##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the period ended June 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                 to                .
 Commission file number 333-84486
 Land OLakes, Inc.
 (Exact name of Registrant as Specified in Its Charter)
 Minnesota(State or Other Jurisdiction of 
Incorporation or Organization)
    
    41-0365145(I.R.S. Employer
Identification No.)4001 Lexington Avenue North 
Arden Hills, Minnesota(Address of Principal Executive Offices)
    
    55112(Zip Code)
 (651) 481-2222  (Registrants Telephone Number, Including Area Code)
 o þ
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
    www.landolakesinc.com.




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##### 



INDEX
 PagePart I. Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Consolidated Balance Sheets as of June 30, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008
(unaudited)
    
    
    4Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008 (unaudited)
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    30Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    47Item 4. Controls and Procedures
    
    
    48Part II Other Information
    
    
    49Item 1. Legal Proceedings
    
    
    49Item 1A. Risk Factors
    
    
    50Item 5. Other Information
    
    
    51Item 6. Exhibits
    
    
    51SIGNATURES
    
    
    52EX-10.4EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Part I. Financial Information
 
 Item 1.
    
    Financial Statements
 LAND OLAKES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)($ in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    35,577
    
    
    $
    30,820Receivables, net
    
    
    1,319,506
    
    
    
    1,104,261Inventories
    
    
    1,128,822
    
    
    
    1,083,978Prepaid assets
    
    
    46,623
    
    
    
    1,101,005Other current assets
    
    
    78,596
    
    
    
    123,504Total current assets
    
    
    2,609,124
    
    
    
    3,443,568Investments
    
    
    311,095
    
    
    
    314,487Property, plant and equipment, net
    
    
    679,708
    
    
    
    658,261Goodwill, net
    
    
    276,658
    
    
    
    277,176Other intangibles, net
    
    
    117,701
    
    
    
    120,982Other assets
    
    
    168,172
    
    
    
    166,838Total assets
    
    $
    4,162,458
    
    
    $
    4,981,312LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    432,323
    
    
    $
    409,370Current portion of long-term debt
    
    
    2,539
    
    
    
    2,864Accounts payable
    
    
    1,095,963
    
    
    
    1,175,995Customer advances
    
    
    130,809
    
    
    
    1,045,705Accrued liabilities
    
    
    448,667
    
    
    
    423,494Patronage refunds and other member equities payable
    
    
    39,027
    
    
    
    37,751Total current liabilities
    
    
    2,149,328
    
    
    
    3,095,179Long-term debt
    
    
    532,736
    
    
    
    531,955Employee benefits and other liabilities
    
    
    382,469
    
    
    
    358,404Commitments and contingencies (Note 17)Equities:Capital stock
    
    
    1,587
    
    
    
    1,611Member equities
    
    
    992,903
    
    
    
    947,141Accumulated other comprehensive loss
    
    
    (151,609
    )
    
    
    (150,277
    )Retained earnings
    
    
    240,914
    
    
    
    178,377Total Land OLakes, Inc. equities
    
    
    1,083,795
    
    
    
    976,852Noncontrolling interests
    
    
    14,130
    
    
    
    18,922Total equities
    
    
    1,097,925
    
    
    
    995,774Total liabilities and equities
    
    $
    4,162,458
    
    
    $
    4,981,312
  3




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LAND OLAKES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008($ in thousands)Net sales
    
    $
    2,814,499
    
    
    $
    3,327,865
    
    
    $
    5,761,813
    
    
    $
    6,584,864Cost of sales
    
    
    2,535,384
    
    
    
    3,016,377
    
    
    
    5,222,654
    
    
    
    6,022,669Gross profit
    
    
    279,115
    
    
    
    311,488
    
    
    
    539,159
    
    
    
    562,195Selling, general and administrative
    
    
    165,788
    
    
    
    190,109
    
    
    
    329,061
    
    
    
    357,688Restructuring and impairment
    
    
    8,936
    
    
    
    (12
    )
    
    
    9,233
    
    
    
    41Earnings from operations
    
    
    104,391
    
    
    
    121,391
    
    
    
    200,865
    
    
    
    204,466Interest expense, net
    
    
    12,640
    
    
    
    15,587
    
    
    
    25,838
    
    
    
    32,722Other (income) expense, net
    
    
    (4,341
    )
    
    
    
    
    
    
    (6,728
    )
    
    
    12Equity in earnings of affiliated companies
    
    
    (10,665
    )
    
    
    (20,456
    )
    
    
    (3,501
    )
    
    
    (24,558
    )Earnings before income taxes
    
    
    106,757
    
    
    
    126,260
    
    
    
    185,256
    
    
    
    196,290Income tax expense
    
    
    25,473
    
    
    
    13,716
    
    
    
    24,248
    
    
    
    20,638Net earnings
    
    
    81,284
    
    
    
    112,544
    
    
    
    161,008
    
    
    
    175,652Less: net (loss) earnings attributable to noncontrolling interests
    
    
    (173
    )
    
    
    9,759
    
    
    
    (3,139
    )
    
    
    11,584Net earnings attributable to Land OLakes, Inc.
    
    $
    81,457
    
    
    $
    102,785
    
    
    $
    164,147
    
    
    $
    164,068Applied to:Member equitiesAllocated patronage
    
    $
    33,833
    
    
    $
    80,296
    
    
    $
    111,506
    
    
    $
    128,137Deferred equities
    
    
    (19
    )
    
    
    7,535
    
    
    
    (13,178
    )
    
    
    2,57233,814
    
    
    
    87,831
    
    
    
    98,328
    
    
    
    130,709Retained earnings
    
    
    47,643
    
    
    
    14,954
    
    
    
    65,819
    
    
    
    33,359$
    81,457
    
    
    $
    102,785
    
    
    $
    164,147
    
    
    $
    164,068
  4




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LAND OLAKES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 For the Six Months EndedJune 30,2009
    
    
    2008($ in thousands)Cash flows from operating activities:Net earnings attributable to Land OLakes, Inc.
    
    $
    164,147
    
    
    $
    164,068Adjustments to reconcile net earnings attributable to Land OLakes, Inc. to net
cash provided by operating activities:Depreciation and amortization
    
    
    43,008
    
    
    
    44,114Amortization of deferred financing costs
    
    
    1,180
    
    
    
    1,052Bad debt expense
    
    
    1,604
    
    
    
    1,899Proceeds from patronage revolvement received
    
    
    229
    
    
    
    1,616Non-cash patronage income
    
    
    (555
    )
    
    
    (3,183
    )Deferred income tax expense (benefit)
    
    
    20,856
    
    
    
    (25,418
    )Increase in other assets
    
    
    (1,747
    )
    
    
    (1,496
    )Increase in other liabilities
    
    
    14,911
    
    
    
    8,314Restructuring and impairment
    
    
    9,233
    
    
    
    41Loss on divestiture of a business
    
    
    407
    
    
    
    (Gain) loss on sale of investments
    
    
    (6,958
    )
    
    
    12Gain on foreign currency exchange contracts on sale of investment
    
    
    (177
    )
    
    
    Equity in earnings of affiliated companies
    
    
    (3,501
    )
    
    
    (24,558
    )Dividends from investments in affiliated companies
    
    
    7,630
    
    
    
    10,072Net (loss) earnings attributable to noncontrolling interests
    
    
    (3,139
    )
    
    
    11,584Other
    
    
    (3,506
    )
    
    
    (1,155
    )Changes in current assets and liabilities, net of acquisitions and divestitures:Receivables
    
    
    (232,784
    )
    
    
    (243,378
    )Inventories
    
    
    (45,954
    )
    
    
    (135,059
    )Prepaids and other current assets
    
    
    1,078,869
    
    
    
    761,101Accounts payable
    
    
    (79,183
    )
    
    
    401,144Customer advances
    
    
    (914,896
    )
    
    
    (814,098
    )Accrued liabilities
    
    
    37,569
    
    
    
    169,506Net cash provided by operating activities
    
    
    87,243
    
    
    
    326,178Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (73,374
    )
    
    
    (69,598
    )Acquisitions, net of cash acquired
    
    
    
    
    
    
    (9,040
    )Investments in affiliates
    
    
    (1,665
    )
    
    
    (50,860
    )Distributions from investments in affiliated companies
    
    
    
    
    
    
    7,865Proceeds from divestiture of a business
    
    
    2,698
    
    
    
    Proceeds from sale of investments
    
    
    16,965
    
    
    
    49Proceeds from foreign currency exchange contracts on sale of investment
    
    
    518
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    1,211
    
    
    
    3,105Insurance proceeds for replacement assets
    
    
    6,538
    
    
    
    Change in notes receivable
    
    
    (925
    )
    
    
    (11,816
    )Other
    
    
    249
    
    
    
    (651
    )Net cash used by investing activities
    
    
    (47,785
    )
    
    
    (130,946
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    22,953
    
    
    
    (64,778
    )Proceeds from issuance of long-term debt
    
    
    1,435
    
    
    
    496Principal payments on long-term debt and capital lease obligations
    
    
    (1,291
    )
    
    
    (13,324
    )Payments for redemption of member equities
    
    
    (54,607
    )
    
    
    (94,032
    )Payments for debt issuance costs
    
    
    (1,486
    )
    
    
    Other
    
    
    (1,705
    )
    
    
    (96
    )Net cash used by financing activities
    
    
    (34,701
    )
    
    
    (171,734
    )Net increase in cash and cash equivalents
    
    
    4,757
    
    
    
    23,498Cash and cash equivalents at beginning of the period
    
    
    30,820
    
    
    
    116,839Cash and cash equivalents at end of the period
    
    $
    35,577
    
    
    $
    140,337Supplementary Disclosure of Cash Flow InformationCash paid (received) during periods for:Interest
    
    $
    28,411
    
    
    $
    35,673Income taxes
    
    
    (14,487
    )
    
    
    35,885
  5




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LAND OLAKES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 ($ in thousands in tables)
 (Unaudited)
 1. Summary of Significant Accounting Policies
   Recent Accounting Pronouncements
      6




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7




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Accounting Estimates
  2. Business Combinations and Pending Business Combinations
 2009 Acquisitions and Pending Acquisitions
   2008 Acquisitions
  3. Receivables
  June 30,
    
    
    December 31,2009
    
    
    2008Trade accounts
    
    $
    824,781
    
    
    $
    846,794Notes and contracts
    
    
    91,620
    
    
    
    89,736Vendor rebates
    
    
    325,757
    
    
    
    57,007Other
    
    
    97,003
    
    
    
    130,5911,339,161
    
    
    
    1,124,128Less allowance for doubtful accounts
    
    
    (19,655
    )
    
    
    (19,867
    )Total receivables, net
    
    $
    1,319,506
    
    
    $
    1,104,261
  8




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##### Table of Contents



4. Inventories
  June 30,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    177,786
    
    
    $
    217,087Work in process
    
    
    1,632
    
    
    
    1,639Finished goods
    
    
    949,404
    
    
    
    865,252Total inventories
    
    $
    1,128,822
    
    
    $
    1,083,978
 5. Investments
  June 30,
    
    
    December 31,2009
    
    
    2008Agriliance LLC
    
    $
    169,032
    
    
    $
    176,191Advanced Food Products, LLC
    
    
    32,131
    
    
    
    33,870Ag Processing Inc.
    
