service and reliability as a supplier.

Imperial,the largest marketer of sugar in theUnited States**,** recently reorganized under Chapter 11 of the United StatesBankruptcy Code.  The results of thereorganization for Imperial and on the domestic sugar market remain to bedetermined.  Tate & Lyle hasannounced its intention to exit the United States sugar market. To that end,Tate & Lyle sold its Domino Sugar division during fiscal 2001. Tate &Lyle is also attempting to divest itself of Western Sugar Company (“Western”),its beet sugar processing subsidiary. Tate & Lyle has entered into a purchase agreement with the RockyMountain Sugar Growers Cooperative (“Rocky Mountain”), a newly formed growercooperative, by which Western may be sold to Rocky Mountain.  The closing of the transaction has notoccurred as of the date hereof.

## **Grower Contracts**

The Company purchases all of its sugarbeets from members under contractwith the Company.  All members havefive-year contracts with the Company covering the growing seasons of 1998through 2002.  Each member is obligatedto enter into a new five-year contract for subsequent years.  In addition, each member has an annualcontract with the Company specifying the number of acres the member isobligated to grow during that year. Each share of Preferred Stock held by a member requires that member togrow one acre of sugarbeets for sale to the Company.  The Company’s Board of Directors has the discretion to adjust theacreage, that may be planted for each share of Preferred Stock held by themembers.  However, it is the currentintention of the Board of Directors and management that the relationshipbetween shares of Preferred Stock and acres of sugarbeet production bemaintained at a ratio of 1 to 1 for the foreseeable future, subject totolerances for overplanting and underplanting established by the Board eachyear and potential changes in government programs.

The gross beet payment is the value of recoveredsugar from the sugarbeets a member delivers plus the member’s share ofagri-product revenues, minus the member’s share of member business operatingcosts.  The following allowances, costsand deductions, if applicable, are used to adjust the gross beet payment toarrive at the net beet payment: hauling program allowance and costs, pre-pilequality premium and costs, minimum payment program allowance and costs, tareincentive premium/penalty program and unit retains.  Members are paid a hauling allowance based on the distance theymust transport sugarbeets for delivery to the Company and may also receiveminimum beet payments and an allowance for early delivery of sugarbeets priorto the commencement of the stockpiling of harvested sugarbeets.  The costs of these programs are shared amongmembers on the basis of the net tonnage of sugarbeets delivered by each member.

Under current grower contracts, payments tomembers for sugarbeets must be made in at least three installments: (i) onor about November 15, the Company pays its members an amount equal to 65percent of the Company’s estimate of the grower’s net beet payment;(ii) on or about March 31, the Company pays an amount which combinedwith the November payment equals 89.6 percent of the estimated net beetpayment; (iii) and not more than 15 days after completion and acceptanceof the audit of the Company’s annual financial statements, the Company pays theremainder of the member’s net beet payment. Except for unit retains, the Company must pay to its members for theirsugarbeets all proceeds from the sale of the members’ sugar and agri-productsin excess of related member business operating costs, as described above.

The following tablessummarize the gross beet payment and net beet payment and certain cropstatistics for each of the last 10 completed fiscal years, respectively:
|                               |                                                   | **2001**                |       | **2000** |   | **1999** |   | **1998** |    | **1997** |   | **1996** |   | **1995** |    | **1994** |    | **1993** |   | **1992** |    |
|------------------------------------|--------------------------------------------------------|-------------------------|------------|----------|--------|----------|--------|----------|---------|----------|--------|----------|--------|----------|---------|----------|---------|----------|--------|----------|---------|
|                               |                                                   |                    |       |     |   |     |   |     |    |     |   |     |   |     |    |     |    |     |   |     |    |
|                               | **Distribution of Net Proceeds Totals (In Thousands)** |                    |
|                               |                                                   |                    |       |     |   |     |   |     |    |     |   |     |   |     |    |     |    |     |   |     |    |
| Net Proceeds                       |                                                   | $                       | 389,039    |     | $      | 358,373  |   | $        | 369,681 |     | $      | 313,007  |   | $        | 373,649 |     | $       | 316,244  |   | $        | 326,693 |   | $ | 266,102 |   | $ | 309,255 |   | $ | 274,910 |   |
| PIK Payment                        |                                                   | (28,067                 | )          | 0        |   | 0        |   | 0        |    | 0        |   | 0        |   | 0        |    | 0        |    | 0        |   | 0        |    |
| Non-Member Loss                    |                                                   | 1,884                   |       | 1,879    |   | 494      |   | 9,679    |    | 18,074   |   | 396      |   | 15       |    | 544      |    | 77       |   | 1,075    |    |
| Gross Beet Payment                 |                                                   | $                       | 362,856    |     | $      | 360,252  |   | $        | 370,175 |     | $      | 322,686  |   | 391,723  |    | $        | 316,640 |     | $      | 326,708  |    | $ | 266,646 |   | $ | 309,332 |   | $ | 275,985 |   |
| Unit Retains                       |                                                   | (19,239                 | )          | (19,299  | )      | (21,332  | )      | (8,545   | )       | (16,611  | )      | (16,040  | )      | (16,648  | )       | (19,328  | )       | (20,223  | )      | (10,364  | )       |
| Member Tax ADJ, Net                |                                                   | 0                       |       | 0        |   | 0        |   | 0        |    | 0        |   | 0        |   | 5,621    |    | 12,585   |    | 447      |   | 676      |    |
| Net Beet Payment                   |                                                   | $                       | 343,617    |     | $      | 340,953  |   | $        | 348,843 |     | $      | 314,141  |   | $        | 375,112 |     | $       | 300,600  |   | $        | 315,681 |   | $ | 259,903 |   | $ | 289,556 |   | $ | 266,297 |   |
|                               |                                                   |                    |       |     |   |     |   |     |    |     |   |     |   |     |    |     |    |     |   |     |    |
|                               | **Distribution of Net Proceeds Per Ton Harvested (1)** | ** **              |
|                               |                                                   |                    |       |     |   |     |   |     |    |     |   |     |   |     |    |     |    |     |   |     |    |
| Net Proceeds                       |                                                   | $                       | 40.42      |     | $      | 37.11    |   | $        | 34.62   |     | $      | 36.60    |   | $        | 44.95   |     | $       | 39.39    |   | $        | 39.21   |   | $ | 41.25 |   | $ | 45.83 |   | $ | 39.75 |   |
| PIK Payment                        |                                                   | (2.92                   | )          | 0.00     |   | 0.00     |   | 0.00     |    | 0.00     |   | 0.00     |   | 0.00     |    | 0.00     |    | 0.00     |   | 0.00     |    |
| Non-Member Loss                    |                                                   | .20                     |       | .20      |   | .05      |   | 1.13     |    | 2.17     |   | 0.05     |   | 0.00     |    | 0.09     |    | 0.01     |   | 0.16     |    |
| Gross Beet Payment                 |                                                   | $                       | 37.70      |     | $      | 37.31    |   | $        | 34.67   |     | $      | 37.73    |   | $        | 47.12   |     | $       | 39.44    |   | $        | 39.21   |   | $ | 41.34 |   | $ | 45.84 |   | $ | 39.91 |   |
| Unit Retains                       |                                                   | (2.00                   | )          | (2.00    | )      | (2.00    | )      | (1.00    | )       | (2.00    | )      | (2.00    | )      | (2.00    | )       | (3.00    | )       | (3.00    | )      | (1.50    | )       |
| Member Tax ADJ, Net                |                                                   | 0.00                    |       | 0.00     |   | 0.00     |   | 0.00     |    | 0.00     |   | 0.00     |   | 0.68     |    | 1.95     |    | 0.07     |   | 0.10     |    |
| Net Beet Payment                   |                                                   | $                       | 35.70      |     | $      | 35.31    |   | $        | 32.67   |     | $      | 36.73    |   | $        | 45.12   |     | $       | 37.44    |   | $        | 37.89   |   | $ | 40.29 |   | $ | 42.91 |   | $ | 38.51 |   |
|                               |                                                   |                    |       |     |   |     |   |     |    |     |   |     |   |     |    |     |    |     |   |     |    |
|                               |                                                   | **Crop Statistics (1)** | ** ** |
|                               |                                                   |                    |       |     |   |     |   |     |    |     |   |     |   |     |    |     |    |     |   |     |    |
| Tons Harvested (In Thousands):     |                                                   | 9,626                   |       | 9,657    |   | 10,679   |   | 8,553    |    | 8,313    |   | 8,029    |   | 8,332    |    | 6,450    |    | 6,748    |   | 6,915    |    |
| Tons Purchased Per Acre Harvested: |                                                   | 21.8                    |       | 19.9     |   | 22.2     |   | 18.5     |    | 18.1     |   | 18.7     |   | 20.2     |    | 16.3     |    | 16.9     |   | 17.4     |    |
| Sugar Content of Beets:            |                                                   | 17.8                    | %          | 17.4     | %      | 17.7     | %      | 17.6     | %       | 17.3     | %      | 16.4     | %      | 16.8     | %       | 17.6     | %       | 18.0     | %      | 17.0     | %       |

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(1)           Information provided with respect tonet proceeds, gross beet payment, net beet payment, tons harvested per acre andsugar content of sugarbeets represents an average of the financial andproduction results experienced by the members. As described elsewhere in this Report, the return to members for theirsugarbeets is based upon the value of the recovered sugar from the sugarbeetsdelivered to the Company by each member. As a result of variations in the sugar content of the sugarbeetsdelivered by the various members to the Company, the payments received by thevarious members also vary.

## **Sales and Marketing**

United Sugars Corporation, a common marketingagency operating on a cooperative basis, markets the Company’s sugar. TheCompany is a party to a “Uniform Member Marketing Agreement” with United SugarsCorporation. The other members of United Sugars Corporation, Minn-Dak FarmersCooperative, Southern Minnesota Beet Sugar Cooperative and United States SugarCorporation, are parties to similar agreements.  Under these agreements, all of the members market all of theirrefined sugar on a pooled basis through United Sugars Corporation.  The Company receives payment for its sugarby receiving its pro rata share of the net proceeds from the sale of the pooledsugar.  The net proceeds of such salesrepresent the gross proceeds from the sale of the sugar, adjusted for thevarious costs and expenses of marketing the pooled sugar, including theCompany’s pro rata share of the marketing and sales expenses incurred by UnitedSugars Corporation.  Any net proceedsfrom the operation of United Sugars Corporation are distributed to the fourmembers proportionally based on sugar production.

The Uniform Member Marketing Agreementsautomatically renew on an annual basis unless notice of termination is given bya party. In order to terminate its agreement, a party must provide notice oftermination by May 1 of the then current year for the termination to beeffective on the August 31 of the subsequent year.  In the event one of the parties terminates its Uniform MemberMarketing Agreement, the amount of sugar that is marketed by United SugarsCorporation would decrease. United Sugars Corporation would also be required toreturn the exiting member’s capital over a period of five years. Nonotifications of termination have been received as of the date hereof.

United Sugars Corporation sells sugarprimarily to industrial users such as confectioners, breakfast cerealmanufacturers and bakeries.  For thefiscal year ended August 31, 2001, 89.2 percent (by weight) of the sugarwas sold to industrial users.  Theremaining portion is marketed by United Sugars Corporation through sugarbrokers to wholesalers and retailers under the “Crystal Sugar” and “Pillsbury”brand names and various private labels for household consumption.  With regard to brand name sales, the Companylicenses the use of the “Crystal” trademark and sub-licenses the use of the“Pillsbury” trademark to United Sugars Corporation.

United Sugars Corporation markets sugar tocustomers over a large geographical area. United Sugars Corporation’s customers are located primarily in Illinois,Indiana, Iowa, Minnesota, New York, North Carolina, Ohio, Pennsylvania,Tennessee, and Wisconsin.  During fiscalyear 2001, United Sugars Corporation’s 10 largest customers accounted forapproximately 52.9 percent (by weight) of the sugar sold.

The prices atwhich United Sugars Corporation sells the Company’s sugar fluctuateperiodically based on changes in domestic sugar supply and demand. Sugar pricesare very sensitive to the balance between supply and demand in the UnitedStates market. The largest proportion of United Sugars Corporation’s sugarsales are contracted one or more quarters in advance, with the effect ofstabilizing fluctuations in revenue from quarter to quarter.  Retail (grocery) products are sold on a spotprice basis.

The Company markets its agri-products throughMidwest Agri-Commodities Company, a common marketing agency operating on acooperative basis, whose members are the Company, Minn-Dak Farmers Cooperativeand Southern Minnesota Beet Sugar Cooperative. Sugarbeet pulp is marketed to livestock feed mixers and livestockfeeders in the United States and foreign markets.  For the year ended August 31, 2001, the majority of theCompany’s pulp production was exported to Japan and Europe.  The market for sugarbeet pulp is affected bythe availability and quality of competitive foodstuffs.  Sugarbeet molasses is marketed primarily toyeast manufacturers, livestock feed mixers and livestock feeders.  Total agri-product sales accounted for 6.9percent of the Company’s total revenues during fiscal 2001, of which exportsales accounted for 3.7 percent of such revenues.  In the past, agri-products export sales accounted for 4.1 percentof the Company’s total revenues in 2000 and 3.1 percent in 1999. Thesepercentages are primarily a function of the average market prices for sugar,pulp and molasses and are not necessarily indicative of future relationshipsbetween agri-product revenues (both export and domestic) and sugar revenues,because prices of these commodities fluctuate independently of each other.

## **Government Programs and Regulation**s

### **FAIR Act**

Domestic sugar prices are directly affectedby a program administered by the USDA. Under the current program, which was initiated in 1981 and extended withmodifications under the Food Security Act of 1985, the Food, Agriculture,Conservation and Trade Act of 1990 and the Federal Agriculture Improvement andReform Act of 1996 (the “FAIR Act”), the USDA attempts to maintain the price ofsugar at a certain level by influencing the supply of sugar in the domesticmarket.  This price level is dictated bythe price at which producers can forfeit sugar to repay non-recourse loansobtained through the Commodity Credit Corporation (“CCC”).  Sugar processors can borrow funds on anon-recourse basis from the CCC that are secured by sugar.  When the price of sugar drops below theforfeiture price, the processors can forfeit the sugar securing the loans inlieu of repayment.

The USDA has historically maintained sugarprices above the forfeiture price without cost to the U.S. Treasury byregulating the supply of sugar in the U.S. market through regulating thequantity of sugar imports.  Under theTariff Rate Quota (“TRQ”) implemented October 1, 1990, sugar producingcountries are allowed to export a fixed quantity of sugar into the UnitedStates duty-free or subject to minimal duties. Unlimited additional quantities may be exported to the United Statesupon payment of a tariff of 15.36 cents per pound prior to shipment.  To date, only immaterial quantities of sugarhave been imported under this higher tariff level.

The FAIR Act establishes an 18 cent per poundloan rate for raw sugar and establishes a 22.90 cent per pound loan rate forrefined sugarbeet sugar.  Both loanrates are effective for crop years 1996 through 2002. The FAIR Act requires aone cent per pound penalty be paid by processors if the processor forfeits onsugar price support loans.

During fiscal 2000, market conditions causedprices for raw and refined sugar to drop below the non-recourse loan ratesestablished under the FAIR Act.  As aresult, several processors forfeited sugar under the terms of loans obtainedfrom the CCC.  The Company forfeitedapproximately 4.5 million hundredweight (225,000 tons) of sugar under CCC loanson September 30, 2000 (the maturity date of the loans).  Approximately 800,000 tons of the forfeitedsugar continues to be owned by the United States government.

During fiscal 2001, market conditionsimproved slightly keeping the prices for raw and refined sugar above thenon-recourse loan rates preventing any additional forfeitures.

From fiscal years 1990 to 1996, sugarprocessors (including the Company) were required to remit to the CCC anon-refundable marketing assessment equivalent to 1.1794 percent of the rawcane sugar loan rate of 18 cents per pound. The Federal Agriculture Improvement and Reform Act of 1996 increased theassessment for fiscal years 1997 through 2003 to 1.47425 percent of the rawcane sugar loan rate of 18 cents per pound. Congress suspended the obligationof sugar processors to pay the assessment for fiscal years 2000 and 2001.  Thus, from October 1, 1999 to September 30,2001, sugar processors, including the Company, will not be required to pay a marketingassessment to the CCC.

The FAIR Act will expire on September 30,2003.  Upon expiration of the FAIR Act,all of the programs discussed above will potentially expire or beeliminated.  The Federal government isexpected to enact a new Farm Bill in 2002to replace the FAIR Act.  The nature and scope of future legislationaffecting the sugar market cannot be predicted and there can be no assurancethat price supports will continue in their present form.  If the price support program, including theTariff Rate Quota system described above, was eliminated in its entirety, or ifthe protection the United States’ price support program provides from foreigncompetitors was materially reduced, the Company could be materially and adversely affected.  In such a situation, if the Company were not able to adoptstrategies that would allow it to compete effectively in a greatly changeddomestic market for sugar, the adverse effects could negatively impact theCompany’s continued viability and the desirability of growing sugarbeets fordelivery to the Company.

### **2000 and 2001 PIK Program****s**

The USDA implemented a Payment-In-Kind(“PIK”) program that was available to sugar producers throughout the UnitedStates during fiscal year 2000.  The PIKprogram was intended to alleviate the oversupply of sugar in the United Statesby giving a producer refined sugar in exchange for the producer’s agreement todestroy sugarbeets that would produce a comparable amount of sugar.  Under the PIK program, the Company’s memberswere paid to destroy a portion of their 2000 sugarbeet crop.  Payments to the Company’s members were madeby the USDA in the form of PIK certificates to be exchanged for governmentowned sugar.  The Company entered intoPIK Certificate Purchase Agreements with its members to purchase the PIKcertificates they received from the USDA and to reduce the members’ deliveryobligations to the Company to the extent sugarbeets were destroyed under thePIK program. The purchase price for the PIK certificates reflected an allocationof the Company’s fixed costs to account for the reduction of sugarbeetsavailable for processing.

The PIK Certificate Purchase Agreementauthorized the Company to require additional direct capital investments bymembers participating in the PIK program. The amount of the equity contributionis calculated per cwt. of PIK certificates and is approximately equivalent (ona Company-wide average basis) to the unit retain declared by the Company on thecorresponding year’s sugarbeet crop. The Company has a policy whereby theCompany refunds, to the entity legally entitled thereto, the equity retainsattributable to a deceased or totally and permanently disabled formershareholder.

The Company encouraged and facilitatedparticipation in the PIK program by its members.  As a result of the PIK program, the number of acres of the 2000sugarbeet crops harvested by the Company’s members was reduced by approximately33,000. The PIK certificates received were exchanged for approximately 1.6million hundredweight of sugar.

