This discussion should be read in conjunction with information contained in the Consolidated Financial Statements and the notes thereto and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2008.

Overview

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

The Company experienced an explosion and fire on February 7, 2008, at its sugar refinery in Port Wentworth, Georgia, which represents approximately 60% of our refined sugar capacity. The refinery's bulk storage silos and virtually its entire packaging capabilities were destroyed, while the refining and warehousing operations received more limited damage. Demolition efforts at the site have been completed and the rebuilding effort has begun. The Company expects to begin bulk sugar production in the spring of 2009 with the complete restoration of packaging capabilities in the fall of 2009.

Results of Operations

Three Months Ended December 31, 2008 compared to Three Months Ended December 31, 2007

In the current quarter, we reported a loss from continuing operations of $0.6 million or $0.05 per diluted share, compared to income of $12.3 million or $1.04 per diluted share during the first fiscal quarter of the prior year. Lower sales volumes and higher costs due to the loss of the Port Wentworth refinery production capacity, offset partially by higher domestic sugar prices were the primary drivers of lower profitability as compared to the prior year. Refinery explosion related charges (as described in Note 2 to the Consolidated Financial Statements) resulted in net pre-tax charges of $3.3 million in the quarter ended December 31, 2008. We discuss these and other factors in more detail below. These results do not include any recoveries for lost income under the business interruption portion of the Company's property insurance policy.

Sugar sales comprise approximately 97% of our net sales. Sugar sales volumes and prices were:

                                      Three Months Ended December 31,
                                      2008                    2007 (1)
                              Volume        Price       Volume        Price
                             (000 cwt)    (per cwt)    (000 cwt)    (per cwt)
            Sugar Sales:
            Industrial           1,190   $     30.36       2,826   $     29.86
            Consumer             1,170         38.34       2,273         35.78
            Distributor            637         34.19       1,110         31.19

            Domestic Sales       2,996         34.29       6,209         32.26
            World Sales            120         24.09         389         21.14

            Sugar Sales          3,117   $     33.90       6,598   $     31.61

(1) The Company redefined its foodservice sales channel and began reporting sales as the distributor channel in fiscal 2009. The effect of this change, in general, was to move certain customers from the industrial channel to the distributor channel. Fiscal 2008 sales volumes and prices have been restated accordingly.

Net sales decreased 49.6% for the three months ended December 31, 2008, compared to the same period in the prior year. Domestic sugar volumes decreased 51.7% for the quarter primarily due to the lost production volume from the Port Wentworth refinery partially offset by increased production in our Gramercy refinery and sugar purchased from other producers. Domestic prices increased 6.3% for the quarter. Sugar produced from the domestic sugar beet crop harvested in the fall of 2008 is forecasted by the USDA to be 10.5% smaller than the prior year. This reduction in available supply has led to higher refined prices. For the three months ended December 31, 2008, gross margin as a percentage of sales decreased to (2.7%) compared to 6.6% in the prior year quarter. The decline in gross margin percentage is primarily due to freight, manufacturing and raw sugar cost increases in excess of sales price increases.

A significant portion of industrial channel sales are made under fixed price forward sales contracts for generally up to a year, many of which are on a calendar year basis. As a result, industrial sales prices tend to lag market trends. The Company continues to fulfill lower-priced contracts which existed at the time of the Port Wentworth explosion in February 2008. The weighting of these contracts in the mix of industrial sales should begin to diminish in the second quarter of fiscal 2009 and average realized prices for the industrial channel are expected to increase.

Our cost of domestic raw cane sugar increased from $20.87 per cwt (on a raw market basis) for the prior year quarter to $21.68 per cwt for the quarter ended December 31, 2008. The higher domestic raw cane sugar cost decreased our gross margin percentage by 1.6% for the three months ended December 31, 2008 compared to the same quarter last year. We expect that domestic raw sugar costs for the balance of FY09 will continue at levels higher than the prior year. Lower margins on world sugar sales negatively impacted gross margin percentage by 0.6% for the quarter.