    
    31,242
    
    
    
    31,858Delta Egg Farm, LLC
    
    
    12,000
    
    
    
    11,464Melrose Dairy Proteins, LLC
    
    
    9,401
    
    
    
    6,397Universal Cooperatives, Inc.
    
    
    7,873
    
    
    
    7,877CoBank, ACB
    
    
    5,345
    
    
    
    4,892Pro-Pet, LLC
    
    
    3,602
    
    
    
    2,123Wilco-Winfield, LLC
    
    
    3,209
    
    
    
    3,131Prairie Farms Dairy, Inc.
    
    
    2,908
    
    
    
    2,954Other  principally cooperatives and joint ventures
    
    
    34,352
    
    
    
    33,730Total investments
    
    $
    311,095
    
    
    $
    314,487
  9




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6. Goodwill and Other Intangible Assets
 Goodwill
  June 30,
    
    
    December 31,2009
    
    
    2008Feed
    
    $
    126,566
    
    
    $
    126,960Dairy Foods
    
    
    68,525
    
    
    
    68,525Agronomy
    
    
    50,663
    
    
    
    50,663Layers
    
    
    20,222
    
    
    
    20,346Seed
    
    
    10,682
    
    
    
    10,682Total goodwill
    
    $
    276,658
    
    
    $
    277,176
  Other Intangible Assets
  June 30,
    
    
    December 31,2009
    
    
    2008Amortized other intangible assets:Dealer networks and customer relationships, less accumulated amortization of $5,277
and $4,045, respectively
    
    $
    49,245
    
    
    $
    50,478Patents, less accumulated amortization of $8,994 and $8,414, respectively
    
    
    7,717
    
    
    
    8,297Trademarks, less accumulated amortization of $3,016 and $2,668, respectively
    
    
    4,599
    
    
    
    4,946Other intangible assets, less accumulated amortization of $4,019 and $4,412, respectively
    
    
    4,515
    
    
    
    5,636Total amortized other intangible assets
    
    
    66,076
    
    
    
    69,357Total non-amortized other intangible assets  trademarks and license agreements
    
    
    51,625
    
    
    
    51,625Total other intangible assets
    
    $
    117,701
    
    
    $
    120,982
  7. Accrued Liabilities
  June 30,
    
    
    December 31,2009
    
    
    2008Marketing programs and consumer incentives
    
    $
    216,879
    
    
    $
    70,209Employee compensation and benefits
    
    
    85,673
    
    
    
    141,376Unrealized hedging losses and deferred option premiums received
    
    
    37,509
    
    
    
    99,964Other
    
    
    108,606
    
    
    
    111,945Total accrued liabilities
    
    $
    448,667
    
    
    $
    423,494
  8. Debt Obligations
 Notes and Short-term Obligations
   10




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Long-term Debt
  June 30,
    
    
    December 31,2009
    
    
    2008Senior unsecured notes  due 2011 (8.75%)
    
    $
    174,002
    
    
    $
    174,002Senior secured notes  due 2010 (9.00%)
    
    
    149,700
    
    
    
    149,700Capital Securities of Trust Subsidiary  due 2028 (7.45%)
    
    
    190,700
    
    
    
    190,700MoArk, LLC debt  due 2009 through 2023 (8.82% weighted average)
    
    
    14,936
    
    
    
    15,449MoArk, LLC capital lease obligations (6.00% to 8.25%)
    
    
    4,096
    
    
    
    4,668Other debt
    
    
    1,841
    
    
    
    300535,275
    
    
    
    534,819Less current portion
    
    
    (2,539
    )
    
    
    (2,864
    )Total long-term debt
    
    $
    532,736
    
    
    $
    531,955
  11




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9. Other Comprehensive Income
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net earnings attributable to Land OLakes, Inc.
    
    $
    81,457
    
    
    $
    102,785
    
    
    $
    164,147
    
    
    $
    164,068Pension and other postretirement adjustments, net
of income taxes of $0, $142, $813 and $81,
respectively
    
    
    
    
    
    
    (230
    )
    
    
    (1,312
    )
    
    
    (131
    )Foreign currency translation adjustment, net of
income taxes of $3, $(1,661), $11 and $279,
respectively
    
    
    (5
    )
    
    
    (3,398
    )
    
    
    (17
    )
    
    
    (450
    )Unrealized gains (loss) on
available-for-sale-investment securities, net of
income taxes of $(4), $(1), $1 and $(62),
respectively
    
    
    13
    
    
    
    2
    
    
    
    (4
    )
    
    
    (253
    )Less: Other comprehensive (earnings) loss
attributable to noncontrolling interests
    
    
    (7
    )
    
    
    (1
    )
    
    
    2
    
    
    
    78Total comprehensive income
    
    $
    81,458
    
    
    $
    99,158
    
    
    $
    162,816
    
    
    $
    163,312
 10. Derivative Instruments
     Three Months
    
    Six MonthsEnded
    
    EndedJune 30,
    
    June 30,Derivative Instrument
    
    Location
    
    2009
    
    2009Commodity derivatives
    
    Cost of sales
    
    $
    (43,868
    )
    
    $
    (41,317
    )Commodity derivatives
    
    Selling, general and
administrative
    
    
    (777
    )
    
    
    (1,141
    )Foreign currency
exchange contracts
    
    Cost of sales
    
    
    (931
    )
    
    
    (957
    )Foreign currency
exchange contracts
    
    Other (income) expense, net
    
    
    
    
    
    
    341
 12




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LiabilityAsset Derivatives(a)
    
    
    Derivatives(a)June 30,
    
    
    June 30,Derivative Instrument
    
    2009
    
    
    2009Commodity derivatives
    
    $
    37,037
    
    
    $
    29,818Foreign currency exchange contracts
    
    
    92
    
    
    
    60Total
    
    $
    37,129
    
    
    $
    29,878
 
 (a)
    
    Asset derivative instruments are recorded in
other current assets and liability derivative
instruments are recorded in accrued liabilities in the
consolidated balance sheet.  11. Fair Value Measurements
  June 30, 2009
    
    December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial Derivatives:Commodity derivative assets
    
    $
    37,037
    
    
    $
    37,037
    
    
    $
    50,053
    
    
    $
    50,053Commodity derivative liabilities
    
    
    29,818
    
    
    
    29,818
    
    
    
    85,292
    
    
    
    85,292Foreign currency exchange contract assets
    
    
    92
    
    
    
    92
    
    
    
    341
    
    
    
    341Foreign currency exchange contract liabilities
    
    
    60
    
    
    
    60
    
    
    
    925
    
    
    
    925Loans receivable
    
    
    143,716
    
    
    
    144,398
    
    
    
    137,869
    
    
    
    140,762Available-for-sale securities
    
    
    42
    
    
    
    42
    
    
    
    47
    
    
    
    47Debt:Senior unsecured notes, due 2011
    
    
    174,002
    
    
    
    175,392
    
    
    
    174,002
    
    
    
    161,410Senior secured notes, due 2010
    
    
    149,700
    
    
    
    160,365
    
    
    
    149,700
    
    
    
    150,999Capital Securities of Trust Subsidiary, due 2028
    
    
    190,700
    
    
    
    136,208
    
    
    
    190,700
    
    
    
    107,580MoArk fixed rate debt
    
    
    19,032
    
    
    
    18,438
    
    
    
    20,117
    
    
    
    17,548
     13




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##### Table of Contents



Level 1:
 Level 2:
 Level 3:
  Fair Value Measurements at June 30, 2009 Using:SignificantQuoted prices
    
    other
    
    SignificantTotal carrying
    
    in active
    
    observable
    
    unobservablevalue at
    
    markets
    
    inputs
    
    inputsJune 30, 2009(a)
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Commodity derivative assets
    
    $
    37,037
    
    
    $
    35,986
    
    
    $
    1,051
    
    
    $
    Commodity derivative liabilities
    
    
    29,818
    
    
    
    29,793
    
    
    
    25
    
    
    
    Foreign currency exchange contract assets
    
    
    92
    
    
    
    
    
    
    
    92
    
    
    
    Foreign currency exchange contract liabilities
    
    
    60
    
    
    
    
    
    
    
    60
    
    
    
    Available-for-sale securities
    
    
    42
    
    
    
    42
    
    
    
    
    
    
    
    
 Fair Value Measurements at December 31, 2008 Using:SignificantQuoted prices
    
    other
    
    SignificantTotal carrying
    
    in active
    
    observable
    
    unobservablevalue at
    
    markets
    
    inputs
    
    inputsDecember 31, 2008(a)
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Commodity derivative assets
    
    $
    50,053
    
    
    $
    49,139
    
    
    $
    914
    
    
    $
    Commodity derivative liabilities
    
    
    85,292
    
    
    
    85,128
    
    
    
    164
    
    
    
    Foreign currency exchange contract assets
    
    
    341
    
    
    
    
    
    
    
    341
    
    
    
    Foreign currency exchange contract liabilities
    
    
    925
    
    
    
    
    
    
    
    925
    
    
    
    Available-for-sale securities
    
    
    47
    
    
    
    47
    
    
    
    
    
    
    
    
 
 (a)
    
    FASB Staff Position No. FIN 39-1, Amendment of FASB Interpretation No.
39 (FIN 39-1) permits, but does not require companies that enter into master netting
arrangements to offset fair value amounts recognized for derivative instruments against the
right to reclaim cash collateral or the obligation to return cash collateral. The Company has
master netting arrangements with brokers for its exchange-traded futures and options contracts,
however, it does not elect to offset fair value amounts recognized for derivative instruments
under such master netting arrangements with amounts recognized for margin balances due from or
due to brokers.  14




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##### Table of Contents



Fair Value Measurements at June 30, 2009 Using:Significant
    
    
    
    
    
    
    Loss(b)(beforeQuoted prices
    
    
    other
    
    
    Significant
    
    
    income tax)Total carrying
    
    
    in active
    
    
    observable
    
    
    unobservable
    
    
    Three and Sixvalue at
    
    
    markets
    
    
    inputs
    
    
    inputs
    
    
    Months EndedJune 30, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    June 30, 2009Property,
plant and
equipment, net
(held and used)
    
    $
    2,810
    
    
    $
    
    
    
    $
    2,810
    
    
    $
    
    
    
    $
    5,304Property, plant and
equipment, net
(held and used)
    
    
    2,857
    
    
    
    
    
    
    
    
    
    
    
    2,857
    
    
    
    1,323Total
    
    $
    5,667
    
    
    $
    
    
    
    $
    2,810
    
    
    $
    2,857
    
    
    $
    6,627
 
 (b)
    