As of August 31, 2001, the USDA had notestablished a PIK program for the 2001 crop. In September 2001, the USDAannounced a PIK program for the 2001 crop year. Under the PIK program, the 2001sugarbeet crop harvested by the Company’s members was reduced by approximately29,000 acres. The Company anticipates receiving approximately 1.2 millionhundredweight of sugar in exchange for the PIK certificates to be received byparticipating members.

### **North American Free Trade Agreement**

Under the terms of the original NorthAmerican Free Trade Agreement (“NAFTA”) text, Mexico would have been allowed toship any excess production of sugar into the United States if Mexico were toachieve net surplus producer status two years in a row.  Concerned that Mexico’s productivecapabilities and possible conversion to the use of high fructose cornsweeteners could quickly change Mexico from a net sugar importer to a net sugarexporter, the U.S. sugar industry insisted that NAFTA be modified to delayMexico’s access to the U.S. market.  Toembody these modifications, a side letter agreement on sugar was negotiated bythe United States and Mexico prior to passage of NAFTA.  The side letter agreement gives Mexicoincrementally larger but capped volumes of duty-free access to the U.S. market,and an ability to export additional quantities of sugar to the United States ifMexico pays a gradually descending second tier tariff.  The side letter agreement establishes acommon market between the United States and Mexico in sugar by 2008.

The government of Mexico has indicated thatit does not agree that the side letter agreement to NAFTA is binding, and hasfiled a NAFTA Article XX challenge to the United States’ implementation of theside letter agreement.  At this time, itis not known when, or if, a ruling will be received on the Article XXchallenge.  If the side letter agreementto the NAFTA is ruled to be invalid, the Company could be materially andadversely affected.

The Company is concerned that low world sugarprices and a trade conflict between the United States and Mexico over sweetnerscould permit de facto acceleration of the second tier tariffs under the sideletter agreement.  Under the NAFTAtariff schedule, second tier sugar tariffs are set at approximately 12 cents in2000 but decline by approximately 1.5 cents per year until reaching zero in2008.  Low world raw sugar prices and adeclining second tier tariff could make it economically viable for Mexicansugar to enter the United States earlier than 2008.  In contrast to Mexico’s duty free access to the United Statessugar market (which was 116,611 short tons raw value for fiscal year 2001) theNAFTA contains no restrictions on second tier imports.

Under the current terms of the NAFTA and theside letter agreement, the Company is concerned that imports from Mexico couldoversupply the U.S. market, forcing sugar prices significantly lower.  The Company, along with the domestic sugarindustry, is seeking negotiated changes to the NAFTA and may also pursue legalremedies to address the matter.  If thesugar industry is unsuccessful in these or any other endeavors it pursues toprevent the influx of Mexican sugar into the U.S. market, there could beadverse financial consequences to the Company and its members.

## **Joint Venture: ProGold Limited LiabilityCompany**

The Company is one of three members ofProGold Limited Liability Company (“ProGold”). ProGold was formed to serve as a joint venture between the Company,Minn-Dak Farmers Cooperative and Golden Growers Cooperative.  The joint venture owns a corn wet-millingplant capable of processing corn to produce corn sweeteners (including highfructose corn syrups) and various agri-products.  The Company has a 46 percent membership interest in ProGold,while Golden Growers has a 49 percent interest and Minn-Dak Farmers Cooperativehas a 5 percent interest in ProGold.

ProGold and Cargill, Incorporated enteredinto an operating lease under which Cargill leases ProGold’s corn wet-millingplant.  The lease commenced onNovember 1, 1997, and the initial term will terminate on December 31,2007.

## **Joint Venture: Crystech, LLC**

The Company and Newcourt Capital USA, Inc. (“Newcourt”) formedCrystech, LLC (“Crystech”), a Delaware limited liability company, onMay 28, 1998.  Crystech was formed toconstruct and operate a molasses desugarization facility in Hillsboro, NorthDakota.  The Company and Newcourt eachown a 50 percent membership interest in Crystech. The financing of the facilityincludes approximately $86 million of secured debt placed by Newcourt witha consortium of lenders, and approximately $14 million in subordinateddebt from the Company.

The Company has a 12-year Tolling ServicesAgreement with Crystech whereby the Company pays the full cost of processingsugarbeet molasses delivered to the facility, with title and risk of loss tothe product remaining with the Company throughout the process.  The Tolling Services Agreement may beterminated by the Company if the specific operational processing performancerequired of Crystech in the contract is not maintained.  The Company has also entered into anOperations and Maintenance Agreement with Crystech by which the Company isresponsible for operating and maintaining the facility throughout the term ofthe Tolling Services Agreement. The facility has a capacity to processapproximately 200,000 tons of softened molasses annually for conversion tosugar and other agri-products. During fiscal 2001, approximately 207,000 tonsof softened molasses were processed.

**Employees**

As ofAugust 31, 2001, the Company had 1,250 full-time employees, of which 1,049were hourly and 201 were salaried.  TheCompany had 33 part-time employees.  Inaddition, the Company employs approximately 659 hourly seasonal workers,approximately 355 during the sugarbeet harvest and approximately 304 during theremainder of the sugarbeet processing campaign.  The Company also contracts with a third party agency forapproximately another 1,200 additional workers during the sugarbeet harvest.  During fiscal 2001, the Company reduced itsworkforce by 24 people through early retirements and selected terminations ofnon-unionized employees.

Substantiallyall of the hourly employees at the factories, including full-time and seasonalemployees, are represented by the Bakery, Confectionery, Tobacco Workers andGrain Millers (BCTGM) AFL-CIO, and are covered by a collective bargainingagreement expiring July 31, 2004. Office, clerical and management employees are not unionized, except for certainoffice employees at the Moorhead and Crookston, Minnesota, and Hillsboro, NorthDakota, factories who are covered by the collective bargaining agreement withthe BCTGM.  The Company considers itsemployee relations to be excellent.

Substantially all employees who meeteligibility requirements of age and length of service are covered by one of theCompany’s two defined benefit retirement plans.  Plan A (nonunion employees) and Plan B (union employees) aredefined benefit, noncontributory plans. The plans provide for vesting in five years with benefits for earlyretirement, normal retirement and disability or death.  The Company’s policy is to fund pensioncosts accrued. The plans were fully funded for vested benefits as ofFebruary 29, 2001, the end of the most recent plan year.  Union and nonunion employees are alsoeligible to participate in 401(k) savings plans.

### **EnvironmentalMatters**

The Company is subject to extensive federaland state environmental laws and regulations with respect to water and airquality, solid waste disposal and odor and noise control.  The Company conducts an on-going programdesigned to meet these environmental laws and regulations.  The Company believes that it is insubstantial compliance with applicable environmental laws and regulations.  The Company cannot predict whether futurechanges in environmental laws or regulations might increase the cost ofoperating its facilities and conducting its business.  Any such changes could have adverse financial consequences forthe Company.

## **Important Factors**

The financial results of the Company’soperations may be directly and materially affected by many factors, includingprevailing prices of sugar and agri-products, the Company’s ability to marketits sugar competitively, the weather, government programs and regulations, and costsand expenses.  Beyond the factors thatmay impact the Company’s business generally, the Company is involved in severalventures as discussed above that may also materially affect the financialresults of the Company’s operations.

### **Market Supply**

The domestic sugar market is reactive to any oversupply of refinedsugar. Excess supply may result in a decline in domestic sugar prices.  Lower sugar prices adversely affectprofitability of selling refined sugar in the United States, resulting in adirect negative impact on the Company.

### **Government Programs and Regulations;Legislation**

The nature and scope of future legislationand regulation affecting the sugar market cannot be predicted and there can beno assurance that price supports and market protections will continue in theirpresent forms.  If the price supportprograms were eliminated in their entirety, or if certain protections thefederal government provides from foreign competitors were materially reduced,the Company could be materially and adversely affected.  In such a situation, if the Company were notable to adopt strategies that would allow it to compete effectively in agreatly changed domestic market for sugar, the adverse effects could negativelyimpact the desirability of growing sugarbeets for delivery to the Company, theCompany’s financial results, and the Company’s continued viability.

**UnregulatedForeign Competition**

Under the current terms of the NAFTA andother government regulations, imports of sugar from Mexico may enter the U.S.market.  These imports could oversupplythe U.S. market and negatively affect the price of sugar.  Fluctuation in the price of sugar can impactthe performance of the Company  TheCompany, along with the domestic sugar industry, is seeking improvements toNAFTA and is also pursuing legal remedies to address the matter.  If the sugar industry is unsuccessful inthese and any other endeavors it pursues to prevent the influx of Mexican sugarinto the U.S. market, there could be adverse financial consequences to the Companyand its members.

### **Expiration of the FAIR Act**

The U.S. sugar industry is currentlysupported by the FAIR Act, which will expire on September 30, 2003.  Whether or not the federal government willprovide replacement legislation that will provide equivalent support for sugaris not ascertainable at this time.  Ifthe price support programs under the FAIR Act are not continued or replacedwith similar price support programs, the Company could be materially and adverselyaffected.

**Competition**

Sugar is a fungible commodity withcompetition for sales volume based primarily upon customer service, price andreliability, though differences in proximity to various geographic marketswithin the United States result in differences in freight and shipping costs whichin turn generally affect pricing and competitiveness.  The overall sweetener market, in addition to sugar, includescorn-based sweeteners, such as regular and high fructose corn syrups, andnon-nutritive, high-intensity sweeteners such as aspartame.  Differences in functional properties andprices have tended to define the use of these various sweeteners.  Although the various sweeteners are notinterchangeable in all applications, the substitution of other sweeteners forsugar has occurred in certain products, such as soft drinks.  The Company is not able to predict theavailability, development or potential use of these and other alternativesweeteners and their possible impact on the Company and its members.  The Company’s management believes that it possessesthe ability to compete successfully with other producers of sugar in the UnitedStates.  In spite of this competitiveadvantage, substitute products and sugar imports could have a material andadverse effect on the Company’s operations in the future.

**Weather and Other Factors**

The sugarbeet, as with most other crops, isaffected by weather conditions during the growing season.  Additionally, weather conditions during theprocessing season affect the Company’s ability to store sugarbeets held for processing.  Growing and storage conditions differentfrom the Company’s expectations may change the quantity and quality ofsugarbeets available for processing and therefore may affect the quantity ofsugar produced by the Company.  Asignificant reduction in the quantity or quality of sugarbeets harvestedresulting from adverse weather conditions, disease or other factors couldresult in increased per unit processing costs and decreased production, withadverse financial consequences to the Company and its members.

**Item 2.             PROPERTYAND PROCESSING FACILITIES**

The Companyoperates five sugarbeet processing factories in the Red River Valley. TheCompany owns all of its factories and the land on which they are located. Thefactories range in size from 150,000 to 400,000 square feet.

The locationand processing capacity of the Company’s factories are:
| **Location**         |   | **Approximate Daily  Slicing Capacity  (Tons of Sugarbeets)** |   |
|----------------------|--------|---------------------------------------------------------------|--------|
| Crookston, MN        |   | 5,700                                                         |   |
| East Grand Forks, MN |   | 9,200                                                         |   |
| Moorhead, MN         |   | 5,700                                                         |   |
| Drayton, ND          |   | 6,500                                                         |   |
| Hillsboro, ND        |   | 8,100                                                         |   |

 

Each of the processing factories includes thephysical facilities and equipment necessary to process sugarbeets into sugar.Each factory has space for sugarbeet storage, including ventilated and coldstorage sites. Each of the Company’s facilities is currently operating at ornear its capacity. The Company owns a molasses desugarization (“MDS”) plant atits East Grand Forks facility and participates in a joint venture that owns andoperates a MDS plant at the Hillsboro. The MDS plants process molasses toextract additional sugar.  The Company’ssugar packaging facilities are located at the Moorhead, Hillsboro, Crookstonand East Grand Forks factories.

The Company’s corporate office is located ina 30,000 square foot, two-story office building in Moorhead, Minnesota. TheCompany also has a 100,000 square foot Technical Services Center situated onapproximately 200 acres in Moorhead, Minnesota. The Company owns bothfacilities, and owns numerous sites as sugarbeet receiving and storagestations. All of the Company’s property, plant and equipment (excluding currentassets) is mortgaged or pledged as collateral for its indebtedness to variousfinancial institutions.

**Item 3.             LEGALPROCEEDINGS**

From time totime 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 iscurrently involved in certain legal proceedings which have arisen in theordinary course of the Company’s business. The Company is also aware of certainother potential claims which could result in the commencement of legalproceedings. The Company carries insurance which provides protection againstcertain types of claims. With respect to current litigation and potentialclaims of which the Company is aware, the Company’s management believes that(i) the Company has insurance protection to cover all or a portion of anyjudgments which may be rendered against the Company with respect to certainclaims or actions and (ii) any judgments which may be entered against theCompany and which may exceed such insurance coverage or which may arise inactions involving potential liabilities not covered by insurance policies are notlikely to have a material adverse effect upon the Company, or its assets oroperations.

**Item 4.             SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

No matterswere submitted to a vote of the Company’s shareholders during the quarter endedAugust 31, 2001.

# **PART II**

**Item 5.             MARKET FORREGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

As of August31, 2001, the Company had 3,134 shares of the Common Stock and 498,570 sharesof the Preferred Stock outstanding. There is no established public market for the Company’s Common Stock orPreferred Stock, as such shares may be held only by farmer-producers who areeligible for membership in the Company. The Company’s shares are not listed fortrading on any exchange or quotation system. Although transfers of theCompany’s shares may occur only with the consent of the Board of the Directors,the Company does not obtain information regarding the transfer price inconnection with such transfers. As a result, the Company is not able to provideinformation regarding the prices at which the Company’s shares have beentransferred.

Because thenumber of acres of sugarbeets a member may grow for sale to the Company isdirectly related to the number of shares of Preferred Stock owned, a limited,private market for Preferred Stock exists. However, it is not anticipated thata general public market for the Company’s shares of Common Stock or PreferredStock will develop due to the limitations on transfer and the variousmembership requirements which must be satisfied in order to acquire suchshares.

A memberdesiring to sell his or her Common Stock or Preferred Stock must first offerthem to the Company for purchase at par value. If the Company declines topurchase such shares, either class may be sold to a new member (i.e., anotherfarm operator not already a member) and Preferred Stock may be sold to one ormore existing members or farm operators approved for membership, in each casesubject to approval by the Board of Directors. To date, the Company’s Board ofDirectors has not exercised the Company’s right of first refusal to purchaseshares offered for sale by its members. In the absence of the exercise of suchright of first refusal, the Company is aware of sales of Preferred Stock atprices in excess of the par value of those shares. However, as the Company doesnot require parties seeking approval for transfers to provide informationregarding the transfer price, the Company does not possess verifiableinformation regarding the transfer price involved in recent transfers of theCompany’s Preferred Stock.

**Item 6.             SELECTEDFINANCIAL DATA**

The selectedfinancial data of the Company should be read in conjunction with the financialstatements and related notes included elsewhere in this Annual Report.
|                                                  |   | **Fiscal Year Ended August 31,  (In Thousands, except for ratios)** |    |
|-------------------------------------------------------|--------|---------------------------------------------------------------------|---------|
|                                                  |   | **2001**                                                            |    | **2000** |   | **1999** |   | **1998** |   | **1997** |   |
|                                                  |   |                                                                |    |   |   |   |   |   |   |   |   |
| Net Revenues                                          |   | $                                                                   | 866,362 |   | $ | 731,432 |   | $ | 843,968 |   | $ | 676,625 |   | $ | 677,004 |   |
| Net Proceeds (1)                                      |   | $                                                                   | 389,039 |   | $ | 358,373 |   | $ | 369,681 |   | $ | 313,007 |   | $ | 373,649 |   |
| Total Assets                                          |   | $                                                                   | 641,445 |   | $ | 739,719 |   | $ | 667,824 |   | $ | 648,118 |   | $ | 581,504 |   |
| Long-Term Debt, Net of Current Maturities             |   | $                                                                   | 201,416 |   | $ | 230,905 |   | $ | 233,135 |   | $ | 194,695 |   | $ | 186,800 |   |
| Members’ Investments                             |   | $                                                                   | 255,660 |   | $ | 249,330 |   | $ | 241,286 |   | $ | 224,843 |   | $ | 175,928 |   |
| Property and Equipment Additions, net of  retirements |   | $                                                                   | 21,851  |   | $ | 42,088 |   | $ | 58,693 |   | $ | 98,992 |   | $ | 69,542 |   |
| Working Capital                                       |   | $                                                                   | 48,572  |   | $ | 55,336 |   | $ | 56,733 |   | $ | 30,357 |   | $ | 45,652 |   |
| Ratio of Long-Term Debt to Equity (2)                 |   | .79:1                                                               |    | .93:1 |   | .97:1 |   | .87:1 |   | 1.06:1 |   |

 

 
|                                                |   | **Fiscal Year Ended August 31,  (In Thousands, except for tons purchased per acre and Net Beet Payment per  ton)** |   |
|-----------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|
| **Production Data (3)**                             |   | **2001**                                                                                                           |   | **2000** |   | **1999** |   | **1998** |   | **1997** |   |
|                                                |   |                                                                                                               |   |   |   |   |   |   |   |   |   |
| Acres harvested                                     |   | 442                                                                                                                |   | 486 |   | 481 |   | 462 |   | 459 |   |
| Tons purchased                                      |   | 9,626                                                                                                              |   | 9,657 |   | 10,679 |   | 8,553 |   | 8,313 |   |
| Tons purchased per acre harvested                   |   | 21.8                                                                                                               |   | 19.9 |   | 22.2 |   | 18.5 |   | 18.1 |   |
| Gross beet payment per ton of sugarbeets  purchased |   | $                                                                                                                  | 37.70  |   | $ | 37.31 |   | $ | 34.67 |   | $ | 37.73 |   | $ | 47.12 |   |
| Sugar hundredweight                                 |   |                                                                                                               |   |   |   |   |   |   |   |   |   |
| Produced                                            |   | 29,035                                                                                                             |   | 26,646 |   | 25,453 |   | 21,528 |   | 22,465 |   |
| PIK Sugar Receipts                                  |   | 1,561                                                                                                              |   |   |   |   |   |   |   |   |   |
| Sold, including purchased sugar                     |   | 32,445                                                                                                             |   | 24,756 |   | 27,552 |   | 21,735 |   | 20,579 |   |
| Purchased sugar sold                                |   | 3                                                                                                                  |   | 230 |   | 798 |   | 901 |   | 869 |   |
| Pulp, Molasses and CSB tons                         |   |                                                                                                               |   |   |   |   |   |   |   |   |   |
| Produced                                            |   | 749                                                                                                                |   | 784 |   | 921 |   | 771 |   | 775 |   |
| Sold                                                |   | 701                                                                                                                |   | 803 |   | 1,042 |   | 728 |   | 696 |   |
|                                                     |        |                                                                                                                    |        |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

(1)           Net Proceeds are the Company’s grossrevenues, less the costs and expenses of producing and marketing sugar,agri-products and sugarbeet seed, but before payments to members forsugarbeets. Payments to be made to members for the delivery of sugarbeets areliabilities of the Company. (For a more complete description of the calculationof Net Proceeds, see “Item 1.  Business– Growers’ Contracts.”)

