UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 000-16674

IMPERIAL SUGAR COMPANY

(Exact name of registrant as specified in its charter)

Texas	74-0704500
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Imperial Square, P.O. Box 9, Sugar Land, Texas 77487

(Address of principal executive offices, including Zip Code)

(281) 491-9181

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer, see definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	¨	Accelerated Filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of July 31, 2011, there were 12,243,446 shares of common stock, without par value, of the registrant outstanding.

IMPERIAL SUGAR COMPANY

Index

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited)		2
	Consolidated Statements of Operations (Unaudited)		3
	Consolidated Statements of Cash Flows (Unaudited)		4
	Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)		5
	Notes to Consolidated Financial Statements (Unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		21
Item 4.	Controls and Procedures		21
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		23
Item 1A.	Risk Factors		24
Item 6.	Exhibits		25
	Signatures		26

Forward-Looking Statements

Statements regarding future market prices and margins, refinery timelines and operational dates, future expenses and liabilities arising from the Port Wentworth refinery incident, future costs and actions regarding the Louisiana Sugar Refining, LLC venture, future import and export levels, future government and legislative action, future operating results, future availability of raw sugar, operating efficiencies, results of future investments and initiatives, future cost savings, future product innovations, future energy costs, our liquidity and ability to finance our operations and capital investment programs, future pension plan contributions and other statements that are not historical facts contained in this quarterly report on Form 10-Q are forward-looking statements that involve certain risks, uncertainties and assumptions. These risks, uncertainties and assumptions include, but are not limited to, market factors, farm and trade policy, unforeseen engineering, construction and equipment delays, our ability to realize planned cost savings and other improvements, the available supply of sugar, energy costs, the effect of weather and economic conditions, results of actuarial assumptions, actual or threatened acts of terrorism or armed hostilities, legislative, administrative and judicial actions and other factors detailed elsewhere in this report and in our other filings with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. We identify forward-looking statements in this report by using the following words and similar expressions:

•      expect	•      project	•      estimate
•      believe	•      anticipate	•      likely
•      plan	•      intend	•      could
•      should	•      may	•      predict
•      budget	•      possible	•

Management cautions against placing undue reliance on forward-looking statements or projecting any future results based on such statements or present or future earnings levels. All forward-looking statements in this quarterly report on Form 10-Q are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this report and in our other SEC filings.

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PART I - FINANCIAL INFORMATION

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2011			September 30, 2010
	(In Thousands of Dollars)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	311		$	22,750
Marketable Securities		194			198
Accounts Receivable, Net		44,805			55,093
Inventories:
Finished Products		42,052			30,526
Raw and In-Process Materials		19,128			67,133
Supplies		18,009			15,716
Total Inventory		79,189			113,375
Prepaid Expenses and Other Current Assets		52,026			40,949
Total Current Assets		176,525			232,365
Other Investments		44,957			15,952
Property, Plant and Equipment, Net		252,427			280,211
Deferred Income Taxes, Net		19,887			10,624
Other Assets		5,123			2,414
Total	$	498,919		$	541,566
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable:
Raw Sugar	$	6,879		$	81,673
Other Trade		13,799			28,326
Total Accounts Payable		20,678			109,999
Borrowing under Revolving Credit Line		78,829			22,000
Deferred Income Taxes, Net		11,427			11,427
Other Current Liabilities		67,740			54,189
Total Current Liabilities		178,674			197,615
Deferred Employee Benefits and Other Liabilities		115,165			125,219
Commitments and Contingencies
Shareholders’ Equity:
Preferred Stock, Without Par Value, Issuable in Series; 5,000,000 Shares Authorized,		—			—
Common Stock, Without Par Value; 50,000,000 Shares Authorized; 12,243,446 and 12,145,098 Shares Issued and Outstanding at June 30, 2011 and September 30, 2010		131,633			130,168
Retained Earnings		142,256			163,834
Accumulated Other Comprehensive Loss		(68,809	)		(75,270	)
Total Shareholders’ Equity		205,080			218,732
Total	$	498,919		$	541,566

See notes to consolidated financial statements.

2

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June  30,						Nine Months Ended June  30,
	2011			2010			2011			2010
	(In Thousands of Dollars, Except per Share Amounts)
Net Sales	$	196,985		$	260,978		$	616,540		$	643,620
Business Interruption Insurance Recovery		—			—			—			84,677
Cost of Sales (includes depreciation of $4,698,000 and $5,905,000 for the three months and $15,385,000 and $16,044,000 for the nine months ended June 30, 2011 and 2010, respectively)		(209,055	)		(259,068	)		(622,005	)		(670,157	)
Selling, General and Administrative Expense (includes depreciation of $201,000 and $323,000 for the three months and $632,000 and $987,000 for the nine months ended June 30, 2011 and 2010, respectively)		(10,574	)		(11,367	)		(29,890	)		(38,396	)
Insurance Recoveries Recognized		—			—			—			193,796
Gain on Contribution of Assets to Joint Venture		—			—			3,598			—
Operating Income (Loss)		(22,644	)		(9,457	)		(31,757	)		213,540
Interest Expense		(733	)		(565	)		(1,531	)		(1,307	)
Interest Income		5			6			404			48
Other Income (Loss), Net		(1,395	)		1,350			(814	)		4,559
Income (Loss) Before Income Taxes		(24,767	)		(8,666	)		(33,698	)		216,840
Benefit (Provision) for Income Taxes		8,683			2,979			12,854			(77,675	)
Net Income (Loss)	$	(16,084	)	$	(5,687	)	$	(20,844	)	$	139,165
Basic Earnings (Loss) per Share of Common Stock	$	(1.35	)	$	(0.48	)	$	(1.75	)	$	11.79
Diluted Earnings (Loss) per Share of Common Stock	$	(1.35	)	$	(0.48	)	$	(1.75	)	$	11.53
Weighted Average Shares Outstanding:
Basic		11,928,210			11,811,540			11,890,013			11,800,372
Diluted		11,928,210			11,811,540			11,890,013			12,068,163

See notes to consolidated financial statements.

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IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended June 30,
	2011			2010
	(In Thousands of Dollars)
Operating Activities:
Net Income (Loss)	$	(20,844	)	$	139,165
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities:
Insurance Recoveries Recognized		—			(278,473	)
Depreciation		16,017			17,031
Deferred Income Taxes		(12,854	)		77,675
Reclassification from Accumulated Other Comprehensive Income (Loss) to Net Income (Loss)		(5,916	)		847
Cash (Paid) Received on Change in Fair Value of Derivative Instruments		12,669			(1,604	)
Gain on Contribution of Assets to Joint Venture		(3,598	)		—
Stock-Based Compensation		2,135			1,818
Equity (Earnings) Loss in Unconsolidated Subsidiaries		1,531			(3,495	)
Reduction of Fair Value of Guarantee		(700	)		—
Excess Tax Benefits from Stock-Based Compensation		286			89
Other		305			168
Changes in Operating Assets and Liabilities:
Accounts Receivable		10,104			(20,674	)
Inventories		34,186			(1,996	)
Prepaid Expenses and Other Assets		2,999			4,157
Accounts Payable—Raw Sugar		(74,794	)		15,833
Accounts Payable—Other Trade		(8,785	)		263
Other Liabilities		(10,130	)		(3,472	)
Net Cash Used in Operating Activities		(57,389	)		(52,668	)
Investing Activities:
Capital Expenditures		(20,143	)		(65,875	)
Advances from Insurance Carriers		—			51,000
Other		(250	)		(235	)
Net Cash Used in Investing Activities		(20,393	)		(15,110	)
Financing Activities:
Borrowing (Repayment) under Revolving Credit Line		56,829			(27,000	)
Cash Dividends		(816	)		(813	)
Excess Tax Benefits from Stock-Based Compensation		(286	)		(89	)
Other		(384	)		(205	)
Net Cash Provided by (Used in) Financing Activities		55,343			(28,107	)
Decrease in Cash and Cash Equivalents		(22,439	)		(95,885	)
Cash and Cash Equivalents, Beginning of Period		22,750			115,584
Cash and Cash Equivalents, End of Period	$	311		$	19,699
Supplemental Non-Cash Items:
Tax Effect of Deferred Gains and Losses	$	3,648		$	219
Purchase of Property, Plant and Equipment on Account	$	1,245		$	5,636

See notes to consolidated financial statements.

4

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Nine Months Ended June 30, 2011

(Unaudited)

	Shares of Common Stock		Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	(In Thousands of Dollars, Except Share Data)
Balance September 30, 2010		12,145,098	$	130,168	$	163,834		$	(75,270	)	$	218,732
Comprehensive Income:
Net Loss						(20,844	)					(20,844	)
Foreign Currency Translation Adjustment (Net of Tax of $121,000)									215			215
Change in Derivative Fair Value (Net of Tax of $4,571,000)									8,097			8,097
Reclassification from Accumulated Other Comprehensive Income (Loss) to Net Income (Net of Tax of $2,135,000)									(3,781	)		(3,781	)
Change in Pension Liability (Net of Tax of $1,090,000)									1,930			1,930
Total Comprehensive Income												(14,383	)
Dividends ($0.06 per share)						(734	)					(734	)
Restricted Stock Grants		98,348		1,465								1,465
Balance June 30, 2011		12,243,446	$	131,633	$	142,256		$	(68,809	)	$	205,080

See notes to consolidated financial statements.

