##### 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, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission file number 333-84486
 Land OLakes, Inc.
 (Exact name of Registrant as Specified in Its Charter)
 Minnesota(State or Other Jurisdiction of 
Incorporation or Organization)
    
    41-0365145(I.R.S. Employer
Identification No.)4001 Lexington Avenue NorthArden 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
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
    www.landolakesinc.com




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##### 



INDEX
 PagePart I Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Consolidated Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations for the three and nine months ended September 30,
2009 and 2008 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008
(unaudited)
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    31Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    49Item 4. Controls and Procedures
    
    
    49Part II Other Information
    
    
    50Item 1. Legal Proceedings
    
    
    50Item 1A. Risk Factors
    
    
    52Item 6. Exhibits
    
    
    53SIGNATURES
    
    
    54EX-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 31,2009
    
    
    2008(Unaudited)($ in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    29,734
    
    
    $
    30,820Receivables, net
    
    
    1,206,587
    
    
    
    1,104,261Inventories
    
    
    1,088,832
    
    
    
    1,083,978Prepaid assets
    
    
    42,251
    
    
    
    1,101,005Other current assets
    
    
    60,787
    
    
    
    123,504Total current assets
    
    
    2,428,191
    
    
    
    3,443,568Investments
    
    
    258,674
    
    
    
    314,487Property, plant and equipment, net
    
    
    693,846
    
    
    
    658,261Goodwill, net
    
    
    276,657
    
    
    
    277,176Other intangibles, net
    
    
    116,406
    
    
    
    120,982Other assets
    
    
    158,317
    
    
    
    166,838Total assets
    
    $
    3,932,091
    
    
    $
    4,981,312LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    610,612
    
    
    $
    409,370Current portion of long-term debt
    
    
    2,581
    
    
    
    2,864Accounts payable
    
    
    928,840
    
    
    
    1,175,995Customer advances
    
    
    33,515
    
    
    
    1,045,705Accrued liabilities
    
    
    383,395
    
    
    
    423,494Patronage refunds and other member equities payable
    
    
    39,600
    
    
    
    37,751Total current liabilities
    
    
    1,998,543
    
    
    
    3,095,179Long-term debt
    
    
    535,231
    
    
    
    531,955Employee benefits and other liabilities
    
    
    361,841
    
    
    
    358,404Commitments and contingencies (Note 17)Equities:Capital stock
    
    
    1,439
    
    
    
    1,611Member equities
    
    
    964,665
    
    
    
    947,141Accumulated other comprehensive loss
    
    
    (166,876
    )
    
    
    (150,277
    )Retained earnings
    
    
    223,107
    
    
    
    178,377Total Land OLakes, Inc. equities
    
    
    1,022,335
    
    
    
    976,852Noncontrolling interests
    
    
    14,141
    
    
    
    18,922Total equities
    
    
    1,036,476
    
    
    
    995,774Total liabilities and equities
    
    $
    3,932,091
    
    
    $
    4,981,312
  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 30,2009
    
    
    2008
    
    
    2009
    
    
    2008($ in thousands)Net sales
    
    $
    2,177,524
    
    
    $
    2,783,930
    
    
    $
    7,939,337
    
    
    $
    9,368,794Cost of sales
    
    
    1,987,262
    
    
    
    2,547,330
    
    
    
    7,209,916
    
    
    
    8,569,999Gross profit
    
    
    190,262
    
    
    
    236,600
    
    
    
    729,421
    
    
    
    798,795Selling, general and administrative
    
    
    179,412
    
    
    
    204,642
    
    
    
    508,473
    
    
    
    562,330Restructuring and impairment
    
    
    803
    
    
    
    
    
    
    
    10,036
    
    
    
    41Gain on insurance settlement
    
    
    
    
    
    
    (4,032
    )
    
    
    
    
    
    
    (4,032
    )Earnings from operations
    
    
    10,047
    
    
    
    35,990
    
    
    
    210,912
    
    
    
    240,456Interest expense, net
    
    
    12,462
    
    
    
    15,369
    
    
    
    38,300
    
    
    
    48,091Other (income) expense, net
    
    
    (300
    )
    
    
    
    
    
    
    (7,028
    )
    
    
    12Equity in losses (earnings) of affiliated companies
    
    
    978
    
    
    
    (13,541
    )
    
    
    (2,523
    )
    
    
    (38,099
    )(Loss) earnings before income taxes
    
    
    (3,093
    )
    
    
    34,162
    
    
    
    182,163
    
    
    
    230,452Income tax expense
    
    
    1,213
    
    
    
    1,804
    
    
    
    25,461
    
    
    
    22,442Net (loss) earnings
    
    
    (4,306
    )
    
    
    32,358
    
    
    
    156,702
    
    
    
    208,010Less: net earnings (loss) attributable to noncontrolling interests
    
    
    8
    
    
    
    3,796
    
    
    
    (3,131
    )
    
    
    15,380Net (loss) earnings attributable to Land OLakes, Inc.
    
    $
    (4,314
    )
    
    $
    28,562
    
    
    $
    159,833
    
    
    $
    192,630Applied to:Member equitiesAllocated patronage
    
    $
    1,638
    
    
    $
    5,698
    
    
    $
    113,144
    
    
    $
    133,835Deferred equities
    
    
    11,764
    
    
    
    (1,893
    )
    
    
    (1,414
    )
    
    
    67913,402
    
    
    
    3,805
    
    
    
    111,730
    
    
    
    134,514Retained earnings
    
    
    (17,716
    )
    
    
    24,757
    
    
    
    48,103
    
    
    
    58,116$
    (4,314
    )
    
    $
    28,562
    
    
    $
    159,833
    
    
    $
    192,630
  4




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##### Table of Contents



LAND OLAKES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
 For the Nine Months EndedSeptember 30,2009
    
    
    2008($ in thousands)Cash flows from operating activities:Net earnings attributable to Land OLakes, Inc.
    
    $
    159,833
    
    
    $
    192,630Adjustments to reconcile net earnings attributable to Land OLakes, Inc. to net cash
used by operating activities:Depreciation and amortization
    
    
    67,870
    
    
    
    67,776Amortization of deferred financing costs
    
    
    1,868
    
    
    
    3,413Bad debt expense
    
    
    6,479
    
    
    
    5,731Proceeds from patronage revolvement received
    
    
    236
    
    
    
    1,777Non-cash patronage income
    
    
    (798
    )
    
    
    (4,177
    )Deferred income tax expense (benefit)
    
    
    41,501
    
    
    
    (20,707
    )Decrease (increase) in other assets
    
    
    764
    
    
    
    (2,269
    )Increase in other liabilities
    
    
    20,224
    
    
    
    21,399Restructuring and impairment
    
    
    10,036
    
    
    
    41Loss on divestiture of a business
    
    
    407
    
    
    
    (Gain) loss on sale of investments
    
    
    (6,958
    )
    
    
    12Gain on foreign currency exchange contracts on sale of investment
    
    
    (177
    )
    
    
    Gain on insurance settlement
    
    
    
    
    
    
    (4,032
    )Equity in earnings of affiliated companies
    
    
    (2,523
    )
    
    
    (38,099
    )Dividends from investments in affiliated companies
    
    
    36,140
    
    
    
    32,652Net (loss) earnings attributable to noncontrolling interests
    
    
    (3,131
    )
    
    
    15,380Other
    
    
    (4,031
    )
    
    
    (2,525
    )Changes in current assets and liabilities, net of acquisitions and divestitures:Receivables
    
    
    (119,141
    )
    
    
    (412,580
    )Inventories
    
    
    (5,964
    )
    
    
    (102,923
    )Prepaid assets and other current assets
    
    
    1,103,113
    
    
    
    810,792Accounts payable
    
    
    (246,306
    )
    
    
    15,011Customer advances
    
    
    (1,012,190
    )
    
    
    (933,016
    )Accrued liabilities
    
    
    (53,999
    )
    
    
    154,816Net cash used by operating activities
    
    
    (6,747
    )
    
    
    (198,898
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (108,775
    )
    
    
    (120,533
    )Acquisitions, net of cash acquired
    
    
    (2,745
    )
    
    
    (9,040
    )Investments in affiliates
    
    
    (3,290
    )
    
    
    (50,860
    )Distributions from investments in affiliated companies
    
    
    
    
    
    
    8,824Proceeds from divestiture of a business
    
    
    2,698
    
    
    
    Proceeds from sale of investments
    
    
    16,965
    
    
    
    49Proceeds from foreign currency exchange contracts on sale of investment
    
    
    518
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    1,493
    
    
    
    5,581Insurance proceeds for replacement assets
    
    
    6,538
    
    
    
    5,321Change in notes receivable
    
    
    (12,686
    )
    
    
    (11,606
    )Other
    
    
    250
    
    
    
    3,049Net cash used by investing activities
    
    
    (99,034
    )
    
    
    (169,215
    )Cash flows from financing activities:Increase in short-term debt
    
    
    201,243
    
    
    
    388,685Proceeds from issuance of long-term debt
    
    
    4,459
    
    
    
    496Principal payments on long-term debt and capital lease obligations
    
    
    (1,950
    )
    
    
    (14,138
    )Payments for redemption of member equities
    
    
    (95,762
    )
    
    
    (94,896
    )Payments for debt issuance costs
    
    
    (1,486
    )
    
    
    Other
    
    
    (1,809
    )
    
    
    (38
    )Net cash provided by financing activities
    
    
    104,695
    
    
    
    280,109Net decrease in cash and cash equivalents
    
    
    (1,086
    )
    
    
    (88,004
    )Cash and cash equivalents at beginning of the period
    
    
    30,820
    
    
    
    116,839Cash and cash equivalents at end of the period
    
    $
    29,734
    
    
    $
    28,835Supplementary Disclosure of Cash Flow InformationCash paid (received) during periods for:Interest
    
    $
    39,046
    
    
    $
    46,812Income taxes
    
    
    (14,269
    )
    
    
    57,541
  5




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LAND OLAKES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands in tables)
(Unaudited)
 1. Summary of Significant Accounting Policies
   Recent Accounting Pronouncements
 The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162
   6




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##### Table of Contents



Accounting Estimates
  2. Business Combinations and Pending Business Combinations
 2009 Acquisitions and Pending Acquisitions
    2008 Acquisitions
  7




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##### Table of Contents



3. Receivables
  September 30,
    
    
    December 31,2009
    
    
    2008Trade accounts
    
    $
    756,213
    
    
    $
    846,794Notes and contracts
    
    
    97,218
    
    
    
    89,736Vendor rebates
    
    
    314,225
    
    
    
    57,007Other
    
    
    61,313
    
    
    
    130,5911,228,969
    
    
    
    1,124,128Less allowance for doubtful accounts
    
    
    (22,382
    )
    
    
    (19,867
    )Total receivables, net
    
    $
    1,206,587
    
    
    $
    1,104,261
     4. Inventories
  September 30,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    182,026
    
    
    $
    217,087Work in process
    
    
    1,903
    
    
    
    1,639Finished goods
    
    
    904,903
    
    
    
    865,252Total inventories
    
    $
    1,088,832
    
    
    $
    1,083,978
 5. Investments
  September 30,
    
    
    December 31,2009
    
    
    2008Agriliance LLC
    
    $
    116,147
    
    
    $
    176,191Advanced Food Products, LLC
    
    
    32,726
    
    
    
    33,870Ag Processing Inc.
    
