##### 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 September 30, 2008
 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
    
    41-0365145(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (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
  Large accelerated filer o   
    Accelerated filer
o
    Non-accelerated filer þ
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



INDEX
 PagePart
I
    
    Financial Information
    
    3Item 1.
    
    Financial Statements
    
    3Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007
    
    3Consolidated Statements of Operations for the three and nine months ended September 30,
2008 and 2007 (unaudited)
    
    4Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007
(unaudited)
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    32Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    54Item 4.
    
    Controls and Procedures
    
    54Part
II
    
    Other Information
    
    56Item 1.
    
    Legal Proceedings
    
    56Item 1A.
    
    Risk Factors
    
    57Item 6.
    
    Exhibits
    
    59SIGNATURES
    
    60EX-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
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)($ in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    28,835
    
    
    $
    116,839Receivables, net
    
    
    1,420,907
    
    
    
    1,006,931Inventories
    
    
    1,089,884
    
    
    
    964,515Prepaid assets
    
    
    39,632
    
    
    
    857,257Other current assets
    
    
    120,780
    
    
    
    76,357Total current assets
    
    
    2,700,038
    
    
    
    3,021,899Investments
    
    
    329,910
    
    
    
    304,013Property, plant and equipment, net
    
    
    629,799
    
    
    
    565,293Goodwill, net
    
    
    279,545
    
    
    
    280,942Other intangibles, net
    
    
    122,382
    
    
    
    125,004Other assets
    
    
    140,506
    
    
    
    122,044Total assets
    
    $
    4,202,180
    
    
    $
    4,419,195LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    531,225
    
    
    $
    132,170Current portion of long-term debt
    
    
    2,371
    
    
    
    3,082Accounts payable
    
    
    1,170,877
    
    
    
    1,150,353Customer advances
    
    
    11,397
    
    
    
    926,240Accrued liabilities
    
    
    494,358
    
    
    
    341,421Patronage refunds and other member equities payable
    
    
    46,170
    
    
    
    28,065Total current liabilities
    
    
    2,256,398
    
    
    
    2,581,331Long-term debt
    
    
    576,909
    
    
    
    586,909Employee benefits and other liabilities
    
    
    255,588
    
    
    
    230,444Minority interests
    
    
    18,497
    
    
    
    6,175Commitments and contingenciesEquities:Capital stock
    
    
    1,644
    
    
    
    1,701Member equities
    
    
    959,778
    
    
    
    937,126Accumulated other comprehensive loss
    
    
    (61,052
    )
    
    
    (61,931
    )Retained earnings
    
    
    194,418
    
    
    
    137,440Total equities
    
    
    1,094,788
    
    
    
    1,014,336Total liabilities and equities
    
    $
    4,202,180
    
    
    $
    4,419,195
  3




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LAND OLAKES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Restated)
    
    
    
    
    
    
    (Restated)($ in thousands)Net sales
    
    $
    2,783,930
    
    
    $
    2,134,573
    
    
    $
    9,368,794
    
    
    $
    6,338,872Cost of sales
    
    
    2,547,330
    
    
    
    1,974,229
    
    
    
    8,569,999
    
    
    
    5,771,562Gross profit
    
    
    236,600
    
    
    
    160,344
    
    
    
    798,795
    
    
    
    567,310Selling, general and administrative
    
    
    204,642
    
    
    
    159,187
    
    
    
    562,330
    
    
    
    449,040Restructuring and impairment
    
    
    
    
    
    
    32
    
    
    
    41
    
    
    
    1,721Gain on insurance settlement
    
    
    (4,032
    )
    
    
    
    
    
    
    (4,032
    )
    
    
    (5,941
    )Earnings from operations
    
    
    35,990
    
    
    
    1,125
    
    
    
    240,456
    
    
    
    122,490Interest expense, net
    
    
    15,369
    
    
    
    10,339
    
    
    
    48,091
    
    
    
    34,059Other (income) expense, net
    
    
    
    
    
    
    (9,383
    )
    
    
    12
    
    
    
    (37,679
    )Equity in earnings of affiliated companies
    
    
    (13,541
    )
    
    
    (10,317
    )
    
    
    (38,099
    )
    
    
    (31,313
    )Minority interest in earnings of subsidiaries
    
    
    3,870
    
    
    
    286
    
    
    
    15,553
    
    
    
    872Earnings before income taxes
    
    
    30,292
    
    
    
    10,200
    
    
    
    214,899
    
    
    
    156,551Income tax expense
    
    
    1,730
    
    
    
    7,111
    
    
    
    22,269
    
    
    
    21,334Net earnings
    
    $
    28,562
    
    
    $
    3,089
    
    
    $
    192,630
    
    
    $
    135,217Applied to:Member equitiesAllocated patronage
    
    $
    5,698
    
    
    $
    (2,069
    )
    
    $
    133,835
    
    
    $
    98,792Deferred equities
    
    
    (1,893
    )
    
    
    (206
    )
    
    
    679
    
    
    
    4,6783,805
    
    
    
    (2,275
    )
    
    
    134,514
    
    
    
    103,470Retained earnings
    
    
    24,757
    
    
    
    5,364
    
    
    
    58,116
    
    
    
    31,747$
    28,562
    
    
    $
    3,089
    
    
    $
    192,630
    
    
    $
    135,217
  4




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LAND OLAKES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Nine Months EndedSeptember 30,2008
    
    
    2007(Restated)($ in thousands)Cash flows from operating activities:Net earnings
    
    $
    192,630
    
    
    $
    135,217Adjustments to reconcile net earnings to net cash used by operating activities:Depreciation and amortization
    
    
    67,776
    
    
    
    62,579Amortization of deferred financing costs
    
    
    3,413
    
    
    
    2,272Bad debt expense
    
    
    5,731
    
    
    
    2,513Proceeds from patronage revolvement received
    
    
    1,777
    
    
    
    3,133Non-cash patronage income
    
    
    (4,177
    )
    
    
    (1,462
    )Insurance recovery  business interruption
    
    
    
    
    
    
    4,551Deferred income tax benefit
    
    
    (20,707
    )
    
    
    (31,139
    )Increase in other assets
    
    
    (2,269
    )
    
    
    (2,057
    )Increase (decrease) in other liabilities
    
    
    21,399
    
    
    
    (715
    )Restructuring and impairment
    
    
    41
    
    
    
    1,721Gain on divestiture of businesses
    
    
    
    
    
    
    (28,474
    )Loss (gain) on sale of investments
    
    
    12
    
    
    
    (9,205
    )Gain on insurance settlement
    
    
    (4,032
    )
    
    
    (5,941
    )Equity in earnings of affiliated companies
    
    
    (38,099
    )
    
    
    (31,313
    )Dividends from investments in affiliated companies
    
    
    32,652
    
    
    
    27,020Minority interests
    
    
    15,553
    
    
    
    872Other
    
    
    (2,698
    )
    
    
    (218
    )Changes in current assets and liabilities, net of acquisitions and divestitures:Receivables
    
    
    (412,580
    )
    
    
    (185,542
    )Inventories
    
    
    (102,923
    )
    
    
    (150,118
    )Prepaid assets and other current assets
    
    
    810,792
    
    
    
    305,855Accounts payable
    
    
    15,011
    
    
    
    210,550Customer advances
    
    
    (933,016
    )
    
    
    (410,611
    )Accrued liabilities
    
    
    154,816
    
    
    
    67,850Net cash used by operating activities
    
    
    (198,898
    )
    
    
    (32,662
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (120,533
    )
    
    
    (62,309
    )Acquisitions, net of cash acquired
    
    
    (9,040
    )
    
    
    (2,930
    )Investments in affiliates
    
    
    (50,860
    )
    
    
    (216,555
    )Distributions from investments in affiliated companies
    
    
    8,824
    
    
    
    Net settlement on repositioning investment in joint venture
    
    
    
    
    
    
    (133,539
    )Net proceeds from divestiture of businesses
    
    
    
    
    
    
    212,101Proceeds from sale of investments
    
    
    49
    
    
    
    475Proceeds from sale of property, plant and equipment
    
    
    5,581
    
    
    
    5,068Insurance proceeds for replacement assets
    
    
    5,321
    
    
    
    8,635Change in notes receivable
    
    
    (11,606
    )
    
    
    (18,193
    )Other
    
    
    3,049
    
    
    
    (606
    )Net cash used by investing activities
    
    
    (169,215
    )
    
    
    (207,853
    )Cash flows from financing activities:Increase in short-term debt
    
    
    388,685
    
    
    
    282,634Proceeds from issuance of long-term debt
    
    
    496
    
    
    
    5,500Principal payments on long-term debt
    
    
    (14,138
    )
    
    
    (36,856
    )Payments for redemption of member equities
    
    
    (94,896
    )
    
    
    (36,213
    )Other
    
    
    (38
    )
    
    
    (156
    )Net cash provided by financing activities
    
    
    280,109
    
    
    
    214,909Net decrease in cash and cash equivalents
    
    
    (88,004
    )
    
    
    (25,606
    )Cash and cash equivalents at beginning of the period
    
    
    116,839
    
    
    
    79,707Cash and cash equivalents at end of the period
    
    $
    28,835
    
    
    $
    54,101Supplementary Disclosure of Cash Flow InformationCash paid during periods for:Interest
    
    $
    46,812
    
    
    $
    39,538Income taxes
    
    
    57,541
    
    
    
    48,294
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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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Accounting Estimates
  7




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2. Adjustment and Restatement of Prior Years Consolidated Financial Statements
 MoArk, LLC Adjustment of Financial Results
    8




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##### Table of Contents



PreviouslyReported
    
    Effect of
    
    Adjusted2007
    
    Adjustment
    
    2007Total current assets
    
    $
    3,020,272
    
    
    $
    1,627
    
    
    $
    3,021,899Investments
    
    
    303,978
    
    
    
    35
    
    
    
    304,013Property, plant and equipment, net
    
    
    551,752
    
    
    
    13,541
    
    
    
    565,293Goodwill, net
    
    
    318,224
    
    
    
    (37,282
    )
    
    
    280,942Other intangibles, net
    
    
    119,167
    
    
    
    5,837
    
    
    
    125,004Other assets
    
    
    118,438
    
    
    
    3,606
    
    
    
    122,044Total assets
    
    
    4,431,831
    
    
    
    (12,636
    )
    
    
    4,419,195Total current liabilities
    
    
    2,579,486
    
    
    
    1,845
    
    
    
    2,581,331Long-term debt
    
    
    611,602
    
    
    
    (24,693
    )
    
    
    586,909Employee benefits and other liabilities
    
    
    202,400
    
    
    
    28,044
    
    
    
    230,444Retained earnings
    
    
    155,272
    
    
    
    (17,832
    )
    
    
    137,440Total equities
    
    
    1,032,168
    
    
    
    (17,832
    )
    
    
    1,014,336Total liabilities and equities
    
    
    4,431,831
    
    
    
    (12,636
    )
    
    
    4,419,195
 Agriliance Restatement of Financial Results
   9




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For the three months ended September 30,Previously
    
