Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the Fiscal Year Ended September 30, 2003

Commission File No. 1-10307

IMPERIAL SUGAR COMPANY

(Exact name of registrant as specified in its charter)

One Imperial Square, 8016 Highway 90-A, P.O. Box 9, Sugar Land, Texas 77487-0009

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (281) 491-9181

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, without par value

Warrants to Purchase Common Stock

Rights to Purchase Preferred Stock

(Title of each class)

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 the 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.  x

Indicate by check mark whether the registrant is an accelerated filed (as defined in Rule 12b-2 of the Act).    ¨  Yes    x No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on March 31, 2003, the last business day of registrant’s most recently completed second fiscal quarter, based on the last reported trading price of the registrant’s common stock on the NASDAQ National Market on that date, was approximately $34 million. For purposes of the above statement only, all directors, executive officers and 10% shareholders are treated as affiliates.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes  x    No  ¨

There were 10,047,500 shares of the registrant’s common stock outstanding on December 12, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for registrant’s 2004 Annual Shareholders Meeting are incorporated by reference into Part III of this report.

Table of Contents

TABLE OF CONTENTS

Forward-Looking Statements

Statements regarding future market prices and margins, future operating results, sugarbeet acreage, operating efficiencies, future government and legislative action, future cost savings, future pension costs, our liquidity and ability to finance our operations, and other statements that are not historical facts contained in this report on Form 10-K are forward-looking statements. We identify forward-looking statements in this report by using the following words and similar expressions:

Forward-looking statements involve risks, uncertainties and assumptions, including, without limitation, market factors, energy costs, the effect of weather and economic conditions, farm and trade policy, our ability to realize planned cost savings, the available supply of sugar, available quantity and quality of sugarbeets, actual or threatened acts of terrorism or armed hostilities, legislative, administrative and judicial actions and other factors detailed elsewhere in this report and in our other filings with the SEC. Many of such factors are beyond our ability to control or predict. Management cautions against placing undue reliance on forward-looking statements or projecting any future results based on such statements or present or future earnings levels. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All forward-looking statements in this Form 10-K are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this report.

1

Table of Contents

PART I

ITEM 1.    Business

Overview

Imperial Sugar Company is one of the largest processors and marketers of refined sugar in the United States. We produce, package and distribute sugar at facilities located in California, Georgia and Louisiana. For the year ended September 30, 2003, we sold approximately 37 million hundredweight, or cwt, of refined sugar.

We offer a broad product line and sell to a wide range of customers directly and through wholesalers and distributors. Our customers include retail grocers, foodservice distributors and industrial customers, principally food manufacturers. Our products include granulated, powdered, liquid and brown sugars marketed in a variety of packaging options (one pound packages to 100-pound bags and in bulk) under various brands (Dixie Crystals^®, Holly^®, Imperial^®, Pioneer^® and Spreckels^®) or private labels. In addition, we produce selected specialty sugar products, including Savannah Gold^™ (a premium-priced, free-flowing brown sugar) and specialty sugars used in confections and icings. We have a broad customer base, with no single customer accounting for 10% or more of our consolidated sales for the year ended September 30, 2003.

Imperial Sugar Company was incorporated in 1924 and is the successor to a cane sugar plantation and milling operation begun in Sugar Land, Texas in the early 1800s that began producing granulated sugar in 1843. In 1988, we purchased Holly Sugar Corporation and in April 1996, we acquired Spreckels Sugar Company. We completed our acquisition of Savannah Foods & Industries, Inc. in December 1997 and we acquired Wholesome Sweeteners L.L.C. in September 1998 and Diamond Crystal Specialty Foods, Inc. in November 1998.

On August 29, 2001, Imperial Sugar and substantially all of its subsidiaries emerged from protection under the U.S. Bankruptcy Code, under which they filed for relief in January 2001. Under our plan of reorganization, our old common stock was canceled, our bondholders and some of our trade creditors received 98% of the stock of our reorganized company and some of our creditors received reduced cash and deferred payment settlements. We have applied reorganization and fresh start accounting adjustments to our consolidated balance sheet as of August 29, 2001. Under fresh start accounting, a new reporting entity is considered to be created and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values at the date fresh start accounting is applied.

Since the beginning of fiscal 2002, we sold (1) our disposable meal kit business in December 2001, (2) our Michigan Sugar Company subsidiary in February 2002, (3) our Worland, Wyoming sugarbeet factory in June 2002, (4) our Sidney, Montana, Torrington, Wyoming and Hereford, Texas sugarbeet facilities in October 2002 and (5) the majority of our foodservice business in December 2002. These sales, together with sales of surplus land and non-operating assets, have generated gross proceeds of approximately $274 million. We also discontinued our Sugar Land, Texas sugar refinery operations in December 2002 and the related packaging and distribution operations in June 2003. We undertook these transactions and others to reduce our debt, to lower our working capital needs, to reduce our costs and to concentrate our resources in our most strategic regions of the Southeast, Southwest, Midwest and the West Coast. In connection with the Michigan Sugar Company sale, we have a multi-year agreement to market all refined sugar production from those facilities.

In previous years, we operated in two business segments – the sugar segment, which produces and sells refined sugar and related products, and the foodservice segment, which sold and distributed numerous products to foodservice customers. On December 30, 2002, we sold the majority of our foodservice business (including all of the non-sugar products business) for gross proceeds of approximately $121 million and now report foodservice results as discontinued operations. We retained a substantial portion of the bagged sugar product sales to the foodservice market in this transaction, and we entered into a five-year bulk sugar supply agreement for the foodservice operations that were sold.

2

Table of Contents

In conjunction with the sale of our foodservice business, we refinanced our senior bank debt in December 2002, and entered into a new $175 million credit facility. Please read “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Overview of the Sugar Industry

Refined sugar can be produced by either processing sugarbeets or refining raw sugar produced from sugar cane. The profitability of cane sugar and beet sugar operations is affected by government programs designed to support the price of domestic crops of sugar cane and sugarbeets. These government programs affect cane sugar and beet sugar operations differently.

Cane Sugar Production Process

Sugar cane is grown in tropical and semitropical climates throughout the world as well as domestically in Florida, Louisiana, Texas and Hawaii. Sugar cane is processed into raw sugar by raw cane mills promptly after harvest. Raw sugar is approximately 98% sucrose and may be stored for long periods and transported over long distances without affecting its quality. Raw cane sugar imports are limited by United States government programs.

Cane sugar refineries like those we operate purify raw sugar to produce refined sugar. Operating results of cane sugar refineries are driven primarily by the spread between raw sugar and refined sugar prices and, to a lesser extent, by the conversion costs of the refining process.

Beet Sugar Production Process

In contrast to sugar cane, sugarbeets can grow wherever a five-month growing season is possible. In the United States, sugarbeets are grown in California, Colorado, Idaho, Michigan, Minnesota, Montana, Nebraska, North Dakota, Ohio, Oregon, South Dakota, Washington and Wyoming. Harvest periods depend on the growing area, but generally are in the early fall, except in California, where spring and summer harvests occur.

Sugarbeets are highly perishable and must be processed into refined sugar quickly after harvest to avoid deterioration. Sugarbeets may be stored in piles for short periods while awaiting processing where temperatures are sufficiently cool. Sugarbeets are converted to refined sugar through a single continuous process at beet sugar factories which are located near the areas in which sugarbeets are grown in order to reduce freight costs and the risk of deterioration before processing.

The production campaigns at any facility generally last 90 to 200 days, and operating results are driven primarily by the quantity and quality of sugarbeets dedicated to the factory and the net sales prices received for the refined beet sugar. Under industry practice, the beet processor shares a portion of the net sales price with growers through various participation or recovery contracts or cooperative arrangements.