    
    31,405
    
    
    
    31,858Delta Egg Farm, LLC
    
    
    11,832
    
    
    
    11,464Melrose Dairy Proteins, LLC
    
    
    9,638
    
    
    
    6,397Universal Cooperatives, Inc.
    
    
    7,849
    
    
    
    7,877CoBank, ACB
    
    
    5,345
    
    
    
    4,892Pro-Pet, LLC
    
    
    3,188
    
    
    
    2,123Wilco-Winfield, LLC
    
    
    3,261
    
    
    
    3,131Prairie Farms Dairy, Inc.
    
    
    2,913
    
    
    
    2,954Other  principally cooperatives and joint ventures
    
    
    34,370
    
    
    
    33,730Total investments
    
    $
    258,674
    
    
    $
    314,487
 8




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##### Table of Contents



6. Goodwill and Other Intangible Assets
 Goodwill
  September 30,
    
    
    December 31,2009
    
    
    2008Feed
    
    $
    126,566
    
    
    $
    126,960Dairy Foods
    
    
    68,525
    
    
    
    68,525Agronomy
    
    
    50,663
    
    
    
    50,663Layers
    
    
    20,221
    
    
    
    20,346Seed
    
    
    10,682
    
    
    
    10,682Total goodwill
    
    $
    276,657
    
    
    $
    277,176
  Other Intangible Assets
  September 30,
    
    
    December 31,2009
    
    
    2008Amortized other intangible assets:Dealer networks and customer relationships, less accumulated amortization of $5,893
and $4,045, respectively
    
    $
    48,629
    
    
    $
    50,478Patents, less accumulated amortization of $9,285 and $8,414, respectively
    
    
    7,426
    
    
    
    8,297Trademarks, less accumulated amortization of $3,189 and $2,668, respectively
    
    
    4,426
    
    
    
    4,946Other intangible assets, less accumulated amortization of $4,235 and $4,412, respectively
    
    
    4,300
    
    
    
    5,636Total amortized other intangible assets
    
    
    64,781
    
    
    
    69,357Total non-amortized other intangible assets  trademarks and license agreements
    
    
    51,625
    
    
    
    51,625Total other intangible assets
    
    $
    116,406
    
    
    $
    120,982
 9




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##### Table of Contents



7. Accrued Liabilities
  September 30,
    
    
    December 31,2009
    
    
    2008Marketing programs and consumer incentives
    
    $
    156,444
    
    
    $
    70,209Employee compensation and benefits
    
    
    116,617
    
    
    
    141,376Unrealized hedging losses and deferred option premiums received
    
    
    17,398
    
    
    
    99,964Other
    
    
    92,936
    
    
    
    111,945Total accrued liabilities
    
    $
    383,395
    
    
    $
    423,494
  8. Debt Obligations
 Notes and Short-term Obligations
       10




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Long-term Debt
  September 30,
    
    
    December 31,2009
    
    
    2008Senior unsecured notes  due 2011 (8.75%)
    
    $
    174,002
    
    
    $
    174,002Senior secured notes  due 2010 (9.00%)
    
    
    149,700
    
    
    
    149,700Capital Securities of Trust Subsidiary  due 2028 (7.45%)
    
    
    190,700
    
    
    
    190,700MoArk, LLC debt  due 2011 through 2023 (7.75% weighted average)
    
    
    14,730
    
    
    
    15,449MoArk, LLC capital lease obligations (7.00% to 8.25%)
    
    
    3,746
    
    
    
    4,668Other debt
    
    
    4,934
    
    
    
    300537,812
    
    
    
    534,819Less current portion
    
    
    (2,581
    )
    
    
    (2,864
    )Total long-term debt
    
    $
    535,231
    
    
    $
    531,955
  11




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##### Table of Contents



9. Other Comprehensive Income
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) earnings attributable to Land OLakes, Inc.
    
    $
    (4,314
    )
    
    $
    28,562
    
    
    $
    159,833
    
    
    $
    192,630Pension and other postretirement adjustments, net of income taxes
of $9,513, $(1,122), $10,326 and $(1,041), respectively
    
    
    (15,357
    )
    
    
    1,811
    
    
    
    (16,670
    )
    
    
    1,680Foreign currency translation adjustment, net of income taxes of
$(55), $85, $(43) and $364, respectively
    
    
    87
    
    
    
    (137
    )
    
    
    69
    
    
    
    (587
    )Unrealized gains (loss) on available-for-sale-investment
securities, net of income taxes of $(2), $24, $(1) and $(38),
respectively
    
    
    8
    
    
    
    (82
    )
    
    
    4
    
    
    
    (335
    )Less: Other comprehensive (earnings) loss attributable to
noncontrolling interests
    
    
    (4
    )
    
    
    43
    
    
    
    (2
    )
    
    
    121Total comprehensive (loss) income attributable to Land OLakes, Inc.
    
    $
    (19,580
    )
    
    $
    30,197
    
    
    $
    143,234
    
    
    $
    193,509
 12




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10. Derivative Instruments
     Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,Derivative Instrument
    
    Location
    
    2009
    
    
    2009Commodity derivatives
    
    Cost of sales
    
    $
    4,089
    
    
    $
    (37,228
    )Commodity derivatives
    
    Selling, general and administrative
    
    
    1
    
    
    
    (1,140
    )Foreign currency
exchange contracts
    
    Cost of sales
    
    
    (417
    )
    
    
    (1,374
    )Foreign currency
exchange contracts
    
    Other (income) expense, net
    
    
    
    
    
    
    341
  Asset
    
    
    LiabilityDerivatives(a)
    
    
    Derivatives(a)September 30,
    
    
    September 30,Derivative Instrument
    
    2009
    
    
    2009Commodity derivatives
    
    $
    16,647
    
    
    $
    13,518Foreign currency exchange contracts
    
    
    449
    
    
    
    Total
    
    $
    17,096
    
    
    $
    13,518
 
 (a)
    
    Asset derivative instruments are recorded in other current assets and liability derivative
instruments are recorded in accrued liabilities in the consolidated balance sheet.  13




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11. Fair Value Measurements
  September 30, 2009
    
    
    December 31, 2008Carrying Amount
    
    
    Fair Value
    
    
    Carrying Amount
    
    
    Fair ValueFinancial Derivatives:Commodity derivative assets
    
    $
    16,647
    
    
    $
    16,647
    
    
    $
    50,053
    
    
    $
    50,053Commodity derivative liabilities
    
    
    13,518
    
    
    
    13,518
    
    
    
    85,292
    
    
    
    85,292Foreign currency exchange contract assets
    
    
    449
    
    
    
    449
    
    
    
    341
    
    
    
    341Foreign currency exchange contract liabilities
    
    
    
    
    
    
    
    
    
    
    925
    
    
    
    925Loans receivable
    
    
    155,440
    
    
    
    156,069
    
    
    
    137,869
    
    
    
    140,762Available-for-sale securities
    
    
    52
    
    
    
    52
    
    
    
    47
    
    
    
    47Debt:Senior unsecured notes, due 2011
    
    
    174,002
    
    
    
    185,750
    
    
    
    174,002
    
    
    
    161,410Senior secured notes, due 2010
    
    
    149,700
    
    
    
    162,386
    
    
    
    149,700
    
    
    
    150,999Capital Securities of Trust Subsidiary, due 2028
    
    
    190,700
    
    
    
    163,408
    
    
    
    190,700
    
    
    
    107,580MoArk fixed rate debt
    
    
    18,476
    
    
    
    19,975
    
    
    
    20,117
    
    
    
    17,548
        Level 1:inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities.Level 2:inputs are quoted prices for similar assets and liabilities in active markets or
inputs that are observable for the asset or liability, either directly or indirectly through
market corroboration, for substantially the full term of the financial instrument.Level 3:inputs are unobservable inputs based on the Companys own assumptions used to
measure assets and liabilities at fair value.
 14




---



##### Table of Contents



Fair Value Measurements at September 30, 2009 Using:SignificantQuoted prices
    
    
    other
    
    
    SignificantTotal carrying
    
    
    in active
    
    
    observable
    
    
    unobservablevalue at
    
    
    markets
    
    
    inputs
    
    
    inputsSeptember 30, 2009(a)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Commodity derivative assets
    
    $
    16,647
    
    
    $
    16,220
    
    
    $
    427
    
    
    $
    Commodity derivative liabilities
    
    
    13,518
    
    
    
    13,143
    
    
    
    375
    
    
    
    Foreign currency exchange contract assets
    
    
    449
    
    
    
    
    
    
    
    449
    
    
    
    Foreign currency exchange contract
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale securities
    
    
    52
    
    
    
    52
    
    
    
    
    
    
    
    
 Fair Value Measurements at December 31, 2008 Using:SignificantQuoted prices
    
    
    other
    
    
    SignificantTotal carrying
    
    
    in active
    
    
    observable
    
    
    unobservablevalue at
    
    
    markets
    
    
    inputs
    
    
    inputsDecember 31, 2008(a)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Commodity derivative assets
    
    $
    50,053
    
    
    $
    49,139
    
    
    $
    914
    
    
    $
    Commodity derivative liabilities
    
    
    85,292
    
    
    
    85,128
    
    
    
    164
    
    
    
    Foreign currency exchange contract assets
    
    
    341
    
    
    
    
    
    
    
    341
    
    
    
    Foreign currency exchange contract
liabilities
    
    
    925
    
    
    
    
    
    
    
    925
    
    
    
    Available-for-sale securities
    
    
    47
    
    
    
    47
    
    
    
