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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

OR

Commission file number 0-16130

Registrant's telephone number, including area code: (715) 424-4444

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, $.01 par value

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_|

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes  |_|      No   |X|

Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of February 27, 2004:

$4,185,595

Number of shares issued and outstanding of each of the registrant’s classes of common stock as of November 29, 2004:

Class A Common Stock, $.01 par value: 94,091,633 shares

PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE:

Proxy Statement for 2005 annual meeting of shareholders (to be filed with the Commission under Regulation 14A within 120 days after the end of the registrant’s fiscal year and, upon such filing, to be incorporated by reference into Part III, to the extent indicated therein).

PART I

Special Note Regarding Forward-Looking Statements

        We make certain “forward-looking statements” in this Form 10-K, such as statements about our future plans, goals and other events which have not yet occurred. We intend that these statements will qualify for the safe harbors from liability provided by the Private Securities Litigation Reform Act of 1995. You can generally identify these forward-looking statements because we use words such as we “believe,” “anticipate,” “expect” or similar words when we make them. Forward-looking statements include, among others, statements about actions by our competitors, sufficiency of our working capital, potential operational improvements and our efforts to improve profitability, sales and marketing strategies, expected levels of trade and marketing spending, anticipated market share and sales of our branded products, cranberry concentrates and other products, and disposition of significant litigation. These forward-looking statements involve risks and uncertainties and the actual results could differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, without limitation, risks associated with (i) our ability to maintain our Northland and Seneca brand names, distribution capabilities and branded products market share; (ii) the level of cranberry inventory held by industry participants; (iii) the development, market share growth and consumer acceptance of our branded juice products; (iv) agricultural factors affecting our crop and the crop of other North American growers; (v) our ability to comply with the terms and conditions of, and to satisfy our responsibilities under, our credit facilities and other debt agreements; and (vi) our ability to identify, evaluate and successfully execute any strategic alternatives. You should consider these risks and factors and the impact they may have when you evaluate our forward-looking statements. We make these statements based only on our knowledge and expectations on the date of this Form 10-K. We disclaim any duty to update these statements or other information in this Form 10-K based on future events or circumstances. Please read this entire Form 10-K to better understand our business and the risks associated with our operations. Specifically, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of our current financial condition, including our recently revised debt structure.

Item 1. Business.

General; History

        We are a vertically integrated grower, handler- and marketer of cranberries, value-added cranberry products, and branded cranberry and other fruit beverages. As of November 29, 2004, we owned or operated 17 cranberry producing marshes with 1,831 planted acres in Wisconsin. Fourteen of these marshes are subject to purchase by Ocean Spray Cranberries, Inc. (“Ocean Spray”) pursuant to an agreement we entered into with Ocean Spray in the first quarter of fiscal 2005, described in more detail below. We also maintain multi-year crop purchase contracts with 45 independent cranberry growers to purchase all of the cranberries harvested from an aggregate of up to 1,800 contracted acres.

        Our products include:

        • Northland brand 100% juice cranberry blends (containing 27% cranberry juice), which we sell through supermarkets, drug store chains, mass merchandisers and foodservice outlets;

        • Seneca and TreeSweet bottled and canned fruit beverages, including apple, grape, cranberry and orange juice products, and frozen juice concentrate products, including apple, grape and cranberry juice products;

        • Northland brand fresh cranberries, which we sell to retail and wholesale customers;

        • Awake frozen orange-flavored concentrate; and

        • Northland brand sweetened dried cranberries and chocolate-coated cranberries.

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        We began our business in 1987 as a cranberry grower and member of the Ocean Spray marketing cooperative. In 1993, we left Ocean Spray and introduced Northland brand fresh cranberries. In October 1995, we introduced our family of Northland 100% juice cranberry blends. By June 1997, we had successfully achieved national distribution. In fiscal 1999, we acquired the juice division of Seneca Foods Corporation, including the right to produce and sell nationwide Seneca brand products, the TreeSweet and Awake brand names, as well as additional processing, distribution and receiving facilities. In fiscal 2000, we sold our private label juice business, which we acquired in July 1998 from Minot Food Packers, Inc., to Cliffstar Corporation. In June 2001, we sold our bottling and packaging facility in Mountain Home, North Carolina, to Clement Pappas NC, Inc. In June 2001, we also sold our private label and food service cranberry sauce business to Clement Pappas and Company, Inc.

        In November 2001 we consummated a series of transactions with Sun Northland, LLC (an affiliate of Sun Capital Partners, Inc., a private equity investment firm headquartered in Boca Raton, Florida), and with members of our then-current bank group and our new secured lenders, Wells Fargo Foothill Inc. (f/k/a Foothill Capital Corporation)(“Foothill”) and Ableco Finance, LLC (“Ableco”), that resulted in the restructuring of our debt and equity capital structure and a change in control of the company. As a result of the restructuring, Sun Northland, LLC owns approximately 77.3% of our fully-diluted shares of Class A Common Stock and controls approximately 94% of our total voting power.

        On November 19, 2003, we announced that we had retained Stephens Inc. (“Stephens”) of Little Rock, Arkansas, to serve as our financial advisor and assist us in evaluating various strategic alternatives, including, without limitation, potential acquisitions, mergers, joint ventures, licensing arrangements or investments in or potential sale of the company, as well as remaining an independent public company.

        On September 23, 2004, we entered into agreements with Ocean Spray pursuant to which (i) we sold our processing plant, storage facility and certain offices located in Wisconsin Rapids to Ocean Spray for approximately $28 million, subject to certain adjustments and including a $2.5 million escrow; (ii) Ocean Spray paid to us a non-refundable (but creditable) $5 million cash fee in exchange for the option to purchase up to 14 of our 17 cranberry marshes at prices that aggregate $47.5 million (before the option fee); (iii) we agreed, for a period of 10 years, to deliver all of the cranberries harvested from our currently-owned marshes and our contract growers’ marshes to Ocean Spray, which Ocean Spray will receive, clean, bin, store and process into juice concentrate for a fixed fee; and (iv) Ocean Spray agreed, for a period of ten years, to purchase cranberry concentrate not otherwise used by us in our branded products. We also agreed to dismiss with prejudice our then-pending antitrust lawsuit against Ocean Spray.

        On November 16, 2004, we amended and restated the terms and conditions of the financing arrangements with Foothill and Ableco to, among other things, reduce the commitments under the existing revolving facility to an aggregate principal amount of $11.0 million and provide an additional term loan facility in the aggregate principal amount of $15.0 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information on our revised debt structure.

        We declared a special cash dividend of $0.33 per class A share payable on December 1, 2004 to all shareholders of record as of the close of business on November 26, 2004. The dividend will be paid from a combination of the proceeds from the transaction involving the sale of our processing plant to Ocean Spray and our new financing arrangements with Foothill and Ableco.

        We intend to continue working with Stephens to evaluate the means through which we can improve our financial performance in fiscal 2005 and maximize shareholder value.

Fiscal 2004

        In fiscal 2004, we improved our profitability and strengthened our financial condition. We reduced our long-term debt by approximately $21 million and, as of the end of fiscal 2004, held approximately $2 million in cash and cash equivalents. We achieved this primarily as a result of an improvement in income from operations, including the sale of various assets and the settlement of litigation with Cliffstar Corporation relating to the sale of our private label juice business in March 2000. Steps we took during the year, which we believe helped us to compete in the marketplace in fiscal 2004, included:

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        Our costs to manufacture branded products continued to increase in the first quarter of fiscal 2004, primarily due to our Jackson, Wisconsin bottling facility not being utilized to capacity. As a result, we took several steps during the fiscal year to reduce costs, including:

        These steps helped us lower overall operating expenses and maintain profitability in fiscal 2004.

