##### 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, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from           to           .
 Commission file number 333-84486
 Land OLakes, Inc.
 (Exact name of Registrant as Specified in Its Charter)
 Minnesota(State or Other Jurisdiction of 
Incorporation or Organization)
    
    41-0365145(I.R.S. Employer
Identification No.)4001 Lexington Avenue NorthArden Hills, Minnesota(Address of Principal Executive Offices)
    
    55112(Zip Code)
 (651) 481-2222  (Registrants Telephone Number, Including Area Code)
 o þ
   o o þ
 o þ
   www.landolakesinc.com




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##### 



INDEX
 PagePart I Financial Information
    
    3Item 1. Financial Statements
    
    3Consolidated Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006
    
    3Consolidated Statements of Operations for the three and nine months ended September 30,
2007 and 2006 (unaudited)
    
    4Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006
(unaudited)
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    25Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    41Item 4. Controls and Procedures
    
    41Part II Other Information
    
    42Item 1. Legal Proceedings
    
    42Item 1A. Risk Factors
    
    42Item 6. Exhibits
    
    44SIGNATURES
    
    45Agreement Regarding DistributionSecond Amendment to Amended and Restated Five-Year Revolving Credit AgreementFourth Amendment to Purchase and Sale AgreementThird Amended and Restated Receivables Purchase AgreementSection 302 CertificationSection 302 CertificationSection 906 CertificationSection 906 Certification
  2




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 LAND OLAKES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)September 30,
    
    
    December 31,2007
    
    
    2006($ in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    54,101
    
    
    $
    79,707Receivables, net
    
    
    934,696
    
    
    
    604,580Inventories
    
    
    910,371
    
    
    
    471,396Prepaid expenses
    
    
    39,765
    
    
    
    350,423Other current assets
    
    
    62,856
    
    
    
    50,594Total current assets
    
    
    2,001,789
    
    
    
    1,556,700Investments
    
    
    233,463
    
    
    
    270,202Property, plant and equipment, net
    
    
    538,814
    
    
    
    665,069Goodwill, net
    
    
    351,087
    
    
    
    326,527Other intangible assets, net
    
    
    109,030
    
    
    
    95,043Other assets
    
    
    120,447
    
    
    
    113,191Total assets
    
    $
    3,354,630
    
    
    $
    3,026,732LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    339,404
    
    
    $
    58,300Current portion of long-term debt
    
    
    5,164
    
    
    
    10,972Accounts payable
    
    
    771,305
    
    
    
    529,850Customer advances
    
    
    8,905
    
    
    
    419,516Accrued expenses
    
    
    349,210
    
    
    
    223,597Patronage refunds and other member equities payable
    
    
    29,506
    
    
    
    18,626Total current liabilities
    
    
    1,503,494
    
    
    
    1,260,861Long-term debt
    
    
    615,730
    
    
    
    639,059Employee benefits and other liabilities
    
    
    175,850
    
    
    
    173,446Minority interests
    
    
    5,748
    
    
    
    8,830Commitments and contingencies (Note 15)Equities:Capital stock
    
    
    1,732
    
    
    
    1,828Member equities
    
    
    958,329
    
    
    
    904,183Accumulated other comprehensive loss
    
    
    (65,389
    )
    
    
    (66,276
    )Retained earnings
    
    
    159,136
    
    
    
    104,801Total equities
    
    
    1,053,808
    
    
    
    944,536Total liabilities and equities
    
    $
    3,354,630
    
    
    $
    3,026,732
  3




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##### Table of Contents



LAND OLAKES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006($ in thousands)Net sales
    
    $
    2,134,573
    
    
    $
    1,524,579
    
    
    $
    6,338,872
    
    
    $
    5,208,602Cost of sales
    
    
    1,967,905
    
    
    
    1,399,168
    
    
    
    5,765,238
    
    
    
    4,759,835Gross profit
    
    
    166,668
    
    
    
    125,411
    
    
    
    573,634
    
    
    
    448,767Selling, general and administrative
    
    
    158,194
    
    
    
    123,118
    
    
    
    448,047
    
    
    
    389,801Restructuring and impairment charges
    
    
    32
    
    
    
    15,116
    
    
    
    1,721
    
    
    
    19,397Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    (5,941
    )
    
    
    Earnings (loss) from operations
    
    
    8,442
    
    
    
    (12,823
    )
    
    
    129,807
    
    
    
    39,569Interest expense, net
    
    
    9,794
    
    
    
    12,985
    
    
    
    33,514
    
    
    
    44,725Other income, net
    
    
    (9,383
    )
    
    
    (1,754
    )
    
    
    (37,679
    )
    
    
    (17,624
    )Equity in losses (earnings) of affiliated companies
    
    
    7,075
    
    
    
    2,383
    
    
    
    (58,044
    )
    
    
    (27,346
    )Minority interest in earnings of subsidiaries
    
    
    286
    
    
    
    542
    
    
    
    872
    
    
    
    1,127Earnings (loss) before income taxes
    
    
    670
    
    
    
    (26,979
    )
    
    
    191,144
    
    
    
    38,687Income tax expense (benefit)
    
    
    3,466
    
    
    
    (10,282
    )
    
    
    34,566
    
    
    
    (5,480
    )Net (loss) earnings
    
    $
    (2,796
    )
    
    $
    (16,697
    )
    
    $
    156,578
    
    
    $
    44,167Applied to:Member equitiesAllocated patronage
    
    $
    (2,069
    )
    
    $
    5,237
    
    
    $
    98,792
    
    
    $
    42,255Deferred equities
    
    
    (206
    )
    
    
    707
    
    
    
    4,678
    
    
    
    525(2,275
    )
    
    
    5,944
    
    
    
    103,470
    
    
    
    42,780Retained earnings
    
    
    (521
    )
    
    
    (22,641
    )
    
    
    53,108
    
    
    
    1,387$
    (2,796
    )
    
    $
    (16,697
    )
    
    $
    156,578
    
    
    $
    44,167
  4




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##### Table of Contents



LAND OLAKES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Nine Months EndedSeptember 30,2007
    
    
    2006($ in thousands)Cash flows from operating activities:Net earnings
    
    $
    156,578
    
    
    $
    44,167Adjustments to reconcile net earnings to net cash (used) provided by operating activities:Depreciation and amortization
    
    
    61,514
    
    
    
    71,271Amortization of deferred financing costs
    
    
    1,727
    
    
    
    1,759Bad debt expense
    
    
    2,334
    
    
    
    1,983Proceeds from patronage revolvement received
    
    
    3,133
    
    
    
    4,961Non-cash patronage income
    
    
    (1,462
    )
    
    
    (1,138
    )Insurance recovery  business interruption
    
    
    4,551
    
    
    
    Deferred income tax (benefit) expense
    
    
    (17,907
    )
    
    
    2,252(Increase) decrease in other assets
    
    
    (2,057
    )
    
    
    1,631Decrease in other liabilities
    
    
    (2,795
    )
    
    
    (2,487
    )Restructuring and impairment charges
    
    
    1,721
    
    
    
    19,397Gain on divestiture of businesses
    
    
    (28,474
    )
    
    
    (8,063
    )Gain on sale of investments
    
    
    (9,205
    )
    
    
    (7,736
    )Gain on insurance settlement
    
    
    (5,941
    )
    
    
    Equity in earnings of affiliated companies
    
    
    (58,044
    )
    
    
    (27,346
    )Dividends from investments in affiliated companies
    
    
    27,020
    
    
    
    3,952Minority interests
    
    
    872
    
    
    
    1,127Other
    
    
    (218
    )
    
    
    (3,222
    )Changes in current assets and liabilities, net of acquisitions and divestitures:Receivables
    
    
    (190,021
    )
    
    
    128,367Inventories
    
    
    (150,118
    )
    
    
    (5,680
    )Other current assets
    
    
    305,287
    
    
    
    273,132Accounts payable
    
    
    210,550
    
    
    
    (146,300
    )Customer advances
    
    
    (410,611
    )
    
    
    (373,087
    )Accrued expenses
    
    
    66,824
    
    
    
    53,221Net cash (used) provided by operating activities
    
    
    (34,742
    )
    
    
    32,161Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (62,309
    )
    
    
    (50,658
    )Acquisitions
    
    
    (2,930
    )
    
    
    (84,187
    )Investments in affiliates
    
    
    (216,555
    )
    
    
    (4,025
    )Net settlement on repositioning investment in joint venture
    
    
    (133,539
    )
    
    
    Net proceeds from divestiture of businesses
    
    
    212,101
    
    
    
    37,220Proceeds from sale of investments
    
    
    475
    
    
    
    8,819Proceeds from sale of property, plant and equipment
    
    
    5,068
    
    
    