Government Regulation

Federal government programs have existed to support the price of domestic crops of sugarbeets and sugar cane almost continually since 1934. The regulatory framework that currently affects the domestic sugar industry includes the Farm Security and Rural Investment Act of 2002, otherwise known as the Farm Bill. The Farm Bill provides for loans on sugar inventories to first processors (i.e., raw cane sugar mills and beet processors), implements a tariff rate quota that limits the amount of raw and refined sugar that can be imported into the United States, and imposes marketing allotments on sugarbeet processors and domestic raw cane sugar producers in some circumstances. In addition, the North American Free Trade Agreement, or NAFTA, adopted in 1994, limits the amount of sugar that can be imported to and exported from Mexico. To date, NAFTA has had a lesser impact on the United States sugar market than the Farm Bill and its predecessor acts. However, NAFTA may have a greater impact on both demand and supply in the future. Please read “—Sugar Legislation and Other Market Factors.”

3

Table of Contents

Domestic Demand

Domestic demand for refined sugar increased each year from 1986 through 2001 (after an earlier period in which sugar consumption declined due primarily to a switch by soft-drink manufacturers from refined sugar to high-fructose corn syrup), and the annual rate of growth over the five-year period ended September 30, 2001 has ranged from 1.5% to 2.0%. Domestic demand declined 0.5% in 2002, due primarily to increased imports of sugar containing products and sugar blends, and remained flat in 2003.

Domestic Supply

Reduced demand in the early 1980s due primarily to the switch of soft drink manufacturers to high-fructose corn syrup was absorbed principally by capacity reductions in the cane sugar refining sector. Approximately one-third of domestic cane sugar refining capacity was eliminated between 1981 and 1988. Cane sugar refining capacity remained relatively flat from 1988 until 1998, when a competitor constructed a refinery in Florida with a rated annual capacity of approximately 10 million cwt. In December 2002, we closed our Sugar Land Texas refinery and, in 2003, a competitor closed a refinery operation, eliminating additional capacity. Growth in refined sugar demand during the last decade has been largely satisfied through increased beet sugar production. In recent years, there have been a number of expansions to existing beet sugar factories to allow for an increase in acreage dedicated to sugarbeets. Marketing allotments under the Farm Bill likely will affect future sugarbeet production. These allocations may limit the amount of domestic raw sugar that is available for refining and may limit sugar available for sales. Please read “—Sugar Legislation and Other Market Factors.”

Domestic Refined Sugar Prices

Given the existing domestic supply and demand situation and the current status of government regulation, the price of refined sugar in the United States in recent years has been driven primarily by the amount of beet sugar supply. Historically, good crop years have led to relatively soft refined sugar prices, and small crop years have led to relatively strong refined sugar prices.

Our Products

Sugar Products

Imperial Sugar is one of the largest processors and marketers of refined sugar in the United States. Refined sugar is our principal product line and accounted for approximately 96% of our consolidated net sales for the year ended September 30, 2003. We produced approximately 85% of our refined sugar from raw cane sugar and 15% from sugarbeets in 2003 and market our sugar products to retail grocers, foodservice distributors and industrial food manufacturers by direct sales and through brokers.

Retail Grocery Sales—We produce and sell granulated white, brown and powdered sugar to grocery customers in packages ranging from one-pound packages to 25-pound bags. Retail packages are marketed under the trade names:

Retail packages are also sold under retailers’ private labels, generally at prices lower than those for branded sugar. Core markets for our branded sugar and private label products include the Southeast, Southwest and Midwest United States. Our primary business strategy is to seek to capitalize on our well-known brands to increase sales of our higher-margin branded products as a percentage of total grocery sales. For the year ended September 30, 2003, our sales of refined sugar products to retail grocery customers accounted for approximately 32% of our refined sugar sales. Of sales made to retail grocery customers in the year ended September 30, 2003, approximately 36% were of our own brands while 64% were sold as private label.

4

Table of Contents

Industrial Sales—We produce and sell refined sugar, molasses and other ingredients to industrial customers, principally food manufacturers, in bulk, packaged or liquid form. Food manufacturers purchase sugar for use in the preparation of confections, baked products, frozen desserts, canned goods and various other food products. Historically, we have made the majority of our sales to industrial customers under fixed price, forward sales contracts with terms of one year or less. Industrial sales generally provide lower margins than grocery and foodservice sales. For the year ended September 30, 2003, our sales of refined sugar products to industrial customers accounted for approximately 53% of our refined sugar sales in the sugar segment.

We also produce specialty sugar products and sell them to industrial customers. These sales for the year ended September 30, 2003 accounted for 4% of industrial sales. Specialty sugar products include:

Foodservice Sales—We sell a variety of sugar products (including granulated, powdered and brown sugar) in package sizes ranging from one-pound packages to 100-pound bags to foodservice distributors who in turn sell those products to restaurants and institutional foodservice establishments. For the year ended September 30, 2003, our sales of refined sugar products to foodservice distributors accounted for approximately 15% of our refined sugar sales. Under terms of our sale of the majority of our foodservice business in December 2002, we have agreed not to sell individual servings of sugar and certain non-sugar products for a period of five years following the closing date of that sale.

By-Products

We sell by-products from our beet sugar processing, principally beet pulp and molasses, as livestock feeds to dairymen, livestock feeders and livestock feed processors. The major portion of the beet pulp and molasses produced from sugarbeet operations is sold during and shortly after the sugar-making campaigns. By-products from beet sugar processing are marketed primarily in the United States and accounted for approximately 3% of net revenues for the year ended September 30, 2003. By-product markets are highly competitive because of the availability and pricing of by-products of other sugarbeet processors and corn wet millers, as well as other livestock feeds and grains. The market price of our by-products relative to the price of competitive feeds and grains is the principal competitive determinant. Among other factors, the weather and seasonal abundance of such feeds and grains may affect the market price of by-products.

Beet Seed

We also develop, produce and market commercial seed to beet growers under contract to us as well as to growers under contract to grow for other beet sugar processors. For the year ended September 30, 2003, beet seed sales accounted for 1% of our net revenues. We do not sell, nor do we authorize our growers to use, genetically modified seed in their production programs. Our beet seed operations are conducted primarily in Sheridan, Wyoming.

Sales and Marketing

We sell products directly through our sales force and through independent brokers. We maintain sales offices at our offices in Sugar Land, Texas and Port Wentworth, Georgia and at regional locations across the United States, including Saginaw, Michigan. We consider our marketing and promotional activities important to our overall sales effort. We advertise our brand names in both print and broadcast media (primarily radio) and distribute various promotional materials, including discount coupons and compilations of recipes.

5

Table of Contents

Operational Facilities

We own and operate two cane sugar refineries and two sugarbeet factories. Each facility has packaging and distribution capabilities, is served by adequate transportation and is maintained in good operating condition. The following table shows the location, capacity and production of each of our cane sugar refineries and sugarbeet factories:

We also operate a packaging and distribution center in Tracy, California and a distribution facility in Ludlow, Kentucky and we contract for throughput and storage at a number of warehouses and distribution stations.

Raw Materials and Processing Requirements

Raw Cane Sugar

We currently purchase raw cane sugar from domestic sources of supply located in Louisiana and Florida, as well as from various foreign countries. The availability of foreign raw cane sugar for domestic consumption is determined by the import quota level designated by applicable regulation.