    Effect of
    
    Effect ofReported
    
    MoArk
    
    Agriliance
    
    Restated2007
    
    Adjustments
    
    Restatement
    
    2007Cost of sales
    
    $
    1,967,905
    
    
    $
    1,944
    
    
    $
    4,380
    
    
    $
    1,974,229Gross profit
    
    
    166,668
    
    
    
    (1,944
    )
    
    
    (4,380
    )
    
    
    160,344Selling, general and administrative
    
    
    158,194
    
    
    
    993
    
    
    
    
    
    
    
    159,187Earnings from operations
    
    
    8,442
    
    
    
    (2,937
    )
    
    
    (4,380
    )
    
    
    1,125Interest expense, net
    
    
    9,794
    
    
    
    545
    
    
    
    
    
    
    
    10,339Equity in losses (earnings) of
affiliated companies
    
    
    7,075
    
    
    
    
    
    
    
    (17,392
    )
    
    
    (10,317
    )Earnings before income taxes
    
    
    670
    
    
    
    (3,482
    )
    
    
    13,012
    
    
    
    10,200Income tax expense
    
    
    3,466
    
    
    
    (1,332
    )
    
    
    4,977
    
    
    
    7,111Net (loss) earnings
    
    
    (2,796
    )
    
    
    (2,150
    )
    
    
    8,035
    
    
    
    3,089
 For the nine months ended September 30,Previously
    
    Effect of
    
    Effect ofReported
    
    MoArk
    
    Agriliance
    
    Restated2007
    
    Adjustments
    
    Restatement
    
    2007Cost of sales
    
    $
    5,765,238
    
    
    $
    1,944
    
    
    $
    4,380
    
    
    $
    5,771,562Gross profit
    
    
    573,634
    
    
    
    (1,944
    )
    
    
    (4,380
    )
    
    
    567,310Selling, general and administrative
    
    
    448,047
    
    
    
    993
    
    
    
    
    
    
    
    449,040Earnings from operations
    
    
    129,807
    
    
    
    (2,937
    )
    
    
    (4,380
    )
    
    
    122,490Interest expense, net
    
    
    33,514
    
    
    
    545
    
    
    
    
    
    
    
    34,059Equity in losses (earnings) of
affiliated companies
    
    
    (58,044
    )
    
    
    
    
    
    
    26,731
    
    
    
    (31,313
    )Earnings before income taxes
    
    
    191,144
    
    
    
    (3,482
    )
    
    
    (31,111
    )
    
    
    156,551Income tax expense
    
    
    34,566
    
    
    
    (1,332
    )
    
    
    (11,900
    )
    
    
    21,334Net (loss) earnings
    
    
    156,578
    
    
    
    (2,150
    )
    
    
    (19,211
    )
    
    
    135,217
  For the nine months ended September 30Previously
    
    Effect of
    
    Effect ofReported
    
    MoArk
    
    Agriliance
    
    Restated2007
    
    Adjustments
    
    Restatement
    
    2007Net earnings
    
    $
    156,578
    
    
    $
    (2,150
    )
    
    $
    (19,211
    )
    
    $
    135,217Depreciation and amortization
    
    
    61,514
    
    
    
    1,065
    
    
    
    
    
    
    
    62,579Amortization of deferred financing costs
    
    
    1,727
    
    
    
    545
    
    
    
    
    
    
    
    2,272Bad debt expense
    
    
    2,334
    
    
    
    179
    
    
    
    
    
    
    
    2,513Deferred income tax benefit
    
    
    (17,907
    )
    
    
    (1,332
    )
    
    
    (11,900
    )
    
    
    (31,139
    )Equity in earnings of affiliated companies
    
    
    (58,044
    )
    
    
    
    
    
    
    26,731
    
    
    
    (31,313
    )Change in receivables
    
    
    (190,021
    )
    
    
    99
    
    
    
    4,380
    
    
    
    (185,542
    )Change in prepaid assets and other current assets
    
    
    305,287
    
    
    
    568
    
    
    
    
    
    
    
    305,855Change in accrued expenses
    
    
    66,824
    
    
    
    1,026
    
    
    
    
    
    
    
    67,850
 10




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##### Table of Contents



3. Receivables
  September 30,
    
    
    December 31,2008
    
    
    2007Trade accounts
    
    $
    954,737
    
    
    $
    834,070Notes and contracts
    
    
    99,049
    
    
    
    92,207Vendor rebates
    
    
    284,489
    
    
    
    26,050Other
    
    
    105,039
    
    
    
    68,7291,443,314
    
    
    
    1,021,056Less allowance for doubtful accounts
    
    
    (22,407
    )
    
    
    (14,125
    )Total receivables, net
    
    $
    1,420,907
    
    
    $
    1,006,931
    4. Inventories
  September 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    224,518
    
    
    $
    190,586Work in process
    
    
    2,542
    
    
    
    5,058Finished goods
    
    
    862,824
    
    
    
    768,871Total inventories
    
    $
    1,089,884
    
    
    $
    964,515
 5. Investments
  September 30,
    
    
    December 31,2008
    
    
    2007Agriliance LLC
    
    $
    186,870
    
    
    $
    150,945Ag Processing Inc.
    
    
    35,391
    
    
    
    32,832Advanced Food Products, LLC
    
    
    32,571
    
    
    
    34,287Delta Egg Farm, LLC
    
    
    10,757
    
    
    
    7,614Universal Cooperatives, Inc.
    
    
    7,908
    
    
    
    7,802Melrose Dairy Proteins, LLC
    
    
    7,538
    
    
    
    3,856CoBank, ACB
    
    
    4,892
    
    
    
    4,396Prairie Farms Dairy, Inc.
    
    
    3,571
    
    
    
    3,518Agronomy Company of Canada Ltd.
    
    
    
    
    
    
    21,909Other  principally cooperatives and joint ventures
    
    
    40,412
    
    
    
    36,854Total investments
    
    $
    329,910
    
    
    $
    304,013
  11




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##### Table of Contents





For the three months ended
    
    For the three months endedSeptember 30,
    
    September 30,2008
    
    2007Net sales
    
    $
    189,406
    
    
    $
    586,539Gross profit
    
    
    46,715
    
    
    
    111,969Net earnings
    
    
    14,774
    
    
    
    6,357
 For the nine months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2008
    
    2007Net sales
    
    $
    845,755
    
    
    $
    3,234,554Gross profit
    
    
    131,724
    
    
    
    330,271Net earnings
    
    
    22,466
    
    
    
    41,710
 September 30,
    
    December 31,2008
    
    2007Current assets
    
    $
    474,505
    
    
    $
    696,332Non-current assets
    
    
    21,741
    
    
    
    66,099Current liabilities
    
    
    110,113
    
    
    
    426,674Non-current liabilities
    
    
    12,367
    
    
    
    33,867Total equity
    
    
    373,766
    
    
    
    301,890
    6. Goodwill and Other Intangible Assets
 Goodwill
  September 30,
    
    
    December 31,2008
    
    
    2007Feed
    
    $
    127,109
    
    
    $
    127,404Dairy Foods
    
    
    68,757
    
    
    
    69,451Layers
    
    
    20,685
    
    
    
    20,998Agronomy
    
    
    52,303
    
    
    
    52,371Seed
    
    
    10,691
    
    
    
    10,718Total goodwill
    
    $
    279,545
    
    
    $
    280,942
   12




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##### Table of Contents



Other Intangible Assets
  September 30,
    
    
    December 31,2008
    
    
    2007Amortized other intangible assets:Patents, less accumulated amortization of $8,124 and $7,250, respectively
    
    $
    8,587
    
    
    $
    9,461Trademarks, less accumulated amortization of $2,495 and $1,976, respectively
    
    
    5,119
    
    
    
    5,639Dealer networks and customer relationships, less accumulated amortization of $3,427 and
$1,628, respectively
    
    
    51,094
    
    
    
    51,822Other intangible assets, less accumulated amortization of $4,090 and $4,863, respectively
    
    
    5,957
    
    
    
    6,457Total amortized other intangible assets
    
    
    70,757
    
    
    
    73,379Total non-amortized other intangible assets  trademarks and license agreements
    
    
    51,625
    
    
    
    51,625Total other intangible assets
    
    $
    122,382
    
    
    $
    125,004
  7. Accrued Liabilities
  September 30,
    
    
    December 31,2008
    
    
    2007Employee compensation and benefits
    
    $
    142,761
    
    
    $
    116,249Marketing programs and consumer incentives
    
    
    153,554
    
    
    
    63,157Unrealized hedging losses and deferred option premiums received
    
    
    68,874
    
    
    
    31,679Other
    
    
    129,169
    
    
    
    130,336Total accrued liabilities
    
    $
    494,358
    
    
    $
    341,421
  8. Debt Obligations
 Notes and Short-term Obligations
     13




---



##### Table of Contents



Long-term Debt
  September 30,
    
    
    December 31,2008
    
    
    2007Senior unsecured notes  due 2011 (8.75%)
    
    $
    192,743
    
    
    $
    192,743Senior secured notes  due 2010 (9.00%)
    
    
    175,000
    
    
    
    175,000Capital Securities of Trust Subsidiary  due 2028 (7.45%)
    
    
    190,700
    
    
    
    190,700MoArk LLC debt  due 2009 through 2023 (7.74% weighted average)
    
    
    15,587
    
    
    
    26,490MoArk LLC capital lease obligations (6.00% to 8.25%)
    
    
    4,985
    
    
    
    6,000Other debt, including discounts and amortizable terminated swap value
    
    
    265
    
    
    
    (942
    )579,280
    
    
    
    589,991Less current portion
    
    
    (2,371
    )
    
    
    (3,082
    )Total long-term debt
    
    $
    576,909
    
    
    $
    586,909
  9. Other Comprehensive Income
  Three months
    
    
    Nine monthsended
    
    
    endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net earnings
    
    $
    28,562
    
    
    $
    3,089
    
    
    $
    192,630
    
    
    $
    135,217Unrealized gain (loss) on available-for-sale-investment securities
    
    
    (39
    )
    
    
    283
    
    
    
    (214
    )
    
    
    283Foreign currency translation adjustment
    
    
    (137
    )
    
    
    611
    
    
    
    (587
    )
    
    
    1,853Other
    
    
    1,811
    
    
    
    (1,055
    )
    
    
    1,680
    
    
    
    (1,249
    )Total comprehensive income
    
    $
    30,197
    
    
    $
    2,928
    
    
    $
    193,509
    
    
    $
    136,104
 10. Fair Value Measurement
    14




---



##### Table of Contents



Level 1:
 Level 2:
 Level 3:
  Fair Value Measurements at September 30, 2008 Using:SignificantQuoted prices
    
    other
    
    SignificantTotal carrying
    
    in active
    
    observable
    
    unobservablevalue at
    
    markets
    
    inputs
    
    inputsSeptember 30, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Foreign currency exchange contract liabilities
    
    $
    650
    
    
    $
    
    
    
    $
    650
    
    
    $
    Available-for-sale securities
    
    
    191
    
    
    
    191
    
    
    
    
    
    
    
    Commodity derivative assets
    
    
    31,125
    
    
    
    28,242
    
    
    
    2,883
    
    
    
    Commodity derivative liabilities
    
    
    50,250
    
    
    
