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, 2008

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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ¨	Accelerated Filer  x
Non-accelerated filer  ¨	Smaller reporting company  ¨
(Do not check if a 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 21, 2008, there were 11,903,075 shares of common stock, without par value, of the registrant outstanding.

Index to Financial Statements

IMPERIAL SUGAR COMPANY

Index

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited)	3
	Consolidated Statements of Operations (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	15
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 6.	Exhibits	16
	Signatures	17

Forward-Looking Statements

Statements regarding future market prices and margins, Port Wentworth construction costs, timelines and operational restart dates, future expenses and liabilities arising from the Port Wentworth refinery incident, future insurance recoveries, 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 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, results of damaged equipment inspections, unforeseen engineering and equipment delays, results of insurance negotiations, 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 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, 2008			September 30, 2007
	(In Thousands of Dollars)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	73,491		$	74,229
Marketable Securities		311			20,693
Accounts Receivable, Net		28,311			49,409
Inventories:
Finished Products		39,264			34,156
Raw and In-Process Materials		31,032			54,197
Supplies		10,634			11,767
Total Inventory		80,930			100,120
Prepaid Expenses		4,604			7,342
Income Tax Receivable		12,581			—
Total Current Assets		200,228			251,793
Other Investments		12,080			3,683
Property, Plant and Equipment, Net		74,428			88,649
Deferred Income Taxes, Net		13,756			13,226
Other Assets		3,162			2,714
Total	$	303,654		$	360,065
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable, Trade	$	44,364		$	69,057
Other Current Liabilities		28,719			20,991
Total Current Liabilities		73,083			90,048
Long-Term Debt		—			1,500
Deferred Employee Benefits and Other Liabilities		71,462			68,426
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; 11,903,075 and 11,808,743 Shares Issued and Outstanding at June 30, 2008 and September 30, 2007		125,599			123,665
Retained Earnings		59,718			104,586
Accumulated Other Comprehensive Loss		(26,208	)		(28,160	)
Total Shareholders’ Equity		159,109			200,091
Total	$	303,654		$	360,065

See notes to consolidated financial statements.

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IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2008			2007			2008			2007
	(In Thousands of Dollars, Except per Share Amounts)
Net Sales	$	106,887		$	216,356		$	467,614		$	655,964
Cost of Sales (includes depreciation of $2,822,000 and $2,845,000 for the three months and $8,598,000 and $8,406,000 for the nine months ended June 30, 2008 and 2007, respectively)		(111,893	)		(196,952	)		(456,208	)		(578,605	)
Selling, General and Administrative Expense (includes depreciation of $725,000 and $652,000 for the three months and $2,157,000 and $2,013,000 for the nine months ended June 30, 2008 and 2007, respectively)		(11,022	)		(11,820	)		(33,714	)		(39,333	)
Refinery Explosion Related Charges, Net		(5,207	)		—			(17,272	)		—
Gain on Arbitration Settlement		—			6,752			—			6,752
Gain on Commodity Exchange Seats		—			—			—			3,654
Gain on Operating Asset Dispositions		—			—			—			659
Operating Income (Loss)		(21,235	)		14,336			(39,580	)		49,091
Interest Expense		(289	)		(595	)		(1,144	)		(1,538	)
Interest Income		596			1,283			2,240			2,955
Loss on Auction Rate Security		—			—			(388	)		—
Other Income, Net		819			579			13,618			1,498
Income (Loss) from Continuing Operations Before Income Taxes		(20,109	)		15,603			(25,254	)		52,006
(Provision) Credit for Income Taxes		7,593			(4,224	)		9,470			(16,225	)
Income (Loss) from Continuing Operations		(12,516	)		11,379			(15,784	)		35,781
Income (Loss) from Discontinued Operations		—			(3,776	)		—			(3,776	)
Net Income (Loss)	$	(12,516	)	$	7,603		$	(15,784	)	$	32,005
Basic Earnings per Share of Common Stock:
Income (Loss) from Continuing Operations	$	(1.07	)	$	0.98		$	(1.35	)	$	3.14
Loss from Discontinued Operations	$	—		$	(0.32	)	$	—		$	(0.33	)
Net Income (Loss)	$	(1.07	)	$	0.66		$	(1.35	)	$	2.81
Diluted Earnings per Share of Common Stock:
Income (Loss) from Continuing Operations	$	(1.07	)	$	0.95		$	(1.35	)	$	3.06
Income (Loss) from Discontinued Operations	$	—		$	(0.31	)	$	—		$	(0.32	)
Net Income (Loss)	$	(1.07	)	$	0.64		$	(1.35	)	$	2.74
Weighted Average Shares Outstanding:
Basic		11,680,076			11,586,107			11,649,673			11,390,375
Diluted		11,680,076			11,949,544			11,649,673			11,679,236