(2)           Calculated by dividing the Company’slong term debt, exclusive of the current maturities of such debt, by members’investments.

(3)           Information for a fiscal year relatesto the crop planted and harvested in the preceding calendar year (e.g.,information for the fiscal year ended August 31, 2001 relates to the crop of2000).
| **Item 7.** | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:** |
|-------------|-------------------------------------------------------------------------------------------------|

** **

*The followingdiscussion of the financial conditions and results of operations of the Companyshould be read in conjunction with the Company’s financial statements and notesthereto included elsewhere in this report.*

## **Liquidity and Capital Resources**

Under the Company’s Bylaws and GrowerContracts, payments for member delivered sugarbeets, the principal raw materialused in producing the sugar and agri-products it sells, are subordinated to allmember business expenses.  In addition,the beet payment made to members is paid in three payments over the course of ayear, and the payments are made net of the anticipated unit retain for thecrop.  These procedures have the effectof providing the Company with an additional source of short-termfinancing.  This member financing arrangementmay result in an additional source of liquidity and reduced need for outsidefinancing in comparison to a similar business operated on a non-cooperativebasis.

Becausesugar is sold throughout the year (while sugarbeets are processed primarily inthe fall and winter) and because substantial amounts of equipment are requiredfor its operations, the Company has utilized substantial outsidefinancing on both a seasonal and long-term basis to fund such operations. Themajority of such financing has been provided by a consortium of lenders lead byCoBank, ACB. The Company 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 debt outstanding of$50 million from a private placement of Senior Notes that occurred inSeptember of 1998; $43.8 million from nine separate issuances of Pollution Control and Industrial DevelopmentRevenue Bonds; a term loan with Bank of North Dakota of $6.4 million; and $2million from US Bank.  TheCompany also has a seasonal line of credit with a consortium of lenders lead byCoBank, ACB of $180 million 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 $14.0 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.

## **Results of Operations**

U.S. sugar consumption has continued toexpand over the past decade. Growth rates averaged approximately 1.6 percentannually during the 1990’s. Sugar consumption growth rates are a function ofpopulation growth, which has increased slightly over the past five years, andfood market trends. The Company believes that sugar consumption should continueto grow between 1 and 2 percent per year as a result of population growth.

The Company’s operational results and theresulting beet payment to members are substantially dependent on marketfactors, including domestic prices for refined sugar. These factors arecontinuously influenced by a wide variety of market forces, including domesticsugarbeet and cane production, weather conditions and United States farm andtrade policy, that the Company is unable to predict.

In addition, highly variable weatherconditions during the growing, harvesting and processing seasons, as well asdiseases and insects, may materially affect the quality and quantity ofsugarbeets available for purchase as well as the unit costs of raw materials andprocessing.

### **Comparisonof the Years Ended August 31, 2001 and 2000**

Revenue for the year ended August 31, 2001,was $866.4 million, an increase of $134.9 million from 2000.  Revenue from total sugar sales increased19.2 percent which reflects the proceeds from the forfeiture of sugar to theCCC this year, a 31.1 percent increase in hundredweight sold, partially offsetby a 17.0 percent decrease in the average selling price per hundredweight.  Revenue from pulp sales increased 8.8percent due to a 14.8 percent increase in the average selling price per tonpartially offset by a 5.2 percent decrease in the volume of pulp sold.  Revenue from molasses sales decreased 37.4percent due to a 52.6 percent decrease in the volume of molasses sold partiallyoffset by a 32.1 percent increase in the average selling price per ton.  Revenue from the sales CSB increased 58.5percent due to a 13.6 percent increase in sales volume and a 39.4 percentincrease in the average selling price per ton. The decrease in sales volume of molasses and the increase in salesvolume of CSB are primarily the result of the Crystech molasses desugarizationfacility at Hillsboro, North Dakota, which became operational on February 1,2000.

Cost of product sold, exclusive of paymentsfor sugarbeets and PIK certificates increased $89.6 million. Direct processingcosts for sugar and pulp increased 12.3 percent due to processing 3.2 percentmore sugarbeets, higher costs for natural gas and twelve months versus sevenmonths of tolling charges from Crystech. Fixed and committed expenses increased 2.9 percent reflecting higherdepreciation and insurance costs.  Thecost associated with sugar purchased to meet customer needs was down $6.2million due to minimal activity during fiscal 2001.  Change in inventories impacted the cost of product soldunfavorably by $78.2 million.

 

Selling expenses increased $17.3 millionprimarily due to increased sugar sales volume. General and administrativeexpenses increased 1.8 percent due to general cost increases.

 

Interest expense decreased $2.7 million dueto lower long-term and short-term interest rates and lower average borrowinglevels.

 

Non-member activities resulted in a loss of $1.9 million in both 2001 and 2000. The loss in each year was primarilycomprised of activities related to the investment in ProGold.

 

Payments to members for PIK certificates, netof equity retention declared, were $26.5 million in 2001.

 

Payments to members for sugarbeets, net ofunit retains declared, increased by $2.6 million from $341.0 million in 2000 to$343.6 million in 2001.

**Comparison of theYears Ended August 31, 2000 and 1999**

Revenue forthe year ended August 31, 2000, was $731.4 million, a decrease of $112.6million from 1999.  Revenue from totalsugar sales decreased 12.2 percent, reflecting a 10.2 percent decrease inhundredweight sold and a 2.3 percent decrease in the average selling price perhundredweight.  Revenue from pulp salesdecreased 7.6 percent due to a 18.4 percent decrease in the volume of tonssold, partially offset by a 13.3 percent increase in the average selling priceper ton.  Revenue from molasses salesdecreased 50.9 percent due to a 52.4 percent decrease in the volume of molassessold, partially offset by a 3.1 percent increase in the average selling price perton.  Revenue from sales of CSBincreased 32.9 percent due to a 90.1 percent increase in the volume of CSBsold, partially offset by a 30.1 percent decrease in the average selling priceper ton.  The decrease in sales volumeof molasses and the increase in sales volume of CSB are primarily the result ofthe operation of the Crystech molasses desugarization facility at Hillsboro,North Dakota, which became operational on February 1, 2000.

Cost ofproduct sold, exclusive of payments for sugarbeets, decreased $77.4million.  Direct processing costs forsugar and pulp increased 9.3 percent primarily due to the commencement oftolling charges from Crystech, partially offset by reduced costs of harvestingand processing fewer tons.  Fixed andcommitted expenses increased 0.1 percent reflecting slightly higherdepreciation and maintenance costs.  Thecost associated with sugar purchased to meet customer needs was down $15.4million due to the decrease in purchased sugar activity in distant geographicmarkets.  The change in inventoriesimpacted the cost of product sold favorably by $72.5 million.

Sellingexpenses decreased $27.7 million due to lower agri-product freight costs andthe suspension of the Commodity Credit Corporation sugar marketing assessmentfee as of September 1, 1999.  Generaland administrative expenses increased approximately 3.8 percent due to generalcost increases.

Interestincome increased $1.4 million primarily due to interest on the Crystech notesreceivable.

Interestexpense increased $ .7 million primarily due to higher average interest rates.

Non-memberbusiness activities resulted in a loss of $1.9 million in 2000, as compared toa loss of $ .5 million in 1999.  Thischange is primarily the result of the gain on the sale of certain sugarbeetseed assets to Betaseed, Inc. being reflected in 1999, offset by increasedincome from the investment in ProGold.

Payments to members for sugarbeets, net of unit retains declared,decreased by $7.8 million from $348.8 million to $341.0 million. The decreaseis primarily attributable to a 9.6 percent decrease in tons harvested partiallyoffset by a higher per-ton beet payment.

**Comparison of the Years Ended August 31, 1999and 1998**

Revenue for the year ended August 31, 1999, was $844.0 million, anincrease of $167.3 million from 1998. Revenue from total sugar sales increased 27.0 percent, reflecting a 26.8percent increase in hundredweight sold and a 0.2 percent increase in theaverage selling price per hundredweight. Revenue from pulp sales increased 2.8percent due to a 30.6 percent increase in the volume of tons sold, partiallyoffset by a 21.3 percent decrease in the average selling price per ton.  Revenue from molasses sales increased 18.8percent due to an 81.3 percent increase in the volume of molasses sold,partially offset by a 34.5 percent decrease in the average selling price perton.  Revenue from sales of CSBdecreased 13.1 percent due to a 17.4 percent decrease in the average sellingprice per ton, partially offset by a 5.2 percent increase in the volume of CSBsold.

Cost of product sold, exclusive of payments to members for sugarbeets,increased $73.2 million.  This was dueto lower inventory levels at the end of 1999 and higher costs related toprocessing a larger crop.  Direct costsincreased by 16.8 percent due to harvesting a 24.9 percent larger crop andprocessing 20.6 percent more sugarbeets. The cost associated with purchased sugar decreased $2.4 million in 1999compared to 1998, due to more produced sugar available to meet customer requirements.  Fixed and committed expenses increased 20.9percent primarily due to higher depreciation and maintenance costs.

Selling expenses increased $35.3 million.  The increase is primarily attributable to the increase in thevolumes of products sold.  General andadministrative expenses increased approximately 7.4 percent from 1998 due togeneral cost increases.

Interest expense increased $7.6 million. Higher inventory levelsthroughout most of the year, the processing of a larger crop, and increased termdebt to finance capital improvements resulted in higher overall borrowinglevels.

Non-member business activities resulted in a loss of $ .5 million in1999, as compared to a loss of $9.7 million in 1998. This change is primarilythe result of the gain on the sale in 1999 of certain sugarbeet seed assets toBetaseed, Inc.and the reduced loss in 1999 as compared to 1998, from theinvestments in ProGold.

Payments to members for sugarbeets, net of unit retains declared,increased by $34.7 million from $314.1 million to $348.8 million.  The increase is primarily attributable to a24.9 percent increase in tons harvested partially offset by a lower per-tonbeet payment.

## **2001 Crop and Estimated Fiscal Year 2002Information**

This discussion contains a summary of theCompany’s current estimates of the financial results to be obtained from theCompany’s processing of the 2001 sugarbeet crop. Given the nature of theestimates required in connection with the payments to members for theirsugarbeets, this discussion includes forward-looking statements regarding thequantity of sugar to be produced from the 2001 sugarbeet crop, the net sellingprice for the sugar and agri-products produced by the Company and the Company’soperating costs. These forward-looking statements are based largely upon theCompany’s expectations and estimates of future events; as a result, they aresubject to a variety of risks and uncertainties. Some of those estimates, suchas the selling price for the Company’s products and the quantity of sugarproduced from the sugarbeet crop, are beyond the Company’s control. The actualresults experienced by the Company could differ materially from theforward-looking statements contained herein.

As noted earlier, the Growers’ Contractsbetween the Company and its members regarding the delivery of sugarbeets to theCompany require payment for members’ sugarbeets in three installmentsthroughout the year after harvest of the applicable sugarbeet crop. As only thefinal payment is made after the close of the fiscal year in question, the firsttwo payments to members for their sugarbeets are, of necessity, based upon theCompany’s then-current estimates of the net beet payment arising from theprocessing of the crop in question and the subsequent sale of the productsobtained from processing those sugarbeets.

The completedharvest of the sugarbeet crop grown during 2001 produced a total of8.0 million tons of sugarbeets, or approximately 17.8 tons of sugarbeetsper acre from approximately 452,000 acres. The number of acres harvested wasreduced by approximately 29,000 as a result of member participation in the USDA2001 PIK program. This production was less than the ten-year average of 19.1tons per acre for crops grown in the years 1991 through 2000. The sugar contentof the 2001 crop is 18.0 percent in comparison to a ten year average for theapplicable period of approximately 17.35 percent. The Company expects toproduce a total of approximately 24.3 million hundredweight of sugar fromthe 2001 crop, a decrease of approximately 16.3 percent compared to the 2000crop. Such sugar production provides a total sugar recovery of approximately300 pounds of sugar for each ton of sugarbeets harvested by the Company.

## **The Company’sCurrent Strategic Plan**

In order to obtain the best selling price for its products, the Companyintends to focus on sales and marketing strategies that allow the Company toprovide its customers with an appropriate mixture of the Company’s products.The Company plans to optimize its customer mix, improve logistics and continueto evaluate and improve its customer performance.

To pursue the goal of maintaining andimproving upon its current status as a low cost producer, the Company intendsto focus on working with its members to increase the productivity of themembers’ sugarbeet farming operations. The Company expects to focus on, amongothers, programs for nitrogen management and new seed varieties. At the factorylevel, the Company plans to focus on cost reductions and pursue on-goingmaintenance initiatives and targeted capital improvements. The Company plans tocontinue to reduce its average cost of production through the Hillsborodesugarization plant, owned and operated by Crystech.  After completing several large strategic capital projects inrecent years, the Company currently intends to focus its efforts onstrengthening its balance sheet while pursuing maintenance capital and highreturn strategic capital projects.

**Item 7a.           Quantitativeand Qualitative Disclosures about Market Risk**

Market risk isthe risk of loss to future earnings, to fair values or to future cash flowsthat may result 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 not believe that there is any material market riskexposure with respect to interest rates, exchange rates, commodity prices,equity prices and other market changes that would require disclosure under thisitem.

**Item 8.             FINANCIAL STATEMENTS**

The financialstatements of the Company for the fiscal years ended August 31, 2001, 2000 and1999 have been audited by Eide Bailly LLP, independent certified publicaccountants. Such financial statements have been included herein in relianceupon the report of Eide Bailly LLP. The financial statements of the Company areincluded in Appendix A to this annual report.

**Item 9.             CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

** **

None

# **PART III**

**Item 10.           DIRECTORS ANDEXECUTIVE OFFICERS**

**Board of Directors**

The Board of Directors of the Company consists of three directors fromeach of the five factory districts. Directors must hold common stock of theCompany or must be representatives of such shareholders belonging to thedistrict they represent and are elected by the members of that district. In thecase of a holder of common stock who is other than a natural person, a dulyappointed or elected representative of such shareholder may serve as adirector. The directors were elected to serve three-year terms expiring inDecember of the years indicated in the table below. One director iselected each year from each factory district. A director cannot serve more than four consecutive three-year terms.

The tablebelow lists certain information concerning current directors of the Company. 
| **Name and Address**                                                    |   | **Age** |       | **Factory District** |       | **Director  Since** |       | **Term Expires  Dec.** |       |
|-------------------------------------------------------------------------|--------|---------|------------|----------------------|------------|---------------------|------------|------------------------|------------|
|                                                                    |   |    | ** ** |                 | ** ** |                | ** ** |                   | ** ** |
| Michael A. Astrup  PO Box 219  Dilworth, MN 56529                       |   | 48      |       | Moorhead             |       | 1996                |       | 2002                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Jerry D. Bitker  1694 Co. Highway #19  Halstad, MN 56548                |   | 53      |       | Hillsboro            |       | 1996                |       | 2002                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Richard Borgen  1544 Co. Highway #39  Perley, MN 56574                  |   | 52      |       | Moorhead             |       | 1997                |       | 2003                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Paul J. Driscoll  PO Box 555  East Grand Forks, MN 56721                |   | 56      |       | East Grand Forks     |       | 2000                |       | 2003                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Steven M. Goodwin ***  RR 3, Box 116  Angus, MN 56712                   |   | 43      |       | East Grand Forks     |       | 1995                |       | 2001                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Court G. Hanson ***  RR 2, Box 1  Blanchard, ND 58009                   |   | 53      |       | Hillsboro            |       | 1993                |       | 2001                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   |       |
| Curtis Haugen **45508 300th St. NW  Argyle, MN 55108                    |   | 40      |       | East Grand Forks     |       | 2001                |       | 2004                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   |       |
| Lonn M. Kiel  RR 3, Box 71  Crookston, MN 56716                         |   | 48      |       | Crookston            |       | 1994                |       | 2003                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| David J. Kragnes *  10600 60th St. N.  Felton, MN 56536                 |   | 49      |       | Moorhead             |       | 1995                |       | 2004                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Francis L. Kritzberger  RR #1, Box 22  Hillsboro, ND 58045              |   | 56      |       | Hillsboro            |       | 1996                |       | 2003                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Patrick D. Mahar  RR 1, Box 363  Cavalier, ND 58220-9789                |   | 59      |       | Drayton              |       | 1993                |       | 2002                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   |       |
| Jeff McInnes **  RR 2 Box 140  Hillsboro, ND 58045                      |   | 44      |       | Hillsboro            |       | 2001                |       | 2004                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   |       |
| Ronald E. Reitmeier  RR 1, Box 49  Fisher, MN 56723                     |   | 56      |       | Crookston            |       | 1996                |       | 2002                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Jim A. Ross *  RR 1, Box 5  Fisher, MN 56723                            |   | 51      |       | Crookston            |       | 1998                |       | 2004                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| G. Terry Stadstad  1774 22nd Avenue NE  Grand Forks, ND 58203           |   | 58      |       | East Grand Forks     |       | 1993                |       | 2002                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   | ** ** |
| Robert Vivatson  (Chairman) *  PO Box 631  Cavalier, ND 58220 |   | 52      |       | Drayton              |       | 1992                |       | 2004                   |       |
|                                                                    |   |    |       |                 |       |                |       |                   |       |
| Neil Widner  PO Box 305  Stephen, MN 56757                              |   | 50      |       | Drayton              |       | 2000                |       | 2003                   |       |

----

* These Directors were re-elected for additional terms at the 2001Factory District meetings held in November 2001.  Their terms will now expire in 2004.

** These Directors were elected at the 2001 Factory District meetingsheld in November 2001. Their terms begin in December 2001 and expire in 2004.

*** These Directors did not seek re-election as a Director at the endof their respective terms for reasons unrelated to the Company.

Below is the biographical information on eachDirector.

**Michael A. Astrup.**  Mr. Astrup has been a director since1996. Mr. Astrup has been a farmer since 1976, with his farming operationslocated near Dilworth, Minnesota. Mr. Astrup is a Director of the AmericanSugarbeet Growers Association.

**Jerry D. Bitker.**  Mr. Bitker has been a director since1996 and has been a farmer since 1974 near Halstad and Ada, Minnesota.