    49,813
    
    
    
    437
    
    
    
    
   11. Income Taxes
   15




---



##### Table of Contents



12. Pension and Other Postretirement Plans
  Other PostretirementPension Benefits
    
    
    Benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    3,810
    
    
    $
    3,566
    
    
    $
    196
    
    
    $
    182Interest cost
    
    
    9,678
    
    
    
    8,296
    
    
    
    1,071
    
    
    
    980Expected return on assets
    
    
    (11,000
    )
    
    
    (9,262
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    1,290
    
    
    
    3,238
    
    
    
    488
    
    
    
    735Amortization of prior service cost
    
    
    (132
    )
    
    
    (121
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    107Net periodic benefit cost
    
    $
    3,646
    
    
    $
    5,717
    
    
    $
    1,871
    
    
    $
    2,004
    Other PostretirementPension Benefits
    
    
    Benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    11,431
    
    
    $
    10,699
    
    
    $
    589
    
    
    $
    547Interest cost
    
    
    29,033
    
    
    
    24,888
    
    
    
    3,212
    
    
    
    2,942Expected return on assets
    
    
    (32,999
    )
    
    
    (27,788
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    3,871
    
    
    
    9,709
    
    
    
    1,466
    
    
    
    2,207Amortization of prior service cost
    
    
    (396
    )
    
    
    (365
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    348
    
    
    
    321Net periodic benefit cost
    
    $
    10,940
    
    
    $
    17,143
    
    
    $
    5,615
    
    
    $
    6,017
  13. Restructuring and Impairment Charges
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Restructuring charges
    
    $
    
    
    
    $
    32
    
    
    $
    41
    
    
    $
    411Impairment charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,310Total restructuring and impairment charges
    
    $
    
    
    
    $
    32
    
    
    $
    41
    
    
    $
    1,721
 Restructuring Charges
   Impairment Charges
  16




---



##### Table of Contents



14. Gain on Insurance Settlement
    15. Other Income, Net
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Loss (gain) on divestiture
    
    $
    
    
    
    $
    7
    
    
    $
    
    
    
    $
    (28,474
    )(Gain) loss on sale of investments
    
    
    
    
    
    
    (9,390
    )
    
    
    12
    
    
    
    (9,205
    )Total other (income) expense, net
    
    $
    
    
    
    $
    (9,383
    )
    
    $
    12
    
    
    $
    (37,679
    )
   16. Other Acquisitions
   17. Commitments and Contingencies
 ® ® ® ®
 17




---



##### Table of Contents



®
      18. Segment Information
   18




---



##### Table of Contents



Layers
    
    
    LayersThree Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2007
    
    
    2007Cost of sales  as previously reported
    
    $
    102,279
    
    
    $
    306,687Adjustment for MoArk
    
    
    1,944
    
    
    
    1,944Cost of sales  as adjusted
    
    
    104,223
    
    
    
    308,631Selling, general and administrative  as previously reported
    
    
    10,009
    
    
    
    25,118Adjustment for MoArk
    
    
    993
    
    
    
    993Selling, general and administrative  as adjusted
    
    
    11,002
    
    
    
    26,111Interest expense (income), net  as previously reported
    
    
    3,497
    
    
    
    11,420Adjustment for MoArk
    
    
    545
    
    
    
    545Interest expense (income), net  as adjusted
    
    
    4,042
    
    
    
    11,965Earnings before income taxes  as previously reported
    
    
    11,427
    
    
    
    18,334Adjustment for MoArk
    
    
    (3,482
    )
    
    
    (3,482
    )Earnings before income taxes  as adjusted
    
    
    7,945
    
    
    
    14,852
 19




---



##### Table of Contents



Agronomy
    
    
    AgronomyThree Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2007
    
    
    2007Cost of sales  as previously reported
    
    $
    89,691
    
    
    $
    89,689Adjustment for vendor rebates
    
    
    4,380
    
    
    
    4,380Cost of sales  as restated
    
    
    94,071
    
    
    
    94,069Equity in earnings of affiliated companies  as previously reported
    
    
    11,247
    
    
    
    (50,588
    )Adjustment for vendor rebates
    
    
    (17,392
    )
    
    
    26,731Equity in earnings of affiliated companies  as restated
    
    
    (6,145
    )
    
    
    (23,857
    )Earnings before income taxes  as previously reported
    
    
    (6,175
    )
    
    
    49,114Adjustment for vendor rebates
    
    
    13,012
    
    
    
    (31,111
    )Earnings before income taxes  as restated
    
    
    6,837
    
    
    
    18,003
 20




---



##### Table of Contents



Other/Dairy Foods
    
    
    Feed
    
    
    Seed
    
    
    Agronomy*
    
    
    Layers
    
    
    Eliminations
    
    
    ConsolidatedFor the three months ended September 30, 2008:Net sales (1)
    
    $
    984,888
    
    
    $
    990,757
    
    
    $
    45,014
    
    
    $
    642,168
    
    
    $
    135,470
    
    
    $
    (14,367
    )
    
    $
    2,783,930Cost of sales (2)
    
    
    953,080
    
    
    
    947,907
    
    
    
    37,627
    
    
    
    486,925
    
    
    
    132,696
    
    
    
    (10,905
    )
    
    
    2,547,330Selling, general and administrative
    
    
    52,057
    
    
    
    69,483
    
    
    
    18,641
    
    
    
    46,943
    
    
    
    14,339
    
    
    
    3,179
    
    
    
    204,642Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,032
    )
    
    
    
    
    
    
    (4,032
    )Interest expense (income), net
    
    
    4,519
    
    
    
    9,296
    
    
    
    (3,944
    )
    
    
    2,318
    
    
    
    4,481
    
    
    
    (1,301
    )
    
    
    15,369Equity in loss (earnings) of affiliated companies
    
    
    656
    
    
    
    (878
    )
    
    
    
    
    
    
    (11,602
    )
    
    
    (1,717
    )
    
    
    
    
    
    
    (13,541
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    324
    
    
    
    
    
    
    
    3,546
    
    
    
    
    
    
    
    
    
    
    
    3,870Earnings (loss) before income taxes
    
    $
    (25,424
    )
    
    $
    (35,375
    )
    
    $
    (7,310
    )
    
    $
    114,038
    
    
    $
    (10,297
    )
    
    $
    (5,340
    )
    
    $
    30,292For the three months ended September 30, 2007:Net sales (1)
    
    $
    1,121,337
    
    
    $
    722,819
    
    
    $
    80,136
    
    
    $
    94,036
    
    
    $
    123,614
    
    
    $
    (7,369
    )
    
    $
    2,134,573Cost of sales (2)
    
    
    1,062,331
    
    
    
    653,875
    
    
    
    65,488
    
    
    
    94,071
    
    
    
    104,223
    
    
    
    (5,759
    )
    
    
    1,974,229Selling, general and administrative
    
    
    51,883
    
    
    
    66,247
    
    
    
    19,166
    
    
    
    9,576
    
    
    
    11,002
    
    
    
    1,313
    
    
    
    159,187Restructuring and impairment charges
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32Interest expense (income), net
    
    
    6,305
    
    
    
    6,392
    
    
    
    (3,956
    )
    
    
    (913
    )
    
    
    4,042
    
    
    
    (1,531
    )
    
    
    10,339Other expense (income), net
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    (9,390
    )
    
    
    
    
    
    
    
    
    
    
    (9,383
    )Equity in loss (earnings) of affiliated companies
    
    
    566
    
    
    
    (1,144
    )
    
    
    4
    
    
    
    (6,145
    )
    
    
    (3,598
    )
    
    
    
    
    
    
    (10,317
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    286Earnings (loss) before income taxes
    
    $
    220
    
    
    $
    (2,844
    )
    
    $
    (566
    )
    
    $
    6,837
    
    
    $
    7,945
    
    
    $
    (1,392
    )
    
    $
    10,200For the nine months ended September 30, 2008:Net sales (1)
    
    $
    3,070,416
    
    
    $
    2,858,333
    
    
    $
    920,207
    
    
    $
    2,123,009
    
    
    $
    455,208
    
    
    $
    (58,379
    )
    
    $
    9,368,794Cost of sales (2)
    
    
    2,906,720
    
    
    
    2,639,800
    
    
    
    817,433
    
    
    
    1,863,880
    
    
    
    395,756
    
    
    
    (53,590
    )
    
    
    8,569,999Selling, general and administrative
    
    
    143,891
    
    
    
    201,947
    
    
    
    61,749
    
    
    
    104,549
    
    
    
    36,255
    
    
    
    13,939
    
    
    
    562,330Restructuring and impairment charges
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,032
    )
    
    
    
    
    
    
    (4,032
    )Interest expense (income), net
    
    
    10,321
    
    
    
    23,040
    
    
    
    (5,201
    )
    
    
    13,400
    
    
    
    10,433
    
    
    
    (3,902
    )
    
    
    48,091Other expense, net
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Equity in earnings of affiliated companies
    
    
    (4,801
    )
    
    
    (1,785
    )
    
    
    (1,252
    )
    
    
    (14,020
    )
    
    
    (16,241
    )
    
    
    
    
    
    
    (38,099
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    646
    
    
    
    
    
    
    
    14,907
    
    
    
    
    
    
    
    
    
    
    
    15,553Earnings (loss) before income taxes
    
    $
    14,244
    
    
    $
    (5,327
    )
    
    $
    47,478
    
    
    $
    140,293
    
    
    $
    33,037
    
    
    $
    (14,826
    )
    
    $
    214,899For the nine months ended September 30, 2007:Net sales (1)
    
    $
    2,994,676
    
    
    $
    2,175,933
    
    
    $
    739,526
    
    
    $
    94,036
    
    
    $
    354,556
    
    
    $
    (19,855
    )
    
    $
    6,338,872Cost of sales (2)
    
    
    2,774,392
    
    
    
    1,970,474
    
    
    
    640,797
    
    
    
    94,069
    
    
    
    308,631
    
    
    
    (16,801
    )
    
    
    5,771,562Selling, general and administrative
    
    
    149,563
    
    
    
    189,706
    
    
    
    59,020
    
    
    
    21,188
    
    
    
    26,111
    
    
    
    3,452
    
    
    
    449,040Restructuring and impairment charges
    
    
    141
    
    
    
    595
    
    
    
    688
    
    
    
    
    
    
    
    297
    
    
    
    
    
    
    
    1,721Gain on insurance settlement
    
    
    
    
    
    
    (5,941
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,941
    )Interest expense (income), net
    
    
    17,388
    
    
    
    19,568
    
    
    
    (4,640
    )
    
    
    (5,977
    )
    
    
    11,965
    
    
    
    (4,245
    )
    
    
    34,059Other (income) expense, net
    
    
    (28,481
    )
    
    
    7
    
    
    
    
    
    
    
    (9,390
    )
    
    
    
    
    
    
    185
    
    
    
    (37,679
    )Equity in loss (earnings) of affiliated companies
    
    
    1,924
    
    
    
    (2,023
    )
    
    
    (50
    )
    
    
    (23,857
    )
    
    
    (7,300
    )
    
    
    (7
    )
    
    
    (31,313
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872Earnings (loss) before income taxes
    