Energy costs per cwt were higher than the prior year due to a negative mix of energy sources caused by the curtailment of sugar production in Port Wentworth, as well as higher natural gas prices. Higher energy costs reduced gross margin as a percent of sales by 2.6%. The Port Wentworth refinery utilizes lower priced coal as its primary energy source while the Gramercy refinery exclusively uses natural gas. As reflected in the table below, natural gas provided approximately 55% of the energy for our plants in the first quarter of fiscal 2008, while the remainder of our energy usage was comprised of coal and fuel oil. Natural gas usage increased to 100% of the total energy usage in the first quarter of fiscal 2009 as a result of the Port Wentworth refinery not operating. Our average NYMEX basis cost of natural gas after applying gains and losses from hedging activity increased to $9.86 per mmbtu in the current year as compared to $8.10 last year.

                                      Quarter Ended December 31,
                                  2008                          2007
                         Volume          Price         Volume          Price
                       (000 MMBTU)    (per MMBTU)    (000 MMBTU)    (per MMBTU)
         Natural Gas           572   $        9.86           627   $        7.65
         Coal                   -               -            512            3.65
         Fuel Oil               -               -              1            7.40

         Total                 572   $        9.86         1,140   $        5.85

We have purchased or hedged approximately 71% of our expected natural gas requirements for fiscal 2009 at prices higher than fiscal 2008 levels. If the balance of our anticipated natural gas purchases were priced in the futures market on January 28, 2009, our natural gas costs would be $2.2 million lower than fiscal 2008.

Gross margin was significantly impacted by higher transportation costs. Increased distances on deliveries to customer locations caused by servicing Port Wentworth-based customers, as well as higher fuel and rail fleet costs, have had an adverse effect on our transportation costs reducing gross margin percentage by 3.8% for the quarter. Increased distances to customers accounted for 1.9% of the gross margin reduction. A shift in delivery mix with fewer customer pickups and increased deliveries from outside warehouses accounted for 1.1% of the gross margin reduction and higher fuel and freight rates drove the remaining 0.8% gross margin change.

Manufacturing costs increased over the first quarter of fiscal 2008 due to start-up costs at the Port Wentworth refinery as limited liquid sugar production began in early November 2008. The Port Wentworth refinery attempted to produce liquid sugar without the normal crystallization facility, but was unable to produce liquid sugar at costs which were commercially acceptable. Liquid sugar production ceased in late January 2009 and is not expected to resume until the bulk sugar production starts in the spring of 2009. Continuing fixed costs in Port Wentworth, as well as higher labor and maintenance costs in Gramercy also increased manufacturing costs over the first quarter of last year. Gross margin percentage for the quarter was reduced by 3.7% as a result of these increased costs.

Selling, general and administrative expense increased $1.0 million for the quarter ended December 31, 2008 compared to the same period in the prior year primarily due to increased legal costs of $0.8 million and medical costs of $0.8 million. Lower advertising and compensation costs of $0.4 million each respectively, partially offset those higher costs.

We incurred $14.9 million of costs related to the refinery explosion and have accrued insurance recoveries totaling $11.7 million, resulting in a net charge of $3.3 million to operations. Details of the costs incurred and the status of insurance recoveries is provided in Note 2 to the Consolidated Financial Statements.

The Company along with other sugar industry participants was party to a pending lawsuit with McNeil Nutritional, which was settled in November 2008. The Company received $16.1 million in connection with the settlement which was recorded as a gain on litigation settlement in the quarter ended December 31, 2008.

As a result of the foregoing, operating loss was $1.7 million in the first fiscal quarter compared to operating income of $3.6 million in the first fiscal quarter of the prior year.

Other income, which includes equity investment earnings and distributions from cost basis investments, decreased $11.3 million in the three-month period ended December 31, 2008 compared to the same period in the prior year. In October 2007, the Company received an $11.2 million cash distribution from its long-term limited partnership investment as a result of the partnership selling its principal asset, an interest in a fuel oil terminal in the Port of Houston. In November 2007, the Company formed a 50/50 joint venture with a Monterrey, Mexico based sugar producer, which markets sugar products in Mexico and facilitates cross-border transactions (to the extent such transactions are economically viable) under the provisions of NAFTA. We own a 50% share of Wholesome Sweeteners, Inc, an organic and fair trade sweetener company. Other income included the following (in thousands of dollars):

                                                               Quarter Ended December 31,
                                                                2008               2007
Equity Earnings in investment in
Mexican marketing Joint Venture                             $         106     $           186
Wholesome Sweeteners, Inc.                                            327                 321
Distributions from cost basis fuel terminal partnership               147              11,423
Gain on sale of securities                                            388                 173
Other                                                                  48                 166

Total                                                       $       1,016     $        12,269

We have estimated a combined federal and state income tax rate of 28.3% for the three months ended December 31, 2008 compared to 25.0% in the same period last year. The increase in the effective tax rate is primarily attributable to tax-free interest income in fiscal 2008, as well as the impact of tax uncertainties.

