10-Q

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, 2007

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 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  ¨

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 27, 2007 there were 11,799,032 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)	4
	Consolidated Statements of Operations (Unaudited)	5
	Consolidated Statements of Cash Flow (Unaudited)	6
	Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	16
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 6.	Exhibits	17
	Signatures	18

2

Forward-Looking Statements

Statements regarding future market prices and margins, future energy costs, future operating results, future availability of raw sugar, operating efficiencies, future government and legislative actions, future outcomes of legal proceedings, future cost savings, future pension payments, our liquidity and ability to finance our operations, and other statements that are not historical facts contained in this report on Form 10-Q are forward-looking statements. 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	• outlook

Forward-looking statements involve risks, uncertainties and assumptions, including, without limitation, market factors, energy costs, the effect of weather and economic conditions, farm and trade policy, our ability to realize planned cost savings, the available supply of sugar, results of actuarial assumptions, strategic initiatives, 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. Many of such factors are beyond our ability to control or predict. 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. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All forward-looking statements in this Form 10-Q are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this report and other SEC filings.

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PART I—FINANCIAL INFORMATION

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2007			September 30, 2006
	(In Thousands of Dollars)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	28,127		$	56,250
Marketable Securities		72,229			308
Accounts Receivable, Net		51,350			54,192
Inventories:
Finished Products		24,148			53,118
Raw and In-Process Materials		48,727			72,844
Supplies		12,225			11,037
Total Inventory		85,100			136,999
Deferred Costs and Prepaid Expenses		6,761			7,526
Assets Held for Sale		4,527			4,791
Total Current Assets		248,094			260,066
Other Investments		3,925			2,826
Property, Plant and Equipment, Net		87,644			90,449
Deferred Income Taxes, Net		13,168			15,073
Other Assets		3,366			2,729
Total	$	356,197		$	371,143
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable, Trade	$	56,899		$	67,574
Current Maturities of Long-Term Debt		696			2,665
Other Current Liabilities		23,196			30,214
Total Current Liabilities		80,791			100,453
Long-Term Debt, Net of Current Maturities		1,500			1,500
Deferred Employee Benefits and Other Liabilities		84,142			83,305
Commitments and Contingencies
Shareholders’ Equity:
Preferred Stock, Without Par Value, Issuable in Series; 5,000,000 Shares Authorized, None Issued		—			—
Common Stock, Without Par Value; 50,000,000 Shares Authorized; 11,798,849 and 11,292,449 Shares Issued and Outstanding at June 30, 2007 and September 30, 2006		122,985			117,161
Retained Earnings		97,145			101,841
Accumulated Other Comprehensive Loss		(30,366	)		(33,117	)
Total Shareholders’ Equity		189,764			185,885
Total	$	356,197		$	371,143

See notes to consolidated financial statements.

4

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
	(In Thousands of Dollars, Except per Share Amounts)
Net Sales	$	216,356		$	231,294		$	655,964		$	706,544
Cost of Sales		194,107			195,638			570,199			613,271
Selling, General and Administrative Expense		11,168			11,506			37,320			33,417
Depreciation		3,497			3,370			10,419			10,683
Loss (Gain) on:
Arbitration Settlement		(6,752	)		—			(6,752	)		—
Commodity Exchange Seats		—			—			(3,654	)		—
Operating Asset Dispositions		—			—			(659	)		116
Total Costs and Expenses		202,020			210,514			606,873			657,487
Operating Income		14,336			20,780			49,091			49,057
Interest Expense		(595	)		(513	)		(1,538	)		(1,626	)
Interest Income		1,283			967			2,955			1,529
Other Income, Net		579			471			1,498			1,447
Income from Continuing Operations Before Income Taxes		15,603			21,705			52,006			50,407
Provision for Income Taxes		4,224			6,932			16,225			17,451
Income from Continuing Operations		11,379			14,773			35,781			32,956
Income (Loss) from Discontinued Operations		(3,776	)		437			(3,776	)		1,372
Net Income	$	7,603		$	15,210		$	32,005		$	34,328
Basic Earnings per Share of Common Stock:
Income from Continuing Operations	$	0.98		$	1.31		$	3.14		$	3.01
Income (Loss) from Discontinued Operations	$	(0.32	)	$	0.04		$	(0.33	)	$	0.13
Net Income	$	0.66		$	1.35		$	2.81		$	3.14
Diluted Earnings per Share of Common Stock:
Income from Continuing Operations	$	0.95		$	1.26		$	3.06		$	2.94
Income (Loss) from Discontinued Operations	$	(0.31	)	$	0.04		$	(0.32	)	$	0.12
Net Income	$	0.64		$	1.30		$	2.74		$	3.06
Weighted Average Shares Outstanding:
Basic		11,586,107			11,305,763			11,390,375			10,937,462
Diluted		11,949,544			11,677,704			11,679,236			11,221,270

See notes to consolidated financial statements.

5

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	Nine Months Ended June 30,
	2007			2006
	(In Thousands of Dollars)
Operating Activities:
Net Income	$	32,005		$	34,328
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Depreciation		10,419			10,683
Deferred Income Taxes		652			18,205
Reclassification from Accumulated Other Comprehensive (Income) Loss to Net Income		3,924			(5,028	)
Cash Paid (Received) on Change in Fair Value of Derivative Instruments		44			(1,414	)
Gain on Arbitration Settlement		(6,752	)		—
Non-Cash Portion of Gain on Commodity Exchange Seats		(2,893	)		—
Loss (Gain) on Asset Dispositions		(659	)		156
(Income) Loss from Discontinued Operations		3,906			(2,126	)
Non-Cash Portion of Stock-Based Compensation		1,392			345
Excess Tax Benefits from Stock-Based Compensation		(2,106	)		—
Other		(410	)		(521	)
Changes in Operating Assets and Liabilities:
Accounts Receivable		5,573			3,326
Inventories		51,899			(29,471	)
Deferred Costs, Prepaids and Other Assets		(261	)		7,004
Accounts Payable—Trade		(10,675	)		(6,691	)
Other Liabilities		(3,861	)		2,227
Net Cash Provided By Continuing Operations		82,197			31,023
Net Cash Provided By Discontinued Operations		—			1,799
Net Cash Provided By Operations		82,197			32,822
Investing Activities:
Capital Expenditures		(7,619	)		(4,569	)
Proceeds from Sale of Assets		924			10
Investment in Marketable Securities		(71,668	)		—
Proceeds from Sale of Marketable Securities		2,327			—
Proceeds from Maturity of Marketable Securities		168			—
Proceeds from Discontinued Operations, Including Collection of Escrow		—			229
Other		—			(562	)
Investing Cash Flow		(75,868	)		(4,892	)
Financing Activities:
Repayment of Long-Term Debt		(1,969	)		(1,749	)
Issuance of Common Stock		2,058			2,918
Cash Dividends		(36,391	)		(28,163	)
Excess Tax Benefits from Stock-Based Compensation		2,106			—
Other		(256	)		—
Financing Cash Flow		(34,452	)		(26,994	)
Increase (Decrease) in Cash and Cash Equivalents		(28,123	)		936
Cash and Cash Equivalents, Beginning of Period		56,250			49,179
Cash and Cash Equivalents, End of Period	$	28,127		$	50,115
Supplemental Non-Cash Items:
Tax Effect of Deferred Gains and Losses	$	1,253		$	(2,280	)