    1,248Insurance proceeds for replacement assets
    
    
    8,635
    
    
    
    Change in notes receivable
    
    
    (18,193
    )
    
    
    5,733Other
    
    
    (606
    )
    
    
    6,908Net cash used by investing activities
    
    
    (207,853
    )
    
    
    (78,942
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    282,634
    
    
    
    (32,244
    )Proceeds from issuance of long-term debt
    
    
    7,684
    
    
    
    10,004Principal payments on long-term debt
    
    
    (36,960
    )
    
    
    (35,286
    )Payments for redemption of member equities
    
    
    (36,213
    )
    
    
    (43,193
    )Payments for debt issuance costs
    
    
    
    
    
    
    (1,527
    )Other
    
    
    (156
    )
    
    
    5,051Net cash provided (used) by financing activities
    
    
    216,989
    
    
    
    (97,195
    )Net cash used by operating activities of discontinued operations
    
    
    
    
    
    
    (349
    )Net decrease in cash and cash equivalents
    
    
    (25,606
    )
    
    
    (144,325
    )Cash and cash equivalents at beginning of the period
    
    
    79,707
    
    
    
    179,704Cash and cash equivalents at end of the period
    
    $
    54,101
    
    
    $
    35,379Supplementary Disclosure of Cash Flow InformationCash paid during periods for:Interest
    
    $
    39,538
    
    
    $
    39,868Income taxes
    
    
    48,294
    
    
    
    4,626
  5




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##### Table of Contents



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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##### Table of Contents



Accounting Estimates
  2. Repositioning of Agronomy Assets
   Receivables
    
    $
    97,096Inventories
    
    
    302,956Other current assets
    
    
    712Property, plant and equipment
    
    
    23,733Goodwill
    
    
    52,278Other intangibles
    
    
    16,032Other assets
    
    
    1,557Accounts payable
    
    
    (32,632
    )Accrued expenses
    
    
    (58,938
    )Employee benefits and other liabilities
    
    
    (7,244
    )Net assets distributed
    
    $
    395,550
   7




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##### Table of Contents



Pro forma
    
    Pro formaThree months
    
    Nine monthsended
    
    endedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Net sales
    
    $
    2,292,041
    
    
    $
    1,723,630
    
    
    $
    7,332,672
    
    
    $
    6,212,778Net (loss) earnings
    
    
    (5,913
    )
    
    
    (8,129
    )
    
    
    156,477
    
    
    
    82,683
 3. Receivables
  September 30,
    
    
    December 31,2007
    
    
    2006Trade accounts
    
    $
    642,288
    
    
    $
    469,230Notes and contracts
    
    
    85,794
    
    
    
    73,469Other
    
    
    220,604
    
    
    
    72,435948,686
    
    
    
    615,134Less allowance for doubtful accounts
    
    
    13,990
    
    
    
    10,554Total receivables, net
    
    $
    934,696
    
    
    $
    604,580
   4. Inventories
  September 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    158,719
    
    
    $
    152,010Work in process
    
    
    3,448
    
    
    
    3,914Finished goods
    
    
    748,204
    
    
    
    315,472Total inventories
    
    $
    910,371
    
    
    $
    471,396
 5. Investments
  September 30,
    
    
    December 31,2007
    
    
    2006Agriliance LLC
    
    $
    77,925
    
    
    $
    124,719Ag Processing Inc.
    
    
    35,013
    
    
    
    33,975Advanced Food Products, LLC
    
    
    33,125
    
    
    
    32,933Agronomy Company of Canada Ltd.
    
    
    21,407
    
    
    
    16,834Universal Cooperatives, Inc.
    
    
    7,909
    
    
    
    7,986Delta Egg Farm, LLC
    
    
    5,649
    
    
    
    3,890CoBank, ACB
    
    
    4,304
    
    
    
    7,198Prairie Farms Dairy, Inc.
    
    
    3,812
    
    
    
    3,696Golden Oval Eggs, LLC
    
    
    2,870
    
    
    
    4,265Melrose Dairy Proteins, LLC
    
    
    2,604
    
    
    
    5,741Other  principally cooperatives and joint ventures
    
    
    38,845
    
    
    
    28,965Total investments
    
    $
    233,463
    
    
    $
    270,202
  8




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##### Table of Contents



Three month
ended
September 30,
    
    Nine months
ended
September 30,2007
    
    2006
    
    2007
    
    2006Net sales
    
    $
    606,139
    
    
    $
    633,638
    
    
    $
    3,254,154
    
    
    $
    3,041,259Gross profit
    
    
    79,386
    
    
    
    64,774
    
    
    
    385,934
    
    
    
    296,052Net (loss)
earnings
    
    
    (26,226
    )
    
    
    (8,098
    )
    
    
    97,373
    
    
    
    56,613
 September 30,
    
    December 31,2007
    
    2006Current assets
    
    $
    601,865
    
    
    $
    1,518,133Non-current assets
    
    
    67,466
    
    
    
    164,917Current liabilities
    
    
    479,048
    
    
    
    1,302,148Non-current liabilities
    
    
    34,804
    
    
    
    131,465Total equity
    
    
    155,479
    
    
    
    249,437
   6. Goodwill and Other Intangible Assets
 Goodwill
  September 30,
    
    
    December 31,2007
    
    
    2006Feed
    
    $
    127,585
    
    
    $
    127,893Agronomy
    
    
    84,461
    
    
    
    45,461Dairy Foods
    
    
    69,683
    
    
    
    83,799Layers
    
    
    58,631
    
    
    
    58,982Seed
    
    
    10,727
    
    
    
    10,392Total goodwill
    
    $
    351,087
    
    
    $
    326,527
   Other Intangible Assets
  September 30,
    
    
    December 31,2007
    
    
    2006Amortized other intangible assets:Patents, less accumulated amortization of $6,968 and $6,063, respectively
    
    $
    9,743
    
    
    $
    10,648Trademarks, less accumulated amortization of $1,548 and $2,498, respectively
    
    
    1,445
    
    
    
    1,472Other intangible assets, less accumulated amortization of $10,720 and $10,578, respectively
    
    
    21,217
    
    
    
    6,298Total amortized other intangible assets
    
    
    32,405
    
    
    
    18,418Total non-amortized other intangible assets  trademarks and dealer networks
    
    
    76,625
    
    
    
    76,625Total other intangible assets
    
    $
    109,030
    
    
    $
    95,043
   9




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##### Table of Contents



7. Debt Obligations
 Notes and Short-term Obligations
     Long-term Debt
  September 30,
    
    
    December 31,2007
    
    
    2006Senior unsecured notes  due 2011 (8.75%)
    
    $
    192,743
    
    
    $
    196,452Senior 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 2007 through 2023 (7.81% weighted average)
    
    
    29,904
    
    
    
    44,004Industrial development revenue bonds and other secured notes
payable  due 2008 through 2009 (6.00%)
    
    
    48
    
    
    
    14,868Capital lease obligations (5.22% to 8.95%)
    
    
    6,564
    
    
    
    7,776Other debt
    
    
    25,935
    
    
    
    21,231620,894
    
    
    
    650,031Less current portion
    
    
    5,164
    
    
    
    10,972Total long-term debt
    
    $
    615,730
    
    
    $
    639,059
   10




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##### Table of Contents



8. Other Comprehensive (Loss) Income
  Three months
    
    
    Nine monthsended
    
    
    endedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net (loss) earnings
    
    $
    (2,796
    )
    
    $
    (16,697
    )
    
    $
    156,578
    
    
    $
    44,167Unrealized gain (loss) on available-for-sale-investment securities
    
    
    283
    
    
    
    (49
    )
    
    
    283
    
    
    
    (107
    )Change in minimum pension liability
    
    
    (1,055
    )
    
    
    111
    
    
    
    (1,249
    )
    
    
    111Foreign currency translation adjustment
    
    
    611
    
    
    
    201
    
    
    
    1,853
    
    
    
    743Total comprehensive (loss) income
    
    $
    (2,957
    )
    
    $
    (16,434
    )
    
    $
    157,465
    
    
    $
    44,914
 9. Income Taxes
    11




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##### Table of Contents



10. Pension and Other Postretirement Plans
  Other PostretirementPension Benefits
    
    
    Benefits2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    3,566
    
    
    $
    4,850
    
    
    $
    182
    
    
    $
    175Interest cost
    
    
    8,296
    
    
    
    7,925
    
    
    
    980
    
    
    
    975Expected return on assets
    
    
    (9,262
    )
    
    
    (8,650
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    3,238
    
    
    
    3,425
    
    
    
    735
    
    
    
    675Amortization of prior service cost
    
    
    (121
    )
    
    
    (125
    )
    
    
    
    
    
    
    75Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    107
    
    
    