        In fiscal 2004, we did have revenues from one customer, Wal-Mart, Inc., that exceeded 10% of our total net revenues.

        As of August 31, 2004, we were in compliance with all of our debt arrangements.

Branded Products

      Products

        Our family of Northland 100% juice cranberry blends is our primary branded product. We introduced Northland 100% juice cranberry blends in late 1995 in an effort to offer consumers an alternative to the Ocean Spray brand and achieved national distribution in the summer of 1997. As of September 17, 2004, our Northland 100% juice cranberry blends were available in all 50 states and in supermarkets nationwide that account for approximately 71.0% of total grocery sales. We currently produce and sell 11 flavors of Northland 100% juice cranberry blends, including traditional cranberry, cranberry apple, cranberry raspberry, cranberry grape, cranberry peach, cranberry cherry, cranberry blackberry, cranberry blueberry, cranberry guava, cranberry mango and cranberry tropical. We have two plastic bottle sizes, 46 and 64 ounce, available for general distribution.

        Northland 100% juice cranberry blends are also available in two can sizes. The 5.5 ounce can is sold in the foodservice market and used as a sampling device in the retail grocery trade. The 46 ounce can is sold to retail grocery accounts in markets where the Northland brand is approved for participation in the Women, Infants and Children program administered by the United States Department of Agriculture.

        We also produce and sell several varieties of Seneca juice products, including apple, grape and cranberry shelf-stable juice blends and frozen juice concentrates. The Seneca cranberry products are designed to compete against other non-premium drink brands.

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        We also sell citrus juice products under the TreeSweet label. TreeSweet products are now sold in 64 ounce plastic, 5.5 aluminum and 46 ounce tin sizes. We also sell frozen orange-flavored concentrate under the Awake brand.

        Our foodservice business markets and distributes juice products in industry-specific packaging to businesses and public institutions such as restaurants, hotels, schools and hospitals. We offer our foodservice products in a variety of sizes and packages under the Northland, Seneca and TreeSweet brands.

        We also grow and package Northland brand fresh cranberries and primarily sell them in 12-ounce plastic bags to food retailers and wholesalers during the fall. We also sell Northland brand sweetened dried cranberries and chocolate coated cranberries in 10-ounce bags to food retailers.

      Marketing

        Our principal consumer marketing strategy for our family of Northland 100% juice cranberry blends involves educating consumers on the health benefits of cranberry juice with 27% cranberry content. Research suggests that regular consumption of 27% cranberry juice helps to maintain a healthy urinary tract. Northland is the only 100% juice blend that combines 27% cranberry juice with other natural and healthy fruit juices in every flavor. Although not required to do so, we disclose the cranberry content on each Northland label to educate consumers about the premium nature of our products. We also use media advertising to educate consumers about the difference between juice drinks (juice and water typically sweetened with high fructose corn syrup) and 100% juice blends, which are naturally sweetened with other fruit juices, such as apple and grape.

        In fiscal 2004, we focused our marketing efforts on:

      Sales

        Industry-wide dollar sales of supermarket shelf-stable cranberry beverages were down nearly 4% during fiscal 2004 versus fiscal 2003. Total category dollar sales-grocery reached nearly $731 million for the 52 weeks ending September 5, 2004. Total category volume sales-grocery remained at 2% for the 52 weeks ending September 5, 2004. The supermarket shelf-stable cranberry beverage category is composed of cranberry drinks and 100% juice cranberry blends. According to industry data, sales of 100% juice cranberry blends accounted for approximately 21.8% of the cranberry category for the 52 weeks ending September 5, 2004, compared to 22.2% of the cranberry category for the 52 weeks ending September 7, 2003.

        Our sales of branded products in fiscal 2004 accounted for approximately 64.0% of net revenues, compared to approximately 58.7% in fiscal 2003 and 58.3% in fiscal 2002. Availability of our Northland brand in supermarkets nationwide increased by over 3% during fiscal 2004. Some of the steps we took during fiscal 2004 to promote sales of our branded products included:

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        Crossmark, Inc. continued to act as our broker for the Northland and Seneca brands throughout the United States in most channels of distribution during fiscal 2004. Crossmark employs over 10,000 people on a nationwide basis. We believe that its access to state of the art management systems allows us to continue to focus on and improve implementation of our promotional programs. In addition, as a result of our agreement with Crossmark, Crossmark continued to focus on the Northland and Seneca brands in the areas of field sales and sales information within each individual market region.

        Our branded juice sales efforts in fiscal 2004 were coordinated by our Vice President-Sales. In fiscal 2004, we reduced the number of our area sales directors from six to five in response to continuing consolidation within the grocery industry. In addition to their experience with our branded products to date, our sales staff personnel have prior sales experience working for companies such as H.J. Heinz Company, Campbell’s Soup Company, Sara Lee, Veryfine Products, Inc., The Quaker Oats Company, Uncle Ben's and Ralston Purina. Between our personnel and those within Crossmark, the organization has current or past experience with nearly every major branded grocery manufacturer in the country.

      Competition

        Based on industry data, nationwide retail supermarket bottled shelf-stable cranberry beverage sales were approximately $731 million for the 52-weeks ending September 5, 2004, showing a decline of 3.9% versus the previous year. Ocean Spray dominates the shelf-stable cranberry juice and drinks market in which we compete. Ocean Spray is an agricultural marketing cooperative comprised of over 700 member-growers located in the United States, Canada and elsewhere, accounting for over 65% of all cranberries grown in North America.

        Northland 100% juice cranberry blends compete with:

        Our Northland branded juice products are 100% juice cranberry blends, which contain 27% cranberry juice in every flavor. Our competitors’ products typically consist of less than 100% juice, and in several instances, contain significantly less than 27% cranberry juice content. For example, many of Ocean Spray’s cranberry juice blends contain from 6% to 21% juice with the remainder being water and sweeteners such as high fructose corn syrup. Like Ocean Spray, other competitors’ juices often use sugar or corn syrup additives as sweeteners. We believe that we should have an advantage over our competitors due to the perceived health and other benefits of our 100% juice products. We also believe that we should have an advantage because we are currently the only major manufacturer of 100% juice blends with an entire product line that contains 27% cranberry juice, a formulation that studies suggest is beneficial to human health. The success of our branded juice products will continue to depend on the opportunities we have to convince consumers to think highly of our products’ quality and taste compared to that of our competitors’ products.

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        Northland 100% juice cranberry blends are premium-priced products because of their quality. Our products compete mainly with other premium-priced branded cranberry beverages, but also with private label products, which are usually lower-priced.

        We also compete in the markets for frozen juice concentrate and shelf-stable canned fruit juices and drinks with our Seneca, Treesweet, and Awake branded products. Our principal competitors in the frozen juice concentrate market include several established brand names such as Welch’s, Tree Top, Minute Maid and Tropicana. Our principal competitors in the market for shelf-stable canned fruit juices and drinks include Welch’s, Mott’s, Tree Top, Minute Maid and many regional brands. Many of these competitors have greater brand name recognition and greater marketing and distribution resources than we do. We cannot be certain that we will be successful in competing against these competitors. Ocean Spray does not compete in the frozen juice concentrate market.