    $
    79,749
    
    
    $
    2,675
    
    
    $
    43,711
    
    
    $
    18,003
    
    
    $
    14,852
    
    
    $
    (2,439
    )
    
    $
    156,551
 
 *
    
    Increased Agronomy operations are due to the distribution of the crop protection products
business to the Company from Agriliance in September 2007.  Other/Dairy Foods
    
    Feed
    
    Seed
    
    Agronomy
    
    Layers
    
    Eliminations
    
    ConsolidatedFor the three months ended: September 30, 2008
    
    $
    1,705
    
    
    $
    16,946
    
    
    $
    (1,590
    )
    
    $
    60
    
    
    $
    
    
    
    $
    (17,121
    )
    
    $
    For the three months ended: September 30, 2007
    
    
    5,095
    
    
    
    6,229
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    (11,345
    )
    
    
    For the nine months ended: September 30, 2008
    
    
    6,128
    
    
    
    38,209
    
    
    
    11,483
    
    
    
    10,955
    
    
    
    
    
    
    
    (66,775
    )
    
    
    For the nine months ended: September 30, 2007
    
    
    17,804
    
    
    
    16,961
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    (34,786
    )
    
    
    
  Other/Dairy Foods
    
    Feed
    
    Seed
    
    Agronomy
    
    Layers
    
    Eliminations
    
    ConsolidatedFor the three months ended: September 30, 2008
    
    $
    (354
    )
    
    $
    19,407
    
    
    $
    10,048
    
    
    $
    
    
    
    $
    2,075
    
    
    $
    1,184
    
    
    $
    32,360For the three months ended: September 30, 2007
    
    
    (2,854
    )
    
    
    (5,039
    )
    
    
    (2,933
    )
    
    
    
    
    
    
    (1,133
    )
    
    
    390
    
    
    
    (11,569
    )For the nine months ended: September 30, 2008
    
    
    (4,611
    )
    
    
    25,617
    
    
    
    10,393
    
    
    
    
    
    
    
    2,695
    
    
    
    1,399
    
    
    
    35,493For the nine months ended: September 30, 2007
    
    
    (1,390
    )
    
    
    (762
    )
    
    
    (2,527
    )
    
    
    
    
    
    
    (1,277
    )
    
    
    897
    
    
    
    (5,059
    )
  21




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##### Table of Contents



19. Subsequent Events
       20. Consolidating Financial Information
    22




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##### Table of Contents



23




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
September 30, 2008
 LandOLakes, Inc.Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,239
    
    
    $
    2,601
    
    
    $
    23,995
    
    
    $
    
    
    
    $
    28,835Receivables, net
    
    
    100,629
    
    
    
    805,703
    
    
    
    949,898
    
    
    
    (435,323
    )
    
    
    1,420,907Intercompany receivables, net
    
    
    337,202
    
    
    
    10,874
    
    
    
    
    
    
    
    (348,076
    )
    
    
    Inventories
    
    
    445,077
    
    
    
    551,007
    
    
    
    93,800
    
    
    
    
    
    
    
    1,089,884Prepaid
assets
    
    
    30,755
    
    
    
    9,003
    
    
    
    (126
    )
    
    
    
    
    
    
    39,632Other current assets
    
    
    101,634
    
    
    
    18,023
    
    
    
    1,123
    
    
    
    
    
    
    
    120,780Total current assets
    
    
    1,017,536
    
    
    
    1,397,211
    
    
    
    1,068,690
    
    
    
    (783,399
    )
    
    
    2,700,038Investments
    
    
    1,075,801
    
    
    
    60,574
    
    
    
    16,027
    
    
    
    (822,492
    )
    
    
    329,910Property, plant and equipment, net
    
    
    235,425
    
    
    
    285,001
    
    
    
    109,373
    
    
    
    
    
    
    
    629,799Goodwill, net
    
    
    192,177
    
    
    
    66,271
    
    
    
    21,097
    
    
    
    
    
    
    
    279,545Other intangibles, net
    
    
    2,270
    
    
    
    112,788
    
    
    
    7,324
    
    
    
    
    
    
    
    122,382Other assets
    
    
    41,453
    
    
    
    42,577
    
    
    
    60,323
    
    
    
    (3,847
    )
    
    
    140,506Total assets
    
    $
    2,564,662
    
    
    $
    1,964,422
    
    
    $
    1,282,834
    
    
    $
    (1,609,738
    )
    
    $
    4,202,180LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    35,001
    
    
    $
    1,042
    
    
    $
    916,799
    
    
    $
    (421,617
    )
    
    $
    531,225Current portion of long-term debt
    
    
    
    
    
    
    50
    
    
    
    2,593
    
    
    
    (272
    )
    
    
    2,371Accounts payable
    
    
    437,285
    
    
    
    703,756
    
    
    
    45,884
    
    
    
    (16,048
    )
    
    
    1,170,877Intercompany payables, net
    
    
    
    
    
    
    340,292
    
    
    
    7,784
    
    
    
    (348,076
    )
    
    
    Customer advances
    
    
    593
    
    
    
    8,941
    
    
    
    1,863
    
    
    
    
    
    
    
    11,397Accrued liabilities
    
    
    180,537
    
    
    
    285,599
    
    
    
    29,727
    
    
    
    (1,505
    )
    
    
    494,358Patronage refunds and other member equities payable
    
    
    46,170
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,170Total current liabilities
    
    
    699,586
    
    
    
    1,339,680
    
    
    
    1,004,650
    
    
    
    (787,518
    )
    
    
    2,256,398Long-term debt
    
    
    557,039
    
    
    
    83
    
    
    
    19,515
    
    
    
    272
    
    
    
    576,909Employee benefits and other liabilities
    
    
    213,250
    
    
    
    28,960
    
    
    
    13,378
    
    
    
    
    
    
    
    255,588Minority interests
    
    
    (1
    )
    
    
    6,338
    
    
    
    12,160
    
    
    
    
    
    
    
    18,497Commitments and contingenciesEquities:Capital stock
    
    
    1,644
    
    
    
    
    
    
    
    2,908
    
    
    
    (2,908
    )
    
    
    1,644Additional paid-in capital
    
    
    
    
    
    
    195,359
    
    
    
    81,588
    
    
    
    (276,947
    )
    
    
    Member equities
    
    
    959,778
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    959,778Accumulated other comprehensive loss
    
    
    (61,052
    )
    
    
    (106
    )
    
    
    167
    
    
    
    (61
    )
    
    
    (61,052
    )Retained earnings
    
    
    194,418
    
    
    
    394,108
    
    
    
    148,468
    
    
    
    (542,576
    )
    
    
    194,418Total equities
    
    
    1,094,788
    
    
    
    589,361
    
    
    
    233,131
    
    
    
    (822,492
    )
    
    
    1,094,788Total liabilities and equities
    
    $
    2,564,662
    
    
    $
    1,964,422
    
    
    $
    1,282,834
    
    
    $
    (1,609,738
    )
    
    $
    4,202,180
 24




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended September 30, 2008
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    1,002,391
    
    
    $
    1,546,956
    
    
    $
    234,583
    
    
    $
    
    
    
    $
    2,783,930Cost of sales
    
    
    967,545
    
    
    
    1,364,877
    
    
    
    214,908
    
    
    
    
    
    
    
    2,547,330Gross profit
    
    
    34,846
    
    
    
    182,079
    
    
    
    19,675
    
    
    
    
    
    
    
    236,660Selling, general and administrative
    
    
    76,873
    
    
    
    110,853
    
    
    
    16,916
    
    
    
    
    
    
    
    204,642Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    (4,032
    )
    
    
    
    
    
    
    (4,032
    )(Loss) earnings from operations
    
    
    (42,027
    )
    
    
    71,226
    
    
    
    6,791
    
    
    
    
    
    
    
    35,990Interest expense (income), net
    
    
    21,628
    
    
    
    (2,520
    )
    
    
    (3,739
    )
    
    
    
    
    
    
    15,369Equity in earnings of affiliated companies
    
    
    (94,946
    )
    
    
    (1,159
    )
    
    
    (1,717
    )
    
    
    84,281
    
    
    
    (13,541
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    3,870
    
    
    
    
    
    
    
    3,870Earnings before income taxes
    
    
    31,291
    
    
    
    74,905
    
    
    
    8,377
    
    
    
    (84,281
    )
    
    
    30,292Income tax expense (benefit)
    
    
    2,729
    
    
    
    71
    
    
    
    (1,070
    )
    
    
    
    
    
    
    1,730Net earnings
    
    $
    28,562
    
    
    $
    74,834
    
    
    $
    9,447
    
    
    $
    (84,281
    )
    
    $
    28,562
 25




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the nine months ended September 30, 2008
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    3,896,230
    
    
    $
    4,703,485
    
    
    $
    769,079
    
    
    $
    
    
    
    $
    9,368,794Cost of sales
    
    
    3,637,022
    
    
    
    4,281,579
    
    
    
    651,398
    
    
    
    
    
    
    
    8,569,999Gross profit
    
    
    259,208
    
    
    
    421,906
    
    
    
    117,681
    
    
    
    
    
    
    
    798,795Selling, general and administrative
    
    
    225,915
    
    
    
    279,591
    
    
    
    56,824
    
    
    
    
    
    
    
    562,330Restructuring and impairment
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    (4,032
    )
    
    
    
    
    
    
    (4,032
    )Earnings from operations
    
    
    33,252
    
    
    
    142,315
    
    
    
    64,889
    
    
    
    
    
    
    
    240,456Interest expense (income), net
    
    
    50,495
    
    
    
    3,593
    
    
    
    (5,997
    )
    
    
    
    
    
    
    48,091Other expense, net
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12Equity in earnings of affiliated companies
    
    
    (230,312
    )
    
    
    (2,140
    )
    
    
    (16,241
    )
    
    
    210,594
    
    
    
    (38,099
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    15,553
    
    
    
    
    
    
    
    15,553Earnings before income taxes
    
    
    213,069
    
    
    
    140,850
    
    
    
    71,574
    
    
    
    (210,594
    )
    
    
    214,899Income tax expense
    
    
    20,439
    
    
    
    44
    
    
    
    1,786
    
    
    
    
    
    
    
    22,269Net earnings
    
    $
    192,630
    
    
    $
    140,806
    
    
    $
    69,788
    
    
    $
    (210,594
    )
    
    $
    192,630
 26




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2008
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net earnings
    
    $
    192,630
    
    
    $
    140,806
    
    
    $
    69,788
    
    
    $
    (210,594
    )
    
    $
    192,630Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:Depreciation and amortization
    
    
    27,944
    
    
    
    31,989
    
    
    
    7,843
    
    
    
    
    
    
    
    67,776Amortization of deferred financing costs
    
    
    1,467
    
    
    
    
    
    
    
    1,946
    
    
    
    
    
    
    
    3,413Bad debt expense
    
    
    2,100
    
    
    
    2,216
    
    
    
    1,415
    
    
    
    
    
    
    
    5,731Proceeds from patronage revolvement received
    
    
    1,769
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    1,777Non-cash patronage income
    
    
    (622
    )
    
    
    (3,555
    )
    
    
    
    
    
    
    