    150Net periodic benefit cost
    
    $
    5,717
    
    
    $
    7,425
    
    
    $
    2,004
    
    
    $
    2,050
   Other PostretirementPension Benefits
    
    
    Benefits2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    10,699
    
    
    $
    14,550
    
    
    $
    547
    
    
    $
    525Interest cost
    
    
    24,888
    
    
    
    23,775
    
    
    
    2,942
    
    
    
    2,925Expected return on assets
    
    
    (27,788
    )
    
    
    (25,950
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    9,709
    
    
    
    10,275
    
    
    
    2,207
    
    
    
    2,025Amortization of prior service cost
    
    
    (365
    )
    
    
    (375
    )
    
    
    
    
    
    
    225Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    321
    
    
    
    450Net periodic benefit cost
    
    $
    17,143
    
    
    $
    22,275
    
    
    $
    6,017
    
    
    $
    6,150
   11. Restructuring and Impairment Charges
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Restructuring charges
    
    $
    32
    
    
    $
    116
    
    
    $
    411
    
    
    $
    1,614Impairment charges
    
    
    
    
    
    
    15,000
    
    
    
    1,310
    
    
    
    17,783Total restructuring and impairment charges
    
    $
    32
    
    
    $
    15,116
    
    
    $
    1,721
    
    
    $
    19,397
 Restructuring Charges
   Impairment Charges
  12




---



##### Table of Contents



12. Gain on Insurance Settlement
  13. Other Income, Net
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Loss (gain) on divestiture
    
    $
    7
    
    
    $
    (29
    )
    
    $
    (28,474
    )
    
    $
    (8,063
    )(Gain) loss on sale of investments
    
    
    (9,390
    )
    
    
    100
    
    
    
    (9,205
    )
    
    
    (7,736
    )Gain on sale of intangible
    
    
    
    
    
    
    (1,825
    )
    
    
    
    
    
    
    (1,825
    )Total other income, net
    
    $
    (9,383
    )
    
    $
    (1,754
    )
    
    $
    (37,679
    )
    
    $
    (17,624
    )
      14. Other Acquisitions
   13




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##### Table of Contents



15. Commitments and Contingencies
 ® ® ® ® ®
  16. Segment Information
        14




---



##### Table of Contents



Other/Dairy Foods
    
    
    Feed
    
    
    Seed
    
    
    Agronomy
    
    
    Layers
    
    
    Eliminations
    
    
    ConsolidatedFor 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
    
    
    
    89,691
    
    
    
    102,279
    
    
    
    (5,759
    )
    
    
    1,967,905Selling, general and administrative
    
    
    51,883
    
    
    
    66,247
    
    
    
    19,166
    
    
    
    9,576
    
    
    
    10,009
    
    
    
    1,313
    
    
    
    158,194Restructuring and impairment charges
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32Interest expense (income), net
    
    
    6,305
    
    
    
    6,392
    
    
    
    (3,956
    )
    
    
    (913
    )
    
    
    3,497
    
    
    
    (1,531
    )
    
    
    9,794Other expense (income), net
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    (9,390
    )
    
    
    
    
    
    
    
    
    
    
    (9,383
    )Equity in loss (earnings) of affiliated companies
    
    
    566
    
    
    
    (1,144
    )
    
    
    4
    
    
    
    11,247
    
    
    
    (3,598
    )
    
    
    
    
    
    
    7,075Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    286Earnings (loss) before income taxes
    
    $
    220
    
    
    $
    (2,844
    )
    
    $
    (566
    )
    
    $
    (6,175
    )
    
    $
    11,427
    
    
    $
    (1,392
    )
    
    $
    670For the three months ended September 30, 2006:Net sales (1)
    
    $
    765,968
    
    
    $
    628,946
    
    
    $
    55,169
    
    
    $
    
    
    
    $
    73,796
    
    
    $
    700
    
    
    $
    1,524,579Cost of sales (2)
    
    
    715,355
    
    
    
    557,962
    
    
    
    49,266
    
    
    
    
    
    
    
    75,711
    
    
    
    874
    
    
    
    1,399,168Selling, general and administrative
    
    
    40,033
    
    
    
    58,536
    
    
    
    15,850
    
    
    
    3,694
    
    
    
    6,863
    
    
    
    (1,858
    )
    
    
    123,118Restructuring and impairment charges
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    15,116Interest expense (income), net
    
    
    7,982
    
    
    
    6,158
    
    
    
    (1,993
    )
    
    
    (1,747
    )
    
    
    3,735
    
    
    
    (1,150
    )
    
    
    12,985Other (income) expense, net
    
    
    (1,825
    )
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (1,754
    )Equity in (earnings) loss of affiliated companies
    
    
    (826
    )
    
    
    (684
    )
    
    
    (285
    )
    
    
    1,963
    
    
    
    2,206
    
    
    
    9
    
    
    
    2,383Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    542
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    542Earnings (loss) before income taxes
    
    $
    5,133
    
    
    $
    6,364
    
    
    $
    (7,669
    )
    
    $
    (3,910
    )
    
    $
    (29,719
    )
    
    $
    2,822
    
    
    $
    (26,979
    )For 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
    
    
    
    89,689
    
    
    
    306,687
    
    
    
    (16,801
    )
    
    
    5,765,238Selling, general and administrative
    
    
    149,563
    
    
    
    189,706
    
    
    
    59,020
    
    
    
    21,188
    
    
    
    25,118
    
    
    
    3,452
    
    
    
    448,047Restructuring 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
    )
    
    
    11,420
    
    
    
    (4,245
    )
    
    
    33,514Other (income) expense, net
    
    
    (28,481
    )
    
    
    7
    
    
    
    
    
    
    
    (9,390
    )
    
    
    
    
    
    
    185
    
    
    
    (37,679
    )Equity in loss (earnings) of affiliated companies
    
    
    1,924
    
    
    
    (2,023
    )
    
    
    (50
    )
    
    
    (50,588
    )
    
    
    (7,300
    )
    
    
    (7
    )
    
    
    (58,044
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872Earnings (loss) before income taxes
    
    $
    79,749
    
    
    $
    2,675
    
    
    $
    43,711
    
    
    $
    49,114
    
    
    $
    18,334
    
    
    $
    (2,439
    )
    
    $
    191,144For the nine months ended September 30, 2006:Net sales (1)
    
    $
    2,350,917
    
    
    $
    1,967,862
    
    
    $
    607,066
    
    
    $
    
    
    
    $
    286,843
    
    
    $
    (4,086
    )
    
    $
    5,208,602Cost of sales (2)
    
    
    2,202,882
    
    
    
    1,763,484
    
    
    
    518,365
    
    
    
    
    
    
    
    277,161
    
    
    
    (2,057
    )
    
    
    4,759,835Selling, general and administrative
    
    
    126,385
    
    
    
    176,987
    
    
    
    50,516
    
    
    
    10,443
    
    
    
    26,335
    
    
    
    (865
    )
    
    
    389,801Restructuring and impairment charges
    
    
    4,397
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    19,397Interest expense (income), net
    
    
    24,985
    
    
    
    18,751
    
    
    
    (976
    )
    
    
    (8,231
    )
    
    
    13,356
    
    
    
    (3,160
    )
    
    
    44,725Other (income) expense, net
    
    
    (9,662
    )
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    (8,033
    )
    
    
    3
    
    
    
    (17,624
    )Equity in (earnings) losses of affiliated companies
    
    
    (458
    )
    
    
    (1,101
    )
    
    
    (285
    )
    
    
    (30,299
    )
    
    
    4,793
    
    
    
    4
    
    
    
    (27,346
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    1,127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,127Earnings (loss) before income taxes
    
    $
    2,388
    
    
    $
    8,546
    
    
    $
    39,446
    
    
    $
    28,087
    
    
    $
    (41,769
    )
    
    $
    1,989
    
    
    $
    38,687
 
 (1)
    
    Net sales includes intersegment sales of: Other/Dairy Foods
    
    Feed
    
    Seed
    
    Agronomy
    
    Layers
    
    Eliminations
    
    ConsolidatedFor the three months ended: September 30, 2007
    
    $
    5,095
    
    
    $
    6,229
    
    
    $
    
    
    
    $
    21
    
    
    $
    
    
    
    $
    (11,345
    )
    
    $
    For the three months ended: September 30, 2006
    
    
    1,127
    
    
    
    3,711
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,838
    )
    
    
    For the nine months ended: September 30, 2007
    
    
    17,804
    
    
    
    16,961
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    (34,786
    )
    
    
    For the nine months ended: September 30, 2006
    
    
    3,915
    
    
    
    14,143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,058
    )
    
    
    
  Other/Dairy Foods
    
    Feed
    
    Seed
    
    Agronomy
    
    Layers
    
    Eliminations
    
    ConsolidatedFor the three months ended: September 30, 2007
    
    $
    (2,854
    )
    