    
    
    
    
    
 
 (a)
    
    ASC 815-10 permits, but does not require companies that enter into
master netting arrangements to offset fair value amounts recognized for derivative instruments
against the right to reclaim cash collateral or the obligation to return cash collateral. The
Company has master netting arrangements with brokers for its exchange-traded futures and
options contracts, however, it does not elect to offset fair value amounts recognized for
derivative instruments under such master netting arrangements with amounts recognized for
margin balances due from or due to brokers.   Fair Value Measurements at September 30, 2009 Using:Significant
    
    
    
    
    
    
    Loss(b)(beforeQuoted prices
    
    
    other
    
    
    Significant
    
    
    income tax)Total carrying
    
    
    in active
    
    
    observable
    
    
    unobservable
    
    
    For the Ninevalue at
    
    
    markets
    
    
    inputs
    
    
    inputs
    
    
    Months EndedSeptember 30, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    September 30, 2009Property, plant and equipment, net (held and used)
    
    $
    2,810
    
    
    $
    
    
    
    $
    2,810
    
    
    $
    
    
    
    $
    5,304Property, plant and equipment, net (held and used)
    
    
    2,857
    
    
    
    
    
    
    
    
    
    
    
    2,857
    
    
    
    1,323Total
    
    $
    5,667
    
    
    $
    
    
    
    $
    2,810
    
    
    $
    2,857
    
    
    $
    6,627
 
 (b)
    
    The losses were recorded in the restructuring and impairment line of the
Consolidated Statements of Operations for the nine months ended September 30, 2009.   15




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##### Table of Contents



12. Income Taxes
  13. Pension and Other Postretirement Plans
  Other PostretirementPension Benefits
    
    
    Benefits2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    3,333
    
    
    $
    3,810
    
    
    $
    128
    
    
    $
    196Interest cost
    
    
    9,474
    
    
    
    9,678
    
    
    
    908
    
    
    
    1,071Expected return on assets
    
    
    (10,432
    )
    
    
    (11,000
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    1,318
    
    
    
    1,290
    
    
    
    184
    
    
    
    488Amortization of prior service cost
    
    
    (111
    )
    
    
    (132
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    107
    
    
    
    116Net periodic benefit cost
    
    $
    3,582
    
    
    $
    3,646
    
    
    $
    1,327
    
    
    $
    1,871
   Other PostretirementPension Benefits
    
    
    Benefits2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    10,001
    
    
    $
    11,431
    
    
    $
    385
    
    
    $
    589Interest cost
    
    
    28,422
    
    
    
    29,033
    
    
    
    2,722
    
    
    
    3,212Expected return on assets
    
    
    (31,298
    )
    
    
    (32,999
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    3,952
    
    
    
    3,871
    
    
    
    552
    
    
    
    1,466Amortization of prior service cost
    
    
    (331
    )
    
    
    (396
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    321
    
    
    
    348Net periodic benefit cost
    
    $
    10,746
    
    
    $
    10,940
    
    
    $
    3,980
    
    
    $
    5,615
   14. Restructuring and Impairment Charges
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Restructuring charges
    
    $
    803
    
    
    $
    
    
    
    $
    3,409
    
    
    $
    41Impairment charges
    
    
    
    
    
    
    
    
    
    
    6,627
    
    
    
    Total restructuring and impairment charges
    
    $
    803
    
    
    $
    
    
    
    $
    10,036
    
    
    $
    41
 Restructuring Charges
  16




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##### Table of Contents



Impairment Charges
   15. Other (Income) Expense, Net
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Gain) loss on sale of investments
    
    $
    
    
    
    $
    
    
    
    $
    (6,958
    )
    
    $
    12Loss on divestiture of a business
    
    
    
    
    
    
    
    
    
    
    407
    
    
    
    Gain on sale of intangibles
    
    
    (300
    )
    
    
    
    
    
    
    (300
    )
    
    
    Gain on foreign currency exchange contracts on sale of investment
    
    
    
    
    
    
    
    
    
    
    (177
    )
    
    
    Total other (income) expense, net
    
    $
    (300
    )
    
    $
    
    
    
    $
    (7,028
    )
    
    $
    12
      17




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##### Table of Contents



16. Insurance Proceeds
  17. Commitments and Contingencies
 ® ® ® ® ®
    18




---



##### Table of Contents



18. Subsequent Events
    19




---



##### Table of Contents



19. Segment Information
  LAND
O LAKES Indian Maiden Alpine Lace New
Yorker
       20




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##### Table of Contents



Other/Dairy Foods
    
    
    Feed
    
    
    Seed
    
    
    Agronomy
    
    
    Layers
    
    
    Eliminations
    
    
    ConsolidatedFor the three months ended September 30, 2009:Net sales (1)
    
    $
    776,070
    
    
    $
    833,378
    
    
    $
    (14,643
    )
    
    $
    482,862
    
    
    $
    110,579
    
    
    $
    (10,722
    )
    
    $
    2,177,524Cost of sales (2)
    
    
    715,955
    
    
    
    764,932
    
    
    
    (25,081
    )
    
    
    431,895
    
    
    
    110,434
    
    
    
    (10,873
    )
    
    
    1,987,262Selling, general and administrative
    
    
    49,096
    
    
    
    64,453
    
    
    
    23,450
    
    
    
    30,594
    
    
    
    10,424
    
    
    
    1,395
    
    
    
    179,412Restructuring and impairment
    
    
    
    
    
    
    704
    
    
    
    
    
    
    
    
    
    
    
    99
    
    
    
    
    
    
    
    803Interest expense (income), net
    
    
    3,680
    
    
    
    6,118
    
    
    
    (66
    )
    
    
    1,785
    
    
    
    2,210
    
    
    
    (1,265
    )
    
    
    12,462Other income, net
    
    
    
    
    
    
    (300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (300
    )Equity in (earnings) loss of affiliated companies
    
    
    (1,519
    )
    
    
    (1,754
    )
    
    
    (11
    )
    
    
    2,567
    
    
    
    1,695
    
    
    
    
    
    
    
    978Earnings (loss) before income taxes
    
    $
    8,858
    
    
    $
    (775
    )
    
    $
    (12,935
    )
    
    $
    16,021
    
    
    $
    (14,283
    )
    
    $
    21
    
    
    $
    (3,093
    )For 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
    )Earnings (loss) before income taxes
    
    $
    (25,424
    )
    
    $
    (35,051
    )
    
    $
    (7,310
    )
    
    $
    117,584
    
    
    $
    (10,297
    )
    
    $
    (5,340
    )
    
    $
    34,162For the nine months ended September 30, 2009:Net sales (1)
    
    $
    2,242,329
    
    
    $
    2,578,104
    
    
    $
    1,124,303
    
    
    $
    1,681,743
    
    
    $
    368,584
    
    
    $
    (55,726
    )
    
    $
    7,939,337Cost of sales (2)
    
    
    2,076,214
    
    
    
    2,351,198
    
    
    
    984,556
    
    
    
    1,500,481
    
    
    
    354,356
    
    
    
    (56,889
    )
    
    
    7,209,916Selling, general and administrative
    
    
    147,496
    
    
    
    188,291
    
    
    
    67,639
    
    
    
    77,760
    
    
    
    27,056
    
    
    
    231
    
    
    
    508,473Restructuring and impairment
    
    
    7,441
    
    
    
    1,173
    
    
    
    
    
    
    
    
    
    
    
    1,422
    
    
    
    
    
    
    
    10,036Interest expense (income), net
    
    
    8,781
    
    
    
    18,362
    
    
    
    3,313
    
    
    
    4,862
    
    
    
    6,675
    
    
    
    (3,693
    )
    
    
    38,300Other expense (income), net
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    4,046
    
    
    
    (11,181
    )
    
    
    
    
    
    
    (7,028
    )Equity in (earnings) loss of affiliated companies
    
    
    (6,586
    )
    
    
    (5,399
    )
    
    
    (88
    )
    
    
    9,270
    
    
    
    280
    
    
    
    
    
    
    
    (2,523
    )Earnings (loss) before income taxes
    
    $
    8,983
    
    
    $
    24,372
    
    
    $
    68,883
    
    
    $
    85,324
    
    
    $
    (10,024
    )
    
    $
    4,625
    
    
    $
    182,163For 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
    
    
    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
    )Earnings (loss) before income taxes
    
    $
    14,244
    
    
    $
    (4,681
    )
    
    $
    47,478
    
    
    $
    155,200
    
    
    $
    33,037
    
    
    $
    (14,826
    )
    
    $
    230,452(1) Net sales includes intersegment sales of:Other/Dairy Foods
    
    Feed
    
    Seed
    
    Agronomy
    
    Layers
    
    Eliminations
    
    ConsolidatedFor the three months ended: September 30, 2009
    
    $
    2,991
    
    
    $
    9,507
    
    
    $
    (3,263
    )
    
    $
    2,023
    
    
    $
    
    
    
    $
    (11,258
    )
    
    $
    For the three months ended: September 30, 2008
    
    
    1,705
    
    
    
    16,946
    
    
    
    (1,590
    )
    
    
    60
    
    
    
    
    
    
    
    (17,121
    )
    
    
    For the nine months ended: September 30, 2009
    
    
    7,185
    
    
    
    28,089
    
    
    
    18,755
    
    
    
    4,164
    
    
    
    
    
    
    
    (58,193
    )
    
    
    For the nine months ended: September 30, 2008
    
    
    6,128
    
    
    
    38,209
    
    
    
    11,483
    
    
    
    10,955
    
    
    
    
    
    
    
    (66,775
    )
    
    
    (2) Cost of sales includes unrealized hedging (gains) losses of:Other/Dairy Foods
    
    Feed
    
    Seed
    
    Agronomy
    
    Layers
    
    Eliminations
    
    ConsolidatedFor the three months ended: September 30, 2009
    
    $
    8,291
    
    
    $
    (2,555
    )
    
    $
    (1,698
    )
    
    $
    (67
    )
    
    $
    (33
    )
    
    $
    (266
    )
    
    $
    3,672For the three months ended: September 30, 2008
    
    
    (354
    )
    
    
    19,407
    
    
    
    10,048
    
    
    
    
    
    
    
    2,075
    
    
    
    1,184
    
    
    
    32,360For the nine months ended: September 30, 2009
    
    
    (16,703
    )
    
    
    (18,909
    )
    
    
    (8,609
    )
    
    
    (775
    )
    
    
    (507
    )
    
    
    6,901
    
    
    
    (38,602
    )For the nine months ended: September 30, 2008
    
    
    (4,611
    )
    
    
    25,617
    
    
    
    10,393
    
    
    
    
    
    
    
    2,695
    
    
    
    1,399
    
    
    
    35,493
 21




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##### Table of Contents



20. Consolidating Financial Information
    22




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##### Table of Contents



LAND OLAKES, INC.
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
September 30, 2009
 LandOLakes, Inc.
    