    The losses were recorded in the restructuring and impairment line of
the Consolidated Statements of Operations for the three and six months ended June 30, 2009.   12. Income Taxes
  13. Pension and Other Postretirement Plans
  Other PostretirementPension Benefits
    
    
    Benefits2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    3,334
    
    
    $
    3,811
    
    
    $
    129
    
    
    $
    197Interest cost
    
    
    9,474
    
    
    
    9,677
    
    
    
    907
    
    
    
    1,070Expected return on assets
    
    
    (10,433
    )
    
    
    (10,999
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    1,317
    
    
    
    1,291
    
    
    
    184
    
    
    
    489Amortization of prior service cost
    
    
    (110
    )
    
    
    (132
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    107
    
    
    
    116Net periodic benefit cost
    
    $
    3,582
    
    
    $
    3,648
    
    
    $
    1,327
    
    
    $
    1,872
  15




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##### Table of Contents



Other PostretirementPension Benefits
    
    
    Benefits2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    6,668
    
    
    $
    7,621
    
    
    $
    257
    
    
    $
    393Interest cost
    
    
    18,947
    
    
    
    19,355
    
    
    
    1,814
    
    
    
    2,141Expected return on assets
    
    
    (20,865
    )
    
    
    (21,999
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    2,635
    
    
    
    2,581
    
    
    
    368
    
    
    
    978Amortization of prior service cost
    
    
    (221
    )
    
    
    (264
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    214
    
    
    
    232Net periodic benefit cost
    
    $
    7,164
    
    
    $
    7,294
    
    
    $
    2,653
    
    
    $
    3,744
   14. Restructuring and Impairment
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Restructuring (reversals) charges
    
    $
    2,309
    
    
    $
    (12
    )
    
    $
    2,606
    
    
    $
    41Impairment charges
    
    
    6,627
    
    
    
    
    
    
    
    6,627
    
    
    
    Total restructuring and impairment
    
    $
    8,936
    
    
    $
    (12
    )
    
    $
    9,233
    
    
    $
    41
 Restructuring Charges
    Impairment charges
   16




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##### Table of Contents



15. Other (Income) Expense, Net
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Gain) loss on sale of investments
    
    $
    (4,748
    )
    
    $
    
    
    
    $
    (6,958
    )
    
    $
    12Loss on divestiture of a business
    
    
    407
    
    
    
    
    
    
    
    407
    
    
    
    Gain on foreign currency exchange contracts on sale of investment
    
    
    
    
    
    
    
    
    
    
    (177
    )
    
    
    Total other (income) expense, net
    
    $
    (4,341
    )
    
    $
    
    
    
    $
    (6,728
    )
    
    $
    12
      16. Insurance Proceeds
  17. Commitments and Contingencies
 ® ® ® ® ®
 17




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##### Table of Contents



18




---



##### Table of Contents



18. Subsequent Event
   19. Segment Information
  LAND
O LAKES Indian Maiden Alpine Lace New
Yorker
       19




---



##### Table of Contents



Other/Dairy Foods
    
    
    Feed
    
    
    Seed
    
    
    Agronomy
    
    
    Layers
    
    
    Eliminations
    
    
    ConsolidatedFor the three months ended June 30, 2009:Net sales (1)
    
    $
    713,021
    
    
    $
    850,974
    
    
    $
    363,804
    
    
    $
    790,464
    
    
    $
    119,778
    
    
    $
    (23,542
    )
    
    $
    2,814,499Cost of sales (2)
    
    
    638,153
    
    
    
    764,867
    
    
    
    345,851
    
    
    
    693,343
    
    
    
    117,232
    
    
    
    (24,062
    )
    
    
    2,535,384Selling, general and administrative
    
    
    48,771
    
    
    
    61,527
    
    
    
    21,619
    
    
    
    25,354
    
    
    
    10,633
    
    
    
    (2,116
    )
    
    
    165,788Restructuring and impairment
    
    
    7,441
    
    
    
    172
    
    
    
    
    
    
    
    
    
    
    
    1,323
    
    
    
    
    
    
    
    8,936Interest expense (income), net
    
    
    3,140
    
    
    
    5,818
    
    
    
    1,107
    
    
    
    1,314
    
    
    
    2,083
    
    
    
    (822
    )
    
    
    12,640Other expense (income), net
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    (14
    )
    
    
    (4,734
    )
    
    
    
    
    
    
    (4,341
    )Equity in earnings of affiliated companies
    
    
    (2,495
    )
    
    
    (1,657
    )
    
    
    (77
    )
    
    
    (6,589
    )
    
    
    153
    
    
    
    
    
    
    
    (10,665
    )Earnings (loss) before income taxes
    
    $
    18,011
    
    
    $
    19,840
    
    
    $
    (4,696
    )
    
    $
    77,056
    
    
    $
    (6,912
    )
    
    $
    3,458
    
    
    $
    106,757For the three months ended June 30, 2008:Net sales (1)
    
    $
    1,037,469
    
    
    $
    925,844
    
    
    $
    248,076
    
    
    $
    993,690
    
    
    $
    138,596
    
    
    $
    (15,810
    )
    
    $
    3,327,865Cost of sales (2)
    
    
    947,418
    
    
    
    830,252
    
    
    
    219,125
    
    
    
    919,115
    
    
    
    115,769
    
    
    
    (15,302
    )
    
    
    3,016,377Selling, general and administrative
    
    
    44,883
    
    
    
    69,072
    
    
    
    20,396
    
    
    
    33,029
    
    
    
    12,919
    
    
    
    9,810
    
    
    
    190,109Restructuring and impairment
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )Interest expense (income), net
    
    
    3,262
    
    
    
    6,560
    
    
    
    (1,949
    )
    
    
    6,583
    
    
    
    2,352
    
    
    
    (1,221
    )
    
    
    15,587Equity in earnings of affiliated companies
    
    
    (2,859
    )
    
    
    (1,026
    )
    
    
    (1,252
    )
    
    
    (11,889
    )
    
    
    (3,430
    )
    
    
    
    
    
    
    (20,456
    )Earnings (loss) before income taxes
    
    $
    44,777
    
    
    $
    20,986
    
    
    $
    11,756
    
    
    $
    46,852
    
    
    $
    10,986
    
    
    $
    (9,097
    )
    
    $
    126,260For the six months ended June 30, 2009:Net sales (1)
    
    $
    1,466,259
    
    
    $
    1,744,726
    
    
    $
    1,138,946
    
    
    $
    1,198,881
    
    
    $
    258,005
    
    
    $
    (45,004
    )
    
    $
    5,761,813Cost of sales (2)
    
    
    1,360,259
    
    
    
    1,586,266
    
    
    
    1,009,637
    
    
    
    1,068,586
    
    
    
    243,922
    
    
    
    (46,016
    )
    
    
    5,222,654Selling, general and administrative
    
    
    98,400
    
    
    
    123,838
    
    
    
    44,189
    
    
    
    47,166
    
    
    
    16,632
    
    
    
    (1,164
    )
    
    
    329,061Restructuring and impairment
    
    
    7,441
    
    
    
    469
    
    
    
    
    
    
    
    
    
    
    
    1,323
    
    
    
    
    
    
    
    9,233Interest expense (income), net
    
    
    5,101
    
    
    
    12,244
    
    
    
    3,379
    
    
    
    3,077
    
    
    
    4,465
    
    
    
    (2,428
    )
    
    
    25,838Other expense (income), net
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    4,046
    
    
    
    (11,181
    )
    
    
    
    
    
    
    (6,728
    )Equity in earnings of affiliated companies
    
    
    (5,067
    )
    
    
    (3,645
    )
    
    
    (77
    )
    
    
    6,703
    
    
    
    (1,415
    )
    
    
    
    
    
    
    (3,501
    )Earnings (loss) before income taxes
    
    $
    125
    
    
    $
    25,147
    
    
    $
    81,818
    
    
    $
    69,303
    
    
    $
    4,259
    
    
    $
    4,604
    
    
    $
    185,256For the six months ended June 30, 2008:Net sales (1)
    
    $
    2,085,528
    
    
    $
    1,867,576
    
    
    $
    875,193
    
    
    $
    1,480,841
    
    
    $
    319,738
    
    
    $
    (44,012
    )
    
    $
    6,584,864Cost of sales (2)
    
    
    1,953,640
    
    
    
    1,691,893
    
    
    
    779,806
    
    
    
    1,376,955
    
    
    
    263,060
    
    
    
    (42,685
    )
    
    
    6,022,669Selling, general and administrative
    
    
    91,834
    
    
    
    132,464
    
    
    
    43,108
    
    
    
    57,606
    
    
    
    21,916
    
    
    
    10,760
    
    
    
    357,688Restructuring and impairment
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Interest expense (income), net
    
    
    5,802
    
    
    
    13,744
    
    
    
    (1,257
    )
    
    
    11,082
    
    
    
    5,952
    
    
    
    (2,601
    )
    
    
    32,722Other expense, net
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Equity in earnings of affiliated companies
    
    
    (5,457
    )
    
    
    (907
    )
    
    
    (1,252
    )
    
    
    (2,418
    )
    
    
    (14,524
    )
    
    
    
    
    
    
    (24,558
    )Earnings (loss) before income taxes
    
    $
    39,668
    
    
    $
    30,370
    
    
    $
    54,788
    
    
    $
    37,616
    
    
    $
    43,334
    
    
    $
    (9,486
    )
    
    $
    196,290
   Other/Dairy Foods
    
    
    Feed
    
    
    Seed
    
    
    Agronomy
    
    
    Layers
    
    
    Eliminations
    
    
    ConsolidatedFor the three months ended June 30, 2009
    
    $
    2,487
    
    
    $
    9,433
    
    
    $
    12,489
    
    
    $
    207
    
    
    $
    
    
    
    $
    (24,616
    )
    
    $
    For the three months ended June 30, 2008
    
    
    2,264
    
    
    
    10,519
    
    
    
    4,147
    
    
    
    1,239
    
    
    
    
    
    
    
    (18,169
    )
    
    
    For the six months ended June 30, 2009
    
    
    4,194
    
    
    
    18,582
    
    
    
    22,018
    
    
    
    2,141
    
    
    
    
    
    
    
    (46,935
    )
    
    
    For the six months ended June 30, 2008
    
    
    4,422
    
    
    
    21,264
    
    
    
    13,073
    
    
    
    10,895
    
    
    
    
    
    
    
    (49,654
    )
    
    
    
  Other/Dairy Foods
    
    
    Feed
    
    
    Seed
    
    
    Agronomy
    
    
    Layers
    
    
    Eliminations
    
    
    ConsolidatedFor the three months ended June 30, 2009
    
    $
    (27,017
    )
    
    $
    (10,777
    )
    
    $
    (5,207
    )
    
    $
    (581
    )
    
    $
    (359
    )
    
    $
    (858
    )
    