See notes to consolidated financial statements.

6

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Nine Months Ended June 30, 2007

(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, 2006	11,292,449	$	117,161	$	101,841		$	(33,117	)	$	185,885
Comprehensive Income:
Net Income	—		—		32,005			—			32,005
Change in Unrealized Securities Gains (Net of Tax of $11)	—		—		—			25			25
Change in Derivative Fair Value (Net of Tax of $14)	—		—		—			30			30
Reclassification from Accumulated Other Comprehensive Income (Loss) to Net Income (Net of Tax of $1,228)	—		—		—			2,696			2,696
Total Comprehensive Income	—		—		—			—			34,756
Dividends ($3.20 per share)	—		—		(36,701	)		—			(36,701	)
Stock Options and Warrants Exercised and
Restricted Stock Grants	506,400		5,824		—			—			5,824
Balance June 30, 2007	11,798,849	$	122,985	$	97,145		$	(30,366	)	$	189,764

See notes to consolidated financial statements.

7

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED JUNE 30, 2007 AND 2006

(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, 2006. The Company operates its business as one domestic segment—the production and sale of refined sugar and related products.

Certain reclassifications were made to the prior years’ financial statements to conform to current year presentation.

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.

Marketable Securities

Marketable securities at June 30, 2007 include $71.5 million of short-term investments in variable rate municipal demand notes, which reprice weekly. The carrying amount of these investments approximates fair value because of the frequent repricing of these securities.

Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48—Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently analyzing the potential impact, if any, of FIN 48 on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently analyzing the potential impact, if any, of SFAS 157 on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (SFAS 158). This statement amends SFAS No. 87, Employers’ Accounting for Pensions (SFAS 87), SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits (SFAS 88), SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other than Pensions (SFAS 106), and SFAS No. 132 (revised 2003), Employers’ Disclosure about Pension and Other Postretirement Benefits (SFAS 132R). SFAS 158 requires the recognition of the overfunded or underfunded status of a defined benefit pension and other postretirement plan as an asset or liability in the balance sheet and changes in that funded status to be recognized in comprehensive income in the year in which the changes occur. SFAS 158 also requires measurement of the funded status of a plan as of the balance sheet date. As permitted, the Company has early-adopted the funded status recognition provisions of SFAS 158 effective September 30, 2006. The measurement date provisions are effective for fiscal years ending after December 15, 2008. The Company expects to adopt the measurement date provisions of SFAS 158 in fiscal 2009.

8

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment to FASB Statement No. 115 (SFAS 159). SFAS 159 permits an entity to choose to measure many financial instruments and certain other items at fair value that are currently not required to be measured at fair value. Under SFAS 159, entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date. The fair value option may be elected on an instrument-by instrument basis, with a few exceptions, as long as it is applied to the instrument in its entirety. The fair value option election is irrevocable, unless a new election date occurs. The statement establishes presentation and disclosure requirements to help financial statement users understand the effect of the entity’s election on its earnings. SFAS 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007. The Company is currently analyzing the potential adoption and impact, if any, of SFAS 159 on its consolidated financial statements.

2. GAIN ON COMMODITY EXCHANGE SEATS

In January 2007, Intercontinental Commodity Exchange, Inc. (NYSE: ICE) merged with the New York Board of Trade (NYBOT) in exchange for a combination of cash and ICE common stock. The Company was a member of NYBOT and has two seats on the exchange, which gives the Company trading privileges in the sugar futures and options contracts traded on the exchange. The merger consideration received for the Company’s membership interests included cash of $0.8 million and restricted and unrestricted ICE stock. A gain of approximately $3.7 million was recorded in connection with this transaction. As of June 30, 2007, the Company had disposed of 15,810 shares of the ICE stock received in this transaction for proceeds of $2.2 million. The Company continues to own $0.4 million of restricted stock, recorded in Marketable Securities, which it intends to dispose and an additional $0.4 million of restricted stock, recorded in Other Investments, which it intends to hold in order to retain its trading privileges on the exchange.

3. CONTINGENCIES

The Company is party to 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 and, in some cases, may be deducted from the related escrow balance.

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 remains 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 pursuant to Financial Interpretation No. 45.

In connection with the sale of the Holly Sugar subsidiary (“Holly”) to Southern Minnesota Beet Sugar Cooperative (“SMBSC”) in September 2005, SMBSC alleged that the Company breached certain provisions in the sales agreement and filed a $14.3 million arbitration claim before the American Arbitration Association. In June 2007, the arbitrator awarded damages of $3.1 million plus interest to SMBSC. The award is recorded as Loss from Discontinued Operations.

Also, in conjunction with the sale of Holly, the Company negotiated a five-year option to purchase up to 500,000 hundredweight of bulk, refined sugar per year from SMBSC at a formula price based on the traded domestic raw sugar futures market. SMBSC rejected the Company’s exercise of the first year of that option in February 2006, alleging that there had been a “material change” in the domestic raw sugar futures market, necessitating a renegotiation of the refined sugar price under the option. The Company filed a counterclaim against SMBSC as part of the arbitration described in the preceding paragraph. In June 2007, the Company received a declaratory judgment that the agreement remains in force and was awarded $6.1 million of damages, plus interest, for breach of contract, which is recorded as Gain on Arbitration Settlement.

In July 2007, the Company received $3.2 million from SMBSC pursuant to the net settlement of the arbitration award. Additionally, $2.8 million of proceeds from the 2005 sale of Holly remain in escrow, pending resolution of $0.5 million of remaining claims. Both the net settlement amount and escrow balance are recorded in accounts receivable at June 30, 2007.