    
    Consolidated
    
    
    Non-GuarantorParent Company
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,069
    
    
    $
    2,353
    
    
    $
    23,312
    
    
    $
    
    
    
    $
    29,734Receivables, net
    
    
    43,793
    
    
    
    658,580
    
    
    
    788,004
    
    
    
    (283,790
    )
    
    
    1,206,587Intercompany receivables, net
    
    
    169,128
    
    
    
    75,159
    
    
    
    1,240
    
    
    
    (245,527
    )
    
    
    Inventories
    
    
    439,493
    
    
    
    580,437
    
    
    
    68,902
    
    
    
    
    
    
    
    1,088,832Prepaid assets
    
    
    34,411
    
    
    
    4,946
    
    
    
    2,894
    
    
    
    
    
    
    
    42,251Other current assets
    
    
    51,261
    
    
    
    8,555
    
    
    
    971
    
    
    
    
    
    
    
    60,787Total current assets
    
    
    742,155
    
    
    
    1,330,030
    
    
    
    885,323
    
    
    
    (529,317
    )
    
    
    2,428,191Investments
    
    
    1,149,660
    
    
    
    58,576
    
    
    
    16,151
    
    
    
    (965,713
    )
    
    
    258,674Property, plant and equipment, net
    
    
    281,237
    
    
    
    296,787
    
    
    
    115,822
    
    
    
    
    
    
    
    693,846Goodwill, net
    
    
    191,541
    
    
    
    64,532
    
    
    
    20,584
    
    
    
    
    
    
    
    276,657Other intangibles, net
    
    
    1,406
    
    
    
    108,547
    
    
    
    6,453
    
    
    
    
    
    
    
    116,406Other assets
    
    
    53,130
    
    
    
    40,531
    
    
    
    68,581
    
    
    
    (3,925
    )
    
    
    158,317Total assets
    
    $
    2,419,129
    
    
    $
    1,899,003
    
    
    $
    1,112,914
    
    
    $
    (1,498,955
    )
    
    $
    3,932,091LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    120,001
    
    
    $
    2,704
    
    
    $
    767,700
    
    
    $
    (279,793
    )
    
    $
    610,612Current portion of long-term debt
    
    
    10
    
    
    
    54
    
    
    
    2,517
    
    
    
    
    
    
    
    2,581Accounts payable
    
    
    282,626
    
    
    
    615,290
    
    
    
    38,811
    
    
    
    (7,887
    )
    
    
    928,840Intercompany payables, net
    
    
    
    
    
    
    244,882
    
    
    
    645
    
    
    
    (245,527
    )
    
    
    Customer advances
    
    
    363
    
    
    
    31,906
    
    
    
    1,246
    
    
    
    
    
    
    
    33,515Accrued liabilities
    
    
    113,787
    
    
    
    240,180
    
    
    
    29,463
    
    
    
    (35
    )
    
    
    383,395Patronage refunds and other member equities payable
    
    
    39,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,600Total current liabilities
    
    
    556,387
    
    
    
    1,135,016
    
    
    
    840,382
    
    
    
    (533,242
    )
    
    
    1,998,543Long-term debt
    
    
    513,317
    
    
    
    82
    
    
    
    21,832
    
    
    
    
    
    
    
    535,231Employee benefits and other liabilities
    
    
    327,090
    
    
    
    28,744
    
    
    
    6,007
    
    
    
    
    
    
    
    361,841Commitments and contingenciesEquities:Capital stock
    
    
    1,439
    
    
    
    (34
    )
    
    
    2,935
    
    
    
    (2,901
    )
    
    
    1,439Additional paid-in capital
    
    
    
    
    
    
    196,909
    
    
    
    77,429
    
    
    
    (274,338
    )
    
    
    Member equities
    
    
    964,665
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    964,665Accumulated other comprehensive loss
    
    
    (166,876
    )
    
    
    (18
    )
    
    
    22
    
    
    
    (4
    )
    
    
    (166,876
    )Retained earnings
    
    
    223,107
    
    
    
    538,304
    
    
    
    150,166
    
    
    
    (688,470
    )
    
    
    223,107Total Land OLakes, Inc. equities
    
    
    1,022,335
    
    
    
    735,161
    
    
    
    230,552
    
    
    
    (965,713
    )
    
    
    1,022,335Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    14,141
    
    
    
    
    
    
    
    14,141Total equities
    
    
    1,022,335
    
    
    
    735,161
    
    
    
    244,693
    
    
    
    (965,713
    )
    
    
    1,036,476Total liabilities and equities
    
    $
    2,419,129
    
    
    $
    1,899,003
    
    
    $
    1,112,914
    
    
    $
    (1,498,955
    )
    
    $
    3,932,091
 23




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##### Table of Contents



LAND OLAKES, INC.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended September 30, 2009
 LandOLakes, Inc.
    
    
    Consolidated
    
    
    Non-GuarantorParent Company
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    736,074
    
    
    $
    1,246,917
    
    
    $
    194,533
    
    
    $
    
    
    
    $
    2,177,524Cost of sales
    
    
    663,456
    
    
    
    1,138,820
    
    
    
    184,986
    
    
    
    
    
    
    
    1,987,262Gross profit
    
    
    72,618
    
    
    
    108,097
    
    
    
    9,547
    
    
    
    
    
    
    
    190,262Selling, general and administrative
    
    
    75,621
    
    
    
    85,042
    
    
    
    18,749
    
    
    
    
    
    
    
    179,412Restructuring and impairment
    
    
    
    
    
    
    704
    
    
    
    99
    
    
    
    
    
    
    
    803(Loss) earnings from operations
    
    
    (3,003
    )
    
    
    22,351
    
    
    
    (9,301
    )
    
    
    
    
    
    
    10,047Interest expense (income), net
    
    
    16,438
    
    
    
    (2,125
    )
    
    
    (1,851
    )
    
    
    
    
    
    
    12,462Other income
    
    
    
    
    
    
    (300
    )
    
    
    
    
    
    
    
    
    
    
    (300
    )Equity in (earnings) losses of affiliated companies
    
    
    (16,874
    )
    
    
    (2,152
    )
    
    
    1,695
    
    
    
    18,309
    
    
    
    978(Loss) earnings before income taxes
    
    
    (2,567
    )
    
    
    26,928
    
    
    
    (9,145
    )
    
    
    (18,309
    )
    
    
    (3,093
    )Income tax expense (benefit)
    
    
    1,747
    
    
    
    565
    
    
    
    (1,099
    )
    
    
    
    
    
    
    1,213Net (loss) earnings
    
    
    (4,314
    )
    
    
    26,363
    
    
    
    (8,046
    )
    
    
    (18,309
    )
    
    
    (4,306
    )Less: net earnings (loss) attributable to noncontrolling interests
    
    
    
    
    
    
    213
    
    
    
    (205
    )
    
    
    
    
    
    
    8Net (loss) earnings attributable to Land OLakes, Inc.
    
    $
    (4,314
    )
    
    $
    26,150
    
    
    $
    (7,841
    )
    
    $
    (18,309
    )
    
    $
    (4,314
    )
 24




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##### Table of Contents



LAND OLAKES, INC.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the nine months ended September 30, 2009
 LandOLakes, Inc.
    
    
    Consolidated
    
    
    Non-GuarantorParent Company
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    3,268,855
    
    
    $
    4,072,076
    
    
    $
    598,406
    
    
    $
    
    
    
    $
    7,939,337Cost of sales
    
    
    2,959,634
    
    
    
    3,681,201
    
    
    
    569,081
    
    
    
    
    
    
    
    7,209,916Gross profit
    
    
    309,221
    
    
    
    390,875
    
    
    
    29,325
    
    
    
    
    
    
    
    729,421Selling, general and administrative
    
    
    220,625
    
    
    
    244,485
    
    
    
    43,363
    
    
    
    
    
    
    
    508,473Restructuring and impairment
    
    
    7,441
    
    
    
    1,173
    
    
    
    1,422
    
    
    
    
    
    
    
    10,036Earnings (loss) from operations
    
    
    81,155
    
    
    
    145,217
    
    
    
    (15,460
    )
    
    
    
    
    
    
    210,912Interest expense (income), net
    
    
    54,681
    
    
    
    (6,351
    )
    
    
    (10,030
    )
    
    
    
    
    
    
    38,300Other (income) expense, net
    
    
    (7,147
    )
    
    
    119
    
    
    
    
    
    
    
    
    
    
    
    (7,028
    )Equity in (earnings) losses of affiliated companies
    
    
    (150,481
    )
    
    
    (6,084
    )
    
    
    280
    
    
    
    153,762
    
    
    
    (2,523
    )Earnings (loss) before income taxes
    
    
    184,102
    
    
    
    157,533
    
    
    
    (5,710
    )
    
    
    (153,762
    )
    
    
    182,163Income tax expense
    
    
    24,269
    
    
    
    1,092
    
    
    
    100
    
    
    
    
    
    
    
    25,461Net earnings (loss)
    
    
    159,833
    
    
    
    156,441
    
    
    
    (5,810
    )
    
    
    (153,762
    )
    
    
    156,702Less: net earnings (loss) attributable to noncontrolling interest
    
    
    
    
    
    
    11
    
    
    
    (3,142
    )
    
    
    
    
    
    
    (3,131
    )Net earnings (loss) attributable to Land OLakes, Inc.
    
    $
    159,833
    
    
    $
    156,430
    
    
    $
    (2,668
    )
    
    $
    (153,762
    )
    
    $
    159,833
 25




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##### Table of Contents



LAND OLAKES, INC.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2009
 LandOLakes, Inc.
    
    
    Consolidated
    
    
    Non-GuarantorParent Company
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net earnings (loss) attributable to Land OLakes, Inc.
    