    
    
    
    (4,177
    )Deferred income tax expense (benefit)
    
    
    (20,707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,707
    )Increase in other assets
    
    
    (479
    )
    
    
    (1,676
    )
    
    
    (226
    )
    
    
    112
    
    
    
    (2,269
    )Increase (decrease) in other liabilities
    
    
    21,349
    
    
    
    51
    
    
    
    (1
    )
    
    
    
    
    
    
    21,399Restructuring and impairment
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Loss on sale of investments
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    (4,032
    )
    
    
    
    
    
    
    (4,032
    )Equity in earnings of affiliated companies
    
    
    (230,312
    )
    
    
    (2,140
    )
    
    
    (16,241
    )
    
    
    210,594
    
    
    
    (38,099
    )Dividends from investments in affiliated companies
    
    
    23,126
    
    
    
    1,900
    
    
    
    7,626
    
    
    
    
    
    
    
    32,652Minority interests
    
    
    
    
    
    
    
    
    
    
    15,553
    
    
    
    
    
    
    
    15,553Other
    
    
    (2,121
    )
    
    
    (611
    )
    
    
    34
    
    
    
    
    
    
    
    (2,698
    )Changes in current assets and liabilities, net of
acquisitions and divestitures:Receivables
    
    
    300,146
    
    
    
    (317,561
    )
    
    
    (66,882
    )
    
    
    (328,283
    )
    
    
    (412,580
    )Inventories
    
    
    (54,400
    )
    
    
    (23,993
    )
    
    
    (24,530
    )
    
    
    
    
    
    
    (102,923
    )Prepaids and other current assets
    
    
    411,463
    
    
    
    391,431
    
    
    
    7,898
    
    
    
    
    
    
    
    810,792Accounts payable
    
    
    (60,983
    )
    
    
    73,775
    
    
    
    6,150
    
    
    
    (3,931
    )
    
    
    15,011Customer advances
    
    
    (513,476
    )
    
    
    (401,929
    )
    
    
    (17,611
    )
    
    
    
    
    
    
    (933,016
    )Accrued liabilities
    
    
    24,313
    
    
    
    133,366
    
    
    
    (5,152
    )
    
    
    2,289
    
    
    
    154,816Net cash provided (used) by operating activities
    
    
    123,248
    
    
    
    24,089
    
    
    
    (16,422
    )
    
    
    (329,813
    )
    
    
    (198,898
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (64,472
    )
    
    
    (36,682
    )
    
    
    (19,379
    )
    
    
    
    
    
    
    (120,533
    )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
    
    
    1,400
    
    
    
    71
    
    
    
    7,353
    
    
    
    
    
    
    
    8,824Proceeds from sale of investments
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    49Proceeds from sale of property, plant and equipment
    
    
    3,676
    
    
    
    1,708
    
    
    
    197
    
    
    
    
    
    
    
    5,581Insurance proceeds for replacement assets
    
    
    
    
    
    
    
    
    
    
    5,321
    
    
    
    
    
    
    
    5,321Change in notes receivable
    
    
    145
    
    
    
    604
    
    
    
    (12,355
    )
    
    
    
    
    
    
    (11,606
    )Other
    
    
    (167
    )
    
    
    
    
    
    
    3,216
    
    
    
    
    
    
    
    3,049Net cash used by investing activities
    
    
    (111,786
    )
    
    
    (35,346
    )
    
    
    (22,083
    )
    
    
    
    
    
    
    (169,215
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    24,632
    
    
    
    (2,773
    )
    
    
    37,013
    
    
    
    329,813
    
    
    
    388,685Proceeds from issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    496
    
    
    
    
    
    
    
    496Principal payments on long-term debt
    
    
    (32
    )
    
    
    (405
    )
    
    
    (13,701
    )
    
    
    
    
    
    
    (14,138
    )Payments for redemption of member equities
    
    
    (94,896
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (94,896
    )Distribution to members
    
    
    48,700
    
    
    
    
    
    
    
    (48,700
    )
    
    
    
    
    
    
    Other
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Net cash used by financing activities
    
    
    (21,634
    )
    
    
    (3,178
    )
    
    
    (24,892
    )
    
    
    329,813
    
    
    
    280,109Net decrease in cash and cash equivalents
    
    
    (10,172
    )
    
    
    (14,435
    )
    
    
    (63,397
    )
    
    
    
    
    
    
    (88,004
    )Cash and cash equivalents at beginning of period
    
    
    12,411
    
    
    
    17,036
    
    
    
    87,392
    
    
    
    
    
    
    
    116,839Cash and cash equivalents at end of period
    
    $
    2,239
    
    
    $
    2,601
    
    
    $
    23,995
    
    
    $
    
    
    
    $
    28,835
 27




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
December 31, 2007
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,411
    
    
    $
    17,036
    
    
    $
    87,392
    
    
    $
    
    
    
    $
    116,839Receivables, net
    
    
    352,797
    
    
    
    544,941
    
    
    
    872,799
    
    
    
    (763,606
    )
    
    
    1,006,931Intercompany receivables
    
    
    
    
    
    
    146,951
    
    
    
    
    
    
    
    (146,951
    )
    
    
    Inventories
    
    
    390,236
    
    
    
    527,014
    
    
    
    47,265
    
    
    
    
    
    
    
    964,515Prepaid expenses
    
    
    454,073
    
    
    
    398,820
    
    
    
    4,364
    
    
    
    
    
    
    
    857,257Other current assets
    
    
    55,781
    
    
    
    19,637
    
    
    
    939
    
    
    
    
    
    
    
    76,357Total current assets
    
    
    1,265,298
    
    
    
    1,654,399
    
    
    
    1,012,759
    
    
    
    (910,557
    )
    
    
    3,021,899Investments
    
    
    1,339,385
    
    
    
    48,312
    
    
    
    15,528
    
    
    
    (1,099,212
    )
    
    
    304,013Property, plant and equipment, net
    
    
    197,177
    
    
    
    270,044
    
    
    
    98,072
    
    
    
    
    
    
    
    565,293Goodwill, net
    
    
    211,900
    
    
    
    47,632
    
    
    
    21,410
    
    
    
    
    
    
    
    280,942Other intangibles, net
    
    
    3,587
    
    
    
    113,440
    
    
    
    7,977
    
    
    
    
    
    
    
    125,004Other assets
    
    
    35,887
    
    
    
    35,927
    
    
    
    53,965
    
    
    
    (3,735
    )
    
    
    122,044Total assets
    
    $
    3,053,234
    
    
    $
    2,169,754
    
    
    $
    1,209,711
    
    
    $
    (2,013,504
    )
    
    $
    4,419,195LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    
    
    
    $
    3,815
    
    
    $
    879,785
    
    
    $
    (751,430
    )
    
    $
    132,170Current portion of long-term debt
    
    
    
    
    
    
    396
    
    
    
    2,907
    
    
    
    (221
    )
    
    
    3,082Accounts payable
    
    
    498,081
    
    
    
    629,981
    
    
    
    34,408
    
    
    
    (12,117
    )
    
    
    1,150,353Intercompany payables
    
    
    90,209
    
    
    
    55,855
    
    
    
    887
    
    
    
    (146,951
    )
    
    
    Customer advances
    
    
    514,069
    
    
    
    410,870
    
    
    
    1,301
    
    
    
    
    
    
    
    926,240Accrued liabilities
    
    
    159,693
    
    
    
    152,233
    
    
    
    33,289
    
    
    
    (3,794
    )
    
    
    341,421Patronage refunds and other member
equities payable
    
    
    28,065
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,065Total current liabilities
    
    
    1,290,117
    
    
    
    1,253,150
    
    
    
    952,577
    
    
    
    (914,513
    )
    
    
    2,581,331Long-term debt
    
    
    556,844
    
    
    
    142
    
    
    
    29,702
    
    
    
    221
    
    
    
    586,909Employee benefits and other liabilities
    
    
    191,938
    
    
    
    25,002
    
    
    
    13,504
    
    
    
    
    
    
    
    230,444Minority interests
    
    
    
    
    
    
    1,558
    
    
    
    4,617
    
    
    
    
    
    
    
    6,175Commitments and contingenciesEquities:Capital stock
    
    
    1,701
    
    
    
    
    
    
    
    2,909
    
    
    
    (2,909
    )
    
    
    1,701Additional paid-in capital
    
    
    
    
    
    
    639,343
    
    
    
    125,260
    
    
    
    (764,603
    )
    
    
    Member equities
    
    
    937,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    937,126Accumulated other comprehensive
(loss) earnings
    
    
    (61,931
    )
    
    
    (189
    )
    
    
    476
    
    
    
    (287
    )
    
    
    (61,931
    )Retained earnings
    
    
    137,439
    
    
    
    250,748
    
    
    
    80,666
    
    
    
    (331,413
    )
    
    
    137,440Total equities
    
    
    1,014,335
    
    
    
    889,902
    
    
    
    209,311
    
    
    
    (1,099,212
    )
    
    
    1,014,336Total liabilities and equities
    
    $
    3,053,234
    
    
    $
    2,169,754
    
    
    $
    1,209,711
    
    
    $
    (2,013,504
    )
    
    $
    4,419,195
 28




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended September 30, 2007
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    
    
    
    
    
    
    
    
    (Restated)Net sales
    
    $
    1,263,430
    
    
    $
    728,856
    
    
    $
    142,287
    
    
    $
    
    
    
    $
    2,134,573Cost of sales
    
    
    1,193,525
    
    
    
    657,941
    
    
    
    122,763
    
    
    
    
    
    
    
    1,974,229Gross profit
    
    
    69,905
    
    
    
    70,915
    
    
    
    19,524
    
    
    
    
    
    
    
    160,344Selling, general and administrative
    
    
    74,976
    
    
    
    74,942
    
    
    
    9,269
    
    
    
    
    
    
    
    159,187Restructuring and impairment charges
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32(Loss) earnings from operations
    
    
    (5,103
    )
    
    
    (4,027
    )
    
    
    10,255
    
    
    
    
    
    
    
    1,125Interest expense (income), net
    
    
    15,457
    
    
    
    (172
    )
    
    
    (4,946
    )
    
    
    
    
    
    
    10,339Other (income) expense, net
    
    
    (9,390
    )
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    (9,383
    )Equity in earnings of affiliated companies
    
    
    (21,513
    )
    
    
    (1,162
    )
    
    
    (4,255
    )
    
    
    16,613
    
    
    
    (10,317
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    286Earnings (loss) before income taxes
    
    
    10,343
    
    
    
    (2,700
    )
    
    
    19,170
    
    
    
    (16,613
    )
    
    
    10,200Income tax
expense (benefit)
    
    
    7,254
    
    
    
    75
    
    
    
    (218
    )
    
    
    
    
    
    
    7,111Net (loss) earnings
    
    $
    3,089
    
    
    $
    (2,775
    )
    
    $
    19,388
    
    
    $
    (16,613
    )
    
    $
    3,089
 29




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the nine months ended September 30, 2007
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    
    
    
    
    
    
    
    
    (Restated)Net sales
    
    $
    3,481,824
    
    
    $
    2,424,641
    
    
    $
    432,407
    
    
    $
    
    
    