Industrial/Ingredients/International

      Sales

        During fiscal 2004, cranberry concentrate continued to be our principal industrial/ingredients product in terms of sales dollars, accounting for approximately 25.0% of our net revenues compared to approximately 28.7% in fiscal 2003 and 21.7% in fiscal 2002. Our industrial/ingredient sales efforts in fiscal 2004 were coordinated by our Vice President-Industrial/Ingredient/International group and conducted primarily through our internal industrial/ingredient sales force as well as a limited network of independent brokers. As a result of the agreements we entered into with Ocean Spray during the first quarter of fiscal 2005, we expect, through the 2013 harvest, to convert into cranberry concentrate substantially all of the cranberries we grow and purchase from independent cranberry growers for use as an ingredient in our branded juice products or, to the extent not used as an ingredient in our branded juice products, for sale to Ocean Spray.

      International

        International demand for cranberry products decreased in fiscal 2004 compared to fiscal 2003, due to increased inventory levels and increased cost which lead to a decreased demand. Our sales of cranberry concentrate, customized non-cranberry blends and retail brands to international customers during fiscal 2004 were approximately $1.8 million, compared to approximately $4.2 million in fiscal 2003 and $2.5 million in fiscal 2002.

Manufacturing

      Receiving and Processing

        During fiscal 2004, we operated a processing facility located in Wisconsin Rapids, Wisconsin at which we processed our grown and purchased cranberries from Wisconsin. We utilized a contract processor to press and concentrate the cranberries from our contract growers on the west coast. In fiscal 2004 we utilized our manufacturing facilities in the various stages of processing cranberries. For example:

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        In conjunction with the sale of our processing plant to Ocean Spray, we have entered into a agreement pursuant to which Ocean Spray will, for a period of ten years, receive, clean, bin, store and process into juice concentrate all cranberries harvested from our currently-owned marshes and our contract growers’ marshes. The fees payable to Ocean Spray for the services provided are fixed in the processing agreement.

      Packaging and Bottling

        Prior to fiscal 2004, we conducted our packaging and bottling operations at our owned bottling plant in Jackson, Wisconsin, and through the services of third-party contract packagers in various locations across the country. In a continuing effort to reduce costs and improve service to our customers, and in response to continued underutilization of capacity, we ceased production at our Jackson, Wisconsin bottling plant in November 2003 and closed the facility in January 2004. We also entered into agreements with third party contract packaging providers with plants located in New Jersey, North Carolina, Florida, Arkansas, California, and Washington. We believe this network of contract packaging providers allows us to better service our customers throughout the country and help to reduce production and freight costs.

        The contract packaging network provides distribution services directly from the production location, minimizing the need for transfer of finished products to outside warehouses. We produce PET and other shelf stable products at contracted facilities located in Seabrook, New Jersey, Springdale, Arkansas, Lake Wales, Florida, Ontario, California, and Mountain Home, North Carolina. Additionally, we utilize third party contract distribution warehouses located in Aurora, Colorado, and Kent, Washington, for distribution of shelf stable products to smaller, non-truckload customers in those areas. We produce and distribute frozen concentrate products from third party contract packaging providers located in Prosser, Washington and Mountain Home, North Carolina. We also utilize a third party frozen distribution warehouse in Indianapolis, Indiana. All production and distribution facilities are strategically located in high volume markets to minimize freight costs and maximize service levels.

        With the closure of our Jackson, Wisconsin bottling facility, we also discontinued contract packaging services for third parties. Contract packaging services accounted for approximately 0.3% of net revenues in fiscal 2004, compared to 2.5% fiscal 2003 and 10.1% of net revenues in fiscal 2002.

      Distribution

        Our primary distribution strategy for fiscal 2004 was to maximize distribution from our contracted production locations and to minimize distribution centers that were not associated with a production facility. During fiscal 2004, we utilized six distribution centers, with all but two either on the site of or directly associated with a production facility. This distribution strategy allowed for cost reductions and improved inventory control, and also resulted in reduced freight costs because of the strategic locations of these facilities. We currently expect to have nine distribution locations throughout the country with three remote minimal inventory distribution centers not directly associated with a production facility. We believe our agreements with third party contract packaging providers will allow us to continue our focus on reducing transfer costs and finished goods inventory while satisfying customer orders.

        We have an internal transportation department that contracts with independent carriers to distribute our products to grocery customers and customers in other channels. We believe that the strategic locations of the contract packaging plants, along with our distribution strategy and our in-house transportation department, contributes to lower costs overall while continuing to provide timely response to customer demands.

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Agricultural Operations

        We own and operate 17 cranberry marshes and approximately 1,831 planted acres in Wisconsin as of November 29, 2004. During fiscal 2004, we sold our Chittamo marsh property and terminated our operating agreement related to the Cranberry Hills marsh. In connection with the sale of Chittamo, we entered into a multi-year crop purchase agreement pursuant to which the purchaser is required to sell to us all cranberries harvested from the property.

        As noted earlier, we entered into an agreement with Ocean Spray pursuant to which it has the option to purchase 14 of our marshes at predetermined prices, generally exercisable during the period commencing December 1, 2004 and ending March 22, 2005 (see Note 17 of our Notes to Consolidated Financial Statements). We cannot be certain whether Ocean Spray will exercise its option, in whole or in part, or at what times it may choose to do so. Should Ocean Spray exercise its option in full, our cranberry growing operations would become limited to the three remaining marshes not subject to the option.

        In the fall of 2003 (i.e., fiscal 2004), we harvested approximately 332,000 barrels from 1,864 acres, and purchased approximately 325,000 barrels of cranberries from our contract growers. As of November 29, 2004, we maintained multi-year crop purchase contracts with 45 independent cranberry growers to purchase all of the cranberries harvested from an aggregate of up to 1,800 contracted acres, subject to federal marketing order limitations. These contracts generally last for five years, and pay the growers at a market rate, as defined, for all raw cranberries delivered (plus $3 per barrel in certain circumstances) and certain incentives for premium cranberries. We believe the location of our marshes and the marshes of our contract growers provides us with geographical diversity in our crop and helps spread our agricultural risk.

        For the 2004 growing season, no federal marketing order restricting the volume of cranberry harvests was in effect. Our fall 2004 harvest (i.e., fiscal 2005) has been completed on our owned and operated marshes. Production from 1,730 harvested acres totaled approximately 277,000 barrels of cranberries. During the fall 2004 harvest, we also purchased approximately 286,000 barrels of cranberries from our contract growers.

        The quality and quantity of cranberries produced in any given year is dependent upon certain factors over which we have little or no control. For example, extremes in temperature, rainfall levels, storms and hail, or crop infestations can all adversely impact the quality and/or quantity of the harvest in any crop year. While we make efforts to reduce the potential adverse effects these factors may have on our internal crop, our cranberry production remains subject to these agricultural and industry factors.

        We also purchase insurance coverage for most of our marshes, which is subsidized by the federal government. These policies help insure against bad weather and other contingencies which may affect our crop. They generally insure us for at least 50% of the average crop yield over the past 10 years on each marsh.

Regulation

      Cranberry Products Regulation

        The production, packaging, labeling, marketing and distribution of our fresh cranberries and cranberry juice products are subject to the rules and regulations of various federal, state and local food and health agencies, including the United States Food and Drug Administration (“USDA”), the United States Department of Agriculture, the Federal Trade Commission and the Environmental Protection Agency. We believe we have complied, and will be able to comply, in all material respects with such rules, regulations and laws.