9

4. STOCK-BASED COMPENSATION

Options to purchase 25,565 shares and 420,566 shares of the Company’s common stock with a weighted-average exercise price per share of $5.06 and $4.81 were exercised during the three and nine-month periods ended June 30, 2007, respectively. Cash received from the exercise of stock options was $0.1 million and $2.0 million for the same periods. The total intrinsic value of options exercised for the three and nine months was $0.6 million and $10.1 million, respectively. The excess tax benefit realized from stock options exercised and restricted stock vested was $0.1 million and $2.1 million, for the three and nine months ended June 30, 2007, respectively.

In the nine-month period ended June 30, 2007, the Company granted 92,000 shares of restricted stock to employees with a weighted-average grant date fair value of $31.78 per share. These shares generally vest over a four-year period from date of grant. During the nine-month period, 46,011 shares of restricted stock vested with a fair value of $1.5 million. Additionally, in the second quarter of fiscal 2007, the Company granted 12,000 restricted share units (RSU’s) to non-employee directors. The RSU’s have no requisite service period and were immediately expensed. The Company recognized approximately $0.4 million of compensation expense in connection with this grant.

Stock Appreciation Rights (SARs) totaling 5,000 were exercised during the three-month period ended December 31, 2006 at an exercise price of $1.35 per share. At June 30, 2007, there were no SARs remaining.

5. 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,
	2007			2006		2007			2006
Income from Continuing Operations	$	11,379		$	14,773	$	35,781		$	32,956
Average Shares Outstanding		11,586,107			11,305,763		11,390,375			10,937,462
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		363,437			371,941		288,861			283,808
Adjusted Average Shares		11,949,544			11,677,704		11,679,236			11,221,270
Diluted EPS - Continuing Operations	$	0.95		$	1.26	$	3.06		$	2.94
Income (Loss) from Discontinued Operations	$	(3,776	)	$	437	$	(3,776	)	$	1,372
Average Shares Outstanding		11,586,107			11,305,763		11,390,375			10,937,462
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		363,437			371,941		288,861			283,808
Adjusted Average Shares		11,949,544			11,677,704		11,679,236			11,221,270
Diluted EPS - Discontinued Operations	$	(0.31	)	$	0.04	$	(0.32	)	$	0.12
Net Income	$	7,603		$	15,210	$	32,005		$	34,328
Average Shares Outstanding		11,586,107			11,305,763		11,390,375			10,937,462
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		363,437			371,941		288,861			283,808
Adjusted Average Shares		11,949,544			11,677,704		11,679,236			11,221,270
Diluted EPS - Net Income	$	0.64		$	1.30	$	2.74		$	3.06

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6. PENSION AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic benefit costs for the three and nine months ended June 30, 2007 and 2006 were (in thousands):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
Pension Plans
Service Cost	$	257		$	193		$	772		$	579
Interest Cost		3,139			2,819			9,416			8,459
Expected Return on Plan Assets		(2,841	)		(3,038	)		(8,523	)		(9,116	)
Amortization of Prior Service Cost		27			28			81			84
Recognized Actuarial Loss		312			396			936			1,188
Curtailment Loss		—			97			—			291
Total Net Periodic Benefit Costs	$	894		$	495		$	2,682		$	1,485
Postretirement Benefits Other than Pension Plans
Service Cost	$	3		$	(4	)	$	10		$	19
Interest Cost		150			(276	)		449			1,058
Amortization of Prior Service Cost		(399	)		515			(1,196	)		(1,976	)
Recognized Actuarial Loss		139			(269	)		415			1,029
Total Net Periodic Benefit Costs (Income)	$	(107	)	$	(34	)	$	(322	)	$	130

Pension plan contributions, which are based on regulatory requirements, were $1.0 million and $0.6 million during the nine months ended June 30, 2007 and 2006, respectively. Contributions during the remainder of fiscal 2007 are expected to be approximately $10.7 million, including $10.2 million which is not required to be paid until fiscal 2008.

7. SUBSEQUENT EVENTS

In July 2007, the Company sold the site of a former refinery in Sugar Land, Texas, which was closed in 2003, for proceeds of $6.5 million and expects to recognize a gain of approximately $1.9 million in the fourth fiscal quarter. The property is reflected in Assets Held for Sale at June 30, 2007.

In July 2007, the Company amended its $100 million senior secured revolving credit agreement led by Bank of America, N.A. and extended its maturity to December 31, 2011. Interest on borrowings under the facility was reduced to LIBOR plus a margin that varies (with liquidity, as defined) from 1.00% to 1.75%, or the base rate (Bank of America prime rate) plus a margin of negative 0.25% to positive 0.25%. All other major terms of the facility remain unchanged.

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, 2006.

Overview

We operate in a single domestic business segment, which produces and sells 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 market 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 sugarbeets, prices of competing crops, domestic health and eating trends, competing sweeteners, weather conditions and United States farm and trade policy. The domestic sugar industry is subject to substantial influence by legislative and regulatory actions. The current 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.

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Results of Operations

Three and Nine Months Ended June 30, 2007 compared to Three and Nine Months Ended June 30, 2006

In the third fiscal quarter ended June 30, 2007, we reported income from continuing operations of $11.4 million or $0.95 per diluted share, compared to $14.8 million or $1.26 per diluted share during the third fiscal quarter of the prior year. For the first nine months of the current year, we reported income from continuing operations of $35.8 million or $3.06 per diluted share, compared to $33.0 million or $2.94 per diluted share last year. The current quarter decrease was the result of a lower gross margin resulting from lower domestic and world refined sugar sales prices and higher manufacturing conversion costs, offset in part by lower raw sugar and energy costs and a gain realized on a favorable arbitration ruling. A lower effective tax rate also contributed to the quarter’s results. We discuss these factors in more detail below.

Our results of operations primarily depend on our success in achieving appropriate spreads of sugar sales prices over raw material costs and our ability to control our manufacturing, distribution and administrative costs. Sugar sales comprise approximately 97% of our net sales.