**Richard Borgen.**  Mr. Borgen has been a director since1997. Mr. Borgen has farmed east of Perley, Minnesota since 1967 and hasserved as a director on the Perley Co-op Elevator Board for nine years and theNorman County West school board for 10 years.

**Paul J. Driscoll. **Mr. Driscoll has been a director since2000. Mr. Driscoll has farmed in the East Grand Forks, Minnesota area for manyyears. Mr. Driscoll currently serves on the Marshall Polk Rural Water Board,the Minnesota Rural Water Finance Authority, the Huntsville Township Board, theNorthwest Technical College Advisory Board and the East Grand Forks Chamber ofCommerce Board.

**Steven M. Goodwin.**  Mr. Goodwin has been a director since1995. Mr. Goodwin has been a farmer since 1980 and owns and operates afarm near Angus, Minnesota.

**Court G. Hanson.**  Mr. Hanson has been a director since1993 and has been a farmer since 1971. Mr. Hanson is president of C.Hanson Farm, Inc., operating near Blanchard, North Dakota. Prior tofarming, Mr. Hanson was an assistant national bank examiner from 1970 to1973.

**Curtis Haugen. **Mr. Haugen will begin to serve as adirector in December 2001. Mr. Haugen has been a farmer since 1981andfarms near Argyle, Minnesota. Mr. Haugen is completing his twelfth year asa director of the Red River Valley Sugarbeet Growers Association. Mr. Haugenhas served as a director of the Farmer’s Union Oil Company, Oslo since 1987 andhe has also served as its President.

**Lonn M. Kiel.**  Mr. Kiel has been a director since 1994and has been farming near Crookston, Minnesota since 1982. Mr. Kiel is thepresident of Kiel Corporation and also serves on the Board of Directors of theCrookston Fuel Company.

**David J. Kragnes.**  Mr. Kragnes has been a director since1995. Mr. Kragnes has been a farmer since 1972, with his farming operationlocated near Felton, Minnesota. Mr. Kragnes serves on the Board ofDirectors of United Sugars Corporation and is also a director for the AmericanSugarbeet Growers Association.

**Francis L. Kritzberger.**  Mr. Kritzberger has been a directorsince 1996. Mr. Kritzberger has previously served as a director with theCompany, from July 30, 1989 until July 30, 1993. Mr. Kritzbergerhas been a farmer since 1964. Mr. Kritzberger serves on the Board ofDirectors of the North Dakota Council of Cooperatives.

**Patrick D. Mahar.**  Mr. Mahar has been a director since1993 and has been a farmer since 1962. Mr. Mahar is currently a partner ofMahar Farms near Cavalier, North Dakota. Mr. Mahar previously served aspresident of the Red River Valley Sugarbeet Growers Association, Fargo, NorthDakota, and as president of the American Sugarbeet Growers Association,Washington, D.C. Mr. Mahar is currently serving as a director for MidwestAgri-Commodities Company and also on the Boards of Directors of First StateBank and Farmers Co-op Elevator, both of Cavalier, North Dakota.

**JeffMcInnes.** Mr. McInnes will begin to serve as a director in December 2001.Mr. McInnes co-manages a 3,300 acre farming operation near Hillsboro.Mr. McInnes is the founder and manager of the Basement Traders Marketing Club,a grain marketing association in Hillsboro. Mr. McInnes is a director andthe chairman of the Hillsboro Economic Development Corporation.Mr. McInnes is currently a director of the Red River Valley SugarbeetGrowers Association and the current chairman of the Hillsboro Factory District.

**Ronald E. Reitmeier.**  Mr. Reitmeier has been a director since1996, and has been a farmer since 1968. Mr. Reitmeier previously served onthe Board of Directors of PKM Electric Co-op for ten years.

**Jim A. Ross.**  Mr. Ross has been a director since1998. Mr. Ross has farmed near Fisher, Minnesota since 1971 and is a boardmember of Fisher Fuel and Hardware Cooperative.

**G.****TerryStadstad.**  Mr. Stadstadhas been a director since 1993 and has been farming near Grand Forks, NorthDakota since 1965. Mr. Stadstad serves on the Board of Directors of UnitedSugars Corporation.

**Robert Vivatson.**  Mr. Vivatson has been a director since1992. Operating as a farmer near Cavalier, North Dakota since 1975,Mr. Vivatson is a partner of Vivatson Bros. and President of VivatsonFarms Inc. Mr. Vivatson is serving on the Board of Directors of UnitedSugars Corporation, the United Valley Bank of Cavalier and Grand Forks and theBoard of Governors of ProGold Limited Liability Company.

**Neil Widner. **Mr. Widner has been a director since 2000. Mr.Widner has farmed near Stephen, Minnesota since 1973. Mr. Widner currentlyserves as the President of Farmers Grain in Stephen, Minnesota.

The Board ofDirectors meets monthly. The Company provides its directors with compensationconsisting of (i) a payment of $200 per month, (ii) a per diempayment of $200 for each day spent on Company activities, including boardmeetings and other Company functions, and (iii) reimbursement of expensesfor attendance at Board of Directors’ meetings. The Chairman of the Board ofDirectors receives a payment of $500 per month, rather than $200 per month; theChairman also receives a per diem in the amount of $200 for each day spent onCompany activities.

Under theterms of the Board of Directors Deferred Compensation Plan, members of theBoard of Directors can elect to defer receipt of their monthly and per diemcompensation.  This is an annualirrevocable election made prior to January 1, of each calendar year the feesare to be paid.  The amounts aredeferred until either withdrawal from the Board of Directors by a member oruntil retirement from the Board Member’s regular employment or business, butnot beyond age 65.  Two payment optionsare available at the election of the participant.  Payments can be received in a single lump sum or in equalinstallments over a period up to ten years. The Board of Directors, at its discretion, can elect to distribute theremaining balance at any time.  Interestis earned on the amounts deferred based on the five year Treasury bondrate.  Currently, there is one Boardmember who has elected to participate in this plan.  The amount deferred, as of August 31, 2001 was $108,000.

**Executive Officers**

The tablebelow lists the principal officers of the Company, none of whom owns any sharesof Common or Preferred Stock. Officers are elected annually by the Board ofDirectors.
| **Name**           |   | **Age** |       | **Position**                                                                        |       |
|--------------------|--------|---------|------------|-------------------------------------------------------------------------------------|------------|
|               |   |    | ** ** |                                                                                | ** ** |
| James J. Horvath   |   | 56      |       | Chief Executive Officer                                                             |       |
| Thomas S. Astrup   |   | 32      |       | Vice President-Administration                                                       |       |
| David A. Berg      |   | 47      |       | Vice President- Agriculture                                                         |       |
| Joseph J. Talley   |   | 41      |       | Vice President-Finance                                                              |       |
| David A. Walden    |   | 48      |       | Vice President-Operations                                                           |       |
| Daniel C. Mott     |   | 42      |       | Secretary                                                                           |       |
| Samuel S. M. Wai   |   | 47      |       | Treasurer and Assistant Secretary                                                   |       |
| Brian Ingulsrud    |   | 38      |       | Corporate Controller, Assistant Secretary and Assistant Treasurer                   |       |
| Mark L. Lembke     |   | 45      |       | Finance Administration Manager, Assistant Secretary and  Assistant Treasurer   |       |
| Ronald K. Peterson |   | 46      |       | Accounting & Systems Manager, Assistant Secretary and  Assistant Treasurer |       |
| David L. Malmskog  |   | 44      |       | Director Business Development, Assistant Secretary and Assistant  Treasurer    |       |

 

 **James J. Horvath.**  Mr. Horvath was named Chief Executive Officer in May, 1998.He served as Chief Financial Officer from 1996 to 1998. From 1994 to 1996,Mr. Horvath served as the Company’s Vice President-Joint Ventures as wellas Chief Manager and Chief Operating Officer of ProGold Limited LiabilityCompany. Mr. Horvath also served as the Company’s Vice President-Financefrom 1985 to 1994. Mr. Horvath currently serves on the Boards of Directorsof United Sugars Corporation and Midwest Agri-Commodities Company.

**ThomasS. Astrup**.  Mr.Astrup was named the Company’s Vice President-Administration in 2000.  Mr. Astrup served as the Company’s CorporateController, Assistant Treasurer and Assistant Secretary from 1999 to 2000.  From 1997 until 1999, he held the positionof Controller for Midwest Agri-Commodities Company.  He was the Corporate Accountant for ProGold Limited LiabilityCompany from 1994 to 1997.

**DavidA. Berg.**  Mr.Berg was named Vice President–Agriculture in December 2000.  He was Vice President-Administration duringthe period from October 1998 to December 2000. During the period from 1994 to1998, Mr. Berg served as the Company’s Vice President-BusinessDevelopment, Vice President-Strategic Planning, Director-Market Information,Manager of Marketing and Analysis and Manager-Economic Research.

**JosephJ. Talley.** Mr. Talley was named Vice President-Finance in 1998. He served asthe Company’s Treasurer and Finance Director, Assistant Treasurer and AssistantSecretary from 1996 until his appointment as Vice President-Finance.Mr. Talley served as Finance Director of ProGold Limited Liability Companyfrom 1994 through 1996. He currently serves on the Board of Governors forProGold Limited Liability Company. Prior to July 1994, Mr. Talley was apartner with the accounting firm of Eide Helmeke & Co.

**David W. Walden.**  Mr. Walden was elected Vice Presidentof Operations in January 1998. He served as Production Manager from 1995until 1998. He joined the Company in 1979 as a Resident Engineer at theCrookston facility and has held positions of Engineering and MaintenanceSuperintendent, Production Superintendent, Assistant Operations Manager andMaintenance Manager. Mr. Walden also serves as the chairman of the Board ofManagers of Crystech LLC.

**DanielC. Mott.** Mr. Mott became the Company’s Secretary during 1999. Previously, hehad served as Assistant Secretary since 1995. Mr. Mott also serves as the Company’s General Counsel. He is a Partnerin the law firm of Oppenheimer Wolff & Donnelly LLP.  Mr. Mott is not an employee of the Company.

**SamuelS. M. Wai.** Mr. Wai was named the Company’s Treasurer and Assistant Secretaryin 1999. He served as the Company’s Corporate Controller from 1996 until 1999and was the Company’s Treasurer from 1985 to 1996. He held various financialpositions with the Company from 1979 to 1985. Mr. Wai also serves on theBoard of Managers of Crystech LLC and as Treasurer of the American CrystalSugar Political Action Committee. Mr. Wai also serves on the Board of Directorsof the Institute of Cooperative Financial Officers.

**BrianIngulsrud.**  Mr.Ingulsrud was named as the Corporate Controller, Assistant Secretary andAssistant Treasurer in 2000.  Mr.Ingulsrud served as Director of Agriculture Strategy and Development from 1999to 2000, Financial Planning Manager from 1997 until 1998, and Factory OfficesManager from 1995 until 1997.

**MarkL. Lembke.** Mr. Lembke was named Assistant Secretary and AssistantTreasurer in 1996. He currently serves as Finance Administration Manager.  Mr. Lembke served as the Company’s CorporateAccounting Manager from 1995 to 1999. From 1987 through 1995, Mr. Lembkeserved as Factory Accounting Supervisor.

**RonaldK. Peterson.** Mr. Peterson has served as Assistant Treasurer and AssistantSecretary since 1993. He currently holds the position of Accounting and SystemsManager.  From 1996 to 1999 Mr. Petersonwas the Financial Systems Manager and from 1991 to 1995 served as the Company’sCorporate Accounting Manager. Mr. Peterson has held various financialpositions with the Company since 1979.

**DavidL. Malmskog.** Mr. Malmskog currently serves as Director-Business Development andwas appointed Assistant Secretary and Assistant Treasurer in 1998.Mr. Malmskog has held various financial positions with the Company since1980.

**Item 11.                EXECUTIVECOMPENSATION**

The following table summarizes the amount of compensation paid forservices rendered to the Company during the fiscal year ended August 31,2001 and the two prior fiscal years to those persons serving as the Company’sChief Executive Officer and to the four other most highly compensated currentexecutive officers of the Company whose cash compensation exceeded $100,000 perannum.

**SUMMARY COMPENSATION TABLE**
|                           |   | ** Annual Compensation** |   | **Long-Term Compensation Payouts** |    |
|--------------------------------|--------|-------------------------------|--------|------------------------------------|---------|
|                           |   | **Year**                      |   | **Salary  ($)**                    |    | **Incentive Compensation  ($)** |   | **Other Annual Compensation  ($)(1)** |   | **1995 Plan Payouts  ($)(2)** |   | **1999 Plan Payouts  ($)** |   |
|                           |   |                          |   |                               |    |   |   |   |   |   |   |   |   |
| James J. Horvath               |   | 2001                          |   | $                                  | 410,762 |   | $ | 279,335 |   | $ | 38,181 |   | $ | 6,450 |   | - |   |
| Chief Executive Officer        |   | 2000                          |   | $                                  | 405,865 |   | $ | 257,645 |   | $ | 26,954 |   | $ | 4,437 |   | - |   |
|                           |   | 1999                          |   | $                                  | 388,840 |   | $ | 103,000 |   | 34,249 |   | $ | 4,197 |   | - |   |
|                           |   |                          |   |                               |    |   |   |   |   |   |   |   |   |
| Thomas S. Astrup               |   | 2001                          |   | $                                  | 119,060 |   | $ | 88,566 |   | $ | 6,019 |   | N/A |   | - |   |
| Vice President-Administration* |   | 2000                          |   | $                                  | 93,556  |   | $ | 19,749 |   | $ | 9,745 |   | N/A |   | - |   |
|                           |   | 1999                          |   | $                                  | 83,747  |   | $ | 8,275 |   | $ | 3,721 |   | N/A |   | - |   |
|                           |   |                          |   |                               |    |   |   |   |   |   |   |   |   |
| David A. Berg                  |   | 2001                          |   | $                                  | 179,077 |   | $ | 100,800 |   | $ | 19,099 |   | $ | 2,409 |   | - |   |
| Vice President-Agriculture     |   | 2000                          |   | $                                  | 171,077 |   | $ | 119,016 |   | $ | 14,162 |   | $ | 2,393 |   | - |   |
|                           |   | 1999                          |   | $                                  | 152,994 |   | $ | 39,000 |   | $ | 14,735 |   | $ | 1,852 |   | - |   |
|                           |   |                          |   |                               |    |   |   |   |   |   |   |   |   |
| Joseph J. Talley               |   | 2001                          |   | $                                  | 181,615 |   | $ | 91,592 |   | $ | 17,953 |   | N/A |   | - |   |
| Vice President-Finance         |   | 2000                          |   | $                                  | 171,077 |   | $ | 98,136 |   | $ | 13,648 |   | N/A |   | - |   |
|                           |   | 1999                          |   | $                                  | 154,231 |   | $ | 49,008 |   | $ | 12,594 |   | N/A |   | - |   |
|                           |   |                          |   |                               |    |   |   |   |   |   |   |   |   |
| David A. Walden                |   | 2001                          |   | $                                  | 185,000 |   | $ | 84,431 |   | $ | 18,398 |   | N/A |   | - |   |
| Vice President-Operations      |   | 2000                          |   | $                                  | 171,077 |   | $ | 89,784 |   | $ | 14,025 |   | N/A |   | - |   |
|                           |   | 1999                          |   | $                                  | 158,561 |   | $ | 35,000 |   | $ | 14,966 |   | N/A |   | - |   |

 

----

*      Effective December 11, 2000

 

(1)           Includes the cost of additional lifeinsurance coverage, car allowance, costs of tax return preparation, Company401(k) matching contributions, Company matching SERP contributions, flexiblespending taxable cash, and flexible spending dollars into 401(k).

(2)           Represents the “profit per acrepayments” made to the executive under the Company’s 1995 LTIP plan (describedbelow).  The profit per acre paymentsare determined by subtracting from the Company’s beet payment per acre theaverage cost of production per acre incurred by the Company’s members and multiplyingthe result by the number of contract rights held by the executive.

**Employment Agreement with CEO**

EffectiveMay 15, 1998, the Company and Mr. Horvath entered into an agreementregarding Mr. Horvath’s employment by the Company. The agreement providesthat Mr. Horvath shall serve as an “at will” employee at the pleasure ofthe Board of Directors.  The agreementalso contains the provision of a three-year non-compete/non-solicitationagreement with Mr. Horvath, grants the Board of Directors the authority toestablish Mr. Horvath’s base compensation each year, and also provides that hemay participate in other benefit plans offered by the Company.

If  Mr. Horvath’s employment terminateswith the Company without cause or he incurs a termination due to disabilityafter age 60, Mr. Horvath is entitled to receive reimbursement for thecost of medical and dental coverage for himself and his spouse from the date oftermination through their respective deaths; life insurance coverage equal tohis base salary on the date of termination until he attains age 65, from age 65to 70 equal to 50 percent of his base salary on the date of termination, andafter age 70 equal to 25 percent of his base salary on the date of termination;and supplemental pension benefits equal to the difference between the cumulativemonthly amount of the retirement benefit Mr. Horvath would have receivedunder Retirement Plan A and the Supplemental Executive Retirement Plan (SERP)computed as though Mr. Horvath continued his employment to age 65 assumingcompensation equal to that in effect as of the date of termination ofemployment and had attained 30 years of service with no reduction in benefitson account of an election by Mr. Horvath for any death benefit to be paid tohis spouse under the Retirement Plan A and the cumulative monthly amount of theretirement benefits actually paid to Mr. Horvath under Retirement Plan Aand the Supplemental Executive Retirement Plan (SERP).

If  Mr. Horvath’s employment terminateswith the Company without cause after age 60 and Mr. Horvath subsequentlydies, or if Mr. Horvath dies prior to terminating his employment with theCompany, Mr. Horvath’s spouse is entitled to receive monthly payments forthe remainder of her life equal to the difference between the cumulativemonthly amount of the retirement benefit Mr. Horvath would have receivedunder Retirement Plan A and the Supplemental Executive Retirement Plan (SERP)computed as though Mr. Horvath continued his employment to age 65 assumingcompensation equal to that in effect as of the date of termination ofemployment and had attained 30 years of service, with no reduction in benefitson account of an election by Mr. Horvath for any death benefit to be paid tohis spouse under the Retirement Plan A and the cumulative monthly amount of theretirement benefits actually payable to his spouse under Retirement Plan A andthe Supplemental Executive Retirement Plan (SERP).

**Incentive Plans**

**Annual Incentive Plan**

The Company’ssalaried employees are entitled to participate in an annual incentive programthat provides for cash awards based partially on the performance of the Companyand partially on achievement of certain performance objectives. The performanceobjectives of the CEO are determined by the Board of Directors. The performanceobjectives of other executives are determined by the CEO. The amount of theincentive bonus is dependent on the employee’s responsibilities, theperformance of the Company and the results of the employee’s evaluation for thefiscal year.