Of our raw cane sugar purchases, we historically have purchased approximately 40% to 60% through long-term contracts with raw sugar producers; 20% to 30% under annual contracts with sugar producers or sugar traders; and 10% to 20% on a spot basis. In fiscal 2003, we purchased substantially all our raw cane sugar needs for our Georgia refinery under a supply arrangement, which expired in September 2003 and provided for purchase of weekly quantities needed by our refinery, in lieu of full shipments of raw sugar. Since the expiration of the supply agreement for our Georgia refinery, we have negotiated supply agreements with a number of trade suppliers and a producer of raw sugar to provide approximately 70% of the refinery requirements, with the remainder purchased from the domestic and offshore markets. We have two years remaining under a three-year contract with a local producer that supplies substantially all the raw sugar needs for our Louisiana refinery.

The terms of raw cane sugar contracts vary. Raw cane sugar purchase contracts can provide for the delivery of a single cargo or for multiple cargoes over a specified period or a specified quantity over one or more crop years. Contract terms may provide for fixed prices but generally provide for prices based on the futures market during a specified period of time. The contracts provide for a premium if the quality of the raw cane sugar is above a specified grade or a discount if the quality is below a specified grade. Contracts generally provide that the seller pays freight, insurance charges and other costs of shipping.

6

Table of Contents

Historically, the majority of our industrial sales are under fixed price, forward sales contracts. In order to mitigate price risk in raw and refined sugar commitments, we manage the volume of refined sugar sales contracted for future delivery in relation to the volume of raw cane sugar purchased for future delivery by entering into forward purchase contracts to buy raw cane sugar at fixed prices and by using raw sugar futures and option contracts.

We have access to approximately 300,000 short tons of aggregate raw sugar storage capacity, including 220,000 short tons of storage capacity at our Port Wentworth, Georgia refinery. At Port Wentworth, we have the capability to segregate our raw sugar inventory, which allows us to store bonded sugar for re-export. Bonded sugar is non-quota eligible raw sugar stored for re-export in a bonded warehouse under federal customs service regulations.

Sugarbeet Purchases

We purchase sugarbeets for our two California beet processing facilities from independent growers under multi-year contracts, the pricing and quantity terms of which are negotiated annually with an association representing the growers. We contract for acreage prior to the planting season based on estimated demand, marketing strategy, expected impact of marketing allotments, processing capacity and historical crop yields.

The contracts we use provide for payments to the grower based on the sugar content of the sugarbeets delivered by each grower and the net selling price of refined beet sugar during the specified contract year. The net selling price is the gross sales price less certain marketing costs, including packaging costs, brokerage, freight expense and amortization costs for certain facilities used in connection with marketing. Use of a participating contract reduces our exposure to price risks on our refined sugar inventory by causing the price we pay on our sugarbeet purchases to vary with the price received for refined sugar.

Our beet sugar operations depend on the quantity, quality and proximity of sugarbeets available to our factories. Sugarbeet acreage varies depending on factors such as prices anticipated by growers for sugarbeets versus alternative crops, prior crop quality, productivity, availability of irrigation and weather conditions. In addition, the quantity and cost of refined sugar subsequently produced from the sugarbeet crop may be materially affected by the acreage harvested, crop disease, insects and weather conditions during the growing, harvesting, and processing season.

Energy

The primary fuel we use is natural gas, although we also use coal in Brawley, California and Port Wentworth, Georgia. We generate a substantial portion of the electricity used at our refineries and factories. We have the equipment to use fuel oil at certain locations both as an alternative energy source when the price is more attractive and as a backup to natural gas in the event of curtailment of gas deliveries.

We typically purchase natural gas and coal supplies under contracts for terms of one year or more that do not contain minimum quantity requirements. Pricing of natural gas generally is indexed to a spot market index. We have used financial tools such as futures, options, swaps and caps in an effort to stabilize the price for gas purchases under indexed contracts. Coal is available in abundant supply domestically and we are able to purchase coal competitively. Higher natural gas prices in fiscal 2003 were mitigated by hedging activity but we expect to pay high energy prices in fiscal 2004.

Other Raw Materials

We use foundry coke and limestone at our Brawley, California beet sugar factory. We generally purchase coke under contracts with one to three-year terms and use rail transportation to deliver the coke to factories. Domestic coke supplies may become tighter due to environmental restrictions; however, we have the option of converting existing coke-fired equipment to natural gas should the availability and economics of coke so dictate.

7

Table of Contents

Seasonality

Sales of refined sugar are somewhat seasonal, normally increasing during the third and fourth fiscal quarters because of increased demand of various food manufacturers, including fruit and vegetable packers. Shipments of specialty products (brown and powdered sugar) increase in the first fiscal quarter due to holiday baking needs. Our second fiscal quarter ending March 31 historically has experienced lower revenues and earnings than our other fiscal quarters as a result of reduced demand for refined sugar, margin reduction from product mix changes and lower absorption of fixed costs of our cane refineries, as well as reduced inventories of refined sugar produced from sugarbeets in the period prior to the commencement of the seasonal sugarbeet campaign.

Although the refining of cane sugar is not seasonal, the production of beet sugar is a seasonal activity. Each of our beet sugar factories operates during sugar-making campaigns, which generally begin in early April and total 150 days to 200 days in length each year, depending on the supply of sugarbeets available to the factory. The seasonal production of sugarbeets requires us to store significant refined sugar inventory at each sugarbeet factory.

Sugar Legislation and Other Market Factors

Our business and results of operations are substantially affected by market factors, principally the domestic prices for refined sugar and raw cane sugar and the quality and quantity of sugarbeets available to us. These market factors are influenced by a variety of forces, including the number of domestic acres contracted to grow sugarbeets, prices of competing crops, weather conditions and United States farm and trade policies.

The principal legislation currently supporting the price of domestic crops of sugar cane and sugarbeets is the Farm Security and Rural Investment Act of 2002, otherwise known as the Farm Bill, which became effective October 1, 2002 and extended the sugar price support program for sugar cane and sugarbeets until 2008.

Farm Bill

The Farm Bill has three important aspects:

8

Table of Contents

The Farm Bill requires that the USDA operate its non-recourse sugar loan program, to the maximum extent possible, so as to avoid forfeiture of sugar to the CCC. To this end, the USDA has the authority to accept bids from sugar cane and sugarbeet processors to obtain raw cane sugar or refined beet sugar in CCC inventory in exchange for reduced production of raw cane sugar or refined beet sugar. This payment-in-kind authority, if employed by the USDA, effectively moves inventories of CCC-owned sugar back into the market without increasing overall supply.

Free Trade Initiatives

The North American Free Trade Agreement, or NAFTA, contains provisions that allow Mexico to increase its raw or refined sugar exports to the United States to 275,576 short tons raw value by 2007, if Mexico is projected to produce a net surplus of sugar. In 2008, NAFTA sugar duties and quotas expire and sugar may be freely traded between the United States and Mexico. The NAFTA sugar agreement currently is under renegotiation by the governments of the United States and Mexico. Mexican access to the United States market could be greater in future periods. In addition to the NAFTA programs, a number of other trade initiatives and negotiations involving the Americas and other quota holding countries are evolving and their impact on the domestic market is currently unknown.

Environmental Regulation

Our operations are governed by various federal, state and local environmental regulations. These regulations impose effluent and emission limitations, and requirements regarding management of water resources, air resources, toxic substances, solid waste, and emergency planning. We make application for environmental permits required under federal, state and local regulations and we have obtained or have filed for environmental permits as required in California, Florida, Georgia, Louisiana and Texas.