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,
	2008			2007
	(In Thousands of Dollars)
Operating Activities:
Net Income (Loss)	$	(15,784	)	$	32,005
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Refinery Explosion Related Impairment Charges		11,269			—
Depreciation		10,755			10,419
Deferred Income Taxes		(934	)		652
Reclassification from Accumulated Other Comprehensive (Income) Loss to Net Income		2,766			3,924
Cash (Paid) Received on Change in Fair Value of Derivative Instruments		388			44
Insurance recoveries recognized		(24,625	)		—
Advances from Insurance Carriers		23,731			—
Gain on Asset Dispositions		—			(659	)
Gain on Arbitration Settlement		—			(6,752	)
(Income) Loss from Discontinued Operations		—			3,906
Loss on Auction Rate Security		388			—
Non-Cash Portion of Gain on Commodity Exchange Seats		—			(2,893	)
Non-Cash Portion of Stock-Based Compensation		1,921			1,392
Equity Earnings in Unconsolidated Subsidiaries		(1,535	)		(715	)
Excess Tax Benefits from Stock-Based Compensation		(456	)		(2,106	)
Other		97			305
Changes in Operating Assets and Liabilities:
Accounts Receivable		8,517			5,573
Inventories		19,190			51,899
Deferred Costs, Prepaid Expenses and Other Assets		2,125			(261	)
Accounts Payable—Trade		(24,693	)		(10,675	)
Other Liabilities		2,425			(3,861	)
Net Cash Provided By Continuing Operations		15,545			82,197
Investing Activities:
Capital Expenditures		(7,803	)		(7,619	)
Advances from Insurance Carriers		11,269			—
Investment in Marketable Securities		(193,402	)		(71,668	)
Proceeds from Maturity of Marketable Securities		205,852			168
Proceeds from Sale of Marketable Securities		512			2,327
Proceeds from Sale of Assets		—			924
Other		216			—
Investing Cash Flow		16,644			(75,868	)
Financing Activities:
Repayment of Long-Term Debt		(1,500	)		(1,969	)
Issuance of Common Stock		56			2,058
Cash Dividends		(31,836	)		(36,391	)
Excess Tax Benefits from Stock-Based Compensation		456			2,106
Other		(103	)		(256	)
Financing Cash Flow		(32,927	)		(34,452	)
Decrease in Cash and Cash Equivalents		(738	)		(28,123	)
Cash and Cash Equivalents, Beginning of Period		74,229			56,250
Cash and Cash Equivalents, End of Period	$	73,491		$	28,127
Supplemental Non-Cash Items:
Tax Effect of Deferred Gains and Losses	$	1,120		$	1,253

See notes to consolidated financial statements.

5

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Nine Months Ended June 30, 2008

(Unaudited)

	Shares of Common Stock	Common Stock		Retained Earnings			Accumulated Other Comprehensive Loss			Total
	(In Thousands of Dollars, Except Share Data)
Balance September 30, 2007	11,808,743	$	123,665	$	104,586		$	(28,160	)	$	200,091
Comprehensive Loss:
Net Loss	—		—		(15,784	)		—			(15,784	)
Change in Derivative Fair Value (Net of Tax of $141,000)	—		—		—			246			246
Reclassification from Accumulated Other Comprehensive Income (Loss) to Net Income (Net of Tax of $1,008,000)	—		—		—			1,758			1,758
Other	—		—		—			(52	)		(52	)
Total Comprehensive Loss	—		—		—			—			(13,832	)
Cumulative Effect of Change in Accounting Principles	—		—		2,864			—			2,864
Dividends ($2.71 per share)	—		—		(31,948	)		—			(31,948	)
Stock Options Exercised and Restricted Stock Grants	94,332		1,934		—			—			1,934
Balance June 30, 2008	11,903,075	$	125,599	$	59,718		$	(26,208	)	$	159,109

See notes to consolidated financial statements.

6

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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, 2007. The Company operates its business as one domestic segment—the production and sale of refined sugar and related products.

Certain reclassifications of depreciation charges in the consolidated statements of operations 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.

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.

Accounting Pronouncements

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 No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other than Pensions, and SFAS No. 132 (revised 2003), Employers’ Disclosure about Pension and Other Postretirement Benefits. 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.

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

7

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.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R), which replaces SFAS No. 141, Business Combinations. SFAS 141R establishes principles and requirements for determining how an enterprise recognizes and measures the fair value of certain assets and liabilities acquired in a business combination, including non-controlling interests, contingent consideration, and certain acquired contingencies. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R will be applicable prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R would have an impact on accounting for any businesses acquired after the effective date of this pronouncement.

In December 2007, the FASB also issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for the non-controlling interest in a subsidiary (previously referred to as minority interests). SFAS 160 also requires that a retained non-controlling interest upon the deconsolidation of a subsidiary be initially measured at its fair value. Upon adoption of SFAS 160, the Company would be required to report any non-controlling interests as a separate component of stockholders’ equity. The Company would also be required to present any net income allocable to non-controlling interests and net income attributable to the stockholders of the Company separately in its consolidated statements of operations. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. The Company is currently assessing the impact, if any, of SFAS 160 on its consolidated financial statements.