    $
    6,338,872Cost of sales
    
    
    3,194,450
    
    
    
    2,195,112
    
    
    
    382,000
    
    
    
    
    
    
    
    5,771,562Gross profit
    
    
    287,374
    
    
    
    229,529
    
    
    
    50,407
    
    
    
    
    
    
    
    567,310Selling, general and administrative
    
    
    218,046
    
    
    
    205,341
    
    
    
    25,653
    
    
    
    
    
    
    
    449,040Restructuring and impairment charges
    
    
    828
    
    
    
    595
    
    
    
    298
    
    
    
    
    
    
    
    1,721Gain on insurance settlement
    
    
    
    
    
    
    (5,941
    )
    
    
    
    
    
    
    
    
    
    
    (5,941
    )Earnings from operations
    
    
    68,500
    
    
    
    29,534
    
    
    
    24,456
    
    
    
    
    
    
    
    122,490Interest expense (income), net
    
    
    34,024
    
    
    
    (1,506
    )
    
    
    1,541
    
    
    
    
    
    
    
    34,059Other income, net
    
    
    (9,205
    )
    
    
    (28,474
    )
    
    
    
    
    
    
    
    
    
    
    (37,679
    )Equity in earnings of affiliated companies
    
    
    (111,260
    )
    
    
    (2,114
    )
    
    
    (8,696
    )
    
    
    90,757
    
    
    
    (31,313
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    872Earnings before income taxes
    
    
    154,941
    
    
    
    61,628
    
    
    
    30,739
    
    
    
    (90,757
    )
    
    
    156,551Income tax expense
    
    
    19,724
    
    
    
    343
    
    
    
    1,267
    
    
    
    
    
    
    
    21,334Net earnings
    
    $
    135,217
    
    
    $
    61,285
    
    
    $
    29,472
    
    
    $
    (90,757
    )
    
    $
    135,217
 30




---



##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2007
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    
    
    
    
    
    
    
    
    (Restated)Cash flows from operating activities:Net earnings
    
    $
    135,217
    
    
    $
    61,285
    
    
    $
    29,472
    
    
    $
    (90,757
    )
    
    $
    135,217Adjustments to reconcile net earnings to net
cash provided 
(used) by operating activities:Depreciation and amortization
    
    
    31,260
    
    
    
    23,448
    
    
    
    7,871
    
    
    
    
    
    
    
    62,579Amortization of deferred financing costs
    
    
    1,330
    
    
    
    288
    
    
    
    654
    
    
    
    
    
    
    
    2,272Bad debt expense
    
    
    317
    
    
    
    2,008
    
    
    
    188
    
    
    
    
    
    
    
    2,513Proceeds from patronage revolvement received
    
    
    3,128
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    3,133Non-cash patronage income
    
    
    (1,413
    )
    
    
    (49
    )
    
    
    
    
    
    
    
    
    
    
    (1,462
    )Insurance recovery  business interruption
    
    
    
    
    
    
    4,551
    
    
    
    
    
    
    
    
    
    
    
    4,551Deferred income tax expense (benefit)
    
    
    (5,368
    )
    
    
    (25,771
    )
    
    
    
    
    
    
    
    
    
    
    (31,139
    )Increase in other assets
    
    
    (1,110
    )
    
    
    (947
    )
    
    
    
    
    
    
    
    
    
    
    (2,057
    )Decrease in other liabilities
    
    
    (1,040
    )
    
    
    326
    
    
    
    (1
    )
    
    
    
    
    
    
    (715
    )Restructuring and impairment charges
    
    
    828
    
    
    
    595
    
    
    
    298
    
    
    
    
    
    
    
    1,721(Gain) loss on divestiture of business
    
    
    
    
    
    
    (28,481
    )
    
    
    7
    
    
    
    
    
    
    
    (28,474
    )Gain on sale of investments
    
    
    (9,205
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,205
    )Gain on insurance settlement
    
    
    
    
    
    
    (5,941
    )
    
    
    
    
    
    
    
    
    
    
    (5,941
    )Equity in earnings of affiliated companies
    
    
    (111,260
    )
    
    
    (2,114
    )
    
    
    (8,696
    )
    
    
    90,757
    
    
    
    (31,313
    )Dividends from investments in affiliated companies
    
    
    20,523
    
    
    
    972
    
    
    
    5,525
    
    
    
    
    
    
    
    27,020Minority interests
    
    
    
    
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    872Other
    
    
    283
    
    
    
    (320
    )
    
    
    (181
    )
    
    
    
    
    
    
    (218
    )Changes in current assets and liabilities, net of
acquisitions 
and divestitures:Receivables
    
    
    45,796
    
    
    
    59,989
    
    
    
    (145,600
    )
    
    
    (145,727
    )
    
    
    (185,542
    )Inventories
    
    
    (132,971
    )
    
    
    (8,756
    )
    
    
    (8,391
    )
    
    
    
    
    
    
    (150,118
    )Other current assets
    
    
    293,256
    
    
    
    11,249
    
    
    
    1,350
    
    
    
    
    
    
    
    305,855Accounts payable
    
    
    132,894
    
    
    
    86,710
    
    
    
    (2,337
    )
    
    
    (6,717
    )
    
    
    210,550Customer advances
    
    
    (383,618
    )
    
    
    (23,401
    )
    
    
    (3,592
    )
    
    
    
    
    
    
    (410,611
    )Accrued liabilities
    
    
    44,780
    
    
    
    21,923
    
    
    
    3,429
    
    
    
    (2,282
    )
    
    
    67,850Net cash provided (used) by operating activities
    
    
    63,627
    
    
    
    177,569
    
    
    
    (119,132
    )
    
    
    (154,726
    )
    
    
    (32,662
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (30,147
    )
    
    
    (27,837
    )
    
    
    (4,325
    )
    
    
    
    
    
    
    (62,309
    )Acquisitions
    
    
    (58
    )
    
    
    
    
    
    
    (2,872
    )
    
    
    
    
    
    
    (2,930
    )Investments in affiliates
    
    
    (216,399
    )
    
    
    
    
    
    
    (156
    )
    
    
    
    
    
    
    (216,555
    )Net settlement on repositioning investment in joint venture
    
    
    32,248
    
    
    
    (165,787
    )
    
    
    
    
    
    
    
    
    
    
    (133,539
    )Net proceeds from divestiture of businesses
    
    
    211,851
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    212,101Proceeds from sale of investments
    
    
    475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    475Proceeds from sale of property, plant and equipment
    
    
    2,038
    
    
    
    2,942
    
    
    
    88
    
    
    
    
    
    
    
    5,068Insurance proceeds for replacement assets
    
    
    
    
    
    
    8,635
    
    
    
    
    
    
    
    
    
    
    
    8,635Change in notes receivable
    
    
    1,071
    
    
    
    125
    
    
    
    (19,575
    )
    
    
    186
    
    
    
    (18,193
    )Other
    
    
    (209
    )
    
    
    (227
    )
    
    
    (170
    )
    
    
    
    
    
    
    (606
    )Net cash provided (used) by investing activities
    
    
    870
    
    
    
    (182,149
    )
    
    
    (26,760
    )
    
    
    186
    
    
    
    (207,853
    )Cash flows from financing activities:(Decrease) increase in short-term debt
    
    
    (475
    )
    
    
    (611
    )
    
    
    129,180
    
    
    
    154,540
    
    
    
    282,634Proceeds from issuance of long-term debt
    
    
    
    
    
    
    1,750
    
    
    
    3,750
    
    
    
    
    
    
    
    5,500Principal payments on long-term debt
    
    
    (9,022
    )
    
    
    (12,112
    )
    
    
    (15,722
    )
    
    
    
    
    
    
    (36,856
    )Payments for redemption of member equities
    
    
    (36,213
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,213
    )Other
    
    
    (153
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (156
    )Net cash (used) provided by financing activities
    
    
    (45,863
    )
    
    
    (10,976
    )
    
    
    117,208
    
    
    
    154,540
    
    
    
    214,909Net increase (decrease) in cash and cash equivalents
    
    
    18,634
    
    
    
    (15,556
    )
    
    
    (28,684
    )
    
    
    
    
    
    
    (25,606
    )Cash and cash equivalents at beginning of period
    
    
    8,976
    
    
    
    15,613
    
    
    
    55,118
    
    
    
    
    
    
    
    79,707Cash and cash equivalents at end of period
    
    $
    27,610
    
    
    $
    57
    
    
    $
    26,434
    
    
    $
    
    
    
    $
    54,101
 31




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##### 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
  Adjustment and Restatement of Prior Years Consolidated Financial Statements
 MoArk, LLC Adjustment of Financial Results
    32




---



##### Table of Contents



PreviouslyReported
    
    Effect of
    
    Adjusted2007
    
    Adjustment
    
    2007Total current assets
    
    $
    3,020,272
    
    
    $
    1,627
    
    
    $
    3,021,899Investments
    
    
    303,978
    
    
    
    35
    
    
    
    304,013Property, plant and equipment, net
    
    
    551,752
    
    
    
    13,541
    
    
    
    565,293Goodwill, net
    
    
    318,224
    
    
    
    (37,282
    )
    
    
    280,942Other intangibles, net
    
    
    119,167
    
    
    
    5,837
    
    
    
    125,004Other assets
    
    
    118,438
    
    
    
    3,606
    
    
    
    122,044Total assets
    
    
    4,431,831
    
    
    
    (12,636
    )
    
    
    4,419,195Total current liabilities
    
    
    2,579,486
    
    
    
    1,845
    
    
    
    2,581,331Long-term debt
    
    
    611,602
    
    
    
    (24,693
    )
    
    
    586,909Employee benefits and other liabilities
    
    
    202,400
    
    
    
    28,044
    
    
    
    230,444Retained earnings
    
    
    155,272
    
    
    
    (17,832
    )
    
    
    137,440Total equities
    
    
    1,032,168
    
    
    
    (17,832
    )
    
    
    1,014,336Total liabilities and equities
    
    
    4,431,831
    
    
    
    (12,636
    )
    
    
    4,419,195
 Agriliance Restatement of Financial Results
  33




---



##### Table of Contents



Other Significant Items
 ® ® ® ® ®
     34




---



##### Table of Contents



Seasonality
  Dairy and Agricultural Commodity Inputs and Outputs
  Dairy Foods.
 35




---



##### Table of Contents



For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Per pound market price average:Butter
    
    $
    1.62
    
    
    $
    1.44
    
    
    $
    1.45
    
    
    $
    1.38Block cheese
    
    
    1.86
    
    
    
    1.95
    
    
    
    1.92
    
    
    
    1.68Nonfat dry milk (NASS)
    
    
    1.33
    
    
    
    2.04
    
    
    
    1.33
    
    
    
    1.61
 Feed.
     36




---



##### Table of Contents



Layers
 Derivative Commodity Instruments
  For the three months ended
    
    For the nine months ended}September 30,
    September 30,2008
    
    2007
    
    2008
    
    2007(in millions)
    
    (in millions)Unrealized hedging gain (loss)
    
    $
    (32.4
    )
    
    $
    11.6
    
    
    $
    (35.5
    )
    