** **

**1995 Plan**

During 2001, the 1995 Long-Term Incentive Plan was terminated and allcontract rights cancelled.  Theparticipants in the 1995 Plan were compensated for the value of vested benefitsunder the 1995 Plan. The Company adopted the 1995 Plan, which provided deferredcompensation to certain key executives of the Company, on September 1,1995.  This 1995 Plan created financialincentives to reward executives for long-term commitment to the Company and forsuccessfully implementing the Company’s long-term growth strategies. Suchincentives were based upon contract rights that were available to the executiveunder the terms of the 1995 Plan, the value of which was related to the valueof preferred shares of the Company. The 1995 Plan allowed participants topurchase a limited number of contract rights at the end of each three-yearcycle. The 1995 Plan established both minimum and maximum ownership levels.When an executive reached their minimum ownership level, he or she could sellany vested shares over the minimum to any qualified grower. The executive orhis estate could also sell any vested shares at the time of his termination,disability or death. At the point of sale, the contract right became a share ofPreferred Stock which the Company issued to the purchasing grower. Theexecutive received the proceeds of the sale, less appropriate taxes. Thelong-term cost of the stock was not to the Company, but to the grower whoeventually purchased the stock from the executive. The 1995 Plan also providedfor annual payments of “profit per acre payments” to executives holdingcontract rights. The profit per acre payments were determined by subtractingfrom the Company’s beet payment per acre the average cost of production peracre incurred by the Company’s members and multiplying the result by the numberof contract rights held by the executive. The contract rights acquired under this plan terminate five years afterthe executive’s employment with the Company is terminated, if not exercised bythe executive.  This 1995 Plan wasreplaced by the 1999 Long-Term Incentive Plan discussed below.

The table below reflects last year’s “profit per acre payments” for the1995 Plan prior to the termination.

**1995 PlanLong-Term Incentive Plan Awards**

| **Executive Officers** |   | **Fiscal 2001   Representative  Payout (1)** |   |
|------------------------|--------|----------------------------------------------|--------|
|                   |   |                                         |   |
| James J. Horvath       |   | $6,450                                       |   |
| David A. Berg          |   | $2,409                                       |   |

----

(1)           The amount shown represents arepresentative amount, determined for the last fiscal year, with respect to“profit per acre payments”, which are non-stock price based payments. Theprofit per acre payments are determined by subtracting from the Company’s netbeet payment per acre the average cost of production per acre incurred by theCompany’s members and multiplying the result by the number of contract rightsheld by the executive. Based on that formula, the Company must provide a beetpayment per acre to its members equal to the average cost of production for anacre of sugarbeets in order for executives holding contract rights to obtainany payment of profit per acre payments. Given the method of determining theprofit per acre payments, there is no maximum payment amount.

** **

**1999 Plan**

In June of1999, the Board of Directors adopted the 1999 Long-Term Incentive Plan, whichis effective beginning fiscal year 2000. Under this plan, awards will be based upon progress towards achievingcertain long-term strategic objectives established by the Board ofDirectors.  Incentive awards under theplan will range from 0 to 40 percent of base compensation for the VicePresidents and from 0 to 80 percent of base compensation for the CEO.  The actual amount of the award available toa given individual will be based upon the collective performance level ofparticipants as determined by the Board of Directors. Awards paid under theplan may be paid in the form of cash paid to the employee’s SupplementalExecutive Retirement Plan, as discussed below, or in the form of contractrights, in each case as determined by the Board of Directors.  All awards will be subject to a three yearvesting schedule.  The Board of Directorsretains the discretion to determine the amount of any cash awards and/orcontract rights to be made available to plan participants with respect to agiven fiscal year.

In fiscal2001, 440.9 contract rights were granted. As of August 31, 2001, a total of802.68 contract rights had been granted and held under the 1999 Plan, of which120.59 were vested.  The table belowlists the executives named in the compensation table who have been granted andhold contract rights. Each contract right listed below carried a stated valueupon grant of $1,000 per share.

 

**1999Plan**

**Long-TermIncentive Plan Awards**

 
| ** **             | ** ** | **Fiscal 2001**     | ** ** | **Total Contract  Rights Held** | ** ** | **Fiscal 2001** | ** ** |
|------------------------|------------|---------------------|------------|---------------------------------|------------|-----------------|------------|
|                   |       | **Contract Rights** |       |                            |       |            |       |   |   | **Representative** |   |
| **Executive Officers** | ** ** | **Granted**         | ** ** | **Stated Value**                | ** ** | **Granted**     | ** ** | **Vested** | ** ** | **Stated Value** | ** ** | **Payout** | ** ** |
| James J. Horvath       |       | 246.65              |       | $                               | 246,653    |            | 467.49     |   | 73.61 |   | $ | 467,491 |   | - |   |
| Thomas S. Astrup       |       | 29.25               |       | $                               | 29,250     |            | 29.25      |   |   |   | $ | 29,250 |   | - |   |
| David A. Berg          |       | 54.00               |       | $                               | 54,000     |            | 100.98     |   | 15.66 |   | $ | 100,980 |   | - |   |
| Joseph J. Talley       |       | 54.90               |       | $                               | 54,900     |            | 101.88     |   | 15.66 |   | $ | 101,880 |   | - |   |
| David A Walden         |       | 56.10               |       | $                               | 56,100     |            | 103.08     |   | 15.66 |   | $ | 103,080 |   | - |   |

 

 

**Retirement Plans**

The Companyhas established noncontributory, defined benefit retirement plans which areavailable to all eligible employees of the Company. Those employees who arecovered by a collective bargaining agreement participate in Plan B, whileemployees who are not subject to a collective bargaining agreement, includingthe executive officers listed on the Summary Compensation Table, participate inpension Plan A.  The benefits of theplans are funded by periodic Company contributions to a retirement trust whichinvests the Company’s contributions and the earnings from such contributions inorder to pay the benefits to the employees. The plans provide for the paymentof monthly retirement benefits determined under a calculation based on years ofservice and a participant’s compensation. Retirement benefits are paid toparticipants upon normal retirement at the age of 65 or later or upon earlyretirement. The plans also provide for the payment of certain disability anddeath benefits.

Certain executiveemployees of the Company are eligible to participate in a “SupplementalExecutive Retirement Plan.”  Subject tothe discretion of the Board of Directors, the plan provides for theCompany to credit to the account of each executive eligible to participate inthe Supplemental Plan amounts equal to (i) the difference between amountsactually contributed to the Company’s 401(k) plan on behalf of the executiveand the amounts which could have been contributed if certain provisions of theInternal Revenue Code did not prohibit the contribution of such amounts and(ii) the difference between the benefits actually payable to the executiveunder the provisions of Retirement Plan “A” and the amounts which would bepayable under Retirement Plan “A” if certain provisions of the Internal RevenueCode did not prohibit the payment of such benefits. In addition, the executivemay elect to defer a portion of his or her compensation, ranging from 2 percentto 16 percent, by regular payroll deductions under the Supplemental Plan, andmay also defer 100 percent of all incentive compensation and profits-per-acrepayments. The Supplemental Plan is an “unfunded” plan, with all amounts to bepaid under the Supplemental Plan to be paid from the general assets of theCompany when due and also to be subject to the claims of the Company’screditors.

The tablebelow shows the approximate annual pension benefits payable to executiveofficers at normal retirement under Retirement Plan A, as well as anon-qualified supplemental benefit plan. The compensation covered by the pension program is based on anemployee’s annual salary and incentive compensation. Amounts payable arecomputed on the basis of a straight life annuity and are not reduced for socialsecurity benefits or other offsets.

**American Crystal Sugar Company**

**2001 Calculation**

**Plan A Qualified and Non-QualifiedSupplemental Benefits**

 
|             |   |   |    | **Years of Service** |   |    |   |
|------------------|--------|--------|---------|----------------------|--------|---------|--------|
| **Remuneration** |   | **15** |    | **20**               |   | **25**  |   | **30** |   | **35** |   |
|             |   |   |    |                 |   |    |   |   |   |   |   |
| $125,000         |   | $      | 24,017  |                 | $      | 32,023  |   | $ | 40,029 |   | $ | 48,035 |   | $ | 48,035 |   |
| $150,000         |   | $      | 29,267  |                 | $      | 39,023  |   | $ | 48,779 |   | $ | 58,535 |   | $ | 58,535 |   |
| $175,000         |   | $      | 34,517  |                 | $      | 46,023  |   | $ | 57,529 |   | $ | 69,035 |   | $ | 69,035 |   |
| $200,000         |   | $      | 39,767  |                 | $      | 53,023  |   | $ | 66,279 |   | $ | 79,535 |   | $ | 79,535 |   |
| $225,000         |   | $      | 45,017  |                 | $      | 60,023  |   | $ | 75,029 |   | $ | 90,035 |   | $ | 90,035 |   |
| $250,000         |   | $      | 50,267  |                 | $      | 67,023  |   | $ | 83,779 |   | $ | 100,535 |   | $ | 100,535 |   |
| $300,000         |   | $      | 60,767  |                 | $      | 81,023  |   | $ | 101,279 |   | $ | 121,535 |   | $ | 121,535 |   |
| $400,000         |   | $      | 81,767  |                 | $      | 109,023 |   | $ | 136,279 |   | $ | 163,535 |   | $ | 163,535 |   |
| $450,000         |   | $      | 92,267  |                 | $      | 123,023 |   | $ | 153,779 |   | $ | 184,535 |   | $ | 184,535 |   |
| $500,000         |   | $      | 102,767 |                 | $      | 137,023 |   | $ | 171,279 |   | $ | 205,535 |   | $ | 205,535 |   |

 

The five executive officers named in the Summary Compensation Table whoare currently employees of the Company, have years of service under the plan asfollows: Mr. Horvath has served for 16 years; Mr. Astrup has servedfor 7 years; Mr. Berg has served for 14 years; Mr. Talley has served for 7years; and Mr. Walden has served for 22 years.

The Company maintains Section 401(k) plans that permit employees toelect to set aside, on a pre-tax basis, a portion of their gross compensationin trust to pay future retirement benefits. The Company matches 100 percent ofthe nonunion and union year-round participant’s contribution up to 4 percentand 2 percent respectively of their gross earnings. The total annual pre-incometax addition to any employee’s account in any calendar year may not exceed thelesser of (i) $30,000 or (ii) 25 percent of annual compensation lessthe amount of the contribution and any salary conversion. For calendar 2001,the employee pre-income tax contribution is limited to $10,500. An employee mayalso contribute up to 10 percent of his annual compensation on an after-taxbasis. Benefits under the 401(k) plans begin to be paid to the employee uponthe close of the plan year in which one of the following events has occurred:the date the employee attains age 591⁄2, the date the employee terminates hisservice with the employer and the date specified in a written election made bythe employee to receive benefits no later than April 1 of the yearfollowing the calendar year in which the employee retires, dies, becomes disabled,reaches age 701⁄2 or is terminated.

**Item12.  SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT**

Under statelaw and the Company’s Bylaws, each member of the cooperative is entitled to onevote, regardless of the number of shares the member holds.  The Common Stock of the Company is votingstock and each member of the Company holds one share of Common Stock.  The Preferred Stock of the Company isnon-voting stock.  The Company’s stockcan only be held by individuals who are sugarbeet growers.  None of the officers or executives of theCompany hold stock of the Company.  Asof the date hereof, no director owns beneficially more than 1 percent of theCompany’s issued and outstanding Preferred Stock and the directors, as a group,beneficially own 2.16 percent of the Company’s issued and outstanding PreferredStock. To the best of the Company’s knowledge, no other party beneficially ownsmore than 2 percent of the Company’s Preferred Stock.

**Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

Each of theCompany’s directors is also a sugarbeet farmer and a shareholder member orrepresentative of a shareholder member of the Company. By virtue of theirstatus as such members of the Company, each director or the member herepresents sells sugarbeets to the Company and receives payments for thosesugarbeets. Such payments for sugarbeets often exceed $60,000. However, suchpayments are received by the directors or the entities they represent onexactly the same basis as payments are received by other members of the Companyfor the delivery of their sugarbeets. Except for the sugarbeet sales describedin the preceding sentences, none of the directors or executive officers of theCompany have engaged in any other transactions with the Company involving amountsin excess of $60,000.

 

# **PART IV**

**Item 14.  EXHIBITS, FINANCIALSTATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.**

(a)           Documents filed as part of thisreport

1.             FinancialStatements

Report ofIndependent Auditors

Balance Sheetsas of August 31, 2001 and 2000

Statements ofOperations for the Years Ended August 31, 2001, 2000 and 1999

Statements ofChanges in Members’ Investments for the Years Ended August 31, 2001, 2000and 1999

Statements ofCash Flows for the Years Ended August 31, 2001, 2000 and 1999

Notes to Financial Statements

2.             FinancialStatement Schedules

None

3.             The exhibits tothis Annual Report on Form 10-K are listed in the Exhibit Index on pages E-1 toE-5 of this report

 

(b)           Reportson Form 8-K

The Company filed the following currentreport on Form 8-K during the quarter ending on August 31, 2001.

(i)            Currentreport on Form 8-K, dated July 11, 2001, under item 9 reporting projected grossbeet payment increase.

(c)           Exhibits

The response to this portion of Item 14 is included as a separatesection of this Annual Report on Form 10-K.

**SIGNATURES**

Pursuant tothe requirements of Section 13 or 15 of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized, on November 21, 2001.
|   | AMERICAN CRYSTAL SUGAR COMPANY |
|--------|--------------------------------|
|   | By:                            | /s/ JAMES J. HORVATH |
|   |                           | *Chief Executive Officer* |

 

Dated:November 21, 2001

Pursuant tothe requirements of the Securities Exchange Act of 1934, this report has beensigned by the following persons on behalf of the registrant in the capacitiesand on the dates indicated.
| **Signature**              |   | **Title**                                               |   | **Date**               |
|----------------------------|--------|---------------------------------------------------------|--------|------------------------|
|                       |   |                                                    |   |                   |
| /s/ JAMES J. HORVATH       |   | Chief Executive Officer   (Principal Executive Officer) |   | November 21, 2001 |
| /s/ JOSEPH J. TALLEY       |   | Vice President-Finance   (Principal Financial Officer)  |   | November 21, 2001 |
| /s/ BRIAN INGULSRUD        |   | Corporate Controller   (Principal Accounting Officer)   |   | November 21, 2001 |
| /s/ MICHAEL A. ASTRUP      |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ JERRY D. BITKER        |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ RICHARD BORGEN         |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ PAUL J. DRISCOLL       |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ STEVEN M. GOODWIN      |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ COURT G. HANSON        |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ LONN M. KIEL           |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ DAVID J. KRAGNES       |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ FRANCIS L. KRITZBERGER |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ PATRICK D. MAHAR       |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ RONALD E. REITMEIER    |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ JIM A. ROSS            |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ G. TERRY STADSTAD      |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ ROBERT VIVATSON        |   | Director                                                |   | November 21, 2001 |
|                       |   |                                                    |   |                   |
| /s/ NEIL WIDNER            |   | Director                                                |   | November 21, 2001 |

**APPENDIX A**

**INDEX TO FINANCIAL STATEMENTS**
| **AMERICAN CRYSTAL  SUGAR COMPANY**                                                                         |   |
|-------------------------------------------------------------------------------------------------------------|--------|
| FINANCIAL STATEMENTS:                                                                                       |   |
| Report of Independent Auditors                                                                              |   |
| Statements of Operations for the Years Ended August 31, 2001,  2000 and 1999                           |   |
| Balance Sheets as of August 31, 2001  and 2000                                                         |   |
| Statements of Changes in Members’  Investments for the Years Ended August 31, 2001, 2000 and 1999 |   |
| Statements of Cash Flows for the Years Ended August 31, 2001,  2000 and 1999                           |   |
| Notes to the Financial Statements                                                                           |   |

 

**REPORT OF INDEPENDENT AUDITORS**

To the Members of American Crystal SugarCompany

Moorhead,Minnesota

We have audited the accompanying balance sheets of the American CrystalSugar Company (a Minnesota cooperative corporation) as of August 31, 2001and 2000, and the related statements of operations, changes in members’investments and cash flows for the years ended August 31, 2001, 2000 and1999. These financial statements are the responsibility of the company’smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audits.

We conductedour audits in accordance with auditing standards generally accepted in theUnited States of America. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of the AmericanCrystal Sugar Company as of August 31, 2001 and 2000, and the results ofits operations and its cash flows for the years ended August 31, 2001,2000 and 1999, in conformity with accounting principles generally accepted inthe United States of America.

/s/ EIDE BAILLY LLP

 

Eide Bailly LLP

October 5, 2001

Eden Prairie,Minnesota

**AMERICAN CRYSTAL SUGAR COMPANY**

**STATEMENTSOF OPERATIONS**

**FOR THE YEARS ENDED AUGUST 31**

**(INTHOUSANDS)**
|                                                                          |   | **2001**    |        | **2000** |   | **1999** |   |
|-------------------------------------------------------------------------------|--------|-------------|-------------|----------|--------|----------|--------|
| **Net Revenue**                                                               |   | **$**       | **866,362** |     | $      | 731,432  |   | $ | 843,968 |   |
|                                                                          |   |        |        |     |   |     |   |
| **Cost of Product  Sold**                                                     |   | **279,978** |        | 190,365  |   | 267,764  |   |
|                                                                          |   |        |        |     |   |     |   |
| **Gross Proceeds**                                                            |   | **586,384** |        | 541,067  |   | 576,204  |   |
|                                                                          |   |        |        |     |   |     |   |
|                                                                          |   |        |        |     |   |     |   |
| **Selling, General  and Administrative Expenses**                             |   | **181,607** |        | 163,803  |   | 190,413  |   |
|                                                                          |   |        |        |     |   |     |   |
| **Operating Proceeds**                                                        |   | **404,777** |        | 377,264  |   | 385,791  |   |
|                                                                          |   |        |        |     |   |     |   |
| **Other Income  (Expense):**                                                  |   |        |        |     |   |     |   |
| Interest Income                                                               |   | **3,232**   |        | 3,202    |   | 1,762    |   |
| Interest  Expense, Net                                                        |   | **(19,973** | )           | (22,645  | )      | (21,960  | )      |
| Other, Net                                                                    |   | **1,112**   |        | 615      |   | 4,219    |   |
|                                                                          |   |        |        |     |   |     |   |
| **Total Other  (Expense)**                                                    |   | **(15,629** | )           | (18,828  | )      | (15,979  | )      |
|                                                                          |   |        |        |     |   |     |   |
| **Proceeds Before  Income Taxes**                                             |   | **389,148** |        | 358,436  |   | 369,812  |   |
|                                                                          |   |        |        |     |   |     |   |
| **Income Tax Expense**                                                        |   | **(109**    | )           | (63      | )      | (131     | )      |
|                                                                          |   |        |        |     |   |     |   |
|                                                                          |   |        |        |     |   |     |   |
| **Net Proceeds  Resulting from Member and Non-Member Business**               |   | **$**       | **389,039** |     | $      | 358,373  |   | $ | 369,681 |   |
|                                                                          |   |        |        |     |   |     |   |
| **Distributions of  Net Proceeds:**                                           |   |        |        |     |   |     |   |
| Credited  (Charged) to Members’ Investments:                             |   |        |        |     |   |     |   |
| Non-Member  Business (Loss)                                                   |   | **$**       | **(1,884**  | )        | $      | (1,879   | )      | $ | (494 | ) |
| Equity Retention Declared to Members                                          |   | **1,560**   |        | -        |   | -        |   |
| Unit Retains  Declared to Members                                             |   | **19,239**  |        | 19,299   |   | 21,332   |   |
| Net Credit to  Members’ Investments                                      |   | **18,915**  |        | 17,420   |   | 20,838   |   |
| Payments to  Members for PIK Certificates,   Net of Equity Retention Declared |   | **26,507**  |        | -        |   | -        |   |
| Payments to  Members for Sugarbeets,   Net of Unit Retains Declared           |   | **343,617** |        | 340,953  |   | 348,843  |   |
| **Total**                                                                     |   | **$**       | **389,039** |     | $      | 358,373  |   | $ | 369,681 |   |

 

The Accompanying Notes are anIntegral Part of These Financial Statements.