2. REFINERY EXPLOSION RELATED CHARGES

The Company experienced an explosion and fire on February 7, 2008, at its sugar refinery in Port Wentworth, Georgia, which is located near Savannah, Georgia. The refinery’s bulk storage silos and virtually its entire packaging capabilities were destroyed, while the refining and warehousing operations received more limited damage. The Company intends to rebuild the damaged portions of the facility and has retained outside design and engineering services and is in the process of engaging construction firms to complete the rebuild. Based on engineering and construction estimates received thus far, the Company expects to begin bulk sugar production in late calendar year 2008, and to complete the restoration of packaging capabilities in the first half of calendar year 2009.

Charges and insurance recoveries included in the consolidated statements of operations for the three and nine months ended June 30, 2008, are as follows (in thousands):

	Three Months Ended June 30, 2008			Nine Months Ended June 30, 2008
Property, plant and equipment impairment	$	738		$	11,269
Inventory destroyed or damaged		380			5,773
Cost incurred as a result of the event:
Legal and consulting		2,506			5,338
Cleanup and repairs		3,135			3,893
Demolition		1,171			1,250
Loss (gain) on raw sugar contracts		(893	)		1,246
Emergency services and site security		385			1,177
Humanitarian efforts		114			652
Other		774			1,888
Continuing refinery payroll cost		5,607			8,911
Deductibles accrued on liability policies		—			500
Total Charges		13,917			41,897
Insurance Recoveries Recognized (net of $500 deductible on property insurance)		(8,710	)		(24,625	)
Net Charges	$	5,207		$	17,272

8

The Company has property damage insurance, which provides replacement cost coverage for the affected facilities. The policy also provides for business interruption insurance based on lost income and certain costs incurred during a reasonable period of reconstruction. Insurance recoveries that are deemed probable and are reasonably estimable have been recognized in the consolidated statements of operations to the extent of the related losses. Such recognized recoveries totaled $8.7 million for the three months and $24.6 million for the nine months ended June 30, 2008. Recoveries which are possible, but not yet probable and reasonably estimable, have not been recognized. The Company has provided preliminary claims information for property damage, incurred costs and business interruption coverage and is in discussions with the insurers about those claims. Of the remaining $17.3 million net charges, the Company estimates that insurance recoveries for property damage and incurred costs which are possible, but not yet probable and therefore are not recognized at June 30, 2008, are in the range of $5 million to $8 million.

Insurance recoveries that result in gains will be recognized only when realized. The Company estimated that business interruption claims for lost income during the second and third quarters will total approximately $15 million to $20 million. Business interruption recoveries will be recognized in revenues upon settlement with the insurance carriers. No business interruption claim periods have yet been settled.

The Company’s property insurance policy provides for replacement cost coverage for destroyed property, if replaced within a two-year period. Based on engineering reports and construction estimates received to date, the Company estimates that the replacement cost of the destroyed buildings and equipment is in the range of $180 million to $230 million, compared to the $11.3 million net book value recognized as impaired. Accordingly, the Company expects to recognize a substantial gain in future periods when the property claims are settled. Such gain may not be recognized for tax purposes to the extent the Company elects under the involuntary conversion rules of the Internal Revenue Code, if the insurance proceeds are reinvested in replacement property within a specified period of time. The replacement cost will establish a new basis in the assets for financial reporting purposes, which will result in higher depreciation charges in future years. The tax basis in the replaced assets will be reduced by the amount of the gain not recognized under the involuntary conversion rules.

The Company has thus far received advances on its property insurance claims totaling $35 million.

3. LOSS ON AUCTION RATE SECURITY

The Company has an investment in a $7.5 million federally insured student loan backed auction rate security for which the auction has failed several times since February 2008. The Company reclassified the security from short-term Marketable Securities to long-term Other Investments, and recorded a loss of $388,000 in the second quarter of fiscal year 2008 to reflect an other-than-temporary impairment of the security. In the third quarter of fiscal year 2008, the Company recognized a temporary decline in fair value of $71,000 in other comprehensive income (loss).

4. OTHER INCOME

In October 2007, the Company received an $11.2 million cash distribution from its long-term limited partnership investment as a result of the partnership selling its principal asset, an interest in a fuel oil terminal in the Port of Houston. The Company recorded the distribution in other income.

5. CONTINGENCIES

The Company is party to a number of claims, including seven lawsuits, by employees and third parties or their families, for injuries and losses of life suffered as a result of the Port Wentworth refinery explosion and fire. The Company believes that its workers compensation and liability insurance coverage is adequate to provide for damages arising from such claims. The Company has recorded a charge for the required deductibles under these policies as part of refinery explosion related charges in the consolidated statements of operations for the nine months ended June 30, 2008.

The U.S. Occupational Safety Health Administration (OSHA) and the U.S. Chemical Safety and Hazard Investigation Board (CSB) initiated investigations related to the February 7, 2008 explosion at the Company’s Port Wentworth facility. OSHA also initiated an investigation of the Company’s Gramercy, Louisiana refinery, and the Kentucky Office of Occupational Safety and Health (Kentucky OSHA) inspected the Company’s Ludlow, Kentucky facility. OSHA and Kentucky OSHA have the authority to issue citations alleging violations of the Occupational Safety and Health Act and the Kentucky Occupational Safety and Health Act and the regulations thereunder and to propose penalties for any such violations.