        The Cranberry Marketing Committee (“CMC”) of the USDA has the authority to recommend that the Secretary of the USDA impose harvest restrictions on cranberry growers under certain circumstances, including if the CMC believes there will be an oversupply of cranberries for the coming crop year. The Secretary of the USDA has not invoked a volume regulation since 2001.

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      Environmental and Other Governmental Regulation

        It can be difficult under federal laws for cranberry growers and other developers to obtain permits to create new cranberry marshes in wetlands in the United States. To do so, such growers must generally observe a “no net loss” of wetlands policy. That is, they must show that the proposed development activity will not result in a loss of wetland acreage, or they must restore the functional value of acreage they propose to disturb. Given this strict requirement, as well as water quality legislation in Wisconsin and Massachusetts, we believe it is currently unlikely that we, or other cranberry growers or developers in the United States, will be able to secure permits for cranberry marsh development or expansion in wetland acreage. However, we and other growers or developers may renovate existing wetland acreage from time to time and replant older cranberry vine varieties with higher-yielding vine varieties. Also, certain developers have created upland cranberry marshes, which are marshes that are not on wetland acreage.

        Pursuant to permits previously received, in the past several years certain growers have planted, cultivated, and developed new cranberry-producing acreage in several states and abroad, particularly in Canada. Many of these previously planted acres have recently become productive or should become productive in the near future.

        We are currently taking steps to clean up certain contamination caused by underground storage tanks at our former marsh in Hanson, Massachusetts. The site has been reported to the appropriate state regulatory agencies. In addition, all clean-up activities are subject to state supervision. We do not expect to incur material liabilities as a result of this remedial activity. We do not expect environmental or other governmental legislation or regulation to have a material effect on our capital expenditures, results of operations or competitive position.

Seasonality

        Since our evolution from a cranberry grower to a consumer products company in 1997, the seasonality of our business has been limited because we offer our products for sale throughout the entire year. We do expect, however, that our results of operations will continue to fluctuate from quarter to quarter depending mainly upon the level of media advertising and other promotional expenditures in any given quarter, the level of distribution we can achieve, as well as seasonal sales of fresh fruit.

Materials and Supplies

        We buy bottles, caps, flavorings, juice concentrates and packaging from independent third parties. We get most of the materials and supplies necessary for growing and cultivating cranberries, including water and sand, from our own marshes. We purchase and expect to continue to purchase most of our fertilizer and pesticides from our subsidiary, Wildhawk, Inc. We purchase the rest of the raw materials and supplies, including the materials used to package our fresh fruit, from various sources.

        If necessary, we believe we would be able to find other sources for these raw materials and supplies without a material delay or adverse effect on our business.

Trademarks and Formulae

        We own the Northland, TreeSweet, and Awake trademarks, which are registered in the United States Patent and Trademark Office. We have also entered into a 99-year license agreement with Seneca which allows us to market and sell Seneca brand juice and concentrate. The Northland and Seneca trademarks are important in the sale of our branded cranberry juice and other fruit juice and fruit products.

        We use proprietary flavor formulations to make our cranberry blends. We protect the confidentiality of these formulations by requiring co-packers to enter into confidentiality agreements with us.

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Employees

        As of August 31, 2004, we had 172 full-time employees, as compared to 223 as of August 31, 2003. As of November 29, 2004, we had approximately 163 full-time employees. In addition to our full-time employees, we hired:

        We laid off 47 employees at our Jackson facility during fiscal 2004 due to the closure of the plant. We believe our current relationships with our employees are good.

Item 2. Properties.

        In Wisconsin Rapids, Wisconsin we own an office building on West Grand Avenue.

        We owned a 172,000 square foot receiving station, fresh fruit packaging and concentrate facility located on 40 acres in Wisconsin Rapids until September 2004, when we sold this facility and an adjacent office building to Ocean Spray (see Note 17 of our Notes to Consolidated Financial Statements). This facility includes 62,400 square feet of freezer space, 45,000 square feet of cooler space, 8,500 square feet of dry warehouse and 55,100 square feet devoted to cranberry receiving and cleaning, fresh fruit packaging and concentrate production.

        During fiscal 2004, we owned a production and warehouse facility in Bridgeton, New Jersey. We leased approximately 90,000 first floor square footage of the warehouse building to a warehouseman and distributor whose main offices are located in Bayonne, New Jersey. During the first quarter of fiscal 2004, we sold our Bridgeton facility to an affiliate of the lessee. We had previously, in fiscal 2003, sold the adjacent office building to another party.

        We closed our Dundee, New York, bottling and packaging plant in fiscal 2002. The facility totals 139,000 square feet, including 40,000 square feet of production area, 53,000 square feet of dry warehouse, 17,200 square feet of freezer space and 21,000 square feet of cooler and bulk tank storage area. This facility was sold during the third quarter of fiscal 2004.

        In Jackson, Wisconsin, we owned a bottling facility totaling 136,000 square feet including 55,000 square feet of production area, 70,000 square feet of dry warehouse and 5,000 square feet of cooler and bulk storage area. We ceased production at and sold this facility in fiscal 2004.

        In Eau Claire, Michigan, we owned a 79,000 square foot storage facility and distribution center. This facility was mostly destroyed by fire in May 2003. We negotiated a settlement with our insurance carrier and sold the property “as is” to a developer during fiscal 2004.

        In addition to our facilities, we own 17 cranberry marshes. We have set forth in the following table information about each of our cranberry marshes as of November 29, 2004. We own all of these marshes in fee subject to mortgages. All of our marshes have storage buildings and repair shops for machinery, trucks and harvest and irrigation equipment. Each also has a house on site or close to the site which serves as the marsh manager’s residence. Many of our marshes also have residences for assistant marsh managers. We believe that all of our facilities are suitable and adequate for our existing needs.

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(1)     Ocean Spray has the option to purchase, exercisable only during the period commencing on December 1, 2004 and ending March 22, 2005, any of our marshes (excluding the Associates West, Meadow Valley and Three Lakes marshes) at purchase prices that aggregate $47,500,000 plus certain deferred crop expenses. The option may be exercised individually or collectively by Ocean Spray or any assignee of Ocean Spray.

Item 3. Legal Proceedings.

        On November 11, 2002, we filed an antitrust lawsuit against Ocean Spray alleging that it engaged in anticompetitive tactics and unlawfully monopolized the cranberry products industry to the detriment of its competitors and customers. We dismissed the lawsuit with prejudice upon the consummation of the sale of our Wisconsin Rapids plant to Ocean Spray on September 23, 2004.

Item 4. Submission of Matters to a Vote of Shareholders.

        We did not submit any matters to a vote of our shareholders during the fourth quarter of fiscal 2004.

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Executive Officers

        As of November 29, 2004, each of our executive officers is identified below together with information about each officer’s age, current position with us and employment history for at least the past five years:

        The Board of Directors generally elects our executive officers annually after the annual meeting of shareholders. Each executive officer holds office until his successor has been duly qualified and elected or until his earlier death, resignation or removal.

        John Swendrowski originally founded Northland in 1987 and has served as our Chief Executive Officer since that time.