**AMERICAN CRYSTAL SUGAR COMPANY**

**BALANCE SHEETS**

**AUGUST 31**

**(In Thousands)**

**Assets**

 
|                                              |   | **2001**     |        | **2000** |   |
|---------------------------------------------------|--------|--------------|-------------|----------|--------|
| **Current Assets:**                               |   |         |        |     |   |
| Cash and  Cash Equivalents                        |   | **$**        | **5,902**   |     | $      | 70,124 |   |
| Receivables:                                      |   |         |        |     |   |
| Trade                                             |   | **67,332**   |        | 49,489   |   |
| Members                                           |   | **3,300**    |        | 1,063    |   |
| Other                                             |   | **1,553**    |        | 3,230    |   |
| Advances to Related Parties                       |   | **14,924**   |        | 9,219    |   |
| Inventories                                       |   | **104,269**  |        | 147,935  |   |
| Prepaid Expenses                                  |   | **5,989**    |        | 4,363    |   |
|                                              |   |         |        |     |   |
| **Total Current Assets**                          |   | **203,269**  |        | 285,423  |   |
|                                              |   |         |        |     |   |
| **Property and Equipment:**                       |   |         |        |     |   |
| Land                                              |   | **32,511**   |        | 27,616   |   |
| Buildings and Equipment                           |   | **839,431**  |        | 825,047  |   |
| Construction in  Progress                         |   | **1,453**    |        | 6,676    |   |
| Less Accumulated Depreciation                     |   | **(510,015** | )           | (477,868 | )      |
|                                              |   |         |        |     |   |
| **Net Property and Equipment**                    |   | **363,380**  |        | 381,471  |   |
|                                              |   |         |        |     |   |
| **Other Assets:**                                 |   |         |        |     |   |
| Investments in CoBank, ACB                        |   | **15,676**   |        | 15,135   |   |
| Investments in Marketing  Cooperatives            |   | **1,638**    |        | 3,219    |   |
| Investments in ProGold Limited  Liability Company |   | **38,533**   |        | 36,867   |   |
| Investments in Crystech, LLC                      |   | **1,545**    |        | 1,630    |   |
| Notes Receivable - Crystech,  LLC                 |   | **13,905**   |        | 13,905   |   |
| Other Assets                                      |   | **3,499**    |        | 2,069    |   |
|                                              |   |         |        |     |   |
| **Total Other Assets**                            |   | **74,796**   |        | 72,825   |   |
|                                              |   |         |        |     |   |
| **Total Assets**                                  |   | **$**        | **641,445** |     | $      | 739,719 |   |

 

TheAccompanying Notes are an Integral Part of These Financial Statements.

**AMERICAN CRYSTAL SUGAR COMPANY**

**BALANCE SHEETS**

**AUGUST 31**

**(In Thousands)**

**Liabilities and Members’ Investments**

 
|                                                |   | **2001**    |        | **2000** |   |
|-----------------------------------------------------|--------|-------------|-------------|----------|--------|
| **Current Liabilities:**                            |   |        |        |     |   |
| Short-Term  Debt                                    |   | **$**       | **13,963**  |     | $      | 103,376 |   |
| Current Maturities of  Long-Term Debt               |   | **19,070**  |        | 18,925   |   |
| Accounts Payable                                    |   | **19,775**  |        | 26,291   |   |
| Advances Due to Related  Parties                    |   | **3,568**   |        | 8,845    |   |
| Other Current Liabilities                           |   | **15,555**  |        | 18,984   |   |
| Amounts Due Members                                 |   | **82,766**  |        | 53,666   |   |
|                                                |   |        |        |     |   |
| **Total Current Liabilities**                       |   | **154,697** |        | 230,087  |   |
|                                                |   |        |        |     |   |
| **Long-Term Debt, Net of Current Maturities**       |   | **201,416** |        | 230,905  |   |
|                                                |   |        |        |     |   |
| **Other Liabilities**                               |   | **29,672**  |        | 29,397   |   |
|                                                |   |        |        |     |   |
| **Total Liabilities**                               |   | **385,785** |        | 490,389  |   |
|                                                |   |        |        |     |   |
| **Members’ Investments:**                      |   |        |        |     |   |
| Preferred Stock                                     |   | **38,275**  |        | 38,275   |   |
| Common Stock                                        |   | **31**      |        | 30       |   |
| Additional Paid-In Capital                          |   | **137,241** |        | 131,071  |   |
| Unit Retains                                        |   | **116,480** |        | 116,216  |   |
| Equity Retention                                    |   | **1,560**   |        | -        |   |
| Accumulated Other  Comprehensive Income (Loss)      |   | **(436**    | )           | (655     | )      |
| Retained Earnings (Deficit)                         |   | **(37,491** | )           | (35,607  | )      |
|                                                |   |        |        |     |   |
| **Total Members’ Investments**                 |   | **255,660** |        | 249,330  |   |
|                                                |   |        |        |     |   |
| **Total Liabilities and Members’ Investments** |   | **$**       | **641,445** |     | $      | 739,719 |   |

 

TheAccompanying Notes are an Integral Part of These Financial Statements.

**AMER**ICAN CRYSTAL SUGAR COMPANY

**STATEMENTS OF CHANGES IN MEMBERS’ INVESTMENTS**

**FOR YEARS ENDEDAUGUST 31**

**(In Thousands)**

 

 
|                                           |   | **Preferred Stock** |       | **Common Stock** |       | **Additional Paid-In Capital** |       | **Unit Retains** |        | **Equity Retention** | **Accumulated   Other   Comprehensive   Income(Loss)** | **Retained Earnings (Deficit)** |       | **Total**   | **Annual   Comprehensive   Income/(Loss)** |
|------------------------------------------------|--------|---------------------|------------|------------------|------------|--------------------------------|------------|------------------|-------------|----------------------|--------------------------------------------------------|---------------------------------|------------|-------------|--------------------------------------------|
| **Balance, August 31, 1998**                   |   | **$**               | **38,275** | ** **       | **$**      | **28**                         | ** ** | **$**            | **116,183** | ** **           | **$**                                                  | **105,850**                     | ** ** | **$**       | **-**                                      | ** ** | **$** | **(2,259** | **)** | **$** | **(33,234** | **)** | **$** | **224,843** | ** ** |   | ** ** |
| Non-Member Business (Loss)                     |   | -                   |       | -                |       | -                              |       | -                |        | -                    |                                                   | -                               |       | (494        | )                                          | (494 | ) | $ | (494 | ) |
| Pension Liability Adjustment                   |   | -                   |       | -                |       | -                              |       | -                |        | -                    |                                                   | (1,829                          | )          | -           |                                       | (1,829 | ) | (1,829 | ) |
| Unit Retains Withheld from  Members            |   | -                   |       | -                |       | -                              |       | 21,332           |        | -                    |                                                   | -                               |       | -           |                                       | 21,332 |   | - |   |
| Payments to Estates and  Disabled Individuals  |   | -                   |       | -                |       | -                              |       | (365             | )           | -                    |                                                   | -                               |       | -           |                                       | (365 | ) | - |   |
| Payments of 1991 Crop Unit  Retains to Members |   | -                   |       | -                |       | -                              |       | (9,968           | )           | -                    |                                                   | -                               |       | -           |                                       | (9,968 | ) | - |   |
| Stock Issued, Net                              |   | -                   |       | 2                |       | 7,765                          |       | -                |        | -                    |                                                   | -                               |       | -           |                                       | 7,767 |   | - |   |
|                                           |   |                |       |             |       |                           |       |             |        |                 |                                                   |                            |       |        |                                       |   |   |   |   |
| **Balance, August 31, 1999**                   |   | **38,275**          | ** ** | **30**           | ** ** | **123,948**                    | ** ** | **116,849**      | ** **  | **-**                | ** **                                             | **(4,088**                      | **)**      | **(33,728** | **)**                                      | **241,286** | ** ** | **$** | **(2,323** | **)** |
| Non-Member Business (Loss)                     |   | -                   | ** ** | **-**            |       | -                              | ** ** | **-**            |        | -                    |                                                   | -                               |       | (1,879      | )                                          | (1,879 | ) | $ | (1,879 | ) |
| Pension Liability Adjustment                   |   | -                   |       | -                |       | -                              |       | -                |        | -                    |                                                   | 3,433                           |       | -           |                                       | 3,433 |   | 3,433 |   |
| Unit Retains Withheld from  Members            |   | -                   |       | -                |       | -                              |       | 19,299           |        | -                    |                                                   | -                               |       | -           |                                       | 19,299 |   | - |   |
| Payments to Estates and  Disabled Individuals  |   | -                   |       | -                |       | -                              |       | (401             | )           | -                    |                                                   | -                               |       | -           |                                       | (401 | ) | - |   |
| Payments of 1992 Crop Unit  Retains to Members |   | -                   |       | -                |       | -                              |       | (19,531          | )           | -                    |                                                   | -                               |       | -           |                                       | (19,531 | ) | - |   |
| Stock Issued, Net                              |   | -                   |       | -                |       | 7,123                          |       | -                |        | -                    |                                                   | -                               |       | -           |                                       | 7,123 |   | - |   |
|                                           |   |                | ** ** |             | ** ** |                           | ** ** |             | ** **  |                 | ** **                                             |                            | ** ** |        | ** **                                 |   | ** ** |   | ** ** |
| **Balance, August 31, 2000**                   |   | **38,275**          | ** ** | **30**           | ** ** | **131,071**                    | ** ** | **116,216**      | ** **  | **-**                | ** **                                             | **(655**                        | **)**      | **(35,607** | **)**                                      | **249,330** | ** ** | **$** | **1,554** | ** ** |
| Non-Member Business (Loss)                     |   | **-**               | ** ** | **-**            | ** ** | **-**                          | ** ** | **-**            | ** **  | **-**                | ** **                                             | **-**                           | ** ** | **(1,884**  | **)**                                      | **(1,884** | **)** | **$** | **(1,884** | **)** |
| Pension Liability Adjustment                   |   | **-**               | ** ** | **-**            | ** ** | **-**                          | ** ** | **-**            | ** **  | **-**                | ** **                                             | **219**                         | ** ** | **-**       | ** **                                 | **219** | ** ** | **219** | ** ** |
| Unit Retains Withheld from  Members            |   | **-**               | ** ** | **-**            | ** ** | **-**                          | ** ** | **19,239**       | ** **  | **-**                | ** **                                             | **-**                           | ** ** | **-**       | ** **                                 | **19,239** | ** ** | **-** | ** ** |
| Equity Retention                               |   | **-**               | ** ** | **-**            | ** ** | **-**                          | ** ** | **-**            | ** **  | **1,560**            | ** **                                             | **-**                           | ** ** | **-**       | ** **                                 | **1,560** | ** ** | **-** | ** ** |
| Payments to Estates and  Disabled Individuals  |   | **-**               | ** ** | **-**            | ** ** | **-**                          | ** ** | **(217**         | **)**       | **-**                | ** **                                             | **-**                           | ** ** | **-**       | ** **                                 | **(217** | **)** | **-** | ** ** |
| Payments of 1993 Crop Unit  Retains to Members |   | **-**               | ** ** | **-**            | ** ** | **-**                          | ** ** | **(18,758**      | **)**       | **-**                | ** **                                             | **-**                           | ** ** | **-**       | ** **                                 | **(18,758** | **)** | **-** | ** ** |
| Stock Issued, Net                              |   | **-**               | ** ** | **1**            | ** ** | **6,170**                      | ** ** | **-**            | ** **  | **-**                | ** **                                             | **-**                           | ** ** | **-**       | ** **                                 | **6,171** | ** ** | **-** | ** ** |
|                                           |   |                | ** ** |             | ** ** |                           | ** ** |             | ** **  |                 | ** **                                             |                            | ** ** |        | ** **                                 |   | ** ** |   | ** ** |
| **Balance, August 31, 2001**                   |   | **$**               | **38,275** | ** **       | **$**      | **31**                         | ** ** | **$**            | **137,241** | ** **           | **$**                                                  | **116,480**                     | ** ** | **$**       | **1,560**                                  | ** ** | **$** | **(436** | **)** | **$** | **(37,491** | **)** | **$** | **255,660** | ** ** | **$** | **(1,665** | **)** |

 

TheAccompanying Notes are an Integral Part of These Financial Statements.

**AMERICAN CRYSTAL SUGAR COMPANY**

**STATEMENTSOF CASH FLOWS**

**FOR THE YEARS ENDED AUGUST 31**

**(In Thousands)**

 
|                                                                        |   | **2001**     |        | **2000** |   | **1999** |    |
|-----------------------------------------------------------------------------|--------|--------------|-------------|----------|--------|----------|---------|
| **Cash Provided By (Used In) Operations:**                                  |   |         |        |     |   |     |    |
| Net Proceeds Resulting from  Member and Non-Member Business                 |   | **$**        | **389,039** |     |   | $        | 358,373 |   |   | $ | 369,681 |   |
|                                                                        |   |         |        |     |   |     |    |
| Payments to Members for  Sugarbeets, Net of Unit Retains Declared           |   | **(343,617** | **)**       | (340,953 | )      | (348,843 | )       |
|                                                                        |   |         |        |     |   |     |    |
| Payments to Members for PIK  Certificates, Net of Equity Retention Declared |   | **(26,507**  | )           | -        |   | -        |    |
| Add (Deduct) Non-Cash Items:                                                |   |         |        |     |   |     |    |
| Depreciation and Amortization                                               |   | **40,427**   |        | 37,562   |   | 34,334   |    |
| Income from Equity Method  Investees                                        |   | **(69**      | )           | (1,298   | )      | (802     | )       |
| Loss on the Disposition of  Property and Equipment                          |   | **1,170**    |        | 1,216    |   | 661      |    |
| Non-Cash Portion of Patronage  (Dividend)/Loss from  CoBank, ACB       |   | **(541**     | )           | 292      |   | 463      |    |
| Deferred Gain Recognition                                                   |   | **(197**     | )           | (197     | )      | (201     | )       |
| Changes in Assets and  Liabilities:                                         |   |         |        |     |   |     |    |
| Receivables                                                                 |   | **(18,402**  | )           | 22,109   |   | (16,658  | )       |
| Inventories                                                                 |   | **(61,379**  | )           | (35,977  | )      | 30,424   |    |
| Prepaid Expenses                                                            |   | **(2,402**   | )           | (2,083   | )      | 799      |    |
| Advances To/Due to Related  Parties                                         |   | **(10,982**  | )           | 22,045   |   | 3,983    |    |
| Accounts Payable                                                            |   | **(6,516**   | )           | 33       |   | (9,873   | )       |
| Other  Liabilities                                                          |   | **1,451**    |        | 4,052    |   | 3,900    |    |
| Amounts Due Members                                                         |   | **29,100**   |        | 17,968   |   | 21,283   |    |
| **Net Cash Provided By (Used In) Operations**                               |   | **(9,425**   | )           | 83,142   |   | 89,151   |    |
| **Cash Provided By (Used In) Investing  Activities:**                       |   |         |        |     |   |     |    |
| Purchases of Property and  Equipment                                        |   | **(23,063**  | )           | (43,935  | )      | (59,783  | )       |
| Proceeds from the Sale of  Property and Equipment                           |   | **42**       |        | 631      |   | 430      |    |
| Investments in Marketing  Cooperatives                                      |   | **-**        |        | -        |   | (609     | )       |
| Investments in Crystech, LLC                                                |   | **-**        |        | (47      | )      | (114     | )       |
| Issuance of  Notes Receivable - Crystech, LLC                               |   | **-**        |        | (2,022   | )      | (8,164   | )       |
| Changes in Other Assets                                                     |   | **(1,723**   | )           | 2,032    |   | 357      |    |
| **Net Cash (Used In) Investing Activities**                                 |   | **(24,744**  | )           | (43,341  | )      | (67,883  | )       |
| **Cash Provided By (Used In) Financing  Activities:**                       |   |         |        |     |   |     |    |
| Net Proceeds (Payments) on  Short-Term Debt                                 |   | **12,095**   |        | 43,196   |   | (56,142  | )       |
| Proceeds from Long-Term Debt                                                |   | **14,841**   |        | 17,000   |   | 67,455   |    |
| Long-Term Debt Repayment                                                    |   | **(44,185**  | )           | (19,220  | )      | (27,900  | )       |
| Issuance of Stock                                                           |   | **6,171**    |        | 7,123    |   | 7,767    |    |
| Payment of Unit Retains                                                     |   | **(18,975**  | )           | (19,932  | )      | (10,333  | )       |
| **Net Cash Provided By (Used In) Financing  Activities**                    |   | **(30,053**  | )           | 28,167   |   | (19,153  | )       |
|                                                                        |   |         |        |     |   |     |    |
| **Increase (Decrease) In Cash and Cash  Equivalents**                       |   | **(64,222**  | )           | 67,968   |   | 2,115    |    |
| **Cash and Cash Equivalents, Beginning of  Year**                           |   | **70,124**   |        | 2,156    |   | 41       |    |
|                                                                        |   |         |        |     |   |     |    |
| **Cash and Cash Equivalents, End of Year**                                  |   | **$**        | **5,902**   |     | $      | 70,124   |    | $ | 2,156 |   |
|                                                                             |        |              |             |          |        |          |         |  |  |  |  |  |

 

TheAccompanying Notes are an Integral Part of These Financial Statements.