        The CSB and Kentucky OSHA investigations are ongoing and the Company is cooperating in these investigations. OSHA concluded its Port Wentworth and Gramercy investigations on July 25, 2008, and issued numerous citations with total proposed penalties of $5.1 million in Port Wentworth and $3.7 million in Gramercy. Additionally, OSHA issued requirements for certain abatement actions to be undertaken by the Company at the Port Wentworth and Gramercy facilities. The Company has contested all of the citations, proposed penalties and abatement actions regarding the Port Wentworth and Gramercy investigations, and these matters will be assigned to the Occupational Safety and Health Review Commission for a review of the merits of the citations, proposed penalties and abatement actions. The administrative review process of OSHA citations does not commence until approximately 35 to 60 days after the notice of contest is filed.

Because the contest of the citations is in the very early stages and the Company has not had the opportunity to initiate any discovery or evaluate any of the evidence OSHA relied upon in issuing the citations, the Company is unable to estimate the amount or a reasonable range of amounts of the liability which may ultimately result from these OSHA citations or the ongoing Kentucky OSHA investigation. OSHA penalties are not covered by insurance, and are not deductible for federal income tax purposes. The Company has suspended operation of its powder sugar production in Gramercy, which represents 7% of sales from the Gramercy refinery.

Additionally, 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.

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6. STOCK-BASED COMPENSATION

Options to purchase 7,417 shares of the Company’s common stock with a weighted-average exercise price per share of $7.56 were exercised during the nine-month period ended June 30, 2008. Cash received from the exercise of stock options was $56,000 and the total intrinsic value of options exercised during the nine-month period was $101,000.

In the nine-month period ended June 30, 2008, the Company granted 113,650 shares of restricted stock to employees with a weighted average grant date fair value of $20.89 per share. These shares generally vest over a four-year period from date of grant. Additionally, in the nine-month period ended June 30, 2008, the Company granted 32,086 restricted share units (RSUs) to non-employee directors with a weighted-average grant date fair value of $19.19 per share. The RSUs vest six months following termination of board service, but no earlier than two years from date of grant. During the nine-month period ended June 30, 2008, 59,943 shares of restricted stock vested with a fair value of $1.2 million.

The excess tax benefit realized from stock options exercised and restricted stock vested was $0.5 million for the nine-month period ended June 30, 2008.

7. EARNINGS PER SHARE

The following table presents information necessary to calculate basic and diluted earnings per share for the three months and nine months ended June 30, 2008 and 2007 (in thousands of dollars, except per share amounts):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2008			2007			2008			2007
Income (Loss) from Continuing Operations	$	(12,516	)	$	11,379		$	(15,784	)	$	35,781
Average Shares Outstanding		11,680,076			11,586,107			11,649,673			11,390,375
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		—			363,437			—			288,861
Adjusted Average Shares		11,680,076			11,949,544			11,680,076			11,679,236
Diluted EPS - Continuing Operations	$	(1.07	)	$	0.95		$	(1.35	)	$	3.06
Income (Loss) from Discontinued Operations	$	—		$	(3,776	)	$	—		$	(3,776	)
Average Shares Outstanding		11,680,076			11,586,107			11,649,673			11,390,375
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		—			363,437			—			288,861
Adjusted Average Shares		11,680,076			11,949,544			11,649,673			11,679,236
Diluted EPS - Discontinued Operations	$	—		$	(0.31	)	$	—		$	(0.32	)
Net Income (Loss)	$	(12,516	)	$	7,603		$	(15,784	)	$	32,005
Average Shares Outstanding		11,680,076			11,586,107			11,649,673			11,390,375
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options and Nonvested Restricted Stock Under the Treasury Stock Method		—			363,437			—			288,861
Adjusted Average Shares		11,680,076			11,949,544			11,680,076			11,679,236
Diluted EPS - Net Income (Loss)	$	(1.07	)	$	0.64		$	(1.35	)	$	2.74

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The assumed exercise of employee stock options and warrants outstanding and the issuance of nonvested restricted stock was not included in the computation of diluted earnings per share for the three and nine months ended June 30, 2008 because their assumed exercise and issuance would have an antidilutive effect on the computation of diluted loss per share.