    $
    5.1
 Vendor Rebates
  Unconsolidated Businesses
  For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007(in millions)Earnings from unconsolidated businesses
    
    $
    13.5
    
    
    $
    10.3
    
    
    $
    38.1
    
    
    $
    31.3
    37




---



##### Table of Contents



Results of Operations
 Three months ended September 30, 2008 as compared to three months ended September 30, 2007
 Adjustment and Restatement of Financial Results
 Overview   Adjustment and Restatement of Prior Years Consolidated Financial
Statements
 Previously
    
    Effect of
    
    Effect ofReported
    
    MoArk
    
    Agriliance
    
    Restated2007
    
    Adjustments
    
    Restatement
    
    2007($ in millions)Cost of Sales
    
    $
    1,967.9
    
    
    $
    1.9
    
    
    $
    4.4
    
    
    $
    1,974.2Gross profit
    
    
    166.6
    
    
    
    (1.9
    )
    
    
    (4.4
    )
    
    
    160.3Selling, general and administrative
    
    
    158.2
    
    
    
    1.0
    
    
    
    
    
    
    
    159.2Earnings from operations
    
    
    8.4
    
    
    
    (2.9
    )
    
    
    (4.4
    )
    
    
    1.1Interest expense, net
    
    
    9.8
    
    
    
    0.5
    
    
    
    
    
    
    
    10.3Equity in losses (earnings) of affiliated companies
    
    
    7.1
    
    
    
    
    
    
    
    (17.4
    )
    
    
    (10.3
    )Earnings before income taxes
    
    
    0.7
    
    
    
    (3.5
    )
    
    
    13.0
    
    
    
    10.2Income tax expense
    
    
    3.5
    
    
    
    (1.3
    )
    
    
    4.9
    
    
    
    7.1Net (loss) earnings
    
    
    (2.8
    )
    
    
    (2.2
    )
    
    
    8.1
    
    
    
    3.1
 Overview of Results
 For the three months ended September 30,Increase2008
    
    2007
    
    (Decrease)($ in millions)Net earnings
    
    $
    28.6
    
    
    $
    3.1
    
    
    $
    25.5
  Net sales
    
    $
    2,783.9
    
    
    $
    2,134.6
    
    
    $
    649.3
  38




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##### Table of Contents



For the three months ended September 30,Increase2008
    
    2007
    
    (Decrease)($ in millions)Gross profit
    
    $
    236.6
    
    
    $
    160.4
    
    
    $
    76.2
  Selling, general and administrative expense
    
    $
    204.6
    
    
    $
    159.2
    
    
    $
    45.4
  Gain on insurance settlement
    
    $
    4.0
    
    
    $
    
    
    
    $
    4.0
  Interest expense, net
    
    $
    15.3
    
    
    $
    10.3
    
    
    $
    5.0
  Equity in earnings of affiliated companies
    
    $
    13.5
    
    
    $
    10.3
    
    
    $
    3.2
 Overview Unconsolidated Businesses
 Income tax expense
    
    $
    1.7
    
    
    $
    7.1
    
    
    $
    (5.4
    )
  Net Sales and Gross Profit by Business Segment
  39




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##### Table of Contents



Dairy Foods
 For the three months ended September 30,($ in millions)
    
    2008
    
    2007
    
    % changeNet sales
    
    $
    984.9
    
    
    $
    1,121.3
    
    
    
    (12.2
    )%Gross profit
    
    
    31.8
    
    
    
    59.0
    
    
    
    (46.1
    )%Gross profit % of net sales
    
    
    3.2
    %
    
    
    5.3
    %
 Net Sales Variance
    
    Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    (216.5
    )Volume impact
    
    
    80.1Total decrease
    
    $
    (136.4
    )
  Gross Profit Variance
    
    Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (22.7
    )Volume impact
    
    
    (2.0
    )Unrealized hedging
    
    
    (2.5
    )Total decrease
    
    $
    (27.2
    )
  Feed
 For the three months ended September 30,($ in millions)
    
    2008
    
    2007
    
    % changeNet sales
    
    $
    990.8
    
    
    $
    722.8
    
    
    
    37.1
    %Gross profit
    
    
    42.9
    
    
    
    68.9
    
    
    
    (37.7
    )%Gross profit % of net sales
    
    
    4.3
    %
    
    
    9.5
    %
 Net Sales Variance
    
    Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    250.7Volume impact
    
    
    18.1Acquisitions and Divestitures
    
    
    (0.8
    )Total increase
    
    $
    268.0
  40




---



##### Table of Contents



Gross Profit Variance
    
    Increase(decrease)(In millions)Margin / product mix impact
    
    $
    (1.1
    )Volume impact
    
    
    (0.7
    )Acquisitions and Divestitures
    
    
    0.2Unrealized hedging
    
    
    (24.4
    )Total decrease
    
    $
    (26.0
    )
  Seed
 For the three months ended September 30,($ in millions)
    
    2008
    
    2007
    
    % changeNet sales
    
    $
    45.0
    
    
    $
    80.1
    
    
    
    (43.8
    )%Gross profit
    
    
    7.4
    
    
    
    14.6
    
    
    
    (49.3
    )%Gross profit % of net sales
    
    
    16.4
    %
    
    
    18.2
    %
 Net Sales Variance
    
    Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    (0.1
    )Volume impact
    
    
    (35.0
    )Total decrease
    
    $
    (35.1
    )
  Gross Profit Variance
    
    Increase(decrease)(In millions)Margin / product mix impact
    
    $
    3.6Volume impact
    
    
    2.2Unrealized hedging
    
    
    (13.0
    )Total decrease
    
    $
    (7.2
    )
 ®
 Layers
 For the three months ended September 30,($ in millions)
    
    2008
    
    2007
    
    % changeNet sales
    
    $
    135.5
    
    
    $
    123.6
    
    
    
    9.6
    %Gross profit
    
    
    2.8
    
    
    
    19.4
    
    
    
    (85.6
    )%Gross profit %
of net sales
    
    
    2.1
    %
    
    
    15.7
    %
 Net Sales Variance
    
    Increase(decrease)(In millions)Pricing / product mix impact
    
    $
    7.9Volume impact
    
    
    4.0Total increase
    
    $
    11.9
 41




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##### Table of Contents



IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    (13.9
    )Volume impact
    
    
    0.5Unrealized hedging
    
    
    (3.2
    )Total decrease
    
    $
    (16.6
    )
  Agronomy
  Net Sales
  Gross Profit
  Nine months ended September 30, 2008 as compared to nine months ended September 30, 2007
 Adjustment and Restatement of Financial Results
 Overview  Adjustment and Restatement of Prior Years Consolidated Financial
Statements
 42




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##### Table of Contents



Previously
    
    Effect of
    
    Effect ofReported
    
    MoArk
    
    Agronomy
    
    Restated2007
    
    Adjustments
    
    Restatement
    
    2007($ in millions)Cost of sales
    
    $
    5,765.3
    
    
    $
    1.9
    
    
    $
    4.4
    
    
    $
    5,771.6Gross profit
    
    
    573.6
    
    
    
    (1.9
    )
    
    
    (4.4
    )
    
    
    567.3Selling, general and administrative
    
    
    448.0
    
    
    
    1.0
    
    
    
    
    
    
    
    449.0Earnings from operations
    
    
    129.8
    
    
    
    (2.9
    )
    
    
    (4.4
    )
    
    
    122.5Interest expense, net
    
    
    33.5
    
    
    
    0.5
    
    
    
    
    
    
    
    34.0Equity in earnings of affiliated companies
    
    
    (58.0
    )
    
    
    
    
    
    
    26.7
    
    
    
    (31.3
    )Earnings before income taxes
    
    
    191.2
    
    
    
    (3.5
    )
    
    
    (31.1
    )
    
    
    156.6Income tax expense
    
    
    34.5
    
    
    
    (1.3
    )
    
    
    (11.9
    )
    
    
    21.3Net earnings
    
    
    156.6
    
    
    
    (2.2
    )
    
    
    (19.2
    )
    
    
    135.2
 Overview of Results
 For the nine months ended September 30,Increase2008
    
    2007
    
    (Decrease)($ in millions)Net earnings
    
    $
    192.6
    
    
    $
    135.2
    
    
    $
    57.4
  Net sales
    
    $
    9,368.8
    
    
    $
    6,338.9
    
    
    $
    3,029.9
  Gross profit
    
    $
    798.8
    
    
    $
    567.3
    
    
    $
    231.5
  Selling, general and administrative expense
    
    $
    562.3
    
    
    $
    449.0
    
    
    $
    113.3
  Restructuring and impairment charges
    
    $
    
    
    
    $
    1.7
    
    
    $
    (1.7
    )
  Gain on insurance settlement
    
    $
    4.0
    
    
    $
    5.9
    
    
    $
    (1.9
    )
  43




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##### Table of Contents



For the nine months ended September 30,Increase2008
    
    2007
    
    (Decrease)($ in millions)Interest expense, net
    
    $
    48.1
    
    
    $
    34.1
    
    
    $
    14.0
  Equity in earnings of affiliated companies
    
    $
    38.1
    
    
    $
    31.3
    
    
    $
    6.8
 Overview
 Unconsolidated Businesses
 Income tax expense
    
    $
    22.3
    
    
    $
    21.3
    
    
    $
    1.0
  Net Sales and Gross Profit by Business Segment
  Dairy Foods
 For the nine months ended September 30,($ in millions)
    
    2008
    
    
    2007
    
    
    % changeNet sales
    
    $
    3,070.4
    
    
    $
    2,994.7
    
    
    
    2.5
    %Gross profit
    
    
    163.7
    
    
    
    220.3
    
    
    
    (25.7
    )%Gross profit % of net sales
    
    
    5.3
    %
    
    
    7.4
    %
 IncreaseNet Sales Variance
    
    (decrease)(In millions)Pricing / product mix impact
    
    $
    37.5Volume impact
    
    
    149.6Acquisitions and divestitures
    
    
    (111.4
    )Total increase
    
    $
    75.7
 44




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##### Table of Contents



IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    (50.4
    )Volume impact
    
    
    (0.2
    )Unrealized hedging
    
    
    3.2Acquisitions and divestitures
    
    
    (9.2
    )Total decrease
    
    $
    (56.6
    )
  Feed
 For the nine months ended September 30,($ in millions)
    
    2008
    
    2007
    
    % changeNet sales
    
    $
    2,858.3
    
    
    $
    2,175.9
    
    
    
    31.4
    %Gross profit
    
    
    218.5
    
    
    
    205.5
    
    
    
    6.3
    %Gross profit % of net sales
    
    
    7.6
    %
    
    
    9.4
    %
 IncreaseNet Sales Variance
    
    (decrease)(In millions)Pricing / product mix impact.
    