    $
    159,833
    
    
    $
    156,430
    
    
    $
    (2,668
    )
    
    $
    (153,762
    )
    
    $
    159,833Adjustments to reconcile net earnings (loss) attributable to
Land OLakes, Inc. to net cash provided by operating
activities:Depreciation and amortization
    
    
    30,817
    
    
    
    28,487
    
    
    
    8,566
    
    
    
    
    
    
    
    67,870Amortization of deferred financing costs
    
    
    1,270
    
    
    
    342
    
    
    
    256
    
    
    
    
    
    
    
    1,868Bad debt expense
    
    
    2,551
    
    
    
    1,965
    
    
    
    1,963
    
    
    
    
    
    
    
    6,479Proceeds from patronage revolvement received
    
    
    205
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    236Non-cash patronage income
    
    
    (640
    )
    
    
    (158
    )
    
    
    
    
    
    
    
    
    
    
    (798
    )Deferred income tax expense
    
    
    41,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,501(Increase) decrease in other assets
    
    
    (196
    )
    
    
    921
    
    
    
    (2
    )
    
    
    41
    
    
    
    764Increase (decrease) in other liabilities
    
    
    20,250
    
    
    
    32
    
    
    
    (58
    )
    
    
    
    
    
    
    20,224Restructuring and impairment
    
    
    7,441
    
    
    
    1,173
    
    
    
    1,422
    
    
    
    
    
    
    
    10,036Loss on divestiture of a business
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    407(Gain) loss on sale of investments
    
    
    (6,970
    )
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    (6,958
    )Gain on foreign currency exchange contracts on sale of
investment
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (177
    )Equity in (earnings) losses of affiliated companies
    
    
    (150,481
    )
    
    
    (6,084
    )
    
    
    280
    
    
    
    153,762
    
    
    
    (2,523
    )Dividends from investments in affiliated companies
    
    
    27,670
    
    
    
    4,918
    
    
    
    3,552
    
    
    
    
    
    
    
    36,140Net earnings (loss) attributable to noncontrolling interests
    
    
    
    
    
    
    11
    
    
    
    (3,142
    )
    
    
    
    
    
    
    (3,131
    )Other
    
    
    (318
    )
    
    
    (113
    )
    
    
    (3,600
    )
    
    
    
    
    
    
    (4,031
    )Changes in current assets and liabilities, net of acquisitions
and divestitures:Receivables
    
    
    140,695
    
    
    
    (160,262
    )
    
    
    164,692
    
    
    
    (264,266
    )
    
    
    (119,141
    )Inventories
    
    
    (63,453
    )
    
    
    26,328
    
    
    
    31,161
    
    
    
    
    
    
    
    (5,964
    )Prepaids and other current assets
    
    
    687,491
    
    
    
    413,509
    
    
    
    2,113
    
    
    
    
    
    
    
    1,103,113Accounts payable
    
    
    (134,681
    )
    
    
    (124,257
    )
    
    
    (2,436
    )
    
    
    15,068
    
    
    
    (246,306
    )Customer advances
    
    
    (642,817
    )
    
    
    (369,511
    )
    
    
    138
    
    
    
    
    
    
    
    (1,012,190
    )Accrued liabilities
    
    
    (85,347
    )
    
    
    41,740
    
    
    
    (13,875
    )
    
    
    3,483
    
    
    
    (53,999
    )Net cash provided by operating activities
    
    
    34,644
    
    
    
    15,921
    
    
    
    188,362
    
    
    
    (245,674
    )
    
    
    (6,747
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (61,926
    )
    
    
    (30,136
    )
    
    
    (16,713
    )
    
    
    
    
    
    
    (108,775
    )Acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (2,745
    )
    
    
    
    
    
    
    (2,745
    )Investments in affiliates
    
    
    (400
    )
    
    
    (490
    )
    
    
    (2,400
    )
    
    
    
    
    
    
    (3,290
    )Proceeds from divestiture of a business
    
    
    
    
    
    
    2,698
    
    
    
    
    
    
    
    
    
    
    
    2,698Proceeds from sale of investments
    
    
    16,951
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    16,965Proceeds from foreign currency exchange contracts on sale of
investments
    
    
    518
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    518Proceeds from sale of property, plant and equipment
    
    
    142
    
    
    
    1,199
    
    
    
    152
    
    
    
    
    
    
    
    1,493Insurance proceeds for replacement assets
    
    
    
    
    
    
    6,538
    
    
    
    
    
    
    
    
    
    
    
    6,538Change in notes receivable
    
    
    6,788
    
    
    
    (1,144
    )
    
    
    (18,330
    )
    
    
    
    
    
    
    (12,686
    )Other
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250Net cash used by investing activities
    
    
    (37,927
    )
    
    
    (21,071
    )
    
    
    (40,036
    )
    
    
    
    
    
    
    (99,034
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    100,004
    
    
    
    460
    
    
    
    (144,895
    )
    
    
    245,674
    
    
    
    201,243Proceeds from issuance of long-term debt
    
    
    
    
    
    
    50
    
    
    
    4,409
    
    
    
    
    
    
    
    4,459Principal payments on long-term debt and capital lease
obligations
    
    
    (37
    )
    
    
    (93
    )
    
    
    (1,820
    )
    
    
    
    
    
    
    (1,950
    )Payments for redemption of member equities
    
    
    (95,762
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95,762
    )Payments for debt issuance costs
    
    
    (1,486
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,486
    )Other
    
    
    (352
    )
    
    
    58
    
    
    
    (1,515
    )
    
    
    
    
    
    
    (1,809
    )Net cash provided (used) by financing activities
    
    
    2,367
    
    
    
    475
    
    
    
    (143,821
    )
    
    
    245,674
    
    
    
    104,695Net (decrease) increase in cash and cash equivalents
    
    
    (916
    )
    
    
    (4,675
    )
    
    
    4,505
    
    
    
    
    
    
    
    (1,086
    )Cash and cash equivalents at beginning of period
    
    
    4,985
    
    
    
    7,028
    
    
    
    18,807
    
    
    
    
    
    
    
    30,820Cash and cash equivalents at end of period
    
    $
    4,069
    
    
    $
    2,353
    
    
    $
    23,312
    
    
    $
    
    
    
    $
    29,734
 26




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##### Table of Contents



LAND OLAKES, INC.
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
December 31, 2008
 LandOLakes, Inc.
    
    
    
    
    
    
    Non-Parent
    
    
    Consolidated
    
    
    GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,985
    
    
    $
    7,028
    
    
    $
    18,807
    
    
    $
    
    
    
    $
    30,820Receivables, net
    
    
    130,313
    
    
    
    580,897
    
    
    
    941,107
    
    
    
    (548,056
    )
    
    
    1,104,261Intercompany receivables, net
    
    
    238,447
    
    
    
    9,633
    
    
    
    1,240
    
    
    
    (249,320
    )
    
    
    Inventories
    
    
    377,150
    
    
    
    606,765
    
    
    
    100,063
    
    
    
    
    
    
    
    1,083,978Prepaid assets
    
    
    686,331
    
    
    
    410,295
    
    
    
    4,379
    
    
    
    
    
    
    
    1,101,005Other current assets
    
    
    105,190
    
    
    
    16,715
    
    
    
    1,599
    
    
    
    
    
    
    
    123,504Total current assets
    
    
    1,542,416
    
    
    
    1,631,333
    
    
    
    1,067,195
    
    
    
    (797,376
    )
    
    
    3,443,568Investments
    
    
    1,058,744
    
    
    
    57,027
    
    
    
    16,517
    
    
    
    (817,801
    )
    
    
    314,487Property, plant and equipment, net
    
    
    252,638
    
    
    
    294,212
    
    
    
    111,411
    
    
    
    
    
    
    
    658,261Goodwill, net
    
    
    191,936
    
    
    
    64,532
    
    
    
    20,708
    
    
    
    
    
    
    
    277,176Other intangibles, net
    
    
    2,113
    
    
    
    111,763
    
    
    
    7,106
    
    
    
    
    
    
    
    120,982Other assets
    
    
    71,684
    
    
    
    40,553
    
    
    
    58,485
    
    
    
    (3,884
    )
    
    
    166,838Total assets
    
    $
    3,119,531
    
    
    $
    2,199,420
    
    
    $
    1,281,422
    
    
    $
    (1,619,061
    )
    
    $
    4,981,312LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    19,998
    
    
    $
    2,244
    
    
    $
    912,595
    
    
    $
    (525,467
    )
    
    $
    409,370Current portion of long-term debt
    
    
    281
    
    
    
    50
    
    
    
    2,533
    
    
    
    
    
    
    
    2,864Accounts payable
    
    
    418,156
    
    
    
    739,547
    
    
    
    41,247
    
    
    
    (22,955
    )
    
    
    1,175,995Intercompany payables, net
    
    
    
    
    
    
    246,342
    
    
    
    2,978
    
    
    
    (249,320
    )
    
    
    Customer advances
    
    
    643,180
    
    
    
    401,417
    
    
    
    1,108
    
    
    
    
    
    
    
    1,045,705Accrued liabilities
    
    
    185,234
    
    
    
    198,440
    
    
    
    43,338
    
    
    
    (3,518
    )
    
    
    423,494Patronage refunds and other member
equities payable
    
    
    37,751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,751Total current liabilities
    
    
    1,304,600
    
    
    
    1,588,040
    
    
    
    1,003,799
    
    
    
    (801,260
    )
    
    
    3,095,179Long-term debt
    
    
    512,785
    
    
    
    71
    
    
    
    19,099
    
    
    
    
    
    
    
    531,955Employee benefits and other liabilities
    
    
    325,294
    
    
    
    29,047
    
    
    
    4,063
    
    
    
    
    
    
    
    358,404Commitments and contingenciesEquities:Capital stock
    
    
    1,611
    
    
    
    (34
    )
    
    
    2,935
    
    
    
    (2,901
    )
    
    
    1,611Additional paid-in capital
    
    
    
    
    
    
    200,643
    
    
    
    73,885
    
    
    
    (274,528
    )
    
    
    Member equities
    
    
    947,141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    947,141Accumulated other comprehensive loss
    
    
    (150,277
    )
    
    
    (15
    )
    
    
    (31
    )
    
    
    46
    
    
    
    (150,277
    )Retained earnings
    
    
    178,377
    
    
    
    381,679
    
    
    
    158,739
    
    
    
    (540,418
    )
    
    
    178,377Total Land OLakes, Inc. equities
    
    
    976,852
    
    
    
    582,273
    
    
    
    235,528
    
    
    
    (817,801
    )
    
    
    976,852Noncontrolling interests
    
    
    
    
    
    
    (11
    )
    
    
    18,933
    
    
    
    
    
    
    
    18,922Total equities
    
    
    976,852
    
    
    
    582,262
    
    
    
    254,461
    
    
    
    (817,801
    )
    
    
    995,774Total liabilities and equities
    
    $
    3,119,531
    
    
    $
    2,199,420
    
    
    $
    1,281,422
    
    
    $
    (1,619,061
    )
    
    $
    4,981,312
 27




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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.
    