8. PENSION AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic benefit costs for the three months and nine months ended June 30, 2008 and 2007 were (in thousands):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2008			2007			2008			2007
Pension Plans
Service Cost	$	436		$	257		$	968		$	772
Interest Cost		3,077			3,139			9,231			9,416
Expected Return on Plan Assets		(2,910	)		(2,841	)		(8,731	)		(8,523	)
Amortization of Prior Service Cost		31			27			92			81
Recognized Actuarial Loss		347			312			1,041			936
Curtailment Loss		—			—			—			—
Total Net Periodic Benefit Costs	$	981		$	894		$	2,601		$	2,682
Postretirement Benefits Other than Pension Plans
Service Cost	$	3		$	3		$	10		$	10
Interest Cost		147			150			440			449
Amortization of Prior Service Cost		(399	)		(399	)		(1,196	)		(1,196	)
Recognized Actuarial Loss		106			139			319			415
Total Net Periodic Benefit Costs (Income)	$	(143	)	$	(107	)	$	(427	)	$	(322	)

Pension plan contributions, which are based on regulatory requirements, were $3.8 million and $1.0 million during the nine months ended June 30, 2008 and 2007, respectively. Contributions during the remainder of fiscal 2008 are expected to be approximately $3.7 million.

9. INCOME TAXES

The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109 (FIN 48) as of October 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The following table reflects the impacts to the Company’s Consolidated Balance Sheet (in millions) at adoption of FIN 48:

	Increase (Decrease)
Assets:
Deferred Income Taxes-Net	$	0.5
Liabilities:
Other Liabilities (current)		(7.8	)
Deferred Employee Benefits and Other Liabilities (non-current)		5.4
Shareholders’ Equity:
Retained Earnings (Cumulative Effect of Accounting Change)		2.9

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A reconciliation of the change in the amount of unrecognized tax benefits for the nine months ended June 30, 2008, is as follows (in millions):

	Tax			Interest			Total
Balance, October 1, 2007	$	4.9		$	0.5		$	5.4
Additions based on tax positions related to the current year		0.1			0.2			0.3
Reductions for tax positions of prior years		(0.1	)		(0.0	)		(0.1	)
Balance, June 30, 2008	$	4.9		$	0.7		$	5.6

Substantially all of the $5.6 million unrecognized benefits would affect the Company’s effective tax rate if recognized. Interest and penalties recognized in the Consolidated Balance Sheet at June 30, 2008 were $1.1 million. The Company classifies interest and penalties related to unrecognized tax benefits as interest and tax expense, respectively.

The Company files tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the fiscal years 2005 through 2007. The Company or its subsidiaries’ state tax returns are open to audit under the statute of limitations for the fiscal years 2004 through 2007.

10. WHOLESOME SWEETENERS INVESTMENT

On July 14, 2008 the Company increased its ownership stake in Wholesome Sweeteners, and also acquired an option to purchase the remaining equity interest. Wholesome, an organic and natural sweetener company based in Sugar Land, Texas, was formed as a venture in 2001 between the Company and Edward Billington & Son, a diversified agriculture and food company based in the United Kingdom. Under the terms of the agreement, the Company paid $4.0 million in cash to purchase 5% of Wholesome’s common stock from Billington, increasing the Company’s ownership position from 45% to 50%. The $4.0 million investment also includes an option to acquire the remaining 50% interest owned by Billington and is exercisable between September 1, 2010 and May 31, 2011, at an agreed multiple of future earnings.

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, 2007.

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, production outages at key industry facilities 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.

The Company experienced an explosion and fire on February 7, 2008, at its sugar refinery in Port Wentworth, Georgia, which is located near Savannah, Georgia. A number of employees and contractors were injured and there were 13 fatalities. The refinery’s bulk storage silos and virtually its entire packaging capabilities were destroyed, while the refining and warehousing operations received more limited damage. Demolition efforts at the site are substantially complete. The Company intends to rebuild the damaged portions of the facility and has retained outside design and engineering services and is in the process of engaging construction firms to complete the rebuild. Based on engineering and construction estimates received thus far, the Company expects to begin bulk sugar production in late calendar year 2008, and to complete the restoration of packaging capabilities in the first half of calendar year 2009.

Liquidity and Capital Resources

The Company has property damage insurance, which provides replacement cost coverage for affected facilities or a reduced amount to the extent not replaced. The policy also provides for business interruption insurance based on lost income and certain costs incurred during a reasonable period of reconstruction. The combined policy coverage for property damage and business interruption is subject to deductibles and a number of exclusions and sub-limits, as well as an overall policy limit of $350 million per event. Based on engineering reports and construction estimates received to date, the Company believes its insurance coverage is adequate to provide for the replacement of the damaged facilities at the Savannah refinery, estimated in the range of $180 million to $230 million. The Company is in continuous communication with representatives of the insurers to assure a smooth flow of information in an effort to expedite the claims processing effort. The Company has thus far received advances on its property insurance claims totaling $35 million.

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Additionally, the Company has workers compensation insurance and general liability insurance. Workers compensation insurance provides for coverage equal to the statutory benefits provided under state law. The general liability insurance provides coverage for damage to third parties or their property, up to a policy limit of $100 million. Each of these policies is subject to sub limits and exclusions and required deductibles.