    $
    (44,799
    )For the three months ended June 30, 2008
    
    
    (2,587
    )
    
    
    (8,298
    )
    
    
    (5,993
    )
    
    
    
    
    
    
    (7,135
    )
    
    
    (795
    )
    
    
    (24,808
    )For the six months ended June 30, 2009
    
    
    (24,994
    )
    
    
    (16,354
    )
    
    
    (6,911
    )
    
    
    (708
    )
    
    
    (474
    )
    
    
    7,167
    
    
    
    (42,274
    )For the six months ended June 30, 2008
    
    
    (4,257
    )
    
    
    6,210
    
    
    
    345
    
    
    
    
    
    
    
    620
    
    
    
    215
    
    
    
    3,133
 20




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##### Table of Contents



20. Consolidating Financial Information
    21




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
June 30, 2009
 LandOLakes, Inc.Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,625
    
    
    $
    885
    
    
    $
    28,067
    
    
    $
    
    
    
    $
    35,577Receivables, net
    
    
    209,416
    
    
    
    715,521
    
    
    
    895,693
    
    
    
    (501,124
    )
    
    
    1,319,506Intercompany receivables, net
    
    
    197,022
    
    
    
    46,744
    
    
    
    1,242
    
    
    
    (245,008
    )
    
    
    Inventories
    
    
    423,415
    
    
    
    609,999
    
    
    
    95,408
    
    
    
    
    
    
    
    1,128,822Prepaid assets
    
    
    24,746
    
    
    
    17,609
    
    
    
    4,268
    
    
    
    
    
    
    
    46,623Other current assets
    
    
    65,374
    
    
    
    12,111
    
    
    
    1,111
    
    
    
    
    
    
    
    78,596Total current assets
    
    
    926,598
    
    
    
    1,402,869
    
    
    
    1,025,789
    
    
    
    (746,132
    )
    
    
    2,609,124Investments
    
    
    1,187,511
    
    
    
    58,359
    
    
    
    16,686
    
    
    
    (951,461
    )
    
    
    311,095Property, plant and equipment, net
    
    
    276,341
    
    
    
    293,011
    
    
    
    110,356
    
    
    
    
    
    
    
    679,708Goodwill, net
    
    
    191,542
    
    
    
    64,532
    
    
    
    20,584
    
    
    
    
    
    
    
    276,658Other intangibles, net
    
    
    1,499
    
    
    
    109,531
    
    
    
    6,671
    
    
    
    
    
    
    
    117,701Other assets
    
    
    66,908
    
    
    
    42,050
    
    
    
    63,126
    
    
    
    (3,912
    )
    
    
    168,172Total assets
    
    $
    2,650,399
    
    
    $
    1,970,352
    
    
    $
    1,243,212
    
    
    $
    (1,701,505
    )
    
    $
    4,162,458LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    76,003
    
    
    $
    1,976
    
    
    $
    848,191
    
    
    $
    (493,847
    )
    
    $
    432,323Current portion of long-term debt
    
    
    10
    
    
    
    50
    
    
    
    2,479
    
    
    
    
    
    
    
    2,539Accounts payable
    
    
    352,434
    
    
    
    657,444
    
    
    
    96,475
    
    
    
    (10,390
    )
    
    
    1,095,963Intercompany payables, net
    
    
    
    
    
    
    254,431
    
    
    
    (9,423
    )
    
    
    (245,008
    )
    
    
    Customer advances
    
    
    37,668
    
    
    
    90,814
    
    
    
    2,327
    
    
    
    
    
    
    
    130,809Accrued liabilities
    
    
    200,708
    
    
    
    223,797
    
    
    
    24,961
    
    
    
    (799
    )
    
    
    448,667Patronage refunds and other member equities payable
    
    
    39,027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,027Total current liabilities
    
    
    705,850
    
    
    
    1,228,512
    
    
    
    965,010
    
    
    
    (750,044
    )
    
    
    2,149,328Long-term debt
    
    
    513,248
    
    
    
    46
    
    
    
    19,442
    
    
    
    
    
    
    
    532,736Employee benefits and other liabilities
    
    
    347,506
    
    
    
    28,902
    
    
    
    6,061
    
    
    
    
    
    
    
    382,469Commitments and contingenciesEquities:Capital stock
    
    
    1,587
    
    
    
    (34
    )
    
    
    2,935
    
    
    
    (2,901
    )
    
    
    1,587Additional paid-in capital
    
    
    
    
    
    
    200,993
    
    
    
    73,345
    
    
    
    (274,338
    )
    
    
    Member equities
    
    
    992,903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    992,903Accumulated other comprehensive loss
    
    
    (151,609
    )
    
    
    (12
    )
    
    
    (18
    )
    
    
    30
    
    
    
    (151,609
    )Retained earnings
    
    
    240,914
    
    
    
    511,945
    
    
    
    162,307
    
    
    
    (674,252
    )
    
    
    240,914Total Land OLakes, Inc. equities
    
    
    1,083,795
    
    
    
    712,892
    
    
    
    238,569
    
    
    
    (951,461
    )
    
    
    1,083,795Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    14,130
    
    
    
    
    
    
    
    14,130Total equities
    
    
    1,083,795
    
    
    
    712,892
    
    
    
    252,699
    
    
    
    (951,461
    )
    
    
    1,097,925Total liabilities and equities
    
    $
    2,650,399
    
    
    $
    1,970,352
    
    
    $
    1,243,212
    
    
    $
    (1,701,505
    )
    
    $
    4,162,458
 22




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended June 30, 2009
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    1,038,456
    
    
    $
    1,551,472
    
    
    $
    224,571
    
    
    $
    
    
    
    $
    2,814,499Cost of sales
    
    
    944,769
    
    
    
    1,374,704
    
    
    
    215,911
    
    
    
    
    
    
    
    2,535,384Gross profit
    
    
    93,687
    
    
    
    176,768
    
    
    
    8,660
    
    
    
    
    
    
    
    279,115Selling, general and administrative
    
    
    70,984
    
    
    
    79,319
    
    
    
    15,485
    
    
    
    
    
    
    
    165,788Restructuring and impairment
    
    
    7,442
    
    
    
    171
    
    
    
    1,323
    
    
    
    
    
    
    
    8,936Earnings (losses) from operations
    
    
    15,261
    
    
    
    97,278
    
    
    
    (8,148
    )
    
    
    
    
    
    
    104,391Interest expense (income), net
    
    
    19,120
    
    
    
    (2,093
    )
    
    
    (4,387
    )
    
    
    
    
    
    
    12,640Other (income) expense, net
    
    
    (4,734
    )
    
    
    393
    
    
    
    
    
    
    
    
    
    
    
    (4,341
    )Equity in (earnings) losses of affiliated companies
    
    
    (105,853
    )
    
    
    (3,628
    )
    
    
    153
    
    
    
    98,663
    
    
    
    (10,665
    )Earnings before income taxes
    
    
    106,728
    
    
    
    102,606
    
    
    
    (3,914
    )
    
    
    (98,663
    )
    
    
    106,757Income tax expense (benefit)
    
    
    25,271
    
    
    
    (34
    )
    
    
    236
    
    
    
    
    
    
    
    25,473Net earnings (loss)
    
    
    81,457
    
    
    
    102,640
    
    
    
    (4,150
    )
    
    
    (98,663
    )
    
    
    81,284Less: net loss attributable to noncontrolling interests
    
    
    
    
    
    
    (161
    )
    
    
    (12
    )
    
    
    
    
    
    
    (173
    )Net earnings (loss) attributable to Land OLakes, Inc.
    
    $
    81,457
    
    
    $
    102,801
    
    
    $
    (4,138
    )
    
    $
    (98,663
    )
    
    $
    81,457
 23




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the six months ended June 30, 2009
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    2,532,780
    
    
    $
    2,825,159
    
    
    $
    403,874
    
    
    $
    
    
    
    $
    5,761,813Cost of sales
    
    
    2,296,177
    
    
    
    2,542,381
    
    
    
    384,096
    
    
    
    
    
    
    
    5,222,654Gross profit
    
    
    236,603
    
    
    
    282,778
    
    
    
    19,778
    
    
    
    
    
    
    
    539,159Selling, general and administrative
    
    
    145,006
    
    
    
    159,442
    
    
    
    24,613
    
    
    
    
    
    
    
    329,061Restructuring and impairment
    
    
    7,441
    
    
    
    469
    
    
    
    1,323
    
    
    
    
    
    
    
    9,233Earnings (losses) from operations
    
    
    84,156
    
    
    
    122,867
    
    
    
    (6,158
    )
    
    
    
    
    
    
    200,865Interest expense (income), net
    
    
    38,241
    
    
    
    (4,226
    )
    
    
    (8,177
    )
    
    
    
    
    
    
    25,838Other (income) expense, net
    
    
    (7,147
    )
    
    
    419
    
    
    
    
    
    
    
    
    
    
    
    (6,728
    )Equity in earnings of affiliated companies
    
    
    (133,607
    )
    
    
    (3,932
    )
    
    
    (1,415
    )
    
    
    135,453
    
    
    
    (3,501
    )Earnings before income taxes
    
    
    186,669
    
    
    
    130,606
    
    
    
    3,434
    
    
    
    (135,453
    )
    
    
    185,256Income tax expense
    
    
    22,522
    
    
    
    528
    
    
    
    1,198
    
    
    
    
    
    
    
    24,248Net earnings
    
    
    164,147
    
    
    
    130,078
    
    
    
    2,236
    
    
    
    (135,453
    )
    
    
    161,008Less: net loss attributable to noncontrolling interests
    
    
    
    
    
    
    (202
    )
    
    
    (2,937
    )
    
    
    
    
    
    
    (3,139
    )Net earnings attributable to Land OLakes, Inc.
    
    $
    164,147
    
    
    $
    130,280
    
    
    $
    5,173
    
    
    $
    (135,453
    )
    
    $
    164,147
 24




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2009
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net earnings attributable to Land OLakes, Inc.
    