Remediation

The soil and ground water at our Mendota, California facility has been found to have elevated concentrations of salts. In the mid-1990s, we developed a prevention plan to install a clay cap on the area of concern and to treat the affected ground water. The prevention plan will be accomplished over a 20- to 30-year period, and we have recorded a $1.1 million liability for the present value of the estimated future costs to install the cap in accordance with the plan established with local authorities.

As a result of the cessation of sugar production at our facilities in Clewiston, Florida; Hamilton City, California; and Tracy, California, we expect that we will be required to incur costs to remediate certain production areas, including possibly the removal of material from former production settling ponds in accordance with waste discharge requirements. Additional expenditures also may be required to comply with future environmental protection standards, although the amount of any further expenditures cannot be fully estimated. We have recorded a liability of $1.4 million based on management’s estimates of the remediation costs likely to be incurred in connection with remediating these production areas, including closing the former settling ponds.

Research

We operate research and development centers in Sugar Land, Texas and Port Wentworth, Georgia where we conduct research relating to:

9

Table of Contents

In Port Wentworth, we operate a “pilot plant” where we have developed sugar products co-crystallized with other flavors such as honey. We market the co-crystallized specialty products produced at the pilot plant.

Competition

We compete with other cane sugar refiners and beet sugar processors and, in certain product applications, with producers of other nutritive and non-nutritive sweeteners, such as high-fructose corn syrup, aspartame, saccharin, sucralose and acesulfam-k. We also compete with foodservice companies and resellers in distributing bag sugar products. Our principal business is highly competitive, where the selling price and our ability to supply a customer’s needs in a timely fashion are important competitive considerations.

Employees

At November 30, 2003, we employed approximately 1,200 year-round employees. In addition, we employ approximately 300 seasonal employees over the course of a year in our California sugarbeet operations. Our Port Wentworth, Georgia refinery employs non-union labor. Substantially all of the employees at our other plants are covered by collective bargaining agreements which expire in March 2004 in California and February 2005 in Louisiana.

Disposed of Operations

Since we emerged from bankruptcy protection in August 2001, we have explored avenues to rationalize capacity, reduce cash flow volatility and to shift our focus to high-value functions such as marketing and distribution. To that end, we sold (1) our Michigan Sugar Company subsidiary and its four sugarbeet factories in February 2002 for gross proceeds of approximately $63 million, (2) our Worland, Wyoming sugarbeet factory in June 2002 for gross proceeds of approximately $3 million and (3) our Sidney, Montana, Torrington, Wyoming and Hereford, Texas sugarbeet facilities in October 2002 for gross proceeds of approximately $34 million. In connection with the sale of the four Michigan Sugar Company beet factories, we executed an agreement to market all refined sugar production from those factories through September 2011. In addition, we discontinued our raw cane sugar refinery operations in Sugar Land, Texas in December 2002 and the related packaging and distribution operations in June 2003. Since the beginning of fiscal 2002, we have also sold certain parcels of real estate and other assets for gross proceeds of approximately $25 million.

We sold our nutritional products business in April 2001 for gross proceeds of approximately $65 million and our disposable meal kits business in December 2001 for gross proceeds of approximately $28 million. On December 30, 2002, we sold the majority of our foodservice business (including all of the non-sugar products business) for gross proceeds of approximately $121 million. We retained a substantial portion of the sugar product sales to the foodservice market in this transaction and entered into a five-year agreement to supply the majority of the sugar requirements for the disposed of business. As a result of the sale, we have reflected our foodservice business as discontinued operations in our consolidated financial statements.

Previously, our foodservice business sold numerous products to our foodservice customers ranging from 50-pound bags of sugar to individual packets of sugar, salt, pepper, non-dairy creamer, sauces, seasonings, drink mixes and desserts. Our foodservice customers included restaurants, healthcare institutions, geriatric centers, schools and other institutions and distributors to these businesses.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports are available free of charge on our web site located at www.imperialsugar.com as soon as reasonably practicable after we file or furnish these reports electronically with the SEC.

10

Table of Contents

ITEM 2.    Properties

We own each of our cane sugar refineries and sugarbeet factories, our packaging and distribution facility in Tracy, California, and our corporate headquarters in Sugar Land, Texas. We operate a distribution facility in Kentucky, and contract for throughput and storage at a number of warehouses and distribution stations. We own additional acreage at our refineries and factories that is used primarily for settling ponds and as buffers from nearby communities or is leased as farm and pasture land. Substantially all of these properties are subject to liens securing our bank debt. We are actively marketing the real estate for our former Clewiston, Florida, Indianapolis, Indiana, and Hamilton City, California facilities and our Sugar Land, Texas refinery site. Please read “Item 1. Business—Operational Facilities.”

ITEM 3.    Legal Proceedings

We are a party to litigation and claims that are normal in the course of our operations. While the results of litigation and claims cannot be predicted with certainty, we believe the final outcome of such matters will not materially and adversely affect our consolidated results of operations, financial position or cash flows.

In accordance with our plan of reorganization, we are working to resolve the remaining disputed claims of our pre-petition trade creditors in the U.S. Bankruptcy Court for the District of Delaware. As we resolve disputed claims, we are distributing to the remaining pre-petition trade creditors cash or common stock as provided under the plan of reorganization.

In conjunction with the cessation of refining operations in Sugar Land in December 2002, the Company offered its affected bargaining unit employees severance aggregating $2.3 million, even though not required by the collective bargaining agreement, in return for certain changes to the agreement. The union leadership rejected the Company’s offer and in February 2003 filed a grievance alleging the Company owed unspecified severance and other benefits pursuant to the existing contract. The Company estimates that severance and other benefits calculated pursuant to the grievance would be between $4 million and $5 million. The Company believes that its interpretation of the contract is correct and that it will prevail in the arbitration of this grievance. The grievance arbitration hearing was conducted in August 2003 and the parties are currently awaiting the arbitrator’s decision.

In May 2003, sugarbeet growers from the Torrington, Wyoming area filed a complaint for unspecified damages alleging breach of contract, anticipatory repudiation and breach of an implied covenant of fair dealing in connection with the Company’s sale of a beet processing facility to a third party in 2002. In September 2003, the Wyoming Federal District Court granted the Company’s motion to dismiss all counts of the plaintiff’s complaint and overruled the growers motion for a rehearing. The growers have since filed an appeal of the Court’s decision. The Company believes these claims are without merit and that it will be successful in defending against these claims.

ITEM 4.    Submission of Matters to a Vote of Security Holders

None.

11

Table of Contents

EXECUTIVE OFFICERS OF THE REGISTRANT

The table below sets forth the name, age and position of our executive officers as of December 10, 2003. Our by-laws provide that each officer shall hold office until the officer’s successor is elected or appointed and qualified or until the earlier of the officer’s death, resignation or removal by the Board of Directors. In February 2003, we changed the titles of our Executive Vice Presidents to Senior Vice Presidents.

Mr. Peiser became President and Chief Executive Officer in April 2002. Prior to joining Imperial, Mr. Peiser served as Chairman and Chief Executive Officer of Vitality Beverages, Inc. of Tampa, Florida, a privately owned beverage company, from July 1999 to February 2002. Mr. Peiser was Chairman of the Board of CV Services International, Inc. from May 1998 to November 1999 and President and Chief Executive Officer of Western Pacific Airlines from December 1996 to February 1998.

Ms. Hastings joined the Company as Senior Vice President-Human Resources in June 2003. Prior to joining Imperial, she served as Senior Vice President-Human Resources for Big V Supermarkets/Shoprite, a privately held grocery chain and member of the Wakefern Food Cooperative, from 1999 to 2002. From 1997 to 1999, Ms. Hastings held domestic and international management roles as Director of Training and Special Projects with Hechinger Investment Company and with Wal Mart International-Mexico.