**American Crystal Sugar Company**

**Notes to the Financial Statements**

**(1)****Summary ofSignificant Accounting Policies:**

*Organization*

American Crystal Sugar Company is a Minnesotaagricultural cooperative corporation which processes and markets sugar,sugarbeet pulp, molasses and seed. Business done with its shareholders (members) constitutes “patronagebusiness” as defined by the Internal Revenue Code, and the net proceedstherefrom are credited to members’ investments in the form of unit retains ordistributed to members in the form of payments for sugarbeets. Members are paidthe net amounts realized from the current year’s production less memberoperating costs determined in conformity with generally accepted accountingprinciples.

*Cash and CashEquivalents*

The Companyconsiders financial instruments purchased with a maturity of three months orless to be cash equivalents.  TheCompany places its temporary cash investments with high credit qualityfinancial institutions.  At times, suchinvestments may be in excess of the applicable insurance limit.

*Receivables*

The Companygrants credit, individually and through its marketing cooperatives, to itscustomers, which are primarily companies in the food processing industrylocated throughout the United States. Ongoing credit evaluations of customers’ financial condition areperformed and the Company maintains a reserve for potential credit losses.

*Inventories*

Sugar, pulp,molasses and other agri-products inventories are valued at estimated netrealizable value.  Maintenance parts andsupplies and sugarbeet seed inventories are valued at the lower of average costor market.  Sugarbeets are valued at theprojected gross per-ton beet payment related to that year’s crop.

*Property,Equipment and Depreciation*

Property andequipment are recorded at cost. Indirect costs and construction period interest are capitalized as acomponent of the cost of qualified assets. Property and equipment are depreciated for financial reporting purposesprincipally using straight-line methods with estimated useful lives rangingfrom 3 to 45 years.

*RelatedParties*

The followingorganizations are considered related parties for financial reporting purposes:United Sugars Corporation (United), Midwest Agri-Commodities Company (Midwest),Crystech, LLC (Crystech), ProGold Limited Liability Company (ProGold), and WestCoast Beet Seed Company.

*Investments*

Investments inCoBank, ACB are stated at cost plus unredeemed patronage refunds received inthe form of capital stock. Investments in marketing cooperatives, ProGold andCrystech are accounted for using the equity method.

*Members’ Investments*

Preferred andCommon Stock - The ownership of common and preferred stock is restricted to a“farm operator” as defined by the bylaws of the Company.  Each shareholder may own only one share ofcommon stock and is entitled to one vote in the affairs of the Company.  Each shareholder is required to grow aspecified number of acres of sugarbeets in proportion to the shares ofpreferred stock owned.  The preferredshares are non-voting.  All transfers ofstock must be approved by the Company’s Board of Directors and any shareholder desiringto sell stock must first offer it to the Company for repurchase at its parvalue.  The Company has never exercisedthis repurchase option.  The bylaws donot allow dividends to be paid on either the common or preferred stock.

Unit Retains -The bylaws authorize the Company’s Board of Directors to require additionaldirect capital investments by members in the form of a variable unit retain perton of up to a maximum of 10 percent of the weighted average gross per ton beetpayment.  The Company has a policywhereby the Company refunds, to the entity legally entitled thereto, the unitretains attributable to a deceased or totally and permanently disabled formershareholder.

EquityRetention – The Payment-In-Kind (PIK) Certificate Purchase Agreement authorizesthe Company to require additional direct capital investments by membersparticipating in the PIK program. The amount of the equity contribution iscalculated per cwt. of PIK certificates and is approximately equivalent (on aCompany-wide average basis) to the unit retain declared by the Company on thecorresponding year’s sugarbeet crop. The Company has a policy whereby theCompany refunds, to the entity legally entitled thereto, the equity retainsattributable to a deceased or totally and permanently disabled formershareholder.

AccumulatedOther Comprehensive Income (Loss) - Accumulated Other Comprehensive Income(Loss) represents the cumulative net increase (decrease) in equity related tothe recording of the minimum pension liability adjustment.  Consistent with the Company’s treatment ofincome taxes related to member source income and expenses, accumulated othercomprehensive income (loss) does not include any adjustment for income taxes.

RetainedEarnings (Deficit) - Retained earnings represent the cumulative netincome/(loss) resulting from non-member business and the difference betweenmember income as determined for financial reporting purposes and federal incometax reporting purposes from the years prior to 1996.

*Interest Expense,Net*

The Companyearns patronage dividends from CoBank, ACB based on the Company’s share of thenet income earned by the bank.  Thesepatronage dividends are applied against interest expense.

*Income Taxes*

The Company isa non-exempt cooperative for federal income tax purposes.  As such, the Company is subject to corporateincome taxes on its net income from non-member sources.  The provision for income taxes relates tothe results of operations from non-member business, state income taxes andcertain other permanent differences between financial and income tax reporting.

*AccountingEstimates*

Thepreparation of the financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses duringthe reporting period.  Actual resultscould differ from those estimates.

*Recently IssuedAccounting Pronouncements*

The Financial Accounting Standards Board hasrecently issued Statement 143 regarding Accounting for Asset RetirementObligations. Management is reviewing the pronouncement, but does not expect theimplementation of the pronouncement to have a significant effect on thefinancial statements.

*Shipping andHandling Costs*

The costsincurred in the shipping and handling of products sold are classified in thefinancial statements as a selling expense on the Statements of Operations.

*Reclassifications*

Certainreclassifications have been made to the 2000 and 1999 financial statements toconform with the 2001 presentation.

**(2)RECEIVABLES:**

**               **TheCompany had a major agri-products customer that accounted for approximately10.5 percent and 16.3  percent of totalreceivables as of August 31, 2001 and 2000, respectively.

**(3)****INVENTORIES:**

The major components of inventories are as follows:
| **(In Thousands)**                                                            |   | **2001**   |        | **2000** |   |
|-------------------------------------------------------------------------------|--------|------------|-------------|----------|--------|
| Refined  Sugar, Pulp, Molasses, other   Agri-Products and Sugarbeet Seed |   | **$**      | **86,367**  |     | $      | 126,545 |   |
| Sugarbeets                                                                    |   | **-**      |        | 3,402    |   |
| Maintenance Parts and Supplies                                                |   | **17,902** |        | 17,988   |   |
| Total Inventories                                                             |   | **$**      | **104,269** |     | $      | 147,935 |   |

 

**(4)PROPERTY AND EQUIPMENT:**

                Indirectcosts capitalized were $ .8 million, $1.1 million and $1.0 million in 2001,2000 and 1999, respectively.  Constructionperiod interest capitalized was $ .3 million, $ .7 million and $1.2 million in2001, 2000 and 1999, respectively.

** **

**(5)****INVESTMENTSIN MARKETING COOPERATIVES:**

The Companyhas a 56 percent ownership interest and a 25 percent voting interest in United. The investment is accounted for usingthe equity method.  All sugar productsproduced are sold by United as an agent for the Company.  The amount of sales and related costs to berecognized by each owner of United is allocated based on its pro rata share ofsugar production for the year.  Theowners provide United with cash advances on an ongoing basis for operating andmarketing expenses incurred by United. The Company had outstanding advances to United of $14.4 million and $8.4million as of August 31, 2001 and 2000, respectively.  The Company provides administrative services for United and isreimbursed for costs incurred. The Company was reimbursed $1.3 million, $1.6million and $ .9 million for services provided during 2001, 2000 and 1999,respectively.

The Companyhas a 33 1/3 percent ownership and voting interest in Midwest.  The investment is accounted for using theequity method.  All sugarbeet pulp,molasses and other agri-products produced are sold by Midwest as an agent forthe Company.  The amount of sales andrelated costs to be recognized by each owner of Midwest is allocated based onits pro rata share of production for each product for the year.  The owners provide Midwest with cashadvances on an ongoing basis for operating and marketing expenses incurred byMidwest. The Company had outstanding advances (from) Midwest of $(2.5) millionand $(2.9) million as of August 31, 2001 and 2000, respectively.  The owners of Midwest are guarantors of theshort-term line of credit Midwest has with CoBank, ACB. As of August 31, 2001,Midwest had outstanding short-term debt with CoBank, ACB of $3.7 million, ofwhich $2.6 million was guaranteed by the Company.

**(6)****PROGOLDLIMITED LIABILITY COMPANY:**

The Companyhas a 46 percent ownership interest in ProGold. ProGold leases substantiallyall of its assets to Cargill, Incorporated under an operating lease. Followingis summary financial information for ProGold:

 
| (In Thousands)                              |   | **2001**    |        | **2000**   |   |      |       |
|---------------------------------------------|--------|-------------|-------------|------------|--------|-----------|------------|
| **Current Assets**                          |   | **$**       | **2,932**   | ** ** | **$**  | **2,418** | ** ** |   | ** ** |
| Long-Term Assets                            |   | **199,471** |        | 209,663    |   |      |       |
| Total Assets                                |   | **$**       | **202,403** |       | $      | 212,081   |       |   |   |
|                                        |   |        |        |       |   |      |       |
| Current Liabilities                         |   | **$**       | **3,856**   |       | $      | 6,314     |       |   |   |
| Long-Term Liabilities                       |   | **121,729** |        | 133,091    |   |      |       |
| Total Liabilities                           |   | **125,585** |        | 139,405    |   |      |       |
| Members’ Equity                        |   | **76,818**  |        | 72,676     |   |      |       |
| Total Liabilities and Members’  Equity |   | **$**       | **202,403** |       | $      | 212,081   |       |   |   |
|                                        |   |        |        |       |   |      |       |
| (In Thousands)                              |   | **2001**    |        | **2000**   |   | **1999**  |       |
| Rental Revenue on Operating  Lease          |   | **$**       | **26,709**  |       | $      | 26,793    |       | $ | 27,988 |   |
| Expenses                                    |   | **22,567**  |        | 23,581     |   | 26,473    |       |
| Net Income                                  |   | **$**       | **4,142**   |       | $      | 3,212     |       | $ | 1,515 |   |

 

**(7)****CRYSTECH,LLC:**

Crystech is aspecial purpose entity that operates a molasses desugarization facility at theCompany’s Hillsboro, North Dakota sugar factory together with certain sugarprocessing equipment located at the Hillsboro, North Dakota and Moorhead, Minnesotasugar factories. The Company accounts for its investment in the joint ventureusing the equity method. The net interest capitalized related to the investmentin Crystech totaled $47,000 and $114,000 for the years ended August 31, 2000and 1999, respectively. The molasses desugarization facility became operationalon February 1, 2000.

As of August31, 2001 and 2000, the Company had outstanding notes receivable from Crystechtotaling $13.9 million. The notes are subordinate to long-term debt of Crystechtotaling $67.6 million and $82.9 million as of August 31, 2001 and 2000,respectively.  The notes bear interestat rates of 6.41 percent to 8.17 percent. Interest income related to these notes totaled $1.0 million in both 2001and 2000.  The Company had a receivablefrom Crystech, related to the interest on these notes of $ .3 million as ofAugust 31, 2000. Repayments of principal are not permitted until the seniordebt has been paid in full.  Thesubordinated notes are due and payable in December 2007. The Company also hadoutstanding payables to Crystech of $1.2 million and $6.0 million as of August31, 2001 and 2000, respectively, related to the tolling servicesagreement.  The Company had outstandingreceivables of $ .1 million and $ .7 million as of August 31, 2001 and 2000,respectively, primarily relating to capital expenditures paid on behalf ofCrystech.

The Companyhas a 12-year tolling services agreement with Crystech whereby the Company paysfor tolling services for processing sugarbeet molasses delivered to Crystechwith title and risk of loss throughout the process maintained by theCompany.  The tolling agreement may beterminated by the Company if the specified plant performance is not achievedand maintained.  Following is summaryfinancial information for Crystech:
| (In Thousands)                              |   | **2001**   |       | **2000**   |   |      |       |
|---------------------------------------------|--------|------------|------------|------------|--------|-----------|------------|
| **Current Assets**                          |   | **$**      | **1,922**  | ** ** | **$**  | **6,635** | ** ** |   | ** ** |
| Long-Term Assets                            |   | **82,471** |       | 95,462     |   |      |       |
| Total Assets                                |   | **$**      | **84,393** |       | $      | 102,097   |       |   |   |
|                                        |   |       |       |       |   |      |       |
| Current Liabilities                         |   | **$**      | **9,334**  |       | $      | 14,633    |       |   |   |
| Long-Term Liabilities                       |   | **72,265** |       | 84,552     |   |      |       |
| Total Liabilities                           |   | **81,599** |       | 99,185     |   |      |       |
| Members’ Equity                        |   | **2,794**  |       | 2,912      |   |      |       |
| Total Liabilities and Members’  Equity |   | **$**      | **84,393** |       | $      | 102,097   |       |   |   |
|                                        |   |       |       |       |   |      |       |
| (In Thousands)                              |   | **2001**   |       | **2000**   |   | **1999**  |       |
| Revenue                                     |   | **$**      | **24,052** |       | $      | 14,692    |       | $ | - |   |
| Operating Expenses                          |   | **17,349** |       | 10,588     |   | -         |       |
| Other Expenses                              |   | **6,821**  |       | 4,282      |   | -         |       |
| Net Loss                                    |   | **$**      | **(118**   | )          | $      | (178      | )          | $ | - |   |

** **

**(8)LONG-TERM AND SHORT-TERM DEBT:**

The long-term debt outstanding as of August 31, 2001 and 2000, issummarized below: 
| (In Thousands)                                                                                                                                                                                                                                        |   | **2001**    |        | **2000**   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-------------|------------|--------|
| **Term Loans from CoBank, ACB, due in varying  amounts through 2008, Interest at 6.01% to 8.58%, with senior lien on  substantially all non-current assets.**                                                                                         |   | **$**       | **118,300** | ** ** | **$**  | **155,300** | ** ** |
| Term Loans from Insurance  Companies, due in varying amounts from 2018 through 2028, Interest at 7.32%  to 7.42%, with senior lien on substantially all non-current assets.                                                                           |   | **50,000**  |        | 50,000     |   |
| Term Loans from US Bank Corp,  Ag Credit, due in equal amounts through 2002, Interest at 8.25%, unsecured.                                                                                                                                            |   | **2,000**   |        | 3,000      |   |
| Term Loans from the Bank of  North Dakota, due in equal amounts through 2009, Interest at 6.34%,  unsecured.                                                                                                                                          |   | **6,400**   |        | 7,200      |   |
| Pollution Control and  Industrial Development Revenue Bonds, due in varying amounts through 2018,  Interest at fixed and varying rates, (3.90% to 5.40% and 2.35%, respectively,  as of August 31, 2001), substantially secured by letters of credit. |   | **43,786**  |        | 34,330     |   |
| Total Long-Term Debt                                                                                                                                                                                                                                  |   | **220,486** |        | 249,830    |   |
| Less Current Maturities                                                                                                                                                                                                                               |   | **(19,070** | )           | (18,925    | )      |
| Long-Term Debt, Net of Current  Maturities                                                                                                                                                                                                            |   | **$**       | **201,416** |       | $      | 230,905 |   |

 

Minimum annualprincipal payments for the next five years are as follows:

 
| (In  Thousands) |   |                   |       |
|-----------------|--------|------------------------|------------|
| 2002            |   | **$19,070**            | ** ** |
| 2003            |   | **  19,045** | ** ** |
| 2004            |   | **  18,060** | ** ** |
| 2005            |   | **  18,075** | ** ** |
| 2006            |   | **  18,090** | ** ** |

 

As of August31, 2001, the unused portion of the term loan line of credit with CoBank, ACB,was $15.3 million.

During theyear ended August 31, 2001, the Company borrowed from CoBank, ACB, and theCommodity Credit Corporation, (CCC) and issued commercial paper to meet itsshort-term borrowing requirements. As of August 31, 2001, the Company hadavailable short-term lines of credit totaling $183.0 million.

The short-term debt outstanding as of August 31, 2001 and 2000, issummarized below:
| (In  Thousands)                              |   | **2001**   |       | **2000** |   |
|----------------------------------------------|--------|------------|------------|----------|--------|
| Loans from the Commodity  Credit Corporation |   | **$**      | **-**      |     | $      | 103,376 |   |
| Commercial Paper                             |   | **13,963** |       | -        |   |
| Total Short-Term Debt                        |   | **$**      | **13,963** |     | $      | 103,376 |   |

 

Maximum borrowings, average borrowing levels andaverage interest rates for short-term debt for the years ended August 31, 2001and 2000, follow:

 
| (In Thousands, Except Interest  Rates) |   | **2001** |        | **2000** |   |
|----------------------------------------|--------|----------|-------------|----------|--------|
| Maximum Borrowings                     |   | **$**    | **202,673** |     | $      | 197,055 |   |
| Average Borrowing Levels               |   | **$**    | **105,817** |     | $      | 116,489 |   |
| Average Interest Rates                 |   | **6.32** | %           | 6.71     | %      |

 

The terms ofthe loan agreements contain certain covenants related to, among other matters,the: level of working capital; ratio of term liabilities to members’investment; current ratio; level of term debt to net funds generated; andinvestment in CoBank, ACB, stock in amounts prescribed by the bank.Substantially all non-current assets are pledged to the senior lenders toprovide security to support the Company’s seasonal and long-termfinancing.  As of August 31, 2001, theCompany was in compliance with the terms of the loan agreements.

On September30, 2000, the Company forfeited sugar in satisfaction of the CCC loans of$105.3 million including accrued interest of $3.8 million.

Interest paid,net of amounts capitalized, was $21.1 million, $19.2 million and $22.6 millionfor the years ended August 31, 2001, 2000 and 1999, respectively.

The Companyhad outstanding letters of credit totaling $48.9 million as of August 31, 2001.

**(9)****FAIR VALUEOF FINANCIAL INSTRUMENTS:**

The fair valueof financial instruments is generally defined as the amount at which theinstrument could be exchanged in a current transaction between willing parties,other than in a forced liquidation sale. Quoted market prices are generally not available for the Company’sfinancial instruments.  Fair values arebased on judgments regarding anticipated cash flows, future expected lossexperience, current economic conditions, risk characteristics of variousfinancial instruments and other factors. These estimates involve uncertainties and matters of judgment, andtherefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

*Notes Receivable - Crystech, LLC -*Basedon current interest rates with similar maturities, the fair value of the notesreceivable approximates the carrying value.

*Long-Term Debt* -Based upon current borrowing rates with similar maturities, the fair value ofthe long-term debt approximates the carrying value.