    
    Consolidated
    
    
    Non-GuarantorParent Company
    
    
    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
    )Earnings before income taxes
    
    
    31,291
    
    
    
    74,905
    
    
    
    12,247
    
    
    
    (84,281
    )
    
    
    34,162Income tax expense (benefit)
    
    
    2,729
    
    
    
    71
    
    
    
    (996
    )
    
    
    
    
    
    
    1,804Net earnings
    
    
    28,562
    
    
    
    74,834
    
    
    
    13,243
    
    
    
    (84,281
    )
    
    
    32,358Less: net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    3,796
    
    
    
    
    
    
    
    3,796Net earnings attributable to Land OLakes, Inc.
    
    $
    28,562
    
    
    $
    74,834
    
    
    $
    9,447
    
    
    $
    (84,281
    )
    
    $
    28,562
 28




---



##### Table of Contents



LAND OLAKES, INC.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the nine months ended September 30, 2008
 LandOLakes, Inc.Parent
    
    
    Consolidated
    
    
    Non-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
    )Earnings before income taxes
    
    
    213,069
    
    
    
    140,850
    
    
    
    87,127
    
    
    
    (210,594
    )
    
    
    230,452Income tax expense
    
    
    20,439
    
    
    
    44
    
    
    
    1,959
    
    
    
    
    
    
    
    22,442Net earnings
    
    
    192,630
    
    
    
    140,806
    
    
    
    85,168
    
    
    
    (210,594
    )
    
    
    208,010Less: net earnings attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    15,380
    
    
    
    
    
    
    
    15,380Net earnings attributable to Land OLakes, Inc.
    
    $
    192,630
    
    
    $
    140,806
    
    
    $
    69,788
    
    
    $
    (210,594
    )
    
    $
    192,630
 29




---



##### 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 attributable to Land OLakes, Inc.
    
    $
    192,630
    
    
    $
    140,806
    
    
    $
    69,788
    
    
    $
    (210,594
    )
    
    $
    192,630Adjustments to reconcile net earnings attributable to Land OLakes, Inc. 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 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
    
    
    
    
    
    
    
    32,652Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    15,380
    
    
    
    
    
    
    
    15,380Other
    
    
    (2,121
    )
    
    
    (611
    )
    
    
    207
    
    
    
    
    
    
    
    (2,525
    )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 and capital lease obligations
    
    
    (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
 30




---



##### 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
  ® ® ® ® ®
   31




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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 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Per pound market price average:Butter
    
    $
    1.22
    
    
    $
    1.62
    
    
    $
    1.18
    
    
    $
    1.45Block cheese
    
    
    1.28
    
    
    
    1.86
    
    
    
    1.21
    
    
    
    1.92Nonfat dry milk (NASS)
    
    
    0.89
    
    
    
    1.33
    
    
    
    0.85
    
    
    
    1.33
 Feed
  32




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##### Table of Contents



Layers
 Derivative Commodity Instruments
  For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in millions)
    
    
    (in millions)Unrealized hedging gain (loss)
    
    $
    (3.7
    )
    
    $
    (32.6
    )
    
    $
    39.4
    
    
    $
    (35.7
    )
 Vendor Rebates
  Recoverability of Long-Lived Assets
  33




---



##### Table of Contents



Unconsolidated Businesses
  For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in millions)(Losses) earnings from unconsolidated businesses
    
    $
    (1.0
    )
    
    $
    13.5
    
    
    $
    2.5
    
    
    $
    38.1
        34




---



##### Table of Contents



Results of Operations
 Three months ended September 30, 2009 as compared to three months ended September 30, 2008
 Overview of Results
 For the three months ended September 30,2009
    
    
    2008
    
    
    Increase (Decrease)($ in millions)Net earnings (loss)
    
    $
    (4.3
    )
    
    $
    28.6
    
    
    $
    (32.9
    )Net earnings decreased $32.9 million in the three months ended September 30, 2009 compared to
the same period in the prior year. Net earnings include the impact of the year-to-year change in
unrealized hedging gains and losses on derivative contracts due to volatility in commodity markets.
Unrealized hedging gains and losses in earnings represent the change in value of open derivative
instruments from one period to another versus what will be effectively realized by the Company once
the instruments expire and the underlying commodity purchases or product sales being hedged occur.
Net earnings included $2.3 million and $20.1 million for unrealized hedging losses, net of income
taxes, for the three months ended September 30, 2009 and 2008, respectively.Excluding the unrealized hedging losses, the Companys net earnings decreased $50.7 million
compared to the same period last year. Decreased net earnings were driven primarily by earnings
declines in Agronomy due to the earlier completion of binding arrangements governing vendor
rebates, which were recorded in the first and second quarters versus the third quarter, compared to
the same period in the prior year and lower volumes, in Seed due to higher sales returns and in
Layers due to the effect of lower egg prices, partially offset by improved performance in Dairy
Foods and Feed due to favorable pricing.Net sales
    
    $
    2,177.5
    
    
    $
    2,783.9
    
    
    $
    (606.4
    )Net sales declined in Dairy Foods, Agronomy, Feed, Seed and Layers by $208.8 million, $159.3
million, $157.4 million, $59.7 million and $24.9 million, respectively, compared to the same period
in 2008. The decrease in net sales was primarily driven by lower markets in milk, cheese and eggs,
lower volume in Agronomy as customers built inventory ahead of price increases in the fall of 2008,
reducing demand in 2009, economic and competitive pressures in Feed and significantly higher sales
returns in Seed. A discussion of net sales by business segment is found below under the caption
Net Sales and Gross Profit by Business Segment.Gross profit
    
    $
    190.3
    
    
    $
    236.6
    
    
    $
    (46.3
    )Gross profit decreased by $46.3 million in the three months ended September 30, 2009 largely
driven by the earlier finalization of binding arrangments for vendor rebates earned in Agronomy,
which were recorded in the first and second quarters versus the third quarter, compared to the same
period in the prior year and meaningfully lower egg markets. These decreases were partially offset
by improved margins in Dairy Foods, Feed and Seed, partly caused by an improvement in unrealized
hedging losses from $32.6 million for the three months ended September 30, 2008 to $3.7 million for
the three months ended September 30, 2009. A discussion of gross profit by business segment is
found below under the caption Net Sales and Gross Profit by Business Segment.Gain on insurance settlement
    
    $
    
    
    
    $
    4.0
    
    
    $
    (4.0
    )In 2007, MoArk experienced a fire at a facility located in Anderson, Missouri. Damage was
extensive and caused operations to cease. Costs of repair or replacement of inventory, property,
plant and equipment were covered under the terms of applicable insurance policies, subject to
deductibles. As of and for the three and nine months ended September 30, 2008, Layers received
$3.3 million of total insurance proceeds for the capital asset replacement and recorded a gain on
insurance settlement of $2.0 million. Additionally, as of and for the three and nine months ended
September 30, 2008, Layers received $2.0 million of total insurance proceeds related to the
settlement of a fraud loss claim involving a former employee during the years 2002 through 2004.
The proceeds were recorded as a gain on insurance settlement.Selling, general and administrative expense
    
    $
    179.4
    
    
    $
    204.6
    
    
    $
    (25.2
    )The decrease in selling, general and administrative expense compared to the prior year was
primarily due to reduced expenses in Agronomy of $16.3 million due to lower employee costs and the
deconsolidation of certain joint ventures in the third quarter of 2008 and in Feed of $5.0 million
due to decreased employee costs.Restructuring and impairment charges
    
    $
    0.8
    
    
    $
    
    
    
    $
    0.8During the three months ended September 30, 2009, Feed incurred restructuring charges of $0.7
million primarily related to employee severance due to reorganization of Feed personnel. Layers
incurred restructuring charges of $0.1 million as a result of an announced facility closure in
Berino, New Mexico.
 35




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##### Table of Contents



For the three months ended September 30,2009
    
    
    2008
    
    
    Increase (Decrease)($ in millions)Interest expense, net
    
    $
    12.5
    
    
    $
    15.4
    
    
    $
    (2.9
    )The favorable variance in interest expense compared to the prior year was primarily due to
lower interest rates.Equity in (losses) earnings of affiliated companies
    
    $
    (1.0
    )
    
    $
    13.5
    
    
    $
    14.5Decreased equity in earnings of affiliated companies is primarily related to lower earnings
from investments in the Agronomy and Layers segments. Results for the three months ended September
30, 2009, included equity losses from Agriliance of $3.0 million compared to equity earnings of
$7.4 million for the same period of 2008. In Layers, equity method investments incurred losses of
$1.7 million for the three months ended September 30, 2009, compared to equity earnings of $1.7
million for the same period of 2008, primarily due to lower egg prices. A discussion of net
earnings for Agriliance can be found under the caption Overview Unconsolidated Businesses.Income tax expense
    
    $
    1.2
    
    
    $
    1.8
    
    
    $
    (0.6
    )
  Net Sales and Gross Profit by Business Segment
  Dairy Foods
 For the three months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    
    % changeNet sales
    
    
    776.1
    
    
    $
    984.9
    
    
    
    (21.2
    )%Gross profit
    
    
    60.1
    
    
    
    31.8
    
    
    
    89.0
    %Gross profit % of net sales
    
    
    7.7
    %
    
    
    3.2
    %
 Increase (decrease)Net Sales Variance
    
    (In millions)Pricing / product mix impact
    
    $
    (352.2
    )Volume impact
    
    
    143.4Total decrease
    
    $
    (208.8
    )
  Increase (decrease)Gross Profit Variance
    
    (In millions)Margin / product mix impact
    
    $
    31.5Volume impact
    
    
    5.4Unrealized hedging
    
    
    (8.6
    )Total increase
    
    $
    28.3
 36




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##### Table of Contents



Feed
 For the three months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    
    % changeNet sales
    
    $
    833.4
    
    
    $
    990.8
    
    
    
    (15.9
    )%Gross profit
    
    
    68.4
    
    
    
    42.9
    
    
    