Sugar sales volumes and prices were:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
	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	3,456	$	30.61	3,236	$	33.79	9,575	$	31.87	9,992	$	31.66
Consumer	1,857		35.43	1,926		37.23	5,946		36.54	6,294		36.31
Foodservice	777		32.53	889		41.54	2,148		35.85	3,173		38.39
Domestic Sales	6,090		32.32	6,051		36.02	17,669		33.92	19,459		34.26
World/Toll Sales	599		22.38	599		12.11	2,074		18.60	1,726		12.34
Sugar Sales	6,689	$	31.43	6,650	$	33.87	19,743	$	32.32	21,185	$	32.48

Net sales decreased 6.5% for the three months and 7.2% for the nine months ended June 30, 2007, each compared to the same period in the prior year. Domestic sugar volumes increased 0.6% for the quarter and decreased 9.2% for the nine-month period. Domestic prices decreased 10.3% for the quarter and 1.0% for the nine-month period. Last year’s tight domestic sugar market supply conditions, driven by a smaller domestic sugar beet crop and delays in the start of the harvest in some sugar beet areas, along with the impact of Gulf Coast hurricanes on the cane sugar industry in the fall of 2005, led to rapidly rising refined sugar prices during fiscal 2006. Additionally, certain channels experienced higher volumes caused by shortages in the domestic industry’s refining capacity in the months immediately following the hurricanes. Beginning late in fiscal 2006 and continuing in fiscal 2007, spot industrial prices and new contract pricing declined from the high levels reached in 2006 due to the restoration of capacity and USDA estimates of a 12.5% increase in beet sugar production from the crop which commenced harvest in fall of 2006. Early contracting activity for 2008 shows continuing price weakness, reflective of expectations of an oversupplied market.

A significant portion of our industrial sales are done under fixed price forward sales contracts for generally up to a year, many of which are on a calendar year basis. As a result, industrial sales prices tend to lag market trends. The lag effect of rising industrial contract prices last year largely matured in the second half of fiscal 2006 and the impact of falling prices has been realized more fully each period of the current year as old contracts are completed. As a result, industrial prices realized during the current quarter were 9.4% lower than the third quarter of the prior year and 3.0% lower than the immediately preceding quarter. Industrial volumes increased 6.8% in the third quarter of fiscal 2007 due in part to the continued shift of a toll contract to industrial sales as well as an aggressive sales effort.

Branded consumer volume during the quarter continued to increase from levels achieved in the previous year due to an aggressive sales effort to restore business volumes with the existing customer base as well as to establish sales with new customers. On the other hand, private label consumer volume continues to be down due to both the increased availability of sugar this past fall and increased private label competition, including Mexican imports. Higher consumer prices were realized in the third quarter of fiscal 2006 related to the then tight domestic supply condition. Competitive pressure in the marketplace resulting from larger supplies has resulted in lower consumer prices during the current quarter.

Restoration of the domestic cane production capacity and competitive pressure continue to negatively impact foodservice price and volume, however the rate of volume decrease versus the prior year was significantly less in the third quarter than experienced earlier this fiscal year. Foodservice prices continued to decline during the current quarter of fiscal 2007 and were 21.7% lower than the same quarter last year. World and toll sales volumes were flat in the current quarter compared to the prior year quarter as higher

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world sales more than offset the conversion of a toll contract to domestic industrial sales. World and toll sales price increased significantly with the shift of volumes to higher priced world sales in the current quarter.

Partially offsetting the margin impact of lower refined prices, cost of raw sugar continues to be lower than the prior year levels. Our cost of domestic raw cane sugar decreased from $22.51 per cwt (on a raw market basis) for the quarter ended June 30, 2006 to $20.85 per cwt for the current quarter and from $21.80 per cwt for the first nine months of last fiscal year to $20.91 per cwt for the first nine months of this fiscal year. The lower domestic raw cane sugar cost increased our gross margin percentage by 4.7% for the three months and 2.4 % for the nine months ended June 30, 2007. Lower world raw sugar costs compared to both the prior year quarter and first nine months of last year, combined with increased volume in both the current quarter and fiscal year, positively impacted gross margin by 3.5% and 0.7%, respectively.

Recently, supply constraints in the raw sugar market along with increased transportation costs have resulted in increasing domestic raw sugar prices in the futures market. While we are unable to predict whether these higher raw sugar futures market prices will continue, we have purchased or hedged substantially all of our expected raw sugar requirements for the balance of fiscal 2007 at prices below prior year levels which should result in full year fiscal 2007 domestic raw sugar costs being approximately $22.7 million lower than the prior year, including $8.3 million for the fourth fiscal quarter.

Energy costs continue to be lower than last year. Natural gas provides approximately half of the energy for our plants, while the remainder of our energy usage is comprised of coal and fuel oil. Our average NYMEX basis cost of natural gas after applying gains and losses from hedging activity decreased to $8.24 per mmbtu in the current quarter from $9.17 per mmbtu in the comparable prior year’s quarter and to $8.15 from $10.28 for the nine month periods. Our purchases of coal decreased to an annual average cost of $3.58 per mmbtu in fiscal 2007 compared to $3.86 per mmbtu in the prior year. In total, energy costs were $0.3 million and $2.6 million lower for the three and nine months ended June 30, 2007, amounting to an increase of gross margin percentage of 0.2% and 0.4%, respectively. We have purchased or hedged approximately 94% of our expected 2.5 million mmbtu natural gas requirements for fiscal 2007 at prices below prior year levels. If the balance of our anticipated natural gas purchases were priced in the futures market on July 16, 2007, our full year fiscal 2007 natural gas costs would be approximately $4.5 million lower than the prior year, including $0.8 million for the fourth fiscal quarter.

Gross margin as a percentage of sales for the three months ended June 30, 2007, decreased to 10.3% compared to 15.4% in the prior year quarter and decreased to 13.1% for the first nine months compared to 13.2% for the prior year. In addition to the effects of sales prices, raw sugar costs and energy costs described above, gross margin was impacted by manufacturing conversion costs. Manufacturing conversion costs increased in the current quarter and fiscal year due to increased costs for labor, repairs and maintenance costs, property insurance expense, fringe benefit costs and the influence of lower production volumes on unit costs. Increased manufacturing conversion costs (excluding energy) negatively impacted gross margin by approximately 2.2% and 3.0% for the three and nine-month periods ended June 30, 2007 compared to the same periods in the prior year.

Selling, general and administrative expense decreased $0.3 million for the three months ended June 30, 2007 compared to the same period in the prior year primarily because of higher spending in the prior year for corporate development activities and advertising costs, largely offset by higher employee benefit costs in the current period. A $3.9 million increase for the nine-month period was driven by litigation costs, compensation and other employee benefit costs, and professional services fees primarily related to corporate development activities.