    $
    164,147
    
    
    $
    130,280
    
    
    $
    5,173
    
    
    $
    (135,453
    )
    
    $
    164,147Adjustments to reconcile net earnings attributable
to Land OLakes, Inc. to net cash provided by
operating activities:Depreciation and amortization
    
    
    19,126
    
    
    
    18,984
    
    
    
    4,898
    
    
    
    
    
    
    
    43,008Amortization of deferred financing costs
    
    
    781
    
    
    
    228
    
    
    
    171
    
    
    
    
    
    
    
    1,180Bad debt expense
    
    
    936
    
    
    
    558
    
    
    
    110
    
    
    
    
    
    
    
    1,604Proceeds from patronage revolvement received
    
    
    199
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    229Non-cash patronage income
    
    
    (621
    )
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    (555
    )Deferred income tax
    
    
    20,856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,856Increase in other assets
    
    
    (205
    )
    
    
    (1,557
    )
    
    
    (13
    )
    
    
    28
    
    
    
    (1,747
    )Increase (decrease) in other liabilities
    
    
    14,979
    
    
    
    (35
    )
    
    
    (33
    )
    
    
    
    
    
    
    14,911Restructuring and impairment
    
    
    7,441
    
    
    
    469
    
    
    
    1,323
    
    
    
    
    
    
    
    9,233Loss on divestiture of a business
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    407(Gain) loss on sale of investments
    
    
    (6,970
    )
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    (6,958
    )Gain on foreign currency exchange contracts on
sale of investment
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (177
    )Equity in earnings of affiliated companies
    
    
    (133,607
    )
    
    
    (3,932
    )
    
    
    (1,415
    )
    
    
    135,453
    
    
    
    (3,501
    )Dividends from investments in affiliated companies
    
    
    1,695
    
    
    
    2,383
    
    
    
    3,552
    
    
    
    
    
    
    
    7,630Net loss attributable to noncontrolling interests
    
    
    
    
    
    
    (202
    )
    
    
    (2,937
    )
    
    
    
    
    
    
    (3,139
    )Other
    
    
    (172
    )
    
    
    49
    
    
    
    (3,383
    )
    
    
    
    
    
    
    (3,506
    )Changes in current assets and liabilities, net of
acquisitions and divestitures:Receivables
    
    
    (41,853
    )
    
    
    (172,580
    )
    
    
    28,581
    
    
    
    (46,932
    )
    
    
    (232,784
    )Inventories
    
    
    (47,375
    )
    
    
    (3,234
    )
    
    
    4,655
    
    
    
    
    
    
    
    (45,954
    )Prepaids and other current assets
    
    
    680,980
    
    
    
    397,290
    
    
    
    599
    
    
    
    
    
    
    
    1,078,869Accounts payable
    
    
    (64,873
    )
    
    
    (82,103
    )
    
    
    55,228
    
    
    
    12,565
    
    
    
    (79,183
    )Customer advances
    
    
    (605,512
    )
    
    
    (310,603
    )
    
    
    1,219
    
    
    
    
    
    
    
    (914,896
    )Accrued liabilities
    
    
    27,870
    
    
    
    25,357
    
    
    
    (18,377
    )
    
    
    2,719
    
    
    
    37,569Net cash provided by operating activities
    
    
    37,645
    
    
    
    1,867
    
    
    
    79,351
    
    
    
    (31,620
    )
    
    
    87,243Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (48,079
    )
    
    
    (17,666
    )
    
    
    (7,629
    )
    
    
    
    
    
    
    (73,374
    )Investments in affiliates
    
    
    (75
    )
    
    
    (340
    )
    
    
    (1,250
    )
    
    
    
    
    
    
    (1,665
    )Proceeds from divestiture of a business
    
    
    
    
    
    
    2,698
    
    
    
    
    
    
    
    
    
    
    
    2,698Proceeds from sale of investments
    
    
    5,770
    
    
    
    14
    
    
    
    11,181
    
    
    
    
    
    
    
    16,965Proceeds from foreign currency exchange contracts
on sale of investments
    
    
    518
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    518Proceeds from sale of property, plant and equipment
    
    
    282
    
    
    
    905
    
    
    
    24
    
    
    
    
    
    
    
    1,211Insurance proceeds for replacement assets
    
    
    
    
    
    
    6,538
    
    
    
    
    
    
    
    
    
    
    
    6,538Change in notes receivable
    
    
    5,850
    
    
    
    (116
    )
    
    
    (6,659
    )
    
    
    
    
    
    
    (925
    )Other
    
    
    (1
    )
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    249Net cash used by investing activities
    
    
    (35,735
    )
    
    
    (7,717
    )
    
    
    (4,333
    )
    
    
    
    
    
    
    (47,785
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    56,005
    
    
    
    (268
    )
    
    
    (64,404
    )
    
    
    31,620
    
    
    
    22,953Proceeds from issuance of long-term debt
    
    
    
    
    
    
    10
    
    
    
    1,425
    
    
    
    
    
    
    
    1,435Principal payments on long-term debt and capital
lease obligations
    
    
    (34
    )
    
    
    (41
    )
    
    
    (1,216
    )
    
    
    
    
    
    
    (1,291
    )Payments for redemption of member equities
    
    
    (54,607
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,607
    )Payments for debt issuance costs
    
    
    (1,486
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,486
    )Other
    
    
    (148
    )
    
    
    6
    
    
    
    (1,563
    )
    
    
    
    
    
    
    (1,705
    )Net cash used by financing activities
    
    
    (270
    )
    
    
    (293
    )
    
    
    (65,758
    )
    
    
    31,620
    
    
    
    (34,701
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,640
    
    
    
    (6,143
    )
    
    
    9,260
    
    
    
    
    
    
    
    4,757Cash and cash equivalents at beginning of period
    
    
    4,985
    
    
    
    7,028
    
    
    
    18,807
    
    
    
    
    
    
    
    30,820Cash and cash equivalents at end of period
    
    $
    6,625
    
    
    $
    885
    
    
    $
    28,067
    
    
    $
    
    
    
    $
    35,577
 25




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
December 31, 2008
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,985
    
    
    $
    7,028
    
    
    $
    18,807
    
    
    $
    
    
    
    $
    30,820Receivables, net
    
    
    130,313
    
    
    
    580,897
    
    
    
    941,107
    
    
    
    (548,056
    )
    
    
    1,104,261Intercompany receivables, net
    
    
    238,447
    
    
    
    9,633
    
    
    
    1,240
    
    
    
    (249,320
    )
    
    
    Inventories
    
    
    377,150
    
    
    
    606,765
    
    
    
    100,063
    
    
    
    
    
    
    
    1,083,978Prepaid assets
    
    
    686,331
    
    
    
    410,295
    
    
    
    4,379
    
    
    
    
    
    
    
    1,101,005Other current assets
    
    
    105,190
    
    
    
    16,715
    
    
    
    1,599
    
    
    
    
    
    
    
    123,504Total current assets
    
    
    1,542,416
    
    
    
    1,631,333
    
    
    
    1,067,195
    
    
    
    (797,376
    )
    
    
    3,443,568Investments
    
    
    1,058,744
    
    
    
    57,027
    
    
    
    16,517
    
    
    
    (817,801
    )
    
    
    314,487Property, plant and equipment, net
    
    
    252,638
    
    
    
    294,212
    
    
    
    111,411
    
    
    
    
    
    
    
    658,261Goodwill, net
    
    
    191,936
    
    
    
    64,532
    
    
    
    20,708
    
    
    
    
    
    
    
    277,176Other intangibles, net
    
    
    2,113
    
    
    
    111,763
    
    
    
    7,106
    
    
    
    
    
    
    
    120,982Other assets
    
    
    71,684
    
    
    
    40,553
    
    
    
    58,485
    
    
    
    (3,884
    )
    
    
    166,838Total assets
    
    $
    3,119,531
    
    
    $
    2,199,420
    
    
    $
    1,281,422
    
    
    $
    (1,619,061
    )
    
    $
    4,981,312LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    19,998
    
    
    $
    2,244
    
    
    $
    912,595
    
    
    $
    (525,467
    )
    
    $
    409,370Current portion of long-term debt
    
    
    281
    
    
    
    50
    
    
    
    2,533
    
    
    
    
    
    
    
    2,864Accounts payable
    
    
    418,156
    
    
    
    739,547
    
    
    
    41,247
    
    
    
    (22,955
    )
    
    
    1,175,995Intercompany payables, net
    
    
    
    
    
    
    246,342
    
    
    
    2,978
    
    
    
    (249,320
    )
    
    
    Customer advances
    
    
    643,180
    
    
    
    401,417
    
    
    
    1,108
    
    
    
    
    
    
    
    1,045,705Accrued liabilities
    
    
    185,234
    
    
    
    198,440
    
    
    
    43,338
    
    
    
    (3,518
    )
    
    
    423,494Patronage refunds and other member
equities payable
    
    
    37,751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,751Total current liabilities
    
    
    1,304,600
    
    
    
    1,588,040
    
    
    
    1,003,799
    
    
    
    (801,260
    )
    
    
    3,095,179Long-term debt
    
    
    512,785
    
    
    
    71
    
    
    
    19,099
    
    
    
    
    
    
    
    531,955Employee benefits and other liabilities
    
    
    325,294
    
    
    
    29,047
    
    
    
    4,063
    
    
    
    
    
    
    
    358,404Commitments and contingenciesEquities:Capital stock
    
    
    1,611
    
    
    
    (34
    )
    
    
    2,935
    
    
    
    (2,901
    )
    
    
    1,611Additional paid-in capital
    
    
    
    
    
    
    200,643
    
    
    
    73,885
    
    
    
    (274,528
    )
    
    
    Member equities
    
    
    947,141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    947,141Accumulated other comprehensive loss
    
    
    (150,277
    )
    
    
    (15
    )
    
    
    (31
    )
    
    
    46
    
    
    
    (150,277
    )Retained earnings
    
    
    178,377
    
    
    
    381,679
    
    
    
    158,739
    
    
    
    (540,418
    )
    
    
    178,377Total Land OLakes, Inc. equities
    
    
    976,852
    
    
    
    582,273
    
    
    
    235,528
    
    
    
    (817,801
    )
    
    
    976,852Noncontrolling interests
    
    
    
    
    
    
    (11
    )
    
    
    18,933
    
    
    
    
    
    
    
    18,922Total equities
    
    
    976,852
    
    
    
    582,262
    
    
    
    254,461
    
    
    
    (817,801
    )
    
    
    995,774Total liabilities and equities
    
    $
    3,119,531
    
    
    $
    2,199,420
    
    
    $
    1,281,422
    
    
    $
    (1,619,061
    )
    
    $
    4,981,312
 26




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended June 30, 2008
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    1,257,242
    
    
    $
    1,791,958
    
    
    $
    278,665
    
    
    $
    
    
    
    $
    3,327,865Cost of sales
    
    
    1,132,945
    
    
    
    1,648,202
    
    
    
    235,230
    
    
    
    
    
    
    
    3,016,377Gross profit
    
    
    124,297
    
    
    
    143,756
    
    
    
    43,435
    
    
    
    
    
    
    
    311,488Selling, general and administrative
    
    
    77,995
    
    
    
    90,051
    
    
    
    22,063
    
    
    
    
    
    
    
    190,109Restructuring and impairment
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )Earnings from operations
    
    
    46,314
    
    
    
    53,705
    
    
    
    21,372
    
    
    
    
    
    
    
    121,391Interest expense (income), net
    
    
    13,885
    
    
    
    2,910
    
    
    
    (1,208
    )
    
    
    
    
    
    
    15,587Equity in earnings of affiliated companies
    
    
    (85,895
    )
    
    
    (1,062
    )
    
    
    (3,431
    )
    
    
    69,932
    
    
    
    (20,456
    )Earnings before income taxes
    
    
    118,324
    
    
    
    51,857
    
    
    
    26,011
    
    
    
    (69,932
    )
    
    
    126,260Income tax expense (benefit)
    
    
    15,539
    
    
    
    (98
    )
    
    
    (1,725
    )
    
    
    
    
    
    
    13,716Net earnings
    
    
    102,785
    
    
    
    51,955
    
    
    
    27,736
    
    
    
    (69,932
    )
    
    
    112,544Less: net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    9,759
    
    
    
    
    
    
    
    9,759Net earnings attributable to Land OLakes, Inc.
    