        Ricke A. Kress was appointed President and Chief Operating Officer in July 2001. Previously he served as our Executive Vice President since October 2000; Non Branded Group President since October 1999; and Non Branded Sales President since November 1998. Prior to that time, he held several positions with Seneca Foods Corporation, including serving as its Senior Vice President — Technical Services since June 1997, President — Juice Division since October 1995 and Senior Vice President — Operations since June 1994.

        Nigel J. Cooper was appointed Vice President – Finance in May 2002. He joined us as Corporate Controller in October 2000. Before that he was a financial and accounting consultant with Resources Connection from 1999. Prior to that he held controller positions with InterAct Security, Riverplace Inc., Separation Technology and W. Security Systems, Inc. He spent four years with Price Waterhouse in the U.K. and is a Chartered Accountant.

        Kenneth A. Iwinski was appointed Vice President — Legal in January 2001 and Secretary in October 2001. He joined the Company in November 1998 as Assistant Corporate Counsel/Assistant Secretary. Prior to joining the Company, he practiced law with the business law firm of Meissner Tierney Fisher & Nichols, S.C., in Milwaukee, Wisconsin since May 1992.

        William J. Haddow, Sr. was named Vice President – Purchasing and Logistics in September 1998. Before that, he served as Vice President-Purchasing, Transportation and Budget since October 1996; Vice President-Purchasing and Transportation from May 1993; and Assistant Vice President-Purchasing from 1989.

        Steven E. Klus was appointed Vice President – Manufacturing in January 2001. Previously he served as our Manufacturing Division President since September 1998. He joined us in April 1996 as the Director of Strategic Product Planning. He was appointed Vice President-Manufacturing in October 1996. Before that, he served as President-Eastern Division of Seneca Foods Corporation in New York from May 1990.

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        John B. Stauner was appointed Vice President – Agricultural Operations in January 2001. Previously he served as our Agricultural Operations Division President since September 1998; Vice President-Agricultural Operations since October 1996; Vice President-Operations from May 1995; and Assistant Vice President of Operations since we were formed in 1987.

        Robert M. Wilson was appointed Vice President – Industrial/Ingredients, which includes international and fresh fruit sales, in January 2001. He joined us as our Industrial-Ingredients Division President in April 1999 when we purchased Potomac Foods of Virginia, Inc., a broker of fruit juices and other fruit products. Before that, he was the President and owner of Potomac Foods of Virginia, Inc., since 1986.

PART II

Item 5. Market for the Company's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

(1)     The range of sale prices listed for each quarter includes intra-day trading prices. These quotations represent inter-dealer prices, without retail mark-up, mark-down, or commissions, and may not necessarily represent actual transactions.

        On November 26, 2004 there were approximately 848 shareholders of record for the shares of our Class A Common Stock. Shares of our Class A Common Stock are quoted on the Over-The-Counter Bulletin Board under the symbol “NRCNA.” On November 26, 2004, the last sale price of shares of our Class A Common Stock was $0.95 per share.

        On December 9, 2003, Foothill purchased 2,543,053 shares of Class A Common Stock for an aggregate purchase price of $25,430.53 pursuant to the terms and conditions of Northland Cranberries, Inc. Common Stock Purchase Warrant No. W-1 dated November 6, 2001 and issued to Foothill as part of the consideration to provide credit facilities to us in connection with the restructuring of our debt and equity on November 6, 2001.

        On November 12, 2004, we declared a special cash dividend of $0.33 per share of Class A Common Stock payable on December 1, 2004 to all shareholders of record at the close of business on November 26, 2004. Prior to this special dividend, we did not pay any dividends on our common stock since the third quarter of fiscal 2000.

        Our Amended and Restated Loan and Security Agreement with Foothill and Ableco prohibits us from making any distributions on our common stock, except that under certain circumstances following the sale of assets to Ocean Spray pursuant to its option to purchase certain of our marshes, we may pay a cash dividend in an amount not to exceed in the aggregate $5.0 million.

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Item 6. Selected Financial Data.

(1)     See Note 4 of our Notes to Consolidated Financial Statements for a discussion of a significant disposition affecting the comparability of information contained herein.

(2)     During the years ended August 31, 2001 and 2000, respectively, we had adjustments to cost of goods sold to reflect lower of cost or market adjustments of inventory in the amount of $17.6 million and $ 57.4 million, respectively.

(3)     All share and per share data have been restated to give effect to our November 5, 2001 one-for-four reverse stock split.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

      General

        We are a vertically integrated grower, handler and marketer of cranberries, value-added cranberry products, and branded cranberry and other fruit beverages. We derive our revenue primarily from the sale of our Northland brand 100% juice products, as well as the sale of our Seneca and other branded products, which accounted for approximately 64.0% of our net revenues in fiscal 2004, compared to approximately 58.7% in fiscal 2003 and 58.3% in fiscal 2002. In recent years, we also derived revenue from the sale of cranberry products, primarily cranberry concentrate, in the industrial/ingredients markets. Cranberry concentrate sales accounted for approximately 25.0% of our net revenues in fiscal 2004, compared to approximately 28.7% in fiscal 2003 and 21.7% in fiscal 2002. On September 23, 2004, we entered into agreements with Ocean Spray that are described in Note 17 of our Notes to Consolidated Financial Statements. As a result of these agreements, we expect, through the 2013 harvest, to convert into cranberry concentrate substantially all of the cranberries we grow and purchase from independent cranberry growers for use as an ingredient in our branded juice products or, to the extent not used as an ingredient in our branded juice products, for sale to Ocean Spray.

        We incur expenses primarily related to our cost of sales and our selling, general and administrative expenses. Cost of sales generally includes cost of materials and ingredients, packaging costs, certain labor and overhead and depreciation. Selling, general and administrative expenses generally include media advertising, commissions, wages, benefits, office overhead and supplies, depreciation and professional fees and expenses.

        During fiscal 2004 we focused our efforts on (i) improving profitability by lowering operating expenses and (ii) reducing long-term and short-term debt. We reduced total debt by $20.7 million in fiscal 2004. Shareholders equity also improved by $18.0 million.

        We also focused our marketing efforts on educating consumers about the health benefits of our Northland brand 100% juice cranberry blends. However, increased competition and increased consumer trends toward purchasing low calorie and low carbohydrate items generally resulted in lower sales for our branded juice products. Increased competition for concentrate and raw cranberries also resulted in lower sales in fiscal 2004. Total sales decreased in fiscal 2004 by 23.2% from fiscal 2003.

      Critical Accounting Policies

        The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an on-going basis, we evaluate our estimates, including those related to product shipments and returns, bad debts, inventories, income taxes, contingencies and litigation. We base these estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        Specifically, we believe that the following accounting policies and estimates are most important to the portrayal of our financial condition and operating results and require management’s most difficult judgments:

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      Revenue Recognition

        We recognize revenue when persuasive evidence of an arrangement exists, product is delivered, collectibility is reasonably assured and title passes to the customer. Estimated reserves for discounts, coupons, product returns and trade allowances are established based on an analysis of historical trends and experience, as well as the trade allowances offered by us at the time products are delivered. The estimated reserves are charged against revenues in the same period that corresponding sales are recorded. We periodically evaluate such reserves and make necessary adjustments when actual participation in these programs differs from historical experience. There have been no significant changes in estimates for such reserves during fiscal 2004.