5

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED JUNE 30, 2011 AND 2010

(Unaudited)

1. ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and reflect, in the opinion of management, all adjustments, consisting only of normal recurring accruals, that are necessary for a fair presentation of financial position and results of operations for the interim periods presented. These financial statements include the accounts of Imperial Sugar Company and its majority-owned subsidiaries (the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures required by accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2010. The Company operates its business as one domestic segment—the production and sale of refined sugar and related products. Refinery explosion related charges have been combined into Selling, General and Administrative Expense in the Consolidated Statements of Operations.

Cost of Sales

The Company’s sugar inventories, which are accounted for on a LIFO basis, are periodically reduced at interim dates to levels below that of the beginning of the fiscal year. When such interim LIFO liquidations are expected to be restored prior to fiscal year-end, the estimated replacement cost of the liquidated layers is utilized as the basis of the cost of sugar sold from beginning of the year inventory. Accordingly, the cost of sugar utilized in the determination of cost of sales for interim periods includes estimates which may require adjustment in future fiscal periods. Sugar inventory quantities at June 30, 2011 declined below the September 30, 2010 balance, resulting in the liquidation of a LIFO inventory layer with a cost approximately $24 million below the cost of the current year’s purchases.

Insurance Recoveries

Insurance recoveries that are deemed to be probable and reasonably estimable are recognized to the extent of the related loss. Insurance recoveries which result in gains, including recoveries under business interruption coverage, are recognized only when realized by settlement with the insurers. Advances on insurance settlements are recorded as liabilities or offsets to accrued probable recoveries. The evaluation of insurance recoveries requires estimates and judgments about future results which affect reported amounts and certain disclosures. Actual results could differ from those estimates.

2. INSURANCE RECOVERIES

The Company settled its property insurance claim related to the 2008 Port Wentworth accident in December 2009 for an aggregate of $345 million. Insurance recoveries aggregating $66.5 million which were deemed probable and reasonably estimable were recognized to the extent of the related loss in prior periods. The remaining $278.5 million of recoveries were recognized as gains in the quarter ended December 31, 2009, as follows (in millions):

	Insurance Recovery		Previously Recognized		Recognized in the Three Months Ended December 31, 2009
Business interruption	$	84.7		—	$	84.7
Property replacement cost		212.4	$	23.2		189.2
Payroll and other incurred costs		47.9		43.3		4.6
Total	$	345.0	$	66.5	$	278.5

Financial reporting gains recognized for replacement cost recoveries are not recognized for tax purposes to the extent the Company made elections under the involuntary conversion rules of the Internal Revenue Code, as the insurance proceeds have been reinvested in replacement property within the required period of time. The replacement cost expenditures establish a new basis in the assets for financial reporting purposes, resulting in higher depreciation charges. The tax basis in the replaced assets will be reduced by the amount of the gain not recognized under the involuntary conversion rules.

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3. CONTINGENCIES

The Company is party to a number of claims, including sixteen remaining lawsuits brought on behalf of eleven employees or their families and five third parties or their families, for injuries and losses suffered as a result of the 2008 Port Wentworth refinery industrial accident. Fifteen of the lawsuits are pending in the State Court of Chatham County, Georgia, and one lawsuit is pending in the Superior Court of Chatham County, Georgia. None of the lawsuits demand a specific dollar amount of damages sought by the plaintiffs. The Company previously settled thirty-two lawsuits related to the accident. The State Court of Chatham County, Georgia has scheduled three of the remaining lawsuits for trial on October 10, 2011, but has not determined which of these cases will be tried on that date.

The Company has workers compensation insurance which provides for coverage equal to the statutory benefits provided to workers under state law. Additionally, the Company’s general liability policy provides for coverage for damages to third parties up to a policy limit of $100 million. While the Company believes, based on the facts of these cases, that claims by employees and certain contractors are limited to benefits provided under Georgia workers compensation law, the ultimate resolution of these matters could result in liability in excess of the amount accrued. The Company believes the likelihood of the aggregate liability, including the amounts paid in the previous settlements, exceeding the $100 million policy limit is remote.

In August 2010, the Company filed suit in the District Court of Fort Bend County, Texas, against one of its general liability excess insurers, XL Insurance Company America, Inc. (“XL”). XL issued a $25 million policy of insurance (a portion of the $100 million coverage described above) that provides coverage for lawsuits filed as a result of the Port Wentworth refinery industrial accident. XL, which has not denied coverage for payments for settlements or judgments, asserts that its policy does not include coverage of defense costs in litigation. The Company’s lawsuit seeks a declaration that pursuant to the insurance policy it issued to the Company, XL is required to pay the Company’s costs of defense in lawsuits filed by claimants for injuries and losses suffered as a result of the Port Wentworth refinery accident. In October 2010, XL removed the lawsuit to the United States District Court for the Southern District of Texas. In July 2011, the Company and XL entered into a settlement of the litigation which included XL’s agreement to pay a portion of the Company’s defense costs until the limit of the XL insurance policy is exhausted, if ever. American Guaranty & Liability Insurance Company (“American Guaranty”) and St. Paul Fire & Marine Insurance Company (“St. Paul”) each issued insurance policies for a 50% participating share in a $50 million layer of excess liability insurance coverage (a portion of the $100 million coverage described above) that provide coverage for lawsuits filed as a result of the Port Wentworth refinery industrial accident. American Guaranty and St. Paul have issued reservation of rights, and separately, while American Guaranty and St. Paul have not denied coverage for payments for settlements or judgments, they have denied coverage of defense costs in litigation. The Company has notified American Guaranty and St Paul that it believes the policies do provide coverage for defense costs.

In December 2010, AdvancePierre Foods, Inc. (“Pierre”) filed suit against the Company and its distributor, Evergreen Sweeteners, Inc. in the United States District Court for the Western District of North Carolina seeking damages in connection with sugar that had been voluntarily recalled by the Company in July 2010. The claims asserted against the Company seek recovery of losses allegedly incurred by Pierre due to its alleged incorporation of recalled sugar in food products. Although the complaint does not specify alleged damages, Pierre previously indicated that its damages were approximately $3.2 million. The insurer that issued the Company’s $1 million primary liability insurance policy has assumed the defense of this lawsuit. Ironshore Specialty Insurance Company (“Ironshore”), which provides $25 million of umbrella liability insurance coverage in excess of the Company’s $1 million primary liability insurance policy, has denied coverage for the Pierre property damage claims and two other property damage claims totaling approximately $200,000 that involve the same recalled sugar. The Company believes that Ironshore’s umbrella liability insurance policy is enforceable to respond to Pierre’s lawsuit and the other property damage claims. In January 2011, the Company filed suit against Ironshore in the United States District Court for the Southern District of Texas seeking a declaratory judgment that Ironshore is required to provide coverage for the Pierre lawsuit and the other property damage claims pursuant to the umbrella liability insurance policy it issued to the Company. The Company is an additional insured under another primary insurance policy

7

and that insurer has also assumed the defense of this lawsuit under a reservation of rights. As a result, under the second primary insurance policy the Company has defense cost coverage and may have an additional $1 million of coverage in its capacity as an additional insured.

In September 2010, the State of Georgia Department of Natural Resources Environmental Protection Division (“EPD”) issued a notice of violation to the Company in connection with discharges of excess quantities of sugar under the Company’s Clean Water Act discharge permits for storm water and cooling water at its Port Wentworth, Georgia refinery. In June 2011, the Company agreed to a consent order with EPD to settle the notice of violation. Without admitting liability, the Company agreed to pay a fine of $80,000, make certain housekeeping and process improvements within 30 days and make improvements to the Port Wentworth facility by December 31, 2011. The Company also agreed to complete an engineering study of the Port Wentworth refinery by December 31, 2012. The purpose of the study is to evaluate and compare the ability of various potential facility improvements to maintain compliance with applicable storm water and cooling water discharge permits. The recommendations made by the study are required to be implemented by June 30, 2014. Expenditures may be required for this implementation, although the amount and timing of any expenditure cannot currently be estimated.

In December 2010, the Louisiana Department of Environmental Quality (“LDEQ”) issued a Consolidated Compliance Order and Notice of Potential Penalty to the Company alleging violations of state environmental regulations and the terms of the wastewater discharge permit for the Company’s Gramercy, Louisiana refinery. The alleged violations relate to the release of foam into waters of the state and exceedances of applicable criteria for dissolved oxygen and pH. The Company investigated the alleged violations, took measures to cease and contain the foam discharge, and coordinated with the LDEQ to develop and implement a plan to remove and dispose of the foamy material and achieve and maintain compliance with applicable legal requirements. LDEQ has indicated that it plans to assess a penalty for the alleged violations and invited a settlement proposal from the Company, which has been submitted and is under review by LDEQ.

In November 2010, the Company filed suit in the Fort Bend County, Texas District Court against Hills Fuel Company (“Hills”), its supplier of coal, for breach of contract. Hills failed to make deliveries due under the contract and the Company has been sourcing its supply of coal at prices higher than stipulated under the contract. Hills filed an answer in January 2011 denying the allegations in the complaint and, in April 2011, Hills filed a counterclaim alleging that the Company breached the supply contract in not taking coal for a prolonged period of time and claiming $1.5 million in lost profits. The lawsuit is in the discovery phase and the Company is unable to predict the ultimate outcome of this matter.