In June 2007, we were awarded damages of $6.1 million plus interest in connection with an arbitration claim concerning breach of contract under an option agreement to purchase refined sugar from Southern Minnesota Beet Sugar Cooperative (SMBSC).

In January 2007, Intercontinental Commodity Exchange, Inc. (NYSE: ICE) merged with the New York Board of Trade (NYBOT) in exchange for a combination of cash and ICE common stock. The merger consideration received for our NYBOT membership interests included cash of $0.8 million and restricted and unrestricted ICE stock. A gain of approximately $3.7 million was recorded in connection with this transaction as Gain on Commodity Exchange Seats.

In the second quarter of fiscal 2007, we sold land and remaining buildings at a former refinery in Clewiston, Florida, which ceased operations in 2000, and recorded a gain of approximately $0.7 million.

As a result of the foregoing, operating income was $14.3 million in the third fiscal quarter compared to $20.8 million in the third fiscal quarter of the prior year and was unchanged from $49.1 million for the nine months ended June 30, 2007 compared to the same period last year.

Interest expense increased $0.1 million and decreased $0.1 million for the quarter and nine-months ended June 30, 2007 compared to the same periods in the prior year.

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Interest income increased $0.3 million in the three-month period and $1.4 million in the nine-month period ended June 30, 2007 compared to the same periods in the prior year, primarily due to increased interest income from higher invested balances.

Other income, which includes equity investment earnings and distributions from cost basis investments, increased $0.1 million in the three and nine-month period ended June 30, 2007 compared to the same periods in the prior year.

We have estimated a combined federal and state income tax rate of 31.2% for the nine months ended June 30, 2007 compared to 34.6% in the same period of last year. The decrease in the effective tax rate is primarily attributable to utilization of previous capital loss carryforwards as a result of the ICE/NYBOT transaction and the sale of certain properties in the current year, as well as an increasing federal manufacturing credit that the Company expects to more fully utilize in fiscal 2007.

In connection with the arbitration decision discussed above, SMBSC was awarded $3.1 million plus interest for claims against the Company related to breaches of warranties and covenants in the sales agreement which have been recorded as Loss from Discontinued Operations.

Liquidity and Capital Resources

We fund our liquidity and capital requirements from cash generated from operations, supplemented as necessary with revolving credit borrowings under an agreement that provides for up to $100 million (subject to a borrowing base) of senior secured revolving credit loans (the “Revolver”). At June 30, 2007, we had no outstanding borrowings under the Revolver and had borrowing capacity of $94.3 million, after deducting outstanding letters of credit totaling $5.7 million.

The Revolver is secured by our cash and temporary investments, accounts receivable, inventory, certain investments and certain property, plant and equipment. Each of our subsidiaries is either a borrower or a guarantor under the facility. In July 2007, the Company amended its Revolver led by Bank of America, N.A. and extended its maturity to December 31, 2011. Interest on borrowings under the facility was reduced to LIBOR plus a margin that varies (with liquidity, as defined) from 1.00% to 1.75%, or the base rate (Bank of America prime rate) plus a margin of negative 0.25% to positive 0.25%. All other major terms of the facility remain unchanged.

The agreement contains covenants limiting our ability to, among other things:

• incur other indebtedness,

• incur other liens,

• undergo any fundamental changes,

• engage in transactions with affiliates,

• enter into sale and leaseback transactions,

• change our fiscal periods,

• enter into mergers or consolidations,

• sell assets, and

• prepay other debt.

In addition, in the event that our average total liquidity (defined as the average of the borrowing base including cash, less average actual borrowings and letters of credit) falls below $20 million, the Revolver requires that we comply with a quarterly covenant which establishes a minimum level of earnings before interest, taxes, depreciation and amortization. The Revolver limits our ability to pay dividends or repurchase stock if our average total liquidity, after adjustment on a pro forma basis for such transaction, is less than $20 million. Average total liquidity was $149 million during the nine months ended June 30, 2007.

The Revolver also includes customary events of default, including a change of control. Borrowings are generally 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. Although the facility has a final maturity date of December 31, 2011, we classify debt under the Revolver as current, pursuant to Emerging Issues Task Force Issue 95-22 as the agreement contains a subjective acceleration clause if in the opinion of the lenders there is a material adverse effect, and provides the lenders direct access to our cash receipts.

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Our capital expenditures for the first nine months of fiscal 2007 were $7.6 million, primarily for normal replacement, safety, product quality and process improvements. Capital expenditures in fiscal 2007 are expected to be about $15 million, of which approximately $10 million relates to normal equipment, product quality and safety improvements and the balance relates to process improvement, packaging and technology investments.

We expect to make pension plan contributions of approximately $10.7 million in the fourth fiscal quarter of 2007, including a $10.2 million contribution which is one year earlier than statutorily required. This early contribution is expected to reduce contributions required to be made in fiscal 2008 by a like amount.

During the first quarter of fiscal 2007, we declared a special cash dividend of $3.00 per share or $34.4 million, which was paid in January 2007. In second quarter of fiscal 2007, the regular quarterly dividend was increased from $0.06 per share to $0.07 per share.

A detailed analysis of the sources and uses of cash is provided in the Consolidated Statements of Cash Flow.

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, 2006.

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 ability to effectively hedge raw sugar purchases is limited by the illiquidity in the domestic raw sugar futures market. Gains and losses on raw sugar futures and options are matched to inventory purchases and charged or credited to cost of sales as such inventory is sold. Gains and losses on natural gas futures are matched to the natural gas purchases and charged to cost of sales in the period of the purchase.

The information in the table below presents our domestic and world raw sugar futures positions outstanding as of June 30, 2007.

	Expected Maturity Fiscal 2007		Expected Maturity Fiscal 2008
Domestic Futures Contracts (net long positions):
Contract Volumes (cwt)		812,000		1,372,000
Weighted Average Contract Price (per cwt)	$	21.21	$	21.03
Contract Amount	$	17,223,000	$	28,847,000
Weighted Average Fair Value (per cwt)	$	21.49	$	21.06
Fair Value	$	17,450,000	$	28,889,000
	Expected Maturity Fiscal 2008		Expected Maturity Fiscal 2009
World Futures Contracts (long positions):
Contract Volumes (cwt)		1,383,000		18,000
Weighted Average Contract Price (per cwt)	$	9.80	$	10.07
Contract Amount	$	13,549,000	$	181,000
Weighted Average Fair Value (per cwt)	$	9.84	$	10.59
Fair Value	$	13,614,000	$	190,000

The above information does not include either our physical inventory or our fixed price purchase commitments for raw sugar. Short raw sugar futures positions may occur when suppliers deliver short futures pursuant to the pricing provisions of raw sugar supply agreements, creating an equal and offsetting long position in the physical supply agreement.