*Investments in CoBank, ACB, Investments inMarketing Cooperatives, Investments in ProGold Limited Liability Company andInvestments in Crystech, LLC* - The Company believes itis not practical to estimate the fair value of these investments withoutincurring excessive costs because there is no established market for thesesecurities and equity interests, and it is inappropriate to estimate futurecash flows which are largely dependent on future earnings of theseorganizations.

**(10)****MEMBERS’INVESTMENTS:**

The following schedule details the Preferred Stock and Common Stock asof August 31, 2001, 2000 and 1999:
|                                                                                                        |   | **Par Value** |   | **Shares Authorized** |    | **Shares Issued & Outstanding** |    |
|-------------------------------------------------------------------------------------------------------------|--------|---------------|--------|-----------------------|---------|-------------------------------------|---------|
| Preferred Stock:                                                                                            |   |          |   |                  |    |                                |    |
|                 August 31,  2001 |   | $             | 76.77  |                  | 600,000 |                                | 498,570 |   |
|                 August 31,  2000 |   | $             | 76.77  |                  | 600,000 |                                | 498,570 |   |
|                 August 31,  1999 |   | $             | 76.77  |                  | 600,000 |                                | 498,570 |   |
|                                                                                                        |   |          |   |                  |    |                                |    |
| Common Stock:                                                                                               |   |          |   |                  |    |                                |    |
|                 August 31, 2001  |   | $             | 10.00  |                  | 4,000   |                                | 3,134   |   |
|                 August 31,  2000 |   | $             | 10.00  |                  | 4,000   |                                | 3,006   |   |
|                 August 31,  1999 |   | $             | 10.00  |                  | 4,000   |                                | 2,950   |   |

 

Related to the 1997 stock offering, the Company received $6.2 million,$7.1 million and $7.8 million from the sale of stock during the years endedAugust 31, 2001, 2000 and 1999, respectively. The remaining $15.0 million is tobe received in installment amounts through 2004.

**(11)****EMPLOYEEBENEFIT PLANS:**

Company-Sponsored Defined Benefit Pension and Other Post-RetirementBenefit Plans

Substantially all employees who meet eligibility requirements of ageand length of service are covered by a Company-sponsored retirement plan.  As of August 31, 2001, the pension planswere funded as required by the funding standards set forth by the EmployeeRetirement Income Security Act (ERISA). The Company also has a non-qualified supplemental executive retirementplan for certain employees.

The Companyhas a medical plan and a Medicare supplement plan which are available tosubstantially all the Company retirees. The costs of these plans are shared by the Company and planparticipants.

 

The following schedules provide the components of the Net PeriodicPension and Post-Retirement Costs as of August 31, 2001, 2000 and 1999:
| ***Components of Net Periodic Pension Cost*** |   |       |      |     |   |     |   |
|-----------------------------------------------|--------|------------|-----------|----------|--------|----------|--------|
| (In Thousands)                                |   | **2001**   |      | **2000** |   | **1999** |   |
| Service  Cost                                 |   | **$**      | **1,872** |     | $      | 1,625    |   | $ | 1,816 |   |
| Interest  Cost                                |   | **5,167**  |      | 4,783    |   | 4,341    |   |
| Expected  Return on Plan Assets               |   | **(5,879** | )         | (4,986   | )      | (4,923   | )      |
| Multiple  Employer Adjustment                 |   | **(111**   | )         | (90      | )      | (1       | )      |
| Special  Termination Benefits                 |   | **779**    |      | -        |   | -        |   |
| Curtailment  Loss                             |   | **29**     |      | -        |   | -        |   |
| Amortization  of Net Transition Assets        |   | **(296**   | )         | (296     | )      | (296     | )      |
| Amortization  of Prior Service Costs          |   | **506**    |      | 447      |   | 1,090    |   |
| Amortization  of Net (Gain) Loss              |   | **60**     |      | 138      |   | (6       | )      |
| Net  Periodic Pension Cost                    |   | **$**      | **2,127** |     | $      | 1,621    |   | $ | 2,021 |   |

 
| ***Components of Net Periodic Post-Retirement  Cost*** |   |      |      |     |   |     |   |
|--------------------------------------------------------|--------|-----------|-----------|----------|--------|----------|--------|
| (In Thousands)                                         |   | **2001**  |      | **2000** |   | **1999** |   |
| Service  Cost                                          |   | **$**     | **517**   |     | $      | 518      |   | $ | 619 |   |
| Interest  Cost                                         |   | **1,013** |      | 871      |   | 900      |   |
| Special  Termination Benefits                          |   | **151**   |      | -        |   | -        |   |
| Amortization  of Prior Service Costs                   |   | **-**     |      | 2        |   | 2        |   |
| Amortization  of Net (Gain) Loss                       |   | **(274**  | )         | (270     | )      | (100     | )      |
| Net  Periodic Post-Retirement Cost                     |   | **$**     | **1,407** |     | $      | 1,121    |   | $ | 1,421 |   |

 

Formeasurement purposes, a 6.75 percent annual rate of increase in the per capitacost of covered healthcare benefits was assumed for 2001.  The rate is assumed to decline to 5.5percent over the next three years.

Assumedhealthcare trends can have a significant effect on the amounts reported forhealthcare plans.  A 1 percent change inthe assumed healthcare trend rates would have the following effects:
| (In  Thousands)                                                                                            |   | **1% Increase** |   | **1% Decrease** |   |
|------------------------------------------------------------------------------------------------------------|--------|-----------------|--------|-----------------|--------|
| Effect on total service and  interest cost components  of net  periodic post-retirement benefit costs |   | $               | 331    |            | $      | (265 | ) |
| Effect on the accumulated post-retirement  benefit  obligation                                        |   | $               | 2,572  |            | $      | (2,080 | ) |

 

The following schedules set forth a reconciliation ofthe changes in the plans’ benefit obligation and fair value of assets for theyears ending August 31, 2001 and 2000 and a statement of the fundedstatus and amounts recognized in the Balance Sheets as of August 31, 2001 and2000:
|                                                                       |   | **Pension** |       | **Post-Retirement** |       |
|----------------------------------------------------------------------------|--------|-------------|------------|---------------------|------------|
| (In Thousands)                                                             |   | **2001**    |       | **2000**            |       | **2001** |   | **2000** |   |
| ***Change in Benefit Obligation***                                         |   |        | ** ** |                | ** ** |   | ** ** |   | ** ** |
| Obligation  at the Beginning of the Year                                   |   | **$**       | **64,448** | ** **          | $          | 65,357 |   | **$** | **12,561** | ** ** | $ | 11,802 |   |
| Service  Cost                                                              |   | **1,872**   | ** ** | 1,625               |       | **517** | ** ** | 518 |   |
| Interest  Cost                                                             |   | **5,167**   | ** ** | 4,783               |       | **1,013** | ** ** | 871 |   |
| Plan  Participant Contributions                                            |   | **-**       | ** ** | -                   |       | **(323** | **)** | (277 | ) |
| Amendments                                                                 |   | **-**       | ** ** | 833                 |       | **-** | ** ** | - |   |
| Curtailment  Loss                                                          |   | **29**      | ** ** | -                   |       | **-** | ** ** | - |   |
| Special  Termination Benefits                                              |   | **779**     | ** ** | -                   |       | **151** | ** ** | - |   |
| Actuarial  (Gain)/Loss                                                     |   | **2,857**   | ** ** | (4,991              | )          | **4,035** | ** ** | 174 |   |
| Benefits  Paid by Employer                                                 |   | **(3,536**  | **)**      | (3,159              | )          | **(697** | **)** | (527 | ) |
| Obligation  at the End of the Year                                         |   | **$**       | **71,616** | ** **          | $          | 64,448 |   | **$** | **17,257** | ** ** | $ | 12,561 |   |
|                                                                       |   |        | ** ** |                |       |   | ** ** |   |   |
| ***Change in Plan Assets***                                                |   |        | ** ** |                |       |   | ** ** |   |   |
| Fair  Value at the Beginning of the Year                                   |   | **$**       | **65,250** | ** **          | $          | 55,230 |   | **$** | **-** | ** ** | $ | - |   |
| Actual  Return on Plan Assets                                              |   | **(787**    | **)**      | 9,752               |       | **-** | ** ** | - |   |
| Plan  Participant Contributions                                            |   | **-**       | ** ** | -                   |       | **323** | ** ** | 277 |   |
| Employer  Contributions                                                    |   | **4,168**   | ** ** | 3,427               |       | **697** | ** ** | 527 |   |
| Benefits  Paid                                                             |   | **(3,536**  | **)**      | (3,159              | )          | **(1,020** | **)** | (804 | ) |
| Fair  Value at the End of the Year                                         |   | **$**       | **65,095** | ** **          | $          | 65,250 |   | **$** | **-** | ** ** | $ | - |   |
|                                                                       |   |        | ** ** |                |       |   | ** ** |   |   |
| ***Funded Status***                                                        |   |        | ** ** |                |       |   | ** ** |   |   |
| Funded  Status as of August 31,                                            |   | **$**       | **(6,521** | **)**               | $          | 802 |   | **$** | **(17,257** | **)** | $ | (12,561 | ) |
| Unrecognized  Net Transition Asset                                         |   | **(569**    | **)**      | (865                | )          | **-** | ** ** | - |   |
| Unrecognized  Actuarial Loss/(Gain)                                        |   | **6,775**   | ** ** | (2,717              | )          | **(1,251** | **)** | (5,236 | ) |
| Unrecognized  Prior Service Cost                                           |   | **2,645**   | ** ** | 3,180               |       | **-** | ** ** | - |   |
| Net  Amount Recognized                                                     |   | **$**       | **2,330**  | ** **          | $          | 400 |   | **$** | **(18,508** | **)** | $ | (17,797 | ) |
|                                                                       |   |        | ** ** |                |       |   | ** ** |   |   |
| ***Amounts Recognized in the Balance Sheets***                             |   |        | ** ** |                |       |   | ** ** |   |   |
| Prepaid  Pension Cost                                                      |   | **$**       | **4,630**  | ** **          | $          | 2,545 |   | **$** | **-** | ** ** | $ | - |   |
| Accrued  Benefit Liability                                                 |   | **(2,925**  | **)**      | (3,062              | )          | **(18,508** | **)** | (17,797 | ) |
| Intangible  Asset                                                          |   | **189**     | ** ** | 262                 |       | **-** | ** ** | - |   |
| Accumulated  Other Comprehensive Income                                    |   | **436**     | ** ** | 655                 |       | **-** | ** ** | - |   |
| Net  Amount Recognized                                                     |   | **$**       | **2,330**  | ** **          | $          | 400 |   | **$** | **(18,508** | **)** | $ | (17,797 | ) |
|                                                                       |   |        |       |                |       |   |   |   |   |
| ***Change in Additional Minimum Liability (for the current year)***   |   |        |       |                |       |   |
|                                                                       |   | **2001**    |       |                |       |   |   |   |   |
| Other Comprehensive Income                                                 |   | **$**       | 219        |                |       |   |   |   |   |   |
| Intangible Asset Decrease                                                  |   | **$**       | 73         |                |       |   |   |   |   |   |
| Accrued  Pension Liability Decrease                                        |   | **$**       | 292        |                |       |   |   |   |   |   |

 

The assumptions used in themeasurement of the Company’s benefit obligations are shown below:

 
| ***Weighted Average  Assumptions as of August 31,***         |   |        |   |                |   |     |       |     |   |
|--------------------------------------------------------------|--------|-------------|--------|---------------------|--------|----------|------------|----------|--------|
|                                                         |   | **Pension** |   | **Post-Retirement** |   |
|                                                         |   | **2001**    |   | **2000**            |   | **2001** |       | **2000** |   |
| Discount Rate                                                |   | **7.75**    | **%**  | 8.25                | %      | **7.75** | **%**      | 8.25     | %      |
| Expected Return on Plan Assets                               |   | **9.0**     | **%**  | 9.0                 | %      | **N/A**  | ** ** | N/A      |   |
| Rate  of Compensation Increase    (Non-Union Plan Only) |   | **5.0**     | **%**  | 5.0                 | %      | **N/A**  | ** ** | N/A      |   |

 

*Long-Term Incentive Plans*

During 2001, the 1995 Long-Term Incentive Plan was terminated and allcontract rights were cancelled.

The 1999 Long-Term Incentive Plan provides deferred compensation tocertain key executives of the Company. The plan creates financial incentives that are based upon contractrights which are available to the executive under the terms of the plan, thevalue of which is related to the value of preferred shares of the Company asdetermined by the Board of Directors. In fiscal 2001, 440.9 contract rights were granted at a stated value of$440,903. As of August 31, 2001, there were 802.68 rights issued andoutstanding, 120.59 of which were vested. Each contract right carried a statedvalue upon grant of $1,000.

*DefinedContribution Plans*

The Company has qualified 401(k) plans for all eligible employees.  The plans provide for immediate vesting ofbenefits.  Participants may contribute apercentage of their gross earnings each pay period as provided in theparticipation agreement.  The Companymatches the non-union and union year-round participants’ contributions up to 4percent and 2 percent respectively, of their gross earnings.  The Company’s contributions to these planstotaled $1.5 million, $1.4 million and $1.4 million for the years ended August31, 2001, 2000 and 1999, respectively.

**(12) 2000 PIK Program**

Under the United States Department ofAgriculture (USDA) Payment- In-Kind (PIK) program, the Company’s members werepaid to destroy a portion of their 2000 sugarbeet crop.  Payments to the Company’s members were madeby the USDA in the form of PIK certificates to be exchanged for governmentowned sugar.  The Company entered intocontracts with its members to purchase the PIK certificates they received fromthe USDA and to reduce the members’ delivery obligations to the Company to theextent sugarbeets were destroyed under the PIK program. The purchase price forthe PIK certificates reflected an allocation of the Company’s fixed costs toaccount for the reduction of sugarbeets available for processing.

As a result of the PIK program, the number ofacres of the 2000 sugarbeet crop harvested by the Company’s members was reducedby approximately 33,000 acres.  The PIKcertificates received were exchanged for approximately 1.6 millionhundredweight of sugar.

**(13)****INCOME TAXES:**

Total incometax payments (refunds) were $ (300), $ (7,600) and $ (380,000) in the yearsended August 31, 2001, 2000 and 1999, respectively.

As of August 31, 2001, the Company had accumulated approximately $21.0million of net operating loss carryforwards. The net operating loss carryforwards expire in the years 2012 through2020.  The Company has provided avaluation allowance for the entire balance of the deferred tax asset related tothe loss carryforwards.

**(14)****ENVIRONMENTAL MATTERS:**

The Company issubject to extensive federal and state environmental laws and regulations withrespect to water and air quality, solid waste disposal and odor and noisecontrol.  The Company conducts anon-going compliance program designed to meet these environmental laws andregulations.  The Company believes thatit is in substantial compliance with applicable environmental laws andregulations.  From time to time,however, the Company may be involved in investigations or determinationsregarding non-material matters that may arise.

** **

 

**EXHIBITINDEX TO ANNUAL REPORT**ON FORM 10-KFOR FISCAL YEAR ENDED AUGUST 31, 2001

 
| **Item No.** |   |                                                                                                                                                  |   | **Method of Filing**                                                                                                                                                      |
|--------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 3.1          |   | Restated  Articles of Incorporation of American Crystal Sugar Company                                                                                 |   | Incorporated  by reference to Exhibit 3(i) from the Company’s Registration Statement on  Form S-1 (File No. 33-83868), declared effective November 23, 1994.    |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 3.2          |   | Restated  By-laws of American Crystal Sugar Company                                                                                                   |   | Incorporated  by reference to Exhibit 3(ii) from the Company’s Registration Statement on  Form S-1 (File No. 333-11693), declared effective November 13, 1996.  |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 4.1          |   | Restated  Articles of Incorporation of American Crystal Sugar Company                                                                                 |   | See Exhibit  3.1                                                                                                                                                          |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 4.2          |   | Restated  By-laws of American Crystal Sugar Company                                                                                                   |   | See Exhibit 3.2                                                                                                                                                           |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.1         |   | Trademark  License Agreement between Registrant and United Sugars Corporation, dated  November 1, 1993                                           |   | Incorporated  by reference to Exhibit 10(l) from the Company’s Registration Statement on  Form S-1 (File No. 33-83868), declared effective November 23, 1994.   |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.2         |   | Uniform  Member Marketing Agreement, Pool Basis between Registrant and Midwest  Agri-Commodities Company, dated April 14, 1992                   |   | Incorporated  by reference to Exhibit 10(m) from the Company’s Registration Statement on  Form S-1 (File No. 33-83868), declared effective November 23, 1994.   |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.3         |   | 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.   |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.4         |   | 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.   |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.5         |   | 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.   |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.6         |   | 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.   |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.7         |   | 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.   |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.8         |   | Uniform  Member Marketing Agreement                                                                                                                   |   | Incorporated  by reference to Exhibit 10(x) from the Company’s Registration Statement on  Form S-1 (File No. 33-83868), declared effective November 23, 1994.   |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| +10.9        |   | 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.  |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| +10.10       |   | 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.  |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| +10.11       |   | Gas Sales  Contract between Registrant and Coastal Gas Marketing Company, dated as of  March 20, 1996                                            |   | Incorporated  by reference to Exhibit 10(aa) from the Company’s Registration Statement on  Form S-1 (File No. 333-11693), declared effective November 13, 1996. |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| +10.12       |   | 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.  |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.13        |   | 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.                                      |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.14        |   | 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.                                      |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.15        |   | 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.                                      |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.16        |   | 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.                                      |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| ++10.17      |   | 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.                                      |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.18        |   | 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                                        |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.19        |   | Uniform  Member Beet Sugar Marketing Agreement                                                                                                        |   | Incorporated  by reference to Exhibit 10.23 from the Company’s Annual Report on Form 10-K  for the year ended August 31, 1999                                        |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.20        |   | 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                                        |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.21        |   | 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                                        |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.22        |   | 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                                        |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.23        |   | 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                                       |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.24        |   | 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                                                         |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.25        |   | 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                                         |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.26        |   | 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                                         |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.27        |   | 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                                                    |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.28        |   | 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                                                    |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.29        |   | 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                                                         |
|         |   |                                                                                                                                                  |   |                                                                                                                                                                      |
| 10.30        |   | Addendum to  Master Agreement between the Registrant and Bakery, Confectionery, Tobacco  Workers & Grain Millers AFL-CIO, CLC dated July 10, 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                                                                                                                           |   | Filed  herewith electronically                                                                                                                                            |

 

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+              Portions of the Exhibit have been granted confidentialtreatment by the Commission. The omitted portions have been filed separatelywith the Commission.

++           Portions of the Exhibit have been deleted from thepublicly filed document and have been filed separately with the Commissionpursuant to a request for confidential treatment.