    $
    (5,039
    )
    
    $
    (2,933
    )
    
    $
    
    
    
    $
    (1,133
    )
    
    $
    390
    
    
    $
    (11,569
    )For the three months ended: September 30, 2006
    
    
    1,895
    
    
    
    696
    
    
    
    1,243
    
    
    
    
    
    
    
    (17
    )
    
    
    271
    
    
    
    4,088For the nine months ended: September 30, 2007
    
    
    (1,390
    )
    
    
    (762
    )
    
    
    (2,527
    )
    
    
    
    
    
    
    (1,277
    )
    
    
    897
    
    
    
    (5,059
    )For the nine months ended: September 30, 2006
    
    
    (693
    )
    
    
    949
    
    
    
    1,050
    
    
    
    
    
    
    
    (279
    )
    
    
    551
    
    
    
    1,578
  15




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##### Table of Contents



17. Consolidating Financial Information
       16




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
September 30, 2007
 LandOLakes, Inc.Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,610
    
    
    $
    57
    
    
    $
    26,434
    
    
    $
    
    
    
    $
    54,101Receivables, net
    
    
    248,669
    
    
    
    344,309
    
    
    
    608,636
    
    
    
    (266,918
    )
    
    
    934,696Intercompany receivable, net
    
    
    
    
    
    
    81,998
    
    
    
    
    
    
    
    (81,998
    )
    
    
    Inventories
    
    
    363,209
    
    
    
    500,653
    
    
    
    46,509
    
    
    
    
    
    
    
    910,371Prepaid expenses
    
    
    28,626
    
    
    
    8,547
    
    
    
    2,592
    
    
    
    
    
    
    
    39,765Other current assets
    
    
    45,590
    
    
    
    14,256
    
    
    
    3,010
    
    
    
    
    
    
    
    62,856Total current assets
    
    
    713,704
    
    
    
    949,820
    
    
    
    687,181
    
    
    
    (348,916
    )
    
    
    2,001,789Investments
    
    
    1,393,717
    
    
    
    51,888
    
    
    
    11,819
    
    
    
    (1,223,961
    )
    
    
    233,463Property, plant and equipment, net
    
    
    185,924
    
    
    
    266,334
    
    
    
    86,556
    
    
    
    
    
    
    
    538,814Goodwill, net
    
    
    128,416
    
    
    
    163,577
    
    
    
    59,094
    
    
    
    
    
    
    
    351,087Other intangibles, net
    
    
    3,826
    
    
    
    102,999
    
    
    
    2,205
    
    
    
    
    
    
    
    109,030Other assets
    
    
    25,024
    
    
    
    39,005
    
    
    
    60,091
    
    
    
    (3,673
    )
    
    
    120,447Total assets
    
    $
    2,450,611
    
    
    $
    1,573,623
    
    
    $
    906,946
    
    
    $
    (1,576,550
    )
    
    $
    3,354,630LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    
    
    
    $
    2,695
    
    
    $
    598,515
    
    
    $
    (261,806
    )
    
    $
    339,404Current portion of long-term debt
    
    
    1,836
    
    
    
    411
    
    
    
    2,917
    
    
    
    
    
    
    
    5,164Accounts payable
    
    
    463,551
    
    
    
    286,214
    
    
    
    25,409
    
    
    
    (3,869
    )
    
    
    771,305Intercompany payable, net
    
    
    42,186
    
    
    
    39,505
    
    
    
    307
    
    
    
    (81,998
    )
    
    
    Customer advances
    
    
    439
    
    
    
    8,461
    
    
    
    5
    
    
    
    
    
    
    
    8,905Accrued expenses
    
    
    146,278
    
    
    
    180,971
    
    
    
    26,877
    
    
    
    (4,916
    )
    
    
    349,210Patronage refunds and other member equities payable
    
    
    29,506
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,506Total current liabilities
    
    
    683,796
    
    
    
    518,257
    
    
    
    654,030
    
    
    
    (352,589
    )
    
    
    1,503,494Long-term debt
    
    
    577,848
    
    
    
    538
    
    
    
    37,344
    
    
    
    
    
    
    
    615,730Employee benefits and other liabilities
    
    
    135,159
    
    
    
    34,365
    
    
    
    6,326
    
    
    
    
    
    
    
    175,850Minority interests
    
    
    
    
    
    
    1,396
    
    
    
    4,352
    
    
    
    
    
    
    
    5,748Commitments and contingenciesEquities:Capital stock
    
    
    1,732
    
    
    
    100
    
    
    
    2,909
    
    
    
    (3,009
    )
    
    
    1,732Additional paid-in capital
    
    
    
    
    
    
    753,019
    
    
    
    132,281
    
    
    
    (885,300
    )
    
    
    Member equities
    
    
    958,329
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    958,329Accumulated other comprehensive loss
    
    
    (65,389
    )
    
    
    (118
    )
    
    
    489
    
    
    
    (371
    )
    
    
    (65,389
    )Retained earnings
    
    
    159,136
    
    
    
    266,066
    
    
    
    69,215
    
    
    
    (335,281
    )
    
    
    159,136Total equities
    
    
    1,053,808
    
    
    
    1,019,067
    
    
    
    204,894
    
    
    
    (1,223,961
    )
    
    
    1,053,808Total liabilities and equities
    
    $
    2,450,611
    
    
    $
    1,573,623
    
    
    $
    906,946
    
    
    $
    (1,576,550
    )
    
    $
    3,354,630
 17




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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
    
    
    ConsolidatedNet sales
    
    $
    1,263,430
    
    
    $
    728,856
    
    
    $
    142,287
    
    
    $
    
    
    
    $
    2,134,573Cost of sales
    
    
    1,193,522
    
    
    
    653,561
    
    
    
    120,822
    
    
    
    
    
    
    
    1,967,905Gross profit
    
    
    69,908
    
    
    
    75,295
    
    
    
    21,465
    
    
    
    
    
    
    
    166,668Selling, general and administrative
    
    
    74,979
    
    
    
    74,942
    
    
    
    8,273
    
    
    
    
    
    
    
    158,194Restructuring and impairment charges
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32(Loss) earnings from operations
    
    
    (5,103
    )
    
    
    353
    
    
    
    13,192
    
    
    
    
    
    
    
    8,442Interest expense (income), net
    
    
    15,458
    
    
    
    (172
    )
    
    
    (5,492
    )
    
    
    
    
    
    
    9,794Other (income) expense, net
    
    
    (9,390
    )
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    (9,383
    )Equity in earnings of affiliated companies
    
    
    (10,967
    )
    
    
    (1,162
    )
    
    
    (4,255
    )
    
    
    23,459
    
    
    
    7,075Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    286(Loss) earnings before income taxes
    
    
    (204
    )
    
    
    1,680
    
    
    
    22,653
    
    
    
    (23,459
    )
    
    
    670Income tax expense
    
    
    2,592
    
    
    
    75
    
    
    
    799
    
    
    
    
    
    
    
    3,466Net (loss) earnings
    
    $
    (2,796
    )
    
    $
    1,605
    
    
    $
    21,854
    
    
    $
    (23,459
    )
    
    $
    (2,796
    )
 18




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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
    
    
    ConsolidatedNet sales
    
    $
    3,481,824
    
    
    $
    2,424,641
    
    
    $
    432,407
    
    
    $
    
    
    
    $
    6,338,872Cost of sales
    
    
    3,194,448
    
    
    
    2,190,732
    
    
    
    380,058
    
    
    
    
    
    
    
    5,765,238Gross profit
    
    
    287,376
    
    
    
    233,909
    
    
    
    52,349
    
    
    
    
    
    
    
    573,634Selling, general and administrative
    
    
    218,048
    
    
    
    205,341
    
    
    
    24,658
    
    
    
    
    
    
    
    448,047Restructuring and impairment charges
    
    
    828
    
    
    
    595
    
    
    
    298
    
    
    
    
    
    
    
    1,721Gain on insurance settlement
    
    
    
    
    
    
    (5,941
    )
    
    
    
    
    
    
    
    
    
    
    (5,941
    )Earnings from operations
    
    
    68,500
    
    
    
    33,914
    
    
    
    27,393
    
    
    
    
    
    
    
    129,807Interest expense (income), net
    
    
    34,024
    
    
    
    (1,506
    )
    
    
    996
    
    
    
    
    
    
    
    33,514Other income, net
    
    
    (9,205
    )
    
    
    (28,474
    )
    
    
    
    
    
    
    
    
    
    
    (37,679
    )Equity in earnings of affiliated companies
    
    
    (145,468
    )
    
    
    (2,114
    )
    
    
    (8,696
    )
    