The information in the table below presents our natural gas futures positions outstanding as of June 30, 2007.

	Expected Maturity Fiscal 2007		Expected Maturity Fiscal 2008
Futures Contracts (long positions):
Contract Volumes (cwt)		380,000		570,000
Weighted Average Contract Price (per cwt)	$	8.04	$	8.78
Contract Amount	$	3,055,000	$	5,003,000
Weighted Average Fair Value (per cwt)	$	6.82	$	8.17
Fair Value	$	2,591,000	$	4,659,000

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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, 2007, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange 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 nine months ended June 30, 2007, 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 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 and, in some cases, may be deducted from the related escrow balance.

In connection with the sale of the Holly Sugar subsidiary (“Holly”) to Southern Minnesota Beet Sugar Cooperative (“SMBSC”) in September 2005, SMBSC alleged that the Company breached certain provisions in the sales agreement and filed a $14.3 million arbitration claim before the American Arbitration Association. In June 2007, the arbitrator awarded damages of $3.1 million plus interest to SMBSC. The award is recorded as Loss from Discontinued Operations.

Also, in conjunction with the sale of Holly, the Company negotiated a five-year option to purchase up to 500,000 hundredweight of bulk, refined sugar per year from SMBSC at a formula price based on the traded domestic raw sugar futures market. SMBSC rejected the Company’s exercise of the first year of that option in February 2006, alleging that there had been a “material change” in the domestic raw sugar futures market, necessitating a renegotiation of the refined sugar price under the option. The Company filed a counterclaim against SMBSC as part of the arbitration described in the preceding paragraph. In June 2007, the Company received a declaratory judgment that the agreement remains in force and was awarded $6.1 million of damages, plus interest, for breach of contract, which is recorded as Gain on Arbitration Settlement.

In July 2007, the Company received $3.2 million from SMBSC pursuant to the net settlement of the arbitration award. Additionally, $2.8 million of proceeds from the 2005 sale of Holly remain in escrow, pending resolution of $0.5 million of remaining claims. Both the net settlement amount and escrow balance are recorded in accounts receivable at June 30, 2007.

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, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Under the Company’s August 2001 plan of reorganization, warrants to purchase an aggregate of 1,111,111 shares of common stock exercisable through August 2008 were issued to persons who were common shareholders of the Company immediately prior to effectiveness of the plan of reorganization. During the quarter ended June 30, 2007, warrant holders exercised 9 warrants to purchase shares of the Company’s common stock at an effective exercise price of $23.05 per share. Through June 30, 2007, warrant holders had exercised 1,740 warrants to purchase shares of the Company’s common stock, at an average effective exercise price of $23.40 per share. The issuance of the shares and the conversion of the warrants were exempt from registration under Section 1145 of the U.S. Bankruptcy Code.

Item 6. Exhibits

(a) Exhibits

4	Third Amendment to Amended and Restated Credit Agreement dated July 30, 2007, by and among Bank of America, N.A., as administrative agent, Imperial Sugar Company and the other borrowers and obligated parties thereto.
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.

17

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: July 30, 2007	By:	/s/ H. P. Mechler
		H. P. Mechler
		Senior Vice President and Chief Financial Officer

18

Exhibit Index

Exhibit No.	Document
4	Third Amendment to Amended and Restated Credit Agreement dated July 30, 2007, by and among Bank of America, N.A., as administrative agent, Imperial Sugar Company and the other borrowers and obligated parties thereto.
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.

19

EX-4

Exhibit 4

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as of July 30, 2007, is executed by and among BANK OF AMERICA, N.A., in its capacity as administrative agent for the Lenders under the Credit Agreement referred to below (the “Agent”), the Lenders which are parties to the Credit Agreement, IMPERIAL SUGAR COMPANY, a Texas corporation (the “Parent” and one of the Borrowers), and the other Borrowers and Guarantors which are signatories hereto below.

R E C I T A L S:

A. The Parent and certain of its Subsidiaries, as Borrowers, and Bank of America, N.A., as the Agent and a Lender, are parties to that certain Amended and Restated Credit Agreement dated as of December 1, 2004 (as amended by that certain Omnibus Amendment dated effective as of January 1, 2006 and that certain Second Amendment to Credit Agreement dated as of March 15, 2006 among the Obligated Parties, the Agent and the Lenders and as further amended or modified from time to time, the “Credit Agreement”) pursuant to which, among other things, the Lender has made a revolving credit facility available to the Borrowers.

B. The parties hereto now desire to further amend the Credit Agreement as provided in this Amendment.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings therefor set forth in the Credit Agreement.

2. Amendments to the Credit Agreement.

(a) Section 3.2. The last sentence of Section 3.2 (including the table contained therein) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“Subject to Section 2.3, if this Agreement is terminated at any time on or before July 30, 2010, whether pursuant to this Section or pursuant to Section 9.2, the Borrowers shall pay to the Agent, for the account of the Lenders, an early termination fee determined in accordance with the following table; provided that if the Borrowers refinance the credit facility provided by this Agreement with a credit facility agented and arranged by the same or another lending department of the Agent, then the fee for early termination set forth in this Section 3.2 shall not apply:

Period During which Early Termination Occurs	Early Termination Fees
On or before July 30, 2008	$	750,000
After July 30, 2008 but on or before July 30, 2010	$	250,000

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 1

(b) Section 5.2. Subclause (iii) of clause (m) of Section 5.2 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(iii) [intentionally omitted];”.

(c) Section 6.10. The reference to the date “September 30, 2004” contained in the last sentence of Section 6.10 of the Credit Agreement is hereby amended to mean and refer to “September 30, 2006”.

(d) Section 6.25. The reference to the date “September 30, 2003” contained in Section 6.25 of the Credit Agreement is hereby amended to mean and refer to “September 30, 2006.”

(e) Section 7.10. Clause (c) of Section 7.10 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(c) make any Restricted Investment if Average Total Liquidity for the twelve month period consisting of the four Fiscal Quarters then most recently ended immediately prior to the making of such Restricted Investment, or if Average Total Liquidity calculated on a pro forma basis for the twelve month period consisting of the four Fiscal Quarters then most recently ended as if such Restricted Investment had been made as of the first day of such twelve month period, is or would be less than $50,000,000.”