    $
    621.5Volume impact
    
    
    69.9Acquisitions and divestitures
    
    
    (9.0
    )Total increase
    
    $
    682.4
  IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    39.2Volume impact
    
    
    0.1Unrealized hedging
    
    
    (26.4
    )Acquisitions and divestitures
    
    
    0.1Total increase
    
    $
    13.0
 2
 45




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##### Table of Contents



Seed
 For the nine months ended September 30,($ in millions)
    
    2008
    
    2007
    
    % changeNet sales
    
    $
    920.2
    
    
    $
    739.5
    
    
    
    24.4
    %Gross profit
    
    
    102.8
    
    
    
    98.7
    
    
    
    4.2
    %Gross profit % of net sales
    
    
    11.1
    %
    
    
    13.3
    %
 IncreaseNet Sales Variance
    
    (decrease)(In millions)Pricing / product mix impact
    
    $
    108.6Volume impact
    
    
    72.1Total increase
    
    $
    180.7
  IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    7.8Volume impact
    
    
    9.2Unrealized hedging
    
    
    (12.9
    )Total increase
    
    $
    4.1
  Layers
 For the nine months ended September 30,($ in millions)
    
    2008
    
    2007
    
    % chaNet sales
    
    $
    455.2
    
    
    $
    354.6
    
    
    
    28.4
    %Gross profit
    
    
    59.4
    
    
    
    46.0
    
    
    
    29.1
    %Gross profit % of
net sales
    
    
    13.0
    %
    
    
    13.0
    %
 IncreaseNet Sales Variance
    
    (decrease)(In millions)Pricing / product mix impact
    
    $
    101.4Volume impact
    
    
    (0.8
    )Total increase
    
    $
    100.6
  46




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IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    18.5Volume impact
    
    
    (1.1
    )Unrealized hedging
    
    
    (4.0
    )Total increase
    
    $
    13.4
  Agronomy
  Net Sales
 2
 Gross Profit
  Liquidity and Capital Resources
 Overview
    47




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##### Table of Contents



As of
    
    
    As of
    
    
    As ofSeptember 30,
    
    
    September 30,
    
    
    December 31,2008
    
    
    2007
    
    
    2007($ in millions)Cash and cash equivalents
    
    $
    28.8
    
    
    $
    54.1
    
    
    $
    116.8Availability on revolving credit facility
    
    
    176.7
    
    
    
    196.0
    
    
    
    196.0Availability on receivable securitization program
    
    
    
    
    
    
    20.0
    
    
    
    230.0Availability on MoArk revolving credit facility
    
    
    40.0
    
    
    
    40.0
    
    
    
    40.0Total liquidity
    
    $
    245.5
    
    
    $
    310.1
    
    
    $
    582.8
  Cash Flows
 Adjustment and Restatement of Financial Results
 Adjustment and Restatement of Prior Years
 Previously
    
    
    Effect of
    
    
    Effect ofReported
    
    
    MoArk
    
    
    Agronomy
    
    
    Restated2007
    
    
    Adjustment
    
    
    Restatement
    
    
    2007($ in millions)Net earnings
    
    $
    156.6
    
    
    $
    (2.2
    )
    
    $
    (19.2
    )
    
    $
    135.2Depreciation and amortization
    
    
    61.5
    
    
    
    1.1
    
    
    
    
    
    
    
    62.6Amortization of deferred financing costs
    
    
    1.7
    
    
    
    0.5
    
    
    
    
    
    
    
    2.2Bad debt expense
    
    
    2.3
    
    
    
    0.2
    
    
    
    
    
    
    
    2.5Deferred income tax benefit
    
    
    (17.9
    )
    
    
    (1.3
    )
    
    
    (11.9
    )
    
    
    (31.1
    )Equity in earnings of affiliated companies
    
    
    (58.0
    )
    
    
    
    
    
    
    26.7
    
    
    
    (31.3
    )Change in receivables
    
    
    (190.0
    )
    
    
    0.1
    
    
    
    4.4
    
    
    
    (185.5
    )Change in other current assets
    
    
    305.3
    
    
    
    0.6
    
    
    
    
    
    
    
    305.9Change in accrued expenses
    
    
    66.8
    
    
    
    1.0
    
    
    
    
    
    
    
    67.8
  For the Nine Months EndedOperating Activities
    
    September 30,2008
    
    
    2007($ in millions)Net earnings
    
    $
    192.6
    
    
    $
    135.2Adjustments to reconcile net earnings to net cash used by operating activities.
    
    
    76.4
    
    
    
    (5.9
    )Changes in current assets and liabilities, net of acquisitions and divestitures
    
    
    (467.9
    )
    
    
    (162.0
    )Net cash used by operating activities
    
    $
    (198.9
    )
    
    $
    (32.7
    )
 48




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##### Table of Contents



Investing Activities
 For the Nine Months EndedSeptember 30,2008
    
    
    2007($ in millions)Additions to property, plant and equipment
    
    $
    (120.5
    )
    
    $
    (62.3
    )Acquisitions, net of cash acquired
    
    
    (9.0
    )
    
    
    (2.9
    )Investments in affiliates
    
    
    (50.9
    )
    
    
    (216.6
    )Distributions from investments in affiliated companies
    
    
    8.8
    
    
    
    Net settlement on repositioning investment in joint venture
    
    
    
    
    
    
    (133.5
    )Net proceeds from divestiture of businesses
    
    
    
    
    
    
    212.1Proceeds from sale of investments
    
    
    0.1
    
    
    
    0.5Proceeds from sale of property, plant and equipment
    
    
    5.6
    
    
    
    5.1Insurance proceeds for replacement assets
    
    
    5.3
    
    
    
    8.6Changes in notes receivable
    
    
    (11.6
    )
    
    
    (18.2
    )Other
    
    
    3.0
    
    
    
    (0.7
    )Net cash used by investing activities
    
    $
    (169.2
    )
    
    $
    (207.9
    )
   Financing Activities
 For the Nine Months EndedSeptember 30,2008
    
    
    2007($ in millions)Increase in short-term debt, net
    
    $
    388.7
    
    
    $
    282.6Proceeds from issuance of long-term debt
    
    
    0.5
    
    
    
    5.5Principal payments on long-term debt
    
    
    (14.1
    )
    
    
    (36.9
    )Payments for redemption of member equities
    
    
    (94.9
    )
    
    
    (36.2
    )Other
    
    
    (0.1
    )
    
    
    (0.1
    )Net cash provided by financing activities
    
    $
    280.1
    
    
    $
    214.9
  Principal Debt Facilities
   49




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##### Table of Contents



50




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##### Table of Contents



Capital Leases
  Recent Accounting Pronouncements
      51




---



##### Table of Contents



Critical Accounting Policies
  Inventory Valuation.
 52




---



##### Table of Contents



Derivative Commodity Instruments
 Rebates Receivable
 Allowance for Doubtful Accounts
 Recoverability of Long-Lived Assets
 Trade Promotion and Consumer Incentive Activities
 Pension and Other Post-Retirement Plans
  Income
Taxes, Tax Valuation, and Uncertain Tax Positions
  53




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##### Table of Contents



Forward-Looking Statements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 (a)
    
    Evaluation of disclosure controls and procedures
  (b)
    
    Remediation and Changes in Internal Control over Financial Reporting
  Material Weakness Identified as of April 15, 2008:
  
    
    Develop a process to obtain evidence to support the existence of binding arrangements
with vendors, and
 54




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##### Table of Contents




    
    Improve the accounting personnel review processes and procedures over the existence
of such evidence of binding arrangements to support vendor rebates recognized in the
consolidated financial statements.
  Material Weaknesses Identified as of September 30, 2008:
 Inadequate interim periodic close process
   Personnel lacked adequate accounting expertise and business knowledge
  Inadequate books and records
  Remediation and Changes in Internal Control over Financial Reporting:
   (c)
    
    Changes in internal controls
  55




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##### Table of Contents



Part II. Other Information
 
 Item 1. Legal Proceedings
  ® ® ® ® ®
     56




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##### Table of Contents



Adam Properties, Inc. v. Michael Foods, Inc. et al. Bemus Point Inn, Inc. v. United Egg Producers, Inc., et al. Brigiottas Farmland Produce and Garden Center, Inc., et al. Country Foods v.
Hillandale Farms of Pa., Inc., et al. Eby-Brown Company, LLC v. United Egg
Producers, Inc., et al. Eggology, Inc. v. United Egg Producers, Inc., et al. Goldberg and Solovy Foods, Inc. v. United Egg Producers, Inc., et al. John A. Lisciandro v. United Egg Producers, et al. Julius Silvert, Inc. v. Golden
Oval Eggs LLC, et al. Karetas Foods, Inc. v. Cal-Maine Foods, Inc., et al. Nussbaum  SF, Inc. v. United Egg Producers, Inc., et al. Oasis
Foods Company v. Michael Foods, Inc., et al. Pilar M. DeCastro & Co., Inc., et al.
v. Cal-Maine Foods, Inc., et al. SensoryEffectsFlavor Co. v. United Egg Producers,
Inc., et al. Sicilian Chefs, Inc. v. Michael Foods, Inc., et al. Somerset Industries, Inc. v. Cal-Maine Foods, Inc., et al. The Egg Store, Inc. v.
United Egg Producers, Inc., et al. T.K. Ribbings Family Restaurant v. United Egg
Producers, et al. Williams v. United Egg Producers, Inc., et al. Wixon,
Inc. v. United Egg Producers, Inc., et al. Zaza, Inc. v. Michael Foods, Inc.; et al. Zeqiri Corp v. Golden Oval Eggs, LLC, et al.
 
 Item 1A. Risk Factors
  
    
    COMPETITION IN THE INDUSTRY MAY REDUCE OUR SALES AND MARGINS.
    
    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.
    
    CURRENT AND THREATENED LITIGATION COULD INCREASE OUR EXPENSES, REDUCE OUR
PROFITABILITY, AND, IN SOME CASES, ADVERSELY AFFECT OUR BUSINESS REPUTATION.
    
    IF AUDITED FINANCIAL STATEMENTS ARE NOT SUBMITTED IN ACCORDANCE WITH THE TERMS OF OUR
PRINCIPAL DEBT FACILITIES, A COVENANT DEFAULT COULD RESULT UNLESS WE ARE ABLE TO CURE THE
DEFAULT WITHIN THE PRESCRIBED CURE PERIOD OR UNLESS THE COVENANT IS OTHERWISE WAIVED.
    
    THE GEOGRAPHIC SHIFT IN DAIRY PRODUCTION HAS DECREASED SALES AND MARGINS AND COULD
CONTINUE TO NEGATIVELY IMPACT OUR SALES AND MARGINS.
    
    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.
    
    A CONTINUING OR DEEPENING DOWNTURN OF THE U.S. ECONOMY, INCLUDING INCREASED VOLATILITY
IN THE CREDIT MARKETS, COULD ADVERSELY IMPACT OUR CUSTOMERS AND VENDORS ABILITY OR
WILLINGNESS TO CONDUCT BUSINESS WITH US ON THE SAME TERMS OR AT THE SAME LEVELS AS THEY
HAVE HISTORICALLY.
    
    WE OPERATE THROUGH JOINT VENTURES IN WHICH OUR RIGHTS TO EARNINGS AND TO CONTROL THE
JOINT VENTURE ARE LIMITED.
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
    
    CERTAIN OF OUR BUSINESS 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.
    
    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.
    
    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.
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Item 6. Exhibits
 (a) Exhibits
 EXHIBIT
    
    DESCRIPTION31.1
    
    
    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 59




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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) 60