At June 30, 2008, the Company had cash and cash equivalents of $73.5 million. Additionally, the Company has a revolving credit agreement (the “Revolver”) which provides for up to $100 million (subject to a borrowing base) of senior secured revolving credit loans. At June 30, 2008, we had no outstanding borrowings and had the capacity under the borrowing base formula to borrow $48 million against inventory and receivables, after deducting outstanding letters of credit totaling $6.2 million. The Revolver is secured by substantially all of our current assets, certain investments and certain property, plant and equipment, and contains covenants limiting our ability to incur debt, sell assets, pay dividends and enter into certain other transactions. Additionally, the Revolver requires maintenance of certain financial covenants if liquidity, as defined in the agreement, falls below a certain level.

We believe that our available liquidity and capital resources are sufficient to meet our operating and capital needs, including estimated reconstruction costs and ongoing capital improvements, during the period required to restore production capabilities at the Port Wentworth refinery.

Results of Operations

Our operating results were significantly impacted by the events at our Port Wentworth sugar refinery, which comprised almost 60% of our productive capacity. In spite of increasing the Gramercy, Louisiana refinery production, available production and inventories substantially constrained sugar volumes available to ship to customers. Additionally, cost in excess of amounts recognizable as probable insurance recoveries significantly impacted results of operations.

Three Months and Nine Months Ended June 30, 2008 compared to Three Months and Nine Months Ended June, 2007

In the current quarter, we reported a net loss of $12.5 million or $1.07 per diluted share, compared to income of $7.6 million or $0.64 per diluted share during the third fiscal quarter of the prior year. For the first nine months of the current year, we reported a net loss of $15.8 million or $1.35 per diluted share, compared to income of $32.0 million or $2.74 per diluted share last year. Lower sales volumes and higher costs due in large part to the loss of the Savannah refinery production capacity, as well as lower domestic sugar prices, are the primary drivers of lower profitability in the current periods. Additionally, the refinery explosion related charges (as described in Note 2 to the Consolidated Financial Statements) resulted in net pre-tax charges of $5.2 million in the quarter and $17.3 million in the nine months ended June 30, 2008. We discuss these and other factors in more detail below. These results do not include any recoveries for lost income under the business interruption portion of the Company’s property insurance policy.

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,
	2008			2007			2008			2007
	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	1,695	$	28.98	3,456	$	30.61	7,402	$	29.45	9,575	$	31.87
Consumer	906		35.33	1,857		35.43	4,326		35.48	5,946		36.54
Foodservice	450		32.53	777		32.53	1,805		31.35	2,148		35.85
Domestic Sales	3,051		31.39	6,090		32.32	13,533		31.63	17,669		33.92
World/Toll Sales	341		22.10	599		22.38	1,124		21.35	2,074		18.60
Sugar Sales	3,391	$	30.46	6,689	$	31.43	14,657	$	30.85	19,743	$	32.32

Net sales decreased 50.6% for the three months and 28.7% for the nine months ended June 30, 2008, each compared to the same period in the prior year. Sugar volumes decreased 49.3% for the quarter and 25.8% for the nine-month period primarily due to the lost production volume from the Savannah refinery, partially offset by increased production in our Gramercy refinery and sugar purchased from other producers. Domestic prices decreased 2.9% for the quarter and 6.8% for the nine-month period. Gross margin (after depreciation) as a percentage of sales

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was a negative 4.7% for the three months and 2.4% for the nine months ended June 30, 2008, as compared to 9.0% for the quarter and 11.8% for the nine months last year. Domestic sugar market supply conditions, driven by a large domestic sugar beet crop, led to lower refined sugar prices and reduced sales margins in fiscal 2008. The large crop and projected surplus inventories resulted in price declines which we expect to continue to realize in industrial contracts for the balance of fiscal 2008. The Company declared force majeure on the industrial contracts sourced from the Savannah refinery and is allocating product from excess available production and product purchased from other producers to customers under those contracts. We expect to honor the unfilled contracts, which are estimated to be about one-third of our anticipated fiscal 2009 industrial sales volume, as additional production capacity is available in fiscal 2009.

Partially offsetting the margin impact of lower refined prices, the higher availability of raw sugar has resulted in lower raw sugar prices. Our cost of domestic raw cane sugar decreased from $20.92 per cwt (on a raw market basis) for the quarter ended June 30, 2007 to $20.76 per cwt for the current quarter and from $20.94 per cwt for the first nine months of last fiscal year to $20.78 per cwt for the first nine months of this fiscal year. The lower domestic raw cane sugar cost increased our gross margin percentage by 0.4% for the three months and 0.5% for the nine months ended June 30, 2008.

Recent USDA reports have increased demand estimates and shown a significant reduction in domestic sugar beet acreage planted for harvest in the fall of 2008. The resulting projection of a tighter domestic supply has firmed prices and increased refining margins in the forward contract market for 2009. As described above, however, we expect to have a higher than normal carryover of lower priced contract volumes into fiscal 2009 as a result of our inability to fulfill those contracts in 2008. Projection of tighter supply conditions have also led to increases in the raw sugar futures market prices, but not as much as the price increases in the forward refined contract market.