Mr. Henneberry joined Imperial as Executive Vice President in July 2002. Prior to joining Imperial, he was employed by Louis Dreyfus Corporation from 1984 to 2002. His more recent positions with Louis Dreyfus were: Vice President, Alcohol Division September 2001 to July 2002, Vice President, Louis Dreyfus eBusiness Ventures from May 2000 to March 2002 and Executive Vice President, Louis Dreyfus Sugar Company from April 1996 to April 2000.

Mr. Schwer became Executive Vice President in July 1999 and served as Managing Director from October 1995 to July 1999, and General Counsel since 1989. He also served as Senior Vice President from 1993 to 1995. Mr. Schwer joined Holly Sugar Corporation as Assistant General Counsel in 1988.

Mr. Smith joined Imperial as a Managing Director in September 1999 and became Executive Vice President in 2002. Prior to joining Imperial, Mr. Smith was Senior Vice President – Worldwide Product Supply at Gerber Products Company from 1995 to 1999.

Mr. Swank joined Imperial as Executive Vice President and Chief Financial Officer in September 2002. Prior to joining Imperial, he served as Executive Vice President, Chief Financial Officer and Corporate Secretary of Purina Mills, Inc., a leading branded consumer and agricultural feed manufacturer in the U.S. from April 1998 to February 2002. Before Purina Mills, Inc., Mr. Swank was the Chief Financial Officer of Koch Agriculture, a division of Koch Industries, Inc.

12

Table of Contents

Mr. Van Syckle joined Imperial as Executive Vice President in November 2002. Prior to joining Imperial, he served as head of Global Sales for Novartis Consumer Health from March 2001 to April 2002 and was Senior Vice President of Sales in North America from November 1997 to March 2001. Prior to the acquisition of Gerber by Novartis, he served as Vice President – Sales, Gerber Infant Care, North America.

Mr. Armero joined Imperial in June 2003 after nineteen years with Tate & Lyle PLC, a global sweetener and starch company. From 2000 to 2002, he was with Tate and Lyle’s Domino Sugar unit as Vice President – Sales and Marketing – Consumer and Foodservice and previously Vice President Specialty Ingredients. Mr. Armero held various other positions, including Commercial Director of Grupo Saenz (a unit of Tate & Lyle) in Mexico for three years and prior to that he was responsible for strategy and business development for Tate & Lyle North America, which included Domino and Western Sugar (in the U.S.), Redpath Sugar (in Canada) and Bundaberg Sugar (in Australia).

Mr. Mechler became Vice President—Accounting and Finance in February 2003 and was Vice President – Accounting from April 1997 to February 2003. Mr. Mechler had been Controller since joining Imperial in 1988.

Mr. Cordes joined Imperial as Deputy General Counsel in September 1997. He became Secretary of Imperial in July 1998. Prior to joining the Company, Mr. Cordes was in private law practice from 1995 to 1997.

Mr. Story became Treasurer in February 2003. He joined Savannah Foods & Industries, Inc. in 1987, which we acquired in 1997, and he has held a number of finance and accounting positions within both Savannah Foods & Industries and Imperial. He became corporate controller for Savannah in 1994 and director of planning and analysis for Imperial in 2002.

13

Table of Contents

PART II

ITEM 5.    Market for Registrant’s Common Equity and Related Shareholder Matters

Market Price of and Dividends on Common Equity and Related Stockholder Matters

Our common stock currently is listed on the NASDAQ National Market System under the symbol “IPSU.” As of December 10, 2003, there were approximately 2,000 shareholders of record of our common stock.

The following table contains information about the high and low sales price per share of our common stock for fiscal years 2003 and 2002. Shares of our common stock existing after our reorganization became effective did not begin trading on the OTC Bulletin Board until October 11, 2001. Information about OTC bid quotations represents prices between dealers, does not include retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions. On April 16, 2003, our common stock began trading on the NASDAQ National Market System; market prices since April 16, 2003 are closing prices as reported by NASDAQ.

On August 29, 2001, Imperial Sugar’s plan of reorganization became effective. Under the plan of reorganization, an aggregate of 10,000,000 shares of common stock were issued to persons who were common shareholders and creditors of Imperial Sugar immediately prior to effectiveness of the plan of reorganization. As of December 10, 2003, 325,364 shares of common stock were not yet distributed pursuant to the plan of reorganization pending finalization of certain claims. Pursuant to the plan of reorganization, warrants expiring in August 2008 to purchase an aggregate of 1,111,111 shares of Imperial Sugar’s common stock at $31.89 per share were issued to persons who were common shareholders of Imperial Sugar immediately prior to effectiveness of the plan of reorganization.

Dividend Policy

Our current credit agreement prohibits the payment of dividends, other than dividends payable solely in our capital stock, so long as any borrowings remain outstanding under the credit agreement. Unless we repay borrowings early, we will have borrowings outstanding under our credit facility until December 31, 2005. We currently do not anticipate paying dividends in the form of our capital stock. Any determination to declare or pay dividends out of funds legally available for that purpose after termination or expiration of the credit facility will be at the discretion of our board of directors and will depend on our future earnings, results of operations, financial condition, capital requirements, any future contractual restrictions and other factors our board of directors deems relevant.

14

Table of Contents

ITEM 6.    Selected Financial Data

The following selected consolidated financial information is derived from the consolidated financial statements of Imperial Sugar for periods both before and after emerging from bankruptcy protection in August 2001. This consolidated financial data should be read in conjunction with our consolidated financial statements including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report.

The consolidated statements of operations information for the periods ended September 30, 2003, 2002 and 2001 and the consolidated balance sheet information at September 30, 2003, 2002 and 2001 reflect our financial position and operating results after the effect of our plan of reorganization and the application of the principles of fresh start accounting in accordance with the provisions of Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Law” (“SOP 90-7”). Accordingly, such financial information is not comparable to our historical financial information before August 29, 2001.

Selected financial data for the last six periods is as follows (in thousands of dollars, except per share data):

15

Table of Contents

ITEM 7.    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.

Overview

We have significantly de-leveraged our balance sheet and improved our liquidity and our operating results since emerging from bankruptcy in August 2001. A key part of our strategy was the sale of certain operating units as well as the sale of surplus assets (for example, excess real estate and idle factory assets). During fiscal 2003, we sold the majority of our foodservice business and our Sidney, Montana, Torrington, Wyoming and Hereford, Texas sugarbeet factories, which we report as discontinued operations. In fiscal 2002, we sold our King Packaging operation, our Michigan sugarbeet operation and our Worland, Wyoming sugar beet factory. As a result of these asset sales and improvements in our operating results, our total debt has been reduced from $231 million upon our emergence from bankruptcy to $38 million at September 30, 2003.

The comparability of our financial results is affected by our filing for reorganization under chapter 11 of the Bankruptcy Code on January 16, 2001 and our emergence from bankruptcy. The consolidated balance sheet information at September 30, 2003 and 2002 and the consolidated statements of operations and cash flows for the years ended September 30, 2003 and 2002 and the period ended September 30, 2001 reflect results after the consummation of our plan of reorganization and the application of the principles of fresh start accounting in accordance with the provisions of SOP 90-7. Our company before and our company after adopting fresh start accounting are different reporting entities and our consolidated financial statements have not been prepared on the same basis.

We previously operated in two domestic business segments. With the sale of the majority of our foodservice operations, we now operate in a single segment, which produces and sells refined sugar and related products. Revenues, volumes, costs and expenses of discontinued operations have been segregated from continuing operations in the Consolidated Statements of Operations and in the following discussion and analysis of results of operations. Discontinued operations are presented in more detailed in Note 14 to the Consolidated Financial Statements.