      Inventory

        We have stated our inventory carrying value at the lower of cost (using the first-in, first-out costing method) or estimated market values, based upon management’s best estimates of future product selling costs for the periods during which the cranberries are grown and the cranberries and cranberry-related products are expected to be sold. The market estimates are dependent upon several factors including, but not limited to, price, product mix, demand, costs and the period of time it takes to sell the inventory.

      Allowance for Doubtful Accounts

        We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We determine the level of our allowance based on historical experience, the aging of our accounts receivables and the credit worthiness of individual customers. If the financial condition of our customers were to deteriorate, resulting in impairment of their ability to make payments, additional allowances may be required. Our accounts receivable balance was $4.4 million, net of doubtful accounts of $0.3 million, and $8.5 million, net of doubtful accounts of $0.4 million, as of August 31, 2004 and 2003, respectively.

      Recoverability of Long-Lived Assets

        We state the value of our long-lived assets (property and equipment) at cost less depreciation and amortization. We periodically evaluate this carrying value. Our estimates of the expected future undiscounted cash flows related to the recoverability of these assets may change from actual cash flows due to, among other things, changes in technology and economic conditions.

      Assets Held for Sale

        From time to time, in connection with our management’s ongoing efforts to maximize operating effectiveness, decisions are made to exit certain production or distribution facilities. At the time that our management commits to a decision to exit existing facilities and initiates an active plan to dispose of the facility, an assessment of the recoverability of the carrying value of the long-lived assets of the facility to be closed is made by our management. This assessment requires our management to estimate the fair value of the assets to be disposed of and the estimated cost to sell such assets. To the extent the carrying value of the assets to be disposed of exceeds the estimated fair value of those assets less their estimated cost to sell, impairment in the value of the assets is recognized.

        Estimates of the fair value of the assets to be disposed of are generally based on a discounted cash flow analysis or substantive purchase offers from viable potential buyers. Estimates of the value are impacted by a variety of relevant factors, including, but not limited to, alternative future uses of such assets, the availability of potential buyers, general economic conditions, current legal restrictions, if any, on the use of the assets, and any relevant legal issues. Our management continues to evaluate all available evidence of the fair value of the assets to be disposed of and makes any necessary adjustments at the time that additional information becomes available.

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      Deferred Gain on Forgiveness of Indebtedness

        On November 6, 2001 we completed the restructuring of our then-outstanding debt obligations. In estimating the gain or loss resulting from this restructuring, our management was required to make certain estimates of the future cash payments to be made under the terms of the modified debt. Since the modified debt included provisions for a variable interest rate based on a premium above the lender’s prime borrowing rate, the critical assumption made at the time of the restructuring was the interest rate to be incurred over the life of the debt. For purposes of the determination of the gain from the restructuring, the estimated interest rate over the term of the debt was assumed to be the rate in effect at the date of the restructuring. Since the debt restructuring in November 2001, general economic conditions and other factors have resulted in a reduction of interest rates. Accordingly, interest paid has been less than previously estimated resulting is us recognizing a gain of approximately $5.3 million upon final payment of the principal outstanding of the modified debt.

      Realization of Deferred Tax Assets

        We have net deferred tax assets of $31.3 million and a valuation allowance against these assets of $25.1 million as of August 31, 2004. We have recorded a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. We considered our recent history of profitable operations adjusted for nonrecuring items, the sale of certain assets to Ocean Spray announced in September 2004 and projected future operations in reaching our conclusion.

      Off-Balance Sheet Arrangements

        We do not typically engage in off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships with unconsolidated entities or other persons that may have a material current or future effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. We do not materially rely on off-balance sheet arrangements for liquidity, capital resources, market risk support, credit risk support or other benefits.

        In addition, we have outstanding 100 shares of our Series B Preferred Stock. The Series B Preferred Stock is subject to mandatory redemption upon (i) the consummation of a transaction following which neither Sun Northland, LLC nor its affiliates owns or controls securities possessing at least 10% of the voting power of the company, or (ii) the distribution of assets to holders of our capital stock upon the sale of substantially all our assets. The redemption price in such a circumstance varies depending upon the number of shares of Series B Preferred Stock then outstanding and the internal rate of return (as defined in the Articles of Incorporation) recognized by Sun Northland, LLC in connection with the event triggering such redemption. We cannot be certain if or when the Series B Preferred Stock may be redeemed, nor can we be certain of the redemption price in the event of such a redemption. See Note 11 of our Notes to Consolidated Financial Statements for more information regarding our Series B Preferred Stock.

      Fiscal 2004 Compared to Fiscal 2003

        Net Revenues. Our total net revenues decreased 23.2% to $74.0 million in fiscal 2004 from $96.5 million in fiscal 2003. The decrease resulted primarily from (i) reduced concentrate and cranberry sales; and (ii) reduced sales of Northland and Seneca branded products. Increased competition and increased consumer trends toward purchasing low calorie and low carbohydrate items resulted in lower sales for our branded juice products. Increased competition for concentrate and raw cranberries also contributed to lower sales in fiscal 2004. Trade spending, slotting and consumer coupons, which are reported as a reduction of net revenue, were down 1.1% to $16.5 million in fiscal 2004 from $16.7 million in fiscal 2003.

        Industry data indicated that, for the 12-week period ended September 17, 2004, our Northland brand 100% juice products achieved a 4.9% market share of the supermarket shelf-stable cranberry beverage category on a national basis, down from 5.6% market share for the 12-week period ended September 7, 2003. We believe this decrease is attributable primarily to our reduction in advertising spending in fiscal 2004 and increased competition.

        Cost of Sales. Our cost of sales for fiscal 2004 was $51.0 million compared to $65.1 million in fiscal 2003, resulting in gross margins of 31.2% and 32.5%, respectively. The decrease in cost of sales resulted primarily from lower sales volumes from our branded juice products, concentrates and cranberries.

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        Selling, General and Administrative Expenses. Our selling, general and administrative expenses were $19.0 million, or 25.7% of net revenues, in fiscal 2004, compared to $24.5 million, or 25.4% of net revenues, in fiscal 2003. The reduction in fiscal 2004 was primarily attributable to decreases in advertising expenses of $4.9 million and in wages of $0.6 million.

        Gain on Disposal of Property and Equipment. In fiscal 2004, we recognized a net $2.8 million gain on the sale of various assets. We sold (i) our production and warehouse facility in Bridgeton, New Jersey; (ii) one of our cranberry marshes located in Minong, Wisconsin; (iii) our bottling plant in Jackson, Wisconsin; (iv) our storage facility in Eau Claire, Michigan; (v) our bottling and packaging plant in Dundee, New York; and (vi) various other property and equipment. In fiscal 2003, we recognized a net $0.1 million gain on the sale of (i) an office in Bridgeton, New Jersey; (ii) one of our cranberry marshes located in Armenia, Wisconsin; and (iii) various other property and equipment.

        Other Income. In fiscal 2004 we recognized $3.0 million in other income from Cliffstar Corporation (“Cliffstar”) in connection with the settlement of all disputes between us and Cliffstar relating to the earn-out payments we were entitled to under an Asset Purchase Agreement previously entered into by the parties in connection with the sale of the net assets of our private label juice business to Cliffstar in March 2000. In fiscal 2003 we recognized $1.5 million in other income from the settlement of a claim against a third party storage facility (see Note 5 of our Notes to Consolidated Financial Statements), as well as a gain of $0.1 million attributable to the settlement of certain other litigation with Cliffstar (see Note 3 of our Notes to Consolidated Financial Statements).