    
    98,234
    
    
    
    (58,044
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    872Earnings before income taxes
    
    
    189,149
    
    
    
    66,008
    
    
    
    34,221
    
    
    
    (98,234
    )
    
    
    191,144Income tax expense
    
    
    32,571
    
    
    
    343
    
    
    
    1,652
    
    
    
    
    
    
    
    34,566Net earnings
    
    $
    156,578
    
    
    $
    65,665
    
    
    $
    32,569
    
    
    $
    (98,234
    )
    
    $
    156,578
 19




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##### 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
    
    
    ConsolidatedCash flows from operating activities:Net earnings
    
    $
    156,578
    
    
    $
    65,665
    
    
    $
    32,569
    
    
    $
    (98,234
    )
    
    $
    156,578Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:Depreciation and amortization
    
    
    31,259
    
    
    
    23,448
    
    
    
    6,807
    
    
    
    
    
    
    
    61,514Amortization of deferred financing costs
    
    
    1,330
    
    
    
    288
    
    
    
    109
    
    
    
    
    
    
    
    1,727Bad debt expense
    
    
    317
    
    
    
    2,008
    
    
    
    9
    
    
    
    
    
    
    
    2,334Proceeds 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)
    
    
    7,864
    
    
    
    (25,771
    )
    
    
    
    
    
    
    
    
    
    
    (17,907
    )Increase in other assets
    
    
    (1,110
    )
    
    
    (947
    )
    
    
    
    
    
    
    
    
    
    
    (2,057
    )Decrease in other liabilities
    
    
    (3,120
    )
    
    
    326
    
    
    
    (1
    )
    
    
    
    
    
    
    (2,795
    )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
    
    
    (145,468
    )
    
    
    (2,114
    )
    
    
    (8,696
    )
    
    
    98,234
    
    
    
    (58,044
    )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
    
    
    45,587
    
    
    
    55,610
    
    
    
    (145,491
    )
    
    
    (145,727
    )
    
    
    (190,021
    )Inventories
    
    
    (132,971
    )
    
    
    (8,756
    )
    
    
    (8,391
    )
    
    
    
    
    
    
    (150,118
    )Other current assets
    
    
    293,256
    
    
    
    11,249
    
    
    
    782
    
    
    
    
    
    
    
    305,287Accounts payable
    
    
    132,894
    
    
    
    86,710
    
    
    
    (2,337
    )
    
    
    (6,717
    )
    
    
    210,550Customer advances
    
    
    (383,618
    )
    
    
    (23,401
    )
    
    
    (3,592
    )
    
    
    
    
    
    
    (410,611
    )Accrued expenses
    
    
    44,605
    
    
    
    21,923
    
    
    
    2,578
    
    
    
    (2,282
    )
    
    
    66,824Net cash provided (used) by operating activities
    
    
    61,547
    
    
    
    177,570
    
    
    
    (119,133
    )
    
    
    (154,726
    )
    
    
    (34,742
    )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
    
    
    2,184
    
    
    
    1,750
    
    
    
    3,750
    
    
    
    
    
    
    
    7,684Principal payments on long-term debt
    
    
    (9,126
    )
    
    
    (12,112
    )
    
    
    (15,722
    )
    
    
    
    
    
    
    (36,960
    )Payments for redemption of member equities
    
    
    (36,213
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,213
    )Other
    
    
    (153
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (156
    )Net cash (used) provided by financing activities
    
    
    (43,783
    )
    
    
    (10,976
    )
    
    
    117,208
    
    
    
    154,540
    
    
    
    216,989Net 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
 20




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
December 31, 2006
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,976
    
    
    $
    15,613
    
    
    $
    55,118
    
    
    $
    
    
    
    $
    79,707Receivables, net
    
    
    300,803
    
    
    
    266,680
    
    
    
    449,742
    
    
    
    (412,645
    )
    
    
    604,580Intercompany receivables, net
    
    
    77,042
    
    
    
    
    
    
    
    
    
    
    
    (77,042
    )
    
    
    Inventories
    
    
    227,258
    
    
    
    204,814
    
    
    
    39,324
    
    
    
    
    
    
    
    471,396Prepaid expenses
    
    
    339,507
    
    
    
    7,735
    
    
    
    3,181
    
    
    
    
    
    
    
    350,423Other current assets
    
    
    28,192
    
    
    
    19,199
    
    
    
    3,203
    
    
    
    
    
    
    
    50,594Total current assets
    
    
    981,778
    
    
    
    514,041
    
    
    
    550,568
    
    
    
    (489,687
    )
    
    
    1,556,700Investments
    
    
    1,134,363
    
    
    
    42,809
    
    
    
    8,323
    
    
    
    (915,293
    )
    
    
    270,202Property, plant and equipment, net
    
    
    183,580
    
    
    
    388,410
    
    
    
    93,079
    
    
    
    
    
    
    
    665,069Goodwill, net
    
    
    184,414
    
    
    
    83,019
    
    
    
    59,094
    
    
    
    
    
    
    
    326,527Other intangibles, net
    
    
    4,789
    
    
    
    88,255
    
    
    
    1,999
    
    
    
    
    
    
    
    95,043Other assets
    
    
    28,392
    
    
    
    36,557
    
    
    
    51,729
    
    
    
    (3,487
    )
    
    
    113,191Total assets
    
    $
    2,517,316
    
    
    $
    1,153,091
    
    
    $
    764,792
    
    
    $
    (1,408,467
    )
    
    $
    3,026,732LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    2,005
    
    
    $
    3,306
    
    
    $
    469,335
    
    
    $
    (416,346
    )
    
    $
    58,300Current portion of long-term debt
    
    
    449
    
    
    
    403
    
    
    
    10,120
    
    
    
    
    
    
    
    10,972Accounts payable
    
    
    335,955
    
    
    
    165,950
    
    
    
    25,097
    
    
    
    2,848
    
    
    
    529,850Intercompany payables, net
    
    
    
    
    
    
    74,513
    
    
    
    2,529
    
    
    
    (77,042
    )
    
    
    Customer advances
    
    
    384,057
    
    
    
    31,862
    
    
    
    3,597
    
    
    
    
    
    
    
    419,516Accrued expenses
    
    
    107,786
    
    
    
    94,146
    
    
    
    24,299
    
    
    
    (2,634
    )
    
    
    223,597Patronage refunds and other member
equities payable
    
    
    18,626
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,626Total current liabilities
    
    
    848,878
    
    
    
    370,180
    
    
    
    534,977
    
    
    
    (493,174
    )
    
    
    1,260,861Long-term debt
    
    
    586,030
    
    
    
    10,911
    
    
    
    42,118
    
    
    
    
    
    
    
    639,059Employee benefits and other liabilities
    
    
    137,872
    
    
    
    27,542
    
    
    
    8,032
    
    
    
    
    
    
    
    173,446Minority interests
    
    
    
    
    
    
    4,808
    
    
    
    4,022
    
    
    
    
    
    
    
    8,830Commitments and contingenciesEquities:Capital stock
    
    
    1,828
    
    
    
    100
    
    
    
    37
    
    
    
    (137
    )
    
    
    1,828Additional paid-in capital
    
    
    
    
    
    
    504,118
    
    
    
    139,820
    
    
    
    (643,938
    )
    
    
    Member equities
    
    
    904,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    904,183Accumulated other comprehensive loss
    
    
    (66,276
    )
    
    
    (16
    )
    
    
    
    
    
    
    16
    
    
    
    (66,276
    )Retained earnings
    
    
    104,801
    
    
    
    235,448
    
    
    
    35,786
    
    
    
    (271,234
    )
    
    
    104,801Total equities
    
    
    944,536
    
    
    
    739,650
    
    
    
    175,643
    
    
    
    (915,293
    )
    
    
    944,536Total liabilities and equities
    
    $
    2,517,316
    
    
    $
    1,153,091
    
    
    $
    764,792
    
    
    $
    (1,408,467
    )
    
    $
    3,026,732
 21




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended September 30, 2006
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    674,996
    
    
    $
    749,897
    
    
    $
    99,686
    
    
    $
    
    
    
    $
    1,524,579Cost of sales
    
    
    623,976
    
    
    
    677,844
    
    
    
    97,348
    
    
    
    
    
    
    
    1,399,168Gross profit
    
    
    51,020
    
    
    
    72,053
    
    
    
    2,338
    
    
    
    
    
    
    
    125,411Selling, general and administrative
    
    
    56,530
    
    
    
    57,068
    
    
    
    9,520
    
    
    
    
    
    
    
    123,118Restructuring and impairment charges
    
    
    9,393
    
    
    
    
    
    
    
    5,723
    
    
    
    
    
    
    
    15,116(Loss) earnings from operations
    
    
    (14,903
    )
    