In March 2011, the Company filed suit in the United States District Court for the Southern District of Texas against Southern Systems, Inc. (“SSI”), the contractor who constructed the conditioning silos at the Company’s Port Wentworth refinery, for breach of contract. The lawsuit seeks damages for deficiencies in construction of the conditioning silos. In June 2011, SSI filed a counterclaim against the Company for $3.5 million for work it allegedly performed and was not paid. The Company is unable to predict the ultimate outcome of this matter.

In May 2011, the Company joined seven cane and beet sugar producers and two sugar industry trade associations as plaintiffs in a lawsuit filed against six producers of high fructose corn syrup and the Corn Refiners Association (collectively, the “HFCS Defendants”) in the United States District Court for the Central District of California regarding advertising and marketing of high fructose corn syrup. The lawsuit alleges violations of the federal Lanham Act and state law by the HFCS Defendants in marketing and advertising high fructose corn syrup as a natural product equivalent to cane and beet sugar. The lawsuit seeks money damages and injunctive relief. In July 2011, the HFCS Defendants filed a motion to dismiss the amended complaint and a motion to strike the state law claim which are pending before the court.

The Company is party to other litigation and claims which are normal in the course of its operations. While the results of such litigation and claims cannot be predicted with certainty, the Company believes the final outcome of such matters will not have a materially adverse effect on its consolidated results of operations, financial position or cash flows. In connection with the sales of certain businesses, the Company made customary representations and warranties, and undertook indemnification obligations with regard to certain of these representations and warranties including financial statements, environmental and tax matters, and the conduct of the businesses prior to the sale. These indemnification obligations are subject to certain deductibles, caps and expiration dates.

In connection with the sale of a subsidiary in 2002, the buyer assumed $18.5 million of industrial revenue bonds, with final maturity in 2025. The Company remained contingently liable for repayment of the bonds under a guaranty arrangement and does not believe that a liability is probable. The Company has recorded a non-current liability for the fair value of the guarantee. On January 6, 2011, the buyer redeemed $9.0 million of the industrial revenue bonds, releasing the Company’s obligations related to such bonds. As a result of the redemption, the Company reduced the recorded liability by $0.7 million during the three months ended March 31, 2011.

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4. LSR VENTURE

The Company is a one-third member in Louisiana Sugar Refining, LLC (“LSR”), a joint venture formed to construct and operate a new cane sugar refinery. Each member agreed to contribute $30 million in cash or assets as equity to capitalize the venture. The Company’s contribution, which will occur in three stages, consists of land and the existing refinery assets. The Company operated the existing refinery with sales and earnings for its own account until December 31, 2010, during which time the Company completed certain improvements. The equipment and personal property in the existing refinery (other than the small packaging assets) were contributed to LSR on January 1, 2011 resulting in a gain of $3.6 million. After January 1, 2011, the Company continues to operate the small bag packing facility in Gramercy, with 3.5 million cwt of refined bulk sugar purchased annually from LSR under a long term, supply agreement with market-based pricing provisions.

The Company contributed the footprint parcel of approximately 7 acres of land for the new refinery in November 2009. Pursuant to the terms of the operative agreements, LSR and Imperial jointly enrolled the entire site (including the footprint parcel) in the Voluntary Remediation Program (the “VRP”) of the LDEQ to conduct an environmental assessment of the site and complete remediation of any identified contamination. The Company is required to pay for the cost of remediation if the VRP uncovers contamination above the applicable industrial standard. The Company will convey the remainder of the land to LSR upon completion of the VRP and be released of future environmental liabilities to state and federal authorities. All site soil and groundwater sampling has been completed and the samples are undergoing laboratory analysis and risk assessment under the VRP standards. Preliminary results indicate there may be a few discrete areas of soil at the site with exceedances of the applicable industrial screening levels that may require remediation. The Company has recorded a liability for the current estimate of the cost for remediation of approximately $380,000. Once the laboratory analysis and risk assessment are complete, the Company and LSR will present LDEQ with a proposed remediation plan for its approval as a prerequisite to conducting the remediation and receiving a certificate of completion that will provide the release of future environmental liabilities.

LSR has entered into financing agreements aggregating $165 million to provide construction and working capital financing for the project. The financing is non-recourse to LSR’s members. The members have agreed to proportionately contribute additional capital to LSR if necessary to cover certain construction cost overruns and certain costs relating to the VRP that LSR agreed to assume. Construction costs of the new refinery, which is expected to commence operations in the late summer of 2011, are estimated at $120 million. The existing Gramercy refinery will operate during the construction and start-up phase of the new refinery.

5. AMENDMENT OF REVOLVING CREDIT FACILITY AGREEMENT

On May 20, 2011, the Company entered into the Second Amended and Restated Loan and Security Agreement with certain financial institutions as lenders and Bank of America, N.A. as agent (the “Credit Agreement”). The Credit Agreement provides for a $140 million revolving credit facility maturing December 31, 2015, to refinance and replace the Company’s previous credit facility and will be used to finance various ongoing capital needs of the Company as well as for other general corporate purposes. At June 30, 2011, the Company had $78.8 million of outstanding borrowings under the Credit Agreement and had the capacity under the borrowing base formula to borrow an additional $53.5 million, after deducting outstanding letters of credit totaling $6.1 million.

The Credit Agreement has no financial covenants unless availability (defined as the borrowing base, less actual borrowings and letters of credit) is less than $20 million at any time or less than $25 million for a period of five consecutive business days; otherwise a minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) test would apply until availability has been greater than $30 million for three consecutive months.

6. STOCK-BASED COMPENSATION

During the nine months ended June 30, 2011, the Company granted 146,440 shares of restricted stock to employees with a weighted average grant date fair value of $13.22 per share. These shares vest over periods of 33 to 48 months. Of these grants of restricted stock, 97,610 shares have performance and service conditions which must be met prior to vesting, while the remaining 48,830 shares have only service conditions.

Additionally, during the nine months ended June 30, 2011, the Company granted 51,545 restricted stock units (“RSU’s”) to non-employee directors with a weighted average grant date fair value of $11.45 per unit. The RSU’s vest six months following termination of Board service.

During the nine months ended June 30, 2011, 105,667 restricted shares vested with a vesting date fair value of $1.3 million.

9

7. EARNINGS PER SHARE

The following table presents information necessary to calculate basic and diluted earnings per share (in thousands of dollars, except per share amounts):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Income/(Loss) from Continuing Operations	$	(16,084	)	$	(5,687	)	$	(20,844	)	$	139,165
Average Shares Outstanding		11,928,210			11,811,540			11,890,013			11,800,372
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method (1)		—			—			—			267,791
Adjusted Average Shares		11,928,210			11,811,540			11,890,013			12,068,163
Diluted Earnings (Loss) per Share	$	(1.35	)	$	(0.48	)	$	(1.75	)	$	11.53

(1) No assumed restricted stock share issuances or option exercises were included in the computation of diluted EPS for the three and nine months ended June 30, 2011 and the three months ended June 30, 2010, because doing so would have an antidilutive effect on the computation of diluted earnings per share. Includes 223,380 shares of restricted stock and 44,411 options for the nine months ended June 30, 2010. Excludes 546,448 antidilutive securities for the three and nine months ended June 30, 2011 and 506,428 and 6,998 antidilutive securities for the three and nine months ended June 30, 2010.

8. PENSION AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic benefit costs for the three and nine months ended June 30, 2011 and 2010 were (in thousands):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Pension Plans
Service Cost	$	257		$	291		$	806		$	873
Interest Cost		2,579			2,824			7,936			8,471
Expected Return on Plan Assets		(2,614	)		(2,575	)		(7,809	)		(7,725	)
Amortization of Prior Service Cost		9			34			44			103
Recognized Actuarial Loss		1,107			817			3,121			2,450
Curtailment Loss		—			—			169			—
Total Net Periodic Benefit Costs	$	1,338		$	1,391		$	4,267		$	4,172
Postretirement Benefits Other than Pension Plans
Service Cost	$	4		$	4		$	12		$	14
Interest Cost		96			113			300			339
Amortization of Prior Service Cost		(399	)		(399	)		(1,196	)		(1,196	)
Recognized Actuarial Loss		157			162			476			484
Total Net Periodic Benefit Costs (Income)	$	(142	)	$	(120	)	$	(408	)	$	(359	)

Pension plan contributions, which are based on regulatory requirements, were $9.4 million for the nine months ended June 30, 2011 and $8.2 million for the nine months ended June 30, 2010. Contributions during the remainder of fiscal 2011 are expected to be approximately $3.2 million. During the second quarter of fiscal 2011, a curtailment loss of $169 thousand was recognized for the Colonial Union Pension Plan due to a reduction in headcount associated with the contribution of the Gramercy refinery assets to LSR. Additionally during the second fiscal quarter, Accumulated Other Comprehensive Income increased $1.9 million as a result of the revaluation of the Colonial Union Pension Plan liability triggered by the curtailment.