    59.4
    %Gross profit % of net sales
    
    
    8.2
    %
    
    
    4.3
    %
 Increase (decrease)Net Sales Variance
    
    (In millions)Pricing / product mix impact
    
    $
    (104.7
    )Volume impact
    
    
    (52.7
    )Total decrease
    
    $
    (157.4
    )
  Increase (decrease)Gross Profit Variance
    
    (In millions)Margin / product mix impact
    
    $
    5.1Volume impact
    
    
    (1.5
    )Unrealized hedging
    
    
    22.0Total increase
    
    $
    25.5
  Seed
 For the three months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    
    % changeNet sales
    
    $
    (14.6
    )
    
    $
    45.0
    
    
    
    (132.4
    )%Gross profit
    
    
    10.4
    
    
    
    7.4
    
    
    
    40.5
    %Gross profit % of net sales
    
    
    (71.2
    )%
    
    
    16.4
    %
 Increase (decrease)Net Sales Variance
    
    (In millions)Pricing / product mix impact
    
    $
    16.7Volume impact
    
    
    (76.3
    )Total decrease
    
    $
    (59.6
    )
 37




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##### Table of Contents



Increase (decrease)Gross Profit Variance
    
    (In millions)Margin / product mix impact
    
    $
    9.2Volume impact
    
    
    (17.9
    )Unrealized hedging
    
    
    11.7Total increase
    
    $
    3.0
  Layers
 For the three months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    
    % changeNet sales
    
    $
    110.6
    
    
    $
    135.5
    
    
    
    (18.4
    )%Gross profit
    
    
    0.1
    
    
    
    2.8
    
    
    
    (96.4
    )%Gross profit %
of net sales
    
    
    0.1
    %
    
    
    2.1
    %
 Increase (decrease)Net Sales Variance
    
    (In millions)Pricing / product mix impact
    
    $
    (28.9
    )Volume impact
    
    
    4.0Total decrease
    
    $
    (24.9
    )
  Increase (decrease)Gross Profit Variance
    
    (In millions)Margin / product mix impact
    
    $
    (5.0
    )Volume impact
    
    
    0.2Unrealized hedging
    
    
    2.1Total decrease
    
    $
    (2.7
    )
  38




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Agronomy
 For the three months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    
    % changeNet sales
    
    $
    482.9
    
    
    $
    642.2
    
    
    
    (24.8
    )%Gross profit
    
    
    51.0
    
    
    
    155.2
    
    
    
    (67.1
    )%Gross profit % of net sales
    
    
    10.6
    %
    
    
    24.2
    %
 Increase (decrease)Net Sales Variance
    
    (In millions)Pricing / product mix impact
    
    $
    (83.5
    )Volume impact
    
    
    (90.0
    )Acquisitions and divestitures
    
    
    14.2Total decrease
    
    $
    (159.3
    )
  Increase (decrease)Gross Profit Variance
    
    (In millions)Margin / product mix impact
    
    $
    (79.3
    )Volume impact
    
    
    (23.4
    )Unrealized hedging
    
    
    0.3Acquisitions and divestitures
    
    
    (1.8
    )Total decrease
    
    $
    (104.2
    )
  Nine months ended September 30, 2009 as compared to nine months ended September 30, 2008
 Overview of Results
 For the nine months ended September 30,Increase2009
    
    
    2008
    
    
    (Decrease)($ in millions)Net earnings
    
    $
    159.8
    
    
    $
    192.6
    
    
    $
    (32.8
    )
  39




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##### Table of Contents



For the nine months ended September 30,Increase2009
    
    
    2008
    
    
    (Decrease)($ in millions)Net sales
    
    $
    7,939.3
    
    
    $
    9,368.8
    
    
    $
    (1,429.5
    )The decrease in net sales was primarily due to lower market prices in Dairy Foods and lower
volume in Agronomy as customers built inventory ahead of price increases in the fall of 2008,
reducing demand in 2009. Net sales decreased in Dairy Foods, Agronomy, Feed and Layers by $828.1
million, $441.3 million, $280.2 million and $86.6 million, respectively and increased in Seed by
$204.1 million. A discussion of net sales by business segment is found below under the caption
Net Sales and Gross Profit by Business Segment.Gross profit
    
    $
    729.4
    
    
    $
    798.8
    
    
    $
    (69.4
    )Gross profit decreased in the nine months ended September 30, 2009, primarily due to decreased
volume and margins in Agronomy and depressed markets in Layers compared to the same time period in
2008, partially offset by unrealized hedging gains of $39.4 million for the nine months ended
September 30, 2009 compared to unrealized hedging losses of $35.7 million for the nine months ended
September 30, 2008. A discussion of gross profit by business segment is found below under the
caption Net Sales and Gross Profit by Business Segment.Selling, general and administrative expense
    
    $
    508.5
    
    
    $
    562.3
    
    
    $
    (53.8
    )The decrease in selling, general and administrative expense compared to the prior year was
primarily due to lower costs in Agronomy of $26.8 million primarily as a result of an accounting
change for joint ventures to the equity method in July 2008 that were consolidated in the prior
period, lower employee costs in Feed of $13.7 million and reduced employee and administrative costs
in Layers of $9.2 million.Restructuring and impairment charges
    
    $
    10.0
    
    
    $
    
    
    
    $
    10.0Restructuring and impairment charges were $10.0 million during the nine months ended September
30, 2009. Dairy Foods incurred impairment charges of $5.3 million to write down fixed assets to
fair value and $2.1 million for restructuring charges, primarily for employee severance, related to
the announced closure of a facility in Madison, Wisconsin. Layers incurred impairment and
restructuring charges of $1.4 million related to an announced facility closure in Berino, New
Mexico and Feed incurred restructuring charges of $1.2 million primarily related to a
reorganization of personnel.Interest expense, net
    
    $
    38.3
    
    
    $
    48.1
    
    
    $
    (9.8
    )The favorable variance in interest expense compared to the prior year was primarily due to
lower interest rates.Equity in earnings of affiliated companies
    
    $
    2.5
    
    
    $
    38.1
    
    
    $
    (35.6
    )Equity in earnings of affiliated companies decreased primarily due to decreased earnings in
the Layers and Agronomy segments. In Layers, equity method investments had losses of $0.3 million
for the nine months ended September 30, 2009, compared to equity earnings of $16.2 million for the
same period of 2008 primarily due to lower egg prices. Results for the nine months ended September
30, 2009 included equity losses from Agriliance of $10.2 million compared to equity earnings of
$10.8 million for the same period of 2008. A discussion of net earnings for Agriliance can be
found under the caption Overview  General  Unconsolidated Businesses.Income tax expense
    
    $
    25.5
    
    
    $
    22.4
    
    
    $
    3.1Income tax expense for the nine months ended September 30, 2009 and September 30, 2008
resulted in an effective tax rate of 14.0% and 9.7%, respectively. As a cooperative, earnings from
member business that meet certain requirements, known as patronage income are deductible from
taxable income. The federal and state statutory rate applied to nonmember business activity was
38.3% for the six month periods ended September 30, 2009 and 2008. Income tax expense and the
difference between the effective tax rate and statutory tax rate vary each year based upon patronage business activity and the level and
profitability of nonmember business during each of the comparable years.
 40




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Net Sales and Gross Profit by Business Segment
  Dairy Foods
 For the nine months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    
    % changeNet sales
    
    $
    2,242.3
    
    
    $
    3,070.4
    
    
    
    (27.0
    )%Gross profit
    
    
    166.1
    
    
    
    163.7
    
    
    
    1.5
    %Gross profit % of
net sales
    
    
    7.4
    %
    
    
    5.3
    %
 Increase (decrease)Net Sales Variance
    
    (In millions)Pricing / product mix impact
    
    $
    (955.6
    )Volume impact
    
    
    127.5Total decrease
    
    $
    (828.1
    )
  Increase (decrease)Gross Profit Variance
    
    (In millions)Margin / product mix impact
    
    $
    (14.2
    )Volume impact
    
    
    4.5Unrealized hedging
    
    
    12.1Total increase
    
    $
    2.4
  Feed
 For the nine months ended September 30,($ in millions)
    
    2008
    
    
    2007
    
    
    % changeNet sales
    
    $
    2,578.1
    
    
    $
    2,858.3
    
    
    
    (9.8
    )%Gross profit
    
    
    226.9
    
    
    
    218.5
    
    
    
    3.8
    %Gross profit % of net sales
    
    
    8.8
    %
    
    
    7.6
    %
 Increase (decrease)Net Sales Variance
    
    (In millions)Pricing / product mix impact
    
    $
    (158.7
    )Volume impact
    
    
    (121.5
    )Total decrease
    
    $
    (280.2
    )
  41




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IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    (20.5
    )Volume impact
    
    
    (15.6
    )Unrealized hedging
    
    
    44.5Total increase
    
    $
    8.4
  Seed
 For the nine months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    

% changeNet sales
    
    $
    1,124.3
    
    
    $
    920.2
    
    
    
    22.2
    %Gross profit
    
    
    139.7
    
    
    
    102.8
    
    
    
    35.9
    %Gross profit % of
net sales
    
    
    12.4
    %
    
    
    11.2
    %
 IncreaseNet Sales Variance
    
    (decrease)(In millions)Pricing / product mix impact
    
    $
    254.6Volume impact
    
    
    (50.5
    )Total increase
    
    $
    204.1
  IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    30.5Volume impact
    
    
    (12.6
    )Unrealized hedging
    
    
    19.0Total increase
    
    $
    36.9
  42




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Layers
 For the nine months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    

% changeNet sales
    
    $
    368.6
    
    
    $
    455.2
    
    
    
    (19.0
    )%Gross profit
    
    
    14.2
    
    
    
    59.5
    
    
    
    (76.1
    )%Gross profit %
of net sales
    
    
    3.9
    %
    
    
    13.1
    %
 IncreaseNet Sales Variance
    
    (decrease)(In millions)Pricing / product mix impact
    
    $
    (105.4
    )Volume impact
    
    
    18.8Total decrease
    
    $
    (86.6
    )
  IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    (51.1
    )Volume impact
    
    
    2.6Unrealized hedging
    
    
    3.2Total decrease
    
    $
    (45.3
    )
  Agronomy
 For the nine months ended September 30,($ in millions)
    
    2009
    
    
    2008
    
    

% changeNet sales
    
    $
    1,681.7
    
    
    $
    2,123.0
    
    
    
    (20.8
    )%Gross profit
    
    
    181.3
    
    
    
    259.1
    
    
    