(f) Section 7.12. Section 7.12 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“Section 7.12. Guaranties. Neither any Obligated Party nor any of its Subsidiaries shall make, issue, or become liable on any Guaranty, except (a) Guaranties of the Debt allowed under Section 7.13 (other than Section 7.13(f)), (b) Guaranties of the Obligations in favor of the Agent, (c) any Guaranties in effect as of the date of this Agreement and described on Schedule 6.8, and (d) Guaranties by a Borrower or Guarantor of Debt of joint ventures in which a Borrower or Guarantor is a partner in an aggregate amount not to exceed $50,000,000 at any time outstanding.”

(g) Section 7.13.

(i) Clause (c) of Section 7.13 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(c) Capital Leases and purchase money-secured Debt incurred to purchase Fixed Assets, Inventory located outside the U.S. and other assets (other than Inventory located in the U.S.); provided that (i) the Liens securing such Capital Leases and purchase money secured Debt shall attach only to the Fixed Assets, Inventory located outside the U.S. and other assets (other than Inventory located in the U.S.) acquired by the incurrence of such Capital Leases and purchase money secured Debt and, in the case of Debt incurred pursuant to this clause (c) which is owed to an affiliate of the Agent and if and to the extent permitted by an intercreditor agreement between the Agent and such affiliate of the Agent which has been approved by the Required Lenders (which approval shall not be unreasonably withheld, conditioned or delayed), a Lien on other Collateral which is expressly subordinated to the Liens on the Collateral securing the Obligations, (ii) the aggregate amount of such Capital Leases and purchase money secured Debt shall not exceed $50,000,000 at any time and

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 2

(iii) prior to the purchase of any Real Estate with such purchase money secured Debt, the Borrowers shall provide the Agent with environmental reports related to such Real Estate that are reasonably acceptable to the Agent;”.

(ii) Clause (h) of Section 7.13 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(h) [intentionally omitted]; “.

(h) Definition of “Applicable Margin”. The table and information contained therein which are contained in the proviso succeeding clause (b) of the definition of the term “Applicable Margin” contained in Annex A of the Credit Agreement are hereby amended and restated to read in their entirety as follows:

Average Total Liquidity	Base Rate Revolving Loans		LIBOR Rate Revolving Loans
Greater than or equal to $90,000,000	(0.25	)%	1.00	%
Greater than or equal to $70,000,000 but less than $90,000,000	(0.25	)%	1.25	%
Greater than or equal to $40,000,000 but less than $70,000,000	0.00	%	1.50	%
Less than $40,000,000	0.25	%	1.75	%

(i) Definition of “Borrowing Base”. The definition of the term “Borrowing Base” contained in Annex A to the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“‘Borrowing Base’ means, at any time, an amount equal to the following (without duplication):

(a) 100% of all cash balances, plus the current account balance of all other Approved Investments, of Imperial Sugar Company on deposit in that certain deposit account no. 22312044 maintained with Banc of America Securities, LLC which is under the Control of the Agent (or on deposit in such other account or accounts under the Control of the Agent

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 3

as may be approved by the Agent from time to time for purposes of this clause (a)); for purposes of this clause (a), “Approved Investments” shall mean any investments referred to in clause (f) of the definition of the term “Restricted Investment” and any other investments approved by the Agent and the Required Lenders in writing for inclusion in the Borrowing Base; plus

(b) the Receivables Advance Rate multiplied by the Net Amount of Eligible Accounts; plus

(c) the sum of:

(i) 70% of the amount of Eligible Inventory consisting of raw materials; plus

(ii) 70% of the amount of Eligible Inventory consisting of finished goods; plus

(iii) 70% of the amount of Eligible Inventory consisting of work-in-process and by-products; minus

(d) the sum of:

(i) the Bank Product Reserve; plus

(ii) such other Reserves from time to time established by the Agent in its reasonable credit judgment.”

(j) Definition of “CCC Reserve”. The term “CCC Reserve” and the definition thereof contained in Annex A of the Credit Agreement are hereby deleted.

(k) Definition of “Environmental Compliance Reserve”. The term “Environmental Compliance Reserve” and the definition thereof contained in Annex A of the Credit Agreement are hereby deleted.

(l) Definition of “Permitted UCC Lien”. The term “Permitted UCC Lien” and the definition thereof contained in Annex A of the Credit Agreement are hereby deleted.

(m) Definition of “Permitted Liens”.

(i) Clause (g) of the definition of the term “Permitted Liens” contained in Annex A of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(g) Liens which constitute purchase money Liens and secure Debt permitted under clause (c) of Section 7.13, and additional Liens which secure Debt and are expressly subordinated to the Liens on the Collateral securing the Obligations if and to the extent that such additional Liens are permitted by clause (c) of Section 7.13;”.

(ii) Clause (i) of the definition of the term “Permitted Liens” contained in Annex A of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(i) [intentionally omitted];”.

(n) Definition of “Producer Lien Reserve”. The term “Producer Lien Reserve” and the definition thereof contained in Annex A of the Credit Agreement are hereby deleted.

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 4

(o) Definition of “Reserve” or “Reserves”. Clause (a) of the definition of the term “Reserve” or “Reserves” contained in Annex A of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(a) The Bank Product Reserve;”.

(p) Definition of “Restricted Investment”. Clauses (d), (e) and (f) of the definition of the term “Restricted Investment” contained in Annex A of the Credit Agreement are hereby amended and restated to read in their entirety as follows:

“(d) investments in direct obligations of the U.S., or any agency thereof, or obligations guaranteed by the U.S., provided that such obligations mature within one year from the date of acquisition thereof; (e) investments in certificates of deposit maturing within one year from the date of investment, bankers’ acceptances, Eurodollar bank deposits, or overnight bank deposits, in each case issued by, created by, or with a bank or trust company organized under the laws of the U.S. or any state thereof having capital and surplus aggregating at least $100,000,000; (f) investments in (i) commercial paper given a rating of “A2” or better by Standard & Poor’s Corporation or “P2” or better by Moody’s Investors Service, Inc. and maturing not more than ninety (90) days from the date of creation thereof and (ii) variable rate demand notes or variable rate demand obligations that are credit enhanced, auction rate securities rated “AA” or better by Standard & Poor’s Corporation or money market funds;”.

(q) Definition of “Stated Termination Date”. The definition of the term “Stated Termination Date” contained in Annex A of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“‘Stated Termination Date’ means December 31, 2011.”