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9. OTHER INCOME (LOSS)

Other income (loss) included the following (in thousands of dollars):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Equity Earnings in investment in
Comercializadora Santos Imperial S. de R.L. de C.V.	$	797		$	430		$	2,277		$	1,299
Wholesome Sweeteners, Inc.		1,062			934			1,092			2,196
Louisiana Sugar Refining, LLC		(3,159	)		—			(4,666	)		—
Reduction of fair value of guarantee		—			—			700			—
Settlement of natural gas pricing litigation		—			—			—			761
Other		(95	)		(14	)		(217	)		303
Total	$	(1,395	)	$	1,350		$	(814	)	$	4,559

The Company reports its share of earnings in these investees on the equity method. Equity earnings in Wholesome Sweeteners for the quarter ended December 31, 2010 included a $2.4 million adjustment to the carrying value of Imperial’s investment to reflect the increased value of Wholesome’s management incentive shares; such adjustments were not significant in prior periods. Absent this adjustment, Imperial’s 50% interest in Wholesome’s net income was $3.5 million for the nine months ended June 30, 2011. Summarized combined financial information for the Company’s equity method investees for the three and nine months ended June 30, 2011 and 2010 includes the following (in thousands of dollars):

	Three Months Ended June 30,
	Comercializadora Santos Imperial S. de R.L. de C.V.				Wholesome Sweeteners, Inc.				Louisiana Sugar Refining, LLC
	2011		2010		2011		2010		2011			2010
Net Sales	$	96,704	$	72,447	$	28,932	$	26,647	$	164,042		$	—
Gross Margin	$	2,844	$	2,160	$	6,417	$	6,115	$	(6,101	)	$	—
Operating Income	$	2,305	$	1,140	$	3,872	$	3,395	$	(8,547	)	$	—
Net Income	$	1,592	$	861	$	2,306	$	2,072	$	(9,476	)	$	—
	Nine Months Ended June 30,
	Comercializadora Santos Imperial S. de R.L. de C.V.				Wholesome Sweeteners, Inc.				Louisiana Sugar Refining, LLC
	2011		2010		2011		2010		2011			2010
Net Sales	$	269,581	$	185,132	$	85,984	$	73,790	$	167,253		$	—
Gross Margin	$	7,946	$	5,575	$	20,321	$	16,799	$	(9,847	)	$	—
Operating Income	$	6,431	$	3,641	$	12,565	$	8,876	$	(15,254	)	$	—
Net Income	$	4,553	$	2,598	$	7,553	$	5,127	$	(13,998	)	$	—

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10. FAIR VALUE

The Company determines the fair value of natural gas and raw sugar futures contracts and marketable securities using quoted market prices for the individual securities. The following table presents the Company’s assets and liabilities measured and recognized at fair value on a recurring basis classified at the appropriate level of the fair value hierarchy as of June 30, 2011 and September 30, 2010 (in thousands of dollars):

	June 30, 2011
	Fair Value						Margin Requirements Settled in Cash			Balance Sheet Total
	Level 1		Level 2		Level 3
Current Assets:
No. 16 Domestic Sugar Futures Contracts	$	3,072		—		—	$	(3,072	)		—
Natural Gas		35		—		—		(35	)		—
Marketable Securities		194		—		—		—		$	194
Current Liabilities:
No. 16 Domestic Sugar Futures Contracts		1,337		—		—		(1,337	)		—
No. 11 World Sugar Futures Contracts		1		—		—		(1	)		—
Natural Gas		32		—		—		(32	)		—
Non-Current Assets:
No. 16 Domestic Sugar Futures Contracts		1,567		74		—		(1,641	)		—
Natural Gas		4		—		—		(4	)		—
Non-Current Liabilities:
No. 16 Domestic Sugar Futures Contracts		3		—		—		(3	)		—
Natural Gas		1		—		—		(1	)		—
	September 30, 2010
	Fair Value						Margin Requirements Settled in Cash			Balance Sheet Total
	Level 1		Level 2		Level 3
Current Assets:
No. 16 Domestic Sugar Futures Contracts	$	22,027		—		—	$	(22,027	)		—
No. 11 World Sugar Futures Contracts		333		—		—		(333	)
Marketable Securities		198		—		—		—		$	198
Current Liabilities:
No. 11 World Sugar Futures Contracts		194		—		—		(194	)		—
Natural Gas		333		—		—		(333	)		—
Non-Current Assets:
No. 16 Domestic Sugar Futures Contracts		25		—		—		(25	)		—
Non-Current Liabilities:
No. 16 Domestic Sugar Futures Contracts		276		—		—		(276	)		—

Fair value hierarchy levels are as follows:

• Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

• Level 2—Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;

• Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. These inputs may be used with internally developed methodologies that are used to generate management’s best estimate of fair value.

The Company uses the market approach in determining the fair value of our Level 1 and Level 2 assets and liabilities. Valuation of Level 2 domestic sugar futures contracts is based on the pricing of the Intercontinental Exchange (ICE) Sugar No. 16 futures contract. The Company’s policy for determining when transfers between levels are recognized is to do so at the end of each reporting period. Due to increased activity of trading in certain No. 16 domestic sugar futures contracts, the Company transferred contracts with a June 30, 2011 fair value of $4.6 million from Level 2 to Level 1 during the three months ended June 30, 2011. There were no significant transfers between Level 1 and Level 2 for the nine months ended June 30, 2011 or the three and nine months ended June 30, 2010.

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11. DERIVATIVE INSTRUMENTS

We use raw sugar futures and options in our raw sugar purchasing programs and natural gas futures and options to hedge natural gas purchases used in our manufacturing operations. Additionally, we periodically use derivatives to manage interest rate and foreign currency exchange risk. Our objective in the use of derivative instruments is to mitigate commodity price, interest rate or foreign currency exchange risk. Our derivatives hedging activity is supervised by a senior risk management committee which monitors and reports compliance with our risk management policy to the Audit Committee of the Board of Directors.

The majority of our industrial channel sales and a portion of our distributor channel sales are made under fixed price, forward sales contracts. In order to mitigate price risk in raw and refined sugar commitments, we manage the volume of refined sugar sales contracted for future delivery in relation to the volume of raw cane sugar purchased for future delivery by entering into forward purchase contracts to buy raw cane sugar at fixed prices and by using raw sugar futures contracts. Historically, substantially all of our purchases of domestic raw sugar and quota raw sugar imports are priced based on the ICE Sugar No. 16 futures contract. We use these futures contracts to price our physical domestic and quota raw sugar purchase commitments. Certain of these derivative instruments qualify as cash flow hedges and are designated as hedges for accounting purposes. To the extent that derivative instruments do not qualify for hedge accounting treatment, the Company records the effect of those instruments in current earnings. Non-quota imports under the re-export program, which constitutes less than 10% of our raw sugar purchases, are priced based on the ICE Sugar No. 11 futures contract. We use these futures contracts to price our world raw purchase commitments, however, these derivative instruments are not designated as cash flow hedges. Additionally we receive short raw sugar futures contracts from certain raw sugar suppliers that are used as pricing mechanisms which are not designated as hedges. We have purchased domestic raw sugar futures contracts up to 17 months in advance of the physical purchase.

The pricing of our physical natural gas purchases generally is indexed to a spot market index and we use natural gas futures contracts traded on the New York Mercantile Exchange to hedge the cost of natural gas purchased under these physical contracts. The derivative instruments which qualify as cash flow hedges are designated as hedges for accounting purposes. Additionally, we utilize natural gas futures which are not designated as cash flow hedges to manage the remaining commodity price risk above the volume of derivatives designated as cash flow hedges. We have purchased natural gas futures contracts up to 15 months in advance of the physical purchase of natural gas.

For derivative instruments that qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative is reported as a component of other comprehensive income and reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses that result from the discontinuance of cash flow hedges because it is probable that the original forecasted transaction will not occur are recognized in current earnings and the current year’s results include $0.9 million of such gains. Gains and losses on derivatives representing hedge ineffectiveness are recognized in current earnings. Gains and losses on derivatives not designated as hedges are recognized in current earnings.

At June 30, 2011 we had the following net futures positions:

Hedge Designation	Domestic Sugar  (cwt)			World Sugar (cwt)		Natural Gas (mmbtu)
Cash Flow		3,167,360			—		—
Not Designated		(21,280	)		22,400		790,000

All of our futures contracts are settled in cash daily with the respective futures exchanges and therefore do not contain credit-risk-related contingent features. The Company has $6.3 million recorded on the balance sheet for cash held on deposit in margin accounts at June 30, 2011 for the futures positions above. At June 30, 2011 there were no derivative positions to mitigate the risk of interest rates or foreign currency exchange. For the nine month period ended June 30, 2011, we did not engage in trading activity with derivatives.

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The table below shows the location and amounts in the consolidated balance sheets for derivative instruments (in thousands):

As of June 30, 2011:

	Hedge Designation		Fair Value		Margin Requirements Settled in Cash			Balance Sheet Total
Current Assets:
No. 16 Domestic Sugar Futures Contracts		Not Designated	$	13	$	(13	)	$	—
No. 16 Domestic Sugar Futures Contracts		Cash Flow		3,059		(3,059	)		—
Natural Gas		Not Designated		35		(35	)		—
Current Liabilities:
No. 16 Domestic Sugar Futures Contracts		Cash Flow		1,337		(1,337	)		—
No. 11 World Sugar Futures Contracts		Not Designated		1		(1	)
Natural Gas		Not Designated		32		(32	)		—
Non-Current Assets:
No. 16 Domestic Sugar Futures Contracts		Cash Flow		1,641		(1,641	)		—
Natural Gas		Not Designated		4		(4	)
Non-Current Liabilities:
No. 16 Domestic Sugar Futures Contracts		Cash Flow		3		(3	)		—
Natural Gas		Not Designated		1		(1	)

As of September 30, 2010:

	Hedge Designation		Fair Value		Margin Requirements Settled in Cash			Balance Sheet Total
Current Assets:
No. 16 Domestic Sugar Futures Contracts		Not Designated	$	22,027	$	(22,027	)	$	—
No. 11 World Sugar Futures Contracts		Not Designated		333		(333	)		—
Current Liabilities:
No. 11 World Sugar Futures Contracts		Not Designated		194		(194	)
Natural Gas		Cash Flow		260		(260	)		—
Natural Gas		Not Designated		73		(73	)		—
Non-Current Assets:
No. 16 Domestic Sugar Futures Contracts		Not Designated		25		(25	)		—
Non-Current Liabilities:
No. 16 Domestic Sugar Futures Contracts		Not Designated		276		(276	)		—

The impact of futures contracts on the consolidated income statement for fiscal 2011 is presented below:

Hedge Designation	Income Statement Line Item	Three Months Ended June 30, 2011									Nine Months Ended June 30, 2011
		Domestic Sugar			World Sugar			Natural Gas			Domestic Sugar			World Sugar			Natural Gas
Cash Flow	Cost of Sales(1)	$	(4,262	)	$	—		$	—		$	(6,510	)	$	—		$	594
Cash Flow	Accumulated other comprehensive loss		1,532			—			—			(12,716	)		—			47
Not Designated	Cost of Sales (credit)		(72	)		(291	)		(16	)		(1,967	)		(4,681	)		3

(1) Amounts were reclassified from accumulated other comprehensive income.