Results of Operations

Industry Environment

Our results of operations substantially depend on market factors, including the demand for and price of refined sugar, the price of raw cane sugar, the quantity and quality of sugarbeets available to us and the availability and price of energy and other resources. These market factors are influenced by a variety of external forces that we are unable to predict, including the number of domestic acres contracted to grow sugar cane and sugarbeets, prices of competing crops, domestic health and eating trends, competing sweeteners, weather conditions and United States farm and trade policy. The domestic sugar industry is subject to substantial influence by legislative and regulatory actions. The current farm bill limits the importation of raw cane sugar and the marketing of refined beet and raw cane sugar, potentially affecting refined sugar sales prices and volumes as well as the supply and cost of raw material available to our cane refineries. Please read “Item 1. Business—Sugar Legislation and Other Market Factors” and “—Competition” and “—Overview of the Sugar Industry.”

Weather conditions during the growing, harvesting and processing seasons, the availability of acreage to contract for sugarbeets, as well as the effects of crop diseases and insects, may materially affect the quality and quantity of sugarbeets available for purchase as well as the costs of raw materials and processing. Please read “Item 1. Business—Raw Materials and Processing Requirements.”

16

Table of Contents

Fiscal Year Ended September 30, 2003

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 comprised 95.8% of our net revenues in fiscal 2003, up from 94.8% in 2002.

Sugar sales revenues increased slightly in fiscal 2003, primarily as a result of higher prices attributable to improved market conditions, as well as a higher mix of consumer products, which carry higher prices, due to rationalizing our industrial business after the closure of our Sugar Land, Texas refining operations in December 2002.

Volumes decreased 0.7% in fiscal 2003, primarily as a result of the Sugar Land refinery closure.

Our gross margin improved to 7.3% of sales in fiscal 2003 compared to 6.5% in 2002, primarily due to better spreads of sugar selling prices over raw material costs and our ability to reduce per unit manufacturing costs. Our cost of raw cane sugar, which is the raw material for 85% of our sugar sales, increased from $21.08 per cwt (on a raw market basis) in 2002 to $21.60 per cwt in 2003 or 2.4%. Sugarbeets are purchased from growers under contracts which relate the cost of beets with the average selling prices of sugar, effectively sharing a fixed percentage of the final sales price. Thus, sugarbeet cost increased in fiscal 2003 proportionate with the increased sales price. Sugar manufacturing is an energy intensive process, and while we utilize coal and fuel oil in a portion of our operations, the primary energy source for our plants is natural gas. We purchase approximately 5 million mmbtu annually and our average cost of natural gas, after hedging activity, increased to $3.82 per mmbtu in fiscal 2003 compared to $3.42 per mmbtu in 2002. We were able to mitigate the impact of the increase in natural gas costs by switching to less expensive alternate fuels where possible and by improving energy efficiency, resulting in a 4% increase in energy cost per unit of production in fiscal 2003. Energy costs have continued to rise, and, as of November 30, 2003, we have purchased natural gas futures for approximately 85% of our 2004 gas needs at an average cost of $5.06 per mmbtu. Other manufacturing costs decreased in fiscal 2003, primarily due to more efficient refinery operations following the cessation of refining in Sugar Land and to commensurate increases in volume at our remaining refineries.

Selling, general and administrative expense decreased 2.3% in fiscal 2003. We reduced staffing levels and undertook other cost reduction programs in response to the downsizing of our sales volumes and manufacturing activities. SG&A expenses include $0.8 million of severance and other termination costs in fiscal 2003, incurred as a result of these actions. Severance and other termination costs were $1.6 million in fiscal 2002. Additionally,

17

Table of Contents

we incurred $3.2 million of professional fees and other costs in 2003 in connection with our initiatives to rationalize businesses and restructure capital requirements, including trailing bankruptcy costs of $0.6 million, compared to $5.6 million of such costs in fiscal 2002. Partially offsetting these decreases were $4.1 million of higher medical and incentive compensation costs.

Depreciation and amortization costs increased $2.1 million in 2003 as a result of $4.0 million of additional depreciation in 2003 due to the determination to close the Sugar Land operations. This additional depreciation was partially offset by a reduction in depreciation as a result of the sales of the Michigan and Worland, Wyoming sugarbeet factories, which occurred during fiscal 2002.

Gains on asset sales decreased $21.1 million primarily because of the Michigan Sugar sale in 2002. Additionally, in Fiscal 2003 we recorded impairment and other charges totaling $4.3 million, primarily related to the Sugar Land closure and the adjustment of assets held for sale. Gains and losses on asset sales and impairment and other charges are described in more detail in Note 13 to the Consolidated Financial Statements.

As a result of the items discussed above, operating income declined from $23.5 million for the year ended September 30, 2002 to $8.0 million for the year ended September 30, 2003. Operating income includes charges (credits) which affect comparability between periods as follows:

18

Table of Contents

Interest expense decreased dramatically in fiscal 2003 as a result of the debt reductions from asset sales. Additionally, interest expense was reduced due to lower working capital financing needs resulting from improved operations, and lower interest rates, as a result of both the new financing agreement and lower market rates. Finally, as a result of our repaying the senior bank debt in December 2002, we received a refund of $2.1 million of interest which had been charged to expense in fiscal 2002. We reduced interest expense in fiscal 2003 by this refund. We wrote off $4.6 million of costs in connection with the repayment of our senior bank debt in December 2002.

Other income includes dividends, royalties and other distributions from cost basis investments and joint ventures. In September 2003, we received a liquidating distribution of $2.2 million from the de-mutualization of an insurance company we had purchased key-man life insurance policies from a number of years ago.

Detail of our provision for income taxes, including a reconciliation to the statutory federal rates, is provided in Note 8 to the Consolidated Financial Statements. We currently are not paying federal income taxes on our earnings as a result of net operating loss carryforwards from prior periods. However, we expect to begin paying cash taxes in fiscal 2004.

Income from discontinued operations includes the operating results and gains on sale of our foodservice and Rocky Mountain beet sugar operations, as detailed in Note 14 to the Consolidated Financial Statements.

Fiscal Year Ended September 30, 2002

During fiscal 2001 and 2002, we sold a number of business units in order to reduce our leverage. As a result, our consolidated sales, costs and expenses declined significantly during fiscal 2002. The table below shows the effects of these dispositions, and our pro forma net sales, costs of sales and gross margin (before depreciation) as if all these transactions had occurred on October 1, 2000 (in millions of dollars). The sales in first quarter fiscal 2003 of our foodservice business and our Rocky Mountain beet factories are reported as discontinued operations and have been excluded from the presentation below.

19

Table of Contents

Pro forma net sales decreased $22.8 million or 2.0% in fiscal 2002 as a result of lower sales volume relating primarily to the closure of two Northern California beet factories in fiscal 2001, which more than offset a 10% increase in sugar prices. Sugar prices in fiscal 2001 were depressed by a significant oversupply resulting from consecutive large domestic sugarbeet crops, which outstripped the USDA’s ability to maintain price supports at higher levels. Smaller domestic crops and certain USDA actions, including implementation of PIK programs, led to higher refined sugar prices in fiscal 2002.

Pro forma gross margin as a percent of sales increased from 2.7% in 2001 to 6.4% in fiscal 2002, principally as a result of improved margins on sugar products. Refined sugar prices increased more than raw cane sugar costs during fiscal 2002, improving margins. Sugarbeet costs increased proportionately with refined prices due to the provision for sharing in net sales prices in our contracts with the growers. Additionally, reductions in manufacturing costs, including lower energy costs, added to margin improvements.