    $
    102,785
    
    
    $
    51,955
    
    
    $
    17,977
    
    
    $
    (69,932
    )
    
    $
    102,785
 27




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the six months ended June 30, 2008
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    2,893,839
    
    
    $
    3,156,529
    
    
    $
    534,496
    
    
    $
    
    
    
    $
    6,584,864Cost of sales
    
    
    2,669,478
    
    
    
    2,916,702
    
    
    
    436,489
    
    
    
    
    
    
    
    6,022,669Gross profit
    
    
    224,361
    
    
    
    239,827
    
    
    
    98,007
    
    
    
    
    
    
    
    562,195Selling, general and administrative
    
    
    149,043
    
    
    
    169,882
    
    
    
    38,763
    
    
    
    
    
    
    
    357,688Restructuring and impairment
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Earnings from operations
    
    
    75,277
    
    
    
    69,945
    
    
    
    59,244
    
    
    
    
    
    
    
    204,466Interest expense (income), net
    
    
    28,867
    
    
    
    6,113
    
    
    
    (2,258
    )
    
    
    
    
    
    
    32,722Other expense, net
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12Equity in earnings of affiliated companies
    
    
    (134,888
    )
    
    
    (981
    )
    
    
    (14,524
    )
    
    
    125,835
    
    
    
    (24,558
    )Earnings before income taxes
    
    
    181,298
    
    
    
    64,801
    
    
    
    76,026
    
    
    
    (125,835
    )
    
    
    196,290Income tax expense (benefit)
    
    
    17,230
    
    
    
    (27
    )
    
    
    3,435
    
    
    
    
    
    
    
    20,638Net earnings
    
    
    164,068
    
    
    
    64,828
    
    
    
    72,591
    
    
    
    (125,835
    )
    
    
    175,652Less: net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    11,584
    
    
    
    
    
    
    
    11,584Net earnings
    
    $
    164,068
    
    
    $
    64,828
    
    
    $
    61,007
    
    
    $
    (125,835
    )
    
    $
    164,068
 28




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2008
 LandOLakes, Inc.
    
    
    
    
    
    Non-Parent 
Company
    
    
    ConsolidatedGuarantors
    
    
    GuarantorSubsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net earnings attributable to Land OLakes, Inc.
    
    $
    164,068
    
    
    $
    64,828
    
    
    $
    61,007
    
    
    $
    (125,835
    )
    
    $
    164,068Adjustments to reconcile net earnings attributable to
Land OLakes, Inc. to net cash provided by operating
activities:Depreciation and amortization
    
    
    18,955
    
    
    
    20,579
    
    
    
    4,580
    
    
    
    
    
    
    
    44,114Amortization of deferred financing costs
    
    
    979
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    1,052Bad debt expense
    
    
    577
    
    
    
    1,159
    
    
    
    163
    
    
    
    
    
    
    
    1,899Proceeds from patronage revolvement received
    
    
    1,560
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    1,616Non-cash patronage income
    
    
    (2,635
    )
    
    
    (548
    )
    
    
    
    
    
    
    
    
    
    
    (3,183
    )Deferred income tax benefit
    
    
    (25,418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,418
    )Increase in other assets
    
    
    (454
    )
    
    
    (1,041
    )
    
    
    (79
    )
    
    
    78
    
    
    
    (1,496
    )Increase (decrease) in other liabilities
    
    
    8,323
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    8,314Restructuring and impairment
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Loss on sale of investments
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12Equity in earnings of affiliated companies
    
    
    (134,888
    )
    
    
    (981
    )
    
    
    (14,524
    )
    
    
    125,835
    
    
    
    (24,558
    )Dividends from investments in affiliated companies
    
    
    2,434
    
    
    
    500
    
    
    
    7,138
    
    
    
    
    
    
    
    10,072Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    11,584
    
    
    
    
    
    
    
    11,584Other
    
    
    (1,360
    )
    
    
    72
    
    
    
    133
    
    
    
    
    
    
    
    (1,155
    )Changes in current assets and liabilities, net of
acquisitions and divestitures:Receivables
    
    
    78,981
    
    
    
    (297,513
    )
    
    
    (76,600
    )
    
    
    51,754
    
    
    
    (243,378
    )Inventories
    
    
    (16,251
    )
    
    
    (100,371
    )
    
    
    (18,437
    )
    
    
    
    
    
    
    (135,059
    )Prepaids and other current assets
    
    
    427,930
    
    
    
    335,379
    
    
    
    (2,208
    )
    
    
    
    
    
    
    761,101Accounts payable
    
    
    163,889
    
    
    
    191,442
    
    
    
    49,468
    
    
    
    (3,655
    )
    
    
    401,144Customer advances
    
    
    (507,765
    )
    
    
    (292,452
    )
    
    
    (13,881
    )
    
    
    
    
    
    
    (814,098
    )Accrued liabilities
    
    
    84,526
    
    
    
    87,974
    
    
    
    (982
    )
    
    
    (2,012
    )
    
    
    169,506Net cash provided by operating activities
    
    
    263,492
    
    
    
    9,086
    
    
    
    7,435
    
    
    
    46,165
    
    
    
    326,178Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (30,798
    )
    
    
    (22,517
    )
    
    
    (16,283
    )
    
    
    
    
    
    
    (69,598
    )Acquisitions, net of cash acquired
    
    
    (1,743
    )
    
    
    (1,096
    )
    
    
    (6,201
    )
    
    
    
    
    
    
    (9,040
    )Investments in affiliates
    
    
    (50,625
    )
    
    
    
    
    
    
    (235
    )
    
    
    
    
    
    
    (50,860
    )Distributions from investments in affiliated companies
    
    
    1,000
    
    
    
    
    
    
    
    6,865
    
    
    
    
    
    
    
    7,865Proceeds from sale of investments
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    49Proceeds from sale of property, plant and equipment
    
    
    2,402
    
    
    
    505
    
    
    
    198
    
    
    
    
    
    
    
    3,105Change in notes receivable
    
    
    (8,979
    )
    
    
    588
    
    
    
    (3,425
    )
    
    
    
    
    
    
    (11,816
    )Other
    
    
    (1,953
    )
    
    
    
    
    
    
    1,302
    
    
    
    
    
    
    
    (651
    )Net cash used by investing activities
    
    
    (90,696
    )
    
    
    (22,471
    )
    
    
    (17,779
    )
    
    
    
    
    
    
    (130,946
    )Cash flows from financing activities:(Decrease) increase in short-term debt
    
    
    (44,477
    )
    
    
    (3,440
    )
    
    
    29,304
    
    
    
    (46,165
    )
    
    
    (64,778
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    496
    
    
    
    
    
    
    
    496Principal payments on long-term debt and capital
lease obligations
    
    
    (4,242
    )
    
    
    (206
    )
    
    
    (8,876
    )
    
    
    
    
    
    
    (13,324
    )Payments for redemption of member equities
    
    
    (94,032
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (94,032
    )Distribution to members
    
    
    48,700
    
    
    
    
    
    
    
    (48,700
    )
    
    
    
    
    
    
    Other
    
    
    (96
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96
    )Net cash used by financing activities
    
    
    (94,147
    )
    
    
    (3,646
    )
    
    
    (27,776
    )
    
    
    (46,165
    )
    
    
    (171,734
    )Net increase (decrease) in cash and cash equivalents
    
    
    78,649
    
    
    
    (17,031
    )
    
    
    (38,120
    )
    
    
    
    
    
    
    23,498Cash and cash equivalents at beginning of period
    
    
    12,411
    
    
    
    17,036
    
    
    
    87,392
    
    
    
    
    
    
    
    116,839Cash and cash equivalents at end of period
    
    $
    91,060
    
    
    $
    5
    
    
    $
    49,272
    
    
    $
    
    
    
    $
    140,337
 29




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the following discussions of financial condition and results of operations
together with the financial statements and the notes to such statements included elsewhere in this
Form 10-Q.
 Overview
 General
  ® ® ® ® ®
  Seasonality
  30




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##### Table of Contents



Dairy and Agricultural Commodity Inputs and Outputs
  Dairy Foods.
   For the three months ended
    
    For the six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Per pound market price average:Butter
    
    $
    1.23
    
    
    $
    1.46
    
    
    $
    1.18
    
    
    $
    1.36Block cheese
    
    
    1.16
    
    
    
    2.01
    
    
    
    1.17
    
    
    
    1.94Nonfat dry milk (NASS)
    
    
    0.83
    
    
    
    1.30
    
    
    
    0.83
    
    
    
    1.33
 Feed
    31




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##### Table of Contents



Layers
 Derivative Commodity Instruments
  For the three months ended
    
    For the six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008(in millions)
    
    (in millions)Unrealized hedging gain (loss)
    
    $
    44.8
    
    
    $
    24.8
    
    
    $
    42.3
    
    
    $
    (3.1
    )
 Vendor Rebates
  Recoverability of Long-Lived Assets
  32




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##### Table of Contents



Unconsolidated Businesses
  For the three months ended
    
    For the six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008(in millions)Earnings from unconsolidated businesses
    
    $
    10.7
    
    
    $
    20.5
    
    
    $
    3.5
    
    
    $
    24.6
     Results of Operations
 Three months ended June 30, 2009 as compared to three months ended June 30, 2008
 Overview of Results
 For the three months ended June 30,Increase2009
    
    2008
    
    (Decrease)($ in millions)Net earnings
    
    $
    81.5
    
    
    $
    102.8
    
    
    $
    (21.3
    )
   33




---



##### Table of Contents



For the three months ended June 30,Increase2009
    
    
    2008
    
    
    (Decrease)($ in millions)Net sales
    
    $
    2,814.5
    
    
    $
    3,327.9
    
    
    $
    (513.4
    )
  Gross profit
    
    $
    279.1
    
    
    $
    311.5
    
    
    $
    (32.4
    )
  Selling, general and administrative expense
    
    $
    165.8
    
    
    $
    190.1
    
    
    $
    (24.3
    )
  Restructuring and impairment charges
    
    $
    8.9
    
    
    $
    
    
    
    $
    8.9
  Interest expense, net
    
    $
    12.6
    
    
    $
    15.6
    
    
    $
    (3.0
    )
  Equity in earnings of affiliated companies
    
    $
    10.7
    
    
    $
    20.5
    
    
    $
    (9.8
    )
 Overview
Unconsolidated Businesses
 Income tax expense
    
    $
    25.5
    
    
    $
    13.7
    
    
    $
    11.8
  34




---



##### Table of Contents



Net Sales and Gross Profit by Business Segment
  Dairy Foods
 For the three months ended June 30,($ in millions)
    