    
    14,985
    
    
    
    (12,905
    )
    
    
    
    
    
    
    (12,823
    )Interest expense, net
    
    
    8,714
    
    
    
    3,969
    
    
    
    302
    
    
    
    
    
    
    
    12,985Other (income) expense, net
    
    
    (1,822
    )
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    (1,754
    )Equity in losses (earnings) of affiliated companies
    
    
    5,474
    
    
    
    (641
    )
    
    
    1,968
    
    
    
    (4,418
    )
    
    
    2,383Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    542
    
    
    
    
    
    
    
    542(Loss) earnings before income taxes
    
    
    (27,269
    )
    
    
    11,589
    
    
    
    (15,717
    )
    
    
    4,418
    
    
    
    (26,979
    )Income tax (benefit) expense
    
    
    (10,572
    )
    
    
    1,641
    
    
    
    (1,351
    )
    
    
    
    
    
    
    (10,282
    )Net (loss) earnings
    
    $
    (16,697
    )
    
    $
    9,948
    
    
    $
    (14,366
    )
    
    $
    4,418
    
    
    $
    (16,697
    )
 22




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the nine months ended September 30, 2006
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    2,440,650
    
    
    $
    2,410,319
    
    
    $
    357,633
    
    
    $
    
    
    
    $
    5,208,602Cost of sales
    
    
    2,227,345
    
    
    
    2,190,416
    
    
    
    342,074
    
    
    
    
    
    
    
    4,759,835Gross profit
    
    
    213,305
    
    
    
    219,903
    
    
    
    15,559
    
    
    
    
    
    
    
    448,767Selling, general and administrative
    
    
    177,620
    
    
    
    184,084
    
    
    
    28,097
    
    
    
    
    
    
    
    389,801Restructuring and impairment charges
    
    
    13,674
    
    
    
    
    
    
    
    5,723
    
    
    
    
    
    
    
    19,397Earnings (loss) from operations
    
    
    22,011
    
    
    
    35,819
    
    
    
    (18,261
    )
    
    
    
    
    
    
    39,569Interest expense, net
    
    
    35,333
    
    
    
    7,634
    
    
    
    1,758
    
    
    
    
    
    
    
    44,725Other expense (income), net
    
    
    3,213
    
    
    
    68
    
    
    
    (20,905
    )
    
    
    
    
    
    
    (17,624
    )Equity in (earnings) loss of affiliated companies
    
    
    (54,519
    )
    
    
    (1,021
    )
    
    
    4,555
    
    
    
    23,639
    
    
    
    (27,346
    )Minority interest in (loss) earnings of subsidiaries
    
    
    (61
    )
    
    
    
    
    
    
    1,188
    
    
    
    
    
    
    
    1,127Earnings (loss) before income taxes
    
    
    38,045
    
    
    
    29,138
    
    
    
    (4,857
    )
    
    
    (23,639
    )
    
    
    38,687Income tax (benefit) expense
    
    
    (6,122
    )
    
    
    2,267
    
    
    
    (1,625
    )
    
    
    
    
    
    
    (5,480
    )Net earnings (loss)
    
    $
    44,167
    
    
    $
    26,871
    
    
    $
    (3,232
    )
    
    $
    (23,639
    )
    
    $
    44,167
 23




---



##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2006
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net earnings
    
    $
    44,167
    
    
    $
    26,871
    
    
    $
    (3,232
    )
    
    $
    (23,639
    )
    
    $
    44,167Adjustments to reconcile net earnings to net
cash (used) provided by operating activities:Depreciation and amortization
    
    
    30,443
    
    
    
    33,400
    
    
    
    7,428
    
    
    
    
    
    
    
    71,271Amortization of deferred financing costs
    
    
    1,686
    
    
    
    59
    
    
    
    14
    
    
    
    
    
    
    
    1,759Bad debt expense
    
    
    335
    
    
    
    823
    
    
    
    825
    
    
    
    
    
    
    
    1,983Proceeds from patronage revolvement received
    
    
    4,957
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4,961Non-cash patronage income
    
    
    (1,076
    )
    
    
    (62
    )
    
    
    
    
    
    
    
    
    
    
    (1,138
    )Deferred income tax expense
    
    
    2,252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,252Decrease (increase) in other assets
    
    
    2,775
    
    
    
    (1,744
    )
    
    
    600
    
    
    
    
    
    
    
    1,631(Decrease) increase in other liabilities
    
    
    (2,372
    )
    
    
    55
    
    
    
    (170
    )
    
    
    
    
    
    
    (2,487
    )Restructuring and impairment charges
    
    
    13,674
    
    
    
    
    
    
    
    5,723
    
    
    
    
    
    
    
    19,397Loss (gain) on divestiture of business
    
    
    12,872
    
    
    
    (30
    )
    
    
    (20,905
    )
    
    
    
    
    
    
    (8,063
    )Gain on sale of investment
    
    
    (7,834
    )
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    (7,736
    )Equity in (earnings) loss of affiliated companies
    
    
    (54,519
    )
    
    
    (1,021
    )
    
    
    4,555
    
    
    
    23,639
    
    
    
    (27,346
    )Dividends from investments in affiliated companies
    
    
    1,858
    
    
    
    1,194
    
    
    
    900
    
    
    
    
    
    
    
    3,952Minority interests
    
    
    (61
    )
    
    
    
    
    
    
    1,188
    
    
    
    
    
    
    
    1,127Other
    
    
    (1,747
    )
    
    
    (12
    )
    
    
    (1,463
    )
    
    
    
    
    
    
    (3,222
    )Changes in current assets and liabilities, net of
acquisitions and divestitures:Receivables
    
    
    132,761
    
    
    
    (38,556
    )
    
    
    (234,326
    )
    
    
    268,488
    
    
    
    128,367Inventories
    
    
    494
    
    
    
    (6,269
    )
    
    
    95
    
    
    
    
    
    
    
    (5,680
    )Other current assets
    
    
    268,992
    
    
    
    3,788
    
    
    
    352
    
    
    
    
    
    
    
    273,132Accounts payable
    
    
    (146,440
    )
    
    
    20,184
    
    
    
    (22,088
    )
    
    
    2,044
    
    
    
    (146,300
    )Customer advances
    
    
    (351,146
    )
    
    
    (30,606
    )
    
    
    8,665
    
    
    
    
    
    
    
    (373,087
    )Accrued expenses
    
    
    44,705
    
    
    
    7,860
    
    
    
    2,095
    
    
    
    (1,439
    )
    
    
    53,221Net cash (used) provided by operating activities
    
    
    (3,224
    )
    
    
    16,036
    
    
    
    (249,744
    )
    
    
    269,093
    
    
    
    32,161Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (19,248
    )
    
    
    (20,363
    )
    
    
    (11,047
    )
    
    
    
    
    
    
    (50,658
    )Acquisitions
    
    
    (84,187
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,187
    )Investments in affiliates
    
    
    (22,925
    )
    
    
    
    
    
    
    (3,100
    )
    
    
    22,000
    
    
    
    (4,025
    )Net proceeds from divestiture of business
    
    
    
    
    
    
    161
    
    
    
    37,059
    
    
    
    
    
    
    
    37,220Proceeds from sale of investments
    
    
    7,917
    
    
    
    902
    
    
    
    
    
    
    
    
    
    
    
    8,819Proceeds from sale of property, plant and equipment
    
    
    147
    
    
    
    938
    
    
    
    163
    
    
    
    
    
    
    
    1,248Changes in notes receivable
    
    
    5,611
    
    
    
    (141
    )
    
    
    5,084
    
    
    
    (4,821
    )
    
    
    5,733Other
    
    
    809
    
    
    
    3,901
    
    
    
    2,198
    
    
    
    
    
    
    
    6,908Net cash (used) provided by investing activities
    
    
    (111,876
    )
    
    
    (14,602
    )
    
    
    30,357
    
    
    
    17,179
    
    
    
    (78,942
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    (677
    )
    
    
    922
    
    
    
    231,783
    
    
    
    (264,272
    )
    
    
    (32,244
    )Proceeds from issuance of long-term debt
    
    
    2,047
    
    
    
    
    
    
    
    7,957
    
    
    
    
    
    
    
    10,004Principal payments on long-term
    
    
    (528
    )
    
    
    (408
    )
    
    
    (34,350
    )
    
    
    
    
    
    
    (35,286
    )Distribution to members
    
    
    6,500
    
    
    
    
    
    
    
    (6,500
    )
    
    
    
    
    
    
    Payments for redemption of member equities
    
    
    (43,193
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,193
    )Payments for debt issuance costs
    
    
    (1,527
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,527
    )Other
    
    
    (504
    )
    
    
    
    
    
    
    27,555
    
    
    