Selling, general and administrative expense remained relatively flat in fiscal 2002 compared to the combined amount for the period ended August 29, 2001 and the period ended September 30, 2001, principally as a result of reductions in selling and administrative cost from sale of business units, as well as ongoing cost savings initiatives. Additionally, the 2001 amounts include $3.2 million of costs incurred in connection with, but prior to, filing a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. Trailing bankruptcy costs in fiscal 2002 were $1.6 million. Costs incurred during the pendency of the bankruptcy case in 2001 are reported separately as reorganization costs. Included in the fiscal 2002 amounts are $5.6 million of consulting and personnel related costs incurred in connection with the rationalization of our businesses and restructuring of our capital requirements. We experienced higher pension costs affecting both manufacturing cost and administrative expense in 2002, as a result of both fresh start accounting and investment losses in the pension trust accounts.

Depreciation and amortization decreased during fiscal 2002 due to the application of fresh start accounting and the disposition of assets.

Interest expense declined during 2002 as a result of lower market interest rates and lower borrowings levels resulting from both the sale of business units and the restructuring of our debt in bankruptcy. The margin of our borrowing rates over market interest rates under our senior bank credit agreement were increased under amendments executed during fiscal 2002.

Liquidity and Capital Resources

On December 31, 2002, we entered into a new credit facility with a group of lenders led by Bank of America and General Electric Capital Corporation, which replaced the term and working capital facilities we had in place when we emerged from bankruptcy. The initial funding under the new facility, together with the cash proceeds from the sale of the majority of our foodservice operations, was used to repay senior bank debt and repurchase accounts receivable sold under a securitization agreement, which was terminated. The new facility consists of a $35 million three-year term loan and a $140 million (subject to a borrowing base calculation) three-year revolving credit facility, including a $50 million sub-limit for letters of credit. At September 30, 2003, the balance of the term loan was $24.7 million and we had no outstanding borrowings under the revolving credit facility.

The facility is secured by substantially all of our assets and each of our subsidiaries is either a borrower or a guarantor under the facility. The agreement contains covenants limiting our ability to, among other things:

20

Table of Contents

In addition, the agreement requires that we comply with quarterly covenants, commencing September 30, 2003, as follows:

The facility also includes customary events of default, including a change of control. Borrowings will generally be available subject to a borrowing base and to the accuracy of all representations and warranties, including the absence of a material adverse change and the absence of any default or event of default. Although the facility has a final maturity date of December 31, 2005, we have classified debt under the new credit facility as current, pursuant to Emerging Issues Task Force Issue 95-22 as the agreement contains a subjective acceleration clause if in the opinion of the lenders, there is a material adverse effect, and provides the lenders direct access to our cash receipts. We are in compliance with all requirements of the agreement at September 30, 2003 and had unused borrowing capacity of $58 million under the revolving credit facility, after considering $31.3 million of outstanding letters of credit issued principally to secure insurance obligations.

Interest on the term loan accrues at LIBOR plus a margin that varies (based on utilization) between 2.75% and 3.50% or at a base rate (the Bank of America prime rate) plus a margin that varies from 0.25% to 1.00%. Interest on revolving credit borrowings accrues at LIBOR plus a margin of 2.25% to 3.00% or the base rate plus a margin of zero to 0.50%.

Our capital expenditures for the twelve months ended September 30, 2003 were $16 million, primarily for technology and productivity improvements. Capital expenditures in fiscal 2004 are expected to total approximately $19 million, including $4 million of technology investments (primarily an Enterprise Resource Planning system), with $5 million of expenditures related to normal replacement of factory equipment and $10 million related to productivity and packaging improvements.

Accumulated other comprehensive income includes a charge of $50 million to increase the minimum pension liability at September 30, 2003, primarily due to a lower discount rate and lower than expected returns on plan assets. In 2003, we froze the benefits under our salaried pension plan which, along with the reduction of participants resulting from the sale of our foodservice operations, was accounted for as a curtailment, decreasing the actuarial projected benefit obligation. This gain was offset against accumulated actuarial losses and no gain or loss was recognized in the consolidated statement of operations. Pension liabilities totaled $89 million, which along with a $25 million liability for postretirement and postemployment medical benefits and deferred compensation liabilities of $9 million, comprised the the substantial portion of the non-current deferred employee benefits and other liabilities at September 30, 2003.

Our contributions to company-sponsored pension plans totaled $3 million in fiscal 2003 and are expected to total approximately $3 million in fiscal 2004. Our independent actuary has estimated, assuming no change in current interest rates and assuming the plans’ assets grow at 8% per year, that our contributions will increase to $4 million in 2005 and $18 million in 2006, decreasing to $15 million in 2007 and $12 million in 2008.

21

Table of Contents

Our sugar production operations require seasonal working capital. Following the sale of our Rocky Mountain sugarbeet factories, which had substantial working capital requirements in the first half of our fiscal years, our seasonal requirements are expected to peak during our fourth fiscal quarter when inventory levels are high, and a substantial portion of the payments to raw material suppliers have been made. Management believes that the credit facility and cash flow from operations will provide sufficient capital to meet anticipated working capital and operational needs for at least the next twelve months.

In connection with the sales of DCB and the beet factories described above, we made customary representation and warranties, and undertook indemnification obligations with regard to certain of these representations and warranties. These indemnification obligations are subject to certain deductibles, caps and expiration dates and, in some cases, may be deducted from the related escrow balance. To date, no significant indemnity claims have been asserted and we do not believe any future claim, if asserted, would be material to our consolidated financial position, results of operations or cash flows.

Critical Accounting Policies and Estimates

The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may materially differ from these estimates and our estimates may change materially if our assumptions or conditions change and as additional information becomes available in future periods. Management has discussed the selection of critical accounting policies and estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed our disclosure relating to critical accounting policies and estimates in this Form 10-K.

Our significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements for fiscal 2003. The following is a summary of the more significant judgments and estimates used in the preparation of the consolidated financial statements.

Trade Promotions: Trade promotions are an important component of the sales and marketing of our products, and are critical to the support of our business. Trade promotion costs include amounts paid to encourage retailers to offer temporary price reduction for the sale of our products to consumers, reimbursement of customer paid advertising and amounts paid to obtain favorable display positions in retailers’ stores. Accruals for trade promotions are recorded at the time of sale of product to the customer based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a customer from amounts otherwise due to us or by direct payment to customers. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by our customers for amounts they consider due them. Allowances for trade promotions total $5.8 million at September 30, 2003. Final determination of trade promotion allowances may result in adjustments in future periods.

Allowance for Credit Losses: We extend trade credit to customers on substantially all of our sales and are subject to credit risk in the event of non-payment. We provide an allowance for estimated credit losses based on a review of prior loss history, a review of the trend in credit quality statistics about the receivable portfolio such as past due percentages, a review of individual credit extensions and other factors. As of September 30, 2003, the allowance for estimated credit losses, which is reported as a reduction of accounts receivable in the consolidated balance sheet, was $1.6 million. Actual credit losses in the future may vary from this estimate.