    2009
    
    2008
    
    %    changeNet sales
    
    $
    713.0
    
    
    $
    1,037.5
    
    
    
    (31.3
    )%Gross profit
    
    
    74.9
    
    
    
    90.1
    
    
    
    (16.9
    )%Gross profit % of net sales
    
    
    10.5
    %
    
    
    8.7
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    (302.0
    )Volume impact
    
    
    (22.5
    )Total decrease
    
    $
    (324.5
    )
  Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (39.7
    )Volume impact
    
    
    0.1Unrealized hedging
    
    
    24.4Total decrease
    
    $
    (15.2
    )
  Feed
 For the three months ended June 30,($ in millions)
    
    2009
    
    2008
    
    % changeNet sales
    
    $
    851.0
    
    
    $
    925.8
    
    
    
    (8.1
    )%Gross profit
    
    
    86.1
    
    
    
    95.6
    
    
    
    (9.9
    )%Gross profit % of net sales
    
    
    10.1
    %
    
    
    10.3
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    (47.2
    )Volume impact
    
    
    (27.6
    )Total decrease
    
    $
    (74.8
    )
  35




---



##### Table of Contents



Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (7.3
    )Volume impact
    
    
    (4.7
    )Unrealized hedging
    
    
    2.5Total decrease
    
    $
    (9.5
    )
  Seed
 For the three months ended June 30,($ in millions)
    
    2009
    
    2008
    
    % changeNet sales
    
    $
    363.8
    
    
    $
    248.1
    
    
    
    46.6
    %Gross profit
    
    
    18.0
    
    
    
    29.0
    
    
    
    (37.9
    )%Gross profit % of net sales
    
    
    4.9
    %
    
    
    11.7
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    137.3Volume impact
    
    
    (21.6
    )Total increase
    
    $
    115.7
  Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (9.8
    )Volume impact
    
    
    (0.4
    )Unrealized hedging
    
    
    (0.8
    )Total decrease
    
    $
    (11.0
    )
  Layers
 For the three months ended June 30,($ in millions)
    
    2009
    
    2008
    
    % changeNet sales
    
    $
    119.8
    
    
    $
    138.6
    
    
    
    (13.6
    )%Gross profit
    
    
    2.5
    
    
    
    22.8
    
    
    
    (89.0
    )%Gross profit %
of net sales
    
    
    2.1
    %
    
    
    16.5
    %
 36




---



##### Table of Contents



Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    (38.6
    )Volume impact
    
    
    19.8Total decrease
    
    $
    (18.8
    )
  Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (16.0
    )Volume impact
    
    
    2.5Unrealized hedging
    
    
    (6.8
    )Total decrease
    
    $
    (20.3
    )
  Agronomy
 For the three months ended June 30,($ in millions)
    
    2009
    
    2008
    
    % changeNet sales
    
    $
    790.5
    
    
    $
    993.7
    
    
    
    (20.4
    )%Gross profit
    
    
    97.1
    
    
    
    74.6
    
    
    
    30.2
    %Gross profit % of net sales
    
    
    12.3
    %
    
    
    7.5
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    54.3Volume impact
    
    
    (220.3
    )Acquisitions and divestitures
    
    
    (37.2
    )Total decrease
    
    $
    (203.2
    )
  Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    56.1Volume impact
    
    
    (20.0
    )Unrealized hedging
    
    
    0.6Acquisitions and divestitures
    
    
    (14.2
    )Total increase
    
    $
    22.5
 37




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##### Table of Contents



Six months ended June 30, 2009 as compared to six months ended June 30, 2008
 Overview of Results
 For the six months ended June 30,Increase2009
    
    
    2008
    
    
    (Decrease)($ in millions)Net earnings
    
    $
    164.1
    
    
    $
    164.1
    
    
    $
    Net earnings were unchanged in the six months ended June 30, 2009 compared to the same period
in the prior year. Net earnings include the impact of the year-to-year change in unrealized
hedging gains and losses on derivative contracts due to volatility in commodity markets.
Unrealized hedging gains and losses in earnings represent the change in value of open derivative
instruments from one period to another versus what will be effectively realized by the Company once
the instruments expire and the underlying commodity purchases or product sales being hedged occur.
In 2009, net earnings included $26.6 million, net of income taxes, for unrealized hedging gains
compared to unrealized hedging losses of $1.9 million for the six months ended June 30, 2008, net
of income taxes.In 2009, net earnings also included a $6.9 million gain, net of income taxes, related to our
investment in Golden Oval Eggs, LLC. Excluding the unrealized hedging gains and losses and gain
related to the Golden Oval Eggs, LLC investment, the Companys net earnings decreased $33.5 million
compared to the same period last year. Net earnings were driven by earnings declines in Dairy Foods
due to lower market prices versus the prior year, in Layers due to the effect of lower egg prices
and in Feed due to volume declines and a shift in sales to lower margin products, partially offset
by increased earnings in Seed due to increased pricing and in Agronomy due to the earlier
completion of binding arrangements governing vendor rebates compared to the same period in the
prior year.Net sales
    
    $
    5,761.8
    
    
    $
    6,584.9
    
    
    $
    (823.1
    )The decrease in net sales was primarily due to lower market prices in Dairy Foods and lower
volume in Agronomy as customers built inventory ahead of price increases in the fall of 2008,
reducing demand in 2009. Net sales decreased in Dairy Foods, Agronomy, Feed and Layers by $619.2
million, $281.9 million, $122.9 million and $61.7 million, respectively, and increased in Seed by
$263.7 million. A discussion of net sales by business segment is found below under the caption
Net Sales and Gross Profit by Business Segment.Gross profit
    
    $
    539.2
    
    
    $
    562.2
    
    
    $
    (23.0
    )Gross profit decreased in the six months ended June 30, 2009 primarily due to depressed market
prices in Dairy Foods and Layers and challenging economic and competitive conditions in Feed
compared to the same time period in 2008. Partially offsetting these decreases were improved
margins in Seed and the timing of vendor rebates recognized in Agronomy. A discussion of gross
profit by business segment is found below under the caption Net Sales and Gross Profit by Business
Segment.Selling, general and administrative expense
    
    $
    329.1
    
    
    $
    357.7
    
    
    $
    (28.6
    )The decrease in selling, general and administrative expense compared to the prior year was
primarily due to lower costs in Agronomy of $10.4 million as a result of an accounting change for
joint ventures to the equity method in July 2008 that were consolidated in the prior period and
lower employee costs in Feed of $8.6 million.Restructuring and impairment charges
    
    $
    9.2
    
    
    $
    
    
    
    $
    9.2Restructuring and impairment charges were $9.2 million during the six months ended June 30,
2009. Dairy Foods incurred impairment charges of $5.3 million to write down fixed assets to fair
value and $2.1 million for restructuring charges, primarily for employee severance, related to the
announced closure of a facility in Wisconsin. Layers incurred impairment charges of $1.3 million
to write down fixed assets at a facility in New Mexico to fair value. Feed incurred restructuring
charges of $0.5 million primarily related to employee severance due to reorganization of Feed
personnel.Interest expense, net
    
    $
    25.8
    
    
    $
    32.7
    
    
    $
    (6.9
    )
  38




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##### Table of Contents



For the six months ended June 30,Increase2009
    
    2008
    
    (Decrease)($ in millions)Equity in earnings of affiliated companies
    
    $
    3.5

    
    $
    24.6

    
    $
    (21.1
    )
 Overview  General  Unconsolidated Businesses.
 Income tax expense
    
    $
    24.2

    
    $
    20.6

    
    $
    3.6
  Net Sales and Gross Profit by Business Segment
  Dairy Foods
 For the six months ended June 30,($ in millions)
    
    2009
    
    2008
    
    % changeNet sales
    
    $
    1,466.3
    
    
    $
    2,085.5
    
    
    
    (29.7
    )%Gross profit
    
    
    106.0
    
    
    
    131.9
    
    
    
    (19.6
    )%Gross profit % of net
sales
    
    
    7.2
    %
    
    
    6.3
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    (599.9
    )Volume impact
    
    
    (19.3
    )Total decrease
    
    $
    (619.2
    )
  Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (45.7
    )Volume impact
    
    
    (0.9
    )Unrealized hedging
    
    
    20.7Total decrease
    
    $
    (25.9
    )
  39




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Feed
 For the six months ended June 30,($ in millions)
    
    2008
    
    2007
    
    % changeNet sales
    
    $
    1,744.7
    
    
    $
    1,867.6
    
    
    
    (6.6
    )%Gross profit
    
    
    158.5
    
    
    
    175.7
    
    
    
    (9.8
    )%Gross profit % of net sales
    
    
    9.1
    %
    
    
    9.4
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    (40.1
    )Volume impact
    
    
    (82.8
    )Total decrease
    
    $
    (122.9
    )
  Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (25.7
    )Volume impact
    
    
    (14.1
    )Unrealized hedging
    
    
    22.6Total decrease
    
    $
    (17.2
    )
  Seed
 For the six months ended June 30,($ in millions)
    
    2009
    
    2008
    
    % changeNet sales
    
    $
    1,138.9
    
    
    $
    875.2
    
    
    
    30.1
    %Gross profit
    
    
    129.3
    
    
    
    95.4
    
    
    
    35.5
    %Gross profit % of net
sales
    
    
    11.4
    %
    
    
    10.9
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    269.2Volume impact
    
    
    (5.5
    )Total increase
    
    $
    263.7
  40




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Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    32.2Volume impact
    
    
    (5.6
    )Unrealized hedging
    
    
    7.3Total increase
    
    $
    33.9
  Layers
 For the six months ended June 30,($ in millions)
    
    2009
    
    2008
    
    % changeNet sales
    
    $
    258.0
    
    
    $
    319.7
    
    
    
    (19.3
    )%Gross profit
    
    
    14.1
    
    
    
    56.7
    
    
    
    (75.1
    )%Gross profit %
of net sales
    
    
    5.5
    %
    
    
    17.7
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    (84.2
    )Volume impact
    
    
    22.5Total decrease
    
    $
    (61.7
    )
  Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (47.5
    )Volume impact
    
    
    3.8Unrealized hedging
    
    
    1.1Total decrease
    
    $
    (42.6
    )
  Agronomy
 For the six months ended June 30,($ in millions)
    
    2009
    
    2008
    
    % changeNet sales
    
    $
    1,198.9
    
    
    $
    1,480.8
    
    
    
    (19.0
    )%Gross profit
    
    
    130.3
    
    
    
    103.9
    
    
    
    25.4
    %Gross profit % of net sales
    
    
    10.9
    %
    
    
    7.0
    %
 Net Sales Variance
 Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    109.6Volume impact
    
    
    (346.2
    )Acquisitions and divestitures
    
    
    (45.3
    )Total decrease
    
    $
    (281.9
    )
 41




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Gross Profit Variance
 Increase(decrease)(In millions)Margin / product mix impact
    
    $
    74.9Volume impact
    
    
    (31.3
    )Unrealized hedging
    
    
    0.4Acquisitions and divestitures
    
    
    (17.6
    )Total increase
    
    $
    26.4
  Liquidity and Capital Resources
 Overview
       As of
    
    
    As of
    
    
    As ofJune 30,
    
    
    June 30,
    
    
    December 31,2009
    
    
    2008
    
    
    2008($ in millions)Cash and cash equivalents
    
    $
    35.6
    
    
    $
    140.3
    
    
    $
    30.8Availability on revolving credit facility
    
    
    302.6
    
    
    
    191.7
    
    
    
    188.6Availability on receivable securitization program
    
    
    120.0
    
    
    
    400.0
    
    
    
    120.0Availability on the Agriliance credit facility
    
    
    
    
    
    
    20.0
    
    
    
    Availability on MoArk revolving credit facility
    
    
    40.0
    
    
    
    40.0
    
    
    
    40.0Total liquidity
    
    $
    498.2
    
    
    $
    792.0
    
    
    $
    379.4
  42




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##### Table of Contents



Cash Flows
  Operating Activities
 For the Six Months EndedJune 30,2009
    
    
    2008($ in millions)Net earnings attributable to Land OLakes, Inc.
    