The impact of futures contracts on the consolidated income statement for fiscal 2010 is presented below:

Hedge Designation	Income Statement Line Item	Three Months Ended June 30, 2010								Nine Months Ended June 30, 2010
		Domestic Sugar			World Sugar		Natural Gas			Domestic Sugar			World Sugar		Natural Gas
Cash Flow	Cost of Sales(1)	$	—		$	—	$	601		$	—		$	—	$	1,126
Cash Flow	Accumulated other comprehensive loss		—			—		(244	)		—			—		1,604
Not Designated	Cost of Sales (credit)		(9,723	)		72		36			(21,519	)		8,636		244

(1) Amounts were reclassified from accumulated other comprehensive income.

14

There were no gains or losses recognized on cash flow hedges for ineffectiveness, nor were there any portion of derivatives excluded from the effectiveness assessment. Approximately $4.6 million of gains on cash flow hedges for domestic raw sugar are expected to be reclassified to earnings over the next twelve months.

12. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in Accumulated Other Comprehensive Income for the nine months ended June 30, 2011 are as follows (in thousands of dollars):

	Net Unrealized Gains (Losses) on Derivatives			Net Unrealized Gains (Losses) on Pension and Other Post Retirement Medical Benefits			Foreign Currency Translation Adjustments and Other		Total
Balance September 30, 2010	$	(241	)	$	(75,075	)	$	46	$	(75,270	)
Change in Derivative Fair Value (Net of Tax of $4,571)		8,097								8,097
Reclassification from Accumulated Other Comprehensive Income (Loss) to Net Income (Net of Tax of $2,135)		(3,781	)							(3,781	)
Change in Pension Liability (Net of Tax of $1,090)					1,930					1,930
Foreign Currency Translation Adjustment (Net of Tax of $121)								215		215
Balance June 30, 2011	$	4,075		$	(73,145	)	$	261	$	(68,809	)

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with information contained in the Consolidated Financial Statements and the notes thereto and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2010.

Overview

We operate in a single domestic business segment, the production and sale of refined sugar and related products. Our results of operations substantially depend on market factors, including the demand for and price of refined sugar, the price of raw cane sugar and the availability and price of energy and other resources. These factors are influenced by a variety of external forces that we are unable to predict, including the number of domestic acres contracted to grow sugar cane and sugar beets, prices of competing crops, supply and price of raw cane sugar in the world, domestic dietary trends, competing sweeteners, weather conditions, production outages at key industry facilities and the United States and Mexican farm and trade policies. The domestic sugar industry is subject to substantial influence by legislative and regulatory actions. The 2008 Farm Bill limits the importation of raw cane sugar and the marketing of refined beet and raw cane sugar, potentially affecting refined sugar sales prices and volumes as well as the supply and cost of raw material available to our cane refineries.

On January 1, 2011, we contributed the equipment and personal property of our Gramercy refinery (other than our small packaging assets) to Louisiana Sugar Refining, LLC (“LSR”), a one-third owned joint venture in accordance with the terms of our joint venture agreement. We continue to operate the small bag packaging facility in Gramercy and have agreed to purchase 3.5 million cwt of refined bulk sugar annually from LSR under a long term supply agreement with market-based pricing provisions. Sales derived from the existing Gramercy refinery will be lower in future periods as a result of this contribution, as only sales from the small bag packaging operations will be consolidated in our results. Sales of sugar in bulk and large bags produced at the Gramercy refinery for the three months ended December 31, 2010 totaled 1.2 million cwt or $50.1 million. These sales contributed gross margin, with derivative activity adjusted to reflect hedge accounting, of approximately $0.2 million.

Results of Operations

Three and Nine Months Ended June 30, 2011 compared to Three and Nine Months Ended June 30, 2010

Results for the third fiscal quarter ended June 30, 2011 were significantly impacted by rising raw sugar costs in a period of more modest sales price increases, negatively impacting margins. Raw sugar purchased during the quarter was primarily priced against the March and May #16 raw sugar futures contract which peaked at near $40 per cwt prior to their expiration. Competitive pressures from Mexican and domestic sugar sources limited the ability to pass on higher raw sugar costs in the form of sales price increases, particularly in the spot grocery and distributor channels.

15

In June 2011, the USDA reported a 6% increase in sugar beet acreage planted for this fall’s harvest, which together with continued high levels of refined sugar imports from Mexico, have sustained competitive sales pressure, limiting our ability to raise sales prices thus far in the fourth fiscal quarter.

For the three months ended June 30, 2011, we reported a net loss of $16.1 million or $1.35 per diluted share, compared to a net loss of $5.7 million or $0.48 per diluted share during the third fiscal quarter of the prior year. For the nine months ended June 30, 2011, we reported a net loss of $20.8 million or $1.75 per diluted share, compared to net income of $139.2 million or $11.53 per diluted share for the same period last year. The recognition of insurance and derivative gains and losses had a significant impact on our reported earnings for the comparative periods. In December 2009, the Company settled the property insurance claim relating to the Port Wentworth accident and recorded pretax gains totaling $278.5 million ($178.2 million after tax) in the quarter. Raw sugar derivatives in prior years did not qualify for deferral hedge accounting resulting in current recognition of gains and losses during a period of significant raw sugar futures market volatility. We discuss these and other factors in more detail below.

Sugar sales comprised approximately 97% of our net sales in the fiscal 2011 periods and 98% of net sales in the fiscal 2010 periods. Sugar sales volumes and prices were:

	Three Months Ended June 30,								Nine Months Ended June 30,
	2011				2010				2011				2010
	Volume		Price		Volume		Price		Volume		Price		Volume		Price
	(000 cwt)		(per cwt)		(000 cwt)		(per cwt)		(000 cwt)		(per cwt)		(000 cwt)		(per cwt)
Sugar Sales:
Industrial		2,064	$	44.55		3,498	$	36.05		6,547	$	42.00		8,952	$	34.53
Consumer		1,388		51.12		1,300		45.72		4,529		49.57		3,669		45.51
Distributor		528		51.54		1,394		42.02		1,780		48.70		3,144		40.61
Domestic Sales		3,980		47.77		6,192		39.42		12,856		45.59		15,765		38.30
World Sales		15		44.36		369		32.67		335		36.39		761		33.93
Sugar Sales		3,995	$	47.75		6,561	$	39.04		13,192	$	45.36		16,526	$	38.10

Net sales decreased 24.5% for the three months and 4.2% for the nine months ended June 30, 2011, compared to the same periods in the prior year. Domestic sugar volumes decreased 35.7% for the quarter primarily due to the reduction in volumes from the Gramercy refinery after the contribution of the facility to LSR. Domestic sugar volumes decreased 18.5% for the nine months ended June 2011 primarily due to the contribution of the Gramercy facility to LSR, offset in part by higher production at the Port Wentworth refinery. Domestic sales prices increased 21.2% for the quarter and 19.0% for the current nine month period. Refined sugar prices have risen to levels much higher than historical norms due to tighter domestic supply conditions, as well as higher raw sugar prices which placed upward pressure on refined prices.

The majority of industrial channel sales and a portion of distributor channel sales are made under fixed price contracts which generally extend up to a year, many of which are on a calendar year basis. As a result, realized sales prices tend to lag market trends. We seek to mitigate the price risk in these forward sales agreements with our raw sugar hedging activities.

For the three months ended June 30, 2011, gross margin as a percentage of sales decreased to a negative 6.1% compared to a positive 0.7% gross margin in the prior year quarter. On a hedge accounting basis excluding the effects of LIFO inventory liquidations, gross margin for the current quarter was a negative 7.3%, compared to a positive 7.9% for the immediately preceding second fiscal quarter and a negative 6.3% in the third quarter of fiscal 2010. The decrease in gross margin percentage is primarily due to increases in raw sugar costs which exceeded sales price increases thereby compressing margins. The domestic sales price increases of 2.9% on a consecutive quarter basis and 21.2% versus the same quarter of the prior year compare to increases in raw sugar purchases (on a raw market basis) of 12.4% and 33.5% respectively. Our ability to increase prices during the third quarter was limited by competition from both domestic and Mexican sources of supply. Mexican imports of refined sugar have increased significantly this year, as high fructose corn syrup imported from the U.S. has displaced refined sugar consumption in Mexico, resulting in a surplus of refined sugar in Mexico. Additionally, in June the Mexican government announced the allowance for 150,000 tons of imported sugar into Mexico from the world market, to compensate for the over shipment of refined sugar to the U.S.