Energy costs for the quarter and year were higher than the prior year due to a negative mix of energy sources caused by the curtailment of sugar production in Savannah, as well as higher natural gas prices. Higher energy costs reduced gross margin as a percent of sales by 1.7% for the quarter and 0.5% for the nine-month period. The Savannah refinery utilizes lower priced coal as its primary energy source while the Gramercy refinery exclusively uses natural gas. Natural gas provided approximately 54% and 55% of the energy for our plants in last year’s third quarter and first nine months respectively, while the remainder of our energy usage was comprised of coal and fuel oil. In the current quarter and first nine months, natural gas usage has increased to 98% and 69% of the total. Our average NYMEX basis cost of natural gas after applying gains and losses from hedging activity increased to $9.83 per mmbtu in the current quarter and $8.52 in the first nine months of the current year as compared to $8.24 and $8.14 in the same quarter and first nine months of last year. We have purchased or hedged approximately 87% of our expected natural gas requirements for the last three months of fiscal 2008 at prices significantly higher than prior year levels. If the balance of our anticipated natural gas purchases were priced in the futures market on July 24, 2008, our natural gas costs in the last three months of fiscal 2008 would be approximately $11.09 per mmbtu compared to $7.37 per mmbtu in the same quarter last year.

Gross margin was significantly impacted by higher transportation costs. Increased distances on deliveries to customer locations caused by servicing Savannah based customers, as well as higher fuel and rail fleet costs, have had an adverse effect on our transportation costs reducing gross margin percentage by 4.3% for the quarter and 1.7% for the nine months ended June 30, 2008.

Manufacturing costs for the three months ended June 30, 2008 increased over the 2007 quarter due to continuing fixed costs in Savannah as well as higher repairs and maintenance and packaging materials cost in Gramercy. Gross margin percentage for the quarter was reduced by 2.1% as a result of these increased costs. Gross margin percentage for the nine month period was also affected by the same factors, with a gross margin percentage reduction of 1.0%. Warehousing costs negatively impacted gross margin percentage by 0.6% in the quarter and 0.1% for the nine months due to fixed space commitments with lower sales volumes.

We purchased 0.7 million cwt of product from other producers in the third quarter and 0.8 million cwt in the first nine months to help mitigate the impact on industrial customers of supply disruptions under existing industrial contracts. The cost of those purchases was higher than our cost of production, negatively impacting gross margin as a percent of sales by 1.7% for the quarter and 0.4% for the nine months. Additionally, we recorded losses on raw sugar futures contracts which did not qualify for hedge accounting, reducing gross margin percentage 1.1% in the third quarter.

Selling, general and administrative expense decreased $0.8 million for the quarter and $5.6 million for the first nine months of the fiscal year. The decrease for the quarter was driven by reductions in brokerage, advertising and professional services. The decrease in the nine-month period was the result of lower professional fees primarily related to the Southern Minnesota arbitration matter last year, lower advertising, workers compensation, brokerage and compensation costs.

Refinery explosion related charges, net of recognized probable insurance recoveries, are detailed in Note 2 to the consolidated financial statements.

        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 $0.8 million of cash and restricted and unrestricted ICE stock. A gain of approximately $3.7 million was recorded in the first nine months of fiscal 2007 in connection with this transaction as Gain on Commodity Exchange Seats.

The Company has an investment in a $7.5 million federally insured student loan backed auction rate security for which the auction failed in mid-February and in subsequent periods. The Company recorded a loss of $388,000 in the second quarter to reflect an other-than-temporary impairment of the security.

Other income, which includes equity investment earnings and distributions from cost basis investments, increased $0.3 million in the quarter and $12.2 million in the first nine months of the fiscal year compared to the same periods in the prior year. In October 2007, the Company received an $11.2 million cash distribution from its long-term limited partnership investment as a result of the partnership selling its principal asset, an interest in a fuel oil terminal in the Port of Houston. The Company recorded the distribution in other income. In November 2007, the Company formed a 50/50 joint venture with a Monterrey, Mexico-based sugar producer, to market sugar products in Mexico and facilitate cross-border transactions (to the extent such transactions are economically viable) under the recently implemented NAFTA provisions. Equity in earnings of this joint venture is $0.2 million in the current quarter and $0.5 million in the first nine months of the fiscal year. Additionally other income includes $0.3 million of equity earnings in the third quarter and 1.0 million for the nine months from our 45% share of the earnings of Wholesome Sweeteners.

We have estimated a combined federal and state income tax rate of 37.5% for the nine months ended June 30, 2008 compared to 31.2% in the same period last year. The increase in the effective tax rate is primarily attributable to the effect of tax-free interest income, as well as the impact of equity earnings in our Mexican joint venture.

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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, 2007 except for the accounting for asset impairments and insurance recoveries described in Note 2.

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 raw sugar purchases and charged or credited to cost of sales as the related production 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 the related production is sold.

The information in the table below presents our domestic and world raw sugar futures positions outstanding as June 30, 2008.