    (22,000
    )
    
    
    5,051Net cash (used) provided by financing activities
    
    
    (37,882
    )
    
    
    514
    
    
    
    226,445
    
    
    
    (286,272
    )
    
    
    (97,195
    )Net cash used by operating activities of
discontinued operations
    
    
    (349
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (349
    )Net (decrease) increase in cash and cash equivalents
    
    
    (153,331
    )
    
    
    1,948
    
    
    
    7,058
    
    
    
    
    
    
    
    (144,325
    )Cash and cash equivalents at beginning of period
    
    
    157,445
    
    
    
    
    
    
    
    22,259
    
    
    
    
    
    
    
    179,704Cash and cash equivalents at end of period
    
    $
    4,114
    
    
    $
    1,948
    
    
    $
    29,317
    
    
    $
    
    
    
    $
    35,379
 24




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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
      25




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##### Table of Contents



Unconsolidated Businesses
  For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006($ in millions)Losses (earnings) from unconsolidated businesses
    
    $
    7.1
    
    
    $
    2.4
    
    
    $
    (58.0
    )
    
    $
    (27.3
    )Cash flow from investments in unconsolidated businesses
    
    
    2.3
    
    
    
    0.8
    
    
    
    27.0
    
    
    
    4.0
     For the three months
    
    For the nine monthsended September 30,
    
    ended September 30,2007
    
    2006
    
    2007
    
    2006($ in millions)Equity in losses (earnings) from Agriliance
    
    $
    13.1
    
    
    $
    4.0
    
    
    $
    (48.7
    )
    
    $
    (28.3
    )Cash distributions from Agriliance
    
    
    0.0
    
    
    
    0.0
    
    
    
    19.6
    
    
    
    0.0
  26




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##### Table of Contents



Seasonality
  Dairy and Agricultural Commodity Inputs and Outputs
  Dairy Foods.
   For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Per pound market price average:Butter
    
    $
    1.44
    
    
    $
    1.26
    
    
    $
    1.38
    
    
    $
    1.22Block cheese
    
    
    1.95
    
    
    
    1.23
    
    
    
    1.68
    
    
    
    1.21
 Feed.
  27




---



##### Table of Contents



Layers.
 Derivative Commodity Instruments
  For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006($ in millions)
    
    ($ in millions)Unrealized hedging gain (loss)
    
    $
    11.6
    
    
    $
    (4.0
    )
    
    $
    7.6
    
    
    $
    (1.4
    )
 Results of Operations
 Three months ended September 30, 2007 as compared to three months ended September 30, 2006
 Overview of Results
 For the three months ended September 30,2007
    
    2006
    
    Increase (Decrease)($
in millions)Net loss
    
    $
    (2.8
    )
    
    $
    (16.7
    )
    
    $
    13.9
  28




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##### Table of Contents



For the three months ended September 30,Increase2007
    
    2006
    
    (Decrease)($ in millions)Net sales
    
    $
    2,134.6
    
    
    $
    1,524.6
    
    
    $
    610.0
  Gross profit
    
    
    $166.7
    
    
    
    $125.4
    
    
    
    $41.3
  Selling, general and administrative expense
    
    $
    158.2
    
    
    $
    123.1
    
    
    $
    35.1
  Restructuring and impairment charges
    
    $
    0.0
    
    
    $
    15.1
    
    
    $
    (15.1
    )
  Interest expense, net
    
    $
    9.8
    
    
    $
    13.0
    
    
    $
    (3.2
    )
  Equity in losses of affiliated companies
    
    $
    (7.1
    )
    
    $
    (2.4
    )
    
    $
    (4.7
    )
  Income tax expense (benefit)
    
    $
    3.5
    
    
    $
    (10.3
    )
    
    $
    13.8
  Net Sales and Gross Profit by Business Segment
  29




---



##### Table of Contents



Dairy Foods
 For the three months ended September 30,2007
    
    2006
    
    % change($ in millions)Net sales
    
    $
    1,121.3
    
    
    $
    766.0
    
    
    
    46.4
    %Gross profit
    
    
    59.0
    
    
    
    50.6
    
    
    
    16.6
    %Gross profit %
of net sales
    
    
    5.3
    %
    
    
    6.6
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    396.1Volume impact
    
    
    49.5Acquisitions and divestitures
    
    
    (90.3
    )Total increase
    
    $
    355.3
  Gross Profit Variance
    
    Increase($ in millions)Margin / product mix impact
    
    $
    7.7Volume impact
    
    
    (4.3
    )Unrealized hedging
    
    
    4.7Acquisitions and divestitures
    
    
    0.3Total increase
    
    $
    8.4
  Feed
 For the three months ended September 30,2007
    
    2006
    
    % change($ in millions)Net sales
    
    $
    722.8
    
    
    $
    628.9
    
    
    
    14.9
    %Gross profit
    
    
    68.9
    
    
    
    71.0
    
    
    
    (3.0
    )%Gross profit % of net sales
    
    
    9.5
    %
    
    
    11.3
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    142.8Volume impact
    
    
    (36.6
    )Acquisitions and divestitures
    
    
    (12.3
    )Total increase
    
    $
    93.9
  30




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##### Table of Contents



IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    (0.2
    )Volume impact
    
    
    (6.0
    )Unrealized hedging
    
    
    5.7Acquisitions and divestitures
    
    
    (1.6
    )Total decrease
    
    $
    (2.1
    )
  Seed
 For the three months ended September 30,2007
    
    
    2006
    
    
    % change($ in millions)Net sales
    
    $
    80.1
    
    
    $
    55.2
    
    
    
    45.1
    %Gross profit
    
    
    14.6
    
    
    
    5.9
    
    
    
    147.5
    %Gross profit %
of net sales
    
    
    18.2
    %
    
    
    10.7
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    (7.7
    )Volume impact
    
    
    32.6Total increase
    
    $
    24.9
  IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    (4.5
    )Volume impact
    
    
    9.0Unrealized hedging
    
    
    4.2Total increase
    
    $
    8.7
  31




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##### Table of Contents



Layers
 For the three months ended September 30,2007
    
    2006
    
    % change($ in millions)Net sales
    
    $
    123.6
    
    
    $
    73.8
    
    
    
    67.5
    %Gross profit
    
    
    21.3
    
    
    
    (1.9
    )
    
    
    1,221.1
    %Gross profit %
of net sales
    
    
    17.2
    %
    
    
    (2.6
    )%
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    53.6Volume impact
    
    
    (3.8
    )Total increase
    
    $
    49.8
  IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    22.0Volume impact
    
    
    0.1Unrealized hedging
    
    
    1.1Total increase
    
    $
    23.2
  Agronomy
  Net Sales
  Gross Profit
  32




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##### Table of Contents



Nine months ended September 30, 2007 as compared to nine months ended September 30, 2006
 Overview of Results
 For the nine months ended September 30,Increase2007
    
    2006
    
    (Decrease)($ in millions)Net earnings
    
    $
    156.6
    
    
    $
    44.2
    
    
    $
    112.4
  Net sales
    
    $
    6,338.9
    
    
    $
    5,208.6
    
    
    $
    1,130.3
  Gross profit
    
    $
    573.6
    
    
    $
    448.8
    
    
    $
    124.8
  Selling, general and administrative expense
    
    $
    448.0
    
    
    $
    389.8
    
    
    $
    58.2
  Restructuring and impairment charges
    
    $
    1.7
    
    
    $
    19.4
    
    
    $
    (17.7
    )
  Gain on insurance settlement
    
    $
    5.9
    
    
    $
    0.0
    
    
    $
    5.9
  Interest expense, net
    
    $
    33.5
    
    
    $
    44.7
    
    
    $
    (11.2
    )
  Equity in earnings of affiliated companies
    
    $
    58.0
    
    
    $
    27.3
    
    
    $
    30.7
  33




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##### Table of Contents



For the nine months ended September 30,Increase2007
    
    2006
    
    (Decrease)($ in millions)Income tax expense (benefit)
    
    $
    34.6
    
    
    $
    (5.5
    )
    
    $
    40.1
  Net Sales and Gross Profit by Business Segment
  Dairy Foods
 For the nine months ended September 30,2007
    
    2006
    
    % change($ in millions)Net sales
    
    $
    2,994.7
    
    
    $
    2,350.9
    
    
    
    27.4
    %Gross profit
    
    
    220.3
    
    
    
    148.0
    
    
    
    48.9
    %Gross profit % of
net sales
    
    
    7.4
    %
    
    
    6.3
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    661.5Volume impact
    
    
    134.5Acquisitions and divestitures
    
    
    (152.2
    )Total increase
    
    $
    643.8
  34




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##### Table of Contents



IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    65.6Volume impact
    
    
    (8.6
    )Unrealized hedging
    
    
    0.7Acquisitions and divestitures
    
    
    14.6Total increase
    
    $
    72.3
  Feed
 For the nine months ended September 30,2007
    
    2006
    
    % change($ in millions)Net sales
    
    $
    2,175.9
    
    
    $
    1,967.9
    
    
    