(r) Certain Schedules. Each of Schedules 6.3, 6.4, 6.5, 6.8, 6.10, 6.11, 6.14, 6.15, 6.18, 6.25, 6.26, 6.28, 6.30 and 7.2 and Schedule A is hereby amended and restated to read in its entirety as set forth on Third Amendment Schedules 6.3, 6.4, 6.5, 6.8, 6.10, 6.11, 6.14, 6.15, 6.18, 6.25, 6.26, 6.28, 6.30 and 7.2 and Third Amendment Schedule A, respectively, attached to this Amendment.

3. Conditions Precedent. The effectiveness of this Amendment is subject to the Agent’s receipt of the following, each in form and substance reasonably satisfactory to the Agent and each dated the date of this Amendment unless otherwise agreed by the Agent:

(a) a Revolving Loans Note executed by the Borrower payable to the order of each of the Lenders;

(b) a modification to each Mortgage relating to this Amendment (including the extension of the Stated Termination Date referred to herein), and an endorsement to each mortgagee policy of title insurance relating to such Mortgage as modified;

(c) certified resolutions of the board of directors or other appropriate governing body of each of the Obligated Parties which authorize the execution, delivery and performance of this Amendment and the other Loan Documents and transactions contemplated hereby and thereby; and

(d) such other documents as the Agent may reasonably request.

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 5

4. Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the Loan Documents are ratified and confirmed and shall continue in full force and effect. Each of the Obligated Parties, the Agent, and the Lenders agrees that the Credit Agreement as amended hereby and the Loan Documents shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

5. Representations and Warranties. Each Obligated Party hereby represents and warrants to the Agent and the Lenders that, as of the date of and after giving effect to this Amendment, (a) the execution, delivery, and performance of this Amendment have been authorized by all requisite action on the part of such Obligated Party and will not violate such Obligated Party’s organizational or governing documents, (b) after giving effect to this Amendment, the representations and warranties contained in the Credit Agreement and in the Loan Documents are correct in all material respects on and as of the date hereof except for such representations and warranties limited by their terms to a specific date, and (c) after giving effect to this Amendment, no Default or Event of Default exists.

6. Survival of Representations and Warranties. All representations and warranties of the Obligated Parties made in this Amendment, the Credit Agreement or any other Loan Document shall survive the execution and delivery of this Amendment, and no investigation by the Agent or any Lender, or any closing, shall affect the representations and warranties or the right of the Agent and the Lenders to rely upon them.

7. Reference to Credit Agreement. The Credit Agreement and each of the Loan Documents, and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference in such agreements, documents and instruments, whether direct or indirect, shall mean a reference to the Credit Agreement as amended hereby.

8. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment, and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

9. Effect of Amendment. The effect of any waiver contained in the Credit Agreement as amended is expressly limited as provided therein, and, in order to induce the Agent and the Lenders to agree to any such waiver, each of the Obligated Parties agrees that such waiver shall not constitute or be deemed a waiver of any other Default or Event of Default, now existing or hereafter arising, or a waiver of any right or remedy arising as a result of any such other Default or Event of Default. No consent or waiver, express or implied, by the Agent or any Lender to or for any breach of or deviation from any covenant, condition or duty by any Obligated Party shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty.

10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE U.S.

11. Counterparts. This Amendment may be executed in any number of counterparts, all of which when taken together shall constitute one agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart.

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 6

12. Successors and Assigns. This Amendment shall inure to the benefit of the Agent and the Lenders and their respective successors and assigns and is binding upon the Borrowers and the other Obligated Parties and their successors and assigns; provided, however, that none of the Borrowers or other Obligated Parties may assign or transfer any of its obligations hereunder without the prior written consent of the Agent and the Lenders.

13. Headings. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

14. Entire Agreement. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER OF THIS AMENDMENT AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS BETWEEN OR AMONG ANY OF THE PARTIES HERETO.

15. Consent to Dissolution and Liquidation of Holly Finance Company and Fort Bend Utilities Company. Each of the Borrowers, the Guarantors, the Agent and the Lenders hereby consents to the dissolution and liquidation of Holly Finance Company and Fort Bend Utilities Company. Notwithstanding any such dissolution and liquidation, each of the Borrowers and the Guarantors hereby ratifies, confirms and reaffirms all of its indebtedness, liabilities and obligations, and all liens and security interests granted by it, under each of the Loan Documents to which it is a party.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers effective as of the day and year first above written.

IMPERIAL SUGAR COMPANY
By:	/s/ H.P. Mechler
Name:	H. P. Mechler
Title:	Senior Vice President and Chief Financial Officer
FORT BEND UTILITIES COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 7

IMPERIAL DISTRIBUTING, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	Senior Vice President
IMPERIAL SWEETENER DISTRIBUTORS, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
IMPERIAL-SAVANNAH LP
By:	Savannah Molasses & Specialties Company
Title:	General Partner
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
RAGUS HOLDINGS, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH FOODS INDUSTRIAL, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
BIOMASS CORPORATION
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 8

DIXIE CRYSTALS FOODSERVICE, INC.
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
ICUBE, INC.
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
IMPERIAL HOLLY CORPORATION
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
MENU MAGIC FOODS, INC.
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH FOODS & INDUSTRIES, INC.
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	Senior Vice President
SAVANNAH INVESTMENT COMPANY
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 9

SAVANNAH MOLASSES & SPECIALTIES COMPANY
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH SUGAR REFINING CORPORATION
By	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 10

AGENT AND THE LENDER:
BANK OF AMERICA, N.A., as the Agent and the Lender
By:	/s/ Stephen J. King
Name:	Stephen J. King
Title:	Vice President

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 11

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Robert A. Peiser, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Imperial Sugar Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: July 30, 2007	By:	/s/ Robert A. Peiser
		Robert A. Peiser
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, H.P. Mechler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Imperial Sugar Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: July 30, 2007	By:	/s/ H.P. Mechler
		H. P. Mechler
		Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,

United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), Robert A. Peiser, President and Chief Executive Officer, and H.P. Mechler, Senior Vice President and Chief Financial Officer, of Imperial Sugar Company, a Texas corporation (the “Company”), each hereby certifies that, to the best of his knowledge:

(1) the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 30, 2007	/s/ Robert A. Peiser
	Robert A. Peiser
	President and Chief Executive Officer
	/s/ H.P. Mechler
	H. P. Mechler
	Senior Vice President and Chief Financial Officer