Defined Benefit and Medical Retirement Plans: The plan obligations and related assets of defined benefit and medical retirement plans are presented in Note 9 to the Consolidated Financial Statements. Plan assets, which consist primarily of marketable equity and debt instruments, are valued using market quotations. Plan obligations and the annual pension expense are determined by independent actuaries and are based in part on a

22

Table of Contents

number of assumptions we provide. Key assumptions in measuring the plan obligations include the discount rate, the rate of salary increases, the long-term healthcare cost trend rate, mortality rates and the estimated future return on plan assets. In determining the discount rate, we use the yield on Moody’s AA rated, fixed-income investments currently available with maturities corresponding to the anticipated timing of the benefit payments. Salary increase assumptions are based upon historical experience and anticipated future management actions. Asset returns are based upon the anticipated average rate of earnings expected on the invested funds of the plans based on the results of historical statistical studies performed by our advisors. At September 30 , 2003, the actuarial assumption for our plans were: discount rate of 6%; long-term rate of return on plan assets of 9% (we changed the assumed long-term rate of return on plan assets to 8% for fiscal 2004); assumed salary increases of 4% to 5%; and healthcare cost trend rate ranging from 11.5% to 5%. A 1% change in the discount rate would change our recorded retirement obligations by approximately $26 million, while a 1% change in the assumed rate of return on assets would change annual costs by $2 million. The impact of changes in healthcare trend rates is described in Note 9 to the Consolidated Financial Statements.

Sugarbeet Purchase Costs: We purchase sugarbeets under contracts with growers which provide for a purchase price which varies with the net selling price (as defined) of refined sugar during a specified contract year ending either February 28 or June 30. We accrue for the estimated remaining unpaid cost of sugarbeets at fiscal year end based upon the net selling price realized on a contract-to-date basis through September 30 for each contract. The final cost of sugarbeets cannot be determined until the end of each contract year. The total cost of sugarbeets purchased in fiscal 2003 was $83 million, and the liability for unpaid purchase price included in accounts payable was $16 million at September 30, 2003. A 1% change in the estimated net selling price would change the end of year liability by $1 million.

Interim LIFO Accruals: Our sugar inventories, which are accounted for on the LIFO basis of accounting, 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 cost of sugar sold from beginning of the year inventory. Changes in the estimated replacement cost are recognized in subsequent interim fiscal periods as they arise. These changes in estimates have no effect on results for the full fiscal year.

New Accounting Standards

The Financial Accounting Standards Board (“FASB”) has issued a number of new accounting standards discussed in Note 1 to the Consolidated Financial Statements. These standards, which became effective in fiscal 2003, establish additional accounting and disclosure requirements. Management has evaluated, as described in Note 1 to the Consolidated Financial Statements, the effects such requirements will have on our consolidated financial statements.

Effective October 2002, we adopted the provisions of Statement of Financial Accounting Standards No. 145 which, among other things, amends prior statements to require that gains and losses from the extinguishment of debt generally be classified within continuing operations.

Effective October 2002, we adopted Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” which requires that long-lived assets to be disposed of by sale, including discontinued operations be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. SFAS 144 also broadens the reporting requirements of discontinued operations to include all components of an entity that have operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. We reported the foodservice operations and our Rocky Mountain sugar beet factories, which were sold in fiscal 2003, as discontinued operations pursuant to SFAS 144.

Effective January 2003, we adopted Statement of Financial Accounting Standards No. 146 (“SFAS 146”), “Accounting for Costs Associated with Exit or Disposal Activities,” which replaced Emerging Issues Task Force

23

Table of Contents

(EITF) Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.” SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The adoption of SFAS 146 had no effect at the date of adoption.

Effective January 2003, we adopted Statement of Financial Accounting Standards No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation-Transition and Disclosure,” which amends Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation.” This Statement amends the disclosure requirements of Statement of Financial Accounting Standards No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. In addition, this statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation, which we have elected not to adopt at this time. We have provided the additional disclosures required by SFAS 148 in the Notes to the Consolidated Financial Statements.

In April 2003, the FASB issued Statement of Accounting Standards No.149 which provided for technical amendments of SFAS No.133 for derivative contracts entered into after June 30, 2003. The effect of applying this new standard was not material to our consolidated financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others” (“FIN 45”), which required recognition of a liability for the obligation undertaken upon issuing a guarantee. This liability would be recorded at the inception date of the guarantee and would be measured at fair value. The disclosure provisions of the statement are effective for the financial statements as of February 1, 2003. The liability recognition provisions apply prospectively to any guarantees issued or modified after December 31, 2002. The adoption did not have a material effect on our financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which requires the consolidation of variable interest entities, as defined. FIN 46 applies immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply to all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. This statement does not have a material effect on our financial position or results of operations as we do not have a variable interest entity.

ITEM 7A.    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. Gains and losses on raw sugar futures and options are matched to inventory purchases and charged or credited to cost of sales as such inventory is sold. Gains and losses on natural gas futures are matched to the natural gas purchases and charged to cost of sales in the period the related manufactured product is sold.

The information in the table below presents our domestic and world raw sugar futures positions outstanding as of September 30, 2003. Our world sugar option positions are not material to our consolidated financial position, results of operations or cash flows.

24

Table of Contents

The above information does not include either our physical inventory or our fixed price purchase commitments for raw sugar. At September 30, 2002, our domestic futures position was a net long position of 1.6 million cwt. at an average contract price of $21.23 and an average fair value price of $21.89. Our world futures position at September 30, 2002 was a net long position of 1.1 million cwt. at an average contract price of $5.95 and an average fair market value of $6.15.

The information in the table below presents our natural gas futures positions outstanding as of September 30, 2003.

At September 30, 2002, our natural gas futures position was a long position of 1.7 million mmbtu’s with an average contract price of $3.87 and an average fair value price of $3.94. Additionally, at September 30, 2002, we had long options for 3.1 million mmbtu’s at an average strike price of $3.62 and a market value of $2.2 million, and short option positions for 1.1 million mmbtu’s at an average strike price of $4.02 and a market value of $0.4 million.

We have material amounts of debt with interest rates that float with market rates, exposing us to interest rate risk. We have attempted to reduce this risk by entering into interest rate swap agreements for a portion of this floating rate debt. In connection with the refinancing of our senior bank debt, we terminated our interest rate swap agreements in December 2002 and entered into new interest rate swap agreements in fiscal 2003.

The tables below provide information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations at September 30, 2003 and 2002. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based on implied forward rates in the treasury yield curve at the reporting date.

25

Table of Contents

26

Table of Contents

ITEM 8.    Financial Statements and Supplementary Data.

See the index of financial statements and financial statement schedules under “Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.”

Unaudited quarterly financial data for the last eight fiscal quarters is as follows (in thousands of dollars, except per share amounts):

There were no cash dividends paid or declared during any of the last eight fiscal quarters.

27

Table of Contents

ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A.    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 September 30, 2003 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has been no change in our internal controls over financial reporting that occurred during the three months ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

28

Table of Contents

PART III

ITEM 10.    Directors and Executive Officers of the Registrant

ITEM 11.    Executive Compensation

ITEM 12.    Security Ownership of Certain Beneficial Owners and Management

ITEM 13.    Certain Relationships and Related Transactions

ITEM 14.    Principal Accountant Fees and Services

Information regarding Imperial Sugar’s executive officers is included in Part I of this report. The other information required by Items 10, 11, 12, 13 and 14 will be included in our definitive proxy statement for the 2004 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission within 120 days after September 30, 2003, and is incorporated in this report by reference.

PART IV

ITEM 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) Financial Statements.

(a)(2) Financial Statement Schedules.

All schedules and other statements for which provision is made in the applicable regulations of the SEC have been omitted because they are not required under the relevant instructions or are inapplicable.

(a)(3) Exhibits.

An asterisk indicates we have previously filed the exhibit with the SEC as indicted in the document description. We incorporate those previously filed exhibits in this report by reference.

29

Table of Contents