        Interest Expense. Our interest expense was $2.9 million for fiscal 2004, compared to $3.6 million in fiscal 2003. The decrease in our interest expense was due primarily to reduced debt levels between periods as a result of a paydown of $16.1 million in long-term and short-term debt during fiscal 2004. The weighted average interest rate on our borrowings for fiscal 2004 was approximately 7.2%.

        Gain on Debt Extinguishment. A gain of $5.3 million was recognized in the second quarter of fiscal 2004 as a result of the prepayment in full of a term note held by one of our lenders.

        Interest Income. Our interest income was $47,000 in fiscal 2004 compared to $1.6 million in fiscal 2003. Interest income was recognized primarily as a result of an unsecured, subordinated note receivable we received in connection with the sale of our private label juice business to Cliffstar in March 2000. The reduction in interest income was the result of the conversion of the note receivable from Cliffstar to cash in May 2003 in connection with the settlement of certain litigation.

        Income Tax. In fiscal 2004 we recognized deferred income tax benefits of $6.2 million which resulted from the recognition for certain net operating loss carry forwards expected to be utilized for financial reporting purposes during fiscal 2005. In fiscal 2003 there was no income tax provision due to the utilization of certain net operating loss carry forwards for which no benefit had previously been provided.

        Net Income. In fiscal 2004 we recorded net income of $18.0 million or $0.18 per diluted share compared to net income of $6.6 million or $0.06 per diluted share in fiscal 2003.

      Fiscal 2003 Compared to Fiscal 2002

        Net Revenues. Our total net revenues decreased 5.0% to $96.5 million in fiscal 2003 from $101.5 million in fiscal 2002. The decrease resulted primarily from (i) reduced co-packing revenues; and (ii) reduced sales of Seneca branded products due to decreased trade spending in those markets where we had previously lost distribution. Trade spending, slotting and consumer coupons, which are reported as a reduction of net revenue, were up 37.4% to $16.7 million in fiscal 2003 from $12.2 million in fiscal 2002.

        The decrease in net revenues in fiscal 2003 was partially offset by an increase in sales of Northland branded products and cranberry concentrate. Gross sales of Northland branded product increased by 16.3% in fiscal 2003 over fiscal 2002 and industrial/ingredients sales increased by 17.0% in fiscal 2003 over fiscal 2002. Industry data indicated that, for the 12-week period ended September 7, 2003, our Northland brand 100% juice products achieved a 5.6% market share of the supermarket shelf-stable cranberry beverage category on a national basis, up from 5.1% market share for the 12-week period ended September 8, 2002.

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        With the closure of our Jackson, Wisconsin facility, we discontinued providing contract packaging services for third parties. Contract packaging services accounted for approximately 2.5% of net revenues in fiscal 2003.

        Cost of Sales. Our cost of sales for fiscal 2003 was $65.1 million compared to $69.7 million in fiscal 2002, resulting in gross margins of 32.5% and 31.3%, respectively. The decrease in cost of sales resulted primarily from reduced co-packing costs associated with reduced co-packing volume. In addition to the reduced costs, the improved margins in fiscal 2003 resulted from the impact of higher selling prices for cranberry concentrate.

        Selling, General and Administrative Expenses. Our selling, general and administrative expenses were $24.5 million, or 25.4% of net revenues, in fiscal 2003, compared to $24.8 million, or 24.5% of net revenues, in fiscal 2002. Included in the fiscal 2002 amount were approximately $1.3 million of charges relating to our debt and equity restructuring in November 2001. Partly offsetting the reduction of restructuring charges in fiscal 2003 were increases in advertising expenses of $0.7 million and increases in management fees paid to Sun Capital Partners Management, LLC of $0.4 million.

        Gain on Disposal of Property and Equipment. In fiscal 2003, we recognized a net $0.1 million gain on the sale of various assets. We sold (i) an office building in Bridgeton, New Jersey; (ii) one of our cranberry marshes located in Armenia, Wisconsin; and (iii) various equipment. In fiscal 2002, we recognized a net $0.1 million gain on the sale of various assets. We sold (i) our office facility in Wisconsin Rapids, Wisconsin; (ii) our processing facility in Cornelius, Oregon; and (iii) our cranberry marshes in Hanson, Massachusetts. We also closed our juice packaging facility in Dundee, New York and sold the related equipment.

        Other Income. In fiscal 2003 we recognized $1.5 million in other income from the settlement of a claim against a third party storage facility (see Note 5 of our Notes to Consolidated Financial Statements). Also included in other income was a gain of $0.1 million attributable to the settlement of certain litigation with Cliffstar Corporation (see Note 5 of our Notes to Consolidated Financial Statements).

        Interest Expense. Our interest expense was $3.6 million for fiscal 2003, compared to $6.6 million in fiscal 2002. The decrease in our interest expense was due primarily to reduced debt levels between periods as a result of a paydown of $28.6 million in long-term and short-term debt during fiscal 2003. The weighted average interest rate on our borrowings for fiscal 2003 was approximately 6.3%.

        Interest Income. Our interest income was $1.6 million in fiscal 2003 compared to $2.5 million in fiscal 2002. Interest income was recognized primarily as a result of an unsecured, subordinated note receivable we received in connection with the sale of our private label juice business to Cliffstar in March 2000. The reduction in interest income was the result of the conversion of the note receivable from Cliffstar to cash in May 2003 in connection with the settlement of certain litigation with Cliffstar Corporation.

        Income Tax. In fiscal 2003 there was no income tax provision due to the utilization of certain net operating loss carry forwards for which no benefit had previously been provided. In fiscal 2002 there was income tax expense of $32.5 million. This expense was comprised of (i) $32.8 million of expense related to the income tax on the gain on forgiveness of indebtedness; and (ii) $0.3 million of benefit as a result of certain refunds of Federal Alternative Minimum Tax (AMT) related to a change in the tax law for AMT carry-backs.

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        Net Income. In fiscal 2003 we recorded net income of $6.6 million or $0.06 per diluted share compared to net income of $53.8 million or $0.64 per diluted share in fiscal 2002. Included in fiscal 2002 net income was a net of tax gain of $50.5 million on the forgiveness of indebtedness related to the financial restructuring of the company.

Financial Condition

        In fiscal 2004, net cash provided by operating activities was $2.9 million compared to $14.3 million in fiscal 2003. Cash used by changes in working capital was $6.2 million in fiscal 2004 compared to $2.5 million of cash provided in fiscal 2003. Receivables, prepaid expenses and other current assets provided cash of $4.6 million in fiscal 2004 compared to $4.9 million in fiscal 2003. Increase in inventories used cash of $6.8 million in fiscal 2004 compared to $2.0 million of cash provided in fiscal 2003. The increase in inventory was primarily attributable to lower cranberry concentrate sales during fiscal 2004. Reductions in accounts payable and accrued expenses used cash of $4.0 million in fiscal 2004 and $4.5 million in fiscal 2003. These reductions resulted primarily from lower trade promotions, discounts and incentives during the last quarter of fiscal 2004.