    (30.0
    )%Gross profit % of net sales
    
    
    10.8
    %
    
    
    12.2
    %
 IncreaseNet Sales Variance
    
    (decrease)(In millions)Pricing / product mix impact
    
    $
    9.2Volume impact
    
    
    (432.7
    )Acquisitions and divestitures
    
    
    (17.8
    )Total decrease
    
    $
    (441.3
    )
  43




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IncreaseGross Profit Variance
    
    (decrease)(In millions)Margin / product mix impact
    
    $
    (7.5
    )Volume impact
    
    
    (53.7
    )Unrealized hedging
    
    
    0.7Acquisitions and divestitures
    
    
    (17.3
    )Total decrease
    
    $
    (77.8
    )
  Liquidity and Capital Resources
 Overview
       As of
    
    
    As of
    
    
    As ofSeptember 30,
    
    
    September 30,
    
    
    December 31,2009
    
    
    2008
    
    
    2008($ in millions)Cash and cash equivalents
    
    $
    29.7
    
    
    $
    28.8
    
    
    $
    30.8Availability on revolving credit facility
    
    
    258.8
    
    
    
    176.7
    
    
    
    188.6Availability on receivable securitization program
    
    
    
    
    
    
    
    
    
    
    120.0Availability on the Agriliance credit facility
    
    
    
    
    
    
    
    
    
    
    Availability on MoArk revolving credit facility
    
    
    40.0
    
    
    
    40.0
    
    
    
    40.0Total liquidity
    
    $
    328.5
    
    
    $
    245.5
    
    
    $
    379.4
   44




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Cash Flows
 For the Nine Months EndedSeptember 30,Operating Activities
    
    2009
    
    
    2008($ in millions)Net earnings attributable to Land OLakes, Inc.
    
    $
    159.8
    
    
    $
    192.6Adjustments to reconcile net earnings attributable to Land OLakes, Inc. to
net cash used by operating activities
    
    
    167.9
    
    
    
    76.4Changes in current assets and liabilities, net of acquisitions and divestitures
    
    
    (334.5
    )
    
    
    (467.9
    )Net cash used by operating activities
    
    $
    (6.7
    )
    
    $
    (198.9
    )
   Investing Activities
 For the Nine Months EndedSeptember 30,2009
    
    
    2008($ in millions)Additions to property, plant and equipment
    
    $
    (108.8
    )
    
    $
    (120.5
    )Acquisitions, net of cash acquired
    
    
    (2.7
    )
    
    
    (9.0
    )Investments in affiliates
    
    
    (3.3
    )
    
    
    (50.9
    )Distributions from investments in affiliated companies
    
    
    
    
    
    
    8.8Proceeds from divestiture of businesses
    
    
    2.7
    
    
    
    Proceeds from sale of investments
    
    
    17.0
    
    
    
    0.1Proceeds from foreign currency exchange contracts on sale of investment
    
    
    0.5
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    1.5
    
    
    
    5.6Insurance proceeds for replacement assets
    
    
    6.5
    
    
    
    5.3Change in notes receivable
    
    
    (12.7
    )
    
    
    (11.6
    )Other
    
    
    0.3
    
    
    
    3.0Net cash used by investing activities
    
    $
    (99.0
    )
    
    $
    (169.2
    )
   Financing Activities
 For the Nine Months EndedSeptember 30,2009
    
    
    2008($ in millions)Increase in short-term debt
    
    $
    201.2
    
    
    $
    388.7Proceeds from issuance of long-term debt
    
    
    4.5
    
    
    
    0.5Principal payments on long-term debt and capital lease obligations
    
    
    (1.9
    )
    
    
    (14.1
    )Payments for redemption of member equities
    
    
    (95.8
    )
    
    
    (94.9
    )Payments for debt issuance costs
    
    
    (1.5
    )
    
    
    Other
    
    
    (1.8
    )
    
    
    (0.1
    )Net cash provided by financing activities
    
    $
    104.7
    
    
    $
    280.1
  45




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Principal Debt Facilities
          46




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47




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##### Table of Contents



Capital Leases
  Recent Accounting Pronouncements
 The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162
   48




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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
 Evaluation of disclosure controls and procedures
  49




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Remediation and Changes in Internal Control over Financial Reporting
  Inadequate interim periodic close process
  Personnel lacked adequate accounting expertise and business knowledge
  Remediation and Changes in Internal Control over Financial Reporting:
  Change in internal controls
 
 
 Part II. Other Information
 
 Item 1. Legal Proceedings
  50




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® ® ® ® ®
    51




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##### Table of Contents



Item 1A. Risk Factors
  
    
    COMPETITION IN THE INDUSTRY MAY REDUCE OUR SALES AND MARGINS.
    
    THE CURRENT ECONOMIC DOWNTURN COULD ADVERSELY AFFECT THE COMPANYS BUSINESS AND
FINANCIAL RESULTS.
    
    THE CURRENT CREDIT CRISIS COULD NEGATIVELY AFFECT THE OPERATIONS OF OUR SUPPLIERS AND
CUSTOMERS.
    
    OUR OPERATIONS ARE SUBJECT TO NUMEROUS LAWS AND REGULATIONS, EXPOSING US TO POTENTIAL
CLAIMS AND COMPLIANCE COSTS THAT COULD ADVERSELY AFFECT OUR MARGINS, PARTICULARLY THOSE
RELATED TO OUR SALES OF ROUNDUP READY® ALFALFA.
    
    THE GEOGRAPHIC SHIFT IN DAIRY PRODUCTION HAS DECREASED SALES AND MARGINS AND COULD
CONTINUE TO NEGATIVELY IMPACT OUR SALES AND MARGINS.
    
    CURRENT AND THREATENED LITIGATION COULD INCREASE OUR EXPENSES, REDUCE OUR
PROFITABILITY, AND, IN SOME CASES, ADVERSELY AFFECT OUR BUSINESS REPUTATION.
    
    CHANGES IN CONSUMER PREFERENCES AND DISTRIBUTION CHANNELS COULD DECREASE OUR DAIRY
FOODS REVENUES AND CASH FLOWS.
    
    OUR OPERATING RESULTS FLUCTUATE BY SEASON AND ARE AFFECTED BY WEATHER CONDITIONS.
    
    INCREASED ENERGY AND GAS COSTS COULD INCREASE OUR EXPENSES AND REDUCE OUR
PROFITABILTIY.
    
    OUTBREAKS OF DISEASE CAN REDUCE OUR NET SALES AND OPERATING MARGINS.
    
    CHANGES IN THE MARKET PRICES OF THE COMMODITIES THAT WE USE AS INPUTS AS WELL AS THE
PRODUCTS WE MARKET MAY CAUSE OUR MARGINS TO DECLINE AND REDUCE THE LIKELIHOOD OF RECEIVING
DIVIDENDS FROM OUR JOINT VENTURES.
    
    WE OPERATE THROUGH JOINT VENTURES IN WHICH OUR RIGHTS TO EARNINGS AND TO CONTROL THE
JOINT VENTURE ARE LIMITED.
    
    CERTAIN OF OUR BUSINESSES MAY BE ADVERSELY AFFECTED BY OUR DEPENDENCE UPON OUR
SUPPLIERS.
    
    THE MANNER IN WHICH WE PAY FOR CERTAIN OF OUR INPUTS AND OTHER PRODUCTS THAT WE
DISTRIBUTE EXPOSES US TO SUPPLIER-SPECIFIC RISK.
    
    INCREASED FINANCIAL LEVERAGE COULD ADVERSELY AFFECT OUR ABILITY TO FULFILL OUR
OBLIGATIONS UNDER OUR DEBT FACILITIES AND TO OPERATE OUR BUSINESSES.
    
    SERVICING OUR INDEBTEDNESS REQUIRES A SIGNIFICANT AMOUNT OF CASH, AND OUR ABILITY TO
GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
    
    IF CREDITORS OF OUR SUBSIDIARIES AND JOINT VENTURES MAKE CLAIMS WITH RESPECT TO THE
ASSETS AND EARNINGS OF THESE COMPANIES, SUFFICIENT FUNDS MAY NOT BE AVAILABLE TO REPAY OUR
INDEBTEDNESS AND WE MAY NOT RECEIVE THE CASH WE EXPECT FROM INTERCOMPANY TRANSFERS.
    
    THE COLLATERAL PLEDGED IN SUPPORT OF OUR DEBT OBLIGATIONS MAY NOT BE VALUABLE ENOUGH TO
SATISFY ALL THE BORROWINGS SECURED BY THE COLLATERAL.
 52




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
    
    A LOSS OF OUR COOPERATIVE TAX STATUS COULD INCREASE OUR TAX LIABILITY.
    
    OUR LIMITED ACCESS TO EQUITY MARKETS COULD ADVERSELY AFFECT OUR ABILITY TO OBTAIN
ADDITIONAL EQUITY CAPITAL.
    
    INABILITY TO PROTECT OUR TRADEMARKS AND OTHER PROPRIETARY RIGHTS COULD DAMAGE OUR
COMPETITIVE POSITION.
    
    OUR BRAND NAMES COULD BE CONFUSED WITH NAMES OF OTHER COMPANIES WHO, BY THEIR ACT OR
OMISSION, COULD ADVERSELY AFFECT THE VALUE OF OUR BRAND NAMES.
    
    A CHANGE IN THE ASSUMPTIONS USED TO VALUE OUR REPORTING UNITS OR OUR INDEFINITE-LIVED
INTANGIBLE ASSETS COULD NEGATIVELY AFFECT OUR CONSOLIDATED RESULTS OF OPERATIONS AND NET
WORTH.
    
    PRODUCT LIABILITY CLAIMS OR PRODUCT RECALLS COULD ADVERSELY AFFECT OUR BUSINESS
REPUTATION AND EXPOSE US TO INCREASED SCRUTINY BY FEDERAL AND STATE REGULATORS.
    
    WE COULD INCUR SIGNIFICANT COSTS FOR VIOLATIONS OF OR LIABILITIES UNDER ENVIRONMENTAL
LAWS AND REGULATIONS APPLICABLE TO OUR OPERATIONS.
    
    STRIKES OR WORK STOPPAGES BY OUR UNIONIZED WORKERS COULD DISRUPT OUR BUSINESS.
    
    THERE IS NO ASSURANCE THAT OUR SENIOR MANAGEMENT TEAM OR OTHER KEY EMPLOYEES WILL
REMAIN WITH US.
 Item 5. Other Information
 
 Item 6. Exhibits
 (a)
    
    Exhibits
 EXHIBIT
    
    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 53




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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)
 54