Income from discontinued operations is a result of the resolution of pre-disposal contingencies.

Liquidity and Capital Resources

We are currently rebuilding the portion of the Port Wentworth refinery damaged or destroyed in the industrial accident in February 2008. The Company has property damage insurance, which provides replacement cost coverage for affected facilities. The policy also provides for business interruption insurance based on lost income and certain costs incurred during a reasonable period of reconstruction. The combined policy coverage for property damage and business interruption is subject to deductibles and a number of exclusions and sub-limits, as well as an overall policy limit of $350 million per event. Based on engineering reports and construction estimates received to date, the Company believes its insurance coverage is adequate to provide for the replacement of the damaged facilities at the Port Wentworth refinery, estimated in the range of $200 million to $220 million. Through December 31, 2008, we have received advances on our property insurance claims totaling $110 million.

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

At December 31, 2008, the Company had cash and cash equivalents of $35.1 million. Additionally, the Company has a revolving credit agreement with Bank of America, N.A. (the "Revolver") which provides for up to $100 million (subject to a borrowing base) of senior secured revolving credit loans. At December 31, 2008, we had no outstanding borrowings and had the capacity under the borrowing base formula to borrow $46.7 million against inventory and receivables, after deducting outstanding letters of credit totaling $5.9 million. The Company borrowed $30 million under the Revolver in January, 2009, to provide quick standby liquidity and had in excess of $50 million in cash and cash equivalents including proceeds of the borrowing, at January 31, 2009.

We believe that our available liquidity and capital resources including insurance recoveries, cash balances and existing revolving credit agreement, are sufficient to meet our operating and capital needs, including estimated reconstruction costs and ongoing capital improvements, during the period required to restore production capabilities at the Port Wentworth refinery. As a result, the Company does not anticipate the need to access the capital markets which are in an uncertain state at this time.

The Revolver, which expires December 31, 2011, is secured by substantially all of our current assets, certain investments and certain property, plant and equipment. Each of our subsidiaries is either a borrower or a guarantor under the facility. Interest on borrowings under the Revolver is at LIBOR plus a margin that varies (with liquidity, as defined) from 1.00% to 1.75%, or the base rate (Bank of America prime rate) plus a margin of negative 0.25% to positive 0.25%.

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

• incur other indebtedness;

• incur other liens;

• undergo any fundamental changes;

• engage in transactions with affiliates;

• enter into sale and leaseback transactions;

• change our fiscal periods;

• enter into mergers or consolidations;

• sell assets; and

• prepay other debt.

In addition, in the event that our quarterly average total liquidity (defined as the average of the borrowing base, less average actual borrowings and letters of credit) falls below $20 million, the Revolver requires that we comply with a quarterly covenant which establishes a minimum level of earnings before interest, taxes, depreciation and amortization, as defined (EBITDA). The Revolver limits our ability to pay dividends or repurchase stock if our average total liquidity for the four fiscal quarters then most recently ended, after adjustment on a pro forma basis for such transaction, is less than $20 million. Average total liquidity for the quarter ended December 31, 2008 was $94 million.

The Revolver 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, 2011, we classify debt under the Revolver as current, pursuant to Emerging Issues Task Force Issue 95-22 as the agreement contains a subjective acceleration clause if in the opinion of the lenders there is a material adverse effect, and provides the lenders direct access to our cash receipts.

Our capital expenditures for the three months ended December 31, 2008 were $16.5 million including $14.2 million relating to the Port Wentworth rebuild. To-date we have expended $22.5 million on the Port Wentworth rebuild project. Capital expenditures in fiscal 2009, excluding the Port Wentworth rebuild, are expected to total between $12 million and $22 million, related primarily to normal equipment replacement, product quality and safety improvements.

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

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimate methodologies since the filing of our Annual Report on Form 10-K for the year ended September 30, 2008.