	Expected Maturity Fiscal 2008			Expected Maturity Fiscal 2009
Domestic Futures Contracts (net short positions):
Contract Volumes (cwt)		(207,000	)		(110,000	)
Weighted Average Contract Price (per cwt)	$	21.87		$	22.96
Contract Amount	$	(4,531,000	)	$	(2,520,000	)
Weighted Average Fair Value (per cwt)	$	23.55		$	22.01
Fair Value	$	(4,880,000	)	$	(2,416,000	)
				Expected Maturity Fiscal 2009
World Futures Contracts (long positions):
Contract Volumes (cwt)					859,000
Weighted Average Contract Price (per cwt)				$	12.08
Contract Amount				$	10,379,000
Weighted Average Fair Value (per cwt)				$	13.10
Fair Value				$	11,253,000

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, 2008.

	Expected Maturity Fiscal 2008		Expected Maturity Fiscal 2009
Futures Contracts (long positions):
Contract Volumes (mmbtu)		230,000		40,000
Weighted Average Contract Price (per mmbtu)	$	10.95	$	13.60
Contract Amount	$	2,517,000	$	544,000
Weighted Average Fair Value (per mmbtu)	$	13.38	$	13.64
Fair Value	$	3,078,000	$	545,000

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, 2008, to provide

15

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 three months ended June 30, 2008, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to a number of claims, including seven lawsuits, by employees and third parties or their families, for injuries and losses of life suffered as a result of the Port Wentworth refinery explosion and fire. The Company believes that its workers compensation and liability insurance coverage is adequate to provide for damages arising from such claims. The Company has recorded a charge for the required deductibles under these policies as part of refinery explosion related charges in the consolidated statements of operations for the nine months ended June 30, 2008.

The U.S. Occupational Safety Health Administration (OSHA) and the U.S. Chemical Safety and Hazard Investigation Board (CSB) initiated investigations related to the February 7, 2008 explosion at the Company’s Port Wentworth facility. OSHA also initiated an investigation of the Company’s Gramercy, Louisiana refinery, and the Kentucky Office of Occupational Safety and Health (Kentucky OSHA) inspected the Company’s Ludlow, Kentucky facility. OSHA and Kentucky OSHA have the authority to issue citations alleging violations of the Occupational Safety and Health Act and the Kentucky Occupational Safety and Health Act and the regulations thereunder and to propose penalties for any such violations.

The CSB and Kentucky OSHA investigations are ongoing and the Company is cooperating in these investigations. OSHA concluded its Port Wentworth and Gramercy investigations on July 25, 2008, and issued numerous citations with total proposed penalties of $5.1 million in Port Wentworth and $3.7 million in Gramercy. Additionally, OSHA issued requirements for certain abatement actions to be undertaken by the Company at the Port Wentworth and Gramercy facilities. The Company has contested all of the citations, proposed penalties and abatement actions regarding the Port Wentworth and Gramercy investigations, and these matters will be assigned to the Occupational Safety and Health Review Commission for a review of the merits of the citations, proposed penalties and abatement actions. The administrative review process of OSHA citations does not commence until approximately 35 to 60 days after the notice of contest is filed.

Because the contest of the citations is in the very early stages and the Company has not had the opportunity to initiate any discovery or evaluate any of the evidence OSHA relied upon in issuing the citations, the Company is unable to estimate the amount or a reasonable range of amounts of the liability which may ultimately result from these OSHA citations or the ongoing Kentucky OSHA investigation. OSHA penalties are not covered by insurance, and are not deductible for federal income tax purposes. The Company has suspended operation of its powder sugar production in Gramercy, which represents 7% of sales from the Gramercy refinery.

Additionally, 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.

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, 2007, except as follows:

Our Port Wentworth refinery is a substantial portion of our production capacity and a prolonged interruption of operations would materially adversely affect our results. Business interruption insurance provides coverage for lost income, subject to certain policy limits, during a reasonable reconstruction period, plus up to a year after such reconstruction period. If reconstruction of the facility extends beyond a reasonable period, or if we experience an interruption for a longer period of time, business interruption recoveries may not be available for the full amount of lost income. Our property insurance policy provides for replacement cost coverage, subject to certain policy limits. If the reconstruction costs exceed the policy limits, property insurance may not be available to fund the full reconstruction costs. The Company is party to a number of claims, including seven lawsuits, for injuries and losses suffered as a result of the explosion. If damages in these matters exceed the policy limits, we could be subject to liabilities, which could be material.

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.

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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: July 29, 2008	By:	/s/ H. P. Mechler
		H. P. Mechler
		Senior Vice President and Chief Financial Officer and Duly Authorized Signatory

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Index to Financial Statements

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.

18

EX-31.1

Exhibit 31.1

CERTIFICATION

I, John C. Sheptor, 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 control 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 control over financial reporting.

Date: July 29, 2008	By:	/s/ John C. Sheptor
		John C. Sheptor
		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 control 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 control over financial reporting.

Date: July 29, 2008	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), John C. Sheptor, 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, 2008 (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 29, 2008	/s/ John C. Sheptor
	John C. Sheptor
	President and Chief Executive Officer
	/s/ H. P. Mechler
	H. P. Mechler
	Senior Vice President and Chief Financial Officer