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Gross margin on a hedge accounting basis excluding the effects of LIFO inventory liquidations for the nine months ended June 30, 2011 was a positive 0.2%, compared to a negative 2.0% for the same period of fiscal 2010 as the sales price increases more than offset the increased raw sugar cost for the periods.

Reconciliation of Gross Margin on a Hedge Accounting Basis excluding LIFO liquidations:

	Quarter Ended									Nine Months Ended
(In millions of Dollars)	June 30, 2011			March 31, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Gross margin as reported	$	(12.1	)	$	10.3		$	1.9		$	(5.5	)	$	(26.5	)
Derivative gains recognized in the period which intended to hedge raw sugar purchases in future periods		—			—			(10.7	)		—			(4.8	)
Derivative gains (losses) recognized in prior periods intended to hedge raw sugar purchases in the current period		2.0			19.1			(2.5	)		30.8			23.3
Impact of LIFO liquidation		(4.3	)		(14.3	)		(5.0	)		(24.2	)		(4.9	)
Gross margin on a hedge accounting basis excluding the impact of LIFO liquidations	$	(14.4	)	$	15.1		$	(16.3	)	$	1.1		$	(12.9	)
Gross margin on a hedge accounting basis excluding the impact of LIFO liquidations as a percent of sales		-7.3	%		7.9	%		-6.3	%		0.2	%		-2.0	%

Tight supply conditions in the world raw sugar market have driven up world raw sugar prices. Rising world raw sugar prices together with restrictions on imports imposed by the 2008 Farm Bill pushed domestic raw sugar prices to their highest levels in 30 years.

Domestic Raw Sugar Costs

	Three Months Ended June 30,									Nine Months Ended June 30,
	2011				2010					2011				2010
	Volume		Raw Market Basis		Volume		Raw Market Basis			Volume		Raw Market Basis		Volume		Raw Market Basis
	(000 cwt)		(per cwt)		(000 cwt)		(per cwt)			(000 cwt)		(per cwt)		(000 cwt)		(per cwt)
Raw sugar purchased		2,950	$	38.08		5,469	$	28.52			9,376	$	33.49		14,923	$	28.10
Raw sugar sold from beginning LIFO inventory		249		20.86		699		21.35			1,983		21.26		722		21.32
Cost of raw sugar before derivative activity		3,199		36.74		6,168		27.71			11,359		31.36		15,645		27.79
Derivative gains recognized in the period intended to hedge future purchases				—				(1.63	)				—				(0.29	)
Cost of raw sugar as reported in Cost of Sales		3,199		36.74		6,168		26.08			11,359		31.36		15,645		27.50

Our cost of domestic raw cane sugar increased to $38.08 per cwt (on a raw market basis) for the current year quarter as compared to $28.52 per cwt for the quarter ended June 30, 2010. Raw sugar costs for the nine months ended June 30, 2011 were $33.49 per cwt (on a raw market basis) compared to $28.10 per cwt for the nine months ended June 30, 2010. Raw sugar purchased during the quarter was primarily priced against the March and May #16 raw sugar futures contract which peaked at near $40 per cwt prior to their expiration. The USDA announced an increase in the raw sugar quota in early April 2011, after expiration of the May futures contract. The raw sugar futures market prices declined temporarily following the quota announcement, but concerns over available inventory in quota holding countries and increases in the world raw sugar market have resulted in prices in the raw sugar futures market rallying back to pre-announcement levels. We have purchased or priced substantially all of our raw sugar requirements for the fourth quarter of fiscal 2011 at prices similar to third quarter levels.

Sugar inventory quantities at June 30, 2011 declined below the September 30, 2010 level primarily as a result of the contribution of the Gramercy refinery to LSR, resulting in the liquidation of beginning LIFO inventory layers with a cost approximately $24 million below the cost of current purchases for the nine months ended June 30, 2011.

The Company’s raw sugar derivative activity did not qualify for deferral accounting in prior periods because of the inability to forecast raw sugar purchases as a result of delays in the Port Wentworth refinery production start-up. Gains and losses on raw sugar futures positions were recognized in earnings as they arose, rather than deferred and recognized when the related raw sugar purchase occurred. The effect of recognizing derivative gains results in higher raw sugar cost in subsequent periods while the recognition of losses results in lower raw sugar costs in future periods. Beginning in the quarter ended December 31, 2010, gains and losses on derivatives designated to hedge raw sugar purchases in future periods qualified for hedge accounting and are deferred in Accumulated Other Comprehensive Income.

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Raw sugar derivative gains and losses recognized in fiscal 2009 and fiscal 2010, which were entered into to hedge future sugar purchases were as follows:

Raw Sugar Futures Derivative Gains (Losses)

(In Millions)

				Futures Contract Delivery Period
Recognized In				Fiscal 2010										Fiscal 2011
				Q1		Q2		Q3			Q4			Q1			Q2			Q3			Q4			Fiscal 2012
Fiscal 2009	$	27.9		$	8.8	$	10.0	$	5.7		$	2.9		$	0.5
Q1 Fiscal 2010	$	18.9					7.0		7.9			3.4			0.2			0.4
Q2 Fiscal 2010	$	(24.8	)						(16.1	)		(5.7	)		(1.4	)		(1.3	)		(0.1	)		(0.2	)
Q3 Fiscal 2010	$	10.7										5.7			0.9			2.9			0.4			0.8
Q4 Fiscal 2010	$	30.6													9.5			17.1			1.7			2.6			(0.3	)
				$	8.8	$	17.0	$	(2.5	)	$	6.3		$	9.7		$	19.1		$	2.0		$	3.2		$	(0.3	)

The prior year’s cost of sales included $10.7 million of gains for the quarter ended June 30, 2010 and $4.8 million of gains for the nine months ended June 30, 2010 recognized on raw sugar derivatives which were intended to hedge raw sugar purchases in subsequent periods. Additionally, both the current and prior year’s quarter raw sugar costs were impacted by the non-deferral of derivative gains and losses arising in prior periods. As a result of the foregoing, had the Company applied hedge accounting in prior periods, raw sugar costs would have been $13.2 million higher in the third fiscal quarter of 2010 and $18.5 million lower in the nine months ended June 30, 2010 respectively. Similarly, had hedge accounting been applied in prior periods, raw sugar costs would have been $2.0 million lower for the third fiscal quarter of 2011 and $30.8 million lower for nine months ended June 30, 2011, respectively.

Manufacturing costs per cwt in Port Wentworth for the quarter were generally flat with the prior year quarter. Port Wentworth’s manufacturing costs per cwt improved for the current nine month period compared to last year as the increased average daily melt improved fixed cost absorption. Sugar yields also improved and gross margin increased by 0.1% for the quarter ended June 30, 2011 and 1.1% for the nine months ended June 30, 2011 largely as a result of these lower costs and improved yields. Final inspections of the newly constructed bulk sugar silos at the Port Wentworth refinery revealed construction deficiencies by the contractor which required taking the silos offline for repairs at the end of November 2010. Although the silo repairs were completed in mid-January, the silos were not placed back in service until the first week of April 2011 in an effort to minimize the impact on servicing customers’ needs. The refinery ran at reduced production rates during this period from December 2010 through March 2011. The Port Wentworth refinery’s progress toward full production rates during the third fiscal quarter was hampered by mechanical reliability, including significant interruptions in the steam boilers providing power to the plant.

Average daily melt rates and production days since the restart of the refinery in fiscal 2009, and for the two fiscal years prior to the accident were as follows:

Quarterly Period	Average Daily Melt (millions of pounds)		Number of Production Days  in Quarter
Average quarter fiscal 2006		5.9		73
Average quarter fiscal 2007		5.9		65
Third quarter fiscal 2009		0.5		14
Fourth quarter fiscal 2009		1.4		85
First quarter fiscal 2010		3.2		81
Second quarter fiscal 2010		3.9		82
Third quarter fiscal 2010		4.7		82
Fourth quarter fiscal 2010		4.4		86
First quarter fiscal 2011		4.7		77
Second quarter fiscal 2011		4.2		89
Third quarter fiscal 2011		4.5		78

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The LSR refinery was restarted in early February 2011 and began delivering refined sugar in mid-February, limiting our packaging activity during the quarter ended March 31, 2011. Gramercy’s packaging costs for the current quarter ended June 30, 2011 improved significantly as volumes increased 120% compared to the prior quarter. The additional volumes improved fixed cost absorption but costs in the current quarter remained higher than the quarter ended June 30, 2010 and as a result gross margin was reduced by 0.5% for the quarter ended June 30, 2011. Unit manufacturing costs included in our first fiscal quarter were higher than the prior year as the final quarter of refining operations in Gramercy prior to the LSR contribution was challenging with reduced yields, higher energy and environmental costs as well as a lower average daily melt. Gross margin percentage was negatively impacted by 1.7% for the nine months ended June 2011 as a result of these higher Gramercy costs.

Energy costs were lower than the prior year for the quarter and the nine months as lower natural gas prices were partially offset by higher coal cost. The table below shows our energy cost by source with the natural gas cost shown on a NYMEX basis after applying gains and losses from hedging activity.