        Net cash provided by investing activities was $6.6 million in fiscal 2004 compared to $23.0 million in fiscal 2003. In fiscal 2004, proceeds from disposals of property and equipment and assets held for sale were $8.4 million compared to $1.4 million in fiscal 2003. The asset sales in fiscal 2004 consisted primarily of the sale of (i) a marsh located in Minong, Wisconsin, (ii) former plants in Bridgeton, New Jersey, Dundee, New York and Jackson, Wisconsin, (iii) a storage facility in Eau Claire, Michigan, and (iv) various other property and equipment. The asset sales in fiscal 2003 consisted primarily of the sale of a marsh located in Armenia, Wisconsin, the sale of an office building in Bridgeton, New Jersey and sale of various equipment. Property and equipment purchases decreased from $1.4 million in fiscal 2003 to $1.0 million in fiscal 2004. In fiscal 2003, collections on the note receivable from Cliffstar were $23.0 million. In fiscal 2004, we also loaned $0.8 million to one of our independent contract growers (see Note 16 of our Notes to Consolidated Financial Statements).

        Our net cash used in financing activities was $16.1 million in fiscal 2004 compared to $28.6 million in fiscal 2003. Payments on long-term debt and other obligations, primarily attributable to the application of the proceeds from the Cliffstar settlement and sale of assets, amounted to $16.1 million in fiscal 2004 compared to $28.0 million in fiscal 2003. We did not have any borrowings under the revolving line of credit facility compared to net payments in the amount of $0.6 million in fiscal 2003. In both fiscal 2004 and fiscal 2003, monthly principal payments were made on other obligations and additional payments were made as required under our restructured debt agreements.

        Cash and cash equivalents. Our cash balance decreased to $2.4 million at the end of fiscal 2004 from $9.1 million at the end of fiscal 2003 primarily as a result of the use of cash to reduce debt.

        Long-Term Debt and Other Arrangements. During fiscal 2004 we were able to reduce our long-term debt by approximately $20.7 million. This was in part due to the application of proceeds received in connection with the settlement of Cliffstar litigation and the sale of various assets as described above. At the end of fiscal 2004 we did not have a balance outstanding on our revolving credit facility.

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        The following schedule sets forth our contractual obligations as of August 31, 2004:

(1)     Purchase obligations represent estimated payments due to our contract growers for cranberries purchased by us during the first quarter of fiscal 2005. Under our crop purchase contracts, we pay the growers at a market rate, as defined, for all raw cranberries delivered (plus $3 per barrel in certain circumstances). These obligations are subject to variability and generally not fixed until the fourth quarter of each fiscal year.

        The following table sets forth our long-term debt as of August 31, 2004 and 2003:

        Aggregate annual principal payments required under terms of the debt agreements as of August 31, 2004, consisted of the following:

        As of August 31, 2004, we had no outstanding borrowings under our $30 million revolving credit facility with Foothill and Ableco. As of August 31, 2004, we had approximately $7.5 million of unused borrowing available under this facility.

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        On November 16, 2004 we entered into an Amended and Restated Loan and Security Agreement with Foothill and Ableco (the “Restated Loan Agreement”) which, among other things, (i) amended and reduced our existing revolving credit facility into two separate revolving credit facilities in an aggregate principal amount of $11,000,000, (ii) permits the repayment of existing indebtedness owing to The Equitable Life Assurance Society of the United States in the amount of $5,000,000, (iii) provides for an additional term loan facility in an aggregate principal amount of $15,000,000; (iv) appoints Foothill as Administrative Agent for the Lenders, and (v) appoints Ableco as Collateral Agent for the Lenders.

        Under the terms of the Restated Loan Agreement, we may use the proceeds of the revolving credit facilities and the term loan facility only to (i) pay a special dividend on our shares of class A common stock, (ii) for general working capital and general corporate purposes, and (iii) to pay fees and expenses related to the Restated Loan Agreement. We intend to utilize approximately $20,000,000 million of amounts borrowed pursuant to the term loan and revolving credit facilities, as well cash on hand, to pay a special cash dividend of $0.33 per class A share payable on December 1, 2004 to all shareholders of record as of the close of business on November 26, 2004. Amounts borrowed pursuant to revolving credit facilities may be repaid at any time during the term of the Restated Loan Agreement.

        The term loan facility must be repaid in an amount of (i) $2,000,000 on March 1, 2005, (ii) $2,000,000 on June 1, 2005, and (iii) $1,000,000 on the first day of each subsequent fiscal quarter, commencing on September 1, 2005. The term loan facility matures on November 5, 2007. Our obligations under the Restated Loan Agreement are secured by all owned or subsequently acquired assets, excluding certain excluded collateral and permitted liens as defined in the Restated Loan Agreement.

        The following table sets forth our long-term debt as of November 16, 2004, giving effect to the debt restructuring effected by the Restated Loan Agreement:

        Aggregate annual principal payments required under terms of the debt agreements as of November 16, 2004, giving effect to the debt restructuring effected by the Restated Loan Agreement, consisted of the following:

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        We believe that we will be able to fund our ongoing operational needs for the foreseeable future through (i) cash generated from operations; (ii) current cash on hand; and (iii) financing available under our Restated Loan Agreement with Foothill and Ableco. We do not have any significant capital expenditure commitments and continue to review our capital requirements in an effort to match expenditures with revenues.

        As of August 31, 2004 we were in compliance with all of our debt agreement covenants.

Quarterly Results

        The table below sets forth our quarterly results for fiscal 2004 and 2003. We believe the following considerations are relevant to an analysis of our quarterly results:

        The following table contains unaudited selected historical quarterly information, which includes adjustments, consisting only of normal recurring adjustments.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

        We do not enter into any material futures, forwards, swaps, options or other derivative financial instruments for trading or other purposes. Our primary exposure to market risk is related to changes in interest rates and the effects those changes may have on our earnings as a result of our long-term financing arrangements. We manage our exposure to this market risk by monitoring interest rates and possible alternative means of financing. Our earnings are affected by changes in short-term interest rates under our revolving credit facility and certain term loans, pursuant to which our borrowings bear interest at a variable rate. Based upon the debt outstanding on certain term loans as of August 31, 2004, an increase of 1.0% in market interest rates would have increased interest expense and decreased earnings before income taxes by approximately $5,000. Giving effect to the debt restructuring effected by the Restated Loan Agreement and our long-term debt as of November 16, 2004, an increase of 1.0% in market interest rates would increase in interest expense and decrease earnings before income taxes by approximately $204,500. This analysis does not take into account any actions we might take in an effort to mitigate our exposure in the event interest rates were to change materially. See Note 10 of Notes to Consolidated Financial Statements.

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Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board
of Directors of Northland Cranberries, Inc.:

        We have audited the accompanying consolidated balance sheets of Northland Cranberries, Inc. and subsidiaries (collectively, the "Company") as of August 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended August 31, 2004. Our audits also included the consolidated financial statement schedule listed at Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Northland Cranberries, Inc. and subsidiaries as of August 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2004, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

/s/ DELOITTE & TOUCHE LLP

Milwaukee, Wisconsin
November 18, 2004

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NORTHLAND CRANBERRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2004 AND 2003

See notes to consolidated financial statements.

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NORTHLAND CRANBERRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2004 AND 2003

See notes to consolidated financial statements.

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NORTHLAND CRANBERRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2004, 2003 AND 2002

See notes to consolidated financial statements.

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NORTHLAND CRANBERRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2004, 2003 AND 2002

See notes to consolidated financial statements.

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NORTHLAND CRANBERRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
YEARS ENDED AUGUST 31, 2004, 2003 AND 2002

See notes to consolidated financial statements.

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NORTHLAND CRANBERRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 2004, 2003, AND 2002

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