    10.6
    %Gross profit
    
    
    205.5
    
    
    
    204.4
    
    
    
    0.5
    %Gross profit % of net sales
    
    
    9.4
    %
    
    
    10.4
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    333.2Volume impact
    
    
    (92.3
    )Acquisitions and divestitures
    
    
    (32.9
    )Total increase
    
    $
    208.0
  IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    16.7Volume impact
    
    
    (13.4
    )Unrealized hedging
    
    
    1.7Acquisitions and divestitures
    
    
    (3.9
    )Total increase
    
    $
    1.1
  35




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##### Table of Contents



Seed
 For the nine months ended September 30,2007
    
    
    2006
    
    
    % change($ in millions)Net sales
    
    $
    739.5
    
    
    $
    607.1
    
    
    
    21.8
    %Gross profit
    
    
    98.7
    
    
    
    88.7
    
    
    
    11.3
    %Gross profit % of
net sales
    
    
    13.3
    %
    
    
    14.6
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    48.8Volume impact
    
    
    83.6Total increase
    
    $
    132.4
  IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    (1.4
    )Volume impact
    
    
    7.8Unrealized hedging
    
    
    3.6Total increase
    
    $
    10.0
  Layers
 For the nine months ended September 30,2007
    
    
    2006
    
    
    % change($ in millions)Net sales
    
    $
    354.6
    
    
    $
    286.8
    
    
    
    23.6
    %Gross profit
    
    
    47.9
    
    
    
    9.7
    
    
    
    393.8
    %Gross profit % of
net sales
    
    
    13.5
    %
    
    
    3.4
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    117.4Volume impact
    
    
    5.0Acquisitions and divestitures
    
    
    (54.6
    )Total increase
    
    $
    67.8
  36




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##### Table of Contents



IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    38.8Volume impact
    
    
    3.1Unrealized hedging
    
    
    1.0Acquisitions and divestitures
    
    
    (4.7
    )Total increase
    
    $
    38.2
  Liquidity and Capital Resources
 Overview
       As of
    
    
    As of
    
    
    As ofSeptember 30,
    
    
    September 30,
    
    
    December 31,2007
    
    
    2006
    
    
    2006($ in millions)Cash and cash equivalents
    
    $
    54.1
    
    
    $
    35.4
    
    
    $
    79.7Availability on revolving credit facility
    
    
    196.0
    
    
    
    174.4
    
    
    
    174.4Availability on receivable securitization program
    
    
    20.0
    
    
    
    130.0
    
    
    
    200.0Total liquidity
    
    $
    270.1
    
    
    $
    339.8
    
    
    $
    454.1
  37




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Cash Flows
  For the Nine Months EndedSeptember 30,Operating Activities
    
    2007
    
    
    2006($ in millions)Net earnings
    
    $
    156.6
    
    
    $
    44.2Adjustments to reconcile net earnings to net cash (used) provided by operating
activities
    
    
    (23.2
    )
    
    
    58.3Changes in current assets and liabilities, net of acquisitions and divestitures
    
    
    (168.1
    )
    
    
    (70.3
    )Net cash (used) provided by operating activities
    
    $
    (34.7
    )
    
    $
    32.2
  Investing Activities
 For the Nine Months EndedSeptember 30,2007
    
    
    2006($ in millions)Additions to property, plant and equipment
    
    $
    (62.3
    )
    
    $
    (50.6
    )Acquisitions
    
    
    (2.9
    )
    
    
    (84.2
    )Payments for investments
    
    
    (216.6
    )
    
    
    (4.0
    )Net settlement on repositioning investment in joint venture
    
    
    (133.5
    )
    
    
    Net proceeds from divestiture of businesses
    
    
    212.1
    
    
    
    37.2Proceeds from sale of investments
    
    
    0.5
    
    
    
    8.8Proceeds from sale of property, plant and equipment
    
    
    5.1
    
    
    
    1.3Insurance proceeds for replacement assets
    
    
    8.6
    
    
    
    Changes in notes receivable
    
    
    (18.2
    )
    
    
    5.7Other
    
    
    (0.7
    )
    
    
    6.9Net cash used by investing activities
    
    $
    (207.9
    )
    
    $
    (78.9
    )
   Financing Activities
 For the Nine Months EndedSeptember 30,2007
    
    
    2006($ in millions)Increase (decrease) in short-term debt, net
    
    $
    282.6
    
    
    $
    (32.2
    )Proceeds from issuance of long-term debt
    
    
    7.7
    
    
    
    10.0Principal payments on long-term debt
    
    
    (37.0
    )
    
    
    (35.3
    )Payments for redemption of member equities
    
    
    (36.2
    )
    
    
    (43.2
    )Payments for debt issuance costs
    
    
    
    
    
    
    (1.5
    )Other
    
    
    (0.1
    )
    
    
    5.0Net cash provided (used) by financing activities
    
    $
    217.0
    
    
    $
    (97.2
    )
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Principal Debt Facilities
        39




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Capital Leases
  Recent Accounting Pronouncements
     40




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##### Table of Contents



Critical Accounting Policies
  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) Changes in internal control
  41




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##### Table of Contents



Part II. Other Information
 
 Item 1. Legal Proceedings
     
 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.
    
    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.
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##### Table of Contents




    
    OUR OPERATING RESULTS FLUCTUATE BY SEASON AND ARE AFFECTED BY WEATHER CONDITIONS.
    
    INCREASED ENERGY AND GAS COSTS COULD INCREASE OUR EXPENSES AND REDUCE OUR
PROFITABILITY.
    
    OUTBREAKS OF DISEASE CAN REDUCE OUR NET SALES AND OPERATING MARGINS.
    
    CHANGES IN THE MARKET PRICES OF THE DAIRY AND AGRICULTURAL COMMODITIES THAT WE USE AS
INPUTS AS WELL AS THE PRODUCTS WE MARKET MAY CAUSE OUR MARGINS TO DECLINE AND REDUCE THE
LIKELIHOOD OF RECEIVING DIVIDENDS FROM OUR JOINT VENTURES.
    
    WE OPERATE THROUGH JOINT VENTURES IN WHICH OUR RIGHTS TO EARNINGS AND TO CONTROL THE
JOINT VENTURE ARE LIMITED.
    
    CERTAIN OF OUR BUSINESSES MAY BE ADVERSELY AFFECTED BY THEIR DEPENDENCE UPON THEIR
SUPPLIERS.
    
    OUR 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.
    
    DESPITE OUR LEVERAGE, WE WILL BE ABLE TO INCUR MORE DEBT, WHICH MAY INTENSIFY THE RISKS
ASSOCIATED WITH OUR LEVERAGE, INCLUDING OUR ABILITY TO SERVICE OUR DEBT.
    
    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.
    
    RESTRICTIONS IMPOSED BY OUR DEBT AGREEMENTS LIMIT OUR ABILITY TO FINANCE FUTURE
OPERATIONS OR CAPITAL NEEDS OR TO ENGAGE IN OTHER BUSINESS ACTIVITIES THAT MAY BE IN OUR
BEST INTERESTS.
    
    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
    
    DESCRIPTION10.1
    
    Agreement Regarding Distribution of Assets by and between United
Country Brands, LLC, its parent organization, CHS Inc., and
Winfield Solutions, LLC, and its parent organization, Land
OLakes, Inc., dated September 4, 2007.*10.2
    
    Second Amendment, dated as of September 4, 2007 to the Amended
and Restated Five-Year Revolving Credit Agreement dated as of
October 11, 2001, among Land OLakes, Inc., as a borrower, the
several banks and other financial institutions from time to time
lenders thereto, and JPMorgan Chase Bank, N.A., as administrative
agent.*10.3
    
    Fourth Amendment, dated as of September 4, 2007 to that certain
Purchase and Sale Agreement dated December 18, 2001, by and among
Land OLakes, Inc., Land OLakes Purina Feed LLC, and Purina
Mills, LLC, as originators, Land OLakes Purina Feed LLC as
initial servicer, and LOL SPV, LLC, as purchaser.*10.4
    
    Third Amended and Restated Receivables Purchase Agreement, dated
as of September 4, 2007, by and among LOL SPV, LLC, as seller,
Land OLakes, Inc., as initial servicer, CoBank, ACB and other
purchasers party thereto, as purchasers, and CoBank, as
administrator.*31.1
    
    Certification Pursuant to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    Certification Pursuant to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed electronically herewith 44




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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) 45