	Three Months Ended June 30,								Nine Months Ended June 30,
	2011				2010				2011				2010
	Volume		Price		Volume		Price		Volume		Price		Volume		Price
	(000 mmbtu)		(per mmbtu)		(000 mmbtu)		(per mmbtu)		(000 mmbtu)		(per mmbtu)		(000 mmbtu)		(per mmbtu)
Natural Gas		567	$	4.33		1,012	$	4.80		2,028	$	4.31		3,342	$	4.99
Coal		162		5.29		213		3.92		667		5.15		275		4.00
Total		728	$	4.54		1,225	$	4.65		2,695	$	4.52		3,618	$	4.91

Transportation costs for quarter and the nine months increased compared to the same prior year periods primarily due to higher costs to service retail customers as a result of the delayed restart of the Gramercy packaging operations, higher fuel costs and higher rail fleet costs. As a result of these factors, gross margin declined 1.4% for the quarter and 1.0% for the nine months ended June 30, 2011.

Selling, general and administrative costs in the third quarter decreased $0.8 million from the prior year third quarter primarily due to $1.4 million of lower compensation costs, partially offset by $0.8 million of higher legal and professional costs. Selling, general and administrative costs for the nine months ended June 30, 2011 declined $8.5 million from the same period last year, primarily due to $3.7 million of workers compensation costs in last year’s second quarter for a loss based assessment under the state of Georgia’s Subsequent Injury Trust Fund, $2.0 million of lower legal costs principally related to the February 2008 Port Wentworth accident and $2.1 million of lower employee compensation costs.

The Company settled the Port Wentworth property and business interruption insurance claim in December 2009 for $345.0 million resulting in pretax gains of $278.5 million. Details of the settlement of the insurance claim are provided in Note 2 to the Consolidated Financial Statements.

Other income, which includes equity investment earnings, declined in the current quarter, primarily the result of negative operating results in the LSR venture’s operations. Other income for the nine months June 30, 2011 was lower than the prior period primarily due to LSR results as well as a reduction in the carrying value of our equity based investment in Wholesome Sweeteners, reflecting an increase in the value of Wholesome’s management equity incentive shares.

We have estimated a combined federal and state income tax rate of 38.0% for the nine months ended June 30, 2011 which increased from 35.8% in the same period last year due primarily to the relative impact of permanent differences.

Liquidity and Capital Resources

On May 20, 2011, the Company entered into the Second Amended and Restated Loan and Security Agreement with certain financial institutions as lenders and Bank of America, N.A. as agent (the “Credit Agreement”). The Credit Agreement provides for a $140 million revolving credit facility maturing December 31, 2015, to refinance and replace the Company’s previous credit facility and will be used to finance various ongoing capital needs of the Company as well as for other general corporate purposes. At June 30, 2011, the Company had $78.8 million of outstanding borrowings under the Credit Agreement and had the capacity under the borrowing base formula to borrow an additional $53.5 million, after deducting outstanding letters of credit totaling $6.1 million.

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The Credit Agreement has no financial covenants unless availability (defined as the borrowing base, less actual borrowings and letters of credit) is less than $20 million at any time or less than $25 million for a period of five consecutive business days. Should such minimum availability not be maintained, a minimum of $20 million of EBITDA (defined in the Credit Agreement as earnings before interest, taxes, depreciation and amortization, on a hedge accounting basis) for the trailing four quarter period would be required until availability has been greater than $30 million for three consecutive months. Had this financial covenant applied as of June 30, 2011, EBITDA for the trailing four quarter period would have been a negative $9.8 million. As a result of the Company’s future cash needs, including for capital expenditures, pension contributions and margin requirements of the commodity futures program, as well as the need to fund possible future operating losses in the event current margin pressures continue, the Company’s borrowing availability in the fourth quarter and beyond may be reduced to levels that would trigger the applicability of the financial covenants and other restrictions under the Credit Agreement. In such an event, it is possible that the Company will not be in compliance with such covenants and will need to seek a waiver from its lenders in order to avoid an event of default under the Credit Agreement.

Advances under the new facility are subject to a borrowing base which specifies advance rates against eligible receivables and inventory, as well as up to $40 million allowable advances against property, plant and equipment. The facility is secured by the cash and cash equivalents, accounts receivable, inventory, substantially all property, plant and equipment and certain investments of the Company and its domestic subsidiaries. All domestic subsidiaries of the Company are borrowers or guarantors under the new facility. Interest rates under the Credit Agreement are LIBOR plus a margin that varies (with availability as defined) from 2.00% to 2.75%, or the base rate (Bank of America prime rate) plus a margin of 0.75% to 1.50%. Although the final maturity of the new facility is December 31, 2015, the Company will classify debt under the facility as current, as the agreement contains a subjective acceleration clause which can be exercised, if, in the opinion of the lender, there is a material adverse effect, and provides the lenders direct access to the Company’s cash receipts.

The Credit Agreement contains covenants limiting the Company’s ability to, among other things:

• incur other indebtedness;

• incur other liens;

• undergo any fundamental changes;

• engage in transactions with affiliates;

• make investments;

• change its fiscal periods;

• enter into mergers or consolidations;

• sell assets; and

• prepay other debt.

The Credit Agreement limits the Company’s ability to pay dividends or repurchase stock if availability, after adjustment on a pro forma basis for such transaction, is less than $30 million.

The Credit Agreement also includes customary events of default, including a change of control. Borrowings will generally be available subject to a borrowing base and to the accuracy of all representations and warranties, including the absence of a material adverse change and the absence of any default or event of default.

Our capital expenditures for the quarter and nine months ended June 30, 2011 were $3.3 million and $20.1 million, respectively, and included amounts to make improvements to the Gramercy facility prior to the January 1, 2011 contribution to LSR. Capital expenditures in fiscal 2011 are expected to total approximately $25 million, related primarily to safety improvements and normal equipment replacement.

The Company is reviewing potential operating and capital improvements in the utilities, raw sugar melt and water management areas of the Port Wentworth refinery, to improve operating performance. Additionally, in connection with the consent order entered into with the State of Georgia Department of Natural Resources, we are obligated to undertake an engineering study and complete improvements at the refinery to maintain compliance with storm and cooling water discharge permits by 2014. While the impact of these capital requirements cannot be estimated at this time, the Company expects capital expenditure levels to remain above historical replacement capital levels for the next several years.

The Company allowed its option to acquire the remaining 50% equity interest in Wholesome Sweeteners to expire on May 31, 2011. The Company and its partner are exploring strategic alternatives for the joint venture including the potential sale of the business. Under the Wholesome joint venture agreement, either partner can cause the joint venture company to be sold to a third party if certain conditions specified in the agreement are met. There can be no assurance that any transaction involving Wholesome will occur.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimate methodologies since the filing of our Annual Report on Form 10-K for the year ended September 30, 2010, except for the accounting for derivative instruments. The Company uses raw sugar futures contracts to hedge commodity price risk in forecasted raw sugar purchases. In order to apply hedge accounting to the gains and losses arising from the change in fair value of these derivative instruments, the Company must be able to reasonably estimate the amount and timing of future raw sugar purchases. Commencing with the quarter ended December 31, 2010, the Company applied hedge accounting to the change in fair value of raw sugar derivatives, deferring $12.9 million of gains in Other Comprehensive Income.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We use raw sugar futures and options in our raw sugar purchasing programs and natural gas futures and options to hedge natural gas purchases used in our manufacturing operations. Our derivatives hedging activity is supervised by a senior risk management committee which monitors and reports compliance with our risk management policy to the Audit Committee of the Board of Directors.

The information in the table below presents our domestic raw sugar futures positions outstanding as of June 30, 2011.

	Expected Maturity Fiscal 2011		Expected Maturity Fiscal 2012		Expected Maturity Fiscal 2013
Domestic Futures Contracts (net long positions):
Contract Volumes (cwt)		315,000		2,781,000		50,000
Weighted Average Contract Price (per cwt)	$	37.59	$	34.59	$	33.28
Contract Amount	$	11,831,000	$	96,180,000	$	1,677,000
Weighted Average Fair Value (per cwt)	$	35.38	$	36.02	$	34,.75
Fair Value	$	11,135,000	$	100,175,000	$	1,751,000

	Expected Maturity Fiscal 2012
World Futures Contracts (net long positions):
Contract Volumes (cwt)		22,000
Weighted Average Contract Price (per cwt)	$	25.74
Contract Amount	$	577,000
Weighted Average Fair Value (per cwt)	$	25.71
Fair Value	$	576,000

The above information does not include either our physical inventory or our fixed price purchase commitments for raw sugar. At June 30, 2010, our domestic futures position was a net long position of 3,623,000 cwt at an average contract price of $27.94 and an average fair value price of $29.61. Our world futures position at June 30, 2010 was a net long position of 171,000 cwt at an average contract price of $17.33 and an average fair value price of $16.20.

The information in the table below presents our natural gas futures positions outstanding as of June 30, 2011.

	Expected Maturity Fiscal 2011		Expected Maturity Fiscal 2012
Futures Contracts (long positions):
Contract Volumes (mmbtu)		220,000		570,000
Weighted Average Contract Price (per mmbtu)	$	4.47	$	4.65
Contract Amount	$	983,000	$	2,650,000
Weighted Average Fair Value (per mmbtu)	$	4.38	$	4.69
Fair Value	$	964,000	$	2,674,000

At June 30, 2010, our natural gas futures position was a long position of 640,000 mmbtu with an average contract price of $5.62 and an average fair value price of $4.77.