    $
    164.1
    
    
    $
    164.1Adjustments to reconcile net earnings attributable to Land OLakes, Inc. to
net cash provided by operating activities
    
    
    79.6
    
    
    
    22.9Changes in current assets and liabilities, net of acquisitions and divestitures
    
    
    (156.5
    )
    
    
    139.2Net cash provided by operating activities
    
    $
    87.2
    
    
    $
    326.2
  Investing Activities
 For the Six Months EndedJune 30,2009
    
    
    2008($ in millions)Additions to property, plant and equipment
    
    $
    (73.4
    )
    
    $
    (69.6
    )Acquisitions, net of cash acquired
    
    
    
    
    
    
    (9.0
    )Investments in affiliates
    
    
    (1.7
    )
    
    
    (50.9
    )Distributions from investments in affiliated companies
    
    
    
    
    
    
    7.9Net proceeds from divestiture of a business
    
    
    2.7
    
    
    
    Proceeds from sale of investments
    
    
    17.0
    
    
    
    0.1Proceeds from foreign currency exchange contracts on sale of investment
    
    
    0.5
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    1.2
    
    
    
    3.1Insurance proceeds for replacement assets
    
    
    6.5
    
    
    
    Change in notes receivable
    
    
    (0.9
    )
    
    
    (11.8
    )Other
    
    
    0.3
    
    
    
    (0.7
    )Net cash used by investing activities
    
    $
    (47.8
    )
    
    $
    (130.9
    )
   Financing Activities
 For the Six Months EndedJune 30,2009
    
    
    2008($ in millions)Increase (decrease) in short-term debt, net
    
    $
    23.0
    
    
    $
    (64.8
    )Proceeds from issuance of long-term debt
    
    
    1.4
    
    
    
    0.5Principal payments on long-term debt and capital lease obligations
    
    
    (1.3
    )
    
    
    (13.3
    )Payments for redemption of member equities
    
    
    (54.6
    )
    
    
    (94.0
    )Payments for debt issuance costs
    
    
    (1.5
    )
    
    
    Other
    
    
    (1.7
    )
    
    
    (0.1
    )Net cash used by financing activities
    
    $
    (34.7
    )
    
    $
    (171.7
    )
  43




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Principal Debt Facilities
          44




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##### Table of Contents



Capital Leases
  Recent Accounting Pronouncements
     45




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##### Table of Contents



46




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##### Table of Contents



Critical Accounting Policies
  Forward-Looking Statements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  47




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##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of disclosure controls and procedures
   Remediation and Changes in Internal Control over Financial Reporting
  Inadequate interim periodic close process
  Personnel lacked adequate accounting expertise and business knowledge
  Remediation and Changes in Internal Control over Financial Reporting:
  Change in internal controls
  48




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##### Table of Contents



Part II. Other Information
 
 Item 1.
    
    Legal Proceedings
  ® ® ® ® ®
    49




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##### Table of Contents



Item 1A.
    
    Risk Factors
  
    
    COMPETITION IN THE INDUSTRY MAY REDUCE OUR SALES AND MARGINS.
    
    THE CURRENT ECONOMIC DOWNTURN COULD ADVERSELY AFFECT THE COMPANYS BUSINESS AND
FINANCIAL RESULTS.
    
    THE CURRENT CREDIT CRISIS COULD NEGATIVELY AFFECT OUR LIQUIDITY, INCREASE OUR COSTS OF
BORROWING AND DISRUPT THE OPERATIONS OF OUR SUPPLIERS AND CUSTOMERS.
    
    OUR OPERATIONS ARE SUBJECT TO NUMEROUS LAWS AND REGULATIONS, EXPOSING US TO POTENTIAL
CLAIMS AND COMPLIANCE COSTS THAT COULD ADVERSELY AFFECT OUR MARGINS, PARTICULARLY THOSE
RELATED TO OUR SALES OF ROUNDUP READY® ALFALFA.
    
    THE GEOGRAPHIC SHIFT IN DAIRY PRODUCTION HAS DECREASED SALES AND MARGINS AND COULD
CONTINUE TO NEGATIVELY IMPACT OUR SALES AND MARGINS.
    
    CURRENT AND THREATENED LITIGATION COULD INCREASE OUR EXPENSES, REDUCE OUR
PROFITABILITY, AND, IN SOME CASES, ADVERSELY AFFECT OUR BUSINESS REPUTATION.
    
    CHANGES IN CONSUMER PREFERENCES AND DISTRIBUTION CHANNELS COULD DECREASE OUR DAIRY
FOODS REVENUES AND CASH FLOWS.
    
    OUR OPERATING RESULTS FLUCTUATE BY SEASON AND ARE AFFECTED BY WEATHER CONDITIONS.
    
    INCREASED ENERGY AND GAS COSTS COULD INCREASE OUR EXPENSES AND REDUCE OUR
PROFITABILTIY.
    
    OUTBREAKS OF DISEASE CAN REDUCE OUR NET SALES AND OPERATING MARGINS.
    
    CHANGES IN THE MARKET PRICES OF THE COMMODITIES THAT WE USE AS INPUTS AS WELL AS THE
PRODUCTS WE MARKET MAY CAUSE OUR MARGINS TO DECLINE AND REDUCE THE LIKELIHOOD OF RECEIVING
DIVIDENDS FROM OUR JOINT VENTURES.
    
    WE OPERATE THROUGH JOINT VENTURES IN WHICH OUR RIGHTS TO EARNINGS AND TO CONTROL THE
JOINT VENTURE ARE LIMITED.
    
    CERTAIN OF OUR BUSINESSES MAY BE ADVERSELY AFFECTED BY OUR DEPENDENCE UPON OUR
SUPPLIERS.
    
    THE MANNER IN WHICH WE PAY FOR CERTAIN OF OUR INPUTS AND OTHER PRODUCTS THAT WE
DISTRIBUTE EXPOSES US TO SUPPLIER-SPECIFIC RISK.
    
    INCREASED FINANCIAL LEVERAGE COULD ADVERSELY AFFECT OUR ABILITY TO FULFILL OUR
OBLIGATIONS UNDER OUR DEBT FACILITIES AND TO OPERATE OUR BUSINESSES.
    
    SERVICING OUR INDEBTEDNESS REQUIRES A SIGNIFICANT AMOUNT OF CASH, AND OUR ABILITY TO
GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
    
    IF CREDITORS OF OUR SUBSIDIARIES AND JOINT VENTURES MAKE CLAIMS WITH RESPECT TO THE
ASSETS AND EARNINGS OF THESE COMPANIES, SUFFICIENT FUNDS MAY NOT BE AVAILABLE TO REPAY OUR
INDEBTEDNESS AND WE MAY NOT RECEIVE THE CASH WE EXPECT FROM INTERCOMPANY TRANSFERS.
 50




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##### Table of Contents




    
    THE COLLATERAL PLEDGED IN SUPPORT OF OUR DEBT OBLIGATIONS MAY NOT BE VALUABLE ENOUGH TO
SATISFY ALL THE BORROWINGS SECURED BY THE COLLATERAL.
    
    A LOSS OF OUR COOPERATIVE TAX STATUS COULD INCREASE OUR TAX LIABILITY.
    
    OUR LIMITED ACCESS TO EQUITY MARKETS COULD ADVERSELY AFFECT OUR ABILITY TO OBTAIN
ADDITIONAL EQUITY CAPITAL.
    
    INABILITY TO PROTECT OUR TRADEMARKS AND OTHER PROPRIETARY RIGHTS COULD DAMAGE OUR
COMPETITIVE POSITION.
    
    OUR BRAND NAMES COULD BE CONFUSED WITH NAMES OF OTHER COMPANIES WHO, BY THEIR ACT OR
OMISSION, COULD ADVERSELY AFFECT THE VALUE OF OUR BRAND NAMES.
    
    A CHANGE IN THE ASSUMPTIONS USED TO VALUE OUR REPORTING UNITS OR OUR INDEFINITE-LIVED
INTANGIBLE ASSETS COULD NEGATIVELY AFFECT OUR CONSOLIDATED RESULTS OF OPERATIONS AND NET
WORTH.
    
    PRODUCT LIABILITY CLAIMS OR PRODUCT RECALLS COULD ADVERSELY AFFECT OUR BUSINESS
REPUTATION AND EXPOSE US TO INCREASED SCRUTINY BY FEDERAL AND STATE REGULATORS.
    
    WE COULD INCUR SIGNIFICANT COSTS FOR VIOLATIONS OF OR LIABILITIES UNDER ENVIRONMENTAL
LAWS AND REGULATIONS APPLICABLE TO OUR OPERATIONS.
    
    STRIKES OR WORK STOPPAGES BY OUR UNIONIZED WORKERS COULD DISRUPT OUR BUSINESS.
    
    THERE IS NO ASSURANCE THAT OUR SENIOR MANAGEMENT TEAM OR OTHER KEY EMPLOYEES WILL
REMAIN WITH US.
 
 Item 5.
    
    Other Information
 
 Item 6.
    
    Exhibits
 (a) Exhibits
 EXHIBIT
    
    DESCRIPTION10.4
    
    Fourth Amendment to the Amended and Restated Five-Year Revolving Credit Agreement, dated as of May 4, 2009.31.1
    
    Certification Pursuant to 15 U.S.C. Section 7241, As Adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*31.2
    
    Certification Pursuant to 15 U.S.C. Section 7241, As Adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
 
 *
    
    Filed electronically herewith 51




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SIGNATURES
  LAND OLAKES, INC.By
    /s/ Daniel KnutsonDaniel E. KnutsonSenior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) 52