At June 30, 2011 and 2010, we had no interest rate derivatives which were sensitive to interest rate changes.

Item 4. CONTROLS AND PROCEDURES

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2011, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange

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Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal controls over financial reporting that occurred during the three months ended June 30, 2011, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to a number of claims, including sixteen remaining lawsuits brought on behalf of eleven employees or their families and five third parties or their families, for injuries and losses suffered as a result of the 2008 Port Wentworth refinery industrial accident. Fifteen of the lawsuits are pending in the State Court of Chatham County, Georgia, and one lawsuit is pending in the Superior Court of Chatham County, Georgia. None of the lawsuits demand a specific dollar amount of damages sought by the plaintiffs. The Company previously settled thirty-two lawsuits related to the accident. The State Court of Chatham County, Georgia has scheduled three of the remaining lawsuits for trial on October 10, 2011, but has not determined which of these cases will be tried on that date.

The Company has workers compensation insurance which provides for coverage equal to the statutory benefits provided to workers under state law. Additionally, the Company’s general liability policy provides for coverage for damages to third parties up to a policy limit of $100 million. While the Company believes, based on the facts of these cases, that claims by employees and certain contractors are limited to benefits provided under Georgia workers compensation law, the ultimate resolution of these matters could result in liability in excess of the amount accrued. The Company believes the likelihood of the aggregate liability, including the amounts paid in the previous settlements, exceeding the $100 million policy limit is remote.

In August 2010, the Company filed suit in the District Court of Fort Bend County, Texas, against one of its general liability excess insurers, XL Insurance Company America, Inc. (“XL”). XL issued a $25 million policy of insurance (a portion of the $100 million coverage described above) that provides coverage for lawsuits filed as a result of the Port Wentworth refinery industrial accident. XL, which has not denied coverage for payments for settlements or judgments, asserts that its policy does not include coverage of defense costs in litigation. The Company’s lawsuit seeks a declaration that pursuant to the insurance policy it issued to the Company, XL is required to pay the Company’s costs of defense in lawsuits filed by claimants for injuries and losses suffered as a result of the Port Wentworth refinery accident. In October 2011, XL removed the lawsuit to the United States District Court for the Southern District of Texas. In July 2011, the Company and XL entered into a settlement of the litigation which included XL’s agreement to pay a portion of the Company’s defense costs until the limit of the XL insurance policy is exhausted, if ever. American Guaranty & Liability Insurance Company (“American Guaranty”) and St. Paul Fire & Marine Insurance Company (“St. Paul”) each issued insurance policies for a 50% participating share in a $50 million layer of excess liability insurance coverage (a portion of the $100 million coverage described above) that provide coverage for lawsuits filed as a result of the Port Wentworth refinery industrial accident. American Guaranty and St. Paul have issued reservation of rights, and separately, while American Guaranty and St. Paul have not denied coverage for payments for settlements or judgments, they have denied coverage of defense costs in litigation. The Company has notified American Guaranty and St. Paul that it believes the policies do provide coverage for defense costs.

In December 2010, AdvancePierre Foods, Inc. (“Pierre”) filed suit against the Company and its distributor, Evergreen Sweeteners, Inc. in the United States District Court for the Western District of North Carolina seeking damages in connection with sugar that had been voluntarily recalled by the Company in July 2010. The claims asserted against the Company seek recovery of losses allegedly incurred by Pierre due to its alleged incorporation of recalled sugar in food products. Although the complaint does not specify alleged damages, Pierre previously indicated that its damages were approximately $3.2 million. The insurer that issued the Company’s $1 million primary liability insurance policy has assumed the defense of this lawsuit. Ironshore Specialty Insurance Company (“Ironshore”), which provides $25 million of umbrella liability insurance coverage in excess of the Company’s $1 million primary liability insurance policy, has denied coverage for the Pierre property damage claims and two other property damage claims totaling approximately $200,000 that involve the same recalled sugar. The Company believes that Ironshore’s umbrella liability insurance policy is enforceable to

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respond to Pierre’s lawsuit and the other property damage claims. In January 2011, the Company filed suit against Ironshore in the United States District Court for the Southern District of Texas seeking a declaratory judgment that Ironshore is required to provide coverage for the Pierre lawsuit and the other property damage claims pursuant to the umbrella liability insurance policy it issued to the Company. The Company is an additional insured under another primary insurance policy and that insurer has also assumed the defense of this lawsuit under a reservation of rights. As a result, under the second primary insurance policy the Company has defense cost coverage and may have an additional $1 million of coverage in its capacity as an additional insured.

In September 2010, the State of Georgia Department of Natural Resources Environmental Protection Division (“EPD”) issued a notice of violation to the Company in connection with discharges of excess quantities of sugar under the Company’s Clean Water Act discharge permits for storm water and cooling water at its Port Wentworth, Georgia refinery. In June 2011, the Company agreed to a consent order with EPD to settle the notice of violation. Without admitting liability, the Company agreed to pay a fine of $80,000, make certain housekeeping and process improvements within 30 days and make improvements to the Port Wentworth facility by December 31, 2011. The Company also agreed to complete an engineering study of the Port Wentworth refinery by December 31, 2012. The purpose of the study is to evaluate and compare the ability of various potential facility improvements to maintain compliance with applicable storm water and cooling water discharge permits. The recommendations made by the study are required to be implemented by June 30, 2014. Expenditures may be required for this implementation, although the amount and timing of any expenditure cannot currently be estimated.

In December 2010, the Louisiana Department of Environmental Quality (“LDEQ”) issued a Consolidated Compliance Order and Notice of Potential Penalty to the Company alleging violations of state environmental regulations and the terms of the wastewater discharge permit for the Company’s Gramercy, Louisiana refinery. The alleged violations relate to the release of foam into waters of the state and exceedances of applicable criteria for dissolved oxygen and pH. The Company investigated the alleged violations, took measures to cease and contain the foam discharge, and coordinated with the LDEQ to develop and implement a plan to remove and dispose of the foamy material and achieve and maintain compliance with applicable legal requirements. LDEQ has indicated that it plans to assess a penalty for the alleged violations and invited a settlement proposal from the Company, which has been submitted and is under review by LDEQ.

In November 2010, the Company filed suit in the Fort Bend County, Texas District Court against Hills Fuel Company (“Hills”), its supplier of coal, for breach of contract. Hills failed to make deliveries due under the contract and the Company has been sourcing its supply of coal at prices higher than stipulated under the contract. Hills filed an answer in January 2011 denying the allegations in the complaint and, in April 2011, Hills filed a counterclaim alleging that the Company breached the supply contract in not taking coal for a prolonged period of time and claiming $1.5 million in lost profits. The lawsuit is in the discovery phase and the Company is unable to predict the ultimate outcome of this matter.

In March 2011, the Company filed suit in the United States District Court for the Southern District of Texas against Southern Systems, Inc. (“SSI”), the contractor who constructed the conditioning silos at the Company’s Port Wentworth refinery, for breach of contract. The lawsuit seeks damages for deficiencies in construction of the conditioning silos. In June 2011, SSI filed a counterclaim against the Company for $3.5 million for work it allegedly performed and was not paid. The Company is unable to predict the ultimate outcome of this matter.

In May 2011, the Company joined seven cane and beet sugar producers and two sugar industry trade associations as plaintiffs in a lawsuit filed against six producers of high fructose corn syrup and the Corn Refiners Association (collectively, the “HFCS Defendants”) in the United States District Court for the Central District of California regarding advertising and marketing of high fructose corn syrup. The lawsuit alleges violations of the federal Lanham Act and state law by the HFCS Defendants in marketing and advertising high fructose corn syrup as a natural product equivalent to cane and beet sugar. The lawsuit seeks money damages and injunctive relief. In July 2011, the HFCS Defendants filed a motion to dismiss the amended complaint and a motion to strike the state law claim which are pending before the court.

The Company is party to other litigation and claims which are normal in the course of its operations. While the results of such litigation and claims cannot be predicted with certainty, the Company believes the final outcome of such matters will not have a materially adverse effect on its consolidated results of operations, financial position or cash flows. In connection with the sales of certain businesses, the Company made customary representations and warranties, and undertook indemnification obligations with regard to certain of these representations and warranties including financial statements, environmental and tax matters, and the conduct of the businesses prior to the sale. These indemnification obligations are subject to certain deductibles, caps and expiration dates.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended September 30, 2010.

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Item 6. Exhibits

(a) Exhibits

31.1	Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
31.2	Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
32	Certifications required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of June 30, 2011 and September 30, 2010; (ii) Consolidated Statements of Operations for the three and nine months ended June 30, 2011 and 2010; (iii) Consolidated Statements of Cash Flows for the nine months ended June 30, 2011 and 2010; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended June 30, 2011; and (v) Notes to the Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	IMPERIAL SUGAR COMPANY
		(Registrant)
Dated: August 4, 2011	By:	/s/ H. P. Mechler
		H. P. Mechler
		Senior Vice President and Chief Financial Officer

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Exhibit Index

Exhibit No.	Document
31.1	Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
31.2	Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
32	Certifications required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of June 30, 2011 and September 30, 2010; (ii) Consolidated Statements of Operations for the three and nine months ended June 30, 2011 and 2010; (iii) Consolidated Statements of Cash Flows for the nine months ended June 30, 2011 and 2010; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended June 30, 2011; and (v) Notes to the Consolidated Financial Statements.

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